John Laing plc 2010 - AnnualReports.co.uk · 2016-11-04 · Tunbridge Wells Hosp (Pembury) 37.5%...

2010

Further copies of this statement are

available by visiting the Company’s

website or at the address below

John Laing plc

Registered Office:Allington House,150 Victoria Street,London SW1E 5LBEngland

Registered No. 1345670

Tel: +44 (0)20 7901 3200Fax: +44 (0)20 7901 3520

email: [email protected]

www.laing.com

THE PARTNEROF CHOICE…

John Laing plcannual report 2010

OUR CORE VALUES are the foundation

of what we do and how we do it.

They are the belief system by which we as a business

operate, defining the manner in which we interact with

and treat each other and our external stakeholders.

The John Laing Core Values provide a set of guiding

principles for our people, wherever they are, globally.

OUR STRATEGY is to deliver predictable investment returns and

consistent growth in the value of our investment portfolio.

This is achieved through the active approach we take to

managing all of our projects, and the strong relationships

that are built and maintained with our public sector clients.

01

John Laing Annual Report & Accounts 2010

THE JOHN LAING MISSION

“INNOVATION, FLEXIBILITY AND RELIABILITY ARE THECORNERSTONES ON WHICH JOHN LAING IS FOUNDED.”

to succeed globally as a leading sponsor of privately financed

investment in infrastructure through our expertise in creating

sustainable value for all stakeholders. We will achieve this by

enabling and organising winning partnerships to deliver

innovative development solutions with the public sector which

operate for the benefit of communities worldwide.

‘> Commitment

‘> Adaptability

‘> Integrity

‘> Responsibility

‘> Partnership

02


CONTENTS

“JOHN LAING HAS A ROBUST BUSINESS MODEL THAT HASCONTINUED TO DELIVER THROUGHOUT 2010.”

03-17‘ THE LONG-TERM

PARTNER

04 Financial Highlights06 Where We Operate08 Chairman’s Statement10 Chief Executive’s Introduction12 Finance Director’s Review14 Business Development16 Operations

18-27‘ WHY

JOHN LAING?

20 Track Record of Delivery andLong-Term Involvement

22 Developing Innovative Solutions24 Independence and Transparency26 Forming Partnerships that

Respond to Community Needs

56-67‘ SUSTAINABILITY

58 Introduction60 Community Engagement62 Project Engagement63 Health and Safety64 Environment

68-142‘ DIRECTORS’ REPORT

AND ACCOUNTS

70 Board of Directors72 Directors and Advisers73 Directors’ Report75 Corporate Governance78 Principal Risks and Risk Management82 Statement of Director’s Responsibilities83 Independent Auditors’ Report84 Group Income Statement85 Group Statement of Comprehensive Income86 Group Statement of Changes in Equity87 Group Balance Sheet88 Group Cash Flow Statement89 Accounting Policies98 Restatement of Comparatives99 Notes to the Group Financial Statements138 Company Balance Sheet139 Notes to the Company Financial Statements142 Five-Year Summary

28-55‘ BUSINESS

REVIEW

30 Chief Executive’s Review of 201036 Business Development40 Operations44 Portfolio Valuation48 Financial Review

03

The Long-Term Partner Why John Laing? Business Review Sustainability Directors’ Report and Accounts

‘ INVESTING IN INFRASTRUCTURE

‘ DEVELOPING INFRASTRUCTURE

‘ OPERATING INFRASTRUCTURE

‘ MAKING INFRASTRUCTURE HAPPEN

“John Laing identifiesopportunities createdby government needsfor efficient and costeffective delivery ofmajor investments.”

“John Laing employsexperienced stafffrom a wide rangeof disciplines andbackgrounds to meetthe needs of ourclients and partners.”

“John Laing workswith strong deliverypartners in eachsector and geographicmarket.”

04


“THE ROBUST NATURE OF THE REVENUE STREAMS IN OURPORTFOLIO OF PROJECTS HAS RESULTED IN CONTINUEDSTRONG FINANCIAL PERFORMANCE THROUGHOUT APERIOD OF RELATIVE ECONOMIC TURBULENCE.”

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

‘ PORTFOLIOVALUATION

£544.3 million

‘ NEW EQUITYCOMMITTED

£78.0 million

‘ PROJECT YIELD

£35.7million

‘ PROFIT BEFORE TAX

£68.0 million

VALUE BY SECTOR2010 2009£544.3 million £652.9 million

Environment and utilities Transport Accommodation

2010£116.2m

2009£71.3m

2010£161.4m

2009£230.2m

2010£200.1m

2009£351.4m

TOTAL REVENUE

2010£954.4 million

2009£874.9 million

Accommodation£540.9m

Environmentand utilities£191.7m

Transport£205.1m

Managementservices£16.7m



Transport£107.3m


05


‘ JOHN LAING’S PORTFOLIO (As at 31 December 2010)

HealthTunbridge WellsHosp (Pembury)

37.5%

NorthBirmingham

100%

Tees, Esk &Wear Valleys

100%

NewcastleHospital

15%

Forth ValleyHospital

50%

North StaffsHospital

75% (42% mezz)

Queen ElizabethHospital

12.5%

SchoolsHighlandsSchool

100%

NewhamSchools

80%

EnfieldSchools

80%

North SwindonSchools

100%

EdinburghSchools

10%

Barnsley BSF(Ph2&3 closed 2010)

40%

Justice &EmergencyServices

MPS South EastLondon

25%

BritishTransport Police

100%

ClevelandFirearms

27.08%

ClevelandPolice HQ

42.5%

NEFRA

80%

LIFT LIFT Sandwell

30%

LIFT MaST

30%

LIFTSouth Derby

30%

LIFTNorth Notts.

30%

LIFT Great Notts.(Ph2 closed 2010)

30%

LIFT Leicester(Ph2 closed 2010)

30%

DefenceDARA RedDragon

100%

Corsham MoDProject

50%

RegenerationBentilee

Regeneration

100%

OtherAccommodation

HastingsFE College BP

100% (50% prpty element)

Local AuthorityDevelopment

Croydon CouncilUrban Regen.

PSDH50%

Tunbridge WellsDevelopmentFramework

50%

Roads

Severn RiverCrossing

35%

M6 Hungary

30%

A55

50%

A130

100%

M6, Scotland

11%

NH3 (Ma1) Road,India

36%

A1 Germany

42.5%

E4 NelostieFinland

50%

A1 GdanskPoland

(Ph2 closed 2008)

29.69%

A15 Holland

28%

Rail Property Coleshill

100%

Aylesbury ValeParkway

100%

InternationalAccommodation

Kelowna &Vernon Hospitals

50%

GroningenTax Office

40%

KromhoutBarracks

40%

AbbotsfordHospital

20%

InternationalOther

BrisbaneAirLink

6.05%

DenverEagle P3

45%

Utilities Kinnegar

50%

LUL Connect

19.5%

ManchesterWaste VL Co

50%

ManchesterWaste TPS Co

37.5%

East LondonWaste Authority

80%

Dumfries &Galloway (D&G)

80%

Light Rail DLR (CGL)

40%

Street Lighting Surrey SL

50%

Closed pre 2010Closed 2010Stakes reduced 2010Commercial close only

06


“AT JOHN LAING WE MAINTAIN OUR WIDE SKILL BASEAND EXPERIENCE, COMBINING FINANCIAL ANALYSIS,TECHNICAL, OPERATIONAL AND SECTOR SKILLS, WHICHSTRENGTHEN THE VALUE WE BRING TO OUR GLOBALCLIENTS AND PARTNERS.”

WHERE WE OPERATE

WHERE WE OPERATE

PORTFOLIO BY VALUE

MainlandEurope£97.4m

NorthAmerica£28.6m

JLIF£66.6m

AsiaPacific£4.9m

UK£346.8m

12

1 2

3

4

5

678

910

11

1. Defence 1%2. Health 13%3. Justice & Emergency Services 3%4. LIFT 6%5. Roads 21%6. Schools 5%7. Street Lighting < 1%

8. Utilities 21% 9. International Accommodation 7%10. Regeneration 1%11. Other Accommodation 2%12. Rail Property 2%13. International Other 2%14. Light Rail 4%15. JLIF 12%

13 14

15

‘ WE CURRENTLY OPERATE IN THE UK,MAINLAND EUROPE, ASIA PACIFIC ANDNORTH AMERICA

UNITEDKINGDOM

NORTH AMERICAMAINLAND EUROPE

ASIA PACIFIC

07


‘ PROJECTS AND OPERATIONS

UNITED MAINLAND ASIA NORTHRegion KINGDOM EUROPE PACIFIC AMERICA

Countries of All The Netherlands India Canadaoperation Germany Singapore United States

Hungary AustraliaPoland New ZealandFinlandNorway

Sectors operating Accommodation: Accommodation: Accommodation: Accommodation:within regions Health Defence Health Health

Education Local/Central AuthorityJustice & Emergency Transport: Transport:Services Transport: Roads Rail

LIFT Roads Light RailDefenceLocal Authority

Transport:RoadsRailLight Rail

Environment & utilities:Street LightingWasteCommunications

Regeneration/Property__________________________ __________________________ __________________________ __________________________

Bidding: Bidding: Bidding: Bidding:Accommodation Transport Accommodation AccommodationTransport Transport TransportEnvironment & utilitiesRegeneration/Property

Number of projects in the region:Operation 30 2 1 1Construction 13 5 1 2Commercial Close 1 – – –Preferred Bidder 7 – 1 –

08


“JOHN LAING HAS A BUSINESS MODEL AND STRATEGIESTHAT HAVE ENABLED THE COMPANY TO DELIVER ITSINVESTMENT TARGETS – EVEN IN A PERIOD OF AUSTERITY.OUR GLOBAL STRATEGIES AND FOCUS ON ECONOMICINFRASTRUCTURE SHOULD ENSURE THAT WE CANCONTINUE TO DELIVER GROWTH.”

CHAIRMAN’S STATEMENT

CHAIRMAN’S STATEMENTI am pleased to look back on my first full year as Chairman of John Laing and describe it asone in which we have set the foundations for the future growth of the Company.

We have reviewed our strategy and business model with our shareholder and confirmed our focus oncreating shareholder value through growth in the level of investment we commit to new projects. Our coreexpertise is in creating winning bids and steering projects through the development and constructionstages. This de-risking greatly enhances value. We continue to take operational responsibility on projectswhere we can take a leading role, focussing on efficient delivery and further value enhancement. We haveworld-class teams in the UK and internationally. During the past year, I have been able to spend time withthese teams, both in our domestic market and overseas, and I have been hugely impressed by theirenthusiasm and expertise.

Our business depends upon a pipeline of projects coming to market and a line of funding to create the valuewe seek. On both counts, I am pleased to report on a successful year in 2010.

In a year of difficult market conditions, which saw deferral and cancellation of many UK projects, thedevelopment team has sourced new opportunities in new sectors, both in the UK and in overseas markets.Of particular note is the progress that we have made in the waste sector in the UK and in a variety ofprojects in Australia and the USA. As a result, we have beaten our budget targets for investment committedto new projects.

We have also made very significant progress on the financing front through the combined efforts of theCompany and the shareholder. The key transaction was the successful listing of John Laing InfrastructureFund Limited (‘JLIF’) in November 2010 which provided JLIF with funds to purchase £255.2 million of assetsfrom the Company. The proceeds enabled us to retire the shareholder’s acquisition debt and have providedus with resources to fund new projects. We also refinanced our corporate debt facilities for a three-year term.

These successes have built a solid platform on which we can base an exciting future for John Laing. Theywere hard won and many obstacles had to be overcome in the process. It has been a team effort andeveryone in the Company can feel proud of our success so far. But this is only the beginning. We have muchfurther to go and our strategies will continue to evolve as we drive towards the shareholder’s targetvaluation for the Company.

Having been with the Company for a year and experienced up close what our people are capable of, I lookforward to facing these challenges and I have complete confidence in our ability to succeed.

As we build John Laing into a bigger and more valuable entity, we also need to ensure that the governanceof the Company continues to develop in tandem so that we grow into a stronger Company. The John LaingBoard now has an independent Non-executive Chairman and has the committee structures that provideindependent challenge to management. In 2011, the Board will reconsider its membership to ensure thatit will have a majority of Non-executive Directors. It will also initiate a formal board performance reviewprocess for implementation at the year end.

I believe that right across John Laing, the shareholder, Board members, management and employees areworking together to build a successful, strong company with a winning culture.

09


In my first year as Chairman I have been hugelyimpressed by the range of skills and the qualitiesdemonstrated by our staff across the whole business.We are confident about our ability to successfullygrow the business. ”

“

Phil NolanCHAIRMAN

CHIEF EXECUTIVE’S INTRODUCTIONSTRATEGIES THAT ARE WORKING

In 2010, we have achieved all of our Key Performance Indicators with respect tobusiness development and the capturing of value. We have yet again demonstrated thesuccess of our global strategies with project wins in the USA and Australia. Thesuccessful launch of a listed infrastructure fund has established a platform for realisingvalue from operational projects while maintaining our long-term involvement in therunning of projects.

RESPONDING TO CHANGING MARKETS

An increasing proportion of our bid pipeline is in overseas markets. Here we see increasing use of thetraditional Private Finance Initiative (‘PFI’)/Public Private Partnership (‘PPP’) model. While there may bevariations between local market practices, the base line is consistent. Many global markets are nowdeploying the UK model as a means of financing investment in both social and economic infrastructure thatwill stimulate economic growth. John Laing is very well positioned to capitalise on the growth in theseoverseas markets.

In the UK, we are experiencing a declining market for traditional PFI. This is no surprise as the financialausterity measures were well signalled ahead of the general election in May 2010, as was the politicalchallenge to the PFI model that then shadow ministers were voicing. The reality is that PFI has resulted insignificant capital investment in UK infrastructure. New or refurbished assets result in improved outcomesfor the UK general public at known costs to the public sector and those assets will be fully maintained –in contrast to those that have been procured in the traditional manner. All recent Government policydocuments relating to investment in infrastructure stress the importance of harnessing private sectorinvestment expertise and PFI will continue to be used where it is demonstrably good value for money. Weare growing our PFI business in the rail and environmental sectors. We are already deploying alternativeprocurement methods that seek to address the current agenda in the public sector, with particular emphasison regeneration projects.

John Laing will continue to work with the UK Government on the evolution of procurement methods thatembrace the strengths and efficiencies of the private sector.

Our very good results in 2010 reflect our leading market position and our willingness to adapt at John Laing.We are independent of any contractor, design house, service provider or project financier but we have realstrength in depth in project management, project financing and asset management.

Our independence, coupled with our proven skills, is the key to our continued success.

10


“2010 WAS A GOOD YEAR FOR JOHN LAING. WE HAVE CEMENTED OUR CREDENTIALS IN THESECTORS OF THE UK MARKET THAT REMAIN CENTRAL TO THE GOVERNMENT INVESTMENTPLANS, SUCH AS RAIL AND WASTE MANAGEMENT. IN OUR OVERSEAS MARKETS WE SECUREDOUR FIRST INVESTMENT IN THE USA AND HAVE BUILT A STRONG PIPELINE OF BIDOPPORTUNITIES IN AUSTRALIA.”

CHIEF EXECUTIVE’S INTRODUCTION

Our success is founded upon an ability andwillingness to adapt the business model to suitmarket conditions. We constantly seek to developthe model for privately financed infrastructure ina way that addresses our clients’ requirements.”

“

Adrian EwerCHIEF EXECUTIVE

11


FINANCE DIRECTOR’S REVIEWDuring the year, the Group refinanced its corporate bank facilities and put in place athree-year £305 million syndicated facility, in addition to £19.9 million of bilateral facilities.This has given the Group significant capacity for backing future investment with availablefinancial resources at the end of the year of £182.9 million (2009 – £110.4 million). TheGroup successfully listed the John Laing Infrastructure Fund Limited, on the London StockExchange, culminating in the disposal of 19 investments for £255.2 million to JLIF. Totaldisposals in the year realised a £35.1 million accounting profit and a £135.2 million totalprofit on cost. £120.4 million of the disposal proceeds was used to fund a special dividendto repay the shareholder’s acquisition facility; the remainder was used for working capitaland project investment. The Group retains a 23.1% investment in JLIF.

During 2010, the Group has continued to work with the pension fund trustee on risk reduction initiativesand the defined benefit pension scheme will be closed to future accrual from 31 March 2011. A triennialvaluation was completed at 31 March 2010 and a revised deficit repair contribution schedule has beenagreed. The value of the pension deficit is highly dependent on price inflation, discount rate andlongevity experience and the sensitivity of the pension liabilities to changes in these assumptions.The IAS19 pension deficit at 31 December 2010 decreased to £169.0 million (2009 – £195.0 million).

At 31 December 2010, the portfolio comprised 56 project investments (2009 – 69). Based on theCompany’s valuation methodology, the year end value including the investment in JLIF was£544.3 million (2009 – £652.9 million). The decline in value reflects the fact that 22 investmentswere sold during the year for a consideration of £285.3 million.

After adjusting the opening position to take account of disposals, new cash investments and distributions,the 2010 portfolio valuation reflects an underlying growth of 18% (2009 – 9%).

12


“2010 WAS A YEAR OF SUCCESS FOR JOHN LAING, INCLUDING SECURING £78 MILLION OF NEWINVESTMENTS AND THE LAUNCH OF AN INFRASTRUCTURE FUND, UNDERPINNED BY THESTRONG OPERATIONAL PERFORMANCE OF THE ASSET PORTFOLIO.”

FINANCE DIRECTOR’S REVIEW

13


Successful refinancing of the corporate facilities,combined with working capital released throughasset disposals, has given the Group a strongplatform to finance future growth.”

“

Lynn KrigeGROUP FINANCE DIRECTOR

BUSINESS DEVELOPMENTBUSINESS DESCRIPTION

John Laing Business Development is responsible for all of the Group’s bid developmentactivities both in the UK and internationally. This includes traditional PFI/PPP projectsas well as new strategic partnership structures such as the urban regenerationschemes in the UK.

We work with partners who are individually selected for each scheme and we bring our broad skills base to everything we do, including project development, finance,construction and operational skills.

STRATEGY

John Laing is a developer of infrastructure projects for public sector clients. The business is primarilybased on long-term concessions to design, build, finance and operate infrastructure projects but alsoincludes the new strategic partnership structures which are increasingly emerging such as the asset-backed regeneration schemes in the UK. John Laing applies the same five strategic dimensions to allactivities: globalisation, value chain, partnership, innovation and brand, with the objective of deliveringhigh-quality infrastructure for our clients and users, and creating value for our stakeholders. Globalisationmeans the selective targeting of markets on an international basis. Value chain means the alignment andimprovement of our business processes to deliver best value. Long-term partnerships are at the coreof our business, including supply chain partners and clients. We aim to differentiate ourselves throughinnovation, whether through new business models and project structures or by moving into emergingsectors where we can succeed. Our brand and reputation reflect our underlying corporate values, andunderpin our long-term success.

VISION

OUR VISION IS TO DELIVER HIGH-QUALITY INFRASTRUCTURE TO OUR CLIENTS,USERS AND THE COMMUNITIES IN WHICH THEY OPERATE AND, BY DOING THIS,WE CREATE SUSTAINABLE VALUE FOR ALL OF OUR STAKEHOLDERS.

14


“BUSINESS DEVELOPMENT PLANS TO EXPAND ITS ACTIVITIESDURING 2011, FOCUSSING ON A MIX OF UK AND INTERNATIONALMARKETS, AND WILL ENGAGE IN NEW FORMS OF PFI/PPPOPPORTUNITIES TO RESPOND TO CHANGING MARKET DEMANDSAND GOVERNMENT POLICIES. CARE WILL BE TAKEN TOPURSUE OPPORTUNITIES WHICH ARE VIABLE, AND STRUCTURETHEM ROBUSTLY, GIVEN GLOBAL ECONOMIC UNCERTAINTIES.”

BUSINESS DEVELOPMENT

For more than 30 years, we have been associated withsome of the most challenging and prestigious projectsundertaken in the infrastructure sector. We continue tobuild on that heritage, using our skills and experience ininnovative ways to deliver new, complex projects whichmeet our clients’ future needs.”

“

Derek PottsMANAGING DIRECTOR,BUSINESS DEVELOPMENT

15


OPERATIONSBUSINESS DESCRIPTION

John Laing Operations is responsible for managing all aspects of projects, over theirwhole life, from financial close through construction and thereafter during theoperational phase.

A significant area of activity within John Laing Operations is the identification andimplementation of operational improvements and realisation of value to stakeholders.

STRATEGY

Operations’ strategy is to deliver projected investment returns and consistent growth in the value of theinvestment portfolio. This is achieved by developing strong working relationships with partners over thefull life of concessions.

Our strategy has evolved following the launch of the John Laing Infrastructure Fund Limited in November2010 and the sale of 19 projects to JLIF. John Laing Operations will continue to provide the day-to-daymanagement services directly to these projects under a management services agreement. To ensurecontinuity of client relationships and project knowledge, it is intended to retain the current John Laingproject directors who will continue to take an active role in managing and reviewing these projects underformal asset management arrangements.

We place considerable value on being able to use operational experience in the development and designof new projects. As an asset manager, it is, therefore, important that John Laing Operations activelymanages the four key phases of a project through construction, mobilisation of services, management of service provision and life cycle of the infrastructure.

VISION

OUR VISION AS ASSET MANAGERS IS TO BE RECOGNISED AS THE PARTNER WHOADDS MOST VALUE WHEREVER WE OPERATE.

16


“OUR FOCUS ON THE TRANSFORMATION OF PROJECTSTHROUGH CONSTRUCTION AND MOBILISATION OF THEBUILT ENVIRONMENT HAS DEMONSTRATED IMPROVEDPUBLIC SERVICES.”

OPERATIONS

17


Chris WaplesMANAGING DIRECTOR,OPERATIONS

We have absolute focus on delivering projected investmentreturns and consistent growth in the value of ourinvestment portfolio by developing strong relationshipswith our partners over the life of each service concession.”

“

18

Why John Laing?WE AIM TO BE THE PUBLICSECTOR’S PARTNER OF CHOICE by delivering genuine value andinnovation through our investment and project development solutions.

why John Laing?

19

20 Track Record of Delivery and Long-Term Involvement22 Developing Innovative Solutions24 Independence and Transparency26 Forming Partnerships that Respond to Community Needs

20


“OUR TRACK RECORD AS AN ACTIVE INVESTOR ANDLONG-TERM PARTNER DEMONSTRATES OUR CAPACITY TODELIVER PROJECTS – IN EVEN THE MOST CHALLENGINGCIRCUMSTANCES; AND ACROSS A WIDE RANGE OFSECTORS AND MARKETS.”

WHY JOHN LAING?

TRACK RECORD OF DELIVERYAND LONG-TERM INVOLVEMENT

As of December 2010, John Laing held investments in and/or managed 75 PFI/PPPprojects. Our varied portfolio illustrates the breadth of our competencies and our abilityto deploy. All mainstream and non-mainstream fundraising methodologies, such assenior debt financing, both fixed-rate and index-linked bonds, and development finance.As an active investor, we look to deliver long-term value for our clients by identifyingand realising value enhancement opportunities and sharing the upside generated bythem. The global economic crisis saw some of the most challenging funding marketconditions ever experienced. Yet, during this period, John Laing achieved successfulfinancial closes on a number of major projects in the UK and overseas.

Project: Severn River Crossing Bridge

Location: United Kingdom

Description: John Laing was a co-developer and is joint major shareholder in Severn River Crossingplc, the £320 million project company responsible for the construction of the new bridgeand operation of both bridges linking England and Wales.

The Second Severn Crossing was opened in 1996 as part of a 30-year design, build, financeand operate concession for the new 5.2 km cable-stayed river crossing that also includesmaintenance of the Severn Bridge, the original suspension bridge.

During the mid-1980s, the decision was taken to construct a second crossing 5 kmdownstream from the existing suspension bridge. This was in response to increasingtraffic volumes and frequent congestion problems on the original Severn Bridge; madeworse by occasional high winds, breakdowns and accidents, at times leading to closure ofthe old bridge for safety reasons.

Royal Assent was given to the Severn Bridges Act 1992, enabling the concession andconstruction of the new bridge to start in April 1992. The Second Severn Crossing wasopened on 5 June 1996 by His Royal Highness, The Prince of Wales. The design of the newbridge offers a dual three-lane road, which is able to remain open even in high winds.

‘

21


Project: Newham and Enfield SchoolsLocation: United KingdomDescription: The first of its kind to be bid to aconsortium of authorities, this project was partof an initiative by the London Boroughs ofNewham and Enfield to jointly procure PFIschools. Financial close was reached in 2003to design, build, finance and operate four newschools, one in Newham and three in Enfield.The concessions will run for 26 years.

Project: Roseberry Park HospitalLocation: United KingdomDescription: The development phase on thisproject to design, build, finance and operate anew mental health facility in Middlesbrough onbehalf of the Tees, Esk and Wear Valleys NHSTrust has been completed. Financial close wasreached in December 2007. The 312-bedhospital will replace an existing facility on theSt Luke’s site.

Project: Surrey Street LightingLocation: United KingdomDescription: The John Laing/Skanskaconsortium was appointed to design, build,finance and operate the stock of lightingcolumns across Surrey County for a periodof 25 years starting from March 2010.

The works are being carried out bySkanska Infrastructure Services which hasextensive experience in infrastructure services.

‘ JOHN LAING WAS A CO-DEVELOPER ANDIS A JOINT MAJOR SHAREHOLDER IN THESECOND SEVERN CROSSING PLC WHICHWAS OPENED IN 1996 AS PART OF A 30-YEAR CONCESSION FOR THE NEW 5.2 KMCABLE-STAYED RIVER CROSSING.

22


“WE TAKE PRIDE IN OUR ABILITY TO DEVELOP AND DELIVERNEW SOLUTIONS THAT MEET THE NEEDS OF OUR CLIENTSIN THE MOST EFFECTIVE WAY. OUR COMMITMENT TOINNOVATION CAN BE SEEN IN PRACTICE THROUGHOUTOUR PORTFOLIO OF OPERATIONAL PROJECTS.”

WHY JOHN LAING?

DEVELOPING INNOVATIVE SOLUTIONS

We deliver real innovation into our partnerships, by combining our expertise inevaluating risk, project management and raising finance and by placing a strongemphasis on understanding our clients’ needs.

Our commitment to pioneering new approaches is widely recognised in each of themarkets in which we operate:

• We have realised some of the largest and most complicated PPPs in Europe,in some of the most challenging funding markets ever known.

• We have introduced new partnership models that enable our clients to generatesavings, deliver efficiencies and get better value from their assets.

• We have adopted innovative funding and commercial models to realise the bestoutcomes for clients and their projects.

Project: Manchester Waste


Description: Through Viridor Laing (Greater Manchester) Limited and TPSCo (Runcorn), a consortiumcomprising John Laing, Viridor Waste Management Limited and INEOS ChlorVinylsachieved financial close on a groundbreaking 25-year PFI waste and recycling project withGreater Manchester Waste Disposal Authority in 2009.

Together with the Authority both the European Investment Bank and the TreasuryInfrastructure Finance Unit (‘TIFU’), joined the funding group to provide debt finance intothis project (the first and only project to be closed by TIFU).

The project (worth £3.8 billion) is the largest in Europe. It will provide a revolutionary,integrated solution for over 1.3 million tonnes of waste and will recycle and compost atleast 50% of all the Authority’s waste by 2015.

The £640 million construction contract is underway and will create state-of-the-artrecycling facilities across Greater Manchester.

Viridor Laing estimates that at least 5,000 vital jobs in the building trade and the widereconomy will be added to the 620 jobs at Greater Manchester Waste, based in Bolton,which are secured and upskilled to ‘green collar’ jobs by this contract. Subcontractors tothe Viridor Laing consortium are planning to increase the permanent workforce by another116 staff once the facilities are operational.

‘

23


Project: Forth Valley Royal Hospital

Location: United KingdomDescription: Forth Valley Royal Hospital, an860-bed acute hospital in which John Laingholds a 50% stake, is the first hospital in the UKto utilise robotic technology for the movementof goods around the building. The hospitalpharmacy is also fully automated with themajority of drugs being sorted, stored anddispensed by robotics.

Project: Denver FasTracks

Location: United StatesDescription: The Denver Transit PartnersConsortium in which John Laing holds a 45%stake, achieved financial close for two newcommuter rail lines and a portion of a third.This was the first availability-based PPPproject in the transit sector in the USA andthe first transit project to be funded usingPrivate Activity Bonds.

Project: Hounslow Librariesand Leisure Services

Location: United KingdomDescription: The £13 million Hounslowcontract is the first of its kind in the UK wherethe private sector directly manages librariesfor the local authority. John Laing IntegratedServices is working to the local authority’s aimsand objectives across cultural services todeliver their aspirations effectively, efficientlyand at an affordable price.

‘ MANCHESTER WASTE IS THELARGEST PROJECT OF ITS TYPEIN EUROPE AND SUCCESSFULLYACHIEVED FINANCIAL CLOSE INONE OF THE MOST CHALLENGINGFUNDING MARKETS WE HAVEEVER KNOWN.

24


“JOHN LAING IS COMPLETELY INDEPENDENT FROM ITSCONSTRUCTION PARTNERS. THIS ENABLES US TODEMONSTRATE TRANSPARENCY IN OUR SUPPLY CHAINMANAGEMENT APPROACH; AND PLACE A TRUE FOCUSON GETTING THE BEST DEAL FOR OUR PUBLIC SECTORPARTNERS.”

WHY JOHN LAING?

INDEPENDENCEAND TRANSPARENCY

Our clients recognise that our independence enables us to get the best deals foreach partnership and provides total transparency of our supply chain managementapproach. John Laing formed the first two Local Asset-Backed Vehicles (‘LABVs’) inthe UK, with the Croydon and Tunbridge Wells Borough Councils respectively. Thesemodels enable public sector partners to harness the maximum value from theirassets and share equitably in the profits generated through development. This willprovide them with greater control over local regeneration than is possible through theplanning system alone.

Much of the success of these partnerships is underpinned by our independence fromthe supply chains we assemble to realise each project.

Project: Croydon LABV


Description: The joint venture between John Laing and Croydon Council will regenerate significant sitesacross Croydon town centre and deliver a new Public Service Delivery Hub (‘PSDH’).

This is the first deal of its kind, this new model of PPP, takes the form of an asset-backedUrban Regeneration Vehicle (‘URV’) into which Croydon Council has invested the land andJohn Laing the equity.

Through this limited liability partnership, the Council will receive a 50/50 share of profitsand will maintain ongoing control of its regeneration agenda by retaining an interest as apartner/landowner.

The 28-year URV partnership will provide a new 22,300m2 PSDH for the Council as well asretail space.

The initial development brief also includes plans to deliver the phased regeneration oftwo important town centre sites. The creation of substantial residential-led developments,a combination of both private and affordable accommodation, is planned. In December2010, the second project under the partnership for the development of a leisure centre andsocial housing, commenced.

‘

25


Project: MoD Main BuildingLocation: United KingdomDescription: Modus Services Limited, jointlymanaged by John Laing and Innisfree, secured a30-year, £746 million PFI contract to moderniseand rationalise the Ministry of Defence’s Grade Ilisted Whitehall Headquarters and Grade IIlisted Old War Office.

The project has generated annual savingsof £18 million for the client.

Project: Brockley Social HousingLocation: United KingdomDescription: In 2007, Regenter B3 Limitedcontracted with London Borough of Lewishamto renovate, maintain and manage 1,336 rentedproperties and 502 leasehold properties inBrockley under a concession which runsuntil 2027.

Refurbishment works to the value of£74 million were completed by HigginsConstruction plc in July 2010.

Project: Kromhout BarracksLocation: The NetherlandsDescription: Komfort (a consortium comprisingJohn Laing, Strukton and Ballast Nedam) wasawarded the design, build, finance, maintainand operate contract with the Dutch Ministryof Defence for the Kromhout Barracks. Theproject has a net value of over €450 million.Phase II is in the construction phase and willbe completed in 2011.

‘ CROYDON LABV IS THE FIRST DEALOF ITS KIND TO UTILISE AN ASSET-BACKED URBAN REGENERATIONVEHICLE INTO WHICH CROYDONCOUNCIL WILL INVEST THE LANDAND JOHN LAING THE EQUITY.

26


WHY JOHN LAING?

“AS A LONG-TERM PARTNER TO THE PUBLIC SECTOR,WE UNDERSTAND THAT PUBLIC INVESTMENT ININFRASTRUCTURE IS ULTIMATELY ABOUT SUCCESSFULLYMEETING THE NEEDS OF THE COMMUNITIES THAT EACHPROJECT WILL SERVE.”

FORMING PARTNERSHIPS THATRESPOND TO COMMUNITY NEEDS

John Laing’s commitment to social responsibility can be traced back throughout ourheritage of over 160 years. We are one of only 38 companies in the UK to be awardedthe CommunityMark by Business in the Community. We take pride in being activemembers of each community in which we operate and in making a positivecontribution through the way we conduct our business.

We work together with public sector partners, delivery partners, and local voluntaryand community sector groups to formulate bespoke socio-economic regenerationstrategies for each project. These aim to optimise the positive impacts that eachproject creates within its local community, whilst also supporting our clients to fulfiltheir wider community strategies.

Project: Canning Town Regeneration


Description: Regenter, the joint venture between John Laing and Pinnacle Regeneration Group Limiteddelivered an award-winning £59 million regeneration and housing project in Canning Town,Newham, London. Regenter was tasked with refurbishing the homes to the Decent HomesStandard, and will be responsible for managing and maintaining these properties for thenext 25 years.

Canning Town is one of the most vibrant regeneration areas in London and the PFIensures that the homes receive much needed investment alongside the development of new homes and improvement to the transport infrastructure.

One of the successes of the project has been the community engagement strategy.Residents were engaged in an extensive consultation process and were involved inpreparing the specification and choosing the contractors. Regenter has also hostedsummer activity schemes since the inception of the project with the aim of involving youngpeople in the area. The schemes have provided DJ training, fashion and sport workshopsand, as a result of its success, a sustainable youth engagement model is being developed.

The project has received two awards for its vision and commitment to the London Boroughof Newham; 4ps Excellence Award for the Regeneration and Place Shaping Category 2007.

‘

27


Project: NH3 Road IndiaLocation: IndiaDescription: A John Laing, HCC and Sadbhavconsortium reached financial close on a £200million project to deliver a 96.5 km four-lanehighway from Maharashtra-Madhya PradeshBorder to Dhule, with an overall concession of18 years.

This project includes a strategy to supportinformal roadside trading which sustains localeconomies alongside the highway.

Project: Bentilee HubLocation: United KingdomDescription: Bentilee Hub is a healthcarecentre with a construction cost of £8.75 millionwhich was procured through the PFI routeand is managed by Regenter. Regeneration ofthe estate has taken place and Regenter isresponsible for the design, build, maintenanceand operation. The concession will run for27 years.

Project: Coleshill ParkwayLocation: United KingdomDescription: John Laing developedWarwickshire County Council’s concept forColeshill Parkway and further developed theproject through to full scheme approval fromNetwork Rail and the Department for Transportto deliver the award-winning, modern railwaystation. This is the second railway stationproject delivered through a partnership withthe Council, the first being Warwick Parkway.

‘ CANNING TOWN HOUSINGPROJECT IS A £59.0 MILLIONREGENERATION PROJECTREFURBISHING ANDMAINTAINING OVER 1,200HOMES IN LINE WITH THEDECENT HOMES STANDARD.

28

OUR GLOBAL PRESENCE ENSURES AGROWING PIPELINE OF OPPORTUNITIES.Our network of co-investors and supplychain partners enables us to presentwinning propositions…

30 Chief Executive’s Review of 201036 Business Development40 Operations44 Portfolio Valuation48 Financial Review

business review

29

30


“WE PRIDE OURSELVES ON AN ABILITY TO DELIVERNEW BUSINESS MODELS THAT ARE RELEVANT TO THECHANGING MARKET CONDITIONS THAT ALL BUSINESSESARE FACING.”

BUSINESS REVIEW

CHIEF EXECUTIVE’S REVIEW OF 2010IMPLEMENTING OUR STRATEGIES John Laing is adeveloper, manager and operator of infrastructure assetsfor public sector clients. We form consortia with a range ofco-investors, contractors and service providers to bid forlong-term concessions for the design, build, finance andoperation of transport infrastructure, social infrastructure,such as hospitals and schools, and environmentalinfrastructure, such as waste management facilities.

John Laing currently operates in the UK, NorthAmerica, Western Europe and the Asia Pacific region. TheUK forms the single largest market for the Company.

The Company bids in open competition for projects,seeking an investment rate of return that includes adelivery risk premium for the development phases and anoperating risk premium that reflects ongoing operationalrisks post-construction. The Company adds value for itsshareholder by monetising the value of its investment inprojects after the riskier development phases have beensuccessfully completed. This monetisation can be achievedthrough either holding the investment to maturity or via fullor partial sale of the investment. Due to the long-termnature of the concessions, the Company has a strategy tosell a proportion of its assets each year and to recycle theproceeds into new investment opportunities.

In November 2010, John Laing launched a listedinfrastructure fund, John Laing Infrastructure Fund Limited(‘JLIF’). That company is managed by an independent Boardof Directors and is listed on the London Stock Exchange.John Laing has retained an interest of 23.1% in the sharesof JLIF.

Through the listing of JLIF, John Laing has beenable to realise value from 19 projects in its portfolio ofinfrastructure assets whilst retaining the responsibility ofmanaging the projects on behalf of our public sector clients.JLIF purchased operational assets from John Laing, whichhad been independently valued at £255.2 million.

The listing has also established a future fundmanagement income stream for the business as John Laingprovides a dedicated fund management service to JLIF forwhich it receives a fee of 1.1% of the net book value of theassets managed. It is anticipated that John Laing will makefurther asset sales to JLIF in the future as part of ourstrategy to recycle capital.

OUR MARKETS Looking back at 2010, the economicconditions that prevailed in our chosen markets werelargely predictable.

United Kingdom In the UK, the newly-formed CoalitionGovernment has moved hard and fast to rein in publicsector spending. The volume of new PFI projects enteringprocurement has continued to decline as expected.However, the Government has set out its agenda forinvestment in infrastructure in the ComprehensiveSpending Review and in the National Infrastructure Plan.Central Government is sponsoring investment in capitalprojects of high, long-term economic value. Included in thefocus are the following sectors in which the Company isspecifically engaged:• Energy infrastructure• Transport infrastructure• Digital communications• Water and waste

31


It would appear that far less emphasis is being given tosocial infrastructure than has been the case in recentyears. This is already evident from the cancellation of theBuilding Schools for the Future programme and Round 6 of the Social Housing PFI programme.

The Coalition Government has made it very clearthat investment in local infrastructure should be theresponsibility of local government and should not besupported financially from the Centre. This extends to theHealth Sector in which the new reforms could leaveresponsibility for investment with Foundation Trusts.

It remains to be seen how localism will work inpractice but the direction of travel is clear and companiessuch as ours will need to play their part in managing thechange.

VALUATION GROWTH OVER TIME£ million

Prior to the change of Government, PFI had becomethe default procurement method for most infrastructureprojects. This will no longer be the case and projectsponsors will need to select whichever procurement methoddelivers the best value for money relative to the risk transfer.In many instances this will continue to be done through PFI.

In all of the new Government’s policy documents,they stress the importance of private sector investment tothe delivery of new infrastructure. We remain committed toplaying a full and active role in the development of UKinfrastructure for public sector clients and we fully expectJohn Laing to be at the forefront of designing new businessmodels that address the public sector’s agenda.

Value

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32


“IN 2010 WE SECURED OUR FIRST INVESTMENT IN THEUS MARKET – THE DENVER FASTRACKS RAIL PROJECT.OUR GLOBAL STRATEGY ENABLES US TO ENTER NEWMARKETS AS A DRIVER OF GROWTH.”

BUSINESS REVIEW

Overseas John Laing has a well-established presence ina number of overseas markets. We have focussed on NorthAmerica, Western Europe and the Asia Pacific regions.When selecting target regions, we look for an identifiablepipeline of projects coming to market, a trusted legal system,returns that meet our risk-adjusted hurdle rates and strongpolitical will to utilise private investment. It is also aprecondition that we are able to develop partnerships withstrong contractors that have an established local presence.

Canada continues to present a steady flow of projects.Through our offices in Toronto and Vancouver, we are activelyengaged in a number of bids covering both transport andsocial infrastructure. In the USA, there is significant demandfor new investment in infrastructure and some evidencethat PPP is becoming accepted as a viable procurementmethod. We achieved financial close on our first project inthe USA in August 2010 – Denver FasTracks. This projectwill deliver new rolling stock, depots and 36.5 km of newcommuter rail and light rail from the west of the city centreout to the airport which is to the east.

In Continental Europe, the Company has had furthersuccess in The Netherlands on the A15 road. There are anumber of projects to bid in our target European markets,principally in the transport sector, where the commitmentto continue with investment as a means of stimulatingeconomic growth is ongoing.

During 2010, we committed to our first investmentin India. The demand for new infrastructure in India is self-evident and the opportunities to invest are significant. Ourapproach to this market is to proceed with caution since therisks that accompany traditional project financing in Indiaare more extensive than in the more mature markets.

From our office in Singapore, we have tracked asmall number of projects in the Singaporean market itselfbut, to date, very little has actually been procured usingPPP. We have, therefore, diverted our efforts in the AsiaPacific region to Australia where there is a significantpipeline of projects and we have achieved early success.The Australian market has evolved following a series ofproject failures on early transport projects. These resultedfrom overambitious revenue projections coupled with thefull transfer of demand risk to the private sector. Theprocuring authorities have changed the model such thatdemand risk now largely rests with the authority. TheCompany has a number of active bids in Australia whichpresent the opportunity to secure significant growth. We arealso beginning to look at projects in New Zealand but thisis likely to be a much smaller market.

THE PFI/PPP BUSINESS MODEL John Laing was one of thefirst movers into the PFI market in the mid-1990s and hasbeen at the forefront of developing the business model thatis now being adopted globally under the generic banner ofPPP. While the UK market is changing due to politicalpressures on the PFI model, the PPP model remains highlyrelevant in many overseas markets where we will continueto deploy it in its current form.

In the UK, we have been developing an alternativeprocurement method to PFI which is designed to reduce thetime and cost for both the public and private sectors duringprocurement, to increase flexibility within the contractstructure and to align fully the public sector and privatesector interests in successful outcomes. We have alreadydeployed this model in partnership with Croydon Counciland are working with Tunbridge Wells Borough Council ona similar basis. In these cases, the projects are focussedupon regeneration so as to improve local amenitiesincluding housing, education and leisure facilities, retailand Council offices. These projects utilise all the projectfinancing techniques that are normally associated with PFIand benefit from private sector disciplines such as designdevelopment and guaranteed maximum price contractprocurement with full risk transfer to a contractor. Theequity in such schemes is provided jointly by the Council,in the form of estate value, and by their selected deliverypartner, in these cases John Laing. This is a model thataddresses many of the public sector concerns and will,we believe, be of significant interest to a range of clientsin the UK.

All of the new UK Government publications oninvestment in infrastructure stress the importance ofcontinued private sector investment and none of themexcludes PFI as a procurement option. John Laing iscommitted to developing alternative procurement modelsbut, in the final analysis, PFI/PPP has been a majorsuccess in the UK. The model will continue to evolve and,provided that the new models demonstrate good value formoney, it will continue to be used both in the UK andoverseas.

33


RESULTS AND DIVIDENDS The profit before tax oncontinuing operations for the year ended 31 December 2010was £68.0 million (2009 – £16.6 million), restated to reflectthe implementation of IFRIC12.

Financial close was achieved on ten new projectinvestments, securing investment commitments of£78.0 million (2009 – six investments with commitmentsof £64.0 million). Two of the investments secured in 2010were secondary purchases of PFI waste managementassets from Shanks plc for a combined consideration of£25.0 million including £0.4 million in relation toprospective future investments.

Profits of £35.1 million were secured on the saleof investments for a total consideration of £282.7 million(2009 – losses of £15.3 million with consideration andrelease of future funding commitments totalling £120.0million). These profits and losses are disclosed within theGroup profit on continuing operations and in 2010 includeprofits on the sale of 19 assets to JLIF.

Dividends for the year amounted to £136.4 million(2009 – £38.0 million). Two interim dividends were paidcomprising £16.0 million paid on 25 June 2010 and£120.4 million paid on 13 December 2010. No final dividendis proposed.

The defined benefit pension scheme, which theCompany has operated over many decades is being closedwith effect from 31 March 2011. The accounting deficit as at31 December 2010 was £169.0 million (2009 – £195.0 million).The Company has agreed to a new deficit repair contributionschedule with the pension fund trustees, based on thetriennial valuation of the pension fund as at 31 March 2010.

BUSINESS HIGHLIGHTS

‘ REACHED FINANCIAL CLOSE ON JOHN LAING’S FIRSTPPP INVESTMENT IN THE USA

‘ STRONG PIPELINE DEVELOPED BOTH IN THE UKAND OVERSEAS

‘ ESTABLISHED A LEADING MARKET POSITION IN THEUK WASTE SECTOR

‘ DISPOSAL PROCEEDS OF £282.7 MILLION WHICHESTABLISHES CAPITAL FOR REINVESTMENT INPRIMARY PFI/PPP OPPORTUNITIES

‘ PORTFOLIOVALUATION

£544.3 million

‘ NEW EQUITYCOMMITTED

£78.0 million

‘ PROJECT YIELD

£35.7 million

‘ PROFIT BEFORE TAX

£68.0 million

34


“DUE TO THE DEDICATION OF OUR STAFF, JOHN LAINGCONTINUES TO PROSPER AND WE HAVE THE CONFIDENCEIN MARKETS THAT ALLOW US TO PRESS AHEAD WITH AGROWTH STRATEGY TO BENEFIT ALL.”

BUSINESS REVIEW

PORTFOLIO PERFORMANCE At 31 December 2010, theinvestment portfolio comprised 56 projects (2009 – 69).Based on the Company’s valuation methodology, the year endvalue including the investment in JLIF was £544.3 million(2009 – £652.9 million). The decline in value reflects the factthat we sold 22 investments for a value of £285.3 million.After adjusting the opening position to take account ofdisposals, new cash investments and distributions, the 2010valuation reflects an underlying growth of 18% (2009 – 9%).

The valuation represents the Directors’ assessmentof the fair value of the assets on the basis that each assetis held to full maturity. The portfolio valuation as at31 December 2010 included the Company’s 23.1% interestin JLIF at £66.6 million.

The weighted average discount rate used in theportfolio valuation for 2010 was 8.5% (2009 – 7.9%).

The running cash yield from the portfolio ofoperational assets in 2010 was £35.7 million (2009 –£35.8 million). This represents cash receipts in the formof dividends, interest and loan repayments.

STAFF AND THE BOARD Throughout 2010, the executivemanagement kept a very close eye on new recruitment andstaff numbers were, therefore, allowed to decline as leaverswere not replaced. At 31 December 2010, the number ofpermanent staff in the PFI/PPP investment business was265 (2009 – 279). In our facilities management business,John Laing Integrated Services, the staff numbers increasedfrom 752 to 866 as the value of services increased. Lowerpaid staff benefited from an annual pay award in 2009 and2010 and we introduced a voluntary flexible workingarrangement for 12 months from 1 July 2009 as part of acost reduction programme. I am grateful for the continuedcommitment of our staff over the last two years – a generallydifficult period caused by the economic crisis. Due to theirdedication, the Company has continued to prosper and I ampleased to say that we now have the confidence in marketsthat allows us to press ahead with a growth strategy thatshould be for the benefit of all.

Dr Philip Nolan joined the Board on 21 January 2010as an independent Non-executive Chairman. On 30 September2010, Paul Woodbury, a Non-executive Director and theprevious Chairman, resigned from the Board. I would liketo express my thanks to Paul for his contribution to thebusiness since his appointment in January 2007.

35


PROSPECTS The prospects for the business are good.Despite the decline in UK PFI, we are very well

positioned in those sectors of the UK market thatdemonstrate opportunity. In particular, this is the case inthe Waste sector and on a number of acute health projects.We are also one of the market leaders in the developmentof alternative procurement methods to PFI, which we havealready deployed successfully.

In our overseas markets we remain confident offurther success in Western Europe and in particular wehave built a strong pipeline of opportunities in Australia.Following our first success in the USA market, we cansee a growing number of opportunities there that willbe of interest.

The rate at which we can continue to grow thebusiness will be dependent upon our ability to raise capitalfor new investments. The successful launch of JLIF is asignificant step forward and has established a platformfor monetising value while maintaining our long-terminvolvement in the running of projects – an importantrequirement for our public sector clients.

John Laing’s strategies have proved to be robustunder difficult market conditions and innovative in termsof promoting growth when markets permit. I see no reasonwhy this should not continue and we expect to grow furtherin 2011.

KEY ACHIEVEMENTS

‘ ACHIEVED FINANCIAL CLOSE IN TEN NEW PROJECTS,INVESTING £78.0 MILLION (2009 – £64.0 MILLION)

‘ SUCCESSFUL LAUNCH OF A £270.0 MILLIONINFRASTRUCTURE FUND

‘ SECURED £324.9 MILLION 3-YEAR CORPORATEDEBT FACILITIES

‘ PREFERRED BIDDER ON PROJECTS WITH INVESTMENTPOTENTIAL OF UP TO £160.0 MILLION

The successful launch of a listed infrastructure fundhas established a platform for recycling capital thatcan be deployed to drive further growth.”

“Adrian EwerCHIEF EXECUTIVE

36


“BUSINESS DEVELOPMENT TAKES RESPONSIBILITYFOR MARKET RESEARCH, PROJECT SELECTION, BIDCO-ORDINATION AND FINALISATION OF NEGOTIATIONSWITH PUBLIC SECTOR CLIENTS AND THE SUPPLY CHAINTHROUGH TO FINANCIAL CLOSE.”

BUSINESS REVIEW

BUSINESS DEVELOPMENT2010 IN REVIEW

John Laing Business Development is responsible for all ofthe Group’s bid development activities, both in the UK andinternationally. This includes traditional PFI/PPP projectsas well as new strategic partnership structures such asthe emerging regeneration schemes in the UK. BusinessDevelopment takes responsibility for market research,project selection, bid co-ordination and finalisation ofnegotiations with public sector clients and the supply chainthrough to financial close. It operates in a wide variety ofsectors, including social, economic and environmentalinfrastructure. Activities are focussed on Western Europe,North America and Asia Pacific where good progress wasmade in re-entering the Australian market in 2010. JohnLaing works with strong delivery partners in each market.For instance, in the UK, the Group is currently working withleading contractors and service providers including Costain,FCC, Hitachi, Interserve, Laing O’Rourke, Shanks, Skanska,Sir Robert McAlpine, Viridor and Wates. This approach isreplicated in each region.

Management of the division is the responsibilityof the Business Development Board, supported by threespecialist Management Boards: UK PFI, UK StrategicPartnerships and International, in addition to whichexperienced colleagues in other divisions (John LaingOperations, as well as Group Services) also provide support.

Activities are focussed on a wide variety of sectors,including all of the main social infrastructure areas suchas healthcare (both large acute hospitals and local primaryhealthcare centres), education, regeneration, police andcriminal justice, government and local authorityaccommodation, social housing and defence, as well astransportation (roads, street lighting, highwaysmaintenance and rail infrastructure) and environmentalprojects (waste management and renewable energy).

During 2010, Business Development successfullyclosed ten new investments, securing total commitmentsof £78.0 million (2009 – £64.0 million). These included theDenver FasTracks rail project in the USA, the acquisition of two UK waste management interests (East London Waste Authority and Dumfries and Galloway, both fully

constructed and operational), Barnsley BSF (Phases 2and 3 of the Group’s first UK Building Schools for theFuture scheme), the A15 road in The Netherlands, a newUK headquarters office for Croydon Council (part of ourStrategic Partnership with the Council), the NH3 roadproject in India, and two small LIFT schemes (primaryhealthcare programme) in the UK. In addition, the businessreached financial close on a community facilities projectin Waddon, Croydon, to act as development and deliverypartner for the Council, the first such purely fee-basedproject to be closed from the regeneration partnership withCroydon Council. This partnership is an example of a LocalAsset-Backed Vehicle (‘LABV’) project, of which the Groupcurrently has two – Croydon Council and Tunbridge WellsBorough Council. Investment potential within thesepartnerships will evolve as the schemes are developed infuture years. These schemes have established the Group atthe forefront of the emerging local authority regenerationmarket in the UK.

Preferred bidder appointments in 2010, totalled four,with an investment potential amounting to £89.0 million. In addition to the waste management, Denver rail and The Netherlands road projects referred to above, the newproject wins include the New Royal Adelaide Hospitalproject in Australia, where our consortium was appointedpreferred bidder in December 2010. This successful resultwas the first bid decision reached on our bid programme inAustralia since we re-engaged in the market in late 2009.

John Laing has continued to selectively extend itsinternational reach. Our re-entry into the Australian PPPmarket has gathered momentum in 2010 and we havesuccessfully entered the USA market during the year. In the UK, the new Government’s decisions to cut spending inorder to improve the UK fiscal position have had an impacton the pipeline in a number of sectors, although few of ourbids were subject to cancellation. Whilst pipeline in some UKsectors has been cut back, other new areas of opportunityexist in the Strategic Partnerships sector and in RenewableEnergy projects, both in the UK and internationally. Duringthe year, we have developed our plans for engagement inthe Renewable Energy sector and intend to begin toimplement these in 2011.

37


FINANCIAL MARKETS Global financial markets havecontinued to ease slightly during 2010. Bank debt hasbecome more accessible and the cost of debt financing hasreduced but is still relatively high by recent historicalstandards. Governments in many major economies need toreduce public sector debt in the coming years and in somemarkets, like the UK, this has led to reductions in capitalinvestment programmes. This has had an impact on theGroup’s pipeline in some sectors but new opportunitiesexist in other sectors like Renewable Energy and StrategicPartnerships. In addition, John Laing’s internationalbreadth and diversification should allow the Group tosustain large and growing levels of investment. As in recentyears, global economic uncertainties mean that John Laingwill continue to take particular care to pursue opportunitieswhich are deliverable and robustly structured.

UNITED KINGDOM The UK market for PFI/PPP wasaffected by the general election in May 2010, followingwhich the new Government has made cutbacks to someinvestment programmes. In addition, the IEP rail project,for which we were appointed preferred bidder in 2009, hasbeen subject to continued delays but in early March 2011,the Government announced its decision to proceed with theproject. Only one of the Group’s live bids was actuallysubject to cancellation. The pipeline remains reasonablystrong in certain sectors such as waste management.Overall, the Group’s activities in the UK market areexpected to comprise a significant proportion of its overallvolumes in the coming years. The Strategic Partnershipschemes, such as the LABV projects in Croydon andTunbridge Wells, should help support central and localgovernments’ desire to unlock the value in their existingreal estate portfolios and secure enhancement to theirinfrastructure, and John Laing is positioned at the forefrontof this. Renewable Energy is another emerging sector,supported by government, to promote low carbon policies,which is expected to offer good investment opportunitiesto the Group.

BUSINESS HIGHLIGHTS

‘ REACHED FINANCIAL CLOSE ON THE DENVERFASTRACKS PROJECT IN COLORADO, THE GROUP’SFIRST INVESTMENT IN THE USA PPP MARKET

‘ SECURED PREFERRED BIDDER STATUS ON THE NEWROYAL ADELAIDE HOSPITAL PROJECT IN AUSTRALIA,A SUCCESSFUL RESULT ON THE FIRST BID DECISIONREACHED SINCE OUR RE-ENGAGEMENT IN THATMARKET

‘ CONTINUED TO ADAPT TO NEW MARKETS ANDSECTORS, INCLUDING A STEP UP IN THE GROUP’S UKWASTE MANAGEMENT BIDDING, FORMING A NEWSTRATEGIC COLLABORATION WITH SHANKS, ANDACQUIRING TWO LARGE INTERESTS IN EXISTINGWASTE PROJECTS

‘ CLOSED THE CROYDON OFFICE PROJECT IN THE UK, A FINANCED PROJECT TO EMERGE FROM THE STRATEGICPARTNERSHIP WITH CROYDON COUNCIL

‘ WON AND CLOSED THE NETHERLANDS A15 ROADPROJECT, THE THIRD PROJECT WHICH THE GROUPHAS SECURED IN THAT MARKET

‘ REACHED FINANCIAL CLOSE ON THE NH3 ROADPROJECT IN INDIA, THE GROUP’S FIRST INVESTMENTIN THAT MARKET

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“BUSINESS DEVELOPMENT OPERATES IN A WIDE VARIETYOF SECTORS, INCLUDING SOCIAL, ECONOMIC ANDENVIRONMENTAL INFRASTRUCTURE. IT IS RESPONSIBLEFOR ALL OF THESE ACTIVITIES FOR THE GROUP IN THEUK AND GLOBALLY.”

BUSINESS REVIEW

INTERNATIONAL PFI/PPP MARKETS The Group’s maingrowth potential in the long-term continues to be inemerging international markets for PFI/PPP infrastructureprojects. In the short-term, this could be constrained byeconomic pressures faced by some major economies aslevels of public sector investment are limited in order toreduce public sector debt. For John Laing, this is mitigatedby the international spread of markets in which we operate.In the medium to longer term, the opportunities available toJohn Laing should increase as the demand for PFI recovers.

The dynamics of individual markets continue tovary significantly. Outside the UK, the Group has existingprojects in Finland, Norway, Poland, Hungary, TheNetherlands, Germany, the USA, Canada and India. TheGroup is actively bidding (or preparing to bid) in theseand other markets such as Asia Pacific (Australia andNew Zealand).

In 2010, the Group closed its first investment in theUSA market, the Denver FasTracks project. Plans forfurther bidding are already in place. In Canada, majorprogrammes for healthcare schemes and transportationprojects continued during the year.

In Europe (outside the UK), activity continues at aconsistent level in several northern and western Europeanstates such as The Netherlands, France and Germany. Morenortherly markets such as Finland, Sweden and Poland, arestill expected to launch new PPP projects in the short tomedium term but these have been delayed.

The Asia Pacific region also offers significantopportunities and the Group’s bidding activities are currentlyfocussed on Australia, where the PPP market remainsstrong. We also plan to engage in the New Zealand PPPmarket during 2011. During 2010, the Group closed its firstinvestment in India, the NH3 road project; the Indianinfrastructure investment programme is substantial butconstraints imposed by local project financing marketscurrently limit the extent of our involvement.

THE FUTURE John Laing Business Development plans toexpand its activities in the UK and international marketsduring 2011 and beyond. The business will continue totake care to pursue opportunities which are viable anddeliverable in the context of the uncertain global economicoutlook and recovering financial markets. We will maintainour wide skill base and experience, combining financial,technical, operational and sector skills, which strengthenthe value we bring to clients and partners. It is this breadthof skills which we believe makes John Laing uniqueamongst PPP investors.

MARKET DEVELOPMENTS AND FUTURE OUTLOOK

During 2010, Business Development successfullyreached financial close on ten new investments,securing total commitments of £78.0 million.In addition, the business reached financial closeon the first purely fee-based project to be closedfrom the regeneration partnership with CroydonCouncil.”

“

Derek PottsMANAGING DIRECTOR,BUSINESS DEVELOPMENT

39


‘ BARNSLEY BSF: BarnsleyBuilding Schools for the Futurehas entered the third phase of anambitious £1 billion+ schemewhich will transform secondaryand special education in Barnsley.John Laing Integrated Serviceswill provide facilities managementservices to the schools over the25-year concession period.

‘ ROYAL ADELAIDE: John Laingis one of the equity providersin the SA Health Partnershipconsortium, which was appointedPreferred Bidder for the project bythe Government of South Australiain December 2010. This will be a30-year concession.

‘ SHANKS WASTE: In September2010, John Laing acquired fromShanks plc 80% of the shares and100% of the loan stock in twooperational waste managementPFI projects: ELWA (East LondonWaste Authority) and D&G(Dumfries & Galloway).

‘ A15 MOTORWAY, THENETHERLANDS: Construction workon this project, which representsthe first transportation project inThe Netherlands for John Laing, isplanned to commence in mid 2011and is expected to be completedby mid 2015.

Design: Quist Wintermans Architekten BV, Rotterdam

‘ CROYDON AND LEWISHAMSTREET LIGHTING: On 21February 2011, the Skanska-LaingConsortium was appointed thePreferred Bidder for the c.£79million Croydon and LewishamStreet Lighting PFI project. The25-year contract will replace46,000 lighting columns.

‘ IEP: Agility Trains, a consortiumof Hitachi and John Laing, wasannounced preferred bidder forthe Intercity Express Programmein February 2009. IEP will providea new generation of intercity,200 km per hour trains to takeadvantage of the electrificationof the Great Western Main Line.

40


“OPERATIONS TAKES RESPONSIBILITY FOR MANAGINGALL ASPECTS OF PROJECTS OVER THEIR WHOLE LIFE.FROM FINANCIAL CLOSE THROUGH CONSTRUCTIONAND THEREAFTER DURING THE OPERATIONAL PHASE.”

BUSINESS REVIEW

OPERATIONS2010 IN REVIEW

John Laing Operations has responsibility for managing allaspects of projects, over their whole life, from financialclose through to construction and thereafter during theoperational phase.

The division has continued its focus on theidentification and implementation of operational improvementsand realisation of value to stakeholders with a wide rangeof project-specific value enhancements being successfullyimplemented. As a result, and notwithstanding the continuedimpact of lower interest rates, John Laing Operationsachieved underlying growth of 18% on the retained portfoliovalue during 2010. In the current challenging economicenvironment, John Laing Operations has devotedconsiderable attention to the management and mitigationof operational risks, including covenant compliance, pre-empting, but where necessary, resolving formal disputeseffectively. In particular, several long outstanding disputeswere successfully resolved during the year.

This growth was due to reaching financial close onassets, the completion of construction activities on budgetand on time and the enhancement of projects already inoperation. At every stage, we focus on value creationthrough the management and removal of development andoperational risk.

CONSTRUCTION PROGRAMME During 2010, ten newprojects were added to the Group’s portfolio.

There were 21 projects in construction at the endof the year. Projects achieving part/full operational phaseduring the year included:• Newcastle Hospital – phase 7 which is the last

significant clinical phase of the Royal Victoria Infirmary,was completed on time in March 2010. The remainingphases 8 and 9 are currently progressing on schedule.

• Roseberry Park Hospital – phase 1, comprising all themain hospital blocks, was completed on time also inMarch 2010.

• Forth Valley Royal Hospital – phases 1 and 2 of thishospital were completed on time in May and August2010. Phase 3 (final) is progressing ahead of schedulefor a target completion in 2011.

• North Staffs Hospital – Haywood Hospital wascompleted and handed over in April 2010.

• Pembury Hospital – phasing of the works has beenadjusted to achieve earlier handover to acceleratedemolition of the existing hospital, leading to earlyhandover of the car parks. Contract completion datesremain on target.

• Barnsley BSF – the first two schools were opened onprogramme in January 2011.

• NEFRA – all five fire stations were successfullycompleted in 2010.

• Kromhout Barracks, The Netherlands – completion ofphase 1 was achieved in October 2010.

• Corsham, MoD project – all new building works werecompleted by the end of November 2010.

• A1 Autobahn, Germany – the 50% construction milestonewas achieved on programme in November 2010.

• M6 motorway, Hungary – completed construction onschedule in March 2010. In June 2010, it obtained theFinal Licence to Operate, the first ever in Hungary fora PPP road.

• E18 Ykkostie road, Finland – received the ConstructionCompletion Certificate in January 2010.

• Groningen Tax Office, The Netherlands – constructionis on schedule and by the end of 2010 the buildingwas physically complete. The official handover wason 24 March 2011.

• Brockley Social Housing – the refurbishment elementof this contract was completed nine months early inJune 2010.

Risk management of project and joint ventures is controlledthrough the Group’s risk and compliance procedures.Assurance procedures ensure regular reviews of managementsystems and health and safety of the Group’s activities.

JOHN LAING INTEGRATED SERVICES (‘JLIS’) The Group’ssupport service and facilities management businesscontinues to grow and increased turnover by 26.5% in 2010.

JLIS mobilised four new long-term contracts duringthe year with operational projects at Roseberry ParkHospital, Barnsley BSF, North East Fire and RescueAuthority and St Oswald’s Community Hospital.

During the year, JLIS won the former Jarvis, Tyne and Wear Fire and Rescue contract comprising nineregional fire stations and facilities. This contract has 20years remaining of the concession.

41


Business development activity has focussed onthe local authority outsourcing market, building on thegroundbreaking contract for the London Borough ofHounslow won in 2009. This 15-year leisure and culturalservices contract positions JLIS as the only private sectorcompany operating public library services in the UK withall the library arts and heritage staff transferring to theemployment of JLIS under TUPE legislation. TheComprehensive Spending Review and subsequent cost-saving requirements in the UK are increasing the serviceopportunities in the local authority market. Serviceconsolidation and efficiency optimisation is a key componentof the JLIS diversified product offering.

As the support services business grows, it has beenpossible to create more resilience in customer service andmore efficiencies by developing a self-delivery model. Thishas been a key factor in demonstrating value for money inthe benchmarking and market testing of public sectorinfrastructure projects. In addition, many of these operationalprojects are reaching the stage where life cycle works andasset replacements are increasing and the business is wellplaced to support delivery and management of such activities.

The support services business will focus ondelivering operational efficiencies in the John Laing UK PFIportfolio. Additionally, it is exploring bundled servicesolutions across the rail infrastructure and local authoritymarket sectors.

RESULTS The valuation of the projects in the portfolio,adjusted to take into account acquisitions, disposals, newinvestment, cash distributions and the movement indiscount and exchange rates during the year, increased by18% from £459.6 million to £544.3 million at 31 December2010, primarily reflecting the beneficial impact of newfinancial closes, the achievement of a wide range of valueenhancements across the portfolio and a reduction in theUK rate of Corporation Tax. These upside gains werepartially offset by reduced traffic levels on roads projects asa result of lower economic activity. The distributions fromprojects, including those received from projects prior todisposal, of £35.7 million (2009 – £35.0 million) were abovetarget, emphasising the robust nature of the projects andcontinued pro active management.

BUSINESS HIGHLIGHTS

‘ COMPLETED THE CONSTRUCTION OF THE M6MOTORWAY HUNGARY AND OBTAINED THE FINALLICENCE TO OPERATE

‘ INCREASED THE RETAINED PORTFOLIO VALUE BY 18%,£84.7 MILLION

‘ DIVESTED 19 STEADY STATE OPERATIONAL ASSETSTO THE JOHN LAING INFRASTRUCTURE FUND

‘ ACHIEVED SIGNIFICANT SAVINGS THROUGH MARKETTESTING FOR CLIENTS

42


“OUR STRATEGY IS TO GROW THE PROJECT PORTFOLIOAND ENHANCE VALUE TO ALL STAKEHOLDERS OVERTHE LONG-TERM.”

BUSINESS REVIEW

THE FUTURE The emphasis during 2011 will move fromconstruction to the mobilisation and ramping up of servicesas a consequence of the lower level of new projectopportunities in the UK. Internationally, John LaingOperations is providing an increased level of support to thebusiness development teams.

John Laing Operations has developed anoperational base in Vancouver, to support three Canadianhospitals, and a European base, to manage the Europeanroads and accommodation projects. Additional expertisefrom the UK is used to support international businessdevelopment bid teams. As critical mass is reached inregions, the division will deploy dedicated operationalteams locally.

John Laing Operations actively contributes to thedevelopment of service delivery solutions and feedbackof experience and lessons learned from existing projects.This early involvement has the added benefit of ensuring asmooth handover to John Laing Operations once a projectachieves financial close.

JOHN LAING OPERATIONS APPROACH TO PFI/PPPPROJECT COMPANIES John Laing endeavours to secureManagement Service Agreements (‘MSAs’) and currentlyhas MSAs with 42 Project Companies. MSA servicestypically include construction and project management,administration, company secretarial, disputes resolution,technical and accounting services. These services arecompletely aligned to the interests of the equity investorsand are regarded positively by both clients and partners.This direct involvement enables John Laing to manage riskduring construction and mobilisation of services.

PROACTIVE STAKEHOLDER ENGAGEMENT As an investor,the Group seeks collaborative agreements with partnersand embraces the spirit of co-operation to ensure they arefully integrated for the benefit of all parties.

With maturing assets the process of benchmarkingand market testing of service costs has become a regularactivity and offers opportunities to review and realignservice provision to meet the changing needs of facilities,particularly on accommodation projects. Benchmarkingand market testing have either been completed or are inprogress across the MoD Main Building, Metropolitan Policeprojects and North East London schools.

Community involvement in social infrastructure hasbeen achieved at several of the Group’s schools and socialhousing projects. Furthermore, the Group has the uniquesupport of the John Laing Charitable Trust to engage inmeaningful community and social capital activities.

PROTECTION OF THE INVESTMENT AND ASSETPERFORMANCE Operational responsibility commencesupon financial close of a project, continues through theconstruction phase, operational delivery and ultimatelyfinishes on transfer of the asset at the end of the concessionperiod. Clients benefit from the involvement of John LaingOperations during the technical development of the biddingprocess and throughout the concession. The technicalservices team has amassed considerable asset performanceknowledge gained from the projects managed, thusenabling John Laing Operations to provide a comprehensiveapproach to the management of asset renewal and lifecycle maintenance.

During 2010 we have performed welldespite the continued global economicdownturn, with investment and servicedelivery showing tremendous resilience.”

“

Chris WaplesMANAGING DIRECTOROPERATIONS

43


‘ PRIMARY PLUS – BULWELL:Greater Nottingham LIFT wasestablished in 2004 as part of agovernment initiative to supplementinvestment in primary health care andsocial care premises. This £70 millionconstruction project involves theprovision of health care centres andjoint access centres.

‘ CORSHAM: Inteq, a joint venturebetween John Laing andInterserve, provides state-of-the-art facilities to the DefenceCommunications Services Agencyon the £117 million Basil Hill Sitein Corsham, Wiltshire, and hasestablished a communicationcentre of excellence.

‘ NEFRA: John Laing and ShepherdConstruction have successfullyworked together to deliver theNorth East Fire and RescueAuthority project, which is currentlyin operation. The contract termis 25 years and the facilitiesmanagement services aredelivered by JLIS.

‘ M6 MOTORWAY, HUNGARY:The 86 km construction projectincludes four tunnels and severalviaducts. The project companyoperators will service andmaintain the motorway for29.5 years.

‘ GRONINGEN: Consortium DUO2, is responsible for delivering the PPPHousing Informatie Beheer Groepand Regional Tax Office project inGroningen. The project comprises thedesign, build, finance, maintenanceand operation of the new office for aconcession period of 20 years.

‘ ABBOTSFORD: In February 2007,John Laing acquired Access HealthAbbotsford (‘AHA’), the companyselected to design, build, financeand maintain the new C$355million Abbotsford RegionalHospital and Cancer Centre, inBritish Columbia, Canada. TheAHA concession is for 30 years.

44


“OUR OVERALL STRATEGY IS TO DELIVER PROJECTEDINVESTMENT RETURNS AND CONSISTENT GROWTH IN THEVALUE OF OUR INVESTMENT PORTFOLIO BY DEVELOPINGSTRONG RELATIONSHIPS WITH OUR PARTNERS OVER THELIFE OF EACH SERVICE CONCESSION.”

BUSINESS REVIEW

PORTFOLIO VALUATION

METHODOLOGY A valuation of the John Laing portfolio isprepared on a consistent, principally Discounted Cash Flowbasis, for each six month period. The purpose of thisexercise is to determine the fair value of the portfolio basedon forecast cash flows and assumes the assets will be helduntil maturity of the relevant concession.

The current methodology uses discount rates thatare related to government bond rates. Risk premia areadded to the relevant long-term gilt or government bondrate for each project, plus 50bps. These discount rates areapplied to cash flows that are after project but beforeshareholder taxes.

The risk premia used are inevitably subjective, butrepresent our assessment of the price of risk to arrive at afair value for the unenhanced project cash flows, and dependon the distribution of cash flows between the construction,ramp-up and operational phases.

For the current valuation the weighted averagediscount rate was 8.5% (2009 – 7.9%).

The cash flows valued are those that will bedistributable to John Laing, derived from detailed projectfinancial models approved and updated at Project Companylevel, in line with operational experience and projectlenders’ requirements.

SUMMARY In 2010, the underlying growth in the value of the Group’s PFI portfolio, after adjusting for acquisitions, disposals,new investment, cash distributions and the movement in discount and exchange rates, was £84.7 million; representing agrowth rate of 18%, of this, growth of 8% – 9% represents the increase that would be expected as a result of the unwindingof discount rates during 2010.

Due to the significant proportion of the portfolio disposed of during the year, the disposed portfolio has beenexcluded from the underlying growth rate. The £15.6 million growth in respect of the disposed portfolio represents theenhancement in the value of projects and the unwinding of the discount rate prior to disposal; disposal proceeds werebroadly in line with the portfolio valuation of these projects.

On an absolute basis the portfolio value decreased by £108.6 million to £544.3 million, primarily as a result ofdisposals during the year, partially offset by acquisitions.

Retained Disposed Total£ million £ million £ million

Opening Portfolio Valuation at 1 January 2010 362.3 290.6 652.9Acquisitions and Transfers 91.1 – 91.1Equity and loan note subscriptions 39.1 9.3 48.4Distributions (16.9) (18.8) (35.7)Movement in discount rates (15.8) (12.9) (28.7)Movement in exchange rates (0.2) 1.5 1.3

Rebased value 459.6 269.7 729.3Disposal proceeds – (285.3) (285.3)Growth on rebased value 84.7 15.6 100.3

Portfolio valuation at 31 December 2010 544.3 – 544.3Underlying growth 18%

CHANGES IN VALUATION The reduction in the portfoliovaluation is attributable to the disposal of John Laing’sstake in 18 projects and the partial disposal of stakes infour other projects (including a partial transfer to The JohnLaing Pension Fund) during 2010, for a total price of£285.3 million.

The reduction in value resulting from thesedisposals was partially offset by acquisitions during theyear; a 23.1% investment in JLIF was made in November2010 and interests in two waste projects were also acquiredduring the year. The acquisitions and transfer valuestotalled £91.1 million.

Eight new projects reached financial close duringthe year (including two further phases of the Barnsley BSFproject and two further tranches of LIFT schemes). Equityand loan note subscriptions of £48.4 million were injectedinto projects in the portfolio as they progressed throughor completed construction, although £9.3 million of thiswas invested in a project prior to disposal.

Distributions from projects during 2010 totalled£35.7 million. Of this £16.9 million was received fromprojects within the retained portfolio.

45


Since 2008 a long-run average approach has beenused to determine the underlying government bond ratesused as a basis for discount rates. For 2010 the long-runaverage was rolled forward to cover the last 5 years.

After allowing for the above effects the value of theretained portfolio grew by £84.7 million or 18%.

In 2010, the portfolio continued to benefit fromreduced insurance costs as part of an arrangement to bulkbuy insurances. The portfolio has also benefited from awide range of project-specific value enhancements and areduction in Corporation Tax rates, as announced in the UKEmergency Budget, which have filtered down into forecastcashflows. These upsides have more than offset thenegative impact of changes to previously forecast trafficassumptions in several of the transport projects.

IMPACT OF ECONOMIC INDICATORS During the year higherthan previously forecast inflation has had a positive impacton a majority of projects within the portfolio as revenueshave been higher than previously forecast.

Deposit rates received on cash balances during2010 have been low but this was anticipated in the forecastsmade in 2009 for a majority of projects. Deposit rates areanticipated to remain at low levels in the short-run and thishas been reflected in project forecasts.

Overseas assets are investments in foreign currency(notably Canadian Dollars and Euros). The weakening ofSterling relative to the Canadian Dollar and strengtheningof Sterling against the Euro during 2010 has had a broadlyneutral impact on the portfolio valuation of retained projects.

DISCOUNT RATE SENSITIVITY The weighted averagediscount rate used in 2010 was 8.5% (2009 – 7.9%). Thetable below shows the sensitivity of changes in this rate inthe range of plus or minus 3.0%. The average rate used foraccommodation assets is 7.6% (2009 – 7.5%), transportassets 8.8% (2009 – 7.8%), and environment and utilitiesassets 10.3% (2009 – 10.3%). The investment in JLIF is heldat market value hence the discount rate for InfrastructureFunds is not applicable.

Discount rate Portfolio Differenceadjustment valuation in valuation

% £ million £ million

3.0 402.8 (141.5)2.0 442.8 (101.5)1.0 489.5 (54.8)0.0 544.3 –(1.0) 609.0 64.8(2.0) 686.1 141.9(3.0) 778.5 234.2

VALUE BY TIME REMAINING ON CONCESSION£ million

John Laing benefits from holding long-term concessions.As demonstrated here; 13% of the portfolio by value hasmore than a 30-year unexpired concession term, 45% has20 to 30 years remaining and a further 22% has 10 to 20years remaining concession length. The investment in JLIF,which represents 12% of the portfolio, has been separatedout as this is held at market value and comprises 19projects with varying concession lengths.

VALUE BY SECTOR£ million

The largest sector within the portfolio is the accommodationsector which represents 37% of the portfolio. Transportassets make up 30% of the portfolio with environment andutilities comprising 21%. The investment in JLIF has beenseparated out as this comprises 19 projects across thethree sectors.

Dec 09Dec 10

41.1 (8%)

66.6 (12%)

70.1 (13%)

243.8 (45%)

122.7 (22%)

398.9 (61%)

60.5 (9%)

155.4 (24%)

38.1 (6%)

20 to 30 yearsGreater than 30 years

10 to 20 yearsLess than 10 yearsJLIF

Dec 09Dec 10

66.6 (12%)

200.1 (37%)

161.4 (30%)

116.2 (21%)

351.4 (54%)

230.2 (35%)

71.3 (11%)

TransportAccommodation

Environment and utilitiesJLIF

46


BUSINESS REVIEW

VALUE BY REVENUE TYPE£ million

Availability based assets continue to make up the majorityof the portfolio value, representing 66% of the portfolio.Shadow toll based assets make up 7% of the portfolio andvolume based assets 15%*. The investment in JLIF has beenseparated out as this comprises 19 projects with primarilyavailability based revenue mechanisms.

* Since January 2010 revenue for the City Greenwich Lewisham (DLR) projecthas been based on patronage compared to availability during 2009.

Dec 09Dec 10

66.6 (12%)

357.7 (66%)

38.0 (7%)

82.0 (15%)

557.6 (86%)

86.1 (13%)9.3 (1%)

Shadow TollAvailability

VolumeJLIF

RebasedGrowth/ December

Portfolio Acqui- Equity Decline (decline) 2009 Portfoliovaluation sitions and loan due to due to value at Growth on valuation Growth onDecember and note sub- Distrib- discount exchange December rebased December rebased

2009 transfers Disposals scriptions utions rates rates 2010 valuation 2010 valuation£ million £ million £ million £ million £ million £ million £ million £ million £ million £ million %

Retained portfolioAccommodation 157.7 3.9 – 13.6 (6.5) (7.0) 1.3 163.0 37.1 200.1 23Transport 144.3 0.1 – 11.0 (6.4) (8.2) (1.5) 139.3 22.1 161.4 16Environment and utilities 60.3 24.6 – 14.5 (4.0) (0.6) – 94.8 21.4 116.2 22Infrastructure Funds – 62.5 – – – – – 62.5 4.1 66.6 6

Retained portfolio total 362.3 91.1 – 39.1 (16.9) (15.8) (0.2) 459.6 84.7 544.3 18

Disposed portfolio 290.6 – (285.3) 9.3 (18.8) (12.9) 1.5 (15.6) 15.6 – –

Total portfolio 652.9 91.1 (285.3) 48.4 (35.7) (28.7) 1.3 444.0 100.3 544.3 –

ACCOMMODATION After stripping out disposals, the absolutevalue of retained projects within the accommodation sectorincreased by £42.4 million to £200.1 million.

Within this sector, five projects reached financial closeduring the year, including two further phases of the BarnsleyBSF project, further tranches of LIFT schemes and thePSDH Croydon project.

An element of the Croydon LABV not previouslyincluded in the portfolio valuation has now been included at a value of £3.9 million following financial close of theproject during the year.

Equity and loan notes were injected into severalaccommodation projects totalling £13.6 million, of which themost significant was £8.8 million into the Kromhout Barracksproject. Distributions from projects were £6.5 million in 2010.

Changes in discount rates resulted in a net decreasein the valuation of £7.0 million for projects within this sector.

After allowing for the movement in exchange rates,which had a positive impact of £1.3 million (due to thestrengthening of the Canadian Dollar), the overall rebasedgrowth in the accommodation sector was £37.1 million or 23%.

TRANSPORT After stripping out disposals, the absolutevalue of transport projects increased by £17.1 million to£161.4 million during the year.

Within this sector, three new projects reachedfinancial close during the year. An investment in one of theseprojects with a value of £0.1 million made prior to financialclose has now been transferred into the portfolio valuation.

Equity and loan notes were injected into severaltransport projects totalling £11.0 million, of which the twomost significant were £4.4 million paid into the secondphase of the A1 road project in Poland and £4.6 million intothe M6 motorway in Hungary. Distributions from projectswithin the transport sector were £6.4 million.

Changes in discount rates resulted in a net decrease inthe valuation of £8.2 million for projects in the transport sector.

After allowing for adverse movements in exchangerates of £1.5 million, the overall rebased growth in thetransport sector was £22.1 million or 16%.

47


ENVIRONMENT AND UTILITIES After stripping outdisposals, the absolute value of environment and utilitiesprojects increased by £55.8 million to £116.2 million duringthe year. Within this sector, two projects were acquiredduring the year for a total consideration of £24.6 million.

Equity and loan notes totalling £14.5 million wereinjected into the two Manchester Waste projects during theyear. Distributions from projects within the environmentand utilities sector were £4.0 million.

Changes in discount rates resulted in a net decreasein the valuation of £0.6 million for projects in this sector.

The overall rebased growth for the environment andutilities sector was £21.4 million or 22%.

INFRASTRUCTURE FUNDS During the year John Laingsubscribed to a 23.1% stake in JLIF which listed inNovember 2010. The investment is held at market valuewhich represented a 6% uplift on the initial investment.

PROJECT PHASE ANALYSIS No value is attributed to aproject at the preferred bidder stage. Once financial closeis reached an initial value is calculated which steps up invalue when the construction phase is complete to recognisethe reduced risk profile. The ramp-up stage is the first twoyears of operation after which the project typically movesinto the yield stage for the rest of its life prior to maturity.

The profile of the portfolio by phase is shown below:

27% of the portfolio by value is in the construction phasewith the remaining 73% split across the ramp-up (11%),yielding (61%, including the investment in JLIF) andmaturity phases (1%).

John Laing continues to be committed to the long-term management of projects and to international markets.With 56 projects, John Laing has achieved critical mass thatis benefiting customers, particularly in the area ofmobilisation post construction and ramping up of servicesready for operational delivery.

Our strategy has evolved over the past yearfollowing the launch of JLIF in November 2010. Theportfolio strategy is to deliver the projected investmentreturns and growth of the investment portfolio during theconstruction and initial operation phases.

Chris WaplesMANAGING DIRECTOROPERATIONS

VALUE CREATIONAs at 31 December 2010

A1 GermanyA1 Gdansk Poland (Ph2) *A15 Maasvlakte-VaanpleinBarnsley BSFCorsham MoD ProjectDenver Eagle P3 ProjectGN LIFT – Project Co 2*Groningen Tax Office, NLHastings PropertyDevelopmentKromhout Barracks, NL(Ph2)*Leicester LIFT – Project Co 2*Manchester Waste VL CoManchester Waste TPS CoNH3 Road, IndiaSandwell LIFT – Project Co 2*Surrey SLTunbridge Wells Hosp.CCURVForth Valley HospitalKelowna & Vernon Hosps.North Staffs Hospital

Gateways to OldhamIntercity ExpressKenilworth RailKirkleesLambeth Myatts FieldNew Royal Adelaide HospitalMaST LIFT – Project Co 3*Sandwell LIFT – Project Co 3*

Tunbridge WellsDevelopment Framework

Kromhout Barracks,NL (Ph1)**M6 HungaryNEFRANewcastle HospitalSouth Derby LIFT –Project Co 2*Tees & NE York Hosp

A1 Poland (Ph1) *A130A55Abbotsford HospitalAylesbury Vale ParkwayBentilee Regen.Brisbane AirLinkBritish Transport PoliceCity Greenwich Lewisham(DLR)Cleveland Firearms TrainingCleveland Police HQColeshillDumfries and GallowayEdinburgh SchoolsELWAEnfield (2) Schools

GN LIFT – Project Co 1*Highlands SchoolKinnegar WWT PlantLeicester LIFT – Project Co 1*LUL ConnectM6 ScotlandMaST LIFT – Project Cos 1&2MPS SELNewham SchoolsNorth Birmingham MHTNorth Notts LIFTNorth Swindon SchoolsQE (Meridian) HospitalSandwell LIFT – Project Co 1*South Derby LIFT –Project Co 1 *

DARA – Red DragonE4 Nelostie, FinlandSevern River Crossing

Preferred Bidder, 8 Construction, 21 Ramp up, 5 Yield, 26 Maturity, 3

Commercial Close, 1

TIME

VALUE

Value Equity

Pre-Financial ClosePart operationalConstructionFully operational

Note:LIFT projects have many tranches, at varying stages of project life.* The total FC figure of 55 project only counts LIFT Project Co 1 and Phase1 of projects.

Total of 55 financially + 1 commercially closed projects

7

7

Cash Distributions

48


BUSINESS REVIEW

Additional information on the Group’s financial performance can be found elsewhere in the Annual Report and Accountsas indicated:

Topic Additional information

Group trading performance See page 84 for more detailed comments.

Group cash flow performance More detailed analysis on the movements in net cash are shown in note 25.

Directors’ valuation of PFI/PPP A key part of the Group’s Balance Sheet is the investments in PFI/PPP Project Companies Project Companies and the investment in JLIF. The basis of valuation is

included on pages 44 to 47.

Principal business risks The Finance Review largely focusses on Treasury-related risks. A broader description of the Group’s principal risks is included on pages 78 to 81.

“REFINANCING OF THE CORPORATE BANKING FACILITIES AT£324.9 MILLION FOR A 3-YEAR TERM PROVIDES A STRONGPLATFORM FOR GROWTH IN INVESTMENT ACTIVITY.”

FINANCIAL REVIEW

YEAR UNDER REVIEW The principle matters affecting thefinancial performance, financial position and cash flows ofthe Group in 2010 were:• Financial close on ten projects, including total investment

commitments of £78.0 million (2009 – six projects withan investment of £64.0 million).

• Successful listing of JLIF, culminating in the disposalof 19 projects for £255.2 million to JLIF. Total disposalsin the year resulted in a £35.1 million accounting profitand a £135.2 million total profit on cost. £120.4 millionof the disposal proceeds was used to fund a specialdividend to repay the parent’s acquisition facility; theremainder will be used for working capital and projectinvestment.

• Refinancing of the corporate banking facilities. The newthree-year £324.9 million facilities will primarily beused for Letters of Credit supporting new investments.

• Impact of the adoption of IFRIC12, resulting in a reductionin net assets of £12.3 million at 31 December 2009.

• The accounting deficit of the Group’s defined benefitpension and post-retirement medical schemes at 31 December 2010 decreased to £175.3 million (2009 –£199.6 million), due largely to better than anticipatedreturns on the assets and the impact of using CPI forthe indexation of liabilities of deferred members fromApril 2011, following the UK Government’s change ofpolicy. Deficit repair payments of £21.1 million weremade in 2010, of which £6.4 million was in the formof PFI investments.

BASIS OF CONSOLIDATION The Group’s accounts areprepared under International Financial Reporting Standards.The results and net assets of non-recourse subsidiaryPFI/PPP Project Companies are consolidated. The Group’sinterests in non-recourse joint venture PFI/PPP ProjectCompanies and the investment in JLIF are measured at fairvalue in accordance with IAS39, with changes to the fairvalue recognised in profit and loss. The Income Statementincludes both operational performance and the impact offair value accounting.

49


GROUP INCOME STATEMENT The consolidated Income Statement includes the results of the Group’s non-recoursesubsidiary PFI/PPP Project Companies and the movement in the fair value of its interests in non-recourse PFI/PPP jointventures and the investment in JLIF, as adjusted for dividends and other income received during the period.

2010 2009

Subsidiary SubsidiaryRecourse Project Recourse Project

companies Companies Total companies Companies Total£ million £ million £ million £ million £ million £ million

Group revenue 61.2 274.6 335.8 79.6 253.2 332.8Bid recoveries 7.5 – 7.5 18.3 – 18.3Cost of sales (51.5) (252.5) (304.0) (65.5) (236.0) (301.5)

Gross profit 17.2 22.1 39.3 32.4 17.2 49.6Other operating income 11.1 – 11.1 8.8 – 8.8Bid costs (staff and third party costs) (11.6) – (11.6) (16.2) – (16.2)Staff and administration expenses (31.5) (2.7) (34.2) (25.5) (1.0) (26.5)Fair value movement on jointventures and associates 23.0 – 23.0 2.1 – 2.1

Other gains/(losses) 35.1 – 35.1 (15.3) – (15.3)

Profit from operations 43.3 19.4 62.7 (13.7) 16.2 2.5Investment income 13.2 70.4 83.6 15.3 66.3 81.6Finance costs (13.6) (64.7) (78.3) (11.0) (56.5) (67.5)

Profit before tax 42.9 25.1 68.0 (9.4) 26.0 16.6

Revenue, presented on a statutory basis, relates only to the Group’s subsidiaries. The revenue of the John Laing Groupin 2010 (being John Laing subsidiaries and share of the joint venture revenues) was £954.4 million (2009 – £874.8 million).Revenue includes amounts invoiced under management services and fund management agreements and the value ofconstruction work certified for the PFI/PPP projects. During 2010, there were 21 (2009 – 21) projects under construction,the largest of which was Manchester Waste which is part operational and generated revenue of £122.7 million (2009 –£71.2 million). Total revenue of the Group, including joint ventures, is depicted below on a sector basis:



Transport£205.1m




Transport£107.3m


2010£954.4 million

TOTAL REVENUE

2009£874.9 million

50


BUSINESS REVIEW

The Group was successful in achieving financial close onten projects and recovered bid costs of £7.5 million (2009 –six projects closed with a £18.3 million recovery). Thirdparty bid costs were lower than 2009 as a consequenceof the low level of bid activity in the UK. The Group activelybid in international markets (USA, Australia and Canada)where the cost of the bidding process tends to besignificantly lower.

The Group’s investment in joint venture PFI/PPPProject Companies is calculated by discounting the valueof their future cash flows. The discount rates use relevantaverage gilt rates to which risk premia are applied. The netimpact of investment in new projects, distributions,disposals, changes in the value of Sterling and risk premiaresulted in an uplift of £23.0 million (2009 – £2.1 million)in the fair value of joint ventures. The Group’s investmentin JLIF is held at the closing market value at the year end,resulting in an uplift of £4.1 million in the value from thedate of IPO.

To fund future growth of the business, an increasedLetter of Credit facility was established through therefinancing of corporate facilities and working capital wascreated through asset disposals. In November 2010, JLIFwas successfully listed, raising £270.0 million of which£255.2 million was used to buy 19 projects from John Laing.In addition, during the year, 2 assets were sold to fellowshareholders and an asset was transferred to the pensionfund in lieu of a cash contribution, resulting in total workingcapital of £282.7 million being created. An accounting profiton disposal of £35.1 million has been recorded in theIncome Statement. There was, however, a substantial profitof £135.2 million on the disposals when measured againstthe original cost of the investment.

Note 5 to the accounts analyses investment incomeand finance costs (page 102). Within the IAS19 interest onpension scheme liabilities in 2010 was greater than theexpected return on scheme assets, resulting in a net financecost of £9.8 million (2009 – £7.0 million).

The movement in yield curves over 2010 resulted ina £0.4 million decrease (2009 – £1.4 million increase) in thefair value of derivatives outside hedging relationships.

Profit before tax was £68.0 million (£32.9 millionexcluding the profit on disposals) (2009 – £16.6 million,£31.9 million excluding the loss on disposals).

During 2010, dividends of £136.4 million (2009 –£38.0 million) were paid to the shareholder, HendersonInfrastructure Holdco Limited.

TAXATION The Group’s tax credit on continuing activitiesfor 2010 was £2.5 million (2009 – charge of £1.7 million).This mainly arises from overseas tax charges and therelease of a deferred tax provision for undistributed profitsof overseas subsidiaries under IAS accounting for theGroup’s consolidated accounts. This provision is no longernecessary now that there is an exemption from UK tax forforeign dividends.

There is minimal UK tax payable by the UK holdingand management services activities of the Group. Broadlythis is because of the significant annual payments made toreduce the pension fund deficit which provide tax shelterfor Group profits. This is expected to be the case for someyears. The projects in which John Laing invests are usuallytaxed on the composite trade or capital allowances basis.The composite trade projects are taxed at 28% on accountingprofits after any disallowed items (normally minimal) butthey can often use tax losses from the investing group tooffset their taxable profits. Payment is made for suchsurrendered tax losses. The capital allowances projectsreceive a tax deduction for plant and machinery but may notbe entitled to a tax deduction for other capital expenditure.Since there is negligible residual value in the underlyingassets the depreciation charge can outweigh the capitalallowances, resulting in a high effective tax rate on reportedprofits over the life of the contract. This initially takes theform of a deferred tax charge, which often does not reverseto current tax payable until well into the concession period.

Capital gains from the disposal of PFI investmentsare generally exempt from tax under the SubstantialShareholding Exemption for shares in trading companies.To the extent this exemption is not available there is shelterfrom current year losses or losses brought forward in theGroup’s holding companies.

The net deferred tax liability in the Balance Sheetof £12.9 million relates mainly to temporary differencesarising on projects acquired during 2010. (The £15.0 millionnet deferred tax liability at the end of 2009 related mainly toaccelerated tax deductions for PFI projects, reserves ofoverseas subsidiaries (now released) and temporarydifferences on intangible assets, reduced by the effect of taxlosses in PFI projects.)

There is a significant unrecognised deferred tax assetrelating to carried forward tax losses and the pension deficit.

51


GROUP BALANCE SHEET The consolidated Balance Sheet includes the Group’s share of the recourse assets and liabilitiesof its subsidiary PFI/PPP Project Companies. In accordance with IAS39, fair value adjustments of a net liability of £22.4 million(2009 – liability of £8.9 million) have been made to the financial assets and liabilities of the PFI/PPP Project Companies.The following table re-analyses the Balance Sheet and shows separately recourse and non-recourse assets and liabilitiesas at 31 December 2010:

2010 2009

Recourse Non-recourse restated

Amortised Fair value Total Amortised Fair value Total non-cost adjustments recourse cost adjustments recourse Total Total

£ million £ million £ million £ million £ million £ million £ million £ million

PFI/PPP subsidiaries investments 28.5 – 28.5 – – – 28.5 106.0Investment in joint ventures at fairvalue through profit and loss 237.0 179.2 416.2 – – – 416.2 457.6

Fixed assets and working capitalbalances (24.4) – (24.4) 828.0 40.6 868.7 844.3 1,005.8

Discontinued businesses (3.8) – (3.8) – – – (3.8) (5.1)Current tax (3.4) – (3.4) (1.0) – (1.0) (4.4) (1.5)Deferred tax 0.5 – 0.5 (23.0) 8.3 (14.7) (14.2) (16.4)Post retirement obligations(net of deferred tax asset) (174.0) – (174.0) – – – (174.0) (198.2)

Net funding/(debt) 24.5 – 24.5 (781.7) – (781.7) (757.2) (964.2)Derivatives and commodity swaps – – – – (71.3) (71.3) (71.3) (68.5)

Net assets 84.9 179.2 264.1 22.4 (22.4) – 264.1 315.5

In 2010, the Group adopted IFRIC12 ‘Service Concession Arrangements’. This affects accounting by private sector operatorsfor public sector infrastructure assets and services and requires rights to consideration receivable to be accounted for aseither financial assets, intangible assets, or a combination of both. Previously, all such rights were accounted for asfinancial assets. Refer to page 98 for an analysis of the impact of IFRIC12.

52


BUSINESS REVIEW

PENSION FUND The accounting deficit in the Group’sdefined benefit pension and post-retirement medicalschemes at 31 December 2010 was £175.3 million (2009 –£199.6 million) net of deferred tax. The value of the pensiondeficit is highly dependent on price inflation, discount rateand longevity experience and the sensitivity of the pensionliabilities to changes in these assumptions is illustratedin note 20. The year end 2010 figures allow for the priceinflation index change from RPI to CPI for the revaluationof excess over GMP for deferred pensions and post-5 April1988 GMP pension increases. The impact of moving to CPIfor these benefits is an actuarial gain of £23.0 million forthe pension fund.

During 2010, the Company has continued to workwith the pension fund trustee on risk reduction initiativesand £75.0 million of inflation swaps were transacted tohedge inflation at 3.5%. The Company agreed with theremaining 40 active members to close the pension fundto future accrual from 31 March 2011. From that date,all future pension benefits will accrue under a definedcontribution scheme. This resulted in a £0.6 millioncurtailment gain under IAS19, in the Income Statement.

The deficit repair payment made in 2010 was£21.1 million (2009 – £20.3 million), comprising £14.7 million(2009 – £5.0 million) cash and £6.4 million (2009 – £15.3million) of shares in a PFI investment. The March 2010triennial valuation of the pension fund was completedduring the year and showed a 69% funding position.

In November 2010, a deficit repair contribution schedulewas agreed with the trustee over a period of 13 years,commencing with annual contributions of £23.5 million,escalating by 3.55%, paid annually each March.

The key movements in the year are:

KEY VALUATION MOVEMENTS (PENSION FUND)£ million

* benefit service cost net of curtailment and experience gain.

PORTFOLIO VALUE The portfolio value at 31 December 2010 was £544.3 million (2009 – £652.9 million) and has beencalculated on a basis consistent with prior years (refer to page 44 for the basis of calculation). Projects are valued in theportfolio when financial close has been achieved. The portfolio value can be reconciled to the Balance Sheet as follows:

Portfolio Value ReconciliationFair value

Balance not inPortfolio Sheet Balance

value value Sheet£ million £ million £ million

Portfolio value of joint ventures 415.2 415.2Joint ventures not yet reached financial close 1.0

Investment in joint ventures at fair value through profit and loss 416.2Portfolio value/net assets of subsidiary PFI/PPP Project Companies 129.1 28.5 100.6

Total 544.3 444.7 100.6Net liabilities of Group holding and overhead companies, including the pension deficit (180.6)

Total Balance Sheet 264.1

As subsidiary PFI/PPP Project Companies are consolidated on a net asset basis, £100.6 million of fair value uplift is notreflected in the accounts, this uplift principally being future, post-tax returns from the service element of these concessions.

Decem

ber

2009

defi

cit

Decem

ber

2010

defi

cit

Inter

est

on lia

bility

Other

*

CPI gain

Loss

on o

ther

assu

mpt

ions

Return

on a

ssets

Emplo

yer

cont

ribut

ions

194.9

(7.2)

(23.0)

(62.4)

42.7

(21.9)

45.9

169.0

100

120

140

160

180

200

220

240

260

53


GROUP CASH FLOW During the year, the Group raised working capital from disposals which, together with cash generatedfrom operations, was applied to fund investments in PFI/PPP Project Companies, staff and overhead costs, pensioncontributions and dividends to the shareholder. The recourse cash flow statement is analysed below:

Analysis of Cash Flow

2010 2009£ million £ million

Net recourse funds/(debt) at 1 January 9.7 (15.7)Cash from investing activities and operationsPFI/PPP investment into projects (49.0) (44.0)Investment in JLIF (62.5) –Purchase of PFI Project Companies (15.1) (0.5)Distributions from PFI/PPP Project Companies 35.7 35.8Sale of PFI Project Companies and investments 279.6 89.6Purchase of fixed assets and inventories (1.4) (2.7)Facilities Management net cash flows 0.5 2.0

197.5 64.5

Bidding activity and Group overheadsBid costs and overheads (net of recoveries on financial close) (22.1) (13.6)Pension contributions towards the deficit (14.7) (5.0)

Other recourse non-operating movementsNet interest paid (0.5) (0.5)Refinancing costs (6.1) –Dividend from discontinued operations 0.7 1.7Dividends paid (136.4) (38.0)

Recourse funds at 31 December 18.4 9.1

Unamortised financing costs 6.1 0.6

Net recourse funds at 31 December 24.5 9.7

The Board monitors the cash flows relevant to the Group’s recourse funds on a continuous basis for the purpose ofassessing the adequacy of financial resources.

54


BUSINESS REVIEW

LIQUIDITY The Group’s liquidity risk is managed centrallyand the quantum of facilities available is regularly reviewedby the Board to ensure that there are sufficient fundsavailable to cover current and forecast equity and loancommitments to PFI/PPP Project Companies that havereached financial close. These commitments are mostlyin the form of Letters of Credit which support the Group’sshare of the equity and sub-debt of PFI/PPP ProjectCompanies up to the completion of construction whenfunds are injected.

In December 2010, the Group put in place a newthree-year committed facility of £305.0 million (2009 –£260.0 million) of which £158.6 million was undrawn at31 December 2010 (2009 – £78.7 million). In addition,there are coterminous bilateral facilities of £19.9 millionand a £5.0 million overdraft. During December, the Grouprepaid all of its outstanding borrowings of £96.0 millionand paid a special dividend of £120.4 million following thesale of 19 operational projects to JLIF.

INTEREST RATES The Group is not a significant borrowerat the corporate level and does not, therefore, generallyseek to hedge exposure to interest rate movements.However, there are significant non-recourse borrowingswithin the PFI/PPP Project Companies in which the Groupinvests. The interest rate exposure on the debt of PFI/PPPProject Companies is, in almost all circumstances, fixed onfinancial close, either through the issue of a long-datedbond or through the purchase of interest rate swaps wherethe project has been financed using floating rate bank debt.

Since the interest rates on PFI/PPP ProjectCompany debt has been almost completely fixed, theimpact of changes to interest rates on the finance cost isminimal. There is, however, an impact on the investmentincome on monies held on deposit both at Group level andin PFI/PPP Project Companies. Such an effect has notbeen, and is unlikely to be, significant in the context of theGroup Income Statement.

Analysis of Group Financial Resources (recourse)


Cash and bank deposits 30.4 31.7Bank and other loans (5.9) (22.0)

Net funds 24.5 9.7

Corporate bank facilitiesSyndicate 305.0 260.0Bilateral 19.9 25.0

324.9 285.0Less: Letters of Credit drawn (160.4) (184.3)

Bank loans (5.9) (22.0)

Undrawn corporate facilities 158.6 78.7

Net available financial resources 189.0 110.4

55


FOREIGN CURRENCY The Group does not hedge individual overseas investments but monitors its total exposure toparticular currencies. The Board applies an appropriate hedge for that specific currency exposure, which could includeborrowings in that currency or entering into forward foreign exchange contracts.

At 31 December 2010, the portfolio valuation can be analysed on the basis of foreign currency exposure as follows:

PORTFOLIO VALUE

2010 2009£544.3 million £652.9 million

A significant amount of the Letters of Credit is denominated in foreign currencies and are revalued monthly, to Sterling.This retranslation risk does not directly impact on the Balance Sheet or the Income Statement. A €0.01 movement in theSterling/Euro exchange rate has a £0.4 million effect on the Group facility.

A foreign currency analysis of Letters of Credit at 31 December 2010 is as follows:

LETTERS OF CREDIT

2010 2009£158.6 million £78.7 million

GOING CONCERN During 2010, the Group realised£278.9 million of working capital through the disposal ofinvestments in PFI/PPP Project Companies, of which £255.2million were sold to JLIF in which the Group amount re-invested was £62.5 million. The funds generated were usedto repay bank debt at the Group and shareholder levels andto make deficit repair payments to the pension fund. Theestablishment of JLIF opens the way to make further salesof operational assets releasing capacity in the Group’s bankfacilities, enabling more investment in new bidding activity.

The Group has committed corporate facilities untilNovember 2013 and has sufficient available resources tomeet its committed capital requirements, investments andoperating costs for the foreseeable future. Accordingly,the Group has adopted the going concern basis in thepreparation of its Annual Report and Accounts.

Lynn KrigeGROUP FINANCE DIRECTOR

Euro£97.4m

US dollar£10.2m

Indian Rupee£1.3m

Canadiandollar£18.5m

Sterling£413.3m

Australiandollar£3.6m

Euro£104.7m

Norweigian Krone£15.2m


Sterling£442.9m

Australiandollar£2.3m

Euro£51.2m

US dollar£15.8m


Sterling£83.5m

Euro£53.8m

US dollar£nil


Sterling£122.7m

58 Introduction60 Community Engagement62 Project Engagement63 Health and Safety64 Environment

sustainability

57

58


“OUR SUSTAINABILITY FRAMEWORK IS ACTIVELYSUPPORTED BY ALL MEMBERS OF THE JOHN LAINGEXECUTIVE COMMITTEE, WITH EACH MEMBER TAKINGOWNERSHIP AND RESPONSIBILITY FOR A PARTICULARWORK STREAM.”

SUSTAINABILITY

SUSTAINABILITYINTRODUCTION During 2010, we have continued to developour strategic commitment towards sustainability. Since 2007,each member of staff has been encouraged to sign up to aCorporate Responsibility objective as part of their annualappraisal and, this year, many of these activities havestrengthened the relationship between ourselves and ourcommunity partners.

Our commitment to Corporate Social Responsibilitywas rewarded with a Gold Award in the 2010 Business inthe Community Corporate Responsibility Index. This followsour success in achieving the CommunityMark, the nationalstandard of community investment excellence in 2009. Wecontinue to build on this achievement and have sustainedour commitment to support the communities in which weoperate.

John Laing also achieved a RoSPA Gold certificate.This is the second year in succession that we have achievedthis award and is a reflection of our safety performance andthe systems we operate in the control and mitigation of risks.

During the year, we have retained our certificationto BS EN ISO 9001:2008, BS EN ISO 14001:2004 andOHSAS 18001:2007 and also gained third party certificationto Business Continuity ManagementBS 25999, demonstrating we havesystems in place to manage ouroperations and processes,regardless of any external factors.

KEY ACHIEVEMENTS IN 2010

‘ WE ARE ONE OF ONLY 38 COMPANIES WHOHOLD THE COMMUNITYMARK, THE UK’S ONLYNATIONAL STANDARD THAT PUBLICLYRECOGNISES EXCELLENCE IN COMMUNITYINVESTMENT

‘ WE ACHIEVED GOLD STATUS IN THEBUSINESS IN THE COMMUNITY CORPORATERESPONSIBILITY INDEX FOR 2010 THISBUILDS ON OUR SUCCESS OF ACHIEVINGSILVER IN 2009

‘ JOHN LAING WAS AWARDED THE ROSPAGOLD CERTIFICATE FOR THE SECOND YEAR INSUCCESSION. THIS IS A REFLECTION OF OURSAFETY PERFORMANCE, THE SYSTEMS WEOPERATE TO CONTROL AND MITIGATE RISKS,OUR EMPLOYEE ENGAGEMENT AND OURACCIDENT/INCIDENT RATE

‘ REACCREDITATION TO OHSAS 18001:2007 –OCCUPATIONAL HEALTH AND SAFETYMANAGEMENT, ISO 9001:2008 – QUALITYMANAGEMENT AND ISO 14001:2004 –ENVIRONMENTAL MANAGEMENT.INDEPENDENT THIRD PARTY CERTIFICATIONTO BS 25999 BUSINESS CONTINUITYMANAGEMENT

59


Our approach to sustainability is endorsed by the John Laing ExecutiveCommittee; however, it is the engagement of our employees that makethe difference.

We recognise the importance of maintaining our commitment to community engagement,particularly in light of the cutbacks in public sector spending, when the need to provide supportis even greater.

John Laing takes its corporate responsibility very seriously. It is committed to the health, safetyand welfare of its employees and anyone who may be affected by its activities. Through the activecooperation of our employees and the support of the John Laing Charitable Trust, we are able todischarge our social responsibility, which has been recognised by our award of the CommunityMarkby Business in the Community.

We also understand we have a part to play in supporting our public sector clients in their environmentalstrategies in the reduction of waste going to landfill and the emissions of CO2 to the atmosphere andits adverse impact on climate change.

Adrian EwerCHIEF EXECUTIVE

”

“

60


SUSTAINABILITY

Victim supportFor the last three years, JohnLaing’s funding has supporteda full-time coordinator for theMulti Agency Risk AssessmentConference (MARAC) in Lewisham, an area whereJohn Laing has a high presence. It is intended that theYoung Persons MARAC approach will be rolled out to allcommunities, with the aspiration to move to full andsustainable funding by the Department of Justice, to becomparable with the UK national youth crime strategy.

Claudine Piggott, Victim Support’s CorporateRelationship Manager said:“The innovative Young Persons MARAC has successfullymet its key objectives, is involved in extensive communitypartnership work and is well established in Lewisham.Through early identification of complex serious crimes,this project makes appropriate intervention at multi-agency work, thus saving tax payers’ money at the sametime. To date, over a thousand young clients have beenassisted with hundreds identified as high risk. Withoutthe financial support of John Laing this would not havebeen possible.”

Learning Through LandscapesSince 2006, the John Laing SchoolGrounds Awards, managed by Learningthrough Landscapes, have offeredsupport and opportunities for childrento learn and develop in stimulatingand innovative school grounds. Over thelast three years the scheme has fundedprojects that have been educational,environmental, artistic, health-promoting or simplyenhanced play or social development. Now in its fourthyear, the Awards continue to make positive change forschools across London.

COMMUNITY ENGAGEMENT We work with our employees and strategic charitable partners at three levels.

STRATEGIC

CommunityMarkJohn Laing is one of only 38 companies in the UK to achieve the CommunityMark.The award is made to businesses who can demonstrate a long-term commitmentto community investment measured against CommunityMark’s five principles.CommunityMark companies achieve this national standard by delivering measurableand positive benefits for their business and the community through their investments.

The Prince’s TrustJohn Laing has been a Patron ofThe Prince’s Trust’s Constructionand Business Services LeadershipGroup (CBSLG) since 2006, allowingJohn Laing to work in partnershipwith The Prince’s Trust to helpsupport disadvantaged young peopleacross the UK.

The CBSLG supports young people through the‘Get into Construction’ programme, a skills developmentscheme that helps young people find a way into theindustry. John Laing’s significant support of the CBSLGcommittee and its commitment to the ‘Get intoConstruction’ programme has created a wide and excitingpartnership with the Trust.

Feedback from The Prince’s TrustSarah Hertzog,Head of Fundraising Construction and TransportAs patron member of the CBSLG, John Laing has played a key role in supporting our work in trainingdisadvantaged young people across the UK to move intothe construction and business services sector. Last year,we helped over four hundred young people increase theirskills and confidence. This year, we will help a record-breaking 500 young people and four in five will move onto employment, self-employment or further training. Wehave strived, with the support of John Laing and othermembers of the Group, to ensure that we are trainingyoung people with the relevant skills that are needed,and where there are entry level employmentopportunities. Adrian Ewer, as Vice-Chairman of theCBSLG Group, offers us time and expertise along withthe support of John Laing to ensure that together wecan build better lives.

61


British Trust for Conservation VolunteersJohn Laing has been working inpartnership with the British Trust forConservation Volunteers (‘BTCV’) for anumber of years to:• Increase communities’ awareness

of their local environment;• Bring people together to work on a number of local

or national conservation projects;• Increase morale, through structured teamwork,

for those members of the community who may beunemployed or suffering from mental or physicalhealth problems.

Green Gym is BTCV’s award-winning programmethat operates across the UK to facilitate practicalconservation or gardening work. Activities are led byqualified leaders and include warm up and cool downexercises; training in tools and equipment use and anexplanation on how the project will benefit the localenvironment.

Adrian Ewer at the Haringey 6th Formcentre.

David Micciche at the Pimlico Academy. Chris Waples at the City Academy.

The Prince’s Seeing is Believing ProgrammeJohn Laing is participating in Business in the Community’sEducation campaign.

During 2010, Adrian Ewer (CEO), Chris Waples(MD Operations) and David Micciche (SustainabilityDirector) participated in the Prince’s Seeing is Believing‘What Works in Schools’ programme which includedvisits to a number of educational establishments.

The ‘What Works in Schools’ visits showcased anumber of initiatives including Business Class, a BITCstrategic programme designed to provide a sustainableframework for business engagement with education andthe work of the Prince’s Teaching Institute, a programmeaimed at providing departmental head teachers with highcalibre continuing professional development training.Both programmes have been adopted by John Laing onthe Swindon Schools project.

Feedback from the Seeing is Believing programmewas made to HRH Prince Charles on 1st February 2011at St James’ Palace.

Photographer: Alastair Fyfe

62


SUSTAINABILITY

PROJECT ENGAGEMENT

Croydon Town CentreCroydon Council Urban Regeneration Vehicle (‘CCURV’)is a long-term partnership between Croydon BoroughCouncil and John Laing to regenerate the centre ofCroydon. This joint venture provides John Laing with theopportunity to make a real difference by supportingCroydon’s communities and local businesses.

To this end, John Laing, the Council, localpartners and supply chain parties developed a socio-economic regeneration strategy for CCURV, focussingon how the lead contractors for CCURV’s initial projectscould optimise the advantages of working together.

Achievements to date:-• Over £200k of contracts awarded to local businesses

through Sir Robert McAlpine (the lead contractor forthe public services delivery hub);

• Over 18% local employment achieved on site;• Training, Learning & Visitors Suite opened providing a

much-needed facility for the use of local communitygroups.

John Laing is a Founding Patron of the CroydonCommitment, a corporate-led social responsibilitycharity that promotes the work of local charities andvoluntary groups and is supported by local businesses.The John Laing Charitable Trust has committed £75,000to the fund and this will be matched pound for pound bythe Government.

Jatinder Thind and AsadHassan preparing habitatsfor wildlife.

The Toronto Team.

John Laing Regeneration and Education Team after rejuvenatingthe MIND charity shop garden.

EMPLOYEE ENGAGEMENT John Laing employees areencouraged to get involved with our Third Sector partnersin a variety of ways including fundraising. Some of our staffchoose to work with our community partners.

London Wildlife TrustOur Operations Finance team spent a day with theLondon Wildlife Trust clearing an area called TheGreenway, a cycle and footpath running from Bow toBeckton, which will be one of the main pedestrian routesinto the Olympic Park in 2012. Working with the LondonWildlife Trust, the team spent the day building bird andbat boxes, clearing brambles and building habitats forsmall animals and insects.

MIND for better mental healthIn September, the John Laing Regeneration and Educationteam rejuvenated the courtyard at the Gipsy Hill charityshop, MIND, in Croydon. Having supplied new plants andtrees, funded by The John Laing Charitable Trust, theJohn Laing team fought against wind and rain to ensurethat overgrown shrubs, trees and flower beds were tidiedup, gravel stones in pathways replaced, and new treesand shrubs planted.

Adopt-A-Day Habitat for Humanity, Toronto, CanadaIn November, the John Laing Toronto team participatedin the Habitat for Humanity (‘HFH’) Adopt-A-Dayvolunteer programme. Internationally, HFH seeks toeliminate poor housing from the world and build simple,decent, affordable homes in partnership with low-income families.

Operations Finance Teamat the Greenway.

63


Make a DifferenceAll John Laing employees or members of their immediatefamily directly involved in a charity are able to apply fora grant to support the good cause. These grants aregenerally given to small charities where they can makea real difference. During the past year, 43 payments of£500 were made to a wide variety of organisationsincluding schools, youth football teams, choirs, variousyouth clubs such as sailing groups and many smallcharities.

Matched givingThrough The John Laing Charitable Trust, we are ableto match money raised by employees, up to a value of£1,000 per employee. This year, 28 applications werereceived from staff with the value of matched donationstotalling £16,326.89.

Various donations were made throughout the yearand these are just a few of the many charities to benefit.

Holly Bunning, Regeneration and EducationTeam Bid Coordinator with a cheque for£1,000 payable to GUCH, the Grown UpCongenital Heart Patients Association.

Carl Dix, ExecutiveDirector at Primary Plusraised £688.20 by notonce, but twice,swimming one mile inopen water.The amountwas matched by theJohn Laing CharitableTrust to make a grandtotal of £1,376.40 forthe charity Guide Dogsfor the Blind.

Hope Village orphanage project inNamibia received £1,000. The nominationwas made by John Laing OperationsDirector, Jos Heemelaar.

0

100

200

300

400

500

600

700

800

900

John Laing Employees

John Laing Projects (UK)

HSE Construction Standard 09/10

734

364

283

Q4 09 Q1 10 Q2 10 Q3 10 Q4 10

HEALTH AND SAFETY John Laing takes its health andsafety responsibilities very seriously and operates to aninternationally-recognised safety management system.In 2010, we retained our third-party certification toBS OHSAS 18001:2007 Occupational Health and Safetymanagement system.

The standard enables us to demonstrate ourongoing commitment to the health and safety of our staffand anyone who may be directly or indirectly affected byour activities.

Certification has seen a continuedimprovement in our health and safetyperformance in terms of health andsafety management, incident reportingand investigation, employee engagementand occupational health and wellbeing.

Accident Incidence Rate (‘AIR’) per 100,000 employees(AIR)

64


SUSTAINABILITY

The Health and Safety Executive (‘HSE’) defines the AIR asthe total number of RIDDOR incidence causing injury over12 months, divided by the average number of employeesover the same period multiplied by 100,000.

John Laing has not been the subject of anyenforcement action throughout 2010 and the AIR (12-monthrolling average) associated with our UK PFI constructionprojects, employing some 9,000 contractors, was consistentlywell below the HSE industry average. Safety performanceon all our projects is closely monitored and subject toroutine audits by members of the Compliance team andour operational directors.

The AIR for John Laing employees over the sameperiod did see a rise in the third quarter, resulting from onesingle ‘over three day’ injury.

John Laing was awarded a RoSPA Gold Award forOccupational Health and Safety. This is the second yearrunning that John Laing has achieved this award whichreflects not only the quality of the management systememployed, but also the safety performance beingmaintained throughout the business.

ENVIRONMENTBiodiversityJohn Laing fully acknowledges the value of the naturalenvironment and aspires to manage its operations in such away as to minimise any impact upon habitats and resources.

During bidding activities, we review clientrequirements and, where feasible, offer alternativeenvironmentally-friendly options and sustainable solutionsthat may not have been considered within the originaloutput specification. We endeavour to ensure that ourlandholdings are managed in a way that is sympatheticto the needs of flora and fauna, thus enhancing localbiodiversity and public amenities.

We encourage our employees to participate inenvironmental CR days, allowing them time off work toundertake tasks that provide biodiversity benefits suchas pond clearance and recreation of habitat areas toencourage wildlife to flourish.

Energy and wasteWe continue to improve upon the accuracy of metricsassociated with quantifying our carbon footprint, which isfurnished through the introduction of enhanced datacapture and reporting systems and software. Details ofelectricity, gas and diesel consumption are recorded acrossJohn Laing’s entire portfolio, allowing us to preciselycalculate our carbon emissions.

As a result of organisational changes, we will thisyear be reporting our carbon and waste footprint inabsolute terms whereas, in previous years, we reported asa proportion of our equity holding. Whilst we have anaspiration to reduce the impact upon the environment as aresult of greenhouse gas emissions, the ability for us to doso is dictated by our clients’ commitment to a reductionstrategy.

2010 TOTAL CO2 BY SECTORTonnes

Robin Phayre, HSEQ Manager collects theRoSPA Gold Award from RoSPA TrusteeMichael Hampson

HealthEducationDefence

Street LightingJusticePrimary Care

15,200

24,900

21,200

9,40015,100

52,400

65


WasteJohn Laing’s commitment to reduce the volume of wasteit and its end-users produce is firmly embedded withinthe culture of the business. This ethos stems from topmanagement and is cascaded to staff, clients andcontractors at all levels to ensure the Company’saspirations can be realised.

We are collating and analysing waste data fromHead Office and our projects on an annual basis, with aview to witnessing a decline in the quantity of wasteproduced, and an increase in the amount recycled.

Our ability to influence the volume of wasteproduced by our projects remains reliant upon our clients’commitment towards reducing their environmental impact.As such, we continue to work with our stakeholders to lookat joint initiatives that provide both environmental andfinancial benefits. Where possible, we aim to educate ourclients and end-users by raising awareness of the negativeenvironmental impact waste has and of the small changesthat can be made to lessen the volume of materials sentto landfill.

Within Head Office, all general waste is nowconverted into energy with all other materials segregatedand recycled, confirming the success of recentimprovement initiatives.

The overall volume of waste produced iscommensurate with the number of projects within ouroperational portfolio. Escalating landfill costs will act asa driver to further improvements in this area.

TOTAL WASTE GENERATED 2010Tonnes

John LaingOffices

Justice

Primary Care

Health

Education

Defence

43

65

77

97

39

137

The absolute carbon footprint for John Laing for2010 was 140,278.20 tonnes, showing a marginal increaseof 5.1% from the previous year. This increase has, in themain, been due to improvements in reporting, coupled withan increase in the number of projects that have becomeoperational. Whilst the absolute figures quantify the volumeof CO2 generated, the CO2 intensity represented in the chartbelow provides a measure of energy efficiency.

ENERGY INTENSITY CO2Kg/m2

The table above shows the 2010 carbon intensity ofour projects and offices per m2 by sector.

Carbon Reduction CommitmentThe Climate Change Act 2008 introduced the CarbonReduction Commitment Energy Efficiency Scheme (‘CRC’)which requires the registration, monitoring and trading inemissions for undertakings that had ‘half hourly meters’for electricity as at 31 December 2008 and whose annualelectricity supply in 2008 exceeded 6,000 MWh.

Following extensive consultation with theEnvironment Agency regarding the application of the schemeto Private Finance Initiative projects, John Laing’s position isthat, whilst it has a supply responsibility, it has no liabilityfor emissions and, therefore, no obligation to participate orprovide the agency with an information disclosure.

We fully appreciate the additional financial burdenthis places on our clients and we are committed toproviding support and assistance in the development andimplementation of energy-reduction strategies.

Total WasteGenerated

Total Amount of NonHazardous Waste

Total Amount of NonHazardous Waste

Sent to Landfill

Total Amount of NonHazardous Waste Recycled

Total Amount of HazardousWaste Generated

14,178

4,543

73

18,722

18,795

66


SUSTAINABILITY

Waste SectorIn 2009, we secured the Manchester Waste project througha consortium comprising John Laing and Viridor. Whencomplete, this project will be able to divert from landfill50% of the 1.3 million tonnes of municipal waste generatedby Greater Manchester Waste Disposal Authority. Theproject also includes the provision of a CHP plant with acapacity to treat up to 420ktpa of solid recovered fuelderived from household waste and will be able to supplysome 270,000 MWh of electricity and 500ktpa of steam intothe internal network of the Ineos Runcorn site. In 2010,we also secured a significant investment in two Shanksprojects; the first, East London Waste Authority, which hasthe capacity to divert 500,000 tonnes of waste each yearfrom landfill and the second, in Dumfries and Gallowaywhich will divert some 65,000 tonnes waste per year fromlandfill.

Both projects involve the biological mechanicaltreatment of waste and the production of Solid RecoveredFuel (‘SRF’) which is odour free. The SRF will substitute theneed for fossil fuels (e.g. coal and oil) and can be storedand transported safely. The material is suited for use in“Advanced Thermal Processes” and qualifies as a sourceof renewable energy if utilised in this way. The use of thestabilised waste as a secondary fuel creates significantopportunities for both public and private sectors toprogress towards self-sufficiency in renewable power.

WorkplaceOur PeopleJohn Laing is strongly committed to being a responsibleand attractive employer. The Company invests in itsemployees to support the realization of individual employeepotential through stimulating work assignments, up-to-date learning and development initiatives and a healthywork/life balance.

EmploymentAs at 31 December 2010, the Company employed 1,131 staffacross our business with offices in the United Kingdom andoverseas. The composition of our workforce remainsdiverse and reflective of the commercial needs of ourbusiness and the communities we work in.

RecruitmentThe Company’s resourcing strategy remains focussed onensuring that the right people are selected using efficientand effective processes, anchored in our corporate valuesand core competency framework. Our core competenciesare also consistently adopted across the employee lifecycle.

Learning and DevelopmentJohn Laing supports and invests in employees’ skillsdevelopment and life-long learning through a variety ofmeans, including attending external courses and seminars,sponsorship of professional qualifications, secondments,development assessments, leadership development,coaching and mentoring.

The Company runs in-house training programmeswhich are open to all employees spanning four core areas:management development, personal effectiveness,professional development and information technology. JohnLaing also offers a personal financial planning course toassist employees in planning for their long-term financialfuture including pension planning. We continue to introducenew courses to our in-house training programmes to matchthe changing needs of the Company and employees.

Retention of our employees through effectivedevelopment is key to the success of the business andtherefore, learning and development remains an area offocus. Our Future Leaders’ Programme was implementedin 2010 to provide personal development, mentoring andcoaching support for a core group of high-performingemployees. We invest in the Company’s future leadership bysupporting a variety of tailored programmes and continuousprofessional development initiatives.

Longley Lane MBT-AD Facility, Sharston, Manchester –The Mechanical Pre-Treatment Plant separates the organicwaste that will be digested from the other recyclable andrecoverable materials.

67


Employee Reward and BenefitsJohn Laing recognises the importance of reward to attract,motivate and retain staff. The Company’s strategy isreviewed periodically to ensure it remains competitive andcontinues to reward high performing employees.

Employee SurveyJohn Laing is committed to continuous improvement andconducts employee surveys annually to seek and respond tofeedback from our employees. Our 2009 employee surveyresulted in a range of initiatives in 2010 specifically onappraisals, leadership development and succession planning,diversity and inclusiveness training, and communication ofthe corporate vision.

Our 2010 employee survey was administered inJanuary 2011 by an external consultancy, and focussed onthe following areas:• Leadership• Management• Communication• Teamwork• Career Development• Client Focus• Work environment• Well being

The survey responses are being analysed and action plansfor areas of improvement will be rolled out in the courseof 2011.

Equality and Fair TreatmentJohn Laing is committed to providing all employees withequal opportunities to work and develop in a positiveenvironment free from discrimination or unfair treatment.Our Equality and Diversity training course was developed in2009 and rolled out to managers in 2010. This remains apriority and the Company continues to update its policiesand increase employees’ awareness in compliance withrecent legislation.

Work Life BalanceJohn Laing is committed to providing a working environmentthat enables employees to achieve a productive and positivebalance between their work life and personal life to themutual benefit of the individual, the business and society.Where it can, the Company provides enhancements tostatutory minimum requirements for maternity, paternityand adoption arrangements. The Company’s policies andpractices on flexible working, supporting working parentsand approved absence from the work place show itscommitment to this goal.

The Company also provides an employee assistanceprogramme which is available to all employees, theirpartners and their immediate family. This is an independentservice which offers confidential support and counsellingon a wide range of work, personal and family issues.

70 Board of Directors72 Directors and Advisers73 Directors’ Report and Accounts

directors’ report and accounts

69

70


BOARD OF DIRECTORS

Adrian Ewer

Chris Waples

Guy Pigache

Lynn Krige

Phil Nolan (Chairman)

Roger Greville

Derek Potts

Toby Hiscock

71


EXECUTIVE DIRECTORS

Adrian EwerChief Executive, John Laing plc

After qualifying as a CharteredAccountant in 1977, Adrian pursueda career in industry in electronics,engineering and constructionbusinesses. In 1991 Adrian joinedJohn Laing and in 1995 was promotedto Deputy Group Finance Director.From this position he tookresponsibility for the establishmentof the Investments Division whichwas the catalyst for John Laing’spresent day core business.

In June 1999 Adrian joined theBoard as Finance Director. He hasbeen central to the strategic shiftaway from construction and housebuilding. He has promoted thecurrent strategy to focus on globaldevelopment and investment ininfrastructure projects for publicsector clients. He became ChiefExecutive in July 2006.

Lynn KrigeFinance Director, John Laing plc

Lynn joined John Laing plc in 1999in the central finance team. In 2002,Lynn was appointed as GroupFinancial Controller and in July 2007to the position of Group FinanceDirector for John Laing plc. Lynnqualified as a Chartered Accountantwith Deloitte in South Africa in 1991where she entered the constructionindustry as the Finance Director of aprivate local construction company.

Lynn is a member of the ExecutiveCommittee, and has specific CSRresponsibility for community matters.Lynn is a Trustee of the John LaingCharitable Trust.

Derek PottsDirector, John Laing plc andManaging Director, BusinessDevelopment

Derek joined John Laing plc in 2001,where he heads the BusinessDevelopment division, which isresponsible for the Global PFI/PPPbidding and business development.

Derek is a qualified CharteredAccountant, having graduated as anengineer. He previously held seniorpositions with Jardine Matheson UK,GB Railways Group plc and VirginGroup. He is a member of the Group’sExecutive Committee, and a Directorof John Laing plc. Derek is responsiblefor CSR issues relating to customersand consumers.

Chris WaplesDirector John Laing plc andManaging Director, Operations

Chris joined John Laing plc in August2007, where he heads the Operationsdivision. Chris is responsible formanaging all aspects of the Group’slong-term investments coveringdelivery over the whole project lifefrom financial close duringconstruction and throughout theoperating phase. Chris is a memberof the Executive Committee.

Chris formerly held seniormanagement positions with Amey plc,and prior to that held senior positionswith Scottish Power plc and BlueCircle plc. Chris is the John Laing plcdirector responsible for health andsafety matters. He also takes CSRresponsibility for issues relating tocommunity and wellbeing.

NON-EXECUTIVE DIRECTORS

Phil NolanChairman, John Laing plc

Dr Nolan has a wealth of experienceon the Boards of many companies,private and public in both an executiveand non-executive capacity. He iscurrently Chairman of Infinis, aprivately held, leading renewableenergy generator and Sepura plc,a listed, global supplier of TETRAradios. He was CEO of Eircom,Ireland’s national telecommunicationssupplier from 2002 – 2006. Prior tothat, he served as an ExecutiveDirector of BG Group plc and CEO forTransco plc from 1998 and in 2000led the demerger of Transco as CEOof the Lattice Group.

Toby HiscockDirector, John Laing plc

Toby Hiscock is a Fellow of the Instituteof Chartered Accountants in Englandand Wales with 30 years experiencein the accounting profession. He wasthe Chief Financial Officer and anExecutive Director of HendersonGroup Plc from 2003 until hisretirement in September 2009. AtHenderson he was responsible forall aspects of financial stewardshipof the Group. Prior to that, Toby heldseveral senior internal audit andfinance roles in Henderson afterjoining that business in 1992. BeforeHenderson, he was a senior managerat Midland Bank Group in Londonand from 1981 – 1988 he workedfor Binder Hamlyn, CharteredAccountants in the City, aftergraduating from Oxford University.

Toby is also a Non-executiveDirector of a number of other publicand private institutions, which areindependent of John Laing.

Roger GrevilleDirector, John Laing plc

Roger is the Managing Director ofHenderson Private Equity Limited,which specialises in Asian privateequity, infrastructure and privateequity fund of funds.

Roger has over 20 years ofinvestment and managementexperience covering unlisted andlisted assets. Prior to his current role,Roger was the Managing Directorof AMP Henderson Global Investors(NZ) Limited, a multi-sector assetmanagement company managinglisted and unlisted investments.Roger has also held positions withthe Reserve Bank of New Zealand,the New Zealand Treasury andHendery Hay McIntosh Limited(a sharebroking and investmentbanking firm) as an economist.

Guy PigacheDirector, John Laing plc

Guy is co-Head of Henderson EquityPartners’ infrastructure team, havingjoined Henderson in 2003 bringingwith him extensive experience of theconcession-based infrastructuremarket.

Guy has been active in the UKinfrastructure concession marketsince its inception in 1992, initiallyas a financial adviser to both the UKGovernment and private sectorconsortia.

In 1997, Guy established the PFIprimary equity investment division ofHSBC Infrastructure, a leading UKconcession-based infrastructureinvestor.

72


DIRECTORS AND ADVISERS

EXECUTIVE DIRECTORS

Adrian Ewer FCAChief Executive

Lynn Krige CA (SA)Finance Director

Derek Potts MA, ACADirector

Chris Waples CDir FIoDDirector

ADVISERS

Company Secretary andregistered officeRoger MillerAllington House150 Victoria StreetLondonSW1E 5LBRegistered No. 1345670

AuditorsDeloitte LLP2 New Street SquareLondonEC4A 3BZ

Principal bankersBarclays Bank plcLevel 281 Churchill PlaceLondonE14 5HP

The Royal Bank of Scotland280 BishopsgateLondonEC2M 4RB

HSBC70 Pall MallLondonSW1Y 5EZ

Principal solicitorsCMS Cameron McKenna LLPMitre House160 Aldersgate StreetLondonEC1A 4DD

NON-EXECUTIVE DIRECTORS

Philip Nolan (Chairman) BSc PHD MBA

Roger Greville BAgEco, MCom(Econ)

Guy Pigache BSc

Toby Hiscock MA(Oxon), FCA

The Directors submit their annual report and the audited financial statements for the year ended 31 December 2010.

GROUP ACTIVITIES

John Laing is a focussed developer, investor and operator in PFI/PPP projects in the UK and overseas markets.

A list of the principal subsidiaries and joint ventures can be found in note 30 to the accounts.

During the year, the Company successfully raised £270 million through the flotation of John Laing Infrastructure Fund Limited(‘JLIF’), a closed-ended investment company, on the London Stock Exchange’s Main Market. There have been no other significantchanges in the Group’s principal activities in the year under review. The Directors are not aware, at the date of this report, of anymajor changes in the Group’s activities in the coming year.

RESULTS AND DIVIDENDS FOR CONTINUING OPERATIONS

The profit for the year before taxation amounted to £68.0 million (2009 – £16.6 million restated). After a tax credit of £2.5 million (2009 – charge of £1.7 million), profit for the year was £70.5 million (2009 – £14.9 million restated).

The Directors paid interim dividends for the year of £16.0 million and £120.4 million on 25 June 2010 and 13 December 2010respectively (2009 – £38 million), making a total dividend of 34.8 pence per Ordinary Share (2009 – 9.7 pence per Ordinary Share).No final dividend for the year has been recommended.

REVIEW OF BUSINESS DEVELOPMENTS

The key events during the year and the development of the business are set out in the Chief Executive’s Review on pages 30 to 35.

The Finance Director’s Review is set out on pages 48 to 55.

The principal risks facing the Group are set out on pages 78 to 81.

STATEMENT OF DISCLOSURE OF INFORMATION TO AUDITORS

Each of the persons who is a Director at the date of approval of this report confirms that:

• as far as the Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware

• the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of anyrelevant audit information and to establish that the Company’s Auditors are aware of that information

This confirmation is given and should be interpreted in accordance with the provision of Section 418 of the Companies Act 2006.

DIRECTORS

The Directors who served throughout the year, except as noted, were:

A J H EwerL G KrigeD PottsC B WaplesR P GrevilleN T HiscockP M G Nolan (appointed 21 January 2010)G R M PigacheA P Woodbury (resigned 30 September 2010)

DIRECTORS’ REPORT


73

EMPLOYEES

The Group seeks to ensure employee commitment to its objectives in a number of ways. Strategic changes are communicateddirectly to all staff and resultant queries are handled by the business head or Executive Director as appropriate. Regular teambriefings at local level provide employees with information about the performance of, and initiatives in, their part of the business.A wide range of information is also communicated across the Group’s Intranet.

The framework within which decisions about people are made is set out in the Group’s personnel policies which are available to allstaff. It is part of those policies to employ and train disabled people whenever their skills and qualifications allow and when suitablevacancies arise. If existing employees become disabled, every effort is made to find them appropriate work and training is provided if necessary.

CREDITORS AND SUPPLIER PAYMENT POLICY

It is the Group’s policy to settle suppliers in accordance with the terms of the underlying transactions. Trade creditors at 31 December 2010 amount to 40 days (2009 – 49 days) of average supplies for the year.

AUDITORS

A resolution to reappoint Deloitte LLP as Auditors will be proposed at the forthcoming Annual General Meeting.

On behalf of the Board

R K MillerCOMPANY SECRETARY

24 March 2011

DIRECTORS’ REPORT


74

During 2010, the Board resolved that the disclosures to be made in the Annual Report regarding the operation of the Board and itssub-committees should be enhanced to fall into line, where commercially practicable, with the requirements of the 2008 CombinedCode and best practice generally.

DIRECTORS

The Board meets on a regular basis throughout the year and as needed to deal with special business. The Board has appointed anAudit Committee, a Finance Committee, an Investment Committee, a Nominations Committee and a Remuneration Committee whichconsider issues relevant to their specific terms of reference. Attendance of Directors at meetings of the Board during 2010 was asfollows:

Number of meetings: 18

Attended by:

P M G Nolan – independent Non-executive Chairman 16A J H Ewer – Chief Executive 18L G Krige – Finance Director 17D Potts – Managing Director, Business Development 16C B Waples – Managing Director, Operations 18R P Greville – Non-executive Director 17N T Hiscock – Non-executive Director 16G R M Pigache – Non-executive Director 17A P Woodbury – Non-executive Director 9

When Directors are unable to attend meetings they receive the relevant papers and give their comments in advance of the relatedmeetings.

Board meetings follow a formal agenda of matters reserved for decision and approval by the Board as well as any special business.Matters Reserved for the Board include the review of strategy and organisational change, the review of internal controls and riskmanagement processes, the approval of significant investments and disposals, the approval of budgets and the regular review ofcurrent trading and the financial position of the Group. A schedule of the Matters Reserved for the Board is included on theCompany’s website at www.laing.com. The Board receives regular reports prior to meetings on current trading, the financial positionand forecasts of the Group. In addition, the Board receives relevant information on business, corporate and strategic issues. Formalprocedures exist to ensure that the Board is made aware of any significant health and safety issues and non-compliance withstatutory regulations. C B Waples is the Board member responsible for health and safety issues. Further details of the Company’sapproach to health and safety are set out in the report on Corporate Social Responsibility on page 63.

All Directors may take independent professional advice at the Group’s expense in the furtherance of their duties and have full accessto the Group Company Secretary.

Upon appointment, the non-executive Directors undertake an induction process to familiarise themselves with the Group’s activities,policies and key issues.

The Chairman meets with the other non-executive Directors to discuss the performance of the Board and the Board sub-committees atleast once a year. The Directors have agreed that a more formal review of the Board’s effectiveness should be introduced during 2011.The performance of executive Directors is measured against a predetermined set of objectives that are agreed with each executiveDirector at the start of the calendar year.

The Chairman has no executive responsibilities but leads and sets the agenda for the Board ensuring its effectiveness. The Chairmanacts as an interface between the executive and non-executive Directors and the Company’s shareholder to establish constructivecommunications and relationships.

BOARD SUB-COMMITTEES

Sub-committees of the Board have been constituted to consider and make recommendations to the Board regarding matters relatingto external and internal audit, internal control and risk management processes, the selection of appropriate accounting policies, thepresentation of the interim and full year accounts, investment performance, acquisitions and disposals, the appointment of Directorsand Directors’ remuneration. The membership is determined by the Board and the duties of the Board sub-committees are set out inthe following sections of this report.

All of the sub-committees of the Board operate within clearly defined terms of reference which are reviewed and updated to reflectbest practice and the Combined Code as far as is commercially practicable. The terms of reference of the sub-committees areavailable on request from the Group Company Secretary and are included on the website at www.laing.com.

CORPORATE GOVERNANCE


75

THE AUDIT COMMITTEE

Throughout the year, the Audit Committee was chaired by N T Hiscock, a non-executive Director who has up to date, relevant financeexperience. Other members who served during the year are G R M Pigache, A P Woodbury (resigned 30 September 2010) and P Davies,an appointed representative of the Company’s shareholder (appointed 30 September 2010 and who attended the one meeting heldbetween that date and 31 December 2010).

Attendance of Directors at meetings of the Audit Committee during 2010 was as follows:


N T Hiscock –Attended by: P M G Nolan L G Krige C B Waples Chairman G R M Pigache A P Woodbury

3# 6# 1# 6 4 5

# attendance only

The Committee meets at least four times a year. One meeting is dedicated to the review of internal control procedures, including riskmanagement processes, while the others include the review of internal and external audit plans, the interim results and the full yearresults. Regular reviews of significant risks identified as a result of risk management processes are undertaken at meetings of theCommittee and the Committee’s observations are reported to the Board.

The internal audit department provides independent assurance to the Board, through the Audit Committee, that the internal controlprocesses, including those related to risk management, are relevant, effective and operating throughout the business.

The Group Finance Director is normally invited to attend the meetings, along with other members of management as appropriate.The external auditor and internal auditor are also invited to attend the meetings and meet with the Audit Committee privately,without management present, at least once a year.

The Committee considers and approves the external audit approach with the external auditor. The Committee reviews theindependence of the external auditor and the procedures in place to ensure that independence is not compromised. The Committeegives specific approval to non-audit services performed by the external auditor where the fee is expected to exceed a pre-determinedthreshold of £20,000. The Committee is satisfied that the non-audit work carried out by Deloitte LLP has not compromised theirindependence. The external auditor has also confirmed that it is satisfied that it has maintained its independence since appointment.

Audit Committee meetings are minuted and copies of the minutes are provided to the Directors and the external auditor. TheCommittee reports to the Board, through the Chairman of the Committee, any relevant issue that should be brought to the attentionof the Directors.

THE FINANCE COMMITTEE

The Finance Committee first met on 12 July 2010 and, in a full year will meet at least six times. The current members are N T Hiscock(who acted as Chairman throughout the year), G R M Pigache and C Tanner (an appointed representative of the Company’s shareholderwho has attended the only meeting that has taken place since his appointment). A P Woodbury was a member of the Committee from12 July 2010 until his resignation on 30 September 2010.

Attendance of Directors at meetings of the Finance Committee during 2010 was as follows:


N T Hiscock –Attended by: P M G Nolan L G Krige D Potts C B Waples Chairman G R M Pigache A P Woodbury

1# 4# 1# 1# 4 3 3

# attendance only

The Group Finance Director is normally invited to attend the meetings, along with other members of management as appropriate.The principal purpose of the Committee includes, but is not limited to, reviewing and recommending to the Board:

• the annual Budget and Plan;

• monitoring and reviewing the Group’s long-term/strategic financial planning;

• monitoring the Group’s banking arrangements; and

• overseeing the hedging of the Group’s corporate financial exposures.

The activities, recommendations and approvals of the Committee are reported to each routinely scheduled Board meeting.



76

THE INVESTMENT COMMITTEE

The purpose of the Investment Committee is to make recommendations to the Board, or to approve proposals within its delegatedauthority, in relation to the Company’s infrastructure projects. The Committee also reviews the Company’s portfolio valuationprocess referred to on page 44 and monitors the balance of risk across the portfolio. The activities, recommendations and approvalsof the Committee are reported to each of the routinely scheduled Board meetings.

Members of the Committee are appointed by the Board. Membership comprises not less than two non-executive Directors of theCompany and one Executive Director. G R M Pigache is the Chairman of the Committee.

Attendance of Directors at meetings of the Investment Committee during 2010 was as follows:


G R M Pigache –Attended by: P M G Nolan A J H Ewer L G Krige D Potts C B Waples R P Greville N T Hiscock Chairman A P Woodbury

1# 25 16# 24 16# 1# 1# 23 10

# attendance only

D B Marshall, a senior manager appointed by the Company, acted as Chairman of the Investment Committee between 1 January 2010and 28 May 2010 for 10 meetings. G R M Pigache acted as Chairman of the Investment Committee between 29 May 2010 and31 December 2010 for 16 meetings. L G Krige acted as Chairman for one meeting on 11 March 2010.

THE NOMINATIONS COMMITTEE

The Nominations Committee was formed but did not need to meet during the year. Going forward, the Committee will meet at leastannually. Its purpose is to consider and make recommendations to the Board concerning all new Board appointments and theretirement of Directors and to make recommendations to the Board relating to the policy for ongoing education and development ofDirectors. During the recruitment process, the Committee will use external search consultants or open advertising as deemed mostappropriate. When nominating candidates for non-executive directorships the Committee will take account of the need forindependence if appropriate. Dr P M G Nolan is the Chairman of the Committee. Membership is not less than two non-executiveDirectors, one of whom must be the Chairman of the Committee.

THE REMUNERATION COMMITTEE

The Remuneration Committee has three scheduled meetings per year and meets additionally as circumstances require.

Attendance of Directors at meetings of the Remuneration Committee during 2010 was as follows:


P M G Nolan –Attended by: Chairman A J H Ewer L G Krige R P Greville G R M Pigache A P Woodbury

3 4# 1# 4 2 3

# attendance only

A P Woodbury acted as Chairman of the Remuneration Committee between 1 January 2010 and 15 February 2010 for 1 meeting.Dr P M G Nolan acted as Chairman of the Remuneration Committee between 16 February 2010 and 31 December 2010 for 3 meetings.

The Remuneration Committee sets and monitors the overall remuneration policy for the executive Directors and other senior executives.The Committee reviews, but is not limited to, the following key areas and makes recommendations to the Board in this respect:

• total remuneration (including base pay, bonus and incentive arrangements);

• method of remuneration;

• service contracts;

• terms and conditions and any material changes to the standard terms of employment; and

• approval of financial arrangements proposed by the Chief Executive relating to the termination of Directors’ service contracts.

The activities, recommendations and approvals of the Committee are reported to the next routinely scheduled Board meeting.



77

The effective management of risks within the Group is essential to underpin the delivery of the Group’s objectives. The Board isresponsible for ensuring that risks are identified and appropriately managed across the Group and has delegated to the AuditCommittee responsibility for reviewing the effectiveness of the Group’s internal controls, including the systems established toidentify, assess, manage and monitor risks.

The principal internal controls that operated throughout 2010 and continue to this date include:

• an organisational structure, which provides adequate segregation of responsibilities, clearly defined lines of accountability,delegated authority and extensive reporting;

• clear business objectives aligned with the Group’s risk appetite;

• risk reporting, including Group wide risk registers, that is embedded in the regular management reporting of business units andreports to the Board; and

• an independent internal audit function, which reports to the Audit Committee. The external auditors also report to the AuditCommittee on the efficiency of controls.

These procedures are underpinned by a control environment which is supported by a culture of openness of communication betweenoperational management and the executive management on all matters, including risk and control and procedures for bringing suchmatters to the attention of the Board.

This section below, sets out the Directors’ opinion of the principal risks related to the business of the Group and to the PFI/PPPmarkets in general. Additional risks and uncertainties not presently known to the Directors, or that the Directors currently considernot to be material, may also have an adverse effect on the Group.

Risk Potential impact MitigationEXTERNAL RISKS

Government policyPFI/PPP is not the only way of funding The potential impact of a change in The Board has approved a strategy that limits dependence government projects. Governments may government policy towards the funding upon any single sub-sector of the UK PFI/PPP market and in future decide to favour alternative of capital investment is a reduction in which increasingly targets overseas markets, provided the funding mechanisms. In addition, available investment opportunities. risk profile and returns are acceptable.governments may reduce the overall In addition, changes to legislation or Thorough reviews are carried out in order to assess a specific level of funding allocated to major policy in relation to the profits available country’s risk (for example economic and political stability,capital projects. The volume of from PFI/PPP investment could result tax policy and local practices) before commercial activities potential opportunities available to in a reduction in the returns ultimately commence.the Group might in future reduce in available to the Group from PFI/PPP In addition, the Group is actively pursuing other adjacent sectors markets subject to policy change. project investments. These Special such as strategic partnering with public sector bodies to deliver In addition, Governments may seek to Purpose Companies (‘SPC’s’) generally their infrastructure requirements through different structures.introduce new policies or legislation assume the risk of non-discriminatory The Group will seek specific contractual protection where that seek to tax or share in the profits changes in law. possible from changes to government policy and law. General from investment in PFI/PPP. change of law is considered to be a normal business risk.

During the bidding process John Laing takes a view on the appropriate pricing of non-discriminatory changes in law risk.

Counterparty riskIn today’s economic climate, there is an Client failure could result in the The Group works with a large number of clients, joint venture increased risk of counterparty failure. non-collection of amounts owed and partners, sub-contractors and funders so as to reduce The Group is exposed to counterparty ultimately a significant impairment in systemic counterparty risk in the portfolio. In establishing credit risk of its clients, sub-contractors, the value of the investment, if not a contractual arrangements prior to making an investment, the joint venture partners, financial total loss. Failure of a sub-contractor credit standing and relevant experience of a sub-contractor is institutions and suppliers. or financial institution would result in considered and informs the overall security package which is

the Group having to find a replacement, required of them, such as guarantees, bonding and payment which could result in delays and reserving. Post contract award, the financial standing of key additional costs and may adversely counterparties is monitored to provide an early warning of affect the return on an investment in financial distress.the SPC. The impact of the failure of Clients are almost exclusively supported by central and local a joint venture partner would depend government covenants, which significantly reduce our risk. on whether all equity and sub-debt Client risk is further reduced by the increasing geographical had been invested and may require spread of the Group’s business into international markets. having to find a replacement partner, Entry into new geographical areas, which have a different legal at short notice. framework and/or financial market characteristics, is

considered separately by the Group Board from individual investment decisions.The counterparties for corporate deposits and project swaps and deposits are required to be banks of a suitable credit rating and are monitored closely on an ongoing basis.

PRINCIPAL RISKS AND RISK MANAGEMENT


78

Risk Potential impact MitigationEXTERNAL RISKS

Macroeconomic factors

Inflation, interest rates, foreign To the extent there are adverse Macroeconomic factors which have the potential to adversely exchange and GDP all potentially movements in macroeconomic factors impact upon the underlying cash flows of an investment are impact upon the return generated which cannot be adequately hedged hedged where possible and sensitivities are considered during from an investment. then the return on an investment the investment approval process.

may decline versus the base case, Systemic risks, such as persistent deflation, or appreciationor indeed result in eventual lock up of Sterling versus the currency in which an investment isof distributions and default on the made, are considered on a Group-wide basis.investment.

Risk Potential impact MitigationSTRATEGIC RISKS

Reputation

John Laing’s projects involve activities To the extent that John Laing and The Board receives regular reports on the quality of its in the public sector, providing facilities fellow project partners fail to provide services, health, safety and environmental issues, following and services that are used by members a facility or service to the appropriate both proactive and reactive monitoring of projects by the of the public. standard, or a major health, safety or Group’s operational management and dedicated compliance

environmental incident occurs during team. In addition to this, the service level of each project is the construction or operational phase rigorously monitored with clients through agreed performance of a project due to acts or omissions and measurement mechanisms. Refer to page 63 for further of the contractors, this could generate details.adverse publicity and have an adverse The Group has an extensive CSR policy. Refer to page 58 for effect on the Group’s reputation and its further details.ability to win new business and retain existing business.

Competition

The Group competes with other Competition for appropriate investment The Group operates in a diversity of sectors and geographical PFI/PPP investors to win PFI/PPP opportunities may increase, thus areas in order to prevent an over-dependence on one contracts from public authorities. reducing the number of opportunities sub-sector where competitive pressures might be concentrated.

available and adversely affecting the If the returns in a specific sector or geography are unacceptableterms upon which investments can then the Group will not invest.be made by the Group. The Group takes advantage of strategic local partnering across

geographies and sectors to further support competitive bids.

Liquidity in the secondary market

The majority of investments made by Adverse changes in liquidity in future The secondary market for realising value from Group the Group comprise interests in project periods may hamper the retention of investments continues to operate albeit at lower levels of companies which are not publicly shareholder value by the Group. activity than seen prior to the recent recession. During 2010,traded and are often subject to the Group successfully launched a listed infrastructure fund,constraints on transfer or sale. which acquired £255.2 million of PFI assets from the Group

and with whom the Group has arrangements to sell further investments over time, subject to acceptable terms. A number of large scale third party acquirers also operate in the market.

Reliance on third parties

The Group does not self-deliver The Group is reliant on the performance Extensive due diligence is undertaken through the bidding construction of assets and in the of third parties in constructing an asset process.majority of cases contracts with to the appropriate standard as well as The terms of the sub-contracts into which SPC’s enter provide third parties to service a facility operating it in a manner consistent significant protections for investment returns arising from the post construction. with contracted requirements. Failure poor performance of third parties.

of such third parties may result in the The ability to replace defaulting third parties is supported impairment or loss of investment. by security packages to protect against price movement

on re-tendering.



79

Risk Potential impact MitigationORGANISATION AND MANAGEMENT RISKS

People

Due to the specialist nature of the Failure to recruit and retain Programmes for staff retention and development are actively PFI/PPP industry, the Group is appropriately skilled people could monitored and tailored to the needs of the Group. In order to dependent on members of senior adversely impact on the Group’s ability nurture talent across the whole organisation, programmes are management and a highly skilled, to deliver current projects and secure in place to ensure good staff retention. These appropriate experienced and well-motivated projects for future growth. incentive schemes for management and staff, together with work force. targeted learning and development programmes. In addition,

succession planning is reviewed annually by the Board.

Major incident

The Group understands its dependency A major disaster could lead to a Detailed business continuity plans have been designed and on its people, technology and other dislocation of crucial business data, are reviewed at frequent/regular intervals. These plans have core services. The Group has identified technology, building, reputation and been accredited to BS25999 standard. Business continuity the possible disruption that could staff leading to loss of financial control procedures are regularly updated in order to maintain their follow from a major disaster such as and loss of confidence of investors and relevance.a terrorist attack, fire or flood. key suppliers.

In addition, there could be a major A major project failure could lead to John Laing operates to independent third party certified investment project failure. the loss of reputation and possible management systems in respect of health and safety

health and safety issues. (OHSAS 18001:2007) and environmental management(ISO 14001:2004). In addition, the John Laing complianceteam routinely monitor HSE performance to ensure issuesare identified and addressed.

Risk Potential impact MitigationFINANCIAL AND TREASURY RISKS

The financial review on pages 54, 55, together with notes 17 and 18 to the accounts, provide details of the Group’s financial and treasury risks.

Financial resources

John Laing requires adequate financial No assurance can be given that The Group closely monitors its working capital and letter resources, including bank facilities, additional financing will be available of credit requirements. It operates a policy of ensuring that for its known obligations. The Group’s or that, if available, the terms of such difficult financial resources are maintained to satisfy funding requirements will depend on financing will be acceptable to John committed and likely future investment requirements of many factors, including its success Laing. If adequate funds are not PFI/PPP projects.rate in winning projects, and, to available to satisfy its financial During November 2010, a new 3-year corporate facility was the extent that available financial obligations, John Laing may be required secured of £305.0 million, which is adequate for the Group’s resources in the future are insufficient to curtail its business development, foreseeable financial requirements.to fund its activities, it may need to refinance its outstanding obligations, raise additional funds or facilities. forego investment and acquisition

opportunities and/or sell assets.

PFI project finance

The pressures in the senior debt During the bidding process, if a project The Group works closely with a range of project funders to lending market have added a significant becomes unaffordable to the client or secure sufficient cost effective finance for its projects. The risk to the bidding process in securing un-fundable in the market there is a Group is currently leveraging its position in the market to senior debt. risk that the bidding and development ensure that it has a portfolio of key lending banks to John Laing.

costs that the business incurs prior to reaching financial close, may be irrecoverable.

Adverse financial performance by an Breach of financial covenants could Prior to financial close, all proposed PFI/PPP investments are SPC in relation to the financial ratios lead to a delay in receipt of distributions scrutinised by the Board’s Investment Committee and by the in its project finance loan documents to John Laing or ultimately a total Executive Directors. This scrutiny includes a review of may result in the SPC being unable to loss of investment should security sensitivities to adverse performance of investment returns make distributions to shareholders or enforcement materially impair recovery. and financial ratio tests. Monitoring of senior debt compliance junior debt providers and may enable continues throughout a project’s life, both at project and the senior debt providers to declare Group level. default of the financing terms and exercise their security.



80

Risk Potential impact MitigationFINANCIAL AND TREASURY RISKS

Pensions

The Group is exposed to financial The amount of the deficit can vary The Directors have appointed independent actuaries to advise risks in relation to the defined benefit significantly due to gains or losses on the Company on a funding strategy that is designed to pension schemes. At present, the scheme investments, and movements address the deficit over a reasonable period and to comply Company’s main scheme has a large in the assumptions used to value with the Regulator’s prevailing guidance. The Directors have deficit. scheme liabilities (in particular also taken steps to improve the governance of the scheme.

mortality, discount rate and inflation These initiatives have resulted in the rationalisation of the rate assumptions). Consequently, the board of trustees (including the appointment of an independent Group is exposed to the risk of trustee as Chairman), the adoption of a new investment strategy increases in the cash contributions (including inflation swaps, reduction in property and equity payable under the recovery plan, exposures and triggers for further swaps/asset reallocation), volatility in the deficit reported in the appointment of a new investment manager and the closure the Group’s Balance Sheet, and of the scheme to future accrual.gains/losses recorded in the Group’s SOCI.

Risk Potential impact MitigationDELIVERY AND OPERATIONAL RISKS

Cost overruns and construction delays

During the construction period of a To the extent that such risks are not The Group has procedures in place to ensure that SPC’s project, there are risks that either the borne by sub-contractors, or that appoint competent sub-contractors with relevant experience works are not completed within the sub-contractors fail to meet their and financial stability. SPC sub-contracting arrangements agreed time-frame or construction commitments, delays or cost overruns contain terms enabling the SPC to recover liquidated costs overrun. may adversely affect the return on the damages, additional costs and lost revenue, subject to limits,

investment to its shareholders. from the construction sub-contractor. In addition, the SPCmay terminate its sub-contract if in default and seek an alternative construction contractor.

Long-term forecasting of revenues

and costs

Investment decisions are based upon In circumstances where the revenue The Group restricts investments exposed to patronage risk assumptions of revenue, timing and derived from a project is related to and, where such risk is taken, the Directors review the the cost of major asset maintenance patronage (i.e. customer usage), the assumptions and their sensitivities in detail prior to any and other ongoing costs over the term actual revenues may vary materially commitment and set the pace accordingly.of a PFI/PPP contract (typically up from assumptions at the time the Day-to-day service provision is sub-contracted to qualified to 30 years). relevant contractual documentation sub-contractors supported by appropriate security packages.

was entered into. To the extent that Cost and price inflation risk in relation to the provision of actual costs incurred differ from services lies with the sub-contractors. forecast costs and cannot be passed Major maintenance and ongoing SPC costs are reviewed on to sub-contractors, then the annually and cost mitigation strategies adopted as appropriate.expected investment returns may be adversely affected. This could lead to a loss of investment value.



81

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law andregulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors arerequired to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) asadopted by the European Union and Article 4 of the IAS Regulation and have chosen to prepare the parent company financialstatements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards andapplicable law). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true andfair view of the state of affairs of the Company and of the profit or loss of the Company for that year.

In preparing the parent company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed andexplained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continuein business.

In preparing the Group financial statements, International Accounting Standard 1 requires that the Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandableinformation;

• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users tounderstand the impact of particular transactions, other events and conditions on the entity’s financial position and financialperformance; and

• make an assessment of the Group’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure thatthe financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Companyand hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information shown on the Company’swebsite. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ fromlegislation in other jurisdictions.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give atrue and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included inthe consolidation taken as a whole; and

• the Directors’ report, Business Review and Financial Review, includes a fair view of the development and performance of thebusiness and the position of the Company and the undertakings included in the consolidation taken as a whole, together with adescription of the principal risks and uncertainties that they face.

By order of the Board

A J H Ewer L G KrigeDIRECTOR DIRECTOR

24 March 2011 24 March 2011

STATEMENT OF DIRECTOR’S RESPONSIBILITIES


82

We have audited the financial statements of John Laing plc for the year ended 31 December 2010 which comprise the Group IncomeStatement, the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Group and ParentCompany Balance Sheets, the Group Cash Flow Statement and the related notes 1 to 30 for the Group and notes 1 to 12 for theParent Company. The financial reporting framework that has been applied in the preparation of the group financial statements isapplicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reportingframework that has been applied in the preparation of the parent company financial statements is applicable law and UnitedKingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s member, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.Our audit work has been undertaken so that we might state to the company’s member those matters we are required to state tothem in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company and the company’s member as a body, for our audit work, for this report, or for theopinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of thefinancial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinionon the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonableassurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes anassessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and havebeen consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;and the overall presentation of the financial statements.

OPINION ON FINANCIAL STATEMENTS

In our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31December 2010 and of the group’s profit for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally AcceptedAccounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared isconsistent with the financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been receivedfrom branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Ross Howard (Senior Statutory Auditor)for and on behalf of Deloitte LLPCHARTERED ACCOUNTANTS AND STATUTORY AUDITORSLONDON, UK

24 March 2011

INDEPENDENT AUDITORS’ REPORT TO THE MEMBER OF JOHN LAING PLC


83

Year ended 2010 Year ended 2009*Notes £ million £ million £ million £ million

Continuing operations

Revenue 1 343.3 351.1Cost of sales (304.0) (301.5)

Gross profit 39.3 49.6Other operating income 2 11.1 8.8Administrative expenses (45.8) (42.7)Fair value movement on joint ventures and associates 12 23.0 2.1Other gains/(losses) 6 35.1 (15.3)

Profit from operations 3 62.7 2.5Investment income 5 83.6 81.6Movement in fair value of derivatives outside hedging relationships – 1.4Other investment income 83.6 80.2Finance costs 5 (78.3) (67.5)Movement in fair value of derivatives outside hedging relationships (0.4) –Other finance costs (77.9) (67.5)Profit before tax 68.0 16.6Tax 7 2.5 (1.7)

Profit for the year from continuing operations 70.5 14.9Discontinued operations

Profit for the year from discontinued operations (after tax) 8 0.4 –

Profit for the year 70.9 14.9

Attributable to:Owners of the Group 69.9 14.1Non-controlling interests 1.0 0.8

70.9 14.9

*all comparative information, including relevant notes, has been restated to reflect implementation of IFRIC12.

GROUP INCOME STATEMENTfor the year ended 31 December 2010


84

Year ended 2010 Year ended 2009*

Hedging, Hedging,revaluation revaluation

and Accumulated and Accumulatedtranslation profits/ translation profits/reserve (losses) Total reserve (losses) Total£ million £ million £ million £ million £ million £ million

Profit for the year – 70.9 70.9 – 14.9 14.9Exchange difference on translation of overseas operations 1.4 – 1.4 (2.1) – (2.1)Net increase/(decrease) in fair value of financial assets 35.2 – 35.2 (30.3) – (30.3)Net (decrease)/increase in fair value of hedging derivatives (13.9) – (13.9) 21.0 – 21.0Actuarial gain/(loss) on post retirement obligations – 13.9 13.9 – (62.9) (62.9)Movement in deferred tax on post retirement obligations – 0.1 0.1 – 0.8 0.8Recycling of fair value of financial assets on disposal (40.3) – (40.3) – – –Recycling of fair value of hedging derivatives on disposal 16.5 – 16.5 – – –Recycling of translation gains on disposal (7.1) – (7.1) – – –Adjustment in respect of business combinations – – – – (1.2) (1.2)Non-controlling interests (0.2) (1.0) (1.2) 1.9 (0.8) 1.1

Total comprehensive income/(expense) for the year (8.4) 83.9 75.5 (9.5) (49.2) (58.7)


GROUP STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2010


85

Group Statement of Changes in Equity in 2010

Joint Hedging, ventures and revaluation associates and Accumulated Non-

Share Capital revaluation translation profits/ controlling Totalcapital reserve reserve reserves (losses) Total interest equity

Notes £ million £ million £ million £ million £ million £ million £ million £ million

Balance at 1 January 2010

(as previously reported) 97.9 68.2 277.0 (4.8) (110.5) 327.8 – 327.8Effect of change in accountingpolicy for IFRIC12 – – – – (12.3) (12.3) – (12.3)

As restated 97.9 68.2 277.0 (4.8) (122.8) 315.5 – 315.5Arising on acquisition 24 – – – – – – 4.1 4.1Total comprehensive income

for the year – – – (8.4) 83.9 75.5 1.2 76.7Reclassification on acquisitionof non-controlling interest – – 0.3 – (0.3) – – –Transfer on disposal of interestsin joint ventures and associates – – (119.3) – 119.3 – – –Transfer on revaluation of investments 12 – – 24.2 – (24.2) – – –Realisation of capital reserveon contribution to pension fund deficit 23 – (21.1) – – 21.1 – – –Net other movements – – – (3.2) 7.1 3.9 0.4 4.3Dividends paid 9 – – – – (136.4) (136.4) (0.1) (136.5)

Balance at 31 December 2010 97.9 47.1 182.2 (16.4) (52.3) 258.5 5.6 264.1

Group Statement of Changes in Equity in 2009

Joint Hedging, ventures and revaluation associates and Accumulated Non-

Share Capital revaluation translation profits/ controlling Totalcapital reserve reserve reserves (losses) Total interest equity

Notes £ million £ million £ million £ million £ million £ million £ million £ million

Balance at 1 January 2009

(as previously reported) 97.9 88.5 363.0 4.7 (130.5) 423.6 0.6 424.2Effect of change in accountingpolicy for IFRIC12 – – – – (10.6) (10.6) – (10.6)

As restated 97.9 88.5 363.0 4.7 (141.1) 413.0 0.6 413.6Total recognised income

and expenditure – – – (9.5) (49.2) (58.7) (1.1) (59.8)Transfer excess losses attributableto non-controlling interestto Group accumulated losses – – – – (0.8) (0.8) 0.8 –Transfer on disposal of interestsin joint ventures and associates – – (88.1) – 88.1 – – –Transfer on revaluation of investments – – 2.1 – (2.1) – – –Realisation of capital reserve oncontribution to pension fund deficit 23 – (20.3) – – 20.3 – – –Dividends paid 9 – – – – (38.0) (38.0) (0.3) (38.3)

Balance at 31 December 2009 97.9 68.2 277.0 (4.8) (122.8) 315.5 – 315.5


GROUP STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2010


86

2010 2009* 2008*Notes £ million £ million £ million

Non-current assetsIntangible assets 10 37.9 54.3 53.6Property, plant and equipment 11 0.7 2.6 2.8Investments at fair value through profit and loss 12 70.2 2.3 2.3Investment in joint ventures and associates at fair value through profit and loss 12 346.0 457.6 509.6Financial assets – available for sale 16 879.8 1,060.9 950.8Derivative financial instruments 18 – – 5.7Other financial assets 14 – 55.7 141.0Trade and other receivables 13 0.1 0.3 1.2

1,334.7 1,633.7 1,667.0

Current assetsFinancial assets – available for sale 16 15.3 13.0 10.6Trade and other receivables 13 54.8 47.6 58.4Current tax assets 0.8 – 0.4Other financial assets 14 34.5 60.8 57.3Cash and cash equivalents 14 112.4 117.2 94.2

217.8 238.6 220.9

Assets classified as held for sale or discontinued 8 5.5 6.0 8.2

Total assets 1,558.0 1,878.3 1,896.1

Current liabilitiesCurrent portion of interest-bearing loans and borrowings 14,18 26.2 39.0 30.9Trade and other payables 15 92.4 103.7 88.8Current tax liabilities 4.4 1.5 1.6

123.0 144.2 121.3

Liabilities classified as held for sale or discontinued 8 9.3 11.1 11.8

Net current assets 91.0 89.3 96.0

Non-current liabilitiesInterest-bearing loans and borrowings 14,18 877.9 1,103.2 1,046.3Derivative financial instruments 18 71.3 68.5 104.7Trade and other payables 15 6.2 3.4 9.1Retirement benefit obligations 20 175.3 199.6 149.3Deferred tax liabilities 19 13.0 15.1 17.8Long-term provisions 21 17.9 17.7 22.2

1,161.6 1,407.5 1,349.4

Total liabilities 1,293.9 1,562.8 1,482.5

Net assets 264.1 315.5 413.6

EquityShare capital 22 97.9 97.9 97.9Capital reserve 23 47.1 68.2 88.5Joint ventures and associates revaluation reserve 182.2 277.0 363.0Hedging, revaluation and translation reserve 23 (16.4) (4.8) 4.7Accumulated losses (52.3) (122.8) (141.1)- post retirement obligations (175.3) (199.6) (149.3)- other reserves 123.0 76.8 8.2Non-controlling interest 5.6 – 0.6

Shareholder’s funds 264.1 315.5 413.6

*all comparative information, including relevant notes, has been restated to reflect implementation of IFRIC12 and the reclassification of certaincash balances to other financial assets.

The financial statements of John Laing plc, registered number 1345670, on pages 84 to 137 were approved by the Board of Directors andauthorised for issue on 24 March 2011. They were signed on its behalf by:


24 March 2011 24 March 2011

GROUP BALANCE SHEETas at 31 December 2010


87

Year ended 2010 Year ended 2009*Notes £ million £ million

Net cash (outflow)/inflow from operating activities 25 (14.3) 10.5

Investing activities

Interest received 16.3 17.0Proceeds from the sale of subsidiaries 83.1 (0.3)Proceeds from the sale of joint ventures and associates 174.2 89.6Proceeds from loan repayments from joint ventures and associates 11.6 4.4Purchases of property, plant, computer software and equipment (1.4) (2.7)Investment/acquisition of joint ventures, associates and investments (111.6) (48.4)Acquisition of subsidiaries 24 (15.1) (1.0)

Net cash generated by investing activities 157.1 58.6

Financing activities

Dividends paid – equity shareholder (136.4) (38.0)Dividends paid – non-controlling interests (0.1) (0.3)Interest paid (58.7) (51.5)Proceeds from borrowings 89.0 75.6Repayment of borrowings (35.6) (30.4)

Net cash used in financing activities (141.8) (44.6)

Net increase in cash and cash equivalents 1.0 24.5Cash and cash equivalents at beginning of year* 122.6 101.8Effect of foreign exchange rate changes (6.5) (3.7)

Cash and cash equivalents at end of year 26 117.1 122.6

*restated for the reclassification of certain cash balances to other financial assets.

GROUP CASH FLOW STATEMENTfor the year ended 31 December 2010


88

BASIS OF PREPARATION

The Group has adopted accounting policies that are compliant with International Financial Reporting Standards (“IFRS”) in so far asthey have been codified and endorsed by EU member states and therefore these accounts comply with Article 4 of the EU IAS regulation.

ADOPTION OF NEW AND REVISED STANDARDS

In the current year, the following interpretation has been adopted, which has had a material impact on the Group’s financial statements:

Standard Impact on the financial statements

IFRIC12 ‘Service Concession Arrangements’ The interpretation addresses accounting by private sector operators involved in the provision of public sector infrastructure assets and services and requires rights to consideration receivable to be accounted for as either financial assets or intangible assets or a combination of both. Previously, all such rights were accounted for as financial assets. Its application requires the restatement of the comparative year ended 31 December 2009. Operating profit has increased by £1.0 million in the year ended 31 December 2010 (31 December 2009 – £0.9 million), broadly offset by a corresponding decrease in investment income of £2.4 million (31 December 2009 – £2.3 million). The impact on net assets was to decrease by £13.8 million (31 December 2009 – £12.3 million).

The following standards and amendments and interpretations are effective and relevant to the Group for the first time in the current year:

Standard

IFRS3 (revised 2008): Business CombinationsIFRIC18: Transfer of Assets from CustomersIAS39: Financial Instruments: Recognition and Measurement – Eligible Hedged Items Embedded Derivatives

The adoption of these interpretations and amendments has not led to any changes in the Group’s accounting policies or had anymaterial impact on these financial statements, other than in respect of acquisitions in the current period which have been accountedfor in accordance with IFRS3 (revised 2008), details of which are set out in note 24.

At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied inthese financial statements were in issue and relevant but not yet effective (and in some cases had not yet been adopted by the EU):

Standard

IAS24 (revised November 2009): Related Party DisclosuresIFRS9: Financial InstrumentsIFRIC19: Extinguishing Financial Liabilities with Equity InstrumentsAmendment to IFRIC14: Prepayments of Minimum Funding RequirementsImprovements to IFRS (May 2010)

With the exception of IFRS9, the Directors anticipate that the adoption of these standards or interpretations in future periods willhave no material impact on the financial statements of the Group when the relevant standards come into effect for periodscommencing on or after 1 January 2011. The adoption of IFRS9, expected in 2013 onwards, will impact on the measurement,classification and disclosures of financial instruments.

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Recognition and measurement of financial assets

The fair value of PFI/PPP Project Companies’ financial assets is calculated by discounting anticipated future cash flows at an appropriaterate, which is set by adding an appropriate risk premium for the asset class to the long-term gilt or risk free rate. The discount ratesthat have been applied to financial assets at 31 December 2010 were in the range of 4.9% to 14.8% (2009 – 6.3% to 13.2%). To theextent that long-term gilt rates either increase or reduce, the fair value of financial assets will rise or fall.

ACCOUNTING POLICIES


89

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Fair value of interests in joint ventures and associates

The Group’s investments in joint venture PFI/PPP Project Companies are carried at fair value through profit and loss, based on theportfolio valuation methodology as disclosed on pages 44 to 47. The 2010 fair value gain recorded in the Income Statement is anuplift of £23.0 million (2009 – £2.1 million).

Major maintenance provisioning

The cost of major maintenance over the life of a project is estimated during the project design stage before financial close. Actualmaintenance costs may be higher or lower than forecast. The risk is mitigated by regular management review of actual expenditureand regular technical evaluations of the physical condition of the infrastructure.

Pension and other post-retirement liability accounting

The accounting deficit in the Group’s defined benefit pension and post-retirement medical schemes at 31 December 2010 was£175.3 million (2009 – £199.6 million). The value of the pension deficit is highly dependent on price inflation, discount rate andlongevity experience and the sensitivity of the pension liabilities to changes in these assumptions is illustrated in note 20.

During 2010, the Company has continued to work with the Fund Trustee on risk reduction initiatives. During 2010 there was arebalancing of equity into fixed income investments, £75.0 million of 40-year inflation hedges were transacted, the March 2010triennial was completed and a revised deficit repair schedule agreed. In 2011, the Company will continue to work closely with theTrustee to implement additional risk management strategies.

In respect of post retirement obligations, scheme assets are recorded at their market value at 31 December 2010. Scheme liabilitiesare based on the assumptions set out in note 20.

Going concern

During 2010, the Group’s corporate bank facilities were refinanced and £287.0 million (net of dividend paid of £136.4 million) inworking capital was raised through the disposal of investments in PFI/PPP Project Companies. The funds generated were used torepay bank debt at the Group and shareholder levels and make deficit repair payments to the pension fund. The establishment ofJLIF opens the pipeline to make further sales of operational assets to JLIF, releasing capacity under the Group’s bank facilitiesenabling further investment in new bidding activity.

The Group has committed corporate facilities until November 2013 and has adequate resources available to meet committed capitalrequirements and continue operating for the foreseeable future. Accordingly, the Group has adopted the going concern basis inpreparing its annual report and accounts. Further details are set out in accounting policy (a) below.

GENERAL

Accounting Policies

a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by theCompany (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policiesof an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated Income Statement from theeffective date of acquisition or up to the effective date of disposal, as appropriate.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders may be initially measured at fair value or at the non-controlling interests’ proportionate share of the fairvalue of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis.Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognitionplus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

ACCOUNTING POLICIES


90

GENERAL (CONTINUED)

Going concern

The Directors, in their consideration of going concern, have reviewed the Group’s future operational projections and cash flow forecasts,which are based on prudent market data and past experience and believe, based on those forecasts and projections, that it isappropriate to prepare the financial statements of the Group on a going concern basis.

As set out in the Financial Review, in arriving at their conclusion that the Group has adequate financial resources, the Directors weremindful that the Group has a robust policy towards liquidity and cash flow management and that it is financed through £324.9 millionof bank facilities which are committed to 2013. Management is currently of the opinion that the Group’s forecasts and projections,taking account of expected bidding activity and operational performance, indicate that the Group will be able to operate within itscurrent facilities and comply with the associated banking covenants.

In determining that the Group is a going concern, certain risks and uncertainties which arise as a result of the current economicenvironment, have been considered by the Board of Directors, which has concluded that they currently do not represent a significantthreat to the ability of the Group to continue to trade within its available facilities. The Directors believe that the Group is adequatelyplaced to manage these business risks successfully. The most important matters identified and considered by the Directors are setout below. In addition, the Group’s policies for management of exposure to financial risk, including liquidity, foreign exchange, creditand interest risks are set out in notes 17 and 18.

The Directors have considered reasonable changes in economic and financial conditions (particularly the availability of debt markets,higher costs of capital and the impact on deal flow) a continued downturn could have on achieving financial close on new PFI/PPPprojects. As the principal utilisation of available facility headroom is for the investment and issuance of Letters of Credit on thesuccessful financial close of PFI Projects, such impact would conserve headroom, but delay recovery of bid costs.

Interest rate and currency movements present risks to the Group. Interest rate risk is significantly reduced through the use of interestrate derivatives in PFI/PPP Project Companies. Adverse movements in Sterling however would impact on available headroom as circa50% of issued Letters of Credit are denominated in foreign currencies. The Board monitors the hedging strategy on a continual basis.

The Group has a defined benefit pension scheme which has an accounting deficit at 31 December 2010 of £169.0 million. The Groupcurrently has arrangements in place to make defined deficit repayments over a period of 5 years. Any deterioration in the scheme’sfunding position could impact the Group’s liquidity in the medium term. The Group continues to work with the pension fund trusteeson a number of options including implementing a new investment strategy.

The Group is invested in 56 operational non-recourse PFI Project Companies which yield annual interest and dividends and it holds23.1% of JLIF which yields 6% in dividends and 1.1% in management fees of the valuation of assets held.

The Group owns a high quality diversified portfolio of infrastructure assets valued at £544.3 million (see Portfolio Valuation on pages 44to 47) as at 31 December 2010. Capital constraints within the economy have impacted on the levels of transactions in the secondarymarket, although asset values have held up reasonably. The Directors believe that this portfolio of assets provides the Company’sbanks with significant loan to value protection.

The Group’s forecasts indicate full covenant compliance in the foreseeable future. If a covenant breach became likely, the Groupwould enter into negotiations with its debt providers. This could result in the Group accepting higher financing costs or, if necessary,considering actions such as the sale of a number of the infrastructure assets. It is the current expectation of the Directors that theseactions would not be required.

b) PFI/PPP subsidiaries – specific accounting policies

The Group invests in 56 PFI/PPP Project Companies and, of these, there are 16 subsidiary PFI/PPP Project Companies that areconsolidated and apply the following accounting policies. The Group’s interests in PFI/PPP Project Companies which are jointventures or associates are accounted for at fair value through the Income Statement, as set out in (c).

In accordance with IFRIC12 (“Service Concessions”) and the various provisions of IFRS, the Group has determined theappropriate treatment of the principal assets of, and income streams from, PFI and similar contracts within the subsidiaryPFI/PPP Project Companies. Results of all service concessions which fall within the scope of IFRIC12 conform to the followingpolicies depending on the rights to consideration under the service concession.

The Group restates, where applicable, the results of subsidiary PFI/PPP Project Companies to reflect consistent accountingpolicies across the Group.

The Group determines the treatment of service concessions, held by PFI/PPP subsidiaries as financial assets or intangibleassets as follows:

ACCOUNTING POLICIES


91

GENERAL (CONTINUED)

(i) Service concessions treated as financial assets

Where the Group, as operator, has an unconditional right to receive cash or another financial asset from or at the direction ofthe grantor the asset created and/or provided under the contract is accounted for as a financial asset. Revenue is recognisedby allocating a proportion of total cash receivable to construction income and services income. The consideration receivedwill be allocated by reference to the relative fair value of the services delivered, when the amounts are separately identifiable.

During the construction phase, revenue is recognised at cost, plus attributable profit to the extent that this is reasonablycertain, in accordance with IAS11. Costs for this purpose includes valuation of all work done by sub-contractors whethercertified or not, and all overheads other than those relating to the general administration of the relevant companies.

During the operational stage, cash received in respect of the service concession is allocated to services revenue (see (ii)below) based on its fair value, with the remainder being allocated between capital repayment and interest income using theeffective interest method.

The financial assets are designated as ‘available for sale’ in accordance with (d) below. The fair values of the financial assetsare determined as described in (b)(i) above, with changes recognised in equity

• Interest payableProject specific interest costs including net payable on interest rate swaps are expensed as incurred using the effectiveinterest rate method.

• Major maintenanceFor financial asset accounted projects, the cost of major maintenance is recorded in cost of sales and an appropriateamount of revenue that would otherwise have been available to amortise the financial asset is transferred to revenue.This has the effect of increasing the financial asset by the cost of major maintenance. No profit margin is likely to berecognised on major maintenance since the principal profit recognition on PFI/PPP projects is derived from the provisionof routine services.

• DebtDebt in each subsidiary PFI/PPP Project Company, which is non-recourse to the rest of the Group, is initially stated at theamount of the net proceeds after deduction of issue costs. The carrying amount is increased by the finance cost inrespect of the accounting period and reduced by payments made in the period.

(ii) Service concessions treated as intangible assets

Where the Group, as operator, has a contractual right to charge users of the services the asset created and/or providedunder the contract is accounted for as an intangible asset. The intangible asset represents the construction cost of assetswhich give rise to the contractual right of charge. The intangible asset is amortised to estimated residual value over theremaining life of the service concession on a straight line basis and tested each year for impairment as described in (m) below.

Revenue arising in respect of these service concessions is recognised when the services are delivered.

(iii) Service concessions giving rise to both financial and intangible assets.

Where the service concession arrangements give rise to both unconditional rights to receive cash and in addition contractualrights to charge users, separate financial assets and intangible assets are recognised to represent each of the elements.

c) Investments in joint ventures and associates

The Group’s ultimate controlling party meets the definition in IAS31(1) of a fund management company and upon initialrecognition has designated its investment in joint ventures and associates at fair value through the Income Statement. The Grouptherefore measures its interest in joint ventures and associates at fair value in accordance with IAS39, with changes in fair valuerecognised in profit or loss in the period of the change. Refer to page 93 for details of the areas of estimation in the calculation offair value and refer to note (d) for the basis of the fair value calculation.

ACCOUNTING POLICIES


92

GENERAL (CONTINUED)

d) Other financial assets

The Group classifies its other financial assets as listed below. The classification depends on the purpose for which the financialassets were acquired. The Directors determine the classification of financial assets at their initial recognition.

(i) Financial assets at fair value through profit and loss comprise:

• the Group’s interests in joint ventures and associates (refer to note (c)); and

• The Group’s investment in John Laing Infrastructure Fund Limited (‘JLIF’) which has been designated on initialrecognition as a financial asset at fair value through profit and loss.

(ii) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an activemarket. They are included in current assets, except for maturities greater than 12 months after the Balance Sheet date which areclassified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cashequivalents’ in the Balance Sheet.

(iii) Available for sale financial assets are non-derivative assets that are either designated in this category or not classified in any of theother categories and include financial assets arising from service concessions as described in (b). They are included in non-currentassets unless there is an intention to dispose of the investment within 12 months of the Balance Sheet date.

Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the Balance Sheet date.

The fair value of financial instruments that are not traded in active markets is derived in one of three ways:

(i) Financial assets available for sale

The discount rates used to fair value financial assets available for sale are calculated by adding an appropriate premium to therelevant gilt yield for each PFI/PPP project. The gilt yield reflects the territory and unexpired term of the project agreement and thepremium reflects market spread that would be required by investors in bonds issued by PFI/PPP Project Companies with similarrisk profiles, plus the market wrapping fee, that would normally be charged to enhance the project cash flows to investment grade.The discount rates that have been applied to determine the fair value of financial assets at 31 December 2010 were in the range of4.84% to 5.70% (2009 – 5.59% to 6.87%).

The amount by which the fair value element of financial assets classified as available for sale changes, as a result of changes to thediscount rate during any accounting period, is taken directly to equity. The net cumulative gain or loss that has been taken directly toequity is transferred to the Income Statement when the financial asset is either sold or derecognised.

(ii) Financial assets at fair value through profit and loss

The fair value Investments in joint ventures and associates is calculated by discounting their future cash flows at an appropriatediscount rate. The basis of discount rates is long run average government bond rates adjusted for an appropriate premium to reflectPFI specific risk. Risk premia are then added to this adjusted base gilt rate depending on the phase of the project. The discountrates that have been applied to the financial assets at 31 December 2010 were in the range of 4.9% to 14.8% (2009 – 6.3% to 13.2%).

(iii) Loans and receivables

The carrying value less impairment provision of trade and other receivables are assumed to approximate their fair values.

The fair value of the Group’s investment in John Laing Infrastructure Fund Limited is determined by its closing share price at theBalance Sheet date.

ACCOUNTING POLICIES


93

GENERAL (CONTINUED)

e) Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The consideration of the acquisition is measured atthe aggregate of the fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity instrumentsissued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3(revised 2008) Business Combinations are recognised at their fair value at the acquisition date. Acquisition related costs are expensedas incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent considerationarrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the costof acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair valueof contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3(revised 2008) are recognised at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised andmeasured in accordance with IAS12 Income Taxes and IAS19 Employee Benefits respectively;

• liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards aremeasured in accordance with IFRS2 Share-based Payments; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS5 Non-current Assets Held for Saleand Discontinued Operations are measured in accordance with that Standard.

Assets identified and recognised on the acquisition of a PFI Project Company typically include contractual rights to future projectinterest in the service element of the concession. These assets are classified as intangible assets.

f) Revenue recognition for non-PFI/PPP entities

Revenue recognition in the Group’s management companies is determined by reference to the following policies:

• long-term facilities management contracts are accounted for in accordance with IAS11 ‘Construction Contracts’. Revenuesand profits recognised are determined by reference to services provided in the period, adjusted to reflect the forecast level ofprofitability at the end of the contract period.

• fees receivable in respect of management services agreements with PFI/PPP Project Companies are recognised evenly overthe period of the agreement; and

• income arising in respect of recoveries of bid costs on financial close of PFI/PPP Project Companies is recognised as invoiced.

Revenue excludes the value of intra-group transactions and VAT and includes the Group’s revenue derived from the provision ofservices to joint ventures by Group subsidiaries.

When it is probable that the expected outcome over the life of a facilities management or management services contract willresult in a net outflow of economic benefits or overall loss, a provision is recognised immediately. The provision is determinedbased on the net present value of the expected future cash inflows and outflows.

g) PFI Bid Costs

PFI bid costs are charged to the Income Statement until such time as the Group is virtually certain that it will recover the costs.Virtual certainty is generally achieved when an agreement is in place demonstrating that costs are fully recoverable even in the eventof cancellation of a project. From the point of virtual certainty, bid costs are held in the Group Balance Sheet as a debtor prior toachieving financial close. On finalisation of PFI project and financing agreements (financial close), the Group recovers bid costs bycharging a fee to the relevant Project Company. Accordingly for subsidiaries, if the fee exceeds the bid costs of the project, the excessis credited to the Balance Sheet as deferred income and recognised as income at the end of construction of the projects assets.

h) Provisions

Provisions for restructuring costs, legal claims and environmental restoration are recognised when:

• the Group has a present legal or constructive obligation as a result of past events;

• it is probable that an outflow of resources will be required to settle the obligation; and

• the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined byconsidering the class of the obligations as a whole.

ACCOUNTING POLICIES


94

GENERAL (CONTINUED)

i) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying property, plant and equipmentor intangible assets, which are assets that necessarily take a substantial period of time to prepare for their intended use or sale,are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investmentincome earned on the temporary investment of amounts drawn under specific borrowings, pending their expenditure on qualifyingassets, is deducted from the borrowing costs eligible for capitalisation. Available for sale financial assets are not qualifying assets.

All other borrowing costs are recognised in the Income Statement in the year in which they are incurred.

j) Taxation

The tax expense represents the sum of tax currently payable and deferred tax.

Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the IncomeStatement because it excludes items of income or expense that are taxable or deductible in other years and it further excludesitems that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have beenenacted, or substantively enacted, by the Balance Sheet date.

The Finance Act (No.2) 2010, which provides for a reduction in the main rate of corporation tax from 28% to 27% effective from1 April 2011, was substantively enacted on 21 July 2010. The change has resulted in a deferred tax charge arising from thereduction in Balance Sheet carrying value of deferred tax.

The budget (23 March 2011) announced a further reduction of 1% to 26% effective from 1 April 2011. It has not been substantivelyenacted at the Balance Sheet date and therefore is not yet reflected in these financial statements, in accordance with IAS10, as itis a non-adjusting event occurring after the reporting period.

The Government has also indicated that it intends to enact future reductions in the main tax rate of 1% each year down to 23% by1 April 2014. The future 1% main tax rate reductions are expected to have a similar impact on our financial statements as outlinedabove, however the actual impact will be dependent on our deferred tax position at that time.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accountedfor using the Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available againstwhich deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differencearises from goodwill or from the initial recognition of other assets and liabilities (other than in a business combination) in atransaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising from investments in subsidiaries and associates,and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets isreviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will beavailable to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply inthe period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Income Statementexcept when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against currenttax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis.

k) Foreign currencies

Translations into Sterling are made at the average of rates ruling throughout the year for Income Statement items and at therates ruling at 31 December for assets and liabilities.

Exchange differences arising in the ordinary course of trading are reflected in the Income Statement; those arising on translationof net equity are transferred to the Group’s translation reserve. Such translation differences are reclassified to the IncomeStatement in the period in which the operation is disposed of.

Monetary assets and liabilities expressed in foreign currency are reported at the rate of exchange prevailing at the Balance Sheetdate or, if appropriate, at the forward contract rate. Any difference arising on the retranslation of these amounts is taken to theIncome Statement. The exception to this is long-term shareholder loans, which form part of net investment in a foreign operation,and where any difference arising on the retranslation of these amounts is taken to a translation reserve in the Balance Sheet. In theevent of disposal of a foreign investment, this reserve is reclassified to the Income Statement as part of the profit or loss on disposal.

ACCOUNTING POLICIES


95

GENERAL (CONTINUED)

l) Non-current assets held for sale and discontinued operations

Assets and liabilities associated with the disposal of the Group’s Rail, Construction, Homes and Property businesses areclassified as discontinued operations. These include retained onerous contracts and warranties which will take a number ofyears to bring to a conclusion.

Non-current assets classified as held for sale and discontinued operations are measured at the lower of their carrying amountand fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount is recoverable through a saletransaction rather than through continuing use. This condition is regarded as having been met only when the sale is highlyprobable, the asset (or disposal group) is available for immediate sale in its present condition and the sale is completed withinone year of the date of its classification.

m) Intangible assets

Intangible assets principally comprise rights to charge users under service concession arrangements, in accordance with IFRIC12(see (b) (ii)) and computer software.

Intangible assets other than computer software are amortised on a straight line basis over the operational period of theconcession. Computer software that is classified as an intangible asset is amortised over three to five years on a straight linebasis.

Impairment of Intangible and Tangible Fixed Assets

The present value of future cash flows of a service concession are tested for impairment on a periodic basis. If the present valueis lower than the carrying value of the net assets of the relevant PFI/PPP Project Company then a full impairment review isprepared. Any impairment charges are recognised in the Income Statement.

n) Property, plant and equipment

Plant and equipment, including fixtures and fittings and computer equipment, are stated at cost less accumulated depreciationand any impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives using the straight linemethod on the following bases:

Leasehold offices Lesser of period of lease or 50 yearsFixtures and fittings 3 to 5 yearsVehicles, plant and machinery 3 to 10 yearsIT equipment 3 to 5 years

o) Inventories

Inventories are stated at the lower of cost, including production overheads, and net realisable value.

p) Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

For defined benefit retirement schemes and post-retirement medical benefit schemes, the cost of providing benefits is determinedusing the Projected Unit Credit Method, with actuarial valuations being carried out at least every three years which are extrapolatedat each Balance Sheet date. Actuarial gains and losses are recognised in full in the year in which they occur. They are recognisedoutside the Income Statement and presented in the Group Statement of Comprehensive Income. Curtailment gains arising fromchanges to members benefits are recognised in full in the Income Statement.

The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligationsas adjusted for unrecognised past service costs and as reduced by the fair value of scheme assets. Any asset resulting from thiscalculation is limited to past service costs plus the present value of available refunds and reductions in future contributions tothe schemes.

ACCOUNTING POLICIES


96

GENERAL (CONTINUED)

q) Derivative financial instruments – recognition

Due to the nature of PFI/PPP projects, it is important that all financial risks are hedged at the inception of the project. Thereforeeach PFI/PPP project fixes the interest rate on its debt. This is done either by issuing a fixed rate bond or, if the project is bank-financed, by fixed rate bank debt or variable rate debt which is swapped into fixed rate. In addition, and where appropriate,inflation risk is hedged by the use of inflation swaps.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasuredat their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as ahedging instrument and, if so, the nature of the item being hedged.

r) Derivative financial instruments hedge designation and effectiveness testing

The Group typically designates its interest rate swaps and inflation swaps as cash flow hedges. At the inception of the hedgerelationship, the entity documents the relationship between the hedging instrument and the hedged item, being forecast interestpayments or inflationary linked payments.

These swaps are tested both retrospectively and prospectively for ineffectiveness at each reporting date and if results are withinthe range of 80% to 125% then hedge accounting is applied and treated as cash flow hedges. These derivatives are marked tomarket and differences are taken directly to equity.

Where ineffectiveness is judged to have occurred, either a proportion or the full amount of the ineffectiveness is taken to theIncome Statement depending on the level of ineffectiveness experienced.

Hedge accounting is discontinued when the hedging instrument expires or is terminated, for example when a project is refinanced.At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasttransaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity istransferred to net profit or loss for the period.

Certain of the Group’s subsidiary Project Companies have entered into internal rate basis swaps which are classified as derivativesheld for trading as they are not eligible to be considered for hedge accounting under IAS39. Movements in the fair value of thesederivatives are recorded in the Income Statement.

The fair values of various derivative instruments used for hedging purposes are disclosed in note 18. Movements in the hedgingreserve in shareholder’s equity are shown in note 23. The full fair value of a hedging derivative is classified as a non-currentasset or liability when the remaining hedged item has more than 12 months to maturity and as a current asset or liability whenthe remaining maturity of the hedged item is less than 12 months.

The fair values of derivatives at the Balance Sheet date are obtained from the banks or financial institutions with which thederivatives have been transacted, subject to adjustment for own credit if necessary.

s) Cash and cash equivalents

Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand and short term deposits with originalmaturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents comprise cash andshort term deposits as defined above, net of bank overdrafts.

t) Bank borrowings

Interest bearing bank loans and overdrafts are initially recorded at fair value, being the proceeds received, net of direct issuecosts and subsequently at amortised cost using the effective interest rate method. Finance charges, including premiums payableon settlement or redemption, and direct issue costs are accounted for on an accrual basis in the Income Statement and areadded to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Bankborrowings are classified on the Balance Sheet as other financial liabilities.

u) Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are chargedto income on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enterinto an operating lease are also spread on a straight line basis over the lease term.

v) Share capital

Ordinary Shares are classified as equity instruments on the basis that they evidence a residual interest in the assets of the Groupafter deducting all of its liabilities.

ACCOUNTING POLICIES


97

ADOPTION OF IFRIC12

The Group was required to adopt IFRIC12 Service Concession Arrangements in 2010. The interpretation addresses accounting byprivate sector operators involved in the provision of public sector infrastructure assets and services, and impacts one subsidiary PFIconcession arrangement. The interpretation has been applied retrospectively and the consolidated net assets attributable to thisconcession have accordingly been restated as at 1 January 2009 and 31 December 2009, principally to reflect the recognition of anintangible asset in accordance with accounting policy note (m), and an adjustment to the carrying value of the available for salefinancial asset recorded in the Balance Sheet at each of these dates. These changes have also affected revenue and profitrecognition as set out below, although profit attributable to the Group from this concession over its life remains unchanged:

Revenue has increased by £3.3 million in the year ended 31 December 2010 (31 December 2009 – £3.2 million);

• Profit from operations has increased by £1.0 million in the year ended 31 December 2010 (31 December 2009 – £0.9 million);

• Investment income has decreased by £2.4 million in the year ended 31 December 2010 (31 December 2009 – £2.3 million);

• Profit before tax has decreased by £1.2 million in the year ended 31 December 2010 (31 December 2009 – £1.7 million); and

• Profit after tax has decreased by £1.2 million in the year ended 31 December 2010 (31 December 2009 – £1.7 million).

The impact on the Balance Sheets has been as follows:

• Recognition of an intangible asset of £22.5 million (31 December 2009 – £23.6 million; 1 January 2009 – £24.8 million);

• Reduction in the carrying value of available for sale financial assets of £28.8 million (31 December 2009 – £28.5 million;1 January 2009 – £29.0 million); and

• Decrease in net assets of £13.8 million (31 December 2009 – £12.3 million; 1 January 2009 – £10.6 million).

RECLASSIFICATION OF BALANCES FROM CASH AND CASH EQUIVALENTS TO OTHER FINANCIAL ASSETS

During the year the Group undertook a review of the basis on which its cash and similar assets were classified on the Balance Sheet.On the finalisation of the review, management determined that certain instruments do not meet the definition of cash and cashequivalents. They have accordingly been reclassified to other financial assets; current and non-current, to reflect contractual maturity.

Reclassification has no impact on net assets, or profit and loss in the period. Further details are set out in note 14.

RESTATEMENT OF COMPARATIVES


98

1 SECTOR AND GEOGRAPHICAL ANALYSIS

For management purposes, the Group is currently organised into four operating sectors – Accommodation, Transport,Environment and utilities and Management services. These sectors are the basis on which the Group reports its primarysegment information.

Year ended 31 December 2010

Environment ManagementAccommodation Transport and utilities services Discontinued Eliminations Consolidated

£ million £ million £ million £ million £ million £ million £ million

External revenue 305.4 6.9 14.3 16.7 0.3 – 343.6Inter-segment revenue 23.9 – 0.7 17.3 – (41.9) –

Total revenue 329.3 6.9 15.0 34.0 0.3 (41.9) 343.6

Inter-segment sales are charged at prevailing market prices.Normal operations including gains/(losses) on disposals 43.0 46.8 15.6 (6.4) 0.4 –

Segment result 43.0 46.8 15.6 (6.4) 0.4 – 99.4

Central administration costs (19.8)Corporate finance costs (11.2)

Profit before tax 68.4Tax 2.5Profit for the period from discontinued operations (0.4)

Profit for the period from continuing operations 70.5

Year ended 31 December 2009*

Environment ManagementAccommodation Transport and utilities services Discontinued Eliminations Consolidated

£ million £ million £ million £ million £ million £ million £ million

External revenue 306.5 10.7 3.5 30.4 0.3 – 351.4Inter-segment revenue 22.3 – – 16.9 0.1 (39.3) –

Total revenue 328.8 10.7 3.5 47.3 0.4 (39.3) 351.4

Inter-segment sales are charged at prevailing market prices.Normal operationsincluding gains/(losses)on disposals 24.9 0.6 13.0 2.5 – –

Segment result 24.9 0.6 13.0 2.5 – – 41.0

Central administration costs (16.2)Corporate finance income 0.1Corporate finance costs (8.3)

Profit before tax 16.6Tax (1.7)

Profit for the period from continuing operations 14.9

The profit before tax disclosed in relation to the core sectors is shown after adding or deducting interest received and paid onproject-specific funds. Corporate finance (cost)/income excludes interest on project funds and includes interest payable on fundsavailable for general corporate purposes.

*all comparative information has been restated to reflect implementation of IFRIC12.

NOTES TO THE GROUP FINANCIAL STATEMENTSfor the year ended 31 December 2010


99

1 SECTOR AND GEOGRAPHICAL ANALYSIS (CONTINUED)

Net Assets

31 December 31 December2010 2009*

£ million £ million

Accommodation 213.2 297.2Transport 78.7 204.1Environment and utilities 117.3 69.5Management services (124.4) (232.1)Non-core business (0.3) (1.5)

Sector net assets 284.5 337.2Net deferred and current tax liabilities (16.6) (16.6)Discontinued operations (3.8) (5.1)

Net assets 264.1 315.5

Other information

2010 2009

Capital Depreciation Capital Depreciationadditions and amortisation additions and amortisation£ million £ million £ million £ million

Continuing operations

Accommodation 0.1 0.3 0.3 1.3Transport – – – 0.3Management services 0.1 0.5 – 0.6

0.2 0.8 0.3 2.2

Geographical analysis

The Group’s operations are located in the UK, other European countries, North America and Asia Pacific. The following tableprovides an analysis of the Group’s revenue and profit before tax from continuing operations.

Year ended 2010 Year ended 2009*

Profit ProfitRevenue before tax Revenue before tax£ million £ million £ million £ million

United Kingdom 311.5 62.9 320.7 10.8Rest of Europe 2.2 (4.4) 0.3 1.9North America 28.8 9.2 30.1 4.2Asia Pacific 0.8 0.3 – (0.3)

343.3 68.0 351.1 16.6

31 December 2010 31 December 2009*

Carrying Carryingamount of amount of

sector assets/ Capital sector assets/ Capital(liabilities) additions (liabilities) additions£ million £ million £ million £ million

United Kingdom 89.8 0.2 183.8 –Rest of Europe 143.3 – 94.8 –North America 26.5 – 37.8 0.3Asia Pacific 4.5 – (0.9) –

264.1 0.2 315.5 0.3




100

2 OTHER OPERATING INCOME

Year ended 2010 Year ended 2009£ million £ million

Dividends from joint ventures and associates 11.1 8.8

11.1 8.8

3 PROFIT FROM OPERATIONS


Profit from operations has been arrived at after (charging)/crediting:

Fees payable to the Company’s auditor and its associates for other services– the audit of the Company’s subsidiaries pursuant to legislation (0.4) (0.4)

Total audit fees (0.4) (0.4)

– other services (0.1) (0.1)

Total non-audit fees (0.1) (0.1)Payments under operating leases– rentals of land and buildings (4.9) (5.3)Net foreign exchange gain 5.4 5.5Depreciation of property, plant and equipment (0.8) (0.6)Amortisation of intangibles (3.8) (1.6)Release of onerous contract provision 1.6 6.2

The fees payable to the Company’s auditor for the audit of the Company’s annual accounts were £20,489 (2009 – £19,567).

4 DIRECTORS AND EMPLOYEES


All Directors

Directors’ emoluments 2.3 2.1Highest paid Director

Director’s emoluments 0.9 0.9

The highest paid Director is a member of a defined benefit scheme under which the accrued pension to which they would beentitled from a normal retirement date if they were to retire at the year end is £70,298 (2009 – £66,771).

Retirement benefits are accruing to three (2009 – three) Directors under the defined benefit scheme. From 1 April 2011, thedefined benefit scheme will close to future accrual and pension benefits will then accrue under the defined contribution scheme.

Remuneration of key management personnel*

The remuneration of the Directors of John Laing plc, who are the key management personnel of the Group, is set out below inaggregate for each of the categories specified in IAS24 ‘Related Party Disclosures’:


Short-term employee benefits 1.7 1.5Post-employment benefits 0.1 0.1Cash payments under long-term incentive plans 0.5 0.5

2.3 2.1

*Remuneration for key management personnel includes £0.1 million in respect of Nacon Management Services Limited of which Dr. P M G Nolan (Chairman of John Laing plc)is a Director.



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4 DIRECTORS AND EMPLOYEES (CONTINUED)

Year ended 2010 Year ended 2009*£ million £ million

Employee costs comprise:

Salaries 39.7 37.6Social security costs 3.8 3.9Pension charge– defined benefit schemes (see note 20) 2.0 2.1– defined contribution scheme 2.0 1.2

47.5 44.8

Annual average employee numbers (including Directors):

Year ended 2010 Year ended 2009No. No.

Staff 1,190 1,110

UK 1,170 1,086Overseas 20 24Activity

Bidding activity, asset management and Group management 324 347Facilities management 866 763

1,190 1,110

*the Salaries disclosed for 2009 have been adjusted to correctly state costs.

5 INVESTMENT INCOME AND FINANCE COSTS


Investment income

Interest on bank deposits– recourse 0.9 0.3– non-recourse 6.3 14.3Financial asset interest– non-recourse 64.1 50.6Movement in fair value of derivatives outside hedging relationships – 1.4Interest received from joint ventures 12.3 15.0

Total investment income 83.6 81.6

Finance costs

Interest on bank overdrafts and loans– recourse (2.3) (2.2)– non-recourse (63.0) (55.4)Pension and post-retirement medical benefit finance cost (9.8) (7.3)Movement in fair value of derivatives outside hedging relationships (0.4) –Unwinding of discounts on provisions (0.7) (1.2)Amortisation of debt issue costs– recourse (0.5) (0.3)– non-recourse (1.2) (1.1)Refinancing– recourse (0.3) –– non-recourse (0.1) –

Total finance costs (78.3) (67.5)

Net investment income 5.3 14.1




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6 OTHER GAINS/(LOSSES)


Profit/(loss) on disposal 35.1 (15.3)

Other gains/(losses) 35.1 (15.3)

During the year ended 31 December 2009, the Group disposed of the shares and debt in ten PFI/PPP Project Companies for£96.0 million and a loss of £15.3 million was recorded.

During the year ended 31 December 2010, the Group disposed of shares and debt in 22 PFI/PPP Project Companies and threeoperating companies. Sale proceeds were £289.1 million of which £282.7 million was cash and £6.4 million related to shares ofServices Support (SEL) Limited, which were transferred to the John Laing Pension Fund as part settlement of the deficit repairpayment. The book value of assets disposed of was £287.8 million at the date of disposal, costs of £3.1 million, resulting in aprofit on disposal of £35.1 million.

Details of joint ventures and associates are as follows:

Original Holding RetainedDate sale and purchase holding disposed of holding

Project agreement signed % % %

Sold to John Laing Infrastructure Fund Limited

3ED Glasgow Limited 29 October 2010 10.0 10.0 –Amey Highways Lighting (Manchester) Limited 29 October 2010 50.0 50.0 –Amey Highways Lighting (Wakefield) Limited 29 October 2010 50.0 50.0 –Healthcare Support (Newham) Limited 29 October 2010 50.0 50.0 –Inspired Education (South Lanarkshire) plc 29 October 2010 15.0 15.0 –Meridian Hospital Company plc 29 October 2010 27.5 15.0 12.5Modus Services Limited 29 October 2010 26.0 26.0 –Services Support (Avon & Somerset) Limited 29 October 2010 40.0 40.0 –Services Support (Gravesend) Limited 29 October 2010 27.1 27.1 –Services Support (Manchester) Limited 29 October 2010 27.1 27.1 –Tieyhtio Ykkostie Oy 29 October 2010 41.0 41.0 –UK Highways M40 Limited 29 October 2010 50.0 50.0 –

Sold to other investors/pension fund

Equipe Regeneration Limited 22 October 2010 50.0 50.0 –Healthcare Support (Newcastle) Limited 30 September 2009 40.0 25.0 15.0Orkdalsvegen AS 28 October 2010 50.0 50.0 –Services Support (SEL) Limited 23 December 2010 50.0 25.0 25.0

Details of subsidiaries are as follows:

Original Holding RetainedDate sale and purchase holding disposed of holding

Project agreement signed % % %

Sold to John Laing Infrastructure Fund Limited

AHA Access Health Abbotsford Ltd. 29 October 2010 100.0 80.0 20.0AHV Access Health Vancouver Ltd. 29 October 2010 100.0 100.0 –Prime Care Solutions (Kingston) Limited 29 October 2010 60.0 60.0 –Regenter B3 Limited 29 October 2010 100.0 100.0 –Regenter LCEP Limited 29 October 2010 100.0 100.0 –Sirhowy Enterprise Way Limited 29 October 2010 100.0 100.0 –Walsall Public Lighting Limited 29 October 2010 100.0 100.0 –

Sold to other investors

Ignis Energy Limited 25 November 2010 100.0 100.0 –



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6 OTHER GAINS/(LOSSES) (CONTINUED)

The net assets for the above subsidiaries and joint ventures at date of disposal were:

Totals disposed Subsidiaries Joint ventures of 2010

£ million £ million £ million

Intangible assets 26.2 – 26.2 Deferred tax on intangible assets (6.9) – (6.9)Property, plant and equipment 1.3 – 1.3 Financial assets - available for sale 516.0 – 516.0 Trade and other receivables 9.8 – 9.8 Cash and cash equivalents 22.4 – 22.4 Subordinated debt disposed of 48.1 38.7 86.8 Investment in joint ventures and associates at fair value through profit and loss – 137.5 137.5 Interest-bearing loans and borrowings (413.4) – (413.4)Trade and other payables (48.8) – (48.8)Derivative financial instruments (26.1) – (26.1)Tax liabilities (1.8) – (1.8)IAS tax liability (2.5) – (2.5)Deferred tax liabilities (12.7) – (12.7)

Net assets disposed of 111.6 176.2 287.8 Recycling of fair value of financial assets on disposal net of deferred tax (40.3) – (40.3)Recycling of fair value of hedging derivatives on disposal net of deferred tax 16.5 – 16.5

Net consolidated assets disposed of 87.8 176.2 264.0

Cash consideration 105.5 183.6 289.1 Cost of sales – (3.1) (3.1)Retention of investment 13.1 – 13.1

Gain on disposal 30.8 4.3 35.1

Satisfied by: Cash consideration 105.5 183.6 289.1 less assets disposed of to Pension Fund – (6.4) (6.4)less cash in subsidiary disposed of (22.4) – (22.4)Cost of sales – (3.1) (3.1)

Net cash inflow arising on disposal 83.1 174.1 257.2



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7 TAX


Current tax:UK corporation tax (charge)/credit – 0.2Double tax relief credit 0.7 –Foreign tax charge (3.4) (1.0)

(2.7) (0.8)Deferred tax credit/(charge) 5.2 (0.9)

Tax credit/(charge) on continuing operations 2.5 (1.7)

The tax credit/(charge) for the year can be reconciled to the profit in the Group Income Statement as follows:


Profit before tax on continuing operations 68.0 16.6

Tax at the UK corporation tax rate of 28% (2009 – 28%) (19.0) (4.6)UK dividend income 2.9 1.3Disallowed expenses and similar items 0.6 (0.6)Provision for impairment of investments – (0.2)Untaxed fair value adjustments 6.5 0.9Non taxable gains/(losses) on disposal 9.8 (4.3)Temporary differences arising on financial instruments (0.1) 0.4Capital allowances less than depreciation 0.2 –Other temporary timing differences 2.6 5.7Tax losses used but not previously recognised for deferred tax purposes 1.4 2.4Tax losses carried forward and not recognised for deferred tax purposes (5.8) (2.3)Prior year adjustment (1.7) 0.3Other (0.1) 0.2

Current tax charge on continuing operations for the year (2.7) (0.8)Movement in deferred tax of PFI companies (1.8) (0.4)Deferred tax movement on amortisation of intangible assets 0.3 (0.1)Deferred tax movement on financial instruments 0.1 (0.4)Tax losses used but not previously recognised for deferred tax purposes (1.4) (2.4)Deferred tax adjustments in respect of prior years 8.0 2.4

Total tax credit/(charge) on continuing operations for the year 2.5 (1.7)

For the year ended 31 December 2010 and 31 December 2009, the UK rate of 28% is applied.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.




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8 ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Certain of the Group’s assets and liabilities, which relate to legacy property and construction businesses, are classified asdiscontinued. The remaining assets and liabilities relate to the settlement of warranties given at the time of sale and areexpected to wind down in the short to medium term.

The results of discontinued operations by sector, which have been included in the Consolidated Income Statement, were as follows:

Year ended 2010 Year ended 2009

Property PropertyConstruction and Homes Total Construction and Homes Total

£ million £ million £ million £ million £ million £ million

Revenue 0.1 0.2 0.3 0.1 0.2 0.3Cost of sales (0.8) (0.2) (1.0) 0.4 (0.2) 0.2

Gross (loss)/profit from discontinued operations (0.7) – (0.7) 0.5 – 0.5Administrative expenses 0.8 (0.2) 0.6 (0.2) – (0.2)

(Loss)/profit from discontinued operations 0.1 (0.2) (0.1) 0.3 – 0.3

Investment income 0.1 – 0.1 0.2 – 0.2Finance costs – – – (0.4) – (0.4)

Profit/(loss) before tax from discontinued operations 0.2 (0.2) – 0.1 – 0.1Tax credit/(charge) on discontinued operations 0.4 – 0.4 – (0.1) (0.1)

Net profit/(loss) attributable to discontinued operations 0.6 (0.2) 0.4 0.1 (0.1) –

The gain in Construction shown within Administrative expenses was the result of recycling the translation gains on liquidation ofan overseas company.

The major classes of assets and liabilities by sector comprising operations classified as held for sale and discontinued are as follows:

2010 2009

Property PropertyConstruction and Homes Total Construction and Homes Total


Non-current assets

Deferred tax asset – 0.1 0.1 – 0.1 0.1Current assets

Trade and other receivables – 0.7 0.7 – 0.5 0.5Cash and cash equivalents 4.7 – 4.7 5.4 – 5.4

Assets classified as held for sale or discontinued 4.7 0.8 5.5 5.4 0.6 6.0Current liabilities

Trade and other payables 1.4 0.1 1.5 0.6 0.1 0.7Tax liabilities – – – 0.5 – 0.5Non-current liabilities

Long-term provisions 7.5 0.3 7.8 9.5 0.4 9.9

Total liabilities classified as held for sale or discontinued 8.9 0.4 9.3 10.6 0.5 11.1

Net (liabilities)/assets (4.2) 0.4 (3.8) (5.2) 0.1 (5.1)

Refer to note 21 for details of provisions.

During the year ended 31 December 2010 net cash outflows from operating activities included £3.2 million (2009 – £1.4 million) inrespect of discontinued operations, which also generated £0.1 million (2009 – £0.2 million) from investing and financing activities.



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9 DIVIDENDS


Equity shares – interim dividends proposed and paid of 34.8 pence per Ordinary Share (2009 – 9.7 pence) 136.4 38.0

10 INTANGIBLE ASSETS

Cost ofBifurcated Computer service

asset software concession Total£ million £ million £ million £ million

Original cost

Balance at 1 January 2010 (as previously reported) – 3.5 30.7 34.2Effect of change in accounting policy for IFRIC12 31.5 – – 31.5

As restated 31.5 3.5 30.7 65.7Arising on acquisitions (note 24) – – 12.3 12.3Additions – 1.2 – 1.2Disposals – – (30.1) (30.1)

At 31 December 2010 31.5 4.7 12.9 49.1

Accumulated amortisation

Balance at 1 January 2010 (as previously reported) – (1.5) (2.0) (3.5)Effect of change in accounting policy for IFRIC12 (7.9) – – 31.5

As restated (7.9) (1.5) (2.0) (11.4)Charge for the year (1.1) (0.1) (2.6) (3.8)Disposals – – 4.0 4.0

At 31 December 2010 (9.0) (1.6) (0.6) (11.2)

Carrying amount at 31 December 2010 22.5 3.1 12.3 37.9

Carrying amount at 31 December 2009* 23.6 2.0 28.7 54.3


11 PROPERTY, PLANT AND EQUIPMENT

Computer Officeequipment equipment Total£ million £ million £ million

Original cost

At 1 January 2010 2.2 3.2 5.4Additions 0.2 – 0.2Disposals (1.4) (0.3) (1.7)Exchange movements 0.1 – 0.1

At 31 December 2010 1.1 2.9 4.0

Accumulated depreciation

At 1 January 2010 (0.6) (2.2) (2.8)Charge for the year (0.4) (0.4) (0.8)Disposals 0.2 0.1 0.3

At 31 December 2010 (0.8) (2.5) (3.3)

Carrying amount at 31 December 2010 0.3 0.4 0.7

Carrying amount at 31 December 2009 1.6 1.0 2.6



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12 INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

2010 2009

Joint ventures Otherand associates investments Total Total

£ million £ million £ million £ million

At 1 January 457.6 2.3 459.9 511.9Loan repayments (11.6) – (11.6) (4.4)Investment in equity and loans 46.5 62.5 109.0 59.4Disposals (176.2) – (176.2) (109.1)Reclassification of investments on acquisition (0.4) – (0.4) –Fair value of retained holding in disposed subsidiary 13.1 – 13.1 –Reversal of capitalised interest (0.6) – (0.6) –Exchange movements on loans* (1.2) – (1.2) (1.0)Fair value movement* 18.8 5.4 24.2 3.1

At 31 December 346.0 70.2 416.2 459.9

*total fair value movement in the year.

During the year the Group acquired a 23.14% interest in John Laing Infrastructure Fund Limited which is a listed investment.This has been included in other investments. The fair value of listed equity securities is based on quoted market prices. TheGroup has committed to retain an interest of at least 20% in John Laing Infrastructure Fund Limited for a minimum of 12 monthsfrom the date of subscription.

13 TRADE AND OTHER RECEIVABLES


Current assetsTrade debtors 10.0 9.9Other taxation 0.6 –Other debtors 11.3 5.1Prepayments and accrued income 32.9 32.6

54.8 47.6

Non-current assetsOther debtors and accrued income 0.1 0.3

The fair value of trade and other receivables is equal to the carrying value.

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:


Sterling 53.7 45.8Canadian Dollar 0.3 1.8United States Dollar – 0.1Indian Rupee – 0.1Other currencies 0.9 0.1

54.9 47.9

Included in the Group’s trade receivable balances are debtors with a carrying value of £1.2 million (2009 – £1.9 million) whichwere overdue at the reporting date. The Group has not provided for these debtors as there has not been a significant change intheir credit quality since the amounts became overdue and they are still considered fully recoverable. The Group does not holdany collateral against these balances.



108

13 TRADE AND OTHER RECEIVABLES (CONTINUED)

Ageing of overdue but not impaired trade receivables:


Up to 60 days 0.4 1.360-90 days 0.1 –Over 90 days 0.7 0.6

Total 1.2 1.9

Included in the Group’s trade receivable balances are debtors with a carrying value of £0.2 million (2009 – £0.2 million) whichwere impaired at the reporting date. The Group has provided in full for these amounts as they are not considered recoverable.

14 CASH AND CASH EQUIVALENTS AND OTHER FINANCIAL ASSETS

2010 2009*

Non- Non-Recourse recourse Recourse recourse

funds funds Total funds funds Total£ million £ million £ million £ million £ million £ million

CurrentCash and bank deposits 30.4 82.0 112.4 31.7 85.5 117.2Other financial assets – 34.5 34.5 – 60.8 60.8Bank and other loans falling due within one year – (26.2) (26.2) – (39.0) (39.0)Bank and other loans falling due after more than one year (5.9) (872.0) (877.9) (22.0) (1,081.2) (1,103.2)

24.5 (781.7) (757.2) 9.7 (973.9) (964.2)

Non-currentOther financial assets – – – – 55.7 55.7


Other financial assets comprise amounts received from the issue of bonds to finance construction of PFI assets in one subsidiaryproject company which are invested in a guaranteed investment contract with a stated contractual maturity over a period of11 months (2009 – 23 months). Such investments do not meet the definitions of cash or cash equivalents.

The recourse funds shown above do not include cash balances held in discontinued operations which are identified in note 8.

Non-recourse debt is secured against assets in each Project Company.

15 TRADE AND OTHER PAYABLES


Current liabilitiesTrade creditors 51.9 53.3Other taxation 1.9 1.4Accruals 28.4 39.7Deferred income 10.2 9.3

92.4 103.7

Non-current liabilitiesAccruals 6.2 3.4



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16 FINANCIAL ASSETS

a) Maturity of financial assets

The maturity profile of the Group’s financial assets is as follows:

Continuing operations 2010 Continuing operations 2009*

Less than Greater than Less than Greater than1 year 1 year Total 1 year 1 year Total


Financial assets – available for sale 15.3 879.8 895.1 13.0 1,060.9 1,073.9Trade and other receivables 54.8 0.1 54.9 47.6 0.3 47.9Other financial assets 34.5 – 34.5 60.8 55.7 116.5Cash and cash equivalents 112.4 – 112.4 117.2 – 117.2

Financial assets (excluding investments

at fair value through profit and loss) 217.0 879.9 1,096.9 238.6 1,116.9 1,355.5Investments at fair value through profit and loss – 70.2 70.2 – 2.3 2.3Investment in joint ventures and associatesat fair value through profit and loss – 346.0 346.0 – 457.6 457.6

Investments at fair value through profit and loss – 416.2 416.2 – 459.9 459.9

Total financial assets 217.0 1,296.1 1,513.1 238.6 1,576.8 1,815.4


Held for sale or Held for sale ordiscontinued operations 2010 discontinued operations 2009

Less than Greater than Less than Greater than1 year 1 year Total 1 year 1 year Total


Cash and cash equivalents 4.7 – 4.7 5.4 – 5.4Trade and other receivables 0.8 – 0.8 0.6 – 0.6

Total financial assets 5.5 – 5.5 6.0 – 6.0

None of the financial assets are either overdue or impaired.

b) Currency and interest rate profile of financial assets (excluding investments at fair value through profit and loss):

Continuing operations Continuing operationsfinancial assets – 2010 financial assets – 2009

Floating Fixed Non-interest Floating Fixed Non-interestrate rate bearing Total rate rate bearing Total

Currency £ million £ million £ million £ million £ million £ million £ million £ million

Sterling 20.9 – 13.6 34.5 25.8 – 16.4 42.2Euro – – 5.9 5.9 0.6 – 0.1 0.7Canadian Dollar – – 0.8 0.8 – – 1.3 1.3United States Dollar – – 0.1 0.1 – – 0.1 0.1Czech Koruna – – 0.1 0.1 – – 0.1 0.1Indian Rupee – – 0.9 0.9 – – 1.2 1.2Singapore Dollar – – – – – – 0.2 0.2Norwegian Kroner – – – – – – 0.5 0.5

Recourse 20.9 – 21.4 42.3 26.4 – 19.9 46.3

Sterling 78.8 895.1 80.7 1,054.6 26.4 901.5 58.9 986.8Canadian Dollar – – – – – 313.5 8.9 322.4

Non-recourse 78.8 895.1 80.7 1,054.6 26.4 1,215.0 67.8 1,309.2

Total 99.7 895.1 102.1 1,096.9 52.8 1,215.0 87.7 1,355.5



110

16 FINANCIAL ASSETS (CONTINUED)

b) Currency and interest rate profile of financial assets (excluding investments at fair value through profit and loss): (continued)

Held for sale or discontinued operations Held for sale or discontinued operationsfinancial assets – 2010 financial assets – 2009

Floating Fixed Non-interest Floating Fixed Non-interestrate rate bearing Total rate rate bearing Total

Currency £ million £ million £ million £ million £ million £ million £ million £ million

Sterling 4.6 – 0.8 5.4 5.4 – 0.6 6.0Euro – – 0.1 0.1 – – – –

Total 4.6 – 0.9 5.5 5.4 – 0.6 6.0

The floating rate financial assets are cash and deposits placed principally with banks or highly rated money market funds atrates related to LIBID.

The fixed rate financial assets principally represent PFI finance debtors. The weighted average interest rate of the continuingfixed rate financial assets is 6.4% (2009 – 7.1%) and the weighted average period for which the interest rate is fixed is 21.1years (2009 – 23.7 years). They also include fixed rate cash and deposits held by subsidiary project companies in the form ofa Guaranteed Investment Contract.

The non-interest bearing assets comprise cash in current accounts as well as trade and other receivables.

c) Foreign currency exposure of investments at fair value through profit and loss:

2010 2009

Joint ventures Otherand associates investments Total Total


Sterling 214.7 70.2 284.9 333.7Euro 97.7 – 97.7 104.8Australian Dollar 3.6 – 3.6 2.3Canadian Dollar 18.5 – 18.5 3.8United States Dollar 10.2 – 10.2 –Norwegian Kroner – – – 15.2Indian Rupee 1.3 – 1.3 0.1

346.0 70.2 416.2 459.9

The joint ventures and associates are valued on a discounted cash flow basis. The weighted average discount rate was 8.8%(2009 – 8.1%).

Included in other investments is the Group’s investment in John Laing Infrastructure Fund Limited which is a listedinvestment. The fair value of listed equity securities is based on the quoted market prices.

17 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency exchange rate risk, interestrate risk, inflation risk), credit risk, liquidity risk, and capital risk. The Group’s overall risk management programme focuses onthe unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.The Group uses derivative financial instruments to hedge certain risk exposures.

For John Laing plc and its recourse subsidiaries financial risks are managed by a central treasury operation which operateswithin Board approved policies. For the non-recourse subsidiaries and joint ventures, due to the nature of PFI/PPP projects,financial risks are hedged at the inception of a project. The various types of financial risk are managed as follows:



111

17 FINANCIAL RISK MANAGEMENT (CONTINUED)

Market risk – foreign currency exchange rate risk

As at 31 December 2010 the Group had invested in 12 overseas projects (none of which are subsidiaries). The Group’s foreigncurrency exchange rate risk policy is not to automatically hedge on an individual project basis but to determine the total Groupexposure to individual currencies.

In addition, the Group policy on managing foreign currency exchange rate risk is to cover significant transactional exposuresarising from receipts and payments in foreign currencies, where appropriate and cost effective. As at 31 December 2009, theCompany held one currency forward contract for two Euro commitments totalling €13.9 million in 2010 – see note 18 (b) formore details.

In 2010 the Group was mainly exposed to the Euro. The carrying amounts of the Group’s foreign currency denominated monetaryitems at the reporting date are as follows:

Assets Liabilities

2010 2009 2010 2009£ million £ million £ million £ million

Canadian Dollar 0.8 291.1 (0.5) (251.6)Euro 5.9 0.6 – (22.6)Czech Koruna 0.1 0.1 – –Other 1.0 0.8 – (0.4)

7.8 292.6 (0.5) (274.6)

The above table does not include investments in joint venture project companies, refer to note 16 (c), which account for themajority of currency exposure in the Group.

The following table details the Group’s sensitivity to a 10% increase or decrease in Sterling against relevant foreign currencies.The sensitivity analysis includes outstanding foreign currency denominated monetary items. A negative number below indicates adecrease in profit from operations where the relevant currency weakens by 10% against Sterling. For a 10% strengthening of therelevant currency against Sterling, there would be an equal and opposite impact on profit from operations, and the negativebalances below would be positive.

Effect on profit from operations of relevant currency weakening of net monetary assets/(liabilities) by 10% against Sterling:


Canadian Dollar – (4.0)Euro (0.6) 2.2Indian Rupee (0.1) –

(0.7) (1.8)Tax credit on above at 28% 0.2 0.5

(0.5) (1.3)

The Group’s sensitivity to foreign currency exchange rate movements has decreased during the year mainly due to disposals offoreign subsidiaries. This decrease is mostly reflected in the reduction of the Group’s exposure to the Canadian Dollar.



112


Market risk – interest rate risk

The Group’s interest rate risk arises from long-term borrowings and cash balances. Borrowings issued at variable rates exposethe Group to variability of interest payment cash flows. Borrowings issued at fixed rates expose the Group to revaluation risk ofits borrowings.

Each PFI/PPP project hedges its interest rate risk at the inception of a project. This will either be done by issuing a fixed ratebond or, if the project is bank financed, with fixed rate bank debt or variable rate debt which will be swapped into fixed rate by theuse of interest rate swaps.

John Laing plc and its recourse subsidiaries were in a net cash position at the reporting date. The Group’s non-recoursesubsidiaries however were in a net borrowing position. Related cash flows are managed closely in order to manage costs.

The sensitivity analyses below have been determined based on the interest rates for both derivatives and non-derivativeinstruments as at 31 December 2010. For floating rate assets and liabilities, the analysis has been prepared assuming theamount of an asset or liability outstanding as at 31 December 2010 was outstanding for the whole year.

Effect on the consolidated accounts if interest rates had been 1% higher and all other variables were held constant:

2010 2009

Profit Hedging Profit Hedgingbefore tax reserve before tax reserve£ million £ million £ million £ million

Sterling 4.2 29.4 2.2 42.7

The increase in profit before tax is attributable to the Group’s exposure to interest rates on its variable rate deposits andborrowings (£0.5 million increase) and on its non-hedged derivatives (£3.7 million increase). The increase in hedging reserve ismainly as a result of changes in the fair value of hedged derivatives.

For a 1% reduction in interest rates, there would be an equal and opposite impact on profit before tax and hedging reserves.

Market risk – inflation risk

Each PFI/PPP project will typically have part of its revenue and some of its costs linked to inflation at the inception of a project.In most cases this results in the project being insensitive to inflation. However, in a minority of cases where the project issensitive to inflation, this risk will be hedged by entering into RPI inflation swaps.

Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and derivative financial instruments,as well as credit exposures to customers.

Cash investments and derivative transactions are limited to financial institutions of a suitable credit quality. The Group’s surpluscash is invested in line with a policy approved by the Board. This includes a cap on how much can be invested with individualfinancial institutions.

The Group’s projects receive revenue from government departments, public sector or local authority clients and directly from thepublic via real tolls. Therefore these projects are not exposed to significant credit risk.

Given the above factors, the Board does not consider it necessary to present a detailed analysis of credit risk.

Liquidity risk

The Group adopts a prudent approach to liquidity management by maintaining sufficient cash and available committed facilitiesto meet its obligations. Due to the nature of PFI/PPP projects, the timing of cash outflows is reasonably predictable and,therefore, is not a major risk to the Group.

The Group’s liquidity management policy involves projecting cash flows in major currencies and assessing the level of liquidassets necessary to meet these; together with monitoring balance sheet liquidity ratios against internal and external regulatoryrequirements.



113


Liquidity risk (continued)

The maturity profile of the Group’s financial liabilities is as follows:

2010 2009

Non- Non-Recourse recourse Derivatives Total Recourse recourse Derivatives Total£ million £ million £ million £ million £ million £ million £ million £ million

In one year or less, or on demand 40.6 78.0 19.4 138.0 36.4 106.2 23.4 166.0In more than one year butless than two years – 23.5 17.5 41.0 – 47.4 15.1 62.5In more than two years butless than five years 5.9 99.7 25.7 131.3 22.0 123.8 15.2 161.0In more than five years – 755.0 8.7 763.7 – 913.4 14.9 928.3

Total 46.5 956.2 71.3 1,074.0 58.4 1,190.8 68.6 1,317.8

The following table details the remaining contractual maturity of the Group’s non-derivative financial liabilities. The table reflectsthe undiscounted cash flows relating to financial liabilities based on the earliest date on which the Group is required to pay. Thetable includes both interest and principal cash flows:

Weighted In more In moreaverage than 1 year than 2 yearseffective In 1 year but less but less In more

interest rate or less than 2 years than 5 years than 5 years Total% £ million £ million £ million £ million £ million

2010

Variable interest rate instruments 6.64 2.5 2.8 20.9 30.0 56.2Fixed interest rate instruments 5.51 25.2 15.5 90.7 766.8 898.2Non-interest bearing instruments* 92.4 3.4 2.3 0.5 98.6

120.1 21.7 113.9 797.3 1,053.0



2009Variable interest rate instruments 1.28 1.6 0.6 22.3 – 24.5Fixed interest rate instruments 5.60 39.5 48.0 130.5 962.7 1,180.7Non-interest bearing instruments* 103.7 1.4 0.2 1.8 107.1

144.8 50.0 153.0 964.5 1,312.3

*non-interest bearing instruments relate to trade and other payables.



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Liquidity risk (continued)

The following table details the remaining contractual maturity of the Group’s derivative financial instruments. The table reflectsthe undiscounted net cash flows relating to derivative instruments that settle on a net basis:



2010

Net settled interest rate swaps 5.51 19.3 17.6 27.2 22.4 86.5Net settled inflation swaps 1.03 0.1 0.1 0.2 16.0 16.4

19.4 17.7 27.4 38.4 102.9



2009Net settled interest rate swaps 5.60 23.4 15.6 17.1 20.3 76.4Net settled inflation swaps 1.03 (0.1) (0.1) (0.5) 20.3 19.6

23.3 15.5 16.6 40.6 96.0

Capital risk

The Group seeks to adopt efficient financing structures that enable it to manage capital effectively to achieve the Group’sobjectives without putting shareholder value at risk. The Group’s capital structure comprises its equity (refer to the ConsolidatedStatement of Changes in Equity) and its net debt.

The Group has requirements for both borrowings and Letters of Credit and these are met by a combination of a £305.0 million(2009 – £260.0 million) syndicated committed facility, two bilateral committed facilities for Letters of Credit and financialguarantees of £19.9 million (2009 – £25.0 million) and an uncommitted overdraft facility which is repayable on demand of £5.0 million(2009 – £5.0 million). The committed facilities are summarised below:

2010 2009

Letters of Letters ofTotal Loans Credit Total Total Loans Credit Total

facility drawn drawn undrawn facility drawn drawn undrawn£ million £ million £ million £ million £ million £ million £ million £ million

Syndicated committed revolvingcredit facility (with Letterof Credit option) 305.0 12.0 158.9 134.1 260.0 22.6 170.4 67.0Bilateral Letter of Credit facilities 19.9 – 1.5 18.4 25.0 – 13.9 11.1

Total committed Group

facilities (recourse) 324.9 12.0 160.4 152.5 285.0 22.6 184.3 78.1

The syndicated committed facility was signed on 25 November 2010 and can be used either for drawing down loans capped at anyone time to £75.0 million or for issuing Letters of Credit. It expires on 25 November 2013. The overdraft and both bilateralfacilities were also renewed in 2010. A Barclays bilateral was signed on 25 November 2010 and an ANZ bilateral and theoverdraft were signed on 16 December 2010.

Of the Letters of Credit drawn, £159.2 million (2009 – £179.3 million) back future capital and loan commitments, £1.2 million(2009 – £1.2 million) relate to bid bonds, £0.02 million (2009 – £0.02 million) counter indemnify performance bonds issued by otherbanks and £nil (2009 – £3.8 million) relates to a reducing guarantee on the sale of Laing Rail, which expired in September 2010.



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18 FINANCIAL INSTRUMENTS

a) Financial instruments by category:

Assets atfair value Financial Financial Derivativesthrough Available liabilities liabilities at in effective

Loans and profit for sale held for amortised hedgingreceivables and loss assets trading cost relationships Total£ million £ million £ million £ million £ million £ million £ million

Fair value measurement method Level 1/3* Level 3 Level 2 Level 2

2010

Non-current assets

Investments at fair value throughprofit and loss* – 70.2 – – – – 70.2Investment in joint ventures and associatesat fair value through profit and loss – 346.0 – – – – 346.0Financial assets – available for sale – – 879.8 – – – 879.8Trade and other receivables 0.1 – – – – – 0.1

Current assets

Financial assets – available for sale – – 15.3 – – – 15.3Trade and other receivables 54.8 – – – – – 54.8Other financial assets 34.5 – – – – – 34.5Cash and cash equivalents 112.4 – – – – – 112.4

Total financial assets 201.8 416.2 895.1 – – – 1,513.1

Current liabilities

Interest bearing loans and borrowings – – – – (26.2) – (26.2)Trade and other payables – – – – (92.4) – (92.4)

Non-current liabilities

Interest bearing loans and borrowings – – – – (877.9) – (877.9)Fair value of derivatives – – – (8.8) – (62.5) (71.3)Trade and other payables – – – – (6.2) – (6.2)

Total financial liabilities – – – (8.8) (1,002.7) (62.5) (1,074.0)

Net financial instruments 201.8 416.2 895.1 (8.8) (1,002.7) (62.5) 439.1

The above table provides an analysis of financial instruments that are measured subsequent to their initial recognition at fair value.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assetsor liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that areobservable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs to the asset or liabilitythat are not based on observable market data (unobservable inputs).

There were no transfers between Levels 1 and 2 during the year.

*the Assets at fair value through profit and loss are split between: Level 1, John Laing Infrastructure Fund Limited which is a listedinvestment fair valued at £66.6 million using quoted market prices, Level 3, non-listed investments fair valued at £3.6 million andLevel 3 investments in joint ventures and associates.



116

18 FINANCIAL INSTRUMENTS (CONTINUED)

a) Financial instruments by category: (continued)

Reconciliation of Level 3 fair value measurement of financial assets and liabilities

An analysis of the movement between opening and closing balances of assets at fair value through profit and loss is given innote 12. For investment in joint ventures and associates at fair value through profit and loss, changing the discount rate used tovalue the underlying instruments would alter their fair value. As at 31 December 2010 a 1% increase in the discount rate wouldreduce the fair value by £38.4 million and a 1% reduction in the discount rate would increase the fair value by £45.2 million.

A 1% increase in the discount rate used to fair value available for sale assets would reduce their fair value by £48.3 millionand a 1% reduction in the discount rate would increase their fair value by £55.4 million.

Assets atfair value Financial Financial Derivativesthrough Available liabilities liabilities at in effective

Loans and profit for sale held for amortised hedgingreceivables and loss assets trading cost relationships Total£ million £ million £ million £ million £ million £ million £ million

Fair value measurement method Level 3 Level 3 Level 2 Level 2

2009*Non-current assetsInvestment at fair value throughprofit and loss – 2.3 – – – – 2.3Investment in joint ventures and associatesat fair value through profit and loss – 457.6 – – – – 457.6Financial assets – available for sale – – 1,060.9 – – – 1,060.9Other financial assets 55.7 – – – – – 55.7Trade and other receivables 0.3 – – – – – 0.3

Current assetsFinancial assets – available for sale – – 13.0 – – – 13.0Trade and other receivables 47.6 – – – – – 47.6Other financial assets 60.8 – – – – – 60.8Cash and cash equivalents 117.2 – – – – – 117.2

Total financial assets 281.6 459.9 1,073.9 – – – 1,815.4

Current liabilitiesInterest bearing loans and borrowings – – – – (39.0) – (39.0)Fair value of derivatives – – – (0.1) – – (0.1)Trade and other payables – – – – (103.6) – (103.6)

Non-current liabilitiesInterest bearing loans and borrowings – – – – (1,103.2) – (1,103.2)Fair value of derivatives – – – (6.4) – (62.1) (68.5)Trade and other payables – – – – (3.4) – (3.4)

Total financial liabilities – – – (6.5) (1,249.2) (62.1) (1,317.8)

Net financial instruments 281.6 459.9 1,073.9 (6.5) (1,249.2) (62.1) 497.6




117


b) Fair value of derivatives


Derivatives

Current liabilities

Foreign exchange derivative instruments – (0.1)

Non-current liabilities

Interest rate swaps (69.2) (56.8)LIBOR basis swaps (1.4) (3.7)Inflation swaps (0.7) (8.0)Foreign exchange derivative instruments – (0.1)

Total fair value of derivatives (71.3) (68.6)Net deferred tax thereon 19.3 19.2

Total fair value of derivatives after tax (52.0) (49.5)

Financial assets and liabilities have been fair valued in accordance with the Group’s accounting policies. The movement infair value reflects the changes in the forward curves for inflation and interest rates at the year end.

Project Companies, which are financed by floating rate debt, swap their floating rate exposure into fixed rates using interestrate swaps in order to manage exposure to movements in interest rates. 12 of the 16 subsidiary project companies arefinanced by floating rate debt and have transacted interest rate swaps for this purpose.

The fixed interest rates on the swaps range from 4.8% to 6.4% and maturities range from 2011 to 2039. Gains and losses,recognised in the hedging reserve in equity (note 23), on interest rate swap contracts as at 31 December 2010 remain inequity until repayment of the related bank borrowings (note 14).

The breakdown by notional value of interest rate swaps is shown below:


Notional value of interest rate swaps

Attributable to John Laing plc (452.2) (519.1)Attributable to non-controlling interests (28.4) (24.6)

Total (480.6) (543.7)

The notional value of inflation swaps as at 31 December 2010 was £2.0 million (2009 – £0.8 million) of which £nil million(2009 – £0.3 million) was attributable to non-controlling interests.

During 2010 two interest rate swaps were added via the acquisition of subsidiaries. These swaps were not designated forhedge accounting either at the date of acquisition or at the end of the year and accordingly the movement during the year(gain of £2.9 million) in their fair values has been recognised in the Consolidated Income Statement. Also during 2010 theLIBOR basis swaps originally entered into in 2008, were not eligible for hedge accounting and accordingly the movement intheir fair values has been recognised in the Consolidated Income Statement. This movement amounted to a gain of £2.3 million(2009 – loss of £2.1 million).

The disposal of subsidiaries during the year removed five interest rate swaps from the Group. Their accumulated fair valuenet loss of £16.5 million within the hedging, revaluation and translation reserve has been expensed to the ConsolidatedIncome Statement.

Two interest rate swaps were not designated during 2009. The movement in fair value during 2010, being a loss of £4.8 million,has been recognised in the Consolidated Income Statement (2009 – loss of £3.1 million from date of de-designation to31 December 2009). These swaps are due to expire in 2019 and 2024.

As at 31 December 2010 the remaining hedges have been tested for hedge effectiveness. As at 31 December 2010 there wereno material ineffective portions (2009 – profit of £0.1 million) to be recognised in the Consolidated Income Statement and thewhole loss of £18.8 million (2009 – profit £29.2 million) for year from the movement in their values was transferred directly tothe hedging reserve.

During 2009 a Window Forward Plus foreign exchange hedge contract was entered into in order to minimise exposure tomovements in the Euro foreign exchange rate for two Euro investment commitments totalling €13.9 million in 2010. Thiscontract expired in 2010. As at 31 December 2009 the fair value of the instrument was a liability of £0.1 million. Theinstrument had not been designated for hedge accounting and so the movement in its fair value of £0.4 million (reduction)has been recognised in the Consolidated Income Statement.



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c) Foreign currency and interest rate profile of financial liabilities

The Group’s financial liabilities at 31 December 2010 were £1,074 million (2009 – £1,317.8 million), of which £956.2 million(2009 – £1,190.8 million) were non-recourse liabilities principally representing borrowings of subsidiary Project Companies.Within each Project Company the lenders have recourse solely to the Project Company with no recourse to the Group. Thereare £5.9 million of recourse borrowings as at 31 December 2010 (2009 – £22.0 million).

2010 Financial liabilities 2009 Financial liabilities

Non- Non-Floating Fixed interest Floating Fixed interest

rate rate bearing Total rate rate bearing TotalCurrency £ million £ million £ million £ million £ million £ million £ million £ million

Group loans– borrowings > 1 year – Sterling 5.9 – – 5.9 – – – –

– Euro – – – – 22.0 – – 22.0Group trade and otherpayables < 1 year – Sterling – – 40.1 40.1 – – 35.6 35.6

– Canadian Dollar – – 0.5 0.5 – – 0.5 0.5– Indian Rupee – – – – – – 0.1 0.1– Singapore Dollar – – – – – – 0.2 0.2

Total recourse 5.9 – 40.6 46.5 22.0 – 36.4 58.4Project Companies– borrowings < 1 year – Sterling 2.3 23.9 – 26.2 1.6 22.2 – 23.8

– Canadian Dollar – – – – – 15.2 – 15.2Project Companies– borrowings > 1 year – Sterling 44.6 827.4 – 872.0 0.6 848.2 – 848.8

– Canadian Dollar – – – – – 232.4 – 232.4Group trade and otherpayables < 1 year – Sterling – – 51.8 51.8 – – 63.7 63.7

– Canadian Dollar – – – – – – 3.5 3.5Group trade and otherpayables > 1 year – Sterling – – 6.2 6.2 – – 3.4 3.4

Total non-recourse 46.9 851.3 58.0 956.2 2.2 1,118.0 70.6 1,190.8Total derivative liabilities – 71.3 – 71.3 – 68.6 – 68.6

Total 52.8 922.6 98.6 1,074.0 24.2 1,186.6 107.0 1,317.8

The Group paid arrangement fees for a syndicated committed revolving credit facility and committed bilateral facilities whichwere arranged in November 2010. The arrangement fees for each of these facilities are being amortised over the relevantfacility term. The total amount remaining to be amortised as at 31 December 2010 was £6.1 million (2009 – £0.6 million) andhas been netted off against the loan balance in the Group Balance Sheet.

One subsidiary Project Company is funded by bond financing totalling £312.0 million (2009 – three subsidiary ProjectCompanies totalling £552.9 million). The bond has a fixed interest coupon rate of 2.0% and matures in 2043. The interestrates for the remaining Project Companies are fixed using either interest rate swaps or by using fixed rate debt bankfacilities. The maturities range from 2013 to 2039 and the effective interest rates vary from 4.8% to 6.4%. The weightedaverage effective interest rate for these non-recourse fixed rate financial liabilities is 5.9% (2009 – 5.6%) and the weightedaverage period for which these interest rates are fixed is 24.9 years (2009 – 24.4 years).

The non-recourse floating rate liabilities relate to short-term or junior facilities within certain Project Companies with ratesrelated to LIBOR.

Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities in these financialstatements approximate their fair values:

Carrying amount Fair value

2010 2009 2010 2009£ million £ million £ million £ million

Interest bearing loans and borrowings 904.1 1,142.2 913.9 1,282.2



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19 DEFERRED TAX

The following are the major deferred tax assets and liabilities recognised by the Group and movements therein for the year ended31 December 2010:

Other IAS39 fair TaxableAccelerated temporary value of temporary

tax Tax differences Tax derivatives differences Otherdeductions losses on business reserves on Retirement and on deductible

of PFI of PFI combi- overseas benefit financial intangible temporaryprojects projects nations subsidiaries obligations assets assets differences Total£ million £ million £ million £ million £ million £ million £ million £ million £ million

Opening (liability)/asset (18.1) 14.4 (3.0) (6.8) 1.4 3.3 (7.3) 1.1 (15.0)Arising on acquisitions in the year – – (16.6) – – 0.5 (3.1) – (19.2)Credit/(charge) to income– prior year (0.1) 0.3 – 6.8 – – – 1.0 8.0(Charge)/credit to income– current year (3.9) 2.0 0.2 – – 0.1 0.3 (1.3) (2.6)Tax movement on pensioncontributions – – – – (0.2) – – – (0.2)Arising on disposals andother movements 20.7 (15.9) – – – 3.2 6.8 – 14.8Credit to equity– disposals – – – – 0.1 1.2 – – 1.3

Closing (liability)/asset (1.4) 0.8 (19.4) – 1.3 8.3 (3.3) 0.8 (12.9)

The net £1.3 million credit to equity and disposals is related to each component of recognised income and expenditure as follows:

Gross Tax Net£ million £ million £ million

Net increase in fair value of financial assets 48.6 (13.5) 35.1Net decrease in fair value of hedging derivatives (19.3) 5.4 (13.9)Recycling of financial assets and hedging derivatives on disposal (33.1) 9.3 (23.8)Movement in deferred tax on post retirement obligations 13.9 0.1 14.0

1.3

Closing deferred balances have been provided at 27% to reflect the reduction in the corporation tax rate from 6 April 2011.

Netting of deferred tax balances


Deferred tax assets 34.7 22.1Deferred tax liabilities (47.7) (37.2)

Net deferred tax on continuing activities as disclosed on the Balance Sheet (13.0) (15.1)Deferred tax asset on discontinued activities 0.1 0.1

(12.9) (15.0)

The Group has unused tax losses of £131.8 million (2009 – £111.4 million) available for offset against future profits. This includes£5.8 million (2009 – £7.5 million) of capital losses. A deferred tax asset has not been recognised in respect of these losses.Under present tax legislation, these losses may be carried forward indefinitely.



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20 POST RETIREMENT OBLIGATIONS

Post retirement obligations held in the Company’s subsidiaries:


Pension plans (169.0) (195.0)Post retirement medical benefits (6.3) (4.6)

(175.3) (199.6)Associated deferred tax asset 1.3 1.4

Post retirement benefit obligations (174.0) (198.2)

a) Pension plans

John Laing operates two primary defined benefit schemes in the UK (‘the Schemes’) – The John Laing Pension Fund (‘the Fund’)and The John Laing Pension Plan (‘the Plan’). Both Schemes are closed to new members.

Staff employed since 1 January 2002, who are entitled to retirement benefits, can choose to be members of a definedcontribution Stakeholder Scheme sponsored by the Group in conjunction with Legal and General Assurance Society Limited.

The Fund

A full actuarial valuation of the Fund was carried out as at 31 March 2010 by a qualified independent actuary, Towers Watson.At 31 March 2010, the Fund was 69% funded on the technical provision funding basis. This valuation took into account theContinuous Mortality Investigation Bureau projections of mortality. The assets of these schemes are held in separate trusteeadministered funds. The next triennial valuation of the Fund is due as at 31 March 2013.

During 2010 employer contributions represented 23.5% of pensionable salaries and employees contributed 6% of pensionablesalary. In addition to regular contributions, John Laing made its deficit reduction contribution of £21.1 million, comprising a cashpayment of £14.7 million and £6.4 million of shares in a PFI investment. In addition, the Company has guaranteed to fund anycumulative shortfall in forecast project yield payments from the PFI investment, up until 2017 but considers it unlikely that anet shortfall will arise. This guarantee is consistent with similar guarantees provided in respect of contributions made in theform of shares in PFI investments in prior periods. No such guarantees are expected to be called upon during their lifetimes.The deficit reduction contribution for 2011 will be £23.5 million and will increase by 3.55% per annum thereafter to 2019when it will increase by 9%, unless agreed otherwise by the Company and the Trustees, until the deficit has been eliminated.

The Fund will close to future accrual from 1 April 2011 which will result in a curtailment gain of £0.6 million. This has beenaccounted for as part of the year end 2010 figures. The 2010 liability also allows for indexation of deferred pensions and post5 April 1988 GMP pension increases based on the Consumer Price Index (‘CPI’) rather than the Retail Price Index (‘RPI’). Theimpact of moving to CPI is a gain of £23.0 million to the Fund. This gain has been recognised as an ‘Actuarial gain’ recordedin equity.

The Plan

The Plan has an actuarial surplus and no contributions were made to the Plan in 2010.

An analysis of members at 31 December 2010 is shown below:

Actives Deferred Pensioners Total

The John Laing Pension Fund 40 5,560 3,498 9,098The John Laing Pension Plan – 140 296 436

The weighted average financial assumptions used in the actuarial valuation were:

2010 2009% %

Discount rate 5.50 5.90Rate of increase in salaries 3.90 3.95Rate of increase in non-GMP pensions in payment 3.25 3.30Rate of increase in non-GMP pensions in deferment 2.90 3.45Inflation – RPI 3.40 3.45Inflation – CPI 2.90 2.95



121

20 POST RETIREMENT OBLIGATIONS (CONTINUED)

a) Pension plans (continued)

Critical assumptions

The value of the Fund deficit is highly dependent upon certain critical assumptions and is likely to vary significantly from yearto year. The impact of possible future changes to some of these assumptions is shown below:

(Increase)/decrease ingross pension deficit

Increase in Decrease inassumption assumption£ million £ million

0.25% on discount rate 29.8 (31.9)0.25% on inflation rate (29.2) 27.41 year post retirement longevity (23.8) 23.5

In 2009, mortality assumptions were based on tables published by the Institute and Faculty of Actuaries. The 2010 mortalityassumptions were based on the following tables published by the Continuous Mortality Investigation Bureau (CMIB):

Mortality before retirement – AM00 and AF00 ultimate mortality table for men and women respectively.

Mortality after retirement – SAPS normal year of birth tables with medium cohort projections and a minimum improvementof 1% per annum for future improvements in longevity of staff members.

Mortality after retirement – SAPS light year of birth tables with medium cohort projections and a minimum improvement of1% per annum for future improvements in longevity, of executive members.

The table below summarises the life expectancy implied by the mortality assumptions used in the year:

2010 2009

Male Female Male FemaleYears Years Years Years

Life expectancy – for an active/deferred member reaching age 65 22.3 25.1 22.3 25.6Life expectancy – for a 65 year old pensioner 21.1 23.9 20.8 24.0

Net pension liability

The aggregate fair values of the assets in the Group’s defined benefit schemes, the aggregate net pension liabilities and theirexpected weighted average long-term rates of return at 31 December were:

2010 2009

£ million % £ million %

Bonds and insurance policy* 386.7 4.95 326.6 4.81Equities 152.8 8.00 157.3 7.10Property 70.2 7.00 99.0 7.10Cash and other 26.9 0.40 14.8 0.50PFI assets 22.3 9.40 15.0 9.20

Total market value of assets 658.9 612.7Present value of Schemes’ liabilities (824.6) (804.4)

Deficit in the Schemes (165.7) (191.7)Unrecoverable surplus in the Plan (3.3) (3.3)

Net pension deficit (169.0) (195.0)Associated deferred tax asset 1.3 1.4

Net pension liability (167.7) (193.6)

*in February 2009, the Fund Trustees entered into a bulk annuity buy-in agreement with Aviva. At 31 December 2010, the insurancepolicy was valued at £184.1 million (2009 – £186.8 million), being equal to the IAS19 valuation of the related liabilities.



122



Analysis of Schemes’ assets

The major categories of Fund assets as a percentage of total assets at 31 December were as follows:

2010 2009% %

Bonds and insurance policy 58.7 53.3Equities 23.2 25.7Property 10.6 16.2Cash and other 4.1 2.4PFI assets 3.4 2.4

100.0 100.0

Analysis of amounts charged to operating profit


Current service cost* (2.0) (2.1)

*both Schemes are closed to new entrants, therefore, under the Projected Unit method of valuation, the current service cost for theFund will increase as a percentage of pensionable payroll as the members approach retirement.

Analysis of amounts charged to finance costs


Expected return on Schemes’ assets 36.3 36.3Interest on Schemes’ liabilities (46.4) (43.3)Curtailment gain 0.6 –

Net charge to finance costs (9.5) (7.0)

Analysis of amount recognised in the Group Statement of Comprehensive Income


Actual return less expected return on Schemes’ assets 26.8 (5.9)Experience gain/(loss) arising on Schemes’ liabilities 8.5 (0.4)Changes in assumptions underlying the present value of Schemes’ liabilities (19.7) (58.1)Decrease in unrecoverable surplus – 1.1

Actuarial gains/(losses) recognised in Group Statement of Comprehensive Income 15.6 (63.3)Movement in deferred tax asset (0.1) 0.4

Actuarial gains/(losses) recognised in Group Statement of Comprehensive Income 15.5 (62.9)



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Changes in present value of defined benefit obligations


Opening defined benefit obligation (804.4) (738.3)Current service cost (2.0) (2.1)Contributions by members (0.1) (0.1)Interest cost (46.4) (43.3)Experience gain/(loss) on the Schemes’ liabilities 8.5 (0.4)Changes in assumptions underlying the present value of the Schemes’ liabilities (19.7) (58.1)Benefits paid 38.9 37.9Curtailment gain 0.6 –

Closing defined benefit obligation (824.6) (804.4)

Changes in the fair value of Schemes’ assets


Opening fair value of Schemes’ assets 612.7 598.5Expected return on Schemes’ assets 36.3 36.3Actual return less expected return on Schemes’ assets 26.8 (5.9)Contributions by employer 21.9 21.6Contributions by members 0.1 0.1Benefits paid (38.9) (37.9)

Closing fair value of Schemes’ assets 658.9 612.7

Analysis of the movement in the deficit during the year


Opening deficit (191.7) (139.8)Current service cost (2.0) (2.1)Other finance cost (9.5) (7.0)Contributions 21.9 21.6Actuarial gain/(loss)* 15.6 (64.4)

Deficit in Schemes at 31 December (165.7) (191.7)Unrecovered surplus in Plan (3.3) (3.3)

Pension deficit at 31 December (169.0) (195.0)

*excluding the increase in unrecoverable surplus in Plan.

History of the weighted average experience gains and losses

2010 2009

Difference between actual and expected returns on assets:

Amount (£ million) 26.8 (5.9)% of Schemes’ assets 4.1 1.0Experience gain/(loss) on Schemes’ liabilities:

Amount (£ million) 8.5 (0.4)% of present value of Schemes’ liabilities 1.0 –Total amount recognised in the Group Statement of Comprehensive Income (excluding deferred tax):

Amount (£ million) 15.6 (63.3)% of present value of Schemes’ liabilities 1.9 7.9



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Amounts for the current and previous four years are as follows:

2010 2009 2008 2007 2006£ million £ million £ million £ million £ million

Present value of Schemes’ liabilities (824.6) (804.4) (738.3) (772.6) (821.5)Market value of Schemes’ assets 658.9 612.7 598.5 681.1 675.9Deficit (after unrecognisable surplus on Plan) (169.0) (195.0) (144.2) (95.4) (149.3)Experience gain/(loss) on Schemes’ liabilities 8.5 (0.4) – 0.1 –Experience gain/(loss) on Schemes’ assets 26.8 (5.9) (132.2) (21.8) 10.5

b) Post retirement medical benefits

The Company provides post retirement medical insurance benefits to a group of 65 past employees. This scheme was closedto new members in 1991. This scheme is unfunded.

The present value of the future liabilities under this arrangement has been assessed by the scheme actuary, Mercer Limited,and has been included in the Group Balance Sheet, net of deferred taxation, under retirement benefit obligations as follows:


Post retirement medical liability at 1 January (4.6) (5.1)Other finance costs (0.3) (0.3)Contributions 0.3 0.3Actuarial (loss)/gain recognised in the Group Statement of Comprehensive Income (1.7) 0.5

Post retirement medical liability at 31 December (6.3) (4.6)

The annual rate of increase in the per capita cost of medical benefits was assumed to be 5% in 2010. It is expected toincrease from 2011 at 6% per annum.

Medical cost inflation has a significant effect on the liability reported for this scheme. A 1% change in assumed medical costinflation would result in the following costs and liability:

1% increase 1% decrease

Post retirement medical liability at 1 January (7.0) (5.7)Aggregate of the service and interest cost (0.4) (0.3)

21 LONG-TERM PROVISIONS

Unwind Charge/(credit)of to Income

2009* discount Statement Utilised 2010£ million £ million £ million £ million £ million

Retained liabilities 9.9 – 1.1 (3.2) 7.8Onerous facilities management contracts 8.9 0.7 (1.6) 0.3 8.3Employee related liabilities 0.1 – – – 0.1Major maintenance 6.0 – 1.2 – 7.2Onerous property leases 2.7 0.1 – (0.5) 2.3

Total provisions 27.6 0.8 0.7 (3.4) 25.7

Classified as:Continuing 17.7 17.9Discontinued (see note 8) 9.9 7.8

*all comparative information has been restated to reflect the implementation of IFRIC12.

RETAINED LIABILITIES’ provisions relate to disposed businesses; £6.6 million of which relates to Construction following the saleof Laing Construction in 2001. These amounts are assessed regularly on a contract by contract basis and are expected to beutilised over the next few years. In addition, provisions of £1.2 million relate to self insurance which are calculated usinghistorical data and are based on the advice of loss adjustors and an independent actuary.



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21 LONG-TERM PROVISIONS (CONTINUED)

ONEROUS FACILITIES MANAGEMENT CONTRACT provisions relate to projected losses on long-term facilities managementcontracts. During 2010, the impact of profit improvement including cost saving initiatives on the long-term performance of thecontracts was assessed and resulted in a release of £1.6 million of the onerous facility management provision. This release isrecorded in cost of sales in the Consolidated Income Statement. The balance of the provision is expected to be utilised over the20-25 year term of the contracts.

ONEROUS PROPERTY LEASE costs will be utilised over the remaining life of the leases.

22 SHARE CAPITAL

2010 2009No. No.

Authorised:

Ordinary Shares of £0.25 each 470,605,252 470,605,252


Allotted, called up and fully paid:

391,742,514 Ordinary Shares of £0.25 each 97.9 97.9

23 CAPITAL, HEDGING, REVALUATION AND TRANSLATION RESERVE

Hedging Revaluation Translationreserve reserve reserve Total£ million £ million £ million £ million

At 1 January 2010 (45.3) 27.2 13.3 (4.8)Exchange difference on translation of overseas operations – – 1.4 1.4Net increase in fair value of financial assets – 35.2 – 35.2Net decrease in fair value of hedging derivatives (13.9) – – (13.9)Released on disposal and liquidation 16.5 (40.3) (10.3) (34.1)Non-controlling interest 0.9 (1.1) – (0.2)

At 31 December 2010 (41.8) 21.0 4.4 (16.4)

Movements in the fair value of derivatives, net of deferred tax, are recognised in the hedging reserve only if designated andeffective.

Movements in the fair value of financial assets, net of deferred tax, are recognised in the revaluation reserve.

At an extraordinary general meeting of the company held on 29 January 2007, shareholders approved a resolution to reduce theCompany’s share premium account by £124.1 million and created a special capital reserve, this was approved by the High Courton 14 February 2007. As a result of the capital reduction, a special reserve of £124.1 million was created. In 2010 the pensionfund trustees agreed that an amount equal to the pension deficit repair payment of £21.1 million (2009 – £20.3 million) could betransferred to distributable reserves.



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24 ACQUISITIONS

On 30 September 2010, the Group acquired 80% of the issued share capital in both ELWA Holdings Limited and Shanks Dumfriesand Galloway Holdings Limited, both of which are operational waste projects.

On 18 March 2010, the Group acquired a 35% non-controlling interest in Ignis Energy Limited. This increased the Group’s holdingin this investment to 100%.

Net assets acquired in the respective transactions and the fair value arising were as follows:

Shanks DumfriesIgnis Energy ELWA and Galloway

TotalBook value Fair value Book value Fair value Book value Fair value Fair value£ million £ million £ million £ million £ million £ million £ million

Net assets acquired

Cost of service concession intangible – 1.1 – 9.7 – 1.5 12.3Financial assets – available for sale – – 102.9 110.3 25.6 28.1 138.4Trade and other receivables – – 9.0 9.0 0.7 0.7 9.7Cash and cash equivalents – – 7.4 7.4 2.3 2.3 9.7Interest-bearing loans and borrowings – – (88.5) (79.8) (23.9) (21.4) (101.2)Trade and other payables (0.9) (0.9) (8.0) (8.1) (0.2) (0.2) (9.2)Deferred tax liabilities – – (13.9) (13.9) (0.3) (0.3) (14.2)Derivative financial instruments – – – (7.6) – (4.0) (11.6)Tax liabilities – – – (3.9) – (1.1) (5.0)Non-controlling interest – – (1.7) (13.2) (0.9) (0.9) (4.1)

(0.9) 0.2 7.2 19.9 3.3 4.7 24.8

Satisfied by:

Cash consideration 0.2 19.9 4.7 24.8

Net cash flow arising on acquisition

Cash consideration 0.2 19.9 4.7 24.8Cash and cash equivalents acquired – (7.4) (2.3) (9.7)

Cash outflow on acquisition 0.2 12.5 2.4 15.1

The investment in Ignis Energy Limited was sold on 25 November 2010.

With respect to ELWA and Shanks Dumfries and Galloway, revenue from the date of acquisition, 30 September 2010 to 31 December2010 was £10.7 million and loss before tax was £0.2 million. With respect to the Ignis Energy acquisition, revenue from 18 March 2010to the date of sale was £1.2 million and profit before tax was £1.2 million.

If the acquisition of ELWA and Shanks Dumfries and Galloway had been completed on the first day of the financial year, grouprevenues for the period would have been £378.3 million and group profit attributable to equity holders of the parent would havebeen £71.0 million. For Ignis Energy there would be no change to the revenue or group profit attributable to equity holders.

In 2009 the Group acquired no new assets. A deferred payment of £1.0 million, however, was made for an additional 50% shareof Regenter LCEP Holdco Limited. As the cash paid was equal to the fair value of the separately identifiable assets and liabilitiesacquired, no intangible asset arose on this acquisition.



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25 NOTES TO THE GROUP CASH FLOW STATEMENT

2010 2009*£ million £ million

Profit from operations 62.7 2.5Adjustments for:

Discontinued operations’ cash flows (3.2) (1.4)Unrealised profit arising on changes in fair value of investments in joint ventures and associates (note 12) (23.0) (2.1)Other (gains)/losses (35.1) 15.3Depreciation of property, plant and equipment 0.8 0.6Amortisation of intangible assets 3.8 2.8Contribution to fund pension deficit (14.7) (5.0)Increase/(decrease) in provisions 0.2 (5.6)

Operating cash flows before movements in working capital (8.5) 7.1Increase in receivables (16.0) (2.6)Decrease in payables 10.2 5.8

Cash (outflow)/inflow from operations (14.3) 10.3Income taxes received – 0.2

Net cash (outflow)/inflow from operating activities (14.3) 10.5

*all comparative information has been restated to reflect implementation of IFRIC12 and the reclassification of certain cash balances toother financial assets.

26 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE GROUP BALANCE SHEET

2010 2009*£ million £ million

Cash and cash equivalents 112.4 117.2Cash and cash equivalents in discontinued operations (note 8) 4.7 5.4

Group cash and cash equivalents 117.1 122.6


27 GUARANTEES, CONTINGENT ASSETS AND LIABILITIES AND OTHER COMMITMENTS

The Company entered into a £305 million syndicated committed facility, dated 25 November 2010, under which John LaingInvestments Limited is also a borrower. The facility includes asset cover ratio, interest cover ratio and project life cover ratiocovenants tested and repeated at the end of each financial half year, undertakings on the maximum value of new businesseswhich may be entered into on a rolling 12 month basis and the proportion by value of operational projects within the totalportfolio. The Company guarantees utilisations made by John Laing Investments Limited under this facility. As at 31 December2010, the amount utilised was £170,881,821 (2009 – £192,897,924 under the £260 million facility dated 21 March 2007). As statedin note 20 (a) the Company provides guarantees in respect of PFI assets transferred to the John Laing Pension Fund insettlement of annual contribution obligations.

As at 31 December 2010 the Directors had not authorised any capital expenditure.

The Group has given guarantees to lenders of a normal trading nature, including performance bonds, some of which may bepayable on demand.

Claims arise in the normal course of trading which in some cases involve or may involve litigation. Full provision has been madein these accounts for all amounts which the Directors consider will become payable on account of such claims.



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27 GUARANTEES, CONTINGENT ASSETS AND LIABILITIES AND OTHER COMMITMENTS (CONTINUED)

As at 31 December 2010, the Group had outstanding commitments for future minimum lease payments under non-cancellableoperating leases, falling due as follows:

2010 2009

Land andbuildings Other Total Total£ million £ million £ million £ million

Within one year 3.6 0.3 3.9 3.8In the second to fifth years inclusive 7.9 0.3 8.2 10.3After five years 11.2 – 11.2 12.9

22.7 0.6 23.3 27.0

28 TRANSACTIONS WITH RELATED PARTIES

Group

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated onconsolidation and are not disclosed in this note. Details of transactions between the Group and other related parties aredisclosed below.

Trading transactions

During the year the Group entered into the following trading transactions with joint ventures and associates:


Services income* 34.6 45.2Cost of sales – (2.4)Finance income 12.3 15.0Dividend income 11.1 8.8Amounts owed by joint ventures and associates 12.7 14.5Amounts owed to joint ventures and associates (1.2) (2.8)

*services income is generated from joint venture Project Companies through facilities management contracts, management servicesagreements and recoveries of bid costs on financial close.

Also during the year ended 31 December 2010, the Group transferred ownership of a proportion of its interests in one of its PFIjoint venture investments (2009 – three) to the John Laing Pension Fund as partial consideration in respect of agreed deficitrepair contributions. See note 6 for more details. As part of this transfer agreement, John Laing plc has guaranteed to pay anydistribution shortfall to the Pension Fund for the next seven years.

Loans to and from related parties

Amounts owed by Amounts owed byrelated parties related parties


Joint ventures and associates 117.0 120.8

These balances comprise loans to joint ventures and associates which are provided by the Group at market rates of interest. Theloans are repayable in accordance with the terms of the loan agreements.



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29 DISCLOSURE – SERVICE CONCESSION ARRANGEMENTS

The Group operates 56 service concession arrangements in the Accommodation, Transport, and Environment and utilitiessectors. The concessions vary as to the extent of their obligations but typically require the construction and operation of an assetduring the concession period. The concessions may require the acquisition or replacement of an existing asset or the constructionof a new asset. The operation of the assets may include the provision of major maintenance and facilities management servicessuch as cleaning, catering and caretaking. Typically at the end of concession periods the assets are returned to the concessionowner. However on nine of the projects the Group has a right to retain the concession asset.

The rights of both the concession owner and concession operator are stated within the specific project agreement. The rights ofthe provider include provisions to terminate the concession for poor performance of the contract by the operator or upon theevent of a force majeure. The rights of the operator to terminate include the failure of the provider to make payment under theagreement, a material breach of contract and relevant changes of law which would render it impossible for the operator to fulfilits requirements.

Short description Period of concession Obligations to % of concession No. property, plant

Sector Company name Project name owned arrangement Start date End date years and equipment

Accommodation

Hospitals Healthcare Support North Birmingham 100% Design, build, finance 15/08/2000 31/03/2037 37 Refurbishment and(Erdington) Limited Mental Health and operate mental construction at the

Hospitals health facilities in All Saints &Birmingham. Highcroft Hospital

costing £12 million.

Healthcare Support Newcastle 15% Design, build, finance 04/05/2005 03/05/2043 38 Refurbishment and(Newcastle) Limited Hospitals and operate hospitals construction at the

in Newcastle. Freeman Hospitaland Royal VictoriaInfirmary andconstruction of amulti-storey carpark for theFreeman Hospital,costing £295 million.

Meridian Hospital Queen Elizabeth 12.5% Design, build, finance 08/07/1998 31/10/2030 32 Construction ofCompany Limited Hospital, and operate new hospital costing

Greenwich hospital in the £96 million.Greenwich areaof London.

Healthcare Support North Staffs 75% Design, build, finance 19/06/2007 19/08/2044 37 Refurbishment and(North Staffs) Hospital and operate new build construction on twoLimited and extensions to sites costing

North Staffs Hospital. £304 million.

Forth Health Limited Forth Health 50% Design, build, finance 15/05/2007 31/03/2042 34 Construction ofand operate new hospital costinghospital in Larbert. £293 million.

Three Valleys St Lukes’ Hospital 100% Design, build, finance 18/12/2007 22/03/2040 32 Construction ofHealthcare Limited and operate a new hospital costing

mental health facility £75 million.in Middlesbrough.

AHA Access Health Abbotsford 20% Design, build, finance 07/12/2004 06/05/2038 33 Construction ofAbbotsford Limited Regional Hospital and operate new hospital hospital costing

and Cancer Centre in Abbotsford, British CAD$355 million.Columbia, Canada.

Infusion KVH General Kelowna and 50% Design, build, finance 26/08/2008 12/08/2042 34 Construction of twoPartnership Vernon Hospitals and operate two new hospitals and

hospitals in Kelowna parkade costingand Vernon, British CAD$341 million.Columbia, Canada.

Kent and East Pembury Hospital 37.5% Design, build, finance 26/03/2008 30/09/2042 30 Construction ofSussex Weald and operate new hospital costingHospital Limited hospital in Tunbridge £225 million.

Wells.



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29 DISCLOSURE – SERVICE CONCESSION ARRANGEMENTS (CONTINUED)



Schools Education Support Swindon Schools 100% Design, build, finance 01/04/2005 30/06/2032 27 New schools(Swindon) Limited and operate seven new construction

schools in Swindon. costing£70 million.

Education Support Highlands School 100% Design, build, finance 25/02/1999 30/09/2025 27 New school(Enfield) Limited and operate one construction

secondary school costing £17 million.in Enfield.

Education Support Newham Schools 80% Design, build, finance 24/09/2003 31/08/2029 26 New school(Newham) Limited and operate one construction

secondary school costing £22 million.in Newham.

Education Support Enfield Schools 80% Design, build, finance 24/09/2003 31/08/2029 26 New schools(Enfield 2) Limited and operate three construction

schools in Enfield, costing £27 million.two primary and onesecondary.

The Edinburgh School Edinburgh Schools 10% Design, build, finance 15/11/2001 30/09/2033 32 Refurbishment ofPartnership Limited and operate 17 schools three secondary

in total, ten new schools and oneprimaries, two new special school –secondary schools, £25 million. Newthree refurbished build of ten primarysecondary schools schools, twoand two special secondary and oneschools. special school –

£82 million.

Barnsley SPV Barnsley BSF 40% Design, build, finance 07/07/2009 26/04/2036 25 New schoolsOne Limited and operate three new construction and

secondary schools refurbishmentand two special costingschools in the £115 million.Barnsley area.

Barnsley SPV Barnsley BSF2 40% Design, build, finance 09/04/2010 31/12/2036 27 New schoolsTwo Limited and operate two new construction and

secondary schools refurbishmentin the Barnsley area. costing £51 million.

Barnsley SPV Barnsley BSF3 40% Design, build, finance 29/10/2010 02/09/2037 27 New schoolsThree Limited and operate four new construction and

secondary schools refurbishmentin the Barnsley area. costing

£126 million.

Justice and Cleveland FM Cleveland Police 42.5% Design, build, finance 01/04/2005 31/01/2032 27 ConstructionEmergency Services Limited HQ and operate five police costing Services stations. £26 million.

Service Support BTP (British 100% Design, build, finance 26/03/1999 28/02/2022 23 Construction(BTP) Limited Transport Police) and operate one office costing £2 million.

and operate a furthersix BTP premises.

Services Support Cleveland Firearms 27.08% Design, build, finance 18/04/2000 31/03/2026 26 Construction(Cleveland) Limited and operate firearms costing £6 million.

training facility inCleveland.

Services Support Metropolitan 25% Design, build, finance 26/10/2001 16/01/2029 27 Construction(SEL) Limited Police SEL and operate four police costing £80 million.

stations in SouthEast London.

Collaborative NEFRA 80.1% Design, construction, 26/06/2009 16/05/2035 26 ConstructionServices Support finance and operation costing £27 million.NE Limited of five community fire

stations in NorthEast England.



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Defence Defence Support Red Dragon 100% Design, build and 01/08/2003 17/12/2019 16 Construction(St Athan) Limited finance aircraft costing

maintenance facilities £89 million.at RAF St. Athan.

Inteq Services Corsham MoD 50% Design, build and 01/08/2008 31/07/2033 25 Construction ofLimited Accommodation finance a new MoD defence facility

building facility costingin Corsham. £117 million.

Regeneration Regenter Bentilee Bentilee Hub 100% Design, build, finance 24/02/2005 31/01/2032 27 ConstructionDistrict Centre and operate joint costing £8 million.Limited services community

facility.

Property Laing/Gladedale Hastings JV 50% Development and 12/11/2007 31/05/2014 7 ConstructionDevelopment (Hastings) Limited sale of surplus sites costing

from Hastings College. £46 million to besold oncompletion ofconstruction asindividual units.

Netherlands Komfort B.V. Kromhout 40% The design, build, 23/07/2008 30/09/2035 27 Total spendBarracks finance, maintenance €205 million

and operation of per the financialaccommodation close model.(Kromhout Barracks)for certain units of theNetherlands Ministryof Defence.

Duo2 BV Groningen 40% This project, for the 26/09/2008 14/03/2031 23 Total spendTax Office State Buildings Office, €133 million per

is for the DBFMO of the financial closenew buildings to house model.the national centre forstudent data registration(‘InformationManagement Group’)and the regional taxoffice.

LIFT Greater Nottingham LIFT – Greater 30% LIFT scheme for the 14/06/2004 31/03/2032 28 Five new careLIFT Project Company Nottingham design, build, finance centres costing(No. 1) Limited and operation of local £46 million.

primary and socialcare facilities.

Greater Nottingham LIFT – Greater 30% LIFT scheme for the 25/10/2011 27/09/2036 25 One new care centreLIFT Project Company Nottingham 2 design, build, finance costing £21 million.(No. 2) Limited and operation of local

primary and social care facilities.

Leicester LIFT LIFT – Leicester 30% LIFT scheme for the 18/08/2004 30/09/2033 29 Five new care(No. 1) Limited design, build, finance centres costing

and operation of local £31 million.primary and socialcare facilities.

Leicester LIFT LIFT – Leicester 2 30% LIFT scheme for the 06/05/2011 13/06/2036 25 Two new care centres(No. 2) Limited design, build, finance costing £8 million.

and operation of local primary and social care facilities.

North LIFT – North 30% LIFT scheme for the 01/12/2005 22/11/2032 27 Seven new careNottinghamshire Nottingham design, build, finance centres costingLIFT Project and operation of local £34 million.Company (No.1) primary and socialLimited care facilities.



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LIFT Sandwell LIFT LIFT – Sandwell 30% LIFT scheme for the 15/01/2004 05/07/2031 27 Four new care(continued) Project Company design, build, finance centres costing

(No.1) Limited and operation of local £10 million.primary and socialcare facilities.

Sandwell LIFT LIFT – Sandwell 2 30% LIFT scheme for the 26/11/2009 22/05/2041 32 One new careProject Company (Glebefields) design, build, finance centre costing(No.2) Limited and operation of local £7 million.


Southern LIFT – South 30% LIFT scheme for the 03/12/2004 08/03/2032 27 Six new careDerbyshire Derbyshire design, build, finance centres and oneLIFT Project and operation of local extension costingCompany (No.1) primary and social £34 million.Limited care facilities.

Southern LIFT – South 30% LIFT scheme for the 07/10/2008 30/09/2040 32 One new careDerbyshire LIFT Derbyshire 2 design, build, finance centre costingProject Company and operation of local £22 million.(No.2) Limited primary and social

care facilities.

MaST LIFT Project LIFT – MaST 30% LIFT scheme for the 01/07/2004 30/09/2032 28 Nine new careCompany (No.1) design, build, finance centres costingLimited and operation of local £38 million.


MaST LIFT Project LIFT – MaST 2 30% LIFT scheme for the 01/11/2006 29/11/2038 32 Three new careCompany (No.2) design, build, finance centres costingLimited and operation of local £33 million.


Transport

Roads Autolink M6 11% Design, build, finance 01/12/1996 29/07/2027 31 Upgrade andConcessionaires and operate project to maintain existing(M6) plc maintain 90 km of the motorway costing

M6 and M74 (from Gretna, £95 million.on the Scottish borderto Millbank, 48 kmsouth of Glasgow).Project includes theupgrade of the A74 toa 29 km stretch of dualthree lane motorway.

CountyRoute A130 100% Design, build, finance 01/02/2000 31/01/2030 30 New build at a cost(A130) Plc and operate the A130 of £76 million.

bypass linking the A12and A127 in Essex.

Gdansk Transport A1 Road Poland 29.69% Design, build, finance 31/08/2004 24/08/2039 35 New build at a costCo. SA and operate the A1 of €651 million for

Motorway in Poland phase 1 and €900min two phases. for phase 2.

Severn River SRC 35% Design, build, finance 26/04/1992 No later The Cost of new secondCrossing Plc and operate a second than earlier crossing

crossing over the 26/04/2022 of 30 approximatelySevern River plus years £320 million.operate and maintain or untilexisting crossing. a pre-

determinedlevel ofrevenueachieved

MAK Mecsek M6 Expressway 30% Design, construct, 01/04/2010 31/10/2037 30 Build and maintainAutopalya (Hungary) refurbish, operation, new expressways atKonzorcium Zrt. maintenance and financing a cost of

of 48 km section of M6 €886 million.expressway and 32 kmof M60 expressway.



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Roads Tiehytio Nelostie Oy Nelostie 50% Design, build, finance 01/09/1997 30/08/2012 15 Upgrade and(continued) and operate the E4 maintain part of

Motorway in Finland. existing road andThe project has involved build new motorwaythe upgrading of an at a cost ofexisting road and the €104 million.construction of a new69 km shadow tollmotorway from Helsinkito Lahti in the north.

UK Highways A55 50% Design, build, finance 16/12/1998 15/12/2028 30 Build new trunkA55 Limited and operate the A55, road and maintain

a trunk road running existing Menai andacross the Island of Britannia Bridges Anglesey (Ynys Môn), at a cost ofNorth Wales. £102 million.

A1 Mobile Gmbh A1 Germany 42.5% Construct and operate 04/08/2008 31/08/2038 30 New build at a cost& Co. KG the A1 Autobahn of €417.1 million.

between Bremen andHamburg in Germany.

A-Lanes A15 B.V. A15 MAVA 28% Design, build, finance 09/12/2010 30/06/2035 25 Extension of road,(Maasvlakte – and maintain the A15 construction valueVaanplein) highway south of of €727 million.

Rotterdam (about 40 km Maintenance forconnecting the ‘2nd 20 years in total Maasvlakte’ to the €204 million (real).‘Vaanplein’).

Dhule Palesner NH3 (Ma1) India 36% Design, engineering, 04/01/2010 03/01/2028 18 Build and maintainTollway Limited finance, construction, highway at a cost

development, operation of INRI, 415 Crand maintenance of (£200 million).the 96.5 km four-lanehighway fromMaharashtra-MadhyaPradesh Border toDhule section of theNational Highway 3.

Rail City Greenwich CGL Rail 40% Construction and 01/10/1996 31/03/2021 25 Build 4.2 kmLewisham Rail operation of extension of theLink plc infrastructure DLR from Isle of

on Lewisham Dogs to Lewisham,extension of the including boring ofDocklands Light tunnels beneath theRailway. Thames at a cost of

£205 million.

Aylesbury Vale Aylesbury Vale 100% Construction and 10/08/2007 31/12/2028 20 ConstructionParkway Limited Parkway operation of the costing

Aylesbury Vale £12.1 million ofParkway Station. which the Council

will fund£8.2 million and themaintenance over20 year concession.

John Laing Coleshill Parkway 100% Construction and 10/03/2006 31/12/2026 20 ConstructionRail Infrastructure operation of the costing £7.1 millionLimited Coleshill Parkway of which the

Station. Council will fund£5 million and themaintenance over20 year concession.



134


135




Rail Denver Transit Denver FasTracks 45% Design, build, 30/08/2010 31/12/2046 36 Phase 1 is a 36.5(continued) Partners LLC Eagle P3 finance, maintain and km route from

operation of passenger Denverrail systems in Denver, InternationalColorado. Airport to Denver

Union Stationincluding acommuter RailMaintenanceFacility andrailcars.

Environment and utilities

Street Lighting Surrey Lighting Surrey Street 50% Installation and 01/03/2010 28/02/2035 25 ReplacementServices Limited Lighting maintenance of column programme

street lighting. costing £78 million.

Utilities Citylink LUL Connect 19.5% Upgrade of London 21/11/1999 21/11/2019 20 Maintain theTelecommunications Underground’s existing radio andLimited existing radio and communications

telecommunications systems andsystems and replace at a cost ofimplementing and £198 million.operating a newsystem.

Coastal Clearwater Kinnegar 50% Design, build, finance 30/04/1999 30/04/2024 25 Upgrade at a cost ofLimited and operate an upgrade £15 million.

to the waste treatmentplant, Belfast, NorthernIreland.

INEOS Runcorn Manchester Waste 37.43% Design, build, finance 08/04/2009 07/04/2034 25 New waste CHP(TPS) Limited and operate a waste plant construction

CHP plant in Runcorn. costing£236 million.

Viridor Laing Manchester Waste 50% Design, build and 08/04/2009 07/04/2034 25 New waste(Greater Manchester) commission 42 facilities processing facilitiesLimited which all contribute to with construction

the service delivery of costingwaste processing and £401 million.recycling services in theGreater Manchester Area.

ELWA Limited London Waste 80% Operate the process 01/12/2002 01/12/2027 25 Risk for lifecycle for household waste in . resides withfour London boroughs Operator (Shanks(Redbridge, Barking Wasteand Dagenham, Management). Havering and At contract end, Newham). all PPE passed to

Authority.

Shanks Dumfries Dumfries and 80% Manage waste 01/11/2004 01/11/2029 25 Risk for lifecycleand Galloway Galloway Waste treatment resides withLimited and disposal Operator (Shanks

in Dumfries Wasteand Galloway. Management).

At contract end, all PPE passed to Authority.



136

30 PRINCIPAL SUBSIDIARIES AND JOINT VENTURES AND ASSOCIATES


Autolink Concessionaires (M6) plcOrdinary shares of £1 (11%)PFI road concession operator

Aylesbury Vale Parkway LimitedDevelopment and operation of railinfrastructure assets

Barnsley SPV One Limited Ordinary shares of £1 (40%)PFI accommodation operatorFinancial year end 31 March

Barnsley SPV Two Limited Ordinary shares of £1 (40%)PFI accommodation operatorFinancial year end 31 March

Barnsley SPV Three Limited Ordinary shares of £1 (40%)PFI accommodation operatorFinancial year end 31 March

City Greenwich Lewisham Rail Link plcOrdinary shares of £1 (40%)Light rail concession operator

Citylink Telecommunications LimitedOrdinary shares of £1 (19.5%)Utility concession operatorFinancial year end 31 March

Cleveland FM Services LimitedOrdinary shares of £1 (42.5%)PFI accommodation operator

Collaborative Services Support NE LimitedOrdinary shares of £1 (80.1%)PFI accommodation operator

Coastal Clearwater LimitedOrdinary shares of £1 (50%)PFI wastewater treatment plant operator inNorthern IrelandFinancial year end 31 March

CountyRoute (A130) PlcRoad concession operator

Croydon PSHD Holdco LimitedHolding company for property developmentcompany

Croydon PSHD Holdco 2 LimitedHolding company for property developmentcompany

CCURV LLPLimited Liability Partnership (50%)Property Development

Davis House LLPLimited Liability Partnership (50%)Office building owner and management

Defence Support (St Athan) LimitedPFI accommodation operator

Education Support (Enfield) LimitedPFI accommodation operator

Education Support (Enfield 2) LimitedOrdinary shares of £1 (80%)PFI accommodation operator

Education Support (Newham) LimitedOrdinary shares of £1 (80%)PFI accommodation operator

Education Support (Swindon) LimitedPFI accommodation operator

ELWA LimitedOrdinary shares of £1 (80%)PFI waste management operatorFinancial year end 31 March

Forth Health LimitedOrdinary shares of £1 (50%)PFI accommodation operator

Healthcare Support (Erdington) LimitedPFI accommodation operator

Healthcare Support (Newcastle) LimitedOrdinary shares of £1 (15%)PFI accommodation operator

Healthcare Support (North Staffs) LimitedOrdinary shares of £1 (75%)PFI accommodation operator

INEOS Runcorn (TPS) LimitedOrdinary shares of £1 (37.43%)PFI accommodation operator

Inteq Services LimitedOrdinary shares of £1 (50%)PFI accommodation operator

John Laing (Croydon Development Company) LLPHolding company for property developmentcompany

John Laing Infrastructure LimitedHolding company for roads investments

John Laing Investments Limited*Holding company for the investments business

John Laing Projects & Developments LimitedProperty management company

John Laing Projects & Developments(Holdings) LimitedHolding company for rail related assets andproperty developments

John Laing Projects & Developments(Croydon) LimitedHolding company for Croydon propertydevelopments

John Laing Rail Infrastructure Limited Development and operation of railinfrastructure assets

John Laing Social Infrastructure LimitedHolding company for the accommodationinvestments

Kent & East Sussex Weald Hospital LimitedOrdinary shares of £1 (37.5%)PFI accommodation operator

Laing/Gladedale (Hastings) LimitedOrdinary shares of £1 (50%)Property development company

Laing/Gladedale (St Saviours) LimitedOrdinary Shares of £1 (50%) Propertydevelopment company

Laing Investment Company LimitedProperty development

Meridian Hospital Company plcOrdinary shares of £1 (12.5%)PFI accommodation operatorFinancial year end 31 March

Primary Plus (Holdings) LimitedOrdinary shares of £1 (50%)Holding company for PFI accommodationoperator

Regenter Bentilee District Centre LimitedPFI accommodation operator

Services Support (BTP) LimitedPFI accommodation operator

Services Support (Cleveland) LimitedOrdinary shares of £1 (27.08%)PFI accommodation operator

Services Support (SEL) LimitedOrdinary shares of £1 (25%)PFI accommodation operator

Severn River Crossing PlcOrdinary shares of £1 (35%)Toll bridge concessionaire

Shanks Dumfries and Galloway LimitedOrdinary shares of £1 (80%)PFI waste management operatorFinancial year end 31 March

Surrey Lighting Services Limited Ordinary shares of £1 (50%)Street lighting concession operator

The Edinburgh School Partnership LimitedOrdinary shares of £1 (10%)PFI accommodation operatorFinancial year end 31 March

Three Valleys Healthcare LimitedPFI accommodation operator

Tunbridge Wells Regeneration CompanyLimitedOrdinary A shares of £1 (50%)PFI accommodation operator

UK Highways A55 LimitedOrdinary shares of £1 (50%)Road concession operatorFinancial year end 31 March

UK Highways LimitedOrdinary shares of £1 (25 pence paid up) (50%)Manage road concession operatorsFinancial year end 31 March

Viridor Laing (Great Manchester) LimitedOrdinary shares of £1 (50%)PFI waste management operator

Investments

United Kingdom

*shares owned directly by the Company.


137NOTES TO THE GROUP FINANCIAL STATEMENTSfor the year ended 31 December 2010

A1 Mobile Gmbh & Co. KGRoad concession operator – operating in Germany (42.5%)

A-Lanes A15 B.V.Shares of €1 (28%)PFI road concession operator

AHA Access Health Abbotsford LtdCommon shares CAD$0.01 (20%)Hospital concession operator – operating inCanada

Denver Transit Partners LLC Limited Liability Corporation (45%)PFI rail concession operator in USA

Dhule Palesner Tollway Limited9.126 million ordinary shares of 10 rupeeseach (36%)Road concession operator – operating in India

Duo2 B.V.Shares €1 (40%)PFI accommodation operator – operating inNetherlands

Gdansk Transport Company SAB series shares PLN10 each (29.69%) C series shares PLN10 each (29.69%)Road concession operator – operating inPoland

Infusion Health KVH General Partnership Hospital concession operator – operating inCanada (50%)

Komfort B.V.Shares of €1 (40%)PFI accommodation operator – operating inNetherlands

MAK Mecsek Autopalya Koncesszios Zrt.Ordinary shares HUF25,000 (30%)Road concession operator – operating inHungary

SPC Management Services B.V.Ordinary shares of €1 (33%)Management services to Dutch road projects

Tieyhtio Nelostie OyOrdinary A shares €6.055 (50%)Ordinary B shares €2.355 (25%) Road concession operator – operating in Finland (41%)

30 PRINCIPAL SUBSIDIARIES AND JOINT VENTURES AND ASSOCIATES (CONTINUED)

Investments

Overseas

Except where indicated, all companies are wholly owned, have 31 December year ends, are incorporated in Great Britain andregistered in England and Wales or Scotland, and operate mainly in the country of incorporation.

*shares owned directly by the Company.

The Pinnacle Fund Limited Partnership (registered office: Allington House, 150 Victoria Street, London, SW1E 5LB) is a limitedpartnership formed under the Limited Partnership Act 1907. The results of The Pinnacle Fund Limited Partnership are includedwithin the consolidated results of John Laing plc and The Pinnacle Fund Limited Partnership has taken advantage of theexemption from auditing or filing accounts at Companies House conferred by regulation 7 of the Partnerships (Accounts)Regulation 2008.

Listed Investment

John Laing Infrastructure Fund LimitedRegistered in GuernseyOrdinary shares of £0.01 (23.14%)

Group Service Companies

John Laing Services Limited*Management of retained constructionliabilities

John Laing Capital Management Limited*Investment management company

John Laing Integrated Services LimitedProvision of facilities management services

Laing Investments Management Services(Australia) LimitedManagement, staff and administrative services– operating in Australia

John Laing Infrastructure ManagementServices India Private LimitedManagement, staff and administrative services– operating in India

Laing Property Limited*Holding company for property developments

Laing Investments ManagementServices LimitedManagement, staff and administrative services

Laing Investments Management Services(Canada) LimitedManagement, staff and administrative services

Laing Investments Management Services(Singapore) LimitedManagement, staff and administrative services

Woodcroft Insurance Company Limited*Insurance company– regulated in Guernsey

Laing Investments Management Services(Netherlands) LimitedManagement, staff and administrative services


138

2010 2009Notes £ million £ million

Fixed assets

Interests in subsidiary undertakings 3 497.6 554.8

Current assets

Debtors: amounts falling due within one year 4 164.3 201.4Cash at bank and in hand 19.5 25.4

183.8 226.8Creditors: amounts falling due within one year 5 20.9 32.3

Net current assets 162.9 194.5

Total assets less current liabilities 660.5 749.3

Creditors: amounts falling due after more than one year 6 129.3 144.5

Provisions for liabilities

Interests in subsidiary undertaking 8 168.5 180.8

Net assets 11 362.7 424.0

Capital and reserves

Called up share capital 9 97.9 97.9Capital reserve 10 47.1 68.2Revaluation reserve 10 175.7 220.3Profit and loss account 10 42.0 37.6

Shareholder’s funds 362.7 424.0

The financial statements of John Laing plc, registered number 1345670, were approved by the Board of Directors and authorised forissue on 24 March 2011 and were signed on its behalf by:


24 March 2011 24 March 2011

COMPANY BALANCE SHEETas at 31 December 2010


139

1 ACCOUNTING POLICIES

a) Basis of preparation of accounts

The financial statements of the Company are presented separately as required by the Companies Act 2006. They have beenprepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards and law.

The principal accounting policies are summarised below:

b) Investments

Investments in subsidiaries and joint ventures and associates are reflected in the financial statements at fair value which inthe case of PFI/PPP Project Companies, is the portfolio valuation. For other companies, the net book value equates to fair value.

2 PROFIT FOR THE YEAR

In accordance with Section 408 of the Companies Act 2006, no separate profit and loss account has been presented for theCompany. For the year ended 31 December 2010, the Company reported a profit of £140.5 million (2009 – £58.5 million). TheDirectors authorised payment of interim dividends of £136.4 million (2009 – £38.0 million) during the year.

3 INTERESTS IN SUBSIDIARY UNDERTAKINGS

Investments Loans TotalIncluded as fixed assets £ million £ million £ million

Original cost

At 1 January 2010 235.6 11.6 247.2Additions 0.4 – 0.4Repayments – (11.6) (11.6)

At 31 December 2010 236.0 – 236.0

Provisions made against investments

At 1 January 2010 (81.9) (11.6) (93.5)Movements in the year (0.7) 11.6 10.9

At 31 December 2010 (82.6) – (82.6)

Revaluation

At 1 January 2010 401.1 – 401.1Movement in the year (56.9) – (56.9)

344.2 – 344.2

Valuation*

At 31 December 2010 497.6 – 497.6

At 31 December 2009 554.8 – 554.8

*total of original cost, provisions made against investments and revaluations.

The adverse revaluation movement in the year of £56.9 million reflects disposals of indirectly held investments in the period andthe remittance of a dividend to the Company.

Short-term trading balances with subsidiaries are included in the Company’s Balance Sheet in debtors or creditors as appropriate.

NOTES TO THE COMPANY FINANCIAL STATEMENTSfor the year ending 31 December 2010


140

4 DEBTORS

31 December 31 December2010 2009


Due within one year:

Amounts owed by subsidiary undertakings 164.3 201.4

The amounts owed by subsidiary undertakings, in the current and prior year are repayable in line with the respective repayments’schedules. Interest is charged at agreed arms length interest rates.

5 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR



Amounts owed to Group undertakings 16.6 29.8Other taxation and social security 0.1 0.1Accruals and deferred income 4.2 2.4

20.9 32.3

6 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR



Bank loans and overdrafts 5.9 22.0Amounts owed to Group undertakings 123.4 122.5

129.3 144.5

Interest is charged by Group undertakings on loans at 1% above bank base rate.

7 CREDITORS ANALYSIS

Maturity



Due within 1 year 20.9 32.3Due after 2 years and less than 5 years 5.9 22.0Due after more than 5 years 123.4 122.5

150.2 176.8

8 PROVISION FOR LIABILITIES

At 1 January Revaluation At 31 December2010 amount 2010

£ million £ million £ million

Investment in subsidiary undertaking* 180.8 (12.3) 168.5

*this relates to the Company’s investment in John Laing Services Limited which holds the Group’s pension fund deficit.



141

9 CALLED UP SHARE CAPITAL

31 December 31 December2010 2009No. No.

Ordinary Shares of £0.25 each 470,605,252 470,605,252


Allotted, called up and fully paid:

391,742,514 Ordinary Shares of £0.25 each 97.9 97.9

10 MOVEMENT IN RESERVES

Profit and Capital Revaluationloss account reserve reserve Total


At 1 January 2010 37.6 68.2 220.3 326.1Retained profit for the year 4.5 – – 4.5Unrealised loss on the revaluation of investments* – – (44.6) (44.6)Additional capital contributions to the pension fund (21.2) – – (21.2)Transfer from capital reserve on contribution to pension fund deficit 21.1 (21.1) – –

At 31 December 2010 42.0 47.1 175.7 264.8

At an extraordinary general meeting of the company held on 29 January 2007, shareholders approved a resolution to reduce theCompany’s share premium account by £124.1 million and create a special capital reserve, this was approved by the High Court on14 February 2007. As a result of the capital reduction, a special reserve of £124.1 million was created. Distributions may not be madeout of the special reserve prior to the satisfaction of creditors or contingent creditors as at the date of capital reduction. In 2010the pension fund trustees agreed that an amount equal to the pension deficit repair payment of £21.1million (2009 – £20.3 million)could be transferred to distributable reserves.

*the revaluation reserve is stated net of unrealised losses of £168.5 million (2009 – £180.8 million) relating to the revaluation ofsubsidiaries.

11 RECONCILIATION OF MOVEMENTS IN SHAREHOLDER’S FUNDS

2010 2009

Share capital Reserves Total Total£ million £ million £ million £ million

Profit for the financial year – 140.9 140.9 58.5Dividends paid on Ordinary Shares – (136.4) (136.4) (38.0)

Retained profit for the financial year – 4.5 4.5 20.5Unrealised loss on the revaluation of investments – (44.6) (44.6) (109.7)Contribution to pension fund deficit – (21.2) (21.2) (20.8)

Net decrease in shareholder’s funds – (61.3) (61.3) (110.0)

Opening shareholder’s funds 97.9 326.1 424.0 534.0

Closing shareholder’s funds 97.9 264.8 362.7 424.0

12 ULTIMATE PARENT UNDERTAKING

The Company’s immediate parent company is Henderson Infrastructure Holdco Limited, a company incorporated in Great Britain.

The largest group in which the Company’s results are consolidated is that of its ultimate parent and controlling entity, HendersonInfrastructure Holdco (Jersey) Limited, a company incorporated in Jersey, Channel Islands.


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IFRS

2010 2009* 2008* 2007 2006£ million £ million £ million £ million £ million

Results

Revenue 343.3 351.1 243.9 197.6 599.6

Profit/(loss) from operations 62.7 2.5 28.2 9.0 (12.4)

Profit before tax 68.0 16.6 43.6 29.8 4.6

Profit attributable to Owners of the Group 69.9 14.1 81.2 47.2 1.3

Assets employed

Non-current assets 1,334.7 1,633.7 1,667.0 1,265.8 2,168.8Current assets 223.3 244.6 229.1 552.3 636.9Current liabilities (132.3) (155.3) (133.1) (197.6) (270.9)Non-current liabilities (1,143.7) (1,389.8) (1,327.2) (1,156.3) (2,322.8)Long-term provisions (17.9) (17.7) (22.2) (17.1) (3.0)

Net assets 264.1 315.5 413.6 447.1 209.0

Financed by

Equity 258.5 315.5 413.0 445.5 209.0Non-controlling interest 5.6 – 0.6 1.6 –

264.1 315.5 413.6 447.1 209.0

*all comparative information, including relevant notes, has been restated to reflect implementation of IFRIC12 and the reclassification of certaincash balances to other financial assets.

FIVE-YEAR SUMMARYfor year ended 31 December 2010


142

OUR CORE VALUES are the foundation

of what we do and how we do it.

They are the belief system by which we as a business

operate, defining the manner in which we interact with

and treat each other and our external stakeholders.

The John Laing Core Values provide a set of guiding

principles for our people, wherever they are, globally.

OUR STRATEGY is to deliver predictable investment returns and

consistent growth in the value of our investment portfolio.

This is achieved through the active approach we take to

managing all of our projects, and the strong relationships

that are built and maintained with our public sector clients.

2010

Further copies of this statement are

available by visiting the Company’s

website or at the address below

John Laing plc

Registered Office:Allington House,150 Victoria Street,London SW1E 5LBEngland

Registered No. 1345670

Tel: +44 (0)20 7901 3200Fax: +44 (0)20 7901 3520

email: [email protected]

www.laing.com

THE PARTNEROF CHOICE…

John Laing plcannual report 2010

John Laing plc 2010 - AnnualReports.co.uk · 2016-11-04 · Tunbridge Wells Hosp (Pembury) 37.5%...

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