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Problem jobs in the UK and the cost of a dispute in Australia helped send Laing O鈥橰ourke crashing to its worst set of results since the business was formed in 2001.

The country鈥檚 biggest private contractor racked up an eye-watering pre-tax loss of 拢288m, eclipsing the 拢246m it lost seven years ago, on turnover up 拢500m to 拢3.6产苍 for the year to March 2023.

In anticipation of negative headlines, chief operating officer Cathal O鈥橰ourke and group finance chief Rowan Baker have spent the past few weeks visiting key clients to warn them bad news was coming and to calm fears about the state of the business. 鈥淐lients have been very supportive and we鈥檙e delighted with the way it鈥檚 gone,鈥� Baker added.

She said the firm was on course to make a pre-tax profit this year and had last month extended its credit facility to April 2026 with HSBC 鈥� before the accounts were signed off.

A note in the accounts about the business as a going concern added: 鈥淭he directors also carefully considered the forecast period to be reviewed as part of the going concern assessment and, due to the lead time for securing new projects, the period of visibility on future cash flows and management鈥檚 usual forecast cycle, concluded that considering a 17-month period to March 2025 was appropriate.鈥�

The firm鈥檚 Europe hub, which also includes work in Canada and the Middle East, sank to a pre-tax loss of 拢149m on revenue up 19% to 拢2.2bn.

O鈥橰ourke said business in the UK had been hit by 鈥渃ontinued inflationary pressures, challenging delivery on projects experiencing significant change and delays to capital investment in UK public sector work鈥�.

It declined to name which jobs in the UK had caused it the most problems but it is understood the losses are to do with its scheme at Olympia and its work at the former Whiteleys shopping centre in Bayswater 鈥� with the bulk of these losses being blamed on the Olympia job.

>>> See also: Laing O鈥橰ourke and client in talks over cost of design changes on 拢600m Olympia scheme

>>> See also: Residents to move in next year after glazing problem hits Laing O鈥橰ourke鈥檚 Whiteleys scheme

Both were signed on fixed-price terms and Baker admitted: 鈥淲e are reducing our exposure to fixed-price. There is a place for fixed-price where we completely understand the design and the costing of the job.鈥�

The Olympia scheme, believed to be 拢600m, was signed with client Yoo Capital in May 2021 but a few months later dozens of design changes were submitted to the local council.

The scale of these is in dispute but in his chairman鈥檚 statement, Sir John Parker, referenced 鈥渇actors impacting Laing O鈥橰ourke鈥檚 UK profitability鈥� as including 鈥渘ew clients, with high-value projects, requesting major design changes post-contract鈥�.

Chief executive Ray O鈥橰ourke used his statement in the accounts to admit the surge in construction costs had been unprecedented but added: 鈥淲e have sought to collaborate with clients to manage the impacts of this and keep projects on track but our commitment to finding solutions in a difficult environment has not always been reciprocated. Inequitable risk-sharing adds to the ongoing turbulence across construction.鈥�

But there was a crumb of comfort for the firm鈥檚 Europe business with the news that its scheme to build a PFI hospital in Canada 鈥� the job behind much of the 拢246m loss in 2016 鈥� had not shipped any more money with cumulative losses on this job staying at just over 拢219m. 鈥淚t doesn鈥檛 take up management time anymore,鈥� Baker added.

Although not named, a 拢144m provision in Australia is understood to relate to a pay dispute with its Japanese partner on a huge gas station job in northern Australia. Signed in 2010, it was building four cryogenic tanks at the LNG Tanks Project in Darwin for lead construction partner Kawasaki Heavy Industries before its contract was ended in 2017.

The firm also racked up a further 拢15.7m in legal costs on top of the 拢17m legal bill the dispute has cost it in the previous four years.

Baker said the bust-up was in arbitration with a formal outcome expected by the middle of 2025. 鈥淭he 拢144m is a balanced view [of the cost],鈥� she added.

The underlying performance of its Australia business improved, with pre-exceptional earnings jumping 27% to 拢91m.

Baker said the group business was concentrating on six sectors in the future 鈥� nuclear, defence, data centres, rail, healthcare and science and research. But she admitted the firm was now thinking twice about taking on mixed-use commercial schemes. 鈥淚t鈥檚 about more collaborative contracting and mitigating risk,鈥� she said.

The number of employees at the year-end was 10,603, a rise of 3% on last time.