Laing O’Rourke reports FY23 results30.11.23
- In the year ending 31 March 2023, the Group delivered strong growth in pre-exceptional Group revenue (up 13 per cent to £3.4bn)
- Group order book grew to record £10bn, up 16 per cent (from £8.6bn) versus prior year
- Australia business achieved excellent pre-exceptional performance, increasing EBIT to AUD$160.8m (FY22: AUD$132.3m)
- This was offset by the impact of inflation on a small number of UK fixed-price contracts, resulting in Group pre-exceptional EBIT loss of £78.8m (FY22: profit £95.5m)
- Group post-exceptional EBIT loss of £273.9m (FY22: profit £19.8m) was driven by a provision taken in relation to a long-running legacy contract signed in Australia in 2010
- Group finished the year with strong gross cash of £428.1m and net cash of £286.3m, with continued strong Group cash forecast
- HSBC finance facility extended by two years to April 2026
- Solid performance during the first half of FY24 (to 30 September 2023)
- Revenue increased 22 per cent versus same period prior year and Group results well ahead of management’s expectations at £31.4m EBIT
- New Group COO, Cathal O’Rourke, focused on reducing exposure to wider market conditions through Group-wide adoption of more collaborative contracting models used in Australia
- The Group is embedding enhanced processes and controls to improve operational delivery and margins
Laing O’Rourke today published its Group Accounts for FY23 and provided an update on current trading for the six months to 30 September 2023 (H1 FY24).
Despite a challenging period for the construction sector, with the war in Ukraine driving inflation to a 40 year high, the Group achieved top line revenue growth of 13 per cent versus prior year (to £3.4bn) and ended FY23 with a record order book of £10.0bn (up 16 per cent from £8.6bn at the end of FY22).
The Group’s Australian business delivered an excellent pre-exceptional performance, increasing EBIT to AUD$160.8m (FY22: AUD$132.3m).
With margins on a small number of UK projects impacted by unprecedented inflation, the Group has reported a pre-exceptional EBIT loss of £78.8m.
The Australia post-exceptional results include an adjustment related to a historical contract, signed in 2010, which has been going through a long-running, confidential arbitration. This led to a £143.7m provision being made during FY23.
The adjustment had no immediate cash impact and has not impacted operations or the Group’s ability to deliver projects. The Australia business is underpinned by a strong balance sheet and solid cash generation, with a year-end cash position of AUD$416.9m.
In both of its operating hubs, the business continues to win work in its strategic sectors – healthcare, energy, rail and road, defence, science and research, and data centres – which is fuelling its order book growth and reducing exposure to market conditions beyond its control.
The strength of the Group’s record £10.0bn order book was driven by a combination of factors. In the UK, it continues to work closely with the UK government as a strategic supplier to deliver much needed healthcare, energy, transport, and defence infrastructure, while in Australia the business is benefitting from successful bids for new public works, scope extensions to existing projects, and the Australian government’s 10-year infrastructure investment programme.
I am encouraged by the fact that in FY23 we delivered strong pre-exceptional Group revenue growth of 13 per cent (to £3.4bn) versus FY22, ended the period with gross cash of £428.1m, net cash of £286.3m, and added £1.4bn to our Group order book. These are positive indicators for our future performance.
Together with the whole UK construction sector, we were presented with extremely challenging market conditions during this trading period. Unprecedented inflation impacted margins on a small number of our fixed-price projects in the UK. And while it had no immediate cash impact, provision for an exceptional item on a legacy project in Australia added to our loss.
We have seen strong performance across the business in the first half of the current financial year. Our revenue increased 22 per cent versus the same period prior year, and results are well ahead of management’s expectations at £31.4m EBIT.
During FY23, geopolitical upheaval had profound inflationary effects, impacting the global economy, households, the wider sector, and our business. Official figures showed inflationary costs for the sector peaked at 26 per cent during 2022, the biggest impact on construction in 40 years.
The work we have done over a number of years has ensured Laing O’Rourke remains a resilient business and I thank all our colleagues for their hard work. With a record order book and a return to profitability in the first half of FY24, I remain very positive about the future.
We continue to win work in our priority sectors, fuelling our strong order book growth and at the same time helping us to reduce our exposure to wider market conditions beyond our control. Our investment in the products, digital tools, and systems to unlock the productivity, quality, and safety benefits of advanced manufacturing underpins our strong sense of optimism about the outlook for the business. I am excited about our plans to deliver infrastructure projects of significant size and complexity in a new way.