Results for the six months ended 30 June 2020

JOHN LAING GROUP PLC

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

Solid PPP portfolio performance offset by Renewable Energy projects challenges and COVID-19

With our strong balance sheet and differentiated greenfield platform, we are well positioned to invest in a growing and attractive infrastructure market

John Laing Group plc ("John Laing" or "the Group") is a responsible investor and active manager of infrastructure projects internationally. We create value through investing in sustainable greenfield infrastructure projects, and by actively managing these projects through construction and into operation.

The Group is today announcing its unaudited results for the six months ended 30 June 2020.

Financial and operational overview:

For the six months ended 30 June 2020.

o 87% of PPP portfolio value comprised availability-based revenue projects, which performed well in the period and provide a resilient underpin to the portfolio, particularly in a challenging macro-economic environment.

o 13% of PPP portfolio value comprised volume-based revenue projects, with only a modest impact from COVID-19.

o 26% of total portfolio value comprised Renewable Energy projects which will be realised over time, reducing the exposure to merchant power prices and reducing volatility in portfolio value and returns.

o Focused on realising Renewable Energy projects at the right time and under the right conditions in order to maximise value for shareholders.

o Attractive secondary portfolio, capable of generating good realisation returns over the next few years. Secondary assets represent £836 million of total portfolio value.

o Material proportion of secondary assets portfolio comprises availability-based revenue projects with good yield characteristics, and which are expected to be highly attractive prospects for realisation, particularly in a low interest rate environment.

o Group's dividend policy allows shareholders to share directly in the Group's realisation successes.

o Low investment activity in the period, largely due to delays in public procurement and bid processes from 2020 to 2021, driven by COVID-19 disruption. Therefore, the target of £1 billion of investments by the end of 2021 is unlikely to be achieved.

o Healthy increase in preferred and short-listed bidder PPP positions: 10 positions with an aggregate gross investment value of £572 million (31 December 2019: nine positions with an aggregate gross investment value of £443 million).

o Group well positioned to access new investment opportunities in a growing infrastructure market, including Government programmes to build new infrastructure to stimulate economies.

o Strong balance sheet and liquidity position, providing resources and flexibility to take advantage of a developing investment pipeline and new opportunities.

Strategic review:

o Strategy: define a clear and focused strategy for John Laing.

o Resources and capabilities: determine the right resourcing and capabilities for the business and its target investment areas, including the scale and skill-set of the investment teams.

o Processes: improve the consistency and discipline of our investment processes and asset management approach.

o Costs: ensure that the cost base is efficient, and aligned with the market opportunity.

o Capital management: ensure an efficient balance sheet strategy to generate both good distributions to shareholders and funds to invest in future growth opportunities.

o Disclosure: enhance the level of disclosure and define new Key Performance Indicators for the business, aligned with its strategy.

Ben Loomes, John Laing's Chief Executive, said:

"The first half of 2020 has been challenging and I would like to thank all of my colleagues for their hard work and commitment. The resilient performance of the PPP portfolio and continued good project delivery have been more than offset by challenges in the Renewable Energy portfolio as well as macro-economic factors. New investments in the period were minimal, with COVID-19 delaying public procurement processes, as well as the decision taken earlier this year to cease new investment in wind and solar generation.

Nevertheless, I am confident in the outlook for the business. We are building good momentum in our pipeline of preferred and short-listed bidder positions in PPP projects, and the prospects for infrastructure investment are stronger than ever. At its core, John Laing has a differentiated greenfield projects platform with a strong long-term track record of creating value.

The valuation of our portfolio provides a solid base from which to deliver attractive and more consistent and sustainable shareholder returns. We have an attractive portfolio with significant embedded value and, as we manage greenfield projects through to operation, good realisation opportunities at uplifts to book value.

The Group's expertise and long-term partner relationships enable it to access new opportunities, and create value for all stakeholders by investing in, and actively managing, sustainable infrastructure projects. A strategic review is well underway, that will ensure that we are well-positioned to capitalise on new investment opportunities and develop a healthy future pipeline."

John Laing Group will be announcing its half year results for the six months to 30 June 2020 on Thursday, 20 August 2020.

A recorded presentation will be available at www.laing.com at 08.00 BST and CEO Ben Loomes and Group Financial Controller Stuart Colvin will host a Q&A for analysts and investors at 09.30 BST. 

Webcast URL:

(Participants can register for the event but the presentation will not be available until 8am)

https://www.investis-live.com/john-laing/5f2a7c4bd9f7a00c00a4d183/yrbs

Conference call details - go live at 09:30am:

UK: 0800 640 6441

UK (Local): 020 3936 2999

All other locations: +44 20 3936 2999

Participant access code: 622696

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

For further information:

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.

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

Notes:

(1) NAV per share at 30 June 2020 calculated as NAV of £1,525 million divided by the number of shares in issue at 30 June 2020 of 493.0 million, excluding shares held in the EBT.

(2) Basic EPS; see note 7 to the Condensed Group Financial Statements.

(3) For further details, see the Business Review.

H1 2020 in review: SOLID PPP PORTFOLIO PERFORMANCE offset by RENEWABLE ENERGY PROJECTS CHALLENGES AND COVID-19

COVID-19 RESPONSE

At the on-set of the COVID-19 crisis, we took swift action to protect the wellbeing of our employees and those of our project companies. We initiated our business continuity plan with all of our employees working remotely and complying with all of the latest public health guidance. John Laing has senior staff and resources located in each of the geographies in which we invest and manage assets, and this allows the business to respond effectively to any project issues that may arise. 

Operationally, our assets and teams responded well to the challenges presented by COVID-19. Our teams worked with our partners, clients and communities across our portfolio to prioritise wellbeing whilst progressing projects under construction and maintaining asset availability. Our focus remains on supporting the public sector to keep essential infrastructure running smoothly, and our teams continue to provide clients with the support they need. This includes frontline assets such as Alder Hey Children's hospital where the project company supported the hospital's response to the pandemic, agreeing variations to the project agreement to enable the provision of additional intensive care beds.

As local guidelines and regulations permit, we will progressively open our offices. Returning to the office is voluntary. We have undertaken risk assessments for each of our offices, and have modified premises to keep our people safe. Clear, consistent and frequent communication has been critical, and has enabled us to ensure that our teams remain engaged and motivated. John Laing would like to thank all its employees and stakeholders for their commitment and support through this crisis.

In response to the pandemic, and to support our communities, we launched the John Laing Group COVID Communities Response Fund. Donations have been focused on organisations with links to our projects and people. 

FINANCIAL Performance 

During the first half, NAV reduced from £1,658 million at 31 December 2019 to £1,525 million at 30 June 2020. And NAV per share reduced from 337 pence to 309 pence, a reduction of 6% before dividends paid (equivalent to a decline of 10% on a constant currency basis).

Despite the COVID-19 crisis, we continued to make good progress with project delivery. Our projects were resilient operationally, maintaining asset availability and delivering critical services to the communities we serve.

While our PPP portfolio delivered a solid performance, this was more than offset by challenges in the Renewable Energy portfolio. A breakdown of the contribution to NAV from each of the PPP and Renewable Energy portfolios during the first half of 2020, is as follows:

Project delivery contributed £84 million (H1 2019: £88 million), or 17 pence per share, to NAV. Delays to construction of projects as a result of COVID-19 had only a modest financial impact. However, due to the crisis, achievement of value enhancements in the period was lower than expected, at £15 million (H1 2019: £78 million), or 3 pence per share. Operational enhancements to our projects were hampered by the lockdown and credit market movements have diminished some of the potential nearer-term upside from potential refinancings. For those projects with short-term debt, none have any requirement to refinance in 2020. We continue to monitor the market closely, and will look to take advantage of opportunities where the market permits.

Total value reductions to the portfolio were £234 million, or 47 pence per share. These comprise:

· £95 million due to project performance losses, of which £84 million relates to Renewable Energy projects. Within this, £77 million relates to performance issues on our solar and biomass projects, including £38 million due to increased discount rates to reflect higher risk on these projects. One of our two Australian solar assets, Sunraysia, which is still in construction, experienced technical issues. There have also been ongoing delays with the Australian Energy Market Operator ("AEMO") registration process which is holding up the project's connection to the grid. The two assets also experienced value reductions to reflect the expected costs of recapitalisation principally brought on by asset-specific challenges, including transmission issues, and lower power price forecasts. For our US solar assets, the combination of falling power prices with relatively short off-take arrangements, and high leverage, means much of the value of the assets is attributable to back-end loaded cash flows. Our biomass plants in the UK were also impacted by higher feedstock costs, significantly reduced power prices and some operational performance issues, and have been substantially written down. 

· £50 million due to lower power price forecasts across the Renewable Energy portfolio. Near-term power price forecasts have been materially impacted by the fall in economic activity as a result of COVID-19, which led to lower electricity demand. The medium- to longer-term outlook for power prices has also generally weakened due to falling gas and carbon prices as well as increasing renewable energy penetration. As a result, the most recent power price forecasts used by the Group as part of its valuation process show a material reduction in near-term forecasts, and a lesser reduction over the longer-term in almost all of the markets in which we have assets. PPA and off-take arrangements in place have provided some protection, but we have three assets which are fully exposed to merchant power prices - our two UK biomass plants and a Swedish wind farm. Over 70% of the value reduction due to power prices relates to assets with PPAs and off-take agreements with less than 10 years to run (as compared with asset lives of 25-35 years) - these assets represent 58% of our Renewable Energy portfolio. In Europe, following an external benchmarking to listed funds in the secondary market, we moved to use Generation Weighted Average power price curves. This change in valuation methodology contributed a £17 million value reduction.

· £40 million due to changes in macro-economic assumptions, particularly lower short-term inflation forecasts, which were largely caused by the volatile economic markets brought on by COVID-19. Value reductions related to lower short-term inflation assumptions totalled £32 million, with the remainder due to lower deposit rates.

· £21 million due to the direct impact of COVID-19. The most significant related to revised assumptions on project refinancings due to changes in debt markets during COVID-19. Value reductions to reflect lower short-term traffic forecasts on our two operational volume-based PPP road projects amounted to £6 million. Both projects have experienced a good improvement in traffic volumes since April but these are still below pre-COVID-19 levels.

· £11 million due to transmission issues in Australia. This primarily relates to a loss on one of our solar projects as a result of transmission-related issues. Due to the instability of the power system in south-western New South Wales, AEMO imposed a constraint on this network. This limits the flow of power on the main transmission line.

The weakening of Sterling against the US dollar, Australian dollar and Euro contributed a total value uplift of £73 million, or 15 pence per share, to NAV.

Close to 75% of the total value reduction in the period related directly to the Renewable Energy portfolio, particularly our solar and biomass assets. This Renewable Energy portfolio faced certain asset-specific challenges and as a result we have increased discount rates on these assets to reflect the higher relative risk the market is attributing to them, particularly in the currently uncertain market. As we progress construction and build stronger operational track records for these particular assets, and resolve the project-specific issues, there is scope to reduce the discount rates. Once ready for sale, the objective is to realise these assets in order to reduce the exposure of the portfolio to Renewable Energy and, in particular, to merchant power and fuel prices and the volatility that these have caused in portfolio value and returns.

The PPP portfolio has been resilient in the period, with the impact on portfolio value being mostly limited to changes in short-term macro-economic assumptions, and these have been offset by positive project performance. In respect of macro-economic assumptions, we have lowered our short-term inflation forecasts. We believe there is scope for this to reverse over time, dependent on the pace and extent of an economic recovery. 

PROJECT DELIVERY AND AVAILABILITY: COnTINUED GOOD PROGRESS AND PERFORMANCE

The overall impact of COVID-19 on our assets under construction during the period was modest. We made good progress on the delivery of a number of key projects including:

· IEP East: rolling stock replacement project in the UK

· I-4 Ultimate: highway project in Florida, USA

· MBTA: fare collection and ticketing system upgrade in Boston, USA

· Clarence Correctional Centre: correctional facility in New South Wales, Australia

· Sydney Light Rail: light rail project in Sydney, Australia

In our secondary assets portfolio, which represents 52% of total portfolio value, asset availability was maintained in line with expectations. Our two volume-based road projects, the I-77 in the US and the A130 in the UK, experienced a good recovery in traffic following declines in the early stages of the pandemic. While traffic volumes remain below pre-COVID levels, we expect an ongoing recovery during the rest of the year.

Further detail is provided in the Regional Reviews below.

INVESTMENTs: Muted 2020, momentum building for 2021 and beyond

New investment opportunities during the first half of 2020 were limited and investment commitments amounted to £2 million, comprising an additional equity commitment to MBTA as a result of a scope expansion and project refinancing.

The low investment activity in the period was largely due to public procurement and bid processes being delayed from 2020 to 2021. This was driven by the disruption caused by the COVID-19 pandemic which understandably diverted the resources and attention of Governments and authorities, and caused delays in launching procurement processes and related decision-making on bids.

As a result, our expectations for new investment commitments during the second half of 2020 are very modest. While public procurement and bid processes have been delayed, we have not seen any material cancellations of projects, and therefore we believe that this is a timing issue, and we will see bid processes progressing in 2021.

Encouragingly, in recent weeks we have seen momentum returning, which has resulted in a healthy increase in our preferred and short-listed bidder positions in PPP projects. Since the end of June, we have secured three new short-listed positions in North America: the SR-400 Express Lanes in Georgia; Phase 1 of the I-495 & I-270 P3 in Maryland; and a further PPP project which is confidential at this time.

Currently, we have one preferred bidder and nine short-listed positions representing an aggregate potential gross investment value of approximately £572 million, which is a material increase to the equivalent level of £443 million at 31 December 2019. The majority of these PPP projects in this pipeline have availability-based revenues.

Preferred and short-listed bidder positions

* Preferred bidder position

In March 2019, the Group announced an investment target of £1 billion to be achieved over three years from 1 January 2019 to 31 December 2021. Subsequent to that investment target being set, the Group decided to cease investing in further wind and solar generation projects following performance issues with investments made in this area. Furthermore, in 2020, the COVID-19 pandemic has resulted in delays in public procurement and bid processes for PPP projects. Over the 18-month period from 1 January 2019 to 30 June 2020, the Group invested £186 million. While we expect investment levels to increase in 2021, it is clear that achievement of the £1 billion investment target by the end of 2021 is unlikely.

A key objective of the Group is to develop a healthy and sustainable investment pipeline. In line with this, our focus will be on generating attractive and sustainable shareholder returns from investing selectively, managing our portfolio intensively, and realising assets at the right time to maximise value. This is not always compatible with volume-based and time-limited investment targets, particularly in changing market conditions. Instead of providing future investment and divestment targets, we will instead be focusing on providing details of our preferred and short-listed bidder positions, which we believe are a useful guide to our potential future investments. We have enhanced this disclosure by providing the revenue-type of each of the short-listed projects. In future, we will provide further disclosure of our investment track record across our projects and how we create value.

Historically, the Group has also provided an investment pipeline which looks up to three years ahead, which at 31 December 2019, was announced at a level of £3.2 billion. For reference, at June 2020, an updated assessment of the pipeline was £2.7 billion. The reduction in the pipeline reflects greater selectivity. In this assessment, we continue to see the majority of activity and opportunities in Australia and in the US. In addition, we see some potential emerging opportunities in Colombia and Peru, and are evaluating these carefully.

The pipeline has been intended to provide a reflection of the market potential, but has included potential longer-term opportunities which are not yet in formal bid processes, and may not ultimately come to market, or may not offer acceptable returns to John Laing. We do not believe that this three-year pipeline metric is a reliable guide to the future. Accordingly, and in line with our focus on investing well and selectively, we will discontinue the pipeline update going forward, and will instead provide more qualitative information on the pipeline and the future market opportunities, supplemented by details of our preferred and short-listed bidder positions.

MARKET AND INVESTMENT OUTLOOK: GROWING AND ATTRACTIVE INFRASTUCTURE MARKET, PRESENTING INCREASING OPPORTUNITIES FOR JOHN LAING 

Despite the uncertainty caused by COVID-19, we are seeing good momentum in our preferred and short-listed bidder positions in the PPP business. These positions have increased over the last 6 months. 

The fundamental drivers of the infrastructure market and the need for new infrastructure remain as strong as ever: population growth, urbanisation, energy transition, and the growing role of data and therefore the need for communications infrastructure. Oxford Economics estimates that c.USD3.7 trillion must be invested in infrastructure globally every year to 2040. 

Whilst uncertainty stemming from COVID-19 has caused some short-term delays to bid processes, we believe that the crisis has strengthened the medium- to longer-term outlook for infrastructure investment. Governments around the world view infrastructure investment not only as a means to support economic recovery, but as essential to the functioning of a modern economy. This includes investment in our traditional sectors, such as transport and social infrastructure, as well as infrastructure to improve digital connectivity and build resilience in the future, as well as infrastructure to support the energy transition as the world looks to a low-carbon future. Private finance will be needed to support this, which will provide new opportunities for us to invest. John Laing has strong liquidity and is well funded, which allows us to capitalise on these future opportunities. We bring strong greenfield expertise with experience of having invested in, and managed, over 150 projects. We are also adding to our team further expertise and capabilities, specifically in these new and emerging sectors, to ensure that we are well positioned. We also have a good international footprint, allowing us to access opportunities in different geographies as and when they emerge.

We see the outlook for our key geographies as follows: 

· Australia: the outlook is underpinned by economic and population growth, a strong PPP framework and a material national project pipeline. With population growth of over 40% expected from 2016-2040, Oxford Economics estimates total infrastructure spend of USD1.5 trillion over the same period. The combined pipelines for New South Wales and Victoria currently stand at over AUD160 billion, much of it focused on transport which is a key sector for John Laing where we have strong credentials. 

· US: one of the largest infrastructure markets in the world, the US also has one of the widest infrastructure investment gaps. Oxford Economics forecasts spending of USD8.6 trillion from 2016-40 based on current trends, and believes this would need to be 45% higher to address decades of under-investment. We continue to view the US as a market with great growth potential for John Laing, both for PPPs and in new sectors.  

· UK & Europe: a relatively mature and well-invested market with plans for infrastructure spending in our larger countries (the UK, Germany and the Netherlands), albeit we do not expect much of this investment will be under the PPP model. This autumn's National Infrastructure Strategy is expected to set out around £100 billion of spending over this parliament, including plans to improve broadband and transport infrastructure. Decarbonisation is likely to be another growth area; the Committee on Climate Change believes the UK's commitment to net zero by 2050 alone could cost an additional 1-2% of GDP. The EU's Green deal and €750 billion post-COVID recovery plan is aimed at investing in a greener, more inclusive, digital and sustainable Europe.  

· Latin America: our current focus is in Colombia and Peru, which both have good PPP pipelines. In Colombia, there are a number of opportunities relating to the c.USD19 billion 4G roads programme. More recently, the 5G PPP programme will cover a more diverse range of sectors, and is expected to be worth c.USD9 billion. Peru also has a diverse infrastructure pipeline, and in January 2020, the country's investment promotion agency, ProInversion, announced an updated c.USD5.4 billion PPP pipeline.

REALISATIONS: MATERIAL FUTURE PIPELINE OF REALISATION OPPORTUNITIES

During the first half of 2020, the Group generated £88 million of proceeds from the realisation of five assets: one PPP project and four Renewable Energy assets. The aggregate proceeds from these realisations were in line with book value. These realisations comprised the sale of our interest in the Auckland South Corrections Facility in New Zealand, and our interests in the Buckthorn wind farm in the US and three wind farms in France.

Realisations in the first half of 2020

As at 30 June 2020, the Group's secondary assets portfolio was valued at £836 million. A material proportion of our secondary portfolio is made up of availability-based revenue projects with good yield characteristics, and which are expected to be highly attractive prospects for realisation, particularly in a low interest rate environment.

Investor appetite for core infrastructure assets, particularly with availability-based revenues, offering attractive and stable yields, remains strong. We believe the challenging macro-economic environment and low interest rate outlook have heightened the attractions of these types of assets. 

The Group's dividend policy allows shareholders to share directly in the Group's realisation successes.

In March 2019, the Group announced a realisation target of £1 billion to be achieved over three years from 1 January 2019 to 31 December 2021. Over the 18-month period from 1 January 2019 to 30 June 2020, the Group has generated total proceeds from realisations of £231 million. While we are committed to realising secondary assets and a number of sale processes are currently underway, the disruption caused by COVID-19 has led to some delays, and we are unlikely to achieve the £1 billion target by the end of 2021.

We are committed to maximising the value of our secondary assets. We have assessed each asset, and drawn up asset-specific plans to ensure that each asset is ready to be brought to market with a strong operational track record, in order to optimise value. As a result of this planning, we are confident that this portfolio is capable of generating attractive realisation returns, with proceeds at or above book value, over the next few years. As part of our divestment planning, we are committed to reducing our exposure to Renewable Energy projects, in order to reduce the portfolio's exposure to merchant power prices and reduce the volatility in portfolio value and returns.

For certain Renewable Energy projects, there is further work to be done to ensure that operational issues are resolved and that they are ready for sale. In addition, COVID-19 has resulted in some near-term disruption to sale processes, for example due to logistical issues such as site visits, as have changes in regulatory processes, including changes to the Australian Foreign Investment Review Board ("FIRB") approval timetable. While these factors may cause some short-term delays in the sale of some assets, our strong balance sheet and liquidity position gives us the flexibility to maintain a disciplined approach to the timing of realisations in order to maximise value for shareholders.

STRATEGIC REVIEW

A comprehensive strategic review is well underway and the outcome of this will be announced in November. This review will focus on the future strategy and business priorities for John Laing.

Our focus is on delivering consistent and sustainable returns to shareholders, which will be driven by:

· Investing selectively in opportunities that deliver attractive returns for our shareholders;

· Realising assets at the right time to maximise value, and at or above book value; and

· Ensuring an efficient balance sheet strategy to generate both good distributions to shareholders and funds to invest in future growth opportunities.

INTERIM DIVIDEND

In line with our dividend policy, we are declaring an interim dividend of 1.88 pence per share, representing a year-on-year increase of 2.2%, which is above inflation. This is payable on 23 October 2020.

BOARD cHANGES

Philip Keller was appointed to the Board as a Non-executive Director with effect from 1 January 2020, succeeding Toby Hiscock as Chair of the Audit & Risk Committee.

On 8 May 2020, Ben Loomes was appointed to the Board as Chief Executive Officer, succeeding Olivier Brousse.

On 3 August 2020, Luciana Germinario stood down from her position as Chief Financial Officer. The Board has commenced a search for a new Chief Financial Officer. In the interim period, Stuart Colvin, Group Financial Controller, who has been with the business for over 16 years, will be undertaking a key role in leading the finance function.

OUTLOOK

We expect modest underlying NAV growth during the second half of the year, excluding foreign exchange movements and other external factors. As a result of the impact of COVID-19, we expect value enhancements in the second half of the year to be at a similar level to those achieved in the first half.

The valuation of our portfolio provides a solid base from which to deliver attractive and more consistent and

sustainable shareholder returns.

With continued good project delivery, we expect to be able to capture over time the material value embedded within our Primary portfolio.

We have an attractive secondary asset portfolio, capable of generating good realisation returns over the next few years.

REGIONAL REVIEWS

ASIA PACIFIC REVIEW

At 30 June 2020, the portfolio of investments in the Asia Pacific ("APAC") region comprised 14 assets (31 December 2019: 15) including five in the Primary portfolio (31 December 2019: seven) and nine in the Secondary portfolio (31 December 2019: eight) with a total value of £539 million (31 December 2019: £587 million).

The portfolio value decreased by £48 million in the first half of 2020. This was due to divestments and cash distributions received from projects totalling £27 million and a net fair value loss of £21 million for the period (H1 2019: £14 million loss). The net fair value loss included a £29 million gain for foreign exchange movements and value enhancements of £4 million (H1 2019: £29 million).

APAC: PPP portfolio

The PPP portfolio, which makes up over two thirds of the total APAC portfolio by value, performed well and in line with expectations. The net fair value gain from PPP projects in the period was £24 million (H1 2019: £19 million), including foreign exchange gains of £17 million (H1 2019: £nil). Good progress continued to be made on PPP project delivery, with key highlights including:

APAC: Renewable Energy portfolio

The region's Renewable Energy portfolio generated a fair value loss of £45 million in the first half of the year (H1 2019: £33 million), including foreign exchange gains of £12 million (H1 2019: £1 million loss). The fair value loss was driven by project performance losses of £49 million. Additionally, there were total net losses of £24 million from external factors that comprised adverse changes in macro-economic assumptions (£6 million), principally lower short-term expectations for inflation as a result of the market volatility caused by COVID-19, reductions in power price forecasts (£7 million) and transmission issues (£11 million), which have impacted one of our two solar farms as described in more detail in the Financial Performance section above.

Of the project performance losses of £49 million, £43 million were on the region's two solar assets which have experienced asset-specific issues, as well as the adverse impact from external factors as described above. This and a limited operational track record have led us to increase discount rates on both assets to reflect an increase in risk.

The portfolio comprises six operational assets, including Cherry Tree Wind Farm which transitioned into the secondary portfolio during the period. We are making progress with the two assets still under construction, Granville and Sunraysia. A remediation plan is in place at Sunraysia, which has experienced technical issues related to transformers and where delays with the AEMO registration processes have held up connections to the grid. Granville wind farm is progressing, albeit with some delays related to COVID-19 and weather conditions. Completion of construction for both assets is targeted for the beginning of 2021.

APAC: investments and realisations

In the short-term, COVID-19 is having a direct impact on the public procurement timetables.. A number of APAC PPP bids expected to close in 2020 have now been delayed into 2021. As a result, we made no new investment commitments during the first half, and this is likely to continue into the second half of 2020.

We completed the divestment of our interest in the Auckland South Corrections Facility on 5 May 2020. Recent changes in Australia's FIRB rules have extended the likely timeframe for approving foreign investment applications, which is expected to lead to extended divestment process timetables, where successful bidders are international investors. 

APAC: outlook

While COVID-19 has delayed bids, the business is short-listed for the following three PPP projects: Redfern Communities Plus, North East Link and Footscray Hospital.

In the medium-term, the business has visibility on a number of opportunities across Victoria and NSW with PPP projects expected in the social infrastructure and transport sectors. Moreover, almost all Australian States and Territories, and New Zealand, have announced a boost in spending on new infrastructure to provide economic stimulus in response to the crisis. The short-term focus appears to be on cash funding of smaller scale projects as opposed to accelerating large-scale PPP investment, but we remain confident in the medium-term opportunities this will create for John Laing.

EUROPE REVIEW

At 30 June 2020, our portfolio of investments in Europe comprised 15 assets (31 December 2019: 18) including three in the Primary portfolio (31 December 2019: three) and 12 in the Secondary portfolio (31 December 2019: 15) with a total value of £531 million (31 December 2019: £599 million).

The decrease in portfolio value of £68 million in the first half of 2020 was due to divestments and cash distributions received from projects totalling £31 million and a net fair value loss in the period of £40 million, including £13 million gains from foreign exchange movements, offset by cash invested into projects of £3 million.   

Europe: PPP portfolio

In respect of our PPP assets, which make up over 80% of the Europe portfolio by value, we saw a net fair value loss in the period of £9 million (H1 2019: gain of £28 million) including foreign exchange gains of £4 million (H1 2019: £nil), largely driven by changes to our macro-economic assumptions, particularly lower short-term inflation expectations. There was a modest value reduction in respect of the A130 road project in the UK, one of the Group's two volume-based operational PPP projects, to reflect more prudent short-term traffic forecast assumptions. The asset is 54% exposed to traffic volumes, and while traffic volumes have recovered well, they remain approximately 10% below pre-COVID-19 levels.

We continue to make good progress on IEP Phase 2, our UK rolling stock replacement project and largest single investment. As at the end of June 2020, 59 out of 65 trains for the East Coast main line had achieved qualified acceptance and, since then, this has increased further to 63 trains. During this period, we have worked with the client and our partners in order to ensure the implementation of the correct protocols to enable train acceptance to continue. The project is on track to achieve a key milestone of qualified acceptance of all trains during Q3 2020. 

Following the complete suspension of all construction works at the University of Brighton student accommodation project, the project was re-opened on a phased basis from late April onwards. Other notable milestones included the commencement of bulk earthworks in March 2020 on the A16, our Dutch road project north of Rotterdam. 

Europe: Renewable Energy portfolio

Fair value losses on the Renewable Energy portfolio were £30 million (H1 2019: £40 million loss), including foreign exchange gains of £8 million (H1 2019: £nil), reduced power price forecasts, lower inflation expectations and asset-specific issues related to our two biomass projects.

The biomass projects have faced significant challenges and the operating environment for biomass combined heat and power plants in the UK has become significantly more challenging due not only to lower power prices, but also higher biomass feedstock costs. In the case of Speyside, this has been compounded by a COVID-19-related shutdown of the heat off-taker in the first half of 2020. In addition to reflecting lower power prices, we also took the prudent decision to apply higher discount rates to both assets.

All of our wind assets in Europe are operational and performed well during the period with minimal operational impact from COVID-19. We continue to optimise the remaining wind assets with a view to realising value over the next one to two years.  

Europe: investments and realisations

There were no new investment commitments in Europe during the first half.

We are pleased to have completed the disposal of our interests in our French wind portfolio which consisted of three wind farms: Pasilly, St Martin and Sommette. Aggregate divestment proceeds were slightly ahead of book value. 

Europe: outlook

We remain preferred bidder for ViA 15, a greenfield road project in the Netherlands, albeit we now expect financial close in 2021 due to delays caused by COVID-19. The market for new PPP projects across Europe is relatively subdued with available deals offering compressed returns and, as such, we continue to be highly selective. Looking ahead, we view the private sector as the more likely source of new investments, particularly in sectors such as Digital Infrastructure and Energy Transition.

NORTH AMERICA REVIEW

At 30 June 2020, our portfolio of investments in North America comprised 13 assets (31 December 2019: 14) including five in the Primary portfolio (31 December 2019: five) and eight in the Secondary portfolio (31 December 2019: nine) with a total value of £463 million (31 December 2019: £514 million).

The decrease in portfolio value in the first half of 2020 was of £51 million. This was principally due to divestments and cash distributions received from projects totalling £50 million. Additionally, there was a fair value loss of £3 million (H1 2019: gain of £75 million), including favourable foreign exchange movements of £35 million, offset by cash invested into projects of £2 million.

Excluding foreign exchange movements, the fair value loss of £38 million was driven by net project performance losses of £22 million, as well as an adverse impact from external factors, including short-term inflation (£14 million) and reductions in power price forecasts (£29 million), which were offset by project delivery gains of £24 million and value enhancements of £9 million.

All of the project performance losses of £22 million were in the region's Renewable Energy portfolio, and primarily on the solar assets (£20 million). See the North America: Renewable Energy portfolio section below for more detail.

North America: PPP portfolio

The PPP portfolio, which accounts for around two thirds of the North American portfolio by value, performed well and in line with expectations. The net fair value gain from PPP projects in the period was £30 million (H1 2019: £50 million), including foreign exchange gains of £20 million (H1 2019: £1 million). Good progress continued to be made on PPP project delivery, with key highlights including: 

The I-77 managed lanes project in North Carolina which fully opened in December 2020, is the second of the Group's two operational volume-based PPP projects. The asset experienced a material reduction in revenue due to the impact of COVID-19 on traffic volumes at the beginning of lockdown. Revenues showed a good improvement in May and June, although we remain cautious about the pace of recovery during the rest of the year. A modest value reduction of £2 million was applied to the project to reflect revised traffic assumptions, and this was more than offset by project delivery.

North America: Renewable Energy portfolio

The Renewable Energy portfolio, comprising the Live Oak wind farm and the five Cypress Creek solar assets, had a total fair value loss in the period of £32 million, driven by losses from lower power price forecasts (£29 million), changes in macro-economic assumptions (£5 million) and project performance losses (£22 million).

Asset availability and operational performance were maintained in line with expectations throughout the period and this delivered gains of £8 million, which along with value enhancements of £1 million and gains of £15 million from a favourable foreign exchange movement, partially offset the above losses.

The project performance losses were primarily on the region's solar assets, on which discount rates were increased to reflect the increased risk, especially in the current market climate, on assets with limited operational track record and exposure to changes in future power prices.

North America: investments & realisations

A new investment commitment of £2 million was made in the region in the first half, comprising an additional equity commitment to MBTA as a result of a scope expansion and project upgrade.  A number of public procurement processes were delayed as a result of COVID-19.

We were successful in completing the sale of our interest in the Buckthorn wind farm in Texas. Proceeds were in line with book value and are subject to customary post-completion adjustments.

North America: outlook

We continue to see significant opportunities for investments over the coming years and we are encouraged by the progress we have made on key PPP projects in recent weeks. Since the end of June 2020, we have been short-listed for three PPP projects - the SR-400 highway project in Atlanta, Georgia; Phase 1 of the I-495 & I-270 Program in Maryland; and a further confidential social infrastructure project. Currently, in total, the business is short-listed for five PPP projects in the region.

LATIN AMERICA REVIEW

During the first half of 2020, the Group's investment in the Ruta del Cacao PPP road project in Colombia generated a positive fair value movement of £6 million, which included £1 million of value enhancements recognised in the period, offset by adverse foreign exchange movements of £4 million.

During the period, the project achieved several important construction milestones and the project's more complex technical challenges have been addressed. While the project sites were fully closed for three weeks from late March to mid-April 2020 during the COVID-19 lockdown, this is not expected to impact the expected completion timeline as the site is back to full pre-COVID-19 productivity levels. Construction works were over 55% complete as at the end of June 2020.

We have continued to strengthen our team on the ground, significantly bolstering our local knowledge and relationships with the appointment of senior advisers for Colombia and Peru.

LATAM: outlook

As in all of our markets, there were delays to public procurement processes. Nonetheless, the mid-term outlook for Colombia remains buoyant as a result of the 4th generation (4G) and 5th generation (5G) PPP programmes focused on the transportation sector in particular.

Additionally, we are carefully assessing opportunities in Peru. As a PPP market, Peru bears many similarities to Colombia, with good mid-term macro-economic fundamentals and an infrastructure investments pipeline. The country is on track for OECD accession in the next two to three years, has a strong PPP framework and a number of our international partners are already active there.

FINANCIAL REVIEW

H1 2020 NAV AND PORTFOLIO VALUE CREATION

Our net asset value (NAV) decreased from £1,658 million at 31 December 2019 to £1,525 million at 30 June 2020. This is equivalent to a NAV per share of 309p which is down 6% (-10% at constant currency) before dividends paid in the period of £38 million, versus NAV per share of 337p at 31 December 2019.

The key component of the Group's NAV is its investment portfolio, which at 30 June 2020 was valued at £1,603 million, a decrease of £165 million from £1,768 million at 31 December 2019. After rebasing the portfolio value at 1 January 2020 for realisations of £88 million, cash yield of £20 million and cash invested into projects of £5 million in the period, the value of our portfolio decreased by £62 million or -4% on this rebased value.

Within this, our core PPP portfolio contributed a positive fair value movement of £46 million, 3% of opening NAV (or 1% at constant currency), while negative fair value movements of £108 million on our renewable energy portfolio reduced NAV by 7% of opening NAV (or -9% at constant currency). Availability-based PPP projects delivered the strongest performance, contributing a positive fair value movement of £43 million.

This overall reduction in NAV per share in the period was principally driven by losses on the investment portfolio, particularly for renewable energy assets. These losses reflect the changes in macro-economic assumptions, which have resulted from increased market volatility and uncertainty brought on by COVID-19, reductions in power price forecasts and transmission issues in Australia. There have also been a higher than usual level of project performance losses, particularly from solar and biomass assets. We have increased discount rates on the solar and biomass assets to reflect increased risk from asset-specific challenges and perception of these risks in a more volatile and uncertain market. Total write downs in the period amounted to £234 million, or 47p per share, of which £173 million, or 35p per share, related to renewable energy projects.

The overall negative movement in fair value of £62 million (2019 - positive fair value movement of £52 million) is analysed in the table below:

The portfolio generated positive fair value movement from project delivery of £84 million (H1 2019: £88 million), made up of unwinding of discounting and reduction of construction risk premia. These are levers of value creation embedded in the portfolio value and should continue to contribute value uplift in the future. Despite COVID-19, the investment portfolio produced a resilient underlying operational performance. Short construction delays as a result of the crisis had only a modest financial impact.  

Value enhancements of £15 million (H1 2019: £78 million) were achieved in the period, lower year on year largely due to COVID-19, with operational improvements hampered by the lockdown and market volatility providing fewer opportunities for enhancements.

Net losses from project performance in the first half of 2020 were £95 million (H1 2019: £44m negative). 88% of these losses related to renewable energy particularly solar and biomass assets on which total losses were £77 million. The solar and biomass assets have limited operational track records and face asset-specific challenges, including completing construction in respect of one of the assets. We have increased discount rates on these assets to reflect an heightened risk relative to other assets, partly due to current market volatility and uncertainty.

Other losses reflect the impact on the portfolio from external factors: 

Impact of foreign exchange movements: £73m positive (H1 2019: £2 million negative). This reflects the weakening of sterling against the US dollar, Australian dollar and Euro. 

BALANCE SHEET

The NAV at 30 June 2020 was £1,525 million (December 2019: £1,658 million). The principal components of NAV are the portfolio valuation, cash holdings and cash borrowings. A re-presented balance sheet is shown below.

1 Cash and cash equivalents comprise £84 million (2019: £2 million) in the Company and recourse subsidiaries that are consolidated (as shown in the Condensed Group Balance Sheet) and £202 million (2019: £5 million) including £150 million of UK Treasury bills (2019: £nil) in recourse subsidiaries held at FVTPL (included within investments at FVTPL in the Condensed Group Balance Sheet; see note 9).

2 Other assets comprise net other assets and liabilities within recourse investment entity subsidiaries of £2 million (2019: £6 million) (included within investments at FVTPL in the Condensed Group Balance Sheet; see note 9) and other assets as shown in the Condensed Group Balance Sheet of £13 million (2019: £10 million).

3 Borrowings of £515 million (2019: £236 million) as shown in the Condensed Group Balance Sheet comprise £517 million (2019: £239 million) of cash borrowings less unamortised financing costs of £2 million (2019: £3 million) included in other liabilities above.

References to "note" in the above table and the footnotes underneath are to the notes to the Condensed Group financial statements.

Portfolio valuation

The Group's portfolio of investments in project companies was valued at £1,603 million at 30 June 2020 (31 December 2019: £1,768 million). Further details are provided in the Portfolio Valuation section.

Cash and cash borrowings

The Group held total cash balances of £412 million at 30 June 2020 (31 December 2019: £125 million) of which £126 million (31 December 2019: £118 million) was held to collateralise future US dollar investment commitments to the I-66 Managed Lanes project. Cash balances at 30 June 2020 included amounts held in UK Treasury bills of £150 million.

The Group had short-term cash borrowings from its corporate banking facilities of £517 million at 30 June 2020 (December 2019 - £239 million). 

Cash and cash borrowings both increased from 31 December 2019 due to the Group drawing down the majority of its unutilised facilities as cash borrowings as a measure of risk mitigation during the Covid-19 outbreak.

Pension surplus

The Group operates two defined benefit pension 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.

The triennial actuarial valuation of JLPF as at 31 March 2019 was finalised and agreed in April 2020. The actuarial deficit decreased by £70 million from £171 million as at 31 March 2016 to £101 million as at 31 March 2019 with the decrease primarily as a result of the scheduled cash contributions of £80 million over the three year period.

A new deficit repayment plan has been agreed with the JLPF Trustee, as set out below, which results in a small increase to each of the remaining four annual payments under the previous repayment plan and an overall increase in payments of £3.1 million:

The combined net accounting surplus in the Group's defined benefit pension schemes at 30 June 2020 was £38 million (31 December 2019: surplus of £13 million). Under IAS 19, at 30 June 2020, JLPF recorded a surplus of £36 million (31 December 2019: surplus of £12 million) and the Plan recorded a surplus of £2 million (31 December 2019: surplus of £1 million).

The surplus (under IAS 19) as at 30 June 2020 increased from 31 December 2019 primarily as a result of the Group's cash contribution to JLPF of £26 million in March 2020.

The pension liabilities in JLPF under IAS 19 were based on a discount rate of 1.4% (31 December 2019 - 2.1%) and long term RPI of 2.8% (31 December 2019 - 3.0%) at 30 June 2020. The amount of the liabilities 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.

INCOME STATEMENT

The Group incurred a loss before tax for the six months ended 30 June 2020 of £95 million compared to a profit before tax for the six months ended 30 June 2019 of £35 million. The significant reduction was principally due to negative fair value movements on the investment portfolio of £62 million in the first half of 2020 compared to positive fair value movements in £52 million in the same period last year. There was also a reduction in IMS revenue from last year primarily as a result of the sale of the Group's remaining fund management activities in June 2019.

Fair value movement - portfolio

The components of the fair value movement on the investment portfolio are shown at the start of this financial review together with analysis and details of these movements.

Asset management services revenue

Asset management services revenue includes fees earned from project management services, under management services agreements with projects, and from investment management services. The reduction from £23 million in the first half of 2019 to £4 million in H1 2020 was primarily due to the sale of the Group's remaining fund management activities in June 2019. 

Administrative expenses

Administrative expenses in the first half of 2020 were £32 million, £4 million lower than in the six months ended 30 June 2019. The reduction was due to lower third party bid costs (£2 million), principally as a result of delays to bidding and client procurement processes, lower staff costs (£1 million), following the transfer of the investment advisory team on the sale of the Group's remaining fund management activities in June 2019, and £1 million reversal of a provision relating to the legacy construction business.

CASH FLOW

The Condensed Group Cash Flow Statement includes the cash flows of the Company and certain recourse subsidiaries that are consolidated (Service Companies). The Group's recourse investment entity subsidiaries, through which the Company holds its investments in non-recourse project companies, are held at fair value in the financial statements and accordingly cash flows relating to investments in the portfolio are not included in the Condensed Group Cash Flow Statement. Investment-related cash flows are disclosed in note 9 to the Condensed Group Financial Statements.

The re-presented cash flow statement for the six months ended 30 June 2020 below shows all recourse cash flows that arise in both the consolidated group (the Company and its consolidated subsidiaries) and in the recourse investment entity subsidiaries.

Cash yield from the investment portfolio was £20 million in the first half of 2020 compared with £35 million for the same period last year, which included a large cash distribution from the Denver Eagle P3 project following construction completion.

Operating cash flow in the six months ended 30 June 2020 was adverse compared to 2019 primarily due to lower asset management services received as a result of the fund management activities ceasing in June 2019, offset by lower administrative expenses paid in the first half of 2020 compared to the same period last year.

During the period, cash of £5 million (2019: £89 million) was invested in project companies and divestments in five projects were realised for total proceeds of £88 million (2019: £131 million from the realisation of three investments), offset by disposal costs paid of £3 million (2019: £2 million). A further £2 million of proceeds from realisations was received in the first half of 2019 from deferred consideration on the disposal of IEP Phase 1 in 2018.

In the period, the Group made a cash contribution to JLPF of £26 million (2019: £29 million).

Dividend payments of £38 million in the six months ended 30 June 2020 comprised the final dividend for 2019 (2019: final dividend for 2018 of £38 million).

FINANCIAL RESOURCES

At 30 June 2020, the Group held principal committed revolving credit banking facilities of £650 million (31 December 2019: £650 million), £500 million expiring in July 2023 and £150 million expiring in January 2022, which are primarily used to back investment commitments. Net available financial resources at 30 June 2020 were £311 million (31 December 2019: £314 million).

Analysis of Group financial resources

1 Cash and bank deposits exclude cash collateral balances. Of the total cash and bank deposit balances of £286 million (2019: £7 million), £84 million (2019: £2 million) was in the Company and recourse subsidiaries that are consolidated and therefore shown as cash and cash equivalents on the Condensed Group Balance Sheet, with the remaining £202 million (2019: £5 million) including £150 million held within UK Treasruy bills (2019: £nil) in recourse subsidiaries held at FVTPL which are included within investments at FVTPL on the Condensed Group Balance Sheet.

DIVIDEND

In-line with our dividend policy, the Board has declared an interim dividend for the period of 1.88 pence per share, or £9 million in aggregate (June 2019 - 1.84 pence; £9 million).

GUIDANCE

For the full year, the building blocks for NAV (before dividends paid) are set out below:

· Project delivery:

o We expect discounting unwind and the reduction in construction risk premia to be somewhat lower year on year due to the profile of the portfolio.

o Value uplifts on financial closes are likely to be modest given investment delays.

· Value enhancements: we expect a similar performance in the second half, with COVID-19 remaining a factor.

· Administrative expenses: costs are likely to rise during H2 to reflect higher bidding and divestment activity.

· External factors: sensitivities are set out in the Portfolio Valuation section below. 

PORTFOLIO VALUATION

The Group's investments at 30 June 2020 were valued at £1,603 million compared to £1,768 million at 31 December 2019. After adjusting for realisations, cash yield and cash invested, this represented a negative movement in fair value of £62 million (-3.7%) on the rebased portfolio valuation:

The split of the portfolio valuation between primary and secondary investments and the movements in the period within each are shown in the tables below:

METHODOLOGY

The methodology for the valuation of the investment portfolio is unchanged from that used as at 31 December 2019, as described in the 2019 Annual Report and Accounts.

In arriving at the valuation as at 30 June 2020, we considered and reflected changes to the two principal inputs, (i) forecast cash flows from investments in projects and (ii) discount rates.

In addition, we 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 as a whole represented a fair market value in the conditions prevailing at 30 June 2020.

Discount rates

For the 30 June 2020 valuation, the overall weighted average discount rate was 8.7% compared to the weighted average discount rate at 31 December 2019 of 8.6%. The weighted average discount rate at 30 June 2020 was made up of 9.1% (31 December 2019: 9.1%) for the Primary Investment portfolio and 8.3% (31 December 2019: 8.0%) for the Secondary Investment portfolio.

The weighted average discount rate at 30 June 2020 was 8.8% (31 December 2019: 8.9%) for the PPP investments and 8.6% (31 December 2019: 8.1%) for the renewable energy investments.

The discount rate ranges used in the portfolio valuation at 30 June 2020 were as set out below:

The table below shows the sensitivity of a 0.25% change in discount rates:

Energy yields

Revenues and therefore cash flows from investments in wind and solar generation projects may be affected by the volume of power production, for example from changes in wind or solar yield.

Our valuation of wind and solar generation projects assumes a P50 level of electricity output based on reports by technical consultants. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being achieved or exceeded and a 50% probability of being underachieved - both in any single year and over the long term. Hence the P50 is the expected level of generation over the long term. A P75 output means a lower forecast with a 75% probability of being achieved or exceeded and a P25 output means a higher forecast with a 25% probability of being achieved or exceeded.

The impact on the valuation at 30 June 2020 on all wind and solar generation assets with total value of £411 million from changes in energy yield is shown below:

The sensitivities shown above assume that changes in energy yields move in the same direction for all of the assets. However, across the portfolio of wind and solar generation assets, any actual change in forecast energy yields could be an increase for some assets and a decrease for others.

Macro-economic assumptions

During the first half of 2020, updates for actual macro-economic outcomes and assumptions had a net adverse impact of £40 million (first half of 2019: £1 million net adverse impact) on the portfolio valuation. . Additionally, a decrease in forecast power and gas prices resulted in a £50 million adverse fair value movement (first half of 2019: adverse fair value movement of £13 million).

Movements of foreign currencies against Sterling over the six months to 30 June 2020 resulted in net favourable foreign exchange movements of £73 million (first half of 2019: £2 million net adverse foreign exchange movements) as Sterling weakened against most of the relevant currencies.

The table below summarises the main macro-economic and exchange rate assumptions used in the portfolio valuation at 30 June 2020 and at 31 December 2019. The table also shows the impact from changes in these assumptions and from changes in power and gas prices and MLFs in the period or year as well as the sensitivity to the portfolio value from changes in the future:

The sensitivities shown above from changes in assumption are on the basis that changes are in the same direction across all assets. In practice, there could be an increase for some assets and a decrease forothers and as a result offsetting impacts.

PORTFOLIO ANALYSIS

The Group continues to enjoy an investment portfolio that is well diversified by geography and sectoras shown in the following tables.

By PPP and Renewable Energy

By geographical region

By time remaining of project concession/operational life

By revenue type

Availability-based PPP investments continued to make up the majority of the portfolio at 30 June 2020.

By sector

The disposal of one wind farm in the US and three in Europe in the first half of the year, as well as negative fair value movements on the renewable energy portfolio, resulted in a reduction in the value of environmental assets since 31 December 2019. The small reduction in the value of assets in the social infrastructure sector resulted from the sale of the Auckland South Corrections Facility partially offset by positive fair value movements. Further cash injections and positive fair value movements resulted in increases in value in the first half of 2020 in other sectors.

By currency

The valuation ranges for the five largest Primary investments and the five largest Secondary investments are shown in the tables below:

Primary

Secondary

At 30 June 2020, nine out of the ten largest investments were outside the UK.

InVestment portfolio as at 30 June 2020

APAC - Asia Pacific

EUR - Europe

NA - North America

Latam - Latin America

*Cypress Creek projects

pRINCIPAL Risks AND GOING CONCERN

The Group's principal risks at 30 June 2020 were as follows:

· Governmental policy (incl. Brexit)

· Macro-economic factors

· Liquidity in the secondary market

· Financial resources

· Investment performance and valuation

· Pensions

· Future investment activity

· Counterparty risk

· Major incident

· Personnel

· ESG

More detail on these risks can be found on pages 50 to 54 of the 2019 Annual Report & Accounts.

During the six months ended 30 June 2020, as a result of the COVID-19 pandemic, we have seen heightening of certain of these risks, as described below, and we would expect this to continue into the second half of the year.

Governmental policy/future investment activity - A number of bids relating to public procurement processes have been delayed from 2020 into 2021 due to COVID-19. We continue to review a number of investment opportunities and are maintaining a disciplined approach, particularly due to the uncertainty caused by the pandemic and the deteriorating macro-economic backdrop. Beyond the immediate crisis, we expect governments around the world to consider infrastructure investment as a key part of the measures to stimulate their economies and we are well placed to capture this opportunity over the medium-term given our track record, our relationships and the strength of our balance sheet.

Macro-economic factors - COVID-19 has caused significant market volatility and increased market uncertainty which has resulted in lower short-term expectations for inflation and lower deposit rates.. As set out in the Financial Review section, updates for actual macro-economic outcomes and forecasts had an adverse impact of £40 million on the portfolio valuation at 30 June 2020. Against this, foreign exchange movements were favourable in the period, notably the weakening of sterling against the US dollar and the Australian dollar, which have resulted in an increase to the portfolio valuation of £73 million.

Investment performance and valuation - During the first half, we implemented enhanced project monitoring in response to COVID-19 to limit the impact of construction delays or reduced operational performance. Two construction sites were closed for a short period during the early lockdown. These have now re-opened. We worked closely with our partners so that these projects could continue to be delivered as efficiently as possible and in accordance with revised safe working arrangements.

Our operational teams and partners have continued to operate our projects during the period. Our availability based projects often provide essential services (health and transport) and we have been able to substantially maintain performance and address revised client requirements.

We have two operational volume-based road projects that together account for c.5% of total portfolio value. While these projects experienced sharp traffic declines at the beginning of the COVID-19 lockdown, both experienced a good improvement in traffic volumes in May and June, although we remain cautious about the pace of recovery during the rest of the year.

Our renewable energy projects maintained strong availability during the period but there was a significant reduction in forecast wholesale power prices through the first half of the year and this has had a portfolio valuation impact of £50 million at 30 June 2020. The factors driving this impact varied across our regions and included the impact of COVID-19 lockdown measures which has resulted in reduced demand leading to decreased commodity prices, increased forecast renewable energy penetration levels and weather driven volatility. Off-take arrangements, in place for most of our renewable assets, have provided some protection against short-term volatility.

We increased discount rates on a select number of assets, specifically our solar and biomass assets, to reflect specific challenges faced by these assets as well as, more generally, the currently heightened uncertainty and greater market volatility that has resulted from the pandemic, which in aggregate had an adverse impact to NAV of £38 million at 30 June 2020.

Counterparty risk - The projects in which the Group invests are predominantly in jurisdictions with strong and robust economies and credit ratings. So far, the Group has seen the relevant government bodies continuing to support critical infrastructure assets. The Group works with multiple clients, joint venture partners, sub-contractors and institutional investors so as to reduce the probability of systemic counterparty risk in its investment portfolio. The Group regularly monitors counterparty risk and has made a recent assessment of this risk following the outbreak of COVID-19. In the main, the Group's major counterparties continue to remain robust with satisfactory credit ratings but there are certain counterparties which the Group will continue to monitor closely.

Major Incident & Personnel - In response to COVID-19, the Group implemented its Business Continuity Plan and management of the Incident was coordinated by the Executive Committee. All staff based in John Laing Group offices have been working remotely since early March and our process and controls have been enhanced to support this. We continue to monitor the situation in each of our regions and anticipate a gradual return to our offices in accordance with local guidelines and our own Group protocols. Some of our staff are based in project offices and we have coordinated with our project partners to agree project specific protocols.

Going concern

The Directors have reviewed the Group's financial projections and cash flow forecasts and believe, based on those projections and forecasts and taking into account expected bidding activity and operational performance, that it is appropriate to prepare the Condensed Group Financial Statements on the going concern basis. In arriving at their conclusion, the Directors took into account the financial resources available to the Group from its committed banking facilities comprising £500 million corporate banking facilities committed until July 2023 and an additional £150 million facilities committed until January 2022. At 30 June 2020, there were net available financial resources of £311 million, as detailed in the Financial Review section Utilisation of the facilities includes letters of credit issued which, together with cash collateral balances held by the Group, back all future investment commitments which at 30 June 2020 were £230 million. Investments into project companies are made on a non-recourse basis, which means that providers of debt to such project companies do not have recourse to the Group beyond its investment.

Following the onset of COVID-19, the Group almost fully drew down on its facilities to improve the Group's liquidity as well as to mitigate credit risk. The Group's liquidity has been maintained in the first six months of the year by the recent completion of the disposals of interests in five assets which has offset the payment by the John Laing group of operating costs, the contribution to JLPF and the final 2019 dividend. All future capital commitments of £230 million are already supported by letters of credit issued under the banking facilities or cash collateral. Whilst further divestment processes are in progress, the Group is not reliant on divestment proceeds to meet its debts as they fall due, to operate within its banking facilities and to comply with the financial covenants over the next 18 months In determining that the Group is a going concern, certain risks and uncertainties, some of which have heightened as a result of COVID-19 as described above have been considered. This has been carried out by running various sensitivities on the Group's cash flow projections including up to a six month delay in planned disposals and reductions in the valuation of investments. The Group has also run a reverse stress test on the decline in the investmernt valuation before there is a covenant breach. This reduction is significant and therefore the Group believes the risk of such a decline to be remote. The Directors have also considered various mitigating actions that could be undertaken to maintain liquidity including a delay in future investments in order to preserve cash and liquidity. After making this assessment, the Directors believe that the Group is adequately placed to manage these risks. 

Related party transactions

Related party transactions are disclosed in note 16 to the Condensed Group Financial Statements. There have been no other related party transactions in the first six months of the financial year or the comparative period in 2019 that have had a material effect on the financial position or performance of the Group.

Responsibility statement

We confirm that to the best of our knowledge:

· The Condensed Group Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; and

· The Business Review includes a fair review of the information required by:

a) the Disclosure and Transparency Rules (DTR) rule 4.2.7R, being an indication of important events during the first six months and a description of principal risks and uncertainties for the remaining six months of the year; and

b) DTR rule 4.2.8R, being the disclosure of related party transactions and changes therein.

By order of the Board

INDEPENDENT REVIEW REPORT TO JOHN LAING GROUP PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 which comprises the condensed group income statement, the condensed group statement of comprehensive income, the condensed group statement of changes in equity, the condensed group balance sheet, the condensed group cash flow statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

Statutory Auditor

London, United Kingdom

19 August 2020

Condensed Group Income Statement

for the six months ended 30 June 2020

Condensed Group Statement of Comprehensive Income

for the six months ended 30 June 2020

Condensed Group Statement of Changes in Equity

for the six months ended 30 June 2020

for the six months ended 30 June 2019

for the year ended 31 December 2019

1 Dividends paid:

The total estimated amount to be paid in October 2020 in respect of the proposed interim dividend for 2020 is £9 million.

Condensed Group Balance Sheet

as at 30 June 2020

Condensed Group Cash Flow Statement

for the six months ended 30 June 2020

Notes to the Condensed Group Financial Statements

for the six months ended 30 June 2020

1 General information

The Condensed Group Financial Statements of John Laing Group plc (the Company or the Group) have been prepared as described below. The registered office of the Company is 1 Kingsway, London WC2B 6AN. The principal activity of the Company is the origination, investment in and management of greenfield infrastructure projects.

The Condensed Group Financial Statements included in this half-yearly financial report are presented in Sterling and have been prepared in accordance with, and contain the information required by IAS 34 Interim Financial Reporting, as adopted by the European Union, and the disclosure guidance and transparency rules of the Financial Conduct Authority.

The financial information for the year ended 31 December 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006. The annual financial statements of John Laing Group plc are prepared in accordance with IFRS as adopted by the European Union.

The same accounting policies, presentation and methods of computation have been followed in these Condensed Group Financial Statements as were applied in John Laing Group plc's latest annual audited financial statements.

Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the interim Condensed Group Financial Statements.

2 Accounting policies

Basis of preparation

The Condensed Group Financial Statements have been prepared on the historical cost basis except for (i) the revaluation of the investment portfolio that it holds through its investment in John Laing Holdco Limited and (ii) financial instruments that are measured at fair value at the end of each reporting period. The Company concluded that it meets the definition of an investment entity set out within IFRS 10 Consolidated Financial Statements, paragraph 27 on the basis described in the notes to the Group financial statements in the 2019 Annual Report and Accounts.

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 and/or subordinated debt 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".

Going concern

The Directors have reviewed the Group's financial projections and cash flow forecasts and believe, based on those projections and forecasts and taking into account expected bidding activity and operational performance, that it is appropriate to prepare the Condensed Group Financial Statements on the going concern basis. In arriving at their conclusion, the Directors took into account the financial resources available to the Group from its committed banking facilities comprising £500 million corporate banking facilities committed until July 2023 and an additional £150 million facilities committed until January 2022. At 30 June 2020, there were net available financial resources of £311 million. Utilisation of the facilities includes letters of credit issued which, together with cash collateral balances held by the Group, back all future investment commitments which at 30 June 2020 were £230 million. Investments into project companies are made on a non-recourse basis, which means that providers of debt to such project companies do not have recourse to the Group beyond its investment.

Following the onset of COVID-19, the Group almost fully drew down on its facilities to improve the Group's liquidity as well as to mitgate credit risk. The Group's liquidity has been maintained in the first six months of the year by the recent completion of the disposals of interests in five assets which has offset the payment by the John Laing group of operating costs, the contribution to JLPF and the final 2019 dividend. All future capital commitments of £230 million are already supported by letters of credit issued under the banking facilities or cash collateral. Whilst further divestment processes are in progress, the Group is not reliant on divestment proceeds to meet its debts as they fall due, to operate within its banking facilities and to comply with the financial covenants over the next 18 months. In determining that the Group is a going concern, certain risks and uncertainties, some of which have heightened as a result of COVID-19, have been considered. This has been carried out by running various sensitivities on the Group's cash flow projections including up to a six month delay in planned disposals and reductions in the valuation of investments. The Group has also run a reverse stress test on the decline in the investmernt valuation before there is a covenant breach. This reduction is significant and therefore the Group believes the risk of such a decline to be remote. The Directors have also considered various mitigating actions that could be undertaken to maintain liquidity including a delay in future investments in order to preserve cash and liquidity. After making this assessment, the Directors believe that the Group is adequately placed to manage these risks.

Critical accounting judgements and key sources of estimation uncertainty

The Group's critical accounting judgements and key sources of estimation uncertainty are set out in note 4 of the Group's 2019 Annual Report & Accounts. The critical accounting judgements disclosed were the methodology for valuing the Group's investment portfolio (incorporating key inputs including the discount rate and the evidence available for the inclusion of value enhancements) and that there is no minimum funding requirement under IFRIC14. The key sources of estimation uncertainty in valuing the Group's investment portfolio were the discount rates adopted, the long term inflation rate, MLFs impacting Australian renewable energy assets and future energy yields and long-term power prices impacting all renewable energy assets and on the Group's pension schemes the discount, inflation and mortality rates adopted.

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

Fair value of investments

Critical accounting judgements in applying the Group's accounting policies

The Company measures its investment in John Laing Holdco Limited at fair value. The critical accounting judgement is how the investment in John Laing Holdco Limited is fair valued. Fair value is determined based on the fair value of investments in project companies (the Group's investment portfolio) and other assets and liabilities of investment entity subsidiaries.  A full valuation of the Group's investment portfolio is prepared on a consistent, discounted cash flow basis, at 30 June and 31 December. The key inputs, therefore, to the valuation of each investment are (i) the discount rate; and (ii) the cash flows forecast to be received from such investment. 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 a risk premium is added to reflect the additional risk during the construction phase. The construction risk premium reduces over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operational stage. The valuation assumes that forecast cash flows are received until maturity of the underlying assets. The cash flows on which the discounted cash flow valuation is based are those forecast to be distributable to the Group at each balance sheet date, derived from detailed project financial models. These incorporate a number of assumptions with respect to individual assets, including: dates for construction completion (where relevant); value enhancements; the terms of project debt refinancing (where applicable); the outcome of any disputes; the level of volume-based revenue; future rates of inflation and, for renewable energy projects, energy yield and future energy prices. Value enhancements are only incorporated when the Group has sufficient evidence that they can be realised.

Key sources of estimation uncertainty

A key source of estimation uncertainty in valuing the investment portfolio is the discount rate applied to forecast project cash flows. A base case discount rate for an operational project is derived from secondary market information and other available data points. The base case discount rate is then adjusted to reflect project-specific risks. In addition, a risk premium is added during the construction phase to reflect the additional risks throughout construction. This premium reduces over time as the project progresses through its construction programme, reflecting the significant reduction in risk once the project reaches the operational stage. The discount rates applied to investments at 31 December 2019 were in the range of 6.2% to 12.3% (31 December 2019 - 6.4% to 12.4%). Note 10 provides details of the weighted average discount rate applied to the investment portfolio as a whole and sensitivities to the investment portfolio value from changes in discount rates.

The key sources of estimation uncertainty present in the forecast cash flows to be received from investments are the forecasts of marginal loss factors impacting Australian wind and solar generation assets, future energy prices and energy yields impacting all renewable energy projects and forecasts for long-term inflation across the whole portfolio. Note 10 provides details of the sensitivities to the investment portfolio value from changes in forecast energy prices, marginal loss factors (MLFs), energy yields and forecast long-term inflation. The Group does not consider the other factors that affect cash flows, as described in the critical accounting judgements in applying the Group's accounting policies above, to be key sources of estimation uncertainty. They are based either on reliable data or the Group's experience and individually not considered likely to deviate materially year on year.

During the six months ended 30 June 2020, the market volatility and uncertainty brought about by COVID-19 has resulted in a significant reduction in short-term inflation which has reduced the portfolio value by £32 million (six months ended 30 June 2019 - £5 million) but the Group's forecasts for long-term inflation have largely remained unchanged from 31 December 2019. The Group has also reduced its power price forecasts across all regions, partly as a result of the impact from COVID-19 lockdown measures leading to reduced demand, which has resulted in value reductions of £67 million in the first half (six months ended 30 June 2019 - £13 million). There has not been a significant impact from COVID-19 on energy yields from our renewable energy assets, which have maintained strong availability during the period. and there has been no significant impact on MLFs.

Pension and other post-retirement liability accounting

Critical judgements in applying the Group's accounting policies

The accounting surplus in the Group's defined benefit pension schemes at 30 June 2020 was £38 million (31 December 2019 - surplus of £13 million). In determining the Group's defined benefit pension surplus, consideration is also given to whether there is a minimum funding requirement under IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction which is in excess of the IAS 19 Employee Benefits liability. If the minimum funding requirement was higher, an additional liability would need to be recognised. Under the trust deed and rules of JLPF, the Group has an ultimate unconditional right to any surplus, accordingly the excess of the minimum funding requirement over the IAS 19 Employee Benefits liability has not been recognised as an additional liability.

Key sources of estimation uncertainty

The value of the pension deficit is highly dependent on key assumptions including price inflation, discount rate and life expectancy. The discount rate is based on yields from high quality corporate bonds. The assumptions applied at 30 June 2020 and the sensitivity of the pension liabilities to certain changes in these assumptions are illustrated in note 11.  

The COVID-19 crisis has resulted in significant volatility in the financial markets. Reductions in corporate bond yields have resulted in the discount rate reducing from 2.1% to 1.4%, which has led to an increase in pension liabilities, and reductions in inflation have led to an increase in pension liabiltiies. A large proportion of the assets of the pension scheme provide hedging against movements in liabilities for changes in discount rates and inflation and, as a result, the impact of COVID-19 on the pension surplus has been insignificant.

3 Operating segments

Information is reported to the Group's Board (the chief operating decision maker under IFRS 8 Operating Segments) for the purposes of resource allocation and assessment of performance on a regional basis. Regional performance targets have also been set. Accordingly, the reportable segments under IFRS 8 are based on regions which are currently: Asia Pacific, Europe, North America and Latin America. Further reportable segments are "Fund management", relating to external fund management activities, which ceased in 2019, and "Central", which covers the corporate activities at the Group's headquarters.

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

The following is an analysis of the Group's operating income and PBT for the six months ended 30 June 2020 and 2019 and for the year ended 31 December 2019 for each segment:

For the six months ended 30 June 2020, the Group held seven (six months ended 30 June 2019: four; year ended 31 December 2019: three) investments from which it received more than 10% of its operating income. The operating income from the seven investments was: £6 million, £8 million and £8 million reported within the North America segment and £16 million, £6 million, £8 million and £7 million reported within the Asia Pacific segment. The Group treats each investment in a project company as a separate customer for purposes of IFRS 8.

The Group's investment portfolio valuation is the aggregation of the values of the investment portfolios in each region where the investments are actively managed. Other assets and liabilities, including cash balances and borrowings as well as retirement benefit obligations, are also predominantly managed centrally.

Other assets and liabilities within investments at FVTPL above include cash and cash equivalents, investments in UK Treasury bills, trade and other receivables and trade and other payables within recourse investment entity subsidiaries.

4 Seasonality

Neither operating income nor profit are impacted by seasonality.

5 Other income

In June 2019, the Group completed the sale of its remaining fund management activities by way of a novation of the Investment Advisory Agreement with John Environmental Assets Group (JLEN) and transfer of the investment advisory team to Foresight Group.

6 Tax

The tax (charge)/credit for the period comprises:

For the six months ended 30 June 2020, a tax rate of 19.0% has been applied (six months ended 30 June 2019 and year ended 31 December 2019: 19.0%).

7 Earnings per share

The calculation of basic and diluted earnings per share (EPS) is based on the following information:

8 Share-based INCENTIVES

The total expense recognised in the Condensed Group Income Statement for all awards granted under share-based incentive arrangements for the six months ended 30 June 2020 was £1 million (six months ended 30 June 2019: £2 million; year ended 31 December 2019: £4 million). The £1 million is charged in arriving at the loss for the period and is a credit in Other reserves in the Condensed Group Statement of Changes in Equity. An amount of £2 million has been transferred from other reserves to retained earnings in respect of awards previously granted under share-based incentive arrangements that vested and were exercised in the six months ended 30 June 2020.

Long-term incentive plan (LTIP)

The Group operates share-based incentive arrangements for Executive Directors, senior executives and other eligible employees under which awards are granted over the Company's ordinary shares. Awards are conditional on the relevant employee remaining in employment from the date of grant to the vesting date (the vesting period) and are subject to the plan rules. The awards vest three years from the grant date, subject to the Group achieving a target share-based performance condition, total shareholder return (50% of the award), and a non-share based performance condition, NAV per share growth (50% of the award). The Group has no legal or constructive obligation to repurchase or settle the awards in cash.

The movement in the number of shares awarded under the LTIP was as follows:

In addition to the 1,072,112 shares that vested per the table above, a further 80,192 shares were awarded in lieu of dividends payable since the grant date on the vested shares (see note 12).

Deferred Share Bonus Plan (DSBP)

The Group operates a Deferred Share Bonus Plan (DSBP) for Executive Directors and certain senior executives under which the amount of any bonus above 60% of their base salary (or, for Executive Directors, where higher, 60% of maximum bonus potential) is awarded in deferred shares. Awards under the DSBP vest in equal tranches on the first, second and third anniversary of grant, normally subject to continued employment and are subject to the plan rules.

The movement in the number of shares awarded under the DSBP was as follows:

No awards under the DSBP were granted in the six months ended 30 June 2020. In addition to the 66,833 shares that vested as per the table above, a further 2,922 shares were awarded in lieu of dividends payable since the grant date on the vested shares (see note 12).

Buy-out awards

In the six months ended 30 June 2020, buy-out awards were granted to two senior executives on joining the Group in the period in compensation for certain awards that were forfeited on leaving their previous employers. Two awards were granted to each individual with the first award vesting on the first anniversary of the grant date and the second award vesting on the anniversary of the grant date. Vesting is subject to continued employment and the plan rules.

The movement in the number of shares subject to buy-out awards was as follows:

In addition to the 13,182 shares that vested as per the table above, a further 67 shares were awarded in lieu of dividends payable since the grant date on the vested shares (see note 12).

Employee Benefit Trust (EBT)

On 19 June 2015, the Company established an EBT to be used as part of the remuneration arrangements for employees. The purpose of the EBT is to facilitate the ownership of shares by or for the benefit of employees through the acquisition and distribution of shares in the Company. The EBT is able to acquire shares in the Company to satisfy obligations under the Company's share-based incentive arrangements. At 1 January 2020, the EBT held 1,199,652 shares. During the six months ended 30 June 2020, 250,000 new shares in John Laing Group plc were issued to the EBT with which to satisfy obligations under share-based incentive arrangements. 1,235,308 of share awards vested and were exercised in the period under these arrangements leaving 214,344 shares held by the EBT at 30 June 2020 (see note 12).

9 Investments at fair value through profit or loss

Six months ended 30 June 2020

During the six months ended 30 June 2020, the Group disposed of its interests in one PPP and four renewable energy projects to third parties.

Total proceeds were £88 million.

Details of investments sold in the period ended 30 June 2020 were as follows: