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John Laing hit by further £50m pensions shortfall

NEWS - PFI investor prepares to pay £6.5 million a year to top up its former construction arm's pension fund

THE BUNGLED sale of its former construction arm continues to haunt John Laing after it announced it will have to find a further £50 million to make up a pensions shortfall for staff now mainly employed by new owner O'Rourke.

In a trading update the firm, which has transformed itself into a Private Finance Initiative investor following the sale in 2001, said the FRS17 pension deficit, which relates primarily to those employed at its disposed construction business, would 'increase significantly' Laing is currently shelling out £4 million a year for the scheme, which is now closed, but is preparing to stump up an additional £2.5 million a year over the next 20 years.

Charlie Cottam, an analyst at broker Panmure Gordon, said: 'We believe Laing's FRS17 pension deficit has risen by up to £50 million to around £145 million.'

Laing's shares fell 2 per cent to 268.5p on the news.

After paying just £1 for the firm, insiders at O'Rourke later admitted they found the men responsible for negotiating the sale at Laing had overestimated the problems at the contracts O'Rourke agreed to take on by up to £35 million.

As part of the deal O'Rourke also left liabilities for 13 contracts, including the Cardiff Millennium stadium project, with Laing and in this week's statement the firm said it had reached a final, undisclosed settlement on the Cardiff scheme last October.

It added that it expects judgement on the Great Eastern Hotel claim by the end of March.

The Conran-owned hotel in London is suing Laing for £17.5 million in damages following the revamp of the hotel, which was finished a year late.

In all, the firm has set aside £39 million to cover liabilities relating to old contracts.

Chief executive Andy Friend said the capital value of all its preferred and sole bidder projects stood at £1.8 billion. He added: 'The outlook for PFI/PPP activity in our chosen accommodation, rail and roads sectors remains strong.'

Analysts are expecting pre-tax profits for 2004 to come in at around £21 million when the results are announced on March 21.