TIDMJLG
RNS Number : 6867Y
John Laing Group plc
07 March 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
John Laing Group plc
RESULTS FOR THE YEARED 31 DECEMBER 2016
John Laing Group plc (John Laing or the Company or the Group)
announces its audited results for the year ended 31 December
2016.
Highlights
-- 14.3% increase in Net Asset Value (NAV), from GBP889.6
million at 31 December 2015 to GBP1,016.8 million
-- NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p)
-- New investment commitments of GBP181.9 million (2015 - GBP180.5 million)
-- Realisations of GBP146.6(1) million from the sale of investments
-- Profit before tax of GBP192.1 million compared to GBP106.6 million (pro forma) in 2015(2)
-- Earnings per share of 51.9p (2015 - 27.6p pro forma)
-- 30% increase in external Assets under Management (AuM) to GBP1,472 million(3)
-- Cash yield from investment portfolio of GBP34.8 million (2015 - GBP38.9 million)
-- Continuing international growth including the Group's first
offshore wind farm investment and first renewable energy investment
in the US
-- Final dividend of 6.3p per share in line with policy
(including a special dividend of 2.6p per share), giving a total
2016 dividend of 8.15p (2015 - total dividend of 6.9p)
Olivier Brousse, John Laing's Chief Executive Officer,
commented:
"2016 has been another good year for John Laing with strong
growth in NAV and dividends. Our origination platform is working
well as shown by our increasingly diversified and growing pipeline
of opportunities, while our portfolio of projects under
construction is well balanced and actively managed by experienced
teams, allowing us to deliver steady results. We are well organised
and positioned to take advantage of future opportunities in order
to continue to move our business forward while controlling our
costs and our risks. "
Notes:
1. Realisations include GBP19.5 million in respect of British
Transport Police and Oldham Housing transactions which counted
towards guidance for 2015.
2. Profit before tax from continuing operations of GBP192.1
million (2015 - GBP100.9 million) and from discontinued operations
of GBPnil (2015 - GBP5.7 million).
3. External AuM based on published portfolio values of JLIF and JLEN at 30 September 2016.
A presentation for analysts and investors will be held at 9:00am
(London time) today at The Lincoln Centre, 18 Lincoln's Inn Fields,
London WC2A 3ED. A conference call facility will also be available
using the dial-in details below.
Conference call dial in details:
UK: 020 3059 8125
Other locations: +44 (0) 20 3059 8125
Participant password: John Laing Conference Call
Participant URL for live access to the on-line presentation:
http://www.investis-live.com/john-laing/58b6c29a146fbc10004bcf54/gfasdgdafg
A copy of the presentation slides will be available at
www.laing.com later today.
Analyst/investor enquiries:
Olivier Brousse, Chief Executive
Officer +44 20 7901 3200
Patrick O'D Bourke, Group Finance
Director +44 20 7901 3200
Tom Randell, Head of Investor Relations
and Communications +44 20 7901 3200
Media enquiries:
James Isola, Maitland +44 20 7379 5151
This announcement may contain forward looking statements. It has
been made by the Directors of John Laing in good faith based on the
information available to them up to the time of their approval of
this announcement and should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying such forward looking information.
Chairman's Statement
Last year, we stated that "looking forward, we have confidence
in the robustness of our business model and the deliverability of
our strategy". Our results for 2016 confirm that confidence, in
what has been a year of political and economic turbulence.
When facing an uncertain environment, we believe in keeping our
strategy simple, focused and flexible. In 2016, we simplified our
business through the disposal of our non-core Project Management
Services (PMS) activities in the UK. This allows management to
concentrate on the core tasks of origination of greenfield
projects, active management of construction and operational risk
and timely realisations in order to monetise value. Our focus
remains on PPP infrastructure and renewable energy in Asia Pacific,
Europe and North America. Our pipeline is strong and diversified by
sector and geography, which gives us flexibility in origination,
and the funds we manage and the active secondary market give us
flexibility in distribution.
Our performance in 2016 was strong:
-- Net Asset Value (NAV) grew by 14.3% to GBP1,016.8 million or
277p per share at 31 December 2016, from GBP889.6 million or 242p
per share at 31 December 2015;
-- Investment commitments reached GBP182 million, in line with our guidance;
-- Realisations of investments for dividend purposes were GBP127
million, ahead of our guidance for 2016 of approximately GBP100
million;
-- Our total external Assets under Management grew to GBP1,472
million, an increase of 30%; and
-- We are proposing a final dividend for 2016 of 6.3p per share
made up of a base dividend of 3.7p per share and a special dividend
of 2.6p per share.
Our three core markets all saw continued strong demand for new
privately-financed infrastructure projects. Using our experienced
teams, sector specialists and working with local partners, we have
committed capital to both PPP and renewable energy in all three
regions, and increasingly also see prospects in related
infrastructure sectors, for instance in the water or broadband
sectors.
During the year, the markets in which we are active continued to
be affected by significant movements in macro-economic factors. In
particular, the Brexit vote in June 2016 precipitated a prolonged
weakening of Sterling versus the major currencies we invest in.
While this has been positive for the value of our overseas
investment portfolio in Sterling terms, our preference would be for
a more stable foreign exchange environment. At a governmental
level, there are signs that a number of countries are moving
towards fiscal rather than monetary policy in order to stimulate
economic growth. We would agree that increased infrastructure
expenditure is a good way to provide such fiscal stimulus and in
some of the jurisdictions we operate in, notably Australia and
Canada, we see it already happening. Other countries - including
the UK and the US - look as if they could follow suit.
No changes to the Board took place during the year. At a senior
management level, Derek Potts, Group Managing Director of Primary
Investment, has decided to retire, and will leave us at the end of
March 2017. Derek originally joined John Laing in 2001. He has had
responsibility for all the Group's bidding and primary investment
activities and has been instrumental in leading the Group's
expansion into international markets and new sectors. During his
time with the Group, he has made an exceptional contribution and we
are very sorry to see him go.
During the year under review, the Board complied with all
applicable provisions of the UK Corporate Governance Code (the
Code). We have a balanced group of directors who worked well as a
board during the year. With the impending retirement of Derek
Potts, we reviewed our succession plans and I was encouraged to see
much promise among our senior management team. As well as regular
Board meetings, we held reviews in June and in October 2016 to
address the future strategy and direction of the business. These
reconfirmed our commitment to creating further shareholder value
through the continued application of our current business
model.
As Chairman, I interact regularly with many members of staff
both from overseas and the UK and, on behalf of the Board, I would
like to thank all of them for their contribution to these results.
I would also like to extend the Board's thanks to all the Group's
stakeholders for their continued support.
Our dividend policy has two parts:
-- a base dividend of GBP20 million (starting from 2015) growing
at least in line with inflation; the Board is recommending a final
base dividend for 2016 of 3.7p per share; and
-- a special dividend of approximately 5% - 10% of gross
proceeds from the sale of investments on an annual basis, subject
to specific investment requirements in any one year. The Board is
recommending a special dividend for 2016 of 2.6p per share. This
has been arrived at by applying 7.5% to realisations for dividend
purposes of GBP127 million achieved in 2016, which exclude the
combined proceeds of GBP19.5 million from the disposals of our
shareholdings in British Transport Police and Oldham Housing.
The total final dividend therefore amounts to 6.3p per share,
which, together with the interim dividend of 1.85p paid in October
2016, makes a total dividend for 2016 of 8.15p per share, an
increase of 7% over 2015, after taking into account the timing of
the IPO in February 2015. The final dividend will be put to
shareholders for their approval at the Company's Annual General
Meeting (AGM) which will be held on 11 May 2017. At the Company's
AGM on 12 May 2016, all resolutions were approved by
shareholders.
There are positive signs in each of our core infrastructure
markets of a strong level of deal flow over the coming years. With
our flexible business model and our strong geographical presence,
we believe we are well positioned to take advantage of the
opportunities this will create.
Phil Nolan
Chairman
Chief Executive Officer's Review
2016 was our first full year since our IPO in February 2015 and
I am delighted to report that we continued to deliver strong
results.
The highlights included:
-- 14.3% increase in NAV, from GBP889.6 million at 31 December 2015 to GBP1,016.8 million;
-- NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p);
-- New investment commitments of GBP181.9 million in six different countries;
-- Realisations of GBP146.6 million from the sale of assets;
-- Profit before tax of GBP192.1 million compared to GBP106.6 million in 2015;
-- 30% increase in external Assets under Management (AuM) to GBP1,472 million;
-- Cash yield from investment portfolio of GBP34.8 million (2015 - GBP38.9 million); and
-- Sale of UK activities of Project Management Services (PMS).
Outlook for our markets
As I have said before, we operate in an international market for
new infrastructure primarily driven by population growth,
urbanisation and climate change. Population growth and urbanisation
create the need for new infrastructure, particularly in transport
and in social infrastructure such as healthcare. Equally, climate
change is the catalyst behind new infrastructure in the renewable
energy, waste management and water sectors.
In addition, there are strong drivers for public sector
authorities to involve the private sector in the procurement of new
infrastructure, including risk transfer, funding and access to the
best international contractors and investors. As a recognised
international greenfield infrastructure expert, we target all the
above sectors and therefore benefit from the overall growth in
public-private infrastructure.
In Primary Investment, we continue to see a robust and diverse
pipeline of future opportunities in each of the three regions where
we currently operate: Asia Pacific (Australia and New Zealand);
North America (Canada and the US); and Europe. We entered 2017 with
an increased level of activity and strong positions in eight
short-listed PPP consortia and with a number of exclusive renewable
energy opportunities.
-- Asia Pacific: we remain very active in the PPP markets in
both Australia and New Zealand. In Australia, the renewable energy
sector continues to grow and gain momentum following resolution of
the Federal Renewable Energy Target in 2015 and our team is taking
advantage of this.
-- Europe: even if the overall PPP market remains subdued, we
focus our attention on those countries which are bringing projects
to market, such as the Netherlands, the Republic of Ireland,
Germany, Norway, the Czech Republic and potentially the UK where we
believe the current government will announce new PPP projects. Many
of the opportunities are in the transport sector, which fits well
with our credentials. In renewable energy, the level of activity
remains high, with attractive risk-return profiles. We concentrate
on selected countries with governmental support mechanisms in order
to reduce energy price exposure.
-- North America: four of our eight shortlisted PPP positions
are for potential investments in North America. In Canada, we see a
strong commitment to PPP from federal and local authorities,
especially in Ontario and British Columbia, mainly in the transport
sector. In the US, we concentrate on those states where we see a
growing pipeline of PPP opportunities particularly in the transport
sector and potentially the water sector. During the year, we made
our first investment in renewable energy, a wind farm project in
New Mexico. Overall, our reputation in North America is growing,
leading to more opportunities to join consortia for new projects.
This bodes well for the future, especially when considering the
obvious needs in the US for new infrastructure.
Beyond the PPP and renewable energy markets, we continue to
research other asset classes that look as if they could fit our
business model in order to feed future growth. The due diligence we
carry out before investing in new markets follows a rigorous
process that eventually rules out many opportunities. Currently, we
are reviewing: broadband, driven in Europe by the EU directive to
see 100% high speed coverage by 2025; water resource management,
driven by climate change; and energy storage, driven by the
changing way in which electricity is generated across transmission
and distribution networks. We expect these sectors to offer a
number of investment opportunities in the future.
Active management
During the year, we demonstrated again why we believe it is
essential for us to be an active investor. For us, it means not
only participating actively in consortia at the bidding stage, but
also being actively involved in project companies during the
construction phase in order to protect our investment and help when
delays occur or problems arise:
-- In South Australia, our team has been particularly active in
helping the New Royal Adelaide Hospital project company to resolve
the sometimes competing priorities of the Government of South
Australia, the bank lending consortium and the construction
contractor. This situation has arisen principally because technical
completion of the hospital has been delayed, having been scheduled
for April 2016. Following mediation discussions in late 2016 and
early 2017, the parties are now working towards technical
completion later this month (March 2017) followed by commercial
acceptance three months later; it is intended that remaining
disputes will be dealt with through a process of arbitration. The
Government of South Australia is making the necessary preparations
for the hospital to be ready to open for patients before the peak
of the winter flu season.
-- At Manchester Waste VL Co, the project's operational
performance is good; it has been achieving diversion of waste from
landfill ahead of contractual requirements. The Greater Manchester
Waste Disposal Authority (GMWDA) has indicated it wants to achieve
cost savings and efficiencies. While the project company had
proposed that such savings could be achieved within the existing
contractual structure, this has not been accepted by the GMWDA.
Separately, the GMWDA has challenged aspects of the operational
service levels provided by the project company and the operator;
this is strongly refuted by the project company and the matter is
being addressed through an independent third party under the
procedures in the project agreement with a decision due at the end
of March 2017. The project company believes there will be a
resolution with the GMWDA. If, as part of this, the GMWDA were to
seek to take the project into public ownership, this would only be
acceptable to the project company if it resulted in appropriate
compensation for all stakeholders. The project company is working
with its shareholders, John Laing and Viridor, to protect the value
of the equity in the project and also to minimise any impact on
Manchester Waste TPS Co which is contractually linked to Manchester
Waste VL Co.
For both investments, we have taken account of current
developments in our portfolio valuation at 31 December 2016. Taken
together, the investments in New Royal Adelaide Hospital and
Manchester Waste VL Co, which are not linked, make up approximately
8% of our investment portfolio of GBP1,176 million.
Wherever we operate, we believe our investing, contracting and
banking partners appreciate and value the investment experience and
active management we provide. We continue to make good use of this
expertise to monitor and guide our investments through construction
while protecting the investment base cases and where appropriate
seeking to find additional value.
Business model
Our business model has three key areas of activity:
-- Primary Investment: we source, originate, bid for and win
greenfield infrastructure projects, typically as part of a
consortium in the case of PPP projects. Our Primary Investment
portfolio comprises interests in infrastructure projects which are
in the construction phase.
-- Secondary Investment: we own a substantial portfolio of
investments in operational infrastructure projects, almost all of
which were previously part of our Primary Investment portfolio.
-- Asset Management: we actively manage our own Primary and
Secondary Investment portfolios and provide investment advice and
asset management services to two external funds, John Laing
Infrastructure Fund (JLIF) and John Laing Environmental Assets
Group (JLEN), through John Laing Capital Management Limited (JLCM),
which is regulated by the Financial Conduct Authority (FCA), as
well as in respect of a small number of PPP assets held by John
Laing Pension Fund (JLPF).
Our business model is based on our specialist infrastructure
investment and asset management capabilities and the increasing
recognition of operational infrastructure assets as an attractive
investment class.
We aim to invest in new greenfield infrastructure projects
which, post-construction, produce long-term predictable cash flows
that meet our rate of return targets. The projects we invest in are
held within special purpose vehicles (SPVs) which we (often in
conjunction with other investors) fund with equity, and which are
structured so that providers of third party debt finance have no
contractual recourse to equity investors beyond their equity
commitment.
When investments become part of our Primary Investment
portfolio, their value should grow progressively with a relatively
high degree of predictability as the underlying assets move through
the construction phase and their risk correspondingly reduces. Once
the projects reach the operational stage, investments move from our
Primary to our Secondary Investment portfolio where they can be
held to maturity or sold to secondary market investors, who are
targeting a lower rate of return consistent with the reduction in
risk.
Our asset management activities focus on management and
reduction of project risks, especially during the construction
phase, and enhancement of project cash flows. The latter involves
identifying and implementing value enhancement initiatives that can
increase future cash flows to investors compared to those
originally forecast at the start of the project. We look at a wide
range of such value enhancements. Opportunities may arise at any
time during a project's life and may vary significantly from one
investment to another.
Objectives and outcomes
Our overall strategy is to create value for shareholders by
originating, investing in and managing infrastructure assets
internationally. In that respect, we see NAV growth and dividends
as key measures of our success. In 2016, our NAV grew by 14.3% from
GBP889.6 million at 31 December 2015 to GBP1,016.8 million at 31
December 2016. We are proposing dividends of 8.15p per share in
total for 2016 compared to dividends of 6.9p per share for 2015.
This represents growth of 7% over 2015, once the 2015 base dividend
is adjusted to reflect the timing of our IPO in February 2015.
To deliver our strategy, we have set ourselves the core
objectives below, while maintaining the discipline and analysis
required to mitigate against the delivery, revenue and operational
risks associated with infrastructure projects:
-- growth in primary investment volumes (new investment capital
committed to greenfield infrastructure projects) over the medium
term;
-- growth in the value of external Assets under Management (AuM) and related fee income; and
-- management and enhancement of our investment portfolio, with
a clear focus on active management during construction, accompanied
by realisations of investments which, combined with our corporate
banking facilities and operational cash flows, enable us to finance
new investment commitments.
Growth in primary investment volumes over the medium term
We operate in a broad market for new infrastructure with a
strong pipeline of future opportunities.
Throughout the year, we maintained a disciplined approach to
making new investments. Using detailed financial analysis and
investment appraisal processes, we assess the specific risk
profiles for each prospective investment with the aim of optimising
risk-adjusted returns and securing only those new investments which
are likely to meet the investment appetites of secondary market
investors when the underlying assets become operational.
Our resources are concentrated on countries or geographical
regions carefully selected against five key criteria:
-- a stable political and legal framework;
-- a commitment to the development of privately-financed infrastructure;
-- the ability to form relationships with strong supply chain partners;
-- the likelihood of target financial returns, on a risk-adjusted basis, being realised; and
-- the existence of a market for operational investments or a
strong expectation that such a market will develop.
Our total commitment to new investments in 2016 was GBP181.9
million, made up of GBP134.8 million in renewable energy and
GBP47.1 million in PPP assets, at a similar level to investment
commitments of GBP180.5 million in 2015. Our international growth
continued with investment commitments in six different countries,
including the following projects:
-- A6 Parkway (Netherlands) - GBP9.0 million
-- Kiata wind farm (Australia) - GBP20.4 million
-- Nordergründe offshore wind farm (Germany) - GBP36.7 million
-- Sommette wind farm (France) - GBP11.7 million
-- Sterling wind farm (US) - GBP15.7 million.
Growth in the value of external AuM and related fee income
Our strategy to grow the value of our external AuM is linked to
our activities as an investment adviser to JLIF and JLEN. The Group
not only advises and provides management services to the portfolios
of JLIF and JLEN, but also sources new investments on their behalf.
During the year, both JLIF and JLEN successfully undertook
secondary equity issues and made acquisitions both from John Laing
and from third parties. Both funds have the benefit of a right of
first offer over certain investments should they be offered for
sale by the Group.
We made good progress during the year, with the value of
external AuM growing from GBP1,136 million to GBP1,472 million, an
increase of 30%. Fee income from external AuM was GBP15.8 million
for 2016, up from GBP12.0 million in 2015.
Investment portfolio and realisations
At 31 December 2016, our portfolio comprised investments in 42
infrastructure projects and our shareholding in JLEN (31 December
2015 - 39 projects). Our year end portfolio value, including the
shareholding in JLEN, was GBP1,175.9 million (31 December 2015 -
GBP841.4 million). The increase was primarily due to cash
injections into projects, favourable foreign exchange movements and
growth in the retained portfolio, offset by investment
realisations.
The portfolio valuation represents our assessment of the fair
value of investments in projects on the basis that each asset is
held to maturity, other than shares in JLEN which are held at
market value. The 2016 year end valuation reflected underlying
growth of 22.3% after adjusting for acquisitions, realisations,
cash invested and cash yield. This growth is analysed further in
the Portfolio Valuation section.
The cash yield in 2016 was GBP34.8 million (2015 - GBP38.9
million), a yield of 7.6% (2015 - 9.8%) on the average Secondary
Investment portfolio, in line with our guidance of a 6.5% to 8.5%
yield. Cash yield represents cash receipts in the form of
dividends, interest and shareholder loan repayments from project
companies and listed investments.
During the year, we agreed a number of realisations:
-- sale of our investments in the British Transport Police and
Oldham Housing PPP projects to JLIF for GBP19.5 million which, as
previously explained, counted towards our 2015 year end guidance
and special dividend;
-- proceeds from a further four completed transactions of
GBP127.1 million, which form the basis for our special dividend
calculation for 2016;
-- agreed sale of our 29.69% shareholding in the A1 motorway,
Poland. Proceeds of EUR137.3 million (adjusted for distributions
received in late 2016) were received on 2 March 2017; and
-- agreed sale of our 30% shareholding in the M6 road project in
Hungary for EUR26.6 million which is expected to complete in the
second quarter of 2017.
We were particularly pleased to achieve prices in line with
portfolio valuation for our investments in the A1 motorway in
Poland and the M6 road project in Hungary, both in jurisdictions
where there is a less developed secondary market.
Profit before tax
Our total profit before tax was GBP192.1 million in 2016,
compared to GBP106.6 million in 2015. Profit before tax is
primarily driven by the fair value movement in our investment
portfolio, which in 2016 benefited significantly from favourable
foreign exchange movements.
Funding
In February 2015, we entered into a five-year GBP350.0 million
committed corporate banking facility and associated ancillary
facilities, all of which expire in March 2020. These revolving
facilities enable us to issue letters of credit and/or put up cash
collateral to back investment commitments. We finance new
investments through a combination of cash flow from existing
assets, the above corporate banking facilities and realisations of
investments in operational projects.
In June 2016, the above facilities were increased to GBP400.0
million. In addition, in November 2016, we entered into additional
GBP50.0 million liquidity facilities, which together with surety
financing entered into earlier in the year, had the effect of
increasing our committed facilities to GBP450.0 million until March
2018.
Organisation and staff
In June 2016, we announced the sale of the business and assets
of our PMS activities in the UK to HCP Management Services Limited
(HCP). The reason for the sale was to concentrate our resources and
attention on our greenfield activities where we create most value.
As part of the sale, 81 staff roles and 52 Management Services
Agreements (MSAs) transferred to HCP. The sale completed on 30
November 2016 for total proceeds of GBP4.0 million, GBP1.9 million
of which was received on completion and GBP2.1 million of which was
received in January 2017 once all consents were obtained.
Principally as a result of the sale, our staff numbers fell from
252 at 31 December 2015 to 160 at the end of 2016.
We now have 36% of staff located outside the UK (2015 - 22%).
This growing internationalisation is consistent with where our
future opportunities lie.
Reflecting Derek Potts' retirement in early 2017, we have
re-organised our Primary Investment management teams so that the
heads in each of our three geographical regions now report directly
to me. We will miss Derek's enthusiasm and experience but I am very
pleased that he has agreed to continue to assist our Investment
Committee on a consultancy basis.
I visited our offices around the world several times during
2016. We have strong individuals and great teams in each region and
I want to extend my heartfelt thanks to all staff for their
contribution during the year. As I have said before, the success of
our business depends on them.
Current trading and guidance
Our total investment pipeline at 31 December 2016 was GBP1,859
million and includes GBP1,408 million of PPP opportunities looking
out three years or so as well as nearer term renewable energy
opportunities of GBP451 million. The current pipeline does not
include potential opportunities that may come from additional
public-private infrastructure in the UK post Brexit or in the US
under the new administration. We will aim to maintain a majority of
availability-based cash flows in our portfolio. At 31 December
2016, the balance was 73% availability-based versus 27%
volume-based.
As our investment pipeline continues to grow, our aim is to
increase our investment commitments for 2017 by approximately 10%
compared to 2016. We expect realisations to be at a broadly similar
level to our investment commitments, consistent with our
self-funding model.
We have a proven business model and we believe we are in a good
position to take advantage of opportunities for investment in
greenfield infrastructure in a growing market. In the two years
since we have been listed, we have delivered steady growth despite
changing governmental policies and macro-economic environments.
Against this background, we have confidence in the future.
Olivier Brousse
Chief Executive Officer
Primary Investment
Our Primary Investment activities are focused on greenfield
infrastructure projects. These are principally those awarded under
PPP programmes as well as renewable energy assets and may also
include similar long-term projects which have a strong
private-sector (rather than governmental) counterparty. Asset
management services in respect of the Primary Investment portfolio
during the construction period are provided by John Laing's Asset
Management division. When underlying projects reach the end of
construction, the investments transfer into our Secondary
Investment portfolio.
The Primary Investment portfolio comprises the Group's
shareholdings in 11 PPP projects, and in ten renewable energy
projects, which are in the construction phase. The Group's Primary
Investment portfolio was valued at GBP696.3 million at 31 December
2016 (31 December 2015 - GBP405.9 million).
New investment commitments
During 2016, the Primary Investment team successfully secured
ten new investments, and made additional commitments to one
existing investment, resulting in total commitments of GBP181.9
million:
-- Asia Pacific - the Hornsdale 2 wind farm project in South
Australia reached financial close in June 2016 and we closed the
Kiata wind farm project in Victoria in November 2016, further
strengthening the Group's presence in the renewable energy market
in the region.
-- North America - we continued to increase our activities in
the market. During the year, we secured a stake in the Sterling
wind farm project in New Mexico, our first investment in renewable
energy in this region, and we made a small additional investment in
the I-77 Managed Lanes project in North Carolina.
-- Europe -
-- We made a GBP9.0 million commitment to the A6 Parkway PPP project in the Netherlands;
-- We acquired an additional 6% stake in the IEP (Phase 1) project in the UK from a co-investor;
-- We committed to four on-shore wind farm investments, one in
each of the UK and Germany, and two in France; and
-- We also secured and closed the Group's first investment in
the offshore wind sector, acquiring a 30% stake in the Nordergründe
wind farm project in Germany.
Our investment commitments for 2016 are summarised in the table
below:
PPP RE* Total
Investment commitments Region GBP million GBP million GBP million
Intercity Express Programme (IEP) (Phase 1) UK 37.0 - 37.0
Llynfi wind farm UK - 24.9 24.9
A6 Parkway Europe 9.0 - 9.0
Nordergründe offshore wind farm Europe - 36.7 36.7
Sommette wind farm Europe - 11.7 11.7
Horath wind farm Europe - 14.3 14.3
Saint-Martin-L'Ars wind farm Europe - 5.1 5.1
I-77 Managed Lanes North America 1.1 - 1.1
Sterling wind farm North America - 15.7 15.7
Hornsdale wind farm (Phase 2) Asia Pacific - 6.0 6.0
Kiata wind farm Asia Pacific - 20.4 20.4
Totals 47.1 134.8 181.9
-------------------------------------------------------------- ------------- ------------- -------------
*RE = renewable energy
Since 31 December 2016, we have committed GBP10.0 million for a
20% shareholding in the Hornsdale wind farm (Phase 3) in
Australia.
Activities
The Primary Investment team is responsible for all the Group's
bid development activities. The team takes responsibility for
developing and managing a pipeline of opportunities, including
market research, project selection, bid co-ordination and
negotiations with public sector authorities, vendors and lenders.
In each of our target markets of Asia Pacific, North America and
Europe, we work with strong delivery partners. For instance, in the
Asia Pacific and North American regions, the Group is currently
working with leading international and domestic contractors and
service providers, including Acciona, ACS Group, Aecom, Alstom,
Bombardier, Bouygues, Brookfield Multiplex, Cintra, Cubic, Downer,
Fluor, Fulton Hogan, John Holland, Laing O'Rourke, Leighton/CIMIC,
Lend Lease, Serco, SNC, Spotless and Vinci.
We target a wide range of infrastructure sectors:
-- Transport - rail, including rolling stock, roads, street lighting and highways maintenance;
-- Environmental - renewable energy (including wind power, solar
power and biomass), water treatment and waste management;
-- Social infrastructure - healthcare, education, justice,
public sector accommodation and social housing.
We are also assessing opportunities in new infrastructure
sectors such as the emerging energy storage programmes to support
electricity grid performance, and broadband infrastructure
upgrades, where we believe our business model could be successfully
applied.
Project finance
Pricing of project finance facilities remained broadly stable
during 2016, although the trend of falling prices and improving
terms experienced in recent years appears to have levelled off. We
were able to secure financing for projects where required.
Institutional sources of long-term project finance were available
in Europe, although commercial bank debt was typically more
competitively priced. In Australia and New Zealand, medium-term
bank debt and refinancing requirements are well established, with a
large number of international banks being active in these markets.
In Canada and the US, projects tend to be financed in the debt
capital markets rather than with bank financing. Overall, financial
markets in the regions in which the Group is active supported our
growing levels of investment and we expect this to continue in
2017.
Pipeline
At 31 December 2016, our overall investment pipeline of GBP1,859
million was higher than the pipeline of GBP1,494 million at 31
December 2015. The pipeline comprises opportunities to invest
equity in PPP projects with the potential to reach financial close
over the next three years, while the renewable energy pipeline
relates to the next two years. The growth compared to 2015 reflects
an increase in renewable energy pipelines in Asia Pacific and North
America, as well as some impact from the devaluation of
Sterling.
Our overall pipeline is constantly evolving as new opportunities
are added and other opportunities drop out. We budget a win rate of
30% for PPP bids.
Our total pipeline broken down by bidding stage is as
follows:
Number of PPP RE* Total
Pipeline at 31 December 2016 by bidding stage projects GBP million GBP million GBP million
----------------------------------------------- ---------- ------------- ------------- -------------
Shortlisted/exclusive 18 234 173 407
Other active bids 4 185 - 185
Other pipeline 49 989 278 1,267
----------------------------------------------- ---------- ------------- ------------- -------------
Totals 71 1,408 451 1,859
----------------------------------------------- ---------- ------------- ------------- -------------
*RE = renewable energy
The shortlisted PPP projects at 31 December 2016 comprised a
prison project in Australia, a broadband upgrade project in
Ireland, and six availability-based transportation and schools
projects, spread across the US, Canada and Australia.
In terms of geography, our pipeline is well spread across our
target markets:
PPP RE* Total
Pipeline at 31 December 2016 by target market GBP million GBP million GBP million
----------------------------------------------- ------------- ------------- -------------
Asia Pacific 491 142 633
North America 449 97 546
Europe (including the UK) 468 212 680
----------------------------------------------- ------------- ------------- -------------
Totals 1,408 451 1,859
----------------------------------------------- ------------- ------------- -------------
*RE = renewable energy
Some 34% of our pipeline relates to the Asia Pacific region
which continues to offer substantial opportunities. In this region,
the Group's current bidding activities are focused on Australia and
New Zealand, where the Group has built up a strong base. Our
growing presence in the renewable energy sector in Australia offers
significant potential in the coming years.
In North America (the US and Canada), which makes up 29% of the
pipeline, our focus is on what is becoming a very substantial PPP
market, whilst continuing to progress our presence in the renewable
energy market, following our first US wind farm investment in 2016.
We continue to explore PPP opportunities primarily in the
transportation sector and also the growing water and social
infrastructure sectors. The Canadian market continues to
demonstrate strong PPP deal flow, which we are actively pursuing.
At the end of 2016, we were shortlisted on four large PPP
projects.
The balance of our pipeline is in Europe, where PPP activity
remains at a satisfactory level in countries such as the
Netherlands. However, in 2017 we expect to increase our activities
in markets such as Germany, Norway and the Czech Republic. There is
also a significant PPP programme in Turkey, but we have deferred
further work on this market following the challenges in that
country in 2016. The UK government has given indications of a new
pipeline of privately financed projects, and we are waiting for the
programme to become more clearly defined.
Selected countries in Europe, Asia Pacific and North America
will provide our main focus for renewable energy opportunities in
2017. Our pipeline includes many potential wind and solar projects
as well as investment opportunities in biomass plant.
Our overall renewable energy pipeline was GBP451 million at 31
December 2016, higher than at 31 December 2015. In the main, we
target investments where a substantial proportion of revenue is
supported by governmental support mechanisms which leads to reduced
exposure to energy price fluctuations. During the year, we closed
our first offshore wind farm investment, and this sector offers
strong potential in the coming years, though our pipeline does not
currently include any offshore wind opportunities.
In addition to the above, the Group continues to monitor new
geographic markets which offer potential in the medium to long
term. These include countries in South America, such as Chile and
Colombia, and other Asia Pacific markets such as Singapore.
I will be retiring at the end of March 2017 but I am confident
in the ability and experience of our teams within Primary
Investment and the strength of our pipeline. Following my
retirement, the heads of Primary Investment in each of our three
geographical regions will report directly to the Chief Executive
Officer.
Derek Potts
Group Managing Director, Primary Investment
Secondary Investment
At 31 December 2016, the Secondary Investment portfolio
comprised 15 PPP projects and six renewable energy projects with a
book value of GBP479.6 million (31 December 2015 - GBP419.4
million). The Secondary Investment portfolio also included a 3.3%
shareholding in JLEN valued at GBP10.0 million at 31 December 2016
(31 December 2015 - 7.0% shareholding valued at GBP16.1
million).
Asset management services in respect of the Secondary Investment
portfolio are provided by John Laing's Asset Management
division.
Investment realisations
During the year, we achieved proceeds of GBP146.6 million from
the realisation of investments:
-- Our investments in two PPP projects, British Transport Police
and Oldham Housing, were sold to JLIF for GBP19.5 million;
-- Our investments in Dungavel Wind Farm (100%) and New Albion
Wind Farm (100%) were sold to JLEN for a total of GBP50.0
million;
-- Our investment in the A55 project and 20% of our interest in
IEP (Phase 1) were sold to JLIF in the second half of the year;
and
-- We sold a 2.2% shareholding in JLEN for GBP6.4 million.
Taking realisations for the year as a whole, prices were in line
with the most recent portfolio valuation.
Total
Realisations completed Shareholding Purchaser GBP million
--------------------------- ------------- ---------- -------------
British Transport Police* 54.17% JLIF 19.5*
---------- -------------
Oldham Housing* 95%
--------------------------- ------------- ---------- -------------
Dungavel Wind Farm 100% JLEN 38.2
----------
New Albion Wind Farm 100% 11.8
--------------------------- ------------- ---------- -------------
Market
Shareholding in JLEN 2.2% placing 6.4
--------------------------- ------------- ---------- -------------
A55 100% JLIF 28.3
IEP (Phase 1) 6% 42.4
Total 146.6
--------------------------- ------------- ---------- -------------
*counted towards guidance for 2015
Excluding the sales of our investments in British Transport
Police and Oldham Housing, we achieved disposals for dividend
purposes of GBP127.1 million, ahead of our guidance of
approximately GBP100 million.
We also agreed two further disposals:
-- Sale of our 29.69% shareholding in Gdansk Transport Company
S.A (GTC), the owner and operator of part of the A1 motorway in
Poland, for EUR137.3 million (adjusted for distributions received
in November and December 2016), subject to certain reductions and
adjustments. A sale and purchase agreement was originally entered
into with FS Amber Holdings BV, an entity managed by First State
Investments, in late 2016. However, as the result of the exercise
of pre-emption rights by NDI Autostrada SP.2.0.0 (NDIA), a
co-shareholder in GTC, a new sale and purchase agreement was
entered into with NDIA in January 2017. Completion of the disposal
was subject to certain consents and conditions and occurred on 2
March 2017.
-- Sale of our 30% shareholding in the M6 road, Hungary for
EUR26.6 million. This sale was originally agreed in December 2016.
However, following the exercise of pre-emption rights by
co-shareholders in the project company, Strabag AG and
Intertoll-Europe ZRT (Intertoll), new sale and purchase agreements
were entered into on 1 February 2017. Completion of the disposal is
subject to obtaining certain consents and satisfying certain
conditions and is expected to take place in the second quarter of
2017.
Transfers from the Primary Investment portfolio
During the year, six investments became part of the Secondary
Investment portfolio as the underlying projects moved into the
operational stage:
Croydon & Lewisham Street Lighting, UK (50% interest)
The final milestone for the construction and installation of
more than 23,000 street lights was completed in late November 2016,
resulting in the project moving to a fully operational status.
Rammeldalsberget Wind Farm, Sweden (100% interest)
Located near Kramfors in central Sweden, the project comprises
six wind turbines of 2.5MW each. Operations commenced in June 2016
and revenue is supported by a fixed price power purchasing
agreement for 50% of production until the end of 2019.
New Albion Wind Farm, UK (100% interest, disposed in July
2016)
Located in Northamptonshire, UK, the project comprises seven
Senvion turbines, each with 2.05MW capacity. Following commencement
of operations in January 2016, this project was sold to JLEN in
July 2016 for GBP11.8 million.
Pasilly Wind Farm, France (100% interest)
Located in the Yonne region of Burgundy, this was our first
renewable energy project in France. The wind farm comprises ten
Gamesa G97 turbines of 2MW each. Full operation commenced in
December 2016, with revenue supported by a feed-in-tariff for the
first 15 years.
Hornsdale Wind Farm Phase One, Australia (30%)
The project comprises a 32 turbine wind farm in South Australia
with an installed capacity of 102.4MW and represents our first
renewable energy project in the Asia Pacific region. The project
benefits from a 20 year offtake from a government counterparty
(Australian Capital Territory).
A15, Netherlands (28% interest)
This availability-based road project comprises the expansion of
two intersections and the provision of maintenance along a 37km
motorway section in the Rotterdam region of the Netherlands for a
period of 20 years after completion of construction. The scope of
the project included widening the motorway and rebuilding many of
the structures and junctions connecting the motorway with the road
network.
Chris Waples
Group Managing Director, Asset Management
Asset Management
The Asset Management division's activities comprise Investment
Management Services and Project Management Services.
Investment Management Services
Investment Management Services (IMS) are provided to both JLIF
and JLEN and also to our own investment portfolio.
External IMS JLCM provides advisory services to JLIF and JLEN
under investment advisory agreements. As at 30 September 2016, JLIF
and JLEN had published portfolio values of GBP1,113.8 million and
GBP320.7 million respectively. JLCM has an independent chairman and
two separate dedicated fund management teams whose senior staff are
authorised and regulated by the FCA. The teams focus their advice
primarily on sourcing new investments for and arranging capital
raisings by the two funds. They operate behind information barriers
in view of the market sensitive nature of their activities and to
ensure the separation of "buy-side" and "sell-side" teams when John
Laing is selling investments to either fund. Both funds have a
right of first offer over certain investments should they be
offered for sale by the Group, and both are stand-alone entities
separate from the Group. Each fund maintains an independent board
of directors and is independently owned.
At 31 December 2016, the Group also managed two PPP investments
valued at GBP37.8 million held by JLPF.
Fee income from external IMS grew from GBP12.0 million in 2015
to GBP15.8 million in 2016.
Internal IMS John Laing actively manages its own Primary and
Secondary Investment portfolios. Our objective is to deliver the
base case returns on our investments as a minimum and additionally
to enhance those returns through active asset management. There are
two main strategies, value protection and value enhancement:
Value protection - examples
-- To target PPP projects which have revenue streams based on
availability of the underlying infrastructure asset rather than
revenues based on patronage or volume.
-- To ensure construction risks associated with design,
workmanship, cost overruns and delays lie with our construction
supply chain partners who are best able to manage them.
-- To ensure project operational performance and cost risks lie
principally with our service supply chain partners.
-- To eliminate the risk of increased interest costs on third
party project debt finance over the life of an infrastructure
project by swapping variable interest rates to fixed interest
rates.
-- To reduce the impact of short-term volatility on revenues in
our renewable energy projects by entering into short or medium term
power purchase agreements with electricity suppliers.
Value enhancement - examples
-- To promote a culture of continuous improvement with public
sector counter-parties: responding to their need for changes over
the life of PPP infrastructure projects, reducing the public sector
burden and, where possible, to generate incremental revenues
therefrom.
-- To optimise SPV management costs and project insurance
premiums through bulk purchasing or efficiency gains, thereby
increasing investor returns.
-- To optimise major maintenance and asset renewal costs over
the life of an infrastructure project and thereby increase investor
returns.
-- To maximise working capital efficiency within project companies.
-- To ensure projects are efficiently financed over their concessions or useful lives.
The total IMS income for the year ended 31 December 2016 of
GBP17.8 million (2015 - GBP13.4 million) includes GBP2.0 million
(2015 - GBP1.4 million) of fee income for the provision of
directors on project company boards.
Project Management Services
The Group also provides Project Management Services (PMS),
largely of a financial or administrative nature, to project
companies in which John Laing, JLIF or JLEN are investors. These
services are provided under Management Services Agreements
(MSAs).
On 30 November 2016, the Group completed the divestment of its
PMS activities in the UK to HCP Management Services Limited (HCP).
As part of the sale, 81 staff roles and 52 MSAs transferred to HCP.
The activities sold contributed GBP7.9 million of the total PMS
revenues of GBP14.9 million.
The remaining PMS activities are principally focused on MSAs
relating to projects outside the UK. At 31 December 2016, the Group
held 19 MSAs (31 December 2015 - 75 MSAs).
Projects Under Construction
John Laing's investments in projects are managed by the Asset
Management division. An update on significant projects under
construction is set out below.
Intercity Express Programme (IEP)
John Laing is in partnership with Hitachi to manage the
contracts that cover the design, manufacture, finance and delivery
into daily service and maintenance of a fleet of 122 Super Express
trains for the UK's Great Western Main Line (Phase 1 - 24%
interest) and the East Coast Main Line (Phase 2 - 30% interest).
With a total capital expenditure across the two phases of GBP3.4
billion, it is one of the largest PPP projects to be awarded.
Construction of the Phase 1 (Great Western) depots completed in
early 2016 and development of the Phase 2 (East Coast) depots is
progressing well. During 2016, trains commenced testing on the UK
rail network for Phase 1 and remain scheduled to become operational
during 2017.
In November 2016, it was announced that electrification of
certain parts of the Great Western Route being undertaken by
Network Rail on behalf of the Department for Transport would be
further delayed. The Department for Transport has asked the Phase 1
project company to convert all trains for use as bi-mode which can
be powered by diesel or electricity. We are not expecting any
negative impact on our investments from these delays.
New Royal Adelaide Hospital (NRAH), South Australia (17.3%
interest)
This project is currently one of the largest building
construction projects in Australia. Containing 700 single bedrooms
and 100 same-day beds, NRAH will have the capacity to admit over
80,000 patients per year. Delays relating to this project are
addressed in the Chief Executive Officer's Review. Technical
completion is now expected to occur in March 2017 followed by
commercial acceptance three months later.
Denver Eagle P3, Colorado, US (45% interest)
This project is to design, build, finance, maintain and operate
two commuter rail lines and a section of a third in the Denver
Metropolitan area. The fleet of rolling stock has been completed.
The first line (A Line, East Corridor) became operational in the
second quarter of 2016, and the second line (B Line, North West
Corridor electrified segment) in the third quarter. The third line
(G Line) is scheduled to become operational in the first quarter of
2017.
I-4 Ultimate, Florida, US (50% interest)
This availability-based road project has total capital
expenditure of US$2.3 billion and involves reconstructing 15 major
interchanges, building more than 140 bridges, adding four variable
toll Express Lanes, and completely rebuilding the general use lanes
of 21 miles of the existing I-4 interstate in central Florida.
Construction commenced in 2015 and is anticipated to finish in
2021.
New Perth Stadium, Western Australia (50% interest)
The New Perth Stadium will be a major sporting and entertainment
venue, capable of staging national and international events. The
stadium will predominantly be used for Australian-rules football
but will be able to readily accommodate other sports, as well as
entertainment events through the use of drop-in seats. Construction
works are on track for completion in advance of the 2018 Australian
Football League season.
New Generation Rollingstock, Queensland, Australia (40%
interest)
The project involves the provision and maintenance of 75 new
six-car trains for Queensland Rail. The first train is now being
tested with progress slower than expected in part due to reduced
availability of train drivers.
Nordergründe offshore wind farm, Germany (30% interest)
The final turbine (of 18) for this offshore wind farm was
installed in December 2016. In September 2016, the sub-contractor
responsible for provision of the offshore electrical sub-station
went into administration and this caused some delays to the
project. The project company, with the support of its lenders, has
entered into an agreement with the administrator and work on the
sub-station has resumed. Operations are due to start in late
2017.
Sydney Light Rail, New South Wales, Australia (32.5%
interest)
This light rail project will form an integral part of Sydney's
public transport infrastructure network and pedestrianise one of
its busiest streets, providing a commuter route into the Central
Business District and access to the south east of the city.
Services are scheduled to begin in the first half of 2019.
Speyside Biomass, UK (43.35% equity interest)
This 15MW combined heat and power plant supplies the adjacent
Macallan whisky distillery with heat and exports power to the grid.
Its fuel is virgin wood sourced from the local region. In January
2017, the plant achieved functional take-over.
Chris Waples
Group Managing Director, Asset Management
Portfolio Valuation
The portfolio valuation at 31 December 2016 was GBP1,175.9
million compared to GBP841.4 million at 31 December 2015. After
adjusting for realisations, cash yield and cash invested, this
represented a positive movement in fair value of GBP214.4 million
(22.3%):
Investments Listed
in projects investment Total
GBP million GBP million GBP million
----------------------------------------- ------------- ------------- -------------
Portfolio valuation at 1 January 2016 825.3 16.1 841.4
- Cash invested 301.5 - 301.5
- Cash yield (33.9) (0.9) (34.8)
- Proceeds from realisations (140.2) (6.4) (146.6)
Rebased valuation 952.7 8.8 961.5
- Movement in fair value 213.2 1.2 214.4
Portfolio valuation at 31 December 2016 1,165.9 10.0 1,175.9
----------------------------------------- ------------- ------------- -------------
Cash investment in respect of eight new projects (one PPP and
seven renewable energy) entered into during 2016 totalled GBP109.3
million. We committed to an additional stake in one existing PPP
project during the year for GBP37.0 million. In addition, equity
and loan note subscriptions of GBP155.2 million were injected into
existing projects in the portfolio as they progressed through, or
completed, construction.
During 2016, the Group completed the realisation of five
investments for a total consideration of GBP146.6 million. Cash
yield received from projects during the year totalled GBP34.8
million.
The movement in fair value of GBP214.4 million is analysed in
the table below. The fair value movement includes a net benefit of
GBP27.5 million from the amendment of benchmark discount rates for
certain investments in response to our understanding and experience
of the secondary market.
Year ended Year ended
31 December 2016 31 December 2015
Total Total
GBP million GBP million
------------------------------------------------ ------------------ ------------------
Unwinding of discount 77.1 61.0
Reduction of construction risk premia 52.7 22.8
Impact of foreign exchange movements 74.7 (9.2)
Change in macroeconomic assumptions (13.8) (9.4)
Change in power and gas price forecasts (17.6) (10.7)
Change in operational benchmark discount rates 27.5 19.5
Uplift on financial closes 31.0 27.1
Value enhancements and other changes (17.2) 31.0
Movement in fair value 214.4 132.1
------------------------------------------------ ------------------ ------------------
The net movement in fair value comprised unwinding of
discounting (GBP77.1 million), the reduction of construction risk
premia (GBP52.7 million), the reduction in operational benchmark
discount rates (GBP27.5 million), favourable foreign exchange
movements (GBP74.7 million) and uplift on financial closes (GBP31.0
million), offset by adverse movements from lower power and gas
price forecasts (GBP17.6 million), adverse movements in
macroeconomic forecasts (GBP13.8 million) and a net adverse
movement from value enhancements and other changes (GBP17.2
million). Foreign exchange movements are addressed further in the
Financial Review section.
The adverse fair value movement of GBP17.2 million relating to
value enhancements and other changes arose partly due to the
matters described in the Chief Executive Officer's Review in
relation to the Group's investments in New Royal Adelaide Hospital
and Manchester Waste VL Co. There were also value reductions on
some other investments, offset by value enhancements.
The split between primary and secondary investments is shown in
the table below:
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------- ------------ ------ ------------ ------
Primary Investment 696.3 59.2 405.9 48.2
Secondary Investment 479.6 40.8 435.5 51.8
---------------------- ------------ ------ ------------ ------
Portfolio valuation 1,175.9 100.0 841.4 100.0
---------------------- ------------ ------ ------------ ------
The increase in the Primary Investment portfolio is due to a
movement in fair value of GBP136.5 million, including value
enhancements and financial closes achieved during the period, and
cash invested of GBP287.1 million, offset by transfers to the
Secondary Investment portfolio of GBP89.6 million, cash from
investment realisation of GBP42.4 million and cash yield of GBP1.2
million.
Primary
Investment
GBP million
----------------------------------------- -------------
Portfolio valuation at 1 January 2016 405.9
- Cash invested 287.1
- Cash yield (1.2)
- Proceeds from realisations (42.4)
- Transfers to Secondary Investment (89.6)
----------------------------------------- -------------
Rebased valuation 559.8
- Movement in fair value 136.5
----------------------------------------- -------------
Portfolio valuation at 31 December 2016 696.3
----------------------------------------- -------------
The increase in the Secondary Investment portfolio is due to
transfers from the Primary Investment portfolio of GBP89.6 million,
cash investment of GBP14.4 million and a movement in fair value of
GBP77.9 million, offset by investment realisations during the year
of GBP104.2 million and cash yield of GBP33.6 million.
Secondary
Investment
GBP million
----------------------------------------- -------------
Portfolio valuation at 1 January 2016 435.5
- Cash invested 14.4
- Cash yield (33.6)
- Proceeds from realisations (104.2)
- Transfers from Primary Investment 89.6
----------------------------------------- -------------
Rebased valuation 401.7
- Movement in fair value 77.9
----------------------------------------- -------------
Portfolio valuation at 31 December 2016 479.6
----------------------------------------- -------------
Methodology
A full valuation of the investment portfolio is prepared every
six months, at 30 June and 31 December, with a review at 31 March
and 30 September, principally using a discounted cash flow
methodology. The valuation is carried out on a fair value basis
assuming that forecast cash flows from investments are received
until maturity of the underlying assets.
Under the Group's valuation methodology, a base case discount
rate for an operational project is derived from secondary market
information and other available data points. The base case discount
rate is then adjusted to reflect additional project-specific risks.
In addition, risk premia are added to reflect the additional risk
during the construction phase. The construction risk premia reduce
over time as the project progresses through its construction
programme, reflecting the significant reduction in risk once the
project reaches the operational stage.
The discounted cash flow valuation is based on future cash
distributions from projects forecast as at 31 December 2016,
derived from detailed financial models for each underlying project.
These incorporate the Group's expectations of likely future cash
flows, including value enhancements.
For the 31 December 2016 valuation, the overall weighted average
discount rate was 8.9% compared to the weighted average discount
rate at 31 December 2015 of 9.5%. The decrease was primarily due to
changes in operational discount rates for certain investments as
referred to earlier. The weighted average discount rate at 31
December 2016 was made up of 9.1% (31 December 2015 - 9.7%) for the
Primary Investment portfolio and 8.4% (31 December 2015 - 8.9%) for
the Secondary Investment portfolio.
The overall weighted average discount rate of 8.9% reflects the
fact that project cash flows for investments in the Primary
Investment portfolio tend to have a longer duration than for
investments in the Secondary Investment portfolio.
Compared to other market benchmarks, the weighted average
discount rate of 8.4% for the Secondary Investment portfolio
reflects (i) the impact of renewable energy projects which tend to
have higher discount rates than PPP projects and (ii) a few PPP
projects with above average discount rates because of location or
an element of volume/technology risk.
The discount rate ranges used in the portfolio valuation at 31
December 2016 were as set out below:
Primary Secondary
Investment Investment
Sector % %
-------------------------- ------------ ------------
PPP projects 7.3 - 11.3 7.0 - 10.0
Renewable energy projects 7.6 - 11.6 7.0 - 9.3
-------------------------- ------------ ------------
The shareholding in JLEN was valued at its closing market price
on 31 December 2016 of 106p per share (31 December 2015 - 103p per
share).
The Directors have obtained an independent opinion from a third
party, which has considerable expertise in valuing the type of
investments held by the Group, that the investment portfolio
valuation represented a fair market value in the market conditions
prevailing at 31 December 2016.
Macro - economic assumptions
During 2016, lower than previously forecast inflation and
deposit rates receivable on cash balances within projects had a
negative impact on the majority of forecast project cash flows
within the portfolio. Deposit rates are anticipated to remain at
low levels in the short-term. As mentioned above, strengthening of
foreign currencies against Sterling over the year to 31 December
2016 resulted in favourable foreign exchange movements of GBP74.7
million (excluding the effect of foreign exchange hedges as
described in the Financial Review section).
The table below summarises the main macro-economic assumptions
used in the portfolio valuation:
Assumption 31 December 31 December
2016 2015
--------------------- -------------- ------------ -------------- --------------
Long term inflation UK RPI & RPIX 2.75% 2.75%
Europe CPI 1.60% - 2.00% 2.00%
US CPI 2.25% - 2.50% 2.25% - 2.50%
Asia Pacific CPI 2.00% - 2.75% 2.00% - 2.75%
--------------------- -------------- ------------ -------------- --------------
Exchange rates GBP/EUR 1.1708 1.3592
GBP/AUD 1.7094 2.0340
GBP/USD 1.2329 1.4833
GBP/NZD 1.7754 2.1692
------------------------------------------------- -------------- --------------
Investments in overseas projects are fair valued based on the
spot exchange rate on the balance sheet date. As at 31 December
2016, a 5% movement of each relevant currency against Sterling
would decrease or increase the value of investments in overseas
projects by c.GBP27 million.
At 31 December 2016, based on a sample of seven of the larger
PPP investments by value, a 0.25% increase in inflation is
estimated to increase the value of PPP investments by GBP14 million
and a 0.25% decrease in inflation is estimated to decrease the
value of PPP investments by GBP13 million. Certain of the
underlying project companies incorporate some inflation
hedging.
Discount rate sensitivity
The weighted average discount rate applied at 31 December 2016
was 8.9% (31 December 2015 - 9.5%). The table below shows the
sensitivity of each 0.25% change in this rate of up to plus or
minus 0.75%.
Portfolio valuation Increase/(decrease) in valuation
Discount rate sensitivity GBP million GBP million
-------------------------- -------------------- ---------------------------------
+0.75% 1,083.6 (92.3)
+0.50% 1,113.0 (62.9)
+0.25% 1,143.8 (32.1)
- 1,175.9 -
-0.25% 1,209.5 33.6
-0.50% 1,244.7 68.8
-0.75% 1,281.6 105.7
-------------------------- -------------------- ---------------------------------
Further analysis of the portfolio valuation is shown in the
following tables:
by time remaining on project concession/OPERATIONAL life
31 December 2016 31 December 2015
GBP million % GBP million %
----------------------- ------------ ------ ------------ ------
Greater than 25 years 630.3 53.6 402.6 47.8
20 to 25 years 309.8 26.3 245.0 29.1
15 to 20 years 183.1 15.6 108.3 12.9
10 to 15 years 21.0 1.8 47.6 5.7
Less than 10 years 21.7 1.8 21.8 2.6
Listed investment 10.0 0.9 16.1 1.9
----------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
----------------------- ------------ ------ ------------ ------
PPP projects are based on long-term concessions and renewable
energy assets have long-term useful economic lives. As demonstrated
in the table above, 53.6% of the portfolio by value had a greater
than 25-year unexpired concession term or useful economic life
remaining at 31 December 2016, compared to 47.8% at 31 December
2015. The investment in JLEN, which represented 0.9% (31 December
2015 - 1.9%) of the portfolio valuation, is shown separately.
split between PPP and renewable energy
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Primary PPP 548.3 46.6 329.9 39.2
Primary renewable energy 148.0 12.6 76.1 9.0
Secondary PPP 345.6 29.4 328.0 39.0
Secondary renewable energy 124.0 10.5 91.3 10.9
Listed investment 10.0 0.9 16.1 1.9
---------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
---------------------------- ------------ ------ ------------ ------
Primary PPP investments made up the largest part of the
portfolio, representing 46.6% of the portfolio valuation at 31
December 2016, with Secondary PPP investments representing a
further 29.4%.
by revenue type
31 December 2016 31 December 2015
GBP million % GBP million %
------------------- ------------ ------ ------------ ------
Availability 855.0 72.7 603.7 71.8
Shadow toll 23.4 2.0 45.6 5.4
Volume 287.5 24.4 176.0 20.9
Listed investment 10.0 0.9 16.1 1.9
------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
------------------- ------------ ------ ------------ ------
Availability-based investments continued to make up the majority
of the portfolio, representing 72.7% of the portfolio valuation at
31 December 2016. Renewable energy investments comprised the
majority of the volume-based investments. The investment in JLEN,
which holds investments in PPP and renewable energy projects, is
shown separately.
by sector
31 December 2016 31 December 2015
GBP million % GBP million %
----------------------------------- ------------ ------ ------------ ------
Social infrastructure 122.1 10.4 125.4 14.9
Transport - other 395.3 33.6 277.4 33.0
Transport - rail rolling stock 280.4 23.8 158.7 18.9
Environmental - wind 252.9 21.5 154.5 18.3
Environmental - waste and biomass 115.2 9.8 109.3 13.0
Listed investment 10.0 0.9 16.1 1.9
----------------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
----------------------------------- ------------ ------ ------------ ------
Investments in the transport sector (excluding rail rolling
stock) continued to make up the largest proportion of the portfolio
valuation, representing 33.6% of the portfolio at 31 December 2016,
with rail rolling stock investments accounting for a further 23.8%.
Wind investments made up 21.5% of the portfolio by value, social
infrastructure investments - 10.4% and waste and biomass
investments - 9.8%. The portfolio underlying the JLEN shareholding
consists of a mix of renewable energy and environmental
projects.
by currency
31 December 2016 31 December 2015
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
Sterling 510.4 43.4 437.8 52.0
Euro 341.2 29.0 213.0 25.3
Australian dollar 181.4 15.4 88.2 10.5
US dollar 121.0 10.3 83.7 10.0
New Zealand dollar 21.9 1.9 18.7 2.2
-------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
-------------------- ------------ ------ ------------ ------
The percentage of investments denominated in foreign currencies
increased from 48.0% to 56.6%. This was partly caused by the
weakness of Sterling during 2016 but is also consistent with our
pipeline and the overseas jurisdictions we target.
by geographical region
31 December 2016 31 December 2015
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
UK 500.4 42.5 421.7 50.1
Continental Europe 341.2 29.0 213.0 25.3
North America 121.0 10.3 83.7 10.0
Asia Pacific 203.3 17.3 106.9 12.7
Listed investment 10.0 0.9 16.1 1.9
-------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
-------------------- ------------ ------ ------------ ------
Investments in the UK continued to make up the largest single
region in the portfolio valuation, representing 42.5% of the
portfolio at 31 December 2016. Continental Europe remained the next
largest category with 29.0%. Investments in projects located in the
Asia Pacific region made up 17.3% and investments in North America
10.3%. A substantial majority of the JLEN portfolio consists of
investments in UK based projects.
by investment size
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Five largest projects 520.2 44.2 358.3 42.6
Next five largest projects 236.4 20.1 202.7 24.1
Other projects 409.3 34.8 264.3 31.4
Listed investment 10.0 0.9 16.1 1.9
---------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
---------------------------- ------------ ------ ------------ ------
The top five investments in the portfolio made up 44.2% of the
portfolio at 31 December 2016. The next five largest investments
made up a further 20.1%, with the remaining investments in the
portfolio comprising 34.8%. The shareholding in JLEN made up 0.9%
of the portfolio.
Financial Review
Basis of preparation
Statutory financial information for the year ended 31 December
2016 is presented in the Group Income Statement, the Group
Statement of Comprehensive Income and the Group Statement of
Changes in Equity alongside comparative statutory and pro forma
financial information for the year ended 31 December 2015. Both the
Group Balance Sheet at 31 December 2016 and at 31 December 2015 are
presented on a statutory basis. The comparative pro forma financial
information was prepared on the basis that the restructuring
associated with the Company's admission to listing in February
2015, as described in more detail in the Financial Review section
of the 2015 Annual Report, had been in place throughout the year
ended 31 December 2015. In the opinion of the Directors, presenting
pro forma information for 2015 was necessary in order to give a
true and fair view of the state of the Company's affairs for that
year.
The statutory and pro forma financial information has been
prepared on the historical cost basis except for the revaluation of
the investment portfolio and financial instruments that are
measured at fair value at the end of each reporting period. The
Company meets the definition of an Investment Entity set out in
IFRS 10. Investment Entities are required to account for all
investments in controlled entities, as well as investments in
associates and joint ventures, at fair value through profit or loss
(FVTPL), except for those directly-owned subsidiaries that provide
investment-related services or engage in permitted
investment-related activities with investees (Service Companies).
Service Companies are consolidated rather than recorded at
FVTPL.
Project companies in which the Group invests are described as
"non-recourse", which means that providers of debt to such project
companies do not have recourse to John Laing beyond its equity
commitments in the underlying projects. Subsidiaries through which
the Company holds its investments in project companies, which are
held at FVTPL, and subsidiaries that are Service Companies, which
are consolidated, are described as "recourse".
Re-presented financial RESULTS
As described above, the Company meets the criteria for being an
Investment Entity under IFRS 10 and accordingly the Company is
required to fair value its investments in all subsidiaries except
for those directly-owned subsidiaries that provide
investment-related services, and do not themselves qualify as
Investment Entities; it consolidates such subsidiaries on a line by
line basis.
Included within the subsidiaries that the Company fair values in
its financial statements are recourse subsidiaries through which
the Company holds its investments in non-recourse project
companies. These recourse subsidiaries have, in addition to
investments in non-recourse project companies, other assets and
liabilities, including recourse cash balances, which are included
within the Company's investments at FVTPL. For management reporting
purposes, these other assets and liabilities are reported
separately from the investments in non-recourse project companies
as are certain income and costs that do not arise directly from
these investments in project companies. Under management reporting,
it is the investments in non-recourse project companies that are
considered as investments of the Group.
The Directors of the Company use the management reporting basis,
including when reviewing the level of financial resources and
deciding where these resources should be utilised, when making
business decisions. Therefore, the Directors believe it is helpful
to readers of the Company's financial statements to set out in this
Financial Review the Group Income Statement, the Group Balance
Sheet and the Group Cash Flow Statement on the management reporting
basis. When set out on the management reporting basis, these
statements are described as "re-presented".
Re-presented income statement
Preparing the re-presented income statement involves a
reclassification of certain amounts within the Group Income
Statement principally in relation to the net gain on investments at
FVTPL. The net gain on investments at FVTPL in the Group Income
Statement includes fair value movements from the portfolio of
investments in non-recourse project companies but also comprises
income and costs that do not arise directly from investments in
this portfolio, including investment fees earned from project
companies.
Year ended 31
December 2016 2015(d)
---------------------------------------------------- ------------------
Re-presented
IFRS Group Income Re-presented Re-presented income statement
Statement Adjustments income statement income statement line items
------------------ ------------ ------------------ ------------------ ------------------
GBP million GBP million GBP million GBP million
Fair value Fair value
movements - movements -
investment investment
portfolio 214.4 - 214.4 132.1 portfolio
Fair value
movements - Fair value
other (2.6) (0.6)(a) (3.2) (7.5) movements - other
Investment fees Investment fees
from projects 7.0 - 7.0 7.7 from projects
------------------ ------------------ ------------ ------------------ ------------------ ------------------
Net gain on
investments at
fair value
through profit
or loss 218.8 (0.6) 218.2 132.3
IMS revenue 17.8 - 17.8 13.4 IMS revenue
PMS revenue 14.9 - 14.9 17.0 PMS revenue
Recoveries on Recoveries on
financial close 7.5 - 7.5 3.4 financial close
Other income 1.8 (1.8)(b) - -
------------------ ------------------ ------------ ------------------ ------------------ ------------------
Other income 42.0 (1.8) 40.2 33.8
Total income 260.8 (2.4) 258.4 166.1
Third party costs (7.7) - (7.7) (6.6) Third party costs
Staff costs (34.1) - (34.1) (32.5) Staff costs
General overheads (13.2) - (13.2) (11.7) General overheads
Other net costs (1.8) 1.1(a,b) (0.7) (3.6) Other net costs
Pension and other
charges (1.6) 1.6(c) - -
Administrative
expenses (58.4) 2.7 (55.7) (54.4)
EBIT 202.4 0.3 202.7 111.7
Finance costs (10.3) 2.6(a,c) (7.7) (6.6) Finance costs
Pension and other Pension and other
charges - (2.9)(c) (2.9) (4.2) charges
Profit before tax 192.1 - 192.1 100.9
------------------ ------------------ ------------ ------------------ ------------------ ------------------
Notes:
a) Adjustments primarily comprise a GBP1.5 million provision
offset by a GBP0.8 million release of other provisions reclassified
from 'fair value movements - other' to 'other net costs'; as well
as GBP1.3 million interest income reclassified from 'fair value
movements - other to 'finance costs'.
b) Adjustments primarily comprise GBP1.6 million part proceeds
received from the sale of the PMS UK business reclassified from
'other income' to 'other net costs' and GBP0.2 million of other
income from projects reclassified from 'other income' to 'other net
costs'.
c) Under IAS 19, the costs of the pension schemes comprise a
service cost of GBP1.6 million (2015 - GBP1.5 million), included in
administrative expenses in the Group Income Statement, and a
finance charge of GBP1.3 million (2015 - GBP2.7 million), included
in finance costs in the Group Income Statement. These amounts are
combined together under management reporting.
d) For a reconciliation between the IFRS Group Income Statement
and re-presented income statement for the year ended 31 December
2015, please see the Additional Financial Information.
The results for the year are also shown by operating segment in
the table below.
Primary Secondary Asset
Investment Investment Management Total
2016 2015 2016 2015 2016 2015 2016
GBP GBP GBP GBP GBP GBP GBP 2015
million million million million million million million GBP million
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
Profit
before tax
for
reportable
segments 113.1 50.7 57.1 43.0 19.9 15.5 190.1 109.2
Post
retirement
charges (2.9) (4.2)
Other net
gain/(loss) 4.9 (4.1)
Profit
before tax 192.1 100.9
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
Profit before tax from continuing operations for the year ended
31 December 2016 was GBP192.1 million (2015 - GBP100.9 million).
The main reason for the higher profit before tax was a higher fair
value movement compared to 2015, which in turn was principally as a
result of favourable foreign exchange rate movements.
-- The main profit contributor in 2016 was the Primary
Investment division. Its contribution was higher than last year
primarily because of a higher fair value movement, which in turn
was principally as a result of favourable foreign exchange rate
movements and a higher value uplift from the reduction of
construction risk premia offset by an adverse fair movement
relating to value enhancements and other changes referred to in the
Portfolio Valuation section.
-- The higher contribution in 2016 from the Secondary Investment
division was also primarily as a result of foreign exchange gains
on the portfolio as well as higher value enhancements offset by
adverse other changes referred to in the Portfolio Valuation
section.
-- The higher contribution in 2016 from the Asset Management
division was principally due to higher fee income from IMS as a
result of increased external Assets under Management.
The movement in fair value on the portfolio for the year ended
31 December 2016, after adjusting for the impact of investments,
cash yield and realisations, was a GBP214.4 million gain (2015 -
GBP132.1 million gain). The higher value uplift is primarily due to
favourable foreign exchange movements in 2016 compared to the
previous year. For further details of the movement in fair value on
the portfolio, see the Portfolio Valuation section.
There were other fair value movements for the year ended 31
December 2016 of a GBP3.2 million loss which comprised net foreign
exchange losses of GBP11.2 million (principally comprising GBP11.9
million losses on foreign exchange hedges held by the Group during
the year and at 31 December 2016 - see the foreign currency
exposure section in this review for further details) offset by fair
value gains of GBP0.9 million in respect of non-portfolio
investments in small joint ventures, GBP6.6 million of tax income
and a partial release of GBP0.5 million of a provision created in
the year ended 31 December 2015. For the year ended 31 December
2015, other fair value movements primarily comprised a loss of
GBP8.2 million from providing against a loan to a project company
in the UK healthcare sector.
The Group earned IMS revenue of GBP17.8 million (2015 - GBP13.4
million) for investment advisory and asset management services
primarily to the external funds JLIF and JLEN, with the increase
from last year due to the higher level of external Assets under
Management.
The Group also earned PMS revenue of GBP14.9 million (2015 -
GBP17.0 million). As mentioned in the Chief Executive Officer's
Review, on 30 November 2016, the Group completed the sale of the
business and assets of its PMS activities in the UK to HCP. As part
of the sale, 81 staff roles and 52 MSAs transferred to HCP. The
activities sold contributed approximately GBP7.9 million of the
GBP14.9 million PMS revenues for the year ended 31 December 2016
referred to above and had attributable costs of c.GBP6 .0
million.
The Group achieved recoveries of bidding costs on financial
closes of GBP7.5 million in the year ended 31 December 2016 (2015 -
GBP3.4 million), in line with third party bid costs incurred in the
year.
Staff costs by division are shown below:
Primary Secondary Asset
Investment Investment Management Central Total
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Staff
costs 9.6 9.0 - - 17.1 17.0 7.4 6.5 34.1 32.5
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Included within Asset Management staff costs are costs relating
to:
Investment Management Project Management Total Asset
Services Services Management
2016 2015 2016 2015 2016 2015
GBP million GBP million GBP million GBP million GBP million GBP million
------------- ------------- ------------- ------------- ------------- ------------- -------------
Staff costs 9.0 8.1 8.1 8.9 17.1 17.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
The overall increase in staff costs is principally due to the
higher costs under IFRS 2 of share-based incentive schemes with
costs in the year ended 31 December 2016 of GBP2.0 million compared
to GBP0.7 million in the prior year. See note 5 of the Group
financial statements for further details on the share-based
incentive schemes.
Other net costs of GBP3.6 million in 2015 primarily comprised
staff incentive costs in relation to the Company's listing in
February 2015.
Finance costs of GBP7.7 million (2015 - GBP6.6 million) include
costs arising on the corporate banking facilities net of any
interest income, with the increase from last year primarily due to
higher average usage of the corporate banking facilities.
The Group's overall tax credit on profit on continuing
activities for 2016 was GBP4.8 million (2015 - charge of GBP0.1
million). This comprised a tax charge of GBP1.8 million (2015 -
GBP2.1 million) in recourse group subsidiary entities that are
consolidated (shown in the 'Tax' line of the Group Income
Statement), primarily in relation to group relief payable to
entities held at FVTPL, and a tax credit of GBP6.6 million (2015 -
GBP2.0 million) in recourse group subsidiary entities that are held
at FVTPL (included within 'net gain on investments at fair value
through profit or loss' on the Group Income Statement), including
group relief receivable from recourse group subsidiary entities
that are consolidated together with group and consortium relief
received from project companies. The contributions made to JLPF are
tax deductible when paid and, as a result, there is minimal tax
payable by the UK holding and asset management activities of the
Group. Capital gains from the realisation of investments in
projects are generally exempt from tax under the UK's Substantial
Shareholding Exemption for shares in trading companies or under the
overseas equivalent. To the extent this exemption is not available,
gains may be sheltered using current year losses or losses brought
forward within the Group's holding companies. There are no losses
in the Company but there are tax losses in recourse group
subsidiary entities that are held at FVTPL.
In November 2016 and January 2017, HM Treasury issued draft
provisions for the Finance Bill 2017, which included new proposed
legislation to restrict tax deductible interest to 30% of a
company's earnings before interest, tax, depreciation and
amortisation (EBITDA) with effect from 1 April 2017. This followed
the publication by HM Treasury of a consultation in May 2016 on
Base Erosion and Profit Shifting (BEPS) to which the Company
responded as part of industry representative forums. The Company
holds a provision as at 31 December 2016 for the estimated impact
of the new proposed legislation on the basis that the proposed new
legislation had been enacted at that date; this provision is not
material in the context of the Company's net asset value at this
date.
Re-presented balance sheet
The re-presented balance sheet is reconciled to the Group
Balance Sheet at 31 December 2016 below. The re-presented balance
sheet involves the reclassification of certain amounts within the
Group Balance Sheet principally in relation to assets and
liabilities of GBP76.6 million (31 December 2015 - GBP123.4
million) within certain of the Company's recourse subsidiaries that
are included in investments at FVTPL in the Group Balance sheet as
a result of the requirement under IFRS 10 to fair value investments
in these subsidiaries.
31 December 2016 2015(g)
----------------------------------------------------- ------------------
Re-presented
IFRS Group Re-presented Re-presented balance sheet
Balance Sheet Adjustments balance sheet balance sheet line items
------------------ ------------- ------------------ ------------------ ------------------
GBP million GBP million GBP million GBP million
Non-current assets
Plant and
equipment 0.3 (0.3)(c) - -
Investments at Portfolio book
FVTPL 1,257.5 (81.6)(a) 1,175.9 841.4 value
Cash collateral
- 23.7(b) 23.7 123.9 balances
Non-portfolio
- 0.3(a) 0.3 0.5 investments
Deferred tax
assets 1.0 (1.0)(c) - -
Other long term
- 3.7(c,e) 3.7 5.6 assets
------------------ ------------- ------------------ ------------------
1,258.8 (55.2) 1,203.6 971.4
------------------ ------------- ------------------ ------------------
Current assets
Trade and other
receivables 7.4 (7.4)(d) - -
Cash and cash Cash and cash
equivalents 1.6 51.5(a) 53.1 5.5 equivalents
------------------ ------------- ------------------ ------------------
9.0 44.1 53.1 5.5
------------------ ------------- ------------------ ------------------
Total assets 1,267.8 (11.1) 1,256.7 976.9
------------------ ------------- ------------------ ------------------
Current
liabilities
Working capital
and other
- (5.6)(b,d,e) (5.6) (22.1) balances
Current tax
liabilities (4.1) 4.1(d) - -
Borrowings (161.4) (3.6)(e) (165.0) (19.0) Cash borrowings
Trade and other
payables (14.7) 14.7(d) - -
------------------ ------------- ------------------ ------------------
(180.2) 9.6 (170.6) (41.1)
------------------ ------------- ------------------ ------------------
Net current
liabilities (171.2) 53.7 (117.5) (35.6)
------------------ ------------- ------------------ ------------------
Non-current
liabilities
Retirement benefit Pension deficit
obligations (69.3) 8.0(f) (61.3) (38.9) (IAS 19)
Other retirement
benefit
- (8.0)(f) (8.0) (7.3) obligations
Provisions (1.5) 1.5(d) - -
------------------ ------------- ------------------ ------------------
(70.8) 1.5 (69.3) (46.2)
------------------ ------------- ------------------ ------------------
Total liabilities (251.0) 11.1 (239.9) (87.3)
------------------ ------------- ------------------ ------------------
Net assets 1,016.8 - 1,016.8 889.6
------------------ ------------- ------------------ ------------------
Notes:
a) Investments at fair value through profit or loss (FVTPL)
comprise: portfolio valuation of GBP1,175.9 million (31 December
2015 - GBP841.4 million), other investments not included in the
portfolio valuation of GBP0.3 million (31 December 2015 - GBP0.5
million) and other assets and liabilities within recourse
investment entity subsidiaries of GBP81.3 million (31 December 2015
- GBP123.4 million) (see note 11 to the Group financial
statements). Re-presented cash and cash equivalents increased from
GBP1.6 million (31 December 2015 - GBP1.1 million) on the Group
Balance Sheet because of the inclusion of available cash balances
in recourse group investment subsidiaries of GBP51.5 million (31
December 2015 - GBP4.4 million) excluding cash collateral balances
of GBP23.7 million (31 December 2015 - GBP123.9 million); see the
Financial Resources section in this Financial Review.
b) Other assets and liabilities within recourse investment
entity subsidiaries of GBP81.3 million (31 December 2015 - GBP123.4
million) referred to in note (a) include (i) cash and cash
equivalents of GBP75.2 million (31 December 2015 - GBP128.3
million), of which GBP23.7 million (31 December 2015 - GBP123.9
million) is held to collateralise future investment commitments,
and (ii) positive working capital and other balances of GBP6.1
million (31 December 2015 - GBP4.9 million).
c) Plant and equipment and deferred tax assets are combined as other long term assets.
d) Trade and other receivables, current tax liabilities, trade
and other payables and provisions are combined as working capital
and other balances.
e) Borrowings comprise cash borrowings of GBP165.0 million (31
December 2015 - GBP19.0 million) net of unamortised financing costs
of GBP3.6 million (31 December 2015 - GBP4.1 million), with the
non-current portion of GBP2.4 million (31 December 2015 - GBP3.0
million) re-presented as other long term assets and the current
portion of GBP1.2 million (31 December 2015 - GBP1.1 million)
re-presented as working capital and other balances.
f) Total retirement benefit obligations are shown in their
separate components as in note 18 to the Group financial
statements.
g) For a reconciliation between the IFRS Group Balance Sheet and
re-presented balance sheet as at 31 December 2015, please see the
Additional Financial Information.
Net assets are also shown by operating segment in the table
below.
Primary Secondary Asset
Investment Investment Management Total
As at 31 December 2016 2015 2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Portfolio valuation 696.3 405.9 479.6 435.5 - - 1,175.9 841.4
Other net current
liabilities (1.6) (16.0)
Group net
(borrowings)/cash(1) (88.2) 110.4
Post-retirement
obligations (69.3) (46.2)
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Group net assets 1,016.8 889.6
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Note:
(1) Short-term cash borrowings of GBP165.0 million (31 December
2015 - GBP19.0 million) net of cash balances of GBP76.8 million (31
December 2015 - GBP129.4 million), of which GBP23.7 million was
held to collateralise future investment commitments (31 December
2015 - GBP123.9 million).
Net asset value increased from GBP889.6 million at 31 December
2015 to GBP1,016.8 million at 31 December 2016.
The Group's portfolio of investments in project companies and
listed investments was valued at GBP1,175.9 million at 31 December
2016 (31 December 2015 - GBP841.4 million). The valuation
methodology and details of the portfolio value are provided in the
Portfolio Valuation section.
The Group held cash balances of GBP76.8 million at 31 December
2016 (31 December 2015 - GBP129.4 million) of which GBP23.7 million
(31 December 2015 - GBP123.9 million) was held to collateralise
future investment commitments (see the Financial Resources section
below for more details).
Working capital and other balances (a negative amount) were
lower primarily because of lower provisions at 31 December 2016,
higher accruals at 31 December 2015 relating to IPO incentive
payments and a net positive fair value at 31 December 2016 on
foreign exchange hedges.
The combined accounting deficit in the Group's defined benefit
pension and post-retirement medical schemes at 31 December 2016 was
GBP69.3 million (31 December 2015 - GBP46.2 million). The Group
operates two defined benefit schemes in the UK - the John Laing
Pension Fund (JLPF) and the John Laing Pension Plan (the Plan).
Both schemes are closed to new members and future accrual. Under
IAS 19, at 31 December 2016, the JLPF had a deficit of GBP64.2
million (31 December 2015 - GBP38.9 million) whilst the Plan had a
surplus of GBP2.9 million (31 December 2015 - GBP2.7 million; this
surplus was not recognised at 31 December 2015. The liability at 31
December 2016 under the post-retirement medical scheme was GBP8.0
million (31 December 2015 - GBP7.3 million).
The pension deficit in JLPF is based on a discount rate applied
to pension liabilities of 2.80% (31 December 2015 - 3.75%) and long
term RPI of 3.2% (31 December 2015 - 3.0%). The amount of the
deficit is dependent on key assumptions, principally: inflation;
the discount rate used; and the anticipated longevity of members.
The discount rate, as prescribed by IAS 19, is based on yields from
high quality corporate bonds. The deficit (under IAS 19) has
increased from last year primarily due to an increase in JLPF's
liabilities, as a result of the lower discount rate and higher long
term RPI, partly offset by cash contributions to JLPF of GBP18.1
million.
Following a triennial actuarial review of the JLPF as at 31
March 2016, a seven-year deficit repayment plan has been agreed
with the JLPF Trustee. The actuarial deficit of GBP171 million at
31 March 2016 is to be repaid as follows:
By 31 March GBP million
------------- ------------
2017 24.5
2018 26.5
2019 29.1
2020 24.9
2021 25.7
2022 26.4
2023 24.6
------------- ------------
Re-presented cash flow statement
The Group Cash Flow Statement includes the cash flows of the
Company and certain recourse subsidiaries that are consolidated
(Service Companies). The Group's recourse investment entity
subsidiaries, through which the Company holds its investments in
non-recourse project companies, are held at fair value in the
financial statements and accordingly cash flows relating to
investments in the portfolio are not included in the Group Cash
Flow Statement. Investment-related cash flows are disclosed in note
11 to the financial statements.
The re-presented cash flow statement shows all recourse cash
flows that arise in both the consolidated group (the Company and
its consolidated subsidiaries) and in the recourse investment
entity subsidiaries.
Year ended 31 December 2016 2015
------------------------ ------------------------
Re-presented cash flows Re-presented cash flows
GBP million GBP million
Cash yield 36.8 44.3
Operating cash flow (10.9) (15.9)
Net foreign currency exchange impact (18.2) 2.8
Total operating cash flow 7.7 31.2
------------------------------------------------------------------ ------------------------ ------------------------
Cash contributions to JLPF (including PPF levy) (18.4) (47.5)
Cash investment in projects (301.5) (142.9)
Proceeds from realisations 146.6 85.9
------------------------------------------------------------------ ------------------------ ------------------------
Net investing cash flows (154.9) (57.0)
------------------------------------------------------------------ ------------------------ ------------------------
Finance charges (6.8) (13.4)
Capital raise (net of costs) - 123.0
Dividend payments (26.2) (5.9)
Net cash (outflow)/inflow from financing activities (33.0) 103.7
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group cash (outflow)/inflow (198.6) 30.4
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group opening net cash balances 110.4 80.0
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group closing net (debt)/cash balances (88.2) 110.4
------------------------------------------------------------------ ------------------------ ------------------------
Reconciliation to line items on re-represented Group Balance
Sheet
------------------------------------------------------------------ ------------------------ ------------------------
Cash collateral balances 23.7 123.9
------------------------------------------------------------------ ------------------------ ------------------------
Other cash balances 53.1 5.5
------------------------------------------------------------------ ------------------------ ------------------------
Total cash and cash equivalents 76.8 129.4
------------------------------------------------------------------ ------------------------ ------------------------
Cash borrowings (165.0) (19.0)
------------------------------------------------------------------ ------------------------ ------------------------
Net (debt)/cash (88.2) 110.4
------------------------------------------------------------------ ------------------------ ------------------------
Cash yield comprises GBP34.8 million (2015 - GBP38.9 million)
from the investment portfolio and GBP2.0 million (2015 - GBP5.4
million) from non-portfolio investments.
Operating cash flow in the year ended 31 December 2016 was less
adverse than in 2015 primarily due to higher recoveries of costs on
financial closes and as a result of amounts paid in the prior year
in relation to the Company's IPO in 2015.
Total operating cash flows are net of an adverse foreign
exchange impact of GBP18.2 million (2015 - favourable impact of
GBP2.8 million), principally arising on foreign exchange hedges as
a result of the weakening of Sterling against relevant currencies
during the year.
In the year, in addition to the payment of the PPF levy, the
Group made a cash contribution to JLPF of GBP18.1 million (2015 -
regular cash contributions of GBP27.0 million, special cash
contributions of GBP20.0 million).
During the year, cash of GBP301.5 million (31 December 2015 -
GBP142.9 million) was invested in project companies. In the same
period, investments in six projects were realised (including four
investments to JLIF and two investments to JLEN) for total proceeds
of GBP140.2 million (2015 - GBP85.9 million from the realisation of
seven investments for total proceeds of GBP86.3 million net of a
GBP0.4 million price adjustment for a project disposed of in 2014).
Additionally, a 2.2% shareholding in JLEN was sold for GBP6.4
million (2015 - GBPnil).
Finance charges were higher in 2015 due to the payment of
upfront costs in relation to the committed corporate banking
facilities entered into at the time of IPO.
The capital raise, net of costs, from the Company's IPO in 2015
was GBP123.0 million.
Dividend payments of GBP26.2 million in the year ended 31
December 2016 comprise the final dividend for 2015 of GBP19.4
million and the interim dividend for 2016 of GBP6.8 million (2015 -
interim dividend for 2015 of GBP5.9 million).
FINANCIAL RESOURCES
At 31 December 2016, the Group had principal committed corporate
banking facilities of GBP400.0 million, expiring in March 2020 (31
December 2015 - GBP350.0 million), which are primarily used to back
investment commitments. These facilities were increased by GBP50.0
million in June 2016. The Group also had surety facilities of
GBP50.0 million backed by committed liquidity facilities both
expiring in March 2018. Net available financial resources at 31
December 2016 were GBP168.1 million (31 December 2015 - GBP180.1
million).
Analysis of Group financial resources
31 December 31 December
2016 2015
GBP million GBP million
------------------------------------------ ------------- -------------
Total committed facilities 450.0 350.0
------------------------------------------ ------------- -------------
Letters of credit issued under corporate
banking facilities (see below) (112.6) (154.2)
Letters of credit issued under surety (50.0) -
facilities (see below)
Other guarantees and commitments (6.5) (1.1)
Short term cash borrowings (165.0) (19.0)
------------------------------------------ ------------- -------------
Utilisation of facilities (334.1) (174.3)
------------------------------------------ ------------- -------------
Headroom 115.9 175.7
Cash and bank deposits(1) 53.1 5.5
Less unavailable cash (0.9) (1.1)
------------------------------------------ ------------- -------------
Net available financial resources 168.1 180.1
------------------------------------------ ------------- -------------
(1) Cash and bank deposits excluding cash collateral
balances
Letters of credit issued under the committed corporate banking
facilities of GBP112.6 million (31 December 2015 - GBP154.2
million) and under additional surety facilities of GBP50.0 million
(31 December 2015 - GBPnil) together with cash collateral represent
future cash investment by the Group into underlying projects in the
Primary Investment portfolio.
31 December 31 December
2016 2015
GBP million GBP million
-------------------------------------- ------------- -------------
Letters of credit issued 162.6 154.2
Cash collateral 23.7 123.9
-------------------------------------- ------------- -------------
Future cash investment into projects 186.3 278.1
-------------------------------------- ------------- -------------
The table below shows the letters of credit issued analysed by
investment and the date or dates when cash is expected to be
invested into the underlying project at which point the letter of
credit would expire:
Letter of Expected
credit issued date of cash
Project GBP million investment
---------------------------------------- --------------- ----------------------
New Generation Rollingstock, Australia 24.3 Jan 2017 to Oct 2017
Cramlington Biomass, UK 27.0 Oct 2017
IEP (Phase 2), UK 72.7 Mar 2018
Sterling Wind Farm, US 18.1 May 2017 to Sept 2017
Kiata Wind Farm, Australia 16.0 Jan 2017 to Oct 2017
New Royal Adelaide Hospital, Australia 4.5 June 2017
Total 162.6
---------------------------------------- --------------- ----------------------
The table below shows the cash collateral balances at 31
December 2016 analysed by investment and the date when the cash
collateral is expected to be invested into the underlying
project:
Cash
collateral Expected
amount date of cash
Project GBP million investment
------------------------------ ------------- ---------------------
New Perth Stadium, Australia 3.3 Jan 2017 to Dec 2017
I-77 Managed Lanes, US 20.1 Oct 2017 to Nov 2018
IEP (Phase 1), UK 0.3 July 2017
Total 23.7
------------------------------ ------------- ---------------------
Cash collateral is included within 'investments at fair value
through profit or loss' in the Group Balance Sheet.
There are significant non-recourse borrowings within the project
companies in which the Group invests. The interest rate exposure on
the debt of such project companies is, in most circumstances, fixed
on financial close, through a long-dated bond or fixed rate debt,
or through the fixing of floating rate bank debt via interest rate
swaps. Given this, the impact on the Group's returns from
investments in project companies of changes in interest rates on
project borrowings is minimal. There is an impact from changes in
interest rates on the investment income from monies held on deposit
both at Group level and within project companies but such an effect
is not material in the context of the Group Balance Sheet.
FOREIGN CURRENCY EXPOSURE
The Group regularly reviews the sensitivity of its balance sheet
to changes in exchange rates relative to Sterling and to the timing
and amount of forecast foreign currency denominated cash flows. As
set out in the Portfolio Valuation section, the Group's portfolio
comprises investments denominated in Sterling, Euro, and
Australian, US and New Zealand Dollars. As a result of foreign
exchange movements in the year ended 31 December 2016, there was a
favourable fair value movement of GBP74.7 million in the portfolio
valuation between 31 December 2015 and 31 December 2016. This
positive impact was partly offset by net losses, both realised and
unrealised of GBP11.9 million from foreign exchange hedges held by
the Group during 2016 on part of its Euro-denominated investments
(GBP152.5 million) and on part of its New Zealand
Dollar-denominated investment (GBP10.9 million). The net losses on
other hedges held by the Group against cash collateral balances
currencies were offset by foreign exchange translation gains on
those and other balances.
The Group may apply an appropriate hedge to a specific currency
transaction exposure, which could include borrowing in that
currency or entering into forward foreign exchange contracts. An
analysis of the portfolio value by currency is set out in the
Portfolio Valuation section.
Letters of credit in issue at 31 December 2016 of GBP162.6
million (31 December 2015 - GBP154.2 million) are analysed by
currency as follows:
31 December 31 December
2016 2015
Letters of credit by currency GBP million GBP million
------------------------------- ------------- -------------
Sterling 99.7 122.1
US dollar 18.1 11.7
Australian dollar 44.8 20.4
------------------------------- ------------- -------------
162.6 154.2
------------------------------- ------------- -------------
Cash collateral at 31 December 2016 of GBP23.7 million (31
December 2015 - GBP123.9 million) is analysed by currency as
follows:
31 December 31 December
2016 2015
Cash collateral by currency GBP million GBP million
----------------------------- ------------- -------------
Sterling 0.3 58.7
US dollar 20.1 16.7
Australian dollar 3.3 48.5
----------------------------- ------------- -------------
23.7 123.9
----------------------------- ------------- -------------
GOING CONCERN
The Group has committed corporate banking facilities until March
2020 and has sufficient resources available to meet its committed
capital requirements, investments and operating costs for the
foreseeable future. Accordingly, the Group has adopted the going
concern basis in the preparation of its financial statements for
the year ended 31 December 2016.
Patrick O'D Bourke
Group Finance Director
PRINCIPAL Risks AND RISK MANAGEMENT
The effective management of risks within the Group is essential
to the successful delivery of the Group's objectives. The Board is
responsible for ensuring that risks are identified and
appropriately managed across the Group and has delegated to the
Audit & Risk Committee responsibility for reviewing the
effectiveness of the Group's internal controls, including the
systems established to identify, assess, manage and monitor risks.
The Group's risk appetite when making decisions on investment
commitments or potential realisations is assessed by reference to
the expected impact on NAV.
During the year, the previous Audit Committee was renamed the
Audit & Risk Committee and its remit was expanded. Under its
new remit, the Committee has a greater involvement in overseeing
the effective management of risks within the Group.
The principal internal controls that operated throughout 2016
and up to the date of this Annual Report include:
-- an organisational structure which provides adequate
segregation of responsibilities, clearly defined lines of
accountability, delegated authority to trained and experienced
staff and extensive reporting;
-- clear business objectives aligned with the Group's risk appetite;
-- risk reporting, including identification of risks through
Group-wide risk registers, that is embedded in the regular
management reporting of business units and is communicated to the
Board; and
-- an independent internal audit function, which reports to the
Audit & Risk Committee. The external auditor also reports to
the Audit & Risk Committee on the effectiveness of financial
controls relevant to the audit.
The Group's Internal Audit function has several objectives, in
particular:
-- to provide independent assurance to the Board, through the
Audit & Risk Committee, that internal control processes,
including those related to risk management, are relevant, fit for
purpose, effective and operating throughout the business;
-- to provide a deterrent to fraud and to provide another layer
of assurance that the Group is meeting its FCA regulatory
requirements; and
-- to provide advice on efficiency improvements to internal control processes.
Internal Audit is independent of the business and reports
functionally to the Group Finance Director and directly to the
Chairman of the Audit & Risk Committee. The Group Head of
Internal Audit meets regularly with senior management and the Audit
& Risk Committee to discuss key findings and management actions
undertaken.
The Group Head of Internal Audit can call a meeting with the
Chairman of the Audit & Risk Committee at any time and meets
privately with the Audit & Risk Committee, without senior
management present, as and when required, but at least
annually.
A Management Risk Committee, comprising senior members of
management and chaired by the Group Finance Director, assists the
Board, Audit & Risk Committee, and Executive Committee in
formulating and enforcing the Group's risk management policy. The
Head of Internal Audit attends each meeting of the Management Risk
Committee. It reports formally to the Audit & Risk
Committee.
The Directors confirm that they have monitored throughout the
year and carried out (i) a review of the effectiveness of the
Group's risk management and internal control systems and (ii) a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency and liquidity. No material weaknesses were
identified from the review of the Group's risk management and
internal control systems. The Group risk register is reviewed at
every meeting of the Audit & Risk Committee and Management Risk
Committee and every six months by the Board.
The above controls and procedures are underpinned by a culture
of openness of communication between operational and executive
management. All investment decisions are scrutinised in detail by
the Investment Committee and, if outside the Investment Committee's
terms of reference, also by the Board.
The Directors' assessment of the principal risks applying to the
Group is set out below, including the way in which risks are linked
to the three strategic objectives set out in the Chief Executive
Officer's Review. Additional risks and uncertainties not presently
known to the Directors, or which they currently consider not to be
material, may also have an adverse effect on the Group:
Change
Link to strategic in risk since 31 December
Risk objectives (note) Mitigation 2015
---------------------------- ---------------------------- ---------------------------- ----------------------------
Governmental policy 1, 2, 3 The Board limits its No change
Changes to legislation or exposure to any single
public policy in the jurisdiction.
jurisdictions in which the Thorough due diligence is
Group operates or carried out in order to
may wish to operate could assess a specific
negatively impact the country's risk (for
volume of potential example
opportunities available economic and political
to the Group and the stability, tax policy and
returns from existing local practices) before
opportunities. any investment is
The use of PPP programmes made.
by governmental entities Where possible the Group
may be delayed or may seeks specific contractual
decrease thereby protection from changes in
limiting opportunities for government
private sector policy and law for the
infrastructure investors in projects it invests in.
the future, or be General change of law is
structured considered to be a
such that returns to normal business risk.
private sector During the bidding process
infrastructure investors for a project, the Group
are reduced. takes a view on
Governmental entities may an appropriate level of
in the future seek to return to cover the risk
terminate or renegotiate of non-discriminatory
existing projects changes in law.
for example to introduce During the bidding process
new policies or legislation for a project, the Group
that result in higher tax assesses the sensitivity
obligations of the project's
on existing PPP or forecast returns to
renewable energy projects changes in factors such as
or otherwise affect tax rates and/or, for
existing or future renewable energy projects,
projects. governmental support
Changes to legislation or mechanisms.
public policy relating to The Group targets
renewable energy could jurisdictions which have a
negatively impact track record of support
the economic returns on the for renewable energy
Group's investments in investments and which
renewable energy projects, continue to demonstrate
which would such support.
adversely affect the demand Through its track record
for and attractiveness of of more than 120
such projects. investment commitments,
Compliance with the public the Group has developed
tender regulations which significant expertise in
apply to PPP projects is compliance with public
complex and the tender regulations.
outcomes may be subject to
third party challenge and
reversed.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Macroeconomic factors 1, 2, 3 Factors which have the Increased
To the extent such factors potential to impact
cannot be hedged, adversely the underlying
inflation, interest rates cash flows of an
and foreign exchange investment,
all potentially impact the and hence its valuation,
return generated from an are hedged wherever
investment and its possible at a project
valuation. level and sensitivities
Weakness in factors which are considered during the
affect energy prices, such investment appraisal
as the oil price, could process.
negatively impact Systemic risks, such as
the economic returns on the potential deflation, or
Group's investments in appreciation/depreciation
renewable energy. of Sterling versus
Weakness in the political the currency in which an
and economic climate in a investment is made, are
particular jurisdiction assessed in the context of
could impact the the portfolio
value of, or the return as a whole.
generated from, any or all The Group seeks to reduce
of the Group's investments the extent to which its
located in that renewable energy
jurisdiction. investments are exposed
to energy prices through
governmental support
mechanisms and/or off-take
arrangements.
The Group monitors closely
the level of investments
it has exposed to foreign
currencies,
including regularly
testing the sensitivity of
the financial covenants in
its corporate banking
facilities to a
significant change in the
value of individual
currencies.
Where possible, specific
clauses relating to
potential currency change
within a particular
jurisdiction are
incorporated in project
documentation.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Liquidity in the secondary 1, 2, 3 Projects are appraised on No change
market a number of bases,
Weakness in the secondary including being held to
markets for investments in maturity. Projects are
PPP or renewable energy, also carefully structured
for example so that they are capable
as the result of a lack of of being divested, if
economic growth in relevant appropriate, before
markets, regulatory changes maturity.
in the Over recent years, the
banking sector, liquidity secondary markets for both
in financial markets, PPP and renewable energy
changes in interest and investments have
exchange rates and grown. In particular,
project finance market several new environmental
conditions, and the recent funds have been launched.
difficulties in parts of While JLIF and JLEN are
the Eurozone, may natural buyers of the
affect the Group's ability Group's PPP and renewable
to realise full value from energy investments
its divestments. respectively, the size and
The secondary market for breadth of secondary
investments in renewable markets provide the Group
energy projects may be with confidence
affected by, inter that it can sell
alia, changes in energy investments to other
prices, in governmental purchasers.
policy, in the value of
governmental support
mechanisms and in project
finance market conditions.
The ability of JLIF and
JLEN to raise finance for
further investments may
have an impact on
both the Group's ability to
sell investments in PPP and
renewable energy projects
and on the
Group's asset management
business more generally.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Financial resources 1, 3 In February 2015, the No change
Any shortfall in the Group entered into
financial resources that corporate banking
are available to the Group facilities totalling
to satisfy its financial GBP350.0 million
obligations may make it which mature in March
necessary for the Group to 2020. In June 2016, these
constrain its business facilities were increased
development, refinance to GBP400.0 million
its outstanding and in December 2016
obligations, forego additional surety
investment opportunities facilities (GBP50.0
and/or sell existing million) became committed
investments. until
Inability to secure project March 2018. Available
finance could hinder the headroom is carefully
ability of the Group to monitored and compliance
make a bid for with the financial
an investment opportunity, covenants
or where the Group has a and other terms of these
preferred bidder position, facilities is closely
could negatively observed. The Group also
impact whether an monitors its working
underlying project reaches capital, cash collateral
financial close. and letter of credit
The inability of a project requirements and maintains
company to satisfactorily an active dialogue
refinance existing maturing with its banks. It
medium-term operates a policy of
project finance facilities ensuring that sufficient
periodically during the financial resources are
life of a project could maintained
affect the Group's to satisfy committed and
projected future returns likely future investment
from investments in such requirements.
projects and hence their The Group believes that
valuation in the there is currently
Group's balance sheet. sufficient depth and
Adverse financial breadth in project finance
performance by a project markets to meet the
company which affects the financing needs of the
financial covenants in projects it invests in.
its project finance loan The Group works closely
documents may result in the with a wide range of
project company being project finance providers,
unable to make including banks and other
distributions to the Group financial institutions.
and other investors, which Projects in which the
would impact the valuation Group has invested in PPP
of the Group's markets such as Australia
investment in such project and New Zealand,
company, and may enable where the tenor of project
project finance debt finance facilities at
providers to declare financial close tends to
default on the financing be medium term,
terms and exercise their will need to be refinanced
security. in due course.
Prior to financial close,
all proposed investments
are scrutinised by the
Investment Committee.
This scrutiny includes a
review of sensitivities to
adverse performance of
investment returns
and financial ratio tests
as well as an assessment
of a project's ability to
be refinanced
if the tenor of its debt
is less than the term of
the concession or the
project's useful life.
The Group maintains an
active dialogue with the
banks and other financial
institutions which
provide project finance to
the projects in which it
invests. Monitoring of
compliance with
financial covenant ratios
and other terms of loan
documents continues
throughout the term
of the project finance
loan.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Pensions 1, 3 The Group's two defined No change
The amount of the deficit benefit pension schemes
in the Group's main defined are overseen by corporate
benefit pension scheme trustees, the directors
(JLPF) can vary of which include
significantly due to gains independent and
or losses on scheme professionally qualified
investments and movements individuals. The Group
in the assumptions works closely
used to value scheme with the trustees on the
liabilities (in particular appropriate funding
life expectancy, discount strategy for the schemes
rate and inflation and takes independent
rate). Consequently the actuarial advice as
Group is exposed to the appropriate. Both schemes
risk of increases in cash are closed to future
contributions payable, accrual and accordingly
volatility in the deficit have no active members,
reported in the Group only deferred members and
Balance Sheet, and pensioners. A significant
gains/losses recorded in proportion of
the Group Statement of the liabilities of JLPF is
Comprehensive Income. matched by a bulk annuity
buy-in agreement with
Aviva. Other hedging
is also in place.
The actuarial valuation of
JLPF as at 31 March 2016
was finalised in December
2016. The next
actuarial valuation is due
as at 31 March 2019.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Competition 1 The Group believes that No change
The Group operates in its experience and
competitive markets and may expertise as an active
not be able to compete investor and asset manager
effectively or profitably. accumulated over more than
20 years, together with
its flexibility and
ability to respond
to market conditions will
continue to enable it to
compete effectively and
secure attractive
investments.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Valuation 3 The discount rates used to Increased
The valuation of an value investments are
investment in a project may derived from publicly
not reflect its ultimate available market data
realisable value. and other market evidence
In circumstances where the and are updated regularly.
revenue derived from a The Group has a good track
project is related to record of realising
patronage (i.e. customer investments at prices
usage), actual revenues may consistent with the fair
vary materially from values at which they are
assumptions made at the held.
time the investment The Group's investments
commitment is made. In are in projects which are
addition, to the extent principally
that a project company's availability-based (where
actual costs incurred the
differ from forecast costs, revenue does not generally
for example, because of depend on the level of use
late construction, and of the project asset).
cannot be passed Where patronage
on to sub-contractors or or volume risk is taken,
other third parties, the Directors review
investment returns and revenue assumptions and
valuations may be adversely their sensitivities
affected. in detail prior to any
Revenues from renewable investment commitment. The
energy projects may be Group's intention is to
affected by the volume of maintain a majority
power production of availability - based
(e.g. from changes in wind investments by value in
or solar yield), the its portfolio.
availability of fuel (in Where the revenue from
the case of biomass investments is related to
projects), restrictions on patronage or volume (e.g.
the electricity network, with regard to
the reliability of investments in renewable
electrical connections energy projects), risks
or other factors such as are mitigated through a
noise and other combination of factors,
environmental restrictions, including (i) the use of
as well as by changes independent forecasts of
in energy prices and to future volumes (ii) lower
governmental support gearing versus
mechanisms. that of availability-based
The valuation of the projects (iii)
Group's investment stress-testing the
portfolio is affected by robustness of project
movements in foreign returns
exchange against significant falls
rates, which are reflected in forecast volumes.
through the Group's The Group typically hedges
financial statements. In cash flows arising from
addition, there are investment realisations or
foreign exchange risks significant
associated with conversion distributions in
of foreign currency cash currencies other than
flows relating Sterling.
to an investment into and The intention is that
out of Sterling. projects are structured
The valuation of the such that (i) day-to-day
Group's investment service provision is
portfolio could be affected sub-contracted to
by changes in tax qualified sub-contractors
legislation, supported by appropriate
for instance changes to security packages (ii)
limit tax-deductible cost and price inflation
interest (see Taxation risk in relation to the
section). provision of services lies
During the construction with sub-contractors
phase of an infrastructure (iii) performance
project, there are risks deductions in relation to
that either the non-availability lie with
works are not completed sub-contractors (iv)
within the agreed future major maintenance
time-frame or that costs and ongoing project
construction costs overrun. company costs are reviewed
Where annually and
such risks are not borne by cost mitigation strategies
sub-contractors, or adopted as appropriate.
sub-contractors fail to The Group has procedures
meet their contractual in place to ensure that
obligations, this can project companies in which
result in delays or cost it invests appoint
overruns, which may competent sub-contractors
adversely affect the with relevant experience
valuation and financial strength. If
of and return on the project construction
Group's investments. If is delayed,
construction or other long sub-contracting
stop dates are exceeded, arrangements contain terms
this may enable public enabling the project
sector counter-parties company to recover
and/or project finance debt liquidated damages,
providers to declare additional costs and lost
a default and, in the case revenue, subject to
of the latter, to exercise limits. In addition, the
their security. project company may
The Group is reliant on the terminate its agreement
performance of third with a sub-contractor if
parties in constructing an the latter is in default
asset to an appropriate and seek an alternative
standard as well as sub-contractor.
operating it in a manner The terms of the
consistent with contractual sub-contracts into which
requirements. Poor project companies enter
performance by, or failure provide some protections
of, such third parties may for investment returns
result in the impairment or from the poor performance
loss of of third parties.
an investment. The ability to replace
defaulting third parties
is supported by security
packages to protect
against price movement on
re-tendering.
If long stop dates are
exceeded, the Group has
significant experience as
an active manager
in protecting its
investments by working
with all parties to a
project to agree revised
timetables
and/or other restructuring
arrangements.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Counterparty risk 3 The Group works with Increased
The Group is exposed to multiple clients, joint
counterparty credit risk venture partners,
with regards to (i) sub-contractors and
governmental entities, institutional
sub-contractors, lenders investors so as to reduce
and suppliers at a project the probability of
level and (ii) consortium systemic counterparty risk
partners, financial in its investment
institutions and suppliers portfolio. In establishing
at a Group level. project contractual
Public sector arrangements prior to
counter-parties to PPP making an investment,
projects may seek to the credit standing and
renegotiate contract terms relevant experience of a
and/or sub-contractor are
terminate contracts in a considered. Post contract
way which impacts the award, the financial
valuation of one or more of standing of key
the Group's investments. counterparties is
In overseas jurisdictions, monitored to provide an
the Group's investments early warning
backed by governmental of possible financial
entities may ultimately distress.
be subject to sovereign PPP projects are normally
risk. structured so as to
provide significant
contractual protection for
equity investors. Such
protection may include
"termination for
convenience" clauses which
enable public sector
counter-parties to
terminate projects subject
to payment of
compensation,
including equity
investors.
PPP projects are normally
supported by central and
local government
covenants, which
significantly
reduce the Group's risk.
Risk is further reduced by
the increasing
geographical spread of
the Group's investments.
Counterparties for
deposits at a Group level,
project debt swaps and
deposits within project
companies are required to
be banks with a suitable
credit rating and are
monitored on an ongoing
basis.
Entry into new
geographical areas which
have a different legal
framework and/or different
financial market
characteristics is
considered by the Board
separately from individual
investment
decisions.
Typically, a substantial
proportion of the revenue
generated by renewable
energy projects
is backed by governmental
support mechanisms.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Major incident 2, 3 At financial close, No change
A major incident at any of projects benefit from
the Group's main locations comprehensive insurance
or any of the projects arrangements, either
invested in by directly
the Group, such as a or through contractors'
terrorist attack, war or insurance policies.
significant cyber-attack, Detailed business
could lead to a loss continuity plans have been
of crucial business data, designed and are tested at
technology, buildings and frequent/regular
reputation and harm to the intervals.
public, all Business continuity
of which could collectively procedures are also
or individually result in a regularly updated in order
loss of value for the to maintain their
Group. relevance.
John Laing operates to
independent, third
party-certified management
systems in respect of
health and safety (OHSAS
18001:2007). In addition,
it routinely monitors
health, safety and
environmental issues in
the projects it invests in
or manages.
Cyber risk is addressed
through (i) the Group's
organisational structure
which includes segregation
of responsibilities,
delegated lines of
accountability, delegated
authorities and outsourced
IT arrangements, as well
as (ii) specific controls,
including controls over
payments and access
to IT systems.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Investment adviser 2 Through JLCM, and No change
agreements with JLIF and supported by other parts
JLEN of the Asset Management
A loss of JLCM's investment division, the Group
adviser agreements with focuses
JLIF and/or JLEN on delivering a high
respectively would be quality service to both
detrimental to the Group's funds.
Asset Management business.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Future returns from 1, 2, 3 In bidding for new No change
investments projects, the Group sets a
The Group's historical target internal rate of
returns and cash yields return taking account
from investments may not be of historical experience,
indicative of future current market conditions
returns. and expected returns once
The Group's expected the project
hold-to-maturity internal becomes operational. The
rates of return from Group continually looks
investments are based for value enhancement
on a variety of assumptions opportunities which
which may not be correct at would improve the target
the time they are made and rate of return.
may not At the investment
be achieved in the future. appraisal stage, projects
are tested for their
sensitivity to changes in
key assumptions.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Taxation 1, 3 Tax positions taken by the Increased
The Group may be exposed to Group are based on
changes in taxation in the industry practice and/or
jurisdictions in which it external tax advice.
operates, At the investment
or it may cease to satisfy appraisal stage, projects
the conditions for relevant are tested for their
reliefs. Tax authorities sensitivity to changes in
may disagree tax rates. Project
with the positions that the valuations are regularly
Group has taken or intends updated for changes in tax
to take. rates.
Project companies may be In March 2016, in response
exposed to changes in to the OECD
taxation in the recommendations, the UK
jurisdictions in which they Government announced
operate. proposals
In October 2015, the OECD for the introduction of a
published its Fixed Ratio Rule to cap
recommendations for the amount of tax
tackling BEPS by deductible net interest
international to 30% of a company's UK
companies. It identified EBITDA. This was followed
the use of tax deductible by a detailed consultation
interest as one of the key paper in May
areas where 2016 and detailed
there is opportunity for legislation in November
BEPS by international 2016 and January 2017 (for
companies. It is up to the further information,
governments of OECD see the Financial Review
countries to decide how to section).
implement the OECD's The Group's understanding
recommendations into their is that not all
domestic law. To governments will implement
the extent that one or more the OECD recommendations
of the jurisdictions in in the same way. Some
which the Group operates believe their existing
changes its rules rules are adequate to
to limit tax deductible limit the scope for BEPS.
interest, this could Others may take advantage
significantly impact (i) of grandfathering
the tax payable by provisions or the
subsidiaries potential for exemptions
of the Group (ii) the for
valuation of existing projects with a public
investments (iii) the way benefit.
in which future The Group's effective tax
project-financed rate tends to be lower
infrastructure investments than the standard rate of
are structured, in each UK corporation
case in such jurisdictions. tax principally because
the contributions the
Group makes to JLPF are
deductible for tax
purposes.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Personnel 1, 2, 3 The Group regularly No change
The Group may fail to reviews pay and benefits
recruit or retain key to ensure they remain
senior management and competitive. The Group's
skilled personnel in, or senior managers
relocate high-quality participate in long term
personnel to, the incentive plans. The Group
jurisdictions in which it plans its human resources
operates or seeks to needs carefully, including
expand. appropriate local
As a result of the outcome recruitment, when it bids
of the UK referendum on for overseas projects.
membership of the EU, there The Group has the ability
is some uncertainty to recruit EU nationals in
as to the position of its Amsterdam office or
certain EU nationals living could open further
and working in the UK. This offices in other EU
uncertainty jurisdictions if
could impact the Group's necessary.
ability to recruit and
retain EU nationals in the
UK.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Note:
The Group's three strategic objectives, as set out in the Chief
Executive Officer's Review, are:
1. Growth in primary investment volumes (new capital committed
to greenfield infrastructure projects) over the medium term.
2. Growth in the value of external AuM and related fee income.
3. Management and enhancement of the Group's investment
portfolio, with a clear focus on active management during
construction, accompanied by realisations of investments which,
combined with the Group's corporate banking facilities and
operational cash flows, enable it to finance new investment
commitments.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU) and Article 4 of the IAS
Regulation and have also chosen to prepare the parent company
financial statements under IFRS as adopted by the EU. Under company
law the Directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period. In preparing these 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
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company'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's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
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 included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole;
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that it faces; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
This responsibility statement was approved by the Board of
Directors on 6 March 2017 and is signed on its behalf by:
Olivier Brousse Patrick O'D Bourke
Chief Executive Group Finance
Officer Director
6 March 2017 6 March 2017
Independent Auditor's Report to the Shareholders of John Laing
Group plc on the audited financial results of John Laing Group
plc
We confirm that we have issued an unqualified opinion on the
full financial statements of John Laing Group plc.
Our audit report on the full financial statements sets out the
following risks of material misstatement which had the greatest
effect on our audit strategy; the allocation of resources in our
audit; and directing the efforts of the engagement team, together
with how our audit responded to those risks:
Risk description How the scope of our audit responded to the risk
-------------------------------------------------- ------------------------------------------------------------------
Valuation of investments
The Group holds a range of investments which * We assessed the design and implementation of the
primarily include PPP and Renewable Energy controls in place when valuing the Group's
assets. investments.
The total value of these assets at 31 December
2016 was GBP1,176 million (31 December 2015
- GBP841 million) as disclosed in note 11 to the
financial statements. These underlying assets * We obtained evidence, including external market data,
are held across a range of different sectors to substantiate key assumptions, including project
comprising Transport, Environmental (including discount rate(s) and macro-economic assumptions such
Renewable Energy) and Social Infrastructure, and as forecast inflation and deposit rates.
a range of geographies including the UK,
Europe, North America and Asia Pacific.
The valuation of investments is a significant * We benchmarked management's discount rates against
judgement underpinned by a number of key market transaction data, including the Group's
assumptions disposals in the current and previous period. We
and estimates. These judgements include discount performed this work in conjunction with our own
rates, forecast project cash-flows and valuation specialists.
macro-economic
assumptions such as future inflation and deposit
rates. Many of these assumptions differ depending
on both the sector and geography of the project. * On the valuation of the New Royal Adelaide Hospital
A full internal valuation is prepared at and Manchester Waste investments we reviewed, where
June and December each year and this valuation is relevant, the legal advice obtained and held
incorporated into the financial statements. discussions with the Group's external legal counsel,
An independent opinion is obtained from an reviewed contractual documentation and held
external valuer that the portfolio as a whole discussions with the directors of each project
represents company to understand and challenge the key
fair value. judgements in valuing each project.
As disclosed in note 2 to the financial
statements, the New Royal Adelaide Hospital
project
is experiencing construction delays and the * We met with the Group's external valuer to understand
Manchester Waste VL Co project is experiencing and challenge the process undertaken by them in
increased counterparty risk. Consequently, there arriving at their opinion that the portfolio as a
is increased judgement to be made around whole represents fair value. We also assessed the
the valuation of the investment in each project competence and independence of the external valuer.
including the completion date of New Royal
Adelaide Hospital and the outcome of discussions
with the Greater Manchester Waste Disposal
Authority (GMWDA) on the future of the Manchester * We checked that the disclosures in the financial
Waste VL Co project. statements were appropriate particularly in respect
of the judgements taken.
More information on the valuation and valuation
methodology (including the judgements associated
with the valuation of New Royal Adelaide Hospital
and Manchester Waste) can be found in note
2 to the financial statements.
-------------------------------------------------- ------------------------------------------------------------------
Key observations No material matters were identified arising from our audit work.
We consider the judgements
adopted in valuing the Group's investments to be appropriate. We
also consider the disclosures
around the valuation of investments to be appropriate.
-------------------------------------------------- ------------------------------------------------------------------
Valuation of the defined benefit pension schemes
The Group has two defined benefit pension schemes
(The John Laing Pension Fund and The John * We assessed the design and implementation of the
Laing Pension Plan) which had a combined deficit controls in place when valuing the Group's defined
of GBP61 million at 31 December 2016 (GBP39 benefit pension schemes including the setting of
million at 31 December 2015). actuarial assumptions.
The valuation of the deficit is subject to a
number of judgements including the adoption of
the appropriate (i) discount rate (ii) inflation * In conjunction with our internal actuarial
rate and (iii) mortality rate assumptions. specialists, we compared the Group's key assumptions,
including the discount rate, mortality rate
There is also a judgement concerning the Group's assumptions and the inflation rates against our
ability to recover a surplus under the rules expected benchmarks and those adopted by other
of the John Laing Pension Fund and consequently companies in the market.
the consideration of minimum funding requirements
under IFRIC 14 'The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their
Interaction'. * We audited the scheme assets via agreement to
external confirmations from the custodian and also
See note 18 for further information. agreed a sample of scheme assets back to independent
market data. We also obtained and reviewed the AAF
01/06/ISAE 3402 assurance report on internal controls
for each custodian to assess if there were any
matters which impact our work.
* In assessing the impact of IFRIC 14, we examined the
nature of the Group's funding commitments to the
schemes and reviewed the scheme rules, the external
legal advice obtained by management and the actuarial
schedule of contributions.
* We checked that the disclosure requirements of IAS
19R Employee Benefits had been fulfilled.
-------------------------------------------------- ------------------------------------------------------------------
Key observations No material matters were identified arising from our audit work.
We consider the judgements
adopted by the Group in valuing the pension scheme liabilities to
be appropriate and concur
that the Group has the ability to recover any surplus under the
rules of the John Laing Pension
Fund and consequently is not subject to a minimum funding
requirement under IFRIC 14. We also
consider the disclosures around the valuation of the defined
benefit pension schemes to be
appropriate.
-------------------------------------------------- ------------------------------------------------------------------
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we did not provide a separate opinion on these
matters.
Our liability for this report and for our full audit report on
the financial statements is to the Company's members 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 members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for our audit report or this report, or for the
opinions we have formed.
Deloitte LLP
Chartered Accountants and Statutory Auditor
6 March 2017
Group Income Statement
for the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
------------------------------------------------------------
Statutory Pro forma Statutory
Notes GBP million GBP million GBP million
------------------------------------------------------------ ------ ------------------ ------------- -------------
Continuing operations
Net gain on investments at fair value through profit or
loss 11 218.8 133.1 129.7
Other income 6 42.0 34.5 31.5
------------------------------------------------------------ ------ ------------------ ------------- -------------
Operating income 3 260.8 167.6 161.2
Cost of sales - (0.1) (0.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Gross profit 260.8 167.5 161.1
Administrative expenses (58.4) (55.3) (52.3)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit from operations 7 202.4 112.2 108.8
Finance costs 9 (10.3) (11.3) (11.3)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit before tax 3 192.1 100.9 97.5
Tax charge 10 (1.8) (2.1) (2.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit from continuing operations 190.3 98.8 95.4
Discontinued operations
Profit from discontinued operations (after tax) - 5.7 5.7
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit for the year attributable to the Shareholders of the
Company 190.3 104.5 101.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Earnings per share (pence)
From continuing operations
Basic 4 51.9 27.6 28.3
Diluted 4 51.4 27.5 28.2
From continuing and discontinued operations
Basic 4 51.9 29.2 30.0
Diluted 4 51.4 29.1 29.9
Group Statement of Comprehensive Income
for the year ended 31 December 2016
Year ended Year ended
31 December 31 December 2015
2016
Statutory Pro forma Statutory
Note GBP million GBP million GBP million
Profit for the year 190.3 104.5 101.1
Exchange differences
on translation of
overseas operations 0.3 - -
Actuarial (loss)/gain
on retirement benefit
obligations 18 (39.2) 15.8 39.0
------------- ------------- -------------
Other comprehensive
(loss)/income for
the year (38.9) 15.8 39.0
Total comprehensive
income for the year 151.4 120.3 140.1
------------- ------------- -------------
The only movement which could subsequently be recycled to the
Group Income Statement is the exchange difference on translation of
overseas operations.
Group Statement of Changes in Equity
for the year ended 31 December 2016
Statutory
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
Balance at 1 January 2016 36.7 218.0 0.7 634.2 889.6
Profit for the year - - - 190.3 190.3
Other comprehensive loss
for the year - - - (38.9) (38.9)
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 151.4 151.4
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
Share-based incentives 5 - - 2.0 - 2.0
Dividends paid - - - (26.2) (26.2)
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
Balance at 31 December
2016 36.7 218.0 2.7 759.4 1,016.8
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
for the year ended 31 December 2015
Pro forma
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
Balance at 1 January
2015 30.0 100.0 - 519.8 649.8
Profit for the year - - - 104.5 104.5
Other comprehensive
income for the year - - - 15.8 15.8
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 120.3 120.3
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Shares issued in the
year 20, 21 6.7 123.8 - - 130.5
Costs associated with
the issue of shares 21 - (5.8) - - (5.8)
Share-based incentives 5 - - 0.7 - 0.7
Dividends paid - - - (5.9) (5.9)
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 31 December
2015 36.7 218.0 0.7 634.2 889.6
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Statutory
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 1 January
2015 - - - - -
Profit for the year - - - 101.1 101.1
Other comprehensive
income for the year - - - 39.0 39.0
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 140.1 140.1
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Shares issued in the
year 20, 21 36.7 723.8 - - 760.5
Costs associated with
the issue of shares 21 - (5.8) - - (5.8)
Reduction of share
premium account 21 - (500.0) - 500.0 -
Share-based incentives 5 - - 0.7 - 0.7
Dividends paid - - - (5.9) (5.9)
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 31 December
2015 36.7 218.0 0.7 634.2 889.6
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Year ended Year ended
31 December 31 December
2016 2015
pence pence
------------------------------ ------------- -------------
Dividends on ordinary shares
Per ordinary share:
- interim 1.85 1.60
- final 6.30 5.30
------------------------------ ------------- -------------
Group Balance Sheet
as at 31 December 2016
31 December 2016 31 December 2015
Statutory Statutory
Notes GBP million GBP million
------------------------------------------------------------------------ ------ ----------------- -----------------
Non-current assets
Intangible assets - 0.2
Plant and equipment 0.3 1.0
Investments at fair value through profit or loss 11 1,257.5 965.3
Deferred tax assets 17 1.0 1.4
------------------------------------------------------------------------ ------ ----------------- -----------------
1,258.8 967.9
------------------------------------------------------------------------ ------ ----------------- -----------------
Current assets
Trade and other receivables 12 7.4 8.3
Cash and cash equivalents 1.6 1.1
------------------------------------------------------------------------ ------ ----------------- -----------------
9.0 9.4
------------------------------------------------------------------------ ------ ----------------- -----------------
Total assets 1,267.8 977.3
------------------------------------------------------------------------ ------ ----------------- -----------------
Current liabilities
Current tax liabilities (4.1) (2.7)
Borrowings 14 (161.4) (14.9)
Trade and other payables 13 (14.7) (19.6)
------------------------------------------------------------------------ ------ ----------------- -----------------
(180.2) (37.2)
------------------------------------------------------------------------ ------ ----------------- -----------------
Liabilities directly associated with assets classified as held for sale - (4.2)
------------------------------------------------------------------------ ------ ----------------- -----------------
Net current liabilities (171.2) (32.0)
------------------------------------------------------------------------ ------ ----------------- -----------------
Non-current liabilities
Retirement benefit obligations 18 (69.3) (46.2)
Provisions 19 (1.5) (0.1)
------------------------------------------------------------------------ ------ ----------------- -----------------
(70.8) (46.3)
------------------------------------------------------------------------ ------ ----------------- -----------------
Total liabilities (251.0) (87.7)
------------------------------------------------------------------------ ------ ----------------- -----------------
Net assets 1,016.8 889.6
------------------------------------------------------------------------ ------ ----------------- -----------------
Equity
Share capital 20 36.7 36.7
Share premium 21 218.0 218.0
Other reserves 2.7 0.7
Retained earnings 759.4 634.2
------------------------------------------------------------------------ ------ ----------------- -----------------
Equity attributable to the Shareholders of the Company 1,016.8 889.6
------------------------------------------------------------------------ ------ ----------------- -----------------
The financial statements of John Laing Group plc, registered
number 05975300, were approved by the Board of Directors and
authorised for issue on 6 March 2017. They were signed on its
behalf by:
Olivier Brousse Patrick O'D Bourke
Chief Executive Officer Group Finance Director
6 March 2017 6 March 2017
Group Cash Flow Statement
for the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
Statutory Pro forma Statutory
Notes GBP million GBP million GBP million
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash outflow from operating activities 22 (37.1) (70.5) (70.5)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Investing activities
Net cash transferred to investments held at fair value
through profit or loss 11 (73.4) (54.0) (54.0)
Cash acquired on acquisition of subsidiaries - - 2.2
Purchase of plant and equipment (0.1) (0.6) (0.6)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash used in investing activities (73.5) (54.6) (52.4)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Financing activities
Dividends paid (26.2) (5.9) (5.9)
Finance costs paid (8.9) (13.7) (13.7)
Proceeds from borrowings 165.0 50.0 50.0
Repayment of borrowings (19.0) (31.0) (31.0)
Net proceeds on issue of share capital - 124.7 124.7
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash from financing activities 110.9 124.1 124.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net increase/(decrease) in cash and cash equivalents 0.3 (1.0) 1.2
Cash and cash equivalents at beginning of the year 1.1 2.2 -
Effect of foreign exchange rate changes 0.2 (0.1) (0.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Cash and cash equivalents at end of year 1.6 1.1 1.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Notes to the Group Financial Statements
for the year ended 31 December 2016
1 General information
The statutory and pro forma results of John Laing Group plc (the
"Company" or the "Group") are stated according to the basis of
preparation described below. The registered office of the Company
is 1 Kingsway, London, WC2B 6AN. The principal activity of the
Company is the origination, investment in and management of
international infrastructure projects.
Statutory and pro forma financial information is presented in
pounds sterling and prepared in accordance with IFRS as adopted by
the EU.
2 Accounting policies
a) Basis of preparation
Statutory financial information for the year ended 31 December
2016 is presented in the Group Income Statement, the Group
Statement of Comprehensive Income and the Group Statement of
Changes in Equity alongside comparative pro forma and statutory
financial information for the year ended 31 December 2015. The
comparative pro forma financial information was prepared on the
basis that the restructuring associated with the Company's
admission to listing in February 2015, as described in more detail
in the Financial Review section of the 2015 Annual Report, had been
in place throughout the year ended 31 December 2015. Both the Group
Balance Sheet at 31 December 2016 and at 31 December 2015 are
presented on a statutory basis. There is no difference in the
statutory and pro forma Group Balance Sheet for 31 December 2015.
In the opinion of the Directors, presenting pro forma information
for 2015 was necessary in order to give a true and fair view of the
state of the Company's affairs for that year. This is the last year
for which pro forma financial information will be presented.
The financial statements have been prepared on an investment
entity basis (see note 2c) and in accordance with the historical
cost convention except for the revaluation of the investment
portfolio and financial instruments that are measured at fair value
at the end of each reporting period, as explained in the accounting
policies.
b) Adoption of new and revised standards
The Group has adopted the following amendments to IFRS in the
current year, none of which has had a material impact on the
financial statements:
-- Amendments resulting from the September 2014 Annual Improvements to IFRS
-- Amendments to IFRS 10 Consolidated Financial Statements, IFRS
12 Disclosure of Interests in Other Entities and IAS 28 Investments
in Associates and Joint Ventures - amendments regarding the
consolidation exception
-- Amendments to IFRS 11 Joint Arrangements - amendments
regarding the accounting for acquisitions of an interest in joint
operation
-- Amendments to IAS 1 Presentation of Financial Statements - Disclosure initiative
-- Amendments to IAS 16 Property, Plant and Equipment and IAS 38
Intangible Assets - amendments regarding the clarification of
acceptable methods of depreciation
At the date of authorisation of these financial statements,
there are a number of standards and interpretations which are in
issue but not yet effective and in some cases have not yet been
adopted by the EU. These include:
Issued and endorsed by the EU
-- IFRS 9 Financial Instruments
-- IFRS 15 Revenue from Contracts with Customers
Issued and not endorsed by the EU
-- IFRS 16 Leases
-- Amendments to IAS 7 Statement of Cash flows - amendments as a
result of the Disclosure initiatives
-- Amendments to IAS 12 Income Taxes - amendments regarding the
recognition of deferred tax assets for unrealised losses
-- Amendments resulting from the Annual Improvements to IFRS 2014-2016 cycle
-- Amendments to IFRS 2 Share Based Payments - amendments to
clarify the classification and measurement of share-based payment
transactions.
While the Group is still undertaking an assessment of the impact
of the new standards, it is not anticipated that they will have a
material impact on the Group with the exception that the adoption
of IFRS 15 may lead to further disclosure within the financial
statements. IFRS 16 is not expected to have a significant impact as
the Group does not have any material leases.
IFRS 9 Financial Instruments, when it becomes effective, will
have an impact on the classification and disclosure of financial
instruments.
The principal accounting policies applied in the preparation of
these Group financial statements are set out below. These policies
have been applied consistently to each of the years presented,
unless otherwise stated.
c) Application of investment entity guidance
The Company meets the definition of an investment entity set out
in IFRS 10. Investment entities are required to account for all
investments in controlled entities, as well as investments in
associates and joint ventures, at fair value through profit or loss
(FVTPL), except for those directly-owned subsidiaries that provide
investment related services or engage in permitted investment
related activities with investees (Service Companies). Service
Companies are consolidated rather than recorded at FVTPL.
For details of the subsidiaries that are consolidated, see note
26 to the Group financial statements.
d) Going concern
The Directors have reviewed the Group's financial projections
and cash flow forecasts and believe, based on those projections and
forecasts, that it is appropriate to prepare the financial
statements of the Group on the going concern basis.
In arriving at their conclusion, the Directors took into account
the Group's approach to liquidity and cash flow management and the
availability of its GBP400.0 million corporate banking facilities
committed until March 2020 and of its GBP50.0 million surety
facilities committed until March 2018. The Directors are of the
opinion that, based on the Group's forecasts and projections and
taking into account expected bidding activity and operational
performance, the Group will be able to operate within its bank
facilities and comply with the financial covenants therein for the
foreseeable future.
In determining that the Group is a going concern, certain risks
and uncertainties, some of which arise or increase as a result of
the economic environment in some of the Group's markets, have been
considered. The Directors believe that the Group is adequately
placed to manage these risks. The most important risks and
uncertainties identified and considered by the Directors are set
out in the Principal Risks and Risk Management section. In
addition, the Group's policies for management of its exposure to
financial risks, including liquidity, foreign exchange, credit,
price and interest rate risks are set out in note 16.
e) Dividend income
Dividend income from investments at FVTPL is recognised when the
shareholders' rights to receive payment have been established
(provided that it is probable that the economic benefits will flow
to the Group and the amount of revenue can be measured reliably).
Dividend income is recognised gross of withholding tax, if any, and
only when approved and paid by the project company.
f) Dividend payments
Dividends on the Company's ordinary shares are recognised when
they have been appropriately authorised and are no longer at the
Company's discretion. Accordingly, interim dividends are recognised
when they are paid and final dividends are recognised when they are
declared following approval by shareholders at the Company's AGM.
Dividends are recognised as an appropriation of shareholders'
funds.
g) Net gain on investments at FVTPL
Net gain on investments at FVTPL excludes dividend income
referred to above. Please refer to accounting policy i)(i) for
further detail.
h) Other income
The Group earns income from the following sources:
(i) Fees from asset management services
Fees from asset management services to projects in which the
Group invests and to external parties are recognised as the
services are provided in accordance with IAS 18 Revenue.
When it is probable that the expected outcome over the life of a
management services contract will result in a net outflow of
economic benefits or overall loss, a provision is recognised
immediately. The provision is determined based on the net present
value of the expected future cash inflows and outflows.
(ii) Recovery of bid costs on financial close
Bid costs in respect of primary investments are charged to the
Group 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 event of cancellation of a
project. From the point of virtual certainty, bid costs are held in
the Group Balance Sheet as a debtor prior to achieving financial
close. On financial close, the Group recovers bid costs by charging
a fee to the relevant project company in the investment
portfolio.
Other income excludes the value of intra-group transactions and
VAT and includes revenue derived from the provision of services by
Service Companies to project companies which are held at FVTPL.
i) Financial instruments
Financial assets and financial liabilities are recognised on the
Group Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognised when the contractual rights to the cash flows from the
instrument expire or the asset is transferred and the transfer
qualifies for derecognition in accordance with IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 13 Fair Value
Measurement.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at
FVTPL are recognised immediately in profit or loss.
(i) Financial assets
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except
for those financial assets classified as at FVTPL, which are
initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets at FVTPL; 'held-to-maturity'
investments; 'available-for-sale' financial assets; or 'loans and
receivables'. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial
recognition.
The financial assets that the Group holds are classified as
financial assets at FVTPL and loans and receivables:
-- Financial assets at FVTPL comprise the Group's investment in
John Laing Holdco Limited (through which the Group holds its
investments) which is valued based on the fair value of investments
in project companies, the Group's investment in JLEN and other
assets and liabilities of investment entity subsidiaries.
Investments in project companies and in JLEN are designated upon
initial recognition as financial assets at FVTPL. Subsequent to
initial recognition, investments in project companies are measured
on a combined basis at fair value principally using discounted cash
flow methodology. The investment in JLEN is valued at the quoted
market price at the end of the period.
The Directors consider that the carrying value of other assets
and liabilities held in investment entity subsidiaries approximates
to their fair value, with the exception of derivatives which are
measured in accordance with accounting policy i(v).
Changes in the fair value of the Group's investment in John
Laing Holdco Limited are recognised within operating income in the
Group Income Statement.
-- Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted on an
active market. Loans and receivables are measured at amortised cost
using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short term receivables when the recognition of interest
would be immaterial. Loans and receivables are included in current
assets, except for maturities greater than 12 months after the
balance sheet date which are classified as non-current assets. The
Group's loans and receivables comprise 'trade and other
receivables' and 'cash and cash equivalents' in the Group Balance
Sheet.
(ii) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indications of impairment at each balance sheet date. Financial
assets are impaired where there is objective evidence that, as a
result of one or more events which have occurred after the initial
recognition of the financial asset, the estimated future cash flows
of the investment have been affected. For financial assets carried
at amortised cost, the amount of the impairment is the difference
between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the financial asset's
original effective interest rate. The carrying amount of the
financial asset is reduced by the impairment loss.
(iii) Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
(iv) Financial liabilities
Interest-bearing bank loans and borrowings are initially
recorded at fair value, being the proceeds received net of direct
issue costs, and subsequently at amortised cost using the effective
interest rate method. Finance charges, including premiums payable
on settlement or redemption, and direct issue costs are accounted
for on an accruals basis in the Group Income Statement and are
added to the carrying amount of the instrument to the extent that
they are not settled in the period in which they arise.
Other non-derivative financial instruments are measured at
amortised cost using the effective interest method less any
impairment losses.
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
(v) Derivative financial instruments
The Group treats forward foreign exchange contracts and currency
swap deals it enters into as derivative financial instruments at
FVTPL. Changes in the fair value of these instruments are taken
through the Group Income Statement.
j) Provisions
Provisions are recognised when:
-- the Group has a 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 on settlement is determined by
considering the class of obligations as a whole.
k) Finance costs
Finance costs relating to the corporate banking facilities,
other than set-up costs, are recognised in the year in which they
are incurred. Set-up costs are recognised over the remaining
facility term.
Finance costs also include the net interest cost on retirement
benefit obligations and the unwinding of discounting of
provisions.
l) Taxation
The tax charge or credit represents the sum of tax currently
payable and deferred tax.
Current tax
Current tax payable is based on taxable profit for the year.
Taxable profit differs from net profit as reported in the Group
Income Statement because it excludes both items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted,
or substantively enacted, by the balance sheet date.
Deferred tax
Deferred tax liabilities are recognised in full for taxable
temporary differences. Deferred tax assets are recognised to the
extent that it is probable that future taxable profits will arise
to allow all or part of the assets to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited to the Group Income Statement
except 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 and current
tax liabilities and when they relate to income taxes levied by the
same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
m) Foreign currencies
The individual financial statements of each Group subsidiary
that is consolidated (i.e. a Service Company) are presented in the
currency of the primary economic environment in which it operates
(its functional currency). For the purposes of the financial
statements, the results and financial position of each Group
subsidiary are expressed in pounds sterling, the functional
currency of the Company and the presentation currency of the
financial statements.
Monetary assets and liabilities expressed in foreign currency
(including investments measured at fair value) are reported at the
rate of exchange prevailing at the balance sheet date or, if
appropriate, at the forward contract rate. Any difference arising
on the retranslation of these amounts is taken to the Group Income
Statement with foreign exchange movements on investments measured
at fair value recognised in operating income as part of net gain on
investments at FVTPL. Income and expense items are translated at
the average exchange rates for the period.
n) Non-current assets held for sale and discontinued operations
Where a disposal group represents a separate major line of
business or geographical area of operations, or is part of a single
co-ordinated plan to dispose of a separate major line of business
or geographical area of operations, it is treated as a discontinued
operation. The post-tax profit or loss of this discontinued
operation together with the gain or loss recognised on its disposal
is shown as a single amount on the face of the Group Income
Statement, with all historical financial periods being presented on
this basis.
Non-current assets classified as held for sale are measured at
the lower of their carrying amount and 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 sale
rather than through continuing use. This condition is regarded as
having been met only when the sale is highly probable, the asset
(or disposal group) is available for immediate sale in its present
condition and the sale is completed within one year of the date of
its classification.
o) Retirement benefit costs
The Group operates both defined benefit and defined contribution
pension arrangements. Its two defined benefit pension schemes are
the John Laing Pension Fund (JLPF) and the John Laing Pension Plan,
which are both closed to future accrual. The Group also provides
post-retirement medical benefits to certain former employees.
Payments to defined contribution pension arrangements are
charged as an expense as they fall due. For the defined benefit
pension schemes and the post-retirement medical benefit scheme, the
cost of providing benefits is determined in accordance with IAS 19:
Employee Benefits (revised) using the projected unit credit method,
with actuarial valuations being carried out at least every three
years. Actuarial gains and losses are recognised in full in the
year in which they occur and are presented in the Group Statement
of Comprehensive Income. Curtailment gains arising from changes to
members' benefits are recognised in full in the Group Income
Statement.
The retirement benefit obligations recognised in the Group
Balance Sheet represent the present value of: (i) defined benefit
scheme obligations as adjusted for unrecognised past service costs
and reduced by the fair value of scheme assets, where any asset
resulting from this calculation is limited to past service costs
plus the present value of available refunds and reductions in
future contributions to the schemes; and (ii) unfunded
post-retirement medical benefits.
Net interest expense or income is recognised within finance
costs.
p) Cash and cash equivalents
Cash and cash equivalents in the Group Balance Sheet comprise
cash at bank and in hand and short term deposits with original
maturities of three months or less. For the purposes of the Group
Cash Flow Statement, cash and cash equivalents comprise cash and
short term deposits as defined above, net of bank overdrafts.
Deposits held with original maturities of greater than three
months are shown as other financial assets.
q) Leasing
All leases are classified as operating leases. Rentals payable
under operating leases are charged to income on a straight line
basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are
also spread on a straight line basis over the lease term.
r) Share capital
Ordinary shares are classified as equity instruments on the
basis that they evidence a residual interest in the assets of the
Group after deducting all its liabilities.
Incremental costs directly attributable to the issue of new
ordinary shares are recognised in equity as a deduction, net of
tax, from the proceeds in the period in which the shares are
issued.
s) Employee benefit trust
In June 2015, the Group established the John Laing Group
Employee Benefit Trust (EBT) as described further in note 5. The
Group is deemed to have control of the EBT and it is therefore
treated as a subsidiary and consolidated for the purposes of the
accounts. Any investment by the EBT in the parent company's shares
is deducted from equity in the Group Balance Sheet as if such
shares were treasury shares. No investment was made in the year.
Other assets and liabilities of the EBT are recognised as assets
and liabilities of the Group.
Any shares held by the EBT are excluded for the purposes of
calculating earnings per share.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying value of assets and liabilities. The
key areas of the financial statements where the Group is required
to make critical judgements and material accounting estimates are
in respect of the fair value of investments and accounting for the
Group's defined benefit pension liabilities.
Fair value of investments
Critical judgements in applying the Group's accounting
policies
The Company measures its investment in John Laing Holdco Limited
at fair value. Fair value is determined based on the fair value of
investments in project companies and the Group's investment in JLEN
(together the Group's investment portfolio) and other assets and
liabilities of investment entity subsidiaries. A valuation of the
Group's investment portfolio is prepared on a consistent,
principally discounted cash flow basis at 30 June and 31 December.
The valuation (excluding the investment in JLEN) assumes that
forecast cash flows are received until maturity of the underlying
assets. The cash flows on which the discounted cash flow valuation
is based are those forecast to be distributable to the Group at
each balance sheet date, derived from detailed project financial
models. These incorporate a number of assumptions with respect to
individual assets, including: dates for construction completion;
value enhancements; the terms of project debt refinancing (where
applicable); the outcome of any disputes; the level of volume-based
revenue; and, for renewable energy projects, future energy prices.
Value enhancements are only incorporated when the Group has
sufficient evidence that they can be realised.
Key sources of estimation uncertainty
A key source of estimation uncertainty in valuing the investment
portfolio is the discount rate applied to forecast project cash
flows. A base case discount rate for an operational project is
derived from secondary market information and other available data
points. The base case discount rate is then adjusted to reflect
project-specific risks. In addition, risk premia are added during
the construction phase to reflect the additional risks throughout
construction. These premia reduce over time as the project
progresses through its construction programme, reflecting the
significant reduction in risk once the project reaches the
operating stage. The discount rates applied to investments at 31
December 2016 were in the range of 7.0% to 11.6% (31 December 2015
- 7.3% to 12.3%). Further detail on key assumptions underpinning
the valuation of the investments (including sensitivities) can be
found in note 16.
As part of the valuation of the investment portfolio at 31
December 2016, the Group has valued its investments in New Royal
Adelaide Hospital and in Manchester Waste VL Co. This has involved
making assumptions as to the outcome of the current situations
relating to each investment, as described in the Chief Executive
Officer's Review. Both situations are dependent on future events
and therefore carry an element of uncertainty. In the case of the
investment in New Royal Adelaide Hospital, the main judgement
underlying the Group's valuation is an assumption that the hospital
reaches commercial acceptance in mid 2017. In the case of
Manchester Waste VL Co, the Group's valuation is based on the
assumption that a resolution is reached with GMWDA which is
commercially acceptable to Manchester Waste VL Co and which has a
minimal impact on Manchester Waste TPS Co.
Pension and other post-retirement liability accounting
Critical judgements in applying the Group's accounting
policies
The combined accounting deficit in the Group's defined benefit
pension and post-retirement medical schemes at 31 December 2016 was
GBP69.3 million (31 December 2015 - GBP46.2 million). In
determining the Group's defined benefit pension liability,
consideration is also given to whether there is a minimum funding
requirement under IFRIC 14 The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction which is in
excess of the IAS 19 Employee Benefits liability. If the minimum
funding requirement is higher, an additional liability would need
to be recognised. Under the trust deed and rules of JLPF, the Group
has an ultimate unconditional right to any surplus, accordingly the
excess of the minimum funding requirement over the IAS 19 Employee
Benefits liability has not been recognised as an additional
liability.
Key sources of estimation uncertainty
The value of the pension deficit is highly dependent on key
assumptions including price inflation, discount rate and life
expectancy. The assumptions applied at 31 December 2016 and the
sensitivity of the pension liabilities to certain changes in these
assumptions are illustrated in note 18.
3 Operating segments
Information is reported to the Group's Board (the chief
operating decision maker under IFRS 8 Operating Segments) for the
purposes of resource allocation and assessment of segment
performance based on the category of activities undertaken within
the Group. The principal categories of activity, and thus the
reportable segments under IFRS 8 Operating Segments, are: Primary
Investment, Secondary Investment and Asset Management.
The results included within each of the reportable segments
comprise:
Primary Investment - costs and cost recoveries associated with
originating, bidding for and winning greenfield infrastructure and
renewable energy projects; investment returns from and growth in
the value of the Primary Investment portfolio, net of associated
costs.
Secondary Investment - investment returns from and growth in the
value of the Secondary Investment portfolio, net of associated
costs.
Asset Management - fee income and associated costs from
investment management services in respect of both the Primary and
Secondary Investment portfolios and in respect of JLIF's and JLEN's
portfolios and the PPP assets in JLPF's portfolio plus fee income
and associated costs from project management services.
The Board's primary measure of profitability for each segment is
profit before tax.
The Board does not monitor on an ongoing basis the results of
the Group on a geographical basis. An analysis of the Group's
investments at FVTPL by foreign currency can be found in note
16.
The following is an analysis of the Group's profit before tax
and operating income for the years ended 31 December 2016 and 31
December 2015:
Year ended 31 December 2016
Reportable segments
Non-
Primary Secondary Asset Segment Inter- segmental
Investment Investment Management Sub-total segment results Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Continuing
operations
Net gain on
investments at
FVTPL 144.4 66.9 - 211.3 - 7.5 218.8
Other income 7.5 - 47.4 54.9 (14.7) 1.8 42.0
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Operating
income 151.9 66.9 47.4 266.2 (14.7) 9.3 260.8
Cost of sales - - - - - - -
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Gross profit 151.9 66.9 47.4 266.2 (14.7) 9.3 260.8
Administrative
expenses (33.3) (7.6) (27.5) (68.4) 14.7 (4.7) (58.4)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit from
operations 118.6 59.3 19.9 197.8 - 4.6 202.4
Finance costs (5.5) (2.2) - (7.7) - (2.6) (10.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax from
continuing
operations 113.1 57.1 19.9 190.1 - 2.0 192.1
Profit before
tax -
statutory 113.1 57.1 19.9 190.1 - 2.0 192.1
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Year ended 31 December 2015
Reportable segments
Non-
Primary Secondary Asset Segment Inter- segmental
Investment Investment Management Sub-total segment results Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Continuing
operations
Net gain on
investments at
FVTPL 82.9 49.4 - 132.3 - 0.8 133.1
Other income 3.4 - 42.4 45.8 (12.0) 0.7 34.5
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Operating
income 86.3 49.4 42.4 178.1 (12.0) 1.5 167.6
Cost of sales - - - - - (0.1) (0.1)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Gross profit 86.3 49.4 42.4 178.1 (12.0) 1.4 167.5
Administrative
expenses (29.3) (5.9) (26.9) (62.1) 12.0 (5.2) (55.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit from
operations 57.0 43.5 15.5 116.0 - (3.8) 112.2
Finance costs (6.3) (0.5) - (6.8) - (4.5) (11.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax from
continuing
operations 50.7 43.0 15.5 109.2 - (8.3) 100.9
Profit before
tax from
discontinued
operations 5.7
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax - pro
forma 106.6
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Reconciliation
to statutory
results:
Fair value loss
on acquisition
of John Laing
Holdco Limited (3.4)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax -
statutory 103.2
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Non-segmental results include results from corporate activities
and discontinued operations.
For the year ended 31 December 2016, more than 10% of operating
income was derived from the IEP (Phase 1) and A1 Gdansk Poland
projects (year ended 31 December 2015 - IEP (Phase 1)).
The Group's investment portfolio, comprising investments in
project companies and a listed fund included within investments at
FVTPL (see note 11) is allocated between primary and secondary
investments. The Primary Investment portfolio includes investments
in projects, which are in the construction phase. The Secondary
Investment portfolio includes investments in operational
projects.
31 December 31 December
2016 2015
Segment assets GBP million GBP million
-------------------------------- ------------- -------------
Primary Investment 696.3 405.9
Secondary Investment 479.6 435.5
-------------------------------- ------------- -------------
Total investment portfolio 1,175.9 841.4
Other investments 0.3 0.5
Other assets and liabilities 81.3 123.4
-------------------------------- ------------- -------------
Total investments at FVTPL 1,257.5 965.3
Other assets 10.3 12.0
-------------------------------- ------------- -------------
Total assets 1,267.8 977.3
-------------------------------- ------------- -------------
Retirement benefit obligations (69.3) (46.2)
Other liabilities (181.7) (41.5)
-------------------------------- ------------- -------------
Total liabilities (251.0) (87.7)
-------------------------------- ------------- -------------
Group net assets 1,016.8 889.6
-------------------------------- ------------- -------------
Other assets and liabilities above include cash and cash
equivalents, trade and other receivables less trade and other
payables within recourse group investment entity subsidiaries.
4 Earnings per share
The calculation of basic earnings per share is based on the
following data:
Year Year Year
ended ended ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
-------------- -------------- --------------
GBP million GBP million GBP million
Earnings
Profit from continuing
operations for the purpose
of basic and diluted
earnings per share 190.3 98.8 95.4
Profit from discontinued
operations for the purpose
of basic and diluted
earnings per share - 5.7 5.7
-------------- -------------- --------------
Profit for the
year 190.3 104.5 101.1
-------------- -------------- --------------
Number of shares
Weighted average number
of ordinary shares for
the purpose of basic
earnings per share 366,923,076 358,305,584 336,935,722
Dilutive effect of ordinary
shares potentially issued
under share-based incentives
(note 5) 3,313,330 1,255,857 1,255,857
-------------- -------------- --------------
Weighted average number
of ordinary shares for
the purpose of diluted
earnings per share 370,236,406 359,561,441 338,191,579
-------------- -------------- --------------
Earnings per share from
continuing operations
(pence/share)
Basic 51.9 27.6 28.3
Diluted 51.4 27.5 28.2
Earnings per share from
continuing and discontinued
operations (pence/share)
Basic 51.9 29.2 30.0
Diluted 51.4 29.1 29.9
5 Share-based incentives
Long-term incentive plan
The Group operates share-based incentive arrangements for
Executive Directors, senior executives and other eligible employees
under which awards are granted over the Company's ordinary shares.
Awards are conditional on the relevant employee completing three
years' service (the vesting period). The awards vest three years
from the grant date, subject to the Group achieving a target
share-based performance condition, total shareholder return (50% of
the award), and a non-market based performance condition, NAV
growth per share (50% of the award). The Group has no legal or
constructive obligation to repurchase or settle the awards in
cash.
The movement in the number of shares awarded is as follows:
Number of shares
awarded
2016 2015
---------------- ---------- ----------
At 1 January 1,763,030 -
Granted 2,094,460 1,795,830
Lapsed (83,160) (32,800)
---------------- ---------- ----------
At 31 December 3,774,330 1,763,030
---------------- ---------- ----------
The weighted average fair value of awards granted during the
year was 167.25 pence per share (2015 - 130.89p) for the
market-based performance condition, determined using the Stochastic
valuation model, and 226.49 pence per share (2015 - 218.11p) for
the non-market based performance condition determined using the
Black Scholes model. The weighted average fair value of awards
granted during the year from both models is 196.87 pence per share
(2015 - 174.46p). The significant inputs into the model were the
weighted average share price of 226.5 pence (2015 - 219.5p) at the
grant date, expected volatility of 12.55% (2015 - 14.17%), expected
dividend yield of 3.10% (2015 - 2.17%), an expected award life of
three years and an annual risk-free interest rate of 0.4% (2015 -
0.68%). The volatility measured at the standard deviation of
continuously compounded share returns is based on statistical
analysis of daily share prices over three years.
The total expense recognised in the Group Income Statement for
awards granted under share-based incentive arrangements for the
year ended 31 December 2016 was GBP2.0 million (2015 - GBP0.7
million).
Of the 3,774,330 outstanding awards (2015 - 1,763,030), none
were exercisable at 31 December 2016 (2015 - nil). The weighted
average exercise price of the awards granted during 2016 was GBPnil
(2015 - GBPnil). There were no awards forfeited, exercised or
expired during the year ended 31 December 2016 (2015 - nil). During
the year ended 31 December 2016, there were 83,160 awards (2015 -
32,800) that lapsed.
Of the awards outstanding at the end of the year, 1,695,470 vest
on 15 April 2018 and 2,078,860 vest on 15 April 2019 subject to the
conditions described above. The weighted average exercise price of
the awards outstanding at 31 December 2016 was GBPnil (31 December
2015 - GBPnil).
Deferred Share Bonus Plan
In accordance with the Deferred Share Bonus Plan, 84,439 shares
were awarded on 15 March 2016 to Executive Directors and certain
senior executives in relation to that part of their annual bonus
for 2015 which exceeded 60% of their base salary. These awards vest
in equal tranches on the first, second and third anniversary of
grant, normally subject to continued employment. For further
details on this plan, please refer to the Directors' Remuneration
Report.
The movement in the number of shares awarded is as follows:
Number of shares awarded
2016 2015
--------------- --------------- ----------
At 1 January - -
Granted 84,439 -
At 31 December 84,439 -
--------------- --------------- ----------
Employee Benefit Trust
On 19 June 2015 the Company established the John Laing Group
Employee Benefit Trust (the EBT) to be used as part of the
remuneration arrangements for employees. The purpose of the EBT is
to facilitate the ownership of shares by or for the benefit of
employees by the acquisition and distribution of shares in the
Company. The EBT purchases shares in the Company to satisfy the
Company's obligations under its share-based payment plans.
During the year the EBT purchased no shares in John Laing Group
plc and as at 31 December 2016 the EBT held no shares in the
Company.
6 Other income
Year ended Year ended
31 December 31 December
2016 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
---------------------------- ------------- ------------- -------------
Fees from asset management
services 34.5 31.1 28.1
Recoveries on financial
close 7.5 3.4 3.4
42.0 34.5 31.5
---------------------------- ------------- ------------- -------------
Included within fees from asset management services is GBP1.9
million received on the sale of the UK Project Management Services
business in November 2016. A further GBP2.1 million was deferred
and recognised in January 2017 on transfer of the final MSA
contracts. Total costs of the sale were GBP1.4 million (recognised
in administrative expenses in the year ended 31 December 2016)
leading to an overall profit on sale in the year ended 31 December
2016 of GBP0.5 million.
7 Profit from operations
Year
Year ended ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
-------------- -----------------
GBP million GBP million
Profit from operations has
been arrived at after charging:
Fees payable to the Company's
auditor and its associates
for the audit of the Company's
subsidiaries (0.2) (0.3)
-------------- ---------------
Total audit fees (0.2) (0.3)
-------------- ---------------
Other assurance services - -
Total non-audit fees - -
-------------- ---------------
Operating lease charges:
rental of land
- and buildings (1.3) (0.8)
Depreciation of plant
and equipment (0.6) (0.7)
Amortisation of intangible
assets (0.2) (0.5)
Net foreign exchange
gain - 1.4
-------------- ---------------
The fee payable to the Company's auditor for the audit of the
Company's annual accounts was GBP6,375 (2015 - GBP6,312). The fees
payable to the Company's auditor for the audit of the Company's
subsidiaries were GBP241,560 (2015 - GBP295,334). The fees payable
to the Company's auditor for non-audit services comprised:
GBP44,800 for other assurance services (2015 - GBP44,700). Other
fees were GBPnil in 2016 (2015 - GBP1.1 million paid to the
Company's auditor for reporting accountant and other services in
relation to the IPO of the Company in February 2015 which was
deducted from share premium in 2015 as an expense on the issue of
equity shares).
8 Employee costs and directors' emoluments
Year Year Year
ended ended ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
-------------- -------------- --------------
GBP million GBP million GBP million
Employee costs comprise:
Salaries (26.8) (29.9) (26.0)
Social security costs (2.9) (3.4) (3.0)
Pension charge
- defined benefit
schemes (see note 18) (1.6) (1.3) (1.3)
- defined contribution (1.3) (1.2) (1.0)
Share-based incentives
(see note 5) (2.0) (0.7) (0.7)
(34.6) (36.5) (32.0)
-------------- -------------- --------------
Employee costs in 2015 include one-off costs of GBP3.4 million
incurred in relation to the IPO.
Annual average employee numbers (including Directors):
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
No. No.
---------------------------- ------------- ---------------
Staff 248 247
---------------------------- ------------- ---------------
UK 191 196
Overseas 57 51
---------------------------- ------------- ---------------
Activity
Primary investments, asset
management and central
activities 248 247
---------------------------- ------------- ---------------
Details of Directors' remuneration for the year ended 31
December 2016 can be found in the Directors' Remuneration
Report.
9 Finance costs
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
GBP million GBP million
--------------------------------- ------------- ---------------
Finance costs on corporate
banking facilities (7.9) (7.6)
Amortisation of debt issue
costs (1.1) (1.0)
Net interest cost of retirement
obligations (see note 18) (1.3) (2.7)
--------------------------------- ------------- ---------------
Total finance costs (10.3) (11.3)
--------------------------------- ------------- ---------------
10 Tax
The tax charge for the year comprises:
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
GBP million GBP million
------------------------------- ------------- ---------------
Current tax:
UK corporation tax charge
- current year (1.9) (2.0)
UK corporation tax charge -
- prior year 0.5
------------------------------- ------------- ---------------
(1.4) (2.0)
------------------------------- ------------- ---------------
Deferred tax:
Deferred tax charge - current
year (0.2) (0.1)
Deferred tax charge - prior -
year (0.2)
------------------------------- ------------- ---------------
(0.4) (0.1)
------------------------------- ------------- ---------------
Tax charge on continuing
operations (1.8) (2.1)
------------------------------- ------------- ---------------
The tax charge for the year can be reconciled to the profit in
the Group Income Statement as follows:
Year ended Year ended
31 December 31 December
2016 2015
Pro
forma Statutory
Statutory GBP GBP
GBP million million million
--------------------------------- ------------- --------- ----------
Profit before tax on continuing
operations 192.1 100.9 97.5
--------------------------------- ------------- --------- ----------
Tax at the UK corporation
tax rate (38.4) (20.4) (19.7)
Tax effect of expenses
and other similar items
that are not deductible (0.6) (1.1) (1.1)
Non-taxable movement on
fair value of investments 43.8 27.0 26.3
Adjustment for management
charges to fair value group (6.6) (7.4) (7.4)
Origination and reversal
of timing differences - (0.1) (0.1)
Other movements (0.3) (0.1) (0.1)
Prior period - current - -
tax 0.5
Prior period - deferred - -
tax (0.2)
--------------------------------- ------------- --------- ----------
Total tax charge on continuing
operations for the year (1.8) (2.1) (2.1)
--------------------------------- ------------- --------- ----------
For the year ended 31 December 2016 a tax rate of 20.0% has been
applied (2015 - 20.25%). The UK Government has announced its
intention to reduce the main corporation tax rate by 1% to 19% from
1 April 2017 and by a further 2% to 17% from 1 April 2020.
The Group expects that the majority of deferred tax assets will
be realised after 1 April 2020 and therefore the Group has measured
its deferred tax assets at 31 December 2016 at 17% (31 December
2015 - 18%).
11 Investments at fair value through profit or loss
31 December 2016
Other
Project Listed assets
companies investment and liabilities Total
Statutory GBP million GBP million GBP million GBP million
---------------------- ------------- ------------- ----------------- -------------
Opening balance 825.8 16.1 123.4 965.3
Distributions (35.9) (0.9) 36.8 -
Investment in equity
and loans 302.1 - (302.1) -
Realisations (140.5) (6.4) 146.9 -
Fair value movement 214.7 1.2 2.9 218.8
Net cash transferred
to investments held
at FVTPL - - 73.4 73.4
---------------------- ------------- ------------- ----------------- -------------
Closing balance 1,166.2 10.0 81.3 1,257.5
---------------------- ------------- ------------- ----------------- -------------
31 December 2015
Other
Project Listed assets
companies investment and liabilities Total
Pro forma GBP million GBP million GBP million GBP million
------------------------- ------------- ------------- ----------------- -------------
Opening balance 706.7 65.6 85.9 858.2
Distributions (43.4) (0.9) 44.3 -
Investment in equity
and loans 142.9 - (142.9) -
Realisations (86.3) - 86.3 -
Investments transferred
to JLPF (29.6) (50.4) - (80.0)
Fair value movement 135.5 1.8 (4.2) 133.1
Net cash transferred
to investments held
at FVTPL - - 54.0 54.0
------------------------- ------------- ------------- ----------------- -------------
Closing balance 825.8 16.1 123.4 965.3
------------------------- ------------- ------------- ----------------- -------------
31 December 2015
Other
Project Listed assets
companies investment and liabilities Total
Statutory GBP million GBP million GBP million GBP million
------------------------- ------------- ------------- ----------------- -------------
Opening balance - - - -
Acquisition of John
Laing Holdco Limited 706.7 65.6 (142.3) 630.0
Acquisition of Service
Companies - - 231.6 231.6
Distributions (43.4) (0.9) 44.3 -
Investment in equity
and loans 142.9 - (142.9) -
Realisations (86.3) - 86.3 -
Investments transferred
to JLPF (29.6) (50.4) - (80.0)
Fair value movement 135.5 1.8 (7.6) 129.7
Net cash transferred
to investments held
at FVTPL - - 54.0 54.0
------------------------- ------------- ------------- ----------------- -------------
Closing balance 825.8 16.1 123.4 965.3
------------------------- ------------- ------------- ----------------- -------------
On 27 January 2015, the Company acquired the remaining 77.54%
interest in John Laing Holdco Limited for GBP630.0 million as part
of a pre IPO restructuring. On 17 February 2015, the Company
acquired from the John Laing Holdco Limited group the interests in
its Service Companies. From this date, these Service Companies have
been consolidated in the Group financial statements. This latter
acquisition was treated as an acquisition under common control.
Included within other assets and liabilities at 31 December 2016
above is cash collateral of GBP23.7 million (31 December 2015 -
GBP123.9 million) in respect of future investment commitments on
IEP (Phase 1), I-77 Managed Lanes and New Perth Stadium (31
December 2015 - IEP (Phase 1), I-77 Managed Lanes, New Perth
Stadium and Sydney Light Rail).
The investment disposals that have occurred in the years ended
31 December 2016 and 2015 are as follows:
Year ended 31 December 2016
During the year ended 31 December 2016, the Group disposed of
shares and subordinated debt in six PPP and renewable energy
project companies. Total proceeds from all disposals were GBP146.9
million.
Details were as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
------------------------------------------------------ ----------------- --------- ---------- ---------
Sold to John Laing
Environmental Assets
Group Limited (JLEN)
Dreachmhor Wind
Farm (Holdings) 29 June
Limited 2016 100.0 100.0 -
New Albion Wind (Holdings) Limited 21 July 2016 100.0 100.0 -
Sold to John Laing Infrastructure Fund Limited (JLIF)
Inspiral Oldham Holdings Company Limited 27 May 2016 95.0 95.0 -
Rail Investments (Great Western) Limited* 29 December 2016 100.0 20.0 80.0
Services Support (BTP) Holdings Limited 29 February 2016 54.2 54.2 -
UK Highways (A55) Holdings Limited 22 December 2016 100.0 100.0 -
Sold to other parties
John Laing Environmental Assets Group Limited 2 November 2016 5.5 2.2 3.3
UK Highways Limited** 30 November 2016 100.0 100.0 -
* Holds the Group's 24% interest in IEP (Phase 1).
** Sold as part of disposal of UK activities of PMS for GBP0.3
million.
Year ended 31 December 2015
During the year ended 31 December 2015, the Group disposed of
shares and subordinated debt in seven PPP and renewable energy
project companies. Sale proceeds were GBP86.3 million. The Group
also made a contribution of GBP80.0 million to JLPF settled by a
transfer of shares in JLEN and shares in one PPP project
company.
Details were as follows:
Original Holding Retained
Date of holding disposed of holding
completion % % %
------------------------------------------------------
Sold to John Laing
Environmental Assets
Group Limited (JLEN)
31 March
Carscreugh Holdings Limited 2015 100.0 100.0 -
31 March
Wear Point Wind Holdco Limited 2015 100.0 100.0 -
31 March
Branden Solar Park Holdings Limited 2015 100.0 64.0 36.0
30 July
Branden Solar Park Holdings Limited 2015 36.0 36.0 -
2 December
Burton Wold Extension Limited 2015 100.0 100.0 -
Sold to John Laing Infrastructure Fund Limited (JLIF)
Healthcare Support (Erdington) Holdings Limited 30 June 2015 100.0 100.0 -
Sold to other parties
31 October
Dhule Palesner Tollway Limited 2015 36.0 36.0 -
5 November
Services Support (Cleveland) Holdings Limited 2015 27.08 27.08 -
Transferred to JLPF
17 February
City Greenwich Lewisham Rail Link plc 2015 52.0 47.0 5.0
17 February
John Laing Environmental Assets Group Limited (JLEN) 2015 39.7 29.9 9.8*
* shareholding reduced to 5.5% following equity issues by JLEN
in 2015 and 2016.
12 Trade and other receivables
31 December 2016 31 December 2015
GBP million GBP million
Current assets
Trade receivables 6.3 7.1
Other receivables 0.6 0.7
Prepayments and accrued income 0.5 0.5
---------------- ----------------
7.4 8.3
---------------- ----------------
Trading amounts receivable from project companies in which the
Group holds an interest were previously included at 31 December
2015 in other receivables. The Group has presented these within
trade receivables at 31 December 2016 to better reflect the nature
of the asset. The trade receivables and other receivables at 31
December 2015 have consequently been amended to present a
consistent year on year presentation. There is no impact on overall
trade and other receivables.
In the opinion of the Directors the fair value of trade and
other receivables is equal to their carrying value.
The carrying amounts of the Group's trade and other receivables
are denominated in the following currencies:
31 December 2016 31 December 2015
GBP million GBP million
Sterling 5.9 7.7
Other currencies 1.5 0.6
---------------- ----------------
7.4 8.3
---------------- ----------------
Other currencies mainly comprise trade and other receivables in
Euros (31 December 2015 - Canadian dollars).
Included in the Group's trade receivables are debtors with a
carrying value of GBP0.4 million which were overdue at 31 December
2016 (31 December 2015 - GBP0.1 million). The overdue balances have
an ageing of up to 120 days (31 December 2015 - up to 60 days). The
Group has not provided for these debtors as there has not been a
significant change in their credit quality since the amounts became
overdue, and they are considered fully recoverable. The Group does
not hold any collateral against these balances.
Included in the Group's trade receivables are debtors with a
carrying value of GBPnil which were impaired at 31 December 2016
(31 December 2015 - GBPnil).
13 Trade and other payables
31 December 2016 31 December 2015
GBP million GBP million
Current liabilities
Trade payables (1.9) (1.8)
Other taxation (1.6) (1.6)
Accruals (11.1) (15.8)
Deferred income (0.1) (0.4)
(14.7) (19.6)
Employee related accruals were previously included at 31
December 2015 in trade payables. The Group has presented these
within accruals at 31 December 2016 to better reflect the nature of
the liability. The trade payables and accruals figures at 31
December 2015 have consequently been amended to present a
consistent year on year presentation. There is no impact on overall
trade and other payables.
14 Borrowings
31 December 2016 31 December 2015
GBP million GBP million
Current liabilities
Interest-bearing loans and borrowings net of unamortised financing costs (note
15 c) (161.4) (14.9)
(161.4) (14.9)
15 Financial instruments
a) Financial instruments by category
Financial
liabilities at
Loans and Assets at amortised
receivables FVTPL cost Total
Continuing operations GBP million GBP million GBP million GBP million
Level
Fair value measurement method n/a 1 / 3* n/a
31 December 2016
Non-current assets
Investments at FVTPL* - 1,257.5 - 1,257.5
Current assets
Trade and other receivables 7.0 - - 7.0
Cash and cash equivalents 1.6 - - 1.6
------------ ---------------
Total financial assets 8.6 1,257.5 - 1,266.1
Current liabilities
Interest-bearing loans and borrowings - - (161.4) (161.4)
Trade and other payables - - (13.0) (13.0)
------------ ------------
Total financial liabilities - - (174.4) (174.4)
------------ ------------ --------------- ------------
Net financial instruments 8.6 1,257.5 (174.4) 1,091.7
------------ ------------ --------------- ------------
Financial
liabilities at
Loans and Assets at amortised
receivables FVTPL cost Total
Continuing operations GBP million GBP million GBP million GBP million
Level
Fair value measurement method n/a 1 / 3* n/a
31 December 2015
Non-current assets
Investments at FVTPL* - 965.3 - 965.3
Current assets
Trade and other receivables 8.1 - - 8.1
Cash and cash equivalents 1.1 - - 1.1
------------ ------------ --------------- ------------
Total financial assets 9.2 965.3 - 974.5
Current liabilities
Interest-bearing loans and borrowings - - (14.9) (14.9)
Trade and other payables - - (17.6) (17.6)
------------ ------------ --------------- ------------
Total financial liabilities - - (32.5) (32.5)
------------ ------------ --------------- ------------
Net financial instruments 9.2 965.3 (32.5) 942.0
------------ ------------ --------------- ------------
* Investments at FVTPL are split between: Level 1, JLEN, which
is a listed investment fair valued at GBP10.0 million (31 December
2015 - GBP16.1 million) using a quoted market price; and Level 3
investments in project companies fair valued at GBP1,166.2 million
(31 December 2015 - GBP825.8 million). Level 1 and Level 3
investments are fair valued in accordance with the policy and
assumptions set out in note 2 i. The investments at FVTPL include
other assets and liabilities as shown in note 11. Such other assets
and liabilities are recorded at amortised cost which the Directors
believe approximates to their fair value.
The tables in section a) provide 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 assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable 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 liability
that are not based on observable market data (unobservable
inputs).
There were no transfers between Levels 1 and 2 during either
year. There were no transfers out of Level 3.
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 FVTPL is given in note 11. The carrying amounts of
financial assets and financial liabilities in these financial
statements reflect their fair values.
b) Foreign currency and interest rate profile of financial
assets (excluding investments at FVTPL)
31 December 2016 31 December 2015
Non-interest Non-interest
bearing bearing
Currency GBP million GBP million
Sterling 5.9 7.7
Euro 1.5 0.2
Canadian dollar 0.4 0.6
US dollar 0.4 0.4
Australian dollar 0.4 0.2
Other - 0.1
Total 8.6 9.2
c) Foreign currency and interest rate profile of financial liabilities
The Group's financial liabilities at 31 December 2016 were
GBP174.4 million (31 December 2015 - GBP32.5 million), of which
GBP161.4 million (31 December 2015 - GBP14.9 million) related to
short-term cash borrowings of GBP165.0 million net of unamortised
finance costs of GBP3.6 million.
31 December 2016 31 December 2015
Fixed Non-interest Fixed Non-interest
rate bearing Total rate bearing Total
Currency GBP million GBP million GBP million GBP million GBP million GBP million
Sterling (161.4) (9.8) (171.2) (14.9) (14.2) (29.1)
Euro - (0.5) (0.5) - (0.6) (0.6)
US dollar - (0.9) (0.9) - (1.4) (1.4)
Australian dollar - (1.4) (1.4) - (1.1) (1.1)
Other - (0.4) (0.4) - (0.3) (0.3)
Total (161.4) (13.0) (174.4) (14.9) (17.6) (32.5)
16 Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange rate risk, interest
rate risk and inflation risk), credit risk, price risk, liquidity
risk and capital risk. The Group's overall risk management
programme focuses on the 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 the parent company and its recourse subsidiaries, financial
risks are managed by a central treasury operation which operates
within Board approved policies. The various types of financial risk
are managed as follows:
Market risk - foreign currency exchange rate risk
As at 31 December 2016 the Group held investments in 26 overseas
projects (31 December 2015 - 18 overseas projects). The Group's
foreign currency exchange rate risk policy is to determine the
total Group exposure to individual currencies; it may then enter
into hedges against certain individual investments. The Group's
exposure to exchange rate risk on its investments is disclosed
below.
In addition, the Group policy on managing foreign currency
exchange rate risk is to cover significant transactional exposures
arising from receipts and payments in foreign currencies, where
appropriate and cost effective. There were 21 forward currency
contracts open as at 31 December 2016 (31 December 2015 - 15). The
fair value of these contracts was a net asset of GBP3.5 million (31
December 2015 - GBP3.7 million liability) and is included in
investments at FVTPL.
At 31 December 2016, the Group's most significant currency
exposure was to the Euro
(31 December 2015 - Euro).
Foreign currency exposure of investments at FVTPL:
31 December 2016 31 December 2015
Other Other
assets assets
Project Listed and Project Listed and
companies investments liabilities Total companies investments liabilities Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Sterling 500.5 10.0 41.4 551.9 421.9 16.1 53.3 491.3
Euro 341.4 - 10.3 351.7 213.3 - 1.4 214.7
Australian
dollar 181.4 - 5.5 186.9 88.2 - 50.2 138.4
US dollar 121.0 - 23.7 144.7 83.7 - 18.0 101.7
New Zealand
dollar 21.9 - 0.4 22.3 18.7 - 0.5 19.2
1,166.2 10.0 81.3 1,257.5 825.8 16.1 123.4 965.3
Investments in project companies are fair valued based on the
spot rate at the balance sheet date. As at 31 December 2016, a 5%
movement of each relevant currency against Sterling would decrease
or increase the value of investments in overseas projects by
c.GBP27 million.
Market risk - interest rate risk
The Group's interest rate risk arises due to fluctuations in
interest rates which impact on the value of returns from floating
rate deposits and expose the Group to variability in interest
payment cash flows on variable rate borrowings. The Group has
assessed its exposure to interest rate risk and considers that this
exposure is low as its variable rate borrowings tend to be short
term, its finance costs in relation to letters of credit issued
under the corporate banking facilities are at a fixed rate and the
interest earned on its cash and cash equivalents minimal.
The exposure of the Group's financial assets to interest rate
risk is as follows:
31 December 2016 31 December 2015
Interest-bearing Non-interest Interest- bearing Non-interest
Floating rate bearing Total Floating rate bearing Total
GBP million GBP million GBP million GBP million GBP million GBP million
Financial assets
Investments at FVTPL - 1,257.5 1,257.5 - 965.3 965.3
Trade and other
receivables - 7.0 7.0 - 8.1 8.1
Cash and cash equivalents - 1.6 1.6 - 1.1 1.1
Financial assets exposed
to interest rate risk - 1,266.1 1,266.1 - 974.5 974.5
An analysis of the movement between opening and closing balances
of investments at FVTPL is given in note 11. Investments in project
companies are principally valued on a discounted cash flow basis.
At 31 December 2016, the weighted average discount rate was 8.9%
(31 December 2015 - 9.5%). For investments in project companies,
changing the discount rate used to value the underlying instruments
would alter their fair value. As at 31 December 2016 a 0.25%
increase in the discount rate would reduce the fair value by
GBP32.1 million (31 December 2015 - GBP26.1 million) and a 0.25%
reduction in the discount rate would increase the fair value by
GBP33.6 million (31 December 2015 - GBP27.2 million).
The exposure of the Group's financial liabilities to interest
rate risk is as follows:
31 December 2016 31 December 2015
Interest Interest
-bearing Non-interest -bearing Non-interest
fixed rate bearing Total fixed rate bearing Total
GBP million GBP million GBP million GBP million GBP million GBP million
Interest-bearing
loans and
borrowings (161.4) - (161.4) (14.9) - (14.9)
Trade and other
payables - (13.0) (13.0) - (17.6) (17.6)
Total financial
liabilities (161.4) (13.0) (174.4) (14.9) (17.6) (32.5)
Market risk - inflation risk
The Group has limited direct exposure to inflation risk, but the
fair value of investments is determined by future project revenue
and costs which can be partly linked to inflation. Sensitivity to
inflation can be mitigated by the project company entering into
inflation swaps. Where PPP investments are positively correlated to
inflation, an increase in inflation expectations will tend to
increase the value of PPP investments. However, an increase in
inflation expectations would tend to increase JLPF's pension
liabilities.
Based on a sample of seven of the larger PPP investments by
value at 31 December 2016, a 0.25% increase in inflation is
estimated to increase the value of PPP investments by c.GBP14
million and a 0.25% decrease in inflation is estimated to decrease
the value of PPP investment by c.GBP13 million. Certain of the
underlying project companies incorporate some inflation
hedging.
Credit risk
Credit risk is managed on a Group basis and arises from a
combination of the value and term to settlement of balances due and
payable by counterparties for both financial and trade
transactions.
In order to minimise credit risk, cash investments and
derivative transactions are limited to financial institutions of a
suitable credit quality and counterparties are carefully screened.
The Group's cash balances are invested in line with a policy
approved by the Board, capped with regard to counter-party credit
ratings.
A significant majority of the project companies in which the
Group invests receive revenue from government departments, public
sector or local authority clients and/or directly from the public.
As a result, these projects tend not to be exposed to significant
credit risk.
Price risk
The Group's investments in PPP assets have limited direct
exposure to price risk. The fair value of many such project
companies is dependent on the receipt of fixed fee income from
government departments, public sector or local authority clients.
As a result, these projects tend not to be exposed to price risk.
The Group also holds investments in renewable energy projects whose
fair value may vary with forecast energy prices to the extent they
are not hedged through short to medium term fixed price purchase
agreements with electricity suppliers, or do not benefit from
governmental support mechanisms at fixed prices. The Group's
investment in JLEN is valued at its closing market share price.
Liquidity risk
The Group adopts a prudent approach to liquidity management by
maintaining sufficient cash and available committed facilities to
meet its current and upcoming obligations.
The Group's liquidity management policy involves projecting cash
flows in major currencies and assessing the level of liquid assets
necessary to meet these. Managing liquidity risk is helped by the
relative predictability in both value and timing of cash flows to
and from the project companies in which the Group invests.
Maturity of financial assets
The maturity profile of the Group's financial assets (excluding
investments at FVTPL) is as follows:
Continuing operations
31 December 31 December
2016 2015
Less than Less than
one year one year
GBP million GBP million
Trade and other receivables 7.0 8.1
Cash and cash equivalents 1.6 1.1
Financial assets (excluding investments at FVTPL) 8.6 9.2
Other than certain trade and other receivables, as detailed in
note 12, none of the financial assets is either overdue or
impaired.
The maturity profile of the Group's financial liabilities is as
follows:
31 December 31 December
2016 2015
GBP million GBP million
In one year or less, or on demand (174.4) (32.5)
------------ ------------
Total (174.4) (32.5)
------------ ------------
The following table details the remaining contractual maturity
of the Group's financial liabilities. The table reflects
undiscounted cash flows relating to financial liabilities based on
the earliest date on which the Group is required to pay. The table
includes both interest and principal cash flows:
Weighted average In one year
effective interest rate or less Total
% GBP million GBP million
31 December 2016
Fixed interest rate instruments - loans and borrowings 2.75 (161.4) (161.4)
Non-interest bearing instruments* n/a (13.0) (13.0)
------------------------ ------------ ------------
(174.4) (174.4)
------------------------ ------------ ------------
31 December 2015
Fixed interest rate instruments - loans and borrowings 3.0 (14.9) (14.9)
Non-interest bearing instruments* n/a (17.6) (17.6)
------------------------ ------------ ------------
(32.5) (32.5)
------------------------ ------------ ------------
* Non-interest bearing instruments relate to trade and other
payables.
Capital risk
The Group seeks to adopt efficient financing structures that
enable it to manage capital effectively and achieve the Group's
objectives without putting shareholder value at undue risk. The
Group's capital structure comprises its equity (as set out in the
Group Statement of Changes in Equity) and its net borrowings.
At 31 December 2016, the Group had committed corporate banking
facilities of GBP400.0 million, expiring in March 2020, together
with additional surety facilities of GBP50.0 million, backed by
committed liquidity facilities, expiring in March 2018.
Issued at 31 December 2016 were letters of credit of GBP162.6
million (31 December 2015 - GBP154.2 million), related to future
capital and loan commitments, and contingent commitments and
performance and bid bonds of GBP6.5 million (31 December 2015 -
GBP1.1 million).
The Group has requirements for both borrowings and letters of
credit, which at 31 December 2016 were met by its GBP450.0 million
committed facilities and related ancillary facilities and
uncommitted cash backed facilities (31 December 2015 - GBP350.0
million). The committed facilities are summarised below:
31 December 2016
Letters of credit
in issue/other Total
Total facilities Loans drawn commitments undrawn
GBP million GBP million GBP million GBP million
Committed corporate banking facilities 400.0 (165.0) (119.1) 115.9
Surety facilities backed by liquidity facilities 50.0 - (50.0) -
----------------- ------------
Total committed Group facilities 450.0 (165.0) (169.1) 115.9
----------------- ------------
31 December 2015
Letters of credit
in issue/other Total
Total facilities Loans drawn commitments undrawn
GBP million GBP million GBP million GBP million
Committed corporate banking facilities 350.0 (19.0) (155.3) 175.7
----------------- ------------
Total committed Group facilities 350.0 (19.0) (155.3) 175.7
----------------- ------------
17 Deferred tax
The movements in the deferred tax asset relating to other
deductible temporary differences were:
Year ended Year ended Year ended
31 December 2016 31 December 2015 31 December 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening asset 1.4 1.5 -
Arising on acquisition - - 1.5
Charge to income - prior year (0.2) (0.2) (0.2)
Credit to income - current year (0.2) 0.1 0.1
Closing asset 1.0 1.4 1.4
The Group has no losses within its entities which are
consolidated but there are tax losses in investment entity
subsidiaries which are held at FVTPL.
18 Retirement benefit obligations
31 December 31 December
2016 2015
GBP million GBP million
Pension schemes (61.3) (38.9)
Post-retirement medical benefits (8.0) (7.3)
------------ ------------
Retirement benefit obligations (69.3) (46.2)
------------ ------------
a) Pension schemes
The Group operates two defined benefit pension schemes in the UK
(the Schemes) - The John Laing Pension Fund (JLPF) which commenced
on 31 May 1957 and The John Laing Pension Plan (the Plan) which
commenced on 6 April 1975. JLPF was closed to future accrual from 1
April 2011 and the Plan was closed to future accrual from September
2003. Neither Scheme has any active members, only deferred members
and pensioners. The assets of both Schemes are held in separate
trustee-administered funds.
UK staff employed since 1 January 2002, who are entitled to
retirement benefits, can choose to be members of a defined
contribution stakeholder scheme sponsored by the Group in
conjunction with Legal and General Assurance Society Limited. Local
defined contribution arrangements are available to overseas
staff.
JLPF
An actuarial valuation of JLPF was carried out as at 31 March
2016 by a qualified independent actuary, Willis Towers Watson. At
that date, JLPF was 85% funded on the technical provision funding
basis. This valuation took into account the Continuous Mortality
Investigation Bureau (CMI Bureau) projections of mortality.
The actuarial deficit of GBP171 million is to be repaid over
seven years as follows:
By 31 March GBP million
2017 24.5
2018 26.5
2019 29.1
2020 24.9
2021 25.7
2022 26.4
2023 24.6
The next triennial actuarial valuation of JLPF is due as at 31
March 2019.
During the year ended 31 December 2016, John Laing made deficit
reduction contributions of GBP18.1 million in cash (2015 - GBP127.4
million in a mixture of cash, JLEN shares and PPP assets). At 31
December 2016, JLPF's assets included PPP investments valued at
GBP37.8 million (31 December 2015 - GBP41.4 million). The Company
has guaranteed to fund any cumulative shortfall in forecast project
yield payments for some of these PPP investments up until 2017, but
considers it unlikely that a net shortfall will arise.
The liability at 31 December 2016 allows for indexation of
deferred pensions and post 5 April 1988 GMP pension increases based
on the Consumer Price Index (CPI).
The Plan
No contributions were made to the Plan in the year ended 31
December 2016 (31 December 2015 - none). At its last actuarial
valuation as at 31 March 2014, the Plan had assets of GBP12.3
million and liabilities of GBP11.4 million resulting in an
actuarial surplus of GBP0.9 million. The next triennial actuarial
valuation of the Plan is due as at 31 March 2017.
An analysis of members of both Schemes is shown below:
31 December 2016 Deferred Pensioners Total
JLPF 4,385 3,883 8,268
The Plan 109 328 437
31 December 2015 Deferred Pensioners Total
JLPF 4,569 3,787 8,356
The Plan 114 334 448
The weighted average financial assumptions used in the valuation
of JLPF and the Plan under IAS 19 at 31 December were:
31 December 31 December
2016 2015
% %
Discount rate 2.80 3.75
Rate of increase in non-GMP pensions in payment 3.10 2.90
Rate of increase in non-GMP pensions in deferment 2.10 2.00
Inflation - RPI 3.20 3.00
Inflation - CPI 2.10 2.00
----------- -----------
The major categories and fair value of assets held by the
Schemes were as follows:
31 December 31 December
2016 2015
GBP million GBP million
Bonds and other debt instruments 415.2 364.2
Equity instruments 374.7 337.1
Aviva bulk annuity buy-in agreement 234.1 214.2
Property 1.8 2.3
Derivatives (6.1) (8.3)
Cash and cash equivalents 52.4 5.8
UK PPP investments 37.8 41.4
------------ ------------
Total market value of assets 1,109.9 956.7
------------ ------------
The amount of the JLPF deficit is highly dependent upon the
assumptions above and may vary significantly from period to period.
The impact of possible future changes to some of the assumptions is
shown below, without taking into account any inter-relationship
between the assumptions. In practice, there would be
inter-relationships between the assumptions. The analysis has been
prepared in conjunction with the Group's actuarial adviser.
(Increase)/decrease
in pension liabilities at
31 December 2016
Increase in Decrease in
assumption assumption
GBP million GBP million
0.25% on discount rate 45.8 (48.9)
0.25% on inflation rate (34.1) 33.2
1 year post retirement longevity (43.7) 38.4
Mortality
Mortality assumptions at 31 December 2016 were based on the
following tables published by the CMI Bureau:
-- SAPS S2 normal (S2NA) year of birth tables for staff members
with mortality improvements in line with CMI 2015 core projections
with a long term trend rate of 1.25% per annum; and
-- SAPS S2 light (S2NA_L) year of birth tables for executive
members with mortality improvements in line with CMI 2015 core
projections with a long term trend rate of 1.25% per annum.
Mortality assumptions at 31 December 2015 were based on the
following tables published by the CMI Bureau:
-- SAPS S2 normal (S2NA) year of birth tables for staff members
with mortality improvements in line with CMI 2013 core projections
with a long term trend rate of 1.0% per annum; and
-- SAPS S2 light (S2NA_L) year of birth tables for executive
members with mortality improvements in line with CMI 2013 core
projections with a long term trend rate of 1.0% per annum.
The table below summarises the weighted average life expectancy
implied by the mortality assumptions used:
31 December 31 December
2016 2015
Years Years
Life expectancy - of member reaching age 65 in 2016
Males 22.4 22.3
Females 24.5 24.4
Life expectancy - of member aged 65 in 2031
Males 23.6 23.4
Females 25.9 25.5
----------- -----------
Analysis of the major categories of assets held by the
Schemes
31 December 2016 31 December 2015
GBP million % GBP million %
Bond and other debt instruments
UK corporate bonds 80.9 114.0
UK government gilts 141.6 104.7
UK government gilts - index linked 192.7 145.5
----------- ------ ----------- ------
415.2 37.3 364.2 38.1
Equity instruments
UK listed equities 152.0 147.5
European listed equities 34.3 28.7
US listed equities 73.8 80.7
Other international listed equities 114.6 80.2
----------- ------ ----------- ------
374.7 33.8 337.1 35.3
Aviva bulk annuity buy-in agreement 234.1 21.1 214.2 22.4
Property
Industrial property 1.8 2.3
----------- ------ ----------- ------
1.8 0.2 2.3 0.2
Derivatives
Inflation swaps (6.1) (8.3)
----------- ------ ----------- ------
(6.1) (0.5) (8.3) (0.9)
Cash and equivalents 52.4 4.7 5.8 0.6
UK PPP investments 37.8 3.4 41.4 4.3
----------- ------ ----------- ------
Total market value of assets 1,109.9 100.0 956.7 100.0
----------- ------ ----------- ------
Present value of Schemes' liabilities (1,171.2) (992.9)
----------- -----------
Deficit in the Schemes (61.3) (36.2)
Less unrecoverable surplus in the Plan* - (2.7)
----------- -----------
Net pension liability (61.3) (38.9)
----------- -----------
* The surplus in the Plan, which at 31 December 2016 was GBP2.9
million, has been treated as recoverable for the first time in
2016.
Virtually all equity and debt instruments held by JLPF have
quoted prices in active markets (Level 1). Derivatives can be
classified as Level 2 instruments and property and PPP investments
as Level 3 instruments. It is the policy of JLPF to use inflation
swaps to hedge its exposure to inflation risk. The JLPF Trustee
invests in return seeking assets, such as equity, property and PPP
investments, whilst balancing the risks of inflation and interest
rate movements through the annuity buy-in agreement, inflation
swaps and interest rate hedging.
In February 2009, the JLPF Trustee entered into a bulk annuity
buy-in agreement with Aviva to mitigate JLPF's exposure to changes
in liabilities. At 31 December 2016, the underlying insurance
policy was valued at GBP234.1 million (31 December 2015 - GBP214.2
million), being very substantially equal to the IAS 19 valuation of
the related liabilities.
Analysis of amounts charged to operating profit
Year ended
31 December Year ended
2016 31 December
2015
Statutory Pro forma and statutory
GBP million GBP million
Current service cost* (1.6) (1.3)
------------ ------------------------
* The Schemes no longer have any active members. Therefore,
under the projected unit method of valuation the current service
cost for JLPF will increase as a percentage of pensionable payroll
as members approach retirement. The current service cost has been
included within administrative expenses.
Analysis of amounts charged to finance costs
Year ended
31 December Year ended
2016 31 December
2015
Statutory Pro forma and statutory
GBP million GBP million
Interest on Schemes' assets 35.3 34.2
Interest on Schemes' liabilities (36.3) (36.6)
------------ ------------------------
Net charge to finance costs (1.0) (2.4)
------------ ------------------------
Analysis of amounts recognised in Group Statement of
Comprehensive Income
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Return on Schemes' assets (excluding amounts included in interest
on Schemes' assets above) 151.5 (23.0) (23.7)
Experience (loss)/gain arising on Schemes' liabilities (5.7) 15.6 15.6
Changes in financial assumptions underlying the present value of
Schemes' liabilities (185.6) 22.1 46.0
Changes in demographic assumptions underlying the present value of
Schemes' liabilities (1.1) - -
Recognition of surplus in the Plan at 31 December 2015 2.7 - -
Decrease in unrecoverable surplus - 0.3 0.3
Actuarial (loss)/gain recognised in Group Statement of
Comprehensive Income (38.2) 15.0 38.2
The cumulative amount recognised in the Group Statement of
Changes in Equity is GBPnil (31 December 2015 - GBP38.2 million
gain).
Changes in present value of defined benefit obligations
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening defined benefit obligation (992.9) (1,041.0) -
Arising on acquisition - - (1,058.9)
Current service cost (1.6) (1.3) (1.3)
Interest cost (36.3) (36.6) (36.6)
Experience (loss)/gain arising on Schemes' liabilities (5.7) 15.6 15.6
Changes in financial assumptions underlying the present value of Schemes'
liabilities (185.6) 22.1 46.0
Changes in demographic assumptions underlying the present value of Schemes'
liabilities (1.1) - -
Benefits paid (including administrative costs paid) 52.0 48.3 42.3
Closing defined benefit obligation (1,171.2) (992.9) (992.9)
The weighted average life of JLPF liabilities at 31 December
2016 is 16.8 years (31 December 2015 - 15.3 years).
Changes in the fair value of Schemes' assets
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening fair value of Schemes' assets 956.7 866.4 -
Arising on acquisition - - 861.1
Interest on Schemes' assets 35.3 34.2 34.2
Return on Schemes' assets (excluding amounts included in interest on Schemes'
assets above) 151.5 (23.0) (23.7)
Contributions by employer 18.4 127.4 127.4
Benefits paid (including administrative costs paid) (52.0) (48.3) (42.3)
Closing fair value of Schemes' assets 1,109.9 956.7 956.7
Analysis of the movement in the deficit during the year
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening deficit (38.9) (174.6) -
Arising on acquisition - - (197.8)
Current service cost (1.6) (1.3) (1.3)
Finance cost (1.0) (2.4) (2.4)
Contributions 18.4 127.4 127.4
Actuarial (loss)/gain (38.2) 14.7 37.9
Closing deficit in Schemes (61.3) (36.2) (36.2)
Less unrecoverable surplus in the Plan - (2.7) (2.7)
Pension deficit (61.3) (38.9) (38.9)
History of the weighted average experience gains and losses
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
Difference between actual and expected returns on assets:
Amount (GBP million) 151.5 (23.0) (23.7)
% of Schemes' assets 13.6 2.4 2.5
Experience (loss)/gain on Schemes' liabilities:
Amount (GBP million) (5.7) 15.6 15.6
% of present value of Schemes' liabilities 0.5 1.6 1.6
Total amount recognised in the Group Statement of Comprehensive Income
(excluding deferred
tax):
Amount (GBP million) (38.2) 15.0 38.2
% of present value of Schemes' liabilities 3.3 1.5 3.8
------------ ------------ ------------
b) Post-retirement medical benefits
The Company provides post-retirement medical insurance benefits
to 62 former employees. This scheme, which was closed to new
members in 1991, is unfunded.
The present value of the future liabilities under this
arrangement has been assessed by the Company's actuarial adviser,
Lane Clark & Peacock LLP, and has been included in the Group
Balance Sheet under retirement benefit obligations as follows:
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Post-retirement medical liability - opening (7.3) (8.2) -
- arising on acquisition - - (8.2)
Other finance costs (0.3) (0.3) (0.3)
Contributions 0.5 0.4 0.4
Experience (loss)/gain* (0.2) 0.4 0.4
Changes in financial assumptions underlying the present value of
scheme's liabilities* (0.9) 0.4 0.4
Changes in demographic assumptions underlying the present value of
liabilities* 0.1 - -
Curtailment and settlements 0.1 - -
Post-retirement medical liability - closing (8.0) (7.3) (7.3)
* These amounts are actuarial (losses)/gains that go through the
Group Statement of Comprehensive Income.
The annual rate of increase in the per capita cost of medical
benefits was assumed to be 5.2% in 2016 (2015 - 5.0%). It is
expected to increase in 2017 and thereafter at RPI plus 2.0% per
annum (2015 - at RPI plus 2.0% per annum).
Medical cost inflation has a significant effect on the liability
reported for this scheme. A 1% change in assumed medical cost
inflation would result in the following liability at 31 December
2016:
1% increase 1% decrease
GBP million GBP million
Post-retirement medical liability (8.9) (7.3)
------------ ------------
Life expectancy also has a significant effect on the liability
reported for this scheme. A one-year increase or decrease in life
expectancy would result in the following liability at 31 December
2016:
1% increase 1% decrease
GBP million GBP million
Life expectancy (8.7) (7.4)
------------ ------------
19 Provisions
At 1 January Credit/(charge) to Group At 31 December
2016 Reclassification Income Statement Utilised 2016
GBP million GBP million GBP million GBP million GBP million
Retained liabilities (4.2) - (0.7) 3.4 (1.5)
Employee related liabilities (0.1) - 0.1 - -
Total provisions (4.3) - (0.6) 3.4 (1.5)
------------ --------------
Classified as:
Continuing operations (0.1) (4.2) (0.6) 3.4 (1.5)
Discontinued operations (4.2) 4.2 - - -
Provisions on continuing
operations are analysed as:
Non-current provisions (0.1) (1.5)
------------
(0.1) (1.5)
At 1 January Arising on Unwinding Credit to Group At 31 December
2015 acquisition of discount Income Statement Utilised 2015
GBP million GBP million GBP million GBP million GBP million GBP million
Retained liabilities - (8.8) - 2.2 2.4 (4.2)
Employee related
liabilities - (0.1) - - - (0.1)
Onerous property leases - (2.0) - - 2.0 -
Total provisions - (10.9) - 2.2 4.4 (4.3)
Classified as:
Continuing operations - (2.1) - - 2.0 (0.1)
Discontinued operations - (8.8) - 2.2 2.4 (4.2)
Provisions on continuing
operations are analysed as:
Non-current provisions (2.1) (0.1)
(2.1) (0.1)
During the year, provisions relating to retained liabilities
were reclassified from discontinued operations to continuing
operations as they are no longer sufficiently material to show
separately as discontinued operations.
Provisions of GBP1.5 million as at 31 December 2016 (31 December
2015 - GBP4.2 million) relate to retained liabilities from the sale
of the Laing Construction business in 2001.
20 Share capital
31 December 31 December
2016 2015
No. No.
Authorised:
Ordinary shares of GBP0.10 each 366,923,076 366,923,076
------------ ------------
Total 366,923,076 366,923,076
------------ ------------
31 December 2016 31 December 2015
No. GBP million No. GBP million
Allotted, called up and fully paid:
Statutory
At 1 January - 366,923,076 ordinary shares of GBP0.10 each
(2015 - 100,000,000 ordinary shares
of GBP0.00000001 each) 366,923,076 36.7 100,000,000 -
Issue of 100,000,000 ordinary shares of GBP0.00000001 each - - 100,000,000 -
Conversion of 200,000,000 ordinary shares of GBP0.00000001
each to 20 ordinary shares of GBP0.10 each - - (199,999,980) -
Issue of 299,999,980 ordinary shares of GBP0.10 each - - 299,999,980 30.0
Issue of 66,923,076 ordinary shares of GBP0.10 each - - 66,923,076 6.7
------------
At 31 December 366,923,076 36.7 366,923,076 36.7
------------
Pro forma
At 1 January - 300,000,000 ordinary shares of GBP0.10 each 300,000,000 30.0
Issue of 66,923,076 ordinary shares of GBP0.10 each 66,923,076 6.7
At 31 December 366,923,076 36.7
The Company has one class of ordinary shares which carry no
right to fixed income.
21 Share premium
On 26 January 2015 the Company allotted to its shareholder
100,000,000 ordinary shares of GBP0.00000001 each credited as fully
paid to rank pari passu with its existing ordinary shares. On 27
January 2015 all the ordinary shares were consolidated into 20
ordinary shares of GBP0.10 each, each share having the same rights
and being subject to the same restrictions (except as to nominal
value) as the existing ordinary shares of GBP0.00000001 each in the
Company as set out in its Articles. On the same day the Company
allotted and issued to its shareholder a further 299,999,980
ordinary shares of GBP0.10 each at a premium of GBP2.00 per share,
each to rank pari passu with the existing ordinary shares of
GBP0.10 each in the capital of the Company. In addition, the
Company undertook a reduction of its share premium account by
GBP500 million.
On 17 February 2015, the Company issued 66,923,076 new ordinary
shares of GBP0.10 each at a premium of GBP1.85 per share in
connection with admission of its shares to listing.
31 December 2016 31 December 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening balance 218.0 100.0 -
Premium arising on issue of equity shares - 123.8 723.8
Reduction of share premium account - - (500.0)
Costs associated with the issue of equity shares - (5.8) (5.8)
Closing balance 218.0 218.0 218.0
22 Net cash outflow from operating activities
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Profit before tax from continuing operations 192.1 100.9 97.5
Adjustments for:
Finance costs 10.3 11.3 11.3
Discontinued operations' cash flows - 1.1 1.1
Unrealised profit arising on changes in fair value of investments in
project companies (note
11) (218.8) (133.1) (129.7)
Depreciation of plant and equipment 0.6 0.7 0.7
Amortisation of intangible assets 0.2 0.5 0.5
Share-based incentives 2.0 0.7 0.7
Contribution to JLPF (18.4) (47.5) (47.5)
Decrease in provisions (2.8) (1.9) (1.9)
Operating cash outflow before movements in working capital (34.8) (67.3) (67.3)
Decrease/(increase) in trade and other receivables 1.2 (1.0) (1.0)
Decrease in trade and other payables (3.5) (2.2) (2.2)
Net cash outflow from operating activities (37.1) (70.5) (70.5)
23 Guarantees, contingent assets and liabilities and other commitments
At 31 December 2016, the Group had future equity and loan
commitments in PPP and renewable energy projects of GBP186.3
million (31 December 2015 - GBP278.1 million) backed by letters of
credit of GBP162.6 million (31 December 2015 - GBP154.2 million)
and collateralised cash of GBP23.7 million (31 December 2015 -
GBP123.9 million).
As stated in note 18 a), the Company has provided guarantees in
respect of certain PPP investments transferred to JLPF in
settlement of prior annual contribution obligations. Guarantees are
provided to fund any cumulative shortfall in forecast yield
payments from these PPP investments up until 2017, and the maximum
exposure at 31 December 2016 was GBPnil (31 December 2015 - GBP0.3
million).
The Group has given guarantees to lenders of a normal trading
nature, including performance bonds, some of which may be payable
on demand.
Claims arise in the normal course of trading which in some cases
involve or may involve litigation. Full provision has been made for
all amounts which the Directors consider are likely to become
payable on account of such claims.
The Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases for land and
buildings, falling due as follows:
31 December 31 December
2016 2015
GBP million GBP million
Within one year 1.0 0.9
In the second to fifth years inclusive 3.0 3.3
After five years 2.8 4.0
6.8 8.2
24 Transactions with related parties
Group
Details of transactions between the Group and its related
parties are disclosed below.
Trading transactions
The Group has entered into the following trading transactions
with project companies in which the Group holds interests:
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Services income* 18.0 13.5
Amounts owed by project companies 1.6 3.1
Amounts owed to project companies (0.6) (0.7)
* Services income is generated from project companies through
management services agreements and recoveries of bid costs on
financial close.
Investment transactions
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Net cash transferred to investments at FVTPL (note 11) (73.4) (54.0)
Transactions with other related parties
There were no transaction with other related parties during the
year ended 31 December 2016.
In the year ended 31 December 2015, the Group transferred
ownership of shares in JLEN and shares in a PPP project company to
JLPF as partial consideration for agreed deficit reduction
contributions. More details are set out in note 11.
Remuneration of key management personnel
The remuneration of the Directors of John Laing Group plc
together with other members of the Executive Committee, who were
the key management personnel of the Group for the period of the
financial statements, is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures:
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Cash basis
Short-term employee benefits 2.8 3.0
Post-employment benefits 0.2 0.2
Cash payments under long-term incentive plan 1.9 1.9
Social security costs 0.7 0.7
5.6 5.8
Award basis
Short-term employee benefits 2.8 3.0
Post-employment benefits 0.2 0.2
Awards under long-term incentive plan 1.0 2.6
Social security costs 0.4 0.7
4.4 6.5
In addition to the above amounts, GBP44,231 (2015 - GBPnil) was
paid to Nalon Management Services Limited, of which Phil Nolan is a
director, for services in the period prior to the Company's IPO in
February 2015.
25 Events after balance sheet date
On 2 March 2017, the Group disposed of its investment in the A1
Gdansk project in Poland for proceeds of EUR137.3 million.
ADDITIONAL FINANCIAL INFORMATION (Unaudited)
Re-presented financial statements
Income Statement for the year ended 31 December 2015
Pro forma IFRS Group Re-presented income Re-presented income
Income Statement Adjustments statement statement line items
GBP million GBP million GBP million
Fair value movements - Fair value movements -
investment portfolio 132.1 - 132.1 investment portfolio
Fair value movements - Fair value movements -
other (6.7) (0.8)(a) (7.5) other
Investment fees from Investment fees from
projects 7.7 - 7.7 projects
Net gain on investments
at fair value through
profit or loss 133.1 (0.8) 132.3
IMS revenue 13.4 - 13.4 IMS revenue
PMS revenue 17.0 - 17.0 PMS revenue
Recoveries on financial Recoveries on financial
close 3.4 - 3.4 close
Other income 0.7 (0.7)(a,c) -
Other income 34.5 (0.7) 33.8
Total income 167.6 (1.5) 166.1
Cost of sales (0.1) 0.1(c) -
Cost of sales (0.1) 0.1 -
Third party costs (6.9) 0.3(c) (6.6) Third party costs
Staff costs (31.8) (0.7)(a) (32.5) Staff costs
General overheads (11.7) - (11.7) General overheads
Other net costs (3.4) (0.2)(c) (3.6) Other net costs
Pension and other charges (1.5) 1.5(b) -
Administrative expenses (55.3) 0.9 (54.4)
EBIT 112.2 (0.5) 111.7
Finance charges (11.3) 4.7(a,b) (6.6) Finance charges
Pension and other
Pension and other charges - (4.2)(b) (4.2) charges
Finance costs (11.3) 0.5 (10.8)
Profit before tax 100.9 - 100.9
Notes:
a) Adjustments comprise: GBP2.0 million interest income
reclassified from 'fair value movements - other' to 'finance
costs'; GBP0.7 million cost in respect of the IFRS 2 charge for
share-based incentives reclassified from 'fair value movements -
other' to 'staff costs'; GBP0.5 million fee income from project
company shown as 'other income' in Group Income Statement
reclassified to 'fair value movements - other' in re-presented
income statement.
b) Under IAS 19, the costs of the pension schemes comprise a
service cost of GBP1.5 million, included in administrative expenses
in the Group Income Statement, and a finance charge of GBP2.7
million, included in finance costs in the Group Income Statement.
These amounts are combined together under management reporting.
c) Other small reclassifications: (i) GBP0.1 million costs shown
as 'cost of sales' in the Group Income Statement reclassified to
'other net costs'; (ii) GBP0.3 million of cost recoveries in 'other
income' in the Group Income Statement offset against 'third party
costs' in the re-presented income statement; (iii) other net costs
of GBP0.1 million reclassified from 'other income' to 'other net
costs'.
Balance sheet as at 31 December 2015
31 December 2015
Re-presented Balance Re-presented balance
IFRS Group Balance Sheet Adjustments Sheet sheet line items
GBP million GBP million GBP million
Non-current assets
Intangible assets 0.2 (0.2)(c) -
Plant and equipment 1.0 (1.0)(c) -
Investments at FVTPL 965.3 (123.9)(a) 841.4 Portfolio book value
- 123.9(b) 123.9 Cash collateral balances
Non-portfolio
- 0.5(a) 0.5 investments
Deferred tax assets 1.4 (1.4)(c) -
- 5.6(c,e) 5.6 Other long term assets
967.9 3.5 971.4
Current assets
Trade and other
receivables 8.3 (8.3)(d) -
Cash and cash
Cash and cash equivalents 1.1 4.4(a) 5.5 equivalents
9.4 (3.9) 5.5
Total assets 977.3 (0.4) 976.9
Current liabilities
Working capital and
- (22.1)(b,d,e) (22.1) other balances
Current tax liabilities (2.7) 2.7(d) -
Borrowings (14.9) (4.1)(e) (19.0) Cash borrowings
Trade and other payables (19.6) 19.6(d) -
(37.2) (3.9) (41.1)
Liabilities directly
associated with assets
classified as held for
sale (4.2) 4.2(d) -
Net current liabilities (32.0) (3.6) (35.6)
Non-current liabilities
Retirement benefit
obligations (46.2) 7.3(f) (38.9) Pension deficit (IAS 19)
Other retirement benefit
- (7.3)(f) (7.3) obligations
Provisions (0.1) 0.1(d) -
(46.3) 0.1 (46.2)
Total liabilities (87.7) 0.4 (87.3)
Net assets 889.6 - 889.6
Notes:
a) Investments at fair value through profit or loss (FVTPL)
comprise: portfolio valuation of GBP841.4 million, non-portfolio
investments of GBP0.5 million and other assets and liabilities
within recourse investment entity subsidiaries of GBP123.4 million
(see note 11 to the Group financial statements). Re-presented cash
and cash equivalents increased from GBP1.1 million on the Group
Balance Sheet because of the inclusion of available cash balances
in recourse group investment subsidiaries of GBP4.4 million
excluding cash collateral balances of GBP123.9 million.
b) Other assets and liabilities within recourse investment
entity subsidiaries of GBP123.4 million referred to in note (a)
include (i) cash and cash equivalents of GBP128.3 million, of which
GBP123.9 million is held to collateralise future investment
commitments, and (ii) negative working capital and other balances
of GBP4.9 million.
c) Intangible assets, plant and equipment and deferred tax
assets are combined as other long term assets.
d) Trade and other receivables, current tax liabilities, trade
and other payables, liabilities directly associated with assets
classified as held for sale and provisions are combined as working
capital and other balances.
e) Borrowings comprise cash borrowings of GBP19.0 million net of
unamortised financing costs of GBP4.1 million, with the non-current
portion of GBP3.0 million re-presented as other long term assets
and the current portion of GBP1.1 million re-presented as working
capital and other balances.
f) Total retirement benefit obligations are shown in their
separate components as per note 18 to the Group financial
statements.
Details of investments in project companies
Details of the Group's investments in project companies as at 31
December 2016 broken down by infrastructure sector are as
follows:
Period of concession
or estimated
operating life
Equity
committed /
Start invested
Sector Company name Project name % owned Description date No. of years (par value)
Social
Infrastructure
Health Alder Hey (Special Alder Hey 40% Design, build, July 30 <GBP10
Purpose Vehicle) Children's finance and 2015 million
Limited Hospital operate new
hospital in
Liverpool costing
GBP167 million.
SA Health New Royal 17.26% Design, build, Nov 35 GBP25 -
Partnership Nominees Adelaide Hospital finance and 2011 GBP50
Pty Limited operate new million
hospital in
Adelaide, South
Australia costing
AUD $1,850
million.
Justice and Securefuture Wiri Auckland South 30% Design, build, Sept 28 GBP10 -
Emergency Limited Corrections finance and 2012 GBP25
Services Facility operate a 960 million
place prison at
Wiri, South
Auckland, New
Zealand
costing NZD $270
million.
Defence Defence Support DARA Red Dragon 100% Design, build and Aug 16 <GBP10
(St Athan) Limited finance aircraft 2003 million
maintenance
facilities at RAF
St. Athan costing
GBP89 million.
Regeneration Regenter Myatts Lambeth Housing 50% Build and May 25 <GBP10
Field North Limited refurbish, 2012 million
finance and
operate social
housing in
Lambeth costing
GBP72.6 million.
Other Westadium Project Co New Perth Stadium 50% Design, build, Aug 28 GBP25 -
accommodation Pty Limited finance, 2014 GBP50
maintenance and million
operation of new
Perth Stadium in
Western Australia
comprising total
expenditure of
AUD $1.0 billion.
Environmental
Waste and INEOS Runcorn (TPS) Manchester Waste 37.43% Design, build, Apr 25 GBP10 -
biomass Limited TPS Co finance and 2009 GBP25
operate a waste million
CHP plant in
Runcorn costing
GBP233 million.
Viridor Laing Manchester Waste 50% Design, build and Apr 25 GBP25 -
(Greater Manchester) VL Co commission 42 2009 GBP50
Limited facilities million
comprising waste
processing and
recycling
services
in the Greater
Manchester area
with construction
costing GBP401
million.
Speyside Renewable Speyside Biomass 43.35% Design, build, Aug 33 GBP10 -
Energy Partnership finance and 2014 GBP25
Limited operate a 15 MW million
biomass CHP plant
in Speyside.
Cramlington Cramlington 44.7% Design, build, Sept 22 GBP25 -
Renewable Energy Biomass finance and 2015 GBP50
Developments Limited operate a 28 MW million
biomass CHP plant
in Cramlington.
Wind Rammeldalsberget Rammeldalsberget 100% Design, build, Nov 24 GBP10 -
Vindkraft AB wind farm finance and 2014 GBP25
operate six 2.5 million
MW turbines in
Sweden
Glencarbry Windfarm Glencarbry wind 100% Design, build, Jan 26 GBP10 -
Limited farm finance and 2016 GBP25
operate seven 3.3 million
MW and five 2.5
MW turbines in
Ireland
Kabeltrasse Morbach Horath wind farm 81.82% Design, build, Nov 24 GBP10 -
GmbH & Co KG finance and 2016 GBP25
operate nine 3.3 million
MW turbines in
Germany
HWF 1 Pty Limited Hornsdale wind 30% Design, build, Aug 26 GBP10 -
farm (Phase 1) finance and 2015 GBP25
operate 32 million
turbines to give
100 MW total
installed
capacity in
Australia.
HWF 2 Pty Limited Hornsdale wind 20% Design, build, June 26 < GBP10
farm (Phase 2) finance and 2016 million
operate 32
turbines to give
100 MW total
installed
capacity in
Australia.
Kiata Wind Farm Pty Kiata wind farm 72.3% Design, build, Nov 26 GBP10 -
Limited finance and 2016 GBP25
operate a nine million
turbine 30 MW
windfarm in
Australia
Llynfi Afan Llynfi wind farm 100% Design, build, June 26 GBP10 -
Renewable Energy finance and 2016 GBP25
Park Limited operate twelve 2 million
MW turbines in
Wales.
Société Pasilly wind farm 100% Design, build, Dec 26 < GBP10
d'Exploitation du finance and 2015 million
Parc Eolien Du operate ten 2 MW
Tonnerois turbines in
France.
Svartvallsberget SPW Svartvallsberget 100% Design, build, Mar 26 GBP10 -
AB wind farm finance and 2013 GBP25
operate ten 2 MW million
turbines in
Sweden
Klettwitz Shipkau Klettwitz wind 100% Design, build, Oct 25 GBP25 -
Nord Beteiligungs farm finance and 2015 GBP50
GmbH operate the million
re-powering of a
windfarm with 27
turbines to give
89 MW total
installed
capacity
AEM Wind LLC Sterling wind 92.5% Design, build, Oct 31 GBP10 -
farm finance and 2016 GBP25
operate 13 2.3 MW million
turbines in New
Mexico, USA
Parc Eolien des St Martin wind 100% Design, build, Nov 27 < GBP10
Courtibeaux SAS farm finance and 2016 million
operate five 2.05
MW turbines in
France
Parc Eolien des Sommette wind 100% Design, build, Sept 27 GBP10 -
Tournevents du Cos farm finance and 2016 GBP25
SAS operate nine 2.4 million
MW turbines in
France
OWP Nordergründe 30% Design, build, Aug 26 GBP25 -
Nordergründe offshore wind finance and 2016 GBP50
GmbH & Co. KG farm operate 18 million
offshore 6.2 MW
turbines in the
German North Sea
Transport
Other CountyRoute (A130) A130 100% Design, build, Feb 30 < GBP10
plc finance and 2000 million
operate the A130
bypass linking
the A12 and A127
in Essex at a
cost of GBP76
million.
Gdansk Transport A1 Gdansk Poland 29.69% Design, build, Aug 35 GBP10 -
Company SA finance and 2004 GBP25
operate the A1 million
motorway in
Poland in two
phases at a cost
of EUR651
million for phase
1 and EUR900
million for phase
2.
I-4 Mobility I-4 Ultimate 50% Design, build, Sept 40 GBP10 -
Partners Op Co LLC finance and 2014 GBP25
operate 21 miles million
of the I-4
Interstate in
Florida, US at a
cost
of USD $2.32
billion.
I-77 Mobility I-77 Managed 10% Design, build, May 53 GBP10 -
Partners LLC Lanes finance and 2015 GBP25
operate 25.9 million
miles of the I-77
Interstate in
Charlotte, North
Carolina,
US at a cost of
USD $665 million.
Severn River Severn River 35% Design, build, Apr The earlier of GBP10 -
Crossing Plc Crossing finance and 1992 30 years or GBP25
operate a second until a million
crossing over the pre-determined
Severn River plus level of
operate and revenue
maintain existing achieved
crossing.
Construction cost
approximately
GBP320 million.
MAK Mecsek Autopalya M6 Hungary 30% Design, Apr 27 GBP10 -
Koncesszios Zrt. construction, 2010 GBP25
refurbishment, million
operation,
maintenance and
financing of 48
km section
of M6 expressway
and 32 km of M60
expressway at a
cost of EUR886
million.
Parkway A6 BV A6 85% Design, build, Nov 23 < GBP10
finance, manage 2016 million
and maintain for
a 20 year
operational
period the A6
Almere
highway in the
greater Amsterdam
region.
A1 Mobil GmbH & Co. A1 Germany 42.5% Construct and Aug 30 GBP25 -
KG operate the A1 2008 GBP50
Autobahn between million
Bremen and
Hamburg in
Germany at a cost
of EUR417.1
million.
A-Lanes A15 BV A15 Netherlands 28% Design, build, Dec 25 GBP10 -
finance and 2010 GBP25
maintain the A15 million
highway south of
Rotterdam (about
40 km) at a
construction cost
of EUR727
million.
City Greenwich City Greenwich 5% Construction and Oct 25 GBP10 -
Lewisham Rail Link Lewisham (DLR) operation of 1996 GBP25
plc infrastructure on million
Lewisham
extension of the
Docklands Light
Railway (DLR) at
a cost of GBP205
million.
Aylesbury Vale Aylesbury Vale 50% Construction and Aug 21 <GBP10
Parkway Limited Parkway operation of the 2007 million
Aylesbury Vale
Parkway Station.
Construction cost
GBP15.5
million.
John Laing Rail Coleshill Parkway 100% Construction and Mar 21 <GBP10
Infrastructure operation of the 2006 million
Limited Coleshill Parkway
Station.
Construction cost
GBP7.1 million.
Denver Transit Denver Eagle P3 45% Design, build, Aug 34 GBP10 -
Partners LLC finance, 2010 GBP25
maintenance and million
operation of
passenger rail
systems in
Denver, Colorado.
Construction cost
USD $1.27
billion.
ALTRAC Light Rail Sydney Light Rail 32.5% Design, build, Feb 19 GBP50 -
Partnership finance, operate 2015 GBP100
and maintain the million
CBD and South
East Light Rail
and to operate
and maintain the
Inner West Light
Rail in Sydney,
Australia.
Croydon and Lewisham Croydon & 50% Installation and Apr 25 <GBP10
Lighting Services Lewisham Street maintenance of 2011 million
Limited Lighting street lighting.
Programme cost
GBP74.2 million.
Rolling stock Agility Trains West IEP (Phase 1) 30% Delivery and May 41 GBP50 -
Limited maintenance of 2012 GBP100
intercity train million
services on the
Great Western
Main Line (UK)
using
a fleet of new
Super Express
Trains and
maintenance
facilities.
Construction cost
GBP1.8 billion.
Agility Trains East IEP (Phase 2) 30% Delivery and Apr 41 GBP50 -
Limited maintenance of 2014 GBP100
intercity train million
services on the
East Coast Main
Line (UK) using
a fleet of new
Super Express
Trains and
maintenance
facilities.
Construction cost
GBP1.6 billion.
NGR Project Company New Generation 40% Provision and Jan 32 GBP10 -
Pty Limited Rolling stock maintenance of 75 2014 GBP25
new six-car million
trains for
Queensland Rail,
Australia.
Construction
cost AUD $1.8
billion.
Shareholder Information
Financial Diary
7 March 2017 Full Year Results Presentation
11 May 2017 Annual General Meeting
19 May 2017 Payment of Final Dividend
August 2017 Announcement of Half Year Results
October 2017 Interim Dividend expected to be paid
Registered Office and Advisers
Secretary and Registered Office
C Cattermole
1 Kingsway
London WC2B 6AN Registered No: 05975300
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Solicitors
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
Principal Group Banks
Barclays Bank PLC
1 Churchill Place
London E14 5HP
HSBC Bank plc
60 Queen Victoria Street
London EC4N 4TR
Australia and New Zealand Banking Group Limited
40 Bank Street
London E14 5EJ
The Bank of Tokyo-Mitsubishi UFJ, Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9AN
Sumitomo Mitsui Banking Corporation
99 Queen Victoria Street
London EC4V 4EH
Crédit Agricole Corporate and Investment Bank
Broadwalk House
5 Appold Street
London EC2A 2DA
Joint Stockbrokers
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
Independent Valuers
KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Please contact the Registrars at the address above to advise of
a change of address or for any enquiries relating to dividend
payments, lost share certificates or other share registration
matters. The Registrars provide on-line facilities at
www.shareview.co.uk. Once you have registered you will be able to
access information on your John Laing Group plc shareholding,
update your personal details and amend your dividend payment
instructions on-line without having to call or write to the
Registrars.
Registrars Queries
Information on how to manage your shareholdings can be found at
https://help.shareview.co.uk. The pages at this web address provide
answers to commonly asked questions regarding shareholder
registration, links to downloadable forms and guidance notes.
If your question is not answered by the information provided,
you can send your enquiry via secure email from the pages at
https://help.shareview.co.uk. You will be asked to complete a
structured form and to provide your Shareholder Reference, name and
address. You will also need to provide your email address if this
is how you would like to receive your response.
Alternatively you can telephone: 0371 384 2030. Lines are open
8.30am to 5.30pm Monday to Friday.
Calls from overseas: +44 121 415 7047.
Company Website
The Company's website at www.laing.com contains the latest
information for shareholders, including press releases and an
updated financial diary. Email alerts of the latest news, press
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obtained by registering for the email news alert service on the
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Share Price Information
The latest price of the Company's ordinary shares is available
on www.laing.com. Alternatively click on
www.londonstockexchange.com. John Laing's ticker symbol is JLG.
John Laing is classified in the Speciality Finance Sector of
Financial Services on The London Stock Exchange. It is recommended
that you consult your financial adviser and verify information
obtained from these services before making any investment
decision.
Dividends
Shareholders who wish to have their dividends paid directly into
a bank or building society account should contact the
Registrars.
Share Dealing Services
The Registrars offer a real-time telephone and internet dealing
service for the UK. Further details including terms and rates can
be obtained by logging on to the website at
www.shareview.co.uk/dealing or by calling 03846 037 037. Lines are
open between 8am and 4.30pm, Monday to Friday.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGGFVNVGNZG
(END) Dow Jones Newswires
March 07, 2017 02:02 ET (07:02 GMT)
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