Laing O Rourke Announces Full Year Results To 31st March 2015

Financial Highlights

Profitable trading performance maintained, with strong result in Australian business offsetting a year of operational challenges in the UK construction market

• Managed revenue decreased 13 per cent to £3.85 billion (£4.41 billion: 2013/14), reflecting selective bidding and adverse foreign exchange movements.
• Pre-exceptional EBIT was £73.2 million (£60.1 million: 2013/14) despite continuing market challenges.
• Profit after tax of £20.1 million (£41.9 million: 2013/14) was delivered through a strong performance from the Australia Hub and a disappointing performance from the Europe Hub.
• Australia Hub posted a solid managed revenue performance £1.5 billion. Profit after tax was £76.5 million, up £43.5 million on the previous year. This improved result can be attributed to operational focus and discipline translating to stronger delivery performances across all regions.
• Europe posted a solid managed revenue performance of £2.4 billion (including share of joint ventures and associates), down moderately on the previous year (2013/14: £2.6 billion), with a loss after tax of £53.1 million, down £90 million on the previous year.
• The Europe Hub results were particularly affected by three first-generation DfMA UK construction contracts, adversely impacted by input cost inflation and delays in delivery using new construction methods. Significant lessons have been learned from these projects, all of which were secured during the recession.
• There was good underlying growth in Infrastructure, Expanded, Crown House Technologies and Select Plant, helping to offset some of the reduction in the UK Construction business.
• Maintained strong net funds of £370 million (£409 million: 2013/14) despite reduced Group revenue and the weaker Australian dollar, reflecting the underlying strength of the result and business model.
• Group order book increased significantly to £9.2 billion (£7.4 billion: 2013/14) with the depth and quality of pipeline at an all time high.

PERFORMANCE REVIEW
Strong foundations in place to achieve the next stage of our strategy

• Good geographic and sector diversity delivering resilience and strong future profit sources.
• Industry-leading senior leadership team now in place.
• Maintained commercial discipline to create highest ever quality order book.
• Sustainable long-term investments in engineering excellence, digital engineering and advanced manufacturing capabilities.
• Maintained expenditure levels in global health, safety and sustainability programmes.
• Increased focus on human capital agenda, with substantial commitment to enhancing entry-level development opportunities.
• Strengthened corporate governance and risk management frameworks.

OUTLOOK
Drive sales of our value proposition by focusing on delivering certainty for customers

• Group investing for the long term to respond to increased customer demands for greater certainty
in time, cost, quality, safety and sustainability.
• Strong medium-term revenue visibility and an attractive pipeline of high-quality contract opportunities in key sectors.
• Anticipated benefits derived from the widespread deployment of our value proposition coupled with an unrelenting focus on productivity.

Anna Stewart, Group Chief Executive said:

‘As I said last year, we expected a challenging two years as we worked through the portfolio of projects secured in recessionary times, which are being delivered in a period of acute skills shortage and resource cost inflation. Our financial results, although profitable, pay testimony to this and have also inevitably been impacted by our continuing programme of investments. Our private ownership is supportive of the long-term ambitions of the business and we are confident our strategy is both attractive and commercially prudent, through the cycles.

‘Our profit after tax, at £20.1 million on reduced managed revenue of £3.85 billion, is however disappointing, albeit parts of the Group, such as the Australia Hub, have enjoyed a record year. Cash generation and management continues to be strong, with net cash of £370 million, while at the same time we are recognised as one of the industry’s fairest employers and best payers.

‘We expect the 2015/16 period to be equally challenging with margin improvements yielding enhanced financial performance in the 2016/17 year. Unfortunately, we are a three-year cycle business so will emerge from recession later than most other sectors.

‘However, it is difficult not to be excited by the increasingly attractive market opportunities, as our economies recover from the financial crisis. Although uncertainty remains, particularly within Europe, and the UK’s relationship with Europe, the Election outcomes in most of our geographies would seem to create the environment for medium to long-term stability.’

Stewart McIntyre, Group Finance Director said:

‘Laing O’Rourke continues to focus on its established objective to deepen its capability as an enduring engineering enterprise. Our focused investment in innovation through our excellence in engineering capabilities, digital engineering, design for manufacture and assembly (DfMA) approach and our specialist direct delivery businesses is having a significantly positive impact on the way we generate value and benefit to our clients.’

Ray O’Rourke, Group Executive Chairman commented:

‘Laing O’Rourke will be highly selective in pursuing opportunities that align with our value proposition. We will focus on our engineering and manufacturing capabilities. We will create certainty for our customers from the earliest engagement.

‘Our investment programme supports the development of construction techniques to deliver quality, certainty and value for our customers. In May 2015, the Board ratified the Final Investment Decision (FID) to build and operate a new Advanced Manufacturing Facility (AMF) alongside our existing factory at Explore Industrial Park in the East Midlands. The new facility will use intelligent design, precision engineering and fully automated processes to deliver modular solutions that will revolutionise house-building in the UK.’