Further copies of this Annual Report & Accounts
are available by visiting the Company’s
website or at the address below
www.laing.com
John Laing Group plc
Registered Office:
1 Kingsway
London
WC2B 6AN
United Kingdom
Registered No. 05975300
Tel: +44 (0)20 7901 3200
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JOHN LAING GROUP PLC
Annual Report
2017
& Accounts
CONTENTS
OVERVIEW
02 KPIs and Highlights
03 Summary Financial
Information
04 Our Business Model
06 Our International Reach
08 Chairman’s Statement
STRATEGIC REPORT
10 Chief Executive
Officer’s Review
14 Primary Investment
18 Secondary Investment
22 Asset Management
24 Portfolio Valuation
29 Financial Review
36 Viability Statement
37 Principal Risks and
Risk Management
43 Corporate Responsibility
GOVERNANCE
46 Directors and
Company Secretary
48 Directors’ Report
50 Corporate Governance
Report
54 Audit & Risk Committee
Report
58 Directors’ Remuneration
Report
FINANCIAL
STATEMENTS
74 Statement of Directors’
Responsibilities
75 Independent Auditor’s
Report to the Members
of John Laing Group plc
82 Group Income Statement
83 Group Statement of
Comprehensive Income
84 Group Statement of
Changes in Equity
85 Group Balance Sheet
86 Group Cash Flow Statement
87 Notes to the Group
Financial Statements
118 Company Balance Sheet
119 Company Statement of
Changes in Equity
120 Company Cash Flow
Statement
121 Notes to the Company
Financial Statements
133 Additional Financial
Information (unaudited)
136 Notice of Annual
General Meeting
ibc Shareholder Information
OUR MARKETS
Infrastructure can be defined as the physical assets and systems that support a country or
community. Infrastructure assets typically support services such as transportation, utilities
and communications and also cater to social needs such as housing, health and education.
Renewable energy projects
typically involve electricity
generation assets which
produce green energy and
benefit from long-term
governmental support
mechanisms alongside
income for the amount
of power produced.
Opportunities in other
infrastructure markets
in sectors closely linked to
PPP and renewable energy.
These include areas such as
high speed broadband and
water resource management.
PPP projects
typically a consortium enters
into a long-term concession
contract with a public sector
body to design, build, finance
and operate/maintain an
infrastructure asset in
accordance with agreed
service standards.
The infrastructure asset
usually reverts back to the
public sector body at the
end of the concession.
John Laing Annual Report and Accounts 2017 /
01
(John Laing or the Company or the Group)
John Laing Group plc
is an international originator, active investor and
manager of greenfield infrastructure projects.
The Group aims to create value for shareholders
through originating, investing in and managing
infrastructure assets internationally.
We are focused on major transport, energy, social and environmental infrastructure projects in regions of
the world where we have expertise and where there is a legal and commercial environment supportive of
long-term investment. We hold a portfolio of investments in projects awarded under government backed
Public-Private Partnership (PPP) programmes and renewable energy projects and have developed
capabilities in other closely linked sectors which have similar operational and financial characteristics.
We typically invest in infrastructure projects at the greenfield, pre-construction stage. We apply our
management, engineering and technical expertise and invest equity and subordinated debt into special
purpose companies which have rights to the underlying infrastructure asset. These special purpose
companies are typically also financed with ring-fenced medium to long-term senior debt.
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We are a leading name in our core international
•
markets and chosen sectors.
Since making our first infrastructure investment in 1969, we have committed
to invest in 133 projects.
•
•
As at 31 December 2017, we held a portfolio of 41 investments in infrastructure
projects in 9 countries with a book value of £1,184 million.
Plus a shareholding in JLEN (a listed environmental asset investment fund)
valued at £10 million, making an overall investment portfolio of £1,194 million.
/ John Laing Annual Report and Accounts 2017
02
KEY PERFORMANCE INDICATORS (KPIs) AND HIGHLIGHTS
WE AIM TO DELIVER PREDICTABLE RETURNS AND TO
ACTIVELY MANAGE AND REDUCE RISK ACROSS OUR
PRIMARY AND SECONDARY INVESTMENT PORTFOLIOS.
KPIs
£ million (unless otherwise stated) 2017 2016
1
Net asset value (NAV)
NAV per share
Profit before tax
2
Earnings per share (EPS)
Total dividend per share
Portfolio valuation
Cash yield from investments
New investment committed
External Assets under Management (AuM)
3
1,123.9
306p
126.0
34.7p
10.61p
1,193.8
40.2
382.9
1,648.5
1,016.8
277p
192.1
51.9p
8.15p
1,175.9
34.8
181.9
1,472.3
HIGHLIGHTS
•
•
10.5% increase in Net Asset Value (NAV), from £1,016.8 million at 31 December 2016
to £1,123.9 million at 31 December 2017
13.5% increase in NAV including dividends paid in 2017
• NAV per share at 31 December 2017 of 306p (31 December 2016 – 277p)
4
• New investment commitments of £382.9 million
(2016 – £181.9 million), well ahead of guidance
•
•
•
•
•
•
•
•
1
2
3
4
Realisations of £289.0 million from the sale of eight investments (2016 – £146.6 million),
well ahead of guidance
Profit before tax of £126.0 million compared to £192.1 million in 2016
Earnings per share of 34.7p (2016 – 51.9p)
12% increase in external Assets under Management (AuM) from £1,472.3 million at
31 December 2016 to £1,648.5 million
at 31 December 2017
3
Cash yield from investment portfolio of £40.2 million (2016 – £34.8 million)
Strong investment pipeline, including nine shortlisted PPP positions
Final dividend of 8.70p per share in line with policy (including a special dividend of 4.88p per share),
giving a total 2017 dividend of 10.61p (2016 – total dividend of 8.15p), an increase of 30.2% from 2016
2
1 for 3 rights issue announced on 8 March 2018
Calculated as NAV at 31 December 2017 of £1,123.9 million (31 December 2016 – £1,016.8 million) divided by the number of shares
in issue at 31 December 2017 of 366.96 million (31 December 2016 – 366.92 million).
Before adjustment for the rights issue announced on 8 March 2018.
External AuM at 31 December 2017 is based on published portfolio values of JLIF as at 30 September 2017 and JLEN as at
31 December 2017.
Based on new investment commitments secured in the year ended 31 December 2017; for further details see the Primary Investment
section of the Strategic Report.
SUMMARY FINANCIAL INFORMATION
John Laing Annual Report and Accounts 2017 /
03
Year ended Year ended
or as at or as at
31 December 31 December
£ million (unless otherwise stated) 2017 2016
1
Net asset value
NAV per share
Retirement benefit obligations
Profit before tax
Earnings per share (EPS)
Dividends per share
3
2
Primary Investment portfolio
Secondary Investment portfolio
Total investment portfolio
Future investment commitments backed by letters of credit and cash collateral
Gross investment portfolio
4
5
New investment committed during the period
Proceeds from investment realisations
Cash yield from investments
4
PPP investment pipeline
Renewable energy pipeline
4
Asset Management
Internal Assets under Management
External Assets under Management
6
7
Total Assets under Management
1,123.9
306p
(40.3)
126.0
34.7p
10.61p
580.3
613.5
1,193.8
335.4
1,529.2
382.9
289.0
40.2
1,585
565
1,518.9
1,648.5
3,167.4
1,016.8
277p
(69.3)
192.1
51.9p
8.15p
696.3
479.6
1,175.9
186.3
1,362.2
181.9
146.6
34.8
1,408
451
1,352.2
1,472.3
2,824.5
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Calculated as NAV at 31 December 2017 of £1,123.9 million (31 December 2016 – £1,016.8 million) divided by the number of shares
in issue at 31 December 2017 of 366.96 million (31 December 2016 – 366.92 million).
Basic EPS; see note 5 to the Group financial statements.
Before adjustment for the rights issue announced on 8 March 2018.
For further details, see the Primary Investment section of the Strategic Review.
Represents cash proceeds received on realisations for the year ended 31 December 2017, including £1.9 million consideration
deferred to 2018.
Gross investment portfolio, less shareholding in JLEN valued at £10.3 million (31 December 2016 – £10.0 million).
External AUM at 31 December 2017 is based on published portfolio values of JLIF as at 30 September 2017 and JLEN as at
31 December 2017.
/ John Laing Annual Report and Accounts 2017
04
OUR BUSINESS MODEL
OUR BUSINESS IS ORGANISED ACROSS
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).
We create value by originating
and investing in new greenfield
infrastructure investments
Post-construction, these investments are
designed to produce long-term predictable
cash flows that meet our rate of return targets.
Once operational, investments move from our
Primary Investment portfolio to our Secondary
Investment portfolio.
Operational investments can be sold to secondary
market investors who target a lower rate of return
consistent with the reduction in risk for assets
that have completed construction.
These realisations release capital to recycle
into primary investment opportunities.
Alternatively, investments can be retained in
the portfolio after construction to generate a
cash yield and also offer potential for further
value enhancement from changes that improve
project cash flow.
Our asset management activities focus on
management and reduction of project risks,
especially during the construction phase,
and enhancement of project cash flows.
The John Laing business model
is based on strong investment and
asset management capabilities
and is supported by the current
strong demand in secondary
markets for operational
infrastructure assets.
OUR BUSINESS MODEL
>
Management Fees
>
ASSET
MANAGEMENT
>
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>
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s
PRIMARY
INVESTMENT
>
>
SECONDARY
INVESTMENT
>
>
Reinvestment in
greenfield projects
Operational
>
Assets
Sale of operational assets
and yield from projects
John Laing Annual Report and Accounts 2017 /
05
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Project:
>
Buckthorn
Wind Farm
Location:
Texas, US
Partners:
NRG Energy Inc
Description:
•
•
•
Located in Texas, this project has a total capacity of 100 MW. Partial operations
commenced in November 2017 with full operations commencing in January
2018. The wind farm benefits from a 13 year power purchase agreement.
/ John Laing Annual Report and Accounts 2017
06
OUR INTERNATIONAL REACH
JOHN LAING HAS A WELL-ESTABLISHED PRESENCE IN EACH OF ITS
CHOSEN OVERSEAS MARKETS: ASIA PACIFIC, NORTH AMERICA AND
EUROPE, INCLUDING THE UK.
When selecting target regions, we look for an identifiable pipeline of projects coming to market,
a trusted legal system, returns that meet our risk-adjusted hurdle rates, strong political will to
utilise private investment and the existence of a market for operational investments or a strong
expectation that one will develop. It is also a precondition that we are able to develop partnerships
with strong contractors and ones that have an established local presence.
Alder Hey
Children’s
Hospital
40%
Manchester
Waste TPS Co
37.43%
DARA Red
Dragon
100%
Lambeth
Housing
50%*
Severn River
Crossing
35%
Speyside
Biomass
43.35%
A130
100%
IEP (Phase 1)
15%
•
•
•
Social Infrastructure
Transport
Environmental, including
Renewable Energy and Waste
IEP (Phase 2)
30%
Cramlington
Biomass
44.7%
UNITED
KINGDOM
EUROPE
NORTH AMERICA
•
•
•
Social Infrastructure
Transport
Renewable Energy and Water
Buckthorn
Wind Farm
90.05%
Sterling
Wind Farm
92.5%
Rocksprings
Wind Farm
95.3%
Denver
Eagle P3
45%
I-66 Managed
Lanes
I-77 Managed
Lanes
I-4 Ultimate
10%
10%
50%
*
Conditional sale agreed as of 31 December 2017.
Primary
Secondary
John Laing Annual Report and Accounts 2017 /
07
OUR SECTORS
Our activities are focused on the
following infrastructure sectors:
Transport
Rail (including rolling stock),
roads, street lighting and
highways maintenance
Environmental
Renewable energy (including wind power,
solar power, energy storage and biomass),
water treatment and waste management
Social
Healthcare, education, justice, stadiums,
public sector accommodation and
social housing
“The business has a strong
pipeline of future investment
opportunities spread across
multiple sectors and
geographies…”
Pasilly
Wind Farm
100%
A1 Germany
Rammeldalsberget
Wind Farm
42.5%
100%
Svartvallsberget
Wind Farm
100%
A15
Netherlands
28%
Nordergründe
Wind Farm
30%
Glencarbry
Wind Farm
100%
A6 Parkway
Netherlands
85%
St. Martin
Wind Farm
100%
Horath
Wind Farm
81.82%
Klettwitz
Wind Farm
100%
Sommette
Wind Farm
100%
Solar House
80%
•
•
•
Social Infrastructure
Transport
Renewable Energy
“…we maintain a disciplined approach
to new investments using detailed
financial analysis and investment
appraisal processes to assess
specific risk profiles.”
Hornsdale 1
Wind Farm
30%
Hornsdale 2
Wind Farm
20%
Auckland South
Corrections
Facility
30%
New Perth
Stadium
50%
Hornsdale 3
Wind Farm
20%
New Royal
Adelaide Hospital
17.26%
Kiata
Wind Farm
72.3%
New Grafton
Correctional
Centre
80%
Sydney
Light Rail
32.5%
New Generation
Rollingstock
40%
Melbourne
Metro
30%
ASIA PACIFIC
•
•
•
Social Infrastructure
Transport
Renewable Energy
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/ John Laing Annual Report and Accounts 2017
08
CHAIRMAN’S STATEMENT
THIS IS MY LAST REPORT TO SHAREHOLDERS AS CHAIRMAN AND
I AM PLEASED TO BE LEAVING THE BUSINESS WELL POSITIONED
FOR FUTURE GROWTH.
> NAV
million
£1,123.9
> Profit before tax
million
£126.0
> Portfolio valuation
million
> New investment committed
£1,193.8
million
£382.9
Since I became Chairman in January 2010, John Laing has
evolved significantly in a number of ways: it’s a simpler business,
with non-core activities divested; it’s a much more international
business, with three well-established geographical regions
and the potential for expansion into further jurisdictions; and
it’s a stronger business, with the ability to access new capital,
having undertaken a successful IPO three years ago. In addition,
we have launched two successful independent secondary
funds, JLIF and JLEN, which are the purchasers of a number
of our investments once the underlying projects reach the
operational stage.
As well as announcing our results, we are today launching a
1 for 3 rights issue to raise £210 million, net of costs. The rights
issue will enable the Group to take advantage of a higher
proportion of the attractive opportunities currently available to
it and is consistent with the Board’s intention to increase the
scale of the business over the medium term. We plan to use the
proceeds to invest in public private partnership (PPP) projects,
renewable energy assets, and in other appropriate greenfield
infrastructure assets which fit our business model and meet
our investment criteria. The Board considers the rights issue
to be in the best interests of John Laing and its shareholders
as a whole.
During 2017, as in earlier years, we kept our strategy focused
but also flexible. Our business model has stood the test of time
and allows the management team 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 investments.
We committed capital to each of our three core regions –
Asia Pacific, Europe and North America – in the year. The US
market in particular is now showing the potential we have been
anticipating for some time. As well as two further renewable
energy projects, we invested in the I-66 Managed Lanes project
in Virginia. We continue to see strong demand for new greenfield
infrastructure in each of our regions.
John Laing Annual Report and Accounts 2017 /
09
“Our business is in good shape
and, based on our investment
pipeline, we anticipate a
strong level of deal flow over
the coming years in each of
our core markets.”
Phil Nolan
CHAIRMAN
Our dividend policy has two parts:
•
a base dividend of £20 million (starting from 2015) growing
at least in line with inflation; the Board is recommending
a final base dividend for 2017 of 3.82p per share, before
adjustment for the rights issue; 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 2017
of 4.88p per share, before adjustment for the rights issue.
This reflects 6.2% of 2017 realisations of £289.0 million.
The total final dividend therefore amounts to 8.70p per share,
which, together with the interim dividend of 1.91p per share
paid in October 2017, makes a total dividend for 2017 of 10.61p
per share, an increase of 30.2% over 2016, reflecting the
significant level of realisations achieved in 2017. The final
dividend will be put to shareholders for their approval at the
Company’s AGM which will be held on 10 May 2018. At the
Company’s last AGM on 11 May 2017, all resolutions were
approved by shareholders.
Our business is in good shape and, based on our investment
pipeline, we anticipate a strong level of deal flow over the
coming years in each of our core markets.
Phil Nolan
CHAIRMAN
The business delivered another strong performance in 2017:
•
Net Asset Value (NAV) grew by 10.5% to £1,123.9 million or
306p per share at 31 December 2017, from £1,016.8 million
or 277p per share at 31 December 2016;
Investment commitments reached £382.9 million, our
highest ever and significantly ahead of our guidance of
approximately £200 million;
•
•
•
•
•
Realisations of investments were £289.0 million, again well
ahead of our guidance for 2017 of approximately £200 million;
Our total external Assets under Management grew to
£1,648.5 million, an increase of 12.0%; and
We are proposing a final dividend for 2017, before adjustment
for the rights issue, of 8.70p per share made up of a base
dividend of 3.82p per share and a special dividend of 4.88p
per share.
In December 2017, Will Samuel joined the Board as Chairman
Designate and will take over from me when I stand down at the
Annual General Meeting (AGM) in May 2018. In the few months
since he joined us, Will has met all the key members of
management and has already got his feet well under the table.
He brings with him a wealth of experience both as a chairman
of listed and private companies as well as from his successful
executive career. I am confident I will leave the Board and the
Company in capable hands.
During the year under review, the Board complied with all
applicable provisions of the UK Corporate Governance Code
(the Code). We have an experienced Board which has been
strengthened by the addition of Will Samuel. As well as regular
Board meetings, we held reviews in June and in October 2017
to address the future strategy and direction of the business.
These recognised the robustness and flexibility of our existing
business model and reconfirmed our commitment to creating
further shareholder value from growth in NAV.
I will be sorry to say goodbye to the many members of staff
I have met and worked with during my time at John Laing and,
on behalf of the Board, I would like to thank all of them for their
contribution during my chairmanship and to these results in
particular. I would also like to extend the Board’s thanks to all
the Group’s stakeholders for their continued support.
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/ John Laing Annual Report and Accounts 2017
10
CHIEF EXECUTIVE OFFICER’S REVIEW
I AM PLEASED TO REPORT THAT IN 2017 WE SIGNIFICANTLY INCREASED
OUR INVESTMENT COMMITMENTS, WHILE MAINTAINING OUR TRACK RECORD
OF STRONG RESULTS. THIS WAS ACHIEVED DESPITE THE IMPACT OF LOWER
POWER PRICE FORECASTS WHICH AFFECTED A NUMBER OF OUR RENEWABLE
ENERGY INVESTMENTS AND WITHOUT THE BENEFIT OF THE SIGNIFICANT
FOREIGN EXCHANGE GAIN IN 2016.
The highlights included:
•
10.5% increase in NAV, from £1,016.8 million
at 31 December 2016 to £1,123.9 million at
31 December 2017;
•
•
•
•
•
•
•
•
13.5% increase in NAV including dividends
paid in 2017;
NAV per share at 31 December 2017 of
306p (31 December 2016 – 277p);
New investment commitments of
£382.9 million (2016 – £181.9 million);
Realisations of £289.0 million from the
sale of eight investments;
Profit before tax of £126.0 million
compared to £192.1 million in 2016;
12% increase in external Assets under
Management (AuM) to £1,648.5 million;
Cash yield from investment portfolio of
£40.2 million (2016 – £34.8 million); and
Final dividend of 8.70p per share, giving
a total 2017 dividend of 10.61p per share
(2016 – total dividend of 8.15p per share),
an increase of 30.2% from 2016, before
adjustment for the rights issue.
Outlook for our markets
The overall market for greenfield infrastructure is driven by a
number of factors, but especially population growth, urbanisation
and climate change. In the case of urbanisation, some
commentators forecast that within 20 years, two out of every
three people will live in a city. Other factors which influence
infrastructure spending include governmental policy towards
regulation and investment, the demand for energy and the
availability of capital, both private and public sector.
Most of these factors apply to each of the sectors in which
we operate: transport and transport-related infrastructure,
such as roads, tunnels, bridges and rail assets; environmental
infrastructure, such as renewable energy, water treatment and
waste management; and social infrastructure, such as schools
and hospitals. We are proud of the fact that many of the assets
we invest in provide a public benefit.
We operate in a wider infrastructure market in which there
has been historical under-investment. This provides a strong
incentive for governments to use public private partnerships
(PPPs) to procure greenfield infrastructure. As well as access
to private capital, PPP arrangements enable governmental
and other public sector bodies to benefit from fixed price
arrangements which transfer very significant risks to the
private sector, especially design, construction and operational
delivery risks. The growing international adoption of PPPs as
a procurement model for infrastructure is acknowledged by
the World Bank which publishes a PPP Reference Guide.
Our Primary Investment teams benefit from a robust and
diverse pipeline of future opportunities in each of the three
regions where we currently operate: North America (Canada
and the US); Asia Pacific (Australia and New Zealand); and
Europe (including the UK). We have focused strongly on
developing our relationships with international partners,
including construction companies, rolling stock manufacturers
and renewable energy developers and this is resulting in more
investment opportunities. We entered 2018 with strong positions
in nine shortlisted PPP consortiums and with four exclusive
renewable energy opportunities.
•
North America: six of the nine shortlisted PPP positions
are for potential investments in North America. In Canada,
we continue to see a strong commitment to PPPs from
federal authorities, as evidenced by the recent establishment
of the Canadian Infrastructure Board. The most active
province is Ontario, especially in the transport sector.
John Laing Annual Report and Accounts 2017 /
11
“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.”
Olivier Brousse
CHIEF EXECUTIVE OFFICER
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).
Our business model is based on our specialist infrastructure
investment and asset management capabilities and the
continuing demand for 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.
The principal value creation mechanism inherent in our business
model is the difference between the hold-to-maturity IRR at the
financial close of a greenfield investment and the discount rate
applied to that investment once the underlying project has
reached the operational phase. Although we have in recent
years experienced pressure on hold-to-maturity IRRs as our
Primary Investment teams bid for new greenfield projects, this
has typically been accompanied by a reduction in secondary
discount rates. This has allowed the Group to maintain attractive
“yield shifts” which drive one of the principal measures applied
to the Group’s investments, namely annualised rate of return.
When investments become part of our Primary Investment
portfolio, their value should grow progressively with a reasonable
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 project 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.
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In the US, 2017 has been a breakthrough year for John Laing.
We have taken advantage of increased activity in PPPs, and
made further investments in renewable energy. The US is
a market where procurement for greenfield assets takes
place predominantly at state or city, rather than federal,
level, and where the need for greenfield infrastructure has
been highlighted by states or cities introducing specific
local tax increases to raise funds for new assets required.
Asia Pacific: we remain very active in the PPP markets in
both Australia and New Zealand. In Australia, following a
very successful year in 2017, we see fewer PPP projects
reaching financial close in 2018, but a very active pipeline
thereafter. In renewable energy, we have benefited from
the impetus given to the market by the Federal Renewable
Energy Target in Australia.
Europe: three of the nine shortlisted PPP positions are
for potential investments in Europe. While the PPP market
in some European countries remains subdued, we are
concentrating on those jurisdictions which have, or will be,
initiating active PPP road programmes, such as the
Netherlands, Spain, Germany and Norway. While the
political climate in the UK is currently not favourable
towards PPP, it only accounts for 5% of our total pipeline.
•
•
Outside the current pipeline and beyond the PPP and renewable
energy markets, we continue to research other infrastructure
asset classes that could potentially 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. Over the last three years,
we have made our first investments in managed lanes and in
offshore wind, and expect these sectors to offer a number of
investment opportunities in the future. We also continue to
research new geographies where we see potential opportunities
to invest alongside established partners at appropriate returns.
These include selected countries in Latin America and South
East Asia.
Business model
Primary Investment:
Our business model has three key areas of activity:
•
we source, originate, bid for and win
greenfield infrastructure projects, typically as part of a
consortium in the case of PPP projects. Our Primary
Secondary Investment:
Investment portfolio comprises interests in infrastructure
projects which are in the construction phase.
•
we own a substantial portfolio
of investments in operational infrastructure projects,
almost all of which were previously part of our Primary
Investment portfolio.
/ John Laing Annual Report and Accounts 2017
12
CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)
Objectives and outcomes
Growth in the value of external AuM and related fee income
Our overall strategy is to create value for shareholders through
originating, investing in and managing infrastructure assets
internationally. In that respect, we see NAV growth and dividends
as key measures of our success:
•
In 2017, our NAV grew by 10.5% from £1,016.8 million at
31 December 2016 to £1,123.9 million at 31 December 2017.
This was 13.5% if we add back the dividends paid in 2017.
•
We are proposing total dividends of 10.61p per share for
2017 compared to dividends of 8.15p per share for 2016.
This represents growth of 30.2% over 2016, reflecting the
significant increase in realisations during 2017.
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 investments in 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 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, legal, regulatory and taxation framework;
•
•
•
•
a commitment to the development of privately-financed
infrastructure;
the ability to form relationships with strong supply chain
partners, preferably companies we have worked with before;
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 2017 was
£382.9 million, made up of £142.5 million in renewable energy
and £240.4 million in PPP assets. This was a record level for
John Laing and significantly ahead of investment commitments
of £181.9 million in 2016 and our guidance. Our international
growth continued with all our investment commitments being
made outside the UK, including the following:
•
I-66 Managed Lanes (US) – £118.0 million
•
•
•
Rocksprings Wind Farm (US) – £62.9 million
New Grafton Correctional Centre (Australia) – £79.3 million
Melbourne Metro (Australia) – £43.1 million.
Our strategy to grow the value of our external AuM is linked
to our activities as an investment adviser to JLIF and JLEN.
JLCM 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.
During the year, the value of external AuM grew from
£1,472 million to £1,649 million, an increase of 12%.
Fee income from external AuM was £16.7 million for 2017,
up from £15.8 million in 2016.
Management and enhancement of our investment portfolio
For John Laing, being an active investor means not only
participating actively in consortiums at the bidding stage, but
also being actively involved in the project during the construction
phase in order to protect the value of our investment and
provide advice and/or assistance when delays occur or problems
arise. This time last year, we reported on the work of our team
on the New Royal Adelaide Hospital project in helping to resolve
the sometimes competing priorities of the Government of
South Australia, the bank lending consortium, and the
construction contractor. This situation had arisen principally
because construction of the hospital had been delayed. At the
half year, we reported that the hospital had successfully
achieved technical completion in mid-March 2017 followed by
commercial acceptance in mid-June 2017. Our team played a
key part in the achievement of this stage. Patients were first
admitted to the hospital in early September 2017.
Like many assets in the early operational stage, certain aspects
of service provision are still being addressed and, as we have
previously reported, remaining disputes are being dealt with
through a process of arbitration. The important thing from our
perspective is that the hospital is delivering under its contract
to the people of South Australia.
As regards Manchester Waste, we reported in September 2017
that our investment in Manchester Waste VL Co had been
acquired by the Greater Manchester Waste Disposal Authority
(GMWDA). While this resulted in a reduction compared to the
value of this investment at 31 December 2016, it is important
to note that the cash received of £23.5 million, together with
previous distributions, resulted in a positive return on the
investment versus our original commitment in 2009. We remain
shareholders in Manchester Waste TPS Co where the
underlying asset, a combined heat and power station which
burns refuse-derived fuel, is performing well.
We regularly apply our active management skills when issues
arise. 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 investment base cases and, where appropriate,
seeking to find additional value.
At 31 December 2017, our portfolio comprised investments
in 41 infrastructure projects plus our shareholding in JLEN
(31 December 2016 – 42 projects plus shareholding in JLEN).
Our year end portfolio value, including the shareholding in
JLEN, was £1,193.8 million (31 December 2016 – £1,175.9 million).
The portfolio value decreased by £142.8 million as a result of
cash flows in the year, with proceeds from realisations and
cash yield received from project companies partly offset by
cash invested in projects. Fair value movements of £160.7 million,
John Laing Annual Report and Accounts 2017 /
13
or 15.6% of the cash rebased portfolio value, increased the
portfolio value to £1,193.8 million at 31 December 2017. This
growth is analysed further in the Portfolio Valuation section.
The portfolio valuation represents our assessment of the fair
value of investments in projects on a discounted cash flow basis
and assuming that each asset is held to maturity, other than
shares in JLEN which are held at market value. At 31 December
2017, investments with availability-based cash flows made up
58.8% of our portfolio by value.
The cash yield in 2017 was £40.2 million (2016 – £34.8 million),
a yield of 7.4% (2016 – 7.6%) 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 realisations totalling £298.9 million,
including the agreed sale of five UK PPP investments to JLIF
for a total of £104.6 million, one of which is not expected to
complete until later in March 2018. This left us with realisations
for 2017 of £289.0 million which were well ahead of our original
guidance for 2017 of approximately £200 million.
Consistent with our self-funding model, we are actively
considering a number of realisations which are yet to be
confirmed. One potential realisation, which is at a reasonably
advanced stage, is the disposal of our remaining 15%
shareholding in IEP (Phase 1) which could be announced in
the next few weeks.
The percentage of our portfolio value attributable to UK
investments has fallen from 58% at 31 December 2014 to 34%
at 31 December 2017.
Profit before tax
Our profit before tax was £126.0 million in 2017, compared to
£192.1 million in 2016. Profit before tax is primarily driven by
the fair value movement on our investment portfolio. As set out
in the Portfolio Valuation section, the main reasons for the
lower fair value movement were:
•
The impact of lower power price forecasts (£54.8 million
negative in 2017 compared to £17.6 million negative in 2016);
•
Adverse foreign exchange movements (£11.0 million
negative in 2017 compared to £74.7 million positive in 2016,
as a result of the significant weakening of Sterling in 2016);
offset by:
•
A higher value uplift on financial closes (£50.1 million in
2017 versus £31.0 million in 2016);
•
•
Higher value enhancements and other changes
(£15.1 million positive in 2017 versus £17.2 million
negative in 2016), including in 2017 the value reduction
in the Manchester Waste investments; and
A benefit from revised macroeconomic assumptions of
£4.1 million (£13.8 million negative in 2016).
Funding
In October 2017, the Group’s corporate banking facilities were
increased from £400 million to £475 million. The facilities
comprise a five-year committed corporate banking facility and
associated ancillary facilities, all of which expire in March 2020.
The Group also held surety facilities of £50 million backed by
two £25 million committed liquidity facilities both expiring in
March 2018. In early 2018 these liquidity facilities were
extended to February 2019.
The Group’s facilities enable us to issue letters of credit and/or
put up cash collateral to back investment commitments. We
finance our new investments through a combination of cash
flow from existing assets, the above corporate banking facilities
and realisations of investments in operational projects.
Organisation and staff
Our staff numbers were 158 at 31 December 2017 compared
to 160 at the end of 2016. We now have 39% of staff located
outside the UK (31 December 2016 – 36%), consistent with our
increasing internationalisation.
In January 2018, we initiated an internal reorganisation under
which the Primary Investment and Asset Management teams
in each of our three geographical regions will in future report
to a single regional head, each of whom in turn reports to me.
The principal objective behind this revised structure is to enable
us to focus more effectively on value creation in each region,
while allowing our business to scale up.
I visited our international offices regularly during 2017. We are
lucky to have high quality individuals and experienced teams
across our business and it is my privilege to thank them for all
they have done this year. As I have said before, our success
depends on our people.
Current trading and guidance
Our total investment pipeline at 31 December 2017 was
£2,150 million and includes £1,585 million of PPP opportunities
looking out three years as well as nearer term renewable energy
opportunities of £565 million. Within the pipeline is one preferred
bidder position related to the MBTA fare collection project in
Boston, US as well as nine shortlisted PPP positions with an
investment opportunity of approximately £200 million and four
exclusive renewable energy positions with an investment
opportunity of approximately £150 million. The current pipeline
does not include potential opportunities in new jurisdictions
or take account of late entry investment opportunities which
may arise.
As stated earlier, we achieved a record level of investment
commitments in 2017. As our investment pipeline continues to
grow, our aim is to keep on growing investment commitments,
but not necessarily year on year, giving our teams the time to
select the best opportunities. In 2018, our guidance is for
investments commitments of approximately £250 million.
We expect realisations to be at a broadly similar level to our
investment commitments, consistent with our self-funding model.
As set out in the Chairman’s statement, we have today launched
a 1 for 3 rights issue to raise £210 million, net of costs, which
will enable us to take advantage of a higher proportion of the
attractive investment opportunities currently available to the
Group. With the benefit of the rights issue, we will have greater
ability both to position ourselves for, and execute on, investment
commitments in excess of £250 million in 2018.
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. Since we
re-listed in 2015, we have delivered steady growth despite
changing governmental policies and macroeconomic
environments. Against this background, we have confidence
in the future.
Olivier Brousse
CHIEF EXECUTIVE OFFICER
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/ John Laing Annual Report and Accounts 2017
14
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 infrastructure 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.
North America
The Group’s Primary Investment portfolio at 31 December 2017
comprised shareholdings in 11 PPP projects and in three
renewable energy projects, which were in the construction phase.
This portfolio was valued at £580.3 million (31 December 2016 –
£696.3 million).
NEW INVESTMENT COMMITMENTS
During 2017, the Primary Investment team successfully secured
seven new investments, resulting in total commitments of
£382.9 million:
•
– we continued to increase our activities in
the market, most notably through committing £118.0 million
to the I-66 Managed Lanes PPP project in Virginia. We
also invested £47.6 million in the Buckthorn Wind Farm
Asia Pacific
project and £62.9 million in the Rocksprings Wind Farm,
both in Texas.
•
•
– the New Grafton Correctional Centre in New
South Wales reached financial close in June 2017 with an
investment commitment of £79.3 million, and this was
followed by an investment commitment in December 2017
of £43.1 million to the Melbourne Metro project. Both these
Europe
investments further strengthen the Group’s presence in the
PPP market in this region.
– we made a £22.0 million commitment to Solar
House, a rooftop solar energy project in France.
Our investment commitments for 2017 are summarised in the table below:
Investment commitments
New Grafton Correctional Centre
Hornsdale 3 Wind Farm
Solar House
Buckthorn Wind Farm
Rocksprings Wind Farm
I-66 Managed Lanes
Melbourne Metro
Total
* RE = renewable energy
ACTIVITIES
Region
PPP
£ million
RE*
£ million
Total
£ million
Asia Pacific
Asia Pacific
Europe
North America
North America
North America
Asia Pacific
79.3
–
–
–
–
118.0
43.1
–
10.0
22.0
47.6
62.9
–
–
79.3
10.0
22.0
47.6
62.9
118.0
43.1
240.4
142.5
382.9
The Primary Investment teams are responsible for all the Group’s
bid development activities. The teams take 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 North America, Asia Pacific
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, Akuo, Alstom, Ansaldo, Astaldi, Bechtel, Bombardier,
Bouygues, Brookfield Multiplex, Capella, Ferrovial, Cubic,
Downer, Fluor, Fulton Hogan, John Holland, Leighton/CIMIC,
Lend Lease, NRG, Serco, SNC Lavallin, Spotless, Transdev,
Vestas 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,
stadiums, public sector accommodation and social housing.
We also continually assess opportunities in other infrastructure
sectors where we believe our business model could be
successfully applied. Potential sectors which have been or
are being considered include: broadband; water resource
management; energy storage; and other forms of renewable
energy, such as pumped storage.
John Laing Annual Report and Accounts 2017 /
15
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Project:
>
Intercity Express
Programme
Location:
United Kingdom
Partners:
Hitachi Rail Europe
Description:
•
•
•
The IEP is an innovative scheme covering the finance, design, manufacture,
delivery into daily service and maintenance of a fleet of 122 state-of-the-art Hitachi
Super Express trains over a guaranteed minimum usage period of 26 years for the
Great Western Main Line (Phase 1) and the East Coast Main Line (Phase 2) in the
UK. As at 31 December 2017, 15 trains for IEP (Phase 1) had been accepted into
operational service. Total fleet acceptance for Phase 1 is expected in late 2018 and
commencement of train deliveries for Phase 2 is also expected in late 2018.
/ John Laing Annual Report and Accounts 2017
16
Project:
>
I-77 Managed Lanes
Location:
North Carolina, US
Partners:
Cintra
Description:
•
•
•
This project involves the design, build, finance and operation of 25.9 miles of
the I-77 Interstate road in Charlotte, North Carolina, US. Once completed, the
project will add 25.9 miles of dynamically priced, high-occupancy toll lanes to
existing toll-free road capacity in order to alleviate congestion in the rapidly
growing Charlotte metropolitan area.
PRIMARY INVESTMENT (CONTINUED)
John Laing Annual Report and Accounts 2017 /
17
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PROJECT FINANCE
PIPELINE
In Europe and Asia Pacific, the projects we invest in tend to
be financed with long-term commercial bank debt whereas in
Canada and the US projects tend to be financed in the long-term
debt capital markets. In Australia and New Zealand, the tenor
of PPP project finance debt tends to be more medium-term
than long-term. Overall, financial markets in the regions in
which the Group is active supported our growing levels of
investment with a large number of international banks being
active in these markets and we expect this to continue in 2018.
At 31 December 2017, our overall investment pipeline of
£2,150 million was higher than the pipeline of £1,859 million
at 31 December 2016. 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 2016 reflects an increase in the renewable energy
pipelines in Asia Pacific and North America.
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:
Pipeline at 31 December 2017 by bidding stage
Number of
projects
PPP
£ million
RE
£ million
Total
£ million
Preferred bidder
Shortlisted/exclusive
Other active bids
Other pipeline
Total
1
13
6
64
84
19
197
112
1,257
1,585
–
141
129
295
565
19
338
241
1,552
2,150
The preferred bidder position related to a fare collection project in Boston, US. The shortlisted PPP projects
at 31 December 2017 comprised two broadband upgrade projects (one in the Republic of Ireland and one in
Pennsylvania, US), a rental car centre at Los Angeles airport and six availability-based transportation projects,
spread across the US, Canada and Europe. These should all reach financial close in the next eighteen months.
In terms of geography, our pipeline is well spread across our target markets:
Pipeline at 31 December 2017 by target market
Asia Pacific
North America
Europe (including the UK)
Total
PPP
£ million
RE
£ million
Total
£ million
431
631
523
1,585
174
233
158
565
605
864
681
2,150
In North America (the US and Canada), which makes up 40%
of the pipeline, our focus is on what is becoming a very
substantial US PPP market, whilst continuing to progress our
presence in the renewable energy market, where we made
two further investments during 2017. We continue to explore
PPP opportunities primarily in the transportation sector and
social infrastructure sectors. The Canadian market also
continues to demonstrate strong PPP deal flow, which we
are actively pursuing.
Some 28% 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.
The balance of our pipeline is in Europe, where PPP activity
remains at a satisfactory level in countries such as the
Netherlands. The focus is on those countries which have,
or will be, initiating active PPP programmes such as the
Netherlands, Spain, Germany and Norway.
Our overall renewable energy pipeline was £565 million at
31 December 2017, higher than at 31 December 2016. Selected
countries in Europe, Asia Pacific and North America will provide
our main focus in 2018. The pipeline includes many potential
wind and solar projects as well as investment opportunities in
biomass and other less developed technologies.
In addition to the above, the Group continues to monitor
new geographic markets which offer the potential to invest
alongside established partners. These include countries
in South America, such as Chile and Colombia, and other
countries in the Asia Pacific region, which are currently not
in the pipeline.
/ John Laing Annual Report and Accounts 2017
18
SECONDARY INVESTMENT
AT 31 DECEMBER 2017, THE SECONDARY INVESTMENT PORTFOLIO
COMPRISED 11 PPP PROJECTS AND 16 RENEWABLE ENERGY PROJECTS WITH
A BOOK VALUE OF £603.2 MILLION (31 DECEMBER 2016 – £469.6 MILLION).
TRANSFERS FROM THE PRIMARY INVESTMENT PORTFOLIO
The Secondary Investment portfolio also included a 2.5%
shareholding in JLEN valued at £10.3 million at 31 December 2017
(31 December 2016 – 3.3% shareholding valued at £10.0 million).
The increase in the Secondary Investment portfolio between
31 December 2016 and 31 December 2017 was primarily due
to investments transferring from the Primary Investment
portfolio, net of the realisations completed in 2017.
During the year, 14 investments transferred from the Primary
Investment portfolio to the Secondary Investment portfolio as
the underlying projects moved into the operational stage. Of
these 14 investments, the investment in Llynfi Wind Farm was
sold before the year end leaving the following 13 investments
still in the Secondary Investment portfolio at 31 December 2017.
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 agreed realisations totalling £298.9 million,
one of which, Lambeth Social Housing, is not expected to
complete until later in March 2018, giving us realisations for
the year of £289.0 million:
•
Our investments in two PPP road projects, A1 Poland and
M6 Hungary, were sold to third parties for £120.4 million
and £22.7 million respectively in March 2017;
New Royal Adelaide Hospital, Australia (17.26% interest)
Designed to admit 80,000 patients per annum, the hospital
achieved technical completion in mid-March, commercial
acceptance in mid-June and admitted its first patients in
September 2017, resulting in the project moving into a fully
operational status. The project company has recently agreed
with its syndicate of senior lenders a two year extension of the
project’s senior debt facility beyond June 2018 to allow a
sufficient period for refinancing. Since the start of full operations,
the project company has been closely monitoring the
performance of the facilities management services, which is
steadily improving.
•
•
•
Our investment in one PPP project, Croydon and Lewisham
Street Lighting, was sold to JLIF in June 2017 for £8.2 million;
Lambeth Social Housing, UK (50% interest, sale agreed in
October 2017)
Our investments in five further PPP projects, including a
further 9% in IEP (Phase 1), were sold to JLIF in October
2017 for £104.6 million; and
Our investment in Llynfi Wind Farm was sold to JLEN for
£43.0 million.
Taking agreed realisations for the year as a whole, prices were
in line with the most recent portfolio valuation.
Total
Realisations announced Shareholding Purchaser £ million
A1 Poland Road 29.69% Third party 120.4
This project comprises the construction of 808 new build homes
and the modernisation and refurbishment of 172 existing
homes in Lambeth, South London. John Laing agreed to sell
its interest in this project to JLIF in October 2017.
Glencarbry Wind Farm, Republic of Ireland (100% interest)
This project comprises seven 3.3 MW turbines and five 2.5 MW
turbines with total installed capacity of 35.6 MW, and is our
first renewable energy investment in the Republic of Ireland.
Full operation commenced in July 2017, with revenue supported
by the Renewable Energy Feed-in Tariff.
M6 Hungary Road 30% Third parties 22.7
Hornsdale Wind Farm Phase Two, Australia (20% interest)
Croydon & Lewisham
Street Lighting 50% JLIF 8.2
Lambeth Social Housing 50% JLIF
Coleshill Parkway 100% JLIF
Aylesbury Vale Parkway 50% JLIF 104.6
City Greenwich Lewisham (DLR) 5% JLIF
IEP (Phase 1) 9% JLIF
Llynfi Wind Farm 100% JLEN 43.0
Total 298.9
The project comprises a 32 turbine wind farm in South Australia
with an installed capacity of 102 MW. The project benefits from
a 20 year offtake arrangement from a government counterparty
(Australian Capital Territory).
Hornsdale Wind Farm Phase Three, Australia (20% interest)
The project comprises a 35 turbine wind farm in South Australia
with an installed capacity of 109 MW. The project benefits from
a 20 year offtake arrangement from a government counterparty
(Australian Capital Territory).
John Laing Annual Report and Accounts 2017 /
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Project:
>
New Perth Stadium
Location:
Perth, Western Australia
Partners:
Brookfield Multiplex
Brookfield Global Integrated Services
Description:
•
•
•
This 60,000 seater stadium is a major sporting and entertainment venue,
capable of staging national and international events. Construction was
completed in December 2017 in time for the start of the 2018 Australian Rules
Football season.
/ John Laing Annual Report and Accounts 2017
20
Project:
>
Nordergründe
Offshore Wind Farm
Location:
North Sea north of Wilhelmshaven, Germany
Partners:
wpd AG and Gothaer Leben Renewables GmbH
Description:
•
•
•
This is the Group’s first investment in offshore wind. This project has a total
capacity of 110.7 MW. Following installation of the offshore sub-station in
September 2017, all 18 turbines were subsequently commissioned in the fourth
quarter of 2017 and the project became fully operational.
SECONDARY INVESTMENT (CONTINUED)
John Laing Annual Report and Accounts 2017 /
21
Speyside Biomass, UK (43.35% interest)
Nordergründe Offshore Wind Farm, Germany (30% interest)
Located in the North Sea north of Wilhelmshaven, Germany,
this is the Group’s first investment in offshore wind. This project
comprises 18 Senvion 6.2 M126 turbines with a total capacity
of 110.7 MW. Following installation of the offshore sub-station
in September 2017, all 18 turbines were subsequently
commissioned in the fourth quarter of 2017 and the project
became fully operational.
Sommette Wind Farm, France (100% interest)
Located in Picardie, France, this project comprises 9 Nordex
N117 turbines and has a total capacity of 21.6 MW. Operations
commenced in December 2017 and the wind farm benefits from
a 15 year feed-in-tariff arrangement.
Buckthorn Wind Farm, US (90.05% interest)
Located in Texas, this project has a total capacity of 100 MW.
Partial operations commenced in November 2017 with full
operations commencing in January 2018. The wind farm
benefits from a 13 year power purchase agreement.
This 14 MWe Combined Heat and Power biomass plant in
Speyside, Scotland, supplies heat in the form of steam to the
adjacent Macallan distillery and electricity to the grid. Its fuel is
low-grade wood harvested locally and supplied by a consortium
of provincial growers and forest industry suppliers.
Sterling Wind Farm, US (92.5% interest)
This 30 MW wind farm located in New Mexico was the Group’s
first renewable energy investment in the US. Operations
commenced in late 2017 and the wind farm benefits from a
15 year fixed price power purchase agreement.
Rocksprings Wind Farm, US (95.3% interest)
Located in Texas, this project has a total capacity of 149 MW.
Operations commenced in late 2017 and the wind farm benefits
from power purchase agreements with two investment grade
corporate offtakers.
New Perth Stadium, Western Australia (50% interest)
This 60,000 seater stadium is a major sporting and entertainment
venue, capable of staging national and international events.
Construction was completed in December 2017 in time for
the start of the 2018 Australian Rules Football season and on
28 January 2018 the stadium hosted its first one-day cricket
international between Australia and England.
Kiata Wind Farm, Australia (72.3% interest)
Located in South Australia, the project comprises nine Vestas
V126 WTG turbines with a total installed capacity of 30 MW. Full
operation commenced in December 2017. The project benefits
from a 10 year offtake agreement with the Victorian Government.
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ASSET MANAGEMENT
THE ASSET MANAGEMENT DIVISION’S ACTIVITIES COMPRISE INVESTMENT
MANAGEMENT SERVICES AND PROJECT MANAGEMENT SERVICES.
INVESTMENT MANAGEMENT SERVICES
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 2017
of £19.0 million (2016 – £17.8 million) includes £2.3 million
(2016 – £2.0 million) of fee income for the provision by
John Laing of directors to 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).
The Group earned revenues of £6.1 million from the provision of
PMS during 2017 (year ended 31 December 2016 – £14.9 million).
In November 2016, the Group divested its PMS activities in the
UK to HCP Management Services Limited (HCP). The activities
sold contributed £7.9 million of the total PMS revenues of
£14.9 million in 2016.
The remaining PMS activities are principally focused on MSAs
relating to projects outside the UK. At 31 December 2017, the
Group held 24 MSAs (31 December 2016 – 19 MSAs).
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 31 December 2017,
JLIF’s and JLEN’s latest published portfolio values were
£1,227.8 million at 30 September 2017 and £420.7 million at
31 December 2017 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 if 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.
Fee income from external IMS grew from £15.8 million in 2016
to £16.7 million in 2017.
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
•
Where possible, 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
from the projects underlying our renewable energy
investments by entering into short or medium-term power
purchase agreements with electricity suppliers.
John Laing Annual Report and Accounts 2017 /
23
PROJECTS UNDER CONSTRUCTION
New Generation Rollingstock, Queensland, Australia (40% interest)
The project involves the provision and maintenance of 75 new
six-car trains for the state of Queensland, which will be operated
by Queensland Rail, as well as a new maintenance facility at
Wulkuraka, Queensland. Whilst the programme is currently
behind schedule, the maintenance facility has been completed
and nine trains are currently in passenger service. Additional
trains are expected to be accepted and enter passenger service
ahead of the Commonwealth Games that start on the Australian
Gold Coast in April 2018.
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.
While the overall programme is approximately 12 months behind
schedule, the first light rail vehicles arrived in Australia in 2017
and the total length of track installed is now 12.9 kilometres,
more than 50% of the total.
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John Laing’s investments in projects are managed by the
Asset Management division. For each project we invest in, the
Asset Management division closely monitors the construction
stage and provides active input where necessary to ensure that
deadlines are met. Despite this, since the projects we invest
in are principally large and sophisticated infrastructure assets,
delays can occur. In all instances, the impact of construction
delays and a judgement as to potential outcomes are taken
into account when the portfolio valuation is prepared.
An update on significant projects under construction is set out
below.
Intercity Express Programme (IEP), UK (Phase 1 – 15% interest;
Phase 2 – 30% interest)
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 intercity express
trains for the UK’s Great Western Main Line (Phase 1 – 15 %
interest) and the East Coast Main Line (Phase 2 – 30% interest).
With a total capital expenditure across the two phases of
£3.4 billion, it is one of the largest PPP projects to be awarded.
In the last quarter of 2017, the first ten trains for IEP (Phase 1)
were accepted into passenger operations, achieving a key
milestone for the project known as Minimum Fleet Acceptance.
As at 31 December 2017, 15 trains had been accepted into
operational service. Total fleet acceptance for Phase 1 is
expected in late 2018 and commencement of train deliveries
for Phase 2 is also expected in late 2018.
Denver Eagle P3, Colorado, US (45% interest)
This project is to design, build, finance, maintain and operate
two new commuter rail lines and a section of a third in the
Denver Metropolitan area. The three rail lines run for a total of
36 miles, connecting Denver International Airport and Denver
Union Station to each other and to other parts of the Denver
Metropolitan area. The fleet of rolling stock has been completed.
Following opening of the “A” line in 2016 and the “B” line in 2017,
testing and commissioning of the “G” line is currently underway.
The project company is appealing against the Colorado Public
Utility Commission’s decision not to issue the required permit
for the level crossings on the “A” line. The outcome should be
known in the second quarter of 2018.
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 is expected to be completed in 2021.
/ John Laing Annual Report and Accounts 2017
24
PORTFOLIO VALUATION
INVESTMENT PORTFOLIO AS AT 31 DECEMBER 2017
E
R
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U
Health
R
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S
A
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Justice and
F
emergency
N
services
L
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O
Defence
S
I
I
Other
accommodation
T
R
O
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N
A
Other
R
T
PRIMARY INVESTMENT
SECONDARY INVESTMENT
New Grafton
Correctional Centre
80%
Alder Hey
Children’s
Hospital
40%
New Royal
Adelaide Hospital
17.26%
Auckland South
Corrections Facility
30%
DARA Red
Dragon
100%
Lambeth
Housing
50%
New Perth
Stadium
50%
A6 Parkway
Netherlands
85%
Denver
Eagle P3
45%
I-4 Ultimate
I-66 Managed
Lanes
A1 Germany
A15 Netherlands
50%
10%
42.5%
28%
A130
100%
Severn River
Crossing
35%
I-77 Managed
Lanes
Melbourne
Metro
10%
30%
Sydney
Light Rail
32.5%
IEP (Phase 1)
IEP (Phase 2)
New Generation
Rollingstock
Rail rolling stock
15%
30%
40%
Cramlington
Biomass
44.7%
Solar House
80%
St Martin
Wind Farm
100%
Waste and
biomass
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Wind and solar
Investment commitment pre 2017
New investment commitment in 2017
Manchester
Waste TPS Co
37.43%
Buckthorn
Wind Farm
90.05%
Speyside
Biomass
43.35%
Glencarbry
Wind Farm
100%
Hornsdale 2
Wind Farm
Hornsdale 3
Wind Farm
20%
20%
Horath
Wind Farm
81.82%
Kiata
Wind Farm
72.3%
Hornsdale 1
Wind Farm
30%
Klettwitz
Wind Farm
100%
Nordergründe
Wind Farm
Pasilly
Wind Farm
Rammeldalsberget
Wind Farm
Rocksprings
Wind Farm
30%
100%
100%
95.3%
Sommette
Wind Farm
Sterling
Wind Farm
Svartvallsberget
Wind Farm
100%
92.5%
100%
John Laing Annual Report and Accounts 2017 /
25
The portfolio valuation at 31 December 2017 was £1,193.8 million compared to £1,175.9 million at
31 December 2016. After adjusting for realisations, cash yield and cash invested, this represented
a positive movement in fair value of £160.7 million (15.6%):
Portfolio valuation at 1 January 2017
– Cash invested
– Cash yield
– Proceeds from realisations
– Cash received on acquisition of Manchester Waste VL Co by GMWDA
Rebased valuation
– Movement in fair value
Portfolio valuation at 31 December 2017
1,165.9
209.9
(39.6)
(289.0)
(23.5)
1,023.7
159.8
1,183.5
Investments
in projects
£ million
Listed
investment
£ million
Total
£ million
1,175.9
209.9
(40.2)
(289.0)
(23.5)
1,033.1
160.7
10.0
–
(0.6)
–
–
9.4
0.9
10.3
1,193.8
Cash investment in respect of four new renewable energy assets and one new PPP asset entered
into during 2017 totalled £115.0 million. In addition, equity and loan note subscriptions of
£94.9 million were injected into existing projects in the portfolio as they progressed through,
or completed, construction.
During 2017, the Group completed the realisation of seven entire investments and part of one
other investment for a total consideration of £289.0 million, including £1.9 million of consideration
deferred to 2018. In addition, the Group received £23.5 million on the acquisition of its investment
in Manchester Waste VL Co by the Greater Manchester Waste Disposal Authority (GMWDA).
Cash yield on the portfolio during the year totalled £40.2 million.
The movement in fair value of £160.7 million is analysed in the table below.
Year ended
Year ended
31 December 31 December
2016
£ million
2017
£ million
Unwinding of discounting
Reduction of construction risk premia
Impact of foreign exchange movements
Change in macroeconomic assumptions
Change in power and gas price forecasts
Change in operational benchmark discount rates
Value uplift on financial closes
Value enhancements and other changes
80.0
53.6
(11.0)
4.1
(54.8)
23.6
50.1
15.1
77.1
52.7
74.7
(13.8)
(17.6)
27.5
31.0
(17.2)
Movement in fair value
160.7
214.4
The net movement in fair value comprised unwinding of discounting (£80.0 million), the reduction
of construction risk premia (£53.6 million), the reduction in operational benchmark discount rates
(£23.6 million), uplift on financial closes (£50.1 million), movements in macroeconomic forecasts
(£4.1 million) and a net movement from value enhancements and other changes (£15.1 million),
offset by adverse movements from lower power and gas price forecasts (£54.8 million) and
adverse foreign exchange movements (£11.0 million). Foreign exchange movements are addressed
further in the Financial Review section. The net benefit of £23.6 million from the amendment of
benchmark discount rates for a number of investments is in response to our understanding and
experience of the secondary market.
There was a net increase of £32.3 million in value enhancements and other changes from 2016 to
2017. The Group achieved higher value enhancements in 2017 compared to 2016. Further, in 2016
there were value reductions in relation to the Group’s investment in New Royal Adelaide Hospital,
which made a positive contribution in 2017. In 2017, the value reduction of £25.5 million on the
two Manchester Waste investments announced at the half year was partly offset by improvements
in the valuation of Manchester Waste TPS Co once it became unleveraged.
The split between primary and secondary investments is shown in the table below:
Primary Investment
Secondary Investment
Portfolio valuation
31 December 2017
31 December 2016
£ million
%
£ million
%
580.3
613.5
48.6
51.4
696.3
479.6
59.2
40.8
1,193.8
100.0
1,175.9
100.0
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/ John Laing Annual Report and Accounts 2017
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PORTFOLIO VALUATION (CONTINUED)
The decrease in the Primary Investment portfolio is due to
transfers to the Secondary Investment portfolio of £413.1 million
and investment realisations of £82.5 million, offset by a positive
movement in fair value of £172.9 million, including value
enhancements and financial closes achieved during the year,
and cash invested of £206.7 million.
Primary
Investment
£ million
Portfolio valuation at 1 January 2017 696.3
– Cash invested 206.7
– Cash yield –
– Proceeds from realisations (82.5)
– Transfers to Secondary Investment (413.1)
Rebased valuation 407.4
– Movement in fair value 172.9
Portfolio valuation at 31 December 2017 580.3
The increase in the Secondary Investment portfolio is due to
transfers from the Primary Investment portfolio of £413.1 million
and a cash investment of £3.2 million, offset by a negative
movement in fair value of £12.2 million, investment realisations
during the year of £230.0 million and cash yield of £40.2 million.
Secondary
Investment
£ million
Portfolio valuation at 1 January 2017 479.6
– Cash invested 3.2
– Cash yield (40.2)
– Proceeds from realisations (206.5)
– Cash received on acquisition of Manchester Waste VL Co
by GMWDA (23.5)
– Transfers from Primary Investment 413.1
Rebased valuation 625.7
– Movement in fair value (12.2)
Portfolio valuation at 31 December 2017 613.5
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 two principal inputs are (i) forecast
cash flows from investments and (ii) discount rate. 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 2017,
derived from detailed financial models for each underlying
project. These incorporate the Group’s expectations of likely
future cash flows, which are stated net of project tax, and
therefore reflect changes in tax legislation as at 31 December
2017 in the jurisdictions in which the Group operates, including
recent changes in the US. Expectations of future cash flows
also include expected value enhancements and the Group’s
expectations of future macroeconomic factors such as inflation
and, for renewable energy projects, power and gas prices.
For the 31 December 2017 valuation, the overall weighted average
discount rate was 8.8% compared to the weighted average
discount rate at 31 December 2016 of 8.9%. The decrease was
primarily due to reductions in operational discount rates for
certain investments and progress in construction, partially
offset by the impact of new investments. The weighted average
discount rate at 31 December 2017 was made up of 9.3%
(31 December 2016 – 9.1%) for the Primary Investment portfolio
and 7.9% (31 December 2016 – 8.4%) for the Secondary
Investment portfolio.
The overall weighted average discount rate of 8.8% is closer to
the weighted average discount rate for the Primary Investment
portfolio, reflecting the fact that project cash flows for
investments in the Primary Investment portfolio tend to have a
longer duration than for investments in the Secondary
Investment portfolio.
The discount rate ranges used in the portfolio valuation at
31 December 2017 were as set out below:
Primary Secondary
Investment Investment
Sector % %
PPP investments 7.6% – 11.8% 7.0% – 9.0%
Renewable energy investments 8.0% – 10.2% 6.8% – 10.0%
The shareholding in JLEN was valued at its closing market price
on 31 December 2017 of 109.25p per share (31 December 2016 –
106p 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 2017.
MACROECONOMIC ASSUMPTIONS
During 2017, higher than previously forecast actual inflation
and deposit rates receivable on cash balances within projects
had a positive 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,
movements of foreign currencies against Sterling over the year
to 31 December 2017 resulted in net adverse foreign exchange
movements of £11.0 million (excluding the effect of foreign
exchange hedges as described in the Financial Review section)
(2016 – £74.7 million net favourable foreign exchange movements).
Investments in overseas projects are fair valued based on
the spot exchange rate on the balance sheet date. As at
31 December 2017, a 5% movement of each relevant currency
against Sterling would decrease or increase the value of
investments in overseas projects by c.£38 million.
John Laing Annual Report and Accounts 2017 /
27
At 31 December 2017, based on a sample of six of the larger
PPP investments by value, a 0.25% increase in inflation is
estimated to increase the value of PPP investments by
£15 million and a 0.25% decrease in inflation is estimated
to decrease the value of PPP investments by £14 million.
Certain of the underlying project companies incorporate
some inflation hedging.
On each valuation and review of the portfolio, the Group updates
the detailed financial model of each renewable energy project to
reflect the impact of the latest power and gas forecast prices on
the project’s revenue to the extent that prices are not fixed by
governmental support mechanisms and/or offtake arrangements.
The Group obtains forecasts for power and gas prices from
external parties who are recognised as experts in the market
in the relevant region, including by potential secondary market
buyers. During 2017, a reduction in forecast power and gas
prices resulted in a £54.8 million adverse fair value movement
(2016 – adverse fair value movement of £17.6 million). At
31 December 2017, based on a sample of seven of the larger
renewable energy investments by value, a 5% increase in power
price forecasts is estimated to increase the value of renewable
energy investments by £15 million and a 5% decrease in power
price forecasts is estimated to decrease the value of renewable
energy investments by £14 million.
The table below summarises the main macroeconomic assumptions used in the portfolio valuation:
31 December 31 December
Assumption 2017 2016
Long-term inflation UK RPI & RPIX 2.75% 2.75%
Europe CPI 1.75% – 2.00% 1.60% – 2.00%
US CPI 2.25% – 2.50% 2.25% – 2.50%
Asia Pacific CPI 2.25% – 2.75% 2.00% – 2.75%
Exchange rates GBP/EUR 1.1252 1.1708
GBP/AUD 1.7311 1.7094
GBP/USD 1.3527 1.2329
GBP/NZD 1.9055 1.7754
DISCOUNT RATE SENSITIVITY
The weighted average discount rate applied at 31 December 2017 was 8.8% (31 December 2016 – 8.9%). The table below shows the
sensitivity of a 0.25% change in this rate.
Discount rate sensitivity Portfolio valuation Increase/(decrease) in valuation
£ million £ million
+0.25% 1,153.1 (40.7)
– 1,193.8 –
-0.25% 1,236.4 42.6
Further analysis of the portfolio valuation is shown in the following tables:
BY TIME REMAINING ON PROJECT CONCESSION/OPERATIONAL LIFE
£ million
SPLIT BETWEEN PPP AND RENEWABLE ENERGY
£ million
10.3 (0.9%)
8.8 (0.7%)
19.4 (1.6%)
167.9 (14.1%)
247.3 (20.7%)
10.0 (0.9%)
21.7 (1.8%)
21.0 (1.8%)
183.1 (15.6%)
309.8 (26.3%)
740.1 (62%)
630.3 (53.6%)
Listed investment
Less than 10 years
10 to 15 years
15 to 20 years
20 to 25 years
Greater than 25 years
10.3 (0.9%)
374.2 (31.3%)
229.0 (19.2%)
38.6 (3.2%)
10.0 (0.9%)
124.0 (10.5%)
345.6 (29.4%)
148.0 (12.6%)
541.7 (45.4%)
548.3 (46.6%)
Listed investment
Secondary renewable energy
Secondary PPP
Primary renewable energy
Primary PPP
Dec 17
Dec 16
Dec 17
Dec 16
PPP projects are based on long-term concessions and
renewable energy assets have long-term useful economic lives.
As demonstrated in the table above, 62.0% of the portfolio by
value had a greater than 25-year unexpired concession term or
useful economic life remaining at 31 December 2017, compared
to 53.6% at 31 December 2016.
Primary PPP investments made up the largest part of the
portfolio, representing 45.4% of the portfolio value at
31 December 2017, with Secondary renewable energy
investments representing a further 31.3%.
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PORTFOLIO VALUATION (CONTINUED)
BY REVENUE TYPE
£ million
10.3 (0.9%)
19.4 (1.6%)
461.9 (38.7%)
702.2 (58.8%)
10.0 (0.9%)
23.4 (2.0%)
287.5 (24.4%)
855.0 (72.7%)
BY CURRENCY
£ million
21.8 (1.8%)
283.2 (23.7%)
269.4 (22.6%)
204.1 (17.1%)
415.3 (34.8%)
21.9 (1.9%)
121.0 (10.3%)
181.4 (15.4%)
341.2 (29.0%)
510.4 (43.4%)
New Zealand dollar
US dollar
Australian dollar
Euro
Sterling
Listed investment
Shadow toll
Volume
Availability
Dec 17
Dec 16
Dec 17
Dec 16
Availability-based investments continued to make up the
majority of the portfolio, representing 58.8% of the portfolio
value at 31 December 2017. 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.
The percentage of investments denominated in foreign
currencies increased from 56.6% to 65.2%. This is consistent
with our pipeline and the overseas jurisdictions we target.
BY GEOGRAPHICAL REGION
£ million
BY SECTOR
£ million
10.3 (0.9%)
89.0 (7.4%)
369.2 (30.9%)
296.8 (24.9%)
10.0 (0.9%)
115.2 (9.8%)
252.9 (21.5%)
280.4 (23.8%)
288.1 (24.1%)
395.3 (33.6%)
140.4 (11.8%)
122.1 (10.4%)
Dec 17
Dec 16
Listed investment
Environmental –
waste and biomass
Environmental – wind and solar
Transport – rail rolling stock
Transport – other
Social infrastructure
Wind and solar investments represented 30.9% of the portfolio
value at 31 December 2017, with rail rolling stock accounting
for a further 24.9%. Other transport investments (excluding rail
rolling stock) made up 24.1% of the portfolio by value, while
social infrastructure investments and waste and biomass
investments made up 11.8% and 7.4% respectively. The portfolio
underlying the JLEN shareholding consists of investments in a
mix of renewable energy and environmental projects.
10.3 (0.9%)
291.2 (24.4%)
283.2 (23.7%)
204.1 (17.1%)
405.0 (33.9%)
10.0 (0.9%)
203.3 (17.3%)
121.0 (10.3%)
341.2 (29.0%)
500.4 (42.5%)
Dec 17
Dec 16
Listed investment
Asia Pacific
North America
Continental Europe
UK
Investments in the UK decreased to 33.9% of the portfolio value
at 31 December 2017. Asia Pacific was the next largest category
at 24.4%. Investments in projects located in North America
made up 23.7% and investments in Continental Europe made up
17.1%. A substantial majority of the JLEN portfolio consists of
investments in UK-based projects.
BY INVESTMENT SIZE
£ million
10.3 (0.9%)
10.0 (0.9%)
480.3 (40.2%)
233.8 (19.6%)
409.3 (34.8%)
236.4 (20.1%)
469.4 (39.3%)
520.2 (44.2%)
Dec 17
Dec 16
Listed investment
Other projects
Next five largest projects
Five largest projects
The top five investments in the portfolio made up 39.3% of
the portfolio at 31 December 2017, a decline from 44.2% at
31 December 2016. The next five largest investments made up
a further 19.6%, with the remaining investments in the portfolio
comprising 40.2%.
FINANCIAL REVIEW
John Laing Annual Report and Accounts 2017 /
29
BASIS OF PREPARATION
The financial information has been prepared on the historical
cost basis except for the revaluation of the Group’s investment
in John Laing Holdco Limited, through which the Group indirectly
holds its 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 Consolidated Financial Statements. 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”.
Included within the subsidiaries that the Company fair values
in its financial statements are recourse subsidiaries through
which the Company holds its investments in non-recourse
project companies. These recourse subsidiaries have, in addition
to investments in non-recourse project companies, other
assets and liabilities, including recourse cash balances, which
are included within the Company’s investments at FVTPL.
For management reporting purposes, these other assets
and liabilities are reported separately from the investments
in non-recourse project companies as are certain income
and costs that do not arise directly from these investments.
Under management reporting, it is the investments in
non-recourse project companies that are considered as
investments of the Group.
The Directors of the Company use the management reporting
basis when making business decisions, including when
reviewing the level of financial resources and deciding where
these resources should be utilised. Therefore, the Directors
believe it is helpful to readers of these financial statements to
set out in this Financial Review the 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 FINANCIAL RESULTS
Re-presented income statement
As described above, the Company meets the criteria for being
an investment entity under IFRS 10 and accordingly the Company
is required to fair value its investments in its subsidiaries,
joint ventures and associates except for those directly-owned
subsidiaries that provide investment-related services, and do
not themselves qualify as investment entities; it consolidates
such subsidiaries on a line by line basis.
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 and
also comprises income and costs that do not arise directly from
investments in this portfolio, including investment fees earned
from project companies by recourse subsidiaries that are held
at FVTPL.
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FINANCIAL REVIEW (CONTINUED)
Year ended 31 December
2017
2016
Re-presented Re-presented
d
Adjustments
£ million
statement statement line items
£ million £ million
income income Re-presented income statement
Group
Income
Statement
£ million
Fair value movements – investment portfolio 160.7 – 160.7 214.4 Fair value movements –
investment portfolio
Fair value movements – other (1.5) (0.6)
(2.1) (3.2) Fair value movements – other
Investment fees from projects 7.1 – 7.1 7.0 Investment fees from projects
a
Net gain on investments at fair value
through profit or loss 166.3 (0.6) 165.7 218.2
IMS revenue 19.0 – 19.0 17.8 IMS revenue
PMS revenue 6.1 – 6.1 14.9 PMS revenue
b
Recoveries on financial close 3.7 – 3.7 7.5 Recoveries on financial close
Other income 1.6 (1.6)
– –
Other income 30.4 (1.6) 28.8 40.2
Operating income 196.7 (2.2) 194.5 258.4
Third party costs (11.3) – (11.3) (9.8) Third party costs
Staff costs (33.9) – (33.9) (34.1) Staff costs
a,b
General overheads (12.4) (0.3)
c
Other net costs – 2.1
Pension and other charges (1.3) 1.3
(12.7) (11.1) General overheads
2.1 (0.7) Other net costs
– –
a,b
Administrative expenses (58.9) 3.1 (55.8) (55.7)
Profit from operations 137.8 0.9 138.7 202.7
a,c
Finance costs (11.8) 1.7
Pension and other charges – (2.6)
c
(10.1) (7.7) Finance costs
(2.6) (2.9) Pension and other charges
Profit before tax 126.0 – 126.0 192.1
Notes:
a) Adjustments comprise £0.6 million income reclassified from ‘fair value movements – other’ to ‘other net costs’; £0.4 million of costs reclassified from
‘fair value movements – other’ to ‘general overheads’ and £0.4 million interest income reclassified from ‘fair value movements – other to ‘finance costs’.
b) Adjustments comprise £1.5 million part proceeds received from the sale of the PMS UK business reclassified from ‘other income’ to ‘other net costs’ and
£0.1 million of other income from projects reclassified from ‘other income’ to ‘general overheads’.
c) Under IAS 19 Employee Benefits, the costs of the pension schemes comprise a service cost of £1.3 million, included in administrative expenses in the Group
Income Statement, and a finance charge of £1.3 million, included in finance costs in the Group Income Statement. These amounts are combined together
under management reporting.
d) For a reconciliation between the Group Income Statement and re-presented income statement for the year ended 31 December 2016, refer to the 2016 Annual
Report and Accounts.
The results for the year are also shown by operating segment in the table below.
Primary
Investment
2017
£ million
2016
£ million
Secondary
Investment
2017
£ million
2016
£ million
Asset
Management
2017
£ million
2016
£ million
Total
2017
£ million
2016
£ million
Profit before tax for reportable segments 137.3 113.1 (31.9) 57.1 18.8 19.9 124.2 190.1
Post-retirement charges (2.6) (2.9)
Other net gain 4.4 4.9
Profit before tax 126.0 192.1
Profit before tax for the year ended 31 December 2017 was
£126.0 million (2016 – £192.1 million). The main reason for
the lower profit before tax was a lower fair value movement
compared to 2016.
•
The main profit contributor in 2017 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 higher value
uplift on financial closes of new investments and value
enhancements offset by adverse foreign exchange
rate movements.
•
•
The lower contribution in 2017 from the Secondary
Investment division was primarily as a result of adverse
foreign exchange rate movements as well as lower power and
gas price forecasts and a value reduction in relation to the
Group’s investment in the Manchester Waste VL Co project.
The lower contribution in 2017 from the Asset Management
division was principally due to lower fee income from PMS
as a result of the sale of the UK activities of PMS in late
2016 offset by higher fee income from IMS as a result of
increased external AuM.
John Laing Annual Report and Accounts 2017 /
31
The movement in fair value on the portfolio for the year ended
31 December 2017, after adjusting for the impact of investments,
cash yield and realisations, was a £160.7 million gain (2016 –
£214.4 million gain). For further details of the movement in
fair value on the portfolio, see the Portfolio Valuation section.
The Group earned IMS revenue of £19.0 million (2016 –
£17.8 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.
Negative other fair value movements of £2.1 million for the year
ended 31 December 2017 principally comprised net foreign
exchange losses outside the investment portfolio of £3.9 million
(see the Foreign Currency Exposure section in this review for
further details) and a disposal proceeds adjustment payment
of £3.6 million offset by fair value gains of £0.7 million in
respect of non-portfolio investments in small joint ventures
and £4.7 million of tax income.
The Group also earned PMS revenue of £6.1 million (2016 –
£14.9 million) with the reduction from 2016 a result of the sale
of the Group’s PMS activities in the UK to HCP in November
2016. The activities sold contributed approximately £7.9 million
of the £14.9 million PMS revenues for the year ended
31 December 2016.
The Group achieved recoveries of bidding costs on financial
closes of £3.7 million in 2017 (2016 – £7.5 million).
Staff costs by division are shown below:
Primary
Investment
2017
£ million
2016
£ million
Secondary
Investment
2017
£ million
2016
£ million
Asset
Management
2017
£ million
2016
£ million
Central
Total
2017
£ million
2016
£ million
2017
£ million
2016
£ million
Staff costs
10.2
9.6
–
–
13.9
17.1
9.8
7.4
33.9
34.1
Included within Asset Management staff costs are costs relating to:
Investment Management
Services
Project Management
Services
2017
£ million
2016
£ million
2017
£ million
2016
£ million
Total Asset
Management
2017
£ million
2016
£ million
Staff costs
10.0
9.0
3.9
8.1
13.9
17.1
The small decrease in overall staff costs is principally due to
the sale of the PMS UK activities in November 2016 offset by
higher costs of share-based incentive schemes under IFRS 2
Share-based Payment with costs in the year ended 31 December
2017 of £3.2 million compared to £2.0 million in the prior year.
See note 6 of the Group financial statements for further details
on the share-based incentive schemes.
Finance costs of £10.1 million in 2017 (2016 – £7.7 million)
include costs arising on the corporate banking facilities net of
any interest income, with the increase from last year primarily
due to a higher average usage of the corporate banking facilities,
resulting from the increased level of investments, and lower
interest earned on cash collateral balances.
The Group’s overall tax credit on profit on continuing activities
for 2017 was £6.2 million (2016 – credit of £4.8 million). This
comprised a net tax credit of £1.5 million (2016 – £1.8 million
charge) in recourse subsidiaries that are consolidated (shown
in the ‘Tax credit/(charge)’ line on the Group Income Statement),
primarily in relation to group relief receivable from entities held
at FVTPL, and a net tax credit of £4.7 million (2016 – £6.6 million)
in recourse subsidiaries that are held at FVTPL (shown in the
‘net gain on investments at fair value through profit or loss’
line on the Group Income Statement), including (i) group relief
payable to recourse subsidiaries that are consolidated, together
with (ii) group/consortium relief received from project companies.
The contributions made to JLPF are tax deductible when paid
and, as a result, there is minimal tax payable by the UK holding
and asset management activities of the Group. Capital gains
from the realisation of investments in projects are generally
exempt from tax under the UK’s Substantial Shareholding
Exemption for shares in trading companies or under the overseas
equivalent. To the extent this exemption is not available, gains
may be sheltered using current year losses or losses brought
forward within the Group’s recourse subsidiaries. There are
no losses in the Company but there are tax losses in recourse
subsidiaries that are held at FVTPL.
In late 2017, the UK Government enacted legislation, effective
from 1 April 2017, which introduced a Fixed Ratio Rule to cap
the amount of tax deductible net interest to 30% of a company’s
UK EBITDA. This was in response to OECD recommendations.
In the US, new legislation came into effect on 1 January 2018,
including a restriction on interest deductibility for certain US
entities paying interest to foreign entities. The impact from
both the changes to UK and US tax is reflected in the fair
value at 31 December 2017 of the Group’s investments in
those jurisdictions.
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FINANCIAL REVIEW (CONTINUED)
RE-PRESENTED BALANCE SHEET
The re-presented balance sheet is reconciled to the Group Balance Sheet at 31 December 2017 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 £152.6 million (31 December 2016 – £81.6 million) within 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.
g
31 December
Group
Balance
Sheet
£ million
2017
2016
Re-presented Re-presented
Adjustments
£ million
sheet sheet line items
£ million £ million
balance balance Re-presented balance sheet
Non-current assets
a
Plant and equipment 0.1 (0.1)
b
Investments at FVTPL 1,346.4 (152.6)
b
– 133.1
– 0.3
c,e
Deferred tax assets 0.5 (0.5)
– 2.1
– –
1,193.8 1,175.9 Portfolio value
133.1 23.7 Cash collateral balances
c
0.3 0.3 Non-portfolio investments
– –
2.1 3.7 Other long-term assets
1,347.0 (17.7) 1,329.3 1,203.6
Current assets
b
Trade and other receivables 7.6 (7.6)
Cash and cash equivalents 2.5 12.1
– –
14.6 53.1 Cash and cash equivalents
c
d
10.1 4.5 14.6 53.1
Total assets 1,357.1 (13.2) 1,343.9 1,256.7
b,d,e
d
Current liabilities – (3.7)
e
Current tax liabilities (1.4) 1.4
– –
d
(176.0) (165.0) Cash borrowings
Borrowings (173.2) (2.8)
– –
Trade and other payables (17.3) 17.3
(3.7) (5.6) Working capital and other balances
(191.9) 12.2 (179.7) (170.6)
Net current liabilities (181.8) 16.7 (165.1) (117.5)
Non-current liabilities
Retirement benefit obligations (40.3) 8.0
d
– (8.0)
Provisions (1.0) 1.0
f
f
(32.3) (61.3) Pension deficit (IAS 19)
(8.0) (8.0) Other retirement benefit obligations
– –
(41.3) 1.0 (40.3) (69.3)
Total liabilities (233.2) 13.2 (220.0) (239.9)
Net assets 1,123.9 – 1,123.9 1,016.8
Notes:
a)
Investments at FVTPL of £1,346.4 million comprise: portfolio valuation of £1,193.8 million and other assets and liabilities within recourse investment entity
subsidiaries of £152.6 million (see note 12 to the Group financial statements).
b) Other assets and liabilities within recourse investment entity subsidiaries of £152.6 million referred to in note (a) include: (i) cash and cash equivalents of
£145.2 million, of which £133.1 million is held to collateralise future investment commitments and £12.1 million is other cash balances, (ii) net positive
working capital and other balances of £7.1 million and (iii) non-portfolio investments of £0.3 million.
c) Plant and equipment and deferred tax assets are combined as other long-term assets.
d)
Trade and other receivables (£7.6 million), current tax liabilities (£1.4 million), trade and other payables (£17.3 million) and provisions (£1.0 million) are
combined as working capital and other balances.
e) Borrowings of £173.2 million comprise cash borrowings of £176.0 million less unamortised financing costs of £2.8 million, with the non-current portion of
unamortised financial costs of £1.5 million re-presented as other long-term assets and the current portion of £1.3 million re-presented as working capital
and other balances.
f)
Total retirement benefit obligations are shown in their separate components as in note 19 to the Group financial statements.
g) For a reconciliation between the Group Balance Sheet and re-presented balance sheet as at 31 December 2016, refer to the 2016 Annual Report and Accounts.
John Laing Annual Report and Accounts 2017 /
33
Net assets are also shown by operating segment in the table below.
As at 31 December
Primary
Investment
2017
£ million
2016
£ million
Secondary
Investment
2017
£ million
2016
£ million
Asset
Management
2017
£ million
2016
£ million
Total
2017
£ million
2016
£ million
Portfolio valuation 580.3 696.3 613.5 479.6 – – 1,193.8 1,175.9
Other net current liabilities (1.3) (1.6)
Group net borrowings
(28.3) (88.2)
Post-retirement obligations (40.3) (69.3)
1
Group net assets 1,123.9 1,016.8
Note:
(1) Short-term cash borrowings of £176.0 million (31 December 2016 – £165.0 million) net of cash balances of £147.7 million (31 December 2016 – £76.8 million),
of which £133.1 million was held to collateralise future investment commitments (31 December 2016 – £23.7 million).
The pension deficit in JLPF is based on a discount rate applied
to pension liabilities of 2.50% (31 December 2016 – 2.80%)
and long-term RPI of 3.10% (31 December 2016 – 3.20%).
The amount of the deficit is dependent on key assumptions,
principally: inflation rate, discount rate and life expectancy
of members. The discount rate, as prescribed by IAS 19, is
based on yields from high quality corporate bonds. The deficit
(under IAS 19) has decreased since 31 December 2016
primarily as a result of the Group’s cash contribution to JLPF
of £24.5 million in March 2017.
In December 2016, following a triennial actuarial review of the
JLPF as at 31 March 2016, a seven-year deficit repayment plan
was agreed with the JLPF Trustee. It was agreed to repay the
actuarial deficit of £171 million at 31 March 2016 as follows:
By 31 March £ million
2017 24.5
2018 26.5
2019 29.1
2020 24.9
2021 25.7
2022 26.4
2023 24.6
Net asset value increased from £1,016.8 million at 31 December
2016 to £1,123.9 million at 31 December 2017.
The Group’s portfolio of investments in project companies
and listed investments was valued at £1,193.8 million at
31 December 2017 (31 December 2016 – £1,175.9 million).
The valuation methodology and details of the portfolio value
are provided in the Portfolio Valuation section.
The Group held cash balances of £147.7 million at 31 December
2017 (31 December 2016 – £76.8 million) of which £133.1 million
(31 December 2016 – £23.7 million) was held to collateralise
future investment commitments (see the Financial Resources
section below for more details). Of the total Group cash
balances of £147.7 million, £145.2 million was in recourse
subsidiaries held at FVTPL, including the cash collateral
balances, that are included within investments at FVTPL on the
Group Balance Sheet. The remaining £2.5 million was in the
Company and recourse subsidiaries that are consolidated and
shown as cash and cash equivalents on the Group Balance
Sheet (see the re-presented balance sheet for further details).
Working capital and other balances (a negative amount) were
lower than prior year primarily because of a net positive fair
value at 31 December 2017 on foreign exchange hedges, lower
provisions and higher trade receivables as a result of increased
fund management income.
The combined accounting deficit in the Group’s defined benefit
pension and post-retirement medical schemes at 31 December
2017 was £40.3 million (31 December 2016 – £69.3 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
2017, JLPF had a deficit of £35.2 million (31 December 2016 –
£64.2 million) whilst the Plan had a surplus of £2.9 million
(31 December 2016 – £2.9 million). The liability at 31 December
2017 under the post-retirement medical scheme was £8.0 million
(31 December 2016 – £8.0 million).
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FINANCIAL REVIEW (CONTINUED)
RE-PRESENTED CASH FLOW STATEMENT
The Group Cash Flow Statement includes the cash flows of the
Company and those 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 12 to the Group financial statements.
The re-presented cash flow statement shows all recourse cash
flows that arise in both the consolidated group (the Company
and its consolidated subsidiaries) and in the recourse
investment entity subsidiaries.
Year ended 31 December
2017 2016
Re-presented Re-presented
cash flows cash flows
£ million £ million
Cash yield 40.9 36.8
Operating cash flow (17.3) (10.9)
Net foreign currency exchange impact (1.3) (18.2)
Total operating cash flow 22.3 7.7
Cash investment in projects (209.9) (301.5)
Proceeds from realisations 287.1 146.6
Cash received from acquisition of
Manchester Waste VL Co by the GMWDA 23.5 –
Total operating cash flow in the year ended 31 December 2017
was higher than in 2016 primarily due to an adverse impact on
foreign exchange hedges in 2016.
In the year, in addition to the payment of the PPF levy of
£0.2 million (2016 – £0.3 million), the Group made a cash
contribution to JLPF of £24.5 million (2016 – £18.1 million).
During the year, cash of £209.9 million (2016 – £301.5 million)
was invested in project companies. In the same period,
investments in eight projects were realised (including five
investments to JLIF, one to JLEN and two investments to
third parties) for total proceeds of £289.0 million, of which
£287.1 million was received in the year and £1.9 million was
deferred to 2018 (2016 – £140.2 million from the realisation
of six investments (including four investments to JLIF and two
investments to JLEN) and sale of a 2.2% shareholding in JLEN
for £6.4 million). The above proceeds were in addition to the
cash received on the acquisition of Manchester Waste VL Co
by the GMWDA of £23.5 million.
Finance charges were higher in 2017 due to higher average
usage of the corporate banking facilities as well as lower
interest income received on cash collateral balances.
Dividend payments of £30.1 million in the year ended
31 December 2017 comprised the final dividend for 2016 of
£23.1 million and the interim dividend for 2017 of £7.0 million
(2016 – final dividend for 2015 of £19.4 million and interim
dividend for 2016 of £6.8 million).
Net investing cash inflow/(outflow) 100.7 (154.9)
FINANCIAL RESOURCES
Finance charges (8.3) (6.8)
Cash contributions to JLPF (including PPF levy) (24.7) (18.4)
Dividend payments (30.1) (26.2)
Net cash outflow from financing activities (63.1) (51.4)
Recourse group cash inflow/(outflow) 59.9 (198.6)
Recourse group opening net debt/cash balances (88.2) 110.4
Recourse group closing net debt balances (28.3) (88.2)
Reconciliation to line items on re-presented
balance sheet
1
Cash collateral balances
133.1 23.7
1
Cash and cash equivalents
14.6 53.1
Total cash balances 147.7 76.8
Cash borrowings (176.0) (165.0)
Net debt (28.3) (88.2)
Reconciliation of cash borrowings to
Group Balance Sheet
Cash borrowings as per re-presented
balance sheet (176.0) (165.0)
At 31 December 2017, the Group had principal committed
corporate banking facilities of £475 million (31 December 2016 –
£400 million), expiring in March 2020, which are primarily used
to back investment commitments. The Group also had surety
facilities of £50 million backed by two £25 million committed
liquidity facilities both expiring in March 2018. Since the year
end, these liquidity facilities have been extended to February
2019. Net available financial resources at 31 December 2017
were £153.1 million (31 December 2016 – £168.1 million).
Analysis of Group financial resources
31 December 31 December
2017 2016
£ million £ million
Total committed facilities 525.0 450.0
Letters of credit issued under corporate
banking facilities (see below) (152.3) (112.6)
Letters of credit issued under surety
facilities (see below) (50.0) (50.0)
Other guarantees and commitments (7.5) (6.5)
Short-term cash borrowings (176.0) (165.0)
Utilisation of facilities (385.8) (334.1)
Unamortised financing costs 2.8 3.6
Headroom 139.2 115.9
1
Borrowings as per Group Balance Sheet (173.2) (161.4)
1
For reconciliation of these amounts to the Group Balance Sheet see the
re-presented balance sheet above.
Cash yield comprises £40.2 million (2016 – £34.8 million) from
the investment portfolio (see the Portfolio Valuation section
for further details) and £0.7 million (2016 – £2.0 million) from
non-portfolio investments.
The net operating cash outflow in the year ended 31 December
2017 of £17.3 million was higher than the outflow in 2016
principally due to higher bid costs net of recoveries.
Cash and bank deposits
14.6 53.1
Less unavailable cash (0.7) (0.9)
Net available financial resources 153.1 168.1
1
Cash and bank deposits exclude cash collateral balances. Of the total
cash and bank deposit balances of £14.6 million, £2.5 million was in the
Company and recourse subsidiaries that are consolidated and therefore
shown as cash and cash equivalents on the Group Balance Sheet, with
the remaining £12.1 million in recourse subsidiaries held at FVTPL which
are included within investments at FVTPL on the Group Balance Sheet
(see the re-presented balance sheet).
John Laing Annual Report and Accounts 2017 /
35
Letters of credit issued under the committed corporate banking
facilities of £152.3 million (31 December 2016 – £112.6 million)
and under additional surety facilities of £50.0 million
(31 December 2016 – £50.0 million) together with cash
collateral represent future cash investment by the Group into
underlying projects in the Primary Investment portfolio.
31 December 31 December
2017 2016
£ million £ million
Letters of credit issued 202.3 162.6
Cash collateral 133.1 23.7
Future cash investment into projects 335.4 186.3
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 £ million investment
IEP (Phase 2) 72.7 Feb 2018 – Mar 2018
New Grafton Correctional Centre 76.4 Dec 2018 – Jul 2019
Buckthorn Wind Farm 9.5 Jan 2018
Melbourne Metro 43.7 Oct 2019 – Dec 2019
Total 202.3
The table below shows the cash collateral balance at
31 December 2017 analysed by investment and the dates
when the cash collateral is expected to be invested into the
underlying project:
Cash
collateral Expected
amount date of cash
Project £ million investment
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
2017, there was a net adverse fair value movement of £11.0 million
in the portfolio valuation, which was net of a £3.0 million gain
on the divestment of the Group’s investment in the A1 Poland
project where the proceeds were hedged (see below). Sterling
strengthened against the US, Australian and New Zealand
dollars between 31 December 2016 and 31 December 2017,
but weakened against the Euro.
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. In the year, there was a
net loss of £3.9 million from foreign exchange movements
outside the portfolio, which was primarily as a result of a loss
of £3.0 million on forward foreign exchange contracts taken
out to hedge the proceeds from the divestment of the Group’s
investment in the A1 Poland project.
Letters of credit in issue at 31 December 2017 of £202.3 million
(31 December 2016 – £162.6 million) are analysed by currency
as follows:
Letters of credit by currency
31 December 31 December
2017 2016
£ million £ million
Sterling 72.7 99.7
US dollar 9.5 18.1
Australian dollar 120.1 44.8
202.3 162.6
I-77 Managed Lanes 18.3 Apr 2018 – Nov 2018
I-66 Managed Lanes 114.8 May 2020 – Dec 2022
Total 133.1
Cash collateral at 31 December 2017 of £133.1 million
(31 December 2016 – £23.7 million) is analysed by currency
as follows:
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.
Cash collateral by currency
31 December 31 December
2017 2016
£ million £ million
Sterling – 0.3
US dollar 133.1 20.1
Australian dollar – 3.3
133.1 23.7
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 2017.
Patrick O’D Bourke
GROUP FINANCE DIRECTOR
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The Directors’ assessment has been undertaken using a
detailed financial model, which the Group uses consistently
both for forecasting purposes and to monitor compliance with
the covenants in its corporate banking facilities. Key outputs
from this model are reviewed at monthly treasury meetings and
by the Group’s Executive Committee, Audit & Risk Committee
and Board. Where appropriate, the model has been subjected
to robust sensitivity analysis to stress test the resilience of
the Group’s forecasts to severe but plausible scenarios.
These included:
(i) a scenario under which the Group is unable to make
further investment realisations over an extended time
period and accordingly materially reduces new investment
activity as well as its costs; and
(ii) a scenario where the Group experiences a combination
of a significant write down in one or more of its largest
investments, a six month delay in forecast investment
realisations and material strengthening of Sterling versus
the currencies the Group invests in.
Based on the above assessment, the Directors have formed a
reasonable expectation that the Group will be able to continue
its operations and meet its liabilities as they fall due over the
next three years from 31 December 2017.
/ John Laing Annual Report and Accounts 2017
36
VIABILITY STATEMENT
In accordance with the revised UK Corporate Governance Code,
the Directors have assessed the viability of the Group over the
three year period to 31 December 2020, taking into account the
Group’s current position and the principal risks set out on
pages 37 to 42. The assessment carried out supports the
Directors’ statements both on viability, as set out below, and
also in respect of going concern, as set out in the Financial
Review section.
The Company has a strong risk management culture, supported
by a Management Risk Committee and an Internal Audit function,
which helps to ensure that key risks to the business are identified,
assessed and monitored appropriately.
The Directors selected a period of three years for their
assessment because this is the longest timescale over which
the Group has visibility over the future investment opportunities
which make up its pipeline. This is consistent with the Group’s
business model and is also the key period of focus in the
Group’s budget and planning process.
The particular factors and/or assumptions the Directors
considered in making their assessment were as follows:
•
The Group makes primarily long-term investments which
are not publicly traded. The minimum holding period for
an investment typically extends beyond the construction
period for the underlying asset and some assets may be
held to maturity;
•
•
•
•
New investments in greenfield projects are funded through
a combination of cash flow from existing assets, the Group’s
corporate banking facilities and realisations of investments
in operational projects. Realisations are dependent on
continuing demand in a currently active secondary market;
Availability of debt finance continues at Group level through
the corporate banking facilities and at project level through
non-recourse project finance facilities specific to each
project; it is assumed that the £475 million corporate banking
facilities which mature in March 2020 will be renewed or
refinanced before that date;
The Group is exposed to potential increases in pension
cash contributions as well as volatility in the JLPF pension
deficit reported as part of NAV, principally because of
movements in the main assumptions (discount rate, inflation
rate and life expectancy) which impact the value of pension
liabilities. The next triennial actuarial valuation of JLPF is
due as at 31 March 2019; and
The value of the Group’s investment portfolio is dependent
on a number of key assumptions including: discount rates
derived from the secondary market; macroeconomic
factors such as exchange rates, taxation rates, inflation
and deposit rates; the construction stage and operational
performance of underlying assets; forecast project cash
flows; volumes (where project revenue is linked to project
usage); and forward energy prices and energy yields.
John Laing Annual Report and Accounts 2017 /
37
A Management Risk Committee, comprising senior members
of management, assists the Board, Audit & Risk Committee and
Executive Committee in formulating and enforcing the Group’s
risk management policy. During 2017, this committee was
chaired by the Group Finance Director but from 2018 will be
chaired by the Group’s Chief Risk Officer. The Head of Internal
Audit attends each meeting of the Management Risk Committee.
The Management Risk Committee 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. All divestment decisions are scrutinised by the
Divestment Committee and approved by the Board.
The Directors’ assessment of the principal risks applying to
the Group is set out below, including the way in which risks
are linked to the three strategic objectives set out in the Chief
Executive Officer’s Review. 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.
The Group’s three strategic objectives are:
1. Growth in primary investment volumes (new investment
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.
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PRINCIPAL RISKS AND RISK MANAGEMENT
The effective management of risks within the Group is essential
to the successful delivery of the Group’s objectives. The Board
is responsible for ensuring that risks are identified and
appropriately managed across the Group and has delegated
to the Audit & Risk Committee responsibility for reviewing the
effectiveness of the Group’s internal controls, including the
systems established to identify, assess, manage and monitor
risks. The Group’s risk appetite when making decisions on
investment commitments or potential realisations is assessed
by reference to the expected impact on NAV.
The principal internal controls that operated throughout 2017
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;
•
•
•
a deterrent to fraud;
another layer of assurance that the Group is meeting its
FCA regulatory requirements; and
advice on efficiency improvements to internal control
processes.
Internal Audit is independent of the business and reports
functionally to the Group Finance Director and directly to the
Chairman of the Audit & Risk Committee. The Head of Internal
Audit meets regularly with senior management and the Audit
& Risk Committee to discuss key findings and management
actions undertaken. The Head of Internal Audit can call a
meeting with the Chairman of the Audit & Risk Committee at
any time and meets privately with the Audit & Risk Committee,
without senior management present, as and when required,
but at least annually.
/ John Laing Annual Report and Accounts 2017
38
PRINCIPAL RISKS AND RISK MANAGEMENT (CONTINUED)
Change
in risk since
31 December
2016
Increased
>
No change
>
No change
Link to
strategic
objectives
above
1, 2, 3
1, 2, 3
1, 2, 3
Mitigation
Thorough due diligence is carried out in order to assess a
specific country's risk (for example economic and political
stability, tax policy, legal framework and local practices)
before any investment is made.
Where possible the Group seeks specific contractual
protection from changes in governmental policy and law
for the projects it invests in. General change of law is
considered to be a normal business risk. During the bidding
process for investment in a project, the Group takes a
view on an appropriate level of return to cover the risk of
non-discriminatory changes in law.
PPP projects are normally structured so as to provide
significant contractual protection for equity investors
(see also counterparty risk).
During the bidding process for investment in a project,
the Group assesses the sensitivity of the project’s forecast
returns to changes in factors such as tax rates and/or,
for renewable energy projects, governmental support
mechanisms. The Group targets jurisdictions which have a
track record of support for renewable energy investments
and which continue to demonstrate such support.
Through its track record of more than 130 investment
commitments, the Group has developed significant
expertise in compliance with public tender regulations.
Factors which have the potential to adversely impact the
underlying cash flows of an investment, and hence its
valuation, are hedged wherever possible at a project level
and sensitivities are considered during the investment
appraisal process.
Systemic risks, such as potential deflation, or
appreciation/depreciation of Sterling versus the currency
in which an investment is made, are assessed in the
context of the portfolio as a whole.
The Group seeks to reduce the extent to which its
renewable energy investments are exposed to energy
prices through governmental support mechanisms
and/or offtake arrangements.
The Group monitors closely the level of investments it has
exposed to foreign currencies, including regularly testing
the sensitivity of the financial covenants in its corporate
banking facilities to a significant change in the value of
individual currencies.
Where possible, specific clauses relating to potential
currency change within a particular jurisdiction are
incorporated in project documentation.
Projects are appraised on a number of bases, including
being held to maturity. Projects are also carefully
structured so that they are capable of being divested,
if appropriate, before maturity.
Over recent years, the secondary markets for both PPP
and renewable energy investments have grown.
While JLIF and JLEN are natural buyers of a number
of the Group’s PPP and renewable energy investments
respectively, the size and breadth of secondary markets
and the growth of operational infrastructure as an asset
class, plus the Group’s recent experience, all provide
the Group with confidence that it can sell investments
to other purchasers.
Risk
Governmental policy
Changes to legislation or public policy in the jurisdictions
in which the Group operates or may wish to operate
could negatively impact the volume of potential
opportunities available to the Group and the returns
from existing investments.
The use of PPP programmes by governmental entities
may be delayed or may decrease thereby limiting
opportunities for private sector infrastructure investors
in the future, or be structured such that returns to
private sector infrastructure investors are reduced.
Governmental entities may in the future seek to terminate
or renegotiate existing projects by introducing new policies
or legislation that result in higher tax obligations on
existing PPP or renewable energy projects or otherwise
affect existing or future PPP or renewable energy projects.
Changes to legislation or public policy relating to
renewable energy could negatively impact the economic
returns on the Group’s investments in renewable energy
projects, which would adversely affect the demand for
and attractiveness of such projects.
Compliance with the public tender regulations which
apply to PPP projects is complex and the outcomes may
be subject to third party challenge and reversed.
Macroeconomic factors
To the extent such factors cannot be hedged, changes
in inflation and interest rates and foreign exchange
all potentially impact the return generated from an
investment and its valuation.
Changes in factors which affect energy prices, such as
the future energy demand/supply balance and the oil
price, could negatively impact the economic returns on
the Group’s investments in renewable energy.
Weakness in the political and economic climate in a
particular jurisdiction could impact the value of, or the
return generated from, any or all of the Group’s
investments located in that jurisdiction.
Liquidity in the secondary market
Weakness in the secondary markets for investments in
PPP or renewable energy projects, for example as the
result of a lack of economic growth in relevant markets,
actual or potential governmental policy, regulatory
changes in the banking sector, liquidity in financial
markets, changes in interest and exchange rates and
project finance market conditions may affect the Group’s
ability to realise full value from its divestments.
The secondary market for investments in renewable
energy projects may be affected by, inter alia, changes
in energy prices, in governmental policy, in the value of
governmental support mechanisms and in project finance
market conditions.
The ability of JLIF and JLEN to raise finance for further
investments may have an impact on both the Group’s
ability to sell investments in PPP and renewable energy
projects and on the Group’s asset management business
more generally.
John Laing Annual Report and Accounts 2017 /
39
Link to
strategic
objectives
above
1, 3
Risk
Financial resources
Any shortfall in the financial resources that are available
to the Group to satisfy its financial obligations may make
it necessary for the Group to constrain its business
development, refinance its outstanding obligations, forego
investment opportunities and/or sell existing investments.
Inability to secure project finance could hinder the ability
of the Group to make a bid for an investment opportunity,
or where the Group has a preferred bidder position, could
negatively impact whether an underlying project reaches
financial close.
The inability of a project company to satisfactorily
refinance existing maturing medium-term project finance
facilities periodically during the life of a project could affect
the Group’s projected future returns from investments in
such projects and hence their valuation in the Group’s
Balance Sheet.
Adverse financial performance by a project company
which affects the financial covenants in its project finance
debt documents may result in the project company being
unable to make distributions to the Group and other
investors, which would impact the valuation of the Group’s
investment in such project company, and may ultimately
enable public-sector counterparties (through cross
default links to other project agreements) and/or project
finance debt providers to declare default and, in the latter
case, to exercise their security.
1, 3
Pensions
The amount of the deficit in the Group’s main defined
benefit pension scheme (JLPF) can vary significantly
due to gains or losses on scheme investments and
movements in the assumptions used to value scheme
liabilities (in particular life expectancy, discount rate and
inflation rate). Consequently the Group is exposed to the
risk of increases in cash contributions payable, volatility
in the deficit reported in the Group Balance Sheet, and
gains/losses recorded in the Group Statement of
Comprehensive Income.
Future investment activity
The Group operates in competitive markets and may not
be able to compete effectively or profitably.
1
The Group’s investment pipeline is not a guarantee of
actual bidding activity or future investments.
The Group’s historical win rate for PPP projects may
decline and is an uncertain indicator of new investments
by the Group.
Change
in risk since
31 December
2016
>
No change
>
No change
>
No change
Mitigation
The Group has corporate banking facilities totalling
£475 million which mature in March 2020 as well as
additional liquidity facilities (£50 million) committed until
February 2019. Available headroom is carefully monitored
and compliance with the financial covenants and other
terms of these facilities is closely observed. The Group also
monitors its working capital, cash collateral and letter of
credit requirements and maintains an active dialogue with
its banks. It operates a policy of ensuring that sufficient
financial resources are maintained to satisfy committed
and likely future investment requirements. A Divestment
Committee was set up in 2017 to provide oversight and
recommendations on all potential divestments that were
previously under the remit of the Executive Committee.
The Group believes that there is currently sufficient depth
and breadth in project finance markets to meet the financing
needs of the projects it invests in. The Group works closely
with a wide range of project finance providers, including
banks and other financial institutions. In markets such as
Australia and New Zealand, where the tenor of project
finance facilities at financial close tends to be medium
term, certain PPP projects in which the Group has invested
are due for refinancing in due course. One such project,
Auckland South Corrections Facility, was successfully
refinanced in late 2017.
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 project finance debt is less than the term of the
concession or the project’s useful life. The Group maintains
an active dialogue with the banks and other financial
institutions which provide project finance to the projects in
which it invests. Monitoring of compliance with financial
covenant ratios and other terms of loan documents
continues throughout the term of the project finance loan.
The Group’s two defined benefit pension schemes are
overseen by corporate trustees, the directors of which
include independent and professionally qualified individuals.
The Group works closely with the trustees on the appropriate
funding strategy for the schemes and takes independent
actuarial advice as appropriate. Both schemes are closed
to future accrual and accordingly have no active members,
only deferred members and pensioners. A significant
proportion of the liabilities of JLPF is matched by a bulk
annuity buy-in agreement with Aviva. Other hedging is
also in place.
The next actuarial valuation of JLPF is due as at
31 March 2019.
The Group believes that its experience and expertise as an
active investor and asset manager 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.
Both the PPP and the renewable energy pipelines are
diversified by geography and number of and type of project.
The Group budgets a 30% win rate for PPP projects and
has achieved an average win rate for the three years ended
31 December 2017 ahead of this.
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/ John Laing Annual Report and Accounts 2017
40
PRINCIPAL RISKS AND RISK MANAGEMENT (CONTINUED)
Risk
Link to
strategic
objectives
above
Mitigation
Change
in risk since
31 December
2016
Valuation
The valuation of an investment in a project may not reflect
its ultimate realisable value, for instance because of
changes in operational benchmark discount rates.
3
The discount rates used to value investments are derived
from publicly available market data and other market
evidence and are updated regularly.
>
No change
In circumstances where the revenue derived from a
project is related to volume (i.e. customer usage or wind
energy yield), actual revenues may vary materially from
assumptions made at the time the investment commitment
is made. In addition, to the extent that a project company’s
actual costs incurred differ from forecast costs, for example,
because of late construction, and cannot be passed on to
sub-contractors or other third parties, investment returns
and valuations may be adversely affected.
Revenues from renewable energy projects may be affected
by the volume of power production (e.g. from changes in
wind or solar yield), the availability of fuel (in the case of
biomass projects), operational issues, restrictions on the
electricity network, the reliability of electrical connections
or other factors such as noise and other environmental
restrictions, as well as by changes in energy prices and
to governmental support mechanisms.
The valuation of the Group’s investment portfolio is
affected by movements in foreign exchange rates, which
are reflected through the Group’s financial statements.
In addition, there are foreign exchange risks associated
with conversion of foreign currency cash flows relating
to an investment into and out of Sterling.
The valuation of the Group’s investment portfolio could be
affected by changes in tax legislation, for instance changes
which limit tax-deductible interest (see Taxation section).
During the construction phase of an infrastructure project,
there are risks that either the works are not completed
within the agreed time-frame or that construction
costs overrun. Where such risks are not borne by
sub-contractors, or sub-contractors fail to meet their
contractual obligations, this can result in delays in the
receipt of project income and/or cost overruns, which
may adversely affect the valuation of and return on the
Group’s investments. If construction or other long stop
dates are exceeded, this may enable public sector
counter-parties and/or project finance debt providers
to declare a default and, in the case of the latter, to
exercise their security.
The Group is reliant on the performance of third parties
in constructing an asset to an appropriate standard
as well as subsequently operating it in a manner
consistent with contractual requirements. Consistent
under-performance by, or failure of, such third parties
may result in the ability of public sector counter parties
and/or project finance debt providers to declare a
default and consequently the impairment or loss of
the Group’s investment.
A significant portion of the Group’s portfolio valuation is,
and may in the future be, in a small number of projects,
and changes to the value of these projects could
materially affect the Group’s financial position and
results of operations.
A project company or a service provider to a project
company may fail to manage contracts efficiently
or effectively.
The Group has a good track record of realising investments at
prices consistent with the fair values at which they are held.
The Group’s investments are in projects which are principally
availability-based (where the revenue does not generally
depend on the level of use of the project asset). Where
patronage or volume risk is taken, the Directors review
revenue assumptions and their sensitivities in detail prior
to any investment commitment.
Where the revenue from investments is related to patronage
or volume (e.g. with regard to investments in renewable
energy projects), risks are mitigated through a combination
of factors, including (i) the use of independent forecasts
of future volumes (ii) lower gearing versus that of
availability-based projects (iii) stress-testing the robustness
of project returns against significant falls in forecast volumes.
In addition, where possible, fixed-price arrangements are
entered into to mitigate the impact of changes in future
energy prices.
The Group typically hedges cash flows arising from
investment realisations or significant distributions in
currencies other than Sterling.
During the bidding process for investment in a project,
the Group assesses the sensitivity of the project’s forecast
returns to changes in tax rates.
The intention is that projects are structured such that
(i) day-to-day service provision is sub-contracted to qualified
sub-contractors supported by appropriate security packages
(ii) cost and price inflation risk in relation to the provision of
services lies with sub-contractors (iii) performance deductions
in relation to non-availability lie with sub-contractors
(iv) future major maintenance costs and ongoing project
company costs are reviewed annually and cost mitigation
strategies adopted as appropriate.
The Group has procedures in place to ensure that project
companies in which it invests appoint competent
sub-contractors with relevant experience and financial
strength. If project construction is delayed, sub-contracting
arrangements contain terms enabling the project company
to recover liquidated damages, additional costs and lost
revenue, subject to limits. In addition, the project company
may terminate its agreement with a sub-contractor if the
latter is in default and seek an alternative sub-contractor.
The terms of the sub-contracts into which project
companies enter provide some protections for investment
returns from the poor performance of third parties.
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.
The Group monitors the concentration risk within its
portfolio. Since 31 December 2014, the percentage of its
portfolio value attributable to UK investments has reduced
from 58% to 34% at 31 December 2017.
The performance of project companies and service
providers to project companies is regularly monitored by
the Asset Management team.
John Laing Annual Report and Accounts 2017 /
41
Change
in risk since
31 December
2016
>
No change
Risk
Link to
strategic
objectives
above
Mitigation
Counterparty risk
The Group is exposed to counterparty credit risk with
regards to (i) governmental entities, sub-contractors,
lenders and suppliers at a project level and (ii) consortium
partners, financial institutions and suppliers at a
Group level.
3
Public sector counter-parties to PPP projects may
seek to renegotiate contract terms and/or terminate
contracts, as a result of changes in governmental policy
or otherwise, in a way which impacts the valuation of
one or more of the Group’s investments.
In overseas jurisdictions, the Group’s investments
backed by governmental entities may ultimately be
subject to sovereign risk.
Project companies are exposed to counterparty credit
risk and counterparty performance risk with regards to
public sector bodies, sub-contractors, lenders, supplier
and consortium partners.
Worsening of general economic conditions in the UK as
a result of the UK’s withdrawal from the European Union
could affect project companies in the UK through, for
example, heightened counterparty risk.
The Group works with multiple clients, joint venture
partners, sub-contractors and institutional investors so
as to reduce the probability of systemic counterparty risk in
its investment portfolio. In establishing project contractual
arrangements prior to making an investment, the credit
standing and relevant experience of a sub-contractor are
considered. Post financial close, the financial standing of
key counterparties is monitored to provide an early warning
of possible financial distress.
PPP projects are normally 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 appropriate
compensation, including to 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.
The performance of service providers to project companies
is regularly monitored by the Asset Management team.
Counterparties for cash 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
A major incident at any of the Group’s main locations or
any of the projects invested in by the Group, such as a
terrorist attack, war or significant cyber-attack, could
lead to a loss of crucial business data, technology,
buildings and reputation and harm to the public, all of
which could collectively or individually result in a loss
of value for the Group.
Such an incident affecting any of the projects invested
in by the Group could also affect the Group’s ability to
sell its investment in that project.
Failure to maintain secure IT systems and to combat
cyber and other security risks to information and to
physical sites could adversely affect the Group.
2, 3
At financial close, projects benefit from comprehensive
insurance arrangements, either directly or through
contractors’ insurance policies.
>
No change
Business continuity plans at project level have been
designed and are tested at frequent/regular intervals.
Business continuity procedures are also regularly updated
in order to maintain their relevance.
John Laing believes that proper attention to the health and
safety of its employees, subcontractors, and the community
within which the Group operates is a key element of
effective business management and sees health and safety
as an important measure of business performance and
essential to our reputation. The Group is committed to
ensuring the health, safety and welfare of all its employees
and all other persons who may be affected by its direct
activities, or those under its control.
The projects in which the Group invests each have their own
health and safety policies and business continuity plans.
The Group’s IT requirements are outsourced to a third party.
A re-tender process is currently underway.
Within the outsourced arrangements, cyber risk is addressed
through (i) the Group’s organisational structure which
includes segregation of responsibilities, delegated lines of
accountability, delegated authorities and (ii) specific controls,
including controls over payments and access to IT systems.
Investment adviser agreements with JLIF and JLEN
A loss of JLCM’s investment adviser agreements with
JLIF and/or JLEN respectively would be detrimental
to the Group’s Asset Management business.
2
Through JLCM, and supported by other parts of the Asset
Management division, the Group focuses on delivering a
high quality service to both funds.
>
No change
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/ John Laing Annual Report and Accounts 2017
42
PRINCIPAL RISKS AND RISK MANAGEMENT (CONTINUED)
Link to
strategic
objectives
above
1, 2, 3
Risk
Future returns from investments
The Group’s historical returns and cash yields from
investments may not be indicative of future returns.
The Group’s expected hold-to-maturity internal rates
of return from investments are based on a variety of
assumptions which may not be correct at the time they
are made and may not be achieved in the future.
Taxation
The Group may be exposed to changes in taxation in the
jurisdictions in which it operates, or it may cease to
satisfy the conditions for relevant reliefs. Tax authorities
may disagree with the positions that the Group has taken
or intends to take.
1, 3
Project companies may be exposed to changes in
taxation in the jurisdictions in which they operate.
In 2015, the OECD published its recommendations for
tackling BEPS by international companies. It identified
the use of tax deductible interest as one of the key areas
where there is opportunity for BEPS by international
companies. It is up to the governments of OECD countries
to decide how to implement the OECD’s recommendations
into their domestic law. To the extent that one or more of
the jurisdictions in which the Group operates changes its
rules to limit tax deductible interest, this could significantly
impact (i) the tax payable by subsidiaries of the Group,
(ii) the valuation of existing investments and (iii) the way
in which future project-financed infrastructure investments
are structured, in each case in such jurisdictions.
Change
in risk since
31 December
2016
Increased
Mitigation
In bidding for new projects, the Group sets a target internal
rate of return taking account of historical experience, current
market conditions and expected returns once the project
becomes operational. The Group continually looks for value
enhancement opportunities which would improve the target
internal rate of return and projected annualised return.
At the appraisal stage, investments in projects are tested
for their sensitivity to changes in key assumptions.
Tax positions taken by the Group are based on industry
practice and/or external tax advice.
Increased
At the appraisal stage, investments in projects are tested
for their sensitivity to changes in tax rates. Project
valuations are regularly updated for changes in tax rates.
In late 2017, the UK Government enacted legislation,
effective from 1 April 2017, which introduced a Fixed Ratio
Rule to cap the amount of tax deductible net interest to
30% of a company’s UK EBITDA. This was in response
to OECD recommendations.
In the US, new legislation came into effect on 1 January
2018, including a restriction on interest deductibility for
certain US entities paying interest to foreign entities. The
impact from both the changes to UK and US tax is reflected
in the fair value at 31 December 2017 of the Group’s
investments in those jurisdictions.
The Group monitors closely the way in which other
governments are implementing the OECD recommendations.
Personnel
The Group may fail to recruit or retain key senior
management and skilled personnel in, or relocate
high-quality personnel to, the jurisdictions in which
it operates or seeks to expand.
Following the decision to leave the EU, the UK
Government has made some proposals regarding
EU nationals living and working in the UK but their
position has not been resolved. This uncertainty
could impact the Group’s ability to recruit and retain
EU nationals in the UK.
1, 2, 3
The Group regularly reviews pay and benefits to ensure
they remain competitive. The Group’s senior managers
participate in long-term incentive plans. The Group plans
its human resources needs carefully, including appropriate
local recruitment, when it bids for overseas projects.
The Group has the ability to recruit EU nationals in its
Amsterdam office or could open further offices in other
EU jurisdictions if necessary.
>
No change
John Laing Annual Report and Accounts 2017 /
43
CORPORATE RESPONSIBILITY
THE JOHN LAING GROUP REMAINS COMMITTED FOR THE LONG TERM TO ITS
Our community investment strategy is based
CORPORATE RESPONSIBILITY AGENDA.
on supporting the efforts of our employees with the worthy causes they select to make a
significant positive impact. We believe it is most effective to support and encourage our
employees to contribute positively in their own capacities to good causes where they live and
work. Our policies and procedures in general reflect our values as a responsible employer
which operates with integrity, and in a manner that is both ethical and transparent.”
Olivier Brousse
CHIEF EXECUTIVE OFFICER
COMMUNITY INVESTMENT
HEALTH AND SAFETY
Our community investment strategy is based on delivery through
our employees and a number of partners.
Since 2006 we have been an active Patron of the Prince's Trust,
which has allowed us to support disadvantaged and vulnerable
young people across the UK, to help them move into work,
education or training.
The Group encourages its staff across each of the different
markets where it operates to involve themselves in activities
that benefit local communities, both related and unrelated to
projects John Laing is working on.
The John Laing WestStadium team in Perth, Australia continues
to provide vital support to their Business Class partner school,
Girrawheen Senior High School, by assisting in developing the
school’s strategic plan, organising project tours and one-on-one
training by site-based personnel as part of the school’s vocational
education and training. They also help with the management
and structure of Aboriginal Girls’ Academy which exists to
develop and empower young women through leadership
training, mentoring, sport and extra-curricular programmes.
During the year, Student Sponsor Partners, an organisation
which aims to bridge the educational achievement gap for low
income, academically at-risk high school students in New York
City was awarded a grant by the John Laing Charitable Trust
towards tuition scholarship of five students for the full four
years of high school. This partnership offers our US team the
opportunity to mentor the sponsored students and enhance
their chances of achieving educational progress.
John Laing believes that proper attention to the health and safety
of its employees, subcontractors, and the community within
which the Group operates is a key element of effective business
management and sees health and safety as an important
measure of business performance and essential to our reputation.
The Group is committed to ensuring the health safety and
welfare of all its employees and all other persons who may be
affected by its direct activities, or those under its control.
The projects in which the Group invests each have their own
health and safety policies.
ENVIRONMENT
The Group aspires to reduce the impact on the environment
of the infrastructure projects in which it invests, for example,
in terms of greenhouse gas emissions and the volume of
waste going to landfill. Environmental considerations play an
important part in any PPP procurement, ongoing construction
and operations and are a central feature of the planning
approvals granted for renewable energy projects. The Group’s
investments in renewable energy projects are contributing to
2
reduced CO
investments in the Group’s investment portfolio increased
from 16 at 31 December 2016 to 19 at 31 December 2017.
emissions. The number of renewable energy
Greenhouse gas emissions report
Since John Laing Group plc was listed on the London Stock
Exchange in February 2015, we have had a regulatory obligation
to report greenhouse gas (GHG) emissions pursuant to Section 7
of The Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
The John Laing Charitable Trust (JLCT)
JLCT has special regard to supporting the needs of current
and former employees or their families who are in need of
financial assistance on account of illness, old age or other
causes. It supports the valuable work of the welfare team who
look after the needs of former employees and their surviving
partners. JLCT trustees make available considerable funds
each year to relieve financial hardship through the provision
of gratuities and other allowances.
All John Laing Group employees or members of their immediate
family directly involved in a charity are able to apply to JLCT for
a grant of £1,000 to support a good cause. Additionally, JLCT
is able to match charitable donations raised by employees,
up to a value of £1,500 per employee. JLCT, together with the
Company, recognises the loyalty of long serving staff and their
contribution to the business through the annual Star Awards
(see Workplace section). In 2017, employees who received
such awards were given the opportunity to nominate a charity
to receive a donation of up to £3,000. A total of 79 successful
applications made under all available schemes during the year
amounted to combined donations of over £90,000 to charitable
organisations including a number based in Canada, the US,
Australia and the Netherlands. This included a £5,000 donation
to the 1st Claygate Scout group in Surrey which supports the
development of young people and gives them an opportunity
to develop new skills including team work, leadership,
communication, self-motivation as well as learning respect
for others and how to make a positive impact in the community.
JLCT supports the Company’s corporate responsibility
activities as well as making a difference in the communities
where the Company operates. During the year, 16 projects
were awarded a total of over £382,000 in donations and grants.
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/ John Laing Annual Report and Accounts 2017
44
CORPORATE RESPONSIBILITY (CONTINUED)
Methodology
John Laing quantifies and reports its organisational GHG
emissions according to the Greenhouse Gas Protocol and has
utilised the UK Government 2017 Conversion Factors for
Company Reporting and European Residual Mixes 2016
2
(RE-DISS II) to calculate CO
equivalent emissions from
corresponding activity data. Supplier-specific emission factors
were supplied in grams of carbon dioxide per kilowatt-hour of
2
electricity (CO
/kWh) by EDF Energy and E.ON.
This report has been prepared in accordance with the
amendments to the Greenhouse Gas Protocol’s Scope 2
Guidance and therefore includes both a location-based and
market-based Scope 2 emissions figure. When quantifying
emissions using the market-based approach, John Laing used
a supplier-specific emissions factor where possible. If this was
unavailable a residual mix emissions factor was used instead,
and as a last option the location-based grid emissions factor
was used.
Greenhouse gas emissions
2
In 2017, John Laing’s activities emitted a total of 11.8 tCO
Scope 1 direct emissions from fuel combustion and operation of
2
its facilities. This tCO
e figure includes emissions of GHG other
2
2
.
, such as methane or nitrous oxide, in addition to CO
than CO
e
Through electricity purchased for our own use (Scope 2 indirect),
2
we emitted a total of 127.8 tCO
e when taking the location-based
2
approach and 115.4 tCO
approach. We have also chosen to voluntarily report Scope 3
emissions arising from our business travel and water
consumption where information is available.
when taking the market-based
The table below shows emissions by scope for 2017 and 2016.
Emissions from the consumption of electricity outside the UK
2
2
are reported in tonnes of carbon dioxide (tCO
e.
) rather than tCO
Scope 2 emissions were calculated using both the location-based
and market-based approaches, with supplier-specific emission
factors and residual mix emission factors used for the latter.
Year-on-year change in Greenhouse Gas Emissions
2017 2016
Combustion of fuel and operation
of facilities (Scope 1) 11.8 tCO
2
e 81.7 tCO
Electricity, heat, steam and cooling
purchased for our own use
(Scope 2: location-based) 127.8 tCO
2
e 139.9 tCO
Electricity, heat, steam and cooling
purchased for our own use
(Scope 2: market-based) 115.4 tCO
2
2
Other indirect emissions (Scope 3) 618.0 tCO
97.0 tCO
2
e
e 708.3 tCO
2
e
2
e
2
The table below shows our total Scope 1 and Scope 2 emissions
for 2017 and 2016 under the two accounting methodologies
(location-based approach and market-based approach)
applicable for the Scope 2 emissions. The table also shows the
total Scope 1 and Scope 2 emissions as a ratio against full-time
equivalent (FTE) employees. This calculation is based on the
average number of full-time equivalent (FTE) employees each
year. This is 160 for 2017 and 248 for 2016. As mentioned
previously, emissions from electricity consumed outside the UK
and Scope 2 emissions are calculated using the market-based
approach using supplier specific emission factors and residual
2
mix emission factors are calculated in tCO
.
Location-based Market-based
approach approach
2017 2016 2017 2016
Total Scope 1 and 2* 139.6 tCO
2
tCO
e per full-time equivalent (FTE) employee 0.87 tCO
2
2
2
e 221.6 tCO
2
e 0.89 tCO
e 127.2 tCO
e 178.7 tCO
e
2
2
e 0.79 tCO
e 0.72 tCO
e
2
2
2
* Market-based includes Scope 2 in tCO
There was a decrease in Scope 1 emissions because vehicles
used by our Amsterdam office run mostly on electricity (a Scope 2
activity), rather than biofuel (a Scope 1 activity). Scope 2
emissions decreased year-on-year for several reasons; the
removal of certain offices as part of the sale of the UK PMS
activities in 2016; the reduction in emission factors in the
countries in which John Laing operates; and the refurbishment
of air conditioning equipment at the Group’s headquarters.
In 2017, there was an 88% reduction in rail travel and a 1%
reduction in air travel which resulted in a reduction of Scope 3
emissions by 13%.
Reporting Boundaries and Limitations
We consolidate our organisational boundary according to the
operational control approach and have adopted a materiality
threshold of 10% for GHG reporting purposes. The GHG sources
that constitute the operational boundaries for the 2017
reporting period are:
•
Scope 1: Natural gas combustion within boilers and fuel
combustion within leased vehicles
•
•
Scope 2: Purchased electricity consumption for our own
use within buildings and leased electric vehicles
Scope 3: Business travel and the supply and treatment
of water
Assumptions and Estimations
In some cases, missing data has been estimated using either
extrapolation of available data from the reporting period or data
from 2016 as a proxy. The Group’s New York, Auckland, Toronto
and Los Angeles offices are serviced and as such do not receive
separate utility bills and so were not able to provide any data,
and therefore an average annual consumption figure per square
metre of floor area was used to estimate electricity consumption
at these sites.
2
TOTAL EMISSIONS 2016 AND 2017
(tCO
e)
708.2
618.0
618.0
127.8
127.8
139.9
139.9
81.7
81.7
11.8
11.8
Scope 1
2
e)
emissions (tCO
Scope 2
Location-based
2
emissions (tCO
e)
Scope 3
emissions (tCO
2
e)
2017
2016
SCOPE 2 EMISSIONS BY METHODOLOGY
2
) – 2017
(tCO
2
e and tCO
127.8
115.4
115.4
Scope 2 - Location-based
2
e)
emissions (tCO
Scope 2 - Market-based
emissions (tCO
2
)
WORKPLACE
Our People
John Laing aims to attract and retain, develop and reward high
quality employees. We support our people through learning and
development so they can maximise their career potential and
their value as an employee, and we encourage them to achieve
an appropriate work-life balance. We recognise that investing
in our people is critical to the success of our business.
We are committed to a positive working environment which is
free from any discrimination, harassment or unfair treatment,
providing all employees with equal opportunities to develop
within the Group and we have the appropriate policies in place
to support this.
Employment
At 31 December 2017, the Group employed 158 people in the
UK and overseas (2016 – 160). A reduction in UK headcount
and an increase in overseas recruitment have resulted in the
percentage of staff located outside the UK increasing from 36%
to 39% at 31 December 2017.
Employee Engagement
Employees are regularly informed of progress and updates
in the business through conference calls conducted by senior
management as well as through other briefings on topical
and relevant business issues. The Group’s 15-25 most senior
managers met on two occasions in 2017 over one to two days
to address specific business issues and future strategy.
John Laing Annual Report and Accounts 2017 /
45
Recognition and Reward
We review our pay and benefits structure on an annual basis
to ensure that we remain competitive within the market, are
attractive to potential new employees, and provide the right link
between performance and reward. As well as a competitive pay
and benefits structure, we recognise and reward employee
performance through bonuses and long-term incentive plans.
We conduct annual staff awards (the Star Awards) which
provide for recognition of the achievements and contributions
employees make to both the business and the community.
Work-Life Balance Policies
We recognise the importance of a working environment which
enables employees to achieve a balance between their work
and personal life to the mutual benefit of the individual, the
business and society. Our aim is to create an environment that
supports staff and their general wellbeing, maintains effective
working practices and enables a productive and positive balance
between work and life outside work. The Group has a number of
work-life balance policies and practices in place which support
flexible working, working parents and periods of absence from
the work place. The Group seeks to exceed statutory minimum
requirements where it can. For example, we offer enhanced
maternity, paternity and adoption pay arrangements.
The Group also provides an employee assistance programme
which is available to all employees, their partners and their
immediate family. This is an independent service which offers
support and counselling on a wide range of work, personal and
family issues.
Learning and Development
We aim to enhance the skills, development and learning of all our
employees through external courses and seminars, sponsorship
for undertaking professional qualifications, secondments,
development assessments and coaching and mentoring.
Retention of our employees through effective development
is key to the success of the business. Throughout 2017,
we focused on the development requirements of individuals
and teams, supported where necessary with external
facilitation, to ensure teams were operating effectively.
We continue to manage the development of our people through
a bi-annual Performance Development Review. This encourages
a two-way discussion on performance and objectives between
individuals and their managers. It also allows individuals to
discuss their career aspirations and identify with their manager
development opportunities.
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Staff numbers at 31 December 2017, broken down by certain remuneration and gender criteria, were:
Total Male Female
Number
Number
Number
%
%
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Total Group
158
160
115
107
73
67
43
Senior managers earning above
£70,000 per annum
Executive Directors
Modern Slavery Act
101
2
96
2
92
2
84
2
91
100
88
100
9
–
53
12
–
27
9
–
33
12
–
The UK Modern Slavery Act addresses the role of businesses in preventing modern slavery within their organisations and down into
their supply chain. Last year we published our first modern slavery statement, setting out the steps the Group has taken to ensure
slavery and human trafficking are not taking place in any part of our business or supply chains. A further statement will be produced
and published on our website describing our continued efforts in this respect over the last year.
/ John Laing Annual Report and Accounts 2017
46
DIRECTORS AND COMPANY SECRETARY
Dr Phil Nolan
Will Samuel
Olivier Brousse
Patrick O’D Bourke
Anne Wade
Dr Jeremy Beeton
Toby Hiscock
David Rough
Carolyn Cattermole
* EXECUTIVE DIRECTORS
** NON-EXECUTIVE DIRECTORS
John Laing Annual Report and Accounts 2017 /
47
**Dr Phil Nolan BSc, PHD, MBA
**Will Samuel BSc, BA, FCA
*Olivier Brousse EP, ENPC
Chairman
Phil has been Chairman since joining John Laing
in January 2010 but will be stepping down after
the 2018 AGM. He has a wealth of experience on
the boards of many companies, private and
public and in both an executive and non-executive
capacity. He is also non-executive Chairman of
Associated British Ports Holding Limited. He
previously served as non-executive Chairman of
Affinity Water Limited, Chairman of Ulster Bank
Ireland Limited and as a non-executive director
of Providence Resource Plc and EnQuest PLC.
He was Chairman of Infinis, a then privately held,
leading renewable energy generator between
2007 and 2010, Chairman of Sepura plc, a listed,
global supplier of TETRA radios between 2007
and 2010 and CEO of Eircom, Ireland’s national
telecommunications supplier from 2002 to 2006.
Prior to that, he served as an Executive Director
of BG Group plc and CEO of Transco plc from
1998 and in 2000, led the demerger of Transco
as CEO of the Lattice Group. Age 64
Chairman Designate
Will joined John Laing in December 2017 as a
non-executive director and Chairman Designate.
Will is also Chairman of Tilney Group Limited.
Prior to this he was Chairman of TSB Bank plc,
which he took through IPO after its de-merger
from Lloyds Bank plc, Chairman of Howdens
Joinery Group, Chairman of Ecclesiastical
Insurance Group plc, Chairman of H P Bulmer plc,
Deputy Chairman of Inchcape plc, Senior Advisor
to Lazard & Co Ltd and Senior Advisor to the
Prudential Regulation Authority (formerly the
Financial Services Authority), a director of
Schroders plc, Co-Chief Executive Officer at
Schroder Salomon Smith Barney (a division of
Citigroup Inc), a non-executive director of the
Edinburgh Investment Trust plc and a Trustee
and Honorary Treasurer of International Alert.
Will is a Fellow of the Institute of Chartered
Accountants in England and Wales and has a
First Class Honours Degree in Chemistry from
Durham University and a Degree in Mathematics
from the Open University. Age 66
Chief Executive Officer
Olivier joined John Laing in March 2014 as
Chief Executive Officer. Following graduation
from École Polytechnique and École Nationale
des Ponts et Chaussées in France, he became
Commercial Director of Unic Systems and then
Chief of Staff to the Chairman and CEO of
Compagnie Générale des Eaux in 1994, both in
France. In 1998, he moved to London as CEO of
Connex Trains and then moved to Washington DC
in 2003 as CEO of Veolia Transportation Inc. He
came back to France in 2007 as Deputy CEO of
Veolia Transport Group, responsible for French
and US businesses. From 2008 to 2014, he served
as CEO and then Executive Chairman of Saur SA
in France. In 2016, he was awarded the Légion
d'Honneur by the French President François
Hollande. Age 53
*Patrick O’D Bourke MA, ACA
**Anne Wade BA, MSc
**Dr Jeremy Beeton CB, BSc, CEng, FICE
Group Finance Director
Patrick joined John Laing in 2011 as Group
Finance Director. He graduated from Cambridge
University and qualified as a chartered accountant
with Peat Marwick (now KPMG) before spending
nine years in investment banking with first Hill
Samuel and then with Barclays de Zoete Wedd.
In 1995, he joined Powergen plc where he was
responsible for mergers and acquisitions before
becoming Group Treasurer. From 2000 to 2006,
he was Group Finance Director of Viridian
Group PLC, the Northern Ireland based energy
group, becoming Group Chief Executive in 2007
after Viridian was taken private. He joined the
Board of Affinity Water Limited in 2013 as a
non-executive director. Age 60
Independent Non-Executive Director
Anne joined John Laing in December 2014
as a non-executive director. An asset manager
by background, Anne has extensive experience
in capital markets. From 1995 to 2012, she
was Senior Vice President and Director of
Capital International. Throughout her 17 year
career with Capital, she was responsible for
infrastructure-related investments. Anne is a
Director and member of the Audit Committee
of Summit Materials Inc in the US, of the Heron
Foundation in New York, and of Big Society
Capital in London. She is also a Partner
with Leader’s Quest. Anne was previously
a non-executive director and member of the
Governance and Strategy Committee of Holcim,
based in Switzerland. Anne has a BA from
Harvard and an MSc from the London School
of Economics. Age 45
Independent Non-Executive Director
Jeremy joined John Laing in December 2014
as a non-executive director. He is a Fellow of
the Institution of Civil Engineers with 40 years
of international experience in project and
programme management over very large
multi-site, multiple project operations portfolios
for and within government, public companies
and private companies. He is also currently an
independent non-executive director of SSE plc,
an independent non-executive director of
WYG plc, an Advisory Board member of
PricewaterhouseCoopers LLP and Chairman
of Merseylink Ltd. He has also been appointed
as an independent non-executive director of
OPG Power Ventures Plc. Additionally, Jeremy
sits on the governing Court of Strathclyde
University. He was Director General of the London
2012 Olympic and Paralympic Games from 2007
until the Olympic Baton was passed on to Rio
de Janeiro in 2012. For eight years prior to this,
he was a Principal Vice President with Bechtel,
responsible for their worldwide civil operations
and has lived and worked extensively in the
Middle East and Asia Pacific. He was awarded
CB in the 2013 New Year Honours and holds
an honorary Doctorate of Engineering from
Napier University. Age 64
**Toby Hiscock MA (Oxon), FCA
**David Rough BSc Hons
COMPANY SECRETARY
Independent Non-Executive Director
Toby joined John Laing in June 2009 as a
non-executive director. He is a qualified chartered
accountant with 36 years’ experience as a finance
professional. He was the Chief Financial Officer
and an Executive Director of Henderson Group plc
from 2003 until his retirement in 2009, and was
responsible for all aspects of financial stewardship
of the Henderson Group. Before Henderson, he
was a senior manager at Midland Bank Group
in London and from 1981 to 1988 worked for
Binder Hamlyn, Chartered Accountants after
graduating from Oxford University. Toby is also
a non-executive director of and consultant to a
number of other public and private institutions.
Age 58
Senior Independent Director
David joined John Laing in December 2014 as
a non-executive director. He has spent his
life working in the financial services sector
predominantly in the investment management
business. He joined Legal and General in 1988
and was made head of securities in 1989. In 1991,
David was appointed to the group board as
Group Director (Investments) responsible for the
group’s investment operations. He retired from
the business in 2002. During that time he also
served as chairman of the Association of British
Insurers’ Investment Committee. David has been
a non-executive and senior independent director
on a number of boards, including Land Securities,
London Metal Exchange, Friends Provident
and Xstrata. Since 2003, David has been a
non-executive director of Brown Shipley, a wealth
management business and he was appointed as
a non-executive director of Hansteen Holdings plc
in October 2015. Age 67
Carolyn Cattermole LLB
Group General Counsel and
Company Secretary
Carolyn joined John Laing in September 2012 as
Group General Counsel and Company Secretary.
Her previous roles were General Counsel and
Company Secretary of DS Smith Plc, the
international supplier of recycled packaging,
for ten years, and Company Secretary of
Courtaulds Textiles plc for three years. Prior
to that, she was a senior legal adviser with
Courtaulds plc, having qualified as a solicitor
with Norton Rose. Age 57
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DIRECTORS’ REPORT
The Directors submit their Annual Report and the audited Group and Company financial statements of John Laing Group plc for
the year ended 31 December 2017. The Group financial statements are set out on pages 82 to 117 and the Company financial
statements on pages 118 to 132. Disclosures made elsewhere in this Annual Report are cross-referenced (and thereby deemed
disclosed) in this Directors’ Report as appropriate.
GROUP ACTIVITIES
John Laing is an originator, active investor and manager of international infrastructure projects. John Laing Group plc is a
company incorporated in England and Wales with company number 05975300.
A list of the Company’s investments at 31 December 2017 can be found in note 13 to the Company financial statements on
page 126 of this Annual Report.
The Directors are not aware, at the date of this report, of any major changes in the Group's activities in the coming year.
The Group’s GHG emissions for 2017 are presented in the Corporate Responsibility section.
RESULTS AND DIVIDENDS FROM CONTINUING OPERATIONS
The Group profit before taxation for the year ended 31 December 2017 was £126.0 million (2016 – £192.1 million).
The Company-only profit after tax for the year was £139.4 million (see page 118) (2016 – £138.4 million).
An interim dividend of 1.91 pence per ordinary share was paid on 27 October 2017 and the Directors are recommending a
final dividend of 8.70 pence per ordinary share which, together with the interim dividend, makes a total dividend for the year
of 10.61 pence per ordinary share. These amounts have not been adjusted for the rights issue announced on 8 March 2018.
Subject to the approval of shareholders at the AGM to be held on 10 May 2018 the final dividend will be paid on 18 May 2018
to shareholders on the register at the close of business on 20 April 2018.
FINANCIAL INSTRUMENTS
The Group’s financial risk management objectives and policies and its exposure to the following risks – market, credit, price,
liquidity and capital – are detailed in note 17 to the Group financial statements.
POST BALANCE SHEET EVENTS
Post balance sheet events are detailed in note 27 to the Group financial statements.
KEY EVENTS AND FUTURE DEVELOPMENTS
The key events during the year and the development of the business of the John Laing group of companies are set out in the
Strategic Report on pages 10 to 45. The Strategic Report includes the Financial Review on pages 29 to 35, the viability statement
on page 36 and the principal risks facing the Group on pages 37 to 42.
As described in the Chairman’s statement on page 8, on 8 March 2018 the Company launched a 1 for 3 rights issue to raise
£210 million net of costs.
GOVERNANCE ARRANGEMENTS
Information regarding the Company’s governance arrangements is set out in the Corporate Governance Report on pages 50 to 53.
These pages are incorporated by reference into the Directors’ Report.
SHARE CAPITAL
Details of the Company’s issued share capital and the rights and restrictions attached to the shares, together with details of
movements in the issued share capital during the year, are shown in note 21 to the Group financial statements on page 114 of
this Annual Report. The Company has not utilised its authority to make market purchases of shares granted to it at the 2017
AGM but, in line with market practice, will be seeking to renew such authority at this year’s AGM.
MAJOR INTERESTS IN ORDINARY SHARES
Notifications of the following major voting interests in the Company’s ordinary share capital (notifiable in accordance with Rule 5
of the FCA’s Disclosure and Transparency Rules or section 793 of the Companies Act 2006) had been received by the Company as
at 31 December 2017 and 1 March 2018:
As at
31 December 2017
% of issued
share capital
As at
1 March 2018
% of issued
share capital
Standard Life Aberdeen
Schroder Investment Management
Fidelity Investment International
BlackRock Inc
Morgan Stanley Investment Management
Janus Henderson Investors
38,601,773
35,257,831
31,760,727
27,236,400
18,357,885
16,208,037
10.52
9.61
8.66
7.42
5.00
4.42
39,095,255
35,182,637
32,742,522
26,872,095
18,357,885
17,637,916
10.65
9.59
8.92
7.32
5.00
4.81
The processes by which the Company seeks to understand the views of its major shareholders are described on page 53.
John Laing Annual Report and Accounts 2017 /
49
STATEMENT OF DISCLOSURE OF INFORMATION TO AUDITORS
Each of the persons who is a Director at the date of approval of this report confirms that:
•
•
as far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and
the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with section 418 of the Companies Act 2006.
DIRECTORS
The following Directors served on the Board during the year.
P M G Nolan
O Brousse
P O’D Bourke
N T Hiscock
J J Beeton
D Rough
A K Wade
W M Samuel (appointed 7 December 2017)
Biographical details of the current Directors can be found on page 47 of this Annual Report.
BOARD OF DIRECTORS
The Directors listed above constituted the Board during the year. In accordance with best practice, all Directors will retire at
each AGM and offer themselves for re-election.
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
The Company has purchased and maintains appropriate insurance cover in respect of Directors’ and Officers’ liabilities.
The Company has also entered into qualifying third party indemnity arrangements for the benefit of its Directors, in a form
and scope which comply with the requirements of the Companies Act 2006.
MATERIAL CONTRACTS
The Group’s £475 million committed corporate banking facilities dated 19 January 2015, as amended and restated on 21 June
2016 and 6 October 2017, mature on 9 March 2020 and include a change of control clause. In the event of a change of control
occurring, it would be expected that new financing arrangements to fund the outstanding utilisations would need to be made
by the incoming owners. Separately, the Group’s £50 million liquidity facilities, originally due to mature in March 2018, were
extended to February 2019. These facilities contain change of control provisions similar to the main facilities.
EMPLOYEES
The Group seeks to ensure employee commitment to its objectives in a number of ways. Strategic changes are communicated
directly to all staff and resultant queries are handled by the relevant business head or Executive Committee member as
appropriate. Regular team briefings at local level provide employees with information about the performance of, and initiatives
in, their part of the business. A wide range of information is also communicated across the Group's intranet.
The framework within which decisions about people are made is set out in the Group's personnel policies which are available to
all staff. It is part of those policies to employ and train disabled people whenever their skills and qualifications allow and when
suitable vacancies arise. If existing employees become disabled, every effort is made to find them appropriate work and training
is provided if necessary.
Further details relating to the employees of the Group (including details of certain of the Group’s employment policies) can be
found on page 45 of the Corporate Responsibility section of this Annual Report.
The Directors’ Report, the Strategic Report, the Corporate Governance Report and the Directors’ Remuneration Report were
approved by the Board on 7 March 2018.
MANAGEMENT REPORT
Together, the Strategic Report and the Directors’ Report comprise the ‘management report’ for the purposes of the FCA’s
Disclosure & Transparency Rules (DTR 4.1.5R).
On behalf of the Board
Carolyn Cattermole
GROUP GENERAL COUNSEL AND COMPANY SECRETARY
7 March 2018
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CORPORATE GOVERNANCE REPORT
The Board has resolved that the disclosures to be made in the Annual Report regarding the operation of the Board and its
sub-committees should comply with the requirements of the UK Corporate Governance Code (the Code) and best practice
generally. The Company complied with the requirements of the Code throughout 2017. The Code is published by the Financial
Reporting Council (FRC) and the full text is available on its website at www.frc.org.uk. The following section describes how the
Board applies the main principles of the Code.
DIRECTORS
The Board believes it has an appropriate balance of skills and experience. On 7 December 2017 it was announced that Phil Nolan
would be stepping down from the Board following the 2018 AGM and that his replacement would be Will Samuel who was
appointed as non-executive Chairman Designate. Will is also Chairman of Tilney Group Limited. He joins John Laing having held
a number of other non-executive roles and senior positions throughout his career.
The Board met on a regular basis throughout the year and as needed to deal with special business. The Board has appointed an
Audit & Risk Committee, a Nomination Committee and a Remuneration Committee which consider issues relevant to their
specific terms of reference. The offices of the Chairman and the Chief Executive Officer are held separately.
Board meetings follow a formal agenda of matters reserved for decision and approval by the Board and also address any special
business. Matters reserved for the Board include the review of strategy and organisational change, the review and monitoring of
internal controls and risk management processes, the approval of significant investments and disposals, the approval of budgets
and the regular review of current trading and the financial position of the Group. A schedule of matters reserved for the Board is
published on the Company’s website at www.laing.com. The Board receives regular reports on current trading and the financial
position and forecasts of the Group prior to its meetings. In addition, the Board receives relevant information on business,
corporate and strategic issues. Formal procedures exist to ensure that the Board is made aware of any significant health and
safety issues and non-compliance with statutory regulations. Olivier Brousse is the Board member responsible for health and
safety issues. Further details of the Company’s approach to health and safety are set out in the Corporate Responsibility section
of the Strategic Report on page 43 of this Annual Report.
The Company maintains a register of Directors’ conflicts. At the end of each year, all Directors make a declaration concerning
any conflicts they or their connected persons may have. In addition, at the start of each Board meeting, as a routine item,
Directors are asked to declare any interests that might conflict with the agenda items under discussion. Directors may also notify
the Company, via the Company Secretary, at any time, of any potential or future conflicts that may arise. Any such notifications
are reviewed at the next Board meeting and, if considered appropriate, authorised. Directors do not participate in the discussion
or vote regarding their own conflicts. If authorised, any conflicts are entered in the register of Directors’ conflicts.
All Directors may take independent professional advice at the Group’s expense in the furtherance of their duties and have full
access to the Company Secretary.
Upon appointment, non-executive directors undertake an induction process to familiarise themselves with the Group’s activities,
policies and key issues. Since joining the Board in December 2017, the Chairman Designate has met all the senior managers in
the Group as well as the Group’s brokers, legal adviser and external auditor. During their appointment, non-executive directors
are expected to dedicate adequate time to carry out their role effectively and to challenge management in a constructive way.
The Chairman meets regularly with the other non-executive directors to discuss the performance of the Board and the Board
sub-committees. The performance of Executive Directors is measured against predetermined objectives that are agreed with
each Executive Director at the start of the financial year.
The Chairman has no executive responsibilities but leads and sets the agenda for the Board. The Chairman also acts as an
interface between the Executive Directors and non-executive directors.
EFFECTIVENESS
Following the external Board evaluation carried out in 2016, an internal review was conducted in 2017. A questionnaire
covering the Board’s role and composition, strategy, accountability, stakeholder management, behaviours and effectiveness
was sent to the Directors and the Chairman then met with each individually to elaborate on answers and raise issues not
covered in the questionnaire.
Overall the Board felt that it operated effectively and there were open and frank conversations with a strong focus on delivery and
strategy, matters the 2016 evaluation had highlighted. There was agreement on the strategy and direction of the Company and
where it needs to get to. Management had built a strong platform, a growing investment pipeline and the Board had committed
itself to continued growth.
The review had established that the sub-committees of the Board were operating effectively and no major control or governance
issues were observed within the Group.
Overall, there was strong agreement that the Board understood its role with clear Terms of Reference and a good mix of skill and
experience. The 2016 evaluation had suggested that the Board’s governance might need to become more international as the
business grew into different geographies. Consideration would be given to this when identifying the background and experience
which would be desirable in future non-executive appointments.
Succession planning was another matter identified by the 2016 evaluation and the Board had received a paper and presentation
on this topic from the Chief Executive Officer at a strategy day held in October.
John Laing Annual Report and Accounts 2017 /
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BOARD AND COMMITTEE ATTENDANCE
Total number of regular meetings in 2017
Total number of meetings attended in 2017
Executive Directors
Olivier Brousse
Patrick O’D Bourke
Non-Executive Directors
Phil Nolan
Jeremy Beeton
Toby Hiscock
David Rough
Anne Wade
Board
8
Nomination
Committee
Audit & Risk
Committee
Remuneration
Committee
2
6
6
Independent
Board
Nomination
Committee
Audit & Risk
Committee
Remuneration
Committee
No
No
On appointment
Yes
Yes
Yes
Yes
8
8
8
8
8
8
8
2
n/a
2
2
2
2
2
n/a
n/a
n/a
6
6
6
n/a
n/a
n/a
n/a
6
6
6
6
BOARD SUB-COMMITTEES
Sub-committees of the Board have been constituted to consider and make recommendations to the Board regarding matters
relating to external and internal audit, internal control and risk management processes, the selection of appropriate accounting
policies, the presentation of the half year and full year accounts, investment performance, acquisitions and disposals and the
appointment of Directors and Directors’ remuneration. Membership is determined by the Board and the duties of the Board
sub-committees are set out in the following sections of this report.
All the sub-committees of the Board operate within clearly defined terms of reference which are reviewed and updated to reflect
best practice and the Code as far as is commercially practicable. The terms of reference of the sub-committees are available on
request from the Company Secretary and are published on the Company’s website at www.laing.com.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee is chaired by Toby Hiscock, a non-executive director, who has up to date relevant financial
experience. The other members are David Rough and Jeremy Beeton.
During the year, the Committee met six times. It considers risk management processes in addition to reviewing internal control
procedures, including internal audit plans, and the interim and full year results, including external audit plans. Regular reviews
of significant risks are undertaken at meetings of the Committee and its observations are reported to the Board. The Group’s
system of internal control is designed to manage and mitigate rather than eliminate altogether the risk of failure to meet business
objectives and can only provide reasonable, but not absolute, assurance against material financial misstatement or loss.
The Internal Audit function provides independent assurance to the Board, through the Audit & Risk Committee, that internal
control processes, including those related to risk management, are relevant, effective and have operated across the business
throughout the year.
The Group Finance Director is normally invited to attend meetings, along with other members of management as appropriate.
The external auditor and Head of Internal Audit are also invited to attend meetings and meet with the Audit & Risk Committee
privately, without management present, at least once a year. Representatives from the Group’s independent valuer attend
meetings when the Committee consider the portfolio valuation.
The Committee considers and approves the external audit approach with the external auditor. The Committee reviews the
independence of the external auditor and the procedures in place to ensure that its independence is not compromised. The
Committee’s specific approval is required for non-audit services performed by the external auditor where the fee is expected to
exceed £20,000 in accordance with the Company’s Charter of Statutory Auditor Independence (a copy of which can be found on
the Company’s website at www.laing.com).
Audit & Risk Committee meetings are minuted and copies of the minutes are provided to the Directors and the external auditor.
The Committee reports to the Board, through the Chairman of the Committee.
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CORPORATE GOVERNANCE REPORT
(CONTINUED)
NOMINATION COMMITTEE
The Committee met formally twice during the year. Phil Nolan is the current Chairman of the Committee and Will Samuel will
become Chairman of the Committee when he takes over from Phil Nolan as Chairman of the Company. The other members of
the Committee are the four non-executive directors (Anne Wade, David Rough, Jeremy Beeton and Toby Hiscock) and the Chief
Executive Officer.
The purpose of the Nomination Committee is to consider and make recommendations to the Board concerning all new Board
appointments and the retirement of Directors and to make recommendations to the Board relating to the policy for the ongoing
education and development of Directors. The Committee uses external search consultants or open advertising for recruitment
purposes as deemed most appropriate. When nominating candidates for non-executive directorships, the Committee takes
account of the need for diversity and independence.
David Rough, as Senior Independent Director, led the search for the new Chairman and there were a number of meetings involving
Nomination Committee members which resulted in the recommendation to the Board of Will Samuel as Chairman Designate.
As referred to above, at the Group’s strategy day in October 2017, the Board received a paper and presentation from the Chief
Executive Officer on succession planning.
The Committee keeps under review and evaluates the composition of the Board and its Committees to maintain the most
appropriate balance of skills, knowledge, experience and independence and to ensure their continued effectiveness.
REMUNERATION COMMITTEE
The Remuneration Committee has four regular scheduled meetings each year and meets additionally as circumstances require.
The Committee met six times during the year. Anne Wade is the Chairman of the Committee. The other members are Jeremy
Beeton, Toby Hiscock and David Rough.
The Remuneration Committee sets and monitors the overall remuneration policy for the Executive Directors and other senior
executives. The Company has adopted the FCA’s Remuneration Code which is applied to those staff involved in regulated activities.
The Committee reviews, but does not limit itself to, the following key areas and makes recommendations to the Board accordingly:
•
•
•
•
•
total remuneration (including base pay, bonus and incentive arrangements);
method of remuneration;
service contracts;
terms and conditions and any material changes to the standard terms of employment; and
approval of financial arrangements proposed by the Chief Executive Officer relating to the termination of Executive Directors’
service contracts.
The activities, recommendations and approvals of the Committee are reported to the next routinely scheduled Board meeting.
MANAGEMENT COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee comprises the Executive Directors, the Group Managing Director – International Projects, the Chief Risk
Officer, the three Regional Managing Directors, the Group HR Director and the Company Secretary. The Executive Committee
deals with the day-to-day business of the Group and also considers Group-wide initiatives and priorities. It reviews the
implementation of strategy, discusses the development of new investments and progress on existing investments. It also reviews
the disposal of investments and proposals before they are presented to the Board and monitors progress against the budget.
John Laing Annual Report and Accounts 2017 /
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INVESTMENT COMMITTEE
The purpose of the Investment Committee is to make recommendations to the Board, or to approve proposals within its
delegated authority, in relation to the Group’s investments in infrastructure projects. The Committee also reviews the Group’s
portfolio valuation and monitors the balance of risk across the portfolio. The activities, recommendations and approvals of the
Committee are reported to the Board. The Committee’s delegated authorities are reviewed annually by the Board.
Members of the Committee are appointed by the Board and comprise the Executive Directors, the Group Managing Director –
International Projects, the Company Secretary (or the Group Head of Legal as alternate), the Chief Risk Officer and up to five
other persons as the Chief Executive Officer shall nominate from time to time. The Committee is currently chaired by the Chief
Executive Officer and usually meets at least fortnightly.
The role of the Investment Committee was reviewed in 2016 with the help of external consultants. A number of changes were
implemented including the appointment of a dedicated resource in order to improve the quality of risk analysis.
DIVESTMENT COMMITTEE
During 2017 the Company established a Divestment Committee. Its purpose is to provide oversight and recommendations on all
proposed disposals. The Committee generally meets once per month, with other meetings scheduled as necessary. The Committee
comprises the Executive Directors, the Group Managing Director – International Projects, the Company Secretary, the Chief Risk
Officer and up to three other senior managers. The Committee is currently chaired by the Group Finance Director.
MANAGEMENT RISK COMMITTEE
The Management Risk Committee’s role is to assist the Audit & Risk Committee and Board in monitoring financial, legal and
regulatory risks, by reviewing the internal control and risk management systems of the Group. The Committee normally meets
six times a year.
Members of the Committee are appointed by the senior management and comprise at least three members of the senior
management team, including the Group Finance Director. During 2017 the Committee was chaired by the Group Finance
Director. With effect from the beginning of 2018, the Committee has been chaired by the Chief Risk Officer. The other members
of the committee are currently the Group Finance Director, the Company Secretary, the Group Managing Director – International
Projects and three other senior managers.
ENGAGEMENT WITH SHAREHOLDERS
The Board is committed to providing shareholders with timely announcements of significant events or transactions affecting
the Company, including its financial performance and any changes to strategy as well as material investment commitments
and realisations. As part of this, the Company’s brokers provide regular market feedback to the Board and senior management.
In addition, the Chairman and Senior Independent Director are available to shareholders to discuss governance, strategy or any
concern they may have. It is proposed that Will Samuel will offer to meet the Company’s top 10-20 shareholders once he takes
over as Chairman in May.
The Chief Executive Officer and the Group Finance Director are responsible for the Company’s interaction with existing
shareholders, potential new shareholders and analysts. To ensure its financial and operational performance and strategic
objectives are properly communicated, the Company operates a dedicated investor relations programme. This includes formal
events along with other meetings outside the financial reporting calendar. In November 2017, the Chief Executive Officer,
together with other members of the senior management team, hosted the Company’s second investor day since its IPO;
this focused on the North American market and its potential; the background to how John Laing makes renewable energy
investments; potential new markets; John Laing's financial resources and the impact of macroeconomic factors on the
Company's balance sheet.
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AUDIT & RISK COMMITTEE REPORT
ROLE OF THE COMMITTEE
The Committee’s responsibilities have not changed since last year’s report. They are, in summary, to:
1. Scrutinise the integrity of the Group and Company financial statements, preliminary announcements, trading updates and
other statements on financial performance and prospects, prior to their publication;
2. Review the content of the annual and interim report and accounts and advise the Board on whether, as a whole, they are fair,
balanced and understandable, and provide the information necessary for shareholders to assess the Group and Company’s
financial affairs, business model and strategy;
3. Monitor the efficacy of the Group’s internal financial and operational controls, including compliance with FCA requirements,
insurance cover, data protection and cyber security, business continuity and disaster recovery plans;
4. Monitor and assess the work and matters arising from the Internal Audit function;
5. Consider and recommend to the Board the appointment, reappointment, resignation or removal of the Group’s external
auditor, subject to approval of the Company’s shareholders at the AGM;
6. Negotiate and agree on behalf of the Board the external auditor’s remuneration, including fees for any non-audit services
performed;
7. Assess the external auditor’s independence and objectivity, the overall effectiveness of the external audit process and the
quality of work delivered, including scrutiny and approval of any non-audit services;
8. Advise the Board on the Group’s overall risk appetite and tolerance and monitor the confluence of risks affecting the Group’s
markets and investments;
9. Review the results of regular stress testing of the Group’s major financial exposures;
10. Advise the Board on any proposed strategic transactions, such as acquisitions and disposals of recourse business entities;
and
11. Advise the Remuneration Committee on any risk weightings applied to the performance objectives of Executive Directors,
wider management and staff.
COMPOSITION OF THE COMMITTEE
There were no changes to the membership of the Committee during the year. It continues to comprise the following independent
non-executive directors:
Toby Hiscock (Chair)
Jeremy Beeton
David Rough
The Committee Chair is deemed to have up to date relevant financial experience and competence in accounting matters.
The Committee as a whole has extensive experience in the sector in which the Company operates, investing in international
infrastructure. Further details of the qualifications and experience of Committee members are given on page 47 of this
Annual Report.
COMMITTEE MEETINGS
The Committee met six times during the year, including twice on the interim report and accounts prior to their publication, to
assess inter-alia a settlement agreement reached with the Greater Manchester Waste Disposal Authority (GMWDA) in respect
of the Group’s investment in Manchester Waste VL Co and its impact on the half-year portfolio valuation (see page 25).
The Group Finance Director and other management representatives attend Committee meetings together with the Head of
Internal Audit and the external auditor. In addition, both the internal and external auditors met privately with the Committee
during the year, without management present.
The Committee Chair attends the Company’s AGM and is prepared to answer any questions from shareholders on matters falling
within the Committee’s responsibilities.
John Laing Annual Report and Accounts 2017 /
55
SIGNIFICANT MATTERS CONSIDERED BY THE COMMITTEE IN THE 2017 GROUP AND
COMPANY FINANCIAL STATEMENTS
1.
Investment portfolio valuation – The valuation of the Group’s investment portfolio is at the core of its financial reporting and
the Committee has a particular duty to ensure it is comprehensively reported in a fair, balanced and understandable way.
A full valuation of the Group’s investments is prepared every six months, at 30 June and 31 December each year, with a
review at 31 March and 30 September each year, using a discounted cash flow methodology. The valuation assumes that
investments and their related cash flows are held until maturity. Changes in the fair value of investments are recognised in
the Group Income Statement in net gains on investments at fair value through profit or loss.
In preparing the valuation, the key assumptions made by management include:
i)
forecast cash flows accruing to each investment;
ii) macro economic factors affecting forecast cash flows, including estimates of long-term inflation, interest, currency and
taxation rates, energy yield and future power prices; and
iii) discount factors applied to each investment to reflect market and operational risks.
The valuation of investments is sensitive to changes in these assumptions and, in order to aid shareholders, the key
sensitivities are illustrated in the Portfolio Valuation section on pages 24 to 28 of this Annual Report.
During the year the Committee reviewed and challenged the valuations and disclosures prepared by management as well as
the work performed by the Group’s independent valuer, a professionally qualified third party, and the procedures carried out
by the external auditor. At the half year, there was a particular focus on the Group’s investment in Manchester Waste VL Co
following a settlement agreement reached with the GMWDA in the period. Furthermore, the Committee has reviewed the
discount rate ranges between primary and secondary assets by inspection of market evidence and cross-examination of
subject-matter experts, to ensure trends are properly reflected in the Group’s portfolio valuation. It has also observed the
downward trend in power price forecasts produced by independent third parties and challenged the valuation of the Group’s
renewable energy assets accordingly.
We are satisfied that the Group’s investment portfolio as a whole is reflected in the 2017 accounts at its prevailing fair value.
2. Retirement benefit obligations – The net deficit in the Group’s two defined benefit and post-retirement medical schemes
has been reflected in the Group Balance Sheet as at 31 December 2017 in accordance with IAS 19. During the year the
Group agreed to a request by the scheme trustee to enhance pension commutation factors, thus increasing scheme
liabilities. This was offset by a reduction in longevity expectations, as predicated in latest published actuarial tables.
The deficit is sensitive to movements in future price inflation, discount rates and life expectancy and can, therefore, be
volatile. To assist shareholders, the key sensitivities have been included in note 19 of the Group financial statements on
page 109 of this Annual Report.
The IAS 19 deficit calculation is prepared by the Company with input from the Group’s actuarial adviser. Following a detailed
review and challenge of the underlying assumptions, in addition to assessing the procedures performed by the external
auditor, the Committee is satisfied that the net deficit shown as at 31 December 2017 is properly disclosed and fairly reflects
the Group’s retirement benefit obligations at that date as prescribed by IAS 19. Furthermore, the Committee is satisfied that,
based on legal advice, there is no minimum funding requirement and consequently no additional pension liability arising
under IFRIC 14.
3. Principal risks and uncertainties – The Committee received various presentations and reports from management during the
year on inter alia bidding activities, portfolio management, major financial exposures and related provisions, and taxation
risks. We looked at: markets; business growth; organisational risks; the aggregated exposures to contractors that the Group
partners with; and topics raised by subject matter experts, for example on taxation strategy, risk management and cyber
security. During the period a statement of the Group’s taxation strategy was recommended by the Committee to the Board for
approval and published in accordance with the Finance Act 2016. In addition we reviewed and approved an anti-evasion policy
on taxation as required by the Criminal Finances Act 2017.
A risk assurance map has been created for the Group and will be monitored and updated by the Committee at regular
intervals. Following discussions with management, we are pleased to report the appointment of Mark Westbrook as Chief
Risk Officer with effect from January 2018. Mark has been appointed to the Executive Committee in his new role (see page 52).
He is a senior and seasoned member of the management team and will attend meetings of the Committee going forward and
provide executive support to it in relation to its responsibilities for monitoring risks. Mark will also take over the chair of the
Management Risk Committee from the Group Finance Director.
Whilst we cannot give absolute assurance that the Group’s internal control system is operating effectively, we are satisfied
that overall the control and compliance culture of the Group is strong and its risk base is well diversified, which helps to
provide reasonable assurance that these financial statements are free from material error and/or misstatement.
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/ John Laing Annual Report and Accounts 2017
56
AUDIT & RISK COMMITTEE REPORT
(CONTINUED)
SIGNIFICANT MATTERS CONSIDERED BY THE COMMITTEE IN THE 2017 GROUP AND
(CONTINUED)
COMPANY FINANCIAL STATEMENTS
4. Financial Reporting Council (FRC) review of 2016 Annual Report and Accounts and key developments for 2017/18 – As part
of its normal cycle of work, the Conduct Committee of the FRC conducted a limited review of the Group’s 2016 Annual Report
and Accounts during the year and commented on the following main areas:
i) determination of the Group’s investment entity status in accordance with IFRS 10;
ii) details of the Group’s taxation charge and reconciliation; and
iii) the sensitivity of the Group’s portfolio valuation to changes in assumptions.
The Group has responded to the FRC on each of its comments and has enhanced disclosures in these and supplementary
areas of the 2017 Annual Report and Accounts.
In addition, the FRC wrote to UK public and large private companies, including the Group, during the year to highlight a
number of disclosure areas it will focus on in 2017/18 accounts, namely cash flows, dividends, pensions, and other critical
judgments and estimates. The Committee has paid particular attention to these themes and is satisfied with the level of
disclosures in these financial statements.
INTERNAL AUDIT
The Head of Internal Audit continues to report directly to the Committee and have access to the Company and Committee Chairs
at any time.
During the year the Committee again scrutinised the efficacy of the Internal Audit function including its:
i)
terms of reference, budget and resourcing – both internal and co-sourced arrangements;
ii)
risk-based programme of work; and
iii) reports and the adequacy of responses from management to them. As in previous years, Internal Audit achieved its coverage
plan for 2017 and the majority of audits completed were rated as good or satisfactory. There were no new emerging trends
or themes.
Following a review of resources during the period, the Committee is pleased to report an increase in Internal Audit headcount,
from two to three full-time heads, to match the Group’s expansion into international markets and growth in funds under
management. This should enable the function’s continued satisfactory performance and contribution to the business.
EXTERNAL AUDIT
Further to the Group conducting a competitive tender of its audit during 2016 and the re-appointment of Deloitte with a change of
partners, the Committee is satisfied with the effectiveness of the external auditor’s audit and independence in respect of 2017,
after scrutiny of:
1. Deloitte’s planned approach to the interim and annual accounts, including the fresh perspective brought as a result of the
tender process;
2. Deloitte’s execution of the above approach, such as inter alia its physical inspection and valuation of the Group’s investment
portfolio, together with any adjustments or qualifications to the accounts (of which there were none);
3. Deloitte’s arrangements to ensure there were no conflicts of interest arising from its work;
4. Deloitte’s safeguards over its audit independence and objectivity;
5. The extent and quality of any non-audit services provided by Deloitte during the year; and
6. The day to day management of the audit relationship by the Group Finance Director and his team.
The Company has published on its website a Charter of Statutory Auditor Independence which summarises the arrangements
that ensure the external auditor remains independent throughout its term. In particular the external auditor is required to rotate
its engagement partner at least every five years (Claire Faulkner was appointed as engagement partner in 2016) and the audit
is subject to an open market tender no more than every ten years (last tendered in 2016). In addition no work by the external
auditor is permitted in a range of areas including: secondments to management; bookkeeping services; systems design and
implementation work; valuation and actuarial services; human resources and Internal Audit support; and any other activities that
could create an actual or perceived conflict of interest.
The Group has complied with the provisions of the Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014.
John Laing Annual Report and Accounts 2017 /
57
(CONTINUED)
EXTERNAL AUDIT
The Committee reviewed and approved on behalf of the Board the external auditor’s terms of engagement and remuneration.
Fees for audit services to the Company and recourse subsidiaries during the year amounted to £224,257 (2016 – £185,806).
Fees for audit services to non-recourse subsidiaries during the year amounted to £59,403 (2016 – £62,129). The increase in fees
for audit services to the Company and recourse subsidiaries was due to additional work on the Group’s investments in certain
project companies which Deloitte does not audit.
Any potential non-audit work by the external auditor is considered case by case by the Committee and is generally awarded on a
competitive basis.
The only non-audit work performed by Deloitte in 2017 was, as in the prior year, in relation to its review of the Group and
Company interim financial statements and the annual review of the Group’s FCA regulated subsidiary. Fees for this work
amounted to £61,000 (2016 – £44,800). The increase in 2017 fees was due to a) additional work by the external auditor on the
interim results following the settlement agreement on Manchester Waste VL Co and its impact on the portfolio valuation and
b) an increase in scope of the FCA review in response to additional industry-wide obligations imposed by the regulator.
With regards to the rights issue launched with announcement of these results, the Committee approved the appointment of
Deloitte as reporting accountant because:
•
•
•
•
•
it is represented by an independent partner;
its work is limited to a small number of reporting workstreams with no management role;
it is familiar with the Group’s cash forecasting methodology, having carried out a working capital review for the IPO in 2015;
it can draw on the knowledge of the external audit team; and
its fee proposal was considered competitive relative to market benchmarks. Although material in the context of the Group’s
average statutory audit fee over the last three years, the fee is not in breach of the cap on non-audit services recently set out
in EU Audit Legislation which does not come into effect until the Group’s financial year end in 2020.
The principal area of work for the reporting accountant is a working capital review for the benefit of the rights issue’s sponsors,
Barclays and HSBC. This is to provide comfort to them on the working capital statement made by the Directors in the
prospectus. The other main areas of work are:
•
•
•
•
A review of a proforma net asset statement;
A review of any material changes since 31 December 2017;
Confirmation of financial numbers extracted from the audited accounts; and
Comments on drafting of the prospectus and responding to the UK Listing Authority’s review thereof.
The recommendation to reappoint Deloitte was supported unanimously by the Board and will be subject to shareholder approval
at the Company’s forthcoming AGM.
OTHER MATTERS
As part of the Board’s review of its effectiveness in 2017 the work of its committees, including the Committee, was assessed by
Directors. The comments were positive although we will look to enhance structured training of members, for example through
further presentations on topics by subject experts, during the course of 2018.
Other matters considered by the Committee during 2017 included:
i)
ii)
the lookout period and forecast assumptions for the Group’s viability statement and the adoption of the going concern basis
in these financial statements;
the Group’s compliance with market abuse regulation, including anti-bribery, anti-money laundering and whistle blowing
arrangements; and
iii) the Group’s policies and procedures for preventing and detecting fraud.
After detailed consideration and enquiry, including testing of evidence provided by management, each of these matters was
deemed satisfactory by the Committee.
Toby Hiscock
AUDIT & RISK COMMITTEE CHAIRMAN
7 March 2018
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/ John Laing Annual Report and Accounts 2017
58
DIRECTORS’ REMUNERATION REPORT
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors' Remuneration Report for the year ended 31 December 2017.
This report is split into two sections:
•
•
Annual Report on Remuneration – this sets out in detail how the remuneration policy has been applied in 2017, the
remuneration received by Directors for the year and how the policy will be applied in 2018. The Annual Report on
Remuneration will be subject to an advisory shareholder vote at the AGM in May 2018.
Directors' Remuneration Policy – this sets out the remuneration policy for the Executive Directors, Chairman and non-executive
directors. The Directors' Remuneration Policy is subject to approval by shareholders every three years. The policy was
approved by shareholders at our 2016 AGM and therefore was not subject to a shareholder vote in 2017.
REMUNERATION AT A GLANCE
How the remuneration policy supports our business strategy
Our remuneration policy is designed to support the Group's strategy as summarised below:
Strategy
To create value for shareholders through
originating, investing in and managing
infrastructure assets internationally
Remuneration Policy
Focus on performance-related
pay, with the emphasis on
long-term performance
Use of share-based incentives
and share ownership guidelines
for executives
Performance targets which
support sustainable long-term
value creation
In addition to setting the remuneration for the Executive Directors, the Remuneration Committee also has oversight of
remuneration for all members of the senior management team, ensuring a cohesive approach to reward is operated throughout
the Group.
SUMMARY OF THE CURRENT REMUNERATION ARRANGEMENTS FOR EXECUTIVE DIRECTOR
Element
Description
Opportunity
d
e
Base pay
x
i
F
Benefits
Salaries are set taking into account the experience of the
Director, his/her role and responsibilities.
Current salaries are £465,000 for the Chief Executive
Officer and £346,300 for the Group Finance Director.
Private medical insurance, life insurance, permanent health
insurance and, for Patrick O'D Bourke, a car allowance.
Market competitive.
Pension
Cash allowance in lieu of pension.
15% of salary.
Bonus
e
l
b
a
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a
V
LTIP
Annual bonus is determined by reference to corporate and
individual performance*. Any bonus above target (60% of
salary) is deferred into shares vesting in equal tranches over
one, two and three years subject to continued employment.
Shares vest after three years subject to continued employment
and the achievement of NAV per share and Total Shareholder
Return (TSR) targets (with 50% of the award on each measure).
Executive Directors are required to retain the net of tax
number of any shares vesting under the LTIP for a further
two years post-vesting.
Up to 100% of salary (60% of salary at target).
Current award levels are 175% of salary per annum
for the Chief Executive Officer and 150% of salary per
annum for the Group Finance Director (within a policy
maximum of 200% of salary per annum).
* The performance measures for the 2017 Bonus are set out in the Annual Report on Remuneration on page 62.
John Laing Annual Report and Accounts 2017 /
59
REMUNERATION RECEIVED BY THE EXECUTIVE DIRECTORS FOR 2017
£’000
Benefits Pension
Salary
1
2
Bonus
3
Long-Term
Incentives
Olivier Brousse
Patrick O'D Bourke
434
336
2
12
56
43
342
251
774
514
1 Cash allowance in lieu of pension is paid net of employer’s national insurance.
2 Bonuses were based on an assessment of corporate and individual performance objectives (see page 62 for further details).
3 This relates to the estimated value of the 2015 LTIP which will vest in April 2018, see page 63.
Total
1,608
1,156
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2017 has been a busy year for John Laing, as we continue to scale up the business and strengthen the pipeline of investment
opportunities for future growth across our three regions. New investment commitments of £383 million were significantly ahead
of the targets set at the start of the year and total realisations increased to £289 million (compared to £147 million for 2016),
providing additional funding for new investments and enabling us to declare a special dividend for 2017 of 4.88p. The investment
portfolio as a whole is performing well and we are pleased to report NAV as at 31 December 2017 of £1,124 million (up 10.5% on
prior year) and value enhancements of £66 million.
The Executive Directors are eligible for an annual bonus of up to 100% of salary. The majority of the bonus (up to 80% of salary)
is based on a scorecard of corporate financial targets to provide a rounded assessment of the financial performance of the
business. Detail of the scorecard targets set and performance against them is disclosed in full on page 62. Based on
performance against the targets and the overall strong performance of the business over the year, a bonus of 60.8% of salary
(76% of the maximum) was awarded for the corporate element of the bonus. The remainder of the bonus (up to 20% of salary) is
based on specific individual targets for each Executive Director, the weighting of the bonus on personal objectives being reduced
from 40% in 2016. Details of the Committee’s assessment against the personal objectives are set out on page 62. The Executive
Directors performed strongly against their personal objectives set resulting in overall bonuses for 2017 of 78.8% of salary for the
Chief Executive Officer and 74.8% of salary for the Group Finance Director. Part of the bonus is deferred into shares.
The first awards granted under the John Laing Group plc Long Term Incentive plan are due to vest in April 2018. The awards
were based on half on compound annual growth in NAV per share and half on relative TSR. NAV per share was measured over
three financial years to 31 December 2017. NAV per share grew by 15.5% per annum over this period, resulting in 69% of shares
for this part of the award becoming eligible to vest. The performance period for the relative TSR condition runs until 15 April 2018.
Based on performance as at 15 February 2018, the estimated level of vesting for this part of the award is 81%. The awards will
vest once the final outcome of the TSR performance condition is known. Any shares vesting to the Executive Directors are subject
to a two year post-vesting retention period.
REMUNERATION FOR 2018
In terms of application of the policy for 2018:
•
The Group’s results demonstrate continued strong financial and operational performance and our employees, including the
senior management team, have been critical to this success. The Remuneration Committee is conscious of the need to ensure
that the remuneration of our top talent reflects their experience, performance and contribution to our success and remains
market competitive. The Remuneration Committee recently undertook salary reviews for the Executive Directors and wider
senior leadership team, including employees in John Laing Capital Management Limited. The review took into consideration
the performance of the Group as a whole, individual performance, roles and responsibilities, individual relativities and industry
benchmark data. Following this review, the Committee approved an average salary increase of 4% across the workforce. The
increase for the Group Finance Director, Patrick O’D Bourke, was 3.0%, bringing his salary to £346,300 from 1 January 2018.
The Chief Executive Officer, Olivier Brousse, received a 7.1% increase, increasing his salary from £434,300 to £465,000 effective
from 1 January 2018. The increase for the Chief Executive Officer reflects his strong performance in the role since IPO and
bringing his salary closer to, but still below, the market level following limited salary increases since his appointment in
March 2014 on a salary of £420,000. The Committee continues to monitor salary levels across the Group to ensure that they
remain appropriate and reflect the competitive nature of the industry in which we operate.
•
The structure and operation of the bonus scheme remain unchanged. The bonus maximum remains 100% of salary. Bonuses
will continue to be based on corporate and individual performance. The measures used to assess corporate performance for
2018 will be:
– NAV
– Distributions (excluding from non-portfolio assets)
– Divestments
– New investments
– Value enhancements
– Profit before tax.
/ John Laing Annual Report and Accounts 2017
60
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
REMUNERATION FOR 2018
The detailed targets and how the Group has performed against them will be set out retrospectively in next year's Annual Report
on Remuneration.
(CONTINUED)
•
•
Annual LTIP awards will be granted at 175% of salary for the Chief Executive Officer and 150% of salary for the Group Finance
Director as in 2017. The awards will continue to be based 50% on relative TSR and 50% on growth in NAV per share. Details of
the relative TSR targets to be applied to the 2018 awards, which are consistent with those applying to the 2017 awards, are
shown on page 63. The NAV per share targets for the 2018 awards will require 10% to 16% p.a. compound annual growth rate
over three years for 25% to 100% vesting of this part of the award. These targets are the same as for 2017.
The annual fee for the Chairman will increase to £200,000 when Will Samuel becomes Chairman immediately following the
Company’s AGM on 10 May 2018. Base annual fees for other non-executive directors will increase by £5,000 to £50,000 with
effect from 1 May 2018. In addition, the fee for chairing the Remuneration Committee will increase by £5,000 to £15,000 to
match the fee for chairing the Audit & Risk Committee.
SUMMARY
The aim of this report is to communicate details of Executive Director compensation and how this is clearly linked to
performance. We are committed to maintaining an open and transparent dialogue with shareholders and I welcome any
comments you may have.
During the course of 2018, the Committee intends to undertake a review of the Remuneration Policy, ahead of the shareholder
vote to renew the policy required at the 2019 AGM. If any significant changes to the policy are proposed following this review, we
will consult with the Company's major shareholders in advance.
I very much hope that you will support the resolution to approve the Annual Report on Remuneration at the forthcoming AGM.
We firmly believe that our remuneration policy is right for the Company and that it will continue to motivate and incentivise our
senior team to deliver the Company’s strategy.
Anne Wade
CHAIRMAN, REMUNERATION COMMITTEE
7 March 2018
John Laing Annual Report and Accounts 2017 /
61
ANNUAL REPORT ON REMUNERATION
This part of the report has been prepared in accordance with Part 3 of the revised Schedule 8 set out in The Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and 9.8.6R of the Listing Rules. The Annual
Report on Remuneration will be put to an advisory shareholder vote at the forthcoming AGM.
Remuneration Committee members
Anne Wade (Chairman)
Jeremy Beeton
Toby Hiscock
David Rough
All members of the Committee are independent non-executive directors. Further details on the members of the Committee can
be found on pages 46 and 47 of this Annual Report.
Responsibilities
The Committee recommends the Group’s policy on executive remuneration, determines the levels of remuneration for the
Executive Directors, the Chairman and other senior executives and prepares an Annual Report on Remuneration for approval
by shareholders at the AGM. The Committee's terms of reference can be viewed on our website at www.laing.com/investor-
relations/corporate-governance. Details of the number of meetings held during the year are shown in the Corporate Governance
Report on page 51.
Advisors
The Committee receives information and takes advice from inside and outside the Group. Internal support is provided by the
Group HR Director and the Company Secretary. The Chairman and Chief Executive Officer are invited to attend meetings where
appropriate. No individual is present when matters relating to his/her own remuneration are discussed.
New Bridge Street (NBS) was appointed in early 2015 to act as the independent adviser to the Committee. NBS is a trading
name of Aon Hewitt Limited, which is a subsidiary of Aon plc. Fees are normally charged on a time spent basis, with estimates
provided in advance for particular projects. The total fees paid to NBS in respect of its services to the Committee during the year
were £53,842 plus VAT (2016 – £38,986 plus VAT). The increase is largely due to an exercise on international benchmarking
carried out during the year. NBS also provided advice to the Company in relation to the implementation of the Company’s share
plans. NBS is a signatory to the Remuneration Consultants' Code of Conduct and reports directly to the Chairman of the
Committee. The Committee is satisfied that the advice that it receives from NBS is objective and independent.
Directors' single total figure of remuneration for 2017 (audited)
The table below provides a breakdown of the various elements of Director pay for the year ended 31 December 2017 and for the
prior year. This comprises the total remuneration earned in respect of the period from 1 January 2017 to 31 December 2017, and
the prior period from 1 January 2016 to 31 December 2016.
4
3
£’000 2017 2016 2017
2016 2017
2016 2017
2016 2017
2016 2017
2016 2017
2016
Salary/Fees
Benefits¹
Pension²
Bonus
LTIP
Other
Total
5
Olivier Brousse 434 430 2
Patrick O'D Bourke 336 333 12
Dr Phil Nolan 180 180 –
3 – –
Will Samuel
David Rough 55 55 –
Jeremy Beeton 45 45 –
Toby Hiscock 60 60 –
Anne Wade 55 55 –
2 56
12 43
– –
– –
– –
– –
– –
– –
56 342
43 251
– –
– –
– –
– –
– –
– –
271 774
210 514
– –
– –
– –
– –
– –
– –
nil n/a
nil n/a
– –
– –
– –
– –
– –
– –
n/a 1,608
n/a 1,156
– 180
– 3
– 55
– 45
– 60
– 55
759
598
180
–
55
45
60
55
1.
This relates to private health insurance. The figure for Patrick O'D Bourke also includes a car allowance of £10,200.
2. Paid as a cash supplement in lieu of pension.
3.
4.
In accordance with the Deferred Share Bonus Plan (DSBP), any amount over 60% of salary awarded in bonus is deferred in shares. Awards under the
DSBP vest in equal tranches on the first, second and third anniversary of grant, subject to continued employment.
The 2015 LTIP award is due to vest in April 2018. 50% of the award is based on NAV per share performance over a three year period to 31 December 2017.
The remaining 50% is based on relative TSR performance which is measured to 15 April 2018, for which an estimated outcome has been used in calculating
the above figures. The estimated value of the shares is based on the share price for the last three months of 2017. See page 63 for further details.
5.
Appointed to the Board on 7 December 2017.
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62
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
ANNUAL REPORT ON REMUNERATION
Annual Bonus
(CONTINUED)
Details of variable pay earned in the year (audited)
The bonus payable for 2017 (excluding JLCM employees) was assessed by the Committee taking into account performance
against the following scorecard of metrics:
£ million
Threshold
Narrative
Stretch
Target
Actual
NAV
Value enhancements
Distributions (excluding
from non-portfolio assets)
Disposals
New investments
Profit before tax
1,083
36
37
257
214
142
1,140
38
39
271
225
150
1,198
41
43
298
247
165
1,124
66
40
289
383
126
Between threshold and target
Above stretch
Between target and stretch
Between target and stretch
Above stretch
Below threshold
Based on the achievement of the above scorecard of metrics, the Committee determined that the overall bonus payable for
corporate performance was 76% of the maximum, equivalent to 60.8% of salary for the Executive Directors.
In addition to the overall Company targets, the Executive Directors were given specific individual objectives which accounted for
20% of their maximum bonus entitlement. The individual objectives for 2017 and a summary of the Committee's assessment of
the Executive Directors' performance against these objectives are set out below:
Chief Executive Officer, Olivier Brousse
In addition to oversight of all Group objectives, the Chief Executive Officer was individually tasked with:
•
Completing a comprehensive review of the senior management structure at John Laing to best align the Group for future
growth opportunities. The Chief Executive Officer recently initiated an internal reorganisation under which the Primary
Investment and Asset Management teams in each of our three geographical regions will in future report to a single regional
head, complemented by a Group Chief Risk Officer, each of whom reports to the Chief Executive Officer.
•
Making a significant step-change in the size and profile of the North American business. We have seen a marked increase in
the pipeline, in our shortlisted positions and an increase in committed investments.
•
Review and reform of the Investment Committee. This has been done with success.
The Board is pleased with the progress to date, including the sizeable step-change in the Group’s total investment commitments,
and accordingly awarded the Chief Executive Officer 90% of the maximum potential for performance against his individual objectives.
Group Finance Director, Patrick O'D Bourke
In addition to oversight of all Group objectives, the Group Finance Director was individually tasked with:
•
•
Developing and agreeing with the Board a future funding strategy with options for financial flexibility to meet the increasing
investment opportunities as well as dividend expectations. This was a continued process begun in 2016 and supported the
Group’s increase in investments in 2017.
Establishing a new Divestment Committee with the goal of improving visibility of the Group disposal pipeline over the next
three years and efficiency on disposal costs. While we achieved a good outcome on realisations in 2017 this process remains
a work in progress.
The Board has awarded the Group Finance Director 70% of the maximum potential for performance against his individual objectives.
Overall, bonuses for 2017 for the Executive Directors were as follows:
% salary
Olivier Brousse
Patrick O’D Bourke
Corporate (maximum 80% of salary)
Individual (maximum 20% of salary)
Total (maximum 100% of salary)
Total (£000)
60.8%
18%
78.8%
342
60.8%
14%
74.8%
251
Bonuses up to 60% of salary are paid in cash with any bonus above this level awarded in the form of deferred shares, vesting in
equal tranches over one, two and three years, normally subject to continued employment. Any deferred shares due will normally
be awarded as soon as practicable following the results announcement in March.
John Laing Annual Report and Accounts 2017 /
63
ANNUAL REPORT ON REMUNERATION
(CONTINUED)
Vesting of the 2015 Long-Term Incentive Plan award (audited)
The first awards granted under the John Laing Group plc Long-Term Incentive Plan (LTIP) are due to vest
Performance
period
Threshold target
(25% vesting)
1
Stretch target
(100% vesting)
Performance
outcome
3
Measure
Weighting
Compound annual growth
in NAV per Share
TSR relative to the
constituents of the
FTSE 250 Index
2
50% 1 January 2015 to
31 December 2017
50%
16 April 2015 to
15 April 2018
12% p.a.
18% p.a.
Median
ranking
Upper quartile
ranking or
above
15.5% p.a. growth
of this element vesting.
resulting in 68.75%
The performance period for the TSR
condition has not yet ended, but as at
15 February 2018, John Laing was
ranked between the median and upper
quartile of the comparator group
resulting in an estimated 81.43%
of this vesting element.
1
2
3
For performance between threshold and stretch, awards vest on a straight line basis.
The base year for the measurement of the growth in value of NAV per share was the 2014 financial year, and at 31 December 2014 the NAV per share
value was 210p which was adjusted to include the funds raised in the Company's IPO in February 2015.
NAV is based on the figures reported in the Company’s annual financial statements but adjusted to include the value of any dividends paid to or
approved by shareholders during the three year performance period. NAV per share for 2017, the final year of the performance period, adjusted to
include the value of dividends, was 323p.
The performance period for the relative TSR condition has not yet ended, but based on performance to-date, 81.43% of this
element would vest. Taking the NAV per share growth element of 68.75%, this would give rise to an overall expected level of
vesting of 75.09%. The final vesting position will be disclosed in next year’s report.
1
Number of Anticipated number Estimated value
Type of award shares granted of shares vesting of shares vesting
Olivier Brousse
Patrick O'D Bourke
LTIP (nil cost option) 342,820 257,423 £774,482
LTIP (nil cost option) 227,560 170,874 £514,091
1
Value based on the average share price over the period 1 October 2017 to 31 December 2017 (283.9p), including the value of dividend equivalents
(16.96p per share) to be rolled-up and paid out based on the number of shares estimated to vest.
As a result of the rights issue announced on 8 March 2018, the Company will make appropriate adjustments to awards held
under its share plan arrangements, to ensure award holders will not be disadvantaged compared to shareholders.
The awards were structured as nil cost options and, on vesting, will ordinarily be capable of exercise up to the day before the
tenth anniversary of grant. The awards are subject to a post-vesting holding period and the Executive Directors must retain the
net number of shares vesting under the LTIP (after tax) for two years post vesting.
Details of share awards granted in the year (audited)
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The following LTIP awards were granted to the Executive Directors during the financial year:
1
Type of
award
Award
size
Face
value
Number
of shares
Grant
date
Performance
period
Performance
targets
Olivier Brousse
LTIP (nil
cost option)
175%
salary
Patrick
O’D Bourke
LTIP (nil
cost option)
150%
salary
£757,044
262,680
£504,436
175,030
19 April 2017
1 January 2017 to
31 December 2019
50% based on relative TSR and
50% based on NAV per share
1
Calculated using the closing middle market share price on the day preceding the date of grant which was 288.2 pence.
The performance conditions attached to the awards are:
•
•
50% is based on TSR performance against a comparator group comprising the members of the FTSE 250 index. 25% of the
shares in this tranche will vest for median performance with full vesting for upper quartile performance or above (straight line
vesting between these points).
50% is based on the compound annual growth in the Group's NAV per share. NAV per share growth will be based on the NAV
per share reported in the Group's annual financial statements but adjusted to include the value of any dividends paid to or
approved by shareholders during the three year performance period. The NAV per share figures may also be adjusted at the
discretion of the Committee to reflect any regulatory or accounting changes or any changes to the Company's share capital.
25% of the shares in this tranche will vest for 10% per annum compound growth, with full vesting for 16% per annum
compound growth or above (straight line vesting between these points).
/ John Laing Annual Report and Accounts 2017
64
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
(CONTINUED)
ANNUAL REPORT ON REMUNERATION
The awards are structured as nil cost options and will normally vest on the later of the third anniversary of grant and the
determination of the performance conditions, and will then normally remain exercisable until the day before the tenth
anniversary of the date of grant provided the individual remains an employee or officer of the Group. The Executive Directors may
not sell shares vesting under the LTIP (other than to settle related tax liabilities) within two years of vesting.
The following were granted to the Executive Directors under the DSBP during the financial year. These related to the deferred
element of the 2016 bonus.
1
Type of Award Face Number Grant
award size value of shares
date
Olivier Brousse
DSBP Bonus £12,900 4,808
(nil cost option) earned
———————————————————————————————————————— over ———————————————————————————— 17 March 2017
Patrick O’D Bourke
DSBP 60% £9,989 3,723
(nil cost option) of salary
1
Calculated using the closing middle market share price on the day preceding the date of grant which was 268.3p.
The awards will vest in three equal tranches on each of the first three anniversaries of the date of grant and will then remain
exercisable until the day before the tenth anniversary of the date of grant provided the individual remains an employee or officer
of the Group.
The first tranche of shares granted under the deferred element of the 2015 bonus vested during the year. The value of the shares
on vesting was £16,788 for Olivier Brousse, and £13,278 for Patrick O'D Bourke (calculated using the closing middle market
share price on the date of vesting, 15 March 2017, which was 260.2p).
Chairman and non-executive director fees
The current fees for the Chairman and the non-executive directors are set out below:
Chairman
Non-executive directors:
Base fee
Additional fees for:
– Chairing the Audit & Risk Committee
– Chairing the Remuneration Committee
– Senior Independent Director
Fee
£180,000
£45,000
£15,000
£10,000
£10,000
In addition, the Chairman and the non-executive directors are entitled to reimbursement of reasonable expenses.
Will Samuel is entitled to an annual fee of £45,000 for his role as non-executive director and Chairman Designate, which will
increase to £200,000 when he becomes Chairman immediately following the Company’s AGM on 10 May 2018.
The base fee for non-executive directors will increase to £50,000 per annum as from 1 May 2018. The additional fee for chairing
the Remuneration Committee will increase to £15,000.
Directors' shareholdings (audited)
The following table sets out a summary of the Directors' interests in shares (including any interests held by connected persons).
No. of shares No. of shares Other interests in Total interest in
owned on owned on shares as at shares as at
31 December 2016 31 December 2017 31 December 2017 31 December 2017
Outstanding Outstanding
LTIP awards Deferred Share
Bonus Plan awards
1
Olivier Brousse 155,604 168,929 935,830 17,372 1,122,131
Patrick O'D Bourke 136,282 141,385 621,860 13,660 776,905
Dr Phil Nolan 110,256 110,256 N/A N/A 110,256
David Rough 35,256 35,256 N/A N/A 35,256
– – N/A N/A –
Will Samuel
Jeremy Beeton 16,256 16,256 N/A N/A 16,256
Toby Hiscock 20,500 20,500 N/A N/A 20,500
Anne Wade 20,256 20,256 N/A N/A 20,256
1
Appointed to the Board 7 December 2017.
John Laing Annual Report and Accounts 2017 /
65
ANNUAL REPORT ON REMUNERATION
Between 31 December 2017 and the date of this report there have been no changes in the Directors’ shareholdings.
(CONTINUED)
The guideline shareholding for Executive Directors is 100% of salary. At 31 December 2017, Olivier Brousse and Patrick O'D Bourke
held shares worth 114% and 123% of salary respectively.
Payments to past Directors (audited)
There were no payments to past Directors during the year.
Payments for loss of office (audited)
No payments have been made for loss of office in the year.
Relative importance of the expenditure on pay
The table below shows the Group's expenditure on pay compared with distributions to shareholders.
£ million 2017 2016
Remuneration paid to or receivable by all employees 33.6 34.6
Distributions to shareholders by way of dividends 30.1 26.2
Distributions to shareholders by way of share buy-backs Nil Nil
Percentage change in the remuneration of the Director undertaking the role of Chief Executive Officer compared to the
average for other employees
The table below shows the percentage change in salary, benefits and bonus earned between 1 January 2017 and 31 December 2017
for the Chief Executive Officer compared to the average for other UK-based employees. This comparator group was used because
the Committee believe it gives the best understanding of underlying increases, while avoiding distortions from currency fluctuation
and different economic conditions in other countries.
Salary
Benefits
Bonus
CEO
Average for other UK employees
1.0%
4.4%
6.4%
1.3%
26.3%
25.0%
Performance graph and total remuneration history for Chief Executive Officer
The graph below shows the Company’s performance, measured by TSR, compared with the performance of the FTSE 250 Index
for the period from the Company’s IPO in February 2015 to 31 December 2017. This comparator has been chosen as it is a broad
equity index of which the Company is a constituent and it is also the one used in assessing relative TSR performance under
the LTIP.
180
160
140
120
100
80
60
40
20
0
)
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(
)
£
(
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a
V
161.42
132.87
Feb-15
Dec-15
John Laing Group plc
Dec-16
FTSE 250 Index
Dec-17
The graph shows the value (as at 31 December 2017) of £100 invested in John Laing Group plc on the date of Admission
(17 February 2015) compared to £100 invested in the FTSE 250. The other points plotted are the values at intervening financial
year-ends.
The total remuneration figures for the Chief Executive Officer for 2015, 2016 and 2017 are shown in the table below. The annual
bonus and long-term incentive award vesting level as a percentage of the maximum opportunity are also disclosed.
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/ John Laing Annual Report and Accounts 2017
66
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
ANNUAL REPORT ON REMUNERATION
2015 2016 2017
(CONTINUED)
Total remuneration (£'000) 1,535 759 1,608
Annual bonus (% of maximum) 70% 63% 79%
LTIP (% of maximum) Nil Nil 75%
1
1
Estimated
Voting outcome on Remuneration
The following votes were received at the 2016 and 2017 AGMs:
Date Approved Votes For
Votes Against
Votes Withheld
Resolution to approve the Annual Report on Remuneration 11 May 2017 292,599,856
(99.99%*)
Resolution to approve the Directors’ Remuneration Policy 12 May 2016 258,873,852
(95.86%*)
36,853
(0.01%*)
11,182,710
(4.14%*)
1,947,354
5,337
* Percentage of votes cast.
Application of the Remuneration Policy for 2018
A summary of how the remuneration policy will be applied during the forthcoming year is set out below:
Salaries for Executive Directors
Olivier Brousse – £465,000
Patrick O'D Bourke – £346,300
Benefits and Pension
No change
2018 Bonus
2018 LTIP
The 2018 bonus will be based on 80% corporate and 20% individual objectives. Bonuses will be
awarded based on a mix of corporate and individual performance. Corporate performance will be
assessed taking into account NAV, distributions (excluding from non-portfolio assets), disposals, new
investments, value enhancements and profit before tax. The performance targets for 2018 are deemed
to be commercially sensitive and will be disclosed in next year's Annual Report on Remuneration.
LTIP awards granted to the Chief Executive Officer and Group Finance Director in 2018 will be over
shares worth 175% and 150% of salary respectively (the same as 2017). Performance will be measured
over three years subject to the following conditions (with an equal weighting on each measure):
Performance condition
Threshold (25% vesting)
Maximum (100% vesting)
Compound annual growth in NAV per share 10% p.a.
TSR relative to the constituents
of the FTSE 250 Index
There will be straight-line vesting between these points.
Median performance
16% p.a.
Upper quartile
performance
Chairman and non-executive
director fees
The fees for the Chairman and non-executive directors were reviewed during the year, the current fee
policy having been in place since IPO. The fees to apply for 2018 onwards are as follows:
1
Chairman £200,000
Non-executive directors:
Base fee £50,000
Additional fees for:
Chairing the Audit & Risk Committee £15,000
Chairing the Remuneration Committee £15,000
Senior Independent Director £10,000
1 To apply from 10 May 2018 (increased from £180,000)
2 To apply from 1 May 2018 (increased from £45,000)
3 To apply from 1 May 2018 (increased from £10,000)
2
3
By order of the Board
Anne Wade
CHAIRMAN OF THE REMUNERATION COMMITTEE
7 March 2018
John Laing Annual Report and Accounts 2017 /
67
DIRECTORS' REMUNERATION POLICY
This report sets out the Remuneration Policy for the Directors. The report was subject to a binding vote by shareholders at our
AGM in 11 May 2016 and is intended to remain in place for three years. Shown below is the Policy in full, as approved by
shareholders, updated where appropriate to reference how the Policy will be applied in 2018.
Remuneration Policy Table
The table below sets out the remuneration policy for the Executive Directors.
Purpose and
link to strategy
Operation
Link to performance
Maximum opportunity
Base salary levels are
set at a level to reflect
the experience, skills
and responsibilities of
the individual as well
as the scope and scale
of their role.
Increases to base salary
will reflect individual
performance and
contribution as well as
the pay and conditions
for other employees of
the Group.
Not applicable
While there is no maximum
salary, increases will normally
be in line with the typical level
of increase awarded to other
employees of the Group.
However, increases above this
level may be offered in certain
circumstances such as where
an Executive Director has been
promoted, has had a change
in responsibilities, to reflect
increased experience in the
role, or where there has been
a significant change in the size
and/or scope of the business.
For details of salary levels from
1 January 2018 see the Annual
Report on Remuneration on
page 66.
The cost of the benefit provision
varies from year-to-year and
there is no prescribed maximum
limit. The Committee monitors
annually the overall cost of the
benefits provided to ensure that
it remains appropriate.
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Element
Base
salary
Reviewed annually by the Committee (with
effect from 1 January) or, if appropriate,
following a change in an individual’s
position or responsibilities.
Benchmarked periodically against relevant
market comparators, including companies
of a similar size and complexity and other
broadly comparable companies.
To provide a
core reward
for the role at
a sufficient
level to
recruit and
retain
individuals of
the necessary
calibre to
execute the
Company’s
business
strategy.
Benefits
To operate a
competitive
benefits
structure for
Executive
Directors that
aids in their
recruitment
and retention.
Provision of benefits such as private
medical insurance, life insurance,
permanent health insurance, company
sick pay and a car allowance.
Executive Directors are also eligible to
participate in any all-employee share
plans operated by the Company, in line
with HMRC guidelines currently prevailing,
on the same basis as other eligible
employees.
Additional benefits may be provided from
time to time if the Committee decides
payment of such benefits is appropriate,
for example, if this is in line with emerging
market practice or to facilitate the
relocation of an Executive Director.
Each Executive Director is entitled to
reimbursement of reasonable expenses
incurred by him in the performance of his
duties (including any tax payable thereon).
/ John Laing Annual Report and Accounts 2017
68
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
Purpose and
link to strategy
Element
Pension
Annual
bonus
Operation
Link to performance
Maximum opportunity
Not applicable
15% of salary
To offer
market
competitive
levels of
pension and
to recognise
long-term
commitment
to the Group.
The Company may provide
a cash allowance in lieu of
a contribution to a pension
scheme, contribute an amount
to a money purchase pension
scheme or provide for a
combination of the two
depending on the circumstances
of the individual.
100% of salary (60% of
salary for target
performance).
No more than 25% of
salary will be payable
for threshold
performance.
To recognise
and reward
the delivery
of short-term
strategic and
financial
objectives
which
contribute
towards
long-term
sustainable
growth.
The Executive Directors
participate in the same overall
bonus structure as other Group
employees (except for those
employees within John Laing
Capital Management (JLCM)).
The size of the overall Group
bonus is determined based on
performance against a range of
metrics linked to the Group’s
strategy. The overall bonus is
then allocated partly based on
Company performance with the
remainder based on individual
performance.
To the extent any bonus exceeds
the target amount (60% of
salary), the full amount of any
excess will be deferred in shares
under the Deferred Share Bonus
Plan (DSBP). Awards under the
DSBP vest in equal tranches
on the first, second and third
anniversary of grant, normally
subject to continued
employment. Dividends that
accrue on the DSBP shares
during the vesting period may
be paid in cash and/or shares
at the time of vesting.
Clawback and, in the case of
deferred share awards, malus
provisions will apply.
The size of the bonus is assessed by the
Committee taking into account performance
against a scorecard of corporate metrics. The
choice of metrics is reviewed by the Committee
at the start of each financial year, with a target
range set for each measure. Details of the
metrics used to determine the 2017 bonus are
set out in the Annual Report on Remuneration
on page 62 and the metrics to be used for the
2018 bonus are set out in the Annual Report on
Remuneration on page 66.
There is no pre-determined weighting between
metrics. The Committee uses the scorecard as a
guide to help it consider the overall performance
of the business and the appropriate size of the
overall bonus. The Committee will, in its
absolute discretion, take into account all
relevant circumstances when determining the
size of the overall Group bonus, recognising
that, given the long-term nature of the business,
timescales on particular projects may be outside
management's control. The Committee also has
the discretion to reduce the size of the overall
Group bonus if it feels that the level of bonus is
not supported by the underlying financial and
operational performance of the business.
Once performance against the corporate metrics
has been determined, the calculation of an
individual’s allocation will be subject to an
assessment by the Committee of both Group
performance and individual performance.
The amount allocated based on individual
performance cannot exceed 40% of salary.
For 2018, this will be 20% of salary.
The Committee may reduce a participant's
bonus (including to zero) to reflect adverse
events, e.g. health and safety breaches or
poor individual performance.
John Laing Annual Report and Accounts 2017 /
69
Element
Long
Term
Incentive
Plan
(LTIP)
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
Purpose and
link to strategy
Operation
Link to performance
Maximum opportunity
Awards are subject to the achievement of
performance targets linked to the long-term
success of the Company.
These are currently based 50% on growth in NAV
per share and 50% on TSR. However, different
performance metrics/weightings may be set for
future awards to ensure that the LTIP remains
aligned to the Company’s strategy.
A sliding scale of targets is applied for each
performance metric, with no more than 25% of
that part of the award vesting for achievement
of the threshold target.
Up to 200% of salary.
It is intended that
awards for 2018 will
be limited to 175% and
150% of salary for the
Chief Executive Officer
and Group Finance
Director respectively.
To incentivise
and reward
the creation
of long-term
shareholder
value.
At the discretion of the Committee,
Executive Directors will receive
annual awards of shares in the
form of nil (or nominal) cost
options or conditional awards
which will usually vest on the third
anniversary of grant (or, if later,
when the Committee determines
that the performance conditions
have been satisfied).
The awards are subject to the
achievement of performance and
service conditions.
Executive Directors are required to
retain the net of tax number of any
shares vesting under an LTIP
award for a further two years post-
vesting.
Dividends that accrue on the
shares during the vesting period
may be paid in cash and/or shares
at the time of vesting.
Clawback and malus provisions
apply.
Shareholding guidelines
The Executive Directors are required to build and maintain a shareholding in the Company equivalent to 100% of their salary and
are expected to retain all shares vesting under the DSBP and LTIP (net of tax) until such time as the guideline shareholding has
been achieved.
Annual bonus performance metrics
The size of the overall Group bonus is assessed by the Committee taking into account performance against a scorecard of
metrics which reflect the growth of the business. The choice of metrics may change for future award cycles, but was based on
the following for 2017:
Metric
Link to strategy
NAV
Distributions
Disposals
This measures growth in the value of the Group's net assets.
This reflects the Group's ability to realise cash distributions from its investments.
Disposals of existing investments provide additional funding for new investments. Special dividends payable to
shareholders are based on disposal proceeds.
New investments
New investments are designed to contribute to future NAV growth.
Value enhancements
Value enhancements increase the investment portfolio valuation and therefore contribute to future NAV growth.
Profit before tax
This is linked to growth in NAV in any given year and in addition provides an appropriate focus on cost control.
LTIP metrics
Awards under the LTIP vest subject to delivering against metrics which are aligned to long-term shareholder value creation.
The choice of metric may change for future award cycles, but is currently based on the following:
Metric
Link to strategy
TSR
This measures the total return to shareholders provided through share price appreciation and dividends.
TSR is measured relative to performance against a comparative group comprising the members of the
FTSE 250 index. TSR provides a clear alignment between the value created for shareholders and the reward
earned by executives.
NAV per share
This measures the overall value of the Group's net assets (adjusted for dividends paid or approved) divided
by the number of shares in issue and provides an assessment of the growth of the business over time.
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/ John Laing Annual Report and Accounts 2017
70
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
Incentive plan operation
The Committee operates the Company’s incentive plans according to their respective rules and consistent with normal market
practice, the Listing Rules and HMRC rules where relevant, including flexibility in a number of regards. This includes dealing
with leavers and making adjustments to awards following acquisitions, disposals, changes in share capital and other merger and
acquisition activity.
The Committee also retains the ability to adjust the targets and/or set different metrics for the annual bonus plan and
outstanding LTIP awards if events occur which cause it to determine that the conditions are no longer appropriate and the
amendment is required so that the conditions achieve their original purpose and are not materially less difficult to satisfy.
Any use of the above discretions would, where relevant, be explained in the Annual Report on Remuneration and may, as
appropriate, be the subject of consultation with the Company’s major shareholders.
Clawback and malus
The Company has the right to reduce the number of shares over which an award was granted under the DSBP or LTIP where it is
discovered that the award was granted over too many shares as a result of a material misstatement in the Company’s accounts,
when there has been an error or reliance on misleading information when assessing the size of the award that was granted,
and/or it is discovered that the participant could reasonably have been dismissed as a result of his/her misconduct.
The Company may also clawback cash bonus awards or previously vested DSBP and LTIP awards in accordance with the
principles set out above to ensure that the full value of any overpayment is recouped. In these circumstances the Committee
may apply clawback within three years of the payment of the cash bonus, date of grant of a DSBP award or the vesting of an
LTIP award.
Shareholder views
The Remuneration Committee values the views of the Company’s shareholders and guidance from shareholder representative
bodies. Shareholder feedback received in relation to the AGM, as well as any additional feedback received during the year, is
considered as part of the Company’s annual remuneration review. The Committee will consult with major shareholders in
advance of making any significant changes to remuneration arrangements.
Link to the remuneration policy for all employees
The remuneration policy for the Executive Directors is similar to the policy for employees across the Group, although the
Committee does not formally consult with employees in respect of the design of the Directors’ remuneration policy.
A consistent approach to remuneration is applied across the Group – with the same overarching principle that reward should be
sufficient to attract and retain high calibre talent and that reward should support the delivery of the business strategy.
The same approach to salary reviews is applied to all employees and the Executive Directors participate in the same overall
bonus structure as other Group employees (except those employees within JLCM). However only the most senior employees
are subject to deferral arrangements and some other employees may have a higher weighting on individual performance.
The Executive Directors also participate in the same LTIP as other senior executives.
However, there are some differences in the structure of the remuneration policy for the Executive Directors compared to other
senior employees, which the Committee believes are necessary to reflect the different levels of responsibility. The two main
differences are the increased emphasis on performance-related pay for Executive Directors (through a higher variable pay
opportunity) and a greater focus on long-term alignment (through bonus deferral, additional holding periods for LTIP awards
and minimum shareholding guidelines).
John Laing Annual Report and Accounts 2017 /
71
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
Remuneration reward scenarios
The total remuneration for each of the Executive Directors that could result from the remuneration policy in 2018 is shown below:
Minimum
Target
Maximum
Minimum
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Target
Maximum
Notes:
100%
£537
44%
30%
100%
£410
23%
33%
£1,223
26%
44%
£1,816
47%
32%
24%
29%
£878
27%
41%
£1,276
0
250
500
750
1,000
1,250
1,500
1,750
2,000
£’000
Fixed Pay
Annual Bonus
Long-term Incentive Plan (LTIP)
1. Fixed pay consists of salary, benefits and pension. Salary is the amount to be paid in 2018 and benefits are based on the value shown in the single total
figure of remuneration for 2017 on page 59. Pension is shown as 15% of salary.
2. The maximum bonus opportunity is 100% of salary with 60% of salary earned at target performance. Any bonus earned for above target performance is
deferred in shares, which vest subject to continued employment over one, two and three years.
3. The maximum LTIP award for 2018 is 175% of salary for the Chief Executive Officer and 150% of salary for the Group Finance Director. An award of 50%
of the maximum is assumed for target performance. LTIP awards are subject to a three year performance period and the net of tax number of any shares
received must be held for a further two years post vesting.
4. No assumptions are made as to future share price movements which will impact on the actual values to be received under the DSBP and LTIP.
Executive Director Recruitment and Promotions
Remuneration arrangements for a new appointment will be set in accordance with the policy for the existing Executive Directors,
except as noted below:
•
•
•
•
If it is considered appropriate to set the salary for a new Executive Director at a level which is below market, his or her salary
may be increased in future periods to achieve the desired market positioning by way of a series of phased above inflation
increases, subject to his or her continued development in the role.
Any bonus payment for the year of joining will normally be pro-rated to reflect the proportion of the period worked and the
Committee may set different performance measures and targets, depending on the timing and nature of the appointment.
In the case of an Executive Director being recruited overseas, being recruited by the Company to relocate overseas or an existing
Executive Director being asked to relocate overseas, expatriate benefits may be provided on an ongoing basis. The Committee
may also approve the payment of one-off relocation-related expenses and legal fees.
The Committee may offer cash and/or share-based elements to compensate an individual for remuneration forfeited on
leaving a former employer, if it considers these to be in the best interests of the Company (and therefore its shareholders).
Such payments would take account of remuneration relinquished and would mirror (as far as possible) the delivery
mechanism, time horizons and performance requirement attached to that remuneration. Where possible any such payments
would be facilitated through the Company’s existing share plans, but, if not, the awards may be granted outside these plans as
permitted under the Listing Rules which allow for the grant of awards to facilitate the recruitment of an Executive Director.
•
In the case of an internal appointment, any variable pay element awarded in respect of the prior role will be allowed to pay out
according to its original terms or adjusted as considered appropriate to reflect the new role.
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/ John Laing Annual Report and Accounts 2017
72
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
Executive Directors' service agreements and payments for loss of office
The Executive Directors entered into new service agreements with the Company on 16 January 2015. There is no fixed term and
the contracts continue until terminated by either party giving 12 months’ notice.
The Company is also entitled to terminate the Executive Directors’ employment by payment of a cash sum in lieu of notice equal
to salary and the cost to the Company of providing contractual benefits (including pension but excluding bonus) during what
would otherwise have been the notice period. A payment in lieu of notice can, at the Company’s discretion, be paid as a lump
sum or in equal monthly instalments over the notice period. There is a mechanism in the agreement to reduce the instalments
where the Executive Director commences alternative employment during the notice period. Outplacement services and
reimbursement of legal costs may also be provided.
The Company may also terminate the Executive Directors' employment with immediate effect and with no liability to make any
further payments in certain prescribed circumstances (e.g. in the case of a serious or repeated breach of the Executive
Directors' obligations).
The Committee may pay any statutory entitlements or settle or compromise claims in connection with a termination of
employment, where considered in the best interest of the Company.
The table below sets out the general position in respect of incentive arrangements for departing Executive Directors. In
accordance with the terms of the relevant incentive plan rules, and based on the circumstances of any departure, the Committee
has discretion to determine how an Executive Director should be categorised for each element and determine the relevant
vesting levels:
Bad Leaver¹
Good Leaver²
Annual Bonus
No entitlement.
Bonus may be payable subject to performance. Awards normally pro-rated based on
the period worked during the financial year.
DSBP
LTIP
Unvested awards will lapse.
Unvested awards will vest on the date of cessation with no pro-rata reduction.
Unvested awards will lapse.
Awards will vest on the normal vesting date, subject to performance and a time pro-rata
reduction (based on the number of complete months served from the date of grant to
cessation of employment).
The Committee may, in its absolute discretion, determine that awards can vest, subject to
performance, earlier than the normal vesting date and, if a participant dies, the award
will ordinarily vest, subject to performance, on the date of death unless the Committee
decides it should vest on the normal vesting date.
In any of the circumstances described above, the Committee may determine that the
pro-rata reduction should not apply at all or should apply to a lesser extent if it
considers that exceptional circumstances justify such treatment.
1
2
e.g. termination for cause etc.
e.g. death, injury, disability, redundancy, retirement with the agreement of the participant’s employer, the sale of the participant’s employer or the
business in which he or she is employed out of the Group or any other reason at the Remuneration Committee’s discretion.
Other
In the event of a change of control or voluntary winding-up, unvested LTIP awards will vest at the time of the relevant event
subject to performance and a time-based pro-rata reduction (although the Committee may determine that the pro-rata reduction
should not apply at all or should apply to a lesser extent if it considers that exceptional circumstances justify such a treatment).
Unvested DSBP awards will vest early and in full. The Committee may require LTIP and DSBP awards to be exchanged for
equivalent awards over shares in a new holding company if the change of control is part of an internal reorganisation.
In the event that a demerger, special dividend or other similar event is proposed which, in the opinion of the Committee, would
affect the price of a share to a material extent, the Committee may decide that unvested LTIP and DSBP awards will vest on the
same basis as described above.
John Laing Annual Report and Accounts 2017 /
73
DIRECTORS' REMUNERATION POLICY
(CONTINUED)
External Board appointments
The Committee recognises that Executive Directors may be invited to become non-executive directors in other companies and
that these appointments can enhance their knowledge and experience to the benefit of the Company. It is the Company’s policy
that Board approval is required before any external appointment may be accepted by an Executive Director. The Executive
Director is permitted to retain any fees paid for such services.
Olivier Brousse is a non-executive director of 1001 Fontaines and of Brive Rugby Club. He does not receive any fees for these
appointments. Patrick O'D Bourke is a non-executive director of Affinity Water Limited and received fees of £47,587.50 in 2017
(£47,000 in 2016).
Remuneration for the Chairman and non-executive directors
Operation
Fee policy
The Chairman is paid an all-inclusive fee for all Board responsibilities.
The other non-executive directors receive a basic Board fee, with supplementary fees payable for additional Board
responsibilities (e.g. for Chairmanship of the Audit & Risk or Remuneration Committee or the role of Senior
Independent Director).
The non-executive directors do not participate in any of the Company’s incentive arrangements.
The maximum aggregate fee is set at £750,000 in the Company's Articles of Association. Current fee levels are set out
in the Annual Report on Remuneration on page 64. Fee levels are reviewed on a periodic basis, and may be increased
taking into account factors such as the time commitment of the role and market levels in companies of comparable
size and complexity and other broadly comparable companies.
The Chairman and the non-executive directors are entitled to reimbursement of reasonable expenses (and any tax
payable thereon).
The letter of appointment for the Chairman states that his appointment is expected to last for at least three years but
will be subject to annual re-election at the AGM. The appointment is terminable by either party giving to the other six
months’ written notice or at any time in accordance with the Articles of Association of the Company (without prejudice
to the Chairman’s right to receive six months’ payment in lieu of notice unless the removal is as a result of a serious
default on his part).
The appointments of the other non-executive directors are for initial terms of three years. The non-executive directors
are subject to annual re-election by the Company’s shareholders. Their appointments may be terminated at any time
upon written notice or in accordance with the Articles of Association of the Company or upon their resignation. The
non-executive directors are not entitled to receive any compensation on termination of their appointment.
Director
Date of letter of appointment*
Unexpired term at 31 December 2017**
Expenses
Letters of
appointment
and policy on
termination
Dr Phil Nolan
16 January 2015
Jeremy Beeton
18 December 2014
Toby Hiscock
David Rough
Will Samuel
16 January 2015
17 December 2014
7 December 2017
6 weeks
6 weeks
6 weeks
6 weeks
Two years and 11 months
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Anne Wade
* The agreements were conditional on and did not become effective until the Company's admission to the Official List
17 December 2014
6 weeks
on 17 February 2015.
** Amendments to the letters of appointment were signed in January 2018 extending the terms by a further three years
to 16 February 2021.
Recruitment
policy
For the appointment of a new Chairman or non-executive director, the fee arrangement would be set in accordance
with the approved Remuneration Policy in force at that time.
/ John Laing Annual Report and Accounts 2017
74
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 7 March 2018 and is signed on its behalf by:
Olivier Brousse
CHIEF EXECUTIVE OFFICER
Patrick O’D Bourke
GROUP FINANCE DIRECTOR
7 March 2018
7 March 2018
John Laing Annual Report and Accounts 2017 /
75
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2017 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of John Laing Group plc (the ‘Parent Company’) and its subsidiaries (together the
‘Group’) which comprise:
•
•
•
•
•
•
the Group income statement;
the Group statement of comprehensive income;
the Group and Parent Company statements of changes in equity;
the Group and Parent Company balance sheets;
the Group and Parent Company cash flow statements; and
the related notes 1 to 27 of the Group financial statements and the related notes 1 to 13 of the Parent Company financial
statements.
The financial reporting framework that has been applied in their preparation is applicable law and IFRS as adopted by the
European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
• Valuation of investments
• Valuation of defined benefit pension schemes.
The above key audit matters are consistent with the prior year with the exception that in the prior year, as part of
the valuation of investments we paid particular attention to the valuation of the Group’s investments in New Royal
Adelaide Hospital and Manchester Waste (being the Group’s investment in Manchester Waste VL Co and
Manchester Waste TPS Co). Following commercial acceptance being achieved on New Royal Adelaide Hospital in
June 2017 and the Group’s investment in Manchester Waste VL Co being acquired by the Greater Manchester Waste
Disposal Authority in September 2017, we no longer consider the valuation of these investments to be a key audit
matter.
The materiality that we used for the Group financial statements in the current year was £21 million. The materiality
that we used for the Parent Company financial statements was £19 million. This is 1.9% of shareholders’ equity for
the Group and 1.6% of shareholders’ equity for the Parent Company.
Our audit scope primarily focused on the fair value of those PPP and renewable energy investments which are
significant to the Group.
There has been no significant change in our audit approach in the current year.
Materiality
Scoping
Significant changes
in our approach
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/ John Laing Annual Report and Accounts 2017
76
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC
(CONTINUED)
CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT
We confirm that we have nothing material
to report, add or draw attention to in respect
of these matters.
We confirm that we have nothing material
to report, add or draw attention to in respect
of these matters.
Going concern
We have reviewed the directors’ statement in note 2(c) to the Group
financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s and Parent
Company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements.
We are required to state whether we have anything material to add or
draw attention to in relation to that statement required by Listing Rule
9.8.6R(3) and report if the statement is materially inconsistent with our
knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering
whether they were consistent with the knowledge we obtained in the
course of the audit, including the knowledge obtained in the evaluation
of the directors’ assessment of the Group’s and the Parent Company’s
ability to continue as a going concern, we are required to state whether
we have anything material to add or draw attention to in relation to:
• the disclosures on pages 37 – 42 that describe the principal risks and
explain how they are being managed or mitigated;
• the directors' confirmation on page 37 that they have carried out a
robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity; or
• the directors’ explanation on page 36 as to how they have assessed the
prospects of the Group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to
the prospects of the Group required by Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters include those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team.
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 do not provide a separate opinion on these matters.
John Laing Annual Report and Accounts 2017 /
77
VALUATION OF INVESTMENTS
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
The Group holds a range of investments which primarily include PPP and renewable energy assets.
The total value of these assets at 31 December 2017 was £1,194 million (31 December 2016 –
£1,176 million) as disclosed in note 12 to the Group financial statements. These investments are
held across a range of different sectors comprising transport, environmental (including renewable
energy) and social infrastructure, and a range of geographies including the UK, Europe, North
America and Asia Pacific.
The valuation of investments is a significant judgement underpinned by a number of key
assumptions and estimates. The key estimate is the discount rates adopted. Given the level of
judgement involved, we also consider whether there was a potential for fraud through the possible
manipulation of these rates. Other key sources of estimation uncertainty include forecast project
cash-flows, in particular future power prices which impact the value of the Group’s investments in
renewable energy projects.
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.
An independent opinion is obtained from a third party that the portfolio as a whole represents fair
market value at the balance sheet date.
More information on the valuation and valuation methodology (including the discount rates adopted,
the relevant sensitivity of the valuation of investments to a change in those rates and the relevant
sensitivity of the valuation to a change in future power prices) can be found on page 55 of the Audit
& Risk Committee’s report and note 3 to the Group financial statements.
• We assessed the design and implementation of the controls in place to value the Group’s
investments.
• We obtained evidence to substantiate the discount rate(s) adopted including benchmarking
management’s discount rates against market data, including the Group’s disposals in the
current and previous period. We also benchmarked the discount rates on key assets to each
other to ensure that we understood why projects have different rates and why there had been a
change in the rates since the prior year. We performed this work in conjunction with our own
valuation specialists.
• We met with the Group’s external valuer to understand the process undertaken by them in
arriving at their opinion that the portfolio as a whole represents fair market value. This included
assessing how the discount rates adopted by the Group benchmarked against those of the
external valuer. We also assessed the competence and independence of the external valuer.
• We reviewed the key changes in cash flows since the prior year within a sample of project
models which included checking that the latest forward power price curves had been correctly
incorporated into a sample of project models.
• We checked that the disclosures in the financial statements were appropriate particularly in
respect of the judgements taken and the sensitivities disclosed.
Key observations
• While there are both upside and downside risks on the value of individual assets we consider the
judgements adopted in valuing the Group’s investments as a whole (including the discount
rate(s) adopted) to be appropriate.
• We consider the disclosures around the valuation of investments to be appropriate.
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78
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC
(CONTINUED)
VALUATION OF DEFINED BENEFIT PENSION SCHEMES
Key audit matter
description
The Group has two defined benefit pension schemes (The John Laing Pension Fund and The
John Laing Pension Plan) which had a combined net deficit of £32 million at 31 December 2017
(£61 million at 31 December 2016).
The valuation of the deficit is subject to a number of assumptions including the adoption of the
appropriate (i) discount rate (ii) inflation rate and (iii) mortality assumptions. We considered
whether there was potential for fraud through the possible manipulation of these assumptions.
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
There is also a judgement concerning the Group’s ability to recover a surplus under the rules of the
John Laing Pension Fund and consequently the consideration of minimum funding requirements under
IFRIC 14 ‘
’.
See note 19 of the Group financial statements for further information and page 55 of the Audit &
Risk Committee’s report and the Group’s disclosures around critical accounting judgements and key
sources of estimation uncertainty in note 3.
• We assessed the design and implementation of the controls in place when valuing the Group’s
defined benefit pension schemes including the setting of actuarial assumptions.
• In conjunction with our internal actuarial specialists, we compared the Group’s key
assumptions, including the discount rate, mortality assumptions and inflation rate against our
expected benchmarks and those adopted by other companies in the market.
• 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.
How the scope of our
audit responded to the
key audit matter
Key observations
• We consider the judgements adopted by the Group in valuing the pension scheme liabilities to be
appropriate.
• We 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.
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole (both the Group and
Parent Company financial statements) to be as follows:
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
Materiality for the
financial statements
£21 million (2016 – £19 million) with the
increase driven by an increase in
shareholders’ equity.
£19 million (2016 – £17 million) with the
increase driven by an increase in
shareholders’ equity.
Basis for determining
materiality
Rationale for the
benchmark applied
Below 2% of Group shareholders’ equity.
Below 2% of Parent Company
shareholders’ equity.
Shareholders’ equity was selected as net asset
value is a key performance indicator for the
Group. This is consistent with the prior year.
Shareholders’ equity was selected as net asset
value is a key performance indicator for the
Parent Company. This is consistent with the
prior year.
We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £500,000
(2016 – £500,000) for the Group and for the Parent Company, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit & Risk Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
John Laing Annual Report and Accounts 2017 /
79
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls,
and assessing the risks of material misstatement at the Group level. Our audit scope primarily focused on the fair value of those
PPP and renewable energy investments which are significant to the Group.
We made enquiries of the auditors of a sample of investments as to whether they were aware of any matters which may impact
the fair value of those investments.
Our audit work on those subsidiaries which provide asset management services and which are consolidated in the Group
financial statements was executed at a materiality lower than Group materiality. All audit work on these subsidiaries was
performed by the Group audit team.
At the Group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information of the remaining subsidiaries
not subject to audit or audit of specified account balances.
The Group audit team has initiated a programme of planned visits that has been designed so that it visits a sample of the
Group’s investments each year with a specific focus on visiting the Group’s largest investments by value. Over the past three
years the Group audit team has visited seven of the Group’s investments which covered 25% of the investment portfolio by value
at 31 December 2017.
We have nothing to report in respect
of these matters.
OTHER INFORMATION
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of
the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information,
we are required to report that fact.
In this context, matters that we are specifically required to report to you as
uncorrected material misstatements of the other information include
where we conclude that:
Fair, balanced and understandable – the statement given by the directors
that they consider 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 Group’s position and
performance, business model and strategy, is materially inconsistent with
our knowledge obtained in the audit; or
Audit committee reporting – the section describing the work of the audit
committee does not appropriately address matters communicated by us to
the audit committee; or
Directors’ statement of compliance with the UK Corporate Governance
Code – the parts of the directors’ statement required under the Listing
Rules relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK Corporate Governance Code.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC
(CONTINUED)
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely 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 this report, or for
the opinions we have formed.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
We have nothing to report in respect
of these matters.
• we have not received all the information and explanations we require for
our audit; or
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the
accounting records and returns.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of directors’ remuneration have not been
made or the part of the directors’ remuneration report to be audited is not
in agreement with the accounting records and returns.
We have nothing to report in respect
of these matters.
John Laing Annual Report and Accounts 2017 /
81
OTHER MATTERS
Auditor tenure
We were initially appointed as auditors by the Board of John Laing Group in 2008 to audit the financial statements for the year
ended 31 December 2008. Following an audit tender led by the Audit & Risk Committee in 2016, on the recommendation of the
Board, we were reappointed as auditors at the Annual General Meeting on 11 May 2017 to audit the financial statements for the
year ended 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is 10 years, covering the years ended 31 December 2008 to 31 December 2017.
Consistency of the audit report with the additional report to the Audit & Risk Committee
Our audit opinion is consistent with the additional report to the Audit & Risk Committee we are required to provide in accordance
with ISAs (UK).
Claire Faulkner FCA (Senior statutory auditor)
FOR AND ON BEHALF OF DELOITTE LLP
STATUTORY AUDITOR
LONDON, UNITED KINGDOM
7 March 2018
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GROUP INCOME STATEMENT
for the year ended 31 December 2017
Net gain on investments at fair value through profit or loss
Other income
Operating income
Administrative expenses
Profit from operations
Finance costs
Profit before tax
Tax credit/(charge)
Profit for the year attributable to the Shareholders of the Company
Earnings per share (pence)
Basic
Diluted
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
Notes
12
7
4
8
10
4
11
5
5
166.3
30.4
196.7
(58.9)
137.8
(11.8)
126.0
1.5
127.5
34.7
34.3
218.8
42.0
260.8
(58.4)
202.4
(10.3)
192.1
(1.8)
190.3
51.9
51.4
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
Profit for the year
Exchange differences on translation of overseas operations
Actuarial gain/(loss) on retirement benefit obligations
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
John Laing Annual Report and Accounts 2017 /
83
Notes
19
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
127.5
190.3
0.1
6.4
6.5
134.0
0.3
(39.2)
(38.9)
151.4
The only movement which could subsequently be recycled to the Group Income Statement is the exchange difference on
translation of overseas operations.
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GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Notes
Share capital
£ million
Share premium
£ million
Other reserves Retained earnings
£ million
£ million
Total equity
£ million
Balance at 1 January 2017
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Share-based incentives
Dividends paid
1
6
36.7
–
–
–
–
–
218.0
–
–
–
–
–
Balance at 31 December 2017
36.7
218.0
2.7
–
–
–
3.2
–
5.9
759.4
127.5
6.5
134.0
–
(30.1)
863.3
1,016.8
127.5
6.5
134.0
3.2
(30.1)
1,123.9
for the year ended 31 December 2016
Notes
Share capital
£ million
Share premium
£ million
Other reserves Retained earnings
£ million
£ million
Total equity
£ million
Balance at 1 January 2016
Profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Share-based incentives
Dividends paid
1
6
36.7
–
–
–
–
–
218.0
–
–
–
–
–
Balance at 31 December 2016
36.7
218.0
0.7
–
–
–
2.0
–
2.7
634.2
190.3
(38.9)
151.4
–
(26.2)
759.4
889.6
190.3
(38.9)
151.4
2.0
(26.2)
1,016.8
1
Dividends paid:
Dividends on ordinary shares
Per ordinary share:
– final paid
– interim proposed and paid
– final proposed
Year ended
31 December
2017
pence
Year ended
31 December
2016
pence
6.30
1.91
8.70
5.30
1.85
6.30
The total estimated amount to be paid in May 2018 in respect of the proposed final dividend for 2017 is £31.9 million.
These amounts have not been adjusted for the rights issue announced on 8 March 2018.
GROUP BALANCE SHEET
as at 31 December 2017
Non-current assets
Plant and equipment
Investments at fair value through profit or loss
Deferred tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Current tax liabilities
Borrowings
Trade and other payables
Net current liabilities
Non-current liabilities
Retirement benefit obligations
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
John Laing Annual Report and Accounts 2017 /
85
31 December
2017
£ million
31 December
2016
£ million
Notes
12
18
13
15
14
19
20
21
22
0.1
1,346.4
0.5
1,347.0
7.6
2.5
10.1
0.3
1,257.5
1.0
1,258.8
7.4
1.6
9.0
1,357.1
1,267.8
(1.4)
(173.2)
(17.3)
(191.9)
(181.8)
(40.3)
(1.0)
(41.3)
(4.1)
(161.4)
(14.7)
(180.2)
(171.2)
(69.3)
(1.5)
(70.8)
(233.2)
(251.0)
1,123.9
1,016.8
36.7
218.0
5.9
863.3
36.7
218.0
2.7
759.4
Equity attributable to the Shareholders of the Company
1,123.9
1,016.8
The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and
authorised for issue on 7 March 2018. They were signed on its behalf by:
Olivier Brousse
CHIEF EXECUTIVE OFFICER
Patrick O'D Bourke
GROUP FINANCE DIRECTOR
7 March 2018
7 March 2018
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GROUP CASH FLOW STATEMENT
for the year ended 31 December 2017
Net cash outflow from operating activities
Investing activities
Net cash transferred from/(to) investments at fair value through profit or loss
Purchase of plant and equipment
Net cash from/(used in) investing activities
Financing activities
Dividends paid
Finance costs paid
Proceeds from borrowings
Repayment of borrowings
Net cash (used in)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Notes
23
12
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
(47.3)
(37.1)
77.4
(0.1)
77.3
(30.1)
(10.0)
11.0
–
(29.1)
0.9
1.6
–
2.5
(73.4)
(0.1)
(73.5)
(26.2)
(8.9)
165.0
(19.0)
110.9
0.3
1.1
0.2
1.6
John Laing Annual Report and Accounts 2017 /
87
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
1 GENERAL INFORMATION
The 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.
The 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
The Group financial statements have been prepared on the historical cost basis except for the revaluation of the
investment portfolio and other financial instruments that are measured at fair value at the end of each reporting period.
The Company has concluded that it meets the definition of an investment entity as set out in IFRS 10 Consolidated
Financial Statements, paragraph 27 on the following basis:
(i) as an entity listed on the London Stock Exchange, the Company is owned by a number of investors;
(ii) the Company holds a substantial portfolio of investments in project companies through intermediate holding
companies. The underlying projects have a finite life and the Company has an exit strategy for its investments which
is either to hold them to maturity or, if appropriate, to divest them. Investments take the form of equity and/or
subordinated debt;
(iii) the Group’s strategy is to originate, invest in, and manage infrastructure assets. It invests in PPP and renewable
energy projects and aims to deliver predictable returns and consistent growth from its investment portfolio. The
underlying project companies have businesses and activities that the Group is not directly involved in. The Group's
returns from the provision of management services are small in comparison to the Group’s overall investment-based
returns; and
(iv) the Group measures its investments in PPP and renewable energy projects on a fair value basis. Information on the
fair value of investments forms part of monthly management reports reviewed by the Group’s Executive Committee,
who are considered to be the Group’s key management personnel, and by its Board of Directors.
Although the Group has a net defined benefit pension liability, IFRS 10 does not exclude companies with non-investment
related liabilities from qualifying as investment entities.
Investment entities are required to account for all investments in controlled entities, as well as investments in associates
and joint ventures, at fair value through profit or loss (FVTPL), except for those directly owned subsidiaries that provide
investment related services or engage in permitted investment related activities with investees (Service Companies).
Service Companies are consolidated rather than recorded at FVTPL.
Project companies in which the Group invests are described as “non-recourse”, which means that providers of debt to
such project companies do not have recourse to John Laing beyond its equity and/or subordinated debt commitments in
the underlying projects. Subsidiaries through which the Company holds its investments in project companies, which are
held at FVTPL, and subsidiaries that are Service Companies, which are consolidated, are described as “recourse”.
Unconsolidated project company subsidiaries are part of the ‘non-recourse’ business. Based on arrangements in place
with those subsidiaries, the Group has concluded that there are no:
a) significant restrictions (resulting from borrowing arrangements, regulatory requirements or contractual
arrangements) on the ability of an unconsolidated subsidiary to transfer funds to the Group in the form of cash
dividends or to repay loans or advances made to the unconsolidated subsidiary by the Group; and
b) current commitments or intentions to provide financial or other support to an unconsolidated subsidiary, including
commitments or intentions to assist the subsidiary in obtaining financial support, beyond the Group’s original
investment commitment.
Transactions and balances receivable or payable between recourse subsidiary entities held at fair value and those that are
consolidated are eliminated in the Group financial statements. Transactions and balances receivable or payable between
non-recourse project companies held at fair value and recourse entities that are consolidated are not eliminated in the
Group financial statements.
For details of the subsidiaries that are consolidated, see note 13 to the Company financial statements.
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NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
b) Adoption of new and revised standards
The Group has adopted the following amendments to IFRS in 2017, none of which has had a material impact on the financial
statements with the exception of the Amendments to IAS 7 Statement of Cash Flows Disclosure Initiative which has led the
Group to present a reconciliation of the changes in liabilities arising from financing activities. This reconciliation can be
found on note 24 of the Group financial statements.
•
•
•
Amendments to IAS 7 Statement of Cash Flows Disclosure Initiative
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to IFRS 12 Disclosure of Interest in Other Entities included in Annual Improvements to IFRS Standards
2014-2016 Cycle
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
IFRS 16 Leases
Amendments resulting from Annual Improvements to IFRS 2014-2016 Cycle
The Group’s principal revenue stream is net gain on investments held at FVTPL, which is accounted for under IAS 39
Financial Instruments Recognition and Measurement rather than IFRS 15. The Group’s other revenue stream is other
income comprising fees from asset management services and recovery of bid costs on financial close. The Group does
not expect IFRS 15 to have a material impact on the accounting for these revenue streams.
The adoption of IFRS 16 will require the Group to bring its operating leases on to the Group Balance Sheet. The Group
does not have material operating leases (total outstanding commitments under operating leases at 31 December 2017
are £6.4 million) and therefore adopting the standard is not expected to have a significant impact.
It is not expected that IFRS 9, when it becomes effective, will have a significant impact on the measurement of the
Group’s financial assets and liabilities as the Group’s principal financial assets are investments held at fair value through
profit or loss which are not impacted by the adoption of IFRS 9. IFRS 9 also changes the classification of financial assets
and implements new rules around hedge accounting. The Group does not have any financial assets whose classification
will be impacted by adoption of IFRS 9 nor does it apply hedge accounting to any of its derivatives.
Issued and not endorsed by the EU
•
•
•
•
•
•
•
•
Amendments resulting from Annual Improvements to IFRS 2015-2017 Cycle
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions
Amendments to IAS 40 Transfers of Investment Property
Amendments to IFRS 9 Prepayment Features with Negative Compensation
Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 17 Insurance Contracts.
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.
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.
John Laing Annual Report and Accounts 2017 /
89
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
c) 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 £475 million corporate banking facilities committed until March 2020, together
with the additional £50 million of liquidity facilities committed until February 2019. 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 17.
d) Revenue
(i) Dividend income
The key accounting policies for the Group’s material revenue streams are as follows:
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.
(ii) Net gain on investments at FVTPL
(iii) Other income
Net gain on investments at FVTPL excludes dividend income referred to above. Please refer to accounting policy f)(i)
for further detail.
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
Recovery of bid costs on financial close
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.
Costs incurred in respect of bidding for new 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 VAT and the value of intra-group transactions between recourse subsidiaries held at FVTPL
and those that are consolidated.
e) 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.
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90
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
f) 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.
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
(i) Financial assets
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL
are recognised immediately in profit or loss.
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: cash and cash equivalents, 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, loans and receivables and cash
and cash equivalents:
•
Financial assets at FVTPL comprise the Group’s investment in John Laing Holdco Limited (through which the
Group indirectly holds its investments in projects) 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 f)(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' in the Group Balance Sheet.
•
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.
John Laing Annual Report and Accounts 2017 /
91
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
(ii) Impairment of financial assets
2 ACCOUNTING POLICIES
(CONTINUED)
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.
(v) Derivative financial instruments
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or they expire.
The Group treats forward foreign exchange contracts and currency swap deals it enters into as derivative financial
instruments at FVTPL. All the Group’s derivative financial instruments are held by subsidiaries which are recorded at
FVTPL and consequently the fair value of derivatives is incorporated into investments held at FVTPL.
g) 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.
h) 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.
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92
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
i)
Taxation
Current tax
The tax charge or credit represents the sum of tax currently payable and deferred 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, which includes the fair value movement on the investment in John Laing
Deferred tax
Holdco Limited. 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 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.
j) 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.
k) 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 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 (ii) unfunded post-retirement medical benefits.
Net interest expense or income is recognised within finance costs.
l) 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.
John Laing Annual Report and Accounts 2017 /
93
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
m) 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.
n) Employee benefit trust
In June 2015, the Group established the John Laing Group Employee Benefit Trust (EBT) as described further in note 6.
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 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.
3 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 (which are those estimates where there is a risk
of material adjustment in the next reporting period) are in respect of the fair value of investments and accounting for the
Group’s defined benefit pension liabilities.
Critical accounting judgements in applying the Group’s accounting policies
Fair value of investments
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 full valuation of the Group’s investment portfolio is
prepared on a consistent, principally discounted cash flow basis at 30 June and 31 December. The key inputs, therefore,
to the valuation of each investment are (i) the discount rate; and (ii) the cash flows forecast to be received from such
investment. 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 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; future rates of inflation and, for renewable
Key sources of estimation uncertainty
energy projects, energy yield and future energy prices. Value enhancements are only incorporated when the Group has
sufficient evidence that they can be realised.
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 operational stage. The discount rates applied to investments at 31 December 2017 were in the range of 6.8% to 11.8%
(31 December 2016 – 7.0% to 11.6%). Note 17 provides details of the weighted average discount rate applied to the investment
portfolio as a whole and sensitivities to the investment portfolio value from changes in discount rates.
The key sources of estimation uncertainty present in the forecast cash flows to be received from investments are the
forecasts of future energy prices on renewable energy projects and forecasts for long-term inflation. Note 17 provides details
of the sensitivities to the investment portfolio value from changes in forecast energy prices and forecast long-term inflation.
The Group does not consider the other factors that affect cash flows, as described in the critical accounting judgements in
applying the Group’s accounting policies above, to be key sources of estimation uncertainty. They are based either on reliable
data or the Group’s experience and individually not considered likely to materially deviate year on year.
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94
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Critical judgements in applying the Group’s accounting policies
(CONTINUED)
Pension and other post-retirement liability accounting
The combined accounting deficit in the Group’s defined benefit pension and post-retirement medical schemes at
31 December 2017 was £40.3 million (31 December 2016 – £69.3 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
Key sources of estimation uncertainty
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.
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 2017 and the sensitivity of the pension liabilities to certain changes in
these assumptions are illustrated in note 19.
4 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. For the year ended 31 December 2017, the principal categories of activity, and thus the reportable
segments under IFRS 8, were: 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 PPP and
renewable energy infrastructure 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.
For the year ended 31 December 2017, the Board did 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 17.
The following is an analysis of the Group's operating income and profit before tax for the years ended 31 December 2017 and
31 December 2016:
Year ended 31 December 2017
Net gain on investments at FVTPL
Other income
Operating income
Administrative expenses
Profit from operations
Finance costs
Profit before tax
Reportable segments
Primary
Investment
£ million
Secondary
Asset
Investment Management
£ million
£ million
Segment
Sub-total
£ million
Inter-
segment
£ million
Non-
segmental
results
£ million
Total
£ million
179.9
3.7
183.6
(37.9)
145.7
(8.4)
137.3
(21.5)
–
(21.5)
(8.2)
(29.7)
(2.2)
(31.9)
–
42.4
42.4
(23.6)
18.8
–
18.8
158.4
46.1
204.5
(69.7)
134.8
(10.6)
124.2
–
(17.3)
(17.3)
17.3
–
–
–
7.9
1.6
9.5
(6.5)
3.0
(1.2)
1.8
166.3
30.4
196.7
(58.9)
137.8
(11.8)
126.0
John Laing Annual Report and Accounts 2017 /
95
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
4 OPERATING SEGMENTS
(CONTINUED)
Net gain on investments at FVTPL
Other income
Operating income
Administrative expenses
Profit from operations
Finance costs
Profit before tax
Reportable segments
Year ended 31 December 2016
Primary
Investment
£ million
Secondary
Asset
Investment Management
£ million
£ million
Segment
Sub-total
£ million
Inter-
segment
£ million
Non-
segmental
results
£ million
Total
£ million
144.4
7.5
151.9
(33.3)
118.6
(5.5)
113.1
66.9
–
66.9
(7.6)
59.3
(2.2)
57.1
–
47.4
47.4
(27.5)
19.9
–
19.9
211.3
54.9
266.2
(68.4)
197.8
(7.7)
190.1
–
(14.7)
(14.7)
14.7
–
–
–
7.5
1.8
9.3
(4.7)
4.6
(2.6)
2.0
218.8
42.0
260.8
(58.4)
202.4
(10.3)
192.1
Non-segmental results include results from corporate activities.
For the year ended 31 December 2017, the Group had three (2016 – two) investments from each of which it received more
than 10% of its operating income. The operating income from the three investments was £36.1 million, £37.3 million and
£27.5 million, all of which was reported within the Primary Investment sector. The Group treats each investment in a project
company as a separate customer for the purpose of IFRS 8.
The Group's investment portfolio, comprising investments in project companies and a listed fund included within investments
at FVTPL (see note 12) 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.
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31 December
2017
£ million
31 December
2016
£ million
580.3
613.5
1,193.8
0.3
152.3
1,346.4
10.7
1,357.1
(40.3)
(192.9)
(233.2)
696.3
479.6
1,175.9
0.3
81.3
1,257.5
10.3
1,267.8
(69.3)
(181.7)
(251.0)
1,123.9
1,016.8
Segment assets
Primary Investment
Secondary Investment
Total investment portfolio
Other investments
Other assets and liabilities
Total investments at FVTPL
Other assets
Total assets
Retirement benefit obligations
Other liabilities
Total liabilities
Group net assets
Other assets and liabilities above include cash and cash equivalents, trade and other receivables and trade and other payables
within recourse group investment entity subsidiaries.
/ John Laing Annual Report and Accounts 2017
96
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
5 EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following information:
Earnings
Profit for the purpose of basic and diluted earnings per share
Profit for the year
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
127.5
127.5
190.3
190.3
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share
Dilutive effect of ordinary shares potentially issued under share-based incentives (note 6)
366,952,621
4,892,369
366,923,076
3,313,330
Weighted average number of ordinary shares for the purpose of diluted earnings per share
371,844,990
370,236,406
Earnings per share from continuing operations (pence/share)
Basic
Diluted
34.7
34.3
51.9
51.4
6 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 market-based performance condition, total shareholder return (50% of the award), and a
non-market based performance condition, NAV per share growth (50% of the award). The Group has no legal or constructive
obligation to repurchase or settle the awards in cash.
The movement in the number of shares awarded is as follows:
At 1 January
Granted
Adjustment to awards granted in prior periods
Lapsed
At 31 December
Number of shares awarded
2016
2017
3,774,330
1,557,430
35,500
(108,290)
1,763,030
2,094,460
–
(83,160)
5,258,970
3,774,330
The weighted average fair value of awards granted during the year was 136.26p per share (2016 – 167.25p per share) for the
market-based performance condition, determined using the Stochastic valuation model, and 291.09p per share (2016 –
226.49p per share) 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 213.69p per share (2016 – 196.87p per share). The
significant inputs into the model were the weighted average share price of 291.2p per share (2016 – 226.5p per share) at the
grant date, expected volatility of 12.79% (2016 – 12.55%), expected dividend yield of 2.80% (2016 – 3.10%), an expected award
life of three years and an annual risk-free interest rate of 0.14% (2016 – 0.4%). 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 2017 was £3.2 million (2016 – £2.0 million).
Of the 5,258,970 outstanding awards (2016 – 3,774,330), none were exercisable at 31 December 2017 (2016 – nil). The
weighted average exercise price of the awards granted during 2017 was £nil (2016 – £nil). There were no awards forfeited,
exercised or expired during the year ended 31 December 2017 (2016 – nil). During the year ended 31 December 2017, there
were 108,290 awards (2016 – 83,160) that lapsed.
Of the awards outstanding at the end of the year, 1,703,090 vest on 15 April 2018, 1,998,450 vest on 15 April 2019 and
1,557,430 vest on 18 April 2020 subject to the conditions described above. The weighted average exercise price of the awards
outstanding at 31 December 2017 was £nil (31 December 2016 – £nil).
John Laing Annual Report and Accounts 2017 /
97
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
6 SHARE-BASED INCENTIVES
Deferred Share Bonus Plan
(CONTINUED)
In accordance with the Deferred Share Bonus Plan, 9,762 shares were awarded on 17 March 2017 to Executive Directors and
certain senior executives in relation to that part of their annual bonus for 2016 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, refer to the Directors’ Remuneration Report.
The movement in the number of shares awarded is as follows:
At 1 January
Granted
Adjustment to awards granted in the prior period
Vested in the period
At 31 December
Number of shares awarded
2016
2017
84,439
9,762
5,000
(36,080)
63,121
–
84,439
–
–
84,439
In addition to the 36,080 shares that vested as per the table above, a further 978 shares were awarded in lieu of dividends
payable since the grant date on the vested shares.
Employee Benefit Trust
On 19 June 2015 the Company established 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 obligations under the Company’s
share-based payment plans.
During the year the EBT purchased no shares in John Laing Group plc and as at 31 December 2017 the EBT held no shares
in the Company.
7 OTHER INCOME
Fees from asset management services
Recoveries on financial close
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
26.7
3.7
30.4
34.5
7.5
42.0
In November 2016 the Group sold its UK Project Management Services business for £4.0 million, of which £1.9 million was
received in 2016 and £2.1 million was deferred and recognised in January 2017 on transfer of the final underlying MSA
contracts. Total costs of the sale were £1.6 million with £0.2 million recognised in 2017 (in administrative expenses) giving a
total profit on sale recognised in the year ended 31 December 2017 of £1.9 million. A profit of £0.5 million was recognised in
the year ended 31 December 2016 on initial transfer of the MSA contracts, leading to an overall profit on sale of £2.4 million.
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NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
8 PROFIT FROM OPERATIONS
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
Total audit fees
Other assurance services
Total non-audit fees
Operating lease charges:
– rental of land and buildings
Depreciation of plant and equipment
Amortisation of intangible assets
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
(0.3)
(0.3)
(0.1)
(0.1)
(1.2)
(0.3)
–
(0.2)
(0.2)
–
–
(1.3)
(0.6)
(0.2)
The fee payable to the Company's auditor for the audit of the Company's annual accounts was £6,566 (2016 – £6,375). The
fees payable to the Company’s auditor for the audit of the Company’s subsidiaries were £277,094 (2016 – £241,560). The fees
payable to the Company's auditor for non-audit services comprised: £48,500 (2016 – £40,000) for other assurance services
and £12,500 (2016 – £4,800) for a FCA regulatory review.
9 EMPLOYEE COSTS AND DIRECTORS' EMOLUMENTS
Employee costs comprise:
Salaries
Social security costs
Pension charge
– defined benefit schemes (note 19)
– defined contribution
Share-based incentives (note 6)
Annual average employee numbers (including Directors):
Staff
UK
Overseas
Activity
Primary investments, asset management and central activities
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
(25.1)
(2.9)
(1.3)
(1.1)
(3.2)
(26.8)
(2.9)
(1.6)
(1.3)
(2.0)
(33.6)
(34.6)
Year ended
31 December
2017
No.
Year ended
31 December
2016
No.
160
101
59
248
191
57
160
248
Details of Directors' remuneration for the year ended 31 December 2017 can be found in the audited sections of the
Directors' Remuneration Report.
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
10 FINANCE COSTS
Finance costs on corporate banking facilities
Amortisation of debt issue costs
Net interest cost of retirement obligations (note 19)
Total finance costs
11 TAX CREDIT/(CHARGE)
The tax credit/(charge) for the year comprises:
Current tax:
UK corporation tax credit/(charge) – current year
UK corporation tax credit – prior year
Foreign tax charge
Deferred tax:
Deferred tax charge – current year
Deferred tax charge – prior year
Tax credit/(charge)
John Laing Annual Report and Accounts 2017 /
99
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
(9.2)
(1.3)
(1.3)
(11.8)
(7.9)
(1.1)
(1.3)
(10.3)
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
0.5
1.6
(0.1)
2.0
–
(0.5)
(0.5)
1.5
(1.9)
0.5
–
(1.4)
(0.2)
(0.2)
(0.4)
(1.8)
The tax credit/(charge) for the year can be reconciled to the profit in the Group Income Statement as follows:
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
Profit before tax
Tax at the UK corporation tax rate
Tax effect of expenses and other similar items that are not deductible
Non-taxable movement on fair value of investments
Adjustment for management charges to fair value group
Other movements
Prior year – current tax credit
Prior year – deferred tax charge
Total tax credit/(charge)
126.0
(24.3)
(1.1)
32.0
(6.1)
(0.1)
1.6
(0.5)
1.5
192.1
(38.4)
(0.6)
43.8
(6.6)
(0.3)
0.5
(0.2)
(1.8)
The above tax credit/(charge) of the Company and the recourse group subsidiary entities that are consolidated is primarily
in relation to a group relief credit/(charge) with recourse group subsidiary entities held at FVTPL, where there are tax losses
primarily as a result of the tax deduction from the payment of contributions to JLPF obtained by a recourse subsidiary held at
FVTPL. There is a corresponding tax (charge)/credit within ‘net gain on investments at FVTPL’ on the Group Income Statement.
For the year ended 31 December 2017 a tax rate of 19.25% has been applied (2016 – 20.0%). 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 2017 at a tax rate of 17% (31 December 2016 – 17%).
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100
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
12 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December 2017
Investments
in project Listed
companies investment
£ million £ million
Opening balance 1,165.9 10.0
Distributions (39.6) (0.6)
Investment in equity and loans 209.9 –
Realisations from investment portfolio (289.0) –
Proceeds received on acquisition
of Manchester Waste VL Co by GMWDA (23.5) –
Fair value movement 159.8 0.9
Net cash transferred from investments at FVTPL – –
Portfolio
valuation
sub-total
£ million
1,175.9
(40.2)
209.9
(289.0)
(23.5)
160.7
–
Closing balance 1,183.5 10.3
1,193.8
Other assets
and liabilities
£ million
81.6
40.2
(209.9)
289.0
23.5
5.6
(77.4)
152.6
Investments
in project Listed
companies investment
£ million £ million
Opening balance 825.3 16.1
Distributions (33.9) (0.9)
Investment in equity and loans 301.5 –
Realisations from investment portfolio (140.2) (6.4)
Fair value movement 213.2 1.2
Net cash transferred to investments at FVTPL – –
31 December 2016
Portfolio
valuation
sub-total
£ million
841.4
(34.8)
301.5
(146.6)
214.4
–
Other assets
and liabilities
£ million
123.9
34.8
(301.5)
146.6
4.4
73.4
Total
£ million
1,257.5
–
–
–
–
166.3
(77.4)
1,346.4
Total
£ million
965.3
–
–
–
218.8
73.4
Closing balance 1,165.9 10.0
1,175.9
81.6
1,257.5
Included within other assets and liabilities at 31 December 2017 above is cash collateral of £133.1 million (31 December 2016
– £23.7 million) in respect of future investment commitments to the I-66 Managed Lanes and I-77 Managed Lanes projects
(31 December 2016 – IEP (Phase 1), I-77 Managed Lanes and New Perth Stadium).
John Laing Annual Report and Accounts 2017 /
101
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
12 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
(CONTINUED)
The investment disposals that have occurred in the years ended 31 December 2017 and 2016 are as follows:
Year ended 31 December 2017
During the year ended 31 December 2017, the Group disposed of shares and subordinated debt in eight PPP and renewable
energy project companies for £289.0 million (including £1.9 million deferred to 2018). In addition, the Group’s shareholding in
Viridor Laing (Greater Manchester) Limited was acquired by the Greater Manchester Waste Development Authority (GMWDA)
for £23.5 million.
Details were as follows:
Date of
completion
Original
holding
%
Holding
disposed of
%
Retained
holding
%
Acquired by John Laing Environmental Assets Group Limited (JLEN)
Llynfi Afan Renewable Energy Park (Holdings) Limited
12 December 2017
100.0
100.0
–
Acquired by John Laing Infrastructure Fund Limited (JLIF)
Aylesbury Vale Parkway Limited
City Greenwich Lewisham Rail Link plc
Croydon & Lewisham Lighting Services (Holdings) Limited
John Laing Rail Infrastructure Limited
Rail Investments (Great Western) Limited*
20 October 2017
20 October 2017
1 June 2017
20 October 2017
26 October 2017
50.0
5.0
50.0
100.0
80.0
50.0
5.0
50.0
100.0
30.0
Acquired by GMWDA
Viridor Laing (Greater Manchester) Limited
Sold to other parties
Gdansk Transport Co. SA
MAK Mecsek Autopálya Koncessziós Zrt.
28 September 2017
50.0
50.0
2 March 2017
29 March 2017
29.69
30.0
29.69
30.0
–
–
–
–
50.0
–
–
–
* This entity held a 30% interest in IEP (Phase 1) as at 31 December 2017, resulting in a 15% indirect interest in IEP (Phase 1) by the Company.
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 as well as part of its shareholding in JLEN. Total proceeds from all disposals were £146.6 million.
In addition, the Group sold its interest in UK Highways Limited for £0.3 million as part of its disposal of the UK activities of PMS.
Details were as follows:
Date of
completion
Original
holding
%
Holding
disposed of
%
Retained
holding
%
Acquired by John Laing Environmental Assets Group Limited (JLEN)
Dreachmhor Wind Farm (Holdings) Limited
New Albion Wind (Holdings) Limited
29 June 2016
21 July 2016
Acquired by John Laing Infrastructure Fund Limited (JLIF)
Inspiral Oldham Holdings Company Limited
Rail Investments (Great Western) Limited*
Services Support (BTP) Holdings Limited
UK Highways (A55) Holdings Limited
27 May 2016
29 December 2016
29 February 2016
22 December 2016
Sold to other parties
John Laing Environmental Assets Group Limited
UK Highways Limited
2 November 2016
30 November 2016
100.0
100.0
95.0
100.0
54.2
100.0
5.5
100.0
100.0
100.0
95.0
20.0
54.2
100.0
2.2
100.0
–
–
–
80.0
–
–
3.3
–
* This entity held a 30% interest in IEP (Phase 1) as at 31 December 2016, which resulted in a 24% indirect interest in IEP (Phase 1) by the Company.
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102
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
13 TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Other taxation
Other receivables
Prepayments and accrued income
31 December
2017
£ million
31 December
2016
£ million
6.2
0.1
0.3
1.0
7.6
6.3
–
0.6
0.5
7.4
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
2017
£ million
Sterling
Other currencies
6.9
0.7
7.6
31 December
2016
£ million
5.9
1.5
7.4
Other currencies mainly comprise trade and other receivables in Canadian dollars (31 December 2016 – Euros).
Included in the Group's trade receivables are debtors with a carrying value of £0.1 million which were overdue at 31 December
2017 (31 December 2016 – £0.4 million). The overdue balances have an ageing of up to 120 days (31 December 2016 – up to
120 days). The Group has not provided for these debtors as 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 £nil which were impaired at 31 December 2017
(31 December 2016 – £nil).
14 TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Other taxation and social security
Accruals
Deferred income
15 BORROWINGS
Current liabilities
Interest-bearing loans and borrowings net of unamortised financing costs (note 16 c and note 17)
31 December
2017
£ million
31 December
2016
£ million
(1.5)
(0.7)
(15.0)
(0.1)
(17.3)
(1.9)
(1.6)
(11.1)
(0.1)
(14.7)
31 December
2017
£ million
31 December
2016
£ million
(173.2)
(173.2)
(161.4)
(161.4)
John Laing Annual Report and Accounts 2017 /
103
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
16 FINANCIAL INSTRUMENTS
a) Financial instruments by category
Cash
and cash Loans and
equivalents receivables
31 December 2017 £ million £ million
Assets at
FVTPL
£ million
Financial
liabilities at
amortised cost
£ million
Level 1 / 3*
n/a
Fair value measurement method n/a n/a
Non-current assets
Investments at FVTPL* – –
Current assets
Trade and other receivables – 6.9
Cash and cash equivalents 2.5 –
Total financial assets 2.5 6.9
Current liabilities
Interest-bearing loans and borrowings – –
Trade and other payables – –
Total financial liabilities – –
Net financial instruments 2.5 6.9
1,346.4
Cash
and cash Loans and
equivalents receivables
31 December 2016 £ million £ million
Assets at
FVTPL
£ million
Financial
liabilities at
amortised cost
£ million
Level 1 / 3*
n/a
Fair value measurement method n/a n/a
Non-current assets
Investments at FVTPL* – –
Current assets
Trade and other receivables – 7.0
Cash and cash equivalents 1.6 –
Total financial assets 1.6 7.0
Current liabilities
Interest-bearing loans and borrowings – –
Trade and other payables – –
Total financial liabilities – –
Total
£ million
1,346.4
6.9
2.5
1,355.8
(173.2)
(16.5)
(189.7)
1,166.1
Total
£ million
1,257.5
7.0
1.6
1,266.1
(161.4)
(13.0)
(174.4)
1,091.7
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1,346.4
–
–
1,346.4
–
–
–
1,257.5
–
–
1,257.5
–
–
–
–
–
–
–
(173.2)
(16.5)
(189.7)
(189.7)
–
–
–
–
(161.4)
(13.0)
(174.4)
(174.4)
Net financial instruments 1.6 7.0
1,257.5
* Investments at FVTPL are split between: Level 1, JLEN, which is a listed investment fair valued at £10.3 million (31 December 2016 – £10.0 million)
using a quoted market price; and Level 3 investments in project companies fair valued at £1,183.5 million (31 December 2016 – £1,165.9 million).
Level 1 and Level 3 investments are fair valued in accordance with the policy and assumptions set out in note 2 f). The investments at FVTPL
include other assets and liabilities as shown in note 12. 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 12. Level 3
financial assets are those relating to investments in project companies. The carrying amounts of financial assets and
financial liabilities in these financial statements reflect their fair values.
/ John Laing Annual Report and Accounts 2017
104
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
16 FINANCIAL INSTRUMENTS
(CONTINUED)
b) Foreign currency and interest rate profile of financial assets (excluding investments at FVTPL)
31 December 2017
Currency
Floating rate
£ million
Non-interest
bearing
£ million
31 December 2016
Non-interest
bearing
£ million
Total
£ million
Sterling 0.5
Euro –
Canadian dollar –
US dollar –
New Zealand dollar –
Australian dollar –
Total 0.5
6.5
0.2
0.4
0.3
0.7
0.8
8.9
7.0
0.2
0.4
0.3
0.7
0.8
9.4
5.9
1.5
0.4
0.4
–
0.4
8.6
c) Foreign currency and interest rate profile of financial liabilities
The Group's financial liabilities at 31 December 2017 were £189.7 million (31 December 2016 – £174.4 million), of
which £173.2 million (31 December 2016 – £161.4 million) related to short-term cash borrowings of £176.0 million
(31 December 2016 – £165.0 million) net of unamortised finance costs of £2.8 million (31 December 2016 – £3.6 million).
31 December 2017
31 December 2016
Currency
Sterling
Euro
US dollar
Australian dollar
Other
Total
Fixed
rate
£ million
Non-interest
bearing
£ million
(173.2)
–
–
–
–
(173.2)
(12.0)
(1.0)
(1.2)
(1.9)
(0.4)
(16.5)
Total
£ million
(185.2)
(1.0)
(1.2)
(1.9)
(0.4)
(189.7)
Fixed
rate
£ million
Non-interest
bearing
£ million
(161.4)
–
–
–
–
(161.4)
(9.8)
(0.5)
(0.9)
(1.4)
(0.4)
(13.0)
Total
£ million
(171.2)
(0.5)
(0.9)
(1.4)
(0.4)
(174.4)
17 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 (including power price risk which impacts the fair value of the Group’s
investments in renewable energy projects), 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.
Market risk – foreign currency exchange rate risk
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:
As at 31 December 2017 the Group held investments in 31 overseas projects (31 December 2016 – 26 overseas projects) all
of which are fair valued based on the spot rate at 31 December 2017 (31 December 2016 – spot rate at 31 December 2016).
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’s 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 eight
forward currency contracts open as at 31 December 2017 (31 December 2016 – 21). The fair value of these contracts was a
net asset of £1.3 million (31 December 2016 – net asset of £3.5 million) and is included in investments at FVTPL.
At 31 December 2017, the Group's most significant currency exposure was to the US dollar (31 December 2016 – Euro).
John Laing Annual Report and Accounts 2017 /
105
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
17 FINANCIAL RISK MANAGEMENT
(CONTINUED)
Foreign currency exposure of investments at FVTPL:
Sterling
Euro
Australian dollar
US dollar
New Zealand dollar
Project
companies
£ million
405.0
204.1
269.4
283.2
21.8
1,183.5
31 December 2017
Listed Other assets
investment and liabilities
£ million
£ million
Total
£ million
Project
companies
£ million
31 December 2016
Listed Other assets
investment and liabilities
£ million
£ million
10.3
–
–
–
–
10.3
2.1
5.8
2.7
142.0
–
417.4
209.9
272.1
425.2
21.8
500.4
341.2
181.4
121.0
21.9
152.6
1,346.4
1,165.9
10.0
–
–
–
–
10.0
41.5
10.5
5.5
23.7
0.4
81.6
Total
£ million
551.9
351.7
186.9
144.7
22.3
1,257.5
Investments in project companies are fair valued based on the spot rate at the balance sheet date. As at 31 December 2017,
a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas
Market risk – interest rate risk
projects by c.£38 million. The Group’s profit before tax would be impacted by the same amounts. There would be no
additional impact on equity.
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:
Financial assets
Investments at FVTPL
Trade and other receivables
Cash and cash equivalents
Financial assets exposed
to interest rate risk
Interest bearing
floating rate
£ million
–
–
0.5
0.5
31 December 2017
Non-interest
bearing
£ million
31 December 2016
Interest bearing
floating rate
£ million
Non-interest
bearing
£ million
Total
£ million
1,346.4
6.9
2.5
1,346.4
6.9
2.0
1,257.5
7.0
1.6
–
–
–
–
1,355.3
1,355.8
1,266.1
1,266.1
Total
£ million
1,257.5
7.0
1.6
An analysis of the movement between opening and closing balances of investments at FVTPL is given in note 12. Investments
in project companies are principally valued on a discounted cash flow basis. At 31 December 2017, the weighted average
discount rate was 8.8% (31 December 2016 – 8.9%). For investments in project companies, changing the discount rate used
to value the underlying instruments would alter their fair value. As at 31 December 2017 a 0.25% increase in the discount
rate would reduce the fair value by £40.7 million (31 December 2016 – £32.1 million) and a 0.25% reduction in the discount
rate would increase the fair value by £42.6 million (31 December 2016 – £33.6 million). The Group’s profit before tax would be
impacted by the same amounts. There would be no additional impact on equity.
The exposure of the Group's financial liabilities to interest rate risk is as follows:
Interest bearing
fixed rate
£ million
31 December 2017
Non-interest
bearing
£ million
31 December 2016
Total
£ million
Interest bearing
fixed rate
£ million
Non-interest
bearing
£ million
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities
(173.2)
–
(173.2)
–
(16.5)
(16.5)
(173.2)
(16.5)
(189.7)
(161.4)
–
(161.4)
–
(13.0)
(13.0)
Total
£ million
(161.4)
(13.0)
(174.4)
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106
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
Market risk – inflation risk
17 FINANCIAL RISK MANAGEMENT
(CONTINUED)
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, all other things being equal, an increase in
inflation expectations would also tend to increase JLPF's pension liabilities.
Based on a sample of six of the larger PPP investments by value at 31 December 2017, a 0.25% increase in inflation is
estimated to increase the value of PPP investments by c.£15 million and a 0.25% decrease in inflation is estimated to
Credit risk
decrease the value of PPP investment by c.£14 million. Certain of the underlying project companies incorporate some
inflation hedging.
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 number of the project companies in which the Group invests receive revenue from government departments,
Price risk
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.
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 economically hedged through short to medium-term fixed price purchase agreements with electricity
suppliers, or do not benefit from governmental support mechanisms at fixed prices. At 31 December 2017, based on a
sample of seven of the larger renewable energy investments by value, a 5% increase in power price forecasts is estimated to
increase the value of renewable energy investments by £15 million and a 5% decrease in power price forecasts is estimated
to decrease the value of renewable energy investments by £14 million. The Group’s profit before tax would be impacted by the
same amounts. There would be no additional impact on equity.
Liquidity risk
The Group’s investment in JLEN is valued at its closing market share price at 31 December 2017.
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.
John Laing Annual Report and Accounts 2017 /
107
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
17 FINANCIAL RISK MANAGEMENT
Maturity of financial assets
(CONTINUED)
The maturity profile of the Group's financial assets (excluding investments at FVTPL) is as follows:
31 December
2017
Less than
one year
£ million
Trade and other receivables
Cash and cash equivalents
Financial assets (excluding investments at FVTPL)
6.9
2.5
9.4
31 December
2016
Less than
one year
£ million
7.0
1.6
8.6
Other than certain trade and other receivables, as detailed in note 13, none of the financial assets is either overdue or impaired.
The maturity profile of the Group's financial liabilities is as follows:
In one year or less, or on demand
Total
31 December
2017
£ million
31 December
2016
£ million
(189.7)
(189.7)
(174.4)
(174.4)
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
effective interest rate
%
In one year
or less
£ million
Total
£ million
31 December 2017
Fixed interest rate instruments – loans and borrowings
(173.2)
Non-interest bearing instruments* n/a (16.5) (16.5)
(173.2)
3.00
(189.7) (189.7)
31 December 2016
Fixed interest rate instruments – loans and borrowings
(161.4)
Non-interest bearing instruments* n/a (13.0) (13.0)
(161.4)
2.75
(174.4) (174.4)
* Non-interest bearing instruments relate to trade payables and accruals.
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108
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
Capital risk
17 FINANCIAL RISK MANAGEMENT
(CONTINUED)
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. The Group monitors internally net debt and a reconciliation
of net debt can be found in note 24.
At 31 December 2017, the Group had committed corporate banking facilities of £475 million, expiring in March 2020, together
with additional liquidity facilities of £50 million. The liquidity facilities originally expiring in March 2018, were extended in early
2018 until February 2019.
Issued at 31 December 2017 were letters of credit of £202.3 million (31 December 2016 – £162.6 million), related to future
capital and loan commitments, and contingent commitments and performance and bid bonds of £7.5 million (31 December
2016 – £6.5 million).
The Group has requirements for both borrowings and letters of credit, which at 31 December 2017 were met by its £525.0 million
committed facilities and related ancillary facilities (31 December 2016 – £450.0 million). The committed facilities are
summarised below:
31 December 2017
Total facilities
£ million
Loans drawn
£ million
Letters of credit
in issue/other
commitments
£ million
Committed corporate banking facilities 475.0
Surety facilities backed by committed liquidity facilities 50.0
Total 525.0
(176.0)
–
(176.0)
(159.8)
(50.0)
(209.8)
31 December 2016
Total facility
£ million
Loans drawn
£ million
Letters of credit
in issue/other
commitments
£ million
Committed corporate banking facilities 400.0
Surety facilities backed by committed liquidity facilities 50.0
Total 450.0
(165.0)
–
(165.0)
(119.1)
(50.0)
(169.1)
18 DEFERRED TAX
The movements in the deferred tax asset relating to other deductible temporary differences were:
31 December
2017
£ million
Opening asset
Charge to income – prior year
Charge to income – current year
Closing asset
1.0
(0.5)
–
0.5
Total
undrawn
£ million
139.2
–
139.2
Total
undrawn
£ million
115.9
–
115.9
31 December
2016
£ million
1.4
(0.2)
(0.2)
1.0
The Group has no tax losses within its entities which are consolidated but there are tax losses in investment entity
subsidiaries which are held at FVTPL.
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
19 RETIREMENT BENEFIT OBLIGATIONS
Pension schemes
Post-retirement medical benefits
Retirement benefit obligations
a) Pension schemes
John Laing Annual Report and Accounts 2017 /
109
31 December
2017
£ million
31 December
2016
£ million
(32.3)
(8.0)
(40.3)
(61.3)
(8.0)
(69.3)
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
JLPF
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.
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 Group agreed to repay the actuarial deficit of £171.0 million at 31 March 2016 over seven years as follows:
By 31 March
£ million
2017
2018
2019
2020
2021
2022
2023
24.5
26.5
29.1
24.9
25.7
26.4
24.6
The next triennial actuarial valuation of JLPF is due as at 31 March 2019.
During the year ended 31 December 2017, John Laing made deficit reduction contributions of £24.5 million (2016 –
£18.1 million) in cash. At 31 December 2017, JLPF's assets included PPP investments valued at £nil (31 December 2016
– £37.8 million).
The Plan
The liability at 31 December 2017 allows for indexation of deferred pensions and post 5 April 1988 GMP pension increases
based on the Consumer Price Index (CPI).
No contributions were made to the Plan in the year ended 31 December 2017 (2016 – none). At its last actuarial valuation
as at 31 March 2017, the Plan had assets of £13.1 million and liabilities of £12.0 million resulting in an actuarial surplus
of £1.1 million. The next triennial actuarial valuation of the Plan is due as at 31 March 2020.
An analysis of the members of both Schemes is shown below:
31 December 2017
Deferred
Pensioners
Total
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JLPF
8,086
The Plan 106 334 440
3,960
4,126
31 December 2016
Deferred
Pensioners
Total
JLPF
8,268
The Plan 109 328 437
4,385
3,883
/ John Laing Annual Report and Accounts 2017
110
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
19 RETIREMENT BENEFIT OBLIGATIONS
a) Pension schemes (continued)
(CONTINUED)
The financial assumptions used in the valuation of JLPF and the Plan under IAS 19 at 31 December were:
31 December
2017
%
Discount rate
Rate of increase in non-GMP pensions in payment
Rate of increase in non-GMP pensions in deferment
Inflation – RPI
Inflation – CPI
2.50
3.00
2.00
3.10
2.00
31 December
2016
%
2.80
3.10
2.10
3.20
2.10
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. The Group considers that
the changes below are reasonably possible based on recent experience.
(Increase)/decrease
in pension liabilities
at 31 December 2017
0.25% on discount rate
0.25% on inflation rate
1 year post-retirement longevity
Mortality
Increase in
assumption
£ million
Decrease in
assumption
£ million
45.6
(34.2)
(50.5)
(48.5)
33.3
48.3
Mortality assumptions at 31 December 2017 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 2016 core
projections with a long-term improvement rate of 1.25% per annum and a smoothing parameter of 7.5; and
SAPS S2 light (S2NA_L) year of birth tables for executive members with mortality improvements in line with CMI 2016
core projections with a long-term improvement rate of 1.25% per annum and a smoothing parameter of 7.5.
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 2016
core projections with a long-term trend rate of 1.25% per annum.
The table below summarises the life expectancy implied by the mortality assumptions used:
Life expectancy – of member reaching age 65 in 2017
Males
Females
Life expectancy – of member aged 65 in 2032
Males
Females
31 December
2017
Years
31 December
2016
Years
22.3
24.2
23.3
25.4
22.4
24.5
23.6
25.9
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
John Laing Annual Report and Accounts 2017 /
111
19 RETIREMENT BENEFIT OBLIGATIONS
Analysis of the major categories of assets held by the Schemes
(CONTINUED)
a) Pension schemes (continued)
Bond and other debt instruments
UK corporate bonds
UK government gilts
UK government gilts – index linked
Equity instruments
UK listed equities
European listed equities
US listed equities
Other international listed equities
Aviva bulk annuity buy-in agreement
Property
Industrial property
Derivatives
Inflation swaps
Cash and equivalents
UK PPP investments
31 December 2017
31 December 2016
£ million
%
£ million
%
84.4
192.4
157.4
434.2
140.7
39.9
132.6
92.6
405.8
231.0
2.1
2.1
–
–
82.9
–
80.9
141.6
192.7
415.2
152.0
34.3
73.8
114.6
374.7
234.1
1.8
1.8
(6.1)
(6.1)
52.4
37.8
37.5
35.1
20.0
0.2
–
7.2
–
37.3
33.8
21.1
0.2
(0.5)
4.7
3.4
Total market value of assets
1,156.0
100.0
1,109.9
100.0
Present value of Schemes' liabilities
Net pension liability
(1,188.3)
(32.3)
(1,171.2)
(61.3)
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 UK 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 and property, whilst balancing the risks of inflation and interest rate movements through the annuity buy-in
agreement, inflation swaps and interest rate hedging.
In late 2008, 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 2017, the underlying insurance policy was valued at £231.0 million (31 December
2016 – £234.1 million), being very substantially equal to the IAS 19 valuation of the related liabilities.
Analysis of amounts charged to operating profit
The pension liability of £32.3 million at 31 December 2017 (31 December 2016 – £61.3 million) is net of a surplus under
IAS 19 of £2.9 million in the Plan (31 December 2016 – £2.9 million).
Current service cost*
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
(1.3)
(1.6)
* The Schemes no longer have any active members. Therefore, under the projected unit method of valuation the current service cost for JLPF will
Analysis of amounts charged to finance costs
increase as a percentage of pensionable payroll as members approach retirement. The current service cost has been included within
administrative expenses.
Interest on Schemes' assets
Interest on Schemes' liabilities
Net charge to finance costs
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
30.8
(31.9)
(1.1)
35.3
(36.3)
(1.0)
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NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
19 RETIREMENT BENEFIT OBLIGATIONS
Analysis of amounts recognised in Group Statement of Comprehensive Income
(CONTINUED)
a) Pension schemes (continued)
Return on Schemes' assets (excluding amounts included in interest on Schemes' assets above)
Experience loss arising on Schemes' liabilities
Changes in financial assumptions underlying the present value of Schemes' liabilities
Changes in demographic assumptions underlying the present value of Schemes' liabilities
Recognition of surplus in the Plan
Actuarial gain/(loss) recognised in Group Statement of Comprehensive Income
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
55.9
(5.1)
(61.1)
17.0
–
6.7
151.5
(5.7)
(185.6)
(1.1)
2.7
(38.2)
Changes in present value of defined benefit obligations
The cumulative gain recognised in the Group Statement of Changes in Equity is £6.7 million (31 December 2016 – £nil).
Opening defined benefit obligation
Current service cost
Interest cost
Experience loss arising on Schemes' liabilities
Changes in financial assumptions underlying the present value of Schemes' liabilities
Changes in demographic assumptions underlying the present value of Schemes' liabilities
Benefits paid (including administrative costs paid)
2017
£ million
2016
£ million
(1,171.2)
(1.3)
(31.9)
(5.1)
(61.1)
17.0
65.3
(992.9)
(1.6)
(36.3)
(5.7)
(185.6)
(1.1)
52.0
Closing defined benefit obligation
(1,188.3)
(1,171.2)
Changes in the fair value of Schemes' assets
The weighted average life of JLPF liabilities at 31 December 2017 is 16.4 years (31 December 2016 – 16.8 years).
Opening fair value of Schemes' assets
Interest on Schemes' assets
Return on Schemes' assets (excluding amounts included in interest on Schemes' assets above)
Contributions by employer
Benefits paid (including administrative costs paid)
Closing fair value of Schemes' assets
Analysis of the movement in the deficit during the year
Opening deficit
Current service cost
Finance cost
Contributions
Actuarial gain/(loss)
Pension deficit
31 December
2017
£ million
31 December
2016
£ million
1,109.9
30.8
55.9
24.7
(65.3)
1,156.0
956.7
35.3
151.5
18.4
(52.0)
1,109.9
31 December
2017
£ million
31 December
2016
£ million
(61.3)
(1.3)
(1.1)
24.7
6.7
(32.3)
(38.9)
(1.6)
(1.0)
18.4
(38.2)
(61.3)
John Laing Annual Report and Accounts 2017 /
113
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
19 RETIREMENT BENEFIT OBLIGATIONS
History of experience gains and losses
(CONTINUED)
a) Pension schemes (continued)
Year ended
31 December
2017
Year ended
31 December
2016
Difference between actual and expected returns on assets:
Amount (£ million)
% of Schemes' assets
Experience loss on Schemes' liabilities:
Amount (£ million)
% of present value of Schemes' liabilities
Total amount recognised in the Group Statement of Comprehensive Income (excluding deferred tax):
Amount (£ million)
% of present value of Schemes' liabilities
55.9
4.8
(5.1)
0.4
6.7
(0.6)
151.5
13.6
(5.7)
0.5
(38.2)
3.3
b) Post-retirement medical benefits
The Company provides post-retirement medical insurance benefits to 60 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
2017
£ million
31 December
2016
£ million
Post-retirement medical benefits liability – opening
Other finance costs
Contributions
Experience loss*
Changes in financial assumptions underlying the present value of scheme’s liabilities*
Changes in demographic assumptions underlying the present value of liabilities*
Curtailment and settlements
Post-retirement medical benefits liability – closing
(8.0)
(0.2)
0.5
(0.2)
(0.2)
0.1
–
(8.0)
(7.3)
(0.3)
0.5
(0.2)
(0.9)
0.1
0.1
(8.0)
* 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 5.1% in 2017 (2016 – 5.2%).
It is expected to increase in 2018 and thereafter at RPI plus 2.0% per annum (2016 – at RPI plus 2.0% per annum).
Medical cost inflation has a significant effect on the liability reported. A 1% change in assumed medical cost inflation
would result in the following liability at 31 December 2017:
1% increase
£ million
1% decrease
£ million
Post-retirement medical liability
(8.9)
(7.3)
Life expectancy also has a significant effect on the liability reported. A one-year increase or decrease in life expectancy
would result in the following liability at 31 December 2017:
1 year increase
£ million
1 year decrease
£ million
Life expectancy
(8.7)
(7.4)
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NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
20 PROVISIONS
Non-current provisions
Retained liabilities
Total provisions
At 1 January
2017
£ million
Reclassification
£ million
Credit to
Group Income
Statement
£ million
Utilised
£ million
At 31 December
2017
£ million
(1.5)
(1.5)
–
–
0.5
0.5
–
–
(1.0)
(1.0)
At 1 January
2016
£ million
Reclassification
£ million
Credit/(charge)
to Group Income
Statement
£ million
Utilised
£ million
At 31 December
2016
£ million
Retained liabilities
Employee related liabilities
Total provisions
Classified as:
Continuing operations
Discontinued operations
Provisions on continuing operations are analysed as:
Non-current provisions
(4.2)
(0.1)
(4.3)
(0.1)
(4.2)
(0.1)
(0.1)
–
–
–
(4.2)
4.2
(0.7)
0.1
(0.6)
(0.6)
–
3.4
–
3.4
3.4
–
(1.5)
–
(1.5)
(1.5)
–
(1.5)
(1.5)
In 2016, provisions relating to retained liabilities were reclassified from discontinued operations to continuing operations as
they were no longer sufficiently material to show separately as discontinued operations.
Provisions of £1.0 million as at 31 December 2017 (31 December 2016 – £1.5 million) relate to retained liabilities from the
sale of the Laing Construction business in 2001.
21 SHARE CAPITAL
Authorised:
Ordinary shares of £0.10 each
Total
31 December
2017
No.
31 December
2016
No.
366,960,134
366,923,076
366,960,134
366,923,076
Allotted, called up and fully paid:
At 1 January
Issue of 37,058 ordinary shares of £0.10 each
At 31 December
31 December 2017
No.
£ million
31 December 2016
No.
£ million
366,923,076
37,058
366,960,134
36.7
–
36.7
366,923,076
–
366,923,076
36.7
–
36.7
37,058 shares were issued in the year ended 31 December 2017 (2016 – nil) in relation to share awards vesting under the
Group’s Deferred Share Bonus Plan (see note 6 for further details).
The Company has one class of ordinary shares which carry no right to fixed income.
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
22 SHARE PREMIUM
Opening balance
Closing balance
23 NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Finance costs
Unrealised profit arising on changes in fair value of investments (note 12)
Depreciation of plant and equipment
Amortisation of intangible assets
Share-based incentives
IAS 19 service cost
Contribution to JLPF
Decrease in provisions
Operating cash outflow before movements in working capital
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
24 RECONCILIATION OF NET DEBT
Cash and cash equivalents
Borrowings
Net debt
Cash and cash equivalents
Borrowings
Net debt
At 1
January
2017
£ million
1.6
(161.4)
(159.8)
At 1
January
2016
£ million
1.1
(14.9)
(13.8)
Cash
movements
£ million
Non-cash
movements
£ million
0.9
(11.0)
(10.1)
–
(0.8)
(0.8)
Cash
movements
£ million
Non-cash
movements
£ million
0.5
(146.0)
(145.5)
–
(0.5)
(0.5)
John Laing Annual Report and Accounts 2017 /
115
31 December
2017
£ million
31 December
2016
£ million
218.0
218.0
218.0
218.0
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
126.0
192.1
11.8
(166.3)
0.3
–
3.2
1.3
(24.7)
(0.5)
(48.9)
0.6
1.0
(47.3)
10.3
(218.8)
0.6
0.2
2.0
1.6
(18.4)
(2.8)
(33.2)
1.2
(5.1)
(37.1)
At 31
December
2017
£ million
2.5
(173.2)
(170.7)
At 31
December
2016
£ million
1.6
(161.4)
(159.8)
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NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
25 GUARANTEES, CONTINGENT ASSETS AND LIABILITIES AND OTHER COMMITMENTS
At 31 December 2017, the Group had future equity and loan commitments in PPP and renewable energy projects of £335.4 million
(31 December 2016 – £186.3 million) backed by letters of credit of £202.3 million (31 December 2016 – £162.6 million) and
cash collateral of £133.1 million (31 December 2016 – £23.7 million). There were also contingent commitments, performance
and bid bonds of £7.5 million (31 December 2016 – £6.5 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 2017
31 December 2016
Within one year
In the second to fifth years inclusive
After five years
Land and
buildings
£ million
1.0
3.0
2.2
6.2
Other
£ million
Total
£ million
Total
£ million
0.1
0.1
–
0.2
1.1
3.1
2.2
6.4
1.0
3.0
2.8
6.8
26 TRANSACTIONS WITH RELATED PARTIES
Details of transactions between the Group and its related parties are disclosed below.
Transactions with non-recourse entities
The Group entered into the following trading transactions with non-recourse project companies in which the Group
holds interests:
31 December
2017
£ million
31 December
2016
£ million
For the year ended:
Services income*
Balances as at:
Amounts owed by project companies
Amounts owed to project companies
3.1
18.0
3.0
(0.6)
1.6
(0.6)
* Services income is generated from project companies through management services agreements and recoveries of bid costs on
financial close.
Transactions with recourse subsidiary entities held at FVTPL
The Group had the following transactions and balances with recourse subsidiary entities held at FVTPL that are eliminated
in the Group financial statements:
31 December
2017
£ million
31 December
2016
£ million
For the year ended:
Management charge payable to the Group by recourse subsidiary entities held at FVTPL
Net interest receivable by the Group from recourse subsidiary entities held at FVTPL
Net cash transferred from/(to) investments at FVTPL (note 12)
Balances as at:
Net amounts owed to the Group by recourse subsidiary entities held at FVTPL
27.1
0.7
77.4
26.4
1.4
(73.4)
48.9
77.9
John Laing Annual Report and Accounts 2017 /
117
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2017
26 TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Transactions with other related parties
There were no transactions with other related parties during the year ended 31 December 2017.
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
31 December
2017
£ million
Year ended
31 December
2016
£ million
Cash basis
Short-term employee benefits
Post-employment benefits
Cash payments under long-term incentive plan
Social security costs
Award basis
Short-term employee benefits
Post-employment benefits
Awards under long-term incentive plan
Social security costs
2.9
0.2
–
0.4
3.5
2.9
0.2
1.2
0.4
4.7
2.8
0.2
1.9
0.7
5.6
2.8
0.2
1.0
0.4
4.4
In addition to the above amounts, in 2016 £44,231 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. No amounts were paid in 2017.
27 EVENTS AFTER BALANCE SHEET DATE
On 8 March 2018, the Group launched a 1 for 3 rights issue to raise £210 million, net of costs.
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118
COMPANY BALANCE SHEET
as at 31 December 2017
Non-current assets
Investments at fair value through profit or loss
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Borrowings
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
31 December
2017
£ million
31 December
2016
£ million
Notes
4
5
6
7
8
9
1,094.9
1,094.9
245.6
1.1
246.7
952.7
952.7
272.4
–
272.4
1,341.6
1,225.1
(173.2)
(21.5)
(194.7)
(194.7)
(161.4)
(29.3)
(190.7)
(190.7)
1,146.9
1,034.4
36.7
218.0
5.9
886.3
36.7
218.0
2.7
777.0
1,146.9
1,034.4
As permitted by Section 408(2) of the Companies Act 2006, the Company’s income statement is not presented in these
financial statements. The amount of profit after tax of the Company for the year ended 31 December 2017 was £139.4 million
(2016 – £138.4 million).
The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and
authorised for issue on 7 March 2018. They were signed on its behalf by:
Olivier Brousse
CHIEF EXECUTIVE OFFICER
Patrick O'D Bourke
GROUP FINANCE DIRECTOR
7 March 2018
7 March 2018
John Laing Annual Report and Accounts 2017 /
119
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Share capital
£ million
Share premium
£ million
Other reserves Retained earnings
£ million
£ million
Total equity
£ million
Balance at 1 January 2017
Profit for the year
Total comprehensive income for the year
Share-based incentives
Dividends paid
36.7
–
–
–
–
218.0
–
–
–
–
Balance at 31 December 2017
36.7
218.0
2.7
–
–
3.2
–
5.9
777.0
139.4
139.4
–
(30.1)
886.3
1,034.4
139.4
139.4
3.2
(30.1)
1,146.9
Share capital
£ million
Share premium
£ million
Other reserves Retained earnings
£ million
£ million
Total equity
£ million
Balance at 1 January 2016
Profit for the year
Total comprehensive income for the year
Share-based incentives
Dividends paid
36.7
–
–
–
–
218.0
–
–
–
–
Balance at 31 December 2016
36.7
218.0
0.7
–
–
2.0
–
2.7
664.8
138.4
138.4
–
(26.2)
777.0
920.2
138.4
138.4
2.0
(26.2)
1,034.4
The Company has sufficient distributable reserves at 31 December 2017 to continue to pay dividends at the current level for the
foreseeable future. It also has the ability to increase its distributable reserves through payment of dividends by its subsidiaries.
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COMPANY CASH FLOW STATEMENT
for the year ended 31 December 2017
Operating activities
Profit from operations
Unrealised profit on changes in fair value of investments at FVTPL
Share-based incentives
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash inflow from operating activities
Investing activities
Interest received
Dividends received
Net cash inflow from investing activities
Financing activities
Interest paid
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Decrease/(increase) in intercompany loans
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
138.9
(142.2)
3.2
0.8
(0.1)
0.6
3.5
1.9
5.4
(3.8)
(30.1)
11.0
–
18.0
(4.9)
1.1
–
1.1
134.7
(136.6)
2.0
(0.1)
0.2
0.2
3.6
4.0
7.6
(2.9)
(26.2)
165.0
(19.0)
(124.7)
(7.8)
–
–
–
John Laing Annual Report and Accounts 2017 /
121
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
1 GENERAL INFORMATION
John Laing Group plc (the “Company”) is a public limited company incorporated and domiciled in the United Kingdom.
The Company’s ordinary shares are listed on the London Stock Exchange. The principal activity of the Company is that of
a holding company.
The remuneration of the Directors of the Company is shown in the Directors’ Remuneration Report on pages 58 to 73.
2 ACCOUNTING POLICIES
a) Basis of accounting
These financial statements have been prepared in accordance with IFRS as adopted by the EU.
The financial statements have been prepared under the historical cost convention in accordance with the Companies
Act 2006, except for investments at fair value through profit or loss (FVTPL) which are stated at fair value.
For the reasons set out on page 89, the Company’s financial statements are prepared on a going concern basis.
A summary of the principal accounting policies adopted by the Directors, which have been applied consistently
throughout the current and preceding years, is shown below.
b)
Investments
The Company meets the definition of an Investment Entity under IFRS 10 Consolidated Financial Statements and as such
has adopted Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27). See note 2a) to the Group financial
statements for details on how the Company has concluded that it meets the definition of an investment entity. In
Investments at fair value through profit or loss
accordance with IAS 27 Consolidated and Separate Financial Statements and the Investment Entities standard, the
Company has accounted for its investments as follows:
Investments at cost
The Company has accounted for its investment in John Laing Holdco Limited at FVTPL, consistent with the Group
financial statements.
Under IAS 27, the Company has elected to account for its interest in directly owned subsidiaries that provide investment
related services or engage in permitted investment related activities (Service Companies) at cost less provision for
impairment. In the Group financial statements, these interests are consolidated.
Current tax
c) Taxation
The tax charge or credit represents the sum of tax currently payable or receivable.
Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit 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.
Deferred tax
The Company’s liability for current tax is calculated using tax rates that have been enacted, or substantively enacted,
by the balance sheet date.
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 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 Company
intends to settle its current tax assets and liabilities on a net basis.
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
2 ACCOUNTING POLICIES
(CONTINUED)
d) Financial instruments
Financial assets and financial liabilities are recognised on the Company Balance Sheet when the Company becomes a
party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to
(i) Financial assets
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.
The Company classifies its financial assets in the following categories: investments at FVTPL, loans and receivables,
a)
cash and cash equivalents and investments at cost. The classification depends on the purpose for which the financial
assets were acquired. The Company determines the classification of its financial assets at initial recognition.
Investments at FVTPL
b) Loans and receivables
The Company's accounting policy in respect of investments at FVTPL is set out in section 2(b) above.
c) Cash and cash equivalents
The Company’s loans and receivables comprise cash and cash equivalents and amounts owed by subsidiary
undertakings and are recorded at amortised cost.
d)
Investments at cost
Cash and cash equivalents in the Company Balance Sheet comprise cash at bank and in hand and short-term
deposits with original maturities of three months or less.
(ii) Financial liabilities and equity
The Company’s investments at cost comprise its investments in Service Companies (see note 2 (b) for further
details) which are held at cost less impairments.
a) Equity instruments – share capital
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement.
b) Financial liabilities
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or associated with
the establishment of the Company that would otherwise have been avoided are written off against the balance of
the share premium account.
Financial liabilities are classified as other financial liabilities, comprising loans and borrowings which are initially
recognised at the fair value of the consideration received and subsequently at amortised cost using the effective
interest rate method.
e) 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.
John Laing Annual Report and Accounts 2017 /
123
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The key area of the financial statements where the Company is required to make critical judgements and material
accounting estimates is in respect of the fair value of investments held by the Company. The methodology for determining
the fair value of investments and the critical accounting judgements and key sources of estimation uncertainty therein are
set out in note 3 to the Group financial statements.
4 INVESTMENTS
At 1 January
Fair value movement
At 31 December
Investments at FVTPL*
Investments at cost less impairment
31 December
2017
£ million
31 December
2016
£ million
952.7
142.2
1,094.9
1,079.9
15.0
1,094.9
816.1
136.6
952.7
937.7
15.0
952.7
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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* Net gain on investments at FVTPL for the year ended 31 December 2017 is £142.2 million (2016 – £136.6 million).
Details of Company’s investments and how they are recognised in the accounts are as follows:
Investments
Treatment
John Laing Holdco Limited
John Laing (USA) Limited
John Laing Capital Management Limited
John Laing Projects & Developments Limited
John Laing Services Limited
Laing Investments Management Services (Australia) Limited
Laing Investments Management Services (Canada) Limited
Laing Investments Management Services (Germany) Limited
Laing Investments Management Services (Netherlands) Limited
Laing Investments Management Services (New Zealand) Limited
Laing Investments Management Services (Singapore) Limited
Laing Investments Management Services Limited
All entities are incorporated in the United Kingdom.
Fair valued
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
As set out in note 2a) of the Group financial statements, the Company holds its investments in non-recourse project
companies through intermediate holding company subsidiaries with its investment in its directly-held intermediate holding
company subsidiary (John Laing Holdco Limited) recorded at FVTPL in the Group and Company accounts.
The Company also has investments in directly-owned subsidiaries that provide investment-related services or engage in
permitted investment-related activities with investees. These subsidiaries, referred to as “service companies”, are
consolidated in the Group accounts rather than recorded at FVTPL. In the Company accounts, these investments are held at
cost less provision for impairment.
Inter-company transactions occur between subsidiaries in which investments are recorded at FVTPL and subsidiaries that
are consolidated in the Group accounts.
The differences in the amounts of (i) investments at FVTPL and (ii) fair value movements in the year between the Company
Financial Statements (as stated above) and the Group financial statements occur because in the latter inter-company
balances arising from the transactions referred to above are eliminated under the normal basis of consolidation, whereas in
the Company accounts these inter-company balances are not eliminated.
The differences do not relate to any items that might have an effect on the tax recognised in the Group accounts.
/ John Laing Annual Report and Accounts 2017
124
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
5 TRADE AND OTHER RECEIVABLES
Due within one year:
Amounts owed by subsidiary undertakings
31 December
2017
£ million
31 December
2016
£ million
245.6
272.4
The amounts owed by subsidiary undertakings at 31 December 2017 and 2016 are repayable on demand and interest is
charged at arm's length interest rates.
6 BORROWINGS
31 December
2017
£ million
31 December
2016
£ million
Interest bearing loans and borrowings net of unamortised financing costs
(173.2)
(161.4)
Reconciliation of net debt:
Cash and cash equivalents
Borrowings
Net debt
Cash and cash equivalents
Borrowings
Net debt
7 TRADE AND OTHER PAYABLES
Amounts owed to subsidiary undertakings
Accruals and deferred income
8 SHARE CAPITAL
Authorised:
Ordinary shares of £0.10 each
At 1
January
2017
£ million
–
(161.4)
(161.4)
At 1
January
2016
£ million
–
(14.9)
(14.9)
Cash
movements
£ million
Non-cash
movements
£ million
1.1
(11.0)
(9.9)
–
(0.8)
(0.8)
Cash
movements
£ million
Non-cash
movements
£ million
–
(146.0)
(146.0)
–
(0.5)
(0.5)
At 31
December
2017
£ million
1.1
(173.2)
(172.1)
At 31
December
2016
£ million
–
(161.4)
(161.4)
31 December
2017
£ million
31 December
2016
£ million
(20.3)
(1.2)
(21.5)
(28.4)
(0.9)
(29.3)
31 December
2017
No.
31 December
2016
No.
366,960,134
366,923,076
366,960,134
366,923,076
£ million
£ million
36.7
36.7
36.7
36.7
Allotted, called up and fully paid:
366,960,134 ordinary shares of £0.10 (31 December 2016 – 366,923,076 of £0.10) each
John Laing Annual Report and Accounts 2017 /
125
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
8 SHARE CAPITAL
(CONTINUED)
The Company has one class of ordinary shares which carry no right to fixed income.
31 December 2017
No.
£ million
31 December 2016
No.
£ million
Allotted, called up and fully paid:
At 1 January
Issue of 37,058 ordinary shares of £0.10 each
At 31 December
366,923,076
37,058
366,960,134
36.7
–
36.7
366,923,076
–
366,923,076
36.7
–
36.7
9 SHARE PREMIUM
Opening balance
Closing balance
10 FINANCIAL INSTRUMENTS
31 December
2017
£ million
31 December
2016
£ million
218.0
218.0
218.0
218.0
Financial risk exposure is addressed on a Group basis rather than a company only basis. The Company's risk management
programme is disclosed in detail in the Group financial statements in note 17 and in the Financial Review section. The
Company’s valuation methods are disclosed in note 16 to the Group financial statements.
Cash
and cash Loans and
equivalents receivables
31 December 2017 £ million £ million
Assets
at FVTPL
£ million
Investments
at cost less
impairments
£ million
Financial
liabilities at
amortised
cost
£ million
Fair value measurement method n/a n/a
Non-current assets
Investments – –
Current assets
Trade and other receivables – 245.6
Cash and cash equivalents 1.1 –
Total financial assets 1.1 245.6
Current liabilities
Interest-bearing loans and borrowings – –
Trade and other payables – –
Total financial liabilities – –
Level 3
n/a
n/a
1,079.9
15.0
–
–
–
–
1,079.9
15.0
–
–
–
–
Total
£ million
1,094.9
245.6
1.1
1,341.6
–
–
–
–
–
–
(173.2)
(21.5)
(173.2)
(21.5)
(194.7)
(194.7)
Net financial instruments 1.1 245.6
1,079.9
15.0
(194.7)
1,146.9
31 December 2016
Fair value measurement method
Non-current assets
Investments
Current assets
Trade and other receivables
Total financial assets
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities
Net financial instruments
Loans and
receivables
£ million
Assets
at FVTPL
£ million
Investments
at cost less
impairments
£ million
Financial
liabilities at
amortised
cost
£ million
n/a
Level 3
–
937.7
272.4
272.4
–
937.7
–
–
–
–
–
–
n/a
15.0
–
15.0
–
–
–
Total
£ million
952.7
272.4
1,225.1
n/a
–
–
–
(161.4)
(29.3)
(161.4)
(29.3)
(190.7)
(190.7)
272.4
937.7
15.0
(190.7)
1,034.4
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
11 TRANSACTIONS WITH RELATED PARTIES
Trading transactions
The Company has entered into loans with its subsidiaries, with interest being charged at arm’s length rates.
Year ended
31 December
2017
£ million
Year ended
31 December
2016
£ million
Amounts owed by subsidiary undertakings
Amounts owed to subsidiary undertakings
Dividends received
Interest income received
Interest paid
245.6
(20.3)
1.9
2.5
(0.8)
272.4
(28.4)
4.0
3.5
(0.9)
12 GUARANTEES AND OTHER COMMITMENTS
At 31 December 2017, the Company was a guarantor under the Group’s £475 million syndicated, committed, revolving credit
facility and associated credit facilities dated 6 October 2017. At 31 December 2017, the total amount utilised under these
facilities, and hence guaranteed by the Company, was £335.8 million (2016 – £284.1 million).
On 8 April 2016, the Company became an indemnitor under each of two uncommitted surety facilities, one from Euler
Hermes UK and the other from QBE Insurance Limited. These were each utilised to the sum of £25 million at 31 December
2017 and were guaranteed by the Company.
On 24 November 2016, the Company became a guarantor under each of two committed £25 million term liquidity facilities
backing the surety facilities entered into with Euler Hermes UK and QBE Insurance Limited. One facility was provided by
Barclays Bank PLC and the other by HSBC Bank plc. Both of these facilities were undrawn at 31 December 2017 and were
due to mature in March 2018.
On 9 February 2018, the HSBC facility was extended until February 2019 and was amended and made available for general
corporate purposes.
On 23 February 2018, the Barclays facility was extended to February 2019 and was made available for a surety facility
provided by Tokio Marine HCC.
13 SUBSIDIARIES AND OTHER INVESTMENTS
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”. 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 beyond John Laing’s equity commitments in the underlying projects.
Details of the Company's subsidiaries at 31 December 2017 were as follows:
Country of Ownership Registered
Name incorporation interest office
RECOURSE SUBSIDIARIES
Service Companies (consolidated)
John Laing (USA) Limited * United Kingdom 100% Note 1
John Laing and Son BV ** Netherlands 100% Note 3
John Laing Capital Management Limited * United Kingdom 100% Note 1
John Laing Projects & Developments Limited * United Kingdom 100% Note 1
John Laing Services Limited * United Kingdom 100% Note 1
Laing Investments Management Services (Australia) Limited * United Kingdom 100% Note 1
Laing Investments Management Services (Canada) Limited * United Kingdom 100% Note 1
Laing Investments Management Services (Germany) Limited * United Kingdom 100% Note 1
Laing Investments Management Services (Netherlands) Limited * United Kingdom 100% Note 1
Laing Investments Management Services (New Zealand) Limited * United Kingdom 100% Note 1
Laing Investments Management Services (Singapore) Limited * United Kingdom 100% Note 1
Laing Investments Management Services Limited * United Kingdom 100% Note 1
RL Design Solutions Limited ** United Kingdom 100% Note 1
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
John Laing Annual Report and Accounts 2017 /
127
13 SUBSIDIARIES AND OTHER INVESTMENTS
Country of Ownership Registered
Name incorporation interest office
(CONTINUED)
Investment Entity subsidiaries (measured at fair value)
Argon Ventures Limited ** United Kingdom 100% Note 1
Croydon PSDH Holdco 2 Limited ** United Kingdom 100% 15 Canada Square,
London, E14 5GL
Croydon PSDH Holdco Limited ** United Kingdom 100% 15 Canada Square,
London, E14 5GL
Denver Rail (Eagle) Holdings Inc. ** United States 100% Note 8
Forum Cambridge Holdco Limited ** United Kingdom 100% Note 1
Hungary M6 Limited ** United Kingdom 100% Note 1
Hyder Investments Limited ** United Kingdom 100% Note 1
John Laing Buckthorn Wind HoldCo Corp ** United States 100% Note 8
John Laing Cambridge Limited ** United Kingdom 100% Note 1
John Laing Funding Limited ** United Kingdom 100% Note 1
John Laing Holdco Limited * United Kingdom 100% Note 1
John Laing Homes Limited ** United Kingdom 100% Note 1
John Laing I-4 Holdco Corp ** United States 100% Note 8
John Laing I-66 Holdco Corp ** United States 100% Note 8
John Laing I-77 Holdco Corp ** United States 100% Note 8
John Laing Infrastructure Limited ** United Kingdom 100% Note 1
John Laing Infrastructure (A1 Mobil Holdings) Limited ** United Kingdom 100% Note 1
John Laing Infrastructure (German Holdings) Limited ** United Kingdom 100% Note 1
John Laing Infrastructure Management Services India ** India 100% Delhi Rectangle,
Private Limited 4th Floor Rectangle No. 1,
Saket Commercial Complex,
D4 Saket, New Delhi, India
John Laing Investments (SLR) BV ** Netherlands 100% Note 3
John Laing Investments Limited ** United Kingdom 100% Note 1
John Laing Investments (Grafton) BV ** Netherlands 100% Note 3
John Laing Investments (Hornsdale) Pty Limited ** Australia 100% Note 4
John Laing Investments (Hornsdale 2) Pty Limited ** Australia 100% Note 4
John Laing Investments Netherlands Holdings BV ** Netherlands 100% Note 3
John Laing Investments (LBAJQ) BV ** Netherlands 100% Note 3
John Laing Investments (Melbourne Metro) BV ** Netherlands 100% Note 3
John Laing Investments (NGR) BV ** Netherlands 100% Note 3
John Laing Investments (NRAH) BV ** Netherlands 100% Note 3
John Laing Investments NZ Holdings Limited ** United Kingdom 100% Note 1
John Laing Investments Overseas Holdings Limited ** United Kingdom 100% Note 1
John Laing Investments (Perth Stadium) BV ** Netherlands 100% Note 3
John Laing Limited ** United Kingdom 100% Note 1
John Laing Projects & Developments (Croydon) Limited ** United Kingdom 100% 15 Canada Square,
London, E14 5GL
John Laing Projects & Developments (Holdings) Limited ** United Kingdom 100% Note 1
John Laing Rocksprings Wind Holdco Corp ** United States 100% Note 8
John Laing Social Infrastructure Limited ** United Kingdom 100% Note 1
John Laing Sterling Wind Holdco Corp ** United States 100% Note 8
Laing Infrastructure Holdings Limited ** United Kingdom 100% Note 1
Laing Investment Company Limited ** United Kingdom 100% Note 1
Laing Investments Greenwich Limited ** United Kingdom 100% Note 1
Laing Property Limited ** United Kingdom 100% Note 1
Laing Property Holdings Limited ** United Kingdom 100% Note 1
Rail Investments (Great Western) Limited ** United Kingdom 50% Note 1
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
13 SUBSIDIARIES AND OTHER INVESTMENTS
Country of Ownership Registered
Name incorporation interest office
(CONTINUED)
NON-RECOURSE SUBSIDIARIES
Subsidiary project companies (measured at fair value)
AEM Holdco LLC ** United States 92.5% 645 N. Michigan,
Suite 980, Chicago,
IL 60611
United States of America
AEM Wind LLC ** United States 92.5% 645 N. Michigan,
Suite 980, Chicago,
IL 60611
United States of America
ALTRAC Light Rail Holdings 3 Pty Limited ** Australia 100% Note 4
ALTRAC Light Rail Holdings Trust 3 ** Australia 100% Note 4
ALTRAC Light Rail 3 Pty Limited ** Australia 100% Note 4
ALTRAC Light Rail 3 Trust ** Australia 100% Note 4
Buckthorn Wind John Laing OpCo LLC ** United States 90.05% Note 8
Buckthorn Wind Class B Holdco LLC ** United States 90.05% Note 8
Buckthorn Wind Project LLC ** United States 90.05% Note 8
Buckthorn Wind Tax Equity Holdco LLC ** United States 90.05% Note 8
CountyRoute (A130) Plc ** United Kingdom 100% Note 2
CountyRoute 2 Limited ** United Kingdom 100% Note 2
CountyRoute Limited ** United Kingdom 100% Note 2
Courtibeaux (Holding) Limited ** United Kingdom 100% Note 1
CY Holdings 3 Pty Limited ** Australia 100% Note 4
Cross Yarra Holding Trust 3 ** Australia 100% Note 4
Cross Yarra Trust 3 ** Australia 100% Note 4
Defence Support (St Athan) Holdings Limited ** United Kingdom 100% Note 2
Defence Support (St Athan) Limited ** United Kingdom 100% Note 2
Dritte Nordergründe Beteiligungs GmbH ** Germany 100% Lise-Meitner-Strasse 5,
28359 Bremen,
Germany
Education Support (Southend) Limited ** United Kingdom 100% Note 1
Glencarbry (Holdings) Limited ** Ireland 100% Note 1
Glencarbry Supply Company Limited ** Ireland 100% Arthur Cox Building,
Earlsfort Terrace,
Dublin 2,
Ireland
Glencarbry Windfarm Limited ** Ireland 100% Arthur Cox Building,
Earlsfort Terrace,
Dublin 2,
Ireland
Kabeltrasse Morbach GmbH & Co KG ** Germany 81.82% Oberdorfstraße 10,
55262 Heidesheim
am Rhein, Germany
KGE Windpark Schipkau-Nord GmbH & Co. KG ** Germany 100% Am Nesseufer 40,
26789 Leer, Germany
KGE Schipkau-Nord Infrastruktur GmbH & Co. KG ** Germany 85% Am Nesseufer 40,
26789 Leer, Germany
Kiata Wind Farm Holdings Pty Limited ** Australia 72.3% Level 4,
30 Marcus Clarke Street,
Canberra City ACT 2601,
Australia
Kiata Wind Farm Pty Limited ** Australia 72.3% Level 4,
30 Marcus Clarke Street,
Canberra City ACT 2601,
Australia
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
John Laing Annual Report and Accounts 2017 /
129
13 SUBSIDIARIES AND OTHER INVESTMENTS
Country of Ownership Registered
Name incorporation interest office
(CONTINUED)
Klettwitz Schipkau Nord Beteiligungs GmbH ** Germany 100% Note 7
Klettwitz SN Holdings GmbH ** Germany 100% Note 7
Klettwitz SN Verwaltungs GmbH ** Germany 100% Note 7
LBAJQ Holding 4 Pty Limited ** Australia 100% Note 4
LBAJQ Holding Trust 4 ** Australia 100% Note 4
LBAJQ 4 Pty Limited ** Australia 100% Note 4
LBAJQ Trust 4 ** Australia 100% Note 4
Nordergrunde Holdco GmbH ** Germany 100% Lise-Meitner-Strasse 5,
28359 Bremen, Germany
Parc Eolien des Courtibeaux SAS ** France 100% 20 Av de la Paix,
Strasbourg 67000, France
Parc Eolien des Tournevents du Cos SAS ** France 100% 20 Av de la Paix,
Strasbourg 67000, France
Parkway 6 BV ** Netherlands 85% Taurusavenue 100,
Hoofddorp, Netherlands
Parkway 6 Holding BV ** Netherlands 85% Taurusavenue 100,
Hoofddorp, Netherlands
Rammeldalsberget Vindkraft AB ** Sweden 100% Sveavagen 17,
111 57 Stockholm,
Sweden
Rammeldalsberget Holding AB ** Sweden 100% Sveavagen 17,
111 57 Stockholm, Sweden
Rocksprings Wind John Laing OpCo LLC ** United States 100% Note 8
Rocksprings Val Verde Wind LLC ** United States 95.3% Note 8
Services Support (Surrey) Holdings Limited ** United Kingdom 100% Note 1
Services Support (Surrey) Limited ** United Kingdom 100% Note 1
Société d'Exploitation du Parc Eolien Du Tonnerois ** France 100% Pasilly Nord les Points,
89310 Pasilly, France
Sterling Wind John Laing Op Co. LLC ** United States 100% Note 8
Svartvallsberget SPW AB ** Sweden 100% Sveavagen 17,
111 57 Stockholm, Sweden
Svartvallsberget Holding AB ** Sweden 100% Sveavagen 17,
111 57 Stockholm, Sweden
Tonnerois (Holdings) Limited ** United Kingdom 100% Note 1
Tournevents (Holding) Limited ** United Kingdom 100% Note 1
Val Verde Wind HoldCo III LLC ** United States 95.3% Note 8
Vierte Nordergründe Beteiligungs GmbH ** Germany 100% Lise-Meitner-Strasse 5,
28359 Bremen, Germany
Wind Hold Co 1 Limited ** United Kingdom 100% Note 1
Wind Project Co 1 Limited ** United Kingdom 100% Note 1
Windpark Horath Holding GmbH ** Germany 100% Note 7
Windpark Horath Verwaltungs GmbH ** Germany 100% Note 7
WP Horath GmbH & Co KG ** Germany 100% Note 7
Zweite Nordergründe Beteiligungs GmbH ** Germany 100% Lise-Meitner-Strasse 5,
28359 Bremen, Germany
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
13 SUBSIDIARIES AND OTHER INVESTMENTS
(CONTINUED)
Details of the Company’s joint ventures and other investments at 31 December 2017 were as follows:
Country of Ownership Registered
Name incorporation interest office
NON-RECOURSE
Joint venture project companies (measured at fair value)
A Mobil Services GmbH ** Germany 42.5% Stader Strasse 36,
27419 Sittensen, Germany
A1 Mobil GmbH & Co. KG ** Germany 42.5% Stader Strasse 36,
27419 Sittensen, Germany
A1 Mobil Verwaltungs GmbH ** Germany 42.5% Stader Strasse 36,
27419 Sittensen, Germany
A-Lanes A15 Holding BV ** Netherlands 28% Venkelweg 64,
Hoogvliet Rotterdam,
Netherlands
A-Lanes A15 BV ** Netherlands 28% Venkelweg 64,
Hoogvliet Rotterdam,
Netherlands
A-Lanes Management Services BV ** Netherlands 25% Venkelweg 64,
Hoogvliet Rotterdam,
Netherlands
Agility Trains West (Holdings) Limited ** United Kingdom 15% Note 6
Agility Trains West (Midco) Limited ** United Kingdom 15% Note 6
Agility Trains West Limited ** United Kingdom 15% Note 6
Agility Trains East (Holdings) Limited ** United Kingdom 30% Note 6
Agility Trains East (Midco) Limited ** United Kingdom 30% Note 6
Agility Trains East Limited ** United Kingdom 30% Note 6
Alder Hey Holdco 3 Limited ** United Kingdom 40% Note 2
Alder Hey Holdco 2 Limited ** United Kingdom 40% Note 2
Alder Hey (Holdco 1 Limited ** United Kingdom 40% Note 2
Alder Hey (Special Purpose Vehicle) Limited ** United Kingdom 40% Note 2
ALTRAC Light Rail Partnership ** Australia 32.5% Level 7,
280 Elizabeth St Surry Hills,
NSW 2010, Australia
Celsus Holding Pty Limited ** Australia 17.26% c/- Royal Adelaide Hospital,
Port road,
Adelaide SA 5000,
Australia
Celsus Pty Limited ** Australia 17.26% c/- Royal Adelaide Hospital,
Port road,
Adelaide SA 5000,
Australia
Cramlington Renewable Energy Developments Hold Co Limited ** United Kingdom 44.72%*** Note 1
Cramlington Renewable Energy Developments Limited ** United Kingdom 44.72%*** Note 1
Cross Yarra Partnership Pty Limited ** Australia 30% Level 8,
136 Exhibition St,
Melbourne VIC 3000,
Australia
Denver Transit Holdings LLC ** United States 45% Note 8
Denver Transit Partners LLC ** United States 45% Note 8
Forum Cambridge LLP ** United Kingdom 50% Note 1
Hornsdale Asset Co Pty Limited ** Australia 15% Note 5
HWF Holdco 1 Pty Limited ** Australia 30% Note 5
HWF FinCo 1 Pty Limited ** Australia 30% Note 5
HWF 1 Pty Limited ** Australia 30% Note 5
HWF Holdco 2 Pty Limited ** Australia 20% Note 5
HWF FinCo 2 Pty Limited ** Australia 20% Note 5
HWF 2 Pty Limited ** Australia 20% Note 5
I-4 Mobility Partners HoldCo LLC ** United States 50% Note 8
I-4 Mobility Partners Midstream LLC ** United States 50% Note 8
I-4 Mobility Partners Op Co LLC ** United States 50% Note 8
I-66 Express Mobility Partners Holding LLC ** United States 10% 1209 Orange St,
Wilmington,
Delaware 19801, USA
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
John Laing Annual Report and Accounts 2017 /
131
13 SUBSIDIARIES AND OTHER INVESTMENTS
Country of Ownership Registered
Name incorporation interest office
(CONTINUED)
I-66 Mobility Partners Midstream LLC ** United States 10% 1209 Orange St,
Wilmington,
Delaware 19801, USA
I-66 Mobility Partners OpCo LLC ** United States 10% 1209 Orange St,
Wilmington,
Delaware 19801, USA
I-77 Mobility Partners Holding LLC ** United States 10% 1209 Orange St,
Wilmington,
Delaware 19801, USA
I-77 Mobility Partners LLC ** United States 10% 1209 Orange St,
Wilmington,
Delaware 19801, USA
INEOS Runcorn (TPS) Holding Limited ** United Kingdom 37.43% PO BOX 9
Runcorn Site Hq,
South Parade, Runcorn,
Cheshire, WA7 4JE
INEOS Runcorn (TPS) Limited ** United Kingdom 37.43% PO BOX 9
Runcorn Site Hq,
South Parade, Runcorn,
Cheshire, WA7 4JE
Laing/Gladedale (Hastings) Holdings Limited ** United Kingdom 50% Note 1
Laing/Gladedale (Hastings) Limited ** United Kingdom 50% Note 1
Laing/Gladedale (St Saviours) Limited ** United Kingdom 50% Note 1
Laing Wimpey Alireza Limited ** Saudi Arabia 33% P.O. Box 2059
Jeddah, Saudi Arabia
NGR Holding Company Pty Limited ** Australia 40% c/- Allens, Level 33,
101 Collins Street,
Melbourne VIC 3000,
Australia
NGR Project Company Pty Limited ** Australia 40% c/- Allens, Level 33,
101 Collins Street,
Melbourne VIC 3000,
Australia
OWP Nordergründe GmbH & Co. KG ** Germany 30% Stephanitorsbollwerk 3,
28217 Bremen, Germany
Regenter Myatts Field North Holdings Company Limited ** United Kingdom 50% Note 2
Regenter Myatts Field North Limited ** United Kingdom 50% Note 2
Securefuture Wiri Holdings Limited ** New Zealand 30% Level 3, 37 Galway Street,
Britomart, Auckland 1010,
New Zealand
Securefuture Wiri Limited ** New Zealand 30% Level 3,
37 Galway Street,
Britomart, Auckland 1010,
New Zealand
Severn River Crossing Plc ** United Kingdom 35% Bridge Access Road,
Aust, South Gloucestershire,
BS35 4BD
SPC Management Services BV ** Netherlands 33.3% Westkanaaldijk 2 Utrecht,
Netherlands
Speyside Renewable Energy Partnership Hold Co Limited ** United Kingdom 43.35%**** 13 Queens Road,
Aberdeen,
Scotland, AB15 4YL
Speyside Renewable Energy Finance Limited ** United Kingdom 43.35%**** 13 Queens Road,
Aberdeen,
Scotland, AB15 4YL
Speyside Renewable Energy Partnership Limited ** United Kingdom 43.35%**** 13 Queens Road,
Aberdeen,
Scotland, AB15 4YL
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132
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2017
13 SUBSIDIARIES AND OTHER INVESTMENTS
Country of Ownership Registered
Name incorporation interest office
(CONTINUED)
Transcend Property Limited ** United Kingdom 50% Note 1
Westadium Project Holdco Pty Limited ** Australia 50% Note 4
Westadium Project Co Pty Limited ** Australia 50% Note 4
Wimpey Laing Iran Limited ** United Kingdom 50% Gate House,
Turnpike Road,
High Wycombe,
Buckinghamshire, HP12 3NR
Wimpey Laing Limited ** United Kingdom 50% Gate House,
Turnpike Road,
High Wycombe,
Buckinghamshire, HP12 3NR
Other investments
John Laing Environmental Assets Group Limited ** Guernsey 2.5% Sarnia House,
Le Truchot, St Peter Port,
Guernsey GY1 1GR
Channel Islands
*
Entities owned directly by the Company
** Entities owned indirectly by the Company
*** 44.72% of share capital ownership and 55.9% investment in subordinated debt loan
**** 43.35% of share capital ownership and 51% investment in subordinated debt loan
Notes:
1. The registered office of these companies is: 1 Kingsway, London, WC2B 6AN
2. The registered office of these companies is: 8 White Oak Square, London Road, Swanley, Kent, BR8 7AG
3. The registered office of these companies is: Schiphol Boulevard 253 D-building, Schiphol, 1118 BH, The Netherlands
4. The registered office of these companies is: Level 16, 15 Castlereagh Street, Sydney NSW 2000, Australia
5. The registered office of these companies is: Suite 3 Level 14, 219-227 Elizabeth Street, Sydney NSW 2000, Australia
6. The registered office of these companies is: 4th Floor 4 Copthall Avenue, London, EC2R 7DA
7. The registered office of these companies is: Münzstraße 21, 10178 Berlin, Germany
8. The registered office of these companies is: 251 Little Falls Drive, Wilmington, Delaware 19808, USA
John Laing Annual Report and Accounts 2017 /
133
ADDITIONAL FINANCIAL INFORMATION (UNAUDITED)
DETAILS OF INVESTMENTS IN PROJECT COMPANIES
Details of the Group’s investments in project companies as at 31 December 2017 broken down by infrastructure sector are as follows:
Sector
Company name
Project name
%
owned Description
Period of concession or
estimated operating life
Start
date
No. of
years
Equity committed /
invested (par value)
<
Social
Infrastructure
Health
Alder Hey
(Special Purpose
Vehicle) Limited
Alder Hey
Children's
Hospital
40%
Design, build, finance and operate
new hospital in Liverpool costing
£167 million.
July 2015 30
£10 million
Celsus Pty
Limited
New Royal
Adelaide Hospital
Justice and
Emergency
Services
Securefuture
Wiri Limited
Auckland South
Corrections
Facility
NorthernPathways
Holding Pty
Limited
New Grafton
Correctional
Centre
Defence
Defence Support
(St Athan)
Limited
DARA Red
Dragon
Other
accommodation
Westadium
Project Co Pty
Limited
New Perth
Stadium
Regenter Myatts
Field North
Limited
Lambeth
Housing
Environmental
17.26% Design, build, finance and operate
Nov 2011
35
£25 – £50 million
30%
80%
new hospital in Adelaide, South
Australia costing AUD $1,850 million.
Design, build, finance and operate
a 960 place prison at Wiri, South
Auckland, New Zealand costing
NZD $270 million.
Design, build, finance and operate a
1,700 place prison at Grafton, New
South Wales, Australia costing
AUD $719 million.
Sept 2012 28
£10 – £25 million
June 2017 23
£50 – £100 million
<
100% Design, build and finance aircraft
Aug 2003
16
£10 million
50%
50%
maintenance facilities at RAF
St. Athan costing £89 million.
Design, build, finance, maintenance
and operation of new Perth Stadium
in Western Australia comprising total
expenditure of AUD $1.0 billion.
Build and refurbish, finance and
operate social housing in Lambeth
costing £72.6 million.
Aug 2014
28
£25 – £50 million
<
May 2012 25
£10 million
Waste and
biomass
INEOS Runcorn
(TPS) Limited
Manchester
Waste TPS Co
37.43% Design, build, finance and operate a
waste CHP plant in Runcorn costing
£233 million.
Apr 2009
25
£10 – £25 million
Speyside
Renewable
Energy
Partnership
Limited
Cramlington
Renewable
Energy
Developments
Limited
Speyside
Biomass
43.35% Design, build, finance and operate
Aug 2014
33
£10 – £25 million
a 14 MWe biomass CHP plant
in Speyside.
Cramlington
Biomass
44.7% Design, build, finance and operate
a 28 MW biomass CHP plant
in Cramlington.
Sept 2015 22
£25 – £50 million
Wind and solar
Rammeldalsberget
Vindkraft AB
Rammeldalsberget
Wind Farm
100% Design, build, finance and operate
Nov 2014
24
£10 – £25 million
six 2.5 MW turbines in Sweden
Glencarbry
Windfarm
Limited
Glencarbry
Wind Farm
100% Design, build, finance and operate
Jan 2016
26
£10 – £25 million
seven 3.3 MW and five 2.5 MW
turbines in Ireland.
Kabeltrasse
Morbach GmbH
& Co. KG
Horath
Wind Farm
81.82% Design, build, finance and operate
nine 3.3 MW turbines in Germany.
Nov 2016
24
£10 – £25 million
HWF 1 Pty
Limited
Hornsdale Wind
Farm (Phase 1)
30%
HWF 2 Pty
Limited
Hornsdale Wind
Farm (Phase 2)
20%
HWF 3 Pty
Limited
Hornsdale Wind
Farm (Phase 3)
20%
Design, build, finance and operate
32 turbines to give 100 MW total
installed capacity in Australia.
Design, build, finance and operate
32 turbines to give 100 MW total
installed capacity in Australia.
Design, build, finance and operate
35 turbines to give 109 MW total
installed capacity in Australia.
Aug 2015
26
£10 – £25 million
<
June 2016 26
£10 million
<
Feb 2017
22
£10 million
Solar House 1
Limited
Solar House
80%
Design, build, finance and operate
10,000 solar panels to give 90 MW
totalled installed capacity in France.
Jul 2017
26
£10 – £25 million
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ADDITIONAL FINANCIAL INFORMATION (UNAUDITED)
(CONTINUED)
DETAILS OF INVESTMENTS IN PROJECT COMPANIES
(CONTINUED)
Period of concession or
estimated operating life
Sector
Company name
Project name
%
owned Description
Start
No. of
years
Equity committed /
invested (par value)
Wind and solar
(continued)
Kiata Wind Farm
Pty Limited
Kiata Wind Farm 72.3% Design, build, finance and operate
Nov 2016
26
a nine turbine 30 MW windfarm
in Australia.
£10 – £25 million
<
Société
d'Exploitation du
Parc Eolien du
Tonnerois
Pasilly
Wind Farm
100% Design, build, finance and operate
ten 2 MW turbines in France.
Dec 2015
26
£10 million
Svartvallsberget
SPW AB
Svartvallsberget
Wind Farm
100% Design, build, finance and operate
Mar 2013
26
£10 – £25 million
ten 2 MW turbines in Sweden.
Klettwitz Shipkau
Nord
Beteiligungs
GmbH
AEM Wind LLC
Klettwitz
Wind Farm
100% Design, build, finance and operate
the re-powering of a windfarm with
27 turbines to give 89 MW total
installed capacity in Germany.
Oct 2015
25
£25 – £50 million
Sterling
Wind Farm
92.5% Design, build, finance and operate
Oct 2016
31
13 2.3 MW turbines in New Mexico, USA.
<
£10 – £25 million
Parc Eolien des
Courtibeaux SAS
St. Martin
Wind Farm
Parc Eolien des
Tournevents du
Cos SAS
Sommette
Wind Farm
100% Design, build, finance and operate
Nov 2016
27
£10 million
five 2.05 MW turbines in France.
100% Design, build, finance and operate
Sept 2016
27
£10 – £25 million
nine 2.4 MW turbines in France.
OWP
Nordergründe
GmbH & Co. KG
Nordergründe
Offshore
Wind Farm
30%
Design, build, finance and operate
18 offshore 6.15 MW turbines in the
German North Sea.
Aug 2016
26
£25 – £50 million
Rocksprings
Wind John Laing
OpCo LLC
Rocksprings
Wind Farm
95.3% Installation of 53 General Electric
Sept 2017
30
£50 – £100 million
2.3 MW wind turbines and 16 1.72 MW
turbines in Val Verde County, Texas, US.
Buckthorn Wind
John Laing OpCo
LLC
Buckthorn
Wind Farm
90.05% Design, build, finance and operate
29 turbines to produce a 100 MW in
Erath County, Texas, US.
Oct 2017
30
£25 – £50 million
<
Transport
Other
CountyRoute
(A130) plc
I-4 Mobility
Partners Op Co
LLC
A130
100% Design, build, finance and operate
Feb 2000
30
£10 million
I-4 Ultimate
50%
I-77 Mobility
Partners LLC
I-77 Managed
Lanes
10%
I-66 Mobility
Partners OpCo
LLC
I-66 Managed
Lanes
10%
Severn River
Crossing Plc
Severn River
Crossing
35%
Parkway 6 BV
A6 Parkway
Netherlands
85%
the A130 bypass linking the A12
and A127 in Essex at a cost of
£76 million.
Design, build, finance and operate
21 miles of the I-4 Interstate in
Florida, US at a cost of USD
$2.32 billion.
Design, build, finance and operate
25.9 miles of the I-77 Interstate in
Charlotte, North Carolina, US at a
cost of USD $665 million.
Design, build, finance, operate and
maintain 22.5 miles of managed
lanes along the I-66 corridor in
Northern Virginia, US.
Design, build, finance and operate
a second crossing over the Severn
River plus operate and maintain
existing crossing. Construction cost
approximately £320 million.
Design, build, finance, manage and
maintain for a 20 year operational
period the A6 Almere highway in the
greater Amsterdam region.
€
Sept 2014
40
£10 – £25 million
May 2015
53
£10 – £25 million
>
Nov 2017
50
£100 million
Apr 1992
The earlier
of 30 years
or until a
pre-determined
level of revenue
achieved
£10 – £25 million
<
Nov 2016
23
£10 million
A1 Mobil GmbH
& Co. KG
A1 Germany
42.5% Construct and operate the A1 Autobahn
Aug 2008
30
£25 – £50 million
between Bremen and Hamburg in
Germany at a cost of
417.1 million.
DETAILS OF INVESTMENTS IN PROJECT COMPANIES
(CONTINUED)
Sector
Company name
Project name
%
owned Description
Other
(continued)
A-Lanes A15 BV A15
28%
Netherlands
€
Design, build, finance and maintain
the A15 highway south of Rotterdam
(about 40 kilometres) at a construction
cost of
727 million.
Denver Transit
Partners LLC
Denver Eagle P3 45%
Design, build, finance, maintenance
and operation of passenger rail
systems in Denver, Colorado.
Construction cost USD $1.27 billion.
ALTRAC Light
Rail Partnership
Sydney Light Rail 32.5% Design, build, finance, operate and
maintain both the Central Business
District and South East Light Rail and
to operate and maintain the Inner
West Light Rail in Sydney, Australia.
Cross Yarra
Partnership Pty
Limited
Melbourne Metro 30%
Rail rolling stock Agility Trains
West Limited
IEP (Phase 1)
15%
Agility Trains
East Limited
IEP (Phase 2)
30%
NGR Project
Company Pty
Limited
New Generation
Rollingstock
40%
Design, build, finance, operate and
maintain twin nine-kilometre tunnels
and five new underground stations in
Melbourne, Australia.
Delivery and maintenance of intercity
train services on the Great Western
Main Line (UK) using a fleet of new
Super Express Trains and maintenance
facilities. Construction cost £1.8 billion.
Delivery and maintenance of intercity
train services on the East Coast Main
Line (UK) using a fleet of new Super
Express Trains and maintenance
facilities. Construction cost
£1.6 billion.
Provision and maintenance of 75
new six-car trains for Queensland Rail,
Australia. Construction cost
AUD $1.8 billion.
John Laing Annual Report and Accounts 2017 /
135
Period of concession or
estimated operating life
Start
date
No. of
years
Equity committed /
invested (par value)
Dec 2010
25
£10 – £25 million
Aug 2010
34
£10 – £25 million
Feb 2015
19
£50 – £100 million
Dec 2017
25
£25 – £50 million
May 2012 41
£50 – £100 million
Apr 2014
41
£50 – £100 million
Jan 2014
32
£10 – £25 million
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/ John Laing Annual Report and Accounts 2017
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NOTICE OF ANNUAL GENERAL MEETING
to be held at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS on 10 May 2018 at 11.00 am.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you
should seek your own advice from an independent stockbroker, solicitor, accountant, or other professional adviser.
If you have sold or otherwise transferred all of your ordinary shares in John Laing Group plc, please pass this document together
with the accompanying documents to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the
sale or transfer was effected, so they can pass these documents to the person who now holds the shares.
A form of proxy for the annual general meeting (AGM) is enclosed and should be completed and returned as soon as possible in
accordance with the instructions printed on the form of proxy. To be valid, it must reach the Company’s registrar, Equiniti, no
later than 48 hours before the time of the AGM. Alternatively, you may register your vote online by visiting the registrar’s website
at www.sharevote.co.uk or, if you already have a portfolio registered with Equiniti, by logging onto www.shareview.co.uk.
In order to register your vote online you will need to enter the Voting I.D., Task I.D. and Shareholder Reference Number which are
on the enclosed form of proxy. If you are a member of CREST, the electronic settlement system for UK securities, you may
register the appointment of a proxy by using the CREST electronic proxy appointment service. Further details are contained in
the notes to the notice of AGM (see pages 143 and 144 of this document) and in the form of proxy. Electronic and CREST proxy
voting instructions should also be submitted no later than 11.00am on 8 May 2018. Completion of a form of proxy or the
appointment of a proxy electronically will not stop you from attending the AGM and voting in person should you so wish.
John Laing Annual Report and Accounts 2017 /
137
CHAIRMAN’S LETTER
Dear Shareholder,
I am writing to you with details of the annual general meeting (AGM) of John Laing Group plc (John Laing or the Company) which
we are holding at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS on 10 May 2018 at 11.00am.
We very much hope that as many shareholders as possible will be able to attend.
Voting on all the proposed resolutions at the AGM will be conducted on a poll rather than on a show of hands. Voting on a poll is
more transparent and equitable because it includes a vote in respect of every share held by each shareholder (present and voting
in person or by proxy), rather than a single vote for each shareholder or proxy who attends the AGM.
NOTICE OF AGM
The formal notice of the AGM is set out on page 141 of this document.
Shareholders of the Company will be asked to consider and, if thought fit, approve resolutions in respect of the following matters:
ORDINARY RESOLUTIONS
Consideration of the Company’s accounts and the reports of the Directors of the Company (the Directors) and the auditor of the
Company (the external auditor);
Approval of the final dividend for the year ended 31 December 2017;
Re-election and election of Directors;
Approval of the Directors’ remuneration report for the year ended 31 December 2017;
Reappointment of Deloitte LLP as auditor for the ensuing year;
Authority to determine the remuneration of the auditor;
Authority to allot shares; and
Authority to make political donations.
SPECIAL RESOLUTIONS
Waiver of pre-emption rights in certain circumstances;
Authority for the Company to purchase its own shares; and
Approval to reduce the notice period for a general meeting, other than an annual general meeting.
(resolutions 1 and 2)
A brief description of these matters is set out below.
Report and accounts and final dividend
The first resolution at the AGM relates to the receipt and consideration of the Company’s accounts and the reports of the
Directors and the external auditor for the financial year ended 31 December 2017.
Separately, shareholders will be asked to approve the payment of a final dividend of 7.17 pence per ordinary share in respect of
the year ended 31 December 2017, as recommended by the Directors.
If the recommended final dividend is approved, it is proposed that it will be paid on 18 May 2018 to shareholders on the
(resolutions 3 to 9)
Company’s register of members at the close of business on 20 April 2018 (the record date).
Re-election and election of Directors
Resolutions 3 to 9 propose the re-election of six out of the seven current Directors of the Company in accordance with the
articles of association of the Company and the UK Corporate Governance Code (the Code). The re-election of these Directors will
take effect from the conclusion of the AGM.
Having announced my retirement on 7 December 2017, I will not stand for re-election as a Director of the Company. Accordingly,
I will retire as Chairman of the Company from the Board with effect from the conclusion of the AGM.
Shareholders' approval is sought for the election of Will Samuel as a Director of the Company. He was first appointed by the
Board as a Director on 7 December 2017 and now stands for election by shareholders in accordance with the Code. If so elected,
he will succeed me as Chairman with effect from the conclusion of the AGM.
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/ John Laing Annual Report and Accounts 2017
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CHAIRMAN’S LETTER
(CONTINUED)
Biographical details for each of the Directors offering themselves for re-election or election are set out on pages 46 to 47 of the
Annual Report. The Board believes this information is sufficient to enable shareholders to make an informed decision on the
proposed re-election or election of these Directors.
Following the annual evaluation exercise conducted in 2017, the Board considers that the contribution, commitment and
performance of each of the Directors proposed for re-election and election continues to be valuable and effective and that it is
appropriate for them to continue to serve as Directors of the Company.
In accordance with the Code, the Board has reviewed the independence of its non-executive Directors and has determined that
they remain fully independent of management and that there are no relationships or circumstances likely to affect their
(resolution 10)
character or judgement.
Directors’ remuneration report
The Company believes that the Directors’ remuneration report, which may be found on pages 58 to 73 of the Annual Report,
demonstrates the link between our remuneration policy and practice, and the Company’s strategy and performance.
The Directors’ remuneration policy, a summary of which may be found on pages 67 to 73 of the Annual Report, sets out the
Company’s forward-looking policy on directors’ remuneration and describes the components of the Executive and non-executive
Directors’ remuneration.
The Board considers that appropriate executive remuneration plays a vital part in helping to achieve the Company’s overall
objectives and, accordingly, and in compliance with the relevant legislation, shareholders will be invited to approve the Directors’
remuneration report.
The Directors’ remuneration report is included in the Annual Report and provides details of the remuneration paid to the
Directors during the year ended 31 December 2017, including share awards. Shareholders are invited to approve the Directors’
remuneration report under resolution 10. This vote is advisory in nature in that payments made or promised to Directors will not
have to be repaid, reduced or withheld in the event that the resolution is not passed. This vote will be in respect of the content of
the Directors’ remuneration report and not specific to any Director’s level or terms of remuneration.
The Company is required to seek shareholder approval of the Directors’ remuneration policy every three years, except in the
event that a change to the policy is proposed or the advisory vote on the Directors’ remuneration report is not passed at the
preceding AGM. The Directors’ remuneration policy was approved at the 2016 AGM and there have been no changes since it was
approved. It is expected that a resolution approving the Directors’ remuneration policy will next be put to shareholders at the
(resolutions 11 and 12)
2019 AGM.
External Auditor
Resolutions will be proposed to reappoint Deloitte LLP as external auditor until the conclusion of the AGM in 2019 and to
(resolution 13)
authorise the Directors to determine their remuneration.
Directors’ authority to allot shares
Further to the provisions of section 551 of the Companies Act 2006 (the Act), shareholders will be asked to grant the Board the
authority to allot shares, grant rights to subscribe for shares, or convert any security into shares in the Company (the new authority).
The new authority would be valid until the close of the AGM in 2019 or, if earlier, the close of business on 10 August 2019.
If passed, the new authority would be limited to an aggregate nominal value of £16,309,339.20, or 163,093,392 ordinary shares,
representing approximately one third of the Company’s issued ordinary share capital as at 27 March 2018 being the latest
practicable date prior to the publication of this notice save that, if the new authority were used in connection with a rights issue,
it would be limited to an aggregate nominal value of £32,618,678.50 ordinary shares, or 326,186,785 ordinary shares, representing
approximately two thirds of the Company’s issued share capital as at 27 March 2018.
In each case the number of shares to which the new authority applies is in addition to those committed to employee share plans.
At the date this document was despatched to shareholders, the Directors had no intention to exercise this new authority,
although they considered its grant to be appropriate in order to preserve maximum flexibility for the future. The Directors intend
to seek the approval of shareholders to renew this authority annually.
John Laing Annual Report and Accounts 2017 /
139
(resolution 14)
Political donations
The Act restricts companies from making donations to political parties, other political organisations or independent election
candidates and from incurring political expenditure, in each case without shareholders’ consent. It is not proposed or intended
to alter the Company’s policy of not making such donations or incurring such expenditure. However, the Act contains some
potentially broad definitions and it may be that some of the activities of the Company and its subsidiaries fall within these
definitions and, without the necessary authorisation, this could inhibit the Company’s ability to communicate its views effectively
to political audiences and to relevant interest groups. Accordingly, the Company believes that the authority contained in this
resolution is necessary to allow it and its subsidiaries to fund activities which it is in the interests of shareholders that the
John Laing group of companies should support. Such authority will enable the Company and its subsidiaries to be sure that
they do not unintentionally commit a technical breach of the Act. Any expenditure which may be incurred under authority of this
resolution will be disclosed in next year’s Annual Report. It is the Company’s intention to seek renewal of this resolution on an
(resolutions 15 and 16)
annual basis.
Waiver of pre-emption rights
Under section 561(1) of the Act, if the Directors wish to allot ordinary shares, or grant rights to subscribe for, or convert
securities into, ordinary shares, or sell treasury shares for cash (other than pursuant to an employee share scheme) they must
in the first instance offer them to existing shareholders in proportion to their holdings. There may be occasions, however, when
the Directors need the flexibility to finance business opportunities by the allotment of shares without a pre-emptive offer to
existing shareholders. This cannot be done under the Act unless the shareholders have first waived their pre-emption rights, so
two resolutions will be proposed to waive these statutory pre-emption provisions for a period ending at the close of the AGM in
2019 or, if earlier, at the close of business on 10 August 2019.
In line with the Pre-Emption Group’s Statement of Principles, the first resolution will empower the Board to allot equity
securities for cash consideration either on a non-pre-emptive basis: (i) by way of a rights or other pre-emptive issue in order to
allow the Directors to make appropriate exclusions and other arrangements to resolve legal or practical problems which might,
for example, arise in relation to overseas shareholders; or (ii) by way of a non-pre-emptive issue, in the latter case limited to
an aggregate nominal value of £2,446,400.80, or a total of 24,464,008 ordinary shares, representing approximately 5% of the
Company’s issued share capital as at 27 March 2018. The second resolution will empower the Board to allot equity securities
representing a further 24,464,008 ordinary shares or 5% of the Company’s issued share capital to be used only for the purposes
of financing (or refinancing, if the power is to be used within six months after the original transaction) a transaction which the
Directors determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on
Disapplying Pre-Emption Rights in March 2015. Both of these resolutions are conditional on resolution 13 being passed.
At the date this document was approved by the Board, the Directors had no intention to exercise these authorities, although they
considered their grants to be appropriate in order to preserve maximum flexibility for the future. The Directors intend to seek the
(resolution 17)
approval of shareholders to renew these authorities annually.
Authority to purchase own shares
Shareholders will be asked to authorise the market purchase by John Laing of a proportion of its issued ordinary share capital,
subject to the limits referred to below.
The Directors consider it prudent to be able to act at short notice if circumstances warrant. In considering the purchase of
ordinary shares, the Directors will follow the procedures laid down in the Act and will take into account cash resources, capital
requirements and the effect of any purchase on gearing levels and on NAV and earnings per share. They will only consider
exercising the authority when satisfied that it would be in the best interests of the Company and its shareholders as a whole to
do so, having first considered any other investment opportunities open to the Company.
Any purchase by the Company of its own shares pursuant to this authority will be paid for out of distributable profits. Any shares
which are repurchased will be dealt with in accordance with section 724 of the Act. The Company is entitled to hold the shares as
treasury shares, sell them for cash, cancel them or transfer them pursuant to an employee share plan. The authority, which will
expire at the close of the AGM in 2019 or, if earlier, at the close of business on 10 November 2019, will be limited to the purchase
of 48,928,017 ordinary shares, representing approximately 10% of John Laing’s issued ordinary share capital as at 27 March 2018.
The maximum price (excluding expenses) to be paid per ordinary share on any occasion will be restricted to the higher of (i)
105% of the average of the middle market quotations of an ordinary share of the Company derived from the London Stock
Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is contracted
to be purchased and (ii) an amount equal to the higher of the price of the last independent trade of an ordinary share and the
highest current independent bid for an ordinary share as derived from the London Stock Exchange Trading System. The
minimum price will be 10p per ordinary share, which is the nominal value of the shares.
Shareholders should understand that the maximum number of shares and the price range are stated merely for the purposes of
compliance with statutory requirements in seeking this authority and should not be taken as any indication of the terms upon
which the Company intends to make such purchases. At the date this document was approved by the Board, the Directors had no
intention to exercise this authority.
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140
CHAIRMAN’S LETTER
(CONTINUED)
Any purchases of ordinary shares would be by means of market purchases through the London Stock Exchange. Any shares
purchased under this authority may either be cancelled or held as treasury shares. Treasury shares may subsequently be
cancelled, sold for cash or used to satisfy options issued to employees pursuant to the Company’s employee share schemes.
The Company’s issued share capital as at 27 March 2018 (the latest practicable date prior to the publication of this document)
was 489,280,178 ordinary shares of 10p each. The total number of awards over ordinary shares which were outstanding as at
27 March 2018 was approximately 5,031,360 (before any adjustment for the recent rights issue) which represents approximately
1.03% of the issued share capital of the Company at that date. If the maximum number of 48,928,017 shares were to be
purchased by the Company (under resolution 17), the adjusted issued share capital would be 440,352,161 and the awards
(resolution 18)
outstanding would represent approximately 1.14% of the adjusted issued share capital.
Notice of general meetings
The Act sets the notice period required for general meetings of the Company at 21 days unless shareholders approve a shorter
notice period, which cannot however be less than 14 clear days. This resolution seeks such approval. It is intended that the
shorter notice period would not be used as a matter of routine for such meetings but only where the flexibility is merited by the
business of the meeting and is thought to be in the interests of shareholders as a whole. The Company undertakes to meet the
requirements for electronic voting in the Act before calling a general meeting on 14 clear days’ notice. If given, the approval will
be effective until the Company’s next AGM, when it is intended that a renewal of the approval will be proposed.
ANNUAL GENERAL MEETING
The resolutions referred to in this letter are included in the notice of AGM set out on page 141 of this document. The AGM is to be
held at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS at 11.00am on 10 May 2018. If you
are unable to attend the AGM, please complete and return the enclosed form of proxy in the prepaid envelope provided so as to
reach the Company’s registrar, Equiniti, not less than 48 hours before the time of the AGM. Alternatively, you may register your
vote online by visiting the registrar’s website at www.sharevote.co.uk or, if you already have a portfolio registered with Equiniti,
by logging onto www.shareview.co.uk. In order to register your vote online you will need to enter the Voting I.D., Task I.D. and
Shareholder Reference Number which are on the enclosed form of proxy. If you are a member of CREST, you may register the
appointment of a proxy by using the CREST electronic proxy appointment service.
Further details are contained in the notes to the notice of AGM and in the form of proxy.
Completion of a form of proxy, or the appointment of a proxy electronically, will not stop you from attending the AGM and voting
in person should you so wish. If you are unable to attend the AGM but would like to ask a question, please e-mail
carolyn.cattermole@laing.com or philip.naylor@laing.com.
RECOMMENDATION
The Directors consider that all the resolutions to be put to the AGM are in the best interests of the Company and its shareholders
as a whole and are most likely to promote the success of the Company. Your Board will be voting in favour of all the proposed
resolutions and unanimously recommends that you do so as well.
Yours sincerely,
Phil Nolan
CHAIRMAN
Registered Office:
1 Kingsway
London WC2B 6AN
United Kingdom
John Laing Group plc
Registered in England and Wales No. 05975300
John Laing Annual Report and Accounts 2017 /
141
NOTICE OF ANNUAL GENERAL MEETING
The Annual General Meeting will be held at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS
on 10 May 2018 at 11.00am. You will be asked to consider and vote on the resolutions below. Resolutions 15 to 18 (inclusive) will
be proposed as special resolutions and will be passed if at least three-quarters of the votes cast (in person or by proxy) are in
favour. All other resolutions will be proposed as ordinary resolutions and will be passed if a majority of the votes cast (in person
or by proxy) are in favour.
ORDINARY RESOLUTIONS
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions
1. To receive and consider the audited accounts of the Company for the year ended 31 December 2017 and the report of the
Directors and external auditor thereon.
2. To declare a final dividend of 7.17 pence per ordinary share for the year ended 31 December 2017 recommended by the
Directors.
3. To re elect Olivier Brousse as Director of the Company with effect from the end of the AGM.
4. To re elect Patrick O’Donnell Bourke as Director of the Company with effect from the end of the AGM.
5. To re elect David Rough as Director of the Company with effect from the end of the AGM.
6. To re elect Jeremy Beeton as Director of the Company with effect from the end of the AGM.
7. To re elect Toby Hiscock as Director of the Company with effect from the end of the AGM.
8. To re elect Anne Wade as Director of the Company with effect from the end of the AGM.
9. To elect Will Samuel as Director of the Company with effect from the end of the AGM.
10. To receive and approve the Directors’ Remuneration Report contained within the Annual Report for the year ended
31 December 2017, in accordance with section 439 of the Companies Act 2006 (the Act).
11. To re-appoint Deloitte LLP as the Company’s auditor to hold office until the conclusion of the next general meeting of the
Company at which accounts are laid.
12. To authorise the Directors to agree the auditor’s remuneration.
13. THAT, pursuant to section 551 of the Act, the Board be generally and unconditionally authorised to allot shares in the
Company and to grant rights to subscribe for or to convert any security into shares in the Company:
(i) up to an aggregate nominal amount of £16,309,339.20; and
(ii) comprising equity securities, as defined in section 560 of the Act, up to an aggregate nominal amount of £32,618,678.50
(including within such limit any shares or rights issued or granted under (i) above) in connection with an offer by way of
a rights issue:
(A) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(B) to people who are holders of other equity securities if this is required by the rights of those securities or, if the Board
considers it necessary, as permitted by the rights of those securities;
and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or
under the laws of, any territory or any other matter, such authorities to expire (unless previously reviewed, varied or revoked
by the Company in general meeting) at the close of the AGM in 2019 (or, if earlier, at the close of business on 10 August
2019) provided that, in each case, the Company may make offers and enter into agreements during the relevant period which
would or might require shares in the Company to be allotted, or rights to subscribe for or convert any security into shares to
be granted, after the authority expires and the Board may allot shares in the Company and grant rights under any such offer
or agreement as if the authority had not expired.
14. THAT the Company, and any company which is or becomes a subsidiary of the Company, at any time up to the end of the AGM
in 2019, be generally authorised, in aggregate, to:
(i) make political donations to political parties and/or independent election candidates not exceeding £50,000 in total;
(ii) make political donations to political organisations other than political parties not exceeding £100,000 in total; and
(iii) incur political expenditure not exceeding £50,000 in total.
For the purposes of this authority the terms “political donation”, “political parties”, “independent election candidates”,
“political organisation” and “political expenditure” have the meanings given by sections 363 to 365 of the Act.
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142
NOTICE OF ANNUAL GENERAL MEETING
(CONTINUED)
SPECIAL RESOLUTIONS
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
15. THAT, subject to resolution 13 being passed, the Board be generally empowered, pursuant to section 570 and section 573 of
the Act, to allot equity securities (as defined in the Act) for cash under the authority given by resolution 13 and/or to sell
ordinary shares held by the Company as treasury shares for cash as if section 561 of the Act did not apply to any such
allotment or sale, such power to be limited:
(i)
to the allotment of equity securities in connection with an offer of equity securities (but in the case of the authority
granted under resolution 13(ii), by way of a rights issue only):
(A) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(B) to people who are holders of other equity securities, if this is required by the rights of those securities or, if the Board
considers it necessary, as permitted by the rights of those securities;
and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or
under the laws of, any territory or any other matter; and
(ii) to the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (i) above) up to a
nominal amount of £2,446,400.80, being approximately 5 per cent of the issued ordinary share capital of the Company as
at 27 March 2018,
such power to expire at the end of the next AGM of the Company (or, if earlier, at the close of business on 10 August 2019)
but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might,
require equity securities to be allotted (and treasury shares to be sold) after the power expires and the Board may allot equity
securities (and sell treasury shares) under any such offer or agreement as if the power had not expired.
16. THAT, subject to resolution 13 being passed, the Board be generally empowered, pursuant to section 570 and section 573 of
the Act, and in addition to any authority granted under resolution 15, to allot equity securities (as defined in the Act) for cash
under the authority given by resolution 13 and/or to sell ordinary shares held by the Company as treasury shares for cash as
if section 561 of the Act did not apply to any such allotment or sale, such power to be:
(i)
limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £2,446,400.80, being
approximately 5 per cent of the issued ordinary share capital of the Company as at 27 March 2018; and
(ii) used only for the purposes of financing (or refinancing, if the power is to be used within six months after the original
transaction) a transaction which the Board of the Company determines to be an acquisition or other capital investment
of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by
the Pre-Emption Group prior to the date of this notice,
such power to expire at the end of the next AGM of the Company (or, if earlier, at the close of business on 10 August 2019)
but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might,
require equity securities to be allotted (and treasury shares to be sold) after the power expires and the Board may allot equity
securities (and sell treasury shares) under any such offer or agreement as if the power had not expired.
17. THAT the Company is hereby generally and unconditionally authorised in accordance with section 701 of the Act to make
market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 10p each in the capital of the
Company provided that: (i) the maximum number of ordinary shares hereby authorised to be purchased is 48,928,017; (ii)
the minimum price (exclusive of expenses) which may be paid for an ordinary share is 10p per share; (iii) the maximum
price (exclusive of expenses) which may be paid for an ordinary share is, in respect of an ordinary share contracted to be
purchased on any day, the higher of (a) an amount equal to 105% of the average of the middle market quotations of an
ordinary share of the Company derived from the London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which the ordinary share is contracted to be purchased and (b) an amount equal to the
higher of the price of the last independent trade of an ordinary share and the highest current independent bid for an ordinary
share as derived from the London Stock Exchange Trading System; (iv) the authority hereby conferred shall expire at the
close of the AGM in 2019 (or, if earlier, at the close of business on 10 November 2019); and (v) during the relevant period the
Company may make a contract to purchase ordinary shares under this authority prior to the expiry of such authority which
will or may be executed wholly or partly after the expiry of such authority and may make a purchase of ordinary shares in
pursuance of any such contract as if the authority had not expired.
John Laing Annual Report and Accounts 2017 /
143
18. THAT a general meeting of the Company, other than an annual general meeting, may be called on not less than 14 clear
days’ notice.
By order of the Board
Carolyn Cattermole
COMPANY SECRETARY
27 March 2018
Registered Office:
1 Kingsway
London WC2B 6AN
United Kingdom
John Laing Group plc
Registered in England and Wales No. 05975300
Notes
1. The right to attend and vote at the AGM is determined by reference to the Company’s register of members. Only a member entered in
the register of members at 6.00 p.m. on 8 May 2018 (or, if this AGM is adjourned, in the register of members at 6.00p.m. two
business days before the time of any adjourned meeting) is entitled to attend and vote at the AGM and a member may vote in respect
of the number of ordinary shares registered in the member’s name at that time. Changes to the entries in the register of members
after that time shall be disregarded in determining the rights of any person to attend and vote at the AGM.
2. Any shareholder or nominee shareholder may appoint one or more persons (whether shareholders of the Company or not) to act as
his/her proxy or proxies to attend, speak and vote instead of him/her (provided that each such proxy is appointed to exercise the
rights attached to a different share or shares held by that shareholder). The form of proxy for use at the AGM must be deposited,
together with any power of attorney or authority under which it is signed, at Equiniti, Aspect House, Spencer Road, Lancing, West
Sussex BN99 6DA, not less than 48 hours before the time appointed for the AGM or any adjournment thereof. An appropriate form of
proxy is enclosed. Alternatively, you may register your vote online by visiting www.sharevote.co.uk or, if you already have a portfolio
registered with Equiniti, by logging onto www.shareview.co.uk. In order to register your vote online you will need to enter the Voting
I.D., Task I.D. and Shareholder Reference Number which are on the enclosed form of proxy.
3. CREST members who wish to appoint a proxy or proxies, or amend an instruction to a previously appointed proxy, through the CREST
electronic proxy appointment service may do so for the AGM to be held at 11.00am on 10 May 2018 and any adjournment(s) thereof,
by using the procedures described in the CREST manual (available via www.euroclear.com). CREST personal members or other
CREST sponsored members, and those CREST members who have appointed (a) voting service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST
Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must
contain the information required for such instructions, as described in the CREST manual. The message, regardless of whether it
relates to the appointment of a proxy or to an instruction to a previously appointed proxy, must be transmitted so as to be received by
the issuer’s agent (ID: RA19) by no later than 11.00am on 8 May 2018. For this purpose, the time of receipt will be taken to be the
time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able
to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST proxy instructions. It is the responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal member or sponsored member or has appointed (a) voting service provider(s),
to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a
message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST manual
concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
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/ John Laing Annual Report and Accounts 2017
144
NOTICE OF ANNUAL GENERAL MEETING
(CONTINUED)
4. Completion of a form of proxy, or the appointment of a proxy electronically, will not stop you from attending the AGM and voting in
person should you so wish.
Shareholders may change proxy instructions by submitting a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded. If you submit more than one valid proxy appointment, the
appointment received last before the latest time for the receipt of proxies will take precedence.
Shareholders may revoke a proxy instruction delivered pursuant to note 2, but to do so must inform the Company in writing by
sending a signed hard copy notice clearly stating their intention to revoke the proxy appointment to Equiniti, Aspect House, Spencer
Road, Lancing, West Sussex, BN99 6DA. In the case of a shareholder which is a company, the revocation notice must be executed
under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or
any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included
with the revocation notice. The revocation notice must be received by the Company no later than the cut-off time (48 hours before the
time appointed for the AGM) set out above. If a shareholder attempts to revoke his or her proxy appointment but the revocation is
received after the time specified, such shareholder’s original proxy appointment will remain valid unless the shareholder attends the
AGM and votes in person.
The 2018 AGM will be held at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS on 10 May 2018
at 11.00am.
In the case of joint holders, where more than one of the joint holders completes a proxy appointment, only the appointment
submitted by the most senior holder will be accepted. For this purpose seniority is determined by the order in which the names of
the joint holders appear in the Company’s register of members (the first-named being the most senior).
5. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise, on its behalf, all of its
powers as a shareholder, provided that no more than one corporate representative exercises powers over the same share.
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Act to enjoy information rights (a Nominated
Person) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be
appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right
or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as
to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in paragraph 2 above does not apply to
Nominated Persons. The rights described in that paragraph can only be exercised by shareholders of the Company.
7. As at 27 March 2018 (being the last practicable date prior to the publication of this Notice) the Company’s issued share capital
consisted of 489,280,178 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 27 March 2018
are 489,280,178 votes.
8. Under section 527 of the Act, members meeting the threshold requirements set out in that section have the right to require the
Company to publish a statement on a website setting out any matter relating to:
• the audit of the Company’s accounts (including the external auditor’s report and the conduct of the audit) that are to be
laid before the AGM; or
• any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual
accounts and reports were laid.
The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with
sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it
must forward the statement to the Company’s external auditor not later than the time when it makes the statement available on the
website. The business which may be dealt with at the AGM includes any statement that the Company has been required under
section 527 of the Act to publish on a website.
9. Any shareholder, proxy or corporate representative attending the AGM has the right to ask questions. The Company must cause to be
answered any such question relating to the business being dealt with at the AGM but no such answer need be given if:
• to do so would interfere unduly with the preparation for the AGM or involve the disclosure of confidential information;
• the answer has already been given on a website in the form of an answer to a question; or
• it is undesirable in the interests of the Company or the good order of the AGM that the question be answered.
10. The following documents will be available for inspection during normal business hours on any business day at the Company’s
registered office and will also be available during the AGM and for 15 minutes beforehand:
• copies of the Directors’ service contracts with, or letters of appointment by, the Company; and
• the articles of association of the Company.
11. A copy of this notice, and other information required by section 311A of the Act, can be found at www.laing.com.
12. You may not use any electronic address provided either in this notice or any related documents (including the form of proxy) to
communicate with the Company for any purpose other than those expressly stated.
The results of the voting at the AGM will be announced through a Regulatory Information Service and will appear on the Company’s
website (www.laing.com/investor-relations/regulatory-news.html) as soon as possible following the AGM.
SHAREHOLDER INFORMATION
FINANCIAL DIARY
8 March 2018
19 April 2018
20 April 2018
10 May 2018
18 May 2018
August 2018
October 2018
Full year results presentation
Ex-dividend date for final dividend
Record date for final dividend
Annual General Meeting
Payment of final dividend
Announcement of half year results
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
71 Queen Victoria Street
London EC4V 4AY
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
ABN AMRO Bank NV
Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
JOINT STOCKBROKERS
Barclays Bank PLC
5 The North Colonnade
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
INDEPENDENT VALUERS
KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
REGISTRARS
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Please contact the Registrars at the address above to advise
of a change of address or for any enquiries relating to dividend
payments, lost share certificates or other share registration
matters. The Registrars provide on-line facilities at
www.shareview.co.uk. Once you have registered you will be
able to access information on your John Laing Group plc
shareholding, update your personal details and amend your
dividend payment instructions on-line without having to call
or write to the Registrars.
REGISTRARS QUERIES
Information on how to manage your shareholdings can be
found at https://help.shareview.co.uk. The pages at this web
address provide answers to commonly asked questions
regarding shareholder registration, links to downloadable
forms and guidance notes.
If your question is not answered by the information provided,
you can send your enquiry via secure email from the pages
at https://help.shareview.co.uk. You will be asked to complete
a structured form and to provide your Shareholder Reference,
name and address. You will also need to provide your email
address if this is how you would like to receive your response.
Alternatively you can telephone: 0371 384 2030. Lines are open
from 8.30am to 5.30pm (UK time) Monday to Friday, excluding
public holidays in England and Wales.
Calls from overseas: +44 121 415 7047.
COMPANY WEBSITE
The Company’s website at www.laing.com contains the latest
information for shareholders, including press releases and an
updated financial diary. Email alerts of the latest news, press
releases and financial reports about John Laing Group plc
may be obtained by registering for the email news alert
service on the website.
SHARE PRICE INFORMATION
The latest price of the Company’s ordinary shares
is available on www.laing.com. Alternatively click on
www.londonstockexchange.com. John Laing's ticker symbol
is JLG. John Laing is classified in the Speciality Finance Sector
of Financial Services on The London Stock Exchange. It is
recommended that you consult your financial adviser and
verify information obtained from these services before making
any investment decision.
DIVIDENDS
Shareholders who wish to have their dividends paid directly into
a bank or building society account should contact the Registrars.
SHARE DEALING SERVICES
The Registrars offer a real-time telephone and internet
dealing service for the UK. Further details including terms
and rates can be obtained by logging on to the website
at www.shareview.co.uk/dealing or by calling 03456 037 037.
Lines are open from 8:00am to 4:30pm (UK time) for dealing,
and until 6:00pm (UK time) for enquiries Monday – Friday,
excluding public holidays in England and Wales.
Designed and produced by MAGEE (www.magee.co.uk)
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Printed by Pureprint Group Limited, a CarbonNeutral
Printing Company. Pureprint Group Limited is FSC
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Further copies of this Annual Report & Accounts
are available by visiting the Company’s
website or at the address below
www.laing.com
John Laing Group plc
Registered Office:
1 Kingsway
London
WC2B 6AN
United Kingdom
Registered No. 05975300
Tel: +44 (0)20 7901 3200
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JOHN LAING GROUP PLC
Annual Report
2017
& Accounts