The jewel in the crown

Tony Douglas, chief operating officer, Laing O’Rourke

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Laing O'Rourke chief operating officer Tony Douglas explains to Alasdair Reisner why the wise man should build his house upon the sand

To say that John Laing International was just a footnote in the famous sale of Laing Construction to O'Rourke for £1 in 2001 would be unfair.

In truth, the inclusion of the business – a loosely-linked band of outposts in Abu Dhabi, Oman, Sweden and Malaysia as well as a series of joint ventures in farflung locales including Diego Garcia – in the deal warranted a mention in the main copy of the formal particulars of sale, on page 65.

But seeing as the particulars only ran to 66 pages, it was reasonable that most observers didn't pay too much attention to this little rump. In particular, its turnover in the previous year had been just under £17 million compared to the £845 million of Laing's whole construction business.

Well that rump is now the finest sirloin. When Laing O'Rourke published its recent annual report and accounts, the firm's work overseas took as many honourable mentions as UK success stories like the Channel Tunnel Rail Link and Heathrow's Terminal 5, contributing around £1 billion of the group's £4.2 billion overall managed revenues.

Eastern promise

Particular attention was lavished on the Middle East, one of the group's three business hubs, and home to its biggest single job, the £10 billion Al Raha beach resort in Abu Dhabi, that it is delivering in partnership with local developer Aldar.

As he spells out the reasons for the importance of the Middle East to Laing O'Rourke, the group's chief operating officer Tony Douglas reveals a shift in the focus of the group, which had previously targeted growth with a reported aim of achieving a turnover of £5 billion by 2010.

"Because of our scale we are now concentrating on quality of earnings, which takes precedence over just growing for growth's sake.

"The Middle East is very important to us for that purpose. Market conditions out there are disproportionately beneficial because of the quality of the mega projects that we are involved in and its tax free status," he says.

Now Mr Douglas says that this drive for quality earnings means the group's board spends more than half its time investigating
opportunities in the Middle East.

The region's two dominant markets – Dubai and Abu Dhabi – already provide a happy hunting ground. But gas-rich Qatar also piqued Mr Douglas' interest and the firm recently started work on a £500 million deal to build a railway across 800 km of desert in Saudi Arabia.

But just as the UK economy is now facing uncertainty, could a similar slump hit the region? Are some of the wilder mega-projects in the Middle East not built on the sand, both literally and metaphorically?

Mr Douglas bats away the suggestion: "The flaw in the argument is that it is not built on sand, it is built out of oil and at $120 a barrel there is an insatiable desire to convert primary economic wealth into secondary economic wealth."

Indeed, he says the evidence is that, rather than slowing down, such work is speeding up with more opportunities becoming available.

This plays well into the strategy for Laing O'Rourke that Mr Douglas outlined to staff in May. Under his proposals the firm will move from being just a builder to become what Mr Douglas calls a total solutions provider for clients, targeting some of the world's largest construction projects.

This would see Laing O'Rourk provide all the services required by a client, from management of its overall programme of works, through design and project delivery while also looking after the management and maintenance of the resulting infrastructure.

Strength in numbers

Mr Douglas has already taken on 300 staff to provide early advice for clients at the front end of projects. As an example, Mr Douglas looks closer to home in the UK, where Laing O'Rourke has been working with global banking giant HSBC to understand its requirements in the field of data centres.

By getting in at the earliest stage with the client, Mr Douglas says the firm has been able to provide a more sophisticated, higher value service, which has already led to two major projects in Welwyn Garden City and Wakefield.

A further example of this work up front is Laing O'Rourke's collaboration centre at its Dartford head offices, where clients can see their projects in virtual reality before they are built. This allows them to work with the rest of the project team to value engineer and optimise the design before the first brick is laid.

"I think that is relatively unique in this sector, although it is the norm in other sectors," says Mr Douglas. "If you went to the McLaren-Mercedes F1 team you would see something similar."

Indeed, he says that innovation is creating distance between Laing O'Rourke and its competitors, highlighting its plans for a precast facility at Steetley in Derbyshire, part of a commitment to offsite manufacture.

"I hope we will be taking product out of Steetley inside 12 months. It is a significant investment, probably more than all of our competitors put together, in terms of investing in innovation, manufacturing and preassembly."

But just as Mr Douglas needs the right work coming through the door, and the most innovative tools and materials to build with, he also needs the right people to deliver the group's burgeoning project pipeline.

Part of his strategy is to push power in the organisation from the boardroom onto its major sites, employing what he describes as "super-heavyweight" project managers for these deals.

But while the downturn has taken some of the heat out of the employment market, highly skilled staff are still extremely hard to come by. How is Mr Douglas finding the recruitment market, and what is he doing to ensure he gets the people he wants?

"We have no problems whatsoever recruiting what, as far as I am concerned, are some of the finest employees you will find in the world.

"It has always been the case that great projects attract great people and when you pull in an Al Raha Beach you find it easier to recruit than if it was a residential scheme in London.

"Great people also know other great people so you then get more momentum from that. One of the things that I have been talking about is creating a virtuous circle that draws people in."

With the right people doing the right jobs, Mr Douglas's strategy seems to be heading in the right direction to achieve the quality of earnings required for the group.

And, although he says that growth for growth's sake is no longer the goal, it seems likely that this strategy will maintain Laing O'Rourke's position as one of the biggest players in the market for some time.