8 August 2011
Financial Highlights
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Managed revenue¹ down by 6 per cent to £4.0 billion, impacted by continuing macro-economic challenges
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Pre-exceptional earnings² before interest and taxes at £51 million
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Improved net funds position and £110 million of debt paid down during the year in review
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Pre-exceptional gross margin³ stable at 10.2 per cent reflecting quality of project portfolio and cost efficiencies
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Strong year-end gross cash position at £619 million
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Order book of £8.1 billion creating good medium-term earnings visibility
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Increased banking and bonding facilities to sustain core activities and support strategic growth
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Strategy execution with major projects secured in new growth territories, including Hong Kong and Canada.
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Managed revenue includes share of joint ventures’ revenue, inter-segment revenue and revenue from managed operations.
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Earnings before Interest and Tax (EBIT) includes profit from operations, net non-operating expense and excludes joint venture interest and tax.
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Gross margin percentage is stated pre-exceptional items.
Operational Highlights
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Completed restructure of Australia Hub with new leadership team in place to leverage growth opportunities in heavy infrastructure markets
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Successful completion of a number of high-profile projects including One Hyde Park – the world’s most exclusive new residential development
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Significant increase in conversion rate of opportunities into secured pipeline
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First major contract secured in Canada to build Centre Hospitalier de l’Université de Montréal (CHUM) in joint venture as an equity and delivery partner
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Prestigious project awarded to build the new Francis Crick Institute in central London
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Successful year in Hong Kong with three major mass transit/high speed rail projects secured
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Programme management of major venues on the London 2012 Olympic and Paralympic Park on schedule and on budget for successful completion and handover during 2011.
Safety and Sustainability Highlights
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Industry-leading Rolling Accident Frequency Rate¹ (AFR) of 0.09
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Mission Zero launched – an ambitious campaign to eliminate all accidents from our operations by 2020
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Good progress against our sustainability agenda, including first construction group in Australia to have accredited Reconciliation Action Plan (RAP) in place to drive engagement with the indigenous population
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Design for Manufacture and Assembly (DfMA) methodology delivering environmental benefits in project delivery, with reductions in waste and energy consumption at individual project level
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Ongoing investment in human capital agenda, with the recruitment of graduates and apprentices continuing through the recession.
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Number of reportable incidents resulting in more than three days’ absence per 100,000 working hours.
Chairman and Chief Executive’s comments
Ray O’Rourke KBE said: “Laing O’Rourke once again demonstrated its resilience despite the continuing economic turbulence, highlighting the strength and diversity of our business model.
“We continued to steer the company through recession, posting a profitable performance and winning new work in parallel, reflecting progress on all fronts. Our focus on operational excellence has paid real dividends in both financial and strategic terms. We continue to hold substantial cash reserves on our balance sheet, while at the same time reducing our debt levels by £110 million. We are exercising selectivity in our project portfolio to improve earnings quality over time while simultaneously investing for growth in new markets and sectors.
“Looking forward, the engineering and construction sector will continue to face into an economic storm for the foreseeable future. Whilst these and a number of other uncertainties remain in the immediate term, our medium-term view of demand growth remains positive, and we will recommence revenue growth from 2012/13.
“In this environment we will focus on protecting cash reserves and maintaining earnings quality at the individual project level. In this regard we will expand selectively into markets where the work opportunities are greatest, but we will only do this in a responsible way that fits with our business ethics.
“We now have a safer, leaner and smarter business that is in good competitive shape. We have stayed true to our core values, maintaining safety as our number-one priority; we continue to build leadership capability to drive global growth; we have added further engineering expertise; and we have strengthened operational efficiency, financial rigour and long-term thinking.
“Our performance in the year under review has reinforced our belief in the resilience of the Group’s integrated business model and the relevance of our strategy to create value as a globally focused engineering enterprise.”
Group Finance and Commerce Director’s comments
Anna Stewart said: “In the year under review the Group once again generated profits, posting a strong work-winning performance in the face of ongoing macro-economic and sector challenges in our core markets, while continuing to make significant investments in new territories, sectors and DfMA.
“The Australia Hub has had a challenging year as it has grown - although revenue performance was strong, rising 40 per cent over the previous year, the earnings performance was tempered by a number of events that suppressed the headline figure. These included a series of delays in contract schedules due to the exceptional weather conditions, uncertainties over the tax regimes within the mining sector caused by changes in government at the federal and state level, state electricity reforms and the increasingly strict environmental compliance issues associated with major oil & gas infrastructure development.
“We are on track to deliver our 2011/12 targets and are once again seeing the benefits of our vertically integrated delivery model. We continue to be selective but decisive in the opportunities we pursue and have already secured major contracts in target markets, demonstrating the tangible progress being made in transforming the intent of our strategy into real value.
“Our financial objective remains simple – to deliver rates of return above our cost of capital by efficiently deploying our skills and services into a controlled portfolio of markets and sectors. With our financial strength, engineering and construction capabilities, underpinned by a highly skilled and talented workforce, we face the future with real confidence.”
Availability of the Annual Review
The review is available on the Laing O’Rourke Annual Review website.