Laing O’Rourke’s Profitable Comeback After a Tough Year

Laing O’Rourke, the UK’s largest private contractor, has returned to profitability after facing major challenges in fiscal year 2023. The company is now focusing on improving profit margins and securing long-term growth.

What happened

Laing O’Rourke posted a pre-tax profit of £18m for the year ending March 2024, rebounding from a £288m loss the previous year. The firm’s turnover grew by 19%, reaching £4.3bn. Their order book also hit a record £10.8bn, a £800m increase from last year.

• Pre-exceptional group revenue grew by 18.2% to £4.0bn.

• EBIT (Earnings Before Interest and Taxes) before exceptional items rose to £75.6m.

• Post-exceptional EBIT stood at £40.0m.

• The company’s net cash position reached £278.5m.

Why it matters

Laing O’Rourke's return to profitability demonstrates its resilience after a difficult FY23, which was marred by high inflation and problems with fixed-price contracts. The recovery reflects both strong performance in Australia and improved operational efficiencies in the UK.

Industry margins: CEO Cathal O’Rourke is aiming to increase margins to 5%, a figure higher than the current industry average of 2.5-3%. He warns that such low margins are unsustainable for the sector’s long-term health.

How they did it

The company shifted its focus away from single-stage lump sum projects and toward negotiated contracts and frameworks, which reduced risks and boosted profitability. Strong performance from the Australian business, which achieved margins of 4-5%, also supported the turnaround.

• Priority sectors such as healthcare, energy, rail, and data centers contributed to Laing O’Rourke's record order book.

• The company resolved issues with several problematic projects, such as the £600m Olympia scheme in London.

Yes, but...

Challenges remain, particularly in the form of ongoing legal disputes. Laing O’Rourke’s seven-year battle over a gas station project in Australia has cost it nearly £40m in legal fees, and the firm paid £36m after arbitration. Additionally, its Europe hub continues to face losses from a hospital project in Canada, with no improvement on the £219m loss it has incurred since 2016.

What’s next

Cathal O'Rourke plans to modernise procurement and contracting practices, pushing for better project margins through innovation and cost reduction. Upcoming projects, including the completion of Everton Stadium later this year, could bolster the firm’s reputation as it seeks future opportunities, potentially including Manchester United’s Old Trafford stadium.

Bottom line

Laing O'Rourke’s return to profit after a turbulent year is promising, but sustained growth will depend on improving margins, resolving legal disputes, and capitalising on high-profile future projects.