TIDMBBGI
RNS Number : 4146T
BBGI Global Infrastructure S.A.
25 March 2021
25 March 2021
BBGI GLOBAL INFRASTRUCTURE S.A.
('BBGI' or the 'Company')
Annual Results for financial year ended 31 December 2020
The information contained within this Announcement is deemed by
the Company to constitute inside information. Upon the publication
of this Announcement via a Regulatory Information Service this
inside information is now considered to be in the public
domain.
ABOUT BBGI
BBGI Global Infrastructure S.A. (BBGI, the 'Company', and
together with its subsidiaries, the 'Group') is a global
infrastructure investment company helping to provide the
responsible capital required to build and maintain critical social
infrastructure[i] in the countries where we do business.
These are the important infrastructure assets that citizens rely
on every day. They are building blocks of the local economy, and as
a long-term custodian, we partner with the public sector to help
deliver and manage them.
In doing so, we follow a low-risk, globally diversified and
internally managed investment strategy to deliver long-term and
predictable shareholder returns.
COMPANY OVERVIEW
WHY INVEST IN BBGI
BBGI provides access to a diversified portfolio of
infrastructure investments that generate long-term, sustainable
returns and serve an inherent social purpose in supporting local
communities. The healthy demand for responsible private sector
finance for public infrastructure is underpinned by the widening
infrastructure spending gap in the developed countries where BBGI
invests.
In return for long-term investment in and active ownership of
essential social infrastructure investments such as, schools,
healthcare, blue light[ii] and justice facilities, and transport
procured using availability-based investment models, BBGI receives
stable, predictable and contracted cash flows. These are
underpinned by government or government-backed counterparties.
The predictability of these contracted revenues allows BBGI to
return to investors a stable and progressive income stream in the
form of a semi-annual dividend. The Management Board follows a
proven operating model of value-driven active asset management,
prudent financial management and a selective acquisition strategy
to preserve value and achieve portfolio growth. Environmental,
Social and Governance ('ESG') considerations are embedded in our
business strategy, operations and investment processes. These
operational pillars are fundamental to the Company's low-risk,
globally diversified and internally managed investment
strategy.
1. Low-risk[iii]
The Company is committed to an availability-based social
infrastructure investment platform. This commitment to an
availability-based investment strategy generates stable,
predictable cash flows backed by secure, contracted public sector
revenues. This is the Management Board's area of expertise,
avoiding style drift by maintaining a disciplined approach to this
strategy.
2. Globally diversified
The investment strategy is deployed in stable, well-established
developed markets where governments and local authorities maintain
support for availability-based models to finance public
infrastructure. This provides focused exposure to highly-rated
investment grade countries, across UK, North America, Australia and
Continental Europe.
3. Strong ESG approach
By aligning our value-driven active asset management approach to
relevant UN Sustainable Development Goals ('SDGs'), ESG principles
are integrated into the Company's investment cycle to strengthen
the non-financial returns the portfolio generates for all
stakeholders. This enables the Company to deliver, monitor and
report social impact effectively, and incentivise strong ESG
performance by directly linking results to executive
compensation.
4. Internally managed
The Company's in-house management team is focused on delivering
shareholder value, incentivised by shareholder returns and growth
in Net Asset Value ('NAV') per share. This means that no NAV-based
management or acquisition fees are charged, and the internal
management team's interests are fully aligned with those of the
shareholders, resulting in full pricing discipline when managing
the portfolio and assessing investment opportunities. As a result,
the Company consistently maintains the lowest comparative ongoing
charges to its shareholders in the sector.[iv]
YEAR IN NUMBERS
Financial highlights
Investment Basis NAV per Share Total Shareholder Return
NAV up 1.2% as at 31 ('TSR')
up 6.7% as at 31 December 2020 since IPO[vii]
December 2020 (31 December 2019:
(31 December 2019: 136.2pps)[vi] 157.5%
GBP858.6 million)[v] 137.8pps
GBP916.0m
Annualised Total 2020 Dividend Distribution 2021 Target Dividend[ix]
Shareholder Return per Share
since IPO[viii] 7.18pps 7.33pps
11.0%
--------------------------- -------------------------
2022 Target Dividend Cash Dividend Cover[x] Ongoing Charges[xi]
(viii)
7.48pps 1.27x (2019: 0.88%)
0.86%
--------------------------- -------------------------
Portfolio highlights
-- Globally diversified portfolio of 50 availability-based
Public-Private Partnership (PPP) infrastructure investments with a
strong social impact.
-- Portfolio performance and cash receipts ahead of business
plan, underpinning BBGI's progressive dividend policy.
-- Consistently high level of asset availability at over 99.8
per cent. with no material lock-ups or defaults reported over the
period.
-- The Company did not experience any material Covid-19 related
operational or financial impacts.
-- A combined GBP59.2 million of new cash investments in six new
and follow-on acquisitions in lower-risk availability-based
healthcare, as well as road and bridge investments.
-- Strong support for the Company's investment case demonstrated
by oversubscribed equity issue in November 2020 which raised gross
proceeds of GBP55 million.
-- As at 31 December 2020, the Group had a net cash position of
GBP20.5 million with no cash borrowings outstanding under the
Revolving Credit Facility ('RCF') .
-- The Company has an attractive pipeline of availability-based
investments in highly-rated investment grade countries across
Europe and North America.
PORTFOLIO AT A GLANCE
The fundamentals
Based on portfolio value at 31 December 2020.
Investment type
100% availability-based revenue stream.
Investment Type
================================== =====
Availability-Based Revenue
Assets 100%
Regulated Assets -
Demand-Based Assets -
100%
Investment status
Low-risk operational portfolio.
Investment Status
==================== =====
Operational >99%
Construction <1%
100%
Geographical split
Geographically diversified in stable developed countries.
Geographic Split
==================== =====
Canada 38%
UK 30%
Australia 13%
Cont. Europe 10%
USA 9%
100%
Sector split
Social impact portfolio with well diversified sector
exposure.
Sector Split
======================== =====
Transport 51%
Health(1) 23%
Blue Light and Justice 14%
Education 10%
Other 2%
100%
(1) Less than 1% exposure to UK acute health (by NAV).
Investment life
Long investment life with 58% of portfolio by value with a
duration of greater than 20 years; weighted average life of 20.4
years. Average portfolio debt maturity of 17.2 years.
Investment Life
====================== =====
>=25 years 14%
>=20 years and
<25 years 44%
>=10 years and
<20 years 40%
<10 years 2%
100%
Top five investments
Well-diversified portfolio with no major single asset
exposure.
Top Five Investments
====================================== =====
Golden Ears Bridge 9%
Ohio River Bridges 9%
Northern Territory Secure
Facilities 7%
McGill University Health
Centre 5%
A1/A6 Diemen - Almere motorway 5%
Next five largest investments 19%
Remaining investments 46%
100%
Investment ownership
80% of assets by value in the portfolio are 50% owned or
more.
Investment Ownership
======================= =====
100% 47%
>=75% <100% 6%
>=50% <75% 27%
<50% 20%
100%
Country rating
All assets located in countries with ratings between AA and
AAA.
Country Rating
================= =====
AAA 61%
AA+ 9%
AA 30%
100%
Projected portfolio cash flow
The cash flows are stable and long-term, with their
predictability enhanced by government or government-backed
counterparties as well as their contracted nature. The index-linked
provisions provide a positive link to inflation of approximately
0.45 per cent.
The investments made over the period contributed positively to
both stable cash flows and the weighted average length of the
portfolio. Based on current estimates and assuming no further
investments, the existing portfolio is forecast to enter into the
repayment phase in 2035, after which cash inflows from the
portfolio will be paid to the Company's shareholders as capital. By
acquiring accretive investments, the intention is that the capital
repayment phase is pushed further into the future.
As at 31 December 2020, BBGI has a weighted average portfolio
life of 20.4 years, a decrease of 0.3 years compared with 31
December 2019.
CHAIRMAN'S STATEMENT
Dear Shareholders,
As I reflect on my first period as your Chairman, I am proud of
the way the Company - which was renamed BBGI Global Infrastructure
S.A. in November 2020 - has performed. At a time when we are all
searching for certainty and predictability, the portfolio has
generated financial results ahead of our expectations.
This has reaffirmed the value of the 50 availability-based
investments we manage, all of which continue to deliver
well-maintained global infrastructure to local communities and
end-users, and robust, long-term, stable income to shareholders.
This performance, in a difficult year for many because of the
Covid-19 pandemic, would not have been possible without the
dedication of the Company's employees who have worked tirelessly to
support all of our stakeholders.
We provide the responsible capital required to build and
maintain the developed world's social infrastructure. Our purpose
is now more relevant than ever, and the significant progress we
have made over the period on embedding ESG factors into our
investment and asset management activities is reflected in the Our
Approach To ESG section of this Annual Report, and the Company's
inaugural Environmental, Social and Governance Report ('ESG
Report') which can be viewed via our website.
Portfolio performance
Over the year, our priority was to preserve the value of the
Company's portfolio and continue providing essential infrastructure
services to our public sector clients by maintaining a high level
of asset availability of 99.8 per cent. We are pleased to report
that the Company did not experience any material Covid-19 related
operational or financial impacts. This strong performance was again
underpinned by the Company's proven business model of investing in
low-risk, availability-based infrastructure in highly-rated
investment grade countries. In practice, our value-driven active
asset management approach enabled safe and secure working, learning
and health environments, and fully functioning transport
infrastructure and other facilities across the UK, North America,
Australia and Continental Europe.
This contributed to an increase in the Company's NAV from 136.2
pence per share to 137.8 pence per share, representing an increase
of 1.2 per cent. In the challenging circumstances of 2020 this
demonstrates the resilience of our investment proposition.
Cash receipts during the year were ahead of business plan and
none of our investments recorded a material lock-up or default. Any
deductions over the period were either borne by third-party
facility managers and road operators, or as part of planned
lifecycle budgets.
Asset availability
99.8%
Long-term sustainable shareholder returns and progressive
dividends
The Company has delivered a Total Shareholder Return since IPO
of 157.5 per cent, or 11 per cent on a compounded annual basis,
while the high cash flow visibility we receive from creditworthy
government counterparties enabled the Company to achieve dividend
cover of 1.27x.
Accordingly, the Company has met our full year dividend target
of 7.18pps for 2020, and we continue to deliver a progressive
dividend. I am pleased to reaffirm the dividend target of 7.33pps
for 2021 and provide a new dividend target of 7.48pps for 2022.
Delivering value for money for shareholders remains a
fundamental component of our investment case and we have maintained
the lowest comparative ongoing charge in our sector at 0.86 per
cent.[xii]
Dividend target 2021
7.33pps 2.1%
Dividend target 2022
7.48pps 2.0%
Selective acquisition strategy
The Management Board has effectively mobilised its network and
tracked a number of primary and secondary opportunities over the
period. As with previous years, the Company assessed considerably
more investments than it committed to. This has enabled us to gauge
pricing and competitive trends to ensure the investments the
Company makes accurately reflect our conservative investment
criteria.
Using existing cash resources and our RCF, the Company made six
acquisitions - these are detailed in the Portfolio Review. We
increased the Company's allocation to lower-risk roads and bridges
with investments into Canada's Highway 104 and Samuel De Champlain
Bridge Corridor, as well as a follow-on acquisition in the Dutch
N18 motorway.
We also increased our exposure to healthcare assets in Canada
with the completion of two follow-on acquisitions in Stanton
Territorial Hospital and Kelowna and Vernon Hospitals,
respectively. These transactions were sourced using our strong
existing client and industry relationships and increased the
Company's respective interests to 100 per cent.
Total acquisitions (new and follow-on)
GBP59.2m
Prudent financial management
In pursuing a selective acquisition strategy, the Company
invests responsibly using a tried and tested financing method,
typically drawing on our GBP180 million RCF before raising capital
to fund debt repayments. This limits cash drag on our balance sheet
and enables both existing and new shareholders to invest in our
portfolio with certainty over where proceeds are allocated. We are
grateful to our shareholders' support for the oversubscribed issue
in November 2020 which raised gross proceeds of GBP55 million.
The Company continues to manage the risk of currency volatility
as part of our globally diversified investment portfolio via a
hedging strategy which limits foreign exchange sensitivity. We
explain this in more detail in the Valuation section of this Annual
Report.
Corporate governance and ESG
As an investment fiduciary, the Company is committed to good
corporate governance. During the year, and in accordance with the
AIC Code of Corporate Governance, the Company proactively engaged
an independent and externally facilitated evaluation of the
Supervisory Board. This evaluation was undertaken in the spirit of
The Chartered Governance Institute's ('ICSA') recently published
principles of good practice for FTSE-listed companies using
external board reviewers. I am pleased to report that the Company
received a very encouraging assessment with the review finding the
Board to be well constituted, highly effective and well-run.
During the year, the Supervisory Board formally constituted
separate committees for Nomination and Remuneration to further
strengthen the independence and objectivity of our decision-making.
The Remuneration Committee, with the support of an independent
adviser, undertook a comprehensive review of the existing
remuneration for the Management Board and the Company's executives,
including peer and wider FTSE 250 benchmarking to ensure that the
approach is competitive and aligned with our business strategy.
Further detail is provided in the Remuneration Report.
The Nomination Committee assessed, amongst other things, the
renewal of Management Board members' appointments, the development
of a distinct policy concerning Group diversity and equality and
succession planning. Following an extensive search, the Company is
also delighted to announce the appointment of Chris Waples to the
Supervisory Board, subject to shareholder approval at the 2021 AGM.
Chris has 35 years' global experience of managing the acquisition,
construction and divestment of infrastructure projects and has
extensive asset management experience.
The Company also established an ESG Committee during the year to
oversee the management of material ESG activities, including
climate-related issues. We understand the value of maintaining a
disciplined focus and strive to integrate ESG factors into our
business strategy, operations and investment processes. Crucially,
while much of the focus in 2020 has been responding effectively to
the global pandemic, we have not lost sight of managing short,
medium and long-term risks posed by ESG issues relevant to the
Company and our portfolio. We continue to align our investment
portfolio to contribute to five of the SDGs, recognising the
important role that investors can play in helping to meet global
sustainable development priorities.
During the year, we formalised our approach to managing climate
risks and the impacts they have on our Company and our portfolio.
This included the development of a climate resilient infrastructure
screening tool to better monitor and predict how our assets are
impacted as the environment around us changes. This year, we began
to report our progress against the Task Force on Climate-related
Financial Disclosures ('TCFD') recommendations. Whilst we recognise
that we have further work to do to improve our understanding of the
finance-related risks on the Company and our portfolio of
transitioning to a low carbon economy, and of the physical risks of
climate change, this is a significant step forward for our
Company.
Post period end, the Company made disclosures relating to
specific Articles of the EU Sustainable Finance Disclosure
Regulation ('SFDR'). This is a regulation requiring EU based
companies to make certain disclosures on the subject of
sustainability risk and on the manner in which sustainability
factors are integrated into investment decisions, and it allows
companies that meet certain sustainability criteria to
self-classify if they promote environmental or social
characteristics. The Company takes the view that it falls within
the scope of Article 8 and meets the criteria for socially positive
investment.
We are proud to have been awarded an 'A' in our inaugural
assessment by the UN's Principles for Responsible Investment
('PRI'), more about which is detailed in the Company's ESG Report.
We are committed to continuously reviewing and improving our
approach to Responsible Investment, collaborating with our
stakeholders and the wider industry to ensure we remain responsible
custodians.
Risk monitoring and management
Over the period, we implemented the Company's business
continuity plan ('BCP') globally. With most staff working remotely,
IT security and an additional management focus on introducing
workplace mental healthcare programmes for our employees were
critical in ensuring the Company was effective in the
transition.
The Company has continued its focus on monitoring the potential
concentration and failure risk of operational and maintenance
contractors who provide counterparty services to the Company's
investments. We have not identified any significant risk exposure
and the Management and Supervisory Boards remain comfortable with
the current contractors. Despite the pandemic, the contractors have
performed in line with expectations. The Company benefits from a
diversified contractor base and supply chain with no concentrated
exposure, combined with rigorous supply chain monitoring and
contingency planning.
The direct knock-on effects on the Company from the UK's
departure from the EU were largely technical in nature and were
dealt with by the Management Board over the course of the year to
ensure a seamless continuity of listing post-completion of the
Brexit transition period.
Our outlook
The Management and Supervisory Boards have been reassured by the
resilience of our portfolio and the positive response to the global
pandemic by governments of the countries in which we invest. We
continue to believe in the power of private finance to deliver
essential public infrastructure, and the Portfolio Snapshot in our
Strategic Report is testament to the quality of the services our
investments provide.
The fiscal commitment to infrastructure spending is likely to
generate a medium-term pipeline of opportunities and further
affirms the inherent attractiveness of our asset class and the
benefits of infrastructure investment allocation through the
economic cycle.
We have confidence in our ability to continue sourcing
attractive acquisition opportunities thanks to the strength of the
Company's relationships, our proven track record in value-driven
active asset management, and the dedication of our people and
partners.
We are therefore confident in our ability to maintain a robust
long-term, predictable and stable income derived from our
diversified global portfolio of infrastructure investments.
Sarah Whitney
Chairman
24 March 2021
STRATEGIC REPORT
CO-CEO Q&A
The Company's co-CEOs, Frank Schramm and Duncan Ball, share
their thinking for the year in review and look ahead to the
positive outlook for global infrastructure investment.
Q: What was the focus in 2020?
A: If you asked us for our 2020 predictions last year, many of
them would have been wrong. It's been a challenging period for all,
but one thing has remained the same as before: our ability to
deliver long-term, stable and predictable returns to our
shareholders. We believe this is because of the way we responsibly
build and manage our portfolio, and the strength of our industry
relationships.
Indeed, the services delivered by our investments have never
been more important than in this global health and economic crisis.
Active management of our 50 investments has been vital to ensuring
that healthcare, educational, blue light, judicial and transport
facilities are able to stay open and serve people and local
communities in a secure way.
We remain nimble, and our BCP - which we have tested every year
since IPO - has proven robust as the pandemic has evolved. Even
though elements of our daily working life have changed, the
fundamentals of our business have not. While investor meetings,
client visits, partnering sessions and staff reviews, all of which
are usually done in person, were replaced with video conferences,
stakeholder engagement has remained a principal focus for the
Company's senior leadership. Communication became even more
important as we prioritised checking-in on our people, our public
sector clients, our investors and our partners.
We have remained prudent in our financial management. This has
enabled us to preserve value and continue to receive predictable
cash flows which underpin the delivery of stable and reliable
income to our shareholders. During 2020, approximately two thirds
of London Stock Exchange ('LSE') listed companies cancelled, cut or
suspended their dividends[xiii]. We are very proud of the fact that
we delivered our target dividend and stand behind our guidance for
a further dividend increase in 2021. We are also very proud that we
were able to honour all of our hiring commitments without having to
lay-off or furlough any of our people or accept grants or revenue
support from any source.
Q: How has the portfolio performed and what changes have you
made to it?
A: As the portfolio continued to perform above expectations,
2020 has again proven the resilience of all our investments and the
sectors in which we invest. This performance amidst unpredictable
market volatility, disruption to global supply chains and changes
to consumer behaviour has reinforced why we stay true to our
founding principles of investing in low-risk, availability-based
investments.
The pandemic has in fact strengthened the structural demand for
our facilities across UK, North America, Australia and Continental
Europe. Patients still need high-quality healthcare facilities,
pupils and teachers must have safe, secure buildings in which to
teach and learn; road-users still expect well-maintained highways
and bridges; and local governments need blue light[xiv] and other
public buildings to uphold their commitment to local communities.
We are proud to enable the delivery of all these services at a time
when society arguably needs them more than ever.
We have seen a greater bifurcation in pricing as the financial
profile of many demand-based asset classes have been adversely
impacted by the pandemic and now more accurately reflects the
inherent risks associated with demand versus availability-based
investments. None of our investments have been materially impacted,
either operationally or financially, by the pandemic, the
associated lockdowns or the economic slowdown, and we are pleased
to report another period of high asset availability.
We anticipate a continued trend of construction companies
accelerating their plans to sell availability-based investments to
realise value, and our network of vendors has continued to open up
otherwise hard-to-access investment opportunities over the
period.
The six acquisitions we made over the year that are detailed in
the Portfolio Review combine new investments and follow-on
interests, increasing our exposure to lower-risk social
infrastructure projects in highly-rated investment grade
countries.
Q: How has your approach to Responsible Investment evolved?
A: As long-term responsible investors in social infrastructure,
we take our stewardship role very seriously. The landscape for
responsible investment is shifting, and we welcome the heightened
expectation from all our stakeholders to pursue, deliver and report
non-financial returns and any adverse sustainability impacts across
our portfolio. This is manifested in our 'A' rating for the
Company's inaugural assessment by the PRI, more about which can be
found in the Our Approach to ESG section and in our standalone ESG
Report.
Over the period, we further refined and formalised our
governance systems and processes to enable us to better meet these
expectations. This included establishing a dedicated ESG Committee
to further integrate ESG priorities into all parts of our business
including our business strategy, operations and investment
processes. Key developments included linking remuneration to our
ESG goals, running dedicated sustainability training for all staff,
improved ESG related disclosure in this report and on our website,
and overseeing the production of BBGI's inaugural stand-alone ESG
report.
During the period, we also became signatories to the UN Global
Compact, further demonstrating our commitment to being responsible
stewards. We use the SDG framework to guide our investment
strategy; and we have identified five SDGs where our investments
can make a positive contribution to our public sector clients in
meeting the goals by 2030. See the 'Our Approach To ESG' section
for more detail.
These top-down changes were complemented by bottom-up action
where we strengthened our focus on climate change mitigation,
specifically with the development of a climate resilient
infrastructure screening tool, which will support us in measuring
and managing our climate impact going forward.
On reporting, we fully endorse the need for greater clarity and
integration of disclosure requirements and standards. During the
period, we communicated our support for the TCFD recommendations,
demonstrating our commitment to enhanced transparency and positive
action on climate change. We also welcome the standardisation of
reporting on other ESG topics through the introduction of the
Sustainable Finance Disclosure Regulations ('SFDR'), ensuring that
our shareholders have the information they need to understand the
positive and adverse sustainability impacts of our investment
portfolio. We have updated our policies to meet the first phase of
requirements (available on our website), and our first standalone
ESG Report for the year 2020 is also a significant step
forward.
Q: What is your outlook for BBGI and for global infrastructure
investment?
A: We are confident that the resilience of the Company's
financial and operational performance will continue.
On a macro level, the future for global infrastructure
investment also looks strong. Ongoing low interest rates and a
substantial premium over risk free rates continue to drive demand
from investors that are looking for yield and to increase their
exposure to long-duration investments, and this has provided a
boost to infrastructure investment valuations. We believe there is
further room for valuation uplifts in the future. BBGI also
continues to believe that it is well placed to source attractive
investment opportunities.
What's more, the type of much-needed public infrastructure we
provide is universally supported in all the markets in which we
operate, and this remains a bipartisan issue for all governments.
This focus on infrastructure as a fiscal stimulus tool to back
national economies has only been bolstered this year, with more
infrastructure spending committed to by governments in order to
stimulate the economic recovery.
As a long-term custodian and trusted partner to the public
sector, we believe BBGI is well placed to benefit from this renewed
interest as economies rebuild, and we look forward to playing a
critical role in that.
Q. How is BBGI addressing the global threat of climate
change?
A: As responsible stewards of global infrastructure, BBGI fully
acknowledges the existential threat to humanity from the physical
impacts of climate change. We remain optimistic that by working
collaboratively, governments, society and the investment sector can
make the necessary and timely transition to a low carbon economy
that will minimise the impacts of future climate change by keeping
the global temperature rise below two degrees Celsius. We take our
role in this transition to a low carbon economy and preparing our
assets to adapt to future climate change very seriously, and we are
taking steps to understand how this period of change translates
into investment risk.
In 2020, we have made progress by integrating climate-related
risk into our governance and risk management processes. These
top-down changes were complemented by bottom-up action where we
strengthened our focus on climate change mitigation specifically,
with the development of a climate resilient infrastructure
screening tool, which will support us in measuring and managing our
climate impact going forward. But we know that we have more to do
to get better visibility of the granularity of our climate risks,
how this translates to financial risk and how we can mitigate these
risks through our stewardship and management of our assets.
In 2021, our next step is to measure our direct carbon footprint
and identify what we need to put in place to meet carbon reduction
targets for the emissions that we control. More importantly, as an
investor in global infrastructure, we have a pivotal role in
influencing the management and operation of our assets and to
increase the disclosure of carbon-related risks. And by the end of
2021, we expect to have a full picture of the impact our investment
decisions have on the sustainability factors such as the
environment and climate risk.
INVESTMENT PROPOSITION
We are a responsible global social infrastructure investor with
a low-risk investment strategy focused on delivering long-term
sustainable returns.
Strategic Pillars
Low-risk(1) Investment Globally diversified Strong ESG approach Internally managed
Strategy
Availability-based Focus on highly-rated ESG integration Alignment of
investment strategy investment grade countries in investment interests
Secure public sector-backed Stable, well-developed cycle Shareholder
contracted revenues operating environments value first,
Stable and predictable cash A global portfolio serving Focus on portfolio growth
flows with progressive society through supporting delivering second
long-term dividend growth local communities social impact Lowest
Executive comparative
compensation ongoing
linked to ESG charges(2)
performance
---------------------------- ---------------------------- ----------------------------
Consistent delivery of
objectives
Robust total Progressive Sustainable
shareholder long-term growth
returns dividend growth
(1) In comparison to other equity infrastructure asset
classes.
(2) In comparison to the latest publicly available information
for all closed-ended, LSE-listed equity infrastructure investment
companies.
The Company seeks to provide its shareholders with unique access
to a global portfolio of social infrastructure investments which
generate stable, predictable cash flows over the life of government
or government-backed contracts that typically extend to 20 years
and more in length.
The predictability of these government-backed revenues enables
BBGI to return to investors a sustainable and progressive income
stream in the form of a semi-annual dividend.
The Company's investment policy dictates that no more than 25
per cent of the Company's portfolio value calculated at the time of
investment will be derived from investments whose revenue streams
are not public sector or government-backed (currently zero per
cent). To ensure a spread of investment risk, any new acquisition
will not have an acquisition value greater than 25 per cent of
portfolio value of the Company immediately post-acquisition.
Avoiding style drift
As the competition to acquire availability-based assets at
attractive valuations has intensified, the Company's Management
Board has consciously worked to avoid 'style drift'. This refers to
the practice of moving up the risk spectrum, particularly where
pricing does not accurately reflect inherent risks, both to find
investible assets and to make the targeted returns to
investors.
The Management Board has made the conscious decision to avoid
investing in infrastructure transactions where the revenue stream
is demand-based which is typically highly correlated to Gross
Domestic Product or subject to uncertainty due to regulatory review
periods and political interventions.
While this disciplined approach may at times result in periods
of lower portfolio growth, we believe the benefits of this
continued specialisation and focus on a low-risk,
availability-based investment model result in dependable and
consistent income and returns with low volatility. By staying
focused on the availability sector and by remaining within our
sphere of expertise, we believe we offer a less complex business
proposition, and consequently, there should be fewer surprises and
the returns to our shareholders should remain predictable and
consistent. The robustness of this strategy has been validated
during the recent global pandemic - as the Company does not have
any demand-based assets and the portfolio is greater than 99 per
cent operational. Consequently, the portfolio performance has been
strong and there has been no material impact on our distributions
due to Covid-19.
Strategic investment partnerships
The Company continues to leverage strong relationships with
leading construction companies to source a potential pipeline that
supports a low-risk and globally diversified investment
strategy.
One notable relationship is the North American strategic
partnership with SNC-Lavalin which covers five assets. The Company
estimates that further investment opportunities in excess of C$250
million could result from the pipeline agreement over the next
years; all of which will be assessed on a case-by-case basis.
Typically, these contractors have secured the mandate to design
and build new assets but continue to look to divest financially
after the construction period has finished - thereafter often
maintaining facility management contracts through a long-term
partnership. The Company is an attractive partner for a number of
reasons:
-- We have extensive asset credentials and a strong track record
that can assist with the shortlisting process for new projects.
-- Having a financial partner is a pre-requisite for some
construction companies so they can avoid consolidating the
Portfolio Company debt onto the balance sheet of the Parent
Company.
-- Our cost of capital is typically lower than construction
companies, so involving BBGI can make the bid more competitive.
-- We are a long-term investor which is attractive to government
and government-backed counterparties.
-- We are considered a reliable source of liquidity should a
construction partner decide to sell in the future.
OPERATING MODEL
The Management Board follows a proven operating model of
value-driven active asset management, prudent financial management
and a selective acquisition strategy to preserve value, achieve
portfolio growth and ensure ESG considerations are embedded in our
investment processes. These three operational pillars are
fundamental to the Company's success.
We ensure stable operational performance through an active asset
management approach, where we actively seek to preserve value and
where possible also to identify and incorporate value enhancements
over the lifetime of asset ownership. In turn, this helps to reduce
cost to our public sector clients and the asset's end-users, and
enhance the operational efficiency of each asset. This active asset
management approach allows the Company to generate a high level of
asset availability, which supports high client satisfaction rates
and underpins the strong social purpose of our entire
portfolio.
Our prudent financial management is focused on efficient cash
management and implementation of our foreign exchange hedging
strategy. The portfolio's geographical diversification results in
exposure to multiple currencies. We actively seek to manage
geographical concentration and mitigate foreign exchange risk by
balance sheet hedging through foreign exchange forward contracts,
hedging of forecast portfolio distributions and borrowing in
non-Sterling currencies. Furthermore, Euro-denominated running
costs provide a natural hedge against the Euro-denominated
portfolio distributions.
The Company's selective acquisition strategy ensures that the
Management Board's focus remains within its area of expertise and
that the strategic pillars defined by the Company's investment
proposition are upheld.
We actively consider acquisitions that have inflation-protection
characteristics which supports the portfolio's inflation
linkage.
Value-driven active asset management
We pursue a standardised approach across all investments in the
portfolio to help derive operational and value enhancements and
preserve value, including:
-- Preserving value and where possible identifying and
delivering value enhancements to improve customer experience and
financial performance.
-- Focused management at the asset level to ensure distributions
are on time, and on or above budget.
-- Applying a high-quality corporate governance framework.
-- ESG KPI tracking tool introduced in 2018 to evaluate
non-financial performance of each investment.
-- Climate resilience questionnaire introduced in 2020 considers
climate risks and opportunities within the portfolio.
-- Comprehensive monitoring to ensure fulfilment of contractual
and legal obligations, which additionally serves to maintain high
availability levels and prevent deductions.
-- Strong client relationship management, including regular
meetings to uphold client satisfaction and monitor ESG
performance.
-- Focused and active asset management including site visits to
all significant investments annually and proactive management of
issues.[xv]
-- Focused cost management and portfolio-wide cost-saving
initiatives leveraging economies of scale (e.g. portfolio insurance
and standardised management contracts for project companies).
-- Identifying and continuing initiatives at the individual
asset level to outperform base case (e.g. lifecycle reviews).
-- Measured exposure to construction risk to support NAV uplift
by de-risking assets over the construction period.
Prudent financial management
We maintain focus and attention to cash performance at the asset
and portfolio level to drive efficiencies, including:
-- Maintaining modest cash balances to limit cash drag.
-- The portfolio's geographical diversification by necessity
involves exposure to multiple currencies. We actively seek to
manage and mitigate foreign exchange risk through our hedging
strategy.
-- Maintaining a low ongoing charge through an efficient and
cost-effective internal management structure.
-- Progressive future dividend growth underpinned by strong portfolio distributions.
Selective acquisition strategy
We maintain strategic discipline in our acquisition strategy and
portfolio composition to ensure we pursue growth that is accretive
to shareholder value, not just for growth's sake, including:
-- Broad industry relationships in multiple geographies.
-- Pre-emption rights to acquire co-shareholders' interests.
-- Global exposure to avoid geographical concentration.
-- Robust framework embedding ESG principals into investment due diligence.
-- Revolving corporate debt facility to support transaction execution.
-- Visible pipeline through a North American strategic partnership.
-- Maintaining focus on the Management Board's core areas of expertise.
OUR APPROACH TO ESG
Responsible stewardship, strong corporate citizenship and
sustainable growth guide our business decisions
To accompany this Annual Report, we have published our inaugural
ESG Report, which provides a more detailed explanation of our
performance, case studies and our forward-looking plans. Here, we
provide a summary of our approach to responsible investment and our
ESG activities.
As well as ensuring that through our investment portfolio we are
influencing our partners to reduce adverse sustainability impacts,
we are also integrating ESG principles and approaches into how we
run our Company. In 2020, we implemented a number of initiatives at
our portfolio companies to reduce our greenhouse gas emissions. In
2021, we will measure our own carbon footprint and set reduction
targets. We will continue to work with our staff and our portfolio
companies which employ staff to ensure the promotion of a diverse
and inclusive culture, and support our people to stay healthy and
safe.
Investment Strategy
Our investment strategy embodies the Company's purpose to
provide responsible capital required to build and maintain the
developed world's social infrastructure. To demonstrate how we
deliver social value, we have aligned our investment strategy with
the UN's SDGs. Specifically, our investment strategy helps to
deliver Target 9.1 by developing quality, reliable, sustainable and
resilient infrastructure to support economic development and human
well-being, with a focus on affordable and equitable access for
all. All of our capital investments in our portfolio enable our
public sector clients to deliver quality services and contribute to
the following SDGs:
-- SDG3: Ensure healthy lives and promote wellbeing for all at
all ages (we provide capital for 41 hospitals and health care
facilities).
-- SDG4: Ensure inclusive and equitable quality education and
promote lifelong learning opportunities for all (capital investment
in 34 schools and colleges).
-- SDG9: Build resilient infrastructure, promote inclusive and
sustainable industrialisation and foster innovation (a central
tenet of the BBGI portfolio of social infrastructure
investments).
-- SDG11: Making cities and human settlements inclusive, safe,
resilient and sustainable (17 transportation infrastructure
investments).
-- SDG16: Promote peaceful and inclusive societies for
sustainable development, provide access to justice for all and
build effective, accountable and inclusive institutions at all
levels (10 fire stations, four police facilities and three modern
correctional facilities).
To further develop the maturity of our approach to responsible
investment, we are identifying a set of social value indicators
which will improve the transparency of how we are fulfilling our
social purpose.
Our approach to Responsible Investment
BBGI became signatories to the PRI, and in our first reporting
cycle, we received an 'A' rating for our strategy, governance and
infrastructure. We are using the six principles as a framework to
integrate ESG into the Company's whole investment process and
lifecycle of the asset.
-- We have implemented a robust framework to integrate ESG into
all aspects of our investment lifecycle, from initial screening
through to end of investment life. ESG outcomes also affect
discretionary performance related remuneration for staff.
-- Our approach to active management, at both a corporate level
and the portfolio company level is aligned with and guided by the
SDGs, as explained above.
-- In 2018 we implemented a standardised ESG KPI tracking tool
across our portfolio of assets, and we publish on our website an
updated individual ESG information sheet for each of our
investments.
-- We engage with our co-investors and sponsors on the rationale
for responsible investment, and we communicate ESG expectations to
investment service providers.
-- We participate in ESG and RI industry initiatives, and we
participated in the IMP+ACT Alliance in 2020, undertaking its SDG
screening tool.
-- We report regularly on our responsible investment activities
each year, submitting a Public Signatory Report to the PRI, and
publishing our first ESG Report.
Adverse Sustainability Impacts Disclosures
At BBGI, we recognise that, whilst the purpose of our
investments is to provide responsible capital for social
infrastructure, the construction, operation and decommissioning of
such assets can have adverse sustainability impacts. We take a
stewardship approach towards our investments, and we continue to
invest in the assets throughout the investment lifecycle and take
an active management role in order to mitigate risks and minimise
their impacts. We are committed to the 'do no significant harm'
principle, and we are working to develop a set of sustainability
indicators, aligned to the SFDR, which will allow us to monitor and
disclose our performance over time, demonstrating how we are
meeting this principle. For a qualitative review of our performance
to the end of 2020 on our key sustainability issues, please refer
to our ESG Report.
Climate Related Financial Disclosures
This is our first year reporting against TCFD recommendations,
and we will continue to refine and develop our approach as we
progress our understanding of the financial risks and opportunities
of climate change to our business in order to meet the
recommendations in full.
-- Governance: In the Corporate Governance section of the 2020
Annual Report, we describe how the Supervisory Board and the
Management Board maintain oversight of the Company's
climate-related risks and opportunities. Specifically, in 2020, we
established an ESG Committee as a sub-committee of the Management
Board which governs the Company's approach to climate-related risks
and opportunities. In 2021, we also hired an ESG Director in order
to further strengthen our commitment to sustainability.
-- Strategy: We are currently focused on identifying current and
evolving climate risks and mitigating these risks. We are also
working towards obtaining a better understanding of the potential
financial impacts and our resilience with regards to different
scenarios. We are considering physical risks such as rising
temperatures, rising sea-levels, changes in precipitation, changes
in storm patterns, and changes to resource quality and
availability; as well as transition risks such as increased
regulation, litigation and reputational risks. This will enable us
to start to quantify the potential financial impacts of climate
change to our business and provide further insights to take into
our strategic approach to mitigating these impacts.
-- Risk: In the Risk section of the 2020 Annual Report, we
describe the Company's processes for identifying, assessing and
managing climate-related risks. We have a comprehensive risk
management framework which integrates the assessment and management
of climate risk as a subset of the wider risks which include
economic and market risk, taxation risk, political risk, financial
risk, operational risk and strategic risk.
-- All new investments are screened for climate risk, and we are
systematically reviewing existing investments for climate change
considerations. We have a target that all 50 investments will be
individually screened against our climate change questionnaire by
mid-2021. When analysing climate risks, we consider the short (one
year), medium (five year) and long-term (10-year+) impacts.
-- Metrics: We take our environmental impact and
responsibilities seriously and recognise the value of measurement,
target setting and reporting in driving our emissions down. We are
currently working with a specialist external consultancy to collect
the necessary data in 2021 that will allow us to voluntarily report
our Scope 1, 2 and 3 emissions in next year's Annual Report. We
will then look at setting reduction targets. In addition, we use
our proprietary ESG KPI tracking tool to drive enhanced ESG
performance in our investment portfolio. Further information on
this is included in our 2020 ESG Report.
Our Purpose and our Stakeholders
We are stewards of important social infrastructure investments
and there are many stakeholders who are impacted by our actions:
users of the infrastructure, communities, employees, investors,
partners, the environment, and society at large. We take this job
seriously. While the importance of considering our stakeholders is
not new, we are taking the opportunity this year to explain in more
detail how the Supervisory Board and the Management Board engage
with stakeholders. Further detail is also provided in our inaugural
ESG Report which is available on the Company's website.
This section serves as our Section 172 Statement. Section 172 of
the UK Companies Act 2006 requires Directors to take into
consideration the interests of stakeholders in their
decision-making. While, as a Luxembourg-based company, BBGI is not
obliged to comply with the UK Companies Act, we are voluntarily
complying with the spirit of the Section 172 requirement by
including details describing how the decision-making of our
Directors considers the interest of our stakeholders.
Effective engagement with stakeholders is crucial to the
Company's success and to fulfilling BBGI's purpose of providing
responsible capital required to build and maintain the developed
world's social infrastructure.
The stakeholder voice is heard by the Management Board
throughout the year by direct engagement with various
stakeholders.
During 2020, the impact of the pandemic on the mental health of
our people remained an important concern of the Management Board.
To address this, mental health was added to the agenda of all
employee semi-annual reviews and continually prioritised on a
one-to-one basis. We solicited feedback from our people and took
steps to support them as they worked remotely for much of the
year.
Typically, members of the Management Board routinely visit our
infrastructure investments over the course of the year and receive
direct feedback from public sector clients, partners and employees.
This is a great way for our Directors to experience BBGI from a
customer and community perspective and receive information directly
from people working on site at those assets. While Covid-19
restrictions have prevented these physical visits in 2020, we
continued to engage but did so predominantly via virtual
meetings.
Members of the Management Board conduct two roadshows per annum
after the Annual and Interim Reports, respectively. During these
two roadshows, they usually meet with more than 75% of the share
register (by shareholding) over the course of the year to discuss
the Company's performance and hear any concerns the shareholders
may have. Throughout the year, shareholders are also able to
contact the Chairman or members of the Board via email, telephone
or through the website. Again, in 2020, these meetings continued
unabated, but were done virtually.
To best understand BBGI's purpose, one can look at the various
stakeholders we serve and our aspirations towards these groups via
a multi-pronged mission statement:
-- Our public sector clients: To deliver a high standard of
long-term investment stewardship by delivering value for money to
our public sector clients, enabling them to provide robust, safe
and secure public facilities and services.
-- Our communities: To support the lives of the people in the
communities our investments serve by delivering well maintained,
responsibly managed infrastructure.
-- Our people: To maintain BBGI as a diverse and inclusive place
of work by having a clear vision; providing honest leadership, open
communication, and promoting a collaborative meritocracy where
performance is duly recognised and rewarded.
-- Our partners and suppliers: To create a productive and fair
working relationship through collaboration and shared values which
puts high-quality client service to the public sector as our mutual
objective.
-- Our investors: To be the preferred low-risk responsible
global infrastructure investment company with strong sustainability
credentials.
While BBGI has consistently engaged with our stakeholders
through a variety of channels over the years, the Company plans to
undertake a formal materiality assessment in 2021. BBGI plans to
reach out to stakeholders and solicit their views on which ESG
matters are most important and will prioritise based on stakeholder
expectations and feedback.
PORTFOLIO REVIEW
Portfolio summary
The Company's investments at 31 December 2020 consist of
interests in 50 availability-based social infrastructure
investments. The portfolio has no exposure to demand-based or
regulatory risk investments, and is well diversified across sectors
in education, health[xvi], blue light and justice, and
transport.
All portfolio companies in the portfolio are in the stable,
well-developed and highly-rated investment grade countries of
Europe, North America and Australia.
Portfolio breakdown[xvii]
No Investment Country Legal holding %
Transportation Infrastructure Investments
------------------------------------------------------------------------
1 A1/A6 Motorway Netherlands 37.1
---------------------------------------- ------------ ----------------
2 Canada Line Canada 26.7
---------------------------------------- ------------ ----------------
3 E18 Motorway Norway 100
---------------------------------------- ------------ ----------------
4 Golden Ears Bridge Canada 100
---------------------------------------- ------------ ----------------
5 Highway 104 Canada 50
---------------------------------------- ------------ ----------------
6 Kicking Horse Canyon Canada 50
---------------------------------------- ------------ ----------------
7 M1 Westlink UK 100
---------------------------------------- ------------ ----------------
8 M80 Motorway UK 50
---------------------------------------- ------------ ----------------
9 Mersey Gateway Bridge UK 37.5
---------------------------------------- ------------ ----------------
10 N18 Motorway Netherlands 52
---------------------------------------- ------------ ----------------
11 North Commuter Parkway Canada 50
---------------------------------------- ------------ ----------------
12 North East Stoney Trail Canada 100
---------------------------------------- ------------ ----------------
13 Northwest Anthony Henday Drive Canada 50
---------------------------------------- ------------ ----------------
14 Ohio River Bridges US 66.7
---------------------------------------- ------------ ----------------
15 Samuel De Champlain Bridge Corridor Canada 25
---------------------------------------- ------------ ----------------
16 South East Stoney Trail Canada 40
---------------------------------------- ------------ ----------------
17 William R. Bennett Bridge Canada 80
---------------------------------------- ------------ ----------------
Social Infrastructure Investments
------------------------------------------------------------------------
18 Avon & Somerset Police HQ UK 100
---------------------------------------- ------------ ----------------
19 Barking Dagenham & Havering (LIFT) UK 60
---------------------------------------- ------------ ----------------
20 Bedford Schools UK 100
---------------------------------------- ------------ ----------------
21 Belfast Metropolitan College UK 100
---------------------------------------- ------------ ----------------
22 Burg Correctional Facility Germany 90
---------------------------------------- ------------ ----------------
23 Clackmannanshire Schools UK 100
---------------------------------------- ------------ ----------------
24 Cologne Schools Germany 50
---------------------------------------- ------------ ----------------
25 Coventry Schools UK 100
---------------------------------------- ------------ ----------------
26 East Down Colleges UK 100
---------------------------------------- ------------ ----------------
27 Frankfurt Schools Germany 50
---------------------------------------- ------------ ----------------
28 Fürst Wrede Military Base Germany 50
---------------------------------------- ------------ ----------------
29 Gloucester Royal Hospital UK 50
---------------------------------------- ------------ ----------------
30 Kelowna and Vernon Hospital Canada 100
---------------------------------------- ------------ ----------------
31 Kent Schools UK 50
---------------------------------------- ------------ ----------------
32 Lagan College UK 100
---------------------------------------- ------------ ----------------
33 Lisburn College UK 100
---------------------------------------- ------------ ----------------
34 Liverpool & Sefton Clinics (LIFT) UK 60
---------------------------------------- ------------ ----------------
35 McGill University Health Centre Canada 40
---------------------------------------- ------------ ----------------
36 Mersey Care Hospital UK 79.6
---------------------------------------- ------------ ----------------
37 North London Estates Partnership (LIFT) UK 60
---------------------------------------- ------------ ----------------
38 North West Regional College UK 100
---------------------------------------- ------------ ----------------
39 Northern Territory Secure Facilities Australia 100
---------------------------------------- ------------ ----------------
40 Restigouche Hospital Centre Canada 80
---------------------------------------- ------------ ----------------
41 Rodenkirchen Schools Germany 50
---------------------------------------- ------------ ----------------
42 Royal Women's Hospital Australia 100
---------------------------------------- ------------ ----------------
43 Scottish Borders Schools UK 100
---------------------------------------- ------------ ----------------
44 Stanton Territorial Hospital Canada 100
---------------------------------------- ------------ ----------------
45 Stoke & Staffs Rescue Service UK 85
---------------------------------------- ------------ ----------------
46 Tor Bank School UK 100
---------------------------------------- ------------ ----------------
47 Unna Administrative Centre Germany 90
---------------------------------------- ------------ ----------------
48 Victoria Correctional Facilities Australia 100
---------------------------------------- ------------ ----------------
49 Westland Town Hall Netherlands 100
---------------------------------------- ------------ ----------------
50 Women's College Hospital Canada 100
---------------------------------------- ------------ ----------------
For portfolio statistics, refer to Portfolio at a Glance.
Operating model in action
Active asset management and value preservation
The Management Board's continued focus on active asset
management and preserving investment value resulted in modest NAV
growth through operational and value--accretive enhancements.
The Company's portfolio of over 99 per cent operational
investment proved resilient during the reporting period thanks to
its low-risk composition, with cash receipts ahead of business plan
and a high level of asset availability, recorded at approximately
99.8 per cent.
There were no material lock-ups or events of default reported,
and deductions were either borne by third-party facility management
companies and road operators or were part of planned lifecycle
expenditures.
We evolved our active asset management approach over the period,
working in even closer collaboration with our public sector clients
as they responded and adapted to the impacts of the Covid-19
pandemic. This has proven the adaptability and value of our
operating model, particularly in times of prolonged stress and
uncertainty for our public sector clients.
At the asset level, we provided enhanced support in particular
to the healthcare facilities operating through 11 of our
investments. We worked with these public sector clients throughout
the year, helping to reconfigure facilities, setting up Covid-19
testing sites, providing pro-bono financial contributions, and even
arranging pre-packed lunches from local merchants to support the
surrounding communities.
Through our active and hands-on asset management approach, we
also achieved a net value enhancement amount of GBP11.6 million.
The activities included, inter alia, managing change orders and
earning a fee for this service, tax optimisation, cost savings due
to lower fees on management service agreements, cash optimisations
and further de-risking of selected investments.
Where appropriate, we have also made use of reduced occupancy at
some of our assets to accelerate maintenance or improvement works.
For example, on one of our roads we were able to take advantage of
the low oil price to accelerate re-pavement works which resulted in
an overall lifecycle saving.
Prudent financial management
Robust portfolio performance and prudent financial management
has supported the Company's established progressive dividend policy
in this challenging market environment and allowed us to again meet
our full-year dividend target of 7.18pps and reconfirm the 7.33pps
target for 2021. Furthermore, the Company is targeting a dividend
of 7.48pps for 2022.
BBGI has an RCF of GBP180 million in place which matures in
2022, with the potential to increase the total size to GBP250
million by the exercise of an accordion provision. This enables the
Company to be a trusted and repeat partner in its key markets and
supports the Management Board's ability to efficiently execute
portfolio acquisitions.
During the course of the year, the Company managed its
borrowings responsibly and drew down on the RCF to make
acquisitions. As at 31 December 2020, there were no cash borrowings
outstanding under the RCF. GBP1.2 million continued to be utilised
to cover letters of credit and BBGI had a net cash position of
GBP20.5 million.
In November, the Company raised gross proceeds of GBP55 million
through an oversubscribed issue of new ordinary shares, the
proceeds of which were used to repay existing debt, maintaining a
modest cash balance, and providing additional balance sheet
flexibility.
The Company has no requirement to raise equity in the immediate
future. All debt financing at the portfolio company level is issued
on a non-recourse basis. Only the Northern Territory Secure
Facility portfolio company is subject to refinancing risk when a
portion of the debt matures in 2025.
The Company's hedging strategy aims to limit a 10 per cent
adverse foreign exchange sensitivity to approximately 3 per cent of
NAV movement. We also hedge 100 per cent of anticipated portfolio
distributions on a four-year rolling basis (excluding EUR and GBP),
which provides additional comfort as it shields the Company's
forecasted dividend payment from adverse foreign exchange
movements, de-risking the portfolio[xviii].
Selective acquisition strategy
The Company continued to pursue a selective acquisition strategy
over the year in line with its proven operating model, with the
Management Board consciously working to avoid style drift.
Over the last year, the Management Board sourced attractive
investment opportunities and grew the portfolio - but only where it
made sense to do so. Here, the Company continues to demonstrate the
selectiveness of our approach, the strength of our industry
networks, and the effectiveness of our operating model.
Over the period, the Company made six new and follow-on
acquisitions with a total aggregate value of GBP59.2 million. These
included:
-- Highway 104 (Canada): In May, the Company acquired a 50 per cent stake in Highway 104, an availability-based motorway investment in Nova Scotia. Preparations to start construction work began in May 2020, with an estimated completion date of the end of 2023. The concession will run until 2043 and availability payments will be received from the Government of Nova Scotia, which is rated Aa2 by Moody's and AA- by Standard & Poor's ('S&P'). Despite initial delays in receiving certain environmental permits for in-water works, the construction remains on schedule with no material impact resulting from Covid-19.
-- N18 Motorway (Netherlands): In April, the Company completed a
follow-on acquisition in the N18 Motorway, bringing BBGI's total
equity interest in the investment to 52 per cent. The concession
runs until 2043 and availability payments are received from the
State of the Netherlands, which is rated Aaa by the credit rating
agency Moody's.
-- Stanton Territorial Hospital (Canada): During the period, the
Company completed two follow-on acquisitions in Stanton Territorial
Hospital, increasing BBGI's interest in the investment from 25 per
cent to 100 per cent. Stanton is an operational 27,000m(2) hospital
with 100 patient rooms located in Yellowknife, Northwest
Territories. The concession runs until 2048 and availability
payments are received from the Government of Northwest Territories,
which is rated Aa1 by the credit rating agency Moody's.
-- Kelowna and Vernon Hospitals (Canada): In August, the Company
completed a follow-on acquisition for the remaining 50 per cent
interest in Kelowna and Vernon Hospitals. The concession runs until
2042 and availability payments are received from the Interior
Health Authority, funded by the Province of British Columbia which
is rated Aaa by Moody's and AAA by S&P. BBGI's equity interest
in the investment is now 100 per cent.
-- Samuel De Champlain Bridge Corridor (Canada): In December,
BBGI completed the acquisition of a 25 per cent equity interest in
Signature on the Saint-Lawrence Group, the concessionaire of the
Samuel De Champlain Bridge Corridor in Montreal. The investment
consists of the design, construction, financing, operation,
maintenance and rehabilitation of a new bridge spanning the St.
Lawrence River between Montreal and Brossard, Quebec. Availability
payments are received from the Government of Canada, which is rated
AAA by both Moody's and S&P credit rating agencies. The bridge
opened to traffic in summer 2019 and the concession runs until
2049.
As availability-style assets, these acquisitions further
strengthened the global footprint of the Company's portfolio of
investments in AAA/AA rated countries.
Monitoring the supply chain
The Management Board continually reviews the potential
concentration and/or failure risk of operational and maintenance
('O&M') contractors that provide counterparty services to the
Company's assets. The table below illustrates the level of O&M
contractor exposure as a percentage of portfolio value.[xix]
Facility manager / O&M contractor
=================================== =====
SNC-Lavalin O&M Inc 10%
Capilano Highway Services 9%
Portfolio Company inhouse 9%
Honeywell 7%
Black & McDonald 7%
Cushman and Wakefield 6%
Integral FM 4%
Carmacks Maintenance Services 4%
BEAR Scotland 4%
Graham AM 3%
Amey Community Ltd 3%
Intertoll Ltd 3%
Galliford Try FM 3%
ENGIE FM Limited 3%
Johnson Controls LP 2%
Remaining contractors 23%
100%
The Management Board has not identified any material risk
exposure and remains comfortable with the current level of
contractor exposure. Our immediate response, in the wake of the
Covid-19 pandemic, was to request all Facility Managers ('FM') and
O&M contractors (together the 'Subcontractors') to conduct an
immediate review of their respective BCPs under severely stressed
scenarios. These BCPs continue to perform in line with
expectations.
The Company benefits from a diversified Subcontractor supply
chain with no concentrated exposure, combined with rigorous
monitoring and contingency planning. We pay close attention to how
Subcontractors are performing on an ongoing basis and have risk
mitigation procedures in place in case of any supply chain
failures.
As an active asset manager, the Company continues to be in close
dialogue with its Subcontractors. This is to ensure that where the
Company can take mitigating actions to support the health and
well-being of its stakeholders, it will. Despite the unprecedented
strain on some operating companies resulting from the pandemic, we
have not recorded any material adverse Subcontractor issues during
the reporting period, and we believe we are well positioned to
handle any service quality issues should they arise.
Construction defects
The Company routinely monitors the quality of its assets to
identify any potential construction defects early on and to
implement the appropriate remediation measures before they impact
user accessibility and experience.
A key component of our effective counterparty risk management
approach is that the responsibility for, and cost of remediation
falls to the relevant construction subcontractor on each asset,
subject to statutory limitation periods.
Latent defects risk was mitigated over the reporting period with
65 per cent of portfolio value covered by either limitation or
warranty periods and there were no material defects on any of the
Company's portfolio assets reported or if there were any issues,
they are in the process of being resolved with no material impact
on the NAV.
Latent Defects Limitations
/ Warranty Period
Remaining
============================ =====
Expired 35%
Within 1 year 7%
1-2 years 1%
2-5 years 29%
5-10 years 18%
10+ years 10%
100%
PORTFOLIO SNAPSHOT
Our five largest assets
1) Golden Ears Bridge: Building Canadian roads & bridges at unprecedented scale
-- Type: Availability-based
-- Status: Operational
-- Equity Holding (%) BBGI: 100%
-- Total Investment Volume (Debt & Equity): C$1.1 billion
-- Financial Close/Operational: March 2006/June 2009
-- Concession Period: 32 years (post construction) ending in 2041
Golden Ears Bridge represented the largest private financing for
a greenfield PPP in Canada at the time of its launch. The project
involves the design, build, financing, operation and maintenance of
the Golden Ears Bridge near Vancouver, which is a 1km, six-lane
cable-stayed bridge that spans the Fraser River and connects the
cities of Maple Ridge and Pitt Meadows to the cities of Langley and
Surrey. The road opened in June 2009 and includes more than 3.5km
of ramps, viaducts, small bridges and underpasses, and more than
13km of mainline roadway; a large part of which has been
landscaped.
The investment has brought close to C$1 billion in
construction-related activity to the area, while commuters that use
the bridge now save up to 40 minutes per peak-hour round-trip from
Maple Ridge to Langley. In coordination with the asset operator, we
have implemented an LED conversion for all lighting, which is
expected to deliver C$72K in annual savings to the operator and to
reduce consumption by 450,000 kWh per annum.
2) Ohio River Bridges: Breaking down barriers to US transport P3
-- Type: Availability-based
-- Status: Operational
-- Equity Holding (%) BBGI: 66.7%
-- Total Investment Volume (Debt & Equity): US$1.175 billion
-- Financial Close/Operational: March 2013/December 2016
-- Concession Period: 35 years (post construction) ending in 2051
One of the largest transportation assets ever undertaken in the
US, this asset is at the cutting-edge of public partnerships
currently in operation in the US PPP market and reached commercial
close just ten months after final tender documents were issued. It
was the first US PPP transport deal not to use the Transportation
Infrastructure Finance and Innovation Act ('TIFIA') in its capital
structure, demonstrating to other US states how even the most
complex of transactions can be structured without reliance on
federal funding. Instead, the scheme uses a private activity bond
issue[xx] - the first of its kind for a US PPP highway
availability-based asset.
The investment includes a 760m cable-stay bridge; a 500m long
twin vehicular tunnel and 2.25km of associated six-lane Interstate
Highway, with more than 21 bridges and multiple roundabout style
interchanges.
The investment addresses cross-river mobility challenges in the
Louisville Metropolitan Area, by improving safety, alleviating
traffic congestion, and better integrating existing highways. This
supports the economic development of the Louisville Southern
Indiana region such that the project achieved the Platinum award
from the Institute of Sustainable Infrastructure in 2016.
3) Northern Territory Secure Facilities (NTSF): A modern
detention and rehabilitation centre to serve the people of Northern
Territories.
-- Type: Availability-based
-- Status: Operational
-- Equity Holding (%) BBGI: 100%
-- Total Investment Volume (Debt & Equity): A$620 million
-- Financial Close/Operational: October 2011/November 2014
-- Concession Period: 30 years (post construction) ending in 2044
Located near Darwin, Northern Territory (the 'Territory'), the
investment involves the design, build, financing, operation and
maintenance of three separate centres. This includes a 1,000-bed
multi-classification male and female correctional centre, a 30-bed
secure mental health and behavioural management centre (the first
of its kind in the Territory), and a 48-bed supported accommodation
and programme centre for community-based offenders, which is
designed to support the government's goals of enhanced
rehabilitation, education and reduced reoffending rates in the
Territory. NTSF is also designed to accommodate an on-site Learning
System, which allows inmates to participate in online learning
tutorials to improve key skills and ensure better integration into
the community following release.
The asset is one of the largest social infrastructure
investments in the Territory. BBGI acquired its initial 50 per cent
interest in the asset while it was still in construction and
subsequently acquired the remaining 50 per cent stake in July
2015.
4) McGill University Health Centre (MUHC): Financing Canada's
first truly sustainable health campus
-- Type: Availability-based
-- Status: Operational
-- Equity Holding (%) BBGI: 40%
-- Total Investment Volume (Debt & Equity): C$2 billion
-- Financial Close/Operational: July 2010/October 2014
-- Concession Period: 34 years ending in 2044
The investment involves the design, build, finance, operation
and maintenance of MUHC's Glenn campus. It comprises two hospitals,
a cancer centre and a research institute in Montreal.
MUHC is one of the most innovative academic health centres in
North America and at 214,000m(2) , it is the largest
English-speaking hospital in Quebec. One integrated campus
consolidates the Montreal Children's Hospital, the Royal Victoria
Hospital and the Montreal Chest Institute, as well as the new
Cedars Cancer Centre and the Research Institute of the MUHC. MUHC
is the workplace of over 12,000 hospital staff, 1,356 physicians,
dentists, pharmacists and 720 medical students.
The Glenn campus investment achieved a Gold certification for
Leadership in Energy and Environmental Design ('LEED') in 2016 -
the first hospital in Quebec to do so.
5) A1/A6 Diemen Almere Motorway: Connecting more communities via Dutch roads
-- Type: Availability-based
-- Status: Operational
-- Equity Holding (%) BBGI: 37.14%
-- Total Investment Volume (Debt & Equity): EUR727 million
-- Financial Close/Operational: February 2013 /July 2017
-- Concession Period: 25 years (post construction) ending in 2042
The A1/A6 investment is the largest of the five sub-projects for
the Dutch Road Directorate (Rijkswaterstaat), part of the upgrading
of the road network linking Schiphol Airport via Amsterdam to
Almere in the Netherlands.
The enlargement of the A1/A6 involves the reconstruction and
widening of this section of the SAA motorway and the subsequent
long-term maintenance. The A1 and the A6 motorway sections were
transformed into a road with 2x5 lanes and partly 4x2 lanes, while
reversible lanes were also built, allowing two lanes to change
direction twice a day. It facilitates road traffic from the east
into Amsterdam during the morning rush hour, and then in the
opposite direction in the afternoon.
After construction, completion was achieved well in time in
2017, and SAAOne is now responsible for maintaining the
infrastructure for a 25-year period.
During the year, the high-pressure sodium SON-T lighting was
completely replaced by an energy efficient LED lighting system.
This is projected to reduce the future CO(2) emissions from
lighting by 53 per cent and reduce the CO(2) footprint of the
project by approximately 350 tons per year.
OUR RESPONSE TO COVID-19
We are pleased to report that, despite the challenging back
drop, there has been no material impact on the performance of our
investment portfolio over the reporting period. The Management
Board maintained its focus on value preservation of our diversi ed
portfolio of 50 infrastructure assets. Combined with our focused
approach of investing in low-risk, availability-based
infrastructure [xxi] , the Company did not experience any
interruption to the expected cash flows received from a globally
diversi ed group of creditworthy government counterparties. During
2020, our investment availability level remained very high at 99.8
per cent and we continued to operate without any material
interruptions.
Our People
-- The Company provided support and guidance to staff to aid working from home including early identification and sourcing of equipment, increased cyber security initiatives and all staff receiving additional cyber security training.
-- Mental and physical health were prioritised with risk
assessment and regular contact to support wellbeing, and increased
communication to combat isolation and boost morale.
-- No staff employed directly by the Group were furloughed.
-- Outstanding hiring commitments were honoured and new staff were successfully on-boarded.
-- The Company initiated its BCP with all staff working remotely
for much of the year and always in compliance with the latest
public health guidance.
-- We oversaw a seamless transition to remote working.
-- Business travel was cancelled.
-- BBGI has senior staff located in jurisdictions where we
invest which enabled BBGI to lead and respond in real-time to any
project level issues that were encountered.
-- The BCP in place proved to be robust and appropriate to
ensure uninterrupted delivery of services by BBGI as an investment
manager.
Our Clients
-- All of BBGI's assets continued to be available for our public
sector clients, communities and end-users.
-- Availability-based transportation assets make up 51 per cent
of the portfolio by value. These assets have been largely
unaffected by Covid-19.
-- The Company has 11 healthcare investments which account for
23 per cent of the portfolio value. Our 11 healthcare investments
consist of 42 different healthcare buildings which include clinics,
ambulatory care facilities and traditional hospitals. In total,
this represents over 2,000 hospital beds. We worked closely with
the various health authorities and supported them, often
reconfiguring key facilities to help them navigate the changing
environment. Much of our focus during the pandemic was targeted
towards helping healthcare workers and the communities they
serve.
-- For much of the year, the schools in our portfolio,
representing 10 per cent by portfolio value, either closed or
operated at reduced capacity for children of those providing
essential services in the Covid-19 effort. Nonetheless, the
availability fee continued to be paid.
Our Suppliers
-- The Management Board remained in active dialogue with all
facilities managers and operators of our assets.
-- We worked closely with our suppliers, supporting them to
prioritise the health of their teams and to apply best practice
guidance.
-- The Company prioritised prompt payment of invoices to aid supplier cash flow.
-- No material service delivery issues occurred, and no material disruptions were reported.
-- The Company increased sub-contractor monitoring to ensure
integrity of its supply chain. We will continue to rigorously
monitor performance and supply chain exposure.
-- BBGI has a diversified supply chain in place and a
geographically-diversified portfolio which helps mitigate this
exposure. Furthermore, our supply chain partners have BCPs in place
and to date performance continues to be strong.
Our Communities
BBGI, through its investment companies, contributed over
GBP33,000 to various Covid-19 relief funds and initiatives.
Additional detail is available in our ESG report. Total charitable
donations made through our investment companies in the year
exceeded GBP132,000.
Our Investors
-- Our resilient business model delivering essential
infrastructure to governments and government-backed entities
performed as expected with no impact on dividends for 2020 or
expected dividends for 2021 and 2022.
-- Despite not being able to travel, the Company participated in
over 70 virtual meetings with investors to provide updates on
performance.
While the rollout of several successful vaccines is encouraging,
significant uncertainty surrounding Covid-19 still remains, and all
the consequences and potential disruptions are difficult to
foresee. While we believe our resilient business model can continue
to withstand this challenging market environment over the
long-term, we will remain vigilant and ready to adapt as needed.
Further detail of the Company's risk mitigation can be found in the
Risk section of this Annual Report.
MARKET TRS & PIPELINE
2021 and beyond
The pandemic impacted the global economy and caused widespread
unemployment. Interest rates are either at or close to historic
lows, as many central banks undertook further monetary easing. In
this environment of low rates and uncertainty, the stability and
resilience associated with availability-based social infrastructure
investments has maintained its status as an attractive asset class
and competition for investments remains strong.
The levels of competition for the availability-based assets in
which we invest vary between markets. In all of BBGI's target
markets, infrastructure under-investment persists, and public
finance budget constraints necessitate the involvement of the
private sector to deliver the finance and expertise required to
build, maintain and operate much-needed assets. Many governments
have ambitious plans to make major infrastructure commitments to
create jobs, revitalise communities, move towards a low carbon
economy, and to act as a catalyst for economic recovery.
At the same time, the financial challenges of the pandemic have
stressed many construction companies' balance sheets and encouraged
them to consider the divestments of availability-based
infrastructure investments that they may hold. As a result of this
trend, BBGI undertook considerable acquisition activity in 2020 and
we continue to see significant scope to make further investments
during the course of 2021.
Investment activity in 2021 will involve sourcing and
originating, bidding for and winning new operational availability-
based investments, with consideration for measured exposure to
construction assets to support future valuation uplift.
The pipeline for availability-based transactions remains
generally strong within the Company's key markets. We anticipate
these will come from a variety of sources, including:
-- A North American strategic partnership with SNC-Lavalin which
has already resulted in the acquisition of five assets amounting to
approximately C$191 million and provides the opportunity for
potentially five more assets with an expected value in excess of
C$250 million;
-- Soliciting off-market transactions through BBGI's extensive
network of market participants in Australia, Europe and North
America;
-- Participating in primary investment opportunities and bidding
on new availability-based assets as part of public sector
procurement processes;
-- Acquiring accretive equity interests from co-shareholders in existing assets; and
-- Participating in competitive sale processes, not least to test pricing assumptions.
The Company will continue to source assets that fit the
requirements of its low-risk and globally diversified investment
strategy, and which also support its approach to Responsible
Investment.
Canada
Canada has remained one of the world's most prolific PPP markets
and is one of the most mature and stable of the Company's markets.
A total of 291 assets across Canada are procured under the PPP
model, with those already in operation or under construction valued
at C$139.4 billion - including hospitals, schools, courthouses, and
transportation assets.
The Investing in Canada Infrastructure Program was adjusted so
that provinces and territories can use federal funding to act
quickly on a wider range of more pandemic-resilient infrastructure
projects. Under a new Covid-19 resilience funding stream worth up
to C$3.3 billion, projects will be eligible for a significantly
larger federal cost share and a simplified funding application
process will ensure that projects can get underway as soon as
possible.
These changes are designed as short-term measures to address the
current situation while the Federal Government works towards its
long-term infrastructure objectives, including better public
transit, more high-speed broadband, wastewater infrastructure and
clean energy projects.
With 15 assets in Canada, BBGI is well positioned to participate
in an attractive primary pipeline and is considered a very credible
purchaser for and manager of secondary assets. In 2020, there was a
well-defined pipeline of availability-based transactions and the
Company completed one primary investment and four secondary
investments in Canada.
The Company also benefits from its North American strategic
partnership with SNC-Lavalin which covers five assets. The Company
estimates that further investment opportunities in excess of C$250
million could result from the pipeline agreement over the next few
years; all of which will be assessed on a case-by-case basis.
The Canadian secondary market is expected to be active in 2021
and beyond, as assets developed over the last several years come
into operation and may come to market.
UK
The UK availability-based infrastructure market has been
impacted by both positive and negative influences. The decisive
parliamentary victory for the Conservative Party in December 2019
has significantly reduced the threat of the Labour Party
nationalising certain PFI assets.
Whilst Brexit has dominated Britain's political agenda, it is
difficult to say how the UK's decision to leave the EU will affect
private investment in infrastructure in the longer-term. The UK is
now at a crossroads, with the Conservative Government having made
the decision to abolish the PF2 model in October 2018 but also
having made an ambitious 100 billion infrastructure pledge. The
sentiment among many in the public and private sectors is that some
type of public-private partnership is inevitable, but the exact
form it will take remains in question.
The Government has promised to use infrastructure spending as a
means to kick-start the economy post-Brexit and 'level up' regions
within the UK. The Government is committed to major infrastructure
investment including health, education, science and defence, with
the 2020 Spending Review delivering a GBP100 billion total
investment programme in 2021-22 to support the recovery. This is
part of the Government's plans to invest over GBP600 billion over
the next five years, delivering the highest sustained levels of
public sector net investment as a proportion of GDP since the late
1970s.
The Government will continue to develop new revenue support
models and consider how existing models - such as the Regulated
Asset Base model and Contracts for Difference - can be applied in
new areas, and it remains open to new ideas from the market. The
Government will not reintroduce the private finance initiative
model (PFI/PF2) but we remain optimistic that there will continue
to be a role for private capital, particularly where it
demonstrates good value for money.
The Management Board notes that some other asset classes are
demonstrating a risk-return profile that increasingly matches the
Company's low-risk, availability-based investment strategy. The
Mutual Investment Model in Wales is a good example of how there
continue to be attractive investment opportunities in the UK which
are very similar to P3s and include a long-term availability income
stream from creditworthy counterparties.
The UK market continues to be a source of secondary market
transactions. However, the reduction in secondary market PPP deal
flow reflects the slowdown in public sector procurement since 2010
and the large amount of secondary activity in previous years. While
supply has decreased, there has been no corresponding decrease in
demand. This has resulted in a trend of lower discount rates for
stable, mature secondary assets since around 2010.
The Company's appetite for the selective acquisition of quality
availability-based assets has not diminished. We will continue to
pursue mainly secondary availability-based opportunities in the
UK.
US
2020 saw an increase in greenfield P3s in the US. In the first
half of the year, ten transactions reached financial close with a
total value of $10 billion.
While the PPP delivery method can be instrumental in getting
projects operational, US municipalities and states have
historically been much more reluctant to adopt PPPs than their
Canadian counterparts. Since 2010, 59 greenfield PPP deals reached
financial close in the US for $42.2 billion compared to 151
greenfield P3 deals in Canada for C$58.8 billion.
With an increasing number of state legislatures taking steps to
make P3s more acceptable for stakeholders, the number of US
projects adopting PPPs increased from 7 per cent of closed
greenfield deals in 2017 to 8.7 per cent of greenfield deals in
2019. PPP made up 11.5 per cent of all greenfield deals in the
first half of 2020.
While some states such as Maryland, Virginia and Texas have a
state procurement agency, projects in the US are being procured at
all levels - municipal, county and state. This means there can be
multiple procurement agencies in one state which makes it more
difficult for projects to move forward.
Despite these challenges, the US P3 market remains one of great
potential. President Joe Biden has explained his 'Build Back
Better' plan will serve as a way to make historic investments in
infrastructure . This 'Build Back Better' proposal of about $2
trillion is expected to focus on addressing climate change
concerns, the adoption of autonomous vehicles, expanding rural
access to broadband, guaranteeing safe drinking water, and
modernising highways, bridges and tunnels.
We are currently tracking several transactions and are in active
discussions regarding upcoming social infrastructure opportunities.
Going forward, we expect that the success of the Ohio River
Bridges/East End Crossing asset, which opened on time and on
budget, will create opportunities for BBGI.
Continental Europe
47 European PPPs reached financial close during 2020, which is
just over half the number of deals in 2019. 19 of these were
projects over EUR100 million. While some countries in Europe have
slowed down their PPP programmes, there are others which are
pushing ahead. Primary and secondary opportunities remain in the
Netherlands, Germany and Belgium, and there are also expectations
of opportunities arising in France and Poland. Overall, Continental
European infrastructure markets remain active with certain
countries offering an attractive pipeline of new assets as well as
secondary opportunities. We believe these markets are likely to
provide attractive investment opportunities over the
medium-term.
Scandinavia
Norway has a EUR1 billion road and bridge PPP tender ongoing,
and more projects are in the making on a smaller scale elsewhere in
the Nordics.
Netherlands
Over the past decade, the Netherlands has built up a reputation
for stable, predictable infrastructure deal flow. While no
greenfield transport transactions reached financial close during
2020, we are expecting some meaningful secondary opportunities in
the Netherlands. Following our investment in three assets in the
Netherlands in 2018, we are actively investigating further
investment opportunities in this market.
Belgium
BBGI is part of a consortium which successfully pre-qualified
for the R4 Ghent project. The project is a 30-year
availability-based PPP project involving the upgrade of the R4 West
and East in Ghent to primary roads, removing intersections and
creating new cycle highways.
Germany
13 PPP transactions closed in Germany in 2020, compared to an
average of just three deals per year since 2017, although the
majority of those closed in 2020 did not require any equity
investment. Germany alone accounted for a third of the overall
European greenfield PPP market by deal volumes with EUR5 billion of
investment; a ten-fold increase compared to an average of just over
EUR500 million in the past three years. The expectation is that the
road PPP schemes will continue. With six existing assets in
Germany, strong credentials and German language skills amongst our
senior executive and asset management team, BBGI is well positioned
to consider these upcoming opportunities.
Southern Europe
Countries including Spain, Italy, Portugal and Greece have P3
pipelines. While some of these programmes may be viewed as
attractive in terms of their size and the availability-based nature
of the assets, the credit rating of the counterparties and certain
risk transfer expectations make these investment opportunities
unattractive to the Company. Consequently, BBGI has not focused on
these opportunities.
Australia
Australia presents a very reliable investment market for
availability-style projects, which are vital to the development of
infrastructure in the country. The National PPP Policy and
Guidelines provide a consistent framework for the public and
private sector to work together. The treasury departments of some
states have also issued their own PPP guidelines. Furthermore, the
central state and territory governments produce strategic
infrastructure plans. The country presents a strong pipeline of PPP
projects since the establishment of the National PPP Policy
Framework in 2008.
The P3 model seems to retain attractiveness to government
authorities in Australia - Victoria in particular seems set to
continue to use this model not only for social infrastructure but
also for large scale infrastructure transport projects. Other
states such as New South Wales have indicated a continuing interest
in using the model where appropriate. New South Wales and Victoria,
the two biggest states, are each spending AUD$90 billion over four
years on major projects.
BBGI has three large operational assets in Australia and will
continue to monitor the market. The Company is hopeful that some
select opportunities may emerge in 2021.
Pipeline assets
Asset Sector Estimated Concession Length after
Asset Capital construction completion
Value
Confederation Line (Ottawa, Rail C$3.2 billion 30 years
ON)
-------------- --------------- -------------------------
Eglinton Crosstown LRT (Toronto, Rail C$9.1 billion 30 years
ON)
-------------- --------------- -------------------------
Highway 407 East Extension Phase Road C$1.2 billion 30 years
I (Ontario)
-------------- --------------- -------------------------
John Hart Generating Station Energy C$1.1 billion 15 years
(Campbell River, BC)
-------------- --------------- -------------------------
New Corridor for the Champlain Road & Bridge C$3.2 billion 30 years
Bridge (Montreal, QC)
-------------- --------------- -------------------------
Expected potential equity investment opportunity of these
pipeline assets is in excess of C$250 million.
Primary bidding opportunities
Region Sector Estimated Expected Investment Status
Asset Capital Concession
Value[xxii] Length
North America Road GBP1 billion 35 years Shortlisted bidder.
Financial submission
due in May 2021.
------- --------------- ------------ ----------------------
Continental Road GBP750 million 30 years Shortlisted as one
Europe of three bidders.
------- --------------- ------------ ----------------------
OPERATING & FINANCIAL REVIEW
The Management Board is pleased to present the Operating and
Financial Review for the year ended 31 December 2020.
Highlights and Key Performance Indicators
Please see Financial Highlights for a summary of the Year in
Numbers for 2020. Certain key performance indicators ('KPIs') for
the last four years are highlighted below:
KPI Target Dec-17 Dec-18 Dec-19 Dec-20 Commentary
-------------------------------------------------------- ------- ------ --------- -----------
Dividends Progressive long-term dividend growth in pence per share 6.50 6.75 7.00 7.18 Achieved:
(paid or declared) Second 2020
interim
dividend of
3.59pps
declared in
February
2021
-------------------------------------------------------- ------- ------ --------- ----------- -----------
NAV per share Positive NAV per share growth 3.0% 2.8% 2.0% 1.2% Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Compound annual Shareholder Return
Since IPO[xxiii] 7% to 8% on IPO issue price of GBP1 per share 10.5% 11.2% 11.3% 11.0% Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Ongoing Charge Competitive cost position 0.99% 0.93% 0.88% 0.86%[xxiv] Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Cash Dividend Cover >1.0x 1.51x 1.50x 1.30x 1.27x Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Refinancing Risk Minimise refinancing risk 9% 7% 6% 7% Achieved:
(as a percentage of portfolio) Northern
Territory
Secure
Facilities
is the only
asset with
refinancing
risk
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Asset availability > 98% asset availability Yes Yes Yes Yes Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Single asset concentration risk To be less than 25% of portfolio at time of acquisition 12% 11% 10% (GEB) 9% Achieved
(as a percentage of portfolio value) (GEB) (GEB) (GEB)
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Availability-based assets (as a
percentage of portfolio) Maximise availability-based assets 100% 100% 100% 100% Achieved
-------------------------------------------------------- ------- ------ --------- ----------- -----------
Asset Management
Cash Performance
The Company's portfolio of 50 availability-based infrastructure
investments continued to perform well during the year, with cash
flows ahead of the expectations and the underlying financial
models.
Construction exposure
The Company's investment policy is to invest principally in
assets that are operational and that have completed construction.
Accordingly, investment in construction assets will be limited to
25 per cent of the portfolio value. The rationale for this approach
is to be able to produce a stable dividend for our shareholders,
while at the same time gaining some exposure to the potential NAV
uplift that occurs when assets move from a successful construction
stage to the operational stage. The Company has demonstrated in the
past that it can manage such assets during the construction period
and its successful transition into a stable operational asset.
The Management Board believes that the Company's ability to meet
its dividend targets is not compromised by having some construction
exposure.
As at 31 December 2020, more than 99 per cent of the assets were
operational with only one project in construction. On 5 March 2020,
BBGI, together with its consortium partners, was named as the
preferred bidder for a PPP motorway project in Canada that will
twin Highway 104 between Sutherlands River and Antigonish in Nova
Scotia. Financial close occurred in May 2020 and construction is
progressing according to plan.
The Company is currently pursuing two primary investment
opportunities which, if successful, will add some construction
exposure over the course of 2021.
Investment performance
Returns track record
The Company's share price maintained a strong premium to NAV
through the majority of the reporting period although there was a
period of volatility during the height of the market-wide sell-off
in March 2020 due to Covid-19.
BBGI's share price quickly rebounded after this initial
adjustment phase, likely due to investors realising that Covid-19
would have a limited impact on BBGI's future cash flows, which come
exclusively from long-term availability-based government or
government-backed contracts. Against the FTSE All-Share, the
Company has shown a low five-year correlation of 27.3 per cent and
a beta of 0.24. ([xxv])
Save for the brief period in March 2020, the Company's share
price has performed well and has maintained a strong premium to NAV
during the reporting period. This was against the backdrop of
economic uncertainty which saw two thirds[xxvi] of companies listed
on the London Stock Exchange cut, suspend or cancel dividends
during 2020 due to the effects of the pandemic.
We continue to believe that a key benefit of the portfolio is
the high-quality cash flows derived from long-term
availability-based government or government-backed contracts. As a
result, the portfolio performance has been largely uncorrelated to
the many wider economic factors that may cause market volatility in
other sectors.
The share price closed the year at 174pps, an increase of 4.5
per cent (excluding dividends) in 2020 and representing a 26.3 per
cent premium to the NAV per share at the year-end.
TSR in the calendar year 2020 was 9.0 per cent whilst TSR since
IPO to 31 December 2020 was 157.5 per cent or 11 per cent on a
compounded annual basis.
The total accounting return per share in the calendar year 2020
was 6.38 per cent[xxvii], with a dividend yield of 4.1 per
cent.
Distribution policy
Distributions on the ordinary shares are planned to be paid
twice a year, normally in respect of the six months to 30 June and
the six months to 31 December.
Dividends
On 2 April 2020, the Company paid a second interim dividend of
3.50pps for the period 1 July 2019 to 31 December 2019. The 2020
interim dividend of 3.59pps was paid on 22 October 2020. In
February 2021, subsequent to the year-end, the Company declared a
second interim dividend of 3.59pps in respect of the six-month
period ended 31 December 2020; resulting in a total dividend of
7.18pps for the year ended 31 December 2020.
As previously reported, the Company is targeting an increase in
the 2021 dividend to 7.33pps, which represents a further increase
of 2.1 per cent for the year and a progressive long-term dividend
growth averaging 3.3 per cent since IPO. Furthermore, the Company
is targeting a dividend of 7.48pps for 2022.
Proven progressive dividend policy
Average dividend increase of 3.3 per cent from 2012 to 2021
-- FY 2021 target dividend of 7.33pps[xxviii], up 2.1 per cent
-- FY 2022 target dividend of 7.48pps([xxviii])
Investor communications
The Company places great importance on communication with its
shareholders and welcomes their views. The Company intends to
remain at the forefront of disclosure and transparency in its asset
class, and therefore the Management Board and Supervisory Board
regularly review the level and quality of the information that the
Company makes public.
The Company formally reports twice a year through the Annual and
Interim Reports and Financial Statements. Other current information
on the Company is provided through the Company's website and
through market announcements. At Shareholder General Meetings, each
share is entitled to one vote, all votes validly cast at such
meetings (including by proxy) are counted, and the Company
announces the results on the day of the relevant meeting.
The Management and Supervisory Boards are keen to develop and
maintain positive relationships with the Company's shareholders. As
part of this process, immediately following release of the Annual
and Interim Reports at the end of March and August each year, the
co-CEOs present the Company's results to market analysts and
subsequently conduct investor roadshows and offer shareholder
meetings to discuss the results, explain the ongoing strategy of
the Company, and receive feedback.
Outside of these formal meetings, feedback from investors is
received via the Management Board and the Corporate Brokers and -
together with the feedback from results meetings - this is reported
to the Supervisory Board. Throughout the year under review, the
co-CEOs have made themselves available to shareholders and key
sector analysts, for discussion of key issues and expectations
around Company performance. The co-CEOs intend to continue to be
available to meet with shareholders periodically to facilitate an
open two-way communication on the development of the Company.
Shareholders may contact members of both the Management and
Supervisory Boards at the registered office of the Company, the
address for which can be found at the end of the Annual Report or
on the Company's website at www.bb-gi.com.
While shareholder engagement is typically conducted by the
Co-CEOs, it should be noted that the Chairman also makes herself
available throughout the year to understand the views of
shareholders on governance and performance against the Company's
investment objectives and investment policy. Given this level of
engagement with shareholders, the Management and Supervisory Boards
consider that they meet the requirements of AIC Code Principle
5D.
Share capital
The issued share capital of the Company is 664,691,283 ordinary
shares of no-par value. All of the ordinary shares
issued rank pari passu. During the year ended 31 December 2020,
the Company issued 34,478,057 shares.
Voting rights
There are no special voting rights, restrictions or other rights
attached to any of the ordinary shares. There are no restrictions
on the voting rights attaching to ordinary shares.
Discount management
Although the Company's shares have continuously traded at a
premium since IPO in December 2011, except for a brief period in
March 2020, the Management Board will actively monitor any discount
to the NAV per share at which the ordinary shares may trade in the
future. The Management Board will report to the Supervisory Board
on any such discount and propose actions to mitigate this.
Purchase of ordinary shares by the Company in the market
In order to assist in the narrowing of any discount to the NAV
at which the ordinary shares may trade from time to time and/or to
reduce discount volatility, the Company may, subject to shareholder
approval:
-- make market purchases of up to 14.99 per cent annually of its
issued ordinary shares; and
-- make tender offers for ordinary shares.
No shares have been bought back during the year ended 31
December 2020. The most recent authority to purchase ordinary
shares which may be held in treasury or subsequently cancelled was
granted to the Company on 30 April 2020. This authority expires on
the date of the next Annual General Meeting ('AGM') to be held on
30 April 2021, at which point the Company will propose that its
authority to buy back shares be renewed.
Continuation vote
The Company's Articles of Association ('Articles') require the
Boards to offer a continuation vote to the Company's shareholders
at the AGM to allow the Company to continue in its current form,
with a further vote every two years. On 30 April 2019, at the
Company's AGM, the shareholders voted unanimously for the
continuation of the Company. In accordance with the Articles, a
further continuation vote will be offered to shareholders at the
AGM due to be held in 30 April 2021.
VALUATION
The Management Board is responsible for carrying out the fair
market valuation of the Company's investments, which it then
presents to the Supervisory Board for their consideration and, if
appropriate, approval of this Report. The valuation is carried out
on a six-monthly basis as at 30 June and 31 December each year and
is reviewed by an independent third-party valuation expert.
The valuation is determined using the discounted cash flow
methodology. The Company makes forecast assumptions for key
macro-economic factors having an effect on the cash flows forecast
of investments such as inflation rates and deposit rates based on
market data, publicly available economic forecasts and long-term
historical averages, and adjusts for any enacted changes in
taxation during the reporting period. In addition, the Company
exercises its judgement in assessing the expected future cash flows
from each investment based on the detailed financial models
produced by each Portfolio Company, and adjusting these where
necessary to reflect the Company's assumptions as well as any
specific cash flow assumptions.
The fair value for each investment is then derived from the
application of an appropriate discount rate, alongside reporting
period-end currency exchange rate and withholding taxes (if
applicable). The discount rate considers risks associated with the
investment including the phase the investment is in such as
construction, ramp-up or stable operation, investment specific
risks and opportunities as well as country specific factors. The
Company uses its judgement in determining the appropriate discount
rates. This is based on its knowledge of the market, considering
information obtained from its investment and bidding activities,
benchmark analysis with comparable companies and sectors,
discussions with advisers in the relevant markets, and publicly
available information. The valuation methodology remains unchanged
from previous reporting periods.
A breakdown of the movements in the portfolio value and net
asset value is shown in the chart and table below.
Portfolio movement 31 December 2019 to 31 December 2020
The Company's portfolio value at 31 December 2020 was GBP895.7
million (31 December 2019: GBP846.0 million), representing an
increase of 5.9 per cent.
NAV movement 31 December 2019 to 31 December GBP million
2020
NAV at 31 December 2019 858.6
================================================ ===========
Deduct: other net assets at 31 December 2019(1) (12.6)
================================================ ===========
Portfolio value at 31 December 2019 846.0
================================================ ===========
Acquisitions(2) 59.2
================================================ ===========
Distributions from investments(3) (69.1)
================================================ ===========
Rebased opening portfolio value at 1 January
2020 836.0
================================================ ===========
Unwinding of discount 59.8
================================================ ===========
Change in market discount rate 18.5
================================================ ===========
Change in macro-economic assumptions (33.5)
================================================ ===========
Value enhancements 11.6
================================================ ===========
Foreign exchange gain(4) 3.2
================================================ ===========
Portfolio value at 31 December 2020 895.7
================================================ ===========
Other net assets at 31 December 2020(1) 20.3
NAV at 31 December 2020 916.0
-----------
(1) These figures represent the net assets of the Group after
excluding the investments at fair value through profit or loss
(Investments at FVPL). Refer to the Pro forma balance sheet in the
Financial Results section of this Annual Report for further
breakdown.
(2) Refer to the Portfolio Review for further details on the
acquisitions during the period.
(3) While distributions from investments reduce the portfolio
value, there is no impact on the Company's NAV as the effect of the
reduction in the portfolio value (investments at fair value through
profit or loss) is offset by the receipt of cash at the
consolidated Group level. Distributions are shown net of
withholding tax.
(4) The result from balance sheet hedging is recorded at the
consolidated Group level, and while inversely correlated, does not
directly impact portfolio value. The net foreign exchange loss on
hedging over the period, recorded at the consolidated Group level,
was GBP1.5 million.
Key drivers for NAV change
The rebased opening portfolio value after considering
acquisitions in the reporting period of GBP59.2 million and cash
distributions from investments of GBP69.1 million was GBP836.0
million.
Unwinding the discount and value enhancements:
During the period, the Company recognised GBP71.4 million, or an
8.3 per cent increase in NAV, from the unwinding of discounts and
value accretive enhancements. As the Company moves closer to
forecasted investment distribution dates, the time value of those
cash flows increases on a net present value basis. The portfolio
value growth from unwinding of discount during the period was
approximately GBP59.8 million or a 7.0 per cent change in NAV.
The remaining GBP11.6 million, or a 1.4 per cent change in NAV,
represents inter alia the net effect of value accretive
enhancements across the portfolio through active management. This
includes amongst others the net valuation effect of enhanced
operational performance through our active and hands on asset
management approach. The activities involved inter alia managing
change orders and earning a fee for this service, tax optimisation,
cost savings due to lower fees on management service agreements and
cash optimisations. Where appropriate, we have also made use of
reduced occupancy at some of our assets to accelerate maintenance
or improvement works. For example, we were able to take advantage
of the low oil price to accelerate re-pavement works on one of our
roads which resulted in an overall lifecycle saving. Other positive
effects derived from adjusting risk premiums reflected in specific
investment discount rates as well as reducing premiums for
investments moving towards the stable operational phase.
Change in discount rate:
The market for availability-based transactions continues to be
very competitive and discount rates are compressing further. This
is a result of a continued low interest environment and a high
investment demand in the availability-based social infrastructure
sector, while the supply of new greenfield infrastructure
investments is not keeping pace. Based on data from transactional
activity, benchmark analysis with comparable companies and sectors,
discussions with advisers in the relevant markets, and publicly
available information, BBGI has reduced its weighted average
discount rate to approximately 6.77 per cent (31 December 2019:
7.07 per cent), representing a reduction of 30 bps from 31 December
2019.
Change in macro-economic assumptions:
During the period, the Company recognised a reduction in the
portfolio value due to changes in the macro-economic assumptions:
changes in corporate tax rates in the UK, Netherlands and Province
of Alberta resulting in a portfolio value decrease of GBP4.1
million; a change in the forecasted deposit rates; replacing the
retail price index ('RPI') with the consumer price index including
owner occupiers' housing ('CPIH') beginning 1 January 2031 in the
UK[xxix]; and the actual indexation against the previously modelled
indexation resulting in a further portfolio value decrease of
GBP29.4 million.
In total, the Company recognised a reduction of GBP33.5 million,
or a 3.9 per cent decrease in NAV, from changes in these
assumptions.
The net effect of inflation, against the 31 December 2019
modelled macro-economic assumptions, on the portfolio value has
been negative, and is included in the value above.
Foreign Exchange:
The forecasted distributions from investments are converted to
Sterling at either the hedged rate, for a predetermined percentage
of cash flows forecast to be received over the next four years, or
at the closing rate for unhedged future cash flows.
A significant proportion of the Company's underlying investments
are denominated in currencies other than Sterling. The Company
maintains its accounts, prepares the valuation and pays dividends
in Sterling. Accordingly, fluctuations in exchange rates between
Sterling and the relevant local currencies will affect the value of
the Company's underlying investments.
During the year ended 31 December 2020, the depreciation of
Sterling against the Australian Dollar and the Euro, and the
appreciation of Sterling against the Canadian Dollar, the US Dollar
and the Norwegian Krone accounted for a net increase in the
portfolio value of GBP3.2 million. Since listing in December 2011,
the net cumulative effect of foreign exchange movements on the
portfolio value, after considering the effect of balance sheet
hedging, has been a decrease of GBP7.8 million which is less than
0.9 per cent of the 31 December 2020 NAV.
The table below shows those closing rates, which were used to
convert unhedged future cash flows into the reporting currency at
31 December 2020.
GBP/ Valuation impact FX rates as FX rates as FX rate change
of 31 December of 31 December
2020 2019
AUD Positive 1.771 1.880 5.80%
================== ================ ================ ===============
CAD Negative 1.739 1.716 (1.34%)
================== ================ ================ ===============
EUR Positive 1.113 1.176 5.36%
================== ================ ================ ===============
NOK Negative 11.670 11.595 (0.65%)
================== ================ ================ ===============
USD Negative 1.365 1.319 (3.49%)
================== ================ ================ ===============
Although the closing rate is the required conversion rate to
use, it is not necessarily representative of future exchange rates
as it reflects a specific point in time.
The Group uses forward currency swaps to (i) hedge 100 per cent
of forecasted cash flows over the next four years on an annual
rolling basis and (ii) to implement balance sheet hedging in order
to limit the decrease in the NAV to approximately 3 per cent for a
10 per cent adverse movement in foreign exchange rates ([xxx]) .
This is achieved by hedging a portion of the non-Sterling and
non-Euro portfolio value. The benefit of the Company's hedging
strategy can also be expressed as a theoretical or implicit
portfolio allocation to Sterling exposure. In other words, on an
unhedged basis, the portfolio allocation to Sterling exposure would
need to be approximately 72 per cent to obtain the same NAV
sensitivity to a 10 per cent adverse change in foreign exchange
rates as shown below.
Covid-19
The portfolio continued its strong performance over the
reporting period with no material adverse effect on valuation
resulting from Covid-19. This strong performance is primarily as a
result of the Company holding a low-risk, 100 per cent
availability-based portfolio, coupled with strong stakeholder
collaboration during the reporting period. There continues to be
uncertainty surrounding Covid-19 with the consequences and
potential disruptions difficult to foresee, but currently our
portfolio remains resilient in this challenging market environment.
We will continue to work very closely with all stakeholders to help
mitigate the risks and effects of this global pandemic.
Discount rates
The discount rates used for individual investments range between
6.20 per cent and 8.75 per cent. The weighted average rate is
approximately 6.77 per cent (31 December 2019: 7.07 per cent),
representing a reduction of 30 bps from 31 December 2019, which
management believes to be towards the conservative end of the range
for a portfolio of availability-based social infrastructure
investments. This methodology calculates the weighted average based
on the value of each investment in proportion to the total
portfolio value i.e. based on the net present value of their
respective future cash flows.
The discount rate considers risks associated with the investment
including the phase the investment is in, such as construction,
ramp-up or stable operation, investment specific risks and
opportunities as well as country specific factors.
BBGI applies a risk premium for investments in construction to
reflect the higher-risk inherent in the construction phase of any
investment's lifecycle. Currently, the portfolio has one investment
in construction, Highway 104, which represents 0.5 per cent of the
overall portfolio value. BBGI has also applied a risk premium to a
limited number of other investments to reflect the individual
situations. For example, adjustments have been applied to acute
hospitals in the UK where a risk premium of 50bps continues to be
applied. This risk premium reflects the continued situation in the
UK where some public health clients are under cost pressure and are
actively looking for cost savings including deductions. To date,
BBGI has not been affected. The only UK acute hospital in the
portfolio is Gloucester Royal Hospital, which represents less than
one per cent of the overall NAV.
General market activity
Through the course of the Covid-19 pandemic, there has been an
increased focus on valuation from investors as the varied risk
profiles of the different investment classes within the
infrastructure sector have become more pronounced. For example,
demand-based investments such as airports, and (shadow) toll roads
have generally suffered severe traffic reductions, thereby reducing
revenue. Investors in demand-based investments have had to revisit
traffic growth assumptions, at least in the short-term. In
addition, lower than forecasted volumes will not only impact
demand-based income but also other third-party income such as
retail business in airports and rail stations, motorway service
stations and other income sources reliant on customer footfall.
On the other hand, availability-based investments passed the
stress test and proved to be very robust as the sector has not
experienced any material negative impact. This, coupled with the
historically low interest rate environment, has further contributed
to increased competition for PPP investments. The deal volume in
2020 shows that demand for stable yielding investments is strong
even with continued uncertainty surrounding Covid-19, and market
intelligence suggests discount rates in the secondary market remain
very competitive and likely to decrease further in the future.
Macro-economic assumptions
Apart from the discount rates, the Company uses the following
assumptions for the cash flows:
31 December 2020 31 December 2019
Indexation UK(1) RPI/CPIH 2.75% / 2.00% 2.75%
================ ======================== ========================
Canada 2.00% / 2.35% 2.00% / 2.35%
================ ======================== ========================
Australia 2.50% 2.50%
================================ ======================== ========================
Germany 2.00% 2.00%
================================ ======================== ========================
Netherlands(2) 2.00% 2.00%
================================ ======================== ========================
Norway(2) 2.25% 2.25%
================================ ======================== ========================
USA(3) 2.50% 2.50%
================================ ======================== ========================
Deposit UK 0.25% to Q4 2023, then 1.00% to Q4 2023, then
rates (p.a.) 1.00% 2.50%
================ ======================== ========================
Canada 0.75% to Q4 2023, then 1.00% to Q4 2023, then
1.50% 2.50%
================ ======================== ========================
Australia 0.50% to Q4 2023, then 2.00% to Q4 2023, then
2.00% 3.00% - 4.00% (medium
term)
================ ======================== ========================
Germany 0.00% to Q4 2023, then 1.00% to Q4 2023, then
0.50% 2.50%
================ ======================== ========================
Netherlands 0.00% to Q4 2023, then 1.00% to Q4 2023, then
0.50% 2.50%
================ ======================== ========================
Norway 0.25% to Q4 2023, then 1.80% to Q4 2023, then
2.00% 3.00%
================ ======================== ========================
USA 0.25% to Q4 2023, then 1.00% to Q4 2023, then
1.50% 2.50%
================ ======================== ========================
Corporate UK 19% 19% to 2019, then 17%
tax rates
(p.a.)
================ ======================== ========================
23.0% / 26.5% / 27% /
Canada(4) 29% 26.5% / 27% / 29%
================================ ======================== ========================
Australia 30% 30%
================================ ======================== ========================
Germany(5) 15.8% (incl. solidarity 15.8% (incl. solidarity
charge) charge)
================ ======================== ========================
Netherlands(6) 25% 25% to 2020, then 21.7%
================ ======================== ========================
Norway 22% 22%
================================ ======================== ========================
USA 21% 21%
================================ ======================== ========================
(1) On the 25th of November 2020, the UK Government announced
the phasing out of RPI after 2030, and replacement with CPIH; the
Company's UK portfolio indexation factor changes from RPI to CPIH
beginning on 1 January 2031.
(2) CPI indexation only. Where investments are subject to a
basket of indices, these non-CPI indices are not considered.
(3) 80 per cent of ORB indexation factor for revenue is
contractual and is not tied to CPI.
(4) Individual tax rates vary among Canadian Provinces.
(5) Individual local trade tax rates are considered in addition
to the tax rate above.
(6) In September 2020, the Dutch Government confirmed that the
planned reduction of the headline corporate income tax rate (CIT)
to 21.7 per cent will not be introduced in 2021.
Sensitivities
Discount rate sensitivity
The weighted average discount rate that is applied to the
Company's portfolio of investments is the single most important
judgement and variable.
The following table shows the sensitivity of the NAV to a change
in the discount rate.
Change in NAV 31 December
Discount Rate Sensitivity 2020
(GBP73.6) million, i.e.
Increase by 1% to 7.77%(1) (8.0)%
==========================
Decrease by 1% to 5.77%(1) GBP85.1 million, i.e. 9.3%
==========================
(1) Based on the weighted average discount rate of 6.77 per
cent.
Inflation sensitivity
The Company's investments are contractually entitled to receive
availability-based income streams from public sector clients, which
are adjusted every year for inflation. Facilities management
subcontractors for accommodation investments and operating and
maintenance subcontractors for transport investments have similar
indexation arrangements. The investment cash flows are positively
correlated with inflation (e.g. RPI, CPI, or a basket of
indices).
The table below shows the sensitivity of the NAV to a change in
inflation rates compared to the assumptions in the table above:
Inflation Sensitivity Change in NAV 31 December
2020
Inflation +1% GBP37.8 million, i.e. 4.1%
==========================
(GBP31.0) million, i.e.
Inflation -1% (3.4)%
==========================
Foreign exchange sensitivity
As described above, a significant proportion of the Company's
underlying investments are denominated in currencies other than
Sterling.
The following table shows the sensitivity of the NAV to a change
in foreign exchange rates:
Change in NAV 31 December
Foreign Exchange Sensitivity 2020
(GBP25.5) million, i.e.
Increase by 10%(1) (2.8)%
==========================
Decrease by 10%(1) GBP25.4 million, i.e. 2.8%
==========================
(1) Sensitivity in comparison to the spot foreign exchange rates
at 31 December 2020 and considering the contractual and natural
hedges in place, derived by applying a 10 per cent increase or
decrease to the Sterling/foreign currency rate.
Deposit rate sensitivity
Project Companies typically have cash deposits which are
required to be maintained as part of the senior debt funding
requirements. (e.g. six-month debt service reserve accounts,
maintenance reserve accounts). The asset cash flows are positively
correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a percentage
point change in long-term deposit rates compared to the assumptions
in the table above:
Change in NAV 31 December
Deposit Rate Sensitivity 2020
Deposit rate +1% GBP17.1 million, i.e. 1.9%
==========================
(GBP16.6) million, i.e.
Deposit rate -1% (1.8)%
==========================
Lifecycle costs sensitivity
Lifecycle is the cost of planned interventions or replacing
material parts of an asset to maintain it over the concession term.
It involves larger items that are not covered by routine
maintenance and for roads it will include items such as replacement
of asphalt, rehabilitation of surfaces, or replacement of
electromechanical equipment. Lifecycle obligations, are generally
passed down to the facility maintenance provider with the exception
of transportation investments where these obligations are typically
retained by the Portfolio Company.
Of the 50 investments in the portfolio, 17 investments retain
the lifecycle obligations. The remaining 33 investments have this
obligation passed down to the subcontractor.
The table below shows the sensitivity of the NAV to of a change
in lifecycle costs:
Lifecycle Costs Sensitivity Change in NAV 31 December
2020
(GBP17.6) million, i.e.
Increase by 10%(1) (1.9)%
==========================
Decrease by 10%(1) GBP17.4 million, i.e. 1.9%
==========================
(1) Sensitivity applied to the 17 investments in the portfolio
which retain the lifecycle obligation i.e. the obligation is not
passed down to the subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation
tax in the country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to of a change
in corporate tax rates compared to the assumptions in the table
above:
Change in NAV 31 December
Corporate Tax Rate Sensitivity 2020
(GBP6.6) million, i.e.
Tax rate +1% (0.7)%
=========================
Tax rate -1% GBP6.6 million, i.e. 0.7%
=========================
On 3 March, 2021, the UK Chancellor of the Exchequer announced a
plan to increase the UK Corporate Tax rate to 25 per cent from
April 2023. Whilst this increase is not currently enacted and is
still to be approved by the UK Parliament, the Company recognises
that any change in the UK Corporate Tax rate will have an effect on
the portfolio valuation. It is the Company's policy to value those
tax rates that have been enacted into law at the reporting period
date. Notwithstanding this, and to aid transparency, we have
calculated that this increase of the UK Corporation Tax rate would
result in a GBP8.9 million or 1.0 per cent reduction in NAV.
Senior debt refinancing sensitivity
Assumptions are used where a refinancing of senior debt
financing is required for an investment during the remaining
investment concession term. There is a risk that such assumptions
may not be achieved.
The table below shows the sensitivity of the NAV to a +100bps
adjustment to the forecasted margins. The base rate for senior debt
is either fixed or a long-term interest swap is available with the
effect that none of our investments are subject to changes in base
rates.
Change in NAV 31 December
Senior Debt Refinancing Sensitivity 2020
(GBP7.7) million, i.e.
Margin +1%(1) (0.8)%
=========================
(1) The Northern Territory Secure Facilities investment is the
only remaining investment in the BBGI portfolio with refinancing
risk.
GDP sensitivity
The BBGI portfolio is not sensitive to GDP.
The principal risks faced by the Group and the mitigants in
place are outlined in the Risk section.
Key Portfolio Company and portfolio cash flow assumptions
underlying NAV calculation include:
-- Discount rates and the assumptions as set out above continue to be applicable.
-- The updated financial models used for valuation accurately
reflect the terms of all agreements relating to the Portfolio
Companies and represent a fair and reasonable estimation of future
cash flows accruing to the Portfolio Companies.
-- Cash flows from and to the Portfolio Companies are received
and made at the times anticipated.
-- Non-UK Portfolio Companies are valued in local currency and
their cash flows converted to Sterling at either the period-end
exchange rates or the contract hedge rate.
-- Where the operating costs of the Portfolio Companies are
fixed by contract, such contracts are performed, and where such
costs are not fixed, they remain within the current forecasts in
the valuation models.
-- Where lifecycle costs/risks are borne by the Portfolio
Companies, they remain in line with the current forecasts in the
valuation models.
-- An assessment is made of construction defect remediation
where the risk sits with the Portfolio Company.
-- Contractual payments to the Portfolio Companies remain on
track and contracts with public sector or public sector backed
counterparties are not terminated before their contractual expiry
date.
-- Any deductions or abatements during the operational period of
Portfolio Companies are fully passed down to subcontractors under
contractual arrangements or are part of the planned (lifecycle)
forecasts.
-- Where the Portfolio Companies own the residual property value
in an investment, the projected amount for this value is
realised.
-- In cases where the Portfolio Companies have contracts that
are in the construction phase, they are either completed on time or
any delay costs are borne by the construction contractors.
-- There are no tax or regulatory changes in the future which
negatively impact cash flow forecasts.
In forming the above assessments, BBGI works with Portfolio
Company management teams, as well as using due diligence
information from, or working with, suitably qualified third parties
such as technical advisers, legal advisers and insurance
advisers.
FINANCIAL RESULTS
The Consolidated Financial Statements of the Group for the year
ended 31 December 2020 are in the Financial Statements section of
this Annual Report .
BASIS OF ACCOUNTING
The Group has prepared its Consolidated Financial Statements in
accordance with International Financial Reporting Standards
('IFRS') as adopted by the European Union ('EU'). In accordance
with IFRS the Company qualifies as an Investment Entity and as
such, does not consolidate its investments in subsidiaries that
qualify as investments at fair value through profit or loss
('Investments at FVPL'). Certain subsidiaries that are not
Investments at FVPL, but instead provide investment-related
services or activities that relate to the investment activities of
the Group, are consolidated. As an Investment Entity, the Company
recognises distributions from investments at FVPL as a reduction in
their carrying value. These distributions reduce the estimated
future cash flows which are used to determine the fair value of the
Investments at FVPL.
INCOME AND COSTS
Pro forma Income Statement Year ended Year ended
31 Dec
20 31 Dec 19
GBP million GBP million
=============================================== ============ ============
Income from investments at fair value through
profit or
loss ('FVPL income') 63.3 69.8
Other operating income 0.2 -
=============================================== ============ ============
Operating income 63.5 69.8
=============================================== ============ ============
Administrative expenses (9.6) (8.5)
Other operating expenses (7.3) (7.3)
Net loss on balance sheet hedging and net (2.3) -
finance result
=============================================== ============ ============
Profit before tax 44.3 54.0
Tax expense (2.6) (3.0)
=============================================== ============ ============
Profit from continuing operations 41.7 51.0
=============================================== ============ ============
Basic earnings per share (pence) 6.58 8.43
=============================================== ============ ============
During the year, the Group recognised FVPL income of GBP63.3
million (31 December 2019: GBP69.8 million). This FVPL income is
made up of a combination of the positive effect of the unwinding of
discount, changes in market discount rates, value enhancements, the
net effect of foreign exchange on the underlying investment
portfolio with a partial offset resulting from changes in
macro-economic assumptions. A more detailed analysis of the
movement in Investments at FVPL is outlined in the Valuation
section of this Report.
Administration expenses include, amongst others, personnel
costs, legal and professional fees and office and administration
costs. See further detail in the Corporate Cost analysis.
The Group has implemented a policy of using forward currency
swaps to hedge its anticipated non-Sterling and non-Euro
denominated cash flows on a four-year rolling basis, referred to as
cash flow hedging, and also uses 12-month forward currency swaps to
hedge part of the non-Sterling, non-Euro denominated portfolio
values, referred to as balance sheet hedging. During the year, the
Company recognised a net loss GBP0.9 million on cash flow hedging
(31 December 2019: GBP3.0 million net loss) and is reflected in
'Other operating expenses' in the table above.
During the year the Company recognised a net loss from balance
sheet hedging of GBP0.6 million (31 December 2019: GBP2.1 million
net gain).
Profit from continuing operations for the year ended 31 December
2020 decreased by 18.2 per cent to GBP41.7 million (31 December
2019: GBP51.0 million).
Group Level Corporate Cost Analysis
The table below is prepared on an accrual basis.
Year ended Year ended
31 Dec
20 31 Dec 19
Corporate costs GBP million GBP million
============================= ============== ============
Net finance costs 1.6 2.0
Personnel costs 6.2 4.8
Legal and professional fees 2.6 2.4
Office and administration 0.8 1.3
Acquisition related costs 1.6 1.1
Taxes 2.6 3.0
============================= ============== ============
Corporate costs 15.4 14.6
============================= ============== ============
Net finance costs for the year were GBP1.6 million (31 December
2019: GBP2.0 million). The Company used the proceeds from
distributions from its investments and the proceeds from its
November 2020 placing to repay outstanding borrowings, resulting in
a decrease in finance costs in the year. The cash flow analysis
section of this report provides further information regarding
utilisation and repayments under the RCF during the year.
Personnel costs for the year were GBP6.2 million (31 December
2019: GBP4.8 million) reflecting an increase in staff numbers as
well as remuneration. Refer to the 'Remuneration Report' section of
this report for further detail on Management Board and Supervisory
Board remuneration.
During the year, the Company acquired a 50 per cent equity
interest in the Highway 104 project and a 25 per cent equity
interest in Champlain bridge, both projects are located in Canada.
In addition, the Company acquired follow-on interests in the
Stanton Territorial Hospital, the KVH Hospital in Canada and the
N18 Motorway in the Netherlands. Acquisition related costs incurred
during the year amounted to GBP1.6 million (31 December 2019:
GBP1.1 million) and includes unsuccessful bid costs amounting to
GBP0.8 million (31 December 2019: GBP0.7 million).
Ongoing Charges
The Ongoing Charges ('OGC') percentage presented in the table
below is prepared in accordance with the AIC recommended
methodology, latest update published in October 2020[xxxi]. The
percentage represents the annualised reduction or drag on
shareholder returns as a result of recurring operational expenses
incurred in managing the Group's consolidated entities, and
provides an indication of the level of recurring costs likely to be
incurred in managing the Group in the future.
Year ended Year ended
31 Dec
20 31 Dec 19
Ongoing Charges Information GBP million GBP million
----------------------------------------------------- ------------ ------------
Ongoing Charges (using AIC recommended methodology) 0.86% 0.88%
----------------------------------------------------- ------------ ------------
In prior reporting periods, fees linked directly to investment
performance were included in the reported OGC. It is however the
view of the AIC that compensation schemes which are linked directly
to investment performance could be viewed as analogous to
performance fees paid by externally managed investment companies
and should therefore be excluded from the principal OGC
calculation. Therefore, the reported OGC for 31 December 2020
excludes such fees.
The Management Board will continue to follow this AIC
recommended methodology in future reporting periods, thereby
facilitating a direct comparison with externally managed investment
companies which follow the AIC recommended methodology for
calculating the Ongoing Charge.
Fees directly linked to investment performance recorded in 2020
as a percentage of average NAV were 0.08 per cent. Combined
therefore the aggregate of Ongoing Charges plus investment
performance fees was 0.94% in the year.
For the year ended 31 December 2020, and in line with AIC
recommendations, certain non-recurring costs were excluded from the
Ongoing charges, most notably acquisition-related advisory costs of
GBP1.6 million, taxation of GBP2.6 million and net finance costs of
GBP1.6 million.
The table below provides a reconciliation of the Ongoing Charges
and the Ongoing Charges Percentage to the administration expenses
under IFRS.
Year ended Year ended
31 Dec
20
GBP million 31 Dec 19
(except GBP million
%) (except %)
======================================================== ============= =============
Administration expenses to 31 December 9.6 8.5
Less: Non-recurring costs as per AIC guidelines
Non-recurring professional and external
advisory costs (0.4) (0.3)
Personnel costs related to acquisition
or non-recurring (0.4) (0.4)
Compensation linked to investment performance (0.8) -
Other non-recurring costs (0.3) (0.3)
======================================================== ============= =============
Ongoing Charges 7.7 7.5
Divided by:
Average undiluted Investment Basis NAV for
2020 (average of 31
December 2020: GBP916.0 million and 30
June 2020: GBP860.8 million) million) 888.4 858.3
======================================================== ============= =============
Ongoing Charges percentage(1) 0.86% 0.88%
======================================================== ============= =============
(1) Percentage calculation is based on actual results rather
than rounded numbers
During the year, in response to the UK's departure from the EU
and a requirement from Euroclear UK and Ireland, the Company was
required to interpose an EEA-based Central Securities Depository
into the shareholding structure, in order to ensure uninterrupted
trade settlement of the Company's non-certified shares on the LSE
post the completion of the Brexit transition period on 31 December
2020. The non-recurring advisory and set up costs of this
restructuring amounted to approximately GBP0.2 million and are
reflected in the Non-recurring professional and external advisory
costs in the table above.
Cash flows
The table below summarises the sources and uses of cash and cash
equivalents for the Group.
Year ended Year ended
31 Dec 20 31 Dec 19
GBP million GBP million
============================================= ============ ============
Distributions from Investments at FVPL(1) 72.8 64.0
Net cash flows from operating activities (18.5) (10.9)
Additional Investments at FVPL (59.2) (62.9)
Net cash flows from financing activities (9.5) 33.9
Impact of foreign exchange gain on cash and
cash equivalents 0.2 0.3
============================================= ============ ============
Net cash (outflow) inflow (14.2) 24.4
============================================= ============ ============
(1) These distributions are shown gross of withholding tax and
include the realisation of distributions in transit at 31 December
2019. The associated withholding tax outflow is included in 'Net
cash flows from operating activities'.
The Group's portfolio of investments performed well during the
year, with rebased cash flows ahead of business plan.[xxxii]
Distributions from Investments at FVPL, increased during the year
by 13.8 per cent to GBP72.8 million.
Additional investments during the year were financed through a
combination of borrowings under the RCF, placing proceeds and
reinvestment of distributions received from Investments at
FVPL.
The Company borrowed an additional amount of GBP41.0 million
under the RCF during the year and also repaid a total of GBP62.0
million over the same period. There were no borrowings outstanding
under the RCF at 31 December 2020. The net proceeds from the
November 2020 capital raise were used to part finance the
acquisition of the Champlain Bridge investment, acquired in
December 2020, and also to repay those amounts borrowed under the
RCF.
Cash dividends paid during the year ended 31 December 2020
amounted to GBP42.6 million, an increase of GBP1.8 million on the
previous year.
The Consolidated Statement of Cash Flows provides further
details of cash flows during the year ended 31 December 2020.
For the year ended 31 December 2020, the Group has a cash
dividend cover ratio[xxxiii] of 1.27x (year ended 31 December 2019:
1.30x) and is calculated as follows:
31 Dec 20 31 Dec 19
GBP million GBP million
(except (except
ratio) ratio)
================================================ ============ ============
Distributions received from Investments 72.8 64.0
Less: Net cash flows from operating activities
under
IFRS (consolidated) (18.5) (10.9)
================================================ ============ ============
Net distributions 54.3 53.1
Divided by: Cash dividends paid under IFRS
(consolidated) 42.6 40.8
================================================ ============ ============
Cash Dividend Cover (ratio) 1.27x 1.30x
================================================ ============ ============
The strong cash dividend coverage in 2020 was again supported by
BBGI's contracted portfolio cash flows which, unlike demand-based
assets, are not sensitive to the performance of the wider economic
environment. The Company has reaffirmed the target dividend of
7.33pps for 2021 and is providing a new dividend target of 7.48pps
for 2022.
Balance Sheet
Pro forma Balance Sheet
31 December 2020 31 December 2019
========================================= ======================= =============
Investment Consolidated Investment Consolidated
Basis(1) Adjust IFRS Basis Adjust IFRS
GBP
GBP million GBP million GBP million GBP million million GBP million
============================== ============ ============ ============= ============ ========= =============
Investments at FVPL 895.7 - 895.7 846.0 - 846.0
Trade and other receivables 1.6 - 1.6 3.9 - 3.9
Other assets and liabilities
(net) (1.9) (0.1) (2.0) (5.1) 0.9 (4.2)
Net cash 20.5 - 20.5 13.8 0.7 14.5
Derivative financial
asset 0.1 (0.1) - - 1.4 1.4
============================== ============ ============ ============= ============ ========= =============
NAV attributable to
ordinary shares 916.0 (0.2) 915.8 858.6 3.0 861.6
============================== ============ ============ ============= ============ ========= =============
(1) Represents the value of the Group's total assets less the
value of its total liabilities under the Investment Basis NAV. The
Investment Basis NAV represents the residual interest of the
shareholders in the Group, after all the liabilities of the Group,
if any, have been settled.
As at 31 December 2020, the Group has 50 availability-based
Investments at FVPL (31 December 2019: 48). The main drivers of the
net movement in Investments at FVPL are:
-- + GBP59.2 million: from new portfolio acquisitions in Highway
104 and Champlain Bridge and additional equity interests in Stanton
Territorial Hospital, KVH Hospital and N18 motorway.
-- + GBP63.3 million: from the net effect of unwinding of
discount, revised macro-economic assumptions on portfolio value,
changes in market discount rates, value enhancements and the impact
of net foreign exchange gains during the year .
-- - GBP72.8 million: from net distributions from the Investments at FVPL during the year .
At 31 December 2020, the fair value of forward currency swaps
used to hedge future portfolio distributions over the next four
years was GBP0.1 million net liability position. This figure is
excluded under the Investment Basis NAV as the related contracted
forward rates are directly applied to hedged future distributions
and therefore embedded in the Investments at FVPL. The unhedged
distributions are converted at the 31 December 2020 closing
rate.
As at 31 December 2020, cash and cash equivalents amounted to
GBP20.5 million (GBP34.8 million as at 31 December 2019).
A reconciliation of net cash as compared to net borrowings under
IFRS is as follows:
31 Dec 31 Dec
20 19
GBP million GBP million
==================================================== ============ ============
Cash and cash equivalent under IFRS (consolidated) 20.5 34.8
==================================================== ============ ============
Loans and borrowings under IFRS (consolidated) (0.2) (20.4)
Gross up: Unamortised debt issuance costs
under IFRS (consolidated) (1) - (0.7)
Less: Interest payable under IFRS (consolidated) 0.2 0.1
==================================================== ============ ============
Outstanding loan drawdowns - (21.0)
Net cash under Investment Basis NAV 20.5 13.8
==================================================== ============ ============
(1) During the year, unamortised debt issuance costs amounting
to GBP0.4 million were reclassed from the 'loans and borrowings
non-current liabilities' to 'other current assets'. Accordingly, no
gross up was required for the 2020 reconciliation of net cash.
Three-year comparative of Investment Basis NAV
31 Dec 20 31 Dec 19 31 Dec 18
======================= ========== ========= =========
NAV (millions) 916.0 858.6 774.5
NAV per share (pence) 137.8 136.2 133.5
======================= ========== ========= =========
The Investment Basis NAV increased by 6.7 per cent to GBP916.0
million at 31 December 2020 (31 December 2019: GBP858.6 million).
This equates to a growth in Investment Basis NAV per share of 1.2
per cent to 137.8p at 31 December 2020 (31 December 2019: 136.2p).
The Investment Basis NAV per share is the Investment Basis NAV
divided by the number of Company shares issued and outstanding.
This information presents the residual claim of each shareholder to
the net assets of the Group.
CORPORATE GOVERNANCE
INTRODUCTION
The Company is internally managed with a two-tier governance
structure that comprises a Supervisory Board and a Management
Board, with the responsibilities of each as indicated in this
Report.
Primary responsibilities of the Supervisory Board include the
supervision of the activities of the Management Board and the
establishment and monitoring of compliance with the Company's
investment policy. Notwithstanding this, the Directors on both the
Management Board and the Supervisory Board are accountable under
the Listing Rules as the Listing Rules do not make a distinction
between different types of directors. In particular, for such time
as the Company's shares are listed on the Official List of the UK
Listing Authority, the Supervisory Board and the Management Board
act as one in approving any circular or corporate action where the
Listing Rules require the recommendation of the board of directors
of a publicly listed company (or where such recommendation is
customarily given). Any responsibility applied to directors under
the Listing Rules applies to all directors of the Company.
The Management Board's principal responsibility is the
day-to-day management of the Company, including the discretionary
investment management of the Company's investments and those of the
rest of the Group. In carrying out the function of investment
manager via the Management Board, the Company does not engage an
external investment manager to provide such investment management
services.
The Management Board is otherwise responsible for the overall
administration of the Company including the preparation of
semi-annual valuations; statutory financial statements; management
accounts and the business plan that defines the Company's active
approach to asset management. Given its role as investment manager,
the Management Board is the primary interface for investor
relations, including engagement with the Supervisory Board on
shareholders' behalf.
The Company is regulated by the CSSF under Part II of the
amended Luxembourg law of 17 December 2010 on undertakings for
collective investments, and is subject to the Luxembourg amended
law of 12 July 2013 on Alternative Investment Fund Managers ('AIFM
Law') that implemented the EU Alternative Investment Funds Managers
Directive ('AIFMD') into national legislation.
Governance and Regulatory Environment
As an internally managed investment company, having effective
controls in place is paramount to securing the sound financial and
operational performance of the Company's investments. The Company
recognises the importance of effective engagement with its
stakeholders, viewing it as a key part of its own long-term success
and sustainability.
BBGI is a member of the AIC and as such reports against the AIC
Code of Corporate Governance (the 'AIC Code').
Both the Management Board and the Supervisory Board of the
Company have considered the Principles and Provisions of the AIC
Code. The AIC Code addresses the Principles and Provisions set out
in the UK Corporate Governance Code 2018 (the 'UK Code'), as well
as setting out additional Provisions on issues that are of specific
relevance to the Company. The Management and Supervisory Boards
consider that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting
Council ('FRC'), provides relevant information to shareholders.
Whilst BBGI is a non-domiciled publicly listed entity on the UK
London Stock Exchange, to which the UK Companies Act 2006 (the
'CA2006') has limited application, the Company recognises the value
that all its stakeholders bring to the business. As such, BBGI
acknowledges the requirement for most UK publicly listed companies
to make a s172(1) CA2006 statement. Consideration of BBGI's
stakeholders, and details of how the Company adopts the spirit of
those provisions can be found in the Our Approach To ESG section of
this Annual Report, and also in the Company's inaugural standalone
ESG Report, both of which detail the Company's commitment to
generating positive non-financial returns for all our
stakeholders.
For the most part, the Company has complied with the Principles
and Provisions of the AIC Code and where it currently does not, we
have explained why not. Those specific Provisions are outlined
below along with the section reference for the accompanying
explanation:
-- AIC Code Provision 10 (at least half the board excluding the
chairman, should be non-executive directors which the board
considers to be independent): Management Board - General section
;
-- AIC Code Provision 13 (circumstances likely to impair, or
appear to impair a non-executive director's independence - serving
in excess of nine years): Board Tenure and Diversity ;
-- AIC Provision 17 (in relation to establishing separate
Management Engagement Committee): Committees of the Supervisory
Board;
-- AIC Provision 23 (All directors should be subject to annual
re-election by the shareholders): Management Board - General
section ;
-- AIC Provision 29 (in relation to chairman as a member of the
Audit Committee): Audit Committee Report .
AIFM
During 2020, the Company was required to interpose an EEA-based
Central Securities Depository ('CSD') into the shareholding
structure, in order to ensure uninterrupted trade settlement of the
Company's non-certified shares on the LSE post the completion of
the Brexit transition period on 31 December 2020. Refer to the
Delegated Functions section of this report for an update on this
and further functions delegated by the Company. There have been no
other material changes in respect of Art. 20 Para. 2(d) of the AIFM
Law that would warrant further disclosure to shareholders.
Sustainable Finance Disclosure Regulation
Post period end, the Company made disclosures relating to
Articles 3, 4, 5, 6, 7(2), 8 and 10 of EU Regulation 2019/2088,
known as the Sustainable Finance Disclosure Regulation or SFDR.
SFDR requires EU based companies to make certain disclosures on the
subject of sustainability risk, the manner in which sustainability
factors are integrated into investment decision and allows
companies that meet certain sustainability characteristics to
self-classify if they promote environmental or social
characteristics. The Company takes the view that it falls within
the scope of Article 8 and meets the criteria for socially positive
investment.
SUPERVISORY BOARD AND MANAGEMENT BOARD
As at 31 December 2020
Name Function Independence Age Original Next renewal
appointment date
Supervisory Board
Sarah Whitney Chairman of Supervisory Independent 57 1 May 2019 30 April
Board 2021
Howard Myles Senior Independent Director Independent 71 3 October 30 April
2011 2021
Jutta af Chairman of Audit Committee Independent 62 1 July 2018 30 April
Rosenborg 2021
Management Board
Duncan Ball Member of the Management Non-independent 55 5 October 5 October
Board 2011 2021
Frank Schramm Member of the Management Non-independent 52 5 October 5 October
Board 2011 2021
Michael Member of the Management Non-independent 43 30 April 30 April
Denny Board 2013 2021
-------------- ---------------------------- ---------------- ---- ------------- -------------
This table sets out the expiry dates of the current terms of the
Directors' appointments. All appointments may be renewed in
accordance with the provisions of the Company's Articles.
BIOGRAPHIES OF DIRECTORS
Supervisory Board
Sarah Whitney
Chairman
Ms Whitney has extensive experience in the real estate and
finance sectors. She was a corporate finance partner at
PricewaterhouseCoopers. She set-up and led the Government &
Infrastructure Team at CB Richard Ellis, and was Managing Director
of the Consulting & Research business at DTZ Holdings plc (now
Cushman & Wakefield).
For the last 15 years, Ms Whitney's career has been focused on
the provision of consultancy services to national and local
governments, investors, and real estate companies on matters
pertaining to real estate, economic growth, infrastructure and
investment. Her early career was spent as an investment banker
advising major corporates on M&A transactions.
Ms Whitney became Chairman with effect from 31 July 2020
following Mr Colin Maltby stepping down from his role as a
Non-Executive Director of the Company. Ms Whitney was appointed
Chairman of the Nomination Committee with effect from 29 June
2020.
Ms Whitney has a BSc in Economics & Politics from the
University of Bristol and is a fellow of the Institute of Chartered
Accountants of England and Wales.
Ms Whitney serves as a Non-Executive Director of two other
listed companies.
Howard Myles
Senior Independent Director
Howard Myles began his career in stockbroking in 1971 as an
equity salesman, before joining Touche Ross in 1975 where he
qualified as a chartered accountant. In 1978, he joined W.
Greenwell & Co in the corporate broking team, and in 1987 moved
to SG Warburg Securities where he was involved in a wide range of
commercial and industrial transactions, in addition to leading
Warburg's corporate finance function for investment funds. Mr Myles
worked for UBS Warburg until 2001 and was subsequently a partner in
Ernst & Young LLP from 2001 to 2007, where he was responsible
for the Investment Funds Corporate Advisory team.
Mr Myles became Senior Independent Director on 31 August 2018,
and Chairman of the Remuneration Committee on 29 June 2020.
Mr Myles holds an MA from Oxford University.
He is a Fellow of the Institute of Chartered Accountants, a
Fellow of the Chartered Institute for Securities and
Investment.
Mr Myles serves as a Non-Executive Director of three other
listed investment companies.
Jutta af Rosenborg
Chairman of the Audit Committee
Jutta af Rosenborg has extensive experience in management and
strategy derived from senior operational roles in a number of
companies and significant experience with group finance and
auditing, risk management, mergers & acquisitions and
streamlining of business processes.
Ms af Rosenborg served as the Chief Financial Officer, Executive
Vice President of Finance and IT, and Member of the Board of
Management at ALK-Abelló A/S until 2010. Prior to this, Ms af
Rosenborg served at Chr. Hansen Holding A/S as its Vice President
of Group Accounting from 2000 to 2003. From 1978 to 1992, she
worked for the Audit Group at Deloitte.
Ms af Rosenborg became Chairman of the Audit Committee on 31
August 2018.
Ms af Rosenborg obtained a certificate in Business
Administration from Copenhagen Business School in 1982, gained an
MSc in Business Economics and Auditing from Copenhagen Business
School in 1987 and qualified as a state authorised public
accountant in 1992.
Ms af Rosenborg serves as a Non-Executive Director on four other
listed companies.
Management Board
Duncan Ball
Co-CEO and member of the Management Board
Duncan Ball has been co-CEO of BBGI from inception and was
actively involved in the establishment and IPO listing of BBGI in
2011 and the subsequent growth from 19 assets at IPO to 50 assets
at the end of the reporting period.
Mr Ball has worked in the infrastructure sector, investment
banking and advisory business for over 30 years. As co-CEO of BBGI,
he is responsible for overall strategy and management of the
Company. He is one of three members of the Management Board and
sits on the Group's Investment and ESG Committees.
Additionally, he is a shareholder representative and holds
directorships in key assets of BBGI.
Frank Schramm
Co-CEO and member of the Management Board
Frank Schramm has been co-CEO of BBGI from inception and was
actively involved in the establishment and IPO listing of BBGI in
2011 and the subsequent growth from 19 assets at IPO to 50 assets
at the end of the reporting period.
Mr Schramm has worked in the infrastructure sector, investment
banking and advisory business for over 24 years. As co-CEO of BBGI,
he is responsible for overall strategy and management of the
Company. He is one of three members of the Management Board and
sits on the Group's Investment and ESG Committees.
Additionally, he is a shareholder representative and holds
directorships in key assets of BBGI.
Michael Denny
CFO and member of the Management Board
Michael Denny has over 20 years' experience in corporate finance
with a focus on the infrastructure and real estate sectors.
He joined BBGI in early 2012, shortly after the Company's IPO.
As CFO of the Group, he is primarily responsible for all corporate
financial matters including but not limited to financial reporting,
UK listing requirements, taxation, foreign exchange hedging and
regulatory compliance. Mr Denny is a member of the Management Board
and sits on the Group's Investment and ESG Committees.
SUPERVISORY BOARD
General
The Supervisory Board consists of three Independent
Non-Executive Directors. Ms Sarah Whitney became Chairman of the
Supervisory Board on 31 July 2020 following Mr Colin Maltby
stepping down from his role as Non-Executive director of the
Company.
In accordance with the Articles, all members of the Supervisory
Board are elected for a period ending at the AGM of the Company in
April each year, at which time they are required to retire. They
may, if they so wish, offer themselves for re-election by
shareholders. However, re-appointment is not automatic.
The Supervisory Board believes that its members continue to have
an appropriate combination of skills, experience and knowledge to
enable them to fulfil their obligations.
The Supervisory Board members have a breadth and diversity of
experience relevant to the Company, and the Company believes that
any future changes to the composition of the Supervisory Board can
be managed without undue disruption.
The Supervisory Board meets at least four times a year and
between these formal meetings, there is regular contact with the
Management Board and the Company's corporate brokers. Where
necessary, both Supervisory and Management Board members also have
access to independent professional advice at the expense of the
Company.
The Supervisory Board considers items laid out in the Notices
and Agendas of meetings which are formally circulated to its
members in advance of the meeting as part of the Board papers. At
each meeting, members are required to advise of any potential or
actual conflicts of interest prior to discussion.
Role and Responsibilities of the Supervisory Board
The Supervisory Board is responsible for establishing and
monitoring compliance with the Company's investment policy,
appointing and replacing the Management Board, supervising and
monitoring the appointment of the Company's service providers and
those of its subsidiaries, considering any prospective issues,
purchases or redemptions of shares that are proposed by the
Management Board, reviewing and monitoring compliance with the
corporate governance framework and financial reporting procedures
within which the Company operates, reviewing and (if thought fit)
approving interim and annual financial statements and providing
general supervisory oversight to the Management Board and the
operations of the Group as a whole.
The Supervisory Board meets at least quarterly where it reviews
investment performance and associated matters, compliance and risk
management activities, the performance of key service providers,
investment and financial controls, marketing and investor
relations, general administration, peer group information, industry
issues and other matters relevant to their remit.
The Supervisory Board will continue to regularly consider the
Company's strategy taking account of market conditions and feedback
from the Management Board, the Company's joint corporate brokers
and engagement with shareholders. The Company's strategy is
considered regularly in conjunction with the Management Board.
In addition, the Supervisory Board is responsible for
establishing and monitoring compliance with the Company's
investment policy, providing general supervisory oversight to the
operations of the Group as a whole; and supervising and monitoring
the appointment and performance of the Company's third-party
service providers (and those of its subsidiaries). In the case of
the latter role, the Supervisory Board acts in its capacity as the
Management Engagement Committee, further detailed below under
Committees of the Supervisory Board.
Climate related risk and other material ESG issues are also
reviewed at least quarterly by the Supervisory Board, ensuring that
issues are appropriately addressed through the Company's strategy,
Responsible Investment approach and other key processes such as
risk management.
The Company has a formally constituted Audit Committee, to which
the Supervisory Board has delegated its responsibility for the
general oversight and monitoring of the Company's compliance with
various financial and regulatory controls in accordance with AIC
Code and Disclosure and Transparency Rules requirements.
During the year, a formally constituted Remuneration Committee
was established, to which the Supervisory Board delegated its
responsibilities for establishing the general principles of the
policy for Directors' remuneration and for setting remuneration for
the Management Board, as well as supervising the general
remuneration structure and levels for other employees. In addition,
a formally constituted Nomination Committee was established, to
which the Supervisory Board delegated its responsibilities for
appointing the members of the Management Board and the appointment
of any further Supervisory Board members. Prior to these Committees
being formally constituted, the Supervisory Board Directors would
meet as a whole and carry out the respective roles of the
Remuneration and Nomination Committees. Further details on the
roles of each of the Committees and their activities undertaken
during the year can be found in the section titled Committees of
the Supervisory Board.
Each of the Supervisory Board members continues to be considered
as independent, and the Supervisory Board is not aware of any
circumstances which are likely to impair, or could appear to
impair, the independence of any of the Supervisory Board
members.
Annual performance evaluation
In accordance with AIC Code Provision 26, an externally
facilitated evaluation of the Supervisory Board was conducted in
2020 by BoardAlpha Limited ('BoardAlpha'). BoardAlpha evaluated the
performance of the Supervisory Board, its committees, the Chairman
and individual directors. BoardAlpha was independent of the Company
and there was no connection between the evaluator and the Company
or any of its individual Directors.
Following the publication post-period end of a review undertaken
by ICSA into the quality of independent board evaluation in the UK
listed sector (commissioned by the UK's Department of Business,
Energy and Industrial Strategy), the Supervisory Board believes
BoardAlpha' s evaluation of the Company was done in the spirit of
ICSA's principles of good practice.
Individual interviews were held with each of the four
Supervisory Board members, including the Chairman at the time, Mr
Colin Maltby. Additional meetings were also held with each member
of the Management Board, the Company Secretary and a representative
from the Company's Corporate Brokers. BoardAlpha was presented with
Committee and Board packs from the Board meetings held in the
preceding year and two BoardAlpha representatives were invited to
attend and observe meetings held by the Supervisory Board and Audit
Committee.
BoardAlpha found that the Supervisory Board as a whole and the
Directors individually had a clear understanding of their role and
discharged their governance duties with a high degree of vigilance,
integrity and competence. The Supervisory Board as a whole held an
appropriate spread of skills and experience with a high degree of
collective knowledge of good corporate governance, and provided a
good level of challenge to the Management Board. With its most
recent appointments, the Supervisory Board had enhanced its gender
diversity. The Supervisory Board was kept well informed both in
terms of day-to-day operations and strategic overview, with
comprehensive reporting received sufficiently in advance of any
meetings. The report concluded in summary that the Supervisory
Board appeared to be well constituted, highly effective and well
run. Where findings of the evaluation were deemed relevant and in
the interest of the Company and its stakeholders to implement, the
Company has done so. These changes, although limited in nature, are
highlighted in the corresponding parts of this Annual Report.
In presenting the results of its evaluation, BoardAlpha made
recommendations, a number of which corresponded with actions the
Company had independently determined to undertake prior to
receiving the evaluation results. These are outlined below,
including the principal outcomes and actions taken as a result of
the BoardAlpha recommendations.
-- Establishment of separate, formally constituted, Nomination
and Remuneration Committees with Terms of Reference developed in
line with good corporate governance practice and regulatory
requirements. Each of the Committees (including the existing Audit
Committee) are chaired by a different Director, to allow each of
them to focus on their designated areas.
-- Establishment of a clear, formal, and written Chairman's
succession plan. Whilst succession planning has always remained
high on the Supervisory Board's agenda, a formal policy documenting
the succession plans for the Chairman was developed on
recommendation from the external evaluation.
-- Recruitment of a further Supervisory Board Director, which
was already part of the Company's long-term director succession
plans, was also recommended by the evaluation.
-- Improving reporting of the Company's sustainability measures
across the portfolio and ESG credentials, primarily through the
introduction of BBGI's inaugural ESG report made available on the
Company's website, an area which was very much on the Management
Board's agenda prior to the Board evaluation.
-- Introduction of a maintained register of any relevant
training undertaken by the Directors, to ensure adequate training
continued to be made available to the directors, whether through
the Company or any of the Directors' externally held mandates. The
Company has expanded upon this recommendation and, in addition to
the Directors, also maintains a register of training undertaken by
all key personnel.
-- BoardAlpha's recommendation for the establishment of a
formally structured induction process has been incorporated into
the appointment process, retaining elements of the existing bespoke
induction process in order to maximise the benefit of the induction
process to each individual Director.
An externally-facilitated performance review of the Chairman,
being Mr Maltby at the time of the evaluation, was also undertaken
through BoardAlpha. BoardAlpha's report was initially considered by
the Senior Independent Director before sharing and discussing it
with the rest of the Supervisory Board. Mr Maltby was considered to
have been an excellent Chairman and an asset to the dual Board
structure of the Company and to shareholders. His pre-existing
tenure length was noted and BoardAlpha's main recommendations were
for greater interaction between the Chairman and the wider
management team and a more proactive approach to shareholder
engagement. With his retirement and as his successor, Ms Whitney
noted the recommendations made for the role of Chairman.
In the intervening years between externally-facilitated
performance evaluations, the Supervisory Board conducts formal
self-evaluations of its performance, that of its Chairman, and
considers the term and independence of each member on an annual
basis. Such evaluation is normally conducted by way of
questionnaire and is undertaken to ensure that the composition of
the Supervisory Board and its Committees continue to reflect a
suitable mix of skills, experience and knowledge; that each body is
functioning effectively; and that the performance of each
individual member continues to be effective. The Chairman's
evaluation is also conducted by way of questionnaire, led by the
Senior Independent Director, in accordance with Provision 14 of the
AIC Code, and the results subsequently discussed with the Chairman
and the remaining members as necessary.
Attendance at Supervisory Board meetings during the financial
year ended 31 December 2020
Total meetings
Name and attendance
Supervisory Board 12
---------------
Colin Maltby(1) 3
---------------
Howard Myles(2) 11
---------------
Jutta af Rosenborg 12
---------------
Sarah Whitney 12
---------------
(1) Mr Maltby stepped down from his role on the Supervisory
Board with effect from 31 July 2020. He did not attend any meetings
at which his succession was discussed, and attended all other
meetings held during his appointment.
(2) Mr Myles was unable to attend one meeting due to
illness.
Other listed company directorships
The members of the Supervisory Board held the following
additional non-executive directorship mandates in publicly quoted
companies as at 31 December 2020. Any mandates accepted subsequent
to the balance sheet date are included below.
Sarah Whitney Howard Myles
St Modwen Properties plc Baker Steel Resources Trust Limited
JPMorgan Global Growth & Income Aberdeen Latin America Income Fund Limited
plc Chelverton UK Dividend Trust plc
-------------------------------- -------------------------------------------
Jutta af Rosenborg
Standard Life Aberdeen PLC
JP Morgan European Investment
Trust PLC
NKT A/S
Nilfisk Holding A/S
-------------------------------- -------------------------------------------
As part of the Supervisory Board's annual performance evaluation
process, it was concluded that throughout the reporting period each
member had, and was expected to continue to have, sufficient
capacity to carry out their duties properly with no one member
being over-boarded by their current directorship mandates.
COMMITTEES OF THE SUPERVISORY BOARD
During the year, the Supervisory Board determined that it was
now appropriate for the functions of the Nomination Committee and
the Remuneration Committee to be separately conducted through the
formal establishment of the relevant committees.
Oversight of delegates and key service providers is highly
regulated by the Luxembourg CSSF, including formal reporting
structures, regular visits and compliance monitoring plans in
accordance with the Company's Oversight of Delegated Activities
framework. In recognition of the Management Board's primary
involvement in the process, the Company being internally managed,
and considering the size of the Supervisory Board, the functions of
a Management Engagement Committee continue to be conducted by the
Supervisory Board as a whole, with Ms Whitney acting as Chairman.
As a result, the establishment of a separate management engagement
committee, as prescribed under AIC Code Provision 17, was
considered to be unnecessary as there is no material benefit to the
Company and its shareholders.
Audit Committee
In accordance with provision 29 of the AIC Code and the
Disclosure Guidance and Transparency Rules ('DTR') rule 7.1, the
Supervisory Board has a formally constituted Audit Committee.
The Audit Committee operated throughout the year in accordance
with the AIC Code. As indicated above, it does so within clearly
defined terms of reference including all matters indicated by DTR
7.1 and the AIC Code. It comprises the three independent
Non-Executive Directors who are also members of the Supervisory
Board: Jutta af Rosenborg is Chairman of the Committee, and Sarah
Whitney and Howard Myles are the other members. Colin Maltby
stepped down as a member of the Committee on 31 July 2020.
The Audit Committee is required to report its findings to the
Supervisory Board, identifying any matters on which it considers
that action or improvement is recommended. In the event of any
conflict between the provisions of the AIC Code and the provisions
of the law on the Audit Profession, the Company will comply with
the provisions of the law on the Audit Profession and will disclose
any such conflict.
The External Auditor is invited to attend and present the
conclusions of its work at those Audit Committee meetings at which
the annual and interim financial statements are considered, and at
other times if considered necessary by the Audit Committee.
The Audit Committee meets not less than three times per year,
and at such other times as the Audit Committee Chairman may
require. Additional meetings may be requested by any other member
of the Audit Committee, or the External Auditor, if deemed
necessary. Other Directors and third parties may be invited by the
Audit Committee to attend meetings as and when appropriate.
Further details on the Audit Committee and its work during the
year can be found in the Audit Committee report.
The Audit Committee Chairman attends each AGM of the Company and
is prepared to respond to any shareholder questions on the
Committee's activities.
The Audit Committee terms of reference are available on the
Company's website and can also be requested directly from the
Company Secretary.
Remuneration Committee
As described above, the Supervisory Board established a formally
constituted Remuneration Committee during the year, in accordance
with AIC Code provision 37.
It comprises the three independent Non-Executive Directors who
are also members of the Supervisory Board: Howard Myles is Chairman
of the Committee, Sarah Whitney and Jutta af Rosenborg are the
other members.
During the year, the Remuneration Committee met four times
(including meetings held by the Supervisory Board in its capacity
as the Remuneration Committee) to review the levels and structure
of the remuneration, compensation, and other benefits and
entitlements of the Management Board of the Company. Further
information in relation to both Executive and Non-Executive
Directors remuneration can be found in the Remuneration Report.
The Remuneration Committee meets no less than two times per
year, and at such other times as the Remuneration Committee
Chairman may require. Additional meetings may be requested by any
other member of the Remuneration Committee, if deemed necessary.
Other Directors and third parties may be invited by the
Remuneration Committee to attend meetings as and when
appropriate.
The Remuneration Committee Chairman attends each AGM of the
Company and is prepared to respond to any shareholder questions on
the Committee's activities.
The Remuneration Committee terms of reference are available on
the Company's website and can also be requested directly from the
Company Secretary.
Nomination Committee
As described above, during the year, the Supervisory Board
established a formally constituted Nomination Committee, in
accordance with AIC Code provision 22.
It comprises the three independent Non-Executive Directors who
are also members of the Supervisory Board: Sarah Whitney is
Chairman of the Committee, and Howard Myles and Jutta af Rosenborg
are the other members.
During the year, the Nomination Committee met four times
(including meetings held by the Supervisory Board in its capacity
as the Nomination Committee) to consider the renewal of the
appointments of the Management Board members (which appointments
are renewable annually for one year only), the appointment of a new
Supervisory Board member and to review the succession plans for
both the Management and Supervisory Boards.
Given the significant growth of the Company since IPO and the
size and complexity of its organisation and scope of Supervisory
Board's responsibilities, an assessment of the Supervisory Board's
size and composition was undertaken by the Nomination Committee
during the year. In order to further strengthen the overall
governance of the Company, the Nomination Committee has recommended
that the size of the Supervisory Board and number of Non-Executive
Directors increases to five members. As outlined in the
Remuneration Report, the Remuneration Committee consider the
Non-Executive Directors' fees annually within the approved maximum
aggregate remuneration cap as approved by the Company's
shareholders. These fees will remain unchanged for 2021. However,
to accommodate the potential addition of a new Non-Executive
Director to the Supervisory Board, it is proposed that an increase
in the maximum aggregate remuneration cap from GBP300,000 to
GBP400,000 will be put, by way of resolution, to the Company's
shareholders at the 2021 AGM.
The Nomination Committee oversaw the re-appointment of Cornforth
Consulting Limited, an external search consultancy firm, who had
previously assisted in facilitating the appointments of Ms af
Rosenborg and Ms Whitney. With their knowledge of investment
companies and an understanding of the Company's requirements,
Cornforth Consulting Limited was separately engaged to assist with
the search for a replacement Supervisory Board member following Mr
Maltby's resignation as Non-Executive Director in 2020.
Following a successful conclusion to this search, the Company
will seek at the upcoming AGM approval from its shareholders to
appoint Mr Chris Waples CDir FloD as a new member of the
Supervisory Board with effect from 1 May 2021. Mr Waples has 35
years' global experience of managing the acquisition, construction
and divestment of infrastructure projects. Mr Waples has an
extensive track record of asset management in progressive high
profile companies, including 12 year with John Laing Group plc
where he held the position of Executive Director, Asset Management
and led the management of an international portfolio of PPP assets
across Europe, North America and Asia Pacific regions. Apart from
this engagement, there was no other connection between Cornforth
Consulting Ltd and the Company, or individual Directors.
As outlined in the Annual Performance Evaluation section, the
Supervisory Board in its capacity as Nomination Committee further
oversaw the appointment of BoardAlpha, an independent external
specialist, to facilitate the Supervisory Board's inaugural
external board performance evaluation, and the implementation of
responses to BoardAlpha's recommendations.
During the year, the Nomination Committee implemented a formal,
written policy documenting the succession plans for the Chairman of
the Supervisory Board, as well as the development of a distinct
Group Diversity and Equality Policy.
As stated under 'Management Board - Performance Evaluation and
Reappointment', each member of the Management Board was reappointed
for a further year. In respect of succession planning, the detailed
plans developed for all senior positions were reviewed. These plans
are regularly updated by the Management Board and reviewed with the
Supervisory Board at least annually.
In accordance with AIC Code provision 22, the Chairman does not
chair any Committee meeting at which her succession is
discussed.
The Nomination Committee meets not less than two times per year,
and at such other times as the Nomination Committee Chairman may
require. Additional meetings may be requested by any other member
of the Nomination Committee, if deemed necessary. Other Directors
and third parties may be invited by the Nomination Committee to
attend meetings as and when appropriate.
The Nomination Committee Chairman attends each AGM of the
Company and is prepared to respond to any shareholder questions on
the Committee's activities.
The Nomination Committee terms of reference are available on the
Company's website and can also be requested directly from the
Company Secretary.
Management Engagement Committee
In its role as Management Engagement Committee, the Supervisory
Board met on five occasions during the year under review to
consider, together with the Management Board, the performance,
effectiveness and appropriateness of the ongoing appointments of
the Company's third-party service providers under Principle H of
the AIC Code. During these meetings, the Management Board provides
feedback and key findings resulting from any onsite meetings with
third-party service providers as part of the Company's programme of
oversight of delegates and key service providers.
Re-election of Supervisory Board members
In accordance with the Articles, Supervisory Board members are
elected for a period ending at the Company's next AGM, at which
time they are eligible for reappointment. With the exception of Mr
Maltby, who stepped down on 31 July 2020, all members of the
Supervisory Board have decided to offer themselves for re-election
at the forthcoming AGM and, as a result of the successful
performance evaluation, the Supervisory Board recommends the
re-election of each member.
Scheduled meetings and attendance during 2020
Name Audit Committee Remuneration Committee Nomination Committee
(4 meetings) (4 meetings)(1) (5 meetings)(1)
Colin Maltby(2) 2 3 3
Jutta af Rosenborg 4 4 5
Howard Myles(3) 3 3 4
Sarah Whitney 4 4 5
--------------- ---------------------- --------------------
(1) Remuneration and Nomination Committee meetings include
meetings held through the Supervisory Board acting in its capacity
as those committees prior to their formal constitution.
(2) Mr Maltby stepped down from the Supervisory Board and Audit
Committee with effect from 31 July 2020. He was not appointed to
the formally constituted Remuneration and Nomination Committees and
did not attend meetings at which his succession was discussed, but
attended all other meetings held during his appointment, including
where the Supervisory Board acted in its capacity as Remuneration
and Nomination Committees.
(3) Mr Myles was unable to attend one meeting for each Committee
due to illness.
MANAGEMENT BOARD
General
The Management Board comprises three members, each contractually
engaged by BBGI Management HoldCo S.à r.l., a direct consolidated
100% held subsidiary of the Company. As a result, no member is
deemed independent under AIC Code Provision 10. However, the
Management Board's functions are overseen by the Supervisory Board
which itself meets the independence criteria set out in Provision
10. Whilst this two-tier structure is not explicitly covered by the
AIC Code, the Company considers that an independent Supervisory
Board ensures the Company is compliant with AIC Code Provision 10.
Under AIC Code Provision 3, it is the co-CEOs of the Management
Board who primarily seek regular engagement with the Company's
major shareholders in order to understand their views concerning
significant matters. The Chairman of the Supervisory Board is,
however, always available to undertake such engagement at
shareholders' request.
The Company's Articles require that the Management Board's
members be elected on an annual basis by the Supervisory Board, and
not by shareholders. As a result, this does not meet the
requirements of AIC Code Provision 23, which requires that
directors should be subject to election by shareholders. However,
as the Management Board carries out the role of investment manager,
the Supervisory Board deems it appropriate that it elects the
members of the Management Board. The Articles also require that the
members of the Supervisory Board themselves be subject to annual
election by shareholders, who may also dismiss any such member.
Accordingly, the Company considers that this procedure satisfies
the requirements of AIC Code Provision 23.
Internal controls
The Management Board has established an ongoing process and
system of robust internal controls designed to meet the particular
needs of the Company in managing the risks to which it is exposed.
This process included establishing procedures to manage risk,
oversee the internal control framework, and determine the nature
and extent of principal risks the Company is willing to take to
achieve its long-term strategic objectives. The policies and
procedures are reviewed at least annually, together with continual,
ongoing monitoring.
During the year, the Company continued its work to further
refine and reinforce its existing robust governance and internal
controls frameworks in compliance with circular 18/698 from the
CSSF, governing the authorisation and organisation of investment
fund companies based in Luxembourg. To this end, the Luxembourg
regulator, CSSF, provided formal approval of the appointment of a
new Head of Compliance and Risk, with effect from January 2020.
Internalising the appointment to a full-time dedicated employee has
enabled BBGI to further reinforce its existing governance and risk
controls frameworks, including oversight of delegated activities
and the appointed delegates.
Furthermore, at each quarterly meeting, the Supervisory Board
monitors the Company's investment performance against its stated
objectives and reviews its activities to ensure that the Management
Board is adhering to the investment policy and guidelines -
including clearly defined investment criteria, returns targets,
risk profile and compliance framework. During these meetings, the
Management Board reports in relation to Key Performance Indicators
('KPIs') on operating performance, cash projections, investment
valuations and corporate governance matters. The Head of Compliance
and Risk presents the Company's interim and annual Risk report and
annual Compliance report separately to meetings of both the
Management Board and Supervisory Board.
In 2020, the Management Board established an ESG Committee to
oversee the management of material ESG activities, including
climate-related issues. The ESG Committee meets at least quarterly,
and membership comprises the Co-CEOs, the CFO and the Company
Secretary. Through the ESG Committee the Management Board remains
informed about the dual risks to the Company of transitioning to a
low carbon economy (with associated increased regulation) and the
risk of physical impacts of climate change on the assets in the
portfolio. In March 2021, BBGI has employed a full-time dedicated
ESG Director who has also become a member of the ESG Committee.
The Company continues to delegate the Internal Audit function to
Grant Thornton Vectis in Luxembourg. Internal Audit reviews are
performed within the framework of a triennial audit plan as agreed
upon by the Management Board and Audit Committee and communicated
to the CSSF. Within this timeframe, the nature, timing and extent
of the internal audit procedures are determined by an assessment of
the risk related to specific activities, and by the complexity and
sophistication of the Company's operations and systems, including
the method of controlling information processing. The Internal
Audit summary report is presented to the Audit Committee in April
each year and is subsequently submitted to the CSSF.
The Company recognises that effective control systems can only
seek to manage and mitigate the risks of failure to achieve
business objectives. They cannot eliminate them. By their very
nature, these procedures are not able to provide absolute assurance
against material misstatement or loss.
Performance evaluation and reappointment
As stated above, the Management Board carries out the functions
of the Company's investment manager, and its Directors are
appointed by the Supervisory Board for a period of one year, which
is renewable. Mr Ball and Mr Schramm were both originally appointed
on 5 October 2011 at the time of the Company's IPO, with Mr Denny
originally appointed to the Management Board on 30 April 2013.
Re-election of the Management Board members
The Supervisory Board evaluates the performance of the
Management Board and its Directors annually to ensure that the
Management Board and its individual members continue to operate
effectively and efficiently, and that the continued appointment of
the individual Directors is in the best interests of the Company
and its shareholders. Satisfied with the evaluations carried out in
2020, the Supervisory Board resolved to renew Mr Denny's
appointment for a further term of one year with effect from 30
April 2020, and those of Mr Ball and Mr Schramm for a further term
of
one year with effect from 5 October 2020.
Attendance at Management Board meetings during the financial
year ended 31 December 2020
Total meetings
Name and attendance
Management Board 37
Frank Schramm 37
Duncan Ball 37
Michael Denny 37
---------------
Delegated functions
Amongst other requirements, the Company is required under the
AIFM Law to have dedicated Risk Management, Compliance, and
Internal Audit functions; each of which is required to be both
functionally and hierarchically separate from the functions of the
operating units. Accordingly, Grant Thornton Vectis has been
appointed to the role of Internal Audit and was engaged for the
full year ended 31 December 2020.
Internal Audit: Grant Thornton Vectis
As previously reported, in recognition of the Company's
continued growth and as a result of a market-wide increase in
regulatory oversight and the complexity of compliance requirements,
the decision was taken in 2019 to internalise the Compliance and
Risk Management functions. In October 2019, the Company hired a new
full-time employee as Head of Risk and Compliance. Formal approval
of this appointment was received from the regulator with effect
from 10 January 2020, prior to which the functions were delegated
to the providers detailed below:
Risk Management: IQ EQ Fund Management (Luxembourg) SA (to January 2020)
Compliance: 99 Advisory Luxembourg (to January 2020)
An orderly handover from these delegated functions to the new
Head of Risk and Compliance commenced in 2019 and concluded in
January 2020. The Head of Risk and Compliance performs the risk
management and compliance functions and reports to the Supervisory
Board independently of the Management Board, as well as reporting
to the respective Designated Board Members who retain
responsibility for overseeing the performance of the respective
functions.
Notwithstanding the above, the Company's Management Board
retains overall responsibility for the correct and effective
operation of the delegated functions.
Other key delegates and providers are noted below:
Central Administrative Agent, Depositary,
Paying Agent, Registrar and Transfer Agent: RBC Investor Services Bank S.A ('RBC').
Depository (UK): Link Market Services Trustees (Nominees)
Limited ('Link')
Information Technology: G.I.T.S. PSF
Principal Agent: Banque Internationale à Luxembourg S.A.
('BIL')
Central Securities Depository: LuxCSD S.A. ('Lux CSD')
The Company's shares are admitted to trading on the LSE main
market for listed securities. In this context, the Company has
engaged Link as depository, receiving agent and UK transfer agent.
Listing on the LSE provides liquidity for investors in what is
otherwise a closed-ended investment company, holding a portfolio of
illiquid assets.
Link, acting in its depository capacity, as holder of in excess
of 99.9 per cent of the issued ordinary shares in the Company,
represents all the ordinary shares that are ultimately subscribed
for in dematerialised, non-certified form. Link holds such
dematerialised ordinary shares and issues uncertificated depository
interest holdings in order to facilitate indirect holding of the
Company's shares by non-certified depository interest holders.
These non-certified dematerialised shareholdings are held via
shareholder nominee accounts. The remaining issued ordinary shares
are held directly on the certified share register maintained by
RBC. Accordingly, the Company's share register only lists the
Certified Investors.
During the year, in response to the UK's departure from the EU
and a requirement from Euroclear UK and Ireland, the Company was
required to interpose an EEA-based CSD into the shareholding
structure, in order to ensure uninterrupted trade settlement of the
Company's non-certified shares on the LSE, post the completion of
the Brexit transition period on 31 December 2020. The Company
appointed LuxCSD as its EEA-based CSD. A Luxembourg principal
agent, BIL, was appointed to act as a required intermediary between
the Company and LuxCSD. Both LuxCSD and BIL are classified as
delegates and as such will be subject to the appropriate level of
delegate oversight in accordance with the Company's delegate
oversight framework.
In accordance with the Luxembourg law of 6 April 2013, creating
a new category of dematerialised securities, in addition to
securities in bearer or registered form (the Dematerialisation
Law), transfer of the shares to LuxCSD involved the shares being
converted from their former issued registered form (recorded on the
official register maintained by RBC) to a dematerialised form, held
by LuxCSD on their Clearstream account, and further credited to
Link.
Approval was sought by way of a general meeting of the
shareholders held on 30 November 2020, with shareholders voting in
favour of the proposals. Accordingly, those shares which were
issued in registered form to the account of Link were converted to
dematerialised form on 8 December 2020. Those shareholders who
continue to hold their shares in issued registered form have, in
accordance with the Dematerialisation Law, a period of up to two
years from the 30 November 2020 general meeting to instruct their
shares to be converted from issued registered form to a
dematerialised form after which those issued registered shares will
be required to be mandatorily converted.
Board members and other interests
The members of the Management Board are also BBGI Management
HoldCo S.à r.l. managers. Mr Ball and Mr Schramm both hold service
contracts and Mr Denny holds a management contract in respect of
BBGI Management HoldCo S.à r.l. Otherwise, no other member of the
Group held service or management contracts during the year under
review. Notice periods to and from the Company of 12 months apply
in respect of Mr Ball, Mr Denny and Mr Schramm.
No loan has been granted to, nor any guarantee provided for the
benefit of, any Director by the Company.
Ms Whitney, Mr Myles and Ms af Rosenborg are all considered to
be independent Board members as they: (i) have not been employees
of the Company; (ii) have not had material business relationships
with the Company; (iii) have not received performance-based
remuneration from the Company; (iv) do not have family ties with
any of the Company's advisers, Directors or senior employees; (v)
do not hold cross-directorships or have links with other Directors
through involvement on other companies; (vi) do not represent a
significant shareholder; and (vii) have not, with the exception of
Mr Myles, served on the Board for more than nine years. For further
information on tenure, refer to the section Board tenure and
diversity.
Refer to the Remuneration Report for details of the Director's
holdings in the Company's shares.
Board tenure and diversity
The Nomination Committee and the Management Board regularly
reviews the succession plans for the Company. As part of a
structured succession plan, each of the original Non-Executive
Directors planned to retire on a staggered basis and the Company is
recruiting additional Non-Executive Directors over a timeframe that
enables the knowledge and experience built up over the preceding
years to be both retained and enhanced. Three of the original four
Non-Executive Directors have now retired, with Mr Myles expected to
step down at the Company's 2022 shareholders' Annual General
Meeting in accordance with internal succession planning and the
managed rotation of the Supervisory Board members.
As at the date of the Company's next Annual General Meeting of
shareholders, Mr Myles will have served a term in excess of nine
years. The Supervisory Board acknowledge that, in accordance with
Provision 13 of the AIC Code, a tenure of more than nine years is
only one of a number of circumstances which could impair, or appear
to impair, a Non-Executive Director's independence. Nonetheless, Mr
Myles continues to demonstrate independent judgement and challenge
to the Management Board and the Company does not consider his
independence to be compromised or impaired. As the sole remaining
Non-Executive Director to have been appointed at the time of the
Company's IPO, Mr Myles holds significant legacy knowledge of the
business. The succession plan for Mr Myles to step down in 2022
will therefore ensure there is a suitable transition period for his
replacement to be recruited, inducted and become fully familiarised
with BBGI.
The Management and Supervisory Boards of BBGI take into full
consideration both the gender and ethnic diversity of their
composition. They fully acknowledge the Hampton-Alexander Review on
Women on Boards and the Parker Review on Ethnic Diversity on
Boards. Female representation on the Supervisory Board at the
reporting date / currently stood at two thirds, exceeding the aim
of the Hampton-Alexander Review of having at least one third
representation of women on the Boards of FTSE 350 companies by the
end of 2020. The Company prides itself on being one of the few FTSE
350 companies with both a female Chairman and Audit Committee
Chairman. To further its commitment to the goals of both the
Hampton Alexander Review and Parker Review, the Nomination
Committee oversaw the development of a separate Group Diversity and
Equality Policy which seeks to enhance BBGI's existing culture of
diversity, equality and inclusion.
The Company recognises that the aims set by Hampton-Alexander
extend down to the Management Board, as well as direct reports to
them. With a relatively low turnover and small number of staff
employed across the Group, the Management and Supervisory Boards
are mindful of the limited opportunities that exist to promote
greater diversity of gender and ethnicity to senior roles within
the Company. As at 31 December 2020, 14 different nationalities
were represented by the Group's employee base of 23 people.
In recruiting new Directors, the Nominations Committee actively
seeks greater diversity by gender, ethnicity, nationality and other
criteria, whilst remaining committed to selecting members on merit
with relevant and complementary skills to help the Company maximise
stakeholder value.
The Company will continue to make future appointments at all
levels on the basis of the full merits of the individual
candidates, and the strengths, skills and experience that they
would bring to the composition and balance of the Management and
Supervisory Boards or Company as a whole. The process of appointing
any new Directors is led by the Nomination Committee.
In accordance with Provision 24 of the AIC Code, the Company has
a formal policy on the tenure of the Supervisory Board Chairman.
The Company acknowledges the Supplementary Guidance under Provision
24 of the AIC Code with regard to a more flexible approach in
respect of chair tenure. In the case of the Chairman, the need for
regular refreshment and diversity must be balanced with the skills
and experience of the existing Board and Committee members, and the
benefit of retained historic knowledge of the Company's business,
all of which are taken into account when considering succession of
the role.
General Meetings
2020
The AGM was held on 30 April 2020. There were two further
shareholder meetings held during the year:
27 October 2020 - to approve the change of name of the Company
to BBGI Global Infrastructure S.A.
30 November 2020 - to approve the dematerialisation of the
issued registered shares.
The notices for all of these meetings (and associated documents)
as well as the results of the meetings can be found in the Investor
Relations section of the Company's website. Under AIC Code
Provision 4, no votes of 20 per cent or more were cast against the
Board recommendation for a resolution.
2021
The next Company AGM will be held on Friday 30 April 2021. Given
the extraordinary circumstances, and in accordance with the Law of
23 September 2020, as amended (the 'Covid-19 Law'), the meeting
will be organised without the physical presence of participants The
Notice of Meeting, proposed Resolutions and Explanatory Notes, and
the associated Proxy Form, will be circulated to shareholders to
meet the regulatory deadlines. These will also be made available on
the Company's website.
Substantial shareholdings
As at 31 December 2020, the Company had 664,691,283 shares in
issue. Pursuant to DTR5 of the FCA's Disclosure Guidance and
Transparency Rules, the Company had received notice of substantial
interests (5 per cent or more) in the total voting rights of the
Company as follows, in compliance with DTR 7.2.6R:
% of total
Name Held share capital(1)
M&G plc 59,502,903 9.42%
Schroders plc(2) 47,392,362 8.96%
Newton Investment Management Limited 39,947,825 8.46%
Investec Wealth & Investment Limited 31,569,569 5.01%
Smith & Williamson Holdings Limited 28,885,124 5.00%
---------- -----------------
(1) The percentage of voting rights detailed in the table above
was calculated at the time of the relevant disclosure made in
accordance with Rule 5 of the Disclosure Guidance and Transparency
Rules and the shareholders' percentage interests in the Company may
have changed since that date.
(2) The Company was notified on 5 January 2021 that Schroders
plc's holding stood at 56,340,964 shares, representing 8.48 per
cent of total issued share capital
REMUNERATION
Annual Statement from Remuneration Committee Chairman
Dear Shareholders,
I am pleased to present the Remuneration Committee (the
'Committee') report for the financial year ended 31 December 2020
on behalf of the Supervisory Board. This is the first annual report
of the Committee, which was formally constituted during the
year.
Composition of the Committee
The Committee consists of a minimum of two members. The
Committee and the Chairman thereof (who cannot be the Chairman of
the Supervisory Board) are appointed by the Supervisory Board.
Membership is confined to Independent Non-Executive Directors. Each
of the three Independent Non-Executive Directors is a member of the
Committee, which is chaired by me, and our biographies can be found
in the Corporate Governance section of this Annual Report.
Responsibilities
The Committee is responsible for establishing the general
principles of the policy for Directors' remuneration and for
setting remuneration for the Management Board, in accordance with
the Principles and Provisions of the Code, and the terms of the
Remuneration Policy.
This Remuneration report has been prepared in compliance with
the reporting obligations as outlined in the relevant Luxembourg
legislation. Furthermore, and in the interest of greater
transparency, the Company has taken the voluntary decision to
disclose additional remuneration detail, beyond its legal reporting
obligations.
The Company continues to comply with the provisions of the AIC
Code in respect of remuneration and is subject to the relevant
AIFMD regulations.
Business context and external environment
Against a backdrop of global economic uncertainty, the Company
has achieved another year of robust long-term, predictable and
stable income derived from our diversified global portfolio of
social infrastructure investments. During 2020, we closely
monitored the impact of Covid-19, prioritising the health and
safety of our employees and the continued provision of essential
infrastructure services to our public sector clients by maintaining
a high level of asset availability. We supported employees in
adapting to the new ways of working resulting from the pandemic and
remained committed to providing the responsible capital required to
build and maintain some of the critical social infrastructure
essential to the countries in which we operate.
A key theme during the year was one of preserving and where
possible enhancing the value of the Company's portfolio. It is
reassuring that despite the global disorder caused by the pandemic,
the Company did not experience any material Covid-19 related
operational or financial impacts. For further information refer to
the section of the Annual Report titled 'Our Response to
Covid-19'.
Our proven investment strategy of acquiring and managing
low-risk, availability-based assets has supported a 6.7 per cent
increase in NAV to GBP916.0 million and a 1.2 per cent increase in
NAV per share during 2020. In turn, the Company has met its
full-year dividend target of 7.18pps, an increase of 2.6 per cent
compared to the prior year.
Key activities during the year
During the year, the Committee, with the support of Deloitte LLP
as independent adviser, undertook a comprehensive review of the
existing remuneration framework for the Management Board
(comprising two Co-CEOs and the Chief Financial Officer) and other
executives. This included appropriate benchmarking with FTSE 250
listed companies of similar size, and other relevant sector
comparators to ensure that, on completion of the review,
remuneration is competitive and aligned with our business
strategy.
The last independent remuneration review of the remuneration of
the Co-CEOs was conducted in 2014. Given the significant growth of
the business since then and the market in which we compete for
senior executive talent, a number of changes were recommended to
more closely reflect the size and complexity of the organisation
and the scope of Management Board responsibilities. In addition,
changes were also made to improve governance through alignment of
interests and to bring remuneration structures in line with UK FTSE
250 best practice. A summary of the revised remuneration framework
is set out below:
-- Salary levels from 1 May 2020 will be C$842,162 and
EUR555,977 for the Co-CEOs, Duncan Ball and Frank Schramm
respectively, and EUR356,097 for the CFO.
-- Salaries remain in the lower quartile against companies in
the FTSE 250 market and are based on Sterling amounts converted at
the exchange rates on 1 May 2020.
-- Increase in the maximum opportunity under the annual
short-term incentive plan ('STIP') for the Co-CEOs from 125 per
cent to 150 per cent of salary from FY 2020. This increase has been
made alongside a reduction in opportunity for target performance -
from 100 per cent of salary to 75 per cent of salary (50 per cent
of maximum). The CFO will also participate in a maximum annual
bonus opportunity of 150 per cent of salary (target at 50 per cent
of maximum).
-- Introduction of bonus deferral under the STIP. From 2020,
one-third of any bonus earned will be used to purchase shares to be
held for a period of three years.
-- Increase in maximum opportunity under the long-term incentive
plan ('LTIP') from 150 per cent to 200 per cent of salary for the
Co-CEOs, subject to shareholder approval at the 2021 AGM. The CFO
will be eligible for an annual award of up to 150 per cent of
salary. Awards will be subject to stretching NAV Total Return
performance targets over a three-year period, and will be satisfied
entirely in shares.
-- Introduction of post-employment shareholding requirements, in
line with best practice in UK listed companies, with Management
Board members being required to hold 100 per cent of salary in
shares for a period of two years after leaving the Company.
Other key decisions during the year
Annual bonus (FY20) outcome
For the financial year ended 31 December 2020, the Co-CEOs and
CFO were eligible for a maximum bonus of 150 per cent of base
salary at 31 December 2020 respectively. The annual bonus was
assessed against a range of stretching financial and strategic
KPIs, as outlined further in this report. The Management Board
delivered excellent performance and progress against the targets
set, and annual bonus outcomes were 97 per cent of the maximum
opportunity in respect of the 2020 financial year. One-third of the
earned bonus will be used to purchase shares to be held for three
years.
LTIP outcome (2017 award)
In December 2017, LTIP awards were granted to the Co-CEOs and
CFO. These equated to an award value of 150 per cent of salary for
the Co-CEO and EUR100,000 for the CFO, and were based on stretching
TSR and NAV growth targets. The 2017 award will vest and be
released following the publication of the Company's 2020 audited
accounts. 2017 awards will vest at 81.8 per cent and 97.6 per cent
of maximum for the TSR and NAV elements respectively, reflecting
performance against targets in the three-year period to 31 December
2020.
No discretion was exercised in determining the incentive
outcomes described above.
Howard Myles
Remuneration Committee Chairman
24 March 2021
Remuneration at a glance
Key remuneration principles
BBGI's remuneration framework is based on the following key principles:
* Attract and retain highly qualified executives and
employees with a history of proven success.
* Align the interests of BBGI's Management Board and
employees with shareholders' interests, the execution
of the Company's investment policy and the fulfilment
of the Company's investment objectives.
* Support strategy and promote long-term sustainable
success.
* Establish performance goals that, if met, are
expected to be accretive to long-term shareholder
value.
* Link compensation to performance goals and provide
meaningful rewards for achieving these goals. This
includes performance on ESG and health & safety
factors.
BBGI's remuneration policy encourages sound and efficient management
of risks, and does not encourage excessive risk-taking. In considering
Management Board remuneration during 2020, the Committee had regard
to the principles of transparency, clarity, simplicity, risk management,
proportionality and alignment to culture.
Summary of Management Board remuneration framework
Element
-------------- ----------------------------------------------------------
Base salary Base salaries effective from 1 May 2020:
Co-CEOs: $C842,162 and EUR555,977[xxxiv] CFO: EUR356,097
-------------- ----------------------------------------------------------
Pension Co-CEOs and CFO: 15% of salary (cash allowance)
and benefits The Co-CEOs receive a monthly car allowance
-------------- ----------------------------------------------------------
Annual Co-CEOs and CFO: Maximum opportunity: 150% of salary.
Bonus (STIP) Target opportunity: 75% of salary (50% of maximum)
From 2020, one-third of bonus will be used to purchase
shares to be held for a period of three years.
STIP is based on a balance of financial, strategic
and ESG/H&S metrics with robust quantitative performance
requirements set for threshold, target and maximum
performance.
-------------- ----------------------------------------------------------
Long-term Co-CEOs: Performance measures established entitling
Incentive beneficiaries to 50% of salary at threshold, 100%
Plan (LTIP) of salary at target and 200% at maximum (Subject
to approval at the 2021 AGM).
CFO: Threshold: 50% of salary, Target: 75% of salary,
Maximum: 150% of salary.
Performance is measured over three years. For 2020,
awards will be subject to stretching Net Asset Value
(NAV) Total Return targets.
-------------- ----------------------------------------------------------
Shareholding All Management Board members are required to build
requirements and maintain a minimum holding of BBGI shares with
a value of 200% of salary[xxxv] :
Post-employment shareholding requirements : From
September 2020, Management Board members will be
required to hold 100% of salary in shares for a period
of two years after leaving the Company.
-------------- ----------------------------------------------------------
Annual report on remuneration
Single total figure table - Management Board
The following table sets out total remuneration for each member
of the Management Board in respect of the year ending 31 December
2020[xxxvi].
Duncan Ball Frank Schramm Michael Denny
In Pounds Sterling (Co-CEO) (Co-CEO) (CFO)
Salary 456,921 467,173 275,758
Benefits 13,799 13,874 -
Annual Bonus 713,994 720,917 461,739
Pension 73,456 74,168 47,504
LTIP(1) 565,204 593,770 106,526
Other - - -
Total fixed 544,176 555,215 323,262
Total variable 1,279,198 1,314,687 568,265
-------------------- ------------ -------------- --------------
Total remuneration 1,823,374 1,896,902 891,527
-------------------- ------------ -------------- --------------
(1) The 2017 LTIP vests by reference to performance in the
three-year period to 31 December 2020, and shares will be released
to Executive Directors following the AGM in May 2021. The value
included in the single figure for the year ended 31 December 2020
is based on an average share price over the last quarter of FY20
(GBP1.7317).
The figures in the table above are derived from the
following:
(a) Base salary The amount of salary earned in respect of the year,
shown in the reporting currency of the Group (Pound
Sterling). Both Mr Denny and Mr Schramm receive all
cash entitlements in Euro. Mr Ball receives all cash
entitlements in Canadian Dollars. The amounts shown
in sterling are converted using the average exchange
rate for the respective financial year. For the year
ended 31 December 2020, the relevant exchange rates
were GBP1 = C$0.581 and GBP1 = EUR0.889.
(b) Benefits The taxable value (gross) of benefits received in the
year. These are principally car allowance.
-------------- -------------------------------------------------------------
(c) Annual bonus The value of the bonus earned in respect of the financial
(STIP) year of which one third will be paid in shares and held
for a period of three years. A description of achievements
against the performance measures which applied for the
financial year is provided below.
-------------- -------------------------------------------------------------
(d) Pension The pension figure represents the cash value of any
pension contributions including any cash payments in
lieu of pension contributions made in the year.
-------------- -------------------------------------------------------------
(e) Long-term The value of LTIP shares vesting, calculated by the
incentives estimated number of shares that vest in respect of the
2017 LTIP award multiplied by the average share price
over the last quarter of the year ended 31 December
2020.
-------------- -------------------------------------------------------------
Additional disclosures in respect of the single figure table
Base salary
Each member of the Management Board receives an annual base
salary payable monthly in arrears.
Details of annual base salary for the Management Board are set
out below. Base salaries were reviewed in 2020 and revised salaries
were set with effect from 1 May 2020.
Base salary from
1 May 2020
-------------- -----------------
Duncan Ball GBP484k
Frank Schramm GBP484k
Michael Denny GBP315k
The combined annual base salary received by the members of the
Management Board during the year ended 31 December 2020 was
GBP1,199,852 (2019: GBP989,046).
Taxable benefits and pension-related benefits
The Co-CEOs received a monthly car allowance amounting to a
total amount of GBP27,763 for the year.
As shown in the Single Total Figure table, the Co-CEOs and the
CFO also received a supplementary annual payment to provide
pension, retirement or similar benefits equating to 15 per cent of
their annual base salary at 31 December 2020, in line with market
practice.
STIP - Annual Bonus in respect of year ended 31 December
2020
The following table summarises the STIP performance metrics and
achievements in respect of the financial year ended 31 December
2020. The Remuneration Committee is responsible for determining
both whether the relevant financial and non-financial performance
objectives have been satisfied and the level of award under the
STIP for the relevant year. The Management Board delivered
excellent performance and progress against the targets set at the
start of the year. No payment under the STIP is made if performance
is below the Threshold criteria.
The maximum STIP opportunity for the Co CEOs and the CFO is 150
per cent of base salary.
Performance assessed Threshold performance Target performance Maximum performance Outcome
- summary (33% vesting (50% vesting (100% vesting (% of
equating to equating to equating to maximum)
50% of base 75% of base 150% of base
salary) salary) salary)
Assessment based on key financial achievements
during the year including:
* Dividends paid and declared for the year
* Growth in NAV per share
* Portfolio performance KPIs
* Ongoing charge
Key financial metrics
(25% weighting) * Other key financial performance metrics 89%
======================================================================= =========
Assessment based on key disciplined
growth metrics including:
* The value, quality and pricing of projects acquired
Disciplined growth * The prospective investment pipeline at 31 December
(25% weighting) 2020 100%
======================================================================= =========
Assessment based on key metrics relating
to strategic projects and investments,
including portfolio control and also
Strategic projects organisational effectiveness through
and investments the assessment of capacity, risk management,
(25% weighting) overruns and delays. 100%
======================================================================= =========
Assessment of key compliance and regulatory
metrics including, AIFMD compliance,
Compliance and regulation regulator relationship, management
(10% weighting) of issues related to Brexit. 100%
======================================================================= =========
Assessment of key health and safety
policies and reporting, ESG performance
in accordance with BBGI's ESG Best
Practices Guidance where appropriate
ESG, Health and Safety or equivalent standards, ESG reporting
(15% weighting) standards. 100%
======================================================================= =========
For 2020, awards of 146 per cent of base salary were achieved by
the Co-CEOs and CFO. One-third of the earned bonus will be settled
in shares, with the net number of shares after settling the
associated tax liability to be held for a period of three-year
period. The remaining STIP awards will be paid in cash in May 2021.
During the year ended 31 December 2020, the total amount accrued in
respect of the 2020 STIP amounted to GBP1,896,650 (2019:
GBP1,089,522). Payments under the STIP are made in Canadian Dollars
and Euros.
Long-term incentive plan ('LTIP') - awards granted during the
financial year
LTIP awards of 200 per cent of base salary were granted to the
Co-CEOs in December 2020, subject to shareholder approval at the
2021 AGM. The CFO's maximum LTIP award is set at 150 per cent of
base salary and is within the approved limits under the current
LTIP Plan. Awards under the LTIP are subject to stretching Net
Asset Value ('NAV') Total Return targets over a three-year period,
as set out below. NAV Total Return reflects both capital returns
generated and dividends returned to shareholders.
NAV Total Return over three-year period
Threshold performance Target performance Maximum performance
(33% vesting equating (50% vesting equating (100% vesting equating
to 50% of base to 75% of base to 150% of base
salary) salary) salary)
-------------------------- ----------------------- ------------------------
Performance Dividend of 7.18p Dividend growth Dividend growth
metric per annum to 2023, of 2% per annum of 2% per annum
and to 2023; and to 2023; and
NAV per share maintained 1% per annum NAV 2% per annum NAV
from 31 December per share growth per share growth
2020 to 31 December to 31 December to 31 December
2023. 2023. 2023.
-------------------------- ----------------------- ------------------------
A key feature of these awards is that they will be settled
entirely by way of Company shares and not in cash. All LTIP awards,
which are to be settled by shares, fall under the scope of IFRS 2
'Share-Based Payments' and its specific requirements. The Company
continues to engage Ernst & Young Advisory ('EY') to carry out
the valuation of LTIP awards falling under the scope of IFRS 2.
Refer to Note 20 of the Consolidated Financial Statements for
further detail on share-based payments.
The 2020 award was issued in December 2020 subject to
shareholder approval at the 2021 AGM as referred to above. No
expense was accrued for this particular award during the reporting
period.
During the year ended 31 December 2020, the Company settled the
2016 award obligation by issuing the respective gross share
entitlement to each member of the Management Board. In total the
Company issued and allotted 690,274 shares by way of
settlement.
As at the date of this Report, there are no amounts set aside,
needing to be set aside or accrued by the Company to provide
pension, retirement or similar benefits to any member of the
Management Board.
Total basic and variable remuneration for the financial year
The total basic remuneration paid to all members of staff
(including the Management Board members) during the year ended 31
December 2020 was GBP2.65 million (2019: GBP2.45 million). The
total amount accrued for cash settled variable remuneration at 31
December 2020 was GBP1.64 million. The total variable remuneration
paid in cash in 2020 relating to the financial year ended 31
December 2019 was GBP1.53 million (2019: GBP1.43 million).
Payments made to former Directors and payments for loss of
office during the year
No payments for loss of office and no payments to any former
Management Board member were made in the year.
Single total figure table - Supervisory Board
The Supervisory Board members are the Company's independent
Non-Executive Directors and are paid a fixed quarterly fee. The
Remuneration Committee consider the Non-Executive Directors' fees
annually within the approved maximum aggregate remuneration cap as
approved by the Company's shareholders. No member of the
Supervisory Board is entitled to vote on his or her own individual
remuneration. Supervisory Board members are not entitled to any
other fees, pension payments, incentive plans, performance-related
payments or any other form of compensation; with the exception of
ex gratia fees that are considered in the event of an exceptional
and substantial increase in the members' workload.
Single total figure of remuneration - Supervisory Board
The table below outlines the fees paid in Sterling to each of
the Supervisory Board members in 2020 and 2019.
Colin Maltby(2) Sarah Whitney(3) Howard Myles(4) Jutta af Rosenborg
---------------------- ---------------------- ---------------------- ----------------------
2020 2019 2020 2019 2020 2019 2020 2019
Base GBP37,917 GBP65,000 GBP53,333 GBP30,000 GBP45,000 GBP45,000 GBP45,000 GBP45,000
Senior Non-Executive - - - - GBP5,000 GBP5,000 - -
Director
Committee Chair - - - - GBP2,500 - GBP5,000 GBP5,000
Other - additional - GBP5,000 GBP5,000 GBP5,000 GBP5,000 GBP5,000 GBP5,000 GBP5,000
fees(1)
Total GBP37,917 GBP70,000 GBP58,333 GBP35,000 GBP57,500 GBP55,000 GBP55,000 GBP55,000
--------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(1) In addition to the standard fees each of the sitting
directors was entitled to ex gratia fees in 2019 and 2020 in
relation to equity issues.
(2) Colin Maltby stood down from the Supervisory Board on 31
July 2020.
(3) Sarah Whitney was appointed as Chairman of the Board,
effective from 31 July 2020.
(4) Howard Myles was appointed as the Chairman of the
Remuneration Committee on 3 July 2020.
Supervisory Board fees
Details of Supervisory Board fees are set out below(.)
Fees from 1 January Fees from 1 January
2020 2019
------------------------------- -------------------- --------------------
Chairman GBP65,000 GBP65,000
Senior Independent Director(1) GBP55,000 GBP50,000
Audit Committee Chairman GBP50,000 GBP50,000
(1) An additional fee of GBP5,000 is paid to the Chairman of the
Remuneration Committee and is included in the above amount for
2020.
During the year, Deloitte LLP also carried out a review of the
Supervisory Board fee structure. Following this review, it was
decided to leave the fees unchanged for 2021. Supervisory Board
fees were last changed in 2017.
However, to accommodate the potential addition of a new
Non-Executive Director to the Supervisory Board, it is proposed
that an increase in the maximum aggregate remuneration cap from
GBP300,000 to GBP400,000 will be put, by way of resolution, to the
Company's shareholders at the 2021 AGM.
Share interests and statement of Directors' shareholdings
Total share interests as at 31 December 2020
The interests of the Directors and their connected persons in
the Company's ordinary shares as at 31 December 2020 were as set
out below.
Shares owned by Directors:
Number of shares At 01/01/2020 At 31/12/2020 (or, if
earlier, date of stepping
down from the Board)
-------------------- -------------- ---------------------------
Management Board
Duncan Ball 430,679 548,490
Frank Schramm 418,080 500,000
Michael Denny 137,569 262,015
Supervisory Board
Sarah Whitney 25,000 39,000
Howard Myles - -
Jutta af Rosenborg - -
Colin Maltby(1) 122,804 132,000
(1) Colin Maltby retired from the Supervisory Board on 31 July
2020.
Awards under share plans:
Granted Lapsed/
in the Vested in Forfeited
Award At 31/12/2019(1) year the year in the year At 31/12/2020
---------------- ------- ----------------- -------- ---------- ------------- --------------
Management
Board
Duncan Ball LTIP 1,499,863 574,165 (328,902) (49,742) 1,695,384
Frank Schramm LTIP 1,513,637 596,200 (301,160) (45,546) 1,763,131
Michael Denny LTIP 231,760 286,394 (60,212) - 457,942
(1) Reflects maximum potential number of shares under all the
awards granted, including the 2016 award which was settled in March
2020.
Shareholding guidelines:
The Committee has adopted a shareholding guideline for the
Management Board, which requires a shareholding equivalent to 200
per cent of salary (increased from 150 per cent of salary in 2020
for the Co-CEOs). Prior to adopting the shareholding guideline, the
CFO had no contractual shareholding requirement. Management Board
members have until December 2021 to meet the minimum shareholding
requirements. The respective Management Board members achievement
of this guideline at 31 December 2020 is summarised below:
Shares counting towards Percentage of
the guideline at 31 Required shareholding shareholding
Management Board December 2020 to achieve(1) requirement achieved
------------------ ------------------------ ---------------------- ----------------------
Duncan Ball 548,490 576,190 95.2%
Frank Schramm 500,000 576,190 86.8%
Michael Denny 262,015 375,000 69.9%
(1) Two times the revised base salary with effect from 1 May
2020 divided by the share price on date revised terms were agreed.
The minimum holding requirement is fixed for a period of three
years.
Post-employment shareholding requirements : From September 2020,
Management Board members will be required to hold shares to the
value of 100 per cent of salary for a period of two years after
leaving the Company.
Other information
Advisers
Deloitte LLP is retained to provide independent advice to the
Committee as required. Deloitte is a member of the Remuneration
Consultants Group and, as such, voluntarily operated under the Code
of Conduct in relation to executive remuneration consulting in the
UK. Deloitte LLP fees for providing remuneration advice to the
Committee were GBP34k for the year ended 31 December 2020. The
Committee assesses from time to time whether this appointment
remains appropriate or should be put out to tender and considers
the Remuneration Consultants Group Code of Conduct when considering
this.
Consideration by the Directors of matters relating to Directors'
remuneration
Committee responsibilities and composition
BBGI's Remuneration Committee comprises three members including
Howard Myles, Sarah Whitney and Jutta af Rosenborg. The Chairman of
the Remuneration Committee is Howard Myles.
The Committee is responsible for ensuring that the remuneration
of the Management supports the delivery of BBGI's strategic goals
without encouraging undesirable risk-taking behaviour. This is
achieved through the Committee approving all aspects of Management
Board remuneration, and monitoring pay arrangements for the wider
workforce.
There were four scheduled Committee meetings plus further ad-hoc
meetings during the year. During the year, all members of the
Committee were and remain independent, and represent a broad range
of backgrounds and experience to provide balance and diversity.
The following parties may attend Committee meetings by
invitation during the year in relation to its consideration of
matters relating to Directors' remuneration: Co-CEOs, CFO, Company
Secretary and Deloitte LLP. No Management Board member is involved
in deciding their own remuneration outcome and no attendee is
present when their own remuneration is being discussed.
Remuneration and AIFM law
In 2013, the European Securities and Markets Authority ('ESMA')
published its final guidelines on sound remuneration policies under
the AIFMD. These guidelines indicate that remuneration disclosures
may be made on a 'proportional' basis and acknowledge that the
application of proportionality may lead exceptionally to the
'disapplication' of some requirements, provided this is
reconcilable with the risk profile, risk appetite and strategy of
the AIFM and the AIFs it manages. According to the Guidelines, the
different risk profiles and characteristics among AIFMs justify a
proportionate implementation of the remuneration principles and,
where a company chooses to disapply requirements, it must be able
to explain the rationale to a competent authority. No such
requirements were disapplied by the Company during or in respect of
2020.
Employee remuneration
At BBGI, we provide development opportunities for our employees
to build their careers and enhance their skills. We encourage and
embrace employee diversity, equality and inclusion. We support and
invest in individuals to achieve their potential across the
business.
Each of the remuneration components are combined to ensure an
appropriate and balanced remuneration package that reflects the
business units, job grade within the Company and professional
activity, as well as market practice.
Statement of implementation of Directors' Remuneration Policy
for the financial year commencing 1 January 2021
Base salary and benefits
Management Board salaries were reviewed with effect from 1 May
2020 and are as follows:
Duncan Ball Co-CEO GBP484k
Frank Schramm Co-CEO GBP484k
Michael Denny CFO GBP315k
The next expected review will be in May 2021.
Annual bonus (STIP)
The maximum bonus opportunity for FY21 will remain at 150 per
cent of salary for the Co-CEOs and 150 per cent of salary for the
CFO. The target opportunity will be 50 per cent of maximum.
One-third of any bonus earned will be used to purchase shares to be
held for a period of three years.
The annual bonus will be subject to stretching financial and
strategic targets. The Committee considers the targets are
commercially sensitive and therefore they should remain
confidential. However, the Committee will disclose an overview of
the bonus performance measures and out-turns retrospectively in the
2021 Directors' Remuneration Report
LTIP
Subject to shareholder approval at the 2021 AGM, the current
intention of the Committee is to grant ongoing annual maximum LTIP
awards of 200 per cent of salary to the Co-CEOs and 150 per cent of
salary to the CFO, subject to stretching NAV Total Return
targets
Approval
This Report was approved by the Board on 24 March 2021 and
signed on its behalf by:
Howard Myles
Chairman of the Remuneration Committee
AUDIT COMMITTEE REPORT
I am pleased to present the Audit Committee's (the 'Committee')
report to shareholders on its activities in respect of the year
ended 31 December 2020. The Committee has been operating throughout
the year in line with its terms of reference.
Composition of the Committee
Each of the three Independent Non-Executive Directors is a
member of the Committee, which is chaired by me, and our
biographies can be found in the Corporate Governance section of
this Annual Report. The Supervisory Board considers that at least
one Committee member has recent and relevant financial experience
for the Committee to discharge its functions effectively. Due to
the size of the Supervisory Board, its Chairman, Sarah Whitney, is
also a member of the Committee.
Colin Maltby stepped down as a member of the Committee on 31
July 2020.
Responsibilities
The Committee's terms of reference include all matters indicated
by the Disclosure and Transparency Rule 7.1 and the AIC Code. The
terms of reference are reviewed at each formally scheduled meeting
by the Committee and any changes are then referred to the
Supervisory Board for approval. A copy of the terms of reference is
available on the Company website.
The Committee's main responsibilities are as follows:
-- Providing advice to the Supervisory Board on whether the
Group's Annual and Interim Reports and Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
-- Monitoring the integrity of the financial statements of the
Group and any formal announcements relating to the Group's
financial performance, and reviewing significant financial
reporting judgements contained therein.
-- Reviewing the Group's internal financial controls including
consistency of accounting policies and practices on a year-to-year
basis, and, unless expressly addressed by the Supervisory Board
itself, the Group's internal control and risk management systems,
including reviewing the Internal Auditors annual regulatory
report.
-- Monitoring and reviewing the effectiveness of the Company's
internal audit function, including the appointment and removal of
the third-party service provider and reviewing and approving the
tri-annual internal audit plan.
-- Making recommendations to the Supervisory Board for
resolutions to be put to shareholders for approval at the AGM on
the appointment, re-appointment and removal of the External
Auditor, and for approval of their associated remuneration and
terms of engagement.
-- Reviewing and monitoring the External Auditor's independence
and objectivity and the effectiveness of the audit process, taking
into consideration relevant UK and Luxembourg professional and
regulatory requirements.
-- Developing and implementing a policy on the engagement of the
External Auditor to supply non-audit services, considering relevant
guidance and legislation regarding the provision of non-audit
services by the external audit firm.
-- Reviewing the Company's procedures for detecting and
reporting any wrongdoing in financial reporting, fraud, bribery and
other matters, including arrangements for employees and contractors
to do so in confidence via BBGI's whistle-blower hotline.
-- Reviewing the Group's Annual and Interim Reports and Financial Statements.
2020 overview
The Committee met four times in the year to 31 December 2020 and
member attendance can be found within the Corporate Governance
section of this Annual Report, under the heading 'Committees of the
Supervisory Board'. At these meetings, the Committee considered,
inter alia:
-- The Committee's terms of reference.
-- The 2019 Annual and 2020 Interim Reports and Financial Statements.
-- The valuation reports in respect of the Company's investments.
-- The Reports of the External Auditor.
-- The External Auditor's terms of appointment and remuneration
(including overseeing the independence of the Auditor, particularly
as it relates to the provision of non-audit services).
-- Review and approval of the External Auditor's plan for the
following financial year and the key business risks relevant to the
audit.
-- The conducting of a transparent market tender process during
2021 in accordance with the mandatory external audit firm rotation
requirements per EU audit legislation as transposed into National
law.
-- The appropriateness of the Group's accounting policies.
-- New IFRS reporting standards, Amendments to IFRS 3:
'Definitions of Business' and Amendments to IAS 1 and IAS 8:
'Definition of Material', as well as the impact, if any, that new
IFRS reporting standards might have on Group financial
reporting.
-- The non-financial impact of Covid-19 and in particular the
effectiveness of the Company's BCP, the controls in place to
mitigate the increased cyber threat and the impact that remote
working, if any, was having on employees.
-- The Company's Risk Profile and Key Risk Indicators.
-- The Company's approach to managing the risks associated with
the Covid-19 pandemic and associated market communication.
-- The adequacy of the internal control systems and standards
including feedback on the revised controls implemented as part of
the 2019 18/698 gap analysis.
-- The 2019 Internal Auditor's Annual Report and the 2020-2022 triennial internal audit plan.
Covid-19
The emergence of the Covid-19 pandemic was inevitably a key area
of focus for the Audit Committee during the reporting period. While
the Committee continued to be briefed by members of the Management
Board on financial matters, a key focus of the briefings during the
year was in respect of non-financial matters. Management
periodically briefed the Committee on the effectiveness of the
Company's internal controls on mitigating the risks posed by the
pandemic when the vast majority of staff were working from home for
prolonged periods of time. The Committee was also briefed on
training programmes which were rolled out in order to further
mitigate specific risks either resulting from, or augmented by
Covid-19, such as the annual Cyber Awareness training and the Anti
Money Laundering training programmes.
The Committee is satisfied that staff appear to have adapted
particularly well to the remote working solution and that the
Company's BCP operated very effectively during the year with
minimum disruption to the effectiveness and implementation of the
internal control framework.
Significant risks considered
During the year under review, the Committee held discussions
with each of the Management Board, the External Auditor and the
Internal Auditor. Once again, the Committee concluded from these
discussions that the most significant risk of material misstatement
in the Company's financial statements continues to be the fair
valuation of the investment portfolio which makes up 97.8 per cent
of the Company's NAV at 31 December 2020. The valuation of the
Company's portfolio of assets requires significant judgement. The
Management Board carries out a fair market valuation of the
investments every six months at 30 June and 31 December
respectively, which is then reviewed by an independent third-party
valuer, after which it is presented to the Supervisory Board.
The External Auditor was invited to attend the Committee
meetings at which the Annual and Interim Financial Statements were
considered in order to present the conclusion of its work, which
included a review of the adequacy of the valuation. The External
Auditor, including the External Auditor's valuation specialist,
delivered a review of the Company's Annual and Interim Financial
Statements, paying particular attention to the portfolio valuation,
discount rates applied, and key assumptions used in deriving the
fair valuation of the investments. Furthermore, the External
Auditor briefed the Audit Committee on the outcome of their
controls testing and the audit procedures performed. This risk of
material misstatement is therefore carefully considered when the
Committee reviews the Company's annual and interim financial
statements.
The Management Board members were available during the Committee
review process to provide detailed explanations of the rationale
used for the valuation of investments and the assumptions
applied.
Subsequent to the valuation and ensuing reviews, the Committee
concluded that the valuation process of the Company's investments
for the year ended 31 December 2020 had been properly carried out
and the investments fairly valued.
Over the year the Committee considered the UK's exit from the
European Union and in particular the risk it could pose to the
Company's listing on the London Stock Exchange ('LSE'). The
Committee obtained sufficient comfort that appropriate plans were
in place to ensure continuity of listing post the end of the Brexit
transition period.
Non-Audit Services
The Committee considered the extent of non-audit services
('NAS') provided by the External Auditor. To the extent that the
NAS are not prohibited, the Committee will continue to review and,
where appropriate, approve NAS engagements performed by the
External Auditor on controlled subsidiaries. As a general principle
the Company will not look to retain the services of the External
Auditor for NAS unless there is a specific justification for doing
so, for example legacy knowledge whereby the appointment of another
adviser would potentially be sub optimal to the business. There
were no NAS provided by the External Auditor the to the Group
during 2020.
Audit Tender
In accordance with the European Audit Reform, KPMG would conduct
its last audit under its current ten-year tenure as external
auditor in respect of the financial year ending 31 December 2021.
In November 2020, the Company announced its intention to conduct an
audit tender with a view to selecting a firm to audit the Company's
consolidated IFRS financial statements starting for the fiscal
period beginning 1 January 2022.
The Tender was initiated in compliance with European Audit
Reform as adopted by the EU legislators in 2014 and with Luxembourg
law on 23 July 2016 on the audit profession ('Law ndeg6929') which
requires Public Interest Entities to put their statutory audit
engagement out to tender at least every ten years.
The Tender process is being led by the Audit Committee in
consultation with the Management Board.
The request for proposal for the tender was issued during the
last quarter of 2020 with the tender process to be conducted during
the first half of 2021.
Appointment of External Auditor
As stated above in the '2020 overview', the Committee annually
reviews the performance of KPMG Luxembourg, Société coopérative
('KPMG'), the Company's External Auditor. In doing so, we consider
a range of factors including the quality of service, specialist
expertise and the level of audit fee. Following that review, the
Committee remains satisfied with KPMG's effectiveness. There are no
contractual obligations restricting the choice of External Auditor.
The reappointment of the External Auditor is subject to shareholder
approval at the Annual General Meeting.
As a result of its work during the period, the Committee
concludes that it has acted in accordance with its terms of
reference and has ensured the independence and objectivity of the
External Auditor. The Committee has recommended to the Board to
re-appoint KPMG Luxembourg, Société coopérative as the Group's
External Auditor.
On behalf of the Audit Committee
Jutta af Rosenborg
Chairman of the Audit Committee
24 March 2021
VIABILITY
Viability statement
As part of their ongoing process of monitoring risk, and as
required by the AIC Code Principle N and Provision 36, the
Directors have considered the viability and prospects of the
Company for a period of the next five years.
Whilst the average remaining life of the portfolio of assets is
20.4 years, we continue to consider that five years is an
appropriate and acceptable length of time in which to consider the
risks of the Company continuing in existence. In making this
judgement, the Directors have considered detailed information
provided at Board meetings, including:
-- The Company's investment policy and the investment pipeline.
-- The long-term and contractual nature of the Company's investments.
-- Investment reviews.
-- The Company's risk profile and key risk indicators (including
the principal risks and uncertainties).
-- Current relevant financial and economic information.
-- Long-term economic assumptions.
-- Scenario testing.
-- Annual and semi-annual valuations.
This judgement forms part of the overall annual risk review
process carried out by the Company. Each of the principal risks and
uncertainties the Company faces, along with detailed descriptions
of the areas and factors of the risks as well as explanations of
the processes by which the Management and Supervisory Boards
monitor, review and assess them, can be found in the Risk section
of this Annual Report.
The Company has put in place a robust risk and internal controls
framework with the objectives of reducing the likelihood and impact
of poor decision-making, risk-taking above agreed levels, and human
error. More about this framework can be found within the
corresponding section under the heading Committees of the
Supervisory Board.
The Management and Supervisory Boards regularly review and
assess the principal risks facing the Company including and in
particular those that could threaten its business model, strategy,
solvency, liquidity and future performance. All risks identified
are assessed based on (i) probability or likelihood of occurrence,
(ii) impact and (iii) mitigation measures in place. They are then
scored and ranked in accordance with remaining residual risk and
monitored on an ongoing basis by the Management Board.
In addition to the risk management and the mitigation measures
in place, a valuation of each asset is carried out every six months
at each of the Company's financial half-year and year-ends (30 June
and 31 December, respectively). Such valuations are based on
long-term discounted future cash flows that are themselves
predominantly based on long-term contracts and other assumptions
which together form a key part of the overall viability assessment.
Once complete, each portfolio valuation is independently reviewed
by an independent third-party valuer and is also subject to
audit/review by the Company's External Auditor.
A key part of the viability assessment is analysing how the
Company's NAV will be impacted in stressed macro-economic
scenarios. This provides further insight into how the Company is
likely to perform when affected by variables and events that are
inherently outside of the control of the Management and Supervisory
Boards and its risk management framework. As part of this
assessment, the Management Board continues to consider the risk
posed by Covid-19 and the impact it could have on the Company and
the performance of its underlying investment portfolio. To date,
the Company has not experienced any material Covid-19 related
operational or financial impact.
A more detailed description of the valuations, assumptions and
stress-testing applied can be found in the Valuation section of the
Strategic Report.
Following the assessment, the Board has a reasonable expectation
that the Company will be able to continue in operation and meet all
of its liabilities as they fall due up to March 2026. This
assessment is subject to the following conditions: that the
availability of sufficient capital and market liquidity continues
to allow for the refinancing/repayment of any short-term recourse
RCF obligations which may be due; and that the Company's
investments are not materially affected by retrospective changes to
government policy, laws, regulations or other risks which are
currently not considered material or probable by the Company.
The Company is also subject to a biennial shareholder
continuation vote, the next of which is scheduled to take place at
the forthcoming AGM of shareholders scheduled to be held on 30
April 2021.
RISK
The Company's approach to internal controls is risk based. The
Company's Risk Management Function which is performed by the Risk
Manager facilitates the Management Board's responsibility to
effectively govern and manage the Company's approach to risk. The
Company does not operate in a risk-free environment. In an
uncertain environment, proactive action is required to address
risks in order to achieve the business and investment
objectives.
All material risks are identified, analysed, assessed, reported
and managed. Risks to the Company are identified as early as
possible so as to minimise their impact and are classified
according to the following risk types:
-- Economic and Market risk
-- Taxation risk
-- Political risk
-- Financial risk
-- Operational risk
-- Strategic risk
All identified risks are analysed during the risk reporting
process to identify the range of possible impacts on the Company. A
review is undertaken to determine which risks are the material
risks to pursue and respond to, and which risks require no further
attention, thus arriving at a material risk universe. The Risk
Management Function performs a risk assessment to determine the
likelihood that a predefined event will occur and the impact it
would have. This includes an estimation of the levels of risks
involved in a particular situation, their comparison against
benchmarks or standards, and determination of an acceptable level
of risk.
The Risk Profile is designed to assess material risks. For the
material risks identified, the Company's Risk Manager advises on
the key risk indicators to be included in the Risk Profile and
suggests appropriate quantitative and qualitative limits to
mitigate the potential impact of those risks, which are discussed
and approved by the Management Board before being formally included
in the Risk Profile.
Below is a list of material risks related to the reporting
period, as identified by the Risk Management Function, and
validated by the Management Board. The inherent risk has been
assessed and relevant mitigating factors been applied, to arrive at
a remaining residual risk, which has been deemed acceptable by the
Management Board. The risks to which the Company is exposed have
not materially changed since those set out in detail in the 28
August 2020 Interim Report.
Risk description Risk mitigation
ECONOMIC AND MARKET RISKS
Foreign Exchange A significant Currency-hedging arrangements
proportion in respect of the non-Sterling
of the Company's portfolio distributions denominated
underlying in Australian Dollars, Canadian
investments - 70 per Dollars, Norwegian Kroner and
cent US Dollars are in place for
of portfolio value at a period of four years, on a
31 rolling basis, in order to mitigate
December 2020 - are some of this risk.
denominated
in currencies other In addition to cash flow hedging,
than our strategy is also to hedge
Sterling. The Company a portion of the non-Sterling,
maintains non-Euro portfolio to reduce
its financial NAV sensitivity to approximately
statements, 3 per cent for a 10 per cent
prepares the valuation adverse FX movement.
and
pays distributions in Euro-denominated fund running
Sterling. costs provide a natural hedge
against the Euro-denominated
There is a risk that portfolio distributions.
fluctuations
in exchange rates Furthermore, the ability to
between draw on the RCF in the currency
Sterling and the of the underlying asset distributions
relevant provides an additional hedging
local currencies will possibility.
adversely
affect the value of BBGI has investments in five
the Company's currencies other than Sterling,
underlying so there is some natural diversification
investments, the amongst the underlying currencies.
distributions and the
ultimate Refer to the sensitivity analysis
rate of return in the Valuation section of
realised by the 2020 Annual Report in relation
investors. to foreign exchange rates.
----------------------- -----------------------------------------------------------------------
Interest and The Company's The Portfolio Companies have
deposit rates performance sought to hedge substantially
may be adversely all of their floating rate interest
affected liabilities against changes
by changes in interest in underlying interest rates
rates. with interest rate swaps.
BBGI has an exposure
to interest At the Group level, BBGI maintains
rates through deposits at low levels with
borrowings the Company only raising capital
under the RCF, debt at when there is a clear strategy
the for the deployment of proceeds.
Portfolio Company
level and Refer to the sensitivity analysis
cash deposits. in the 2020 Annual Report in
relation to deposit rates of
The Portfolio the Portfolio Companies.
Companies typically
have some cash
reserves and
deposits. From a
financial
modelling perspective,
an
assumption is usually
made
that the deposits can
be
placed at a forecast
rate
that varies depending
on
country and historical
long-term
averages. The effect
on investment
returns if deposit
rates
exceed or fall below
the
projections for this
long-term
rate is dependent on
the
amount of deposits.
----------------------- -----------------------------------------------------------------------
Inflation The Company's Portfolio Companies typically
performance mitigate this risk to some extent
may be adversely or by seeking to match the indexation
positively of the revenues to the indexation
affected by lower or of the operational cost.
higher
than expected The Company and the service
inflation and providers for the underlying
prolonged periods of Portfolio Companies continually
deflation monitor any potential or actual
could result in changes.
defaults
under loan Refer to the sensitivity analysis
arrangements in in the 2020 Annual Report in
Portfolio Companies. relation to inflation rates
of the Portfolio Companies.
The revenues and
expenditure
of Portfolio Companies
developed
under
availability-based
schemes are often
partly
or wholly subject to
indexation.
From a financial
modelling
perspective, an
assumption
is usually made that
inflation
will increase at an
assumed
rate (which may vary
depending
on country). The
effect on
investment returns if
inflation
exceeds or falls below
the
projections for this
rate
is typically dependent
on
the nature of the
underlying
asset earnings, the
extent
to which the Portfolio
Company's
costs are affected by
inflation
and any unitary charge
indexation
provisions agreed with
the
client on any
investment.
----------------------- -----------------------------------------------------------------------
Volatility The Company uses a BBGI uses a market-based evaluation
of discount discounted to determine a base discount
rates cash flow methodology rate for steady-state, operational
to availability-based investments
value its portfolio of and the Company uses its judgement
investments. in arriving at the appropriate
Higher discount rates discount rate. Adjustments may
may then be applied to the base
have a negative impact rate to reflect variances from
on the average benchmark when determining
valuation while lower the investment-specific adjustments.
rates Changes in market rates of interest
may have a positive (including government bond yields)
impact. may among other factors impact
the discount rate used to value
the Company's future projected
cash flows and thus its valuation.
The NAV is sensitivity tested
periodically for changes in
discount rates.
Refer to the sensitivity analysis
in the 2020 Annual Report in
relation to discount rates of
the Portfolio Companies.
----------------------- -----------------------------------------------------------------------
Covid-19 Since the outbreak of The Company's portfolio is 99.5
Covid-19 per cent operational and relies
in December 2019, it on availability-based revenues.
was At the time of producing this
declared a global Annual Report, there was no
pandemic evidence to suggest of material
by the World Health disruption to the Company and
Organization financial performance is not
(WHO). expected to be materially affected.
As a result, there has However, there is naturally
been significant uncertainty around
materially increased how the pandemic will evolve
market and therefore it is difficult
volatility and to foresee all consequences
macro-economic or disruptions potentially arising
uncertainty, prompting from the pandemic.
several
monetary and fiscal The timing of potential equity
policy issuances may be impacted, but
interventions to this will not likely restrict
manage what the Company's access to capital
has become a severe in the medium-term. The Group
global has a four-year GBP 180 million
economic shock. RCF, with a further GBP 70 million
Due to a period of incremental uncommitted accordion
likely tranche. As at 31 December 2020,
prolonged the Group had utilised GBP 1
macro-economic million of the facility.
uncertainty, the
ultimate Global travel restrictions imposed
long-term impact of in response to the pandemic
Covid-19 have meant that meetings of
remains unclear. the Company's Supervisory Board,
Management Board and the various
Near-term, the Committees have been held via
operations video conference. Notwithstanding
of Portfolio Companies this, the general consensus
could among the respective Board members
potentially be was that the technology deployed
impacted due ensured that all virtual meetings
to supply-chain held during 2020 continued to
disruptions. be effective. It is expected
that meetings will continue
to be held by way of video conferencing
for as long as such travel restrictions
remain in place.
As an active asset manager,
the Company continues to be
in close dialogue with its facilities
managers and operators. At the
time of producing this Report
there were no indications from
any contractor that they would
not be able to continue to deliver
contracted services to the respective
Portfolio Companies.
The Company does not foresee
any material impact on its own
workforce, given the already
decentralised nature of the
Management Board, asset management
teams and our internal infrastructure
(e.g. information technology),
as well as the Company's inherent
flexibility to work from remote
locations. The impact of global
travel restrictions does mean
that personal engagement with
the Company's public sector
clients will be more limited,
although this is mitigated through
remote communication.
----------------------- -----------------------------------------------------------------------
TAXATION RISKS
Changes to There is a continued Certain risks, such as changes
tax legislation, risk to corporation tax rates (including
treaties and that enacted changes those due to fiscal constraints),
rates in tax cannot be prevented or mitigated.
law, tax rates and BBGI values its Portfolio Companies
global based on enacted tax rates.
tax initiatives Management works closely with
including the Group's global tax advisers
the OECD's and are briefed periodically
recommendation on relevant tax developments.
in relation to Base
Erosion BBGI has a globally diversified
and Profit Shifting portfolio of assets, thereby
could reducing the tax concentration
have an adverse effect risk of any one country.
on
the Group's cash flows Refer to the sensitivity analysis
thereby in the 2020 Annual Report.
reducing the returns
to investors.
Furthermore, there is
a risk
that governments may
seek
to increase corporate
tax
rates in a response to
the
Covid-19 crisis.
----------------------- -----------------------------------------------------------------------
POLITICAL RISKS
Change in Different laws and The Management Board seeks regular
law/regulation regulations briefings from its legal and
apply within the tax advisers to stay abreast
countries of impending or possible changes
where the Company and in law.
the
Portfolio Companies Change in law provisions are
are located. included in some contracts,
There is a risk that thus providing further mitigation.
changes
in laws may have an BBGI has a globally diversified
adverse portfolio of assets, thereby
effect on the reducing the Group's exposure
performance to changes in any one country.
of the underlying
investment
that in turn will
affect
the cash flows derived
from
the investments and/or
the
valuation of the
investments.
----------------------- -----------------------------------------------------------------------
Brexit The Company is The UK Temporary Permissions
incorporated Regime
in Luxembourg and is As part of the UK's preparations
listed for Brexit, the UK Government
on the London Stock established a temporary permissions
Exchange, regime ('TPR') enabling European
raising questions Economic Area ('EEA') AIFs with
around EEA AIFMs passporting into the
the continuity of UK at the end of the transition
listing period to continue to access
and marketing in the the UK market in the same manner
UK. as before the transition period
ended for a limited period of
The UK's departure time.
from the
EU also poses a risk BBGI has made the necessary
to performance notification to the FCA (and
of the wider UK the CSSF) under the TPR of its
economy, intention and as a result has
which may adversely temporary permission to be marketed
impact in the UK.
the performance of
certain To continue marketing the Company
infrastructure asset in the UK after the end of the
classes. TPR, the Company must notify
under the UK national private
placement regime and will be
directed by the FCA to make
this notification within two
years from the end of the transition
period.
Regarding portfolio performance,
while the long-term economic
outcome of the UK's departure
from the EU will remain uncertain
for some time, BBGI's portfolio
cash flows are availability-based
and, unlike demand-based assets,
are not sensitive to the performance
of the wider economic environment.
----------------------- -----------------------------------------------------------------------
Voluntary There remains a risk We remain unconvinced by the
Termination that practicalities of terminating
Risk public sector clients the contracts given the complexities
of involved and the overall compensation
portfolio companies that would currently be required
choose to terminate these contracts.
to exercise their The Management Board believes
right to there are several mitigants
voluntarily terminate or deterrents to the risk of
the voluntary termination of contracts:
contracts. In case of
such * Most transactions were agreed at a time when interest
a voluntary rates were significantly higher than currently. As
termination, interest rates have fallen, swaps have become 'out of
the public sector is the money' for the Portfolio Companies, so any public
typically body wishing to terminate a contract in the current
contractually obliged interest environment would need to cover the cost of
to the swap breakage fee.
pay compensation
amounts
on termination to both * The Portfolio Company equity investors would
the typically also need to be (at least partially)
equity holders and the compensated, often requiring a compensation payment,
debt as well as the public sector being required to budget
providers and - for the ongoing provision of the service.
depending
on the circumstances -
to
other parties. While
the
provisions vary
between contracts,
they generally ensure
that
the investor is paid
either
market value for the
equity
interests or a value
to achieve
the originally
projected
IRR, and in these
cases,
where the compensation
amount
is materially less
than current
valuation levels, the
Company
would suffer a loss.
----------------------- -----------------------------------------------------------------------
FINANCIAL RISKS
Valuation The most significant The Company's portfolio value
risk is prepared semi-annually by
of material an experienced internal team,
misstatement overseen by the Management Board.
in the Company's The valuation is then reviewed
financial by an independent, third-party
statements continues valuer, and finally reviewed
to be and audited by the Company's
the fair valuation of auditor.
the
investment portfolio, All key assumptions used in
the the valuation process are subject
discount rates applied to sensitivity testing. However,
and sensitivity testing has its
the key assumptions limitations. It cannot provide
when a comprehensive assessment of
valuing these all of the risks and should
investments. be treated accordingly.
There is a risk that
errors
may be made in the
assumptions,
calculations or
methodology
used in a periodic
valuation
process.
Financial models,
either
for the Group or the
underlying
Portfolio Companies,
may
contain errors, or
incorrect
inputs, resulting in
inaccurate
projections of the
distributions.
These could adversely
impact
the valuation on
individual
investments and the
overall
assessment of the
Company's
financial position.
----------------------- -----------------------------------------------------------------------
Poor investment There is a risk that BBGI has developed a robust
selection errors asset acquisition due diligence
may be made in the process. Typical due diligence
assumptions, includes model audit or review,
calculations or legal, tax, technical, ESG,
methodology anti-money laundering and insurance
during the acquisition reviews.
due
diligence process. In
such
circumstances, the
figures
and/or the returns
generated
by the Portfolio
Company
may be lower to those
estimated
or projected.
----------------------- -----------------------------------------------------------------------
OPERATIONAL RISKS
Construction The budget, and In general, Portfolio Companies
defects therefore are able to submit claims against
the risk, of certain construction subcontractors
key when it comes to defects in
operational costs in the design, construction or
relation commissioning of project assets.
to construction This right to claim applies
defects lies for a pre-determined period
with the Portfolio of time following the completion
Company. of construction (the 'statutory
There is a risk that limitations period') and this
the may differ between jurisdictions.
budget to rectify If disputes were to arise, an
defects arbitration or court process
could prove to be may be used. At the point that
insufficient. the statutory limitations period
has ended, the risk of remediation
of construction defects which
are identified after this point
typically falls to the Portfolio
Company itself and is the risk
of the Portfolio Company. In
addition, there may be other
situations, for example where
a subcontractor becomes insolvent,
and may no longer be able to
fulfil its obligations to correct
these defects.
----------------------- -----------------------------------------------------------------------
Lifecycle During the life of an Of the 50 assets in the BBGI
risk/ Operational investment, portfolio, 17 Portfolio Companies
cost components of the retain the lifecycle obligations.
assets The remaining 33 assets have
(such as asphalt or this obligation passed down
concrete to the subcontractor.
in the case of roads
and The timing and costs of such
elevators, or roofs replacements or refurbishments
and air is forecast, modelled and provided
handling plants in the for by each Portfolio Company
case based upon technical advisers
of buildings) are to assist in such forecasting
likely of lifecycle timings, scope
to need to be replaced of work and costs.
or Refer to the sensitivity analysis
undergo a major in the 2020 Annual Report in
refurbishment. relation to lifecycle costs.
There is a risk that
the As part of the acquisition due
actual cost of diligence the budgeted cost
replacement are reviewed and assessed if
or refurbishment will they are adequate.
be In the case of insurance cost,
greater than the this risk of increasing premiums
forecast is on the majority of investments
cost, or that the taken by the public sector or
timing mitigated by a contractual premium
of the intervention risk-sharing mechanism.
may be
earlier than forecast.
There is the general
risk
that costs are higher
than
budgeted. This
typically
relates to insurance
cost
and management service
contracts.
----------------------- -----------------------------------------------------------------------
Subcontractor The risk of a For assets under construction,
performance subcontractor there are a number of mitigants
or credit service failure, poor and steps taken to manage this
risk (construction performance risk:
contractors, or subcontractor * In the case of a construction joint venture
facility managers, insolvency consisting of two or more counterparties, these are
operation which is sufficiently typically jointly and severally liable, meaning if
and maintenance serious one party fails, the other is obligated to take over
contractors) to cause a Portfolio the obligations.
Company
to terminate or to be
required * A contractor replacement analysis is performed as
by the client or part of the initial investment due diligence.
lenders
to terminate a
subcontract. * The construction subcontractors are typically
There may be a loss of required by lenders to provide a robust security
revenue package often consisting of letters of credit, Parent
during the time taken Company guarantees and performance bonding.
to
find a replacement
subcontractor.
Furthermore, the The latter two mitigants are
replacement in place for investments once
subcontractor may levy they become operational. Other
a mitigants during operations
surcharge to assume include:
the subcontract
or charge more to * Periodic benchmarking of defined facility services on
provide some investments.
the services.
* Diversified group of subcontractors with no
substantial concentration risk.
* Ongoing subcontractor monitoring.
----------------------- -----------------------------------------------------------------------
Cyber security A breach of data BBGI has taken a number of measures
attack security to reduce the risk of a cyber-attack,
could occur by some of which are outlined below.
accident or
as a result of an The Company has outsourced the
external hosting of its IT platform to
cyber-attack. A an industry specialist. In doing
cyber-attack so, BBGI obtains the benefit
could affect the IT of having access to IT security
systems experts, with the platform being
of the BBGI or a monitored by an advanced IT
Portfolio security system, something that
Company, causing theft might not be cost effective
or if the Company's IT infrastructure
loss of data, or was maintained onsite.
damage to
the infrastructure's BBGI engages an external expert
control to carry out an annual intrusion
systems and equipment. test on the IT platform in order
to identify and patch any vulnerabilities
The threat of that might be identified.
cyber-attack
has meant that Business continuity tests are
businesses performed regularly, disaster
can no longer afford recovery tests are performed
to be annually, and all staff undergo
reactive. A cyber security training.
cyber-attack
could not only affect Portfolio Companies typically
BBGI's operate through a subcontracted
reputation but could management structure, and tend
also not to have their own IT systems
affect the Group and rely on the management service
legally, provider. Data is normally backed
financially and up and the risk, should data
operationally. be corrupted or stolen, is considered
low.
The risk of cybercrime
has
increased during the
pandemic
with cyber criminals
looking
to exploit the
vulnerabilities
caused by many people
working
from home. The Company
therefore
needs to remain
vigilant
to this risk.
----------------------- -----------------------------------------------------------------------
STRATEGIC
RISKS
----------------------- -----------------------------------------------------------------------
Premium/discount The risk of share To assist the Company in managing
to NAV price volatility any share price premiums or
or trading at a discounts to NAV, the Company
discount has the ability to make market
to NAV leading to purchases of up to 14.99 per
shareholder cent per annum of the ordinary
dissatisfaction. shares in issue.
In addition, a continuation
vote is offered to shareholders
every two years, the next of
which will be proposed at the
Company's AGM on 30 April 2021.
Furthermore, the Management
Board meets regularly with shareholders
and receives regular briefings
from the Company's brokers to
manage investor relations.
----------------------- -----------------------------------------------------------------------
Access to There is a risk that a The need to issue new equity
capital disruption capital primarily relates to
to the equity markets the repayment of drawings under
could the RCF in connection with the
lead to an inability acquisition of new investments.
to raise
new capital. Such a The Board and its Corporate
disruption Brokers regularly assess market
could limit the sentiment.
Company's
ability to grow and Furthermore, the Board can consider
its ability refinancing the RCF to extend
to repay debt drawn its maturity and reduce the
under near-term requirement to repay
its RCF. To the extent drawings, though it is not the
that Company's intention to be drawn
the Company does not for substantial periods of time.
have
cash reserves pending The Company's RCF expires in
investment, January 2022.
the Company expects to
bridge
finance further
investments
by way of the credit
facility.
Although the Company
has
had a credit facility
in
place since July 2012
(which
has been subsequently
refinanced),
there can be no
guarantee
that this will always
be
the case or that it
will
be able to issue
further
shares in the market.
----------------------- -----------------------------------------------------------------------
Climate risk Climate risks can Events arising from adverse
affect climate change are typically
BBGI in a multitude of mitigated through insurance
ways. coverage, pass-down to subcontractors,
The political and public sector client relief
uncertainty events. However, in severe cases
inherent in regulation adverse climate change events
may could lead to early termination
lead to a wide range of concession agreements and
of potential compensation payments which
outcomes. Direct are lower than the valuation
physical of an investment.
climate impacts may be
a BBGI has established an ESG
significant risk for Committee which provides oversight
BBGI to this risk and has begun implementing
in the medium to a climate-resilient infrastructure
long-term. screening tool which will assess
Climate-change-related the risks and opportunities
threats relating to climate change associated
such as extreme with each Portfolio Company.
weather events, BBGI engages with each infrastructure
lost productivity and investment to influence the
effects increased disclosures of climate-related
on physical risks to enable the Company
infrastructure to assess climate-related risks
from longer-term across the investment portfolio.
shifts in
climate patterns.
Failure
of the Company to
transition
to a low carbon
economy may
also alienate certain
investors
and reduce access to
capital.
----------------------- -----------------------------------------------------------------------
ADMINISTRATION
Incorporation and administration
The ordinary shares were created in accordance with Luxembourg
law and conform to the regulations made thereunder, have all
necessary statutory and other consents, and are duly authorised
according to, and operate in conformity with, the Articles.
Articles of Association
The Articles were originally approved and formalised before a
Luxembourg notary public on 24 November 2011. The Articles are
filed with the Luxembourg Registre de Commerce et des Sociétés and
are published in the Mémorial. The Articles may be amended in
accordance with the rules set out in article 32 of the
Articles.
A copy of the current Articles, which were most recently amended
by shareholder approval on 30 November 2020, is available for
inspection on the Company's website
https://www.bb-gi.com/investors/policies/articles-of-association/
.
MANAGEMENT BOARD RESPONSIBILITIES STATEMENT
The Management Board of the Company is responsible for ensuring
proper preparation of the Company's Annual Report and financial
statements for each financial period in accordance with applicable
laws and regulations, which require it to:
i) Give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group as of and at the
end of the financial period, in accordance with International
Financial Reporting Standards as adopted by the European Union and
the Listing Rules.
ii) Give a true and fair view of the development and performance
of the business and the position of the Group.
iii) Give a true and fair description of the principal risks and
uncertainties the Group may encounter and put in place an
appropriate control framework designed to meet the Group's
particular needs and the risks to which it is exposed.
In addition, the Management Board is responsible for ensuring
that the Company complies with applicable company law and other UK
or Luxembourg applicable laws and regulations.
In preparing such Financial Statements, the Management Board is
responsible for:
-- Selecting suitable accounting policies and applying them consistently.
-- Making judgements and estimates that are reasonable and prudent.
-- Stating whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
-- Preparing the financial statements on a going concern basis,
unless it is inappropriate to presume that the Group will continue
in business.
-- Maintaining proper accounting records which disclose with
reasonable accuracy the financial position of the Group and enable
it to ensure that the financial statements comply with all relevant
regulations.
-- Safeguarding the assets of the Group and taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Management Board Responsibilities Statement
We confirm that to the best of our knowledge:
-- The financial statements have been prepared in accordance
with the applicable set of accounting standards and give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and Group included in the consolidation as a
whole.
-- The Chairman's Statement and the Report of the Management
Board ('Strategic Report') include a fair review of the development
and performance of the business and the position of the Company and
Group included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that it
faces.
Luxembourg, 24 March 2021
Duncan Ball
Co-CEO
Frank Schramm
Co-CEO
Michael Denny
CFO
AUDIT OPINION
To the Shareholders of
BBGI Global Infrastructure S.A. (formerly BBGI SICAV S.A.)
6E, route de Trèves
L-2633 Senningerberg
Luxembourg
REPORT OF THE REVISEUR D'ENTREPRISES AGREE
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of BBGI
Global Infrastructure S.A. (formerly BBGI SICAV S.A.) and its
subsidiaries (the "Group"), which comprise the consolidated
statement of financial position as at 31 December 2020, and the
consolidated income statement, consolidated statement of other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2020 and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards ("IFRSs") as adopted by European Union.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July
2016 on the audit profession ("Law of 23 July 2016") and with
International Standards on Auditing ("ISAs") as adopted for
Luxembourg by the "Commission de Surveillance du Secteur Financier"
("CSSF"). Our responsibilities under the Law of 23 July 2016 and
ISAs are further described in the << Responsibilities of
"réviseur d'entreprises agréé" for the audit of the consolidated
financial statements >> section of our report. We are also
independent of the Group in accordance with the International
Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants ("IESBA Code") as adopted for Luxembourg
by the CSSF together with the ethical requirements that are
relevant to our audit of the consolidated financial statements, and
have fulfilled our other ethical responsibilities under those
ethical requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current year. These
matters were addressed in the context of the audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Investments at fair value through profit or loss
a) Why the matter was considered to be one of most significance
in our audit of the consolidated financial statements of the
current period
We refer to the accounting policy "Investments at FVPL" and to
Note 9 in the consolidated financial statements. Over 97% of the
Group's assets are infrastructure assets that have been developed
predominantly under the PPP/PFI or similar procurement models
("Infrastructure Investments"), held at fair value through profit
or loss. The valuation of infrastructure investments is a
significant judgement area resulting from a number of assumptions
in the financial models. The valuation is inherently subjective due
to the absence of a liquid market for these investments. The
complexity of this methodology as well as assumptions taken in the
financial models mean that there is a risk that the fair value of
these investments may not be appropriate. The key assumptions used
by the Management Board are among others in respect of discount
rates and components of budgets used being part of long term
forecast cash flows. In addition, the Management Board also used
assumptions such as inflation, deposit interest and tax rates that
have an impact on the long term forecast cash flows.
The significance of the estimates and judgements involved,
coupled with the fact that a small percentage difference in the key
assumptions in individual infrastructure investment valuations,
when aggregated, could result in a material misstatement on the
consolidated income statement and consolidated statement of
financial position, warrants specific audit focus in this area.
b) How the matter was addressed in our audit
Our audit procedures over the valuation of investments at fair
value through profit or loss included, but were not limited to the
following:
- We tested the design, implementation and effectiveness of the
controls around the determination and monitoring of the discounted
cash flows and the determination and monitoring of related key
macroeconomic assumptions;
- We used our own valuation specialists and their market
knowledge to perform the following procedures:
Ø We considered and commented the approach and methodology
documented by Management Board used in BBGI's Valuation Report
against International Private Equity and Venture Capital Valuation
Guidelines;
Ø We obtained market benchmarks for discount rates from public
and private sources. We considered the discount rates applied in
BBGI's Valuation Report against market benchmarks in the light of
market, project, sector and country issues;
Ø We performed research on key assumptions and commented and
compared those against the assumptions applied in BBGI's Valuation
Report;
Ø We reviewed the results of the sensitivity analysis on key
assumptions taken by Management;
Ø We challenged and determined the appropriateness of the
Management Board's assumptions used for the valuation of a sample
of Infrastructure Investments applying following procedures:
-- We agreed the underlying shareholder cash flows inputs (such
as dividends, subordinated debt interest and principal repayment
and director's fees) from the underlying project model to the
Group's valuation model;
-- We considered if the methodology for assessing fair value has
been applied consistently across the assets;
-- We read the latest board minutes, board packages and other
supporting documents and information in respect of the sampled
investments and raised Q&A comments to challenge the inputs in
the valuation;
- We reviewed the Valuation Report prepared by the Management
Board and assessed whether the valuation inputs and results are
consistent with our other audit procedures performed as part of our
audit of the consolidated financial statements;
- We obtained and reviewed the valuation review opinion issued
by the independent third party valuation expert engaged by the
Group, in connection with the appropriateness of the portfolio
value prepared by the Management Board; and
- We tested the design, implementation and effectiveness of the
management review controls over the valuation process.
Other information
The Management Board is responsible for the other information.
The other information comprises the information stated in the
annual report but does not include the consolidated financial
statements and our report of "réviseur d'entreprises agréé"
thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report this fact. We have nothing
to report in this regard.
Responsibilities of the Management Board for the consolidated
financial statements
The Management Board is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with IFRSs, and for such internal control as the Management Board
determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the
Management Board is responsible for assessing the Group's ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Management Board either intends to liquidate
the Group or to cease operations, or has no realistic alternative
but to do so.
Responsibilities of the réviseur d'entreprises agréé for the
audit of the consolidated financial statements
The objectives of our audit are to obtain reasonable assurance
about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and
to issue a report of "réviseur d'entreprises agréé" that includes
our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with the
Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the
CSSF will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the Law of 23 July 2016
and with ISAs as adopted for Luxembourg by the CSSF, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
- Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the Management Board.
- Conclude on the appropriateness of the Management Board'
use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Group's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are
required to draw attention in our report of the "réviseur
d'entreprises agréé" to the related disclosures
in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
report of the "réviseur d'entreprises agréé".
However, future events or conditions may cause the Group
to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent
the underlying transactions and events in a manner that achieves
fair presentation.
- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities
within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our report unless law or regulation
precludes public disclosure about the matter.
Report on other legal and regulatory requirements
We have been appointed as "réviseur d'entreprises agréé" by the
General Meeting of the Shareholders on and the duration of our
uninterrupted engagement, including previous renewals and
reappointments, is ten years.
The annual report is consistent with the consolidated financial
statements and has been prepared in accordance with applicable
legal requirements.
Luxembourg, 24 March 2021 KPMG Luxembourg
Société coopérative
Cabinet de révision
agréé
Joseph de Souza
Partner
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER
2020
In thousands of Pounds Sterling Note 2020 2019
================================================================= ===== ========= =========
Continuing operations
Income from investments at fair value through profit
or loss 9 63,337 69,772
Other operating income 186 -
================================================================= ===== ========= =========
Operating income 63,523 69,772
================================================================= ===== ========= =========
Administrative expenses 6 (9,607) (8,488)
Other operating expenses 7 (7,268) (7,331)
================================================================= ===== ========= =========
Operating expenses (16,875) (15,819)
================================================================= ===== ========= =========
Results from operating activities 46,648 53,953
Net finance result 8 (1,647) (2,029)
Net gain(loss) on balance sheet hedging 18 (642) 2,060
================================================================= ===== ========= =========
Profit before tax 44,359 53,984
Tax expense - net 11 (2,649) (3,000)
================================================================= ===== ========= =========
Profit from continuing operations 41,710 50,984
================================================================= ===== ========= =========
Profit from continuing operations attributable to
the owners of the
Company 41,710 50,984
================================================================= ===== ========= =========
Earnings per share
Basic earnings per share (pence) 14 6.58 8.43
Diluted earnings per share (pence) 14 6.57 8.41
================================================================= ===== ========= =========
The accompanying notes form an integral part of the consolidated
financial statements
In thousands of Pounds Sterling Note 2020 2019
====================================================== ====== ======= =======
Profit from continuing operations attributable to
the owners
of the Company 41,710 50,984
Other comprehensive income for the year - -
====================================================== ====== ======= =======
Total comprehensive income for the year attributable
to the
owners of the Company 41,710 50,984
============================================================== ======= =======
The accompanying notes form an integral part of the consolidated
financial statements
In thousands of Pounds Sterling Note 2020 2019
================================================== ===== ======== ========
Assets
Property plant and equipment 58 61
Investments at fair value through profit or loss 9 895,674 845,967
Deferred tax assets 11 225 -
Derivative financial assets 18 12 605
================================================== ===== ======== ========
Non-current assets 895,969 846,633
================================================== ===== ======== ========
Trade and other receivables 19 1,631 3,876
Other current assets 12 2,164 594
Derivative financial assets 18 247 756
Cash and cash equivalents 10 20,532 34,778
================================================== ===== ======== ========
Current assets 24,574 40,004
================================================== ===== ======== ========
Total assets 920,543 886,637
================================================== ===== ======== ========
Equity
Share capital 13 770,942 714,280
Additional paid-in capital 20 1,517 965
Translation reserves 13 (597) (597)
Retained earnings 143,978 146,984
================================================== ===== ======== ========
Equity attributable to the owners of the Company 915,840 861,632
================================================== ===== ======== ========
Liabilities
Loans and borrowings 15 - 20,318
Derivative financial liabilities 18 218 -
Non-current liabilities 218 20,318
================================================== ===== ======== ========
Loans and borrowings 15 177 116
Trade payables 73 353
Accruals and other payables 16 2,643 2,515
Derivative financial liabilities 18 25 -
Tax liabilities 11 1,567 1,703
================================================== ===== ======== ========
Current liabilities 4,485 4,687
Total liabilities 4,703 25,005
================================================== ===== ======== ========
Total equity and liabilities 920,543 886,637
================================================== ===== ======== ========
Net asset value attributable to the owners of
the Company 13 915,840 861,632
Net asset value per ordinary share (pence) 13 137.78 136.72
The accompanying notes form an integral part of the consolidated
financial statements
Additional
Share paid-in Translation Retained Total
In thousands of Pounds Sterling Notes capital capital reserve earnings equity
=================================== ====== ======== =========== ============ ========= =========
As at 1 January 2019 639,160 837 (597) 137,620 777,020
Total comprehensive income
for
the year ended 31 December
2019
Profit from continuing operations
attributable to the owners
of the Company - - - 50,984 50,984
=================================== ====== ======== =========== ============ ========= =========
Total comprehensive income
for year - - - 50,984 50,984
=================================== ====== ======== =========== ============ ========= =========
Transactions with the owners
of the
Company, recognised
directly in equity
Issuance of shares from
placing of
ordinary shares - net of
issue cost 13 73,915 - - - 73,915
Scrip dividends 13 772 - - (772) -
Cash dividends 13 - - - (40,848) (40,848)
Equity settlement of share
based
compensation 13,20 433 (433) - - -
Share-based payment 20 - 561 - - 561
=================================== ====== ======== =========== ============ ========= =========
Balance as at 31 December
2019 714,280 965 (597) 146,984 861,632
=================================== ====== ======== =========== ============ ========= =========
The accompanying notes form an integral part of the consolidated
financial statements
Additional
Share paid-in Translation Retained Total
In thousands of Pounds Sterling Notes capital capital reserve earnings equity
=================================== ====== ======== =========== ============ ========= =========
Balance as at 1 January
2020 714,280 965 (597) 146,984 861,632
Total comprehensive income
for
the year ended 31 December
2020
Profit from continuing operations
attributable to the owners
of the Company - - - 41,710 41,710
=================================== ====== ======== =========== ============ ========= =========
Total comprehensive income
for year - - - 41,710 41,710
=================================== ====== ======== =========== ============ ========= =========
Transactions with the owners
of the
Company, recognised
directly in equity
Issuance of shares from
placing of
ordinary shares - net of
issue cost 13 54,169 - - - 54,169
Scrip dividends 13 2,068 - - (2,068) -
Cash dividends 13 - - - (42,648) (42,648)
Equity settlement of share
based
compensation 13,20 425 (425) - - -
Share-based payment 20 - 977 - - 977
=================================== ====== ======== =========== ============ ========= =========
Balance as at 31 December
2020 770,942 1,517 (597) 143,978 915,840
=================================== ====== ======== =========== ============ ========= =========
The accompanying notes form an integral part of the consolidated
financial statements
In thousands of Pounds Sterling Notes 2020 2019
====================================================== ====== ========= =========
Operating activities
Profit from continuing operations 41,710 50,984
Adjustments for:
Depreciation expense 6 27 21
Net finance results 8 1,647 2,029
Income from investments at fair value through
profit or loss 9 (63,337) (69,772)
Loss on derivative financial instruments - net 18 1,495 930
Foreign currency exchange loss - net 7 4,767 3,250
Share-based compensation 20 977 561
Tax expense - net 11 2,649 3,000
====================================================== ====== ========= =========
(10,065) (8,997)
Working capital adjustments:
Trade and other receivables (1,094) 8
Other current assets (2,822) 75
Trade and other payables (168) (126)
====================================================== ====== ========= =========
Cash used in operating activities (14,149) (9,040)
Interest paid and other borrowing costs (1,219) (721)
Interest received 10 62
Realised gain (loss) on derivative financial
instruments - net 18 (151) 1,164
Taxes paid (3,010) (2,379)
====================================================== ====== ========= =========
Net cash flows used in operating activities (18,519) (10,914)
====================================================== ====== ========= =========
Investing activities
Acquisition of/additional investments at fair
value through profit
or loss 9 (59,185) (62,900)
Distributions received from investments at fair
value through
profit or loss 9 72,815 63,988
Acquisition of property, plant and equipment (24) (49)
====================================================== ====== ========= =========
Net cash flows from investing activities 13,606 1,039
====================================================== ====== ========= =========
Financing activities
Issuance of share capital through placing (net
of issuance cost) 13 54,169 73,915
Dividends paid 13 (42,648) (40,848)
Repayment of loans and borrowings 15 (62,000) (80,057)
Proceeds from issuance of loans and borrowings 15 41,000 81,780
Debt issue cost (27) (934)
====================================================== ====== ========= =========
Net cash flows from/(used in) financing activities (9,506) 33,856
====================================================== ====== ========= =========
Net increase (decrease) in cash and cash equivalents (14,419) 23,981
Impact of foreign exchange gain on cash and cash
equivalents 173 353
Cash and cash equivalents at 1 January 34,778 10,444
====================================================== ====== ========= =========
Cash and cash equivalents at 31 December 10 20,532 34,778
====================================================== ====== ========= =========
The accompanying notes form an integral part of the consolidated
financial statements
1. Corporate information
BBGI Global Infrastructure S.A., formerly BBGI SICAV
S.A.,('BBGI', or the 'Company' or, together with its consolidated
subsidiaries, the 'Group') is an investment company incorporated in
Luxembourg in the form of a public limited liability company
(société anonyme) with variable share capital (société
d'investissement à capital variable, or 'SICAV') and regulated by
the Commission de Surveillance du Secteur Financier ('CSSF') under
Part II of the amended Luxembourg law of 17 December 2010 on
undertakings for collective investments with an indefinite life.
The Company qualifies as an alternative investment fund within the
meaning of Article 1 (39) of the amended law of 12 July 2013 on
alternative investment fund managers ('2013 Law') implementing
Directive 2011/61/EU of the European Parliament and of the Council
of 8 June 2011 on Alternative Investment Fund Managers and amending
Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No
1060/2009 and (EU) No 1095/2010 and is authorised as an internal
alternative investment fund manager in accordance with Chapter 2 of
the 2013 Law. The Company was admitted to the official list of the
UK Listing Authority (premium listing, closed-ended investment
company) and to trading on the
main market of the London Stock Exchange on 21 December
2011.
As of 1 January 2021, the main market of the London Stock
Exchange is not considered as an EU regulated market (as defined by
the MiFID II). As a result, Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004, on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market, and amending Directive 2001/34/EC (the
Transparency Directive) as implemented in the Luxembourg law by the
act dated 11 January 2008 on transparency requirements for issuers
(the Transparency Act 2008), among other texts, do not apply to the
Company.
The Company's registered office is EBBC, 6E, route de Trèves ,
L-2633 Senningerberg , Luxembourg. On 27 October 2020, the Company
changed its registered name from BBGI SICAV S.A. to BBGI Global
Infrastructure S.A.
The Company is a closed-ended investment company that invests
principally in a diversified portfolio of Public Private
Partnership ('PPP')/Private Finance Initiative ('PFI')
infrastructure or similar style assets. At 31 December 2020, the
Company has one investment that is under construction.
As at 31 December 2020, the Group employed 23 staff (31 December
2019: 21 staff) .
Reporting period
The Company's reporting period runs from 1 January to 31
December each year. The Company's consolidated statement of
financial position, consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows include
comparative figures as at 31 December 2019.
The amounts presented as 'non-current' in the consolidated
statement of financial position are those expected to be recovered
or settled after more than one year. The amounts presented as
'current' are those expected to be recovered or settled within one
year.
These consolidated financial statements were approved by the
Management Board on 24 March 2021.
2. Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union ('EU').
The Group follows, to the fullest extent possible, the
provisions of the Standard of Recommended Practices issued by the
Association of Investment Companies ('AIC SORP'). If a provision of
the AIC SORP is in direct conflict with IFRS as adopted by the EU,
the standards of the latter shall prevail.
The consolidated financial statements have been prepared on a
historical cost basis, except for investments at fair value through
profit or loss ('Investments at FVPL') and derivative financial
instruments that have been measured at fair value.
Changes in accounting policy
New and amended standards applicable to the Group are as
follows:
- Amendments to IFRS 3: Definition of a Business (effective 1
January 2020)
The amendment to IFRS 3 clarifies that to be considered a
business, an integrated set of activities and assets must include,
at a minimum, an input and a substantive process that together
significantly contribute to the ability to create output.
Furthermore, it clarified that a business can exist without
including all of the inputs and processes needed to create outputs.
These amendments had no significant impact on the consolidated
financial statements of the Group but may impact future periods
should the Group enter into any business combinations.
- Amendments to IAS 1 and IAS 8: Definition of Material
(effective 1 January 2020)
The amendments provide a new definition of material that states,
'information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the
primary users of general-purpose financial statements make on the
basis of those financial statements, which provide financial
information about a specific reporting entity'.
The amendments clarify that materiality will depend on the
nature or magnitude of information, either individually or in
combination with other information, in the context of the financial
statements.
A misstatement of information is material if it could reasonably
be expected to influence decisions made by the primary users. These
amendments had no significant impact on the consolidated financial
statements.
- Conceptual Framework for Financial Reporting (effective 1
January 2020)
The Conceptual Framework is not a standard, and none of the
concepts contained therein override the concepts or requirements in
any standard. The purpose of the Conceptual Framework is to assist
the IASB in developing standards, to help preparers develop
consistent accounting policies where there is no applicable
standard in place and to assist all parties to understand and
interpret the standards. This will affect those entities which
developed their accounting policies based on the Conceptual
Framework. The revised Conceptual Framework includes some new
concepts, updated definitions and recognition criteria for assets
and liabilities and clarifies some important concepts. These
amendments had no impact on the consolidated financial statements
of the Group.
Functional and presentation currency
These consolidated financial statements are presented in Pounds
Sterling, the Company's functional currency. All amounts presented
in tables throughout the report have been rounded to the nearest
thousand, unless otherwise stated.
The Company as an Investment Entity
The Management Board has assessed that the Company is an
Investment Entity in accordance with the provisions of IFRS 10. The
Company meets the following criteria to qualify as an Investment
Entity:
a) Obtains funds from one or more investors for the purpose of
providing those investors with investment management services - The
Group is internally managed with management focused solely on
managing those funds received from its shareholders in order to
maximise investment income/returns.
b) Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both - The investment objectives of the
Company are to:
-- Provide investors with secure and highly predictable
long-term cash flows whilst actively managing the investment
portfolio with the intention of maximising return over the
long-term.
-- Target an annual dividend payment with the aim to increase
this distribution progressively over the longer-term.
-- Target an IRR which is to be achieved over the longer-term
via active management and to enhance the value of existing
investments.
The above-mentioned objectives support the fact that the main
business purpose of the Company is to seek to maximise investment
income for the benefit of its shareholders.
c) Measures and evaluates performance of substantially all of
its investments on a fair value basis - The investment policy of
the Company is to invest in equity, subordinated debt or similar
interests issued in respect of infrastructure assets that have been
developed predominantly under the PPP/PFI or similar styled
procurement models. Each of these assets is valued at fair value.
The valuation is carried out on a six-monthly basis as at 30 June
and 31 December each year.
Based on the Management Board's assessment, the Company also
meets the typical characteristics of an Investment Entity as
follows:
a) it has more than one investment - as at 31 December 2020, the
Company has 50 investments;
b) it has more than one investor - the Company is listed on the
London Stock Exchange with its shares held by a broad pool of
investors;
c) it has investors that are not related parties of the entity -
other than those shares held by the Supervisory Board and
Management Board Directors, and certain other employees, all
remaining shares in issue (more than 99 per cent) are held by
non-related parties of the Company; and
d) it has ownership interests in the form of equity or similar
interests - ownership in the Company is through equity
interest.
3. Summary of significant accounting policies
a) Basis of consolidation
Business combination
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to direct
the relevant activities, i.e. the activities that significantly
affect the investee's returns and to obtain those returns. In
assessing control, the Group takes into consideration potential
voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as:
- the fair value of the consideration transferred; plus
- the recognised amount of any non-controlling interests in the acquiree; plus
- if the business combination is achieved in stages, the fair
value of the pre-existing equity interest in the acquiree; less
- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When there is an excess of value over consideration, a bargain
purchase gain is recognised immediately in the consolidated income
statement.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts
generally are recognised in the consolidated income statement.
Transaction costs, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection with
a business combination are expensed as incurred.
Any contingent consideration payable is measured at fair value
at the acquisition date. If the contingent consideration is
classified as equity, then it is not re-measured and settlement is
accounted for within equity. Otherwise, subsequent changes in fair
value of the contingent consideration are recognised in the
consolidated income statement.
Subsidiaries
Subsidiaries are investees controlled by the Company (directly
or indirectly). The Company controls an investee if it is exposed
to, or has rights to, variable returns from its involvement with
the investee and has the ability to affect those returns through
its power over the investee.
The Company is an Investment Entity and measures investments in
certain subsidiaries at fair value through profit or loss. In
determining whether the Company meets the definition of an
Investment Entity, the management considered the Group structure as
a whole (see also Note 2).
Although the Company qualifies as an Investment Entity and is
required to value certain subsidiaries at fair value, the Company
has a number of subsidiaries which provide services that relate to
the Company's investment activities. These subsidiaries are
consolidated on a line-by-line basis (see Note 19).
Acquisition of non-controlling interests (consolidated
subsidiaries)
Acquisitions of non-controlling interests are accounted for as
transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result. Adjustments to
non-controlling interest arising from transactions that do not
involve the loss of control are based on a proportionate amount of
the net assets of the subsidiary.
Loss of control (consolidated subsidiaries)
For subsidiaries which are consolidated on a line-by-line basis,
upon the loss of control, the Group derecognises the assets and
liabilities of the subsidiary, any non-controlling interests and
the other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognised in
the consolidated income statement. If the Group retains any
interest in the previous subsidiary, then such interest is measured
at fair value at the date that control is lost. Subsequently, it is
accounted for as an investment at fair value through profit or loss
or as an available-for-sale financial asset depending on the level
of influence retained.
Transactions eliminated on consolidation (consolidated
subsidiaries)
Intra-group receivables, liabilities, revenue and expenses are
eliminated in their entirety when preparing the consolidated
financial statements. Gains that arise from intra-group
transactions and that are unrealised from the standpoint of the
Group, at the date of the consolidated statement of financial
position, are eliminated in their entirety. Unrealised losses on
intra-group transactions are also eliminated in the same way as
unrealised gains, to the extent that the loss does not correspond
to an impairment loss.
b) Foreign currency transactions
Transactions in foreign currencies are translated into Pounds
Sterling at the exchange rate at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into Pounds Sterling at the
exchange rate on that date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated into
Pounds Sterling at the exchange rate on the date that the fair
value was determined. Foreign currency differences arising on
translation are recognised in the consolidated income statement as
a gain or loss on currency translation.
c) Foreign currency translations
The assets and liabilities of foreign operations are translated
to Pounds Sterling at the exchange rates on the reporting date. The
income and expenses of foreign operations are translated to Pounds
Sterling at the average exchange rates during the year, if such
does not significantly deviate from the exchange rates at the date
on which the transaction is entered into. If significant deviations
arise, then the exchange rate at the date of the transaction is
used.
Foreign currency differences are recognised in consolidated
statement of other comprehensive income, and presented in
'translation reserve' in equity, except for exchange differences
from intra-Group monetary items which are reflected in the
consolidated income statement. However, since the Company qualifies
as an investment entity under IFRS 10 and records its investments
in subsidiaries and associates at investment at FVPL, 'translation
reserve' movements during the reporting period relating to
investments are classified as 'Income from investments at fair
value through profit or loss' (income from Investments at FVPL). If
the foreign operation is a non-wholly owned consolidated
subsidiary, then the relevant portion of the translations
difference is allocated to non-controlling interest. When a foreign
operation is disposed of such that control, significant influence
or joint control is lost, the cumulative amount in the translation
reserve related to that foreign operation is reclassified to
consolidated income statement as part of the gain or loss on
disposal. When the Group disposes of only part of its interest in a
consolidated subsidiary that includes a foreign operation while
retaining control, the relevant proportion of the cumulative amount
is reattributed to non-controlling interests.
When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign currency gains and losses arising from
such an item are considered to form part of a net investment in the
foreign operation and are recognised in other comprehensive income,
and presented in the translation reserve in equity.
d) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Financial assets are classified at initial recognition at
either: (i) amortised cost; (ii) fair value through other
comprehensive income - debt instruments; (iii) fair value through
other comprehensive income - equity instruments; or (iv) fair value
through profit or loss.
In general, the Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
such transferred financial assets that is created or retained by
the Group is recognised as a separate financial asset or
liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
At the date of the consolidated statement of financial position,
except for Investments at FVPL and derivative financial assets, all
non-derivative financial assets of the Group have been classified
as financial assets at amortised cost.
Investments at FVPL
The Company is an Investment Entity and therefore values its
investment in subsidiaries at fair value through profit or loss,
except where the subsidiary provides investment related services or
activities. The fair value of an investment in subsidiary includes
the fair value of the equity, loans and interest receivable and any
other amounts which are included in the discounted estimated cash
flow (which is used to compute the fair value) from such
subsidiary. The Company subsequently measures its investment in
certain subsidiaries at fair value in accordance with IFRS 13, with
changes in fair value recognised in consolidated income statement
in the period of change. The fair value estimation of investments
in subsidiaries is described in Note 18.
In addition to valuing certain subsidiaries at fair value
through profit or loss, the Company also values investments in
associates and jointly controlled entities at fair value.
The Company meets the definition of IAS 28 paragraph 18 for a
venture capital organisation or a similar entity and upon initial
recognition has designated its investment in joint ventures and
associates at fair value through profit or loss. The Group manages
the performance of each of the joint ventures and associates on a
fair value basis in accordance with the Group's investment
strategy. The information about associates and joint ventures is
provided internally on a fair value basis to the Group's Management
Board and Supervisory Board. The Group therefore measures its
associates and joint ventures at fair value in accordance with IFRS
9 with changes in fair value recognised in the consolidated income
statement in the period of change.
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the Group
holds between 20 per cent and 50 per cent of the voting power of
another entity. Jointly controlled entities are those entities over
whose activities the Group has joint control, established by
contractual agreement and requiring unanimous consent for strategic
financial and operating decisions.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest rate ('EIR') method and are subject to
impairment. Gains and losses are recognised in the consolidated
statement of income when the asset is derecognised, modified or
impaired.
The Group recognises an allowance for expected credit losses
('ECLs') for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate.
The Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each
reporting date.
Non-derivative financial liabilities
The Company classifies non-derivative financial liabilities as
liabilities at amortised cost. Such financial liabilities are
recognised initially at fair value less any direct attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost using the EIR
method.
The Company derecognises a financial liability (or part of a
financial liability) from the consolidated statement of financial
position when, and only when, it is extinguished or when the
obligation specified in the contract or agreement is discharged or
cancelled or has expired. The difference between the carrying
amount of a financial liability (or part of a financial liability)
extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities
assumed, is considered in the consolidated income statement.
e) Fair value measurement
The Group accounts for its investments in PPP/PFI entities
('Project Companies') as Investments at FVPL. The valuation is
determined using the discounted cash flow methodology. The cash
flows forecasted to be received by the Company or its consolidated
subsidiaries, generated by each of the underlying assets, and
adjusted as appropriate to reflect the risk and opportunities, have
been discounted using asset-specific discount rates. The valuation
methodology is the same one used in previous reporting periods.
The fair value of other financial assets and liabilities, other
than current assets and liabilities, is determined by discounting
future cash flows at an appropriate discount rate and with
reference to recent market transactions, where appropriate. Further
information on assumptions and estimation uncertainties are
disclosed in Note 18.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs in the valuation methodology,
as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities.
-- Level 2: inputs other than quoted prices included in Level 1,
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data ('unobservable inputs').
If the inputs to measure fair value of an asset or a liability
fall into different levels of the fair value hierarchy, then the
fair value measurement is categorised in its entirety at the same
level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement.
The Group recognises transfers between levels of fair value
hierarchy at the end of the reporting period in which the change
has occurred.
f) Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to a liability. The unwinding
of such discount is recognised as finance cost.
g) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and term
deposits with maturities of three months or less from the date when
the deposits were made and that are subject to an insignificant
risk of change in their fair value, and are used by the Group in
the management of its short-term commitments.
h) Share capital
Ordinary shares are classified as equity. Costs directly
attributable to the issue of ordinary shares, or which are
associated with the establishment of the Company, that would
otherwise have been avoided are recognised as a deduction from
equity, net of any tax effects.
i) Segment reporting
Segment results that are reported to the Management Board
include items directly attributable to segments as well as those
that can be allocated on a reasonable basis.
j) Employee benefits
Short-term and other long-term employee benefits are expensed as
the related services are provided. A liability is recognised for
the amount expected to be paid, and discounted at present value if
necessary, if the Group has present legal or constructive
obligation to pay this amount as a result of a past service
provided by the employee and the obligation can be estimated
reliably.
For share-based payment arrangements, the grant-date fair value
of the equity settled share-based payment arrangement is recognised
as an expense, with a corresponding increase in additional paid in
capital over the vesting period of the awards. The amount
recognised as an expense is adjusted to reflect related service and
non-market performance conditions. The market condition related to
the award is measured at the date of grant and there is no
adjustment of expense/income to the consolidated income statement
for differences between expected and actual outcomes.
k) Finance income and finance costs
Interest income and expenses are recognised in the consolidated
income statement using the EIR method.
The effective interest rate is the rate that exactly discounts
the estimated future cash payments and receipts through the
expected life of the financial instrument (or, where appropriate, a
shorter period) to the carrying amount of the financial instrument.
When calculating the effective interest rate, the Group estimates
future cash flows considering all contractual terms of the
financial instrument, but not future credit losses.
Interest received or receivable and interest paid or payable are
recognised in the consolidated income statement as finance income
and finance costs, respectively.
l) Leases
Under IFRS 16, upon lease commencement, a lessee recognises a
right-of-use asset and a lease liability. The right-of-use asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove any
improvements made to office premises.
m) Tax
According to the Luxembourg regulations regarding SICAV
companies, the Company itself, as an undertaking for collective
investment, is exempt from paying income and/or capital gains taxes
in Luxembourg. It is, however, liable to annual subscription tax of
0.05 per cent on its consolidated net asset value ('NAV'), payable
quarterly and assessed on the last day of each quarter.
Income tax on the consolidated subsidiaries' profits for the
year comprises current and deferred tax. Current and deferred tax
is recognised in consolidated income statement except to the extent
that it relates to a business combination, or items recognised
directly in equity or in the consolidated statement of other
comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous periods.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- Temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- Temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that the Company is
able to control the timing of the reversal of the temporary
difference and it is probable that they will not reverse in the
foreseeable future; and
-- Taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed each
reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
n) Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in
the normal operating cycle
-- Held primarily for the purpose of trading
-- Expected to be realised within 12 months after the reporting
period or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
A liability is current when:
-- It is expected to be settled in the normal operating
cycle
-- It is held primarily for the purpose of trading
-- It is due to be settled within 12 months after the reporting
period
or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
The Group classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and assumptions
The preparation of consolidated financial statements in
conformity with IFRS requires the Management Board to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In the process of applying the Group's accounting policies, the
Management Board has made the following judgements that would have
the most significant effect on the amounts recognised in the
consolidated financial statements.
4.1 Assessment as an investment entity
Refer to Note 2 for the discussion on this topic.
4.2 Fair value determination
Refer to Note 3 e) for the discussion on this topic.
4.3 Share-based payments
Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation model,
which depends on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and
making assumptions about them.
For the measurement of the fair value of equity-settled
transactions for the Long-Term Incentive Plan ('LTIP'), the Group
uses a Monte Carlo simulation model. For the measurement of the
fair value of equity-settled transactions for the Deferred
Short-Term Incentive Plan ('Deferred STIP'), the Group recognises a
portion of the annual estimated bonus of the Management Board. The
assumptions and models used for estimating fair value for
share-based payment transactions are disclosed in Note 20.
4.4 Going concern basis of accounting
As part of its assessment, the Management Board has considered
the risk posed by the Covid-19 pandemic. The Group's portfolio is
more than 99 per cent operational and relies on availability-based
revenues. At the time of producing these consolidated financial
statements, there was no evidence to suggest of material disruption
to the Group and financial performance is not expected to be
materially affected. However, there is naturally significant
uncertainty around how the pandemic will evolve and therefore it is
difficult to foresee all consequences or disruptions potentially
arising from the pandemic.
The Management Board has satisfied itself that the Group has
adequate resources to continue in operational existence for at
least 12 months from the date of approval of the consolidated
financial statements. After due consideration, the Management Board
believes it is appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
5. Segment reporting
IFRS 8 - Operating Segments adopts a 'through the eyes of the
management' approach to an entity's reporting of information
relating to its operating segments, and also requires an entity to
report financial and descriptive information about its reportable
segments.
Based on a review of information provided to the Management
Board, the Group has identified five reportable segments based on
the geographical concentration risk. The main factor used to
identify the Group's reportable segments is the geographical
location of the asset. The Management Board has concluded that the
Group's reportable segments are:
(1) UK; (2) North America; (3) Australia; (4) Continental
Europe; and (5) Holding Activities. These reportable segments are
the basis on which the Group reports information to the Management
Board.
Segment information is presented below:
For the year ended 31 December North Continental Holding Total
2020
In thousands of Pounds Sterling UK America Australia Europe Activities Group
================================== ======= ======== ========== ============ =========== ========
Income from investments
at FVPL 18,715 15,685 22,062 6,875 - 63,337
Administration expenses - - - - (9,607) (9,607)
Other operating expenses
- net - - - - (7,082) (7,082)
================================== ======= ======== ========== ============ =========== ========
Results from operating activities 18,715 15,685 22,062 6,875 (16,689) 46,648
Finance cost - - - - (1,657) (1,657)
Finance income - - - - 10 10
Net loss on derivative financial
instruments - - - - (642) (642)
Tax expense - net - - - - (2,649) (2,649)
================================== ======= ======== ========== ============ =========== ========
Profit or loss from continuing
operations 18,715 15,685 22,062 6,875 (21,626) 41,710
For the year ended 31 December North Continental Holding Total
2019
In thousands of Pounds Sterling UK America Australia Europe Activities Group
================================== ======== ============ =========== =======
Income from investments
at FVPL 24,709 40,720 2,024 2,319 - 69,772
Administration expenses - - - - (8,488) (8,488)
Other operating expenses - - - - (7,331) (7,331)
==================================
Results from operating activities 24,709 40,720 2,024 2,319 (15,819) 53,953
Finance cost - - - - (2,091) (2,091)
Finance income - - - - 62 62
Net gain on derivative financial
instruments - - - - 2,060 2,060
Tax expense - net - - - - (3,000) (3,000)
==================================
Profit or loss from continuing
operations 24,709 40,720 2,024 2,319 (18,788) 50,984
Statement of financial position per segment information as at 31
December 2020 and 2019 are presented below:
As at 31 December 2020 North Continental Holding Total
In thousands of Pounds UK America Australia Europe Activities Group
Sterling
Assets
Investments at FVPL 264,797 418,063 117,984 94,830 - 895,674
Other non-current assets - - - - 295 295
Current assets - - - - 24,574 24,574
Total assets 264,797 418,063 117,984 94,830 24,869 920,543
Liabilities
Non-current - - - - 218 218
Current - - - - 4,485 4,485
Total liabilities - - - - 4,703 4,703
as at 31 December 2019 North Continental Holding Total
In thousands of Pounds
Sterling UK America Australia Europe Activities Group
Assets
Investments at FVPL 272,281 372,696 103,410 97,580 - 845,967
Other non-current assets - - - - 666 666
Current assets - - - - 40,004 40,004
Total assets 272,281 372,696 103,410 97,580 40,670 886,637
Liabilities
Non-current - - - - 20,318 20,318
Current - - - - 4,687 4,687
Total liabilities - - - - 25,005 25,005
The Holding Activities of the Group include the activities which
are not specifically related to a specific asset or region, but to
those companies which provide services to the Group. The total
current assets classified under Holding Activities mainly represent
cash and cash equivalents.
Transactions between reportable segments are conducted at arm's
length and are accounted for in a similar way to the basis of
accounting used for third parties. The accounting methods used for
all the segments are similar and comparable with those of the
Company.
6. Administrative expenses
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Personnel expenses 6,246 4,842
Legal and professional fees 2,570 2,040
Office and other expenses 764 1,585
Depreciation expense 27 21
9,607 8,488
The Group has engaged certain third parties to provide legal,
depositary, custodian, audit, tax and other services to the Group.
The expenses incurred in relation to such services are treated as
legal and professional fees. Depositary and custodian related
charges during the year amounted to GBP347,000 (2019:
GBP287,000).
During the year, the Company and its consolidated subsidiaries
obtained the following services from the external auditors.
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Group auditor remuneration:
Statutory audit fees to the Group's external auditor 187,088 195,543
Audit-related fees 65,620 59,714
Other statutory audit fees 29,185 24,218
281,893 279,475
Audit-related fees includes the fees in respect to the interim
review of the Group's condensed consolidated financial statements
and other permitted audit-related services.
There were no non-audit related fees charged by the Group's
external auditor during the year (31 December 2019: nil).
7. Other operating expenses
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Foreign currency exchange loss - net 4,767 3,250
Acquisition-related and unsuccessful bid costs 1,626 1,086
Loss on derivative financial instruments at FVPL(1) 853 2,990
Others 22 5
7,268 7,331
(1) Relates to foreign exchange hedging on forecasted
distributions from Investments at FVPL. Refer to Note 18 for the
reclassification made on the prior year comparative.
8. Net finance result
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Interest expense on loan and borrowings (Note 15) (1,657) (2,091)
Interest income on bank deposits 10 62
(1,647) (2,029)
9. Investments at FVPL
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Balance at 1 January 845,967 780,356
Acquisitions of/additions in Investments at FVPL 59,185 62,900
Income from investments at FVPL (1) 63,337 69,772
Distributions received from Investments at FVPL (72,815) (63,988)
Reclassification to other receivables - (3,073)
Balance at 31 December 895,674 845,967
(1) This account relates purely to unrealised gain on revaluation of investments.
The impact of foreign exchange gains or losses on income from
Investments at FVPL for the year ended 31 December 2020 amounted to
a gain of GBP3.2 million (year ended 31 December 2019: loss of
GBP6.2 million). Refer to Note 17 of the consolidated financial
statements for further information on investments at FVPL.
Distributions from Investments at FVPL are received after
either: (a) financial models have been tested for compliance with
certain ratios; or (b) financial models have been submitted to the
external lenders of the Project Companies; or (c) approvals of the
external lenders on the financial models have been obtained.
As at 31 December 2020 and 2019, loan and interest receivable
from unconsolidated subsidiaries is embedded within Investments at
FVPL.
The valuation of Investments at FVPL considers all cash flows
related to individual assets.
Interest income, dividend income, asset-related management fee
income and other income, recorded under the accruals basis at the
level of the consolidated subsidiaries for the year ended 31
December 2020, amounted to GBP65,689,000 (31 December 2019:
GBP62,322,000). The associated future cash flows deriving from
these items are taken into account when fair valuing the
investments.
Over the period, the Group made six new and follow-on
acquisitions as follows:
-- Highway 104 (Canada): In May, the Company acquired a 50 per cent stake in Highway 104, an availability-based motorway investment in Nova Scotia. Preparations to start construction work began in May 2020, with an estimated completion date of the end of 2023. The concession will run until 2043 and availability payments will be received from the Government of Nova Scotia, which is rated Aa2 by Moody's and AA- by Standard & Poor's ('S&P'). Despite initial delays in receiving certain environmental permits for in-water works, the construction remains on schedule with no material impact resulting from Covid-19.
-- N18 Motorway (Netherlands): In April, the Company completed a
follow-on acquisition in the N18 Motorway, bringing BBGI's total
equity interest in the investment to 52 per cent. The concession
runs until 2043 and availability payments are received from the
State of the Netherlands, which is rated Aaa by the credit rating
agency Moody's.
-- Stanton Territorial Hospital (Canada): During the period, the
Company completed two follow-on acquisitions in Stanton Territorial
Hospital, increasing BBGI's interest in the investment from 25 per
cent to 100 per cent. Stanton is an operational 27,000m(2) hospital
with 100 patient rooms located in Yellowknife, Northwest
Territories. The concession runs until 2048 and availability
payments are received from the Government of Northwest Territories,
which is rated Aa1 by the credit rating agency Moody's.
-- Kelowna and Vernon Hospitals (Canada): In August, the Company
completed a follow-on acquisition for the remaining 50 per cent
interest in Kelowna and Vernon Hospitals. The concession runs until
2042 and availability payments are received from the Interior
Health Authority, funded by the Province of British Columbia which
is rated Aaa by Moody's and AAA by S&P. BBGI's equity interest
in the investment is now 100 per cent.
-- Samuel De Champlain Bridge Corridor (Canada): In December,
BBGI completed the acquisition of a 25 per cent equity interest in
Signature on the Saint-Lawrence Group, the concessionaire of the
Samuel De Champlain Bridge Corridor in Montreal. The investment
consists of the design, construction, financing, operation,
maintenance and rehabilitation of a new bridge spanning the St.
Lawrence River between Montreal and Brossard, Quebec. Availability
payments are received from the Government of Canada, which is rated
AAA by both Moody's and S&P credit rating agencies. The bridge
opened to traffic in summer 2019 and the concession runs until
2049.
Details of various asset investments in the Group's portfolio
and their respective acquisition dates are as follows:
Country Ownership Year
of
Company Asset Incorporation Interest Acquired
RW Health Partnership Royal Women's Hospital Australia 100% 2012
Holdings Pty Limited*
Victorian Correctional Victoria Correctional Facilities Australia 100% 2012
Infrastructure Partnership
Pty Limited
BBPI Sentinel Holdings Northern Territory Secure Australia 100% 2014 and
Pty Limited* BBGI Sentinel Facilities 2015
Holdings 2 Pty Limited*,
and Sentinel Financing
Holdings Pty Limited*
Golden Crossing Holdings Golden Ears Bridge Canada 100% 2012 and
Inc.* 2013
Trans-Park Highway Kicking Horse Canyon Canada 50% 2012
Holding Inc.*
NorthwestConnect Holdings Northwest Anthony Henday Canada 50% 2012
Inc.* Drive
BBGI KVH Holdings Inc.* Kelowna and Vernon Hospital Canada 100% 2013 and
2020
WCP Holdings Inc.* Women's College Hospital Canada 100% 2013
Stoney Trail Group Northeast Stoney Trail Canada 100% 2013
Holdings Inc.*
BBGI NCP Holdings Inc.* North Commuter Parkway Canada 50% 2015
SNC-Lavalin Infrastructure William R. Bennet Bridge Canada 80% 2017
Partners LP*
Southeast Stoney Trail Canada 40% 2017
Canada Line Canada 26.7% 2017
Restigouche Hospital Centre Canada 80% 2017
McGill University Health Canada 40% 2018
Centre
BBGI Canada Holding Stanton Territorial Hospital Canada 100% 2018 and
5 Inc.* 2020
BBGI 104 GP Inc. Highway 104 Canada 50% 2020
BBGI Champlain Holding Champlain Bridge Canada 25% 2020
Inc.*
Kreishaus Unna Holding Unna Administrative Centre Germany 90% 2012 and
GmbH* 2020
PJB Beteiligungs - Burg Correctional Facility Germany 90% 2012
GmbH*
Hochtief PPP 1 Holding Cologne Schools Germany 50% 2014
GmbH & Co.KG* Rodenkirchen Schools Germany
Frankfurt Schools Germany
Fürst Wrede Military Germany
Base
Noaber18 Holding B.V.* N18 Motorway Netherlands 52% 2018, 2019
and 2020
De Groene SchakelHolding Westland Town Hall Netherlands 100% 2018 and
B.V. * 2019
SAAone PPP B.V* A1/A6 Motorway Netherlands 37.14% 2018 and
2019
Agder OPS Vegselskap E18 Motorway Norway 100% 2013 and
AS 2014
Kent Education Partnership Kent Schools UK 50% 2012
(Holdings) Limited*
Healthcare Providers Gloucester Royal Hospital UK 50% 2012
(Gloucester) Ltd.*
Highway Management M80 Motorway UK 50% 2012
M80 Topco Limited*
Bedford Education Partnership Bedford Schools UK 100% 2012
Holdings Limited*
Lisburn Education Partnership Lisburn College UK 100% 2012
Holdings Limited*
Clackmannanshire Schools Clackmannanshire Schools UK 100% 2012
Education Partnership
(Holdings) Limited*
Primaria (Barking & Barking & Havering Clinics UK 60% 2012
Havering) Limited* (LIFT)
East Down Education East Down Colleges UK 100% 2012 and
Partnership (Holdings) 2018
Limited*
Scottish Borders Education Scottish Borders Schools UK 100% 2012
Partnership (Holdings)
Limited*
Coventry Education Coventry Schools UK 100% 2012
Partnership Holdings
Limited*
Fire Support (SSFR) Stoke & Staffs Rescue Service UK 85% 2012
Holdings Limited*
GB Consortium 1 Limited* North London Estates Partnership UK 60% (both) 2012, 2014
(LIFT) UK and 2018
Liverpool & Sefton Clinics
(LIFT)
Mersey Care Development Mersey Care Hospital UK 79.6% 2013 and
Company 1 Limited* 2014
MG Bridge Investments Mersey Gateway Bridge UK 37.5% 2014
Limited*
Tor Bank School Education Tor Bank School UK 100% 2013
Partnership (Holdings)
Limited*
Lagan College Education Lagan College UK 100% 2014
Partnership (Holdings)
Limited*
Highway Management M1 Westlink UK 100% 2014
(City) Holding Limited*
Blue Light Partnership Avon and Somerset Police UK 100% 2014, 2015
(ASP) NewCo Limited* HQ and 2016
Blue Light Partnership
(ASP) NewCo 2 Limited*
Northwin Limited North West Regional College UK 100% 2015
Northwin (Intermediate) Belfast Metropolitan College UK 100% 2016
(Belfast) Limited*
BBGI East End Holdings Ohio River Bridges USA 66.67% 2014 and
Inc.* 2019
*and its subsidiary companies.
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to
GBP20,532,000 (31 December 2019: GBP34,778,000).
11. Taxes
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Current tax:
Income tax and other taxes 2,449 2,594
Subscription tax 427 406
2,876 3,000
Deferred tax:
Recognition of previously unrecognised tax losses (227) -
2,649 3,000
The Company, as an undertaking for collective investment, is
exempt from corporate income tax in Luxembourg and instead pays an
annual subscription tax of 0.05 per cent on the value of its total
net assets. Moreover, the Company as a SICAV is not subject to
taxes on capital gains or income. All other consolidated companies
are subject to taxation at the applicable rate in their respective
jurisdictions.
Reconciliation of tax expense and the accounting profit
multiplied by the Company's effective corporate tax rate for the
year is as follows:
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Profit before tax 44,359 53,984
Income tax using the Luxembourg domestic tax rate
of 24.94% 11,063 13,464
Subscription tax during the year 427 406
Reconciling difference mainly due to fair valuation
of
assets, net of gain/loss on derivatives (unrealised) (8,841) (10,870)
Tax charge for the year 2,649 3,000
A significant portion of the profit before tax results from fair
valuation of Investments at FVPL. The net income of the
unconsolidated subsidiaries is taxed in their respective
jurisdictions.
As a consequence of the adoption of IFRS 10, the Company is
classified as an Investment Entity (see Note 2), meaning the tax
expenses of the unconsolidated subsidiaries are not included within
these consolidated financial statements. Therefore, the
consolidated tax expense and tax assets/liabilities, if any, do not
include those of the Project Companies. The tax liabilities of the
Project Companies are embedded in the fair value calculation of the
Investments at FVPL.
Deferred tax asset of GBP225,000 relates to taxable losses
available for offsetting against future taxable income (31 December
2019: nil). Furthermore, the Group has additional tax losses
carried forward amounting to GBP5,823,000 (2019: GBP5,931,000) in
which no deferred tax asset was recognised.
Tax liability as at 31 December 2020 amounted to GBP1,567,000
(31 December 2019: GBP1,703,000).
12. Other current assets
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Prepaid taxes 1,627 437
Prepaid expenses 413 69
Other current assets 124 88
2,164 594
13. Capital and reserves
Share capital
Changes in the Company's share capital are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Share capital as at 1 January 714,280 639,160
Issuance of ordinary shares through placing 55,000 75,000
Shares issuance cost on placing (831) (1,085)
Share capital issued through scrip dividends 2,068 772
Equity settlement of share-based compensation (see
Note 20) 425 433
770,942 714,280
The changes in the number of ordinary shares of no-par value
issued by the Company are as follows:
31 December 31 December
In thousands of shares 2020 2019
In issue at beginning of the year 630,213 580,005
Shares issued through placing of ordinary shares 32,544 49,020
Shares issued through scrip dividends 1,244 491
Shares issued as share based compensation 690 697
664,691 630,213
In November 2020, the Company raised gross proceeds of
GBP55,000,000 through a placing of 32,544,379 new ordinary shares
of no-par value ('Placing'). The Placing price was 169.0 pence per
Placing share. The related share issuance cost amounted to
GBP831,000.
All shares rank equally with regard to the Company's residual
assets. The holders of ordinary shares are entitled to receive
dividends as declared from time to time, and are entitled to one
vote per share at general meetings of the Company.
The Company meets the minimum share capital requirement as
imposed under the applicable Luxembourg regulation.
Translation reserve
Foreign currency differences are recognised in other
comprehensive income, and presented in the foreign currency
translation reserve in equity except for exchange differences from
intragroup monetary items which are reflected in the consolidated
income statement. The translation reserve comprises foreign
currency differences arising from the translation of the financial
statements of foreign operations.
Dividends
The dividends declared and paid by the Company during the year
ended 31 December 2020 are as follows:
31 December
In thousands of Pounds Sterling except as otherwise stated 2020
2019 2(nd) interim dividend of 3.5 pence per qualifying ordinary
share - for the period
1 July 2019 to 31 December 2019 22,057
2020 1(st) interim dividend of 3.59 pence per qualifying ordinary
share - for the period 22,659
1 January 2020 to 30 June 2020
Total dividends declared and paid during the year 44,716
The 31 December 2019 2(nd) interim dividend was paid in April
2020. The value of the scrip election was GBP429,000, with the
remaining amount of GBP21,628,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2020 1(st) interim dividend was paid in October
2020. The value of the scrip election was GBP1,639,000 with the
remaining amount of GBP21,020,000 paid in cash to those investors
that elected for a cash dividend.
The dividends declared and paid by the Company during the year
ended 31 December 2019 are as follows:
31 December
In thousands of Pounds Sterling except as otherwise stated 2019
2018 2(nd) interim dividend of 3.375 pence per qualifying ordinary
share - for the period
1 July 2018 to 31 December 2018 19,575
2019 1(st) interim dividend of 3.5 pence per qualifying ordinary
share - for the period
1 January 2019 to 30 June 2019 22,045
Total dividends declared and paid during the year 41,620
The 31 December 2018 2(nd) interim dividend was paid in April
2019. The value of the scrip election was GBP181,000, with the
remaining amount of GBP19,394,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2019 1(st) interim dividend was paid in October
2019. The value of the scrip election was GBP591,000 with the
remaining amount of GBP21,453,000 paid in cash to those investors
that elected for a cash dividend.
Net Asset Value ('NAV')
The consolidated NAV and NAV per share as at 31 December 2020,
31 December 2019 and 31 December 2018 were as follows:
In thousands of Pounds Sterling/pence 2020 2019 2018
NAV attributable to the owners of the Company 915,840 861,632 777,020
NAV per ordinary share (pence) 137.78 136.72 133.97
14. Earnings per share
a) Basic earnings per share
The basic earnings per share is calculated by dividing the
profit attributable to the owners of the Company by the weighted
average number of ordinary shares outstanding.
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling / in thousands 2020 2019
of shares
Profit attributable to the owners of the Company 41,710 50,984
Weighted average number of ordinary shares in issue 633,662 605,115
Basic earnings per share (in pence) 6.58 8.43
The weighted average number of ordinary shares outstanding for
the purpose of calculating the basic earnings per share is computed
as follows:
Year ended Year ended
31 December 31 December
In thousands of shares 2020 2019
Shares outstanding as at 1 January 630,213 580,005
Effect of shares issued on placing of ordinary shares
participating for the interim and final dividend of
the year - 24,510
Effect of shares issued on placing of ordinary shares
participating for the second interim dividend of the
year 2,712 -
Effect of scrip dividends issued 363 164
Shares issued as share based compensation 374 436
Weighted average - outstanding shares 633,662 605,115
b) Diluted earnings per share
The diluted earnings per share is calculated by dividing the
profit attributable to the owners of the Company by the weighted
average number of ordinary shares outstanding, after adjusting for
the effects of all potential dilutive ordinary shares.
The weighted average number of potential diluted ordinary shares
for the purpose of calculating the diluted earnings per share is
computed as follows:
Year ended Year ended
31 December 31 December
In thousands of shares 2020 2019
Weighted average number of ordinary shares for basic
earnings per share 633,662 605,115
Effect of potential dilution from share-based payment 1,122 1,152
Weighted average - outstanding shares 634,784 606,267
The price of the Company's shares for the purpose of calculating
the potential dilutive effect of award letters (Note 20) was based
on the average market price for the year ended 2020 and 2019,
during which period the awards were outstanding.
15. Loans and borrowings
The Group has a four-year GBP180 million Revolving Credit
Facility from ING Bank and KfW IPEX-Bank and DZ Bank AG ("RCF')
which commenced in January 2018 and matures in January 2022. The
borrowing margin amounts to 165 bps over LIBOR. Under the RCF, the
Group retains the possibility to consider larger transactions by
virtue of having structured a further GBP70 million incremental
accordion tranche, for which no commitment fees are payable.
As at 31 December 2020, the Group had utilised GBP1.2 million
(31 December 2019: GBP22.2 million) of the GBP180 million RCF, of
which GBP1.2 million (31 December 2019: GBP1.2 million) was being
used to cover letters of credit. There was no outstanding principal
from the RCF as at the 31 December 2020 (31 December 2019:
GBP21,000,000).
The interest payable and other related RCF fee payables under
the credit facility as at 31 December 2020 amounted to GBP177,000
(31 December 2019: GBP287,000).
The RCF unamortised debt issuance cost amounted to GBP358,000 as
at 31 December 2020 (2019: GBP682,000). The unamortised debt
issuance cost is presented as part of the 'Other current assets' in
the consolidated financial position (31 December 2019: netted
against the amount borrowed under the credit facility).
The total finance cost incurred under the RCF for the year ended
31 December 2020 amounted to GBP1,655,000 (31 December 2019:
GBP2,091,000) which includes amortisation of debt issue expense of
GBP351,000 (31 December 2019: GBP339,000).
Changes in liabilities arising from financing activities
1 January Foreign 31 December
In thousands of Pounds 2020 Proceeds Repayment Exchange Others 2020
Sterling
Loans and borrowings_non-current 20,318 41,000 (62,000) - 682 -
1 January Foreign 31 December
In thousands of Pounds 2019 Proceeds Repayment Exchange Others 2019
Sterling
Loans and borrowings_non-current 14,311 81,780 (80,057) 4,000 284 20,318
Pledges and collaterals
As of 31 December 2020, and 31 December 2019, the Group has
provided a pledge over shares issued by consolidated subsidiaries,
pledge over receivables between consolidated subsidiaries and a
pledge over the bank accounts of the consolidated subsidiaries.
Based on the provisions of the RCF, in the event of continuing
event default, the lender, among other things, will have the right
to cancel all commitments and declare all or part of utilisations
to be due and payable, including all related outstanding amounts,
and exercise or direct the security agent to exercise any or all of
its rights, remedies, powers or discretions under the RCF.
The Group operated comfortably within covenant limits of the RCF
during the year.
16. Accruals and other payables
Accruals and other payables are non-interest bearing and are
usually settled within six months.
17. Financial risk review and management
The Group has exposure to the following risks from financial
instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk and the Group's
management of capital. This note also presents the result of the
review performed by management on the above-mentioned risk
areas.
Risk management framework
The Management Board has overall responsibility for the
establishment and control of the Group's risk management
framework.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group, resulting in:
1) impairment or reduction in the amounts recoverable from
receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
Exposures to credit risks
The Group is exposed to credit risks on the following items in
the consolidated statement of financial position:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Derivative financial assets 259 1,361
Trade and other receivables 1,631 3,876
Cash and cash equivalents 20,532 34,778
22,422 40,015
The maximum exposure to credit risk on receivables that are
neither overdue nor impaired as of 31 December 2020, amounts to
GBP1,631,000 (2019: GBP3,876,000).
As of 31 December 2020, the Group is also exposed to credit risk
on the loan receivable, interest and other receivable components of
Investments at FVPL (loans provided to Project Companies) totalling
to GBP216,631,000 (2019: GBP187,474,000).
Cash and cash equivalents and foreign currency forwards
The cash and cash equivalents and foreign currency forward
contracts are maintained with reputable banks with ratings that are
acceptable based on the established internal policy of the Group.
Based on the assessment of the Management Board, there are no
significant credit risks related to the cash and cash equivalents
and foreign currency forward contracts maintained. The main
counterparty banks of the Group have S&P/Moody's credit rating
of A+/Aa3 and AA-/Aa2.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group's policy over liquidity risk is that it will seek to
have sufficient liquidity to meet its liabilities and obligations
when they fall due.
The Group manages liquidity risk by maintaining adequate cash
and cash equivalents and access to borrowing facilities to finance
day-to-day operations and medium to long-term capital needs. The
Group also regularly monitors the forecast and actual cash
requirements and matches the maturity profiles of the Group's
financial assets and financial liabilities.
The following are the undiscounted contractual maturities of the
financial liabilities of the Group, including estimated interest
payments:
Contractual cash flows
31 December 2020 Carrying Within 1-5
In thousands of Pounds Sterling amount Total 1 year years
=========
Loans and borrowings (Note 15) 177 1,220 1,220 -
Trade payables 73 73 73 -
Other payables 2,643 2,643 2,643 -
2,893 3,936 3,936 -
Contractual cash flows
31 December 2019 Carrying Within 1-5
In thousands of Pounds Sterling amount Total 1 year years
=========
Loans and borrowings (Note 15) 20,434 21,056 56 21,000
Trade payables 353 353 353 -
Other payables 2,515 2,515 2,515 -
23,302 23,924 2,924 21,000
The Group needs to maintain certain financial covenants under
the RCF. Non-compliance with such covenants may trigger an event of
default (see Note 15). At 31 December 2020 and 2019, the Group was
not in breach of any of the covenants under the credit facility.
The Group has operated and continues to operate comfortably within
covenant limits.
The Company has the possibility of raising capital through the
issuance of shares in order to finance further acquisitions or
repay debt.
All external financial liabilities of the Group have maturities
of less than one year except for loans and borrowings, which have a
maturity of more than one year. The Group has sufficient cash and
cash equivalents and sufficient funding sources to pay and/or
refinance currently maturing obligations.
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the returns.
UK departure from the European Union
As part of the UK's preparations for Brexit, the UK Government
established a temporary permissions regime ('TPR') enabling
European Economic Area ('EEA') AIFs with EEA AIFMs passporting into
the UK at the end of the transition period to continue to access
the UK market in the same manner as before the transition period
ended for a limited period of time.
The Company has made the necessary notification to the FCA (and
the CSSF) under the TPR of its intention and as a result has
temporary permission to be marketed in the UK.
To continue marketing the Company in the UK after the end of the
TPR, the Company must notify under the UK national private
placement regime and will be directed by the FCA to make this
notification within two years from the end of the transition
period.
Regarding portfolio performance, while the long-term economic
outcome of the UK's departure from the EU will remain uncertain for
some time, the Group's portfolio cash flows are contracted and,
unlike demand-based assets, are not sensitive to the performance of
the wider economic environment.
The Group buys derivative financial instruments, and also incurs
financial liabilities, in order to manage market risks. All such
transactions are carried out within certain internal guidelines.
The Group, via its hedge counterparty, reports all trades under
these hedging instruments, for European Market Infrastructure
Regulations purposes, to an EU branch of the derivative
repository.
Currency risk
The Group is exposed to currency risk as a result of its
underlying Investments at FVPL and cash and cash equivalents being
denominated in currencies other than Pounds Sterling. The
currencies in which these items are primarily denominated are
Australian dollars (A$), Canadian dollars (C$), Euros (EUR),
Norwegian kroner (NOK) and US dollars (US$).
The Group actively seeks to manage geographical concentration
and mitigate foreign exchange risk by balance sheet hedging through
foreign exchange forward contracts, hedging of forecast portfolio
distributions and borrowing in non-Sterling currencies.
Furthermore, Euro-denominated running costs provide a natural hedge
against the Euro-denominated portfolio distributions.
In respect of other monetary assets and liabilities denominated
in currencies other than Pounds Sterling, the Group's policy is to
ensure that its net exposure is kept at an acceptable level. The
Company believes that foreign exchange exposure is part of an
international portfolio, but believes the risk is partially
mitigated by having exposure to a number of different currencies
including the Australian dollar, Canadian dollar, US dollar, Euro
and Norwegian krone, all of which can provide diversification
benefits. The Management Board spends considerable time reviewing
its hedging strategy and believes it remains both appropriate and
cost effective to continue with its four-year rolling hedge
policy.
The summary of the quantitative data about the Group's exposure
to foreign currency risk are as follows:
31 December 2020
In thousands of Pounds Sterling A$ C$ EUR NOK US
$
Financial assets measured at fair value
Investments at FVPL 117,984 337,417 66,615 28,216 80,645
Financial assets measured at amortised
cost
Cash and cash equivalents 24 11,542 1,020 3 2,125
Trade and other receivables 341 589 84 - 526
365 12,131 1,104 3 2,651
Financial liabilities measured at amortised
cost
Trade payables (2) - (11) - -
Accruals and other payables (2) (687) (1,730) - -
(4) (687) (1,741) - -
31 December 2019
In thousands of Pounds Sterling A$ C$ EUR NOK US
$
Financial assets measured at fair value
Investments at FVPL 103,410 296,335 67,753 29,827 76,362
Financial assets measured at amortised
cost
Cash and cash equivalents 22 13,172 1,851 3 29
Trade and other receivables 250 214 1,194 - 2,034
272 13,386 3,045 3 2,063
Financial liabilities measured at amortised
cost
Trade payables - (54) (104) - -
Accruals and other payables - (1) (1,847) - -
- (55) (1,951) - -
The significant exchange rates applied during the year ended 31
December 2020 and 31 December 2019 are as follows:
31 December 2020
Average Spot rate
GBP GBP
A$ 1 0.538 0.565
C$ 1 0.581 0.575
EUR 1 0.889 0.899
NOK 1 0.083 0.086
US$ 1 0.780 0.733
31 December 2019
Average Spot rate
GBP GBP
A$ 1 0.544 0.531
C$ 1 0.590 0.582
EUR 1 0.877 0.850
NOK 1 0.089 0.086
US$ 1 0.783 0.758
The sensitivity of the NAV to a 10 per cent positive and adverse
movement in foreign exchange rates is disclosed in Note 18 to the
consolidated financial statements. This is a scenario that the
Group considers to be reasonably possible at the reporting date.
The analysis assumes that all other variables, in particular
interest rates, remain constant and ignores any impact of
forecasted revenues and other related costs.
Interest rate risk
Except for the loans and other receivables from Project
Companies which are included as part of Investments at FVPL, the
Group does not account for other fixed-rate financial assets and
liabilities at fair value through profit or loss. For the years
ended 31 December 2020 and 2019, the main variable interest rate
exposure of the Group is on the interest rates applied to the
Group's cash and cash equivalents, including deposit rates used in
valuing the Investments at FVPL and the loans and borrowings of the
Group. A change in the deposit rates used in valuing Investments at
FVPL would have an impact on the value of such and a corresponding
impact on the Group's NAV. Refer to Note 18 for a sensitivity
analysis of the impact of a change in deposit rates on the Group's
NAV.
Investment risk
The valuation of Investments at FVPL depends on the ability of
the Group to realise cash distributions from Project Companies. The
distributions to be received from the Project Companies are
dependent on cash received by a particular Portfolio Company from
the service concession agreements. The service concession
agreements are predominantly granted to the Portfolio Company by a
variety of public sector clients including, but not limited to,
central government departments and local, provincial and state
government and corporations set up by the public sector.
The Group predominantly makes investments in countries where the
Management Board consider that asset structures are reliable, where
(to the extent applicable) public sector counterparties carry what
the Management Board consider to be an appropriate credit risk, or
alternatively where insurance or guarantees are available for the
sovereign credit risk, where financial markets are relatively
mature and where a reliable judicial system exists to facilitate
the enforcement of rights and obligations under the assets.
The Management Board continuously monitors the ability of a
particular Portfolio Company to make distributions to the Group.
During the year, there have been no material concerns raised in
relation to current and future distributions to be received from
any of the Project Companies.
Capital risk management
The Company's objective when managing capital is to ensure the
Group's ability to continue as a going concern in order to provide
returns to shareholders and benefits for further stakeholders and
to maintain an optimal capital structure. The Company, at a Group
level, views the share capital (see Note 13) and the RCF (see Note
15) as capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividend paid to shareholders,
return capital to shareholders, avail itself of additional debt
financing, pay down debt or issue new shares.
The Group regularly reviews compliance with Luxembourg
regulations regarding restrictions on minimum capital. During the
year, the Group complied with all externally imposed capital
requirements and made no changes in its approach to capital
management.
Derivative financial assets and liabilities for which hedge
accounting is not applied
The Group has entered into foreign currency forwards to fix the
foreign exchange rates on certain investment distributions that are
expected to be received and on a portion of the non-Pounds Sterling
denominated portfolio value. The derivative financial instruments
(asset/liability) in the consolidated statement of financial
position represent the fair value of foreign currency forwards
which were not designated as hedges. The movements in their fair
value are directly charged/credited in the consolidated income
statement within the administrative expenses and net gain(loss) on
derivative financial instruments group.
18. Fair value measurements and sensitivity analysis
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the consolidated statement of
financial position are presented below. This does not include fair
value information for financial assets and financial liabilities
not measured at fair value if the carrying amount is a reasonable
approximation of fair value (ie, cash and cash equivalents; trade
and other receivables; trade payables, accruals and other payables,
loans and borrowings).
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities.
-- Level 2: inputs other than quoted prices included in Level 1,
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
31 December 2020 Fair value
In thousands of Pounds Sterling Level Level Level Total
1 2 3
Financial assets measured at fair value
Investments at FVPL - - 895,674 895,674
Derivative financial assets - 259 - 259
Financial liabilities measured at fair
value
Derivative financial liabilities - (243) - (243)
31 December 2019 Fair value
In thousands of Pounds Sterling Level Level Level Total
1 2 3
Financial assets measured at fair value
Investments at FVPL - - 845,967 845,967
Derivative financial assets - 1,361 - 1,361
The following table shows a reconciliation of the movements in
the fair value measurements in level 3 of the fair value
hierarchy:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Balance at 1 January 845,967 780,356
Acquisitions of/additions in Investments at FVPL 59,185 62,900
Income from investments at FVPL 63,337 69,772
Distributions received from Investments at FVPL (72,815) (63,988)
Reclassification to other receivables - (3,073)
Balance at 31 December 895,674 845,967
Investments at FVPL
The Management Board is responsible for carrying out the fair
market valuation of the Company's investments, which it then
presents to the Supervisory Board. The portfolio valuation is
carried out on a six-monthly basis as at 30 June and 31 December
each year. The portfolio valuation is reviewed by an independent
third-party professional.
The valuation is determined using the discounted cash flow
methodology. The cash flow forecasts, generated by each of the
underlying assets, are received by the Company or its subsidiaries,
adjusted as appropriate to reflect risks and opportunities, and
discounted using asset-specific discount rates. The portfolio
valuation methodology remains unchanged from previous reporting
periods.
Covid-19
The portfolio continued its strong performance over the
reporting period with no material adverse effect on valuation
resulting from Covid-19. This strong performance is primarily as a
result of the Group holding a low-risk, 100 per cent
availability-based portfolio, coupled with strong stakeholder
collaboration during the reporting period. There continues to be
uncertainty surrounding Covid-19 with the consequences and
potential disruptions difficult to foresee, but currently our
portfolio remains resilient in this challenging market environment.
We will continue to work very closely with all stakeholders to help
mitigate the risks and effects of the global pandemic.
Key Portfolio Company and portfolio cash flow assumptions
underlying NAV calculation include:
-- The discount rates and the Assumptions as set out below
continue to be applicable.
-- The updated financial models used for valuation accurately
reflect the terms of all agreements relating to the Portfolio
Companies and represent a fair and reasonable estimation of future
cash flows accruing to the Portfolio Companies.
-- Cash flows from and to the Portfolio Companies are received
and made at the times anticipated.
-- Non-UK Portfolio Companies are valued in local currency and
their cash flows converted to Sterling at either the period-end
exchange rates or the contract hedge rate.
-- Where the operating costs of the Portfolio Companies are
fixed by contract, such contracts are performed, and where such
costs are not fixed, they remain within the current forecasts in
the valuation models.
-- Where lifecycle costs/risks are borne by the Portfolio
Companies, they remain in line with the current forecasts in the
valuation models.
-- An assessment is made of construction defect remediation
where the risk sits with the Portfolio Company.
-- Contractual payments to the Portfolio Companies remain on
track and contracts with public sector or public sector backed
counterparties are not terminated before their contractual expiry
date.
-- Any deductions or abatements during the operations period of
Portfolio Companies are fully passed down to subcontractors under
contractual arrangements or are part of the planned (lifecycle)
forecasts.
-- Where the Portfolio Companies own the residual property value
in an investment, the projected amount for this value is
realised.
-- In cases where the Portfolio Companies have contracts that
are in the construction phase, they are either completed on time or
any delay costs are borne by the construction contractors.
-- There are no tax or regulatory changes in the future which
negatively impact cash flow forecasts.
In forming the above assessments, the Group works with Portfolio
Company management teams, as well as using due diligence
information from, or working with, suitably qualified third parties
such as technical, legal and insurance advisers.
Macro-economic assumptions
Apart from the discount rates, the Company uses the following
assumptions for the cash flows:
31 December 2020 31 December 2019
Indexation UK(1) RPI/CPIH 2.75% / 2.00% 2.75%
Canada 2.00% / 2.35% 2.00% / 2.35%
Australia 2.50% 2.50%
Germany 2.00% 2.00%
Netherlands(2) 2.00% 2.00%
Norway(2) 2.25% 2.25%
USA(3) 2.50% 2.50%
Deposit UK 0.25% to Q4 2023, then 1.00% to Q4 2023, then
rates (p.a.) 1.00% 2.50%
Canada 0.75% to Q4 2023, then 1.00% to Q4 2023, then
1.50% 2.50%
Australia 0.50% to Q4 2023, then 2.00% to Q4 2023, then
2.00% 3.00% - 4.00% (medium term)
Germany 0.00% to Q4 2023, then 1.00% to Q4 2023, then
0.50% 2.50%
Netherlands 0.00% to Q4 2023, then 1.00% to Q4 2023, then
0.50% 2.50%
Norway 0.25% to Q4 2023, then 1.80% to Q4 2023, then
2.00% 3.00%
USA 0.25% to Q4 2023, then 1.00% to Q4 2023, then
1.50% 2.50%
Corporate UK 19.00% long-term 19.00% to 2019, then 17.00%
tax rates
(p.a.)
Canada(4) 23.00% / 26.50% / 27.00% 26.50% / 27.00% / 29.00%
/ 29.00%
Australia 30% long-term 30% long-term
Germany(5) 15.8% long-term (incl. 15.8% long-term (incl.
solidarity charge) solidarity charge)
Netherlands(6) 25% long-term 25% till 2020, then 21.7%
Norway 22% long-term 22% long-term
USA 21% long-term 21% long-term
(1) On the 25th of November 2020, the UK Government announced
the phasing out of RPI after 2030, and replacement with CPIH; the
Company's UK portfolio indexation factor changes from RPI to CPIH
beginning on 1 January 2031.
(2) CPI indexation only. Where investments are subject to a
basket of indices, these non-CPI indices are not considered.
(3) 80 per cent of ORB indexation factor for revenue is
contractual and is not tied to CPI.
(4) Individual tax rates vary among Canadian Provinces.
(5) Individual local trade tax rates are considered in addition
to the tax rate above.
(6) In September 2020, the Dutch Government confirmed that the
planned reduction of the headline corporate income tax rate (CIT)
to 21.7 per cent will not be introduced in 2021.
Discount rate sensitivity
The weighted average discount rate that is applied to the
Company's portfolio of investments is the single most important
judgement and variable.
The following table shows the sensitivity of the NAV, by
applying a change in the discount rate on Investments at FVPL:
+1% to 7.77% in -1% to 5.77% in
2020 (1) 2020 (1)
Profit or Profit or
Effects in thousands of Pounds Sterling Equity loss Equity loss
31 December 2020 (73,609) (73,609) 85,076 85,076
31 December 2019 (70,769) (70,769) 82,003 82,003
(1) Based on the weighted average discount rate of 6.77 per cent
(31 December 2019: 7.07 per cent).
Inflation rate sensitivity
The Company's investments are contractually entitled to receive
availability-based income streams from public sector clients, which
are adjusted every year for inflation. Facilities management
subcontractors for accommodation investments and operating and
maintenance subcontractors for transport investments have similar
indexation arrangements. The investment cash flows are positively
correlated with inflation (e.g. RPI, CPI, or a basket of
indices).
The following table shows the sensitivity of the NAV, by
applying a change in the inflation rate to Investments at FVPL:
+1% -1%
Effects in thousands of Pounds Profit or Profit or
Sterling Equity loss Equity loss
31 December 2020 37,787 37,787 (30,983) (30,983)
31 December 2019 40,405 40,405 (33,236) (33,236)
Foreign exchange rate sensitivity
A significant proportion of the Group's underlying investments
are denominated in currencies other than Pounds Sterling.
The following table shows the sensitivity of the NAV, by
applying a change to foreign exchange rates on Investments at
FVPL:
Decrease by 10%
Increase by 10% (1) (1)
Effects in thousands of Pounds Profit or Profit or
Sterling Equity loss Equity loss
31 December 2020 (25,491) (25,491) 25,396 25,396
31 December 2019 (26,578) (26,578) 24,643 24,643
(1) Sensitivity in comparison to the spot foreign exchange rates
at 31 December 2020 and considering the contractual and natural
hedges in place, derived by applying a 10 per cent increase or
decrease to the Sterling/foreign currency rate.
Deposit rate sensitivity
Project Companies typically have cash deposits which are
required to be maintained as part of the senior debt funding
requirements. (e.g. six months debt service reserve accounts,
maintenance reserve accounts). The asset cash flows are positively
correlated with the deposit rates.
The table below shows the sensitivity of the NAV, by applying a
change in the long-term deposit rates compared to the assumptions
above:
+1% -1%
Effects in thousands of Pounds Profit or Profit or
Sterling Equity loss Equity loss
31 December 2020 17,065 17,065 (16,641) (16,641)
31 December 2019 14,711 14,711 (14,616) (14,616)
Lifecycle costs sensitivity
Lifecycle is the cost of planned interventions or replacing
material parts of an asset to maintain it over the concession term.
It involves larger items that are not covered by routine
maintenance and for roads it will include items such as replacement
of asphalt, rehabilitation of surfaces, or replacement of
electromechanical equipment. Lifecycle obligations, are generally
passed down to the facility maintenance provider with the exception
of transportation investments where these obligations are typically
retained by the Portfolio Company.
Of the Group's 50 Investments at FVPL, 17 Investments at FVPL
retain the lifecycle obligations. The remaining 33 assets have this
obligation passed down to the subcontractor.
The following table shows the sensitivity of the NAV, by
applying a change in lifecycle costs to Investments at FVPL:
Increase by 10% Increase by 10%
(1) (1)
Effects in thousands of Pounds Profit or Profit or
Sterling Equity loss Equity loss
31 December 2020 (17,621) (17,621) 17,390 17,390
31 December 2019 (16,975) (16,975) 16,417 16,417
(1) Sensitivity applied to the 17 investments in the portfolio
which retain the lifecycle obligation i.e. the obligation is not
passed down to the subcontractor.
Corporate tax rate sensitivity
The profits of each portfolio company are subject to corporate
tax in the country where that company is located. The following
table shows the sensitivity of the NAV, by applying a change in the
corporate tax rate to Investments at FVPL:
+1% in 2020 -1% in 2019
Effects in thousands of Pounds Profit or Profit or
Sterling Equity loss Equity loss
31 December 2020 (6,606) (6,606) 6,563 6,563
31 December 2019 (7,230) (7,230) 7,161 7,161
On March 3rd, 2021, the UK Chancellor of the Exchequer announced
a plan to increase the UK Corporate Tax rate to 25 per cent from
April 2023. Whilst this increase is not currently enacted and is
still to be approved by the UK Parliament, the Company recognises
that any change in the UK Corporate Tax rate will have an effect on
the portfolio valuation. It is the Company's policy to value those
tax rates that have been enacted into law at the reporting period
date. Notwithstanding this, and to aid transparency, we have
calculated that this increase of the UK Corporation Tax rate would
result in a GBP8.9 million or 1.0 per cent reduction in NAV.
Senior debt refinancing sensitivity
Assumptions are used where a refinancing of senior debt
financing is required for an investment during the remaining
concession term. There is a risk that such assumptions may not be
achieved.
The following table shows the sensitivity of the NAV, by
applying a change in base rate to the Investments at FVPL, of a
+100bps adjustment to the forecasted margins. The base rate for
senior debt is either fixed or a long-term interest swap is
available with the effect that none of our assets is subject to
changes in base rates.
Margin +1% (1)
In thousands of Pounds Sterling Equity Profit or loss
2020 (7,745) (7,745)
2019 (6,943) (6,943)
(1) The Northern Territory Secure Facilities ('NTSF') asset is
the only remaining asset in the Group's portfolio with refinancing
risk.
Derivative financial instruments
The fair value of derivative financial instruments ('foreign
exchange forwards') is calculated by the difference between the
contractual forward rate and the estimated forward exchange rates
at the maturity of the forward contract. The foreign exchange
forwards are fair valued periodically by the counterparty bank. The
fair value of derivative financial instruments as of 31 December
2020 amounted to a net asset of GBP16,000 (31 December 2019:
GBP1,361,000 - net asset). The counterparty bank has an
S&P/Moody's long-term credit rating of A+/Aa3.
The net loss on the valuation of foreign exchange forwards for
the year ended 31 December 2020 amounted to a net loss of
GBP1,495,000 (31 December 2019: GBP930,000 - net loss).
During the year ended 31 December 2020, the Group realised a net
loss of GBP151,000 on the cash settlement of foreign exchange
forwards (31 December 2019: GBP1,164,000 - realised net gain).
The 2019 net gain on the derivative financial instruments have
been reclassified for consistency with the current year
presentation from 'Other operating expenses' to 'Net gain(loss) on
balance sheet hedging'. This reclassification had no effect on the
reported results in the prior year.
19. Subsidiaries
During the year ended 31 December 2020, the Company had the
following consolidated subsidiaries ('Holding Companies' if
referred to individually) which are included in the consolidated
financial statements:
Effective
Country of Ownership Year
Company Incorporation Interest Acquired/Established
BBGI Global Infrastructure S.A. Luxembourg Ultimate 2011
Parent
BBGI Management HoldCo S.à Luxembourg 100.0% 2011
r. l. ('MHC')
BBGI Inv, S.à r. l. Luxembourg 100.0% 2012
BBGI Investments S.C.A. Luxembourg 100.0% 2012
BBGI Holding Limited UK 100.0% 2012
BBGI (NI) Limited UK 100.0% 2013
BBGI (NI) 2 Limited UK 100.0% 2015
BBGI CanHoldco Inc. Canada 100.0% 2013
BBGI Guernsey Holding Limited Guernsey 100.0% 2013
BBGI Ireland Limited Ireland 100.0% 2017
The Company's subsidiaries which are not consolidated, by virtue
of the Company being an Investment Entity, and are accounted for as
Investments at FVPL, are as follows:
Date
Country Effective Acquired
of
Company Asset Name Incorporation Ownership Controlled
RW Health Royal Women's Australia 100.0% 2012
Partnership Holdings Hospital
Pty Limited
RWH Health Royal Women's Australia 100.0% 2012
Partnership Pty Hospital
Limited
RWH Finance Pty Royal Women's Australia 100.0% 2012
Limited Hospital
Victorian Victoria Australia 100.0% 2012
Correctional Correctional
Infrastructure Facilities
Partnership Pty
Limited
BBPI Sentinel Northern Territory Australia 100.0% 2014
Holdings Pty Secure
Limited Facilities
BBPI Sentinel Northern Territory Australia 100.0% 2014
Holding Trust Secure
Facilities
BBPI Sentinel Pty Northern Territory Australia 100.0% 2014
Limited Secure
Facilities
BBPI Member Trust Northern Territory Australia 100.0% 2014
Secure
Facilities
Sentinel Partnership Northern Territory Australia 100.0% 2014 and 2015
Pty Secure
Limited Facilities
Sentinel UJV Northern Territory Australia 100.0% 2014 and 2015
Secure
Facilities
Sentinel Financing Northern Territory Australia 100.0% 2014 and 2015
Holdings Secure
Pty Limited Facilities
Sentinel Financing Northern Territory Australia 100.0% 2014 and 2015
Pty Limited Secure
Facilities
Sentinel Finance Northern Territory Australia 100.0% 2014 and 2015
Holding Secure
Trust Facilities
Sentinel Finance Northern Territory Australia 100.0% 2014 and 2015
Trust Secure
Facilities
BBGI Sentinel Northern Territory Australia 100.0% 2015
Holdings 2 Secure
Pty Limited Facilities
BBGI Sentinel Northern Territory Australia 100.0% 2015
Holding Trust Secure
2 Facilities
BBGI Sentinel 2 Pty Northern Territory Australia 100.0% 2015
Limited Secure
Facilities
BBGI Sentinel Trust Northern Territory Australia 100.0% 2015
2 Secure
Facilities
BBGI Champlain Champlain Bridge Canada 100.0% 2020
Holding Inc.
BBGI SSLG Partner Champlain Bridge Canada 100.0% 2020
Inc.
Signature on the Champlain Bridge Canada 25.0% 2020
Saint_Laurent
Group G.P.
SSL Finance Inc. Champlain Bridge Canada 25.0% 2020
Golden Crossing Golden Ears Bridge Canada 100.0% 2012 and
Holdings 2013
Inc.
Golden Crossing Golden Ears Bridge Canada 100.0% 2012 and
Finance 2013
Inc.
Golden Crossing Inc. Golden Ears Bridge Canada 100.0% 2012 and
2013
Global Golden Ears Bridge Canada 100.0% 2012 and
Infrastructure 2013
Limited
Partnership
Golden Crossing Golden Ears Bridge Canada 100.0% 2012 and
General 2013
Partnership
BBGI KVH Holdings Kelowna and Vernon Canada 100.0% 2013
Inc. Hospitals
BBGI KVH Inc. Kelowna and Vernon Canada 100.0% 2013
Hospitals
BBGI KVH Holdings 2 Kelowna and Vernon Canada 100.0% 2020
Inc. Hospitals
BBGI KVH 2 Inc. Kelowna and Vernon Canada 100.0% 2020
Hospitals
Infusion Health KVH Kelowna and Vernon Canada 100.0% 2013 and
General Hospitals 2020
Partnership
BBGI 104 GP Inc Highway 104 Canada 100.0% 2020
Dexter Nova Alliance Highway 104 Canada 50.0% 2020
GP
WCP Holdings Inc. Women's College Canada 100.0% 2013
Hospital
WCP Inc. Women's College Canada 100.0% 2013
Hospital
WCP Investments Inc. Women's College Canada 100.0% 2013
Hospital
Women's College Women's College Canada 100.0% 2013
Partnership Hospital
Stoney Trail Group Northeast Stoney Canada 100.0% 2013
Holdings Trail
Inc.
Stoney Trail LP Inc. Northeast Stoney Canada 100.0% 2013
Trail
Stoney Trail Northeast Stoney Canada 100.0% 2013
Investments Trail
Inc.
Stoney Trail Inc. Northeast Stoney Canada 100.0% 2013
Trail
Stoney Trail Global Northeast Stoney Canada 100.0% 2013
Limited Trail
Partnership
Stoney Trail General Northeast Stoney Canada 100.0% 2013
Partnership Trail
BBGI NCP Holdings North Commuter Canada 100.0% 2015
Inc. Parkway
BBGI Stanton Holdco Stanton Canada 100.0% 2018
1 Inc. Territorial
Hospital
BBGI Stanton Holdco Stanton Territorial Canada 100.0% 2020
2 Inc. Hospital
BBGI Stanton Holdco Stanton Territorial Canada 100.0% 2020
3 Inc. Hospital
BBGI Stanton Holdco Stanton Territorial Canada 100.0% 2020
4 Inc. Hospital
BBGI Canada Holding Stanton Territorial Canada 100.0% 2020
5 Inc. Hospital
Boreal Health Stanton Territorial Canada 100.0% 2018 and
Partnership Hospital 2020
PJB Burg Correctional Germany 100.0% 2018 and
Beteiligungs-GmbH Facility 2020
Projektgesellschaft Burg Correctional Germany 90.0% 2012
Justizvollzug Facility
Burg GmbH & Co. KG
PJB Management-GmbH Burg Correctional Germany 100.0% 2012
Facility
Kreishaus Unna Unna Administrative Germany 100.0% 2012 and
Holding GmbH Center 2020
Projekt- und Unna Administrative Germany 90.0% 2012 and
Betriebsgesellschaft Center 2020
Kreishaus Unna mbH
BBGI PPP Investment Holding entity Luxembourg 100.0% 2018
S.à
r.l.
De Groene Schakel Westland Town Hall Netherlands 100.0% 2018 and
Holding 2019
B.V.
De Groene Schakel Westland Town Hall Netherlands 100.0% 2018 and
B.V. 2019
Noaber18 Holding N18 Motorway Netherlands 52.0% 2018, 2019
B.V. and 2020
Noaber18 B.V. N18 Motorway Netherlands 52.0% 2018, 2019
and 2020
Agder OPS Vegselskap E18 Norway 100.0% 2013 and 102014
AS
Bedford Education Bedford Schools UK 100.0% 2012
Partnership
Holdings Limited
Bedford Education Bedford Schools UK 100.0% 2012
Partnership
Limited
Lisburn Education Lisburn College UK 100.0% 2012
Partnership
(Holdings) Limited
Lisburn Education Lisburn College UK 100.0% 2012
Partnership
Limited
Clackmannanshire Clackmannanshire Schools UK 100.0% 2012
Schools
Education
Partnership
(Holdings)Limited
Clackmannanshire Clackmannanshire Schools UK 100.0% 2012
Schools
Education
Partnership Limited
Primaria (Barking & Barking & Havering UK 100.0% 2012
Havering) Clinics
Limited (LIFT)
Barking Dagenham Barking & Havering UK 60.0% 2012
Havering Clinics
Community Ventures (LIFT)
Limited
Barking & Havering Barking & Havering UK 60.0% 2012
LIFT Clinics
(Midco) Limited (LIFT)
Barking & Havering Barking & Havering UK 60.0% 2012
LIFT Clinics
Company (No.1) (LIFT)
Limited
Scottish Borders Scottish Borders Schools UK 100.0% 2012
Education
Partnership
(Holdings) Limited
Scottish Borders Scottish Borders UK 100.0% 2012
Education Schools
Partnership Limited
Coventry Education Coventry Schools UK 100.0% 2012
Partnership
Holdings Limited
Coventry Education Coventry Schools UK 100.0% 2012
Partnership
Limited
Fire Support (SSFR) Stoke & Staffs UK 85.0% 2012
Holdings Rescue Service
Limited
Fire Support (SSFR) Stoke & Staffs UK 85.0% 2012
Limited Rescue Service
Highway Management M80 M80 Motorway UK 100.0% 2012
Topco
Limited
Tor Bank School Tor Bank School UK 100.0% 2013
Education
Partnership (Holdings)
Limited
Tor Bank School Tor Bank School UK 100.0% 2013 and 2014
Education
Partnership Limited
Mersey Care Mersey Care Hospital UK 100.0% 2013 and 2014
Development Company (LIFT)
1 Limited
MG Bridge Investments Mersey Gateway UK 100.0% 2014
Limited Bridge
Lagan College Lagan College UK 100.0% 2014
Education Partnership
(Holdings) Limited
Lagan College Lagan College UK 100.0% 2014
Education Partnership
Limited
Highway Management M1 Westlink UK 100.0% 2014
(City)
Holding Limited
GB Consortium 1 North London Estates UK 100.0% 2012, 2014 and 2018
Limited Partnership (LIFT)
and
Liverpool and
Sefton Clinics
(LIFT)
East Down Education East Down Colleges UK 100.0% 2012 and
Partnership 2018
(Holdings) Limited
East Down Education East Down Colleges UK 100.0% 2012 and
Partnership 2018
Limited
Highway Management M1 Westlink UK 100.0% 2014
(City)
Finance Plc
Highway Management M1 Westlink UK 100.0% 2014
(City)
Limited
Blue Light Partnership Avon and Somerset UK 100.0% 2014, 2015
(ASP) Police HQ and 2016
NewCo Limited
Blue Light Partnership Avon and Somerset UK 100.0% 2014, 2015
(ASP) Police HQ and 2016
Holdings Limited
Blue Light Partnership Avon and Somerset UK 100.0% 2015
(ASP) Police HQ
NewCo 2 Limited
GT ASP Limited Avon and Somerset UK 100.0% 2015
Police HQ
Blue Light Partnership Avon and Somerset UK 100.0% 2015
(ASP) Police HQ
Limited
Northwin Limited North West Regional UK 100.0% 2015
College
Northwin Belfast Metropolitan UK 100.0% 2016
(Intermediate) College
(Belfast)
Limited
Northwin (Belfast) Belfast Metropolitan UK 100.0% 2016
Limited College
BBGI East End Holdings Ohio River Bridges USA 100.0% 2014
Inc.
East End Crossings Ohio River Bridges USA 66.67% 2014 and
Partners, 2019
LLC
Trade and other receivables
As at 31 December 2020, trade and other receivables include
short-term receivables from non-consolidated subsidiaries amounting
to GBP1,631,000 (2019: GBP3,876,000).
20. Related parties and key contracts
All transactions with related parties were undertaken on an
arm's length basis.
Supervisory Board fee
The members of the Supervisory Board of the Company were
entitled to a total of GBP209,000 in fees for the year ended 31
December 2020 (2019: GBP215,000).
Directors' shareholding in the Company
31 December 31 December
In thousands of shares 2020 2019
Duncan Ball 548 431
Frank Schramm 500 418
Michael Denny 262 138
Colin Maltby (1) - 123
Sarah Whitney 39 25
1,349 1,135
(1) Mr. Maltby stepped down from his role on the Supervisory
Board with effect from 31 July 2020.
Remuneration of the Management Board
Under the current remuneration programme, all staff are entitled
to an annual base salary payable monthly in arrears, which is
reviewed annually by the Management Board. The Management Board
members are entitled to a fixed remuneration under their contracts
and are also entitled to participate in a short-term incentive plan
and a long-term incentive plan. Compensation under their contracts
is reviewed annually by the Remuneration Committee.
The total short-term and other long-term benefits recorded in
the consolidated income statement for the Management Board, as the
key management personnel, are as follows:
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Short-term benefits 2,717 2,097
Share-based payment 953 561
3,670 2,658
Share-based compensation
Each of the members of the Management Board received award
letters ('2019 Award', '2018 Award', and '2017 Award',
respectively) under the Group's long-term incentive plan. These
awards are to be settled by MHC in the Company's own shares. Of the
awards granted, 50 per cent vests by reference to a performance
measure based on the Company's Total Shareholder Return ('TSR
condition') over the Return Periods (below), and the remaining
vests by reference to a performance measure based on the increase
in the Company's Investment Basis NAV per share ('NAV condition').
Further details are as follows:
2019 Award 2018 Award 2017 Award
December 2019-December December 2018-December December 2017-December
Return Period 2022 2021 2020
Vesting period (by reference to performance 36 mos. Ending 36 mos. Ending 36 mos. Ending
Measure - NAV condition and TSR 31/12/2022 31/12/2021 31/12/2020
condition)
Maximum number of shares which will
vest 757,893 820,189 881,626
The fair value of the equity instruments awarded to the
Management Board was determined using a Monte Carlo model, the key
parameters of which are listed in the following table:
2019 Award 2018 Award 2017 Award
Share price at grant date GBP 1.675 GBP 1.565 GBP 1.405
Maturity 3 years 3 years 3 years
Annual target dividend (2020) GBP0.0718 - -
Annual target dividends (2021 GBP0.0733 - -
to 2022)
Annual target dividends (2019 - GBP0.0700 -
to 2021)
Annual target dividends (2018 - - GBP0.0650
to 2020)
Volatility 11% 11% 10%
Risk free rate Between 0.53%-0.60% Between 0.75%-0.79% Between 0.38%-0.56%
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the plan
is indicative of future trends, which may not necessarily be the
actual outcome.
During the year, the Group started to implement a 'Staff Award
Plan' to selected employees. The 'Staff Award Plan' entitles the
employee to a right to receive shares in the Company upon meeting a
service condition.
The fair value of the awards and amounts recognised as
additional paid in capital in the Group's consolidated statement of
financial position are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
2019 Award 148 -
2018 Award 315 157
2017 Award 402 268
2016 Award - 540
Deferred STIP 627 -
Staff Award Plan 25 -
Amount recognised in additional paid-in capital 1,517 965
During the year ended 31 December 2020, the Company settled the
outstanding obligation under the 2016 Award through (a) issuance of
690,274 shares at 144.5 pence per share. The total accrued amount
under the 2016 Award as at 31 December 2019 was GBP540,000. This
amount was transferred from Additional paid in capital to Share
capital at the settlement date, less the adjustment of
GBP114,000.
The share-based compensation expenses amount recognised as part
of 'administrative expenses' in the Group's consolidated income
statement are as follows:
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
2019 Award 148 -
2018 Award 157 157
2017 Award 134 134
2016 Award (114) 270
Deferred STIP 627 -
Staff Award Plan 25 -
Amount recognised in administrative expenses 977 561
In December 2020, each of the members of the Management Board
received an award letter ('2020 Award'). The maximum number of
shares that could be issued under this award was determined by
using the closing price of the Company's share price on 23 December
2020, as ascertained from the Official List, which was 170.00 pence
per share. Subject to the achievement of the performance
conditions, the awards will vest after 21 December 2023.
Deferred STIP
Commencing in 2020, the Company introduced a bonus deferral
under the STIP with one-third of any bonus earned being deferred
into shares for three year holding period. The deferral component
of the STIP differs from the Company's share-based compensation in
that there are no further vesting conditions on this earned
bonus.
The Deferred STIP is valued at 33.3% of the outcome of the
annual bonus plan for the Management Board. The total value of the
Deferred STIP as at 31 December 2020 was GBP627,000 (31 December
2019: nil).
21. Commitments and contingencies
The Group has engaged, in the ordinary course of business, the
services of certain entities to provide legal, custodian, audit,
tax and other services to the Company. The expenses incurred in
relation to such are treated as legal and professional fees under
the administrative expenses grouping in the consolidated income
statement.
As at 31 December 2020, the Group had utilised GBP1.2 million
(31 December 2019: GBP22.2 million) of the GBP180 million RCF, of
which GBP1.2 million (31 December 2019: GBP1.2 million) was being
used to cover letters of credit. Refer to Note 15 for further
details on the RCF.
MHC leases its current office under a cancellable operating
lease agreement. The expenses incurred in relation to such are
recognised as office and other expenses under administrative
expenses (see Note 6).
22. Service Concession Agreements
As at 31 December 2020, the Group has a portfolio of 50 assets
(see also Note 9), with a weighted average remaining concession
length of 20.4 years. The Group has a diverse asset mix from which
the service concession receivables are derived. All assets are
availability-based. The rights of both the concession provider and
concession operator are stated within the specific asset
agreement.
The following table summarises the main information about the
Group's outstanding service concession agreements:
Period of
Concession
(Operational
Phase)
Sector Asset Name % Equity Short Description Phase Start Date End Date Investment
Owned on of Concession Volume
Asset Arrangement
Availability Kicking Horse 50.0% Design, build, Operational September October C$ 148
Roads Canyon finance and 2007 2030 million
operate a 26-km
stretch of the
Trans-Canada
Highway, a vital
gateway to British
Columbia.
Golden Ears 100.0% Design, build, Operational June 2009 June 2041 C$ 1,117
Bridge finance and million
operate the
Golden Ears
Bridge that
spans the Fraser
River and connects
Maple Ridge
and Pitt Meadows
to Langley and
Surrey, near
Vancouver, British
Columbia.
Northwest 50.0% Partly design, Operational November October C$ 1,170
Anthony build, finance 2011 2041 million
Henday Drive and operate
a major transport
infrastructure
asset in Canada,
a ring road
through Edmonton,
capital of the
province of
Alberta.
M80 Motorway 50.0% Design, build, Operational July 2011 September GBP310
finance and 2041 million
operate 18 km
of dual two/three
lane motorway
with associated
slip roads and
infrastructure
from Stepps
in North Lanarkshire
to Haggs in
Falkirk (Scotland).
E18 Motorway 100.0% Design, build, Operational August 2009 August NOK 3,604
finance, operate 2034 million
and maintain
a 38 km dual
carriageway
in Norway, including
61 bridges and
structures and
75 km of secondary
roads, carving
through a rugged
and beautiful
landscape between
Grimstad and
Kristiansand.
Northeast 100.0% Design, build, Operational November October C$424 million
Stoney Trail finance, operate 2009 2039
and maintain
a 21 km section
of highway,
forming part
of a larger
ring road developed
in Calgary,
Alberta, Canada.
Ohio River 66.67% Design, build, Operational December September US$ 1,175
Bridge finance, operate 2016 2051 million
and maintain
East End Bridge
asset which
includes a
cable-stay
bridge, a tunnel
and the connecting
highway with
a total length
of 8 miles
crossing the
Ohio river
in the greater
Louisville-Southern
Indiana region.
Mersey Gateway 37.5% Design, build, Operational October March 2044 GBP650
Bridge finance, operate 2017 million
and maintain
a new circa
1-km long six-lane
toll cable-stay
bridge (three
towers) over
the Mersey
river to relieve
the congested
and ageing
Silver Jubilee
Bridge and
upgrading works
for 9.5 km
of existing
roads and associated
structures.
M1 Westlink 100.0% Design, build, Operational February February GBP161
finance, operate 2006 2036 million
and maintain
with significant
amount of
construction
work completed
in 2009 to
upgrade key
sections of
approx. 60
km of motorway
through Belfast
and its vicinity,
including O&M
of the complete
motorway.
North Commuter 50.0% Design, build, Operational October September C$ 311
Parkway finance, operate 2018 2048 million
and maintain
two new arterial
roadways and
a new river
crossing located
in the north
area of Saskatoon,
Saskatchewan,
Canada, and
design, construct,
finance, operate
and maintain
a replacement
river crossing
located in
Saskatoon's
downtown core.
Canada Line 26.7% Design, build, Operational August 2009 July 2040 C$ 1,895
finance, operate million
and maintain
a 19km rapid
transit line
connecting
the cities
of Vancouver
and Richmond
with Vancouver
International
Airport in
British Columbia,
Canada.
Southeast 40.0% Design, build, Operational November September C$ 524 million
Stoney Trail finance, operate 2013 2043
and maintain
a 25km section
of highway,
forming part
of a larger
ring road developed
in Calgary,
Alberta, Canada.
William R. 80.0% Design, build, Operational May 2008 June 2035 C$ 184 million
Bennett Bridge finance, operate
and maintain
a 1.1km long
floating bridge
in Kelowna,
British Columbia,
Canada.
Design, build
finance operate
and maintain
the enlargement
of the A1/A6
in the Netherlands,
which involves
the reconstruction
and widening
of this 2x5
lanes motorway
plus 2 reversible
direction lanes.
The asset involves
some 70 new
engineering
A1/A6 Motorway 37.14%* structures. Operational July 2017 June 2042 EUR 727 million
Design, build,
finance operate
and maintain
the extension
of the N18
motorway between
Varsseveld
and Enschede
in the eastern
part of the
Netherlands.
It comprises
of 15 km of
existing and
27km of a new
2x2-lane motorway
with more than
30 ecological
passages, aiming
at a reduction
in traffic
in certain
villages and
N18 Motorway 52.0% safety improvement. Operational April 2018 April 2043 EUR 130 million
Highway 104 50% Design, build, Construction May 2020 August C$718 million
finance, operate 2043
and maintain
PPP following
completion
of construction.
The project
consists of
the construction
of a four-lane
divided highway
corridor beginning
at the end
of the existing
divided highway
east of New
Glasgow near
Exit 27 at
Sutherlands
River and running
for a distance
of approximately
38km to the
existing divided
highway just
west of the
Addington Fork
Interchange
(Exit 31) at
Antigonish.
Champlain 25% Design, Operational December October C$2,260 million
Bridge construction, 2020 2049
financing,
operation,
maintenance
and rehabilitation
of a new bridge
spanning the
St. Lawrence
River between
Montreal and
Brossard, Quebec.
Social Victoria 100.0% Design, build, Operational March 2006 May 2031 A$ 244.5
Infrastructure Correctional finance, operate, (MRC)/February million
Facilities and maintain 2006 (MCC)
for a period
of 25 years,
two new correctional
facilities
for the State
of Victoria,
Australia (MCC
and MRC).
Design, build,
finance, operate,
and maintain
for a concession
period of 25
years, a new
correctional
facility for
the state of
Burg Correctional Saxony-Anhalt, EUR 100
Facility 90.0% Germany. Operational May 2009 April 2034 million
100.0% Design, build, Operational July 2014/July March 2039 GBP83 million
Avon and finance, operate 2015
Somerset and maintain
Police HQ four new build
police and
custody facilities
in the Avon
and Somerset
region (UK).
Northern 100.0% Design, build, Operational November October A$620 million
Territory finance, operate 2014 2044
Secure Facilities and maintain
a new correctional
facility, located
near Darwin,
including three
separate centres
of the 1,048
bed
multi-classification
men's and women's
correctional
centre and
24-bed Complex
Behaviour Unit.
Bedford Schools 100.0% Design, build, Operational June 2006 December GBP29 million
finance, operate 2035
and maintain
the redevelopment
of two secondary
schools in
the County
of Bedfordshire.
Coventry 100.0% Design, build, Operational In stages December GBP27 million
Schools finance, operate from March 2034
and maintain 2006 to
one new school June 2009
and community
facilities
for the Coventry
City Council.
Kent Schools 50.0% Design, build, Operational June 2007 September GBP106 million
finance, operate 2035
and maintain
the redevelopment,
which included
the construction
of new build
elements for
each school
as well as
extensive
reconfiguration
and refurbishment
of six schools.
Scottish 100.0% Design, build, Operational July 2009 November GBP92 million
Borders Schools finance, operate 2038
and maintain
three new secondary
schools
for Scottish
Borders Council.
Clackmannanshire 100.0% Design, build, Operational In stages March 2039 GBP77 million
Schools finance, operate from January
and maintain to May 2009
the redevelopment
of three secondary
schools in
Clackmannanshire,
Scotland.
East Down 100.0% Design, build, Operational June 2009 May 2036 GBP73.8 million
Colleges finance, operate (with Lisburn
and maintain College)
the East Down
Colleges in
Northern Ireland
Lisburn College 100.0% Design, build, Operational April 2010 May 2036 GBP73.8 million
finance, operate (with East
and maintain Down College)
Lisburn College
in Northern
Ireland.
Tor Bank 100.0% Design, build, Operational October October GBP13 million
School finance, operate 2012 2037
and maintain
a new school
for pupils
with special
education needs
in Northern
Ireland.
Lagan College 100.0% Design , build, Operational October June 2038 GBP33 million
finance operate 2013
and maintain
the redevelopment
of school in
Northern Ireland.
Design, build,
finance operate
and maintain
the redevelopment
of five schools December
Cologne Schools 50.0% in Cologne. Operational April 2005 2029 EUR32 million
Design, build,
finance operate
and maintain
a school for
Rodenkirchen approx. 1200 November November
Schools 50.0% pupils in Cologne. Operational 2007 2034 EUR40 million
Design, build,
finance operate
and maintain
the redevelopment
Frankfurt of four schools
Schools 50.0% in Frankfurt. Operational August 2007 July 2029 EUR89 million
North West 100.0% Design, build, Operational February January GBP9 million
Regional finance, operate 2001 2026
College and maintain
the North West
Regional College
educational
campus in Derry,
Northern Ireland
Belfast Metropolitan 100.0% Design, build, Operational September August GBP20 million
College finance, operate 2002 2027
and maintain
the Belfast
Met educational
campus in Millfield,
Belfast, Northern
Ireland
Design, build,
finance, operate
and maintain
Westland Town
Hall, a PPP
accommodation
asset consisting
of a new
approximately
11,000m(2)
town hall for
the Dutch
Westland Municipality August
Town Hall 100.0% of Westland. Operational August 2017 2042 EUR33 million
Gloucester 50.0% Design, build, Operational April 2005 February GBP38 million
Royal Hospital finance, operate 2034
and maintain
a hospital
scheme in
Gloucester,
UK.
Liverpool 60.0% Design, build, Operational In 7 tranches In 7 GBP97 million
and Sefton finance, operate starting tranches
Clinics (LIFT) and maintain April 2005 starting
the primary and ending November
healthcare February 2037 and
facilities 2013 ending
in Liverpool February
and Sefton, 2043
UK.
North London 60.0% Design, build, Operational In 4 tranches In 4 GBP72 million
Estates Partnership finance, operate starting tranches
(LIFT) and maintain February starting
the primary 2006 and January
healthcare ending June 2031 and
facilities 2013 ending
of the Barnet, June 2043
Enfield and
Haringey LIFT
programme,
UK.
Barking Dagenham 60.0% Design, build, Operational In 3 tranches In 3 GBP65 million
Havering finance, operate starting tranches
(LIFT) and maintain October starting
10 facilities/clinics 2005 and September
in East London, ending October 2030 and
UK with asset 2008 ending
construction September
completions 2033
between 2005
and 2009.
Royal Women's 100.0% Design, build, Operational June 2008 June 2033 A$316 million
Hospital finance, operate
and maintain
a new nine-storey
Royal Women's
Hospital in
Melbourne.
Mersey Care 79.6% Design, build, Operational December December GBP25 million
Hospital finance, operate 2014 2044
(part of and maintain
Liverpool a new mental
Sefton Clinics health in-patient
(LIFT) above) facility on
the former Walton
hospital site
in Liverpool,
UK.
Kelowna and 100.0% Design, build, Operational January August C$432.9
Vernon Hospital finance, operate 2012 2042 million
and maintain
a new Patient
Care Tower,
a new University
of British Columbia
Okanagan Clinical
Academic Campus
and car park
at Kelowna General
Hospital, and
a new Patient
Care Tower at
Vernon Jubilee
Hospital.
Women's College 100.0% Design, build, Operational May 2013 May 2043 C$345 million
Hospital finance, operate (Phase 1),
and maintain September
the new Women's 2015 (Phase
College Hospital 2),
in Toronto, March 2016
Ontario, Canada. (final completion).
Restigouche 80.0% Design, build, Operational June 2015 October C$210 million
Hospital finance, operate 2044
Centre and maintain
the new Psychiatric
Care Centre
in Restigouche,
New Brunswick,
Canada.
McGill University 40 .0 % Design, build, Operational October September C$2,012
Health Centre finance, operate 2014 2044 million
and maintain
the new McGill
University Health
Centre, Montreal,
Canada.
Stanton Territorial 100 .0 Design, build, Operational December December C$298 million
Hospital % finance, operate 2018 2048
and maintain
the new Stanton
Territorial
Hospital, Yellowknife,
Northwest Territories,
Canada.
Stoke & Staffs 85.0% Design, build, Operational November October GBP47 million
Rescue Service finance, operate 2011 2036
and maintain
10 new community
fire stations
in Stoke-on-Trent
and Staffordshire,
UK.
Design, build,
finance, operate
and maintain
the administration
building of
the Unna District
Unna Administrative in Rhine-Westphalia,
Centre 90.0% Germany. Operational July 2006 July 2031 EUR24 million
Design, build,
finance, operate
and maintain
the refurbishment
and new construction
Fürst of a 32 hectare
Wrede Military army barracks
Base 50.0% in Munich, Germany. Operational March 2008 March 2028 EUR48 million
23. Standards issued but not yet effective
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2021 and
earlier application is permitted; however, the Group has not early
adopted any of the forthcoming new or amended standards in
preparing these condensed consolidated interim financial
statements. The Group intends to adopt these new and amended
standards, if applicable, when they become effective.
Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
On 27 August 2020, the IASB published Interest Rate Benchmark
Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16. With publication of the phase two amendments, the IASB has
completed its work in response to IBOR reform.
The amendments provide temporary reliefs which address the
financial reporting effects when an interbank offered rate ('IBOR')
is replaced with an alternative nearly risk-free interest rate
('RFR').
The amendments include a practical expedient to require
contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating
interest rate, equivalent to a movement in a market rate of
interest. Inherent in allowing the use of this practical expedient
is the requirement that the transition from an IBOR benchmark rate
to an RFR takes place on an economically equivalent basis with no
value transfer having occurred.
The adoption of this new standard is not expected to have a
significant impact on the Group's consolidated financial
statements.
24. Events after the end of the reporting period
In February 2021, Company declared a 2(nd) interim dividend of
3.59 pence per share with scrip alternative for qualifying
shareholders for the period 1 July - 31 December 2020, to be paid
in April 2021.
Impact of coronavirus (Covid-19)
At the date of publication of these consolidated financial
statements, the Group and its portfolio has not experienced any
material adverse operational or financial impact related to the
implications of Covid-19. The portfolio continued its strong
performance over the reporting period with no material adverse
effect on valuation resulting from Covid-19. This strong
performance is primarily as a result of the Group holding a
low-risk, 100 per cent availability-based portfolio, coupled with
strong stakeholder collaboration during the reporting period. There
continues to be uncertainty surrounding Covid-19 with the
consequences and potential disruptions difficult to foresee, but
currently our portfolio remains resilient in this challenging
market environment. We will continue to work very closely with all
stakeholders to help mitigate the risks and effects of the global
pandemic.
AUDIT OPINION
To the Shareholders of
BBGI GLOBAL INFRASTRUCTURE S.A. (formerly BBGI SICAV S.A.)
6E, route de Trèves
L-2633 Senningerberg
Luxembourg
REPORT OF THE REVISEUR D'ENTREPRISES AGREE
Report on the audit of the financial statements
Opinion
We have audited the financial statements of BBGI GLOBAL
INFRASTRUCTURE S.A. (formerly BBGI SICAV S.A.) (the "Company"),
which comprise the statement of financial position as at 31
December 2020, and the statement of comprehensive income, statement
of changes in equity and statement of cash flows for the year then
ended, and notes to the financial statements, including a summary
of significant accounting policies.
In our opinion, the accompanying financial statements give a
true and fair view of the financial position of the Company as at
31 December 2020 and of its financial performance and its cash
flows for the year then ended in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by European
Union.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July
2016 on the audit profession ("Law of 23 July 2016") and with
International Standards on Auditing ("ISAs") as adopted for
Luxembourg by the "Commission de Surveillance du Secteur Financier"
("CSSF"). Our responsibilities under the Law of 23 July 2016 and
ISAs are further described in the << Responsibilities of the
"réviseur d'entreprises agréé" for the audit of the financial
statements >> section of our report. We are also independent
of the Company in accordance with the International Ethics
Standards Board for Accountants' Code of Ethics for Professional
Accountants ("IESBA Code") as adopted for Luxembourg by the CSSF
together with the ethical requirements that are relevant to our
audit of the financial statements, and have fulfilled our other
ethical responsibilities under those ethical requirements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of the audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Impairment of investment in subsidiary and loans receivable from
subsidiaries (including interest)
a) Why the matter was considered to be one of most significance
in our audit of the financial statements of the current period?
We refer to the accounting policy for "Impairment testing for
investments" and to Note 13 and 14 in the financial statements.
Over 97% of the Company's total assets are investment in subsidiary
and loans receivable from subsidiaries (including interest) subject
to an impairment assessment at each reporting date.
The conclusion whether there is objective evidence of impairment
on investment in subsidiary is a significant judgement area
resulting from a number of assumptions in the financial models. The
valuation is inherently subjective due to the absence of a liquid
market for these investments, and the fact that their fair value is
determined using the fair value of the underlying infrastructure
investments which, in turn, is determined using a discounted cash
flow methodology applied by the Management Board. The complexity of
this methodology as well as assumptions taken in the financial
models mean that there is a risk that the fair value of these
investments may not be appropriate. The key assumptions used by the
Management Board are in respect of discount rates and components of
budgets used being part of long term forecast cash flows. In
addition, the Management Board also used key macroeconomic
assumptions such as inflation, deposit interest and tax rates that
have an impact on the long term forecast cash flows.
As for the loans receivable from subsidiaries (including
interest), valuation of the underlying investments is an important
consideration in the determination of expected credit losses (ECL).
The significance of the estimates and judgements involved, coupled
with the fact that a variance in the key assumptions used in the
valuation of investment in subsidiary and in the impairment
assessment of loans receivable from subsidiaries (including
interest), when aggregated, could result in a material misstatement
on the statement of comprehensive income and statement of financial
position, warrants specific audit focus in this area.
b) How the matter was addressed in our audit
Our audit procedures to determine if there is any impairment of
investment in subsidiary and loans receivable from subsidiaries
(including interest) consist of the analysis of the valuation of
the underlying infrastructure assets that have been developed
predominantly under PPP/PFI or similar procurements models
("Infrastructure Investments") and of ECL, as appropriate, which
included, but were not limited to the following:
- We tested the design, implementation and effectiveness of the
controls around the determination and monitoring of the discounted
cash flows and the determination and monitoring of related key
macroeconomic assumptions;
- We involved KPMG valuation specialists and their market
knowledge to perform the following procedures:
Ø We considered and commented the approach and methodology
documented by Management Board used in Company's Valuation Report
against International Private Equity and Venture Capital Valuation
Guidelines;
Ø We obtained market benchmarks for discount rates from public
and private sources. We considered the discount rates applied in
Company's Valuation Report against market benchmarks in the light
of market, project, sector and country issues;
Ø We performed research on key assumptions and commented and
compared those against the assumptions applied in Company's
Valuation Report;
Ø We reviewed the results of the sensitivity analysis on key
assumptions taken by Management;
Ø We challenged and determined the appropriateness of the
Management Board's assumptions used for the valuation of a sample
of Infrastructure Investments applying following procedures:
-- We agreed the underlying shareholder cash flows inputs (such
as dividends, subordinated debt interest and principal repayment
and director's fees) from the underlying project model to the
Company's valuation model;
-- We considered if the methodology for assessing fair value has
been applied consistently across the assets;
-- We read the latest board minutes, board packages and other
supporting documents and information in respect of the sampled
investments and raised Q&A comments to challenge the inputs in
the valuation ;
- We reviewed the Valuation Report prepared by the Management
Board and assessed whether the valuation inputs and results are
consistent with our other audit procedures performed as part of our
audit of the consolidated financial statements;
- We obtained and reviewed the valuation review opinion issued
by the independent third party valuation expert engaged by the
Company, in connection with the appropriateness of the portfolio
value prepared by the Management Board;
- We tested the design, implementation and effectiveness of the
management review controls over the valuation process;
- We gained an understanding of the process and controls that
management has established to identify, account for and disclose
loans from subsidiaries (including interest) and to authorize and
approve significant transactions and arrangements with related
parties.
- We verified whether the Company's investment in subsidiary and
loans receivables from subsidiaries (including interest) are not
carried at more than their recoverable amount (fair value
determined) and assessed that there are no external or internal
indicators of impairment.
- We obtained management's assessments of the arm's length
principle and challenged the inputs used.
- We obtained the management impairment analysis by the
Management Board on the impairment of investment in subsidiary and
loans receivable from subsidiaries (including interest) and
performed the following procedures:
Ø We challenged the criteria and inputs used in the impairment
analysis;
Ø We performed an overall assessment of the assumptions and
models used to calculate the ECL; and
Ø We performed impairment testing of non-financial assets
(investment in subsidiary).
Other information
The Management Board is responsible for the other information.
The other information comprises the information stated in the
annual report but does not include the financial statements and our
report of "réviseur d'entreprises agréé" thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
this fact. We have nothing to report in this regard.
Responsibilities of the Management Board for the financial
statements
The Management Board is responsible for the preparation and fair
presentation of the financial statements in accordance with IFRSs,
and for such internal control as the Management Board determines is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the Management Board is
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Management Board either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Responsibilities of the réviseur d'entreprises agréé for the
audit of the financial statements
The objectives of our audit are to obtain reasonable assurance
about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
a report of the "réviseur d'entreprises agréé" that includes our
opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with the Law
of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
As part of an audit in accordance with the Law of 23 July 2016
and with ISAs as adopted for Luxembourg by the CSSF, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the Management Board.
- Conclude on the appropriateness of the Management Board's use
of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention
in our report of the "réviseur d'entreprises agréé"
to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
report of the "réviseur d'entreprises agréé". However,
future events or conditions may cause the Company to cease to
continue as a going concern.
- Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our report unless law or regulation precludes
public disclosure about the matter.
Report on other legal and regulatory requirements
We have been appointed as "réviseur d'entreprises agréé" by the
Shareholders on 30 April 2020 and the duration of our uninterrupted
engagement, including previous renewals and reappointments, is ten
years.
The management report is consistent with the financial
statements and has been prepared in accordance with the applicable
legal requirements.
Luxembourg, 24 March 2021 KPMG Luxembourg, Société
coopérative
Cabinet de révision agréé
Joseph de Souza
COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
DECEMBER 2020
In thousands of Pounds Sterling Notes 2020 2019
=======
Administrative expenses 5 (8,615) (7,415)
Other operating expenses 6 (3,107) (7,991)
Other operating income 7 5,181 -
Results from operating activities (6,541) (15,406)
Finance income 8 18,773 17,278
Profit before tax 12,232 1,872
Tax expense 9 (427) (406)
Profit from continuing operations 11,805 1,466
Profit from continuing operations attributable
to owners of the
Company 11,805 1,466
Other comprehensive income for the year - -
Total comprehensive income for the year attributable
to
owners of the Company 11,805 1,466
The accompanying notes form an integral part of the Company's
financial statements
In thousands of Pounds Sterling Notes 2020 2019
==================================================
Assets
Loans receivable from subsidiaries 13 217,182 201,342
Investment in subsidiary 14 333,048 293,303
Non-current assets 550,230 494,645
Loans receivable from subsidiaries 13 94,784 124,595
Interest and other receivables from subsidiaries 13 14,325 976
Other current assets 256 148
Cash and cash equivalents 10 5,636 20,918
==================================================
Current assets 115,001 146,637
==================================================
Total assets 665,231 641,282
==================================================
Equity
Share capital 11 772,640 715,406
Retained earnings (108,743) (75,832)
==================================================
Equity attributable to owners of the Company 663,897 639,574
==================================================
Liabilities
Trade payables 301 288
Other payables 931 1,313
Current tax liabilities 9 102 107
==================================================
Current liabilities 1,334 1,708
==================================================
Total liabilities 1,334 1,708
==================================================
Total equity and liabilities 665,231 641,282
==================================================
Net asset value attributable to the owners of
the Company 11 663,897 639,574
Net asset value per ordinary share (pence) 11 99.88 101.49
==================================================
The accompanying notes form an integral part of the Company's
financial statements.
Share Retained Total
In thousands of Pounds Sterling Notes Capital Earnings Equity
Balance at 1 January 2019 639,642 (35,678) 603,964
Total comprehensive income for
the year
attributable to the owners of
the Company - 1,466 1,466
Transactions with owners of the
Company, recognised directly in
equity
Issuance of shares from placing
of ordinary shares
- net of issue cost 11 73,915 - 73,915
Cash dividends 11 - (40,848) (40,848)
Scrip dividends 11 772 (772) -
Shares issued on behalf of a subsidiary 11 1,077 - 1,077
Balance at 31 December 2019 715,406 (75,832) 639,574
Total comprehensive income for
the year
attributable to the owners of
the Company - 11,805 11,805
Transactions with owners of the
Company,
recognised directly in equity
Issuance of shares from placing
of ordinary shares
- net of issue cost 11 54,169 - 54,169
Cash dividends 11 - (42,648) (42,648)
Scrip dividends 11 2,068 (2,068) -
Shares issued on behalf of a subsidiary 11 997 - 997
Balance at 31 December 2020 772,640 (108,743) 663,897
The accompanying notes form an integral part of the Company's
financial statements.
In thousands of Pounds Sterling Notes 2020 2019
========================================================== ====== ======== =========
Operating activities
Profit from continuing operations 11,805 1,466
Adjustments for:
Finance income 8,13 (18,773) (17,278)
Foreign currency exchange loss (gain) - net 7,6 (5,173) 168
Tax expense 9 427 406
(11,714) (15,238)
Working capital adjustments:
Other receivables from subsidiary (11,448) 11,178
Other current assets (108) 71
Trade and other payables and current tax liabilities (429) (81)
Cash used in operating activities (23,699) (4,070)
Taxes paid (432) (386)
Net cash flows used in operating activities (24,131) (4,456)
Investing activities
Loan repayment from subsidiaries 13 34,741 26,348
Loans provided to subsidiaries 13 (15,802) (45,681)
Investment in subsidiaries 14 (39,745) (29,932)
Interest received 17,949 38,971
Net cash flows used in investing activities (2,857) (10,294)
Financing activities
Proceeds from issuance of ordinary shares-net 11 54,169 73,915
Dividends paid 11 (42,648) (40,848)
========================================================== ====== =========
Net cash flows from financing activities 11,521 33,067
========================================================== ====== =========
Net increase (decrease) in cash and cash equivalents (15,467) 18,317
Impact of foreign exchange gain on cash and cash
equivalents 185 469
Cash and cash equivalents at 1 January 10 20,918 2,132
========================================================== ====== =========
Cash and cash equivalents at 31 December 10 5,636 20,918
========================================================== ====== =========
The accompanying notes form an integral part of the Company's
financial statements
1. Corporate information
BBGI Global Infrastructure S.A., formerly BBGI SICAV S.A.,
('BBGI', or the 'Company') is an investment company incorporated in
Luxembourg in the form of a public limited company (société
anonyme) with variable share capital (société d'investissement à
capital variable, or 'SICAV') and regulated by the Commission de
Surveillance du Secteur Financier ('CSSF') under Part II of the
amended Luxembourg law of 17 December 2010 on undertakings for
collective investments with an indefinite life. The Company
qualifies as an alternative investment fund within the meaning of
Article 1 (39) of the amended law of 12 July 2013 on alternative
investment fund managers ('2013 Law') implementing Directive
2011/61/EU of the European Parliament and of the Council of 8 June
2011 on Alternative Investment Fund Managers and amending
Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No
1060/2009 and (EU) No 1095/2010 and is authorised as an internal
alternative investment fund manager in accordance with Chapter 2 of
the 2013 Law. The Company was admitted to the official list of the
UK Listing Authority (premium listing, closed-ended investment
fund) and to trading on the main market of the London Stock
Exchange on 21 December 2011.
As of 1 January 2021, the main market of the London Stock
Exchange is not considered as an EU regulated market (as defined by
the MiFID II). As a result, Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004 on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market and amending Directive 2001/34/EC (the
Transparency Directive) as implemented in the Luxembourg law by the
act dated 11 January 2008 on transparency requirements for issuers
(the Transparency Act 2008), among other texts, does not apply to
the Company.
The Company's registered office is EBBC, 6E, route de Treves,
L-2633 Senningerberg, Luxembourg. On 27 October 2020, the Company
changed its registered name from BBGI SICAV S.A. to the current
BBGI Global Infrastructure S.A.
The Company is a closed-ended investment company that invests
principally in a diversified portfolio of operational
Public-Private Partnership ('PPP')/Private Finance Initiative
('PFI') infrastructure assets or similar style assets. At 31
December 2020, the Company has one investment that is under
construction.
The Company had no employees as of 31 December 2020 and 2019,
respectively.
Reporting period
The Company's reporting period runs from 1 January to 31
December each year. The Company's statement of comprehensive
income, statement of financial position, statement of changes in
equity and statement of cash flows include comparative figures as
at 31 December 2019.
The amounts presented as 'non-current' in the Company's
statement of financial position are those expected to be recovered
or settled after more than one year. The amounts presented as
'current' are expected to be recovered settled within one year.
These financial statements were approved by the Management Board on
24 March 2021.
2. Basis of preparation
Statement of compliance
The separate financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union ('EU'), and
applying IAS 27 - Separate Financial Statements, recognition and
measurement requirements, in accounting for its investment in
subsidiary. Please refer to Note 3 d) for the accounting policy for
the investment in subsidiary.
The Company also prepares consolidated financial statements in
accordance with IFRS as adopted by the EU.
The Company follows, to the fullest extent possible, the
provisions of the Standard of Recommended Practices issued by the
Association of Investment Companies ('AIC SORP'). If the provisions
of the AIC SORP are in direct conflict with IFRS as adopted by the
EU, the standards of the latter shall prevail.
Changes in accounting policy
New and amended standards applicable to the Company are as
follows:
Amendments to IAS 1 and IAS 8: Definition of Material (effective
1 January 2020)
The amendments provide a new definition of material that states,
'information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the
primary users of general-purpose financial statements make on the
basis of those financial statements, which provide financial
information about a specific reporting entity'.
The amendments clarify that materiality will depend on the
nature or magnitude of information, either individually or in
combination with other information, in the context of the financial
statements.
A misstatement of information is material if it could reasonably
be expected to influence decisions made by the primary users. These
amendments had no significant impact on the financial
statements.
Conceptual Framework for Financial Reporting (effective 1
January 2020)
The Conceptual Framework is not a standard, and none of the
concepts contained therein override the concepts or requirements in
any standard. The purpose of the Conceptual Framework is to assist
the IAS in developing standards, to help preparers develop
consistent accounting policies where there is no applicable
standard in place and to assist all parties to understand and
interpret the standards. This will affect those entities which
developed their accounting policies based on the Conceptual
Framework. The revised Conceptual Framework includes some new
concepts, updated definitions and recognition criteria for assets
and liabilities and clarifies some important concepts. These
amendments had no impact on the financial statements of the
Company.
Functional and presentation currency
These financial statements are presented in Pounds Sterling, the
Company's functional currency. All amounts presented in tables
throughout the report have been rounded to the nearest thousand,
unless otherwise stated.
Impairment testing for investments
Investment in subsidiary and loans receivable from subsidiaries
are measured at cost less accumulated impairment losses. The
impairment losses are based on expected credit loss ('ECL') on such
receivables. The loans and receivables of the Company from its
subsidiaries are directly linked to the PPP/PFI assets financed by
these subsidiaries either through loans and/or equity investments.
The ECL, if any, of the Company from its loans and receivables from
subsidiaries has a direct link with the fair value of the Group's
portfolio of investments ('PPP/PFI investments'). The Company
performs a fair valuation of the PPP/PFI investments every six
months and considers any ECL on the loans and receivables, among
others based on the results of the valuation. The fair valuation of
the subsidiaries' PPP/PFI assets is done by calculating the net
present value of the cash flows from its PPP/PFI assets, based on
internally generated models. The net present value of each asset is
determined using future cash flows, applying certain macroeconomic
assumptions for the cash flows which include indexation rates,
deposit interest rates, corporate tax rates and foreign currency
exchange rates. The cash flows are discounted at the applicable
discount rate for companies involved in service concession assets.
A material change in the macroeconomic assumptions and discount
rates used for such valuation could have a significant impact on
the net present value of the cash flows. The determined fair value
will be considered as the recoverable amount to be compared to the
carrying amount of investment in subsidiary to determine possible
impairment. Excess of the carrying amount of the investment in
subsidiary over the recoverable amount is recognised as impairment
loss. As of 31 December 2020, the Company identified no ECL to be
recorded on its loans and receivables from subsidiaries (2019: nil)
nor impairment on its investment in subsidiary.
3. Summary of significant accounting policies
a) Foreign currency transactions
Transactions in foreign currencies are translated into Pounds
Sterling at the exchange rate on the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into Pounds Sterling at the
exchange rate on that date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated into
Pounds Sterling at the exchange rate on the date that the fair
value was determined. Foreign currency differences arising on
translation are recognised in the statement of comprehensive income
as a gain or loss on currency translation.
b) Foreign currency translations
The assets and liabilities of foreign operations are translated
to Pounds Sterling at the exchange rates on the reporting date. The
income and expenses of foreign operations are translated to Pounds
Sterling at the average exchange rates during the year, if such
does not significantly deviate from the exchange rates at the date
on which the transaction is entered into. If significant deviations
arise, then the exchange rate at the date of the transaction is
used.
c) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Financial assets are classified at initial recognition at
either: (i) amortised cost; (ii) fair value through other
comprehensive income - debt instruments; (iii) fair value through
other comprehensive income - equity instruments; or (iv) fair value
through profit or loss.
In general, the Company derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred.
Any interest in such transferred financial assets that is created
or retained by the Company is recognised as a separate financial
asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
At the date of the statement of financial position, all
financial assets of the Company have been classified as financial
assets at amortised cost. Financial assets of the Company consist
of investment in subsidiary, loans receivables from subsidiaries,
interest and other receivables from subsidiaries and cash and cash
equivalents.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in the statement of
income when the asset is derecognised, modified or impaired.
Financial liabilities
The Company classifies financial liabilities at amortised cost.
Such financial liabilities are recognised initially at fair value
less any direct attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at
amortised cost using the EIR method.
The Company derecognises a financial liability (or part of a
financial liability) from the statement of financial position when,
and only when, it is extinguished or when the obligation specified
in the contract or agreement is discharged or cancelled or has
expired. The difference between the carrying amount of a financial
liability (or part of a financial liability) extinguished or
transferred to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed, is
considered in the statement of comprehensive income.
d) Investments in subsidiary
The investment in subsidiary is held at cost less any
impairment.
e) Provisions
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to a liability. The unwinding
of such discount is recognised as a finance cost.
f) Cash and cash equivalents
Cash and cash equivalents comprise of cash of balances and term
deposits with maturities of three months or less from the date when
the deposits were made and that are subject to an insignificant
risk of change in their fair value, and are used by the Company in
the management of its short-term commitments.
g) Share capital
Ordinary shares are classified as equity. Costs directly
attributable to the issue of ordinary shares, or which are
associated with the establishment of the Company, that would
otherwise have been avoided are recognised as a deduction from
equity, net of any tax effects.
h) Finance income and finance costs
Interest income and expenses are recognised in statement of
comprehensive income using the EIR method.
The effective interest rate is the rate that exactly discounts
the estimated future cash payments and receipts through the
expected life of the financial instrument (or, where appropriate, a
shorter period) to the carrying amount of the financial instrument.
When calculating the effective interest rate, the Company estimates
future cash flows considering all contractual terms of the
financial instrument, but not future credit losses.
Interest received or receivable and interest paid or payable are
recognised in statement of comprehensive income as finance income
and finance costs, respectively.
i) Tax
According to the Luxembourg regulations regarding SICAV
companies, the Company itself, as an undertaking for collective
investment, is exempt from paying income and/or capital gains taxes
in Luxembourg. It is, however, liable to annual subscription tax of
0.05 per cent on its consolidated net asset value ('NAV') payable
quarterly and assessed on the last day of each quarter.
j) Current versus non-current classification
The Company presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in
the normal operating cycle
-- Held primarily for the purpose of trading
-- Expected to be realised within 12 months after the reporting
period or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
A liability is current when:
-- It is expected to be settled in the normal operating
cycle
-- It is held primarily for the purpose of trading
-- It is due to be settled within 12 months after the reporting
period or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and
assumptions
The preparation of financial statements in conformity with IFRS
requires the Management Board to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In the process of applying the Company's accounting policies,
the Management Board has made the following judgements that would
have the most significant effect on the amounts recognised in the
Company's financial statements.
4.1 Impairment testing for investments
Refer to Note 2 for the discussion of this topic.
4.2 Going concern basis of accounting
The Management Board has examined significant areas of possible
financial risk including cash and cash requirements. It has not
identified any material uncertainties which would cast significant
doubt on the Company's ability to continue as a going concern for a
period of 12 months from the date of approval of the Company's
financial statements. The Management Board has satisfied itself
that the Company has adequate resources to continue in operational
existence for the foreseeable future. As part of its assessment,
the Management Board has considered the risk posed by the Covid-19
pandemic. The Management Board has satisfied itself that the
Company has adequate resources to continue in operational existence
for the foreseeable future. After due consideration, the Management
Board believes it is appropriate to adopt the going concern basis
of accounting in preparing the financial statements.
5. Administrative expenses
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Support agreement fees (see Note 13) 6,637 5,623
Legal and professional fees 1,614 1,395
Supervisory Board fees and expenses 231 223
Others 133 174
8,615 7,415
The legal and professional fees during the year includes amounts
charged by the Company's external auditor which include audit fees
of GBP159,000 (2019: GBP168,000) and audit related fees of
GBP66,000 (2019: GBP60,000). There are no non-audit related fees
charged by the Company's external auditors in the above amounts
(2019: nil). These administrative expenses also include depositary
and custodian related charges which amounted to GBP347,000 (2019:
GBP287,000).
6. Other operating expenses
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Foreign exchange indemnity agreement expense (see
Note 13) 1,891 6,411
Acquisition-related and unsuccessful bid costs 830 991
Non-recoverable VAT 386 344
Foreign currency exchange loss - net - 168
Others - 77
3,107 7,991
7. Other operating income
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Foreign currency exchange gain -net 5,173 -
Others 8 -
5,181 -
8. Finance income
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Finance income from multi-currency facility (see Note
13) 18,768 17,258
Interest income from deposits 5 20
18,773 17,278
9. Tax expense
Current tax payable in 2020 amounting to GBP102,000 relates to
subscription tax due (2019: GBP107,000).
A reconciliation of the tax expense and the tax at applicable
tax rate is as follows:
Year ended Year ended
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Profit before tax 12,232 1,872
Income tax using the Luxembourg domestic tax rate
of 24.94% 3,051 467
Effect of tax-exempt income (3,051) (467)
Subscription tax expense 427 406
Tax charge for the year 427 406
The Company, as an undertaking for collective investment, pays
an annual subscription tax of 0.05 per cent on its consolidated
NAV. For the year ended 31 December 2020, the Company incurred a
subscription tax charge of GBP427,000 (2019: GBP406,000). All
direct and indirect subsidiaries of the Company are subject to
corporation tax at the applicable rate in their respective
jurisdictions.
10. Cash and cash equivalents
Cash and cash equivalents relates to bank deposits amounting to
GBP5,636,000 (2019: GBP20,918,000).
11. Share capital
Changes in the Company's share capital are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Share capital as at 1 January 715,406 639,642
Issuance of ordinary shares through placing 55,000 75,000
Shares issuance cost on placing (831) (1,085)
Share capital issued through scrip dividends 2,068 772
Shares issued as share based compensation 997 1,077
772,640 715,406
In November 2020, the Company raised gross proceeds of
GBP55,000,000 through a placing of 32,544,379 new ordinary shares
of no par value ('Placing'). The Placing price was set at 169.0
pence per Placing share. The related share issuance cost amounted
to GBP831,000.
BBGI Management HoldCo S.à r.l. ('MHC'), a wholly owned
subsidiary of the Company, provides share-based compensation to
senior executives whereby it will issue a certain number of shares
of the Company to entitled executives calculated based on the
conditions of the Long-Term Incentive Plan ('LTIP') rules and the
respective LTIP Award letters. During the year, in accordance with
the LTIP agreement, the Company issued 690,274 shares, in
connection with the LTIP, at 144.5 pence per share for a total
amount of GBP997,000 (2019: GBP1,077,000). The amount of GBP997,000
was recorded as an advance made by the Company to MHC during the
year (2019: GBP1,077,000).
The changes in the number of ordinary shares of no-par value
issued by the Company are as follows:
31 December 31 December
In thousands of shares 2020 2019
In issue at beginning of the year 630,213 580,005
Shares issued through placing of ordinary shares 32,544 49,020
Shares issued through scrip dividends 1,244 491
Shares issued as share based compensation 690 697
664,691 630,213
All shares rank equally with regard to the Company's residual
assets. The holders of ordinary shares are entitled to receive
dividends as declared from time to time, and are entitled to one
vote per share at general meetings of the Company.
The Company meets the minimum share capital requirement as
imposed under the applicable Luxembourg regulation.
Dividends
The dividends declared and paid by the Company during the year
ended 31 December 2020 are as follows:
Year ended
31 December
In thousands of Pounds Sterling except as otherwise stated 2020
2019 2(nd) interim dividend of 3.5 pence per qualifying ordinary
share - for the period
1 July 2019 to 31 December 2019 22,057
2020 1(st) interim dividend of 3.59 pence per qualifying ordinary
share- for the period
1 January 2020 to 30 June 2020 22,659
Total dividends declared and paid during the year 44,716
The 31 December 2019 2(nd) interim dividend was paid in April
2020. The value of the scrip election was GBP429,000, with the
remaining amount of GBP21,628,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2020 1(st) interim dividend was paid in October
2020. The value of the scrip election was GBP1,639,000 with the
remaining amount of GBP21,020,000 paid in cash to those investors
that elected for a cash dividend.
The dividends declared and paid by the Company during the year
ended 31 December 2019 are as follows:
Year ended
31 December
In thousands of Pounds Sterling except as otherwise stated 2019
2018 2(nd) interim dividend of 3.375 pence per qualifying ordinary
share
for the period 1 July 2018 to 31 December 2018 19,575
2019 1(st) interim dividend of 3.5 pence per qualifying ordinary
share
for the period 1 January 2019 to 30 June 2019 22,045
Total dividends declared and paid during the year 41,620
The 2(nd) 2018 interim dividend was paid in April 2019. The
value of the scrip election was GBP181,000, with the remaining
amount of GBP19,394,000 paid in cash to those investors that did
not elect for the scrip.
The 1(st) 2019 interim dividend was paid in October 2019. The
value of the scrip election was GBP591,000 with the remaining
amount of GBP21,453,000 paid in cash to those investors that
elected for a cash dividend.
Net asset value
The Company net asset value and net asset value per share as of
31 December 2020, 2019 and 2018 are as follows:
In thousands of Pounds Sterling/pence 2020 2019 2018
Net asset value attributable to the owners of
the Company 663,897 639,574 603,964
Net asset value per ordinary share (pence) 99.88 101.49 104.13
12. Financial risk and capital risk management
The Company has exposure to the following risks from financial
instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
This note presents information about the Company's exposure to
each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk and the Company's
management of capital. This note also presents the result of the
review performed by management on the above-mentioned risk
areas.
Risk management framework
The Management Board has overall responsibility for the
establishment and control of the Company's risk management
framework.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company, resulting in:
1) impairment or reduction in the amounts recoverable from
receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
A significant part of receivables of the Company are receivables
from subsidiaries. These subsidiaries have the ability to pay based
on the projected cash flows to be received by such subsidiaries
from its investments.
Exposures to credit risks
The Company is exposed to credit risks on the following items in
the Company's statement of financial position:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Loans and other receivable to subsidiaries (including
accrued interest) 326,291 326,913
Cash and cash equivalents 5,636 20,918
331,927 347,831
The maximum exposure to credit risk on receivables that are
neither overdue nor impaired as of 31 December 2020, amounts to
GBP326,291 (2019: GBP326,913).
Recoverable amounts of receivables and other current and
non-current assets
The Company establishes when necessary an allowance for
impairment, based on ECL specific to the asset. Currently there are
no recorded allowances for impairment. All the Company's
receivables are recoverable and no significant amounts are
considered as overdue, impaired or subject to ECL.
Cash and cash equivalents
The cash and cash equivalents are maintained with reputable
banks with ratings that are acceptable based on the established
internal policy of the Company. Based on the assessment of the
Management Board, there are no significant credit risks related to
the cash and cash equivalents. The main counterparty banks of the
Company have S&P/Moody's credit rating between A+/Aa3 and
AA-/Aa2.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Company's policy over liquidity risk is that it will seek to
have sufficient liquidity to meet its liabilities and obligations
when they fall due.
The Company manages liquidity risk by maintaining adequate cash
and cash equivalents and access to borrowing facilities to finance
day-to-day operations and medium to long-term capital needs. The
Group also regularly monitors the forecast and actual cash
requirements and matches the maturity profiles of the Group's
financial assets and financial liabilities.
The Company has the possibility to raise capital through the
issuance of shares in order to finance further acquisitions.
All external financial liabilities of the Company have
maturities of less than one year. The Company has sufficient cash
and cash equivalents and sufficient funding sources to pay and/or
refinance currently maturing obligations.
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Company's income or the value of its holdings of
financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable
parameters, while optimising the returns.
UK departure from the European Union
As part of the UK's preparations for Brexit, the UK government
established a temporary permissions regime ('TPR') enabling
European Economic Area ('EEA') AIFs with EEA AIFMs passporting into
the UK at the end of the transition period to continue to access
the UK market in the same manner as before the transition period
ended for a limited period of time.
The Company has made the necessary notification to the FCA (and
the CSSF) under the TPR of its intention and as a result has
temporary permission to be marketed in the UK.
To continue marketing the Company in the UK after the end of the
TPR, the Company must notify under the UK national private
placement regime and will be directed by the FCA to make this
notification within two years from the end of the transition
period.
Regarding portfolio performance, while the long-term economic
outcome of the UK's departure from the EU will remain uncertain for
some time, the Group's portfolio cash flows are contracted and,
unlike demand-based assets, are not sensitive to the performance of
the wider economic environment.
The Company together with its Subsidiaries (collectively
referred to as the 'Group'), in which the Company is the ultimate
parent entity, maintains a pure-play PPP-style investment platform,
fully committed to a strict investment strategy into
availability-based assets. This generates stable, predictable cash
flows backed by secure, highly visible contracted public-sector
revenues and significantly carry no exposure to demand or
regulatory risk. While the Brexit outcome remains uncertain we can
say that, regardless of the outcome, the Group's portfolio cash
flows are contracted and, unlike demand-based assets, are not
sensitive to the performance of the wider economic environment.
The Company is exposed to currency risk as a result of its cash
and cash equivalents being denominated in currencies other than
Pounds Sterling. The currencies in which these items are primarily
denominated are Australian Dollar (A$), Canadian Dollar (C$), Euro
(EUR), Norwegian Krone (NOK) and US Dollar (US$).
In respect of other monetary assets and liabilities denominated
in currencies other than Pounds Sterling, the Company's policy is
to ensure that its net exposure is kept at an acceptable level. The
management believes that there is no significant concentration of
currency risk in the Company.
The summary of the quantitative data about the Company's
exposure to foreign currency risk provided to the management is as
follows:
31 December 2020
In thousands of Pounds Sterling A$ C$ EUR NOK US
$
Cash and cash equivalents 22 18 202 2 5
Trade payables - - (245) - -
Other payables - - (786) - -
22 18 (829) 2 5
31 December 2019
In thousands of Pounds Sterling A$ C$ EUR NOK US
$
Cash and cash equivalents 21 564 1,346 2 8
Trade payables - - (23) - -
Other payables - (1) (385) - -
21 563 938 2 8
The Company has loans and receivables from MHC denominated in
foreign currency but the Company is not exposed to fluctuations in
foreign exchange rates in relation to these receivables due to the
foreign exchange indemnity agreement entered into between the
Company and MHC (see Note 13).
The significant exchange rates applied during the year ended 31
December 2020 and 31 December 2019 are as follows:
31 December 2020
Average Spot rate
GBP GBP
A$ 1 0.538 0.565
C$ 1 0.581 0.575
EUR 1 0.889 0.899
NOK 1 0.083 0.086
US$ 1 0.780 0.733
31 December 2019
Average Spot rate
GBP GBP
A$ 1 0.544 0.531
C$ 1 0.590 0.582
EUR 1 0.877 0.850
NOK 1 0.089 0.086
US$ 1 0.783 0.758
The impact of a strengthening or weakening of Pounds Sterling
against the A$, C$, NOK and U$, as applicable, by 10 per cent at 31
December 2020 and 31 December 2019 would not have a significant
impact on the Company's cash and cash equivalents and therefore on
the statement of comprehensive income. This assumes that all other
variables, in particular, interest rates, remain constant and
ignores any impact of forecast revenues, hedging instruments and
other related costs.
Fair values versus carrying amounts
The below analyses financial instruments carried at fair value,
by valuation method. The different levels have been defined as
follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities.
Level 2: inputs other than quoted prices included in Level 1,
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The carrying amounts of cash and cash equivalents, receivables
and payables approximates their fair value due to their short-term
nature with maturity of one year or less, or on demand.
The fair value of loans and other receivables from subsidiaries
and investment in subsidiary, with a total carrying value of
GBP659,647,000 (2019: GBP620,216,000), amounts to GBP897,305,000
(2019: GBP849,843,000). The fair value of these loans receivable
and investment in subsidiary is determined by discounting the
future cash flows to be received from such assets using applicable
market rates (Level 3).
Capital risk management
The Company's objective when managing capital is to ensure the
Company's ability to continue as a going concern in order to
provide returns to shareholders and benefits for further
stakeholders and to maintain an optimal capital structure. The
Company views the share capital (see Note 11) as capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividend paid to shareholders,
return capital to shareholders, avail of additional debt financing,
pay down debt, or issue new shares.
The Company regularly reviews compliance with Luxembourg
regulations regarding restrictions on minimum capital. During the
year, the Company complied with all externally imposed capital
requirements and made no changes in its approach to capital
management.
The portfolio continued its strong performance over the
reporting period with no material adverse effect on valuation
resulting from Covid-19. This strong performance is primarily as a
result of the Company holding a low-risk, 100 per cent
availability-based underlying portfolio, coupled with strong
stakeholder collaboration during the reporting period. There
continues to be uncertainty surrounding Covid-19 with the
consequences and potential disruptions difficult to foresee, but
currently our portfolio remains resilient in this challenging
market environment. We will continue to work very closely with all
stakeholders to help mitigate the risks and effects of the global
pandemic.
13. Related parties and key contracts
All transactions with related parties were undertaken on an
arm's length basis.
Supervisory Board fees
The aggregate remuneration of the Directors of the Supervisory
Board in their capacity as such was GBP209,000 (2019:
GBP215,000).
Loans and receivables from subsidiaries - multicurrency facility
agreement ('MCF')
On 1 January 2017, the Company as a lender and MHC as a
borrower, entered into a MCF. Pursuant to this agreement the
Company has and will continue to make available an interest-bearing
loan to MHC for the purposes of funding its initial and subsequent
acquisitions of interests in PPP/PFI and similar styled
infrastructure assets. The maximum amount that can be withdrawn
from the MCF is GBP680,000,000. The interest rate charged on the
withdrawn amount shall be the interest rate on loans charged to the
underlying projects less an appropriate margin.
Movements in the MCF during the year are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
1 January 201,342 192,036
Additions 15,802 15,749
Capitalisation of interest under MCF 100 128
Principal payments received (4,930) (4,442)
Foreign exchange movements 4,868 (2,129)
217,182 201,342
During the year, the finance income from the MCF amounted to
GBP18,768,000 (2019: GBP17,258,000).
Loans receivable from subsidiaries - interest free loan
agreements ('IFL')
The Company has entered into various IFL with MHC and BBGI
Investments S.C.A. ('SCA'), an indirect 100 per cent owned
subsidiary. These IFLs have a term of one year with the possibility
to extend and to introduce an arm's length interest rate. The
details of the interest free loans receivable from subsidiaries are
as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
IFL receivable from MHC 94,784 123,310
IFL receivable from SCA - 1,285
94,784 124,595
Interest and other receivables from subsidiaries
The details of the interest and other receivables from
subsidiaries are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
Interest receivable from MCF 1,880 976
Other advances to MHC 12,445 -
14,325 976
Foreign exchange indemnity agreement
The Company and MHC have entered into a foreign exchange
indemnity agreement (Indemnity Agreement) whereby the Company will
indemnify MHC for any net losses incurred by MHC in relation to
foreign exchange movements, including losses incurred on foreign
exchange forward contracts. The agreement also stipulates that
where MHC makes a net gain on foreign transactions, then it shall
pay an equivalent amount to the Company.
During the year, MHC incurred a net foreign exchange loss of
GBP1,891,000 thus resulting in an Indemnity Agreement expense of
the Company (2019: GBP6,411,000). As of 31 December 2020, all
obligations of the Company to MHC resulting from the Indemnity
Agreement were settled.
Support agreement with MHC
The Company and MHC have entered into a support agreement
(Support Agreement) whereby MHC provides support and assistance to
the Company with respect to the day-to-day operations. As at 31
December 2020, the Company recorded Support Agreement expenses
amounting to GBP6,637,000 (2019: GBP5,623,000).
During 2020, the Company settled all outstanding liabilities to
MHC in relation to the above.
14. Investment in subsidiary
MHC, the Company's wholly-owned direct subsidiary, is a Company
incorporated and domiciled in Luxembourg. The Company's total
equity investment in MHC amounted to GBP333,048,000 as of 31
December 2020 (2019: GBP293,303,000). The movements in the
Company's investment in MHC are as follows:
31 December 31 December
In thousands of Pounds Sterling 2020 2019
1 January 293,303 263,371
Additional investment through capital contribution 39,745 29,932
333,048 293,303
The Company's investments in PPP/PFI infrastructure assets, or
similar assets, were made and will continue to be made through
MHC.
15. Commitments and contingencies
The Company is an obligor under the Group RCF, and as a result
has pledged all its current and future financial assets and shares
in its investments in subsidiaries.
Based on the provisions of the RCF, in the event of continuing
event of default by MHC, as borrower, the lenders will, among other
things, have the right to cancel all commitments and declare all or
part of utilisations to be due and payable, including all related
outstanding amounts, and exercise or direct the security agent to
exercise any or all of its rights, remedies, powers or discretions
under the RCF. There were no outstanding principal from the RCF as
at the 31 December 2020.
16. Standards issued but not yet effective
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Company's financial statements are disclosed below. Where
applicable, the Company intends to adopt these new and amended
standards and interpretations, when they become effective.
Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
On 27 August 2020, the IASB published Interest Rate Benchmark
Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16. With publication of the phase two amendments, the IASB has
completed its work in response to IBOR reform.
The amendments provide temporary reliefs which address the
financial reporting effects when an interbank offered rate (IBOR)
is replaced with an alternative nearly risk-free interest rate
(RFR).
The amendments include a practical expedient to require
contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating
interest rate, equivalent to a movement in a market rate of
interest. Inherent in allowing the use of this practical expedient
is the requirement that the transition from an IBOR benchmark rate
to an RFR takes place on an economically equivalent basis with no
value transfer having occurred.
The adoption of this new standard is not expected to have a
significant impact on the Company's financial statements.
17. Events after the reporting period.
In February 2021, Company declared a 2(nd) interim dividend of
3.59 pence per share with scrip alternative for the period 1 July -
31 December 2020, to be paid in April 2021.
At the date of publication of these financial statements, the
Company and its portfolio has not experienced any material adverse
operational or financial impact related to the implications of
Covid-19. The focus on value preservation will continue as the
pandemic evolves.
Whilst there continues to be significant uncertainty surrounding
Covid-19 with the consequences and potential disruptions difficult
to foresee; currently, our portfolio remains resilient in this
challenging market environment. We will continue to work very
closely with all stakeholders in an effort to mitigate the risks of
this global pandemic.
BOARD MEMBERS, AGENTS & ADVISERS
Supervisory Board Management Board --
* Sarah Whitney (Chairman as of 31 July 2020) * Duncan Ball
* Howard Myles * Michael Denny
* Jutta af Rosenborg * Frank Schramm
Colin Maltby (retired 31 July 2020)
Registered Office Receiving Agent and UK Transfer
EBBC, 6E route de Trèves Agent
L-2633 Senningerberg Link Market Services Trustees
Grand Duchy of Luxembourg Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Central Administrative Agent, Luxembourg Registrar
and Transfer Agent, Depositary and Principal Paying Agent
RBC Investor Services Bank S.A.
14 Porte de France
L-4360 Esch-sur-Alzette
Grand Duchy of Luxembourg
Depository Auditors
Link Market Services Trustees Limited KPMG Luxembourg,
The Registry Société
34 Beckenham Road cooperative
Beckenham 39 Avenue John F. Kennedy
Kent BR3 4TU L-1855 Luxembourg
United Kingdom
Corporate Brokers Winterflood Securities Limited
Jefferies International Limited Cannon Bridge House
100 Bishopsgate 25 Dowgate Hill
London EC2N 4JL London
United Kingdom EC4R 2GA
EEA based Centralised Securities Depository Luxembourg CSD Principal Agent
LuxCSD Banque Internationale à
42 Avenue John F. Kennedy Luxembourg
L-1855 Luxembourg 69 route d'Esch
Office PLM 018A
L-2953 Luxembourg
Communications Adviser
Maitland/AMO
3 Pancras Square
London N1C 4AG
United Kingdom
Registre de Commerce et des Sociétés Luxembourg B163879
Listing Chapter 15 premium listing, closed-ended investment
company
Trading Main Market
ISIN LU0686550053
SEDOL B6QWXM4
Ticker BBGI
Indices FTSE 250, FTSE 350, FTSE 350 High Yield and FTSE All-Share
CAUTIONARY STATEMENT
Certain sections of this Annual Report, including but not
limited to, the Chairman's Statement and the Strategic Report of
the Management Board, have been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. This
additional information should not be relied on by any other party
or for any other purpose.
These sections may include statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'believes', 'estimates',
'anticipates', 'forecasts', 'projects', 'expects', 'intends',
'may', 'will' or 'should' or, in each case, their negative or other
variations or comparable terminology.
These forward-looking statements include matters that are not
historical facts. They appear in a number of places throughout this
document and include statements regarding the intentions, beliefs
or current expectations of the Management and Supervisory Boards
concerning, amongst other things, the investment objectives and
investment policy, financing strategies, investment performance,
results of operations, financial condition, liquidity, prospects
and distribution policy of the Group, and the markets in which it
invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance. The Group's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and
the development of its financing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the
Management and Supervisory Boards expressly disclaim any
obligations to update or revise any forward-looking statement
contained herein to reflect any change in expectations with regard
thereto or any change in events, conditions or circumstances on
which any statement is based.
In addition, these sections may include target figures and
guidance for future financial periods. Any such figures are targets
only and are not forecasts.
This report has been prepared for the Group as a whole and
therefore gives greater emphasis to those matters that are
significant to BBGI Global Infrastructure S.A. and its subsidiaries
when viewed as a whole.
[i] Social infrastructure is the provision of public
infrastructure assets and services and includes schools,
healthcare, blue light (fire and police), justice facilities and
transport. In exchange for the provision of these assets and
services BBGI receives a revenue stream that is paid directly by
the public sector.
([ii]) Fire and police stations.
[iii] References to 'low-risk' throughout this Annual Report are
made in comparison to investments in other infrastructure asset
classes.
[iv] In comparison to the latest publicly available information
for all closed-ended, LSE-listed equity infrastructure investment
companies.
[v] Please refer to the Pro Forma Balance Sheet in the Financial
Section for further detail on Investment Basis NAV.
[vi] 'Pence per share.'
[vii] The TSR combines share price appreciation and dividends
paid since IPO in December 2011 to show the total return to the
shareholder expressed as a percentage. Based on share price at 31
December 2020 and after adding back dividends paid or declared
since listing.
[viii] On a compounded annual growth rate basis. This represents
the steady state annual growth rate based on share price at 31
December 2020 and after adding back dividends paid or declared
since listing.
[ix] These are targets only and are not a profit forecast. There
can be no assurance that these targets will be met or that the
Company will make any distribution at all.
[x] Calculated as: (Distributions received from investments at
fair value through profit or loss less net cash flows from
operating activities) / (Cash Dividends paid). Please refer to the
Pro Forma Balance Sheet in the Financial Section for further
details.
[xi] Please refer to the Ongoing Charges in the Financial
Section for further details.
[xii] In comparison to the latest publicly available information
for all closed-ended, LSE-listed equity infrastructure investment
companies.
([xiii]) Link Group, UK Dividend Monitor (Q4 2020); analyses all
the dividends paid out on the ordinary shares of companies listed
on the UK Main Market.
([xiv]) Fire and police stations.
[xv] Covid-19 constraints prevented physical visits in many
cases in 2020.
[xvi] Includes a limited exposure to UK acute healthcare of less
than one per cent of NAV.
[xvii] In alphabetical order per section.
[xviii] Please refer to the Valuation Section for more details on the Company's hedging strategy.
([xix]) When a project has more than one FM contractor and/or
O&M contractor, the exposure is allocated equally among the
contractors.
([xx]) US tax exempt bonds.
[xxi] The Group does not have any demand-based assets and the
portfolio is greater than 99 per cent operational. The Group's
financial performance was not materially affected due to the
reliance on 100 per cent availability-based revenues.
[xxii] Includes both debt and equity.
[xxiii] On a compounded annual growth rate basis. This
represents the steady state annual growth rate based on share price
at 31 December 2020 and after adding back dividends paid or
declared since the Company's IPO.
[xxiv] Refer to the Ongoing Charges of the Financial Results
section of this report for further detail on how the Ongoing Charge
is calculated.
[xxv] The FTSE All-Share, five-year data represents the five years preceding 31 December 2020.
[xxvi] Link Group, UK Dividend Monitor (Q4 2020); analyses all
the dividends paid out on the ordinary shares of companies listed
on the UK Main Market.
[xxvii] The sum of the change in NAV per share plus the
dividends paid per share in the year, taken as a percentage of the
NAV per share at 31 December 2019.
[xxviii] These are targets only and are not a profit forecast.
There can be no assurance that these targets will be met or that
the Company will make any distribution at all.
[xxix] On the 25th of November 2020, the UK Chancellor of the
Exchequer announced that the retail price index ('RPI') will be
discontinued in 2030 and replaced with the consumer price index
including housing costs ('CPIH'). Given this announcement, the
Company has replaced RPI at 2.75% with CPIH at 2.0% across the UK
portion of the portfolio beginning 1st of January 2031.
[xxx] Based on the portfolio composition on the date the balance
sheet hedge contracts are entered into.
[xxxi] Additional information regarding Ongoing Charges and
ongoing charges percentage can be obtained from the AIC website
www.theaic.co.uk .
[xxxii] Cash flows rebased for investment acquisitions during the year.
[xxxiii] The cash dividend cover ratio is a multiple that
divides the total net cash generated in the period (available for
distribution to investors) by the total cash dividends paid in the
period based on the IFRS cash flows. If the Group has a high
dividend cover ratio, there is a lesser risk that the Group will
not be able to continue making dividend payments.
[xxxiv] The Co-CEOs, Duncan Ball and Frank Schramm, are paid in
Canadian Dollars and Euro, respectively. The CFO is paid in
Euro.
[xxxv] This minimum holding is calculated based on the
Director's salary at 1 May 2020 and is fixed for a period of three
years.
[xxxvi] The detail provided in the table above goes
significantly beyond that which is required to be disclosed under
the relevant Luxembourg law. This additional detail is provided on
a voluntary basis commencing for the reporting period ended 31
December 2020.
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END
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