黑洞社区

Laing O鈥橰ourke has said it is targeting more negotiated contracts as it looks to lift margins to an industry-beating 5% and return the firm to the black after posting another year of losses.

The country鈥檚 biggest private builder narrowed losses in 2018 but continuing problems with a PFI hospital contract in Canada helped keep it firmly in the red for the third successive year.

Laing O鈥橰ourke said it has now lost 拢206m on the Centre Hospitalier de l鈥橴niversit茅 de Montr茅al (CHUM) project, which the firm is delivering in joint venture with Spanish contractor OHL, after it racked up a 拢26.4m hit on the scheme in the year to March 2018.

This and the cost of completing the refinancing of the UK business (see box) helped send Laing O鈥橰ourke tumbling to a 拢43.6m pre-tax loss last year 鈥� although the figure was down on the 拢67m loss for 2017 and well below the 拢246m pre-tax loss it was forced to wear in 2016.

Finance director Stewart McIntyre, who signed off the accounts last Friday, said the firm had now drawn a line under the amounts it was haemorrhaging in Canada and added: 鈥淲e will make a pre-tax profit next year.鈥� The firm said it has an 拢8.1bn pipeline of work.

McIntyre said the firm was targeting more negotiated contracts and confirmed it was disappearing from tender lists as part of a strategy which is targeting gross margins of 10%.

鈥淲e will not trade at anything less than 10%,鈥� he said. Cutting the amount of competitive tendering would save it 拢15m a year and see it grow margins to around 5%.

鈥淲e鈥檙e confident we鈥檒l get there by being more efficient and selective,鈥� he told 黑洞社区. Around half of its 拢1.8bn UK turnover is now won through negotiated work with McIntyre adding it wanted to increase this percentage further.

The firm pulled out of bidding PFI deals more than two years ago after its chastening in Canada and on several schemes in the UK.

The firm sold its stake in the CHUM project for 拢32m during the period and has since sold a stake in a PFI hospital scheme in Dumfries & Galloway for 拢16.5m. It now only has two PFI stakes in the UK 鈥� a schools scheme in Yorkshire and the Alder Hey children鈥檚 hospital in Liverpool 鈥� which McIntryre said could also be sold.

McIntyre admitted the CHUM scheme had been the 鈥渟ingle biggest driver of losses over the last three years鈥� and said the issues it faced included working in a country it didn鈥檛 know for a client and architect it had never worked with before.

The firm also said it had lost just over 拢40m on a huge gas station job in northern Australia over a pay dispute with its Japanese partner which cost it 拢3m in legal fees during the period.

The contractor was building four cryogenic tanks at the LNG Tanks Project in Darwin for lead construction partner Japanese firm Kawasaki Heavy Industries. McIntyre said it has put in a number of claims on the scheme but arbitration, which began last June, may take up to three years to resolve.

McIntyre said the firm had been contingency planning for a no-deal Brexit, although added the impact would be 鈥渕inimal鈥�. Just over 16% of its 12,800 staff, down from 2017鈥檚 number of 15, 273, are from the EU 鈥� with close to a quarter of the 16% coming from Ireland who have settled status.

But McIntyre said it was 鈥渧ery disappointing鈥� UK business still had no idea over the terms of leaving the EU next month and warned against extending the deadline to leave. 鈥淚t just perpetuates the uncertainty,鈥� he said. 鈥淢y own view is there will be a deal of some sorts but it should have been sorted out by now.鈥�

Revenue at the group slipped from 拢3.2bn to just over 拢2.9bn with two thirds of this coming from its Europe hub, which includes the UK, UAE and Canada. Its Australian hub, headed by group chief executive Ray O鈥橰ourke鈥檚 son Cathal, saw workloads slip from 拢922m to 拢812m.

Having now filed its group accounts, Laing O鈥橰ourke, which is registered in Cyprus but whose ultimate parent is British Virgin Islands-registered Suffolk Partners Corporation, is expected to file accounts for its individual businesses, including its largest, Laing O鈥橰ourke plc, at Companies House over the next couple of weeks. These were due at the end of September, more than four months ago.

The group accounts also reveal that back in September 2017, Laing O鈥橰ourke changed where it is registered for tax from Cyprus to Jersey and McIntyre said it would switch its registered office from Cyprus to the Channel Island later this year.