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THE GROUP SPECIALISES IN ORIGINATING PROJECTS, INTEGRATING ALL THE FINANCIAL AND TECHNICAL
ELEMENTS REQUIRED FOR THEIR DELIVERY AND MANAGING THE INVESTMENT PHASE TOGETHER WITH SUBSEQUENT OPERATIONAL RISKS
BUSINESS MODEL
John Laing is unique among UK listed companies in that its core business is to create shareholder value by acting as an investing developer of substantial serviced infrastructure assets utilised in the provision of public services. These assets are privately financed and in general subject to long-term concessions with 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, as market sectors develop, increased emphasis is being placed on the credibility and track record of sponsors in delivering high quality operations for the longer term, post construction.
The Group specialises in originating projects, integrating all the financial and technical elements required for their delivery and managing the investment phase together with subsequent operational risks. John Laing maintains and refreshes a diverse pool of skills and recruits experienced staff from a wide range of disciplines and backgrounds in order to fulfil these roles.
Project delivery, from bidding to management of operation stage concessions, is organised through three sector focussed subsidiaries – Equion, Laing Roads and Laing Rail. A regulated entity, Laing Capital Management, manages investment interests in operational projects on behalf of co-investment partners.
Within the contractual arrangements that underpin projects, John Laing does not generally bear construction risk, but rather it works with a range of construction partners with strong track records of delivery and the capacity to guarantee construction stage 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.
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 employs a team of technical and operational specialists allowing the Group to manage operational risks in specific circumstances on some police, education and local authority projects where Equion Facilities Management (‘Equion FM’) is the appointed sub-contractor. Equion FM’s capacity and activity enables the Group to price service inputs more broadly and, by creating the option of direct provision, contributes to cost efficiency and 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 2005 was Chiltern Railways.
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.
The John Laing business model has developed as part of a sector of activity responding to opportunities created by government needs for efficient and cost effective delivery of major investments which underpin public services. The market itself is now internationalising rapidly, even as the demand profile in different public service activities shifts and new organisational combinations emerge from the competitive process. As in former years, it is likely that the John Laing model will flex to create further internal capabilities, partnerships and additional joint ventures in response to these trends.
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SUBSTANTIAL GROWTH IN PRIMARY MARKETS IN EUROPE AND NORTH AMERICA |
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IN THE UK, THE TREND OF REDUCTION IN SCALE OF NHS MAJOR PFI/PPP ACUTE HOSPITAL PROCUREMENT OFFSET BY EXPANDING INVESTMENT IN PRIMARY CARE FACILITIES THROUGH THE LIFT PROGRAMME |
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