After a long delay Laing O’Rourke finally released its financial results today, and its clients and 15,000 UK staff will be relieved to learn it lost just £60.6m (after tax) in the year ending 31 March 2017, a big improvement on the £219.9m loss suffered in the previous period.
Nerves were a-jangle after the UK’s biggest private contractor, which is building the UK’s first new nuclear plant in a generation at Hinkley Point and other big infrastructure schemes, breached a final deadline in January to file its results with Companies House.
It was due to file by the end of December 2017 but negotiated a month’s extension, and when that deadline passed observers worried about another Carillion-style collapse.
Companies House was reported to have appointed a case officer to monitor the builder’s progress.
In the end, however, the board is celebrating a "turnaround" set of results, which it said showed "substantial improvement in UK performance" and growth in what it called underlying profit to £35m. Turnover increased by just over half a billion pounds.
It is optimistic about the future: "A successful turnaround programme, initiated in FY16, now sees Laing O’Rourke projecting a further material improvement in profitability (and cash generation) for the current year to 31 March 2018," it said, adding that its order book exceeds £10bn in "secured and anticipated work" around the world.
Notably, the company said it is still committed to its offsite construction methodology, which it brands as Design for Manufacture and Assembly (DfMA), and says its DfMA projects have now stopped losing money.
On the down side, ongoing problems with a PFI hospital contract in Montreal, Canada, and ongoing restructuring costs, have kept Laing O’Rourke in the red for a second year running.
The group recorded an "underlying profit" of £35m in 2017 against 2016’s loss of £82m, driven by a return to profitability in the core UK market. It counts underlying profit as profit before exceptional losses and joint venture losses.
Joint ventures lost Laing O’Rourke £86.2m, of which most – £83.2m – drained away from phase one of Montreal’s Centre Hospitalier de l’Université de Montréal project, which the firm is delivering in joint venture with Spanish contractor OHL, and which finished in October 2017.
The board is pleased with the overall loss after tax of £60.6m (including JV losses), which is an improvement on the £219.9m loss reported last year.
Total revenue in the year was £3.17bn in the year to March 2017, up from £2.5bn the year before. Revenue was up in both the Europe and Australia.
"The Group has responded strongly to recent challenges, not only by restructuring the UK business, but also through new processes and controls on project selection, operational delivery, digital data and risk and assurance," said group chief executive Ray O’Rourke.
He added: "It has been a difficult time for our sector, and recent events have only reinforced the importance of Laing O’Rourke’s early actions to redefine the business. Our leadership team across the Group has been steadfast and their achievements remarkable."
Offsite construction has long been held up as the way to increase productivity in the industry, and many will be watching to see if the company can make its early commitment to the approach, which it brands as Design for Manufacture and Assembly (DfMA), pay.
Under DfMA, 70% of the construction is done offsite, which Laing O’Rourke claims will enable a 60% improvement in productivity and a 30% saving on time.
But the methodology got off to a difficult start for Laing O’Rourke. The company reported a loss after tax of £53.1m on three unnamed UK DfMA contracts in 2015, and a further loss on them of £43.3m in 2016. Still, it remained committed to DfMA and today said exceptional costs on these projects were zero in 2017.
Won during the cut-throat, post-recession period of 2013, these contracts were "substantially redesigned" to demonstrate the benefits of DfMA, the company said, and lessons were learned.
"As issues were encountered using new construction methods and lessons have been learned these unusual circumstances are unlikely to recur on new contracts," the firm said.
Image: Laing O’RourkeÂ group chief executive Ray O’Rourke (Laing O’Rourke)