Latest £53.1M loss by European business will not dent contractor’s ambition to boost engineering capability and pioneer its digital engineering, design for manufacture and assembly (DfMA) approach.

Contractor Laing O’Rourke this week restated its commitment to driving innovation and investing new off-site modular construction techniques despite reporting “disappointing’ losses in its European business.

While the overall group reported a £20.1M profit after tax for the year to 31st March 2015, this was down on last year’s £41.9M result and was largely due to a strong performance in Australia which saw revenue grow to £1.5bn and profit climb to £76.5M.

“Our investment programme supports the development of construction techniques to deliver quality, certainty and value for our customers,” Ray O’Rourke.

In contrast the European business posted a £53.1M loss for the year on turnover of £2.4bn, highlighting three “first-generation DFMA (Design for Manufacturing and Assembly) UK construction contracts, adversely impacted by input cost inflation and delays in delivery using new construction methods”.  and contributed to the. 

“Significant lessons have been learned from these projects, all of which were secured during the recession,” the firm added, with group executive chairman Ray O’Rourke restating the firm’s commitment to investing in new and advance manufacturing techniques.

“Our investment programme supports the development of construction techniques to deliver quality, certainty and value for our customers,” explained group executive chairman Ray O’Rourke. 

“In May 2015, the Board ratified the Final Investment Decision to build and operate a new Advanced Manufacturing Facility alongside our existing factory at Explore Industrial Park in the East Midlands,” he explained. “The new facility will use intelligent design, precision engineering and fully automated processes to deliver modular solutions that will revolutionise house-building in the UK.”

Laing O’Rourke has invested heavily over the last seven years in its manufacturing facilities at Explore Industrial Park in Steetley and has boosted investment in expertise through its Engineering Excellence Group now led by former Buro Happold chief executive Paul Westbury.

“Significant lessons have been learned from these projects, all of which were secured during the recession,” Laing O'Rourke

The new £104M project to develop new techniques and products for the house building sector will sit alongside this exist facility at Steetley.

‘Laing O’Rourke will be highly selective in pursuing opportunities that align with our value proposition,” said O’Rourke. “We will focus on our engineering and manufacturing capabilities. We will create certainty for our customers from the earliest engagement.”

Group chief executive Anna Stewart added that the firm had expected a challenging two years as it worked through the portfolio of projects secured in recessionary times pointing out that the European results highlighted this challenge. 

“Our private ownership is supportive of the long-term ambitions of the business and we are confident our strategy is both attractive and commercially prudent, through the cycles,” she said. 

“Our profit after tax, at £20.1M on reduced managed revenue of £3.85bn, is however disappointing,” she added. “We expect the 2015/16 period to be equally challenging with margin improvements yielding enhanced financial performance in the 2016/17 year. Unfortunately, we are a three-year cycle business so will emerge from recession later than most other sectors.”

“It is difficult not to be excited by the increasingly attractive market opportunities, as our economies recover from the financial crisis." Anna Stewart

Former Kier chief executive Paul Sheffield was brought in in 2014 to run the European Hub business. 

Stewart concluded: “It is difficult not to be excited by the increasingly attractive market opportunities, as our economies recover from the financial crisis. Although uncertainty remains, particularly within Europe, and the UK’s relationship with Europe, the Election outcomes in most of our geographies would seem to create the environment for medium to long-term stability.”