contents
     
   
     
  OUR CORE BUSINESS IS CREATING SHAREHOLDER VALUE THROUGH ITS ROLE
AS A FOCUSSED DEVELOPER OF PFI/PPP PROJECTS AND OPERATIONS		  
     
 

OUR BUSINESS MODEL
John Laing acts as a developer of substantial infrastructure assets utilised in the provision of public services. These assets are privately financed and in general subject to long-term concessions, which have a public authority as the counterparty.
Competitiveness in this market is determined by the ability to offer the public sector value for money solutions and, in the UK in particular, increased emphasis is being placed on the credibility and track record of sponsors in delivering high quality operating assets beyond the construction phase.
John Laing is unique among listed companies in that its core business is creating shareholder value through its role as a focussed developer of PFI/PPP projects and operations.
Project delivery, from bidding to management of operation stage concessions, is organised through three sector focussed subsidiaries – Equion, Laing Roads and Laing Rail.
John Laing specialises in originating projects, integrating all the financial and technical elements required for their delivery and managing the investment phase and the subsequent operational risks.
Within the contractual arrangements that underpin such projects, John Laing does not bear construction risk, but rather it works with a range of construction partners with strong track records of delivery and the capacity to adequately guarantee construction outcomes.
Although such projects are typically highly geared (with debt to equity ratios of 9:1 in relation to availability fee based accommodation projects), debt finance raised by special purpose Project Companies is non-recourse to John Laing.
Projected returns from project investments are subject to performance deductions if required service standards are not met, but service related sub-contracts generally provide for such deductions to be passed through to contracted providers.
John Laing assumes such operational risks in limited circumstances on some police, education and local authority projects where Equion FM is the appointed sub-contractor. Equion FM’s capacity and activity assists the Group to price service inputs more broadly and, by creating the option of direct provision, contributes to risk mitigation across the portfolio as a whole.
Similarly, the Group is selective in its exposure to volume based payment mechanisms and concessions with a significant degree of patronage risk. The principal case in point during 2004 was our Chiltern Railways investment where both passenger revenues and profitability once again developed ahead of expectations.
The Group’s business model places emphasis on rigorous targeting of the most appropriate opportunities and selective partnering to assemble the most suitable response to these opportunities. John Laing adopts active management of projects and the relationships that underpin them in order to both enhance the quality of its partnerships with the public sector and the community, and to preserve and enhance returns on its project investments.

OUR PROJECT INVESTMENTS

John Laing is a long-term developer, investor in and operator of facilities and serviced assets and as such, will often take a position of between 50% and 100% of total equity at financial close. While the Group will not generally seek to fully exit from significant operational investments, it may sell down a proportion of its holding in a project once the crucial early phases of risk management and delivery have been successfully completed. However, non-core interests are disposed of as the opportunity arises.
Thus 11 new projects reached financial close during 2004, and we disposed of our holding in Horizon Energy (this now de-listed Australian entity previously owned a 25% share of the Loy Yang A electricity generation project in Victoria).
Brisbane Air Rail Link, our final Australian asset subsequent to the 2003 disposal of the Adelaide and Northern Territory Airports, is also no longer enumerated within the portfolio total of 42 projects. The Group ascribed no value to it when it was acquired in 2001 and it has been held at nil book value since then as a consequence of John Laing purchasing the wider Hyder portfolio.

OUR PROJECT INVESTMENTS
At 31 December 2004, there were 42 investments in the portfolio. These are illustrated in the following chart:

  
     
 
OUR CORE BUSINESS
IS CREATING SHAREHOLDER VALUE THROUGH ITS ROLE AS A FOCUSSED DEVELOPER OF PFI/PPP PROJECTS AND OPERATIONS
 
 
 
 
   
   
 

Since year end, the joint venture between Equion and UK Pacific Investment Management Limited, Regenter, has reached financial close on a £16.9 million urban regeneration project known as Bentilee Hub, thus bringing the total to 43 projects.

> OF THE 43 PROJECTS, 24 ARE FULLY OPERATIONAL AND 7 PARTIALLY OPERATIONAL
   
> MOST SIGNIFICANTLY, CONSTRUCTION COMPLETION WAS REACHED AT THE MINISTRY OF DEFENCE MAIN BUILDING AND THIS FACILITY BECAME FULLY OPERATIONAL IN JULY 2004 AFTER MORE THAN £440 MILLION OF REFURBISHMENT AND UPGRADING OVER THE LAST FOUR YEARS; RE-OCCUPATION WAS ACHIEVED SMOOTHLY AND THE PROJECT HAS BEEN VERY WELL RECEIVED BY THE USERS
   
> 10 OF THE 17 POLICE STATIONS IN THE GREATER MANCHESTER POLICE AUTHORITY SCHEME ARE NOW OPERATIONAL WITH OTHERS UNDER CONSTRUCTION
 
   

There was no instance during 2004 in which performance deductions impacted on projected cash flows to equity in any of our availability based projects, and the roads projects (with volume related payment mechanisms including real tolls) performed well. In particular the Laing Roads result was underpinned by the strong financial performance of the Second Severn River Crossing and the M40 road project. Traffic volumes on the A130, which were below expectations after its opening in February 2002, have run marginally ahead of the revised projections which supported the successful refinancing of the project in January 2004.
John Laing’s activities in the Utilities sector comprise two investments, a 19.5% stake in the London Underground Connect project and a 50% stake in the Kinnegar waste water treatment plant in Northern Ireland. Rephasing of profit recognition on the Connect project, due to late delivery of enabling works, resulted in a £1.1 million loss in the first half of 2004. This was not repeated in the second half of the year but there is a dispute between the Project Company and the client over responsibility for the delays.

DEVELOPING OUR ORGANISATION
The Group’s Portfolio Management capacity was strengthened during 2004. This team supports the investment evaluation and approval process, secondary market acquisitions and disposals, and the portfolio valuation process. In addition it conducts annual in-depth asset reviews on behalf of the Investment Committee and assists subsidiary businesses on key transactions including assisting the financial close process on complex projects.
During 2004 Equion FM’s management capacity was also strengthened as 19 further sites that were previously under construction became operational. Equion FM was providing services at a total of 31 sites by year end, half of these being police stations in Manchester and London. A similar number of sites are scheduled to become operational during 2005, including a housing and regeneration project and educational, local health and additional police facilities. Equion FM has the strategic management capacity to intervene if service sub-contractor performance falls below the standards required under concession agreement with public authorities.
Within Laing Rail additional project management capacity has supported delivery of investment projects forming part of Chiltern’s franchise commitments and the work of Laing Rail Projects in developing and delivering enhancements for third party clients.

> THE GROUP’S CORE HUMAN RESOURCES CAPACITY WAS ALSO ENHANCED DURING 2004, WITH THE FORMATION AND STAFFING OF A NEW TEAM THAT IS BETTER ALIGNED TO SUPPORTING THE OPERATING BUSINESSES AND IN FURTHERING TRAINING AND DEVELOPMENT THROUGHOUT THE GROUP (SEE PAGE 45 FOR FURTHER DETAIL)
   
> SUCCESSFUL PROJECT FINANCING AND PARTNERSHIP WORKING WITH OUR CLIENTS REQUIRES A UNIQUE BLEND OF COMMERCIAL SKILLS AND TECHNICAL DISCIPLINES MATCHED BY KNOWLEDGE OF A DIVERSE RANGE OF PUBLIC SERVICES AND THE CAPACITY TO WORK WITH A DIVERSITY OF SUPPLIERS, PARTNERS AND COMMUNITIES. THE ABILITY OF JOHN LAING TO DELIVER ON ITS STRATEGY IS THEREFORE DEPENDENT ON ATTRACTING, DEVELOPING AND RETAINING A DIVERSITY OF HIGHLY SKILLED, EXPERIENCED AND TALENTED PEOPLE WHO SHARE SIMILAR VALUES AND A COMMITMENT TO DELIVER
   
> THE GROUP CURRENTLY EMPLOYS APPROXIMATELY 1,130 PEOPLE; 170 OF THESE ARE DEPLOYED IN RELATION TO THE ACCOMMODATION AND ROADS PROJECT INVESTMENTS BUSINESS, AND IN RELATION TO CORE GROUP FUNCTIONS; 750 ARE EMPLOYED IN LAING RAIL (730 OF WHOM ARE IN CHILTERN); AND 210 ARE EMPLOYED IN EQUION FM
 
   

2004 saw continued progress in the development of the Group’s quality and environmental management systems and in refining internal controls and risk management processes throughout the Group. Equion was successful in maintaining its ISO 9001 registration for its quality management system and ISO 14001 for its environmental management system.

MARKET DEVELOPMENTS IN 2004
John Laing’s business is developing against a background of strong demand for PFI/PPP investment in the UK and growing demand in Europe. There is also growing interest in the private financing and delivery of projects to meet government and public authority infrastructure needs in other OECD nations – including the United States – and developing nations, although John Laing’s activity is currently focussed on the UK and Europe.
Within the UK the outcome of the 2004 Comprehensive Spending Review, as it impacts on PFI/PPP, was broadly consistent with the policy established by the Treasury in the publication “PFI: Meeting the Investment Challenge” (July 2003). Departmental spending estimates, especially in sectors such as health and education, are consistent with the expectation that between 10% and 15% of public sector net investment is likely to be procured through PFI/PPP mechanisms. Continuation of demand in the acute hospital, primary care facilities and schools sector (expanding in England and Wales through Building Schools for the Future and in Scotland through extended Scottish Executive activity) is being matched by increased activity in local regeneration and housing schemes and the waste sector. John Laing’s sector strategy remains well matched to UK Government demand and the better managed, more clearly defined pipelines of opportunity that have emerged in recent years.
The over-arching focus of Government policy is the pursuit of better value for money and, to this end, 2004 saw a series of policy refinements, including the issue of new guidance to the public sector on evaluating value for money as part of the procurement process. The Group responded to early drafts of this guidance and remains in dialogue with relevant Government entities that impact on PFI/PPP policy, including the National Audit Office, believing that a focus on outcomes that are sustainable for both the public and the private sectors is essential. As more and more PFI/PPP projects become operational, it is inevitable that there will be continuing scrutiny of the quality of the outcomes being achieved and debate on these is welcomed, as is continuing Government refinement of the procurement process.
Laing Rail responded to each stage of the Rail Review announced by the Secretary of State for Transport in January 2004. The conclusions, published in July 2004, rationalise the regulatory superstructure of the industry and clarify the respective roles of Network Rail and train operators such as Chiltern. These changes are being implemented as a prelude to the re-letting and rationalisation of significant franchises during 2005 and 2006.
In parallel with the Rail Review, the Government published a number of policy documents including a White Paper on Transport and a Feasibility Study on Road Pricing which, while looking to the long-term, could have a significant impact in providing the basis for accelerated investment in both the road system and other modes such as rail and light rail.
2004 also saw the continued development of a secondary market for project equity with a number of funds becoming active or conducting further fundraisings in order to finance purchases of project interests from developers and contractors. To date, transactions involving operational projects have predominated with the discount rate applied to projected future equity cash flows from projects decreasing to below 10%. Reported fundraisings suggest that institutional interest in these types of assets, including that from pension funds, is growing as is international interest in acquiring UK PFI/PPP, utility and infrastructure assets.
The number of primary market opportunities in Europe continues to increase. At sector level, roads and related infrastructure predominates but social infrastructure projects such as schools, hospitals and prison projects are also now being put to market by an increasing number of EU governments including those of Germany, France, Portugal, Spain and Italy.

  

VALUE BY CONCESSION LIFE REMAINING
   
Delivering value across our three divisions  
   
  EQUION IS JOHN LAING’S SPECIALIST PROVIDER
OF ACCOMMODATION PROJECTS, INVESTING IN MODERN FACILITIES THAT SUPPORT A WIDE RANGE OF UK PUBLIC SERVICES.
EQUION INVESTS TO MEET THE NEEDS OF LOCAL EDUCATION AUTHORITIES, PRIMARY CARE TRUSTS, POLICE AUTHORITIES, THE DEFENCE FORCES, LOCAL AUTHORITIES, SOCIAL HOUSING PROVIDERS AND ACUTE HOSPITAL TRUSTS.
OVER FIVE YEARS, EQUION HAS BECOME WELL KNOWN ACROSS THE PUBLIC SECTOR AND IS ASSOCIATED WITH A HIGH QUALITY OF DELIVERY.
EQUION WILL TAKE THE LEAD ROLE IN DEVELOPING NEW PROJECTS WITH OTHER JOINT VENTURES. EQUION WILL TAKE UP TO 100% OF THE EQUITY INVESTMENT IN
A PROJECT.		 LAING ROADS IS AN ACTIVE INVESTOR IN ROAD RELATED CONCESSIONS BOTH IN THE UK AND IN AN INCREASING NUMBER OF MARKETS ACROSS EUROPE.
THE DIVISION MANAGES A PORTFOLIO OF 11 ROAD CONCESSIONS, NINE IN THE UK AND TWO IN THE NORDIC REGION. IN ADDITION, LAING ROADS MANAGES TWO UTILITY CONCESSIONS IN THE UK.
LAING ROADS INVESTS IN MAJOR NEW HIGHWAYS, ROAD IMPROVEMENTS, BRIDGES, AND LOCAL IMPROVEMENT AND MAINTENANCE SCHEMES INCLUDING STREET LIGHTING. THE CONCESSIONS HAVE A VARIETY OF PAYMENT MECHANISMS, RANGING FROM REAL TOLLS AND SHADOW TOLLS TO AVAILABILITY AND PERFORMANCE BASED REVENUES.
LAING ROADS DELIVERS INVESTMENT REQUIRED BY NATIONAL AGENCIES AND LOCAL AUTHORITIES AND LAING ROADS MANAGES THE ASSOCIATED PROJECT COMPANIES, ENSURING ONGOING MAINTENANCE AND SERVICING OF CAPITAL INVESTMENTS AS THEY BECOME OPERATIONAL.		 LAING RAIL IS BUILDING ON THE EXPERIENCE OF DELIVERING CHILTERN RAIL’S INDUSTRY LEADING PERFORMANCE.
LAING RAIL IS UNIQUE AMONG UK TRAIN OPERATING COMPANIES IN COMBINING TRAIN OPERATOR EXPERIENCE WITH IN-HOUSE PROJECT FINANCING AND INFRASTRUCTURE ENHANCEMENT CAPACITY.
LAING RAIL AND CHILTERN WORK IN POSITIVE PARTNERSHIP WITH NETWORK RAIL AND ALL THE KEY PLAYERS THAT MAKE UP THE CHANGING STRUCTURE OF UK RAIL.
IN JOINT VENTURE WITH CHOSEN PARTNERS, LAING RAIL WILL BID FOR FURTHER UK RAIL FRANCHISES WHERE CHILTERN’S EXPERIENCE – OF PROFITABLE GROWTH, HIGH CUSTOMER SATISFACTION, AND IMPROVED SERVICES – CAN BE REPLICATED.

Public Sectors

Partners

Communities

Shareholders
               
         
               
  Some Equion Projects   Some Laing Roads Projects   Some Laing Rail Projects    
 
   
> Ministry of Defence Main Building
   
> Norfolk & Norwich Hospital
   
> Glasgow Schools
   
> Greater Manchester Police Stations
   
> Sandwell LIFT primary care facilities
 
   
> E39, Norway
   
> Second Severn River Crossing
   
> Manchester Street Lighting
   
> Nelostie Highway, Finland
   
> Sirhowy Way
 
   
> Chiltern Railways Clubman services
   
> New capacity at London Marylebone
   
> Warwick Parkway station
   
> Docklands Light Rail CGL extension
   
> Wembley Depot
   
               
 
 

PORTFOLIO VALUATION

A valuation of the John Laing portfolio has been carried out on a consistent basis for each half-year period since June 2000. The exercise does not seek to estimate the changing market value of the assets in the portfolio in the light of the development of the secondary market. However, through application of a consistent methodology, the process serves to illustrate movements in value between periods and the impact of intervening transactions and its publication provides shareholders and analysts with information that can be compared to individual transactions in the broader market, where these have been made public.

METHODOLOGY

Each run of the valuation process is based on using one of four methods to establish a value for each of the projects in the portfolio:

• the principal method is the discounted cash flow analysis (‘DCF’) which is applied to the future forecast cash flows to which John Laing as shareholder, or holder of subordinated debt, is entitled.
 
   

The exceptions to the application of the DCF are:

  
   
• where investments are listed, the closing price on the period end date is used (‘market value’);
   
• where a current independent third party value is available, usually because of a recent transaction (‘third party valuation’);
   
• where there are no long-term financial forecasts available, or where the asset has been written down to zero, a current book value is used (‘book value’).
 
   
DCF was utilised on all of the 42 investments for the December 2004 valuation. In this exercise the detailed financial models, approved and updated at Project Company level in line with operational experience and lenders’ requirements, are scrutinised to determine forecast future cash flows to John Laing. A post-tax DCF analysis is then applied, any cash flows resulting from interest bearing loan notes taxed at a notional 30%. Forecast cash flows as evidenced in the approved models are never varied positively, but may be further discounted if John Laing believes additional uncertainties have emerged since the last approved model update.
No value is ascribed to any proposed variations extending or expanding project scope because, whilst the variation scale may be known and they may be projected to yield substantial additional future cash flows, they are not contractually certain. Similarly no value is derived from projected refinancings, which although projected as creating additional value through accelerating cash release from projects, have yet to reach financial close. No value is ascribed to preferred bidder positions in the portfolio valuation.
The discount rate utilised is arrived at by adding risk premia of 6%, 4%, 2% to an approximation of the John Laing post tax Weighted Average Cost of Capital (‘WACC’) of 7.5% depending on the distribution of project cash flows between the construction phase, ramp-up (two years from the start of operations) and subsequent operations. Additional risk premia will be added if the future performance of the project is subject to particular uncertainties, in relation to a payment mechanism incorporating significant volume risk or other unusual risks.
For those investments valued by DCF the weighted average annual discount rate is 10.6% (2003 – 10.8%). Projected Chiltern equity cash flows are discounted, as before, at 15%.
In the case of the Second Severn River Crossing (‘SRC’) debenture stock, market valuation as at 31 December 2004 has been used for the current exercise. The remaining SRC equity interest has been valued on a DCF basis. In addition to the portfolio of 42 investments, there are a further two projects, Brisbane Airlink in Australia and Midland Metro. Both of these projects have a net book value of nil (2003 – nil) and the portfolio valuation ascribes no value to them. They have therefore been excluded from the portfolio list. In no cases have third party valuations been used in the current exercise.
As in previous years, the calculations underpinning the 2004 valuation have been validated by Ernst & Young LLP in line with a brief requiring them to ensure that the valuation is both accurate and in accordance with the adopted methodology. Ernst & Young LLP has not reviewed each of the financial forecasts approved at Project Company level by the relevant Project Company entities.		  
   
 
   

 

 
2004 VALUATION RESULTS  
   
> AT DECEMBER 2004, THE PORTFOLIO VALUATION IS £301.2 MILLION, AS AGAINST £250.3 MILLION IN DECEMBER 2003 GIVING AN ABSOLUTE GROWTH OF 20% OVER 2003
   
> AFTER RE-BASING, TO TAKE CASH FLOWS INTO ACCOUNT THE PORTFOLIO VALUATION REFLECTS UNDERLYING GROWTH OF 18% OR £46.9 MILLION ON A RE-BASED DECEMBER 2003 VALUATION OF £254.3 MILLION. THIS INCLUDES £6.4 MILLION FROM THE PURCHASE AND SALE OF A 50% INTEREST IN THE M40 ROAD PROJECT, EXCLUDING THAT THE GROWTH WAS 15%
   
> AT DECEMBER 2004, 61% OF THE TOTAL VALUATION RELATES TO AVAILABILITY BASED PAYMENT STREAMS (2003 – 55%), 19% TO ROAD PROJECT SHADOW TOLLS (2003 – 20%) AND 20% VOLUME RELATED REVENUE STREAMS (2003 – 23%)

VALUE BY PAYMENT TYPE
   
CHANGES IN VALUATION
Movements in the portfolio valuation are set out below:		  
   
 
Portfolio Portfolio
valuation
December
2003
£ million		 Acquisitions
£ million		 Disposals
£ million		 Equity &
loan note
subscriptions
£ million		 Refinancing
and
distribution
£ million		 Rebased
December
2003
£ million		 Growth on
valuation
£ million		 Portfolio
valuation
December
2004
£ million		 Growth on
valuation
%		  
                     
Accommodation 112.8 – (3.6) 31.1 (7.6) 132.7 19.5 152.2 15  
Roads 59.8 19.7 (26.3) 8.1 (5.1) 56.2 19.9 76.1 35  
Rail 64.3 – – – (5.5) 58.8 9.1 67.9 15  
Utilities & Airports 13.4 _ (6.8) – – 6.6 (1.6) 5.0 (24)  
TOTAL 250.3 19.7 (36.7) 39.2 (18.2) 254.3 46.9 301.2 18  
TOTAL EXCLUDING
M40 SALE		 250.3 – (10.4) 39.2 (18.2) 260.9 40.3 301.2 15  
                     
   
 

The cash movement relating to acquisitions in 2004 was the purchase of a 50% holding of the M40 road project in the first half of the year.
The cash movements relating to disposals in 2004 were the sale of a 50% interest in the M40 road project, the cash receipt from the sale of 9.9% of the Ministry of Defence Main Building project and the cash receipt from the contracted sale of the Northern Territories Airports in 2003.
Equity and loan note subscriptions relate principally to the investment in the Ministry of Defence Main Building project of £26.5 million.
There were no refinancing proceeds in 2004. The proceeds and distributions include investment receipts from yielding projects, whether dividend distributions, loan repayments or interest received.
At sector level, the Accommodation sector exhibited a £39.4 million growth in value and accounts for 51% of the portfolio total (2003 – 45%). This principally reflects the increased investment in the Ministry of Defence Main Building project, the five LIFT bundled primary care schemes and two hospitals reaching financial close.
The Roads sector valuation increased by 27% and accounts for 25% of the portfolio total (2003 – 24%). A contributor to this growth was the purchase and subsequent resale of 50% of the M40 road project in 2004. The A130 road traffic volumes have increased ahead of expectations and two projects reached financial close in the year.
The Rail sector valuation increased by 6% and accounts for 23% of the portfolio total (2003 – 26%). This overall movement reflects growth in line with the portfolio as a whole and one-off distributions relating to a land sale on the City Greenwich Lewisham Link. The Chiltern investment accounts for 73% of the sector total and increased in value by 7%.
The Utilities & Airports sector valuation decreased by 63% reflecting a reduction in valuation being used on the London Underground Connect project and the disposal of the Northern Territories Airports. Kinnegar has been valued on a more prudent basis pending resolution of performance issues that have reduced client payments at this waste water treatment plant in Northern Ireland.
DCF valuation underpins 98% of the total portfolio valuation of £301.2 million.

  
   

The long-term cash flows analysed as part of the DCF analysis are shown below (excludes acquisitions, disposals, bid costs and overheads):

  
   
CASH INFLOW (POST TAX ON SUB-DEBT INTEREST)
  
 
CASH OUTFLOW  

VALUE BY SECTOR

 
   
 

The long-term cash flows analysed as part of the DCF analysis are shown below (excludes cash flows associated with preferred bidder projects):

ESTIMATED FUTURE JOHN LAING CASHFLOW
   
 
  Year£ million 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014  
  Accommodation 5.5 11.3 14.2 15.5 13.3 15.1 16.6 15.3 13.6 15.3  
  Roads (0.2) 4.1 5.0 3.6 9.2 7.2 6.9 7.0 10.8 17.1  
  Rail 5.5 4.0 4.3 4.2 9.6 16.2 13.6 15.0 14.5 15.6  
  Utilities & Airports (7.6) (0.2) 2.0 4.9 2.3 2.3 2.6 2.7 2.4 3.0  
  TOTAL 3.2 19.2 25.5 28.2 34.4 40.8 39.7 40.0 41.3 51.0  
                         
  Year£ million 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024  
  Accommodation 12.3 12.9 12.9 12.7 14.4 16.0 15.3 17.9 18.8 18.9  
  Roads 10.2 12.0 7.5 8.5 8.8 6.7 4.4 5.0 5.9 16.9  
  Rail 14.6 17.1 18.2 18.5 19.6 20.5 3.1 0.2 – –  
  Utilities & Airports 2.2 1.4 3.0 2.5 2.3 – – – – –  
  TOTAL 39.3 43.4 41.6 42.2 45.1 43.2 22.8 23.1 24.7 35.8  
                         
  Year£ million 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034  
  Accommodation 20.7 28.4 39.0 40.2 68.6 27.2 24.5 9.9 9.1 6.5  
  Roads 17.8 27.8 24.6 9.4 9.8 3.6 1.1 0.2 0.3 0.2  
  Rail – – – – – – – – – –  
  Utilities & Airports – – – – – – – – – –  
  TOTAL 38.5 56.2 63.6 49.6 78.4 30.8 25.6 10.1 9.4 6.7  
                         
 

PROSPECTS

2004 saw further significant development of John Laing’s forward pipeline in each of our core sectors and the outlook for 2005 and beyond remains encouraging.
New Parliaments, with or without changes of Government, can often bring a hiatus due to uncertainty in markets that are shaped by Government programmes but this would appear unlikely in the present climate. While points of emphasis may change between programmes, there is broad agreement as to both the need for continuing investment in the asset base underpinning public services and the effectiveness of private sector delivery mechanisms. In addition, markets outside the UK are generating an increasing number of attractive propositions.
During 2004, we achieved preferred bidder status on a further four projects, including the Euro 700 million A1 road project in Poland in which Laing Roads will have a 30% equity interest.
Since the year end, the InspirED consortium (John Laing interest 33%) has been appointed preferred bidder for the £261 million South Lanarkshire schools project involving construction of 17 new schools and refurbishment of a further two. John Laing has also been appointed preferred bidder for the Leicester Hospital project which has a capital value of £765 million and in which the John Laing-CBA joint venture will have a 40% interest.
In addition, Regenter has reached financial close on a £16.9 million urban regeneration project in Stoke-on-Trent, Bentilee Hub.
As at 21 March 2005, the Group is preferred bidder for 11 projects, which have an estimated combined capital value of £3.3 billion and, in aggregate, John Laing expects to provide £90 million of the equity and loan funding required in these projects. During the balance of 2005, it is expected that financial close will be achieved on at least eight further projects.
As at 21 March 2005, the Group is short-listed on 16 projects, which have a combined capital value of £2.5 billion. Since the beginning of the year, prequalification and short-listing has been achieved in relation to the Euro 725 million Ostregion Package 1 road project (John Laing interest 40%), the £110 million Bristol Building Schools for the Future project (John Laing interest 50%) and the Birmingham Highways Maintenance project with an initial investment amount of £170 million (John Laing interest 33%). As at 21 March 2005, the total future funding requirements are £32.9 million committed on signed projects; and in addition there is a potential £137 million as follows:

• £90 million on preferred bids; and
• £47 million on shortlist (assuming a 40% success rate).

The above figures are all shown net of the Commonwealth Bank of Australia’s likely contribution to forward funding commitment.

A E Friend
Chief Executive
21 March 2005

  
   
 
   
       
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