Laing O’Rourke is to sell its profitable Australian division to reinvest the proceeds in its loss-making European division and its avowed strategy of offsite manufacture and assembly.
The Australia business, which returned a pretax profit of £91.7m in 2014/2015 compared to a £57.5m pretax loss in the European Hub, has been a recent success story for the business.
Laing O’Rourke’s surprise decision apparently follows unsolicited bids for parts of the group including the Australia business – and the likelihood that the board anticipates it will fetch a good price.
Read related articles
Laing O’Rourke to ramp up offsite solution for housing crisis
Laing O’Rourke highlights DfMA in search for high margins over volume
In the statement announcing the proposed partial divestment, chairman Ray O’Rourke said that the approaches were “reflective of both the strength and attractiveness of this element of the Group which, having performed well in recent years, is now strongly positioned in the emerging infrastructure market with blue-chip clients, a solid pipeline, a talented leadership team and great people.
“Accordingly a formal sale process will now commence, led by HSBC Investment Bank and supported by our other advisers.”
According to reports in the Australian media, several international businesses, including locally-listed contractor CIMIC, Bechtel and Ferrovial, are all looking to increase their presence in the Australian market.
One local analyst told The Australian: “There’s no shortage of work at the moment, and that has been understood by the international market. There are a couple of things that make [Laing O’Rourke] very attractive for a company that’s been planning an entry for a while.”
Laing O’Rourke used its offsite solution at William Street Quarter in Barking
According to The Australian, Laing O’Rourke established itself in the country more than 10 years ago when it purchased construction business Barclay Mowlem from Carillion.
Since then it has broadened its footprint to Hong Kong, New Zealand and parts of Southeast Asia, working across building construction, infrastructure construction and other industrial services such as building, transport, power, mining, water and oil and gas. However, it has been impacted by a recent downturn in the mining sector.
One commentator has suggested that the move is a “gamble” on the Design for Manufacture and Assembly (DfMA) approach. The consultant told Construction Manager that Laing O’Rourke “must be confident [about DFMA] to be selling the profitable heart of the group”.
“If they are really betting so heavily in DfMA, which is unproven, then it seems quite a gamble – or is it just marketing spin?”
He added that another factor behind the decision to sell could be that “Australia is a pain to manage, especially with the O’Rourke hands-on style, so I’m not surprised [about the decision to sell]”.
