UK construction project manager John Laing - owner of Chiltern Railways - yesterday posted a 43 per cent rise in 2005 profit and said it would look to capitalise on the growing secondary market for private finance initiative projects.

Laing, which manages construction projects such as schools, hospitals, roads and police stations, made £35.8 million in pretax profit on continuing operations, compared with £25 million in 2004, boosted by work on public road, rail and accommodation projects.

It said Chiltern Railways' performance had been hard hit by the collapse last summer of a building at Gerrards Cross which "severely interrupted services for a seven-week period".

Liability for costs and lost revenues had been accepted by those responsible.

Other key initiatives for Laing Rail included an £80 million project creating new station capacity, signalling and line enhancements on the Chiltern route, and new stations at Coleshill, Aylesbury Vale and West Hampstead.

The firm sold stakes in four Government PFI infrastructure projects to German insurer Allianz for £26.7 million in December, and intends to offload more of its mature PFI projects.

"We will continue disposal activity, it will be at a very measured pace. The amount will depend on market conditions," said chief executive Andy Friend.

Under PFI deals, companies typically undertake the design, build, finance and operation of public projects and get paid back over, for example, 20 to 30 years.

Most risk is in the early years of a contract when building costs have to be managed. The final stage, operating the asset, is relatively risk-free and there is a growing secondary market for maturing PFI contracts, of which John Laing has several.

The company said its portfolio valuation had increased 20 per cent to £330 million, while profits from the PFI stake sales allowed Laing to increase the full-year dividend by ten per cent to 3.65 pence.

Analysts at Panmure maintained their 'buy' rating and 368p price target on the stock but lowered profit fore-casts for 2006 to £27.7 million from £31.5 million, pointing to higher than expected bid costs due in part to Surrey County Council's surprise decision in January not to sign a final contract on an accommodation project.

Laing said it was "confident of sustaining the pattern of profitable growth" in 2006.

It said it was short-listed for projects with a total capital value of £5 billion with a potential equity commitment of £205 million, or £82 million assuming a 40 per cent future success rate.

"This is a strong market domestically, and we've seen quite a pick-up in opportunities in Europe," said Mr Friend. He added that the company was seeing a surge in money spent on infrastructure and housing by other European countries. "There is significant growth in the roads market in the EU member states, Nordic regions, Germany, Austria, Poland.

"There's also a growing number of accommodation projects which are starting from a lower base in quantum terms in Spain, Italy, France, Germany in the last year, and also beginning to come to market in Czech Republic and Hungary," he said.

The US is another area of interest for the company. "The opening of the US market in the road and transport sector means there is the potential for fairly rapid growth," Mr Friend noted.