A pre-close update from John Laing (JLG) at the end of June forewarned investors of a challenging first half for the group’s renewable energy assets in Europe and Australia. So, despite delivering £78m of “value enhancements” across the portfolio and receiving £131m in disposal proceeds, this was offset by £121m of writedowns in the six months to 30 June. These impairments weighed on statutory earnings and net asset value where growth of 3 per cent – according to Laing's end-June measurement – was lower than expected.
Grid transmission issues in Australia adversely affected the value of three of John Laing’s renewable assets, equivalent to 11 per cent of the overall portfolio. Affecting the entire industry, the problem relates to marginal loss factors (MLF) – the portion of energy lost when electricity is transmitted due to resistance. With the assets still under construction, a £66m writedown is based on a forecast reduction in value. Meanwhile, low levels of wind activity on some legacy assets in Germany and Ireland have lowered long-term energy yield forecasts in those regions. Together, these events have led the group to suspend investment in European and Australian wind and solar assets and limit further US renewables investment to recycling capital from disposals.
As a result, the pipeline of opportunities has dropped by 11 per cent to £2.1bn, although potential public private partnership (PPP) investments have increased by over a fifth to £1.9bn as US and Australian markets gain momentum and opportunities arise in Latin America. Only £7m of new investments were made during the half, relating to UK student accommodation. However, the group completed a £75m investment in a US wind farm post-period and has made its first foray into Latin America, where £62m has been committed to acquire a 30 per cent stake in a Colombian road project.
Analyst consensus collated by Bloomberg places adjusted pre-tax profit at £223m and EPS at 43p for the full year, rising to £248m and 49p in 2020.
JOHN LAING (JLG) | ||||
ORD PRICE: | 350p | MARKET VALUE: | £ 1.73bn | |
TOUCH: | 350-351p | 12-MONTH HIGH: | 400p | LOW: 282p |
DIVIDEND YIELD: | 2.7% | PE RATIO: | 11 | |
NET ASSET VALUE: | 303p | NET DEBT: | 5% |
Half-year to 30 Jun | Income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2018 | 213 | 175 | 38.8 | 1.80 |
2019 | 76 | 35 | 7 | 1.84 |
% change | -64 | -80 | -82 | +2 |
Ex-div: | 26 Sep | |||
Payment: | 25 Oct |