Annual Report 2006

widening markets 2006 providing value… annual report JOHN LAING plc annual report 2006 . ed Office: +44 (0)20 7901 3200 +44 (0)20 7901 3520 el: Register Allington House, 150 Victoria Street, London SW1E 5LB England No. 1345670 Registered T Fax: JOHN LAING plc Further copies of this statement are available from the address below or website at by visiting the Company’s www.laing.com email: [email protected] www.laing.com Forward-looking statements Certain statements contained in this document, including those in the “Operating and Financial Review” constitute statements that are, or may be deemed to be, “forward-looking statements”. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “forecasts”, “plans”, “anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”, “may”, “will”, “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward- looking statements involve known and unknown risks, uncertainties and other factors and include statements regarding the Group’s intentions, beliefs or current expectations concerning, among other things, the Group’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which the Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation: conditions in the operating margins, anticipated investments and capital expenditures, changing business or other market conditions and general economic conditions. Such risks, uncertainties and other factors are set out more fully in the “Business and Financial Risks”. These forward-looking statements based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Readers should not place undue reliance on forward-looking statements, which speak only as of the date of this document. The Group will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this document except as required by law or by any appropriate regulatory authority. CONTENTS 2 Financial Highlights 2 Business Highlights 3 Key Achievements 4 Business Review 12 Financial Review 18 Restructuring 20 Divisional Review 20 John Laing Infrastructure 24 John Laing Social Infrastructure 28 John Laing Projects & Developments 30 John Laing Business Services 32 John Laing Rail 34 Portfolio Valuation 38 Corporate Social Responsibility 42 Directors, Officers and Advisors 43 Directors' Report 47 Business and Financial Risks 52 Independent Auditors' Report to the Members of John Laing plc 53 Group Income Statement 54 Group Statement of Recognised Income and Expenditure 55 Group Balance Sheet 56 Group Cash Flow Statement 57 Accounting Policies 65 Notes to the Accounts 99 Company Balance Sheet Designed and produced by MAGEE www.magee.co.uk 100 Notes to the Company Financial Statements Printed by PUSH UNDER NEW OWNERSHIP THE BUSINESS WILL HAVE GREATER ACCESS TO COMPETITIVELY PRICED CAPITAL AND THIS WILL FUEL GROWTH 1 FINANCIAL HIGHLIGHTS BUSINESS HIGHLIGHTS 31 December 31 December > Further success with PFI/PPP 2006 2005 £ million £ million project wins Profit before taxation – continuing 4.6 35.8 > Continued growth in portfolio Net funds/(borrowings) – recourse 85.2 108.6 – non-recourse (1,616.9) (1,396.3) valuation (Loss)/earnings per share – continuing (0.6)p 9.9p – total (0.3)p 9.1p > Growing opportunities in the Dividends per share – interim paid 1.3p 1.2p international PFI/PPP markets – final proposed – 2.5p Portfolio valuation (excluding Chiltern) 439.3 424.5 > Change of ownership effective from 22 December 2006 VALUATION GROWTH 450 64.7 439.3 424.5 (15.6) 12.6 (26.6) 400 (20.3) n o i l l i m £ 350 300 t ls ts ld e n t a a n e u o a e 5 s e i d e 6 lu 0 o y e te th d lu 0 a p tm n a w e a v c is s li r o s v c e d e c ilt r a e e D v e g g b lu D in d re a to v Jan 2006 – Dec 2006 2 KEY ACHIEVEMENTS ¯ Financial close ¯ Investment in 2 on Barts and Canadian hospitals The London completed in New Hospitals February 2007 ¯ Selected as ¯ Portfolio of provisional bidder 52 projects and preferred on portfolio valuation Tunbridge Wells of £439.3 million Hospital ¯ Selected as bidder ¯ Growing pipeline of choice on of bids in Greater Manchester development Waste PFI project 2006 WAS ANOTHER YEAR OF FORWARD MOMENTUM IN TERMS OF BUSINESS DEVELOPMENT AND VALUE ENHANCEMENT 3 “THE GROUP HAS POSITIONED ITSELF AS A MARKET LEADER IN THE DEVELOPMENT OF PRIMARY PFI/PPP ASSETS ON WHICH THE RETURNS ARE PRINCIPALLY GENERATED FROM CAPITAL VALUE GROWTH.” ADRIAN EWER CHIEF EXECUTIVE Business Review CHANGE OF OWNERSHIP CHIEF EXECUTIVE’S On 22 December 2006 John Laing plc was acquired by Henderson Infrastructure Holdco Limited (‘HIH’) for total REVIEW OF 2006 cash consideration of £1,004 million. The Company is From a trading point of view, 2006 was another year of no longer listed on the London Stock Exchange. HIH is good performance in the Group’s core PFI/PPP markets. a company formed specifically for the purpose of the The profitability of operational infrastructure assets has acquisition and is managed by Henderson Equity Partners continued to grow and the values are increasing as Limited, a subsidiary of Henderson Group plc – one of predicted. The Group has positioned itself as a market Europe’s largest investment managers. As a result of leader in the development of primary PFI/PPP assets on the acquisition, the John Laing Group will have access which the returns are principally generated from capital to increased capital which will enable the Group to value growth. Value enhancement is achieved through accelerate the growth of its infrastructure development the management of development risk in the bidding, and investment activities. construction and early operational phases of the project life. Thereafter, further value is created through the RESULTS AND DIVIDENDS optimisation of revenues, management of life cycle The Group profit before tax on continuing businesses costs and, where appropriate, refinancing. The pipeline for the year ended 31 December 2006 was £4.6 million of projects in the bid phase remains healthy and the (2005 – £35.8 million). The profit is stated after exceptional global opportunities give us confidence to target acquisition costs of £10.8 million relating to the acquisition continued growth. of the Company by HIH. Due to the change in ownership, At the half year stage we reported the negative the Group abandoned asset disposal plans that had been impact of the Gerrards Cross tunnel collapse on the targeted to take place in the second half. As a result, the profitability of Chiltern Railways. We are now pleased to profit from disposals for the year is consistent with the report that the marketing initiatives which have been put £4.6 million that was reported in the interim accounts in place are beginning to bear fruit. (2005 – £20.9 million). 4 b u s i n The tax charge was £4.1 million (2005 – PORTFOLIO VALUATION – PFI/PPP INFRASTRUCTURE e s £13.0 million). After exceptional costs, tax and profits PROJECTS s r e of £0.8 million relating to discontinued operations In order to show a trend in value creation we are again v i e (2005 – loss £1.5 million), the profit for the period ended publishing the Portfolio Valuation on the 52 PFI/PPP projects w 31 December 2006 was £1.3 million (2005 – £21.3 million). in our existing portfolio, excluding the rail franchise. The An interim dividend for the year ended valuation is calculated using the methodology as described 31 December 2006 of 1.3 pence per Ordinary Share on pages 34 to 37. The valuation as at 31 December 2006 was paid on 2 October 2006. The Directors do not was £439.3 million (31 December 2005 – £424.5 million). propose to pay a final dividend (2005 – full year The valuation methodology is not intended to indicate the dividend 3.6 pence). resale value of the portfolio. PFI/PPP BUSINESS DEVELOPMENT FINANCIAL RESOURCES During the year under review the Group was appointed Net Group cash at 31 December 2006 was £85.2 million as preferred bidder, or provisional preferred bidder, excluding non-recourse funds (2005 – £108.6 million). on six new projects having an estimated combined The corporate bank facilities have been refinanced following capital value of £870 million and on which John Laing the change of control and a new 5-year committed syndicated has an investment potential of £38.3 million. These facility of £260 million has been arranged together with successes include the Forth Valley and Tunbridge Wells bilateral facilities of £25 million and an overdraft of £5 million. major acute hospital projects, Tees, Esk and Wear Valley These resources are sufficient to finance the current mental health and learning disabilities facility, a schools investment commitments and the bid pipeline for the project in East Dunbartonshire in Scotland, a further foreseeable future. Beyond that, it is intended that future education college at Hastings and office accommodation growth will be financed by additional capital resources to for the MoD at Corsham. Financial close was achieved be accessed through the funds management business of on Barts and The London New Hospitals project, South the Henderson Group.

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