Laing plans to take on fewer, but more profitable, projects and cut its turnover by one-third by 2001, from £1.2bn to about £800m.
The company aims to make the bulk of the redundancies in the 12 months from January 2000, when restructuring will begin. Voluntary redundancies will be offered, but the company has not ruled out compulsory job losses. The company said it had targeted 200 key people that it wants to stay.
The new strategy has been described by the company as “the biggest announcement Laing has ever made”. It has been drawn up in conjunction with consultant KPMG, which worked on it from May until September.
In a statement issued to the City on Wednesday morning, Laing chairman Sir Martin Laing said the group needed to restructure to target more profitable work. “For our workforce, the impact of modest profitability is limited career development and insufficient training,” he said.
Under the new structure, preferred procurement routes will be private finance initiative contracts, prime contracting, negotiated work, two-stage tendering and fee-based contracting.
The restructuring is expected to cost about £18m, of which £14m will be for redundancy payments. On top of this, Armstrong said Laing will invest £2m a year of new money in training and £5m in IT.
As well as the move away from competitive tendering, Laing plans to merge its northern, southern and Midlands divisions into a national head office.
The new headquarters will be supported by four hub offices and a dozen small local offices. Armstrong said this would give tighter central control and “a better chance of running a construction company in an environment where more risk is being transferred to the contractor than ever before.”
The shake-up will also see a number of changes to the Laing board. Operations director Tony Aikenhead has been made new business director. Brian Cheshire and Mike Stoney, who were managing directors of the Midlands and northern divisions respectively, will both become operations directors. The third area managing director, Martin Tidd of the southern division, had decided to leave the firm before the shake-up was announced.
The sales and marketing team will focus on the following five key sectors under the new regime: transport, public sector buildings, commercial accommodation, industrial buildings and utilities. The department will be based at the central office under business development director Steve Moore.
Jim Armstrong, chairman of Laing’s construction arm, announced the changes to 150 Laing managers on Tuesday night. Armstrong said that his news had received a good reception.
Laing announced the shake-up to City analysts on Wednesday morning. Steven Rawlinson, an analyst for stockbroker Peel Hunt, said: “This looks more like a downsizing than a new strategy, but it was inevitable after the Cardiff catastrophe.” Laing lost at least £26m on the £99m contract to build the Cardiff Millennium Stadium.
Another analyst said: “It’s farewell to a great name in construction.” He added that the restructuring had come too late. “Balfour Beatty, Amec and Carillion are already focused in these areas, it’s not a market for Johnny-come-latelies,” he said.
Laing now needs to reassure clients that the changes will not have adverse effects. Armstrong said: “Laing will be requesting meetings with all of its major clients in the immediate future.”
Mike Abel, general manager of research and development at client Asda, said: “I’m not shocked at the move. Laing as a group are poor at being proactive and their communication is rubbish.
“As a framework contractor, Laing doesn’t have to tender for store projects, but instead of using the time to to refine Asda’s projects, they seem to spend their time taking people out to dinner to get on tender lists for other projects.”
