Tunnel collapse wipes out profits at Laing rail
Times Online: August 24, 2006
John Laing today cautioned of widened second half losses at its Chiltern Railways business as the collapse of a tunnel at Gerrards Cross weighed on first-half profits.
The infrastructure group said trains unit swung to a £2.4 million loss in the six months to June 30, from profits of £4.1 million in the same period of last year, largely reflecting the impact of the tunnel collapse at the site of a Tesco supermarket development.
The company said Tesco had accepted liability for the tunnel collapse and the two parties have started formal dispute resolution on the scale of compensation the supermarket group will pay.
In the absence of a compensation payment this year the group said it expects second half losses at the unit to exceed the £2.4 million losses reported today, because of cost increases and reducing government subsidy.
It said there remained "significant uncertainties" over the timing and quantum of the compensation claim on the tunnel.
The group cautioned in May that in the absence of compensation the tunnel collapse would impact the company's current year results. As well as the damage caused to the line the company said the collapse had had a longer term impact as passengers opted to use other forms of transport.
Adrian Ewer, chief executive, said it would take until the end of next year to settle the claim. He said the sum would be significant but declined to discuss the size of the possible payment.
Group pre-tax profits fell to £12.3 million, from £13.8 million last time, despite an increase in profits at John Laing's roads and accomodation divisions.
The company cautioned that the UK market for infrastructure projects is suffering from programme delays, in part because of government budgetary constraints.
Bid costs nearly doubled to £2.3 million and it said it expected these costs to rise further in the short to medium term, amid increasing bid activity.
The group said it was also increasing its bid activity overseas, emphasising in particular on Europe and North America.
The shares were trading down 19p at 271.5p at midday.