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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| John Laing Group Plc | LSE:JLG | London | Ordinary Share | GB00BVC3CB83 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 402.60 | 402.60 | 402.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMJLG
RNS Number : 6867Y
John Laing Group plc
07 March 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
John Laing Group plc
RESULTS FOR THE YEARED 31 DECEMBER 2016
John Laing Group plc (John Laing or the Company or the Group) announces its audited results for the year ended 31 December 2016.
Highlights
-- 14.3% increase in Net Asset Value (NAV), from GBP889.6 million at 31 December 2015 to GBP1,016.8 million
-- NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p) -- New investment commitments of GBP181.9 million (2015 - GBP180.5 million) -- Realisations of GBP146.6(1) million from the sale of investments -- Profit before tax of GBP192.1 million compared to GBP106.6 million (pro forma) in 2015(2) -- Earnings per share of 51.9p (2015 - 27.6p pro forma) -- 30% increase in external Assets under Management (AuM) to GBP1,472 million(3) -- Cash yield from investment portfolio of GBP34.8 million (2015 - GBP38.9 million)
-- Continuing international growth including the Group's first offshore wind farm investment and first renewable energy investment in the US
-- Final dividend of 6.3p per share in line with policy (including a special dividend of 2.6p per share), giving a total 2016 dividend of 8.15p (2015 - total dividend of 6.9p)
Olivier Brousse, John Laing's Chief Executive Officer, commented:
"2016 has been another good year for John Laing with strong growth in NAV and dividends. Our origination platform is working well as shown by our increasingly diversified and growing pipeline of opportunities, while our portfolio of projects under construction is well balanced and actively managed by experienced teams, allowing us to deliver steady results. We are well organised and positioned to take advantage of future opportunities in order to continue to move our business forward while controlling our costs and our risks. "
Notes:
1. Realisations include GBP19.5 million in respect of British Transport Police and Oldham Housing transactions which counted towards guidance for 2015.
2. Profit before tax from continuing operations of GBP192.1 million (2015 - GBP100.9 million) and from discontinued operations of GBPnil (2015 - GBP5.7 million).
3. External AuM based on published portfolio values of JLIF and JLEN at 30 September 2016.
A presentation for analysts and investors will be held at 9:00am (London time) today at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. A conference call facility will also be available using the dial-in details below.
Conference call dial in details:
UK: 020 3059 8125
Other locations: +44 (0) 20 3059 8125
Participant password: John Laing Conference Call
Participant URL for live access to the on-line presentation:
http://www.investis-live.com/john-laing/58b6c29a146fbc10004bcf54/gfasdgdafg
A copy of the presentation slides will be available at www.laing.com later today.
Analyst/investor enquiries:
Olivier Brousse, Chief Executive Officer +44 20 7901 3200 Patrick O'D Bourke, Group Finance Director +44 20 7901 3200 Tom Randell, Head of Investor Relations and Communications +44 20 7901 3200 Media enquiries: James Isola, Maitland +44 20 7379 5151
This announcement may contain forward looking statements. It has been made by the Directors of John Laing in good faith based on the information available to them up to the time of their approval of this announcement and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.
Chairman's Statement
Last year, we stated that "looking forward, we have confidence in the robustness of our business model and the deliverability of our strategy". Our results for 2016 confirm that confidence, in what has been a year of political and economic turbulence.
When facing an uncertain environment, we believe in keeping our strategy simple, focused and flexible. In 2016, we simplified our business through the disposal of our non-core Project Management Services (PMS) activities in the UK. This allows management to concentrate on the core tasks of origination of greenfield projects, active management of construction and operational risk and timely realisations in order to monetise value. Our focus remains on PPP infrastructure and renewable energy in Asia Pacific, Europe and North America. Our pipeline is strong and diversified by sector and geography, which gives us flexibility in origination, and the funds we manage and the active secondary market give us flexibility in distribution.
Our performance in 2016 was strong:
-- Net Asset Value (NAV) grew by 14.3% to GBP1,016.8 million or 277p per share at 31 December 2016, from GBP889.6 million or 242p per share at 31 December 2015;
-- Investment commitments reached GBP182 million, in line with our guidance;
-- Realisations of investments for dividend purposes were GBP127 million, ahead of our guidance for 2016 of approximately GBP100 million;
-- Our total external Assets under Management grew to GBP1,472 million, an increase of 30%; and
-- We are proposing a final dividend for 2016 of 6.3p per share made up of a base dividend of 3.7p per share and a special dividend of 2.6p per share.
Our three core markets all saw continued strong demand for new privately-financed infrastructure projects. Using our experienced teams, sector specialists and working with local partners, we have committed capital to both PPP and renewable energy in all three regions, and increasingly also see prospects in related infrastructure sectors, for instance in the water or broadband sectors.
During the year, the markets in which we are active continued to be affected by significant movements in macro-economic factors. In particular, the Brexit vote in June 2016 precipitated a prolonged weakening of Sterling versus the major currencies we invest in. While this has been positive for the value of our overseas investment portfolio in Sterling terms, our preference would be for a more stable foreign exchange environment. At a governmental level, there are signs that a number of countries are moving towards fiscal rather than monetary policy in order to stimulate economic growth. We would agree that increased infrastructure expenditure is a good way to provide such fiscal stimulus and in some of the jurisdictions we operate in, notably Australia and Canada, we see it already happening. Other countries - including the UK and the US - look as if they could follow suit.
No changes to the Board took place during the year. At a senior management level, Derek Potts, Group Managing Director of Primary Investment, has decided to retire, and will leave us at the end of March 2017. Derek originally joined John Laing in 2001. He has had responsibility for all the Group's bidding and primary investment activities and has been instrumental in leading the Group's expansion into international markets and new sectors. During his time with the Group, he has made an exceptional contribution and we are very sorry to see him go.
During the year under review, the Board complied with all applicable provisions of the UK Corporate Governance Code (the Code). We have a balanced group of directors who worked well as a board during the year. With the impending retirement of Derek Potts, we reviewed our succession plans and I was encouraged to see much promise among our senior management team. As well as regular Board meetings, we held reviews in June and in October 2016 to address the future strategy and direction of the business. These reconfirmed our commitment to creating further shareholder value through the continued application of our current business model.
As Chairman, I interact regularly with many members of staff both from overseas and the UK and, on behalf of the Board, I would like to thank all of them for their contribution to these results. I would also like to extend the Board's thanks to all the Group's stakeholders for their continued support.
Our dividend policy has two parts:
-- a base dividend of GBP20 million (starting from 2015) growing at least in line with inflation; the Board is recommending a final base dividend for 2016 of 3.7p per share; and
-- a special dividend of approximately 5% - 10% of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year. The Board is recommending a special dividend for 2016 of 2.6p per share. This has been arrived at by applying 7.5% to realisations for dividend purposes of GBP127 million achieved in 2016, which exclude the combined proceeds of GBP19.5 million from the disposals of our shareholdings in British Transport Police and Oldham Housing.
The total final dividend therefore amounts to 6.3p per share, which, together with the interim dividend of 1.85p paid in October 2016, makes a total dividend for 2016 of 8.15p per share, an increase of 7% over 2015, after taking into account the timing of the IPO in February 2015. The final dividend will be put to shareholders for their approval at the Company's Annual General Meeting (AGM) which will be held on 11 May 2017. At the Company's AGM on 12 May 2016, all resolutions were approved by shareholders.
There are positive signs in each of our core infrastructure markets of a strong level of deal flow over the coming years. With our flexible business model and our strong geographical presence, we believe we are well positioned to take advantage of the opportunities this will create.
Phil Nolan
Chairman
Chief Executive Officer's Review
2016 was our first full year since our IPO in February 2015 and I am delighted to report that we continued to deliver strong results.
The highlights included:
-- 14.3% increase in NAV, from GBP889.6 million at 31 December 2015 to GBP1,016.8 million; -- NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p); -- New investment commitments of GBP181.9 million in six different countries; -- Realisations of GBP146.6 million from the sale of assets; -- Profit before tax of GBP192.1 million compared to GBP106.6 million in 2015; -- 30% increase in external Assets under Management (AuM) to GBP1,472 million; -- Cash yield from investment portfolio of GBP34.8 million (2015 - GBP38.9 million); and -- Sale of UK activities of Project Management Services (PMS).
Outlook for our markets
As I have said before, we operate in an international market for new infrastructure primarily driven by population growth, urbanisation and climate change. Population growth and urbanisation create the need for new infrastructure, particularly in transport and in social infrastructure such as healthcare. Equally, climate change is the catalyst behind new infrastructure in the renewable energy, waste management and water sectors.
In addition, there are strong drivers for public sector authorities to involve the private sector in the procurement of new infrastructure, including risk transfer, funding and access to the best international contractors and investors. As a recognised international greenfield infrastructure expert, we target all the above sectors and therefore benefit from the overall growth in public-private infrastructure.
In Primary Investment, we continue to see a robust and diverse pipeline of future opportunities in each of the three regions where we currently operate: Asia Pacific (Australia and New Zealand); North America (Canada and the US); and Europe. We entered 2017 with an increased level of activity and strong positions in eight short-listed PPP consortia and with a number of exclusive renewable energy opportunities.
-- Asia Pacific: we remain very active in the PPP markets in both Australia and New Zealand. In Australia, the renewable energy sector continues to grow and gain momentum following resolution of the Federal Renewable Energy Target in 2015 and our team is taking advantage of this.
-- Europe: even if the overall PPP market remains subdued, we focus our attention on those countries which are bringing projects to market, such as the Netherlands, the Republic of Ireland, Germany, Norway, the Czech Republic and potentially the UK where we believe the current government will announce new PPP projects. Many of the opportunities are in the transport sector, which fits well with our credentials. In renewable energy, the level of activity remains high, with attractive risk-return profiles. We concentrate on selected countries with governmental support mechanisms in order to reduce energy price exposure.
-- North America: four of our eight shortlisted PPP positions are for potential investments in North America. In Canada, we see a strong commitment to PPP from federal and local authorities, especially in Ontario and British Columbia, mainly in the transport sector. In the US, we concentrate on those states where we see a growing pipeline of PPP opportunities particularly in the transport sector and potentially the water sector. During the year, we made our first investment in renewable energy, a wind farm project in New Mexico. Overall, our reputation in North America is growing, leading to more opportunities to join consortia for new projects. This bodes well for the future, especially when considering the obvious needs in the US for new infrastructure.
Beyond the PPP and renewable energy markets, we continue to research other asset classes that look as if they could fit our business model in order to feed future growth. The due diligence we carry out before investing in new markets follows a rigorous process that eventually rules out many opportunities. Currently, we are reviewing: broadband, driven in Europe by the EU directive to see 100% high speed coverage by 2025; water resource management, driven by climate change; and energy storage, driven by the changing way in which electricity is generated across transmission and distribution networks. We expect these sectors to offer a number of investment opportunities in the future.
Active management
During the year, we demonstrated again why we believe it is essential for us to be an active investor. For us, it means not only participating actively in consortia at the bidding stage, but also being actively involved in project companies during the construction phase in order to protect our investment and help when delays occur or problems arise:
-- In South Australia, our team has been particularly active in helping the New Royal Adelaide Hospital project company to resolve the sometimes competing priorities of the Government of South Australia, the bank lending consortium and the construction contractor. This situation has arisen principally because technical completion of the hospital has been delayed, having been scheduled for April 2016. Following mediation discussions in late 2016 and early 2017, the parties are now working towards technical completion later this month (March 2017) followed by commercial acceptance three months later; it is intended that remaining disputes will be dealt with through a process of arbitration. The Government of South Australia is making the necessary preparations for the hospital to be ready to open for patients before the peak of the winter flu season.
-- At Manchester Waste VL Co, the project's operational performance is good; it has been achieving diversion of waste from landfill ahead of contractual requirements. The Greater Manchester Waste Disposal Authority (GMWDA) has indicated it wants to achieve cost savings and efficiencies. While the project company had proposed that such savings could be achieved within the existing contractual structure, this has not been accepted by the GMWDA. Separately, the GMWDA has challenged aspects of the operational service levels provided by the project company and the operator; this is strongly refuted by the project company and the matter is being addressed through an independent third party under the procedures in the project agreement with a decision due at the end of March 2017. The project company believes there will be a resolution with the GMWDA. If, as part of this, the GMWDA were to seek to take the project into public ownership, this would only be acceptable to the project company if it resulted in appropriate compensation for all stakeholders. The project company is working with its shareholders, John Laing and Viridor, to protect the value of the equity in the project and also to minimise any impact on Manchester Waste TPS Co which is contractually linked to Manchester Waste VL Co.
For both investments, we have taken account of current developments in our portfolio valuation at 31 December 2016. Taken together, the investments in New Royal Adelaide Hospital and Manchester Waste VL Co, which are not linked, make up approximately 8% of our investment portfolio of GBP1,176 million.
Wherever we operate, we believe our investing, contracting and banking partners appreciate and value the investment experience and active management we provide. We continue to make good use of this expertise to monitor and guide our investments through construction while protecting the investment base cases and where appropriate seeking to find additional value.
Business model
Our business model has three key areas of activity:
-- Primary Investment: we source, originate, bid for and win greenfield infrastructure projects, typically as part of a consortium in the case of PPP projects. Our Primary Investment portfolio comprises interests in infrastructure projects which are in the construction phase.
-- Secondary Investment: we own a substantial portfolio of investments in operational infrastructure projects, almost all of which were previously part of our Primary Investment portfolio.
-- Asset Management: we actively manage our own Primary and Secondary Investment portfolios and provide investment advice and asset management services to two external funds, John Laing Infrastructure Fund (JLIF) and John Laing Environmental Assets Group (JLEN), through John Laing Capital Management Limited (JLCM), which is regulated by the Financial Conduct Authority (FCA), as well as in respect of a small number of PPP assets held by John Laing Pension Fund (JLPF).
Our business model is based on our specialist infrastructure investment and asset management capabilities and the increasing recognition of operational infrastructure assets as an attractive investment class.
We aim to invest in new greenfield infrastructure projects which, post-construction, produce long-term predictable cash flows that meet our rate of return targets. The projects we invest in are held within special purpose vehicles (SPVs) which we (often in conjunction with other investors) fund with equity, and which are structured so that providers of third party debt finance have no contractual recourse to equity investors beyond their equity commitment.
When investments become part of our Primary Investment portfolio, their value should grow progressively with a relatively high degree of predictability as the underlying assets move through the construction phase and their risk correspondingly reduces. Once the projects reach the operational stage, investments move from our Primary to our Secondary Investment portfolio where they can be held to maturity or sold to secondary market investors, who are targeting a lower rate of return consistent with the reduction in risk.
Our asset management activities focus on management and reduction of project risks, especially during the construction phase, and enhancement of project cash flows. The latter involves identifying and implementing value enhancement initiatives that can increase future cash flows to investors compared to those originally forecast at the start of the project. We look at a wide range of such value enhancements. Opportunities may arise at any time during a project's life and may vary significantly from one investment to another.
Objectives and outcomes
Our overall strategy is to create value for shareholders by originating, investing in and managing infrastructure assets internationally. In that respect, we see NAV growth and dividends as key measures of our success. In 2016, our NAV grew by 14.3% from GBP889.6 million at 31 December 2015 to GBP1,016.8 million at 31 December 2016. We are proposing dividends of 8.15p per share in total for 2016 compared to dividends of 6.9p per share for 2015. This represents growth of 7% over 2015, once the 2015 base dividend is adjusted to reflect the timing of our IPO in February 2015.
To deliver our strategy, we have set ourselves the core objectives below, while maintaining the discipline and analysis required to mitigate against the delivery, revenue and operational risks associated with infrastructure projects:
-- growth in primary investment volumes (new investment capital committed to greenfield infrastructure projects) over the medium term;
-- growth in the value of external Assets under Management (AuM) and related fee income; and
-- management and enhancement of our investment portfolio, with a clear focus on active management during construction, accompanied by realisations of investments which, combined with our corporate banking facilities and operational cash flows, enable us to finance new investment commitments.
Growth in primary investment volumes over the medium term
We operate in a broad market for new infrastructure with a strong pipeline of future opportunities.
Throughout the year, we maintained a disciplined approach to making new investments. Using detailed financial analysis and investment appraisal processes, we assess the specific risk profiles for each prospective investment with the aim of optimising risk-adjusted returns and securing only those new investments which are likely to meet the investment appetites of secondary market investors when the underlying assets become operational.
Our resources are concentrated on countries or geographical regions carefully selected against five key criteria:
-- a stable political and legal framework; -- a commitment to the development of privately-financed infrastructure; -- the ability to form relationships with strong supply chain partners; -- the likelihood of target financial returns, on a risk-adjusted basis, being realised; and
-- the existence of a market for operational investments or a strong expectation that such a market will develop.
Our total commitment to new investments in 2016 was GBP181.9 million, made up of GBP134.8 million in renewable energy and GBP47.1 million in PPP assets, at a similar level to investment commitments of GBP180.5 million in 2015. Our international growth continued with investment commitments in six different countries, including the following projects:
-- A6 Parkway (Netherlands) - GBP9.0 million -- Kiata wind farm (Australia) - GBP20.4 million -- Nordergründe offshore wind farm (Germany) - GBP36.7 million -- Sommette wind farm (France) - GBP11.7 million -- Sterling wind farm (US) - GBP15.7 million.
Growth in the value of external AuM and related fee income
Our strategy to grow the value of our external AuM is linked to our activities as an investment adviser to JLIF and JLEN. The Group not only advises and provides management services to the portfolios of JLIF and JLEN, but also sources new investments on their behalf. During the year, both JLIF and JLEN successfully undertook secondary equity issues and made acquisitions both from John Laing and from third parties. Both funds have the benefit of a right of first offer over certain investments should they be offered for sale by the Group.
We made good progress during the year, with the value of external AuM growing from GBP1,136 million to GBP1,472 million, an increase of 30%. Fee income from external AuM was GBP15.8 million for 2016, up from GBP12.0 million in 2015.
Investment portfolio and realisations
At 31 December 2016, our portfolio comprised investments in 42 infrastructure projects and our shareholding in JLEN (31 December 2015 - 39 projects). Our year end portfolio value, including the shareholding in JLEN, was GBP1,175.9 million (31 December 2015 - GBP841.4 million). The increase was primarily due to cash injections into projects, favourable foreign exchange movements and growth in the retained portfolio, offset by investment realisations.
The portfolio valuation represents our assessment of the fair value of investments in projects on the basis that each asset is held to maturity, other than shares in JLEN which are held at market value. The 2016 year end valuation reflected underlying growth of 22.3% after adjusting for acquisitions, realisations, cash invested and cash yield. This growth is analysed further in the Portfolio Valuation section.
The cash yield in 2016 was GBP34.8 million (2015 - GBP38.9 million), a yield of 7.6% (2015 - 9.8%) on the average Secondary Investment portfolio, in line with our guidance of a 6.5% to 8.5% yield. Cash yield represents cash receipts in the form of dividends, interest and shareholder loan repayments from project companies and listed investments.
During the year, we agreed a number of realisations:
-- sale of our investments in the British Transport Police and Oldham Housing PPP projects to JLIF for GBP19.5 million which, as previously explained, counted towards our 2015 year end guidance and special dividend;
-- proceeds from a further four completed transactions of GBP127.1 million, which form the basis for our special dividend calculation for 2016;
-- agreed sale of our 29.69% shareholding in the A1 motorway, Poland. Proceeds of EUR137.3 million (adjusted for distributions received in late 2016) were received on 2 March 2017; and
-- agreed sale of our 30% shareholding in the M6 road project in Hungary for EUR26.6 million which is expected to complete in the second quarter of 2017.
We were particularly pleased to achieve prices in line with portfolio valuation for our investments in the A1 motorway in Poland and the M6 road project in Hungary, both in jurisdictions where there is a less developed secondary market.
Profit before tax
Our total profit before tax was GBP192.1 million in 2016, compared to GBP106.6 million in 2015. Profit before tax is primarily driven by the fair value movement in our investment portfolio, which in 2016 benefited significantly from favourable foreign exchange movements.
Funding
In February 2015, we entered into a five-year GBP350.0 million committed corporate banking facility and associated ancillary facilities, all of which expire in March 2020. These revolving facilities enable us to issue letters of credit and/or put up cash collateral to back investment commitments. We finance new investments through a combination of cash flow from existing assets, the above corporate banking facilities and realisations of investments in operational projects.
In June 2016, the above facilities were increased to GBP400.0 million. In addition, in November 2016, we entered into additional GBP50.0 million liquidity facilities, which together with surety financing entered into earlier in the year, had the effect of increasing our committed facilities to GBP450.0 million until March 2018.
Organisation and staff
In June 2016, we announced the sale of the business and assets of our PMS activities in the UK to HCP Management Services Limited (HCP). The reason for the sale was to concentrate our resources and attention on our greenfield activities where we create most value. As part of the sale, 81 staff roles and 52 Management Services Agreements (MSAs) transferred to HCP. The sale completed on 30 November 2016 for total proceeds of GBP4.0 million, GBP1.9 million of which was received on completion and GBP2.1 million of which was received in January 2017 once all consents were obtained. Principally as a result of the sale, our staff numbers fell from 252 at 31 December 2015 to 160 at the end of 2016.
We now have 36% of staff located outside the UK (2015 - 22%). This growing internationalisation is consistent with where our future opportunities lie.
Reflecting Derek Potts' retirement in early 2017, we have re-organised our Primary Investment management teams so that the heads in each of our three geographical regions now report directly to me. We will miss Derek's enthusiasm and experience but I am very pleased that he has agreed to continue to assist our Investment Committee on a consultancy basis.
I visited our offices around the world several times during 2016. We have strong individuals and great teams in each region and I want to extend my heartfelt thanks to all staff for their contribution during the year. As I have said before, the success of our business depends on them.
Current trading and guidance
Our total investment pipeline at 31 December 2016 was GBP1,859 million and includes GBP1,408 million of PPP opportunities looking out three years or so as well as nearer term renewable energy opportunities of GBP451 million. The current pipeline does not include potential opportunities that may come from additional public-private infrastructure in the UK post Brexit or in the US under the new administration. We will aim to maintain a majority of availability-based cash flows in our portfolio. At 31 December 2016, the balance was 73% availability-based versus 27% volume-based.
As our investment pipeline continues to grow, our aim is to increase our investment commitments for 2017 by approximately 10% compared to 2016. We expect realisations to be at a broadly similar level to our investment commitments, consistent with our self-funding model.
We have a proven business model and we believe we are in a good position to take advantage of opportunities for investment in greenfield infrastructure in a growing market. In the two years since we have been listed, we have delivered steady growth despite changing governmental policies and macro-economic environments. Against this background, we have confidence in the future.
Olivier Brousse
Chief Executive Officer
Primary Investment
Our Primary Investment activities are focused on greenfield infrastructure projects. These are principally those awarded under PPP programmes as well as renewable energy assets and may also include similar long-term projects which have a strong private-sector (rather than governmental) counterparty. Asset management services in respect of the Primary Investment portfolio during the construction period are provided by John Laing's Asset Management division. When underlying projects reach the end of construction, the investments transfer into our Secondary Investment portfolio.
The Primary Investment portfolio comprises the Group's shareholdings in 11 PPP projects, and in ten renewable energy projects, which are in the construction phase. The Group's Primary Investment portfolio was valued at GBP696.3 million at 31 December 2016 (31 December 2015 - GBP405.9 million).
New investment commitments
During 2016, the Primary Investment team successfully secured ten new investments, and made additional commitments to one existing investment, resulting in total commitments of GBP181.9 million:
-- Asia Pacific - the Hornsdale 2 wind farm project in South Australia reached financial close in June 2016 and we closed the Kiata wind farm project in Victoria in November 2016, further strengthening the Group's presence in the renewable energy market in the region.
-- North America - we continued to increase our activities in the market. During the year, we secured a stake in the Sterling wind farm project in New Mexico, our first investment in renewable energy in this region, and we made a small additional investment in the I-77 Managed Lanes project in North Carolina.
-- Europe - -- We made a GBP9.0 million commitment to the A6 Parkway PPP project in the Netherlands; -- We acquired an additional 6% stake in the IEP (Phase 1) project in the UK from a co-investor;
-- We committed to four on-shore wind farm investments, one in each of the UK and Germany, and two in France; and
-- We also secured and closed the Group's first investment in the offshore wind sector, acquiring a 30% stake in the Nordergründe wind farm project in Germany.
Our investment commitments for 2016 are summarised in the table below:
Hot Features
Premium
PPP RE* Total
Investment commitments Region GBP million GBP million GBP million
Intercity Express Programme (IEP) (Phase 1) UK 37.0 - 37.0
Llynfi wind farm UK - 24.9 24.9
A6 Parkway Europe 9.0 - 9.0
Nordergründe offshore wind farm Europe - 36.7 36.7
Sommette wind farm Europe - 11.7 11.7
Horath wind farm Europe - 14.3 14.3
Saint-Martin-L'Ars wind farm Europe - 5.1 5.1
I-77 Managed Lanes North America 1.1 - 1.1
Sterling wind farm North America - 15.7 15.7
Hornsdale wind farm (Phase 2) Asia Pacific - 6.0 6.0
Kiata wind farm Asia Pacific - 20.4 20.4
Totals 47.1 134.8 181.9
-------------------------------------------------------------- ------------- ------------- -------------
*RE = renewable energy
Since 31 December 2016, we have committed GBP10.0 million for a 20% shareholding in the Hornsdale wind farm (Phase 3) in Australia.
Activities
The Primary Investment team is responsible for all the Group's bid development activities. The team takes responsibility for developing and managing a pipeline of opportunities, including market research, project selection, bid co-ordination and negotiations with public sector authorities, vendors and lenders. In each of our target markets of Asia Pacific, North America and Europe, we work with strong delivery partners. For instance, in the Asia Pacific and North American regions, the Group is currently working with leading international and domestic contractors and service providers, including Acciona, ACS Group, Aecom, Alstom, Bombardier, Bouygues, Brookfield Multiplex, Cintra, Cubic, Downer, Fluor, Fulton Hogan, John Holland, Laing O'Rourke, Leighton/CIMIC, Lend Lease, Serco, SNC, Spotless and Vinci.
We target a wide range of infrastructure sectors:
-- Transport - rail, including rolling stock, roads, street lighting and highways maintenance;
-- Environmental - renewable energy (including wind power, solar power and biomass), water treatment and waste management;
-- Social infrastructure - healthcare, education, justice, public sector accommodation and social housing.
We are also assessing opportunities in new infrastructure sectors such as the emerging energy storage programmes to support electricity grid performance, and broadband infrastructure upgrades, where we believe our business model could be successfully applied.
Project finance
Pricing of project finance facilities remained broadly stable during 2016, although the trend of falling prices and improving terms experienced in recent years appears to have levelled off. We were able to secure financing for projects where required. Institutional sources of long-term project finance were available in Europe, although commercial bank debt was typically more competitively priced. In Australia and New Zealand, medium-term bank debt and refinancing requirements are well established, with a large number of international banks being active in these markets. In Canada and the US, projects tend to be financed in the debt capital markets rather than with bank financing. Overall, financial markets in the regions in which the Group is active supported our growing levels of investment and we expect this to continue in 2017.
Pipeline
At 31 December 2016, our overall investment pipeline of GBP1,859 million was higher than the pipeline of GBP1,494 million at 31 December 2015. The pipeline comprises opportunities to invest equity in PPP projects with the potential to reach financial close over the next three years, while the renewable energy pipeline relates to the next two years. The growth compared to 2015 reflects an increase in renewable energy pipelines in Asia Pacific and North America, as well as some impact from the devaluation of Sterling.
Our overall pipeline is constantly evolving as new opportunities are added and other opportunities drop out. We budget a win rate of 30% for PPP bids.
Our total pipeline broken down by bidding stage is as follows:
Number of PPP RE* Total
Pipeline at 31 December 2016 by bidding stage projects GBP million GBP million GBP million
----------------------------------------------- ---------- ------------- ------------- -------------
Shortlisted/exclusive 18 234 173 407
Other active bids 4 185 - 185
Other pipeline 49 989 278 1,267
----------------------------------------------- ---------- ------------- ------------- -------------
Totals 71 1,408 451 1,859
----------------------------------------------- ---------- ------------- ------------- -------------
*RE = renewable energy
The shortlisted PPP projects at 31 December 2016 comprised a prison project in Australia, a broadband upgrade project in Ireland, and six availability-based transportation and schools projects, spread across the US, Canada and Australia.
In terms of geography, our pipeline is well spread across our target markets:
PPP RE* Total
Pipeline at 31 December 2016 by target market GBP million GBP million GBP million
----------------------------------------------- ------------- ------------- -------------
Asia Pacific 491 142 633
North America 449 97 546
Europe (including the UK) 468 212 680
----------------------------------------------- ------------- ------------- -------------
Totals 1,408 451 1,859
----------------------------------------------- ------------- ------------- -------------
*RE = renewable energy
Some 34% of our pipeline relates to the Asia Pacific region which continues to offer substantial opportunities. In this region, the Group's current bidding activities are focused on Australia and New Zealand, where the Group has built up a strong base. Our growing presence in the renewable energy sector in Australia offers significant potential in the coming years.
In North America (the US and Canada), which makes up 29% of the pipeline, our focus is on what is becoming a very substantial PPP market, whilst continuing to progress our presence in the renewable energy market, following our first US wind farm investment in 2016. We continue to explore PPP opportunities primarily in the transportation sector and also the growing water and social infrastructure sectors. The Canadian market continues to demonstrate strong PPP deal flow, which we are actively pursuing. At the end of 2016, we were shortlisted on four large PPP projects.
The balance of our pipeline is in Europe, where PPP activity remains at a satisfactory level in countries such as the Netherlands. However, in 2017 we expect to increase our activities in markets such as Germany, Norway and the Czech Republic. There is also a significant PPP programme in Turkey, but we have deferred further work on this market following the challenges in that country in 2016. The UK government has given indications of a new pipeline of privately financed projects, and we are waiting for the programme to become more clearly defined.
Selected countries in Europe, Asia Pacific and North America will provide our main focus for renewable energy opportunities in 2017. Our pipeline includes many potential wind and solar projects as well as investment opportunities in biomass plant.
Our overall renewable energy pipeline was GBP451 million at 31 December 2016, higher than at 31 December 2015. In the main, we target investments where a substantial proportion of revenue is supported by governmental support mechanisms which leads to reduced exposure to energy price fluctuations. During the year, we closed our first offshore wind farm investment, and this sector offers strong potential in the coming years, though our pipeline does not currently include any offshore wind opportunities.
In addition to the above, the Group continues to monitor new geographic markets which offer potential in the medium to long term. These include countries in South America, such as Chile and Colombia, and other Asia Pacific markets such as Singapore.
I will be retiring at the end of March 2017 but I am confident in the ability and experience of our teams within Primary Investment and the strength of our pipeline. Following my retirement, the heads of Primary Investment in each of our three geographical regions will report directly to the Chief Executive Officer.
Derek Potts
Group Managing Director, Primary Investment
Secondary Investment
At 31 December 2016, the Secondary Investment portfolio comprised 15 PPP projects and six renewable energy projects with a book value of GBP479.6 million (31 December 2015 - GBP419.4 million). The Secondary Investment portfolio also included a 3.3% shareholding in JLEN valued at GBP10.0 million at 31 December 2016 (31 December 2015 - 7.0% shareholding valued at GBP16.1 million).
Asset management services in respect of the Secondary Investment portfolio are provided by John Laing's Asset Management division.
Investment realisations
During the year, we achieved proceeds of GBP146.6 million from the realisation of investments:
-- Our investments in two PPP projects, British Transport Police and Oldham Housing, were sold to JLIF for GBP19.5 million;
-- Our investments in Dungavel Wind Farm (100%) and New Albion Wind Farm (100%) were sold to JLEN for a total of GBP50.0 million;
-- Our investment in the A55 project and 20% of our interest in IEP (Phase 1) were sold to JLIF in the second half of the year; and
-- We sold a 2.2% shareholding in JLEN for GBP6.4 million.
Taking realisations for the year as a whole, prices were in line with the most recent portfolio valuation.
Total
Realisations completed Shareholding Purchaser GBP million
--------------------------- ------------- ---------- -------------
British Transport Police* 54.17% JLIF 19.5*
---------- -------------
Oldham Housing* 95%
--------------------------- ------------- ---------- -------------
Dungavel Wind Farm 100% JLEN 38.2
----------
New Albion Wind Farm 100% 11.8
--------------------------- ------------- ---------- -------------
Market
Shareholding in JLEN 2.2% placing 6.4
--------------------------- ------------- ---------- -------------
A55 100% JLIF 28.3
IEP (Phase 1) 6% 42.4
Total 146.6
--------------------------- ------------- ---------- -------------
*counted towards guidance for 2015
Excluding the sales of our investments in British Transport Police and Oldham Housing, we achieved disposals for dividend purposes of GBP127.1 million, ahead of our guidance of approximately GBP100 million.
We also agreed two further disposals:
-- Sale of our 29.69% shareholding in Gdansk Transport Company S.A (GTC), the owner and operator of part of the A1 motorway in Poland, for EUR137.3 million (adjusted for distributions received in November and December 2016), subject to certain reductions and adjustments. A sale and purchase agreement was originally entered into with FS Amber Holdings BV, an entity managed by First State Investments, in late 2016. However, as the result of the exercise of pre-emption rights by NDI Autostrada SP.2.0.0 (NDIA), a co-shareholder in GTC, a new sale and purchase agreement was entered into with NDIA in January 2017. Completion of the disposal was subject to certain consents and conditions and occurred on 2 March 2017.
-- Sale of our 30% shareholding in the M6 road, Hungary for EUR26.6 million. This sale was originally agreed in December 2016. However, following the exercise of pre-emption rights by co-shareholders in the project company, Strabag AG and Intertoll-Europe ZRT (Intertoll), new sale and purchase agreements were entered into on 1 February 2017. Completion of the disposal is subject to obtaining certain consents and satisfying certain conditions and is expected to take place in the second quarter of 2017.
Transfers from the Primary Investment portfolio
During the year, six investments became part of the Secondary Investment portfolio as the underlying projects moved into the operational stage:
Croydon & Lewisham Street Lighting, UK (50% interest)
The final milestone for the construction and installation of more than 23,000 street lights was completed in late November 2016, resulting in the project moving to a fully operational status.
Rammeldalsberget Wind Farm, Sweden (100% interest)
Located near Kramfors in central Sweden, the project comprises six wind turbines of 2.5MW each. Operations commenced in June 2016 and revenue is supported by a fixed price power purchasing agreement for 50% of production until the end of 2019.
New Albion Wind Farm, UK (100% interest, disposed in July 2016)
Located in Northamptonshire, UK, the project comprises seven Senvion turbines, each with 2.05MW capacity. Following commencement of operations in January 2016, this project was sold to JLEN in July 2016 for GBP11.8 million.
Pasilly Wind Farm, France (100% interest)
Located in the Yonne region of Burgundy, this was our first renewable energy project in France. The wind farm comprises ten Gamesa G97 turbines of 2MW each. Full operation commenced in December 2016, with revenue supported by a feed-in-tariff for the first 15 years.
Hornsdale Wind Farm Phase One, Australia (30%)
The project comprises a 32 turbine wind farm in South Australia with an installed capacity of 102.4MW and represents our first renewable energy project in the Asia Pacific region. The project benefits from a 20 year offtake from a government counterparty (Australian Capital Territory).
A15, Netherlands (28% interest)
This availability-based road project comprises the expansion of two intersections and the provision of maintenance along a 37km motorway section in the Rotterdam region of the Netherlands for a period of 20 years after completion of construction. The scope of the project included widening the motorway and rebuilding many of the structures and junctions connecting the motorway with the road network.
Chris Waples
Group Managing Director, Asset Management
Asset Management
The Asset Management division's activities comprise Investment Management Services and Project Management Services.
Investment Management Services
Investment Management Services (IMS) are provided to both JLIF and JLEN and also to our own investment portfolio.
External IMS JLCM provides advisory services to JLIF and JLEN under investment advisory agreements. As at 30 September 2016, JLIF and JLEN had published portfolio values of GBP1,113.8 million and GBP320.7 million respectively. JLCM has an independent chairman and two separate dedicated fund management teams whose senior staff are authorised and regulated by the FCA. The teams focus their advice primarily on sourcing new investments for and arranging capital raisings by the two funds. They operate behind information barriers in view of the market sensitive nature of their activities and to ensure the separation of "buy-side" and "sell-side" teams when John Laing is selling investments to either fund. Both funds have a right of first offer over certain investments should they be offered for sale by the Group, and both are stand-alone entities separate from the Group. Each fund maintains an independent board of directors and is independently owned.
At 31 December 2016, the Group also managed two PPP investments valued at GBP37.8 million held by JLPF.
Fee income from external IMS grew from GBP12.0 million in 2015 to GBP15.8 million in 2016.
Internal IMS John Laing actively manages its own Primary and Secondary Investment portfolios. Our objective is to deliver the base case returns on our investments as a minimum and additionally to enhance those returns through active asset management. There are two main strategies, value protection and value enhancement:
Value protection - examples
-- To target PPP projects which have revenue streams based on availability of the underlying infrastructure asset rather than revenues based on patronage or volume.
-- To ensure construction risks associated with design, workmanship, cost overruns and delays lie with our construction supply chain partners who are best able to manage them.
-- To ensure project operational performance and cost risks lie principally with our service supply chain partners.
-- To eliminate the risk of increased interest costs on third party project debt finance over the life of an infrastructure project by swapping variable interest rates to fixed interest rates.
-- To reduce the impact of short-term volatility on revenues in our renewable energy projects by entering into short or medium term power purchase agreements with electricity suppliers.
Value enhancement - examples
-- To promote a culture of continuous improvement with public sector counter-parties: responding to their need for changes over the life of PPP infrastructure projects, reducing the public sector burden and, where possible, to generate incremental revenues therefrom.
-- To optimise SPV management costs and project insurance premiums through bulk purchasing or efficiency gains, thereby increasing investor returns.
-- To optimise major maintenance and asset renewal costs over the life of an infrastructure project and thereby increase investor returns.
-- To maximise working capital efficiency within project companies. -- To ensure projects are efficiently financed over their concessions or useful lives.
The total IMS income for the year ended 31 December 2016 of GBP17.8 million (2015 - GBP13.4 million) includes GBP2.0 million (2015 - GBP1.4 million) of fee income for the provision of directors on project company boards.
Project Management Services
The Group also provides Project Management Services (PMS), largely of a financial or administrative nature, to project companies in which John Laing, JLIF or JLEN are investors. These services are provided under Management Services Agreements (MSAs).
On 30 November 2016, the Group completed the divestment of its PMS activities in the UK to HCP Management Services Limited (HCP). As part of the sale, 81 staff roles and 52 MSAs transferred to HCP. The activities sold contributed GBP7.9 million of the total PMS revenues of GBP14.9 million.
The remaining PMS activities are principally focused on MSAs relating to projects outside the UK. At 31 December 2016, the Group held 19 MSAs (31 December 2015 - 75 MSAs).
Projects Under Construction
John Laing's investments in projects are managed by the Asset Management division. An update on significant projects under construction is set out below.
Intercity Express Programme (IEP)
John Laing is in partnership with Hitachi to manage the contracts that cover the design, manufacture, finance and delivery into daily service and maintenance of a fleet of 122 Super Express trains for the UK's Great Western Main Line (Phase 1 - 24% interest) and the East Coast Main Line (Phase 2 - 30% interest). With a total capital expenditure across the two phases of GBP3.4 billion, it is one of the largest PPP projects to be awarded. Construction of the Phase 1 (Great Western) depots completed in early 2016 and development of the Phase 2 (East Coast) depots is progressing well. During 2016, trains commenced testing on the UK rail network for Phase 1 and remain scheduled to become operational during 2017.
In November 2016, it was announced that electrification of certain parts of the Great Western Route being undertaken by Network Rail on behalf of the Department for Transport would be further delayed. The Department for Transport has asked the Phase 1 project company to convert all trains for use as bi-mode which can be powered by diesel or electricity. We are not expecting any negative impact on our investments from these delays.
New Royal Adelaide Hospital (NRAH), South Australia (17.3% interest)
This project is currently one of the largest building construction projects in Australia. Containing 700 single bedrooms and 100 same-day beds, NRAH will have the capacity to admit over 80,000 patients per year. Delays relating to this project are addressed in the Chief Executive Officer's Review. Technical completion is now expected to occur in March 2017 followed by commercial acceptance three months later.
Denver Eagle P3, Colorado, US (45% interest)
This project is to design, build, finance, maintain and operate two commuter rail lines and a section of a third in the Denver Metropolitan area. The fleet of rolling stock has been completed. The first line (A Line, East Corridor) became operational in the second quarter of 2016, and the second line (B Line, North West Corridor electrified segment) in the third quarter. The third line (G Line) is scheduled to become operational in the first quarter of 2017.
I-4 Ultimate, Florida, US (50% interest)
This availability-based road project has total capital expenditure of US$2.3 billion and involves reconstructing 15 major interchanges, building more than 140 bridges, adding four variable toll Express Lanes, and completely rebuilding the general use lanes of 21 miles of the existing I-4 interstate in central Florida. Construction commenced in 2015 and is anticipated to finish in 2021.
New Perth Stadium, Western Australia (50% interest)
The New Perth Stadium will be a major sporting and entertainment venue, capable of staging national and international events. The stadium will predominantly be used for Australian-rules football but will be able to readily accommodate other sports, as well as entertainment events through the use of drop-in seats. Construction works are on track for completion in advance of the 2018 Australian Football League season.
New Generation Rollingstock, Queensland, Australia (40% interest)
The project involves the provision and maintenance of 75 new six-car trains for Queensland Rail. The first train is now being tested with progress slower than expected in part due to reduced availability of train drivers.
Nordergründe offshore wind farm, Germany (30% interest)
The final turbine (of 18) for this offshore wind farm was installed in December 2016. In September 2016, the sub-contractor responsible for provision of the offshore electrical sub-station went into administration and this caused some delays to the project. The project company, with the support of its lenders, has entered into an agreement with the administrator and work on the sub-station has resumed. Operations are due to start in late 2017.
Sydney Light Rail, New South Wales, Australia (32.5% interest)
This light rail project will form an integral part of Sydney's public transport infrastructure network and pedestrianise one of its busiest streets, providing a commuter route into the Central Business District and access to the south east of the city. Services are scheduled to begin in the first half of 2019.
Speyside Biomass, UK (43.35% equity interest)
This 15MW combined heat and power plant supplies the adjacent Macallan whisky distillery with heat and exports power to the grid. Its fuel is virgin wood sourced from the local region. In January 2017, the plant achieved functional take-over.
Chris Waples
Group Managing Director, Asset Management
Portfolio Valuation
The portfolio valuation at 31 December 2016 was GBP1,175.9 million compared to GBP841.4 million at 31 December 2015. After adjusting for realisations, cash yield and cash invested, this represented a positive movement in fair value of GBP214.4 million (22.3%):
Investments Listed
in projects investment Total
GBP million GBP million GBP million
----------------------------------------- ------------- ------------- -------------
Portfolio valuation at 1 January 2016 825.3 16.1 841.4
- Cash invested 301.5 - 301.5
- Cash yield (33.9) (0.9) (34.8)
- Proceeds from realisations (140.2) (6.4) (146.6)
Rebased valuation 952.7 8.8 961.5
- Movement in fair value 213.2 1.2 214.4
Portfolio valuation at 31 December 2016 1,165.9 10.0 1,175.9 ----------------------------------------- ------------- ------------- -------------
Cash investment in respect of eight new projects (one PPP and seven renewable energy) entered into during 2016 totalled GBP109.3 million. We committed to an additional stake in one existing PPP project during the year for GBP37.0 million. In addition, equity and loan note subscriptions of GBP155.2 million were injected into existing projects in the portfolio as they progressed through, or completed, construction.
During 2016, the Group completed the realisation of five investments for a total consideration of GBP146.6 million. Cash yield received from projects during the year totalled GBP34.8 million.
The movement in fair value of GBP214.4 million is analysed in the table below. The fair value movement includes a net benefit of GBP27.5 million from the amendment of benchmark discount rates for certain investments in response to our understanding and experience of the secondary market.
Year ended Year ended
31 December 2016 31 December 2015
Total Total
GBP million GBP million
------------------------------------------------ ------------------ ------------------
Unwinding of discount 77.1 61.0
Reduction of construction risk premia 52.7 22.8
Impact of foreign exchange movements 74.7 (9.2)
Change in macroeconomic assumptions (13.8) (9.4)
Change in power and gas price forecasts (17.6) (10.7)
Change in operational benchmark discount rates 27.5 19.5
Uplift on financial closes 31.0 27.1
Value enhancements and other changes (17.2) 31.0
Movement in fair value 214.4 132.1
------------------------------------------------ ------------------ ------------------
The net movement in fair value comprised unwinding of discounting (GBP77.1 million), the reduction of construction risk premia (GBP52.7 million), the reduction in operational benchmark discount rates (GBP27.5 million), favourable foreign exchange movements (GBP74.7 million) and uplift on financial closes (GBP31.0 million), offset by adverse movements from lower power and gas price forecasts (GBP17.6 million), adverse movements in macroeconomic forecasts (GBP13.8 million) and a net adverse movement from value enhancements and other changes (GBP17.2 million). Foreign exchange movements are addressed further in the Financial Review section.
The adverse fair value movement of GBP17.2 million relating to value enhancements and other changes arose partly due to the matters described in the Chief Executive Officer's Review in relation to the Group's investments in New Royal Adelaide Hospital and Manchester Waste VL Co. There were also value reductions on some other investments, offset by value enhancements.
The split between primary and secondary investments is shown in the table below:
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------- ------------ ------ ------------ ------
Primary Investment 696.3 59.2 405.9 48.2
Secondary Investment 479.6 40.8 435.5 51.8
---------------------- ------------ ------ ------------ ------
Portfolio valuation 1,175.9 100.0 841.4 100.0
---------------------- ------------ ------ ------------ ------
The increase in the Primary Investment portfolio is due to a movement in fair value of GBP136.5 million, including value enhancements and financial closes achieved during the period, and cash invested of GBP287.1 million, offset by transfers to the Secondary Investment portfolio of GBP89.6 million, cash from investment realisation of GBP42.4 million and cash yield of GBP1.2 million.
Primary
Investment
GBP million
----------------------------------------- -------------
Portfolio valuation at 1 January 2016 405.9
- Cash invested 287.1
- Cash yield (1.2)
- Proceeds from realisations (42.4)
- Transfers to Secondary Investment (89.6)
----------------------------------------- -------------
Rebased valuation 559.8
- Movement in fair value 136.5
----------------------------------------- -------------
Portfolio valuation at 31 December 2016 696.3
----------------------------------------- -------------
The increase in the Secondary Investment portfolio is due to transfers from the Primary Investment portfolio of GBP89.6 million, cash investment of GBP14.4 million and a movement in fair value of GBP77.9 million, offset by investment realisations during the year of GBP104.2 million and cash yield of GBP33.6 million.
Secondary
Investment
GBP million
----------------------------------------- -------------
Portfolio valuation at 1 January 2016 435.5
- Cash invested 14.4
- Cash yield (33.6)
- Proceeds from realisations (104.2)
- Transfers from Primary Investment 89.6
----------------------------------------- -------------
Rebased valuation 401.7
- Movement in fair value 77.9
----------------------------------------- -------------
Portfolio valuation at 31 December 2016 479.6
----------------------------------------- -------------
Methodology
A full valuation of the investment portfolio is prepared every six months, at 30 June and 31 December, with a review at 31 March and 30 September, principally using a discounted cash flow methodology. The valuation is carried out on a fair value basis assuming that forecast cash flows from investments are received until maturity of the underlying assets.
Under the Group's valuation methodology, a base case discount rate for an operational project is derived from secondary market information and other available data points. The base case discount rate is then adjusted to reflect additional project-specific risks. In addition, risk premia are added to reflect the additional risk during the construction phase. The construction risk premia reduce over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operational stage.
The discounted cash flow valuation is based on future cash distributions from projects forecast as at 31 December 2016, derived from detailed financial models for each underlying project. These incorporate the Group's expectations of likely future cash flows, including value enhancements.
For the 31 December 2016 valuation, the overall weighted average discount rate was 8.9% compared to the weighted average discount rate at 31 December 2015 of 9.5%. The decrease was primarily due to changes in operational discount rates for certain investments as referred to earlier. The weighted average discount rate at 31 December 2016 was made up of 9.1% (31 December 2015 - 9.7%) for the Primary Investment portfolio and 8.4% (31 December 2015 - 8.9%) for the Secondary Investment portfolio.
The overall weighted average discount rate of 8.9% reflects the fact that project cash flows for investments in the Primary Investment portfolio tend to have a longer duration than for investments in the Secondary Investment portfolio.
Compared to other market benchmarks, the weighted average discount rate of 8.4% for the Secondary Investment portfolio reflects (i) the impact of renewable energy projects which tend to have higher discount rates than PPP projects and (ii) a few PPP projects with above average discount rates because of location or an element of volume/technology risk.
The discount rate ranges used in the portfolio valuation at 31 December 2016 were as set out below:
Primary Secondary
Investment Investment
Sector % %
-------------------------- ------------ ------------
PPP projects 7.3 - 11.3 7.0 - 10.0
Renewable energy projects 7.6 - 11.6 7.0 - 9.3
-------------------------- ------------ ------------
The shareholding in JLEN was valued at its closing market price on 31 December 2016 of 106p per share (31 December 2015 - 103p per share).
The Directors have obtained an independent opinion from a third party, which has considerable expertise in valuing the type of investments held by the Group, that the investment portfolio valuation represented a fair market value in the market conditions prevailing at 31 December 2016.
Macro - economic assumptions
During 2016, lower than previously forecast inflation and deposit rates receivable on cash balances within projects had a negative impact on the majority of forecast project cash flows within the portfolio. Deposit rates are anticipated to remain at low levels in the short-term. As mentioned above, strengthening of foreign currencies against Sterling over the year to 31 December 2016 resulted in favourable foreign exchange movements of GBP74.7 million (excluding the effect of foreign exchange hedges as described in the Financial Review section).
The table below summarises the main macro-economic assumptions used in the portfolio valuation:
Assumption 31 December 31 December
2016 2015
--------------------- -------------- ------------ -------------- --------------
Long term inflation UK RPI & RPIX 2.75% 2.75%
Europe CPI 1.60% - 2.00% 2.00%
US CPI 2.25% - 2.50% 2.25% - 2.50%
Asia Pacific CPI 2.00% - 2.75% 2.00% - 2.75%
--------------------- -------------- ------------ -------------- --------------
Exchange rates GBP/EUR 1.1708 1.3592
GBP/AUD 1.7094 2.0340
GBP/USD 1.2329 1.4833
GBP/NZD 1.7754 2.1692
------------------------------------------------- -------------- --------------
Investments in overseas projects are fair valued based on the spot exchange rate on the balance sheet date. As at 31 December 2016, a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas projects by c.GBP27 million.
At 31 December 2016, based on a sample of seven of the larger PPP investments by value, a 0.25% increase in inflation is estimated to increase the value of PPP investments by GBP14 million and a 0.25% decrease in inflation is estimated to decrease the value of PPP investments by GBP13 million. Certain of the underlying project companies incorporate some inflation hedging.
Discount rate sensitivity
The weighted average discount rate applied at 31 December 2016 was 8.9% (31 December 2015 - 9.5%). The table below shows the sensitivity of each 0.25% change in this rate of up to plus or minus 0.75%.
Portfolio valuation Increase/(decrease) in valuation
Discount rate sensitivity GBP million GBP million
-------------------------- -------------------- ---------------------------------
+0.75% 1,083.6 (92.3)
+0.50% 1,113.0 (62.9)
+0.25% 1,143.8 (32.1)
- 1,175.9 -
-0.25% 1,209.5 33.6
-0.50% 1,244.7 68.8
-0.75% 1,281.6 105.7
-------------------------- -------------------- ---------------------------------
Further analysis of the portfolio valuation is shown in the following tables:
by time remaining on project concession/OPERATIONAL life
31 December 2016 31 December 2015
GBP million % GBP million %
----------------------- ------------ ------ ------------ ------
Greater than 25 years 630.3 53.6 402.6 47.8
20 to 25 years 309.8 26.3 245.0 29.1
15 to 20 years 183.1 15.6 108.3 12.9
10 to 15 years 21.0 1.8 47.6 5.7
Less than 10 years 21.7 1.8 21.8 2.6
Listed investment 10.0 0.9 16.1 1.9
----------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
----------------------- ------------ ------ ------------ ------
PPP projects are based on long-term concessions and renewable energy assets have long-term useful economic lives. As demonstrated in the table above, 53.6% of the portfolio by value had a greater than 25-year unexpired concession term or useful economic life remaining at 31 December 2016, compared to 47.8% at 31 December 2015. The investment in JLEN, which represented 0.9% (31 December 2015 - 1.9%) of the portfolio valuation, is shown separately.
split between PPP and renewable energy
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Primary PPP 548.3 46.6 329.9 39.2
Primary renewable energy 148.0 12.6 76.1 9.0
Secondary PPP 345.6 29.4 328.0 39.0
Secondary renewable energy 124.0 10.5 91.3 10.9
Listed investment 10.0 0.9 16.1 1.9
---------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
---------------------------- ------------ ------ ------------ ------
Primary PPP investments made up the largest part of the portfolio, representing 46.6% of the portfolio valuation at 31 December 2016, with Secondary PPP investments representing a further 29.4%.
by revenue type
31 December 2016 31 December 2015
GBP million % GBP million %
------------------- ------------ ------ ------------ ------
Availability 855.0 72.7 603.7 71.8
Shadow toll 23.4 2.0 45.6 5.4
Volume 287.5 24.4 176.0 20.9
Listed investment 10.0 0.9 16.1 1.9
------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
------------------- ------------ ------ ------------ ------
Availability-based investments continued to make up the majority of the portfolio, representing 72.7% of the portfolio valuation at 31 December 2016. Renewable energy investments comprised the majority of the volume-based investments. The investment in JLEN, which holds investments in PPP and renewable energy projects, is shown separately.
by sector
31 December 2016 31 December 2015
GBP million % GBP million %
----------------------------------- ------------ ------ ------------ ------
Social infrastructure 122.1 10.4 125.4 14.9
Transport - other 395.3 33.6 277.4 33.0
Transport - rail rolling stock 280.4 23.8 158.7 18.9
Environmental - wind 252.9 21.5 154.5 18.3
Environmental - waste and biomass 115.2 9.8 109.3 13.0
Listed investment 10.0 0.9 16.1 1.9
----------------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
----------------------------------- ------------ ------ ------------ ------
Investments in the transport sector (excluding rail rolling stock) continued to make up the largest proportion of the portfolio valuation, representing 33.6% of the portfolio at 31 December 2016, with rail rolling stock investments accounting for a further 23.8%. Wind investments made up 21.5% of the portfolio by value, social infrastructure investments - 10.4% and waste and biomass investments - 9.8%. The portfolio underlying the JLEN shareholding consists of a mix of renewable energy and environmental projects.
by currency
31 December 2016 31 December 2015
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
Sterling 510.4 43.4 437.8 52.0
Euro 341.2 29.0 213.0 25.3
Australian dollar 181.4 15.4 88.2 10.5
US dollar 121.0 10.3 83.7 10.0
New Zealand dollar 21.9 1.9 18.7 2.2
-------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
-------------------- ------------ ------ ------------ ------
The percentage of investments denominated in foreign currencies increased from 48.0% to 56.6%. This was partly caused by the weakness of Sterling during 2016 but is also consistent with our pipeline and the overseas jurisdictions we target.
by geographical region
31 December 2016 31 December 2015
GBP million % GBP million %
-------------------- ------------ ------ ------------ ------
UK 500.4 42.5 421.7 50.1
Continental Europe 341.2 29.0 213.0 25.3
North America 121.0 10.3 83.7 10.0
Asia Pacific 203.3 17.3 106.9 12.7
Listed investment 10.0 0.9 16.1 1.9
-------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
-------------------- ------------ ------ ------------ ------
Investments in the UK continued to make up the largest single region in the portfolio valuation, representing 42.5% of the portfolio at 31 December 2016. Continental Europe remained the next largest category with 29.0%. Investments in projects located in the Asia Pacific region made up 17.3% and investments in North America 10.3%. A substantial majority of the JLEN portfolio consists of investments in UK based projects.
by investment size
31 December 2016 31 December 2015
GBP million % GBP million %
---------------------------- ------------ ------ ------------ ------
Five largest projects 520.2 44.2 358.3 42.6
Next five largest projects 236.4 20.1 202.7 24.1
Other projects 409.3 34.8 264.3 31.4
Listed investment 10.0 0.9 16.1 1.9
---------------------------- ------------ ------ ------------ ------
1,175.9 100.0 841.4 100.0
---------------------------- ------------ ------ ------------ ------
The top five investments in the portfolio made up 44.2% of the portfolio at 31 December 2016. The next five largest investments made up a further 20.1%, with the remaining investments in the portfolio comprising 34.8%. The shareholding in JLEN made up 0.9% of the portfolio.
Financial Review
Basis of preparation
Statutory financial information for the year ended 31 December 2016 is presented in the Group Income Statement, the Group Statement of Comprehensive Income and the Group Statement of Changes in Equity alongside comparative statutory and pro forma financial information for the year ended 31 December 2015. Both the Group Balance Sheet at 31 December 2016 and at 31 December 2015 are presented on a statutory basis. The comparative pro forma financial information was prepared on the basis that the restructuring associated with the Company's admission to listing in February 2015, as described in more detail in the Financial Review section of the 2015 Annual Report, had been in place throughout the year ended 31 December 2015. In the opinion of the Directors, presenting pro forma information for 2015 was necessary in order to give a true and fair view of the state of the Company's affairs for that year.
The statutory and pro forma financial information has been prepared on the historical cost basis except for the revaluation of the investment portfolio and financial instruments that are measured at fair value at the end of each reporting period. The Company meets the definition of an Investment Entity set out in IFRS 10. Investment Entities are required to account for all investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit or loss (FVTPL), except for those directly-owned subsidiaries that provide investment-related services or engage in permitted investment-related activities with investees (Service Companies). Service Companies are consolidated rather than recorded at FVTPL.
Project companies in which the Group invests are described as "non-recourse", which means that providers of debt to such project companies do not have recourse to John Laing beyond its equity commitments in the underlying projects. Subsidiaries through which the Company holds its investments in project companies, which are held at FVTPL, and subsidiaries that are Service Companies, which are consolidated, are described as "recourse".
Re-presented financial RESULTS
As described above, the Company meets the criteria for being an Investment Entity under IFRS 10 and accordingly the Company is required to fair value its investments in all subsidiaries except for those directly-owned subsidiaries that provide investment-related services, and do not themselves qualify as Investment Entities; it consolidates such subsidiaries on a line by line basis.
Included within the subsidiaries that the Company fair values in its financial statements are recourse subsidiaries through which the Company holds its investments in non-recourse project companies. These recourse subsidiaries have, in addition to investments in non-recourse project companies, other assets and liabilities, including recourse cash balances, which are included within the Company's investments at FVTPL. For management reporting purposes, these other assets and liabilities are reported separately from the investments in non-recourse project companies as are certain income and costs that do not arise directly from these investments in project companies. Under management reporting, it is the investments in non-recourse project companies that are considered as investments of the Group.
The Directors of the Company use the management reporting basis, including when reviewing the level of financial resources and deciding where these resources should be utilised, when making business decisions. Therefore, the Directors believe it is helpful to readers of the Company's financial statements to set out in this Financial Review the Group Income Statement, the Group Balance Sheet and the Group Cash Flow Statement on the management reporting basis. When set out on the management reporting basis, these statements are described as "re-presented".
Re-presented income statement
Preparing the re-presented income statement involves a reclassification of certain amounts within the Group Income Statement principally in relation to the net gain on investments at FVTPL. The net gain on investments at FVTPL in the Group Income Statement includes fair value movements from the portfolio of investments in non-recourse project companies but also comprises income and costs that do not arise directly from investments in this portfolio, including investment fees earned from project companies.
Year ended 31
December 2016 2015(d)
---------------------------------------------------- ------------------
Re-presented
IFRS Group Income Re-presented Re-presented income statement
Statement Adjustments income statement income statement line items
------------------ ------------ ------------------ ------------------ ------------------
GBP million GBP million GBP million GBP million
Fair value Fair value
movements - movements -
investment investment
portfolio 214.4 - 214.4 132.1 portfolio
Fair value
movements - Fair value
other (2.6) (0.6)(a) (3.2) (7.5) movements - other
Investment fees Investment fees
from projects 7.0 - 7.0 7.7 from projects
------------------ ------------------ ------------ ------------------ ------------------ ------------------
Net gain on
investments at
fair value
through profit
or loss 218.8 (0.6) 218.2 132.3
IMS revenue 17.8 - 17.8 13.4 IMS revenue
PMS revenue 14.9 - 14.9 17.0 PMS revenue
Recoveries on Recoveries on
financial close 7.5 - 7.5 3.4 financial close
Other income 1.8 (1.8)(b) - -
------------------ ------------------ ------------ ------------------ ------------------ ------------------
Other income 42.0 (1.8) 40.2 33.8
Total income 260.8 (2.4) 258.4 166.1
Third party costs (7.7) - (7.7) (6.6) Third party costs
Staff costs (34.1) - (34.1) (32.5) Staff costs
General overheads (13.2) - (13.2) (11.7) General overheads
Other net costs (1.8) 1.1(a,b) (0.7) (3.6) Other net costs
Pension and other
charges (1.6) 1.6(c) - -
Administrative
expenses (58.4) 2.7 (55.7) (54.4)
EBIT 202.4 0.3 202.7 111.7 Finance costs (10.3) 2.6(a,c) (7.7) (6.6) Finance costs Pension and other Pension and other charges - (2.9)(c) (2.9) (4.2) charges Profit before tax 192.1 - 192.1 100.9 ------------------ ------------------ ------------ ------------------ ------------------ ------------------
Notes:
a) Adjustments primarily comprise a GBP1.5 million provision offset by a GBP0.8 million release of other provisions reclassified from 'fair value movements - other' to 'other net costs'; as well as GBP1.3 million interest income reclassified from 'fair value movements - other to 'finance costs'.
b) Adjustments primarily comprise GBP1.6 million part proceeds received from the sale of the PMS UK business reclassified from 'other income' to 'other net costs' and GBP0.2 million of other income from projects reclassified from 'other income' to 'other net costs'.
c) Under IAS 19, the costs of the pension schemes comprise a service cost of GBP1.6 million (2015 - GBP1.5 million), included in administrative expenses in the Group Income Statement, and a finance charge of GBP1.3 million (2015 - GBP2.7 million), included in finance costs in the Group Income Statement. These amounts are combined together under management reporting.
d) For a reconciliation between the IFRS Group Income Statement and re-presented income statement for the year ended 31 December 2015, please see the Additional Financial Information.
The results for the year are also shown by operating segment in the table below.
Primary Secondary Asset
Investment Investment Management Total
2016 2015 2016 2015 2016 2015 2016
GBP GBP GBP GBP GBP GBP GBP 2015
million million million million million million million GBP million
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
Profit
before tax
for
reportable
segments 113.1 50.7 57.1 43.0 19.9 15.5 190.1 109.2
Post
retirement
charges (2.9) (4.2)
Other net
gain/(loss) 4.9 (4.1)
Profit
before tax 192.1 100.9
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
Profit before tax from continuing operations for the year ended 31 December 2016 was GBP192.1 million (2015 - GBP100.9 million). The main reason for the higher profit before tax was a higher fair value movement compared to 2015, which in turn was principally as a result of favourable foreign exchange rate movements.
-- The main profit contributor in 2016 was the Primary Investment division. Its contribution was higher than last year primarily because of a higher fair value movement, which in turn was principally as a result of favourable foreign exchange rate movements and a higher value uplift from the reduction of construction risk premia offset by an adverse fair movement relating to value enhancements and other changes referred to in the Portfolio Valuation section.
-- The higher contribution in 2016 from the Secondary Investment division was also primarily as a result of foreign exchange gains on the portfolio as well as higher value enhancements offset by adverse other changes referred to in the Portfolio Valuation section.
-- The higher contribution in 2016 from the Asset Management division was principally due to higher fee income from IMS as a result of increased external Assets under Management.
The movement in fair value on the portfolio for the year ended 31 December 2016, after adjusting for the impact of investments, cash yield and realisations, was a GBP214.4 million gain (2015 - GBP132.1 million gain). The higher value uplift is primarily due to favourable foreign exchange movements in 2016 compared to the previous year. For further details of the movement in fair value on the portfolio, see the Portfolio Valuation section.
There were other fair value movements for the year ended 31 December 2016 of a GBP3.2 million loss which comprised net foreign exchange losses of GBP11.2 million (principally comprising GBP11.9 million losses on foreign exchange hedges held by the Group during the year and at 31 December 2016 - see the foreign currency exposure section in this review for further details) offset by fair value gains of GBP0.9 million in respect of non-portfolio investments in small joint ventures, GBP6.6 million of tax income and a partial release of GBP0.5 million of a provision created in the year ended 31 December 2015. For the year ended 31 December 2015, other fair value movements primarily comprised a loss of GBP8.2 million from providing against a loan to a project company in the UK healthcare sector.
The Group earned IMS revenue of GBP17.8 million (2015 - GBP13.4 million) for investment advisory and asset management services primarily to the external funds JLIF and JLEN, with the increase from last year due to the higher level of external Assets under Management.
The Group also earned PMS revenue of GBP14.9 million (2015 - GBP17.0 million). As mentioned in the Chief Executive Officer's Review, on 30 November 2016, the Group completed the sale of the business and assets of its PMS activities in the UK to HCP. As part of the sale, 81 staff roles and 52 MSAs transferred to HCP. The activities sold contributed approximately GBP7.9 million of the GBP14.9 million PMS revenues for the year ended 31 December 2016 referred to above and had attributable costs of c.GBP6 .0 million.
The Group achieved recoveries of bidding costs on financial closes of GBP7.5 million in the year ended 31 December 2016 (2015 - GBP3.4 million), in line with third party bid costs incurred in the year.
Staff costs by division are shown below:
Primary Secondary Asset
Investment Investment Management Central Total
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Staff
costs 9.6 9.0 - - 17.1 17.0 7.4 6.5 34.1 32.5
--------- -------- ----------- -------- ----------- -------- ----------- -------- -------- -------- --------
Included within Asset Management staff costs are costs relating to:
Investment Management Project Management Total Asset
Services Services Management
2016 2015 2016 2015 2016 2015
GBP million GBP million GBP million GBP million GBP million GBP million
------------- ------------- ------------- ------------- ------------- ------------- -------------
Staff costs 9.0 8.1 8.1 8.9 17.1 17.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
The overall increase in staff costs is principally due to the higher costs under IFRS 2 of share-based incentive schemes with costs in the year ended 31 December 2016 of GBP2.0 million compared to GBP0.7 million in the prior year. See note 5 of the Group financial statements for further details on the share-based incentive schemes.
Other net costs of GBP3.6 million in 2015 primarily comprised staff incentive costs in relation to the Company's listing in February 2015.
Finance costs of GBP7.7 million (2015 - GBP6.6 million) include costs arising on the corporate banking facilities net of any interest income, with the increase from last year primarily due to higher average usage of the corporate banking facilities.
The Group's overall tax credit on profit on continuing activities for 2016 was GBP4.8 million (2015 - charge of GBP0.1 million). This comprised a tax charge of GBP1.8 million (2015 - GBP2.1 million) in recourse group subsidiary entities that are consolidated (shown in the 'Tax' line of the Group Income Statement), primarily in relation to group relief payable to entities held at FVTPL, and a tax credit of GBP6.6 million (2015 - GBP2.0 million) in recourse group subsidiary entities that are held at FVTPL (included within 'net gain on investments at fair value through profit or loss' on the Group Income Statement), including group relief receivable from recourse group subsidiary entities that are consolidated together with group and consortium relief received from project companies. The contributions made to JLPF are tax deductible when paid and, as a result, there is minimal tax payable by the UK holding and asset management activities of the Group. Capital gains from the realisation of investments in projects are generally exempt from tax under the UK's Substantial Shareholding Exemption for shares in trading companies or under the overseas equivalent. To the extent this exemption is not available, gains may be sheltered using current year losses or losses brought forward within the Group's holding companies. There are no losses in the Company but there are tax losses in recourse group subsidiary entities that are held at FVTPL.
In November 2016 and January 2017, HM Treasury issued draft provisions for the Finance Bill 2017, which included new proposed legislation to restrict tax deductible interest to 30% of a company's earnings before interest, tax, depreciation and amortisation (EBITDA) with effect from 1 April 2017. This followed the publication by HM Treasury of a consultation in May 2016 on Base Erosion and Profit Shifting (BEPS) to which the Company responded as part of industry representative forums. The Company holds a provision as at 31 December 2016 for the estimated impact of the new proposed legislation on the basis that the proposed new legislation had been enacted at that date; this provision is not material in the context of the Company's net asset value at this date.
Re-presented balance sheet
The re-presented balance sheet is reconciled to the Group Balance Sheet at 31 December 2016 below. The re-presented balance sheet involves the reclassification of certain amounts within the Group Balance Sheet principally in relation to assets and liabilities of GBP76.6 million (31 December 2015 - GBP123.4 million) within certain of the Company's recourse subsidiaries that are included in investments at FVTPL in the Group Balance sheet as a result of the requirement under IFRS 10 to fair value investments in these subsidiaries.
31 December 2016 2015(g)
----------------------------------------------------- ------------------
Re-presented
IFRS Group Re-presented Re-presented balance sheet
Balance Sheet Adjustments balance sheet balance sheet line items
------------------ ------------- ------------------ ------------------ ------------------
GBP million GBP million GBP million GBP million
Non-current assets
Plant and
equipment 0.3 (0.3)(c) - -
Investments at Portfolio book
FVTPL 1,257.5 (81.6)(a) 1,175.9 841.4 value
Cash collateral
- 23.7(b) 23.7 123.9 balances
Non-portfolio
- 0.3(a) 0.3 0.5 investments
Deferred tax
assets 1.0 (1.0)(c) - -
Other long term
- 3.7(c,e) 3.7 5.6 assets
------------------ ------------- ------------------ ------------------
1,258.8 (55.2) 1,203.6 971.4
------------------ ------------- ------------------ ------------------
Current assets
Trade and other
receivables 7.4 (7.4)(d) - -
Cash and cash Cash and cash
equivalents 1.6 51.5(a) 53.1 5.5 equivalents
------------------ ------------- ------------------ ------------------
9.0 44.1 53.1 5.5
------------------ ------------- ------------------ ------------------
Total assets 1,267.8 (11.1) 1,256.7 976.9
------------------ ------------- ------------------ ------------------
Current
liabilities
Working capital
and other
- (5.6)(b,d,e) (5.6) (22.1) balances
Current tax
liabilities (4.1) 4.1(d) - -
Borrowings (161.4) (3.6)(e) (165.0) (19.0) Cash borrowings
Trade and other
payables (14.7) 14.7(d) - -
------------------ ------------- ------------------ ------------------
(180.2) 9.6 (170.6) (41.1)
------------------ ------------- ------------------ ------------------
Net current
liabilities (171.2) 53.7 (117.5) (35.6)
------------------ ------------- ------------------ ------------------
Non-current
liabilities
Retirement benefit Pension deficit
obligations (69.3) 8.0(f) (61.3) (38.9) (IAS 19)
Other retirement
benefit
- (8.0)(f) (8.0) (7.3) obligations
Provisions (1.5) 1.5(d) - -
------------------ ------------- ------------------ ------------------
(70.8) 1.5 (69.3) (46.2)
------------------ ------------- ------------------ ------------------
Total liabilities (251.0) 11.1 (239.9) (87.3)
------------------ ------------- ------------------ ------------------
Net assets 1,016.8 - 1,016.8 889.6
------------------ ------------- ------------------ ------------------
Notes:
a) Investments at fair value through profit or loss (FVTPL) comprise: portfolio valuation of GBP1,175.9 million (31 December 2015 - GBP841.4 million), other investments not included in the portfolio valuation of GBP0.3 million (31 December 2015 - GBP0.5 million) and other assets and liabilities within recourse investment entity subsidiaries of GBP81.3 million (31 December 2015 - GBP123.4 million) (see note 11 to the Group financial statements). Re-presented cash and cash equivalents increased from GBP1.6 million (31 December 2015 - GBP1.1 million) on the Group Balance Sheet because of the inclusion of available cash balances in recourse group investment subsidiaries of GBP51.5 million (31 December 2015 - GBP4.4 million) excluding cash collateral balances of GBP23.7 million (31 December 2015 - GBP123.9 million); see the Financial Resources section in this Financial Review.
b) Other assets and liabilities within recourse investment entity subsidiaries of GBP81.3 million (31 December 2015 - GBP123.4 million) referred to in note (a) include (i) cash and cash equivalents of GBP75.2 million (31 December 2015 - GBP128.3 million), of which GBP23.7 million (31 December 2015 - GBP123.9 million) is held to collateralise future investment commitments, and (ii) positive working capital and other balances of GBP6.1 million (31 December 2015 - GBP4.9 million).
c) Plant and equipment and deferred tax assets are combined as other long term assets.
d) Trade and other receivables, current tax liabilities, trade and other payables and provisions are combined as working capital and other balances.
e) Borrowings comprise cash borrowings of GBP165.0 million (31 December 2015 - GBP19.0 million) net of unamortised financing costs of GBP3.6 million (31 December 2015 - GBP4.1 million), with the non-current portion of GBP2.4 million (31 December 2015 - GBP3.0 million) re-presented as other long term assets and the current portion of GBP1.2 million (31 December 2015 - GBP1.1 million) re-presented as working capital and other balances.
f) Total retirement benefit obligations are shown in their separate components as in note 18 to the Group financial statements.
g) For a reconciliation between the IFRS Group Balance Sheet and re-presented balance sheet as at 31 December 2015, please see the Additional Financial Information.
Net assets are also shown by operating segment in the table below.
Primary Secondary Asset
Investment Investment Management Total
As at 31 December 2016 2015 2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Portfolio valuation 696.3 405.9 479.6 435.5 - - 1,175.9 841.4
Other net current
liabilities (1.6) (16.0)
Group net
(borrowings)/cash(1) (88.2) 110.4
Post-retirement
obligations (69.3) (46.2)
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Group net assets 1,016.8 889.6
---------------------- --------- ----------- --------- ----------- --------- ----------- ---------- ----------
Note:
(1) Short-term cash borrowings of GBP165.0 million (31 December 2015 - GBP19.0 million) net of cash balances of GBP76.8 million (31 December 2015 - GBP129.4 million), of which GBP23.7 million was held to collateralise future investment commitments (31 December 2015 - GBP123.9 million).
Net asset value increased from GBP889.6 million at 31 December 2015 to GBP1,016.8 million at 31 December 2016.
The Group's portfolio of investments in project companies and listed investments was valued at GBP1,175.9 million at 31 December 2016 (31 December 2015 - GBP841.4 million). The valuation methodology and details of the portfolio value are provided in the Portfolio Valuation section.
The Group held cash balances of GBP76.8 million at 31 December 2016 (31 December 2015 - GBP129.4 million) of which GBP23.7 million (31 December 2015 - GBP123.9 million) was held to collateralise future investment commitments (see the Financial Resources section below for more details).
Working capital and other balances (a negative amount) were lower primarily because of lower provisions at 31 December 2016, higher accruals at 31 December 2015 relating to IPO incentive payments and a net positive fair value at 31 December 2016 on foreign exchange hedges.
The combined accounting deficit in the Group's defined benefit pension and post-retirement medical schemes at 31 December 2016 was GBP69.3 million (31 December 2015 - GBP46.2 million). The Group operates two defined benefit schemes in the UK - the John Laing Pension Fund (JLPF) and the John Laing Pension Plan (the Plan). Both schemes are closed to new members and future accrual. Under IAS 19, at 31 December 2016, the JLPF had a deficit of GBP64.2 million (31 December 2015 - GBP38.9 million) whilst the Plan had a surplus of GBP2.9 million (31 December 2015 - GBP2.7 million; this surplus was not recognised at 31 December 2015. The liability at 31 December 2016 under the post-retirement medical scheme was GBP8.0 million (31 December 2015 - GBP7.3 million).
The pension deficit in JLPF is based on a discount rate applied to pension liabilities of 2.80% (31 December 2015 - 3.75%) and long term RPI of 3.2% (31 December 2015 - 3.0%). The amount of the deficit is dependent on key assumptions, principally: inflation; the discount rate used; and the anticipated longevity of members. The discount rate, as prescribed by IAS 19, is based on yields from high quality corporate bonds. The deficit (under IAS 19) has increased from last year primarily due to an increase in JLPF's liabilities, as a result of the lower discount rate and higher long term RPI, partly offset by cash contributions to JLPF of GBP18.1 million.
Following a triennial actuarial review of the JLPF as at 31 March 2016, a seven-year deficit repayment plan has been agreed with the JLPF Trustee. The actuarial deficit of GBP171 million at 31 March 2016 is to be repaid as follows:
By 31 March GBP million ------------- ------------ 2017 24.5 2018 26.5 2019 29.1 2020 24.9 2021 25.7 2022 26.4 2023 24.6 ------------- ------------
Re-presented cash flow statement
The Group Cash Flow Statement includes the cash flows of the Company and certain recourse subsidiaries that are consolidated (Service Companies). The Group's recourse investment entity subsidiaries, through which the Company holds its investments in non-recourse project companies, are held at fair value in the financial statements and accordingly cash flows relating to investments in the portfolio are not included in the Group Cash Flow Statement. Investment-related cash flows are disclosed in note 11 to the financial statements.
The re-presented cash flow statement shows all recourse cash flows that arise in both the consolidated group (the Company and its consolidated subsidiaries) and in the recourse investment entity subsidiaries.
Year ended 31 December 2016 2015
------------------------ ------------------------
Re-presented cash flows Re-presented cash flows
GBP million GBP million
Cash yield 36.8 44.3
Operating cash flow (10.9) (15.9)
Net foreign currency exchange impact (18.2) 2.8
Total operating cash flow 7.7 31.2
------------------------------------------------------------------ ------------------------ ------------------------
Cash contributions to JLPF (including PPF levy) (18.4) (47.5)
Cash investment in projects (301.5) (142.9)
Proceeds from realisations 146.6 85.9
------------------------------------------------------------------ ------------------------ ------------------------
Net investing cash flows (154.9) (57.0)
------------------------------------------------------------------ ------------------------ ------------------------
Finance charges (6.8) (13.4)
Capital raise (net of costs) - 123.0
Dividend payments (26.2) (5.9)
Net cash (outflow)/inflow from financing activities (33.0) 103.7
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group cash (outflow)/inflow (198.6) 30.4
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group opening net cash balances 110.4 80.0
------------------------------------------------------------------ ------------------------ ------------------------
Recourse group closing net (debt)/cash balances (88.2) 110.4
------------------------------------------------------------------ ------------------------ ------------------------
Reconciliation to line items on re-represented Group Balance
Sheet
------------------------------------------------------------------ ------------------------ ------------------------
Cash collateral balances 23.7 123.9
------------------------------------------------------------------ ------------------------ ------------------------
Other cash balances 53.1 5.5
------------------------------------------------------------------ ------------------------ ------------------------ Total cash and cash equivalents 76.8 129.4 ------------------------------------------------------------------ ------------------------ ------------------------ Cash borrowings (165.0) (19.0) ------------------------------------------------------------------ ------------------------ ------------------------ Net (debt)/cash (88.2) 110.4 ------------------------------------------------------------------ ------------------------ ------------------------
Cash yield comprises GBP34.8 million (2015 - GBP38.9 million) from the investment portfolio and GBP2.0 million (2015 - GBP5.4 million) from non-portfolio investments.
Operating cash flow in the year ended 31 December 2016 was less adverse than in 2015 primarily due to higher recoveries of costs on financial closes and as a result of amounts paid in the prior year in relation to the Company's IPO in 2015.
Total operating cash flows are net of an adverse foreign exchange impact of GBP18.2 million (2015 - favourable impact of GBP2.8 million), principally arising on foreign exchange hedges as a result of the weakening of Sterling against relevant currencies during the year.
In the year, in addition to the payment of the PPF levy, the Group made a cash contribution to JLPF of GBP18.1 million (2015 - regular cash contributions of GBP27.0 million, special cash contributions of GBP20.0 million).
During the year, cash of GBP301.5 million (31 December 2015 - GBP142.9 million) was invested in project companies. In the same period, investments in six projects were realised (including four investments to JLIF and two investments to JLEN) for total proceeds of GBP140.2 million (2015 - GBP85.9 million from the realisation of seven investments for total proceeds of GBP86.3 million net of a GBP0.4 million price adjustment for a project disposed of in 2014). Additionally, a 2.2% shareholding in JLEN was sold for GBP6.4 million (2015 - GBPnil).
Finance charges were higher in 2015 due to the payment of upfront costs in relation to the committed corporate banking facilities entered into at the time of IPO.
The capital raise, net of costs, from the Company's IPO in 2015 was GBP123.0 million.
Dividend payments of GBP26.2 million in the year ended 31 December 2016 comprise the final dividend for 2015 of GBP19.4 million and the interim dividend for 2016 of GBP6.8 million (2015 - interim dividend for 2015 of GBP5.9 million).
FINANCIAL RESOURCES
At 31 December 2016, the Group had principal committed corporate banking facilities of GBP400.0 million, expiring in March 2020 (31 December 2015 - GBP350.0 million), which are primarily used to back investment commitments. These facilities were increased by GBP50.0 million in June 2016. The Group also had surety facilities of GBP50.0 million backed by committed liquidity facilities both expiring in March 2018. Net available financial resources at 31 December 2016 were GBP168.1 million (31 December 2015 - GBP180.1 million).
Analysis of Group financial resources
31 December 31 December
2016 2015
GBP million GBP million
------------------------------------------ ------------- -------------
Total committed facilities 450.0 350.0
------------------------------------------ ------------- -------------
Letters of credit issued under corporate
banking facilities (see below) (112.6) (154.2)
Letters of credit issued under surety (50.0) -
facilities (see below)
Other guarantees and commitments (6.5) (1.1)
Short term cash borrowings (165.0) (19.0)
------------------------------------------ ------------- -------------
Utilisation of facilities (334.1) (174.3)
------------------------------------------ ------------- -------------
Headroom 115.9 175.7
Cash and bank deposits(1) 53.1 5.5
Less unavailable cash (0.9) (1.1)
------------------------------------------ ------------- -------------
Net available financial resources 168.1 180.1
------------------------------------------ ------------- -------------
(1) Cash and bank deposits excluding cash collateral balances
Letters of credit issued under the committed corporate banking facilities of GBP112.6 million (31 December 2015 - GBP154.2 million) and under additional surety facilities of GBP50.0 million (31 December 2015 - GBPnil) together with cash collateral represent future cash investment by the Group into underlying projects in the Primary Investment portfolio.
31 December 31 December
2016 2015
GBP million GBP million
-------------------------------------- ------------- -------------
Letters of credit issued 162.6 154.2
Cash collateral 23.7 123.9
-------------------------------------- ------------- -------------
Future cash investment into projects 186.3 278.1
-------------------------------------- ------------- -------------
The table below shows the letters of credit issued analysed by investment and the date or dates when cash is expected to be invested into the underlying project at which point the letter of credit would expire:
Letter of Expected
credit issued date of cash
Project GBP million investment
---------------------------------------- --------------- ----------------------
New Generation Rollingstock, Australia 24.3 Jan 2017 to Oct 2017
Cramlington Biomass, UK 27.0 Oct 2017
IEP (Phase 2), UK 72.7 Mar 2018
Sterling Wind Farm, US 18.1 May 2017 to Sept 2017
Kiata Wind Farm, Australia 16.0 Jan 2017 to Oct 2017
New Royal Adelaide Hospital, Australia 4.5 June 2017
Total 162.6
---------------------------------------- --------------- ----------------------
The table below shows the cash collateral balances at 31 December 2016 analysed by investment and the date when the cash collateral is expected to be invested into the underlying project:
Cash
collateral Expected
amount date of cash
Project GBP million investment
------------------------------ ------------- ---------------------
New Perth Stadium, Australia 3.3 Jan 2017 to Dec 2017
I-77 Managed Lanes, US 20.1 Oct 2017 to Nov 2018
IEP (Phase 1), UK 0.3 July 2017
Total 23.7
------------------------------ ------------- ---------------------
Cash collateral is included within 'investments at fair value through profit or loss' in the Group Balance Sheet.
There are significant non-recourse borrowings within the project companies in which the Group invests. The interest rate exposure on the debt of such project companies is, in most circumstances, fixed on financial close, through a long-dated bond or fixed rate debt, or through the fixing of floating rate bank debt via interest rate swaps. Given this, the impact on the Group's returns from investments in project companies of changes in interest rates on project borrowings is minimal. There is an impact from changes in interest rates on the investment income from monies held on deposit both at Group level and within project companies but such an effect is not material in the context of the Group Balance Sheet.
FOREIGN CURRENCY EXPOSURE
The Group regularly reviews the sensitivity of its balance sheet to changes in exchange rates relative to Sterling and to the timing and amount of forecast foreign currency denominated cash flows. As set out in the Portfolio Valuation section, the Group's portfolio comprises investments denominated in Sterling, Euro, and Australian, US and New Zealand Dollars. As a result of foreign exchange movements in the year ended 31 December 2016, there was a favourable fair value movement of GBP74.7 million in the portfolio valuation between 31 December 2015 and 31 December 2016. This positive impact was partly offset by net losses, both realised and unrealised of GBP11.9 million from foreign exchange hedges held by the Group during 2016 on part of its Euro-denominated investments (GBP152.5 million) and on part of its New Zealand Dollar-denominated investment (GBP10.9 million). The net losses on other hedges held by the Group against cash collateral balances currencies were offset by foreign exchange translation gains on those and other balances.
The Group may apply an appropriate hedge to a specific currency transaction exposure, which could include borrowing in that currency or entering into forward foreign exchange contracts. An analysis of the portfolio value by currency is set out in the Portfolio Valuation section.
Letters of credit in issue at 31 December 2016 of GBP162.6 million (31 December 2015 - GBP154.2 million) are analysed by currency as follows:
31 December 31 December
2016 2015
Letters of credit by currency GBP million GBP million
------------------------------- ------------- -------------
Sterling 99.7 122.1
US dollar 18.1 11.7
Australian dollar 44.8 20.4
------------------------------- ------------- -------------
162.6 154.2
------------------------------- ------------- -------------
Cash collateral at 31 December 2016 of GBP23.7 million (31 December 2015 - GBP123.9 million) is analysed by currency as follows:
31 December 31 December
2016 2015
Cash collateral by currency GBP million GBP million
----------------------------- ------------- -------------
Sterling 0.3 58.7
US dollar 20.1 16.7
Australian dollar 3.3 48.5
----------------------------- ------------- -------------
23.7 123.9
----------------------------- ------------- -------------
GOING CONCERN
The Group has committed corporate banking facilities until March 2020 and has sufficient resources available to meet its committed capital requirements, investments and operating costs for the foreseeable future. Accordingly, the Group has adopted the going concern basis in the preparation of its financial statements for the year ended 31 December 2016.
Patrick O'D Bourke
Group Finance Director
PRINCIPAL Risks AND RISK MANAGEMENT
The effective management of risks within the Group is essential to the successful delivery of the Group's objectives. The Board is responsible for ensuring that risks are identified and appropriately managed across the Group and has delegated to the Audit & Risk Committee responsibility for reviewing the effectiveness of the Group's internal controls, including the systems established to identify, assess, manage and monitor risks. The Group's risk appetite when making decisions on investment commitments or potential realisations is assessed by reference to the expected impact on NAV.
During the year, the previous Audit Committee was renamed the Audit & Risk Committee and its remit was expanded. Under its new remit, the Committee has a greater involvement in overseeing the effective management of risks within the Group.
The principal internal controls that operated throughout 2016 and up to the date of this Annual Report include:
-- an organisational structure which provides adequate segregation of responsibilities, clearly defined lines of accountability, delegated authority to trained and experienced staff and extensive reporting;
-- clear business objectives aligned with the Group's risk appetite;
-- risk reporting, including identification of risks through Group-wide risk registers, that is embedded in the regular management reporting of business units and is communicated to the Board; and
-- an independent internal audit function, which reports to the Audit & Risk Committee. The external auditor also reports to the Audit & Risk Committee on the effectiveness of financial controls relevant to the audit.
The Group's Internal Audit function has several objectives, in particular:
-- to provide independent assurance to the Board, through the Audit & Risk Committee, that internal control processes, including those related to risk management, are relevant, fit for purpose, effective and operating throughout the business;
-- to provide a deterrent to fraud and to provide another layer of assurance that the Group is meeting its FCA regulatory requirements; and
-- to provide advice on efficiency improvements to internal control processes.
Internal Audit is independent of the business and reports functionally to the Group Finance Director and directly to the Chairman of the Audit & Risk Committee. The Group Head of Internal Audit meets regularly with senior management and the Audit & Risk Committee to discuss key findings and management actions undertaken.
The Group Head of Internal Audit can call a meeting with the Chairman of the Audit & Risk Committee at any time and meets privately with the Audit & Risk Committee, without senior management present, as and when required, but at least annually.
A Management Risk Committee, comprising senior members of management and chaired by the Group Finance Director, assists the Board, Audit & Risk Committee, and Executive Committee in formulating and enforcing the Group's risk management policy. The Head of Internal Audit attends each meeting of the Management Risk Committee. It reports formally to the Audit & Risk Committee.
The Directors confirm that they have monitored throughout the year and carried out (i) a review of the effectiveness of the Group's risk management and internal control systems and (ii) a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity. No material weaknesses were identified from the review of the Group's risk management and internal control systems. The Group risk register is reviewed at every meeting of the Audit & Risk Committee and Management Risk Committee and every six months by the Board.
The above controls and procedures are underpinned by a culture of openness of communication between operational and executive management. All investment decisions are scrutinised in detail by the Investment Committee and, if outside the Investment Committee's terms of reference, also by the Board.
The Directors' assessment of the principal risks applying to the Group is set out below, including the way in which risks are linked to the three strategic objectives set out in the Chief Executive Officer's Review. Additional risks and uncertainties not presently known to the Directors, or which they currently consider not to be material, may also have an adverse effect on the Group:
Change
Link to strategic in risk since 31 December
Risk objectives (note) Mitigation 2015
---------------------------- ---------------------------- ---------------------------- ----------------------------
Governmental policy 1, 2, 3 The Board limits its No change
Changes to legislation or exposure to any single
public policy in the jurisdiction.
jurisdictions in which the Thorough due diligence is
Group operates or carried out in order to
may wish to operate could assess a specific
negatively impact the country's risk (for
volume of potential example
opportunities available economic and political
to the Group and the stability, tax policy and
returns from existing local practices) before
opportunities. any investment is
The use of PPP programmes made.
by governmental entities Where possible the Group
may be delayed or may seeks specific contractual
decrease thereby protection from changes in
limiting opportunities for government
private sector policy and law for the
infrastructure investors in projects it invests in.
the future, or be General change of law is
structured considered to be a
such that returns to normal business risk.
private sector During the bidding process
infrastructure investors for a project, the Group
are reduced. takes a view on
Governmental entities may an appropriate level of
in the future seek to return to cover the risk
terminate or renegotiate of non-discriminatory
existing projects changes in law.
for example to introduce During the bidding process
new policies or legislation for a project, the Group
that result in higher tax assesses the sensitivity
obligations of the project's
on existing PPP or forecast returns to
renewable energy projects changes in factors such as
or otherwise affect tax rates and/or, for
existing or future renewable energy projects,
projects. governmental support
Changes to legislation or mechanisms.
public policy relating to The Group targets
renewable energy could jurisdictions which have a
negatively impact track record of support
the economic returns on the for renewable energy
Group's investments in investments and which
renewable energy projects, continue to demonstrate
which would such support.
adversely affect the demand Through its track record
for and attractiveness of of more than 120
such projects. investment commitments,
Compliance with the public the Group has developed
tender regulations which significant expertise in
apply to PPP projects is compliance with public
complex and the tender regulations.
outcomes may be subject to
third party challenge and
reversed.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Macroeconomic factors 1, 2, 3 Factors which have the Increased
To the extent such factors potential to impact
cannot be hedged, adversely the underlying
inflation, interest rates cash flows of an
and foreign exchange investment,
all potentially impact the and hence its valuation,
return generated from an are hedged wherever
investment and its possible at a project
valuation. level and sensitivities
Weakness in factors which are considered during the
affect energy prices, such investment appraisal
as the oil price, could process.
negatively impact Systemic risks, such as
the economic returns on the potential deflation, or
Group's investments in appreciation/depreciation
renewable energy. of Sterling versus
Weakness in the political the currency in which an
and economic climate in a investment is made, are
particular jurisdiction assessed in the context of
could impact the the portfolio
value of, or the return as a whole.
generated from, any or all The Group seeks to reduce
of the Group's investments the extent to which its
located in that renewable energy
jurisdiction. investments are exposed
to energy prices through
governmental support
mechanisms and/or off-take
arrangements.
The Group monitors closely
the level of investments
it has exposed to foreign
currencies,
including regularly
testing the sensitivity of
the financial covenants in
its corporate banking
facilities to a
significant change in the
value of individual
currencies.
Where possible, specific
clauses relating to
potential currency change
within a particular
jurisdiction are
incorporated in project
documentation.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Liquidity in the secondary 1, 2, 3 Projects are appraised on No change
market a number of bases,
Weakness in the secondary including being held to
markets for investments in maturity. Projects are
PPP or renewable energy, also carefully structured
for example so that they are capable
as the result of a lack of of being divested, if
economic growth in relevant appropriate, before
markets, regulatory changes maturity.
in the Over recent years, the
banking sector, liquidity secondary markets for both
in financial markets, PPP and renewable energy
changes in interest and investments have
exchange rates and grown. In particular,
project finance market several new environmental
conditions, and the recent funds have been launched.
difficulties in parts of While JLIF and JLEN are
the Eurozone, may natural buyers of the
affect the Group's ability Group's PPP and renewable
to realise full value from energy investments
its divestments. respectively, the size and
The secondary market for breadth of secondary
investments in renewable markets provide the Group
energy projects may be with confidence
affected by, inter that it can sell
alia, changes in energy investments to other
prices, in governmental purchasers.
policy, in the value of
governmental support
mechanisms and in project
finance market conditions.
The ability of JLIF and
JLEN to raise finance for
further investments may
have an impact on
both the Group's ability to
sell investments in PPP and
renewable energy projects
and on the
Group's asset management
business more generally.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Financial resources 1, 3 In February 2015, the No change
Any shortfall in the Group entered into
financial resources that corporate banking
are available to the Group facilities totalling
to satisfy its financial GBP350.0 million
obligations may make it which mature in March
necessary for the Group to 2020. In June 2016, these
constrain its business facilities were increased
development, refinance to GBP400.0 million
its outstanding and in December 2016
obligations, forego additional surety
investment opportunities facilities (GBP50.0
and/or sell existing million) became committed
investments. until
Inability to secure project March 2018. Available
finance could hinder the headroom is carefully
ability of the Group to monitored and compliance
make a bid for with the financial
an investment opportunity, covenants
or where the Group has a and other terms of these
preferred bidder position, facilities is closely
could negatively observed. The Group also
impact whether an monitors its working
underlying project reaches capital, cash collateral
financial close. and letter of credit
The inability of a project requirements and maintains
company to satisfactorily an active dialogue
refinance existing maturing with its banks. It
medium-term operates a policy of
project finance facilities ensuring that sufficient
periodically during the financial resources are
life of a project could maintained
affect the Group's to satisfy committed and
projected future returns likely future investment
from investments in such requirements.
projects and hence their The Group believes that
valuation in the there is currently
Group's balance sheet. sufficient depth and
Adverse financial breadth in project finance
performance by a project markets to meet the
company which affects the financing needs of the
financial covenants in projects it invests in.
its project finance loan The Group works closely
documents may result in the with a wide range of
project company being project finance providers,
unable to make including banks and other
distributions to the Group financial institutions.
and other investors, which Projects in which the
would impact the valuation Group has invested in PPP
of the Group's markets such as Australia
investment in such project and New Zealand,
company, and may enable where the tenor of project
project finance debt finance facilities at
providers to declare financial close tends to
default on the financing be medium term,
terms and exercise their will need to be refinanced
security. in due course.
Prior to financial close,
all proposed investments
are scrutinised by the
Investment Committee.
This scrutiny includes a
review of sensitivities to
adverse performance of
investment returns
and financial ratio tests
as well as an assessment
of a project's ability to
be refinanced
if the tenor of its debt
is less than the term of
the concession or the
project's useful life.
The Group maintains an
active dialogue with the
banks and other financial
institutions which
provide project finance to
the projects in which it
invests. Monitoring of
compliance with
financial covenant ratios
and other terms of loan
documents continues
throughout the term
of the project finance
loan.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Pensions 1, 3 The Group's two defined No change
The amount of the deficit benefit pension schemes
in the Group's main defined are overseen by corporate
benefit pension scheme trustees, the directors
(JLPF) can vary of which include
significantly due to gains independent and
or losses on scheme professionally qualified
investments and movements individuals. The Group
in the assumptions works closely
used to value scheme with the trustees on the
liabilities (in particular appropriate funding
life expectancy, discount strategy for the schemes
rate and inflation and takes independent
rate). Consequently the actuarial advice as
Group is exposed to the appropriate. Both schemes
risk of increases in cash are closed to future
contributions payable, accrual and accordingly
volatility in the deficit have no active members,
reported in the Group only deferred members and
Balance Sheet, and pensioners. A significant
gains/losses recorded in proportion of
the Group Statement of the liabilities of JLPF is
Comprehensive Income. matched by a bulk annuity
buy-in agreement with
Aviva. Other hedging
is also in place.
The actuarial valuation of
JLPF as at 31 March 2016
was finalised in December
2016. The next
actuarial valuation is due
as at 31 March 2019.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Competition 1 The Group believes that No change
The Group operates in its experience and
competitive markets and may expertise as an active
not be able to compete investor and asset manager
effectively or profitably. accumulated over more than
20 years, together with
its flexibility and
ability to respond
to market conditions will
continue to enable it to
compete effectively and
secure attractive
investments.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Valuation 3 The discount rates used to Increased
The valuation of an value investments are
investment in a project may derived from publicly
not reflect its ultimate available market data
realisable value. and other market evidence
In circumstances where the and are updated regularly.
revenue derived from a The Group has a good track
project is related to record of realising
patronage (i.e. customer investments at prices
usage), actual revenues may consistent with the fair
vary materially from values at which they are
assumptions made at the held.
time the investment The Group's investments
commitment is made. In are in projects which are
addition, to the extent principally
that a project company's availability-based (where
actual costs incurred the
differ from forecast costs, revenue does not generally
for example, because of depend on the level of use
late construction, and of the project asset).
cannot be passed Where patronage
on to sub-contractors or or volume risk is taken,
other third parties, the Directors review
investment returns and revenue assumptions and
valuations may be adversely their sensitivities
affected. in detail prior to any
Revenues from renewable investment commitment. The
energy projects may be Group's intention is to
affected by the volume of maintain a majority
power production of availability - based
(e.g. from changes in wind investments by value in
or solar yield), the its portfolio.
availability of fuel (in Where the revenue from
the case of biomass investments is related to
projects), restrictions on patronage or volume (e.g.
the electricity network, with regard to
the reliability of investments in renewable
electrical connections energy projects), risks
or other factors such as are mitigated through a
noise and other combination of factors,
environmental restrictions, including (i) the use of
as well as by changes independent forecasts of
in energy prices and to future volumes (ii) lower
governmental support gearing versus
mechanisms. that of availability-based
The valuation of the projects (iii)
Group's investment stress-testing the
portfolio is affected by robustness of project
movements in foreign returns
exchange against significant falls
rates, which are reflected in forecast volumes.
through the Group's The Group typically hedges
financial statements. In cash flows arising from
addition, there are investment realisations or
foreign exchange risks significant
associated with conversion distributions in
of foreign currency cash currencies other than
flows relating Sterling.
to an investment into and The intention is that
out of Sterling. projects are structured
The valuation of the such that (i) day-to-day
Group's investment service provision is
portfolio could be affected sub-contracted to
by changes in tax qualified sub-contractors
legislation, supported by appropriate
for instance changes to security packages (ii)
limit tax-deductible cost and price inflation
interest (see Taxation risk in relation to the
section). provision of services lies
During the construction with sub-contractors
phase of an infrastructure (iii) performance
project, there are risks deductions in relation to
that either the non-availability lie with
works are not completed sub-contractors (iv)
within the agreed future major maintenance
time-frame or that costs and ongoing project
construction costs overrun. company costs are reviewed
Where annually and
such risks are not borne by cost mitigation strategies
sub-contractors, or adopted as appropriate.
sub-contractors fail to The Group has procedures
meet their contractual in place to ensure that
obligations, this can project companies in which
result in delays or cost it invests appoint
overruns, which may competent sub-contractors
adversely affect the with relevant experience
valuation and financial strength. If
of and return on the project construction
Group's investments. If is delayed,
construction or other long sub-contracting
stop dates are exceeded, arrangements contain terms
this may enable public enabling the project
sector counter-parties company to recover
and/or project finance debt liquidated damages,
providers to declare additional costs and lost
a default and, in the case revenue, subject to
of the latter, to exercise limits. In addition, the
their security. project company may
The Group is reliant on the terminate its agreement
performance of third with a sub-contractor if
parties in constructing an the latter is in default
asset to an appropriate and seek an alternative
standard as well as sub-contractor.
operating it in a manner The terms of the
consistent with contractual sub-contracts into which
requirements. Poor project companies enter
performance by, or failure provide some protections
of, such third parties may for investment returns
result in the impairment or from the poor performance
loss of of third parties.
an investment. The ability to replace
defaulting third parties
is supported by security
packages to protect
against price movement on
re-tendering.
If long stop dates are
exceeded, the Group has
significant experience as
an active manager
in protecting its
investments by working
with all parties to a
project to agree revised
timetables
and/or other restructuring
arrangements.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Counterparty risk 3 The Group works with Increased
The Group is exposed to multiple clients, joint
counterparty credit risk venture partners,
with regards to (i) sub-contractors and
governmental entities, institutional
sub-contractors, lenders investors so as to reduce
and suppliers at a project the probability of
level and (ii) consortium systemic counterparty risk
partners, financial in its investment
institutions and suppliers portfolio. In establishing
at a Group level. project contractual
Public sector arrangements prior to
counter-parties to PPP making an investment,
projects may seek to the credit standing and
renegotiate contract terms relevant experience of a
and/or sub-contractor are
terminate contracts in a considered. Post contract
way which impacts the award, the financial
valuation of one or more of standing of key
the Group's investments. counterparties is
In overseas jurisdictions, monitored to provide an
the Group's investments early warning
backed by governmental of possible financial
entities may ultimately distress.
be subject to sovereign PPP projects are normally
risk. structured so as to
provide significant
contractual protection for
equity investors. Such
protection may include
"termination for
convenience" clauses which
enable public sector
counter-parties to
terminate projects subject
to payment of
compensation,
including equity
investors.
PPP projects are normally
supported by central and
local government
covenants, which
significantly
reduce the Group's risk.
Risk is further reduced by
the increasing
geographical spread of
the Group's investments.
Counterparties for
deposits at a Group level,
project debt swaps and
deposits within project
companies are required to
be banks with a suitable
credit rating and are
monitored on an ongoing
basis.
Entry into new
geographical areas which
have a different legal
framework and/or different
financial market
characteristics is
considered by the Board
separately from individual
investment
decisions.
Typically, a substantial
proportion of the revenue
generated by renewable
energy projects
is backed by governmental
support mechanisms.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Major incident 2, 3 At financial close, No change
A major incident at any of projects benefit from
the Group's main locations comprehensive insurance
or any of the projects arrangements, either
invested in by directly
the Group, such as a or through contractors'
terrorist attack, war or insurance policies.
significant cyber-attack, Detailed business
could lead to a loss continuity plans have been
of crucial business data, designed and are tested at
technology, buildings and frequent/regular
reputation and harm to the intervals.
public, all Business continuity
of which could collectively procedures are also
or individually result in a regularly updated in order
loss of value for the to maintain their
Group. relevance.
John Laing operates to
independent, third
party-certified management
systems in respect of
health and safety (OHSAS
18001:2007). In addition,
it routinely monitors
health, safety and
environmental issues in
the projects it invests in
or manages.
Cyber risk is addressed
through (i) the Group's
organisational structure
which includes segregation
of responsibilities,
delegated lines of
accountability, delegated
authorities and outsourced
IT arrangements, as well
as (ii) specific controls,
including controls over
payments and access
to IT systems.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Investment adviser 2 Through JLCM, and No change
agreements with JLIF and supported by other parts
JLEN of the Asset Management
A loss of JLCM's investment division, the Group
adviser agreements with focuses
JLIF and/or JLEN on delivering a high
respectively would be quality service to both
detrimental to the Group's funds.
Asset Management business.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Future returns from 1, 2, 3 In bidding for new No change
investments projects, the Group sets a
The Group's historical target internal rate of
returns and cash yields return taking account
from investments may not be of historical experience,
indicative of future current market conditions
returns. and expected returns once
The Group's expected the project
hold-to-maturity internal becomes operational. The
rates of return from Group continually looks
investments are based for value enhancement
on a variety of assumptions opportunities which
which may not be correct at would improve the target
the time they are made and rate of return.
may not At the investment
be achieved in the future. appraisal stage, projects
are tested for their
sensitivity to changes in
key assumptions.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Taxation 1, 3 Tax positions taken by the Increased
The Group may be exposed to Group are based on
changes in taxation in the industry practice and/or
jurisdictions in which it external tax advice.
operates, At the investment
or it may cease to satisfy appraisal stage, projects
the conditions for relevant are tested for their
reliefs. Tax authorities sensitivity to changes in
may disagree tax rates. Project
with the positions that the valuations are regularly
Group has taken or intends updated for changes in tax
to take. rates.
Project companies may be In March 2016, in response
exposed to changes in to the OECD
taxation in the recommendations, the UK
jurisdictions in which they Government announced
operate. proposals
In October 2015, the OECD for the introduction of a
published its Fixed Ratio Rule to cap
recommendations for the amount of tax
tackling BEPS by deductible net interest
international to 30% of a company's UK
companies. It identified EBITDA. This was followed
the use of tax deductible by a detailed consultation
interest as one of the key paper in May
areas where 2016 and detailed
there is opportunity for legislation in November
BEPS by international 2016 and January 2017 (for
companies. It is up to the further information,
governments of OECD see the Financial Review
countries to decide how to section).
implement the OECD's The Group's understanding
recommendations into their is that not all
domestic law. To governments will implement
the extent that one or more the OECD recommendations
of the jurisdictions in in the same way. Some
which the Group operates believe their existing
changes its rules rules are adequate to
to limit tax deductible limit the scope for BEPS.
interest, this could Others may take advantage
significantly impact (i) of grandfathering
the tax payable by provisions or the
subsidiaries potential for exemptions
of the Group (ii) the for
valuation of existing projects with a public
investments (iii) the way benefit.
in which future The Group's effective tax
project-financed rate tends to be lower
infrastructure investments than the standard rate of
are structured, in each UK corporation
case in such jurisdictions. tax principally because
the contributions the
Group makes to JLPF are
deductible for tax
purposes.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Personnel 1, 2, 3 The Group regularly No change
The Group may fail to reviews pay and benefits
recruit or retain key to ensure they remain
senior management and competitive. The Group's
skilled personnel in, or senior managers
relocate high-quality participate in long term
personnel to, the incentive plans. The Group
jurisdictions in which it plans its human resources
operates or seeks to needs carefully, including
expand. appropriate local
As a result of the outcome recruitment, when it bids
of the UK referendum on for overseas projects.
membership of the EU, there The Group has the ability
is some uncertainty to recruit EU nationals in
as to the position of its Amsterdam office or
certain EU nationals living could open further
and working in the UK. This offices in other EU
uncertainty jurisdictions if
could impact the Group's necessary.
ability to recruit and
retain EU nationals in the
UK.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Note:
The Group's three strategic objectives, as set out in the Chief Executive Officer's Review, are:
1. Growth in primary investment volumes (new capital committed to greenfield infrastructure projects) over the medium term.
2. Growth in the value of external AuM and related fee income.
3. Management and enhancement of the Group's investment portfolio, with a clear focus on active management during construction, accompanied by realisations of investments which, combined with the Group's corporate banking facilities and operational cash flows, enable it to finance new investment commitments.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that the Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
-- provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
-- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces; and
-- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 6 March 2017 and is signed on its behalf by:
Olivier Brousse Patrick O'D Bourke Chief Executive Group Finance Officer Director 6 March 2017 6 March 2017
Independent Auditor's Report to the Shareholders of John Laing Group plc on the audited financial results of John Laing Group plc
We confirm that we have issued an unqualified opinion on the full financial statements of John Laing Group plc.
Our audit report on the full financial statements sets out the following risks of material misstatement which had the greatest effect on our audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those risks:
Risk description How the scope of our audit responded to the risk
-------------------------------------------------- ------------------------------------------------------------------
Valuation of investments
The Group holds a range of investments which * We assessed the design and implementation of the
primarily include PPP and Renewable Energy controls in place when valuing the Group's
assets. investments.
The total value of these assets at 31 December
2016 was GBP1,176 million (31 December 2015
- GBP841 million) as disclosed in note 11 to the
financial statements. These underlying assets * We obtained evidence, including external market data,
are held across a range of different sectors to substantiate key assumptions, including project
comprising Transport, Environmental (including discount rate(s) and macro-economic assumptions such
Renewable Energy) and Social Infrastructure, and as forecast inflation and deposit rates.
a range of geographies including the UK,
Europe, North America and Asia Pacific.
The valuation of investments is a significant * We benchmarked management's discount rates against
judgement underpinned by a number of key market transaction data, including the Group's
assumptions disposals in the current and previous period. We
and estimates. These judgements include discount performed this work in conjunction with our own
rates, forecast project cash-flows and valuation specialists.
macro-economic
assumptions such as future inflation and deposit
rates. Many of these assumptions differ depending
on both the sector and geography of the project. * On the valuation of the New Royal Adelaide Hospital
A full internal valuation is prepared at and Manchester Waste investments we reviewed, where
June and December each year and this valuation is relevant, the legal advice obtained and held
incorporated into the financial statements. discussions with the Group's external legal counsel,
An independent opinion is obtained from an reviewed contractual documentation and held
external valuer that the portfolio as a whole discussions with the directors of each project
represents company to understand and challenge the key
fair value. judgements in valuing each project.
As disclosed in note 2 to the financial
statements, the New Royal Adelaide Hospital
project
is experiencing construction delays and the * We met with the Group's external valuer to understand
Manchester Waste VL Co project is experiencing and challenge the process undertaken by them in
increased counterparty risk. Consequently, there arriving at their opinion that the portfolio as a
is increased judgement to be made around whole represents fair value. We also assessed the
the valuation of the investment in each project competence and independence of the external valuer.
including the completion date of New Royal
Adelaide Hospital and the outcome of discussions
with the Greater Manchester Waste Disposal
Authority (GMWDA) on the future of the Manchester * We checked that the disclosures in the financial
Waste VL Co project. statements were appropriate particularly in respect
of the judgements taken.
More information on the valuation and valuation
methodology (including the judgements associated
with the valuation of New Royal Adelaide Hospital
and Manchester Waste) can be found in note
2 to the financial statements.
-------------------------------------------------- ------------------------------------------------------------------
Key observations No material matters were identified arising from our audit work.
We consider the judgements
adopted in valuing the Group's investments to be appropriate. We
also consider the disclosures
around the valuation of investments to be appropriate.
-------------------------------------------------- ------------------------------------------------------------------
Valuation of the defined benefit pension schemes
The Group has two defined benefit pension schemes
(The John Laing Pension Fund and The John * We assessed the design and implementation of the
Laing Pension Plan) which had a combined deficit controls in place when valuing the Group's defined
of GBP61 million at 31 December 2016 (GBP39 benefit pension schemes including the setting of
million at 31 December 2015). actuarial assumptions.
The valuation of the deficit is subject to a
number of judgements including the adoption of
the appropriate (i) discount rate (ii) inflation * In conjunction with our internal actuarial
rate and (iii) mortality rate assumptions. specialists, we compared the Group's key assumptions,
including the discount rate, mortality rate
There is also a judgement concerning the Group's assumptions and the inflation rates against our
ability to recover a surplus under the rules expected benchmarks and those adopted by other
of the John Laing Pension Fund and consequently companies in the market.
the consideration of minimum funding requirements
under IFRIC 14 'The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their
Interaction'. * We audited the scheme assets via agreement to
external confirmations from the custodian and also
See note 18 for further information. agreed a sample of scheme assets back to independent
market data. We also obtained and reviewed the AAF
01/06/ISAE 3402 assurance report on internal controls
for each custodian to assess if there were any
matters which impact our work.
* In assessing the impact of IFRIC 14, we examined the
nature of the Group's funding commitments to the
schemes and reviewed the scheme rules, the external
legal advice obtained by management and the actuarial
schedule of contributions.
* We checked that the disclosure requirements of IAS
19R Employee Benefits had been fulfilled.
-------------------------------------------------- ------------------------------------------------------------------
Key observations No material matters were identified arising from our audit work.
We consider the judgements
adopted by the Group in valuing the pension scheme liabilities to
be appropriate and concur
that the Group has the ability to recover any surplus under the
rules of the John Laing Pension
Fund and consequently is not subject to a minimum funding
requirement under IFRIC 14. We also
consider the disclosures around the valuation of the defined
benefit pension schemes to be
appropriate.
-------------------------------------------------- ------------------------------------------------------------------
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.
Our liability for this report and for our full audit report on the financial statements is to the Company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.
Deloitte LLP
Chartered Accountants and Statutory Auditor
6 March 2017
Group Income Statement
for the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
------------------------------------------------------------
Statutory Pro forma Statutory
Notes GBP million GBP million GBP million
------------------------------------------------------------ ------ ------------------ ------------- -------------
Continuing operations
Net gain on investments at fair value through profit or
loss 11 218.8 133.1 129.7
Other income 6 42.0 34.5 31.5
------------------------------------------------------------ ------ ------------------ ------------- -------------
Operating income 3 260.8 167.6 161.2
Cost of sales - (0.1) (0.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Gross profit 260.8 167.5 161.1
Administrative expenses (58.4) (55.3) (52.3)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit from operations 7 202.4 112.2 108.8
Finance costs 9 (10.3) (11.3) (11.3)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit before tax 3 192.1 100.9 97.5
Tax charge 10 (1.8) (2.1) (2.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit from continuing operations 190.3 98.8 95.4
Discontinued operations
Profit from discontinued operations (after tax) - 5.7 5.7
------------------------------------------------------------ ------ ------------------ ------------- -------------
Profit for the year attributable to the Shareholders of the
Company 190.3 104.5 101.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Earnings per share (pence)
From continuing operations
Basic 4 51.9 27.6 28.3
Diluted 4 51.4 27.5 28.2
From continuing and discontinued operations
Basic 4 51.9 29.2 30.0
Diluted 4 51.4 29.1 29.9
Group Statement of Comprehensive Income
for the year ended 31 December 2016
Year ended Year ended
31 December 31 December 2015
2016
Statutory Pro forma Statutory
Note GBP million GBP million GBP million
Profit for the year 190.3 104.5 101.1
Exchange differences
on translation of
overseas operations 0.3 - -
Actuarial (loss)/gain
on retirement benefit
obligations 18 (39.2) 15.8 39.0
------------- ------------- -------------
Other comprehensive
(loss)/income for
the year (38.9) 15.8 39.0
Total comprehensive
income for the year 151.4 120.3 140.1
------------- ------------- -------------
The only movement which could subsequently be recycled to the Group Income Statement is the exchange difference on translation of overseas operations.
Group Statement of Changes in Equity
for the year ended 31 December 2016
Statutory
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
Balance at 1 January 2016 36.7 218.0 0.7 634.2 889.6
Profit for the year - - - 190.3 190.3
Other comprehensive loss
for the year - - - (38.9) (38.9)
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 151.4 151.4
-------------------------- ------ -------------- -------------- --------------- ------------------ -------------
Share-based incentives 5 - - 2.0 - 2.0 Dividends paid - - - (26.2) (26.2) -------------------------- ------ -------------- -------------- --------------- ------------------ ------------- Balance at 31 December 2016 36.7 218.0 2.7 759.4 1,016.8 -------------------------- ------ -------------- -------------- --------------- ------------------ -------------
for the year ended 31 December 2015
Pro forma
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
Balance at 1 January
2015 30.0 100.0 - 519.8 649.8
Profit for the year - - - 104.5 104.5
Other comprehensive
income for the year - - - 15.8 15.8
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 120.3 120.3
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Shares issued in the
year 20, 21 6.7 123.8 - - 130.5
Costs associated with
the issue of shares 21 - (5.8) - - (5.8)
Share-based incentives 5 - - 0.7 - 0.7
Dividends paid - - - (5.9) (5.9)
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 31 December
2015 36.7 218.0 0.7 634.2 889.6
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Statutory
Share capital Share premium Other reserves Retained earnings Total equity
Notes GBP million GBP million GBP million GBP million GBP million
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 1 January
2015 - - - - -
Profit for the year - - - 101.1 101.1
Other comprehensive
income for the year - - - 39.0 39.0
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Total comprehensive
income for the year - - - 140.1 140.1
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Shares issued in the
year 20, 21 36.7 723.8 - - 760.5
Costs associated with
the issue of shares 21 - (5.8) - - (5.8)
Reduction of share
premium account 21 - (500.0) - 500.0 -
Share-based incentives 5 - - 0.7 - 0.7
Dividends paid - - - (5.9) (5.9)
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Balance at 31 December
2015 36.7 218.0 0.7 634.2 889.6
------------------------- ------- -------------- -------------- --------------- ------------------ -------------
Year ended Year ended
31 December 31 December
2016 2015
pence pence
------------------------------ ------------- -------------
Dividends on ordinary shares
Per ordinary share:
- interim 1.85 1.60
- final 6.30 5.30
------------------------------ ------------- -------------
Group Balance Sheet
as at 31 December 2016
31 December 2016 31 December 2015
Statutory Statutory
Notes GBP million GBP million
------------------------------------------------------------------------ ------ ----------------- -----------------
Non-current assets
Intangible assets - 0.2
Plant and equipment 0.3 1.0
Investments at fair value through profit or loss 11 1,257.5 965.3
Deferred tax assets 17 1.0 1.4
------------------------------------------------------------------------ ------ ----------------- -----------------
1,258.8 967.9
------------------------------------------------------------------------ ------ ----------------- -----------------
Current assets
Trade and other receivables 12 7.4 8.3
Cash and cash equivalents 1.6 1.1
------------------------------------------------------------------------ ------ ----------------- -----------------
9.0 9.4
------------------------------------------------------------------------ ------ ----------------- -----------------
Total assets 1,267.8 977.3
------------------------------------------------------------------------ ------ ----------------- -----------------
Current liabilities
Current tax liabilities (4.1) (2.7)
Borrowings 14 (161.4) (14.9)
Trade and other payables 13 (14.7) (19.6)
------------------------------------------------------------------------ ------ ----------------- -----------------
(180.2) (37.2)
------------------------------------------------------------------------ ------ ----------------- -----------------
Liabilities directly associated with assets classified as held for sale - (4.2)
------------------------------------------------------------------------ ------ ----------------- -----------------
Net current liabilities (171.2) (32.0)
------------------------------------------------------------------------ ------ ----------------- -----------------
Non-current liabilities
Retirement benefit obligations 18 (69.3) (46.2)
Provisions 19 (1.5) (0.1)
------------------------------------------------------------------------ ------ ----------------- -----------------
(70.8) (46.3)
------------------------------------------------------------------------ ------ ----------------- -----------------
Total liabilities (251.0) (87.7)
------------------------------------------------------------------------ ------ ----------------- -----------------
Net assets 1,016.8 889.6
------------------------------------------------------------------------ ------ ----------------- -----------------
Equity
Share capital 20 36.7 36.7
Share premium 21 218.0 218.0 Other reserves 2.7 0.7 Retained earnings 759.4 634.2 ------------------------------------------------------------------------ ------ ----------------- ----------------- Equity attributable to the Shareholders of the Company 1,016.8 889.6 ------------------------------------------------------------------------ ------ ----------------- -----------------
The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and authorised for issue on 6 March 2017. They were signed on its behalf by:
Olivier Brousse Patrick O'D Bourke Chief Executive Officer Group Finance Director 6 March 2017 6 March 2017
Group Cash Flow Statement
for the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
Statutory Pro forma Statutory
Notes GBP million GBP million GBP million
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash outflow from operating activities 22 (37.1) (70.5) (70.5)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Investing activities
Net cash transferred to investments held at fair value
through profit or loss 11 (73.4) (54.0) (54.0)
Cash acquired on acquisition of subsidiaries - - 2.2
Purchase of plant and equipment (0.1) (0.6) (0.6)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash used in investing activities (73.5) (54.6) (52.4)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Financing activities
Dividends paid (26.2) (5.9) (5.9)
Finance costs paid (8.9) (13.7) (13.7)
Proceeds from borrowings 165.0 50.0 50.0
Repayment of borrowings (19.0) (31.0) (31.0)
Net proceeds on issue of share capital - 124.7 124.7
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net cash from financing activities 110.9 124.1 124.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Net increase/(decrease) in cash and cash equivalents 0.3 (1.0) 1.2
Cash and cash equivalents at beginning of the year 1.1 2.2 -
Effect of foreign exchange rate changes 0.2 (0.1) (0.1)
------------------------------------------------------------ ------ ------------------ ------------- -------------
Cash and cash equivalents at end of year 1.6 1.1 1.1
------------------------------------------------------------ ------ ------------------ ------------- -------------
Notes to the Group Financial Statements
for the year ended 31 December 2016
1 General information
The statutory and pro forma results of John Laing Group plc (the "Company" or the "Group") are stated according to the basis of preparation described below. The registered office of the Company is 1 Kingsway, London, WC2B 6AN. The principal activity of the Company is the origination, investment in and management of international infrastructure projects.
Statutory and pro forma financial information is presented in pounds sterling and prepared in accordance with IFRS as adopted by the EU.
2 Accounting policies a) Basis of preparation
Statutory financial information for the year ended 31 December 2016 is presented in the Group Income Statement, the Group Statement of Comprehensive Income and the Group Statement of Changes in Equity alongside comparative pro forma and statutory financial information for the year ended 31 December 2015. The comparative pro forma financial information was prepared on the basis that the restructuring associated with the Company's admission to listing in February 2015, as described in more detail in the Financial Review section of the 2015 Annual Report, had been in place throughout the year ended 31 December 2015. Both the Group Balance Sheet at 31 December 2016 and at 31 December 2015 are presented on a statutory basis. There is no difference in the statutory and pro forma Group Balance Sheet for 31 December 2015. In the opinion of the Directors, presenting pro forma information for 2015 was necessary in order to give a true and fair view of the state of the Company's affairs for that year. This is the last year for which pro forma financial information will be presented.
The financial statements have been prepared on an investment entity basis (see note 2c) and in accordance with the historical cost convention except for the revaluation of the investment portfolio and financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies.
b) Adoption of new and revised standards
The Group has adopted the following amendments to IFRS in the current year, none of which has had a material impact on the financial statements:
-- Amendments resulting from the September 2014 Annual Improvements to IFRS
-- Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures - amendments regarding the consolidation exception
-- Amendments to IFRS 11 Joint Arrangements - amendments regarding the accounting for acquisitions of an interest in joint operation
-- Amendments to IAS 1 Presentation of Financial Statements - Disclosure initiative
-- Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - amendments regarding the clarification of acceptable methods of depreciation
At the date of authorisation of these financial statements, there are a number of standards and interpretations which are in issue but not yet effective and in some cases have not yet been adopted by the EU. These include:
Issued and endorsed by the EU
-- IFRS 9 Financial Instruments -- IFRS 15 Revenue from Contracts with Customers
Issued and not endorsed by the EU
-- IFRS 16 Leases
-- Amendments to IAS 7 Statement of Cash flows - amendments as a result of the Disclosure initiatives
-- Amendments to IAS 12 Income Taxes - amendments regarding the recognition of deferred tax assets for unrealised losses
-- Amendments resulting from the Annual Improvements to IFRS 2014-2016 cycle
-- Amendments to IFRS 2 Share Based Payments - amendments to clarify the classification and measurement of share-based payment transactions.
While the Group is still undertaking an assessment of the impact of the new standards, it is not anticipated that they will have a material impact on the Group with the exception that the adoption of IFRS 15 may lead to further disclosure within the financial statements. IFRS 16 is not expected to have a significant impact as the Group does not have any material leases.
IFRS 9 Financial Instruments, when it becomes effective, will have an impact on the classification and disclosure of financial instruments.
The principal accounting policies applied in the preparation of these Group financial statements are set out below. These policies have been applied consistently to each of the years presented, unless otherwise stated.
c) Application of investment entity guidance
The Company meets the definition of an investment entity set out in IFRS 10. Investment entities are required to account for all investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit or loss (FVTPL), except for those directly-owned subsidiaries that provide investment related services or engage in permitted investment related activities with investees (Service Companies). Service Companies are consolidated rather than recorded at FVTPL.
For details of the subsidiaries that are consolidated, see note 26 to the Group financial statements.
d) Going concern
The Directors have reviewed the Group's financial projections and cash flow forecasts and believe, based on those projections and forecasts, that it is appropriate to prepare the financial statements of the Group on the going concern basis.
In arriving at their conclusion, the Directors took into account the Group's approach to liquidity and cash flow management and the availability of its GBP400.0 million corporate banking facilities committed until March 2020 and of its GBP50.0 million surety facilities committed until March 2018. The Directors are of the opinion that, based on the Group's forecasts and projections and taking into account expected bidding activity and operational performance, the Group will be able to operate within its bank facilities and comply with the financial covenants therein for the foreseeable future.
In determining that the Group is a going concern, certain risks and uncertainties, some of which arise or increase as a result of the economic environment in some of the Group's markets, have been considered. The Directors believe that the Group is adequately placed to manage these risks. The most important risks and uncertainties identified and considered by the Directors are set out in the Principal Risks and Risk Management section. In addition, the Group's policies for management of its exposure to financial risks, including liquidity, foreign exchange, credit, price and interest rate risks are set out in note 16.
e) Dividend income
Dividend income from investments at FVTPL is recognised when the shareholders' rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Dividend income is recognised gross of withholding tax, if any, and only when approved and paid by the project company.
f) Dividend payments
Dividends on the Company's ordinary shares are recognised when they have been appropriately authorised and are no longer at the Company's discretion. Accordingly, interim dividends are recognised when they are paid and final dividends are recognised when they are declared following approval by shareholders at the Company's AGM. Dividends are recognised as an appropriation of shareholders' funds.
g) Net gain on investments at FVTPL
Net gain on investments at FVTPL excludes dividend income referred to above. Please refer to accounting policy i)(i) for further detail.
h) Other income
The Group earns income from the following sources:
(i) Fees from asset management services
Fees from asset management services to projects in which the Group invests and to external parties are recognised as the services are provided in accordance with IAS 18 Revenue.
When it is probable that the expected outcome over the life of a management services contract will result in a net outflow of economic benefits or overall loss, a provision is recognised immediately. The provision is determined based on the net present value of the expected future cash inflows and outflows.
(ii) Recovery of bid costs on financial close
Bid costs in respect of primary investments are charged to the Group Income Statement until such time as the Group is virtually certain that it will recover the costs. Virtual certainty is generally achieved when an agreement is in place demonstrating that costs are fully recoverable even in the event of cancellation of a project. From the point of virtual certainty, bid costs are held in the Group Balance Sheet as a debtor prior to achieving financial close. On financial close, the Group recovers bid costs by charging a fee to the relevant project company in the investment portfolio.
Other income excludes the value of intra-group transactions and VAT and includes revenue derived from the provision of services by Service Companies to project companies which are held at FVTPL.
i) Financial instruments
Financial assets and financial liabilities are recognised on the Group Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.
(i) Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at FVTPL, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets at FVTPL; 'held-to-maturity' investments; 'available-for-sale' financial assets; or 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The financial assets that the Group holds are classified as financial assets at FVTPL and loans and receivables:
-- Financial assets at FVTPL comprise the Group's investment in John Laing Holdco Limited (through which the Group holds its investments) which is valued based on the fair value of investments in project companies, the Group's investment in JLEN and other assets and liabilities of investment entity subsidiaries. Investments in project companies and in JLEN are designated upon initial recognition as financial assets at FVTPL. Subsequent to initial recognition, investments in project companies are measured on a combined basis at fair value principally using discounted cash flow methodology. The investment in JLEN is valued at the quoted market price at the end of the period.
The Directors consider that the carrying value of other assets and liabilities held in investment entity subsidiaries approximates to their fair value, with the exception of derivatives which are measured in accordance with accounting policy i(v).
Changes in the fair value of the Group's investment in John Laing Holdco Limited are recognised within operating income in the Group Income Statement.
-- Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial. Loans and receivables are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Group's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents' in the Group Balance Sheet.
(ii) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indications of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events which have occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss.
(iii) Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
(iv) Financial liabilities
Interest-bearing bank loans and borrowings are initially recorded at fair value, being the proceeds received net of direct issue costs, and subsequently at amortised cost using the effective interest rate method. Finance charges, including premiums payable on settlement or redemption, and direct issue costs are accounted for on an accruals basis in the Group Income Statement and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Other non-derivative financial instruments are measured at amortised cost using the effective interest method less any impairment losses.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
(v) Derivative financial instruments
The Group treats forward foreign exchange contracts and currency swap deals it enters into as derivative financial instruments at FVTPL. Changes in the fair value of these instruments are taken through the Group Income Statement.
j) Provisions
Provisions are recognised when:
-- the Group has a legal or constructive obligation as a result of past events; -- it is probable that an outflow of resources will be required to settle the obligation; and -- the amount has been reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required on settlement is determined by considering the class of obligations as a whole.
k) Finance costs
Finance costs relating to the corporate banking facilities, other than set-up costs, are recognised in the year in which they are incurred. Set-up costs are recognised over the remaining facility term.
Finance costs also include the net interest cost on retirement benefit obligations and the unwinding of discounting of provisions.
l) Taxation
The tax charge or credit represents the sum of tax currently payable and deferred tax.
Current tax
Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Group Income Statement because it excludes both items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted, or substantively enacted, by the balance sheet date.
Deferred tax
Deferred tax liabilities are recognised in full for taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will arise to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Group Income Statement except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
m) Foreign currencies
The individual financial statements of each Group subsidiary that is consolidated (i.e. a Service Company) are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the financial statements, the results and financial position of each Group subsidiary are expressed in pounds sterling, the functional currency of the Company and the presentation currency of the financial statements.
Monetary assets and liabilities expressed in foreign currency (including investments measured at fair value) are reported at the rate of exchange prevailing at the balance sheet date or, if appropriate, at the forward contract rate. Any difference arising on the retranslation of these amounts is taken to the Group Income Statement with foreign exchange movements on investments measured at fair value recognised in operating income as part of net gain on investments at FVTPL. Income and expense items are translated at the average exchange rates for the period.
n) Non-current assets held for sale and discontinued operations
Where a disposal group represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, it is treated as a discontinued operation. The post-tax profit or loss of this discontinued operation together with the gain or loss recognised on its disposal is shown as a single amount on the face of the Group Income Statement, with all historical financial periods being presented on this basis.
Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount is recoverable through a sale rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable, the asset (or disposal group) is available for immediate sale in its present condition and the sale is completed within one year of the date of its classification.
o) Retirement benefit costs
The Group operates both defined benefit and defined contribution pension arrangements. Its two defined benefit pension schemes are the John Laing Pension Fund (JLPF) and the John Laing Pension Plan, which are both closed to future accrual. The Group also provides post-retirement medical benefits to certain former employees.
Payments to defined contribution pension arrangements are charged as an expense as they fall due. For the defined benefit pension schemes and the post-retirement medical benefit scheme, the cost of providing benefits is determined in accordance with IAS 19: Employee Benefits (revised) using the projected unit credit method, with actuarial valuations being carried out at least every three years. Actuarial gains and losses are recognised in full in the year in which they occur and are presented in the Group Statement of Comprehensive Income. Curtailment gains arising from changes to members' benefits are recognised in full in the Group Income Statement.
The retirement benefit obligations recognised in the Group Balance Sheet represent the present value of: (i) defined benefit scheme obligations as adjusted for unrecognised past service costs and reduced by the fair value of scheme assets, where any asset resulting from this calculation is limited to past service costs plus the present value of available refunds and reductions in future contributions to the schemes; and (ii) unfunded post-retirement medical benefits.
Net interest expense or income is recognised within finance costs.
p) Cash and cash equivalents
Cash and cash equivalents in the Group Balance Sheet comprise cash at bank and in hand and short term deposits with original maturities of three months or less. For the purposes of the Group Cash Flow Statement, cash and cash equivalents comprise cash and short term deposits as defined above, net of bank overdrafts.
Deposits held with original maturities of greater than three months are shown as other financial assets.
q) Leasing
All leases are classified as operating leases. Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.
r) Share capital
Ordinary shares are classified as equity instruments on the basis that they evidence a residual interest in the assets of the Group after deducting all its liabilities.
Incremental costs directly attributable to the issue of new ordinary shares are recognised in equity as a deduction, net of tax, from the proceeds in the period in which the shares are issued.
s) Employee benefit trust
In June 2015, the Group established the John Laing Group Employee Benefit Trust (EBT) as described further in note 5. The Group is deemed to have control of the EBT and it is therefore treated as a subsidiary and consolidated for the purposes of the accounts. Any investment by the EBT in the parent company's shares is deducted from equity in the Group Balance Sheet as if such shares were treasury shares. No investment was made in the year. Other assets and liabilities of the EBT are recognised as assets and liabilities of the Group.
Any shares held by the EBT are excluded for the purposes of calculating earnings per share.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities. The key areas of the financial statements where the Group is required to make critical judgements and material accounting estimates are in respect of the fair value of investments and accounting for the Group's defined benefit pension liabilities.
Fair value of investments
Critical judgements in applying the Group's accounting policies
The Company measures its investment in John Laing Holdco Limited at fair value. Fair value is determined based on the fair value of investments in project companies and the Group's investment in JLEN (together the Group's investment portfolio) and other assets and liabilities of investment entity subsidiaries. A valuation of the Group's investment portfolio is prepared on a consistent, principally discounted cash flow basis at 30 June and 31 December. The valuation (excluding the investment in JLEN) assumes that forecast cash flows are received until maturity of the underlying assets. The cash flows on which the discounted cash flow valuation is based are those forecast to be distributable to the Group at each balance sheet date, derived from detailed project financial models. These incorporate a number of assumptions with respect to individual assets, including: dates for construction completion; value enhancements; the terms of project debt refinancing (where applicable); the outcome of any disputes; the level of volume-based revenue; and, for renewable energy projects, future energy prices. Value enhancements are only incorporated when the Group has sufficient evidence that they can be realised.
Key sources of estimation uncertainty
A key source of estimation uncertainty in valuing the investment portfolio is the discount rate applied to forecast project cash flows. A base case discount rate for an operational project is derived from secondary market information and other available data points. The base case discount rate is then adjusted to reflect project-specific risks. In addition, risk premia are added during the construction phase to reflect the additional risks throughout construction. These premia reduce over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operating stage. The discount rates applied to investments at 31 December 2016 were in the range of 7.0% to 11.6% (31 December 2015 - 7.3% to 12.3%). Further detail on key assumptions underpinning the valuation of the investments (including sensitivities) can be found in note 16.
As part of the valuation of the investment portfolio at 31 December 2016, the Group has valued its investments in New Royal Adelaide Hospital and in Manchester Waste VL Co. This has involved making assumptions as to the outcome of the current situations relating to each investment, as described in the Chief Executive Officer's Review. Both situations are dependent on future events and therefore carry an element of uncertainty. In the case of the investment in New Royal Adelaide Hospital, the main judgement underlying the Group's valuation is an assumption that the hospital reaches commercial acceptance in mid 2017. In the case of Manchester Waste VL Co, the Group's valuation is based on the assumption that a resolution is reached with GMWDA which is commercially acceptable to Manchester Waste VL Co and which has a minimal impact on Manchester Waste TPS Co.
Pension and other post-retirement liability accounting
Critical judgements in applying the Group's accounting policies
The combined accounting deficit in the Group's defined benefit pension and post-retirement medical schemes at 31 December 2016 was GBP69.3 million (31 December 2015 - GBP46.2 million). In determining the Group's defined benefit pension liability, consideration is also given to whether there is a minimum funding requirement under IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction which is in excess of the IAS 19 Employee Benefits liability. If the minimum funding requirement is higher, an additional liability would need to be recognised. Under the trust deed and rules of JLPF, the Group has an ultimate unconditional right to any surplus, accordingly the excess of the minimum funding requirement over the IAS 19 Employee Benefits liability has not been recognised as an additional liability.
Key sources of estimation uncertainty
The value of the pension deficit is highly dependent on key assumptions including price inflation, discount rate and life expectancy. The assumptions applied at 31 December 2016 and the sensitivity of the pension liabilities to certain changes in these assumptions are illustrated in note 18.
3 Operating segments
Information is reported to the Group's Board (the chief operating decision maker under IFRS 8 Operating Segments) for the purposes of resource allocation and assessment of segment performance based on the category of activities undertaken within the Group. The principal categories of activity, and thus the reportable segments under IFRS 8 Operating Segments, are: Primary Investment, Secondary Investment and Asset Management.
The results included within each of the reportable segments comprise:
Primary Investment - costs and cost recoveries associated with originating, bidding for and winning greenfield infrastructure and renewable energy projects; investment returns from and growth in the value of the Primary Investment portfolio, net of associated costs.
Secondary Investment - investment returns from and growth in the value of the Secondary Investment portfolio, net of associated costs.
Asset Management - fee income and associated costs from investment management services in respect of both the Primary and Secondary Investment portfolios and in respect of JLIF's and JLEN's portfolios and the PPP assets in JLPF's portfolio plus fee income and associated costs from project management services.
The Board's primary measure of profitability for each segment is profit before tax.
The Board does not monitor on an ongoing basis the results of the Group on a geographical basis. An analysis of the Group's investments at FVTPL by foreign currency can be found in note 16.
The following is an analysis of the Group's profit before tax and operating income for the years ended 31 December 2016 and 31 December 2015:
Year ended 31 December 2016
Reportable segments
Non-
Primary Secondary Asset Segment Inter- segmental
Investment Investment Management Sub-total segment results Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Continuing
operations
Net gain on
investments at
FVTPL 144.4 66.9 - 211.3 - 7.5 218.8
Other income 7.5 - 47.4 54.9 (14.7) 1.8 42.0
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Operating
income 151.9 66.9 47.4 266.2 (14.7) 9.3 260.8
Cost of sales - - - - - - -
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Gross profit 151.9 66.9 47.4 266.2 (14.7) 9.3 260.8
Administrative
expenses (33.3) (7.6) (27.5) (68.4) 14.7 (4.7) (58.4)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit from
operations 118.6 59.3 19.9 197.8 - 4.6 202.4
Finance costs (5.5) (2.2) - (7.7) - (2.6) (10.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax from
continuing
operations 113.1 57.1 19.9 190.1 - 2.0 192.1
Profit before
tax -
statutory 113.1 57.1 19.9 190.1 - 2.0 192.1
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Year ended 31 December 2015
Reportable segments
Non-
Primary Secondary Asset Segment Inter- segmental
Investment Investment Management Sub-total segment results Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Continuing
operations
Net gain on
investments at
FVTPL 82.9 49.4 - 132.3 - 0.8 133.1
Other income 3.4 - 42.4 45.8 (12.0) 0.7 34.5
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Operating
income 86.3 49.4 42.4 178.1 (12.0) 1.5 167.6
Cost of sales - - - - - (0.1) (0.1)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Gross profit 86.3 49.4 42.4 178.1 (12.0) 1.4 167.5
Administrative
expenses (29.3) (5.9) (26.9) (62.1) 12.0 (5.2) (55.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit from
operations 57.0 43.5 15.5 116.0 - (3.8) 112.2
Finance costs (6.3) (0.5) - (6.8) - (4.5) (11.3)
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax from
continuing
operations 50.7 43.0 15.5 109.2 - (8.3) 100.9
Profit before
tax from
discontinued
operations 5.7
---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Profit before
tax - pro
forma 106.6 ---------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------- Reconciliation to statutory results: Fair value loss on acquisition of John Laing Holdco Limited (3.4) ---------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------- Profit before tax - statutory 103.2 ---------------- ------------ ------------ ------------ ------------- ------------- ------------- -------------
Non-segmental results include results from corporate activities and discontinued operations.
For the year ended 31 December 2016, more than 10% of operating income was derived from the IEP (Phase 1) and A1 Gdansk Poland projects (year ended 31 December 2015 - IEP (Phase 1)).
The Group's investment portfolio, comprising investments in project companies and a listed fund included within investments at FVTPL (see note 11) is allocated between primary and secondary investments. The Primary Investment portfolio includes investments in projects, which are in the construction phase. The Secondary Investment portfolio includes investments in operational projects.
31 December 31 December
2016 2015
Segment assets GBP million GBP million
-------------------------------- ------------- -------------
Primary Investment 696.3 405.9
Secondary Investment 479.6 435.5
-------------------------------- ------------- -------------
Total investment portfolio 1,175.9 841.4
Other investments 0.3 0.5
Other assets and liabilities 81.3 123.4
-------------------------------- ------------- -------------
Total investments at FVTPL 1,257.5 965.3
Other assets 10.3 12.0
-------------------------------- ------------- -------------
Total assets 1,267.8 977.3
-------------------------------- ------------- -------------
Retirement benefit obligations (69.3) (46.2)
Other liabilities (181.7) (41.5)
-------------------------------- ------------- -------------
Total liabilities (251.0) (87.7)
-------------------------------- ------------- -------------
Group net assets 1,016.8 889.6
-------------------------------- ------------- -------------
Other assets and liabilities above include cash and cash equivalents, trade and other receivables less trade and other payables within recourse group investment entity subsidiaries.
4 Earnings per share
The calculation of basic earnings per share is based on the following data:
Year Year Year
ended ended ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
-------------- -------------- --------------
GBP million GBP million GBP million
Earnings
Profit from continuing
operations for the purpose
of basic and diluted
earnings per share 190.3 98.8 95.4
Profit from discontinued
operations for the purpose
of basic and diluted
earnings per share - 5.7 5.7
-------------- -------------- --------------
Profit for the
year 190.3 104.5 101.1
-------------- -------------- --------------
Number of shares
Weighted average number
of ordinary shares for
the purpose of basic
earnings per share 366,923,076 358,305,584 336,935,722
Dilutive effect of ordinary
shares potentially issued
under share-based incentives
(note 5) 3,313,330 1,255,857 1,255,857
-------------- -------------- --------------
Weighted average number
of ordinary shares for
the purpose of diluted
earnings per share 370,236,406 359,561,441 338,191,579
-------------- -------------- --------------
Earnings per share from
continuing operations
(pence/share)
Basic 51.9 27.6 28.3
Diluted 51.4 27.5 28.2
Earnings per share from
continuing and discontinued
operations (pence/share)
Basic 51.9 29.2 30.0
Diluted 51.4 29.1 29.9
5 Share-based incentives
Long-term incentive plan
The Group operates share-based incentive arrangements for Executive Directors, senior executives and other eligible employees under which awards are granted over the Company's ordinary shares. Awards are conditional on the relevant employee completing three years' service (the vesting period). The awards vest three years from the grant date, subject to the Group achieving a target share-based performance condition, total shareholder return (50% of the award), and a non-market based performance condition, NAV growth per share (50% of the award). The Group has no legal or constructive obligation to repurchase or settle the awards in cash.
The movement in the number of shares awarded is as follows:
Number of shares
awarded
2016 2015
---------------- ---------- ----------
At 1 January 1,763,030 -
Granted 2,094,460 1,795,830
Lapsed (83,160) (32,800)
---------------- ---------- ----------
At 31 December 3,774,330 1,763,030
---------------- ---------- ----------
The weighted average fair value of awards granted during the year was 167.25 pence per share (2015 - 130.89p) for the market-based performance condition, determined using the Stochastic valuation model, and 226.49 pence per share (2015 - 218.11p) for the non-market based performance condition determined using the Black Scholes model. The weighted average fair value of awards granted during the year from both models is 196.87 pence per share (2015 - 174.46p). The significant inputs into the model were the weighted average share price of 226.5 pence (2015 - 219.5p) at the grant date, expected volatility of 12.55% (2015 - 14.17%), expected dividend yield of 3.10% (2015 - 2.17%), an expected award life of three years and an annual risk-free interest rate of 0.4% (2015 - 0.68%). The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over three years.
The total expense recognised in the Group Income Statement for awards granted under share-based incentive arrangements for the year ended 31 December 2016 was GBP2.0 million (2015 - GBP0.7 million).
Of the 3,774,330 outstanding awards (2015 - 1,763,030), none were exercisable at 31 December 2016 (2015 - nil). The weighted average exercise price of the awards granted during 2016 was GBPnil (2015 - GBPnil). There were no awards forfeited, exercised or expired during the year ended 31 December 2016 (2015 - nil). During the year ended 31 December 2016, there were 83,160 awards (2015 - 32,800) that lapsed.
Of the awards outstanding at the end of the year, 1,695,470 vest on 15 April 2018 and 2,078,860 vest on 15 April 2019 subject to the conditions described above. The weighted average exercise price of the awards outstanding at 31 December 2016 was GBPnil (31 December 2015 - GBPnil).
Deferred Share Bonus Plan
In accordance with the Deferred Share Bonus Plan, 84,439 shares were awarded on 15 March 2016 to Executive Directors and certain senior executives in relation to that part of their annual bonus for 2015 which exceeded 60% of their base salary. These awards vest in equal tranches on the first, second and third anniversary of grant, normally subject to continued employment. For further details on this plan, please refer to the Directors' Remuneration Report.
The movement in the number of shares awarded is as follows:
Number of shares awarded
2016 2015
--------------- --------------- ----------
At 1 January - -
Granted 84,439 -
At 31 December 84,439 -
--------------- --------------- ----------
Employee Benefit Trust
On 19 June 2015 the Company established the John Laing Group Employee Benefit Trust (the EBT) to be used as part of the remuneration arrangements for employees. The purpose of the EBT is to facilitate the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company. The EBT purchases shares in the Company to satisfy the Company's obligations under its share-based payment plans.
During the year the EBT purchased no shares in John Laing Group plc and as at 31 December 2016 the EBT held no shares in the Company.
6 Other income
Year ended Year ended
31 December 31 December
2016 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
---------------------------- ------------- ------------- -------------
Fees from asset management
services 34.5 31.1 28.1
Recoveries on financial
close 7.5 3.4 3.4
42.0 34.5 31.5
---------------------------- ------------- ------------- -------------
Included within fees from asset management services is GBP1.9 million received on the sale of the UK Project Management Services business in November 2016. A further GBP2.1 million was deferred and recognised in January 2017 on transfer of the final MSA contracts. Total costs of the sale were GBP1.4 million (recognised in administrative expenses in the year ended 31 December 2016) leading to an overall profit on sale in the year ended 31 December 2016 of GBP0.5 million.
7 Profit from operations
Year
Year ended ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
-------------- -----------------
GBP million GBP million
Profit from operations has
been arrived at after charging:
Fees payable to the Company's
auditor and its associates
for the audit of the Company's
subsidiaries (0.2) (0.3)
-------------- ---------------
Total audit fees (0.2) (0.3)
-------------- ---------------
Other assurance services - -
Total non-audit fees - -
-------------- ---------------
Operating lease charges:
rental of land
- and buildings (1.3) (0.8)
Depreciation of plant
and equipment (0.6) (0.7)
Amortisation of intangible
assets (0.2) (0.5)
Net foreign exchange
gain - 1.4
-------------- ---------------
The fee payable to the Company's auditor for the audit of the Company's annual accounts was GBP6,375 (2015 - GBP6,312). The fees payable to the Company's auditor for the audit of the Company's subsidiaries were GBP241,560 (2015 - GBP295,334). The fees payable to the Company's auditor for non-audit services comprised: GBP44,800 for other assurance services (2015 - GBP44,700). Other fees were GBPnil in 2016 (2015 - GBP1.1 million paid to the Company's auditor for reporting accountant and other services in relation to the IPO of the Company in February 2015 which was deducted from share premium in 2015 as an expense on the issue of equity shares).
8 Employee costs and directors' emoluments
Year Year Year
ended ended ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
-------------- -------------- --------------
GBP million GBP million GBP million
Employee costs comprise:
Salaries (26.8) (29.9) (26.0)
Social security costs (2.9) (3.4) (3.0)
Pension charge
- defined benefit
schemes (see note 18) (1.6) (1.3) (1.3)
- defined contribution (1.3) (1.2) (1.0)
Share-based incentives
(see note 5) (2.0) (0.7) (0.7)
(34.6) (36.5) (32.0)
-------------- -------------- --------------
Employee costs in 2015 include one-off costs of GBP3.4 million incurred in relation to the IPO.
Annual average employee numbers (including Directors):
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
No. No.
---------------------------- ------------- ---------------
Staff 248 247
---------------------------- ------------- ---------------
UK 191 196
Overseas 57 51
---------------------------- ------------- ---------------
Activity
Primary investments, asset
management and central
activities 248 247
---------------------------- ------------- ---------------
Details of Directors' remuneration for the year ended 31 December 2016 can be found in the Directors' Remuneration Report.
9 Finance costs
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
GBP million GBP million
--------------------------------- ------------- ---------------
Finance costs on corporate
banking facilities (7.9) (7.6)
Amortisation of debt issue
costs (1.1) (1.0)
Net interest cost of retirement
obligations (see note 18) (1.3) (2.7)
--------------------------------- ------------- ---------------
Total finance costs (10.3) (11.3)
--------------------------------- ------------- ---------------
10 Tax
The tax charge for the year comprises:
Year ended Year ended
31 December 31 December
2016 2015
Pro forma
Statutory and statutory
GBP million GBP million
------------------------------- ------------- ---------------
Current tax:
UK corporation tax charge
- current year (1.9) (2.0)
UK corporation tax charge -
- prior year 0.5
------------------------------- ------------- ---------------
(1.4) (2.0)
------------------------------- ------------- ---------------
Deferred tax:
Deferred tax charge - current
year (0.2) (0.1)
Deferred tax charge - prior -
year (0.2)
------------------------------- ------------- ---------------
(0.4) (0.1)
------------------------------- ------------- ---------------
Tax charge on continuing
operations (1.8) (2.1)
------------------------------- ------------- ---------------
The tax charge for the year can be reconciled to the profit in the Group Income Statement as follows:
Year ended Year ended
31 December 31 December
2016 2015
Pro
forma Statutory
Statutory GBP GBP
GBP million million million
--------------------------------- ------------- --------- ----------
Profit before tax on continuing
operations 192.1 100.9 97.5
--------------------------------- ------------- --------- ----------
Tax at the UK corporation
tax rate (38.4) (20.4) (19.7)
Tax effect of expenses
and other similar items
that are not deductible (0.6) (1.1) (1.1)
Non-taxable movement on
fair value of investments 43.8 27.0 26.3
Adjustment for management
charges to fair value group (6.6) (7.4) (7.4)
Origination and reversal
of timing differences - (0.1) (0.1)
Other movements (0.3) (0.1) (0.1)
Prior period - current - -
tax 0.5
Prior period - deferred - -
tax (0.2)
--------------------------------- ------------- --------- ----------
Total tax charge on continuing
operations for the year (1.8) (2.1) (2.1)
--------------------------------- ------------- --------- ----------
For the year ended 31 December 2016 a tax rate of 20.0% has been applied (2015 - 20.25%). The UK Government has announced its intention to reduce the main corporation tax rate by 1% to 19% from 1 April 2017 and by a further 2% to 17% from 1 April 2020.
The Group expects that the majority of deferred tax assets will be realised after 1 April 2020 and therefore the Group has measured its deferred tax assets at 31 December 2016 at 17% (31 December 2015 - 18%).
11 Investments at fair value through profit or loss
31 December 2016
Other
Project Listed assets
companies investment and liabilities Total
Statutory GBP million GBP million GBP million GBP million
---------------------- ------------- ------------- ----------------- -------------
Opening balance 825.8 16.1 123.4 965.3
Distributions (35.9) (0.9) 36.8 -
Investment in equity
and loans 302.1 - (302.1) -
Realisations (140.5) (6.4) 146.9 -
Fair value movement 214.7 1.2 2.9 218.8
Net cash transferred
to investments held
at FVTPL - - 73.4 73.4
---------------------- ------------- ------------- ----------------- -------------
Closing balance 1,166.2 10.0 81.3 1,257.5
---------------------- ------------- ------------- ----------------- -------------
31 December 2015
Other
Project Listed assets
companies investment and liabilities Total
Pro forma GBP million GBP million GBP million GBP million
------------------------- ------------- ------------- ----------------- -------------
Opening balance 706.7 65.6 85.9 858.2
Distributions (43.4) (0.9) 44.3 -
Investment in equity
and loans 142.9 - (142.9) -
Realisations (86.3) - 86.3 -
Investments transferred
to JLPF (29.6) (50.4) - (80.0)
Fair value movement 135.5 1.8 (4.2) 133.1
Net cash transferred
to investments held
at FVTPL - - 54.0 54.0
------------------------- ------------- ------------- ----------------- -------------
Closing balance 825.8 16.1 123.4 965.3
------------------------- ------------- ------------- ----------------- -------------
31 December 2015
Other
Project Listed assets
companies investment and liabilities Total
Statutory GBP million GBP million GBP million GBP million
------------------------- ------------- ------------- ----------------- -------------
Opening balance - - - -
Acquisition of John
Laing Holdco Limited 706.7 65.6 (142.3) 630.0
Acquisition of Service
Companies - - 231.6 231.6
Distributions (43.4) (0.9) 44.3 -
Investment in equity
and loans 142.9 - (142.9) -
Realisations (86.3) - 86.3 -
Investments transferred
to JLPF (29.6) (50.4) - (80.0)
Fair value movement 135.5 1.8 (7.6) 129.7
Net cash transferred
to investments held
at FVTPL - - 54.0 54.0
------------------------- ------------- ------------- ----------------- -------------
Closing balance 825.8 16.1 123.4 965.3
------------------------- ------------- ------------- ----------------- -------------
On 27 January 2015, the Company acquired the remaining 77.54% interest in John Laing Holdco Limited for GBP630.0 million as part of a pre IPO restructuring. On 17 February 2015, the Company acquired from the John Laing Holdco Limited group the interests in its Service Companies. From this date, these Service Companies have been consolidated in the Group financial statements. This latter acquisition was treated as an acquisition under common control.
Included within other assets and liabilities at 31 December 2016 above is cash collateral of GBP23.7 million (31 December 2015 - GBP123.9 million) in respect of future investment commitments on IEP (Phase 1), I-77 Managed Lanes and New Perth Stadium (31 December 2015 - IEP (Phase 1), I-77 Managed Lanes, New Perth Stadium and Sydney Light Rail).
The investment disposals that have occurred in the years ended 31 December 2016 and 2015 are as follows:
Year ended 31 December 2016
During the year ended 31 December 2016, the Group disposed of shares and subordinated debt in six PPP and renewable energy project companies. Total proceeds from all disposals were GBP146.9 million.
Details were as follows:
Holding
Original disposed Retained
Date of holding of holding
completion % % %
------------------------------------------------------ ----------------- --------- ---------- ---------
Sold to John Laing
Environmental Assets
Group Limited (JLEN)
Dreachmhor Wind
Farm (Holdings) 29 June
Limited 2016 100.0 100.0 -
New Albion Wind (Holdings) Limited 21 July 2016 100.0 100.0 -
Sold to John Laing Infrastructure Fund Limited (JLIF)
Inspiral Oldham Holdings Company Limited 27 May 2016 95.0 95.0 -
Rail Investments (Great Western) Limited* 29 December 2016 100.0 20.0 80.0
Services Support (BTP) Holdings Limited 29 February 2016 54.2 54.2 -
UK Highways (A55) Holdings Limited 22 December 2016 100.0 100.0 -
Sold to other parties
John Laing Environmental Assets Group Limited 2 November 2016 5.5 2.2 3.3
UK Highways Limited** 30 November 2016 100.0 100.0 -
* Holds the Group's 24% interest in IEP (Phase 1).
** Sold as part of disposal of UK activities of PMS for GBP0.3 million.
Year ended 31 December 2015
During the year ended 31 December 2015, the Group disposed of shares and subordinated debt in seven PPP and renewable energy project companies. Sale proceeds were GBP86.3 million. The Group also made a contribution of GBP80.0 million to JLPF settled by a transfer of shares in JLEN and shares in one PPP project company.
Details were as follows:
Original Holding Retained
Date of holding disposed of holding
completion % % %
------------------------------------------------------
Sold to John Laing
Environmental Assets
Group Limited (JLEN)
31 March
Carscreugh Holdings Limited 2015 100.0 100.0 -
31 March
Wear Point Wind Holdco Limited 2015 100.0 100.0 -
31 March
Branden Solar Park Holdings Limited 2015 100.0 64.0 36.0
30 July
Branden Solar Park Holdings Limited 2015 36.0 36.0 -
2 December
Burton Wold Extension Limited 2015 100.0 100.0 -
Sold to John Laing Infrastructure Fund Limited (JLIF)
Healthcare Support (Erdington) Holdings Limited 30 June 2015 100.0 100.0 -
Sold to other parties
31 October
Dhule Palesner Tollway Limited 2015 36.0 36.0 -
5 November
Services Support (Cleveland) Holdings Limited 2015 27.08 27.08 -
Transferred to JLPF
17 February
City Greenwich Lewisham Rail Link plc 2015 52.0 47.0 5.0
17 February
John Laing Environmental Assets Group Limited (JLEN) 2015 39.7 29.9 9.8*
* shareholding reduced to 5.5% following equity issues by JLEN in 2015 and 2016.
12 Trade and other receivables
31 December 2016 31 December 2015
GBP million GBP million
Current assets
Trade receivables 6.3 7.1
Other receivables 0.6 0.7
Prepayments and accrued income 0.5 0.5
---------------- ----------------
7.4 8.3
---------------- ----------------
Trading amounts receivable from project companies in which the Group holds an interest were previously included at 31 December 2015 in other receivables. The Group has presented these within trade receivables at 31 December 2016 to better reflect the nature of the asset. The trade receivables and other receivables at 31 December 2015 have consequently been amended to present a consistent year on year presentation. There is no impact on overall trade and other receivables.
In the opinion of the Directors the fair value of trade and other receivables is equal to their carrying value.
The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:
31 December 2016 31 December 2015
GBP million GBP million
Sterling 5.9 7.7
Other currencies 1.5 0.6
---------------- ----------------
7.4 8.3
---------------- ----------------
Other currencies mainly comprise trade and other receivables in Euros (31 December 2015 - Canadian dollars).
Included in the Group's trade receivables are debtors with a carrying value of GBP0.4 million which were overdue at 31 December 2016 (31 December 2015 - GBP0.1 million). The overdue balances have an ageing of up to 120 days (31 December 2015 - up to 60 days). The Group has not provided for these debtors as there has not been a significant change in their credit quality since the amounts became overdue, and they are considered fully recoverable. The Group does not hold any collateral against these balances.
Included in the Group's trade receivables are debtors with a carrying value of GBPnil which were impaired at 31 December 2016 (31 December 2015 - GBPnil).
13 Trade and other payables
31 December 2016 31 December 2015
GBP million GBP million
Current liabilities
Trade payables (1.9) (1.8)
Other taxation (1.6) (1.6)
Accruals (11.1) (15.8)
Deferred income (0.1) (0.4)
(14.7) (19.6)
Employee related accruals were previously included at 31 December 2015 in trade payables. The Group has presented these within accruals at 31 December 2016 to better reflect the nature of the liability. The trade payables and accruals figures at 31 December 2015 have consequently been amended to present a consistent year on year presentation. There is no impact on overall trade and other payables.
14 Borrowings
31 December 2016 31 December 2015
GBP million GBP million
Current liabilities
Interest-bearing loans and borrowings net of unamortised financing costs (note
15 c) (161.4) (14.9)
(161.4) (14.9)
15 Financial instruments
a) Financial instruments by category
Financial
liabilities at
Loans and Assets at amortised
receivables FVTPL cost Total
Continuing operations GBP million GBP million GBP million GBP million
Level
Fair value measurement method n/a 1 / 3* n/a
31 December 2016
Non-current assets
Investments at FVTPL* - 1,257.5 - 1,257.5
Current assets
Trade and other receivables 7.0 - - 7.0
Cash and cash equivalents 1.6 - - 1.6
------------ ---------------
Total financial assets 8.6 1,257.5 - 1,266.1
Current liabilities
Interest-bearing loans and borrowings - - (161.4) (161.4)
Trade and other payables - - (13.0) (13.0)
------------ ------------
Total financial liabilities - - (174.4) (174.4)
------------ ------------ --------------- ------------
Net financial instruments 8.6 1,257.5 (174.4) 1,091.7
------------ ------------ --------------- ------------
Financial
liabilities at
Loans and Assets at amortised
receivables FVTPL cost Total
Continuing operations GBP million GBP million GBP million GBP million
Level
Fair value measurement method n/a 1 / 3* n/a
31 December 2015
Non-current assets
Investments at FVTPL* - 965.3 - 965.3
Current assets
Trade and other receivables 8.1 - - 8.1
Cash and cash equivalents 1.1 - - 1.1
------------ ------------ --------------- ------------
Total financial assets 9.2 965.3 - 974.5
Current liabilities
Interest-bearing loans and borrowings - - (14.9) (14.9)
Trade and other payables - - (17.6) (17.6)
------------ ------------ --------------- ------------
Total financial liabilities - - (32.5) (32.5)
------------ ------------ --------------- ------------
Net financial instruments 9.2 965.3 (32.5) 942.0
------------ ------------ --------------- ------------
* Investments at FVTPL are split between: Level 1, JLEN, which is a listed investment fair valued at GBP10.0 million (31 December 2015 - GBP16.1 million) using a quoted market price; and Level 3 investments in project companies fair valued at GBP1,166.2 million (31 December 2015 - GBP825.8 million). Level 1 and Level 3 investments are fair valued in accordance with the policy and assumptions set out in note 2 i. The investments at FVTPL include other assets and liabilities as shown in note 11. Such other assets and liabilities are recorded at amortised cost which the Directors believe approximates to their fair value.
The tables in section a) provide an analysis of financial instruments that are measured subsequent to their initial recognition at fair value.
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from valuation techniques that include inputs to the asset or liability that are not based on observable market data (unobservable inputs).
There were no transfers between Levels 1 and 2 during either year. There were no transfers out of Level 3.
Reconciliation of Level 3 fair value measurement of financial assets and liabilities
An analysis of the movement between opening and closing balances of assets at FVTPL is given in note 11. The carrying amounts of financial assets and financial liabilities in these financial statements reflect their fair values.
b) Foreign currency and interest rate profile of financial assets (excluding investments at FVTPL)
31 December 2016 31 December 2015
Non-interest Non-interest
bearing bearing
Currency GBP million GBP million
Sterling 5.9 7.7
Euro 1.5 0.2
Canadian dollar 0.4 0.6
US dollar 0.4 0.4
Australian dollar 0.4 0.2
Other - 0.1
Total 8.6 9.2
c) Foreign currency and interest rate profile of financial liabilities
The Group's financial liabilities at 31 December 2016 were GBP174.4 million (31 December 2015 - GBP32.5 million), of which GBP161.4 million (31 December 2015 - GBP14.9 million) related to short-term cash borrowings of GBP165.0 million net of unamortised finance costs of GBP3.6 million.
31 December 2016 31 December 2015
Fixed Non-interest Fixed Non-interest
rate bearing Total rate bearing Total
Currency GBP million GBP million GBP million GBP million GBP million GBP million
Sterling (161.4) (9.8) (171.2) (14.9) (14.2) (29.1)
Euro - (0.5) (0.5) - (0.6) (0.6)
US dollar - (0.9) (0.9) - (1.4) (1.4)
Australian dollar - (1.4) (1.4) - (1.1) (1.1)
Other - (0.4) (0.4) - (0.3) (0.3)
Total (161.4) (13.0) (174.4) (14.9) (17.6) (32.5)
16 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange rate risk, interest rate risk and inflation risk), credit risk, price risk, liquidity risk and capital risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
For the parent company and its recourse subsidiaries, financial risks are managed by a central treasury operation which operates within Board approved policies. The various types of financial risk are managed as follows:
Market risk - foreign currency exchange rate risk
As at 31 December 2016 the Group held investments in 26 overseas projects (31 December 2015 - 18 overseas projects). The Group's foreign currency exchange rate risk policy is to determine the total Group exposure to individual currencies; it may then enter into hedges against certain individual investments. The Group's exposure to exchange rate risk on its investments is disclosed below.
In addition, the Group policy on managing foreign currency exchange rate risk is to cover significant transactional exposures arising from receipts and payments in foreign currencies, where appropriate and cost effective. There were 21 forward currency contracts open as at 31 December 2016 (31 December 2015 - 15). The fair value of these contracts was a net asset of GBP3.5 million (31 December 2015 - GBP3.7 million liability) and is included in investments at FVTPL.
At 31 December 2016, the Group's most significant currency exposure was to the Euro
(31 December 2015 - Euro).
Foreign currency exposure of investments at FVTPL:
31 December 2016 31 December 2015
Other Other
assets assets
Project Listed and Project Listed and
companies investments liabilities Total companies investments liabilities Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Sterling 500.5 10.0 41.4 551.9 421.9 16.1 53.3 491.3
Euro 341.4 - 10.3 351.7 213.3 - 1.4 214.7
Australian
dollar 181.4 - 5.5 186.9 88.2 - 50.2 138.4
US dollar 121.0 - 23.7 144.7 83.7 - 18.0 101.7
New Zealand
dollar 21.9 - 0.4 22.3 18.7 - 0.5 19.2
1,166.2 10.0 81.3 1,257.5 825.8 16.1 123.4 965.3
Investments in project companies are fair valued based on the spot rate at the balance sheet date. As at 31 December 2016, a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas projects by c.GBP27 million.
Market risk - interest rate risk
The Group's interest rate risk arises due to fluctuations in interest rates which impact on the value of returns from floating rate deposits and expose the Group to variability in interest payment cash flows on variable rate borrowings. The Group has assessed its exposure to interest rate risk and considers that this exposure is low as its variable rate borrowings tend to be short term, its finance costs in relation to letters of credit issued under the corporate banking facilities are at a fixed rate and the interest earned on its cash and cash equivalents minimal.
The exposure of the Group's financial assets to interest rate risk is as follows:
31 December 2016 31 December 2015
Interest-bearing Non-interest Interest- bearing Non-interest
Floating rate bearing Total Floating rate bearing Total
GBP million GBP million GBP million GBP million GBP million GBP million
Financial assets
Investments at FVTPL - 1,257.5 1,257.5 - 965.3 965.3
Trade and other
receivables - 7.0 7.0 - 8.1 8.1
Cash and cash equivalents - 1.6 1.6 - 1.1 1.1
Financial assets exposed
to interest rate risk - 1,266.1 1,266.1 - 974.5 974.5
An analysis of the movement between opening and closing balances of investments at FVTPL is given in note 11. Investments in project companies are principally valued on a discounted cash flow basis. At 31 December 2016, the weighted average discount rate was 8.9% (31 December 2015 - 9.5%). For investments in project companies, changing the discount rate used to value the underlying instruments would alter their fair value. As at 31 December 2016 a 0.25% increase in the discount rate would reduce the fair value by GBP32.1 million (31 December 2015 - GBP26.1 million) and a 0.25% reduction in the discount rate would increase the fair value by GBP33.6 million (31 December 2015 - GBP27.2 million).
The exposure of the Group's financial liabilities to interest rate risk is as follows:
31 December 2016 31 December 2015
Interest Interest
-bearing Non-interest -bearing Non-interest
fixed rate bearing Total fixed rate bearing Total
GBP million GBP million GBP million GBP million GBP million GBP million
Interest-bearing
loans and
borrowings (161.4) - (161.4) (14.9) - (14.9)
Trade and other
payables - (13.0) (13.0) - (17.6) (17.6)
Total financial
liabilities (161.4) (13.0) (174.4) (14.9) (17.6) (32.5)
Market risk - inflation risk
The Group has limited direct exposure to inflation risk, but the fair value of investments is determined by future project revenue and costs which can be partly linked to inflation. Sensitivity to inflation can be mitigated by the project company entering into inflation swaps. Where PPP investments are positively correlated to inflation, an increase in inflation expectations will tend to increase the value of PPP investments. However, an increase in inflation expectations would tend to increase JLPF's pension liabilities.
Based on a sample of seven of the larger PPP investments by value at 31 December 2016, a 0.25% increase in inflation is estimated to increase the value of PPP investments by c.GBP14 million and a 0.25% decrease in inflation is estimated to decrease the value of PPP investment by c.GBP13 million. Certain of the underlying project companies incorporate some inflation hedging.
Credit risk
Credit risk is managed on a Group basis and arises from a combination of the value and term to settlement of balances due and payable by counterparties for both financial and trade transactions.
In order to minimise credit risk, cash investments and derivative transactions are limited to financial institutions of a suitable credit quality and counterparties are carefully screened. The Group's cash balances are invested in line with a policy approved by the Board, capped with regard to counter-party credit ratings.
A significant majority of the project companies in which the Group invests receive revenue from government departments, public sector or local authority clients and/or directly from the public. As a result, these projects tend not to be exposed to significant credit risk.
Price risk
The Group's investments in PPP assets have limited direct exposure to price risk. The fair value of many such project companies is dependent on the receipt of fixed fee income from government departments, public sector or local authority clients. As a result, these projects tend not to be exposed to price risk. The Group also holds investments in renewable energy projects whose fair value may vary with forecast energy prices to the extent they are not hedged through short to medium term fixed price purchase agreements with electricity suppliers, or do not benefit from governmental support mechanisms at fixed prices. The Group's investment in JLEN is valued at its closing market share price.
Liquidity risk
The Group adopts a prudent approach to liquidity management by maintaining sufficient cash and available committed facilities to meet its current and upcoming obligations.
The Group's liquidity management policy involves projecting cash flows in major currencies and assessing the level of liquid assets necessary to meet these. Managing liquidity risk is helped by the relative predictability in both value and timing of cash flows to and from the project companies in which the Group invests.
Maturity of financial assets
The maturity profile of the Group's financial assets (excluding investments at FVTPL) is as follows:
Continuing operations
31 December 31 December
2016 2015
Less than Less than
one year one year
GBP million GBP million
Trade and other receivables 7.0 8.1
Cash and cash equivalents 1.6 1.1
Financial assets (excluding investments at FVTPL) 8.6 9.2
Other than certain trade and other receivables, as detailed in note 12, none of the financial assets is either overdue or impaired.
The maturity profile of the Group's financial liabilities is as follows:
31 December 31 December
2016 2015
GBP million GBP million
In one year or less, or on demand (174.4) (32.5)
------------ ------------
Total (174.4) (32.5)
------------ ------------
The following table details the remaining contractual maturity of the Group's financial liabilities. The table reflects undiscounted cash flows relating to financial liabilities based on the earliest date on which the Group is required to pay. The table includes both interest and principal cash flows:
Weighted average In one year
effective interest rate or less Total
% GBP million GBP million
31 December 2016
Fixed interest rate instruments - loans and borrowings 2.75 (161.4) (161.4)
Non-interest bearing instruments* n/a (13.0) (13.0)
------------------------ ------------ ------------
(174.4) (174.4)
------------------------ ------------ ------------
31 December 2015
Fixed interest rate instruments - loans and borrowings 3.0 (14.9) (14.9)
Non-interest bearing instruments* n/a (17.6) (17.6)
------------------------ ------------ ------------
(32.5) (32.5)
------------------------ ------------ ------------
* Non-interest bearing instruments relate to trade and other payables.
Capital risk
The Group seeks to adopt efficient financing structures that enable it to manage capital effectively and achieve the Group's objectives without putting shareholder value at undue risk. The Group's capital structure comprises its equity (as set out in the Group Statement of Changes in Equity) and its net borrowings.
At 31 December 2016, the Group had committed corporate banking facilities of GBP400.0 million, expiring in March 2020, together with additional surety facilities of GBP50.0 million, backed by committed liquidity facilities, expiring in March 2018.
Issued at 31 December 2016 were letters of credit of GBP162.6 million (31 December 2015 - GBP154.2 million), related to future capital and loan commitments, and contingent commitments and performance and bid bonds of GBP6.5 million (31 December 2015 - GBP1.1 million).
The Group has requirements for both borrowings and letters of credit, which at 31 December 2016 were met by its GBP450.0 million committed facilities and related ancillary facilities and uncommitted cash backed facilities (31 December 2015 - GBP350.0 million). The committed facilities are summarised below:
31 December 2016
Letters of credit
in issue/other Total
Total facilities Loans drawn commitments undrawn
GBP million GBP million GBP million GBP million
Committed corporate banking facilities 400.0 (165.0) (119.1) 115.9
Surety facilities backed by liquidity facilities 50.0 - (50.0) -
----------------- ------------
Total committed Group facilities 450.0 (165.0) (169.1) 115.9
----------------- ------------
31 December 2015
Letters of credit
in issue/other Total
Total facilities Loans drawn commitments undrawn
GBP million GBP million GBP million GBP million
Committed corporate banking facilities 350.0 (19.0) (155.3) 175.7
----------------- ------------
Total committed Group facilities 350.0 (19.0) (155.3) 175.7
----------------- ------------
17 Deferred tax
The movements in the deferred tax asset relating to other deductible temporary differences were:
Year ended Year ended Year ended
31 December 2016 31 December 2015 31 December 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening asset 1.4 1.5 -
Arising on acquisition - - 1.5
Charge to income - prior year (0.2) (0.2) (0.2)
Credit to income - current year (0.2) 0.1 0.1
Closing asset 1.0 1.4 1.4
The Group has no losses within its entities which are consolidated but there are tax losses in investment entity subsidiaries which are held at FVTPL.
18 Retirement benefit obligations
31 December 31 December
2016 2015
GBP million GBP million
Pension schemes (61.3) (38.9)
Post-retirement medical benefits (8.0) (7.3)
------------ ------------
Retirement benefit obligations (69.3) (46.2)
------------ ------------
a) Pension schemes
The Group operates two defined benefit pension schemes in the UK (the Schemes) - The John Laing Pension Fund (JLPF) which commenced on 31 May 1957 and The John Laing Pension Plan (the Plan) which commenced on 6 April 1975. JLPF was closed to future accrual from 1 April 2011 and the Plan was closed to future accrual from September 2003. Neither Scheme has any active members, only deferred members and pensioners. The assets of both Schemes are held in separate trustee-administered funds.
UK staff employed since 1 January 2002, who are entitled to retirement benefits, can choose to be members of a defined contribution stakeholder scheme sponsored by the Group in conjunction with Legal and General Assurance Society Limited. Local defined contribution arrangements are available to overseas staff.
JLPF
An actuarial valuation of JLPF was carried out as at 31 March 2016 by a qualified independent actuary, Willis Towers Watson. At that date, JLPF was 85% funded on the technical provision funding basis. This valuation took into account the Continuous Mortality Investigation Bureau (CMI Bureau) projections of mortality.
The actuarial deficit of GBP171 million is to be repaid over seven years as follows:
By 31 March GBP million 2017 24.5 2018 26.5 2019 29.1 2020 24.9 2021 25.7 2022 26.4 2023 24.6
The next triennial actuarial valuation of JLPF is due as at 31 March 2019.
During the year ended 31 December 2016, John Laing made deficit reduction contributions of GBP18.1 million in cash (2015 - GBP127.4 million in a mixture of cash, JLEN shares and PPP assets). At 31 December 2016, JLPF's assets included PPP investments valued at GBP37.8 million (31 December 2015 - GBP41.4 million). The Company has guaranteed to fund any cumulative shortfall in forecast project yield payments for some of these PPP investments up until 2017, but considers it unlikely that a net shortfall will arise.
The liability at 31 December 2016 allows for indexation of deferred pensions and post 5 April 1988 GMP pension increases based on the Consumer Price Index (CPI).
The Plan
No contributions were made to the Plan in the year ended 31 December 2016 (31 December 2015 - none). At its last actuarial valuation as at 31 March 2014, the Plan had assets of GBP12.3 million and liabilities of GBP11.4 million resulting in an actuarial surplus of GBP0.9 million. The next triennial actuarial valuation of the Plan is due as at 31 March 2017.
An analysis of members of both Schemes is shown below:
31 December 2016 Deferred Pensioners Total JLPF 4,385 3,883 8,268 The Plan 109 328 437 31 December 2015 Deferred Pensioners Total JLPF 4,569 3,787 8,356 The Plan 114 334 448
The weighted average financial assumptions used in the valuation of JLPF and the Plan under IAS 19 at 31 December were:
31 December 31 December
2016 2015
% %
Discount rate 2.80 3.75
Rate of increase in non-GMP pensions in payment 3.10 2.90
Rate of increase in non-GMP pensions in deferment 2.10 2.00
Inflation - RPI 3.20 3.00
Inflation - CPI 2.10 2.00
----------- -----------
The major categories and fair value of assets held by the Schemes were as follows:
31 December 31 December
2016 2015
GBP million GBP million
Bonds and other debt instruments 415.2 364.2
Equity instruments 374.7 337.1
Aviva bulk annuity buy-in agreement 234.1 214.2
Property 1.8 2.3
Derivatives (6.1) (8.3)
Cash and cash equivalents 52.4 5.8
UK PPP investments 37.8 41.4
------------ ------------
Total market value of assets 1,109.9 956.7
------------ ------------
The amount of the JLPF deficit is highly dependent upon the assumptions above and may vary significantly from period to period. The impact of possible future changes to some of the assumptions is shown below, without taking into account any inter-relationship between the assumptions. In practice, there would be inter-relationships between the assumptions. The analysis has been prepared in conjunction with the Group's actuarial adviser.
(Increase)/decrease
in pension liabilities at
31 December 2016
Increase in Decrease in
assumption assumption
GBP million GBP million
0.25% on discount rate 45.8 (48.9)
0.25% on inflation rate (34.1) 33.2
1 year post retirement longevity (43.7) 38.4
Mortality
Mortality assumptions at 31 December 2016 were based on the following tables published by the CMI Bureau:
-- SAPS S2 normal (S2NA) year of birth tables for staff members with mortality improvements in line with CMI 2015 core projections with a long term trend rate of 1.25% per annum; and
-- SAPS S2 light (S2NA_L) year of birth tables for executive members with mortality improvements in line with CMI 2015 core projections with a long term trend rate of 1.25% per annum.
Mortality assumptions at 31 December 2015 were based on the following tables published by the CMI Bureau:
-- SAPS S2 normal (S2NA) year of birth tables for staff members with mortality improvements in line with CMI 2013 core projections with a long term trend rate of 1.0% per annum; and
-- SAPS S2 light (S2NA_L) year of birth tables for executive members with mortality improvements in line with CMI 2013 core projections with a long term trend rate of 1.0% per annum.
The table below summarises the weighted average life expectancy implied by the mortality assumptions used:
31 December 31 December
2016 2015
Years Years
Life expectancy - of member reaching age 65 in 2016
Males 22.4 22.3
Females 24.5 24.4
Life expectancy - of member aged 65 in 2031
Males 23.6 23.4
Females 25.9 25.5
----------- -----------
Analysis of the major categories of assets held by the Schemes
31 December 2016 31 December 2015
GBP million % GBP million %
Bond and other debt instruments
UK corporate bonds 80.9 114.0
UK government gilts 141.6 104.7
UK government gilts - index linked 192.7 145.5
----------- ------ ----------- ------
415.2 37.3 364.2 38.1
Equity instruments
UK listed equities 152.0 147.5
European listed equities 34.3 28.7
US listed equities 73.8 80.7
Other international listed equities 114.6 80.2
----------- ------ ----------- ------
374.7 33.8 337.1 35.3
Aviva bulk annuity buy-in agreement 234.1 21.1 214.2 22.4
Property
Industrial property 1.8 2.3
----------- ------ ----------- ------
1.8 0.2 2.3 0.2
Derivatives
Inflation swaps (6.1) (8.3)
----------- ------ ----------- ------
(6.1) (0.5) (8.3) (0.9)
Cash and equivalents 52.4 4.7 5.8 0.6
UK PPP investments 37.8 3.4 41.4 4.3
----------- ------ ----------- ------
Total market value of assets 1,109.9 100.0 956.7 100.0
----------- ------ ----------- ------
Present value of Schemes' liabilities (1,171.2) (992.9)
----------- -----------
Deficit in the Schemes (61.3) (36.2)
Less unrecoverable surplus in the Plan* - (2.7)
----------- -----------
Net pension liability (61.3) (38.9)
----------- -----------
* The surplus in the Plan, which at 31 December 2016 was GBP2.9 million, has been treated as recoverable for the first time in 2016.
Virtually all equity and debt instruments held by JLPF have quoted prices in active markets (Level 1). Derivatives can be classified as Level 2 instruments and property and PPP investments as Level 3 instruments. It is the policy of JLPF to use inflation swaps to hedge its exposure to inflation risk. The JLPF Trustee invests in return seeking assets, such as equity, property and PPP investments, whilst balancing the risks of inflation and interest rate movements through the annuity buy-in agreement, inflation swaps and interest rate hedging.
In February 2009, the JLPF Trustee entered into a bulk annuity buy-in agreement with Aviva to mitigate JLPF's exposure to changes in liabilities. At 31 December 2016, the underlying insurance policy was valued at GBP234.1 million (31 December 2015 - GBP214.2 million), being very substantially equal to the IAS 19 valuation of the related liabilities.
Analysis of amounts charged to operating profit
Year ended
31 December Year ended
2016 31 December
2015
Statutory Pro forma and statutory
GBP million GBP million
Current service cost* (1.6) (1.3)
------------ ------------------------
* The Schemes no longer have any active members. Therefore, under the projected unit method of valuation the current service cost for JLPF will increase as a percentage of pensionable payroll as members approach retirement. The current service cost has been included within administrative expenses.
Analysis of amounts charged to finance costs
Year ended
31 December Year ended
2016 31 December
2015
Statutory Pro forma and statutory
GBP million GBP million
Interest on Schemes' assets 35.3 34.2
Interest on Schemes' liabilities (36.3) (36.6)
------------ ------------------------
Net charge to finance costs (1.0) (2.4)
------------ ------------------------
Analysis of amounts recognised in Group Statement of Comprehensive Income
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Return on Schemes' assets (excluding amounts included in interest
on Schemes' assets above) 151.5 (23.0) (23.7)
Experience (loss)/gain arising on Schemes' liabilities (5.7) 15.6 15.6
Changes in financial assumptions underlying the present value of
Schemes' liabilities (185.6) 22.1 46.0
Changes in demographic assumptions underlying the present value of
Schemes' liabilities (1.1) - -
Recognition of surplus in the Plan at 31 December 2015 2.7 - -
Decrease in unrecoverable surplus - 0.3 0.3
Actuarial (loss)/gain recognised in Group Statement of
Comprehensive Income (38.2) 15.0 38.2
The cumulative amount recognised in the Group Statement of Changes in Equity is GBPnil (31 December 2015 - GBP38.2 million gain).
Changes in present value of defined benefit obligations
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening defined benefit obligation (992.9) (1,041.0) -
Arising on acquisition - - (1,058.9)
Current service cost (1.6) (1.3) (1.3)
Interest cost (36.3) (36.6) (36.6)
Experience (loss)/gain arising on Schemes' liabilities (5.7) 15.6 15.6
Changes in financial assumptions underlying the present value of Schemes'
liabilities (185.6) 22.1 46.0
Changes in demographic assumptions underlying the present value of Schemes'
liabilities (1.1) - -
Benefits paid (including administrative costs paid) 52.0 48.3 42.3
Closing defined benefit obligation (1,171.2) (992.9) (992.9)
The weighted average life of JLPF liabilities at 31 December 2016 is 16.8 years (31 December 2015 - 15.3 years).
Changes in the fair value of Schemes' assets
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening fair value of Schemes' assets 956.7 866.4 -
Arising on acquisition - - 861.1
Interest on Schemes' assets 35.3 34.2 34.2
Return on Schemes' assets (excluding amounts included in interest on Schemes'
assets above) 151.5 (23.0) (23.7) Contributions by employer 18.4 127.4 127.4 Benefits paid (including administrative costs paid) (52.0) (48.3) (42.3) Closing fair value of Schemes' assets 1,109.9 956.7 956.7
Analysis of the movement in the deficit during the year
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening deficit (38.9) (174.6) -
Arising on acquisition - - (197.8)
Current service cost (1.6) (1.3) (1.3)
Finance cost (1.0) (2.4) (2.4)
Contributions 18.4 127.4 127.4
Actuarial (loss)/gain (38.2) 14.7 37.9
Closing deficit in Schemes (61.3) (36.2) (36.2)
Less unrecoverable surplus in the Plan - (2.7) (2.7)
Pension deficit (61.3) (38.9) (38.9)
History of the weighted average experience gains and losses
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
Difference between actual and expected returns on assets:
Amount (GBP million) 151.5 (23.0) (23.7)
% of Schemes' assets 13.6 2.4 2.5
Experience (loss)/gain on Schemes' liabilities:
Amount (GBP million) (5.7) 15.6 15.6
% of present value of Schemes' liabilities 0.5 1.6 1.6
Total amount recognised in the Group Statement of Comprehensive Income
(excluding deferred
tax):
Amount (GBP million) (38.2) 15.0 38.2
% of present value of Schemes' liabilities 3.3 1.5 3.8
------------ ------------ ------------
b) Post-retirement medical benefits
The Company provides post-retirement medical insurance benefits to 62 former employees. This scheme, which was closed to new members in 1991, is unfunded.
The present value of the future liabilities under this arrangement has been assessed by the Company's actuarial adviser, Lane Clark & Peacock LLP, and has been included in the Group Balance Sheet under retirement benefit obligations as follows:
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Post-retirement medical liability - opening (7.3) (8.2) -
- arising on acquisition - - (8.2)
Other finance costs (0.3) (0.3) (0.3)
Contributions 0.5 0.4 0.4
Experience (loss)/gain* (0.2) 0.4 0.4
Changes in financial assumptions underlying the present value of
scheme's liabilities* (0.9) 0.4 0.4
Changes in demographic assumptions underlying the present value of
liabilities* 0.1 - -
Curtailment and settlements 0.1 - -
Post-retirement medical liability - closing (8.0) (7.3) (7.3)
* These amounts are actuarial (losses)/gains that go through the Group Statement of Comprehensive Income.
The annual rate of increase in the per capita cost of medical benefits was assumed to be 5.2% in 2016 (2015 - 5.0%). It is expected to increase in 2017 and thereafter at RPI plus 2.0% per annum (2015 - at RPI plus 2.0% per annum).
Medical cost inflation has a significant effect on the liability reported for this scheme. A 1% change in assumed medical cost inflation would result in the following liability at 31 December 2016:
1% increase 1% decrease
GBP million GBP million
Post-retirement medical liability (8.9) (7.3)
------------ ------------
Life expectancy also has a significant effect on the liability reported for this scheme. A one-year increase or decrease in life expectancy would result in the following liability at 31 December 2016:
1% increase 1% decrease
GBP million GBP million
Life expectancy (8.7) (7.4)
------------ ------------
19 Provisions
At 1 January Credit/(charge) to Group At 31 December
2016 Reclassification Income Statement Utilised 2016
GBP million GBP million GBP million GBP million GBP million
Retained liabilities (4.2) - (0.7) 3.4 (1.5)
Employee related liabilities (0.1) - 0.1 - -
Total provisions (4.3) - (0.6) 3.4 (1.5)
------------ --------------
Classified as:
Continuing operations (0.1) (4.2) (0.6) 3.4 (1.5)
Discontinued operations (4.2) 4.2 - - -
Provisions on continuing
operations are analysed as:
Non-current provisions (0.1) (1.5)
------------
(0.1) (1.5)
At 1 January Arising on Unwinding Credit to Group At 31 December
2015 acquisition of discount Income Statement Utilised 2015
GBP million GBP million GBP million GBP million GBP million GBP million
Retained liabilities - (8.8) - 2.2 2.4 (4.2)
Employee related
liabilities - (0.1) - - - (0.1)
Onerous property leases - (2.0) - - 2.0 -
Total provisions - (10.9) - 2.2 4.4 (4.3)
Classified as:
Continuing operations - (2.1) - - 2.0 (0.1)
Discontinued operations - (8.8) - 2.2 2.4 (4.2)
Provisions on continuing
operations are analysed as:
Non-current provisions (2.1) (0.1)
(2.1) (0.1)
During the year, provisions relating to retained liabilities were reclassified from discontinued operations to continuing operations as they are no longer sufficiently material to show separately as discontinued operations.
Provisions of GBP1.5 million as at 31 December 2016 (31 December 2015 - GBP4.2 million) relate to retained liabilities from the sale of the Laing Construction business in 2001.
20 Share capital
31 December 31 December
2016 2015
No. No.
Authorised:
Ordinary shares of GBP0.10 each 366,923,076 366,923,076
------------ ------------
Total 366,923,076 366,923,076
------------ ------------
31 December 2016 31 December 2015
No. GBP million No. GBP million
Allotted, called up and fully paid:
Statutory
At 1 January - 366,923,076 ordinary shares of GBP0.10 each
(2015 - 100,000,000 ordinary shares
of GBP0.00000001 each) 366,923,076 36.7 100,000,000 -
Issue of 100,000,000 ordinary shares of GBP0.00000001 each - - 100,000,000 -
Conversion of 200,000,000 ordinary shares of GBP0.00000001
each to 20 ordinary shares of GBP0.10 each - - (199,999,980) -
Issue of 299,999,980 ordinary shares of GBP0.10 each - - 299,999,980 30.0
Issue of 66,923,076 ordinary shares of GBP0.10 each - - 66,923,076 6.7
------------
At 31 December 366,923,076 36.7 366,923,076 36.7
------------
Pro forma
At 1 January - 300,000,000 ordinary shares of GBP0.10 each 300,000,000 30.0
Issue of 66,923,076 ordinary shares of GBP0.10 each 66,923,076 6.7
At 31 December 366,923,076 36.7
The Company has one class of ordinary shares which carry no right to fixed income.
21 Share premium
On 26 January 2015 the Company allotted to its shareholder 100,000,000 ordinary shares of GBP0.00000001 each credited as fully paid to rank pari passu with its existing ordinary shares. On 27 January 2015 all the ordinary shares were consolidated into 20 ordinary shares of GBP0.10 each, each share having the same rights and being subject to the same restrictions (except as to nominal value) as the existing ordinary shares of GBP0.00000001 each in the Company as set out in its Articles. On the same day the Company allotted and issued to its shareholder a further 299,999,980 ordinary shares of GBP0.10 each at a premium of GBP2.00 per share, each to rank pari passu with the existing ordinary shares of GBP0.10 each in the capital of the Company. In addition, the Company undertook a reduction of its share premium account by GBP500 million.
On 17 February 2015, the Company issued 66,923,076 new ordinary shares of GBP0.10 each at a premium of GBP1.85 per share in connection with admission of its shares to listing.
31 December 2016 31 December 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Opening balance 218.0 100.0 -
Premium arising on issue of equity shares - 123.8 723.8
Reduction of share premium account - - (500.0)
Costs associated with the issue of equity shares - (5.8) (5.8)
Closing balance 218.0 218.0 218.0
22 Net cash outflow from operating activities
Year ended Year ended Year ended
31 December 31 December 31 December
2016 2015 2015
Statutory Pro forma Statutory
GBP million GBP million GBP million
Profit before tax from continuing operations 192.1 100.9 97.5
Adjustments for:
Finance costs 10.3 11.3 11.3
Discontinued operations' cash flows - 1.1 1.1
Unrealised profit arising on changes in fair value of investments in
project companies (note
11) (218.8) (133.1) (129.7)
Depreciation of plant and equipment 0.6 0.7 0.7
Amortisation of intangible assets 0.2 0.5 0.5
Share-based incentives 2.0 0.7 0.7
Contribution to JLPF (18.4) (47.5) (47.5)
Decrease in provisions (2.8) (1.9) (1.9)
Operating cash outflow before movements in working capital (34.8) (67.3) (67.3)
Decrease/(increase) in trade and other receivables 1.2 (1.0) (1.0)
Decrease in trade and other payables (3.5) (2.2) (2.2)
Net cash outflow from operating activities (37.1) (70.5) (70.5)
23 Guarantees, contingent assets and liabilities and other commitments
At 31 December 2016, the Group had future equity and loan commitments in PPP and renewable energy projects of GBP186.3 million (31 December 2015 - GBP278.1 million) backed by letters of credit of GBP162.6 million (31 December 2015 - GBP154.2 million) and collateralised cash of GBP23.7 million (31 December 2015 - GBP123.9 million).
As stated in note 18 a), the Company has provided guarantees in respect of certain PPP investments transferred to JLPF in settlement of prior annual contribution obligations. Guarantees are provided to fund any cumulative shortfall in forecast yield payments from these PPP investments up until 2017, and the maximum exposure at 31 December 2016 was GBPnil (31 December 2015 - GBP0.3 million).
The Group has given guarantees to lenders of a normal trading nature, including performance bonds, some of which may be payable on demand.
Claims arise in the normal course of trading which in some cases involve or may involve litigation. Full provision has been made for all amounts which the Directors consider are likely to become payable on account of such claims.
The Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases for land and buildings, falling due as follows:
31 December 31 December
2016 2015
GBP million GBP million
Within one year 1.0 0.9
In the second to fifth years inclusive 3.0 3.3
After five years 2.8 4.0
6.8 8.2
24 Transactions with related parties
Group
Details of transactions between the Group and its related parties are disclosed below.
Trading transactions
The Group has entered into the following trading transactions with project companies in which the Group holds interests:
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Services income* 18.0 13.5
Amounts owed by project companies 1.6 3.1
Amounts owed to project companies (0.6) (0.7)
* Services income is generated from project companies through management services agreements and recoveries of bid costs on financial close.
Investment transactions
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Net cash transferred to investments at FVTPL (note 11) (73.4) (54.0)
Transactions with other related parties
There were no transaction with other related parties during the year ended 31 December 2016.
In the year ended 31 December 2015, the Group transferred ownership of shares in JLEN and shares in a PPP project company to JLPF as partial consideration for agreed deficit reduction contributions. More details are set out in note 11.
Remuneration of key management personnel
The remuneration of the Directors of John Laing Group plc together with other members of the Executive Committee, who were the key management personnel of the Group for the period of the financial statements, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures:
Year ended Year ended
31 December 31 December
2016 2015
GBP million GBP million
Cash basis
Short-term employee benefits 2.8 3.0
Post-employment benefits 0.2 0.2
Cash payments under long-term incentive plan 1.9 1.9
Social security costs 0.7 0.7
5.6 5.8
Award basis
Short-term employee benefits 2.8 3.0
Post-employment benefits 0.2 0.2
Awards under long-term incentive plan 1.0 2.6
Social security costs 0.4 0.7
4.4 6.5
In addition to the above amounts, GBP44,231 (2015 - GBPnil) was paid to Nalon Management Services Limited, of which Phil Nolan is a director, for services in the period prior to the Company's IPO in February 2015.
25 Events after balance sheet date
On 2 March 2017, the Group disposed of its investment in the A1 Gdansk project in Poland for proceeds of EUR137.3 million.
ADDITIONAL FINANCIAL INFORMATION (Unaudited)
Re-presented financial statements
Income Statement for the year ended 31 December 2015
Pro forma IFRS Group Re-presented income Re-presented income
Income Statement Adjustments statement statement line items
GBP million GBP million GBP million
Fair value movements - Fair value movements -
investment portfolio 132.1 - 132.1 investment portfolio
Fair value movements - Fair value movements -
other (6.7) (0.8)(a) (7.5) other
Investment fees from Investment fees from
projects 7.7 - 7.7 projects
Net gain on investments
at fair value through
profit or loss 133.1 (0.8) 132.3
IMS revenue 13.4 - 13.4 IMS revenue
PMS revenue 17.0 - 17.0 PMS revenue
Recoveries on financial Recoveries on financial
close 3.4 - 3.4 close
Other income 0.7 (0.7)(a,c) -
Other income 34.5 (0.7) 33.8
Total income 167.6 (1.5) 166.1
Cost of sales (0.1) 0.1(c) -
Cost of sales (0.1) 0.1 -
Third party costs (6.9) 0.3(c) (6.6) Third party costs
Staff costs (31.8) (0.7)(a) (32.5) Staff costs
General overheads (11.7) - (11.7) General overheads
Other net costs (3.4) (0.2)(c) (3.6) Other net costs
Pension and other charges (1.5) 1.5(b) -
Administrative expenses (55.3) 0.9 (54.4)
EBIT 112.2 (0.5) 111.7
Finance charges (11.3) 4.7(a,b) (6.6) Finance charges
Pension and other
Pension and other charges - (4.2)(b) (4.2) charges
Finance costs (11.3) 0.5 (10.8)
Profit before tax 100.9 - 100.9
Notes:
a) Adjustments comprise: GBP2.0 million interest income reclassified from 'fair value movements - other' to 'finance costs'; GBP0.7 million cost in respect of the IFRS 2 charge for share-based incentives reclassified from 'fair value movements - other' to 'staff costs'; GBP0.5 million fee income from project company shown as 'other income' in Group Income Statement reclassified to 'fair value movements - other' in re-presented income statement.
b) Under IAS 19, the costs of the pension schemes comprise a service cost of GBP1.5 million, included in administrative expenses in the Group Income Statement, and a finance charge of GBP2.7 million, included in finance costs in the Group Income Statement. These amounts are combined together under management reporting.
c) Other small reclassifications: (i) GBP0.1 million costs shown as 'cost of sales' in the Group Income Statement reclassified to 'other net costs'; (ii) GBP0.3 million of cost recoveries in 'other income' in the Group Income Statement offset against 'third party costs' in the re-presented income statement; (iii) other net costs of GBP0.1 million reclassified from 'other income' to 'other net costs'.
Balance sheet as at 31 December 2015
31 December 2015
Re-presented Balance Re-presented balance
IFRS Group Balance Sheet Adjustments Sheet sheet line items
GBP million GBP million GBP million
Non-current assets
Intangible assets 0.2 (0.2)(c) -
Plant and equipment 1.0 (1.0)(c) -
Investments at FVTPL 965.3 (123.9)(a) 841.4 Portfolio book value
- 123.9(b) 123.9 Cash collateral balances
Non-portfolio
- 0.5(a) 0.5 investments
Deferred tax assets 1.4 (1.4)(c) -
- 5.6(c,e) 5.6 Other long term assets
967.9 3.5 971.4
Current assets
Trade and other
receivables 8.3 (8.3)(d) -
Cash and cash
Cash and cash equivalents 1.1 4.4(a) 5.5 equivalents
9.4 (3.9) 5.5
Total assets 977.3 (0.4) 976.9
Current liabilities
Working capital and
- (22.1)(b,d,e) (22.1) other balances
Current tax liabilities (2.7) 2.7(d) -
Borrowings (14.9) (4.1)(e) (19.0) Cash borrowings
Trade and other payables (19.6) 19.6(d) -
(37.2) (3.9) (41.1)
Liabilities directly
associated with assets
classified as held for
sale (4.2) 4.2(d) -
Net current liabilities (32.0) (3.6) (35.6)
Non-current liabilities
Retirement benefit
obligations (46.2) 7.3(f) (38.9) Pension deficit (IAS 19)
Other retirement benefit
- (7.3)(f) (7.3) obligations
Provisions (0.1) 0.1(d) -
(46.3) 0.1 (46.2)
Total liabilities (87.7) 0.4 (87.3)
Net assets 889.6 - 889.6
Notes:
a) Investments at fair value through profit or loss (FVTPL) comprise: portfolio valuation of GBP841.4 million, non-portfolio investments of GBP0.5 million and other assets and liabilities within recourse investment entity subsidiaries of GBP123.4 million (see note 11 to the Group financial statements). Re-presented cash and cash equivalents increased from GBP1.1 million on the Group Balance Sheet because of the inclusion of available cash balances in recourse group investment subsidiaries of GBP4.4 million excluding cash collateral balances of GBP123.9 million.
b) Other assets and liabilities within recourse investment entity subsidiaries of GBP123.4 million referred to in note (a) include (i) cash and cash equivalents of GBP128.3 million, of which GBP123.9 million is held to collateralise future investment commitments, and (ii) negative working capital and other balances of GBP4.9 million.
c) Intangible assets, plant and equipment and deferred tax assets are combined as other long term assets.
d) Trade and other receivables, current tax liabilities, trade and other payables, liabilities directly associated with assets classified as held for sale and provisions are combined as working capital and other balances.
e) Borrowings comprise cash borrowings of GBP19.0 million net of unamortised financing costs of GBP4.1 million, with the non-current portion of GBP3.0 million re-presented as other long term assets and the current portion of GBP1.1 million re-presented as working capital and other balances.
f) Total retirement benefit obligations are shown in their separate components as per note 18 to the Group financial statements.
Details of investments in project companies
Details of the Group's investments in project companies as at 31 December 2016 broken down by infrastructure sector are as follows:
Period of concession
or estimated
operating life
Equity
committed /
Start invested
Sector Company name Project name % owned Description date No. of years (par value)
Social
Infrastructure
Health Alder Hey (Special Alder Hey 40% Design, build, July 30 <GBP10
Purpose Vehicle) Children's finance and 2015 million
Limited Hospital operate new
hospital in
Liverpool costing
GBP167 million.
SA Health New Royal 17.26% Design, build, Nov 35 GBP25 -
Partnership Nominees Adelaide Hospital finance and 2011 GBP50
Pty Limited operate new million
hospital in
Adelaide, South
Australia costing
AUD $1,850
million.
Justice and Securefuture Wiri Auckland South 30% Design, build, Sept 28 GBP10 -
Emergency Limited Corrections finance and 2012 GBP25
Services Facility operate a 960 million
place prison at
Wiri, South
Auckland, New
Zealand
costing NZD $270
million.
Defence Defence Support DARA Red Dragon 100% Design, build and Aug 16 <GBP10
(St Athan) Limited finance aircraft 2003 million
maintenance
facilities at RAF
St. Athan costing
GBP89 million.
Regeneration Regenter Myatts Lambeth Housing 50% Build and May 25 <GBP10
Field North Limited refurbish, 2012 million
finance and
operate social
housing in
Lambeth costing
GBP72.6 million.
Other Westadium Project Co New Perth Stadium 50% Design, build, Aug 28 GBP25 -
accommodation Pty Limited finance, 2014 GBP50
maintenance and million
operation of new
Perth Stadium in
Western Australia
comprising total
expenditure of
AUD $1.0 billion.
Environmental
Waste and INEOS Runcorn (TPS) Manchester Waste 37.43% Design, build, Apr 25 GBP10 -
biomass Limited TPS Co finance and 2009 GBP25
operate a waste million
CHP plant in
Runcorn costing
GBP233 million.
Viridor Laing Manchester Waste 50% Design, build and Apr 25 GBP25 -
(Greater Manchester) VL Co commission 42 2009 GBP50
Limited facilities million
comprising waste
processing and
recycling
services
in the Greater
Manchester area
with construction
costing GBP401
million.
Speyside Renewable Speyside Biomass 43.35% Design, build, Aug 33 GBP10 -
Energy Partnership finance and 2014 GBP25
Limited operate a 15 MW million
biomass CHP plant
in Speyside.
Cramlington Cramlington 44.7% Design, build, Sept 22 GBP25 -
Renewable Energy Biomass finance and 2015 GBP50
Developments Limited operate a 28 MW million
biomass CHP plant
in Cramlington.
Wind Rammeldalsberget Rammeldalsberget 100% Design, build, Nov 24 GBP10 -
Vindkraft AB wind farm finance and 2014 GBP25
operate six 2.5 million
MW turbines in
Sweden
Glencarbry Windfarm Glencarbry wind 100% Design, build, Jan 26 GBP10 -
Limited farm finance and 2016 GBP25
operate seven 3.3 million
MW and five 2.5
MW turbines in
Ireland
Kabeltrasse Morbach Horath wind farm 81.82% Design, build, Nov 24 GBP10 -
GmbH & Co KG finance and 2016 GBP25
operate nine 3.3 million
MW turbines in
Germany
HWF 1 Pty Limited Hornsdale wind 30% Design, build, Aug 26 GBP10 -
farm (Phase 1) finance and 2015 GBP25
operate 32 million
turbines to give
100 MW total
installed
capacity in
Australia.
HWF 2 Pty Limited Hornsdale wind 20% Design, build, June 26 < GBP10
farm (Phase 2) finance and 2016 million
operate 32
turbines to give
100 MW total
installed
capacity in
Australia.
Kiata Wind Farm Pty Kiata wind farm 72.3% Design, build, Nov 26 GBP10 -
Limited finance and 2016 GBP25
operate a nine million
turbine 30 MW
windfarm in
Australia
Llynfi Afan Llynfi wind farm 100% Design, build, June 26 GBP10 -
Renewable Energy finance and 2016 GBP25
Park Limited operate twelve 2 million
MW turbines in
Wales.
Société Pasilly wind farm 100% Design, build, Dec 26 < GBP10
d'Exploitation du finance and 2015 million
Parc Eolien Du operate ten 2 MW
Tonnerois turbines in
France.
Svartvallsberget SPW Svartvallsberget 100% Design, build, Mar 26 GBP10 -
AB wind farm finance and 2013 GBP25
operate ten 2 MW million
turbines in
Sweden
Klettwitz Shipkau Klettwitz wind 100% Design, build, Oct 25 GBP25 -
Nord Beteiligungs farm finance and 2015 GBP50
GmbH operate the million
re-powering of a
windfarm with 27
turbines to give
89 MW total
installed
capacity
AEM Wind LLC Sterling wind 92.5% Design, build, Oct 31 GBP10 -
farm finance and 2016 GBP25
operate 13 2.3 MW million
turbines in New
Mexico, USA
Parc Eolien des St Martin wind 100% Design, build, Nov 27 < GBP10
Courtibeaux SAS farm finance and 2016 million
operate five 2.05
MW turbines in
France
Parc Eolien des Sommette wind 100% Design, build, Sept 27 GBP10 -
Tournevents du Cos farm finance and 2016 GBP25
SAS operate nine 2.4 million
MW turbines in
France
OWP Nordergründe 30% Design, build, Aug 26 GBP25 -
Nordergründe offshore wind finance and 2016 GBP50
GmbH & Co. KG farm operate 18 million
offshore 6.2 MW
turbines in the
German North Sea
Transport
Other CountyRoute (A130) A130 100% Design, build, Feb 30 < GBP10
plc finance and 2000 million
operate the A130
bypass linking
the A12 and A127
in Essex at a
cost of GBP76
million.
Gdansk Transport A1 Gdansk Poland 29.69% Design, build, Aug 35 GBP10 -
Company SA finance and 2004 GBP25
operate the A1 million
motorway in
Poland in two
phases at a cost
of EUR651
million for phase
1 and EUR900
million for phase
2.
I-4 Mobility I-4 Ultimate 50% Design, build, Sept 40 GBP10 -
Partners Op Co LLC finance and 2014 GBP25
operate 21 miles million
of the I-4
Interstate in
Florida, US at a
cost
of USD $2.32
billion.
I-77 Mobility I-77 Managed 10% Design, build, May 53 GBP10 -
Partners LLC Lanes finance and 2015 GBP25
operate 25.9 million
miles of the I-77
Interstate in
Charlotte, North
Carolina,
US at a cost of
USD $665 million.
Severn River Severn River 35% Design, build, Apr The earlier of GBP10 -
Crossing Plc Crossing finance and 1992 30 years or GBP25
operate a second until a million
crossing over the pre-determined
Severn River plus level of
operate and revenue
maintain existing achieved
crossing.
Construction cost
approximately
GBP320 million.
MAK Mecsek Autopalya M6 Hungary 30% Design, Apr 27 GBP10 -
Koncesszios Zrt. construction, 2010 GBP25
refurbishment, million
operation,
maintenance and
financing of 48
km section
of M6 expressway
and 32 km of M60
expressway at a
cost of EUR886
million.
Parkway A6 BV A6 85% Design, build, Nov 23 < GBP10
finance, manage 2016 million
and maintain for
a 20 year
operational
period the A6
Almere
highway in the
greater Amsterdam
region.
A1 Mobil GmbH & Co. A1 Germany 42.5% Construct and Aug 30 GBP25 -
KG operate the A1 2008 GBP50
Autobahn between million
Bremen and
Hamburg in
Germany at a cost
of EUR417.1
million.
A-Lanes A15 BV A15 Netherlands 28% Design, build, Dec 25 GBP10 -
finance and 2010 GBP25
maintain the A15 million
highway south of
Rotterdam (about
40 km) at a
construction cost
of EUR727
million.
City Greenwich City Greenwich 5% Construction and Oct 25 GBP10 -
Lewisham Rail Link Lewisham (DLR) operation of 1996 GBP25
plc infrastructure on million
Lewisham
extension of the
Docklands Light
Railway (DLR) at
a cost of GBP205
million.
Aylesbury Vale Aylesbury Vale 50% Construction and Aug 21 <GBP10
Parkway Limited Parkway operation of the 2007 million
Aylesbury Vale
Parkway Station.
Construction cost
GBP15.5
million.
John Laing Rail Coleshill Parkway 100% Construction and Mar 21 <GBP10
Infrastructure operation of the 2006 million
Limited Coleshill Parkway
Station.
Construction cost
GBP7.1 million.
Denver Transit Denver Eagle P3 45% Design, build, Aug 34 GBP10 -
Partners LLC finance, 2010 GBP25
maintenance and million
operation of
passenger rail
systems in
Denver, Colorado.
Construction cost
USD $1.27
billion.
ALTRAC Light Rail Sydney Light Rail 32.5% Design, build, Feb 19 GBP50 -
Partnership finance, operate 2015 GBP100
and maintain the million
CBD and South
East Light Rail
and to operate
and maintain the
Inner West Light
Rail in Sydney,
Australia.
Croydon and Lewisham Croydon & 50% Installation and Apr 25 <GBP10
Lighting Services Lewisham Street maintenance of 2011 million
Limited Lighting street lighting.
Programme cost
GBP74.2 million.
Rolling stock Agility Trains West IEP (Phase 1) 30% Delivery and May 41 GBP50 -
Limited maintenance of 2012 GBP100
intercity train million
services on the
Great Western
Main Line (UK)
using
a fleet of new
Super Express
Trains and
maintenance
facilities.
Construction cost
GBP1.8 billion.
Agility Trains East IEP (Phase 2) 30% Delivery and Apr 41 GBP50 -
Limited maintenance of 2014 GBP100
intercity train million
services on the
East Coast Main
Line (UK) using
a fleet of new
Super Express
Trains and
maintenance
facilities.
Construction cost
GBP1.6 billion.
NGR Project Company New Generation 40% Provision and Jan 32 GBP10 -
Pty Limited Rolling stock maintenance of 75 2014 GBP25
new six-car million
trains for
Queensland Rail,
Australia.
Construction
cost AUD $1.8
billion.
Shareholder Information
Financial Diary
7 March 2017 Full Year Results Presentation 11 May 2017 Annual General Meeting 19 May 2017 Payment of Final Dividend August 2017 Announcement of Half Year Results October 2017 Interim Dividend expected to be paid
Registered Office and Advisers
Secretary and Registered Office
C Cattermole
1 Kingsway
London WC2B 6AN Registered No: 05975300
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Solicitors
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
Principal Group Banks
Barclays Bank PLC
1 Churchill Place
London E14 5HP
HSBC Bank plc
60 Queen Victoria Street
London EC4N 4TR
Australia and New Zealand Banking Group Limited
40 Bank Street
London E14 5EJ
The Bank of Tokyo-Mitsubishi UFJ, Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9AN
Sumitomo Mitsui Banking Corporation
99 Queen Victoria Street
London EC4V 4EH
Crédit Agricole Corporate and Investment Bank
Broadwalk House
5 Appold Street
London EC2A 2DA
Joint Stockbrokers
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
Independent Valuers
KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
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Shareholders who wish to have their dividends paid directly into a bank or building society account should contact the Registrars.
Share Dealing Services
The Registrars offer a real-time telephone and internet dealing service for the UK. Further details including terms and rates can be obtained by logging on to the website at www.shareview.co.uk/dealing or by calling 03846 037 037. Lines are open between 8am and 4.30pm, Monday to Friday.
This information is provided by RNS
The company news service from the London Stock Exchange
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(END) Dow Jones Newswires
March 07, 2017 02:02 ET (07:02 GMT)
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