The trading challenges arising from problem contracts in the UK (entered into prior to March 2014) and Canada was the primary reason for the disappointing group performance, Laing O’Rourke confirmed in its report and accounts for 2016 which are now publically available.
Profit after tax from joint venture companies fell from £1.2m in 2015 to a £86.8m loss, due entirely to a £93.1m write-down of a major construction joint venture in Canada, said the company, referring to its £1.3bn PFI hospital in Montreal built in a joint venture with Spanish contractor Obrascón Huarte Lain.
The report says: “The write-down in this contract was due to additional costs due to programme slippage, including damages payable after the original substantial completion date was not achieved.
“The client and the joint venture project team have now agreed to target substantial completion in the last quarter of the year ending 31 March 2017.
“Whilst the scale and complexity of this contract means the position is not without risk, management believe project progress together with recent alignment of programme with the client significantly derisks the company from further material slippage.”
The group also set out a more confident outlook for the year ahead. It said: “In the UK, following an assessment of the strength of our order book and demand across both construction and infrastructure projects, we are confident that our margin improvement plan will deliver the results anticipated in our business plan.
“The strength of our UK order book has allowed us to create stronger partnerships and client engagement, and improve our project selection process.”
