Another year of growth

John Laing Group 8 March 2017 Update
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John Laing Group

Another year of growth

FY16 results

Investment companies

8 March 2017

Price

265p

Market cap

£972m

Net debt (£m) at 31 December 2016

88.2

Shares in issue

366.9m

Free float

100%

Code

JLG

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.8)

(3.6)

24.2

Rel (local)

(2.7)

(9.5)

5.6

52-week high/low

281.5p

209.4p

Business description

John Laing is an originator, active investor in, and manager of greenfield infrastructure projects. John Laing operates internationally and its business is focused on the transport, energy, social and environmental sectors.

Next events

AGM

11 May 2017

Analysts

Graeme Moyse

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

John Laing Group is a research client of Edison Investment Research Limited

John Laing Group (JLG) extended its track record of growth with increases in NAV and DPS in FY16. The outlook for infrastructure investment remains strong and JLG is well on track to meet its target of c £200m of realisations in FY17. Despite share price appreciation over the last year, we believe the valuation remains modest for a company with strong growth prospects.

Year
end

NAV
(p)

EPS*
(p)

DPS*
(p)

P/NAV
(x)

P/E
(x)

Yield
(%)

12/15

242

27.6

6.90

1.1

9.6

2.6

12/16

277

51.9

8.15

1.0

5.1

3.1

12/17e

308

38.9

9.75

0.9

6.8

3.7

12/18e

343

44.8

9.92

0.8

5.9

3.7

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Strong growth in NAV and DPS in FY16

Increases in both the NAV and DPS are regarded as key measures of success by JLG and in FY16 it posted growth of +14% (to 277p) and +18% (to 8.15p/share) respectively, The growth in the NAV, although helped by favourable FX movements of c £75m, was achieved despite reflecting lower values for its holdings the New Royal Adelaide Hospital and Manchester Waste project, which together constitute c 8% of the value of the investment portfolio. We calculate that JLG has achieved a c 13% CAGR in NAV per share growth in 2014-16. JLG also posted a strong performance in investment realisations, which totalled £146.6m in FY16, although for the purposes of calculating the special dividend £19.5m in respect of British Transport Police and Oldham housing transactions was excluded. The base figure allowed a special dividend payment of 2.6p/share (7.5% x £127m/367m shares).

Positive outlook for FY17

The investment pipeline of £1.86bn (+c 24% in FY16), which excludes new areas of potential focus such as broadband, is indicative of continuing opportunities for growth. Global political developments, with greater emphasis on infrastructure investment, also help underpin a favourable outlook for investment. JLG is now guiding to new investment commitments of c £200m for FY17 (FY16 new investments commitments £181.9m vs guidance £180m). The secondary market for assets also remains strong and JLG expects to achieve disposal proceeds of c £200m in FY17. Given the disposal of the A1 motorway project in Poland (€137.3m) and the agreed, but not yet completed, disposal of the M6 road project in Hungary (€26.6m), JLG is already well on the way to meeting its target for FY17.

Valuation: Rating remains modest

In contrast to infrastructure funds, which are trading at a c 20% premium, JLG is trading at c 4% discount to its NAV. Over time, we would expect this valuation gap to close as JLG continues to demonstrate its superior growth prospects.

Exhibit 1: Financial summary

Accounts: IFRS, Year-end: December, £m

 

 

2015

2016

2017e

2018e

2019e

2020e

Profit & loss account

Total revenues

 

 

167.6

260.8

210.2

232.8

258.1

270.5

Cost of sales

 

 

(0.1)

0.0

(0.5)

(0.5)

(0.5)

(0.5)

Gross profit

 

 

167.5

260.8

209.7

232.3

257.6

270.0

SG&A (expenses)

 

 

(54.1)

(57.6)

(48.3)

(49.3)

(50.3)

(51.3)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Depreciation and amortisation

 

 

(1.2)

(0.8)

(0.8)

(0.8)

(0.8)

(0.8)

Reported EBIT

 

 

112.2

202.4

160.6

182.2

206.5

217.9

Finance income/(expense)

 

 

(11.3)

(10.3)

(17.8)

(18.0)

(18.6)

(19.2)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

100.9

192.1

142.8

164.2

188.0

198.7

Income tax expense (includes exceptionals)

 

 

(2.1)

(1.8)

0.0

0.0

0.0

0.0

Reported net income

 

 

104.5

190.3

142.8

164.2

188.0

198.7

Basic average number of shares, m

 

 

358.3

366.9

366.9

366.9

366.9

366.9

Basic EPS (p)

 

 

27.6

51.9

38.9

44.8

51.2

54.2

 

 

 

 

 

 

 

 

 

EBITDA

 

 

113.4

203.2

161.4

183.0

207.3

218.7

NAV (p/share)

 

 

242

277

308

343

384

428

Total DPS (p)

 

 

6.90

8.15

9.75

9.92

10.09

10.27

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

1.0

0.3

0.5

0.7

0.9

1.1

Goodwill

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.2

0.0

0.0

0.0

0.0

0.0

Other non-current assets

 

 

966.7

1,258.5

1,401.4

1,561.6

1,741.3

1,951.3

Total non-current assets

 

 

967.9

1,258.8

1,401.9

1,562.3

1,742.2

1,952.4

Cash and equivalents

 

 

1.1

1.6

0.1

1.0

1.0

1.0

Inventories

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Trade and other receivables

 

 

8.3

7.4

10.4

11.5

12.7

13.3

Other current assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total current assets

 

 

9.4

9.0

10.5

12.5

13.7

14.3

Non-current loans and borrowings

 

 

0.0

0.0

0.0

200.0

300.0

350.0

Trade and other payables

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other non-current liabilities

 

 

46.3

70.8

54.2

29.5

1.7

1.5

Total non-current liabilities

 

 

46.3

70.8

54.2

229.5

301.7

351.5

Trade and other payables

 

 

19.6

14.7

26.5

26.5

26.5

26.5

Current loans and borrowings

 

 

14.9

161.4

198.0

56.9

14.5

14.2

Other current liabilities

 

 

6.9

4.1

4.2

4.2

4.2

4.2

Total current liabilities

 

 

41.4

180.2

228.7

87.6

45.2

44.9

Equity attributable to company

 

 

889.6

1,016.8

1,129.5

1,257.7

1,409.0

1,570.4

Non-controlling interest

 

 

0.0

0.0

0.0

0.0

0.0

0.0

 

 

 

 

 

 

 

 

 

Cash flow statement

 

 

 

 

 

 

 

 

Profit before tax

 

 

100.9

192.1

142.8

164.2

188.0

198.7

Net finance expenses

 

 

11.3

10.3

17.8

18.0

18.6

19.2

Depreciation and amortisation

 

 

1.2

0.8

0.8

0.8

0.8

0.8

Share based payments

 

 

0.7

2.0

0.0

0.0

0.0

0.0

Fair value and other adjustments

 

 

(124.8)

(78.4)

(206.4)

(230.5)

(257.9)

(265.6)

Movements in working capital

 

 

(3.2)

(2.3)

16.8

0.7

0.0

0.2

Cash from operations (CFO)

 

 

(13.9)

124.5

(28.2)

(46.7)

(50.5)

(46.7)

Capex

 

 

(0.6)

(0.1)

(1.0)

(1.0)

(1.0)

(1.0)

Cash transf. from inv. Held at FV

 

 

(54.0)

(73.4)

39.0

43.8

49.1

54.6

Portfolio Investments - Disposals

 

 

(56.6)

(161.6)

0.0

0.0

0.0

0.0

Cash used in investing activities (CFIA)

 

 

(111.2)

(235.1)

38.0

42.8

48.1

53.6

Net proceeds from issue of shares

 

 

124.7

0.0

0.0

0.0

0.0

0.0

Movements in debt

 

 

19.0

146.0

36.6

58.9

57.6

49.6

Other financing activities

 

 

(19.6)

(35.1)

(47.9)

(54.1)

(55.2)

(56.5)

Cash from financing activities (CFF)

 

 

124.1

110.9

(11.4)

4.9

2.4

(6.9)

Currency translation differences and other

 

 

(0.1)

0.2

0.0

0.0

0.0

0.0

Increase/(decrease) in cash and equivalents

 

 

(1.0)

0.3

(1.5)

0.9

(0.0)

0.0

Currency translation differences and other

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Cash and equivalents at end of period

 

 

1.1

1.6

0.1

1.0

1.0

1.0

Net (debt) cash

 

 

(13.8)

(159.8)

(197.9)

(255.9)

(313.5)

(363.2)

Movement in net (debt) cash over period

 

 

(15.9)

(146.0)

(38.1)

(58.0)

(57.6)

(49.6)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by John Laing Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by John Laing Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

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