Construction group John Laing suffered falls in profits as it was forced to take a multimillion-pound hit on its long-troubled waste projects in the north of England.
The group highlighted problems surrounding the Greater Manchester waste disposal projects, where it is trying to avoid a legal battle with local authorities, in half-year results reported on Thursday.
“Our job isn’t to spend our time in court fighting local authorities. The private sector has to provide solutions not problems, so even if it comes at a cost to us, it is better to draw a line and move on . . . I am sure that Manchester will be back in the market and we want to be ready when that happens,” said Olivier Brousse, John Laing’s chief executive.
The company said it had reached an agreement on the investments with Greater Manchester Waste Disposal Authority, which saw it book a reduction in their value of £25.5m compared with their valuation at the end of December.
In arriving at the agreement to exit the contracts, John Laing said it “took the view that the alternative could have been long and costly legal proceedings with an uncertain outcome for the valuation of its two investments”.
Partly as a result of the Manchester impairment, pre-tax profits fell 66 per cent on a year-on-year basis. However, the company did manage to increase its net asset value by 2.3 per cent from the start of the year.
John Laing’s Manchester waste investments represented 8 per cent of its total investment at the end of last year and, while painful, the group “should still have made a small profit on the contract as a whole, and we do not see other assets as similarly affected”, said Peel Hunt’s Andrew Shepherd-Barron.
Mr Brousse emphasised that the company’s investment pipeline remained healthy at £1.9bn over the next three years, and that it remained on track to meet its full-year guidance of £200m for both investment and realisations.
Mr Brousse also added that John Laing was becoming ever less a UK-focused company. “We are becoming more of an American company, more of an Australian company.”
John Laing’s share price was down 1.4 per cent to 303p in mid-morning trading but is up 12 per cent in the year to date while the FTSE All-Share index is up 4.5 per cent.
The group was established in 1848 as a building company based in Carlisle in North West England and has grown to become a major construction and infrastructure company.