Laing's future in doubt despite O'Rourke sale

Laing believes the sale, to subcontractor Ray O'Rourke, will allow it to concentrate on its housing operation and PFI projects, but some City and industry insiders remain unconvinced.

The City is still taking in the full impact of Laing's construction losses, announced last week, which were bigger than expected. Analysts are concerned about the knock-on effects on the parent company.

Laing's construction arm posted an operating loss of £82.1m for the six months to 30 June, bringing the total loss to £195.7m in three-and-a-half years.

As one insider commented: "It's been far worse than anyone realised, and that's hurt Laing's standing in the City even more. It's a real shock and will hurt it for a long time."

The scale of the losses has resulted in a 50% fall in the firm's share price – to 112p – and forced Laing to restructure its finances. Executive chairman Sir Martin Laing also announced he was stepping down next January.

"Really, what has Laing got left? It got rid of construction but there are also big question marks over the rest of the firm," said an insider. "There is also a lot of debt – and who will run the business?"

Every potential buyer will know that Laing has to sell assets

City analyst

Laing said it had refinanced loans because reserves had been seriously depleted by the losses and by its acquisition of Hyder Investments for £58m in February.

But the Hyder buy is another sore point with investors, who are questioning management competency. "The Hyder deal was a mistake. It sucked up the cash when it was needed in construction," said one shareholder.

Laing is implementing a three-part rescue package to raise funds. First, it has renegotiated the terms of a £180m bank facility and £74m of loan notes; second, it plans a rights issue to raise another £76.8m; and finally, it aims to sell assets to raise another £120m. The plan is to have all three operations completed by the middle of next year.

Yet analysts are sceptical about how much Laing will raise from a sale. "Every potential buyer looking at these assets will know that Laing has to sell them and will have a gun to Laing's head – much like Ray O'Rourke did when he was buying construction," said an analyst.

Laing needs funds in the next two to three years to finance its PFI business; this in turn will create a cash squeeze until revenue from the completed schemes starts coming through. In addition, analysts fear that a housing downturn will hurt Laing more than most.