TIDMJLG
RNS Number : 6619Y
John Laing Group plc
23 August 2018
JOHN LAING GROUP PLC
RESULTS FOR THE SIX MONTHSED 30 JUNE 2018
John Laing Group plc (John Laing, the Company or the Group)
announces its unaudited results for the six months ended 30 June
2018.
Highlights
-- Net asset value (NAV) per share at 30 June 2018 of 307p (31 December 2017 - 281p(1) )
- 9.3% increase since 31 December 2017
- 11.7% increase including dividend paid in May 2018
-- NAV of GBP1,505.4 million at 30 June 2018 (31 December 2017 - GBP1,123.9 million)
-- GBP39.2 million in investment commitments (six months ended
30 June 2017 - GBP111.3 million)(2)
-- Strong pipeline of GBP2.3 billion of investment
opportunities, including 12 shortlisted PPP positions representing
c.GBP325 million of potential investment
-- Realisations of GBP241.5 million from the sale of investments
in project companies (six months ended 30 June 2017 - GBP151.3
million)
-- Profit before tax of GBP174.3 million (six months ended 30
June 2017 - GBP36.6 million) and earnings per share (EPS) of 38.8p
(six months ended 30 June 2017 - 9.4p)(3)
-- Portfolio value at 30 June 2018 of GBP1,259.7 million
representing 18.2% increase on rebased portfolio value(4) at 31
December 2017
-- Interim dividend of 1.80p per share payable in October 2018
(six months ended 30 June 2017 - 1.75p per share(5) )
-- 1 for 3 rights issue in March 2018 raising GBP210.5 million, net of costs (the Rights Issue)
-- 2018 guidance for investment commitments and realisations maintained
Olivier Brousse, John Laing's Chief Executive Officer,
commented:
"We are pleased with our performance in the first half of 2018.
John Laing is growing as an international expert investor in
greenfield infrastructure, in Europe, North America, Asia Pacific
and beyond. Our pipeline of opportunities continues to grow, whilst
our exposure to the UK market continues to reduce. The recent
Rights Issue has given us the financial credibility to team up with
the best international infrastructure players. At the same time we
will retain our risk analysis and investment discipline to continue
to grow safely and in a scalable way. Our pipeline should continue
to drive our investment growth, whilst the quality of our secondary
portfolio and the dynamism of the market for operational assets
should continue to fund that growth. The recent reorganisation
around our three regions will ensure scalability of our growth and
cost base while reinforcing local presence. We are confident about
our business model and our future performance."
Notes:
(1) NAV per share at 31 December 2017 of 281p is the previously
reported NAV per share of 306p multiplied by the Rights Issue bonus
factor(6)
(2) Based on new investment commitments secured in the six
months ended 30 June 2018; for further details see the Primary
Investment section of the Business Review
(3) Basic EPS (adjusted for the Rights Issue); see note 7 to the
Condensed Group Financial Statements
(4) Rebased portfolio value is described in the Portfolio Valuation section
(5) Interim dividend per share for the six months ended 30 June
2017 of 1.75p is the 1.91p paid in October 2017 multiplied by the
Rights Issue bonus factor(6)
(6) For details of the Rights Issue bonus factor see note 7 to
the Condensed Group Financial Statements
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 webcast of the presentation and a conference
call facility will be accessible using the details below.
Conference call dial in details:
UK: 020 3936 2999
Other locations: +44 (0) 20 3936 2999
Participant access code: 39 57 10
Participant URL for live access to the on-line presentation:
https://www.investis-live.com/john-laing/5b58540205eeee1000fe20b4/thgs
A copy of the presentation slides will be available at
www.laing.com later today.
Analyst/investor enquiries:
Olivier Brousse, Chief Executive Officer +44 (0)20 7901 3200
Patrick O'D Bourke, Group Finance Director +44 (0)20 7901 3200
Media enquiries:
James Isola, Maitland +44 (0)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.
John Laing aims to create value for shareholders through
originating, investing in and managing greenfield infrastructure
assets internationally.
We are focused on major transport, energy, social and
environmental infrastructure projects in regions of the world where
we have expertise and where there is a legal and commercial
environment supportive of long-term investment. We hold a portfolio
of investments in projects awarded under government-backed
Public-Private Partnership (PPP) programmes and renewable energy
projects and have developed capabilities in other sectors which
have similar operational and financial characteristics.
We typically invest in infrastructure projects at the
greenfield, pre-construction stage. We apply our management,
engineering and technical expertise and invest equity and
subordinated debt into special purpose companies which have rights
to the underlying infrastructure asset. These special purpose
companies are typically also financed with ring-fenced medium to
long-term debt.
Our business, which integrates origination, investment and asset
management capabilities, has three 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, 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).
We focus on three core geographical regions: North America; Asia
Pacific; and Europe, including the UK.
Further information is available at www.laing.com.
Summary financial information Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
GBP million (unless otherwise stated) 2018 2017 2017
Net asset value 1,505.4 1,040.4 1,123.9
NAV per share(1, 2) 307p 261p 281p
Net retirement benefit assets/(obligations) 16.5 (38.2) (40.3)
Profit before tax 174.3 36.6 126.0
Earnings per share (EPS)(3) 38.8p 9.4p 31.9p
Dividends per share 1.80p 1.75p(7) 8.92p(8)
-------------------------------------------------------------------- ----------- ----------- -------------
Primary Investment portfolio 636.2 656.5 580.3
Secondary Investment portfolio 623.5 462.8 613.5
-------------------------------------------------------------------- ----------- ----------- -------------
Total investment portfolio 1,259.7 1,119.3 1,193.8
Future investment commitments backed by letters of credit and cash
collateral 250.9 220.5 335.4
-------------------------------------------------------------------- ----------- ----------- -------------
Gross investment portfolio 1,510.6 1,339.8 1,529.2
-------------------------------------------------------------------- ----------- ----------- -------------
New investment committed during the period(4) 39.2 111.3 382.9
Proceeds from investment realisations (before costs) 241.5 151.3 289.0
Cash yield from investments 17.4 14.7 40.2
PPP investment pipeline(4) 1,567 1,383 1,585
Renewable energy pipeline(4) 733 502 565
-------------------------------------------------------------------- ----------- ----------- -------------
Asset Management
Internal Assets under Management(5) 1,500.9 1,329.7 1,518.9
External Assets under Management 1,808.1(6) 1,581.7 1,648.5
-------------------------------------------------------------------- ----------- ----------- -------------
Total Assets under Management 3,309.0 2,911.4 3,167.4
-------------------------------------------------------------------- ----------- ----------- -------------
Notes:
(1) NAV per share at 30 June 2018 calculated as NAV of
GBP1,505.4 million divided by the number of shares in issue at 30
June 2018 of 490.78 million.
(2) NAV per share at 30 June 2017 and 31 December 2017 of 261p
and 281p is the previously reported NAV per share of 284p and 306p,
respectively, multiplied by the Rights Issue bonus factor(9) .
(3) Basic EPS (adjusted for the Rights Issue); see note 7 to the
Condensed Group Financial Statements.
(4) For further details, see the Primary Investment section of the Business Review.
(5) Gross investment portfolio, less shareholding in JLEN valued
at GBP9.7 million (30 June 2017 - GBP10.1 million; 31 December 2017
- GBP10.3 million).
(6) Based on published portfolio values of JLIF (GBP1,378.6
million) and JLEN (GBP429.5 million) as at 31 March 2018.
(7) Interim dividend per share for the six months ended 30 June
2017 of 1.75p is the 1.91p paid in October 2017 multiplied by the
Rights Issue bonus factor(9) .
(8) The dividends per share for the year ended 31 December 2017
comprise an interim dividend of 1.75p (see note 7 above) and a
final dividend of 7.17p paid after the Rights Issue.
(9) For details of the Rights Issue bonus factor see note 7 to
the Condensed Group Financial Statements.
BOARD
As part of our succession planning, at the Annual General
Meeting in May 2018, Phil Nolan stepped down as Chairman and as a
Director of the Company. On the same date, Will Samuel became
Chairman.
The Company also announced in May 2018 the appointment of Andrea
Abt as a non-executive director. Andrea has also become a member of
the Audit & Risk, Remuneration and Nomination Committees.
BUSINESS REVIEW
Overview and outlook
Our NAV increased from GBP1,123.9 million at 31 December 2017 to
GBP1,505.4 million at 30 June 2018. This is equivalent to 307p per
share and represents growth of 9.3% versus NAV per share of 281p
per share at 31 December 2017 (as adjusted for the Company's one
for three rights issue in March 2018 (the Rights Issue)). The gain
on disposal of the Group's remaining 15% investment in Intercity
Express Programme (IEP) Phase 1, which was announced in March 2018
and completed in May 2018, was a significant contributor to this
performance.
After adding back dividends paid, growth in adjusted NAV per
share in the first half of 2018 was 11.7%. In line with our
dividend policy, we are declaring an interim dividend for 2018 of
1.80p per share, a 2.9% increase versus 1.75p for 2017 (as adjusted
for the Rights Issue bonus factor). For the three years to 31
December 2017, the Company delivered a compound annual growth rate
(CAGR) in NAV per share, including dividends paid, of 15.5%.
Our investment portfolio was valued at GBP1,259.7 million at 30
June 2018, an increase of GBP65.9 million from GBP1,193.8 million
at 31 December 2017 reflecting principally fair value growth and
cash invested, net of realisations completed in the first half (see
the Portfolio Valuation section for further details). After
adjusting for realisations, cash yield and cash invested into
projects in the period, the value of our portfolio increased by
GBP193.9 million or 18.2% of the rebased value. Cash yield from
investments of GBP17.4 million was in line with expectations.
The first half highlights included:
-- The Rights Issue which was 97% taken up by shareholders;
-- Proceeds of GBP241.5 million from the disposal of our
investments in two PPP projects - IEP Phase 1 and Lambeth Social
Housing; and
-- Investment commitments of GBP39.2 million to two PPP projects
- MBTA Automated Fare Collection System in Massachusetts and the
A16 Road in the Netherlands.
Since 30 June 2018, we have committed GBP30.0 million to two
solar farms in North Carolina.
The Rights Issue has enhanced the Group's standing with its
partners and this is reflected in the increased pipeline of
opportunities at 30 June 2018. As flagged in the end-June 2018
pre-close update, bidding activity was lower in the early part of
2018, but has since picked up significantly. The Primary Investment
teams in each region have been and are actively bidding on a number
of projects, while maintaining their focus on investment
discipline. We remain confident in our ability to deploy the funds
available to us.
Our pipeline of PPP and renewable energy opportunities stood at
GBP2.3 billion at 30 June 2018 (31 December 2017 - GBP2.15
billion). This included:
-- 12 shortlisted PPP bids due to reach financial close in the
next two years, representing a total potential investment
opportunity of approximately GBP325 million; and
-- Six exclusive renewable energy positions, representing a
total potential investment opportunity of approximately GBP185
million.
Profit before tax in the period was GBP174.3 million (six months
ended 30 June 2017 - GBP36.6 million). The gain on disposal of the
Group's investment in IEP Phase 1 was a significant contributor as
referred to above.
Our external Assets under Management grew to GBP1,808.1 million
(31 December 2017 - GBP1,648.5 million). On 3 August 2018, the
Board of JLIF recommended a cash offer for its entire issued share
capital from a consortium comprising funds managed by Dalmore
Capital Limited and Equitix Investment Management Limited at 142.5p
per share plus a dividend of 3.57p per share for the six months
ended 30 June 2018. The offer is expected to become effective in
late September/early October 2018. During this period, the Group
expects to discuss with the acquiring consortium the future of its
asset management services to JLIF. As previously disclosed, the
Investment Advisory Agreement between JLIF and JLCM is terminable
by either side with 12 months' notice.
Looking forward:
-- We expect investment commitments to be weighted towards the
second half and we are maintaining our full year guidance of
approximately GBP250 million;
-- With further sale processes underway, full year guidance for
realisations is also maintained at approximately GBP250 million;
and
-- We continue to assess (i) other infrastructure classes that
might fit our business model and (ii) new geographies where we see
potential opportunities to invest alongside established partners at
appropriate returns.
Our overall strategy remains to create value for shareholders
through originating, investing in and managing greenfield
infrastructure assets internationally. In that respect, we see NAV
per share growth and dividends as key measures of our success.
Primary Investment
Our Primary Investment portfolio of shareholdings in 12 PPP and
2 renewable energy projects was valued at GBP636.2 million at 30
June 2018 (31 December 2017 - GBP580.3 million). The increase
resulted principally from cash invested into existing and new
projects in the portfolio and the fair value movement in the first
half of 2018 (see the Portfolio Valuation section below for further
details), net of realisations.
Our Primary Investment teams, operating within each of our core
regions, are responsible for the Group's bid development
activities. The teams target a wide range of infrastructure sectors
in Europe (including the UK), North America and Asia Pacific:
-- 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; and
-- Social infrastructure - healthcare, education, justice,
stadiums, public sector accommodation, broadband and social
housing.
During the first half of 2018, the Primary Investment teams
successfully made two investment commitments in the PPP sector
totalling GBP39.2 million; GBP21.7 million in the A16 Road project
in the Netherlands and GBP17.5 million in the MBTA Automated Fare
Collection System in Massachusetts, US.
Since 30 June 2018, we have committed GBP30.0 million to two
solar farms in North Carolina.
Our investment commitments to date in 2018 are summarised in the
table below. Since 31 December 2017, we have converted one
shortlisted position into an investment (A16 Road, Netherlands) and
added four new positions in North America.
Renewable
PPP energy Total
Investment commitments Region GBP million GBP million GBP million
--------------------------------------------- --------------- ------------- ------------- -------------
MBTA Automated Fare Collection System North America 17.5 - 17.5
A16 Road Europe 21.7 - 21.7
Total at 30 June 2018 39.2 - 39.2
-------------------------------------------------------------- ------------- ------------- -------------
August 2018: Fox Creek/Brantley solar farms North America - 30.0 30.0
--------------------------------------------- --------------- ------------- ------------- -------------
Total YTD 39.2 30.0 69.2
-------------------------------------------------------------- ------------- ------------- -------------
At 30 June 2018, our total pipeline of investment opportunities
stood at GBP2,300 million, higher than at 31 December 2017
(GBP2,150 million). The PPP pipeline, which comprises opportunities
to invest equity in PPP projects with the potential to reach
financial close over the next three years, amounted to GBP1,567
million, compared to GBP1,585 million at 31 December 2017. The
renewable energy pipeline at 30 June 2018 was GBP733 million,
compared to GBP565 million at 31 December 2017.
At 30 June 2018 At 31 December 2017
-------------------------- --------------------------
Pipeline - estimated equity investment Renewable Renewable
GBP million PPP energy Total PPP energy Total
---------------------------------------- ------ ---------- ------ ------ ---------- ------
North America 641 415 1,056 631 233 864
Europe (including the UK) 466 231 697 523 158 681
Asia Pacific 460 87 547 431 174 605
Total 1,567 733 2,300 1,585 565 2,150
---------------------------------------- ------ ---------- ------ ------ ---------- ------
The total pipeline is broken down below according to the bidding
stage of each project. Our overall pipeline is constantly evolving
as new opportunities are added and other opportunities drop
out.
Renewable
Number of PPP energy Total
Pipeline by bidding stage at 30 June 2018 projects GBP million GBP million GBP million
--------------------------------------------- ---------- ------------- ------------- -------------
Preferred bidder 1 7 - 7
Shortlisted / exclusive* 18 323 185 508
Pipeline 56 1,237 548 1,785
--------------------------------------------- ---------- ------------- ------------- -------------
Total 75 1,567 733 2,300
--------------------------------------------- ---------- ------------- ------------- -------------
* includes exclusive positions on six renewable energy
projects.
As at 30 June 2018, we were part of 12 shortlisted PPP bids as
summarised in the table below:
Financial
close achieved
or expected
Shortlisted PPP Projects by Region Description
Gordie Howe International Q3 2018 North America Bridge between the US (Detroit) and Canada
Bridge, Ontario* (Windsor,
Ontario)
I-75 Road, Michigan Q4 2018 North America Modernisation of a section of the I-75 highway
near Detroit, Michigan
LAX CONRAC, California* Q4 2018 North America Facility to accommodate multiple car rental outlets
at Los Angeles airport
Hurontario LRT, Ontario Q2 2019 North America Light rail system in the Greater Toronto area
Michigan Labs Q2 2019 North America Laboratory facility in Michigan
Pennsylvania Broadband Q2 2019 North America Fibre optic installation along Pennsylvania
Turnpike
Belle Chasse, Louisiana Q3 2019 North America Replacement of the Belle Chasse Bridge and Tunnel
near New Orleans, Louisiana
Hamilton Rail, Ontario Q4 2019 North America Light rail system in Hamilton, Ontario
I-10 Mobile River Bridge, Q4 2019 North America
Alabama Highway bridge and replacement in Mobile, Alabama
Santa Clara Water, California Q2 2020 North America Waste water treatment plant and pipeline in Santa
Clara, California
National Broadband, RoI Q4 2018 Europe Project to bring high speed broadband to rural
premises in the Republic of Ireland
Silvertown Tunnel, UK Q2 2019 Europe Tunnel below the Thames linking Greenwich and
Silvertown
in East London
------------------------------ ---------------- -------------- ----------------------------------------------------
* Since 30 June 2018, this bid has been awarded to another
party.
Secondary Investment
At 30 June 2018, our Secondary Investment portfolio comprised
investments in 10 PPP projects and 17 renewable energy projects
with a book value of GBP613.8 million (31 December 2017 - GBP603.2
million). The Secondary Investment portfolio also included a 2.4%
shareholding in JLEN valued at GBP9.7 million (31 December 2017 -
2.5% shareholding valued at GBP10.3 million). The increase in the
Secondary Investment portfolio between 31 December 2017 and 30 June
2018 is primarily due to fair value movements in the period.
During the first half of 2018, one investment, St Martin Wind
Farm, transferred from the Primary Investment portfolio to the
Secondary Investment portfolio.
Also during the first half, we received proceeds of GBP241.5
million from realisations (before costs) of two investments,
achieving returns consistent with our historic track record:
-- Sale of our remaining 15% shareholding in IEP Phase 1 for
consideration of GBP232.0 million, which was in excess of the
valuation at 31 December 2017.
-- Sale of our 50% shareholding in the Lambeth Social Housing
project, announced in late 2017 but not completed until May 2018,
with proceeds of GBP9.5 million.
Our realisations are summarised in the table below:
Total
Realisations Shareholding Purchaser GBP million
------------------------ ------------- ------------ -------------
IEP Phase 1(*) 15% Third party 232.0
Lambeth Social Housing 50% JLIF 9.5
------------------------ ------------- ------------ -------------
Total 241.5
------------------------ ------------- ------------ -------------
* A primary investment at the time of the sale.
A number of further disposal processes are currently
underway.
Asset Management
We actively manage our Primary and Secondary Investment
portfolios and also generate fee income from the provision of (i)
Investment Management Services (IMS) to JLIF and JLEN and (ii)
Project Management Services (PMS) directly to project
companies.
Asset Management teams in each of our core regions actively
monitor and manage each project we invest in. A number of these
projects are large, sophisticated infrastructure assets, and
therefore delays and other issues do occur. In all instances, a
judgement as to potential outcomes is taken into account when
preparing John Laing's portfolio valuation. Projects include:
-- IEP Phase 2, UK - the first trains for the East Coast
mainline, which have the same design as IEP Phase 1, are scheduled
to be accepted into service in Q4 2018;
-- Denver Eagle P3, Colorado, US - the project company has made
good progress in H1 2018 to obtain the necessary approvals for the
level crossings on the "A" and "G" lines. Subject to final
certification, full revenue service is expected to be achieved by
the end of the year;
-- Optus Stadium (formerly New Perth Stadium), Perth, Australia
- the stadium has performed well during a number of high capacity,
high profile events in H1 2018, with over 1,000,000 spectators to
date. The project was the winner of the 2018 Australian
Construction Achievement Award;
-- Sydney Light Rail, New South Wales, Australia - the programme
is approximately 12 months behind the contract schedule, but
remains within the overall long-stop date. Part of the delay is
attributable to the presence of below ground utility services not
identified before construction commenced. This has led to various
claims by the principal contractor, which are currently the subject
of negotiations between the contractor and the public sector
client, facilitated by the project company;
-- New Royal Adelaide Hospital, South Australia - the project
company continues to monitor the performance of the facilities
management services provider. Whilst performance has been
improving, the project company and the South Australian government
are currently in discussions about the application of the abatement
regime resulting from service under-performance;
-- New Generation Rollingstock, Queensland, Australia - whilst
the programme is currently behind schedule, a further 18 trains
were accepted during the first half of 2018, bringing the total
number of accepted trains to 24. The operating performance of the
trains in service has been in line with forecast during the period;
and
-- I-4 Ultimate, Florida, US - this availability-based road
project in central Florida is approximately eight months behind the
contract schedule. All parties are currently discussing schedule
optimisation approaches in order to further mitigate any potential
delays.
We earned revenues of GBP9.4 million from the provision of IMS
during the first half of the year (six months ended 30 June 2017 -
GBP9.1 million). These revenues principally represent fees earned
from investment advisory agreements with JLIF and JLEN. As at 30
June 2018, John Laing had external Assets under Management, based
on the latest published portfolio values of JLIF and JLEN as at 31
March 2018, of GBP1,808.1 million, a 9.7% increase since 31
December 2017.
We earned revenues of GBP2.9 million from the provision of PMS
during the first half of the year (six months ended 30 June 2017 -
GBP2.8 million), in respect of administrative and financial
services provided under Management Services Agreements directly to
project companies in which John Laing, JLIF or JLEN are
investors.
PORTFOLIO VALUATION
The Group's investments at 30 June 2018 were valued at
GBP1,259.7 million compared to GBP1,193.8 million at 31 December
2017. After adjusting for realisations, cash yield and cash
invested, this represented a positive movement in fair value of
GBP193.9 million (18.2%) on the rebased portfolio valuation:
Investments Listed
in projects investment Total
GBP million GBP million GBP million
--------------------------------------- ------------- ------------- -------------
Portfolio valuation at 1 January 2018 1,183.5 10.3 1,193.8
- Cash invested 130.9 - 130.9
- Cash yield (17.1) (0.3) (17.4)
- Proceeds from realisations (241.5) - (241.5)
Rebased portfolio valuation 1,055.8 10.0 1,065.8
- Movement in fair value 194.2 (0.3) 193.9
Portfolio valuation at 30 June 2018 1,250.0 9.7 1,259.7
--------------------------------------- ------------- ------------- -------------
Cash investment in respect of two new PPP assets entered into
during the first half of 2018 totalled GBP39.2 million. In
addition, equity and loan note subscriptions of GBP91.7 million
were injected into existing projects in the portfolio as they
progressed through, or completed, construction.
During the first half of 2018, the Group completed the
realisation of two investments for a total consideration of
GBP241.5 million. Cash yield on the portfolio during the six months
ended 30 June 2018 totalled GBP17.4 million.
The movement in fair value of GBP193.9 million is analysed in
the table below.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
GBP million GBP million GBP million
------------------------------------------------ ----------------- ----------------- ------------------
Unwinding of discounting 47.8 37.8 80.0
Reduction of construction risk premia 23.2 21.6 53.6
Impact of foreign exchange movements (0.9) 3.2 (11.0)
Change in macroeconomic assumptions (5.4) (2.1) 4.1
Change in power and gas price forecasts (3.4) (22.9) (54.8)
Change in operational benchmark discount rates 43.2 20.2 23.6
Value uplift on financial closes 3.1 4.4 50.1
Value enhancements and other changes 86.3 (8.9) 15.1
Movement in fair value 193.9 53.3 160.7
------------------------------------------------ ----------------- ----------------- ------------------
The net benefit of GBP43.2 million from the change in
operational benchmark discount rates for a number of investments is
in response to our understanding and experience of the secondary
market. The net benefit from value enhancements and other changes
of GBP86.3 million is primarily due to the gain on the disposal of
the Group's investment in IEP Phase 1 which completed in May
2018.
The split of the portfolio valuation between primary and
secondary investments is shown in the table below:
30 June 2018 31 December 2017
GBP million % GBP million %
---------------------- ------------ ------ ------------ ------
Primary Investment 636.2 50.5 580.3 48.6
Secondary Investment 623.5 49.5 613.5 51.4
---------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
---------------------- ------------ ------ ------------ ------
The increase in the Primary Investment portfolio is due to a
positive movement in fair value of GBP176.8 million, including
value enhancements and financial closes achieved during the year,
and cash invested of GBP116.8 million, offset by the transfer to
the Secondary Investment portfolio of GBP5.7 million in relation to
St Martin Wind Farm and investment realisations of GBP232.0 million
relating to IEP Phase 1.
Primary Investment GBP million
--------------------------------------- ------------
Portfolio valuation at 1 January 2018 580.3
- Cash invested 116.8
- Cash yield -
- Proceeds from realisations (232.0)
- Transfers to Secondary Investment (5.7)
--------------------------------------- ------------
Rebased portfolio valuation 459.4
- Movement in fair value 176.8
--------------------------------------- ------------
Portfolio valuation at 30 June 2018 636.2
--------------------------------------- ------------
The increase in the Secondary Investment portfolio is due to a positive movement in fair value
of GBP17.1 million, cash investment of GBP14.1 million and the transfer from the Primary Investment
portfolio of GBP5.7 million offset by cash yield of GBP17.4 million and investment realisations
of GBP9.5 million.
Secondary Investment GBP million
------------------------------------------------------------------------------------------------------ ------------
Portfolio valuation at 1 January 2018 613.5
- Cash invested 14.1
- Cash yield (17.4)
- Proceeds from realisations (9.5)
- Transfers from Primary Investment 5.7
------------------------------------------------------------------------------------------------------ ------------
Rebased portfolio valuation 606.4
- Movement in fair value 17.1
------------------------------------------------------------------------------------------------------ ------------
Portfolio valuation at 30 June 2018 623.5
------------------------------------------------------------------------------------------------------ ------------
Methodology
A full valuation of the investment portfolio is prepared every
six months, as at 30 June and 31 December, with a review as at 31
March and 30 September, principally using a discounted cash flow
methodology. The two principal inputs are (i) forecast cash flows
from investments in projects and (ii) discount rates. 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, a risk premium is added to reflect the additional risk
during the construction phase. The construction risk premium
reduces 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 flows
to and from investments forecast as at 30 June 2018, derived from
detailed financial models for each underlying project. These
incorporate the Group's expectations of likely future cash flows,
which are stated net of project tax where applicable, and therefore
reflect changes in tax legislation as at 30 June 2018 in the
jurisdictions in which the Group operates, including such changes
in the US effective in early 2018. Expectations of future cash
flows also include expected value enhancements and the Group's
expectations of future macroeconomic factors such as inflation and,
for renewable energy projects, power and gas prices.
For the 30 June 2018 valuation, the overall weighted average
discount rate was 8.7% compared to the weighted average discount
rate at 31 December 2017 of 8.8%. The decrease was primarily due to
reductions in operational discount rates for certain investments
and progress by projects in construction, partially offset by the
impact of new investments. The weighted average discount rate at 30
June 2018 was made up of 9.0% (31 December 2017 - 9.3%) for the
Primary Investment portfolio and 7.9% (31 December 2017 - 7.9%) for
the Secondary Investment portfolio.
The overall weighted average discount rate of 8.7% is closer to
the weighted average discount rate for the Primary Investment
portfolio, reflecting 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.
The discount rate ranges used in the portfolio valuation at 30
June 2018 and 31 December 2017 were:
At 30 June 2018 At 31 December 2017
----------------------------- ---------------------------- ----------------------------
Primary Secondary Primary Secondary
Sector Investment Investment Investment Investment
----------------------------- ------------- ------------- ------------- -------------
PPP investments 7.3% - 11.8% 7.0% - 9.0% 7.6% - 11.8% 7.0% - 9.0%
Renewable energy investments 10.1% 6.8% - 10.0% 8.0% - 10.2% 6.8% - 10.0%
----------------------------- ------------- ------------- ------------- -------------
The shareholding in JLEN was valued at its closing market price
on 30 June 2018 of 103.5p per share (31 December 2017 - 109.25p 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 30 June 2018.
Macroeconomic assumptions
During the first half of 2018, updates for actual macroeconomic
outcomes and assumptions had a negative impact of GBP5.4 million on
the portfolio valuation. Additionally, as mentioned above,
movements of foreign currencies against Sterling over the six
months to 30 June 2018 resulted in net adverse foreign exchange
movements of GBP0.9 million (2017 - GBP3.2 million net favourable
foreign exchange movements).
Investments in overseas projects are fair valued based on the
spot exchange rate on the balance sheet date. As at 30 June 2018, a
5% movement of each relevant currency against Sterling would
decrease or increase the value of investments in overseas projects
by c.GBP40 million.
Based on a sample of five of the larger PPP investments by value
at 30 June 2018, a 0.25% increase in inflation is estimated to
increase the value of PPP investments by c.GBP16 million and a
0.25% decrease in inflation is estimated to decrease the value of
PPP investments by c.GBP15 million. Certain of the underlying
project companies incorporate some inflation hedging.
On each valuation and review of the portfolio, the Group updates
the detailed financial model of each renewable energy project to
reflect the impact of the latest forecast power and gas prices on
the project's revenue to the extent that prices are not fixed by
governmental support mechanisms and/or offtake arrangements. The
Group obtains forecasts for power and gas prices from external
parties who are recognised as experts in the market in the relevant
region, including by potential secondary market buyers. During the
first half of 2018, a small decrease in forecast power and gas
prices resulted in a GBP3.4 million adverse fair value movement
(2017 - adverse fair value movement of GBP22.9 million). Based on a
sample of six of the larger renewable energy investments by value
at 30 June 2018, a 5% increase in power price forecasts is
estimated to increase the value of renewable energy investments by
c.GBP9.4 million and a 5% decrease in power price forecasts is
estimated to decrease the value of renewable energy investments by
c.GBP9.5 million.
The table below summarises the main macroeconomic assumptions
used in the portfolio valuation:
Assumption 30 June 2018 31 December 2017
--------------------- -------------- ------------ -------------- -----------------
Long-term inflation UK RPI & RPIX 2.75% 2.75%
Europe CPI 1.75% - 2.00% 1.75% - 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 1.1307 1.1252
GBP/AUD 1.7841 1.7311
GBP/USD 1.3199 1.3527
GBP/NZD 1.9477 1.9055
------------------------------------------------- -------------- -----------------
Discount rate sensitivity
The weighted average discount rate applied at 30 June 2018 was
8.7% (31 December 2017 - 8.8%). The table below shows the
sensitivity of a 0.25% change in this rate.
Portfolio valuation Increase/(decrease) in valuation
Discount rate sensitivity GBP million GBP million
-------------------------- -------------------- ---------------------------------
+0.25% 1,217.1 (42.6)
- 1,259.7 -
-0.25% 1,304.5 44.8
-------------------------- -------------------- ---------------------------------
Further analysis of the portfolio valuation is shown in the
following tables:
by time remaining on project concession/OPERATIONAL life
30 June 2018 31 December 2017
GBP million % GBP million %
----------------------- ------------ ------ ------------ ------
Greater than 25 years 665.7 52.9 740.1 62.0
20 to 25 years 359.4 28.5 247.3 20.7
15 to 20 years 185.6 14.7 167.9 14.1
10 to 15 years 38.9 3.1 19.4 1.6
Less than 10 years 0.4 - 8.8 0.7
Listed investment 9.7 0.8 10.3 0.9
----------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
----------------------- ------------ ------ ------------ ------
PPP projects are based on long-term concessions and renewable
energy assets have long-term useful economic lives. As demonstrated
in the table above, 52.9% of the portfolio by value had a greater
than 25-year unexpired concession term or useful economic life
remaining at 30 June 2018, compared to 62.0% at 31 December 2017.
This change was principally as a result of the sale of our interest
in IEP Phase 1 in the first half of 2018.
split between PPP and renewable energy
30 June 2018 31 December 2017
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Primary PPP 599.7 47.6 541.7 45.4
Primary renewable energy 36.5 2.9 38.6 3.2
Secondary PPP 222.2 17.6 229.0 19.2
Secondary renewable energy 391.6 31.1 374.2 31.3
Listed investment 9.7 0.8 10.3 0.9
---------------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
---------------------------- ------------ ------ ------------ ------
Primary PPP investments made up the largest part of the
portfolio, representing 47.6% of the portfolio value at 30 June
2018, with Secondary renewable energy investments representing a
further 31.1%.
by revenue type
30 June 2018 31 December 2017
GBP million % GBP million %
------------------- ------------ ------ ------------ ------
Availability 741.5 58.8 702.2 58.8
Volume 488.3 38.8 461.9 38.7
Shadow toll 20.2 1.6 19.4 1.6
Listed investment 9.7 0.8 10.3 0.9
------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
------------------- ------------ ------ ------------ ------
Availability-based investments continued to make up the majority
of the portfolio, representing 58.8% of the portfolio value at 30
June 2018. Renewable energy investments comprise the majority of
the volume-based investments. The investment in JLEN, which holds
investments in renewable energy and environmental projects, is
shown separately.
by sector
30 June 2018 31 December 2017
GBP million % GBP million %
Transport - other 344.0 27.3 288.1 24.1
Transport - rail rolling stock 283.0 22.4 296.8 24.9
Environmental - wind and solar 381.4 30.3 369.2 30.9
Environmental - waste and biomass 103.0 8.2 89.0 7.4
Social infrastructure 138.6 11.0 140.4 11.8
Listed investment 9.7 0.8 10.3 0.9
----------------------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
----------------------------------- ------------ ------ ------------ ------
Wind and solar investments represented 30.3% of the portfolio
value at 30 June 2018, with other transport (excluding rail rolling
stock) accounting for a further 27.3%. Rail rolling stock
investments made up 22.4% of the portfolio by value, while social
infrastructure investments and waste and biomass investments made
up 11.0% and 8.2% respectively. The portfolio underlying the JLEN
shareholding consists of investments in a mix of renewable energy
and environmental projects.
by currency
30 June 2018 31 December 2017
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
Sterling 395.6 31.4 415.3 34.8
US dollar 336.9 26.8 283.2 23.7
Australian dollar 284.4 22.6 269.4 22.6
Euro 221.0 17.5 204.1 17.1
New Zealand dollar 21.8 1.7 21.8 1.8
Total 1,259.7 100.0 1,193.8 100.0
-------------------- ------------ ------ ------------ ------
The percentage of investments denominated in foreign currencies
increased from 65.2% to 68.6%. This is consistent with our pipeline
and the overseas jurisdictions we target.
by geographical region
30 June 2018 31 December 2017
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
UK 385.9 30.6 405.0 33.9
North America 336.9 26.8 283.2 23.7
Asia Pacific 306.2 24.3 291.2 24.4
Continental Europe 221.0 17.5 204.1 17.1
Listed investment 9.7 0.8 10.3 0.9
-------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
-------------------- ------------ ------ ------------ ------
Investments in the UK decreased to 30.6% of the portfolio value
at 30 June 2018. North America was the next largest category at
26.8%. Investments in projects located in Asia Pacific made up
24.3% and investments in Continental Europe made up 17.5%. A
substantial majority of the JLEN portfolio consists of investments
in UK-based projects.
by investment size
30 June 2018 31 December 2017
GBP million % GBP million %
------------------------------- ------------ ------ ------------ ------
Five largest investments 520.0 41.3 469.4 39.3
Next five largest investments 234.7 18.6 233.8 19.6
Remaining investments 495.3 39.3 480.3 40.2
Listed investment 9.7 0.8 10.3 0.9
------------------------------- ------------ ------ ------------ ------
Total 1,259.7 100.0 1,193.8 100.0
------------------------------- ------------ ------ ------------ ------
The top five investments in the portfolio made up 41.3% of the
portfolio at 30 June 2018, an increase from 39.3% at 31 December
2017. The next five largest investments made up a further 18.6%,
with the remaining investments in the portfolio comprising
40.1%.
The valuation ranges for the five largest Primary Investments
and the five largest Secondary Investments are shown in the tables
below:
Primary
30 June 2018
GBP million
----------------------------- --------------
IEP Phase 2 More than 225
Denver Eagle P3 75 - 100
Sydney Light Rail 50 - 75
New Generation Rollingstock 25 - 50
Cramlington Biomass 25 - 50
----------------------------- --------------
Secondary
30 June 2018
GBP million
----------------------------- -------------
Rocksprings Wind Farm 50 - 100
New Royal Adelaide Hospital 50 - 75
Buckthorn Wind Farm 50 - 75
Manchester Waste TPS Co 50 - 75
Klettwitz Wind Farm 25 - 50
----------------------------- -------------
At 30 June 2018, the Group's largest investment was its
shareholding in IEP Phase 2. Seven out of its ten largest
investments were outside the UK.
Investment portfolio as at 30 June 2018
Primary Investment Secondary investment
Social
infrastructure
--------------------------------------------- --- --------------------------------------------------------------------------
Health Alder Hey New Royal
Children's Adelaide
Hospital Hospital
40% 17.26%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Justice and Clarence Auckland South
emergency Correctional Corrections
services Centre Facility
(formerly 30%
New Grafton
Correctional
Centre)
80%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Defence DARA Red Dragon
100%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Other Optus Stadium
accommodation 50%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Transport
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Other A6 Parkway A16 Road Denver Eagle A1 Germany A15 Netherlands A130 Severn River
P3 Crossing
Netherlands 47.5% 45% 42.5% 28% 100% 35%
85%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
I-4 Ultimate I-66 Managed I-77 Managed
50% Lanes Lanes
10% 10%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
MBTA Melbourne Sydney Light
Automated Metro Rail
Fare 30% 32.5%
Collection
System
90%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Rail rolling stock IEP Phase 2 New Generation
Rollingstock
30% 40%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Environmental
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Waste and biomass Cramlington Manchester Speyside
Biomass Waste TPS Biomass
44.7% Co 43.35%
37.43%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Wind and solar Solar House Buckthorn Glencarbry Horath Wind Hornsdale
80% Wind Farm Wind Farm Farm 1 Wind Farm
90.05% 100% 81.82% 30%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Hornsdale Hornsdale 3 Kiata Wind Klettwitz
2 Wind Farm Wind Farm Farm Wind Farm
20% 20% 72.3% 100%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Nordergründe Pasilly Wind Rammeldalsberget Rocksprings
Wind Farm Farm Wind Farm Wind Farm
30% 100% 100% 95.3%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
Sommette Wind St Martin Wind Sterling Wind Svartvallsberget
Farm Farm Farm Wind Farm
100% 100% 92.5% 100%
------------- --------------- ------------- --- ------------------ ---------------- ----------------- -----------------
FINANCIAL REVIEW
Basis of preparation
The interim financial information has been prepared on the
historical cost basis except for (i) the revaluation of the Group's
investment in its subsidiary John Laing Holdco Limited, through
which the Group holds its investment portfolio, and (ii) financial
instruments that are measured at fair value at the end of each
reporting period. The Company concluded that it meets the
definition of an investment entity set out in IFRS 10 Consolidated
Financial Statements paragraph 27 on the following basis:
(i) as an entity listed on the London Stock Exchange, the
Company is owned by a number of investors;
(ii) the Company holds a substantial portfolio of investments in
project companies through intermediate holding companies. The
underlying projects have a finite life and the Company has an exit
strategy for its investments which is either to hold them to
maturity or, if appropriate, to divest them. Investments take the
form of equity and/or subordinated debt;
(iii) the Group's strategy is to originate, invest in, and
manage infrastructure assets. It invests in PPP and renewable
energy projects and aims to deliver predictable returns and
consistent growth from its investment portfolio. The underlying
project companies have businesses and activities that the Group is
not directly involved in. The Group's returns from the provision of
management services are small in comparison to the Group's overall
investment-based returns; and
(iv) the Group measures its investments in PPP and renewable
energy projects on a fair value basis. Information on the fair
value of investments forms part of monthly management reports
reviewed by the Group's Executive Committee, who are considered to
be the Group's key management personnel, and by its Board of
Directors.
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 its subsidiaries, joint
ventures and associates 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. 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
when making business decisions, including when reviewing the level
of financial resources and deciding where these resources should be
utilised. Therefore, the Directors believe it is helpful to readers
of these financial statements to set out in this Financial Review
the Condensed Group Income Statement, the Condensed Group Balance
Sheet and the Condensed 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 Condensed Group
Income Statement principally in relation to the net gain on
investments at FVTPL. The net gain on investments at FVTPL in the
Condensed Group Income Statement includes fair value movements from
the portfolio of investments in non-recourse project companies and
also comprises income and costs that do not arise directly from
investments in this portfolio, including investment fees earned
from project companies by recourse subsidiaries that are held at
FVTPL.
Six months ended 30 June 2018 2017(c)
----------------------------------------------------------------- ------------------
Condensed Group Income Re-presented income Re-presented
Statement Adjustments statement income statement
------------------------ ------------ ------------------------- ------------------
GBP million GBP million GBP million GBP million
Fair value movements -
investment portfolio 193.9 - 193.9 53.3
Fair value movements -
other 0.1 (1.3)(a) (1.2) (1.4)
Investment fees from
projects 3.8 - 3.8 2.3
------------------------- ------------------------ ------------ ------------------------- ------------------
Net gain on investments
at fair value through
profit or loss 197.8 (1.3) 196.5 54.2
IMS revenue 9.4 - 9.4 9.1
PMS revenue 2.9 - 2.9 2.8
Recoveries on financial
close 3.0 - 3.0 1.4
Other income 15.3 - 15.3 13.3
Operating income 213.1 (1.3) 211.8 67.5
Third party costs (4.2) - (4.2) (2.5)
Disposal costs (3.4) (3.4) (1.0)
Staff costs (17.8) - (17.8) (17.0)
General overheads (5.6) - (5.6) (6.3)
Other net (costs)/income (0.5) - (0.5) 1.9
Post-retirement charges (0.6) 0.6(b) - -
Administrative expenses (32.1) 0.6 (31.5) (24.9)
Profit from operations 181.0 (0.7) 180.3 42.6
Finance costs (6.7) 1.6(a,b) (5.1) (4.7)
Post-retirement charges - (0.9)(b) (0.9) (1.3)
Profit before tax 174.3 - 174.3 36.6
------------------------- ------------------------ ------------ ------------------------- ------------------
Notes:
a) Adjustment comprises GBP1.3 million of finance income
reclassified from 'fair value movements - other' to 'finance
costs'.
b) Under IAS 19, the costs of the pension schemes, including the
post-retirement medical benefits, comprise a service cost of GBP0.6
million, included in administrative expenses in the Condensed Group
Income Statement, and a finance charge of GBP0.3 million, included
in finance costs in the Condensed Group Income Statement. These
amounts are combined together under management reporting.
c) For a reconciliation between the Condensed Group Income
Statement and re-presented income statement for the six months
ended 30 June 2017, refer to the June 2017 Interim Accounts.
The results for the period are shown by reportable segment in
the table below.
Primary Secondary Asset
Investment Investment Management Total
Six months ended 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017 2018 2017
----------------- ---------- ----------- ---------- ----------- ---------- ----------- ----------- -----------
GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million
Profit before
tax for
reportable
segments 164.3 59.9 12.5 (26.1) (0.8) - 176.0 33.8
Post-retirement
charges (0.9) (1.3)
Other net
(loss)/gain (0.8) 4.1
Profit before
tax 174.3 36.6
----------------- ---------- ----------- ---------- ----------- ---------- ----------- ----------- -----------
Profit before tax for the six months ended 30 June 2018 was
GBP174.3 million (2017 - GBP36.6 million). A significant
contributor to the higher profit before tax was the gain on
disposal of the interest in IEP Phase 1, which completed in May
2018.
The main profit contributor in the first half of 2018 was the
Primary Investment division principally due to the IEP Phase 1
gain.
The higher contribution in the first half of 2018 from the
Secondary Investment division was primarily due to the reduction in
value of the two Manchester Waste investments of GBP25.5 million in
the first half of 2017 together with a less adverse impact from
changes in power and gas price forecasts in the first half of
2018.
The movement in fair value on the portfolio for the six months
ended 30 June 2018, after adjusting for investments, cash yield and
realisations, was a GBP193.9 million gain (2017 - GBP53.3 million
gain). The higher value uplift is primarily due to the gain on
disposal of the interest in IEP Phase 1, as mentioned above. For
further details of the movement in fair value on the portfolio, see
the Portfolio Valuation section.
Other fair value movements for the six months ended 30 June 2018
comprised a GBP1.2 million loss which primarily related to net
foreign exchange losses outside of the investment portfolio of
GBP1.0 million. For the six months ended 30 June 2017, other
negative fair value movements of GBP1.4 million primarily comprised
net foreign exchange losses offset by group relief surrendered.
The Group earned IMS revenue of GBP9.4 million (2017 - GBP9.1
million) for investment advisory and asset management services
primarily to the external funds JLIF and JLEN, with the increase
from last year due to higher external Assets under Management.
The Group also earned PMS revenue of GBP2.9 million (2017 -
GBP2.8 million).
The Group achieved recoveries of bidding costs on financial
closes of GBP3.0 million in the six months ended 30 June 2018 (2017
- GBP1.4 million).
Staff costs by division are shown below:
Primary Secondary Asset
Investment Investment Management Central Total
Six
months 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
ended 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Staff
costs 4.5 5.3 - - 8.1 7.3 5.2 4.4 17.8 17.0
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Included within Asset Management staff costs are costs relating
to:
Investment Management Project Management Total Asset
Services Services Management
Six months ended 30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017
------------------ ------------ ------------ ------------ ------------ ------------ ------------
GBP million GBP million GBP million GBP million GBP million GBP million
------------------ ------------ ------------ ------------ ------------ ------------ ------------
Staff costs 5.9 5.4 2.2 1.9 8.1 7.3
------------------ ------------ ------------ ------------ ------------ ------------ ------------
Total staff costs have remained broadly constant after taking
account of inflationary pay increases.
Finance costs of GBP5.1 million (2017 - GBP4.7 million) include
costs arising on the corporate banking facilities net of any
interest income, with the increase from last year primarily due to
an increase in facilities in October 2017.
The Group's overall tax expense on profit from operations for
2018 was GBP0.2 million (2017 - credit of GBP4.0 million). This
comprised a tax expense of GBP0.5 million (2017 - credit of GBP0.8
million) in recourse group subsidiary entities that are
consolidated (shown in the 'Tax' line of the Condensed Group Income
Statement), primarily in relation to deferred tax, and a tax credit
of GBP0.3 million (2017 - GBP3.2 million credit) 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
Condensed Group Income Statement), comprising group/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 January 2018, the Group initiated an internal reorganisation
under which the Primary Investment and Asset Management teams in
each of the three core geographical regions now report to a single
regional head. The principal objective behind this revised
structure is to enable the Group to focus more effectively on value
creation in each region. Accordingly, certain regional performance
targets for 2018 have been set, principally in relation to the
investment portfolio in each region, including fair value movements
thereon.
The fair value movements on the investment portfolio by
geographical region are shown in the table below:
Europe North America Asia Pacific Listed investment Total
Six months 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
ended 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
------------ -------- -------- -------- -------- -------- -------- --------- ----------- --------- ---------
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
Fair value
movements
-
investment
portfolio 155.2 17.7 20.6 5.8 18.4 29.4 (0.3) 0.4 193.9 53.3
------------ -------- -------- -------- -------- -------- -------- --------- ----------- --------- ---------
Re-presented balance sheet
The re-presented balance sheet is reconciled to the Condensed
Group Balance Sheet at 30 June 2018 below. The re-presented balance
sheet involves the reclassification of certain amounts within the
Condensed Group Balance Sheet principally in relation to assets and
liabilities of GBP178.0 million (31 December 2017 - GBP152.6
million) within certain of the Company's recourse subsidiaries that
are included in investments at FVTPL in the Condensed Group Balance
Sheet as a result of the requirement under IFRS 10 to fair value
investments in these subsidiaries.
As at 30 June 2018 31 December
2017(g)
--------------------------------------------------- ------------------
Re-presented
Condensed 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
Other long term
Plant and equipment 0.1 - 0.1 2.1 assets
Investments at FVTPL 1,437.7 (178.0)(a) 1,259.7 1,193.8 Portfolio value
Cash collateral
- 134.4(b) 134.4 133.1 balances
Non-portfolio
- 0.4(b) 0.4 0.3 investments
Retirement benefit Pension surplus
assets 24.0 - 24.0 - (IAS 19)
1,461.8 (43.2) 1,418.6 1,329.3
----------------- ------------- ----------------- ------------------
Current assets
Trade and other
receivables 10.1 (10.1)(c) - -
Cash and cash
equivalents 68.4 41.7(b) 110.1 14.6 Cash
----------------- ------------- ----------------- ------------------
78.5 31.6 110.1 14.6
----------------- ------------- ----------------- ------------------
Total assets 1,540.3 (11.6) 1,528.7 1,343.9
----------------- ------------- ----------------- ------------------
Current liabilities
Current tax
liabilities (0.6) 0.6(c) - -
Borrowings (8.9) (2.1)(d) (11.0) (176.0) Cash borrowings
Trade and other
payables (16.4) 16.4(c) - -
Working capital
and other
- (4.8)(b,c,d) (4.8) (3.7) balances
----------------- ------------- ----------------- ------------------
(25.9) 10.1 (15.8) (179.7)
----------------- ------------- ----------------- ------------------
Net current
assets/(liabilities) 52.6 41.7 94.3 (165.1)
----------------- ------------- ----------------- ------------------
Non-current
liabilities
Retirement benefit Pension deficit
obligations (7.5) 7.5 - (32.3) (IAS 19)
Other retirement
benefit
- (7.5) (7.5) (8.0) obligations
Provisions (1.5) 1.5(c) - -
----------------- ------------- ----------------- ------------------
(9.0) 1.5 (7.5) (40.3)
----------------- ------------- ----------------- ------------------
Total liabilities (34.9) 11.6 (23.3) (220.0)
----------------- ------------- ----------------- ------------------
Net assets 1,505.4 - 1,505.4 1,123.9
----------------- ------------- ----------------- ------------------
Notes:
a) Investments at fair value through profit or loss (FVTPL)
comprise: portfolio valuation of GBP1,259.7 million and other
assets and liabilities within recourse investment entity
subsidiaries of GBP178.0 million (see note 9 to the Condensed Group
Financial Statements).
b) Other assets and liabilities within recourse investment
entity subsidiaries of GBP178.0 million referred to in note (a)
include (i) cash and cash equivalents of GBP176.1 million, of which
GBP134.4 million is held to collateralise future investment
commitments, (ii) positive working capital and other balances of
GBP1.5 million and (iii) other small investments at FVTPL not
included in the portfolio valuation of GBP0.4 million.
c) Trade and other receivables (GBP10.1 million), current tax
liabilities (GBP0.6 million), trade and other payables (GBP16.4
million) and provisions (GBP1.5 million) are combined within
working capital and other balances.
d) Borrowings of GBP8.9 million comprise cash borrowings of
GBP11.0 million less unamortised financing costs of GBP2.1 million,
re-presented in working capital and other balances.
e) For a reconciliation between the Condensed Group Balance
Sheet and re-presented balance sheet as at 31 December 2017, refer
to the 2017 Annual Report and Accounts.
Components of net assets, including reportable segments, are
shown in the table below.
Primary Secondary Asset
Investment Investment Management Total
As at 31 31 31 31
30 June December 30 June December 30 June December 30 June December
2018 2017 2018 2017 2018 2017 2018 2017
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Portfolio valuation 636.2 580.3 623.5 613.5 - - 1,259.7 1,193.8
Other net current
liabilities (4.3) (1.3)
Group net
cash/(borrowings)(1) 233.5 (28.3)
Net post-retirement
assets/(obligations) 16.5 (40.3)
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Group net assets 1,505.4 1,123.9
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Note:
(1) Cash balances of GBP244.5 million (31 December 2017 -
GBP147.7 million), of which GBP134.4 million (31 December 2017 -
GBP133.1 million) was held to collateralise future investments
commitments, net of short-term cash borrowings of GBP11.0 million
(31 December 2017 - GBP176.0 million).
The portfolio valuation by geographical region is shown in the
table below.
Europe North America Asia Pacific Listed investment Total
As at 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
----------- -------- -------- -------- --------- -------- --------- -------- -------- -------- ---------
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
----------- -------- -------- -------- --------- -------- --------- -------- -------- -------- ---------
Portfolio
valuation 606.9 609.1 336.9 283.2 306.2 291.2 9.7 10.3 1,259.7 1,193.8
----------- -------- -------- -------- --------- -------- --------- -------- -------- -------- ---------
Net assets increased from GBP1,123.9 million at 31 December 2017
to GBP1,505.4 million at 30 June 2018 principally as a result of
(i) the Rights Issue and (ii) the Group's profitability in the
first half of 2018.
The Group's portfolio of investments in project companies and
listed investments was valued at GBP1,259.7 million at 30 June 2018
(31 December 2017 - GBP1,193.8 million). The valuation methodology
and details of the portfolio value are described in the Portfolio
Valuation section.
The Group held cash balances of GBP244.5 million at 30 June 2018
(31 December 2017 - GBP147.7 million) of which GBP134.4 million (31
December 2017 - GBP133.1 million) was held to collateralise future
investment commitments (see the Financial Resources section below
for more details). Of the total Group cash balances of GBP244.5
million, GBP176.1 million was held in recourse subsidiaries held at
FVTPL, including the cash collateral balances, that are included
within investments at FVTPL on the Condensed Group Balance Sheet.
The remaining GBP68.4 million was held in the Company and recourse
subsidiaries that are consolidated and shown as cash and cash
equivalents on the Condensed Group Balance Sheet (see the
re-presented balance sheet for further details).
Working capital and other balances (a negative amount) were a
slightly higher liability primarily because of higher fair value
liabilities on foreign exchange hedges offset by higher receivables
at 30 June 2018.
The Group operates two defined benefit pension 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.
In December 2016, following a triennial actuarial review of JLPF
as at 31 March 2016, a seven-year deficit repayment plan was agreed
with the JLPF Trustee. It was agreed to repay the actuarial deficit
of GBP171 million at 31 March 2016 as set out below. The discount
rate used for the actuarial deficit is lower than the IAS 19
discount rate (see below).
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
------------- ------------
Under IAS 19, at 30 June 2018, JLPF had a surplus of GBP21.0
million (31 December 2017 - deficit of GBP35.2 million) and the
Plan had a surplus of GBP3.0 million (31 December 2017 - surplus of
GBP2.9 million). The liability at 30 June 2018 under the
post-retirement medical scheme was GBP7.5 million (31 December 2017
- GBP8.0 million).
The pension liabilities in JLPF under IAS 19 are based on a
discount rate of 2.75% (31 December 2017 - 2.50%) and long term RPI
of 3.10% (31 December 2017 - 3.10%). The amount of the liabilities
is dependent on key assumptions, principally: inflation rate,
discount rate and life expectancy of members. The discount rate, as
prescribed by IAS 19, is based on yields from high quality
corporate bonds. The surplus (under IAS 19) as at 30 June 2018 has
moved from a deficit at 31 December 2017 primarily as a result of
the Group's cash contribution to JLPF of GBP26.5 million in March
2018 and the higher discount rate.
Re-presented cash flow statement
The Condensed 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
Condensed Group Cash Flow Statement. Investment-related cash flows
are disclosed in note 9 to the Condensed Group 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.
Six months ended 30 June 2018 2017
------------------------ ------------------------
Re-presented cash flows Re-presented cash flows
GBP million GBP million
Cash yield 17.4 15.1
Operating cash flow (8.6) (5.3)
Net foreign exchange impact 2.5 (0.1)
Total operating cash flow 11.3 9.7
------------------------------------------------------------ ------------------------ ------------------------
Cash investment in projects (130.9) (57.7)
Proceeds from realisations 241.5 151.3
Disposal costs (4.5) (1.7)
------------------------------------------------------------ ------------------------ ------------------------
Net investing cash flows 106.1 91.9
------------------------------------------------------------ ------------------------ ------------------------
Finance charges (4.4) (4.4)
Rights issue (net of costs) 210.5 -
Cash contributions to JLPF (26.5) (24.5)
Dividend payments (35.2) (23.1)
Net cash inflow/(outflow) from financing activities 144.4 (52.0)
------------------------------------------------------------ ------------------------ ------------------------
Recourse group cash inflow 261.8 49.6
------------------------------------------------------------ ------------------------ ------------------------
Recourse group opening net debt balances (28.3) (88.2)
------------------------------------------------------------ ------------------------ ------------------------
Recourse group closing net cash/(debt) balances 233.5 (38.6)
------------------------------------------------------------ ------------------------ ------------------------
Reconciliation to line items on re-presented balance sheet
------------------------------------------------------------ ------------------------ ------------------------
Cash collateral balances 134.4 20.5
------------------------------------------------------------ ------------------------ ------------------------
Other cash balances 110.1 5.6
------------------------------------------------------------ ------------------------ ------------------------
Total cash and cash equivalents 244.5 26.1
------------------------------------------------------------ ------------------------ ------------------------
Cash borrowings (11.0) (64.7)
------------------------------------------------------------ ------------------------ ------------------------
Net cash/(debt) 233.5 (38.6)
------------------------------------------------------------ ------------------------ ------------------------
Reconciliation of cash borrowings to Condensed Group Balance Sheet
-------------------------------------------------------------------- ------- -------
Cash borrowings as per re-presented balance sheet (11.0) (64.7)
-------------------------------------------------------------------- ------- -------
Unamortised financing costs 2.1 3.0
-------------------------------------------------------------------- ------- -------
Borrowings as per Condensed Group Balance Sheet (8.9) (61.7)
-------------------------------------------------------------------- ------- -------
Cash yield comprised GBP17.4 million (2017 - GBP14.7 million)
from the investment portfolio and GBPnil (2017 - GBP0.4 million)
from non-portfolio investments.
Operating cash flow in the six months ended 30 June 2018 was
adverse compared to 2017 primarily due to deferred consideration of
GBP2.1 million in relation to the sale of the PMS UK business
received in the first half of 2017.
Total operating cash flow was net of a favourable foreign
exchange impact of GBP2.5 million (2017 - adverse impact of GBP0.1
million).
During the period, cash of GBP130.9 million (2017 - GBP57.7
million) was invested in project companies. In the same period,
investments in two projects were realised for total proceeds of
GBP241.5 million (2017 - GBP151.3 million from the realisation of
three investments), offset by disposal costs paid of GBP4.5 million
(2017 - GBP1.7 million).
In the period, the Group made a cash contribution to JLPF of
GBP26.5 million (2017 - GBP24.5 million).
Dividend payments of GBP35.2 million in the six months ended 30
June 2018 comprised the final dividend for 2017 (2017 - final
dividend for 2016 of GBP23.1 million).
FINANCIAL RESOURCES
At 30 June 2018, the Group had principal committed corporate
banking facilities of GBP475 million (31 December 2017 - GBP475
million), expiring in March 2020, which are primarily used to back
investment commitments. The Group also had additional liquidity
facilities of GBP50 million (31 December 2017 - GBP50 million)
committed until February 2019. Net available financial resources at
30 June 2018 were GBP504.0 million (31 December 2017 - GBP153.1
million).
In July 2018, the Group refinanced its existing borrowing
facilities, including additional liquidity facilities, and entered
into new facilities totalling GBP650 million, of which GBP500
million is committed until July 2023 and GBP150 million for 18
months until January 2020.
Analysis of Group financial resources
30 June 31 December
2018 2017
GBP million GBP million
------------------------------------------------------------- ------------- -------------
Total committed facilities 525.0 525.0
------------------------------------------------------------- ------------- -------------
Letters of credit issued under corporate banking facilities (91.3) (152.3)
Letters of credit issued under liquidity facilities (25.2) (50.0)
Other guarantees and commitments (3.0) (7.5)
Short term cash borrowings (11.0) (176.0)
------------------------------------------------------------- ------------- -------------
Facility utilisation (130.5) (385.8)
------------------------------------------------------------- ------------- -------------
Facility headroom 394.5 139.2
Cash and bank deposits(1) 110.1 14.6
Less unavailable cash (0.6) (0.7)
------------------------------------------------------------- ------------- -------------
Net available financial resources 504.0 153.1
------------------------------------------------------------- ------------- -------------
(1) Cash and bank deposits exclude cash collateral balances. Of
the total cash and bank deposit balances of GBP110.1 million,
GBP68.4 million was held in the Company and recourse subsidiaries
that are consolidated and therefore shown as cash and cash
equivalents on the Condensed Group Balance Sheet, with the
remaining GBP41.7 million held in recourse subsidiaries held at
FVTPL which are included within investments at FVTPL on the
Condensed Group Balance Sheet (see the re-presented balance
sheet).
Letters of credit issued under the committed corporate banking
facilities of GBP91.3 million (31 December 2017 - GBP152.3 million)
and under additional liquidity facilities of GBP25.2 million (31
December 2017 - GBP50.0 million) together with cash collateral
represent future cash investment by the Group into underlying
projects in the Primary Investment portfolio.
30 June 31 December
2018 2017
GBP million GBP million
-------------------------------------- ------------- -------------
Letters of credit issued 116.5 202.3
Cash collateral 134.4 133.1
-------------------------------------- ------------- -------------
Future cash investment into projects 250.9 335.4
-------------------------------------- ------------- -------------
The letters of credit issued will reduce and ultimately expire
as cash is invested into the underlying projects, expected to be
over the period from December 2018 to December 2019.
The table below shows the cash collateral balances at 30 June
2018 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
-------------------- ------------- ----------------
I-77 Managed Lanes 16.7 July 2018 - Nov
2018
I-66 Managed Lanes 117.7 May 2020 - Dec
2022
Total 134.4
-------------------- ------------- ----------------
Cash collateral is included within 'investments at fair value
through profit or loss' in the Condensed Group Balance Sheet.
There are significant non-recourse borrowings within the project
companies in which the Group invests. The interest rate exposure on
the borrowings 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 Condensed 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 six months ended 30 June 2018, there was
a net adverse fair value movement of GBP0.9 million in the
portfolio valuation. In the first half of 2018, Sterling
strengthened against the Euro and Australian and New Zealand
Dollars, but weakened against the US Dollar.
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 30 June 2018 of GBP116.5 million
(31 December 2017 - GBP202.3 million) are analysed by currency as
follows:
30 June 31 December
2018 2017
Letters of credit by currency GBP million GBP million
------------------------------- ------------- -------------
Sterling - 72.7
US dollar - 9.5
Australian dollar 116.5 120.1
------------------------------- ------------- -------------
Total 116.5 202.3
------------------------------- ------------- -------------
Cash collateral at 30 June 2018 of GBP134.4 million (31 December
2017 - GBP133.1 million) is analysed by currency as follows:
30 June 31 December
2018 2017
Cash collateral by currency GBP million GBP million
----------------------------- ------------- -------------
US dollar 134.4 133.1
Total 134.4 133.1
----------------------------- ------------- -------------
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.
The principal internal controls that operated throughout the
first half of 2018 and up to the date of this announcement
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's objectives are, inter
alia, 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;
-- a deterrent to fraud;
-- another layer of assurance that the Group is meeting its FCA regulatory requirements; and
-- 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 Head of Internal
Audit meets regularly with senior management and the Audit &
Risk Committee to discuss key findings and management actions
undertaken. The 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 Chief Risk Officer, 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, which reports formally to the Audit & Risk
Committee.
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. All divestment decisions are
scrutinised by the Divestment Committee and approved 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 in the 2017 Annual Report and Accounts. These
risks are not expected to change significantly in the second half
of 2018. 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.
As set out in the 2017 Annual Report and Accounts, the Group's
three strategic objectives 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.
Change
Link in risk
to strategic since 31
objectives December
Risk above Mitigation 2017
------------------------------------------- -------------- -------------------------------------------- -----------
Governmental policy 1, 2, Thorough due diligence is carried out in No change
Changes to legislation or public policy in 3 order to assess a specific country's risk
the jurisdictions in which the Group (for example economic and political
operates stability,
or may wish to operate could negatively tax policy, legal framework and local
impact practices)
the volume of potential opportunities before any investment is made. The Group
available seeks to limit its exposure to any single
to the Group and the returns from existing governmental or public sector body.
investments. Where possible the Group seeks specific
The use of PPP programmes by governmental contractual protection from changes in
entities governmental policy and law for the
may be delayed or may decrease thereby projects
limiting it invests in. General change of law is
opportunities for private sector considered to be a normal business risk.
infrastructure During the bidding process for investment
investors in the future, or be structured in a project, the Group takes a view on
such an appropriate level of return to cover
that returns to private sector the risk of non-discriminatory changes
infrastructure in law.
investors are reduced. PPP projects are normally structured so
Governmental entities may in the future as to provide significant contractual
seek protection
to terminate or renegotiate existing for equity investors (see also
projects counterparty
by introducing new policies or legislation risk).
that result in higher tax obligations on During the bidding process for investment
existing in a project, the Group assesses the
PPP or renewable energy projects or sensitivity
otherwise of the project's forecast returns to
affect existing or future PPP or renewable changes
energy projects. in factors such as tax rates and/or, for
Changes to legislation or public policy renewable energy projects, governmental
relating support mechanisms. The Group targets
to renewable energy could negatively jurisdictions
impact which have a track record of support for
the economic returns on the Group's renewable energy investments and which
existing continue to demonstrate such support.
or future potential investments in Through its track record of more than 130
renewable investment commitments, the Group has
energy projects, which would adversely developed
affect significant expertise in compliance with
the demand for and attractiveness of such public tender regulations.
projects.
Compliance with the public tender
regulations
which apply to PPP projects is complex and
the outcomes may be subject to third party
challenge and reversed.
------------------------------------------- -------------- -------------------------------------------- -----------
Macroeconomic factors 1, 2, Factors which have the potential to No change
To the extent such factors are not hedged, 3 adversely
changes in inflation and interest rates impact the underlying cash flows of an
and investment, and hence its valuation, are
foreign exchange all potentially impact hedged wherever possible at a project
the level
return generated from an investment and and sensitivities are considered during
its the investment appraisal process. In
valuation. particular,
Changes in factors which affect energy prior to investment, renewable energy
prices, projects
such as the future energy demand/supply are assessed for their sensitivity to a
balance number of variables, including future
and the oil price, could negatively impact power
the economic returns on the Group's prices.
investments Systemic risks, such as potential
in renewable energy. deflation,
Weakness in the political and economic or appreciation/depreciation of Sterling
climate versus the currency in which an investment
in a particular jurisdiction could impact is made, are assessed in the context of
the the portfolio as a whole.
value of, or the return generated from, The Group seeks to reduce the extent to
any which its renewable energy investments
or all of the Group's investments located are exposed to energy prices through
in governmental
that jurisdiction. support mechanisms and/or offtake
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 market 1, 2, Projects are appraised on a number of No change
Weakness in the secondary markets for 3 bases,
investments including being held to maturity. Projects
in PPP or renewable energy projects, for are also carefully structured so that they
example are capable of being divested, if
as the result of a lack of economic growth appropriate,
in relevant markets, actual or potential before maturity.
governmental Over recent years, the secondary markets
policy, regulatory changes in the banking for both PPP and renewable energy
sector, investments
liquidity in financial markets, changes in have grown.
interest and exchange rates and project While JLIF and JLEN are potential buyers
finance of certain of the Group's PPP and
market conditions may affect the Group's renewable
ability energy investments respectively, the size
to realise full value from its and breadth of secondary markets and the
divestments. growth of operational infrastructure as
The secondary market for investments in an asset class, plus the Group's recent
renewable experience, all provide the Group with
energy projects may be affected by, inter confidence that it can sell investments
alia, to other purchasers.
changes in energy prices, in governmental
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 The Group has corporate banking facilities Decreased
Any shortfall in the financial resources totalling GBP500 million which mature in
that July 2023 as well as additional facilities
are available to the Group to satisfy its (GBP150 million) committed until January
financial 2020. Available headroom is carefully
obligations may make it necessary for the monitored
Group and compliance with the financial
to constrain its business development, covenants
refinance and other terms of these facilities is
its outstanding obligations, forego closely observed. The Group also monitors
investment its working capital, cash collateral and
opportunities and/or sell existing letter of credit requirements and
investments. maintains
Inability to secure project finance could an active dialogue with its banks. It
hinder operates
the ability of the Group to make a bid for a policy of ensuring that sufficient
an investment opportunity, or where the financial
Group resources are maintained to satisfy
has a preferred bidder position, could committed
negatively and likely future investment requirements.
impact whether an underlying project A Divestment Committee was set up in 2017
reaches to provide oversight and recommendations
financial close. on all potential divestments that were
The inability of a project company to previously under the remit of the
satisfactorily Executive
refinance existing maturing medium-term Committee.
project In March 2018, the Group undertook the
finance facilities periodically during the Rights Issue, raising GBP210.5 million
life of a project could affect the Group's net of costs.
projected future returns from investments The Group believes that there is currently
in sufficient depth and breadth in project
such projects and hence their valuation in finance markets to meet the financing
the Group's Balance Sheet. needs
Adverse financial performance by a project of the projects it invests in. The Group
company which affects the financial works closely with a wide range of project
covenants finance providers, including banks and
in its project finance debt documents may other financial institutions. In markets
result such as Australia and New Zealand, where
in the project company being unable to the tenor of project finance facilities
make at financial close tends to be medium
distributions to the Group and other term,
investors, certain PPP projects in which the Group
which would impact the valuation of the has invested are due for refinancing in
Group's due course. One such project, Auckland
investment in such project company, and South Corrections Facility, was
may successfully
ultimately enable public-sector refinanced in late 2017.
counterparties Prior to financial close, all proposed
(through cross default links to other investments are scrutinised by the
project Investment
agreements) and/or project finance debt Committee. This scrutiny includes a review
providers of sensitivities to adverse performance
to declare default and, in the latter of investment returns and financial ratio
case, tests as well as an assessment of a
to exercise their security. project's
ability to be refinanced if the tenor of
its project finance 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 benefit pension No change
The amount of the surplus/deficit on the schemes are overseen by corporate
Group's trustees,
main defined benefit pension scheme (JLPF) the directors of which include independent
can vary significantly due to gains or and professionally qualified individuals.
losses The Group works closely with the trustees
on scheme investments and movements in the on the appropriate funding strategy for
assumptions used to value scheme the schemes and takes independent
liabilities actuarial
(in particular life expectancy, discount advice as appropriate. Both schemes are
rate closed to future accrual and accordingly
and inflation rate). Consequently the have no active members, only deferred
Group members
is exposed to the risk of increases in and pensioners. A significant proportion
cash of the liabilities of JLPF is matched by
contributions payable, volatility in the a bulk annuity buy-in agreement with
surplus/deficit Aviva.
reported in the Group Balance Sheet, and As at 30 June 2018, JLPF's liabilities,
gains/losses as measured on a self-sufficiency basis,
recorded in the Group Statement of were 72% hedged in respect of both
Comprehensive interest
Income. rates and inflation.
The next actuarial valuation of JLPF is
due as at 31 March 2019.
------------------------------------------- -------------- -------------------------------------------- -----------
Future investment activity 1 The Group believes that its experience No change
The Group operates in competitive markets and expertise as an active investor and
and asset manager accumulated over more than
may not be able to compete effectively or 20 years, together with its flexibility
profitably. and ability to respond to market
The Group's investment pipeline is not a conditions
guarantee will continue to enable it to compete
of actual bidding activity or future effectively
investments. and secure attractive investments.
The Group's historical win rate for PPP
projects Both the PPP and the renewable energy
may decline and is an uncertain indicator pipelines are diversified by geography
of and number of and type of project.
new investments by the Group. The Group budgets a 30% win rate for PPP
projects and achieved an average win rate
for the three years ended 31 December 2017
ahead of this.
------------------------------------------- -------------- -------------------------------------------- -----------
Valuation 3 The discount rates used to value No change
The valuation of an investment in a investments
project are derived from publicly available market
may not reflect its ultimate realisable data and other market evidence and are
value, updated regularly.
for instance because of changes in The Group has a good track record of
operational realising
benchmark discount rates. investments at prices consistent with the
In circumstances where the revenue derived fair values at which they are held.
from a project is related to volume (i.e. The Group's investments are in projects
customer which are principally availability-based
usage or wind energy yield), actual (where the revenue does not generally
revenues depend
may vary materially from assumptions made on the level of use of the project asset).
at Where patronage or volume risk is taken,
the time the investment commitment is the Directors review revenue assumptions
made. and sensitivities thereto in detail prior
In addition, to the extent that a project to any investment commitment.
company's Where the revenue from investments is
actual costs incurred differ from forecast related
costs, for example, because of late to patronage or volume (e.g. with regard
construction, to investments in renewable energy
and cannot be passed on to sub-contractors projects),
or other third parties, investment returns risks are mitigated through a combination
and valuations may be adversely affected. of factors, including (i) the use of
Revenues from renewable energy projects independent
may forecasts of future volumes (ii) lower
be affected by the volume of power gearing versus that of availability-based
production projects (iii) stress-testing the
(e.g. from changes in wind or solar robustness
yield), of project returns against significant
the availability of fuel (in the case of falls in forecast volumes. In addition,
biomass where possible, fixed-price arrangements
projects), operational issues, are entered into to mitigate the impact
restrictions of changes in future energy prices.
on the electricity network, the The Group typically hedges cash flows
reliability arising
of electrical connections or other factors from investment realisations or
such as noise and other environmental significant
restrictions, distributions in currencies other than
as well as by changes in energy prices and Sterling.
to governmental support mechanisms. During the bidding process for investment
The valuation of the Group's investment in a project, the Group assesses the
portfolio sensitivity
is affected by movements in foreign of the project's forecast returns to
exchange changes
rates, which are reflected through the in tax rates.
Group's The intention is that projects are
financial statements. In addition, there structured
are such that (i) day-to-day service provision
foreign exchange risks associated with is sub-contracted to qualified
conversion sub-contractors
of foreign currency cash flows relating to supported by appropriate security packages
an investment into and out of Sterling. (ii) cost and price inflation risk in
The valuation of the Group's investment relation
portfolio to the provision of services lies with
could be affected by changes in tax sub-contractors (iii) performance
legislation, deductions
for instance changes which limit in relation to project non-availability
tax-deductible lie with sub-contractors (iv) future major
interest (see Taxation section). maintenance costs and ongoing project
During the construction phase of an company
infrastructure costs are reviewed annually and cost
project, there are risks that either the mitigation
works strategies adopted as appropriate.
are not completed within the agreed The Group has procedures in place to
time-frame ensure
or that construction costs overrun. Where that project companies in which it invests
such appoint competent sub-contractors with
risks are not borne by sub-contractors, or relevant experience and financial
sub-contractors fail to meet their strength.
contractual If project construction is delayed,
obligations, this can result in delays in sub-contracting
the arrangements contain terms enabling the
receipt of project income and/or cost project company to recover liquidated
overruns, damages,
which may adversely affect the valuation additional costs and lost revenue, subject
of to limits. In addition, the project
and return on the Group's investments. If company
construction may terminate its agreement with a
or other long stop dates are exceeded, sub-contractor
this if the latter is in default and seek an
may enable public sector counter-parties alternative sub-contractor. The Group
and/or seeks
project finance debt providers to declare to limit its exposure to any single
a sub-contractor.
default and, in the case of the latter, to The terms of the sub-contracts into which
exercise their security. project companies enter provide some
The Group is reliant on the performance of protections
third parties in constructing an asset to for investment returns from the poor
an performance
appropriate standard as well as of third parties.
subsequently The ability to replace defaulting third
operating it in a manner consistent with parties is supported by security packages
contractual to protect against price movement on
requirements. Consistent under-performance re-tendering.
by, or failure of, such third parties may If long stop dates are exceeded, the Group
result has significant experience as an active
in the ability of public sector counter manager in protecting the value of its
parties investments by working with all parties
and/or project finance debt providers to to a project to agree revised timetables
declare and/or other restructuring arrangements.
a default resulting in the impairment or The Group monitors the concentration risk
loss within its portfolio. Since 31 December
of the Group's investment. 2014, the percentage of its portfolio
A significant portion of the Group's value
portfolio attributable to UK investments has reduced
valuation is, and may in the future be, in from 58% to 30% at 30 June 2018.
a small number of investments, and changes The performance of project companies and
to the value of these investments could service providers to project companies
materially is regularly monitored by the Asset
affect the Group's financial position and Management
results team.
of operations.
A project company or a service provider to
a project company may fail to manage
contracts
efficiently or effectively.
------------------------------------------- -------------- -------------------------------------------- -----------
Counterparty risk 3 The Group works with multiple clients, No change
The Group is exposed to counterparty joint venture partners, sub-contractors
credit and institutional investors so as to
risk with regards to (i) governmental reduce
entities, the probability of systemic counterparty
sub-contractors, lenders and suppliers at risk in its investment portfolio. In
a establishing
project level and (ii) consortium project contractual arrangements prior
partners, to making an investment, the credit
financial institutions and suppliers at a standing
Group and relevant experience of a
level. sub-contractor
Public sector counter-parties to PPP are considered. Post financial close, the
projects financial standing of key counterparties
may seek to renegotiate contract terms is monitored to provide an early warning
and/or of possible financial distress.
terminate contracts, as a result of PPP projects are normally structured so
changes as to provide significant contractual
in governmental policy or otherwise, in a protection
way for equity investors. Such protection may
which impacts the valuation of one or more include "termination for convenience"
of the Group's investments. clauses
In overseas jurisdictions, the Group's which enable public sector counter-parties
investments to terminate projects subject to payment
backed by governmental entities may of appropriate compensation, including
ultimately to equity investors.
be subject to sovereign risk. PPP projects are normally supported by
Project companies are exposed to central and local government covenants,
counterparty which significantly reduce the Group's
credit risk and counterparty performance risk. Risk is further reduced by the
risk increasing
with regards to public sector bodies, geographical spread of the Group's
sub-contractors, investments.
lenders, suppliers and consortium The performance of service providers to
partners. project companies is regularly monitored
Worsening of general economic conditions by the Asset Management team.
in Counterparties for cash deposits at a
the UK as a result of the UK's withdrawal Group
from level, project debt swaps and deposits
the European Union could affect project within project companies are required to
companies be banks with a suitable credit rating
in the UK through, for example, heightened and are monitored on an ongoing basis.
counterparty risk. 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, projects benefit from No change
A major incident at any of the Group's comprehensive insurance arrangements,
main either
locations or any of the projects invested directly or through contractors' insurance
in policies.
by the Group, such as a terrorist attack, Business continuity plans at project level
war are tested at frequent/regular intervals.
or significant cyber-attack, could lead to Business continuity procedures are also
a loss of crucial business data, regularly updated in order to maintain
technology, their relevance.
buildings and reputation and harm to the The Group is committed to ensuring the
public, health, safety and welfare of all its
all of which could collectively or employees
individually and all other persons who may be affected
result in a loss of value for the Group. by its direct activities, or those under
Such an incident affecting any of the its control. John Laing believes that
projects proper
invested in by the Group could also affect attention to the health and safety of its
the Group's ability to sell its investment employees, sub-contractors, and the
in that project. community
Failure to maintain secure IT systems and within which the Group operates is a key
to element of effective business management
combat cyber and other security risks to and essential to its reputation.
information
and to physical sites could adversely The projects in which the Group invests
affect each have their own health and safety
the Group. policies
and business continuity plans.
The Group's IT requirements are outsourced
to a third party. Following a re-tender
process, a new provider, CDW, was
appointed
in May 2018.
Within the outsourced arrangements, cyber
risk is addressed through (i) the Group's
organisational structure which includes
segregation of responsibilities, delegated
lines of accountability, delegated
authorities
and (ii) specific controls, including
controls
over payments and access to IT systems.
------------------------------------------- -------------- -------------------------------------------- -----------
Investment adviser agreements with JLIF 2 Through JLCM, and supported by other parts Increased
and of the Asset Management division, the
JLEN Group
A loss of JLCM's investment adviser focuses on delivering a high quality
agreements service
with JLIF and/or JLEN respectively would to both funds.
be On 3 August 2018, the Board of JLIF
detrimental to the Group's Asset recommended
Management a cash offer for its entire issued share
business. capital from a consortium comprising funds
managed by Dalmore Capital Limited and
Equitix Investment Management Limited at
142.5p per share plus a dividend of 3.57p
per share for the six months ended 30 June
2018. The offer is expected to become
effective
in late September/early October 2018.
During
this period, the Group expects to discuss
with the acquiring consortium the future
of its asset management services to JLIF.
As previously disclosed, the Investment
Advisory Agreement between JLIF and JLCM
is terminable by either side with 12
months'
notice.
------------------------------------------- -------------- -------------------------------------------- -----------
Future returns from investments 1, 2, In bidding for new projects, the Group No change
The Group's historical returns and cash 3 sets a target internal rate of return
yields taking
from investments may not be indicative of account of historical experience, current
future market conditions and expected returns
returns. once the project becomes operational. The
The Group's expected hold-to-maturity Group continually looks for value
internal enhancement
rates of return from investments are based opportunities which would improve the
on a variety of assumptions which may not target
be internal rate of return and projected
correct at the time they are made and may annualised
not return.
be achieved in the future. At the appraisal stage, investments in
projects are tested for their sensitivity
to changes in key assumptions.
------------------------------------------- -------------- -------------------------------------------- -----------
Taxation 1, 3 Tax positions taken by the Group are based Increased
The Group may be exposed to changes in on industry practice and/or external tax
taxation advice.
in the jurisdictions in which it operates, At the appraisal stage, investments in
or it may cease to satisfy the conditions projects are tested for their sensitivity
for to changes in tax rates. Project
relevant reliefs. Tax authorities may valuations
disagree are regularly updated for changes in tax
with the positions that the Group has rates.
taken The impact of changes to UK and US tax
or intends to take. rules has been taken into account in the
Project companies may be exposed to fair value at 30 June 2018 of the Group's
changes investments in those jurisdictions.
in taxation in the jurisdictions in which The Group monitors closely the way in
they which
operate. other governments, including in Australia
In 2015, the OECD published its and the Netherlands, are implementing the
recommendations OECD recommendations.
for tackling Base Erosion and Profit
Shifting
(BEPS) by international companies. It
identified
the use of tax deductible interest as one
of
the key areas where there is opportunity
for
BEPS by international companies. It is up
to
the governments of OECD countries to
decide
how to implement the OECD's
recommendations
into their domestic law. To the extent
that
one or more of the jurisdictions in which
the
Group operates changes its rules to limit
tax
deductible interest, this could
significantly
impact (i) the tax payable by subsidiaries
of the Group, (ii) the valuation of
existing
investments and (iii) the way in which
future
project-financed infrastructure
investments
are structured, in each case in such
jurisdictions.
In late 2017, the UK Government enacted
legislation,
effective from 1 April 2017, which
introduced
a Fixed Ratio Rule to cap the amount of
tax
deductible net interest to 30% of a
company's
UK EBITDA.
In the US, new legislation came into
effect
on 1 January 2018, including a restriction
on interest deductibility for certain US
entities
paying interest to foreign entities.
The Australian Treasury published draft
legislation
in May 2018 which included proposals to
(i)
increase tax on foreign investors in
certain
stapled structures and (ii) tighten the
Australian
thin capitalisation regime.
In the Netherlands, the tax authorities
released
in early 2018 a policy statement
confirming
their intention to implement the EU
Anti-Tax
Avoidance Directive so as to restrict tax
deductible
interest to 30% of a company's EBITDA.
------------------------------------------- -------------- -------------------------------------------- -----------
Personnel 1, 2, The Group regularly reviews pay and No change
The Group may fail to recruit or retain 3 benefits
key to ensure they remain competitive. The
senior management and skilled personnel Group's senior managers participate in
in, long-term incentive plans. The Group plans
or relocate high-quality personnel to, the its human resources needs carefully,
jurisdictions in which it operates or including
seeks appropriate local recruitment, when it
to expand. bids for overseas projects.
Following the decision to leave the EU, The Group has the ability to recruit EU
the nationals in its Amsterdam office or could
UK Government has made some proposals open further offices in other EU
regarding jurisdictions
EU nationals living and working in the UK if necessary.
but
their position has not been fully
resolved.
This uncertainty could impact the Group's
ability
to recruit and retain EU nationals in the
UK.
------------------------------------------- -------------- -------------------------------------------- -----------
CORPORATE RESPONSIBILITY
The John Laing Group remains committed to its corporate
responsibility agenda. We are proud of the fact that many of the
projects we invest in or have invested in have a positive
environmental and/or social impact. These include:
-- Renewable energy projects (wind farms, solar farms, biomass
and energy-from-waste) which help to reduce CO(2) emissions;
-- Waste processing plants which divert waste away from landfill;
-- Electric rolling stock and light rail transit systems which
help to reduce inner city pollution;
-- Social housing projects; and
-- Hospitals.
The Company encourages staff in each of its three core
geographical regions to involve themselves in activities that
benefit their local communities, both related and unrelated to
projects John Laing might invest in. Amounts raised by John Laing
employees through charitable activities are frequently matched by
the John Laing Charitable Trust (JLCT), a registered charitable
trust which is independent of the Company. During 2018, to
celebrate 170 years since John Laing was founded, JLCT plans to
increase its donations to staff and project initiatives to up to
GBP1.5 million.
John Laing is an internationally diverse group. The number of
staff located outside the UK has been growing and now stands at 40%
of our 165 employees at 30 June 2018. In terms of nationality, some
40% are British; the other 100 or so employees come from
approximately 25 other nationalities.
The Group recognises it has further work to do on gender
diversity. Our overall gender balance was 27% female, 73% male at
30 June 2018. In our central functions (largely UK-based), the
split is more even at 41% female, 59% male. We have therefore been
focusing in particular on redressing the balance outside the UK by
taking a number of positive steps and are pleased that the number
of female staff being hired has been increasing. Further
initiatives, including "unconscious bias" training and mentoring
for female staff across the Group, are being rolled out in the
second half of the year.
Related party transactions
Related party transactions are disclosed in note 16 to the
Condensed Group Financial Statements.
There have been no other related party transactions in the first
six months of the financial year or the comparative period in 2017
that have had a material effect on the financial position or
performance of the Group.
Going concern
The Group has committed corporate banking facilities which
mature in July 2023 and has sufficient resources available to meet
its committed capital requirements, investment commitments and
operating costs for the foreseeable future. Accordingly, the
Directors continue to adopt the going concern basis in preparing
the Condensed Group Financial Statements.
Signed on behalf of the Directors
Olivier Brousse Patrick O'D Bourke
Chief Executive Officer Group Finance Director
22 August 2018 22 August 2018
Responsibility statement
We confirm that to the best of our knowledge:
-- The Condensed Group Financial Statements have been prepared
in accordance with International Accounting Standard 34 'Interim
Financial Reporting'; and
-- The Business Review includes a fair review of the information required by:
a) the Disclosure and Transparency Rules (DTR) rule 4.2.7R,
being an indication of important events during the first six months
and a description of principal risks and uncertainties for the
remaining six months of the year; and
b) DTR rule 4.2.8R, being the disclosure of related party
transactions and changes therein.
By order of the Board
Olivier Brousse Patrick O'D Bourke
Chief Executive Officer Group Finance Director
22 August 2018 22 August 2018
INDEPENT REVIEW REPORT TO JOHN LAING GROUP PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprise the Condensed Group
Income Statement, the Condensed Group Statement of Comprehensive
Income, the Condensed Group Statement of Changes in Equity, the
Condensed Group Balance Sheet, the Condensed Group Cash Flow
Statement and the related notes 1 to 17. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review 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, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
22 August 2018
Condensed Group Income Statement
for the six months ended 30 June 2018
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Notes Unaudited Unaudited Audited
-------------------------------------------------------- ------ ------------- ------------- -------------
Net gain on investments at fair value through profit
or loss 9 197.8 54.8 166.3
Other income 5 15.3 15.0 30.4
-------------------------------------------------------- ------ ------------- ------------- -------------
Operating income 3 213.1 69.8 196.7
Administrative expenses (32.1) (27.8) (58.9)
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit from operations 181.0 42.0 137.8
Finance costs (6.7) (5.4) (11.8)
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit before tax 3 174.3 36.6 126.0
Tax (expense)/credit 6 (0.5) 0.8 1.5
-------------------------------------------------------- ------ ------------- ------------- -------------
Profit for the period attributable to the Shareholders
of the Company 173.8 37.4 127.5
-------------------------------------------------------- ------ ------------- ------------- -------------
Earnings per share (pence)
Basic 7 38.8 9.4 31.9
Diluted 7 38.3 9.2 31.5
Condensed Group Statement of Comprehensive Income
for the six months ended 30 June 2018
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------------------------------ ------------ ------------ -------------
Profit for the period 173.8 37.4 127.5
Exchange difference on translation of overseas operations - 0.1 0.1
Remeasurement of retirement benefit assets and obligations 31.0 7.6 6.4
------------------------------------------------------------ ------------ ------------ -------------
Other comprehensive income for the period 31.0 7.7 6.5
------------------------------------------------------------ ------------ ------------ -------------
Total comprehensive income for the period 204.8 45.1 134.0
------------------------------------------------------------ ------------ ------------ -------------
Condensed Group Statement of Changes in Equity
for the six months ended 30 June 2018
Share Share Other Retained
capital premium reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 1 January 2018 36.7 218.0 5.9 863.3 1,123.9
Profit for the period - - - 173.8 173.8
Other comprehensive income for the
period - - - 31.0 31.0
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive income for the
period - - - 204.8 204.8
Share-based incentives 8 - - 1.4 - 1.4
Vesting of share-based incentives 8, 12 0.2 - (2.5) 2.3 -
Net proceeds from issue of shares 13 12.2 198.3 - - 210.5
Dividend paid(1) - - - (35.2) (35.2)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 30 June 2018
(unaudited) 49.1 416.3 4.8 1,035.2 1,505.4
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
for the six months ended 30 June 2017
Share Share Other Retained
capital premium reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 1 January 2017 36.7 218.0 2.7 759.4 1,016.8
Profit for the period - - - 37.4 37.4
Other comprehensive income for the
period - - - 7.7 7.7
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive income for the
period - - - 45.1 45.1
Share-based incentives 8 - - 1.6 - 1.6
Dividend paid(1) - - - (23.1) (23.1)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 30 June 2017
(unaudited) 36.7 218.0 4.3 781.4 1,040.4
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
for the year ended 31 December 2017
Share Share Other Retained
capital premium reserves earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 1 January 2017 36.7 218.0 2.7 759.4 1,016.8
Profit for the year - - - 127.5 127.5
Other comprehensive income for the
year - - - 6.5 6.5
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive income for the
year - - - 134.0 134.0
Share-based incentives 8 - - 3.2 - 3.2
Dividends paid(1) - - - (30.1) (30.1)
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
Balance at 31 December 2017
(audited) 36.7 218.0 5.9 863.3 1,123.9
----------------------------------- ------ ------------- ------------- ------------- ------------- -------------
(1) Dividends paid:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Pence Pence Pence
Dividends on ordinary shares Unaudited Unaudited Audited
------------------------------ ----------- ----------- -------------
Per ordinary share:
* interim proposed 1.80 1.91(a) 1.91(a)
----------- ----------- -------------
* interim paid - - 1.91(a)
----------- ----------- -------------
* final proposed - - 7.17(b)
----------- ----------- -------------
* final paid 7.17(b) 6.30 6.30
----------- ----------- -------------
(a) The interim dividend for 2017 of 1.91p paid in October 2017
becomes 1.75p after adjustment for the Rights Issue.
(b) The final dividend for 2017 was originally reported in the
2017 Annual Report and Accounts as 8.70p. This was adjusted for the
Rights Issue to 7.17p and paid in May 2018.
The total estimated amount to be paid in October 2018 in respect
of the proposed interim dividend for 2018 is GBP8.8 million.
Condensed Group Balance Sheet
as at 30 June 2018
30 June 31 December
2018 2017
GBP million GBP million
Notes Unaudited Audited
-------------------------------------------------------- ------ ------------- -------------
Non-current assets
Plant and equipment 0.1 0.1
Investments at fair value through profit or loss 9 1,437.7 1,346.4
Deferred tax assets - 0.5
Retirement benefit assets 11 24.0 -
-------------------------------------------------------- ------ ------------- -------------
1,461.8 1,347.0
-------------------------------------------------------- ------ ------------- -------------
Current assets
Trade and other receivables 10.1 7.6
Cash and cash equivalents 68.4 2.5
-------------------------------------------------------- ------ ------------- -------------
78.5 10.1
-------------------------------------------------------- ------ ------------- -------------
Total assets 1,540.3 1,357.1
-------------------------------------------------------- ------ ------------- -------------
Current liabilities
Current tax liabilities (0.6) (1.4)
Borrowings (8.9) (173.2)
Trade and other payables (16.4) (17.3)
(25.9) (191.9)
-------------------------------------------------------- ------ ------------- -------------
Net current assets/(liabilities) 52.6 (181.8)
Non-current liabilities
Retirement benefit obligations 11 (7.5) (40.3)
Provisions (1.5) (1.0)
-------------------------------------------------------- ------ ------------- -------------
(9.0) (41.3)
-------------------------------------------------------- ------ ------------- -------------
Total liabilities (34.9) (233.2)
Net assets 1,505.4 1,123.9
------ ------------- -------------
Equity
Share capital 12 49.1 36.7
Share premium 13 416.3 218.0
Other reserves 4.8 5.9
Retained earnings 1,035.2 863.3
-------------------------------------------------------- ------ ------------- -------------
Equity attributable to the Shareholders of the Company 1,505.4 1,123.9
-------------------------------------------------------- ------ ------------- -------------
Condensed Group Cash Flow Statement
for the six months ended 30 June 2018
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Notes Unaudited Unaudited Audited
------------------------------------------------------ ------ ------------- ------------- -------------
Net cash outflow from operating activities 14 (44.9) (37.6) (47.3)
------------------------------------------------------ ------ ------------- ------------- -------------
Investing activities
Net cash transferred from investments held at fair
value through profit or loss 9 106.5 165.6 77.4
Purchase of plant and equipment - - (0.1)
------------------------------------------------------ ------ ------------- ------------- -------------
Net cash from investing activities 106.5 165.6 77.3
------------------------------------------------------ ------ ------------- ------------- -------------
Financing activities
Net proceeds from issue of shares 13 210.5 - -
Dividends paid (35.2) (23.1) (30.1)
Finance costs paid (6.0) (4.5) (10.0)
Proceeds from borrowings - 0.7 11.0
Repayment of borrowings (165.0) (101.0) -
------------------------------------------------------ ------ ------------- ------------- -------------
Net cash from/(used in) financing activities 4.3 (127.9) (29.1)
------------------------------------------------------ ------ ------------- ------------- -------------
Net increase in cash and cash equivalents 65.9 0.1 0.9
Cash and cash equivalents at beginning of the period 2.5 1.6 1.6
Cash and cash equivalents at end of the period 68.4 1.7 2.5
------------------------------------------------------ ------ ------------- ------------- -------------
Notes to the Condensed Group Financial Statements
for the six months ended 30 June 2018
1 General information
The Condensed Group Financial Statements of John Laing Group plc
(the Company or the Group) have been prepared as 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 greenfield infrastructure
projects.
The Condensed Group Financial Statements are presented in
Sterling and have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting, as adopted by
the European Union.
The financial information for the year ended 31 December 2017
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for that
year has been delivered to the Registrar of Companies. The
auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006. The annual financial statements of John Laing Group plc
are prepared in accordance with IFRS as adopted by the European
Union. The Condensed Group Financial Statements included in this
half-yearly financial report have been prepared in accordance with,
and contain the information required by IAS 34 Interim Financial
Reporting, as adopted by the European Union, and the disclosure
guidance and transparency rules of the Financial Conduct
Authority.
The same accounting policies, presentation and methods of
computation are followed in these Condensed Group Financial
Statements as were applied in John Laing Group plc's latest annual
audited financial statements with the exception that the Group has
adopted in these Condensed Group Financial Statements IFRS 15
Revenue from Contracts with Customers and IFRS 9 Financial
Instruments.
2 Accounting policies
Basis of preparation
The Condensed Group Financial Statements have been prepared on
the historical cost basis except for (i) the revaluation of the
investment portfolio and (ii) financial instruments that are
measured at fair value at the end of each reporting period. The
Company concluded that it meets the definition of an investment
entity set out within IFRS 10 Consolidated Financial Statements,
paragraph 27 on the following basis:
(i) as an entity listed on the London Stock Exchange, the
Company is owned by a number of investors;
(ii) the Company holds a substantial portfolio of investments in
project companies through intermediate holding companies. The
underlying projects have a finite life and the Company has an exit
strategy for its investments which is either to hold them to
maturity or, if appropriate, to divest them. Investments take the
form of equity and/or subordinated debt;
(iii) the Group's strategy is to originate, invest in, and
manage infrastructure assets. It invests in PPP and renewable
energy projects and aims to deliver predictable returns and
consistent growth from its investment portfolio. The underlying
project companies have businesses and activities that the Group is
not directly involved in. The Group's returns from the provision of
management services are small in comparison to the Group's overall
investment-based returns; and
(iv) the Group measures its investments in PPP and renewable
energy projects on a fair value basis. Information on the fair
value of investments forms part of monthly management reports
reviewed by the Group's Executive Committee, who are considered to
be the Group's key management personnel, and by its Board of
Directors.
Although the Group has a net defined benefit pension asset, IFRS
10 does not exclude companies with non-investment related assets
from qualifying as investment entities.
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
and/or subordinated debt 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".
Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future,
being a period of not less than 12 months from the date of approval
of this report. Accordingly, they continue to adopt the going
concern basis in preparing the Condensed Group Financial
Statements.
Changes in accounting policies
The Group has adopted IFRS 15 Revenue from Contracts with
Customers and IFRS 9 Financial Instruments. The adoption of IFRS 15
has had no impact on these Condensed Group Financial Statements as
the Group's principal revenue stream is the fair value movement on
investments held at FVTPL which is outside the scope of the
standard.
The Group does not hold any material financial assets not
already held at fair value and therefore credit risk is not
considered material. The Group also does not apply hedge
accounting. The adoption of IFRS 9 has therefore not had an impact
on these Condensed Group Financial Statements.
IFRS 16 Leases is effective from 1 January 2019. The adoption of
IFRS 16 will require the Group to bring its operating leases on to
the balance sheet. The Group does not have material operating
leases and therefore adopting the standard is not expected to have
a material impact. Total outstanding commitments under operating
leases at 30 June 2018 were GBP5.8 million.
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, 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 JLIF's and JLEN's
portfolios and, until late 2017, 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 following is an analysis of the Group's operating income and
profit before tax for the six months ended 30 June 2018 and 2017
and for the year ended 31 December 2017 for each segment:
Six months ended 30 June 2018
---------------------------------------------------------------------------------------------
Reportable segments
----------------------------------------------- -------------
Primary Secondary Segment Non-segmental
Investment Investment Asset Management Sub-total results Total
GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Net gain on
investments at FVTPL 180.3 16.2 - 196.5 1.3 197.8
Other income 3.0 - 12.3 15.3 - 15.3
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Operating income 183.3 16.2 12.3 211.8 1.3 213.1
Administrative
expenses (14.9) (2.7) (13.1) (30.7) (1.4) (32.1)
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Profit from operations 168.4 13.5 (0.8) 181.1 (0.1) 181.0
Finance costs (4.1) (1.0) - (5.1) (1.6) (6.7)
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Profit before tax 164.3 12.5 (0.8) 176.0 (1.7) 174.3
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Six months ended 30 June 2017
Reportable segments
----------------------------------------------- -------------
Primary Secondary Segment Non-segmental
Investment Investment Asset Management Sub-total results Total
GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
----------------------- ------------- ------------- ------------- -------------- -------------
Net gain on
investments at FVTPL 74.0 (22.9) - 51.1 3.7 54.8
Other income 1.4 - 11.9 13.3 1.7 15.0
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Operating income 75.4 (22.9) 11.9 64.4 5.4 69.8
Administrative
expenses (12.0) (2.0) (11.9) (25.9) (1.9) (27.8)
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Profit from operations 63.4 (24.9) - 38.5 3.5 42.0
Finance costs (3.5) (1.2) - (4.7) (0.7) (5.4)
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Profit before tax 59.9 (26.1) - 33.8 2.8 36.6
----------------------- ------------- ------------- ----------------- ------------- -------------- -------------
Year ended 31 December 2017
--------------------------------------------------------------------------------------------------
Reportable segments
---------------------------------------------------- -------------
Primary Secondary Segment Non-segmental
Investment Investment Asset Management Sub-total results Total
GBP million GBP million GBP million GBP million GBP million GBP million
Audited Audited Audited Audited Audited Audited
------------------ ------------------ ------------- -------------
Net gain on
investments at
FVTPL 179.9 (21.5) - 158.4 7.9 166.3
Other income 3.7 - 25.1 28.8 1.6 30.4
------------------ ------------------ ------------- ----------------- ------------- -------------- -------------
Operating income 183.6 (21.5) 25.1 187.2 9.5 196.7
Administrative
expenses (24.4) (4.4) (23.6) (52.4) (6.5) (58.9)
------------------ ------------------ ------------- ----------------- ------------- -------------- -------------
Profit from
operations 159.2 (25.9) 1.5 134.8 3.0 137.8
Finance costs (8.4) (2.2) - (10.6) (1.2) (11.8)
------------------ ------------------ ------------- ----------------- ------------- -------------- -------------
Profit before tax 150.8 (28.1) 1.5 124.2 1.8 126.0
------------------ ------------------ ------------- ----------------- ------------- -------------- -------------
Since 1 January 2018, the Group's Asset Management segment has
not charged an internal fee to the Primary Investment and Secondary
Investment segments. Therefore the segmental results for the six
months ended 30 June 2017 and for the year ended 31 December 2017
as originally reported in the 2017 Interim Accounts and the 2017
Annual Report and Accounts respectively have been restated above to
exclude this internal fee. The effect of the restatement is shown
below:
Six months ended 30 June Year ended 31 December
2017 2017
-------------------------------------------- --------------------------------------------
As previously As previously
reported Adjustment Restated reported Adjustment Restated
GBP million GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Audited Audited Audited
-------------------------- -------------- ------------- --------------
Primary Investment -
administrative expenses (18.6) 6.6 (12.0) (37.9) 13.5 (24.4)
Secondary Investment -
administrative expenses (3.6) 1.6 (2.0) (8.2) 3.8 (4.4)
Asset Management - other
income 20.1 (8.2) 11.9 42.4 (17.3) 25.1
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
For the six months ended 30 June 2018, the Group had two (six
months ended 30 June 2017 - three; year ended 31 December 2017 -
three) investments from each of which it received more than 10% of
its operating income. The operating income from the two investments
was GBP93.1 million and GBP50.9 million, all of which was reported
within the Primary Investment segment. The Group treats each
investment in a project company as a separate customer for purposes
of IFRS 8.
The Group's investment portfolio, comprising investments in
project companies and JLEN included within investments at FVTPL
(see note 9), 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.
30 June 31 December
2018 2017
GBP million GBP million
Unaudited Audited
-------------------------------- ------------- -------------
Primary Investment 636.2 580.3
Secondary Investment 623.5 613.5
-------------------------------- ------------- -------------
Portfolio valuation 1,259.7 1,193.8
Other assets and liabilities 178.0 152.6
-------------------------------- ------------- -------------
Investments at FVTPL 1,437.7 1,346.4
Retirement benefit assets 24.0 -
Other assets 78.6 10.7
-------------------------------- ------------- -------------
Total assets 1,540.3 1,357.1
-------------------------------- ------------- -------------
Retirement benefit obligations (7.5) (40.3)
Other liabilities (27.4) (192.9)
-------------------------------- ------------- -------------
Total liabilities (34.9) (233.2)
-------------------------------- ------------- -------------
Group net assets 1,505.4 1,123.9
-------------------------------- ------------- -------------
Other assets and liabilities within investments at FVTPL above
include cash and cash equivalents, trade and other receivables and
trade and other payables within recourse investment entity
subsidiaries.
In January 2018, the Group initiated an internal reorganisation
under which the Primary Investment and Asset Management teams in
each of the three core geographical regions now report to a single
regional head. The principal objective behind this revised
structure is to enable the Group to focus more effectively on value
creation in each region. Accordingly, certain regional performance
targets for 2018 have been set, principally in relation to the
investment portfolio in each region and including movement in fair
value. Additional analysis, based on the regional reorganisation,
is presented below showing net gain on investments at FVTPL and
portfolio valuation by region.
Net gain/(loss)
on investments
at FVTPL Portfolio valuation
-------------------------- ----------------------------
Six months Six months
ended ended
30 June 30 June 30 June 31 December
2018 2017 2018 2017
GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Audited
Europe 155.2 17.7 606.9 609.1
North America 20.6 5.8 336.9 283.2
Asia Pacific 18.4 29.4 306.2 291.2
Investment in JLEN (0.3) 0.4 9.7 10.3
Other 3.9 1.5 - -
-------------------- ------------ ------------ ------------ --------------
Total 197.8 54.8 1,259.7 1,193.8
-------------------- ------------ ------------ ------------ --------------
4 Seasonality
Neither operating income nor profit are impacted by
seasonality.
5 Other income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------- ------------- ------------- -------------
Fees from asset management services 12.3 13.6 26.7
Recovery of bid costs 3.0 1.4 3.7
Total other income 15.3 15.0 30.4
------------------------------------- ------------- ------------- -------------
6 Tax
The tax (expense)/credit for the period comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------------------------ ------------- ------------- -------------
Current tax:
UK corporation tax (expense)/credit - current period - (0.5) 0.5
UK corporation tax credit - prior period - 1.9 1.6
Foreign tax expense - (0.1) (0.1)
------------------------------------------------------ ------------- ------------- -------------
- 1.3 2.0
Deferred tax:
Deferred tax expense - prior period (0.5) (0.5) (0.5)
------------------------------------------------------ ------------- ------------- -------------
(0.5) (0.5) (0.5)
------------------------------------------------------ ------------- ------------- -------------
Tax (expense)/credit (0.5) 0.8 1.5
------------------------------------------------------ ------------- ------------- -------------
For the six months ended 30 June 2018, a tax rate of 19.0% has
been applied (six months ended 30 June 2017 and year ended 31
December 2017 - 19.25%).
7 Earnings per share
The calculation of basic and diluted earnings per share (EPS) is
based on the following data:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
------------------------------------------------------- ------------- ------------- -------------
Earnings
Profit for the purpose of basic and diluted EPS 173.8 37.4 127.5
Profit for the period 173.8 37.4 127.5
------------------------------------------------------- ------------- ------------- -------------
Number of shares
Weighted average number of ordinary shares for the
purpose of basic EPS 447,876,982 399,779,697 399,828,392
Dilutive effect of ordinary shares potentially issued
under share-based incentives (note 8) 5,680,493 4,843,379 5,330,145
------------------------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary shares for the
purpose of diluted EPS 453,557,475 404,623,076 405,158,537
-------------
Earnings per share (pence)
Basic 38.8 9.4 31.9
Diluted 38.3 9.2 31.5
In accordance with IAS 33 Earnings Per Share, the EPS for all
periods shown above have been calculated as if the bonus element of
the Rights Issue in March 2018 had arisen proportionately at the
start of each respective period. In the calculation of the number
of shares used to calculate EPS, the number of shares in issue (and
potentially issued for the purposes of the diluted EPS) prior to
the Rights Issue has been adjusted by a bonus factor ("the Rights
Issue bonus factor") of 0.918. This bonus factor is calculated as
follows:
Theoretical ex-rights fair value per share (pence) = 241.95 =0.918
Closing share price on the day the Rights Issue
was announced (pence) 263.60
8 Share-based incentives
Long-term incentive plan (LTIP)
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 per
share growth (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 under the LTIP was
as follows:
Number of shares
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
------------
At beginning of the period 5,258,970 3,774,330 3,774,330
Granted 1,747,340 1,557,430 1,557,430
Adjustment to awards granted in prior periods (290,747) - 35,500
Adjustment for the Rights Issue bonus factor 444,565 - -
Lapsed (380,350) (93,660) (108,290)
Vested (1,383,367) - -
------------
At end of the period 5,396,411 5,238,100 5,258,970
----------------------------------------------- ------------
In addition to the 1,383,367 shares that vested as per the table
above, a further 77,115 shares were awarded in lieu of dividends
payable since the grant date on the vested shares (see note
12).
Deferred Share Bonus Plan (DSBP)
In accordance with the DSBP, 138,987 shares were awarded on 18
April 2018 to Executive Directors and certain senior executives in
relation to that part of their annual bonus for 2017 which exceeded
60% of their base salary. Awards under the DSBP vest in equal
tranches on the first, second and third anniversary of grant,
normally subject to continued employment.
The movement in the number of shares awarded under the DSBP was
as follows:
Number of shares
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
At beginning of the period 63,121 84,439 84,439
Granted 138,987 9,762 9,762
Adjustment to awards granted in prior periods (8) 5,000 5,000
Adjustment for the Rights Issue bonus factor 5,647 - -
Vested (32,606) (36,080) (36,080)
At end of the period 175,141 63,121 63,121
In addition to the 32,606 shares that vested as per the table
above, a further 1,559 shares were awarded in lieu of dividends
payable since the grant date on the vested shares (see note
12).
The total expense recognised in the Condensed Group Income
Statement for awards granted under share-based incentive
arrangements for the six months ended 30 June 2018 was GBP1.4
million (six months ended 30 June 2017 - GBP1.6 million; year ended
31 December 2017 - GBP3.2 million). The GBP1.4 million is charged
in arriving at profit for the period and is a credit in Other
reserves in the Condensed Group Statement of Changes in Equity. An
amount of GBP2.3 million has been transferred from other reserves
to retained earnings in respect of awards granted under share-based
incentive arrangements that vested in the six months ended 30 June
2018.
Employee Benefit Trust (EBT)
On 19 June 2015, the Company established an 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 through the acquisition and distribution of
shares in the Company. The EBT is able to acquire shares in the
Company to satisfy obligations under the Company's share-based
incentive arrangements. During the six months ended 30 June 2018,
1,495,458 shares in John Laing Group plc were issued to the EBT and
after satisfying obligations under share-based incentive
arrangements for 1,494,647 shares, 811 shares remained. These
shares were held by the EBT as at 30 June 2018.
9 Investments at fair value through profit or loss
30 June 2018
Portfolio
Project Listed valuation Other assets Total investments
companies investment sub-total and liabilities at FVTPL
GBP million GBP million GBP million GBP million GBP million
Unaudited Unaudited Unaudited Unaudited Unaudited
Opening balance 1,183.5 10.3 1,193.8 152.6 1,346.4
Distributions (17.1) (0.3) (17.4) 17.4 -
Investment in equity and loans 130.9 - 130.9 (130.9) -
Realisations (241.5) - (241.5) 241.5 -
Fair value movement 194.2 (0.3) 193.9 3.9 197.8
Net cash transferred from investments
held
at FVTPL - - - (106.5) (106.5)
Closing balance 1,250.0 9.7 1,259.7 178.0 1,437.7
The total fair value movement in the six months ended 30 June
2018 of GBP197.8 million includes the gain on disposal of the
Group's investment in IEP Phase 1.
31 December 2017
Portfolio Total
Project Listed valuation Other assets investments
companies investment sub-total and liabilities at FVTPL
GBP million GBP million GBP million GBP million GBP million
Audited Audited Audited Audited Audited
Opening balance 1,165.9 10.0 1,175.9 81.6 1,257.5
Distributions (39.6) (0.6) (40.2) 40.2 -
Investment in equity and loans 209.9 - 209.9 (209.9) -
Realisations (289.0) - (289.0) 289.0 -
Proceeds received on acquisition of
investment
in Manchester Waste VL Co by GMWDA (23.5) - (23.5) 23.5 -
Fair value movement 159.8 0.9 160.7 5.6 166.3
Net cash transferred from investments held
at FVTPL - - - (77.4) (77.4)
Closing balance 1,183.5 10.3 1,193.8 152.6 1,346.4
Six months ended 30 June 2018
During the six months ended 30 June 2018, the Group disposed of
shares and subordinated debt in two PPP project companies. Total
proceeds were GBP241.5 million.
Details of investments sold in the period ended 30 June 2018 are
as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
Acquired by John Laing Infrastructure Fund Limited
(JLIF)
Regenter Myatts Field North Holdings Company
Limited 30 May 2018 50.0 50.0 -
Sold to other parties
Agility Trains West (Holdings) Limited 18 May 2018 15.0 15.0 -
Year ended 31 December 2017
During the year ended 31 December 2017, the Group disposed of
shares and subordinated debt in eight PPP and renewable energy
project companies for GBP289.0 million (including GBP1.9 million
deferred to 2018). In addition, the Group's shareholding in Viridor
Laing (Greater Manchester) Limited was acquired by the Greater
Manchester Waste Development Authority (GMWDA) for GBP23.5
million.
Details were as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
Acquired by John Laing Environmental Assets Group
Limited (JLEN)
Llynfi Afan Renewable Energy Park (Holdings) 12 December
Limited 2017 100.0 100.0 -
Acquired by John Laing Infrastructure Fund Limited
(JLIF)
Aylesbury Vale Parkway Limited 20 October 2017 50.0 50.0 -
City Greenwich Lewisham Rail Link plc 20 October 2017 5.0 5.0 -
Croydon & Lewisham Lighting Services (Holdings)
Limited 1 June 2017 50.0 50.0 -
John Laing Rail Infrastructure Limited 20 October 2017 100.0 100.0 -
Rail Investments (Great Western) Limited* 26 October 2017 80.0 30.0 50.0
Acquired by GMWDA
28 September
Viridor Laing (Greater Manchester) Limited 2017 50.0 50.0 -
Sold to other parties
Gdansk Transport Co. SA 2 March 2017 29.69 29.69 -
MAK Mecsek Autopálya Koncessziós Zrt. 29 March 2017 30.0 30.0 -
* This entity held a 30% interest in IEP Phase 1 at the time of
this disposal.
10 Financial instruments
The Group held the following financial instruments by category
at 30 June 2018.
Financial
liabilities
at
Cash and Loans and Assets at amortised
cash equivalents receivables FVTPL cost Total
GBP million GBP million GBP million GBP million GBP million
Fair value measurement method n/a Level 1 / n/a
n/a 3 *
30 June 2018 (unaudited)
Non-current assets
Investments at FVTPL - - 1,437.7 - 1,437.7
Current assets
Trade and other receivables - 8.2 - - 8.2
Cash and cash equivalents 68.4 - - - 68.4
------------ ------------
Total financial assets 68.4 8.2 1,437.7 - 1,514.3
Current liabilities
Borrowings - - - (8.9) (8.9)
Trade and other payables - - - (15.4) (15.4)
------------ ------------
Total financial liabilities - - - (24.3) (24.3)
------------ ------------
Net financial instruments 68.4 8.2 1,437.7 (24.3) 1,490.0
------------ ------------
Financial
liabilities
at
Cash and Loans and Assets at amortised
cash equivalents receivables FVTPL cost Total
GBP million GBP million GBP million GBP million GBP million
Fair value measurement method n/a Level 1 / n/a
n/a 3 *
31 December 2017 (audited)
Non-current assets
Investments at FVTPL - - 1,346.4 - 1,346.4
Current assets
Trade and other receivables - 6.9 - - 6.9
Cash and cash equivalents 2.5 - - - 2.5
Total financial assets 2.5 6.9 1,346.4 - 1,355.8
Current liabilities
Borrowings - - - (173.2) (173.2)
Trade and other payables - - - (16.5) (16.5)
Total financial liabilities - - - (189.7) (189.7)
Net financial instruments 2.5 6.9 1,346.4 (189.7) 1,166.1
* The investments at FVTPL are split between: Level 1, JLEN,
which is a listed investment fair valued at GBP9.7 million (31
December 2017 - GBP10.3 million) using a quoted market price and
Level 3 investments in project companies fair valued at GBP1,250.0
million (31 December 2017 - GBP1,183.5 million). Level 1 and Level
3 investments are fair valued in accordance with the policy and
assumptions set out below. The investments at FVTPL include other
assets and liabilities as shown in note 9. Such other assets and
liabilities are recorded at amortised cost which the Directors
believe approximates to their fair value.
The table above provides 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 have been no transfers of financial instruments between
levels of the fair value hierarchy. There are no non-recurring fair
value measurements.
The investments at FVTPL, whose fair values include the use of
Level 3 inputs, are valued by discounting future cash flows from
investments in both equity (dividends and equity redemptions) and
subordinated loans (interest and repayments) to the Group at an
appropriate discount rate. 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, a risk premium is added to reflect the additional risk
during the construction phase. This premium reduces over time as
the project progresses through its construction programme,
reflecting the significant reduction in risk once the project
reaches the operating stage. The weighted average discount rate
applied as at 30 June 2018 was 8.7% (31 December 2017 - 8.8%). The
discount rate is considered the most significant unobservable input
through which an increase or decrease would have a material impact
on the fair value of the investments at FVTPL. As at 30 June 2018,
an increase of 0.25% in the discount rate would decrease the fair
value of the investments by GBP42.6 million (31 December 2017 -
GBP40.7 million) and a decrease of 0.25% in the discount rate would
increase the fair value of the investments by GBP44.8 million (31
December 2017 - GBP42.6 million).
Investments denominated in foreign currency are fair valued
based on the spot exchange rate on the balance sheet date. As at 30
June 2018, a 5% movement of each relevant currency against Sterling
would decrease or increase the value of investments in overseas
projects by c.GBP40 million (31 December 2017 - c.GBP38
million).
Based on a sample of five of the larger PPP investments by value
at 30 June 2018, a 0.25% increase in inflation is estimated to
increase the value of PPP investments by c.GBP16 million and a
0.25% decrease in inflation is estimated to decrease the value of
PPP investments by c.GBP15 million. Certain of the underlying
project companies incorporate some inflation hedging.
Based on a sample of six of the larger renewable energy
investments by value at 30 June 2018, a 5% increase in power price
forecasts is estimated to increase the value of renewable energy
investments by c.GBP9.4 million and a 5% decrease in power price
forecasts is estimated to decrease the value of renewable energy
investments by c.GBP9.5 million.
For all of the above sensitivities on the portfolio value as at
30 June 2018, the Group's profit before tax would be impacted by
the same amounts described above. There would be no additional
impact on equity.
The carrying amounts of other financial assets and financial
liabilities recorded in these financial statements are
approximately equal to their fair values.
11 Retirement benefit ASSETS/(obligations)
The Group operates two defined benefit pension schemes in the UK
(the Schemes) - The John Laing Pension Fund (JLPF) and The John
Laing Pension Plan (the Plan). The Group also provides
post-retirement medical insurance benefits to 57 former employees.
This scheme, which was closed to new members in 1991, is
unfunded.
30 June 31 December
2018 2017
GBP million GBP million
Unaudited Audited
Pension schemes 24.0 (32.3)
Post-retirement medical benefits (7.5) (8.0)
Net retirement benefit assets/(obligations) 16.5 (40.3)
Analysis of the movement in the net surplus/(deficit) on the
Schemes during the period:
30 June 31 December
2018 2017
GBP million GBP million
Unaudited Audited
Opening deficit in Schemes (32.3) (61.3)
Current service cost (0.6) (1.3)
Finance cost (0.2) (1.1)
Contributions 26.5 24.7
Remeasurement gain 30.6 6.7
Closing surplus/(deficit) in Schemes 24.0 (32.3)
During the six months ended 30 June 2018, the Group made deficit
reduction contributions of GBP26.5 million in cash.
The financial assumptions used in the valuation of JLPF and the
Plan under IAS 19 were:
30 June 31 December
2018 2017
% %
Unaudited Audited
Discount rate 2.75 2.50
Rate of increase in non-GMP pensions in payment 3.00 3.00
Rate of increase in non-GMP pensions in deferment 2.00 2.00
Inflation - RPI 3.10 3.10
Inflation - CPI 2.00 2.00
The major categories and fair value of assets held by the
Schemes were as follows:
30 June 31 December
2018 2017
GBP million GBP million
Unaudited Audited
Bonds and other debt instruments 501.5 434.2
Equity instruments 403.8 405.8
Aviva bulk annuity buy-in agreement 220.6 231.0
Property 2.4 2.1
Cash and cash equivalents 16.6 82.9
Total market value of assets 1,144.9 1,156.0
12 Share capital
30 June 31 December
2018 2017
No. No.
Unaudited Audited
Authorised:
Ordinary shares of GBP0.10 each 490,775,636 366,960,134
30 June 2018 31 December 2017
No. GBP million No. GBP million
Allotted, called up and fully paid: Unaudited Unaudited Audited Audited
At beginning of the period 366,960,134 36.7 366,923,076 36.7
Issued under Rights Issue 122,320,044 12.2 - -
Issued under LTIP 1,383,367 -
Issued under LTIP - granted in lieu
of dividends payable 77,115 -
Issued under DSBP 32,606 36,080
Issued under DSBP - granted in lieu
of dividends payable 1,559 978
Retained by EBT 811 -
Issued under share-based incentive arrangements
- total 1,495,458 0.2 37,058 -
At end of the period 490,775,636 49.1 366,960,134 36.7
The Company has one class of ordinary shares which carry no
right to fixed income.
As shown in the table above, during the six months ended 30 June
2018, 122,320,044 shares were issued as part of the Rights Issue in
March 2018. Additionally 1,495,458 shares were issued to the EBT to
satisfy awards vesting under share-based incentive arrangements
(see note 8). Of these, 1,460,482 (2017 - nil) shares were issued
under the Group's LTIP and 34,165 (2017 - 37,058) shares were
issued under the Group's DSBP. As at 30 June 2018, 811 shares were
retained by the EBT.
13 SHARE PREMIUM
30 June 31 December
2018 2017
GBP million GBP million
Unaudited Audited
Opening balance 218.0 218.0
Share premium on Rights Issue 204.3 -
Costs of Rights Issue (6.0) -
Closing balance 416.3 218.0
In March 2018, the Company undertook a one for three Rights
Issue. 122,320,044 shares of GBP0.10 each were issued at 177p per
share raising GBP216.5 million in total, represented by GBP12.2
million of nominal share capital (see note 12) and GBP204.3 million
of share premium.
14 Net cash outflow from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
-------------
Profit before tax 174.3 36.6 126.0
Adjustments for:
Finance costs 6.7 5.4 11.8
Unrealised profit arising on changes in fair value of investments
(note 9) (197.8) (54.8) (166.3)
Depreciation of plant and equipment 0.1 0.2 0.3
Share-based incentives expense 1.4 1.6 3.2
IAS 19 pension service cost 0.6 0.6 1.3
Contribution to JLPF (26.5) (24.5) (24.7)
Increase/(decrease) in provisions 0.5 - (0.5)
------------
Operating cash outflow before movements in working capital (40.7) (34.9) (48.9)
(Increase)/decrease in trade and other receivables (1.6) 0.2 0.6
(Decrease)/increase in trade and other payables (2.6) (2.9) 1.0
------------
Net cash outflow from operating activities (44.9) (37.6) (47.3)
------------
15 Commitments
At 30 June 2018, the Group had future equity and loan
commitments in PPP and renewable energy projects of GBP250.9
million (31 December 2017 - GBP335.4 million) backed by letters of
credit of GBP116.5 million (31 December 2017 - GBP202.3 million)
and cash collateral of GBP134.4 million (31 December 2017 -
GBP133.1 million).
At 30 June 2018, there were also contingent commitments,
performance and bid bonds of GBP3.0 million (31 December 2017 -
GBP7.5 million).
16 Transactions with related parties
Details of transactions between the Group and its related
parties are disclosed below.
Transactions with non-recourse entities
The Group entered into the following trading transactions with
non-recourse project companies in which the Group holds
interests:
Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
For the period ended:
Services income* 5.9 3.7 9.3
Balances as at:
Amounts owed by project companies 1.2 0.7 3.0
Amounts owed to project companies (0.6) (0.6) (0.6)
------------
* Services income is earned from project companies through
management services agreements and recoveries of bid costs on
financial close.
Transactions with recourse subsidiary entities held at FVTPL
Six months Six months Year
ended ended ended
or as at or as at or as at
30 June 30 June 31 December
2018 2017 2017
GBP million GBP million GBP million
Unaudited Unaudited Audited
For the period ended:
Management charge payable to the Group by recourse subsidiary
entities held at FVTPL - - 27.1
Net interest receivable by the Group from recourse subsidiary
entities held at FVTPL - - 0.7
Net cash transferred from investments held at FVTPL (note
9) 106.5 165.6 77.4
Balances as at:
Net amounts owed to the Group by recourse subsidiary entities
held at FVTPL 140.4 41.8 48.9
Transactions with other related parties
There were no transactions with other related parties during the
six months ended 30 June 2018.
17 Events after balance sheet date
In August 2018, the Group committed GBP30.0 million for a 100%
shareholding in the Fox Creek and Brantley solar farm projects in
North Carolina.
Since 30 June 2018, the Group has declared an interim dividend
of 1.80p per share, payable on 26 October 2018 to shareholders on
the register on 28 September 2018.
In July 2018, the Group refinanced its existing borrowing
facilities, including additional liquidity facilities, and entered
into new facilities totalling GBP650 million, of which GBP500
million is committed until July 2023 and GBP150 million for 18
months until January 2020.
On 3 August 2018, the Board of JLIF recommended a cash offer for
its entire issued share capital from a consortium comprising funds
managed by Dalmore Capital Limited and Equitix Investment
Management Limited at 142.5p per share plus a dividend of 3.57p per
share for the six months ended 30 June 2018. The offer is expected
to become effective in late September/early October 2018. During
this period, the Group expects to discuss with the acquiring
consortium the future of its asset management services to JLIF.
Other than transactions in the normal course of business, there
were no other significant subsequent events.
Dividend timetable
The interim dividend is proposed to be paid on 26 October 2018
to holders of ordinary shares on the register on 28 September 2018.
The ex-dividend date will be 27 September 2018.
DIRECTORS AND ADVISERS
DIRECTORS AND ADVISERS Executive DIRECTORS Auditors
Olivier Brousse EP ENPC Deloitte LLP
Chief Executive Officer Statutory Auditor
Patrick O'D Bourke MA ACA 1 New Street Square
Group Finance Director London EC4A 3BZ
Non-executive directors Solicitors
Will Samuel BSc BA FCA Freshfields Bruckhaus Deringer LLP
Chairman 65 Fleet Street
Andrea Abt MBA London EC4Y 1HS
Anne Wade BA MSc Independent valuers
David Rough BSc Hons KPMG LLP
Jeremy Beeton CB BSc CEng FICE 15 Canada Square
Toby Hiscock MA (Oxon) FCA London E14 5GL
Company secretary Registrars
David Gormley Equiniti
Interim Company Secretary Aspect House
Registered office Spencer Road
1 Kingsway Lancing
London WC2B 6AN West Sussex
BN99 6DA
PRINCIPAL GROUP BANKERS Barclays Bank Plc ABN Amro Bank NV
1 Churchill Place London E14 5HP Hsbc Bank Gustav Mahlerlaan 10
Plc 71 Queen Victoria Street London EC4V 1082 PP Amsterdam
4AY Australia And New Zealand Banking Group The Netherlands
Limited 40 Bank Street London E14 5EJ Mufg
Bank, Limited Ropemaker Place 25 Ropemaker AIB Group (UK) PLC
Street London EC2Y 9AN Sumitomo Mitsui St Helen's
Banking Corporation 99 Queen Victoria Street 1 Undershaft
London EC4V 4EH Crédit Agricole Corporate London EC3A 8AB
And Investment Bank Broadwalk House 5 Appold
Street London EC2A 2DA National Australia Bank
88 Wood Street
London EC2V 7QQ
Joint Stockbrokers
Barclays Bank PLC
5 The North Colonnade
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
John Laing Group plc
Registered Office:
1 Kingsway
London
WC2B 6AN
United Kingdom
Registered No. 5975300
Tel: +44 (0)20 7901 3200
Fax: +44 (0)20 7901 3520
www.laing.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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END
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