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John Laing Group plc   -  JLG   

Results for the six months ended 30 June 2019

Released 07:00 22-Aug-2019

RNS Number : 8471J
John Laing Group plc
22 August 2019
 

JOHN LAING GROUP PLC

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019

John Laing Group plc (John Laing, the Company or the Group) announces its unaudited results for the six months ended 30 June 2019

 

Highlights: Mixed H1 results - Full year outlook unchanged

·   Net asset value (NAV) of £1,599 million or 325p1 per share at 30 June 2019 (31 December 2018 - £1,586 million or 323p) up 0.6% since 31 December 2018 or 3.0% including dividend paid in May 2019

·    Portfolio value at 30 June 2019 of £1,535 million up 3.5% on the rebased portfolio value2 at 31 December 2018

·    Good operational performance but challenges in renewable energy portfolio, mitigated by value enhancements and strong project delivery:

·    Sale of all remaining fund management activities completed

·    New investments of £7 million (six months ended 30 June 2018 - £39 million)3. One further investment completed in August, in North America, and another agreed and expected to complete in September, our first investment in Latin America, totalling approximately £137 million

·   Healthy pipeline of £2.1 billion of investment opportunities. Solar and wind investments on hold in Europe and Australia pending current issues resolution; investment in US renewable energy assets limited to recycling of capital

·    Realisations of £131 million from the sale of three investments (six months ended 30 June 2018 - £242 million from the sale of two investments)

·    Profit Before Tax (PBT) of £35 million (six months ended 30 June 2018 - £175 million, which included an exceptional gain on IEP Phase 1 disposal) and Earnings Per Share (EPS) of 7.1p (six months ended 30 June 2018 - 38.8p)4

·    Interim dividend of 1.84p per share payable in October 2019 (six months ended 30 June 2018 - 1.80p per share) in line with dividend policy

 

1.     NAV per share at 30 June 2019 calculated as NAV of £1,599 million divided by the number of shares in issue at 30 June 2019 of 491.8 million, excluding the shares held in the Employee Benefit Trust (EBT).

2.     Rebased portfolio value is described in the Portfolio Valuation section.

3.     Based on new investment commitments secured in the six months ended 30 June 2019; for further details see the Business Review.

4.     Basic EPS; see note 7 to the Condensed Group Financial Statements.

 

Olivier Brousse, John Laing's Chief Executive Officer, commented:

"Our operational performance in the first half was strong, however we have had a number of challenges with our renewable energy assets in Australia and Europe. We delivered value enhancements across the portfolio, but predominantly in renewable energy, which has helped to mitigate the impact of these challenges. In addition, we made good progress on key assets in our PPP portfolio. The Denver Eagle P3 commuter rail project fully opened to the public in April, IEP Phase 2 commenced public train services in May and Sydney Light Rail and New Generation Rollingstock also progressed well in the last six months. Our asset management teams have been instrumental in successfully progressing all of these projects, protecting and enhancing the value of our investments.

 

We are confident in our ability to continue to generate value from our existing portfolio, to make the most of a secondary market that remains strong and capitalise on the demand for operational infrastructure. At the same time, our investment teams are actively seeking new PPP investments, supported by our strong financial resources and partner relationships. We are particularly pleased in this regard to have agreed in July our first investment in Latin America, with the Ruta del Cacao PPP road project in Colombia. New renewable energy investments have been put on hold in Europe and Australia, and limited to recycling of capital in North America, as we re-assess our approach to risk and return in these markets. Nevertheless, our pipeline remains healthy across our established geographies and in new markets and sectors.

 

We remain confident in delivering our full year expectations, underpinned by the value inherent in our existing portfolio and further penetration of our targeted markets."

 

A presentation for analysts and investors will be held at 9:00am (London time) today at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. The presentation will be webcast on https://www.investis-live.com/john-laing/5d3b0a179add6d11006d4f04/dsfg

 

A conference call facility will also be available using the following dial in details:

 

 

UK: 020 3936 2999

Other locations: +44 20 3936 2999

Participant access code: 03 73 70

 

 

A copy of the presentation slides will be available at www.laing.com later today.

 

 

Analyst/investor enquiries:

 

Olivier Brousse, Chief Executive Officer

+44 (0)20 7901 3200

Luciana Germinario, Chief Financial Officer

+44 (0)20 7901 3200

 

Media enquiries:

 

 

Matthew Denham / Camilla Cunningham, Teneo

+44 (0)20 7420 3186

 

 

 

This announcement may contain forward looking statements. It has been made by the Directors of John Laing in good faith based on the information available to them up to the time of their approval of this announcement and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.

 

Summary financial information

 

 

 

£ million (unless otherwise stated)

Six months

ended

or as at

30 June

2019

Six months

ended

or as at

30 June

2018

Year

ended

or as at

31 December

2018

 

 

 

 

Net asset value (NAV)

1,599

1,505

1,586

NAV per share1

325p

307p

323p

Profit before tax

35

175

296

Earnings per share (EPS)2

7.1p

38.8p

63.1p

Dividends per share

1.84p

1.80p

9.50p

 

 

 

 

Primary Investment portfolio

896

636

868

Secondary Investment portfolio

639

624

692

Total investment portfolio

1,535

1,260

1,560

Future investment commitments backed by letters of credit and cash collateral

228

251

296

Gross investment portfolio

1,763

1,511

1,856

New investment committed during the period3

7

39

302

Cash invested in projects

89

131

342

Proceeds from investment realisations

131

242

296

Cash yield from investments

35

17

34

PPP investment pipeline3

1,883

1,567

1,543

Renewable energy pipeline3

175

733

830

 

 

 

 

Notes:

(1)   NAV per share at 30 June 2019 calculated as NAV of £1,599 million divided by the number of shares in issue at 30 June 2019 of 491.8 million, excluding the shares held in the EBT.

(2)   Basic EPS; see note 7 to the Condensed Group Financial Statements.

(3)   For further details, see the Business Review.

 

BUSINESS REVIEW

Overview and outlook

Our NAV increased from £1,586 million at 31 December 2018 to £1,599 million at 30 June 2019. This is equivalent to 325p per share and represents growth of 3.0% after adding back dividends paid versus NAV per share of 323p per share at 31 December 2018. This growth was lower than expected, primarily as a result of industry transmission issues on three of our renewable energy assets in Australia, which led to a write down of £66 million, and performance issues for our wind assets in Europe, which led to a write down of £55 million. For more details please refer to the Regional Review section. At the same time and as part of the overall portfolio optimisation strategy, we have identified and delivered £78 million of value enhancements in the first half, which helped to mitigate these losses. Actions will continue in to the second half of the year and we expect to achieve further value enhancements in our full year results.

                                                                                                                                                                                          

In line with our dividend policy, we are declaring an interim dividend for 2019 of 1.84p per share, a 2.2% increase versus 1.80p for 2018.

                                                                                                                                        

Our investment portfolio was valued at £1,535 million at 30 June 2019, a decrease of £25 million from £1,560 million at 31 December 2018 reflecting the realisations completed in the first half (see the Portfolio Valuation section for further details). After adjusting the portfolio value at 1 January 2019 for realisations, cash yield and cash invested into projects in the period, the value of our portfolio increased by £52 million or 3.5% of this rebased value. Cash yield from investments in the six months ended 30 June 2019 was £35 million, which included a large distribution from the Denver Eagle P3 project.

 

Profit before tax in the period was £35 million (six months ended 30 June 2018 - £175 million). The lower profit for the first half of 2019, compared to the same period last year, is due to the issues described above, as well as the significant one-off gain of £87 million on disposal of the Group's investment in IEP Phase 1 in the first half of 2018.

 

The first half highlights included:

 

 

Our investment commitments to date in 2019 are summarised in the table below. Since 30 June 2019, we have completed one further investment.

 

 

Investment commitments

Region

PPP

£ million

Renewable energy

£ million

Total

£ million

University of Brighton student accommodation

Europe

7

-

7

Total at 30 June 2019

 

7

-

7

August 2019: US wind farm

North America

-

75

75

Total YTD

 

7

75

82

 

In addition, in July 2019, we agreed an investment in the Ruta del Cacao road project in Colombia. This investment of approximately £62 million is expected to complete in September 2019.

 

Our pipeline of PPP and renewable energy opportunities stood at £2,058 million at 30 June 2019 (31 December 2018 - £2,373 million). This included:

 

Following the operational issues experienced with our renewable energy assets in Australia and Europe in the first half of 2019, we have put on hold investments in solar and wind assets in these regions. Investment in renewable energy assets in the US will be limited to where capital is being recycled from renewable energy disposals.

 

We are seeing growth in the PPP pipeline in the US and in Australia, where the PPP market is now more active after a quieter period, and the continued emergence of opportunities in Latin America. This is reflected in the pipeline shown in the table below.       

 

The PPP pipeline comprises opportunities to invest equity in PPP projects with the potential to reach financial close over the next three years, while the renewable energy pipeline relates to the next two years.

 

 

At 30 June 2019

At 31 December 2018

Pipeline - estimated equity investment

£ million

PPP

Renewable

energy

Total

PPP

Renewable

energy

Total

North America

758

155

913

691

387

1,078

Europe

349

20

369

343

73

416

Asia Pacific

471

-

471

334

370

704

Latin America

305

-

305

175

-

175

Total

1,883

175

2,058

1,543

830

2,373

 

 

The total pipeline is broken down below according to the bidding stage of each project. Our overall pipeline is constantly evolving as new opportunities are added and others drop out.

 

Pipeline by bidding stage at 30 June 2019

Number of

projects

PPP

£ million

Renewable

energy

£ million

Total

£ million

Preferred bidder

1

28

-

28

Shortlisted / exclusive

10

240

95

335

Other

35

1,615

80

1,695

Total

46

1,883

175

2,058

 

The preferred bidder position and eight of the shortlisted positions are on PPP bids as detailed in the table below:

 

 

Preferred bidder / shortlisted PPP Projects

Financial close achieved or expected by

Region

Description

East Rockingham Waste, Australia*

Q1 2020

Asia Pacific

Waste to Energy plant in Western Australia

Redfern Communities Plus, Australia

Q1 2021

Asia Pacific

Social Housing Development in Sydney, Australia

Hurontario LRT, Ontario

Q4 2019

North America

Light rail system in the Greater Toronto area

Iowa Green Energy, Iowa

Q4 2019

North America

Utility system project for the University of Iowa

Hamilton Rail, Ontario

Q2 2020

North America

Light rail system in Hamilton, Ontario

Jefferson Parkway, Colorado

Q3 2020

North America

9.2 mile four-lane limited access toll highway in Denver, Colorado

I-10 Mobile River Bridge, Alabama

Q4 2020

North America

Highway bridge and replacement in Mobile, Alabama

Dartmouth Green Energy, New Hampshire

Q4 2020

North America

Utility system project for Dartmouth College

Via15, Netherlands

Q2 2020

Europe

12km greenfield road including a major bridge in the east of the Netherlands

* Preferred bidder position

 

In August 2019, we were shortlisted on a further PPP project bid in Asia Pacific.

 

During the first half of 2019, we completed realisations totalling £131 million from the sale of one PPP and two renewable energy investments. These included the disposal of our interest in Optus Stadium, which was our first sale of an operational asset in Australia, and the disposal of the Rocksprings and Sterling wind farms in the US, our first sales in the US. Aggregate prices achieved were in line with the 2018 year end portfolio valuation. 

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 Environmental Assets Group Limited ("JLEN" - previously John Laing Environmental Assets Group Limited) to Foresight Group, including the transfer of the investment advisory team. The sale will allow 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.

 

Looking forward:

 

BOARD CHANGE

Luciana Germinario was appointed to the Board as Chief Financial Officer Designate on 25 April 2019 and succeeded Patrick O'D Bourke as CFO upon his retirement on 9 May 2019.

 

 

REGIONAL REVIEW

ASIA PACIFIC

At 30 June 2019, our portfolio of investments in the Asia Pacific region comprised 14 assets (31 December 2018 - 15) including eight in the Primary portfolio (31 December 2018 - eight) and six in the Secondary portfolio (31 December 2018 - seven) with a total value of £527 million (31 December 2018 - £505 million). The increase in portfolio value of £22 million in the first half of 2019 is due to cash invested in to projects of £71 million, offset by disposals and cash yields received from projects totalling £35 million and a small net overall fair value loss of £14 million for the period.

 

In line with industry peers, we experienced transmission issues relating to marginal loss factors ("MLFs"). MLFs are defined as the portion of energy that is lost when electricity is transmitted across the transmission and distribution networks due to resistance. MLFs for operational assets are published annually by the Australian Energy Market Operator ("AEMO"). In June 2019, AEMO published final MLFs for the July 2019 - June 2020 financial year. Based on these and draft MLFs for assets still under construction, there were unfavourable results for three of our assets, whose value together represented 11% of the Group's investment portfolio at 31 December 2018. The total reduction in value was £66 million in the first half of the year, based on forecasts obtained from an external advisor. At the same time, active asset management has led to us recognising £29 million of value enhancements across the Australian portfolio, predominantly on renewable energy assets, which have partially offset the losses. Further work in this area is underway and we would expect further value enhancements in the second half of the year. Our team in Australia heads a group of approximately 20 renewable energy developers and investors which has made a proposal supporting a rule change under a consultation process with the Australian Energy Market Commission, which, if accepted, is expected to mitigate the impact from MLFs. Additionally, the team are working with advisors to explore project specific opportunities around technical performance which could provide further mitigation.

 

Further renewable energy investments have been put on hold in Australia, as we re-assess our approach to risk and return on these investments.

 

Active asset management in the region saw good progress made on Sydney Light Rail, New Generation Rollingstock and New Royal Adelaide Hospital in the last six months.

 

Sydney Light Rail

 

New Generation Rollingstock

 

New Royal Adelaide Hospital

 

We were pleased to have achieved our first realisation of an operational asset in Australia - the disposal of our 50% shareholding in Optus Stadium completed in March 2019.

 

The Primary Investment team has been successful in achieving one preferred bidder position and one shortlisted position at 30 June 2019 on PPP deals in Australia, which are typically expected to close over the next 18 months while renewable energy investments have been paused. We were recently shortlisted on a further PPP bid in Asia Pacific, pending formal announcement.

 

Asia Pacific pipeline by bidding stage at 30 June 2019

Number of

projects

PPP

£ million

Renewable

energy

£ million

Total

£ million

Preferred bidder

1

28

-

28

Shortlisted / exclusive

1

33

-

33

Other

9

410

-

410

Total

11

471

-

471

 

 

EUROPE

At 30 June 2019, our portfolio of investments in Europe comprised 20 assets (31 December 2018 - 19) including four in the Primary portfolio (31 December 2018 - three) and 16 in the Secondary portfolio (31 December 2018 - 16) with a total value of £574 million (31 December 2018 - £580 million). The small decrease in portfolio value of £6 million in the first half of 2019 is due to a net fair value loss in the period of £11 million and cash yields received from projects of £2 million, offset by cash invested into projects of £7 million.

 

We experienced operational performance issues on our wind assets, mainly driven by low levels of wind, which have translated into lower long-term energy yield forecasts and resulted in write downs in the period of £55 million. We have recognised £16 million of value enhancements, of which £14 million was from the renewable energy portfolio, including extension of asset lives and savings in operating costs, which partially offset the above losses and other smaller losses on the Europe portfolio. Further value enhancement opportunities are being explored for the second half of the year.     

 

As in Australia, new wind and solar investments in Europe have been put on hold.

 

On IEP Phase 2, our largest investment, the first 18 trains for the East Coast mainline, which have a similar design to IEP Phase 1, have been accepted into service and public train services commenced in May 2019.

 

In the first half of the year, 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 shortlisted PPP position in the Netherlands and one exclusive pump storage opportunity in Israel, which are expected to close over the next 18 months.

 

Europe pipeline by bidding stage at 30 June 2019

Number of

projects

PPP

£ million

Renewable

energy

£ million

Total

£ million

Preferred bidder

-

-

-

-

Shortlisted / exclusive

2

19

20

39

Other

11

330

-

330

Total

13

349

20

369

 

 

NORTH AMERICA

At 30 June 2019, our portfolio of investments in North America comprised 12 assets (31 December 2018 - 14) including five in the Primary portfolio (31 December 2018 - six) and seven in the Secondary portfolio (31 December 2018 - eight) with a total value of £423 million (31 December 2018 - £465 million). The decrease in portfolio value of £42 million in the first half of 2019 is principally due to disposals and cash yields received from projects totalling £128 million, offset by cash invested into projects of £11 million and a positive fair value movement of £75 million, which includes £33 million of value enhancements recognised in the period.

 

The sale of our 95.3% shareholding in Rocksprings wind farm in Texas and our 92.5% shareholding in Sterling wind farm in New Mexico in the first half of the year represented our first disposals in the US. Proceeds are subject to customary post-completion adjustments.

 

The North America portfolio of investments performed in line with expectations.

 

Denver Eagle P3

 

In August 2019, we completed an investment of £75 million in a wind farm in the US. Additionally, six of the Group's eight shortlisted PPP positions at 30 June 2019 are for potential investments in North America, including two light rail projects in Ontario, Canada and two road projects in the US.

 

 

 

North America pipeline by bidding stage at 30 June 2019

Number of

projects

PPP

£ million

Renewable

energy

£ million

Total

£ million

Preferred bidder

-

-

-

-

Shortlisted / exclusive

7

188

75

263

Other

9

570

80

650

Total

16

758

155

913

 

LATIN AMERICA

Our pipeline at 31 December 2018 included two investment opportunities in Colombia. One of which, the Ruta del Cacao road project, was agreed in July and is expected to complete in September 2019. Our pipeline of investment opportunities has increased from £175 million at 31 December 2018 to £305 million at 30 June 2019.    

 

 

Latin America pipeline by bidding stage at 30 June 2019

Number of

Projects

PPP

£ million

Renewable

energy

£ million

Total

£ million

Preferred bidder

-

-

-

-

Shortlisted / exclusive

-

-

-

-

Other

6

305

-

305

Total

6

305

-

305

 

We have further strengthened our team in the region and now have three local employees in our Bogota office.     

 

 

PORTFOLIO VALUATION

 

The Group's investments at 30 June 2019 were valued at £1,535 million compared to £1,560 million at 31 December 2018. After adjusting for realisations, cash yield and cash invested, this represented a positive movement in fair value of £52 million (3.5%) on the rebased portfolio valuation:

 

 

Investments

in projects

£ million

Listed

investment

£ million

Total

£ million

Portfolio valuation at 1 January 2019

1,550

10

1,560

- Cash invested

89

-

89

- Cash yield

(35)

-

(35)

- Proceeds from realisations

(131)

-

(131)

Rebased portfolio valuation

1,473

10

1,483

  - Movement in fair value

51

1

52

Portfolio valuation at 30 June 2019

1,524

11

1,535

 

Cash investment in respect of one new PPP asset made into during the first half of 2019 totalled £7 million. In addition, equity and loan note subscriptions of £82 million were made into existing projects in the portfolio as they progressed through, or completed, construction.

 

During the first half of 2019, the Group completed the realisation of three investments for a total consideration of £131 million. Cash yield from the portfolio during the six months ended 30 June 2019 totalled £35 million.

 

The movement in fair value of £52 million is analysed in the table below:

 

 

Six months ended

30 June 2019

£ million

Six months ended

30 June 2018

£ million

Year ended

31 December 2018

£ million

Unwinding of discounting

53

48

98

Reduction of construction risk premia

35

23

43

Value uplift on financial closes

-

3

43

Value enhancements

78

121

166

Net losses from project performance

(44)

(35)

(36)

Impact of industry transmission forecasts in Australia

(66)

-

-

Change in power and gas price forecasts

(13)

(3)

(12)

Impact of foreign exchange movements

(2)

(1)

10

Change in macroeconomic assumptions

(1)

(5)

(1)

Change in operational benchmark discount rates

12

43

43

Movement in fair value

52

194

354

 

 

Unwinding of discount and reduction of construction risk premia, which totalled £88 million in the first half of 2019, are factors of growth which we consider to be embedded in the portfolio value and that should continue to contribute value uplift in the future.

 

We have recognised £78 million of value enhancements in the first half of the year that have partially offset the losses in the period. Work in this area has continued in to the second half of the year and we expect to achieve further value enhancements in our full year results. Value enhancements in the first half of 2018 and full year included a gain of £87 million on the disposal of IEP Phase 1.

 

Net losses from project performance of £44 million include the losses on the European wind assets of £55 million, described in the Europe region review section above, and other smaller losses across the portfolio, offset by value uplift of £24 million from reduction in asset-specific risk premia reflecting the good progress made in the half on certain PPP projects through active asset management. As discussed in the Asia Pacific region review, we suffered losses of £66 million on three of our Australian renewable energy asset projects as a result of adverse changes in MLFs.

 

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 period within each are shown in the tables below:

 

 

30 June 2019

31 December 2018

 

Number of projects

£ million

%

Number of projects

£ million

%

Primary Investment

17

896

58.4

17

868

55.7

Secondary Investment

29

639

41.6

31

692

44.3

Total

46

1,535

100.0

48

1,560

100.0

 

 

Primary Investment

£ million

Portfolio valuation at 1 January 2019

868

  - Cash invested

81

  - Transfers to Secondary Investment

(107)

Rebased portfolio valuation

842

  - Movement in fair value

54

Portfolio valuation at 30 June 2019

896

 

 

 

Secondary Investment

£ million

Portfolio valuation at 1 January 2019

692

  - Cash invested

8

  - Cash yield

(35)

  - Proceeds from realisations

(131)

  - Transfers from Primary Investment

107

Rebased portfolio valuation

641

  - Movement in fair value

(2)

Portfolio valuation at 30 June 2019

639

 

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 30 June 2019, we considered and reflected changes to the two principal inputs, (i) forecast cash flows from investments in projects and (ii) discount rates.

 

The shareholding in JLEN was valued at its closing market price on 30 June 2019 of 119.5p per share (31 December 2018 - 105.00p per share).

 

The Directors have obtained an independent opinion from a third party, which has considerable expertise in valuing the type of investments held by the Group, that the investment portfolio valuation as a whole represented a fair market value in the conditions prevailing at 30 June 2019.

 

Discount rates

For the 30 June 2019 valuation, the overall weighted average discount rate was 8.3% compared to the weighted average discount rate at 31 December 2018 of 8.6%. The weighted average discount rate at 30 June 2019 was made up of 8.6% (31 December 2018 - 8.8%) for the Primary Investment portfolio and 7.8% (31 December 2018 - 8.1%) for the Secondary Investment portfolio. The reduction in the weighted average discount rate for primary investments was primarily the result of projects moving through construction as well as reductions in project-specific risk premia on Sydney Light Rail and New Generation Rollingstock in Australia and the managed lanes projects in the US where positive progress has been achieved. The reduction in the weighted average discount rate for secondary investments was the result of renewable energy projects progressing through their ramp-up periods as well as reductions in project-specific risk premia on New Royal Adelaide Hospital, Alder Hey Children's Hospital, A15 Road and Denver Eagle P3, reflecting the progress made in the period, and reduction in the operational benchmark discount rates for select investments.

 

The discount rate ranges used in the portfolio valuation at 30 June 2019 were as set out below:

 

 

 

At 30 June 2019

At 31 December 2018

Sector

Primary

Investment

Secondary

Investment

Primary

Investment

Secondary

Investment

PPP investments

6.5% - 11.1%

6.5% - 9.0%

6.9% - 11.7%

7.0% - 9.0%

Renewable energy investments

8.2% - 8.9%

6.4% - 8.5%

8.4% - 9.1%

6.8% - 10.0%

 

 

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%

1,479

(56)

-

1,535

-

-0.25%

1,594

59

 

Energy yields

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 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 over the long term. A P75 output means 75% probability of exceedance and a P25 output means 25% probability of exceedance.

 

The impact on the valuation at 30 June 2019 of a sample of renewable energy assets with total value of £304 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

267

(37)

P50

304

-

P25

339

35

 

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 the first half of 2019, updates for actual macroeconomic outcomes and assumptions had a net adverse impact of £1 million (first half of 2018 - £5 million net adverse impact) on the portfolio valuation. Movements of foreign currencies against Sterling over the six months to 30 June 2019 resulted in net adverse foreign exchange movements of £2 million (first half of 2018 - £1 million net adverse foreign exchange movements). Additionally, during the first half of 2019, a decrease in forecast power and gas prices resulted in a £13 million adverse fair value movement (first half of 2018 - adverse fair value movement of £3 million).

 

The table below summarises the main macroeconomic and exchange rate assumptions used in the portfolio valuation at 30 June 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 period or year as well as the sensitivity to the portfolio value from changes in the future:

 

Assumption

 

 

30 June 2019

31 December 2018

 

Long-term inflation

 

UK

 

RPI & RPIX

 

3.00%

 

3.00%

 

Europe

CPI

1.75% - 2.00%

1.75% - 2.00%

 

US

CPI

2.20% - 2.50%

2.20% - 2.50%

 

Asia Pacific

CPI

2.00% - 2.75%

2.00% - 2.75%

 

 

 

 

 

Impact recognised in the period/year

 

 

£(3) million

£(3) million

 

Sensitivity: change in value of five PPP investments with a total value of

 

 

£545 million

£524 million

0.25% increase in inflation

0.25% decrease in inflation

 

 

c.£15 million

c.£(14) million

 

c.£14 million

c.£(13) million

 

 

Exchange rates

 

 

GBP/EUR

 

1.1165

 

1.1134

 

 

GBP/AUD

1.8121

1.8096

 

 

GBP/USD

1.2706

1.2748

 

 

GBP/NZD

1.8924

1.9000

 

 

 

 

 

Impact recognised in the period/year

 

 

£(2) million

£10 million

 

 

 

Sensitivity: 5% movement of each relevant currency against Sterling

+/- c.£57 million

+/- c.£59 million

 

 

Power and gas prices

 

 

 

 

 

Impact in the period/year

 

 

£(13) million

£(12) million

 

 

 

 

 

Sensitivity: change in value of seven renewable energy investments with a total value of  

 

 

£272 million

£343 million

5% increase in power and gas prices

 

 

c.£26 million

c.£18 million

5% decrease in power and gas prices

 

 

c.£(25) million

c.£(18) million

 

 

Marginal loss factors

 

 

 

 

 

Impact recognised in the period/year

 

 

£(66) million

-

 

 

 

 

 

Sensitivity: change in value of a sample of renewable energy investments with a total value of  

 

 

£225 million

-

5% increase in marginal loss factors

 

 

c.£30 million

-

5% decrease in marginal loss factors

 

 

c.£(30) 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. The investment in JLEN is shown as "listed investment" in all tables.

by geographical region

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Europe

574

37.4

580

37.2

Asia Pacific

527

34.3

505

32.4

North America

423

27.6

465

29.8

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

 

There continues to be good diversification of the portfolio across our regions. While all other regions saw an increase of their portfolio values, the value of the portfolio in North America reduced since 31 December 2018 due to disposals in the six months ended 30 June 2019.  

 

by time remaining of project concession/OPERATIONAL life

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Greater than 25 years

972

63.4

1,113

71.4

20 to 25 years

381

24.8

262

16.8

15 to 20 years

56

3.6

133

8.5

10 to 15 years

115

7.5

42

2.7

Less than 10 years

-

-

-

-

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

Split between PPP and renewable energy

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Primary PPP

749

48.9

686

44.0

Primary renewable energy

146

9.5

182

11.7

Secondary PPP

226

14.7

168

10.7

Secondary renewable energy

403

26.2

514

33.0

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

 

The value of secondary renewable energy assets decreased during the first half of 2019 from £514 million to £403 million primarily as a result of the disposals of two wind farms in the US as part of our continuing divestment programme.    

 

by revenue type

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Availability

845

55.1

766

49.2

Volume

679

44.2

784

50.2

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

 

Availability-based investments continued to make up the majority of the portfolio at 30 June 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 whilst 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. We expect to maintain balanced availability-based investments in the portfolio in the medium-term.      

by sector

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Transport - rail and rolling stock

517

33.7

487

31.2

Transport - roads and other

257

16.8

214

13.7

Environmental

549

35.7

697

44.7

Social infrastructure

201

13.1

152

9.8

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

 

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 environmental assets since 31 December 2018. Further cash injections and positive fair value movements have resulted in increases in value in the first half of 2019 in other sectors.

 

by currency

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Sterling

399

26.0

371

23.8

US dollar

423

27.7

465

29.8

Australian and New Zealand dollar

527

34.3

505

32.4

Euro

186

12.0

219

14.0

Total

1,535

100.0

1,560

100.0

 

By investment size

 

30 June 2019

31 December 2018

 

£ million

%

£ million

%

Five largest investments

620

40.4

598

38.4

Next five largest investments

265

17.2

276

17.7

Remaining investments

639

41.7

676

43.3

Listed investment

11

0.7

10

0.6

Total

1,535

100.0

1,560

100.0

 

The valuation ranges for the five largest Primary investments and the five largest Secondary investments are shown in the tables below:

 

Primary

 

30 June 2019

 

£ million

IEP Phase 2

More than 300

Clarence Correctional Centre

75 - 100

Sydney Light Rail

50 - 75

Finley Solar Farm

50 - 75

I-66 Managed Lanes

50 - 75

 

Secondary

 

30 June 2019

 

£ million

Cypress Creek solar farms

Denver Eagle P3

Buckthorn Wind Farm

New Royal Adelaide Hospital

100 - 125

75 - 100

50 - 100

50 - 75

Klettwitz Wind Farm

25 - 50

 

At 30 June 2019, nine out of the ten largest investments were outside the UK.

 

 

InVestment portfolio as at 30 June 2019

 

 

 

Primary Investment

 

Secondary investment

Social infrastructure

 

 

 

Health

 

 

 

 

Alder Hey Children's Hospital

40% (Europe)

New Royal Adelaide Hospital

17.26% (APAC)

 

 

Justice and emergency services

Clarence Correctional Centre

80% (APAC)

 

 

 

Auckland South Corrections Facility

30% (APAC)

 

 

 

Defence

 

 

 

 

DARA Red Dragon

100% (Europe)

 

 

 

Other

University of Brighton Student Accommodation

85% (Europe)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transport

 

 

 

 

 

 

 

 

Roads and other

A6 Parkway

Netherlands

85% (Europe)

A16 Road

47.5% (Europe)

I-4 Ultimate

50% (NA)

 

A1 Germany

42.5% (Europe)

A15 Netherlands

28% (Europe)

A130

100% (Europe)

 

I-66 Managed Lanes

10% (NA)

I-75 Road

40% (NA)

I-77 Managed Lanes

10% (NA)

 

 

 

 

 

MBTA Automated Fare Collection System

90% (NA)

 

 

 

 

 

 

 

Rail and rolling stock

IEP Phase 2
30% (Europe)

Melbourne Metro

30% (APAC)

New Generation Rollingstock

40% (APAC)

 

Denver Eagle P3

45% (NA)

 

 

 

 

Sydney Light Rail
32.5% (APAC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental

 

 

 

 

 

 

 

 

Waste and biomass

 

 

 

 

Speyside Biomass
43.35% (Europe)

Cramlington Biomass

44.7% (Europe)

 

 

Wind and solar

 

Cherry Tree Wind Farm

100% (APAC)

Finley Solar Farm

100% (APAC)

Granville Wind Farm

49.8% (APAC)

 

Brantley Solar Farm*

100% (NA)

Buckleberry Solar Farm*

100% (NA)

Buckthorn Wind Farm

90.05% (NA)

Fox Creek Solar Farm*

100% (NA)

Sunraysia Solar Farm

90.1% (APAC)

 

 

 

 

Glencarbry Wind Farm

100% (Europe)

IS54 Solar Farm* 100% (NA)

IS67 Solar Farm* 100% (NA)

Horath Wind Farm

81.82% (Europe)

 

 

 

 

Hornsdale 1 Wind Farm

30% (APAC)

Hornsdale 2 Wind Farm

20% (APAC)

Hornsdale 3 Wind Farm

20% (APAC)

Kiata Wind Farm

72.3% (APAC)

 

 

 

 

Klettwitz Wind Farm

100% (Europe)

Nordergründe Wind Farm

30% (Europe)

Pasilly Wind Farm

100% (Europe)

Rammeldalsberget Wind Farm
100% (Europe)

 

 

 

 

 

Sommette Wind Farm

100% (Europe)

St Martin Wind Farm

100% (Europe)

Svartvallsberget Wind Farm
100% (Europe)

 

 

 

 

 

 

 

 

 

 

 

APAC - Asia Pacific

NA - North America

*Cypress Creek projects

 

 

FINANCIAL REVIEW

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, 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 Condensed Group Financial Statements.

Re-presented financial RESULTS

As we have done in previous periods, we set out in this Financial Review the Condensed Group Income Statement, the Condensed Group Balance Sheet and the Condensed Group Cash Flow Statement on the management reporting basis. When set out on the management reporting basis, these statements are described as "re-presented".

 

 

Re-presented income statement

Preparing the re-presented income statement involves a reclassification of certain amounts within the Condensed Group Income Statement principally in relation to the net gain on investments at FVTPL. The net gain on investments at FVTPL in the Condensed Group Income Statement includes fair value movements from the portfolio of investments in non-recourse project companies and also comprises income and costs that do not arise directly from investments in this portfolio, including investment fees earned from project companies by recourse subsidiaries that are held at FVTPL.

 

Six months ended 30 June

2019

 

2018c

 

 

Condensed Group Income Statement

Adjustments

Re-presented income statement

 

Re-presented

income statement

 

 

£ million

£ million

£ million

 

£ million

 

Fair value movements - investment portfolio

52

-

52

 

194

 

Fair value movements - other

(1)

(1)a

(2)

 

(1)

 

Investment fees from projects

2

-

2

 

4

 

Net gain on investments at fair value through profit or loss

53

(1)

52

 

197

 

 

 

 

 

 

 

 

Investment management services revenue

20

-

20

 

9

 

Project management services revenue

3

-

3

 

3

 

Recoveries on financial close

-

-

-

 

3

 

Other income

23

-

23

 

15

 

 

 

 

 

 

 

 

Operating income

76

(1)

75

 

212

 

 

 

 

 

 

 

 

Third party costs

(5)

 

(5)

 

(4)

 

Disposal costs

(2)

 

(2)

 

(3)

 

Staff costs

(20)

 

(20)

 

(18)

 

General overheads

(8)

 

(8)

 

(6)

 

Post-retirement charges

(1)

1b

-

 

-

 

Administrative expenses

(36)

1

(35)

 

(31)

 

 

 

 

 

 

 

 

Profit from operations

40

-

40

 

181

 

 

 

 

 

 

 

 

Finance costs

(5)

1a,b

(4)

 

(5)

 

Post-retirement charges

-

(1)b

(1)

 

(1)

 

Profit before tax (PBT)

35

-

35

 

175

 

               

 

Notes:

a)     Adjustment comprises £1 million of finance income in recourse investment entity subsidiaries reclassified from 'fair value movements - other' to 'finance costs'.

b)   Under IAS 19, the costs of the pension schemes, including the post-retirement medical benefits, comprise a service cost of £0.8 million, included in administrative expenses in the Condensed Group Income Statement, and a finance charge of £0.3 million, included in finance costs in the Condensed Group Income Statement. These amounts are combined together under management reporting.

c)     For a reconciliation between the Condensed Group Income Statement and re-presented income statement for the six months ended 30 June 2018, refer to the June 2018 Interim Accounts.

 

Profit before tax (PBT) for the six months ended 30 June 2019 was £35 million (2018 - £175 million). The main reason for the lower PBT in the first half of 2019 compared to last year was the reduction in fair value movement in the portfolio.   

 

The movement in fair value on the portfolio for the six months ended 30 June 2019, after adjusting for investments, cash yield and realisations, was a £52 million gain (2018 - £194 million gain). A significant contributor to the fair value movement in the six months ended 30 June 2018 was the gain of £87 million on disposal of the interest in IEP Phase 1. In contrast, despite significant value enhancements of £78 million, the fair value movement for the first half of 2019 suffered from losses of £66 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 losses of £55 million on our European renewable energy assets (see the Europe section above).

 

Other fair value movements for the six months ended 30 June 2019 comprised a £2 million loss which primarily related to standard price adjustments on renewable energy disposals previously completed.

 

The Group earned IMS revenue of £20 million (2018 - £9 million) from investment advisory and asset management services primarily to Jura and JLEN. The increase from last year is due to the proceeds received from the sale of the IAA with JLEN in the first half as well as an acceleration of fee income from the second half of the year following the termination of the IAA with Jura. Going forward, the Group will only earn IMS revenue from the provision of directors to project company boards (six months ended 30 June 2019 - £1 million; six months ended 30 June 2018 - £1 million).    

 

The Group also earned PMS revenue of £3 million (2018 - £3 million) from the provision of services to project companies under management services agreements.

 

The Group achieved recoveries of bidding costs on financial closes of £0.5 million in the six months ended 30 June 2019 (2018 - £3 million).  

 

Total staff costs for the six months ended 30 June 2019 are higher than the same period last year due to: pay increases in line with inflation (c£0.5 million); increase in average headcount for the period with new recruits at higher average salaries (c£1 million); and one-off staff costs incurred in the first half of 2019 in relation to the termination of fund management activities. We expect staff costs to be lower in the second half of the year following the transfer of staff with the fund management business.

General overheads have increased from last year principally due to costs incurred in the first half of 2019 on one-off project-related costs and corporate initiatives.

Finance costs of £4 million (2018 - £5 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 first half of the year.  

 

The Group's overall tax expense on profit from operations for 2019 was £0.6 million (2018 - expense of £0.2 million). This comprised a tax expense of £0.2 million (2018 - expense of £0.5 million) in recourse group subsidiary entities that are consolidated (shown in the 'Tax' line of the Condensed Group Income Statement) and a tax expense of £0.4 million (2018 - credit of £0.3 million) in recourse group subsidiary entities that are held at FVTPL (included within 'net gain on investments at fair value through profit or loss' on the Condensed Group Income Statement). 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 (£144 million as at 31 December 2017).

 

 

The re-presented income statement for the six months ended 30 June 2019 and for the same period in 2018 by reportable segment is shown in the tables below:

 

 

Six months ended 30 June 2019

 

Asia Pacific

Europe

North America

Latin America

Fund Management

Central

Total

 

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

 

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Net gain/(loss) on investments at FVTPL

(13)

(13)

75

-

-

3

52

Other income

1

1

1

-

20

-

23

Operating income

(12)

(12)

76

-

20

3

75

Staff costs

(4)

(3)

(4)

-

(3)

(6)

(20)

Other administrative expenses

(1)

(3)

(3)

(1)

(2)

(5)

(15)

Profit/(loss) from operations

(17)

(18)

69

(1)

15

(8)

40

Finance costs

-

-

-

-

-

(5)

(5)

Profit/(loss) before tax

(17)

(18)

69

(1)

15

(13)

35

 

 

 

Six months ended 30 June 2018

 

Asia Pacific

Europe

North America

Latin America

Fund Management

Central

Total

 

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

 

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Net gain/(loss) on investments at FVTPL

20

156

22

-

-

(1)

197

Other income

1

2

3

-

9

-

15

Operating income

21

158

25

-

9

(1)

212

Staff costs

(4)

(3)

(2)

-

(3)

(6)

(18)

Other administrative expenses

(1)

(5)

(2)

(1)

(1)

(3)

(13)

Profit/(loss) from operations

16

150

21

(1)

5

(10)

181

Finance costs

-

-

-

-

-

(6)

(6)

Profit/(loss) before tax

16

150

21

(1)

5

(16)

175

 

 

Asia Pacific - the loss in the first half of 2019 was mainly due to write downs of £66 million in the portfolio from adverse changes in MLFs on three of our renewable energy investments. Value enhancements of £29 million recognised in the period partially offset some of these losses. For further details, see the Asia Pacific section in the Regional Review above.

 

Europe - the main drivers of the loss in the six months ended 30 June 2019 were performance issues on wind assets, which resulted in write downs in the period of £55 million. Value enhancements recognised in the half of £16 million across the Europe portfolio helped to partially offset these write downs. In the same period in 2018, Europe 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 £33 million, contributed to the higher profit in the first half of 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. 

 

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 IAA 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 and additional income of £4 million in the first half of 2019 from the Jura agreement when services were terminated. There will be no further income or costs from fund management activities beyond 30 June 2019.        

 

Central - the net gain on investments at FVTPL of £3 million in the first half of 2019 was primarily due to a gain on the JLEN shares (2018 - £1 million loss primarily due to foreign exchange losses outside of the portfolio).

 

 

Re-presented balance sheet

The re-presented balance sheet is reconciled to the Condensed Group Balance Sheet at 30 June 2019 below. The re-presented balance sheet involves the reclassification of certain amounts within the Condensed Group Balance Sheet principally in relation to assets and liabilities of £135 million within certain of the Company's recourse subsidiaries. These subsidiaries are included in investments at FVTPL in the Condensed Group Balance Sheet as a result of the requirement under IFRS 10 to fair value investments in these subsidiaries.

 

 

As at

30 June 2019

 

31 December 2018e

 

 

 

Condensed Group Balance Sheet

Adjustments

Re-presented balance sheet

 

Re-presented balance sheet

 

Re-presented balance sheet line items

 

£ million

£ million

£ million

 

£ million

 

 

Non-current assets

 

 

 

 

 

 

 

Right-of use assets

5

-

5

 

-

 

Other long term assets

Investments at FVTPL

1,670

(135)a

1,535

 

1,560

 

Portfolio value

 

-

129b

129

 

132

 

Cash collateral balances

Retirement benefit asset

14

-

14

 

-

 

Pension surplus (IAS 19)

 

1,689

(6)

1,683

 

1,692

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

14

(14)c

-

 

-

 

 

Cash and cash equivalents

2

5b

7

 

8

 

Cash

 

16

(9)

7

 

8

 

 

Total assets

1,705

(15)

1,690

 

1,700

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

-

(6)b,c,d

(6)

 

(4)

 

Working capital and other balances

Borrowings

(74)

(3)d

(77)

 

(70)

 

Cash borrowings

Trade and other payables

(18)

18c

-

 

-

 

 

 

(92)

9

(83)

 

(74)

 

 

Net current assets/(liabilities)

(76)

-

(76)

 

(66)

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Retirement benefit obligations

(8)

8

-

 

(32)

 

 

Pension deficit (IAS 19)

 

-

(8)

(8)

 

(8)

 

Other retirement benefit obligations

Finance lease liabilities

(4)

4c

-

 

-

 

 

Provisions

(2)

2c

-

 

-

 

 

 

(14)

6

(8)

 

(40)

 

 

Total liabilities

(106)

15

(91)

 

(114)

 

 

 

 

 

 

 

 

 

 

Net assets

1,599

-

1,599

 

1,586

 

 

 

 

 

Notes:

a)     Investments at fair value through profit or loss (FVTPL) comprise: portfolio valuation of £1,535 million and other assets and liabilities within recourse investment entity subsidiaries of £135 million (see note 9 to the Condensed Group Financial Statements).

b)     Other assets and liabilities within recourse investment entity subsidiaries of £135 million referred to in note (a) include (i) cash and cash equivalents of £134 million, of which £129 million is held to collateralise future investment commitments and (ii) positive working capital and other balances of £1 million.

c)     Trade and other receivables (£14 million), trade and other payables (£18 million), finance lease liabilities (£4 million) and provisions (£2 million) are combined within working capital and other balances.

d)    Borrowings of £74 million comprise cash borrowings of £73 million from the main facilities and £4 million of short-term bank overdraft from uncommitted facilities less unamortised financing costs of £3 million, re-presented in 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.

 

 

Components of net assets, including reportable segments, are shown in the table below.

 

 

Asia Pacific

Europe

North America

Latin America

Fund management

Central

Total

As at

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

30 Jun

2019

31 Dec

2018

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

£ million

Portfolio valuation

527

505

574

580

423

465

-

-

-

-

11

10

1,535

1,560

Other net current liabilities

 

 

 

 

 

 

 

 

 

 

(1)

(4)

(1)

(4)

Group net cash/(borrowings)1

 

 

 

 

 

 

 

 

 

 

59

70

59

70

Net post-retirement assets/(obligations)

 

 

 

 

 

 

 

 

 

 

6

(40)

6

(40)

Group net assets

527

505

574

580

423

465

-

-

-

-

75

36

1,599

1,586

 

Note:

(1)  Comprises cash balances of £136 million (31 December 2018 - £140 million) (see below for more details) net of short-term bank overdraft of £4 million (31 December 2018 - £15 million) and short-term cash borrowings of £73 million (31 December 2018 - £55 million).

 

Net assets increased from £1,586 million at 31 December 2018 to £1,599 million at 30 June 2019.

 

The Group's portfolio of investments in project companies and listed investments was valued at £1,535 million at 30 June 2019 (31 December 2018 - £1,560 million). Further details are provided in the Portfolio Valuation section.

 

The Group held cash balances of £136 million at 30 June 2019 (31 December 2018 - £140 million) of which £129 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 £136 million, £134 million was held in recourse subsidiaries held at FVTPL, including the cash collateral balances, that are included within investments at FVTPL in the Condensed Group Balance Sheet. The remaining £2 million was held in the Company and recourse subsidiaries that are consolidated and shown as cash and cash equivalents in the Condensed Group Balance Sheet (see the re-presented balance sheet for further details).   

 

Working capital and other liabilities were higher primarily because of finance lease liabilities of £5 million at 30 June 2019 following adoption of IFRS 16 Leases from 1 January 2019. 

 

The Group operates two defined benefit pension schemes in the UK - the John Laing Pension Fund (JLPF) and the John Laing Pension Plan (the Plan). Both schemes are closed to new members and future accrual.

In December 2016, following a triennial actuarial review of JLPF as at 31 March 2016, a seven-year deficit repayment plan was agreed with the JLPF Trustee to repay the actuarial deficit of £171 million at 31 March 2016 as set out below:

By 31 March

£ million

2017

25

2018

27

2019

29

2020

25

2021

26

2022

26

2023

25

 

The combined net accounting surplus in the Group's defined benefit pension and post-retirement medical schemes at 30 June 2019 was £6 million (31 December 2018 - deficit £40 million). Under IAS 19, at 30 June 2019, JLPF recorded a surplus of £12 million (31 December 2018 - deficit of £35 million) and the Plan recorded a surplus of £2 million (31 December 2018 - surplus of £3 million). The liability at 30 June 2019 under the post-retirement medical scheme was £8 million (31 December 2018 - £8 million).   

 

The pension liabilities in JLPF under IAS 19 were based on a discount rate of 2.3% (31 December 2018 - 2.85%) and long term RPI of 3.2% (31 December 2018 - 3.2%) at 30 June 2019. The amount of the liabilities is dependent on key assumptions, principally: inflation rate, discount rate and life expectancy of members. The discount rate, as prescribed by IAS 19, is based on yields from high quality corporate bonds. The surplus (under IAS 19) as at 30 June 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 Condensed Group Cash Flow Statement includes the cash flows of the Company and certain recourse subsidiaries that are consolidated (Service Companies). The Group's recourse investment entity subsidiaries, through which the Company holds its investments in non-recourse project companies, are held at fair value in the financial statements and accordingly cash flows relating to investments in the portfolio are not included in the Condensed Group Cash Flow Statement. Investment-related cash flows are disclosed in note 9 to the Condensed Group Financial Statements.

 

The re-presented cash flow statement shows all recourse cash flows that arise in both the consolidated group (the Company and its consolidated subsidiaries) and in the recourse investment entity subsidiaries.

 

 

Six months ended 30 June

2019

2018

 

Re-presented cash flows

Re-presented cash flows

 

£ million

£ million

Cash yield

35

17

Operating cash flow

(16)

(9)

Net foreign exchange impact

3

3

Total operating cash flows

22

11

 

 

 

Cash investment in projects

(89)

(131)

Proceeds from realisations

133

242

Disposal costs

(2)

(5)

Net investing cash flows

42

106

 

 

 

Finance charges

(4)

(4)

Rights issue (net of costs)

-

210

Purchase of own shares related to share based incentives

(4)

-

Cash contributions to JLPF

(29)

(27)

Dividend payments

(38)

(35)

Net cash (outflow)/inflow from financing activities

(75)

144

 

 

 

Recourse group cash (outflow)/inflow

(11)

261

Recourse group opening balances

70

(28)

Recourse group closing net cash balances

59

233

 

 

 

Reconciliation to line items on re-presented balance sheet

 

 

Cash collateral balances

129

134

Other cash balances

7

110

Total cash and cash equivalents

136

244

 

 

 

Cash borrowings

(77)

(11)

Net cash

59

233

 

Reconciliation of cash borrowings to Condensed Group Balance Sheet

 

 

Cash borrowings per re-presented balance sheet

(77)

(11)

Unamortised financing costs

3

2

Borrowings per Condensed Group Balance Sheet

(74)

(9)

 

 

Cash yield comprised £35 million (2018 - £17 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 six months ended 30 June 2019 was adverse compared to 2018 primarily due to higher staff costs in 2019 and small cash outflows 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 £3 million (2018 - favourable impact of £3 million).

 

During the period, cash of £89 million (2018 - £131 million) was invested in project companies and investments in three projects were realised for total proceeds of £131 million (2018 - £242 million from the realisation of two investments), offset by disposal costs paid of £2 million (2018 - £5 million). A further £2 million of proceeds from realisations was received from the deferred consideration on the disposal of IEP Phase 1 in 2018.

 

In the period, the Group made a cash contribution to JLPF of £29 million (2018 - £27 million).   

 

Dividend payments of £38 million in the six months ended 30 June 2019 comprised the final dividend for 2018 (2018 - final dividend for 2017 of £35 million).  

 

FINANCIAL RESOURCES

 

At 30 June 2019, the Group held 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 2021, which are primarily used to back investment commitments. Net available financial resources at 30 June 2019 were £458 million (31 December 2018 - £413 million).

Analysis of Group financial resources

 

30 June

2019

£ million

31 December

2018

£ million

Total committed facilities

650

650

Letters of credit issued under corporate banking facilities (see below)

(99)

(139)

Letters of credit issued under surety facilities

(22)

(25)

Other guarantees and commitments

(1)

(10)

Short-term cash borrowings

(73)

(55)

Bank overdraft (uncommitted)

(4)

(15)

Utilisation of facilities

(199)

(244)

Headroom

451

406

Available cash and bank deposits1

7

7

Net available financial resources

458

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 Condensed Group Balance Sheet, with the remaining £5 million in recourse subsidiaries held at FVTPL which are included within investments at FVTPL on the Condensed Group Balance Sheet (see the re-presented balance sheet).

 

 

Letters of credit and cash collateral represent future cash investment by the Group into underlying projects in the Primary Investment portfolio.

 

 

30 June

2019

£ million

31 December

2018

£ million

Letters of credit issued1

99

164

Cash collateral

129

132

Future cash investment into projects

228

296

1 A letter of credit issued under the committed facilities at 30 June 2019 of £22 million was cancelled in July 2019 after cash was invested into the project in June 2019

 

Cash collateral is included within 'investments at fair value through profit or loss' in the Condensed Group Balance Sheet.

 

FOREIGN CURRENCY EXPOSURE

 

The Group regularly reviews the sensitivity of its balance sheet to changes in exchange rates relative to Sterling and to the timing and amount of forecast foreign currency denominated cash flows. As set out in the Portfolio Valuation section, the Group's portfolio comprises investments denominated in Sterling, Euro, and Australian, US and New Zealand dollars. As a result of foreign exchange movements in the six months ended 30 June 2019, there was a net adverse fair value movement of £2 million in the portfolio valuation. Sterling strengthened against the Australian dollar and the Euro between 31 December 2018 and 30 June 2019, but weakened against the US and New Zealand dollars.

 

The Group may apply an appropriate hedge to a specific currency transaction exposure, which could include borrowing in that currency or entering into forward foreign exchange contracts. An analysis of the portfolio value by currency is set out in the Portfolio Valuation section.

 

Letters of credit in issue at 30 June 2019 of £121 million (31 December 2018 - £164 million) are analysed by currency as follows:

 

Letters of credit by currency

30 June

2019

£ million

31 December

2018

£ million

US dollar

16

15

Australian dollar

105

149

Total

121

164

 

 

Cash collateral at 30 June 2019 of £129 million (31 December 2018 - £132 million) is analysed by currency as follows:

 

Cash collateral by currency

30 June

2019

£ million

31 December

2018

£ million

US dollar

129

132

Total

129

132

PRINCIPAL Risks AND GOING CONCERN

 

The Group's principal risks at 31 December 2018 were as follows:

·      Governmental policy (incl. Brexit)

·      Macroeconomic factors

·      Liquidity in the secondary market

·      Financial resources

·      Pensions

·      Future investment activity

·      Valuation

·      Counterparty risk

·      Major incident

·      Investment Advisory Agreement (IAA) with JLEN and Jura

·      Future returns from investments

·      Taxation

·      Personnel

 

More detail on these risks can be found on pages 41 to 46 of the 2018 Annual Report & Accounts.

 

With the exception of the 'IAA with JLEN and Jura' risk, which is no longer applicable following the termination of the Jura IAA and the sale of the JLEN IAA, the Group does not believe there has been a material change in the Group's principal risks in the first six months of 2019, nor does it expect a material change in the remaining six months of the year.

 

The Group has committed corporate banking facilities which mature in July 2023 and has sufficient resources available to meet its committed capital requirements, investment commitments and operating costs for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Condensed Group Financial Statements.

 

Related party transactions

Related party transactions are disclosed in note 16 to the Condensed Group Financial Statements. There have been no other related party transactions in the first six months of the financial year or the comparative period in 2018 that have had a material effect on the financial position or performance of the Group.

 

Signed on behalf of the Directors

 

 

Olivier Brousse

Luciana Germinario

Chief Executive Officer

Chief Financial Officer

 

 

21 August 2019

21 August 2019

 

Responsibility statement

 

We confirm that to the best of our knowledge:

·    The Condensed Group Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; and

·    The Business Review includes a fair review of the information required by:

a)  the Disclosure and Transparency Rules (DTR) rule 4.2.7R, being an indication of important events during the first six months and a description of principal risks and uncertainties for the remaining six months of the year; and

b)  DTR rule 4.2.8R, being the disclosure of related party transactions and changes therein.

 

 

By order of the Board

 

 

Olivier Brousse

Luciana Germinario

Chief Executive Officer

Chief Financial Officer

 

 

21 August 2019

21 August 2019

 

INDEPENDENT REVIEW REPORT TO JOHN LAING GROUP PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprise the Condensed Group Income Statement, the Condensed Group Statement of Comprehensive Income, the Condensed Group Statement of Changes in Equity, the Condensed Group Balance Sheet, the Condensed Group Cash Flow Statement and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

Statutory Auditor

London, United Kingdom

 

21 August 2019

 

Condensed Group Income Statement

for the six months ended 30 June 2019

 

 

Notes

Six months

ended

30 June

2019

£ million

Unaudited

Six months

ended

30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

 

 

 

 

 

Net gain on investments at fair value through profit or loss

9

53

198

366

Other income

5

23

15

31

Operating income

3

76

213

397

 

 

 

 

 

Administrative expenses (excluding GMP equalisation charge)

 

(36)

(32)

(66)

GMP equalisation charge

 

-

-

(21)

Total administrative expenses

 

(36)

(32)

(87)

Profit from operations

 

40

181

310

 

 

 

 

 

Finance costs

 

(5)

(6)

(14)

Profit before tax

3

35

175

296

Tax expense

6

-

(1)

-

Profit for the period attributable to the Shareholders of the Company

 

35

174

296

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

Basic

7

7.1

38.8

63.1

Diluted

7

7.1

38.3

62.4

 

Condensed Group Statement of Comprehensive Income

for the six months ended 30 June 2019

 

 

Six months

ended

30 June

2019

Six months

ended

30 June

2018

Year

ended

31 December

2018

                                                                                                                                                                             

                                                                                                                                                                                  Notes

£ million

Unaudited

£ million

Unaudited

£ million

Audited

Profit for the period

35

174

296

 

 

 

 

Remeasurement gain/(loss) on retirement benefit obligations                                                                    11

18

31

(3)

Other comprehensive income/(loss) for the period

18

31

(3)

Total comprehensive income for the period

53

205

293

 

 

Condensed Group Statement of Changes in Equity

for the six months ended 30 June 2019

 

Notes

Share

capital

£ million

Share

premium

£ million

ESOP reserve

£ million

Other

reserves

£ million

Retained

earnings

£ million

Total equity

£ million

Balance at 1 January 2019

 

49

416

-

6

1,115

1,586

Profit for the period

 

-

-

-

-

35

35

Other comprehensive income for the period

 

-

-

-

-

18

18

Total comprehensive income for the period

 

-

-

-

-

53

53

Share-based incentives

8

-

-

-

2

-

2

Vesting of share-based incentives

8, 12

-

-

-

(4)

4

-

Purchase of own shares related to share-based incentives

12

-

-

(4)

-

-

(4)

Dividend paid1

 

-

-

-

-

(38)

(38)

Balance at 30 June 2019 (unaudited)

 

49

416

(4)

4

1,134

1,599

 

for the six months ended 30 June 2018

 

Notes

Share

capital

£ million

Share

premium

£ million

Other

reserves

£ million

Retained

earnings

£ million

Total equity

£ million

Balance at 1 January 2018

 

37

218

6

863

1,124

Profit for the period

 

-

-

-

174

174

Other comprehensive income for the period

 

-

-

-

31

31

Total comprehensive income for the period

 

-

-

-

205

205

Share-based incentives

8

-

-

1

-

1

Vesting of share-based incentives

8, 12

-

-

(3)

3

-

Net proceeds from issue of shares

13

12

198

-

-

210

Dividend paid1

 

-

-

-

(35)

(35)

Balance at 30 June 2018 (unaudited)

 

49

416

4

1,036

1,505

 

 

for the year ended 31 December 2018

 

Notes

Share

capital

£ million

Share

premium

£ million

Other

reserves

£ million

Retained

earnings

£ million

Total equity

£ million

Balance at 1 January 2018

 

37

218

6

863

1,124

Profit for the year

 

-

-

-

296

296

Other comprehensive loss for the year

 

-

-

-

(3)

(3)

Total comprehensive income for the year

 

-

-

-

293

293

Share-based incentives

8

-

-

3

-

3

Vesting of share-based incentives

8

-

-

(3)

3

-

Net proceeds from issue of shares

13

12

198

-

-

210

Dividends paid1

 

-

-

-

(44)

(44)

Balance at 31 December 2018 (audited)

 

49

416

6

1,115

1,586

 

 

1 Dividends paid:

 

 

 

Six months

ended

30 June

2019

Six months

ended

30 June

2018

Year

ended

31 December

2018

 

 

Pence

Pence

Pence

Dividends on ordinary shares

 

Unaudited

Unaudited

Audited

Per ordinary share:

 

 

 

 

-     interim proposed

 

1.84

1.80

1.80

-     interim paid

 

-

-

1.80

-     final proposed

 

-

-

7.70

-     final paid

 

7.70

7.17a

7.17a

 

a The final dividend for 2017 was originally reported in the 2017 Annual Report and Accounts as 8.70p. This was adjusted for the Rights Issue to 7.17p and paid in May 2018.

The total estimated amount to be paid in October 2019 in respect of the proposed interim dividend for 2019 is £9 million.

 

Condensed Group Balance Sheet

as at 30 June 2019

 

 

30 June 2019

 

31 December 2018

 

Notes

£ million

 

£ million

 

 

Unaudited

 

Audited

Assets

 

 

 

 

Non-current assets

 

 

 

 

Right-of-use assets

2

5

 

-

Investments at fair value through profit or loss

9

1,670

 

 1,700

Retirement benefit assets

11

14

 

-

 

 

1,689

 

 1,700

Current assets

 

 

 

 

Trade and other receivables

 

14

 

 8

Cash and cash equivalents

 

2

 

 6

 

 

16

 

 14

 

 

 

 

 

Total assets

 

1,705

 

 1,714

 

 

 

 

 

Equity and liabilities

 

 

 

 

Equity

 

 

 

 

Share capital

12

 49

 

 49

Share premium

13

 416

 

 416

ESOP reserve

 

(4)

 

 -

Other reserves

 

4

 

 6

Retained earnings

 

1,134

 

 1,115

Total equity

 

 1,599

 

 1,586

 

 

 

 

 

Non-current liabilities

 

 

 

 

Retirement benefit obligations

11

8

 

 40

Finance lease liabilities

 

4

 

-

Provisions

 

2

 

 2

 

 

14

 

 42

Current liabilities

 

 

 

 

Borrowings

 

74

 

 66

Trade and other payables

 

18

 

 20

 

 

92

 

 86

 

 

 

 

 

Total liabilities

 

106

 

 128

 

 

 

 

 

Total equity and liabilities

 

1,705

 

 1,714

 

Condensed Group Cash Flow Statement

for the six months ended 30 June 2019

 

Notes

Six months

ended

30 June

2019

£ million

Unaudited

Six months

ended

30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

Net cash outflow from operating activities

14

(48)

(45)

(54)

Investing activities

 

 

 

 

Net cash transferred from investments held at fair value through profit or loss

9

83

106

12

Net cash from investing activities

 

83

106

12

Financing activities

 

 

 

 

Net proceeds from issue of shares

13

-

210

210

Purchase of own shares related to share-based incentives

 

(4)

-

-

Dividends paid

 

(38)

(35)

(44)

Finance costs paid

 

(5)

(6)

(15)

Proceeds from borrowings

 

18

-

15

Repayment of borrowings

 

(10)

(165)

(121)

Net cash (used in) / from financing activities

 

(39)

4

45

Net (decrease) / increase in cash and cash equivalents

 

(4)

65

3

Cash and cash equivalents at beginning of the period

 

6

3

3

Cash and cash equivalents at end of the period

 

2

68

6

 

Notes to the Condensed Group Financial Statements

for the six months ended 30 June 2019

 

1        General information

The Condensed Group Financial Statements of John Laing Group plc (the Company or the Group) have been prepared as described below. The registered office of the Company is 1 Kingsway, London, WC2B 6AN. The principal activity of the Company is the origination, investment in and management of greenfield infrastructure projects.

 

The Condensed Group Financial Statements are presented in Sterling and have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union.

 

The financial information for the year ended 31 December 2018 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006. The annual financial statements of John Laing Group plc are prepared in accordance with IFRS as adopted by the European Union. The Condensed Group Financial Statements included in this half-yearly financial report have been prepared in accordance with, and contain the information required by IAS 34 Interim Financial Reporting, as adopted by the European Union, and the disclosure guidance and transparency rules of the Financial Conduct Authority.

 

The same accounting policies, presentation and methods of computation are followed in these Condensed Group Financial Statements as were applied in John Laing Group plc's latest annual audited financial statements with the exception that the Group has adopted in these Condensed Group Financial Statements IFRS 16 Leases. As required by IAS 34, the nature and effect of these changes are disclosed below.

 

Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the interim condensed consolidated financial statements of the Group.

 

2        Accounting policies

Basis of preparation

The Condensed Group Financial Statements have been prepared on the historical cost basis except for (i) the revaluation of the investment portfolio and (ii) financial instruments that are measured at fair value at the end of each reporting period. The Company concluded that it meets the definition of an investment entity set out within IFRS 10 Consolidated Financial Statements, paragraph 27 on the basis described in the notes to the Group financial statements in the 2018 Annual Report and Accounts.

 

Investment entities are required to account for all investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit or loss (FVTPL), except for those directly-owned subsidiaries that provide investment-related services or engage in permitted investment-related activities with investees (Service Companies). Service Companies are consolidated rather than recorded at FVTPL.

 

Project companies in which the Group invests are described as "non-recourse", which means that providers of debt to such project companies do not have recourse to John Laing beyond its equity and/or subordinated debt commitments in the underlying projects. Subsidiaries through which the Company holds its investments in project companies, which are held at FVTPL, and subsidiaries that are Service Companies, which are consolidated, are described as "recourse".

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of approval of this report. Accordingly, they continue to adopt the going concern basis in preparing the Condensed Group Financial Statements.

Changes in accounting policies

 

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 lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's 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:

 

 

31 December 2018

£ million

(Unaudited)

Assets

 

Right-of-use assets

5

Total assets

5

 

 

Liabilities

 

Finance lease liability

(5)

Total liabilities

(5)

 

 

Equity

 

Retained earnings

-

Total equity

-

 

 

 

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. 

 

 

31 December 2018

£ million

(Unaudited)

 

 

 

 

Within one year

In the second to fifth years inclusive

(1)

(3)

After five years

(2)

 

(6)

 

 

 

 

 

Discount on lease liability

1

 

 

Total liabilities recognised under IFRS 16

(5)

 

 

 

       

 

The impact on the Condensed Group Income Statement for the six months ended 30 June 2018 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.

 

 

Critical accounting judgements and key sources of estimation uncertainty

The Group's critical accounting judgements and key sources of estimation uncertainty are set out in note 4 of the Group's 2018 Annual Report & Accounts. The critical accounting judgements disclosed were the methodology for valuing the Group's investment portfolio ( incorporating key inputs including the discount rate and the evidence available for the inclusion of value enhancements) and that there is no minimum funding requirement under IFRIC14. The key sources of estimation uncertainty in valuing the Group's investment portfolio were the discount rates adopted, the long term inflation rate and long term power prices and on the Group's pension schemes the discount, inflation and mortality rates adopted. The only change this period are the addition of key sources of estimation uncertainty for the impact of marginal loss factors impacting Australian renewable energy assets and future energy yields impacting all renewable energy assets.

3        Operating segments

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, information is now 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 now based on regions which are currently: Asia Pacific, Europe, 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).

 

The following is an analysis of the Group's operating income and PBT for the six months ended 30 June 2019 and 2018 and for the year ended 31 December 2018 for each segment:

 

 

 

Six months ended 30 June 2019

 

Asia Pacific

Europe

North America

Latin America

Fund Management

Central

Total

 

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

 

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Net gain on investments at FVTPL

(13)

(13)

75

-

-

4

53

Other income

1

1

1

-

20

-

23

Operating income

(12)

(12)

76

-

20

4

76

Administrative expenses

(5)

(6)

(7)

(1)

(5)

(12)

(36)

Profit from operations

(17)

(18)

69

(1)

15

(8)

40

Finance costs

-

-

-

-

-

(5)

(5)

Profit before tax

(17)

(18)

69

(1)

15

(13)

35

 

 

 

Six months ended 30 June 2018 (restated)

 

Asia Pacific

Europe

North America

Latin America

Fund Management

Central

Total

 

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

 

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Net gain on investments at FVTPL

20

156

22

-

-

-

198

Other income

1

2

3

-

9

-

15

Operating income

21

158

25

-

9

-

213

Administrative expenses

(5)

(8)

(4)

(1)

(4)

(10)

(32)

Profit from operations

16

150

21

(1)

5

(10)

181

Finance costs

-

-

-

-

-

(6)

(6)

Profit before tax

16

150

21

(1)

5

(16)

175

 

 

 

Year ended 31 December 2018 (restated)

 

Asia Pacific

Europe

North America

Latin America

Fund Management

Central

Total

 

 

£ million

£ million

£ million

£ million

£ million

£ million

£ million

 

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Net gain on investments at FVTPL

86

188

88

-

-

4

366

Other income

2

4

6

-

19

-

31

Operating income

88

192

94

-

19

4

397

Administrative expenses (excluding GMP equalisation charge)

(10)

(17)

(9)

(1)

(9)

(20)

(66)

GMP equalisation charge

-

-

-

-

-

(21)

(21)

Profit from operations

78

175

85

(1)

10

(37)

310

Finance costs

-

-

-

-

-

(14)

(14)

Profit before tax

78

175

85

(1)

10

(51)

296

 

 

For the six months ended 30 June 2019, the Group held four (six months ended 30 June 2018 - two; year ended 31 December 2018 - two) investments from which it received more than 10% of its operating income. The operating income from the four investments was £20 million, £19 million, £16 million and £10 million, which is reported within the North America and Europe segments. The Group treats each investment in a project company as a separate customer for purposes 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. The investment in JLEN is managed centrally. Other assets and liabilities, including cash balances and borrowings as well as retirement benefit obligations, are also predominantly managed centrally.

 

 

 

30 June

2019

£ million

Unaudited

31 December

2018

£ million

Audited

Asia Pacific

527

505

Europe

574

580

North America

423

465

Central

11

10

Portfolio valuation

1,535

1,560

Other assets and liabilities

135

140

Investments at FVTPL

1,670

1,700

Retirement benefit assets

14

-

Other assets

21

14

Total assets

1,705

1,714

Retirement benefit obligations

(8)

(40)

Other liabilities

(98)

(88)

Total liabilities

(106)

(128)

Group net assets

1,599

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.

4        Seasonality

Neither operating income nor profit are impacted by seasonality.

 

5        Other income

 

Six months

ended

30 June

2019

£ million

Unaudited

Six months

ended

30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

Fees from asset management services

18

12

27

Sale of investment advisory agreement

5

-

-

Recovery of bid costs

-

3

4

Total other income

23

 

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.

 

6        Tax

The tax expense for the period comprises:

 

 

Six months

ended

30 June

2019

£ million

Unaudited

Six months

ended

30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

Deferred tax:

 

 

 

Deferred tax expense - prior period

-

(1)

-

 

-

(1)

-

Tax expense  

-

(1)

-

 

For the six months ended 30 June 2019, a tax rate of 19.0% has been applied (six months ended 30 June 2018 and year ended 31 December 2018 - 19.0%).

 

7        Earnings per share

The calculation of basic and diluted earnings per share (EPS) is based on the following data:

 

Six months

ended

30 June

2019

£ million

Unaudited

Six months

ended

30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

Earnings

 

 

 

Profit for the purpose of basic and diluted EPS

35

174

296

Profit for the period

35

174

296

 

 

 

 

Number of shares

 

 

 

Weighted average number of ordinary shares for the purpose of basic EPS

491,189,378

447,876,982

469,502,029

Dilutive effect of ordinary shares potentially issued under share-based incentives (note 8)

5,105,290

5,680,493

5,535,545

Weighted average number of ordinary shares for the purpose of diluted EPS

496,294,668

453,557,475

475,037,574

 

 

 

 

Earnings per share (pence)

 

 

 

Basic

7.1

38.8

63.1

Diluted

7.1

38.3

62.4

 

 

 

 

 

8        Share-based PAYMENTS

 

The total expense recognised in the Condensed Group Income Statement for all awards granted under share-based incentive arrangements for the six months ended 30 June 2019 was £2 million (six months ended 30 June 2018 - £1 million; year ended 31 December 2018 - £3 million). The £2 million is charged in arriving at profit for the period and is a credit in Other reserves in the Condensed Group Statement of Changes in Equity. An amount of £4 million has been transferred from other reserves to retained earnings in respect of awards previously granted under share-based incentive arrangements that vested and were exercised in the six months ended 30 June 2019.

 

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 remaining in employment from the date of grant to the vesting date (the vesting period) and are subject to the Plan Rules. The awards vest three years from the grant date, subject to the Group achieving a target share-based performance condition, total shareholder return (50% of the award), and a non-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 under the LTIP was as follows:

 

 

Number of shares

 

Six months ended

30 June

2019

Six months ended

30 June

2018

Year

ended

31 December 2018

 

Unaudited

Unaudited

Audited

At beginning of the period

5,216,928

5,258,970

5,258,970

Granted

1,506,698

1,747,340

1,747,340

Adjustment for the Rights Issue bonus factor

-

444,565

436,067

Lapsed

(402,558)

(671,097)

(842,082)

Vested

(1,878,182)

(1,383,367)

(1,383,367)

At end of the period

4,442,886

5,396,411

5,216,928

 

In addition to the 1,878,182 shares that vested per the table above, a further 108,414 shares were awarded in lieu of dividends payable since the grant date on the vested shares (see note 12).

 

Deferred Share Bonus Plan (DSBP)

In accordance with the DSBP, 112,554 awards over shares were granted on 18 April 2019 to Executive Directors and certain senior executives in relation to that part of their annual bonus for 2018 which exceeded 60% of their base salary. Awards under the DSBP vest in equal tranches on the first, second and third anniversary of grant, normally subject to continued employment and are subject to the Plan Rules.

 

 

The movement in the number of shares awarded under the DSBP was as follows:

 

Number of shares

 

 Six months

ended

30 June

2019

 Six months

ended

30 June

2018

Year

ended

31 December

2018

 

Unaudited

Unaudited

Audited

At beginning of the period

175,141

63,121

63,121

Granted

112,554

138,987

138,987

Adjustment to awards granted in prior periods

-

(8)

(8)

Adjustment for the Rights Issue bonus factor

-

5,647

5,647

Vested

(112,087)

(32,606)

(32,606)

At end of the period

175,608

175,141

175,141

 

In addition to the 112,087 shares that vested as per the table above, a further 3,907 shares were awarded in lieu of dividends payable since the grant date on the vested shares (see note 12).

 

Buy-out award

In May 2019, the Chief Financial Officer was granted a buy-out award over 65,044 shares, in compensation for cash-based long-term incentive awards that were forfeited on leaving her previous employer. There are six awards which individually 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. There were 65,044 awards outstanding at 30 June 2019.

 

 

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. At 1 January 2019, the EBT held 811 shares. During the six months ended 30 June 2019, 2,225,000 new shares in John Laing Group plc were issued to the EBT with which to satisfy obligations under share-based incentive arrangements. 2,102,590 of share awards vested and were exercised in the period under these arrangements leaving 123,221 shares held by the EBT.

 

Subsequent to the awards being made, certain employees elected to sell shares 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 Condensed Group Statement of Changes in Equity. Following this acquisition, the total number of shares held by the EBT at 30 June 2019 was 1,237,218, which are excluded for the purposes of calculating earnings per share and NAV per share.

 

9        Investments at fair value through profit or loss

 

30 June 2019

 

Project

companies

£ million

Unaudited

Listed

investment

£ million

Unaudited

Portfolio valuation

sub-total

£ million

Unaudited

Other assets

and liabilities

£ million

Unaudited

Total investments at FVTPL

£ million

Unaudited

Opening balance

1,550

10

1,560

140

1,700

Distributions

(35)

-

(35)

35

-

Investment in equity and loans

89

-

89

(89)

-

Realisations from investment portfolio

(131)

-

(131)

131

-

Fair value movement

51

1

52

1

53

Net cash transferred from investments held at FVTPL

-

-

-

(83)

(83)

Closing balance

1,524

11

1,535

135

1,670

 

 

31 December 2018

 

Project

companies

£ million

Audited

Listed

investment

£ million

Audited

Portfolio valuation

sub-total

£ million

Audited

Other assets

and liabilities

£ million

Audited

Total investments at FVTPL

£ million

Audited

Opening balance

1,184

10

1,194

152

1,346

Distributions

(33)

(1)

(34)

34

-

Investment in equity and loans

342

-

342

(342)

-

Realisations from investment portfolio

(296)

-

(296)

296

-

Fair value movement

353

1

354

12

366

Net cash transferred from investments held at FVTPL

-

-

-

(12)

(12)

Closing balance

1,550

10

1,560

140

1,700

 

Six months ended 30 June 2019

During the six months ended 30 June 2019, the Group disposed of shares and subordinated debt in one PPP and two renewable energy project companies to third parties. Total proceeds were £131 million.

 

Details of investments sold in the period ended 30 June 2019 are as follows:

 

Date of

completion

Original

holding

%

Holding

disposed of

%

Retained

holding

%

 

 

 

 

 

Westadium Project Holdco Pty Limited

11 March 2019

50.0

50.0

-

John Laing Rocksprings Wind HoldCo Corp

2 May 2019

95.3

95.3

-

John Laing Sterling Wind HoldCo Corp

2 May 2019

92.5

92.5

-

Year ended 31 December 2018

During the year ended 31 December 2018, the Group disposed of shares and subordinated debt in three PPP and renewable energy project companies. Total proceeds were £296.1 million.

 

Details were as follows:

 

Date of

completion

Original

holding

%

Holding

disposed of

%

Retained

holding

%

Acquired by Jura Infrastructure Limited

 

 

 

 

Regenter Myatts Field North Holdings Company Ltd

30 May 2018

50.0

50.0

-

 

 

 

 

 

Sold to other parties

 

 

 

 

Agility Trains West (Holdings) Ltd

18 May 2018

15.0

15.0

-

INEOS Runcorn (TPS) Holding Limited

21 December 2018

37.4

37.4

-

 

 

 

 

 

10      Financial instruments

The Group held the following financial instruments by category at 30 June 2019:

 

Cash and cash equivalents

£ million

Loans and

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

 

30 June 2019 (unaudited)

 

 

 

 

 

Non-current assets

 

 

 

 

 

Investments at FVTPL

-

-

1,670

-

1,670

Current assets

 

 

 

 

 

Trade and other receivables

-

12

-

-

12

Cash and cash equivalents

2

-

-

-

2

Total financial assets

2

12

1,670

-

1,684

Non-current liabilities

 

 

 

 

 

Finance lease liabilities

-

-

-

(4)

(4)

Current liabilities

 

 

 

 

 

Borrowings

-

-

-

(74)

(74)

Trade and other payables

-

-

-

(16)

(15)

Total financial liabilities

-

-

-

(94)

(94)

Net financial instruments

2

12

1,670

(94)

1,590

 

 

 

 

 

Cash and cash equivalents

£ million

Loans and

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

 

31 December 2018 (audited)

 

 

 

 

 

Non-current assets

 

 

 

 

 

Investments at FVTPL

-

-

1,700

-

1,700

Current assets

 

 

 

 

 

Trade and other receivables

-

7

-

-

7

Cash and cash equivalents

6

-

-

-

6

Total financial assets

6

7

1,700

-

1,713

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Borrowings

-

-

-

(66)

(66)

Trade and other payables

-

-

-

(19)

(19)

Total financial liabilities

-

-

-

(85)

(85)

Net financial instruments

6

7

1,700

(85)

1,628

 

* The investments at FVTPL are split between: Level 1, JLEN, which is a listed investment fair valued at £11 million (31 December 2018 - £10 million) using a quoted market price and Level 3 investments in project companies fair valued at £1,524 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 below. The investments at FVTPL include other assets and liabilities as shown in note 9. Such other assets and liabilities are recorded at amortised cost which the Directors believe approximates to their fair value.

 

The table above provides an analysis of financial instruments that are measured subsequent to their initial recognition at fair value.

-   Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

-   Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

-   Level 3 fair value measurements are those derived from valuation techniques that include inputs to the asset or liability that are not based on observable market data (unobservable inputs).

 

There have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

 

The investments at FVTPL, whose fair values include the use of Level 3 inputs, are valued by discounting future cash flows from investments in both equity (dividends and equity redemptions) and subordinated loans (interest and repayments) to the Group at an appropriate discount rate. A base case discount rate for an operational project is derived from secondary market information and other available data points. The base case discount rate is then adjusted to reflect additional project-specific risks. In addition, a risk premium is added to reflect the additional risk during the construction phase. This premium reduces over time as the project progresses through construction, reflecting the significant reduction in risk once the project reaches the operating stage. The weighted average discount rate applied as at 30 June 2019 was 8.3% (31 December 2018 - 8.6%). The discount rate is considered the most significant unobservable input through which an increase or decrease would have a material impact on the fair value of the investments at FVTPL. As at 30 June 2019, an increase of 0.25% in the discount rate would decrease the fair value of the investments by £56 million (31 December 2018 - £52 million) and a decrease of 0.25% in the discount rate would increase the fair value of the investments by £59 million (31 December 2018 - £54 million).

 

Investments denominated in foreign currency are fair valued based on the spot exchange rate on the balance sheet date. As at 30 June 2019, a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas projects by c.£57 million (31 December 2018 - c.£59 million).

 

Cash flows from investments may be affected by future changes in certain forecasts or where actual amounts differ from forecast amounts in the future. The most significant observable forecasts to which a change could have a material impact on the fair value of investments at FVTPL are as follows: inflation and, for renewable energy investments, power prices, marginal loss factors ("MLFs") and energy yields. Sensitivities to the fair value of investments at FVTPL from changes in each of these forecasts is provided below.

 

A 0.25% increase in inflation on five of the larger PPP investments with a total value at 30 June 2019 of £545 million is estimated to increase their value by c.£15 million and a 0.25% decrease in inflation is estimated to decrease the value by c.£14 million. Certain of the underlying project companies utilise some inflation hedging.

 

A 5% increase in power price forecasts on seven of the larger renewable energy investments with a total value at 30 June 2019 of £272 million is estimated to increase their value by c.£26 million and a 5% decrease in power price forecasts is estimated to decrease the value by c.£25 million.

 

A 5% increase in MLFs on a sample of renewable energy investments with a total value at 30 June 2019 of £225 million is estimated to increase their value by c.£30 million and a 5% decrease is estimated to decrease their value by c.£30 million.

 

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 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 75% probability of exceedance and a P25 output  means 25% probability of exceedance. At a P75 level of electricity output, the valuation at 30 June 2019 of nine renewable energy assets with a total value of £304 million would reduce by £37 million and a P25 level of electricity output would increase the value by £35 million.

 

For all of the above sensitivities on the portfolio value as at 30 June 2019, the Group's profit before tax would be impacted by the same amounts described above. There would be no additional impact on equity.

 

The carrying amounts of other financial assets and financial liabilities recorded in these financial statements are approximately equal to their fair values.

11      Retirement benefit ASSETS/(obligations)

 

The Group operates two defined benefit pension schemes in the UK (the Schemes) - The John Laing Pension Fund (JLPF) and The John Laing Pension Plan (the Plan). The Group also provides post-retirement medical insurance benefits to 56 former employees. This scheme, which was closed to new members in 1991, is unfunded.

 

30 June

2019

£ million

Unaudited

31 December

2018

£ million

Audited

Pension schemes

14

(32)

Post-retirement medical benefits

(8)

(8)

Net retirement benefit assets/(obligations)

6

(40)

 

Analysis of the movement in the net surplus/(deficit) on the Schemes during the period:

 

30 June

2019

£ million

Unaudited

31 December

2018

£ million

Audited

Opening deficit in Schemes

(32)

(32)

Current service cost

(1)

(2)

GMP equalisation charge

-

(21)

Finance cost

-

(1)

Contributions

29

27

Remeasurement gain/(loss)

18

(3)

Closing surplus/(deficit) in Schemes

14

(32)

 

During the six months ended 30 June 2019, the Group made deficit reduction contributions to JLPF of £29 million in cash.

 

 

The financial assumptions used in the valuation of JLPF and the Plan under IAS 19 were:

 

30 June

2019

%

Unaudited

31 December

2018

%

Audited

Discount rate

2.30

2.85

Rate of increase in non-GMP pensions in payment

3.10

3.10

Rate of increase in non-GMP pensions in deferment

2.10

2.10

Inflation - RPI

3.20

3.20

Inflation - CPI

2.10

2.10

 

The major categories and fair value of assets held by the Schemes were as follows:

 

30 June

2019

£ million

Unaudited

31 December

2018

£ million

Audited

Bonds and other debt instruments

604

498

Equity instruments

376

352

Aviva bulk annuity buy-in agreement

228

218

Cash and cash equivalents

12

20

Total market value of assets

1,220

1,088

 

12      Share capital

 

30 June

2019

No.

Unaudited

31 December

2018

No.

Audited

Authorised:

 

 

Ordinary shares of £0.10 each

493,000,636

490,775,636

 

 

 

30 June 2019

31 December 2018

 

 

No.

£ million

No.

£ million

Allotted, called up and fully paid:

Unaudited

Unaudited

Audited

Audited

At beginning of the period

490,774,825

 49

 366,960,134

 37

Issued

988,593

-

 123,814,691

 12

Shares in issue

 

49

490,774,825

49

Issued and held by the EBT

1,237,218

-

811

-

At end of the period

 493,000,636

 49

 490,775,636

 49

 

 

The Company has one class of ordinary shares which carry no right to fixed income.

 

 

 

 

30 June

31 December

 

 

 

2019

2018

 

 

 

No.

No.

 

 

 

Unaudited

Audited

Issued under:

 

 

 

 

Rights Issue

 

 

-

 122,320,044

LTIP

 

 

1,878,182

 1,383,367

LTIP - granted in lieu of dividends payable

 

 

108,414

 77,115

DSBP

 

 

112,087

 32,606

DSBP - granted in lieu of dividends payable

 

 

3,907

 1,559

Shares acquired by the EBT

 

 

(1,113,997)

 -

Total shares issued

 

 

 988,593

 123,814,691

 

 

 

 

 

         

 

 

During the six months ended 30 June 2019, 2,225,000 shares were issued to the EBT to satisfy awards vesting under share-based incentive arrangements (see note 8). Of these, 1,986,596 (2018 - 1,460,482) shares were used to satisfy awards vested and exercised under the Group's LTIP and 115,994 (2018 - 34,165) shares were used to satisfy awards vested and exercised under the Group's DSBP leaving 122,410 held by the EBT. Of the 2,102,590 shares vested and exercised by employees, 1,113,997 were purchased by the EBT and deducted from equity in the Condensed Group Balance Sheet as if such shares were treasury shares as defined by IFRS. The shares held by the EBT are excluded for the purposes of calculating earnings per share and NAV per share. As at 30 June 2019, 1,237,218 shares were held by the EBT.

13      SHARE PREMIUM

 

 

30 June

2019

31 December

2018

 

£ million

 £ million

 

Unaudited

Audited

Opening balance

         416

         218

Share premium on Rights Issue

-

204

Costs of Rights Issue

-

(6)

Closing balance

416

416

 

In March 2018, the Company undertook a one for three Rights Issue. 122,320,044 shares of £0.10 each were issued at 177p per share raising £216 million in total, being £12 million of nominal share capital (see note 12) and £204 million of share premium.

14      Net cash outflow from operating activities

 

 

Six months ended

30 June

2019

£ million

Unaudited

Six months

 ended

 30 June

2018

£ million

Unaudited

Year

ended

31 December

2018

£ million

Audited

Profit before tax

35

175

            296

 

 

 

 

Adjustments for:

 

 

 

Net finance costs

5

6

14

Unrealised profit arising on changes in fair value of investments (note 9)

(53)

(198)

(366)

Share-based incentives expense

2

1

3

IAS 19 pension service cost

1

1

2

GMP equalisation charge

-

-

21

Contribution to JLPF

(29)

(27)

(27)

Increase in provisions

-

1

1

Operating cash outflow before movements in working capital

(39)

(41)

(56)

Increase in trade and other receivables

(4)

(2)

(1)

(Decrease)/increase in trade and other payables

(5)

(2)

3

Net cash outflow from operating activities

(48)

(45)

(54)

 

15     Commitments

 

At 30 June 2019, the Group held future equity and loan commitments in PPP and renewable energy projects of £228 million (31 December 2018 - £296 million) backed by letters of credit of £99 million (31 December 2018 - £164 million) and cash collateral of £129 million (31 December 2018 - £132 million).

 

At 30 June 2019, there were also contingent commitments, performance and bid bonds of £1 million (31 December 2018 - £10 million).

 

 

16      Transactions with related parties

 

Details of transactions between the Group and its related parties are disclosed below:

Transactions with non-recourse entities

The Group entered into the following trading transactions with non-recourse project companies in which the Group holds interests:

 

 

Six months

ended

or as at

30 June

2019

£ million

Unaudited

Six months

ended

or as at

30 June

2018

£ million

Unaudited

Year

ended

or as at

31 December

2018

£ million

Audited

For the period ended:

 

 

 

Services income*

3

6

9

 

 

 

 

Balances as at:

 

 

 

Amounts owed by project companies

-

1

1

Amounts owed to project companies

(1)

(1)

(1)

 

* Services income is earned from project companies through management services agreements and recoveries of bid costs on financial close.

 

Transactions with recourse subsidiary entities held at FVTPL:

 

Six months

ended

or as at

30 June

2019

£ million

Unaudited

Six months

ended

or as at

30 June

2018

£ million

Unaudited

Year

ended

or as at

31 December

2018

£ million

Audited

For the period ended:

 

 

 

Management charge payable to the Group by recourse subsidiary entities held at FVTPL

-

-

31

Net interest receivable by the Group from recourse subsidiary entities held at FVTPL

-

-

4

Net cash transferred from investments held at FVTPL (note 9)

83

107

12

 

 

 

 

Balances as at:

 

 

 

Net amounts owed to the Group by recourse subsidiary entities held at FVTPL

159

140

215

 

Transactions with other related parties

There were no transactions with other related parties during the six months ended 30 June 2019.

17      Events after balance sheet date

 

In July 2019, the Group agreed an investment of approximately £62 million in the Ruta del Cacao road project in Colombia. This investment is expected to complete in September 2019.

 

In August 2019, the Group completed an investment of approximately £75 million in a wind farm in the US.

 

 

Dividend timetable

 

The interim dividend is proposed to be paid on 25 October 2019 to holders of ordinary shares on the register on 27 September 2019. The ex-dividend date will be 26 September 2019.

 

DIRECTORS AND ADVISERS

Executive DIRECTORS

Olivier Brousse EP ENPC

Chief Executive Officer

 

Luciana Germinario

Chief Financial Officer

Non-executive directors

Will Samuel BSc BA FCA

Chairman

 

Andrea Abt MBA

Anne Wade BA MSc

David Rough BSc Hons

Jeremy Beeton CB BSc CEng FICE

Toby Hiscock MA (Oxon) FCA

Company secretary

Clare Underwood BSc, ACA

Group Company Secretary

Registered office

1 Kingsway

London WC2B 6AN

 

Auditors

Deloitte LLP

Statutory Auditor

1 New Street Square

London EC4A 3BZ

Solicitors

Freshfields Bruckhaus Deringer LLP

65 Fleet Street

London EC4Y 1HS

Independent valuers

KPMG LLP

15 Canada Square

London E14 5GL

Registrars

Equiniti

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

 

 

 

PRINCIPAL GROUP BANKERS

 

Barclays Bank PLC

1 Churchill Place

London E14 5HP

 

 

HSBC UK Bank plc

71 Queen Victoria Street

London EC4V 4AY

 

Australia and New Zealand Banking Group Limited

40 Bank Street

London E14 5EJ

 

 

MUFG Bank, Limited

Ropemaker Place

25 Ropemaker Street

London EC2Y 9AN

 

Sumitomo Mitsui Banking Corporation

99 Queen Victoria Street

London EC4V 4EH

 

Crédit Agricole Corporate and Investment Bank

Broadwalk House

5 Appold Street

London EC2A 2DA

 

Joint Stockbrokers

Barclays Bank PLC

5 The North Colonnade

London E14 4BB

 

HSBC Bank plc

8 Canada Square

London E14 5HQ

 

 

John Laing Group plc

 

Registered Office:

1 Kingsway

London

WC2B 6AN

United Kingdom

Registered No. 5975300

Tel:       +44 (0)20 7901 3200

Fax:      +44 (0)20 7901 3520

 

www.laing.com

 

ABN Amro Bank NV

Gustav Mahlerlaan 10

1082 PP Amsterdam

The Netherlands

 

AIB Group (UK) PLC

St Helen's, 1 Undershaft

London EC3A 8AB

 

National Australia Bank Limited

88 Wood Street

London EC2V 7QQ

 

 


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Results for the six months ended 30 June 2019 - RNS