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Laing O’Rourke | Annual Review 201426

KEY PERFORMANCE INDICATORS

The Board uses a balanced range

of fi nancial and non-fi nancial

indicators across our business units

to measure the Group’s performance

against its excellence plus targets

and key Group Strategic Roadmap

(GSR) objectives, helping to guide

our thinking and decision making

at every stage of development

OUR GROUP STRATEGIC ROADMAP (GSR)Laing O’Rourke’s 2020 vision and longer-term mission of

building an enduring engineering enterprise of considerable

scale committed to excellence plus performance remains

in place as the long-term driver of all our strategic plans.

The GSR’s role is to better articulate and guide the

immediate next steps along this journey.

Our strategy is enabled through our commitment to

excellence plus performance. Excellence plus performance

encompasses four pillars around which our action plans

are being aligned:

• Engineering excellence;

• Human capital management;

• Financial performance;

• Business improvement.

MEASURING OUR PERFORMANCE


FINANCIAL PERFORMANCEThe Group sets stretching but achievable fi nancial performance

targets as part of its annual budget and planning process to

improve performance from both a cost and sales perspective

to drive appropriate fi nancial returns, with complementary

capital structures. These are derived from the Group’s

consolidated fi nancial statements.

0

2

4

6

8

10

1413121110

(£ billion)

ORDER BOOK

£7.4bn

7.4

8.2 8.2 8.28.1

Managed revenue

Total revenue

0

1

2

3

4

5

1413121110

(£ billion)

MANAGED REVENUE

£4.41bn

3.6

4.4

3.53.3

3.5 3.6

4.44.34.0

4.3

EBIT pre-exceptional items

EBIT post-exceptional items

0

20

40

60

80

100

120

1413121110

(£ million)

EARNINGS BEFORE

INTEREST AND TAX

£60.1m

53

6067

4034

58

78

5451

110

Defi nition: Order book represents

the amount of outstanding

work on secured contracts.

It is a key measure of our

success in winning new work

and also provides visibility of

future earnings.

Performance: The Group order

book declined to £7.4 billion

(2012/13: £8.2 billion). Half of

the decline is attributable to

adverse foreign exchange

movements, primarily the weaker

Australian dollar. The remaining

decline refl ects the Group’s focus

on high-quality, profi table work

rather than volume, in targeted

key sectors such as oil and gas

exploration and processing and

mining in Australia, and

infrastructure in the UK.

Defi nition: Managed revenue

represents the amount of sales

generated from the provision

of engineering and construction-

related services, including

the Group’s share of joint

ventures, associates and

inter-segment sales.

Performance: Managed revenue

increased by 0.5 per cent

to £4.41 billion (2012/13:

£4.39 billion), with continued

growth in our Australian business

and a return to growth in the UK,

refl ecting increased activity in

the UK market and the resilience

of our integrated business model.

Reported managed revenue was

adversely affected by the weaker

Australian dollar and at constant

exchange rates managed revenue

was up 5.2 per cent. Our platform

in Canada continues to develop

and is well placed for future

growth. Market conditions

in the Middle East remain

relatively challenging.

Defi nition: Earnings before

interest and taxes is a key

measure of the operating

profi tability of all revenue-

generating business units.

Performance: Earnings before

interest and taxes, prior to

exceptional items, declined by

23 per cent to £60.1 million

(2012/13: £78.4 million), refl ecting

the challenging market conditions

in the UK, where we continue to

see pressure on selling prices

despite the upturn in new tender

volumes, and the completion in

the prior year of higher-margin

projects won in a better

environment. Profi tability in our

Australian business continues

to improve, benefi ting from strict

bid criteria, delivery process

effi ciency and a focus on more

complex, higher-margin

engineering contracts.

Defi nition: Net funds position

at the year-end is a key factor

in evaluating the Group’s cash

and liquidity position. The Group’s

capacity to generate positive net

cash balances is an important

measure of its ability to invest

in business growth and serves

as a strong attractor to

outside investment.

Performance: The Group ended

the fi nancial year with gross

cash of £691 million (2013/13:

£714 million) and net funds

of £409 million (2012/13:

£440 million). The decline is

largely due to adverse foreign

exchange movements on the

translation of Australian dollar

balances. On a like-for-like local

currency basis, our net funds

position increased slightly,

refl ecting our continued focus

on strong cash management and

a prudent investment strategy.

The Group’s strong cash

performance has been achieved

while maintaining alignment to

the UK Government’s Prompt

Payment Code and our creditor

days outstanding reduced in the

year. In April 2014 the Group

committed to the Construction

Supply Chain Payment Charter.

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Gross cash

Net funds

0

100

200

300

400

500

600

700

800

1413121110

(£ million)

CASH BALANCES

£691m

409

691

270 283321

440

714

601619

716


KEY PERFORMANCE INDICATORS CONTINUED

HUMAN CAPITAL MANAGEMENTThe Group’s pursuit of excellence plus fi nancial and operational

performance is dependent on the quality and commitment of

its people. It is critical that the Group attracts, develops and

retains the best talent to ensure project delivery within the

tight tolerances of quality, time, cost, safety and sustainability

required by clients.

BUSINESS IMPROVEMENTWe are refi ning our business systems and processes to

optimise our assets, capabilities and risk appetite. By working

according to our governance framework and complying with the

high standards set out in our Global Code of Conduct, the Group

will sustain long-term business success.

The elimination of all accidents from our business is an

objective of the highest strategic signifi cance. Our health and

safety performance determines our strength as a business.

It is not an isolated measure but one that defi nes our success

in all other areas of our operations. For this reason, it is

central to business improvement – a precondition of our

continued growth.

ACCIDENT FREQUENCY

RATE

0.18

PROFIT PER HEAD

£9,960

Defi nition: Accident Frequency

Rate (AFR) is an industry-standard

measurement equivalent to one

reportable lost-time incident

resulting in more than three

working days’ absence per

100,000 hours worked.*

The Group’s health and safety

approach is aligned globally.

Performance: AFR improved to

0.18 in the year (2012/13: 0.21).

This refl ects an industry-leading

performance relative to our

peers, validating the investment

in leadership time and resources

given to all aspects of safety

management. Sadly, however,

there was a fatality on one of

our projects. On 6 November

2013 an incident occurred at the

construction site of the Francis

Crick Institute in London causing

the death of 31-year-old

metalworker Richard Laco.

Our ability to protect the health

and safety of everyone involved

in or affected by our operations

is, we believe, the single most

important measure of our value.

Harm of any kind in our

workplaces – especially the loss of

a life – is a matter for the deepest

regret, shared by colleagues in

every part of the business.

EMPLOYEE

ENGAGEMENT

64%

TRAINING SPEND PER

EMPLOYEE

£1,424

Defi nition: Profi t per head is

earnings before interest and tax

divided by the average number

of salaried staff, and is a key

measure of operating effi ciency.

Performance: Profi t per head

decreased to £9,960 (2012/13:

£12,800) largely as a result of

the reduction in profi tability

caused by margin pressure

in the UK alongside continued

investment in the Group’s

engineering excellence and

DfMA strategies. Overall staff

effi ciency remains high,

demonstrated by the underlying

increase in managed revenue.

The Group took decisive action

in rightsizing the organisation

following the global fi nancial

crisis and continues to drive

operational effi ciencies, with

further reductions in overheads

in the year. However, we expect

gross margins to remain tight

in the UK as cost infl ation

becomes more of a factor.

Defi nition: Employee

engagement is an

all-encompassing metric

which determines the level

of understanding and

commitment of the Group’s

employee base to our

strategic goals, and hence

provides a direct correlation

to service levels, client

satisfaction, business growth

and fi nancial performance.

We increasingly use our

employee engagement survey –

SHAPE – to assess individual

motivation and organisational

processes in this regard.

Performance: Employee

engagement is measured

every other year and in the

last survey was 64 per cent.

This compares to a global norm

of 57 per cent and once again

places us in the top quartile

of global high-performing

companies for the motivation

and commitment of

our workforce.

Defi nition: Training investment

per employee is an important

indicator of the Group’s

commitment to developing the

knowledge, skills and abilities of

its people to deliver its strategic

objectives and drive up company

performance through increased

productivity. Formal training

programmes also help each

employee perform their current

job more safely and effectively,

and are therefore viewed as

a benefi t. Training also increases

loyalty, and thus retention, and

helps the Group attract the best

possible employees from the

external marketplace. The metric

is computed by dividing the total

Group training spend by total

headcount, defi ned as all directly

employed staff and operatives.

Performance: The Group’s

industry-leading commitment

to building the skills and

capabilities of its workforce is

refl ected in the level of training

investment per employee of

£1,424, up 14 per cent on the

previous year (FY13: £1,244).

By way of example, the metric

justifi es our in-depth safety

training initiatives, because

developing the capabilities of

the workforce by providing staff

and operatives with the additional

skills to positively resolve safety

confl icts at source and assure

the delivery programme

enhances our productivity

and competitiveness in

the marketplace.

* On 1 October 2013 the threshold for reporting in the UK was raised from three to seven days. Laing O’Rourke continues to observe the previous more stringent regulations.


Defi nition: Repeat business*

ratio is the value of external

contracting turnover in the year

generated from repeat clients

as a proportion of total external

contracting turnover in the year.

It is a measure of client

satisfaction and a driver of

revenue and earnings growth

as retention drives an increase

in the lifetime value of a client,

reduces marketing costs and

provides key insights into

client behaviour, which drives

continuous improvements in

our business offering.

Performance: Repeat business

declined to 67 per cent of our

revenue (2012/13: 71 per cent),

with the Europe Hub accounting

for this small decline. In both

the European and Australian

businesses we have seen a shift

into new sectors with new clients,

refl ecting the Group’s strategy

of focusing on higher-margin,

complex engineering projects

in infrastructure sectors, which

has had the impact of diluting the

repeat business ratio. We aim to

achieve ‘trusted delivery partner’

status with our key clients,

through our unique business

offering (UBO) and the quality

of Laing O’Rourke’s delivery.

Defi nition: ‘Right fi rst time’ is

a measure of output quality from

our manufacturing facilities and

is calculated as the number of

products produced less those

rejected for quality or non-

conformance. It is a key measure

of operational effi ciency and

effectiveness as the impact on

projects of defective products

– in terms of client satisfaction

and the costs and delays of

rectifi cations – can be substantial.

Performance: 96 per cent of

products in our UK manufacturing

facilities and 98 per cent of

products in our Australian

facilities are approved as

‘right fi rst time’ output. This

fi gure is vastly in excess of what

can be achieved using traditional

in-situ construction and

demonstrates the value of

our Design for Manufacture

and Assembly strategy.

As our manufacturing capability

continues to grow, we expect

not only to improve this ratio,

but also to increase the proportion

of our business utilising

manufactured components to

continue to drive improvements

in quality and effi ciency.

Defi nition: Digital engineering

(DE) delivers an integrated set

of geometric models, data and

documentation that builds over

the life of a project to capture all

knowledge related to that project.

Utilising our experience gained

over many projects, DE will give

our clients confi dence in our

abilities by demonstrating our

understanding of the complexity

of the construction process, risks,

logistics and programme, thereby

enhancing our reputation for safe

delivery on time and to cost at the

required quality.

Performance: Our deployment

of digital engineering has

accelerated in pace and execution

and is now across our global

business. In our tendering activity

we now deploy a level of DE on

all projects and have completed

117 projects using DE since 2009.

We have invested signifi cantly in

developing our DE capability

across all delivery functions,

with over 1,900 staff completing

software training and over 170

case studies now available to staff.

DE supports our Design for

Manufacturing and Assembly

agenda and we now have over

2,000 components digitally

manufactured at our Explore

Industrial Park facility.

DE has become the ‘way we go

to work’, providing a greater level

of assurance and predictability of

outcome to our clients.

Defi nition: All of our key clients

have a dedicated Client

Relationship Manager. Client

satisfaction data is collected from

key clients relating to the Group’s

operational performance on

projects as part of Core Process.

This provides clients with an

opportunity to share their views

on strengths and weaknesses

in the Group’s delivery approach

and supports our continuous

improvement process by allowing

us to track and manage client

engagement and drive further

improvement across all aspects

of our business.

Performance: The Group’s

goal is an overall year-on-year

improvement in client

satisfaction on its major projects.

These metrics are contract-

specifi c and subject to variations

in interpretation, therefore

Group-wide aggregated data is

not presented.

Processes for the tracking and

reporting of customer service

KPIs differ by geography.

An example is given for the UK,

representing the largest operating

region in the Group, where the

client satisfaction level is a

material representation of the

wider business. In the most recent

feedback from seven of our key

UK clients, representing current

major projects totalling over

£1.7 billion, Laing O’Rourke

scored an average of 8.5 out of 10,

(or 85 per cent) customer service.

ENGINEERING EXCELLENCEThe Group’s desire is to fully understand the needs of its

clients and deliver on its promises throughout the life of the

engineering and construction services provided. Engineering

excellence is fundamental to our strategy – through extensive

deployment of our unique business offering (UBO) embracing

the innovative Engineering Excellence Group (EnEx.G), digital

engineering technologies, Design for Manufacture and

Assembly (DfMA) methodologies and integrated self-delivery

capabilities, across all our key sectors and markets.

To assess progress towards our aim of achieving engineering

excellence, we are monitoring the use of DfMA and digital

engineering across our projects. We also use repeat business

and qualitative client satisfaction survey results as key

indicators of our engineering and delivery performance

on client projects.

REPEAT BUSINESS

67%70% – EUROPE HUB

63% – AUSTRALIA HUB

QUALITY

96-98%RIGHT FIRST TIME ACROSS

OUR GLOBAL

MANUFACTURING FACILITIES

DIGITAL ENGINEERING

DEPLOYMENT

117117 PROJECTS COMPLETED

USING DIGITAL

ENGINEERING SINCE 2009

CLIENT SATISFACTION

85%

* ‘Repeat clients’ represents clients with whom we have a previous relationship, having delivered more than one project. All healthcare and education projects in the UK have been aggregated under National Health Service and Department for Education respectively.

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GROUP FINANCIAL REVIEW

INVESTING FOR FUTURE GROWTH

We will continue to strengthen

the relationships with our

clients through further

development and refi nement

of our unique business

offering and increasing the

effectiveness of our fi nancial

and human resources.”

CALLUM TUCKETT

GROUP DIRECTOR, FINANCE AND COMMERCE


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Laing O’Rourke has maintained focus on its established

objective to deepen capability as an integrated engineering

enterprise. Our focused investment in innovation through

the Engineering Excellence Group (EnEx.G), digital engineering,

Design for Manufacture and Assembly approach and our

specialist direct delivery businesses is beginning to have

a signifi cantly positive impact on the way we deliver value

and benefi t to our clients. We also continue to diversify

geographically with a renewed emphasis on northwest Canada

and Australia, coupled with further investment in key sectors

including oil and gas, power and accommodation, particularly

the private rental and social housing markets in the UK.

It is our fi rm belief that a cross-industry commitment to

meaningful investment in research and development is required

to improve and advance the products and services it offers

to clients. A material increase in these levels of investment

will also further mitigate the risks associated with resource

shortages and strengthen the relative attractiveness of

our industry to the best talent from universities, colleges,

schools and apprenticeship schemes.

Despite the continuing economic pressures, we have also

continued to increase investment in our strategic training

and development programmes. Our sustainable approach

covers entry-level trade apprenticeships, through to cadet,

graduate, management training, Young Guns and Guns

leadership development, alongside the technical and

professional development courses. This level of Group spend

directly supports strategy implementation, as well as continuing

to develop the capabilities of supply chain partners who work

with us, and ensuring we offer something different and more

valuable to clients.

The Group continued to deliver a strong cash performance

and consistent overall fi nancial performance in 2013/14,

despite the negative translation impact of the weaker

Australian dollar. Managed revenue increased 0.5 per cent

to £4.41 billion; however, total revenue declined 0.3 per cent

to £3.57 billion. These fi gures were adversely impacted by

foreign exchange movements in the trading period. On a

like-for-like basis, applying foreign exchange rates from

the previous 2012/13 trading period, managed revenue

increased over 5 per cent. Profi t after tax of £41.9 million

has been delivered, up slightly from £41.1 million in 2012/13.

This is supported by a strong cash performance with net cash

of £409 million down from £440 million in the previous year.

Although marginally lower than 2013, in the context of the

current market conditions this can be considered a strong

outturn relative to our tier-one peer group.

There has been the anticipated tightening of gross margins,

with pre-exceptional gross margin down from 8.7 per cent

(restated for IFRS11) in 2013 to 8.5 per cent, resulting in a

£9 million reduction from £291.4 million to £282.4 million.

This has been offset by a reduction in overheads from

£226.8 million to £219.0 million generating a fl at operating

profi t performance of £65.7 million pre-joint ventures and

exceptional items. The contribution from joint ventures has

fallen back in the year; however, this has been offset by a

lower level of exceptional costs and a lower tax charge.

GROSS MARGINGross margin pre-exceptional items reduced from 8.7 per cent

(restated) to 8.5 per cent as a result of lower margins in the

European business. Whilst the outlook in the UK economy

is more positive and activity levels are beginning to pick up,

market conditions remain challenging and pricing levels are

very competitive. Additionally a number of major profi table

projects were completed in the prior year and this has further

contributed to the margin reduction. A highly selective and

rigorous approvals process continues to be applied to our

pipeline of projects to bid and although this does put pressure

on the order book we believe that this will reduce the impact

in future years of the challenging market conditions that

currently exist.

We are also growing capability in more profi table sectors

including oil and gas, power and accommodation to drive

more sustainable margins moving forward. In contrast,

the Australian business has benefi ted from the strategic

re-balancing of its project portfolio away from an over-reliance

on the traditional building sectors towards more complex

projects in economic infrastructure, including oil and gas

and mining. Our focus on generating diversifi ed sources of

revenue from both a geographic and a sector perspective

should help us maintain our profi table performance

notwithstanding the pressures felt in the European markets.

CASH FLOW AND BORROWINGSThe Group ended the fi nancial year with gross cash of

£691 million down from £714 million (restated) and our net

cash reduced from £440 million to £409 million. The weaker

Australian dollar adversely affected gross cash by £52 million;

however, on an underlying basis excluding currency effect,

gross cash increased. We believe that this is a strong

performance in the current market and indicates the

underlying strength of these results and our business model.

We anticipate cash will come under continued pressure over

the next few years; however, our sales and planned sales of

non-core assets and refi nancing of debt facilities will help

mitigate any negative cash impact. Our average month-end

cash balances are healthy and at the year-end the Group had

undrawn credit facilities of £81 million.


GROUP FINANCIAL REVIEW CONTINUED

Gross debt remained broadly fl at in the year; however, the

underlying mix has changed, with a reduction in non-core

property-related debt and an increased investment in core

operational plant assets. Debt held in relation to property

developments reduced by £93 million, primarily as a result of

the completion of the McLachlan and Ann Street development

in Brisbane and planned repayments on our UK property facility.

Disposal of non-core assets is progressing well allowing us

to achieve carrying value or better, and we remain confi dent

the targeted balance will be sold during the 2014/15 period,

facilitating repayment of the associated debt.

Joint venture borrowings solely relate to non-recourse debt

within Public Private Partnership (PPP) and Private Finance

Initiative (PFI) investments in which the Group participates.

The Group supports prompt payments to suppliers and has

consistently been amongst the industry leaders in its standard

payment terms. As such we welcome and have committed

to the UK Government’s Construction Supply Chain Payment

Charter which has been agreed by the Construction Leadership

Council (CLC), the body set up to deliver the government’s

industrial strategy for construction.

ORDER BOOKThe Group order book reduced to £7.4 billion (2013/14:

£8.2 billion). The reduction is partially due to a foreign exchange

impact of £0.4 billion following translation from the weaker

Australian dollar to the UK sterling denomination. Europe

has maintained its order book at £5.5 billion; however, the

combination of the translational effect and slowing oil and gas

and mining sectors has reduced the Australian order book to

£1.9 billion from £2.6 billion.

In volume of activity terms, the European market is growing

stronger; however, we need to remain cautious as trading terms

remain under pressure following the recent deterioration as

supply chain pricing recovers, therefore we will continue to be

extremely selective in our bidding processes. The Australian

market profi le is changing and we have identifi ed signifi cant

opportunities in the infrastructure markets that play to our

strengths. As a result we have further strengthened our

leadership team in Queensland and Victoria, and are investing

in work-winning to secure further work in these more buoyant

geographies. We also continue to benefi t from high levels of

repeat business, with an increasing number of major clients

choosing to negotiate directly with us to gain exclusive

access to our capabilities in engineering excellence, digital

engineering, Design for Manufacture and Assembly and

direct delivery.

COST MANAGEMENTThe Group continued to focus on improving the cost effi ciency of

its operations, and overheads have reduced from £226.8 million

to £219.0 million in the year. We have sustained additional

overhead investment in developing sector expertise and staff

training in the business units, with further global investment

planned in the EnEx.G and digital engineering function. We

believe these levels of investment spend exceed those made

by others in the industry, and remain confi dent they will deliver

the targeted benefi ts and act as one of the main catalysts for

the implementation of our strategy.

TAXATIONThe Group tax charge for 2013/14 is £10.0 million on profi t

before tax of £51.9 million, which equates to an effective tax

rate for 2013/14 of 19.3 per cent. This is below the UK corporate

tax rate of 23 per cent due to the mix of profi ts generated in

different jurisdictions.

PENSIONSThe Group operates a number of pension schemes with leading

industry providers in Europe and Australia. These are defi ned

contribution schemes and as such there are no outstanding

pension liabilities.

INSURANCEInsurance broking globally is consolidated with Marsh, given

its technical expertise in underwriting engineering-based

projects, combined with international market coverage.

During 2013/14 the Group continued to experience low levels

of claims, although we carefully monitor the balance between

insurance risk retained by the Group through its insurance

captive, and that which we purchase in the external market. Our

insurance profi le closely tracks and correlates with our safety

performance, which this year improved further with a rolling

Accident Frequency Rate (AFR) of 0.18. We remain comfortable

with the level of insurance risk we are carrying internally.

EXCEPTIONAL ITEMSTotal exceptional costs before tax of £6.7 million have been

recognised in the year. The Group continues to monitor

its exposure to development assets and this charge is a

non-cash impairment against this portfolio.

Further details are provided in note 4 to the fi nancial

statements.

GOODWILL AND INTANGIBLE ASSETSThe Group carries £328 million of goodwill in the consolidated

balance sheet. Goodwill is not amortised under International

Financial Reporting Standards, but is tested annually

for impairment.


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In accordance with IAS 36, the recoverable amount has been

tested by reference to four-year forecasts, discounted at the

Group’s estimated weighted average cost of capital. As at

31 March 2014, based on the internal value-in-use calculations,

the Board concluded that the recoverable value of the cash-

generating units exceeded the carrying amount. Details of

this test can be found in note 13 to the fi nancial statements.

FINANCE AND TREASURYThe Group maintains suffi cient fi nancial capacity to support

its long-term contracting commitments and accommodate

future economic and operational challenges. The quantum

of the cash and committed credit lines to which the Group

has access to satisfy the current and future funding

requirements of the Group’s business plan totalled

£772 million (2012/13: £873 million).

The Group’s centralised treasury function has prudently

managed the Group’s liquidity, funding and fi nancial risks

arising from movements in areas such as interest rates

and foreign currency exchange rates.

The Group continues to review its credit support requirement

and broaden its base of key fi nancial stakeholders, including

key banking relationships and surety bonding providers who

support our long-term strategic growth agenda.

We will continue to ensure our treasury policy is appropriate

for the scale, complexity and operating environment of our

business. We will further develop our credit support capacity

in line with the requirements of our core markets and to ensure

we are optimising the Group’s signifi cant cash position.

RISK AND ACCOUNTING POLICIESThe Group’s risk management framework and processes are

largely unchanged from 31 March 2013. The Board continuously

assesses and monitors risks affecting the Group, and the

Chairman’s Statement, Group Chief Executive’s Review and

Hub operating reviews include consideration of the relevant

uncertainties affecting the business. Further details of how

the Group has managed key fi nancial and operational risks

such as credit and liquidity risks are set out on pages 78 to 82.

As an EU-domiciled company, Laing O’Rourke reports

its consolidated fi nancial statements in accordance with

International Financial Reporting Standards as adopted

by the European Union and the Cyprus Companies Law,

Cap 113. The Group’s signifi cant accounting policies

and measures are explained in the Notes to the Financial

Statements on pages 101 to 135.

During the year the Group adopted IFRS 11 Joint Arrangements

(and associated standards, see note 2.3) and as a result

presents restated comparative fi gures for the year ended

31 March 2013.

CONCLUSIONThe Group has continued to focus on its core business,

disposing of non-core assets and building internal capability

through our specialist businesses whilst continuing to invest

in our unique business offering (UBO) to clients. Our globally

diversifi ed revenue and profi t sources are well balanced and we

are working to extend our sector diversifi cation. The European

market continues to be challenged by diffi cult trading terms

and the Australian market in oil and gas and mining has

become more muted. We have anticipated these changing

market dynamics and are putting in place effective plans to

address these challenges and their implementation is on track.

Our Board continues to review our capital structure and we will

always consider more effi cient options that are aligned to our

operating model. At present we are satisfi ed that we have an

appropriate structure, well balanced cash fl ows, acceptable risk

exposure to the supply chain, and a high-quality order book,

which taken together are providing suffi cient fi nancial resources

to meet today’s requirements and fund future growth.

We will continue to strengthen the relationships with our

clients, through further development and refi nement of our

UBO and increasing the effectiveness of our fi nancial and

human resources. Establishing and consolidating deeper and

longer-term relationships with major clients and supply chain

partners across high-value sectors and markets provides

greater confi dence in the validity of our strategic direction.

As a result, the Board has considered the Group’s fi nancial

requirements, based on current commitments and its

secured order book as well as the latest projections of

future opportunities, against its banking and surety bonding

arrangements and has concluded that, despite continuing

uncertainty in the global economic outlook, the Group is

well placed to manage its business risks and meet its

fi nancial targets successfully.

CALLUM TUCKETT

GROUP DIRECTOR, FINANCE AND COMMERCE


HUB PERFORMANCE

EUROPE HUBCANADA

SAUDI ARABIA

UNITED ARAB EMIRATES

UNITED KINGDOM

Our future focus will remain very much in

markets and sectors where enlightened

customers’ preferred procurement routes

and working practices all play to our core

strengths and values as an integrated

engineering, construction and asset

management provider.”

ANNA STEWART

GROUP CHIEF EXECUTIVE

HEATHROW TERMINAL 2AOpened by HM the Queen in

June 2014, Heathrow’s iconic

new Terminal 2A was a

£2.5 billion project, delivered

as a joint venture of Laing

O’Rourke and Ferrovial

Agroman, utilising our DfMA

strategy and digital engineering

throughout. The adjoining

multi-storey car park was

constructed solely by

Laing O’Rourke.

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FINANCIAL HIGHLIGHTS

Managed revenue

£2.6bnOrder book

£5.5bnGross margin

9.5%

GROUP STRATEGIC ROADMAP

(GSR) NEAR-TERM PRIORITIES

• Build repeat business customer relationships based

on early engagement and delivery certainty of our

proven business proposition.

• Leverage the scale and effi ciencies of our vertically

integrated delivery model using preferred

procurement routes.

• Selectively extend our international coverage in Canada

focused primarily on sectors with the right strategic fi t,

building on existing global expertise in oil and gas.

• Enhance technological and digital engineering

capabilities to assure delivery of complex,

multidisciplinary projects.

• Control costs and improve operational and

fi nancial performance.

• Drive forward our Mission Zero safety agenda and

‘Engineering Sustainable Futures’ programme.

6

1 2

34

5

8

7

11

10

9

UNITED KIN

GD

OM

SAU

DI ARABIA

CAN

ADA

UNITED ARAB E

MIR

ATE

S

UNITED KINGDOM

1. CARDIFF

2. DARTFORD

3. EXPLORE INDUSTRIAL

PARK, WORKSOP

4. MANCHESTER

5. MOTHERWELL

UNITED ARAB EMIRATES

6. ABU DHABI

7. DUBAI

SAUDI ARABIA

8. RIYADH

CANADA

9. CALGARY

10. TORONTO

11. VANCOUVER

Our Europe Hub comprises

Laing O’Rourke’s operations in key

building and infrastructure sectors

covering principal markets in Canada,

Saudi Arabia, the United Arab

Emirates and the United Kingdom

The Group is one of the leading engineering and construction

solution providers in its chosen sectors. Our aim is to leverage

the scale and effi ciencies of our unique business offering (UBO)

and vertically integrated delivery model to generate profi table

revenues in our core markets, collaborating with like-minded

partners. We will complement this approach by building leading

positions in selective growth-oriented sectors and geographies

with the right strategic and cultural fi t.

PRINCIPAL OFFICES


HUB PERFORMANCE CONTINUED

FINANCIAL PERFORMANCE OVERVIEWThe Hub posted a good managed revenue performance of

£2.6 billion (including share of joint ventures and associates),

maintaining the performance of the previous year (2012/13:

£2.6 billion), with pre-exceptional earnings before interest and

tax of £47.1 million (2012/13: £67.1 million). This fall can be

attributed to the continuation of diffi cult trading conditions in

the UK building market, coupled with strategic investments

made in our Engineering Excellence Group (EnEx.G) and

sector-led work-winning approach to bolster our bid-to-win

ratio in future years. It is also important to note that 2012/13

profi ts benefi ted from a number of contracts in the fi nal stages

or completing that year, with favourable outturns triggering

bonus incentive payments. There was good underlying growth

in Infrastructure, Crown House Technologies and Select Plant,

partially offset by reductions in the UK Construction business.

The Construction business had a solid performance overall,

although a small number of productivity issues on joint venture

projects affected profi tability during the period.

The increasing penetration of our UBO has also helped us

maintain operating margin at the project level despite coming

under pressure from supply price infl ation. We have continued

to maintain selectivity and avoid bidding for lower-margin

work at a time when price competition in the market remains

intense. We further enhanced our ‘permission to bid’ criteria,

basing our UK activities progressively on our specifi c

sectors where the combination of digital engineering,

DfMA methodologies and integrated delivery provides the

greatest value potential.

We continued to focus on controllable costs as we removed

functional duplication in the delivery business units, specifi cally

through the creation of the Specialist Trading Business Group,

helping to reduce overhead strain. At the year-end the Hub

maintained its order book at £5.5 billion, with £2.4 billion of

new work won during the period, maintaining long-term

revenue visibility of 82 per cent for 2015, 34 per cent for 2016

and 16 per cent for 2017. We have invested in sector specialists

and associated marketing resources to rebuild future workload

beyond 2015 and, encouragingly, our medium-term pipeline of

higher-certainty opportunities includes signifi cant prospects

in Canada, the Middle East and the UK. In addition, at the

year-end, we had a pipeline of ‘in-bid’ opportunities worth

approximately £7.3 billion.

Accommodation 5%

Commercial 15%

Social Infrastructure 40%

Transport 11%

Utilities & Waste 4%

Power 25%

EUROPE 2014 ORDER BOOK BY SECTOR

OPERATIONAL PERFORMANCE OVERVIEWSafety will always be the Group’s number-one priority. During

the year, the Safety and Sustainability Committee implemented

a series of business interventions to improve safety compliance,

posting a rolling Accident Frequency Rate (AFR) of 0.16.

This creditable performance is one of many benefi ts we

derive from DfMA and our direct employment business model.

By controlling delivery of the major work packages on a project

through the use of in-house resources and offsite techniques,

our construction leaders directly infl uence the outcomes

‘on the ground’, mitigating many of the risks associated

with subcontracting through the supply chain, where there

are wide variations in standards and practices.

A range of new initiatives was launched to support our

Mission Zero objective to eradicate all accidents from our

business by 2020. A number of our clients are also seeing

the direct benefi t of adopting our approach in their own

business activities, and we are beginning to see tangible

examples of this behaviour-based methodology being applied

more widely across the industry.

Our core UK-based engineering and construction businesses

all performed in line with expectations, continuing to deliver

profi t-generating revenues despite the ongoing market

diffi culties. The 2013/14 reporting period has been another year

of productivity improvement across our manufacturing facilities,

with a concerted focus on the effi ciency, quality and safety of

our operations. We increased production volumes with a

corresponding improvement in labour effi ciency, as clients

increasingly recognise the incremental value offered by our

DfMA proposition. We still have a long way to go to achieve

the full potential of its wide scale adoption, but the direction

of travel remains positive.

We have also added to our capabilities in complex geotechnical

and civil engineering solutions through our Expanded division,

to support project delivery activities and provide competitive

advantage in bidding for new opportunities.

GLASS REINFORCED

CONCRETE UK LIMITED

In March 2014 Laing O’Rourke acquired Glass Reinforced

Concrete UK Limited, one of the UK’s leading providers

of bespoke architectural glass reinforced concrete

(GRC) products. The acquisition strengthens

Laing O’Rourke’s manufacturing portfolio.


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In Manufacturing we increased our expertise and delivery

capacity with the acquisition of Glass Reinforced Concrete

UK Limited, one of the UK’s leading specialists in bespoke

architectural glass reinforced concrete products, making it

a wholly owned subsidiary of the Group. The factories also

delivered a strong operating performance, with major

productivity gains at Explore Industrial Park, as it consistently

achieved £1 million of product being detailed, manufactured

and ready for despatch on a weekly basis. Aligned to this, the

range, scale and complexity of products being manufactured

have grown as expertise and capability within the factory

have expanded.

Crown House Technologies’ Oldbury offsite factory has also

seen a marked uplift in productivity through the introduction

of leaner, more effi cient working practices. This has helped

increase the number of mechanical and electrical modules

being produced, with over 150 completed units now being

produced at the West Midlands facility every week.

In September, Bison Manufacturing’s Uddingston facility was

recognised as a ‘Centre of Excellence’ for bespoke precast

concrete products following a £100,000 investment in the plant.

The investment, supported by £60,000 from Scottish Enterprise,

has been used to protect a minimum of 27 jobs and to purchase

new machinery, making the site more effi cient and equipped to

produce an even wider range of products for the Scottish and

wider UK construction markets.

During the year, Bison was also among the fi rst UK companies

to receive the BSI Certifi cate of Conformity for the factory

production control for precast concrete products against

internationally recognised standards of quality and service.

To achieve accreditation, Bison’s two plants in Uddingston

and Swadlincote were audited in June. For customers, the CE

mark is further proof of Bison’s competence and performance

capability which has been independently evaluated and thereby

reduces any performance or delivery risk for their projects.

Our approach to business development and work-winning

has once again served us well in the year. We have remained

disciplined in our selective sales strategy over the period.

The further strengthening and mandating of our Core Process

governance procedures in the tendering stages are proving

highly effective in securing profi table work that fi ts our strategic

growth criteria, as the continuing strength of our order book

has clearly demonstrated. This strategy was accelerated by

the further integration of our in-house cost planning activities

to maximise the return on the investment we are making in

state-of-the-art digital engineering technologies, moving us

beyond the limitations of Building Information Modelling to

provide clients with a more holistic asset information

management resource tool.

We are committed to our human capital agenda, and continue

to invest in the development of our people. During the year,

the Hub continued its focus on the recruitment and training

of young talent, with 567 people placed on our entry-level

and fast-track leadership programmes from trade apprentices

to graduate engineers. Our recently published employee

engagement score marks Laing O’Rourke out as one of the

highest-performing companies globally for the loyalty and

dedication of its people – once again demonstrating the

resilience and motivation that exist across the Group. We also

continued to support the Australia Hub by recruiting and

exporting sector expertise to seize the signifi cant business

development opportunities in this part of the business.

Laing O’Rourke’s brand has always been synonymous with

delivery quality and certainty, and during the year in review

we further enhanced our reputation for world-class client

solutions – on time, on budget and to the exacting quality,

safety and sustainability standards demanded.

THE FRANCIS CRICK INSTITUTE, LONDON

The Francis Crick Institute, which is due for completion in

2015, will be a world-class research centre and one of the

most signifi cant developments supporting biomedical science

for the UK for a generation. The LB2 basement plantroom,

which houses the majority of the plant for the building, was

a critical milestone for the project. Much of the installation

was built at Laing O’Rourke’s Oldbury factory with digital

engineering and DfMA playing a signifi cant part in

a sophisticated visual sequencing programme to

communicate this diffi cult and complex installation.



CANCER CENTRE, GUYS AND ST THOMAS

NHS FOUNDATION TRUST, LONDON

Laing O’Rourke broke ground on this £160 million project

in August 2013, demolishing two buildings, excavating

more than 135,000kg of material, uncovering and then

protecting a Roman boat, and drilled 42 metres into

the ground to lay foundations. The substructure was

completed in March 2014 with the project due for

completion in April 2016.

Towards the end of the year, work began on the new cancer

centre at Guy’s Hospital in central London, adjacent to the

Shard. Laing O’Rourke played a signifi cant role in selecting

design partners Rogers Stirk Harbour + Partners and Stantec

Medical Architecture as part of the RIBA contractor-led design

competition. The design centres on the concept of three

stacking ‘health villages’ within the scheme, separating the

‘Art of Care’ from the ‘Science of Treatment’, and is the fi rst

healthcare scheme in the UK to locate the LINAC radiotherapy

bunkers above ground. Digital engineering was used to

interrogate the design and ‘deep dive’ DfMA opportunities,

helping to reduce the time to construct the frame from

33 weeks to just 16 weeks.

In Wales, following successful delivery of enabling works

and full funding approval from the Welsh Government,

Laing O’Rourke has signed the contract for the new Llandough

Adult Mental Health Unit for long-term client Cardiff and Vale

University Health Board. At 20,000m² it will bring together all

general adult mental health inpatient services, as well as

specialist services for low secure, addiction, neuropsychiatry,

intensive care, and supportive recovery services. Flexible ward

design will respond to the needs of service users, including

access to single-sex sitting rooms and bedroom areas, garden

areas and therapeutic space.

The award of the project followed the successful completion

of the 586-space multi-storey car park, which was the fi rst

project to use the Laing O’Rourke Standard Option 1 solution

of 16m-long Bison hollowcore planks, Bison columns, stairs

and edge beams with Explore Manufacturing twin wall. The

solution eliminates the need for intermediate columns due to

the large span of the hollow core planks – creating an ‘open’

car park with good visibility and no obstacles on the decks.

SECTORAL PERFORMANCE

SOCIAL INFRASTRUCTURE

HEALTHCAREIn our core Construction business, we continued to secure

and deliver essential social infrastructure to transform the

health services footprint for many communities, further

enhancing our position as the UK’s leading provider of

healthcare infrastructure. This included the commencement

and completion of major construction phases of complex

hospital, healthcare and medical research facilities around

the UK.

The Group commenced construction of the future-proofed

Alder Hey PFI Hospital in Liverpool – the fi rst NHS health

park for children in the UK. With a scheduled delivery

programme of just 117 weeks, this will be the fastest major

hospital complex ever delivered by the Group. The project won

Infrastructure Journal’s Social Infrastructure ‘Deal of the Year’

and overall ‘Deal of the Year’ awards, with the consortium

being praised for the innovative fi nancing structure that was

specifi cally developed for the scheme.

The project is proving an exemplar for the Group based on

the deployment of major strategic elements of the UBO.

The integrated delivery approach is utilising structural panels

manufactured offsite at Explore Industrial Park and completed

by Expanded onsite. The modular mechanical and electrical

installations have also been completed ahead of schedule due

to earlier assembly and commissioning phases afforded by a

DfMA approach. This success has been further aided by digital

engineering, enabling the complex services to be designed

and ‘installed’ virtually before reaching site to reduce the

potential for interface clashes and the associated delays

these cause on traditional programmes.

Elsewhere in the UK, Laing O’Rourke is undertaking the

high-speed delivery of the West Cumberland Hospital.

The single biggest investment in healthcare for West Cumbria

in over half a century, this new £90 million redevelopment

topped out in November 2013, challenging local perceptions

and winning over local politicians with the speed and quality

of construction. The pace of delivery was achieved using

a DfMA precast concrete building envelope manufactured

offsite at Explore Industrial Park, which also helped to combat

the prevailing severe weather conditions in the region over

the winter season.

In November 2013, the Tyne Centre, Morpeth – part of the

Northumberland, Tyne and Wear NHS Foundation Trust’s

wider forensic learning disability service, providing specialist

multidisciplinary care and treatment for vulnerable men –

was opened to the public by the Duchess of Northumberland.

It was awarded ‘most innovative and forward-thinking project

delivered through the Procure21 and Procure21+ frameworks’,

at the 2013 Building Better Healthcare Awards.


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Elsewhere in Wales, signifi cant progress was made during

the year on the redevelopment of the existing hospital estate

in North Wales, including the completion of the new-build

mortuary and pathology, and accident and emergency

extensions. The overall project involves refurbishing 30,000m²

of existing clinical space, over fi ve fl oors of a general district

hospital. The scheme is split into two distinct parts: new-build

elements providing mortuary building, pathology building and

a new-build accident and emergency extension, and full

internal refurbishment of all existing hospital areas to provide

new clinical facilities for patients and staff. The project received

Gold at the Green Apple Awards for the sustainability practices

being deployed.

Signifi cant milestones were also reached on the programme

of works for the redevelopment of the Bristol Royal Infi rmary

and the extension to the Bristol Royal Hospital for Children.

This complex sequence of interrelated projects totalling

£100 million over three years is helping transform fi rst

impressions for patients with the completion of a new

welcome centre, in time for the retail units to benefi t from

Christmas trade, and a new main hospital reception, which

opened its doors in January 2014. In March 2014 the fi rst cancer

patients began treatment in Bristol’s new specialist adult bone

marrow transplant unit, part of the new extension to Bristol’s

Haematology and Oncology Centre, which stretches seven

storeys high and continues 10 metres below ground.

Since year-end we also received the pleasing news that two

signifi cant Laing O’Rourke healthcare schemes achieved a

major step forward, with approval granted for the £420 million

Royal Sussex County Hospital (formerly known as Brighton 3Ts)

and the £120 million Cambridge Forum biomedical campus.

The Chancellor of the Exchequer, George Osborne, announced

Department of Health funding approval for the Brighton

reconstruction project, following fi ve years of development work

between Laing O’Rourke and Brighton and Sussex University

Hospitals NHS Trust.

EDUCATIONWe enhanced our reputation for delivering state-of-the-art

school facilities for local education authorities under the

existing Building Schools for the Future (BSF) framework

in Salford by securing the fi nal Phase 3a in August 2013.

The £31 million phase consists of two schools – Wentworth

High School and All Hallows RC High School. Wentworth High

School will be built on the existing live school site and will have

facilities for 750 students and 20 special educational needs

places once complete. All Hallows RC High School will be built

on the site of the old Oasis High School and will have facilities

for 600 students and 20 special educational needs places.

We also secured and commenced construction of the Sobell

School in Aberdare, South Wales, utilising the component

set developed for our SIGMA school solution, equating to over

60 per cent of the scheme manufactured offsite with the

majority of works completed by an integrated Laing O’Rourke

delivery team. This is the fi rst project secured through the

SEWSCAP (Southeast Wales Schools and Public Buildings

Contractor Framework).

The Group also delivered the fi rst 100 per cent modular

primary school solution to be built in the North of England

with the rapid installation of the Limetree Primary School

for Trafford Borough Council. The team combined the

specialist skills of Select Plant who installed the classrooms,

and Expanded who did the initial groundworks and fi nal

landscaping. The project was completed in 12 weeks,

with the majority of works delivered during the summer break

to minimise disruption to the academic year.

During the year we further developed and refi ned our

market-leading SIGMA sustainable schools proposition

based on the UK Department for Education’s challenge

to build schools faster, better and for considerably less than

the previous scheme cost. The solution leverages the Group’s

unique in-house manufacturing capability to deliver school

facilities that are predominantly constructed offsite for rapid

WILLIAM STREET QUARTER, LONDON

BOROUGH OF BARKING AND DAGENHAM

This year saw the second phase of 84 new affordable

homes handed over to the client. Laing O’Rourke’s

DfMA approach resulted in a programme of just

82 weeks to deliver a total of 201 new dwellings.


BLAVATNIK SCHOOL OF GOVERNMENT,

UNIVERSITY OF OXFORD

Laing O’Rourke’s eighth major project for the University

of Oxford, the Blavatnik School of Government, is due

for completion in August 2015. The project will be

delivered by an integrated team including Expanded

and Crown House Technologies, using digital

engineering and DfMA.


onsite assembly, achieving a minimum 30 per cent saving in unit

cost, with greater savings achievable for large multi-school

build programmes. The unprecedented air-tightness of these

structures makes them incredibly energy effi cient and we are

now actively marketing this value proposition with local and

central government departments, and are confi dent that it

will lead to a wider recognition of the fl exible application of

DfMA techniques to a range of public-sector construction

requirements. For these reasons, we remain confi dent in

our ability to secure work on large parts of the Department

for Education’s £2 billion PFI-backed Priority School Building

Programme, with the recent release of the fi rst tranche of

prioritised schools.

HIGHER EDUCATIONIn the higher education sector we delivered our most successful

year to date, with notable wins and delivery milestones achieved

throughout the period. Laing O’Rourke’s eighth major project

for Oxford University during a 13-year relationship got underway

with work commencing onsite to build the Blavatnik School of

Government. This integrated approach is benefi ting from the

extensive use of digital engineering, enabling component-led

use of standardised precast and mechanical and electrical

products, prior to converting into the asset management

system for the facility on completion of the construction phase.

In October 2013, Imperial College London selected

Laing O’Rourke to deliver its new Aeronautics and Mechanical

Engineering Department, continuing a well-established

and trusted relationship with the client. An integrated team

approach and early use of digital engineering were cited

as important factors in securing the project, which involves

the refurbishment of existing laboratories to create specialist

aeronautical and mechanical workshops and laboratories –

delivered while most of the surrounding research spaces

remain live.

65 per cent of the project value will be delivered by in-house

companies: Crown House Technologies will provide the

sophisticated mechanical, electrical and process installations

for the high-grade laboratories with Laing O’Rourke Facades

providing the re-cladding. The project also involves the

construction of general offi ce and teaching space for the

university. The scheme is the second part of a four-phase

redevelopment that will merge the Department of Aeronautics

with the existing Mechanical Engineering Building.

During the year Laing O‘Rourke successfully completed and

handed over the second and third phases of the Oxford Brookes

University Headington campus redevelopment – the most

signifi cant capital project in the history of the university.

In July 2013, a year on from Laing O’Rourke completing

Phase 1, the university chancellor offi cially opened the

Abercrombie Extension, closely followed in February 2014

by the John Henry Brookes Building also opening its doors

to students for the fi rst time.


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Having been completed and handed over in 2012, Durham

University Gateway project received numerous awards in 2013,

including: a Built Environment Award from the Durham

Environment Partnership, who seek to reward great design,

environmental guardianship and community spirit; Durham

Environment Partnership’s ‘Outstanding’ award, which

recognises those schemes which go beyond exemplary

status in their own category and display elements which cut

across a number of other categories; and ‘Best Education

Development’ in the Local Authority Building Control Northern

awards. The project also achieved ‘Excellent’ status in the

integration and collaboration category of Constructing

Excellence in the Northeast Awards and ‘Highly Commended’

in the Project of the Year category.

As Manchester City were once again crowned Premier League

champions for the 2013/14 season, Laing O’Rourke was equally

proud to secure the contract to extend the existing Etihad

Football Stadium, which the Group originally constructed for

the 2002 Commonwealth Games. Deploying major elements of

the Group’s UBO, the project will increase stadium capacity

from 48,000 to 60,000 through the addition of a new tier, and will

also expand the range of facilities for fans, corporate hospitality

and visitors. Ground engineering commenced at the point of

contract award, as the complex engineering works must be

seamlessly delivered around events including the new football

season and the stadium’s fi rst Rugby World Cup match in 2015.

SOBELL SCHOOL, ABERDARE, WALES

SIGMA SCHOOLS SOLUTION

Working in partnership with new client Rhondda Cynon

Taf County Borough Council, this is the fi rst project to be

secured under the SEWSCAP (Southeast Wales Schools

and Public Buildings Contractor) Framework. The £32

million development includes a 1,600 place secondary

school, reprovision of an existing dry-sports leisure

centre, new athletics track, stadium and multi-use

games courts. 60 per cent of the scheme will

be manufactured offsite by Laing O’Rourke.

SIGMA is Laing O’Rourke’s standardised approach for

schools which fully utilises Design for Manufacture

and Assembly. Our SIGMA proposition allows us to build

schools in half the time and at a minimum 30 per cent cost

reduction on traditional design and construction

methods, while still meeting the highest

environmental standards.

Elsewhere in the city, work began on the Beswick Regeneration

Project in East Manchester – a joint project between

Manchester City Council, Manchester City Football Club

and urban regeneration company New East Manchester.

The ambitious scheme will transform 16 acres of Beswick –

bringing brand new leisure, education and employment

opportunities to the area for local residents. The transformation

will include a new leisure centre with public swimming pool,

and Connell Sixth Form College – a 600-place college for

16-21 year olds meeting growing demand for sixth form

places in the area. There will also be a new rugby pitch for

community use. In addition, the plans include improved local

shops and changes to the road layout, public realm and car

parking infrastructure to improve road safety and create a

pedestrian-friendly environment for local residents.

Laing O’Rourke commenced construction of the £30 million

project to transform Chester Zoo into a major regional visitor

attraction. The fi rst stage of the unique, long-term masterplan

is the construction of the ‘islands’, to create an Indonesian

themed journey. Visitors will steadily travel between each

island on a boat, with the emphasis being on the difference

between each place. Key elements include Crown House

Technologies’ solution to control the humidity to exacting

levels, and the use of twin wall for tiger tunnels and crocodile

enclosures to exacting tolerances to ensure the animals are

securely and safely housed.



ACCOMMODATIONDuring the year the Group welcomed Stephen Trusler to lead

our route to market for a new housing solution in the UK

accommodation sector based on our Design for Manufacture

and Assembly (DfMA) approach. Stephen is considered a strong

industry infl uencer having participated in government debates

on key issues and policies affecting the national housing

market. As a well-respected fi gure in the industry, he brings

a wide ranging network of contacts throughout the housing

sector in the UK, including government, Homes and

Communities Agency, housing associations, arms-length

management organisations and local authorities. He is also a

distinguished member of the Chartered Institute of Housing,

a member of the BiTC Enterprise leadership team and a board

member and Chair of Aster Homes, the housing association.

During the year we successfully completed and handed

over the William Street Quarter housing development in the

London Borough of Barking and Dagenham. Utilising our

DfMA residential solution, the project was funded through an

innovative private partnership arrangement in which we are an

equity participant – the fi rst totally privately funded affordable

social housing scheme in the UK. By embracing DfMA, it is the

fi rst project to employ SmartWall – a modular internal walling

system manufactured offsite and delivered with fully integrated

mechanical and electrical services, saving over half the time of

traditional in-situ construction.

MANCHESTER CENTRAL

LIBRARY AND TOWN HALL

The new Manchester Central Library and Town Hall opened

its doors to the public on 22 March 2014. The project won

no less than nine awards from various institutions for its

outstanding achievements and innovations including:

RICS (Royal Institution of Chartered Surveyors),

Forum for the Built Environment, the British Council

for Offi ces and the Building Control Association.

Having only started onsite in June 2013, Laing O’Rourke’s

fi rst project for the University of Bath – the R6 student

accommodation project – reached structural completion at

the end of January 2014. The project, a £34 million 710-room

student residence scheme self-delivered over a 64-week

programme, is a fl agship project for the business. The scheme

extensively deploys a DfMA solution that provides long-term

lifecycle benefi ts, including: Crown House Technologies’

modularised risers and horizontal spine distribution; slabs,

walls and columns from Bison and Explore Manufacturing;

and concrete bathroom pods imported from in-house business

Modulor in Dubai.

Laing O’Rourke’s integrated delivery capability has been

central to the quality and certainty of programme and

demonstrates an approach that can be replicated to suit other

projects in the residential sector, from student accommodation

to private residential.

COMMERCIAL

We continued to see tangible signs

of recovery in the UK commercial

development sector, particularly in

central London where demand is

returning to pre-recessionary levels

Following the award of the prestigious contract to build

the iconic Leadenhall Building in the City of London for clients

British Land and Oxford Properties, the extensive application

of preassembly techniques to signifi cantly enhance programme

effi ciency through a material reduction in the delivery schedule

and waste volumes saw this iconic design quickly become a

reality on the UK capital’s skyline with over 85 per cent of the

building manufactured offsite. The building reached its highest

point and ‘topped out’ at a ceremony attended by Mayor of

London Boris Johnson. The project has since gone on to hit

all its major delivery milestones and remains on track for

practical completion and handover to the client in 2014.

Laing O’Rourke’s trusted relationship with British Land over

the course of the Leadenhall Building project led to the Group

being invited to directly negotiate the contract to build their

next fl agship central London commercial development

scheme – Clarges.

During the year the Group was appointed to deliver the fl agship

£55 million Scottish Power Headquarters Building in Glasgow.

Laing O’Rourke’s winning solution was predicated on a

DfMA solution and direct delivery capability combining the

in-house expertise of Select, Expanded, Explore Manufacturing,

Bison, Vetter and Crown House Technologies under the

project management of the core Construction business unit.

This approach has substantively de-risked the project, reducing

the programme time of the 13-storey, 27,000m² frame by

over 40 per cent.

Laing O’Rourke also commenced construction of a privately

funded offi ce development, working with new client Genr8,

linked closely with Stoke-on-Trent Council, who will consolidate

the region’s public services into the two new buildings on

completion. Designed to BREEAM Excellent standards,


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the project will involve delivery of two fi ve-storey offi ce buildings

and substantial public realm works, and creation of a library,

council chambers and several retail units for commercial

letting. With exteriors inspired by art deco ceramics designer

Clarice Cliff, who was born in Stoke-on-Trent, one building

facade will use a unitised curtain walling system to create

a tessellated effect, with the second building using precast

panels fi nished with Staffordshire blue brick slips with an

infi ll of curtain walling. Signifi cant local economic benefi ts

will also be generated through the construction, including

the creation of apprenticeships and local supply chain

procurement opportunities.

Adding to Laing O’Rourke’s growing portfolio of high-profi le

London schemes, in January 2014 work began onsite at the

Elephant Road development in London.

Early engagement between the clients, Oakmayne Properties

and Delancy, and the EnEx.G was infl uential in them embracing

Building Information Modelling as an enabling technology to

a component-led design solution. The project has been fully

digitally engineered, and is one of the fi rst projects to utilise

the DfMA component library in this way to achieve cost and

programme certainty. This mixed-use development comprises

three towers over a podium and basement below. The West

Tower is 23 storeys, the South Tower is 15 storeys, both private

residential, and the North Tower is 18 storeys of student

accommodation. Retail units include a Sainsburys store,

restaurants and cinema within the three-storey podium below

the towers. There is also a split level basement containing a

service yard, parking, plant rooms and storage.

SCIENCE AND RESEARCHFollowing the original contract award to construct the shell

and core for the Francis Crick Institute in the heart of London,

the Group was awarded the remaining mechanical and

electrical work packages to complete the advanced biomedical

research facility, recognising our ground-breaking collaborative

methodology to date. Laing O’Rourke’s Chairman, Ray

O’Rourke, joined George Osborne, Sir Paul Nurse, Director of

the Institute and distinguished guests, to celebrate the topping

out of the Francis Crick Institute in central London as part of

the government’s efforts to stimulate PPP investment activity

in the construction sector.

RETAILLaing O’Rourke helped breathe life back into Leeds city centre,

with the opening of western Europe’s biggest retail scheme

for 2013. Drawing on the expertise of the Group’s integrated

delivery model, including Explore Manufacturing, Expanded,

Vetter and Crown House Technologies, combined with regular

proactive engagement with the local community, meant that

the project was completed on time and to budget for the client

(and the UK’s largest commercial landlord) Land Securities.

The retail development won ‘Best Retail Development in

City Centre’ at the prestigious MAPIC awards in Cannes,

and Laing O’Rourke was proud to be named ‘Contractor of

the Year’ at the Yorkshire Property Awards.

The Group was also awarded the contract to undertake the

£34 million refurbishment of Nottingham’s Victoria Shopping

Centre for client, the intu group, involving the complex logistics

of delivering in a live retail environment.

ETIHAD STADIUM, MANCHESTER CITY

FOOTBALL CLUB

Premier league football club Manchester City has

appointed Laing O’Rourke to increase its stadium capacity

from 48,000 to 54,000 as well as expand the range

of facilities on offer to fans, visitors and corporate

hospitality. A later stage of expansion will

eventually take the stadium to 60,000 capacity.



RAILWe continue to be engaged on the UK’s largest commuter rail

projects for Network Rail, Crossrail, and Manchester Metrolink.

We have established strong working relationships with these

client organisations which continued to prove invaluable in

securing new contracts during the year.

In April, work started on the fi rst phase of the £250 million

programme to improve performance and capacity on the

Stafford section of the UK’s West Coast Main Line on behalf

of Network Rail. The Group is part of the UK’s fi rst ‘pure

construction alliance’ between Laing O’Rourke, VolkerRail,

Atkins and Network Rail. The team is working collaboratively

under one unifi ed agreement where all parties share

benefi ts and risks. The alliance model, developed in Australia,

is a move away from the more traditional ‘hub and spoke’

style of contracting towards a completely integrated

‘one team’ structure.

We continued our programme of intensive construction

on major stations for Crossrail – Tottenham Court Road, Bond

Street, Liverpool Street, Canary Wharf and Custom House. At

Canary Wharf the Group achieved the greatest milestone so far

in June 2013 as the huge 1,000 tonne tunnel boring machine

broke through into the station box. Key to our success on

Crossrail to date has been the Group’s ability to demonstrate

its extensive rail infrastructure capabilities across its internal

supply chain, from the design and digital engineering team

to Explore Manufacturing and Expanded for civil engineering

and station assembly.

HEATHROW TERMINAL T2A

The delivery and completion of Heathrow Terminal 2A

was a key milestone in the transformation of London’s

premier airport. The new terminal builds on

Laing O’Rourke’s track record of achievement, having

earlier constructed Terminal 5 and the new control tower,

as well as major upgrades to other terminals.

Work commenced in 2010 and has involved

in-house businesses from across the Group.

LEISURE, SPORTS AND PUBLIC SERVICESDuring the year, working collaboratively with English Heritage,

we successfully completed the transformation of Manchester’s

iconic Grade I listed Central Library and Town Hall, a complex

combination of refurbishment, restoration and signifi cant

contemporary enhancements to a 1930s landmark. This

sustainable form of contract delivered economic benefi ts

to the surrounding communities, including the creation of

72 project-initiated apprenticeships and a procurement

model that directly boosted local businesses.

The facility offi cially opened its doors to the public on 22 March

2014, and quickly received plaudits for the quality of engineering

and construction achieved. In the year it also won the

Northwest Constructing Excellence Award for ‘Integration and

Collaborative Working’ and a ROSPA Gold award. Subsequent

work was secured to transform St Peter’s Square public realm

and library walk, with the whole project due for completion

by Autumn 2014.

ECONOMIC INFRASTRUCTURE

Through our Infrastructure business

we continued to take advantage of

the pipeline of opportunities in the

key sectors of power, transport and

utility networks in particular

AIRWe underlined our expertise in working in live air environments

by meeting and, in some cases exceeding, delivery milestones

at Heathrow Terminal 2A, despite the challenge of keeping

the adjacent air infrastructure operational throughout the

project. In November 2013, the new Heathrow Terminal 2A –

the Queen’s Terminal – reached construction completion

to enable the customer, Heathrow Airport Limited, to undertake

operational readiness trials. This signifi cant project milestone

has been achieved on time and within budget after

a highly successful construction programme by Laing O’Rourke

and Ferrovial Agroman, working together as the HETCo joint

venture. The team also took top prize for health and safety at

the national fi nals of the Constructing Excellence Awards.

In the same month, Heathrow Terminal 2A’s multi-storey car

park delivery team won the prestigious ‘Post-Tensioned

Structure’ category at this year’s Concrete Society Awards.

The 1,340-space car park will be the gateway to the new

world-class Heathrow Terminal 2A when it opens to passengers

next year.

Integrating the expertise of Laing O’Rourke’s delivery

businesses and using innovative design techniques that

maximise the use of standardised and modular components,

this ‘new breed’ of passenger terminal was constructed at

one of the world’s busiest airports without any interruption

to fl ows of people or aircraft.


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During the year, we also secured a major project with Transport

for London with the award of a key rail infrastructure contract

for the capacity upgrades of operational railway facilities at

Willesden Junction, in northwest London.

Laing O’Rourke also received peer group recognition during

the year for its achievements in the rail sector. Working in

partnership with Network Rail and the wider rail industry,

Laing O’Rourke is providing the skills and competencies to

support the UK Government’s £4 billion programme to extend

rail line electrifi cation to bring greener trains to more parts

of the network, which will be delivered through a nationwide

series of regional framework contracts due for award early

next year. As part of the initial de-risking phase of the works,

an international team of Laing O’Rourke rail engineers were

crowned ‘Best of the Best’ at a Network Rail event to test

excellence in overhead line electrifi cation skills and

best practice.

Similarly, the team delivering Greater Manchester’s Metrolink

network also celebrated major success during the year. In

October 2013, the MPT Consortium, formed of Laing O’Rourke,

VolkerRail and Thales, and tasked by Transport for Greater

Manchester with delivering the £900 million expansion

programme for the Manchester Metrolink network, was

named ‘UK Project of the Year’ and ‘Supplier of the Year’

(over €10 million) at the 2013 International Light Rail Awards.

Additional milestones on the largest light railway project in

the UK included delivery of new tram lines and associated

structures, including stops, street furniture and control

buildings, as part of the overall expansion.

WATER AND UTILITY NETWORKS

The UK water and utilities market is also strategically important

to Laing O’Rourke, with £25 billion of investment planned by

water companies between 2015 and 2020. We are currently

constructing the massive break-pressure tank at Hallgates,

as part of Severn Trent Water’s £44 million Derwent Valley

Aqueduct resilience programme to upgrade the Victorian

water supply system. This tank is a fi rst for Severn Trent Water

at this size and scale for a clean water retaining structure

manufactured offsite. Laing O’Rourke’s project team and

Explore Manufacturing worked closely and collaboratively with

the client’s engineering standards team to incorporate the

preferred DfMA solution into their asset standards, where

previously only a traditional in-situ concrete solution would

have been acceptable.

Regulated markets are less cyclical and the margin potential

less volatile and we have made senior leadership appointments

to access these sectors. We are formalising our delivery

business capability in utility networks, such as power

distribution, where we already possess signifi cant expertise

backed up by the technology platforms, specialist plant and

equipment needed to effi ciently deploy and manage resources

on the multidisciplinary programmes of work typical of these

markets. The Group is strongly positioned in this market with

a place already secured on National Grid’s £650 million

electrical substation framework, utilising our expertise in

design and manufacturing to offer the client a fully DfMA-

enabled structural solution for the delivery of its extensive

network of substations.

A453 ROAD WIDENING, NOTTINGHAM

The A453, used by more than 30,000 motorists a day, is a

major route connecting Nottingham to the M1 motorway.

Ten new bridges will be craned into position along the

seven-mile route. A signifi cant feature of the bridges

is the high percentage of DfMA with piers, beams

and abutment and deck units all being made

offsite at Explore Industrial Park.



SMITHFIELD, STOKE-ON-TRENT

Laing O’Rourke started onsite in October 2013 in the fi rst

part of a master plan for Stoke-on-Trent city to rejuvenate

its central business district. Laing O’Rourke is responsible

for two fi ve-storey offi ce buildings and substantial public

realm works. The project will require an integrated

team comprising Construction, Crown House

Technologies, Expanded, Vetter, Explore

Manufacturing and Select Plant.

HIGHWAYSIn road infrastructure, Laing O’Rourke progressed construction

of the A453 widening work near Nottingham to alleviate one

of the UK’s most congested roads. This is the fi rst of the six

growth road schemes announced by the Highways Agency

with construction getting underway in early 2013.

The overall scheme, worth £150 million, will see a seven-mile

stretch of the A453 widened – boosting a major route for road

users travelling to Nottingham, the M1 and East Midlands

Airport. With a mixture of 11 structures (bridges and

underpasses), conventional highways construction techniques

would cause a lot of disruption to both road and public

transport users. To minimise congestion and speed up the

delivery of the project, a DfMA solution has been utilised early

in the design of the structures and other elements. This has

generated considerable time savings and wider risk mitigation

for the scheme.

MARINEAs the UK’s existing port capacity continues to come under

signifi cant pressure from increasing international trade

volumes, our engineering skills are leading the construction

of Europe’s newest and biggest deep-water development at

London Gateway Port, with a major milestone achieved in the

year with the completion of the three-berth container terminal,

plus oil berth and associated infrastructure (including road

and rail links) together with river channel dredging, quay wall

construction and advanced preparatory works for the logistics

park. Also during the year the Prime Minister, David Cameron,

visited the site, accompanied by Chairman of DP World, His

Excellency Sultan Ahmed Bin Sulayem and Laing O’Rourke

Chairman, Ray O’Rourke, describing the super-port project

as ‘an emblem of ambition’.

POWERThe Group’s strategic growth plans are predicated on

establishing a signifi cant delivery presence in the buoyant

global energy sector. Therefore the UK’s investment plans

to replace ageing power-generation infrastructure with a

fl eet of new-nuclear plants and supporting infrastructure

provide high earnings potential. We are one of only a few

UK contractors with the engineering know-how, specialist

delivery capabilities and reputation for quality needed to

perform to the exacting standards of the nuclear generation,

processing and storage industry.

As preferred bidder with our partner Bouygues TP for the

main civil engineering works package at Hinkley Point C in

June 2012, we have been working with the client under an

Early Contractor Involvement (ECI) agreement to support

the business case for the investment in nuclear new-build

and ensure that we can mobilise into the delivery phases

rapidly once the green light has been given.

HINKLEY POINT C

The fi rst new nuclear power station in the UK in a

generation is due to be delivered at Hinkley Point C

for EDF, by a joint venture of Bouygues TP and

Laing O’Rourke.

Approximately 25,000 jobs are expected to be created

during construction including around 5,000 people

working onsite at the peak of construction and

900 permanent jobs once the power station

goes into operation.


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47

SELECT PLANT INVESTMENT

In-house supplier, Select Plant, continues to reinforce its

position as one of the UK’s leading plant and construction

services companies, with sustained investment in mobile

and tower cranes, heavy plant, modular accommodation

and supporting equipment. The company now operates one

of the youngest fl eets in the industry.

SPECIALIST SERVICES

Our specialist trading businesses

are the ‘engine room’ that unlocks

the inherent value within our unique

business offering (UBO) and helps

bring it to life for our customers

CROWN HOUSE TECHNOLOGIESCrown House Technologies (CHt) retained its leading sector

position, posting a strong operational and fi nancial performance

despite the prevailing conditions which have seen a number

of high-profi le competitors scale back their ambitions. The

business expanded its range of services into new industries

and sectors to support wider Group interests in heavy industrial,

infrastructure, process engineering, power and utilities

markets. The business has also been working with the EnEx.G

and strategic design specialists from Arup, Hoare Lea, AECOM,

Atkins and Watermans during the review period to further align

the external M&E design parameters with the DfMA approach.

CHt also continued to add signifi cant offsite manufacturing

capacity during the year as part of the continuing productivity

drive at its facilities. Through early involvement in the

preconstruction phase, it has manufactured the mechanical

and electrical infrastructure on a number of the Group’s

major building and social infrastructure projects, including

the Alder Hey Children’s Health Park, the Leadenhall Building

in the City of London, the Francis Crick Institute and

Heathrow’s Terminal 2A.

The business unit also secured a number of prestigious

projects during the year. American data centre giant, Equinix,

selected CHt to increase its presence in the Berkshire ‘tech

corridor’ with the new 24,000m² LD6 data centre. The award

follows the successful and safe delivery of the LD5 data centre

for the same client. The project will take just over a year to

complete and will be a fully integrated delivery approach by

CHt, Select, Expanded and the UK Construction business.

SELECT PLANT AND LOGISTICS MANAGEMENTThe Select Plant business posted another year of achievement

providing a range of innovative heavy plant and lifting solutions,

including the tower crane fl eet and expertise to erect the City

of London’s tallest structure, the Leadenhall Building. Select

Plant developed a lift and climbing strategy with the tower

crane manufacturer Terex, which has successfully delivered

heavier lift capabilities throughout the build programme to

reduce the schedule via the extensive adoption of DfMA

components. This joint expertise with Terex is also being

deployed on the Manchester City FC Etihad stadium expansion,

where the newly developed luffi ng jib tower crane has the

heaviest lift capacity in the UK.

It also continued development of its logistics management

capabilities to support the Group’s broader DfMA agenda.

It created a logistics hub to support London-based projects,

to drive greater effi ciencies that derive from ‘just in time’

delivery. A similar approach is also being planned to support

the Alder Hey hospital build programme in Liverpool.

Select Plant progressed its fl exible primary schools solution

during the year with the delivery of additional classroom

capacity at the Orchid Vale School in Swindon to accommodate

growth in the local pupil population. Similarly, Limetree Primary

School was completed in Greater Manchester. The innovative

design, using volumetric modular construction techniques,

allowed the school to be completed in just 19 weeks. It has

since been nominated for the Northwest Construction Awards

and Construction News Awards for projects under £10 million

in value.

Select Plant has also played an instrumental role in supporting

the campaign to improve road safety for vulnerable road users

like cyclists. All future investment in the large goods vehicle

(LGV) fl eet are ‘Euro V’ compliant, low-emission vehicles

featuring safety devices such as nearside cameras, motion

sensors and audible alerts. The Group is also trialling a

prototype LGV with enhanced safety features including

fl oor-to-roof cabin doors and wider fi eld of vision on-board

cameras. This initiative is part of a safety campaign with

partners including the Metropolitan Police and Transport for

London to radically reduce accident rates caused by

construction activity on the UK’s busy city-centre roads.

ASSET MANAGEMENTWe progressed our targeted offer in ‘hard’ facilities

management during the year with the appointment of

Peter Young to lead our new asset management offering.

A facilities services specialist, Peter will be responsible for

leveraging the investments we have made in digital engineering

and DfMA. This approach includes the expertise gained in

advanced delivery techniques, visualisations and commercial

and technical data derived through the design and construction

phases of a project, to provide the client with a whole-life

asset management solution.

We believe we have the opportunity to redefi ne the value

of asset services; to meet the increasingly challenging

requirements of clients and end-users for future-proofed

buildings and infrastructure that meet the most exacting

environmental and economic performance standards.

48



OUTSIDE THE UK

The Middle EastOutside the UK, we are still active, following a rescaling of our

business activities in Dubai and Abu Dhabi. We will continue

with our cautious approach to opportunities that meet our

rigorous fi nancial requirements. There are signs that the Dubai

economy is recovering strongly and this is supported by an

increasing number of attractive opportunities for both our

construction and specialist trading business units.

Dubai has recently won the right to host EXPO 2020 and this

is likely to provide the catalyst for signifi cant government and

private sector investment in infrastructure.

Abu Dhabi remains subdued as a market, but we would

expect to see an improvement in the medium term, especially

with high-end customers who value our history of quality

and reliability.

In the wider Gulf region, Qatar is pushing ahead with its

ambitious development plans, largely linked to the award of

the 2022 FIFA World Cup, but we are cautious in our approach

to this market due to unattractive contract conditions on many

of the largest schemes.

During the year, we were designated a preferred contractor

by Majid Al Futtaim, a developer of world-class retail, hospitality

and community centres, putting us in a favourable position to

secure a regular fl ow of future work, and this was confi rmed

by the award of a contract to build a new Hilton Garden Inn

in Dubai. We also secured work packages on the Emirates

Aluminium Smelter Complex Expansion Project, leveraging our

heavy industry experience developed in the Australian market.

Likewise, we secured work with Emirates Airline, and aviation

infrastructure is expected to be a major growth area within the

Dubai market.

During the year, Austrak, the Group’s modular rail track

business, continued to market its capabilities in the design and

manufacture of concrete sleeper track panels for export to

Australia from its manufacturing facility in Dubai, supporting

our commuter and heavy-haul rail delivery businesses. Our pod

manufacturing subsidiary, Modulor, also continues to supply

preassembled kitchen and bathroom units to the region from

its Dubai factory, and has established itself as a supplier to the

Group’s projects in the UK.

The longer-term prospects for the Middle East remain

broadly positive with global demand for the region’s oil and gas

reserves remaining buoyant. Laing O’Rourke has an

outstanding track record of delivering high-quality projects in

the region, including the Atlantis Hotel, Dubai Airport’s third

terminal, Aldar headquarters and the Al Zeina and Al Bandar

residential and mixed-use developments on Al Raha Beach

in Abu Dhabi.

Therefore, as global confi dence returns, we believe the number

of planned projects expected to come to market will increase,

with the most active market being the UAE and Dubai in

particular, where we are focusing our attention. With our strong

brand recognition and track record spanning over three decades

in the region, the Group is well positioned to benefi t from the

renewed confi dence that is clear to see. We have maintained

our core construction, manufacturing and specialist services

capabilities in the region under refocused leadership to bring

greater market knowledge to our opportunity-selection process.

CanadaWe remain confi dent in our ability to establish a strong

business in Canada that, over time, could contribute a material

proportion of the Europe Hub’s revenue and earnings volumes.

As part of the Comprehensive Economic and Trade Agreement

(CETA) between Canada and the EU, Group representatives

met with Canada’s Trade Minister, Ed Fast, to outline the

company’s experience and preparedness to deliver future

opportunities in the region.

Building on our successful engagement in Australia’s oil and

gas industry, we have broadened our sector focus to embrace

Canada’s growing LNG opportunities. Our approach is based on

following existing strategic customers into new growth markets

in areas like the northwest of British Columbia where several

of our global customers are pursuing major LNG export

facility developments.

To effectively position the business for these future projects,

and leverage our current oil and gas portfolio and resources

capability, we announced the appointment of Terry Jones,

a senior Canadian sector specialist. He is a respected oil and

gas professional with over 25 years’ experience in the Canadian

market, having worked previously with Suncor and SNC Lavalin

in various locations. He will bring both sector and regional

project and construction experience to bear on the major

project proposals we are currently pursuing. To demonstrate

the seriousness of our intent, we also announced the

establishment of a regional offi ce in Vancouver to help

develop close working relationships with customers through

raising awareness of our global and local capabilities.

Although we do not expect a similar number of major projects

to be developed in parallel as we are currently experiencing

in Australia, we are confi dent that world demand for LNG

HILTON GARDEN INN

Laing O’Rourke Middle East (LORME) was awarded the

design and build contract to construct the mid-range

370-bedroom Hilton Garden Inn hotel in Dubai for

prestigious development client, Majid Al Futtaim Properties

LLC. The 16-month build programme will utilise major

elements of our UBO including LORME Construction,

Crown House Technologies, Modulor, Emirates Precast

and Laing O’Rourke Joinery.

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49Laing O’Rourke | Annual Review 2014

49

continues to support the need for additional projects to meet

what is projected to be a shortfall between demand and the

supply provided by current projects already under construction.

The social infrastructure sector continues to grow, supported

by strong political belief in the strength and viability of the

Alternative Financing Procurement (AFP) market. We expect

the Canadian construction market to maintain year-on-year

growth of over 4 per cent for the next four-year period.

AFPs, particularly in Canada’s healthcare sector, play to one

of the Group’s major strengths in complex PPP procurement.

Continual improvements being made to the country’s AFP

model and regulatory framework, as well as the sheer size of

contracts that are awarded, highlight the growing attractiveness

of the Canadian construction market to progressively-minded

international infrastructure investors and providers like

Laing O’Rourke.

As an integral part of the international consortium, CHUM

Collectif, Laing O’Rourke made signifi cant progress during

the year in the delivery of Canada’s largest PPP healthcare

scheme and the world’s second largest hospital – the Centre

Hospitalier de l’Université de Montréal.

The Group has extended its reach in Canada following

notifi cation in May 2013 that it had been appointed preferred

bidder for the contract to construct the new home of

York University’s Lassonde School of Engineering, 10km

outside Toronto. The project is being delivered without a joint

venture partner for an enlightened client who understands

the benefi ts-driven approach of our digital engineering

capabilities, utilising offsite construction techniques and an

integrated delivery programme.

OutlookThe Group is one of the leading engineering and construction

solution providers in its chosen sectors. In line with the Group

Strategic Roadmap (GSR), our aim is to leverage the scale and

effi ciencies of our vertically integrated delivery businesses

and the competitive advantage inherent in our approach to

engineering innovation, digital engineering and Design for

Manufacture and Assembly (DfMA), while optimising the value

of our supply chain relationships to deliver projects on time,

on budget and to an unrivalled level of quality, safety and

sustainability. We will complement this approach by building

leading positions in selective growth-oriented sectors and

territories with the right strategic and cultural fi t.

We will increasingly pursue multidisciplinary projects which

encompass the full range of our UBO from programme

management, civil and structural engineering, manufacturing

and construction services, to mechanical and electrical

engineering and operational maintenance.

These increasingly large and complex infrastructure-based

projects offer greater revenue and profi t retention across a

greater proportion of the client value chain, enhancing our

prospects for growth in the medium to long term.

We will continue to develop our business where growth

opportunities exist and where we believe we can positively

differentiate relative to domestic incumbents or international

competitors. Therefore, our focus will remain in Canada and

selected regions in the Middle East, where the complementary

sectors, pipeline of opportunities, preferred procurement routes

and working practices all play to our core strengths as an

integrated engineering enterprise.

CENTRE HOSPITALIER DE L’UNIVERSITÉ

DE MONTRÉAL (CHUM), QUEBEC, CANADA

As Laing O’Rourke’s fi rst project in Canada the CHUM

has helped to cement the Group as a tier-one contractor

and is generating interest in the market and with potential

new clients. The project’s success so far led to interest

by the client to bid for the new home of York

University’s Lassonde School of Engineering

which Laing O’Rourke was successful in

securing in May 2013.

HUB PERFORMANCE

AUSTRALIA HUBAUSTRALIA

HONG KONG

NEW ZEALAND

SOUTHEAST ASIA

We’re accelerating our unique journey

– working tirelessly on our approach

to the market, our culture and our

delivery – developing a business that

is sustainable in every sense.”

CATHAL O’ROURKE

MANAGING DIRECTOR, AUSTRALIA HUB


PORT BOTANY TERMINAL 3,

SYDNEY, AUSTRALIACompleted in May 2014, the

construction of a new container

terminal for Sydney has seen

Laing O’Rourke deliver the civil

and rail infrastructure work.

51

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FINANCIAL HIGHLIGHTS

Managed revenue

£1.8bnOrder book

£1.9bnGross margin

7.0%

GROUP STRATEGIC ROADMAP

(GSR) NEAR-TERM PRIORITIES

• Continued sector focus – with ongoing work to deliver

the needs of our blue chip clients in rail and oil and gas.

• Realise infrastructure potential, building on successful

delivery in mining, resources, ports, freight and civil

works during the period.

• Geographic expansion through new projects in the

Australian Capital Territory (ACT), and director-led

operations in Victoria for the fi rst time.

• Continued focus on client service, mobilising our unique

resources from the Engineering Excellence Group

(EnEx.G), digital engineering teams and Design for

Manufacture and Assembly (DfMA) and direct delivery

capabilities to assure complex engineering solutions.

• Capitalise on the signifi cant improvements in health

and safety performance and culture over recent years,

by continuing to deploy industry-leading methodologies

and innovation into our Mission Zero commitment.

51

7

8

1

2

4 6

5

3

AUSTR

AL

IA

NEW ZEALAND

SO

UT

HE

AST

ASIA

AUSTRALIA

1. BRISBANE

2. DARWIN

3. MELBOURNE

4. PERTH

5. PORT HEDLAND

6. SYDNEY

SOUTHEAST ASIA

7. HONG KONG

NEW ZEALAND

8. AUCKLAND

Our Australia Hub comprises

a diversifi ed and expanding

infrastructure project portfolio through

principal operations in Australia,

Hong Kong and New Zealand

Laing O’Rourke is now offering a distinctive proposition

based on superior quality of design and delivery. We are

increasingly taking leading positions in carefully targeted

building and infrastructure markets, predominantly in

economic infrastructure sectors including mining and

minerals-handling, oil and gas, rail and power, where

demand is being driven by the emerging world economic

superpowers in and around the region.

PRINCIPAL OFFICES



FINANCIAL PERFORMANCEThe Australia Hub has continued to perform well with

another record year. The Hub reported managed revenue of

AUD$3.1 billion (£1.8 billion) compared to AUD$2.8 billion

(£1.8 billion) in 2012/13.

Overall, the earnings result was again pleasing this year,

with a pre-exceptional EBIT performance of AUD$77.0 million

(£45.0 million) (2012/13: AUD$54.5 million (£35.6 million)).

The Australia business also ended the year with a strong cash

position of AUD$436.8 million (£242.7 million).

Investment in the oil and gas sector continues to pay dividends,

with the Australia Hub engaged on every major gas scheme

in the region with the exception of one. This heavy infrastructure

capability extends across the entire oil and gas value chain:

from accommodation villages to support massive LNG

schemes, to water treatment support for coal-seam production

sites, and the civil, structural, mechanical and piping work

underpinning processing plants. Our industry-leading capability

to integrate our services in this sector complements the

established skills and experience the Hub has long offered

the rail, infrastructure and building industries, giving

Laing O’Rourke a diverse construction and engineering offering

that can respond to any changes in the marketplace.

While the Australian target markets have continued to remain

uneven across building, rail and infrastructure, all sectors

still offer strong profi tability on the back of sound delivery.

With a smaller pipeline of building projects, industrial relations

concerns have not had the same impact on costs this year as

they did last year; however, deployment of regional workforces

on infrastructure projects remains a challenge. The Hub also

continues to focus on controllable costs at all levels, looking

at a range of measures to keep costs down and ensure the

business remains lean and agile. Some of the approaches

adopted include sourcing of materials in cheaper markets;

removal of functional duplication; rigour around tender spend;

and improved effi ciencies through digital engineering

technology and DfMA methodology.

During the year the construction of a mixed-use offi ce, retail

and residential development was completed with less than

20 per cent of the residential portion remaining to be sold.

This generated sales revenue of AUD$234 million (£137 million)

and proceeds were partially used to retire the development

project debt.

Looking forward to 2014/15 and beyond, the Hub is well

positioned to further improve profi t next year given its current

portfolio of work and engagement with key clients and active

involvement in mega resource projects such as Wheatstone,

Gorgon and Ichthys. As Australia’s resources and energy

boom moves from construction phase to production phase,

the Hub will continue to explore opportunities in new sectors

and territories. Key sectors will include roads, where the

Federal Government has committed to spending billions of

dollars. The Hub will renew focus on existing sectors such as

rail and building, where it has a strong track record, and

establish itself in new territories such as Victoria, Australia’s

second most populous state, and the Australian Capital

Territory (ACT). In the May federal budget, the government

announced a package of measures that will signifi cantly

increase investment in infrastructure across Australia over

the next six years. The Federal Government will help the

states build new roads, rail, ports and airports to stimulate

the construction sector as the economy transitions from

resource-led growth to broader-based growth. The government

announced that its investment is intended to drive over

AUD$125 billion of spending on new infrastructure across

the continent, and the Hub is ready to participate in these

new opportunities.

Commercial 10%Social Infrastructure 6%Transport 23%Oil & Gas 59%Mining & Natural Resources 2%

AUSTRALIA 2014 ORDER BOOK BY SECTOR

OPERATIONAL PERFORMANCEThe Australia Hub has continued a strong record of delivery

and the pursuit of complex and exciting engineering projects

across the region. During the period, the business continued

to develop its range of services and further established its

reputation in strategic sectors.

New work was secured in the priority sector of healthcare

with the contract secured for Blacktown Hospital’s Clinical

Services Building project in Sydney’s western suburbs and

in the rail sector with the Novo Rail alliance signing multiple

new packages, new electrifi cation works at Bauhinia in

Queensland for client Aurizon, and the securing of a stabling

project at Wulkuraka just outside Brisbane, part of

Queensland’s biggest-ever investment in public transport.

HOWARD SPRINGS ACCOMMODATION

VILLAGE, ICHTHYS PROJECT, DARWIN

Phase one of this accommodation village, which

includes 1,000 rooms, ten support buildings and a

swimming pool, was handed over to the client in August

2013. When complete, the Howard Springs Accommodation

Village will provide high-quality accommodation for

4,000 people, as they construct and operate the

$42 billion Ichthys LNG terminal at Blaydin Point.


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In our oil and gas sector, we have closed out the Kenya

Water Treatment Plant for QGC and are moving into the

pre-commissioning stages for the client’s larger Northern

Water Treatment Plant, also in the Queensland Gasfi elds.

We are also into the fi nal stages of our General Utilities

programme at Chevron’s Gorgon facility on Barrow Island,

on the other side of the country, and have commenced a major

programme of civil works on the Wheatstone Project, near

Onslow in Western Australia, also for Chevron. Work is

continuing strongly on the Ichthys LNG packages in Darwin,

where having completed the accommodation village building

works for up to 4,000 workers our role in delivering the four

cryogenic tanks at Blaydin Point is entering its critical

construction phases. In a key development, and thanks to

a programme of collaboration and one team working with

our clients, the scope of our Australia Pacifi c LNG project in

Queensland has been expanded and is being delivered across

six gas processing sites.

In resources, our relationship with Rio Tinto has netted us

two further contracts in the period at their Cape Lambert

expansion, a continuation of our three-decade working history

with the mining giant. In the iron ore sector, we have also

developed a new relationship with Samsung C&T and the

Roy Hill Group, to deliver parts of the world’s largest

single-pit mining operation.

Another new client in 2013/14 is the Commonwealth Science

and Industrial Research Organisation (CSIRO) who selected

Laing O’Rourke to consolidate and expand their research

facilities at Black Mountain in Canberra at the same time

formally expanding our Australian operations into the ACT.

In another geographic expansion, Laing O’Rourke has now

formally entered the Victoria market with the establishment

of a new Melbourne offi ce. At the close of the fi nancial year,

a team was being recruited and initial project opportunities

being examined by our new Regional Director, the experienced

local infrastructure and building leader Patrick Cashin.

We have seen the Engineering Excellence Group (EnEx.G) hone

its impact in the Australia Hub, providing assistance to clients

and infl uencing our approach to bids and projects through

technology and innovation, something that will continue to be

prioritised. The EnEx.G’s work is just one part of a deeper

client conversation taking place across all our markets

where a number of key strategic partners have sought out

Laing O’Rourke’s unique capabilities during the year, to realise

the benefi ts of our digital engineering, DfMA, direct delivery

and engineering excellence strategies, skills and resources on

their own work programmes.

NORTHERN WATER TREATMENT

PLANT, QUEENSLAND, AUSTRALIA

Due for completion in September 2014, the Northern

Water Treatment Plant, by Laing O’Rourke and a

GE Consortium, is an advanced facility that will treat

100 megalitres of water a day.



In October 2013 Cathal O’Rourke was appointed Managing

Director of the Australia Hub. Cathal has an intimate knowledge

of the culture and operations of the business, having held a

number of senior leadership roles in the UK, Europe and

Australia for the Group.

The period also saw the appointment of new leadership talent

to the executive team. Nick Luzar was appointed as Southern

Region Director in April 2013, overseeing operations in NSW,

the ACT and New Zealand. Darren Weir joined the Hub in

early 2014 to take over the reins as Northern Region Director,

assuming responsibility for the company’s operations in

Queensland and the Northern Territory. Tim Larkin joined

Laing O’Rourke as Oil and Gas Sector Leader in May 2013,

followed closely by the appointment of Stephen Pascall as

Rail Sector Leader for the Australian business in June 2013.

INFRASTRUCTUREThe Hub’s western region operation continues to be at the

forefront of infrastructure opportunities, leveraging our long

history in the west’s materials handling sector. Following a

period of sustained strong performance, the Group secured

more than AUD$300 million of additional work in the mining

sector during the period.

Laing O’Rourke is now working on the biggest single-pit mining

operation in Australia, Western Australia’s Roy Hill iron ore

deposit, following the award of Roy Hill Package 3 by Roy Hill

Holdings and Samsung C&T, a contract involving the

construction of structural steel and associated mechanical,

piping, electrical and instrumentation works for the AUD$10

billion mining project. It also incorporates the stockyard

facilities to support the ore’s extraction and export, comprising

car dumpers, interconnection conveyors and transfer stations.

The major project award followed receipt of a new negotiated

contract with Rio Tinto to take on our third tranche of work at

the Cape Lambert export facility, a project that forms a key part

of their iron ore expansion plans.

Laing O’Rourke has worked for Rio Tinto since 1975, recently

completing Cape Lambert Phase B Package 1, and currently

delivering Package 2. The reliable delivery of this materials

handling and processing infrastructure led to the award

of Package 3, which will include modifi cations to existing

conveyors, construction of new conveyors, associated transfer

stations and pipework.

In addition to securing these new projects, we successfully

delivered the Hope Downs Sandvik Machine Erection project,

where we delivered two stackers and one reclaimer for

Sandvik Mining and Construction as part of Rio Tinto’s new

Hope Downs 4 iron ore mine in the Pilbara.

The region continues to pursue signifi cant opportunities in

the resources sector, with several major results pending.

Elsewhere in the Hub, we handed over AUD$100 million

in works on the Broadmeadow Sustaining Operations

Mechanical Electrical Works project, where we delivered

a coal clearance system as part of a US$900 million mine

expansion in central Queensland.

Our capabilities in marine projects continued to be drawn

upon, substantially completing major works on the

Port Botany Terminal 3 project in Sydney. The project involved

the construction of a new container terminal for Sydney

International Container Terminal Ltd, owned by Hutchison Port

Holdings, the largest freight operator in the world. Laing

O’Rourke undertook the major civil works and associated

services over 46 hectares of reclaimed land.

Our work on the construction of the K10 berth at Kooragang

Island for Newcastle Coal Infrastructure Group received

industry acclaim during the year, winning both the 2013 NSW

Master Builders Association Excellence in Construction Award

Civil Engineering Projects, and the 2013 Master Builders

Australia National Excellence in Building and Construction

Award Toyota National Civil/Infrastructure Award.

GRIFFITH UNIVERSITY HEALTH CENTRE,

GOLD COAST, QUEENSLAND

Offi cially opened on 19 July 2013 by Australia’s Governor

General, Quentin Bryce, the Griffi th University Health

Centre has been described as being at the forefront of

innovation and a state-of-the-art design-and-construction

project. The $136 million project includes a new

Centre for Medicine and Oral Health as well

as a teaching facility, and is situated next to

Gold Coast University Hospital.

NOVO RAIL ALLIANCE, NEW SOUTH WALES

Setting a trend for the global rail industry to follow, the

NOVO rail alliance has successfully brought client and

delivery teams together in this landmark Australian

infrastructure project. The Alliance is transforming

the complex Sydney commuter rail network, and

recently won the Clyde Junction and Penrith

Substation projects.


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Q CATERING, QANTAS, BRISBANE AIRPORT

Reaching practical completion in May 2013, the new

Q Catering facility for Qantas will see it move to a

just-in-time model, where automation has been

introduced to reduce the time taken to assemble

catering requirements for a fl ight.

BUILDINGOur oil and gas sector clients continued to benefi t from

our integrated delivery model through the provision of

accommodation villages for their CSG and LNG projects

across the Hub.

During the period we closed out delivery of the AUD$66 million

Ruby Jo Accommodation Village – a 550-person accommodation

village to house workers for the development and ongoing

operations of QGC’s gas facilities, west of Dalby in the

Darling Downs, as well as the AUD$120 million Woleebee

Accommodation Village – a 1,100-person accommodation

village to house workers for the development and ongoing

operations of QGC’s gas facilities southwest of Wandoan.

Works at the 4,000-bed Howard Spring Accommodation Village

– part of the AUD$34 billion Ichthys LNG Project – were also

completed, with the last accommodation unit placed onsite

in late 2013.

Capitalising on our global health expertise, we commenced

delivery of the AUD$145 million clinical services building at

Blacktown Hospital, one of Sydney’s busiest public health

precincts. Meanwhile, Laing O’Rourke’s Griffi th University

Health Centre was offi cially opened by Australia’s Governor-

General Quentin Bryce and our work on the car park at the

Gold Coast University Hospital received the 2013 Gold Coast

Region Master Builders’ Awards for Industrial Buildings over

AUD$5 million.

We continued our long relationship with Brisbane Airport,

with work on the Qantas Airways ‘Q-Catering’ facility drawing

to a close. The combined food manufacturing, commercial

kitchen, and food assembly and logistics facility was ‘Highly

Commended’ in the 2013 National Airport Industry Awards

overseen by the Australian Airports Association.

Following completion of the commercial towers last year, the

adjacent residential and retail zones of the McLachlan and Ann

Street development in Brisbane’s Fortitude Valley are now also

complete. The centre also became the new headquarters for

Laing O’Rourke’s northern region, with our teams co-locating

to the fi rst-class facility from Easter 2013.

As part of the Territory Alliance in Australia’s Northern Territory,

a partnership between Laing O’Rourke, Sitzler and McMahon

Services, we completed delivery of our component of the

Strategic Indigenous Housing and Infrastructure Programme

(SIHIP). SIHIP delivered 750 new houses, 230 rebuilds of

existing houses and 2,500 house refurbishments across

73 remote Indigenous communities and a number of

community living areas (town camps) throughout the Territory.

Work also continued on our AUD$870 million Moorebank Units

Relocation (MUR) project with the Department of Defence.

The MUR project is the biggest single defence capital works

project in Australia since the Second World War and involves

the planning and delivery of the complete relocation of

100 hectares of defence assets, while simultaneously

preparing other site upgrades at the nearby Holsworthy

Base to support future defence needs.

Following investigation of opportunities in the ACT, we secured

the Commonwealth Scientifi c and Industrial Research

Organisation (CSIRO) Consolidation Project in Canberra.

The project, which provides a strong foothold for other projects

in and around the ACT, will enable the CSIRO to consolidate

three leased sites by relocating its workforce and operations.

RAILWith planning for, and delivery of, metropolitan rail expansion

projects continuing during the period, the Hub’s rail sector

strategy focused in part on the successful delivery of current

metropolitan rail projects while targeting signifi cant rail

projects across the Hub aligned with our UBO.

Work was signifi cantly completed on rail electrifi cation projects

in Auckland, New Zealand and in Adelaide, South Australia.

The AUD$56 million Auckland Electrifi cation project has

Laing O’Rourke, in joint venture with Hawkins Infrastructure,

delivering 3,700 overhead wiring structures, 80 switching

structures and 170km of overhead wiring in a major boost

to the local rail network.

The fi rst trains have run on the newly electrifi ed line between

Adelaide and Seaford, following an AUD$113 million project

delivered for the Department of Planning, Transport and

Infrastructure over the past two years. The multidisciplined

works have introduced new technologies to South Australia,

including 25kV electrifi cation infrastructure assets and a

custom-built fi bre-optical telecommunications network.

Following the restructuring of governance arrangements for

Sydney’s metropolitan rail network, we continued to work

constructively with Transport for NSW and Sydney Trains.

During the period we successfully delivered the AUD$65 million

Auburn Stabling Project Stage 1, providing a new stabling

facility for suburban train sets on the Sydney network.

We also continued our strong working relationship with

Transport for NSW as part of the Novo Rail Alliance, securing

a fi ve-year extension to the existing alliance agreement.

The alliance has completed over AUD$590 million worth

of work on Sydney rail network to date, with an additional

AUD$260 million to be completed over the next two and

a half years. The execution of the agreement allows the NSW

State Government to refer additional work to the Alliance,

with incentives for all parties for this work to be undertaken.



The Queensland Government is also investing heavily in

metropolitan rail infrastructure through its New Generation

Rollingstock project, which will see the delivery of 75 new

six-car trains, maintenance of the trains for a period of

around 30 years, and construction and maintenance of a train

maintenance centre. Laing O’Rourke secured the contract to

deliver the AUD$190 million purpose-built train maintenance

centre at Wulkuraka in Ipswich. The project will run for two

years and is due for completion in early 2016.

Outside metropolitan networks we continued to build our

portfolio of work in the rail electrifi cation and heavy haul

markets. In Queensland we secured the AUD$110 million

Bauhinia Electrifi cation Project with key client Aurizon.

The project involves 110km of rail electrifi cation, linking

Xstrata Coal’s Rolleston Mine to the Wiggins Island

Coal Export Terminal.

In Western Australia we advanced our heavy-haul rail work

for BHP Billiton Iron Ore Pty Ltd, closing out the

AUD$106 million Port Hedland Inner Harbour and Jimblebar

Project and continued with our heavy-haul rail maintenance

contract in the Pilbarra. Also in the Pilbarra we completed

the AUD$42 million Solomon Rail Spur Construction for

Fortescue Metals Group Ltd.

With a strong pipeline of work available across the Hub, we are

working to target opportunities which draw on the elements of

our UBO, including our digital engineering and DfMA capability,

as well as the innovations offered by the EnEx.G.

OIL AND GASLaing O’Rourke is delivering oil and gas projects in Queensland,

the Northern Territory and Western Australia, including civil,

structural and mechanical infrastructure, gas processing

facilities, cryogenic tanks, water treatment plants and

accommodation villages. With the expansion of oil and gas

investment slowing domestically, the Group focused on

successfully delivering existing projects while positioning

potential existing plant expansions, developing new clients

and expanding our market offering.

A signifi cant result of this focus, and following a close working

relationship with the client, Australia Pacifi c LNG (APLNG),

the northern region’s APLNG project in Queensland has

signifi cantly increased during the period to be worth more than

AUD$1 billion, confi rming its status as a landmark project for

the Australia Hub in size, complexity and sector importance.

Laing O’Rourke’s scope of work includes the construction of six

new gas processing facilities and the construction of temporary

camps and support facilities to house 1,600 workers.

MOOREBANK UNITS RELOCATION,

DEPARTMENT OF DEFENCE,

NEW SOUTH WALES

This fi ve-year project, which is due to be completed in

October 2015, sees the relocation of the Department of

Defence assets from Moorebank to Holsworthy Barracks,

creating a modern facility in Sydney. The project

includes instructional and teaching spaces,

accommodation, sport facilities, civil works,

roads and car parks.


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57

AUBURN STABLING PROJECT STAGE ONE,

NEW SOUTH WALES

The AUD$65 million project delivered a new stabling facility

for suburban train sets on the Sydney metropolitan rail

network. The site was heavily contaminated and in an

environmentally sensitive area, running adjacent

to Duck River, requiring special provisions in the

design and management to protect the river.

The construction team for the INPEX Ichthys LNG Project

Cryogenic Tanks contract mobilised to site in late 2013.

Construction work is well underway on the fi rst two LNG

storage tanks, while work on the two LPG tanks will commence

later in 2014. The scope of work for this contract is among the

most technically demanding that Laing O’Rourke has

undertaken in Australia.

The delivery of the civil works at Wheatstone LNG and the

general utilities for Gorgon LNG, both for Chevron, continued

with major milestones and increases to contract scope

both being achieved. The successful application of digital

engineering at Wheatstone is of particular signifi cance.

Elsewhere in the Hub, our work at the Kenya Water Treatment

Plant for QGC (wholly owned subsidiary of BG), was marked at

the offi cial opening in October 2013, while our work continued

on the AUD$400 million QGC Northern Water Treatment Plant

(NWTP). The NWTP team embraced a DfMA approach to the

project, in collaboration with our subsidiary manufacturing

business Redispan, with the production of in-situ piperacks

resulting in packages of works being completed 60 per cent

faster and with 70 per cent less labour required onsite.

HONG KONGRail work for MTR Corporation Ltd continued to be the major

focus of activities in Hong Kong during the period. Our three

key projects for MTR are C810B and C811A at West Kowloon

and C901 at Admiralty, forming part of a dramatic expansion

of Hong Kong’s MTR network. C901 involves building new rail

tunnels and platforms below and adjacent to the existing

Admiralty Station, as well as adding a major below-ground

interchange concourse. Our joint venture team is now

implementing engineering solutions that link the new station

box with the newly constructed tunnels, directly below the

existing Island Line platform tunnels which remain fully

operational with the trains running every 45 seconds at peak.

In late 2013 we completed our HKD$88 million early works

contract for the West Kowloon Cultural District. Laing O’Rourke

was the fi rst contractor onsite as part of the HKD$21.6 billion

project to deliver a 40-hectare integrated arts and cultural

district. As part of the enabling works, we delivered temporary

access roads and temporary project site facilities, consisting of

3,300m² of offi ce space and parking facilities for 30 cars.

Laing O’Rourke is proud to have attained Caring Company

status in Hong Kong. Launched by the Hong Kong Council of

Social Service in 2002, the Caring Company Scheme aims to

build strategic partnerships among businesses and non-profi t

organisations, to create a more cohesive society by recognising

organisations who excel in corporate social responsibility.

Laing O’Rourke’s Caring Company application was sponsored

by Oxfam, with whom Laing O’Rourke will partner during the

course of our involvement in the scheme.

OUTLOOKWith the Group Strategic Roadmap (GSR) now embedded and

well understood across the business, the Hub is focused on

converting the GSR into practical measures for adoption at all

levels of the business. With multiple coordinated streams of

implementation underway, we are focused on driving excellence

in productivity across the business, delivering improvements

in line with 2015 goals and targets, with a view to the medium-

term goals to 2020.

Our sector-based approach will continue, building on successes

in the oil and gas and rail sectors, and continually assessing

where strong market performance and opportunities warrant

formalisation of new dedicated sector teams.

To fully explore opportunities in the wider Australian market

we have set up a new offi ce in Melbourne from which to drive

our UBO with local clients and in surrounding locations.

We will also continue our exploration of opportunities

in the ACT, building on the early success in the form of the

CSIRO Consolidation Project.

Our continued investment in our engineering excellence agenda

particularly Design for Manufacturing and Assembly and digital

engineering, will see our relationships with clients continue to

evolve and deepen, refl ecting our vision of being the company

of fi rst choice for all stakeholders.

We will drive our industry-leading Mission Zero health and

safety programme to the next level identifying how injuries

occur across the business and implementing ways of

reducing harm.


RISK MANAGEMENT

PROACTIVELY AND EFFECTIVELY MANAGING RISK

GROUP RISK MANAGEMENT

The effective management of risks

and opportunities is fundamental to

the delivery of the Group’s objectives,

achievement of sustainable growth,

protection and enhancement of its

reputation, and upholding the required

standards of corporate governance

HOW LAING O’ROURKE MANAGES RISKThe Group’s structured approach to risk management is based

on the principle of prevention through early identifi cation.

Detailed analysis and decisive action planning are carried out

to remove or mitigate the potential for and impact of key risks

before they actually occur. As risks and uncertainties do

materialise, this structured approach also ensures actual

issues are effectively dealt with.

The Board and senior management are committed to the

proactive protection and optimisation of its assets, which

include human, fi nancial and strategic resources, through the

consistent application of an effective risk management process,

augmented where necessary by insurance. The Group is equally

committed to the effective management of material operational

risks, covering important non-fi nancial and reputational issues

arising in connection with health and safety, environmental

impact and business conduct.

The Board and Group Executive Committee have overall

responsibility for ensuring that risk is effectively managed

across the Group to guarantee full compliance with the

legislative and regulatory requirements in the jurisdictions

where it operates. The Board delegates certain risk

management activities to designated subcommittees. Risk is

a regular agenda item at these senior management forums

and an integral component of the Group’s periodic strategy

review process. This ensures the Board has a full appreciation

of the principal risks affecting business operations as well

as a comprehensive oversight of how they are being managed

in line with our Group risk appetite statement and policy.

Further information on the activities of these committees,

together with the Group’s core business processes and

mandated policies, can be found on page 80.

The Board considers Laing O’Rourke’s internal control system

to be effective and robust. Our internal controls assurance

report maps the key activities that are undertaken to assure

the areas where the organisation has legal, contractual,

regulatory or statutory responsibilities; these elements are

placed under continuous review and improvement.

The Audit Committee reviews the effectiveness of the Group’s

risk management systems and reports regularly to the Board

directors on the key sources of risk, the monitoring of their

status and the corresponding mitigation plans.

Risk reporting at the operational business unit level is

structured so that key issues can be escalated rapidly through

the management team, and ultimately to the Board where

necessary. The individual businesses are able to tailor and

adapt standard risk management processes to suit the specifi c

circumstances of their respective operating environments.

In doing so, they must always adhere to the underlying

principles of the Group’s risk management policies, which are

to continuously identify, analyse, plan and provide for, report

and monitor the principal risks through established control

procedures. Our ‘risk aware’ culture supports this, with staff

involvement at all levels to promote an environment of learning

from experience, in order to adapt and improve our controls

and communicate on risk issues.

Project risks are monitored and reported in the controlled

Project Delivery Review Boards, which are reviewed by

business unit operational management at quarterly and

monthly contract reviews. This process covers the fi nancial

performance of projects and is overseen by the commercial

function. Reporting structures and mechanisms ensure

that project risks are continually monitored and signifi cant

exposures can be escalated from project level to business unit

level and ultimately to the Group Executive Committee and the

Board. All project-owning business units must have assurance

mechanisms to assess the likelihood and potential impact

of risks and to ensure actions can be taken to mitigate and

eliminate risks, while strengthening our internal controls and

systems to manage the recurrence of such risks at any point

in the future.

INTERNAL CONTROLSThis system of internal risk control is designed to manage

rather than eliminate the risk of detrimental business impact

to achieve business objectives, and therefore can only ever

provide reasonable assurance against the possibilities of

material fi nancial loss or organisational disruption.


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THE PROCESS

BOARD

GROUP EXECUTIVE COMMITTEE

SUBCOMMITTEES

1. IDENTIFYING RISKS

Risks are identified at a corporate and project level

and monitored regularly as their impact and

probability may change over time. Material risks are

consolidated into a material risk register, which is

reviewed by the Audit Committee and reported to the

Group Executive Committee and the Board.

Laing O’Rourke’s assessmentof strategic, financial,

operational and project risks

4. REPORTING AND MONITORING

This type of robust mitigation strategy is subject

to rigorous and ongoing review by accountable

management, and is supported through the

Group’s internal audit processes. The Audit

Committee evaluates the effectiveness of risk

controls deployed and reports its findings to the

Group Executive Committee and the Board on a

regular basis.

LAING O’ROURKE’SASSESSMENT OF STRATEGIC,

FINANCIAL, OPERATIONALAND PROJECT RISKS

3. DETERMINING MANAGEMENT ACTIONS

REQUIRED

Existing and additional risk controls will be

agreed and responsibilities assigned to

appropriate ‘risk-owning’ management forums

for implementation.

2. ANALYSING RISKS AND CONTROLS TO

MANAGE IDENTIFIED RISKS

The process evaluates identified risks to ascertain

the degree of financial and non-financial impact on

the Group, together with the root causes and level

of occurrence. Consideration of the appropriate

controls required to successfully mitigate the risks

is also undertaken, which enables identified risks

to be prioritised for action.

79

The Board has a full appreciation of the

principal risks affecting business operations

as well as a comprehensive oversight of

how they are being managed in line with

our Group risk appetite statement and policy.”

GEORGE ROSE

CHAIR, AUDIT COMMITTEE


RISK MANAGEMENT CONTINUED

OPERATIONAL RISK MANAGEMENT

CORE PROCESSA standard approach to the key business decisions

and activities, delivering effective governance,

organisational diligence and consistency for finding,

winning and delivering projects

Salesforce CRM System

• Opportunity pipeline tracking

• Key sectors contact management

• Process gateway governance – ‘permission to bid’

ENABLING PROCESSBest-in-class project delivery to assure greater

predictability in operational and financial performance

• Required minimum standards and skill-sets

• Best practice procedures – functional toolkits

• Continuous improvement – formal feedback process

OPERATIONAL GOVERNANCE

Global Code of ConductLaing O’Rourke believes laws and regulations act as our

minimum integrity standards, and we constantly seek to go

beyond this level. The Global Code of Conduct articulates our

approved set of ethical principles covering key business issues

that we expect every employee and contracted supply chain

partner to uphold in every activity, every day, wherever we

operate. By setting the expected minimum standards of

business conduct in different areas of our work, the Code is

integral to the way we do business at Laing O’Rourke and is

underpinned by our Group vision and values (see page 19).

Compliance with the Code provides heightened assurance of

our business affairs, which in turn supports the long-term

sustainability of the Group by encouraging more ethical and

effective relationships and stimulating deeper economic,

social and environmental contributions where we work.

The Code applies globally and its development and application

are the responsibility of the Group Executive Committee.

Group policiesOur Group policies underpin the Global Code of Conduct and

are based on government laws and regulations that impact

upon every Laing O’Rourke business and every employee.

The policies establish and defi ne the internal rules that

everyone must comply with to conduct business effectively.

As the Group expands globally, we are subject to a growing

number of regulations in the jurisdictions where we operate.

This environment demands that every employee be aware

of, knowledgeable about and committed to excellence

in the application of clear, global and mandatory

Laing O’Rourke policies.

Project Quality Management SystemThe LOR Way is a Group-wide project quality management

system. It comprises the Core and Enabling Processes

(described above) and functional toolkits, a set of standards

and procedures that guide and direct The LOR Way for fi nding,

winning and delivering projects. This proven quality assurance

framework enables us to connect and direct all of the different

decisions and activities necessary, through a series of

mandated process gateways, to achieve maximum performance

and control across the entire lifecycle of a project.

Core ProcessCore Process enables accountable business leaders to fully

understand the critical sign-off procedures in bidding for and

securing a project, and the formal governance approach which

must be observed to secure optimum performance. It is also

a vital tool for establishing accurate and reliable assessments

of risk and opportunity in commercial, design, health, safety

and environment, and Design for Manufacture and Assembly

activities. Core Process is mandatory across all of our projects

and compliance is monitored by our internal audit function.

A key element of Core Process is our centrally managed and

governed client relationship management system – Salesforce

– which captures information in relation to the opportunities the

Group is pursuing, and also acts as a repository for supporting

documentation. Information captured in Salesforce is used

across the business to aid collaboration and provide reporting

at all governance levels. Opportunity pipeline information to

this level of quality and detail helps ensure all bidding-related

decisions are fact-based and fully informed, heightening the

Group’s chance of success in the tendering phases.

Enabling ProcessEnabling Process helps accountable project leaders to fully

understand the minimum requirements, in terms of operational

procedures, for assuring success in project design and delivery.

It also supports project leaders to ensure that their teams have

the necessary skill-sets to meet these minimum requirements,

allowing them to allocate clear responsibilities to team

members. Adherence to Enabling Process is also mandatory,

and it is only permissible to omit elements in clearly defi ned

circumstances, and by specifi c dispensation from an

accountable director.

Key elements of Enabling Process are the functional toolkits,

which enable accountable functional leaders and their teams to

deploy current best practice procedures consistently, executing

project-specifi c plans in an integrated and disciplined manner.

At the end of a project, a formal feedback process is designed

to capture key information to enable us continually to assimilate

the best and most current ways of working.

Business Unit/Function Guidelines and ProceduresBusiness Unit and Function-specifi c Guidelines ensure that

the different operating hubs and their constituent parts can

effectively adapt their business practices and processes to

suit the markets and sectors in which they operate. They are

designed to align with, and complement, Group policies and

stem directly from The LOR Way. In addition, they remain true

to both the spirit and the letter of the Global Code of Conduct,

and comply with applicable laws and regulations.


ST

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The Group’s principal risks are

identifi ed over the following pages,

together with a description of how

we mitigate them

Further information on our fi nancial risks can be found in

note 32 to the fi nancial statements on pages 124 to 128.

This list is not intended to be exhaustive, and some risks and

uncertainties have not been included in this list on the basis

that they are not considered to be material, to affect or be likely

to affect businesses in general, or are not presently known by

the Board and Audit Committee. However, we have established

controls and systems in place to manage these risks.

Key:

Increase in risk during 2013/14

No change in risk during 2013/14

Decrease in risk during 2013/14

SUMMARY OF PRINCIPAL RISKS

HEALTH, SAFETY AND SUSTAINABILITY

Risk/Impact:

Through our activities we could

cause signifi cant harm to employees,

suppliers, clients, members of the

public or the environment, which

could lead to injuries, health issues,

fi nancial loss or damage to the

Group’s reputation.

Mitigation:

Health and safety is a key focus for Laing O’Rourke and mitigation occurs at every level

of the Group’s governance framework. Our global Mission Zero safety campaign is an

integrated programme designed to eradicate all accidents from our business by 2020

by focusing on culture and leadership. Every project is regularly reviewed and changes

implemented where necessary.

The Safety and Sustainable Development Committee meets periodically to review policy

and develop a consistent approach to health, safety and environmental best practice.

Our documented Safety Management System (SMS), containing compulsory procedural,

behavioural and training requirements, is in place on every project and is continually

reviewed and updated.

Further details can be found in the Group Safety and Sustainability Review on

pages 58 to 77.

WORK-WINNING

Risk/Impact:

Failure to secure enough new

orders, or securing projects with

an inappropriate price/risk profi le,

could impact the Group’s future

profi tability and its reputation with

clients, suppliers and employees.

Mitigation:

The Group’s approach to project selection is guided by a detailed set of protocols known

as Core Process. This has defi ned delegated authority levels for approving all tenders

depending on the size and complexity of the project under consideration. Our internal

delivery capability results in greater understanding of the build sequence, cost and

risk profi le pre-contract. Regular tender review meetings are held to check progress,

understand the win strategy and interrogate the contract risk profi le.

PROJECT DELIVERY

Risk/Impact:

The Group delivers complex

construction and engineering projects

across a range of geographies and

sectors. Failure to deliver on time,

to budget and to the right quality

could result in fi nancial loss or

reputational damage.

Mitigation:

Risk mitigation starts with work-winning and project selection as described above.

Laing O’Rourke’s approach is guided by a detailed set of protocols – Core Process – and

an associated project management approach – Enabling Process. Together these form

The LOR Way, which is mandated across all global projects to ensure a standardised

approach to tendering and delivery based on strong project controls and a continuous

improvement loop. The DfMA methodology and our integrated capabilities result in

greater surety of delivery. Building Information Modelling (BIM) and digital engineering

technologies are used to achieve time and cost certainty through a full visualisation of

the build sequence. Regular project review meetings are held to check progress against

KPIs and any deviations from the programme are acted upon quickly and appropriately.


SUPPLY CHAIN AND JOINT VENTURE PARTNERS

Risk/Impact:

Non-delivery by our supply chain or

joint venture partners – through either

poor performance or fi nancial failure

– could impact the Group’s ability to

deliver projects on time, on budget

and to the right quality, and result in

fi nancial loss or reputational damage.

Mitigation:

The Group seeks to work independently wherever possible and only participates in joint

ventures to fulfi l client expectations or accelerate its strategic objectives. The majority

of our projects are self-delivered by internal companies, thus reducing reliance on

third parties.

Where specialist subcontractors are used to meet specifi c delivery needs, the risk is

mitigated through a robust selection process, including reviews to assess fi nancial

and operational viability. The list of preferred suppliers is regularly reviewed to

ensure compliance with Group standards, applicable laws and industry regulations.

Contingency planning is also undertaken. The Group also adheres to contractually

agreed payment terms to avoid fi nancial failure risk.

Joint ventures are only established when the Group’s interests are complementary to

those of its partners. Laing O’Rourke undertakes a thorough evaluation process to

determine the fi nancial, operational and reputational integrity of potential partners

before committing to any formal arrangement. Once established, implementation of

robust governance procedures ensures compliance with all contractual terms and

practices within the joint venture.

PEOPLE

Risk/Impact:

Inability to recruit, develop and retain

appropriately skilled people in the

right geographic locations could

impact the Group’s ability to meet

current commitments, deliver projects

and grow the business as planned.

Mitigation:

Human capital is a primary component of Laing O’Rourke’s strategy and is overseen

by the Group Executive Committee. The Group aims to be a progressive employer of

choice and offers attractive reward packages, training and development, and a broad

range of career opportunities. Succession planning is undertaken for all key roles.

Innovative partnerships with universities also help position Laing O’Rourke in attracting

leading graduates.

FINANCIAL

Risk/Impact:

Inability to secure funding –

in the form of cash bonding facilities

– could impact the Group’s ability

to bid work, make investments or

meet its ongoing liquidity needs, which

could adversely impact profi tability,

cash fl ow and future growth.

Mitigation:

Our experienced in-house treasury management team takes a prudent approach to

liquidity and constantly monitors and maintains suffi cient cash reserves and available

bank facilities to meet liabilities and fi nancing needs as they fall due. Procedures are

in place to monitor and forecast cash usage and other highly liquid current assets.

This, together with committed credit facilities, ensures that we have adequate

availability of cash when required. At year-end, the Group had cash and undrawn

facilities of £772 million.

POLITICAL, ECONOMIC & REGULATORY

Risk/Impact:

The Group operates in a cyclical

industry and changes in the economic

environment, government policy and

regulatory developments can have

a signifi cant impact on the number

of new projects, thus affecting the

Group’s profi tability.

Mitigation:

The Group seeks to maintain a diverse portfolio of projects for both private and public

clients and a broad exposure to a number of resilient sectors and geographic markets.

Laing O’Rourke also focuses on sustainable relationships with key clients, government

departments and related regulatory authorities.

CONDUCT, COMPLIANCE & REPUTATION

Risk/Impact:

Damage to the Group’s reputation

through poor conduct or acts of fraud,

bribery, corruption or anticompetitive

behaviour can all adversely impact

corporate reputation and result in

fi nancial loss.

Mitigation:

The Group has very clear principles governing the way in which it conducts its business

and expects all employees and partners to act in accordance with its published Global

Code of Conduct and established systems and processes. Continuous awareness

programmes ensure high levels of understanding of the Group’s expectations and

each individual’s obligations. The Group also provides a confi dential independent

‘whistle-blowing’ service to encourage the reporting of inappropriate behaviour.

We use a range of strategic advisers to protect and enhance our brand and reputation

in the eyes of key business infl uencers and opinion formers.

RISK MANAGEMENT CONTINUED

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