TIDMJLIF
RNS Number : 2133W
John Laing Infrastructure Fund
13 November 2017
Trading Update Statement
JLIF, the international infrastructure investment
company, today announces its Trading Update Statement
("TUS") for the period 1 July 2017 to 10 November
2017.
FINANCIAL HIGHLIGHTS
* Underlying growth in Portfolio value for the nine
months to 30 September 2017 of 5.5% to GBP1,227.8
million, on a rebased value of GBP1,163.8 million
* Net Asset Value(1) ("NAV") of GBP1,219.6 million as
at 30 September 2017, including GBP34.5 million of
cash allocated to the dividend that was paid in
October 2017
* NAV per share as at 30 September 2017 of 123.1 pence
cum-div (119.6 pence ex-div), up 2.4% on 31 December
2016
* Paid a dividend of 3.48 pence per share in October
2017, resulting in total dividends paid in 2017 of
6.96 pence per share
* Agreed the acquisition of interests in six UK-based
PPP projects for a combined consideration of
approximately GBP148.8 million
Valuation and Portfolio Performance
As at 30 September 2017 (the "Valuation date"), the Directors
valuation of JLIF's portfolio of 63 projects was GBP1,227.8
million. This represented an overall increase of 0.8% on the
portfolio value as at 31 December 2016. Underlying portfolio growth
during the nine months to the Valuation date was 5.5%. The overall
increase of GBP10.2 million since the start of the year is the net
impact of investments, cash distributed from the Portfolio,
discount rate movements, exchange rate movements and the net of
value enhancements and provisions made against certain projects.
The following table provides a breakdown of the various movements
in valuation for the nine months to 30 September 2017.
GBP000s
===================================== ========== ========
Portfolio Value as at 31
December 2016 1,217,647
===================================== ========== ========
Investments 19,038
Cash distributed from Portfolio (74,556)
===================================== ========== ========
Discount rate movements 4,352
Exchange rate movements (2,674)
===================================== ========== ========
Opening value rebased at
31 December 2016 1,163,807
Growth from discount rate
unwind 67,304 5.78%
===================================== ========== ========
Net decline from value enhancements
& other movements (3,294) (0.28%)
Portfolio Value as at 30
September 2017 1,227,816
===================================== ========== ========
Overall, the portfolio continues to perform well, with
distributions remaining strong in the third quarter.
As noted in JLIF's interim results, a long-standing dispute was
ongoing at the Roseberry Park Hospital project in which the Company
was investing significant effort and resources, alongside the other
project parties, towards finding a solution to the disputed issues.
These related to the provision of certain Hard FM services, the
operation of the Service Helpdesk and certain alleged construction
defects. JLIF believes the issues related to this project were
specific to the specialist nature of the mental health facility at
Roseberry Park, particularly around the challenges of being able to
access areas where there were purported construction defects.
Unfortunately, due to the protracted nature of the discussions with
the Trust and other project parties, and the apparent lack of an
acceptable solution being imminent, in September 2017 the senior
lenders decided to take the project holding company into
administration and to take control of attempting to settle the
dispute. As at 30 June 2017, the project represented less than 0.5%
of the portfolio value.
JLIF's value of the entire portfolio as at 30 September 2017
represents a roll-forward of the portfolio value as at 30 June
2017, save for the Roseberry Park Hospital project that has been
written off.
Recent political comments around PFI
At the annual UK Labour Party conference in September 2017, the
UK's Shadow Chancellor of the Exchequer, John McDonnell, made
comments regarding his party's intentions with respect to UK PFI
contracts should the Labour Party come to power. These included an
intent to abandon PFI as a tool for future infrastructure
investment and to bring in-house existing PFI contracts. This
statement was subsequently softened by other members of the Labour
Party, narrowing the range of potential PFI contracts to which the
comments would apply to those not deemed value for money.
In practice, bringing PFI contracts in-house would require local
public sector counterparties to exercise their right to terminate
voluntarily the contract (where such a right exists) and, at the
same time, make alternative arrangements for running the projects
for the local communities. Where this is the case, there are legal
contract provisions regarding the compensation to which a project's
equity investors would be entitled.
As disclosed in the risk committee reports in its annual
results, JLIF monitors the UK political situation carefully. In the
event that all its UK projects were voluntarily terminated by each
and every local public sector counterparty, JLIF would receive
compensation equating to approximately 86% of its UK portfolio
value (including JLIF's recent acquisitions announced in
October)(2) . JLIF's UK portfolio value, including the recently
announced acquisitions, represents approximately 71% by value of
JLIF's entire portfolio. JLIF's UK portfolio comprises 57 projects
spread across seven sectors and approximately 50 different public
sector counterparties, resulting in limited exposure to any single
public sector client.
Catalonia Independence
In October 2017, a referendum on Catalonian independence was
called by the Regional Government. The Spanish Central Government
deemed the referendum illegal under the country's constitution.
Despite this, the referendum proceeded, with a majority voting in
favour of independence on a low turnout. The Catalan government
subsequently made a unilateral declaration of independence. In
response to this, the Central Government triggered Article 155 of
the Spanish constitution resulting in the imposition of direct rule
and the sacking of many Catalan civil servants and government
ministers. The Central Government has called for fresh regional
elections in December 2017.
JLIF holds two availability-based investments in Barcelona,
Catalonia, a 53.5% interest in the Line 9 Section II Metro Stations
project and a 13.5% interest in the Line 9 Section IV Metro
Stations project. At 30 September 2017, the combined value of the
projects represented 14.1% of the Portfolio, reducing to
approximately 12.7% following the recently announced acquisitions
(see Acquisitions below). Both projects form part of the wider
investment in the Line 9 project, a landmark and very important
project for the city. Both projects have availability-based payment
mechanisms, receiving payments from IFERCAT, an agency of the
Catalan government responsible for transport. All payments have
been and continue to be paid by IFERCAT, as per the contract.
IFERCAT benefits from access to the Fondo de Liquidez Autonómico
("FLA"), a credit line from the Central Government. While in the
past the decision as to how the FLA funds are used was made by the
Catalan government, since September 2017 this decision as to how
the FLA is utilised in Catalonia has been taken back by the Central
Government. JLIF continues to monitor the situation closely.
Acquisitions
In July 2017, JLIF completed the acquisition of an additional
15% interest in the North Staffordshire Hospital project from
co-shareholder Sodexo. This brings JLIF's total shareholding in the
project to 90% of the equity and subordinated debt interests, and
100% of the mezzanine debt interest. The consideration was
approximately GBP7.5 million. The acquisition was made on a
bilateral basis and at a price that was accretive to the carrying
value of the existing interest.
As announced at the time, in October 2017 JLIF signed agreements
with John Laing Group plc and The John Laing Pension Trust Limited
with respect to a UK portfolio comprising one social housing
project and four rail sector projects, including an additional 9%
indirect interest in the Intercity Express Programme Phase 1 ("IEP
Phase 1") project. The combined consideration for the five assets
was approximately GBP141.2 million. The acquisition of four out of
the five assets has now completed and was financed through JLIF's
revolving credit facility, the Sterling tranche of which at the
date of this announcement is GBP144.9 million drawn. Following
these acquisitions, approximately 71% of the Portfolio by value is
UK based.
Governance and Regulation
As previously announced, at the end of September 2017, Paul
Lester stepped down from his position as Chairman of JLIF that he
had held since launch in 2010. David MacLellan, previously Deputy
Chairman, has taken on the role of Chairman of the Board.
On the 1 January 2018, the EU's Packaged Retail and
Insurance-based Investment Products ("PRIIP") regulation will take
effect. This requires 'manufacturers' of such products to prepare
and make available (via a Regulated Information Service as well as
on the company's website) a Key Information Document ("KID"). The
Board has determined that shares in the company are covered by the
regulation. JLIF intends to comply fully with the PRIIP
regulations, and will make available a KID relating to its shares
before the end of the year.
Outlook
The market for operational, availability-based PPP projects
remains competitive in all mature jurisdictions. In some cases,
such as the UK and parts of continental Europe, this is largely a
consequence of a lack of deal flow (with the majority of projects
already under the ownership of long-term investors). In other
markets, such as the US, Canada and Australia, the level of funding
available for new investment continues to drive competition and
prices.
The Investment Adviser, John Laing Capital Management Limited,
continues to seek to develop bilateral deals based on long-standing
relationships with developers and continues to review other markets
and sub-sectors that may also be a source of projects with the
characteristics JLIF seeks (i.e. operational, low-risk,
inflation-linked and mature/predictable cash flows).
Contact Information
John Laing Capital Management Limited Tel: + 44 (0)20 7901 3200
David Hardy
Jamie Pritchard
Gianluca Mazzoni
Finsbury Tel: + 44 (0)20 7251 3801
Faeth Birch
Philip Walters
Nidaa Lone
Note:
This Trading Update Statement aims to give an update of material
events and transactions that have taken place during the period
from 1 July 2017 to 10 November 2017 and their impact on the
financial position of the Investment Group. This update reflects
the Investment Adviser's and the Board's current views. They are
subject to a number of risks and uncertainties and could change.
Factors that could cause or contribute to such differences include,
inter alia, general economic, market conditions, and specific
factors affecting the financial prospects or performance of
individual investments within the portfolio of JLIF.
This update contains forward-looking statements that are based
on current expectations or beliefs, as well as assumptions about
future events. Undue reliance should not be placed on any such
statements because they speak only as at the date of this document
and, by their very nature, are subject to known and unknown risks
and uncertainties and can be affected by other factors that could
cause actual results and JLIF's actions to differ materially from
those expressed or implied in the forward-looking statements.
This update has been prepared solely to provide additional
information to shareholders as a body and should not be relied on
by any other party or for any other purpose.
This Trading Update Statement contains Inside Information as
defined under the Market Abuse Regulation (EU) No. 596/2014.
GIIN Number: K2UFLF.99999.SL.831
1 Net Asset Value is equal to total assets (including Portfolio
value) minus liabilities of the JLIF Investment Group (as defined
in the company's 2016 Annual Report).
2 Certain assumptions have been made in estimating this figure.
The amount received could be more or less than this.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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