John Laing Group plc John Laing Group DELIVERING Annual Report & Accounts RESPONSIBLE INFRASTRUCTURE SOLUTIONS 2019 John Laing Group plc Annual Report & Accounts 2019 WE ARE JOHN LAING DELIVERING INFRASTRUCTURE SOLUTIONS JOHN LAING IS DELIVERING INFRASTRUCTURE SOLUTIONS. WE ARE INVESTORS AND PARTNERS BEHIND RESPONSIBLE INFRASTRUCTURE PROJECTS WHICH RESPOND TO PUBLIC NEEDS, EMPOWER SUSTAINABLE GROWTH AND IMPROVE THE LIVES OF THE COMMUNITIES IN WHICH WE WORK. CLARENCE CORRECTIONAL CENTRE, THE INTERCITY EXPRESS PROGRAMME, ASIA PACIFIC EUROPE AND MIDDLE EAST p / 18 p / 24 I-75 ROAD, RUTA DEL CACAO, NORTH AMERICA LATIN AMERICA p / 32 p / 42 Our Alignment to the United Nations Sustainable Development Goals While our projects have overlaps across many of the UN SDGs, we have identified 5 priority SDGs which our investments most directly contribute to. For further information on this, please see page 64. 2019 HIGHLIGHTS CONTENTS FINANCIAL HIGHLIGHTS OVERVIEW 1 > NAV per share at 337p at 31 December 2019 2019 Highlights 2 At a Glance (31 December 2018 – 323p) 4 Our Global Reach Overview > 4.3% increase since 31 December 2018; 7.2% increase before 6 Chairman’s Statement dividends paid; STRATEGIC REPORT > 10.7% increase at constant currency and before dividends paid1 8 Chief Executive Officer’s Review > Final dividend 7.66p per share (including a special dividend 14 Our Strategy and Business Model of 3.98p per share), giving a total dividend for 2019 of 9.50p 16 Key Performance Indicators 20 Regional Review > Investment commitments of £184 million (2018 – £302 million)2 20 Asia Pacific Report Strategic > Realisations of £143 million (2018 – £296 million) 21 Europe and Middle East 22 North America 23 Latin America 26 Portfolio Valuation OPERATIONAL HIGHLIGHTS 34 Financial Review 44 Stakeholder Engagement Governance > Strong performance in asset management and project delivery 47 Prospects and Viability > Wind & solar investments: 49 Principal Risks and Risk Management 55 Corporate Responsibility – Modest improvement to H1 write downs in second half 56 Responsible Employer of the year 63 Responsible Investor 68 Community – Following second half review, all new investments 70 Climate in standalone wind and solar generation to cease > Record pipeline: £3.2 billion (2018 – £2.4 billion) GOVERNANCE Financial Statements 74 Directors and Company Secretary 76 Chairman’s Introduction to Governance 78 Corporate Governance 86 Audit & Risk Committee Report 90 Nomination Committee Report 92 Directors’ Remuneration Report 113 Compliance Against the 2018 Corporate Governance Code 115 Directors’ Report FINANCIAL STATEMENTS 119 Statement of Directors’ Responsibilities 120 Independent Auditor’s Report to the Members of John Laing Group plc 128 Group Income Statement 129 Group Statement of Comprehensive Income 130 Group Statement of Changes in Equity 131 Group Balance Sheet 132 Group Cash Flow Statement 133 Notes to the Group Financial Statements Notes: 168 Company Balance Sheet (1) 10.7% increase calculated after adding back the net FX loss 169 Company Statement of Changes in Equity of £55 million in 2019. 170 Company Cash Flow Statement (2) Based on new investment commitments secured in the year 171 Notes to the Company Financial Statements ended 31 December 2019; for further details see the 185 Additional Financial Information (Unaudited) Chief Executive Officer’s Review. 188 Shareholder Information John Laing Group plc 1 Annual Report and Accounts 2019 AT A GLANCE OUR BUSINESS TODAY JOHN LAING IS AN INTERNATIONAL ORIGINATOR, ACTIVE INVESTOR AND MANAGER OF INFRASTRUCTURE PROJECTS. OUR BUSINESS IS FOCUSED ON MAJOR TRANSPORT, SOCIAL AND ENVIRONMENTAL INFRASTRUCTURE PROJECTS ACROSS EUROPE & MIDDLE EAST, ASIA PACIFIC, NORTH AMERICA AND LATIN AMERICA. WHAT WE DO OUR APPROACH We bring long-term value to communities through • Active asset management – Our people work infrastructure projects which respond to the challenges within the project at board and SPV level, and facing society today. Challenges such as urbanisation, are on-site, actively involved in everything population growth and environmental impacts. from design to completion. We look for new opportunities which deliver solutions • Financial strength – We invest our own money and to those challenges and help drive society forward. stay fully committed to projects until they are fully operational and delivering the benefits promised. • Sustainability – This is embedded throughout the project lifecycle from design and construction to operational delivery. • International, with a local presence – We deliver our projects from a network of 10 offices together with various site offices in four regions – Europe and Middle East, Asia Pacific, North America and Latin America. • Partnership approach – A track record of working closely with like-minded partners to deliver project success. • Highly capable teams – In-depth sector expertise, matched by significant experience in complex OUR DIVERSIFIED PORTFOLIO infrastructure means our teams add measurable Investment portfolio spanning value to projects. a broad range of sectors. • Holistic stakeholder approach – Balancing the needs of our people, partners, communities and investors to create value for all. • Broad experience – Bringing innovative Portfolio value solutions to complex infrastructure projects at 31 December 2019 in road, rail, social and energy sectors. £1.77bn Read about our business model on pages 14-15 Transport – rail and rolling stock 34% Transport – roads and other 20% Social infrastructure 11% Environmental – wind & solar generation 33% Environmental – waste & biomass 2% 2 John Laing Group plc Annual Report and Accounts 2019 SUMMARY FINANCIAL INFORMATION Year Year ended ended or as at or as at 31 December 31 December £ million (unless otherwise stated) 2019 2018 Net asset value (NAV) 1,658 1,587 NAV per share1 337p 323p Profit before tax 100 296 Earnings per share (EPS)2 20p 63p Dividends per share 9.50p 9.50p Overview Primary Investment portfolio 907 868 Secondary Investment portfolio 861 692 Total investment portfolio 1,768 1,560 Future investment commitments backed by letters of credit or cash collateral 219 296 Gross investment portfolio 1,987 1,856 Strategic Report Strategic New investment committed during the period3 184 302 Cash invested in projects 267 342 Proceeds from investment realisations 143 296 Cash yield from investments 57 34 Investment pipeline3 3,172 2,373 Governance Notes: (1) Calculated as NAV at 31 December 2019 of £1,658 million divided by the number of shares in issue at 31 December 2019 of 491.8 million (2) Basic EPS; see note 6 to the Group financial statements (3) For further details, see the Chief Executive Officer’s Review GROWING BEING A RESPONSIBLE INVESTOR Financial Statements INTERNATIONAL PRESENCE We believe that responsible investment is key to fulfilling The percentage of UK investments in our portfolio our purpose to foster sustainable growth. By identifying has reduced from 66% at 31 December 2014, just environmental, social and governance (ESG) considerations before the IPO, to 24% at 31 December 2019. throughout the investment process, we can create value for our stakeholders not only in terms of minimising the down side risk and maximising the opportunities associated with these investments but also by improving the lives of communities around the world as we invest in infrastructure Portfolio value projects which respond to public needs. £1.77bn Read more about our Sustainability on page 63 2019 Portfolio value £772m 2014 Europe & Middle East – 34% 2019 / 85% 2014 North America – 29% 2019 / 7% 2014 Asia Pacific – 33% 2019 / 8% 2014 Latin America – 4% 2019 / 0% 2014 Read more in our Regional Review on page 20 John Laing Group plc 3 Annual Report and Accounts 2019 OUR GLOBAL REACH JOHN LAING HAS A WELL ESTABLISHED PRESENCE IN EACH OF ITS CORE MARKETS: EUROPE & MIDDLE EAST, NORTH AMERICA, ASIA PACIFIC AND LATIN AMERICA. NORTH AMERICA Brantley Buckleberry Buckthorn Denver Fox Creek Solar Farm Solar Farm Wind Farm Eagle P3 Solar Farm 100% 100% 90.05% 45% 100% Hurontario I-66 Managed I-77 Managed Light Rail I-4 Ultimate Lanes I-75 Road Lanes When selecting target regions, we look for an 40% 50% 10% 40% 10% identifiable pipeline of projects coming to market, strong political will for utilising private investment IS54 IS67 MBTA Automated and embracing ESG, a robust infrastructure-delivery Live Oak Fare Collection Solar Farm Solar Farm Wind Farm System supply chain, returns that meet our risk-adjusted 100% 100% 75% 90% hurdle rates and the existence of a market for operational investments or a strong expectation that one will develop. Typically we enter new geographies alongside one of our existing partners that already > North America has an established local presence. investment pipeline £1,044m OUR SECTORS Our activities are focused on the following infrastructure sectors: Transport and transport-related infrastructure, such as roads, tunnels, bridges and rail assets (including rolling stock). Environmental infrastructure, such as energy transition, biomass, water treatment and waste management. Social infrastructure, such as schools, hospitals, university accommodation, stadiums, social housing and justice and other public sector buildings. > Latin America investment pipeline Read more about our Regional performance on pages 20 to 23 £615m LATIN AMERICA Ruta del Cacao Primary 30% Secondary Regional Offices 4 John Laing Group plc Annual Report and Accounts 2019 EUROPE & MIDDLE EAST Alder Hey A6 Parkway