Full Year Results

This announcement contains inside information.

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

John Laing Group plc (John Laing or the Company or the Group) announces its audited results for the year ended 31 December 2017.

Highlights

· 10.5% increase in Net Asset Value (NAV), from £1,016.8 million at 31 December 2016 to £1,123.9 million

· 13.5% increase in NAV including dividends paid in 2017

· NAV per share at 31 December 2017 of 306p (31 December 2016 - 277p)1

· New investment commitments of £382.9 million2 (2016 - £181.9 million), well ahead of guidance

· Realisations of £289.0 million from the sale of eight investments (2016 - £146.6 million), well ahead of guidance

· Profit before tax of £126.0 million compared to £192.1 million in 2016 

· Earnings per share of 34.7p (2016 - 51.9p)

· 12% increase in external Assets under Management (AuM) from £1,472.3 million at 31 December 2016 to £1,648.5 million3 at 31 December 2017

· Cash yield from investment portfolio of £40.2 million (2016 - £34.8 million)

· Strong investment pipeline, including nine shortlisted PPP positions

· Final dividend of 8.70p per share in line with policy (including a special dividend of 4.88p per share), giving a total 2017 dividend of 10.61p (2016 - total dividend of 8.15p), an increase of 30.2% from 20164

· 1 for 3 rights issue announced on 8 March 2018

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

"2017 was a strong year for John Laing. We made record investment commitments, driven in large part by our success in our core Asia Pacific and North America markets. We continued to grow our pipeline, 95% of which is now made up of opportunities outside the UK, and to scale up our business. We are exclusively focused on investment in greenfield projects that meet our strict criteria, and our strategy remains to generate value for shareholders though growth in NAV and dividends."

Notes:  

1. Calculated as NAV at 31 December 2017 of £1,123.9 million (31 December 2016 - £1,016.8 million) divided by number of shares in issue at 31 December 2017 of 366.96 million (31 December 2016 - 366.92 million).

2. Based on new investment commitments secured in the year ended 31 December 2017; for further details see the Primary Investment section of the Strategic Report.

3. External AuM based on published portfolio values of JLIF at 30 September 2017 and JLEN at 31 December 2017.

4. Before adjustment for the rights issue announced on 8 March 2018.

A presentation for analysts and investors will be held at 8:30am (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 3936 2999

Other locations: +44 (0) 20 3936 2999

Participant access code: 60 35 12

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

http://www.investis-live.com/john-laing/5a8fe81b2ce689130086caeb/wmyz

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

Analyst/investor enquiries:

Olivier Brousse, Chief Executive Officer +44 20 7901 3200

Patrick O'D Bourke, Group Finance Director +44 20 7901 3200

Media enquiries:

James Isola, Maitland +44 20 7379 5151

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.

Summary financial information

Notes:

(1) Calculated as NAV at 31 December 2017 of £1,123.9 million (31 December 2016 - £1,016.8 million) divided by the number of shares in issue at 31 December 2017 of 366.96 million (31 December 2016 - 366.92 million).

(2) Basic EPS; see note 5 to the Group financial statements.

(3) Before adjustment for the rights issue announced on 8 March 2018.

(4) For further details, see the Primary Investment section of the Strategic Review.

(5) Represents cash proceeds received on realisations for the year ended 31 December 2017, including £1.9 million consideration deferred to 2018.

(6) Gross investment portfolio, less shareholding in JLEN valued at £10.3 million (31 December 2016 - £10.0 million).

(7) External AUM at 31 December 2017 is based on published portfolio values of JLIF as at 30 September 2017 and JLEN as at 31 December 2017.

Chairman's Statement

This is my last report to shareholders as Chairman and I am pleased to be leaving the business well positioned for future growth. Since I became Chairman in January 2010, John Laing has evolved significantly in a number of ways: it's a simpler business, with non-core activities divested; it's a much more international business, with three well-established geographical regions and the potential for expansion into further jurisdictions; and it's a stronger business, with the ability to access new capital, having undertaken a successful IPO three years ago. In addition, we have launched two successful independent secondary funds, JLIF and JLEN, which are the purchasers of a number of our investments once the underlying projects reach the operational stage.

As well as announcing our results, we are today launching a 1 for 3 rights issue to raise £210 million, net of costs. The rights issue will enable the Group to take advantage of a higher proportion of the attractive opportunities currently available to it and is consistent with the Board's intention to increase the scale of the business over the medium term. We plan to use the proceeds to invest in public private partnership (PPP) projects, renewable energy assets, and in other appropriate greenfield infrastructure assets which fit our business model and meet our investment criteria. The Board considers the rights issue to be in the best interests of John Laing and its shareholders as a whole.

During 2017, as in earlier years, we kept our strategy focused but also flexible. Our business model has stood the test of time and allows the management team 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 investments.

We committed capital to each of our three core regions - Asia Pacific, Europe and North America - in the year. The US market in particular is now showing the potential we have been anticipating for some time. As well as two further renewable energy projects, we invested in the I-66 Managed Lanes project in Virginia. We continue to see strong demand for new greenfield infrastructure in each of our regions.

The business delivered another strong performance in 2017:

· Net Asset Value (NAV) grew by 10.5% to £1,123.9 million or 306p per share at 31 December 2017, from £1,016.8 million or 277p per share at 31 December 2016;

· Investment commitments reached £382.9 million, our highest ever and significantly ahead of our guidance of approximately £200 million;

· Realisations of investments were £289.0 million, again well ahead of our guidance for 2017 of approximately £200 million;

· Our total external Assets under Management grew to £1,648.5 million, an increase of 12.0%; and

· We are proposing a final dividend for 2017, before adjustment for the rights issue, of 8.70p per share made up of a base dividend of 3.82p per share and a special dividend of 4.88p per share.

In December 2017, Will Samuel joined the Board as Chairman Designate and will take over from me when I stand down at the Annual General Meeting (AGM) in May 2018. In the few months since he joined us, Will has met all the key members of management and has already got his feet well under the table. He brings with him a wealth of experience both as a chairman of listed and private companies as well as from his successful executive career. I am confident I will leave the Board and the Company in capable hands.

During the year under review, the Board complied with all applicable provisions of the UK Corporate Governance Code (the Code). We have an experienced Board which has been strengthened by the addition of Will Samuel. As well as regular Board meetings, we held reviews in June and in October 2017 to address the future strategy and direction of the business. These recognised the robustness and flexibility of our existing business model and reconfirmed our commitment to creating further shareholder value from growth in NAV.

I will be sorry to say goodbye to the many members of staff I have met and worked with during my time at John Laing and, on behalf of the Board, I would like to thank all of them for their contribution during my chairmanship and to these results in particular. 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 2017 of 3.82p per share, before adjustment for the rights issue; 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 2017 of 4.88p per share, before adjustment for the rights issue. This reflects 6.2% of 2017 realisations of £289.0 million.

The total final dividend therefore amounts to 8.70p per share, which, together with the interim dividend of 1.91p per share paid in October 2017, makes a total dividend for 2017 of 10.61p per share, an increase of 30.2% over 2016, reflecting the significant level of realisations achieved in 2017. The final dividend will be put to shareholders for their approval at the Company's AGM which will be held on 10 May 2018. At the Company's last AGM on 11 May 2017, all resolutions were approved by shareholders.

Our business is in good shape and, based on our investment pipeline, we anticipate a strong level of deal flow over the coming years in each of our core markets.

Phil Nolan

Chairman

Chief Executive Officer's Review

I am pleased to report that in 2017 we significantly increased our investment commitments, while maintaining our track record of strong results. This was achieved despite the impact of lower power price forecasts which affected a number of our renewable energy investments and without the benefit of the significant foreign exchange gain in 2016.

The highlights included:

· 10.5% increase in NAV, from £1,016.8 million at 31 December 2016 to £1,123.9 million at 31 December 2017;

· 13.5% increase in NAV including dividends paid in 2017;

· NAV per share at 31 December 2017 of 306p (31 December 2016 - 277p);

· New investment commitments of £382.9 million (2016 - £181.9 million);

· Realisations of £289.0 million from the sale of eight investments;

· Profit before tax of £126.0 million compared to £192.1 million in 2016;

· 12% increase in external Assets under Management (AuM) to £1,648.5 million;

· Cash yield from investment portfolio of £40.2 million (2016 - £34.8 million); and

· Final dividend of 8.70p per share, giving a total 2017 dividend of 10.61p per share (2016 - total dividend of 8.15p per share), an increase of 30.2% from 2016, before adjustment for the rights issue.

Outlook for our markets

The overall market for greenfield infrastructure is driven by a number of factors, but especially population growth, urbanisation and climate change. In the case of urbanisation, some commentators forecast that within 20 years, two out of every three people will live in a city. Other factors which influence infrastructure spending include governmental policy towards regulation and investment, the demand for energy and the availability of capital, both private and public sector. 

Most of these factors apply to each of the sectors in which we operate: transport and transport-related infrastructure, such as roads, tunnels, bridges and rail assets; environmental infrastructure, such as renewable energy, water treatment and waste management; and social infrastructure, such as schools and hospitals. We are proud of the fact that many of the assets we invest in provide a public benefit.

We operate in a wider infrastructure market in which there has been historical under-investment. This provides a strong incentive for governments to use public private partnerships (PPPs) to procure greenfield infrastructure. As well as access to private capital, PPP arrangements enable governmental and other public sector bodies to benefit from fixed price arrangements which transfer very significant risks to the private sector, especially design, construction and operational delivery risks. The growing international adoption of PPPs as a procurement model for infrastructure is acknowledged by the World Bank which publishes a PPP Reference Guide.

Our Primary Investment teams benefit from a robust and diverse pipeline of future opportunities in each of the three regions where we currently operate: North America (Canada and the US); Asia Pacific (Australia and New Zealand); and Europe (including the UK). We have focused strongly on developing our relationships with international partners, including construction companies, rolling stock manufacturers and renewable energy developers and this is resulting in more investment opportunities. We entered 2018 with strong positions in nine shortlisted PPP consortiums and with four exclusive renewable energy opportunities.

· North America: six of the nine shortlisted PPP positions are for potential investments in North America. In Canada, we continue to see a strong commitment to PPPs from federal authorities, as evidenced by the recent establishment of the Canadian Infrastructure Board. The most active province is Ontario, especially in the transport sector. In the US, 2017 has been a breakthrough year for John Laing. We have taken advantage of increased activity in PPPs, and made further investments in renewable energy. The US is a market where procurement for greenfield assets takes place predominantly at state or city, rather than federal, level, and where the need for greenfield infrastructure has been highlighted by states or cities introducing specific local tax increases to raise funds for new assets required. 

· Asia Pacific: we remain very active in the PPP markets in both Australia and New Zealand. In Australia, following a very successful year in 2017, we see fewer PPP projects reaching financial close in 2018, but a very active pipeline thereafter. In renewable energy, we have benefited from the impetus given to the market by the Federal Renewable Energy Target in Australia.

· Europe: three of the nine shortlisted PPP positions are for potential investments in Europe. While the PPP market in some European countries remains subdued, we are concentrating on those jurisdictions which have, or will be, initiating active PPP road programmes, such as the Netherlands, Spain, Germany and Norway. While the political climate in the UK is currently not favourable towards PPP, it only accounts for 5% of our total pipeline.

Outside the current pipeline and beyond the PPP and renewable energy markets, we continue to research other infrastructure asset classes that could potentially 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. Over the last three years, we have made our first investments in managed lanes and in offshore wind, and expect these sectors to offer a number of investment opportunities in the future. We also continue to research new geographies where we see potential opportunities to invest alongside established partners at appropriate returns. These include selected countries in Latin America and South East Asia.

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).

Our business model is based on our specialist infrastructure investment and asset management capabilities and the continuing demand for 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.

The principal value creation mechanism inherent in our business model is the difference between the hold-to-maturity IRR at the financial close of a greenfield investment and the discount rate applied to that investment once the underlying project has reached the operational phase. Although we have in recent years experienced pressure on hold-to-maturity IRRs as our Primary Investment teams bid for new greenfield projects, this has typically been accompanied by a reduction in secondary discount rates. This has allowed the Group to maintain attractive "yield shifts" which drive one of the principal measures applied to the Group's investments, namely annualised rate of return.

When investments become part of our Primary Investment portfolio, their value should grow progressively with a reasonable 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 project 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 through originating, investing in and managing infrastructure assets internationally. In that respect, we see NAV growth and dividends as key measures of our success:

· In 2017, our NAV grew by 10.5% from £1,016.8 million at 31 December 2016 to £1,123.9 million at 31 December 2017. This was 13.5% if we add back the dividends paid in 2017.

· We are proposing total dividends of 10.61p per share for 2017 compared to dividends of 8.15p per share for 2016. This represents growth of 30.2% over 2016, reflecting the significant increase in realisations during 2017.

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 investments in 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 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, legal, regulatory and taxation framework;

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

· the ability to form relationships with strong supply chain partners, preferably companies we have worked with before;

· 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 2017 was £382.9 million, made up of £142.5 million in renewable energy and £240.4 million in PPP assets. This was a record level for John Laing and significantly ahead of investment commitments of £181.9 million in 2016 and our guidance. Our international growth continued with all our investment commitments being made outside the UK, including the following:

· I-66 Managed Lanes (US) - £118.0 million

· Rocksprings Wind Farm (US) - £62.9 million

· New Grafton Correctional Centre (Australia) - £79.3 million

· Melbourne Metro (Australia) - £43.1 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. JLCM 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.

During the year, the value of external AuM grew from £1,472 million to £1,649 million, an increase of 12%. Fee income from external AuM was £16.7 million for 2017, up from £15.8 million in 2016.

Management and enhancement of our investment portfolio

For John Laing, being an active investor means not only participating actively in consortiums at the bidding stage, but also being actively involved in the project during the construction phase in order to protect the value of our investment and provide advice and/or assistance when delays occur or problems arise. This time last year, we reported on the work of our team on the New Royal Adelaide Hospital project in helping to resolve the sometimes competing priorities of the Government of South Australia, the bank lending consortium, and the construction contractor. This situation had arisen principally because construction of the hospital had been delayed. At the half year, we reported that the hospital had successfully achieved technical completion in mid-March 2017 followed by commercial acceptance in mid-June 2017. Our team played a key part in the achievement of this stage. Patients were first admitted to the hospital in early September 2017.

Like many assets in the early operational stage, certain aspects of service provision are still being addressed and, as we have previously reported, remaining disputes are being dealt with through a process of arbitration. The important thing from our perspective is that the hospital is delivering under its contract to the people of South Australia. 

As regards Manchester Waste, we reported in September 2017 that our investment in Manchester Waste VL Co had been acquired by the Greater Manchester Waste Disposal Authority (GMWDA). While this resulted in a reduction compared to the value of this investment at 31 December 2016, it is important to note that the cash received of £23.5 million, together with previous distributions, resulted in a positive return on the investment versus our original commitment in 2009. We remain shareholders in Manchester Waste TPS Co where the underlying asset, a combined heat and power station which burns refuse-derived fuel, is performing well.

We regularly apply our active management skills when issues arise. 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 investment base cases and, where appropriate, seeking to find additional value.

At 31 December 2017, our portfolio comprised investments in 41 infrastructure projects plus our shareholding in JLEN (31 December 2016 - 42 projects plus shareholding in JLEN). Our year end portfolio value, including the shareholding in JLEN, was £1,193.8 million (31 December 2016 - £1,175.9 million). The portfolio value decreased by £142.8 million as a result of cash flows in the year, with proceeds from realisations and cash yield received from project companies partly offset by cash invested in projects. Fair value movements of £160.7 million, or 15.6% of the cash rebased portfolio value, increased the portfolio value to £1,193.8 million at 31 December 2017. This growth is analysed further in the Portfolio Valuation section.

The portfolio valuation represents our assessment of the fair value of investments in projects on a discounted cash flow basis and assuming that each asset is held to maturity, other than shares in JLEN which are held at market value. At 31 December 2017, investments with availability-based cashflows made up 58.8% of our portfolio by value.

The cash yield in 2017 was £40.2 million (2016 - £34.8 million), a yield of 7.4% (2016 - 7.6%) 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 realisations totalling £298.9 million, including the agreed sale of five UK PPP investments to JLIF for a total of £104.6 million, one of which is not expected to complete until later in March 2018. This left us with realisations for 2017 of £289.0 million which were well ahead of our original guidance for 2017 of approximately £200 million.

Consistent with our self-funding model, we are actively considering a number of realisations which are yet to be confirmed. One potential realisation, which is at a reasonably advanced stage, is the disposal of our remaining 15% shareholding in IEP (Phase 1) which could be announced in the next few weeks.

The percentage of our portfolio value attributable to UK investments has fallen from 58% at 31 December 2014 to 34% at 31 December 2017.

Profit before tax

Our profit before tax was £126.0 million in 2017, compared to £192.1 million in 2016. Profit before tax is primarily driven by the fair value movement on our investment portfolio. As set out in the Portfolio Valuation section, the main reasons for the lower fair value movement were:

· The impact of lower power price forecasts (£54.8 million negative in 2017 compared to £17.6 million negative in 2016);

· Adverse foreign exchange movements (£11.0 million negative in 2017 compared to £74.7 million positive in 2016, as a result of the significant weakening of Sterling in 2016);

offset by:

· A higher value uplift on financial closes (£50.1 million in 2017 versus £31.0 million in 2016);

· Higher value enhancements and other changes (£15.1 million positive in 2017 versus £17.2 million negative in 2016), including in 2017 the value reduction in the Manchester Waste investments; and

· A benefit from revised macroeconomic assumptions of £4.1 million (£13.8 million negative in 2016).

Funding

In October 2017, the Group's corporate banking facilities were increased from £400 million to £475 million. The facilities comprise a five-year committed corporate banking facility and associated ancillary facilities, all of which expire in March 2020. The Group also held surety facilities of £50 million backed by two £25 million committed liquidity facilities both expiring in March 2018. In early 2018 these liquidity facilities were extended to February 2019.

The Group's facilities enable us to issue letters of credit and/or put up cash collateral to back investment commitments. We finance our new investments through a combination of cash flow from existing assets, the above corporate banking facilities and realisations of investments in operational projects.

Organisation and staff

Our staff numbers were 158 at 31 December 2017 compared to 160 at the end of 2016. We now have 39% of staff located outside the UK (31 December 2016 - 36%), consistent with our increasing internationalisation.

In January 2018, we initiated an internal reorganisation under which the Primary Investment and Asset Management teams in each of our three geographical regions will in future report to a single regional head, each of whom in turn reports to me. The principal objective behind this revised structure is to enable us to focus more effectively on value creation in each region, while allowing our business to scale up.

I visited our international offices regularly during 2017. We are lucky to have high quality individuals and experienced teams across our business and it is my privilege to thank them for all they have done this year. As I have said before, our success depends on our people.

Current trading and guidance

Our total investment pipeline at 31 December 2017 was £2,150 million and includes £1,585 million of PPP opportunities looking out three years as well as nearer term renewable energy opportunities of £565 million. Within the pipeline is one preferred bidder position related to the MBTA fare collection project in Boston, US as well as nine shortlisted PPP positions with an investment opportunity of approximately £200 million and four exclusive renewable energy positions with an investment opportunity of approximately £150 million. The current pipeline does not include potential opportunities in new jurisdictions or take account of late entry investment opportunities which may arise.

As stated earlier, we achieved a record level of investment commitments in 2017. As our investment pipeline continues to grow, our aim is to keep on growing investment commitments, but not necessarily year on year, giving our teams the time to select the best opportunities. In 2018, our guidance is for investments commitments of approximately £250 million. We expect realisations to be at a broadly similar level to our investment commitments, consistent with our self-funding model.

As set out in the Chairman's statement, we have today launched a 1 for 3 rights issue to raise £210 million, net of costs, which will enable us to take advantage of a higher proportion of the attractive investment opportunities currently available to the Group. With the benefit of the rights issue, we will have greater ability both to position ourselves for, and execute on, investment commitments in excess of £250 million in 2018.

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. Since we re-listed in 2015, we have delivered steady growth despite changing governmental policies and macroeconomic 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 infrastructure 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 Group's Primary Investment portfolio at 31 December 2017 comprised shareholdings in 11 PPP projects and in three renewable energy projects, which were in the construction phase. This portfolio was valued at £580.3 million (31 December 2016 - £696.3 million).

New investment commitments

During 2017, the Primary Investment team successfully secured seven new investments, resulting in total commitments of £382.9 million:

· North America - we continued to increase our activities in the market, most notably through committing £118.0 million to the I-66 Managed Lanes PPP project in Virginia. We also invested £47.6 million in the Buckthorn Wind Farm project and £62.9 million in the Rocksprings Wind Farm, both in Texas.

· Asia Pacific - the New Grafton Correctional Centre in New South Wales reached financial close in June 2017 with an investment commitment of £79.3 million, and this was followed by an investment commitment in December 2017 of £43.1 million to the Melbourne Metro project. Both these investments further strengthen the Group's presence in the PPP market in this region.

· Europe - we made a £22.0 million commitment to Solar House, a rooftop solar energy project in France.

Our investment commitments for 2017 are summarised in the table below:

*RE = renewable energy

Activities

The Primary Investment teams are responsible for all the Group's bid development activities. The teams take 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 North America, Asia Pacific 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, Akuo, Alstom, Ansaldo, Astaldi, Bechtel, Bombardier, Bouygues, Brookfield Multiplex, Capella, Ferrovial, Cubic, Downer, Fluor, Fulton Hogan, John Holland, Leighton/CIMIC, Lend Lease, NRG, Serco, SNC Lavallin, Spotless, Transdev, Vestas 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, stadiums, public sector accommodation and social housing.

We also continually assess opportunities in other infrastructure sectors where we believe our business model could be successfully applied. Potential sectors which have been or are being considered include: broadband; water resource management; energy storage; and other forms of renewable energy, such as pumped storage.

Project finance

In Europe and Asia Pacific, the projects we invest in tend to be financed with long-term commercial bank debt whereas in Canada and the US projects tend to be financed in the long-term debt capital markets. In Australia and New Zealand, the tenor of PPP project finance debt tends to be more medium-term than long-term. Overall, financial markets in the regions in which the Group is active supported our growing levels of investment with a large number of international banks being active in these markets and we expect this to continue in 2018.

Pipeline

At 31 December 2017, our overall investment pipeline of £2,150 million was higher than the pipeline of £1,859 million at 31 December 2016. 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 2016 reflects an increase in the renewable energy pipelines in Asia Pacific and North America.

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:

The preferred bidder position related to a fare collection project in Boston, US. The shortlisted PPP projects at 31 December 2017 comprised two broadband upgrade projects (one in the Republic of Ireland and one in Pennsylvania, US), a rental car centre at Los Angeles airport and six availability-based transportation projects, spread across the US, Canada and Europe. These should all reach financial close in the next eighteen months.

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

In North America (the US and Canada), which makes up 40% of the pipeline, our focus is on what is becoming a very substantial US PPP market, whilst continuing to progress our presence in the renewable energy market, where we made two further investments during 2017. We continue to explore PPP opportunities primarily in the transportation sector and social infrastructure sectors. The Canadian market also continues to demonstrate strong PPP deal flow, which we are actively pursuing.

Some 28% 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.

The balance of our pipeline is in Europe, where PPP activity remains at a satisfactory level in countries such as the Netherlands. The focus is on those countries which have, or will be, initiating active PPP programmes such as the Netherlands, Spain, Germany and Norway.

Our overall renewable energy pipeline was £565 million at 31 December 2017, higher than at 31 December 2016. Selected countries in Europe, Asia Pacific and North America will provide our main focus in 2018. The pipeline includes many potential wind and solar projects as well as investment opportunities in biomass and other less developed technologies.

In addition to the above, the Group continues to monitor new geographic markets which offer the potential to invest alongside established partners. These include countries in South America, such as Chile and Colombia, and other countries in the Asia Pacific region, which are currently not in the pipeline.

Secondary Investment

At 31 December 2017, the Secondary Investment portfolio comprised 11 PPP projects and 16 renewable energy projects with a book value of £603.2 million (31 December 2016 - £469.6 million). The Secondary Investment portfolio also included a 2.5% shareholding in JLEN valued at £10.3 million at 31 December 2017 (31 December 2016 - 3.3% shareholding valued at £10.0 million). The increase in the Secondary Investment portfolio between 31 December 2016 and 31 December 2017 was primarily due to investments transferring from the Primary Investment portfolio, net of the realisations completed in 2017.

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 agreed realisations totalling £298.9 million, one of which, Lambeth Social Housing, is not expected to complete until later in March 2018, giving us realisations for the year of £289.0 million:

· Our investments in two PPP road projects, A1 Poland and M6 Hungary, were sold to third parties for £120.4 million and £22.7 million respectively in March 2017;

· Our investment in one PPP project, Croydon and Lewisham Street Lighting, was sold to JLIF in June 2017 for £8.2 million;

· Our investments in five further PPP projects, including a further 9% in IEP (Phase 1), were sold to JLIF in October 2017 for £104.6 million; and

· Our investment in Llynfi Wind Farm was sold to JLEN for £43.0 million.

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

Transfers from the Primary Investment portfolio

During the year, 14 investments transferred from the Primary Investment portfolio to the Secondary Investment portfolio as the underlying projects moved into the operational stage. Of these 14 investments, the investment in Llynfi Wind Farm was sold before the year end leaving the following 13 investments still in the Secondary Investment portfolio at 31 December 2017.

New Royal Adelaide Hospital, Australia (17.26% interest)

Designed to admit 80,000 patients per annum, the hospital achieved technical completion in mid-March, commercial acceptance in mid-June and admitted its first patients in September 2017, resulting in the project moving into a fully operational status. The project company has recently agreed with its syndicate of senior lenders a two year extension of the project's senior debt facility beyond June 2018 to allow a sufficient period for refinancing. Since the start of full operations, the project company has been closely monitoring the performance of the facilities management services, which is steadily improving. 

Lambeth Social Housing, UK (50% interest, sale agreed in October 2017)

This project comprises the construction of 808 new build homes and the modernisation and refurbishment of 172 existing homes in Lambeth, South London. John Laing agreed to sell its interest in this project to JLIF in October 2017.

Glencarbry Wind Farm, Republic of Ireland (100% interest)

This project comprises seven 3.3 MW turbines and five 2.5 MW turbines with total installed capacity of 35.6 MW, and is our first renewable energy investment in the Republic of Ireland. Full operation commenced in July 2017, with revenue supported by the Renewable Energy Feed-in Tariff.

Hornsdale Wind Farm Phase Two, Australia (20% interest)

The project comprises a 32 turbine wind farm in South Australia with an installed capacity of 102 MW. The project benefits from a 20 year offtake arrangement from a government counterparty (Australian Capital Territory).

Hornsdale Wind Farm Phase Three, Australia (20% interest)

The project comprises a 35 turbine wind farm in South Australia with an installed capacity of 109 MW. The project benefits from a 20 year offtake arrangement from a government counterparty (Australian Capital Territory).

Speyside Biomass, UK (43.35% interest)

This 14 MWe Combined Heat and Power biomass plant in Speyside, Scotland, supplies heat in the form of steam to the adjacent Macallan distillery and electricity to the grid. Its fuel is low-grade wood harvested locally and supplied by a consortium of provincial growers and forest industry suppliers. 

Sterling Wind Farm, US (92.5% interest)

This 30 MW wind farm located in New Mexico was the Group's first renewable energy investment in the US. Operations commenced in late 2017 and the wind farm benefits from a 15 year fixed price power purchase agreement.

Rocksprings Wind Farm, US (95.3% interest)

Located in Texas, this project has a total capacity of 149 MW. Operations commenced in late 2017 and the wind farm benefits from power purchase agreements with two investment grade corporate offtakers.

New Perth Stadium, Western Australia (50% interest)

This 60,000 seater stadium is a major sporting and entertainment venue, capable of staging national and international events. Construction was completed in December 2017 in time for the start of the 2018 Australian Rules Football season and on 28 January 2018 the stadium hosted its first one-day cricket international between Australia and England.

Kiata Wind Farm, Australia (72.3% interest)

Located in South Australia, the project comprises nine Vestas V126 WTG turbines with a total installed capacity of 30 MW. Full operation commenced in December 2017. The project benefits from a 10 year offtake agreement with the Victorian Government.

Nordergründe Offshore Wind Farm, Germany (30% interest)

Located in the North Sea north of Wilhelmshaven, Germany, this is the Group's first investment in offshore wind. This project comprises 18 Senvion 6.2 M126 turbines with a total capacity of 110.7 MW. Following installation of the offshore sub-station in September 2017, all 18 turbines were subsequently commissioned in the fourth quarter of 2017 and the project became fully operational.

Sommette Wind Farm, France (100% interest)

Located in Picardie, France, this project comprises 9 Nordex N117 turbines and has a total capacity of 21.6 MW. Operations commenced in December 2017 and the wind farm benefits from a 15 year feed-in-tariff arrangement.

Buckthorn Wind Farm, US (90.05% interest)

Located in Texas, this project has a total capacity of 100 MW. Partial operations commenced in November 2017 with full operations commencing in January 2018. The wind farm benefits from a 13 year power purchase agreement.

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 31 December 2017, JLIF's and JLEN's latest published portfolio values were £1,227.8 million at 30 September 2017 and £420.7 million at 31 December 2017 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 if 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.

Fee income from external IMS grew from £15.8 million in 2016 to £16.7 million in 2017.

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

• Where possible, 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 from the projects underlying our renewable energy investments 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 2017 of £19.0 million (2016 - £17.8 million) includes £2.3 million (2016 - £2.0 million) of fee income for the provision by John Laing of directors to 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).

The Group earned revenues of £6.1 million from the provision of PMS during 2017 (year ended 31 December 2016 - £14.9 million). In November 2016, the Group divested its PMS activities in the UK to HCP Management Services Limited (HCP). The activities sold contributed £7.9 million of the total PMS revenues of £14.9 million in 2016.

The remaining PMS activities are principally focused on MSAs relating to projects outside the UK. At 31 December 2017, the Group held 24 MSAs (31 December 2016 - 19 MSAs).

Projects Under Construction

John Laing's investments in projects are managed by the Asset Management division. For each project we invest in, the Asset Management division closely monitors the construction stage and provides active input where necessary to ensure that deadlines are met. Despite this, since the projects we invest in are principally large, sophisticated, infrastructure assets, delays can occur. In all instances, the impact of construction delays and a judgement as to potential outcomes are taken into account when the portfolio valuation is prepared.

An update on significant projects under construction is set out below.

Intercity Express Programme (IEP), UK (Phase 1 - 15% interest; Phase 2 - 30% interest)

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 intercity express trains for the UK's Great Western Main Line (Phase 1 - 15 % 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.

In the last quarter of 2017, the first ten trains for IEP (Phase 1) were accepted into passenger operations, achieving a key milestone for the project known as Minimum Fleet Acceptance. As at 31 December 2017, 15 trains had been accepted into operational service. Total fleet acceptance for Phase 1 is expected in late 2018 and commencement of train deliveries for Phase 2 is also expected in late 2018.

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

This project is to design, build, finance, maintain and operate two new commuter rail lines and a section of a third in the Denver Metropolitan area. The three rail lines run for a total of 36 miles, connecting Denver International Airport and Denver Union Station to each other and to other parts of the Denver Metropolitan area. The fleet of rolling stock has been completed.

Following opening of the "A" line in 2016 and the "B" line in 2017, testing and commissioning of the "G" line is currently underway. The project company is appealing against the Colorado Public Utility Commission's decision not to issue the required permit for the level crossings on the "A" line. The outcome should be known in the second quarter of 2018.

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 is expected to be completed in 2021.

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

The project involves the provision and maintenance of 75 new six-car trains for the state of Queensland, which will be operated by Queensland Rail, as well as a new maintenance facility at Wulkuraka, Queensland. Whilst the programme is currently behind schedule, the maintenance facility has been completed and nine trains are currently in passenger service. Additional trains are expected to be accepted and enter passenger service ahead of the Commonwealth Games that start on the Australian Gold Coast in April 2018.

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. While the overall programme is approximately 12 months behind schedule, the first light rail vehicles arrived in Australia in 2017 and the total length of track installed is now 12.9 kilometres, more than 50% of the total.

Portfolio Valuation

The portfolio valuation at 31 December 2017 was £1,193.8 million compared to £1,175.9 million at 31 December 2016. After adjusting for realisations, cash yield and cash invested, this represented a positive movement in fair value of £160.7 million (15.6%):

Cash investment in respect of four new renewable energy assets and one new PPP asset entered into during 2017 totalled £115.0 million. In addition, equity and loan note subscriptions of £94.9 million were injected into existing projects in the portfolio as they progressed through, or completed, construction.

During 2017, the Group completed the realisation of seven entire investments and part of one other investment for a total consideration of £289.0 million, including £1.9 million of consideration deferred to 2018. In addition, the Group received £23.5 million on the acquisition of its investment in Manchester Waste VL Co by the Greater Manchester Waste Disposal Authority (GMWDA). Cash yield on the portfolio during the year totalled £40.2 million.

The movement in fair value of £160.7 million is analysed in the table below.

The net movement in fair value comprised unwinding of discounting (£80.0 million), the reduction of construction risk premia (£53.6 million), the reduction in operational benchmark discount rates (£23.6 million), uplift on financial closes (£50.1 million), movements in macroeconomic forecasts (£4.1 million) and a net movement from value enhancements and other changes (£15.1 million), offset by adverse movements from lower power and gas price forecasts (£54.8 million) and adverse foreign exchange movements (£11.0 million). Foreign exchange movements are addressed further in the Financial Review section. The net benefit of £23.6 million from the amendment of benchmark discount rates for a number of investments is in response to our understanding and experience of the secondary market.

There was a net increase of £32.3 million in value enhancements and other changes from 2016 to 2017. The Group achieved higher value enhancements in 2017 compared to 2016. Further, in 2016 there were value reductions in relation to the Group's investment in New Royal Adelaide Hospital, which made a positive contribution in 2017. In 2017, the value reduction of £25.5 million on the two Manchester Waste investments announced at the half year was partly offset by improvements in the valuation of Manchester Waste TPS Co once it became unleveraged.

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

The decrease in the Primary Investment portfolio is due to transfers to the Secondary Investment portfolio of £413.1 million and investment realisations of £82.5 million, offset by a positive movement in fair value of £172.9 million, including value enhancements and financial closes achieved during the year, and cash invested of £206.7 million.

The increase in the Secondary Investment portfolio is due to transfers from the Primary Investment portfolio of £413.1 million and a cash investment of £3.2 million, offset by a negative movement in fair value of £12.2 million, investment realisations during the year of £230.0 million and cash yield of £40.2 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 two principal inputs are (i) forecast cash flows from investments and (ii) discount rate. 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 2017, derived from detailed financial models for each underlying project. These incorporate the Group's expectations of likely future cash flows, which are stated net of project tax, and therefore reflect changes in tax legislation as at 31 December 2017 in the jurisdictions in which the Group operates, including recent changes in the US. Expectations of future cash flows also include expected value enhancements and the Group's expectations of future macroeconomic factors such as inflation and, for renewable energy projects, power and gas prices.

For the 31 December 2017 valuation, the overall weighted average discount rate was 8.8% compared to the weighted average discount rate at 31 December 2016 of 8.9%. The decrease was primarily due to reductions in operational discount rates for certain investments and progress in construction, partially offset by the impact of new investments. The weighted average discount rate at 31 December 2017 was made up of 9.3% (31 December 2016 - 9.1%) for the Primary Investment portfolio and 7.9% (31 December 2016 - 8.4%) for the Secondary Investment portfolio.

The overall weighted average discount rate of 8.8% is closer to the weighted average discount rate for the Primary Investment portfolio, reflecting 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.

The discount rate ranges used in the portfolio valuation at 31 December 2017 were as set out below:

The shareholding in JLEN was valued at its closing market price on 31 December 2017 of 109.25p per share (31 December 2016 - 106p 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 2017.

Macroeconomic assumptions

During 2017, higher than previously forecast actual inflation and deposit rates receivable on cash balances within projects had a positive 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, movements of foreign currencies against Sterling over the year to 31 December 2017 resulted in net adverse foreign exchange movements of £11.0 million (excluding the effect of foreign exchange hedges as described in the Financial Review section) (2016 - £74.7 million net favourable foreign exchange movements).

Investments in overseas projects are fair valued based on the spot exchange rate on the balance sheet date. As at 31 December 2017, a 5% movement of each relevant currency against Sterling would decrease or increase the value of investments in overseas projects by c.£38 million.

At 31 December 2017, based on a sample of six of the larger PPP investments by value, a 0.25% increase in inflation is estimated to increase the value of PPP investments by £15 million and a 0.25% decrease in inflation is estimated to decrease the value of PPP investments by £14 million. Certain of the underlying project companies incorporate some inflation hedging.

On each valuation and review of the portfolio, the Group updates the detailed financial model of each renewable energy project to reflect the impact of the latest power and gas forecast prices on the project's revenue to the extent that prices are not fixed by governmental support mechanisms and/or offtake arrangements. The Group obtains forecasts for power and gas prices from external parties who are recognised as experts in the market in the relevant region, including by potential secondary market buyers. During 2017, a reduction in forecast power and gas prices resulted in a £54.8 million adverse fair value movement (2016 - adverse fair value movement of £17.6 million). At 31 December 2017, based on a sample of seven of the larger renewable energy investments by value, a 5% increase in power price forecasts is estimated to increase the value of renewable energy investments by £15 million and a 5% decrease in power price forecasts is estimated to decrease the value of renewable energy investments by £14 million.

The table below summarises the main macroeconomic assumptions used in the portfolio valuation:

Discount rate sensitivity

The weighted average discount rate applied at 31 December 2017 was 8.8% (31 December 2016 - 8.9%). The table below shows the sensitivity of a 0.25% change in this rate.

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, 62.0% of the portfolio by value had a greater than 25-year unexpired concession term or useful economic life remaining at 31 December 2017, compared to 53.6% at 31 December 2016.

split between PPP and renewable energy

Primary PPP investments made up the largest part of the portfolio, representing 45.4% of the portfolio value at 31 December 2017, with Secondary renewable energy investments representing a further 31.3%.

by revenue type

Availability-based investments continued to make up the majority of the portfolio, representing 58.8% of the portfolio value at 31 December 2017. 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

Wind and solar investments represented 30.9% of the portfolio value at 31 December 2017, with rail rolling stock accounting for a further 24.9%. Other transport investments (excluding rail rolling stock) made up 24.1% of the portfolio by value, while social infrastructure investments and waste and biomass investments made up 11.8% and 7.4% respectively. The portfolio underlying the JLEN shareholding consists of investments in a mix of renewable energy and environmental projects.

by currency

The percentage of investments denominated in foreign currencies increased from 56.6% to 65.2%. This is consistent with our pipeline and the overseas jurisdictions we target.

by geographical region

Investments in the UK decreased to 33.9% of the portfolio value at 31 December 2017. Asia Pacific was the next largest category at 24.4%. Investments in projects located in North America made up 23.7% and investments in Continental Europe made up 17.1%. 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 39.3% of the portfolio at 31 December 2017, a decline from 44.2% at 31 December 2016. The next five largest investments made up a further 19.6%, with the remaining investments in the portfolio comprising 40.2%.

Investment portfolio as at 31 DECEMBER 2017

Financial Review

Basis of preparation

The financial information has been prepared on the historical cost basis except for the revaluation of the Group's investment in John Laing Holdco Limited, through which the Group indirectly holds its 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 Consolidated Financial Statements. 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 its subsidiaries, joint ventures and associates 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. 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 when making business decisions, including when reviewing the level of financial resources and deciding where these resources should be utilised. Therefore, the Directors believe it is helpful to readers of these 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 and also comprises income and costs that do not arise directly from investments in this portfolio, including investment fees earned from project companies by recourse subsidiaries that are held at FVTPL.

Notes:

a) Adjustments comprise £0.6 million income reclassified from 'fair value movements - other' to 'other net costs'; £0.4 million of costs reclassified from 'fair value movements - other' to 'general overheads' and £0.4 million interest income reclassified from 'fair value movements - other to 'finance costs'.

b) Adjustments comprise £1.5 million part proceeds received from the sale of the PMS UK business reclassified from 'other income' to 'other net costs' and £0.1 million of other income from projects reclassified from 'other income' to 'general overheads'.

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

d) For a reconciliation between the Group Income Statement and re-presented income statement for the year ended 31 December 2016, refer to the 2016 Annual Report and Accounts.

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

Profit before tax for the year ended 31 December 2017 was £126.0 million (2016 - £192.1 million). The main reason for the lower profit before tax was a lower fair value movement compared to 2016.

· The main profit contributor in 2017 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 higher value uplift on financial closes of new investments and value enhancements offset by adverse foreign exchange rate movements.

· The lower contribution in 2017 from the Secondary Investment division was primarily as a result of adverse foreign exchange rate movements as well as lower power and gas price forecasts and a value reduction in relation to the Group's investment in the Manchester Waste VL Co project.

· The lower contribution in 2017 from the Asset Management division was principally due to lower fee income from PMS as a result of the sale of the UK activities of PMS in late 2016 offset by higher fee income from IMS as a result of increased external AuM.

The movement in fair value on the portfolio for the year ended 31 December 2017, after adjusting for the impact of investments, cash yield and realisations, was a £160.7 million gain (2016 - £214.4 million gain). For further details of the movement in fair value on the portfolio, see the Portfolio Valuation section.

Negative other fair value movements of £2.1 million for the year ended 31 December 2017 principally comprised net foreign exchange losses outside the investment portfolio of £3.9 million (see the Foreign Currency Exposure section in this review for further details) and a disposal proceeds adjustment payment of £3.6 million offset by fair value gains of £0.7 million in respect of non-portfolio investments in small joint ventures and £4.7 million of tax income.

The Group earned IMS revenue of £19.0 million (2016 - £17.8 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 £6.1 million (2016 - £14.9 million) with the reduction from 2016 a result of the sale of the Group's PMS activities in the UK to HCP in November 2016. The activities sold contributed approximately £7.9 million of the £14.9 million PMS revenues for the year ended 31 December 2016.

The Group achieved recoveries of bidding costs on financial closes of £3.7 million in 2017 (2016 - £7.5 million).

Staff costs by division are shown below:

Included within Asset Management staff costs are costs relating to:

The small decrease in overall staff costs is principally due to the sale of the PMS UK activities in November 2016 offset by higher costs of share-based incentive schemes under IFRS 2 Share-based Payment with costs in the year ended 31 December 2017 of £3.2 million compared to £2.0 million in the prior year. See note 6 of the Group financial statements for further details on the share-based incentive schemes.

Finance costs of £10.1 million in 2017 (2016 - £7.7 million) include costs arising on the corporate banking facilities net of any interest income, with the increase from last year primarily due to a higher average usage of the corporate banking facilities, resulting from the increased level of investments, and lower interest earned on cash collateral balances.

The Group's overall tax credit on profit on continuing activities for 2017 was £6.2 million (2016 - credit of £4.8 million). This comprised a net tax credit of £1.5 million (2016 - £1.8 million charge) in recourse subsidiaries that are consolidated (shown in the 'Tax credit/(charge)' line on the Group Income Statement), primarily in relation to group relief receivable from entities held at FVTPL, and a net tax credit of £4.7 million (2016 - £6.6 million) in recourse subsidiaries that are held at FVTPL (shown in the 'net gain on investments at fair value through profit or loss' line on the Group Income Statement), including (i) group relief payable to recourse subsidiaries that are consolidated, together with (ii) group/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 recourse subsidiaries. There are no losses in the Company but there are tax losses in recourse subsidiaries that are held at FVTPL.

In late 2017, the UK Government enacted legislation, effective from 1 April 2017, which introduced a Fixed Ratio Rule to cap the amount of tax deductible net interest to 30% of a company's UK EBITDA. This was in response to OECD recommendations. In the US, new legislation came into effect on 1 January 2018, including a restriction on interest deductibility for certain US entities paying interest to foreign entities. The impact from both the changes to UK and US tax is reflected in the fair value at 31 December 2017 of the Group's investments in those jurisdictions.

Re-presented balance sheet

The re-presented balance sheet is reconciled to the Group Balance Sheet at 31 December 2017 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 £152.6 million (31 December 2016 - £81.6 million) within 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 FVTPL of £1,346.4 million comprise: portfolio valuation of £1,193.8 million and other assets and liabilities within recourse investment entity subsidiaries of £152.6 million (see note 12 to the Group financial statements).

b) Other assets and liabilities within recourse investment entity subsidiaries of £152.6 million referred to in note (a) include: (i) cash and cash equivalents of £145.2 million, of which £133.1 million is held to collateralise future investment commitments and £12.1 million is other cash balances, (ii) net positive working capital and other balances of £7.1 million and (iii) non-portfolio investments of £0.3 million.

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

d) Trade and other receivables (£7.6 million), current tax liabilities (£1.4 million), trade and other payables (£17.3 million) and provisions (£1.0 million) are combined as working capital and other balances.

e) Borrowings of £173.2 million comprise cash borrowings of £176.0 million less unamortised financing costs of £2.8 million, with the non-current portion of unamortised financial costs of £1.5 million re-presented as other long-term assets and the current portion of £1.3 million re-presented as working capital and other balances.

f) Total retirement benefit obligations are shown in their separate components as in note 19 to the Group financial statements.

g) For a reconciliation between the Group Balance Sheet and re-presented balance sheet as at 31 December 2016, refer to the 2016 Annual Report and Accounts.

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

Note:

(1) Short-term cash borrowings of £176.0 million (31 December 2016 - £165.0 million) net of cash balances of £147.7 million (31 December 2016 - £76.8 million), of which £133.1 million was held to collateralise future investment commitments (31 December 2016 - £23.7 million).

Net asset value increased from £1,016.8 million at 31 December 2016 to £1,123.9 million at 31 December 2017.

The Group's portfolio of investments in project companies and listed investments was valued at £1,193.8 million at 31 December 2017 (31 December 2016 - £1,175.9 million). The valuation methodology and details of the portfolio value are provided in the Portfolio Valuation section.

The Group held cash balances of £147.7 million at 31 December 2017 (31 December 2016 - £76.8 million) of which £133.1 million (31 December 2016 - £23.7 million) was held to collateralise future investment commitments (see the Financial Resources section below for more details). Of the total Group cash balances of £147.7 million, £145.2 million was in recourse subsidiaries held at FVTPL, including the cash collateral balances, that are included within investments at FVTPL on the Group Balance Sheet. The remaining £2.5 million was in the Company and recourse subsidiaries that are consolidated and shown as cash and cash equivalents on the Group Balance Sheet (see the re-presented balance sheet for further details).

Working capital and other balances (a negative amount) were lower than prior year primarily because of a net positive fair value at 31 December 2017 on foreign exchange hedges, lower provisions and higher trade receivables as a result of increased fund management income.

The combined accounting deficit in the Group's defined benefit pension and post-retirement medical schemes at 31 December 2017 was £40.3 million (31 December 2016 - £69.3 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 2017, JLPF had a deficit of £35.2 million (31 December 2016 - £64.2 million) whilst the Plan had a surplus of £2.9 million (31 December 2016 - £2.9 million). The liability at 31 December 2017 under the post-retirement medical scheme was £8.0 million (31 December 2016 - £8.0 million).

The pension deficit in JLPF is based on a discount rate applied to pension liabilities of 2.50% (31 December 2016 - 2.80%) and long-term RPI of 3.10% (31 December 2016 - 3.20%). The amount of the deficit is dependent on key assumptions, principally: inflation rate, discount rate and life expectancy 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 decreased since 31 December 2016 primarily as a result of the Group's cash contribution to JLPF of £24.5 million in March 2017.

In December 2016, following a triennial actuarial review of the JLPF as at 31 March 2016, a seven-year deficit repayment plan was agreed with the JLPF Trustee. It was agreed to repay the actuarial deficit of £171 million at 31 March 2016 as follows:

Re-presented cash flow statement

The Group Cash Flow Statement includes the cash flows of the Company and those 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 12 to the Group 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.

1 For reconciliation of these amounts to the Group Balance Sheet see the re-presented balance sheet above.

Cash yield comprises £40.2 million (2016 - £34.8 million) from the investment portfolio (see the Portfolio Valuation section for further details) and £0.7 million (2016 - £2.0 million) from non-portfolio investments.

The net operating cash outflow in the year ended 31 December 2017 of £17.3 million was higher than the outflow in 2016 principally due to higher bid costs net of recoveries.

Total operating cash flow in the year ended 31 December 2017 was higher than in 2016 primarily due to an adverse impact on foreign exchange hedges in 2016.

In the year, in addition to the payment of the PPF levy of £0.2 million (2016 - £0.3 million), the Group made a cash contribution to JLPF of £24.5 million (2016 - £18.1 million).

During the year, cash of £209.9 million (2016 - £301.5 million) was invested in project companies. In the same period, investments in eight projects were realised (including five investments to JLIF, one to JLEN and two investments to third parties) for total proceeds of £289.0 million, of which £287.1 million was received in the year and £1.9 million was deferred to 2018 (2016 - £140.2 million from the realisation of six investments (including four investments to JLIF and two investments to JLEN) and sale of a 2.2% shareholding in JLEN for £6.4 million). The above proceeds were in addition to the cash received on the acquisition of Manchester Waste VL Co by the GMWDA of £23.5 million.

Finance charges were higher in 2017 due to higher average usage of the corporate banking facilities as well as lower interest income received on cash collateral balances.

Dividend payments of £30.1 million in the year ended 31 December 2017 comprised the final dividend for 2016 of £23.1 million and the interim dividend for 2017 of £7.0 million (2016 - final dividend for 2015 of £19.4 million and interim dividend for 2016 of £6.8 million).

FINANCIAL RESOURCES

At 31 December 2017, the Group had principal committed corporate banking facilities of £475 million (31 December 2016 - £400 million), expiring in March 2020, which are primarily used to back investment commitments. The Group also had surety facilities of £50 million backed by two £25 million committed liquidity facilities both expiring in March 2018. Since the year end, these liquidity facilities have been extended to February 2019. Net available financial resources at 31 December 2017 were £153.1 million (31 December 2016 - £168.1 million).

Analysis of Group financial resources

1 Cash and bank deposits exclude cash collateral balances. Of the total cash and bank deposit balances of £14.6 million, £2.5 million was in the Company and recourse subsidiaries that are consolidated and therefore shown as cash and cash equivalents on the Group Balance Sheet, with the remaining £12.1 million in recourse subsidiaries held at FVTPL which are included within investments at FVTPL on the Group Balance Sheet (see the re-presented balance sheet).

Letters of credit issued under the committed corporate banking facilities of £152.3 million (31 December 2016 - £112.6 million) and under additional surety facilities of £50.0 million (31 December 2016 - £50.0 million) 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 balance at 31 December 2017 analysed by investment and the dates 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 2017, there was a net adverse fair value movement of £11.0 million in the portfolio valuation, which was net of a £3.0 million gain on the divestment of the Group's investment in the A1 Poland project where the proceeds were hedged (see below). Sterling strengthened against the US, Australian and New Zealand dollars between 31 December 2016 and 31 December 2017, but weakened against the Euro.

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. In the year, there was a net loss of £3.9 million from foreign exchange movements outside the portfolio, which was primarily as a result of a loss of £3.0 million on forward foreign exchange contracts taken out to hedge the proceeds from the divestment of the Group's investment in the A1 Poland project.

Letters of credit in issue at 31 December 2017 of £202.3 million (31 December 2016 - £162.6 million) are analysed by currency as follows:

Cash collateral at 31 December 2017 of £133.1 million (31 December 2016 - £23.7 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 2017.

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.

The principal internal controls that operated throughout 2017 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;

· a deterrent to fraud;

· another layer of assurance that the Group is meeting its FCA regulatory requirements; and

· 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 Head of Internal Audit meets regularly with senior management and the Audit & Risk Committee to discuss key findings and management actions undertaken. The 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, assists the Board, Audit & Risk Committee and Executive Committee in formulating and enforcing the Group's risk management policy. During 2017, this committee was chaired by the Group Finance Director but from 2018 will be chaired by the Group's Chief Risk Officer. The Head of Internal Audit attends each meeting of the Management Risk Committee. The Management Risk Committee 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. All divestment decisions are scrutinised by the Divestment Committee and approved 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.

The Group's three strategic objectives are:

1. Growth in primary investment volumes (new investment 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 7 March 2018 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 LLPStatutory Auditor

7 March 2018

Group Income Statement

for the year ended 31 December 2017

Group Statement of Comprehensive Income

for the year ended 31 December 2017

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 2017

for the year ended 31 December 2016

1 Dividends paid:

The total estimated amount to be paid in May 2018 in respect of the proposed final dividend for 2017 is £31.9 million. These amounts have not been adjusted for the rights issue announced on 8 March 2018.

Group Balance Sheet

as at 31 December 2017

The financial statements of John Laing Group plc, registered number 05975300, were approved by the Board of Directors and authorised for issue on 7 March 2018. They were signed on its behalf by:

Group Cash Flow Statement

for the year ended 31 December 2017