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John Laing plcInterim Results Presentation
Monday 1st September 2003
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Bill ForresterChairman
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Andy FriendChief Executive
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H1 2003 Summary
Focused investor, developer, operator of infrastructure projects
32 project investments, 23 fully operational
Portfolio value up by 8% 11 new preferred bidder positions,
short listed on 21 new projects Group PBT of £5.1m (2002 - £17.9m) Interim dividend of 1.0p (2002 – 2.0p)
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Key Developments H1 2003
Disposal of Beechcroft, WL Homes
Progress with extinguishing retained liabilities
Investments PBT of £11.5m (£6.8m prior)
8 project interests acquired, 2 new projects
closed
Good progress with projects under
construction
Strong performance from Chiltern
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John Laing Plc
23%
39%
27%
11%
PortfolioValue
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Portfolio by Origin
Adelaide Airport 14.5%
NT Airports 14.5%
Horizon Energy 4.5%
Kinnegar
50%UTI
LITI
ES /
OTH
ER
Glasgow Schools 25.5%
Edinburgh Schools 30%
SCH
OO
LS South East Essex College 100%
Highlands School 100%
Severn River Crossing 35%
Nelostie
50%
RO
AD
S
Midland Metro 33.3%
Chiltern Railways 100%
Brisbane Air Rail Link 15%
LUL Connect 19.5%
DLR (CGL) 40%R
AIL
A130
100%
M40
50%
A55
50%
Walsall Street Lighting 50%
M6
19.5%
E39 KB
50%
British Transport Police 100%
POLI
CE MPS
Firearms 100%
Greater Manchester Police 100%
MPS South East London 100%
Cleveland Firearms100%
HIL Acquisition
Amey Acquisition
Laing Origination
MEIL Acquisition
Cleveland Acquisition
DEF
ENC
E JSCSC
50%
MoD Main Building 50%
DARA Red Dragon50%
Norfolk & Norwich 20%
Queen Elizabeth 50%
North Birmingham 100%H
EALT
H
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2003 Acquisitions to date
8 projects acquired from Amey plc (March
2003); A19 & 10% of Modus on sold
£24.1 million net cash consideration
(including transaction costs), plus
assumption of £8.5 million of forward
equity commitment
Operational performance in line with
expectations
Acquisition of Cleveland Firearms Training
Facility
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2003 Disposals to date
National Physical Laboratory: £0.8m
Manchester Metro : £1.1m
UK Highway Services: £0.7m
Horizon: conditional contract
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Assets under construction
A130 South completed
Metropolitan Police
Firearms & Public Order
Training Facility
completed
Glasgow 28 of 29
schools completed
Edinburgh 12 of 13
schools completed
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Assets under construction
3 out of 4 South East London Police Stations handed over
Construction commenced on 9 out of 17 police stations in Greater Manchester
Ministry of Defence Main Building: 2004 completion on track
E39 Norway on programme LUL Connect programme
delayed
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec 02 June 03
Portfolio by payment mechanism
Volume
Airport
Shadow Toll
Availability
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Assets in operation
Chiltern
Passenger income growth: 9.5% Rated #1 nationally re customer
satisfaction H1 PBT £2.5 m, 25% up on H1 2002 Platform extensions, car parking, depot
facilities to time, on budget
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Assets in operation
Volume based
SRC, CGL ahead of base case
Airports
Deregulation benefits
Shadow Toll
A130 behind due to slower traffic growth
Availability Based Projects
All projects performing to plan
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Portfolio Value by concession length remaining (years)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec 02 June 03
Less than 10
10 to 20
20 to 30
Greater than 30
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Portfolio Valuation Methodology
Consistent DCF, 3rd Party Value, or Market Value Value of portfolio if held to maturity Laing WACC: 7.5% Risk premia: 2% - 6%, plus up to
4% project specific
Average discount rate 10.8% (10.5% prior)
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Portfolio Valuation Movements
Portfolio valuation
Dec 02£m
Acquisitions
£m
Disposals£m
Equity & Loan Notes
£m
Distributions
£m
RebasedDec 02
valuation
£m
Growth on
valuation £m
ValuationJune 2003
£m
Accom 75.3 20.7 (4.4) 2.9 (3.3) 91.2 8.0 99.2
Rail 66.8 - (1.1) - (2.7) 63.0 4.3 67.3
Roads 51.6 9.2 (2.3) 0.4 (1.5) 57.5 0.4 57.9
Utilities
21.6 - - - (0.3) 21.2 7.1 28.3
Total 215.3 29.9 (7.8) 3.3 (7.8) 232.9
19.8 252.7
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Value Growth
0
50
100
150
200
250
300
Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 Jun 03
£m
UtilitiesRailRoads
AccommodationBook
Dec 00 and Jun 01 excluding Europistas
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Adrian EwerFinance Director
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Financial Summary
Investment PBT £11.5m Accounting policies - Consistent Bid Costs - £1.8m credit Interest charge - £2.2m Tax charge - 45% on
Projects Retained liabilities - £32.0m Cash - £36.7m
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Interim Results
6 months 2003Restated
6 months2002
Year2002
£m Continuing Discontinued Group
Turnover 157.7 37.6 195.3 363.2 741.5
Operating Profit 4.7 (0.1) 4.6 25.8 33.4
Profit on fixed assets 1.2 - 1.2 0.5 3.7
Disposals - 1.5 1.5 1.8 (8.8)
5.9
(2.9)
1.4
0.7
7.3
(2.2)
28.1
(10.2)
28.3
(43.0)Interest
Profit before tax 3.0 2.1 5.1 17.9 (14.7)
Taxation (3.0) (3.7) (6.7) (6.4) (11.3)
Profit after tax - (1.6) (1.6) 11.5 (26.0)
EPS
Dividend per share
(1.6)p
1.0p
5.8p
2.0p
(16.2)p
6.8p
Continuing includes Octagon Developments & John Laing Partnership
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Sector Performance
£m
PBT PBIT
June 03 June 02 June 03 June 02
Accommodation 5.4 2.2 5.1 5.5
Roads 3.6 4.4 3.1 2.2
Rail 3.8 2.0 3.3 2.4
Utilities / Airports 0.5 0.1 0.7 0.7
Bids/Overheads (1.8) (1.9) (1.8) (1.9)
Investments sub-total 11.5 6.8 10.4 8.9
Group Costs (6.9) (14.6) (3.8) (6.8)
Non-Core Businesses (0.5) 25.7 0.7 26.0
Interest - - (2.2) (10.2)
Total Group 5.1 17.9 5.1 17.9
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Change of Accounting Policies
Impact on 2003 Interim Results
FRS 17
New Basis
SSAP 24
Old Basis
Pension Charge (4.3) (9.0)
Investments PBT Road Project Accounting
Finance Debtor
New Basis
Fixed Asset
Old Basis
SRC 1.5 0.2
A130 DBFO Road 0.4 (0.8)
Other projects 9.6 9.7
11.5 9.1
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2003 Bid Costs & Overheads
Balance Sheet
BID COSTS Cash Flow
P&L Capitalised Costs
DeferredRevenue
Opening 1.9 (6.7)
3rd Party Costs (3.2) (0.7) 2.5 -
Internal costs capitalised (0.6) - 0.6 -
Invoiced on financial close 0.6 - - (0.6)
Released from deferred revenue
- 2.4 - 2.4
(3.2) 1.7 Closing 5.0 (4.9)
OVERHEADS
Investment business (4.7)
- recoveries 1.2
Total investments (1.8)
John Laing plc (3.8)
Total Bid Costs & Overheads (5.6)
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Interest Charge
6 Months ended 30 June
£m 2003 2002 Year 2002
Group - Recourse Funds 4.5 (7.0) (11.3)
-Pension interest (cost)/income
(1.3) 2.8 5.5
- 100% PFI project co’s 0.4 (1.1) 0.1
- Amortisation of issue costs (2.3) (0.7) (0.6)
- Makewhole / costs written off - - (22.7)
1.3 (6.0) (29.0)
Joint Ventures (2.0) (2.6) (1.9)
SRC refinancing - - (9.1)
Associates (1.5) (1.6) (3.0)
(2.2) (10.2) (43.0)
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Tax Charge
Tax charge
£m Profit Continuing Discontinued
Current Prior Year
Group operating loss (3.8) 0.5 (overseas) 0.4 1.0
Joint ventures
- PBIT 7.5
- Interest receivable
24.1
- Interest payable (26.1)
5.5 2.5 (45%)
Associates 0.9 - 0.4 1.9
Capital profits 2.7 -
Group interest (0.2) -
5.1 3.0 0.8 2.9
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£m
6 months to 30 June Year
Opening balance
2003 2002 2002
39.2 57.0 57.0
Profit & Loss credit - (1.5) (2.7)
Provisions utilised (7.2) (12.9) (15.1)
Closing balance 32.0 42.6 39.2
Retained Construction Liabilities
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Net Assets at 30 June 2003
Pro Forma£m Reported Non-recourse Recourse
Net Assets Balance Sheet
Investments 418.9 (241.6) 177.3
HomesWimpey receivable 95.2 (64.0) 31.2Provisions (3.0) (3.0)
Retained businesses 7.4 7.4
WL Homes 26.3 26.3Property 2.3 2.3Construction - retained liabilities (32.0) (32.0) - insurance provisions (25.1) (25.1)
Group/general (13.1) (13.1)
Net assets employed 476.9 171.3
BankRecourse 36.7 36.7Project debt (241.6) -Wimpey bridge (64.0) -
Net assets (ex pension) 208.0 208.0
Pension deficit (net) (97.9) (97.9)
Net assets 110.1 110.1
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Significant Cash Flows – Group Funds
£m6 months to 30
June 2003
Corporate Sale of Beechcroft 33.4
Purchase of Amey (31.1)
2.3
Trading Construction liabilities (7.2)
Laing Homes trading (10.8)
Laing Investments - Sales 4.2
- Investment (5.7)
- Distributions 7.8
Other working capital (5.0)
Overheads (10.5)
Interest (3.4)
Tax (3.2)
Dividends (1.3)
Net cash flow (32.8)
Opening balance 69.5
Closing balance 36.7Source management accounts
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Investment Commitments
£m
Committed equity – 30 June 2003 56.9
Preferred Bidder Projects 50.8
Short listed Projects 61.3
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Resources
£m
Cash - 30 June 2003 37
Debtors
Wimpey receivable – 31 December 2003 31
WL Homes – 1 July 2003 26
94
Less: Blocked Cash (24)
70
Residual housing assets 7
Bank facilities
90
167
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Cashflows
Cash Inflows
0
10
20
30
40
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
£m
Cash Outflows
-50-40-30-20-10
0
£m
Utilities
Rail
Roads
Accommodation
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Andy FriendChief Executive
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UK Government PFI/PPP Procurement
Government commitment remains robust
More sophisticated approach to Value for Money
Progress on: Employment issues
Refinancing
Public sector accounting
Better defined, better managed pipelines
Standardisation of contracts
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Evolution of UK PFI/PPP
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UK Market – Current Trends
10-15% of projected rising total of public sector capex
Sectoral focus refined through experience
£9bn of further deals in Health, Education, Housing – to end 2005
Schools for the future: £1.2bn per annum from 2005
Expansion of demand: Housing, Regeneration, Waste, Local Authority needs
Roads: post 2006 pipeline
Rail: infrastructure enhancement projects
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Evolving Procurement Models
Centralised capacity: PUK/Departmental JVs
LIFT: Tranches of Investment
Framework funding for bundled schemes
Major Acute Hospitals: Batching
Scrutiny of operational performance
Annual review and pipeline plan
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PFI in local authorities
DfES - schools
OPDM - fire, housing,regenerationDfT - transport
Home Office - police
DoH - social services
LCD - court services
DEFRA - wastemanagementDCMS - leisure services
Joint projects
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Emergence of local infracos – a real prospect
Equion Police sites
Excellcare Health Sites Regeneration Projects
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Laing as Developer, Investor, Operator
Sector focussed JVs: Excellcare (Equion & HBOS) Transcend (Laing Rail & Kier Property) Rail operations (Laing Rail & partner) Scandinavian Roads (Laing Roads & Skanska BOT) Street Lighting & Road Maintenance (Laing Roads
& Amey/Ferrovial) Social Housing (Equion & Pinnacle) ‘A’ Programme (Laing Roads & WALTER BAU)
Rigorous targeting & selective partnering
Last 6 PBs: Laing O’Rourke x 2, Costain x 2, . Skanska, Wates
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Laing: Key capabilities
Brands, commercial governance, critical mass of operational projects
Skilled and experienced teams in place
Stakeholder management & non-standard PFI/PPP models
Laing Rail projects: example of cross-fertilisation
Refinancing & secondary market experience
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Bid PipelineH
EALT
H
Preferred Bidder
shortlisted
Newcastle Hospital £250m100 %
Kingston Hospital £25m 60%
North Staffs Hospital £250m 75%
LIFT Sandwell£15m < £31m50%
LIFT MAST£50m -£150m50%
POLI
CE
DEF
ENC
E
RO
AD
S
RA
IL
NEW
MA
RK
ETS
Sirhowy£35m50%
Wakefield Lighting£24m50%
Portsmouth Highways£48m100%
Manchester Lighting£33m50%
Leicester Hospital £400m100%
Newham Hospital £32m100%
HO
USI
NG Newham
Housing £33m50%
Forrest Gate Housing £25m - £3050%
LOC
AL
AU
TH Newham & Enfield Schools £60m / 75%
Surrey CC £30m-£50m 100%
Avon & Somerset Courts £45m / 50%
JSCSC variation
LIFT Leicester£26m - £88m50%
LIFT Coventry£42m - £60m50%
E39 South£130m50%
Bentilee Housing£10m50%
Nth Swindon Schools£65m+100%
LIFT Brent, Harr. & Hill.£20m - £45m 50%
LIFT Great Nottingham£27m -£60m 50%
LIFT North Notts.£20m - £30m 50%
LIFT Liverpool £25m - £60m 50%
LIFT Sthern Derbyshire£21m - £33m50%
Chiltern (primary & secondary aspirations)£400m / 100%
Evergreen 2£70m100%
GLMCA Courts£25m / 100%
LIFT St Helens£22m -£50m50%
LIFT Oldham£17m-£35m50%
LIFT Tees & S Durham£25m - £90m50%
Corsham Dev Project £70m / 50%
LIFT Leeds£28m-£100m50%
Telford & Wrekin Schs£65m+100%
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Value Creation
As at 26th August 2003
Preferred Bidder(14)
Construction(9)
Ramp Up(12)
Yield(11)
Maturity (0)
Cash Distributions
Value of Equity
Time
Value
Newcastle HospitalKingston HospitalNewham HospitalSurrey C.C.Avon & Somerset CourtsWakefield Street LightingManchester Street LightingEvergreen IINewham & Enfield SchoolsNewham HousingLIFT ManchesterLIFT SandwellLIFT LeicesterSirhowy Way
MPS SELGMPAMoD Main BuildingEdinburgh SchoolsE39LU ConnectS.E.E. CollegeWalsall St LightingDARA – Red Dragon
N&N HospitalA130A55Midland MetroBrisbane Air LinkAdelaide AirportNT AirportsKinnegar WWT PlantMPS FirearmsBritish Transport PoliceN. Birmingham MHTGlasgow Schools
QE HospitalHighlands SchoolJSCSCCleveland FireArms TrainingHorizon EnergyChiltern RailwaysCity Greenwich Lewisham (DLR)M6M40NelostieSevern River Crossing
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Strategy
Provider of choice
Developer, Investor, Operator
Sustained growth
Grow assets under management
Focus
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Appendices
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(i) Value methodology
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec 02 June 03
Market
3rd party
DCF
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(ii) Homes – sales and profits
6 months to 30 June 2003 6 months to 30 June 2002
£mTurnover Profit
Net Assets
Turnover ProfitNet
Assets
Private housing - (0.2) - 150.2 16.1 251.7
Land sales - - - 14.2 2.2 11.3
- 0.2 - 164.4 18.3 263.0
Net deferred consideration
- - 92.2 - - -
Partnership housing
23.2 - (7.5) 19.1 0.2 (6.2)
Beechcroft 2.3 (0.7) - 5.8 0.2 32.0
Octagon 9.9 (0.3) 14.9 8.1 1.1 14.7
UK 35.4 (1.2) 99.6 197.4 19.8 303.5
USA 34.9 1.7 26.3 36.0 2.7 32.7
Total70.3 0.5 125.9 233.4 22.5 336.2
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(iii) Year 2002 Restatement
£m Reported FRS 17 Road Projects
Restated
Operating profit 12.6 1.0 (7.9) 5.7
Joint ventures 33.3 - (5.6) 27.7
Disposals (9.5) 5.0 (0.6) (5.1)
Profit before interest 36.4 6.0 (14.1) 28.3
Interest (32.3) 5.5 15.6 (11.2)
SRC Refinancing (22.7) (9.1) (31.8)
Profit before tax 18.6 11.5 7.6 (14.7)
Shareholders Funds 222.8 (110.0) (5.6) 107.2
All road projects including SRC now use Finance Debtor accounting
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(iv) FRS 17 Disclosure 6 months ended 30 June
£m 2003 2002Year2002
Profit and Loss
Charged to operating profit (3.0) (3.4) (8.3)
(Charged)/Credited to interest (1.3) 2.8 5.5
(4.3) (0.6) (2.8)
Balance Sheet
Deficit (138.1) (77.4) (146.8)
Deferred tax thereon40.2 22.1 42.9
(97.9) (55.3) (103.9)
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... an extreme example of a general dilemma
(v) UK Public Sector Net Investment
0
1
2
3
4
5
6
7
8
1965 1970 1975 1980 1985 1990 1995 2000 2003/4
% share of GDP Source: HM Treasury
PFI/PPP contributionSource: Laing Calculation from HM Treasury data%
Year
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Non-PFI PFI
Cost escalation 73% 22%
Delayed delivery 70%24%
(8% >60 days)
National Audit Office: Feb 2003
(vi) Project Delivery under PFI
HM Treasury: July 2003
89% on time, all within budget, 77% meeting expectations
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(vii) Laing: Key capacities
Full range of skills to play integrator role: 100+ development, transaction & portfolio management professionals 35 banking, financial & accounting 15 legal & commercial 22 bidding & marketing including sector experts 31 engineering, surveying, property,
construction, planning, facilities management, quality systems
Plus administrative support, project company administration
Total: 820, includes Chiltern & Equion FM