Sharp rise in profit in Australian business helps offset fall in profitability in Europe

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Source: Jason Hawkes

Laing O’Rourke has posted stable full-year results, after a decline in profitability in Europe was offset by an improvement in its Australian business.

Reporting its results for the year to 31 March 2014, Laing O’Rourke Group posted total revenue of £3.57bn, broadly flat on the £3.56bn it posted the previous year.

Group pre-tax profit stood at £51.9m, after £6.7m in exceptional items, down 9% on £57m the previous year.

The exceptional items included £3.3m on impairment of land and developments and £3.4m of impairment of investment property.

The firm’s order book dipped 10% to £7.4bn, down from £8.2bn the previous year.

We are definitely experiencing an improvement in the opportunities now available and in the pipeline

Laing O’Rourke was boosted by an improved performance in its Australian business, which posted total revenue of £1.8bn, up 11% on £1.61bn last year, with a pre-tax profit of £38.7m, up 41% on £27.3m the previous year.

The Australian business, which also includes South-east Asia and New Zealand, posted losses in 2011 and 2012, before returning to profit in 2013.

The firm’s European business posted total revenue of £1.96bn - broadly flat on the £1.95bn it posted last year - with pre-tax profit of £42m, down 16% on £50.3m the previous year.

Laing O'Rourke

Writing in the firm’s accounts, Anna Stewart, Laing O’Rourke Group chief executive, but warned the firm was still facing inflationary pressures, particularly on work bid during the recession.

She said: “In the UK, we are definitely experiencing an improvement in the opportunities now available and in the pipeline.

“Inflationary pressures and resource shortages are being felt, but these are not immediately translating into adjustments to customers’ budgets or bidding prices.

“We are carefully navigating this risky territory and expect modest work-winning success until the market adjustment is more consistent.

“Encouragingly, we are seeing improvement across the whole of the country but confidence is still fragile.”

She added: “Although there are signs in some of our markets of an increasing number of project opportunities, they are not consistent across all of our geographies.

“We expect the next two years to be challenging for our industry and for us, as we complete projects secured in recessionary times while at the same time balancing labour and material price recoveries.

“We are fortunate that we control much of the costs with our self-delivery model and are less exposed to the external supply chain, but inevitably we will all be affected by inflationary pressures.

Stewart added that the firm’s shift into factory production left it less exposed to skills shortages in the industry: “As the global economy picks up and project opportunities increase, the skills shortage experienced before the financial crisis will soon be felt again acutely.

“We are confident that following our strategy of Design for Manufacture and Assembly (DfMA), and transferring as many activities away from construction sites into controlled factory environments, will ensure we are less impacted by the skills shortage in traditional trades and will not be driven to engage a lower skilled and inherently less safe workforce.”