The Laing O’Rourke Growth Study

The Laing O’Rourke Growth Study

Established in 1978, Laing O'Rourke is an international engineering and construction enterprise operating in Australia, the UK, and the Middle East. Here’s its amazing journey...

Established in 1978, Laing O'Rourke is an international engineering and construction enterprise that delivers cutting-edge infrastructure and building projects to its clients in Australia, the United Kingdom, and the Middle East.

From the iconic Atlantis, The Palm in Dubai, and Heathrow Terminals 2 and 5 to One Hyde Park, London, and Everton F.C’s New Stadium, Laing O'Rourke has been involved in an array of projects in the building, transport, power, mining, oil and gas, and water and utility sectors.

This has meant the company doesn’t just have a massive fan following in Australia. But, it has also made a name for itself in the UAE as well as the UK, where it’s the largest privately-owned construction company.

Here are a few stats from 2021 that highlight Laing O'Rourke growing size and stature:

Although officially the company was formed in 1978, its roots go back to the mid 19th century when it was just a small setup. From there to a company that is recognized on multiple continents, the company’s growth has been remarkable.

Let’s now take a detailed look at the inspiring journey of Laing O’Rourke, right from the time it was established to today, to understand how it has grown exponentially.

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The Beginnings

Laing O’Rourke’s history dates back to 1848 when the company John Laing plc was formed.

It was initially a small family business that later expanded into an international company by the descendants of its founder, James Laing.

James Laing Lays The Roots

The story begins in 1848 when James Laing and his wife hired workers for the construction of their house. After that, two more homes were constructed, one for the family and the other for sale.

James’ father had been a repair worker and dug wells, and very early on, the younger Laing had joined his father early at work. Thus, being a construction worker himself, James had the essential know-how of the business.

Eventually, it was his wife who convinced him to capitalize on his skills and establish a small business. Thereupon, a construction business started taking shape, though on a very low scale.

The couple moved to Carlisle, England, with Laing’s family to expand business opportunities.

The Sons Advance the Business

James Laing died in 1882, leaving the command to his eldest son, John Laing, who had become a key member of the enterprise by that time.

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He started taking on bigger projects in Carlisle, expanding the workforce and developing self-sufficiency in materials. Laborers excavated clay and began handcrafting bricks in a kiln on the construction site.

At the end of the 1890s, John’s son, William Laing, started becoming a key part of the company, leading the company to be renamed, John Laing & Son.

Instead of enjoying a natural leadership role, William decided to get his hands dirty. He studied about and participated in all aspects of the company, particularly focusing on the dynamics of construction rather than office work.

The company undertook several public and private contracts in the late 1800s and early 1900s, taking advantage of the growing construction industry in the United Kingdom. The Uldale Reservoir and the Barrow Sewer were some of the prominent works of the company.

Key Takeaway 1: Don’t Take Half-hearted Measures. Go All In!

Laing started as a small family enterprise. After the death of James Laing, the founder, his son, John took over with an ambition to expand the company to a much larger scale. The same pattern followed with John and his son, William.

Yet, growth until this point was still fairly decent and not as spectacular to propel the business’s name into the large companies.

Here, William began the actual expansion, undertaking large-scale public and private contracts. Naturally, it meant significant revenue as well as experience for the company.

This proved that if the company went out there more proactively, it could land bigger contracts, and consequently, become a name that wasn’t just restricted to Carlisle.

The 1900s - Laing’s Peak

The early 1900s ushered in an era of rapid growth in the United Kingdom, particularly in the construction sector.

The two world wars provided defense contracts for the company, saving it from the economic affliction of the wars. Also, William John Laing expanded the company further outside the region, becoming bigger and better than ever before.

William’s Unique Costing

By the 1910s, William had assumed control of the company. Contrary to his predecessors, William wanted to work beyond Carlisle as well.

In addition to the newly secured public contracts, one hallmark of the company was its accurate cost estimates. In the construction industry, cost estimates and overruns are primary concerns for both parties in any deal. William had taken part in on-field parts of construction since his teenage years. This allowed him to use his experience to introduce accurate estimates. He worked with the costing department to prepare a unique costing mechanism that soon became a name in the industry.

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Accurate estimates meant less significant surprise costs and therefore a strong competitive position for John Laing & Son.

Projects in World Wars

The beginning of the First World War meant increased defense spending of the British Government.

Due to its competitive position, John Laing & Son was able to secure dozens of government contracts for military purposes. The company built an arms factory, several testing stations for the navy, and worker accommodations. Towards the conclusion of the war, John Laing & Son had become a major contractor for the government and had a good market share in the private sector as well.

John Laing became a limited company in 1920, with offices starting in London. The headquarters also shifted from Carlisle to a massive location in London. It was able to secure contracts for the Middlesex County Hospital as well as the Federation of British Industries House. Utilizing the slow construction of houses in the war, the company capitalized on the sudden jump in housing demand post-war. In addition, the government kept giving several works to the company.

In the second World War, the Air Force was the primary revenue source, contracting for runways, airports, aerodromes, and much more. With already much governmental work done, the new deals were a significant revenue source for the company in a war that stifled economic growth.

Post World War Growth

Having gained revenue from the defense contracts during the wars, the company was well on its way towards international expansion.

It went public in 1952 under the name John Laing & Sons (Holdings) Ltd. Majority of ownership still remained with the Laing family. It now had more than 9000 employees and state-of-the-art facilities at various locations in England.

Some of the major projects then were the Prestwick and Glasgow airport, and the Windscale and Berkeley nuclear power projects.

By the 1980s, John Laing had become the largest construction company in the UK.

With a strong free cash flow and reserves, John Laing & Sons decided to diversify its portfolio of projects. So, it began taking contracts for supermarkets and water treatment plants. Later, it dedicated a division called Energy, Technology, and Environment for complex new projects in these domains.

The home construction market had grown rapidly in the UK and other territories such as Saudi Arabia, Iran, and the UAE. This became a major revenue source for the company, in addition to the major government and civil contracts.

Laing’s Famous Projects

John Laing has done some prominent projects in the late 1900s. These include:

The Second Severn Crossing (1996)

This is the M4 motorway bridge between England and Wales over the Severn River. It supplemented the traffic capacity of the old Severn bridge constructed in 1966. It was built at a cost of EUR 330 million.

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Bridgewater Hall (1996)

One of the most famous concert venues in England, Bridgewater Hall was constructed at a cost of EUR 42 million by John Laing in 1996.

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Cardiff Millennium Stadium (1999)

A key stadium of the UK and the national stadium of Wales, the Cardiff Millennium Stadium. It was a massive project consisting of a consortium of different companies and architects.

However, this contract proved fatal for John Laing’s construction division as it suffered major losses. Consequently, the division was quickly sold afterward.

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Key Takeaway 2: Be Nothing But The Best In What You Do

Garnering fame through its public projects and the unique costing attractive to contractors, John Laing & Son was able to remain competitive in the industry.

This meant that the company had figured out its unique selling proposition (USP) to be its cost advantage and decided to stick to it to maintain an edge over others.

It was for this exact reason that the government chose the company for numerous projects during the war.

Therefore, understanding their skill and mastering it became a constant source of revenue, creating a diverse clientele over time.

Laing O’Rourke Is Formed

The Cardiff project inflicted major losses to John Laing’s construction division.

Eventually, it was purchased by O’Rourke & Son. The company, O’Rourke, itself had been in the construction industry since the 1980s. After acquiring Laing, it became Laing O’Rourke, reaching new heights in the 2000s.

Eventual Demise of Laing Construction

The 1990s were a rollercoaster ride for Laing. At first, it underwent significant restructuring and comprised four main divisions. These were construction, homes, property, and investments, respectively.

Laing’s profits witnessed stable growth till 1998 when it began facing overruns in the Cardiff Stadium project. The company increased its focus on the housing market in the US, conducting several mergers in the US.

However, the construction division was nowhere near improvement. The overruns and losses from the Cardiff project kept piling up, along with increased competition in the industry. The management decided to reposition Laing more towards housing and investments as its construction division was deemed beyond saving, bearing a loss of EUR 88 million in 2000.

Consequently, the construction division, John Laing Construction, was sold to O’Rourke & Son.

O’Rourke Acquires Laing Construction

O’Rourke & Son acquired Laing Construction for a mere GBP 1. This acquisition made O’Rourke, now called Laing O’Rourke, the biggest private construction company in the UK.

The management first had the major task of revamping the Laing Division acquired and turning it back into a profitable entity. A complete restructuring was done slowly to ensure a synergic acquisition for O’Rourke.

In 2002, the company secured a contract to transform London’s St. Pancras station into a modern international railway terminal. 

In 2004, Crown House Engineering, a mechanical and electrical engineering firm, was purchased from the multinational construction company, Carillion.

Laing O'Rourke expanded its operations in Australia in 2006, when it acquired Barclay Mowlem, which was also acquired from Carillion.

Key Takeaway 3: Smart Acquisitions Can Bring Massive Returns

Although Laing Construction was near collapse due to losses, its acquisitions for a low price proved fruitful for O’Rourke. Laing already held extensive experience in different construction projects.

O’Rourke was a rapidly expanding company. The acquisition not only made it the biggest construction company in the country but also provided a team that had completed dozens of big public projects in its history. The only hurdle was to revamp the purchased division and reignite its profitability, which O’Rourke did excellently. This made the acquisition a very smart and bold decision.

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Major Projects Set The Stage For The Recent Decade

Laing O’Rourke dozens of prominent projects in the 21st century.

Laing O’Rourke’s Prominent Projects

The company has multiple running projects, many of which contributed to its status today. Therefore, to understand the present standing of Laing O’Rourke, an analysis of its projects is essential.

The Ascot Racecourse (2004)

The Ascot Racecourse is a dual-purpose racecourse in Ascot, Berkshire, England. It was a EUR 220 million contract, awarded to Laing O’Rourke.

It was a unique experience for the company as this was a very different stadium compared to football or other sports.

In addition, trying its hand at a relatively unfamiliar territory also meant the company expanded its portfolio and expanded the market reach to encompass those in the racing industry too.

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Darwin Convention Center (2008)

A prominent convention center in Darwin, Australia, the Darwin Convention Center was initiated by Laing O’Rourke in 2006 and completed in 2008. It has an area of around 23,000 square meters.

This reiterated the company’s stronghold in Australia.

Atlantis, The Palm, Dubai (2009)

A 23-story and 93-meter high luxury hotel in the Palm Jumeirah Island of the UAE, Atlantis the Palm was completed in 2009 by Laing O’Rourke.

The resort is based on the theme of the mythical Atlantis island and contains underwater rooms as well - a feather in the cap for Laing O’Rourke as it displayed their prowess in the work.

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One Hyde Park (2011)

A EUR 1.15 billion project, One Hyde Park is a residential and commercial complex in Knightsbridge, London. There are a total of 86 residential properties. Laing O’Rourke was the primary contractor, along with several engineering firms and architects

London Gateway Port (2013)

Also known as DP World London Gateway, it is a port in Essex, London. The project was completed in a period of five years by Laing O’Rourke with an estimated cost of EUR 1.5 billion.

Heathrow Terminal 2 & 5 (2014 and 2018)

Laing O’Rourke also completed two terminals of the famous Heathrow Airport in London. Terminal 2 was completed in 2014. It was a joint venture between Ferrovial and Laing O’Rourke

Terminal 5 handled more than 30 million passengers on around 200,000 flights in 2018. It was the busiest terminal at the airport, both in terms of passenger traffic and flight movements.

From conception to completion, the building cost EUR 4 billion and took nearly 20 years, including the longest public inquiry in British history.

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Francis Crick Institute (2016)

A biomedical research center in London, the Francis Crick Institute has a state-of-the-art building with intricate heating and cooling systems. It was a EUR 430 million project completed well within the stipulated budget and the timeline of 5 years.

Australian Business and Problem Contracts

For most of the 2010s, Laing O’Rourke reported losses annually. It decided to sell its Australian business in 2016 but failed. Later, the company decided to revamp its operations in Australia as the sale did not complete.

In the same year, Laing reported a massive loss of EUR 246 million. However, the loss reduced to EUR 67 million in 2017 and further declined to 46 million in 2018.

The losses were mainly due to contracts causing overruns. For instance, the company could not perform well in the PFI Hospital contract in Montreal, Canada. There were also many problem contracts in the UK.

One such problematic contract was the Ichthys LNG storage tank project. After not receiving payment for several months, the company removed 800 of its personnel. The amount in issue was $250 million, notwithstanding the contractor’s denial that it owed the disputed money.

Key Takeaway 4: Take Setbacks As An Opportunity

Laing O’Rourke experienced a period of sustainable growth when Laing and O’Rourke merged. Yet, in the 2010s, the company again faced several major challenges, registering major losses and failing to sell off its loss-making operations in Australia.

Following this, the company had to make several tough decisions, such as letting go of 800 of its employees. Although difficult, these allowed the company to reduce its losses and gradually return to profitability.

A Timeline Exploring Laing O'Rourke's Journey

The company went through massive twists and turns throughout its journey. The past decade is no different. Let’s review what transpired in the recent decade and how the company progressed to stand where it is today.

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Pre-exceptional earnings of EUR 110 million were unchanged from the previous year, but cash balances increased by 17% to EUR 716 million, confirming the business model's highly cash-generative character. Net cash increased by 56% toby closely managing both costs and working capital.

The company improved its cost planning and modeling by acquiring a renowned planning company, Privica. This helped Laing build on its current 3D models of construction and enhance dimensions.

In 2012, Laing O'Rourke's revenue grew 7.6% to EUR 4.3 billion, an increase from last year's EUR 4 billion, including revenue from joint ventures, inter-segment revenue, and revenue from managed operations.

Pre-exceptional earnings before interest and taxes increased to EUR 54 million up from EUR 51 million last year.

O'Rourke announced an order book backlog of nearly EUR 8.2 billion this morning, indicating a healthy medium-term profits projection.

Infill acquisitions such as Glass Reinforced Concrete UK and Renolith International in Australia broadened manufacturing capabilities. The company enhanced commercial discipline in order to build a portfolio of higher-value projects. The focus was increased on funding for the Mission Zero health and safety initiative, as well as the Mission Zero sustainability campaign.

In 2016, the Board of Directors authorized a new five-year business strategy and operating plan.

The Group's position as a leading major project and strategic frameworks delivery partner will be strengthened as a result of the new strategy. In accordance with the trajectory of enhancing the cost-effectiveness of its core business activities, a revamped structure has been implemented, resulting in a reduction in overheads.

The NGR Maintenance Centre, which Laing O'Rourke designed and built, was declared the winner of the 2016 NSW Safework Awards, with the 'Smart Infrastructure Project' category going to Laing O'Rourke.

On November 1, 2017, Sir John Parker was named Chairman of the group. Sir John's appointment as Chairman freed up Ray O'Rourke to focus on his twin duties as Group CEO as well as the MD of the Europe Hub.

Within UK projects, a newly constituted Laing O'Rourke Residential business segment was developed during the year.

The Europe Hub completed the contracts for the Clatterbridge Cancer Center in Liverpool in July 2017 and signed the contracts for The Grange Hospital in Wales in November, allowing the building to commence. The Hub's UK division reached a financial close on the Manchester Airport Transformation Programme in August, obtaining the four-year construction contract and bolstering the Group's airport capabilities.

The company returned to profitability, with a profit after tax of EUR 33.7 million in its third straight year of growth. During the year, the Europe Hub secured a number of contracts in a variety of industries, many of which were with existing clients, demonstrating the company's commitment to building long-term relationships. Laing O’Rourke completed the contract to build The Factory, a new cultural space in Manchester, and resumed a relationship with Equinix, who chose Laing as a preferred bidder to build their third data center, LD11, and in the same month, the company was named preferred bidder for a residential scheme, St Michael's in Manchester.

The company turned in a strong performance, earning a profit before tax of EUR 45.5 million for the fourth year in a row. The Group improved its net cash position by EUR 22.3 million and net cash of EUR 155.2 million.

Through self-help and UK government Covid-19 assistance, the Hub was able to significantly reduce the effects of Covid-19. The projection for the UK construction sector is strong, but the uncertainty regarding Covid-19's potential future consequences, as well as Brexit, may have a negative influence on the Hub's order book replenishment.

Next In Line

The British football club, Everton, has decided to revamp the site of Liverpool’s Bramley-Moore Dock into its home ground stadium. Laing O’Rourke was chosen as the main contractor due to its glowing reputation and capability to deliver results on-time and on-budget. Currently, this is the largest private-sector construction project in the UK. The stadium will have a capacity of 52,888 spectators. The project is due by the 2024 season and it’s estimated cost is around EUR 500 million. Laing O'Rourke has mobilized its workforce and began actively working on the project.

From Losses to Profits

The management was optimistic about the decline in losses and didn't give up when the going became difficult.

It implemented interim salary cutbacks for salaried employees, depending on grade, and furloughed 1,000 Laing O'Rourke and 1,000 employees for the same period. A total of 150 positions were made redundant as part of a personnel reduction to strengthen the company's resilience.

Losses decreased, and the underlying profits rose. Revenues and cash flow have unavoidably been damaged by Covid-19, but the introduction of mitigation measures, as well as management's quick and immediate action to protect the business and the jobs it supports, allowed it to bear the pandemic and emerge in a good position.

Consequently, pre-tax profit jumped from EUR 1.2 million in 2019 to EUR 26.6 million in 2020. The main reason was the fact that problem contracts had been resolved and the company could now focus on other operations. The PFI contract in Canada was also resolved.

Key Takeaway 5: Resilience Is Key

Laing O’Rourke was struggling with various contracts. However, it managed to stop losses piling up, and instead, they started declining steadily until the company finally reported a positive net profit.

Some losses were avoidable such as those from PFI in Canada while some needed time till resolution. Throughout, the management remained resilient and successfully squeezed through all crises. Where the covid pandemic hit all firms, Laing O’Rourke reported profits bigger than previous years. In 2021, the after-tax profits were 33 million as compared to 42 million from the previous year. The decline was mainly due to the disruptions caused by the pandemic.

Growth By Numbers and Key Takeaways

From a small family business to one of the largest construction firms in the country, Laing O’Rourke has risen to incredible heights.

Little could John Laing, its founder, have expected that his setup would thrive for more than a century, overcoming countless challenges and still managing to come out on top.

Be it in the form of ambitious and goal-driven leadership or smart decision-making, the company has stood out from its competitors and backed itself during every difficult phase.

Unsurprisingly, there are few firms in the construction industry that can claim to have matched Laing O’Rourke’s spectacular growth.

Growth By Numbers

The COVID-19 pandemic brought about a difficult phase for the company and although it managed to stay up during that time, its growth was hampered quite significantly.

On the other hand, just before the pandemic, Laing O’Rourke was growing at a steady rate and sustaining its profits after enduring losses.

 

2019

2016

Revenue

£2.7 Billion

£2.5 Billion

No. of Employees

12,685

15,234

Total Assets

£1.7 Billion

£1.6 Billion

Profit/(loss) after tax

£33.7 Million

(£219.9 Million)

Key Strategic Takeaways

With a journey spanning nearly five decades, Laing O’Rourke has time and time again displayed why it is one of the leading construction firms in the UK and beyond.

From acquiring some very noteworthy projects to navigating such fragile positions where many companies would have given up and shut down, Laing O’Rourke’s growth presents several strategic takeaways that other firms can aspire for.

Here are some of the key strategies that Laing O’Rourke has employed over the year to gain success.

  1. Growth Requires Vision

Laing O’Rourke began its journey as a small family business, located in Carlisle and consisting of merely a few workers. Yet, when William Laing took over the business, he envisioned the company operating on a much larger scale and becoming a recognizable name in the industry.

Hence, he pursued much larger private and public projects than the company had ever been involved in before and as a result, Laing experienced its most rapid growth until then. This also set the tone for how the company would, in the future, always have growth ambitions and have them drive the company’s way forward.

  1. Set Your Business Apart From The Rest

Throughout the 20th century, Laing continued to acquire larger projects and establish itself as one of the leading construction firms in the UK. It managed to do so by showing that it could go above and beyond its competitors.

From the early days in the 1910s when William Laing introduced the unique costing methods to later on during the world wars where the company was the government’s go-to firm, it displayed that by differentiating itself from its competitors, it could become the best firm in the industry.

Consequently, the following decades were marked by the company acquiring several noteworthy projects even during structural and leadership changes.

  1. Acquisitions Open Up Avenues

Leading up to the 21st century, Laing was in a precarious position and needed a major strategic miracle to bail it out. This came in the form of the most important acquisition in the company’s history. O’Rourke was a growing company in the industry and by acquiring Laing, not only did it save the firm from collapse but it also propelled the Laing O’Rourke enterprise to the top of the industry.

Thus, acquisitions like these provide companies with much more abundant resources - both in terms of capital and personnel - and allow them to capture a much larger market share in the process. For Laing O’Rourke, this meant becoming the largest firm in the country!

  1. Take Tough Decisions To Survive

The Laing O’Rourke merger wasn’t enough to keep the company on its growth trajectory for very long. In the 2010s, it was registering consecutive losses and was unable to sell off sectors driving those losses.

Therefore, the firm had to make the tough decision of letting go of 800 of its employees to limit its costs and recover its losses. Eventually, Laing O’Rourke moved back towards profits and showed yet again that despite whatever challenges it faced, it had the ability to bounce back strongly.

Parting Thoughts

Heading into the future, Laing O’Rourke is more than ready to overcome the setbacks faced during COVID-19 and return to its growth path. It has shown that it is equipped with the strategies and the ability to implement at the right to navigate through obstacles. Thus, it continues to stay ahead of competitor firms in the industry.

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