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Annual Review 2012

Engineering the future

Laing O’Rourke Corporation

Laing O’Rourke plcBridge PlaceAnchor BoulevardCrosswaysDartford, KentDA2 6SNUnited KingdomT +44(0) 1322 296 200F +44(0) 1322 296 262www.laingorourke.com

UK contact address

© Laing O’Rourke 2012, all rights reserved.

Laing O’R

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EnginEERingExCELLEnCE

Over the following pages we discuss some of the major trends directly influencing the way we think about the development of the modern world, the opportunities for our industry, and the role Laing O’Rourke is playing in providing the solutions to the engineering challenges that lie ahead.

Cover image: Cannon Place, London, UK

The priority for the engineering and construction industry is to provide the essential building and infrastructure services needed to secure a sustainable future. Around the world millions of people depend on the continuing stability and prosperity provided by a reliable, fit-for-purpose built environment.

Production of this reportThis report is printed by an EMAS-certified Carbon Neutral®company, whose Environmental Management system is certified to ISO 14001. 100 per cent of the inks used are vegetable based, 95 per cent of press chemicals are recycled for further use and, on average, 99 per cent of waste associated with this production will be recycled. The papers used are FSC® certified. The pulp for each is bleached using an Elemental Chlorine Free (ECF) process.

Dr. gavin DaviesMechanical Engineering Discipline Lead [email protected]

Dr. Andrew Harris Chemical and Process Engineering Discipline Lead [email protected]

Dr. Phillip CartwrightElectrical Engineering Discipline Lead [email protected]

Professor Robert MairChair of the Engineering Excellence Group [email protected]

David Scott Structural Engineering Discipline Lead [email protected]

Mark Shirburne-DaviesArchitectural Discipline Lead mshirburne-davies @laingorourke.com

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ii Laing O’Rourke | Engineering excellence

EnginEEring + EntErprisE =ValuE CrEation

Engineering Excellence group The Engineering Excellence Group (EnEx.G) was established in 2011 to bring together world-class professionals drawn from academia and industry as a focus for creating innovative client solutions and partnering with external consultants at the highest levels in order to differentiate Laing O’Rourke and demonstrate our core capabilities. The Group also manages and participates in collaborative research and development projects with the Laing O’Rourke engineering centres sited at our partnering universities.

The EnEx.G has four primary roles:

1. Deliver: internal consultancy The EnEx.G is an intellectual resource for Laing O’Rourke’s design and delivery businesses. Its expertise covers benchmark design, manufacturing and construction processes, troubleshooting operational issues, providing thought-leadership to assist in winning major new projects through novel alternative approaches, and generating fresh perspectives on existing projects to create additional value.

Examples in the year include:

• 122 Leadenhall Street: steelwork temperature assessment and review of conflicting estimates of structural steelwork temperature.

• London Gateway Port: review of compaction and scour protection.

• Francis Crick Institute: assessment of use of photovoltaics.

2. Collaborate: External advisoryThe EnEx.G provides a collaborative and complementary problem-solving service to generate goodwill and loyalty among valued clients, our supply chain, delivery partners, governments and other organisations, including charities and not-for-profit organisations.

Laing O’Rourke’s innovative approach is an integral part of its entrepreneurial culture. We have developed our potential for innovation by establishing a unique in-house engineering consultancy, the Engineering Excellence Group. Staffed by some of the world’s leading industry innovators, it is actively supporting our growth agenda. Over time it will lead to a significant expansion of Laing O’Rourke’s capabilities, performance, client satisfaction and profitability across our sectors.

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The Francis Crick Institute, London, UK


• Engagement with consultants (Atkins) on opportunities to address the marine and energy markets through better engineering.

• ARUP Laing O’Rourke geotechnical knowledge-sharing workshop.

• Thames Water manhole innovation.

3. Innovate: research and development The EnEx.G identifies and manages Laing O’Rourke’s research agenda to innovate across our target sectors and markets, including extending our Design for Manufacture and Assembly (DfMA) capabilities into new product areas. It takes a largely participative approach via partnerships with leading universities and other research providers, complemented by our own commercialised in-house research and development capability.


• Imperial College London: PhD in wireless distributed sensors in system commissioning.

• University of Oxford: PhD in phase-change materials for energy storage in buildings.

• University of Cambridge: PhD in fibre-optics in tunnelling and deep excavations.

4. Educate: supporting education networks The EnEx.G participates in Laing O’Rourke’s existing education networks and leads the development of new ones, as well as mentoring graduate engineering trainees, junior and senior engineers, technical and

Its principal role is to devise engineering strategies to create competitive advantage for Laing O’Rourke and to drive industry-wide innovation.”

construction specialists, project managers and management from across the business. Acting as thought leaders, the engineering discipline leads support the development of stimulating education and training programmes to inspire and equip the next generation to be more radical in advancing our innovation agenda. This approach builds on the existing education platforms that Laing O’Rourke has established with our partner universities.


• The University of Cambridge Masters in Construction Engineering and Imperial College London Masters in Systems Engineering and Innovation.

• Key staff will rotate through the EnEx.G, providing young engineers with increased motivation and specialist expertise.

• Experienced project personnel will gain the opportunity to convert their site learnings into future innovation.

Leadership and organisationThe EnEx.G is led by Professor Robert Mair and is made up of engineering discipline leads in key fields – heavy civil, structural, mechanical, electrical, electronic, and chemical process and manufacturing – working in a dynamic and ‘boundary-less’ environment, operating outside normal business and project governance. Its principal role is to devise engineering strategies to create competitive advantage for Laing O’Rourke and to drive industry-wide innovation.

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ThE roLE of EngInEErIngIn a rapIdLy EvoLvIngworLd

By ray o’rourke KBE, founding Chairman and Chief Executive, Laing o’rourke

The industry is experiencing unprecedented transformation, driven by a number of dynamic forces that are causing engineers to fundamentally rethink the way buildings and infrastructure are funded, designed, constructed and operated.

Laing O’Rourke sees these shifting trends as a significant opportunity to challenge and change the way things are done, to step the pace of innovation up a gear.

While clients will ultimately drive developments by demanding more cost-effective projects, faster schedules, safer and more sustainable solutions and higher quality work, it is our role to anticipate these requirements, exploit new tools, take risks and be the first to try something different. That’s the only way to grow confidence in alternative ideas.

These new approaches include the use of Building Information Modelling (BIM) to analyse a structure’s design before we set foot on-site, or Design for Manufacture and Assembly (DfMA) to reduce construction and installation time, or biomimetic engineering, where solutions are inspired by the natural environment around us. Nature has had billions of years to get it right, so there’s a lot it can teach us about smarter ways of working.

Progressive thinking is vital for solving the issues of the modern world – from congestion and high accident rates on roads to the growing number of air passengers. Aviation is central to the globalisation of many countries, and airport authorities are under pressure to create large-scale terminals that are flexible and integrated, offering greater security than ever before, while at the same time enhancing the passenger experience.

End-users must be at the heart of engineering and construction endeavours. Nowhere is this more true than in the development of medical facilities, where the buildings and landscaping themselves are almost as critical to convalescence as the medicines and staff. For example, changes in government targets mean that many health authorities must find ways to improve their existing buildings in order to deliver efficiencies while offering better care and protection to patients.

As engineers, we can help galvanise communities and put cities on the map. It is a richly rewarding and inspiring role. Contemporary and spacious convention centres, such as the newly reopened Brisbane Conference and Exhibition Centre, attract prestigious trade and commercial visitors; vibrant retail sites become destinations in their own right; inspiring schools, such as those we are building through DfMA in the UK and Australia, make towns and villages places where families want to settle; and transport infrastructure – not just airports, but rail too – boosts tourism and improves import and export capacity.

At Laing O’Rourke, we believe it is important to leverage our expertise into the design and planning, to ensure that the asset is efficient and highly functional for those who will be using it. For this to be effective, however, clients need to invite construction firms to the table from the word go.

Engineering is about constantly setting new standards for what environments should be like – and adapting, challenging and evolving the parameters of construction in line with the world around us.

The challenges facing global societies are different today from 20 or even ten years ago. A fast-expanding population is becoming more demanding – not just about where they go and how they get there, but what their destination looks and feels like.

Schools, hospitals, city centres and surrounding infrastructure can no longer simply ‘do the job’ by meeting basic standards. The built environment is expected to push boundaries, inspire and amaze, relax and reassure, and make our lives easier.

On top of this, governments, councils and land owners are constrained by strict environmental goals and pressures.

Engineering has a pivotal role to play in creatively meeting the charge for efficiency and sustainability. And just as social and political needs are advancing, so the construction industry must break away from traditional processes.

The world over, forums and government groups – are debating what infrastructure their countries need and what the priorities are, namely: faster, more reliable and cost-effective construction.

As engineers, our challenge is to tackle these issues and help people work, travel, get quality medical help, gain an education and enjoy their leisure time. We must ask ourselves: is the traditional method actually the best method? If we don’t have the answers to hand, we can find them through innovation, collaboration, determination and well-thought-out research.

Low-carbon technologies are steering the industry to design passive buildings that are comfortable and high quality, and to do so with as little environmental impact as possible – not just in the construction phase, but over the life of the building. Around 60 per cent of global industrial waste is from the construction and demolition of buildings; the built environment accounts for 60 per cent of all electricity used in the developed world and 40 per cent of total energy consumed.

Engineering has a pivotal role to play in creatively meeting the charge for efficiency and sustainability. And just as social and political needs are advancing, so the construction industry must break away from traditional processes.”

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addrEssIng ThE sKILLsshorTagE

By dr andrew harris

Engineering recruitment is being severely hit by skills shortages, endangering the global economic recovery seen in key sectors like construction, manufacturing and energy and leaving businesses short of the qualified staff that are vital for their corporate development.

Warnings have come from leading industry figures in education, employment and management across the engineering sector. They argue that a growing proportion of global engineering-based employers are struggling to fill vacancies as qualified candidates are difficult to source – at a time when the need for their services is intensifying.

The shortage has created a near doubling of recruitment activity in the past year, particularly in Australia and parts of Asia and South America, placing the demand for professional engineers under greater pressure. Clearly, leaving these vacancies open could put the brakes on the economic recovery.

While many global engineering firms have expressed concern over the issue, not enough are taking progressive and innovative steps to reverse the trend. For example, if central governments are to meet the demands of the new energy age, feed the economic growth engines and replace ageing infrastructure, the private sector must find a more joined-up approach to working with public-sector departments and educational establishments.

With the challenges ahead of us, it is clear the industry must make engineering a more attractive proposition for young people. It is vital for the long-term health of the profession that we build enthusiasm among teenagers as they make choices about their future careers.

In its joint report, Engineering the Future, published in 2009, National Grid and the Royal Academy of Engineering highlighted the task we face as an ‘invisible industry’. Despite teenagers ranking engineering highly as a sector they would consider working in, many lacked real understanding of what engineers actually do. Worse still, it revealed that the proportion of parents and teachers recommending engineering as a career is falling.

Two major themes emerged from this research. Firstly, public attitudes to engineering are very important to young people as they contemplate career paths. Role-model organisations and engineering heroes, recounting everyday experiences have a huge influence. Therefore, it is essential to promote the advancements engineering contributes to society, increasing its attractiveness to a diverse pool of talent. Otherwise our siren call to young people may be drowned out by the din of public opinion.

Secondly, positive experiences with industry and academia are vital for building a young person’s early enthusiasm for engineering, from that first thought about their choice of career right through to the point where they accept their first job or embark on their first development programme. Unfortunately, many young people have uninspiring early encounters with industry, denting its broader appeal as these negative perceptions are shared among family and friends.

It is essential that we present the industry as engaging and rewarding, both professionally and financially.

There is no easy answer to helping young people get more out of their limited exposure to engineering. Our strategy must be more coherent and its implementation more consistent. In recent years, Laing O’Rourke has been at the forefront of a number of excellent programmes set out to actively engage and develop young people to look on engineering as a career of choice and a provider of solutions to the challenges of the modern world.

Alongside academic institutions, professional bodies and other partners, progressive employers like Laing O’Rourke are working hard to improve their engagement with young people through greater exposure to education and research and development opportunities. Others need to quickly follow their lead in becoming a catalyst for the enthusiasm of youth.

The battle for talent is particularly harshly felt in Australia, where an increasing need for infrastructure is coupled with an acute shortage of building and engineering professionals as a result of the resources boom, particularly in remote areas, a low number of graduates and an ageing workforce.

With Australia’s relatively small population and tight migration requirements, the pool of talent to choose from for the country’s biggest infrastructure challenges is always in high demand. And it’s not just engineers

Ultimately, organisations that demonstrate clear career paths and a vision to push boundaries can engage creative, passionate people from a young age.”

that are urgently sought, but project and construction managers, safety advisers and planners.

The Australian Federal Government held a Senate Committee enquiry into the issue, and the Australian Constructors Association concluded, on behalf of Laing O’Rourke and other members, that resolving the shortage will not be easy.

So, how do we tackle the problem? Domestic training will remain critical, as will an expansion of apprenticeship-level schemes. Perhaps the engineering-based organisations that will best weather the storm are those that can quickly draw on skilled personnel from overseas, Europe or the Middle East, for example. Research from Engineers Australia shows that more than 50 per cent of the Australian engineering workforce was born overseas.

Ultimately, organisations that demonstrate clear career paths and a vision to push boundaries can engage creative, passionate people from a young age. The possibility that their ideas and innovations will one day drive the industry forward and develop the inspiring and stimulating environments in which we live and work will surely be too attractive a prospect to turn down.

about the author: Dr Andrew Harris is Chemical and Process Engineering Discipline Lead in Laing O’Rourke’s Engineering Excellence Group. Based in Australia, Andrew has moved between industry and academia throughout his career, and was formerly an associate professor of chemical and biomolecular engineering at the University of Sydney.

Laing O’Rourke is determined to use the momentum around BIM to effect a transformational change, through which the industry becomes more integrated across the entire lifespan of a project, from feasibility to construction to operation and, ultimately, decommissioning.”

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ModELprofEssIonaLs– ThE rIsEof BuILdIngInforMaTIonModELLIng

By david scott

The widespread acceptance of the benefits of Building Information Modelling (BIM) in the past 12 months is the light-bulb moment the industry has been waiting for. It has quickly become the hottest topic in construction and those who remain reluctant will be left behind. The Royal Institution of Chartered Surveyors has called on the profession to ‘get its act together’ and adopt it.

Increasingly, client organisations are demanding its use on their capital projects, as they struggle to balance the urgent need to replace ageing infrastructure with budget deficits. In the UK public sector, BIM is to become mandatory on all contracts. The compelling argument is its potential to make significant savings.

Yet the term BIM is limiting, because it suggests a narrow application, when the reality is that it can be used on any type of project we deliver. At Laing O’Rourke, we believe it is about more than simply creating models. Yes, the visualisation is hugely important to understanding and interrogating a concept, but the most important letter in BIM is the ‘I’ – it is about unlocking the power of information to create knowledge and insight.

Used from the earliest stages of a project, BIM facilitates better design – whether the project is an iconic skyscraper like 122 Leadenhall Street in London, a standardised school solution or a railway station. It enables different parties to work together using a single data source, creating more informed and unified delivery teams, while allowing the supply chain to see beyond their own activities to a more holistic view of the client’s objectives.

Fundamental to achieving true BIM is having the right blend of technical and cultural platforms. An inclusive environment based on openness, collaboration and knowledge-sharing needs to be underpinned by consistent processes and access points, giving anyone connected with a project the ability to easily navigate around the model and explore the data. This allows the whole team to physically see the project build sequence to an incredible level of detail, measuring progress, homing in on specific areas of concern and interrogating the different interfaces, using the same core process. It saves time, money and misunderstanding.

Breakthrough success will come from a better appreciation of the roles that people and processes have to play, alongside state-of-the-art technologies. Forward-thinking project leaders are vital to embedding this culture. Meanwhile training off- and on-site delivery teams to practically embed BIM into business processes will aid take-up and at the same time add a new dimension to the skills of our professionals. Similarly, it is critical to establish the necessary protocols with consultants, subcontractors and other supply chain partners – achieving consistency at every interface.

From a technology perspective, the industry tends to design using bespoke software, without common platforms or conventions. True BIM requires information to be combined into a single working model. This provides real value to the client at handover stage, acting as a virtual operation and maintenance manual for their capital asset, which can significantly optimise the performance of its systems and facilities.

The benefits of BIM can be multiplied by earlier contractor engagement on a project. Put simply, if a project can be built virtually in a BIM world, it is possible to build it in the real world, offering guarantees on price and programme much earlier by significantly managing out risk. BIM provides the ability to go beyond the delivery phase to explore lifecycle analysis and energy performance, creating a greater understanding of those early decisions that impact on operational cost.

Laing O’Rourke is determined to use the momentum around BIM to effect a transformational change, through which the industry becomes more integrated across the entire lifespan of a project, from feasibility to construction to operation and, ultimately, decommissioning. The Group understands that barriers of data ownership and intellectual property exist. However, it believes that through the careful selection of partners, it will ensure those it works with share the same collaborative philosophy, reap equal benefits and create sustainable and valuable relationships with clients. It is ‘challenge and change’ at its most visionary.

about the author: David Scott is a globally renowned expert in structural engineering, with a particular specialism in tall buildings. He is Structural Engineering Discipline Lead in Laing O’Rourke’s Engineering Excellence Group, developing and delivering innovative and sustainable engineering solutions. David was previously a principal at Arup New York, working on the World Trade Center masterplan and the Freedom Tower. He led the post-9/11 industry review of design standards and procedures for tall buildings.

122 Leadenhall Street, City of London

Laing O’Rourke | Engineering excellence xi

fasTEr, BETTEr, for LEss – how dfMa IsTransforMIngConsTruCTIon

By dr phillip Cartwright and dr gavin davies

It’s not just a cliché: time really is money. Increasingly, governments and developers want and need more for less – and as quickly as possible.

A new retail development that falls behind schedule, for instance, or a delayed commercial venture awaiting the arrival of tenants, represents a huge commercial risk.

Beyond cost-savings, councils need schools to open in time for the new academic year in order to hit education targets; developers and architects expect their ideas to be flawlessly executed as their visions come to life; and any process that reduces the safety risks inherent in construction will be applauded.

Our response to these issues is Design for Manufacture and Assembly (DfMA), which is revolutionising how we evolve towns and cities within challenging restraints.

The approach is structured and simple, but the end product remains of high (if not better) quality, with tightly controlled factory processes ensuring accuracy and consistency.

DfMA produces precast and preassembled buildings and their component parts – from columns, beams and walls to sleepers, cladding and building systems – to a cost, time and specification with which traditional construction processes cannot compete.

At the heart of DfMA is early planning and investment – both financially and in terms of resourcing. In-depth up-front speculation and analysis of potential issues provide clarity and greater certainty. That insight and visibility of progress, from every dimension of the Building Information Model all the way to the factory, is hugely valuable to clients and constructors alike. It instils confidence in the ideas, methodologies and programme, with concerns addressed before on-site work starts.

People think about DfMA in the context of buildings, but there is enormous potential to introduce it beyond civil engineering and construction. It is completely foreseeable that modular assembly could inform the build of facilities for electricity and power generation and other utilities. Laing O’Rourke has already, for example, applied DfMA to large water-retaining tanks, which have traditionally been constructed by pouring concrete in situ, requiring a longer installation period and a larger team.

A wildly contrasting environment to a sewage treatment works, London’s ultra-luxurious One Hyde Park used DfMA throughout, from the risers to the bathroom pods. In the residential sector, there are exciting possibilities to implement these ideals in densely populated urban environments in mega cities such as Shanghai and Singapore, which are crying out for efficient, economic and attractive modular housing. Really, offsite manufacturing works at any end of the scale.

A number of factors make DfMA an especially suitable solution for schools and Private Finance Initiative (PFI) projects, principally the reliability and robustness of the finished product and the reduction in noise during the build process, which suits such sensitive environments. Likewise its flexibility is a major advantage: walls and columns can be repositioned, and layouts adjusted. If necessary, a school can be easily transformed into a council office block, which could be modified into a commercial unit.

In rural New South Wales, Australia, the Federal Government’s BER (Building the Education Revolution) programme required more than 300 schools to be built in 18 months. It sounds an impossible task, but with in-depth early planning, you can have one school built, delivered from the factory to the site, and installed on the foundations within a week.

DfMA produces precast and preassembled buildings and their component parts – from columns, beams and walls to sleepers, cladding and building systems – to a cost, time and specification with which traditional construction processes cannot compete.”

While DfMA is not yet a broadly familiar concept in Australian construction, it has proved to be a highly innovative solution to the many problems of working in remote areas. Firstly, doing the preparatory work in factory conditions overcomes the very real challenge of a lack of qualified and appropriately skilled local tradespeople. For example, in the Pilbara, a resource-rich region in Western Australia, infrastructure project sites might be hundreds of kilometres from the nearest city.

Equally, extremes of weather – from baking heat to tropical cyclones to flooding – can bring work to a stop and present safety risks to our workforce. DfMA minimises the amount of work that needs to be done in these conditions.

On this basis, employing DfMA sounds like common sense. It is. But it remains a far from widespread practice – in some markets it is groundbreaking – and we are challenged by a limited awareness and experience of the concept, and a reluctance to acknowledge the value it can add versus more traditional lowest-price decision-making. Gradually, clients are acclimatising, but it is a massive cultural shift and it is our job as engineers to persuade, educate and reassure.

In sectors such as energy and aerospace, these principles have been common practice for ten or 15 years. Therefore, just imagine what a game-changer it would be if it became the first-choice process across the construction industry.

about the authors: In Laing O’Rourke’s Engineering Excellence Group, Dr Phillip Cartwright is the Electrical Engineering Discipline Lead and Dr Gavin Davies is the Mechanical Engineering Discipline Lead. Dr Cartwright is the former Head of Electrical Power and Control Systems for Rolls-Royce and Dr Davies worked with Arup for 17 years, specialising in the investigation and development of energy-efficient solutions.

x Laing O’Rourke | Engineering excellence

Dagenham Park Church of England School, UK

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By professor robert Mair, Chair of the Engineering Excellence group

If you were to take a look at any survey of the world’s most innovative companies, by industry, you will notice a glaring omission. A construction business has never featured on such a list.

One of Laing O’Rourke’s aims – or perhaps a side-effect of it – in setting up the Engineering Excellence Group (EnEx.G) is to correct this oversight.

For it is an oversight. Every day, the best businesses in the industry demonstrate remarkable innovation at every stage of the design and build process. What we’ve perhaps been less successful at, as an industry and as a company, is proactively demonstrating and sharing our innovative thinking and problem-solving with clients, colleagues and young people making career choices, across professions and through the supply chain.

The EnEx.G brings together some of the world’s most respected figures from industry and academia. Multidisciplinary and multinational, we have the privilege of operating across boundaries and outside normal business and project governance, in the search for new ways to challenge and change the industry.

It really is a ministry of all the talents in engineering – heavy civil, structural, mechanical, electrical, chemical and manufacturing. There is almost unlimited opportunity to adopt step-change technologies from other engineering industries, from oil and gas to aerospace and nuclear, and apply them to Laing O’Rourke’s traditional sectors.

What we won’t be doing is providing a complete design service for the business. Our value is in putting together the right combination of skills within the company and also externally – as an extension of the university connections we have and the engineering organisations with whom we’ve worked closely.

The EnEx.G aims to raise the bar of engineering. It will do this in four main ways:

Internal consultancy. We will deal with specific technical problems that arise on particular projects and bring the best engineering knowledge to bear on these. We will also work with business units to support bids, offering new ways to deliver projects. In both cases, the emphasis is on innovation.

External advisers. As trusted engineering advisers, we will proactively go to existing and prospective clients with novel engineering approaches to solving problems. We’ll do this with engineering organisations with whom we already collaborate closely.

research and development. Laing O’Rourke supports and engages with universities in countries where we operate. The role of the EnEx.G is to interact with these institutions and support research projects, ensuring they are delivering value to Laing O’Rourke.

supporting education networks. In addition to our work with universities, Laing O’Rourke’s Partnering with Schools programme allows our project teams to interact with younger students, promoting the excitement of the industry to those considering the next steps in their education. The EnEx.G is involved with internal talent development programmes, such as Young Guns and Guns, building skills that will develop tomorrow’s leaders.

There is huge demand for smarter, quicker, more efficient and more economical ways of delivering projects. The EnEx.G can bring in transferable solutions from other sectors. For instance, one thing we’re researching at the University of Cambridge, which is closely supported by Laing O’Rourke, is the concept of smart infrastructure. In aerospace or automotive industries, the use of sensors is widespread. Rolls-Royce

engineers in Derby know exactly where their engines are flying all over the world and can monitor their performance.

The opportunities for sensor technology in the infrastructure and construction industry are equally promising. A tunnel or bridge, for example, might have embedded sensors that tell designers, owners and constructors how it’s performing during its life, or a façade might have sensors to tell us a building’s energy consumption.

Perhaps the most significant way the EnEx.G can contribute is to highlight sustainable solutions to the most important problems facing our clients, and more broadly, our communities.

Finally, I believe an increasingly key role for the EnEx.G will be to act as engineering champions and ambassadors outside our profession. We need to be able to communicate persuasively the importance of engineering not just to clients, but governments, teachers, students and opinion formers in all fields.

If we want to challenge and change the status quo – and we do – we need to prove to people that there really is a better way.

about the author: Professor Robert Mair is Chair of Laing O’Rourke’s Engineering Excellence Group, which was established in January 2011. He combines this role with his responsibilities as Head of Civil and Environmental Engineering at the University of Cambridge, where he has worked since 1998. He is a specialist in geotechnical engineering and deep excavation, tunnels and large underground spaces. He formed his own company, Geotechnical Consulting Group, in 1983.

The Engineering Excellence group value creation model: innovation, people development, research and organisational development

Improved Laing O’Rourke brand reputation in the marketplace

New income streams

Proactive business initiative

Better ability to attract and retain outstanding staff

New ideas and thinking from outside the industry to support our growth and development

Competitive advantage

Ability to �x problems faster and improve pro�t performance

Performance enhancements on complex and ‘technical’ projects,

delivering increased margins

Entrance to new markets and sectors

More complex build programmes with greater

pro�t potential secured

Growth and development for the whole Laing O’Rourke Group, leading to industry-wide transformation

Thought leadership

Education

Facilitation of cultural and performance improvements

Government-matched funding and support

Enhanced technical expertise

Enhanced innovation capability

EnEx.G=

valuecreation

a nEwsupErgroup – dELIvErIng IndusTry InnovaTIon

The Engineering Excellence Group brings together some of the world’s most respected figures from industry and academia. Multidisciplinary and multinational, we have the privilege of operating across boundaries and outside normal business and project governance, in the search for new ways to challenge and change the industry.”

The Engineering Excellence group








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Laing O’Rourke | Annual Review 2012 1

Overview ii Engineering excellence (inlay booklet)2 Performance highlights4 Our business model Engineering the future6 Europe Hub summary14 Australia Hub summary

Strategy 1818 Chairman and Chief Executive’s statement20 Vision, mission and strategy24 Key performance indicators

Group performance 2626 Financial and business review Safety and sustainability review31 Foreword32 Health and safety36 People39 Environment42 Marketplace46 Risk management

Hub performance 5454 Europe Hub62 Australia Hub

Governance 7070 Senior leadership team72 Corporate governance

Financial statements 7878 Directors, Officers and Advisers79 Directors’ Report81 Independent Auditors’ Report82 Financial statements123 Contacts

More information is available online at: www.laingorourke.com For the latest news visit: www.infoworks.laingorouke.com

In this report

Overview Group performanceStrategy Hub performance Governance Financial statements

Welcome to Laing O’Rourke’s 2012 Annual Review.

Laing O’Rourke is a globally diverse engineering enterprise with a commitment to delivering Excellence Plus performance, founded on 164 years of experience. We fund, design, manufacture, construct and maintain the built environment – providing the facilities to accommodate, educate, employ, transport, care for and sustain communities.

Our business model comprises the full range of engineering, construction and specialist products and services. Through our fully integrated offer we are delivering single-source solutions across the client value chain for some of the world’s most prestigious public and private organisations.

Our collaborative approach combines discipline in delivery with the continuous pursuit of innovation: working with customers from concept to completion, advising on and providing the best ways to successfully complete projects and achieve greatest value for all stakeholders – employees, customers, communities and shareholders.

We are implementing a long-term strategy which aims to create sustainable growth by meeting the economic, social and environmental challenges of our rapidly changing world, targeting high-growth markets and sectors that complement our values and capabilities.


1. Our independent 2012 employee engagement survey score, an aggregate measure of employees’ confidence and belief in: our future direction, personal career growth opportunities, safe and responsible working practices, reward and recognition systems, and quality of management.

2. Number of reportable incidents resulting in more than three days’ absence per 100,000 working hours.

Operational highlights

Outlook

• Strategy execution gathering pace with prestigious project awards in Europe and Australia – 122 Leadenhall Street, Alder Hey Hospital and Crossrail in the UK and Chevron Gorgon in Australia.

• Successful completion of high-profile projects including programme management of London 2012 Olympic and Paralympic Park.

• Over 700 new roles created in the Australia Hub to support major infrastructure projects.

• Increased focus on risk and reward profiling of opportunity pipeline to maintain quality of projects.

• Mission Zero safety campaign launched in Australia Hub, following successful roll-out in Europe and Middle East.

• Design for Manufacture and Assembly (DfMA) methodology delivering efficiencies in project delivery and performance improvements in operations.

• Continued focus on human capital agenda, with substantial commitment in engineering capability and education partnerships.

• Strengthened corporate governance framework through better integration of core processes and increasing capability in financial, investment and risk management functions.

• Although little growth in managed revenue and pre-tax earnings can be expected for the Group in the 2012/13 period, given the current market conditions, a return to growth in sales over a medium-term timeframe is anticipated, assuming satisfactory completion of projects now in delivery.

• Good future revenue visibility and a record pipeline of contract opportunities in key sectors, including nuclear, mining, and oil and gas.

• A higher rate of return on equity is planned for the Group with the anticipated benefit of delivery efficiencies derived from the widespread deployment of DfMA, plus greater cost effectiveness across all support functions.

• Laing O’Rourke remains on track to deliver its 2012/13 financial targets and, beyond these, is well-positioned to achieve its strategic objectives over the medium to long term.

Overview

£25mInvested in education, DfMA and R&D

Employee engagement1

(%)

30

60

90

201220112010

74 7373

Accident Frequency Rate (AFR)2

0.1

0.3

0.5

20122011201020092008

0.190.23 0.24

0.12

0.18

Safety and sustainability

2 Laing O’Rourke | Annual Review 2012

Performance highlights

Financial highlights

• Managed revenue increased 7.6 per cent to £4.3 billion.

• Pre-exceptional earnings before interest and taxes at £54 million.

• Maintained strong gross cash position of £601 million following debt repayment of £57 million.

• Improvement in net cash position of £38 million to £321 million.

• Gross margin, pre-exceptional items at 9.1 per cent reflecting quality of project portfolio and cost efficiencies.

• Order book of £8.2 billion creating good medium-term earnings visibility.

• Strategy execution with major projects secured in new growth territories, including Hong Kong and Canada.

1. Managed revenue includes share of joint ventures’ revenue, inter-segment revenue and revenue from managed operations.

2. EBIT includes profit from operations, net non-operating income/expense and excludes joint venture interest and tax.

3. Gross margin percentage is stated pre-exceptional items.

4. Financial capacity includes gross cash and undrawn committed facilities.

Managed revenue1

(£billion)

Managed revenueRevenue including share of joint ventures

2

4

6

20122011201020092008

4.2

3.64.0

3.3

4.3

3.5

5.0

4.14.3

3.5

Gross margin3

(%)

4

8

12

20122011201020092008

7.14.0

10.2

9.1

7.4

4.3

10.1

Financial capacity4

(£million)

400

800

1,200

20122011201020092008

646

751 762793

905

Earnings before interest and tax2

(£million)

Pre-exceptional itemsPost-exceptional items

40

80

120

20122011201020092008

4.288

51

40

54

34

115

98

110

67

Cash balances(£million)

Gross cashNet funds

300

600

900

20122011201020092008

477

136

619

283

601

321

619

174

716

270

Order book(£billion)

4

8

12

20122011201020092008

9.3

8.1 8.2

10.0

8.2

Laing O’Rourke has sustained a resilient performance by focusing on delivering profitable growth.

We continue to build on our commitment to Excellence Plus performance in every aspect of our activities.

4 Laing O’Rourke | Annual Review 2012 Laing O’Rourke | Annual Review 2012 5

Targeting dynamic growth sectors…

Through two major geographic Hubs

Buildings

Business • Commercial Offices

• Data Centres • Industrial • Science & Research

Lifestyle • Hotels

• Residential • Retail • Sport & Leisure

Social Infrastructure • Defence • Education • Healthcare • Law & Order

Transport

• Aviation • Highways • Marine • Commuter Rail

Power

• Generation • Networks • New Nuclear • Renewables

Utilities & Waste

• Sewage • Utility Networks • Waste • Water Treatment

Mining & Natural Resources

• Coal & Mineral Processing • Heavy-Haul Rail • Labour Accommodation • Materials Transport • Minerals Handling

Oil & Gas

• Labour Accommodation • LNG & CSG Terminals • Pipelines & Pump Stations • Processing Plants • Storage • Water Treatment • Civil Infrastructure

Europe HubCovering principal operations in Abu Dhabi, Canada, Dubai, Saudi Arabia and the United Kingdom.

Australia HubCovering principal operations in Australia, Hong Kong, New Zealand and South East Asia.

Overview

Our business model

World-class capabilities spanning the client value chain…

Investment and Development ServicesInvestment and development services comprises the UK and Australia-based property development, and structured property and infrastructure financing activities. These cover the full range of preconstruction services including feasibility studies and investment appraisals, lifecycle costs and management, through to complex Private Finance Initiative (PFI) and Public Private Partnership (PPP) investment arrangements and management.

Construction ServicesConstruction services comprises the full range of building and refurbishment activities, providing a complete project delivery solution. Capabilities include ‘buildability’ studies, Design for Manufacture and Assembly, remediation and enabling works, logistics management, integrated construction delivery, building technologies installation and testing and commissioning of major building projects.

Infrastructure ServicesInfrastructure services comprises the full range of civil engineering and programme management expertise on major infrastructure projects. Activities include commuter and heavy-haul rail, power generation and distribution, water and utilities networks, mining and natural resources infrastructure services across the lifecycle of capital assets, from feasibility through planning, design and implementation to maintenance.

Support ServicesSupport services comprises Group businesses dedicated to supporting major capital assets during construction, and through ongoing operation and maintenance. Capabilities include the provision of heavy plant, cost and programme quantification and modelling tools, Building Information Modelling and digital prototyping through to the provision of a broadening range of business services for assets after they have been constructed.

Engineering Consultancy Engineering consultancy comprises the Engineering Excellence Group, an internal advisory body providing research, innovation, expertise, advice and direction individually and as a taskforce. The group is responsible for driving Design for Manufacture and Assembly, collaborating with technology, supply chain and educational partners to support clients’ needs. Capabilities include civil, structural, materials, mechanical, electrical, chemical and process engineering.

Manufacturing and Modular SolutionsManufacturing and modular solutions comprises offsite factory operations utilising lean automation processes and quality assurance systems, transforming traditional construction methodologies into a modern process of component-based assembly. Product sets include precast concrete building components, modular mechanical and electrical installations, minerals-handling conveyor systems, rail sleepers and completed internal room ‘pods’.


Focused on delivery excellence



Number of active projects

254Order book

£5.5bnNumber of staff

12,028

Overview

2

1

45

3

9

8 76

Principal officesUnited Kingdom1. Cardiff 2. Dartford 3. Motherwell 4. Explore Industrial Park5. Manchester

United Arab Emirates6. Abu Dhabi 7. Dubai

Saudi Arabia8. Riyadh

Canada9. Toronto

London 2012 Olympic and Paralympic Park

The UK construction industry, spearheaded by the Olympic Delivery Authority (ODA) and its delivery partner, CLM, of which Laing O’Rourke was a key partner, achieved one of the most complex feats of programme management ever undertaken. Once a derelict and polluted wasteland of 670 acres, the Olympic and Paralympic Park in Stratford, East London, has been delivered on time and to agreed budgets. HM Government’s Department of Culture, Media and Sport acknowledged the accomplishment, saying it sent a clear signal to the world about Britain’s ability to design and deliver large-scale infrastructure projects to the highest standard.

Europe HubOur Europe Hub comprises Laing O’Rourke’s operations in key building and infrastructure sectors and construction markets, and has valuable relationships with prestigious client organisations.

The Group is one of the leading construction solution providers in our chosen sectors. Our aim is to leverage the scale and efficiencies of our vertically integrated delivery businesses to generate profitable 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 territories with the right strategic and cultural fit.

Europe Hub continued


122 Leadenhall Street, City of London

A landmark in the making

Towering 224 metres above the City of London, 122 Leadenhall Street is set to become one of the UK’s tallest and most iconic buildings. The shimmering wedge-shaped structure was designed by world-renowned architects Rogers Stirk Harbour + Partners and is being delivered by Laing O’Rourke for British Land and Oxford Properties.

The geometry of the 52-storey skyscraper makes it theoretically unstable. Exceptional engineering skills were necessary therefore, to develop a construction methodology that enabled the building to stay upright – with tolerances of plus or minus 20mm required on all but five of its floors.

Using multidimensional Building Information Modelling (BIM) technology, Laing O’Rourke devised an innovative delivery strategy that harnesses the benefits of offsite manufacturing. This ‘virtual construction’ approach allowed the client to visualise our solution in intricate detail.

Critically, by integrating data from the architects and structural engineers, the team was able to achieve the early design coordination needed to meet such a challenging programme. The model also combines information from key trades to ensure the compatibility of the different packages.

The intense public interest in the development leaves no room for logistical error. Its high-profile location – characterised by narrow and densely populated streets – along with the site’s remarkably tight footprint, represent considerable obstacles.

To work around these constraints, much of the structure – including the cores, basement and building services – will be constructed off site. However, with components of up to 26 metres in length this creates its own challenges. Once again, the team used BIM to perfect its strategy for just-in-time assembly.

Now in delivery phase, the project is piloting the application of radio frequency identification (RFID) software – which uses data tags attached to building components to allow them to be tracked through manufacture, supply and installation. This will enable preventative action in the event of any delays downstream.

When integrated with BIM, RFID can be used to render a data-rich replica of the project in real time. Going forward, this technology will be used to enhance project controls and – against these – develop robust key performance indicators.

Overview


“ At least 83 per cent of construction works will take place off site, reducing the delivery schedule by approximately six months.”

Design and engineering

The structure’s distinct asymmetrical shape – a response to planning requirements to maintain views of St Paul’s Cathedral – meant settlement both in the foundations and through compression of its elements would be irregular. The solution was to design the building to be erected slightly off the vertical so that it would settle in its correct form. This made the construction process exceptionally challenging. Working with tall building expert, Bill Baker of Skidmore, Owings & Merrill, Laing O’Rourke came up with an innovative alternative. Now, when the building reaches the 19th floor, steel along the sloping face will be tensioned to pull the structure back to the vertical. This process will be repeated every seven storeys.

An iconic building

The 224 metre building will become one of the most recognisable in the square mile, occupying a prominent site directly opposite the distinctive Lloyd’s of London headquarters.

The development’s tapering shape, which when viewed from the west will appear to ‘lean away’ from St Paul’s Cathedral, delivers varied sizes of floor plates, all offering spectacular views over London. Practical completion of the shell and core is scheduled for mid-2014.



“ From the very outset, the project team has been excellent. Throughout the design process, the team listened carefully to what we said and worked tirelessly to get this project off the ground and, through engagement sessions, identified the key drivers and aspirations of teachers, students and communities to deliver a building that is not only fit for purpose, but also within budget.”

Simon Weaver, Headteacher, Dagenham Park

Church of England School

fulfilling an ongoing role as facilities manager for the site. This meant lifecycle considerations were key in selecting the building systems – which were delivered through a highly modularised approach to ensure optimum performance.

The London Borough of Barking and Dagenham operates a progressive environmental policy, which was integral to the project brief. The team was tasked with meeting a number of ambitious targets, including a BREEAM ‘excellent’ rating for the building and surrounding site – along with annual operational CO2 emissions of 27kg per square metre.

This was supported through the application of DfMA – in particular the use of precast concrete components, which deliver enhanced thermal efficiency and air-tightness. In addition, a range of other technologies was implemented, including a high-performing building envelope with solar control, mixed-mode ventilation with heat recovery and a rainwater harvesting system.

Delivered without a single reportable safety incident, the completed building achieved exceptional standards of air-tightness.

A testament to the strength of collaboration on the project, the Local Education Partnership formed between the London Borough of Barking and Dagenham, Laing O’Rourke and the Thames Partnership for Learning will continue as a method of delivering other much needed social infrastructure.

Dagenham Park Church of England School, London, UK

A school for the future

Overview

A 10,000 square metre performing arts school, delivered through the construction phase in just 16 months thanks to a combination of innovation and collaboration.

To meet the client’s demanding programme and challenging environmental targets, our Design for Manufacture and Assembly (DfMA) solution was deployed to the greatest extent possible.

The school’s integrated façade and structural system was erected within six months of site operations commencing, allowing an early start of fit-out packages. This was made possible by input from in-house Building Information Modelling (BIM) specialists to ensure exacting specifications were achieved ahead of installation.

With the initial period allocated to planning and design, the team worked closely with teachers, pupils and the client to understand and incorporate their needs. The result is a functional and efficient structure – instilled with a unique sense of character.

The new building is arranged around a performance hall and resource hub, with flexible classrooms located on the perimeter. The space in between creates two connected atria that provide open learning and social areas, as well as natural light and ventilation. This also allows passive supervision of students between lessons.

The contract was procured under a Private Finance Initiative (PFI), with Laing O’Rourke


Efficient build techniques

70 per cent of the building constructed off site, resulting in an incredibly fast and efficient build and one of the most environmentally sustainable schools in the country.

Air-tightness

Delivered without a single reportable safety incident, the completed building achieved exceptional levels of air-tightness – a key measure of its thermal and operational efficiency.




Centre Hospitalier de l’Université de Montréal, Canada

A new vision for healthcare

One of the largest healthcare projects in the world, this 225,000 square metre development will see the delivery of a 21-storey teaching hospital and an 11-storey research facility in the centre of Montréal. The CAD$2.1 billion deal represents the most valuable social infrastructure Public Private Partnership (PPP) in Canada’s history and is the first venture for the Group in this growing market.

The acclaimed Centre Hospitalier de l’Université de Montréal (CHUM) brings together around 35 medical disciplines and receives approximately half a million patients a year. This substantial redevelopment is part of an action plan to strengthen its reputation for world-class training, research and treatment by consolidating these activities into one state-of-the-art location.

As the centrepiece of the Quartier de la Santé regeneration strategy, the project will play a significant role in shaping the city’s future vision. The first phase will be delivered in 2016, with the second handed over in 2020.

When complete, CHUM will provide 772 single-bed rooms, together with a new energy centre. A patient-centred approach is at the heart of our strategy, with the hospital’s architectural concept embracing the principles of sustainable development to LEED (Leadership in Energy and Environmental Design) ‘gold’ level.

The building is designed to capture as much natural light as possible, while providing welcoming open spaces and exceptional views over Montréal. Intended as a friendly place of healing and wellbeing, art will be an integral part of the CHUM environment, as a means to humanise the surroundings.

The Collectif Santé Montréal, of which Laing O’Rourke is one of four equity partners, is responsible for designing and constructing the development – and maintaining it over a 30-year period. To finance the scheme, the consortium raised CAD$1.37 billion through the sale of secured bonds.

Laing O’Rourke’s UK and Canadian teams worked across multiple disciplines to bring this complex transaction to a successful close, with our Explore Investments business leading the commercial and financial aspects of the contract.

Now a year into this nine-year scheme, CHUM has already received a number of prestigious accolades. In 2011, Project Finance International recognised the development as ‘North American Project Bond Deal of the Year’. At the same event, the consortium was awarded top prize ‘Overall North American Project Finance Deal of the Year’. Earlier, in London, the project also received the ‘Bond Deal of the Year’ award.

Overview

“ As the centrepiece of the Quartier de la Santé regeneration strategy, the project will play a significant role in shaping Montréal’s future vision.”

A world-class teaching hospital

The mission of the Laing O’Rourke/OHL construction joint venture, is to design, build, finance and maintain CHUM. Two separate project construction phases will take place over a nine-year period, commencing in 2011. This all-inclusive project in a single venture will deliver a world-class teaching hospital geared to the needs of a community in which it plays a major role. It will be inaugurated in 2016 and is valued at CAD$2.1 billion overall.

The deal of the year

To fund the development, the Collectif Santé Montréal, of which Laing O’Rourke is a 20 per cent member, raised CAD$1.37 billion through the sale of secured bonds, representing the largest rated bond transaction for a hospital in the world. In 2011, Project Finance International recognised the development as ‘North American Project Bond Deal of the Year’. At the same event, the consortium was awarded top prize ‘Overall North American Project Finance Deal of the Year’.

6

4

2

35 1

Principal officesAustralia1. Brisbane 2. Darwin 3. Perth 4. Port Hedland 5. Sydney

South East Asia6. Hong Kong



Growing a diversif ied project portfolioLaing O’Rourke has been active in Australia

since 2004 and is now integrating the global capabilities of the wider Group to provide a distinctive proposition based on superior quality of design and delivery.

Australia Hub

Botany Bay

The Australia Hub has been named preferred bidder for the Port of Sydney’s Terminal 3, an AUD$150 million infrastructure development on the newly reclaimed Botany Bay platform – part of a planned expansion to cater for the forecast increase in trade demand over the next 20 years.

Number of active projects

90Order book

£2.7bnNumber of staff

5,324


Overview

We are growing a diversified project portfolio by taking leading positions in carefully targeted sectors and markets, predominantly in building and social infrastructure, 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.

Transportation

Transportation is an important aspect of the gas business. Liquified natural gas is transported in specially designed, purpose-built ships with double hulls protecting the cargo systems from damage or leaks. Taking the gas to cryogenic temperatures, to reduce volumes, increases the tanker capacity, and therefore increases the commercial viability of transporting it over long distances.

Storage

Laing O’Rourke is deploying Design for Manufacture and Assembly techniques to modularise the construction of the cryogenic tanks, consisting of a quick-assembly external structure which swiftly becomes water tight when installed on site, allowing the internal welding and other finishing activities to take place in dry conditions.

Australia Hub continued


Overview


Ichthys LNG Project, Northern Territory, Australia

Fuelling future growth Located 200 kilometres off the coast of Western Australia, the Ichthys Gas Field is one of the region’s most significant energy reserves. Over the next 40 years it is expected to yield around 8.4 million tonnes of liquefied natural gas (LNG) and 1.6 million tonnes of liquefied petroleum gas (LPG) annually – along with 100,000 barrels of natural gasoline a day.

After undergoing preliminary processing offshore, the gas will be exported via an 889 kilometres subsea pipeline (the longest in the southern hemisphere) to onshore facilities in Darwin. To deliver this infrastructure, a workforce of more than 3,000 will be required – bringing substantial social and economic benefits to the area.

Laing O’Rourke has been selected to deliver one of the largest and most complex components of the AUD$34 billion programme. In joint venture with Kawasaki Heavy Industries, the business will engineer, procure and construct a network of four massive cryogenic tanks, the largest two of which will span 165,000 cubic metres. The tanks will cool the gas to below -160˚C, liquefying it for storage and transportation.

The AUD$750 million project marks the culmination of a five-year partnership between Laing O’Rourke and the Japanese engineering giant, during which the two organisations worked closely together to develop highly automated, modularised technical solutions for the oil and gas industry.

In April, Laing O’Rourke also began work on an AUD$330 million project to deliver a 4,300-bed accommodation village. The high-quality establishment will incorporate indoor and outdoor recreational facilities, an on-site facilities management complex and medical centre – providing a home away from home for Ichthys’ growing workforce.

Once again, innovative strategies have been implemented to achieve the most sustainable outcomes. Considerable attention has been paid to the design, to ensure the development integrates with its surrounding environment. Laing O’Rourke will also ensure the project maximises local employment opportunities – with particular focus on indigenous participation.

Extraction

The Ichthys Gas Field in the Browse Basin off the Western Australian Coast first demonstrated its potential to be a world-class energy reserve in 2000. Since then, resource estimates have grown to 12.8tcf of gas and 527 million barrels of high-value condensate.

Accommodation

Laing O’Rourke’s INPEX Ichthys LNG Contracts, which commenced in 2012, include the construction of a AUD$330 million accommodation village that will cater for 4,300 workers. Superior Design for Manufacture and Assembly solutions and supply chain management will be essential to the speed of delivery, meaning the first 1,500 beds will be ready for occupation by April 2013.


Strategy

Chairman and Chief Executive’s statement

In response to client needs and challenging markets, the Group has developed a targeted focus to position the business for the future.

Safety and sustainable developmentSafety will always sit at the core of Laing O’Rourke in both its corporate culture and its planning and project delivery. Although we have made significant progress in establishing a behaviourally based safety culture across the Group over the past seven years, and we remain an industry leader, I am disappointed to report that our global Accident Frequency Rate (AFR) was 0.24, up 0.01 on the previous year. During the year we instituted Mission Zero globally, with a corresponding recalibration of information reporting systems across all our operations. In Europe, we also conducted safety reviews with

all our subcontractors. We will continue to drive measurable improvements to become an accident-free business by 2020.

Sustainable development is embodied in our delivery methodology and our long-held vision to challenge and change the industry in key sustainability areas. With the mandated adoption of Design for Manufacture and Assembly (DfMA) in our building sectors, and a growing application on our heavy infrastructure projects, we are beginning to realise benefits in onsite recycling. As well, our shorter programmes have reduced carbon emissions and water usage. We are also investing in cleaner-fuel vehicles.

Our success is the result of our investment in research and development, industry and education partnerships, and employee-led community liaison programmes. DfMA is the construction industry’s most sustainable engineering solution, and will keep Laing O’Rourke at the vanguard of best practice. In the period under review we spent £7 million on R&D and DfMA.

Government institutions and the communities adjacent to our projects are rightly demanding greater responsibility from construction providers in their funding, procurement, design and core construction activities. In response, we launched our Global Code of Conduct followed by a comprehensive training programme for all employees.

Excellence Plus performanceLaing O’Rourke’s reputation as a delivery-focused business is based on our integrated approach. The Group’s human capital management agenda for maintaining and developing the skills and capabilities of its employees is a key factor in sustaining our success.

A series of tailored leadership development programmes build the required engineering, project and functional management competencies. The Group’s strategic alliances with its university partners are providing exceptional learning experiences for our brightest engineering talent.

Alongside our site-based apprenticeship and accreditation schemes, we continued to deliver training across the spectrum of our project and functional disciplines to better support the recruitment, retention and engagement of a talented, safe and responsible workforce. The Group invested £25 million in education, DfMA and research and development activities in the period.

In our annual employee engagement survey, we posted an industry-leading performance with a 73 per cent aggregate score. This placed Laing O’Rourke once again in the top quartile of global high-performing companies.

Laing O’Rourke continues to invest in new processes and technologies. The Group has moved quickly to capture a leading advantage in digital modelling and cost planning, and to achieve greater affordability and quality for

the construction and operation of our projects. Additionally, cost reduction measures are being rigorously implemented. To remove wasteful and resource-intensive practices, we have introduced automation technologies for the offsite manufacturing of key components. Taken together, these actions will assist the Group in winning new business and managing workloads.

Strategy and performanceWe continued to develop the Group’s innovation capability with further investments in the expansion of the Engineering Excellence Group, which included key professional appointments. Our focus on large-scale and complex engineering and construction programmes will create sustainable enterprise value.

To address industry-wide time, cost and quality shortcomings in project delivery, we accelerated the deployment of our innovative DfMA methodology across all tendering-stage contracts. One result was the doubling of production outputs for our Explore Manufacturing business. Our profile as a premier constructor was enhanced by major wins including 122 Leadenhall Street and Alder Hey Hospital in the UK and, in Australia, the Chevron Gorgon and Australia-Pacific LNG projects.

We continued to build a culture of Excellence Plus performance – to increase financial returns, meet the needs of the Group’s clients, develop and grow our people, and act responsibly. We made good progress. We have driven for cost efficiencies to improve competitiveness, and executed value-enhancing acquisitions and divestments. We have created value through a profitable return on sales and, importantly, continued to generate strong cash flows.

The Group’s capital allocation supports investment in our operations, generates returns for shareholders, strengthens the balance sheet, and funds business development for the long term. We will continue with our policy of balance sheet conservatism to retain our covenant quality with key financial stakeholders. We remain well-positioned to respond rapidly to changing markets.

Corporate governanceOver the past two years we have strengthened our corporate governance

and internal controls. We have complemented our expertise with broader corporate development, engineering and functional specialisms to ensure the right balance of experience and talent.

Although the current business environment is severely testing, I am confident we have the correct combination of leadership and management to prosper.

During the year, George Rose, formerly Group Finance Director of BAE Systems, joined us in a non-executive capacity as Chairman of both the Europe Hub Board and Audit Committee. Roger Seshan, a former director with Scottish Power, was appointed Group Asset Optimisation and Supply Chain Director, and a member of the Group Executive Committee. Andy Friend, former CEO of John Laing PLC, was appointed Group Strategy Director. Howard Shiplee, Construction Director for the London 2012 Olympic Delivery Authority, also joined the Group to leverage the programme management capability built up through our delivery partner involvement with CLM.

After 32 years with the Group, our fellow Shareholder Bernard Dempsey, Deputy Chairman, retired from the business. I thank him for his outstanding contributions to the Board and the growth and success of the Group.

OutlookUncertain global economic conditions are expected to continue, with sales growth remaining a challenge. Despite this trend, we are confident that 2013 will bring stronger activity, with China and the emerging nations continuing to drive their aggressive economic development plans.

We expect major government and private-sector investment to continue in development territories in Australia, Canada and Hong Kong, where we are well-placed to generate substantial business, alongside demand from Qatar, where investment to boost international trade is increasing.

SummaryThe success of Laing O’Rourke is built on the hard work, creativity and commitment of its employees. Once again during the year I was pleased to formally recognise a number of our highest performers through our annual Excellence Plus Awards. On behalf of the Board I thank all our people for their dedication, ingenuity and sense

of purpose. As a result of their actions during the year, we have taken significant steps towards our goal of creating an enduring engineering enterprise built on a culture of Excellence Plus performance.

Laing O’Rourke’s growth and performance are also directly attributable to the quality of our clients, supply chain partners and stakeholders. I thank them for their continued support and trust in our strategy and approach.

I was particularly gratified to successfully conclude our involvement in the delivery of the infrastructure and venues for the London 2012 Olympic and Paralympic Games. By handing over the park ahead of schedule and below budget, we showcased the collective talents of the UK construction industry on a global stage. Laing O’Rourke was honoured to be involved.

The Group continues to sustain its Australian resilience, competitiveness and capability. In addition to its well-established position in its core UK and Australian markets, we are consolidating strong competitive positions in new markets. Our capability is generating a unique portfolio of building and infrastructure projects. Through our success in developing talent and diversifying our capability, we will attract clients through radical solutions that only Laing O’Rourke can deliver.

Ray O’Rourke KBEChairman and Chief Executive


Strategy


The Laing O’Rourke Group’s activities are underpinned by our unique character. This is described in our vision, mission and strategy. Together they form a compelling and relevant guide to what our goals are and how we will achieve them. They continue to unite us in pointing the way towards achieving future success that is in the common interest.

We pride ourselves on having a straightforward vision and purpose. Based on the values of the founding shareholders, it is clear, powerful and relevant to the business challenges of today and tomorrow.

Our mission and strategy focus on specific high-value sectors and markets. We employ our vertically integrated business model to deliver directly for clients and, behind this approach, we procure competitively to connect and integrate the supply chain.

We combine a deep understanding of global building and infrastructure markets with a proven track record in engineering and constructing high-performing capital assets. We have the people and skills to capture value at any point in the client value chain – from development feasibility to operation and management.

VisionLaing O’Rourke’s well-established vision provides a clear definition of the future state we wish to attain. As a result of the significant changes in our core construction markets we have undertaken a review of our strategic options to ensure they continue to align with the vision. Whilst the vision defines the destination, our commitment to engineering our future through Excellence Plus performance guides all our decisions and actions and is embedded in the Group’s mission statement.

MissionThe mission describes the overall goal and philosophy that underpins our activities, and is key to the achievement of our vision.

A globally focused and enduring engineering enterprise applies the knowledge and methods of an integrated set of engineering disciplines to the design and construction of the built environment. It utilises the application of automated processes, intellectual capital and fit-for-purpose organisational resources to create sustainable value. The goal is a human-technological alliance in which learning takes place at every level.

Excellence Plus performance is verified in every aspect of the way the Group does business – client value, human capital management, financial performance and responsible behaviour. By consistently applying the four key elements of Excellence Plus performance in all our operations globally, we will achieve our vision to be the company of first choice for all stakeholders, able to challenge and change the poor practices synonymous with construction and compete alongside world-leading businesses.

StrategyThe Group strategy provides the framework which defines the direction and shape we will pursue over the medium to long term. This provides a clear mechanism to enable the Board and Group Executive Committee to fully understand the operating environment and prevailing market forces, prioritise objectives and then allocate the necessary financial and non-financial resources to achieve the required state.

Through our Group strategy, the following intent guides our actions:

Laing O’Rourke is a successful company with a long history of offering engineering and construction solutions for like-minded clients. As a result, today we are an international service provider and our business portfolio spans the entire client value chain. We are able to provide integrated capabilities at every stage in the lifecycle of the built environment.

Vision, mission and strategy

A globally focused engineering enterprise

Our vision:

To be the company of first choice for all stakeholders. To challenge and change construction worldwide. To be lean and agile in the adoption of processes to compete with world-leading businesses.

Our mission:

To become a globally focused and enduring engineering enterprise through our commitment to Excellence Plus performance.

Our values:

• Make safety personal and work responsibly • Lead by example • Work as one team through collaboration

• Find or follow a better way • Deliver on our promises, aim to exceed

Our strategy:

What we will do: • Drive the efficiency and integration of the Group’s core engineering, construction and infrastructure delivery business to support clients’ needs.

• Improve financial returns through a relentless focus on efficiency and cash generation across all business activities.

How we will do it: • Deliver sustainable growth by embedding a culture of Excellence Plus performance which encompasses:

– Client value – Human capital management – Financial performance – Responsible behaviour

Key Group Executive Committee objectives:

Increase sector-specific engineering expertise

Establish Design for Manufacture and Assembly (DfMA) as our core delivery approach

Implement efficiency and cost-effectiveness programmes

Invest in and grow our human capital as a direct employer

Improve our safety and sustainability performance

Sustain our home market position

Expand in higher-growth international markets

Integrated business unit delivery plans


Strategy

Key Group Executive Committee ObjectivesThe Group’s strategic framework contains seven key Group Executive Committee objectives. These emanate from our vision, mission and strategy, and constitute the short-term actions required to shape the business portfolio and drive Excellence Plus performance over the medium to long term. These objectives translate the overarching strategic intent into operational plans that are then delivered by the business units.

Integrated business unit delivery plansIntegrated business unit delivery planning is a quarterly process that includes a policy deployment matrix to ensure a clear line of sight between the Laing O’Rourke Board and Group Executive Committee approved strategic and financial plans, and the tactical execution of these. The Group’s corporate governance framework is an integral tool for ensuring adherence to overall strategy and provides the mechanism for rapid issue-resolution caused by unforeseen deviation from the agreed plans due to non-performance or off-plan opportunities arising.

How we deliverLaing O’Rourke is committed to the development of a culture based on Excellence Plus performance. The four cornerstones of this approach are client focus, human capital management, financial performance and responsible behaviour.

1. Client focusThe Group’s priority is to fully understand the needs of its clients and deliver on its promises throughout the life of the engineering and construction services provided. Programme adherence metrics against major contract milestones, together with qualitative client satisfaction survey results, are key indicators of our performance in this regard.

2. Human capital managementThe Group’s pursuit of Excellence Plus financial and operational performance is dependent on the quality and commitment of its people. It is critical the Group attracts, develops and retains the best talent in the marketplace to ensure project

delivery within the tight tolerances of quality, time, cost, safety and sustainability required by clients. The key indicator of performance in this regard, beyond financial metrics, is the level of enterprise-wide employee engagement. It 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, responsible behaviour and financial performance.

3. Financial performanceThe Group sets stretching financial targets as part of its annual budget planning process to improve cost and sales performance and drive profit and cash generation. These are derived from our consolidated financial statements, and include order book, managed revenue, earnings before tax and operating cash flow.

4. Responsible behaviourBy working according to our guiding principles and complying with the high standards set out in our Global Code of Conduct, the Group will sustain long-term business success. In line with our vision, we also seek to encourage more ethical behaviour on an industry-wide basis. The Code underpins all our business activities globally, and metrics are used to track and provide continuous improvement in safety, ethical conduct, environmental performance, and diversity and inclusion.

Our approach to internal audit and controlOur internal control processes ensure that key issues are escalated through the management team, ultimately to the Board if appropriate. They provide a common framework across the Group for operational and financial controls, and are reviewed on a regular basis by the Board. The business policies and processes detailed within the Global Code of Conduct and LOR Way draw on global best practice and their application is mandated across the organisation.

Core and Enabling Processes are two such examples, and promote the application of best practice in the tendering, procurement and delivery phases of projects, facilitating continuous

Drive the efficiency and integration of Laing O’Rourke’s core engineering, construction and infrastructure delivery businesses to support clients’ needs.Over the coming years we will boost our share of available business by targeting long-term strategic client relationships by deeply understanding their needs in each of our core markets, recognising that those can and will change over time. Through greater application of Design for Manufacture and Assembly (DfMA) as our core delivery methodology, we will be lean and agile as a business, in line with our vision. This will enable us to provide solutions that extend over a greater proportion of the client value chain. Offering a broader set of lifecycle services provides secure, higher-margin income on an ongoing basis and is less affected by cyclical fluctuations than the traditional contracting model.

While offering competitive client propositions, we will develop enterprise-wide value from the cross-selling effects that result from cooperation between closely linked Laing O’Rourke businesses. In the future we will seek to further reinforce and expand the integration between businesses and countries by identifying our clients’ vital needs, prioritising our capabilities, and creating long-term demand for our products and services. This approach will also allow us to better anticipate and respond

to global trends in areas such as demographic developments and climate change, deploying our talent where it generates greatest value.

The degree of globalisation in our business operations will create a broader business base to shield us from economic fluctuations in, or an over-reliance on, any one market.

We will seek to continually expand our businesses, concentrating exclusively on countries with high growth rates and socio-economic environments that align with our company values and operating approach. Accordingly, our efforts are targeted at various regions that meet our criteria for growth and where we are able to mobilise efficiently and effectively.

We will extend our footprint in Australia where substantial investments are planned in mining and transport infrastructure. Also we will seek to grow our presence in Canada, where markets are benefiting from a number of economic, social and environmental factors.

In the future, we will continue to differentiate ourselves from the competition on the basis of our technical skills and capabilities in engineering and construction – offering our clients total solutions. We will look to develop a ‘licence to operate’ in selective infrastructure sectors on a global basis, for example in rail, and increasingly in oil and gas, and power generation.

The action plans to achieve this will differ for each sector, leveraging the experience of our industry talent plus significant in-house resources in plant and equipment.

The strategic focus is not based on the sole pursuit of opportunities in one particular type of sector, but on a varied building and infrastructure portfolio spanning both public and private sectors. This allows us to be more resilient in overcoming challenges in the future as a result of changing market dynamics.

Improve financial returns through a relentless focus on efficiency and cash generation across all business activities.The current economic environment is driving up levels of competition and therefore the Group will increase its focus on generating improved financial returns by focusing on efficiency and cash generation.

Our organisational effectiveness programmes and cost reduction initiatives aim to ensure that our management operations remain efficient and effective, improving the competitiveness of the Group and thereby enhancing its ability to win future business.

All the Group’s business units and functional disciplines will strive to eliminate non-value-adding activities through the eradication of duplication and disposal of non-core operations. This must be achieved whilst concurrently maintaining the commitment to Excellence Plus performance in terms of project delivery, client satisfaction, responsible behaviour and financial performance.

To achieve this in 2012/13 and beyond we will recruit, retain and develop the very best talent. We will embed best-in-class processes, systems and methodologies in areas including governance and risk management, capital allocation, DfMA, brand and marketing, safety and sustainability, technology, corporate reporting and human capital management. These provide the key enablers that underpin the delivery of our financial and non-financial goals.

Vision, mission and strategy continued

improvement across the Group. It considers the whole-life implications of project execution from inception to delivery into service and eventual decommissioning, and its application is critical to our capability in delivering projects to schedule, cost and quality.

The Group’s Project Quality Management System is set out in the Corporate Governance section on page 77.

Our approach to risk managementThe 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. The Group’s risk management framework, including principal financial and operational risks is set out on pages 47 to 53.

“ Laing O’Rourke continues to build on its position as one of the world’s largest privately owned and geographically diverse engineering and construction companies, focused on delivering sustainable growth through its commitment to Excellence Plus performance.”

Strategy


Earnings before interest and tax2

(£million)

Pre-exceptional itemsPost-exceptional items

20122011201020092008

88

5140

54

34

115

98110

67

40

80

120

Net funds position(£million)

20122011201020092008

136

283

321

174

270

100

200

300


Key performance indicators

Financial performance

Client focus Human capital management

Responsible behaviour

Order book(£billion)

20122011201020092008

9.38.1 8.2

10.0

8.2

4

8

12

Managed revenue1

(£billion)

Managed revenueRevenue including share of joint ventures

20122011201020092008

4.23.6

4.03.3

4.3

3.5

5.0

4.1 4.33.5

2

4

6

The Board uses a range of financial and non-financial indicators across our business units to monitor the Group’s aggregated performance against its Excellence Plus target and key Group Executive Committee objectives.



Definition: Order book represents the amount of secured orders from customers in the year. It is a key measure of in-year performance and also provides visibility of future earnings. It also acts as a useful indicator of the diversity of the portfolio of future work to be completed.

Comment: At the end of the 2011/12 performance period the Group order book stood at £8.2 billion, marginally above the prior year’s level. With significant new contract awards in core rail, mining, and oil and gas sectors this was a creditable performance given the continuing pressure on public-sector capital funding.

Definition: The amount of earnings before interest and taxes is a key measure of the operating profitability of all revenue-generating business units which is comparable over time. It provides a valuable benchmark in terms both of progress against internally set business targets and of performance relative to external competitors.

Comment: EBIT performance during the year was impacted by continued strong performance in the Europe Hub being dampened by a challenging year in the Australia Hub.

Definition: 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.

Comment: The 7.6 per cent like-for-like increase in Group managed revenue this year has been primarily driven by 18.6 per cent growth in the Australia Hub.

Definition: The net funds position at the year-end is a key factor in evaluating the Group’s cash flow 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.

Comment: During the year, the Group repaid £57 million of its borrowings using cash from its profitable and highly cash-generative businesses.

Definition: 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, which equates to approximately one working lifetime.

During the year, we took significant steps to align our health and safety approach globally. This resulted in a restatement of the Group AFR KPI for previous years to bring the Australia Hub data into line with the Europe Hub.

Comment: The AFR for the year was 0.24. This result still reflects an industry-leading performance relative to our peers, meriting the investment in leadership time and resources given to all aspects of safety management. Health and safety is the Group’s number-one priority, constituting our licence to do business. We lead the construction sector in the implementation of a behaviourally based approach to safety to ensure all our activities are managed and controlled in a safe and responsible way.

The Group sets stretching financial targets as part of its annual budget planning process to improve performance from both a costs and sales perspective to drive profit and cash generation. These are derived from the Group’s consolidated financial statements. By working according to our

guiding principles and complying with the high standards set out in our Global Code of Conduct, the Group will sustain long-term business success. In line with our mission, we also seek to encourage more ethical behaviour on an industry-wide basis.

The Group’s priority is to fully understand the needs of its clients and deliver on its promises throughout the life of the engineering and construction services provided. Programme adherence metrics against major contract milestones, together with qualitative client satisfaction survey results are key indicators of our performance in this regard.

The Group’s target state of Excellence Plus financial 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 in the marketplace to ensure project delivery within the tight tolerances of quality, time, cost, safety and sustainability required by clients.

Programme adherence

Performance: The Group’s goal is an overall year-on-year improvement in programme adherence relating to key delivery milestones on its major construction and infrastructure contracts. These metrics are contract-specific and subject to variations in interpretation, therefore aggregated data is not presented.

Definition: Programme adherence tracks the fulfilment of key delivery milestones against the primary contract commitments agreed with clients prior to the commencement of the delivery phase of the project.

Comment: The year’s target was achieved for the Europe Hub, but not achieved for the Australia Hub where a number of legacy contracts underperformed against programme.

The metrics for programme adherence included 57 projects drawn from a representative sample of the mandatory contract reviews prepared as part of the Core Process within the Group’s Quality Management System.

Client satisfaction

Performance: The Group’s goal is an overall year-on-year improvement in client satisfaction on its major construction and infrastructure contracts. These metrics are contract-specific and subject to variations in interpretation, therefore aggregated data is not presented.

Definition: Client satisfaction data is collected on key client opinions relating to the Group’s operational performance on client-funded projects. 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.

Comment: The year’s target was achieved.

The data for client satisfaction included projects drawn from a representative sample of the mandatory contract reviews prepared as part of the Enabling Process within the Group’s Quality Management System.

Human capital management

Performance: The 2012 Group employee engagement score was 73 per cent, compared to a global norm of 57 per cent. This once again placed us in the top quartile of global ‘high performing’ companies for the motivation and commitment of the workforce.

Definition: 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 financial performance.

Comment: The Group undertakes a number of important human capital initiatives to retain and develop staff, and their effectiveness is highlighted by a low staff turnover for voluntary leavers.

We undertake an annual employee engagement survey using an accredited third-party provider, Ipsos MORI, to provide independent analysis and peer group benchmarking.

Accident Frequency Rate (AFR)Accident Frequency Rate (AFR)

20122011201020092008

0.19

0.23 0.24

0.12

0.18

0.1

0.2

0.3


Group performance


“ The Group has a diversified international portfolio of public and private sector work and is not overly reliant on the dynamics of any particular sector or territory.”

limited domestic capability to satisfy it. We are beginning to build long-term strategic partnerships with global clients to provide them with surety of delivery.

Clients around the world are continuing to challenge the construction industry to provide more cost-effective answers to their needs, as they seek to generate greater value from restricted investment budgets. This increased level of expectation has not been fully recognised by the industry, with limited innovation to deliver a higher-quality built environment at a lower cost.

We have continued to grow our engineering capability to respond to our client’s needs in this regard, and meet our corporate responsibility to advance the wider industry through sustainable development. During the year we have seen our investments in our manufacturing capability and our in-house consultancy (the Engineering Excellence Group) successfully responding to these demands from our clients.

ResultsLaing O’Rourke continued to deliver good overall financial performance in 2011/12, despite our businesses in Australia having a disappointing year. We improved underlying profitability in the Europe Hub which allowed us to continue to reduce borrowings whilst keeping our cash over £600 million.

In the period the Group increased earnings before exceptional items by 5.3 per cent to £54.0 million (2010/11: £51.3 million).

We continued to selectively execute our diversified growth plans across both hubs and within our chosen sectors. Following

successful market entry to Canada and Hong Kong in the previous financial period with significant project wins, we have secured excellent wins in the period in mining, and oil and gas.

During the year we achieved financial close as joint constructor and equity partner under a structured Alternative Finance Procurement (AFP) scheme to build the most valuable social infrastructure public-private-partnership venture in Canada’s history, raising the largest rated bond transaction for a hospital in the world in the process.

We have reinforced our management team in the Middle East, as the region is now starting to see very fragile signs of recovery. We see a strong opportunity pipeline in Qatar as the government is looking to convert the state’s primary wealth in natural resources into secondary wealth in property and infrastructure to broaden international trade links.

The Group has also focused resources in the nuclear sector in the UK, establishing long-term relationships with nuclear operators and bidding for major civil engineering packages on the UK Government’s nuclear new-build programme.

We are delighted to have recently been appointed preferred bidder with our partner, Bouygues TP, for the £2 billion-plus main civils package at Hinkley Point C for client EDF Energy.

Our managed revenue increased by 7.6 per cent to £4.3 billion, ahead of the general industry performance, demonstrating the resilience of our integrated business model in challenging

conditions. Increased managed revenue and order book strength is evidence of the slow rate of recovery we started to see last year. The overall global economic picture is mixed, with some markets recovering and others stalling as countries continue to restrict public spending to address concerns over their static economies and indebtedness.

The Board continues to rigorously exercise its policy of being highly selective in the contracts it pursues, only bidding for work which directly supports the Group’s strategy execution and delivers acceptable margins.

The Group has a diversified international portfolio of public and private sector work and is not overly reliant on the dynamics of any particular sector or territory. We are therefore well equipped to manage market fluctuations and deliver profit-generating revenues irrespective of individual markets and sectors. Indeed, since the acquisition of the Laing Construction business over a decade ago, the Group has consistently posted annual profits, which is a clear testament to its strength and resilience, particularly through the downturn of the last few years.

Financial summary

Managed revenue1

£4.3bnOrder book

£8.2bnEarnings before exceptional items, interest and taxes2

£54mGross margin3

9.1%Cash and cash equivalents

£601mNet funds

£321m

Financial and business review

Overview In the context of the market conditions facing our industry across the world the business has performed strongly, generating profits and cash, replenishing its order book and increasing managed revenue in both the Europe and Australia Hubs. We also took a number of steps to reduce overheads through the removal of excess capacity across the Group, the full benefit of which will only be seen in 2013/14. We expect the prevailing conditions to continue in Europe until credit confidence is fully restored and we expect the twin-track economy in Australia to continue through the next trading period.

Our core UK construction business continues to perform well, despite increasing competition due to the lower number of available project opportunities. The Middle East is performing steadily and our new Canadian business is already cash-generative, and we expect to see the profitable benefits of our investments there over the coming years.

The Australia Hub has had another challenging year and we expect the benefits from the actions taken at the end of last year, particularly the strengthening of the management team and embedding of our Core Process methodology, to return the business to profit in the coming

year. We continue to invest in the heavy mining, and oil and gas infrastructure growth opportunities in the region and the order book has improved following significant project wins in the region. Our embryonic Hong Kong business is already experiencing success.

The Group continues to take advantage of the longer-term perspective presented by our private-ownership status with a measured programme of investments. This year these included taking full control of the Bison Group of companies to support our Design for Manufacture and Assembly (DfMA) agenda and continuing investment in recruiting graduates and other trainees, alongside our ongoing investment in people development programmes. We believe that continuing to invest through the downturn strengthens and future-proofs the Group’s offering.

We believe that our clients are increasingly seeking delivery partners of solid covenant with broad capability and scale to provide them surety of delivery over the lifecycle of their assets, from the design and delivery stage, through to aftercare and eventual decommissioning.

We are seeing the demand for these full-service solutions increasing in growth markets like Australia and Canada, with

Anna StewartGroup Director of Finance and Commerce

Order book by sector(%)

1 Building 22%2 Social Infrastructure 37%3 Transport 25%4 Oil & Gas 7%

5 Mining & Natural Resources 5%6 Utilities & Waste 4%

1

3

4

56

2



3. Gross margin percentage is stated pre-exceptional items.


Group performance

Gross marginGross margins have fallen slightly to 9.1 per cent (2010/11: 10.2 per cent) but this still constitutes a strong performance. Effective cost management and efficiencies in project delivery have played a significant role in sustaining gross margin throughout the recession. We have also reduced the time-related costs associated with traditional construction delivery activities through greater deployment of our DfMA delivery methodology onto projects. The gross margin result posted in the previous period was also positively impacted by a high number of major projects reaching completion, which in some cases triggered the release of performance incentive payments under contract settlement terms.

A strong gross margin result is important as it is a key indicator of performance and earnings quality in engineering and construction, acting as both a financial and qualitative measure of the project portfolio, as well as validating our delivery approach. We expect more modest gross margin returns in the next couple of years as our product mix changes while at the same time the reductions to our overhead spend profile should ensure our operating profit performance is not negatively impacted as a result.

Exceptional itemsWe continue to closely monitor the Group’s exposure to land and developments and have recognised a non-cash £21.2 million impairment, which is included within the year’s exceptional items. During the year a debt outstanding was only partially recovered after a client went into administration, causing a £2.6 million loss to be recognised.

We have continued to benefit from our selective sales approach, where making our Core Process mandatory for the commercial bidding stages of a project has improved our historical conversion rates. However, the market remains highly competitive and our current conversion rates are a testament to the determination and desire of our work-winning and business development teams to secure the majority of the contracts we select to bid.

We expect the current challenging market conditions to prevail in the short to medium term; however our analysis indicates that opportunity levels are better than they were 12–18 months ago. Accordingly we are experiencing consistently high-quality tender opportunities as our work-winning teams prioritise projects to repeat and build our order book.

Cost managementWe remain focused on improving the cost base of our operations. In line with our mission to create a lean and agile business, we benefited in the current year from cost-saving measures implemented last year. These initiatives have allowed us to continue our long-term investments to develop our people and establish the Engineering Excellence Group. We consistently monitor and review our cost base and reduce our overhead base. These initiatives have, and will continue to, improve the Group’s financial capacity.

Our property portfolio is regularly reviewed for impairment and was significantly impacted by the decline in commercial real estate values during the downturn. Urban property values in the UK, Ireland and Australia remain subdued and further impairments were recognised during the year to ensure our valuations remain appropriate.

The Group has no plans to purchase new development sites or add to its real estate portfolio. Our priority is to invest equity to complete our current projects over an appropriate period that will benefit from the recovery, or take minority equity stakes in developments to support our core construction business. Over the next two years, the Group’s equity, invested in development sites, will increase as we build-out projects in Australia which have been substantially de-risked by lettings and sales. We believe this prudent approach to property development allied to our strengthening net funds position reduces the risk profile of the Group.

On securing full control of the Bison Group of companies an exceptional gain of £4.2 million was made on acquisition, primarily because the deferred tax asset of £5.0 million could be utilised immediately within the Laing O’Rourke Group, although it was of no immediate use to other purchasers. The gain is recorded as an exceptional item within other operating income.

Further details are provided in note 4 to the financial statements.

Discontinued operationThe Board decided to close its German finished stone products business and sell the assets during the year. The business has been classified as a discontinued operation and costs of £5.0 million were recognised in relation to the expected sale of the business, together with a trading loss of £1.1 million, which ultimately led to a loss from discontinued operations of £6.1 million in the year. The business assets are expected to be sold in 2012/13.

Cash generationThe Group continues to be highly cash- generative, ending the financial year with gross cash of £601 million. In an environment of low interest earned on cash balances, the strong cashflow generated from our core construction activities has been used to repay £57 million of debt. This was a continuation of our debt reduction strategy, and by year-end we achieved our objective of only having Group borrowings to finance plant hire assets or our land and development businesses. Joint venture borrowings solely relate to non-recourse debt from Public Private Partnership (PPP) and Private Finance Initiatives (PFI) investments.

We believe that the Group’s people and technology investments enhance the accuracy and understanding of project costs at both the individual and aggregate level, through the addition of key personnel, systems and processes. We have reduced our reliance on external cost advisers whose focus was almost exclusively on the analysis of selling prices. Given our direct-employer, self-delivery capability and our in-house global procurement expertise, together with the Group’s ownership of its plant and equipment, we are able to access the key constituents of cost and the supply chain to a greater extent, and thereby determine a more comprehensive understanding of the underlying cost drivers of our products and services.

We continue to invest in our secure, web-based cost database, Insite, which provides an unrivalled benchmarking and cost planning capability for over 600 projects with a combined value in excess of £15 billion. Originally limited to UK operations, during the year we extended this capability across the rest of the Group. In the next year we are further expanding its functionality to include schedule data.

Laing O’Rourke continues to be at the forefront of the application of Building Information Modelling (BIM) technology. Working with our global software providers, we have developed a unique capability to deliver accurate quantification and pricing of projects via multidimensional models. The same model is used to demonstrate our understanding of the construction process, logistics and programme, providing our clients with confidence in our ability to deliver complex projects.

Our use of BIM places us at the leading edge of the industry, from its use supporting greater understanding and

We continue to effectively manage liquidity risk and demonstrate resilience in a tough economic climate, which has been demonstrated by improving our net funds position by 13.6 per cent at the year-end to £321 million.

The Group’s excellent cash performance has been achieved while maintaining our exemplary payment record with our supply chain. During the year we made significant progress in enhancing our responsiveness to the payment of suppliers, improving the number of days billing from suppliers outstanding at 31 March from 25 days to 21 days. This is an industry-leading performance relative to our major UK competitors, directly supporting the UK Government’s agenda to speed up the payment process to support the SME (small and medium enterprise) construction market.

Creditor days

20122011201020092008

2925

21

28 29

12

24

36

Order bookThe Group’s order book increased slightly to £8.2 billion at the year-end. The pipeline of secured work has been replenished with high-quality project wins despite an increasingly competitive environment. Significant contract wins in the oil and gas sector have been achieved in Australia. In Europe a win at Alder Hey Hospital, further sections of the Crossrail project and 122 Leadenhall Street comprise the most significant additions to the work pipeline.

Our businesses have improved the order book by focusing on reappointments by existing clients, as well as helping to improve market and sector diversification in the portfolio by securing a number of new client accounts.

cost certainty at project inception, throughout the design development phase into construction, where improved process and performance lead to an efficient and sustainable facilities management solution.

The Group continues to incur set-up costs during the roll-out of its DfMA agenda, in particular in research and development to optimise the efficient production methods and products manufactured at our facilities at Explore Industrial Park and Oldbury. These costs are currently being expensed but will, over time, be offset by the substantial savings generated from more efficient project delivery. We are now seeing significant benefits from DfMA at the project level. These advantages confirm our belief that DfMA improves safety, reduces construction costs and drives quality for the benefit of our clients and the Group. The Group’s investment in DfMA also leads to ongoing energy consumption reductions for our clients. Examples of this can be seen in a number of schools constructed by the Group around the UK, where the precise nature of the approach has ensured the completed buildings are highly energy-efficient. Unsurprisingly, we are seeing DfMA as a significant differentiator in business development and work-winning.

Financing and treasuryWe continue to hold sufficient financial capacity to take advantage of opportunities and weather any economic or operational challenges. Our cash and committed credit lines to which the Group has access for funding purposes were £762 million (2010/11: £751 million).

We are using our funds prudently to secure work that meets or exceeds our targeted rates of return, and to provide

Financial and business review continued

“ With our financial strength, engineering and construction capabilities, underpinned by a highly skilled and talented workforce, the business is well positioned to bid, win and deliver the world’s largest and most complex construction projects.”

Hinkley Point C Nuclear Power Station

In joint venture with Bouygues TP, Laing O’Rourke has been appointed preferred bidder to deliver the main civil engineering works for the proposed new Hinkley Point C Nuclear Power Station in Somerset, UK, subject to planning consent and the outcome of the final investment decision by EDF Energy at the end of 2012.


Financial and business review continued

the levels of resilience necessary to shield us from any further market shocks that could arise in the future.

Our centralised treasury function has continued to execute Laing O’Rourke’s strategy of reducing gross debt levels to minimise interest costs, while maintaining appropriate Group-level liquidity.

Successful implementation of our growth strategy is dependent on credit support from our banking and surety bonding partners. This is particularly true in some of our territories where there is a heavy reliance on the provision of contract bonding and banking guarantees, particularly for Private Finance Initiatives (PFIs).

Our finance and commercial teams have significantly strengthened relationships with our bonding and banking stakeholders to renew and extend the necessary facilities to meet our current and future requirements, particularly in Australia where a new three-year facility has been agreed. The Group has also successfully renegotiated and extended the terms of the debt facility for the Explore Living UK homebuilding business.

The Group regularly reviews its bonding and banking requirements and we have continued to broaden our base of key providers to support our strategic growth objectives.

In the coming year we will continue to ensure our treasury function 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 significant cash position.

Taxation The Group benefited from an income tax credit of £11.4 million during the year (2010/11: charge £5.5 million). The tax credit is principally due to the recognition of tax assets in respect of losses in Australia and the receipt of income tax refunds in the UK which recognise the significant research and development investments the Group has made in the UK.

Our five-year effective corporation tax rate, including joint ventures, is running at 22.4 per cent.

A significant proportion of our earnings was also generated in lower-tax environments, principally on completion of construction projects in the United Arab Emirates. During the year, the Group was a net income tax payer in Europe, paying £4.3 million, primarily in the UK. We expect the Group to be a net tax payer in 2012/13 at a rate similar to the UK prevailing tax rate.

InsuranceLast year the Group placed its UK insurance broking with Marsh, given their technical expertise in underwriting engineering-based projects, combined with global market coverage. Building on the success of this relationship, this year we consolidated our insurance brokers and subsequently appointed Marsh as our brokers in the Middle East, Canada and Australia.

In 2010/11 we placed a three-year programme of multi-class insurances with QBE and our own Guernsey-based captive insurer. During 2011/12 the Group continued to benefit from low levels of claims, although we carefully monitor the balance between insurance risk retained by the Group and that which we purchase in the external market. Our insurance profile closely tracks and correlates with our safety performance, which this year was again low with a rolling Accident Frequency Rate of 0.24. We remain comfortable with the level of insurance risk we are carrying internally.

GoodwillThe Group carries £335 million of goodwill in the consolidated balance sheet. Goodwill is not amortised under IFRS, but is tested annually for impairment.

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 (WACC). This test demonstrated that the recoverable value exceeded the carrying amount. Details of this test can be found in note 13 to the financial statements.

Pension schemesThe Group runs a number of defined contribution pension schemes with various providers in Europe and Australia.

OutlookIn 2011/12 we continued to generate profits, while posting a strong work-winning performance despite the ongoing macro-economic and sector challenges in our core markets. The Group is not complacent and will continue to seek ways to improve efficiency and productivity.

The Group made significant steps in strengthening its corporate governance, with the appointment of George Rose as Chairman of the newly formed Audit Committee and the strengthening of the internal Audit function. We will continue to strengthen our corporate governance framework through rigorous compliance testing of our Core Processes, particularly in the bidding and delivery phases of the project lifecycle.

Our controlled diversification strategy – by sectors, territories and brands – stabilises the earnings profile of the Group despite various market fluctuations. Diversification also provides exposure to growth markets – and Canada, Australia and the Middle East are all expected to deliver a greater proportion of the Group’s revenue, profit and workload over the next decade. We also expect the sector mix in our workload to become more balanced between infrastructure and building as we grow our infrastructure capability. Over the longer term the Group is also seeking to build a significant facilities management capability to support our clients with their asset lifecycle requirements. Our strong balance sheet and competitive position will enable the Group to create good returns on a long-term basis.

We are on track to deliver our 2012/13 targets and are once again seeing the benefits of our vertically integrated business model. We continue to be selective but decisive in the opportunities we pursue and intend to improve the profitable performance of the business.

Our financial objectives remain unchanged: to deliver rates of return above our cost of capital by efficiently deploying our skills and services into a controlled portfolio of markets and sectors. With our financial strength, engineering and construction capabilities, underpinned by a highly skilled and talented workforce, the business is well-positioned to bid, win and deliver the world’s largest and most complex construction projects.

Group performance


Safety and sustainability review

In a time of diminishing natural resources, our sector consumes far more than its fair share. Levels of innovation have not kept pace with the marketplace. As a consequence traditional construction practices are wasteful and inefficient – and the built environment is the single biggest source of global carbon emissions.

Over the past decade, we have seen a transformation in attitudes to health and safety. Across the industry, businesses are maintaining accident frequency rates once thought unattainable – as yesterday’s aspirations become today’s minimum standards. But in spite of these efforts we continue to expose our workforce to unacceptable levels of risk.

This reality is, in part, the reason that not enough young people are pursuing careers in construction and engineering. In some growth markets the skills shortage is bordering on chronic – threatening the development of the wider economy.

The way we manage these interconnected issues will have a material impact on the success of our business. We must be truthful about the scale of the challenge, committed to finding the right solutions and prepared to admit that we do not have all the answers.

Innovation and ingenuity will take us much of the way. But if we are to attract the talent we need to maintain this momentum, we must do more to perpetuate an image of our industry as enlightened, inclusive, safe and sustainable.

Our approachOver the years, our approach to sustainability has evolved and matured, responding to the changing landscape around us. As we have grown, so have our responsibilities. But in spite of this, our overarching priorities remain the same.

• To protect the health and safety of everyone involved in or affected by our operations, eliminating all accidents by 2020.

• To attract, develop and retain world-class talent, creating an environment that inspires our people to give their best and makes human capital one of our greatest differentiators.

• To minimise the negative impacts of our operations and maximise the quality of the built environment for future generations.

• To achieve the competitive advantage by delivering maximum value to all our stakeholders – clients, suppliers, communities and the wider industry.

It is practically impossible to imagine a world without construction and engineering. The buildings and infrastructure around us shape our existence, providing us with ways to live, learn, work and more. Yet in the face of today’s social, economic and environmental challenges, it is clear we cannot take our sustainability for granted.

Performance highlights

• Mission Zero safety campaign launched in Australia and Hong Kong, following successful roll-out across Europe Hub.

• Achieved an employee engagement score of 73 per cent1, against a global average of 57 per cent2.

• Published our Global Code of Conduct, with 100 per cent of employees successfully completing associated training.

• UK business accredited for the second year under the Certified Emissions Measurement and Reduction Scheme (CEMARS).

• Good progress made in Australia against our government-accredited Reconciliation Action Plan. Through our involvement in the Australian Employment Covenant, we have pledged to hire 700 indigenous employees.

1. This figure is calculated on a like-for-like basis against the criteria applied in previous surveys. During the year we added a number of new engagement questions, resulting in an overall score of 69 per cent. Going forward this will be adopted as our benchmark.

2. Average engagement score for organisations surveyed by Ipsos MORI during the year.


Group performance

Our goalTo protect the health and safety of everyone involved in or affected by our operations, eliminating all accidents by 2020.

Our approachOur industry is getting safer. But many people still believe that accidents are an unavoidable part of what we do. Laing O’Rourke does not accept this view. We believe we can eliminate all forms of harm from our operations – and through our Mission Zero agenda we’ve set ourselves the target of achieving this by 2020.

We have made good progress against our health and safety objectives in recent years, supported by a culture of personal commitment and individual empowerment. This will provide us with a solid foundation for meeting the challenges ahead.

However, we recognise that the same approach that got us to where we are will not, in itself, take us to where we want to be. We must adopt more innovative ways of thinking to eliminate all risk from our processes – and the people who apply them.

Taking nothing for granted, we will need to look to models of best practice from other industries, as well as examples of excellence within our own business.

To this end, we have begun reviewing the characteristics of ‘high-reliability organisations’ – companies that operate virtually accident-free. We have also commissioned an independent study of our Wales & West construction division, which has consistently maintained one of the lowest incident rates in the Group.

The aim of this exercise was to identify the conditions of a culture of safety and replicate these, where applicable, across the business. Visible commitment from the top, close relationships between the leadership team and employees at all levels, and a stable workforce and supply chain were found to be the dominant factors.

The year in reviewDuring the year we took significant steps to align our health and safety approach across both operating Hubs. This resulted in a restatement of the Group Accident Frequency Rate (AFR) for previous years, to bring the Australia Hub data into line with the Europe Hub.

GovernanceOur governance framework is made up of a network of boards, all ultimately accountable to the Chairman and Chief Executive.

Reporting to the Group Executive Committee (GEC), our Europe and Australia Hub Executive Committees are responsible for setting the strategic direction of our health, safety and sustainability agendas, allocating investment and monitoring performance.

Our Human Capital Committee is chaired by the Chairman and Chief Executive and leads the Group’s people and organisational agendas. The Board’s main priority is to mitigate capability risk through targeted attraction, retention and development of a highly skilled, globally mobile workforce.

Our Safety and Sustainable Development Committee – a sub-committee of the GEC – ensures risks and opportunities associated with safety and sustainability are given the highest priority within the Group.

The operational management of health, safety and sustainability is delegated to Hub-level safety and sustainability leadership forums. Chaired by the Hub Chief Executive Officer, the forums are made up of the leaders of each of the relevant business units.

Business unit safety and sustainability leadership forums are responsible for ensuring Hub-level strategy is implemented within each business unit. Chaired by the respective business unit leader, the forums are attended by senior personnel accountable for safety and sustainability.

In Australia the EPIC (Environment, People, Industry and Community) Senior Executive Standing Committee is chaired by the Hub Chief Executive Officer. The committee oversees strategy development for each of the core components of our sustainability agenda, sanctions investment and monitors performance. Specific actions are delegated to panels accountable for each of the above areas.

About this reportThis report describes our activities for the 2011/12 financial year. Specifically, it addresses the issues we regard as having the greatest material impact on the sustainability of our business. We have grouped these under four key headings: health and safety, people, environment and marketplace.

The figures published within these sections are sourced from centralised and Hub-specific databases, and unless otherwise stated represent the consolidated global operations of the Laing O’Rourke Group.

Given the geographic spread of our operations it is not always practical or appropriate to adopt uniform initiatives and measures. In particular, the scope of our sustainability activities will necessarily vary according to the size and maturity of our international businesses.

The Laing O’Rourke Group respects all national and international regulations to which it is subject and complies with the reporting requirements of the countries in which it operates. Local variations relating to the definition and measurement of performance data can, in some instances, make the task of reconciling figures extremely complex. However, every effort has been made to overcome this.

Audit and assuranceThis report has been independently assured by sustainability experts, Two Tomorrows, in accordance with the globally recognised AA1000 Assurance Standard (2008).

To verify key claims within this report, they have examined supporting evidence, interviewed senior personnel, and visited our projects, offices and other facilities.

Safety and sustainability review continued

Health and safety

Performance indicators

Investment in health and safety training

£1.3m

Training days provided

22,930Investment in IIF since launch1

£8.5m

Group AFR2

0.24Group DIFR3

0.42Group AAFR4

2.97Hazard and near-misses reported5

36,877

In October, we celebrated our first ever global health and safety awareness day. This marked the official launch of Mission Zero in Australia and Hong Kong, following its successful roll-out across our Europe and Middle East businesses in 2010.

The campaign was extremely well received in our Australia Hub – where a range of new programmes and initiatives has been introduced, alongside tried and tested practices from our Europe Hub.

To date, 3,439 employees and subcontractors in the Australia Hub have completed Mission Zero training. In Hong Kong, our West Kowloon Terminus Station (South) project recorded the lowest AFR across the entire 26km-long Express Rail Link scheme, beating its original target by 25 per cent. Our Middle East business ended the year with an AFR of 0.01 – its best performance since 2003.

Despite these successes, we were deeply saddened by the loss of a colleague, who was killed in October during track laying operations on our North-South Railway project in Saudi Arabia. A thorough investigation was carried out following the incident, which concluded that a failure to apply the correct procedures was the cause.

1. Includes delegate and attendance costs.

2. AFR (Accident Frequency Rate): an accident resulting in more than three days absence from work.

3. DIFR (Disabling Incident Frequency Rate): an accident resulting in the loss of one or more shifts.

4. AAFR (All Accident Frequency Rate): any accident at all, from serious injuries to minor incidents.

5. UK only, reporting introduced in Australia Hub in April 2012.

Mission Zero

Mission Zero is launched in Australia and Hong Kong through our first ever global health and safety awareness day. Now embedded in our Europe Hub, there are two key targets attached to Mission Zero:

• a 0.1 DIFR (an accident resulting in the loss of one or more shifts) by 2015;

• a 0.1 AAFR (any accident at all, from serious injuries to minor incidents) by 2020.


Group performance

hazards arising from particular activities are controlled.

In addition to our routine occupational health provision, we held a range of wellbeing events across the business. In the UK, these included a ‘know your numbers’ blood pressure campaign – along with tests for diabetes, cholesterol and other lifestyle-related issues. Our lung-health checks saw more than 200 individuals volunteer for stop-smoking advice.

One of the main occupational hazards in Australia and the Middle East is the heat. In desert regions, respiratory infections caused by dust and humidity are also a key concern. In both these businesses we run strict monitoring processes in parallel with awareness-raising programmes.

Health screeningsDuring the year, 4,960 UK employees received health screenings, ranging from safety-critical medicals to lifestyle check-ups, with over 98 per cent considered fit to work. 218 individuals were referred to our occupational health service for assistance to stay at or return to work. In most of these cases, action was taken as a precautionary measure following exposure to hand-arm vibration.

In the Middle East, 6,746 screenings took place; two employees were declared unfit for work and 197 were referred to local hospitals for additional assistance. Among these 250 surveillance checks were conducted for safety-critical or at-risk workers.

There were no RIDDOR-reportable health issues detected.

Drug and alcohol testingLaing O’Rourke operates a zero-tolerance approach to drug and alcohol misuse. This is enforced through random and with-cause testing, along with pre-employment checks. Disciplinary action – up to and including dismissal – will be taken against anyone found in breach of our drugs and alcohol policy.

In the UK 1,404 individuals were tested, with 86 returning positive results – representing a failure rate of 6.1 per cent. Cannabis was the cause in 67.4 per cent of cases. In Australia, the regulatory requirements associated with heavy civil engineering operations mean our workforce are subject to routine checks.

During the year, 197,290 tests were carried out, with 215 failures (0.1 per cent) – 167 of which were for alcohol.

We are committed to supporting any employee seeking help for substance abuse. Rehabilitation is delivered through independent counselling services, backed by a programme of regular testing. During the year 110 employees volunteered in confidence for assistance.

Training and awarenessOur ability to eliminate all accidents from our operations relies, inherently, on the commitment of our people. During the year we delivered 22,930 health and safety development days across the Group.

Incident and Injury Free Through our Incident and Injury Free (IIF) programme we have delivered a step-change in attitudes to safety, underlining the personal responsibility we each have to ourselves and others. After launching IIF Phase 4 in Europe in 2010, the programme was rolled out across our Australia Hub in 2011 – under the banner ‘Mission Zero Behavioural Safety’.

During the year 11,161 individuals attended IIF or Mission Zero briefings, including our own employees and colleagues from client organisations, consultancies and our supply chain. In addition, more than 300 senior staff attended advanced-level safety leadership workshops.

IIF for DesignersIn 2011 we developed a revised version of our IIF for Designers programme – aimed at providing professionals (working for us and our partners) with the skills to manage out risk through innovative solutions. There are 45 employees qualified to deliver these modules across the Group.

Hazard and near-miss reportingWe have made concerted efforts to increase risk-awareness within our workforce by focusing on the importance of hazard and near-miss reporting. This has resulted in an exponential rise in the number of such incidents recorded – with a total of 36,877 in our Europe Hub (compared with 7,176 the previous year).

In April 2012, we launched the initiative in our Australian Hub, with dedicated briefings at all workplaces. While there has been an uptake in reporting, the process is yet to become fully

embedded. 291 hazards and near-misses were registered.

High-potential incidentsWe have also strengthened our incident reporting procedures with the inclusion of a new ‘high-potential’ category. Any occurrence that could have resulted in a fatality (but by chance did not) will be investigated in the same manner as an actual fatality. This process will act as an early-warning system, enabling us to take vital preventative action.

Safer systemsA number of improvements have been made to our systems and processes during the year to ensure they work harder to support our Mission Zero ambitions.

Safety Management System (SMS) reviewAs our ‘safety blueprint’, particular attention has been given to enhancing the usability and effectiveness of our SMS. The new system is more closely aligned to our Core and Enabling Processes (the protocols that govern our bidding and delivery activities). It therefore includes greater emphasis on designing out risk at pre-award stage – along with enhanced guidance on the application of offsite manufacturing and onsite assembly methodologies.

More than 400 employees were consulted as part of this exercise and a compulsory online training module is being developed ahead of its launch in the summer.

Safer Systems of WorkOur Safer Systems of Work initiative was introduced in 2011 to improve the quality of site-based operational communications, such as toolbox talks. As part of this, all individuals responsible for writing or reviewing method statements or risk assessments must now attend a one-day course.

Audit and assuranceWe are reviewing our audit and inspection process to ensure it is accurately reflecting levels of compliance, while enabling us to identify opportunities for improvement. In June, we will pilot a new external assurance protocol, which focuses on supporting better performance – as well as assuring compliance. This will be rolled out shortly afterwards.

There were no other fatalities associated with any of our operations during the year.

We are also disappointed to report that our year-end Group AFR rose to 0.24 from 0.23 in 2011. A number of factors have contributed to this decline and our focus for the period ahead will be to take decisive action to reverse this trend.

In this regard we remain committed to our integrated delivery model and direct employment approach as the most reliable means of ensuring the correct levels of competency and commitment on our sites. We also work closely with our supply chain partners to share learning – and discourage a high turnover of labour.

Additionally in our Australia Hub, we believe greater levels of awareness have resulted in a more rigorous approach to reporting. Over time, however, we anticipate this will produce a much improved performance. It is worth noting that incident rates within our infrastructure division are consistently lower than in other parts of the business. This can be explained by higher rates of directly employed labour.

Leadership, communication and commitmentOur positive ‘health and safety first’ culture relies on visible commitment from our leaders. It is vital that all our people understand not only what we expect of them, but what they in turn can expect of us.

With this in mind, we have taken a number of steps to drive greater engagement with our workforce and open up lines of communication so that everyone feels empowered to take responsibility for their safety.

Safety commitment interviewsIn February, our UK business introduced compulsory ‘one-to-one safety commitment interviews’ for all new-starters and transfers, including subcontractors.

The aim of these sessions is to ensure that everyone on our projects understands our approach to health and safety. As part of the process, inductees must confirm their commitment to our Mission Zero vision. Anyone failing to do so will be refused entry to the site.

Delivered wherever possible by the project leader, the interviews are also designed to strengthen relationships between management and the workforce, encouraging a culture of care and mutual respect. In total, 3,790 interviews have


taken place so far, with two failures. This figure includes our directly employed workforce as well as subcontractors.

New directors’ safety toursWe have made a number of changes to the format of our directors’ safety tours to improve their effectiveness – including a much stronger emphasis on workforce interaction.

Directors must also assess the extent to which innovation is being applied to manage out risk at the earliest stages and how well different disciplines (such as planning, procurement, commercial and design) understand the part they are expected to play.

Focus projectsDuring the year a number of sites across the Group were identified as ‘focus projects’ (those entering a high-risk phase or performing poorly). As part of this process, they were reviewed by the relevant Hub board and action plans were developed.

Health and wellbeingA key priority of our Mission Zero agenda is the prevention of work-related illness and the management of safety risks associated with poor health in the workplace. As a minimum, we have a responsibility to ensure every employee is fit to carry out their duties and that

Innovation

Managing out risk through our Design for Manufacture and Assembly solution using automated processes in controlled environments we are making our activities safer, less wasteful and more sustainable.


Group performance

People


Employee engagement score

73%

Percentage of employees receiving performance appraisals

89% Investment in training and development

£7.2m Training and development days provided

40,958Staff: male to female ratio

81:19Employees: staff to workforce ratio

36:64


Our goalTo attract, develop and retain world-class talent, creating an environment that inspires our people to give their best and makes human capital one of our greatest differentiators.

Our approachIn the UK, the number of 16–19 year-olds in our industry has halved since the recession, while nearly one-fifth of the workforce is within ten years of retirement. At the same time, Australia’s resources boom – coupled with an ageing and relatively small population – has led to a severe skills shortage.

There is little doubt that unless this trend is reversed, the growth of our sector – and the wider economy – will be impacted. Short-term fixes, such as international recruitment, will not be sufficient in the long run to address this issue.

It is clear, therefore, that if we are to build a sustainable pipeline of talent, a more enduring solution must be found. To this end, we are working closely with schools and colleges to inspire more young people to consider careers in construction, while investing in world-class engineering education through our academic partnerships.

Meanwhile, our increasingly sophisticated delivery processes will demand much more of our workforce. To maintain the required levels of competency, it is vital we are able to attract and retain the very best people by offering rewarding careers, with real development opportunities.

The year in reviewWe have taken decisive steps to accelerate our human capital strategy, starting with a root and branch review of the processes that underpin it. Through this exercise we have identified a number of priorities – key among these is the way in which we measure and monitor performance.

While significant progress was made in 2011 with the global roll-out of a single-source employee profiling system, it is clear more needs to be done to improve the quality of this information and, in particular, the way it is generated and analysed.

This data informs our decisions on reward, promotion and mobilisation – along with our investment in training and development. It is critical therefore that it provides us with an accurate picture of our people’s capabilities.


People

A broad-based pipeline of industry talent: the winners of our Excellence Plus awards celebrate with Chairman and Chief Executive, Ray O’Rourke. Meanwhile across the Group we have invested £7.2 million in a range of site-based training and professional development.

The personal insights of our line managers, leaders and human resources professionals provide us with a valid starting point, but are not truly meaningful unless balanced against fact-based criteria.

Work has begun to bring greater discipline to our progress-tracking activities, particularly in relation to our high-potential employees. With the launch of our Big Guns leadership programme later in the year, we will pilot a new approach that fully integrates both qualitative and quantitative information to ensure we are accurately identifying and actively developing our top performers.

Meeting the skills challenge During the year we launched an unprecedented drive to recruit qualified professionals to staff major infrastructure projects in the northern and western areas of our Australia business. In this period 716 new starters joined the business. Of these, 153 were from outside the country. 45 were existing Laing O’Rourke employees who transferred from other operating regions.

In total 61 employees were transferred between operating regions on long-term assignments. Among these were a number of senior personnel, deployed into different parts of the business to meet requirements for specific sector or functional expertise.

Employee engagementOur employee engagement score is, in essence, a measure of how satisfied our people are in their jobs. We therefore regard it as a key indicator of our business performance – and as such have formally linked it to the reward levels of our senior executives.

It is a testament to the commitment and professionalism of our people that, despite ongoing market difficulties, we have once again achieved an exceptional result – with a score of 73 per cent against a global average of 57 per cent.

This figure is tracked through our annual staff survey, which is delivered on our behalf by leading independent research specialists, Ipsos MORI. The survey covers a range of subjects, including safety and sustainability, communication, leadership, business strategy, career development and line management.

The combined responses are passed to our leadership team, who develop action plans to address the areas most in need of improvement. In the interests of open and transparent communication, we publish the results in full on our intranet. We also update our employees throughout the year on how our activities are progressing.

Performance managementThe relatively low profit margins in our industry make productivity a key sustainability issue. To ensure each of our employees is working constructively and demonstrably towards our business objectives, we operate a stringent goal-setting and appraisal process. In 2011/12, 89 per cent of staff completed year-end performance reviews.

These two-way feedback sessions are also designed to ensure our people enjoy stimulating careers that enable them to achieve their professional ambitions. To this end, we have developed a more structured approach to identifying training needs, which will be formally aligned to the appraisal process.

We have also launched a set of ‘career toolkits’ for project delivery disciplines and supporting functions. These contain structured information on the capabilities and qualifications required at each stage of development – giving employees a clear view of where they are and what they need to do to progress.

So far we have published nine, with more planned for the year ahead. Within the next 12 months we aim to have development plans in place for every employee, based around the relevant toolkit.

Employees on development programmes

562Apprentices

207Scholars and cadets

140Graduates

135Young Guns

43Guns

29Masters

8Total employees

Staff Workforce Employees

Europe Hub 4,435 7,593 12,028 Australia Hub 1,832 3,492 5,324 Group 6,267 11,085 17,352

Workforce age profile1

25 and under 11%26–35 33%36–45 28%46–55 18%Over 55 10%

100%

Staff age profile

25 and under 8%26–35 31%36–45 28%46–55 21%Over 55 12%

100%

Staff length of service

Less than 6 months 6%6 months to 1 year 13%1-2 years 12%2-3 years 5%3-5 years 20%5 years + 44%

100%

1. In compliance with local regulations this figure does not include Saudi Arabia based workforce.


Group performance

Particular focus has been given recently to the importance of effective line management in driving strong performance. To support this we have launched a number of new training programmes that focus on leadership, mentoring, career coaching and effective communication.

Learning and developmentThe training and development of our people remains one of our most significant areas of investment. We have an established suite of in-house programmes to meet our trades-based and professional skills requirements. This is augmented where required by external providers.

To ensure maximum returns – for us and our employees – we proactively support past and present participants of our ‘high-potential’ programmes. During the year we conducted an extensive talent review of all current and former apprentices, graduates, cadets, scholars, Young Guns and Guns – along with our top 200 senior executives.

We currently have 562 employees on development programmes across the Group. In 2011/12 we invested £7.2 million in 40,958 training days (up from £4.7 million last year).

In the coming months we will launch Big Guns. The programme, which follows on from Young Guns and Guns, is a key element of our long-term succession strategy – and underlines our commitment to grow our leaders from within. Drawn from an elite group of exceptionally capable professionals, our Big Guns will be trained to take on executive roles at Group and Hub level.

EducationWe continue to invest in world-class education – not only to grow our own talent but, more broadly, to help build the skills and mindsets our industry will need to meet future engineering challenges profitably and sustainably.

Through our partnerships with the University of Cambridge and Imperial College London we have developed two unique masters degrees. Open to applicants around the world, the programmes seek to develop the next generation of industry innovators, challenging candidates to rethink current practices. In 2011, eight Laing O’Rourke employees were accepted onto the courses.

At the other end of the educational spectrum, we are working with schools and colleges to attract more young people to construction and engineering. Through a range of learning experiences


and vocational guidance, our project teams help students make informed career choices by providing an exciting insight into the many different roles our industry offers.

DiversityConstruction and engineering is still regarded as a predominantly male domain. Laing O’Rourke is committed to challenging and changing this negative image by encouraging diversity at every level and honouring its responsibilities as an equal opportunities employer.

Our approach is outlined in our Global Code of Conduct and associated policies, which mandate the fair and impartial treatment of all existing and prospective employees in relation to selection, promotion and development. We also operate strict policies against bullying, harassment and discrimination.

In 2012 we began monitoring ethnic diversity through our employee profiling system. We also track gender ratios across the business – with particular focus on our talent programmes.

Industrial relationsThe changing industrial relations landscape in Australia has had a sector-wide impact, to which Laing O’Rourke has not been immune. During the year, union activity brought work on a number of our projects in Queensland to a halt, while the business renegotiated its workplace agreements.

In response, we have strengthened our industrial relations risk management and compliance capability with a number of key appointments. We have also established a national working group to assess our policies and procedures.

Laing O’Rourke was not subject to any industrial action elsewhere in the Group.

Scholars

Building the skills and mindsets our industry will need to meet the engineering challenges of the future by investing in world-class education, we are currently supporting 140 undergraduates through our scholars and cadets programmes.

Our goalTo minimise the negative impacts of our operations and maximise the quality of the built environment for future generations.

Our approachIn its present form our industry is not sustainable. Neither are the products we deliver. Traditional construction methods are carbon-intensive – and the built environment is the single biggest source of global CO2 emissions. Collectively, our sector consumes around one-third of the world’s natural resources, generating vast amounts of waste and pollution in the process.

As governments rightly take tough measures to tackle these issues – and energy and commodity prices rise on the back of diminishing reserves – those that cannot evolve will find themselves unable to compete in the emerging low-carbon economies.

All of this is compelling us to rethink the way we design, engineer, construct and operate our buildings and infrastructure – putting our innovation activities firmly on the agenda.

With our environmental and commercial objectives becoming increasingly aligned, we continue to embed our Design for Manufacture and Assembly (DfMA) approach across our operations. Coupled with the application of technologies such as Building Information Modelling (BIM), this methodology has the potential to significantly minimise negative impacts in delivery and maximise efficiency in use.

The year in reviewIn 2011, our Australia business registered under the National Greenhouse and Energy Reporting Act for the first time – recording Scope 1 and 2 emissions for the 2010/11 financial year of 19,159.15 tCO2e and 6,538.49 tCO2e respectively.

To ensure full compliance with these regulations, a training programme was rolled out by the legal and environmental teams. The focus now will be to agree long-term reduction targets for this part of the organisation, while embedding a robust system for reporting subcontractor emissions, as required under the legislation.

In July 2012, the Australian Government’s carbon tax will come into effect. Laing O’Rourke does not currently exceed the threshold for liability (emissions over 25,000 tCO2e per year). We are, however, exposed to price increases through our supply chain – as the manufacture of steel, aluminium, cement and glass produces significant amounts of greenhouse gasses.

Estimates of the impact on overall construction costs between now and 2020 vary from 1.4 per cent to 2 per cent. Laing O’Rourke has commissioned sustainability experts, Netbalance, to conduct further research into the potential effect on our operations.

Having demonstrated continued performance improvements, our UK business was accredited for the second time under the Certified Emissions Measurement and Reduction Scheme (CEMARS).

Environment


Waste diverted from landfill (UK)

94.8%

Summary of carbon emissions

UK Australia

2008/9 (Baseline) 2010/11

2011/12(Provisional)1

2008/9 (Baseline) 2010/112 2011/12

Scope 1 80,833 47,931 53,360 N/A 19,159Scope 2 17,600 16,057 11,059 N/A 6,538Total (Scope 1 & 2) 98,433 63,988 64,419 N/A 25,697Scope 3 (Excl. waste) 8,230 4,573 4,587 N/A N/A N/ATotal (Scope 1, 2 & 3) 106,663 68,561 69,006 0 25,697Waste (Scope 3 – excluded from baseline) 5,150 4,180 N/A N/A N/A

1. To be verified through CEMARS accreditation process in July 2012.

2. At year-end the NGER Act reporting period was 75 per cent complete. This figure therefore does not encompass the full financial year.


Group performance


Working with the National Community Wood Recycling Project (NCWRP) in the UK, we have recycled more than 500 tonnes of wood, helping to fund 50 permanent jobs in the process. The NCWRP is a network of social enterprises that provides a collection service for wood waste, while giving disadvantaged people employment and training opportunities.

Assurance and accreditationWe are committed to the highest standards of environmental compliance and management. All Laing O’Rourke Group businesses operate to ISO14001-accredited environmental management systems.

Responsible sourcingOur Explore Manufacturing business has been awarded ‘good’ status under BRE’s responsible sourcing standard, BES 6001. It is the first time composite precast concrete components have been certified under the scheme – and will mean automatic BREEAM points for projects using these products.

The accreditation recognises best practice in the sustainable procurement and production of construction materials. To qualify, manufacturers must demonstrate that their products are made from responsibly sourced materials, while providing detailed evidence of the way in which social, environmental, health and safety, and other ethical issues are managed – within the business and across the supply chain. Our approach to responsible sourcing is outlined through our Global Code of Conduct, which mandates the selection of products and services with the lowest environmental impact. This includes the use of non-hazardous and/or reusable materials, wherever practical.

We also require our timber suppliers to provide 100 per cent FSC (Forest Stewardship Council) or PEFC (Programme for the Endorsement of Forest Certification) accredited materials and collect chain of custody information, as required, on each project.

While we do not rigorously monitor the use of recycled content, we expect to achieve a minimum of 20 per cent across the board – and can increase this where required.

Certified Emissions Measurement and Reduction Scheme (CEMARS)For the second year in succession, our UK business has received CEMARS accreditation, demonstrating a sustained reduction in our greenhouse gas emissions. As part of this process, companies must open up their carbon management and measurement processes to external scrutiny.

This not only provides us with assurance on the accuracy of our CO

2 data, but assists with our placement on other performance league tables – such as the UK Government’s Carbon Reduction Commitment scheme, which assesses how well organisations manage their energy use. The first of these was published in 2011, with Laing O’Rourke ranking in the top 15 per cent.

Systems and processesIn Europe, we have made substantial changes to our ISO 14001-certified environmental management system. To ensure our sites are as energy and waste efficient as possible, the new system provides enhanced guidance on project preparation. Significantly, we have increased the focus on environmental design – particularly in relation to meeting BREEAM requirements.


In 2010 we set ourselves the target of cutting our carbon footprint by 15 per cent1 by 2012. We have fallen short of this target, with an 11.7 per cent reduction. This is due to the increased proportion of infrastructure projects across our portfolio – and the resulting rise in heavy plant use – which has meant our total energy consumption (particularly of red diesel) has gone up.

To further support our efforts, we have invested in a more fuel-efficient vehicle fleet – and made sustained efforts to limit site CO2 emissions, supported by improved guidelines for project teams. In line with the UK Government’s targets, we are now working towards a 30 per cent reduction by 2020 and 80 per cent by 2050.

WasteWe continue to focus on driving down waste – and are working towards a 50 per cent reduction by 2020 (against 2009/10 figures). During the year, our UK operations generated 145,724 cubic metres of construction waste, against a baseline of 259,498 cubic metres.

Our primary objective is to eliminate waste at source through the increased application of DfMA, supported by best practice on our sites and within our supply chain. By using automated processes to manufacture components in a controlled environment, we are able to manage materials much more efficiently and return would-be waste back into production.

Where waste arises during construction, we operate strict protocols, including mandatory recycling targets. In the UK we diverted 94.8 per cent of waste from landfill during the year – a 4.5 per cent improvement on 2011 and 12 per cent ahead of our 2012 target. By 2020 we aim to recycle 100 per cent of non-hazardous waste.

While the regulations do not encompass the CO

2 emissions associated with the construction process itself, innovations in design and materials use will be critical in meeting mandated levels of operational efficiency.

Design for Manufacture and Assembly (DfMA)In this regard, our DfMA solution offers inherent advantages – through efficient use of thermal energy and vastly enhanced air-tightness.

Concrete has a natural ability to store significant amounts of heat, especially unrendered. The superior quality of finish means that exposed concrete is suitable for use on DfMA-built structures.

Through careful management of internal airflow, the absorption and release of this energy can be influenced, reducing the need for artificial temperature control. The standards achieved through factory-controlled construction helps ensure, for example, that joints are more exact and therefore more airtight.

These benefits were recognised in 2011 when our schools design won the Chartered Institution of Building Services Engineers Passive (Energy-Related) Product of the Year. Our recently completed Irlam and Caddishead Community High School achieved an air-tightness of 1.29. With rates of 7 or 8 not uncommon, this is an excellent result.

To further interrogate the value of this approach, we have established a set of environmental indicators. Evidence collected so far suggests that construction waste and site CO

2 emissions can be more than halved – compared with traditional practices.

Building Information Modelling (BIM)The advantages of our DfMA approach are reinforced by the application of BIM – a digital prototyping tool that enables us to integrate data about a building’s design, construction and future function to develop the most efficient methods of delivery and operation.

This ‘virtual construction’ approach has obvious benefits at project stage – where it serves to reduce waste and error. But the technology has wider-ranging functions.

When BIM is integrated with a building’s energy model, it has the capacity to predict ‘real’ performance in operation. Not only can it enhance design, this information can be incorporated into facilities management systems to streamline building services.

The UK Government’s definition of a zero-carbon home relates to its ‘modelled’ performance. This includes anticipated emissions arising from heating, cooling, lighting and ventilation – but excludes cooking and electrical appliances.

But real energy use is often very different to modelled. Recognising the disparity, enlightened clients are shifting their focus beyond compliance toward more holistic solutions. Likewise, many Private Finance Initiative (PFI) entities are asking investors to take on energy performance risk in their contracts.

The 3Ts modelWe have begun pioneering a real energy modelling approach at our Brighton 3Ts Hospital project in the UK. Working with consultants, we are developing highly detailed occupancy data that includes expected usage patterns for each part of the building. This is based on in-depth

Plans are in place to conduct a similar exercise in Australia in the coming months. During the year, the Hub’s environmental reporting procedures were reviewed by its board in an effort to improve governance and compliance. In addition, a manual is currently being developed by Select Plant Hire, in conjunction with our procurement team, to enable sites to set up and dismantle in a more sustainable way.

Environmental incidentsThere were no environmental prosecutions during the year in review. One infringement notice was served to the Transport Express Joint Venture (of which Laing O’Rourke Australia is a partner) for a Category 2 incident relating to sediment contamination of stormwater run-off from site during a period of heavy rainfall. Four environmental notices were served in the Middle East.

There were no Category 1 environmental incidents anywhere in the Group. There were 21 Category 2 incidents and 300 Category 3. 324 environmental hazards and near-misses were reported in the UK and 37 in the Middle East. In 2011/12 we conducted 258 internal audits.

Training and awarenessWe have developed a bespoke in-house course, accredited by the Institute of Environmental Management and Assessment. All UK-based environment advisers have now been trained to associate level.

In Australia, we rolled out a senior managers’ environmental training programme. The first 12 sessions took place in March, with the remainder to be completed by June. The course will be delivered on an ongoing quarterly basis in each region within the Hub.

We continue to deliver ‘environment launches’ on all new UK projects to ensure teams fully understand their responsibilities and are aware of any specific risks relating to local biodiversity or the nature of the work being undertaken.

Towards zero-carbon constructionIn 2016, legislation will come into effect in the UK requiring all new homes to be ‘zero-carbon’. The government has also outlined ambitions to include new schools within these parameters. By 2019 the law is expected to extend to cover all new developments – public, commercial and domestic.

Responsible sourcing

Recognising best practice in the sustainable procurement and production of construction materials, Explore Manufacturing is awarded ‘good’ status under BRE’s responsible sourcing standard. It is the first time composite precast concrete components have been certified under the scheme.

Foresterhill

The UK’s best new eco-friendly industrial building of the year, innovations applied at Foresterhill Energy Centre will cut running costs by 39 per cent, representing annual savings of almost £3 million.

1. All carbon reduction targets are normalised by turnover and measured against 2008/09 baseline.


Group performance


The year in reviewAs a statement of our commitment to the highest standards of ethical business practice, we published our Global Code of Conduct in 2011. This document sets out our standards for working together and with others – and describes the way we manage the social, economic and environmental impacts of our operations.

To ensure our people understand their responsibilities, the Code provides practical guidance on issues such as bribery and corruption, equal opportunities and human rights, safety, sustainability and security. Anyone found in breach of the Code will be subject to disciplinary action, up to and including dismissal.

A copy of the document has been sent to every member of staff, along with an individual link to our online commitment pledge. To date, 96.2 per cent of employees have signed the pledge. As part of our induction process, all new recruits will be expected to follow suit.

To coincide with the launch, we also introduced a new independent ethics helpline for anyone wishing to raise a concern. So far 25 cases have been reported (21 of which are now closed). None involve significant misconduct or represent a material risk to the business.

Anti-bribery and corruptionThe UK Government’s Bribery Act came into effect in July 2011, significantly strengthening the legal framework

for prosecution both in Britain and internationally. The Act imposes wide-ranging requirements on companies to actively prevent bribery and corruption.

Laing O’Rourke has established a framework for ensuring full compliance across the Group. This includes the introduction of an anti-bribery and corruption policy, ‘gifts and hospitality’ and ‘conflict of interest’ registers, and compulsory training for all staff. Globally, 100 per cent employees have successfully completed the module.

Supporting shared goalsWe recognise that we do not operate in isolation – and what benefits the wider industry, benefits us. To this end, we are committed to playing our part in supporting a safe, sustainable and profitable sector.

In 2012, our Australia Hub Chief Executive Officer joined with Chevron and 60 other CEOs and senior managers from organisations involved in the Gorgon LNG project off the Western Australia coast to agree to work together to set a new national benchmark for construction safety. The Chevron-operated scheme is the largest resource project in the country’s history.

In July Laing O’Rourke played a key role in the UK Government’s inaugural construction summit, which discussed the industry’s role in driving economic growth and debated ways to create sustainable momentum.


Marketplace

Code of Conduct

As a statement of our commitment to the highest standards of ethical business practice, we launched our Global Code of Conduct in 2011.

Our goalTo achieve the competitive advantage by delivering maximum value to all our stakeholders – clients, suppliers, communities and the wider industry.

Our approachLaing O’Rourke prides itself on never standing still. An important part of our culture is our collective sense of responsibility to always seek ways to improve. This philosophy manifests itself in our vision and values – to continually challenge ourselves and the wider industry to change from within.

Our strategy is straightforward: increase our work pipeline by building enduring relationships with clients who look to us for construction and engineering solutions that consistently meet their needs and add greatest value.

These endeavours matter most to the growth of our business. They require strong leadership and a workforce with the capabilities and commitment to deliver on our promises.

The quality of our products and services is, without doubt, paramount. But our standing in the marketplace is built as much on what we do as how we do it. Our reputation for honesty and integrity in all our dealings is central to our success. It is defined by the actions of each of our employees – and measured in the trust our stakeholders place in us.


Employees who completed anti-bribery and corruption training

100%

Employees who signed the Code of Conduct commitment pledge

96.2%

Donations to charity (corporate)

£299,546

Donations to charity (employees)

£278,851Volunteer days (employees)

1,507University partnerships

Europe HubCardiff UniversityImperial College LondonMassachusetts Institute of TechnologyUniversity College LondonUniversity of CambridgeUniversity of Loughborough University of Oxford University of Swansea

Australia Hub Curtain University James Cook UniversityMt Eliza Business School, Melbourne UniversityQueensland University of TechnologyUniversity of NewcastleUniversity of New South Wales University of QueenslandUniversity of Sydney University of Technology Sydney University of Western Australia

monitoring of other similar hospitals. To minimise actual carbon emissions, the model encompasses all energy use (including specialist equipment) not just ‘regulated’ consumption.

Future applicationWhile the 3Ts model is more comprehensive than anything in existence to date, this experience will enable us to improve the efficiency of other buildings. In particular, there is potential to apply the same methodology to our schools design – where energy consumption and occupancy patterns are less complex. We are currently exploring these opportunities with our research partners, using this learning to build our capability even further.

External recognitionEnergy efficiency In 2012, our Foresterhill Energy Centre project in Aberdeen was recognised by BREEAM as the UK’s leading eco-friendly industrial building, achieving an ‘excellent’ rating of 83.32 per cent – the highest in its category.

Located on the Foresterhill Health Campus, the new facility provides the site with around 90 per cent of its peak electricity needs. With operational efficiency a key client objective, a holistic environmental approach was adopted from the outset.

Detailed assessments were carried out at design stage in collaboration with lead consultant, Mott MacDonald, to ensure all energy-saving options were explored. The

result is a 39 per cent reduction in running costs (representing a current annual saving of £2.95 million) and a 16 per cent cut in consumption.

Sustainable designDelivered through our DfMA approach, the Mint Hotel Tower of London has demonstrated outstanding levels of operational efficiency. In 2011, the building received the Future Design Award for Sustainability at the European Hotel Design Awards.

Laing O’Rourke worked closely with architects, Bennetts Associates, to incorporate a range of innovations at design and construction stage. This included the use of passive and active low-energy systems, delivering a 40 per cent improvement on the ‘excellent’ standard for buildings of this category. It also achieved an energy performance certification (EPC) rating of B, which is exceptional for a fully air-conditioned four-star hotel.

Other renewable technologies, such as photovoltaic panels and ground-source heat pumps, have contributed to a 30 per cent reduction in carbon emissions – significantly exceeding the latest planning requirements. The 11-storey hotel also features the largest ‘living wall’ in Europe. The attractive installation is made up of 45 self-watering planting cells and helps to insulate the building.

Mint Hotel Tower of London, UK

Delivered through our DfMA approach, the Mint Hotel Tower of London achieved a 40 per cent improvement on the ‘excellent’ standard for buildings of its category.


Group performance

Our customersOur customers are unquestionably our most important stakeholder group. They create the pipeline of work that sustains our business.

During the year we established a central team to assess the way we manage our external relationships. These findings are now being developed into an expanded governance framework, designed to bring greater alignment and control to our decision-making – so that we are always working with the right partners, in the right way.

A key objective of this exercise is to define what ‘best value’ means to our clients and, against these criteria, establish a system of checks and balances to ensure our offering is consistently the most attractive. This will be supported by the roll-out of a policy deployment matrix which outlines clear rules of engagement, along with a comprehensive training programme for customer-facing staff.

Measuring our performance We regard client satisfaction as a key indicator of our business performance, and are committed to achieving year-on-year improvement. This is primarily measured through a combination of programme adherence metrics and stakeholder surveys.

Adherence to key delivery milestones is tracked on all major construction and infrastructure projects through mandatory contract reviews. To measure overall performance we have interrogated a representative sample of 57 projects across the Group. This year’s target was achieved in our Europe Hub. In Australia, however, a number of legacy contracts failed to meet the required deadlines.

Data on key client opinions is collected through stakeholder surveys. These are conducted during and on completion of the relevant project, and provide customers with an opportunity to share their views on our strengths and


weaknesses. In assessing overall performance for the year, we reviewed a representative sample of surveys, which satisfactorily met our expectations.

QualityIn an increasingly value-conscious market, quality is what sets successful brands apart. Laing O’Rourke operates robust processes to ensure predictable outcomes that satisfy our clients and drive ongoing improvement. We are continually refining our ISO 9001-certified quality management system to ensure our standards keep pace with expectations – and this year carried out a major revision of our quality manual and associated policy documentation.

Our suppliersOur suppliers play a vital role in supporting our business activities, and our reputation depends on the quality and value of the services they deliver. For this reason we work closely with our trading partners to ensure they share our values.

Our procurement strategy is based on a dynamic system that harnesses the benefits of long-term relationships, while promoting competition. We continually monitor the performance of our suppliers, who are categorised (depending on the scale of our investment) as ‘strategic’, ‘preferred’ or ‘transactional’. As circumstances change, businesses may move up, down, on or off this framework. This flexibility incentivises high levels of productivity and opens up opportunities for new entrants.

Our supplier relationships are founded on collaboration and respect – as borne out in our industry-leading payment record. During the year we improved our responsiveness from 25 to 21 days between billing and payment.

Ethical partnershipsAs a condition of engagement, we expect our suppliers to comply with all applicable national and international regulations. This includes legislation relating to working hours, wages, welfare and human rights – along with the principles outlined through the International Labour Organisation’s Core Conventions.

Commitment to our own health, safety, environmental and people development objectives is an important factor in the selection process and key trades must agree to work to strict targets. In this regard, we believe in supporting our partners through training and knowledge-sharing, and hold regular forums to communicate clear expectations.

EngagementIn September, the UK business hosted its inaugural national supply chain forum – bringing together our top 20 tier-one partners to discuss how to improve safety across the industry. Going forward, these will take place every six months. We also held seven regional forums in 2011/12.

Significant steps were taken during the year to align our procurement practices globally. For the first time, our Australia Hub hosted supplier health and safety forums in Sydney, Brisbane and Perth. These included a two-hour behavioural safety workshop – and also covered our approach to procurement, design, quality and sustainability.

Our communitiesWith operations around the world, Laing O’Rourke plays an important part in many different communities. Through these interactions we are committed to creating

local employment and business opportunities that support our ambition to build a broad-based pipeline of industry skills.

As part of the Designed for Life: Building for Wales healthcare framework we have achieved an average local spend of 95.98 per cent, with a rate of 99.68 per cent on our Cardiff Royal Infirmary project.

In Manchester, we have committed to supporting 66 new apprenticeships, within our business and across the supply chain, through the redevelopment of the city’s Town Hall and Central Library. Laing O’Rourke will also provide opportunities for a further 19 existing apprentices.

Our Barnsley Building Schools for the Future project has created 43 local apprenticeships. The team has also provided over 60 NVQ opportunities for our directly employed staff and supply chain, and delivered more than 80 accredited training courses.

The Laing O’Rourke National Skills Academy for Construction – developed for the Barnsley scheme – was the first in the UK. This CITB-ConstructionSkills initiative aims to raise the standard of industry training by working with local communities and schools to offer apprenticeships and work placements.

In Australia we are working in regional and remote areas to support the economic development of indigenous communities. Through our involvement with the Australian Employment Covenant, we have pledged to hire 700 Aboriginal and Torres Strait Islander employees.

Laing O’Rourke is a member of the Indigenous Procurement Council and in August we joined the Australian Indigenous Minority Supplier Council. Through this networking scheme, we have developed a relationship with Outsource Personnel, who specialise in recruiting site-based indigenous staff. Our preferred supplier for office consumables, Corporate Express, is also a member of the AMISC.

Community engagement As good neighbours, we encourage our people to support the needs of those they work alongside. This year, we have seen significant increase in community activities with £278,851 raised for charitable causes by employees (up from £158,696) and 1,507 volunteer days (up from 677). In addition, £26,365-worth of materials was donated.

Corporate charitiesAs passionate believers in the transformational power of learning, we have selected Cancer Research UK and the Integrated Education Fund in Northern Ireland as our designated corporate charities. In 2011/12 we donated £299,546.

Considerate constructionAs a benchmark of good practice, we actively participate in the UK’s Considerate Contractors Scheme (CCS). This year we won 22 CCS awards and achieved an average score of 35/40, representing standards that are consistently ‘high level above compliance’.

Apprentices

Providing young people with viable careers: our projects at Manchester Town Hall and Barnsley Building Schools for the Future will support over 120 apprenticeships.

Indigenous Opportunities

Laing O’Rourke employees on the award-winning Strategic Indigenous Housing and Infrastructure Program in Australia’s Northern Territory.

Through our involvement in the Australian Employment Covenant, we have pledged to hire 700 indigenous employees across the business.


Risk management

How Laing O’Rourke manages riskThe Group’s structured approach to risk management is based on the principle of prevention through early identification. 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 Group’s shareholders and senior management are committed to the proactive protection and optimisation of its assets, which include human, financial and strategic resources, through the consistent application of an effective risk management process, augmented where necessary by insurance. Equally, the Group is also committed to the effective management of material operational risks, covering important non-financial and reputational issues arising in connection with health and safety, environmental impact and business conduct.

The Board has overall responsibility for ensuring that risk is effectively managed across the Group to guarantee full compliance with the appropriate legislative and regulatory 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 the business operations as well as a comprehensive oversight of how they are being managed. Further information on the activities of these committees, together with the Group’s core business processes and mandated policies can be found on pages 72 to 77.

The Group Executive Committee has accountability for the system implementation of risk management, and reports regularly to the Board directors on the key sources of risk, the monitoring of their status and the corresponding

mitigation plans. It is also responsible for delegating the management of the Group’s most significant risks to the respective business units, using the Group’s mandated policies and processes, providing guidance and intervention as necessary.

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 specific 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 the established control procedures.

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 financial loss or organisational damage.

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.

1. Identifying risksA globally mandated methodology is consistently applied to identify material risks at a Group, business unit, functional and project-delivery level. The risk mitigation process is an integral component of the executive management of the Group and is applied continuously through the forums that constitute the Group’s governance framework, and is updated at least monthly as part of Board and Group Executive Committee meetings.

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.

3. Determining management actions requiredExisting and additional risk controls will be agreed and responsibilities assigned to appropriate ‘risk-owning’ management forums for implementation.

4. Reporting and monitoringThis 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 the findings to the Board and Group Executive Committee at least every four months.

The process

1.Identifying risks

2.Analysing risks and controls to manage identified risks

4.Reportingand monitoring

3.Determining managementactions required

Laing O’Rourke’s assessment of

strategic, financial, operational and

project risks

Group performance

Exchange rates

Description:The increasing globalisation of our business activities involves foreign currency denominated transactions, and the translation of the net assets and income statements of overseas subsidiaries and equity-based project investments. The Group is exposed to a number of foreign currencies including the Canadian dollar, Australian dollar and the United Arab Emirates Dirham.

Impact:This potentially exposes the Group to significant exchange rate volatility in respect to foreign currency translation exposures and may have an adverse impact on the Group’s financial performance and condition.

Mitigation:To protect itself against adverse exchange rate fluctuations, it is Group policy to enter into forward currency contracts and borrow or deposit funds in foreign currencies to provide a short-term hedge against significant transactional foreign currency exposure. The Group does not hedge the translation effect of exchange rate movements on foreign subsidiary income statements as these are deemed as long-term investments.

Investment

Description:The Group’s expanding capabilities and strategic diversification require investment in fixed capital assets such as Explore Industrial Park. Certain types of work, particularly PFI-funded infrastructure projects, require us to bear a proportion (typically 50 per cent but occasionally reaching 100 per cent) of the financial risk.

Impact:Investment risk has been shown to be particularly significant and potentially damaging in very large, one-off investment projects. This is because such projects are especially prone to issues such as cost overruns and schedule delays that mean the costs of servicing debt can become larger than the revenues available to pay interest on and reduce the debt.

Mitigation:The Investment Committee and leadership of the finance function constantly monitor investment needs against strategic targets, and review capital investment programmes to ensure funding requirements can be met from approved sources within agreed funding limits.

Interest rates

Description:The Group is exposed to interest rate risks in relation to some of our debt-based funding of operations and corporate developments. Interest rate risk potentially affects the value of bonds, and is therefore a major risk to bondholders. As interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realise greater yields by switching to other investments that reflect the higher interest rate.

Impact:The Group’s failure to anticipate interest rate issues may reduce its ability to secure future funding from approved banking providers, impairing the Group’s attractiveness from a credit provision perspective. This could have a material adverse effect on the Group’s financial viability.

Mitigation:The Group uses a number of financial instruments, including interest rate swaps, to manage our exposure to fluctuating interest rates and mitigate impact on our equity. Bank bonding relationships are constantly monitored and investor communications are undertaken periodically to provide greater awareness of forecast movements in interest rates.


Financial and strategic risks

Laing O’Rourke is exposed to a number of financial and strategic risks. Their mitigation is undertaken by the Group’s finance, strategy and governance teams, working to principles set and overseen by the Group Executive Committee.

Risk management continued

Funding liquidity

Description:The Group finances its operations primarily using retained profits, working capital and bank funding. This exposes the Group to liquidity risk in respect to its ability to fund operations and growth. This stems from the lack of marketability of an investment due to concerns regarding macro-economic conditions at a global or country level, or arising from lenders’ concerns regarding the cash-generative nature of the company.

Impact:The Group is exposed to the risk of lack of investment funding to either realise a project opportunity, fulfil an acquisition target or meet its ongoing financial needs. Such a lack could adversely impact revenues, earnings, cash flows and overall financial position.

Mitigation:With an experienced in-house treasury management team, the Group takes a prudent approach to liquidity and

maintains sufficient cash reserves and available bank facilities to meet liabilities and financing needs as they fall due. Procedures are in place to monitor and forecast cash usage and other highly liquid current assets, together with committed credit facilities, to ensure adequacy.

We had £161 million (2011: £132 million) of undrawn committed borrowing facilities at the year-end.

Credit

Description:The higher the perceived credit risk of the Group, the higher the potential rate of interest that investors will demand for lending capital. The credit risk profile of the Group is calculated based on its overall ability to repay. This calculation includes the Group’s collateral assets, revenue-generating ability and taxing authority.

Impact:The Group’s credit exposure is primarily attributable to its loan assets, trade and other receivables totalling £494.7 million

(2011: £631.9 million). The risk of payment defaults by clients could adversely impact the Group’s overall income and cashflow position, impacting its coverage ratio and hence its ongoing ability to service its debt obligations with investors, and attract new funding as required.

Mitigation:The Group has no significant concentrations of credit risk and has policies in place to ensure that sales are only made to clients with an appropriate credit history or payment profile. The

age profile of receivables is continually monitored. Trade debt one year past its due date but not impaired amounts to £5.4 million (2011: £3.9 million).

We hold cash reserves and other forms of liquid assets with high-credit-quality financial institutions. Our finance function is not a profit centre and does not enter into speculative proprietary transactions. Details of the Group’s financial instruments can be found in note 32 to the financial statements.

Inflation

Description:The Group is exposed to inflation rate fluctuations in the countries where it operates. Cost inflation in the construction sector is influenced by higher commodity pricing which becomes apparent through an increase in the price of products and services procured through the supply chain.

Impact:Exposure to potential inflation increases can cause higher operational costs in relation to goods and services procured in these jurisdictions to support project delivery. These could have a negative impact on profit margins and financial performance.

Mitigation:We manage costs very rigorously to ensure the optimisation of our assets. We also employ a number of initiatives, including a proprietary inflation-modelling system, to ensure we have accurate forecasting of supply chain costs based on potential inflation scenarios. This assures greater revenue and profit certainty at the project delivery level.


Summary of principal risks

The Group’s principal risks are identified over the following pages, together with a description of how we mitigate these.

Group performance

Health and safety

Description:Safety is Laing O’Rourke’s number-one priority and the Group has set out a long-term ambition to eliminate all accidents from the organisation by 2020. Achieving this will not only remove adverse consequences for affected individuals but will reduce project delays, help in attracting and retaining the very best talent, and act as an advantage in winning work.

Impact:Failure to maintain the highest levels of safety management can result in harm to the Group’s employees, contractors,

communities adjacent to our project sites and factory operations, as well as damage to the environment. Occupational health risks to employees and contractors are numerous and can lead to long-term health issues, fines and penalties, an impact on Group reputation and an inability to attract skilled people.

Mitigation:Mitigation of this risk occurs at every level of the Group’s governance framework. Our documented Safety Management System, containing organisational details of compulsory procedural, behavioural and training requirements, is continually

reviewed and updated when required. During the year in review the Group globalised its Mission Zero safety campaign – an integrated programme to eradicate all accidents from our business by 2020.

A key challenge for the future is to ensure that the required behaviours are consistently applied at all levels of the Group globally and under all circumstances. Ultimately, it is the responsibility of every employee, partner and subcontractor to ensure that their health and safety remains a priority.

Political, economic and regulatory

Description:The Group’s businesses are directly impacted by government policy or regulatory developments in any of the countries and jurisdictions in which it operates, especially with regard to public infrastructure investment programmes. Therefore changes in policy, particularly regarding economic stimulus and funding regimes, can impact the Group’s pipeline, revenue, profitability and cash-flow position. Likewise, its licence to operate in these jurisdictions is dependent on compliance with regulations through the global application of a code of acceptable business ethics.

Impact:While the construction industry by its nature lags the economic cycle, there can be a high degree of variability between different publicly funded markets. Potential impacts include termination of existing contracts, deterioration in government relationships, corresponding reduction in contract awards, restriction of operations, imposition of special taxes or requirements for local ownership. Political and economic instability can also result in restrictions on available funding as lenders withdraw from the construction sector.

Mitigation:The Group seeks to maintain a diverse portfolio of projects for both private and public clients in a number of sectors and geographic markets. The Strategy

Committee monitors exposure to single sources of public-sector work and advises the Group Executive Committee of risks and mitigating actions as required.

With governments worldwide reducing budget deficits by cutting spending and raising taxes, particularly in the Group’s core UK and Australian markets, the operating environment will remain challenging for a period of at least 24 months. The Group will continue to monitor regulatory and political developments on a ongoing basis. In the past 12 months the Group has increased public affairs activity to develop more sustainable relationships with key government departments and related regulatory authorities.


Talent and capability

Description:The Group is subject to significant competition from national and multinational firms with substantial resources. Therefore the Group’s ability to compete is based on its ability to recruit, develop and retain the appropriate skills. The locations of the Group’s operations can also be in remote regions or in countries where it is increasingly difficult to recruit suitably qualified people.

Impact:The Group’s strategic plans call for new capabilities to be developed or existing ones to be extended into new markets by having the very best talent in place. Failure to attract, develop and retain the right skills could significantly impair

the company’s ability to meet current commitments and grow the business as planned.

Mitigation:As a primary component of Laing O’Rourke’s strategy, a comprehensive human capital agenda has been devised to support the above objectives, focused on attraction, retention and development of the industry’s most talented people, and the effective deployment of this resource across the Group. It is the responsibility of the Group Executive Committee, primarily through its global human capital and engineering agendas, to ensure an appropriate suite of reward and development structures is in place for all employee groups. Innovative

partnerships with universities and a range of benefit schemes help position Laing O’Rourke as a progressive employer of choice.

The Group also seeks to promote employee mobility across business units and countries and works in partnership with the industry, particularly design and architectural consultancies and practices, to build understanding of our engineering and delivery methodologies. The Group also seeks constructive dialogue with trade unions and other employee representatives through a progressive approach to industrial relations.

Project selection and delivery

Description:Selecting and securing projects with an attractive risk and reward profile is a key determinant of the Group’s financial performance. The Group’s ability to compete for contracts depends to a large extent on its intellectual property rights and technical know-how, together with the practical applications and effectiveness of engineering innovations like DfMA and its ability to offer corresponding improvements in programme performance, at a competitive price, to outstanding levels of quality, safety and sustainability.

Impact:The costs of tendering for major projects are significant, with no guarantee of success, and difficulties encountered during the delivery phase of any project can result in irrecoverable

additional costs. Failure to meet delivery timetables and budgets may affect operational performance, impact cash flows, increase capital costs and reduce profitability, as well as harming the Group’s reputation and financial condition.

Mitigation:The Group’s approach to project selection is guided by a detailed set of protocols known as Core Process and an associated project management approach – Enabling Process. These allow accountable decision makers, at every level of the governance framework (depending on the size and complexity of the project under consideration) to understand the critical sign-off procedures in bidding for a project and the formal requirements that must be observed to secure optimum performance in the delivery phases.

The mandatory application of Core and Enabling Processes and the DfMA methodology will result in greater surety of delivery leading to improved operating margin. To mitigate against cost, both in the bidding and delivery phases, Building Information Modelling (BIM) and digital prototyping technologies are used to achieve time and cost-certainty through a full visualisation of the build sequence.

Regular project selection and review meetings are held to check progress against KPIs, and any deviations from the programme are acted upon quickly and appropriately. The Group’s multi-market presence, investment in research and development of approach, practical applications of engineering innovations and cost reduction programmes also contribute to efficiency improvements in this respect.

Operational risks

Laing O’Rourke has robust and proven systems in place covering tendering, project delivery, business unit and support services activities. Our overall aim is to proactively mitigate key risks to minimise adverse effects and realise growth opportunities.


Group performance

Joint ventures

Description:Some of the Group’s activities are undertaken through joint venture partnership arrangements with third-party organisations to better facilitate the funding and delivery of complex projects on an international basis. Risks are inherent in any jointly controlled entity where no single party has majority control.

Impact:Failure to implement consistent standards and processes in joint ventures can lead to higher costs,

lower productivity, health, safety and environmental failures, all of which can have a negative bearing on the Group’s operational performance, financial condition and reputation.

Mitigation:The Group seeks to work independently wherever possible and only participate in joint ventures to accelerate its strategic objectives or meet expected project benefits. Joint venture partnerships are only established in which the Group’s interests are complementary to those of its partners.

Laing O’Rourke undertakes a thorough evaluation process to determine the financial, operational and reputational integrity of the joint venture partners before committing to any formal arrangement. Once established, it implements robust governance procedures to ensure full compliance with all contractual terms and practices within the joint venture.

Supply chain

Description:The Group is dependent upon the delivery of materials by suppliers, and the provision of engineering and construction services in a timely and satisfactory manner, and in full compliance with contractual terms and conditions.

Impact:The use of specialist subcontractors and suppliers does expose the Group to the possibility of non-delivery, whether through financial constraints or other causes, severely impairing their ability to meet Group obligations. In addition, they can cause disruption to operations due to delays, or increased costs may arise if key contractors are not available to meet delivery needs or fall behind the programme. The highly specialist nature of some providers’ materials and services means that in some instances alternative sources are not readily

available. Clearly this would impact the Group’s ability to meet its contractual commitments to clients.

Mitigation:A significant proportion of projects is self-delivered by Group companies, reducing the reliance on third-party service providers. Occasionally specialist engineering and construction contractors are used on a number of the Group’s projects to meet specific delivery needs. This risk is mitigated through a robust and fully audit-trailed selection process, which includes fact-based analysis of the financial and operational viability of preferred supply chain partners. The list of preferred suppliers is also regularly reviewed to ensure all third-party materials and services providers are complying fully with Group procurement and operating standards, applicable laws and industry regulations.

Accountability also rests with the individual project leaders in cooperation with the commercial and finance functions. Critical subcontractors and suppliers are assessed for financial robustness before being contractually engaged. Full contingency planning is also undertaken.

The Group also ensures that it adheres to contractually agreed payment terms to avoid heightening this risk. The Group suffered very few supplier failures in the year under review despite the difficult trading conditions in the construction industry. However, bankruptcies are more likely the longer difficult trading conditions persist. Therefore, as the Group executes its diversification strategy and introduces new suppliers in this respect, supply chain risk will need careful management in the future.


Laing O’Rourke | Annual Review 2012 5352 Laing O’Rourke | Annual Review 2012

Brand reputation

Description:Protection and enhancement of the Group’s brand reputation with clients and stakeholders directly affects its ability to tender for projects in specific sectors and markets to secure a future pipeline of prestigious projects and client relationships. It 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 code of business ethics and established systems and processes.

Impact:Delivery delays, poor asset performance post-handover, industrial accidents or stakeholder dissatisfaction, failure to prevent acts of fraud, bribery, corruption

or anti-competitive behaviour can all adversely impact corporate reputation.

Mitigation:Mitigation occurs at every level of the governance framework in accordance with our published Global Code of Conduct. The Group’s internal control environment is designed to promote policy adherence and prevent unlawful activities. Continuous awareness programmes ensure high levels of understanding of the Group’s expectations and individual’s obligations.

In addition, we use a range of strategic advisers to protect and enhance our brand and reputation in the eyes of key business influencers and opinion formers. The Group also implements a

defined sustainability agenda – further information can be found on pages 31 to 45.

At an operational level it employs a rigorous branding methodology, and has mandated a consistent set of marketing and business development guidelines in the tendering stages to ensure consistency of presentation of brand and visual identity attributes.

The LOR Way (Core and Enabling Processes) has been mandated across all global project sites to ensure a standardised approach to project delivery based on project controls and a continuous improvement loop, helping to reduce the risks associated with poor or non-delivery.

Security and business integrity

Description:Laing O’Rourke is committed to protecting human and financial capital, and safeguarding the communities in which we operate.

Impact:Failure to prevent acts of fraud, bribery, corruption and anti-competitive behaviour have potential impacts which

include financial loss, prosecution, fines, penalties and reputational damage.

Mitigation:The Group has very clear codes of business conduct underpinned by prescriptive policies detailing the manner in which it conducts business and expects employees to act in accordance with the Group’s vision and principles. Communications awareness

programmes ensure continual visibility and understanding across the Group.

Implementing robust security and fraud control systems safeguards the business against activities that would put it at risk. We specifically concentrate on preventing abuse of intellectual property, confidential company data and threats to the physical security of our personnel and assets.

Group performance

Laing O’Rourke | Annual Review 2012 5554 Laing O’Rourke | Annual Review 2012

market entry last year, the Group believes it can further build on its position by targeting growth in core construction and infrastructure sectors, using our balance sheet to support bids on a number of key projects in 2012/13 and beyond.

Middle EastIn the Middle East, the United Arab Emirates market remained subdued, although we are optimistic that our long-term presence in the region, coupled with the goodwill that has been generated by remaining there, despite the severity of the downturn, will stand us in good stead when the upturn happens. Growth opportunities are emerging in Qatar, as the government continues to convert the wealth generated from the world’s third largest reserve of natural

gas into infrastructure development to stimulate broader trade links with the region and diversify its economic growth. The award of the FIFA World Cup tournament in 2022 is also presenting a strong pipeline of contract opportunities in the delivery of major stadia and infrastructure, the attractiveness of which will depend on the procurement routes adopted.

Strategic prioritiesThe Group is one of the leading engineering and construction solution providers in its chosen sectors. Our aim is to leverage the scale and efficiencies of our vertically integrated delivery businesses and our competitive advantage in 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. We will complement this approach by building leading positions in selective growth-oriented sectors and territories with the right strategic and cultural fit.

We will increasingly pursue multidisciplinary projects which encompass the full range of our service offering from programme management, civil and structural engineering, manufacturing and construction services, mechanical and electrical engineering and operational maintenance. These increasingly large and complex infrastructure-based projects offer greater 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 the Group’s focus will remain in Canada and selected regions in the Middle East, where the pipeline of opportunities, preferred procurement routes and working practices all play to our core strengths as an integrated construction provider.

Financial performanceThe Hub sustained a strong managed revenue performance of £2.8 billion (including share of joint ventures and associates), up £65 million on the previous year (2010/11: £2.7 billion), with pre-exceptional earnings before interest and taxes of £82.8 million (2010/11: £67.1 million). The managed revenue and profit outcomes were made up of good performances in our core construction and social infrastructure businesses which benefited from our integrated delivery model, backed by access to the UK’s premier offsite manufacturing and modular assembly capabilities. Margin performance declined slightly as previous higher-margin negotiated projects have reverted to market levels driven by the increasingly fierce price competition strategies being pursued by several providers. The average size of projects has also reduced, which clearly reduces margin potential relative to the larger programmes of work previously available.


Managed revenue

£2.8bnOrder book

£5.5bnGross margin

12.7%

Hub performance

MarketplaceUKAs previously forecast, there was an overall contraction in core UK construction and infrastructure markets during the year under review, with lower volumes of available work caused by the dampened expectations of the UK Government’s comprehensive spending review and the continuing fiscal pressures in the Eurozone adversely affecting confidence levels in the UK. This caused inevitable reductions in previously buoyant sectors like health and education, where margin pressure increased as competitors chased fewer opportunities. Despite these macro-economic issues, there was ongoing investment in well-established schemes, including Crossrail, and continuing optimism surrounding the nuclear new-build programme, both of which remain attractive to the Group. The UK chancellor’s autumn statement did bring some positive signs that public sector capital investment programmes will recommence, with the commitment to High Speed 2 the most notable expression of this intent. The £2 billion Private Finance Initiative-backed schools programme, albeit in a different PFI format to previous models, and the previously announced National Infrastructure Plan, with over 500 potential projects with an estimated value in excess of £250 billion over five years, represent a significant pipeline of opportunity for the Group over the medium term.

In this type of market environment, the Group’s operational diversity is a significant strength, allowing us to better optimise our assets through mobilisation into higher-performing markets. At the same time this provides revenue protection from an over-concentration on any one market or sector.

The subdued private-sector investment environment carried over from the previous year, particularly in the UK, although the commercial office and mixed-use sector did start to show some signs of recovery within the M25 region of the South East of England, with a number of prestigious schemes coming to market in the period. This plays to the Group’s unparalleled strength in building and structural engineering capabilities. It is still too early to predict with any certainty if these early signs of recovery will evolve into a more sustained period of growth.

InternationalCanadaIn Canada, the Alternative Financing Procurement (AFP) market, which shares many characteristics with the Public Private Partnership approach in the UK, continued to be an important driver of growth, particularly in Ontario and Quebec, where both state governments have announced comprehensive plans to invest heavily in long-term programmes for social infrastructure, energy and rail in particular. Following our successful

1 2 3

Senior management

1. George RoseChairman, Europe Hub

2. Roger Robinson Chief Executive Officer, Europe Hub

3. Paul Collins Finance Director, Europe Hub

Managed revenue(%)

1 Europe Hub 65%2 Australia Hub 35%

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Near-term priorities

• Leverage the benefits of DfMA and our integrated approach to delivery

• Selectively extend our international reach into markets with the right strategic fit

• Enhance engineering capabilities to meet increasingly complex client demands

• Reduce controllable costs to industry-leading levels

• Drive our Mission Zero safety strategy relentlessly

“ We have increased the quality and diversity of our project portfolio by focusing our attention on opportunities where we can bring our engineering, manufacturing and direct delivery skills to bear and create sustainable returns.”Roger RobinsonChief Executive Officer, Europe Hub

Europe Hub:Abu Dhabi, Canada, Dubai, Saudi Arabia and the United Kingdom

Hub performance


Hub performance

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5

8

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Despite these market factors, the Hub posted a strong operational performance which helped to offset the changing market dynamics. This was, in part, as a direct result of the collective benefits of a number of contracts in the final stages of delivery or completing during the period, with favourable out-turns triggering bonus incentives in some cases, the most notable being the successful programme management of the London 2012 Olympic and Paralympic stadia and park infrastructure.

The deployment of our mandated DfMA optimisation strategy has also helped us maintain operating margin at the project level which would have otherwise come under pressure from supply-chain impacts. This has allowed us to avoid bidding for lower-margin work at a time when competition in the market remains intense. We further tightened our selectivity criteria, basing our UK activities progressively around our DfMA methodology and integrated delivery model.

The performance was also helped by a continued focus on controllable cost reduction as parts of the construction business rescaled its support activities in line with the prevailing market demand, helping to reduce overhead strain. Our infrastructure business had a solid performance overall, although a small number of projects did impact negatively on profitability.

The Hub’s year-end order book was £5.5 billion, with £2.9 billion of new work secured during the period, providing good visibility of future earnings. We have stepped up our efforts to rebuild the future pipeline beyond 2013, achieving a number of prestigious contract wins. In addition, at the year-end we had a pipeline of ‘in-bid’ opportunities worth approximately £3 billion.

Operational performanceSafety remains the Group’s number-one priority. During the year the Hub maintained its industry-leading safety performance, posting an Accident Frequency Rate (AFR) of 0.12. This equates to a business that is consistently working more than one million working hours between reportable accidents, which ranks the Group alongside the very best in our industry.

This excellent safety performance is one of many benefits we derive directly from

Our approach to business development and work-winning has 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 ‘permit to bid’ governance procedures in the tendering stages is proving highly effective in securing profitable work as the continuing strength in our order book has clearly demonstrated. This strategy was accelerated by the integration of our in-house cost planning activities to maximise the return on the investment we are making in state-of-the-art Building Information Modelling technologies.

We continue to be committed to the human capital agenda and sustained investment levels in the development of our workforce. 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 exists across the Group. We also continued to support the Australia Hub by recruiting and exporting sector expertise to seize the significant 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.

BuildingIn our core construction business we continued to deliver essential social infrastructure to transform the health and education services footprint for many communities across the UK. This included the commencement and completion of major construction phases of complex hospital, healthcare and medical research facilities across the UK, including the future-proofed Forth Valley Royal Hospital in Scotland, the main hub and ward buildings at the North Staffordshire Hospital and the final phase of the Tunbridge Wells Hospital in Kent.

We made further progress in generating profitable revenues from framework agreements. Over the year we completed

our integrated business model. By controlling delivery of the major work packages on a project through the use of in-house resources, our construction leaders directly influence 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 number of new initiatives were launched to support our Mission Zero objective, to eradicate all lost-time incidents from our business by 2020. A number of our clients are also seeing the direct benefit of our approach, and we are beginning to see tangible examples of this behaviourally based methodology being more widely adopted across the industry.

Our core UK-based engineering and construction businesses all performed

significant milestones on the Designed for Life: Building for Wales healthcare framework, a scheme which offers the Group good revenue visibility over its lifetime. Successes included handover of the emergency care unit at Prince Charles Hospital in Merthyr Tydfil and additional contracts secured at Cardiff Royal Infirmary. We also secured major works packages at Bristol Royal Infirmary and the extension to the Bristol Royal Hospital for Children, working collaboratively with the commissioning health authority to support approval of the funding business case by the UK Department of Health.

Similarly, we continued to deliver state-of-the-art school facilities for local education authorities under existing Building Schools for the Future (BSF) frameworks across both the north and south of England, in Salford, Barnsley, Newham and Barking and Dagenham. A particularly noteworthy performance was Dagenham Park Church of England School which set new milestones in quality and energy efficiency against a delivery programme that achieved a 50 per cent time reduction against the original schedule.

in line with expectations, generating strong cash flows, and continuing to deliver to the bottom line despite the ongoing market difficulties. The 2011/12 reporting period has been a year of steady improvement at Explore Industrial Park, with a concerted focus on the productivity, quality and safety of our operations. We doubled production volumes with a corresponding 40 per cent improvement in labour efficiency, as clients increasingly recognise the incremental value offered by our Design for Manufacture and Assembly proposition. We still have a long way to go to achieve wide scale adoption, but the direction of travel is positive.

We have also added to our capabilities in complex geotechnical solutions to support project delivery activities and provide competitive advantage in the bidding of new opportunities.

We further developed our market-leading sustainable schools proposition based on the UK Department for Education’s challenge to create education infrastructure faster, better and for considerably less than the previous scheme. The solution will leverage the Group’s unique in-house manufacturing capability to deliver school facilities that are predominantly constructed off site for rapid 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 efficient and we are now actively marketing this value proposition with local and central government departments, and are confident that it will lead to a wider recognition of the flexible application of DfMA techniques to a range of public-sector construction requirements. For these reasons we are confident in our ability to secure work on large parts of the £2 billion PFI priority schools programme.

We benefited from the first fragile signs of recovery in the UK commercial property sector, particularly in central London during the year, with the award of the

Hub performance continued

1. Howard Shiplee, CBE Programme Management Leader

3. Nick DownBusiness Unit Leader, Middle East

5. Mark RichardsonHead of Human Capital Management

7. Mike LewisBusiness Unit Leader, Crown House Technologies

9. Philip WainwrightBusiness Unit Leader, Select Plant Hire

2. Paul Lynchehaun Health, Safety and Environment Leader

4. Andrew JacksonBusiness Unit Leader, Canada

6. Andy CromptonBusiness Unit Leader, Infrastructure

8. Callum TuckettBusiness Unit Leader, Construction

10. Paul GrammerCommercial Leader

Trinity, Leeds, UK

This £350 million Land Securities development in the heart of Leeds was the first major retail project to get the green light after the start of the recession. With a build period of three years, when complete it will be home to more than 120 retailers and restaurants.

10


Hub performance


prestigious contract to build the iconic 122 Leadenhall Street in the heart of the City of London for clients British Land and Oxford Properties. This followed a hard-fought contest, in which our appointment was, to a large extent, based on the innovative use of Building Information Modelling and the extensive adoption of preassembly techniques to significantly enhance programme efficiency through a material reduction in the delivery schedule and waste volumes, without any compromise on quality or safety.

During the year we also commenced the transformation of Manchester’s iconic Grade II-listed Central Library and Town Hall, a complex combination of refurbishment, restoration and significant contemporary enhancements to a 1930s landmark. Working closely with English Heritage, the contract is already delivering economic benefits to the surrounding communities, including the creation of 66 project-initiated apprenticeships and a procurement model that directly boosts local businesses.

InfrastructureThrough our infrastructure business we continued to take advantage of the investment opportunities in the key sectors of power, rail and utility networks in particular. We underlined our expertise

We were recently appointed preferred bidder with our partner Bouygues TP for the main civil engineering works package at Hinkley Point C.

The decision by Horizon (a joint venture between E.ON UK and RWE Npower) to cancel its investment on the Wylfa B Project in Wales and withdraw from future participation was disappointing news. However, our strategic partnership with Toshiba Westinghouse and Shaw is supporting the UK Government to explore alternative funding sources to help secure the much-needed energy security required by the UK over the longer term.

for working in live air environments by meeting and, in some cases, exceeding significant delivery milestones at Heathrow Terminal 2A, despite the challenge of keeping the adjacent air infrastructure operational throughout the project.

In rail we continue to be engaged on three of the UK’s largest commuter rail projects for Crossrail, Manchester Metrolink and Edinburgh Trams. We are pursuing further opportunities on these schemes and with Network Rail, where we have established strong working relationships with the client organisations. Crossrail provided our largest contract award to date on this scheme, when we were awarded the construction of Liverpool Street Station and Tottenham Court Road with intensive construction work planned to commence later in 2012.

A significant completion in the period was Cannon Place, which won the prestigious Institution of Civil Engineers 2012 London Building Award. Engineering challenges on this complex project included constructing over and around two important live railway stations, above a London Underground tunnel structure, on a site of significant archaeological interest.

The UK water and wastewater market is also strategically important to Laing O’Rourke’s plans and we are

Programme managementAs a leading influence in the CLM consortium, our programme management team successfully completed delivery on the London 2012 Olympic and Paralympic Park, producing another exceptional operational performance with commissioning and handover completed to schedule and on budget. The exemplary record of achievements over the course of this project has provided a global showcase of the British construction industry. We have been leveraging the experience and reputation gained on this scheme by actively marketing our programme management services in new markets, including the

currently designing and delivering complex sewage treatment infrastructure at Beckton and Crossness for Thames Water. Both projects received Royal Society for the Prevention of Accidents (RoSPA) Gold awards in 2012, and were also commended by the Considerate Contractors Scheme, and the client, Thames Water, for the exemplary health and safety performance and community liaison initiatives employed.

Regulated markets are less cyclical and the margin potential less volatile and we have made senior leadership appointments to access these markets. We are formalising our delivery business capability in utility networks, like power distribution, where we already possess significant expertise backed up by the technology platforms, specialist plant and equipment needed to efficiently deploy and manage resources on the multidisciplinary programmes of work typical of these markets.

Similarly we launched our targeted offer in facilities management during the year and gained our first contract with Barking and Dagenham Schools, utilising the expertise gained in advanced delivery techniques, visualisations and commercial and technical data gained in the design and construction phases of a project to provide the client with a whole-of-life offer.

As the UK’s port capacity continues to increase, Laing O’Rourke’s engineering skills are leading the construction of Europe’s newest and largest deep-water development at London Gateway Port.

The Group’s strategic growth plans are predicated on establishing a significant delivery presence in the buoyant global energy sector; therefore the UK’s investment plans to replace ageing power generation infrastructure with a fleet of new nuclear plants provides high earnings potential. We are one of only a few UK contractors with the specialist direct delivery capabilities and reputation for quality needed to perform to the exacting standards of the nuclear generation, processing and storage industry.

Pan Am Games in Ontario, Canada. The Olympic Delivery Authority’s Director of Construction, Howard Shiplee, joined the Group during the year to lead our drive in professional management services.

Specialist servicesOur Crown House Technologies business added significant offsite manufacturing capacity during the year, opening a new facility at Oldbury in the Midlands. Since coming on-stream it has had early involvement in the preconstruction phase to deliver the mechanical and electrical infrastructure at Heathrow’s Terminal 2A. Over 300 complex riser modules, covering 31,000 cubic metres of building services,

Beckton and Crossness Sewage Treatment Works, UK

Using an innovative DfMA solution for the aeration and final settlement tanks, Laing O’Rourke is leading the project to upgrade existing facilities and build new capacity at one of Europe’s largest sewage treatment works on opposing banks of the River Thames at Beckton and Crossness. The project is on track to hand over to the client by the end of 2012 – under budget and an impressive three months ahead of Thames Water’s deadline.

Bristol Royal Infirmary, UK

Laing O’Rourke signed a contract in 2011 to redevelop the Bristol Royal Infirmary and construct the extension to the Bristol Royal Hospital for Children, as part of the ‘Building a Better Bristol’ programme to offer the highest standard of clinical care in the region.


Hub performance


Laing O’Rourke is constructing The Francis Crick Institute, and is scheduled to complete the project in 2015. Work on the shell started in June 2011 and will take two years to complete. In line with our commitment to considerate construction, representatives from local community groups are regularly consulted on the build programme to ensure any issues are quickly resolved.


have been designed and manufactured, and are currently being installed by a combined Crown House Technologies and Select Plant Hire team, creating the main distribution system within the terminal. They also consolidated their market-leading position in business data solutions, handing over a 30,000 square metre tier-four rated data centre, just 20 months after the project commenced, to one of the world’s leading financial institutions.

Our Select Plant Hire business also had a successful year providing a range of innovative heavy plant and lifting solutions, including the tower crane fleet and expertise that is making possible the construction of Europe’s tallest structure, the Shard, in central London.

infrastructure solutions provider and a developer, to ensure we have the right sponsorship arrangements in place for successful market entry.

The longer-term outlook for the Middle East remains positive with global demand for oil and gas continuing to increase, and we expect market activity to start to show signs during the coming year. Laing O’Rourke has an outstanding track record of delivering high-quality projects in the region, including the Atlantis Hotel, Dubai Airport and the Al Zeina residential and mixed-use development on Al Raha Beach in Abu Dhabi.

Therefore, as global confidence returns, we believe the number of planned projects expected to come to market will increase, with the most active market being Qatar, where we are focusing our attention. With our strong brand recognition and track record spanning over three decades in the region, Laing O’Rourke is well-positioned to benefit when the upturn happens. We have maintained our core construction and support services capabilities in the region, with new leadership to bring greater market knowledge to our opportunity selection process.

CanadaWe believe we can establish a strong business in Canada that over time could contribute a material proportion of the Group’s revenue and earnings volumes. The construction industry, in terms of gross domestic product (GDP), is similar in size to the UK and continues to grow, supported by strong political belief in the strength and viability of the Alternative Financing Procurement (AFP) market. For the five-year period beginning 2012, we expect the Canadian construction market to maintain year-on-year growth of over four per cent.

AFPs, particularly in Canada’s healthcare sector, play to one of the Group’s major strengths of undertaking complex financing arrangements. 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

The Middle EastOutside the UK, we are still active, but to a smaller scale than in previous years in Dubai and Abu Dhabi, and will only cautiously pursue opportunities that meet our rigorous financial requirements. Dubai remains heavily constrained by continued debt-restructuring and the negative impact of a stagnant global economy. While Dubai’s well-publicised property collapse has had wider growth implications across the region, a more measured development approach is evident in Abu Dhabi, Sharjah, Qatar and Oman. This is supported by resurgent oil and gas prices, continued investment, and increased output from the region’s LNG producers. Qatar in particular represents new growth prospects for

investors like Laing O’Rourke. As an integral part of the international consortium, CHUM Collectif, Laing O’Rourke commenced delivery of Canada’s largest Public Private Partnership (PPP) healthcare scheme and the world’s second largest hospital – the Centre Hospitalier l’Université, Montréal – as a major investor and delivery partner.

OutlookOver the past year we have accelerated Laing O’Rourke’s strategy to differentiate our offering as an integrated engineering and construction provider through the deployment of our proven Design for Manufacture and Assembly delivery approach. We will continue to progress this strategy in 2012/13 – seeking an opportunity pipeline that maximises the

Laing O’Rourke, with a major programme of development for the 2022 FIFA World Cup, including stadia and supporting infrastructure, where the Group has a significant track record of delivery.

During the year Austrak, the Group’s modular rail track work business, established a manufacturing facility in Dubai to design and manufacture concrete sleeper track panels for export to Australia to support the rapid growth in our commuter and heavy-haul rail delivery businesses there.

Elsewhere in the region there is emerging visibility of the opportunity pipeline as client conversion of projects gathers momentum. We have established a joint venture partnership with a leading Qatar

client benefits of our integrated business model and engineering expertise. In parallel, we will continue to serve our existing clients effectively through Excellence Plus performance on their projects.

The UK public sector will remain challenging, although we believe a number of infrastructure investment programmes will commence over the next 12-month period to provide the required improvements to the built environment and act as a stimulus to economic development in the lead up to the next general election. Priority sectors will remain power, transport, utilities and commercial buildings, where we have significant competitive advantage over both our domestic and international competitors.

Manchester Town Hall Complex, UK

In September 2011, Laing O’Rourke and Manchester City Council agreed a £95 million programme of works that will transform two Grade II-listed architectural icons, Manchester Town Hall and the Central Library, into a unique 21st century public services complex.

Sharjah Malls, UAE

Laing O’Rourke is constructing two shopping malls for retail group Majid Al Futtaim, which are scheduled for completion in summer 2012. Precast concrete structural members and walls were used, alongside Crown House Technologies’ preassembled modular mechanical systems.


and true multidisciplinary capabilities. Laing O’Rourke’s established presence in Australia means it is well-positioned to pursue a number of resources and transport-based infrastructure and building projects as they come to the market over the coming years.

InternationalHong KongFollowing the Group’s successful entry into the Hong Kong construction market in 2010, the competitive environment toughened during the year in review, as incumbent construction providers pursued more aggressive bidding strategies

to counter new market entrants. This was expected behaviour and the Group prioritised delivery of existing rail projects to support reputation-building in the region.

As Hong Kong seeks to build much closer trade links with the Chinese mainland, the importance of infrastructure in the next ten years is undeniable, with the share of infrastructure projects set to rise from 20 per cent to 40 per cent of the total construction market by 2017. As a series of major infrastructure projects comes to market during this period, the Group continues to believe it is well-placed to take advantage of the opportunity pipeline on a selective basis.

Strategic prioritiesLaing O’Rourke has had a presence in Australia since 2004, strengthening its position with the acquisition of the Barclay Mowlem construction business in 2006. We are now an established tier-one engineering and construction group providing design, delivery, operation and maintenance services to the building, infrastructure and resources markets. The Hub is integrating the global capabilities of the wider Group to provide a differentiated infrastructure proposition relative to the incumbent construction providers, based on quality, delivery surety and innovation.

Over time we will grow a diversified project portfolio based on taking leading positions in carefully targeted geographies and sectors, predominantly in mining and materials handling, oil and gas, rail, power and building, where demand is being driven by the growing requirements of the new-world economies adjacent to the region, and the domestic growth this is fuelling.

We are creating and fostering a culture of ‘controlled autonomy’ to attract and retain the very best people through encouraging and rewarding high achievement. We call this Excellence Plus performance. This approach occurs within a robust governance framework where clear policies and codes are set guiding financial performance, business conduct, risk management, health and safety, sustainability and people development.

Financial performanceThe year in review proved to be another challenging one for the Australia Hub as we continued to take the decisive actions necessary to close out the performance issues on legacy projects. Simultaneously we accelerated the pace of operational integration and growth in a business that we believe will become a significant revenue and profit generator over the long term. The Hub is focused predominantly on delivering solutions in the building and heavy infrastructure markets where Laing O’Rourke has quickly established a strong brand and reputation. It has the necessary critical mass to satisfy the qualification criteria of some of the world’s largest resources-related companies, and where it is backed by the international skills base, financial and operational assets of an increasingly globally focused parent organisation.

Managed revenue for the year was £1.5 billion (2010/11: £1.3 billion), with a pre-exceptional loss before interest and tax of £28.8 million (2010/11: £15.8 million loss). Although revenue levels were


Managed revenue

£1.5bnOrder book

£2.7bnGross margin

3.7%


MarketplaceAustraliaThe Australian economy continued to outperform every other major advanced economy, driven primarily by the continuing demand for the region’s natural resources wealth. The main engines of this growth were the mining sector and the accelerating capital investment of the oil and gas producers, as they continue to cater to the voracious appetite for minerals and energy of the new Asian industrial powerhouses.

Public-sector investment did scale back from the peaks seen in the last two years as state governments implemented austerity measures to balance budget deficits, however, public sector spending in real terms will continue to stay well above the historic levels of the last few decades. As a result, the social infrastructure sector, particularly in health, remained buoyant, as a number of major new hospital schemes came to market, although educational construction dropped back as the ‘Building the Education Revolution’ programme and other stimulus works of 2009/2011 concluded.

Taken together these trends reflect the Australian construction market’s compound growth range of between four and five per cent per annum, with the key drivers being investment in resources for

energy and manufacturing purposes, the transport infrastructure to support it, utilities infrastructure, particularly in the gas pipeline and water sectors, healthcare, and slow recovery in the commercial property sector.

In the transport sector, growth continued in heavy-haul rail, port and, airport capacity alongside the continuing infrastructure improvements being made to the various state passenger rail networks. In mining, China’s, India’s and, to a growing extent, Brazil’s reliance on imports of higher-quality coking coal and iron ore also continued during the year, with the corresponding increase in the capacity required to extract, process, handle and transport these record volumes. Unsurprisingly the value of construction work in these sectors increased, providing a valuable pipeline of future opportunities for the Group.

In the oil and gas markets the massive AUD$40 billion Chevron Gorgon and AUD$32 billion INPEX/Total Ichthys LNG projects commenced during the year, and the Group successfully targeted multiple opportunities with these immense gas facilities, including the relatively new specialism of advanced worker accommodation villages.

Australia’s forecast growth in key construction sectors plays to the Group’s diversification strategy, core engineering

1 2

Senior management

1. Jim Sloman Executive Chairman, Australia Hub

2. Steve Hollingshead Chief Executive Officer, Australia Hub

3. Mark WilsonFinance Director, Australia Hub

Managed revenue(%)

1 Australia Hub 35%2 Europe Hub 65%

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2

Near-term priorities

• Pursue a selective project procurement strategy to provide balance sheet resilience

• Strengthen the efficiency and integration of the core delivery businesses

• Continue investment focus on rail and infrastructure

• Attract, grow and up-skill our professional capabilities, including the direct workforce, to meet growing demands of clients

• Drive our Mission Zero safety strategy relentlessly

“ We tackled the year’s challenges head- on and have positioned the business well to take advantage of the strong growth opportunities in the next phase of Laing O’Rourke’s development.”Steve HollingsheadChief Executive Officer, Australia Hub

Australia Hub:Australia, Hong Kong, New Zealand and South East Asia

Hub performance

3



Hub performance

5

1

4

2 3

6

sustained, rising slightly over the previous year, profit performance fell short of its budgeted target. This outcome was impacted by a number of events that suppressed the headline figure. These included a series of delays in contract schedules due to industrial relations tensions and labour disputes, plus client contract interruptions caused by economic uncertainties and compliance issues associated with major infrastructure development. This was compounded by the legacy commercial terms on historical contracts procured prior to 2011, as well as costs related to the completion of the organisational and procedural restructure of the business to better support the opportunity pipeline in high-growth, high-margin sectors.

The aggregate impact of these events was a material contraction in the gross margin rate to 3.7 per cent (2010/11: 9.7 per cent). Investment costs associated with resourcing major bidding activities in growth sectors like healthcare, mining, and oil and gas also increased administrative expenses. We believe the underlying performance justifies our focus on higher-margin heavy engineering sectors, while maintaining a lean overhead at the corporate and project delivery levels. We expect to deliver an enhanced gross margin performance in the next financial period as a consequence of our focus on cost efficiency and strict discipline in project selection and the procurement approach.

The Hub’s year-end order book stood at £2.7 billion, with the bulk of the new work awarded in the year provided by mining, port-side minerals-handling and oil and gas infrastructure, including valuable repeat client business, with 85 per cent of budgeted work secured for the year ahead. Since the year-end we have been

sleeper production capacity by taking advantage of our manufacturing presence in the Middle East. The new Austrak factory in Dubai is operational and has already exported tens of thousands of precast products back to Australia to meet growing demand. The Group is also exploring opportunities to promote this business in African markets where growth in mining and natural resources infrastructure is gathering pace.

One of the key constraints in the Australian construction industry is the shortage of engineering professionals and skilled operatives. The competing dynamics of huge construction-related investment, vast geography, and a relatively small population are all serving to compound the issue. Laing O’Rourke’s progressive human capital agenda has proved highly effective in mitigating this risk to the Group’s operations. In-house mobilisation of talent, creative campaigns

awarded additional contracts, and the pipeline is set for strong growth as we take advantage of major opportunities launching over the next 12-month period. The full deployment of the Group-wide governance model for procuring and delivering work across all business units and functional disciplines, known as Core and Enabling Processes, is already having a positive impact although it will take several years for the full benefits of this system to be fully realised.

Operational performanceDuring the year we continued the reorganisation of the core business in Australia to accelerate the pace of integration of our operations, and leverage the advantages of common systems and processes at a corporate level. Having now achieved critical scale and sector-based brand recognition in these markets, the focus in the year has been on increasing the efficiency of our operations, particularly the pricing of risk during the procurement phase, as well as in the construction delivery phases on projects.

A number of changes occurred at a senior management level during the financial

to support our recruitment drive, the attractiveness of our innovative training and development programmes, our unrelenting focus on the health and safety of our workers, the broad career opportunities we can offer new hires, and the innovation our brand is synonymous with are all proving to be key differentiators in the war for talent in the region. We are increasingly being recognised as a natural career destination for world-class engineers in our major sectors.

During the year the business completed the full adoption of the Group’s behaviourally based safety programme, Mission Zero, which has proved hugely successful in reducing the rolling Accident Frequency Rate (AFR) to industry-leading levels in the Europe Hub. Health and safety remains a core business value. It is an area where we simply will not countenance compromise and have

year and beyond. The Board is confident that the senior team now assembled in the Hub is providing a stable base on which to build and capitalise on the significant growth opportunities that lie ahead. The team, under Chief Executive Officer Steve Hollingshead’s experienced leadership, has achieved a better span of control and consistency across the various geographic regions where it operates. This has been underpinned by full deployment of the necessary Core and Enabling Processes and supporting governance to provide the checks and balances in the bidding, securing and delivery of projects.

Our business is underwritten by the quality of the buildings and infrastructure we deliver. Therefore our near-term priorities are focused on globally exploiting our in-house engineering and manufacturing capabilities, in particular our Design for Manufacture and Assembly (DfMA) methodology, to create real competitive advantage through the project delivery phases, where time, cost and quality are the key determinants of repeat client business. During the year we took the decision to expand Austrak’s concrete

therefore been increasing the resources necessary to improve site safety. Our wider sustainability programme is now firmly embedded in our operations and during the year we made significant community-level progress as the first construction group in Australia to put in place an accredited Reconciliation Action Plan (RAP) to support positive engagement with Australia’s indigenous population.

InfrastructureIn rail infrastructure, new opportunities remain abundant as state budgets focus on network replacements and upgrades, particularly in New South Wales, Victoria and South Australia. In the medium to long term, continued population growth in capital cities will necessitate ongoing infrastructure investment in metro rail links, as well as in heavy-haul freight hubs, to feed the multiple demands of the surrounding Asian industrial and manufacturing markets. Rail is a sector


1. Liam CumminsRegion Director, Western Australia

4. John GreenHealth, Safety and Environment Leader

2. Mike RobinsManaging Director, Hong Kong Region Director, Queensland and Northern Territory

5. Annabel CrookesHead of Human Capital Management and Legal

3. Cathal O’RourkeRegion Director, New South Wales, Australian Capital Territory, Victoria and New Zealand

6. John O’ConnorCommercial Leader

Brisbane Airport, Australia

Laing O’Rourke has been involved in Brisbane Airport at every development stage since the construction of the original domestic terminal 30 years ago. We are delivering a new nine-storey car park at the domestic terminal, providing 5,250 additional spaces and additional airside and ground transport infrastructure to cater for exponential passenger growth.


Hub performance


where Laing O’Rourke possesses truly global expertise and has a current portfolio of active projects with strong visibility of future workload.

We are a partner in the Novorail Alliance, delivering 50 complex rail infrastructure projects valued at more than AUD$1 billion over a five-year period, as part of the capacity and reliability renewal of Sydney’s rail network. We also continued work in Adelaide on a network electrification project that will be the central feature of South Australia’s investment programme in metropolitan public transport infrastructure. Laing O’Rourke is also performing multiple packages of work on the Southern Sydney Freight Line to separate freight and commuter rail services on the complex Sydney network. This adds to an already buoyant urban and freight rail portfolio now spanning New South Wales, Queensland, Victoria, South Australia, Western Australia, and the Northern Territory as well as New Zealand and Hong Kong.

Resources-related infrastructure continued to be a major driver of Laing O’Rourke’s construction work in Australia, with all major players in the

advanced economies. With a number of schemes having received committed investment or under construction, we see huge potential in this sector. Success is dependent on the quality and strategic fit of the construction and technology alliances forged to deliver an integrated civil and process engineering solution on these complex schemes. Therefore, during the year the Group signed a number of prestigious joint venture agreements with some of the world’s leading providers of oil and gas processing technology, creating a number of market-leading consortiums. These relationships will be invaluable in securing major packages of work on the growing number of LNG schemes set to come to the market in the medium term. The most significant development in the year was the commencement of the massive Chevron Gorgon LNG Project. It is one of the world’s largest natural gas projects and the largest single infrastructure project in Australia. Global infrastructure projects of the scale of Gorgon will be an important pillar of the Australian economy for the next four decades. It will naturally require outstanding levels of technological and engineering expertise, as well as a focus on health and safety and environmental controls due to its remote location in the wilderness protected zone of Barrow Island. Laing O’Rourke was therefore delighted to secure the contract to deliver

coal, iron ore, alumina, liquefied natural gas (LNG) and coal-seam gas (CSG)sectors increasing their investment to meet record export demands, particularly from China and the surrounding regions, as Asia rapidly transforms itself into the engine of world growth. Australian mining, minerals and oil and gas producers have embarked upon new projects as well as advancements to existing infrastructure to service higher production levels – along with the necessary pit-to-port logistics to make processing and transportation more efficient. Laing O’Rourke is engaged at every step of this value chain on both sides of the Australian continent.

BHP Billiton, a repeat client of the Group, is investing in major mining-related infrastructure to construct vital rail, port and processing facilities to underpin its expansion programme. As a result we were awarded heavy-haul rail work on BHP Billiton’s Rapid Growth Project 5b/6a in the Pilbara region, renamed the Port Hedland Inner Harbour and Jimblebar projects. Meanwhile, 5,000 kilometres due east, the Infrastructure North business unit secured a project with the BHP Billiton/Mitsubishi (BMA) Alliance at their

the general utilities facility located in the south east corner of the LNG site. When complete, it will comprise the permanent waste water treatment plant combined with associated bridging, power, waste and storage facilities.

We also signed the integrated design and construction contract to deliver the Howard Springs Accommodation Village for the INPEX/Total consortium’s Ichthys LNG project off Darwin. Mobilisation of the project is already underway. This has been followed up more recently with the contract to deliver four immense cryogenic storage tanks on the same project, further showcasing our technical delivery capabilities on this strategic AUD$32 billion project. Work to construct the mainland infrastructure to support the Curtis Island LNG project for APLNG continued during the year in review. The value of the opportunities associated with the LNG projects being pursued by the Group is estimated at over AUD$2 billion alone, for activities such as construction of tanks, accommodation villages, transport and marine facilities and the provision of other civil and mechanical services.

In the coal seam gas (CSG) market, work on the Kenya Water Treatment Plant at Chinchilla in Queensland for client QGC also progressed well against programme during the year. This is the second of three water plants being delivered for QGC in Queensland, with the smaller

Broadmeadow facility near Moranbah, Queensland to deliver brownfield works and extend the life of existing coal mining operations at that site.

During the period we secured a further wharf infrastructure contract for the Port of Newcastle, to supply, manufacture, construct and install additional coal-handling facilities at what is already the world’s largest coal export terminal. This will be the fourth consecutive berth that Laing O’Rourke has delivered to adjacent sites for the region’s most prestigious consortia.

Elsewhere in the marine sector we prefabricated and installed steel berthing components to the new Berth 7 at Geraldton Port and successfully completed the Townsville Marine Precinct, with then Queensland Premier, Anna Bligh, describing the project as a major engineering feat and a credit to all who worked on it, at the official opening ceremony.

In the oil and gas sector, LNG developments in Australia and neighbouring regions share a positive long-term outlook based on rising energy demand, plus a recovery in the world’s

Windibri facility complete and the largest of the trio – Northern Water Treatment Plant – in design phase. These plants all house the processing infrastructure needed to purify water released during the client’s mining and capture of coal-seam gas. The utilities sector will also provide new sources of work, particularly in water and power, where we have a considerable track record of achievement.

Building Australia’s commercial property construction market remained weak although there were early signs of recovery during the financial year, driven by a gradual improvement in credit conditions and underlying demand. Despite this outlook, the Group has continued to deliver a number of prestigious developments, leveraging its reputation as a high-quality builder, particularly in the Sydney and Brisbane markets.

During the year work continued on the McLachlan and Ann Street development in the Brisbane central business district suburb of Fortitude Valley where Laing O’Rourke has gained city council approval to develop commercial and residential towers above retail facilities as part of the AUD$250 million mixed-use development. Laing O’Rourke, as developer and constructor, has also completely let the Ann Street tower’s 19,000 square metres of commercial space, while off-plan sales have been strong, with in excess of 70 per cent of the 234 available

Austrak

The new Austrak precast sleeper manufacturing facility in Dubai became fully operational during the year and has already exported tens of thousands of products to Australia.

Kenya Water Treatment Plant

A Laing O’Rourke and General Electric consortium is constructing a state-of-the-art water treatment plant on Queensland Gas Company’s Kenya property near Chinchilla with ultimate capacity of 100 million litres per day.


Hub performance


apartments pre-sold within months of the commencement of the scheme.

We also made operational progress on Brisbane Airport’s multi-storey car park and terminal access project, linking the terminal and AirTrain to the new parking facility, the largest of its kind in Australia.

Neighbouring this site we are also delivering Qantas Airways’ new high-technology catering facility. To underline our credentials in delivering works in busy urban environments with complex stakeholder needs, we delivered the Barangaroo Headland Park early works package, preparing the Sydney Harbour site for its eventual transformation back to its pre-1836 form, as part of a centrepiece redevelopment of the CBD foreshore.

Laing O’Rourke successfully completed its first Australian high-security data centre facility in Sydney’s western suburbs for a multinational technology provider, once again benefiting from our globally focused mechanical and electrical expertise in high-performing facilities. We completed the Brisbane Convention and Exhibition

During the year in review, Laing O’Rourke was formally awarded a major rail contract, in joint venture with Kier and Kaden, to deliver the 901 SIL East Project as part of the multi-billion dollar programme to develop a high-speed Express Rail Link between Hong Kong and mainland China to meet the demands of a growing commuter population. Laing O’Rourke is now delivering three major infrastructure packages for metro rail operator MTR Corporation, including two to support the massive redevelopment of West Kowloon and a further facility at Admiralty Station. These will prepare the Hong Kong network for connection to the Express Rail Link into mainland China. The Laing O’Rourke projects have been repeatedly recognised over the period for introducing the highest levels of safety discipline into the challenging, underground work programmes. Other sections of these new mass transit and fast rail links will be launched in due course and we will continue to selectively tender for work on these schemes.

Elsewhere in Hong Kong, the local construction market is expected to grow at five per cent per annum over the next five years on the back of major public-sector transport and infrastructure programmes, designed to encourage

Centre, which has received high praise since its official opening during the year, following recovery from significant setbacks caused by the devastating floods of the previous year. Located in a unique urban cultural and entertainment precinct in the heart of Brisbane, it is a world-class, purpose-built venue already renowned for its operational and service excellence.

Social infrastructure, particularly in healthcare, remains an area of significant strength for the business. We currently have a number of projects under consideration, building on the Group’s capabilities in social infrastructure development honed in the UK market, coupled with our unrivalled Public Private Partnership (PPP) investment expertise, working in partnership with the preeminent PPP financial advisers in Australasia. During the year we reached practical completion of stage one of a multi-purpose health facility at Winton in remote western Queensland, as well as the completion of the Nepean hospital expansion at Penrith for the New South Wales Government, delivering new wards,

economic activity and forge better links with mainland China. With our global experience in these infrastructure markets, we believe we will continue to be successful in securing a share of the future pipeline of work.

OutlookAlthough Laing O’Rourke’s Australian contracting business has underperformed financially against expectations, senior management firmly believes the concerted actions it is instituting in the Hub will build the resilience of the business. We will continue to work to increase the size and strengthen the quality of the order book, while underpinning our focus on quality of delivery for clients, supporting significant growth over the second half of this decade.

The infrastructure markets in which Laing O’Rourke is most active will remain buoyant as private-sector investment grows in line with increasing levels of confidence. The Group’s preparatory work in previous years to establish a strong presence in critical heavy infrastructure sectors like rail and resources-related infrastructure, where inward investment is forecast to peak over the coming years, provides assurances that we will be a major

operating theatres, outpatient clinics and a chapel, helping to enhance our reputation in the sector.

Our specialist Select Plant Hire business enjoyed another good year with high deployment rates on our heavy infrastructure projects, continuing to impress with its growth in the tower crane market, as we have done in other jurisdictions. This self-delivery capability, where we have direct control of deployment, supports the surety of delivery while advancing our drive to achieve increased site safety across our entire project portfolio.

Hong KongOur business in Hong Kong delivered a good operational performance, building on the high-quality joint ventures which successfully secured a number of significant rail contracts with MTR Corporation in the previous year. We expect Hong Kong to post solid returns for the Australia Hub over the medium term, and therefore remain confident that it will secure additional work in the next period to underpin its future profitability.

and active industry participant over the same period.

This diversified approach will provide the necessary resilience by shielding us from the emergence of a so-called ‘two speed’ economy, as growth in resource exports offsets declining levels of investment in the building and social infrastructure sectors and public-sector investment is curtailed. At the same time we believe our client-focused strategy will provide a real alternative to the traditional market incumbents through a focus on engineering excellence, safety, quality and delivery discipline.

Chevron Gorgon LNG Project, Australia

In 2012, Chief Executive Officer of the Australian Hub, Steve Hollingshead (left), joined with Chevron and 60 other CEOs and senior managers of companies involved in the Gorgon LNG project to agree a new national benchmark for construction safety.

Mass Transit Railway, Hong Kong

In a three-way joint venture with leading Chinese contractors Hsin Chong and Paul Y, Laing O’Rourke secured a £260 million rail infrastructure contract as part of the Express Rail Link project for MTR in Hong Kong.


Governance


4. Roger SeshanGroup Asset Optimisation and Supply Chain DirectorAge 41. Joined the Group and was appointed a director in January 2012. In this new role Roger directs the Group’s supply chain relationships, organisational and asset optimisation, legal, internal audit and security. He will ensure we have the right strategic partnerships, organisational structures and asset utilisation plans in place to unlock value for the Group.

Roger is a qualified corporate lawyer with a wealth of commercial development experience gained with Scottish Power on large-scale infrastructure transactions, project structures and regulatory frameworks, covering renewable, gas and coal-powered generation. He also has over 12 years of practice experience as a solicitor and partner of an international law firm.

Committee membership: 3,4,5,6,7,8

5. George RoseNon-Executive DirectorAge 60. Joined Laing O’Rourke in September 2011 as a Non-Executive Director. Reporting to the Chairman and Chief Executive, he is Chairman of the Europe Hub and has oversight responsibility for the Audit Committee, with the objective of enhancing confidence in the integrity of our processes and procedures relating to internal control and corporate financial reporting. This includes a continuous review of our financial internal reporting systems and the work of the external auditor. The Audit Committee also plays a key role in enterprise-wide risk management.

A chartered management accountant, George’s previous roles include finance director of Leyland DAF UK and subsequently director, Group Control of DAF NV located in The Netherlands. He was also director of financial control and accounting at British Aerospace and went on to the new position of director of finance and treasury. Following this, George was appointed to the Board of BAE Systems PLC as group finance director. He retired from BAE Systems at the end of March 2011.

Committee membership: 8,10

Other appointments: Non-Executive Director of National Grid PLC, Genel Energy PLC

6. Jim Sloman OAMExecutive Chairman, Australia HubAge 67. Joined the Group and appointed a director in 2010. He is responsible for strategy and setting corporate direction, as well as leading implementation of the construction and investment strategy across the territories of the Australia Hub. During a long and distinguished career, Jim has held a number of high-profile roles in the engineering and construction industry, including Chief Operating Officer responsible for the delivery of the Sydney Olympic and Paralympic Games in 2000.

Governance membership: 5,11

Other appointments: Independent Director of Goodman PLUS Trust, Non-Executive Director of ISIS Holdings Pty Ltd, Chairman of MI Associates Pty Ltd

7. Roger RobinsonChief Executive Officer, Europe HubAge 61. Joined the Group and appointed a director in 2009. Became Chief Executive Officer of the Europe Hub in 2010 and is a member of the Group Executive Committee. Roger has a broad executive remit covering strategic business development and operational management across the Group’s largest and most complex project delivery activities. Prior to joining Laing O’Rourke he was Executive Director for Construction Services and a main board member of Carillion PLC. He is a Fellow of the Institution of Civil Engineers, and has worked for major contractors throughout his career.


8. Steve HollingsheadChief executive Officer, Australia HubAge 56. Appointed Chief Executive Officer, Australia Hub in January 2011. He is a member of the Group and Australia Hub Executive Committees. Steve has a broad executive remit covering strategic business development and operational management across the Group’s most growth-oriented infrastructure markets. Steve joined R O’Rourke & Son Ltd in 1989 as a project manager and has held a number of senior positions in the Group over the last 20 years.

Governance membership: 3,4,5,6,8,11

1. Ray O’Rourke KBEChairman and Chief ExecutiveAge 65. Major Shareholder and founder of the Laing O’Rourke Group. He chairs the Group Executive Committee and is responsible for leading the strategic direction and operational management of the Group’s business activities. Ray founded R O’Rourke & Son in 1977, and commenced trading the following year. The business acquired the construction arm of John Laing PLC in 2001, and with the acquisition of Barclay Mowlem in 2006, created today’s extended international engineering and construction group. Ray has a passion for developing and promoting engineering and project delivery talent to meet global construction challenges, and has a keen focus on safety performance.

Committee membership: 1,2,3,4,5,6,8,9

Other appointments: Non-Executive Director of Anglo American

2. Des O’RourkeDeputy ChairmanAge 63. Shareholder and co-founding director of the Laing O’Rourke Group. Des provides Board-level support to the Chairman and Chief Executive in the operational management of the Group’s business activities. Des has a proven track record in project delivery, mobilising large teams of people onto complex projects around the world.


3. Anna StewartGroup Director of Finance and CommerceAge 48. Joined the Group with the acquisition of Laing Construction by R O’Rourke & Son in 2001. She was appointed Group Commercial Director in 2004 and Group Director of Finance and Commerce in March 2010. Anna is responsible for the Group’s finance, commercial and work-winning functions, as well as supporting business development and Group strategy formulation. She is a member of the Group Executive Committee and all of its subcommittees.

Anna was a Commercial Director at Laing Limited, where she had been employed in a number of senior commercial and general management roles since joining as a trainee in 1982.

Committee membership: 3,4,5,6,7,8,10,11

Other appointments: from 1 November 2012, Non-Executive Director of Babcock International PLC

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3 74 8

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Senior leadership team

Group

The senior team has the breadth of expertise and depth of experience necessary to maintain our strategic focus. Despite difficult market conditions, they continued to drive implementation of our strategy, while in parallel delivering a profitable performance from our core business operations.

Committee Membership:1. Group Shareholders

2. Board of Directors

3. Group Executive Committee

4. Safety and Sustainable Development Committee

5. Human Capital Committee

6. Strategy Committee

7. Investment Committee

8. Audit Committee

9. Engineering Excellence Group

10. Europe Hub Executive Committee

11. Australia Hub Executive Committee

9. Andy Friend Group Strategy Director

10. Ceri Richards Chief Officer, Investments and Corporate Finance

11. Chris Wilkinson Group Human Capital Management Director

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11


Corporate governance

Good corporate governance is integral to the Shareholders’ and Board’s objective to sustain an organisational culture based on the Group’s vision and values, placing strong emphasis on upholding the highest standards of business conduct, ethics and integrity amongst the Group’s employees, supply chain and other business partners. This approach is encompassed in our recently launched Global Code of Conduct. This code provides detailed guidance on a range of standards, including compliance with the UK Bribery Act 2010.

The UK Corporate Governance CodeAs a privately owned, internationally focused construction group, Laing O’Rourke is required to demonstrate compliance relating to a number of ways in which it is governed, covering topics laid down in the Financial Reporting Council’s UK Corporate Governance Code published in June 2010. The Board and Audit Committee have considered the terms of the Code and its potential impact on the company’s corporate governance procedures, and have applied the appropriate principles to ensure the Board

discharges these governance duties within the relevant statutory and regulatory provisions of the Code. It is the view of the Audit Committee and the Board that the company seeks to comply as appropriate with the Code throughout the year under review recognising the private ownership structure of the Group. The formation of the Audit Committee within the year is a further example of the progress being made in this regard.

Effective Board committeesThe Group operates a unitary Board structure, with one group of individuals collectively responsible for promoting the success of the company. There are significant advantages to a diverse, privately owned organisation like Laing O’Rourke in operating a unitary board structure. It allows the Board to engage more quickly and meaningfully with executive-level management at the Group and hub level in providing strategic direction and entrepreneurial leadership. To ensure the Board exercises effective oversight, and is able to provide suitable resolution where any tensions or conflicts of interest may arise, appropriate reliance is placed

on a number of subcommittees comprising an appropriate balance of executive, and more independent, Non-Executive Directors. These committees allow the unitary Board to balance the dual accountabilities of driving the business commercially and maintaining oversight of business conduct and performance.

1. Group Shareholders (‘Shareholders’)

As the Group’s majority equity Shareholder, the Chairman and Chief Executive is ultimately accountable for the workings and leadership of the company on behalf of the Shareholders. He is responsible for leading and managing the business within the authorities delegated by them.

The Group’s organisation and structure is established and overseen by the Shareholders and is based on the principles of efficiency, effectiveness and control. As the diagram (Corporate Governance Framework on page 74) illustrates, the Shareholders have delegated authority to a series of standing committees on specific matters pertinent to the successful management of the company. The Group’s Shareholders are set out on page 70.

2. Board of Directors (‘Board’)The Board is primarily responsible for ensuring that the Group’s accounts are true and fair using suitable accounting standards and judgments, ensuring internal controls are adequate and determining whether the Group is a going concern. They also have responsibility for approving the Annual Review and ensuring compliance with Cyprus company law (where the Group is registered) and other applicable legislation.

An effective Board and its associated committees are central in providing the necessary checks and balances required to operate the Group’s corporate governance regime. They consist of directors with an appropriate balance of skills, experience, independence and diverse backgrounds to enable them to discharge their duties and responsibilities effectively.

Authority for the day-to-day running of the Group is delegated to the Group Executive Committee. In addition to Ray O’Rourke the current members of the Board of Directors are Christakis Klerides, Victor Papadopoulos and Stelios Anastasiades.

3. Group Executive Committee (GEC)

The GEC is responsible to the Board and Shareholders for creating sustainable Shareholder value through the management of the constituent businesses within the governance framework. Their role includes oversight responsibility for formulation and development of the Group’s strategy, the allocation of the requisite levels of financial and human capital resources to deliver it, as well as reviewing and monitoring the performance of management, the integrity of financial information, and internal controls and risk management. The internal risk assurance function reports to the GEC on a regular basis. The members of the GEC are set out on pages 70 and 71.

The GEC has further delegated authority to a series of subcommittees which focus on particular Group-wide functions and business units.

Main responsibilities: • The Group’s overall strategy;

• Financial statements and Shareholder dividend policy;

• Material acquisitions and disposals, material contracts, major capital expenditure projects and budgets;

• Risk management and internal controls (supported by the Audit Committee);

• Succession planning and appointment implementation;

• The Group’s corporate governance and compliance arrangements;

• Corporate policies.

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Laing O’Rourke shareholders are committed to achieving corporate governance standards that meet the highest possible levels of integrity and compliance for a privately owned enterprise. We evaluate the effectiveness of our decision-making, accountability and audit processes against similarly sized publicly listed corporations. We believe this is the best way of ensuring sustainable long-term growth and the success of the Group.

In addition to Ray O’Rourke, the current members of the Board are:

1. Christakis KleridesDirectorAge 61. Joined the Board in September 2007, when Laing O’Rourke Corporation was incorporated in Cyprus. Fellow of the UK Chartered Association of Certified Accountants. As a senior partner of KPMG he specialised in banking, finance and insurance. In 1999 he was appointed by the President of the Republic of Cyprus to the post of Minister of Finance (until 2003). During his term as a Minister he introduced a major tax reform and oversaw the harmonisation with EU laws, the taxation, shipping and competition laws of Cyprus. Since 2003 he was involved in a number of directorships in quoted companies in London, Oslo and Cyprus in financial, shipping, property and IT sectors as well as participating in corporate governance committees.

2. Victor PapadopoulosDirectorAge 59. Joined the Board in September 2007, when Laing O’Rourke Corporation was incorporated in Cyprus.

An experienced senior banking executive, founding member of the London Forfaiting Company and previously Chief Executive of LFC Cyprus, spearheading the Group’s trade finance and capital market operations in the Middle East and Asia, developing a substantial network of operations involving offices in Moscow, Mumbai, Bangkok and Hong Kong. In more recent times he has served on the boards of several international financial institutions and private equity groups.

3. Stelios S AnastasiadesDirectorAge 58. Joined the Board in September 2007, when Laing O’Rourke Corporation was incorporated in Cyprus. A qualified mechanical engineer with a first-class honours BSc (Eng) from Queen Mary College, and MSc and DIC from Imperial College London. He is currently managing director of KONE Elevators Cyprus Ltd and is President of the Cyprus Lifts Association. He is also Vice President of the Nicosia Chamber of Commerce and Industry, and is a member of the Cyprus Technical Chamber and the Labour Court.

Board of Directors

Governance


Governance



A subcommittee of the GEC, this forum ensures risks and opportunities associated with safety and sustainability are given the highest priority within the Group. It also directly supports the delivery of business strategy through the management of sustainable development issues covering social, economic and environmental matters.

Main responsibilities: • Reviewing the development of policies and guidelines for managing safety and sustainable development (SD) issues;

• Reviewing the implementation and performance of the company with regard to these policies;

• Monitoring reports covering matters relating to material safety and SD risks and liabilities;

• Monitoring incidents, including key impacts and mitigation actions and, where appropriate, ensuring these are communicated Group-wide;

• Considering domestic and international regulatory and technical developments impacting safety and SD management.

5. Human Capital CommitteeThe committee is chaired by the Chairman and Chief Executive, with members drawn from the GEC and relevant business unit and functional disciplines. The main purpose of the committee is to lead the formulation and endorsement of the Group’s people and organisation agenda, and ensure total alignment with Group business strategy. The committee is also responsible for making recommendations to the Shareholders regarding remuneration levels and succession planning on an annual basis.

Main responsibilities: • Setting guidelines for the types of skills, experience and diversity of human capital necessary to achieve the Group’s strategic goals;

• Making recommendations as to the composition of senior management committees and forums, including their terms of reference, to ensure the appropriate mix of skills, experience and knowledge of the business;

• Ensuring the human resources function regularly reviews and updates talent and succession plans;

• Ensuring the necessary investment in development and education activities, including the Guns programmes and education networks to meet current and future talent requirements;

• Oversees the Group’s recruitment and resource mobilisation plans to meet operational demands in the field;

• Establishing and developing the Group’s general policy on employee remuneration;

• Determining specific remuneration packages for specialist disciplines;

• Considering legal and regulatory developments impacting human capital management.

6. Strategy CommitteeThe Strategy Committee is chaired by the Group Strategy Director, and its other members are drawn from senior management specialising in corporate development and market appraisal. The main purpose of the committee is to formulate the Group’s global corporate strategy, and to set objectives and priorities to deliver it. In addition, it recommends the prioritisation of projects and business development opportunities, and approves funding for new ventures for ultimate sanction by the GEC.

Main responsibilities: • Develop, review, assess and advise on the company’s medium and long-term business strategy, having regard to the interests of its Shareholders, customers, employees and other stakeholders before its submission for approval to the Board;

• Monitor the implementation of the strategy approved by the Board;

• Help identify and advise management on new business opportunities outside the Group’s current activities;

• Review proposed acquisitions and disposals of companies, assets and businesses (including by way of joint venture or partnership in any legal form) before submission for approval to the Board;

• Work closely with and provide advice to the company’s Chairman and Chief Executive on matters of corporate activity relating to the company or its competitors;

• Monitor information disclosure on issues related to strategy;

• Review the annual ‘SWOT’ analysis of the company.

7. Investment CommitteeThe committee is chaired by the Chief Officer, Investments and Corporate Finance, and is responsible for investment and treasury policy decisions. It oversees the commercial prioritisation of development and Private Finance Initiative (PFI)/Public Private Partnership (PPP) investment opportunities and the Group’s capital expenditure programme for sanction by the GEC. Investment funding for acquisition, disposal, partnering and joint venturing transactions, and related commercial decisions are also managed by this committee.

Main responsibilities: • Determine and agree with the Board the company’s framework or broad policy for investment and monitor the implementation of the investment policy and procedures;

• Receive investment reports from management in a form approved by the committee;

• Monitor compliance with legislation, rules and regulations affecting the company’s investment activities;

• Consider appointment of external investment advisers, managers of the company’s investments and/or custodians, and approve any such appointments with the Board, including agreeing remuneration, approving engagement terms; and monitoring performance;

• Consider all investment and divestment proposals (whether or not Board approval is also required). Where Board approval is required, the committee will make recommendations to the Board in relation to each proposal. In the case of all other proposals, the committee is authorised to approve or reject without reference to the Board;

• Approve internal processes relating to investment transactions, including the documentation required to be completed and records to be maintained;

• Review its own performance, composition and terms of reference to ensure that it is operating effectively and recommend any changes that it considers necessary to the Board for approval.

8. Audit CommitteeThe Audit Committee oversees the Group’s financial reporting, risk management and internal controls and provides a formal reporting link with the external auditors. The Group’s external auditors are PricewaterhouseCoopers.

Main responsibilities: • Monitoring the integrity of the financial statements and formal communications relating to the Group’s financial performance;

• Reviewing significant financial reporting issues and accounting policies and disclosures in financial reports;

• Reviewing the effectiveness of the Group’s internal control procedures and risk management systems;

• Considering how the Group’s internal audit requirements shall be satisfied and making recommendations to the Board;

• Making recommendations to the Board on the appointment or re-appointment of the Group’s external auditors;

• Ensuring that an effective whistle-blowing procedure is in place.

9. Engineering Excellence Group (EnEx.G)

The EnEx.G is chaired and led by the Group’s Chief Engineering Adviser, Professor Robert Mair. Its membership comprises the EnEx.G technical engineering specialists. It is responsible for leading the development and execution of the Group’s innovation agenda by devising engineering strategies to give us competitive advantage and, ultimately, drive industry-wide transformation.

Main responsibilities: • See front inlay booklet.

The Group’s businesses operate within an established and externally benchmarked corporate governance framework that is underpinned by the Group’s vision and values (see pages 20 to 23). A key function of Laing O’Rourke’s corporate governance framework is the identification, management and mitigation of operational and financial risks. At every governance level we ensure the necessary committee processes are functioning correctly, in line with developments in company laws, corporate governance and best practice.

The company’s governance framework is based on the leadership principles in the UK Corporate Governance Code. The core activities of the Board and its committees are documented and planned on an annual basis, and this forms the basic structure within which the Board operates.

1. Group Shareholders

2. Board of Directors

Independent Assurance

Independent Assurance

13. T

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-ten

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Rev

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Bo

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s

14. P

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Rev

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5. Human Capital Committee

6. Strategy Committee

7. Investment Committee

8. Audit Committee

9. Engineering Excellence Group



12. Business Unit/ Functional Committees

12. Business Unit/ Functional Committees

3. Group Executive Committee

Corporate Governance Framework

Corporate governance continued

The Board has clear terms of reference that reflect principles contained in the Code, and cover the following:

• Strategy – reviewing and agreeing strategy;

• Performance – monitoring the performance of the Group and also evaluating its own performance;

• Code of Conduct – setting standards and values to guide the affairs of the Group;

• Oversight – ensuring an effective system of internal controls is in place, ensuring that the Board and its nominated subcommittees receive timely and accurate information on the performance of the Group and the proper delegation of authority;

• People – ensuring the Group is managed by individuals with the necessary skills and experience, and that senior appointments are managed effectively.

Group Hub Business Unit Project


Governance

Corporate governance continued

EffectivenessAll directors are advised regularly of likely time commitments and are asked to seek approval from the Board if they wish to take on additional external appointments. The ability of individual directors to allocate sufficient time to the discharge of their responsibilities is considered as part of the directors’ annual performance review process overseen by the Chairman. Any issues concerning the Chairman’s time commitment are dealt with by the Board.

An induction programme is agreed for all new directors aimed at ensuring that they are able to develop an understanding and awareness of the company’s governance structure and Core and Enabling Processes, its people and businesses. In addition to the above, as part of the induction process, new directors will typically visit the Group’s principal operations in order to meet employees and gain an understanding of the Group’s projects and services. Ongoing training is provided for individual directors as required. The Chairman, with the assistance of the Group Director of Finance and Commerce, is responsible for ensuring that directors are supplied with iPad-based information in a timely manner that is in a form and of a quality appropriate to enable them to discharge their duties. In the normal course of business, such information is provided in a regular report to the Board that includes information on operational matters, strategic developments, reports on the performance of Group operations, financial performance relative to the business plan, business development, corporate responsibility and client/ stakeholder relations.

Independent assuranceThe effectiveness and integrity of the Group’s governance framework is monitored by the Group’s internal risk and audit function and other external advisers as appropriate. The financial statements are independently assured by external auditors PricewaterhouseCoopers. The Group’s internal risk and audit function provides assurance to the Shareholders and the Group Executive Committee

of the adequacy of the internal control environment across all of Laing O’Rourke’s operations. This includes ensuring that efficient and effective control processes are in place to identify, manage and, to the greatest extent possible, mitigate business risk across the Group’s operations.

The independent external auditors report to the members of Laing O’Rourke Corporation Limited, the Shareholders and Board of Directors, on the financial position of the Group. Their audit opinion of the financial statements is set out on page 81 of this Annual Review.

Additional independent assurance and accreditation is also carried out on the Group’s position and statements pertaining to business risk and its health, safety and sustainable development performance.

Operational governance:Project Quality Management SystemThe Core and Enabling Processes and functional toolkits are a set of standards and procedures that guide and direct The LOR Way for finding, 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 and is rigorously followed for all projects.

A key element of Core Process is our centrally managed and governed client relationship management system – Salesforce – which captures key information in relation to the opportunities

the Group is pursuing, and also acts as a repository for key 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 defined circumstances, and by specific 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-specific plans in an integrated and disciplined manner. At the end of a project, formal feedback is captured which ensures we are continually assimilating the best and most current ways of working.


This hub-level executive committee has primary authority for the day-to-day management of business operations across the constituent territories within agreed limits set by the GEC. Its members are drawn from senior management in our construction, infrastructure and specialist services businesses and key supporting functions. It is also responsible for setting the strategic direction for health, safety and sustainable development activities and monitoring performance.


This hub-level executive committee has primary authority for the day-to-day management of business operations across the constituent territories within agreed limits set by the GEC. Members are drawn from senior management in the construction, infrastructure and specialist services businesses and key supporting functions. The committee is also responsible for setting the strategic direction for health, safety and sustainable development activities and monitoring performance.

12. Business Unit/Functional Committees

As subcommittees of the main hub-level executive committees (10 and 11) these forums have delegated authority for the day-to-day management of individual business unit operations, ensuring the alignment of business plans with strategic targets and that operational performance is in line with, or ahead of, approved budget plans.

13. Tender and post-tender review boards

These governance forums are chaired by the commercial and project delivery leads on each tender, and membership consists of key client and delivery-side project representatives as well as accountable senior management from key finance, commercial and supporting functions.

The review boards are responsible for ensuring the financial integrity of the project pre-delivery phase and are supported by appropriate project controls to assure the achievement of pre-agreed financial targets during all stages of construction.

14. Project delivery review boards

Project boards are governed by the standardised processes and practices of ‘The LOR Way’ – a systematic approach to risk management and quality assurance in the tendering and delivery stages of all projects, whatever their scale and complexity.

Through the Core and Enabling Processes (Laing O’Rourke’s approved business quality management system) the project boards ensure project activities are performed in line with legislation, regulations, codes of practice and the requirements of BS EN ISO 9001:2008 quality management assurance accreditations.

Continual improvement is achieved through the implementation of business objectives, audits, data analysis, corrective and preventive actions and management reviews.

“ We continue to evolve our governance arrangements in line with the changing needs of our business strategy and the constant pursuit of best practice.”

Core ProcessA standard approach to the key business decisions and activities, delivering effective governance, organisational diligence and consistency for finding, winning and delivering projects

Enabling ProcessBest-in-class project delivery to assure greater predictability in operational and financial performance

Enabling Process • Key contacts management • Process gateway governance – ‘permission to bid’

Salesforce CRM System • Opportunity pipeline tracking • Key contacts management • Process gateway governance – ‘permission to bid’

Directors, Officers and Advisers

Financial statements

Directors R G O’Rourke KBE C Klerides V Papadopoulos S Anastasiades

Company secretary

PricewaterhouseCoopers Associates LimitedJulia House 3 Themistocles Dervis Street CY-1066 Nicosia Cyprus

Company number 190393 Registered office Julia House

3 Themistocles Dervis Street CY-1066 Nicosia Cyprus

UK contact address

Laing O’Rourke plc Bridge Place Anchor Boulevard Admirals Park Crossways Dartford Kent DA2 6SN United Kingdom

Independent auditors

PricewaterhouseCoopers Limited Julia House 3 Themistocles Dervis Street CY-1066 Nicosia Cyprus

Bankers Lloyds Bank Corporate Markets

Bank of Scotland plc 1st Floor 25 Gresham Street London EC2V 7HN United Kingdom

Santander 17 Ulster Terrace Regent’s Park London NW1 4PJ United Kingdom

HSBC

8 Canada Square London E14 5HQ United Kingdom

Commonwealth Bank Darling Park Tower 1 201 Sussex Street Sydney NSW 2000 Australia

Insurance advisers

Marsh Limited Tower Place London EC3R 5BU United Kingdom

Insurers QBE European Operations

Plantation Place 30 Fenchurch Street London EC3M 3BD United Kingdom

Directors’ Report for the year ended 31 March 2012

The Board of Directors present their annual report together with the audited financial statements of the Laing O’Rourke Corporation Limited consolidated group (the ‘Group’) for the year ended 31 March 2012.

Principal activities The Group’s principal activities are:

Capital • Property development

• Housebuilding

Construction • Programme management

• Construction and building

• Civil engineering

• Mechanical and electrical engineering

• Core enabling and logistics management services

• Infrastructure and support services

• Construction and maintenance of utilities

• Architectural and environmental services

• Plant hire and operations

• Building products

• Design services

• Building operations management

• Manufacturing construction products

A list of principal subsidiaries, jointly controlled entities, jointly controlled operations and associates can be found on pages 121 to 122 in note 38 to the financial statements.

Laing O’Rourke Corporation Limited did not operate through any branches during the year.

A review of the Group’s activities and performance for the year is presented on pages 1 to 69.

Parent undertaking The Company is a wholly owned subsidiary of Suffolk Partners Corporation, a company incorporated in the British Virgin Islands.

Results and dividends The results for the year are set out in the Consolidated Income Statement on page 82 and show a profit for the year after tax of £28.7 million (2011: £21.4 million).

The Company paid interim dividends of £8.8 million during the year (2011: £8.8 million). The Directors do not recommend the payment of a final dividend (2011: £nil).

Health, safety and welfare The Group is committed to ensuring the health, safety and welfare of all employees at work. All reasonable measures have been taken to achieve this policy. Arrangements have been made to protect other persons against risk to health and safety arising from the activities of the Group’s employees when at work.

Employment policy The Group continues to provide employees with relevant information and to seek their views on matters of common concern through their representatives and through line managers. Priority is given to ensuring that employees are aware of significant matters affecting the Group’s trading position and of any significant organisational changes.

The Group treats each application for employment, training and promotion on merit. Full and fair consideration is given to both disabled and able-bodied applicants and employees. If existing employees become disabled, every effort is made to find them appropriate work and training is provided if necessary.

Payment of creditors Whilst the Group does not follow a formal code of practice, its policy for the period to 31 March 2013 for all suppliers is to fix terms of payment when agreeing the terms of each business transaction, to ensure that the supplier is aware of those terms, and to abide by the agreed terms of payment. The number of days billing from suppliers outstanding to the Group as at 31 March 2012 was 21 days (2011: 25 days).

Directors and their interests The current membership of the Board is as set out on page 73. R G O’Rourke KBE is the ultimate beneficiary of the trust which owns the majority of the shareholding of the Company. No other Director has an interest in the shares of the Company. Details of related party transactions can be found on pages 118 to 119 in note 35 to the financial statements.

Charitable contributions During the year the Group contributed £0.3 million (2011: £0.4 million) to its nominated charities.

Research and development Details of the Group’s research and development activities are set out in the Engineering Excellence inlay booklet.

Risk management Details of the Group’s policies and procedures for managing risk are set out on pages 48 to 53.

Key judgements and estimation uncertainty are detailed on page 91 in note 2.24 to the financial statements.

Financial risks are detailed on pages 112 to 117 in note 32 to the financial statements.

Share capital Details of the Company’s share capital are set out on page 111 in note 29 to the financial statements.

Post balance sheet events There were no post balance sheet events requiring disclosure.



Directors’ Report continued

Financial statements continued

Statement of Directors’ responsibilities for the Annual Review Company law in Cyprus requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Group’s profit or loss for that period. In preparing those financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable International Financial Reporting Standards (IFRS) as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the Group and enable them to ensure the financial statements comply with the Cyprus Companies Law, Cap. 113. The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Information published on the internet is accessible in many countries with different legal requirements relating to the preparation and dissemination of financial statements. Cyprus legislation governing preparation and dissemination of financial statements may therefore differ from that in other jurisdictions. The maintenance and integrity of the Group’s website at www.laingorourke.com is also part of the Directors’ responsibilities.

Independent Auditors and Disclosure of information to Auditors So far as each of the Directors are aware, there is no relevant audit information of which the Group’s auditors are unaware, and the Directors have taken all the steps that ought to have been taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.

The auditors, PricewaterhouseCoopers Limited, have indicated their willingness to continue in office as auditors of the Group. A resolution for the reappointment of PricewaterhouseCoopers Limited as auditors of Laing O’Rourke Corporation Limited will be proposed at the Annual General Meeting.

Approval This report was approved by the Board on 29 June 2012 and signed on its behalf by:

C Klerides Director

Independent Auditor’s Report to the Members of Laing O’Rourke Corporation Limited

Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Laing O’Rourke Corporation Limited (the ‘Company’) and its subsidiaries (the ‘Group’) on pages 82 to 122 which comprise the consolidated statement of financial position as at 31 March 2012, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Board of Directors’ responsibility for the consolidated financial statements The Company’s Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of Laing O’Rourke Corporation Limited and its subsidiaries as at 31 March 2012, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113.

Report on other legal and regulatory requirements Pursuant to the requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009, we report the following:

• We have obtained all the information and explanations we considered necessary for the purposes of our audit.

• In our opinion, proper books of account have been kept by the Company.

• The Company’s financial statements are in agreement with the books of account.

• In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give the information required by the Companies Law, Cap. 113, in the manner so required.

• In our opinion, the information given in the report of the Board of Directors on pages 79 and 80 is consistent with the consolidated financial statements.

Other matter This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009, and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come.

Androulla S Pittas Certified Public Accountant and Registered Auditor for and on behalf of

PricewaterhouseCoopers Limited Certified Public Accountants and Registered Auditors Nicosia, 29 June 2012



Consolidated Income Statement for the year ended 31 March 2012


Continuing operations Note

Pre- exceptional

items2012

£m

Exceptional items (note 4)

2012£m

Total2012

£m

Restated pre-exceptional

items 2011

£m

Restated exceptional

items (note 4) 2011

£m

Restated (1) total

2011£m

Total revenue 3,544.6 – 3,544.6 3,313.1 – 3,313.1Less: share of joint ventures’ revenue (639.6) – (639.6) (309.5) – (309.5)

Revenue 3 2,905.0 – 2,905.0 3,003.6 – 3,003.6Cost of sales (2,641.0) (17.2) (2,658.2) (2,697.1) – (2,697.1)Gross profit 264.0 (17.2) 246.8 306.5 – 306.5Administrative expenses (238.9) (3.8) (242.7) (260.9) (7.2) (268.1)Other operating income 7 1.1 4.2 5.3 1.0 – 1.0Operating profit 5 26.2 (16.8) 9.4 46.6 (7.2) 39.4Share of post-tax profit of joint ventures and associates 15 25.5 (2.8) 22.7 – – –Profit from operations 51.7 (19.6) 32.1 46.6 (7.2) 39.4Net non-operating income/(expense) 8 0.2 – 0.2 (0.6) (3.6) (4.2)

Finance income 9 6.0 – 6.0 7.6 – 7.6Finance expense 10 (14.9) – (14.9) (12.9) – (12.9)

Net financing expense (8.9) – (8.9) (5.3) – (5.3)Profit before tax 43.0 (19.6) 23.4 40.7 (10.8) 29.9Income tax benefit/(expense) 11 7.9 3.5 11.4 (6.3) 0.8 (5.5)Profit for the year from continuing operations 50.9 (16.1) 34.8 34.4 (10.0) 24.4

Discontinued operations Loss for the year from discontinued operations 28 (1.1) (5.0) (6.1) – (3.0) (3.0)Profit for the year 49.8 (21.1) 28.7 34.4 (13.0) 21.4

Attributable to: Equity holders of the Parent 49.5 (21.1) 28.4 34.0 (13.0) 21.0Non-controlling interests 0.3 – 0.3 0.4 – 0.4 49.8 (21.1) 28.7 34.4 (13.0) 21.4

(1) Re-presented for discontinued operations: see note 2.3.

Consolidated Statement of Comprehensive Income for the year ended 31 March 2012

Note

Pre- exceptional

items2012

£m

Exceptional items

(note 4)2012

£m

Total2012

£m

Restated pre- exceptional

items 2011

£m

Restated exceptional

items (note 4) 2011

£m

Restated total

2011£m

Profit for the year 49.8 (21.1) 28.7 34.4 (13.0) 21.4Other comprehensive income after tax: Exchange differences on translating foreignoperations (3.7) – (3.7) 12.0 – 12.0Available-for-sale financial assets (0.4) – (0.4) 0.8 – 0.8Share of other comprehensive income of joint ventures and associates 1.4 – 1.4 (1.6) – (1.6)Other comprehensive income for the year, net of tax 11 (2.7) – (2.7) 11.2 – 11.2Total comprehensive income for the year 47.1 (21.1) 26.0 45.6 (13.0) 32.6

Attributable to: Equity holders of the Parent 30 46.5 (21.1) 25.4 45.3 (13.0) 32.3Non-controlling interests 30 0.6 – 0.6 0.3 – 0.3 47.1 (21.1) 26.0 45.6 (13.0) 32.6

The notes on pages 86 to 122 form part of these financial statements.

Consolidated Statement of Financial Position as at 31 March 2012

Assets Note 2012

£m2011

£m

Non-current assets Intangible assets 13 339.8 341.3Investments in joint ventures and associates 15 54.6 51.4Loans to joint ventures 15 72.8 55.3Other investments 16 4.2 4.5Property, plant and equipment 17 256.1 276.5Investment property 18 38.8 22.1Deferred tax assets 27 11.3 20.1Trade and other receivables 23 20.0 37.3Restricted financial assets 21 0.4 0.8Total non-current assets 798.0 809.3Current assets Inventories 22 274.3 277.3Trade and other receivables 23 453.6 594.6Available-for-sale financial assets 19 3.5 10.3Derivative financial instruments 20 0.2 4.6Deferred tax assets 27 15.1 –Current tax assets 0.5 1.4Assets held for sale 28 13.8 –Cash and cash equivalents 600.6 619.3Total current assets 1,361.6 1,507.5Total assets 2,159.6 2,316.8Liabilities Current liabilities Borrowings 24 (97.9) (86.4)Trade and other payables 25 (1,227.3) (1,312.5)Provisions 26 (7.5) (14.7)Derivative financial instruments 20 (0.7) –Deferred tax liabilities 27 (3.4) –Current tax liabilities (8.4) (14.8)Liabilities held for sale 28 (4.9) –Total current liabilities (1,350.1) (1,428.4)Non-current liabilities Borrowings 24 (181.3) (250.1)Trade and other payables 25 (30.1) (18.9)Provisions 26 (28.8) (19.7)Deferred tax liabilities 27 (4.6) (18.6)Total non-current liabilities (244.8) (307.3)Total liabilities (1,594.9) (1,735.7)Net assets 564.7 581.1

Equity Share capital 29 – –Share premium 29 286.4 319.4Fair value reserve 30 (1.7) (1.3)Foreign currency translation reserve 30 47.4 50.0Retained earnings 30 230.0 210.4Total equity attributable to equity holders of the Parent 562.1 578.5Non-controlling interests 30 2.6 2.6Total equity 564.7 581.1

The financial statements were approved by the Board of Directors on 29 June 2012 and were signed on its behalf by:

R G O’Rourke KBE Director C Klerides Director




Consolidated Statement of Cash Flows for the year ended 31 March 2012


Note 2012

£m 2011

£m

Cash flows from operating activities Profit before tax from continuing operations 23.4 29.9Loss before tax from discontinued operations 28 (6.6) (4.0)Adjustments for: Non-cash exceptional items 4 21.8 13.8Depreciation and amortisation 54.2 57.9Profit on disposal of property, plant and equipment (4.5) (5.9)Net financing costs 8.9 5.8Share of post-tax profit of joint ventures and associates (22.7) –Decrease in trade and other receivables 154.9 36.6Increase in inventories (30.1) (26.3)(Decrease)/increase in trade and other payables and provisions (71.5) 28.1Other 6.5 (2.1)Cash generated from operations 134.3 133.8Interest paid (14.9) (13.4)Tax paid (4.3) (7.8)Net cash generated from operating activities 115.1 112.6Cash flows from investing activities Purchase of property, plant and equipment (18.5) (17.4)Purchase of intangible assets 13 (1.4) (4.3)Purchase of investments 16 – (0.3)Acquisition of subsidiaries, net of cash acquired (6.9) 2.5Payments to acquire joint ventures and associates 15 (0.3) (2.0)Disposal of available-for-sale financial assets 19 6.2 0.1Disposal of property, plant and equipment 15.9 26.7Disposal of investment property 18 0.3 –Disposal of subsidiaries – (0.6)Loans to joint ventures and associated companies 15 (34.7) (65.3)Loans repaid by joint ventures and associates 15 0.2 0.6Interest received 6.1 7.5Distributions received from joint ventures and associated companies 15 30.7 28.2Net cash used in investing activities (2.4) (24.3)Cash flows from financing activities Proceeds from new bank loans 36.8 27.6Repayments of bank loans (81.3) (141.8)Finance lease principal repayments (44.8) (43.9)Reduction in share premium 29 (33.0) (20.1)Dividends paid to non-controlling interests 30 (0.6) (0.4)Dividends paid 12 (8.8) (8.8)Net cash used in financing activities (131.7) (187.4)Net decrease in cash and cash equivalents (19.0) (99.1)Cash and cash equivalents at beginning of year 619.3 716.0Effect of exchange rate fluctuations on cash held 0.3 2.4Cash and cash equivalents at end of year 600.6 619.3

Non-cash transactions principally relate to new hire purchase and finance lease agreements taken out during the year amounting to £31.2m (2011: £48.4.m).

Cash and cash equivalents comprise: Cash at bank and on hand 565.7 586.0Short-term bank deposits 33 34.9 33.3 600.6 619.3


Consolidated Statement of Changes in Equity for the year ended 31 March 2012

Note

Share capital & share

premium£m

Other reserves

£m

Retained earnings

£m

Total shareholders’

equity £m

Non-controlling

interests£m

Total equity

£m

At 1 April 2010 339.5 37.4 198.2 575.1 2.7 577.8Total comprehensive income for the year – 11.3 21.0 32.3 0.3 32.6Reduction in share premium 29 (20.1) – – (20.1) – (20.1)Dividends paid 12 – – (8.8) (8.8) (0.4) (9.2)At 31 March 2011 319.4 48.7 210.4 578.5 2.6 581.1

Total comprehensive income for the year – (3.0) 28.4 25.4 0.6 26.0Reduction in share premium 29 (33.0) – – (33.0) – (33.0)Dividends paid 12 – – (8.8) (8.8) (0.6) (9.4)At 31 March 2012 286.4 45.7 230.0 562.1 2.6 564.7

Additional disclosure and details are provided in note 30.




Notes to the Financial statements for the year ended 31 March 2012


1 General Information Laing O’Rourke Corporation Limited (the ‘Company’) is a company incorporated and domiciled in Cyprus. The Company prepares parent company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and the Cyprus Companies Law, Cap. 113. The address of the registered office is given on page 78. The nature of the Group’s operations and its principal activities are set out in note 38 and in the Operating and Financial Review on pages 26 to 30. The consolidated financial statements of the Company for the year ended 31 March 2012 comprise the Company and its subsidiaries (together referred to as the ‘Group’) and the Group’s interest in associates and jointly controlled entities.

2 Significant Accounting Policies 2.1 Statement of compliance The Group consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union (Adopted IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations) and the Cyprus Companies Law, Cap. 113.

2.2 Basis of preparation The Group consolidated financial statements are presented in pounds sterling, rounded to the nearest hundred thousand and include the results of the holding company and its subsidiary undertakings for the year ended 31 March 2012. The consolidated financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of land and buildings (prior to the adoption of IFRS), available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The principal accounting policies which have been consistently applied for all consolidated entities including subsidiaries, joint ventures and associates are set out below.

The following standards, amendments and interpretations became effective in the year ended 31 March 2012 and have been adopted:

a) IAS 24 (Revised), Related Party Disclosures, (effective for accounting periods beginning on or after 1 January 2011)

b) Amendment to IFRIC 14, Pre-payments of a minimum funding requirement, (effective for accounting periods beginning on or after 1 January 2011)

c) IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments, (effective for accounting periods beginning on or after 1 July 2010)

Each standard has been reviewed, the impact on the Group financial statements of adopting these new standards, amendments and interpretations has been determined to be minimal.

The Directors have considered recently published IFRSs, new interpretations and amendments to existing standards that are mandatory to the Group’s accounting periods commencing on or after 1 April 2012.

Standards that are not yet effective and have not been early-adopted by the Group:

a) Amendment to IFRS 7, Disclosures – Transfers of financial assets, (effective for accounting periods beginning on or after 1 July 2011)

b) Amendment to IFRS 7, Disclosures – Offsetting assets and financial liabilities, (effective for accounting periods beginning on or after 1 July 2013)

c) IFRS 9, Financial Instruments, (effective for accounting periods beginning on or after 1 January 2015)

d) IFRS 10, Consolidated Financial Statements, (effective for accounting periods beginning on or after 1 January 2013)

e) IFRS 11, Joint Arrangements, (effective for accounting periods beginning on or after 1 January 2013)

f) IFRS 12, Disclosures of Interests in Other Entities, (effective for accounting periods beginning on or after 1 January 2013)

g) IFRS 13, Fair Value Measurement, (effective for accounting periods beginning on or after 1 January 2013)

h) Amendment to IAS 1, Presentation of other comprehensive income, (effective for accounting periods beginning on or after 1 July 2012)

i) Amendments to IAS 12, Deferred tax – Recovery of underlying assets, (effective for accounting periods beginning on or after 1 January 2012)

j) IAS 19 (revised 2011), Employee benefits, (effective for accounting periods beginning on or after 1 January 2013)

k) IAS 27, Separate Financial Statements, (effective for accounting periods beginning on or after 1 January 2013)

l) IAS 28, Associates and Joint ventures, (effective for accounting periods beginning on or after 1 January 2013)

m) Amendment to IAS 32, Offsetting assets and financial liabilities, (effective for accounting periods beginning on or after 1 January 2014)

The effect on the Group financial statements of adopting these new standards, amendments and interpretations has been determined to be minimal with the exception of those detailed overleaf:

2 Significant Accounting Policies continued IFRS 9 is expected to replace IAS 39 Financial Instruments: Recognition and Measurement from 2015, subject to EU adoption. IFRS 9 is being completed in stages, new requirements for impairments and hedge accounting are expected to be added to the standard later in 2012. The requirements of IFRS 9 in issue at 31 March 2012 would result in the Group’s available-for-sale financial assets being reclassified as this is a category that will no longer exist under the new standard. The assets will be measured either at amortised cost or fair value through profit or loss, as a result movements in the fair value of these assets would no longer be recognised in other comprehensive income. Retrospective application of this standard would result in the closing balance of the fair value reserve (£1.7m) being transferred to retained earnings.

IFRS 10, 11, 12 and IAS 27 & 28 are effective for periods beginning on or after 1 January 2013 but can be early adopted if all applied simultaneously once endorsed by the EU. The new standards and amendments were developed to eliminate the choice of accounting treatments available for interests in other entities and allow for further comparability between financial statements of different companies. With the application of this suite of standards certain of the Group’s jointly controlled entities will change from being equity accounted to being proportionately consolidated. The change in treatment of these entities will have no impact on the Group’s net assets or EBIT, but will affect the presentation of the joint ventures balances in the primary financial statements.

2.3 Re-presentation of comparative information On 9 February 2012 the Directors resolved to dispose of the Group’s interest in Naturstein Vetter GmbH, the Group’s German operations. The carrying value is expected to be recovered principally through a sale transaction within one year rather than through continuing use and accordingly the Group’s German operations have been classified as a discontinued operation held for sale from 9 February 2012. As a result the comparative information for the year ended 31 March 2011 has been re-presented to show all amounts relating to the Group’s German operations in accordance with IFRS 5, Non current assets held for sale and discontinued operations, see note 28.

2.4 Basis of consolidation a) The Group financial statements include the accounts

of the Company and subsidiaries controlled by the Company. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are deconsolidated from the date control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group falling within the scope of IFRS 3, ‘Business Combinations’. The consideration transferred for the acquisition of a subsidiary is fair values of the assets, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling

interest. The excess of the consideration transferred over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

b) Associates are operations over which the Group has the power to exercise significant influence but not control, generally accompanied by a share of between 20 per cent and 50 per cent of the voting rights. Associates are accounted for using the equity method and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in the statement of other comprehensive income. If the Group’s share of losses in an associate equals its investment, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate, in which case a provision is recognised.

c) Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement. In a number of these, the Group’s share of the underlying assets and liabilities may be greater than 50 per cent but the terms of the relevant agreements make it clear that control is not exercised. Jointly controlled entities are accounted for using the equity method from the date that the jointly controlled entity commences until the date that joint control of the entity ceases. If the Group’s share of the losses in the jointly controlled entity equals or exceeds its interest in the undertaking, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the entity, in which case a provision is recognised.

d) Jointly controlled operations are where the Group undertakes a joint venture, established by contractual agreement, without establishing a separate entity. The Group uses its own assets and incurs its own liabilities, the joint venture agreement provides a means by which revenue and any joint expenses are shared amongst the venturers. The Group recognises its share of the assets it controls, liabilities and cash flows it incurs and its share of the results under each relevant heading in the income statement and the statement of financial position.

e) Intra-Group balances and transactions together with any unrealised gains arising from intra-Group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with jointly controlled entities and jointly controlled operations are eliminated to the extent of the Group’s interest in the entity. The Group’s share of unrealised gains arising from transactions with associates is eliminated against the investment in the associate. The Group’s share of unrealised losses is eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.



Notes to the Financial statements continued


2 Significant Accounting Policies continued 2.5 Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in pounds sterling, which is the functional and presentation currency of Laing O’Rourke Corporation Limited and the currency of the primary economic environment in which the Group operates.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at ‘fair value through profit or loss’ are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the fair value reserve in equity.

Group companies The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

ii) income and expenses for each income statement are translated at average exchange rates; and

iii) all resulting exchange differences are recognised in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings designed as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of, or sold, exchange differences that were recorded in other comprehensive income are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.6 Property, plant and equipment Property, plant and equipment are reported at historical cost less accumulated depreciation and any recognised impairment loss. Land is not depreciated. Where parts of an item of property, plant and equipment have different useful lives, they

are accounted for as separate items. Cost comprises purchase price and directly attributable costs. Depreciation is calculated on the straight-line method to write down the cost to their residual values over their estimated useful lives as follows:

Group owner occupied property 2%Other buildings 2%Plant, equipment and vehicles 6%–50%

Certain land and buildings were revalued under previous accounting standards. On transition to IFRS, the Group elected to use the revalued amount as deemed cost.

Assets held under finance leases are depreciated over the term of the lease or the estimated useful life of the asset as appropriate.

Gains and losses on disposal are recognised within cost of sales, administrative expenses or non-operating income/expense in the income statement as appropriate.

2.7 Goodwill and other intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisitions prior to 1 April 2006 (the date of transition to IFRS) is carried at its book value (original cost less cumulative amortisation) on that date, less any subsequent impairment. This is in accordance with the transitional provisions of IFRS 1. Goodwill arising before 1 January 1998 was eliminated against reserves and has not been reinstated in accordance with the transitional provisions of IFRS 3, ‘Business Combinations’. Goodwill arising on the Group’s investments in associates and joint ventures since that date is included within the carrying value of these investments. Negative goodwill arising on or after 1 April 2006 is recognised immediately within operating profit in the income statement. Separately recognised goodwill is tested annually for impairment and carried at cost less impairment losses. Goodwill is included when determining the profit or loss on subsequent disposal of the business to which it relates. Goodwill is allocated to cash generating units for the purpose of impairment testing.

Other intangible assets Other intangible assets are stated at cost less accumulated amortisation and impairment losses. Amortisation is based on the useful lives of the assets concerned, and recognised on a straight-line basis over the following periods:

Brands 8–10 years Computer software and licences 2–4 years

Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually. Assets that are subject to amortisation or depreciation are reviewed for impairment or reversal of previous impairments when circumstances or events indicate there may be a change in the carrying value. For impairment testing, goodwill is allocated to cash-generating units by geographical reporting unit and business segment. Assets are grouped at the lowest level for which there are separately identifiable cash flows.

2 Significant Accounting Policies continued 2.8 Investment property Investment properties are held for long-term rental yields and are not occupied by the Group. Acquired investment properties are initially measured at cost, being the fair value of consideration given to acquire the property. The cost of self-constructed investment properties include all directly attributable costs. Completed investment properties are stated at fair value, which is supported by market evidence, as assessed annually by the chief surveyor or by qualified external valuers at three year intervals. Depreciation is not provided on investment properties. Changes in fair values are recorded in the income statement as part of non-operating income/expense.

2.9 Financial investments The Group has classified its financial investments as available-for-sale financial assets which are recognised at fair value. Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets, at their fair values less transaction costs. The fair values of listed financial investments are determined using bid market prices. Changes in the fair value of financial investments classified as available-for-sale are recorded in the fair value reserve within equity. When these are sold, the fair value adjustments recognised in equity are included in the income statement.

2.10 Derivative financial instruments The Group enters into forward contracts or borrows/deposits funds in foreign currencies in order to hedge against transactional foreign currency exposures. Fair value derivatives are initially recognised at fair value on the date of the contract and are subsequently remeasured at their fair value. Movements in fair value are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

2.11 Cash and cash equivalents Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, and other short-term highly liquid investments with less than 90 days’ maturity from the date of acquisition. For the purpose of the cash flow statement, cash and cash equivalents also include bank overdrafts, which are included in bank loans and overdrafts in the statement of financial position.

2.12 Trade and other receivables Trade receivables are initially recorded at fair value and subsequently measured at amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. Subsequent recoveries of amounts previously written off are credited to the income statement line in which the provision was originally recognised.

2.13 Trade and other payables Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

2.14 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, where it is probable that an outflow will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are measured at the best estimate of the present value of the expenditures expected to be required to settle the obligation.

2.15 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, net of sales tax, for goods and services supplied to external customers. It includes the Group’s share of revenue from work carried out under jointly controlled operations. Revenue from services and construction contracts is recognised by reference to the stage of completion of the contract, as set out in the accounting policy for construction and service contracts. Revenue from the sale of goods is recognised when the Group has transferred significant risks and rewards of ownership of the goods to the buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group.

Rental income is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives are recognised as an integral part of the total rental income.

Revenue on private housing and commercial property is recognised on legal completion of the sale.





2 Significant Accounting Policies continued 2.16 Construction and service contracts When the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognised by reference to the stage of completion of each contract, as measured by the proportion of total costs at the balance sheet date to the estimated total cost of the contract.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where costs incurred plus recognised profits less recognised losses exceed progress billings, the balance is recognised as due from customers on construction contracts within trade and other receivables. Where progress billings exceed costs incurred plus recognised profits less recognised losses, the balance is recognised as advance payments on construction contracts within trade and other payables.

Private Finance Initiative (PFI)/Public Private Partnership (PPP) bid costs are expensed as incurred until the Group is appointed preferred bidder. Provided the contract is expected to generate sufficient net cash inflows to enable recovery and the award of the contract is virtually certain, PFI/PPP bid costs incurred post the appointment as preferred bidder are included within receivables. The PFI/PPP bid costs are expensed on reimbursement at financial close. Any surplus on reimbursement of costs compared with those recorded in receivables is recognised in the income statement.

2.17 Inventories Inventories, including land and related development activity thereon, are stated at the lower of cost and estimated net realisable value. Cost comprises direct materials, direct and subcontract labour, specific borrowing costs and those overheads that have been incurred in bringing inventories to their present location and condition. Net realisable value represents the estimated income less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

2.18 Leases and hire purchase commitments Assets obtained under hire purchase contracts and leases, where a significant portion of the risks and rewards of ownership is transferred to the Group, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the liability and finance charge to produce a constant rate of interest on the finance lease balance outstanding. Assets held for use in such leases are included in ‘Property, plant and equipment’ (note 17) and are depreciated to their residual values over the estimated useful lives or the lease term as appropriate and are adjusted for impairment losses. Obligations under such agreements are included in ‘Borrowings’ (note 24).

Leases other than finance leases are classified as operating leases. Payments made under operating leases are recognised as an expense in the income statement on a straight-line basis over the lease term. Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight-line basis.

2.19 Pension costs The Group operates a defined contribution pension scheme for staff and Directors. The contributions paid by the Group and the employees are invested in the pension fund within 30 days following deduction. Once the contributions have been paid, the Group, as employer, has no further payment obligations. The Group’s contributions are charged to the income statement in the year to which they relate.

2.20 Tax Tax expense represents the sum of the tax currently payable and deferred tax. The current tax expense is based on the taxable profits for the year, after any adjustments in respect of prior years. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable nor deductible in other years and it also excludes items that are neither taxable nor deductible. The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future. Deferred taxes are not provided in respect of temporary differences arising from the initial recognition of goodwill, or from goodwill for which amortisation is not deductible for tax purposes, or from the initial recognition of an asset or liability in a transaction which is not a business combination and affects neither accounting profit nor taxable profit or loss at the time of the transaction. Deferred tax is calculated at the tax rates based on those enacted or substantially enacted at the balance sheet date and are expected to apply when the related asset is realised or liability settled. Deferred tax is charged or credited in the income statement except when it relates to items charged or credited directly to equity, in which case the deferred tax is also included in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.21 Borrowings and borrowing costs Interest bearing bank loans and overdrafts are recognised initially at fair value net of transaction costs incurred. All borrowings are subsequently stated at amortised cost with the difference between initial net proceeds and redemption value recognised in the income statement over the period to redemption.

Borrowing costs are capitalised where the Group borrows funds specifically for the purpose of acquiring, constructing or producing a qualifying asset, in accordance with IAS 23, ‘Borrowing Costs’. All other finance costs of debt, including premiums payable on settlement and direct issue costs, are charged to the income statement on an accruals basis over the term of the instrument, using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2 Significant Accounting Policies continued 2.22 Exceptional items Exceptional items are defined as items of income or expenditure which, in the opinion of the Directors, are material and unusual in nature or of such significance that they require separate disclosure on the face of the consolidated income statement in accordance with IAS 1, ‘Presentation of Financial Statements’.

2.23 Trading analysis Trading analysis information is based on the Group’s internal reporting structure of two operational hubs. Further information on the business trading activities is set out in the Financial and business review on pages 26 to 30. Trading analysis results represent the contribution directly attributable for the different hubs to profit of the Group. Transactions between hubs are conducted at arm’s length market prices.

2.24 Key judgements and estimation uncertainty The preparation of consolidated financial statements under IFRS requires management to make estimates and assumptions that affect amounts recognised for assets and liabilities at the balance sheet date and the amounts of revenue and the expenses incurred during the reported period. Actual outcomes may therefore differ from these estimates and assumptions. The estimates and assumptions that have the most significant impact on the carrying value of assets and liabilities of the Group within the next financial year are detailed as follows:

a) Revenue and margin recognition The Group’s revenue recognition and margin recognition policies, which are set out in notes 2.15 and 2.16, are central to the way the Group values the work it has carried out in each financial year and have been consistently applied. These policies require forecasts to be made of the outcomes of long-term construction and service contracts, which require assessments and judgements to be made on recovery of pre-contract costs, changes in work scopes, contract programmes and maintenance liabilities.

b) Disputes Management’s best judgement has been taken into account in reporting disputed amounts, but the actual future outcome may diverge from this judgement.

c) Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which the goodwill has been allocated. The value in use calculation requires an estimation to be made of the timing and amount of future cash flows expected to arise

from the cash generating unit, and a suitable discount rate in order to calculate the present value. The discount rate used, carrying value of goodwill and further details of the impairment loss calculation are included in note 13.

d) Taxation The Group is subject to tax in a number of jurisdictions and judgement is required in determining the worldwide provision for income taxes including recognition of deferred tax assets. The Group provides for future liabilities in respect of uncertain tax positions where additional tax may become payable in future periods and such provisions are based upon management’s assessment of exposures. Assets are only recognised where it is reasonably certain additional tax will become payable in future periods.

e) Development land and work in progress Determining whether land developments are impaired requires an estimation of the fair values of expected selling prices and costs to complete. A detailed review was completed at 31 March 2012 which resulted in an exceptional impairment of £21.2m being recognised. Further details are included in note 4.

f) Investment property Determining the fair value of investment properties requires an estimation of future rental yields compared to current market evidence. In certain cases comparable market price information is limited due to the current economic conditions and management have exercised their best judgements in determining the fair value of investment properties.

g) Captive insurance company The Group operates a captive insurance company which provides reinsurance exclusively to the Group. Provision is made on actuarial assessment of the reserve for future claims, which necessarily includes estimates of the likely trend of future claims costs and the emergence of further claims subsequent to the year-end. An actuarial review of claims is performed annually. To the extent that actual claims differ from those projected, the provisions could vary significantly.

h) Financial risk management In the course of its business, the Group is exposed to foreign currency risk, liquidity risk and credit risk. The overall aim of the Group’s financial risk management policies is to use judgement to minimise potential adverse effects on financial performance and net assets. Further details are provided in note 32 to these financial statements.





3 Trading Analysis

Performance by geography:

Europe Hub 2012

£m

Australia Hub 2012

£m

Total Group2012

£m

Managed revenue 2,787.3 1,524.6 4,311.9 Less: Inter-segment revenue (623.7) (143.6) (767.3)Total revenue 2,163.6 1,381.0 3,544.6Less: Share of joint ventures’ and associates’ revenue (418.0) (221.6) (639.6)Revenue 1,745.6 1,159.4 2,905.0 Profit from operations post-exceptional items 66.6 (34.5) 32.1Profit for the year before tax post-exceptional items 62.1 (38.7) 23.4 EBIT post-exceptional items 69.5 (35.1) 34.4EBITDA post-exceptional items 105.4 (17.0) 88.4 Profit from operations pre-exceptional items 79.9 (28.2) 51.7Profit for the year before tax and exceptional items 75.4 (32.4) 43.0 EBIT pre-exceptional items 82.8 (28.8) 54.0EBITDA pre-exceptional items 118.7 (10.7) 108.0

Restated Europe Hub

2011 £m

Restated Australia Hub

2011 £m

Restated total Group

2011£m

Managed revenue 2,722.6 1,285.7 4,008.3 Less: Inter-segment revenue (548.4) (146.8) (695.2)Total revenue 2,174.2 1,138.9 3,313.1Less: Share of joint ventures’ and associates’ revenue (141.2) (168.3) (309.5)Revenue 2,033.0 970.6 3,003.6 Profit from operations post-exceptional items 54.7 (15.3) 39.4Profit for the year before tax post-exceptional items 49.8 (19.9) 29.9 EBIT post-exceptional items 56.3 (15.8) 40.5EBITDA post-exceptional items 96.2 1.8 98.0 Profit from operations pre-exceptional items 61.9 (15.3) 46.6Profit for the year before tax and exceptional items 60.6 (19.9) 40.7 EBIT pre-exceptional items 67.1 (15.8) 51.3EBITDA pre-exceptional items 107.0 1.8 108.8

3 Trading Analysis continued

EBIT and EBITDA Reconciliation Note

Pre-exceptional

items2012

£m

Exceptionalitems

(note 4)2012

£m

Total2012

£m

Restated pre-

exceptional items 2011

£m

Restatedexceptional

items(note 4)

2011£m

Restatedtotal

2011£m

Profit from operations 51.7 (19.6) 32.1 46.6 (7.2) 39.4 Adjusted for: Net non-operating income/(expense) 8 0.2 – 0.2 (0.6) (3.6) (4.2)JV net finance (income)/expense 15 (5.0) – (5.0) 2.8 – 2.8JV tax expense 15 7.1 – 7.1 2.5 – 2.5EBIT 54.0 (19.6) 34.4 51.3 (10.8) 40.5 Depreciation 5 51.7 – 51.7 55.4 – 55.4Amortisation 5 2.3 – 2.3 2.1 – 2.1EBITDA 108.0 (19.6) 88.4 108.8 (10.8) 98.0

There is no material difference between revenue by origin and revenue by destination. Revenue includes £2,426.0m on construction contracts (2011: £2,366.6m) calculated on the definition included in IAS 11, Construction Contracts. Revenue arising from the sale of goods and services amounted to £479.0m (2011: £637.0m).

Contracts in progress at the balance sheet date comprise contract costs incurred plus recognised profits less losses of £4,693.4m (2011: £4,497.8m).





4 Exceptional Items

2012

£m 2011

£m

Impairments of land and developments 21.2 7.2Impairment of Group owner occupied property 2.0 3.0Closure costs 3.0 –Receivables impairment 2.6 –Gain on acquisition of a business (4.2) –Disposal of subsidiary – 3.6Exceptional costs before tax 24.6 13.8Income tax credit on exceptional items (3.5) (0.8)Exceptional costs after tax 21.1 13.0

Impairments of land and developments During the year the Directors reviewed the carrying value of the Group’s residential and mixed-use development assets in accordance with current accounting standards. The valuations incorporated forecast selling prices based on recent external market conditions and in certain instances the Directors assumed appropriate planning consents will be granted. Costs to complete (including finance costs) were assessed at the balance sheet date. As a result of the review, the Group recognised exceptional impairments of £21.2m (2011: £7.2m).

Impairment of Group owner occupied property and closure costs An independent external valuation was performed on the Group’s quarrying and land assets held by Naturstein Vetter GmbH in Germany on 31 March 2011. As a result of this valuation the land and buildings were impaired by £3.0m in the prior reporting period. Following the approval of the Group’s management and shareholders on 9 February 2012 to sell Naturstein Vetter GmbH the assets were reclassified as held for sale (see note 28) and as a result a further £2.0m impairment was recognised. Additional closure costs of £3.0m were also recognised, £0.9m for write down of inventories and £2.1m in relation to employee redundancies. Both of these exceptional items have been recognised within discontinued operations in the income statement.

Receivables impairment During the year a debt outstanding from a client was only partially recovered after the client went into administration, causing a £2.6m loss to be recognised.

Exceptional gain on acquisition of a business On 30 January 2012 the Group secured full control of Bison Holdings Limited and Bison Manufacturing Limited (‘Bison’), recognising an exceptional gain of £4.2m on acquisition. The gain was primarily due to a £5.0m deferred tax asset held by Bison at acquisition which could be utilised immediately within the Laing O’Rourke Group but was of no immediate use to other purchasers. The gain is recorded as an exceptional item within other operating income. Further details of the acquisition are provided in note 14 of the financial statements.

Disposal of subsidiary In the previous reporting period the Group sold 100 per cent of the share capital of Eigen Technical Services Private Limited, a company incorporated in India, incurring a £3.6m loss on sale.

5 Operating Profit

Note 2012

£m

Restated2011

£m

Operating profit is stated after charging/(crediting): Staff costs 6 733.9 711.9Depreciation of property, plant and equipment: 17

Owned assets 23.4 26.3Under finance leases 28.3 29.1

Impairment of plant and equipment 17 1.0 –Operating lease rentals and short-term hires:

Property, plant and equipment 79.3 71.4Amortisation of other intangible assets 13 2.3 2.1Profit on disposal of plant and equipment (3.9) (6.4)Foreign exchange (gains)/losses (1.3) 4.8Investment property income 18 (1.7) (1.1)Cost of inventories recognised as an expense:

Exceptional items 4 21.2 7.2Auditors’ remuneration (see below) 2.2 2.1

The Group’s German operations have been classified as discontinued during the current year. Items of expenditure in the prior reporting period previously recognised as part of operating profit have been reallocated to discontinued operations on the face of the income statement. This includes staff costs (£2.4m), depreciation of owned assets (£0.4m), exceptional impairment of plant and equipment (£3.0m) and foreign exchange losses (£0.2m).

Depreciation per note 17 includes £0.2m (2011: £0.4m) on assets reclassified as discontinued operations in the current period therefore not included in operating profit in the income statement.

Auditors’ remuneration

2012

£m2011

£m

Fees payable to the Company’s auditor for the audit of: The Company’s annual accounts and consolidated financial statements 0.3 0.4The Company’s subsidiaries pursuant to legislation 0.9 0.7

Total audit fees 1.2 1.1Fees payable to the Company’s auditor and its associates for other services:

Services relating to taxation 0.8 0.3All other services 0.2 0.7

Total non-audit fees 1.0 1.0Total fees 2.2 2.1

The fees stated above include £0.2m for other non-assurance services and £0.1m for audit fees charged by the Company’s statutory audit firm PricewaterhouseCoopers Limited Cyprus.





6 Staff Costs and Employee Numbers

2012

Number

Restated2011

Number

Number of employees The average monthly number of employees (including the Directors) during the period was: Europe Hub 10,937 11,526Australia Hub 3,810 3,438Total number of employees 14,747 14,964

2012

£m

Restated2011

£m

Aggregate remuneration and related costs, including Directors: Wages and salaries 666.9 643.6Social security costs 34.9 37.0Other pension costs 32.1 31.3 733.9 711.9

At 31 March 2012 £1.4m (2011: £1.5m) was outstanding on defined contribution schemes.

Transactions with key management personnel The Group’s key management personnel include the four Directors and eight (2011: six) other members who served on the Group Executive Committee during the year.

The compensation of key management personnel is as follows:

2012

£m 2011

£m

Salaries and other short-term employee benefits 4.4 3.0Post-retirement benefits – –Termination benefits – 0.6 4.4 3.6

Directors’ remuneration The total remuneration of the Directors (included in key management personnel compensation above) was as follows:

2012

£m 2011

£m

Salaries and other short-term benefits 0.5 0.4

None of the Directors are accruing benefits under a defined contribution scheme (2011: nil). No post-retirement benefits were paid on behalf of Directors (2011: £nil).

7 Other Operating Income

2012

£m2011

£m

Exceptional gain on acquisition of a business (see note 4) 4.2 –Investment income 0.8 0.8Rents received 0.2 0.2Other operating income 0.1 – 5.3 1.0

8 Net Non-Operating Income/(Expense)

2012

£m2011

£m

Exceptional loss on sale of subsidiary (see note 4) – (3.6)Profit/(loss) on sale of property 0.6 (0.6)Impairment of investments (0.4) – 0.2 (4.2)

9 Finance Income

2012

£m2011

£m

Bank interest 4.9 6.6Other interest and similar income 1.1 1.0 6.0 7.6

10 Finance Expense

2012

£m

Restated2011

£m

Interest payable on bank loans and overdrafts 8.7 8.0Finance lease charges 4.7 4.9Other interest payable and similar charges 1.5 – 14.9 12.9





11 Income Tax

2012

£m

Restated2011

£m

Cyprus corporation tax Current tax on income for the year 0.6 0.3Foreign tax Current tax on income for the year 5.7 9.2Adjustment in respect of prior years (2.4) (0.8)Total current tax 3.9 8.7 Net origination of temporary differences (14.6) (2.7)Impact of change in tax rate (0.7) (0.5)Total deferred taxation (15.3) (3.2)Tax (benefit)/expense for the year (11.4) 5.5

The overall tax benefit for the year of £11.4m (negative rate 48 per cent) is explained relative to the UK statutory rate of 26 per cent below:

Total tax reconciliation Profit before tax 23.4 29.9

Tax at the UK corporation tax rate of 26% (2011: UK 28%) 6.1 8.4Effects of – lower overseas tax rates (9.0) (6.4)– other expenditure that is not tax deductible 1.4 1.7– adjustments to prior years (5.3) (0.8)– unutilised losses 2.3 5.8– tax effect of joint ventures (5.3) (1.8)– impact of change in tax rate (0.7) (0.5)– other adjustments (0.9) (0.9)Total tax (credit)/charge (11.4) 5.5

The total tax benefit for the year of £11.4m includes an exceptional tax credit of £3.5m (2011: £0.8m) in relation to tax allowable exceptional expenditure for impairments of land and developments, impairment of owner occupied property and disposal of a subsidiary (see note 4).

A number of changes to the UK Corporation tax system were announced in the March 2012 UK Budget Statement. A resolution passed by Parliament on 26 March 2012 reduces the main rate of Corporation Tax from 26 per cent to 24 per cent from 1 April 2012. The effect of this change is to reduce the UK deferred tax liability provided at the balance sheet date by £0.7m.

Legislation to reduce the main rate of corporation tax from 24 per cent to 23 per cent from 1 April 2013 is expected to be included in the Finance Act 2012. Further reductions to the main rate are proposed to reduce the rate to 22 per cent from 1 April 2014. These further changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

Tax effects relating to each component of comprehensive income 2012 2011

Before-tax amount

£m

Tax expense

£m

Net-of-tax amount

£m

Before-tax amount

£m

Tax expense

£m

Net-of-tax amount

£m

Exchange differences on translating foreign operations (3.7) – (3.7) 12.0 – 12.0Available-for-sale financial assets (0.5) 0.1 (0.4) 1.2 (0.4) 0.8Share of other comprehensive income of joint ventures and associates 1.4 – 1.4 (1.6) – (1.6) (2.8) 0.1 (2.7) 11.6 (0.4) 11.2

12 Dividends

2012

£m2011

£m

Interim dividends paid of £972 per ordinary share (2011: £972). 8.8 8.8

Dividends declared and paid during the year were in respect of the 2009/10 performance period. The Directors do not recommend the payment of a final dividend (2011: £nil).

13 Intangible Assets

Goodwill£m

Brands £m

Computer software and

licences£m

Total£m

Cost At 1 April 2011 335.9 2.6 16.3 354.8Additions – – 1.4 1.4Disposals – – (0.1) (0.1)Transferred to disposal group classified as held for sale – – (0.1) (0.1)Exchange differences 0.3 – 0.1 0.4At 31 March 2012 336.2 2.6 17.6 356.4Accumulated amortisation and impairment At 1 April 2011 – 1.5 12.0 13.5Amortisation for the year – 0.4 1.9 2.3Impairment 0.8 – – 0.8Disposals – – (0.1) (0.1)Exchange differences – – 0.1 0.1At 31 March 2012 0.8 1.9 13.9 16.6Net book value at 31 March 2012 335.4 0.7 3.7 339.8

Cost At 1 April 2010 321.8 2.4 12.3 336.5Acquisitions 12.3 – – 12.3Additions – – 4.3 4.3Disposals (1.6) – (0.3) (1.9)Exchange differences 3.4 0.2 – 3.6At 31 March 2011 335.9 2.6 16.3 354.8Accumulated amortisation At 1 April 2010 – 1.1 10.3 11.4Amortisation for the year – 0.3 1.8 2.1Disposals – – (0.1) (0.1)Exchange differences – 0.1 – 0.1At 31 March 2011 – 1.5 12.0 13.5Net book value at 31 March 2011 335.9 1.1 4.3 341.3

Net book value at 31 March 2010 321.8 1.3 2.0 325.1

Current year impairment During the year the Group fully impaired goodwill of £0.8m which related to an Irish telecoms utility business. Contingent consideration of £0.6m was written back and both amounts were recognised in net non-operating income/expense.

Prior year acquisition and disposal of goodwill On 15 March 2011 the Group disposed of its 100 per cent holding of Eigen Technical Services Private Limited, a company incorporated in India, see note 4.

On 29 October 2010 the Group acquired Laing O’Rourke Insurance Limited, a company incorporated in Guernsey, for a total consideration of £25m.





13 Intangible Assets continued Impairment tests for cash-generating units containing goodwill The following units have significant amounts of goodwill

2012

£m 2011

£m

Australia 56.5 56.1United Kingdom 278.9 279.0Ireland – 0.8 335.4 335.9

The recoverable amount of goodwill attached to each cash-generating unit is based on value-in-use calculations in accordance with IAS 36, Impairment of Assets. Each calculation uses cash flow projections based on four-year financial budgets approved by management and a perpetual growth rate of 3 per cent (2011: 3 per cent) thereafter, discounted at the Group’s estimated pre-tax weighted average cost of capital of 12.5 per cent (2011: 12.5 per cent). Budgeted gross margins are based on past performance and management’s market expectations. The estimated perpetual growth rate of 3 per cent (2011: 3 per cent) does not exceed the long-term average growth rate for the business in which the cash-generating unit operates and is consistent with industry forecast reports. The weighted average cost of capital is a prudent estimate from listed industry competitors, adjusted for changes in capital structures.

As at 31 March 2012, based on the internal value in use calculations, management concluded that the recoverable value of the cash-generating units exceeded their carrying amount.

Amortisation charge The amortisation charge in respect of software, licences and brands is recognised in the following line items in the income statement:

2012

£m 2011

£m

Cost of sales – 1.5Administrative expenses 2.3 0.6 2.3 2.1

14 Business Combinations On 30 January 2012, R O’Rourke & Son Limited, a subsidiary of the Group, increased its shareholding from 19.9 per cent to 100 per cent in Bison Holdings Limited and Bison Manufacturing Limited (‘Bison’). Bison designs and manufactures pre-stressed concrete hollowcore floors, staircases, lift shafts, terraces, walls and columns. The acquisition was made as part of Laing O’Rourke’s on-going Design for Manufacture and Assembly (DfMA) strategy.

Due to the significant debts of Bison it was previously valued at nil, however the acquisition included a restructuring of Bison’s bank facilities so that they were no longer a liability of the company on the date of acquisition. The acquisition was made for £7.8m cash which was fully paid. The acquisition was made for £4.2m less than the fair value of the assets acquired primarily because a deferred tax asset of £5.0m could be utilised immediately within the Laing O’Rourke Group but was of no immediate use to other purchasers. The gain is included as an exceptional item in the consolidated income statement within ‘other operating income’ (see note 7).

Under acquisition accounting no fair value adjustments were deemed to be required. The assets acquired were:

Book and Fair value

acquired£m

Property, plant and equipment 7.9Deferred tax asset 5.0Inventories 1.5Trade and other receivables 4.0Cash and cash equivalents 0.9Trade and other payables (7.3)Total identifiable net assets acquired 12.0Total cash consideration (7.8)Gain on acquisition 4.2

From the date of acquisition to 31 March 2012, Bison contributed £4.2m to revenue, and £0.4m loss to the Group’s operating profit and profit before tax. If Bison had been acquired on 1 April 2011 the Group’s revenue would have been £2,936.6m, operating profit £8.1m and profit before tax £21.9m.

15 Investments in Joint Ventures and Associates

Joint ventures

equity investments

£m

Associates equity

investments £m

Loans to joint ventures

£mTotal

£m

Cost At 1 April 2011 19.2 13.0 86.5 118.7Equity investment purchases – 0.3 – 0.3Loans advanced – – 34.7 34.7Loans repaid – – (0.2) (0.2)Impairment – – (1.2) (1.2)Exchange differences – – (4.5) (4.5)At 31 March 2012 19.2 13.3 115.3 147.8Share of post-acquisition results At 1 April 2011 (16.1) – – (16.1)Share of results for the year after tax 22.7 – – 22.7Distributions received (30.7) – – (30.7)Exchange differences 1.8 0.1 – 1.9At 31 March 2012 (22.3) 0.1 – (22.2)Net book value at 31 March 2012 (3.1) 13.4 115.3 125.6


Cost At 1 April 2010 16.3 12.2 18.9 47.4Equity investment purchases 2.0 – – 2.0Loans advanced – – 65.3 65.3Loans repaid – – (0.6) (0.6)Exchange differences 0.9 0.8 2.9 4.6At 31 March 2011 19.2 13.0 86.5 118.7Share of post-acquisition results At 1 April 2010 15.2 – – 15.2Share of results for the year after tax – – – –Distributions received (28.2) – – (28.2)Exchange differences (3.1) – – (3.1)At 31 March 2011 (16.1) – – (16.1)Net book value at 31 March 2011 3.1 13.0 86.5 102.6


The Group’s share of joint venture and associate equity investments and loans to joint ventures are presented above. IAS 31, Interests in Joint Ventures, and IAS 28, Investments in Associates, require the following presentation adjustments:

• where the Group has already accounted for an obligation to fund net liabilities of a joint venture or associate this is deducted from loans made to the joint venture or associate; and

• where the Group’s obligation to fund net liabilities of a joint venture or associate exceeds the amount loaned a provision is recorded (see note 26).

The Group’s investments in joint ventures and associates are presented in the statement of financial position as:

2012

£m2011

£m

Investments in joint ventures and associates 54.6 51.4Loans to joint ventures 72.8 55.3Provisions (1.8) (4.1) 125.6 102.6

No impairment losses to equity investments were brought forward at 31 March 2012 or charged in the year (2011: £nil).





15 Investments in Joint Ventures and Associates continued The analysis of revenue, income, assets and liabilities of the Group’s interest in joint ventures and associates is set out below:

Joint ventures

2012£m

Associates2012

£m

Total2012

£m

Joint ventures

2011 £m

Associates 2011

£m

Total2011

£m

Revenue 639.4 0.2 639.6 309.4 0.1 309.5Expenses (611.9) (0.1) (612.0) (304.2) – (304.2)Exceptional item (see note 4) (2.8) – (2.8) – – –Operating profit 24.7 0.1 24.8 5.2 0.1 5.3Net finance income/(expense) 5.1 (0.1) 5.0 (2.7) (0.1) (2.8)Profit before tax 29.8 – 29.8 2.5 – 2.5Tax expense (7.1) – (7.1) (2.5) – (2.5)Profit after tax 22.7 – 22.7 – – –Non-current assets Goodwill – 4.4 4.4 – 4.4 4.4Property, plant and equipment 28.2 – 28.2 72.7 0.4 73.1Other non-current assets 249.6 0.8 250.4 116.8 0.4 117.2Current assets Cash and cash equivalents 202.8 – 202.8 44.7 – 44.7Other current assets 164.9 9.6 174.5 102.3 9.3 111.6Total assets 645.5 14.8 660.3 336.5 14.5 351.0Current liabilities Borrowings (43.7) – (43.7) (6.7) – (6.7)Other current liabilities (161.3) (0.2) (161.5) (131.1) (0.2) (131.3)Non-current liabilities Borrowings (404.5) (1.2) (405.7) (131.1) (1.3) (132.4)Other non-current liabilities (39.1) – (39.1) (64.5) – (64.5)Total liabilities (648.6) (1.4) (650.0) (333.4) (1.5) (334.9)Net (liabilities)/assets (3.1) 13.4 10.3 3.1 13.0 16.1

Financial commitments – – – 0.2 – 0.2Capital commitments – – – – – –

16 Other Investments

Fair Value 2012

£m 2011

£m

At 1 April 4.5 4.2Additions – 0.3Impairment (0.3) –At 31 March 4.2 4.5

In the prior reporting period the Group purchased £0.3m of convertible loan notes issued by a company which develops construction related technology. During the year to 31 March 2012 this investment was fully impaired and the loss recognised in the consolidated income statement. At 31 March 2012 the book value of Other investments equated to fair value.

17 Property, Plant and Equipment Group owner

occupied property

£m

Other land and buildings

£m

Plant, equipment

and vehicles£m

Total£m

Cost At 1 April 2011 21.2 26.7 508.9 556.8Additions 1.6 0.2 47.9 49.7Acquisitions 7.9 – – 7.9Disposals (1.5) (0.4) (57.1) (59.0)Transferred to disposal group classified as held-for-sale (12.2) – (11.7) (23.9)Exchange differences (0.7) – 0.7 –At 31 March 2012 16.3 26.5 488.7 531.5Accumulated depreciation At 1 April 2011 7.2 13.7 259.4 280.3Depreciation charge for the year 0.2 1.7 50.0 51.9Impairment 2.0 – 1.0 3.0Disposals (1.5) (0.2) (45.9) (47.6)Transferred to disposal group classified as held-for-sale (6.0) – (6.0) (12.0)Exchange differences (0.3) – 0.1 (0.2)At 31 March 2012 1.6 15.2 258.6 275.4Net book value at 31 March 2012 14.7 11.3 230.1 256.1

Cost At 1 April 2010 20.3 28.8 510.8 559.9Additions 0.1 2.0 63.6 65.7Disposals (0.3) (2.6) (64.1) (67.0)Exchange differences 1.1 (1.5) (1.4) (1.8)At 31 March 2011 21.2 26.7 508.9 556.8Accumulated depreciation At 1 April 2010 3.6 14.7 250.4 268.7Depreciation charge for the year 0.6 1.9 53.3 55.8Impairment 3.0 – – 3.0Disposals (0.3) (2.1) (43.4) (45.8)Exchange differences 0.3 (0.8) (0.9) (1.4)At 31 March 2011 7.2 13.7 259.4 280.3Net book value at 31 March 2011 14.0 13.0 249.5 276.5


Exceptional impairment charges were made during the year of £2.0m (2011: £3.0m) (see note 4).





17 Property, Plant and Equipment continued Finance leases: Included in ‘plant, equipment and vehicles’ are assets held under finance leases at the following amounts:

2012

£m 2011

£m

Cost at 1 April 264.6 252.4Accumulated depreciation at 1 April (99.2) (96.0)Net book value at 1 April 165.4 156.4Additions/acquisitions 28.5 48.4Cost of disposals/transfers out (37.3) (38.0)Depreciation on disposals/transfers out 26.3 26.6Depreciation charge for the year (28.3) (29.1)Exchange differences 0.2 1.1Net book value at 31 March 154.8 165.4

Finance lease terms are between one and five years, see note 24 for ageing of finance lease obligations.

Additions of assets under finance leases in the year are lower than new lease agreements taken out by £2.7m as the Group repaid certain of its leases and entered into new agreements with a different provider.

18 Investment Property

Freehold 2012

£m

Freehold2011

£m

Net book value at 1 April 22.1 21.9Transfers in 17.4 0.3Disposals (0.3) –Exchange differences (0.4) (0.1)Fair value adjustments – –Net book value at 31 March 38.8 22.1

Investment property income earned by the Group, all of which was received under operating leases, amounted to £1.7m (2011: £1.1m) and is shown as revenue in the income statement. Direct operating expenses arising on the investment properties in the year amounted to £0.3m (2011: £0.3m).

The Group’s investment properties are let under non-cancellable operating lease agreements. The leases have varying terms, escalating clauses and renewal rights. The Group’s future operating lease income commitments comprise:

2012

£m 2011

£m

Expiry date: Due within one year 1.5 0.9Due between one and five years 2.5 2.5Due after more than five years 16.1 16.7 20.1 20.1

19 Available-For-Sale Financial Assets

2012

£m2011

£m

At 1 April 10.3 9.1Disposals (6.2) (0.1)Exchange differences (0.2) (0.1)Net (losses)/gains transferred to equity (0.4) 1.4At 31 March 3.5 10.3

Available-for-sale financial assets include the following: Listed securities 2.8 9.6Unlisted securities 0.7 0.7 3.5 10.3

The fair value of available-for-sale financial assets is determined from quoted prices in active markets.

20 Derivative Financial Instruments 2012 2011

Assets£m

Liabilities £m

Assets£m

Liabilities£m

Current portion: Foreign exchange fair value hedges 0.1 – 0.8 –Forward foreign exchange contracts 0.1 (0.7) 3.8 –Total derivative financial instruments 0.2 (0.7) 4.6 –

Foreign Exchange Fair Value Hedges The Group borrows funds in foreign currencies to hedge the foreign currency exposure of future income. The highly probable forecast income is expected to be received at various dates over the next nine months. No gains or losses were recognised in the period to 31 March 2012 (2011: £nil). There were no ineffective portions to be recognised in the profit or loss account arising from fair value hedges (2011: £nil).

Forward Exchange Contracts The Group enters into forward contracts to hedge its foreign currency exposure arising on a number of construction contracts where construction costs have been agreed to be paid in foreign currencies. The highly probable forecast transactions denominated in foreign currencies are expected to occur at various dates during the next 12 months.

21 Restricted Financial Assets

2012

£m2011

£m

Restricted cash deposits 0.4 0.8

At 31 March 2012 £0.4m (2011: £0.8m) relates to bank deposits held as collateral in relation to specific construction and development projects. It is a contractual requirement that permission from third parties is obtained to withdraw these monies. The Directors consider the carrying amount of the restricted cash deposits to be at fair value.





22 Inventories

2012

£m 2011

£m

Development land and work in progress 257.9 263.5Raw materials and consumables 10.4 11.6Finished goods and goods for resale 6.0 2.2 274.3 277.3

Development land and work in progress at 31 March 2012 includes assets to a value of £193.2m (2011: £197.2m) expected to be consumed after more than one year.

Capitalised specific borrowing costs attributable to qualifying assets and included in development land and work in progress decreased in the year by £1.0m (2011: increased by £3.6m).

Inventories carried at fair value less costs to sell at 31 March 2012 had a carrying value of £8.9m (2011: £10.5m).

23 Trade and Other Receivables

2012

£m 2011

£m

Amounts expected to be recovered within one year: Gross amounts due from customers on construction contracts 247.2 439.7Trade receivables 137.4 115.0Prepayments and accrued income 29.5 23.7Other receivables 39.5 16.2 453.6 594.6Amounts expected to be recovered after more than one year: Gross amounts due from customers on construction contracts 7.4 6.5Trade receivables 2.6 7.1Other receivables 10.0 23.7 20.0 37.3Total trade and other receivables 473.6 631.9

At 31 March 2012, trade and other receivables include retentions of £94.1m (2011: £98.8m) relating to construction contracts of which £7.4m (2011: £6.5m) are non-current assets.

For construction contracts in progress at 31 March 2012, £356.1m (2011: £376.9m) was received as an advance and is included within advance payments on construction contracts in trade and other payables (see note 25).

The net losses recognised via write off or impairment of trade and other receivables in the year to 31 March 2012 amounted to £12.1m (2011: £6.1m), £9.5m has been recognised in cost of sales and £2.6m in administrative expenses. At 31 March 2012 the bad debt provision for trade receivables amounted to £15.6 million (2011: £6.0m) and for other receivables amounted to £nil (2011: £0.1m).

24 Borrowings

2012

£m2011

£m

Amounts expected to be settled within one year: Bank loans 65.3 49.4Finance lease obligations 32.6 37.0 97.9 86.4Amounts expected to be settled after more than one year: Bank loans 132.2 192.1Finance lease obligations 49.1 58.0 181.3 250.1Total borrowings 279.2 336.5

Finance lease obligations Finance lease obligations are payable as follows:

Interest2012

£m

Principal2012

£m

Minimum lease

payments2012

£m

Interest 2011

£m

Principal2011

£m

Minimum lease

payments2011

£m

Less than one year 2.9 32.6 35.5 4.1 37.0 41.1Between one and five years 2.5 49.1 51.6 3.6 57.7 61.3More than five years – – – – 0.3 0.3 5.4 81.7 87.1 7.7 95.0 102.7

Obligations under finance leases are secured by legal charges on certain non-current assets of the Group with an original cost of £256.1m (2011: £264.6m) and total net book value of £154.8m (2011: £165.4m).





25 Trade and Other Payables

2012

£m 2011

£m

Amounts expected to be settled within one year: Advance payments on construction contracts 356.1 376.9Trade payables 257.8 250.2Other tax and social security 32.9 31.9Other creditors 109.0 113.1Accruals and deferred income 471.5 540.4 1,227.3 1,312.5Amounts expected to be settled after more than one year: Trade payables 11.0 5.8Other creditors 2.2 2.1Accruals and deferred income 16.9 11.0 30.1 18.9Total trade and other payables 1,257.4 1,331.4

At 31 March 2012, trade and other payables include retentions of £80.8m (2011: £101.6m) relating to construction contracts of which £10.3m (2011: £5.8m) are non-current liabilities.

26 Provisions Insurance technical

provisions£m

Employee provisions

£m

Joint venture provisions

£m

Total provisions

£m

At 1 April 2011 25.3 5.0 4.1 34.4Provisions created 5.2 0.1 0.5 5.8Provisions utilised (1.1) – (2.8) (3.9)At 31 March 2012 29.4 5.1 1.8 36.3

Disclosed within: Current liabilities 3.0 2.7 1.8 7.5Non-current liabilities 26.4 2.4 – 28.8 29.4 5.1 1.8 36.3

At 1 April 2010 – 4.4 – 4.4Provisions created 10.4 1.5 4.1 16.0Provisions utilised – (0.9) – (0.9)Business acquired 14.9 – – 14.9At 31 March 2011 25.3 5.0 4.1 34.4

Disclosed within: Current liabilities 7.5 3.1 4.1 14.7Non-current liabilities 17.8 1.9 – 19.7 25.3 5.0 4.1 34.4

Insurance provisions relate to provisions held by the Group’s captive insurer Laing O’Rourke Insurance Limited. Such provisions are held until utilised or such times as further claims are considered unlikely under the respective insurance policies.

The Group provides in full for obligations to remedy net liabilities of jointly controlled entities in excess of amounts already loaned. At 31 March 2012 these provisions amounted to £1.8m (2011: £4.1m) which were measured in accordance with the Group’s accounting policies. Amounts provided are assessed based on judgements of contract costs, contract programmes and maintenance liabilities and are expected to be paid within one year.

27 Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following;

Recognised deferred tax assets and liabilities

Assets2012

£m

Assets2011

£m

Liabilities2012

£m

Liabilities 2011

£m

Net2012

£m

Net2011

£m

Property, plant and equipment 0.1 5.4 (8.0) (12.5) (7.9) (7.1)Intangible assets – 0.1 – (0.3) – (0.2)Other items 14.0 14.5 – (5.8) 14.0 8.7Tax losses carried forward 12.3 0.1 – – 12.3 0.1Deferred tax assets/(liabilities) 26.4 20.1 (8.0) (18.6) 18.4 1.5

Disclosed within: Current assets/(liabilities) 15.1 – (3.4) – 11.7 –Non-current assets/(liabilities) 11.3 20.1 (4.6) (18.6) 6.7 1.5 26.4 20.1 (8.0) (18.6) 18.4 1.5

Movements in deferred tax assets and liabilities during the year

As at 1 April 2011

£m

Exchange and other

movements£m

Recognised in income

£m

Recognised in equity

£m

As at 31 March

2012£m

Property, plant and equipment (7.1) (1.7) 0.9 – (7.9)Intangible assets (0.2) 0.2 – – –Other items 8.7 3.1 2.1 0.1 14.0Tax losses carried forward 0.1 (0.1) 12.3 – 12.3 1.5 1.5 15.3 0.1 18.4

As at 1 April 2010

£m

Exchange and other

movements£m

Recognised in income

£m

Recognised in equity

£m

As at 31 March 2011

£m

Property, plant and equipment (8.6) 0.1 1.4 – (7.1)Intangible assets (0.4) – 0.2 – (0.2)Other items 5.6 1.0 2.5 (0.4) 8.7Tax losses carried forward 0.1 – – – 0.1 (3.3) 1.1 4.1 (0.4) 1.5

Other items relate to Laing O’Rourke Australia Pty Limited where employee benefits, project accruals and cost provisions have been charged in one period but will be taxed in another.

Unrecognised deferred tax assets and liabilities Deferred tax assets have not been recognised in respect of the following items:

2012 £m

2011 £m

Tax losses 12.2 13.1

The Group has unrecognised deferred tax assets of £12.2m relating to unused tax losses. The tax losses have arisen in the Group and can be carried forward to future periods for use against part of future profits. No deferred tax asset has been recognised in respect of these amounts due to the unpredictability of future taxable profits and the constraints in using the losses themselves.





28 Non-current Assets Held for Sale and Discontinued Operations Discontinued operations relate to the assets and liabilities of the Group’s German operations following the approval of the Group’s management and shareholders on 9 February 2012 to sell Naturstein Vetter GmbH. The completion date for the transaction is expected in the next six months.

Held-for-sale assets relate to certain items of plant and equipment held by Laing O’Rourke Australia Holdings Limited, a subsidiary of the Group, which were purchased for use in constructing a railway. The held-for-sale assets are no longer required by the Group and the carrying value is expected to be recovered by sale within the next year, hence the assets have been reclassified from Property, Plant and Equipment to held-for-sale in accordance with IFRS 5, Assets Held-for-Sale and Discontinued Operations.

2012 2012 2012 2011

Discontinued operations

£mHeld for sale

£m Total

£m Total

£m

Assets of disposal group classified as held-for-sale Property, plant and equipment 7.1 4.8 11.9 –Inventory 1.3 – 1.3 –Other current assets 0.6 – 0.6 – 9.0 4.8 13.8 –

Liabilities of disposal group classified as held-for-sale Trade and other payables (3.8) – (3.8) –Other current liabilities (1.1) – (1.1) – (4.9) – (4.9) –

Cumulative income or expense recognised in other comprehensive income relating to disposal group classified as held for sale Foreign exchange translation adjustments (4.0) – (4.0) –

Cash flows of discontinued operations Operating cash flow (0.5) – (0.5) –Investing cash flow 0.1 – 0.1 –Financing cash flow – – – – (0.4) – (0.4) –

Analysis of the results of discontinued operations, and the result recognised on re-measurement of disposal groups

Discontinued Operations

2012

£m 2011

£m

Revenue 5.2 7.0Expenses (6.8) (8.0)Exceptional items (2.1) (3.0)Loss before tax of discontinued operations (3.7) (4.0)Income tax (expense)/benefit (0.1) 1.0Loss after tax of discontinued operations (3.8) (3.0)

Pre-tax loss recognised on the re-measurement of assets of disposal group (2.9) –Income tax benefit 0.6 –Post-tax loss recognised on the re-measurement of assets of disposal group (2.3) –

Loss for the year from discontinued operations (6.1) (3.0)

Closure costs and re-measurement of assets of disposal group are included as exceptional items, see note 4.

29 Share Capital and Premium

Number of €1 shares

Share premium

£m

At 1 April 2011 9,000 319.4Reduction in share premium – (33.0)At 31 March 2012 9,000 286.4

On 2 November 2011 Laing O’Rourke Corporation Limited passed a resolution to reduce its share premium by €37.7m.

The authorised share capital of Laing O’Rourke Corporation Limited at 31 March 2012 was 18,000 ordinary shares of €1 each (2011: 18,000 shares).

30 Reconciliation of Movements in Shareholders’ Equity

Called-up share capital

£m

Share premium

£m

Fair value reserve

£m

Foreign currency

translation reserve

£m

Retained earnings

£m

Total shareholders’

equity £m

Non-controlling

interests£m

Total equity

£m

At 1 April 2010 – 339.5 (2.1) 39.5 198.2 575.1 2.7 577.8Total comprehensive income for the year – – 0.8 10.5 21.0 32.3 0.3 32.6Reduction in share premium – (20.1) – – – (20.1) – (20.1)Dividends paid – – – – (8.8) (8.8) (0.4) (9.2)At 31 March 2011 – 319.4 (1.3) 50.0 210.4 578.5 2.6 581.1Total comprehensive income for the year – – (0.4) (2.6) 28.4 25.4 0.6 26.0Reduction in share premium – (33.0) – – – (33.0) – (33.0)Dividends paid – – – – (8.8) (8.8) (0.6) (9.4)At 31 March 2012 – 286.4 (1.7) 47.4 230.0 562.1 2.6 564.7

Fair value reserve The fair value reserve includes the cumulative net change in the fair value of available-for-sale investments until the investment is de-recognised, together with any related deferred tax.

Foreign currency translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well as from the translation of liabilities and the cumulative net change in the fair value of instruments that hedge the Group’s net investment in foreign operations. The translation reserve also includes any related current tax.

Retained earnings Retained earnings relate to the proportion of net income retained by the Group less distributions.





31 Guarantees and Contingent Liabilities The Group and certain subsidiaries have, in the normal course of business, given guarantees and entered into counter-indemnities in respect of bonds relating to the Group’s own contracts. The Group has given guarantees in respect of its share of certain contractual obligations of joint ventures and associates.

At 31 March 2012, Group companies are parties to disputes from which legal actions have arisen or may arise in the ordinary course of business. While the outcome of these disputes is uncertain, the Directors believe that, except where provided in these financial statements, no material loss to the Group will occur (2011: £nil). In forming their opinion the Directors have taken relevant legal advice. Undertakings have been given by certain Group companies that they will not seek repayment of amounts due by other Group companies, except to the extent of their ability to pay.

32 Financial Instruments Financial risk management Financial risk management is an integral part of the way the Group is managed. In the course of its business, the Group is exposed primarily to foreign currency risk, interest rate risk, liquidity risk and credit risk. The overall aim of the Group’s financial risk management policies is to minimise potential adverse effects on financial performance and net assets.

The Group’s treasury department manages the principal financial risks within policies and operating parameters approved by the Board of Directors and purchases derivative financial instruments where appropriate. Treasury is not a profit centre and does not enter into speculative transactions.

32 Financial Instruments continued 32.1 Foreign Currency Risk Foreign currency risk is the risk that the value of financial instruments will fluctuate as a result of changes in foreign exchange rates. The pound sterling equivalents of the currency of the Group’s financial assets and liabilities, were as follows:

Pounds sterling value of equivalent currency (m)

2012 GBP

2012EUR

2012AUD

2012AED

2012 SAR

2012Other

2012 Total£m

Loans to joint ventures 15.1 65.9 34.3 – – – 115.3Other investments 4.2 – – – – – 4.2Trade and other receivables 236.6 3.8 107.0 67.3 43.2 1.8 459.7Available-for-sale financial assets – 3.5 – – – – 3.5Derivative financial instruments 0.2 – – – – – 0.2Restricted financial assets 0.2 0.1 – 0.1 – – 0.4Cash and cash equivalents 415.5 10.2 97.3 12.9 8.0 56.7 600.6Total financial assets 671.8 83.5 238.6 80.3 51.2 58.5 1,183.9 Borrowings (192.6) – (68.1) – (6.9) (11.6) (279.2)Derivative financial instruments – – – – – (0.7) (0.7)Trade and other payables (795.3) (4.7) (287.4) (84.5) (3.6) (49.0) (1,224.5)Net financial (liabilities)/assets (316.1) 78.8 (116.9) (4.2) 40.7 (2.8) (320.5)

Other borrowings in 2012 and 2011 relate entirely to USD loans. Other cash and cash equivalents include £31.1m held in CAD and £20.8m held in HKD. Other trade and other payables include £16.3m held in CAD and £27.5m held in HKD.

Pounds sterling value of equivalent currency (m)

2011 GBP

2011EUR

2011AUD

2011AED

2011 SAR

2011Other

2011 Total£m

Loans to joint ventures 2.0 71.5 13.0 – – – 86.5Other investments 4.5 – – – – – 4.5Trade and other receivables 201.0 65.8 169.7 111.7 61.6 4.5 614.3Available-for-sale financial assets – 10.2 0.1 – – – 10.3Derivative financial instruments 0.5 – 4.1 – – – 4.6Restricted financial assets – 0.8 – – – – 0.8Cash and cash equivalents 379.8 3.9 163.1 52.2 0.2 20.1 619.3Total financial assets 587.8 152.2 350.0 163.9 61.8 24.6 1,340.3 Borrowings (227.7) (0.6) (75.6) (1.9) (16.1) (14.6) (336.5)Trade and other payables (843.2) (12.5) (247.7) (159.3) (13.2) (23.6) (1,299.5)Net financial (liabilities)/assets (483.1) 139.1 26.7 2.7 32.5 (13.6) (295.7)

Of the total foreign currency borrowings of £86.6m (2011: £108.8m), the amount of borrowings used to finance overseas operations amounts to £86.6m (2011: £108.8m).

It is Group policy that forward exchange contracts are taken out for all material foreign currency receivables and payables where they differ from the functional currency of the Company or subsidiary.

If the foreign exchange rates that the Group is exposed to had changed adversely by 10 per cent at the balance sheet date, the profit for the year and equity would have reduced by £2.0m (2011: £0.1m). This sensitivity analysis takes into account the tax impact and the forward exchange contracts in place.





32 Financial Instruments continued 32.2 Interest Rate Risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk in relation to some of its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The contractual repricing or maturity dates, whichever dates are earlier, and effective interest rates of borrowings are as follows:

Repricing/maturity date

At 31 March 2012 Total

£m

Within one year

£m

Between one and two years

£m

After two years

£m

Effective interest rate

%

Bank loans 197.5 65.3 58.9 73.3 4.19Finance lease obligations 81.7 32.6 27.4 21.7 4.83 279.2 97.9 86.3 95.0 4.59

At 31 March 2011 Bank loans 241.5 49.4 101.2 90.9 3.51Finance lease obligations 95.0 37.0 28.2 29.8 4.12 336.5 86.4 129.4 120.7 3.62

If interest rates had been 1 per cent higher during the period, profit and equity would have reduced by £2.1m (2011: £2.4m). This sensitivity analysis takes into account the tax impact.

32.3 Liquidity Risk Prudent liquidity risk management involves maintaining sufficient cash and available funding to meet liabilities as they fall due. The Group has procedures in place to minimise liquidity risk such as maintaining sufficient cash and other highly liquid current assets and by having an adequate amount of committed credit facilities.

Maturity of financial liabilities The maturity profile of the carrying amount of the Group’s non-current liabilities including interest is as follows:

At 31 March 2012

Trade and other

payables£m

Bank loans £m

Finance leases

£m Total

£m

Between one and less than two years 24.5 69.8 29.0 123.3Between two and less than five years 5.6 74.1 22.6 102.3Five or more years – 6.7 – 6.7 30.1 150.6 51.6 232.3

At 31 March 2011 Between one and less than two years 16.1 106.1 30.5 152.7Between two and less than five years 2.1 87.1 30.8 120.0Five or more years 0.7 5.7 0.3 6.7 18.9 198.9 61.6 279.4

Borrowing facilities The Group has the following undrawn committed borrowing facilities at the year-end in respect of which all conditions precedent had been met:

2012

£m 2011

£m

Expiring within one year 79.4 129.7Expiring between one and two years 81.7 –Expiring in more than two years – 2.2 161.1 131.9

32 Financial Instruments continued 32.4 Credit Risk Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. The Group’s credit risk is primarily attributable to its loan assets, trade and other receivables.

The ageing of trade receivables at the year-end was:

Gross receivables

2012£m

Impairment 2012

£m

Gross receivables

2011£m

Impairment2011

£m

Not past due 95.7 – 71.1 –Past due 0–30 days 23.3 – 23.7 –Past due 31–120 days 9.8 – 11.6 –Past due 121–365 days 5.8 – 11.9 (0.1)More than one year 21.0 (15.6) 9.8 (5.9) 155.6 (15.6) 128.1 (6.0)

Receivables at 31 March 2012 that are more than one year past due date but not impaired amount to £5.4m (2011: £3.9m). The Group believes that there is no material exposure in respect of these balances.

Based on prior experience and an assessment of the current economic environment, management believes there is no further credit risk provision required in excess of the normal provision for impairment of its loan assets, trade and other receivables. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales are made to customers with an appropriate credit history and monitors on a continuing basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions.





32 Financial Instruments continued 32.5 Fair Values Financial instruments carried at fair value in the statement of financial position are Other investments, available-for-sale financial assets and derivative financial instruments. The following hierarchy classifies each class of financial instrument depending on the valuation technique applied in determining its fair value.

Level 1: The fair value is calculated based on quoted prices traded in active markets for identical assets or liabilities. The Group holds available-for-sale investments which are traded in active markets and valued based on the closing per unit market price at 31 March 2012.

Level 2: The fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of derivative financial instruments is estimated to be the difference between the fixed forward price of the instrument, and the current forward price for the residual maturity of the instrument at the balance sheet date.

Level 3: The fair value is based on unobservable inputs. The fair value of Other investments is calculated by discounting expected future cash flows using asset specific discount rates.

There have been no transfers between these categories in the current or preceding year.

Financial instruments measured at fair value:

Fair value measurement 2012 Fair value measurement 2011

Level 1

£m Level 2

£mLevel 3

£mTotal

£mLevel 1

£mLevel 2

£m Level 3

£m Total

£m

Other investments – – 4.2 4.2 – – 4.5 4.5Derivative financial instruments – (0.5) – (0.5) – 4.6 – 4.6Available-for-sale financial assets 3.5 – – 3.5 10.3 – – 10.3 3.5 (0.5) 4.2 7.2 10.3 4.6 4.5 19.4

Reduction in Other investments valued in accordance with Level 3 of the fair value hierarchy relates solely to the full impairment of convertible loan notes. See note 16 for further details.

The fair value movements on Other investments, available-for-sale financial assets and derivative financial instruments are recognised in the statement of comprehensive income.

The carrying and fair values of the Group’s financial instruments at 31 March 2012 and 31 March 2011 are as follows:

Fair value2012

£m

Carrying amount

2012 £m

Fair value 2011

£m

Carrying amount

2011£m

Other investments 4.2 4.2 4.5 4.5Derivative financial instruments (0.5) (0.5) 4.6 4.6Available-for-sale financial assets 3.5 3.5 10.3 10.3Loans and receivables 575.0 575.0 700.8 700.8Financial liabilities measured at amortised cost (1,503.7) (1,503.7) (1,636.0) (1,636.0)

The carrying and fair values of the Group’s financial instruments were not materially different at 31 March 2012.

Loans, receivables and financial liabilities are valued at their amortised cost which is deemed to reflect fair value due to their short-term nature.

32 Financial Instruments continued 32.6 Capital Risk Management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group regularly forecasts its cash position to management on both a short-term and long-term basis. Performance against forecasts is also reviewed and analysed to ensure the Group efficiently manages its net funds/debt position.

Net funds is calculated as cash and cash equivalents less total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position).

At 31 March 2012 the Group had net funds of £321.4m (2011: £282.8m); see note 37.

The Group complied with all externally imposed capital requirements which it is subject to during the two years to 31 March 2012.

33 Assets Charged as Security for Liabilities and Collateral Accepted as Security for Assets Financial assets pledged to secure liabilities are as follows:

2012

£m2011

£m

Restricted financial assets 0.4 0.8

Financial assets pledged as short-term collateral and included within cash equivalents were £34.9m (2011: £33.3m).

As part of the Group’s management of its insurable risks a proportion of this risk is managed through self insurance programmes operated by its captive insurance subsidiary company, Laing O’Rourke Insurance Limited. This Company is a wholly owned subsidiary of the Group and premiums paid are held to meet future claims. The cash balances held by the Company are reported within cash and cash equivalents. As is usual practice for captive insurance companies some of the cash is used as collateral against contingent liabilities (standby letters of credit) that have been provided to certain external insurance companies. The standby letters of credit have been issued via banking facilities that Laing O’Rourke Insurance Limited has in place.

No financial assets have been provided to the Group as collateral (2011: £nil).





34 Financial and Capital Commitments Capital expenditure for property, plant and equipment, authorised and contracted for which has not been provided for in the financial statements amounted to £3.2m (2011: £6.3m) in the Group.

The Group leases land and buildings, equipment and other various assets under non-cancellable operating lease agreements. The leases have varying terms, escalating clauses and renewal rights. The lease expenditure charge to the income statement is disclosed in note 5. The Group’s future aggregate minimum lease payments comprise:

Land and buildings

2012£m

Other 2012

£m

Land and buildings

2011 £m

Other2011

£m

Expiry date: Due within one year 31.9 5.5 24.8 2.3Due between one and five years 83.3 10.5 68.5 3.5Due after more than five years 167.7 – 161.2 – 282.9 16.0 254.5 5.8

Future commitments have been computed on current rental payments which are subject to periodic review.

The Group has committed to provide its share of further equity funding and subordinated debt investments in PPP special purpose entities amounting to £35.8m (2011: £21.9m).

35 Related Party Transactions and Balances Identity of related parties The Group has a related party relationship with its major shareholder, subsidiaries, jointly controlled entities, jointly controlled operations, associates and key management personnel.

Group The Group received income and incurred expenses with related parties from transactions made in the normal course of business. Details of loans to related parties are given in note 15.

Sale of goods and services provided to related parties 2012 2011

Income earned in year

£m

Receivable at year-end

£m

Income earned in year

£m

Receivable at year-end

£m

Jointly controlled entities 61.0 41.2 67.4 18.9

Purchase of goods and services provided by related parties 2012 2011

Expenses paid in year

£m

Payables at year-end

£m

Expenses paid in year

£m

Payables at year-end

£m

Jointly controlled entities 2.7 1.0 19.1 2.0

The related parties’ receivables are not secured and no guarantees were received in respect thereof. The receivables will be settled in accordance with normal credit terms.

35 Related Party Transactions and Balances continued Property Leases During the year, the Group incurred expenditure of £3.6m (2011: £3.6m) from Sycamore Properties Limited, £2.2m (2011: £2.0m) from Mark Holding & Finance Limited and £5.9m (2011: £5.9m) from Steetley Investments Limited in respect of amounts due under lease agreements for premises occupied by the Group. The interests in Sycamore Properties Limited, Mark Holding & Finance Limited and Steetley Investments Limited are held in trust, the beneficiaries of which are R G O’Rourke KBE and H D O’Rourke, who are also the beneficiaries of the trusts which ultimately own Suffolk Partners Corporation. At the year-end the balance outstanding was £nil (2011: £nil). No amounts were written off in the period by either party in respect of amounts payable under the agreements entered into.

Share acquisition On 30 January 2012 the Group increased its ownership of Bison Holdings Limited and Bison Manufacturing Limited from 19.9 per cent to 100 per cent. As part of the acquisition the Group acquired a 60.2 per cent shareholding from Suffolk Partners (Two) Limited for £4.1m. The immediate and ultimate parent company of Suffolk Partners (Two) Limited and Laing O’Rourke Corporation Limited is Suffolk Partners Corporation. Further details are provided in note 14.

Loans During the year, the ultimate parent company, Suffolk Partners Corporation, repaid £7.5m loaned by the Group (2011: borrowed £2.3m). The loan is subject to interest at commercial rates. At the year-end the balance outstanding was £12.4m (2011: £19.1m).

During the year, the Group acquired a minority share of a syndicated senior debt facility jointly repayable from Southside and City Developments Limited and KDC Properties Limited for £6.0m. The Group’s interest in the senior debt facility ranks pari-passu with other lenders, who are financial institutions. During the year an additional loan of £0.7m was made to Southside and City Developments Limited. The loans entered into are based on normal commercial terms. C Klerides and V Papadopoulos are Directors of Laing O’Rourke Corporation Limited and Southside and City Developments Limited. At the year-end the fair value of the amounts outstanding was £7.1m (2011: £nil). No amounts were written off in the period by either party in respect of amounts payable under the agreements entered into.

During the year, the Group loaned £1.0m (2011: £2.0m) to Augur Investments Limited. Suffolk Partners Corporation is the ultimate parent company of Laing O’Rourke Corporation Limited and a 50 per cent shareholder of Augur Investments Limited. The loan is subject to interest at commercial rates. At the year-end the balance outstanding was £3.2m (2011: £2.0m).

In the opinion of the Directors the agreements entered into are based on normal commercial terms.

Loans to and from joint ventures and associates At 31 March 2012 loans to joint ventures amounted to £115.3m (2011:£86.5m) and loans from joint ventures amounted to £6.6m (2011: £23.8m). During the normal course of business the Group provided services to, and received management fees from certain joint ventures and associates amounting to £0.2m (2011: £0.2m). Amounts due to and from joint ventures and associates at 31 March 2012 are disclosed within trade and other receivables and trade and other payables in notes 23 and 25 respectively.





36 Ultimate Parent Company The immediate and ultimate parent company of Laing O’Rourke Corporation Limited is Suffolk Partners Corporation, a company incorporated in the British Virgin Islands.

The interests in the share capital of Suffolk Partners Corporation are held in trusts, the beneficiaries of which are R G O’Rourke KBE and H D O’Rourke.

37 Reconciliation of Net Cash Flow to Movement in Net Funds

2012

£m 2011

£m

Decrease in cash and cash equivalents for the year (19.0) (99.1)Cash inflow from debt and lease financing 89.3 158.1Change in net funds resulting from cash flows 70.3 59.0New finance leases (31.2) (48.4)Foreign exchange translation differences (0.5) 2.3Movement in net funds in the year 38.6 12.9Net funds at 1 April 282.8 269.9Net funds at 31 March 321.4 282.8

38 Principal Subsidiaries, Jointly Controlled Entities and Associates

Principal subsidiaries Principal activity

Group interest in ordinary voting

shares Country of incorporation or registration

Bison Manufacturing Limited Manufacture of precast concrete 100% England and Wales Crown House Technologies Limited Mechanical and electrical contracting 100% England and Wales Expanded Limited Civil and structural engineering, piling

and demolition 100% England and Wales

Explore Capital Limited Holding company 100% England and Wales Explore Investments Australia Pty Limited Property development 100% Australia Explore Investments Limited Commercial property development 100% England and Wales Explore Living plc Residential development 100% England and Wales Explore Living Balls Park Limited Residential development 100% England and Wales Explore Manufacturing Limited Manufacturing construction products 100% England and Wales John Laing International Limited Overseas contracting 100% England and Wales Laing O’Rourke Australia Construction Pty Limited

Construction, infrastructure, rail and plant hire

100% Australia

Laing O’Rourke Australia Holdings Limited Holding company 100% Cyprus Laing O’Rourke Australia Pty Limited Holding company 100% Australia Laing O’Rourke Canada Limited Building contracting 100% Canada Laing O’Rourke Construction Limited Building contracting 100% England and Wales Laing O’Rourke Infrastructure Limited Civil engineering and infrastructure 100% England and Wales Laing O’Rourke Ireland Holdings Limited Holding company 100% Cyprus Laing O’Rourke Ireland Limited Building contracting 100% Ireland Laing O’Rourke Middle East Holdings Limited Building and civil engineering 100% Cyprus Laing O’Rourke plc Holding company 100% England and Wales Laing O’Rourke Services Limited Service company 100% England and Wales Laing O’Rourke Utilities Limited Utilities contracting 100% England and Wales Naturstein Vetter GmbH Finished stone products 94% Germany O’Rourke Investments Holdings (UK) Limited Holding company 100% England and Wales Select Plant Hire Company Limited Plant hire and operations 100% England and Wales Vetter UK Limited Finished stone products 94% England and Wales



United Kingdom dartfordBridge Place 1 & 2 Anchor Boulevard Crossways Dartford Kent DA2 6SN United Kingdom Tel: +44 (0)1322 296200 Fax: +44 (0)1322 296262

CambridgeshireBarford Road Little Barford St Neots Cambridgeshire PE19 6WB United Kingdom Tel: +44 (0)1480 402500 Fax: +44 (0)1480 402572

CardiffBuilding 2 The Eastern Business Park Wern Fawr Lane St Mellons Cardiff CF3 5XA United Kingdom Tel: +44 (0)2920 775000 Fax: +44 (0)2920 778482

Leeds3320 Century Way Thorpe Park Leeds LS15 8ZB United Kingdom Tel: +44 (0)113 2840250 Fax: +44 (0)113 2607054

manchesterArchway 3 Birley Fields Greenheys Lane West Hulme Manchester M15 5QJ United Kingdom Tel: +44 (0)161 2276000 Fax: +44 (0)161 2276199

newcastleRushwood Balliol Business Park Benton Lane Newcastle upon Tyne NE12 8EW United Kingdom Tel: +44 (0)191 2381430 Fax: +44 (0)191 2381431

Scotland 21 Woodhall Eurocentral Holytown Motherwell ML1 4YT United Kingdom Tel: +44 (0)1698 731000 Fax: +44 (0)1698 731001

SteetleyExplore Industrial Park Off A619 Worksop Nottinghamshire S80 3DT United Kingdom Tel: +44 (0)1777 353000 Fax: +44 (0)1777 353027

Canada401 Bay Street Suite 1600 Toronto M5H 2Y4 Ontario Canada Tel: +1416 (0)646 5167

United arab emirateSabu dhabiLadies Beach PO Box 110800 Abu Dhabi United Arab Emirates Tel: +971 (0)25017 017 Fax: +971 (0)25017 018

dubaiAl Shoala Building 5th Floor Block A PO Box 25948 Dubai United Arab Emirates Tel: +971 (0)42949 944 Fax: +971 (0)42949 049

Europe Hub offices Australia Hub offices

aUStraLia neW SoUtH WaLeSSydneyLevel 4 Innovation Place 100 Arthur Street North Sydney NSW 2060 Australia Tel: +61 (0)2 9903 0300 Fax: +61 (0)2 9903 0333

Hunter ValleyCnr Strathmore and Blakefield Roads Muswellbrook NSW 2333 Australia Tel: +61 (0)2 6543 4600 Fax: +61 (0)2 6543 4060

Sydney rail operations 14 Carter Street Homebush Bay NSW 2127 Australia Tel: +61 (0)2 9647 3200 Fax: +61 (0)2 9647 3205

Hunter Valley rail operationsJunction St Telarah NSW 2333 Australia Tel: +61 (0)2 4932 3636 Fax: +61 (0)2 4932 3680

QUeenSLandbrisbane – Principal officeLevel 4 Mincom Building 192 Ann Street Brisbane QLD 4000 Australia Tel: +61 (0)7 3223 2300 Fax: +61 (0)7 3223 2303

brisbaneLevel 3 200 Adelaide Street Brisbane QLD 4000 Australia Tel: +61 (0)7 3012 3300

WeStern aUStraLiaPerthLevel 3 43-47 Burswood Road Burswood WA 6100 Australia Tel: +61 (0)8 9362 7111 Fax: +61 (0)8 9362 7100

nortHern territorY darwin24 Sandgroves Crescent Winnellie NT 0820 Australia Tel: +61 (0)8 8984 3477 Fax: +61 (0)8 8984 4325

Hong Kong11/F Kerry Centre 683 King’s Road Quarry Bay Hong Kong Tel: +852 (0) 2721 0143 Fax: +852 (0) 2721 0807



38 Principal Subsidiaries, Jointly Controlled Entities and Associates continued

Jointly controlled entities Principal activity Group ownership

interest Country of incorporation or registration

Aldar Laing O’Rourke Construction LLC Construction & project management 49% United Arab Emirates Australia Transport Express Rail track construction 70% Australia Barnsley SPV One Limited PFI accommodation operator schools 40% England and Wales Barnsley SPV Two Limited PFI accommodation operator schools 40% England and Wales Barnsley SPV Three Limited PFI accommodation operator schools 40% England and Wales Barnsley Local Education Partnership Limited PFI accommodation operator schools 40% England and Wales CLM Delivery Partners Limited Delivery partner for 2012 Olympics 37.5% England and Wales Emirates Precast Construction LLC Building and civil engineering 40% United Arab Emirates Health Montreal Collective CJV Limited Partnership

Building and civil engineering 50% Canada

Health Montreal Collective Limited Partnership

PFI accommodation operator hospital 25% Canada

Laing O’Rourke – BSGL JV Rail Infrastructure 50% Hong Kong LORRCRPT JV Mining infrastructure 67.5% Australia Luggage Point Alliance Water treatment plant construction 50% Australia Mid West Rail JV Upgrade of railway civil and track

laying works 25% Australia

Newham Transformation Partnership Limited PFI accommodation operator schools 68% England and Wales Newham Learning Partnership Project Co Limited

PFI accommodation operator schools 68% England and Wales

RGP5 JV Construction of rail duplication, rail bridges, camps and associated earth works

50% Australia

S&W TLP Project Co One Limited PFI accommodation operator schools 40% England and Wales S&W TLP Project Co Two Limited PFI accommodation operator schools 40% England and Wales S&W TLP Education Partnership Limited PFI accommodation operator schools 40% England and Wales Strategic Indigenous Housing and Infrastructure Program Alliance

Housing construction 33.3% Australia

TPFL Project Co Limited PFI accommodation operator schools 80% England and Wales Thames Partnership for Learning Limited PFI accommodation operator schools 80% England and Wales

The Laing O’Rourke Corporation Limited Group has greater than 50 per cent ownership interest in a number of jointly controlled entities. These ownership interests do not constitute control as the voting power attached to each of these ownership interests is 50 per cent or less.

All of the above jointly controlled entities have a year-end of 31 March with the exception of Aldar Laing O’Rourke Construction LLC and CLM Delivery Partners Limited which have 31 December year-ends.

Jointly controlled operations

Costain Laing O’Rourke Farringdon Civil engineering 50% England and Wales Heathrow East Terminal Project Civil engineering 45% England and Wales M-Pact Ireland Civil engineering 50% Ireland M-Pact Manchester Civil engineering 60% England and Wales Thames Water Laing O’Rourke Omega JV Civil engineering 50% England and Wales

Associates

North East Business Park Pty Limited Property development 25% Australia


Contacts


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Download - Laing O’Rourke Corporation Annual Review 2012 …/media/LOR/Files/LA005_120712.pdf · Annual Review 2012 Engineering the future ... Annual Review 2012 EnginEERing ExCELLEnCE

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