Chief executive and brother make move as part of refinancing completed earlier this month
Brothers Ray and Des O鈥橰ourke have gifted Laing O鈥橰ourke more than 拢58m in loans built up over the years as part of a refinancing deal agreed earlier this month.
The pair are the sole shareholders of the country鈥檚 biggest private contractor which is celebrating its twentieth anniversary this month, two decades on from the transformational deal which saw their concrete business buy up one of the country鈥檚 marquee contracting names, Laing Construction, for 拢1.
The Hinkley Point C contractor鈥檚 latest report and accounts said that O鈥橰ourke, the firm鈥檚 chief executive, and younger brother Des, its group deputy chairman, have agreed to allow 拢58.3m of loans to be turned into equity 鈥� although a further 拢13.7m the two have handed the business through a property loan has been retained.
Chairman Sir John Parker said the O鈥橰ourkes鈥� move demonstrated 鈥淸their] confidence in the performance and trajectory of the business鈥� and came on the same day the firm negotiated a new 拢35m refinancing facility with sole lender HSBC.
The news emerged as Laing O鈥橰ourke said revenue in the year to March 2021 edged up 2% to 拢2.5bn although pre-tax profit slipped 9% to 拢41.4m.
Laing O鈥橰ourke paid off 拢56m of debt in its last financial year and a further 拢126m since with the previous 鈥渃omplex鈥� refinancing spread across five different lenders now swapped for a new deal.
Chief financial officer Rowan Baker said the HSBC loan is unsecured meaning the firm is not subject to as much interference from lenders as before.
鈥淸The previous refinancing] was a complex structure and because it was secured, we needed permission to do anything more than just run the business,鈥� she added.
The firm said the new deal incentivises or penalises Laing O鈥橰ourke depending on its progress against sustainability metrics such as reducing carbon intensity, diverting waste from landfill and increasing the number of women in project delivery.
The previous refinancing was first agreed in 2016 with the 拢177m deal, renewed again three years later, struck at the height of its problems on its loss-making PFI hospital scheme in Canada on which losses again went up last year 鈥� by 拢5.5m to now stand at a cumulative 拢214m, with the firm having last year said it wasn鈥檛 expecting any more.
Baker said it was close to drawing a line in the sand on the hospital which has been open since 2017 with the second phase of work completed in April this year by local Montreal contractor Pomerleau.
Chairman says firm 鈥榓dopting practices of listed company鈥�
In August, Laing O鈥橰ourke founder and chief executive Ray O鈥橰ourke said the firm was planning a stock exchange listing by 2024, bringing to an end more than 40 years of family control.
In his chairman鈥檚 statement in the firm鈥檚 latest report and accounts, Sir John Parker (pictured), a widely respected City veteran, said: 鈥淲e have made significant progress in developing governance standards that align with those required of a publicly listed company.
鈥淥ur focus has been on improving our processes and procedures; strengthening our corporate finance controls; and, importantly, sound administration and compliance. I am happy to report these are present and continue to be enhanced.鈥�
Asked if a float was inevitable, Rowan Baker, the firm鈥檚 chief financial officer, who spent nine years at the previously listed housebuilder McCarthy & Stone, said: 鈥淲e are ready for whatever option we take. I don鈥檛 think it鈥檚 inevitable we become listed.鈥�
She said investors needed to be encouraged by signs of progress on revenue growth and margin improvement, adding that the firm鈥檚 offsite factory was part of its attraction to would-be buyers of its shares.
The firm was also forced to shoulder a 拢14.1m increase in costs on a scheme in Scotland because of the impact of the covid-19 pandemic. It did not name the job but it is understood to be the Edinburgh St James Quarter retail scheme in the middle of the city with sites in Scotland enduring a tougher lockdown than those south of the border.
The firm, which made 150 job cuts last year, claimed 拢9.5m in furlough payments under the government鈥檚 Coronavirus Job Retention Scheme although all staff have been back at work since last summer.
Baker added: 鈥淲e used the 拢9.5m as it was intended and we are not in any position where there is a consideration of paying dividends.鈥�
She said the firm was back to its normal levels of productivity and said it would take the prospect of future restrictions, prompted by rising cases in the UK, in its stride. 鈥淲e鈥檝e been operating in the covid environment successfully for several months. We think of it as business as usual.鈥� The firm is aiming for between 拢2.5bn and 拢3bn in its current financial year, she added.
Europe, which includes its UK, Canada and Middle East work, remains its largest business with a turnover of 拢1.6bn although this was down from the 拢1.8bn it posted last time. But pre-tax profit was up 27% to 拢70.4m.
Revenue at its Australia business, which is headed up by Ray O鈥橰ourke鈥檚 son Cathal, was up 39% to 拢890m while pre-tax profit edged up 拢700,000 to 拢27.3m. The firm said it had racked up a further 拢3.8m in legal bills 鈥� taking the total spent on lawyers to more than 拢10m 鈥� over a pay dispute with its Japanese partner on a huge gas station job in northern Australia.
The contractor was building four cryogenic tanks at the LNG Tanks Project in Darwin for lead construction partner Kawasaki Heavy Industries. The firm has lost just over 拢40m on the job which terminated in 2017.
Staff numbers at the year-end were 9,866, down from the 11,580 O鈥橰ourke had on its books the year before. The firm鈥檚 order book at the end of March stood at 拢7.9bn while net cash was up more than 拢120m to just over 拢276m.
It added that a VAT liability of 拢28.5m, which was allowed to be deferred by the government because of the pandemic, would be fully repaid by January next year.
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