28 October 2020

Q3 TRADING UPDATE

PPP portfolio drives 4% underlying NAV growth in the third quarter

John Laing Group plc ("John Laing" or "the Group"), the responsible investor and active manager of infrastructure projects internationally, is today issuing a trading update for the quarter ended 30 September 2020.

Summary:

·    NAV growth of 2%: 314 pence per share at 30 September 2020, an increase of 2% in the quarter from 309 pence per share at 30 June 2020.  Underlying NAV growth was 4% in the quarter, excluding the impact of movements in foreign exchange and the pension balance.

·    PPP: strong underlying contribution to NAV growth in the period from the PPP portfolio, benefitting from the gain on the realisation of our interest in IEP East and continued good delivery of a number of key projects.

·    Renewable Energy: stable overall underlying performance of the Renewable Energy portfolio in the period, with a neutral contribution to NAV progression.  Agreed sale of Australian wind portfolio represents material progress with our strategy to realise fully our Renewable Energy assets over the next two years.

·    Realisations: two significant realisations at values in excess of book value:

o  30% interest in IEP East realised in the period at an uplift of over 22% to the 30 June 2020 valuation, representing a money multiple of over 5.8x.

o  Australian wind farm portfolio realised in October at an uplift of 2% to the 30 June 2020 valuation, representing a money multiple 1.5x, and materially reducing the Group's exposure to Renewable Energy.

·   Pipeline: 10 preferred bidder and short-listed bidder positions with an aggregate gross investment value of £526 million (30 June 2020: 10 positions with an aggregate gross investment value of £572 million). 

·   Balance sheet: strong balance sheet and liquidity position, with available financial resources of approximately £490 million.

·    Outlook: good performance in the third quarter has underpinned the outlook for underlying NAV growth in second half of year.  We continue to expect modest underlying NAV growth for the second half of the year, excluding foreign exchange movements and other external factors.

·    Update on Strategic Review: Capital Markets Day on 25 November to announce John Laing's future strategy and business priorities.

Ben Loomes, Chief Executive of John Laing, said:

"I am pleased to report another resilient performance from our PPP portfolio in the third quarter, with continued good project delivery.  NAV growth in the quarter was driven by the sale of our interest in IEP East at a strong uplift to book value.

The Renewable Energy portfolio has been stable and we remain committed to realising these projects at the right time and under the right conditions in order to maximise value for shareholders.  The agreed sale of our Australian wind portfolio earlier this month marks material progress with this strategy.

The prospects for infrastructure investment globally are strong and I am confident that our proven expertise in greenfield project development and strong network of partner relationships position us well to capitalise on future opportunities."

Net asset value ("NAV")

During the third quarter, NAV increased from £1,525 million at 30 June 2020 to £1,549 million at 30 September 2020.  NAV per share increased from 309 pence to 314 pence.

Underlying NAV growth in the period was £62 million (or 13 pence per share), representing 4% growth on a NAV of £1,525 million at 30 June 2020.  This consists of an underlying increase in the value of the portfolio driven by the sale of our interest in IEP East and continued good project delivery in the PPP portfolio, less net operating costs.  Total NAV per share increased 2% in the period, with underlying growth partly offset by a £28 million impact from foreign exchange translation during the period (or 6 pence per share), primarily due to the strengthening of sterling against the US dollar and a negative movement on the IAS 19 pension position of £10 million (or 2 pence per share).

Portfolio performance

At the end of the third quarter, the PPP portfolio value was £1,262 million. Adjusting for the completion of the first stage of the IEP East divestment and the agreed sale of the Australian wind portfolio in October, the PPP portfolio represents 78% of total portfolio value.  85% of this PPP portfolio value comprised availability-based revenue projects.  

In the period, we have continued to make good progress on the delivery of a number of key PPP projects, enabling us to recognise further embedded value in the portfolio.

Across our secondary assets portfolio, asset availability was maintained in-line with expectations.  In respect of the two volume-based road projects, the A130 in the UK and the I-77 in the US, after a strong recovery in the second quarter from the lows in April, traffic volumes have been steady during the third quarter.

The overall performance of our Renewable Energy portfolio was stable in the period, with a neutral contribution to NAV progression. This flat overall performance includes the decision in the third quarter to write down to zero the value of our interests in two UK-based biomass plants, Speyside and Cramlington.  In light of the deterioration in performance and outlook in the first half, these assets had already been substantially written down at 30 June 2020 to a residual value of £6 million from a value of £29 million at 31 December 2019.

In the third quarter, we have seen limited changes in power price forecasts, and the overall impact from updated power price forecasts was neutral for the Renewable Energy portfolio value.   

Realisations

On 18 September 2020, we announced the sale of our 30% interest in the Intercity Express Programme Phase 2 ("IEP East"), the UK rolling stock project for the East Coast Main Line.  The first stage of the transaction, consisting of a sale of the Group's 15% interest in IEP East, completed on 26 October.  Cash proceeds from this stage were £204.3 million, which included £0.9 million of interest. 

On 19 October 2020, the Group announced the sale of its Australian wind farm portfolio for AUD285 million (approximately £157 million) before disposal costs.  Completion of the sale, which is expected by early 2021, will lead to a material reduction in the size of our Renewable Energy portfolio.  As announced earlier this year, we are committed to realising our Renewable Energy projects at the right time and under the right conditions in order to maximise value for shareholders.  In turn, this will reduce the exposure of the portfolio to merchant power prices and reduce volatility in the portfolio value and returns.

Investment pipeline

During the third quarter, we joined a short-listed consortium for a waste-to-energy project in Melbourne, building on last year's success with the East Rockingham Resource Recovery Facility in Perth.  During the period, the Footscray Hospital project, which we were short-listed for, has been awarded to another consortium.  We ended the period with 10 preferred bidder and short-listed bidder positions with an aggregate gross investment value of £526 million (30 June 2020: 10 positions with an aggregate gross investment value of £572 million).

Balance sheet

The proceeds from the first stage of the realisation of our interest in IEP East together with existing cash balances will be used to repay cash borrowings drawn on our revolving credit facilities.  Currently the Group has available financial resources of approximately £490 million, including undrawn amounts on the credit facilities, available to fund future investment opportunities.

About John Laing

John Laing is a responsible investor and active manager of infrastructure projects internationally. John Laing creates value through investing in sustainable greenfield infrastructure projects, and by actively managing these projects through construction and into operation. We play a key role in providing solutions to complex infrastructure challenges leveraging our deep expertise, flexible business model and strong network of partners to respond to new opportunities as they emerge, helping to deliver vital infrastructure that improves the lives of the communities we serve.

ENDS