Preliminary Results 2000

Chairman's Statement
Group Profit and Loss Account
Group Balance Sheet
Summary Group Cash Flow
Notes

CHAIRMAN'S STATEMENT

The Laing Group is changing direction and is now well on the way to achieving its stated strategic objective of becoming a balanced asset-based business with interests in Home building, Property and Infrastructure Investment. Two significant events have been achieved in the last year:

We are also well advanced in negotiations to complete two further strategic initiatives:

While Laing Homes, Laing Property and Laing Investments all exceeded their budgeted profit targets in 2000, Laing Construction again suffered from unacceptably low margins and incurred heavy losses. This had a major impact on the Group's overall result.

Group profit before tax, for the year to 31 December 2000, was £5.7 million (1999 - £52.7 million). Earnings per share fell to 0.4 pence (1999 - 42.9 pence). However, the Board is recommending an increased final dividend of 8.5 pence per Ordinary Share (1999 - 8.0 pence), making a total of 13.0 pence for the year (1999 - 12.25 pence).

It is pleasing to note how well the businesses that will remain core to the Group's operations are performing. The profit and loss account records a profit before interest of £86.7 million for the continuing businesses in 2000, albeit including £17.3 million of profit from the sale of a 4.9% interest in Europistas.

In November 2000 the Board announced its decision to pursue the sale of Laing Construction. Heads of agreement have now been signed with the preferred bidder, O'Rourke plc, who are in the course of undertaking due diligence. As preparations were being made for the sale, it became evident that contract margins would have to be written down. This resulted in the announcement, earlier this year, of a downgrading of anticipated operating results for 2000 of around £40 million. Taken with losses reported for the first half of the year and £15.1 million of reorganisation costs, the final outcome was a loss of £88.9 million for the Construction Division. The significant contributors to this unacceptable level of loss were contracts secured before 1 January 1999, and in particular the National Physical Laboratory at Teddington. After this date, project selection and tender settlement procedures were strengthened under new management.

Laing Homes had an excellent year in 2000. The UK Division reported profits of £53.0 million (1999 - £38.6 million). Over the last few years the Division has built a reputation for producing excellent results based upon a high quality of product and customer service. Market conditions have been favourable, with relatively low interest rates, low inflation and continued consumer confidence helping to provide the stable economic conditions that are important to continued success in this sector. We have progressively embraced the new technologies within our product range and now offer internet technology as an option in many of our house types. Average selling prices rose to £238,000 (1999 - £207,000) on 1,235 units sold (1999 - 1,281). Laing Homes is committed to sustainable development and almost 90% of homes are built on brownfield sites, well in excess of the Government's 60% target. The acquisition of Beechcroft Plc, the upmarket retirement homebuilder, marked a further step in the development of premium brands at the quality end of the market. Octagon Developments, in which the Group has a 20% interest, had another good year.

Laing Partnership Housing is a specialist developer of low cost housing for local authorities. In conjunction with Laing Investments, Laing Partnership Housing has pre-qualified for two of the eight pathfinder PFI housing projects at Sandwell and Newham. This combination is well placed to take advantage of the projected growth in privately financed social housing and demonstrates the synergy that exists between our continuing businesses.

In the USA, WL Homes LLC, in which the Group has a 50% interest, continues to grow in terms of both volume and profitability. The Group's share of profit from US housebuilding grew to £11.3 million (1999 - £8.0 million). This has delivered the earnings growth that had to be achieved in order to provide the scope for an acceptable exit in line with the Group's stated strategy. Progress continues to be made with the proposed sale which we hope to complete during the second quarter of 2001. Monies released will be utilised in part to repay Group debt and in part to fund growth of the UK housing operations.

The prospects for Laing Homes appear to be very good, even at this stage, and we anticipate another set of impressive results for the current year.

Laing Property has reported profits of £13.2 million for 2000 (1999 - £6.0 million) and has a portfolio of development opportunities which will underpin sustained earnings for the future.

Expansion of its development activity, often in partnership with funders, has been targeted at areas of strong growth. Laing Property now has a stake in a large number of quality schemes, which allows it to spread risk. Resources allocated to speculative development are controlled with a majority of schemes being pre-sold or pre-let.

Our strategy is directed towards medium size developments that fall outside the main focus of the larger property companies but are capable of generating early profit.

Laing Property has a history of delivering flexible, high quality and profitable schemes in the retail, office and service sectors. This will continue but with additional emphasis on the property opportunities that are arising out of the Group's infrastructure investment, particularly in transport.

With this pedigree, an increasing level of activity and a continuation of the favourable conditions that exist in our target markets, Laing Property can be expected to make an increasing contribution to Group results.

Laing Investments has two notable successes to report. Firstly, the excellent results for 2000 in which profits totalled £27.4 million (1999 - £9.3 million); and secondly, the recent acquisition of a portfolio of infrastructure investments from Hyder plc. This marks a quantum leap in the Group's investment business. In 2000 the Division took the opportunity to sell some of the mature investments in terms of value. These sales demonstrate the growth potential that can be expected to flow from an expanded portfolio of investments, while the earnings that flow from projects that have reached the operating phase provide an increasing contribution to Group results.

The Hyder Investments portfolio presents substantial synergy with our existing investments. The purchase consideration of £90.5 million bought infrastructure assets valued at £58.5 million and cash balances of £32 million. We expect this portfolio to be earnings enhancing in its first full year under our ownership and we are very encouraged by the opportunity that we now have to increase the Division's underlying profitability.

In rail, we were very pleased to be selected as the preferred operator for a 20-year franchise extension on the Chiltern Line. As a result of the Hatfield rail crash we have been unable to conclude documentation of the franchise extension. However, we have entered into an interim agreement with the Strategic Rail Authority under which an enhanced subsidy is being paid, thus enabling us to commit to some of the initial investment proposals. We have not been deterred from further commitment to rail as a result of the difficulties that the industry has suffered in recent months. We are continuing to work with Swiss Rail with whom we are jointly targeting the Wessex and Thames franchises, where the bid process is expected to be concluded during the current year. The prospects for Laing Investments' strategy of building a portfolio of long-term high yielding infrastructure investments, underpinned by active management, remain very strong.

The Laing Group is undergoing significant change. The clear strategic direction that has been taken will improve the risk profile and quality of earnings of the Group. The businesses that are to remain core to future operations are moving forwards strongly and are set to deliver another good performance in the current year.

I remain sure that the interests of employees in Laing Construction are best served by a change of ownership to a company that has construction at its core. I express my sincere thanks for their continued loyalty under difficult circumstances. For those staff employed within the continuing businesses, I congratulate them and thank them for their excellent performance in 2000.

On 31 March 2001 Andy Friend, the Managing Director of Laing Investments, joined the Group Board. At the end of April both James Armstrong and Denis Madden will retire. I welcome Andy Friend to the Board and on behalf of the Board, I wish to express my sincere thanks to James Armstrong for his contribution as Finance Director from 1990 to 1999 and more recently for chairing Laing Construction under difficult circumstances; and to Denis Madden for his valued role as Group Personnel Director since 1989.

I look to the future with enthusiasm, confidence and a firm belief that the Group's strategy will continue to deliver growth in total shareholder returns that now are being recognised as the markets re-rate the Group.

Sir Martin Laing CBE
Chairman
26 April 2001

* Restated for the issue of shares under the terms of the enfranchisement of Ordinary A (non-voting) Shares.