Laing counts cost of PFI bids

The Private Finance Initiative will grind to a halt if equity fund managers do not step forward and share the cost of bidding for PFI projects.

Martin Laing, chairman of the John Laing group, warned last week that only a tenth of PFI schemes would get off the ground if contractors continued to carry all the development costs.

Announcing Laing's interim results for the first half of the year, Martin Laing said his company had spent œ2 million on bidding PFI schemes in the UK during the past six months.

"A mechanism must be found so that those other than contractors can share start costs," said Laing.

"We've only chased 4 to 5 schemes out of a total of 400 to 500. Given that there are only 10 or 12 contractors with the financial muscle to take on PFI work, that's equivalent to a total of 40 to 50 projects, just 10% of the total. Progress will be slow unless there is change," he said.

Tax incentives are needed, said Laing, to encourage equity funds which currently come in after a concession is awarded to widen their portfolio of investment to include the scheme's development phase.

The Laing group's interim turnover for the six months to June 1996 was little changed at œ570 million. Profit before tax was œ8.8 million (œ9.7 million last time). Half came from profits on disposals.

"The investment portfolio is an ongoing part of Laing's business," said Jim Armstrong, finance director. "It is not a case of selling the family silver."

The œ3.4 million from Castlecourt, the retail development in Belfast, which Laing sold in 1994, brings total profit from the scheme to œ23 million.

YTL Power, Bolivia's first privately-financed power station where Laing has a œ6 million investment, yielded a œ1 million profit - and a further œ1 million payment has been received in the past few weeks.

Laing's construction division had a turnover of œ475 million. This produced an operating profit of œ500,000 after losing œ1.1 million in the first half of 1995. While UK contracting delivered a œ1.4 million profit, overseas work ran up a loss of œ900,000.

Laing, still in the early stages of developing into an international contractor, aims to make 40% of turnover overseas in five years' time. Currently, the cost of establishing offices around the world is not being covered by profits.

A recent upturn in UK civils work has allowed Laing to withdraw œ1 million of the œ11 million it had set aside for reorganisation. "We've now got recruitment plans in civils," said Laing.

With œ6 million of the reorganisation money spent last year, œ4 million remains for future use.

"It's mostly a case of reorganising buildings," said Laing. "There is no longer a threat of redundancy over people in any department."