Tuesday 19 June 2018

Mayo-born 'pony boy' building a global construction empire

A half century after he started out digging Tube tunnels, the Laing O'Rourke co-founder is leading a drive for robots and automation, he tells John Reynolds

Laing O’Rourke chief executive Ray O’Rourke. Picture: Jonathan Goldberg
Laing O’Rourke chief executive Ray O’Rourke. Picture: Jonathan Goldberg

John Reynolds

Ray O'Rourke began his career in engineering and construction in 1966, when he worked as a 'pony boy', pulling carts in and out of a tunnel for the construction of London's Victoria tube line.

Today, the multibillion pound company that he and his brother Des founded and built up from their first £2,300 contract, Laing O'Rourke, is constructing a new tunnel for the Northern Line tube extension. These days it's using giant boring machines that are the diameter of the tunnel, rather than the labour and machinery of old.

Having moved to the UK in 1966, after growing up near Ballinamore on the Cavan-Leitrim border, the Charlestown, Co Mayo-born 70 year-old could be forgiven for feeling at home when he's in the British capital. He and his firm have built a lot of it over the years, and much more besides.

Over the years, Laing O'Rourke has worked on everything from airport terminals, new train and tube stations, a nuclear power station and London's Olympic stadium to port facilities, skyscrapers, hospitals, schools and hotels.

Today the firm also works in Canada, Australia and New Zealand, and previously worked on projects in Dubai - including its airport and Palm Atlantis hotel - and in Hong Kong.

The history of the firm itself has two chapters. Ray and Des founded R O'Rourke & Son in 1977, initially specialising as sub-contractors in formwork and concrete, with an emphasis on design and offering a range of services including flooring and installation.

Their first contract was for £2,300, and they gradually built the business from there. A utility room between the garage and the kitchen functioned as their office in the early days, with the family washing machine being excused as the sound of a noisy JCB when they were on the phone.

Clients valued their innovative thinking and some allowed them to take on more responsibility. Throughout the 1980s and 1990s, they expanded their range of services, taking on mechanical and electrical engineers, as well as surveyors, planners, buyers and other key expertise.

Several acquisitions have since been bolted on, increasing its specialist capabilities. But acquiring the construction arm of John Laing plc, a renowned firm that had roots in housebuilding in Scotland, later evolving into an infrastructure developer, would be transformational.

Laing lost tens of millions on contracts to build Cardiff's Millennium Stadium and Britain's National Physical Laboratory, and a decision was made to offload the relevant division and 800 employees. The O'Rourkes initially offered £110m for the firm, but ended up paying just £1 for it in 2001. Seizing the opportunity to expand the new Laing O'Rourke's reach, by 2003 the firm had doubled its turnover on the previous year to £1.7bn, having increased it substantially from about £300m back at the end of the 1990s.

When we meet at the company's office on the outskirts of London, O'Rourke is softly spoken. He hasn't lost the West of Ireland accent.

His words are firm, however, each carefully considered sentence suggests a steely clarity of thought.

He's an avid reader about business. In a later question about the 2008 financial crash, he mentions having read Andrew Ross Sorkin's account of the US banks' struggles during that time, Too Big to Fail. His contemporaries in the industry regard him as a tough negotiator.

"He brings out the best in people, and is charismatic, determined and modest," said Dublin-born, London-based architect Angela Brady in a short video for Enterprise Ireland.

British architect Graham Stirk noted his "obsession and drive to push his organisation," adding that he's a "fantastic strategist".

Howard Shiplee, a former London Olympic Delivery Authority executive, regarded him as "honourable, visionary and shrewd."

O'Rourke's boardroom reveals his passion for rugby, and is adorned with framed Irish, English, Australian and All-Black rugby jerseys hanging side by side. One Irish one is signed by the Grand Slam-winning 2009 team. "Some boardrooms have fine art or paintings. This is ours," he says.

In the company's 'data room', one whole wall has a slide with names of projects the firm has secured, others that are prospects and others that are almost secured, as well as their contract value to the business.

No photos are allowed nor will they reveal any specific numbers, due to their commercial sensitivity. Individual projects are in tens or hundreds of millions; the totals are in the billions, and the 'addressable market' being targeted is many billions. Currently, the business has just over 8,000 employees, 3,700 of whom are sub-contractors plus over 3,000 more in Australia and the Middle East. That number peaked in 2007, when it had a 27,500-strong workforce.

Analysis of the firm's accounts going back to 2002 reveals it has notched up profits of over €650m in that time. Last year, however, problems mainly with a €1.4bn Canadian hospital contract resulted in a €290m loss (but €160m pre-tax).

It's been worked through, he says, not wanting to go into detail, adding that this year's accounts will show a return to profit.

The firm has weathered worse events.

A huge joint venture on a $22bn Abu Dhabi project collapsed in 2009. That was then compounded in 2010 when Britain's government slashed public spending by tens of billions on new schools and a defence facility it had proposed to build, taking €3bn out of O'Rourke's order book.

Having turned last year's loss - its first in 15 years - around, at least several pressing matters lie ahead for the company. O'Rourke has talked about stepping down as chief executive in 2020, but he's keen to position the business so it's well-prepared for a changing future.

A new chairman, Belfast man and fellow engineer Sir John Parker came on board earlier this month to help navigate the path ahead. He started his career in Harland and Wolff, working his way up to lead and chair the company.

"He's looking at our resilience - more than just financial resilience," says O'Rourke.

"The board will determine what happens in the medium and longer term and the options that are open to the leadership and to the trustees of the company. He will discuss the options that are open to us. There will be family considerations and ones about what happens when Des and I step down."

He previously talked about the possibility of an IPO, perhaps if the firm had built a second, more advanced factory, that's also on its list of ambitions. "With this advanced manufacturing capability, it would make it more attractive. But I want to make it very clear: we don't have any plans to change the ownership of the business today. And I think it's unlikely that an IPO would happen while I'm still chief executive," he says.

His son Cathal, who has been running the Australian business, seems qualified to take over the reins from him, or might an outsider be recruited?

"We have to be open-minded about where my successor will come from. In any business, if you're able to promote from within it has huge added value because you get great continuity of strategy and a lower likelihood of failure."

The aforementioned factory would be built beside the first one it built in 2009, at a reported cost of £100m. Doing so would also be in keeping with British government policy to increase productivity by using more robots and factory automation to increase offsite work.

"The industry needs to get away from so much manual work. We have to take it to where it's more like the car and aerospace industries by 2025," he says.

O'Rourke already places a keen emphasis on learning, development and education.

An apprentice can join the company at 16 and start a trade apprenticeship, finishing up with a Master's degree from Imperial College London or the prestigious Cambridge University. He also wants to see more women in the industry and hopes they'll be encouraged by his vision.

The new factory would enable 70pc of a building to be built there, giving a 60pc increase in productivity and a 30pc reduction in build time. "It would cost hundreds of millions. My view is you'd want to build the most sophisticated - but also most expensive - one. But therein lies the opportunity. The factory we're looking at can delivery more than 10,000 apartments a year.

"We're talking to very credible FTSE-listed organisations about it, as well as to the government [who are interested in it for social housing].

"Five or 10-year agreements with them would give us a long-term demand and be tied up in an offtake agreement [based on an agreed quota], which is a trading instrument. Once we have that set up, we'd look at how to fund it."

An equity investor could also take a stake in the factory. At such a high cost, the move is not without risks - relying on long-term demand - and indeed offsite, or modular building is not without its critics in the industry, who say it limits design options and can be very costly if it goes wrong.

O'Rourke previously looked at selling the Australian business, with the aim of using the proceeds to invest in the new factory. But it wasn't to be: talks with four potential buyers ended last year.

The Australian business could see an off-grid power venture called Sunshift prosper. It combines modular solar power with a diesel or gas unit.

"We look at various disruptive innovations all the time and it happens to be one of those. I don't want to elaborate on what its potential might be."

He's something of a technology enthusiast.

"We use digital engineering, augmented reality, drones, driverless vehicles and safety innovations. We've got partnerships with robotics and software firms. Right now we're part of a partnership with Rolls Royce to develop small nuclear reactors. We want our people to play an exciting role in determining the future of engineering."

As well as the promises of new technology, Brexit also looms ahead. O'Rourke is surprisingly sanguine about it, however, even when questioned about the potential risks to his firm's supply chain.

"I don't worry about it. We can't influence it. It will settle down. Trade has gone on. It'll continue going on. People will get over it. We'll be quite surprised by the outcomes. I think the issue of the Border in Ireland will be solved as well."

He admires how Ireland has battled its way out of the economic crash, though is reluctant to comment on how Nama has fared or the subsequent housing crisis that has ensued, because he hasn't lived here for the past 50 years.

"We shouldn't be too hard on ourselves in Ireland, because relatively speaking it's a small country. The horsepower in any country comes from its people. That's the engine room; it's our brainpower. I think we punch well above our weight in the world and it's something we should be proud of."

He and Des previously lived on the outskirts of London, but now live on the Channel Island of Jersey.

"Myself and Des and our wives decided we'd like to live there because we like the lifestyle there. Because of the international nature of our business, we've been headquartered in Cyprus, but we didn't want to live there. We wanted to be somewhere that had that environment but that wasn't so far from Ireland or Britain. We're now in the process of being headquartered in Jersey."

Though Jersey has various tax advantages, he explains that's not why they've moved.

A British Virgin Islands company, of which he and Des are the beneficiaries as stated in Laing O'Rourke's annual reports, overarches the company structure, but he declines to elaborate further on the matter.

"We're not in Jersey because of tax. We don't agree with aggressive tax planning. If I have to pay more tax at some point, I will pay what's due. Whether I'm happy about it is neither here nor there," he says.

Neither he nor Des hold their Rich List entry in much regard that puts their worth in the hundreds of millions. "Those numbers have no value. Money is a disease if you start looking at it like that."

Building and engineering was in the O'Rourke genes. Their father was a fitter and welder, and worked for Bord na Mona at one time. An uncle was a master builder as were several of his previous generations.

Our time is up and O'Rourke has to get to a meeting in the City. A black BMW Seven-series is waiting outside the building. He pauses at the entrance on the way out, saying hello to several staff he recognises.

All of them are gathered to watch a live video feed of a huge tunnelling machine working on the Northern Line breaking through near Liverpool Street. He's come a long way since he started out as pony boy working on the Victoria Line tunnel.

Name

Ray O'Rourke

Age

70

Position

Chief executive and majority shareholder, Laing O'Rourke.

Lives

Jersey, Channel Islands.

Education

Diploma in civil engineering, University of East London

Honorary Doctorates: Dublin Institute of Technology and Queen's University, Belfast.

Previous experience

Kier; J Murphy & Son.

Family

Married, with a son and two daughters.

Pastimes

Following Irish rugby, "a bit of flying", (in his twin-prop Beechcraft 200B) spending time with family, reading about business.

Currently reading

Legacy by James Kerr - about lessons from the All Blacks that apply to team building.

Favourite gadget

I'm fond of all my Apple products.

Architect he most admires

We have some excellent relationships with architects and designers, but we've done some exciting projects (such as Heathrow Terminal 5) with Richard Rogers.

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