John Laing lifts pre-tax profit to £35m

John Laing has unveiled a pre-tax profit of £35m, something of a transformation after a figure of just £2m in the previous year.

As a result of the upward surge in profit, the directors of the now-privately-owned group removed a dividend of £35m, quite a hike on the £11m dividend that was paid out in 2006.

Laing’s latest figures cover the 12 months to 31 December 2007.

The former construction group carries a vigorous mission statement declaring that it aims “to succeed globally as a leading sponsor of privately financed investment in infrastructure”.

After selling off its construction operations to Ray O’Rourke six years ago, John Laing no longer builds any of its projects in-house.

Turnover of £640m was divided between Laing’s seven operating divisions:

• £340m – accommodation
• £150m – rail
• £110m – roads
• £13m – projects and development
• £13m – utilities
• £13m – management services
• nil – property

During 2007 Laing’s Chiltern Railways subsidiary (the division has since been sold off) chased a compensation claim for increased operating costs and loss of future revenues after the tunnel collapse at Gerard’s Cross.

Tesco accepted liability, formal dispute resolution procedure was sorted out in June 2007 and a settlement of £29m was negotiated.

Laing Investment Services wrote off bid costs of £2.5m on the cancellation of the Leicester Pathways hospital project following a review by the Strategic Health Authority of the affordability of the scheme.

Laing states: “Due to the nature of the cancellation, the trust has stated that there is no compensation for the consortium bid costs.

“The consortium is in the process of challenging this position and is seeking full compensation. John Laing has taken a prudent approach and [has] written off the bid costs until the dou5tcome of the challenge is determined.”

The 2007 Budget Statement set out the Treasury’s intention to phase out and abolish Industrial Buildings Allowances.

Although specific legislation has not yet been passed, Laing assumes it will be enacted and its portfolio valuation has been re-valued downwards: six projects were affected and the revision knocked 3% of the value of the group’s portfolio.

During 2007, 10 projects reached financial close with a committed shareholder funding requirement of £106m.

Laing became preferred bidder on another eight schemes where it will put up a total of £99m of equity.

The switch from being a publicly-listed company to private ownership, as a result of the £1bn purchase deal by Henderson Infrastructure on 22 December 2006, Laing’s business model has changed.

When quoted on the Stock Exchange, Laing’s business model called for partial exit from equity ownership in mature infrastructure schemes in order to generate the funds for new bids and project delivery.

Under the new model, Laing not longer has to sell to keep moving forward, opening the way for the ownership of an infrastructure portfolio that is ever-increasing in value.

Laing’s KPI target for conversion from shortlist to preferred bidder status is a success rate of 40%.

During 2007 the conversion rate achieved was 52% which is on a par with the average performance over the last five years.