Interim profit drops 11% to £12.3m after collapse closes line for seven weeks

A tunnel collapse at Chiltern Railways in June has dragged down John Laing’s pre-tax profit 11% in the first six months of this year.

Profit fell to £12.3m, causing the group’s share price to drop 8.8% to 265p when the results were released last Thursday.

The line, which is operated by John Laing, was closed for seven weeks when work to build a Tesco store over a railway cutting at Gerrards Cross in Buckinghamshire caused a tunnel collapse.

Bill Forrester, chairman of Laing, said in a trading statement that Tesco had accepted liability and John Laing had now commenced a formal dispute resolution process to settle compensation.

John Laing’s results included an £800,000 loss from normal rail operations and a £4.6m profit from the disposal of PFI investments. At the same stage last year the PFI specialist had posted a £4.8m profit for rail operations, with no disposals.

Laing Roads raised profit to £4.5m from £3.4m last year and the accommodation division recorded a profit of £12m. This included the disposals.

The valuation of John Laing’s project portfolio grew 11% for the first six months to 30 June, excluding the Chiltern line.

Forrester reiterated the group’s plans to open offices in Canada and central Europe as it looked to take advantage of overseas PFI markets.

He said: “We believe there is potential for John Laing to target and have continued success in overseas markets. We are well placed to take advantage of these markets and we are increasing our bid activity.”

However, he warned that although the group’s portfolio of infrastructure projects was strong, the UK infrastructure market was suffering from programme delays, partly caused by budgetary constraints.

During the first half of the year, John Laing reached financial close on Bart’s and The London hospital, valued at £1bn, and signed off the £319m South Lanarkshire school project.

It was also appointed preferred bidder on the Forth Valley hospital and the East Dunbartonshire schools schemes.