Full Year Results

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

John Laing Group plc

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

John Laing Group plc (John Laing or the Company or the Group) announces its audited results for the year ended 31 December 2016.

Highlights

· 14.3% increase in Net Asset Value (NAV), from £889.6 million at 31 December 2015 to £1,016.8 million

· NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p)

· New investment commitments of £181.9 million (2015 - £180.5 million)

· Realisations of £146.61 million from the sale of investments

· Profit before tax of £192.1 million compared to £106.6 million (pro forma) in 20152

· Earnings per share of 51.9p (2015 - 27.6p pro forma)

· 30% increase in external Assets under Management (AuM) to £1,472 million3

· Cash yield from investment portfolio of £34.8 million (2015 - £38.9 million)

· Continuing international growth including the Group's first offshore wind farm investment and first renewable energy investment in the US

· Final dividend of 6.3p per share in line with policy (including a special dividend of 2.6p per share), giving a total 2016 dividend of 8.15p (2015 - total dividend of 6.9p)

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

"2016 has been another good year for John Laing with strong growth in NAV and dividends. Our origination platform is working well as shown by our increasingly diversified and growing pipeline of opportunities, while our portfolio of projects under construction is well balanced and actively managed by experienced teams, allowing us to deliver steady results. We are well organised and positioned to take advantage of future opportunities in order to continue to move our business forward while controlling our costs and our risks. "

Notes: 

1. Realisations include £19.5 million in respect of British Transport Police and Oldham Housing transactions which counted towards guidance for 2015.

2. Profit before tax from continuing operations of £192.1 million (2015 - £100.9 million) and from discontinued operations of £nil (2015 - £5.7 million).

3. External AuM based on published portfolio values of JLIF and JLEN at 30 September 2016.

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. A conference call facility will also be available using the dial-in details below.

Conference call dial in details:

UK: 020 3059 8125

Other locations: +44 (0) 20 3059 8125

Participant password: John Laing Conference Call

Participant URL for live access to the on-line presentation:

http://www.investis-live.com/john-laing/58b6c29a146fbc10004bcf54/gfasdgdafg

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

Analyst/investor enquiries:

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.

Chairman's Statement

Last year, we stated that "looking forward, we have confidence in the robustness of our business model and the deliverability of our strategy". Our results for 2016 confirm that confidence, in what has been a year of political and economic turbulence.

When facing an uncertain environment, we believe in keeping our strategy simple, focused and flexible. In 2016, we simplified our business through the disposal of our non-core Project Management Services (PMS) activities in the UK. This allows management to concentrate on the core tasks of origination of greenfield projects, active management of construction and operational risk and timely realisations in order to monetise value. Our focus remains on PPP infrastructure and renewable energy in Asia Pacific, Europe and North America. Our pipeline is strong and diversified by sector and geography, which gives us flexibility in origination, and the funds we manage and the active secondary market give us flexibility in distribution.

Our performance in 2016 was strong:

· Net Asset Value (NAV) grew by 14.3% to £1,016.8 million or 277p per share at 31 December 2016, from £889.6 million or 242p per share at 31 December 2015;

· Investment commitments reached £182 million, in line with our guidance;

· Realisations of investments for dividend purposes were £127 million, ahead of our guidance for 2016 of approximately £100 million;

· Our total external Assets under Management grew to £1,472 million, an increase of 30%; and

· We are proposing a final dividend for 2016 of 6.3p per share made up of a base dividend of 3.7p per share and a special dividend of 2.6p per share.

Our three core markets all saw continued strong demand for new privately-financed infrastructure projects. Using our experienced teams, sector specialists and working with local partners, we have committed capital to both PPP and renewable energy in all three regions, and increasingly also see prospects in related infrastructure sectors, for instance in the water or broadband sectors.

During the year, the markets in which we are active continued to be affected by significant movements in macro-economic factors. In particular, the Brexit vote in June 2016 precipitated a prolonged weakening of Sterling versus the major currencies we invest in. While this has been positive for the value of our overseas investment portfolio in Sterling terms, our preference would be for a more stable foreign exchange environment. At a governmental level, there are signs that a number of countries are moving towards fiscal rather than monetary policy in order to stimulate economic growth. We would agree that increased infrastructure expenditure is a good way to provide such fiscal stimulus and in some of the jurisdictions we operate in, notably Australia and Canada, we see it already happening. Other countries - including the UK and the US - look as if they could follow suit.

No changes to the Board took place during the year. At a senior management level, Derek Potts, Group Managing Director of Primary Investment, has decided to retire, and will leave us at the end of March 2017. Derek originally joined John Laing in 2001. He has had responsibility for all the Group's bidding and primary investment activities and has been instrumental in leading the Group's expansion into international markets and new sectors. During his time with the Group, he has made an exceptional contribution and we are very sorry to see him go.

During the year under review, the Board complied with all applicable provisions of the UK Corporate Governance Code (the Code). We have a balanced group of directors who worked well as a board during the year. With the impending retirement of Derek Potts, we reviewed our succession plans and I was encouraged to see much promise among our senior management team. As well as regular Board meetings, we held reviews in June and in October 2016 to address the future strategy and direction of the business. These reconfirmed our commitment to creating further shareholder value through the continued application of our current business model.

As Chairman, I interact regularly with many members of staff both from overseas and the UK and, on behalf of the Board, I would like to thank all of them for their contribution to these results. I would also like to extend the Board's thanks to all the Group's stakeholders for their continued support.

Our dividend policy has two parts:

· a base dividend of £20 million (starting from 2015) growing at least in line with inflation; the Board is recommending a final base dividend for 2016 of 3.7p per share; and

· a special dividend of approximately 5% - 10% of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year. The Board is recommending a special dividend for 2016 of 2.6p per share. This has been arrived at by applying 7.5% to realisations for dividend purposes of £127 million achieved in 2016, which exclude the combined proceeds of £19.5 million from the disposals of our shareholdings in British Transport Police and Oldham Housing.

The total final dividend therefore amounts to 6.3p per share, which, together with the interim dividend of 1.85p paid in October 2016, makes a total dividend for 2016 of 8.15p per share, an increase of 7% over 2015, after taking into account the timing of the IPO in February 2015. The final dividend will be put to shareholders for their approval at the Company's Annual General Meeting (AGM) which will be held on 11 May 2017. At the Company's AGM on 12 May 2016, all resolutions were approved by shareholders.

There are positive signs in each of our core infrastructure markets of a strong level of deal flow over the coming years. With our flexible business model and our strong geographical presence, we believe we are well positioned to take advantage of the opportunities this will create.

Phil Nolan

Chairman

Chief Executive Officer's Review

2016 was our first full year since our IPO in February 2015 and I am delighted to report that we continued to deliver strong results.

The highlights included:

· 14.3% increase in NAV, from £889.6 million at 31 December 2015 to £1,016.8 million;

· NAV per share at 31 December 2016 of 277p (31 December 2015 - 242p);

· New investment commitments of £181.9 million in six different countries;

· Realisations of £146.6 million from the sale of assets;

· Profit before tax of £192.1 million compared to £106.6 million in 2015;

· 30% increase in external Assets under Management (AuM) to £1,472 million;

· Cash yield from investment portfolio of £34.8 million (2015 - £38.9 million); and

· Sale of UK activities of Project Management Services (PMS).

Outlook for our markets

As I have said before, we operate in an international market for new infrastructure primarily driven by population growth, urbanisation and climate change. Population growth and urbanisation create the need for new infrastructure, particularly in transport and in social infrastructure such as healthcare. Equally, climate change is the catalyst behind new infrastructure in the renewable energy, waste management and water sectors.

In addition, there are strong drivers for public sector authorities to involve the private sector in the procurement of new infrastructure, including risk transfer, funding and access to the best international contractors and investors. As a recognised international greenfield infrastructure expert, we target all the above sectors and therefore benefit from the overall growth in public-private infrastructure.

In Primary Investment, we continue to see a robust and diverse pipeline of future opportunities in each of the three regions where we currently operate: Asia Pacific (Australia and New Zealand); North America (Canada and the US); and Europe. We entered 2017 with an increased level of activity and strong positions in eight short-listed PPP consortia and with a number of exclusive renewable energy opportunities.

· Asia Pacific: we remain very active in the PPP markets in both Australia and New Zealand. In Australia, the renewable energy sector continues to grow and gain momentum following resolution of the Federal Renewable Energy Target in 2015 and our team is taking advantage of this.

· Europe: even if the overall PPP market remains subdued, we focus our attention on those countries which are bringing projects to market, such as the Netherlands, the Republic of Ireland, Germany, Norway, the Czech Republic and potentially the UK where we believe the current government will announce new PPP projects. Many of the opportunities are in the transport sector, which fits well with our credentials. In renewable energy, the level of activity remains high, with attractive risk-return profiles. We concentrate on selected countries with governmental support mechanisms in order to reduce energy price exposure.

· North America: four of our eight shortlisted PPP positions are for potential investments in North America. In Canada, we see a strong commitment to PPP from federal and local authorities, especially in Ontario and British Columbia, mainly in the transport sector. In the US, we concentrate on those states where we see a growing pipeline of PPP opportunities particularly in the transport sector and potentially the water sector. During the year, we made our first investment in renewable energy, a wind farm project in New Mexico. Overall, our reputation in North America is growing, leading to more opportunities to join consortia for new projects. This bodes well for the future, especially when considering the obvious needs in the US for new infrastructure.

Beyond the PPP and renewable energy markets, we continue to research other asset classes that look as if they could fit our business model in order to feed future growth. The due diligence we carry out before investing in new markets follows a rigorous process that eventually rules out many opportunities. Currently, we are reviewing: broadband, driven in Europe by the EU directive to see 100% high speed coverage by 2025; water resource management, driven by climate change; and energy storage, driven by the changing way in which electricity is generated across transmission and distribution networks. We expect these sectors to offer a number of investment opportunities in the future.

Active management

During the year, we demonstrated again why we believe it is essential for us to be an active investor. For us, it means not only participating actively in consortia at the bidding stage, but also being actively involved in project companies during the construction phase in order to protect our investment and help when delays occur or problems arise:

· In South Australia, our team has been particularly active in helping the New Royal Adelaide Hospital project company to resolve the sometimes competing priorities of the Government of South Australia, the bank lending consortium and the construction contractor. This situation has arisen principally because technical completion of the hospital has been delayed, having been scheduled for April 2016. Following mediation discussions in late 2016 and early 2017, the parties are now working towards technical completion later this month (March 2017) followed by commercial acceptance three months later; it is intended that remaining disputes will be dealt with through a process of arbitration. The Government of South Australia is making the necessary preparations for the hospital to be ready to open for patients before the peak of the winter flu season.

· At Manchester Waste VL Co, the project's operational performance is good; it has been achieving diversion of waste from landfill ahead of contractual requirements. The Greater Manchester Waste Disposal Authority (GMWDA) has indicated it wants to achieve cost savings and efficiencies. While the project company had proposed that such savings could be achieved within the existing contractual structure, this has not been accepted by the GMWDA. Separately, the GMWDA has challenged aspects of the operational service levels provided by the project company and the operator; this is strongly refuted by the project company and the matter is being addressed through an independent third party under the procedures in the project agreement with a decision due at the end of March 2017. The project company believes there will be a resolution with the GMWDA. If, as part of this, the GMWDA were to seek to take the project into public ownership, this would only be acceptable to the project company if it resulted in appropriate compensation for all stakeholders. The project company is working with its shareholders, John Laing and Viridor, to protect the value of the equity in the project and also to minimise any impact on Manchester Waste TPS Co which is contractually linked to Manchester Waste VL Co.

For both investments, we have taken account of current developments in our portfolio valuation at 31 December 2016. Taken together, the investments in New Royal Adelaide Hospital and Manchester Waste VL Co, which are not linked, make up approximately 8% of our investment portfolio of £1,176 million.

Wherever we operate, we believe our investing, contracting and banking partners appreciate and value the investment experience and active management we provide. We continue to make good use of this expertise to monitor and guide our investments through construction while protecting the investment base cases and where appropriate seeking to find additional value.

Business model

Our business model has three key areas of activity:

· Primary Investment: we source, originate, bid for and win greenfield infrastructure projects, typically as part of a consortium in the case of PPP projects. Our Primary Investment portfolio comprises interests in infrastructure projects which are in the construction phase.

· Secondary Investment: we own a substantial portfolio of investments in operational infrastructure projects, almost all of which were previously part of our Primary Investment portfolio.

· Asset Management: we actively manage our own Primary and Secondary Investment portfolios and provide investment advice and asset management services to two external funds, John Laing Infrastructure Fund (JLIF) and John Laing Environmental Assets Group (JLEN), through John Laing Capital Management Limited (JLCM), which is regulated by the Financial Conduct Authority (FCA), as well as in respect of a small number of PPP assets held by John Laing Pension Fund (JLPF).

Our business model is based on our specialist infrastructure investment and asset management capabilities and the increasing recognition of operational infrastructure assets as an attractive investment class.

We aim to invest in new greenfield infrastructure projects which, post-construction, produce long-term predictable cash flows that meet our rate of return targets. The projects we invest in are held within special purpose vehicles (SPVs) which we (often in conjunction with other investors) fund with equity, and which are structured so that providers of third party debt finance have no contractual recourse to equity investors beyond their equity commitment.

When investments become part of our Primary Investment portfolio, their value should grow progressively with a relatively high degree of predictability as the underlying assets move through the construction phase and their risk correspondingly reduces. Once the projects reach the operational stage, investments move from our Primary to our Secondary Investment portfolio where they can be held to maturity or sold to secondary market investors, who are targeting a lower rate of return consistent with the reduction in risk.

Our asset management activities focus on management and reduction of project risks, especially during the construction phase, and enhancement of project cash flows. The latter involves identifying and implementing value enhancement initiatives that can increase future cash flows to investors compared to those originally forecast at the start of the project. We look at a wide range of such value enhancements. Opportunities may arise at any time during a project's life and may vary significantly from one investment to another.

Objectives and outcomes

Our overall strategy is to create value for shareholders by originating, investing in and managing infrastructure assets internationally. In that respect, we see NAV growth and dividends as key measures of our success. In 2016, our NAV grew by 14.3% from £889.6 million at 31 December 2015 to £1,016.8 million at 31 December 2016. We are proposing dividends of 8.15p per share in total for 2016 compared to dividends of 6.9p per share for 2015. This represents growth of 7% over 2015, once the 2015 base dividend is adjusted to reflect the timing of our IPO in February 2015.

To deliver our strategy, we have set ourselves the core objectives below, while maintaining the discipline and analysis required to mitigate against the delivery, revenue and operational risks associated with infrastructure projects:

· growth in primary investment volumes (new investment capital committed to greenfield infrastructure projects) over the medium term;

· growth in the value of external Assets under Management (AuM) and related fee income; and

· management and enhancement of our investment portfolio, with a clear focus on active management during construction, accompanied by realisations of investments which, combined with our corporate banking facilities and operational cash flows, enable us to finance new investment commitments.

Growth in primary investment volumes over the medium term

We operate in a broad market for new infrastructure with a strong pipeline of future opportunities.

Throughout the year, we maintained a disciplined approach to making new investments. Using detailed financial analysis and investment appraisal processes, we assess the specific risk profiles for each prospective investment with the aim of optimising risk-adjusted returns and securing only those new investments which are likely to meet the investment appetites of secondary market investors when the underlying assets become operational.

Our resources are concentrated on countries or geographical regions carefully selected against five key criteria:

· a stable political and legal framework;

· a commitment to the development of privately-financed infrastructure;

· the ability to form relationships with strong supply chain partners;

· the likelihood of target financial returns, on a risk-adjusted basis, being realised; and

· the existence of a market for operational investments or a strong expectation that such a market will develop.

Our total commitment to new investments in 2016 was £181.9 million, made up of £134.8 million in renewable energy and £47.1 million in PPP assets, at a similar level to investment commitments of £180.5 million in 2015. Our international growth continued with investment commitments in six different countries, including the following projects:

· A6 Parkway (Netherlands) - £9.0 million

· Kiata wind farm (Australia) - £20.4 million

· Nordergründe offshore wind farm (Germany) - £36.7 million

· Sommette wind farm (France) - £11.7 million

· Sterling wind farm (US) - £15.7 million.

Growth in the value of external AuM and related fee income

Our strategy to grow the value of our external AuM is linked to our activities as an investment adviser to JLIF and JLEN. The Group not only advises and provides management services to the portfolios of JLIF and JLEN, but also sources new investments on their behalf. During the year, both JLIF and JLEN successfully undertook secondary equity issues and made acquisitions both from John Laing and from third parties. Both funds have the benefit of a right of first offer over certain investments should they be offered for sale by the Group.

We made good progress during the year, with the value of external AuM growing from £1,136 million to £1,472 million, an increase of 30%. Fee income from external AuM was £15.8 million for 2016, up from £12.0 million in 2015.

Investment portfolio and realisations

At 31 December 2016, our portfolio comprised investments in 42 infrastructure projects and our shareholding in JLEN (31 December 2015 - 39 projects). Our year end portfolio value, including the shareholding in JLEN, was £1,175.9 million (31 December 2015 - £841.4 million). The increase was primarily due to cash injections into projects, favourable foreign exchange movements and growth in the retained portfolio, offset by investment realisations.

The portfolio valuation represents our assessment of the fair value of investments in projects on the basis that each asset is held to maturity, other than shares in JLEN which are held at market value. The 2016 year end valuation reflected underlying growth of 22.3% after adjusting for acquisitions, realisations, cash invested and cash yield. This growth is analysed further in the Portfolio Valuation section.

The cash yield in 2016 was £34.8 million (2015 - £38.9 million), a yield of 7.6% (2015 - 9.8%) on the average Secondary Investment portfolio, in line with our guidance of a 6.5% to 8.5% yield. Cash yield represents cash receipts in the form of dividends, interest and shareholder loan repayments from project companies and listed investments. 

During the year, we agreed a number of realisations:

· sale of our investments in the British Transport Police and Oldham Housing PPP projects to JLIF for £19.5 million which, as previously explained, counted towards our 2015 year end guidance and special dividend;

· proceeds from a further four completed transactions of £127.1 million, which form the basis for our special dividend calculation for 2016;

· agreed sale of our 29.69% shareholding in the A1 motorway, Poland. Proceeds of €137.3 million (adjusted for distributions received in late 2016) were received on 2 March 2017; and

· agreed sale of our 30% shareholding in the M6 road project in Hungary for €26.6 million which is expected to complete in the second quarter of 2017.

We were particularly pleased to achieve prices in line with portfolio valuation for our investments in the A1 motorway in Poland and the M6 road project in Hungary, both in jurisdictions where there is a less developed secondary market.

Profit before tax

Our total profit before tax was £192.1 million in 2016, compared to £106.6 million in 2015. Profit before tax is primarily driven by the fair value movement in our investment portfolio, which in 2016 benefited significantly from favourable foreign exchange movements.

Funding

In February 2015, we entered into a five-year £350.0 million committed corporate banking facility and associated ancillary facilities, all of which expire in March 2020. These revolving facilities enable us to issue letters of credit and/or put up cash collateral to back investment commitments. We finance new investments through a combination of cash flow from existing assets, the above corporate banking facilities and realisations of investments in operational projects.

In June 2016, the above facilities were increased to £400.0 million. In addition, in November 2016, we entered into additional £50.0 million liquidity facilities, which together with surety financing entered into earlier in the year, had the effect of increasing our committed facilities to £450.0 million until March 2018.

Organisation and staff

In June 2016, we announced the sale of the business and assets of our PMS activities in the UK to HCP Management Services Limited (HCP). The reason for the sale was to concentrate our resources and attention on our greenfield activities where we create most value. As part of the sale, 81 staff roles and 52 Management Services Agreements (MSAs) transferred to HCP. The sale completed on 30 November 2016 for total proceeds of £4.0 million, £1.9 million of which was received on completion and £2.1 million of which was received in January 2017 once all consents were obtained. Principally as a result of the sale, our staff numbers fell from 252 at 31 December 2015 to 160 at the end of 2016.

We now have 36% of staff located outside the UK (2015 - 22%). This growing internationalisation is consistent with where our future opportunities lie.

Reflecting Derek Potts' retirement in early 2017, we have re-organised our Primary Investment management teams so that the heads in each of our three geographical regions now report directly to me. We will miss Derek's enthusiasm and experience but I am very pleased that he has agreed to continue to assist our Investment Committee on a consultancy basis.

I visited our offices around the world several times during 2016. We have strong individuals and great teams in each region and I want to extend my heartfelt thanks to all staff for their contribution during the year. As I have said before, the success of our business depends on them.

Current trading and guidance

Our total investment pipeline at 31 December 2016 was £1,859 million and includes £1,408 million of PPP opportunities looking out three years or so as well as nearer term renewable energy opportunities of £451 million. The current pipeline does not include potential opportunities that may come from additional public-private infrastructure in the UK post Brexit or in the US under the new administration. We will aim to maintain a majority of availability-based cash flows in our portfolio. At 31 December 2016, the balance was 73% availability-based versus 27% volume-based.

As our investment pipeline continues to grow, our aim is to increase our investment commitments for 2017 by approximately 10% compared to 2016. We expect realisations to be at a broadly similar level to our investment commitments, consistent with our self-funding model.

We have a proven business model and we believe we are in a good position to take advantage of opportunities for investment in greenfield infrastructure in a growing market. In the two years since we have been listed, we have delivered steady growth despite changing governmental policies and macro-economic environments. Against this background, we have confidence in the future.

Olivier Brousse

Chief Executive Officer

Primary Investment

Our Primary Investment activities are focused on greenfield infrastructure projects. These are principally those awarded under PPP programmes as well as renewable energy assets and may also include similar long-term projects which have a strong private-sector (rather than governmental) counterparty. Asset management services in respect of the Primary Investment portfolio during the construction period are provided by John Laing's Asset Management division. When underlying projects reach the end of construction, the investments transfer into our Secondary Investment portfolio.

The Primary Investment portfolio comprises the Group's shareholdings in 11 PPP projects, and in ten renewable energy projects, which are in the construction phase. The Group's Primary Investment portfolio was valued at £696.3 million at 31 December 2016 (31 December 2015 - £405.9 million).

New investment commitments

During 2016, the Primary Investment team successfully secured ten new investments, and made additional commitments to one existing investment, resulting in total commitments of £181.9 million:

· Asia Pacific - the Hornsdale 2 wind farm project in South Australia reached financial close in June 2016 and we closed the Kiata wind farm project in Victoria in November 2016, further strengthening the Group's presence in the renewable energy market in the region.

· North America - we continued to increase our activities in the market. During the year, we secured a stake in the Sterling wind farm project in New Mexico, our first investment in renewable energy in this region, and we made a small additional investment in the I-77 Managed Lanes project in North Carolina.

· Europe -

• We made a £9.0 million commitment to the A6 Parkway PPP project in the Netherlands;

• We acquired an additional 6% stake in the IEP (Phase 1) project in the UK from a co-investor;

• We committed to four on-shore wind farm investments, one in each of the UK and Germany, and two in France; and

• We also secured and closed the Group's first investment in the offshore wind sector, acquiring a 30% stake in the Nordergründe wind farm project in Germany.

Our investment commitments for 2016 are summarised in the table below:

*RE = renewable energy

Since 31 December 2016, we have committed £10.0 million for a 20% shareholding in the Hornsdale wind farm (Phase 3) in Australia.

Activities

The Primary Investment team is responsible for all the Group's bid development activities. The team takes responsibility for developing and managing a pipeline of opportunities, including market research, project selection, bid co-ordination and negotiations with public sector authorities, vendors and lenders. In each of our target markets of Asia Pacific, North America and Europe, we work with strong delivery partners. For instance, in the Asia Pacific and North American regions, the Group is currently working with leading international and domestic contractors and service providers, including Acciona, ACS Group, Aecom, Alstom, Bombardier, Bouygues, Brookfield Multiplex, Cintra, Cubic, Downer, Fluor, Fulton Hogan, John Holland, Laing O'Rourke, Leighton/CIMIC, Lend Lease, Serco, SNC, Spotless and Vinci.

We target a wide range of infrastructure sectors:

• Transport - rail, including rolling stock, roads, street lighting and highways maintenance;

• Environmental - renewable energy (including wind power, solar power and biomass), water treatment and waste management;

• Social infrastructure - healthcare, education, justice, public sector accommodation and social housing.

We are also assessing opportunities in new infrastructure sectors such as the emerging energy storage programmes to support electricity grid performance, and broadband infrastructure upgrades, where we believe our business model could be successfully applied.

Project finance

Pricing of project finance facilities remained broadly stable during 2016, although the trend of falling prices and improving terms experienced in recent years appears to have levelled off. We were able to secure financing for projects where required. Institutional sources of long-term project finance were available in Europe, although commercial bank debt was typically more competitively priced. In Australia and New Zealand, medium-term bank debt and refinancing requirements are well established, with a large number of international banks being active in these markets. In Canada and the US, projects tend to be financed in the debt capital markets rather than with bank financing. Overall, financial markets in the regions in which the Group is active supported our growing levels of investment and we expect this to continue in 2017.

Pipeline

At 31 December 2016, our overall investment pipeline of £1,859 million was higher than the pipeline of £1,494 million at 31 December 2015. The 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. The growth compared to 2015 reflects an increase in renewable energy pipelines in Asia Pacific and North America, as well as some impact from the devaluation of Sterling.

Our overall pipeline is constantly evolving as new opportunities are added and other opportunities drop out. We budget a win rate of 30% for PPP bids.

Our total pipeline broken down by bidding stage is as follows:

*RE = renewable energy

The shortlisted PPP projects at 31 December 2016 comprised a prison project in Australia, a broadband upgrade project in Ireland, and six availability-based transportation and schools projects, spread across the US, Canada and Australia.

In terms of geography, our pipeline is well spread across our target markets:

*RE = renewable energy

Some 34% of our pipeline relates to the Asia Pacific region which continues to offer substantial opportunities. In this region, the Group's current bidding activities are focused on Australia and New Zealand, where the Group has built up a strong base. Our growing presence in the renewable energy sector in Australia offers significant potential in the coming years.

In North America (the US and Canada), which makes up 29% of the pipeline, our focus is on what is becoming a very substantial PPP market, whilst continuing to progress our presence in the renewable energy market, following our first US wind farm investment in 2016. We continue to explore PPP opportunities primarily in the transportation sector and also the growing water and social infrastructure sectors. The Canadian market continues to demonstrate strong PPP deal flow, which we are actively pursuing. At the end of 2016, we were shortlisted on four large PPP projects.

The balance of our pipeline is in Europe, where PPP activity remains at a satisfactory level in countries such as the Netherlands. However, in 2017 we expect to increase our activities in markets such as Germany, Norway and the Czech Republic. There is also a significant PPP programme in Turkey, but we have deferred further work on this market following the challenges in that country in 2016. The UK government has given indications of a new pipeline of privately financed projects, and we are waiting for the programme to become more clearly defined.

Selected countries in Europe, Asia Pacific and North America will provide our main focus for renewable energy opportunities in 2017. Our pipeline includes many potential wind and solar projects as well as investment opportunities in biomass plant.

Our overall renewable energy pipeline was £451 million at 31 December 2016, higher than at 31 December 2015. In the main, we target investments where a substantial proportion of revenue is supported by governmental support mechanisms which leads to reduced exposure to energy price fluctuations. During the year, we closed our first offshore wind farm investment, and this sector offers strong potential in the coming years, though our pipeline does not currently include any offshore wind opportunities.

In addition to the above, the Group continues to monitor new geographic markets which offer potential in the medium to long term. These include countries in South America, such as Chile and Colombia, and other Asia Pacific markets such as Singapore.

I will be retiring at the end of March 2017 but I am confident in the ability and experience of our teams within Primary Investment and the strength of our pipeline. Following my retirement, the heads of Primary Investment in each of our three geographical regions will report directly to the Chief Executive Officer.

Derek Potts

Group Managing Director, Primary Investment

Secondary Investment

At 31 December 2016, the Secondary Investment portfolio comprised 15 PPP projects and six renewable energy projects with a book value of £479.6 million (31 December 2015 - £419.4 million). The Secondary Investment portfolio also included a 3.3% shareholding in JLEN valued at £10.0 million at 31 December 2016 (31 December 2015 - 7.0% shareholding valued at £16.1 million).

Asset management services in respect of the Secondary Investment portfolio are provided by John Laing's Asset Management division.

Investment realisations

During the year, we achieved proceeds of £146.6 million from the realisation of investments:

· Our investments in two PPP projects, British Transport Police and Oldham Housing, were sold to JLIF for £19.5 million;

· Our investments in Dungavel Wind Farm (100%) and New Albion Wind Farm (100%) were sold to JLEN for a total of £50.0 million;

· Our investment in the A55 project and 20% of our interest in IEP (Phase 1) were sold to JLIF in the second half of the year; and

· We sold a 2.2% shareholding in JLEN for £6.4 million.

Taking realisations for the year as a whole, prices were in line with the most recent portfolio valuation.

*counted towards guidance for 2015

Excluding the sales of our investments in British Transport Police and Oldham Housing, we achieved disposals for dividend purposes of £127.1 million, ahead of our guidance of approximately £100 million.

We also agreed two further disposals:

· Sale of our 29.69% shareholding in Gdansk Transport Company S.A (GTC), the owner and operator of part of the A1 motorway in Poland, for €137.3 million (adjusted for distributions received in November and December 2016), subject to certain reductions and adjustments. A sale and purchase agreement was originally entered into with FS Amber Holdings BV, an entity managed by First State Investments, in late 2016. However, as the result of the exercise of pre-emption rights by NDI Autostrada SP.2.0.0 (NDIA), a co-shareholder in GTC, a new sale and purchase agreement was entered into with NDIA in January 2017. Completion of the disposal was subject to certain consents and conditions and occurred on 2 March 2017.

· Sale of our 30% shareholding in the M6 road, Hungary for €26.6 million. This sale was originally agreed in December 2016. However, following the exercise of pre-emption rights by co-shareholders in the project company, Strabag AG and Intertoll-Europe ZRT (Intertoll), new sale and purchase agreements were entered into on 1 February 2017. Completion of the disposal is subject to obtaining certain consents and satisfying certain conditions and is expected to take place in the second quarter of 2017.

Transfers from the Primary Investment portfolio

During the year, six investments became part of the Secondary Investment portfolio as the underlying projects moved into the operational stage:

Croydon & Lewisham Street Lighting, UK (50% interest)

The final milestone for the construction and installation of more than 23,000 street lights was completed in late November 2016, resulting in the project moving to a fully operational status.

Rammeldalsberget Wind Farm, Sweden (100% interest)

Located near Kramfors in central Sweden, the project comprises six wind turbines of 2.5MW each. Operations commenced in June 2016 and revenue is supported by a fixed price power purchasing agreement for 50% of production until the end of 2019. 

New Albion Wind Farm, UK (100% interest, disposed in July 2016)

Located in Northamptonshire, UK, the project comprises seven Senvion turbines, each with 2.05MW capacity. Following commencement of operations in January 2016, this project was sold to JLEN in July 2016 for £11.8 million.

Pasilly Wind Farm, France (100% interest)

Located in the Yonne region of Burgundy, this was our first renewable energy project in France. The wind farm comprises ten Gamesa G97 turbines of 2MW each. Full operation commenced in December 2016, with revenue supported by a feed-in-tariff for the first 15 years.

Hornsdale Wind Farm Phase One, Australia (30%)

The project comprises a 32 turbine wind farm in South Australia with an installed capacity of 102.4MW and represents our first renewable energy project in the Asia Pacific region. The project benefits from a 20 year offtake from a government counterparty (Australian Capital Territory).

A15, Netherlands (28% interest)

This availability-based road project comprises the expansion of two intersections and the provision of maintenance along a 37km motorway section in the Rotterdam region of the Netherlands for a period of 20 years after completion of construction. The scope of the project included widening the motorway and rebuilding many of the structures and junctions connecting the motorway with the road network.

Chris Waples

Group Managing Director, Asset Management

Asset Management

The Asset Management division's activities comprise Investment Management Services and Project Management Services.

Investment Management Services

Investment Management Services (IMS) are provided to both JLIF and JLEN and also to our own investment portfolio.

External IMS JLCM provides advisory services to JLIF and JLEN under investment advisory agreements. As at 30 September 2016, JLIF and JLEN had published portfolio values of £1,113.8 million and £320.7 million respectively. JLCM has an independent chairman and two separate dedicated fund management teams whose senior staff are authorised and regulated by the FCA. The teams focus their advice primarily on sourcing new investments for and arranging capital raisings by the two funds. They operate behind information barriers in view of the market sensitive nature of their activities and to ensure the separation of "buy-side" and "sell-side" teams when John Laing is selling investments to either fund. Both funds have a right of first offer over certain investments should they be offered for sale by the Group, and both are stand-alone entities separate from the Group. Each fund maintains an independent board of directors and is independently owned.

At 31 December 2016, the Group also managed two PPP investments valued at £37.8 million held by JLPF.

Fee income from external IMS grew from £12.0 million in 2015 to £15.8 million in 2016.

Internal IMS John Laing actively manages its own Primary and Secondary Investment portfolios. Our objective is to deliver the base case returns on our investments as a minimum and additionally to enhance those returns through active asset management. There are two main strategies, value protection and value enhancement:

Value protection - examples

• To target PPP projects which have revenue streams based on availability of the underlying infrastructure asset rather than revenues based on patronage or volume.

• To ensure construction risks associated with design, workmanship, cost overruns and delays lie with our construction supply chain partners who are best able to manage them.

• To ensure project operational performance and cost risks lie principally with our service supply chain partners.

• To eliminate the risk of increased interest costs on third party project debt finance over the life of an infrastructure project by swapping variable interest rates to fixed interest rates.

• To reduce the impact of short-term volatility on revenues in our renewable energy projects by entering into short or medium term power purchase agreements with electricity suppliers.

Value enhancement - examples

• To promote a culture of continuous improvement with public sector counter-parties: responding to their need for changes over the life of PPP infrastructure projects, reducing the public sector burden and, where possible, to generate incremental revenues therefrom.

• To optimise SPV management costs and project insurance premiums through bulk purchasing or efficiency gains, thereby increasing investor returns.

• To optimise major maintenance and asset renewal costs over the life of an infrastructure project and thereby increase investor returns.

• To maximise working capital efficiency within project companies.

• To ensure projects are efficiently financed over their concessions or useful lives.

The total IMS income for the year ended 31 December 2016 of £17.8 million (2015 - £13.4 million) includes £2.0 million (2015 - £1.4 million) of fee income for the provision of directors on project company boards.

Project Management Services

The Group also provides Project Management Services (PMS), largely of a financial or administrative nature, to project companies in which John Laing, JLIF or JLEN are investors. These services are provided under Management Services Agreements (MSAs).

On 30 November 2016, the Group completed the divestment of its PMS activities in the UK to HCP Management Services Limited (HCP). As part of the sale, 81 staff roles and 52 MSAs transferred to HCP. The activities sold contributed £7.9 million of the total PMS revenues of £14.9 million.

The remaining PMS activities are principally focused on MSAs relating to projects outside the UK. At 31 December 2016, the Group held 19 MSAs (31 December 2015 - 75 MSAs).

Projects Under Construction

John Laing's investments in projects are managed by the Asset Management division. An update on significant projects under construction is set out below.

Intercity Express Programme (IEP)

John Laing is in partnership with Hitachi to manage the contracts that cover the design, manufacture, finance and delivery into daily service and maintenance of a fleet of 122 Super Express trains for the UK's Great Western Main Line (Phase 1 - 24% interest) and the East Coast Main Line (Phase 2 - 30% interest). With a total capital expenditure across the two phases of £3.4 billion, it is one of the largest PPP projects to be awarded. Construction of the Phase 1 (Great Western) depots completed in early 2016 and development of the Phase 2 (East Coast) depots is progressing well. During 2016, trains commenced testing on the UK rail network for Phase 1 and remain scheduled to become operational during 2017.

In November 2016, it was announced that electrification of certain parts of the Great Western Route being undertaken by Network Rail on behalf of the Department for Transport would be further delayed. The Department for Transport has asked the Phase 1 project company to convert all trains for use as bi-mode which can be powered by diesel or electricity. We are not expecting any negative impact on our investments from these delays.

New Royal Adelaide Hospital (NRAH), South Australia (17.3% interest)

This project is currently one of the largest building construction projects in Australia. Containing 700 single bedrooms and 100 same-day beds, NRAH will have the capacity to admit over 80,000 patients per year. Delays relating to this project are addressed in the Chief Executive Officer's Review. Technical completion is now expected to occur in March 2017 followed by commercial acceptance three months later.

Denver Eagle P3, Colorado, US (45% interest)

This project is to design, build, finance, maintain and operate two commuter rail lines and a section of a third in the Denver Metropolitan area. The fleet of rolling stock has been completed. The first line (A Line, East Corridor) became operational in the second quarter of 2016, and the second line (B Line, North West Corridor electrified segment) in the third quarter. The third line (G Line) is scheduled to become operational in the first quarter of 2017.

I-4 Ultimate, Florida, US (50% interest)

This availability-based road project has total capital expenditure of US$2.3 billion and involves reconstructing 15 major interchanges, building more than 140 bridges, adding four variable toll Express Lanes, and completely rebuilding the general use lanes of 21 miles of the existing I-4 interstate in central Florida. Construction commenced in 2015 and is anticipated to finish in 2021.

New Perth Stadium, Western Australia (50% interest)

The New Perth Stadium will be a major sporting and entertainment venue, capable of staging national and international events. The stadium will predominantly be used for Australian-rules football but will be able to readily accommodate other sports, as well as entertainment events through the use of drop-in seats. Construction works are on track for completion in advance of the 2018 Australian Football League season.

New Generation Rollingstock, Queensland, Australia (40% interest)

The project involves the provision and maintenance of 75 new six-car trains for Queensland Rail. The first train is now being tested with progress slower than expected in part due to reduced availability of train drivers.

Nordergründe offshore wind farm, Germany (30% interest)

The final turbine (of 18) for this offshore wind farm was installed in December 2016. In September 2016, the sub-contractor responsible for provision of the offshore electrical sub-station went into administration and this caused some delays to the project. The project company, with the support of its lenders, has entered into an agreement with the administrator and work on the sub-station has resumed. Operations are due to start in late 2017.

Sydney Light Rail, New South Wales, Australia (32.5% interest)

This light rail project will form an integral part of Sydney's public transport infrastructure network and pedestrianise one of its busiest streets, providing a commuter route into the Central Business District and access to the south east of the city. Services are scheduled to begin in the first half of 2019.

Speyside Biomass, UK (43.35% equity interest)

This 15MW combined heat and power plant supplies the adjacent Macallan whisky distillery with heat and exports power to the grid. Its fuel is virgin wood sourced from the local region. In January 2017, the plant achieved functional take-over.

Chris Waples

Group Managing Director, Asset Management

Portfolio Valuation

The portfolio valuation at 31 December 2016 was £1,175.9 million compared to £841.4 million at 31 December 2015. After adjusting for realisations, cash yield and cash invested, this represented a positive movement in fair value of £214.4 million (22.3%):

Cash investment in respect of eight new projects (one PPP and seven renewable energy) entered into during 2016 totalled £109.3 million. We committed to an additional stake in one existing PPP project during the year for £37.0 million. In addition, equity and loan note subscriptions of £155.2 million were injected into existing projects in the portfolio as they progressed through, or completed, construction.

During 2016, the Group completed the realisation of five investments for a total consideration of £146.6 million. Cash yield received from projects during the year totalled £34.8 million.

The movement in fair value of £214.4 million is analysed in the table below. The fair value movement includes a net benefit of £27.5 million from the amendment of benchmark discount rates for certain investments in response to our understanding and experience of the secondary market.

The net movement in fair value comprised unwinding of discounting (£77.1 million), the reduction of construction risk premia (£52.7 million), the reduction in operational benchmark discount rates (£27.5 million), favourable foreign exchange movements (£74.7 million) and uplift on financial closes (£31.0 million), offset by adverse movements from lower power and gas price forecasts (£17.6 million), adverse movements in macroeconomic forecasts (£13.8 million) and a net adverse movement from value enhancements and other changes (£17.2 million). Foreign exchange movements are addressed further in the Financial Review section.

The adverse fair value movement of £17.2 million relating to value enhancements and other changes arose partly due to the matters described in the Chief Executive Officer's Review in relation to the Group's investments in New Royal Adelaide Hospital and Manchester Waste VL Co. There were also value reductions on some other investments, offset by value enhancements.

The split between primary and secondary investments is shown in the table below:

The increase in the Primary Investment portfolio is due to a movement in fair value of £136.5 million, including value enhancements and financial closes achieved during the period, and cash invested of £287.1 million, offset by transfers to the Secondary Investment portfolio of £89.6 million, cash from investment realisation of £42.4 million and cash yield of £1.2 million.

The increase in the Secondary Investment portfolio is due to transfers from the Primary Investment portfolio of £89.6 million, cash investment of £14.4 million and a movement in fair value of £77.9 million, offset by investment realisations during the year of £104.2 million and cash yield of £33.6 million.

Methodology

A full valuation of the investment portfolio is prepared every six months, at 30 June and 31 December, with a review at 31 March and 30 September, principally using a discounted cash flow methodology. The valuation is carried out on a fair value basis assuming that forecast cash flows from investments are received until maturity of the underlying assets.

Under the Group's valuation methodology, 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, risk premia are added to reflect the additional risk during the construction phase. The construction risk premia reduce over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operational stage.

The discounted cash flow valuation is based on future cash distributions from projects forecast as at 31 December 2016, derived from detailed financial models for each underlying project. These incorporate the Group's expectations of likely future cash flows, including value enhancements.

For the 31 December 2016 valuation, the overall weighted average discount rate was 8.9% compared to the weighted average discount rate at 31 December 2015 of 9.5%. The decrease was primarily due to changes in operational discount rates for certain investments as referred to earlier. The weighted average discount rate at 31 December 2016 was made up of 9.1% (31 December 2015 - 9.7%) for the Primary Investment portfolio and 8.4% (31 December 2015 - 8.9%) for the Secondary Investment portfolio.

The overall weighted average discount rate of 8.9% reflects the fact that project cash flows for investments in the Primary Investment portfolio tend to have a longer duration than for investments in the Secondary Investment portfolio.

Compared to other market benchmarks, the weighted average discount rate of 8.4% for the Secondary Investment portfolio reflects (i) the impact of renewable energy projects which tend to have higher discount rates than PPP projects and (ii) a few PPP projects with above average discount rates because of location or an element of volume/technology risk.

The discount rate ranges used in the portfolio valuation at 31 December 2016 were as set out below:

The shareholding in JLEN was valued at its closing market price on 31 December 2016 of 106p per share (31 December 2015 - 103p 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 represented a fair market value in the market conditions prevailing at 31 December 2016.

Macro - economic assumptions

During 2016, lower than previously forecast inflation and deposit rates receivable on cash balances within projects had a negative impact on the majority of forecast project cash flows within the portfolio. Deposit rates are anticipated to remain at low levels in the short-term. As mentioned above, strengthening of foreign currencies against Sterling over the year to 31 December 2016 resulted in favourable foreign exchange movements of £74.7 million (excluding the effect of foreign exchange hedges as described in the Financial Review section).

The table below summarises the main macro-economic assumptions used in the portfolio valuation:

Investments in overseas projects are fair valued based on the spot exchange rate on the balance sheet date. As at 31 December 2016, a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas projects by c.£27 million.

At 31 December 2016, based on a sample of seven of the larger PPP investments by value, a 0.25% increase in inflation is estimated to increase the value of PPP investments by £14 million and a 0.25% decrease in inflation is estimated to decrease the value of PPP investments by £13 million. Certain of the underlying project companies incorporate some inflation hedging.

Discount rate sensitivity

The weighted average discount rate applied at 31 December 2016 was 8.9% (31 December 2015 - 9.5%). The table below shows the sensitivity of each 0.25% change in this rate of up to plus or minus 0.75%.

Further analysis of the portfolio valuation is shown in the following tables:

by time remaining on project concession/OPERATIONAL life

PPP projects are based on long-term concessions and renewable energy assets have long-term useful economic lives. As demonstrated in the table above, 53.6% of the portfolio by value had a greater than 25-year unexpired concession term or useful economic life remaining at 31 December 2016, compared to 47.8% at 31 December 2015. The investment in JLEN, which represented 0.9% (31 December 2015 - 1.9%) of the portfolio valuation, is shown separately.

split between PPP and renewable energy

Primary PPP investments made up the largest part of the portfolio, representing 46.6% of the portfolio valuation at 31 December 2016, with Secondary PPP investments representing a further 29.4%.

by revenue type

Availability-based investments continued to make up the majority of the portfolio, representing 72.7% of the portfolio valuation at 31 December 2016. Renewable energy investments comprised the majority of the volume-based investments. The investment in JLEN, which holds investments in PPP and renewable energy projects, is shown separately.

by sector

Investments in the transport sector (excluding rail rolling stock) continued to make up the largest proportion of the portfolio valuation, representing 33.6% of the portfolio at 31 December 2016, with rail rolling stock investments accounting for a further 23.8%. Wind investments made up 21.5% of the portfolio by value, social infrastructure investments - 10.4% and waste and biomass investments - 9.8%. The portfolio underlying the JLEN shareholding consists of a mix of renewable energy and environmental projects.

by currency

The percentage of investments denominated in foreign currencies increased from 48.0% to 56.6%. This was partly caused by the weakness of Sterling during 2016 but is also consistent with our pipeline and the overseas jurisdictions we target.

by geographical region

Investments in the UK continued to make up the largest single region in the portfolio valuation, representing 42.5% of the portfolio at 31 December 2016. Continental Europe remained the next largest category with 29.0%. Investments in projects located in the Asia Pacific region made up 17.3% and investments in North America 10.3%. A substantial majority of the JLEN portfolio consists of investments in UK based projects.

by investment size

The top five investments in the portfolio made up 44.2% of the portfolio at 31 December 2016. The next five largest investments made up a further 20.1%, with the remaining investments in the portfolio comprising 34.8%. The shareholding in JLEN made up 0.9% of the portfolio.

Financial Review

Basis of preparation

Statutory financial information for the year ended 31 December 2016 is presented in the Group Income Statement, the Group Statement of Comprehensive Income and the Group Statement of Changes in Equity alongside comparative statutory and pro forma financial information for the year ended 31 December 2015. Both the Group Balance Sheet at 31 December 2016 and at 31 December 2015 are presented on a statutory basis. The comparative pro forma financial information was prepared on the basis that the restructuring associated with the Company's admission to listing in February 2015, as described in more detail in the Financial Review section of the 2015 Annual Report, had been in place throughout the year ended 31 December 2015. In the opinion of the Directors, presenting pro forma information for 2015 was necessary in order to give a true and fair view of the state of the Company's affairs for that year.

The statutory and pro forma financial information has been prepared on the historical cost basis except for the revaluation of the investment portfolio and financial instruments that are measured at fair value at the end of each reporting period. The Company meets the definition of an Investment Entity set out in IFRS 10. 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 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".

Re-presented financial RESULTS

As described above, the Company meets the criteria for being an Investment Entity under IFRS 10 and accordingly the Company is required to fair value its investments in all subsidiaries except for those directly-owned subsidiaries that provide investment-related services, and do not themselves qualify as Investment Entities; it consolidates such subsidiaries on a line by line basis.

Included within the subsidiaries that the Company fair values in its financial statements are recourse subsidiaries through which the Company holds its investments in non-recourse project companies. These recourse subsidiaries have, in addition to investments in non-recourse project companies, other assets and liabilities, including recourse cash balances, which are included within the Company's investments at FVTPL. For management reporting purposes, these other assets and liabilities are reported separately from the investments in non-recourse project companies as are certain income and costs that do not arise directly from these investments in project companies. Under management reporting, it is the investments in non-recourse project companies that are considered as investments of the Group.

The Directors of the Company use the management reporting basis, including when reviewing the level of financial resources and deciding where these resources should be utilised, when making business decisions. Therefore, the Directors believe it is helpful to readers of the Company's financial statements to set out in this Financial Review the Group Income Statement, the Group Balance Sheet and the 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 Group Income Statement principally in relation to the net gain on investments at FVTPL. The net gain on investments at FVTPL in the Group Income Statement includes fair value movements from the portfolio of investments in non-recourse project companies but also comprises income and costs that do not arise directly from investments in this portfolio, including investment fees earned from project companies.

Notes:

a) Adjustments primarily comprise a £1.5 million provision offset by a £0.8 million release of other provisions reclassified from 'fair value movements - other' to 'other net costs'; as well as £1.3 million interest income reclassified from 'fair value movements - other to 'finance costs'.

b) Adjustments primarily comprise £1.6 million part proceeds received from the sale of the PMS UK business reclassified from 'other income' to 'other net costs' and £0.2 million of other income from projects reclassified from 'other income' to 'other net costs'.

c) Under IAS 19, the costs of the pension schemes comprise a service cost of £1.6 million (2015 - £1.5 million), included in administrative expenses in the Group Income Statement, and a finance charge of £1.3 million (2015 - £2.7 million), included in finance costs in the Group Income Statement. These amounts are combined together under management reporting.

d) For a reconciliation between the IFRS Group Income Statement and re-presented income statement for the year ended 31 December 2015, please see the Additional Financial Information.

The results for the year are also shown by operating segment in the table below.

Profit before tax from continuing operations for the year ended 31 December 2016 was £192.1 million (2015 - £100.9 million). The main reason for the higher profit before tax was a higher fair value movement compared to 2015, which in turn was principally as a result of favourable foreign exchange rate movements.

· The main profit contributor in 2016 was the Primary Investment division. Its contribution was higher than last year primarily because of a higher fair value movement, which in turn was principally as a result of favourable foreign exchange rate movements and a higher value uplift from the reduction of construction risk premia offset by an adverse fair movement relating to value enhancements and other changes referred to in the Portfolio Valuation section.

· The higher contribution in 2016 from the Secondary Investment division was also primarily as a result of foreign exchange gains on the portfolio as well as higher value enhancements offset by adverse other changes referred to in the Portfolio Valuation section.

· The higher contribution in 2016 from the Asset Management division was principally due to higher fee income from IMS as a result of increased external Assets under Management.

The movement in fair value on the portfolio for the year ended 31 December 2016, after adjusting for the impact of investments, cash yield and realisations, was a £214.4 million gain (2015 - £132.1 million gain). The higher value uplift is primarily due to favourable foreign exchange movements in 2016 compared to the previous year. For further details of the movement in fair value on the portfolio, see the Portfolio Valuation section.

There were other fair value movements for the year ended 31 December 2016 of a £3.2 million loss which comprised net foreign exchange losses of £11.2 million (principally comprising £11.9 million losses on foreign exchange hedges held by the Group during the year and at 31 December 2016 - see the foreign currency exposure section in this review for further details) offset by fair value gains of £0.9 million in respect of non-portfolio investments in small joint ventures, £6.6 million of tax income and a partial release of £0.5 million of a provision created in the year ended 31 December 2015. For the year ended 31 December 2015, other fair value movements primarily comprised a loss of £8.2 million from providing against a loan to a project company in the UK healthcare sector.

The Group earned IMS revenue of £17.8 million (2015 - £13.4 million) for investment advisory and asset management services primarily to the external funds JLIF and JLEN, with the increase from last year due to the higher level of external Assets under Management.

The Group also earned PMS revenue of £14.9 million (2015 - £17.0 million). As mentioned in the Chief Executive Officer's Review, on 30 November 2016, the Group completed the sale of the business and assets of its PMS activities in the UK to HCP. As part of the sale, 81 staff roles and 52 MSAs transferred to HCP. The activities sold contributed approximately £7.9 million of the £14.9 million PMS revenues for the year ended 31 December 2016 referred to above and had attributable costs of c.£6 .0 million.

The Group achieved recoveries of bidding costs on financial closes of £7.5 million in the year ended 31 December 2016 (2015 - £3.4 million), in line with third party bid costs incurred in the year.

Staff costs by division are shown below:

Included within Asset Management staff costs are costs relating to:

The overall increase in staff costs is principally due to the higher costs under IFRS 2 of share-based incentive schemes with costs in the year ended 31 December 2016 of £2.0 million compared to £0.7 million in the prior year. See note 5 of the Group financial statements for further details on the share-based incentive schemes.

Other net costs of £3.6 million in 2015 primarily comprised staff incentive costs in relation to the Company's listing in February 2015.

Finance costs of £7.7 million (2015 - £6.6 million) include costs arising on the corporate banking facilities net of any interest income, with the increase from last year primarily due to higher average usage of the corporate banking facilities.

The Group's overall tax credit on profit on continuing activities for 2016 was £4.8 million (2015 - charge of £0.1 million). This comprised a tax charge of £1.8 million (2015 - £2.1 million) in recourse group subsidiary entities that are consolidated (shown in the 'Tax' line of the Group Income Statement), primarily in relation to group relief payable to entities held at FVTPL, and a tax credit of £6.6 million (2015 - £2.0 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 Group Income Statement), including group relief receivable from recourse group subsidiary entities that are consolidated together with group and consortium relief received from project companies. The contributions made to JLPF 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.

In November 2016 and January 2017, HM Treasury issued draft provisions for the Finance Bill 2017, which included new proposed legislation to restrict tax deductible interest to 30% of a company's earnings before interest, tax, depreciation and amortisation (EBITDA) with effect from 1 April 2017. This followed the publication by HM Treasury of a consultation in May 2016 on Base Erosion and Profit Shifting (BEPS) to which the Company responded as part of industry representative forums. The Company holds a provision as at 31 December 2016 for the estimated impact of the new proposed legislation on the basis that the proposed new legislation had been enacted at that date; this provision is not material in the context of the Company's net asset value at this date.

Re-presented balance sheet

The re-presented balance sheet is reconciled to the Group Balance Sheet at 31 December 2016 below. The re-presented balance sheet involves the reclassification of certain amounts within the Group Balance Sheet principally in relation to assets and liabilities of £76.6 million (31 December 2015 - £123.4 million) within certain of the Company's recourse subsidiaries that are included in investments at FVTPL in the Group Balance sheet as a result of the requirement under IFRS 10 to fair value investments in these subsidiaries.

Notes:

a) Investments at fair value through profit or loss (FVTPL) comprise: portfolio valuation of £1,175.9 million (31 December 2015 - £841.4 million), other investments not included in the portfolio valuation of £0.3 million (31 December 2015 - £0.5 million) and other assets and liabilities within recourse investment entity subsidiaries of £81.3 million (31 December 2015 - £123.4 million) (see note 11 to the Group financial statements). Re-presented cash and cash equivalents increased from £1.6 million (31 December 2015 - £1.1 million) on the Group Balance Sheet because of the inclusion of available cash balances in recourse group investment subsidiaries of £51.5 million (31 December 2015 - £4.4 million) excluding cash collateral balances of £23.7 million (31 December 2015 - £123.9 million); see the Financial Resources section in this Financial Review.

b) Other assets and liabilities within recourse investment entity subsidiaries of £81.3 million (31 December 2015 - £123.4 million) referred to in note (a) include (i) cash and cash equivalents of £75.2 million (31 December 2015 - £128.3 million), of which £23.7 million (31 December 2015 - £123.9 million) is held to collateralise future investment commitments, and (ii) positive working capital and other balances of £6.1 million (31 December 2015 - £4.9 million).

c) Plant and equipment and deferred tax assets are combined as other long term assets.

d) Trade and other receivables, current tax liabilities, trade and other payables and provisions are combined as working capital and other balances.

e) Borrowings comprise cash borrowings of £165.0 million (31 December 2015 - £19.0 million) net of unamortised financing costs of £3.6 million (31 December 2015 - £4.1 million), with the non-current portion of £2.4 million (31 December 2015 - £3.0 million) re-presented as other long term assets and the current portion of £1.2 million (31 December 2015 - £1.1 million) re-presented as working capital and other balances.

f) Total retirement benefit obligations are shown in their separate components as in note 18 to the Group financial statements.

g) For a reconciliation between the IFRS Group Balance Sheet and re-presented balance sheet as at 31 December 2015, please see the Additional Financial Information.

Net assets are also shown by operating segment in the table below.

Note:

(1) Short-term cash borrowings of £165.0 million (31 December 2015 - £19.0 million) net of cash balances of £76.8 million (31 December 2015 - £129.4 million), of which £23.7 million was held to collateralise future investment commitments (31 December 2015 - £123.9 million).

Net asset value increased from £889.6 million at 31 December 2015 to £1,016.8 million at 31 December 2016.

The Group's portfolio of investments in project companies and listed investments was valued at £1,175.9 million at 31 December 2016 (31 December 2015 - £841.4 million). The valuation methodology and details of the portfolio value are provided in the Portfolio Valuation section.

The Group held cash balances of £76.8 million at 31 December 2016 (31 December 2015 - £129.4 million) of which £23.7 million (31 December 2015 - £123.9 million) was held to collateralise future investment commitments (see the Financial Resources section below for more details).

Working capital and other balances (a negative amount) were lower primarily because of lower provisions at 31 December 2016, higher accruals at 31 December 2015 relating to IPO incentive payments and a net positive fair value at 31 December 2016 on foreign exchange hedges.

The combined accounting deficit in the Group's defined benefit pension and post-retirement medical schemes at 31 December 2016 was £69.3 million (31 December 2015 - £46.2 million). The Group operates two defined benefit 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. Under IAS 19, at 31 December 2016, the JLPF had a deficit of £64.2 million (31 December 2015 - £38.9 million) whilst the Plan had a surplus of £2.9 million (31 December 2015 - £2.7 million; this surplus was not recognised at 31 December 2015. The liability at 31 December 2016 under the post-retirement medical scheme was £8.0 million (31 December 2015 - £7.3 million).

The pension deficit in JLPF is based on a discount rate applied to pension liabilities of 2.80% (31 December 2015 - 3.75%) and long term RPI of 3.2% (31 December 2015 - 3.0%). The amount of the deficit is dependent on key assumptions, principally: inflation; the discount rate used; and the anticipated longevity of members. The discount rate, as prescribed by IAS 19, is based on yields from high quality corporate bonds. The deficit (under IAS 19) has increased from last year primarily due to an increase in JLPF's liabilities, as a result of the lower discount rate and higher long term RPI, partly offset by cash contributions to JLPF of £18.1 million.

Following a triennial actuarial review of the JLPF as at 31 March 2016, a seven-year deficit repayment plan has been agreed with the JLPF Trustee. The actuarial deficit of £171 million at 31 March 2016 is to be repaid as follows:

Re-presented cash flow statement

The 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 Group Cash Flow Statement. Investment-related cash flows are disclosed in note 11 to the 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.

Cash yield comprises £34.8 million (2015 - £38.9 million) from the investment portfolio and £2.0 million (2015 - £5.4 million) from non-portfolio investments.

Operating cash flow in the year ended 31 December 2016 was less adverse than in 2015 primarily due to higher recoveries of costs on financial closes and as a result of amounts paid in the prior year in relation to the Company's IPO in 2015.

Total operating cash flows are net of an adverse foreign exchange impact of £18.2 million (2015 - favourable impact of £2.8 million), principally arising on foreign exchange hedges as a result of the weakening of Sterling against relevant currencies during the year.

In the year, in addition to the payment of the PPF levy, the Group made a cash contribution to JLPF of £18.1 million (2015 - regular cash contributions of £27.0 million, special cash contributions of £20.0 million).

During the year, cash of £301.5 million (31 December 2015 - £142.9 million) was invested in project companies. In the same period, investments in six projects were realised (including four investments to JLIF and two investments to JLEN) for total proceeds of £140.2 million (2015 - £85.9 million from the realisation of seven investments for total proceeds of £86.3 million net of a £0.4 million price adjustment for a project disposed of in 2014). Additionally, a 2.2% shareholding in JLEN was sold for £6.4 million (2015 - £nil).

Finance charges were higher in 2015 due to the payment of upfront costs in relation to the committed corporate banking facilities entered into at the time of IPO.

The capital raise, net of costs, from the Company's IPO in 2015 was £123.0 million.

Dividend payments of £26.2 million in the year ended 31 December 2016 comprise the final dividend for 2015 of £19.4 million and the interim dividend for 2016 of £6.8 million (2015 - interim dividend for 2015 of £5.9 million).

FINANCIAL RESOURCES

At 31 December 2016, the Group had principal committed corporate banking facilities of £400.0 million, expiring in March 2020 (31 December 2015 - £350.0 million), which are primarily used to back investment commitments. These facilities were increased by £50.0 million in June 2016. The Group also had surety facilities of £50.0 million backed by committed liquidity facilities both expiring in March 2018. Net available financial resources at 31 December 2016 were £168.1 million (31 December 2015 - £180.1 million).

Analysis of Group financial resources

1 Cash and bank deposits excluding cash collateral balances

Letters of credit issued under the committed corporate banking facilities of £112.6 million (31 December 2015 - £154.2 million) and under additional surety facilities of £50.0 million (31 December 2015 - £nil) together with cash collateral represent future cash investment by the Group into underlying projects in the Primary Investment portfolio.

The table below shows the letters of credit issued analysed by investment and the date or dates when cash is expected to be invested into the underlying project at which point the letter of credit would expire:

The table below shows the cash collateral balances at 31 December 2016 analysed by investment and the date when the cash collateral is expected to be invested into the underlying project:

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

There are significant non-recourse borrowings within the project companies in which the Group invests. The interest rate exposure on the debt of such project companies is, in most circumstances, fixed on financial close, through a long-dated bond or fixed rate debt, or through the fixing of floating rate bank debt via interest rate swaps. Given this, the impact on the Group's returns from investments in project companies of changes in interest rates on project borrowings is minimal. There is an impact from changes in interest rates on the investment income from monies held on deposit both at Group level and within project companies but such an effect is not material in the context of the 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 year ended 31 December 2016, there was a favourable fair value movement of £74.7 million in the portfolio valuation between 31 December 2015 and 31 December 2016. This positive impact was partly offset by net losses, both realised and unrealised of £11.9 million from foreign exchange hedges held by the Group during 2016 on part of its Euro-denominated investments (£152.5 million) and on part of its New Zealand Dollar-denominated investment (£10.9 million). The net losses on other hedges held by the Group against cash collateral balances currencies were offset by foreign exchange translation gains on those and other balances.

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 31 December 2016 of £162.6 million (31 December 2015 - £154.2 million) are analysed by currency as follows:

Cash collateral at 31 December 2016 of £23.7 million (31 December 2015 - £123.9 million) is analysed by currency as follows:

GOING CONCERN

The Group has committed corporate banking facilities until March 2020 and has sufficient resources available to meet its committed capital requirements, investments and operating costs for the foreseeable future. Accordingly, the Group has adopted the going concern basis in the preparation of its financial statements for the year ended 31 December 2016.

Patrick O'D Bourke

Group Finance Director

PRINCIPAL Risks AND RISK MANAGEMENT

The effective management of risks within the Group is essential to the successful delivery of the Group's objectives. The Board is responsible for ensuring that risks are identified and appropriately managed across the Group and has delegated to the Audit & Risk Committee responsibility for reviewing the effectiveness of the Group's internal controls, including the systems established to identify, assess, manage and monitor risks. The Group's risk appetite when making decisions on investment commitments or potential realisations is assessed by reference to the expected impact on NAV.

During the year, the previous Audit Committee was renamed the Audit & Risk Committee and its remit was expanded. Under its new remit, the Committee has a greater involvement in overseeing the effective management of risks within the Group.

The principal internal controls that operated throughout 2016 and up to the date of this Annual Report include:

· an organisational structure which provides adequate segregation of responsibilities, clearly defined lines of accountability, delegated authority to trained and experienced staff and extensive reporting;

· clear business objectives aligned with the Group's risk appetite;

· risk reporting, including identification of risks through Group-wide risk registers, that is embedded in the regular management reporting of business units and is communicated to the Board; and

· an independent internal audit function, which reports to the Audit & Risk Committee. The external auditor also reports to the Audit & Risk Committee on the effectiveness of financial controls relevant to the audit.

The Group's Internal Audit function has several objectives, in particular:

· to provide independent assurance to the Board, through the Audit & Risk Committee, that internal control processes, including those related to risk management, are relevant, fit for purpose, effective and operating throughout the business;

· to provide a deterrent to fraud and to provide another layer of assurance that the Group is meeting its FCA regulatory requirements; and

· to provide advice on efficiency improvements to internal control processes.

Internal Audit is independent of the business and reports functionally to the Group Finance Director and directly to the Chairman of the Audit & Risk Committee. The Group Head of Internal Audit meets regularly with senior management and the Audit & Risk Committee to discuss key findings and management actions undertaken. 

The Group Head of Internal Audit can call a meeting with the Chairman of the Audit & Risk Committee at any time and meets privately with the Audit & Risk Committee, without senior management present, as and when required, but at least annually. 

A Management Risk Committee, comprising senior members of management and chaired by the Group Finance Director, assists the Board, Audit & Risk Committee, and Executive Committee in formulating and enforcing the Group's risk management policy. The Head of Internal Audit attends each meeting of the Management Risk Committee. It reports formally to the Audit & Risk Committee.

The Directors confirm that they have monitored throughout the year and carried out (i) a review of the effectiveness of the Group's risk management and internal control systems and (ii) a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity. No material weaknesses were identified from the review of the Group's risk management and internal control systems. The Group risk register is reviewed at every meeting of the Audit & Risk Committee and Management Risk Committee and every six months by the Board.

The above controls and procedures are underpinned by a culture of openness of communication between operational and executive management. All investment decisions are scrutinised in detail by the Investment Committee and, if outside the Investment Committee's terms of reference, also by the Board.

The Directors' assessment of the principal risks applying to the Group is set out below, including the way in which risks are linked to the three strategic objectives set out in the Chief Executive Officer's Review. Additional risks and uncertainties not presently known to the Directors, or which they currently consider not to be material, may also have an adverse effect on the Group:

Note:

The Group's three strategic objectives, as set out in the Chief Executive Officer's Review, are:

1. Growth in primary investment volumes (new capital committed to greenfield infrastructure projects) over the medium term.

2. Growth in the value of external AuM and related fee income.

3. Management and enhancement of the Group's investment portfolio, with a clear focus on active management during construction, accompanied by realisations of investments which, combined with the Group's corporate banking facilities and operational cash flows, enable it to finance new investment commitments.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that the Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces; and

• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 6 March 2017 and is signed on its behalf by:

Independent Auditor's Report to the Shareholders of John Laing Group plc on the audited financial results of John Laing Group plc

We confirm that we have issued an unqualified opinion on the full financial statements of John Laing Group plc.

Our audit report on the full financial statements sets out the following risks of material misstatement which had the greatest effect on our audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those risks:

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.

Our liability for this report and for our full audit report on the financial statements is to the Company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's 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 and the Company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.

Deloitte LLP

Chartered Accountants and Statutory Auditor

6 March 2017

Group Income Statement

for the year ended 31 December 2016

Group Statement of Comprehensive Income

for the year ended 31 December 2016

The only movement which could subsequently be recycled to the Group Income Statement is the exchange difference on translation of overseas operations.

Group Statement of Changes in Equity

for the year ended 31 December 2016

Statutory

for the year ended 31 December 2015

Pro forma

Statutory

Group Balance Sheet

as at 31 December 2016

The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and authorised for issue on 6 March 2017. They were signed on its behalf by:

Group Cash Flow Statement

for the year ended 31 December 2016

Notes to the Group Financial Statements

for the year ended 31 December 2016

1 General information

The statutory and pro forma results of John Laing Group plc (the "Company" or the "Group") are stated according to the basis of preparation 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 international infrastructure projects.

Statutory and pro forma financial information is presented in pounds sterling and prepared in accordance with IFRS as adopted by the EU.

2 Accounting policies

a) Basis of preparation

Statutory financial information for the year ended 31 December 2016 is presented in the Group Income Statement, the Group Statement of Comprehensive Income and the Group Statement of Changes in Equity alongside comparative pro forma and statutory financial information for the year ended 31 December 2015. The comparative pro forma financial information was prepared on the basis that the restructuring associated with the Company's admission to listing in February 2015, as described in more detail in the Financial Review section of the 2015 Annual Report, had been in place throughout the year ended 31 December 2015. Both the Group Balance Sheet at 31 December 2016 and at 31 December 2015 are presented on a statutory basis. There is no difference in the statutory and pro forma Group Balance Sheet for 31 December 2015. In the opinion of the Directors, presenting pro forma information for 2015 was necessary in order to give a true and fair view of the state of the Company's affairs for that year. This is the last year for which pro forma financial information will be presented.

The financial statements have been prepared on an investment entity basis (see note 2c) and in accordance with the historical cost convention except for the revaluation of the investment portfolio and financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies.

b) Adoption of new and revised standards

The Group has adopted the following amendments to IFRS in the current year, none of which has had a material impact on the financial statements:

· Amendments resulting from the September 2014 Annual Improvements to IFRS

· Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures - amendments regarding the consolidation exception

· Amendments to IFRS 11 Joint Arrangements - amendments regarding the accounting for acquisitions of an interest in joint operation

· Amendments to IAS 1 Presentation of Financial Statements - Disclosure initiative

· Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - amendments regarding the clarification of acceptable methods of depreciation

At the date of authorisation of these financial statements, there are a number of standards and interpretations which are in issue but not yet effective and in some cases have not yet been adopted by the EU. These include:

Issued and endorsed by the EU

· IFRS 9 Financial Instruments

· IFRS 15 Revenue from Contracts with Customers

Issued and not endorsed by the EU

· IFRS 16 Leases

· Amendments to IAS 7 Statement of Cash flows - amendments as a result of the Disclosure initiatives

· Amendments to IAS 12 Income Taxes - amendments regarding the recognition of deferred tax assets for unrealised losses

· Amendments resulting from the Annual Improvements to IFRS 2014-2016 cycle

· Amendments to IFRS 2 Share Based Payments - amendments to clarify the classification and measurement of share-based payment transactions.

While the Group is still undertaking an assessment of the impact of the new standards, it is not anticipated that they will have a material impact on the Group with the exception that the adoption of IFRS 15 may lead to further disclosure within the financial statements. IFRS 16 is not expected to have a significant impact as the Group does not have any material leases.

IFRS 9 Financial Instruments, when it becomes effective, will have an impact on the classification and disclosure of financial instruments.

The principal accounting policies applied in the preparation of these Group financial statements are set out below. These policies have been applied consistently to each of the years presented, unless otherwise stated.

c) Application of investment entity guidance

The Company meets the definition of an investment entity set out in IFRS 10. 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.

For details of the subsidiaries that are consolidated, see note 26 to the Group financial statements.

d) Going concern

The Directors have reviewed the Group's financial projections and cash flow forecasts and believe, based on those projections and forecasts, that it is appropriate to prepare the financial statements of the Group on the going concern basis.

In arriving at their conclusion, the Directors took into account the Group's approach to liquidity and cash flow management and the availability of its £400.0 million corporate banking facilities committed until March 2020 and of its £50.0 million surety facilities committed until March 2018. The Directors are of the opinion that, based on the Group's forecasts and projections and taking into account expected bidding activity and operational performance, the Group will be able to operate within its bank facilities and comply with the financial covenants therein for the foreseeable future.

In determining that the Group is a going concern, certain risks and uncertainties, some of which arise or increase as a result of the economic environment in some of the Group's markets, have been considered. The Directors believe that the Group is adequately placed to manage these risks. The most important risks and uncertainties identified and considered by the Directors are set out in the Principal Risks and Risk Management section. In addition, the Group's policies for management of its exposure to financial risks, including liquidity, foreign exchange, credit, price and interest rate risks are set out in note 16.

e) Dividend income

Dividend income from investments at FVTPL is recognised when the shareholders' rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Dividend income is recognised gross of withholding tax, if any, and only when approved and paid by the project company.

f) Dividend payments

Dividends on the Company's ordinary shares are recognised when they have been appropriately authorised and are no longer at the Company's discretion. Accordingly, interim dividends are recognised when they are paid and final dividends are recognised when they are declared following approval by shareholders at the Company's AGM. Dividends are recognised as an appropriation of shareholders' funds.

g) Net gain on investments at FVTPL

Net gain on investments at FVTPL excludes dividend income referred to above. Please refer to accounting policy i)(i) for further detail.

h) Other income

The Group earns income from the following sources:

(i) Fees from asset management services

Fees from asset management services to projects in which the Group invests and to external parties are recognised as the services are provided in accordance with IAS 18 Revenue.

When it is probable that the expected outcome over the life of a management services contract will result in a net outflow of economic benefits or overall loss, a provision is recognised immediately. The provision is determined based on the net present value of the expected future cash inflows and outflows.

(ii) Recovery of bid costs on financial close

Bid costs in respect of primary investments are charged to the Group Income Statement until such time as the Group is virtually certain that it will recover the costs. Virtual certainty is generally achieved when an agreement is in place demonstrating that costs are fully recoverable even in the event of cancellation of a project. From the point of virtual certainty, bid costs are held in the Group Balance Sheet as a debtor prior to achieving financial close. On financial close, the Group recovers bid costs by charging a fee to the relevant project company in the investment portfolio.

Other income excludes the value of intra-group transactions and VAT and includes revenue derived from the provision of services by Service Companies to project companies which are held at FVTPL.

i) Financial instruments

Financial assets and financial liabilities are recognised on the Group Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.

(i) Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at FVTPL, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets at FVTPL; 'held-to-maturity' investments; 'available-for-sale' financial assets; or 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The financial assets that the Group holds are classified as financial assets at FVTPL and loans and receivables:

• Financial assets at FVTPL comprise the Group's investment in John Laing Holdco Limited (through which the Group holds its investments) which is valued based on the fair value of investments in project companies, the Group's investment in JLEN and other assets and liabilities of investment entity subsidiaries. Investments in project companies and in JLEN are designated upon initial recognition as financial assets at FVTPL. Subsequent to initial recognition, investments in project companies are measured on a combined basis at fair value principally using discounted cash flow methodology. The investment in JLEN is valued at the quoted market price at the end of the period.

The Directors consider that the carrying value of other assets and liabilities held in investment entity subsidiaries approximates to their fair value, with the exception of derivatives which are measured in accordance with accounting policy i(v).

Changes in the fair value of the Group's investment in John Laing Holdco Limited are recognised within operating income in the Group Income Statement.

• Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial. Loans and receivables are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Group's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents' in the Group Balance Sheet.

(ii) Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indications of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events which have occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss.

(iii) Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

(iv) Financial liabilities

Interest-bearing bank loans and borrowings are initially recorded at fair value, being the proceeds received net of direct issue costs, and subsequently at amortised cost using the effective interest rate method. Finance charges, including premiums payable on settlement or redemption, and direct issue costs are accounted for on an accruals basis in the Group Income Statement and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Other non-derivative financial instruments are measured at amortised cost using the effective interest method less any impairment losses.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

(v) Derivative financial instruments

The Group treats forward foreign exchange contracts and currency swap deals it enters into as derivative financial instruments at FVTPL. Changes in the fair value of these instruments are taken through the Group Income Statement.

j) Provisions

Provisions are recognised when:

• the Group has a legal or constructive obligation as a result of past events;

• it is probable that an outflow of resources will be required to settle the obligation; and

• the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required on settlement is determined by considering the class of obligations as a whole.

k) Finance costs

Finance costs relating to the corporate banking facilities, other than set-up costs, are recognised in the year in which they are incurred. Set-up costs are recognised over the remaining facility term.

Finance costs also include the net interest cost on retirement benefit obligations and the unwinding of discounting of provisions.

l) Taxation

The tax charge or credit represents the sum of tax currently payable and deferred tax.

Current tax

Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Group Income Statement because it excludes both items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted, or substantively enacted, by the balance sheet date.

Deferred tax

Deferred tax liabilities are recognised in full for taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will arise to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Group Income Statement except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

m) Foreign currencies

The individual financial statements of each Group subsidiary that is consolidated (i.e. a Service Company) are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the financial statements, the results and financial position of each Group subsidiary are expressed in pounds sterling, the functional currency of the Company and the presentation currency of the financial statements.

Monetary assets and liabilities expressed in foreign currency (including investments measured at fair value) are reported at the rate of exchange prevailing at the balance sheet date or, if appropriate, at the forward contract rate. Any difference arising on the retranslation of these amounts is taken to the Group Income Statement with foreign exchange movements on investments measured at fair value recognised in operating income as part of net gain on investments at FVTPL. Income and expense items are translated at the average exchange rates for the period.

n) Non-current assets held for sale and discontinued operations

Where a disposal group represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, it is treated as a discontinued operation. The post-tax profit or loss of this discontinued operation together with the gain or loss recognised on its disposal is shown as a single amount on the face of the Group Income Statement, with all historical financial periods being presented on this basis.

Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount is recoverable through a sale rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable, the asset (or disposal group) is available for immediate sale in its present condition and the sale is completed within one year of the date of its classification.

o) Retirement benefit costs

The Group operates both defined benefit and defined contribution pension arrangements. Its two defined benefit pension schemes are the John Laing Pension Fund (JLPF) and the John Laing Pension Plan, which are both closed to future accrual. The Group also provides post-retirement medical benefits to certain former employees.

Payments to defined contribution pension arrangements are charged as an expense as they fall due. For the defined benefit pension schemes and the post-retirement medical benefit scheme, the cost of providing benefits is determined in accordance with IAS 19: Employee Benefits (revised) using the projected unit credit method, with actuarial valuations being carried out at least every three years. Actuarial gains and losses are recognised in full in the year in which they occur and are presented in the Group Statement of Comprehensive Income. Curtailment gains arising from changes to members' benefits are recognised in full in the Group Income Statement.

The retirement benefit obligations recognised in the Group Balance Sheet represent the present value of: (i) defined benefit scheme obligations as adjusted for unrecognised past service costs and reduced by the fair value of scheme assets, where any asset resulting from this calculation is limited to past service costs plus the present value of available refunds and reductions in future contributions to the schemes; and (ii) unfunded post-retirement medical benefits.

Net interest expense or income is recognised within finance costs.

p) Cash and cash equivalents

Cash and cash equivalents in the Group Balance Sheet comprise cash at bank and in hand and short term deposits with original maturities of three months or less. For the purposes of the Group Cash Flow Statement, cash and cash equivalents comprise cash and short term deposits as defined above, net of bank overdrafts.

Deposits held with original maturities of greater than three months are shown as other financial assets.

q) Leasing

All leases are classified as operating leases. Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

r) Share capital

Ordinary shares are classified as equity instruments on the basis that they evidence a residual interest in the assets of the Group after deducting all its liabilities.

Incremental costs directly attributable to the issue of new ordinary shares are recognised in equity as a deduction, net of tax, from the proceeds in the period in which the shares are issued.

s) Employee benefit trust

In June 2015, the Group established the John Laing Group Employee Benefit Trust (EBT) as described further in note 5. The Group is deemed to have control of the EBT and it is therefore treated as a subsidiary and consolidated for the purposes of the accounts. Any investment by the EBT in the parent company's shares is deducted from equity in the Group Balance Sheet as if such shares were treasury shares. No investment was made in the year. Other assets and liabilities of the EBT are recognised as assets and liabilities of the Group.

Any shares held by the EBT are excluded for the purposes of calculating earnings per share.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities. The key areas of the financial statements where the Group is required to make critical judgements and material accounting estimates are in respect of the fair value of investments and accounting for the Group's defined benefit pension liabilities.

Fair value of investments

Critical judgements in applying the Group's accounting policies

The Company measures its investment in John Laing Holdco Limited at fair value. Fair value is determined based on the fair value of investments in project companies and the Group's investment in JLEN (together the Group's investment portfolio) and other assets and liabilities of investment entity subsidiaries. A valuation of the Group's investment portfolio is prepared on a consistent, principally discounted cash flow basis at 30 June and 31 December. The valuation (excluding the investment in JLEN) assumes that forecast cash flows are received until maturity of the underlying assets. The cash flows on which the discounted cash flow valuation is based are those forecast to be distributable to the Group at each balance sheet date, derived from detailed project financial models. These incorporate a number of assumptions with respect to individual assets, including: dates for construction completion; value enhancements; the terms of project debt refinancing (where applicable); the outcome of any disputes; the level of volume-based revenue; and, for renewable energy projects, future energy prices. Value enhancements are only incorporated when the Group has sufficient evidence that they can be realised.

Key sources of estimation uncertainty

A key source of estimation uncertainty in valuing the investment portfolio is the discount rate applied to forecast project cash flows. 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 project-specific risks. In addition, risk premia are added during the construction phase to reflect the additional risks throughout construction. These premia reduce over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operating stage. The discount rates applied to investments at 31 December 2016 were in the range of 7.0% to 11.6% (31 December 2015 - 7.3% to 12.3%). Further detail on key assumptions underpinning the valuation of the investments (including sensitivities) can be found in note 16.

As part of the valuation of the investment portfolio at 31 December 2016, the Group has valued its investments in New Royal Adelaide Hospital and in Manchester Waste VL Co. This has involved making assumptions as to the outcome of the current situations relating to each investment, as described in the Chief Executive Officer's Review. Both situations are dependent on future events and therefore carry an element of uncertainty. In the case of the investment in New Royal Adelaide Hospital, the main judgement underlying the Group's valuation is an assumption that the hospital reaches commercial acceptance in mid 2017. In the case of Manchester Waste VL Co, the Group's valuation is based on the assumption that a resolution is reached with GMWDA which is commercially acceptable to Manchester Waste VL Co and which has a minimal impact on Manchester Waste TPS Co.

Pension and other post-retirement liability accounting

Critical judgements in applying the Group's accounting policies

The combined accounting deficit in the Group's defined benefit pension and post-retirement medical schemes at 31 December 2016 was £69.3 million (31 December 2015 - £46.2 million). In determining the Group's defined benefit pension liability, consideration is also given to whether there is a minimum funding requirement under IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction which is in excess of the IAS 19 Employee Benefits liability. If the minimum funding requirement is higher, an additional liability would need to be recognised. Under the trust deed and rules of JLPF, the Group has an ultimate unconditional right to any surplus, accordingly the excess of the minimum funding requirement over the IAS 19 Employee Benefits liability has not been recognised as an additional liability.

Key sources of estimation uncertainty

The value of the pension deficit is highly dependent on key assumptions including price inflation, discount rate and life expectancy. The assumptions applied at 31 December 2016 and the sensitivity of the pension liabilities to certain changes in these assumptions are illustrated in note 18.

3 Operating segments

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 segment performance based on the category of activities undertaken within the Group. The principal categories of activity, and thus the reportable segments under IFRS 8 Operating Segments, are: Primary Investment, Secondary Investment and Asset Management.

The results included within each of the reportable segments comprise:

Primary Investment - costs and cost recoveries associated with originating, bidding for and winning greenfield infrastructure and renewable energy projects; investment returns from and growth in the value of the Primary Investment portfolio, net of associated costs.

Secondary Investment - investment returns from and growth in the value of the Secondary Investment portfolio, net of associated costs.

Asset Management - fee income and associated costs from investment management services in respect of both the Primary and Secondary Investment portfolios and in respect of JLIF's and JLEN's portfolios and the PPP assets in JLPF's portfolio plus fee income and associated costs from project management services.

The Board's primary measure of profitability for each segment is profit before tax.

The Board does not monitor on an ongoing basis the results of the Group on a geographical basis. An analysis of the Group's investments at FVTPL by foreign currency can be found in note 16.

The following is an analysis of the Group's profit before tax and operating income for the years ended 31 December 2016 and 31 December 2015: