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9
DELIVERING
RESPONSIBLE
INFRASTRUCTURE
SOLUTIONS
John Laing Group plc
Annual Report & Accounts 2019
WE ARE JOHN LAING
DELIVERING
INFRASTRUCTURE
SOLUTIONS
JOHN LAING IS DELIVERING INFRASTRUCTURE SOLUTIONS. WE ARE INVESTORS AND
PARTNERS BEHIND RESPONSIBLE INFRASTRUCTURE PROJECTS WHICH RESPOND
TO PUBLIC NEEDS, EMPOWER SUSTAINABLE GROWTH AND IMPROVE THE LIVES OF
THE COMMUNITIES IN WHICH WE WORK.
CLARENCE CORRECTIONAL CENTRE,
ASIA PACIFIC
THE INTERCITY EXPRESS PROGRAMME,
EUROPE AND MIDDLE EAST
p / 18
p / 24
I-75 ROAD,
NORTH AMERICA
RUTA DEL CACAO,
LATIN AMERICA
p / 32
p / 42
Our Alignment to the United Nations Sustainable Development Goals
While our projects have overlaps across many of the UN SDGs, we have
identified 5 priority SDGs which our investments most directly contribute to.
For further information on this, please see page 64.
2019 HIGHLIGHTS
FINANCIAL HIGHLIGHTS
> NAV per share at 337p at 31 December 2019
(31 December 2018 – 323p)
> 4.3% increase since 31 December 2018; 7.2% increase before
dividends paid;
> 10.7% increase at constant currency and before dividends paid1
> Final dividend 7.66p per share (including a special dividend
of 3.98p per share), giving a total dividend for 2019 of 9.50p
> Investment commitments of £184 million (2018 – £302 million)2
> Realisations of £143 million (2018 – £296 million)
OPERATIONAL HIGHLIGHTS
> Strong performance in asset management and project delivery
> Wind & solar investments:
– Modest improvement to H1 write downs in second half
of the year
– Following second half review, all new investments
in standalone wind and solar generation to cease
> Record pipeline: £3.2 billion (2018 – £2.4 billion)
Notes:
(1) 10.7% increase calculated after adding back the net FX loss
of £55 million in 2019.
(2) Based on new investment commitments secured in the year
ended 31 December 2019; for further details see the
Chief Executive Officer’s Review.
CONTENTS
OVERVIEW
1 2019 Highlights
2 At a Glance
4 Our Global Reach
6 Chairman’s Statement
STRATEGIC REPORT
8 Chief Executive Officer’s Review
14 Our Strategy and Business Model
16 Key Performance Indicators
20 Regional Review
20 Asia Pacific
21 Europe and Middle East
22 North America
23 Latin America
26 Portfolio Valuation
34 Financial Review
44 Stakeholder Engagement
47 Prospects and Viability
49 Principal Risks and Risk Management
55 Corporate Responsibility
56 Responsible Employer
63 Responsible Investor
68 Community
70 Climate
GOVERNANCE
74 Directors and Company Secretary
76 Chairman’s Introduction to Governance
78 Corporate Governance
86 Audit & Risk Committee Report
90 Nomination Committee Report
92 Directors’ Remuneration Report
113
Compliance Against the 2018 Corporate
Governance Code
115 Directors’ Report
FINANCIAL STATEMENTS
119 Statement of Directors’ Responsibilities
120
Independent Auditor’s Report to the
Members of John Laing Group plc
Notes to the Group Financial Statements
Group Statement of Comprehensive Income
128 Group Income Statement
129
130 Group Statement of Changes in Equity
131 Group Balance Sheet
132 Group Cash Flow Statement
133
168 Company Balance Sheet
169
170 Company Cash Flow Statement
171 Notes to the Company Financial Statements
185 Additional Financial Information (Unaudited)
188 Shareholder Information
Company Statement of Changes in Equity
1
OverviewStrategic ReportGovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019
AT A GLANCE
OUR BUSINESS TODAY
JOHN LAING IS AN INTERNATIONAL ORIGINATOR, ACTIVE INVESTOR AND MANAGER OF
INFRASTRUCTURE PROJECTS. OUR BUSINESS IS FOCUSED ON MAJOR TRANSPORT, SOCIAL AND
ENVIRONMENTAL INFRASTRUCTURE PROJECTS ACROSS EUROPE & MIDDLE EAST, ASIA PACIFIC,
NORTH AMERICA AND LATIN AMERICA.
WHAT WE DO
OUR APPROACH
• Active asset management – Our people work
within the project at board and SPV level, and
are on-site, actively involved in everything
from design to completion.
• Financial strength – We invest our own money and
stay fully committed to projects until they are fully
operational and delivering the benefits promised.
• Sustainability – This is embedded throughout
the project lifecycle from design and
construction to operational delivery.
• International, with a local presence – We deliver
our projects from a network of 10 offices together
with various site offices in four regions –
Europe and Middle East, Asia Pacific,
North America and Latin America.
• Partnership approach – A track record of
working closely with like-minded partners
to deliver project success.
• Highly capable teams – In-depth sector expertise,
matched by significant experience in complex
infrastructure means our teams add measurable
value to projects.
• Holistic stakeholder approach – Balancing
the needs of our people, partners, communities
and investors to create value for all.
• Broad experience – Bringing innovative
solutions to complex infrastructure projects
in road, rail, social and energy sectors.
Read about our business model on pages 14-15
We bring long-term value to communities through
infrastructure projects which respond to the challenges
facing society today. Challenges such as urbanisation,
population growth and environmental impacts.
We look for new opportunities which deliver solutions
to those challenges and help drive society forward.
OUR DIVERSIFIED PORTFOLIO
Investment portfolio spanning
a broad range of sectors.
Portfolio value
at 31 December 2019
£1.77bn
Transport – rail and rolling stock 34%
Transport – roads and other 20%
Social infrastructure 11%
Environmental – wind & solar generation 33%
Environmental – waste & biomass 2%
2
John Laing Group plcAnnual Report and Accounts 2019 SUMMARY FINANCIAL INFORMATION
£ million (unless otherwise stated)
Net asset value (NAV)
NAV per share1
Profit before tax
Earnings per share (EPS)2
Dividends per share
Primary Investment portfolio
Secondary Investment portfolio
Total investment portfolio
Future investment commitments backed by letters of credit or cash collateral
Gross investment portfolio
New investment committed during the period3
Cash invested in projects
Proceeds from investment realisations
Cash yield from investments
Investment pipeline3
Notes:
Year
ended
or as at
31 December
2019
Year
ended
or as at
31 December
2018
1,658
337p
100
20p
9.50p
907
861
1,768
219
1,987
184
267
143
57
3,172
1,587
323p
296
63p
9.50p
868
692
1,560
296
1,856
302
342
296
34
2,373
(1) Calculated as NAV at 31 December 2019 of £1,658 million divided by the number of shares in issue at 31 December 2019 of 491.8 million
(2) Basic EPS; see note 6 to the Group financial statements
(3) For further details, see the Chief Executive Officer’s Review
GROWING
INTERNATIONAL PRESENCE
The percentage of UK investments in our portfolio
has reduced from 66% at 31 December 2014, just
before the IPO, to 24% at 31 December 2019.
Portfolio value
£1.77bn
2019
Portfolio value
£772m
2014
Europe & Middle East – 34% 2019 / 85% 2014
North America – 29% 2019 / 7% 2014
Asia Pacific – 33% 2019 / 8% 2014
Latin America – 4% 2019 / 0% 2014
Read more in our Regional Review on page 20
BEING A RESPONSIBLE INVESTOR
We believe that responsible investment is key to fulfilling
our purpose to foster sustainable growth. By identifying
environmental, social and governance (ESG) considerations
throughout the investment process, we can create value for
our stakeholders not only in terms of minimising the down
side risk and maximising the opportunities associated with
these investments but also by improving the lives of
communities around the world as we invest in infrastructure
projects which respond to public needs.
Read more about our Sustainability on page 63
3
OverviewStrategic ReportGovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019 OUR GLOBAL REACH
JOHN LAING HAS A WELL ESTABLISHED PRESENCE
IN EACH OF ITS CORE MARKETS: EUROPE &
MIDDLE EAST, NORTH AMERICA, ASIA PACIFIC
AND LATIN AMERICA.
NORTH AMERICA
When selecting target regions, we look for an
identifiable pipeline of projects coming to market,
strong political will for utilising private investment
and embracing ESG, a robust infrastructure-delivery
supply chain, returns that meet our risk-adjusted
hurdle rates and the existence of a market for
operational investments or a strong expectation that
one will develop. Typically we enter new geographies
alongside one of our existing partners that already
has an established local presence.
Brantley
Solar Farm
100%
Hurontario
Light Rail
40%
IS54
Solar Farm
100%
Buckleberry
Solar Farm
100%
Buckthorn
Wind Farm
90.05%
I-4 Ultimate
I-66 Managed
Lanes
50%
10%
Denver
Eagle P3
45%
I-75 Road
40%
Fox Creek
Solar Farm
100%
I-77 Managed
Lanes
10%
IS67
Solar Farm
100%
Live Oak
Wind Farm
75%
MBTA Automated
Fare Collection
System
90%
> North America
investment pipeline
£1,044m
OUR SECTORS
Our activities are focused on the following infrastructure
sectors:
Transport and transport-related infrastructure, such as roads,
tunnels, bridges and rail assets (including rolling stock).
Environmental infrastructure, such as energy transition,
biomass, water treatment and waste management.
Social infrastructure, such as schools, hospitals, university
accommodation, stadiums, social housing and justice and
other public sector buildings.
Read more about our Regional performance on pages 20 to 23
Primary
Secondary
Regional Offices
4
> Latin America
investment pipeline
£615m
LATIN AMERICA
Ruta del Cacao
30%
John Laing Group plcAnnual Report and Accounts 2019 EUROPE & MIDDLE EAST
A6 Parkway
Netherlands
A15
Netherlands
85%
28%
Cramlington
Biomass
44.7%
Glencarbry
Wind Farm
100%
A16 Road
47.5%
Horath
Wind Farm
81.82%
A130
100%
IEP (Phase 2)
30%
Nordergründe
Wind Farm
30%
Pasilly
Wind Farm
100%
Rammeldalsberget
Wind Farm
100%
Sommette
Wind Farm
100%
Alder Hey
Children’s
Hospital
40%
Klettwitz
Wind Farm
100%
Speyside
Biomass
43.35%
St. Martin
Wind Farm
100%
Svartvallsberget
Wind Farm
100%
University of
British Student
Accommodation
85%
> Europe & Middle East
investment pipeline
£632m
> Asia Pacific
investment pipeline
£881m
ASIA PACIFIC
Auckland South
Corrections
Facility
30%
Cherry Tree
Wind Farm
100%
Clarence
Correctional
Centre
80%
East Rockingham
Waste
40%
Finley
Solar Farm
100%
Granville
Wind Farm
49.8%
Melbourne
Metro
30%
Hornsdale 1
Wind Farm
Hornsdale 2
Wind Farm
Hornsdale 3
Wind Farm
30%
20%
20%
New Generation
Rollingstock
New Royal
Adelaide Hospital
40%
17.26%
Sunraysia
Solar Farm
90.1%
Kiata
Wind Farm
72.3%
Sydney
Light Rail
32.5%
5
OverviewStrategic ReportGovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019 CHAIRMAN’S STATEMENT
DELIVERING OUR PURPOSE
“
DESPITE THE CHALLENGES WE HAVE FACED THIS YEAR, WE HAVE
DELIVERED A SOLID PERFORMANCE AND I AM CONFIDENT THAT
WE ARE WELL POSITIONED TO BENEFIT FROM THE OPPORTUNITIES
THAT LIE AHEAD.”
We delivered a solid performance in 2019, despite facing
challenges principally in our renewable energy portfolio.
This highlights the resilience of our business model and is
testament to the strength of our regional structure, which
was put in place two years ago to enable our regional teams
to focus more effectively on value creation. This model has
delivered tangible benefits in 2019, with strong project delivery
and value enhancements across the business. In a global
environment where the development of responsible and
sustainable infrastructure is key to economic growth and
success, John Laing remains ideally placed to leverage new
market opportunities in all four of our geographic regions.
Our purpose is clear. It is to create value for all our stakeholders
by investing in, developing and actively managing infrastructure
which respond to public needs, foster sustainable growth
and improve the lives of communities around the world.
John Laing is clearly differentiated from other participants
in the infrastructure sector, focusing solely on greenfield
infrastructure investments and investing its own capital.
Following the write-down taken in the first half of the year,
we announced that we would be reassessing our activities
in wind and solar generation investment. Having completed
the review, we have taken the decision to cease investing in
standalone wind and solar generation projects across all our
geographies. In our view, these asset classes have become
commoditised and returns for John Laing are insufficient to
cover the external risks. As with all of our projects, our wind
and solar assets are available for sale once construction is
complete and steady operational performance has been
achieved. We anticipate that these divestments will take place
over the next two years and believe the secondary market for
these assets to be strong.
Our business model is nimble and flexible, enabling us to
respond to opportunities in new markets and geographies.
This has helped to drive growth in our pipeline, which now
stands at a record level despite the removal of standalone
wind and solar generation investment. Alongside new
opportunities in existing areas, such as transportation, the
pipeline also includes new asset classes and new markets
that fit our business model, which is centred on delivering
innovative solutions for complex infrastructure problems.
These new areas include digital infrastructure but currently
do not include those related to the broader energy transition,
such as the decarbonisation of transport.
2019 HIGHLIGHTS
> NAV per share
> NAV per share growth
(before dividends paid)
337p
7.2%
(31 Dec 2018 – 323p)
(31 Dec 2018 – 18.2%)
> Pipeline
£3.2bn
> Total dividend
per share
9.50p
(31 Dec 2018 – £2.4bn)
(2018 – 9.50p)
6
John Laing Group plcAnnual Report and Accounts 2019 We also continued to expand our international footprint in 2019
and, following our investment in the Ruta del Cacao PPP road
project in Colombia, we have established Latin America as
our fourth region. In the year, we committed capital in each
of our four regions, with the majority in North America and
Latin America. Looking ahead, we expect this to continue as
both regions have strong pipelines. Following a period of
political uncertainty in Australia, we are seeing a pick up in
activities, while Europe is expected to remain relatively
subdued, in-line with underlying markets.
Since our IPO in 2015, we have grown NAV per share
(including dividends paid) by 14% compound per annum
(adjusted for the Rights Issue). Despite some challenging
headwinds, the business delivered a solid financial
performance in 2019:
• NAV grew to £1,658 million or 337p per share at
31 December 2019, from 323p per share at
31 December 2018, an increase of 7.2% including
dividends (10.7% at constant currency);
•
Investment commitments totalled £184m, with a record
pipeline of £3.2 billion supporting our three year
investment target of £1 billion; and
As well as our regular Board meeting schedule, we took
time away from the business in June and in October 2019 to
address its future strategy and direction. In these reviews, we
confirmed our commitment to the existing business model
and to creating further shareholder value from growth in NAV;
and we tested the resilience of our existing portfolio against
a backdrop of political and economic uncertainty. We also
reviewed our ESG approach and, in particular, our approach
to responsible investment and plans to improve diversity
and to reduce the gender pay gap within the organisation.
The Board complied with all applicable provisions of the
UK Corporate Governance Code 2018 (the Code), which was
published in July 2018 and applies for the first time this year.
On behalf of the Board, I would like to thank all employees
for their dedication and commitment during a year of change.
I would also like to extend the Board’s thanks to all the
Group’s stakeholders for their continued support.
Our current dividend policy is unchanged and has two parts:
• an annual base dividend of £20 million (starting from
2015) growing at least in line with inflation; the Board is
recommending a final base dividend for 2019 of 3.68p
per share; and
• Realisations of investments were £143m, with a great
• 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.
Proceeds from sale of investments completed in the year
were £143 million. We are also close to completing one
further disposal and in advanced negotiations on another
for aggregate proceeds of approximately £63 million.
We also have other disposal processes underway for
completion later in 2020. The Board is recommending a
special dividend of 3.98p, by applying 9.5% to proceeds of
£206 million, which includes the two disposals expected
to complete soon.
The total final dividend for 2019 therefore amounts to 7.66p
per share, which, together with the interim dividend of 1.84p
per share paid in October 2019, makes a total dividend for
2019 of 9.50p per share, maintaining the 2018 level. The final
dividend will be put to shareholders for their approval at the
Company’s AGM which will be held on 7 May 2020. At the
Company’s last AGM on 9 May 2019, all resolutions were
approved by shareholders.
Despite the challenges we have faced this year, we have
delivered a solid performance and I am confident that we
are well positioned to benefit from the opportunities that
lie ahead.
Will Samuel
Chairman
deal of activity in 2019 to prepare assets for sale in 2020
and 2021, supporting our three year realisations target
of £1 billion.
Turning to the Board, Luciana Germinario became Chief
Financial Officer in May 2019 following the retirement of
Patrick O’D Bourke, Group Finance Director. Luciana has
quickly established herself in the business and in particular
has strengthened the Group’s divestment process.
Toby Hiscock is retiring as Non-executive Director and Chair
of the Audit & Risk Committee following the Annual General
Meeting (AGM) on 7 May 2020, having joined John Laing in
2009. The Company owes much to Toby’s diligence, experience
and commitment for which I am most grateful. Philip Keller
was appointed to the Board as a Non-executive Director and
became a member of the Audit & Risk Committee with effect
from 1 January 2020. He will succeed Toby as the Chair of
this Committee following Toby’s retirement. Philip is also a
member of the Nomination and Remuneration Committees
with effect from 1 January 2020.
I am delighted to welcome Philip to the Board of John Laing.
He brings considerable financial and operational experience,
with a deep understanding of investment businesses and
global organisations, which will further strengthen the diverse
mix of skills and experience on the Board.
After the year end, we also announced that Olivier Brousse
had resigned from his position of Chief Executive Officer. He
will remain with the Company to ensure a smooth transition.
The process is underway to recruit a new Chief Executive
Officer and we will provide updates as appropriate in due
course. On behalf of the Board, I would like to express our
sincere thanks to Olivier for his valuable contribution over
the past five years, delivering the successful IPO and evolving
the Group’s geographic footprint and the diversification of
the portfolio. Olivier will leave behind a strong management
team and a Group that is in good shape.
7
OverviewStrategic ReportGovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019 CHIEF EXECUTIVE OFFICER’S REVIEW
INVESTING STRATEGICALLY
“
A STRONG SECOND HALF OF THE YEAR IN TERMS OF ASSET MANAGEMENT AND PROJECT DELIVERY
HAS ALLOWED US TO DELIVER ON OUR PROMISE FOR FURTHER VALUE ENHANCEMENTS. THIS HAS
BEEN POSSIBLE BECAUSE OF OUR CONSISTENT ABILITY TO CREATE VALUE FROM A DIVERSE RANGE
OF INVESTMENTS AND OUR BUSINESS MODEL THAT GIVES REGIONAL TEAMS RESPONSIBILITY FOR
THEIR OWN PORTFOLIOS.
JOHN LAING IS A GREAT COMPANY WITH A FANTASTIC TEAM OF PEOPLE THROUGHOUT THE BUSINESS,
MAKING MY DECISION TO LEAVE ALL THE MORE DIFFICULT. THEY BRING THE EXPERIENCE, COMMITMENT
AND INNOVATION REQUIRED TO DELIVER INFRASTRUCTURE SOLUTIONS THAT DRIVE SOCIETY FORWARD
AND ARE WELL PLACED TO TAKE ADVANTAGE OF THE OPPORTUNITIES AHEAD.”
2019 was an important year for John Laing on a number
of fronts:
• Strong year for asset management and project delivery:
translating into a high level of value enhancements,
starting in the first half of the year and sustained into
the second half, which helped to offset the H1 wind and
solar write downs, and the impact of falling power prices.
This resulted in NAV per share growth, before dividends
paid in the year, of 7.2%. Excluding the net adverse foreign
exchange impact in the year of £55 million, the growth was
10.7%. With almost £1 billion of assets under construction,
we see significant embedded value in our existing portfolio.
However, the high level of value enhancements in 2019
reflects the initial impact of the move in 2018 to a regional
model and an increased focus on asset management in
the year. We therefore expect a more normalised level of
value enhancements in 2020, in the region of 3% to 5%
of the opening portfolio value.
• Wind and solar: with the issues we encountered in
Australia and Europe in the first half contained and
appropriately priced, we have carefully re-assessed the
risk/return profile of the wind and solar generation sector.
Having concluded that the returns no longer reflect the
risks, we have decided to cease investment in standalone
wind and solar generation assets across all geographies.
John Laing has built an attractive portfolio of operational
wind and solar assets which, in-line with our model,
we will divest into strong secondary markets over the
next 1-2 years.
Olivier Brousse
Chief Executive Officer
2019 HIGHLIGHTS
> New investment
commitments
> Proceeds from
investment realisations
£184m
(2018 – £302m)
£143m
(2018 – £296m)
> Value enhancements
£157m
(2018 – £79m)
8
John Laing Group plcAnnual Report and Accounts 2019 • Refocusing to capitalise on a rapidly changing energy
landscape: wind and solar generation are only one part
of the renewable energy industry, which itself represents
only a portion of the wider energy transition market that is
rapidly gaining momentum. We believe John Laing is well
positioned to provide solutions to some of the complex
infrastructure requirements that energy transition will
involve, particularly decarbonisation. We also remain active
in renewable energy more generally, including in waste to
energy where we made our first investment in Australia
during the year, leveraging experience gained in the UK.
• Significant inroads into a new region: with higher
complexity and higher returns, Latin America is a region
with an attractive pipeline, and our successful entry
into Colombia demonstrates that the Public Private
Partnerships (PPP) model continues to be embraced
in many regions.
OUTLOOK FOR OUR MARKETS AND SECTORS
We believe the biggest drivers for new infrastructure to be a
combination of population growth, urbanisation, the increasing
role of data in societies and economies and climate change.
As we enter a new decade these drivers are as strong as they
have ever been.
We set our purpose to create value for all our stakeholders
by investing in, developing and managing infrastructure
projects which respond to public needs, foster sustainable
growth and improve the lives of communities around the world.
We believe John Laing is well positioned with the right
experience and expertise to help governments make the right
decisions and to contribute to achievement of their goals.
We see three major sectors in which we believe John Laing
has an important part to play that are key to meeting this
purpose: energy transition, including decarbonisation of
transport, managed lanes and telecoms/broadband.
The global energy transition is gaining momentum and, as
such, wind and solar generation will continue to play a key
role as critical enablers of decarbonisation. John Laing was at
the forefront of wind and solar investment through the 2010’s,
investing approximately £850 million in 38 projects across
Europe and in Australia and the US. However, wind and solar
are increasingly mature and commoditised sectors and today
they offer limited value creation potential for an investor such
as John Laing. We believe we can contribute more and create
better value for our stakeholders by playing an active part
in many of the other emerging infrastructure opportunities
driven by the global energy transition. These include:
i) technologies that enable high penetration of renewables;
ii) decarbonisation of other sectors e.g. electrification of
transport; iii) delivering increased energy efficiency. We are
now actively reviewing opportunities across these themes.
WHY WORK WITH JOHN LAING
AT JOHN LAING, WE BRING THE
EXPERIENCE, COMMITMENT AND
INNOVATION REQUIRED TO DELIVER
INFRASTRUCTURE SOLUTIONS THAT
DRIVE SOCIETY FORWARD.
/ 01
OUR BUSINESS MODEL MEANS WE ARE
FULLY COMMITTED TO SUCCESSFUL
PROJECT COMPLETION.
We invest our own money and we do not
receive a return until a project is operational.
That’s why we actively manage.
/ 02
WE BELIEVE COMPLEX PROJECTS REQUIRE
ON THE GROUND COMMITMENT LED BY HIGHLY
EXPERIENCED PEOPLE.
No matter where in the world, we deploy senior
specialists to drive forward improvements,
working shoulder-to-shoulder with consortium
partners. And our network means we can team
up with the best partners from around the world
to deliver locally.
/ 03
WE ARE PROVEN EXPERTS IN MAKING
GREENFIELD DEVELOPMENT HAPPEN.
With credentials from investing in 150 projects
around the world, some of them incredibly
complex and innovative, we are experts in helping
to improve the delivery of public services with
new infrastructure.
Read more about our project delivery on page 12 and in the
Regional Review on pages 20 to 23
/ 04
WE HAVE A FLEXIBLE BUSINESS MODEL, WITH
TRANSFERABLE EXPERIENCE THAT ENABLES
US TO RESPOND TO NEW OPPORTUNITIES AS
THEY EMERGE.
As the world changes, John Laing has evolved,
bringing our expertise to new countries and
sectors. We’ve expanded from the UK, first to
Europe, then to Asia Pacific and North America
and most recently Latin America. And we’ve
continually sought to apply our model to more
sectors as we have grown.
Read more about our business model on pages 14 and 15
9
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CHIEF EXECUTIVE OFFICER’S REVIEW continued
As part of this effort, John Laing officially joined the Hydrogen
Council, a global group of industry and financial players
focused on fostering the contribution of hydrogen-based
technologies and solutions to decarbonisation of energy usage.
We were among the first investors to join the Council and will
look to bring our experience of complex project design and
project finance discipline to facilitate the transition to models
that allow efficient deployment of capital at a large scale.
Population growth and ongoing urbanisation are continuing
to make the largest cities around the world more and more
congested, placing further strains on existing transportation
systems. There is an urgent need for the redevelopment and
decarbonisation of transport systems to ease congestion and
at the same time improve air quality. John Laing has expertise
in both investing in and managing transport systems that
would meet these needs. We currently invest in light-rail
projects in Australia and Canada and we have invested in
both phases of the Intercity Express Programme in the UK,
which has already delivered 104 electric or bi-mode trains.
Our biggest investment to date is in the I-66 Managed Lanes
project, the second managed lanes project that we have
invested in alongside Cintra Ferrovial, which will help to ease
congestion in urban areas expecting population growth and
already experiencing high levels of traffic.
The increasing role of data in modern societies is driving
the need for investment in communications infrastructure.
Broadband fibre networks are seen as the essential digital
backbone of economies. Governments globally are actively
supporting the deployment of networks, either directly by
procuring or subsidising projects in low-density areas, or
indirectly by promoting network competition as in the UK.
The Conservative Government has stated its aim to deliver
high-speed fibre broadband to all communities in the UK. This
will require different models for urban and low-density rural
areas and offer opportunities for the public and private sectors
to work together in an efficient and focused manner. We are
now actively engaged in this space in a number of countries.
There is an on-going need for new infrastructure around the
world. Many countries are failing to keep pace with the changes
brought about by these trends, with the infrastructure market
as a whole historically under-invested.
There will always be pressures on public sector finances.
This creates a strong incentive for the continued use of PPPs
for greenfield infrastructure. As well as access to private
capital, PPPs 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.
OBJECTIVES AND OUTCOMES
Consistent with our purpose, our strategy focuses on NAV per
share growth and dividends as key measures for shareholders:
•
In 2019, our NAV per share increased from 323p per share at
31 December 2018 to 337p per share at 31 December 2019,
representing growth of 7.2% before dividends paid in the
year. Excluding the net adverse impact from foreign
exchange movements of £55 million, the growth was 10.7%.
• We are proposing a total dividend of 9.50p per share for
2019, maintaining the 2018 level.
The two core objectives in delivering our strategy are:
• growth in volume of primary investments in responsible
and sustainable greenfield infrastructure projects over the
medium term; and
• management and enhancement of our investment
portfolio, with a clear focus on active management during
construction and operational phases, 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 VOLUME OF PRIMARY INVESTMENTS
We have a healthy pipeline of new investment opportunities.
This has benefited from the continued strong infrastructure
market in the US and Canada, a resurgence of the PPP market
in Australia and new infrastructure opportunities in Europe
and Israel. We have built on the success of our first investment
in Colombia, and our growing Latin American pipeline reflects
buoyant markets as well as a maintained focus on disciplined
investing. We are also seeing a strong pipeline of exciting
projects in new asset classes, which we believe are a good
match with our business model and offer the potential for good
investment returns. Many of these new opportunities have
come from our ongoing work to foster strong relationships
with our international partners who see John Laing as a
trusted partner for delivering complex infrastructure projects.
At the same time, our funding position means we are well
positioned to make the most of these opportunities. We will
continue to focus on investments in PPP but our business
model is nimble and flexible enough to enable us to respond
to opportunities in other asset classes, providing a strong
pipeline for future growth.
Our investment commitments for 2019 were £184m. While this
was relatively low compared to previous years, this growing
pipeline and a strong capital base underpins our guidance of
£1 billion over the three year period 2019 to 2021, although
given the nature of PPP procurement and its potential for
delays, this could be lumpy and back-ended.
Our new investment commitments for 2019 are summarised in the table below:
Investment commitments
Region
Sector
University of Brighton student accommodation
Europe and Middle East
Social infrastructure
Live Oak wind farm
Ruta del Cacao road
Hurontario light rail
East Rockingham Resource Recovery Facility
North America
Wind and solar generation
Latin America
North America
Asia Pacific
Roads and other
Rail and rolling stock
Waste and biomass
Total
10
Total
£ million
7
75
62
13
27
184
John Laing Group plcAnnual Report and Accounts 2019 • Europe and Middle East: the market for new
infrastructure projects across Europe is relatively
subdued but, despite this, we have a preferred bidder
position on the Via15 PPP project in the Netherlands and
we continue to look at opportunities across the region.
Most notably, our team is looking at opportunities in
Poland, where we have invested successfully in the past,
and Israel, which has an active pipeline of transport and
renewable energy projects and which would be a new
country for us. As part of our assessment of Israeli
opportunities, we have taken a decision not to invest in
any projects located in disputed territory.
• Latin America: our current pipeline in Latin America
reflects the progress we have made in the region. We have
long seen the attraction in investing in Colombia, a country
that joined the OECD in 2018 and has a substantial PPP
programme, particularly in the transportation sector. We
secured our first investment in Colombia in 2019 and we
now have a well established team in our Bogota office.
We continue to see a large pipeline of opportunities here
and in other countries in Latin America such as Peru and
Chile, which we continue to explore with our network of
existing partners.
We entered 2020 with a strong pipeline of £3,172 million of
investment opportunities expected to complete predominantly
over the next three years. Within this pipeline, we have one
preferred bidder position, seven shortlisted positions and one
exclusive position representing a total potential investment of
approximately £443 million.
• North America: we built strong momentum in the US
through 2017 and 2018 and whilst this year was quieter
for us, with some deals being delayed, we see a lot of
opportunities for investment over the next few years
including managed lanes deals. We have four shortlisted
positions on PPP deals. In the US, public sector
procurement for greenfield infrastructure, including PPP,
takes place predominantly at state or city, rather than
federal, level and we are seeing some form of PPP-enabling
legislation across all states with major metropolitan areas.
• Asia Pacific: we remain very active in the Australian PPP
market. We are working on a number of PPP bids in 2020
including three shortlisted positions which should reach
financial close in 2020 and 2021. The longer term pipeline
also looks promising, particularly in the transportation
sector, driven by the significant growth predicted in the
populations of both Melbourne and Sydney. We continue to
explore new sectors, like waste to energy – completing the
East Rockingham Resource Recovery Facility investment
in 2019 – social housing and energy storage. We are also
seeing infrastructure opportunities emerge in new
countries in the region, with Vietnam of particular interest
where there are strong infrastructure fundamentals
supported by a need for major investment in sectors such
as transport and healthcare.
Pipeline – estimated
equity investment
£ million
Transport
Social infrastructure
Environmental
Utilities
Telecoms
Wind & solar generation
Total
At 31 December 2019
At 31 December 2018
Europe
and
Middle
East
Asia
Pacific
North
America
Latin
America
Total
Asia
Pacific
361
260
175
85
–
–
881
336
826
531
2,054
21
42
38
195
–
632
53
75
53
37
–
–
–
84
–
–
334
292
260
232
–
1,044
615
3,172
149
157
28
–
–
370
704
Europe
and
Middle
East
North
America
Latin
America
315
563
175
7
18
–
20
56
29
–
60
39
387
–
–
–
–
–
Total
1,202
193
46
60
59
813
416
1,078
175
2,373
The total pipeline is broken down below according to the bidding stage of each project.
Pipeline by bidding stage
at 31 December 2019
Preferred bidder
Shortlisted / exclusive
Other
Total
Number of
projects
Asia Pacific
£ million
Europe and
Middle East
£ million
North America
£ million
Latin America
£ million
Total
£ million
1
8
65
74
–
181
700
881
22
20
590
632
–
220
824
1,044
–
–
615
615
22
421
2,729
3,172
11
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CHIEF EXECUTIVE OFFICER’S REVIEW continued
The preferred bidder position and the shortlisted positions are detailed in the table below:
Project
Financial close
expected by
Region
Description
Redfern Communities Plus, Australia
Q1 2021
Asia Pacific
Social Housing Development in Sydney,
Australia
North East Link
PPP project
Q4 2020
Asia Pacific
Freeway in Melbourne, Australia
Asia Pacific
Jefferson Parkway, Colorado
Q2 2021
North America
9.2 mile four-lane limited access toll highway
in Denver, Colorado
Dartmouth Green Energy,
New Hampshire
Q4 2020
North America
Utility system project for Dartmouth College
NYS Thruway Service Plazas
Q3 2020
North America
Redevelopment of multiple rest stops located
along New York Thruway, New York
Sepulveda Transit Corridor
Via15, Netherlands1
H1 2024
Q3 2020
North America
13 mile transit link in Los Angeles, California
Europe and Middle East
12km greenfield road including a major
bridge in the east of the Netherlands
1 Preferred bidder position
MANAGEMENT AND ENHANCEMENT OF OUR INVESTMENT
PORTFOLIO
At 31 December 2019, our portfolio comprised investments
in 48 infrastructure projects (31 December 2018 – 48 projects
plus our shareholding in JLEN Environmental Assets Group
Limited (“JLEN” – previously John Laing Environmental
Assets Group Limited)). Our year end portfolio value was
£1,768 million (31 December 2018 – £1,560 million). The
portfolio value increased by £267 million as a result of cash
invested in projects, offset by proceeds from realisations of
£143 million and cash yield received from project companies
of £57 million. Fair value movements of £141 million –
equivalent to 8.7% of the cash rebased portfolio value or
12.2% excluding foreign exchange losses – increased the
portfolio value to £1,768 million at 31 December 2019.
As described earlier, we wrote down the value of our wind and
solar projects during the year, principally as a result of
market-driven and other external factors such as transmission
issues in Australia, lower wind yield on our European wind
assets and lower power price forecasts. Active asset
management by our teams resulted in a significant level of
value enhancements across all of our portfolio which, together
with the embedded growth, more than offset these losses.
The fair value movement is analysed further in the Portfolio
Valuation section.
Elsewhere in the portfolio, our teams were instrumental in
the Sydney Light Rail project reaching agreement on a
settlement in June 2019 following a prolonged period of
disputes. Subsequently, first passenger service commenced
on 14 December 2019 and full service for both stages is
expected by Q1 2020.
We also played a leading role in the Denver Eagle P3 project
reaching substantial completion for the final line in March 2019,
leading to full revenue service being achieved in April 2019.
Both are examples of our active asset management, helping
to resolve complex issues before delivering completed assets
and creating value for our stakeholders.
In 2019, we completed realisations totalling £143 million from
the sale of two PPP and two renewable energy investments, as
well as the sale of our remaining shares in JLEN. The disposal
of our interest in Optus Stadium was our first sale of an
operational asset in Australia and the disposal of the
Rocksprings and Sterling wind farms in the US were our first
sales in the US. Aggregate prices achieved were in line with
valuation.
The cash yield in 2019 was £57 million (2018 – £34 million),
including a large distribution from the Denver Eagle P3 project
following the end of construction.
Overall our investment portfolio is well-diversified in terms of
geography, currency, revenue type and sector.
Further details on the investment portfolio in each of our
regions is provided in the following Regional Review section.
External asset management
In June 2019, the Company completed the sale of its remaining
fund management activities by way of a novation of the
Investment Advisory Agreement (IAA) with JLEN to Foresight
Group, including the transfer of the investment advisory team.
The sale allows the Company to focus on its core business
of investment in and active management of greenfield
infrastructure projects. The JLEN IAA made a relatively
small contribution to our profits compared to the fair value
movements from our investing activities.
The IAA with Jura Limited (formerly JLIF) formally terminated
on 31 December 2019.
12
John Laing Group plcAnnual Report and Accounts 2019 ORGANISATION AND STAFF
CURRENT TRADING AND GUIDANCE
We have a strong investment pipeline which at 31 December
2019 totalled £3.2 billion, including one preferred bidder
position and eight shortlisted or exclusive positions with a
total investment opportunity of approximately £443 million.
This supports our guidance of approximately £1 billion of new
investment commitments over the three year period 2019-2021.
The growth in our pipeline during the year is especially
pleasing given our decision to cease investment in standalone
wind and solar generation. Investment activity over the next
two years will therefore be concentrated on PPP opportunities
where we see strong demand, albeit these are typically lumpier
and their timing more reliant on public procurement processes.
We expect investment activity to gain momentum during 2020,
with this year’s pipeline weighted to the second half.
With a large and diverse secondary portfolio and several sales
processes already underway, divestment activity should ramp
up through the second half of 2020, and we continue to expect
realisations over the same period to be broadly in line with
investment commitments.
As set out in more detail in the Portfolio Valuation and
Financial Review sections, certain of the Group’s income
earned in 2019 will either cease, in the case of fund
management income, or return to more normalised levels in
respect of fair value movements from the portfolio. At the
same time, certain of the losses on the portfolio experienced
in the year are not expected to reoccur. Overall, we enter 2020
with a renewed focus and confidence in our business model
and its ability to benefit from the opportunities that lie ahead.
Olivier Brousse
Chief Executive Officer
Our staff numbers were 153 at 31 December 2019 compared
to 169 at the end of 2018. 24 staff left the Group during the
year as we exited from the fund management business.
Staff numbers increased in Latin America, as we grew the
local team in Bogota, and in the Central teams as we
continue to reinforce the oversight function, in particular
in respect of risk management for new investments and
of the portfolio. We now have 55% of staff located outside
the UK (31 December 2018 – 44%), consistent with our
increasing internationalisation. We have a diverse workforce
comprising around 25 nationalities.
Our high quality individuals and experienced teams responded
to the issues in our wind and solar portfolio by achieving a
significant level of value enhancements, above our long-term
average, across all regions and across the entire portfolio.
This is evidence that the reorganisation we put in place at
the beginning of 2018 is working well, where the Primary
Investment and Asset Management teams in each of our
regions report to single regional heads, each of whom in turn
reports to me. This structure allows the teams to focus more
effectively on growth and value creation across all stages of
the investment and asset management cycle in their individual
regions. I would like to thank our employees for their
continued contribution in what was a challenging year.
PRINCIPLES, PEOPLE AND PERFORMANCE
We distinguish ourselves from other investors by our clear
commitment to making investment decisions that not only
benefit the client and other commercial stakeholders but
deliver benefits to local communities. These benefits include
cleaner air, reduced congestion, better rehabilitation,
improved public facilities, cheaper public transport and
better accessibility.
We have a clear set of values that drive our work internally
and externally:
• Ownership
• Empowerment
• Growth mindset
• Shared prosperity
These values reflect our purpose, which is to invest in
responsible infrastructure projects that respond to public
needs, empower sustainable growth and improve the lives of
the communities in which we work. Our investment decisions
are a function of this purpose and our values, as well as of our
commercial considerations.
13
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report OUR STRATEGY AND BUSINESS MODEL
A STRATEGY TO DELIVER LONG-TERM
SUSTAINABLE GROWTH
OUR PURPOSE IS TO CREATE VALUE FOR ALL OUR STAKEHOLDERS BY INVESTING IN, DEVELOPING
AND MANAGING INFRASTRUCTURE PROJECTS WHICH RESPOND TO PUBLIC NEEDS, FOSTER
SUSTAINABLE GROWTH AND IMPROVE THE LIVES OF COMMUNITIES AROUND THE WORLD.
>
COMMITTED TO OUR PURPOSE
Our purpose provides the focus for our activity. It is at the heart of our wider strategy and forms an essential part of our
decision making when assessing new investment opportunities
RESPONSIBLE INVESTOR
COMMITMENT
PROJECTS THAT RESPOND
TO PUBLIC NEEDS
PROJECTS THAT FOSTER
SUSTAINABLE GROWTH
PROJECTS THAT IMPROVE
THE LIVES OF COMMUNITIES
We have actively embedded
ESG principles across our
business: in new markets and
investment assessment
frameworks, in our choice of
partners and in the way we
design and deliver projects.
See page 63 for more
details on John Laing being
a responsible investor
Large infrastructure projects
can have a positive impact on
communities and the
environment. In assessing new
investment opportunities, we
have adopted a more rigorous
approach to assessing ESG
considerations.
See the case studies on
pages 18, 24, 32 and 42
which highlight the positive
impact projects within our
existing portfolio are having
on local communities and
the environment
Infrastructure assets deliver
services that are essential to
long-term economic and social
growth. However, as investors,
we must also seek to ensure
that communities are directly
involved in projects, can benefit
from them and, where possible,
that we minimise short term
disruption to those who live and
work nearby.
See page 42 for a case study on
our new investment in the Ruta
del Cacao road in Colombia
An increasing focus on global
sustainability means that
significant infrastructure
projects need to demonstrate a
commitment to sustainability.
Equally, there is an increase in
the number of projects that are
driven by the need for
populations to live and work
sustainably. The percentage
of our investment portfolio
made up of sustainability
related projects is likely to
grow as we focus on new
priorities such as supporting
the energy transition industry
or alleviating congestion in
major metropolitan areas.
See page 11 for details of the
Group’s investment pipeline
>
OUR STRATEGY
CONTINUED COMMITMENT TO OUR
FOCUS ON LARGE SCALE, COMPLEX
INFRASTRUCTURE PROJECTS
• Economic growth in emerging markets
and renewal of aging assets in more
mature economies will continue to drive
a robust medium-term pipeline of
projects in core infrastructure.
• The PPP model is embraced in
emerging regions as the most effective
way to deliver core infrastructure.
14
NEW SECTORS AND ASSET CLASSES
The Company is currently focused on new
opportunities in three key areas that are
underpinned by strong long-term
economic and social drivers:
• The requirements for new types of
infrastructure driven by the global energy
transition agenda (e.g. energy efficiency
and decarbonisation of transport).
• The challenges of urbanisation, such
as congestion.
• The increasing importance of data in
modern societies, requiring investment
in infrastructure such as fibre networks.
STRATEGIC ENTRY INTO
NEW MARKETS
• We apply agreed criteria when looking
at new geographical markets; this
includes an identifiable pipeline of
projects coming to market, strong
political will for utilising private
investment and embracing ESG, a robust
infrastructure-delivery supply chain,
returns that meet our risk-adjusted
hurdle rates and the existence of a
secondary market for operational
investments or a good expectation that
one will develop. We typically enter new
markets alongside one of our existing
partners that already have an
established local presence.
• Recent geographical market entries
for John Laing are Israel, where we
are actively looking at investment
opportunities, and Colombia, where
we made our first investment in the
Latin America region in 2019.
John Laing Group plcAnnual Report and Accounts 2019 >
OUR CORE STRATEGIC OBJECTIVES
To deliver our strategy, we have set ourselves the two core objectives below, while maintaining the discipline and analysis
required to mitigate and manage the delivery, revenue and operational risk associated with investments in greenfield
infrastructure projects.
INVESTMENT
ACTIVE MANAGEMENT
GROWTH IN VOLUME OF PRIMARY INVESTMENT
in responsible and sustainable greenfield infrastructure projects
over the medium term.
MANAGEMENT AND ENHANCEMENT
OF OUR INVESTMENT PORTFOLIO
with a clear focus on active management during construction
and operational phases, accompanied by realisations of
investments which, combined with our corporate banking
facilities and operational cash flows, enable us to finance new
investment commitments.
Read more about our new investments and pipeline on page 10
Read more about our active asset management on page 12
>
OUR KEY AREAS OF ACTIVITY
Our business model has two key areas of activity aligned with the above strategic objectives:
PRIMARY INVESTMENT
ASSET MANAGEMENT
We source, originate, bid for and win greenfield infrastructure
projects, typically as part of a consortium in the case of
PPP projects.
We actively manage our investment portfolio. This involves our
teams helping the projects to deliver assets through to the end
of their construction, protecting and increasing the value of our
investments and preparing our operational assets for potential
divestment, should funding for new investment be required or
opportunities to realise or create value arise.
>
HOW WE CREATE VALUE
Quality investments in greenfield
infrastructure projects
Read more on page 10
Sale of operational
assets and capital
recycled
Read more
on page 12
CREATING
VALUE
We create long-term
sustainable value
for stakeholders
Active management
in construction
and operations
Read more
on page 12
We create shareholder value by securing new investments in
greenfield infrastructure projects at attractive risk-adjusted base
case returns before first protecting and then enhancing these
returns through active asset management during construction
and into operations.
The principal value creation mechanism inherent in our business
model is the difference between the hold-to-maturity Internal Rate
of Return (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 stage.
The value of investments in our Primary Investment portfolio 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 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, together
with enhancement of project cash flows. The latter involves identifying
and implementing value enhancement initiatives that can increase
future cash flows beyond the cash flows originally forecast at the start
of the project. We look at a wide range of such value enhancements,
for example:
Extending the useful lives of projects;
Optimisation of operating costs, SPV management costs and project
insurance premiums through bulk purchasing or efficiency gains;
Optimisation of major maintenance and asset renewal costs over the
life of an infrastructure project;
Refinancing senior debt within projects at favourable terms; and
Maximisation of working capital efficiency within projects.
Opportunities for value enhancements may arise at any time during a
project’s life and may vary significantly from one investment to another.
15
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report KEY PERFORMANCE INDICATORS
A STRONG TRACK RECORD
MEASURING OUR PERFORMANCE
WE MEASURE OUR PERFORMANCE THROUGH FIVE FINANCIAL AND THREE NON-FINANCIAL
KEY PERFORMANCE INDICATORS (KPIS). OUR KPIS ARE ALIGNED WITH OUR STRATEGY AND
LINKED INTO OUR REMUNERATION INCENTIVES.
>
FINANCIAL KPIS
NAV PER SHARE GROWTH BEFORE
DIVIDENDS PAID
15
16
17
18
19
16.2%
17.5%
13.5%
18.2%
7.2%
Why is it a KPI:
Our strategy focuses
on NAV per share
growth as a key
measure for
shareholders.
2019 performance: the lower growth compared
to previous years is as a result of losses of
c.£150 million on our standalone wind and solar
generation assets from external factors and
more adverse impact from foreign exchange
movements, offset by higher value enhancements
in the year (see the Portfolio Valuation and
Financial Review sections for more details).
On a constant currency basis, the NAV per share
growth before dividends paid for 2019 was 10.7%.
7.2%
Link to
remuneration
on page 100
TOTAL DIVIDEND PER SHARE (PENCE) Why is it a KPI:
15
16
17
18
19
Our strategy focuses
on dividends as a
key measure for
shareholders and
as such requires
close monitoring.
5.98
7.04
8.92
9.50
9.50
2019 performance: whilst the realisations of
investments in 2019 of £143 million was lower
than that for 2018 (£296 million), we have been
able to keep total dividends per share for 2019
at the same level as 2018. We are confident of
delivering a significant level of disposals in 2020
and to demonstrate this confidence we have taken
into account in calculating the special dividend
for 2019 two disposals for aggregate proceeds
of approximately £63 million, that are agreed or
in advance negotiations with the buyers and
expected to complete soon.
Change
from 2018
–
Link to
remuneration
on page 97
Dividends paid before March 2018 have been adjusted for the Rights Issue bonus factor.
NEW INVESTMENT COMMITTED (£m)
15
16
17
18
19
181
182
184
383
302
Why is it a KPI:
Growth in volume of
primary investments
is one of our two
core objectives in
delivering our
strategy.
2019 performance: 2019 was a year of transition
for John Laing during which we decided to make
no further new investments in standalone wind
& solar generation assets and, with certain
PPP procurements in our core regions delayed,
our focus moved to asset management and
project delivery, including preparing our existing
portfolio of wind & solar assets for sale in the
short to medium term to take advantage of a
strong demand for operational renewable
energy assets.
Change
from 2018
-39%
Link to
remuneration
on page 97
16
John Laing Group plcAnnual Report and Accounts 2019 INVESTMENT PIPELINE (£bn)
15
16
17
18
19
1.5
1.9
2.2
2.4
VALUE ENHANCEMENTS (£m)
15
16
17
18
19
31
44
61
79
3.2
157
Why is it a KPI:
Growth in volume of
primary investments
is one of our two
core objectives in
delivering our
strategy. A growing
pipeline of future
investment
opportunities is
important in achieving
this objective.
2019 performance: Our business model is
nimble and flexible, enabling us to respond to
opportunities in new markets and geographies.
This has helped to drive the growth in our
pipeline, which now stands at record level
despite the removal of standalone wind and
solar generation investment. This includes new
asset classes and new markets that fit our
business model, which is centred on delivering
innovative infrastructure solutions for complex
infrastructure problems.
Change
from 2018
34%
Link to
remuneration
on page 97
Why is it a KPI:
Our strategy
focuses on NAV
per share growth
as a key measure
for shareholders.
Growth in the
portfolio is a key
driver, which is
partially driven by
value enhancements.
2019 performance: Active asset management by
our teams resulted in a significant level of value
enhancements across all of our portfolio which,
together with the embedded growth, more than
offset the losses on our renewable energy
portfolio. The high level of value enhancements
in 2019 also reflects the initial impact of the move
in 2018 to a regional model as well as preparation
of assets for potential divestment in 2020-21; we
therefore expect a more normalised level of value
enhancements in 2020, in the region of closer to
3% to 5% of the opening portfolio value.
Change
from 2018
99%
Link to
remuneration
on page 97
>
NON-FINANCIAL KPIS
EMPLOYEE TURNOVER
EMPLOYEE ENGAGEMENT*
WOMEN ON THE BOARD
13.6%
78%
37.5% (2018 – 25%)
In next year’s Annual Report & Accounts, we will present figures for 2020 vs 2019 for all non-financial KPIs.
* Employees were asked in a survey in March 2019 how engaged they are with the organisation. Employee engagement is a property of the
relationship between an organisation and its employees. An “engaged” employee is one who is fully absorbed by and enthusiastic about their
work and so takes positive action to further the organisation’s reputation and interests.
17
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report OUR STRATEGY IN ACTION
ASIA PACIFIC
CLARENCE CORRECTIONAL CENTRE
BUILD COMMUNITIES
AND IMPROVE LIVES
JOHN LAING HOLDS AN 80% INTEREST IN THE
NORTHERNPATHWAYS CONSORTIUM WHICH IS
RESPONSIBLE FOR THE FINANCING, DESIGN, BUILD
AND OPERATION OF THE CLARENCE CORRECTIONAL
CENTRE PROJECT, A CORRECTIONAL SERVICES
FACILITY IN NEW SOUTH WALES, AUSTRALIA.
This facility is a forward-thinking, world class prison where the
focus is on giving prisoners the opportunity to rehabilitate,
achieve qualifications and develop the life skills and behaviours
that will assist them to be responsible citizens at the end of their
sentence and to not re-offend and return to prison.
During its construction, the prison will inject more than
AUD$560m into the economy. It will provide 1,250 jobs at the
peak of construction and about 600 permanent jobs once
operational at its full capacity of 1,700 prisoners.
Located just over 12 miles outside Grafton in northern New
South Wales, the state-of-the-art facility will be the largest
prison in Australia when it is completed in April 2020 and moves
into the operational phase in July 2020.
The new Clarence Correctional Centre will replace the much
smaller existing Grafton Jail built in 1864, which is to be closed.
The integrated nature of the Clarence Correctional Centre
means that prisoners can serve out an entire sentence as they
move from maximum security classification to minimum
security in a shared living environment, which has a stabilising
effect on prisoners. It is also a better solution for families who
have to date had their imprisoned family members transferred
long distances between other maximum and minimum facilities
in New South Wales – something that is very disruptive and
destabilising for everyone involved.
SCOPE OF PROJECT
> Maximum capacity: 1,700 beds
> Local workforce: more than 1,250 at its peak,
with 18% apprenticeships & re-skilling, 8%
indigenous, 20% workforce aged less than 25
years and 3% women in non-traditional roles
> Anticipated permanent workforce: 600
C
I
F
I
C
A
P
A
I
S
A
18
John Laing Group plc
Annual Report and Accounts 2019
E
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ESG IMPACT
The Project
Passive design achieved daylighting and in-cell
temperature targets, reducing lifecycle replacement costs,
power consumption and CO2 emissions.
To address the unacceptable rates of suicide in the
construction industry, an innovative mental health &
wellbeing program was introduced which empowered
workers to take control of their health and wellbeing,
supported workers at times of crisis and challenged the
industry culture through breaking down stigma and
stereotypes, and promoted a caring environment with
role modelling by project leaders.
During prison operations, a targeted supply chain
approach will result in a reduction in waste costs of
up to 35%.
Its community
One of the most important aspects of this project is
ensuring we support the local community in which we are
working. Alongside two of our partners, the Serco
Foundation and John Holland, and the John Laing
Charitable Trust the consortium has provided funds which
allows projects to offer practical opportunities including
formal work experience, training in sustainable and
transferable skills, creating long-term community benefits
and providing dedicated and long-term support for young
people and those in society who struggle more than
most. This in turn helps to reduce the number of people
turning to crime and facing prison as well as offering
positive and useful skills, support and guidance within
the local community.
The projects that benefitted from this support were:
New Neighbourhood School of Arts: Employed a youth
worker for 12 months for a programme on mental health
and well-being, suicide and self-harm, and renovation of
amenities for homeless persons
Clarence River Domestic and Family Violence Specialist
Services: Redevelopment of a community centre playground
Gurehlgam Corporation: Delivery of Indigenous
programmes and services
Police Citizens Youth Club: Establish a series of
youth-based programmes in conjunction with NSW Police
Nungera Co-op: Renovations to a community building
in Maclean
Grafton Ngerrie Aboriginal Lands Council: Renovations
to a community centre in South Grafton
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John Laing Group plc
Annual Report and Accounts 2019
19
Strategic Report
REGIONAL REVIEW
ASIA PACIFIC
Justin Bailey
Regional Managing Director, Asia Pacific
“
2019 HAS BEEN ANOTHER BUSY YEAR FOR THE
REGION. OUR APAC TEAM HAS BEEN VERY
FOCUSSED ON PROJECT DELIVERY, WITH
SIGNIFICANT PROGRESS MADE ON A NUMBER
OF OUR HIGH PROFILE PPP PROJECTS AND
CONTINUED PROGRESS ON OUR FOUR
REVIEWABLE ENERGY PROJECTS UNDER
CONSTRUCTION DURING THE YEAR.
We have also been evaluating opportunities in new
sectors which present attractive investment fundamentals.
In December, we closed on the East Rockingham Resource
Recovery Facility, which marked the 150th project for
John Laing and is a measure of our success in developing
a pipeline of diverse opportunities in the regions in which
we operate. Finally, we were pleased to have completed
our first divestment with the sale of Optus Stadium,
demonstrating the appetite for high quality secondary
assets in Australia.”
At 31 December 2019, our portfolio of investments in the
region comprised 15 assets (31 December 2018 – 15)
including seven in the Primary portfolio (31 December 2018
– eight) and eight in the Secondary portfolio (31 December 2018
– seven) with a total value of £587 million (31 December 2018
– £505 million). The increase in portfolio value of £82 million
is due to cash invested in projects of £110 million and a net
overall fair value gain of £12 million for the year, offset by
disposals and cash yields received from projects totalling
£40 million.
With regards to new investments, during the year we secured
an investment of £27 million in the East Rockingham
Resource Recovery facility, a waste to energy plant in Perth,
Western Australia. The Primary Investment team had also
been successful in achieving three shortlisted positions at
31 December 2019 on PPP deals in Australia, which are
expected to close over the next 18 months.
2019 HIGHLIGHTS
> Significant progress made on our high profile
PPP projects.
> Transmission issues relating to marginal loss factors
on three of our renewable energy assets.
> First divestment achieved in the region with the sale of
Optus Stadium.
SYDNEY LIGHT RAIL
• Following a settlement agreed by all parties in June 2019,
the first passenger service commenced on 14 December
2019 and full service for both stages is expected by the
end of Q1 2020.
NEW GENERATION ROLLINGSTOCK
• All 75 trains have now been accepted, in line with the re-based
train delivery schedule agreed with the State of Queensland.
• The programme for undertaking various retrofitting and
rectification issues is progressing well.
• This asset has moved into our Secondary portfolio at
31 December 2019.
NEW ROYAL ADELAIDE HOSPITAL
• Settlement commercially agreed between project company
and South Australian government including revised
payment mechanism.
• Arbitration proceedings are ongoing with regard to legacy
issues arising from the construction phase.
From a divestment standpoint, we were pleased to achieve
our first realisation of an operational asset in Australia, the
disposal of our 50% shareholding in Optus Stadium, which
completed in March 2019. We have also started divestment
processes for our interest in the Auckland South Corrections
Facility and for our wind and solar assets in Australia.
Continued active asset management in the second half of
the year has resulted in total year value enhancements for
the APAC region of £47 million (2018 – £16 million) of which
£6 million (2018 – £5 million) related to PPP assets and
£41 million (2018 – £11 million) to renewable energy assets.
As was reported in our interim results, we, along with industry
peers, experienced transmission issues relating to marginal
loss factors (“MLFs”) which negatively impacted three of our
renewable energy assets. As a reminder, MLFs are defined as
the portion of energy that is lost when electricity is transmitted
across the transmission and distribution networks due to
resistance. During the second half of the year, we have worked
closely with external advisors to review their long-term MLF
forecasts. These forecasts took into account the indicative MLFs
for the July 2020 – June 2021 period that the Australian
Energy Market Operator published in November 2019, which
showed an improvement from the previous year on the three
assets referred to above. Overall, the change in MLF forecasts
led to net losses of £52 million.
Our active asset management in the region saw significant
progress made on the Sydney Light Rail, New Generation
Rollingstock and New Royal Adelaide Hospital projects.
We have also seen some volatility in power price forecasts
in the region during the year, particularly over the last two
quarters, which resulted in a loss of £17 million for 2019.
20
John Laing Group plcAnnual Report and Accounts 2019 EUROPE AND MIDDLE EAST
2019 HIGHLIGHTS
> Operational performance issues on our wind assets
mainly driven by low levels of wind.
> Continuing good progress made on IEP Phase 2 with
public train services commencing in May 2019.
David Rushton
Regional Managing Director, Europe and Middle East
“
THE PROGRESSIVE DELIVERY OF IEP PHASE 2
ROLLING STOCK AND ENTERING THE TRAINS INTO
OPERATIONAL SERVICE HAS BEEN A FOCUS OF
THE ASSET MANAGEMENT TEAM DURING 2019
AND PREPARATION OF OUR SWEDISH AND FRENCH
WIND FARMS FOR DIVESTMENT IN 2020 HAS ALSO
BEEN A PRIORITY.
Being appointed preferred bidder on the ViA15 project
in the Netherlands was an extremely positive way to end
2019. We have been active in the fibre sector during the
second half of 2019 in particular and have a number of
opportunities to pursue in 2020. We are also well placed
to pursue opportunities in the energy transition sector
which has the potential to be a significant engine of
growth for the EME region. We are focussed on bringing
in new skills and experience to supplement the expertise
and experience of the existing team in the region.”
At 31 December 2019, our portfolio of investments in the
region comprised 18 assets (31 December 2018 – 19) including
three in the Primary portfolio (31 December 2018 – three) and
15 in the Secondary portfolio (31 December 2018 – 16) with a
total value of £599 million (31 December 2018 – £580 million).
The increase in portfolio value of £19 million in 2019 is due to
a positive fair value movement in the period of £20 million and
cash invested into projects of £8 million offset by disposals
and cash yields received from projects totalling £9 million.
With regards to new investments, we secured an investment
of £7 million in a student accommodation project with the
University of Brighton. The Primary Investment team had
also secured one preferred bidder PPP position in the
Netherlands at 31 December 2019 and one exclusive pump
storage opportunity in Israel, both of which are expected to
close in 2020.
On IEP Phase 2, our largest investment, 47 of the 65 trains
for the East Coast main line have been accepted with public
train services commencing in May 2019. All trains are
expected to have been delivered on schedule by mid-2020.
Continued active asset management in the second half of the
year has resulted in total year value enhancement for the
region of £43 million (2018 – £40 million) of which £18 million
(2018 – £40 million) related to PPP assets and £25 million
(2018 – £nil) to renewable energy assets.
As reported in our interim results, we experienced operational
performance issues on our wind farm assets, mainly driven
by low levels of wind, which have translated into lower
long-term energy yield forecasts and resulted in write downs
of £51 million.
We have also seen some volatility in power price forecasts
in the region during the year, particularly over the last two
quarters, which resulted in a loss of £15 million for 2019.
21
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report REGIONAL REVIEW continued
NORTH AMERICA
Anthony Phillips
Regional Managing Director, North America
2019 HIGHLIGHTS
> Full revenue service was achieved in April 2019 on the
Denver Eagle P3 project and the I-77 Managed Lanes was
fully opened by the end of the year.
> First divestment achieved in the US with the sale of our
interests in the Rocksprings and Sterling wind farms.
“
NORTH AMERICA CONTINUES TO BE A KEY REGION
FOR JOHN LAING AND HAS PRODUCED SOME
OF OUR FLAGSHIP PROJECTS, INCLUDING THE
DENVER COMMUTER RAIL AND TWO MANAGED
LANES PROJECTS.
As state and federal governments embrace the benefits
of working with a PPP structure, John Laing is ideally
placed to contribute investment and project expertise.
We are delighted to be involved in the Hurontario light rail
project in Canada – our first PPP rail investment in the
country – and we are building a pipeline of project
opportunities across all our sectors.”
At 31 December 2019, our portfolio of investments in the region
comprised 14 assets (31 December 2018 – 14) including five
in the Primary portfolio (31 December 2018 – six) and nine in
the Secondary portfolio (31 December 2018 – eight) with a
total value of £514 million (31 December 2018 – £465 million).
The increase in portfolio value of £49 million during the year is
principally due to a positive fair value movement of £98 million
and cash invested into projects of £92 million, offset by
disposals and cash yields received from projects totalling
£141 million.
With regards to new investments, we secured an investment
of £75 million in the Live Oak wind farm and later in the year
we secured an investment of £13 million in the Hurontario
light rail project in Ontario, Canada. The Primary Investment
team had also secured four shortlisted PPP positions at
31 December 2019.
The North America portfolio of investments performed in line
with expectations.
Denver Eagle P3
• Substantial completion of the third line, the G line, was
achieved in March 2019.
• The A line and the B line have been operating successfully
since 2016 and have achieved above 97% on-time
performance.
• Full revenue service of the overall project was achieved
in April 2019.
I-77 Managed Lanes
• The I-77 Managed Lanes was fully open by the end of
the year with the opening of the southern section in
November 2019 following that of the northern section
earlier in the year.
The sale of our interests in the Rocksprings wind farm in Texas
and the Sterling wind farm in New Mexico in the first half of
the year represented our first divestments in the US. Proceeds
are subject to customary post-completion adjustments.
Continued active asset management in the second half
of the year has resulted in total year value enhancements
of £65 million (2018 – £24 million) of which £37 million
(2018 – £18 million) related to PPP assets and £28 million
(2018 – £6 million) to renewable energy assets.
We have also seen some volatility in power price forecasts
in the region during the year, particularly over the last two
quarters, which resulted in a loss of £15 million for 2019.
22
John Laing Group plcAnnual Report and Accounts 2019 LATIN AMERICA
2019 HIGHLIGHTS
> First investment in the region was completed in October
2019, with £62 million committed for a 30% interest in
the Ruta del Cacao PPP road project in Colombia.
Alex Yew
Managing Director, Latin America
“
LATIN AMERICA IS A REGION WITH A SUBSTANTIAL
PIPELINE OF INFRASTRUCTURE PROJECTS WITH
ATTRACTIVE RETURNS. BEING A DEVELOPING
MARKET REGION THAT IS EXPERIENCING STRONG
ECONOMIC GROWTH, THERE IS A FUNDAMENTAL
DEMAND FOR INFRASTRUCTURE INVESTMENT
ACROSS MANY COUNTRIES.
These countries are committed to the PPP model for
delivering their infrastructure needs and for improving
the lives of their communities. Latin America is a
complex region and this suits John Laing’s strengths as
an active investor prepared to invest in local resources.
We established our office in Bogota and recruited a team
of senior locals who understand the market. Working
closely with our partners in the region, we can develop
Latin America into an attractive market for John Laing.
Even more importantly, we will be able to deliver
infrastructure that improves people’s lives.”
In October 2019, after almost three years of due diligence,
we closed our first investment in the region. We committed
£62 million for a 30% interest in the Ruta del Cacao PPP road
project in Colombia. We have one of our key international
partners working with us on this project together with other
leading investors and contractors. The project is progressing
well, with construction almost 50% complete. During delivery,
the project is improving the lives of the local communities
through the building of new water treatment plants, schools
and commercial facilities.
Meanwhile, our pipeline of investment opportunities in the
region has increased to £615 million as at 31 December 2019.
This has been the result of the efforts of our strong team,
with seven employees in our Bogota office, complemented
by senior executives in Madrid and London.
23
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report OUR STRATEGY IN ACTION
EUROPE AND MIDDLE EAST
IEP PHASE 2
DELIVERING
BETTER RAIL SOLUTIONS
THE INTERCITY EXPRESS PROGRAMME (IEP) IS A UK DEPARTMENT FOR TRANSPORT (DFT)
PROGRAMME TO REPLACE OLD ROLLING STOCK ON TWO OF THE UK’S BUSIEST MAIN TRAIN
LINES WITH ELECTRIC OR BI-MODE TRAINS. AS A SINGLE PROJECT, IT IS THE LARGEST
ROLLING STOCK INVESTMENT PROGRAMME IN THE UK FOR MORE THAN 30 YEARS.
24
John Laing Group plc
Annual Report and Accounts 2019
The DfT tender had clear requirements for the new rolling stock,
including weight, passenger capacity, faster speed, full disabled access,
Wi-Fi, sockets and catering. The trains also had to meet Office for
Rail Regulation standards, Network Rail compatibility certification
and each Operator’s safety case.
The construction stage of Phase 1 of the programme, for the Great
Western main line, was completed in December 2018 with 57 trains
being delivered. John Laing sold its remaining interest in Phase 1 earlier
in 2018. On Phase 2 of the project, for the East Coast main line, in which
we currently hold a 30% interest, 47 of the 65 trains have so far been
delivered with public train services commencing in May 2019. All trains
are expected to have been delivered on schedule by mid-2020.
2
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SCOPE OF PROJECT (PHASE 2)
> 65 electric or bi-mode trains
> New depot
> Transfer of three legacy depots
ESG IMPACT
Local jobs and training and a healthier environment
The IEP rolling stock is more environmentally friendly and operates
at faster speeds than existing stock, connecting communities and
businesses along the east coast of the UK. Better accessibility and
facilities improves the travelling experience for those passengers
with reduced mobility.
The choice of bi-mode trains means that electrical power is used
whenever available, reducing emissions compared to ageing diesel
engines. Hitachi, the rolling stock manufacturer, prioritised UK
suppliers wherever possible with 70% of parts for the trains sourced
within 40 miles of the assembly plant. The project’s new maintenance
facility in Doncaster created 250 jobs in the area.
Hitachi co-founded the North East of England’s first university technical
college adjacent to its assembly facility in County Durham. They have
also partnered with many local schools along the route to inspire the
next generation of engineers.
John Laing Group plc
Annual Report and Accounts 2019
25
Strategic Report
PORTFOLIO VALUATION
INVESTMENT PORTFOLIO AS AT 31 DECEMBER 2019
PRIMARY INVESTMENT
SECONDARY INVESTMENT
I
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F
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Health
Justice and
emergency
services
Other
Clarence
Correctional
Centre
80% (APAC)
University of
Brighton Student
Accommodation
85% (EME)
Alder Hey
Children’s Hospital
New Royal
Adelaide Hospital
40% (EME)
17.26% (APAC)
Auckland South
Corrections
Facility
30% (APAC)
T
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S
N
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L
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E
M
N
O
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I
V
N
E
Roads and other
Rail and
rolling stock
A16 Road
I-4 Ultimate
I-66 Managed
Lanes
A6 Parkway
Netherlands
A15 Netherlands
A130
I-77 Managed
Lanes
47.5% (EME)
50% (NA)
10% (NA)
85% (EME)
28% (EME)
100% (EME)
10% (NA)
I-75 Road
40% (NA)
Hurontario
Light Rail
MBTA Automated
Fare Collection
System
90% (NA)
Ruta del Cacao
30% (Latam)
IEP Phase 2
Melbourne Metro
Denver Eagle P3
New Generation
Rollingstock
40% (NA)
30% (EME)
30% (APAC)
45% (NA)
40% (APAC)
Sydney
Light Rail
32.5% (APAC)
Waste and
biomass
East Rockingham
Waste
40% (APAC)
Speyside
Biomass
Cramlington
Biomass
43.35% (EME)
44.7% (EME)
Cherry Tree
Wind Farm
Granville
Wind Farm
Sunraysia
Solar Farm
Brantley
Solar Farm*
Buckleberry
Solar Farm*
Buckthorn
Wind Farm
Finley
Solar Farm
100% (APAC)
49.8% (APAC)
90.1% (APAC)
100% (NA)
100% (NA)
90.05% (NA)
100% (APAC)
Wind and solar
generation
Fox Creek
Solar Farm*
Glencarbry
Wind Farm
Horath
Wind Farm
Hornsdale 1
Wind Farm
100% (NA)
100% (EME)
81.82% (EME)
30% (APAC)
Hornsdale 2
Wind Farm
Hornsdale 3
Wind Farm
IS54
Solar Farm*
IS67
Solar Farm*
20% (APAC)
20% (APAC)
100% (NA)
100% (NA)
Kiata
Wind Farm
Klettwitz
Wind Farm
Live Oak
Wind Farm
Nordergründe
Wind Farm
72.3% (APAC)
100% (EME)
75% (NA)
30% (EME)
Pasilly
Wind Farm
Rammeldalsberget
Wind Farm
Sommette
Wind Farm
St Martin
Wind Farm
100% (EME)
100% (EME)
100% (EME)
100% (EME)
Svartvallsberget
Wind Farm
100% (EME)
Investment commitment pre 2019
New investment commitment in 2019
APAC – Asia Pacific
EME – Europe and Middle East
NA – North America
Latam – Latin America
*Cypress Creek projects
26
John Laing Group plcAnnual Report and Accounts 2019
The portfolio valuation at 31 December 2019 was £1,768 million compared to £1,560 million at 31 December 2018. After adjusting
for cash invested, cash yield and realisations, this represented a positive movement in fair value of £141 million (representing
growth of 8.7% or 12.2% at constant FX).
Portfolio valuation at 1 January 2019
– Cash invested
– Cash yield
– Proceeds from realisations
Rebased valuation
– Movement in fair value
Portfolio valuation at 31 December 2019
Investments
in projects
£ million
Listed
investment
£ million
1,550
267
(57)
(132)
1,628
140
1,768
10
–
–
(11)
(1)
1
–
Total
£ million
1,560
267
(57)
(143)
1,627
141
1,768
Cash investment into three new assets during 2019 totalled £140 million. In addition, £127 million was injected into existing projects
in the portfolio as they progressed through, or completed, construction.
During 2019, the Group completed the realisation of four investments for a total consideration of £132 million and also sold its
remaining shares in JLEN for £11 million.
Cash yield from the investment portfolio during the year totalled £57 million.
The movement in fair value of £141 million is analysed in the table below.
Unwinding of discounting
Reduction of construction risk premia
Value uplift on financial closes
Value enhancements
Net losses from project performance
Movement in fair value before external factors and exceptional items
Wind yield – Europe
Transmission (MLF) – Australia
Change in power and gas price forecasts
Impact of foreign exchange movements
Change in macroeconomic assumptions
Change in operational benchmark discount rates
Exceptional gain on disposal of IEP Phase 1
Movement in fair value
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
110
73
31
157
(23)
348
(51)
(52)
(48)
(57)
(11)
12
–
141
98
43
43
79
(36)
227
–
–
(12)
10
(1)
4
87
354
Unwinding of discounting and reduction of construction risk
premia totalled £183 million for 2019 (2018 – £141 million).
We expect further value uplift in the future from these factors
currently embedded in the portfolio but at a lower level than
2019 given the profile of the portfolio.
Value uplift of £31 million was recognised on the financial
close of new investments of £184 million in the year. We would
expect higher value uplift on financial close next year if the
level of new investments is increased.
We have recognised £157 million of value enhancements in
the year representing a strong result of our ongoing active
asset management capability. Having recognised value
enhancements of £78 million in the first half of the year, work
in this area continued and we were able to deliver further
value enhancements of £79 million in the second half. These
enhancements were achieved in all regions and across the
entire portfolio from a number of areas, including extension
of asset lives, savings on operating costs and refinancing of
project finance. However, the high level of value enhancements
in 2019 reflects the initial impact of the move in 2018 to a
regional model as well as an increased focus on asset
management in the year. We therefore expect a more
normalised level of value enhancements in 2020, in the
region of 3% to 5% of the opening portfolio value.
During the year, there were net losses from project performance
of £23 million. This primarily reflects the impact of construction
delays on certain of our projects, offset by a value uplift from
reductions in project-specific risk premia, principally reflecting
the good progress made in the year on certain PPP projects.
Losses of £51 million on the European wind assets and the
£52 million of losses suffered on three of our Australian
renewable energy asset projects as a result of adverse
changes in MLFs are described further in the Regional
Review section above.
27
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report PORTFOLIO VALUATION continued
Reduction in power and gas price forecasts, particularly in the
second half of the year, resulted in losses of £48 million and
strengthening of Sterling since 30 June 2019 has increase the
adverse impact of foreign exchange movements to £57 million
from just £2 million in the first half.
The net benefit of £12 million from the change in operational
benchmark discount rates was on a number of renewable
energy investments in Europe in response to our understanding
and experience of the secondary market.
The split of the portfolio valuation between primary and secondary investments and the movements in the year within each are
shown in the table below:
Primary Investment portfolio
Secondary Investment portfolio
Total portfolio
31 December 2019
31 December 2018
Number of
projects
16
32
48
£ million
907
861
%
51.3
48.7
1,768
100.0
Number of
projects
17
31
48
£ million
868
692
%
55.7
44.3
1,560
100.0
Portfolio valuation at 1 January 2019
– Cash invested
– Transfers to Secondary Investment
Rebased valuation
– Movement in fair value
Portfolio valuation at 31 December 2019
Portfolio valuation at 1 January 2019
– Cash invested
– Cash yield
– Proceeds from realisations
– Transfers from Primary Investment
Rebased valuation
– Movement in fair value
Portfolio valuation at 31 December 2019
Primary
Investment
£ million
868
258
(377)
749
158
907
Secondary
Investment
£ million
692
9
(57)
(143)
377
878
(17)
861
METHODOLOGY
The methodology for the valuation of the investment portfolio
is unchanged from the methodology used as at 31 December
2018, as described in the 2018 Annual Report and Accounts.
In arriving at the valuation as at 31 December 2019, we
considered and reflected changes to the two principal inputs,
(i) forecast cash flows from investments in projects; and
(ii) discount rates.
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 as a whole represented a fair market value
in the conditions prevailing at 31 December 2019.
Discount rates
For the 31 December 2019 valuation, the overall weighted
average discount rate was 8.6% compared to the weighted
average discount rate at 31 December 2018 of 8.6%. The
weighted average discount rate at 31 December 2019 was
made up of 9.1% (31 December 2018 – 8.8%) for the Primary
Investment portfolio and 8.0% (31 December 2018 – 8.1%)
for the Secondary Investment portfolio. The increase in the
weighted average discount rate for primary investments
was primarily the result of the investment in Ruta del Cacao.
The small reduction in the weighted average discount rate
for secondary investments was the result of reductions in
project-specific risk premia on the New Royal Adelaide
Hospital and A15 Netherlands investments, reflecting the
progress made in the year, and reduction in the operational
benchmark discount rates for select investments, offset by
assets with higher discount rates transferring from the
Primary portfolio.
The discount rate ranges used in the portfolio valuation at 31 December 2019 were as set out below:
Sector
PPP investments
At 31 December 2019
At 31 December 2018
Primary
Investment
Secondary
Investment
Primary
Investment
Secondary
Investment
7.1% – 12.4%
6.5% – 9.25%
6.9% – 11.7%
7.0% – 9.0%
Renewable energy investments
8.6% – 8.6%
6.4% – 8.5%
8.4% – 9.1%
6.8% – 10.0%
28
John Laing Group plcAnnual Report and Accounts 2019 The table below shows the sensitivity of a 0.25% change in discount rates:
Discount rate sensitivity
Portfolio valuation
£ million
Increase/(decrease) in valuation
£ million
+0.25%
–
-0.25%
Energy yields
1,711
1,768
1,828
(57)
–
60
Revenues and therefore cash flows from investments in renewable energy projects may be affected by the volume of power
production, for example from changes in wind or solar yield.
Our valuation of renewable energy projects assumes a P50 level of electricity output based on reports by technical consultants.
The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being achieved or
exceeded and a 50% probability of being underachieved – both in any single year and over the long term. Hence the P50 is the
expected level of generation forecast over the long term. A P75 output means a forecast with a 75% probability of being achieved
or exceeded and a P25 output means a forecast with a 25% probability of being achieved or exceeded.
The impact on the valuation at 31 December 2019 of a sample of renewable energy assets with total value of £293 million from
changes in energy yield is shown below:
Energy yield sensitivity
Portfolio valuation of sample of assets
£ million
Increase/(decrease) in valuation
£ million
P75
P50
P25
255
293
330
(38)
–
37
The sensitivities shown above assume that changes in energy yields move in the same direction for all of the assets in the
sample. However, across a portfolio of renewable energy assets, any actual change in forecast energy yields could be an increase
for some assets and a decrease on others.
MACROECONOMIC ASSUMPTIONS
During 2019, updates for actual macroeconomic outcomes and assumptions had a net adverse impact of £11 million (2018 –
£1 million net adverse impact) on the portfolio valuation. Movements of foreign currencies against Sterling over the year to
31 December 2019 resulted in net adverse foreign exchange movements of £57 million (2018 – £10 million net favourable foreign
exchange movements). Additionally, a decrease in forecast power and gas prices resulted in a £48 million adverse fair value
movement (2018 – adverse fair value movement of £12 million).
The table below summarises the main macroeconomic and exchange rate assumptions used in the portfolio valuation at
31 December 2019 and at 31 December 2018. The table also shows the impact from changes in these assumptions and from
changes in power and gas prices and marginal loss factors in the year as well as the sensitivity to the portfolio value from
changes in the future:
Assumption
Long-term inflation
Impact in the year
Sensitivity: change in value of five
PPP investments with a total value of
0.25% increase in inflation
0.25% decrease in inflation
UK
Europe
North America
Asia Pacific
Latin America
RPI & RPIX
CPI
CPI
CPI
CPI
31 December 2019
31 December 2018
3.00%
1.25% – 2.50%
2.00% – 2.25%
1.50% – 2.50%
3.20% – 3.40%
3.00%
1.75% – 2.00%
2.20% – 2.50%
2.00% – 2.75%
–
£(5) million
£(3) million
£596 million
£524 million
c.£14 million
c.£(13) million
c.£14 million
c.£(13) million
29
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report PORTFOLIO VALUATION continued
Assumption
Exchange rates
Impact in the year
Sensitivity: 5% movement of each relevant
currency against Sterling
Power and gas prices
Impact in the year
Sensitivity: change in value of seven
renewable energy investments with a total
value of
5% increase in power and gas prices
5% decrease in power and gas prices
Marginal loss factors
Impact in the year
Sensitivity: change in value of a sample of
renewable energy investments with a total
value of
5% increase in marginal loss factors
5% decrease in marginal loss factors
GBP/EUR
GBP/AUD
GBP/USD
GBP/NZD
GBP/CAD
GBP/COP
31 December 2019
31 December 2018
1.1799
1.8847
1.3241
1.9641
1.7174
4,351.4
1.1134
1.8096
1.2748
1.9000
–
–
£(57) million
£10 million
+/- c.£64 million
+/- c.£59 million
£(48) million
£(12) million
£338 million
£343 million
c.£21 million
c.£(19) million
c.£18 million
c.£(18) million
£(52) million
£233 million
c.£29 million
c.£29 million
–
–
–
–
The sensitivities shown above from changes in assumption is on the basis that changes are in the same direction across all
assets. In reality, there could be an increase for some assets and a decrease on others and, as a result, offsetting impacts.
Further analysis of the portfolio valuation is shown in the following tables:
BY GEOGRAPHICAL REGION
– (–%)
68 (3.8%)
587 (33.2%)
10 (0.6%)
– (–%)
505 (32.4%)
514 (29.1%)
465 (29.8%)
599 (33.9%)
580 (37.2%)
Dec 19
Dec 18
BY TIME REMAINING ON PROJECT CONCESSION/
OPERATIONAL LIFE
– (–%)
69 (3.9%)
122 (6.9%)
62 (3.5%)
402 (22.7%)
10 (0.6%)
– (–%)
42 (2.7%)
133 (8.5%)
262 (16.8%)
Listed investment
Latin America
Asia Pacific
North America
Europe & Middle East
1,113 (63.0%)
1,113 (71.4%)
Dec 19
Dec 18
Listed investment
Less than 10 years
10 to 15 years
15 to 20 years
20 to 25 years
Greater than 25 years
There continues to be good diversification of the portfolio
across our regions. All regions saw an increase in their
portfolio values including Latin America where we made our
first investment during the year.
30
John Laing Group plcAnnual Report and Accounts 2019 BY REVENUE TYPE
BY CURRENCY
– (–%)
755 (42.7%)
10 (0.6%)
784 (50.2%)
1,013 (57.3%)
766 (49.2%)
68 (3.9%)
514 (29.0%)
587 (33.2%)
182 (10.3%)
417 (23.6%)
– (–%)
465 (29.8%)
505 (32.4%)
219 (14.0%)
371 (23.8%)
Colombian Peso
US and Canadian dollar
Australian and
New Zealand dollar
Euro
Sterling
Listed investment
Volume
Availability
Dec 19
Dec 18
Dec 19
Dec 18
Listed investment
Other projects
Next five largest projects
Five largest projects
Dec 19
Dec 18
The valuation ranges for the five largest Primary Investments
and the five largest Secondary Investments are shown in the
tables below:
Availability-based investments made up the majority of the
portfolio at 31 December 2019. Renewable energy investments
comprise the majority of the volume-based investments.
The increase in the value of availability-based investments
primarily reflects the positive progress made on assets both
in construction and operation, further investment in
availability-based projects and value enhancements recognised
in the year. The reduction in volume-based investments is
primarily due to the disposal of two wind farms in the US as
well as write downs on certain of the Australian and European
renewable energy assets, offset by an investment in a wind farm
in the US and value enhancements recognised. We expect to
maintain balanced availability-based investments in the
portfolio in the medium term.
BY INVESTMENT SIZE
– (–%)
765 (43.3%)
311 (17.6%)
692 (39.1%)
10 (0.6%)
676 (43.3%)
276 (17.7%)
598 (38.4%)
BY SECTOR
– (–%)
207 (11.7%)
35 (2.0%)
577 (32.6%)
344 (19.5%)
605 (34.2%)
10 (0.6%)
152 (9.8%)
41 (2.6%)
656 (42.1%)
214 (13.7%)
487 (31.2%)
Dec 19
Dec 18
Listed investment
Social infrastructure
Environmental –
waste & biomass
Environmental –
wind & solar generation
Transport –
roads and other
Transport –
rail and rolling stock
Primary
IEP Phase 2
Clarence Correctional Centre
Sydney Light Rail
Ruta del Cacao
I-66 Managed Lanes
The disposal of two wind farms in the US in the first half of the
year has contributed to the reduction in the value of wind &
solar generation assets since 31 December 2018. Fair value
losses in the year have resulted in a decrease in the value of
waste and biomass assets. The listed investment was sold in
the year. Cash injections and positive fair value movements
have resulted in increases in value in other sectors.
Secondary
Denver Eagle P3
Cypress Creek Solar Farms
Live Oak Wind Farm
New Royal Adelaide Hospital
Finley Solar Farm
31 December
2019
£ million
325 – 425
75 – 100
75 – 100
50 – 75
50 – 75
31 December
2019
£ million
75 – 125
75 – 125
75 – 100
50 – 75
50 – 75
At 31 December 2019, the Group’s largest investment was
its shareholding in IEP Phase 2. Nine out of its ten largest
investments were outside the UK.
31
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report OUR STRATEGY IN ACTION
NORTH AMERICA
I-75 ROAD
EASING
TRAFFIC CONGESTION
JOHN LAING HOLDS A 40% INTEREST IN THE OAKLAND
CORRIDOR PARTNERS CONSORTIUM WHICH HAS A
DESIGN, BUILD, FINANCE AND MAINTAIN (DBFM)
CONTRACT WITH THE MARYLAND DEPARTMENT OF
TRANSPORT (MDOT) TO UPGRADE THE FINAL SEGMENT
OF THE I-75 MODERNIZATION PROJECT (SEGMENT 3) IN
SOUTHEAST MICHIGAN, AS PART OF MDOT’S WIDER I-75
MODERNIZATION PROJECT.
As well as adding capacity and relieving traffic congestion, the project
will deliver critical improvements to driving surface conditions and
safety. The project involves the reconstruction of a 5.5-mile section
(Segment 3) of the I-75 corridor and includes construction of a new
4-mile long, 14-feet diameter storage and drainage tunnel as well as
a pump station to mitigate future flood events. It utilises an
availability-based payment structure, over an approximately
30-year total contract term.
I
A
C
R
E
M
A
H
T
R
O
N
SCOPE OF PROJECT
> Reconstruction of 5.5 miles of the
existing I-75 corridor
> Replacement of 25 bridges
> Construction of retaining walls/noise
walls and the installation of a major
drainage tunnel
32
John Laing Group plc
Annual Report and Accounts 2019
D
A
O
R
5
7
-
I
ESG IMPACT
Minimising environmental impact and involving highway-using,
residential and business communities
The I-75 Road project includes a commitment to minimising
environmental impact, using a ‘Miss-Minimise-Mitigate’ approach.
This includes 100% of the roadway material being salvaged and reused,
the use of coal combustion products to act as a cementing material –
which will result in an 18 million kilogramme reduction in cement
consumption – and the planting of several thousand trees in the
surrounding landscape.
The project company, led by John Laing, has also proactively reached out
to the local highway-using and business communities using a variety of
methods including face-to-face meetings, mail drops, public information
sessions and public open houses. We have also contributed to volunteer
projects and donated to local schools and charities. The project has
strong governance that allows the team to track progress across all
these areas during construction.
w
e
i
v
r
e
v
O
e
c
n
a
n
r
e
v
o
G
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
F
i
John Laing Group plc
Annual Report and Accounts 2019
33
Strategic Report
FINANCIAL REVIEW
A SOLID SET OF RESULTS
I AM PLEASED TO REPORT THAT PROJECT DELIVERY AND VALUE
ENHANCEMENT MADE A FURTHER STRONG CONTRIBUTION
TO VALUE CREATION DURING THE SECOND HALF OF THE YEAR.”
“
BASIS OF PREPARATION
There has been no change in the basis of preparation
of the financial statements, as described in the
Financial Review section of the 2018 Annual Report
& Accounts, except as explained below.
There has been a change in the reportable segments
under IFRS 8 Operating Segments since last year.
Following an internal reorganisation, under which the
Primary Investment and Asset Management teams in
each of the three core geographical regions report to a
single regional head, regional performance targets are
set, and 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 performance on a
regional basis. Accordingly, the reportable segments
under IFRS 8 are now based on regions which are
currently: Asia Pacific, Europe and Middle East,
North America and Latin America. Further reportable
segments are “Fund management”, relating to the
external fund management activities for Jura
Infrastructure Limited (“Jura”) and JLEN, which
ceased in 2019, and “Central”, which covers the
corporate activities at the Group’s headquarters.
The Group adopted IFRS 16 Leases from 1 January
2019. For further details, see note 2 to the Group
Financial Statements.
RE-PRESENTED FINANCIAL RESULTS
As we have done in previous periods, we 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”.
Luciana Germinario
Chief Financial Officer
2019 HIGHLIGHTS
> NAV per share
337p
(31 Dec 2018 – 323p)
34
> NAV per share growth
(before dividends paid)
7.2%
(31 Dec 2018 – 18.2%)
John Laing Group plcAnnual Report and Accounts 2019 Re-presented income statement
Preparing the re-presented income statement involves a reclassification of certain amounts within the Group Income Statement
principally in relation to the net gain on investments at fair value through profit or loss (FVTPL). The net gain on investments at
FVTPL in the Group Income Statement includes 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.
Year ended 31 December
Fair value movements – investment portfolio
Fair value movements – other
Investment fees from projects
Net gain on investments at fair value through profit or loss
IMS revenue
PMS revenue
Recovery of bid costs
Other income
Operating income
Third party costs
Disposal costs
Staff costs
General overheads
Other net costs
Post-retirement charges
Administrative expenses
Profit from operations
Finance costs
Post-retirement charges
Profit before tax
Notes:
2019
Group
Income
Statement
£ million
Adjustments
£ million
Re-presented
income
statement
£ million
2018c
Re-presented
income
statement
£ million
141
(1)
7
147
20
7
5
32
179
(10)
(4)
(37)
(15)
–
(2)
(68)
111
(11)
–
100
–
(1)a
–
(1)
–
–
–
–
(1)
–
–
–
–
–
2b
2
1
2a,b
(3)b
–
141
(2)
7
146
20
7
5
32
178
(10)
(4)
(37)
(15)
–
–
(66)
112
(9)
(3)
100
354
3
8
365
20
6
4
30
395
(9)
(4)
(37)
(13)
(1)
–
(64)
331
(11)
(24)
296
a) Adjustment comprises £1 million of interest income reclassified from ‘fair value movements – other’ to ‘finance costs’.
b) Under IAS 19 Employee Benefits, the costs of the pension schemes and the post-retirement medical benefits comprise a service cost of £2 million,
included in administrative expenses in the Group Income Statement, and a finance charge of £1 million, included in finance costs in the Group
Income Statement. These amounts are combined together as post-retirement charges under management reporting. The cost for 2018 also
includes a one-off GMP equalisation charge of £21 million.
c) For a reconciliation between the Group Income Statement and re-presented income statement for the year ended 31 December 2018, refer to
the 2018 Annual Report and Accounts.
35
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report FINANCIAL REVIEW continued
Profit before tax for the year ended 31 December 2019 was
£100 million (2018 – £296 million). The main reason for the
lower PBT compared to last year was the reduction in fair
value movement in the investment portfolio.
There were positive fair value movements on the portfolio for
2019 of £141 million (2018 – £354 million). An analysis of the
fair value movement is provided in the Portfolio Valuation
section. A significant contributor to the fair value movement
in 2018 was the gain of £87 million on disposal of the interest
in IEP Phase 1. In contrast, despite significant value
enhancements of £157 million, the fair value movement for
2019 suffered from losses of £52 million on three of our
Australian renewable energy assets, as a result of the impact
of marginal loss factors (see the Asia Pacific section above),
and from wind yield losses of £51 million on our European wind
assets (see the Europe section above). We also experienced
losses from the impact of foreign exchange movements
(£57 million loss compared to a £10 million gain in 2018) and
power and gas price forecasts (£48 million loss compared to
a £12 million loss in 2018).
The Group earned IMS revenue of £20 million (2018 –
£20 million) from investment advisory and asset management
services primarily to Jura and JLEN. The proceeds received
in the year from the sale of the IAA with JLEN of £5 million
offset the loss of revenue from the IAA with Jura which
terminated in 2019. Going forward, the Group will only earn
IMS revenue from the provision of directors to project
company boards (2019 – c.£1 million; 2018 – c.£2 million).
The Group also earned PMS revenue of £7 million (2018 –
£6 million) from the provision of services to project companies
under management services agreements.
The Group achieved recoveries of bidding costs on financial
closes of £5 million in 2019 (2018 – £4 million).
Total staff costs for the year ended 31 December 2019 are
broadly the same as last year due to the impact of pay
increases in line with inflation (c.£1 million), increase in
average headcount for the period with new recruits at higher
average salaries (c.£2 million) and one-off staff costs incurred
in the first half of 2019 in relation to the termination of the
fund management business offsetting the reduction in staff
costs from the transfer of staff with this business.
General overheads have increased from last year principally
due to costs incurred on one-off project-related costs and
development costs incurred in setting up in new regions and
looking at new asset classes.
Finance costs of £9 million (2018 – £11 million) include costs
of the corporate banking facilities, net of any interest income,
with the decrease from last year primarily due to lower
investment activity in the year.
There was a tax credit for the year of £0.2 million (2018 – tax
expense of £0.2 million) primarily as a result of the reversal
of a tax provision held at 31 December 2018. The contributions
made to one of the Group’s defined benefit pension schemes
are tax deductible when paid and, as a result, there is minimal
tax payable by the UK holding and asset management
activities of the Group. Capital gains from the realisation of
investments in projects are generally exempt from tax under
the UK’s Substantial Shareholding Exemption for shares in
trading companies or under the overseas equivalent. To the
extent this exemption is not available, gains may be sheltered
using current year losses or losses brought forward within
the Group’s holding companies. There are no losses in
the Company but there are tax losses in recourse group
subsidiary entities that are held at FVTPL (£177 million as
at 31 December 2018).
36
John Laing Group plcAnnual Report and Accounts 2019 The re-presented income statement for years ended 31 December 2019 and 2018 by reportable segment is shown in the tables below:
Net gain on investments at FVTPL
Other income
Operating income
Staff costs
Other administrative expenses
Profit/(loss) from operations
Finance costs
Post-retirement charges
Profit/(loss) before tax
Net gain on investments at FVTPL
Other income
Operating income
Staff costs
Other administrative expenses
Profit/(loss) from operations
Finance costs
Post-retirement charges
Profit/(loss) before tax
Asia Pacific
£ million
Europe and
Middle East
£ million
North America
£ million
Latin America
£ million
Fund
Management
£ million
Central
£ million
Total
£ million
Year ended 31 December 2019
12
2
14
(7)
(3)
4
–
–
4
18
3
21
(6)
(6)
9
–
–
9
100
6
106
(7)
(7)
92
–
–
92
12
–
12
(1)
(2)
9
–
–
9
–
20
20
(3)
(2)
15
–
–
15
4
1
5
(13)
(9)
(17)
(9)
(3)
(29)
146
32
178
(37)
(29)
112
(9)
(3)
100
Asia Pacific
£ million
Europe and
Middle East
£ million
North America
£ million
Latin America
£ million
Fund
Management
£ million
Central
£ million
Total
£ million
Year ended 31 December 2018
86
2
88
(7)
(3)
78
–
–
78
188
4
192
(6)
(11)
175
–
–
175
88
6
94
(5)
(4)
85
–
–
85
–
–
–
–
(1)
(1)
–
–
(1)
–
19
19
(7)
(2)
10
–
–
10
3
(1)
2
(12)
(6)
(16)
(11)
(24)
(51)
365
30
395
(37)
(27)
331
(11)
(24)
296
Asia Pacific – the lower profit in 2019 compared to 2018 was
mainly due to write downs of £52 million in the portfolio from
adverse changes in MLFs on three of our renewable energy
investments. For further details, see the Asia Pacific section
in the Regional Review above.
Europe and Middle East – the lower profit in 2019 compared
to 2018 was mainly due to performance issues on wind assets,
which resulted in write downs in the period of £51 million.
In 2018, the Europe regional results benefited from a gain
of £87 million on the disposal of our interest in the IEP
Phase 1 project.
North America – good progress was made on the PPP assets
in the US, which, together with value enhancements of
£65 million, contributed to the marginally higher profit in 2019
compared to 2018. Increasing staff costs in North America
reflect an increase in the headcount in that region, consistent
with the increase in the level of activity.
Latin America – the first investment in Latin America was
secured in 2019 and this has led to an increase in profit
from 2018.
Fund management – fund management activities ceased in the
first half of 2019 following the sale of the JLEN IAA at the end
of June 2019 and the termination of the Jura services at the
end of April 2019. The increase in profit from 2018 was primarily
due to the proceeds from the sale of the JLEN agreement of
£5 million. There will be no further income or costs from fund
management activities beyond the end of 2019.
Central – the net gain on investments at FVTPL of £4 million
in 2019 was primarily due to a gain on the JLEN shares as
well as a foreign exchange gain outside of the portfolio
(2018 – £1 million loss primarily due to foreign exchange
losses outside of the portfolio). The overall loss for the Central
segment reflects the costs of the Group’s central support and
overview functions, as well as the Group’s finance costs and
its post-retirement charges. The loss for 2019 of £29 million is
lower than the loss for 2018 of £51 million primarily due to the
one-off GMP equalisation charge of £21 million in 2018.
37
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report
FINANCIAL REVIEW continued
Re-presented balance sheet
The re-presented balance sheet is reconciled to the Group Balance Sheet at 31 December 2019 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 £129 million (31 December 2018 – £140 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.
31 December
2019
Group Balance
Sheet
£ million
Adjustments
£ million
Re-presented
balance sheet
£ million
Non-current assets
Right of use assets
Investments at FVTPL
Retirement benefit asset
Current assets
Trade and other receivables
Cash and cash equivalents
4
1,897
13
1,914
6
2
8
–
(129)a
118b
–
(11)
(6)c
5b
(1)
4
1,768
118
13
1,903
–
7
7
2018e
Re-presented
balance sheet
£ million
Re-presented balance sheet line items
–
Other long-term assets
1,560
Portfolio value
Cash collateral balances
Pension surplus (IAS 19)
Cash
132
–
1,692
–
8
8
Total assets
1,922
(12)
1,910
1,700
Current liabilities
Borrowings
Trade and other payables
Net current liabilities
Non-current liabilities
Retirement benefit obligations
Finance lease liabilities
Provisions
Total liabilities
Net assets
Notes:
Working capital and other balances
Cash borrowings
Pension deficit (IAS 19)
Other retirement benefit obligations
(236)
(15)
(251)
(243)
(7)
(4)
(2)
(13)
(264)
1,658
(6)b,
c,d
(3)d
15c
6
5
–
4c
2c
6
12
–
(6)
(239)
–
(245)
(238)
–
(7)
–
–
(7)
(252)
1,658
(4)
(70)
–
(74)
(66)
(33)
(7)
–
–
(40)
(114)
1,586
a) Investments at FVTPL of £1,897 million comprise: portfolio valuation of £1,768 million and other assets and liabilities within recourse
investment entity subsidiaries of £129 million (see note 13 to the Group financial statements).
b) Other assets and liabilities within recourse investment entity subsidiaries of £129 million referred to in note (a) include: (i) cash and cash
equivalents of £123 million, of which £118 million is held to collateralise future investment commitments and £5 million is other cash balances
and (ii) net positive working capital and other balances of £6 million.
c) Trade and other receivables (£6 million), trade and other payables (£15 million), finance lease liabilities (£4 million) and provisions (£2 million)
are combined in the re-presented balance sheet as working capital and other balances.
d) Borrowings of £236 million comprise cash borrowings of £232 million from the main facilities and £7 million of short-term bank overdraft from
uncommitted facilities less unamortised financing costs of £3 million, which are re-presented as working capital and other balances.
e) For a reconciliation between the Group Balance Sheet and re-presented balance sheet as at 31 December 2018, refer to the 2018 Annual Report
and Accounts.
38
John Laing Group plcAnnual Report and Accounts 2019 Components of net assets, including reportable segments, are shown in the table below.
As at
Portfolio valuation
Other net current assets/
(liabilities)
Group (borrowings)/net cash1
Net post-retirement assets/
(obligations)
Asia Pacific
Europe
North America
Latin America
Fund management
Central
Total
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
31 Dec
2019
£ million
31 Dec
2018
£ million
587
505
599
580
514
465
68
–
–
–
–
(2)
(114)
6
10
(4)
70
(40)
1,768
1,560
(2)
(4)
(114)
6
70
(40)
Group net assets
587
505
599
580
514
465
68
–
–
–
(110)
36
1,658
1,586
Note:
(1) Comprising: short-term cash borrowings of £232 million (31 December 2018 – £55 million) and short-term bank overdraft of £7 million
(31 December 2018 – £15 million) net of cash balances of £125 million (31 December 2018 – £140 million)
Net assets increased from £1,586 million at 31 December 2018
to £1,658 million at 31 December 2019.
The Group’s portfolio of investments was valued at £1,768 million
at 31 December 2019 (31 December 2018 – £1,560 million).
The valuation methodology and details of the portfolio value
are provided in the Portfolio Valuation section.
The Group held cash balances of £125 million at 31 December
2019 (31 December 2018 – £140 million) of which £118 million
(31 December 2018 – £132 million) was held to collateralise
future investment commitments (see the Financial Resources
section below for more details). Of the total Group cash
balances of £125 million, £123 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 million of cash
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).
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.
The triennial actuarial valuation of JLPF as at 31 March 2019
is currently in process and is expected to be finalised by
30 June 2020. In December 2016, following a triennial actuarial
valuation 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 set
out below:
By 31 March
£ million
2017
2018
2019
2020
2021
2022
2023
25
27
29
25
26
26
25
The combined accounting surplus in the Group’s defined
benefit pension and post-retirement medical schemes at
31 December 2019 was £6 million (31 December 2018 – deficit
of £40 million). Under IAS 19, at 31 December 2019, JLPF
had a surplus of £12 million (31 December 2018 – deficit
of £35 million) while the Plan had a surplus of £1 million
(31 December 2018 – surplus of £2 million). The liability at
31 December 2019 under the post-retirement medical scheme
was £7 million (31 December 2018 – £8 million).
The pension surplus in JLPF under IAS 19 is based on a
discount rate applied to pension liabilities of 2.1%
(31 December 2018 – 2.85%) and long-term RPI of 3%
(31 December 2018 – 3.20%). The amount of the surplus is
dependent on key assumptions, principally: inflation rate,
discount rate and life expectancy of members. The discount
rate, as prescribed by IAS 19, is based on yields from high
quality corporate bonds. The surplus as at 31 December 2019
has moved from a deficit at 31 December 2018 primarily as a
result of the Group’s cash contribution to JLPF of £29 million
in March 2019 and gains in the value of scheme assets.
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 13 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.
39
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report Cash yield comprised £57 million (2018 – £34 million) from
the investment portfolio, including a large cash distribution
from the Denver Eagle P3 project following construction
completion in the first half of the year.
Operating cash flow in the year end 31 December 2019 was
adverse compared to 2018 primarily due to higher payments
for staff costs, partly due to payment of deferred bonuses from
prior years for staff in the fund management business leaving
the Group. There was also a small cash outflow in relation to
tax in 2019 compared to cash inflows in 2018 from the
surrender of tax losses to project companies.
Total operating cash flow was net of a favourable foreign
exchange impact of £1 million (2018 – adverse impact of
£1 million).
During the period, cash of £267 million (2018 – £342 million)
was invested in project companies and our interests in four
projects as well as remaining investment in JLEN were sold
for total proceeds of £143 million (2018 – £296 million from
the realisation of three investments). Offsetting proceeds
from realisations were disposal costs paid of £3 million
(2018 – £5 million).
In the year, the Group made a cash contribution to JLPF
of £29 million (2018 – £27 million).
Dividend payments of £47 million in the year ended
31 December 2019 (2018 - £44 million) comprised the
final dividend for 2018 of £38 million (2018 – final dividend
for 2017 of £35 million) and the interim dividend for 2019
of £9 million (2018 – interim dividend for 2018 of £9 million).
FINANCIAL RESOURCES
At 31 December 2019, the Group had principal committed
revolving credit banking facilities of £650 million (31 December
2018 – £650 million), £500 million expiring in July 2023 and
£150 million expiring in January 2022, which are primarily
used to back investment commitments. Net available
financial resources at 31 December 2019 were £314 million
(31 December 2018 – £413 million).
FINANCIAL REVIEW continued
Year ended 31 December
2019
£ million
2018
£ million
Cash yield
Operating cash outflow
Net foreign exchange impact
Total operating cash inflow
Cash investment in projects
Proceeds from realisations
Disposal costs
Net investing cash outflow
Finance charges
Rights issue (net of costs)
Purchase of own shares related
to share based incentives
Cash contributions to JLPF
Dividend payments
Net cash (outflow)/inflow
from financing activities
Recourse group cash
(outflow)/inflow
Recourse group opening
cash/(net debt) balances
Recourse group closing
(net debt)/cash balances
Reconciliation to line items on
re-presented balance sheet
Cash collateral balances1
Cash and cash equivalents1
Total net cash balances
Cash borrowings
(Net debt)/cash
Reconciliation of cash
borrowings to Group Balance
Sheet
Cash borrowings as per
re-presented balance sheet
Unamortised financing costs
Borrowings as per Group
Balance Sheet
57
(24)
1
34
(267)
143
(3)
(127)
(11)
–
(4)
(29)
(47)
(91)
(184)
70
(114)
118
7
125
(239)
(114)
(239)
3
(236)
34
(10)
(1)
23
(342)
296
(5)
(51)
(13)
210
–
(27)
(44)
126
98
(28)
70
132
8
140
(70)
70
(70)
4
(66)
1 For reconciliation of these amounts to the Group Balance Sheet
see the re-presented balance sheet above.
40
John Laing Group plcAnnual Report and Accounts 2019 Analysis of Group financial resources
FOREIGN CURRENCY EXPOSURE
Total committed facilities
Letters of credit issued under
corporate banking facilities
Letters of credit issued under
surety facilities
Other guarantees and
commitments
Short-term cash borrowings
Bank overdraft (uncommitted)
Utilisation of facilities
Headroom
Available cash and bank
deposits1
Net available financial
resources
31 December
2019
£ million
31 December
2018
£ million
650
(95)
–
(9)
(232)
(7)
(343)
307
7
314
650
(139)
(25)
(10)
(55)
(15)
(244)
406
7
413
1 Cash and bank deposits exclude cash collateral balances. Of the
total cash and bank deposit balances of £7 million, £2 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 £5 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).
Letters of credit and cash collateral represent scheduled
future injections of cash by the Group into underlying projects
in the Primary Investment portfolio.
Letters of credit issued and
other guarantees
Cash collateral
Future cash investment
into projects
31 December
2019
£ million
31 December
2018
£ million
101
118
219
164
132
296
Cash collateral is included within ‘investments at fair value
through profit or loss’ in the Group Balance Sheet.
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, Colombian Peso and Australian, US, Canadian
and New Zealand dollars. As a result of foreign exchange
movements in the year ended 31 December 2019, there was a
net adverse fair value movement of £57 million in the portfolio
valuation. Sterling strengthened against all relevant currencies
between 31 December 2018 and 31 December 2019.
The Group does not typically hedge against foreign exchange
movements in its portfolio value but may hedge for
investments denominated in currencies that have been volatile
in the past or expected to be so in the future. The Group may
apply an appropriate hedge to a specific currency transaction
exposure, which could include borrowing in that currency or
entering into forward foreign exchange contracts. An analysis
of the portfolio value by currency is set out in the Portfolio
Valuation section.
Letters of credit in issue at 31 December 2019 of £101 million
(31 December 2018 – £164 million) are analysed by currency
as follows:
Letters of credit by currency
Canadian dollar
US dollar
Australian dollar
Colombian peso
31 December
2019
£ million
31 December
2018
£ million
12
15
68
6
101
–
15
149
–
164
Cash collateral at 31 December 2019 of £118 million
(2018 – £132 million) was all denominated in US dollar.
GOING CONCERN
The Group has committed corporate banking facilities until
July 2023 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 2019.
Luciana Germinario
Chief Financial Officer
41
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report OUR STRATEGY IN ACTION
LATIN AMERICA
RUTA DEL CACAO
MANAGING
POSITIVE OUTCOMES
FOR LOCAL COMMUNITIES
THE RUTA DEL CACAO PPP ROAD PROJECT, IN WHICH JOHN LAING HAS A 30% INTEREST,
IS AN EXTRAORDINARY PROJECT THAT SITS AT THE HEART OF THE DEVELOPMENT OF NORTH-
EASTERN COLOMBIA. AT 236KM LONG AND TRAVELLING THROUGH DIFFICULT TERRAIN, IT’S
EXACTLY THE SORT OF COMPLEX INFRASTRUCTURE PROJECT AT WHICH JOHN LAING EXCELS.
42
John Laing Group plc
Annual Report and Accounts 2019
O
A
C
A
C
L
E
D
A
T
U
R
More than this, Ruta del Cacao is a great example of our commitment
to improving the lives of the communities in which we work. Along the
full stretch of this road lie many communities who, despite all its
inadequacies, depend on the existing route for their livelihoods. Small
businesses and communities have existed for many generations and
the prospect of a fast highway has naturally caused concern for some.
Together with the potential environmental implications of the
development, the project has required careful planning and compromise
to engage communities and interest groups along the way.
This project has gone a step further for affected communities. It has
built schools and invested in new water systems that provide clean
water to villages that previously had none and where children and adults
were regularly sick from drinking infected water. The project has also
created a new business zone where existing businesses can operate
in better facilities, and has created a seed fund to help new businesses
get started. Villagers from small, poorly-finished houses have been
re-settled into bigger, more modern homes that meet their needs.
SCOPE OF PROJECT
> Length of road: 236km
> Bridges and viaducts: 27 (19 – new structures,
8 – rehab of existing structures)
> Tunnels: two (5.3 km)
> Local workforce: 70% (above the 30%
minimum requirement)
> Number of ESG staff across the contract and
project company: 18
ESG IMPACT
Managing positive outcomes for local communities
The significant impact of the road development on nearby communities
has been a major consideration throughout this project. There have been
a number of initiatives both to ensure communities are better off in
terms of housing, business development, clean water and schooling.
Alongside these projects, we have replaced trees on a 10:1 basis, funded
30 seed capital projects for new businesses, employed around 70% of the
workforce from the local region and brought CO2 levels to below industry
standards. There is clear ESG governance within the project, supported
by productive board meetings run by hands-on directors.
I
A
C
R
E
M
A
N
I
T
A
L
w
e
i
v
r
e
v
O
e
c
n
a
n
r
e
v
o
G
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
F
i
John Laing Group plc
Annual Report and Accounts 2019
43
43
Strategic Report
STAKEHOLDER ENGAGEMENT
THE LONG-TERM SUCCESS OF OUR BUSINESS IS DEPENDENT ON THE WAY WE WORK
WITH A LARGE NUMBER OF KEY STAKEHOLDERS.
Our purpose is to create value for all our stakeholders by
investing in, developing and managing infrastructure projects
which respond to public needs, foster sustainable growth and
improve the lives of communities around the world.
In making its decisions, the Board considered the benefits,
impacts and concerns of the stakeholders involved, the values
and strategy of the Group, as well as the creation of long-term
sustainable growth for the Company and Group as a whole.
The table below provides details of key stakeholders,
engagement by the Group with the stakeholders during the
year and outcomes of this engagement. The Board is not
always directly involved in this engagement, but as a result of
the governance structure and information flow the Group has
in place, relevant information is reported directly to the Board
or its Committees. Further information regarding the Group’s
governance can be found on page 79.
>
KEY STAKEHOLDERS, ENGAGEMENT BY THE GROUP
Stakeholder Group
OUR PEOPLE
Form of Engagement
Engagement Outcome
We create an environment
in which our employees can
positively contribute to the
success of the business.
At 31 December 2019 we had
153 employees
Further information on workforce
engagement is provided on
pages 61 and 77.
Engagement with our employees
takes several forms including
engagement surveys, update
calls and attendance at regional
away days. Our Chairman is the
designated Non-executive Director
for the purposes of workforce
engagement. The feedback from
these engagement mechanisms
is reported to the Board.
We defined our purpose in 2018 and
have refreshed our values during
2019. The views of our employees
to develop both the purpose and the
values were sought via workshops,
pulse surveys and discussions and
were taken into account by the
Executive Committee.
OUR PARTNERS
We work together with our
partners to deliver the best
solutions for infrastructure
projects from design and
construction to operation.
OUR COMMUNITIES
Our investments respond to public
needs to improve the lives of
communities around the world.
We continuously work with our
partners in the governance of the
projects we deliver together. Outside
of specific projects, we proactively
seek to engage with them to deepen
mutual understanding of our
objectives and values, and to identify
opportunities for us to offer solutions
to social and economic infrastructure
requirements.
The quality of our partner
relationships is a key consideration
of our investment process in
choosing the projects we engage in
both at the Investment Committee
level and Board level. This has led
us to forego projects that were not
supported by strong relationships
or in line with our agreed strategy
and to consider opportunities in new
areas brought to us by key partners.
The Board receives regular updates
on community engagement, issues
and value creation via reports from
the Regional Managing Directors,
ESG updates and recommendations
from the Investment Committee.
We regularly engage directly with the
communities affected by our projects
in order to understand their needs
and concerns. We do this through
the project companies in which we
invest and also through community
engagement specialists that we
recruit. We then work with all of
the stakeholders to try to address
the needs and concerns of the
communities.
44
John Laing Group plcAnnual Report and Accounts 2019 Stakeholder Group
OUR INVESTORS
– INSTITUTIONAL
SHAREHOLDERS
Continued access to capital is of
vital importance to the long-term
success of our business
Form of Engagement
Engagement Outcome
Our engagement programme for
institutional shareholders and
analysts provides the opportunity for
current and potential investors to
meet with Executives and operational
management. This includes
face-to-face meetings with the
Group’s principal shareholders on a
twice yearly basis following the
publication of the annual and half
yearly results. The Chairman and the
Senior Independent Director are also
available to meet with shareholders
as required.
The Board receives regular feedback
on investor perceptions and opinions
about the Company. The Company’s
brokers provide additional views on
market sentiment and reaction.
Following the announcement of
the resignation of Olivier Brousse
in January 2020, we offered our
major shareholders an opportunity
to directly engage and a number of
calls were held with the Chairman
and other board members.
OUR INVESTORS
– INDIVIDUAL
SHAREHOLDERS
Represent c.0.21% of the total
number of shares on our register.
At the Annual General Meeting
(AGM) – shareholders are provided
with the opportunity to ask questions
and to engage with the Board.
During the AGM the Board members
will listen and respond to views,
questions and feedback to the
business as appropriate.
OUR LENDERS
PENSION TRUSTEES
Our lenders include banks,
(which provide funding via the
Group’s £650 million of borrowing
facilities) and banks and other
financial institutions which
provide other ancillary credit
lines. We also engage with
potential future lenders and
lenders which may invest in
project debt funding.
The Group operates two defined
benefit pension schemes: the
John Laing Pension Fund and
the John Laing Pension Plan.
The assets of the schemes are
held in a separate trustee
administered fund.
We hold regular meetings with all
lenders and potential lenders to
ensure that we are aligned with the
lending market to enable continuing
access to funding for the Group and
the projects we invest in.
The Board ensures that the Company
is aligned to comply with the terms
of its borrowing facilities and that
we seek new opportunities where we
can work in partnership.
The Chief Financial Officer regularly
attends meetings of the Pension
Trustees to provide an update on the
Company’s financial performance.
She also regularly meets with the
Chair of the Pension Trustees. Both
schemes are subject to a triennial
actuarial valuation which is a two
way process.
The Company’s covenant is discussed
with the Trustees’ third party advisor
on a regular basis during the year.
The key issues resulting from the
meetings and discussions with the
Pension Trustee are fed back to the
Board by the Chief Financial Officer
at the following Board meeting.
All cash flow forecasting reflects
the latest agreed schedule of
contributions. The Board assesses
the required contributions to the
Pension Fund when reviewing the
availability of capital for investments
and the payment of dividends.
45
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report STAKEHOLDER ENGAGEMENT continued
S 172 STATEMENT
s.172 of the Companies Act 2006 requires a director of a
company to act in a way he or she considers, in good faith,
would most likely promote the success of the company for the
benefit of its members as a whole. In doing this s.172 requires
a director to have regard, amongst other matters, to the:
• Likely consequences of any decisions in the long-term;
•
Interests of the company’s employees;
• Need to foster the company’s business relationships with
suppliers, customers and others;
•
Impact of the company’s operations on the community
and environment;
• Desirability of the company maintaining a reputation for
high standards of business conduct; and
• Need to act fairly as between members of the company.
In discharging our section 172 duties, we have regard to the
factors set out above. We also have regard to other factors
which we consider relevant to the decisions being made. Those
factors, for example, include alignment with our strategy,
purpose and values. We acknowledge that every decision we
make will not necessarily result in a positive outcome for all our
stakeholders. By considering the Company’s purpose and
values together with its strategic priorities and having a
process in place for decision-making by the Board, Board
Committees and the Management Committees, we do,
however, aim to make sure that our decisions are consistent
and predictable. Please refer to pages 79 to 80 for further
information on how the Board and its Committees operate.
Below are details of how the Board engaged with various
stakeholders along with key decisions made during the year, the
impact the decisions on the Company’s long-term sustainable
success, and what stakeholder considerations were made.
These decisions are either material to the Group and/or are
significant to our key stakeholder groups (as listed above).
EMPLOYEE ENGAGEMENT
The Board reviewed the results of the 2019 employee
engagement survey and the actions developed to address
the matters raised in the survey. Please refer to pages 61 for
further information. The Board also monitors a number of
employee related key indicators, including employee turnover
and diversity, as a barometer that our culture is embedded
across the organisation. As a result, the annual employee
engagement programme has been adapted to reflect the Board
discussions. This has included attendance by Non-executive
Directors at formal and informal events across our regions.
DIVERSITY
During 2019, the Board considered how best to encourage
greater diversity and inclusion within the Group. This included
discussions around the gender pay gap, development and
progression of employees and the availability of flexible
working arrangements. As a result the Executive team has
undertaken a number of initiatives to improve diversity across
the business. For further information on the diversity policy,
please see page 91.
INVESTMENT DECISIONS
In February 2019, the Board approved the investment in the
Ruta del Cacao road project in Colombia, the Group’s first
investment in Latin America. The Board’s decision-making
process included an assessment of the financial returns and
the key risks which could impact the returns, the portfolio
implications and the governance of the project. The Board
discussed the scope of the design of the project as well as
the environmental impact of construction, how this was being
managed and the impact on the local communities. One of
the key decision factors was the strong partnerships with
Cintra/Ferrovial, Colpatria and Ashmore. Please see page 42
for more details regarding this investment.
In December 2019, the Board approved an investment in
East Rockingham Resource Recovery Facility (ERRRF) in
Perth, Australia. The project will deliver sustainable and
affordable solutions for both electricity generation and waste
management. In approving the investment, the Board took
into account the financial returns and the associated risk
and portfolio implications and governance of the project.
The project provides a complex technology solution to waste
management. The partnership with Acciona as well as Masdar,
as co-investors, were important elements of the approval of
the investment. It was also confirmed that the ERRRF had
undergone all the necessary environmental approvals.
In both cases, confirmation was obtained that the governance
of the projects would meet the Group’s requirements for
high standards of business conduct.
DIVIDENDS
Each year we make an assessment of the strength of the
Company’s balance sheet and future prospects relative to
market uncertainties and make decisions about the payment
of dividends. In 2019, we recommended a final dividend for
2018 of 7.7 per share and a 2019 interim dividend of 1.84 per
share. In making our decisions in respect of the dividends, we
considered a range of factors. These included the long-term
viability of the Company, its expected cash flow forecasts and
financing requirements, the required contributions to the
John Laing Pension Fund and the on-going need for capital
allocation for future investments to fulfil our strategy and the
expectations of our shareholders.
REMUNERATION POLICY
Our revised Remuneration Policy (“the Policy”) was approved by
shareholders in 2019. As part of the Policy review process, we
consulted extensively with the Company’s major shareholders
and also reached out to the main proxy advisory bodies during
late 2018/early 2019. Anne Wade, the Remuneration
Committee Chair, held meetings with eight shareholders and
we received comments from a further four. Views were sought
and taken into account on the proposed Policy changes.
Overall, our shareholders were supportive of the proposals
and understood the rationale for the changes proposed.
SALE OF FUND MANAGEMENT BUSINESS
The Board recognises that there may be instances where the
requirements of a number of stakeholders need to be
considered. During the year, the Board approved the sale of
its remaining fund management activities by way of a novation
of the Investment Advisory Agreement with JLEN to Foresight
Group. The Board approval process took into account obtaining
the best price possible whilst taking into account the interests
of all stakeholders including that the new owners of the IAA
would provide positive benefits for JLEN and retain the
services of the investment advisory team.
46
John Laing Group plcAnnual Report and Accounts 2019 PROSPECTS AND VIABILITY
The long-term prospects and viability of the Group are a
consistent focus of the Board when reviewing and determining
the Group’s strategy and business model.
The identification and mitigation of the Group’s principal risks
also form part of the Board’s assessment of long-term
prospects and viability. The Directors have assessed the longer
term prospects of the Group in accordance with provision 31 of
the UK Corporate Governance Code 2018 (the Code).
ASSESSING OUR PROSPECTS
John Laing has been successful in establishing itself as a
valued and trusted partner for infrastructure investment.
We have grown our investment portfolio over the last five years
since IPO and expanded our footprint into new geographical
markets and new asset classes. With this growth in footprint,
together with the strengthening of both our partnerships with
key players in the infrastructure sector and our capital base,
we have also been able to grow our pipeline of future
investment opportunities.
The key drivers for new infrastructure – population growth,
urbanisation, the increasing role of data in societies and
economies and climate change – are as strong now as they
have ever been and we are confident that we are well placed to
continue to see significant investment opportunities over the
foreseeable future.
The Group adopts an annual business planning process which
involves all of the Group’s operating regions and senior
management with review by the Board. The annual business
plan looks out over the next three years with one budget year
followed by two plan years. Detailed budgets for the coming
financial year are established for both the Group and each of
the regions, with performance targets set accordingly.
This planning process is a significant part of the Board’s
assessment of the Group’s prospects and is complemented
by separate strategic reviews by the Board during the year.
The Group’s current market position, its strategy and
business model and the potential impact of the principal
risks (as set out on pages 50 to 54) are all taken into account
in the Board’s assessment of the prospects of the Group. In
assessing the risks facing our business, we have considered
the implications of the UK’s withdrawal from the European
Union at the end of the transition period. We believe our
business model is robust enough and adaptable to weather
any potential short-term disruption which might arise.
ASSESSING OUR VIABILITY
In accordance with provision 31 of the Code, the Directors have
assessed the viability of the Group over a three year period to
31 December 2022. 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 use of a three year time horizon for the purpose of
assessing the viability of the Group reflects the business
model of the Group and the visibility the Group has over the
future investment opportunities in its pipeline and is
consistent with the period of the Group’s business plan.
The Directors’ assessment has been undertaken using
projections from a detailed financial model which the Group
uses continually and 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 as well as being
used for monthly financial reporting and forecasting to the
Executive Committee, the Board and in the annual business
planning process.
These projections include expected fair value movements
from the existing portfolio and incorporate forecasts of the
timing of new investment commitments and the disposal of
investments as well as all cash flows of the Group and its
working capital requirements.
The key assumptions the Directors have made in making their
assessment were as follows:
• Stable government policy and macroeconomic factors and
a continuing strong and liquid secondary market;
• Availability of debt finance continues at Group level through
the corporate banking facilities. Currently, the Group has
committed corporate banking facilities of £650 million, of
which £500 million matures in July 2023, beyond the end of
the viability assessment period and £150 million matures
in January 2022. Our projections assume the facilities of
£150 million are extended beyond January 2022 before the
total facilities are increased to £800 million in March 2022,
consistent with the forecast growth of the business. The
Directors do not see the increase in facilities as being
critical to the Group’s viability over the assessment period,
especially after taking into account the mitigating factors
available to it as described below;
• The remaining annual repayments to the John Laing
Pension Fund under the existing seven-year deficit
repayment plan, as detailed in the Financial Review
section, do not significantly increase on the completion
of the ongoing triennial actuarial valuation as at
31 March 2019; and
• The value of the Group’s investment portfolio is not
significantly adversely impacted by changes in 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.
The Directors have also carried out a robust assessment
of the principal risks facing the Group and how the Group
manages these risks (as set out on pages 49 to 54), including
those that would threaten its strategy, business model, future
operational and financial performance, solvency and liquidity.
47
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report PROSPECTS AND VIABILITY continued
The Group has considered the potential impact of these
risks on the viability of the business. The projections and the
underlying assumptions have been subjected to robust
sensitivity analysis to stress test the resilience of the Group’s
forecasts to severe but plausible scenarios, together with
the likely effectiveness of mitigating actions that would be
expected by the Directors. The particular focus of the stress
testing was on the available headroom under the banking
facilities and to compliance with the key covenants under these
facilities, including the adjusted asset cover ratio (“AACR”).
Similar stress testing is performed regularly throughout the
year and reported to the Audit & Risk Committee.
For the viability assessment, the most severe scenarios tested
are described below. This includes a description of the relevant
principal risks from which an adverse impact is assumed
under the scenario.
Scenario 1
Scenario – the Group is unable to make any further investment
realisations over the assessment period and accordingly
materially reduces new investment activity.
Principal risks tested – a weakness in the secondary market
(risk – ‘liquidity in the secondary market’), both in terms of liquidity
and appetite for particular infrastructure investments; a lower
level of investment activity (risk – ‘future investment activity’);
shortfall in financial resources (risk – ‘financial resources’).
Mitigation – given the cyclical nature of the Group’s disposal
and reinvestment activity, there is an intrinsic mitigation to
a scenario of reduced realisation levels, by reducing new
investment activity, and to a scenario of reduced future
investment activity, by reducing disposal activity. In a scenario
of being unable to make any further investment realisation,
the Group can reduce its new investment activity which would
also reduce its costs. The Group would also expect to receive
a higher level of cash yield from its investment portfolio as it
is maintaining a larger operational and yielding portfolio.
Result – under this scenario, with the likely mitigating actions
available to the Directors, the projections show that the Group
would be able to continue its operations and meet its liabilities
as they fall due over the next three years to 31 December 2022
and to comply with the covenants in its banking facilities over
this period.
Scenario 2
Scenario – the Group experiences a combination of a six month
delay in forecast investment realisations and a significant
write down, in one or more of its largest investments, to an
amount of approximately 15% of the total portfolio value. This
scenario demonstrates the downside that could be experienced
without any mitigating actions before the minimum AACR
under the Group’s banking facilities was reached during the
assessment period.
Principal risks tested – liquidity in the secondary market
(risk – ‘liquidity in the secondary market’); shortfall in financial
resources (risk – ‘financial resources’); adverse investment
performance and valuation (risk – ‘investment performance
and valuation’); significant write down to the portfolio value
(arising from one or more of the following risks – ‘major
incident’, ‘governmental policy’, ‘macroeconomic factors’,
‘counterparty risk’).
Mitigation – this scenario assumes no mitigating action.
The primary mitigating action available would be a reduction
in investment activity, which the Group has the ability to
manage and control.
Result – under this combined downside scenario, the minimum
AACR was only reached in December 2022, but there remained
headroom under the banking facilities. Given the severity of
the downside and the fact that available mitigating actions
would likely be effective, the Directors believe this scenario
proves there is a satisfactory level of robustness.
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 to 31 December 2022.
48
John Laing Group plcAnnual Report and Accounts 2019 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 Group uses the three lines of defence model of Risk
Management:
• Executive – central functions and regional teams that take
ownership and manage risks
• Management oversight – Executive Committee (Exco),
Management Risk Committee, Investment Committee,
Divestment Committee and Project Review Committee
that oversee and provide specialist risk management
and compliance reviews
•
Independent assurance – Internal Audit function and
independent portfolio valuation
The principal internal controls that operated within this
system throughout 2019 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 existing and
emerging risks through a Group-wide risk register,
that is embedded in the regular management reporting
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 external audit.
The Group’s Internal Audit function’s objectives are, inter alia,
to provide:
•
independent assurance to the Board, through the Audit &
Risk Committee, that internal control processes, including
those related to risk management, are relevant, fit for
purpose, effective and operating throughout the business;
• a deterrent to fraud; and
• advice on ongoing initiatives to strengthen internal control
processes.
Internal Audit is independent of the business and reports
functionally to the Chief Financial Officer 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.
>
THREE LINES OF DEFENCE MODEL OF RISK MANAGEMENT
BOARD / AUDIT & RISK COMMITTEE
EXCO / INVESTMENT COMMITTEE, DIVESTMENT COMMITTEE,
MANAGEMENT RISK COMMITTEE AND PROJECT RISK COMMITTEE
First Line
of Defence
Second Line
of Defence
Third Line
of Defence
Line Management Controls
& Procedures
Financial Control
Risk Management Function
Internal Audit
Executive
Management oversight
Independent assurance
n
o
i
t
a
u
l
a
v
o
i
l
o
f
t
r
o
p
t
n
e
d
n
e
p
e
d
n
I
49
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report
PRINCIPAL RISKS AND RISK MANAGEMENT continued
A Management Risk Committee, comprising senior members
of management and chaired by the Chief Risk Officer, assists
the Board, Audit & Risk Committee and Executive Committee
in formulating and enforcing the Group’s risk management
policy. The Head of Internal Audit attends each meeting of the
Management Risk Committee, which reports formally to the
Audit & Risk Committee.
The 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 and approved 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 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. As part of this
monitoring, the Group risk register is reviewed at every meeting
of the Management Risk Committee and regularly by the
Audit & Risk Committee and every six months by the Board.
With the Group facing a number of challenges with its
renewable energy portfolio, resulting in significant losses
in the year, the Directors have sought to re-affirm the
effectiveness of the Group’s risk management process.
In conjunction with this, PwC has recently been engaged
by the Group to perform a review of our governance of
projects and is examining the role of the Investment
Committee and the effectiveness of our project review
process and wider risk management. We are committed
to adopting all appropriate remedial actions to enhance
our risk management approach and have started a process
to enhance the internal audit function.
Overall, the Directors do not believe there are material
weaknesses in the Group’s internal control systems.
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 strategic objectives of the Group. 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 two strategic objectives are:
Growth in volume of primary investments in responsible
and sustainable greenfield infrastructure projects over
the medium term; and
Management and enhancement of the Group’s
investment portfolio, with a clear focus on active
management during the construction and operational
phases, 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.
>
OUR PRINCIPAL RISKS
Risk
1. 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 projects or otherwise affect existing or future projects.
Changes to legislation or public policy relating to
renewable energy could negatively impact the economic
returns on the Group’s existing 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.
The UK’s withdrawal from the European Union may take
place in a manner which affects: (i) the valuation of the
Group’s investments (ii) its ability to make future
investments and/or divestments.
Movement during the year: No change >
50
Link to
strategic
objectives
above
Mitigation and key controls
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. The Group seeks to limit its exposure to
any single governmental or public sector body and uses portfolio
limits as guidance to manage this risk. These portfolio limits are
reviewed when approving individual investments and on a
regular basis by the Investment Committee.
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.
Through its track record of 150 investment commitments, the
Group has developed significant expertise in compliance with
public tender regulations.
The Group believes its business model is robust and able to
weather potential short-term disruption as a result of the UK’s
withdrawal from the European Union from, for example, (i)
changes in the value of Sterling, (ii) changes in financial markets
and/or other macroeconomic factors (see Personnel risk).
John Laing Group plcAnnual Report and Accounts 2019 Risk
2. MACROECONOMIC FACTORS
To the extent such factors are not hedged, changes
in inflation, interest rates and foreign exchange all
potentially impact the return generated from an
investment and its valuation.
Changes in factors which affect power 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 and, as a
result, the valuation of such investments.
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.
Movement during the year: No change >
3. 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.
Movement during the year: No change >
4. 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.
Movement during the year: Small increase due to being one
year closer to the main £500 million banking facilities
maturing in July 2023. The Directors are confident of the
Group’s ability to refinance its current facilities before
this date.
>
Link to
strategic
objectives
above
Mitigation and key controls
Factors which have the potential to adversely impact the
underlying cash flows of an investment, and hence its valuation,
may be hedged at a project level. In addition, unhedged
exposures and associated sensitivities are considered during the
investment appraisal process. In particular, prior to investment,
renewable energy projects are assessed for their sensitivity to a
number of variables, including future power prices.
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 its investments in 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.
The Group does not typically hedge investments in non-Sterling
denominated currency for translation risk but may use hedging
instruments to minimise the degree of fluctuation in foreign
exchange rates for investments in more volatile currencies.
The Group does typically hedge short term cash flows arising
from investment realisations or significant distributions in
currencies other than Sterling.
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 substantially as
operational infrastructure has matured as an asset class.
The Group has developed strong relationships with many
secondary investors in each of its markets. The Group completed
the first disposals of operational assets in Australia and the US
during 2019.
The Group has corporate banking facilities totalling £500 million
which mature in July 2023 as well as additional facilities
(£150 million) committed until January 2022. Available
headroom is carefully monitored and compliance with the
financial covenants and other terms of these facilities is closely
observed. The Group also closely monitors short and medium-
term forecasts of its working capital, cash collateral and letter
of credit requirements and regularly performs stress testing
of these forecasts. The Group 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.
The Divestment Committee manages a rolling divestment
programme across the Group’s entire portfolio which considers
funding requirements and opportunities for divestment in
secondary markets. This Committee provides oversight and
recommendations on all divestment processes.
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.
Prior to financial close, all proposed investments are scrutinised
by the Investment Committee. This scrutiny includes a review of
sensitivities of investment returns and financial ratios to adverse
performance 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. Monitoring of
compliance with financial covenant ratios and other terms of
loan documents continues throughout the term of the project
finance loan.
51
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report PRINCIPAL RISKS AND RISK MANAGEMENT continued
Risk
5. INVESTMENT PERFORMANCE AND 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.
In circumstances where the revenue derived from a
project is related to volume (e.g. customer/offtaker 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 and cost of
fuel (in the case of biomass projects), operational issues,
price differentials and other restrictions on the electricity
network, the reliability of electrical connections or other
factors such as noise, offtaker risk 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 could be
affected by changes in tax legislation, for instance changes
which limit tax-deductible interest.
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 resulting in 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
investments, and changes to the value of these investments
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.
Movement during the year: No change >
Link to
strategic
objectives
above
Mitigation and key controls
The discount rates used to value investments are derived from
publicly available market data and other market evidence and
are updated regularly.
The Group has a good track record of realising investments at
prices consistent with the fair values at which they are held.
A substantial portion of the Group’s investments are in projects
which are 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 sensitivities thereto 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 offtake arrangements, including power purchase
agreements, are entered into to mitigate the impact of changes
in future energy prices.
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.
Typically, 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 project 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, typical 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 Group seeks to limit its exposure to any
single sub-contractor.
The terms of the sub-contracts into which project companies
enter typically provide some protection 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 the value of its
investments by working with all parties to agree revised
timetables and/or other restructuring arrangements.
The Group monitors the concentration risk within its portfolio
to achieve a diversification by individual asset size, market and
asset class.
The performance of project companies and service providers
to project companies is regularly monitored by the Asset
Management team in each geographical region.
52
John Laing Group plcAnnual Report and Accounts 2019 Risk
6. PENSIONS
The amount of the surplus/deficit on 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 surplus/deficit reported in the
Group Balance Sheet, and gains/losses recorded in the
Group Statement of Comprehensive Income.
Movement during the year: Decreased as a result of
the further cash contribution paid in 2019 and the
improvement in the IAS 19 balance from a deficit at
31 December 2018 to a surplus at 31 December 2019. >
7. FUTURE INVESTMENT ACTIVITY
The Group operates in competitive markets and may not
be able to compete effectively or profitably.
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.
Movement during the year: No change >
8. COUNTERPARTY RISK
The Group is exposed to counterparty credit risk with
regards to (i) governmental entities, sub-contractors,
off-takers, lenders and suppliers at a project level and
(ii) consortium partners, financial institutions and
suppliers at a Group level.
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.
Worsening of general economic conditions in any of the
markets in which the Group operates could create
heightened counterparty risk.
Movement during the year: No change >
Link to
strategic
objectives
above
Mitigation and key controls
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. As at
31 December 2019, hedging in place amounted to approximately
95% of JLPF’s assets in respect of both interest rates and inflation.
The actuarial valuation of JLPF as at 31 March 2019 is currently
in progress and is expected to be finalised by 30 June 2020.
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 and its strong relationships with international
partners, will continue to enable it to compete effectively and
secure attractive investments.
The Group’s investment pipeline is diversified by geography and
asset class.
The Group’s business model is sufficiently flexible that when
one asset class or geographical market becomes less attractive,
either permanently or temporarily, we are able to look at new
asset classes and geographical markets.
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/or local
public sector covenants, which significantly reduce the Group’s
risk. Risk is further reduced by the increasing geographical
spread of the Group’s investments.
Counterparties for cash deposits at a Group level, project debt
swaps and deposits within project companies are required to be
institutions 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.
Since 2018, the Group uses portfolio counterparty exposure
limits as guidance to manage counterparty risk. In 2019, a
revised methodology for assessing counterparty exposures and
for setting exposure limits (based on credit ratings) was
established. Counterparty risk is reviewed at each investment
approval and the aggregate exposures across the portfolio
are reviewed on a six-monthly basis by the Management Risk
Committee and reported to the Audit & Risk Committee. In
addition, there is an alert system under which any red flags
are immediately escalated to the relevant teams.
53
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report
PRINCIPAL RISKS AND RISK MANAGEMENT continued
Link to
strategic
objectives
above
Mitigation and key controls
At financial close, projects benefit from comprehensive
insurance arrangements, either directly or through contractors’
insurance policies.
Business continuity plans at project level are tested at frequent/
regular intervals. Business continuity procedures are also
regularly updated in order to maintain their relevance.
The Group is committed to ensuring the health, safety and
welfare of all its employees, sub-contractors and all other
persons in communities who may be affected by its direct
activities, or those under its control and believes this is a key
element of effective business management and essential to
its reputation.
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 an experienced
third party.
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.
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 offices in Amsterdam and Madrid and could open
further offices in other EU jurisdictions if necessary.
The Group has embedded the consideration of ESG factors into
its evaluation of new investments.
During the bidding process for investments, where appropriate,
the Group takes technical advice to evaluate the exposure of the
investment to climate change risk.
Risk
9. 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 work
force fatalities during construction, a terrorist attack,
natural disaster (including from the effects of climate
change), 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.
Movement during the year: Increased due to the
heightened potential impact of climate change
>
10. 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.
Uncertainty arising from the UK’s decision to leave the
EU could impact the Group’s ability to recruit and retain
EU nationals in the UK.
Movement during the year: No change >
11. ESG
The Group may not adequately address ESG considerations
in making investment decisions. This could impact the
reputation of the Group and the valuation of its investments.
We believe that climate change will result in an increased
likelihood and intensity of extreme weather events such as
extreme hot and cold weather or intense rainfall events,
which could impact John Laing by causing physical
damage to assets, such as road and rail infrastructure
investments in the mid-and long-term. Increasing
instances of such damage could lead to increases in
insurance premiums for John Laing’s projects, impacting
the economic performance of investments. In the nearer
term, changes in energy prices, driven by future energy
demand/supply balancing and oil prices could impact
negatively on the economic returns of the Group’s
investments in renewable energy and as a result the
valuation of such investments.
Movement during the year: New risk this year
54
John Laing Group plcAnnual Report and Accounts 2019 CORPORATE RESPONSIBILITY
COMMITTED TO SUSTAINABILITY
“
JOHN LAING’S PURPOSE IS TO CREATE VALUE FOR ALL OUR
STAKEHOLDERS BY INVESTING IN, DEVELOPING AND MANAGING
INFRASTRUCTURE PROJECTS WHICH RESPOND TO PUBLIC NEEDS,
FOSTER SUSTAINABLE GROWTH AND IMPROVE THE LIVES OF
COMMUNITIES AROUND THE WORLD.”
Olivier Brousse
Chief Executive Officer
We believe that by encouraging responsible investing
and sustainable business practices, we can enhance
our performance, contribute to a more sustainable
society and a more inclusive global economy.
Our sustainability strategy and approach, set out
in this section of the Annual Report, divides into
four areas:
(i) Being a responsible employer – see people and
culture section on pages 56 to 62.
(ii) Being a responsible investor – see pages 63 to 67.
(iii) Supporting our local communities – see pages
68 to 69.
(iv) The environment – see pages 70 to 73.
We recognise that climate change creates new
challenges for the global economy and for local
communities everywhere. As an investor in
infrastructure, this presents both risks and
opportunities over the short and long-term.
This is an area of increasing focus for John Laing
and we are committed to supporting increased
transparency in this area. This section of the
Annual Report also includes information on
minimising our direct impact on the environment
including our emissions performance and in addition
to achieving a “B” score from CDP (formerly the
Carbon Disclosure Project) for our performance in
2019, we are pleased to present our first Taskforce
on Climate-related Financial Disclosures on
pages 72 to 73.
55
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CORPORATE RESPONSIBILITY continued
RESPONSIBLE EMPLOYER
PEOPLE & CULTURE
OUR CULTURE IS TO BRING THE EXPERIENCE, COMMITMENT AND INNOVATION REQUIRED
TO DELIVER INFRASTRUCTURE SOLUTIONS THAT DRIVE SOCIETY FORWARD WITH A
BUSINESS MODEL THAT IS FULLY COMMITTED TO SUCCESSFUL PROJECT COMPLETION.”
“
Our employees are principal stakeholders at the heart of delivering our strategy and purpose. As such, their skills, capabilities
and expertise are vital to our success. The culture we strive for stems from embracing our values which empower our employees
to take responsibility for their contribution to the business whilst reflecting our ethics, inclusivity and integrity.
We take personal and
collective responsibility for our
contributions to the business,
reflecting the ethics,
inclusivity and integrity
of our purpose.
We trust our colleagues to do
their best work for our
business, wherever they are,
giving them the tools, skills and
support they need in order to
do their best and reach their
full potential.
We are open minded and alive
to learning new things and
spotting new opportunities.
We’re continually looking for
ways to improve, so that we
develop as individuals and
contribute to the growth of our
business and communities in
which we work.
We believe that our success
can only come from collective
results, where outcomes are
aligned and benefits are
realised for all stakeholders.
>
DIVERSITY AND INCLUSION
Improving the diversity of our employees is important.
Our priority is to recruit and retain a talented and diverse
workforce and to pay all our employees fairly for what
they do. We continue to focus on how to increase diversity
and inclusion engagement across the business.
We have an internationally diverse workforce: while
some 33% of our employees are UK citizens, the balance
comprises around 25 nationalities.
SDGs:
56
John Laing Group plcAnnual Report and Accounts 2019OWNERSHIPEMPOWERMENTGROWTH MINDSETSHARED PROSPERITY
We are committed to promoting employee engagement and
have undertaken a number of initiatives to foster greater
employee engagement, including the launch of an annual
employee engagement survey.
John Laing aims to attract and retain, develop and reward
high quality employees and to create an engaging, diverse and
motivating work environment. We support our people through
learning and development so they can maximise their career
potential and their value as an employee. We recognise that
investing in our people is critical to the success of our business.
We recognise the importance of nurturing the wellbeing and
satisfaction of employees by providing a supportive working
environment and a healthy work/life balance.
Our focus on people covers our current and future employees.
We aim to have an engaged and diverse workforce to stimulate
innovation, reflect the communities where we work and deliver
infrastructure solutions.
At 31 December 2019, the Group employed 153 employees
in total (2018 – 169). The percentage of employees located
outside the UK increased from 44% at 31 December 2018 to
55% at 31 December 2019, as a result of continued recruitment
overseas and a lower headcount in the UK, principally due to
the cessation of the fund management business.
EQUAL OPPORTUNITIES
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.
We recognise the value that differences bring, including but
not limited to gender, race, nationality, social background,
professional and personal experiences and preferences.
We make recruitment and promotion decisions based solely
on the ability to perform each role. No individual colleague or
potential colleague will receive less favourable treatment on
the grounds of age, marital status, gender, gender identity,
gender reassignment, sexual orientation, race, colour,
nationality, ethnic or national origin, religion and disability.
Where an employee’s circumstances change, it is the
Company’s policy to do everything reasonably possible to
ensure that a successful return to work or a change of role if
appropriate is facilitated, either in the same job or in a
different role.
GENDER DIVERSITY
Whilst diversity is wider than gender balance, this continues to
be a key area of focus. We have continued to make progress in
this area against the constraints of a small workforce.
2019
2018
Female
34%
Male
66%
Female
26%
Male
74%
37.5%
62.5%
25%
75%
Overall Gender
Balance
Board Level
Gender Balance
Further information on the Board’s diversity policy can be
found in the Nomination Committee Report on page 91.
We are continually looking to improve our gender balance
and took a number of steps during 2019. These were aimed
particularly at our activities outside the UK. In our UK central
functions, the gender balance is 44% female, 56% male.
During the year, our recruitment of male/female employees
globally was 62% female and 38% male.
>
FOCUS ON GENDER DIVERSITY
Our programme to improve gender diversity has been on-going during the year. The steps taken included:
• Continued support of the 30% Club and its campaign
goals. The 30% Club aims to develop a diverse pool of
talent for all businesses through the efforts of their
Chair and CEO members who are committed to better
gender balance at all levels of their organisations;
• Regular reporting in relation to diversity at Board and
Executive Committee level;
• Search firms used by the Group informed that shortlists
must be strongly diverse and in particular must include
female candidates;
• Diversity targets for our Asia Pacific and North American
teams and for the Group as a whole;
• Launch of the John Laing Women’s Network;
• Encouragement to female employees to join and
participate in female networking groups including
Women in Infrastructure in the UK and the US and
Steel Heels in Australia; and
• The APAC Diversity Committee which comprises a
cross-section of employees from the APAC region has
an annual programme of events including developing
a mentoring programme for our female employees in
the region as well as supporting future talent through
supporting The Girl’s Academy in Australia.
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GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CORPORATE RESPONSIBILITY continued
RESPONSIBLE EMPLOYER continued
GENDER PAY GAP
With less than 250 employees, of whom approximately 70 are
located in the UK, the Company is not required to report on
its gender pay gap. The gender pay gap is the difference
between the average amount that women and men are paid
across the workforce.
However, we are supportive of transparency and decided
voluntarily to disclose our gender pay gap for the first time
in 2018 for our UK employees. In 2019, we are reporting our
global and UK gender pay gap as this is how we monitor
and track our progress. We have also provided the 2018
comparators on a global basis. As a result of the positive
progress over the last two years from our ongoing programme
to improve gender diversity, we are pleased to report that at
both the global and UK level, the hourly gender pay gap has
reduced. However, the gap remains higher than we would
like to see and we will continue to focus on addressing this
to close the gap on a year-on-year basis.
Our bonus pay gap remains higher than our hourly pay gap.
All our employees are entitled to participate in our Annual
Bonus plan. The bonus pay gap is driven by the diversity levels
within the business and the fact that senior roles have higher
bonus opportunities; more men are in senior roles than women.
In addition, the bonus pay gap calculations as required under
the relevant legislation does not take into account that we
pro-rate bonuses for employees who work on a part-time
basis, the majority of whom are female. Further, the bonus
pay gap calculated for any given year is based on the amount
of bonuses paid in that year in relation to the prior year’s bonus
(e.g. the 2019 bonus pay gap is based on the bonus paid in
March 2019 relating to the 2018 bonus). As a result, we are
not seeing in the bonus pay gap numbers for 2019 the same
positive effect from our improved gender diversity that we
have seen in the reduced hourly pay gap. We anticipate to start
seeing this positive effect in our 2020 bonus pay gap numbers.
Another factor is that the bonus structure for more senior
employees (who currently comprise a higher proportion of men)
incorporates a higher element based on corporate rather than
personal performance. This means that in years of strong
corporate performance, the bonus gap between men and
women may be accentuated.
Proportion of UK employees receiving a bonus
Proportion of female UK employees
receiving a bonus
Proportion of male UK employees
receiving a bonus
2019
96.8%
2018
67.7%
100%
91.7%
Proportion of all John Laing employees receiving a bonus
Proportion of female employees
receiving a bonus
Proportion of male employees
receiving a bonus
2019
97.6%
2018
90.9%%
99.1%
90.5%
>
HOURLY PAY AND BONUS DIFFERENCE BETWEEN WOMEN AND MEN
UK Gender Pay Gap
Mean gender
hourly pay gap
On average women earn
28.4%
less than men
(2018 – 49.4%)
42.5% Decrease
Global Gender Pay Gap
Mean gender
hourly pay gap
On average women earn
36.4%
less than men
(2018 – 48.8%)
25.4% Decrease
Median gender
hourly pay gap
Women earn
39.3%
less than men
(2018 – 46.3%)
15.1% Decrease
Median gender
hourly pay gap
Women earn
41.0%
less than men
(2018 – 52.5%)
21.9% Decrease
Mean gender
bonus pay gap
On average women earn
81.5%
less than men
(2018 – 80.9%)
0.6% Increase
Mean gender
bonus pay gap
On average women earn
80.1%
less than men
(2018 – 82.5%)
2.9% Decrease
Median gender
bonus pay gap
Women earn
85.3%
less than men
(2018 – 86.6%)
1.3% Decrease
Median gender
bonus pay gap
Women earn
86.7%
less than men
(2018 – 88.5%)
2.0% Decrease
These figures are irrespective of employee roles or levels in the organisation, expressed as a percentage of male average pay.
58
John Laing Group plcAnnual Report and Accounts 2019 All our employees are entitled to participate in our bonus plan.
The employees who did not receive a bonus during 2019 were
new joiners who were not entitled to receive a bonus for the
year ended 31 December 2018 as they were not employees of
the Group at that time.
Pay quartiles
Based on all John Laing employees in the UK at
31 December 2019.
Upper quartile
Upper middle quartile
Lower middle quartile
Lower quartile
Female
27.8%
27.8%
47.1%
76.5%
Male
72.2%
72.2%
52.9%
23.5%
The table above shows the gender distribution across four
equally divided hourly pay quartiles, each containing
approximately 17 UK employees.
Pay quartiles
Based on all John Laing employees across all entities at
31 December 2019.
Upper quartile
Upper middle quartile
Lower middle quartile
Lower quartile
Female
10.3%
21.1%
36.8%
68.4%
Male
89.7%
78.9%
63.2%
31.6%
The table above shows the gender distribution across four
equally divided hourly pay quartiles, each containing
approximately 38 employees.
Closing the Gender Pay Gap
Whilst we have made progress, we have more to do to improve
our gender pay gap including creating more opportunities for
women to progress and increasing the representation of women
at all levels of the organisation. With a workforce of only 153
employees and a relatively low staff turnover rate, and the need to
recognise equal opportunities, we recognise that it will take time
and continual effort to close the gap to a single digit difference.
We have undertaken a review to establish the key drivers
of our gender pay gap including a review of promotions, the
level at which women are recruited into John Laing, career
development, performance scores and our return to work
rates. The primary drivers of the gender pay gap are that we
have more men in senior roles than women and we have a
higher proportion of women than men in more junior roles.
With a workforce of 153 employees we have very few
employees in identical roles. Therefore, we are confident that
the gender pay gap is not an equal pay issue. We have the
appropriate checks and balances in place to ensure that our
employees’ remuneration is appropriate for their role and their
personal performance. Remuneration for new recruits is
based on market-driven benchmarking.
>
JOHN LAING WOMEN’S NETWORK
2019 saw the launch of the John Laing Women’s
Network (Network) which aims to support and
promote women in John Laing and the infrastructure
industry by developing their skills and capabilities, and
by raising and tackling issues and challenges, so that
we build an environment which attracts and retains
female talent.
The events in 2019 included a round-table discussion
featuring two of our Non-executive Directors, Andrea
Abt and Anne Wade, alongside our CFO, Luciana
Germinario. The discussion was chaired by Olivier
Brousse, our CEO, and attended by women from our
European, Latin American and North American offices.
The Network has a programme of events and
discussions which take place in a confidential and
trusted environment and with the aim of finding
solutions together. Drawing on best practices from
other organisations, inspiration from other leaders
and our own experiences, the network will raise
awareness of workplace issues, challenge attitudes
and assumptions and bring ideas and actions to our
organisation and industry.
We will also celebrate our differences: bringing the
best ideas also means we need male voices in the
room. Our strengths lie in our differences, not our
similarities. The Network, as appropriate, opens
events and discussions to a wider audience so that
the learnings can benefit all employees.
Andrea Abt, Anne Wade and Luciana Germinario at a round table discussion
held during the year.
59
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CORPORATE RESPONSIBILITY continued
RESPONSIBLE EMPLOYER continued
KEY INITIATIVES
In addition to our on-going steps to improve diversity (which are set out
above), our additional initiatives to close the gender pay gap include
focus on the stages of the employee lifecycle to establish a systematic
approach at each stage to break down barriers and develop actions to
address those barriers.
This includes demonstrating our commitment to reducing the gender
pay gap via clear and transparent reporting; encouraging the use of our
flexible working policies; no male only shortlists; diversity of interview
panels; ensuring our maternity, paternity and parental leave policies and
the return to work experience supports our culture and our employees.
Our staff numbers at 31 December 2019, broken down by certain
remuneration and gender criteria, were:
SEPARATION
ATTRACTION
RETENTION
RECRUITMENT
DEVELOPMENT
ONBOARDING
Total
Number
2019
153
116
2
8
2018
169
118
2
8
Total Group
Employees
earning above
£70,000 per annum
Executive Directors
Board Directors
Male
Female
Number
% of total
Number
% of total
2019
2018
2019
2018
2019
2018
2019
101
90
1
5
2018
125
104
66
78
2
6
50
62.5
74
88
100
75
52
26
1
3
44
14
–
2
34
22
50
37.5
26
12
–
25
LEARNING AND DEVELOPMENT
RECRUITMENT AND SELECTION
Fulfilling our purpose depends on our ability to attract, retain
and motivate our employees. We are committed to providing
our employees with the opportunities, experience and training
to achieve their potential and grow their knowledge, skills
and capabilities.
Through a fair, transparent and consistent process, we seek to
attract and select high calibre candidates who will maximise
their contribution to the business. We recruit a small number
of employees each year and the number varies from year to
year, and our employee turnover rate is relatively low.
We have refreshed our process for new joiners who receive
an induction meeting upon joining and will then follow a
programme devised by their line manager to ensure they
meet with key internal stakeholders including the senior
management team shortly after joining.
We aim to enhance the skills, development and learning of
all our employees through external courses and seminars,
sponsorship for undertaking professional qualifications,
secondments, attendance at networking events, international
assignments, development assessments and coaching and
mentoring.
We manage the development of our people through a
bi-annual performance development review which applies to
all employees, including senior managers. 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 development
opportunities with their manager.
We also have a small number of internships available each
year in a number of the geographies in which we operate.
The internships are for school leavers or graduates with little
or no work experience.
RECOGNITION, REWARD AND RETENTION
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 having a
competitive pay and benefits structure, we recognise and
reward employee performance through bonuses and long-term
incentive plans.
SUPPORTIVE WORKING ENVIRONMENT
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 a diverse environment
that supports employees and their general wellbeing, maintains
effective working practices and enables a productive and
positive balance between work and life outside work.
60
John Laing Group plcAnnual Report and Accounts 2019 We are placing increasing focus on employees’ mental health
and well-being. 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 workplace.
We have recently launched a new benefit to provide our
employees with a well-being allowance to help employees
access activities or experiences to support their personal
well-being.
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 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.
EMPLOYEE ENGAGEMENT
Promoting a culture of open and transparent communication
is important to us. We benefit from having a small workforce
with a relatively flat structure and few hierarchies. Our
programme of employee engagement enables the majority
of employees to gain access to Board members during the
course of the year as well as regular interaction with the
members of the Executive Committee.
We conducted a Company-wide employee survey during the
year. 88% of employees responded giving us their views on:
• Purpose – what the organisation stands for and where
it is going
• Reward – intrinsic and extrinsic rewards for workplace
efforts
• Leadership – leaders listen, support, and enable
positive change
• Enablement – conditions that enable the employee to
do their job well
• Autonomy – influence over positive work and health
circumstances
> Employee
engagement:
78%
> Participation
in survey:
88%
This survey sets a benchmark against which to measure
employee engagement and will be undertaken again in 2020
and on annual basis going forward.
The results of the survey were reported at the Leadership
Team away day and subsequently at the regional and Group
team meetings. Each team produced an action plan to address
the results of the survey during the year.
Our Board level engagement programme has included the following in 2019:
May 2019 – Toby Hiscock
attended the Group Team
Away Day
May 2019 – Anne Wade,
attended the NA Away Day
Nov 2019 – David Rough and
Jeremy Beeton attended the
APAC Away Day
Key Areas of Discussion
The Group team held a series of workshops to discuss the results of the employee
engagement survey. Toby Hiscock attended the presentation from the results of the survey
and also provided an opportunity for employees to meet with Toby in an informal environment.
Anne Wade met with the North American team in formal and informal settings. They key
items discussed related to investment opportunities, ESG and the results of the employee
engagement survey.
Jeremy Beeton visited the Melbourne Metro project site, attended the Melbourne Metro
project review with our employees and met a number of our partners.
David Rough and Jeremy also visited the Sydney Light Rail and Clarence Correctional Facility.
The visits to the project sites enabled them to get first hand feedback on performance of the
projects, key stakeholder feedback and the impact of the projects on the local community.
They met with the APAC team during the regional away day which comprised reviews on
business sectors, projects, employee engagement, diversity, performance and priorities.
Nov 2019 – Olivier Brousse, CEO
and Will Samuel visited Bogota
to meet with the Colombian team
Olivier Brousse and Will Samuel spent time with the newly formed Colombian team to
discuss opportunities in the region, challenges facing the new team and to meet with
key stakeholders.
Dec 2019 – Women’s
Networking Panel
Round table discussion for women across the business with two of our Non-executive
Directors, Andrea Abt and Anne Wade, alongside our CFO, Luciana Germinario.
The programme also provided opportunities for the Chairman and the Non-executive Directors to meet the local teams in both
formal and informal settings.
Further detail on how the employee voice is reported to the Board is provided on page 44 and 77
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RESPONSIBLE EMPLOYER continued
The Non-executive Directors have also attended a number of
pre-investment discussions to provide an insight into how the
investment process operates and an insight into our culture.
In addition to the above, 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 20-25 most senior managers, together with
other employees by invitation, met during 2019 over for a
two day conference to address specific business issues and
future strategy.
HEALTH AND SAFETY
John Laing believes that proper attention to the health and
safety of its employees, subcontractors and the communities
within which the Group operates is a key element of effective
business management and we see 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 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
maintain their own health and safety policies.
CONDUCT AND BEHAVIOUR
HUMAN RIGHTS
The Company is committed to conducting its business with
honesty and integrity and expects all individuals who work for
the Group to maintain high standards in accordance with the
Company’s policies and procedures.
The standards of conduct and behaviour that we require of
our employees are set out in our policies and procedures
and these, together with our values and the behaviours
attributable to those values, constitute our code of conduct.
ANTI-BRIBERY AND CORRUPTION
John Laing has Group-wide policies on anti-bribery and
corruption (ABC), anti-money laundering (AML) and gifts and
hospitality. The ABC and AML policies and procedures have
been reviewed and refreshed during 2019 and all employees
have been required to attend face-to-face training. Going
forward, training will be in the form of face-to-face modules
for new employees and also, as previously, online training
which will be required to be completed on an annual basis.
Completion of this training is tracked and failure to complete
it is reported to the Executive Directors.
In addition, our ABC procedures include the requirement
for bidding teams to complete ABC and AML reviews on
partners, consultants and contractors as part of each new
bid, particularly in respect of parties we have not previously
worked with. There is a specific protocol in place for interaction
with governmental departments and officials. All consultants,
suppliers and partners must also be made aware of our
ABC policy.
GRIEVANCE PROCEDURES / WHISTLEBLOWING
We recognise both the business imperative and the moral
obligation to carry out our activities in a socially responsible
and environmentally sustainable manner, with due
consideration given to human rights. A suite of formal policies,
including policies on Equal Opportunities and Fair Treatment,
Corporate Responsibility and Human Rights, underpins this
aim. Copies of these policies can be found on our website
www.laing.com.
We comply fully with applicable human rights legislation in
the countries in which we operate, for example, legislation
covering the right to collective bargaining, equal remuneration
and protection against discrimination.
The Group, including the projects in which it invests, has a
large number of suppliers across the jurisdictions in which
it operates. We believe the risk of modern slavery or human
trafficking in our supply chains and procurement processes
to be low given that our activities do not directly involve
operations where modern slavery or human trafficking are
known to occur. All new suppliers, however, are asked to
confirm that their organisation complies (and take all possible
steps to ensure that all their suppliers and subcontractors
also comply) with all applicable laws, statutes and regulations.
Similar confirmations are requested of the parties involved
when we invest in or bid for new projects.
John Laing is committed, where we have sufficient influence,
to ensuring that the projects we invest in follow our practices
and policies, including those on modern slavery and human
trafficking. We will continue to monitor our supply chain and
investment portfolio in relation to slavery and human
trafficking through regular reviews.
We have procedures in place to enable employees to pursue
legitimate grievances.
MODERN SLAVERY ACT
The Company encourages all individuals to raise any
concerns that they may have about the conduct of others in
the business or the way in which the business is run. Our
whistleblowing policy enables individuals to report concerns
on matters relating to their work with the Group, without fear
of recrimination.
We published our statement on Modern Slavery for the financial
year ended 31 December 2019 on our website. It sets 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.
62
John Laing Group plcAnnual Report and Accounts 2019 RESPONSIBLE INVESTOR
WE BELIEVE THAT RESPONSIBLE INVESTMENT IS KEY TO FULFILLING OUR PURPOSE TO FOSTER
SUSTAINABLE GROWTH. BY IDENTIFYING ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
CONSIDERATIONS THROUGHOUT THE INVESTMENT PROCESS, WE CAN CREATE VALUE FOR OUR
STAKEHOLDERS NOT ONLY IN TERMS OF MINIMISING THE DOWN SIDE RISK AND MAXIMISING THE
OPPORTUNITIES ASSOCIATED WITH THESE INVESTMENTS BUT ALSO BY IMPROVING THE LIVES OF
COMMUNITIES AROUND THE WORLD AS WE INVEST IN INFRASTRUCTURE PROJECTS WHICH
RESPOND TO PUBLIC NEEDS.
OUR ALIGNMENT TO THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
As part of our purpose to foster sustainable growth and improve the lives of
communities around the world, we have reviewed how our work aligns with the
United Nation’s 17 Sustainable Development Goals (SDGs). While our projects
have overlaps across many of the UN SDGs, we have identified 5 priority SDGs
which our investments most directly contribute to. We have also looked at how
our own business and corporate culture aligns with the SDGs.
Ensure healthy lives and
promote well-being for all
at all ages
Our investments in
hospitals enables improved
health outcomes. The Alder
Hey Children’s Hospital
cares for over 330,000
children, young people and
their families every year.
The 800-bed Royal Adelaide
Hospital provides a
comprehensive range of
the most complex clinical
care to an estimated
85,000 inpatients and
400,000 outpatients
each year.
Build resilient
infrastructure, promote
inclusive and sustainable
industrialisation and foster
innovation
Investing, developing and
managing infrastructure is
at the heart of our purpose.
We invest in and develop
quality, reliable,
sustainable and resilient
infrastructure which
responds to global trends
such as urbanisation,
climate change and
population growth.
John Laing brings the
experience, commitment
and innovation required
to deliver infrastructure
solutions that drive
society forward.
Ensure access to
affordable, reliable,
sustainable and modern
energy for all
Our investment in
renewable energy assets
increases the supply of
sustainable energy. Last
year, our operational
assets in North America
generated more than
1,382m KWh of energy. We
also encourage all of our
asset managers to explore
the potential for greater
use of renewable energy
sources including solar
panels on roads and
tunnels and green energy
for transport. Whilst we
have decided to cease
investing in wind and solar,
we believe that John Laing
can play an active part in
many of the emerging
infrastructure opportunities
driven by the global energy
transition.
Make cities and human
settlements inclusive,
safe, resilient and
sustainable
The road and rail projects
in which we invest
contribute to providing
access to safe, affordable,
accessible and sustainable
transport systems for all.
Our investments in road
and rail projects across the
world increase connectivity
between towns and cities
and help to support
economic development.
Our recent investment in
the East Rockingham waste
to energy project supports
sustainable and affordable
solutions for both electricity
generation and waste
management.
We also encourage our
projects to contribute to the
local communities via both
stakeholder engagement
and charitable projects.
Further details on this can
be found on pages 44 to 46.
Promote just, peaceful and
inclusive societies
Our investment in the
prison sector aligns
with our values to invest
in projects that leave
communities more
engaged and better served
than when we found
them. The Auckland South
Corrections Facility in
New Zealand provided
an important opportunity
for investors such as
John Laing to participate in
a new way of approaching
a PPP project. The original
tender for the project
required private partners
to bring creativity and
innovation to the project
in order to achieve
positive social outcomes.
This is replicated on
our investment in the
Clarence Correctional
Facility in Australia.
63
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report ASSET MANAGEMENT
ESG Monitoring
The Company seeks to engage with the key stakeholders to
ensure the delivery of high levels of corporate responsibility.
Where appropriate we will exercise our influence at the board
level of the project company to engage with key stakeholders
on strategy, risk, performance and governance matters.
We have developed ESG metrics to be monitored during the
construction and operational phases of the projects. We have
piloted these during 2019 and will expand the application of
the metrics to more of our projects during 2020.
Road infrastructure that reduces journey times and
improves safety
A16 Road Project, Rotterdam, Europe
In June 2018, John Laing invested in a 47.5% equity stake
in the De Groene Boog consortium for the A16 Rotterdam
project. By relieving traffic congestion on the A13 and A20 in
Rotterdam, the motorway will not only improve access to the
city, but will also improve the quality of life in the region. The
official consent to proceed with the construction of the road
was granted in March 2019. The road will be 11km long and
will be energy neutral when operational i.e. as much energy
will be used as is generated from solar panels. It will be the
first energy neutral highway with a tunnel in the Netherlands.
The new national road will be fitted with earth embankments,
a semi-sunken tunnel of 2.2 km, noise barriers and extra
noise-reducing asphalt. It is an impetus for the development
of adjacent areas: the Terbregseveld, the Vlinderstrik and the
Lage Bergse Bos which are being redesigned with better
connections to each other with cycle paths and hiking trails.
In conjunction with the regional authorities, significant
engagement has taken place with the local community and
other stakeholders.
CORPORATE RESPONSIBILITY continued
RESPONSIBLE INVESTOR continued
We are supportive of the United Nations Principles of
Responsible Investment (UN PRI) which aligns with our
purpose and our approach to responsible investment.
We are in the process of becoming a signatory to the
UN PRI and hope to complete this process in H1 2020.
INTEGRATION OF ESG INTO INVESTMENT
STRATEGY AND PROCESSES
Over the past 12 months we have developed our Responsible
Investment Policy and Principles and have worked on
enhancing and embedding our responsible investment
framework including implementing a more rigorous approach
to assessing the ESG considerations throughout the
investment process. This starts with the countries in which
we invest through to the individual investments.
INVESTMENT
EXCLUSION
(COUNTRY &
PROJECT LEVEL)
Our Exclusion List ensures we do not make
investments which are not compatible with
our purpose and values. This includes:
• Production, use of products or activities
which are deemed illegal under applicable
laws or banned through global
conventions & agreements e.g. slavery,
human trafficking, forced labour and
child labour
• Projects where the partners or projects
are on a sanctions list
• Projects that do not meet minimum
governance thresholds
Our ESG screening checklist is used to help
identify if there are any material ESG issues
associated with the project pre-investment.
The checklist identifies potential ESG risk
including environmental concerns (including
environmental impact, social impact
(including incorporating community, human
resources and health and safety related
issues) and corporate governance concerns
SCREENING
(COUNTRY &
PROJECT LEVEL)
64
John Laing Group plcAnnual Report and Accounts 2019 Hospitals with advanced facilities that improve patient care
The Royal Adelaide Hospital, Australia
John Laing is one of the equity providers in the Celsus
consortium, holding a 17.26% equity stake in the Royal
Adelaide Hospital (RAH), South Australia’s flagship hospital
and providing a comprehensive range of the most complex
clinical care to an estimated 85,000 inpatients and 400,000
outpatients each year.
Patient care
The emotional and physical needs of patients, their loved ones
and carers are at the heart of the RAH, driving its creation
from conception right through to construction. A strong focus
on natural light and environment combine with 100% single
overnight patient rooms to create the best possible healing
environment with greater levels of privacy, comfort and
infection control. The RAH is one of Australia’s most
technologically advanced healthcare facilities, integrating the
latest innovations across health, education and research to
deliver high-quality care.
Telehealth facilities enable staff to consult with colleagues and
patients in regional and remote areas across the state and
further afield, while digital imaging technology allows clinical
images to be streamed live from operating theatres and
procedural rooms for diagnostic and training purposes.
The RAH provides a comprehensive range of complex care
across medical, surgical, emergency, acute mental health,
outpatient and diagnostic fields and also plays a lead role in
South Australia’s disaster management strategies, with
capacity to support victims of both man-made and natural
catastrophes.
Green, sustainable design
The RAH site incorporates a total of 3.8 hectares of
landscaped environment, including more than 70 internal
themed courtyards with Aboriginal and Spinal Garden
themes and sky gardens across the nine levels. This creates
a 1.6 hectare footprint of greenspace within the hospital.
John Laing Group plc
Annual Report and Accounts 2019
65
GovernanceFinancial StatementsOverviewStrategic Report CORPORATE RESPONSIBILITY continued
RESPONSIBLE INVESTOR continued
The Royal Adelaide Hospital, Australia (continued)
4 Star Green Rating
In November 2018, the Celsus consortium received
confirmation that RAH achieved the Green Star rating after
one year of operations, making it the largest and most
technically complex Green Star project in Australia. The rating
from the Green Building Council of Australia (GBCA) formally
recognises the hospital for its commitment to environmentally
sustainable design and building practices. Launched by the
GBCA in 2003, Green Star is Australia’s only national,
voluntary, rating system that evaluates the environmental
design and construction of buildings for communities.
Water conservation
Captured and recycled water is used for toilet flushing,
irrigation etc to offset the water used for drinking, cooking
and personal bathing. In addition, high efficiency water
fittings have been incorporated throughout the facility.
Energy efficiency
The RAH has been designed to optimise daylight, reducing
the demand for artificial light. Extensive energy metering
and reporting strategies are in place to identify and manage
energy consumption. Onsite generation systems utilise waste
heat to provide heating to the building.
Indoor environment quality
Within the patient areas, high levels of natural light and
external views are on offer, as well as environmentally friendly
finishes such as low volatile organise compound paints,
carpets etc. The acoustic design also minimises noise.
Reducing journey times and easing congestion
with new rail links
Denver Eagle, North America
John Laing has a 45% interest in Denver Transit Partners, the
consortium which constructed and operated the Denver Eagle
commuter rail project in Colorado. The A and B lines, opened
in 2016, have shown consistently good performance, with
on-time trains running at 97.1% and 99.2% respectively. Over
20 million people have ridden the lines since opening, helping
to reduce road congestion, improve journey times and
contribute to a healthier air environment in Denver and the
surrounding cities. This success has continued with the third
and final line, the G-Line, which opened in April 2019 and
carries 9,000 passengers a day. The G-Line runs through
residential and business areas from Denver Union Street to
Wheat Ridge and has eight local stops. The line operates
across communities where the train service is much needed.
Some residents and businesses have started to move into
these communities in order to take advantage of the
opportunities created by the new rail link. It also allows
travellers to connect to the A line for quick and easy access
to the Denver International Airport.
All lines are fitted with Positive Train Control technology –
a system mandated by US Congress, which is designed
to manage collision avoidance, speed restrictions and
rail-worker safety. These are the first rail lines in the US to
have this technology built in rather than retro-fitted.
The Denver Eagle project has been a significant one. It is a
testament to the vision and outcomes sought by Denver’s
Regional Transportation District. It involved the construction
of three new lines, with 40.2 miles of new infrastructure in
total, and 18 stations. Lines have been constructed within
busy urban areas as well as quieter suburbs, each of which
brings its own challenge in terms of managing disruption,
construction access, noise and environmental considerations
and close communications with local communities. The
project has also received extremely close political, regulatory
and media scrutiny, meaning that the project partners
including John Laing have faced a wide range of challenges
around the process.
66
John Laing Group plcAnnual Report and Accounts 2019 Hurontario Light Rail Transit Project, Canada
In October 2019, John Laing, the largest equity member of the
Mobilinix consortium reached financial close on the design,
build, finance, operation and maintenance of the Hurontario
Light Rail Transit Project (HuLRT). This is a transformational
transit project connecting municipalities in the Greater
Toronto and Hamilton Area and enhancing transport options
for local communities. John Laing has a 35% equity interest
in the project. Construction of the project is scheduled to be
complete in 2024.
The HuLRT consists of an 18km line from the Port Credit GO
station in Mississauga to Brampton Gateway Terminal in
Brampton, providing an alternative transport mode to driving
and improving connectivity within and between the two
municipalities. The project includes 18 surface stops and
one below grade station, a fleet of 28 light rail vehicles, a
dedicated cycle way and an operations, maintenance and
storage facility. The HuLRT will also be fully integrated
with municipal transit systems including connections to
GO Transit lines and transitways.
The HuLRT delivers several environmental benefits, including
projected reductions in air pollutants and greenhouse gas
emissions, attributable to the project’s associated
replacement of existing diesel bus services and is expected to
significantly reduce congestion. HuLRT will also deliver a new
operation, maintenance and storage facility that will achieve
LEED® Silver accreditation. The project’s strong sustainability
attributes are further supported by the Green Evaluation
completed by Standard & Poor’s (S&P) Global Ratings, which
resulted in a score of E1 (the highest score on S&P’s Green
Evaluation scale) and confirmation that the project’s senior
secured bonds are aligned with the Green Bond Principles 2018.
The project is expected to contribute towards reducing GHG
emissions by an estimated 4,000 tonnes of CO2 annually over
the life of the asset beginning in 2031. Significant employment
opportunities, both during the construction period and during
the subsequent 30-year operations and maintenance period,
is also expected.
Creation of clean energy
East Rockingham Resource Recovery Facility, Australia
In December 2019, John Laing invested in the East
Rockingham Resource Recovery Facility (ERRRF) in Perth,
Australia. The facility addresses two major challenges facing
Australia; delivering sustainable and affordable solutions for
both electricity generation and waste management.
Australia disposes over 23 million tonnes of waste to landfill
every year, with Western Australia having the highest waste
generation rate per capita coupled with the lowest recovery rate.
There are significant environmental costs to land, air and
water associated with landfilling. For example, Perth is built
on a sandy coastal plain that relies heavily on groundwater
as its primary source of potable water. As readily accessible
landfill sites reach capacity, and with no new metropolitan
landfill sites likely to be approved, it is imperative to adopt
other solutions to improve waste diversion rates.
The ERRRF will be the second large-scale Energy from Waste
facility in Australia. It will process up to 300,000 tonnes per
annum (tpa) of residual waste and 30,000 tpa of bio-solids
from the Perth metropolitan area. It will also produce around
70,000 tpa of bottom ash and 12,000 tpa of flue gas treatment
residuals. The bottom ash will be further processed to recover
metals and produce an aggregate product that can be used
in road bases and other construction materials applications.
This will achieve a 96% diversion from landfill.
The ERRRF will export 28.9 MW of electricity to the grid of
which over 50% of the power is deemed to be renewable.
When operational, the facility will process around 300,000
tonnes of residual waste per year, the equivalent of taking
70,000 cars off the road. It is expected to create around
300 jobs during construction and 40-50 during operation.
Criminal justice centres that reduce recidivism
John Laing has a 80% equity investment in the Clarence
Correction Centre. Further information on the project can
be found on page 18.
ESG at Divestment
Where appropriate, we will engage a specialist to conduct
sell-side ESG due diligence in preparation for exit, to ensure
that the potential buyer has a good understanding of the
ESG risks and opportunities.
Moving forward
We have made great progress during year and will continue to
develop and strengthen our ESG screening and analysis at all
stages in the investment life cycle and particularly at portfolio
company level. A key focus is understanding the implications
of climate change across our portfolio of investments as well
as the carbon footprint to identify opportunities to reduce this.
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GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report
CORPORATE RESPONSIBILITY continued
COMMUNITY
WE ACTIVELY SUPPORT OUR EMPLOYEES TO MAKE A SIGNIFICANT POSITIVE IMPACT ON
THE COMMUNITIES IN WHICH THEY LIVE AND WORK. THIS COMMITMENT REFLECTS OUR
PURPOSE AND OUR VALUES, INCLUDING SHARED PROSPERITY.”
“
RESPONDING TO A CRISIS
TAKING ON ACTIVE CHALLENGES
The devastating impact on communities, families and the
local environment from the bushfires of 2019 and early 2020
was closely felt by our colleagues and partners in Australia.
In January 2020, John Laing and the John Laing Charitable
Trust (JLCT or Trust) pledged a total of AU$250,000 to support
relief efforts for these regional communities. Half of this
amount has been donated to the Red Cross for immediate
disaster relief work and the remaining half to projects
supporting the long-term efforts of the fire services to combat
future fire risk. Arrangements have also been put in place to
allow our Australian-based employees to take special leave
to support the bushfire response.
During 2019, John Laing employees around the world
undertook fundraising and volunteering activities both for
individual causes and through our role as an active patron
of The Prince’s Trust.
We took on several physical challenges for The Prince’s Trust
in 2019. In February, nine teams from across our regions took
part in the Future Steps Challenge where participants
committed to walking at least 10,000 steps per day for the
whole month.
In June, nine employees plus nearly 20 external partners took
part in the John Laing Charity Cycle and, in September, one of
our employees took part in the Deloitte Ride Across Britain.
Both events were in support of The Prince’s Trust.
In July, 20 of our employees participated in the Great City Race
in London in support of Futuremakers, a global initiative to
tackle inequality and promote greater economic inclusion for
young people in our communities.
In December, three of our Australian employees took part
in the Bondi to Bronte Ocean Swim to raise funding for Kids
with Cancer.
In addition to funding provided by the Company, the Trust has
matched £44,000 of fundraising by our employees. During the
year, 23 employees who also volunteered their personal time
to charities received £23,000 donation from the Trust.
68
John Laing Group plcAnnual Report and Accounts 2019
>
SUPPORTING YOUNG PEOPLE
The Asia Pacific team have continued to support The
Girls Academy, an Australian charity and the leading
provider of school-based engagement programs for
Aboriginal and Torres Strait Islander girls in Australia.
Activities in support of the charity included a visit to
the Sydney Light Rail project and a presentation on the
infrastructure industry by our local team.
HELPING THOSE IN NEED
A number of our projects support initiatives in the local
community. For example, in North America, our team is
supporting Samaritas, a Michigan-based charity that works
with communities along the corridor of our I-75 highways
project. One of our employees serves on the Samaritas
Foundation Board of Trustees. During the year, employees
have volunteered with the charity. The project company,
Oakland Corridor Partners, donated food to a local school
holiday food drive and sponsored a family through the
Samaritas Christmas Wish programme.
During the year, JLCT, in partnership with John Laing approved
US$150,000 in grant funds to be provided to Samaritas in the
next three years to support the following programmes:
• Eliminating barriers to housing programme funding which
enables families to leave shelters and move to more stable
housing; and
• Skills for Life programme which targets 16-19 year olds
who are coming out of the foster care system without
being adopted.
A presentation to the Girls Academy students by the
Asia Pacific team
In July, the Girls Academy year 12 Summit brought
more than 200 students from across the country
together in Sydney. The Summit included the ‘Be the
Change’ indigenous careers expo, bringing together
Australia’s top employers, universities and other
tertiary education providers to promote diversity and
opportunities for Aboriginal and Torres Strait Islander
students. Our team attended the expo to talk to
students about careers in infrastructure.
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GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CORPORATE RESPONSIBILITY continued
CLIMATE
JOHN LAING IS COMMITTED TO OPERATING WITH INTEGRITY AND IN A MANNER THAT IS
BOTH ETHICAL AND TRANSPARENT. WE BELIEVE WE CAN ACHIEVE OUR STRATEGIC AND
INVESTMENT OBJECTIVES WHILE HAVING A POSITIVE IMPACT ON THE ENVIRONMENT.”
“
Increasingly, the overall market for greenfield infrastructure
is driven by several factors, but especially population growth,
urbanisation and climate change. We recognise that climate
change will have an adverse effect on the global economy and
this presents both risks and opportunities for investments
and to our business over the short and long-term. For example,
the objectives of the Paris Agreement to limit global
temperature increase to 2°C above pre-industrial levels may
drive significant changes to public policies in many countries
which could impact upon our current or future investments.
However, as countries try to increase the amount of electric
energy generated from renewable sources, this will also
create a growing market for renewable generation
infrastructure projects.
Although the direct activities of the Company are judged to
have a low environmental impact, we believe we can deliver
positive social and environmental impact value through our
investments. We invest in a wide range of projects including,
education, healthcare and green transport, which have a
measurable environmental or social benefit alongside a
financial return.
We are committed to enhancing our reporting on our
environmental performance to our investors and stakeholders.
We participated in the CDP (formerly the Carbon Disclosure
Project) Climate Change Programme during the year and we
are pleased to report that we received a “B” score for our
performance in 2019.
We support the recommendations of the Taskforce on
Climate-related Financial Disclosures (“TCFD”). We are
pleased to present our first disclosure on pages 72 to 73.
DIRECT ENVIRONMENTAL IMPACT
John Laing has fewer than 160 employees worldwide
and therefore has a relatively low environmental impact.
Nevertheless, we are committed to minimising that
impact and to improving our environmental performance
wherever possible.
From our network of 10 offices around the world, we
meet the requirements of applicable local environmental
legislation, minimise waste and maximise recycling;
measure our carbon footprint annually; and publish the
results in our annual reports.
GREENHOUSE GAS EMISSIONS
As a listed company, we have a regulatory obligation to report
greenhouse gas emissions (GHG) pursuant to Section 7 of
The Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013. This disclosure is also compliant
with the Companies (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018
(known as Streamlined Energy and Carbon Reporting (SECR)).
Methodology
We quantify and report our organisational GHG according
to the Greenhouse Gas Protocol and have utilised the UK
Government 2019 Conversion Factors for Company Reporting
and International Energy Agency 2019 Factors to calculate CO2e
emissions from corresponding activity data. Supplier-specific
emission factors were sourced in grams of carbon dioxide per
kilowatt-hour of electricity (CO2/kWh) where available.
This report has been prepared in accordance with the recent
amendments to the GHG Protocol’s Scope 2 Guidance and
therefore includes both location-based and market-based
Scope 2 emissions figures. When quantifying emissions using
the market-based approach, we have used supplier specific
emission factors where possible. If this was unavailable, a
residual mix emissions factor was used, and as a last option,
the location-based grid emissions factor was used.
Performance
In 2019, we emitted a total of 32.2 tCO2e Scope 1 direct
emissions from fuel combustion and operation of our facilities.
This is a 2% decrease from 2018 due to a decrease in natural
gas and vehicle fuel usage.
During the reporting year, the Group undertook several
energy efficiency actions, with a particular focus on the
London office, which is the largest direct energy consumer.
Actions implemented in 2018 have consolidated and continue
to deliver energy savings. Further action has been taken
during 2019, which has included replacement of printers to
more energy efficient models, the removal of default colour
printing, use of mugs instead of paper cups, removal of single
use plastic cups and the use of glass bottled milk. In addition,
the lighting in the office is being changed to LED lighting with
an expected life of 15 years.
Through electricity purchased for our own use (Scope 2 indirect),
we emitted a total of 78.9 tCO2e when taking the location-based
approach and 58.8 tCO2e when taking the market-based
approach. This is a 29% decrease in location-based emissions
from 2018. Using a market-based approach this is a 27%
decrease, mostly as a result of our London office now procuring
electricity from 100% renewable sources.
We have also chosen to voluntarily report Scope 3 emissions
arising from our business travel and water consumption
where information is available.
70
John Laing Group plcAnnual Report and Accounts 2019 The table below shows our emissions by scope for 2019 and 2018. Emissions from the consumption of electricity outside the UK
are reported in tonnes of carbon dioxide (tCO2) rather than tCO2e.
Year-on-year Change in Greenhouse Gas Emissions
Combustion of fuel and operation of facilities (Scope 1)
Electricity, heat, steam and cooling purchased for our own use (Scope 2: location-based)
Electricity, heat, steam and cooling purchased for our own use (Scope 2: market-based)
Other indirect emissions (Scope 3)
2019
2018
32.2 tCO2e
78.9 tCO2e
58.8 tCO2
1,726.1 tCO2e
32.7 tCO2e
110.9 tCO2e
80.2 tCO2
1,831.9 tCO2e1
1 Scope 3: figures for 2018 have been restated, due to the addition of data for business flights attributed to our Australian operations
The table below shows our total emissions and intensity figure for the year ended 31 December 2019 and 2018.
Total Scope 1 and 21
tCO2 per full-time equivalent employee
1 Market-based figures include Scope 2 in tCo2
Location-based approach
Market-based approach
2019
2018
2019
2018
111.1 tCO2e
0.72 tCO2e
143.6 tCO2e
0.85 tCO2e
91 tCO2e
0.59 tCO2e
112.9 tCO2e
0.67 tCO2e
There was a decrease in Scope 1 emissions due to a decrease
in natural gas consumption at the Amsterdam office. Scope 2
emissions decreased year-on-year for several reasons including
a reduction in the intensity of the electricity emission factors
in the countries in which the Group operates and a decrease
in the consumption of electricity at both offices in Australia.
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 constituted our operational boundary for the 2019
reporting period were:
• 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.
The 2018 Scope 3 emissions have been restated due to
availability of improved flight data for the APAC team. The
overall Scope 3 emissions have decreased by 105.8 tCO2e.
The decrease relates to an overall decrease in air travel
during the year and a significant decrease in road travel.
Business travel remains our single largest source of carbon
emissions. It is a necessary part of the way we work,
particularly given our geographic spread, the size of our
workforce, the requirement to assess investment opportunities
as well as manage and develop our projects and interact
with our stakeholders. However, we continue to challenge
ourselves on the need, frequency and mode of travel and aim
to continue to reduce our carbon emissions. We have recently
upgraded our video conferencing facilities to assist with this.
To reflect best practice, we have this year included well-to-tank
and transmission losses for the first time which represents
17 tCO2e.
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GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report CORPORATE RESPONSIBILITY continued
CLIMATE continued
Assumptions and estimations
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
In some cases, missing information has been estimated either
by extrapolating available data from the reporting period or
by using information from 2018 as a proxy. Actual information
was not available for the New York, Toronto, Bogota, Tel Aviv
or Los Angeles offices and therefore an average annual
consumption figure per square metre of floor area was used
to estimate electricity consumption at these sites. These sites
typically have low employee headcounts and energy supply is
managed by the building landlord.
Vehicle mileage information for business travel was not available
for all locations, therefore 2018 information has been used as a
proxy where appropriate. Information on refrigerant usage was
not available, therefore refrigerant emissions are excluded.
Total emissions 2019 and 2018
(tCO2e)
1,726.1 1,831.9
32.2
32.7
Scope 1
78.9
110.9
Scope 2
location-based
(tCO2e)
2019
2018
Scope 3
emissions
Scope 2 Emissions by Methodology
(tCO2e/tCO2)
78.9
58.8
Scope 2
location-based
(tCO2e)
Scope 2
market-based
(tCO2)
INTRODUCTION
As an investor, developer and manager of infrastructure
projects – the physical and transition impacts of climate
change are strategically important to our business. We support
the recommendations of the Taskforce on Climate-related
Financial Disclosures (TCFD), which provide guidelines for
businesses to provide information to investors, lenders,
insurers and other stakeholders on climate-related financial
risk. These disclosures are John Laing’s first response to the
recommendations of the TCFD. They set out how we incorporate
climate-related risks and opportunities into our governance,
strategy, risk management and targets. We manage climate
change as two distinct aspects: as an investor and as a
corporate. The disclosure below reflects how we are currently
perform against the TCFD recommendations and we will
continue to use these recommendations to strengthen our
response to climate change and are aiming for full adoption
of the recommendations by 2022.
Governance
At Board level, our CEO has overall responsibility for the Group’s
response to climate change. The Board meets six times during
the year and considers specific reports, reviews business and
financial performance, as well as strategy, key initiatives, risks
and governance, which will include climate-related issues
when relevant.
Below the Board, the Audit & Risk Committee has overall
responsibility for overseeing the Group’s financial reporting
activities and reviewing internal control and risk management
systems. The physical and regulatory risks presented by
climate change are considered through this process and
appropriate mitigation measures identified. Further details
of the Group’s governance structure, the way the Board works
and the responsibilities of the Board and its Committees can
be found on pages 79 to 81.
At the investment level, the Investment Committee is
responsible for assessing climate-related risks and
opportunities in relation to investment opportunities.
Such opportunities may include project investments intended
to capitalise on the opportunities presented by climate
change, such as renewable energy projects or low carbon
infrastructure development.
At the project level, the boards of the individual projects
are responsible for assessing climate-related risks
and opportunities.
Strategy
We aim to create value for all our stakeholders by bringing
the experience, commitment and innovation required to
deliver infrastructure solutions that drive society forward.
Our activities are focused on the transport, environmental
infrastructure and social infrastructure sectors, which
includes investment in projects that are designed to deliver
infrastructure which contributes to climate mitigation and is
resilient to changing climate over the long-term.
72
John Laing Group plcAnnual Report and Accounts 2019 To determine our focus areas for investment, John Laing
considers the factors and global trends affecting the need for
new infrastructure, which include climate change. Climate
change is driving an increased demand for new infrastructure
to be sustainable, both in terms of environmental impact and
resilience to future changes in climate. This market trend,
alongside others such as urbanisation and population growth,
help to inform our chosen focus sectors.
As a business, we have identified several climate-related
risks and opportunities. Short-term risks are considered to
be those for which impacts could occur within the current
financial year, medium-term risks are considered to be those
for which impacts could occur within 1-5 years. And at a project
level, John Laing considers risks over the asset lifetime of
30+ years at the point of investment, including climate-related
risks such as physical impacts and energy pricing.
We believe that climate change will result in an increased
likelihood and intensity of extreme weather events such as
extreme hot and cold weather or intense rainfall events,
which could impact John Laing by causing physical damage
to assets, such as road and rail infrastructure investments in
the mid and long term. Increasing instances of such damage
could lead to increases in insurance premiums for John
Laing’s projects, impacting the economic performance of
investments. In the nearer term, changes in energy prices,
driven by future energy demand/supply balancing and oil
prices could impact negatively on the economic returns of the
Group’s investments in renewable energy and as a result the
valuation of such investments.
Opportunities arising from climate change for our business
include increased value through access to new and emerging
markets. We believe we can create value for our stakeholders
by playing an active part in the emerging infrastructure
opportunities driven by the global energy transition. These
include (i) technologies that enable high penetration of
renewables; (ii) decarbonisation of other sectors including
electrification of transport; (iii) delivering increased energy
efficiency. Further details can be found in our annual
CDP disclosure.
We do not currently use climate-related scenarios to inform
our business strategy as our portfolios are subject to changes
as a result of asset rotation. Such portfolio-wide analyses and
data aggregation would not be meaningful or comparable
year over year. However, we are aware that the physical and
transitional risks addressed in such scenarios are impactful
to our business. As investors in infrastructure, we approach
risks on an asset by asset basis as well as with a geographical
focus and engage with multiple third party consultants across
our investment time-frames, from pre-investment diligence
through to divestment, in understanding risks such as
long-term energy prices and weather patterns.
To manage climate change-related risk, John Laing has
implemented several mitigation measures, including ensuring
that technical due diligence assessments are undertaken for
all projects, that the Investment Committee consider these
when evaluating new investments and that future requirements
on projects factor in climate change. The owners of this risk,
who are responsible for ensuring implementation of these
measures are the Regional Managing Directors and the
Investment Committee.
An example of a transition risk is the risk of John Laing failing
to comply with the expected ESG requirements of a listed
company, including those related to climate change, which
could cause reputational damage. To manage this risk and
ensure regulatory and stakeholder requirements are met,
John Laing has appointed Executive accountability for ESG,
by assigning responsibility to the Group Company Secretary.
It is the Group Company Secretary’s responsibility to then
ensure that an ESG plan is implemented to effectively manage
this risk. The owners of this risk, who are responsible for
ensuring implementation of these measures, are the Chief
Executive Officer and the Group Company Secretary.
Risk Management
John Laing maintains risk registers at a regional and Group
level. Relevant climate-related risks identified at either level
will be recorded on the appropriate risk register. Risk registers
are reviewed regularly to ensure that all relevant risks have
been captured under a range of categories, which includes
Environment, Social and Governance.
Climate-related risks reported on the Group risk register are
required to have identified mitigation measures implemented,
which are defined through discussion at the Management Risk
Committee. For further details on our Risk Management
Approach, please see pages 49 to 54.
Metrics and Targets
As a listed company, we have a regulatory obligation to report
greenhouse gas emissions pursuant to Section 7 of The
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013. Please see page 70 for further details.
John Laing does not yet currently set a greenhouse gas
emissions reduction target. As an investor in large scale
infrastructure projects, we consider our direct activities to
have a low environmental impact. However, our investment
in a wide range of projects, including green transport and
renewable energy have substantive environmental benefits.
73
GovernanceFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewStrategic Report DIRECTORS AND COMPANY SECRETARY
1
3
N
2
N
OUR BOARD
4
A&R
R
N
1. Will Samuel BSC, BA, FCA
Non-executive Chairman
Appointed: December 2017 and became Chairman in May 2018
Key Skills and Experience
• Extensive commercial, capital markets, investments and regulatory
expertise
• Broad business and governance experience from executive and
non-executive positions previously held
• Strong leadership qualities
Will is an experienced Chairman having previously been Chairman
of TSB Bank plc, which he took through IPO after its de-merger from
Lloyds Bank plc. He was also 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.
Current External Appointments
Chairman of Tilney Group Limited.
5
A&R
R
N
6
A&R
R
N
2. Olivier Brousse EP, ENPC1
Chief Executive Officer
Appointed: March 2014
Key Skills and Experience
• Extensive senior managerial and operational experience across a
number of businesses
• Significant international infrastructure experience spanning transport,
rail, water, waste and energy
From 2008 to 2014, Olivier served as Chief Executive Officer and then
Executive Chairman of Saur SAS in France. Prior to this he was Deputy
Chief Executive of Veolia Transport Group, responsible for the French
and US businesses, Chief Executive Officer of Veolia Transportation Inc,
based in Washington and Chief Executive Officer of Connex Trains, based
in London. He was also Chief of Staff to the Chairman and CEO of
Compagnie Générale des Eaux and Commercial Director of Unic Systems.
Current External Appointments
Non-executive Director of 1001 Fontaines, a not for profit organisation.
3. Luciana Germinario
Chief Financial Officer
Appointed: April 2019 (Chief Financial Officer Designate), May 2019
(Chief Financial Officer)
Key Skills and Experience
• Extensive financial experience at senior level
• Significant experience in the investment, real estate and healthcare
sectors
Luciana was previously Chief Financial Officer for Eight Roads, the
principal investment division of Fidelity International Limited, with
responsibility for the finance function, the real estate investment
business and technology. Prior to this, she held a number of finance roles
within General Electric and its worldwide subsidiaries covering industries
such as healthcare, energy, media, plastic and financial services.
Current External Appointments
None
7
A&R
R
N
8
A&R
R
N
9
R
N
10
74
John Laing Group plcAnnual Report and Accounts 2019 4. Andrea Abt MBA
Independent Non-executive Director
Appointed: May 2018
Key Skills and Experience
• Extensive background in a variety of roles, including sales, finance,
procurement and logistics with specialised knowledge of the
European market
• Significant experience of a broader range of industries through
non-executive roles
Andrea joined Siemens in 1997 and held various leadership roles, including
Head of Supply Chain and Chief Procurement Officer for Infrastructure &
Cities from 2011 to 2014. Since leaving Siemens, Andrea has concentrated
on non-executive Director roles. She was previously a Non-executive
Director of Brammer plc and SIG plc.
Current External Appointments
Non-executive Director of Petrofac Ltd and a Member of the Supervisory
Board of Gerresheimer AG.
5. Dr Jeremy Beeton CB, BSc, CEng, FICE
Independent Non-executive Director
Appointed: December 2014
Key Skills and Experience
• Extensive international experience in project and programme management
over complex multi-site, multiple project operations portfolios for and
within government, public companies and private companies
• Significant non-executive experience across a range of sectors
Jeremy was an Advisory Board member of PricewaterhouseCoopers until
October 2018 and an independent Non-executive Director of SSE plc until
July 2018. He was previously Director General of the London 2012 Olympic
and Paralympic Games from 2007 until 2012, and was Chairman of WYG plc
and Merseylink Limited. He was also a Principal Vice President with
Bechtel, responsible for their worldwide civil operations. He has lived and
worked extensively in the Middle East and Asia Pacific.
Current External Appointments
An independent Non-executive Director of OPG Power Ventures Plc and on
the governing Court of Strathclyde University.
6. Toby Hiscock MA (Oxon), FCA2
Independent Non-executive Director, Chair of Audit & Risk Committee
Appointed: June 2009
Key Skills and Experience
• Extensive experience as a finance professional and extensive listed
company and accounting experience
• Significant experience of a broad range of industries through
non-executive roles
Toby was the Chief Financial Officer and an Executive Director of Henderson
Group plc from 2003 until 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.
Current External Appointments
Non-executive Director of a number of private entities and a consultant to
a number of public and private institutions.
Key
Executive Directors
N
Nomination Committee
Non-executive Directors
A&R
Audit & Risk Committee
Group Company Secretary
R
Remuneration Committee
Committee Chair
1 Olivier Brousse tendered his resignation in January 2020.
Further information can be found on page 76 and 90.
2 Toby Hiscock will retire from the Board on 7 May 2020.
7. Philip Keller
Independent Non-executive Director
Appointed: 1 January 2020, and will be Chair of the Audit & Risk Committee
with effect from 7 May 2020 (subject to election at the 2020 AGM)
Key Skills and Experience
• Extensive financial and operational experience at senior management level
• Deep understanding of investment businesses and global organisations
• Strong focus on stakeholder communications
Philip was the Chief Finance and Operating Officer of Intermediate Capital
Group plc, a FTSE 250 alternative investment company, until July 2019.
Prior to this he was Finance Director of ERM Holdings Limited, one of the
world’s largest environmental consultancies. He has also held senior
management roles with Johnson & Johnson Pharmaceutical Group and
Glaxo Smithkline. He trained as a chartered accountant with Arthur
Andersen & Co.
Current External Appointments
Philip is an Executive Fellow at Kings Business School. He also sits on the
Finance Committee of Kings College, London, and on the boards of the
Royal Philharmonic Orchestra and the Northern Ballet, and is the vice-chair
of the trustees of London Music Masters.
8. David Rough
Senior Independent Director, Chair of Nomination Committee
Appointed: December 2014
Key Skills and Experience
• Extensive knowledge of the financial services sector, predominantly
in the investment management business
• Significant experience of a broader range of industries through
non-executive roles
David joined Legal and General in 1988 and became head of securities
in 1989. In 1991, he was appointed to the group board as Group Director
(Investments) responsible for the group’s investment operations. He retired
from the business in 2002. He has also served as chairman or Brown
Shipley & Co Ltd, Chairman of the Association of British Insurers’
Investment Committee and been a non-executive and senior independent
director on a number of boards, including Hansteen Holdings plc, Land
Securities, London Metal Exchange, Friends Provident and Xstrata.
Current External Appointments
None
9. Anne Wade BA, MSc
Independent Non-executive Director, Chair of Remuneration Committee
Appointed: December 2014
Key Skills and Experience
• Extensive experience in investment and asset management, particularly in
infrastructure related investments, social finance and impact investment
• Significant non-executive experience across a range of sectors
From 1995 to 2012, Anne was Senior Vice President and Director of Capital
International, responsible for infrastructure-related investments. Anne was
previously a Non-executive Director and member of the Governance and
Strategy Committee of Holcim, based in Switzerland.
Current External Appointments
Director and member of the Audit Committee of Summit Materials Inc in
the US, Director of the Heron Foundation in New York and of Big Society
Capital Ltd in London. She is also a Partner of Leader’s Quest.
10. Clare Underwood, BSc, ACA
Group Company Secretary
Appointed: September 2018
Clare has extensive governance and listed company experience. Previously,
she was Head of London and Group Company Secretary for Cable & Wireless
Communications plc, having been appointed as Company Secretary post
the demerger of Cable & Wireless plc in 2010. Prior to that she was the
Company Secretary of the Cable & Wireless Communications Operating
Board and Project Director for the Cable & Wireless demerger. She was
also the Head of Tax for Energis.
75
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance CHAIRMAN’S INTRODUCTION TO GOVERNANCE
COMMITTED TO THE HIGHEST STANDARDS
OF GOVERNANCE
“
GOOD CORPORATE GOVERNANCE IS KEY TO HOW JOHN LAING CONDUCTS
ITS BUSINESS AND TO THE SUCCESS OF THE GROUP. WE HAVE IN PLACE
A STRONG AND EFFECTIVE GOVERNANCE FRAMEWORK TO ENSURE THAT
HIGH STANDARDS OF GOVERNANCE, VALUES AND BEHAVIOURS ARE
APPLIED ACROSS THE GROUP.”
CULTURE AND VALUES
The Board recognises the importance of its role in setting the
tone for the John Laing culture and embedding it throughout
the Group. We have refreshed our values during the year so they
support our newly defined purpose and reinforce our culture.
Our values and our code of conduct reinforce the type of
organisation that we want to be. Everyone who works for
us is required to comply with these.
Our culture is monitored in a number of ways including
employee engagement, employee turnover rates, compliance
with policies and processes and formal and informal channels
for employees to raise concerns including via our
whistleblowing programme.
BOARD CHANGES DURING THE YEAR
On 23 January 2020, we announced that Olivier Brousse had
resigned from his position as Chief Executive Officer of the
Company in order to take up a senior position at Veolia Group.
He will remain as CEO of the Company whilst he assists
with an orderly transition. The Company is in the process
of identifying a new CEO and will provide updates, as
appropriate. The Nomination Committee is overseeing the
search process and further details on this are provided on
page 90. I would like to express our sincere thanks to Olivier
for his valuable contribution to the Board and the Company.
Patrick O’D Bourke, Group Finance Director, retired from the
Board after the 2019 AGM. Patrick left with our thanks and
best wishes for the future. Luciana Germinario was appointed
to the Board in April 2019, and became the Chief Financial
Officer with effect from 9 May 2019. On 17 December 2019,
we announced that Toby Hiscock will be stepping down from
the Board and as Chair of the Audit & Risk Committee with
effect from the end of the 2020 AGM. Philip Keller joined the
Board with effect from 1 January 2020 as a Non-executive
Director, and will succeed Toby as the Chair of the Audit &
Risk Committee with effect from the end of the 2020 AGM.
Philip is a member of the Audit & Risk, Remuneration and
Nomination Committees. I would like to express our thanks
to Toby for his valuable contribution to the business.
Both Toby and Olivier leave with our best wishes for the future.
CHAIRMAN’S INTRODUCTION
John Laing is committed to conducting its business with
integrity, and good governance lies at the heart of this. Our
governance framework underpins the Board’s commitment
to the highest standards of corporate governance and sets
the tone for the rest of the organisation. The Board has a vital
role to play in promoting a culture and behaviours that are
consistent with delivering our strategy and fulfilling our
purpose in order to ensure the success of the Company
in the long term.
PURPOSE AND STRATEGY
We refreshed our purpose in 2018. Our purpose is at the
core of our strategy which aims to create value for all of our
stakeholders by bringing the experience, commitment and
innovation required to deliver infrastructure solutions that
drive society forward. We believe the right infrastructure,
built in the right way, improves life for communities.
76
John Laing Group plcAnnual Report and Accounts 2019 CLIMATE CHANGE
Although the direct activities of the Company are judged to
have a low environmental impact, we aim to deliver a positive
social and environmental impact through our investments.
We have enhanced our reporting in respect of this for 2019.
Further information can be found on pages 70 to 73.
BREXIT
In assessing the risks facing our business, the Board has
considered the implications of the manner in which the UK
could withdraw from the European Union (Brexit). We believe
our business model to be robust enough to weather any
potential short-term disruption which might arise.
BOARD EVALUATION
In accordance with the Corporate Governance Code 2018
(the Code), the Board engaged Grant Thornton during the
year to facilitate the external review of the Board and its
Committees, following two years in which we had undertaken
internal reviews of Board effectiveness. The process took
place between October 2019 and January 2020, and full details
can be found on pages 84 to 85, along with an update to
actions which have been taken since the last review in 2018.
CORPORATE GOVERNANCE
This is the first year of reporting against the Code. The Board
confirms that during the year ended 31 December 2019,
the Company fully complied with the provisions of the Code.
A copy of the Code is available on the Financial Reporting
Council’s website at www.frc.org.uk. This report, together with
the other statutory disclosures and reports from the Audit &
Risk, Nomination and Remuneration Committees, provides
details of how the Company has applied the principles of good
governance set out in the Code during the period under
review. A table is provided on pages 113 to 114 detailing the
principles of the Code, and where information can be found in
this report relating to the application of the principles. The
business model and strategy for delivering the objectives of
the Company, the viability and going concern statements and
principal risks and risk management statements each form
part of the Strategic Report which can be found on pages
8 to 73, and the Statement of Directors’ responsibilities can
be found on page 119.
Will Samuel
Chairman
2 March 2020
>
WORKFORCE ENGAGEMENT
AGREED METHOD OF ENGAGEMENT
During 2019 the Board considered how it would
engage with, and gather views from, the workforce,
including the three suggested methods described
in the Code. The Board determined that the most
appropriate approach for the Group was to appoint
a designated Non-executive Director, and that this
would be the Chairman supported by the Non-
executive Directors given the geographic diversity
of the workforce, and the time commitments required
by the role. A workforce engagement programme was
developed and is managed by the Group Company
Secretary who also has responsibility for Human
Resources at the executive level. The Board receives
a report on workforce engagement at every Board
meeting as well as feedback from the Chairman and
the Non-executive Directors in respect of their direct
engagement activities, and to communicate the views
of the workforce to the Board. In order to be
successful, it was agreed that the workforce
engagement mechanism must:
i) best bring the Group’s workforce view to the Board
to ensure colleague opinions are factored into
decision making;
ii) ensure that colleagues feel properly represented;
iii) improve employee engagement; and
iv) reach all employees across our geographic
locations and span all levels of seniority.
WHO IS OUR “WORKFORCE”?
The definition of the Group’s “workforce” was
considered and agreed by the Board as our employees,
fixed-term contractors, temporary workers and
consultants.
WHAT HAS BEEN DONE DURING THE YEAR
The engagement programme included an employee
engagement survey in March 2019. The findings of
this survey and updates on the actions were presented
to the Board during the year. A programme of away
days with the Group and regional teams was also
held during the year to facilitate two-way discussion
opportunities in formal and informal settings with
Non-executive Directors. In addition to this, Olivier
Brousse and Luciana Germinario have engaged in
depth with all colleagues during the year, through
various channels of communication, including office
visits, site visits, update calls, online presentations,
and more informal meetings. Further details of these
visits, and other activities conducted by the Board
during the year can be found on pages 44 to 46 and 61.
77
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance CORPORATE GOVERNANCE
OUR BOARD ATTENDANCE, DIVERSITY AND SKILLS
BOARD AND COMMITTEE MEMBERSHIP AND ATTENDANCE AT MEETINGS
Below is a schedule of attendance by the Board members at Board and Committee meetings during the year. Please note that
Philip Keller was appointed on 1 January 2020, and therefore did not attend any 2019 meetings.
Will Samuel
Olivier Brousse
Patrick O’D Bourke2
Luciana Germinario3
Andrea Abt
Jeremy Beeton
Toby Hiscock
David Rough
Anne Wade
Independent? Board (scheduled)
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
On appointment
No
No
No
Yes
Yes
Yes
Yes
Yes
5/64
6/6
2/2
5/5
6/6
6/6
6/6
6/6
6/6
N/A
N/A
N/A
N/A
5/5
5/5
5/51
5/5
N/A
N/A
N/A
N/A
N/A
5/5
5/5
5/5
5/5
5/51
3/3
3/3
N/A
N/A
3/3
3/3
3/3
3/31
3/3
1 Chair of the Committee
2 Patrick O’D Bourke retired from the Board with effect from 9 May 2019
3 Luciana Germinario joined the Board with effect from 25 April 2019
4 The Chairman was unable to attend one Board meeting during the year due to an unavoidable personal commitment.
COMPOSITION, SKILLS AND DIVERSITY
Biographies of the current Board of Directors can be found on pages 74 and 75. The Chairman is committed to ensuring the
Board comprises a majority of independent Non-executive Directors from a diverse background, who objectively challenge
management, balanced against the need to ensure continuity of the Board.
Collectively, the Non-executive Directors contribute to an effective Board with a strong mix of skills and business experience,
including recent financial, strategic, investment and infrastructure experience gained in a variety of geographic areas and sectors.
As each occupies or has occupied senior positions, each contributes significant weight to Board decisions. The Board believes it
has an appropriate balance of skills and experience, but keeps the composition of the Board under review to ensure any skill gaps
are taken into consideration as part of ongoing succession planning (see page 91 for further details).
Tenure
(as at 31 December 2019,
and measured from IPO
in February 2015)
0-2 years: 3
2-4 years: 0
4-6 years: 5
Over 6 years: 0
Male/Female Diversity
Nationalities
Male: 5
Female: 3
British: 4
French: 1
Italian: 1
German: 1
American: 1
Further information regarding the Board Diversity Policy can be found on page 91
78
John Laing Group plcAnnual Report and Accounts 2019 HOW THE BOARD OPERATES
OUR GOVERNANCE FRAMEWORK (DESCRIBED IN THIS REPORT) FACILITATES THE MONITORING,
REVIEW, DEVELOPMENT AND IMPLEMENTATION OF THE POLICIES, PROCEDURES AND CULTURE
THAT SUPPORT OUR HIGH GOVERNANCE STANDARDS.
The Board is responsible for the Group’s corporate governance
system and is committed to maintaining high governance
standards. In order to progress the objectives of the Group,
the Board meets on a regular basis and is responsible for
organising and directing the Company and the Group in
a manner that promotes the success of the Company and
is consistent with good governance practice. To enable the
Board to function effectively, full and timely access to all
relevant information is given to the Board.
BOARD AND COMMITTEE MEETINGS
During the year there were six scheduled Board meetings,
with details of attendance and membership of Committees
is shown on page 78. In addition to the scheduled meetings,
five further unscheduled Board meetings were convened.
Such meetings are called where necessary to consider
matters of a time-sensitive nature.
Sufficient time is provided at each meeting as necessary for
the Chairman to meet privately with the Senior Independent
Director and the Non-executive Directors to discuss matters
as necessary. The Chairman and Chairs of each Committee
ensure Board and Committee meetings are structured to
facilitate open discussion, debate and challenge. All Board
and Committee meetings are formally minuted by the Group
Company Secretary.
The principal Committees are the Audit & Risk Committee,
the Nomination Committee and the Remuneration Committee
(together the “Committees”). The Board is supported by
its Committees which make recommendations on matters
delegated to them under their Terms of Reference. These
recommendations include matters such as the internal
and external audit, internal control and risk management
processes, financial reporting, Board appointments,
succession planning and remuneration issues.
Each of the Committee Chairs has reported on how each
Committee has discharged its responsibilities in the year
ended 31 December 2019, along with the material matters
which were considered. Following each Committee meeting,
the Chair of the Committee reports its activities to the Board.
Members of the Executive Committee attend and report at every
scheduled Board meeting, and other members of the Senior
Management Team and advisers attend Board meetings by
invitation throughout the year. Whilst not entitled to attend
Committee meetings, other Directors, professional advisors and
members of the Executive Committee and Senior Management
Team attend Committee meetings when invited to do so. The
External Auditor and Head of Internal Audit attend Audit & Risk
Committee meetings by invitation. No persons are present at
Nomination Committee meetings or Remuneration Committee
meetings during discussions pertinent to them. The Group
Company Secretary acts as Secretary to each Committee.
In the rare event of a Director being unable to attend a meeting,
the Chairman of the respective meetings discuss the matters
proposed with the Director concerned wherever possible, seeking
their support and feedback accordingly. The views of the absentee
Director are then represented by the Chair at the meeting.
The Terms of Reference and Matters Reserved for the Board
are regularly reviewed by the Board, and can be found at
www.laing.com.
In addition to formal meetings, the Non-executive Directors
also attended a number of other Company meetings, events
and site visits to increase their understanding of the principal
risks in the business and the strength and depth of the
management teams. Further details of stakeholder
engagement can be found on pages 44 to 46.
The Chairman met with the Non-executive Directors without
the Executive Directors present on a number of occasions
during the year.
79
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance CORPORATE GOVERNANCE continued
HOW THE BOARD OPERATES continued
THE BOARD
Collectively, the Board is responsible for overseeing the strategy and management of the Company and its businesses, including long-term
objectives, business plan, viability and the Group’s corporate governance system to help achieve long-term sustainable success and deliver
shareholder value. The Board also helps to form and influence the Group’s culture, development of its values and identification of
appropriate behaviours to reinforce the values.
AUDIT & RISK COMMITTEE
NOMINATION COMMITTEE
REMUNERATION COMMITTEE
Responsible for:
• Board and Committee composition
• Succession planning
• Overseeing Group policy and strategy
regarding workforce diversity and
inclusion
• Overseeing induction process,
monitoring conflicts, time
commitments, training and
evaluation of Board members
Responsible for:
• Setting of Director and senior
management remuneration
• Agreeing the Remuneration Policy
and practices of the Executive Group
• Promote long-term shareholdings
by Executive Directors and members
of the Executive Committee
• Incentive design and setting of targets
Responsible for:
• Financial reporting and financial
integrity
• Informing the Group’s risk appetite,
and monitoring of the Group’s risks
• Internal financial and operational
controls
• Internal audit
• External auditor relationship
• Stress testing of Group’s financial
exposures
Toby Hiscock
Chair of the
Audit & Risk
Committee
Read more
on page 86
David Rough
Chair of the
Nomination
Committee
Read more
on page 90
Anne Wade
Chair of the
Remuneration
Committee
Read more
on page 92
DIVESTMENT COMMITTEE
The Chief Financial Officer, the Chief Risk Officer and
other senior managers.
Purpose and structure:
• Review divestments programme to meet funding
and portfolio mix
• Approve budgets and review of strategy
• Chaired by the Chief Financial Officer
• Meets monthly, or as required
INVESTMENT COMMITTEE
Executive Directors, the Chief Risk Officer, the Group Head
of Legal (or the Group Legal Advisor as alternate), and up
to five other persons as the Chief Executive Officer shall
nominate from time to time.
Purpose and structure:
• Make recommendations to the Board, or to approve proposals
within its delegated authority, regarding the Group’s potential
investment in infrastructure projects
• Review of the Group’s portfolio valuation and monitoring
the balance of risk across the portfolio
• Activities, recommendations and approvals are reported
to the Board
• The Committee’s delegated authority is reviewed annually
by the Board
• Chaired by the Chief Executive Officer
• Usually meets fortnightly and on request
MANAGEMENT RISK COMMITTEE
Chief Risk Officer, Chief Financial Officer, Group Head of Legal,
the Group Head of Internal Audit, and a senior manager from
each of the regional teams.
Purpose and structure:
• Monitors adequacy/effectiveness of internal controls
(including financial) and risk management systems
• Review of internal audit reports, Project Reviews and the
Group Risk Register
• Advise the Board on current and future risk appetite/
tolerance, exposures and strategy
• Chaired by the Chief Risk Officer
• Meets circa six times a year
EXECUTIVE COMMITTEE
Executive Directors, the Chief Risk Officer, the Regional
Managing Directors, the Group MD Strategy & Partnerships
and the Group Company Secretary.
Purpose and structure:
• Day-to-day business of the Group and also considers
Group-wide initiatives and priorities
• Review of implementation of strategy
• Discusses development of new investments and progress
on existing investments
• Review of disposal of investments and other proposals
before presentation to the Board
• Monitors progress against the annual budget
• Chaired by the Chief Executive Officer
• Meets fortnightly
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John Laing Group plcAnnual Report and Accounts 2019 DIVISION OF RESPONSIBILITIES
THE BOARD TAKE A VERY ACTIVE ROLE IN THE RUNNING OF JOHN LAING. KEY BOARD
RESPONSIBILITIES HAVE BEEN DEFINED BELOW TO DELIVER OUR PURPOSE AND CREATE
WIDER VALUE FOR ALL OUR STAKEHOLDERS.
Will Samuel
Chairman
Olivier Brousse
Chief Executive Officer
• Overall operation and governance of the Board;
• Developing the strategy, policies and business plans
• Providing leadership of the Board to ensure that the
Board satisfies its duties and responsibilities;
• Setting the agenda for the Board;
• Ensuring that the Board receives clear, timely and accurate
information and is consulted on all relevant matters;
• Facilitating the contribution of the Directors, and leads
the Board and creates a culture of openness characterised
by robust, respectful debate and appropriate challenge;
• Monitoring the contribution and performance of Board
members; and
• Ensuring that the Company maintains effective
communication with shareholders and other
stakeholders (shared responsibility with the
Senior Independent Director).
for recommendation to the Board;
• Leadership of the business, its management and
performance, and managing it within the authorities
delegated by the Board;
• Implementing Board decisions, policies and strategies;
• Representing the Company to employees, shareholders,
financial institutions, the media, the community and
the public;
• Leading the Executive Management Team in the day-to-day
running of every part of the business;
• Recommending remuneration, terms of employment and
succession planning for the senior executive team;
• Managing the Group’s risk profile and maintaining an effective
framework of internal control and risk management; and
• Ensuring effective processes for engaging with,
communicating with, and listening to, employees and
others working for the Company.
David Rough
Senior Independent Director
Clare Underwood
Group Company Secretary
• Meeting shareholders on request and acting as the
• Ensuring that good quality corporate governance is
designated point of contact for shareholders to raise any
concerns where contact through the normal channels
of the Chairman and the Executive Directors is inappropriate;
embedded and followed within the Company, along with
the implementation of efficient company administration;
• Acting as confidential sounding board to the Chairman
• Bringing to the attention of the Board any matters raised
and other Directors; and
by major shareholders;
• Ensuring the Company maintains effective communication
with shareholders and other stakeholders (responsibility
shared with the Chairman);
• Leading the Nomination Committee in the appointment
of Executive and Non-executive Directors; and
• Conducting the Chairman’s annual performance appraisal.
• Ensuring compliance with developments in legislation,
regulation and governance.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance CORPORATE GOVERNANCE continued
THE BOARD’S ACTIVITIES
THE BOARDS ACTIVITIES DURING THE YEAR ARE UNDERPINNED BY OUR EXTERNAL REPORTING
CALENDAR AND OUR INTERNAL BUSINESS PLANNING PROCESS.
>
TOPICS DISCUSSED BY THE BOARD IN 2019
REGULAR UPDATES:
STRATEGY:
• Chief Executive Officer’s report
• Two strategy away days
• Finance report, including budgets and forecasts
• New business proposals, including approval
• Updates from the Chairs of the Committees of
the Board
• Regional Updates
• Updates on strategic initiatives
• Reports in respect of HR, Risk and ESG matters
FINANCIAL:
• 2020 budget
• Approval of interim and special dividends for the
year ended 31 December 2019, and final dividends
for the year ended 31 December 2018
• Draft results for the full and half year including
presentation to analysts
• 2018 Annual Report
• NAV reporting
• Portfolio valuation
• Regular pensions updates
CULTURE/COLLEAGUES:
• Workforce engagement including feedback and
actions in respect of the Employee Engagement
Survey, and feedback on engagement activities
undertaken by the Chairman and Non-executive
Directors
• Diversity and gender pay gap, and review and
approval of the 2019/2020 plan
of new investments
• Consideration of the sale of remaining fund
management activities
• Deep dives on aspects such as new markets
and sectors
• Renewable energy strategy review
• ESG strategy and approach
GOVERNANCE/STAKEHOLDERS:
• Board effectiveness and Chairman’s performance
reviews
• AGM documentation approval and subsequent
voting results briefing
• Review of the Delegation of Authority Matrix and
the Terms of Reference for each Committee
• Review of Investment approval process
• Review of strategic partnerships
• Review and approval of various Group policies,
including the Share Dealing Code, Anti-Bribery
& Corruption, Anti-Money Laundering Policies,
Treasury Policy and the Modern Slavery Statement
•
Investor relations updates
• Director’s fees review
Further information regarding what the Board did during the year
in respect of employee engagement can be found on page 61
For further details regarding stakeholder engagement
please see pages 44 to 46
82
John Laing Group plcAnnual Report and Accounts 2019
CONTRIBUTION, PERFORMANCE, INDEPENDENCE
AND TIME COMMITMENTS
The contribution and performance of each Director is
evaluated each year, and as a result of individual experience
and diverse skills and background, the Board is satisfied that
each Director contributes to the long-term sustainable
success of the Company.
Having reviewed the position of each Director individually,
the Board considers all Non-executive Directors to be
independent in both character and judgement.
There were no changes during the year to the Chairman’s
external commitments. All Directors will stand for re-election
(or election in the case of Philip Keller) at the Company’s
Annual General Meeting (AGM) in May with the exception of
Toby Hiscock, who will retire immediately following the AGM.
The Non-executive Directors (not including the Chairman) are
initially appointed for a three-year term with an expectation
that they will continue for a further three-year term (subject to
annual re-election by shareholders at the AGM). Non-executive
Directors are advised of their expected time commitments
prior to their appointment and they are required to devote
such time as necessary to discharge their duties effectively.
The time commitments of Directors are considered on
appointment and annually, and the Board is satisfied that
there are no Directors whose time commitments are
considered to be a matter of concern. External appointments,
which may affect existing time commitments for the Board’s
business, must be agreed with the Chairman, and prior Board
approval must be obtained before taking on any new external
appointments. No Executive Director has either taken up more
than one Non-executive Director role at the FTSE 100
company or taken up the Chairmanship of such a company.
The service contracts for the Executive Directors and the
letters of appointment for the Non-executive Directors are
available for inspection by shareholders at our registered
office during normal business hours and at our AGM.
INDUCTION, TRAINING AND DEVELOPMENT
Upon appointment to the Board, all Directors undertake
a comprehensive induction process to familiarise
themselves with the Group’s activities, policies and key
issues, and also in respect of their responsibilities of being
a Director of a UK listed company under both the Listing
Rules and Corporate Governance Code. The programme
is tailored based on the experience and background of the
Director and requirements of the role.
Luciana Germinario undertook a thorough induction
programme on joining the Company in April 2019. This
included meetings with senior management and the regional
teams. She attended away days in North America and
Australia. She also visited a number of projects including
MBTA, Boston, SLR and Melbourne Metro. She also met with
a number of shareholders, partners, key external advisors,
including the Group’s brokers, legal adviser and External Auditor.
As described above, the Board undertakes a programme
of training and development activities throughout the year,
including deep dives, site visits and meetings with various
stakeholders. In addition, the Board and Committees receive
regular updates on key governance and compliance issues.
All Directors have access to the services of the Group
Company Secretary in relation to the discharge of their duties.
CONFLICTS OF INTEREST
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 Group Company
Secretary, at any time, of any potential or future direct or
indirect conflicts that may arise, or that may possibly conflict
with the interests of the Company. Any such notifications are
reviewed at the next Board meeting and, if considered
appropriate, authorised. Directors do not participate in any
discussion or vote regarding their own conflicts. If authorised,
any conflicts are entered in the register of Directors’ conflicts.
WHISTLEBLOWING
The Board is responsible for the approving and overseeing of the Group’s whistleblowing policy and ensuring that adequate
procedures are in place. The Board reviewed and approved the Whistleblowing Policy in February 2019, and encourages and
protects legitimate whistleblowing. The Group Company Secretary is the Group’s Whistleblowing Champion, and training has
been given to all employees during the year to highlight the policy and methods of reporting.
The Company also offers an independent whistleblowing helpline administered by a third party provider. This allows employees
and other stakeholders to report concerns about any suspected wrongdoing or unethical behaviour occurring within the
business or about the behaviour of individuals. Calls can be conducted on a confidential and anonymous basis, if preferred
by the whistleblower.
Any matters reported are initially reviewed by the Group Company Secretary, and where necessary are reported to the
Chief Financial Officer or Chairman, with reports of any instances of whistleblowing being reported to the Board.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance CORPORATE GOVERNANCE continued
BOARD EVALUATION
OVERALL THE RESULTS OF THE EVALUATION ARE POSITIVE AND SHOW THAT THE BOARD AND ITS
COMMITTEES ARE RUNNING EFFECTIVELY.
Grant Thornton has no other connection with the Company
or individual Directors.
The review of the performance of the Chairman is carried
out by the Non-executive Directors, led by the Senior
Independent Director, taking into account the views
of the Executive Directors.
BOARD PERFORMANCE AND EVALUATION
An external evaluation of the Board took place during the year,
in line with the Code requirements. This was facilitated by
Grant Thornton, between October 2019 and January 2020.
An internal evaluation had been carried out for the past two
years. The 2019 evaluation was led by the Chairman of the
Board, and included a review of effectiveness of the Board,
its Committees and individual Directors with the support of
the Nomination Committee. The objectives of the external
evaluation is to:
• Provide an external Board effectiveness review in line
with the Code;
• Gain a range of views from the Board members and the
Executive Committee and external advisers; and
•
Identify key practices and behaviours that are enhancing
and/or potentially holding back performance.
>
THE 2019 EVALUATION
The externally facilitated Board evaluation was led by the Chairman of the Board, assisted by the Group Company Secretary and
overseen by the Nomination Committee. It consisted of the following:
STAGE 1
STAGE 2
STAGE 3
STAGE 4
DOCUMENTATION REVIEW
AND SET UP
Initial meetings with the
Chairman and Group
Company Secretary took
place to agree the scope
of the review. A desk top
review of documents
such as Board minutes,
and papers, Terms of
Reference and Directors
biographies and role
profiles was undertaken
by Grant Thornton to
help better understand
the Group’s existing
governance structure,
the Board’s purpose
and skills. The survey
and questionnaire were
agreed with the Group
Company Secretary.
84
BUSINESS INSIGHT
ANALYSIS AND ROAD MAP
ACTION PLAN
The Group Company
Secretary will prepare
an action plan to be
agreed by the Board and
Nomination Committee.
Progress against the
actions will be monitored
during 2020.
Report produced based
on the findings of the
interviews, desk top
review and observation
of meetings. An initial
report was shared with
the Chairman and Group
Company Secretary in
late January and the
final report was
presented to the Board
in February 2020.
Interview format agreed
around key themes.
Online Board survey
circulated ahead of
interviews with members
of the Board and Senior
Management Team. The
responses to the survey
were used as the basis for
the interview structure.
A Board meeting and a
meeting of each of the
Committees were
observed to assess
dynamics and skills.
A benchmarking analysis
against listed industry
peers to better understand
whether there are
practices which could
be considered useful by
the Group.
John Laing Group plcAnnual Report and Accounts 2019 >
HIGHLIGHTS OF THE 2019 REVIEW
The evaluation concluded that the performance of the Board, its Committees, the Chairman and each of the Directors continues
to be effective. All Directors demonstrated commitment to their roles and contributed effectively. The evaluation concluded that
there is a high level of cohesion at Board and Committee levels with wide industry, sector and business experience delivering a
diversity of discussion. The involvement and engagement of the Non-executive Directors is considered robust and coverages of
governance, regulatory and compliance management is viewed positively with a good line of sight on key issues.
The key findings and areas for consideration include the following:
Findings
Strategy
The dedicated strategy sessions including the away day were
well received; need to ensure that sufficient time continues to
be dedicated to the strategic agenda
Board papers and presentations
The quality of the Board papers had improved during the year
but there was concern over the length of the Board papers
Succession planning
Key considerations
Consider Board agenda and in particular, whether more time
can be devoted to broader strategic issues and themes
Board papers to be shorter in length and the amount of time
spent presenting Board papers and presentations to be reduced
to allow more time for open discussion and debate
Nomination Committee to maintain attention on succession
discussions including on-going assessment of future
capability and capacity of the pipeline
Continue to evaluate the executive talent pipeline, together with
the executive succession planning aimed at supporting the
development of executives
>
THE 2018 EVALUATION
The 2018 evaluation was facilitated by the Group Company Secretary, took the form of a questionnaire, and sought the Directors’
views on a range of topics, including:
• The Company’s strategic agenda;
• Accountability;
• Board composition and processes;
• Relationships with stakeholders; and
• Board leadership and effectiveness;
• The effectiveness and performance of the Board Committees.
The focus of the review was on both the evaluation of effectiveness of the Board as a whole, and of the individual Directors.
>
PROGRESS AGAINST THE 2018 BOARD EFFECTIVENESS EVALUATION
A summary of the Board’s progress against the actions arising from the 2018 evaluation are set out below.
Recommendation from the 2018 evaluation
Actions taken during 2019
DEEP DIVES
Dedicated sessions on key topics
including the climate for greenfield
investment for each region to be added
to the strategic agenda.
SUCCESSION
PLANNING
Further focus on succession planning
to be covered as part of the Nomination
Committee’s increased remit.
TRAINING
Specific training to be provided to the
Board in respect of industry and
technological developments.
Dedicated discussions on new countries and sectors have
taken place.
The Nomination Committee’s Terms of Reference were revised to
bring into scope various aspects, including succession planning.
Succession planning has been discussed in further detail, to progress
plans during the year. Further details can be found on page 91.
Key development opportunities have been presented to the Board
during the year which included energy transition, including
decarbonisation of transport, managed lanes and telecoms/broadband.
Further topics including new markets and sectors were presented
during strategy away days.
85
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance AUDIT & RISK COMMITTEE REPORT
Toby Hiscock
Chair of the Audit & Risk Committee
2 March 2020
DEAR SHAREHOLDER
I am pleased to present my last report to you as
Chair of the Audit & Risk Committee (the “Committee”)
ahead of my retirement from the Board at the Company’s
2020 AGM. 2019 proved to be a challenging year for the
business, particularly its renewables portfolio, where the
volatile nature of valuation inputs such as transmission,
power price and merchant off-take risks demanded even
more attention from the Committee. We combined this
with a detailed scrutiny of the Group’s internal control
environment and our ‘lines of defence’, particularly
our risk management and internal audit functions,
as described below. We also devoted time to Luciana
Germinario’s induction as our new Chief Financial Officer.
MEETINGS
The Committee met formally five times during the year
ended 31 December 2019. The attendance of each
Committee member is shown on page 78 of the Corporate
Governance Report.
The Chief Financial Officer and her team, the Chief Risk
Officer, and other management representatives attended
Committee meetings along with the Head of Internal Audit
and the External Auditor. There is also a standing invitation
to all Non-executive Directors; the Company Chair
attended each of our meetings during 2019. In addition,
both the Head of Internal Audit and External Auditor met
privately with the Committee during the year, without
management present. Representatives of the Group’s
Independent Valuer also attend meetings at least twice a
year when the Committee considers the portfolio valuation.
86
“
THE AUDIT & RISK COMMITTEE MAINTAINED
ITS FOCUS ON THE GROUP’S FINANCIAL
REPORTING, ITS INTERNAL CONTROL AND
RISK MANAGEMENT SYSTEMS AND THE FAIR
VALUE OF ITS INVESTMENT PORTFOLIO IN
WHAT PROVED TO BE A CHALLENGING YEAR
FOR THE BUSINESS.”
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 of
investment in international infrastructure, the Company’s main
activity. Further information on the credentials and experience
of Committee members can be found on pages 74 and 75.
The Committee Chair attends the Company’s AGM and is
happy to answer any questions from shareholders on matters
falling within the Committee’s responsibilities.
ROLE OF THE COMMITTEE
The Committee’s chief responsibilities have not changed since
last year’s report. They are, in summary, to:
1. Ensure the integrity of the Group’s and Company’s accounting
policies, financial statements, preliminary announcements,
trading updates and other statements on financial
performance and prospects prior to their publication;
2. Scrutinise the content of the annual and interim reports
and accounts and to 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’s and Company’s financial affairs,
business model and strategy;
3. Monitor and review the efficacy of the Group’s key internal
financial, operational and compliance controls and risk
management systems, including compliance with FCA
requirements, insurance cover, data protection and cyber
security, business continuity and disaster recovery plans.
Please see pages 49 to 54 for further information
regarding the Company’s risk management and internal
control systems. Following the cessation of the fund
management activities during 2019 and the consequential
deregistration from the FCA, compliance with FCA
requirements no longer needs to be monitored;
4. Examine and assess the independence, effectiveness and
work of the Internal Audit function;
5. Consider and recommend to the Board the appointment,
re-appointment, resignation or removal of the Group’s
External Auditor, subject to approval by the Company’s
shareholders at the AGM, and conduct the tender process
to select the external auditor;
John Laing Group plcAnnual Report and Accounts 2019 6. Negotiate and agree on behalf of the Board the External
Auditor’s remuneration, including fees for any audit-
related and non-audit services rendered;
7. Assess the External Auditor’s independence and
objectivity, audit quality and effectiveness, including
scrutiny and approval of any audit-related and non-audit
services;
8. Advise the Board on the Group’s risk appetite and
tolerance and to monitor the confluence of risks across
the Group’s markets, sectors and investments;
9. Review the results of regular stress-testing of the Group’s
major financial exposures, including sensitivities to
interest rate, inflationary and currency, energy yield and
pricing fluctuations;
10. Counsel 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 annual performance objectives
of Executive Directors, the wider management and
employees.
The Committee’s Terms of Reference set out its principal
duties in full, including its authority to carry out these duties,
and are available at www.laing.com.
All Committee meetings are formally minuted, copies of which
are circulated to all Directors and the External Auditor.
The Committee reports to the Board after each meeting
through the Committee Chair.
SIGNIFICANT MATTERS CONSIDERED BY THE COMMITTEE IN
THE 2019 GROUP AND COMPANY FINANCIAL STATEMENTS
1. Investment portfolio – The valuation of the Group’s
investment portfolio lies at the core of its financial
reporting and the Committee has a particular duty to
ensure it is reported comprehensively in a fair, balanced
and understandable manner.
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
is undertaken on a fair value basis, assuming forecast
cash flows from investments are received 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.
Key inputs and assumptions made by management in
preparing the valuation, include:
i) Forecast cash flows accruing to each investment;
ii) Macroeconomic factors affecting forecast cash flows,
such as estimates of long-term inflation, interest,
currency and taxation rates, energy yields and future
power prices; and
iii) Discount factors applied to each investment to reflect
market, construction and operational risks.
The valuation of investments is sensitive to changes in
these inputs and assumptions and, in order to assist
shareholders, the key sensitivities are illustrated in the
Portfolio Valuation section on pages 26 to 31 and in
note 18 to the Group financial statements.
During the year the Committee scrutinised 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 External Auditor.
Given a number of industry challenges facing renewable
energy assets and losses experienced by the Group in this
sector during the year, we focused heavily on the
transmission, operational yield, power pricing and
merchant off-take assumptions underlying our valuations.
As a result, processes have been enhanced and our
investment strategy and valuation approach recalibrated
accordingly. We are satisfied that the carrying value of
these investments at 31 December 2019 reflects fair value.
On the PPP side of the portfolio, good progress was
achieved during the year with several of the Group’s
greenfield investments, including IEP 2 – the Group’s
largest investment by value – Sydney Light Rail, New
Generation Rolling Stock and New Royal Adelaide
Hospital. We also substantially completed the construction
of Clarence Correctional Centre in Australia. A small
number of investments, however, remain challenging,
such as Melbourne Metro in Australia and I4 in the US,
and we have stepped up our active asset management
approach in response. The Committee has tested
management’s year end valuations of each of these
projects in detail and satisfied itself that they reflect fair
value at that date.
There has been a significant increase in value
enhancements to the Group’s portfolio in the year, the
product of active asset management across the board.
Given their overall materiality to NAV, we and the Group’s
Independent Valuer and External Auditor have deepened
our reviews of their reasonableness and are satisfied with
their recognition in the financial statements.
In conclusion, the Committee is satisfied that the Group’s
investment portfolio valuation taken as a whole at
31 December 2019 represents fair value at that date.
2. Principal risks and uncertainties – These are set out
on pages 50 to 54 of the Annual Report. The Committee
received regular reports from the Chief Risk Officer and
other members of management during the year covering
for example bidding activities, project reviews, treasury
policy and major financial exposures, accounting
provisions and taxation developments. As in the prior year,
we reviewed in detail the Group’s taxation strategy and
recommended it to the Board for formal approval and
publication on www.laing.com in accordance with the
Finance Act 2016.
We also conducted a review of the Group’s risk register
at each of our meetings throughout the year and
updated risks, risk ratings and mitigants as necessary.
This included our response to climate change and a
post-Brexit world.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance
AUDIT & RISK COMMITTEE REPORT continued
PwC has recently been engaged by the Group to perform
a review of our governance of projects, based on a
representative sample of projects. It is examining the role
of the Investment Committee and the effectiveness of our
project review process and wider risk management and
is expected to report in early 2020. We are committed to
adopting all appropriate remedial actions to enhance our
risk management approach.
The Committee continues to believe that the Group’s
internal control, including the control and compliance
culture within the business, is sound overall and provides
a reasonable level of assurance that the financial
statements are free from material error and misstatement.
3. Post-retirement benefit obligations – The net surplus in
the Group’s defined benefit pensions and post-retirement
medical insurance schemes is reflected in the Group
Balance Sheet as at 31 December 2019 in accordance
with IAS 19.
The main defined benefit scheme, the John Laing Pension
Fund (JLPF), was subject to a triennial valuation as at
31 March 2019. Whilst good progress has been made
with the Scheme Trustee in agreeing the assumptions
underlying the valuation, the outcome of this process and
any revised actuarial deficit recovery plan is not expected to
be finalised until mid 2020. Meanwhile, the post-retirement
obligations in these financial statements have been
updated for latest inflation, interest rate and mortality
factors. The net surplus is sensitive to each of these factors
and, to assist shareholders, the sensitivities have been
included in note 19 to the Group financial statements.
The Committee considered the recent UK government
announcement to align RPI and CPI from 2030 and that
the RPI and CPI assumptions in valuing the pension
scheme liabilities are appropriately stated taking into
account this change.
Having taken advice from the Group’s actuarial adviser,
assessed the procedures undertaken by the External
Auditor and challenged the underlying assumptions
and related disclosures in the financial statements,
the Committee is satisfied that the net surplus as at
31 December 2019 reflects fairly the Group’s post-retirement
obligations at that date as prescribed by IAS 19.
Furthermore, the Committee continues to be satisfied
that, based on legal advice, there is no minimum pensions
funding requirement arising under IFRIC 14.
Internal Audit
Throughout 2019 the Internal Audit function continued to
provide independent assurance to the Board, through the
Committee, on the Group’s internal control system.
The Head of Internal Audit continues to report directly to the
Committee and to have access to the Company and Committee
Chairs at any time.
As in previous years, in 2019 the Committee monitored the
efficacy of Internal Audit by:
i) Reviewing its terms of reference and resourcing –
both internal and co-sourced arrangements;
ii) Examining its risk-based programme of work; and
iii) Scrutinising its reports and the adequacy of management’s
responses to them.
Internal Audit completed its coverage plan for 2019 and,
similar to previous years, the majority of its audits were rated
satisfactory or better. The main areas of focus during the year
were investments and a series of ‘themed’ audits, including
risk management, tax compliance and contractor exposures.
After discussion with the Committee, effective from 2020
Internal Audit will adjust its report ratings to better reflect
their underlying findings and drive positive action by
management. In particular the ‘satisfactory’ rating will
be revised to ‘requires some improvement’ and the ‘weak’
rating will be revised to ‘requires significant improvement’.
Where a report results in a ‘weak’ rating (or ‘requires
significant improvement’ under the new ratings), an
improvement plan is agreed between Internal Audit and the
responsible division/team. The Committee receives regular
updates detailing progress against such improvement plans.
In line with market practice, Internal Audit was subject to an
External Quality Assurance (EQA) review in 2019. This was
the third such review commissioned by the Group in the last
ten years. PwC was chosen for this purpose from a shortlist
of three firms. As part of the EQA, PwC interviewed a range
of auditees and other stakeholders and examined a number
of audits. They found that the Internal Audit function
performed a substantial number of audits each year to a
good standard, but recommended that the broader audit
strategy be revisited – in particular audit coverage and
resources be stepped up to meet the challenges of the
Group’s evolving business strategy, characterised by its
greater geographic and sector diversification. The Committee
has accepted PwC’s recommendations and developed a plan
to implement a more comprehensive Internal Audit function
effective from 2020. This plan has been approved by the Board
and will be closely managed by the Committee.
Independent Valuer
The Independent Valuer, KPMG, has been acting for the
Group for seven years. The Board, through the Committee,
decided to market-test this appointment during 2019. Three
firms, including the incumbent, tendered for the role and a
shortlist of two firms was interviewed by the Committee.
After careful consideration, the Committee recommended
the re-appointment of KPMG to the Board. This was because
they were deemed to have the most experienced team and
demonstrated the best understanding of the markets and
sectors in which the Group operates. The scope of their work
has been increased to enable a higher degree of assurance on
the portfolio valuation, including annual site visits to a number
of our assets. New partners and more sector/valuation
specialists have been added to the team. The Board approved
this re-appointment with a review/break clause in 2021.
External Audit
The Committee oversees the relationship with the External
Auditor (Deloitte), including its terms of engagement and
remuneration, and monitors its independence and objectivity.
Claire Faulkner has been Deloitte’s senior statutory audit
partner for the Group and the Company since 2016 and
attends all meetings of the Committee. During 2019,
the Committee scrutinised:
i) Deloitte’s planned approach to the review and audit of
the interim and annual report and accounts respectively;
88
John Laing Group plcAnnual Report and Accounts 2019
Audit-related assurance services performed by the External
Auditor in 2019 comprised a review of the Group’s interim
financial statements in accordance with IAS 34. The fees for
this work amounted to £53,200 (2018 – £42,200). Following
the cessation of the fund management activities in 2019,
the Group’s FCA-regulated subsidiary no longer performed
FCA-regulated services and consequently deregistered with
the FCA. This means there is no requirement for a FCA review
by the External Auditor for 2019 and in the future. Fees of
£6,700 were also paid to the External Auditor for other
assurance services during the year (2018 – £15,000).
Total fees for non-audit services rendered by the External
Auditor in 2019 amounted to £59,900 (2018 – £346,075), well
below the cap* in EU Audit Legislation effective from 2020
(*no more than 70% of the Group’s average statutory audit
fee over the last three years). As commented on in last year’s
Annual Report, fees for non-audit services from the External
Auditor in 2018 arose mainly from its role as reporting
accountant to the Company’s Rights Issue in that year.
A recommendation to re-appoint Deloitte as External Auditor
is supported unanimously by the Board and will be put to
shareholders for approval at the Company’s next AGM.
Other Matters
Other matters considered by the Committee in 2019 included:
i) The content, lookout period and forecast assumptions
of the Group’s viability statement and the adoption of
the going concern basis in the financial statements;
ii) The Group’s compliance with market abuse regulation
covering Anti-Bribery and Corruption, Anti-Money
Laundering and Whistleblowing legislation;
iii) The Group’s policies and procedures for prevention and
detection of fraud; and
iv) A review of the Committee’s Terms of Reference and the
Charter of External Auditor Independence in compliance
with the 2018 Code.
After detailed consideration and enquiry, including testing
of evidence provided by management, each of these matters
was deemed satisfactory by the Committee.
Lastly, and as referenced on page 84 of this Annual Report,
the Board commissioned an external review of its
effectiveness, including the effectiveness of its Committees,
during 2019. This review was performed by Grant Thornton
and reported on in early 2020. The feedback was that the
performance of the Committee continues to be effective.
Toby Hiscock
Chair of the Audit & Risk Committee
2 March 2020
ii) Deloitte’s execution of this approach, including the physical
inspection and valuation of the Group’s investment portfolio.
In particular, Deloitte increased the number of its site
visits in 2019 to circa 30% of the portfolio by value, and
deployed more local valuation specialists than before in
Europe, US and APAC. It also provided a greater degree of
assurance to the Committee and the Board on the financial
statements by reducing its Group audit materiality to 1% of
shareholder funds and by elevating a number of audit risks,
including value enhancements to the investment portfolio;
iii) Deloitte’s arrangements to ensure there were no conflicts
of interest arising from their work and its safeguards over
their audit independence and objectivity;
iv) The extent and quality of any audit-related and non-audit
services provided by Deloitte during the year; and
v) The day-to-day management of the audit relationship
by the Chief Financial Officer and her team.
The Committee challenged the quality of Deloitte’s audit in
line with UK FRC latest guidance. In addition to the increased
audit assurance referred to above, we satisfied ourselves on
a range of factors such as the engagement partner and wider
firm’s professional standing, their second partner and
technical review arrangements, the hours and areas worked
by senior staff on the audit and their deployment of data
analytical techniques to test our underlying books of account.
As a result, the Committee is satisfied with the effectiveness
and independence of the External Auditor in respect of 2019.
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. Deloitte was first
appointed as External Auditor of the Group in 2007. The
external audit is subject to an open market tender no more
than every ten years and was last tendered in 2016.
The Company has published on its website a Charter of
External Auditor Independence which summarises the
arrangements that ensure the External Auditor remains
independent and objective throughout its term. The External
Auditor is required to rotate its engagement partner at least
every five years. No work by the External Auditor is permitted
in the following areas: tax services; secondments to
management; bookkeeping services; systems design and
implementation; valuation and actuarial services; human
resources and Internal Audit support; and any other activities
that could create an actual or perceived conflict of interest.
Any potential non-audit work by the External Auditor is
considered case-by-case by the Committee and generally
awarded on a competitive basis. The Committee’s specific
approval is needed for non-audit services performed by the
External Auditor which would result in cumulative fees of
more than £20,000 per annum.
During the year, 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 its recourse subsidiaries in 2019 amounted
to £344,037 (2018 – £277,134). Fees for audit services to
non-recourse subsidiaries in 2019 amounted to £52,695
(2018 – £61,186). The increase in fees for audit services to the
Company and its recourse subsidiaries was due to additional
work on the valuation of the Group’s overseas investments.
89
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance NOMINATION COMMITTEE REPORT
David Rough
Chair of the Nomination Committee
2 March 2020
INTRODUCTION
Through the Nomination Committee (the “Committee”)
we keep the composition and performance of the Board
under review to ensure it is refreshed to reflect the
necessary skills, experience and diversity to remain
effective. During the year, the Committee oversaw the
appointments of Luciana Germinario, Chief Financial
Officer, and Philip Keller, Non-executive Director, who
joined the Board in January 2020. Philip will succeed
Toby Hiscock as Chair of the Audit & Risk Committee
after the end of the 2020 AGM.
We are committed to having a Board that is diverse in all
respects and we continue to take into consideration the
targets set out in the Parker and Hampton-Alexander
reviews. I can report that we currently have three female
board members out of nine – reducing to eight after the
May 2020 AGM, which at that point will result in 37.5%
female representation.
ROLE OF THE COMMITTEE
The key duties of the Committee are to:
• Review the size, structure and composition of the
Board, along with length of service;
• Monitor and assess regularly the skills, knowledge,
experience and diversity of both the Board and senior
management;
• Devise and conduct a process of planning and
assessment for orderly succession to Board and
senior management positions, and oversee the
development of a diverse pipeline for succession;
“
SUCCESSION PLANNING AND CONTINUED
FOCUS ON DIVERSITY IS ESSENTIAL TO OUR
PURPOSE AND STRATEGY, ALONG WITH
MAINTAINING A STRONG AND EFFECTIVE
BOARD AND SENIOR MANAGEMENT.”
• Oversee appropriate induction of new Directors and
monitor ongoing conflicts, time commitments, training
and evaluation of the Board members; and
• Oversee the Company’s policy, objectives and strategy on
Board, senior management and workforce diversity and
inclusion.
The Terms of Reference set out the principal duties of the
Committee, including its authority to carry out these duties.
These were reviewed by the Committee during the year and
can be found at www.laing.com.
BOARD CHANGES
Resignation of Olivier Brousse
On 23 January 2020, we announced that Olivier Brousse,
the Chief Executive Officer had tendered his resignation
from the Group. Olivier will remain as CEO of the Company
whilst he assists the Company to effect an orderly transition.
I am leading the search process with Will Samuel, Chairman,
and Clare Underwood, Group Company Secretary. Spencer
Stuart have been engaged to help evaluate suitable external
and internal candidates. The selection process will include the
review of a long list of candidates, which will then be reduced
to a short list of individuals, who will be subject to a formal
interview process.
Appointment of Philip Keller
A formal process was undertaken by the Committee to find a
Non-executive Director to strengthen the experience and skills
on the Board and its Committees and to succeed Toby Hiscock
as Chair of the Audit & Risk Committee. The Committee drew
up a detailed job specification and after a selection process,
appointed Russell Reynolds to assist with the search, as they
did in respect of the Chief Financial Officer. I led the recruitment
process. Following a thorough and rigorous process, Philip Keller
was appointed as a Non-executive Director to the Board with
effect from 1 January 2020. Philip has extensive recent and
relevant financial experience and brings a strong management
background with focus on operational matters and stakeholder
communications. Philip recently retired from Intermediate
Capital Group PLC where he served as Chief Finance and
Operating Officer between 2006 and July 2019.
Philip’s appointment is part of our on-going commitment to
build and maintain an effective Board. His deep understanding
of investment businesses and global organisations will
further strengthen the diverse mix of skills and experiences
on the Board.
•
Identify and make recommendations to the Board on
appointments to the Board and senior management;
The Committee is overseeing Philip’s induction which is taking
place in the early part of 2020.
90
John Laing Group plcAnnual Report and Accounts 2019 Appointment of Luciana Germinario
The Board diversity policy
The overall composition of our Board is fundamental to its
effectiveness; we expect all members of the Board to
demonstrate the skills, experience and knowledge required
to contribute to this effectiveness. We believe that the right
mix of demographics, skills, experience, race, gender, age,
ethnicity and educational and professional backgrounds, along
with cognitive and personal strengths and cultural diversity,
can enhance our perspective and approach to support good
decision making. Therefore, the overall Board balance and
diversity is considered when appointing new directors.
The Board is supportive of the Lord Davies report and
Hampton-Alexander review target for females to represent
33% of boards by 2020; following the AGM in May 2020, we will
have 37.5% female representation on our Board. The Board
also support the 30% Club, which has the goal to have 30%
female representation on FTSE 350 Boards by 2020.
The Board is also committed to ensuring development of
diversity in the senior management team and supports
management action to broaden the diversity of our
global workforce.
Where possible, the Company uses search firms who are
signatories to the Voluntary Code of Conduct for Executive
Search Firms which seeks to address gender diversity on
boards and best practice for the related search processes.
Further information in respect of diversity and inclusion
can be found on page 57.
Independence and time commitments
Directors’ independence and time commitments is kept under
review by the Committee. There were no changes which
impacted this during the year, and therefore all Non-executive
Directors were considered to be independent in both character
and judgement, and no Directors had any other appointments
which adversely affected the amount of time they could
commit to the Company.
Additional external appointments require the approval of the
Board. There were no requests received during the year in
respect of significant external appointments.
Review of performance
The Committee oversaw the externally facilitated Board
effectiveness review which was conducted during 2019 and
which included the performance of this Committee. The
Committee is regarded as effectively performing its duties,
as being effectively chaired and as having clarity as to its role
vis a vis the Board as a whole and other Committees. Further
information regarding the Board effectiveness review can be
found on page 84.
David Rough
Chair of the Nomination Committee
2 March 2020
In order to ensure an orderly succession plan in anticipation
of Patrick O’D Bourke’s retirement, a formal process was
undertaken by the Committee to find a suitable candidate
for the position of Chief Financial Officer. The Committee drew
up a detailed job specification and after conducting a selection
process, Russell Reynolds were appointed to undertake the
search. Russell Reynolds also provides succession planning
and senior management recruitment services to the Group.
A long list of candidates was initially identified and reviewed
by the Chair of the Audit & Risk Committee, Toby Hiscock,
and the Chief Executive Officer, Olivier Brousse, and this was
reduced to a short list of candidates which was presented to
the Committee. The short-listed candidates undertook a panel
interview with a number of Committee members and myself as
Chair of the Committee, as well as individual interviews with
Toby and Olivier. It was announced on 23 January 2019 that
Patrick O’D Bourke would retire and step down from the Board
following the AGM on 9 May 2019 and that Luciana Germinario
would be appointed Chief Financial Officer designate on
25 April 2019 and subsequently succeed Patrick. Luciana
was the Chief Financial Officer for Eight Roads, the principal
investment division of Fidelity International Limited which
oversees proprietary capital investments into real estate,
venture capital and growth businesses. Prior to this, Luciana
held a number of finance roles within General Electric.
Succession planning during the year under review
Effective succession planning contributes to the delivery of
the Group’s strategy by ensuring the desired mix of skills and
experience of Board members now and in the future. The
Board is also committed to recognising and nurturing talent
within the executive and management levels across the Group
to ensure the Group creates opportunities to develop current
and future leaders. As can be seen from the Board changes,
the Committee continued to focus on succession planning
particularly at Board level and also keeps under review, on
an ongoing basis, the structure, size and composition of the
Board and its Committees, making recommendations to the
Board as appropriate. Consideration was given to anticipated
retirements from the Group Board, together with the need to
ensure the appropriate mix of knowledge, skills and experience,
and diversity. The Board continues to be satisfied that plans
are in place for orderly succession to the Board to ensure that
the right balance and skills are appropriately represented.
At an executive level, the Committee considered the executive
talent pipeline, together with executive succession planning
aimed at supporting the development of executives. During
the year, the Committee also considered the adequacy of
succession arrangements for key senior management roles,
also taking into consideration the changing opportunities as
the shape of the Group continues to evolve through delivery of
the Group’s strategy.
The Committee discussed the succession plans for the Board
and Executive Committee and other senior management over
the short, medium and long-term.
The role of succession planning in promoting diversity is
recognised. Further information on the Board’s diversity policy
is set out below.
Diversity
The Board Diversity policy developed in 2018 was reviewed
during the year and amended to reflect diversity in its broadest
sense, which the Board is committed to ensuring is reflected
in its membership.
91
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT
Anne Wade
Chair of the Remuneration Committee
2 March 2020
“
2019 WAS A YEAR OF TRANSITION. NET ASSET
VALUE PER SHARE GROWTH (INCLUDING
DIVIDENDS PAID IN THE YEAR) WAS 7.2%
REFLECTING THE WRITE DOWNS TAKEN AT THE
HALF YEAR ON WIND AND SOLAR GENERATION
AS WELL AS TRANSMISSION ISSUES IN THE FIRST
HALF OF THE YEAR. HOWEVER, IT HAS BEEN A
STRONG YEAR FOR ASSET MANAGEMENT AND
PROJECT DELIVERY WHICH TRANSLATED INTO A
SIGNIFICANT LEVEL OF VALUE ENHANCEMENTS
ACHIEVED ACROSS THE PORTFOLIO BY EACH OF
THE LOCAL MANAGEMENT TEAMS. OVERALL, THE
PERFORMANCE REFLECTS THE RESILIENCE OF
THE BUSINESS MODEL AND THE STRENGTH OF
THE REGIONAL STRUCTURE.”
DEAR SHAREHOLDER,
BOARD CHANGES
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31 December 2019.
This report is split into two sections: The Annual Report
on Remuneration and the Directors’ Remuneration
Policy (the “Policy”). Our Policy was last approved by
shareholders at our 2019 AGM. As part of our regular
three-year cycle we will be asking shareholders to
approve an updated Policy at the 2022 AGM.
2019 was a year of transition for John Laing. Adverse
external factors impacted our wind and solar assets
in Australia and Europe resulting in significant write
downs in value. Despite these write downs and adverse
movements from power price forecasts, we are reporting
a Net Asset Value (NAV) as at 31 December 2019 of
£1,658 million. The strong performance in asset
management and project delivery mitigated the write
downs and transmission issues and resulted in value
enhancements of £157 million.
This performance demonstrates the resilience of our
business model and the strength of our regional structure.
As announced in January 2019, Patrick O’D Bourke, our Group
Finance Director, decided to retire and stepped down from the
Board following the 2019 AGM. Details of the remuneration
arrangements in connection with his retirement, which were
in accordance with the agreed Policy, are set out on page 102.
Patrick continued to receive salary, benefits and pension until
he ceased employment with the Company and, as his
retirement had been agreed with the Board, the Remuneration
Committee (the “Committee”) determined that he received
good leaver status under the Company’s incentive plans.
Luciana Germinario was appointed to the Board on 25 April
2019 as Chief Financial Officer designate and assumed the
role of Chief Financial Officer following Patrick’s retirement on
9 May 2019. The terms of her appointment were in accordance
with the Policy approved by shareholders in 2016. Her base
salary on appointment was £325,000. For 2019, she was
entitled to a maximum annual bonus and maximum LTIP
opportunity of 100% and 150% of salary per annum respectively.
Her bonus for 2019 payable in 2020 will be pro-rated to reflect
actual service during the year. Luciana is entitled to
participate in the same pension arrangements as other UK
based employees with a matching contribution of up to 12%
of salary (see below on Policy). To secure her appointment in
accordance with the Policy approved in 2016, it was necessary
to compensate Luciana for certain cash-based incentive
awards that she forfeited on leaving her previous employer,
Eight Roads. The buy-out award, which was designed to mirror
the time horizon and expected value of the remuneration
forfeited, has been primarily delivered in shares to provide
alignment with the Company and its shareholders. Further
details on her package are set out in this report.
92
John Laing Group plcAnnual Report and Accounts 2019 Luciana has been awarded a salary increase to £346,300 for
2020. This represents a 6.6% increase compared to 2019.
The average salary increase for 2020 for UK based employees
is 4%. Luciana’s increase reflects the significant positive
impact that Luciana has had since joining the business, is in
line with the market and also brings Luciana’s salary in line
with that of the previous (male) Group Finance Director.
All permanent employees participate in the Annual Bonus Plan,
and share the same corporate performance metrics to ensure
cultural alignment across the business. In addition, all
participants of the LTIP share the same metrics. We believe
that aligning remuneration across the business is a key
element of aligning our culture, fulfilling our values and a
strong driver of business performance.
MAXIMUM COMPANY PENSIONS CONTRIBUTION
The Chief Executive Officer currently has a maximum annual
pension contribution opportunity of up to 15% of salary. As
announced on 23 January 2019, our Chief Financial Officer
has a maximum annual pension contribution of 12% aligned
with the current contribution rate for other senior, below
Board, employees.
Following the appointment of our Chief Financial Officer the
Investment Association published further guidance. Our
Remuneration Policy, approved by shareholders, states that
future appointments would be aligned with the majority of
the workforce. We have undertaken a review of pension
contributions across our workforce. For future Executive
Director appointments, the employer pension contribution
(or cash equivalent if at the limits set by Her Majesty’s
Revenue & Customs (HMRC)) will be a maximum of 8% of
salary. This aligns to the pension contribution rate available to
the majority of employees based in the UK. The UK workforce
is considered to be the appropriate comparator since it aligns
with the local market and the Executive Directors are based
in the UK.
POST-EMPLOYMENT SHAREHOLDING REQUIREMENTS
The Committee wishes to align with the new UK Corporate
Governance Code, shareholder views and emerging market
practice in the area of post-employment shareholding
requirements. Effective 2020 upon the implementation of
the relevant contractual arrangements, a post-cessation
shareholding requirement will apply to Executive Directors
who leave the Company. Leavers will have a requirement to
hold the shareholding guideline (200% of salary) or, if lower,
100% of their pre-cessation shareholding guideline including
shares vesting from the DSBP and LTIP for two years from
leaving office with a phase down of up to 50% permitted in
the second year post-cessation. Shares purchased by the
Executive Directors are not included in the post-employment
shareholding requirement. Further information is on page 108.
On 23 January 2020, the Company announced that Olivier
Brousse, Chief Executive Officer, will be leaving but will remain
as Chief Executive Officer of the Company to effect an orderly
transition. Olivier’s remuneration arrangements upon exit will
be determined in due course and will be in accordance with our
Policy and Olivier’s contractual arrangements. The Committee
has exercised its discretion in awarding a 2019 bonus to Olivier
in recognition that he has worked the entirety of 2019, and will
continue to work in 2020 during his notice period (up to 12
months) to achieve a smooth handover and to maintain his
focus during 2020. He will not receive a LTIP award in 2020.
Remuneration arrangements in respect of Olivier Brousse’s
successor will be made at the time of appointment in
accordance with our Policy.
INCENTIVES
The Chief Executive Officer and Chief Financial Officer were
eligible for an annual bonus of up to 150% and 100% of salary
respectively for 2019. The majority of the bonus (up to 80%
of maximum bonus potential) was based on a scorecard of
corporate financial targets to provide a rounded assessment
of financial performance. Details of the scorecard targets
set and performance against them is disclosed on page 97.
Based on performance against the targets and the overall
solid performance of the business over the year, 40% of the
maximum corporate element was awarded. This reflects
that despite the challenges faced, the team delivered a solid
corporate performance. The remainder of the bonus (up to 20%
of maximum bonus potential) was based on specific individual
targets for each Director. Details of the Committee’s assessment
against the personal objectives are set out on page 98. The
Executive Directors performed strongly against their personal
objectives resulting in overall bonuses for 2019 of 42% of
maximum bonus potential (63% of salary) for the Chief
Executive Officer and 46% of maximum bonus potential
(and of salary) for the Chief Financial Officer (pro-rated from
the date of appointment in April 2019).
The 2017 awards granted under the John Laing Group plc
Long-Term Incentive Plan (LTIP) are due to vest in April 2020.
The awards were based half on compound annual growth in
NAV per share (including dividends) and half on relative total
shareholder return (TSR), measured over three financial years
to 31 December 2019. NAV per share grew by 13.7% per
annum over this period, resulting in 71.25% of shares for this
part of the award becoming eligible to vest. John Laing’s TSR
over the period was 61.1% resulting in a top quartile ranking
and all the shares for this part of the award becoming eligible
to vest, giving rise to a total vesting outcome of 85.63%.
Shares vesting to the Executive Directors are subject to a two
year post-vesting retention period. The Committee has not
exercised any discretion in respect of the vesting.
93
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT continued
2020 LONG-TERM INCENTIVE PLAN AWARDS
SUMMARY
The Committee has approved a range of 9% to 15% for the Net
Asset Value performance condition for the 2020 LTIP award.
The 2017 to 2019 LTIP awards have been subject to a NAV
performance condition based on a range of 10% to 16%.
The target growth range is slightly lower than that applying
to the 2017 to 2019 awards, reflecting a more challenging
growth environment in our core businesses, but nevertheless
continues to reflect an ambitious level of growth in the forward
business plan.
We believe the range continues to align our senior
management with the long-term interests of our shareholders
beyond the annual objectives and bonuses and it is essential
to the sustainability of our growth model.
The aim of this report is to communicate details of Executive
Director remuneration 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.
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 existing 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
Chair of the Remuneration Committee
THE DIRECTORS’ REMUNERATION POLICY AND ITS
APPLICATION FOR 2020
2 March 2020
The Remuneration Policy was reviewed in 2018 to ensure
it continues to support the business strategy, meets the
expectations of shareholders and takes into account the
principles set out in the 2018 Code. This revised Policy was
approved by shareholders at the 2019 AGM. With the exception
of the change to post-cessation shareholding requirements,
we are therefore not seeking to make any changes to the
Policy for 2020, however we will keep any upcoming regulatory
or compliance changes under review, and consult widely
where required.
Overall, the Committee believes that the Policy works well,
supporting and promoting sustainable value creation and
providing a fair and appropriate link between performance and
reward. A copy of the Policy can be found on pages 106 to 112.
94
John Laing Group plcAnnual Report and Accounts 2019 REMUNERATION AT A GLANCE
HOW THE REMUNERATION POLICY SUPPORTS OUR BUSINESS STRATEGY
Our Remuneration Policy is designed to support the Group’s strategy and promote the long-term sustainable success of the
Group, as summarised below:
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To create value for all stakeholders through originating, investing in,
developing and managing infrastructure assets internationally.
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 Committee also has oversight of remuneration for all
members of the Senior Management Team (approximately 25 individuals), as well as the remuneration structure for the wider
workforce, ensuring a cohesive approach to reward is operated throughout the Group.
SUMMARY OF THE CURRENT REMUNERATION ARRANGEMENTS FOR EXECUTIVE DIRECTORS
Element
Description
Opportunity for 2020
Base pay Salaries are set taking into account the experience of the
Director and their role and responsibilities.
Olivier Brousse, Chief Executive Officer (CEO): £483,600
Luciana Germinario, Chief Financial Officer (CFO): £346,300.
Benefits
Private medical and dental insurance, life insurance and
permanent health insurance.
Market competitive.
Pension
Cash allowance in lieu of pension.
Bonus
LTIP
Annual bonus is determined by reference to corporate and
individual performance1. Any bonus above target (60% of
salary or where higher 60% of maximum bonus potential)
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
TSR targets (with 50% of the award on each measure1).
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 15% of salary for current CEO; 12% for CFO; Future
appointments to be aligned with majority of the UK
workforce at a rate of 8%.
Up to 150% of salary for the CEO and 100% of salary for
the CFO.2 3
As Olivier Brousse has tendered his resignation he will
not receive an LTIP award in 2020. The CFO will receive an
award of 168% of salary for 2020 (within a policy maximum
of 200% of salary per annum).
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1 The performance measures for the 2020 Annual Bonus and 2020 LTIP awards are set out in the Annual Report on Remuneration on page 105.
2 Olivier’s remuneration arrangements upon exit will be determined in due course and will be in accordance with our Policy and Olivier’s
contractual arrangements.
3 Remuneration arrangement in respect of Olivier Brousse’s successor will be made at the time of appointment.
REMUNERATION RECEIVED BY THE EXECUTIVE DIRECTORS FOR 2019
£’000
Olivier Brousse
Luciana Germinario5
Patrick O’D Bourke3
Salary
Benefits
Pension
Bonus1
484
222
125
2
2
5
63
27
15
305
102
57
Long-Term
Incentives2
973
–
4324
Other
–
897
166
Total
1,827
442
650
1 Bonuses were based on an assessment of corporate and individual performance objectives (see pages 97 and 98 for further details).
2 This relates to the estimated value of the 2017 LTIP which will vest in April 2020, see page 99.
3 Retired from the Board on 9 May 2019.
4 Patrick O’D Bourke was deemed a good leaver by the Committee and, in accordance with the LTIP Rules, his outstanding LTIP awards
have been pro-rated to the date of his leaving the Group.
5 Appointed to the Board on 25 April 2019.
6 Patrick O’D Bourke received a payment in May 2019 in lieu of holiday not taken.
7 This relates to a cash payment of £2,687 made in May 2019 under Luciana Germinario’s Buy Out Agreement and the first tranche of the
buy-out award which vested in September 2019. The value of the buy-out award is based on the share price on the date of vesting.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance
DIRECTORS’ REMUNERATION REPORT continued
>
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 Listing Rule 9.8.6R. The Annual Report on
Remuneration will be put to an advisory shareholder vote at the forthcoming AGM.
REMUNERATION COMMITTEE MEMBERS
Details of members of the Committee are detailed on page 78. All members of the Committee are independent Non-executive
Directors.
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, determines the remuneration structure for the wider workforce
and prepares an Annual Report on Remuneration for approval by shareholders at the AGM.
The Company had adopted the FCA’s Remuneration Code which is applied to those employees involved in regulated activities but
following the sale of the remaining fund management business to Foresight Group in June 2019, and the subsequent
deregistration of the business from the FCA during the year, this requirement ceased. 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 other 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 relating to the termination of Executive Directors’ service contracts.
The activities, recommendations and approvals of the Committee are reported at the next routinely scheduled Board meeting.
The Committee’s Terms of Reference, which have been reviewed during the year, can be viewed on our website at www.laing.com.
The Committee has three regular scheduled meetings each year and meets additionally as circumstances require. The Committee
met five times during the year. Details of attendees at these meetings are shown on page 78.
ADVISERS
The Committee receives information and takes advice from inside and outside the Group. Internal support is provided by the
Group Company Secretary (who also has the responsibility for HR). The Chairman and Chief Executive Officer are invited to attend
meetings where appropriate. No individual is present when matters relating to his or her own remuneration are discussed.
Aon plc (Aon) was appointed in early 2015 by the Committee to act as an independent adviser to it. Aon was selected following
a thorough process at the time of the IPO. Aon is a member of the Remuneration Consultants Group and is a signatory to its
Code of Conduct. During 2019, insurance broking services were also provided to the Group by other subsidiaries of Aon which
the Committee considers in no way prejudices Aon’s position as the Committee’s independent adviser. Aon also provides general
remuneration advice. Fees charged by Aon for advice provided to the Committee for 2019 amounted to £72,955 (excluding VAT)
(2018 – £72,789). Aon has also provided support to management on implementation of incentives. The Committee is satisfied that
these additional services do not prejudice Aon’s position as the Committee‘s independent adviser.
96
John Laing Group plcAnnual Report and Accounts 2019 DIRECTORS’ SINGLE TOTAL FIGURE OF REMUNERATION FOR 2019 (AUDITED)
The table below provides a breakdown of the various elements of Directors’ pay for the year ended 31 December 2019 and for the
prior year. This comprises the total remuneration earned in respect of the period from 1 January 2019 to 31 December 2019, and
the prior period from 1 January 2018 to 31 December 2018.
£’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Salary / Fees
Benefits1
Pension2
Bonus3
LTIP4,5
Other
Total
Olivier Brousse
Luciana Germinario7
Patrick O’D Bourke6
Will Samuel
David Rough
Andrea Abt
Jeremy Beeton
Toby Hiscock
Anne Wade
484
222
125
195
65
50
50
65
65
465
–
346
144
59
32
48
63
62
2
2
5
–
–
–
–
–
–
2
–
12
–
–
–
–
–
–
63
27
15
–
–
–
–
–
–
60
–
45
–
–
–
–
–
–
305
102
57
379
–
279
–
–
–
–
–
–
–
–
–
–
–
–
973
1,452
n/a
n/a
1,827
2,358
–
432
–
964
898
169
–
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
442
650
195
65
50
50
65
65
–
1,646
144
59
32
48
63
62
1 This relates to private health insurance. The figures for Patrick O’D Bourke also includes a car allowance (2019 – pro-rated £3,400; 2018 – £10,200).
2 Cash allowance in lieu of pension is paid net of employer’s national insurance.
3
In accordance with the Deferred Share Bonus Plan (DSBP), any amount over 60% of salary, or where higher, 60% of maximum bonus potential,
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.
4 The 2018 figures relate to the 2016 LTIP award which vested in April 2019. The figures have been adjusted to reflect the actual share price on
vesting of 398.94p per share. These are the final award values based on the share price at the time of vesting and include the dividend
equivalents which were payable upon vesting. The figures disclosed for Olivier Brousse and Patrick O’D Bourke in the 2018 Annual Report &
Accounts of £1,163,000 and £772,000 respectively were estimated values based on the average share price over the period 1 October 2018 to
31 December 2018.
5 The 2019 figures are an estimate of the 2017 LTIP award which is due to vest in April 2020. 50% of the award is based on NAV per share
performance and 50% is based on relative TSR performance over the three year period to 31 December 2019. The value of the award is based on
the average share price for the last three months of 2019 and includes an estimate of the value of the dividend equivalents which are payable
upon vesting. See page 99 for further details.
6 Retired from the Board on 9 May 2019.
7 Appointed to the Board on 25 April 2019.
8 This relates to a cash payment of £2,687 made in May 2019 under Luciana Germinario’s Buy Out Agreement and first tranche of the buy-out
award which vested in September 2019. The value of the buy-out award is based on the share price on the date of vesting.
9 Patrick O’D Bourke received a payment in May 2019 in lieu of holiday not taken.
DETAILS OF VARIABLE PAY EARNED IN THE YEAR (AUDITED)
Annual Bonus
The bonus payable for 2019 was assessed by the Committee taking into account performance against the following scorecard
of metrics:
£ million
NAV (including dividends)
Value enhancements
Distributions
(excluding from non-portfolio assets)
Disposals
New investments
Profit before tax
Threshold
1,754
43
55
233
340
190
Target
1,802
45
58
245
358
238
Stretch
1,850
50
64
270
394
286
Actual
Outcome
1,705
Below threshold
157
57
143
184
100
Above stretch
Between threshold
and target
Below threshold
Below threshold
Below threshold
Based on the achievement of the above scorecard of metrics, the Committee determined that the overall bonus payable for
corporate performance was 40% of the maximum, equivalent to 48% and 32% of salary for the Chief Executive Officer and Chief
Financial Officer respectively.
Four of the six targets were below threshold. However, management delivered above stretch for value enhancements which
mitigated the write downs and transmission issues which impacted on NAV. Distributions were also above threshold. The level of
bonus payable for corporate performance reflects that despite the challenges faced, the team delivered a solid performance and
demonstrated the resilience of the business model and the regional structure.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT continued
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ANNUAL REPORT ON REMUNERATION continued
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 2019 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
The Committee has exercised its discretion in awarding a 2019 bonus to Olivier in recognition that he has worked throughout 2019
and will continue to work in 2020 during his notice period (up to 12 months) to achieve a smooth handover and to maintain his
focus during 2020.
In addition to oversight of all Group objectives, the Chief Executive Officer was individually tasked with:
• Strategic review of John Laing’s traditional investment markets, and new opportunities to enhance the long-term sustainable
success of John Laing.
• More focus on improving asset allocation and investment decision making in the regions, to help secure the global objectives.
• Assisting with the induction and integration of Luciana Germinario into the Executive Team and other stakeholder groups,
such as investors and clients.
• Continuing to develop the Group’s diversity agenda and ESG proposition.
The Committee is pleased with the progress achieved in 2019, notwithstanding its challenges, the strategic evaluation of both
existing and new market opportunities leaves the Group well positioned for the future. This includes the decision to pause stand
alone on-shore wind and solar generation; new research into energy storage and other elements of decarbonizing the economy;
and investments in new markets such as Colombia which contribute to opportunities for John Laing to pursue sustainable growth
in 2020 and beyond. Additionally, the leadership to drive regional management teams in extracting value enhancements from the
portfolio was an important lever in global NAV growth this year. The induction and integration of the new CFO has exceeded
expectations, and we continue to make progress on the Group’s diversity agenda and ESG propositions. Accordingly the
Committee awarded the Chief Executive Officer 50% of the maximum potential for performance against his individual objectives.
Chief Financial Officer, Luciana Germinario
In addition to oversight of all Group objectives, the Chief Financial Officer was individually tasked with:
• Strengthening forecasting for the Group.
• Establishing a saving plan in respect of costs for 2019 and 2020.
• Managing and leading the 2019 disposals plan to ensure delivery, and prepare the 2020 disposal strategy.
• Contributing to driving progress in terms of gender balance and gender pay gap.
The Committee is very pleased with the progress achieved by the CFO in the months since she joined. The forecasting model in
particular has been greatly expanded in terms of detail and inputs, and was implemented rapidly, leading to enhanced accuracy
in projections throughout the year; the development of a granular plan on costs has come at an important time given unexpected
challenges during the year; and the work on disposals, particularly to prepare for 2020 has been impressive. The Committee has
accordingly awarded the Chief Financial Officer 70% of the maximum potential for performance against her individual objectives.
Group Finance Director, Patrick O’D Bourke
In addition to the oversight of all Group objectives, the Group Finance Director was individually tasked with the successful delivery
of the 2018 year end results and facilitation of a smooth handover of the role to Luciana Germinario. The Committee was pleased
with the transition process and awarded the Group Finance Director 70% of the maximum potential for performance against his
individual objectives.
Overall, bonuses for 2019 for the Executive Directors were as follows:
% salary
Corporate
(maximum 80% of salary or maximum bonus potential if higher)
Individual
(maximum 20% of salary or maximum bonus potential if higher)
Total (maximum 150%/100%/100% of salary)
Total to be paid in cash (£’000)
1 Bonus to be paid to Luciana Germinario pro rated from 25 April 2019.
2 Bonus to be paid to Patrick O’D Bourke pro rated for the period to 9 May 2019.
98
Olivier
Brousse
Luciana
Germinario1
Patrick O’D
Bourke2
48%
15%
63%
305
32%
14%
46%
102
32%
14%
46%
57
John Laing Group plcAnnual Report and Accounts 2019 Bonuses up to 60% of salary (or, where higher, 60% of maximum bonus potential) are paid in cash with any bonus above this
level awarded in the form of deferred shares, normally vesting in equal tranches over one, two and three years and subject to
continued employment. Dividend equivalents are payable on the deferred shares on vesting. Any deferred shares due will be
awarded as soon as practicable following the results announcement in March.
None of the bonuses payable to Executive Directors were in excess of 60% of salary (or if higher, of the maximum bonus potential).
Therefore no amounts have been deferred in respect of the 2019 Annual Bonus.
Vesting of the 2017 Long-Term Incentive Plan award (audited)
The awards granted on 19 April 2017 under the John Laing Group plc Long-Term Incentive Plan (LTIP) are due to vest in April 2020.
The awards are subject to the following performance targets:
Measure
Weighting
Compound annual growth
in NAV per Share
TSR relative to the constituents
of the FTSE 250 Index
50%
50%
Performance
period
01/01/17 to
31/12/19
01/01/17 to
31/12/19
Threshold
target
(25%
vesting)
Stretch
target
(100%
vesting)1
Actual
performance
Vesting %
(max. 50%
for each
element)3
10% p.a.
16% p.a.
13.7% p.a.2
35.63%
Median
ranking
Upper
quartile
ranking or
above
Upper
quartile
(61.1% TSR)
50%
1 For performance between threshold and stretch, awards vest on a straight line basis.
2 NAV is based on the figures reported in the Company’s annual financial statements adjusted to include the value of any dividends paid to or
approved by shareholders during the three year performance period. The opening NAV per share figure for the 2017 awards was also adjusted
to reflect the dilutive nature of the Rights Issue. NAV per share as at 31 December 2019, the end of the performance period, adjusted to include
the value of dividends, was 362.7p (per share).
3 Total vesting outcome is 85.63%.
Based on the above, the number of shares vesting under the 2017 LTIP is set out in the table below:
Olivier Brousse
Patrick O’D Bourke4
Type of award
LTIP (nil cost option)
LTIP (nil cost option)
Number
of shares
granted1
262,680
175,030
Rights issue
additional
shares
23,505
15,662
Anticipated
number of
shares
vesting2
262,264
116,501
Estimated
value of
shares
vesting3
£972,999
£432,219
1 As a result of the Rights Issue, the Company made an adjustment to the number of shares under award to ensure that award holders were not
disadvantaged compared to other shareholders. This resulted in an increase to the number of shares under award as shown above by 1.09 times.
2 Anticipated number of shares vesting includes an estimate of the number of shares awarded for dividend equivalents that have accrued on
the awards.
3 Estimated value based on the average share price over the period 1 October 2019 to 31 December 2019 (371p).
4 Patrick O’D Bourke was granted good leaver status under the rules of the LTIP, and therefore will be entitled to a pro-rated number of shares
on vesting, which is based on the number of months between the date of grant to the date of his retirement on 9 May 2019.
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.
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ANNUAL REPORT ON REMUNERATION continued
DETAILS OF SHARE AWARDS GRANTED IN THE YEAR (AUDITED)
Long-term Incentives
The following LTIP awards were granted to the Executive Directors during the financial year:
Type of award
Award size
Face value
Number
of shares
Grant date
Performance
period
Performance
targets
Olivier Brousse
Luciana Germinario
LTIP (nil
cost option)
LTIP (nil
cost option)
175% salary
£846,3001
215,892
10 April 2019
150% salary
£487,5002
126,623
16 May 2019
1 January
2019 to
31 December
2021
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 392.0p.
2 Calculated using the closing middle market share price on the day preceding the date of grant which was 385.0p.
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 base NAV per share figure for the 2019 award is
323p per share. 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).
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.
Deferred Share Bonus Plan
The following awards were granted to the Executive Directors under the DSBP during the financial year. These related to the
deferred element of the 2018 bonus.
Type of award
Award size
Olivier Brousse
DSBP (nil cost option)
Patrick O’D Bourke
DSBP (nil cost option)
Bonus earned
over 60% of salary
Number of
shares
25,612
18,193
Face value1
Grant date
£100,400
£71,320
10 April 2019
1 Calculated using the closing middle market share price on the day preceding the date of grant which was 392.0p
The awards will ordinarily 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. As a result of him leaving the Company on 9 May 2019, Patrick O’D Bourke’s DSBP vested on this date, and
he exercised his awards on 20 May 2019. Dividend equivalents are payable on the deferred shares on vesting.
100
John Laing Group plcAnnual Report and Accounts 2019 Buy-out awards
In compensation for cash-based long-term incentive awards that Luciana Germinario forfeited on leaving her previous employer,
Eight Roads, it was agreed by the Committee that she would receive buy-out awards on commencement of service. The buy-out
awards, which were designed to mirror the time horizon and expected value of the remuneration forfeited, were primarily
delivered in shares. The grant value of the buy-out awards was US$320,288. On 16 May 2019, the following awards were granted,
as conditional share awards over ordinary shares of 10p each in the Company:
Award
A
B
C
D
E
F
Total
Number of
shares
24,314
13,182
3,528
16,964
3,528
3,528
65,044
Value of award
Vesting date
US$119,731
15 September 2019
US$64,911
US$17,370
US$83,535
US$17,370
US$17,371
US$320,288
10 March 2020
15 September 2020
10 March 2021
15 September 2021
15 September 2022
The awards were granted under and subject to the terms of a one-off award agreement entered into upon reliance of FCA Listing
Rule 9.4.2(2) to facilitate Luciana’s recruitment. The share-based awards may only be satisfied using existing shares. Unvested
awards shall ordinarily be forfeited on cessation of service. No payment was required for the grant of the awards. The awards are
not transferable, except on death. The awards are not pensionable. Appropriate adjustments may be made to the awards in
response to variation of share capital.
Under Award A, 24,314 shares vested on 16 September 2019.
DIRECTORS’ SHAREHOLDINGS (AUDITED)
The following table sets out a summary of the Directors’ interests in shares (including any interests held by connected persons).
Olivier Brousse
Patrick O’D Bourke1
Luciana Germinario2
David Rough
Will Samuel
Jeremy Beeton
Toby Hiscock
Anne Wade
Andrea Abt
No. of shares
owned on
31 December
2018
No. of shares
owned on
31 December
2019
Other interests in shares
as at 31 December 20194
Outstanding
LTIP awards
Outstanding
DSBP awards
Total interest
in shares as at
31 December
2019
225,138
304,202
–
47,007
50,000
21,674
27,278
27,007
–
427,748
439,003
12,863
47,007
50,000
21,674
27,245
27,007
–
791,047
188,615
167,353
N/A
N/A
N/A
N/A
N/A
N/A
46,683
1,265,478
– 3
–
N/A
N/A
N/A
N/A
N/A
N/A
627,618
180,216
47,007
50,000
21,674
27,245
27,007
–
1 Resigned from the Board on 9 May 2019. Interests in shares are shown as at 9 May 2019.
2 Appointed to the Board on 25 April 2019. Outstanding LTIP awards figure includes buy-out awards which were granted under the LTIP scheme rules.
3 Patrick O’D Bourke was deemed a good leaver under the Rules of the DSBP. As a result, all outstanding awards vested on 20 May 2019 and he
exercised these shares on 20 May 2019, electing to sell all of the shares which vested.
4 The closing share price on 31 December 2019 was 380.0p.
Between 31 December 2019 and the date of this report there have been no changes in the Directors’ shareholdings.
The guideline shareholding for Executive Directors for 2019 was 200% of salary. At 31 December 2019, Olivier Brousse and
Luciana Germinario held shares worth 347.13% and 14.68% of salary respectively. Shares counting towards achievement of this
guideline include beneficially owned shares and unvested shares (net of tax) held under the DSBP.
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ANNUAL REPORT ON REMUNERATION continued
Of the total interests in shares held at 31 December 2019, the following shares are subject to a post-vesting holding requirement:
Olivier Brousse
Patrick O’D Bourke
Luciana Germinario
Vested LTIP
awards1
Outstanding
LTIP awards2
356,209
236,449
–
791,047
188,615
126,623
1 Shares vesting from the 2015 and 2016 LTIP awards (which are subject to a two year post-vesting holding requirement). These shares are
included in the number of shares owned on 31 December 2019 in the table above.
2 Unvested LTIP awards will ordinarily lapse on cessation of employment. However, in certain circumstances (see page 111), participants are
allowed to retain a right to the shares. In such circumstances, the shares will ordinarily vest on the normal vesting date and a two-year
post-vesting holding period still applies irrespective of employment status. Patrick O’D Bourke retired from the Company on 9 May 2019, and
was granted good leaver status under the rules of the scheme. The outstanding LTIP awards detailed above have been pro-rated for the period
of service during the performance period in accordance with the rules of the scheme. Luciana Germinario’s buy-out awards are not subject to
a post-vesting holding requirement.
PAYMENTS TO PAST DIRECTORS (AUDITED)
Patrick O’D Bourke ceased to be an Executive Director with effect from 9 May 2019. Following his departure, Patrick received
salary, benefits and pension up to the date of cessation of employment on 9 May 2019. As his retirement was agreed by the Board,
Patrick received good leaver status under the Company’s incentive plans. Under the terms of the Policy and respective incentive
plans he:
•
•
•
is eligible to receive, subject to performance, a pro-rata bonus for 2019. This will be paid on the normal payment date and,
as he will no longer be an employee of the Company at that point, it will be paid solely in cash;
retained his outstanding DSBP awards, which vested in full on cessation of employment on 9 May 2019 (in accordance with
the Policy for awards granted prior to May 2019); and
retained his outstanding LTIP awards which will continue to vest on the normal vesting date and be subject to a post-vesting
holding requirement and have been pro-rated for time served.
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
Remuneration paid to or receivable by all employees
Distributions to shareholders by way of dividends
Distributions to shareholders by way of share buy-backs
2019
31
47
Nil
2018
321
44
Nil
1 Remuneration paid to or receivable by all employees comprises salary costs, including cash bonuses, associated social security costs and
pension contributions but excludes the cost of share-based incentives and pension-related costs under IAS 19.
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 31 December 2018 and 31 December
2019 for the Chief Executive Officer compared to the average for other UK-based employees. This comparator group was used
because the Committee believes it gives the best understanding of underlying increases, while avoiding distortions from currency
fluctuation and different economic conditions in other countries.
CEO
Average for other UK employees4
Salary
4.0%
7.0%
Benefits
59.0%1
36.3%
Bonus
(19.7%)2
(21.9%)3
1
Increase in medical premiums and take up of dental plan for the first time.
2 2019 maximum bonus potential increased from 100% to 150% and corporate element reduced from 82% to 40%.
3 Corporate element reduced from 82% to 40%.
4 Data based on the average employee for 2019 compared with the average employee for 2018 employed throughout these periods.
102
John Laing Group plcAnnual Report and Accounts 2019 The Committee considers internal and external relativities when making pay decisions.
With less than 250 UK employees, we are not required to disclose Chief Executive Officer to employee pay ratios. However, in the
2018 Annual Report & Accounts, in order to increase the transparency of our reporting in this area, we disclosed the 2018 numbers
as shown in the tables below ahead of the new reporting requirements and are reporting on this for the second time this year.
The ratios compare the total remuneration of the Chief Executive Officer, as set out in this report, against the total remuneration
of the median UK and Group employees as well as UK and Group employees in the lower and upper quartiles. This disclosure will
build up over time to cover a rolling 10-year period.
A significant proportion of the Chief Executive Officer’s pay is delivered in LTIP awards which are in part linked to the Company’s
share price movements over the longer term. Therefore, the ratios will depend significantly on the outcomes of the LTIP and may
fluctuate from one year to the next.
The tables also include ratios covering salary to enable a further comparison. The process to ensure that employees are paid
fairly is set out on pages 56 to 61 of this report.
Group:
Financial Year
Methodology
A (see notes
below)
P25
(Lower
Quartile)
Pay Ratios
P50
(Median)
P75
(Upper
Quartile)
18:1
10:1
6:1
Salary only
7:1
3:1
A (see notes
below)
22:1
14:1
2:1
8:1
Salary only
7:1
6:1
3:1
Financial Year
Methodology
A (see notes
below)
P25
(Lower
Quartile)
Pay Ratios
P50
(Median)
P75
(Upper
Quartile)
34:1
16:1
9:1
Salary only
11:1
7:1
A (see notes
below)
28:1
17:1
4:1
9:1
Salary only
9:1
5:1
4:1
2019
2018
UK:
2019
2018
Notes:
Remuneration Values
Chief
Executive
Officer
P25
(Lower
Quartile)
P50
(Median)
P75
(Upper
Quartile)
£1,827
£103
£189
£282
£484
£2,069
£73
£93
£145
£194
£145
£257
£465
£64
£78
£138
Remuneration Values
Chief
Executive
Officer
P25
(Lower
Quartile)
P50
(Median)
P75
(Upper
Quartile)
£1,827
£54
£115
£215
£484
£2,069
£43
£74
£71
£123
£122
£234
£465
£52
£86
£129
Calculation
Total
Remuneration
£000s
Salary only
£000s
Total
Remuneration
£000s
Salary only
£000s
Calculation
Total
Remuneration
£000s
Salary only
£000s
Total
Remuneration
£000s
Salary only
£000s
1. The employees at the 25th, 50th and 75th percentiles (lower, median and upper quartile) were determined as at 31 December 2019 based on
full-time equivalent remuneration for all employees other than for variable pay where the actual amount to be paid has been used.
2. “Option A” methodology, as set out in the Companies (Miscellaneous Reporting) Regulations 2018, was selected as this is considered the most
statistically accurate under the reporting regulations.
3. Employees on reduced pay are excluded from the calculation (e.g. maternity leave, unpaid sabbatical).
4. Joiners and leavers have been excluded as their annualised package may not be comparable to the Chief Executive Officer due to limited
participation in the variable pay schemes.
5. The data for the three individuals identified has been considered under the Option A methodology and fairly reflects pay at the relevant quartiles
amongst the Group and UK employee population. Each of the employees was a full-time employee during the year and none received an
exceptional award which would otherwise inflate their pay figures.
103
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT continued
>
ANNUAL REPORT ON REMUNERATION continued
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 2019. 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.
Total shareholder return
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
£300
£250
£200
£150
£100
£50
£0
17/02/2015
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
Source: FactSet
John Laing Group plc
FTSE 250 Index
This graph shows the value, by 31 December 2019, of £100 invested in John Laing Group plc on the date of Admission
(17 February 2015), compared with the value of £100 invested in the FTSE 250 Index on the same date.
The other points plotted are the values at intervening financial year-ends.
The total remuneration figures for the Chief Executive Officer for 2015 to 2019 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.
Total remuneration (£’000)
Annual bonus (% of maximum)
LTIP (% of maximum)
2015
1,535
70%
Nil
2016
759
63%
Nil
2017
1,702
79%
78%
20181
2,358
82%
96%
2019
1,827
42%
86%
1 Total remuneration for 2018 has increased from £2,069,000 as disclosed in the 2018 Annual Report & Accounts to reflect the values of the 2016
LTIP awards that vested in April 2019.
Voting outcome on Remuneration
The table below shows the most recent voting outcomes on the remuneration related resolutions:
Resolution to approve the Annual Report
on Remuneration
Resolution to approve the Directors’
Remuneration Policy
* Percentage of votes cast.
AGM
Votes For
Votes Against
Votes Withheld
9 May 2019
395,359,997 (99.11%*)
3,552,094 (0.89%*)
120,541
9 May 2019
372,132,031 (95.31%*)
18,296,521 (4.69%*)
8,604,080
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John Laing Group plcAnnual Report and Accounts 2019
Application of the Remuneration Policy for 2020
A summary of how the remuneration policy will be applied during the forthcoming year is set out below:
Salaries for
Executive Directors
Olivier Brousse – £483,600
Luciana Germinario – £346,300
Benefits
Pension
2020 Bonus
Details in respect of the remuneration arrangements for Olivier Brousse’s successor will be disclosed on appointment.
No change
No change for incumbent Directors. New Directors will be aligned with the majority of the UK workforce at 8% of salary.
Consistent with the Policy, the 2020 bonuses will be based on 80% corporate and 20% individual objectives. Corporate
performance will be assessed taking into account NAV (including dividends), distributions (excluding from non-portfolio
assets), disposals, new investments, value enhancements and profit before tax. The performance targets for 2020 are
deemed to be commercially sensitive and will be disclosed in next year’s Annual Report on Remuneration.
Olivier’s remuneration arrangements upon exit will be determined in due course and will be in accordance with our Policy
and Olivier’s contractual arrangements.
In accordance with the Remuneration Policy, the maximum bonus opportunity for the CEO will be 150% of salary. Luciana
Germinario will have a maximum opportunity of 100% of salary.
2020 LTIP
LTIP awards granted to Luciana Germinario will be over shares worth 168% of salary.
The 2020 LTIP awards will be measured over three years and 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
9% p.a.
15% p.a.
TSR relative to the constituents of the
FTSE 250 Index
Median performance
Upper quartile performance
There will be straight-line vesting between these points.
Olivier Brousse tendered his resignation in January 2020 and is not eligible for a LTIP award. The remuneration details for
the new CEO will be announced at the time of appointment. The maximum opportunity for the LTIP is 200% of salary.
The fees for the Chairman and Non-executive Directors were reviewed during the year. The revised fees are as follows:
Chairman and
Non-executive
Director fees
Chairman
Non-executive Directors:
Base fee
Additional fees for:
Chairing the Audit & Risk Committee
Chairing the Remuneration Committee
Senior Independent Director & Chairing the Nomination Committee
1
Increased from £50,000 as from 1 April 2020.
£195,000
£53,0001
£15,000
£15,000
£15,000
Retirement of
Patrick O’D Bourke
Patrick continued to receive salary, benefits and pension contributions up until the date of cessation of employment.
As his retirement had the agreement of the Board, under the terms of the Policy and respective incentive plans he:
• Was eligible to receive, subject to performance, a pro-rata bonus for 2019. This will be paid on the normal payment
date in March 2020 and as he was no longer an employee of the Company at this point, will be paid solely in cash; and
• Retained his outstanding LTIP awards, which will continue to vest on the normal vesting date and be subject to a
post-vesting holding requirement and have been pro-rated for time.
By order of the Board
Anne Wade
Chair of the Remuneration Committee
2 March 2020
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DIRECTORS’ REMUNERATION POLICY
This report sets out the updated Remuneration Policy for the Directors.
The Policy promotes the delivery of sustainable long-term performance through the long-term nature of the incentive plans
(bonus deferral and LTIP), the variety of performance measures used (aligning with the business strategy and supporting a
rounded assessment of performance), and the balanced approach to target setting and performance assessment. Updates to the
Policy on pensions and the post-cessation shareholding requirement have been made as set out in the Chair‘s letter on page 93.
REMUNERATION POLICY TABLE
The table below sets out the Remuneration Policy for the Executive Directors.
Salary
Purpose and link to strategy
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.
Operation
Normally reviewed annually by the Committee 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.
Link to performance
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.
Maximum opportunity
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 2020 see the Annual Report on Remuneration on page 105.
Benefits
Purpose and link to strategy
To operate a competitive benefits structure for Executive Directors that aids in their recruitment and retention.
Operation
Provision of benefits such as private medical and dental insurance, life insurance, permanent health insurance
and company sick pay.
Executive Directors are also eligible to participate in any all-employee share plans operated by the Company on
the same basis as other eligible employees.
Additional benefits may be provided from time to time if the Committee decides the payment of such benefits is
appropriate or, where required, to facilitate the relocation of an Executive Director.
Executive Directors are entitled to reimbursement of reasonable expenses incurred by them in the
performance of their duties (including any tax payable thereon).
Link to performance
Not applicable.
Maximum opportunity
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.
Pension
Purpose and link to strategy
To offer market competitive levels of pension and to recognise long-term commitment to the Group.
Operation
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.
Link to performance
Not applicable.
Maximum opportunity
Chief Executive Officer up to 15% of salary; Chief Financial Officer up to 12%; new hires up to 8%. Pension
provision for future appointments to be aligned with the majority of the UK workforce. The UK workforce is
considered to be the appropriate comparator since it aligns with the local market and the Executive Directors
are based in the UK.
106
John Laing Group plcAnnual Report and Accounts 2019 Annual Bonus
Purpose and link to strategy
To recognise and reward the delivery of short-term strategic and financial objectives which contribute towards
long-term sustainable growth.
Operation
The Executive Directors participate in the same overall bonus structure as other Group employees.
Link to performance
To the extent any bonus exceeds 60% of salary or where higher 60% of maximum bonus potential, 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. Dividend equivalents 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 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 each financial year, with threshold,
target and stretch levels of performance set for each measure. There is no fixed weighting between metrics.
Details of the metrics used to determine the 2019 bonus are set out in the Annual Report on Remuneration on
page 97 and the metrics to be used for the 2020 bonus are set out in the Annual Report on Remuneration on
page 105.
The Committee uses the scorecard as a guide to help it consider the overall performance of the business and
the appropriate size of the bonus. The Committee will, in its absolute discretion, take into account all relevant
circumstances when determining the size of the bonus, recognising that, given the long-term nature of the
business, metrics relating to projects invested in may move from one year to another outside management’s
control. The Committee also has the discretion to reduce the size of the 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 20% of the maximum.
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.
Maximum opportunity
Up to 150% of salary (60% of maximum for target performance). For 2020, the maximum bonus will be limited
to 100% of salary for the Chief Financial Officer.
No more than 25% of maximum will be payable for threshold performance.
Long-Term Incentive Plan (LTIP)
Purpose and link to strategy
To incentivise and reward the creation of long-term shareholder value.
Operation
At the discretion of the Committee, Executive Directors will normally 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 any shares vesting under an LTIP award (net of tax) for a further two
years post-vesting.
Dividend equivalents that accrue on award shares during the vesting period may be paid at the time of vesting.
Clawback and malus provisions apply.
Link to performance
Awards are subject to the achievement of performance targets linked to the long-term success of the
Company.
These targets are currently based 50% on growth in NAV per share and 50% on total shareholder return (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.
Maximum opportunity
Up to 200% of salary.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT continued
>
DIRECTORS’ REMUNERATION POLICY continued
SHAREHOLDING GUIDELINES
The Executive Directors are required to build and maintain a shareholding in the Company equivalent to 200% of 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.
Effective 2020, upon the implementation of the relevant contractual arrangement a post-cessation shareholding requirement will
apply to Executive Directors who leave the Company. Leavers will have a requirement to hold the shareholding guideline or, if
lower, 100% of their pre-cessation shareholding guideline including shares vesting from the DSBP and LTIP for two years from
leaving office with a phase down of up to 50% permitted in the second year post-cessation. Shares purchased by the Executive
Directors are not included in the post-employment shareholding requirement. The shareholding requirement ceases to apply in
cases of death. Remuneration Committee discretion can be applied in implementing the post-cessation shareholding
requirement. Enforcement of the shareholding requirement will be supported by a formal policy.
Having reviewed the Executive Directors’ existing shareholdings, the Committee is satisfied that the above policy provides
sufficient exposure for the Executives to the long-term share price movement of the Company. Detail on the Executive Directors’
current interests in shares and the proportion to which a post-employment retention requirement applies are set out on page 101.
ANNUAL BONUS PERFORMANCE METRICS
The size of the overall bonus is assessed by the Committee taking into account performance against a scorecard of corporate
metrics which reflect the growth of the business. The choice of metrics may change for future award cycles, but was the following
for 2019:
Metric
Link to strategy
NAV (including dividends)
This measures growth in the value of the Group’s net asset value.
Distributions
This reflects the Group’s ability to realise cash distributions from its investments.
Disposals
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.
The majority of the bonus (currently 80% of salary or maximum bonus potential if higher at an Executive Director level) is based
on the above assessment of corporate performance. The remainder of the bonus (currently 20% at an Executive Director level)
is assessed on individual performance.
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 the following:
Metric
TSR
Link to strategy
This measures the total return to shareholders provided through share price appreciation and dividends. TSR is
measured relative to performance against a comparator group consisting of 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.
108
John Laing Group plcAnnual Report and Accounts 2019 INCENTIVE PLAN OPERATION
The Committee operates the Company’s incentive plans according to their respective rules and are 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.
For awards granted in 2019, in respect of performance periods beginning on or after 1 January 2019, the Committee retains the
ability to scale-back the extent to which any LTIP award vests, or to impose any additional conditions on vesting, where it considers
it is appropriate to do so (for example, where the vesting outcome does not reflect wider Company or individual performance).
The Committee also retains the ability to adjust the metrics, weighting and targets 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,
where 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. In addition,
for awards granted in respect of performance periods beginning on or after 1 January 2019, the Company may also apply malus
or clawback to an award where the Company suffers a material downturn in its operational or financial performance which is at
least partly attributable to management failure and to which the relevant participant has made a material contribution; where the
Company has suffered an instance of corporate failure resulting in the appointment of a liquidator or administrator; and/or where
there is a failure of risk management and/or regulatory non-compliance resulting in material damage to the Company’s business
or reputation.
The Company may also clawback cash bonus awards or previously vested DSBP and LTIP awards in the circumstances 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 undertook a substantial consultation of its
shareholders prior to the 2019 policy review, and as a matter of policy consults with major shareholders in advance of making
any significant changes to remuneration arrangements.
LINK TO THE REMUNERATION POLICY FOR ALL EMPLOYEES
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. However only the most senior employees are subject to deferral arrangements and
some other employees may have a higher weighting on individual performance. Other senior employees also participate in the
same LTIP as the Executive Directors.
There are some differences in the structure of the Remuneration Policy for the Executive Directors compared to other 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).
The Committee did not formally consult with employees in respect of the design of the Directors’ Remuneration Policy. However,
a review of the workforce engagement programme is underway, including how the Company will engage with employees in
respect of executive pay.
109
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT continued
REMUNERATION REWARD SCENARIOS
The total remuneration for the Executive Directors that could result from the Remuneration Policy in 2020 is shown below:
e
v
i
t
u
c
e
x
E
f
e
h
C
i
r
e
c
i
f
f
O
l
a
i
c
n
a
n
F
f
e
h
C
i
i
Minimum
100%
£559
Target
Maximum
Maximum
+ 50% growth
38%
25%
20%
Minimum
100%
£391
29%
33%
£1,478
32%
27%
43%
£2,252
53%
£2,736
r
e
c
i
f
f
O
Target
Maximum
Maximum
+ 50% growth
37%
25%
20%
30%
33%
£1,049
32%
27%
43%
£1,603
53%
£1,950
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
£’000
Fixed pay
Annual bonus
Long-term incentives
Notes:
1. Fixed pay consists of salary, benefits and pension. Salary is the amount to be paid in 2020 and benefits are based on the estimated value for
2020. Pension is shown as 15% of salary for the Chief Executive Officer and 12% for the Chief Financial Officer. For the Chief Financial Officer,
full year equivalent values have been shown.
2. The maximum bonus opportunity for 2020 is 150% of salary, with 60% of the maximum earned at target performance. The amount of any bonus
in excess of 60% of salary (or maximum bonus potential if higher) is deferred in shares, which vest subject to continued employment over one,
two and three years.
3. The maximum LTIP award for 2020 is 200% of salary. An award of 50% of the maximum is assumed for target performance. LTIP awards are
subject to a three-year performance period and the number of shares that vest (net of tax) must be held for a further two years post vesting.
4. The minimum, target and maximum scenarios exclude the impact of possible share price appreciation. A further scenario has been included to
illustrate the impact of a 50% increase in the share price on the value of LTIP awards in the maximum scenario. The basis of the calculation of
the share price appreciation is that the share price used in the calculation for the further scenario is assumed to increase by 50% across the
performance period. No assumptions have been made as to the value of dividend equivalents on share awards in any scenario.
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 an above inflation increase or
increases, subject to his or her continued development in the role.
• Pension arrangements for new appointments to the Board will be aligned with the rate applying to the majority of the
employees in the country in which the Executive Director is to be based.
• 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 for a specified period.
The Committee may also approve the payment of one-off relocation-related expenses and legal fees.
• Maximum variable pay is limited under the policy to 350% of salary. However, the Committee may offer additional 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 Group plcAnnual Report and Accounts 2019
EXECUTIVE DIRECTORS’ SERVICE AGREEMENTS
Olivier Brousse entered into a service agreement with the Company on 16 January 2015, and gave notice on 22 January 2020.
Luciana Germinario entered into a service agreement with the Company on 22 January 2019. There is no fixed term and the
contracts continue until terminated by either party giving 12 months’ notice.
POLICY ON PAYMENT FOR DEPARTURE FROM OFFICE
The Company is 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 service agreement to reduce the instalments
where the Executive Director commences alternative employment during the notice period.
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). Outplacement services and reimbursement of legal costs may also be provided. Where appropriate, medical
coverage may continue for a period post-cessation.
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:
Voluntary resignation or termination for cause
Annual Bonus
No entitlement.
DSBP
LTIP
Unvested awards will lapse upon cessation of employment
Unvested awards will lapse upon cessation of employment
Death, ill health, disability, redundancy or retirement agreed with the Board or for any other reason determined by the Committee
Annual Bonus
Bonus may be payable subject to performance. Awards normally pro-rated based on the period worked during the
financial year. If the executive has left employment by the payment date, the bonus will be paid wholly in cash.
DSBP
LTIP
Unvested awards granted prior to 9 May 2019 will vest on the date of cessation with no pro-rata reduction. Awards
granted after 9 May 2019 will continue to vest on the normal vesting date, unless the Committee determines that early
vesting should apply.
Awards will vest on the normal vesting date, subject to performance and a time pro-rata reduction.
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.
The post-vesting holding requirement and post-employment shareholding policy continues to apply.
Departure on agreed terms
This will normally fall between the two treatments described above, subject to the discretion of the Committee and the terms of
any termination agreement.
Any outstanding awards under an all employee share plan or separate buy-out arrangements entered into on the recruitment of
an Executive Director will be treated in accordance with the terms of the relevant plan/award.
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 or that such awards should be adjusted in such manner as the Committee may determine.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REMUNERATION REPORT 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 services1.
1 Olivier Brousse is a Non-executive Director of 1001 Fontaines. He does not receive any fees for this appointment. Luciana Germinario holds no
external positions.
REMUNERATION FOR THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS
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 Chair of a Board Committee, the role of Senior Independent Director or other Board appointed role).
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 105. Fee levels are reviewed on a periodic basis, and may be increased taking into
account factors such as the scope and time commitment of the role and market levels in companies of comparable size and
complexity and other broadly comparable companies. Additional fees may be paid as appropriate.
Expenses
The Chairman and the Non-executive Directors are entitled to reimbursement of reasonable expenses (and any tax
payable thereon).
Letters of
appointment
and policy on
termination
The letter of appointment for the Chairman states that his appointment 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
Will Samuel
Andrea Abt
Jeremy Beeton
Toby Hiscock3
Philip Keller
David Rough
Anne Wade
Date of letter of appointment
7 December 2017
10 May 2018
18 December 20141, 2
16 January 20151, 2
01 January 2020
17 December 20141, 2
17 December 20141, 2
1 The agreements were conditional on and did not become effective until the Company’s admission to the Official List on
17 February 2015.
2 Amendments to the letters of appointment were signed in January 2018, extending the terms by a further three years to
16 February 2021.
3 Toby Hiscock will retire from the Board with effect from 7 May 2020.
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.
112
John Laing Group plcAnnual Report and Accounts 2019 COMPLIANCE AGAINST THE 2018 CORPORATE GOVERNANCE CODE
1. BOARD LEADERSHIP AND COMPANY PURPOSE
A. The Group is led by an effective, committed Board, which collectively takes responsibility for the long-term sustainable success of the Group,
ensuring due regarding is given to all of the Group’s stakeholders. Its effectiveness is assessed annually, and further details can be found on
pages 84 to 85. Further details regarding how the Board carried out its duties during the year can be found on pages 44 to 46 in respect of
stakeholders, and page 82 in respect of activities during the year.
B. The Board takes responsibility for establishing the Company’s purpose, establishing the culture, setting the strategy and determining the
values to be observed in achieving that strategy. Details of the Group’s strategy and purpose are found on pages 8 to 73.
C. The Board ensures that the necessary resources are in place for the company to meet its agreed objectives and measure performance
against them, and monitors the use of these resources to ensure they are effectively deployed. Further details regarding the risk
management structure of the Group can be found on pages 49 to 54.
D. The Board and senior management actively engages with its stakeholders, and recognises the importance of doing so in order to meet its
strategic goals and agreed objectives. The engagement which has taken place during the year is detailed on pages 44 to 46, which also
provides details of how the Directors have complied with the requirements under section 172 of the Companies Act 2006.
E. In reviewing the Group’s various policies and procedures, the Board ensures that they are aligned with the Group’s purpose and values.
The Board receives regular updates on matters relevant to colleagues. Further details on workforce engagement can be found on
pages 46, 61 and 77, and details of the Group’s whistleblowing procedures can be found on page 83.
2. DIVISION OF RESPONSIBILITIES
F. The Chairman has overall responsibility for the leadership of the Board and for ensuring its effectiveness. Details of the division of
responsibilities can be found on page 81, and details of the board evaluation process and findings can be found on pages 84 and 85.
G. The Nomination Committee is responsible for assessing the balance of skills, experience, independence and knowledge of the Board as
a whole and individual Directors. These aspects are assessed when considering appointments, and on an annual basis. The Board also
assesses conflicts of interest and the time commitment of each Director. Details of the Director’s independence can be found on page 91,
and the findings of the Board effectiveness review can be found on pages 84 and 85. Details of the Board’s biographies and the overall
composition and diversity of the Board can be found on pages 74 to 75 and 78 respectively. Details of the division of responsibilities can
be found on page 81.
H. All newly appointed Non-executive Directors are advised on their expected time commitments prior to appointment, and are required such
time as is necessary to discharge their duties effectively. The Board reviews time commitments on appointment, and on a regular basis
thereafter, and is satisfied that there are no Directors whose time commitments are considered to be a matter for concern. Any new external
appointments must be approved by the Board prior to acceptance. For details of independence and time commitments, refer to page 91, and
for details of attendance at meetings during the year, please see page 78.
I. The Chairman, supported by the Group Company Secretary, ensures that Board members receive appropriate and timely information. All
Directors have access, at the Company’s expense, to independent professional advisers if required to assist the Directors in their role. Board
Committees are also provided with sufficient resources to discharge their duties.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance COMPLIANCE AGAINST THE 2018 CORPORATE GOVERNANCE CODE continued
3. COMPOSITION, SUCCESSION AND EVALUATION
J. The Nomination Committee leads and oversees Board appointments, and makes recommendations to the Board. Further details on this
process can be found in the Nomination Committee report on pages 90 to 91.
K. The Chairman, supported by the Group Company Secretary leads the training and development of Directors. Any newly appointed Director
receives a thorough, tailored induction programme taking account of the Director’s existing skills and experience, and the role in which they
have been appointed to perform.
All Directors will seek re-election at the 2020 AGM, or election, in the case of Philip Keller. The Board believes that all Directors continue to
be effective and committed to their roles.
L. An externally facilitated Board evaluation was conducted during the year. For further information, please see pages 84 to 85. Individual
performance of Directors is considered on an annual basis.
4. AUDIT, RISK AND INTERNAL CONTROL
M. The Audit & Risk Committee is responsible for overseeing the financial reporting process, the effectiveness of internal controls, the risk
management framework of the Group, and the work undertaken by the internal and external auditors. This Committee reports regularly on
its activities to the Board, and the report detailing how it discharged its duties during the year can be found on pages 86 to 89.
N. The Audit & Risk Committee, and the Board as a whole reviews the Annual Report and Accounts to ensure it is reflecting a fair, balanced and
understandable assessment of the Company’s position and prospects. The Directors’ and Auditors’ Statements of Responsibility can be found
on pages 119 and 125 respectively. Details of the Group’s strategy can be found on pages 8 to 73.
O. The Board is collectively responsible for the Group’s risk management and internal control system. In discharging these duties, the Board is
supported by the Audit & Risk Committee which has delegated authority as detailed in the Audit & Risk Committee Report on pages 86 to 89.
Details of the risk management framework of the Group can be found on pages 49 to 54. The related Directors’ Viability Statement can be
found on page 47, and the going concern statement can be found on page 41.
5. REMUNERATION
P. The Remuneration Policy is designed to promote the long-term and sustainable success of the Company. The Directors Remuneration
Report provides further details regarding the Remuneration of Directors, and the current Remuneration Policy, which was last approved by
shareholders in 2019.
Q. The Remuneration Committee seeks to ensure that all remuneration is fair and transparent. The details of how the Committee worked
during the year, and agreed Director remuneration can be found on pages 92 to 112.
R. The Remuneration Policy seeks to ensure all remuneration decisions made by Directors fully consider the wider circumstances as relevant
to that decision, including but not limited to, individual performance. For further information regarding the Remuneration Committee’s
decisions and outcomes during the year can be found on pages 92 to 105. The Directors Remuneration Report also includes details of any
external consultants engaged during the year, and whether they have any other connection with the Company, or its individual Directors.
114
John Laing Group plcAnnual Report and Accounts 2019
DIRECTORS’ REPORT
The Directors present their report and the audited financial statement of John Laing Group plc (the “Company”) together with
its subsidiary undertakings (the “Group”) for the year ended 31 December 2019. The Directors’ Report and the Strategic Report,
which includes the trends and factors likely to affect the future development, performance and position of the business and a
description of the principal risks and uncertainties of the Group (which can be found on pages 8 to 73 and is incorporated by
reference), collectively comprise the management report as required under the Disclosure and Transparency Rules (the DTR)
(DTR4.1.5R).
ADDITIONAL DISCLOSURES
In accordance with the UK Financial Conduct Authority’s Listing Rules, the information to be included in the 2019 Annual Report
and Accounts, where applicable, under Listing Rule 9.8.4, is set out in this Directors’ Report.
The information required by Listing Rule 9.8.4R is disclosed in the following pages:
Disclosure
Long-term incentive schemes
Unaudited Financial Information
Contracts of significance
Shareholder waiver of dividends
Shareholder waiver of future dividends
Page
92-112
185-188
118
115
115
Disclosures relating to capitalised interest, waiver of emoluments or of future emoluments by a Director, non-pro-rata allotments
for cash (issuer or major subsidiaries), parent participation in placing by a listed company, provision of services by a controlling
shareholder or agreements with controlling shareholders do not apply to the Company.
PRINCIPAL ACTIVITIES
John Laing is an originator, active investor and manager of international infrastructure projects. John Laing Group plc is a public
company incorporated in England and Wales with company number 05975300.
A list of the Company’s investments and subsidiaries at 31 December 2019 can be found in note 13 to the Company financial
statements on page 178 of this Annual Report.
The principal activity of the Company is to act as the holding company of the Group.
The Directors are not aware, at the date of this report, of any major changes in the Group’s activities in the coming year.
RESULTS AND DIVIDENDS
The Group’s results for the year ended 31 December 2019 are set out in the Group Income Statement on page 128. The Group
profit before tax for the year ended 31 December 2019 was £100 million (2018 – £296 million).
The Company-only profit after tax for the year was £124 million (see page 168) (2018 – £294 million).
The Board proposes, subject to the approval of shareholders at the AGM to be held on 7 May 2020, that a base dividend of 3.68 pence
per ordinary share, plus a special dividend of 3.98 pence per ordinary share, totalling a final dividend of 7.66 pence per ordinary share
be paid on 15 May 2020 to shareholders whose names are on the register of members at the close of business on 24 April 2020.
Further information on the final dividend can be found on page 130. This payment, together with the interim dividend of 1.84 pence
per ordinary share paid on 25 October 2019, makes a total for the year of 9.5 pence per share.
During the year under review Sanne Fiduciary Services Limited, trustee of the John Laing Group Employee Benefit Trust, has
waived its entitlement to dividends. With effect from 24 January 2020, the Company transferred the Employee Benefit Trust from
Sanne to Equiniti Trust (Jersey) Limited. Equiniti Trust (Jersey) Limited has also waived its entitlement to dividends.
PERFORMANCE MONITORING
The delivery of the Group’s strategic objectives is monitored by the Board through Key Performance Indicators (KPIs), set out in
the Summary Financial Information section, and regular periodic review of various aspects of the Group’s operations. The Group
considers that the KPIs listed on pages 16 and 17 are appropriate measures to assess the delivery of the Group’s strategy.
115
Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REPORT continued
CHANGES TO THE BOARD DURING THE YEAR
Changes to the composition of the Board since 1 January 2019 up to the date of this report are shown on the table below.
Luciana Germinario
Patrick O’D Bourke
Philip Keller
Joined the Board
25 April 2019
1 January 2020
Left the Board
9 May 2019
APPOINTMENT AND RETIREMENT OF DIRECTORS
The appointment and retirement of Directors is governed by the Company’s Articles of Association, the UK Corporate Governance
Code and the Companies Act 2006. The Company’s Articles may only be amended by a special resolution of the shareholders in a
general meeting.
The Company does not have any agreements with any Director or employee that would provide compensation for loss of office or
employment resulting from a takeover, except that provisions of the Company’s Long-Term Incentive Plan and Deferred Share
Bonus Plan may cause unvested awards granted to Directors and employees to vest on a takeover.
In the interests of good governance and in accordance with the provisions of the UK Corporate Governance Code, all Directors will
retire, and those wishing to serve again will submit themselves for re-election at the 2020 AGM.
Biographies of current Directors can be found on pages 74 and 75. Details of the Directors seeking election or re-election at the
AGM are set out in the Notice of Meeting.
POWERS OF THE DIRECTORS
Subject to the Articles, the Companies Act 2006 (the “Act”) and any directions given by the Company by special resolution and any
relevant statutes and regulations, the business of the Company will be managed by the Board who may exercise all the powers of
the Company. Specific powers relating to the allotment and issuance of ordinary shares and the ability of the Company to
purchase its own securities are also included within the Articles, and such authorities are submitted for approval by shareholders
at the AGM each year.
The Company has not utilised its authority to make market purchases of shares granted at the 2019 AGM but, in line with market
practice, will be seeking to renew such authority at this year’s AGM.
DIRECTORS’ INTERESTS
The Directors’ interests in, and options over, ordinary shares in the Company are shown in the Directors’ Remuneration Report.
Since the year end, there have been no changes to such interests.
In line with the requirements of the Act, Directors have a statutory duty to avoid situations in which they have, or may have,
interests that conflict with those of the Company unless that conflict is first authorised by the Board.
The Company has in place procedures for reviewing and managing conflicts of interest as noted in the Corporate Governance
report on page 83. Directors have a duty to notify the Chairman and Group Company Secretary as soon as they become aware of
actual or potential conflict situations. The Company’s Articles contain provisions to allow the Directors to authorise potential
conflicts of interest, so that if approved, Directors will not be in breach of their duty under company law.
DIRECTORS’ AND OFFICERS’ INDEMNITIES
The Company has purchased and maintains appropriate insurance cover in respect of Directors’ and Officers’ liabilities. The
Directors and Group Company Secretary of the Company and the directors of the Company’s subsidiaries have the benefit of a
third party indemnity provision, as defined by section 236 of the Act, pursuant to the Company’s Articles.
The Directors of the Company, including the former Director who retired during the year, have entered into individual deeds of
indemnity with the Company which constituted “qualifying third-party indemnity provisions” for the purposes of the Companies
Act 2006. The deeds indemnify the Directors to the maximum extent permitted by law and remain in force. The deeds were in
force during the whole of the financial year or from the date of appointment in respect of the Director appointed in 2019. Deeds
for existing Directors are available for inspection at the Company’s registered office.
The Company has also granted deeds of indemnity by deed poll which constitute “qualifying third-party indemnity provisions”
to the directors of the Group’s subsidiary companies, including to former directors who retired during the year and since the
year end, and to remain in force as at the date of this report.
116
John Laing Group plcAnnual Report and Accounts 2019 SHARE CAPITAL AND SHAREHOLDER VOTING RIGHTS
Details of the Company’s issued share capital and the rights attached to the shares, together with details of movements in the
issued share capital during the year, are showing in note 21 to the Group financial statements on page 164 of this Annual Report.
All ordinary shares, including those acquired through the Company share schemes, rank equally with no special rights. There are
no known arrangements that may restrict the transfer of shares or voting rights.
All shareholders are entitled to attend and speak at general meetings of the Company, appoint proxies, receive any dividends,
exercise voting rights and transfer shares without restriction. On a show of hands at a general meeting every member present in
person shall have one vote, and on a poll, every member present in person or by proxy shall have one vote for every ordinary
share held.
SIGNIFICANT SHAREHOLDERS
Information provided to the Company by significant shareholders pursuant to the DTR is published via a Regulatory Information
Service.
As at 31 December 2019 and 2 March 2020, being the last practicable date, the Company had been notified by its significant
shareholders under Rule 5 of the DTR of the following interests in the Company’s shares:
Notification received by
Standard Life Aberdeen plc
JP Morgan Asset Management Holdings Inc
31 December
2019
69,595,741
25,363,186
% of issued
share capital1
14.12
5.15
SFM UK Management LLP
Baille Gifford & Co
Kames Capital plc
Norges Bank
–
24,734,900
14,747,579
14,728,606
–
5.04
3.00
3.00
1 Percentage provided was correct at the date of notification.
% of issued
share capital
16.03
Below 5%
2 March 2020
79,026,448
Notification received
of reduction below
5% threshold on
6 February 2020
24,693,676
5.00
The processes by which the Company seeks to understand the views of its major shareholders are described on pages 44 to 46.
ARTICLES OF ASSOCIATION
In accordance with the Act, the Articles may only be amended by special resolution of the Company’s shareholders in a general
meeting.
TRANSACTIONS WITH RELATED PARTIES
During the period, the Company did not enter into any material transactions with any related parties, other than those disclosed
in note 26 of the financial statements.
POLITICAL DONATIONS
The Group made no political donations during 2019 (2018 – nil). It remains the Company’s policy not to make political donations.
However, the application of the relevant provisions of the Act is potentially very broad in nature and, as it did last year, the Board
will be seeking shareholder authority to make political donations up to a defined limit to ensure that the Group does not
inadvertently breach these provisions as a result of the breadth of its business activities, although the Board has no intention of
using this authority.
GREENHOUSE GAS EMISSIONS
Greenhouse gas emissions are detailed in the Strategic Report on pages 70 to 73.
BRANCHES
The Company and its subsidiaries have established branches in certain of the countries in which the Group operates.
AUDITOR
The Company’s auditor is Deloitte LLP (the “External Auditor”). A resolution proposing reappointment of Deloitte LLP as auditor
and authorising the Directors to set its remuneration are included in the Notice of Meeting and will be put to shareholders at the
2020 AGM.
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Strategic ReportFinancial StatementsJohn Laing Group plcAnnual Report and Accounts 2019OverviewGovernance DIRECTORS’ REPORT continued
STATEMENT OF DISCLOSURE OF INFORMATION TO THE EXTERNAL AUDITOR
In accordance with Section 418(2) of the Act, each Director in office at the date the Directors’ Report is approved confirms that:
• So far as the Director is aware, there is no relevant audit information of which the Company’s External Auditor is unaware;
and
• The Director has taken all 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 External Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
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 8 to 73. The Strategic Report includes the Financial Review on pages 34 to 41, the viability statement
on pages 47 to 48 and the principal risks facing the Group on pages 49 to 54.
RESEARCH AND DEVELOPMENT
Neither the Company nor any of its subsidiaries undertake any research or development activities.
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 18 to the Group financial statements.
POST BALANCE SHEET EVENTS
Post balance sheet events are detailed in note 27 to the Group financial statements.
MATERIAL CONTRACTS
The Group’s £650 million committed corporate banking facilities dated 25 July 2018, currently comprise £500 million committed
until 25 July 2023 and £150 million until 25 January 2022 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 outstanding utilisations would need to be made
by the incoming owners.
EMPLOYEES
The Group seeks to ensure employee commitment to its objectives in a number of ways. Strategic changes are communicated
directly to all employees and resultant queries are handled by the relevant business heads or Executive Committee members 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 employees. 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 as provided if necessary.
Further details relating to employees of the Group (including details of certain of the Group’s employment policies) can be found
on pages 56 to 62 of the Corporate Responsibility section of the Annual Report. Details regarding workforce engagement can
been found on pages 46, 61 and 77.
The Directors’ Report, the Strategic Report, the Corporate Governance Report and the Directors’ Remuneration Report were
approved by the Board on 2 March 2020.
GOVERNANCE ARRANGEMENTS
Information regarding the Company’s governance arrangements is set out in the Corporate Governance Report on pages 76 to 85.
These pages are incorporated by reference into the Directors’ Report.
On behalf of the Board
Clare Underwood
Group Company Secretary
2 March 2020
118
John Laing Group plcAnnual Report and Accounts 2019 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 2 March 2020 and is signed on its behalf by:
Olivier Brousse
Chief Executive Officer
Luciana Germinario
Chief Financial Officer
2 March 2020
2 March 2020
119
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 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 of John Laing Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 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
(IFRSs) as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs 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 which comprise:
•
•
•
•
•
•
the Group income statement;
the Group statement of comprehensive income;
the Group and Parent Company balance sheets;
the Group and Parent Company statements of changes in equity;
the Group and Parent Company cash flow statement; 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 IFRSs as adopted by the
European Union (“EU”) 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 Financial Reporting Council’s (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 scheme liabilities.
The above key audit matters are consistent with the prior year.
Materiality
Scoping
The materiality that we used for the Group financial statements was £17 million (December 2018: £21 million)
which was determined on the basis of shareholders’ equity.
Our audit scope primarily focused on the fair value of those investments which are significant to the Group.
Our audit included local valuation specialists to undertake audit work on the valuation of a sample of
European, North American, Asia Pacific assets. This reflects that the valuation of these assets is now
initially undertaken by management in each of these regions.
Significant changes
in our approach
There has been no significant change in our audit approach in the current year other than the involvement
of valuation specialists in Europe, Australia and North America.
120
John Laing Group plcAnnual Report and Accounts 2019 CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT
Going concern
We have reviewed the directors’ statement in note 3(b) 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 considered as part of our risk assessment the nature of the company, its business
model and related risks including where relevant the impact of Brexit, the requirements
of the applicable financial reporting framework and the system of internal control. We
evaluated the directors’ assessment of the Group’s and Parent Company’s ability to
continue as a going concern, including challenging the underlying data and key
assumptions used to make the assessment, and evaluated the directors’ plans for future
actions in relation to their going concern assessment.
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 49 to 54 that describe the principal risks, procedures to
identify emerging risks and an explanation of how these are being managed
or mitigated;
the directors’ explanation on pages 47 to 48 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.
Going concern is the basis
of preparation of the
financial statements that
assumes an entity will
remain in operation for a
period of at least 12 months
from the date of approval
of the financial statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
Viability means the ability of
the Group to continue over
the time horizon considered
appropriate by the directors.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
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 in the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included 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.
There has been no change in the key audit matters in the current year from what we reported last year.
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Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC continued
VALUATION OF INVESTMENTS
Key audit matter
description
The Group holds a range of investments in infrastructure assets. The total value of these assets at
31 December 2019 was £1,768 million (31 December 2018 – £1,560 million) as disclosed in note 13 to the
Group financial statements. These investments are held across a range of different sectors comprising
transport, environmental (including wind and solar generation assets) and social infrastructure, and a
range of geographies comprising Europe, North America, Asia Pacific and Latin America.
How the scope
of our audit
responded
to the key
audit matter
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. The quantum and timing of value enhancements
recognised in the portfolio was the other significant judgement identified in the current financial year. Given
the level of judgement involved, we consider these areas to be fraud risks. Other key sources of estimation
uncertainty include forecast project cash-flows, in particular future power prices, margined loss factor and
energy yields which impact the value of the Group’s investments in Renewable Energy projects. In addition to
Asia-Pacific assets, North American and European assets were valued locally by John Laing valuation teams
in the current year.
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 valuation is obtained from a third party in respect of the fair market value of the portfolio as a
whole at the balance sheet date. The level of transactional evidence over the past five years has increased
as the Group has divested assets.
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, marginal loss factor and energy yields) can be found in the
Audit & Risk Committee report on page 87 and note 4 to the Group financial statements.
• We obtained an understanding of the relevant controls in place to value the Group’s investments.
• We benchmarked 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.
• A sample of value enhancements were agreed to underlying third party evidence to assess the value and
timing of recognition in the portfolio valuation. We assessed consistency of certain enhancements across
regions and asset classes.
• We worked with Deloitte valuation specialists in Europe, Asia Pacific and North America who assessed
the discount rates on a sample of assets.
• We met with the Group’s independent 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 independent valuer. We also
assessed the competence and independence of the external valuer.
• We assessed 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. For new
investments we also reviewed the project model audit report. We agreed the marginal loss factor and
energy yield forecasts to external third party reports.
• We also visited the North America, Europe and Asia Pacific operations of the Group which included a site
visit to a sample of assets. We discussed asset performance with members of the Asset Management
team and considered the impact of operational challenges on the value of key projects.
• We checked that the disclosures in the financial statements were appropriate particularly in respect of
the judgements taken and the sensitivities disclosed.
Key observations
• We consider the judgements adopted in valuing the Group’s investments as a whole to be appropriate
and within an acceptable range.
• We consider the disclosures in respect of the valuation of investments to be appropriate and in
accordance with IFRS as adopted by the EU.
122
John Laing Group plcAnnual Report and Accounts 2019 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 surplus of £13 million at 31 December 2019 (deficit of £33 million at
31 December 2018).
The valuation of the surplus is subject to a number of assumptions including the adoption of the appropriate
(i) discount rate (ii) inflation rate and (iii) mortality assumptions. We consider this to be a fraud risk due to
the quantum of the defined benefit obligation liability, its sensitivity to the underlying assumptions and the
management judgement involved in deciding on the underlying assumptions.
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
‘The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their Interaction.’
For further information, see note 19 to the Group financial statements and the Audit & Risk Committee
report on page 88 and the Group’s disclosures around critical accounting judgements and key sources of
estimation uncertainty in note 4 to the Group financial statements.
How the scope
of our audit
responded
to the key
audit matter
• We obtained an understanding of the relevant 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 tested 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, external legal advice obtained by management and the
actuarial schedule of contributions.
• We checked that the disclosure requirements of IAS 19R Employee Benefits had been fulfilled.
Key observations
• We consider the judgements adopted by the Group in valuing the pension scheme liabilities (the
discount, inflation and mortality assumptions) to be appropriate and consistent with our own internal
benchmarks.
• We concur with management’s judgement 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 and in accordance with IFRS as adopted by the EU.
OUR APPLICATION OF MATERIALITY
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 as follows:
Group financial statements
Parent company financial statements
Materiality
£17 million (December 2018 – £21 million)
£15 million (December 2018: £19 million)
Basis for determining
materiality
1.0% of Group shareholders’ equity (December
2018 – 1.3%)
1.0% of Parent Company shareholders’ equity
(December 2018 – 1.2%)
Rationale for the
benchmark applied
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.
123
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC continued
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set
at 70% of Group materiality for the 2019 audit (2018 - 70%). In determining performance materiality, we considered our risk
assessment, including our assessment of the Group’s overall control environment and that we consider it appropriate to rely on
controls over a number of business processes. Our past experience of the audit has indicated a low number of corrected and
uncorrected misstatements in prior periods.
Error reporting threshold
We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £750,000
(2018: £750,000), 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.
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
investments which are significant to the Group.
A full scope audit is performed on 26 (2018 – 30) entities comprising a mix of those entities in the fair value group and those
entities which provide investment-related services and which are consolidated into the Group financial statements. Materialities
range from £8.5m to £15m (2018: £10.5m to £17m). 100% of Group revenue, profit before tax and net assets are covered by
auditing these entities. All audit work is 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 visited the Group’s North American, Europe and Asia Pacific operations in the year which was combined
with a site visit to a sample of the Group’s investments. Over the past three years the Group audit team has visited 12 of the
Group’s investments which covered 40% of the investment portfolio by value at 31 December 2019.
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.
We have nothing to report
in respect of these matters.
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:
Fair, balanced and understandable – the statement given by the directors that they
consider the annual report and financial statements taken as a whole is fair, balanced
and understandable and provides 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 & Risk Committee reporting – the section describing the work of the Audit & Risk
Committee does not appropriately address matters communicated by us to the Audit &
Risk 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.
124
John Laing Group plcAnnual Report and Accounts 2019 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.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance
with laws and regulations are set out below.
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.
EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then
design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with
laws and regulations, our procedures included the following:
•
•
•
the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by
the Audit and Risk Committee on behalf of the board on 5 November 2019;
results of our enquiries of management, internal audit and the Audit & Risk Committee about their own identification and
assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
–
–
–
–
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team and involving relevant internal specialists, including tax,
valuations, pensions, IT, and industry specialists regarding how and where fraud might occur in the financial statements
and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud
and identified the greatest potential for fraud in the following areas: the discount rate assumption in the valuation of the investment
portfolio, the quantum and timing of the recognition of value enhancements and the adoption of the appropriate discount rate,
inflation rate and mortality assumptions in determining the defined benefit pension scheme surplus. In common with all audits
under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of
those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions
legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
125
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN LAING GROUP PLC continued
Audit response to risks identified
As a result of performing the above, we identified the valuation of investments and the valuation of the defined benefit pension
schemes as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the
matters in more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
•
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant
laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit & Risk committee and in-house legal counsel concerning actual and potential litigation
and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
•
•
reading minutes of meetings of those charged with governance and reviewing internal audit reports; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of
business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members,
including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
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 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 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.
We have nothing to report
in respect of these matters.
126
John Laing Group plcAnnual Report and Accounts 2019
OTHER MATTERS
Auditor tenure
Following the recommendation of the Audit & Risk Committee, we were reappointed as auditor by the Board of John Laing Group plc
at the Annual General Meeting on 9 May 2019 to audit the financial statements for the year ending 31 December 2019 and
subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of
the firm is 12 years, covering the years ended 31 December 2008 to 31 December 2019.
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).
USE OF OUR REPORT
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Claire Faulkner FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
2 March 2020
127
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements GROUP INCOME STATEMENT
for the year ended 31 December 2019
Net gain on investments at fair value through profit or loss
Other income
Operating income
Administrative expenses (excluding GMP equalisation charge)
GMP equalisation charge
Total administrative expenses
Profit from operations
Finance costs
Profit before tax
Tax (charge)/credit
Profit for the year attributable to the Shareholders of the Company
Earnings per share (pence)
Basic
Diluted
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
Notes
13
8
5
19
9
11
5
12
6
6
147
32
179
(68)
–
(68)
111
(11)
100
–
100
20.4
20.2
366
31
397
(66)
(21)
(87)
310
(14)
296
–
296
63.1
62.4
128
John Laing Group plcAnnual Report and Accounts 2019 GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2019
Profit for the year
Actuarial gain/(loss) on retirement benefit obligations
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Note
19
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
100
19
19
119
296
(3)
(3)
293
Actuarial gain/(loss) on retirement benefit obligations will not be subsequently reclassified to the Group Income Statement.
129
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Balance at 1 January 2019
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Share-based incentives
Vesting of share-based incentives
Purchase of own shares related to share-based incentives
Dividends paid1
Balance at 31 December 2019
Share
capital
£ million
Share
premium
£ million
Other
reserves
£ million
Retained
earnings
£ million
Total
equity
£ million
Notes
49
416
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49
416
6
–
–
–
4
(4)
(4)
–
2
1,115
1,586
100
19
119
–
4
–
(47)
100
19
119
4
–
(4)
(47)
1,191
1,658
7
7, 21
21
for the year ended 31 December 2018
Balance at 1 January 2018
Profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Share-based incentives
Vesting of share-based incentives
Net proceeds from issue of shares
Dividends paid1
Balance at 31 December 2018
1 Dividends paid
Dividends on ordinary shares
Per ordinary share:
– final paid
– interim proposed and paid
– final proposed
Share
capital
£ million
Share
premium
£ million
Other
reserves
£ million
Retained
earnings
£ million
Notes
37
218
–
–
–
–
–
12
–
49
–
–
–
–
–
198
–
416
6
–
–
–
3
(3)
–
–
6
7
7, 21
21, 22
Total
equity
£ million
1,124
296
(3)
293
3
–
210
(44)
863
296
(3)
293
–
3
–
(44)
1,115
1,586
Year ended
31 December
2019
pence
Year ended
31 December
2018
pence
7.70
1.84
7.66
7.17a
1.80
7.70
a The final dividend for 2017 was originally reported in the 2017 Annual Report and Accounts as 8.70p per share. This was adjusted for the Rights
Issue to 7.17p per share and paid in May 2018.
The total estimated amount to be paid in May 2020 in respect of the proposed final dividend for 2019 is £38 million based on the
number of shares in issue as at 31 December 2019. The final dividend paid for 2019 will depend on the number of share-based
incentives vesting before the final dividend is paid.
130
John Laing Group plcAnnual Report and Accounts 2019 GROUP BALANCE SHEET
as at 31 December 2019
Non-current assets
Right-of-use assets
Investments at fair value through profit or loss
Retirement benefit asset
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Net current liabilities
Non-current liabilities
Retirement benefit obligations
Finance lease liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Equity attributable to the Shareholders of the Company
31 December
2019
£ million
31 December
2018
£ million
Notes
13
19
14
16
15
19
20
21
22
4
1,897
13
1,914
6
2
8
–
1,700
–
1,700
8
6
14
1,922
1,714
(236)
(15)
(251)
(243)
(7)
(4)
(2)
(13)
(264)
1,658
49
416
2
1,191
1,658
(66)
(20)
(86)
(72)
(40)
–
(2)
(42)
(128)
1,586
49
416
6
1,115
1,586
The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and
authorised for issue on 2 March 2020. They were signed on its behalf by:
Olivier Brousse
Chief Executive Officer
Luciana Germinario
Chief Financial Officer
2 March 2020
2 March 2020
131
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements GROUP CASH FLOW STATEMENT
for the year ended 31 December 2019
Net cash outflow from operating activities
Investing activities
Net cash transferred (to)/from investments at fair value through profit or loss
Net cash (outflow)/inflow from investing activities
Financing activities
Proceeds from issue of shares
Purchase of own shares related to share-based incentives
Dividends paid
Finance costs paid
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Notes
23
13
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(61)
(50)
(50)
–
(4)
(47)
(11)
339
(170)
107
(4)
6
2
(54)
12
12
210
–
(44)
(15)
15
(121)
45
3
3
6
132
John Laing Group plcAnnual Report and Accounts 2019 NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2019
1 GENERAL INFORMATION
The results of John Laing Group plc (the “Company” or the “Group”) are stated according to the basis of preparation
described in note 3 below. The Company is a public limited company incorporated in England and Wales and 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.
2 ADOPTION OF NEW AND REVISED STANDARDS
New and amended IFRS that are effective for the current year
In 2019, the Group adopted one new IFRS, together with a number of amendments to IFRS and Interpretations, issued by the
International Accounting Standards Board (IASB) that are effective for an annual period that begins on or after 1 January
2019 (and have been endorsed for use within the EU).
•
IFRS 16 Leases
• Amendments to IFRS 9 Prepayment Features with Negative Compensation
• Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
• Annual Improvements to IFRS 2015 – 2017 Cycle: Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
• Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment and Settlement
•
IFRIC 23 Uncertainty over Income Tax Treatments
Other than IFRS 16, the other amendments and interpretations do not have an impact on the consolidated financial
statements of the Group.
The nature and effect of the changes as a result of the adoption of IFRS 16 are described below.
Impact of initial application of IFRS 16 Leases
The Group adopted IFRS 16 Leases using the modified retrospective method of adoption with a date of application of
1 January 2019. This method involves measuring the right-of-use asset at an amount equal to the lease liability at the
transition date. As permitted under this method, the Group has not restated comparatives for the 2018 reporting period.
The Group elected to use the practical expedient allowing the standard to be applied only to contracts that were previously
identified as leases applying IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease – at the
date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’),
and lease contracts for which the underlying asset is of low value (‘low value assets’) being those assets with a value less
than £5,000.
The Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under
the principles of IAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted
using the Group’s incremental borrowing rate as of 1 January 2019. The Group’s weighted average incremental borrowing
rate applied to the lease liabilities on 1 January 2019 was 2.75%.
The effect of adoption of IFRS 16 is as follows:
Assets
Right-of-use assets
Total assets
Liabilities
Finance lease liability
Total liabilities
Equity
Retained earnings
Total equity
1 January
2019
£ million
5
5
(5)
(5)
–
–
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A reconciliation of the Group’s outstanding commitments for future minimum lease payments under non-cancellable
operating leases for land and buildings previously disclosed in the 2018 Annual Report & Accounts to the lease liability
recognised under IFRS 16 is shown below.
Within one year
In the second to fifth years inclusive
After five years
Discount on lease liability
Total liabilities recognised under IFRS 16
1 January
2019
£ million
(1)
(3)
(2)
(6)
1
(5)
The impact on the Group Income Statement for the year ended 31 December 2019 from recognising an interest expense on
the lease liability and depreciation of the right-to-use asset in contrast to the operating lease charge, which would have been
applied under IAS 17, was a net £0.1 million credit.
New and amended IFRS standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised standards
that have been issued but are not yet effective and in some cases had not yet been adopted by the EU:
•
•
IFRS 17 Insurance Contracts
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
• Amendments to IFRS 3 Definition of a business
• Amendments to IAS 1 and IAS 8 Definition of material
• Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial
statements of the Group in future periods.
3 SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The Group financial statements have been prepared in accordance with IFRS as adopted by the EU and are presented
in pounds sterling.
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 its investment in John Laing
Holdco Limited and 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 in project companies take the form of equity and/or subordinated debt;
(iii) the Group’s business model is to originate, invest in, and actively manage infrastructure assets. It invests in
infrastructure 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
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a) Basis of preparation (continued)
(iv)
the Group measures its investments 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 surplus, IFRS 10 does not exclude companies with
non-investment related balances 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)
b)
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
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.
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.
b) 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 £500 million corporate banking facilities committed until July 2023, together
with additional £150 million facilities committed until January 2022. 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 banking 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 foreign exchange, credit, price, liquidity, interest rate and capital
risks are set out in note 18.
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c) Revenue
The key accounting policies for the Group’s material revenue streams are as follows:
(i)
Dividend income
Dividend income from investments at FVTPL is recognised when the shareholders’ rights to receive payment have
been established (provided that it is probable that the economic benefits will flow to the Company 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
Net gain on investments at FVTPL excludes dividend income referred to above. Please refer to accounting policy
e)(i) for further detail.
(iii) Revenue from contracts with customers
Fees from asset management services
Fees from asset management services comprise fees for the management of the Jura and JLEN funds under
Investment Advisory Agreements as well as fees for providing services under Management Services Agreements
to certain projects in which the Group and other parties invest. These fees are earned under contracts that have
a single performance obligation which is to deliver asset management services to the customer. Revenue is
recognised in accordance with the contract to the extent the performance obligation is met which is considered
to be over time as the asset management services are provided.
Management services to the Jura and JLEN funds ceased to be provided in the year ended 31 December 2019.
Recovery of bid costs
The recovery of costs incurred in respect of bidding for new primary investments is recognised when a contract to
recover costs is entered into with either the entity procuring the project or the project company, typically at financial
close. This is the point at which the performance obligation has been met.
Revenue from contracts with customers excludes VAT and the value of intra-group transactions between recourse
subsidiaries held at FVTPL and those that are consolidated.
d) 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.
e) Financial instruments
Financial assets and financial liabilities are recognised in the Group Balance Sheet when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at
FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL
are recognised immediately in profit or loss.
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e) Financial instruments (continued)
(i)
Financial assets
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value,
depending on the classification of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured subsequently at amortised cost:
•
•
the financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are measured subsequently at fair value through other
comprehensive income (FVTOCI):
•
•
the financial asset is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling the financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently at FVTPL.
The financial assets that the Group holds are classified as follows:
•
Investments at FVTPL are measured subsequently at FVTPL.
Investments 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 and other assets and liabilities of investment entity subsidiaries. Investments in project companies are
recognised 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 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 e)(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.
• Trade and other receivables and cash and cash equivalents are measured subsequently at amortised cost using
the effective interest method.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition
minus the principal repayments, plus the cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying
amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
• 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, but exclude bank
overdrafts unless there is a right to offset against corresponding cash balances.
Deposits held with original maturities of greater than three months are shown as other financial assets.
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e) Financial instruments (continued)
(ii)
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on trade and other receivables. The amount
of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition
of the respective financial instrument.
The Group’s financial assets classified as trade and other receivables at 31 December 2019 were only £4 million,
or 0.2% of the Group’s net assets, and therefore any credit risk in relation to the impairment of trade and other
receivables is considered to be immaterial.
(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.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
(iv) Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method
or at FVTPL.
The Group’s financial liabilities, which comprise interest-bearing loans and borrowings and trade and other
payables, are all measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,
or (where appropriate) a shorter period, to the amortised cost of a financial liability.
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 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.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or have expired. The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
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e) Financial instruments (continued)
(v) Derivative financial instruments
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. The Group
does not apply hedge accounting to its derivative financial instruments.
f) 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.
g) 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 on a straight-line basis over the remaining facility term.
Finance costs also include the net interest cost on retirement benefit obligations and the unwinding of discounting
of provisions.
h) Taxation
The tax charge or credit represents the sum of tax currently payable and deferred tax.
Current tax
Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Group
Income Statement because it excludes both items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible, which includes the fair value movement on the investment in John Laing
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
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.
i) 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 that is consolidated 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.
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j) 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 GMP equalisation charge for 2019 has been
presented separately in the Group Income Statement as it was deemed to be a material amount in the context of total
administrative expenses.
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.
k) Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets
(being those assets with a value less than £5,000). For these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its
incremental borrowing rate.
The lease liability is presented as a separate line in the Group Balance Sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an
unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which
case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments
using a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is
recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included
in the related right-of-use asset, unless those costs are incurred to produce inventories.
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k) Leases (continued)
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects
to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the Group Balance Sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified
impairment loss.
l) 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.
m) Employee benefit trust
In June 2015, the Group established the John Laing Group Employee Benefit Trust (EBT) as described further in note 7.
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 as defined by IFRS. 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.
4 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 financial year) are in respect of the fair value of investments and accounting for the
Group’s defined benefit pension liabilities.
Fair value of investments
Critical accounting judgements in applying the Group’s accounting policies
The Company measures its investment in John Laing Holdco Limited at fair value. The critical accounting judgement is how
the investment in John Laing Holdco Limited is fair valued. Fair value is determined based on the fair value of investments
in project companies (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, 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, a risk premium is added to reflect the additional
risk during the construction phase. The construction risk premium reduces over time as the project progresses through its
construction programme, reflecting the significant reduction in risk once the project reaches the operational stage. The
valuation 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 (where relevant); 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 energy projects, energy yield and future energy prices. Value enhancements are only incorporated when the
Group has sufficient evidence that they can be realised.
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Key sources of estimation uncertainty
A key source of estimation uncertainty in valuing the investment portfolio is the discount rate applied to forecast project cash
flows. A base case discount rate for an operational project is derived from secondary market information and other available
data points. The base case discount rate is then adjusted to reflect project-specific risks. In addition, a risk premium is 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 2019 were in the range of 6.4% to 12.4%
(31 December 2018 – 6.8% to 11.7%). Note 18 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 marginal loss factors impacting Australian wind and solar generation assets, future energy prices and energy
yields impacting all renewable energy projects and forecasts for long-term inflation across the whole portfolio. Note 18
provides details of the sensitivities to the investment portfolio value from changes in forecast energy prices marginal loss
factors, energy yields 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 deviate materially year on year.
Pension and other post-retirement liability accounting
Critical judgements in applying the Group’s accounting policies
The accounting surplus in the Group’s defined benefit pension schemes at 31 December 2019 was £13 million (2018 – deficit
of £33 million). In determining the Group’s defined benefit pension surplus, 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 was higher,
an additional liability would need to be recognised. Under the trust deed and rules of JLPF, the Group has an ultimate
unconditional right to any surplus, accordingly the excess of the minimum funding requirement over the IAS 19 Employee
Benefits liability has not been recognised as an additional liability.
Key sources of estimation uncertainty
The value of the pension deficit is highly dependent on key assumptions including price inflation, discount rate and life
expectancy. The assumptions applied at 31 December 2019 and the sensitivity of the pension liabilities to certain changes
in these assumptions are illustrated in note 19.
Brexit
In assessing the risks facing our business, we have considered the implications of and the potential impact on the Group’s
results of the UK withdrawing from the European Union. We believe our business model is robust enough and adaptable to
weather any potential short-term disruption which might arise through the transition period and beyond. The most likely
impact would come from any resulting macroeconomic changes, including changes in interest rates, which could impact
discount rates in relation to both the Group’s investment portfolio and its retirement benefit obligations, inflation and sterling
exchange rates. The above sections on key sources of estimation uncertainty provide more details in these areas.
5 OPERATING SEGMENTS
Following an internal reorganisation, under which the Primary Investment and Asset Management teams in each of the
four core geographical regions report to a single regional head, 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
performance on a regional basis. Regional performance targets have also been set. Accordingly, the reportable segments
under IFRS 8 are based on regions which are currently: Asia Pacific, Europe and Middle East, North America and Latin
America. Further reportable segments are “Fund management”, relating to the external fund management activities for
Jura and JLEN, which ceased in 2019, and “Central”, which covers the corporate activities at the Group’s headquarters.
The prior period segmental information has been restated accordingly.
The Board’s primary measure of profitability for each segment is profit before tax (PBT).
142
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 5 OPERATING SEGMENTS (CONTINUED)
The following is an analysis of the Group’s operating income and profit before tax for the years ended 31 December 2019 and
31 December 2018:
Net gain on investments at FVTPL
Other income
Operating income
Administrative expenses
Profit from operations
Finance costs
Profit before tax
Net gain on investments at FVTPL
Other income
Operating income
Administrative expenses (excluding GMP
equalisation charge)
GMP equalisation charge
Profit from operations
Finance costs
Profit before tax
Asia Pacific
£ million
Europe
£ million
Year ended 31 December 2019
North
America
£ million
Latin
America
£ million
Fund
Management
£ million
Central
£ million
Total
£ million
12
2
14
18
3
21
(10)
(12)
4
–
4
9
–
9
100
6
106
(14)
92
–
92
12
–
12
(3)
9
–
9
–
20
20
(5)
15
–
15
5
1
6
(24)
(18)
(11)
(29)
147
32
179
(68)
111
(11)
100
Year ended 31 December 2018 (restated)
Asia Pacific
£ million
Europe
£ million
North
America
£ million
Latin America
£ million
Fund
Management
£ million
Central
£ million
Total
£ million
86
2
88
(10)
–
78
–
78
188
4
192
(17)
–
175
–
175
88
6
94
(9)
–
85
–
85
–
–
–
(1)
–
(1)
–
(1)
–
19
19
(9)
–
10
–
10
4
–
4
(20)
(21)
(37)
(14)
(51)
366
31
397
(66)
(21)
310
(14)
296
For the year ended 31 December 2019, the Group had three investments (2018 – two investments) from which it received
more than 10% of its operating income. The operating income from the three investments was £54 million, £28 million and
£26 million, which is reported within the Europe and Middle East and the North America segments. The Group treats each
investment in a project company as a separate customer for the purpose of IFRS 8.
The Group’s investment portfolio valuation is the aggregation of the values of the investment portfolios in each region where
the investments are actively managed. Other assets and liabilities, including cash balances and borrowings as well as
retirement benefit obligations, are also managed centrally.
143
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements
5 OPERATING SEGMENTS (CONTINUED)
Asia Pacific
Europe and Middle East
North America
Latin America
Central
Portfolio valuation
Other assets and liabilities
Investments at FVTPL
Retirement benefit assets
Other assets
Total assets
Retirement benefit obligations
Other liabilities
Total liabilities
Group net assets
31 December
2019
£ million
31 December
2018
£ million
587
599
514
68
–
1,768
129
1,897
13
12
1,922
(7)
(257)
(264)
1,658
505
580
465
–
10
1,560
140
1,700
–
14
1,714
(40)
(88)
(128)
1,586
Other assets and liabilities within investments at FVTPL above include cash and cash equivalents, trade and other
receivables and trade and other payables within recourse investment entity subsidiaries.
6 EARNINGS PER SHARE
The calculation of basic and diluted earnings per share (EPS) is based on the following information:
Earnings
Profit for the purpose of basic and diluted EPS
Profit for the year
Number of shares
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
100
100
296
296
Weighted average number of ordinary shares for the purpose of basic EPS
Dilutive effect of ordinary shares potentially issued under share-based incentives
491,491,257
469,502,029
4,825,962
5,535,545
Weighted average number of ordinary shares for the purpose of diluted EPS
496,317,219
475,037,574
EPS (pence/share)
Basic
Diluted
20.4
20.2
63.1
62.4
144
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 7 SHARE-BASED INCENTIVES
Long-term incentive plan (LTIP)
The Group operates share-based incentive arrangements for Executive Directors, senior executives and other eligible
employees under which awards are granted over the Company’s ordinary shares. Awards are conditional on the relevant
employee completing three years’ service (the vesting period). The awards vest three years from the grant date, subject to
the Group achieving a target share-based performance condition, total shareholder return (TSR) (50% of the award), and a
non-share 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 was as follows:
At 1 January
Granted
Adjustment for the Rights Issue bonus factor
Lapsed
Vested
At 31 December
Number of share
awards under LTIP
2019
2018
5,216,928
1,506,698
–
(572,841)
5,258,970
1,747,340
436,067
(842,082)
(1,887,795)
(1,383,367)
4,262,990
5,216,928
In April 2019, 1,380,075 share awards were granted (2018 – 1,747,340). The weighted average fair value of the awards was
289.3p per share (2018 – 191p per share) for the share-based performance condition, determined using the Stochastic
valuation model, and 393.4p per share (2018 – 285p per share) for the non-share based performance condition determined
using the Black Scholes model. The weighted average fair value of these awards from both models was 341.4p per share
(2018 – 238.02p). The significant inputs into the model were the share price of 394.2p (2018 – 286p) at the grant date,
expected volatility of 17.91% (2018 – 17.28%), expected dividend yield of 2.41% (2018 – 3.12%), an expected award life of three
years and an annual risk-free interest rate of 0.68% (2018 – 0.88%). 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 weighted
average exercise price of the awards granted during 2019 was £nil (2018 – £nil).
A further 126,623 share awards were granted in May 2019 to the Chief Financial Officer on her appointment. The weighted
average fair value of the awards was 270.1p per share for the share-based performance condition, determined using the
Stochastic valuation model, and 367.9p per share for the non-share based performance condition determined using the
Black Scholes model. The weighted average fair value of these awards from both models was 319.1p per share. The significant
inputs into the model were the share price of 386.8p at the grant date, expected volatility of 17.34% , expected dividend yield
of 2.41%, an expected award life of three years and an annual risk-free interest rate of 0.70%. 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 weighted average exercise price of the awards granted during 2019 was £nil.
The 2016 LTIP award vested in April 2019. As detailed in the Directors’ Remuneration Report, vesting was at 95.63% of the
maximum, taking into account the TSR and NAV performance conditions over the performance period, which resulted in
1,887,795 shares vesting and being exercised. In addition, a further 108,968 shares were issued in lieu of dividends payable
since the grant date on the vested shares (see note 21).
During the year ended 31 December 2019, a total of 572,841 awards lapsed (2018 – 842,082), of which 86,371 awards lapsed
on the vesting of the 2016 LTIP award (2018 – 380,350) and a further 486,470 awards lapsed as a result of leavers in the year
(2018 – 461,732).
Of the 4,262,990 awards outstanding at 31 December 2019 (2018 – 5,216,928), none were exercisable at 31 December 2019
(2018 – nil). 1,398,846 awards are due to vest or lapse on 15 April 2020, 1,415,556 awards are due to vest or lapse on 18 April
2021 and 1,448,588 awards are due to vest or lapse on 17 April 2022 subject to the conditions described above. The weighted
average exercise price of the awards outstanding at 31 December 2019 was £nil (31 December 2018 – £nil).
Deferred Share Bonus Plan
The Group operates a Deferred Share Bonus Plan (DSBP) for Executive Directors and certain senior executives under which
the amount of any bonus above 60% of their base salary (or, for Executive Directors, where higher, 60% of maximum bonus
potential) is awarded in deferred shares. Awards under the DSBP 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.
145
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 7 SHARE-BASED INCENTIVES (CONTINUED)
The movement in the number of shares awarded was as follows:
At 1 January
Granted
Adjustment to awards granted in the prior period
Adjustment for the Rights Issue bonus factor
Lapsed
Vested
At 31 December
Number of share
awards under DSBP
2019
175,141
112,554
–
–
(13,781)
(115,049)
158,865
2018
63,121
138,987
(8)
5,647
–
(32,606)
175,141
In April 2019, 112,554 share awards were granted (2018 – 138,987). The weighted average fair value of the awards was 394.5p
per share (2018 – 286p per share). The significant inputs into the model were the share price of 394.2p (2018 – 286p) at the
grant date, expected volatility of 18.27% (2018 – 17.28%), expected dividend yield of 2.41% (2018 – 3.12%), an expected award
life of three years and an annual risk-free interest rate of 0.68% (2018 – 0.88%). 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 weighted average exercise price of the awards granted during 2019 was £nil (2018 – £nil).
During the year ended 31 December 2019, 115,049 shares vested and were exercised under the 2016 DSBP, 2017 DSBP,
2018 DSBP and 2019 DSBP. A further 4,030 shares were awarded in lieu of dividends payable since the grant date on the
vested shares (see note 21).
Of the 158,865 awards outstanding at 31 December 2019 (2018 – 175,141), 13,400 were exercisable at 31 December 2019
(2018 – nil). 60,397 awards are due to vest in March and April 2020, 58,206 awards are due to vest in March and April 2021
and 26,862 awards are due to vest in April 2022 subject to the conditions described above. The weighted average exercise
price of the awards outstanding at 31 December 2019 was £nil (31 December 2018 – £nil).
Buy-out award
In May 2019, the Chief Financial Officer was granted six buy-out awards over a total number of 65,044 shares, in compensation
for cash-based long-term incentive awards that were forfeited on leaving her previous employer. The awards vest between
4 months and 3 years and 4 months from the date of grant and are subject to continued employment and the Plan Rules.
The first award of 24,314 shares vested in September 2019 leaving 40,730 awards outstanding at 31 December 2019.
The weighted average fair value of the awards was 388.97p per share. The significant inputs into the model were the share
price of 386.8p at the grant date, expected volatility of 17.89%, expected dividend yield of 2.46% , an expected award life of
between four months and three and a third years and an annual risk-free interest rate of 0.72% . The volatility measured at
the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over
the period of time commensurate with the vesting time of the last tranche (three and a third years) immediately prior to the
date of grant. The weighted average exercise price of the awards granted during 2019 was £nil.
During the year ended 31 December 2019, 24,314 shares vested and were exercised.
Of the 40,730 awards outstanding at 31 December 2019, none were exercisable at 31 December 2019 (2018 – nil). 16,710
awards are due to vest in 2020, 3,528 awards are due to vest in 2021 and 3,528 awards are due to vest in 2022 subject to the
conditions described above. The weighted average exercise price of the awards outstanding at 31 December 2019 was £nil
(31 December 2018 – £nil).
The total expense recognised in the Group Income Statement for awards granted under share-based incentive arrangements
for the year ended 31 December 2019 was £4 million (2018 – £3 million).
Employee Benefit Trust (EBT)
On 19 June 2015, the Company established an EBT to be used as part of the remuneration arrangements for employees.
The purpose of the EBT is to facilitate the ownership of shares by or for the benefit of employees through the acquisition and
distribution of shares in the Company. The EBT is able to acquire shares in the Company to satisfy obligations under the
Company’s share-based incentive arrangements.
146
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 8 OTHER INCOME
Fees from asset management services
Sale of investment advisory agreement
Recovery of bid costs
Other income
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
22
5
5
32
27
–
4
31
Other income represents revenue from contracts with customers under IFRS 15 Revenue From Contracts with Customers.
The Company completed the sale of its remaining fund management activities by way of a novation of the Investment
Advisory Agreement with JLEN and transfer of the investment advisory team to Foresight Group.
9 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 and Group financial statements
The audit of the annual accounts of the Company's subsidiaries
Total audit fees
Audit related assurance services
Other assurance services
Non-assurance related services
Total non-audit fees
Operating lease charges:
rental of land and buildings
Depreciation of plant and equipment and right-of-use asset
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(0.2)
(0.2)
(0.4)
(0.1)
–
–
(0.1)
–
(1.0)
(0.1)
(0.2)
(0.3)
(0.1)
–
(0.3)
(0.4)
(1.5)
(0.1)
The fee payable for the audit of the Company and consolidated financial statements was £202,117 (2018 – £151,576). The fees
payable for the audit of the annual accounts of the Company’s subsidiaries were £194,615 (2018 – £186,744).
Fees for audit related assurance services comprised £53,200 (2018 – £42,200) for a review of the Group interim report and
£nil (2018 – £12,875) for a FCA regulatory review. Fees for other assurance services of £6,700 (2018 – £15,000) were paid for
agreed upon procedures.
In 2018, fees of £276,000 for non-assurance related services was paid for reporting accountant services in relation to the
Rights Issue of the Company in March 2019, which were deducted from share premium as an expense on the issue of
equity shares.
Total non-audit fees for 2019 were £59,900 (2018 – £346,075).
147
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 10 EMPLOYEE COSTS AND DIRECTORS’ EMOLUMENTS
Employee costs comprise:
Salaries
Social security costs
Pension charge
– defined benefit schemes (note 19)1
– defined contribution
Share-based incentives (note 7)
1 The cost for 2018 includes a one-off GMP equalisation charge of £21 million.
Annual average employee numbers (including Directors):
Staff
UK
Overseas
Activity
Primary investments, asset management and central activities
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(26)
(4)
(2)
(1)
(4)
(37)
(27)
(3)
(23)
(2)
(3)
(58)
Year ended
31 December
2019
No.
Year ended
31 December
2018
No.
153
65
88
153
168
99
69
168
Details of Directors’ remuneration for the year ended 31 December 2019 can be found in the audited sections of the
Directors’ Remuneration Report.
11 FINANCE COSTS
Finance costs on corporate banking facilities
Amortisation of debt issue costs
Net interest cost of retirement obligations (note 19)
Finance costs
12 TAX (CHARGE)/CREDIT
The tax (charge)/credit for the year comprises:
Current tax:
UK corporation tax (charge) – current year
UK corporation tax credit – prior year
Tax (charge)/credit
148
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(9)
(1)
(1)
(11)
(10)
(3)
(1)
(14)
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(1)
1
–
–
–
–
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019
12 TAX (CHARGE)/CREDIT (CONTINUED)
The tax (charge)/credit for the year can be reconciled to the profit in the Group Income Statement as follows:
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
Total tax (charge)/credit
For the year ended 31 December 2019 a tax rate of 19% has been applied (2018 – 19%).
13 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
100
(19)
(1)
26
(6)
(1)
1
–
296
(56)
(5)
70
(7)
(2)
–
–
Opening balance
Distributions
Investment in equity and loans
Realisations from investment portfolio
Fair value movement
Net cash transferred to investments at FVTPL
Closing balance
Opening balance
Distributions
Investment in equity and loans
Realisations from investment portfolio
Fair value movement
Net cash transferred from investments at FVTPL
Closing balance
31 December 2019
Investments
in project
companies
£ million
Listed
investment
£ million
Portfolio
valuation
sub-total
£ million
Other assets
and liabilities
£ million
1,550
(57)
267
(132)
140
–
1,768
140
57
(267)
143
6
50
129
10
–
–
(11)
1
–
–
1,560
(57)
267
(143)
141
–
1,768
31 December 2018
Investments
in project
companies
£ million
Listed
investment
£ million
1,184
(33)
342
(296)
353
–
1,550
10
(1)
–
–
1
–
10
Portfolio
valuation
sub-total
£ million
1,194
(34)
342
(296)
354
–
1,560
Other assets
and liabilities
£ million
152
34
(342)
296
12
(12)
140
Total
investments
at FVTPL
£ million
1,700
–
–
–
147
50
1,897
Total
investments
at FVTPL
£ million
1,346
–
–
–
366
(12)
1,700
Of the fair value movement in the year ended 31 December 2019 of £147 million (2018 – £366 million), £10 million (2018 – £nil)
was received during the year as a dividend from John Laing Holdco Limited.
Included within other assets and liabilities at 31 December 2019 above is cash collateral of £118 million (31 December 2018
– £132 million) in respect of future investment commitments to the I-66 Managed Lanes project (31 December 2018 – I-66
Managed Lanes and I-77 Managed Lanes).
149
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 13 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The investment disposals that have occurred in the years ended 31 December 2019 and 2018 are as follows:
Year ended 31 December 2019
During the year ended 31 December 2019, the Group disposed of its interests in two PPP and two renewable energy project
companies for £132 million as well as its holding of shares in JLEN.
Details were as follows:
Westadium Project Holdco Pty Limited
John Laing Rocksprings Wind HoldCo Corp
John Laing Sterling Wind HoldCo Corp
A1 mobil GmbH & Co. KG
Year ended 31 December 2018
Date of
completion
11 March 2019
2 May 2019
2 May 2019
25 November 2019
Original
holding
%
50.0
95.3
92.5
42.5
Holding
disposed of
%
Retained
holding
%
50.0
95.3
92.5
42.5
–
–
–
–
During the year ended 31 December 2018, the Group disposed of shares and subordinated debt in three PPP project
companies for £296 million.
Details were as follows:
Acquired by Jura
Date of
completion
Original
holding
%
Holding
disposed of
%
Retained
holding
%
Regenter Myatts Field North Holdings Company Limited
30 May 2018
50.0
50.0
Sold to other parties
Agility Trains West (Holdings) Limited
INEOS Runcorn (TPS) Holding Limited
18 May 2018
21 December 2018
15.0
37.43
15.0
37.43
–
–
–
150
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 14 TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Other taxation
Prepayments and contract assets
31 December
2019
£ million
31 December
2018
£ million
2
1
3
6
7
–
1
8
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:
Sterling
Australian dollar
Other currencies
31 December
2019
£ million
31 December
2018
£ million
3
1
2
6
7
–
1
8
Other currencies mainly comprise trade and other receivables in Canadian dollars (31 December 2018 – Canadian dollars).
There were no significant overdue balances in trade and other receivables at 31 December 2019 and 31 December 2018.
15 TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Other taxation and social security
Accruals
16 BORROWINGS
Current liabilities
Interest-bearing loans and borrowings net of unamortised financing costs (note 17 c and note 18)
31 December
2019
£ million
31 December
2018
£ million
(3)
(1)
(11)
(15)
(2)
(1)
(17)
(20)
31 December
2019
£ million
31 December
2018
£ million
(236)
(236)
(66)
(66)
151
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements
17 FINANCIAL INSTRUMENTS
a) Financial instruments by category
31 December 2019
Cash and cash
equivalents
£ million
Receivables
at amortised
cost
£ million
Assets at
FVTPL
£ million
Financial
liabilities at
amortised
cost
£ million
Total
£ million
Fair value measurement method
n/a
n/a
Level 1 / 3*
n/a
Non-current assets
Investments at FVTPL*
Current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities
Net financial instruments
–
–
2
2
–
–
–
2
–
4
–
4
–
–
–
4
1,897
–
–
1,897
–
–
–
1,897
–
–
–
–
(236)
(14)
(250)
(250)
31 December 2018
Cash and cash
equivalents
£ million
Receivables
at amortised
cost
£ million
Assets at
FVTPL
£ million
Financial
liabilities at
amortised
cost
£ million
Fair value measurement method
n/a
n/a
Level 1 / 3*
n/a
Non-current assets
Investments at FVTPL*
Current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities
Net financial instruments
–
–
6
6
–
–
–
6
–
7
–
7
–
–
–
7
1,700
–
–
1,700
–
–
–
1,700
–
–
–
–
(66)
(19)
(85)
(85)
1,897
4
2
1,903
(236)
(14)
(250)
1,653
Total
£ million
1,700
7
6
1,713
(66)
(19)
(85)
1,628
* Investments at FVTPL are split between: Level 1, investment in JLEN, which is a listed investment fair valued at £nil (31 December
2018 – £10 million) using a quoted market price; and Level 3 investments in project companies fair valued at £1,768 million
(31 December 2018 – £1,550 million). Level 1 and Level 3 investments are fair valued in accordance with the policy and assumptions
set out in note 3e). The investments at FVTPL include other assets and liabilities in investment entity subsidiaries as shown in
note 13. Such other assets and liabilities are recorded at amortised cost which the Directors believe approximates to their fair value.
These assets and liabilities are Level 3.
152
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 17 FINANCIAL INSTRUMENTS (CONTINUED)
The tables above 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 have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non-
recurring fair value measurements.
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 13. Level 3
financial assets are those relating to investments in project companies.
All items in the above table are measured at amortised cost other than the investments at FVTPL. The Directors believe
that the amortised cost of these financial assets and liabilities approximates to their fair value.
b) Foreign currency and interest rate profile of financial assets (excluding investments at FVTPL)
Currency
Sterling
Euro
Canadian dollar
US dollar
Australian dollar
Total
31 December 2019
31 December 2018
Floating
rate
£ million
Non-
interest
bearing
£ million
Total
£ million
Floating
rate
£ million
Non-
interest
bearing
£ million
Total
£ million
–
–
–
–
–
–
2
1
1
1
1
6
2
1
1
1
1
6
1
–
–
–
–
1
7
–
1
1
3
8
–
1
1
3
12
13
c) Foreign currency and interest rate profile of financial liabilities
The Group’s financial liabilities at 31 December 2019 were £250 million (31 December 2018 – £85 million), of which
£236 million (31 December 2018 – £66 million) related to short-term cash borrowings of £239 million (31 December
2018 – £70 million) net of unamortised finance costs of £3 million (31 December 2018 – £4 million).
Currency
Sterling
Euro
US dollar
Australian dollar
Other
Total
31 December 2019
31 December 2018
Fixed
rate
£ million
Floating
rate
£ million
(229)
(7)
–
–
–
–
–
–
–
–
(229)
(7)
Non-
interest
bearing
£ million
Total
£ million
Fixed
rate
£ million
Floating
rate
£ million
Non-
interest
bearing
£ million
Total
£ million
(8)
(1)
(2)
(3)
–
(8)
(244)
(51)
(15)
(12)
(78)
(1)
(2)
(3)
–
–
–
–
–
–
–
–
–
(1)
(2)
(3)
(1)
(1)
(2)
(3)
(1)
(250)
(51)
(15)
(19)
(85)
153
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 18 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 or revenue risk (including power price risk, marginal loss factors in Australia and
energy yield 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.
For the parent company and its recourse subsidiaries, financial risks are managed by a central treasury operation which
operates within Board approved policies. The various types of financial risk are managed as follows:
Market risk – foreign currency exchange rate risk
As at 31 December 2019 the Group held investments in 42 overseas projects (31 December 2018 – 31 overseas projects) all
of which are fair valued based on the spot exchange rate at 31 December 2019. 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 10
forward currency contracts open as at 31 December 2019 (31 December 2018 – 12). The fair value of these contracts was a
net asset of £1 million (31 December 2018 – net asset of £1 million) and is included in investments at FVTPL.
At 31 December 2019, the Group’s most significant currency exposure was to the US dollar (31 December 2018 – US dollar).
Foreign currency exposure of investments at FVTPL:
31 December 2019
31 December 2018
Project
companies
£ million
Listed
investment
£ million
418
181
568
510
19
68
4
1,768
–
–
–
–
–
–
–
–
Other
assets
and
liabilities
£ million
–
5
7
116
1
–
–
Total
£ million
Project
companies
£ million
Listed
investment
£ million
Other
assets
and
liabilities
£ million
Total
£ million
418
186
575
626
20
68
4
361
219
483
465
22
–
–
10
–
–
–
–
–
–
3
1
5
131
–
–
–
374
220
488
596
22
–
–
129
1,897
1,550
10
140
1,700
Sterling
Euro
Australian dollar
US dollar
New Zealand dollar
Colombian Peso
Canadian dollar
Investments in project companies are fair valued based on the spot exchange rate at the balance sheet date. As at
31 December 2019, a 5% movement of each relevant currency against Sterling would decrease or increase the value of
investments in overseas projects by c.£64 million. The Group’s profit before tax would be impacted by the same amounts.
There would be no additional impact on equity.
Market risk – interest rate risk
The Group’s direct exposure to interest rate risk is from 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.
154
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 18 FINANCIAL RISK MANAGEMENT (CONTINUED)
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
31 December 2019
31 December 2018
Interest-
bearing
floating
rate
£ million
Non-
interest
bearing
£ million
Total
£ million
Interest-
bearing
floating rate
£ million
Non-
interest
bearing
£ million
Total
£ million
–
–
–
–
1,897
1,897
4
2
4
2
1,903
1,903
–
–
1
1
1,700
1,700
7
5
7
6
1,713
1,713
The Group has indirect exposure to interest rate risk through the fair value of its investments at FVTPL which is determined
on a discounted cash flow basis. The key inputs under this basis are (i) the discount rate and (ii) the cash flows forecast to be
received from project companies. An analysis of the movement between opening and closing balances of investments at FVTPL
is given in note 13. The forecast cash flows are determined by future project revenue and costs, including interest income and
interest costs which can be linked to interest rates. Project companies take out either fixed-rate borrowings or enter into
interest rate swaps to fix interest rates on variable rate borrowings which mitigates this risk. The level of interest income in
project companies is not significant and therefore the Group does not consider there is a significant risk from a movement in
interest rates in this regard. Movement in market interest rates can also have an impact on discount rates. At 31 December
2019, the weighted average discount rate was 8.6% (31 December 2018 – 8.6%). As at 31 December 2019, a 0.25% increase in
the discount rate would reduce the fair value by £57 million (31 December 2018 – £52 million) and a 0.25% reduction in the
discount rate would increase the fair value by £60 million (31 December 2018 – £54 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:
31 December 2019
Interest-
bearing
floating
rate
£ million
Non-
interest
bearing
£ million
Total
£ million
(7)
–
(7)
–
(236)
(14)
(14)
(14)
(250)
Interest-
bearing
fixed rate
£ million
(229)
–
(229)
31 December 2018
Interest-
bearing
floating
rate
£ million
Non-
interest
bearing
£ million
(15)
–
(15)
–
(19)
(19)
Interest-
bearing
fixed rate
£ million
(51)
–
(51)
Total
£ million
(66)
(19)
(85)
Interest-bearing loans and
borrowings
Trade and other payables
Total financial liabilities
Market risk – inflation risk
The Group has limited direct exposure to inflation risk, but the fair value of investments is determined by future project
revenue and costs which can be partly linked to inflation. Sensitivity to inflation can be mitigated by the project company
entering into inflation swaps. Where PPP investments are positively correlated to inflation, an increase in inflation
expectations will tend to increase their value. However, all other things being equal, an increase in inflation expectations
would also tend to increase JLPF’s pension liabilities.
At 31 December 2019, on a sample of five of the larger PPP investments with a total value of £596 million, a 0.25% increase
in inflation is estimated to increase their value by c.£14 million and a 0.25% decrease in inflation is estimated to decrease their
value by c.£13 million. Certain of the underlying project companies incorporate some inflation hedging.
Credit risk
Credit risk is managed on a Group basis and arises from a combination of the value and term to settlement of balances due
and payable by counterparties for both financial and trade transactions.
In order to minimise credit risk, cash investments and derivative transactions are limited to financial institutions of a suitable
credit quality and counterparties are carefully screened. The Group’s cash balances are invested in line with a policy
approved by the Board, capped with regard to counterparty credit ratings.
A significant number of the project companies in which the Group invests receive revenue from government departments,
public sector or local authority clients and/or directly from the public. As a result, these projects tend not to be exposed to
significant credit risk.
155
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 18 FINANCIAL RISK MANAGEMENT (CONTINUED)
Price or revenue risk
The Group’s investments in PPP assets have limited direct exposure to price or revenue 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 and
additionally, for Australia wind and solar generation projects, forecast marginal loss factors (MLF) 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 2019, on a sample of seven renewable energy investments with a total value of £338 million, a 5% increase
in power price forecasts is estimated to increase their value by £21 million and a 5% decrease in power price forecasts is
estimated to decrease their value by £19 million.
At 31 December 2019, on a sample of renewable energy investments with a total value of £233 million, a 5% increase in MLFs
is estimated to increase their value by c.£29 million and a 5% decrease is estimated to decrease their value by c.£29 million.
With regards to energy yield risk, our valuation of renewable energy projects assumes a P50 level of electricity output based
on reports by technical consultants. The P50 output is the estimated annual amount of electricity generation (in MWh) that
has a 50% probability of being achieved or exceeded – both in any single year and over the long term – and a 50% probability
of being underachieved. Hence the P50 is the expected level of generation over the long term. A P75 output means a forecast
with a 75% probability of being achieved or exceeded and a P25 output means a forecast with a 25% probability of being
achieved or exceeded. At a P75 level of electricity output, the valuation at 31 December 2019 of a sample of renewable energy
assets with a total value of £293 million would reduce by £38 million and a P25 level of electricity output would increase the
value by £36 million.
For all of the above sensitivities on the portfolio value as at 31 December 2019, the Group’s profit before tax would be
impacted by the same amounts described above. There would be no additional impact on equity.
For further information on these sensitivities, please refer to the Portfolio Valuation section.
Liquidity risk
The Group adopts a prudent approach to liquidity management by maintaining sufficient cash and available committed
facilities to meet its current and upcoming obligations.
The Group’s liquidity management policy involves projecting cash flows in major currencies and assessing the level of liquid
assets necessary to meet these.
Maturity of financial assets
The maturity profile of the Group’s financial assets (excluding investments at FVTPL) is as follows:
Trade and other receivables
Cash and cash equivalents
Financial assets (excluding investments at FVTPL)
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
2019
Less than
one year
£ million
31 December
2018
Less than
one year
£ million
4
2
6
7
6
13
31 December
2019
£ million
31 December
2018
£ million
(250)
(250)
(85)
(85)
156
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 18 FINANCIAL RISK MANAGEMENT (CONTINUED)
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:
31 December 2019
Fixed interest rate instruments – loans and borrowings
Floating interest rate instruments – loans and borrowings
Non-interest bearing instruments*
31 December 2018
Fixed interest rate instruments – loans and borrowings
Floating interest rate instruments – loans and borrowings
Non-interest bearing instruments*
Weighted
average
effective
interest rate
%
In one year
or less
£ million
Total
£ million
2.71
2.78
n/a
2.73
2.78
n/a
(229)
(7)
(14)
(250)
(51)
(15)
(19)
(85)
(229)
(7)
(14)
(250)
(51)
(15)
(19)
(85)
* Non-interest bearing instruments relate to trade payables and accruals.
Capital risk
The Group seeks to adopt efficient financing structures that enable it to manage capital effectively and achieve the Group’s
objectives without putting shareholder value at undue risk. The Group’s capital structure comprises its equity (as set out in
the Group Statement of Changes in Equity) and its net borrowings. The Group monitors its net debt and a reconciliation of net
debt can be found in note 24.
At 31 December 2019, the Group had committed corporate banking facilities of £650 million, £500 million expiring in July 2023
and £150 million expiring in January 2021 (extended in January 2020 until January 2022).
The Group has requirements for both borrowings and letters of credit, which at 31 December 2019 were met by its
£650 million committed facilities and related ancillary facilities (31 December 2018 – £650 million). Issued at 31 December
2019 were letters of credit of £95 million (31 December 2018 – £164 million) and parent company guarantee of £6 million,
related to future capital and loan commitments, and contingent commitments and performance and bid bonds of £3 million
(31 December 2018 – £10 million). The committed facilities and amounts drawn therefrom are summarised below:
Committed corporate banking facilities
Total
Committed corporate banking facilities
Total
31 December 2019
Total
facilities
£ million
Loans
drawn
£ million
Bank
overdraft
£ million
Letters
of credit in
issue/other
commitments
£ million
650
650
(232)
(232)
(7)
(7)
(104)
(104)
31 December 2018
Total
facilities
£ million
Loans
drawn
£ million
Bank
overdraft
£ million
Letters
of credit in
issue/other
commitments
£ million
650
650
(55)
(55)
(15)
(15)
(174)
(174)
Total
undrawn
£ million
307
307
Total
undrawn
£ million
406
406
157
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 19 RETIREMENT BENEFIT OBLIGATIONS
Pension schemes
Post-retirement medical benefits
Classified as:
Retirement benefit asset
Retirement benefit obligations
a) Pension schemes
31 December
2019
£ million
31 December
2018
£ million
13
(7)
6
13
(7)
(33)
(7)
(40)
–
(40)
The Group operates two defined benefit pension schemes in the UK (the Schemes) – The John Laing Pension Fund (JLPF)
which commenced on 31 May 1957 and The John Laing Pension Plan (the Plan) which commenced on 6 April 1975. JLPF
was closed to future accrual from 1 April 2011 and the Plan was closed to future accrual from September 2003. Neither
Scheme has any active members, only deferred members and pensioners. The assets of both Schemes are held in
separate trustee-administered funds.
UK staff employed since 1 January 2002, who are entitled to retirement benefits, can choose to be members of a defined
contribution stakeholder scheme sponsored by the Group in conjunction with Legal and General Assurance Society
Limited. Local defined contribution arrangements are available to overseas staff.
JLPF
An actuarial valuation of JLPF was carried out as at 31 March 2016 by a qualified independent actuary, Willis Towers
Watson. At that date, JLPF was 85% funded on the technical provision funding basis. This valuation took into account the
Continuous Mortality Investigation Bureau (CMI Bureau) projections of mortality.
The Group agreed to repay the actuarial deficit of £171 million at 31 March 2016 over seven years as follows:
By 31 March
2017
2018
2019
2020
2021
2022
2023
£ million
25
27
29
25
26
26
25
The triennial actuarial valuation of JLPF as at 31 March 2019 is in progress and will be finalised by 30 June 2020.
During the year ended 31 December 2019, John Laing made deficit reduction contributions of £29 million (2018 – £27 million)
in cash.
The liability at 31 December 2019 allows for indexation of deferred pensions and post 5 April 1988 GMP pension increases
based on the Consumer Price Index (CPI).
The Plan
No contributions were made to the Plan in the year ended 31 December 2019 (2018 – none). At its last actuarial valuation
as at 31 March 2018, the Plan had assets of £13 million and liabilities of £12 million resulting in an actuarial surplus of
£1 million. The next triennial actuarial valuation of the Plan is due as at 31 March 2020.
158
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 19 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
a) Pension schemes (continued)
An analysis of the members of both Schemes is shown below:
31 December 2019
JLPF
The Plan
31 December 2018
JLPF
The Plan
Deferred
Pensioners
3,965
78
3,790
266
Deferred
Pensioners
3,928
99
4,015
321
Total
7,755
344
Total
7,943
420
The financial assumptions used in the valuation of JLPF and the Plan under IAS 19 at 31 December were:
Discount rate
Rate of increase in non-GMP pensions in payment
Rate of increase in non-GMP pensions in deferment
Inflation – RPI
Inflation – CPI
31 December
2019
%
31 December
2018
%
2.10
2.90
1.90
3.00
1.90
2.85
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 (i) any hedging entered into by JLPF, (ii) 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.
0.25% on discount rate
0.25% on inflation rate
1 year post-retirement longevity
Mortality
(Increase)/decrease
in pension liabilities at
31 December 2019
Increase in
assumption
£ million
Decrease in
assumption
£ million
45
(34)
(54)
(48)
33
53
Mortality assumptions were based on the following tables published by the CMI Bureau:
Base tables
Plan members
JLPF staff members
JLPF executive members
Improvements
All members
31 December 2019
31 December 2018
100% S2NA tables
103%/107% (M/F) S3NA tables
83%/109% (M/F) S3NA light tables
100% S2NA tables
100% S2NA tables
100% S2NA light tables
CMI 2018 projections, 1.25% pa long-term
improvement rate, initial improvement of A=0%
and a smoothing parameter of s=7
CMI 2017 projections, 1.25% pa long-term
improvement rate and a smoothing parameter
of s=7.5
159
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 19 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
a) Pension schemes (continued)
The table below summarises the life expectancy implied by the mortality assumptions used:
Life expectancy – of member reaching age 65 in 2019
Males
Females
Life expectancy – of member aged 65 in 2039
Males
Females
Analysis of the major categories of assets held by the Schemes
31 December
2019
Years
31 December
2018
Years
21.8
23.9
23.1
25.3
22.1
24.2
23.1
25.3
31 December 2019
31 December 2018
£ million
%
£ million
%
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
Option1
Aviva bulk annuity buy-in agreement
Cash and equivalents
97
280
213
590
95
45
163
97
(4)
396
229
15
48.0
32.2
18.6
1.2
Total market value of assets
1,230
100.0
Present value of Schemes' liabilities
Net pension asset/(liability)
(1,217)
13
89
262
147
498
106
36
127
83
–
352
218
20
1,088
(1,121)
(33)
45.8
32.4
20.0
1.8
100.0
1 During 2019, the JLPF entered into a cap and collar option over 25% of its equity assets which limits losses to 10% and caps gains at 13.5%.
Virtually all equity and debt instruments held by JLPF have quoted prices in active markets (Level 1). Equity options can
be classified as Level 2 instruments. The JLPF Trustee invests in return-seeking assets, such as equity, whilst balancing
the risks of inflation and interest rate movements through the annuity buy-in agreement.
A significant proportion of JLPF’s assets are held either as liability-matching holdings (including an Aviva bulk annuity
buy-in agreement and index-linked UK government gilts) or to provide hedges against the impact on liabilities from
movements in interest rates and inflation (other bonds and gilts). The JLPF Trustee has adopted a long-term asset
allocation strategy that has been determined as being most appropriate to meet JLPF’s current and future liabilities.
JLPF’s agreed investment strategy is such that, in combination with an agreed recovery plan, it is expected to reach full
funding on a gilts flat basis between 2023 and 2028 (“the Journey Plan”). The Trustee has established a de-risking
programme, whereby JLPF’s funding level is monitored regularly, and if it moves ahead of the Journey Plan, the Trustee
will lock-in the benefit by de-risking the portfolio to target a lower expected return.
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 2019, the underlying insurance policy was valued at £229 million (31 December
2018 – £218 million), being substantially equal to the IAS 19 valuation of the related liabilities.
The pension asset of £13 million at 31 December 2019 (31 December 2018 – liability £33 million) is a surplus under
IAS 19 of £12 million in the Fund (31 December 2018 – liability £35 million) and a surplus £1 million in the Plan
(31 December 2018 – £2 million).
160
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019
19 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
a) Pension schemes (continued)
Analysis of amounts charged to operating profit
Current service cost*
GMP equalisation charge**
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
(2)
–
(2)
(2)
(21)
(23)
* The Schemes no longer have any active members. Therefore, under the projected unit method of valuation the current service cost for
JLPF will increase as a percentage of pensionable payroll as members approach retirement. The current service cost has been
included within administrative expenses.
** Following the High Court ruling on the Lloyds Banking Group Guaranteed Minimum Pension (GMP) equalisation case in October 2018,
a £21 million non-recurring charge was made in 2018. This represents the additional costs to JLPF arising from the judgement,
estimated at 1.90% of JLPF’s liabilities.
Analysis of amounts charged to finance costs
Interest on Schemes' assets
Interest on Schemes' liabilities
Net charge to finance costs
Analysis of amounts recognised in Group Statement of Comprehensive Income
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
Actuarial gain/(loss) recognised in Group Statement of Comprehensive Income
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
30
(31)
(1)
28
(29)
(1)
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
137
6
(117)
(6)
20
(62)
(4)
56
7
(3)
The cumulative gain recognised in the Group Statement of Changes in Equity is £24 million gain (31 December 2018 –
£4 million).
Changes in present value of defined benefit obligations
Opening defined benefit obligation
Current service cost
Interest cost
GMP equalisation charge
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)
Closing defined benefit obligation
2019
£ million
(1,121)
2018
£ million
(1,189)
(2)
(31)
–
6
(117)
(6)
54
(2)
(29)
(21)
(4)
56
7
61
(1,217)
(1,121)
The weighted average life of JLPF liabilities at 31 December 2019 is 15.7 years (31 December 2018 – 15.6 years).
161
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 19 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
a) Pension schemes (continued)
Changes in the fair value of Schemes’ assets
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
GMP equalisation reserve
Finance cost
Contributions
Actuarial gain/(loss)
Pension deficit
History of the experience gains and losses
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
31 December
2019
£ million
31 December
2018
£ million
1,088
1,156
30
137
29
(54)
28
(62)
27
(61)
1,230
1,088
31 December
2019
£ million
31 December
2018
£ million
(33)
(2)
–
(1)
29
20
13
(33)
(2)
(21)
(1)
27
(3)
(33)
Year ended
31 December
2019
Year ended
31 December
2018
137
11.0
6
0.5
20
1.6
(62)
5.7
(4)
0.4
(3)
0.3
162
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 19 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
b) Post-retirement medical benefits
The Company provides post-retirement medical insurance benefits to 55 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:
Post-retirement medical benefits liability – opening
Contributions
Changes in financial assumptions underlying the present value of scheme’s liabilities*
Post-retirement medical benefits liability – closing
31 December
2019
£ million
31 December
2018
£ million
(7)
1
(1)
(7)
(8)
1
–
(7)
* These amounts are actuarial gains/(losses) 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 5.0% in 2019 (2018 – 5.2%).
It is expected to increase in 2020 and thereafter at RPI plus 2.0% per annum (2018 – at RPI plus 2.0% per annum).
The amount of the medical benefit liability is highly dependent upon the assumptions used and may vary significantly from
period to period. The impact of possible future changes to some of the assumptions is shown below. In practice, there
would be inter-relationships between the assumptions. The analysis has been prepared in conjunction with the Company’s
actuarial adviser. The Company considers that the changes below are reasonably possible based on recent experience.
1.0% change on medical cost trend inflation rate
1 year change in life expectancy
20 PROVISIONS
Non-current provisions
Retained liabilities
Total provisions
Non-current provisions
Retained liabilities
Total provisions
(Increase)/decrease in
medical liabilities at
31 December 2019
before deferred tax
Increase in
assumption
£ million
Decrease in
assumption
£ million
(1)
(1)
1
1
At 1 January
2019
£ million
(2)
(2)
At 1 January
2018
£ million
(1)
(1)
Charge to
Group
Income
Statement
£ million
–
–
Credit to
Group
Income
Statement
£ million
(1)
(1)
At 31
December
2019
£ million
(2)
(2)
At 31
December
2018
£ million
(2)
(2)
Provisions of £2 million as at 31 December 2019 (31 December 2018 – £2 million) relate to retained liabilities from the legacy
construction and home building businesses.
163
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 21 SHARE CAPITAL
Authorised:
Ordinary shares of £0.10 each
Total
Allotted, called up and fully paid:
At 1 January
Issued under Rights Issue
Issued under LTIP
Issued under LTIP – granted in lieu of dividends payable
Issued under DSBP
Issued under DSBP – granted in lieu of dividends payable
Issued under buy-out awards
Shares acquired by the EBT
Issued under share-based incentive arrangements – total
Shares in issue
Retained by EBT
At 31 December
31 December
2019
No.
31 December
2018
No.
493,000,636
490,775,636
493,000,636
490,775,636
31 December 2019
31 December 2018
No.
£ million
No.
£ million
490,774,825
–
1,887,795
108,968
115,049
4,030
24,314
(1,113,997)
1,026,159
491,800,984
1,199,652
493,000,636
49
–
–
49
–
49
366,960,134
122,320,044
1,383,367
77,115
32,606
1,559
–
–
1,494,647
490,774,825
811
490,775,636
37
12
–
49
–
49
During the year ended 31 December 2019, 2,225,000 shares were issued to the EBT to satisfy awards vesting under share-based
incentive arrangements (see note 7). Of these, 1,996,763 (2018 – 1,460,482) shares were used to satisfy awards vested and
exercised under the Group’s LTIPs, 119,079 (2018 – 34,165) shares were used to satisfy awards vested and exercised under
the Group’s DSBPs and 24,314 were used to satisfy awards vested and exercised under buy-out awards leaving 84,844 held
by the EBT.
Subsequent to the LTIP awards vesting and being exercised, certain employees elected to sell shares, partly in order to
satisfy tax liabilities arising on the awards. Of the 1,288,377 shares elected to be sold, the EBT was able to sell 174,380
shares in the open market and acquired the remaining 1,113,997 shares. The acquisition of shares by the EBT was funded
by the Company and as a result of this transaction, a charge of £4 million has been made through reserves in the Group
Statement of Changes in Equity as if such shares were treasury shares as defined by IFRS. Including this acquisition,
the total number of shares held by the EBT at 31 December 2019 was 1,199,652, which are excluded for the purposes
of calculating earnings per share and NAV per share.
The Company has one class of ordinary shares which carry no right to fixed income.
22 SHARE PREMIUM
Opening balance
Share premium on Rights Issue
Costs of Rights Issue
Closing balance
164
31 December
2019
£ million
31 December
2018
£ million
416
–
–
416
218
204
(6)
416
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 23 NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Profit from operations
Adjustments for:
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
111
310
Unrealised profit arising on changes in fair value of investments (note 13)
(147)
(366)
Share-based incentives
IAS 19 service cost
GMP equalisation reserve
Contribution to JLPF
Increase in provisions
Operating cash outflow before movements in working capital
Decrease in trade and other receivables
(Decrease)/increase 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
4
2
–
(29)
–
(59)
2
(4)
(61)
3
2
21
(27)
1
(56)
–
2
(54)
At
1 January
2019
£ million
6
(66)
(60)
At
1 January
2018
£ million
3
(174)
(171)
Cash
movements
£ million
Non-cash
movements
£ million
(4)
(169)
(173)
–
(1)
(1)
Cash
movements
£ million
Non-cash
movements
£ million
3
106
109
–
2
2
At
31 December
2019
£ million
2
(236)
(234)
At
31 December
2018
£ million
6
(66)
(60)
The cash movements from borrowings make up the net amount of proceeds from borrowings and repayment of borrowings
in the Group Cash Flow Statement.
165
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 25 GUARANTEES AND OTHER COMMITMENTS
At 31 December 2019, the Group had future equity and loan commitments in PPP and renewable energy projects of £219 million
(31 December 2018 – £296 million) backed by letters of credit and guarantees of £101 million (31 December 2018 – £164 million)
and cash collateral of £118 million (31 December 2018 – £132 million). There were also contingent commitments,
performance and bid bonds of £3 million (31 December 2018 – £10 million).
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.
Following the adoption of IFRS 16 Leases for the year ended 31 December 2019, the Group does not have any significant
leases classified as operating leases. The Group had outstanding commitments for future minimum lease payments under
non-cancellable operating leases for land and buildings as at 31 December 2018 falling due as follows:
Within one year
In the second to fifth years inclusive
After five years
31 December
2018
£ million
Total
1
3
2
6
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:
For the year ended:
Services income*
Balances as at:
Amounts owed by project companies
Amounts owed to project companies
31 December
2019
£ million
31 December
2018
£ million
11
1
(1)
9
1
(1)
* 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:
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 (to)/from investments at FVTPL (note 13)
31 December
2019
£ million
31 December
2018
£ million
31
4
(50)
31
4
12
Balances as at:
Net amounts owed to the Group by recourse subsidiary entities held at FVTPL
176
215
166
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE GROUP FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 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 2019.
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:
Cash/vested basis
Short-term employee benefits
Post-employment benefits
Awards under long-term incentive plans
Social security costs
Award basis
Short-term employee benefits
Post-employment benefits
Awards under long-term incentive plans
Social security costs
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
4
–
4
1
9
4
–
1
1
6
4
–
3
1
8
4
–
1
1
6
The average number of key management personnel during 2019 was 15, an increase from 14 during 2018. This is primarily
due to the addition during 2019 of Latin America as a core region.
The awards under long-term incentive plans on a cash/vested basis are the awards that vested in April 2019 in relation to the
2016 LTIP. The remuneration amount is based on the number of shares issued to key management valued at the market
price of the shares on the day of vesting.
The awards under long-term incentive plans on an award basis are those outstanding during the year ended 31 December
2019 on all LTIPs, including the 2019 LTIP. The remuneration amount is calculated in accordance with IFRS 2 based on the
fair value of the awards at the time of being granted, with an adjustment to the fair value for the non-share based
performance condition depending on the Group’s NAV per share.
27 EVENTS AFTER BALANCE SHEET DATE
There were no significant events after the balance sheet date.
167
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements COMPANY BALANCE SHEET
as at 31 December 2019
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
2019
£ million
31 December
2018
£ million
Notes
4
5
6
7
8
9
1,491
1,491
466
–
466
1,390
1,390
300
4
304
1,957
1,694
(236)
(34)
(270)
(270)
(66)
(18)
(84)
(84)
1,687
1,610
49
416
2
1,220
1,687
49
416
6
1,139
1,610
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 2019 was £124 million
(2018 – £294 million).
The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and
authorised for issue on 2 March 2020. They were signed on its behalf by:
Olivier Brousse
Chief Executive Officer
Luciana Germinario
Chief Financial Officer
2 March 2020
2 March 2020
168
John Laing Group plcAnnual Report and Accounts 2019 COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Share
capital
£ million
Share
premium
£ million
Other
reserves
£ million
Balance at 1 January 2019
Profit for the year
Total comprehensive income for the year
Share-based incentives
Vesting of share-based incentives
Purchase of own shares related to share base incentives
Dividends paid
49
416
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2019
49
416
6
–
–
4
(4)
(4)
–
2
Retained
earnings
£ million
1,139
124
124
–
4
–
(47)
Total equity
£ million
1,610
124
124
4
–
(4)
–
1,220
1,687
Balance at 1 January 2018
Profit for the year
Total comprehensive income for the year
Share-based incentives
Vesting of share-based incentives
Net proceeds from issue of shares
Dividends paid
Balance at 31 December 2018
Share
capital
£ million
37
–
–
–
–
12
–
49
Share
premium
£ million
218
–
–
–
–
198
–
416
Other
reserves
£ million
Retained
earnings
£ million
Total equity
£ million
6
–
–
3
(3)
–
–
6
886
294
294
–
3
–
(44)
1,139
1,147
294
294
3
–
210
(44)
1,610
The Company had distributable reserves of £376 million at 31 December 2019 which are sufficient 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.
169
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements COMPANY CASH FLOW STATEMENT
for the year ended 31 December 2019
Operating activities
Profit before tax
Unrealised profit on changes in fair value of investments at FVTPL
Dividends receivable
Share-based incentives
Net cash inflow/(outflow) from operating activities
Investing activities
Interest received
Dividends received
Increase in intercompany loans
Investment in subsidiary
Net cash outflow from investing activities
Financing activities
Net proceeds from issue of shares
Purchase of own shares related to share-based incentives
Interest paid
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash inflow from financing activities
Net (decrease)/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
2019
£ million
Year ended
31 December
2018
£ million
124
(101)
(25)
4
2
6
15
(141)
(1)
(121)
–
(4)
(3)
(47)
339
(170)
115
(4)
4
–
294
(295)
(3)
3
(1)
3
3
(53)
–
(47)
210
–
(9)
(44)
15
(121)
51
3
1
4
170
John Laing Group plcAnnual Report and Accounts 2019 NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2019
1 GENERAL INFORMATION
John Laing Group plc (the “Company”) is a public limited company incorporated and domiciled in the United Kingdom and
registered in England and Wales. 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 92 to 112.
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 135, 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 set out below.
New and amended IFRS that are effective for the current year
In 2019, the Company adopted one new IFRS, together with a number of amendments to IFRS and Interpretations, issued
by the International Accounting Standards Board (IASB) that are effective for an annual period that begins on or after
1 January 2019 (and have been endorsed for use within the EU).
•
IFRS 16 Leases
• Amendments to IFRS 9 Prepayment Features with Negative Compensation
• Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
• Annual Improvements to IFRS 2015 – 2017 Cycle: Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
• Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment and Settlement
•
IFRIC 23 Uncertainty over Income Tax Treatments
The new standard, amendments and interpretations do not have an impact on the financial statements of the Company.
New and amended IFRS standards in issue but not yet effective
At the date of authorisation of these financial statements, the Company has not applied the following new and revised
standards that have been issued but are not yet effective and in some cases had not yet been adopted by the EU:
•
•
IFRS 17 Insurance Contracts
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
• Amendments to IFRS 3 Definition of a business
• Amendments to IAS 1 and IAS 8 Definition of material
• Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial
statements of the Company in future periods.
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
accordance with IAS 27 Consolidated and Separate Financial Statements and the Investment Entities standard, the
Company has accounted for its investments as follows:
171
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements
2 ACCOUNTING POLICIES (CONTINUED)
b)
Investments
Investments at fair value through profit or loss
The Company has accounted for its investment in John Laing Holdco Limited at FVTPL, consistent with the Group
financial statements.
Investments at cost
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.
c) Taxation
Current tax
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.
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
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.
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 the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments and IFRS 13 Fair Value Measurement.
(i) Financial assets
The Company classifies its financial assets in the following categories: investments at FVTPL, loans and receivables,
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. All
financial assets are initially measured at fair value. They are subsequently measured at either amortised cost or fair
value, depending on the classification of the financial assets.
Financial assets that meet the following conditions are measured subsequently at amortised cost:
•
•
the financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are measured subsequently at fair value through other
comprehensive income (FVTOCI):
•
•
the financial asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling the financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently at FVTPL.
172
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019
2 ACCOUNTING POLICIES (CONTINUED)
d) Financial instruments
(i) Financial assets
The financial assets that the Company holds are classified as follows:
a)
Investments at FVTPL
The Company’s accounting policy in respect of investments at FVTPL is set out in section 2(b) above.
b) Loans and receivables
The Company’s loans and receivables comprise cash and cash equivalents and amounts owed by subsidiary
undertakings and are recorded at amortised cost. Amounts owed by subsidiary undertakings are held at
amortised cost as the Company’s business model is to hold these receivables to collect contractual cash flows
which comprise payments of principal and interest.
c) Cash and cash equivalents
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.
d)
Investments at cost
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 provision for impairments.
(ii) Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement. All financial liabilities are initially measured at fair value. Subsequent measurement
of financial liabilities depends on whether they are equity instruments or financial liabilities.
a) Equity instruments – share capital
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.
b) Financial liabilities
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 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.
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 consistent with
those for the Group as set out in note 4 to the Group financial statements.
173
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 4
INVESTMENTS
At 1 January
Fair value movement
At 31 December
Investments at FVTPL*
Investments at cost less impairment
31 December
2019
£ million
31 December
2018
£ million
1,390
101
1,491
1,477
14
1,491
1,095
295
1,390
1,375
15
1,390
2018
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
–
100%
100%
–
100%
* Net gain on investments at FVTPL for the year ended 31 December 2019 is £101 million (2018 – £295 million
Details of the Company’s direct investments and how they are recognised in the accounts are as follows:
Investments
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
Treatment
Fair valued
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Cost less impairment
Laing Investments Management Services (Colombia) Limited
Cost less impairment
Laing Investments Management Services (France) Limited
Laing Investments Management Services (Germany) Limited
Laing Investments Management Services (Israel) Limited
Cost less impairment
Cost less impairment
Cost less impairment
Laing Investments Management Services (Netherlands) Limited
Cost less impairment
Laing Investments Management Services (New Zealand) Limited
Cost less impairment
Laing Investments Management Services (Spain) Limited
Laing Investments Management Services Limited
Cost less impairment
Cost less impairment
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All entities are incorporated in the United Kingdom.
As set out in note 3a) to 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 financial statements.
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 financial statements 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 financial statements.
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 financial statements 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.
174
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 5 TRADE AND OTHER RECEIVABLES
Due within one year:
Amounts owed by subsidiary undertakings
31 December
2019
£ million
31 December
2018
£ million
466
300
The amounts owed by subsidiary undertakings at 31 December 2019 and 2018 are repayable on demand and interest is
charged at arm’s length interest rates.
The Company has made a £nil loss allowance for expected credit losses on trade and other receivables.
6 BORROWINGS
Interest bearing loans and borrowings net of unamortised financing costs
31 December
2019
£ million
31 December
2018
£ million
(236)
(66)
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
At 1
January 2019
£ million
Cash
movements
£ million
Non-cash
movements
£ million
4
(66)
(62)
(4)
(169)
(173)
–
(1)
(1)
At 1
January 2018
£ million
Cash
movements
£ million
Non-cash
movements
£ million
1
(173)
(172)
3
106
109
–
1
1
At 31
December
2019
£ million
–
(236)
(236)
At 31
December
2018
£ million
4
(66)
(62)
31 December
2019
£ million
31 December
2018
£ million
(34)
–
(34)
(17)
(1)
(18)
175
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 8 SHARE CAPITAL
Authorised:
Ordinary shares of £0.10 each
Allotted, called up and fully paid:
493,000,636 ordinary shares of £0.10 (31 December 2018 – 490,775,636 of £0.10) each
The Company has one class of ordinary shares which carry no right to fixed income.
31 December
2019
No.
31 December
2018
No.
493,000,636
490,775,636
493,000,636
490,775,636
£ million
£ million
49
49
49
49
Allotted, called up and fully paid:
At 1 January
Issued under Rights Issue
Issued under LTIP
Issued under LTIP – granted in lieu of dividends payable
Issued under DSBP
Issued under DSBP – granted in lieu of dividends payable
Issued under buy-out awards
Shares acquired by the EBT
Issued under share-based incentive arrangements – total
Shares in issue
Retained by EBT
At 31 December
31 December 2019
31 December 2018
No.
£ million
No.
£ million
490,774,825
–
1,887,795
108,968
115,049
4,030
24,314
(1,113,997)
1,026,159
491,800,984
1,199,652
493,000,636
49
–
–
49
–
49
366,960,134
122,320,044
1,383,367
77,115
32,606
1,559
–
–
1,494,647
490,774,825
811
490,775,636
37
12
–
49
–
49
See note 21 to the Group Financial Statements for details of the share issues in the year ended 31 December 2019.
9 SHARE PREMIUM
Opening balance
Share premium on Rights Issue
Costs of Rights Issue
Closing balance
176
31 December
2019
£ million
31 December
2018
£ million
416
–
–
416
218
204
(6)
416
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 10 FINANCIAL INSTRUMENTS
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 18. The Company’s valuation methods are
disclosed in note 18 to the Group financial statements.
Cash
and cash
equivalents
£ million
Loans and
receivables
£ million
Assets at
FVTPL
£ million
Investments
at cost less
impairment
£ million
Financial
liabilities at
amortised
cost
£ million
Total
£ million
31 December 2019
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
31 December 2018
Fair value measurement method
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities
Net financial instruments
–
–
–
–
–
–
–
Cash
and cash
equivalents
£ million
n/a
–
–
4
4
–
–
–
4
–
1,477
466
466
–
–
–
–
1,477
–
–
–
466
1,477
14
–
14
–
–
–
14
–
–
(236)
(34)
(270)
(270)
Assets at
FVTPL
£ million
Level 3
Investments
at cost less
impairment
£ million
Financial
liabilities at
amortised
cost
£ million
n/a
n/a
Loans and
receivables
£ million
n/a
–
300
–
300
–
–
–
1,375
–
–
1,375
–
–
–
300
1,375
15
–
–
15
–
–
–
15
–
–
–
–
(66)
(18)
(84)
(84)
1,491
466
1,957
(236)
(34)
(270)
1,687
Total
£ million
1,390
300
4
1,694
(66)
(18)
(84)
1,610
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.
Amounts owed by subsidiary undertakings
Amounts owed to subsidiary undertakings
Dividends received
Interest income received
Interest paid
Year ended
31 December
2019
£ million
Year ended
31 December
2018
£ million
466
(34)
25
6
(1)
300
(17)
3
6
(1)
177
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 12 GUARANTEES AND OTHER COMMITMENTS
On 25 July 2018, the Group refinanced its £475 million facility and two £25 million term facilities (HSBC and Barclays) with
a £650 million syndicated, committed, revolving credit facility. At 31 December 2019, the Company was a guarantor under
the Group’s £650 million facility and associated credit facilities. The total amount utilised under these facilities, and hence
guaranteed by the Company, was £343 million (31 December 2018 – £197 million).
On 23 February 2018, the Company became an indemnitor to an uncommitted bonding facility from Tokio Marine HCC.
At 31 December 2019 the sum outstanding on this facility was £nil (2018 – £25 million).
On 14 August 2018 and 5 October 2018, the Company became an indemnitor to utilisations on an uncommitted bonding
facility from Chubb. At 31 December 2019 the sum outstanding on this facility was £nil (31 December 2018 – £8 million).
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 2019 were as follows:
Name
Recourse subsidiaries
Service Companies (consolidated)
John Laing (USA) Limited
John Laing and Son BV
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 (Colombia) Limited
Laing Investments Management Services (France) Limited
Laing Investments Management Services (Germany) Limited
Laing Investments Management Services (Israel) Limited
Laing Investments Management Services (Netherlands) Limited
Laing Investments Management Services (New Zealand) Limited
Laing Investments Management Services (Spain) Limited
Laing Investments Management Services Limited
RL Design Solutions Limited
Investment Entity subsidiaries (measured at fair value)
Argon Ventures Limited
Denver Rail (Eagle) Holdings Inc.
Hurontario John Laing Holdco Corp
Hyder Investments Limited
John Laing AFC Holdco Corp
John Laing Buckthorn Wind HoldCo Corp
John Laing Funding Limited
John Laing Holdco Limited
John Laing Homes Limited
John Laing I-4 Holdco Corp
John Laing I-66 Holdco Corp
John Laing I-75 Holdco Corp
John Laing I-77 Holdco Corp
John Laing INH2 BV
John Laing Infrastructure Limited
John Laing Investments Limited
John Laing Investments (Cherry Tree) Pty Ltd
John Laing Investments (East Rockingham) BV
John Laing Investments (Grafton) BV
John Laing Investments (Granville) BV
John Laing Investments (Hornsdale) Pty Limited
John Laing Investments (Hornsdale 2) Pty Limited
Country of
incorporation
Ownership
interest
Registered office
* United Kingdom
**
Netherlands
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
* United Kingdom
** United Kingdom
** United Kingdom
United States
**
Canada
**
** United Kingdom
United States
**
**
United States
** United Kingdom
* United Kingdom
** United Kingdom
United States
**
United States
**
United States
**
United States
**
**
Netherlands
** United Kingdom
** United Kingdom
**
Australia
Netherlands
**
Netherlands
**
Netherlands
**
Australia
**
Australia
**
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Note 1
Note 3
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 8
100 King Street West, Suite
6200, 1 First Canadian Place,
Toronto, Canada , M5X 1B8
Note 1
Note 8
Note 8
Note 1
Note 1
Note 1
Note 8
Note 8
Note 8
Note 8
Note 3
Note 1
Note 1
Note 4
Note 3
Note 3
Note 3
Note 4
Note 4
178
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Name
John Laing Investments (Hornsdale 3) Pty Limited
John Laing Investments (LBAJQ) BV
John Laing Investments (Melbourne Metro) BV
John Laing Investments Netherlands Holdings BV
John Laing Investments (NGR) BV
John Laing Investments (NRAH) BV
John Laing Investments NZ Holdings Limited
John Laing Investments Overseas Holdings Limited
John Laing Investments (Perth Stadium) BV
John Laing Investments (SLR) BV
John Laing Investments Spain SL
John Laing Investments (Sunraysia) BV
John Laing Limited
John Laing Live Oak Wind HoldCo Corp
John Laing Projects & Developments (Holdings) Limited
John Laing Social Infrastructure Limited
Laing Infrastructure Holdings Limited
Laing Investment Company Limited
Laing Investments Greenwich Limited
Laing Property Limited
Laing Property Holdings Limited
Manara JL Holdco BV
Ruta del Cacao JL Holdco SL
Non-recourse subsidiaries
Subsidiary project companies (measured at fair value)
ALTRAC Light Rail Holdings 3 Pty Limited
ALTRAC Light Rail Holdings Trust 3
ALTRAC Light Rail 3 Pty Limited
ALTRAC Light Rail Trust 3
Boston AFC 2.0 Holdco LLC
Boston AFC 2.0 Opco LLC
Brantley Farm Solar LLC
Brantley HoldCo LLC
Buckthorn Wind Class B Holdco LLC
Buckthorn Wind John Laing OpCo LLC
Buckthorn Wind Project LLC
Buckthorn Wind Tax Equity Holdco LLC
Buckleberry HoldCo LLC
Buckleberry Solar LLC
CCP-PL Lessor III LLC
CCP-PL Lessor IV LLC
CCP-PL Lessor V LLC
CCP-PL Managing Member III LLC
CCP-PL Managing Member IV LLC
CCP-PL Managing Member V LLC
Cherry Tree Finance Company Pty Ltd
Cherry Tree Hold Co Pty Ltd
Cherry Tree Hold Trust
Cherry Tree Project Trust
Cherry Tree Wind Farm Pty Ltd
CountyRoute (A130) Plc
CountyRoute 2 Limited
CountyRoute Limited
Courtibeaux (Holdings) Limited
CY Holding 3 Pty Limited
Cross Yarra Holding Trust 3
Cross Yarra 3 Pty Limited
Country of
incorporation
Ownership
interest
Registered office
Australia
**
Netherlands
**
Netherlands
**
Netherlands
**
Netherlands
**
**
Netherlands
** United Kingdom
** United Kingdom
Netherlands
**
Netherlands
**
Spain
**
**
Netherlands
** United Kingdom
**
United States
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
Netherlands
**
Spain
**
**
**
**
**
**
**
**
**
Australia
Australia
Australia
Australia
United States
United States
United States
United States
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
United States
**
Australia
**
Australia
**
Australia
**
Australia
**
**
Australia
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
Australia
**
Australia
**
Australia
**
Note 4
100%
Note 3
100%
Note 3
100%
Note 3
100%
Note 3
100%
Note 3
100%
Note 1
100%
Note 1
100%
Note 3
100%
100%
Note 3
100% Iberia Mart I, Calle Pedro Texeira
8, 28020 Madrid, Spain
Note 3
100%
Note 1
100%
Note 8
100%
Note 1
100%
Note 1
100%
Note 1
100%
Note 1
100%
Note 1
100%
Note 1
100%
Note 1
100%
100%
Note 3
100% Iberia Mart I, Calle Pedro Texeira
8, 28020 Madrid, Spain
100%
100%
100%
100%
90%
90%
Note 4
Note 4
Note 4
Note 4
Note 8
Note 8
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
Note 8
Note 8
Note 8
Note 8
Note 9
Note 9
Note 8
Note 8
Note 8
Note 8
Note 8
Note 8
Note 4
Note 4
Note 4
Note 4
Note 4
Note 2
Note 2
Note 2
Note 1
Note 4
Note 4
Note 4
90.05%
100%
90.05%
90.05%
90.1%
90.1%
90.1%
90.1%
90.1%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
179
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Name
Cross Yarra Trust 3
Cypress Creek Fund 11 LLC
Cypress Creek Fund 11 Managing Member LLC
Cypress Creek Fund 12 LLC
Cypress Creek Fund 12 Managing Member LLC
Defence Support (St Athan) Holdings Limited
Defence Support (St Athan) Limited
Dritte Nordergründe Beteiligungs GmbH
Education Support (Southend) Limited
Finley Solar Holdings Pty Ltd
Finley Solar Farm Pty Ltd
Finley Solar Finance Pty Ltd
Finley Solar Trust
Fox Creek Farm Solar LLC
Fox Creek HoldCo LLC
Glencarbry (Holdings) Limited
Glencarbry Supply Company Limited
Glencarbry Windfarm Limited
Innovative Solar 54 LLC
Innovative Solar 67 LLC
IS54 HoldCo LLC
IS67 HoldCo LLC
John Laing Live Oak Wind OpCo LLC
John Laing US Solar Corp
Kabeltrasse Morbach GmbH & Co. KG
KGE Windpark Schipkau-Nord GmbH & Co. KG
KGE Schipkau-Nord Infrastruktur GmbH & Co. KG
Kiata Wind Farm Holdings Pty Limited
Kiata Wind Farm Pty Limited
Klettwitz Schipkau Nord Beteiligungs GmbH
Klettwitz SN Holdings GmbH
Klettwitz SN Verwaltungs GmbH
Live Oak Wind Class B Member LLC
Live Oak Wind Holdco LLC
Live Oak Wind Partners LLC
Live Oak Wind Project LLC
Nordergrunde Holdco GmbH
NorthernPathways Holding Pty Ltd
NorthernPathways Pty Ltd
NorthernPathways Project Trust
180
Country of
incorporation
Ownership
interest
Australia
100%
Registered office
Note 4
**
**
**
**
**
United States
United States
United States
United States
** United Kingdom
** United Kingdom
Germany
**
** United Kingdom
Australia
**
Australia
**
Australia
**
**
Australia
United States
**
**
United States
** United Kingdom
Ireland
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
Ireland
United States
United States
United States
United States
United States
United States
Germany
Germany
Germany
Australia
Australia
Germany
Germany
Germany
United States
United States
United States
United States
Germany
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
100% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
100% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
Note 2
Note 2
Lise-Meitner-Strasse 5, 28359
Bremen, Germany
Note 1
100%
Note 4
100%
Note 4
100%
Note 4
100%
100%
Note 4
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
90.1% 176 Mine Lake Court, Suite 100,
Raleigh, NC 27615 USA
Note 1
Arthur Cox Building, Earlsfort
Terrace, Dublin 2,
Ireland
Arthur Cox Building, Earlsfort
Terrace, Dublin 2,
Ireland
Note 9
Note 9
Note 9
Note 9
Note 8
Note 9
Oberdorfstraße 10, 55262
Heidesheim am Rhein, Germany
Am Nesseufer 40, 26789 Leer,
Germany
Am Nesseufer 40, 26789 Leer,
Germany
Level 4, 30 Marcus Clarke
Street , Canberra City ACT 2601,
Australia
Level 4, 30 Marcus Clarke
Street , Canberra City ACT 2601,
Australia
Note 7
Note 7
Note 7
Note 8
Note 8
Note 8
Note 8
Lise-Meitner-Strasse 5, 28359
Bremen, Germany
Note 4
Note 4
Note 4
100%
100%
100%
75%
75%
75%
75%
100%
80%
80%
80%
72.3%
72.3%
100%
85%
90.1%
90.1%
90.1%
90.1%
100%
100%
81.82%
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Name
NorthernPathways Holding Trust
Parc Eolien des Courtibeaux SAS
Parc Eolien des Tournevents du Cos SAS
Parkway 6 BV
Parkway 6 Holding BV
Rammeldalsberget Vindkraft AB
Rammeldalsberget Holding AB
**
**
**
**
**
**
**
Australia
France
France
Netherlands
Netherlands
Sweden
Sweden
Services Support (Surrey) Holdings Limited
Services Support (Surrey) Limited
Société d'Exploitation du Parc Eolien Du Tonnerois
** United Kingdom
** United Kingdom
France
**
Solar House Holdings
Solar House 1
Solar House 2
Solar House 3
Solar House 4
Sunraysia Solar Farm Holdings Pty Ltd
Sunraysia Solar Project Pty Ltd
Sunraysia Solar Project Holdings Trust
Sunraysia Solar Project Trust
Sunraysia Solar Finance Pty Ltd
Svartvallsberget SPW AB
Svartvallsberget Holding AB
Tonnerois (Holdings) Limited
Tournevents (Holdings) Limited
Uliving@Brighton (Holdco) Limited
**
**
**
**
**
**
**
**
**
**
**
**
France
France
France
France
France
Australia
Australia
Australia
Australia
Australia
Sweden
Sweden
** United Kingdom
** United Kingdom
** United Kingdom
Uliving@Brighton Limited
** United Kingdom
US Solar John Laing Op Co LLC
Vierte Nordergründe Beteiligungs GmbH
Wind Hold Co 1 Limited
Wind Project Co 1 Limited
Windpark Horath Holding GmbH
Windpark Horath Verwaltungs GmbH
WP Horath GmbH & Co KG
Zweite Nordergründe Beteiligungs GmbH
**
**
United States
Germany
** United Kingdom
** United Kingdom
Germany
**
Germany
**
Germany
**
Germany
**
Country of
incorporation
Ownership
interest
Registered office
90.1%
90.1%
80%
80%
80%
80%
85%
85%
80%
80%
100%
100%
Note 4
100% 1 Rue des Arquebusiers, 67000
Strasbourg, France
100% 1 Rue des Arquebusiers, 67000
Strasbourg, France
Taurusavenue 100, Hoofddorp,
Netherlands
Taurusavenue 100, Hoofddorp,
Netherlands
Sveavagen 17, 111 57
Stockholm, Sweden
Sveavagen 17, 111 57
Stockholm, Sweden
Note 1
100%
Note 1
100%
100% 1 Rue des Arquebusiers, 67000
Strasbourg, France
6 Avenue du Coq, 75009 Paris,
France
6 Avenue du Coq, 75009 Paris,
France
6 Avenue du Coq, 75009 Paris,
France
6 Avenue du Coq, 75009 Paris,
France
6 Avenue du Coq, 75009 Paris,
France
Level 4, 5 Talavera Road
Macquarie Park, NSW 2113,
Australia
Level 4, 5 Talavera Road
Macquarie Park, NSW 2113,
Australia
Level 4, 5 Talavera Road
Macquarie Park, NSW 2113,
Australia
Level 4, 5 Talavera Road
Macquarie Park, NSW 2113,
Australia
Level 4, 5 Talavera Road
Macquarie Park, NSW 2113,
Australia
Sveavagen 17, 111 57
Stockholm, Sweden
Sveavagen 17, 111 57
Stockholm, Sweden
Note 1
Note 1
Linkcity, Becket House, 1
Lambeth Palace Road, London
SE1 7EU
Linkcity, Becket House, 1
Lambeth Palace Road, London
SE1 7EU
Note 8
Lise-Meitner-Strasse 5, 28359
Bremen, Germany
Note 1
Note 1
Note 7
Note 7
Note 7
Lise-Meitner-Strasse 5, 28359
Bremen, Germany
100%
100%
100%
100%
100%
100%
100%
100%
85%
100%
100%
100%
100%
85%
90.1%
90.1%
90.1%
181
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Details of the Company’s joint ventures and other investments at 31 December 2019 were as follows:
Name
Non-recourse
Joint venture project companies (measured at fair value)
A-Lanes A15 Holding BV
A-Lanes A15 BV
A-Lanes Management Services BV
Agility Trains East (Holdings) Limited
Agility Trains East (Midco) Limited
Agility Trains East Limited
Alder Hey Holdco 3 Limited
Alder Hey Holdco 2 Limited
Alder Hey Holdco 1 Limited
Alder Hey (Special Purpose Vehicle) Limited
ALTRAC Light Rail Partnership
Celsus Holding Pty Limited
Celsus Pty Limited
Celsus Holding Trust
Celsus Trust
Concesionaria Ruta del Cacao SAS
Cramlington Renewable Energy Developments Hold Co Limited
Cramlington Renewable Energy Developments Limited
Cross Yarra Partnership
De Groene Boog Holding BV
De Groene Boog BV
Denver Transit Holdings LLC
Denver Transit Partners LLC
East Rockingham RRF Finance Co Pty Ltd.
East Rockingham RRF Hold Co Pty Ltd
East Rockingham RRF Hold Co 2 Pty Ltd.
East Rockingham RRF Hold Trust
East Rockingham RRF Hold Trust 2
East Rockingham RRF Project Trust
East Rockingham RRF Project Co Pty Ltd.
Granville Harbour Holdings Pty Ltd
Granville Harbour Holdings Trust
Granville Harbour Operations Pty Ltd
Granville Harbour Operations Trust
Hornsdale Asset Co Pty Limited
HWF Holdco 1 Pty Limited
HWF 1 Pty Limited
HWF Holdco 2 Pty Limited
182
Country of
incorporation
Ownership
interest
Registered office
**
**
**
Netherlands
Netherlands
Netherlands
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
** United Kingdom
Australia
**
**
**
**
**
**
Australia
Australia
Australia
Australia
Colombia
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
Netherlands
Netherlands
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
17.26%
17.26%
17.26%
17.26%
28%
28%
25%
30%
30%
30%
30%
40%
40%
40%
40%
32.5%
Venkelweg 64, Hoogvliet
Rotterdam, Netherlands
Venkelweg 64, Hoogvliet
Rotterdam, Netherlands
Westkanaaldijk 2, Utrecht,
Netherlands
Note 6
Note 6
Note 6
Note 2
Note 2
Note 2
Note 2
Level 7, 280 Elizabeth St Surry
Hills, NSW 2010, Australia
c/- Royal Adelaide Hospital,
Port road, Adelaide SA 5000,
Australia
c/- Royal Adelaide Hospital,
Port road, Adelaide SA 5000,
Australia
c/- Royal Adelaide Hospital,
Port road, Adelaide SA 5000,
Australia
c/- Royal Adelaide Hospital,
Port road, Adelaide SA 5000,
Australia
Carrera 26 No. 36 - 14 oficina
702 edificio Fénix Bucaramanga,
Santander, Colombia
Note 2
Note 2
Level 8, 136 Exhibition St,
Melbourne VIC 3000, Australia
47.5% Marten Meesweg 25, Rotterdam,
Netherlands
47.5% Marten Meesweg 25, Rotterdam,
Netherlands
Note 8
Note 8
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Note 5
Note 5
Note 5
Note 5
45%
45%
40%
40%
40%
40%
40%
40%
40%
49.8%
15%
30%
30%
20%
49.8%
49.8%
49.8%
** United Kingdom 44.72%***
** United Kingdom 44.72%***
30%
Australia
**
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 Country of
incorporation
Ownership
interest
Registered office
13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Name
HWF 2 Pty Limited
HWF 3 Pty Limited
HWF Holdco 3 Pty Limited
I-4 Mobility Partners HoldCo LLC
I-4 Mobility Partners Midstream LLC
I-4 Mobility Partners Op Co LLC
I-66 Express Mobility Partners Holding LLC
I-66 Express Mobility Partners LLC
I-77 Mobility Partners Holding LLC
I-77 Mobility Partners LLC
Laing/Gladedale (Hastings) Holdings Limited
Laing/Gladedale (Hastings) Limited
Laing Wimpey Alireza Limited
Mobilinx Hurontario General Partnership Project Co
NGR Holding Company Pty Limited
NGR Project Company Pty Limited
NGR Holding Trust
NGR Project Trust
Oakland Corridor Partners HoldCo LLC
Oakland Corridor Partners LLC
OWP Nordergründe GmbH & Co. KG
Palisade Granville Harbour Investments Pty Ltd
Palisade Granville Harbour Investments Trust
**
**
**
**
**
**
**
**
**
**
Australia
Australia
Australia
United States
United States
United States
United States
United States
United States
United States
** United Kingdom
** United Kingdom
Saudi Arabia
**
**
**
**
**
**
**
**
**
**
**
Canada
Australia
Australia
Australia
Australia
United States
United States
Germany
Australia
Australia
Rail Investments (Great Western) Limited
Securefuture Wiri Holdings Limited
** United Kingdom
New Zealand
**
Securefuture Wiri Limited
**
New Zealand
Severn River Crossing Plc
** United Kingdom
Speyside Renewable Energy Partnership Hold Co Limited
Speyside Renewable Energy Finance PLC
Speyside Renewable Energy Partnership Limited
** United Kingdom 43.35%****
** United Kingdom 43.35%****
** United Kingdom 43.35%****
10%
10%
10%
35%
50%
50%
33%
20%
20%
20%
50%
50%
50%
10%
Note 5
Note 5
Note 5
Note 8
Note 8
Note 8
1209 Orange St, Wilmington,
Delaware 19801, USA
1209 Orange St, Wilmington,
Delaware 19801, USA
1209 Orange St, Wilmington,
Delaware 19801, USA
1209 Orange St, Wilmington,
Delaware 19801, USA
Note 1
Note 1
P.O. Box 2059, Jeddah, Saudi
Arabia
110 Matheson Boulevard West,
4th Floor, Mississauga, Ontario,
Canada L5R 4G7
40% c/- Allens, Level 33, 101 Collins
Street, Melbourne VIC 3000,
Australia
40% c/- Allens, Level 33, 101 Collins
Street, Melbourne VIC 3000,
Australia
40% c/- Allens, Level 33, 101 Collins
Street, Melbourne VIC 3000,
Australia
40% c/- Allens, Level 33, 101 Collins
Street, Melbourne VIC 3000,
Australia
1209 Orange St, Wilmington,
Delaware 19801, USA
1209 Orange St, Wilmington,
Delaware 19801, USA
Stephanitorsbollwerk 3, 28217
Bremen, Germany
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Note 1
Level 3, 37 Galway Street,
Britomart, Auckland 1010, New
Zealand
Level 3, 37 Galway Street,
Britomart, Auckland 1010, New
Zealand
Four Brindley Place,
Birmingham, Midlands, B1 2HZ
13 Queens Road, Aberdeen,
Scotland, AB15 4YL
Note 2
13 Queens Road, Aberdeen,
Scotland, AB15 4YL
50%
30%
40%
30%
40%
30%
35%
49.8%
49.8%
183
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements 13 SUBSIDIARIES AND OTHER INVESTMENTS (CONTINUED)
Name
Transcend Property Limited
Westcoast Wind Pty Ltd
Wimpey Laing Iran Limited
Country of
incorporation
Ownership
interest
** United Kingdom
Australia
**
50%
49.8%
** United Kingdom
50%
Wimpey Laing Limited
** United Kingdom
50%
Registered office
Note 1
Level 13, 664 Collins Street,
Dockland VIC 3008, Australia
Gate House, Turnpike
Road, High Wycombe,
Buckinghamshire, HP12 3NR
Gate House, Turnpike
Road, High Wycombe,
Buckinghamshire, HP12 3NR
*
**
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, D-10178 Berlin, Germany
8. The registered office of these companies is: 251 Little Falls Drive, Wilmington, Delaware 19808, USA
9. The registered office of these companies is: 2626 Glendwood Avenue Suite 550, Raleigh, North Carolina 27608, USA
184
John Laing Group plcAnnual Report and Accounts 2019NOTES TO THE COMPANY FINANCIAL STATEMENTS continuedfor the year ended 31 December 2019 ADDITIONAL FINANCIAL INFORMATION (UNAUDITED)
DETAILS OF INVESTMENTS IN PROJECT COMPANIES
Details of the Group’s investments in project companies as at 31 December 2019 broken down by infrastructure sector are as follows:
Sector
Company name
Project name
%
owned
Description
Social
Infrastructure
Health
Alder Hey (Special
Purpose Vehicle)
Limited
Alder Hey Children's
Hospital
40%
Design, build, finance and
operate a new hospital
in Liverpool costing
£167 million.
Celsus Holding
Pty Limited
New Royal Adelaide
Hospital
17.26% Design, build, finance and
operate a new hospital in
Adelaide, South Australia
costing AUD $1,850 million.
Justice and
Emergency
Services
Securefuture Wiri
Limited
Auckland South
Corrections Facility
30%
NorthernPathways
Pty Ltd
Clarence
Correctional Centre
(formerly New
Grafton Correctional
Centre)
Other
accommodation
Uliving@Brighton
Limited
University of
Brighton PBSA
80%
85%
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.
Financing, development and
management of the new
student facilities.
No. of
operational
years
Equity
committed /
invested
(par value)
Operational
start date
Sept 2015
30
<£10 million
Jun 2017
30
May 2015
25
£25 – £50
million
£10 –
£25 million
Jun 2020
20
£50 –
£100 million
Oct 2021
50
< £10 million
Environmental
Biomass
Speyside
Renewable Energy
Partnership
Limited
Cramlington
Renewable Energy
Developments
Limited
East Rockingham
RRF Project Co.
Pty Ltd.
Speyside Biomass
43.35% Design, build, finance and
operate a 14 MWe biomass
CHP plant in Speyside.
Jun 2017
20
Cramlington
Biomass
44.7% Design, build, finance and
operate a 28 MW biomass
CHP plant in Cramlington.
Jul 2018
20
East Rockingham
40%
Jan 2023
40
Wind and solar
Rammeldalsberget
Vindkraft AB
Rammeldalsberget
Wind Farm
100%
Glencarbry
Windfarm Limited
Glencarbry Wind
Farm
100%
Kabeltrasse
Morbach GmbH &
Co. KG
HWF 1 Pty Limited Hornsdale Wind
Farm (Phase 1)
HWF 2 Pty Limited Hornsdale Wind
Farm (Phase 2)
Design, build, finance and
operate a 29 MW waste to
energy plant in Western
Australia.
Design, build, finance and
operate six 2.5 MW turbines
in Sweden.
Design, build, finance and
operate seven 3.3 MW and
five 2.5 MW turbines in
Ireland.
30%
20%
operate nine 3.3 MW turbines
in Germany.
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.
Jun 2016
Jul 2017
Nov 2016
25
30
25
30
Horath Wind Farm
81.82% Design, build, finance and
Nov 2016
£10 –
£25 million
£25 –
£50 million
£25 –
£50 million
£10 –
£25 million
£10 –
£25 million
£10 –
£25 million
£10 – £25
million
Jun 2017
30
< £10 million
185
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements ADDITIONAL FINANCIAL INFORMATION (UNAUDITED) continued
DETAILS OF INVESTMENTS IN PROJECT COMPANIES (CONTINUED)
Sector
Company name
Project name
Environmental
(continued)
HWF 3 Pty Limited Hornsdale Wind
Farm (Phase 3)
%
owned
20%
Description
Design, build, finance and
operate 35 turbines to give
109 MW total installed
capacity in Australia.
No. of
operational
years
Equity
committed /
invested
(par value)
Operational
start date
Dec 2017
30
< £10 million
Kiata Wind Farm
72.3% Design, build, finance and
Nov 2016
30
30
25
25
30
30
28
Kiata Wind Farm
Pty Limited
Société
d'Exploitation du
Parc Eolien Du
Tonnerois
Pasilly Wind Farm
100%
Svartvallsberget
SPW AB
Svartvallsberget
Wind Farm
100%
Klettwitz Shipkau
Nord Beteiligungs
GmbH
Parc Eolien des
Courtibeaux SAS
Parc Eolien des
Tournevents du
Cos SAS
OWP
Nordergründe
GmbH & Co. KG
Klettwitz Wind Farm 100%
St Martin Wind Farm 100%
Sommette Wind
Farm
100%
Nordergründe
Offshore Wind Farm
30%
Buckthorn Wind
John Laing OpCo
LLC
Buckthorn Wind
Farm
John Laing US
Solar Corp
Cypress Creek solar
farms
100%
Finley Solar Farm
Pty Ltd
Finley solar farm
100%
operate a nine turbine 30 MW
windfarm in Australia.
Design, build, finance and
operate ten 2 MW turbines
in France.
Design, build, finance and
operate ten 2 MW turbines
in Sweden.
Design, build, finance and
operate the re-powering of
a windfarm with 27 turbines
to give 89 MW total installed
capacity in Germany.
Design, build, finance and
operate five 2.05 MW turbines
in France.
Design, build, finance and
operate nine 2.4 MW turbines
in France.
Design, build, finance and
operate 18 offshore 6.15 MW
turbines in the German
North Sea.
Dec 2016
Jul 2014
Nov 2016
Jun 2018
Dec 2017
Nov 2017
operate 29 turbines to
produce a 100 MW wind farm
in Erath County, Texas, US.
Build, finance and operate a
portfolio of five utility scale
solar projects located in
North Carolina. The total
capacity of the portfolio is
258.5 MW.
Design, build, finance and
operate a 163 MW Solar PV
farm in south west NSW,
Australia.
90.05% Design, build, finance and
Jan 2018
30
Sunraysia Solar
Project Pty Ltd
Granville Harbour
Operations Pty Ltd
Sunraysia solar farm 90.1% Design, build, finance and
Dec 2020
35
operate a 255 MW Solar PV
farm in south west NSW,
Australia.
Granville wind farm
49.8% Build, finance and operate
May 2020
30
Cherry Tree Wind
Farm Pty Ltd
Cherry Tree wind
farm
100%
a 112 MW wind farm in
Tasmania, Australia.
Design, build, finance and
operate a 57.6 MW wind
farm in north east Victoria,
Australia.
May 2020
30
£10 –
£25 million
< £10 million
£10 –
£25 million
£25 –
£50 million
< £10 million
£10 –
£25 million
£25 –
£50 million
£25 –
£50 million
£50 –
£100 million
£50 –
£100 million
£25 –
£50 million
Oct 2018
35
£50 –
£100 million
Dec 2019
35
£50 –
£100 million
Live Oak Wind
Project LLC
Live Oak wind farm
75%
A 200 MW wind farm in
Schleicher County, Texas, US.
Dec 2018
30
£50 –
£100 million
186
John Laing Group plcAnnual Report and Accounts 2019 DETAILS OF INVESTMENTS IN PROJECT COMPANIES (CONTINUED)
Sector
Company name
Project name
Transport
Other
CountyRoute
(A130) plc
A130
%
owned
100%
I-4 Mobility
Partners Op Co
LLC
I-4 Ultimate
50%
I-77 Mobility
Partners LLC
I-77 Managed Lanes
10%
I-66 Express
Mobility Partners
LLC
I-66 Managed Lanes
10%
Parkway 6 BV
A6 Parkway
Netherlands
85%
A-Lanes A15 BV
A15 Netherlands
28%
Denver Transit
Partners LLC
Denver Eagle P3
45%
No. of
operational
years
Equity
committed /
invested
(par value)
Operational
start date
Feb 2003
24
< £10 million
Dec 2021
40
£10 –
£25 million
Nov 2019
50
£10 –
£25 million
Dec 2022
50
> £100 million
Jul 2019
20
< £10 million
Jul 2016
21
£10 –
£25 million
Apr 2019
25
£10 –
£25 million
Description
Design, build, finance and
operate 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,
manage and maintain for a
20 year operational period
the A6 Almere highway in the
greater Amsterdam region.
Design, build, finance and
maintain the A15 highway
south of Rotterdam
(about 40 kilometres)
at a construction cost
of €727 million.
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,
Mar 2020
16
£50 –
£100 million
Cross Yarra
Partnership
Melbourne Metro
30%
Sep 2024
25
£25 –
£50 million
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.
Design, build, finance,
operate and maintain twin
nine-kilometre tunnels
and five new underground
stations in Melbourne,
Australia.
a new 11 km motorway
connection on the north side
of Rotterdam.
Design, build, finance and
maintain a 5.5 mile existing
section and 4 mile new
section of the I-75 at a
construction cost of $629
million.
Aug 2023
25
De Groene Boog
BV
A16 Netherlands
47.5% Design, build and finance
Dec 2023
20
Oakland Corridor
Partners LLC
I-75 Road
40%
£25 –
£50 million
£10 –
£25 million
187
Strategic ReportGovernanceJohn Laing Group plcAnnual Report and Accounts 2019OverviewFinancial Statements ADDITIONAL FINANCIAL INFORMATION (UNAUDITED) continued
DETAILS OF INVESTMENTS IN PROJECT COMPANIES (CONTINUED)
Sector
Company name
Project name
Transport
(continued)
Boston AFC 2.0
Opco LLC
MBTA Automated
Fare Collection
System
%
owned
90%
Mobilnx
Hurontario
General
Partnership
Project Co
Concesionaria
Ruta del Cacao
SAS
Hurontario
35%
Ruta del Cacao
30%
Rail rolling
stock
Agility Trains East
Limited
IEP Phase 2
30%
NGR Project
Company Pty
Limited
New Generation
Rollingstock
40%
Operational
start date
No. of
operational
years
Feb 2022
10
Equity
committed /
invested
(par value)
£10 –
£25 million
Sep 2024
30
£10 –
£25 million
May 2022
22.5
£50 –
£100 million
Jun 2020
40
£50 –
£100 million
Dec 2019
26.5
£10 –
£25 million
Description
Design, build, finance,
maintenance and operation
of a replacement to the
automated fare collection
system across the Boston
public transport system
at a construction cost of
$204 million.
Design, build, finance,
operate and maintain the
Hurontario Light Rail project
on Ontario, Canada.
Design, build, finance,
maintenance and operation
of 236km of road connecting
the cities of Bucaramanga,
Barrancabermeja and Yondó,
Colombia.
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.
SHAREHOLDER INFORMATION
FINANCIAL DIARY
SOLICITORS
3 March 2020
23 April 2020
24 April 2020
7 May 2020
15 May 2020
August 2020
October 2020
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
Updates to the financial calendar will be made on the
Company’s website www.laing.com when they become
available.
REGISTERED OFFICE AND COMPANY SECRETARY
The Company’s Registered Office is:
1 Kingsway
London WC2B 6AN
Clare Underwood is the Group Company Secretary
AUDITOR
Deloitte LLP
1 New Street Square
London EC4A 3BZ
188
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
PRINCIPAL GROUP BANKS
Barclays Bank PLC
1 Churchill Place
Canary Wharf
London E14 5HP
HSBC UK Bank plc
71 Queen Victoria Street
London EC4V 4AY
Australia and New Zealand Banking Group Limited
40 Bank Street
Canary Wharf
London E14 5EJ
MUFG Bank, Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9AN
John Laing Group plcAnnual Report and Accounts 2019 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
National Australia Bank Limited
52 Lime Street
London EC2M 7AF
AIB Group (UK) P.L.C.
1 Undershaft
London EC3A 8AB
JOINT STOCKBROKERS
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
HSBC Bank plc
8 Canada Square
Canary Wharf
London E14 5HQ
INDEPENDENT VALUER
KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
REGISTRARS
Equiniti Limited
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. 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.
DIVIDENDS
Shareholders holding shares directly may opt for dividends
to be paid straight to their bank or building society account,
rather than being paid by cheque. To elect for this swift
and secure method of payment, contact the Registrars,
visit www.shareview.com or fill in the mandate form that
will be sent to you with your next dividend cheque.
SHARE DEALING SERVICES
The Registrars offer a real-time telephone and internet
dealing service for UK residents. 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 8:30am to 5:30pm (UK time) Monday
to Friday for dealing, excluding public holidays in England
and Wales. For EEA residents, the Registrars offer
a postal share dealing service. Details can be found
at www.shareview.co.uk/dealing.
Production:
Designed and produced by MAGEE (www.magee.co.uk)
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John Laing Group plc
Registered Office:
1 Kingsway
London
WC2B 6AN
United Kingdom
Registered No. 05975300
Tel: +44 (0)20 7901 3200
Further copies of this Annual Report & Accounts are available by visiting the Company’s website or at the address above
www.laing.com