Support services firm’s core divisions turn in good results including £6.4m profit from sale of roads PFI stake
Support services company John Laing was in an upbeat mood this week as it revealed a strong set of annual results, boosted by trading in the PFI secondary market. It has also won a £761m PFI hospital contract.
In 2004 Laing’s pre-tax profit rose 18% to £25.1m after improvements at its three core divisions: Equion, Laing Roads and Laing Rail. But the main reason for the spurt in profitability was the increase in value of Laing’s PFI stake portfolio, which rose more than 20% to £301.2m. The company is also preferred bidder on projects with a capital value of £3.3bn.
Equion was the best performing division. It posted a pre-tax profit of £13.7m, an increase of 30%.
Announcing Laing’s results on Monday, chairman Bill Forrester said: “The early months of 2005 have seen a continuation of successful bidding. After reaching financial close on 11 projects in 2004, we expect to close on at least eight in 2005.”
John Laing capitalised on the secondary PPP/PFI market in which companies sell stakes in projects. Last year it made a £6.4m profit when it bought a 50% stake in the M40 road project from Carillion in June for £19.7m and sold it to the Secondary Market Infrastructure Fund four months later.
Adrian Ewer, finance director, said the sector would develop further, attracting new types of investors: “There are pension funds and private investors that will want to get into this market. We expect a tertiary market to develop.”
Laing’s Equion division has just been appointed by Leicester University NHS Trust preferred bidder, in a joint venture with Serco, on a £761m project to develop three PFI hospitals in the city.
The joint venture, which beat off competition from Bovis Lend Lease’s Catalyst team, will be responsible for the design, construction and maintenance of the three hospitals. The contracts will run for 35 years, and the first buildings are expected to be completed in 2009, with the overall project finishing in 2011.
Laing said that it was setting up more joint ventures, including a co-investment partnership with the Commonwealth Banks of Australia, formed in June. It is targeting equity investments of up to £300m in the UK health and European roads sectors over a three- to five-year period.
The company has also formed alliances with local partners including Skanska, Vinci and Bilfinger Berger to pursue deals in the growing European PPP market.