Laing powers ahead on PFI work

CONSTRUCTION and support services specialist John Laing revealed bumper annual profits today after reporting substantial growth in its private finance initiative (PFI) business.

The company said it expects to close at least eight new projects this year across the health, education and public services sectors. Laing has begun to reap rewards from its PFI work after pulling out of housebuilding, general construction and property over the past three years to concentrate on infrastructure projects. The company now specialises in managing construction operations for schools, hospitals and road projects.

Full year profits jumped 18% to £25.1m on the back of turnover of £481m, little changed on last year, but the company said it was producing improved profits from all its three core sectors. On Friday, Laing said that its joint-venture business with Serco had been selected as the preferred bidder on a £761m project to develop three hospitals for Leicester University Hospital NHS Trust. The contract is the Government's largest hospital PFI deal to date outside London.

Under PFI deals, companies raise money up front for public projects and get paid back over a longer term, usually 20 to 30 years. Laing's chairman Bill Forrester said that the company's PFI exposure was distinctly low-risk as it had deliberately aimed for projects that were less risky with availability-based payment mechanisms.

Laing is branching out onto the Continent after building a substantial PFI business in the UK. Partnerships remain a key part of Laing's strategy and it is developing projects with strategic partners including Skanska, Vinci and Bilfinger Berger. In June last year the company signed an investment agreement with Commonwealth Bank of Australia to develop opportunities worth up to £300m in the UK health and the European roads sectors.

Investors, who have seen their shares outperform the support services sector index by 22% over the past year, get a 2.2p final dividend, making 3.3p a share for the year, up 10%.