NAV growth despite challenges

John Laing Group 5 March 2020 Update
Download PDF

John Laing Group

NAV growth despite challenges

FY19 results

Investment companies

5 March 2020

Price

357p

Market cap

£1,760m

Net debt (£m) at end FY19

114 (re-presented accounts)
238 (Edison calculation based on statutory accounts)

Shares in issue

493.0m

Free float

99%

Code

JLG

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.8

(9.)

(5.7)

Rel (local)

10.9

(5.3)

(2.5)

52-week high/low

402p

328p

Business description

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

Next events

AGM

May 2020

Interim results

August 2020

Analyst

Graeme Moyse

+44 (0)20 3077 5700

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

John Laing Group (JLG) stands at a c 6% premium to its FY19 NAV of 337p per share compared to peer-group NAV premiums of over 10%. This appears modest for a business that, since its 2015 IPO, has delivered 14% compound annual growth in NAV per share (including dividends paid), which we expect to continue to grow at c 10% pa (including dividends). Successful disposal of its renewable assets could be a catalyst for share price appreciation.

Year end

NAV/share (p)

EPS*
(p)

DPS
(p)

P/NAV
(x)

P/E
(x)

Yield
(%)

12/18

323

63.1

9.5

1.11

5.7

2.7

12/19

337

20.4

9.5

1.06

17.5

2.7

12/20e

359

30.0

10.5

0.99

11.9

2.9

12/21e

395

46.6

13.1

0.90

7.7

3.7

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

Growth despite headwinds

JLG reported an FY19 NAV of 337p/share, up 14p (+4.3%) versus FY18’s NAV per share of 323p. The FY19 figure of 337p is struck after the adverse impact of foreign exchange movements that reduced NAV growth by 11p/share and lower forecast power prices, wind yields and transmission related issues, which reduced the NAV by a further 31p/share. Before dividends and currency movements, JLG’s NAV per share rose by 10.7%. Investment realisations and commitments totalled £143m (FY18: £296m) and £184m (FY18: £302m), respectively, with the lower realisations figure affecting the special element of the final dividend, which fell from 4.10p to 3.98p. The overall DPS for FY19 remained unchanged at 9.5p/share.

Outlook of continuing growth

The FY19 project pipeline grew significantly (£3.2bn versus £2.4bn in FY18) despite the decision not to pursue potential stand-alone wind and solar projects. The growth is said to have been facilitated by a deepening of relationships with partners and a buoyant market for public-private partnership (PPP) projects in North and Latin America. Although the macro environment for investment in PPP remains buoyant, the demand for operational renewable assets also remains strong, despite more pessimistic long-term power price forecasts produced by consultants. Although the FY19 figures for investment commitments and realisations fell below the required run rate, JLG believes it remains on course for its target for investment commitments of c £1bn for 2019–21 and for realisations to be broadly in line with investment commitments. A disposal of renewable assets at book value, or above, would be supportive of JLG’s valuation, as would news on a replacement for the departing CEO, Olivier Brousse.

Valuation: Discount to peers

JLG’s share price has rallied modestly following the results, but, at 357p/share, stands at only a c 6% premium to its NAV per share of 337p, compared to a peer group premium of c 10–12%. We believe JLG’s rating is modest for a company that is capable, based on our revised forecasts, of delivering NAV per share growth, before dividends, of c 8% over the next two years (previously 9% FY18–20).

Exhibit 1: Financial summary

Accounts: IFRS; year end: 31 December; £m

 

 

2018

2019

2020e

2021e

Profit & loss

Total revenues

 

 

397

179

235

316

Cost of sales

 

 

0

0

0

0

Gross profit

 

 

397

179

235

316

SG&A (expenses)

 

 

(66)

(68)

(72)

(73)

Other income/(expense)

 

 

(21)

0

0

0

Depreciation and amortisation

 

 

0

0

0

0

Reported EBIT

 

 

310

111

163

243

Finance income/(expense)

 

 

(14)

(11)

(14)

(11)

Other income/(expense)

 

 

0

0

0

0

Reported PBT

 

 

296

100

149

232

Income tax expense (includes exceptionals)

 

 

0

0

0

0

Reported net income

 

 

296

100

149

232

Basic average number of shares, m

 

 

469.5

491.5

492.3

493.2

Adjusted EPS (p/share)

 

 

63.1

20.4

30.0

46.6

 

 

 

 

 

 

 

EBITDA

 

 

331.0

111.0

163.1

242.8

Adjusted NAV (p/share)

 

 

323

337

359

395

Adjusted total DPS (p/share)

 

 

9.5

9.5

10.5

13.1

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

Property, plant and equipment

 

 

0

0

0

0

Goodwill

 

 

0

0

0

0

Intangible assets

 

 

0

0

0

0

Other non-current assets

 

 

1,700

1,914

2,101

2,364

Total non-current assets

 

 

1,700

1,914

2,101

2,364

Cash and equivalents

 

 

6

2

2

2

Trade and other receivables

 

 

8

6

6

6

Total current assets

 

 

14

8

8

8

Non-current loans and borrowings

 

 

0

4

4

4

Trade and other payables

 

 

0

0

0

0

Other non-current liabilities

 

 

42

9

10

10

Total non-current liabilities

 

 

42

13

14

14

Trade and other payables

 

 

20

15

15

15

Current loans and borrowings

 

 

66

236

310

393

Other current liabilities

 

 

0

0

0

0

Total current liabilities

 

 

86

251

325

408

Equity attributable to company

 

 

1,586

1,658

1,771

1,950

Non-controlling interest

 

 

0

0

0

0

 

 

 

 

 

 

 

Cash flow statement

 

 

 

 

 

 

Reported EBIT

 

 

310

111

163

243

Share based payments

 

 

3

4

0

0

Fair value and other adjustments

 

 

(369)

(174)

(247)

(331)

Movements in working capital

 

 

2

(2)

0

(3)

Cash from operations (CFO)

 

 

(54)

(61)

(84)

(91)

Capex

 

 

0

0

(0)

(0)

Cash transf. from inv. Held at FV

 

 

12

(50)

61

70

Portfolio Investments - Disposals

 

 

0

0

0

0

Cash used in investing activities (CFIA)

 

 

12

(50)

61

70

Net proceeds from issue of shares

 

 

210

(4)

0

0

Movements in debt

 

 

(106)

169

74

84

Other financing activities

 

 

(59)

(58)

(50)

(63)

Cash from financing activities (CFF)

 

 

45

107

23

21

Currency translation differences and other

 

 

0

0

0

0

Increase/(decrease) in cash and equivalents

 

 

3

(4)

0

(0)

Currency translation differences and other

 

 

0

0

0

0

Cash and equivalents at end of period

 

 

6

2

2

2

Net (debt) cash

 

 

(60)

(238)

(312)

(395)

Movement in net (debt) cash over period

 

 

111

(178)

(74)

(84)

Source: company accounts, Edison Investment Research (based on JLG’s statutory accounts). Note: Net debt shown for FY19 of £238m reflects cash of £2m less £4m of finance leases and borrowings of £236m. To calculate the net debt figure of £114m shown, JLG uses re-presented accounts with borrowing of £239m (subtract unamortised financing costs of £3m to equal the £236m shown on the statutory accounts) less cash and cash collateral of £125m. (£239m) plus £125m = (£114m).


General disclaimer and copyright

This report has been commissioned by John Laing Group and prepared and issued by Edison, in consideration of a fee payable by John Laing Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by John Laing Group and prepared and issued by Edison, in consideration of a fee payable by John Laing Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues