Jim Armstrong, chairman of Laing’s construction arm, has said the group will consider taking part in industry consolidation once the division returns to the black.
Armstrong said a merger or acquisition could be on the cards for Laing in the future. However, he added that the construction arm, which lost £19m in the first half of 2000, is not expected to make a significant profit before 2002/03.
Referring to the recent wave of deals, he said: “There is no doubt that Lend Lease has been good for Bovis, and Skanska will be good for Kvaerner.
“Laing’s first priority is to fix what we have, then we will look at how best to position ourselves, whether it be through mergers or acquisitions. Laing will be looking to take part in the changes within the sector.” Armstrong is critical of the sector’s performance in the past decade. He said: “Profitability of contractors over the past 10 years has been pretty lousy. We need to improve the service, the value we offer and the margins we get.”
As well as the loss in construction, Laing plans to spend £15m this year reorganising the division. The spend will include redundancy costs and an overhaul of the group’s local offices.
Armstrong said the reorganisation would be complete by the end of the year. He said: “We are not shirking away from making changes.”
He said the group’s exit from competitive tendering work last year was already taking effect, with fee-based and two-stage tender work giving higher margins. Armstrong added that Laing was also looking to increase its construction management work with the launch of a new worldwide division called Laing Project Services.
This division will focus on design management and cost planning. Headed by managing director Brian Emerton, formerly managing director of John Laing International, the arm will have about 100 staff
Despite the losses in the construction division, Laing Group increased its interim pre-tax profit by 70% to £27.5m. This was because of strong performances in the homes and investment divisions. Turnover rose 4% to £804m in the half year.
Laing Homes nearly trebled its pre-tax profit to £28.2m and the group said sales were on target to produce a record result for the year.
Pre-tax profit in the investment arm rose 73% to £13.2m. The group said the arm was working on closing three major private finance initiative schemes, two for the Metropolitan Police and a hospital for east London’s Newham NHS Trust.