Turnover falls 14% to £4.1bn as contractor feels the effects of direct employment model

Laing O’Rourke has shut the Middle East arm of its business and slashed its global workforce by almost half to 18,222.

As revealed by Building in June, the closure of the division marks a significant change in strategy for the UK’s third-largest contractor, which relaunched the business with a three-region structure in 2006.

Staff levels at Laing O’Rourke, which differs from many of its peers by using direct employment, have fallen from a high of 35,753 on 31 March 2009 to 18,222 at the end of March this year.

Many of the redundancies were in the Middle East, where it is understood Laing O’Rourke employed more than 20,000 at the height of the boom. It now employs 6,834.

According to its latest set of financial results, the Middle East arm has now been subsumed into the Europe and Rest of the World hub while the remaining Australia and South-East Asia arm is unaffected.

Chairman and chief executive Ray O’Rourke said: “The year proved our most challenging ever with a significant number of people leaving the group as we took decisive action to align business costs with current and anticipated workload. The majority of this decline was directly attributable to the removal of work associated with the Aldar joint venture in Abu Dhabi and the steep decline in the Dubai market, where many projects were operationally paused.”

Turnover at the company in the year to 31 March 2010 was down 14% from £4.1bn to £3.5bn while pre-tax profit fell from £85m to £50m.

The company ended the year with a cash balance of £716m, up from £614.3m in 2009 but its order book was down from £10bn to £8.2bn.

For more analysis see Building on Friday.