Profit at Laing O’Rourke doubles but building safety defect provisions head north again

Profit at Laing O’Rourke headed north last year but the firm’s bottom line continued to be blighted by a series of exceptional costs including a near £33m provision to cover building safety defects.

The country’s largest private contractor said pre-tax profit stood at £80m in the year to March, up from £41.5m last time, on revenue down 7% to £4bn. Operating profit before exceptional items was up 41% to £157m.

But the firm said it booked nearly £48m of exceptional items, following the £36m it racked up last year, including a further £33m of defect provisions in the wake of the Building Safety Act, following the £22m it booked for the same issue last year.

The firm said it was carrying a defect provision of £171m at the year-end which it said could go up or down.

In a note accompanying the accounts, the firm said: “The extension to limitation periods [under the Building Safety Act] may result in additional liabilities for the Group in the future, in excess of the costs recognised to date, the extent of which cannot be assessed by Laing O’Rourke as we do not have access to the information that would allow a detailed assessment of each potential obligation

“Developers may seek to recover costs from main contractors (e.g. Laing O’Rourke) but, until those claims are raised, it is not possible to determine the full extent of the liability and/or work required on our behalf.”

It said this year’s provision for safety defects was made up of recognised provisions of “£56.9m and income relating to insurance recoveries of £24m”.

The firm also revealed it made a profit of £14m following the liquidation of its subsidiary Laing O’Rourke Construction South in February last year.

Laing O’Rourke Construction South, which built One Hyde Park in London, was at the centre of a row between residents of the luxury flats complex and the firm over the cost of repairs to fix a series of defects at the development.

Earlier this year, a High Court judge accused Laing O’Rourke of being “commercially amoral” in a judgement handed down as part of the bust-up which saw residents claim victory in the £35m dispute.

In the accounts, Laing O’Rourke made no mention of the High Court decision but said “the profit on disposal of the [Construction South] subsidiary of £14m represents the net liabilities of Laing O’Rourke Construction South Limited at the time of entering into liquidation, less those liabilities that were transferred to Laing O’Rourke Plc, its parent entity, on liquidation”.

The firm’s biggest business, its Europe hub, which also includes work in Canada and the Middle East, posted a pre-tax profit of £77m from £14m last time on income up 13% to £2.6bn.

Meanwhile, the firm reiterated that it expects a pay dispute with its Japanese partner on a huge gas station job in northern Australia to be resolved by next April.

Signed in 2010, the firm was building four cryogenic tanks at the LNG Tanks Project in Darwin for lead construction partner Kawasaki Heavy Industries before its contract was ended in 2017.

The firm said it had booked £14.8m of exceptional costs on the dispute last year which included a further £200,000 on legal bills.

Revenue from the Australia hub was down a third to £1.1bn while pre-tax profit was down 13% to £25m.

The firm said its group order book was up 42% to a record £17.2bn with net cash up 60% to £457m.

Chief executive Cathal O’Rourke said its order book was equivalent to more than four years’ revenue, adding that it “reflects the continued success of Laing O’Rourke’s disciplined sector-driven approach, the hard work of our people and the trust the business has built with our clients”.