REG - BBGI Global Infrast. - Annual Results - financial year ended 31-Dec-2023
28/03/2024 07:15
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RNS Number : 6171I BBGI Global Infrastructure S.A. 28 March 2024
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.
28 March 2024
BBGI Global Infrastructure S.A.
("BBGI" or the "Company")
Annual results for financial year ended 31 December 2023
Results for 2023 demonstrate our strong portfolio and operational performance
Continue to deliver predictable progressive income for our shareholders
BBGI Global Infrastructure S.A. (LSE ticker: BBGI), the global infrastructure
investment company, is pleased to announce its full year results for the year
ended 31 December 2023.
Key Highlights
· Strong operational performance of our globally diversified
portfolio of 56 high-quality, 100 per cent availability-style infrastructure
assets.
· Increased dividends by 6 per cent to 7.93pps for 2023, in line
with our previously stated target.
· Fully repaid Revolving Credit Facility as of 31 December 2023.
Sarah Whitney, Non-Executive Chair of BBGI, commented:
"I am pleased to report on our strong operational performance for 2023. Our
results underscore the robustness of our approach, our sound business model
and the enduring strength within our globally diversified portfolio of
high-quality, core social infrastructure assets.
Our low-risk investment strategy and well-managed portfolio have continued to
produce a well-covered and growing dividend for our investors. BBGI takes a
careful approach to capital allocation and directed controlled growth. During
the year we have utilised surplus cash flows generated from our investment
portfolio to pay down in full our revolving credit facility in 2023,
positioning ourselves well for the future."
Duncan Ball, CEO of BBGI, said:
"Our results for 2023 demonstrate our strong portfolio and operational
performance, despite a period of significant macroeconomic and market shifts.
We continued to manage our portfolio responsibly to generate high-quality,
stable, predictable and inflation-linked cash flows, with distributions ahead
of our target. These cash flows supported our strong dividend cover of 1.4x in
2023, and allowed us to increase dividends by 6 per cent to 7.93pps for the
year, in line with our previously stated target. We have also reconfirmed our
dividend target of 8.40pps for 2024, representing a 6 per cent increase
year-on-year, and a target of 8.57pps for 2025. We take pride in our track
record of meeting or exceeding all dividend targets set since IPO and
providing our investors with a progressive dividend, which has always been
fully cash covered and has increased every year since 2013.
Our consistent and disciplined approach to capital allocation, combined with
our value driven active asset management, ensures our investments continue to
perform well and in line with our expectations. Moving forward, we remain
committed to optimising our portfolio construction to maximise value for our
shareholders.
I remain optimistic about the long-term prospects for BBGI. As governments
continue to run deficits and demand for maintaining, repairing, and
constructing new infrastructure grows, there is an increasing need for private
sector investment in infrastructure, presenting long-term opportunities for
BBGI.
With our robust balance sheet, a portfolio that generates secure, predictable
cash flows surpassing our dividend objectives, and an undrawn £230 million
RCF maturing in May 2026, we are well-equipped to navigate evolving markets,
with both discipline and ambition, and to deliver attractive value to all our
stakeholders."
Financial highlights
Investment Basis NAV NAV per share Annualised total NAV return per share since IPO
£1,056.6 million 147.8pps 8.6%
down 1.2% as at 31 December 2023 down 1.4% as at 31 December 2023 (FY 2022: 9.1%)
(31 December 2022: £1,069.2 million) (31 December 2022: 149.9pps)
High-quality inflation linkage Ongoing charges Cash dividend cover
0.5% 0.93% 1.40x
(FY 2022: 0.5%) (31 December 2022: 0.87%) (FY 2022: 1.47x)
2023 dividend declared 2024 target dividend 2025 target dividend
7.93pps 8.40pps 8.57pps
+6% +6% +2%
Financial and operational highlights
Strong operational performance
· Strong operational performance of our globally diversified
portfolio of 56 high-quality, 100 per cent availability-style infrastructure
assets.
· Maintained a consistently high asset availability rate of 99.9
per cent.
· Our portfolio investments are the essential assets on which
people rely every day, such as schools, healthcare facilities, police and fire
stations, affordable housing, roads and bridges, modern correctional
facilities, a clean energy investment and other types of social
infrastructure.
· We partner with the public sector, underpinned by government or
government-backed counterparties, to help deliver and responsibly manage these
assets for the long term.
· Located in Australia, Canada, Germany, the Netherlands, Norway,
the UK, and the US, all Portfolio Companies are in stable, well-developed, and
highly-rated investment grade countries with credit ratings between AA and
AAA.
· Disciplined approach to capital allocation and will only consider
transactions that are accretive to our shareholders, while considering their
attractions against alternative capital allocation options.
Generating high-quality, stable, predictable and inflation-linked cash flows
· Contracted high-quality inflation linkage of 0.5 per cent.
· Cash receipts ahead of projections, with no material lock-ups or
defaults.
· These cash flows supported our strong dividend cover of 1.4x in
2023.
· Increased dividends by 6 per cent to 7.93pps for 2023, in line
with our previously stated target.
· Reconfirmed our dividend target of 8.40pps for 2024, representing
a 6 per cent increase year-on-year, and a target of 8.57pps for 2025.
· All target dividends expected to be fully cash-covered.
· We take pride in our track record of meeting or exceeding all
dividend targets set since IPO and providing our investors with a progressive
dividend, which has always been fully covered and has increased every year
since 2013.
· Based on current estimates, and if there were to be no further
acquisitions, the portfolio could continue to generate a progressive dividend
for the next 15 years, after which the existing portfolio is forecasted to
enter into the capital repayment phase.
· In March 2024, BBGI joined The Association of Investment
Companies' (AIC) "Next generation of dividend heroes", in recognition of our
achieving 10 or more consecutive years of dividend growth.
Net Asset Valuation
· As of 31 December 2023, NAV per share stood at 147.8pps, a slight
decrease of 1.4 per cent from the previous year, and flat since 30 June 2023.
This was attributable to macro-economic drivers beyond our control, including
the increase in the weighted average discount rate (a knock-on effect from
rising global interest rates and general macro-economic volatility), adverse
foreign exchange rate movements (although our hedging strategy provided a
partial buffer against these fluctuations), and the negative effect of
proposed Canadian tax legislation that we have fully provisioned for.
· These negative impacts on the portfolio valuation were partially
offset by our proactive asset management, which increased our NAV by 1.7 per
cent, along with changes in our macro-economic assumptions, driven largely by
the effect of revised deposit rate assumptions, contributing to an increase of
2.6 per cent.
· Both the Management Board and the Supervisory Board continue to
believe that BBGI's share price does not adequately reflect the value of our
portfolio, our high-quality inflation linkage, our strong financial position
and operational performance. We continue to see a disparity between the
private market valuations of high-quality core infrastructure assets and the
value ascribed by public markets and there were a number of market
transactions that substantiate our reported NAV.
· The weighted average discount rate increased from 6.9 per cent to
7.3 per cent as of 31 December 2023, with BBGI's implied risk premium as of 31
December 2023 3.7 per cent above the weighted average government risk-free
rate for our portfolio. We view this as attractive for a low-risk investment
portfolio with high-quality inflation protection, delivering real returns, and
progressive dividend growth, particularly when compared with fixed income
products.
Value-driven active asset management
· Our active asset management activities included applying
high-quality corporate governance frameworks, which helped enable us to
maintain our track record of no reported lock-ups or material defaults at any
of our Portfolio Companies and generated a consistently high asset
availability rate of 99.9 per cent.
· Our equity investment in Highway 104 in Nova Scotia, Canada
achieved substantial completion in September 2023 and significantly improves
efficiency and safety of travel, the flow of goods and services, and connects
communities in the region.
· In 2023, we achieved a strong overall net promoter scores from
our project clients, demonstrating our ability to maintain strong client
relationships and to deliver superior performance.
Prudent financial management
· All our Portfolio Companies are financed on a non-recourse basis
with 55 out of our 56 assets securely financed with fully amortising fixed
rate debt through the length of the concession period (without the need for
refinancing), and only one asset has a refinancing obligation for a tranche of
debt.
· Our strategic hedging policy has enabled us to mitigate the
effects of foreign exchange fluctuations. Moreover, we have adopted a
proactive treasury management approach to optimise the interest earned on the
reserve accounts of our Portfolio Companies.
· Our liquidity position remains robust, with net cash of £9.7
million at 31 December 2023. By using excess cash that we have generated from
our portfolio of investments, we repaid all cash drawings under our £230
million RCF by 31 December 2023. Additionally, we have no outstanding
acquisition commitments, placing the Company in a strong financial position.
Environmental, social and governance progress
· Our sustainable investment portfolio benefits from a strong
social purpose and the Company is classified as SFDR Article 8.
· BBGI is committed to net zero both operationally and with our
portfolio, and in 2023 we enhanced our proprietary ESG database, including
greenhouse gas ('GHG') emissions data, and published our first SFDR Principal
Adverse Impact Statement. All our Portfolio Company assets have a high degree
of climate risk resilience, and we now have a complete overview of their
emissions profiles, which will facilitate future decarbonisation programmes.
· We believe that a strong commitment to ESG principles plays a
crucial role in mitigating risks and supporting our business over the long
term. Moreover, it not only fosters solid relationships with clients and
partners but also motivates and engages our employees. Moreover, it plays a
crucial role in mitigating risks and supporting our business over the long
term.
Focus on disciplined growth and capital allocation strategy
· We used our RCF to acquire two new assets for c. £64.4 million
in 2022, which we have now paid off in full using free cashflows we have
generated from our portfolio. This demonstrates our ability to grow
organically without the need to access the equity markets for funds.
· Our current return projections, all else remaining equal, are not
contingent on new investments. If we were to abstain from further investments,
our existing portfolio alone would sustain our progressive dividend policy for
the next 15 years. We continue to pursue disciplined growth that builds
shareholder value first, encouraged by our internal management structure, and
not growth in assets under management for its own sake.
· Furthermore, we are investigating portfolio diversification
prospects with desirable traits, such as consistent long-term cash flows and
inflation correlation, aligning with our existing investment policy. Any new
investment opportunity will be evaluated by comparing its potential benefits
to other ways of allocating our capital.
Company presentation for analysts and investors
A Company presentation for analysts and investors will take place today at
8.30am (UK time) via an in-person meeting and a live webcast and audio only
dial in conference call.
For those analysts and investors who wish to attend the in-person presentation
or live conference call, please contact InvestorServices@bb-gi.com
(mailto:InvestorServices@bb-gi.com)
To access the live webcast, please register in advance here:
https://www.lsegissuerservices.com/spark/BBGIGLOBALINFRASTRUCTURESA/events/7475c889-ccbf-4e56-826b-69745ec41faa
(https://www.lsegissuerservices.com/spark/BBGIGLOBALINFRASTRUCTURESA/events/7475c889-ccbf-4e56-826b-69745ec41faa)
Webcast participants can type questions into the question box.
The recording of the annual results presentation and slides will be made
available later in the day via the Company website: www.bb-gi.com*
Retail investor presentation via Investor Meet Company
BBGI will host a live presentation for retail investors via Investor Meet
Company today at 1.30pm GMT. The presentation is open to all existing and
potential shareholders. Questions can be submitted at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet BBGI
Global Infrastructure S.A. via:
https://www.investormeetcompany.com/bbgi-global-infrastructure-sa/register-investor
(https://urldefense.com/v3/__https:/www.investormeetcompany.com/bbgi-global-infrastructure-sa/register-investor__;!!IHJ3XrWN4X8!LaWmywR2UQtNjMEttPoZaPxBredZzsw7mq0rQFy51mjQDAHn0HurpqvDx7I_aiowWspj-2FO34Zd8_kwN5wA48PLQoi9ritBY_c$)
Investors who already follow BBGI Global Infrastructure S.A. on the Investor
Meet Company platform will automatically be invited.
FOR FURTHER INFORMATION, PLEASE CONTACT:
BBGI Management Team +352 263 479-1
Duncan Ball, CEO
Michael Denny, CFOO
H/Advisors Maitland (Communications adviser) bbgi-maitland@h-advisors.global
James Benjamin +44(0) 7747 113 930
Rachel Cohen +44 (0) 20 7379 5151
NOTES
BBGI Global Infrastructure S.A. (BBGI) is a responsible infrastructure
investment company and a constituent of the FTSE 250 that invests in and
actively manages for the long-term a globally diversified, low-risk portfolio
of essential social infrastructure investments.
BBGI is committed to delivering stable and predictable cash flows with
progressive long-term dividend growth and attractive, sustainable, returns for
shareholders. BBGI has a proactive approach to preserving and enhancing the
value of its investments, and to delivering well maintained social
infrastructure for communities and end users, whilst serving society by
supporting local communities.
All of BBGI's investments are supported by secure public sector-backed
contracted revenues, with high quality inflation linked characteristics.
BBGI's investment portfolio is 100% operational with all its investments
located across highly rated investment grade countries with stable, well
developed operating environments.
BBGI's in-house management team is incentivised by shareholder returns and
consistently maintains low comparative ongoing charges.
Further information about BBGI is available on its website at www.bb-gi.com
(http://www.bb-gi.com/) *
The Company's LEI: 529900CV0RWCOP5YHK95
Any reference to the Company or BBGI refers also to its subsidiaries (where
applicable).
* Neither the Company's website nor the content of any website
accessible from hyperlinks on its website (or any other website) is (or is
deemed to be) incorporated into, or forms (or is deemed to form) part of this
announcement.
** These are guidance levels or targets only and not a profit forecast and
there can be no assurance that they will be met.
BBGI ANNUAL REPORT 2023
bb-gi.com
"Our purpose is to deliver social infrastructure for healthier, safer and more
connected societies, while creating sustainable value for all stakeholders"
Our vision: We invest to serve and connect people.
Our values:
Trusted to deliver.
Dependable partner.
Investor with impact.
Present-focused, future-ready.
About BBGI
BBGI Global Infrastructure S.A. (BBGI, the 'Company', and together with its
consolidated subsidiaries, the 'Group') is a global infrastructure investment
company helping to provide responsible capital to build and maintain critical
social infrastructure(( i (#_edn1) )).
From hospitals to schools, to affordable housing and safer roads, we partner
with the public sector to deliver social infrastructure that forms the
building blocks of local economies, while creating sustainable value for all
stakeholders.
Financial Highlights
ii (#_edn2)
£1,056.6 million 147.8pps 8.6%
Investment Basis NAV NAV per share Annualised total NAV return per share
down 1.2% as at 31 December 2023
down 1.4% as at 31 December 2023
FY 2022: 9.1%
(31 December 2022 £1,069.2 million) (31 December 2022: 149.9pps)
0.5 per cent 0.93% 1.40x
High-quality inflation linkage Ongoing charges Cash dividend cover
FY 2022: 0.5 per cent (31 December 2022: 0.87%) FY 2022: 1.47x
7.93pps iii (#_edn3) 8.40pps 8.57pps
2023 dividend declared 2024 target dividend 2025 target dividend
+6% +6% +2%
Portfolio Highlights
· Strong operational performance of our globally diversified
portfolio of 56 high-quality, 100 per cent availability-style infrastructure
assets.
· Maintained a consistently high asset availability rate of 99.9
per cent.
· Contracted high-quality inflation linkage of 0.5 per cent.
· Cash receipts ahead of projections, with no material lock-ups or
defaults.
· 6 per cent dividend growth targets for 2023 and 2024 reaffirmed.
· No drawings outstanding under the Revolving Credit Facility
('RCF') as at 31 December 2023 and no outstanding investment commitments to
finance.
· No structural gearing at Group level, and, with limited
exceptions only, borrowing costs are fixed at the Portfolio Company level,
providing stability and predictability. 55 of 56 projects have no refinancing
risk during the concession period.
· Disciplined approach to capital allocation and potential
acquisitions.
· Weighted average discount rate increased to 7.3 per cent from 6.9
per cent as at 31 December 2022, reflecting an equity risk premium of c. 3.7
per cent.
· Hedging strategy aimed to reduce Net Asset Value ('NAV') foreign
exchange ('FX') sensitivity to c. 3 per cent for a 10 per cent movement in FX.
· Internal management structure which supports alignment with our
investors. Ongoing charges of 0.93 per cent.
· Focus on delivering social impact across portfolio - SFDR Article
8.
· High degree of climate resilience independently confirmed across
asset portfolio.
· Tracking and reporting all Scope 1, Scope 2, and material Scope 3
emissions across all 56 Portfolio Companies.
Portfolio at a Glance
The fundamentals
Based on portfolio value as at 31 December 2023.
Investment type
100 per cent availability-style iv (#_edn4) revenue stream.
Investment type
Availability-style revenue assets 100%
Regulated assets -
Demand-based assets -
100%
Investment status
Low-risk operational portfolio.
Investment status
Operations 100%
Construction -
100%
Geographical split
Geographically diversified in stable developed countries.
Geographic split
Canada 35%
UK 33%
Continental Europe 13%
US 10%
Australia 9%
100%
Sector split
Well-diversified sector exposure with large allocation to lower-risk
availability-style road and bridge investments.
Sector split
Transport 53%
Healthcare 21%
Blue light and modern correctional facilities 12%
Education 8%
Affordable housing 3%
Clean energy 2%
Other 1%
100%
Top-ten investments
Well-diversified portfolio with no major single asset exposure.
Top-ten investments
Golden Ears Bridge (Canada) 11%
Ohio River Bridges (US) 10%
Northern Territory Secure Facilities (Australia) 4%
A7 Motorway (Germany) 4%
A1/A6 Motorway (Netherlands) 4%
Victorian Correctional Facilities (Australia) 3%
Liverpool & Sefton Clinics (UK) 3%
McGill University Health Centre (Canada) 3%
M1 Westlink (UK) 3%
Women's College Hospital (Canada) 3%
Remaining investments 52%
100%
Investment life
Long investment life with 41 per cent of portfolio by value with a duration of
greater than or equal to 20 years; weighted average life of 19.3 years.
Average portfolio debt maturity of 15.6 years.
Investment life
≥25 years 22%
≥20 years and <25 years 19%
≥10 years and <20 years 52%
<10 years 7%
100%
Investment ownership
79 per cent of assets by value in the portfolio are 50 per cent owned or
greater.
Investment ownership
100% 47%
≥75% and <100% 6%
≥50% and <75% 26%
<50% 21%
100%
Country rating
All assets located in countries with ratings between AA and AAA v (#_edn5) .
Country rating
AAA 57%
AA+ 10%
AA 33%
100%
Projected portfolio cash flow
The Company's underlying assets generate a consistent and long-term stream of
cash flows for the portfolio, extending up to 2051. These cash flows have a
high degree of visibility and certainty, owing to the involvement of
government or government-backed counterparties and the contractual nature of
the agreements.
Investing in concessions involves a careful balance. On one hand, the
long-term contractual cash flows are exceptionally resilient, indexed to
inflation, and inherently defensive. However, these benefits are tempered by
the fact that the cash flows are finite, concluding at the end of each
concession's term.
When BBGI went public in 2011, its weighted average portfolio life was 24.5
years. Now, 12 years after the initial public offering, the weighted average
portfolio life has decreased modestly to 19.3 years, with less than one per
cent of the portfolio subject to hand-back in the next five years. By
prioritising the acquisition of assets with long residual life and investing
excess cash flows into new projects, while maintaining a progressive dividend,
BBGI plans to maintain a portfolio with a long weighted average life.
Based on current estimates, and if there were to be no further acquisitions,
the portfolio could continue to generate a progressive dividend for the next
15 years, after which the existing portfolio is forecasted to enter into the
capital repayment phase.
This illustrative chart is a target only, as at 31 December 2023, and is not a
profit forecast. There can be no assurance this target will be met. The
hypothetical target cash flows do not consider any further acquisitions,
unforeseen costs, expenses or other factors that may affect the portfolio
assets and therefore the impact on the cash flows to the Company. As such, the
graph above should not in any way be construed as forecasting the actual cash
flows from the portfolio. There are minor cash flows extending beyond 2051 but
for illustrative purposes, these are excluded from the chart above.
Chair Statement
Introduction
On behalf of the Supervisory Board, I am pleased to report on our strong
operational performance for 2023. Despite facing a turbulent economic
landscape, our results underscore the robustness of our approach, our sound
business model and the enduring strength within our globally diversified
portfolio of high-quality, core social infrastructure assets.
Sustainable value creation
Our low-risk investment strategy and well-managed portfolio have continued to
demonstrate resilience through the macroeconomic volatility experienced during
the reporting period, and we delivered a well-covered and growing dividend for
our investors. BBGI takes a careful approach to capital allocation. We have
used surplus cash flows generated from our investment portfolio to pay down
our revolving credit facility in 2023, positioning ourselves well for the
future.
I am pleased to report that the long-term predictable nature of our cash flows
and our high-quality inflation linkage continues to support our dividend
payment of 7.93 pence per share for 2023, a 6 per cent increase on 2022 and in
line with our target, returning substantial inflation-linked gains to
shareholders, as well as strong dividend cover of 1.4x. We are also
reconfirming our 2024 dividend target of 8.40pps, reflecting an increase of 6
per cent year on year. We continue our solid track record of meeting or
exceeding all dividend targets set since IPO and providing our investors with
a progressive dividend that is expected to be fully cash covered.
Uncertain market backdrop
The effects of rising discount rates were partly mitigated by the positive
effects of increasing deposit rates, changes to forecast inflation, and
value-accretive activities, which included effective lifecycle cost
management, Portfolio Company cost savings tax and treasury management, and
optimised cash reserving. BBGI was not immune to macro-economic factors beyond
our control, which resulted in a NAV decrease of 1.2 per cent over 2023, or
1.4 per cent on a per share basis - our first year-on-year NAV decrease since
our IPO in 2011. The decrease in NAV was attributable to several factors,
including the increase in the weighted average discount rate (a knock-on
effect from rising global interest rates and general macroeconomic
volatility), adverse foreign exchange rate movements, and the negative effect
of proposed Canadian tax legislation.
Weak investor sentiment has affected nearly all UK-listed investment companies
over the past year, and the Board does not believe BBGI's share price
adequately reflects the value of our portfolio, our high-quality inflation
linkage, our strong financial position and operational performance. As
responsible long-term stewards of our shareholders' interests, we are
committed to monitoring closely these developments and taking appropriate
steps. Any potential action to reduce our NAV discount will only be undertaken
after thorough consideration, based on our disciplined approach to capital
allocation and taking full account of any longer-term implications.
Aligning with shareholder interests
A significant contributor to our success is our commitment to align Management
Board and shareholder interests.
With an internally managed structure, unique amongst UK-listed infrastructure
equity investment companies, our Management Board is incentivised to
prioritise sound portfolio construction, value preservation and creation, as
well as growth in dividends and NAV per share, rather than solely focusing on
the expansion of assets under management.
The Management Board has a significant stake in BBGI shares and is
incentivised through Long-Term Incentive Plan awards, which fully vest in
shares, as well as Short-Term Incentive Plan awards, where 33 per cent of the
award is settled in shares and deferred for three years. While this approach
is largely viewed as best practice for FTSE-listed companies, it is much less
common among investment companies. These arrangements underscore the
Management Board's dedication to delivering enhanced shareholder value and
prudent capital allocation.
Our two-tier governance structure, comprising the Supervisory Board and
Management Board, ensures robust oversight and strategic direction. While we
operate with a clear division of responsibilities between both Boards, their
strong and open relationship fosters a culture of healthy discourse and
diligent inquiry, as well as thorough scrutiny and comprehensive oversight. We
have an experienced Supervisory Board with a broad set of relevant skills to
lead our business forward, including significant sector and infrastructure
asset management expertise.
Engaging with stakeholders
By fostering open dialogue and transparent communication, we strive to build
enduring relationships with all our stakeholders, ensuring we realise our
vision and purpose of delivering social infrastructure for healthier, safer,
and more connected societies, while creating sustainable value. Together with
our Management Board, I have continued to engage with stakeholders throughout
the year. The Supervisory Board also met periodically with employees during
2023 and we remain readily available to engage with shareholders, underscoring
our commitment to transparency and proactive communication. This approach is
central to our mission of fostering a collaborative and inclusive environment
for all our stakeholders.
Management team succession
The recent evolution of our Management Board reflects our commitment to
nurturing talent and fostering a culture of continuous growth and development.
In January 2024, Frank Schramm retired after 12 years as Co-CEO alongside
Duncan Ball. I extend my sincere appreciation for his significant
contributions to the Company since its IPO in 2011.
Duncan is now sole CEO, Michael Denny has additional COO responsibilities
alongside his CFO duties, and we were delighted to appoint Andreas Parzych to
the Management Board. These changes underscore the depth of senior talent at
BBGI.
Embracing our diverse experience
As well as a varied range of skills and expertise on our Boards and
Committees, we endorse gender and ethnic equality, including initiatives such
as FTSE Women Leaders and the Parker Review.
At BBGI, we recognise the importance of diversity in all its forms. This is
clearly reflected in the diverse backgrounds of our team, with 26 colleagues
representing 14 different nationalities. The effectiveness of the Supervisory
Board is strengthened by our commitment to diversity, and we remain among the
few FTSE 350 companies with both a female Supervisory Board Chair and a female
Audit Committee Chair. In 2023, we retained our 60 per cent female
representation on the Supervisory Board as well as having 39 per cent female
representation amongst those employees who report directly to the Management
Board. 20 per cent of the Supervisory Board and eight per cent of direct
reports to the Management Board are considered to be from an ethnic minority
background as categorised by the Parker Review.
Looking to the future
The investment environment has fundamentally altered over the last 24 months,
but BBGI's portfolio has all the defensive qualities required to deliver a
solid income stream. Our management team continues to manage the Company's
risk profile with their customary attention to detail and will review
opportunities to extend the life of the portfolio in order to maintain the
duration of our asset base for the benefit of shareholders in the years
ahead.
I would like to thank the dedicated BBGI team for their efforts in delivering
a resilient performance for our shareholders, despite the wider market
backdrop, and also our clients, partners and service providers, who continue
to support us in providing a critical role in our communities. With their
steadfast support and unwavering determination, I am confident that we will
continue to deliver sustainable and attractive value for all our stakeholders
in the years to come.
Sarah
Whitney
Chair of the Supervisory Board
27 March 2024
CEO Statement
Our results for 2023 demonstrate our strong portfolio and operational
performance, despite a period of significant macroeconomic and market shifts.
Our consistent and disciplined approach to capital allocation, combined with
our value-driven active asset management, ensures our investments continue to
perform well and in line with our expectations.
The inherent value of our assets and active management delivered by our
experienced internal management team were highlighted again during 2023. We
continued to manage our portfolio responsibly to generate high-quality,
stable, predictable and inflation-linked cash flows, with distributions ahead
of our target. These cash flows supported our strong dividend cover of 1.4x in
2023, and allowed us to increase dividends by six per cent to 7.93pps for the
year, in line with our previously stated target. We have also reconfirmed our
dividend target of 8.40pps for 2024, representing a six per cent increase
year-on-year, and a target of 8.57pps for 2025. We take pride in our track
record of meeting or exceeding all dividend targets set since IPO and
providing our investors with a progressive dividend, which has always been
fully cash covered and has increased every year since 2013.
We have delivered predictable progressive income for our shareholders through
different economic cycles by investing in high-quality social infrastructure
assets, which contribute to healthier, safer and more connected societies. Our
low-risk, globally diversified infrastructure portfolio includes schools,
healthcare facilities, police and fire stations, affordable housing, roads and
bridges, modern correctional facilities, a clean energy investment and other
types of social infrastructure, all of which generate secure, long-term,
contractual government-backed cash flows, with high-quality inflation linkage.
Highlights
· Dividend of 7.93pps for the year, a six per cent increase and in
line with our target.
· Reconfirmed dividend target of 8.40pps for 2024, representing a
six per cent increase year-on-year, and a target of 8.57pps for 2025.
· Strong cash dividend cover of 1.4x in 2023. All target dividends
are expected to be fully cash-covered.
· Projected cash flows generated from our portfolio of 56
investments can sustain a progressive dividend policy for the next 15 years.
· In March 2024, BBGI joined the AIC's next generation of
'dividend heroes', in recognition of achieving 10 years of successive dividend
growth.
· NAV per share decreased by 1.4 per cent to 147.8 pps.
· We repaid all cash drawings under our £230 million RCF and we
currently have no outstanding investment commitments.
· Annualised total NAV return per share of 8.6 per cent since IPO.
· Internal management structure which supports alignment with our
investors. Ongoing charges of 0.93 per cent.
· High-quality inflation linkage of 0.5 per cent.
· Focus on delivering social impact across portfolio - SFDR Article
8 fund.
· High degree of climate resilience independently confirmed across
asset portfolio.
· Tracking and reporting all Scope 1, Scope 2, and material Scope 3
emissions across all 56 Portfolio Companies.
Strong business model and resilient portfolio
Our robust and defensive business model exemplifies our prudent and low-risk
approach to investing, generating long-term, sustainable value for all our
stakeholders. We offer investors a contracted, stable and predictable revenue
stream with high-quality inflation linkage of 0.5 per cent, underpinned by
highly rated, creditworthy public sector counterparties. We invest in
countries with credit ratings between AA and AAA, in Australia, Canada,
Germany, the Netherlands, Norway, the UK and the US. All have stable operating
environments, with independent and proven legal systems.
Value-driven active asset management
All 56 of our infrastructure assets are performing strongly and delivering in
line with expectations and are now all in full operation. Our equity
investment in Highway 104 in Nova Scotia, Canada achieved substantial
completion in September 2023 and significantly improves efficiency and safety
of travel, the flow of goods and services, and connects communities in the
region. In 2023, the Canadian Council for Public-Private Partnerships
recognised Highway 104 with the Gold Award in the P3 Design & Construction
category.
Our active asset management activities included applying high-quality
corporate governance frameworks, which helped enable us to maintain our track
record of no reported lock-ups or material defaults at any of our Portfolio
Companies and generated a consistently high asset availability rate of 99.9
per cent.
We place a high importance on client satisfaction and in 2023, we achieved a
strong overall net promoter scores from our project clients, demonstrating our
ability to maintain strong client relationships and to deliver superior
performance. As we continue to enhance value for our stakeholders, we remain
dedicated to upholding these high standards and reinforcing our position as a
trusted partner.
Prudent financial management
Our prudent approach to portfolio construction and financial management helped
mitigate the impact of rising discount rates during the year. All our
Portfolio Companies are financed on a non-recourse basis with 55 out of our 56
assets securely financed with fully amortising fixed rate debt through the
length of the concession period (without the need for refinancing), and only
one asset has a refinancing obligation for a tranche of debt. However, this
asset benefits from a hedged base market interest rate and therefore is only
sensitive to changes in lenders required margins over base interest rates.
Once again, our hedging policy helped mitigate the adverse impact of foreign
exchange movements on the NAV in 2023, and we took a proactive approach to
treasury management to optimise interest earned on reserve accounts at our
Portfolio Companies.
Our liquidity position remains robust, with net cash of £9.7 million at 31
December 2023. By using excess cash that we have generated from our portfolio
of investments, I am pleased to report that we repaid all cash drawings under
our £230 million RCF by 31 December 2023. Additionally, we have no
outstanding acquisition commitments, placing the Company in a strong financial
position. Moving forward, we remain committed to optimising our portfolio
construction to maximise value for our shareholders.
Our Net Asset Valuation (NAV)
We have not been immune to the significant shifts in macroeconomic and
investor sentiment, which have impacted the broader UK-listed investment
company sector. Increasing interest rates and the volatility of underlying
risk-free rates have had a ripple effect on discount rates, and throughout
2023, the listed social infrastructure sector has traded at an average NAV
discount of 10.5 per cent.
As of December 31, 2023, our NAV per share stood at 147.8 pence, a slight
decrease of 1.4 per cent from the previous year and BBGI's first
year-over-year decrease since our 2011 listing. The shift in market discount
rates had the most significant negative effect on our portfolio valuation,
responsible for a 3.8 per cent reduction. Adverse currency exchange movements
further decreased portfolio valuation by 2.2 per cent, which was partially
offset by income arising from foreign exchange derivative contracts. We have
also decreased our portfolio valuation by 1.5 per cent by fully provisioning
for the anticipated negative effect of proposed changes to Canadian tax
legislation, which are expected to be approved in parliament in 2024 with
effect from 1 January 2024. However, these negative impacts on the portfolio
valuation were partially offset by our proactive asset management, which
increased our NAV by 1.7 per cent, along with changes in our macroeconomic
assumptions, driven largely by the effect of revised deposit rate assumptions,
contributing to an increase of 2.6 per cent.
Both the Management Board and the Supervisory Board continue to believe that
BBGI's share price does not adequately reflect the value of our portfolio, our
high-quality inflation linkage, our strong financial position and operational
performance. We continue to see a disparity between the private market
valuations of high-quality core infrastructure assets and the value ascribed
by public markets and there were a number of market transactions that
substantiate our reported NAV. As of 31 December 2023, BBGI's implied risk
premium was 3.7 per cent above the weighted average government risk-free rate
for our portfolio. We view this as attractive for a low-risk investment
portfolio with high-quality inflation protection, delivering real returns, and
progressive dividend growth, particularly when compared with fixed income
products.
Focus on disciplined growth and capital allocation strategy
During 2023, we fully repaid all drawings on our RCF by using excess cash that
we have generated from our portfolio of investments, helping to reduce our
financing costs and we currently have no commitments to finance new
investments. We are focused on the construction of our portfolio to ensure
that we continue to deliver value to our shareholders. Our confidence in the
robustness of our portfolio has allowed us to raise the dividend by six per
cent in 2023, with a further six per cent increase target for 2024, thereby
returning to shareholders the substantial inflation-linked gains accrued in
our portfolio. We target a two per cent increase for the 2025 dividend, as we
consider it too early to predict the direction of inflation levels.
We believe in pursuing disciplined growth that prioritises building
shareholder value, guided by our internal management structure, rather than
seeking to expand our assets under management merely for the sake of growth.
Our governance model ensures full alignment between management's interests and
those of our shareholders.
Our stringent criteria for pursuing new investments are influenced by the
relative attractiveness of alternative capital allocation options, while
considering the longer-term strategic rationale. We will continue to apply
this approach as we have done since our IPO in 2011. We have used our RCF
responsibly and have grown our business in a disciplined manner, not
overextending our balance sheet and not placing an overreliance on the equity
capital markets. We used our RCF to acquire two new assets (John Hart
Generating Station in Canada and the A7 Motorway in Germany) for c. £64.4
million in 2022, which we have now paid off in full using free cash flows from
our portfolio. This demonstrates our ability to grow organically and develop
our portfolio without the need to access the equity market for funds. In this
context, it is worth noting that our current return projections, all else
remaining equal, are not contingent on new investments. If we were to abstain
from further investments, our existing portfolio alone would sustain our
progressive dividend policy for the next 15 years.
Although we decided not to make any further investments during 2023, we
continue to monitor new investment opportunities in the market through our
strong network of industry relationships. We remain poised to seize the right
opportunities that are value-accretive, will strengthen our portfolio and will
enhance our overall portfolio composition and key metrics, while considering
their attractions against alternative capital allocation options. Despite
deciding against new investments in 2023, we are actively keeping an eye on
new opportunities via our extensive industry connections. We stand ready to
capitalise on investments that will add value, bolster our portfolio, and
improve its overall composition and key metrics. Furthermore, we are
investigating portfolio diversification prospects with desirable traits, such
as consistent long-term cash flows and inflation correlation, aligning with
our existing investment policy. Any new investment opportunity will of course
be evaluated by comparing their potential benefits to other ways of allocating
our capital.
Environmental, social and governance progress
Environmental, social, and governance (ESG) remains a fundamental focus for
us, and we are pleased to report significant progress in this area over the
past year. We believe that a strong commitment to ESG principles plays a
crucial role in mitigating risks and supporting our business over the long
term. Moreover, it not only fosters solid relationships with clients and
partners but also motivates and engages our employees. Moreover, it plays a
crucial role in mitigating risks and supporting our business over the long
term. Our sustainable investment portfolio benefits from a strong social
purpose and the Company is classified as SFDR Article 8.
Over the past year, we have further developed our approach to sustainability
including our capacity to measure and report on our progress, as well as
enhancing our robust approach to governance. BBGI is committed to net zero
both operationally and with our portfolio, and in 2023 we enhanced our
proprietary ESG database, including greenhouse gas ('GHG') emissions data, and
published our first SFDR Principal Adverse Impact Statement. All our Portfolio
Company assets have a high degree of climate risk resilience, and we now have
a complete overview of their emissions profiles, which will facilitate future
decarbonisation programmes. Our alignment with global standards and high
scores from third-party ESG ratings is testament to our commitment to
sustainability.
Looking ahead
This is my first statement as sole CEO, having taken on the role in Q1 2024.
Concurrently, Michael Denny has broadened his remit to encompass COO
responsibilities alongside his CFO duties, and we welcomed Andreas Parzych to
the Management Board. My collaboration with Michael dates back to his initial
days as CFO following our 2011 IPO, and his contribution has been invaluable.
Since joining us in 2016, Andreas has been instrumental in executing our
disciplined growth strategy - a role he will continue to advance. We have a
focused succession planning process to ensure our business remains well
managed and prepared for future developments, with a committed, high-calibre
leadership team in place. I would also like to extend my gratitude to Frank
for his successful tenure and commitment as Co-CEO and offer my best wishes
for his retirement. Additionally, I extend my appreciation to all our
colleagues for their exceptional efforts in 2023.
I remain optimistic about the long-term prospects for BBGI. We will continue
to look ahead in the management of the portfolio, seeking to enhance the
assets that we own, while also identifying opportunities for new investments
to maintain or improve the portfolio metrics. Growth in the infrastructure
asset class will be driven by the imperatives of digitalisation,
decarbonisation, demographic dynamics, and the modernisation or renewal of
aging infrastructure. As governments continue to run deficits and demand for
maintaining, repairing, and constructing new infrastructure grows, there is an
increasing need for private sector investment in infrastructure, presenting
long-term opportunities for BBGI. With our robust balance sheet, a portfolio
that generates secure, predictable cash flows surpassing our dividend
objectives, and an undrawn £230 million RCF maturing in May 2026, we are
well-equipped to navigate evolving markets, with both discipline and ambition,
and to deliver attractive value to all our stakeholders.
Duncan
Ball
CEO
27 March 2024
Our Investment Strategy
BBGI provides access to a globally diversified portfolio of infrastructure
investments, which generate long-term and sustainable returns and serve a
critical social purpose in their local communities. Our portfolio is well
diversified across sectors in education, healthcare, blue light (fire and
police stations), affordable housing, modern correctional facilities, clean
energy and transport infrastructure assets.
Our business model serves as the foundation of our success, enabling us to
deliver robust shareholder returns, a low correlation to other asset classes
and sustainable growth, largely independent of the economic cycle. The model
is structured around four strategic pillars:
Low-risk
· Availability-style investment strategy.
· Secure, public sector-backed contracted revenues.
· Stable, predictable cash flows, with high-quality inflation
linkage and progressive long-term dividend growth.
Internally managed
· In-house management team focused on portfolio construction and
delivering shareholder value, not simply growing assets under management.
· Management interests aligned with those of shareholders.
· Strong pricing discipline and portfolio management.
· Lowest comparative ongoing charges. vi (#_edn6)
Globally diversified
· Focus on highly rated investment grade countries.
· Stable, well-developed operating environments.
· A global portfolio, serving society through supporting local
communities.
Strong ESG approach
· ESG fully integrated into the business model.
· Comprehensive climate risk analysis across the portfolio.
· Focus on delivering positive social impact - SFDR Article
8(( vii (#_edn7) )) - and high degree of climate resilience.
Operating Model
We follow a proven operating model based on three principles: value-driven
active asset management, prudent financial management and a selective
acquisition strategy, which are fundamental to our success. This model aims to
preserve and create value, while achieving portfolio growth, ensuring that ESG
considerations are embedded in our processes.
Our active asset management approach seeks to ensure stable operational
performance, preservation of value and, where possible, identification and
incorporation of value enhancements over the lifetime of the assets under our
stewardship. Our approach aims to reduce costs to our public sector clients
and asset end-users, to enhance the operational efficiency of each asset and
to generate a high level of asset availability, underpinning the social
purpose of our portfolio.
Our prudent financial management approach focuses on efficient cash and
corporate cost management and the implementation of our foreign exchange
hedging strategy. Due to our portfolio's geographical diversification, we are
exposed to foreign exchange volatility, which we actively seek to mitigate.
We pursue a selective acquisition strategy, so our Management Board's focus
remains within its area of expertise, and we uphold the strategic pillars
defined by our investment proposition. We actively seek, through portfolio
construction, acquisitions with long-term, predictable, and
inflation-protection characteristics that support our contracted,
high-quality, inflation linkage of 0.5 per cent.
Value-driven active asset management
We pursue a standardised approach across our portfolio to preserve value, to
derive operational and value enhancements, and to improve clients' experience,
including:
· strong client relationships, by prioritising regular meetings and
active engagement to achieve high rates of client satisfaction;
· focused asset management, to ensure distributions are on time,
and on or above budget;
· focused cost management and portfolio-wide cost-saving
initiatives, to leverage economies of scale or outperform the base case, such
as portfolio insurance and standardised management contracts for Portfolio
Companies, and thorough lifecycle cost reviews;
· comprehensive monitoring, to ensure we fulfil our contractual
obligations;
· detailed climate risk assessment and ESG KPI tracking tool, which
includes over 100 KPIs and questions, to evaluate the sustainable performance
of each of our investments, ensure good governance and mitigate risk;
· maintaining high availability levels by proactively managing any
issues, including site visits to all significant investments;
· monitoring and periodically reviewing Portfolio Company debt
facilities and investigating potential refinancing benefits; and
· measured exposure to construction risk to support NAV uplift by
de-risking assets over the construction period.
Prudent financial management
We focus on cash performance at both the asset and portfolio level to drive
efficiencies, including:
· progressive future dividend growth, underpinned by high-quality
inflation linkage and strong portfolio distributions. Assuming a scenario
where no additional investments are made, the projected cash flows in the
income phase from BBGI's current portfolio of 56 investments could sustain the
Company's progressive dividend policy for 15 years;
· low ongoing charges through our efficient and cost-effective
internal management structure;
· managing and mitigating foreign exchange risk through our hedging
strategy: hedging forecast portfolio distributions, balance sheet hedging
through foreign exchange forward contracts, and borrowing in non-Sterling
currencies;
· euro-denominated running costs, which provide a natural hedge
against Euro-denominated portfolio distributions;
· efficient treasury management processes to maximise interest
income on deposits in the underlying Portfolio Companies; and
· maintaining modest cash balances at the corporate level to limit
cash drag, facilitated through access to the RCF.
Selective acquisition strategy and strategic investment partnership
We maintain strategic discipline in our acquisition strategy and portfolio
composition to ensure we pursue growth that builds shareholder value, not just
for growth's sake, including:
· broad industry relationships throughout multiple geographies;
· pre-emption rights to acquire co-shareholders' interests;
· visible pipeline through a North American strategic partnership,
which offers an option, but not an obligation, to transact;
· global exposure to benefit from geographical diversification;
· robust framework embedding ESG principles into investment due
diligence;
· revolving corporate debt facility to support transaction
execution; and
· focus on the Management Board's core areas of expertise.
We leverage strong relationships with leading construction companies to source
potential pipeline investments, which support our low-risk and globally
diversified investment strategy. Typically, these contractors have secured the
mandate to design and build new assets, but often look to divest financially
after the construction period has finished - thereafter often maintaining
facility management contracts through a long-term partnership. BBGI is an
attractive partner for several reasons:
· 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.
· Having a financial partner is a prerequisite for some
construction companies so they can avoid consolidating Portfolio Company debt
onto the balance sheet of their parent company.
· We have extensive asset credentials and a strong track record,
which can assist with the shortlisting process for new projects.
We operate within a niche of the infrastructure sector characterised by
transactions of a more modest scale, which affords us specific advantages. In
recent times, a significant portion of capital has flowed into substantial,
unlisted infrastructure funds, many of which aim for fund targets exceeding US
$10 billion. These larger funds prioritise the deployment of substantial
amounts of capital and, as a result, do not actively engage in the smaller
transaction space where we excel. Within our market niche, we are recognised
as a dependable source of capital and consequently have very good visibility
of potential opportunities.
Portfolio Review
Portfolio summary
Our investments as at 31 December 2023 consisted of interests in 56
high-quality, availability-style social infrastructure assets, 100 per cent of
which are fully operational (by portfolio value). The portfolio is well
diversified across sectors in education, healthcare, blue light (fire and
police stations), affordable housing, modern correctional facilities, clean
energy, and transport infrastructure assets.
Located in Australia, Canada, Germany, the Netherlands, Norway, the UK, and
the US, all Portfolio Companies are in stable, well-developed, and highly
rated investment grade countries.
No. Asset Country Percentage holding %
1 A1/A6 Motorway Netherlands 37.1
2 A7 Motorway Germany 49
3 Aberdeen Western Peripheral Route UK 33.3
4 Avon & Somerset Police HQ UK 100
5 Ayrshire and Arran Hospital UK 100
6 Barking Dagenham & Havering (LIFT) UK 60
7 Bedford Schools UK 100
8 Belfast Metropolitan College UK 100
9 Burg Correctional Facilities Germany 90
10 Canada Line Canada 26.7
11 Champlain Bridge Canada 25
12 Clackmannanshire Schools UK 100
13 Cologne Schools Germany 50
14 Coventry Schools UK 100
15 E18 Motorway Norway 100
16 East Down Colleges UK 100
17 Frankfurt Schools Germany 50
18 Fürst Wrede Barracks Germany 50
19 Gloucester Royal Hospital UK 50
20 Golden Ears Bridge Canada 100
21 Highway 104 Canada 50
22 John Hart Generating Station Canada 80
23 Kelowna & Vernon Hospitals Canada 100
24 Kent Schools UK 50
25 Kicking Horse Canyon Highway Canada 50
26 Lagan College UK 100
27 Lisburn College UK 100
28 Liverpool & Sefton Clinics (LIFT) UK 60
29 M1 Westlink UK 100
30 M80 Motorway UK 50
31 McGill University Health Centre Canada 40
32 Mersey Care Hospital UK 79.6
33 Mersey Gateway Bridge UK 37.5
34 N18 Motorway Netherlands 52
35 North Commuter Parkway Canada 50
36 North East Stoney Trail Canada 100
37 North London Estates Partnership (LIFT) UK 60
38 North West Fire and Rescue UK 100
39 North West Regional College UK 100
40 Northwest Anthony Henday Drive Canada 50
41 Northern Territory Secure Facilities Australia 100
42 Ohio River Bridges USA 66.7
43 Poplar Affordable Housing & Recreational Centres UK 100
44 Restigouche Hospital Centre Canada 80
45 Rodenkirchen Schools Germany 50
46 Royal Women's Hospital Australia 100
47 Scottish Borders Schools UK 100
48 South East Stoney Trail Canada 40
49 Stanton Territorial Hospital Canada 100
50 Stoke & Staffs Rescue Service UK 85
51 Tor Bank School UK 100
52 Unna Administrative Centre Germany 90
53 Victorian Correctional Facilities Australia 100
54 Westland Town Hall Netherlands 100
55 William R. Bennett Bridge Canada 80
56 Women's College Hospital Canada 100
Projects listed above are in alphabetical order.
Operating model in action
Preserving and enhancing value through active asset management
The increase in short-term interest rates across all jurisdictions over the
past 12 to 18 months has led to a renewed emphasis on treasury management and
optimisation. During the reporting period, we have finalised cash pooling
arrangements in the UK and Canada to maximise interest generated on cash
deposits of our Portfolio Companies.
Value-accretive activities, including effective lifecycle cost management,
Portfolio Company savings, change order revenue, tax and treasury management
and optimised cash reserving, contributed approximately £18.5 million to the
NAV.
The operational performance of the Portfolio Companies continued to be strong.
Through our active value-driven approach to asset management and the
robustness of our portfolio, we have achieved an asset availability level of
approximately 99.9 per cent. Deductions were either borne by third-party
facility management companies and road operators or were part of planned
expenditures.
There were no material lock-ups, default events or covenant breaches in the
underlying debt financing agreements reported during the year. This means that
all our investments contributed to our strong dividend cover with portfolio
distributions ahead of projections. We are very proud of this achievement.
Client satisfaction is paramount to us, and in 2023, our efforts were
reflected in consistently high Net Promoter Scores from our project clients.
These metrics underscore our sustained commitment to fostering robust client
relationships and delivering excellence.
High-quality inflation linkage
During the reporting period, inflation rates began to decline but remained at
elevated levels in the jurisdictions where BBGI invests. Similarly, the
volatility in long-term interest rates during 2023 had an impact on discount
rates.
Our equity cash flows are positively linked to inflation at approximately 0.5
per cent. If inflation is one per cent higher than our assumptions for all
future periods, returns should increase from 7.3 per cent to 7.8 per cent. We
achieve this high-quality inflation linkage through contractual indexation
mechanics in our Project Agreements with our public sector clients at each
Portfolio Company and update the inflation adjustment at least annually.
We pass on the indexation mechanism to our subcontractors - on whom we rely on
to support our assets' operations - providing an inflation cost hedge to
manage effectively our cost base. The Portfolio Companies enter into
facilities management and operating subcontracts that mirror the inflation
arrangements contained in the Project Agreement. In the UK, Project Agreements
tend to have a Retail Price Index ('RPI') adjustment factor, while other
regions commonly use Consumer Price Index ('CPI') indexation. However, some
Project Agreements have bespoke inflation indices that reflect expected
operations and maintenance costs.
The extent of a Portfolio Company's linkage to inflation is determined by the
portion of income and costs linked to inflation. In most cases, cash flows are
positively inflation-linked as the indexation of revenues is greater than the
indexation of expenses.
The high-quality and defensive nature of our inflation linkage is underpinned
by:
Contractual increases: The adjustment for inflation is a
contractual component of the availability-style cash flows for each Portfolio
Company, supported by creditworthy government or government-backed
counterparties in AA to AAA-rated countries. While other types of assets may
offer a strong theoretical inflation linkage (e.g., the ability to raise
prices in response to an increase in CPI), they may be subject to changes in
elasticity of demand. For example, toll roads and student accommodation
projects may have the potential to increase prices in response to an increase
in CPI but may be hindered by market demand from increasing revenue, while
costs may simultaneously rise. Such assets would therefore need to be priced
at an appropriate risk-adjusted basis.
Protection against rising costs: We transfer the indexation
mechanism to our subcontractors, who are crucial in supporting the operations
of our assets. This arrangement serves as an inflation cost hedge, helping us
to control efficiently our cost base. Similarly, in most cases, the risk of
energy cost increases rests with our public sector client or has been passed
down to the subcontractor.
No dependence on regulatory review: The inflation adjustment is
automatic and contractual and is not subject to regulatory review or
substantial lags. Once the relevant reference factor is published, the
adjustment is mechanical.
Portfolio approach: Our inflation linkage comes from diverse
Portfolio Companies in different countries.
Prudent financial management
Our assets continued to perform well during the reporting period with cash
receipts during the period ahead of projections. Our net cash position as of
31 December 2023 was £9.7 million with no cash drawings outstanding under the
RCF.
We have efficient cash management in place, which aims to avoid cash drag. We
employ a proven financing strategy by initially drawing on our RCF to bridge
finance acquisitions, with the cost of borrowing being 165 basis points (bps)
over the reference bank rate. Subsequently, we raise new equity or use free
cash flows generated by the Portfolio Companies to repay the RCF, thereby
clearing the temporary debt. The committed amount available to the Company
from the RCF is £230 million, which matures in May 2026. Furthermore, the
Company has the possibility of increasing the quantum to £300 million by
means of an accordion provision. This provides us with the ability to execute
larger acquisitions in an efficient manner, and ensures we are a trusted and
repeat partner in our key markets.
We have managed our RCF with prudence and discipline, expanding our portfolio
without overleveraging our financial statements and acknowledging that the
equity capital market is not perpetually accessible. In 2022, we utilised our
RCF to secure two new assets - the John Hart Generating Station in Canada and
the A7 Motorway in Germany - for approximately £64.4 million. The RCF
drawings for these acquisitions have been fully repaid using surplus cash
flows generated by our portfolio, showcasing our capacity for organic growth
without resorting to external capital resources.
Each of our Portfolio Companies is financed on a non-recourse basis, with 55
of our 56 assets securely financed and not subject to refinancing
requirements. One Portfolio Company has a refinancing obligation in December
2025. However, the Portfolio Company benefits from a hedged base market
interest rate and is therefore only sensitive to changes in lenders required
margins over base interest rates. In line with our loan agreements, we
maintain substantial cash reserves within these Portfolio Companies. As at 30
September 2023, BBGI's proportionate share in the total cash balances held by
the Portfolio Companies was approximately £385 million viii (#_edn8) , an
amount equivalent to 36 per cent of our NAV.
Our strategic hedging policy has enabled us to mitigate the effects of foreign
exchange fluctuations. Moreover, we have adopted a proactive treasury
management approach to optimise the interest earned on the reserve accounts of
our Portfolio Companies.
Despite the increasing cost pressures attributed to heightened levels of
inflation, our diligent approach to cost management has allowed us to maintain
our ongoing charges at a competitive level of 0.93 per cent.
Selective acquisition strategy
During the period, we remained active in the market and carefully assessed
numerous new investment opportunities. Although we evaluated a variety of
opportunities, the Management Board chose not to pursue them as they did not
meet our criteria for accretive inflation linkage, attractive yield or growing
NAV profile.
Our commitment to disciplined growth is centred on enhancing shareholder
value, reinforced by our unique internal management structure, rather than
merely increasing assets under management. As the only internally managed
equity infrastructure investment company listed on the London Stock Exchange,
we are confident that our governance model ensures the interests of our
management are in harmony with those of our shareholders.
We adhere to strict criteria when evaluating new investments, carefully
weighing the relative appeal of different capital deployment options, all the
while keeping an eye on the long-term strategic objectives, including the
desire to maintain or lengthen the life of the portfolio. We will continue
with this judicious approach as we pursue sustainable growth and value
creation for our shareholders.
Supply chain monitoring
The Management Board consistently monitors the potential concentration risk
posed by operations and maintenance ('O&M') contractors that provide
counterparty services to our assets. The table below depicts the level of
O&M contractor exposure as a percentage of portfolio value.(( ix (#_edn9)
))
O&M contractors
Portfolio Company inhouse 12%
Capilano Highway Services 11%
AtkinsRéalis O&M 9%
Black & McDonald 6%
Cushman and Wakefield 5%
Integral FM 5%
Hochtief Solutions AG 4%
Honeywell 4%
Carmacks Maintenance Services 3%
Amey Community Ltd 3%
Intertoll Ltd 3%
Graham AM 3%
Guildmore Ltd 3%
Galliford Try FM 3%
BEAR Scotland 3%
Remaining investments 23%
100%
The Management Board has thoroughly assessed the risk exposure and has not
identified any significant risks. We have a strict supply chain monitoring
policy, maintain a diverse contractor base, and implement risk mitigation
measures to address proactively any potential issues in our supply chain.
Construction defects
We proactively monitor the quality of our assets to identify promptly any
construction defects. When necessary, we take appropriate remediation measures
to ensure the highest standard of our portfolio. The responsibility for, and
the cost of remediation and related deductions lie with the relevant
construction subcontractor on each asset, in line with statutory limitation
periods. This plays an important role in our effective counterparty risk
management.
Latent defects risk was mitigated during the reporting period, with 50 per
cent of portfolio value covered by either limitation or warranty periods and
there were no material defects reported on any of our portfolio assets.
Latent defects limitations / warranty period remaining
Expired 50%
Within 1 year 11%
1-2 years 4%
2-5 years 18%
5-10 years 11%
10+ years 6%
100%
Project hand-back
At the end of a concession, the private partner transfers control and
management of the project back to the public sector. This process is termed
'hand-back'. The concessions for two of the Company's UK accommodation assets
will expire in January 2026 and August 2027. Preparations for their hand-back
is underway. Following the Infrastructure and Projects Authority UK's
guidelines, collaborative working groups have been established, comprising
representatives from the Client, the FM contractor, and the Portfolio
Companies, each involved in the projects. The FM contractor bears the
hand-back risk for both assets.
The hand-back process is progressing positively, with notable advancements
made so far. Interactions and cooperation among all parties are robust,
fostering strong relationships. As at the reporting date, no risks that could
affect either of the Portfolio Companies have been detected in the process. We
have established transparent communication channels with our subcontractors
and public partners, fostering a robust partnership built on measurable
outcomes, including clear hand-back requirements.
Less than one per cent of the Portfolio is subject to hand-back in the next
five years.
Portfolio Snapshot / Top Ten Assets
Our ten largest assets
The following summary of our top 10 assets provides a snapshot, offering key
data and achievements over time, which are not necessarily limited to the
current reporting period.
1) Golden Ears Bridge
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 100 per cent
· Total investment volume (debt and 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
Public Private Partnership ('PPP') in Canada at the time of its launch. The
project involves the design, build, financing, operation and maintenance of
the Golden Ears Bridge in Vancouver, which is a 1 km, six-lane road that spans
the Fraser River and connects Maple Ridge and Pitt Meadows to Langley and
Surrey. The road opened in March 2009 and includes more than 3.5 km of ramps,
viaducts, minor bridges and underpasses, and more than 13 km of mainline
roadway; a large part of which has been landscaped.
The project brought close to C$1 billion in construction-related activity to
the area, while commuters using the bridge now save up to 40 minutes per
peak-hour round-trip from Maple Ridge to Langley.
In 2023, a four-year replacement program, coordinated with the asset operator,
was successfully concluded. This initiative involved transitioning all
traditional lighting to LED technology. Since 2019, this transition has
delivered annual energy savings in excess of 400,000 kWh. Anticipated further
reductions are expected with the completion of this final phase.
2) Ohio River Bridges
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 66.7 per cent
· Total investment volume: US$1.175 billion
· Financial close/operational: March 2013/December 2016
· Concession period: 35 years (post-construction) ending in 2051
The project includes a 760 m cable-stay bridge, a 500 m long twin vehicular
tunnel and 2.25 km of associated six-lane interstate highway, with more than
21 bridges and multiple roundabout style interchanges. The asset greatly
improves connectivity, public safety and economic growth, which benefits
residents, businesses and visitors in the Southern Indiana region,
particularly for road-users travelling to and from the state of Kentucky.
In October 2021, a US$528 million green bond offering was completed to
refinance its existing indebtedness. This transaction allowed the Portfolio
Company to optimise its financing costs over the remaining term of the
contract thereby further strengthening its financing structure, while also
benefiting the public sector client through a reduction in future service
payments.
The monitoring of Ohio River Bridge's energy reduction programme indicates
ongoing reductions in GHG emissions. Since the installation of solar panels on
the O&M buildings, the surplus renewable electricity generated has
exceeded the amount consumed. Specifically, over 40,000 kWh of renewable
electricity generated on-site was subsequently sold back to the grid.
Additionally, the transition of the project's fleet to electric-powered
vehicles has halved the fleet's fuel since 2019.
3) Northern Territory Secure Facilities
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 100 per cent
· Total investment volume (debt and 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 project
involves the design, build, financing, operation and maintenance of three
separate centres including: a 1,000-bed multi-classification male and female
correctional centre, a 24-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. The latter
is designed to support the Australian Government's goals of enhanced
rehabilitation, education and reduced reoffending rates in the Territory.
The asset is one of the largest social infrastructure projects in the
Territory and is the largest PPP ever procured to date. 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.
The modern correctional facility was designed with a focus on providing
educational and support services to prisoners, prioritising rehabilitation to
aid their reintegration into the community. Prisoners have access to a range
of programmes, including education, training, rehabilitation, and treatment
services, all aimed at decreasing the incidence of reoffending.
4) A7 Motorway
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 49 per cent
· Total investment volume: €773 million (incl. state subsidy of
€213 million)
· Financial close/operational: September 2014/December 2019
· Concession period: 30 years (post Financial Close) ending in 2044
The A7 Motorway project is an availability-based design, build, finance,
operate and maintain project located between the cities of Neumünster and
Hamburg in Germany. The project comprises c. 65 km of highway widening from
four to six lanes including 11 interchanges, six parking facilities, four rest
areas and 79 engineering structures including a 550 m noise tunnel at the City
of Schnelsen.
The noise tunnel provides green spaces and parks, including 400 allotment
gardens which reconnect two previously divided neighbourhoods. Additionally,
over 100,000 square metres of noise protection barriers were built to meet
local requirements. Wildlife crossings were implemented along the motorway to
preserve natural habitats and wildlife migration patterns.
In 2023, the Portfolio Company has started the transition process of its
vehicle fleet to electric vehicles. The project is also committed to install
solar panels on the O&M buildings, which is expected to deliver
approximately 450,000 kWh p.a. of renewable energy once available.
5) A1/A6 Motorway
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 37.14 per cent
· Total investment volume (debt and equity): €727.4 million
· Financial close/operational: February 2013/June 2017
· Concession period: 25 years (post-construction) ending in 2042
At the time of its launch, the A1/A6 Motorway project represented one of the
largest greenfield PPP projects in the Netherlands and forms part of the wider
Schiphol - Amsterdam - Almere ('SAA') corridor. The project is for the design,
construction, financing, and maintenance of 18 km of the A1 and A6 motorways
to the south of Amsterdam and involves re-routing and widening of the A1 (to
two x five lanes and two reversible lanes), reconstruction of two major
interchanges, expansion of the A6 (to two x four lanes and two reversible
lanes) and the construction of various new bridges, an aqueduct and the
longest free span railway bridge in Europe, as well as demolition of the old
part of the A1.
The project forms part of a wider programme of five connected and adjacent
projects, which together provide for significant extra road traffic capacity,
reduced journey times and improved accessibility of the north flank of the
economical heart of the Netherlands around Amsterdam. As a result, the
liveability of the area has been improved significantly.
Since replacing 2,000 fixtures of traditional street lighting with LED in
2020, the project has reduced its electricity consumption by approximately
600,000 kWh per year compared to the annual consumption in 2019.
6) Victorian Correctional Facilities
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 100 per cent
· Total investment volume (debt and equity): A$242 million
· Financial close/operational: January 2004/March 2006
· Concession period: 25 years (post-construction) ending in 2031
The Victorian Correctional Facilities project is an availability-based PPP
including the design, finance, construction and maintenance of two
correctional facilities for the State of Victoria, Australia (the 'State').
The first facility, the maximum security Metropolitan Remand Centre ('MRC'),
accommodates up to 1,009 male offenders and is located approximately 20
kilometres from Melbourne city centre. The second, smaller facility is the
medium security Marngoneet Correctional Centre ('MCC') that accommodates up to
599 male offenders and is located approximately 65 kilometres from Melbourne
city centre.
The project is currently undertaking a significant expansion of both
facilities which will see the bed capacity numbers increase to 1,210 at MRC
and 653 beds at MCC. The Portfolio Company is delivering these works via an
augmentation with the State, with works expected to be completed in 2024.
Energy reduction and waste management programmes are in place at both
facilities, with monitoring indicating continuous reductions in GHG emissions.
To date, approximately 80% of traditional lighting has been replaced by LED.
Additionally, photovoltaic panels have been installed at both facilities,
generating renewable electricity that is sold back to the grid. In 2023,
approximately 120 tonnes of waste were diverted from landfill by either
recycling or incineration.
7) Liverpool and Sefton Clinics (LIFT)
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 60 per cent
· Total investment volume (debt and equity): GBP 89 million
· Financial close/operational: June 2004 - November 2011/June 2005
- February 2013
· Concession period: 25 or 30 years (post construction) last
facility ending in 2043
Long-term, public private strategic partnering agreement to provide strategic
estates services and develop, fund, build, operate and manage primary
healthcare facilities in Liverpool and Sefton. The Project includes a
development company that has a long-term strategic partnering agreement to
provide estate services and new project developments for public sector
organisations within its contract area. Each new development is delivered by a
Portfolio Company sitting under this development company. To date there are
five such Portfolio Companies and 14 completed facilities. Typical services
include GP practices, chiropody, speech and language therapy, community
nursing, dental surgery and family planning.
The project is currently constructing a new capital development scheme for
MerseyCare NHS Foundation Trust on the Mossley Hill site in Liverpool for a
new 80 bed low secure mental health facility which is due to complete in 2025.
The project companies have for a long time worked to make their buildings a
part of the local communities, which are typically in disadvantaged areas,
with spaces within the buildings being made available for community groups and
fundraising activities. BBGI, along with its management services providers,
regularly funds programmes in partnership with social care charities,
targeting young or vulnerable people. In 2023, a two-year replacement program
was finalised, converting all traditional lighting to LED across all sites.
This transition was facilitated by leveraging existing automated control
systems used for managing electricity usage throughout the sites.
8) McGill University Health Centre (MUHC)
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 40 per cent
· Total investment volume (debt and equity): C$2.0 billion (incl.
government subsidy)
· Financial close/operational: July 2010/October 2014
· Concession period: 30 years (post construction) ending in 2044
The project involves the design, build, finance, operation and maintenance of
MUHC's campus in Montreal. It comprises two hospitals, a cancer centre and a
research institute with a total of 500 beds. MUHC is one of the most
innovative academic health centres in North America, and at 214,000 sqm, 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.
The campus project achieved a Gold certification for Leadership in Energy and
Environmental Design ('LEED') in 2016. The Portfolio Company regularly makes a
financial contribution to the MUHC Foundation, supporting medical research
programmes at MUHC.
9) M1 Westlink
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 100 per cent
· Total investment volume (debt and equity): GBP 161 million
· Financial close/operational: February 2006/November 2009
· Concession period: 30 years (post financial close) ending in 2036
The project required the design, upgrade, finance and operation of 60 km of
two to five lane motorway and dual carriageway and associated assets including
structures, street lighting, and safety barriers. The project involved the
widening of 4.5km of the M1 and A12 between Stockman's Lane and Divis junction
to a dual three-lane carriageway and grade separation of three major
junctions. In addition, a third lane was added to the 5km of the downhill
section between Sandyknowes and Greencastle junctions on the M2, including the
construction of 4 new bridges.
In 2023 the Portfolio Company and the operator agreed to replace the current
conventional lighting by LED lighting. The investment programme will be funded
by the Portfolio Company, with financial contributions from the operator. This
investment is expected to generate savings in electricity consumption.
10) Women's College Hospital
· Type: Availability-style
· Status: Operational
· Equity holding BBGI: 100 per cent
· Total investment volume (debt and equity): C$ 421 million (incl.
government subsidy)
· Financial close/operational: July 2010/May 2013 and September
2015
· Concession period: 30 years (post construction phase 1) ending in
2043
The project comprises the design, build, finance, operation and maintenance of
the Women's College Hospital project in Toronto, Ontario. The hospital is a
multi-story building (approximately 60,000 sqm) consisting of ambulatory care,
surgical research and educational facilities, as well as administrative,
parking, and other non-clinical space to support Women's College Hospital's
comprehensive and integrated approach to providing quality women's health care
to patients with a need for diagnostics, extended treatments and chronic care.
The project was delivered in two phases. The ambulatory hospital facility
includes 200 beds.
The project achieved a Gold certification for Leadership in Energy and
Environmental Design ('LEED') in 2017. In 2023, the replacement program for
traditional lighting was continued, transitioning 50% of the site to LED
lighting. The Portfolio Company is partnering with the client to upgrade and
expand the number of electric vehicle charging stations located at the
facility from 14 to 20. In 2023, BBGI funded through the Portfolio Company,
and facilitated the construction of a rooftop Medicine Wheel Garden. The
Garden is a place to harvest native, medicinal plants and to be enjoyed by the
Indigenous community.
Market Trends and Pipeline
BBGI continues to operate in a volatile macroeconomic and geopolitical
environment. Financial markets have oscillated between hopes for a soft
economic landing and fears of sustained high interest and inflation rates
during the reporting period. This culminated in interest rate peaks in autumn,
followed by a repricing in the bond market before year-end. This volatility
continues to be a primary driver of public market valuations across the
infrastructure assets sector and will remain an important factor until markets
establish greater certainty over the future economic path. Resilient
valuations evidenced during this period continue to demonstrate a disconnect
between private and public markets for attractive core infrastructure assets.
Ultimately, core infrastructure remains an attractive asset class that can
serve as a hedge against both inflation and macroeconomic stress.
In 2023, the broader infrastructure asset class endured a sluggish period
marked by diminished fundraising activities in both public and private
markets, along with lower than typical transaction volumes. Challenging
macroeconomic conditions have continued to impact negatively the share prices
of listed infrastructure companies, thereby limiting public market
participants' access to equity capital. Similarly, transactional activity
levels were subdued in the second half of the year. In core social
infrastructure, it is evident that the progress of new procurements for
greenfield social infrastructure assets remains slow in many relevant markets.
Additionally, while there have been several secondary transactions observed,
transaction volumes were muted compared to recent years, possibly because the
asset class continues to perform well, and consequently there have been very
few forced sales.
We believe that infrastructure assets with established customer bases, robust
market positions, and/or contractual and regulatory protections offer a
cushion against economic uncertainty and a prolonged higher interest rate
environment. Additionally, these assets provide a collateral-based exposure to
secular trends, thereby mitigating risks. Specifically, core infrastructure
remains an attractive asset class due to its defensive nature, predictable
cash flows and inflation linkage.
As long-term investors in the sector, we believe that uncertain market
environments can present intriguing opportunities. Investing in assets that
underpin essential social infrastructure has proven effective in providing
inflation linked returns and stability during economic uncertainty.
Historically, the most compelling opportunities have arisen after challenging
periods. Looking ahead, growth in the infrastructure asset class will be
driven by the imperatives of digitalisation, decarbonisation, demographic
dynamics, and the modernisation or renewal of ageing infrastructure.
With our strong balance sheet and an untapped RCF, we are well positioned to
navigate the dynamic landscape of core infrastructure. We will maintain our
disciplined approach, pursuing only those transactions that add value, bolster
our portfolio, and improve our overall portfolio composition, duration and
other key metrics. Our primary objective remains to deliver long-term,
predictable, and inflation-linked cash flows that are value accretive to our
shareholders.
New opportunities
The most significant long-term driver for infrastructure investment is the
immense, unmet global demand for it. According to the Global Infrastructure
Hub, the disparity between government infrastructure spending and the required
amount will reach US$ 15 trillion by 2040. Infrastructure investment remains
pivotal in supporting GDP growth and economic progress. The next decades will
witness a transformative shift in how we create a social and secure
environment for individuals, generate and use energy, transport goods and
people, foster community connectivity, and reshape the environment.
Extensive public investment in infrastructure appears to be constrained, with
governments ruling out significant fiscal expansions due to considerable
debts and ongoing government deficits. If governments are not able to take on
the role of infrastructure owner-investors themselves, many infrastructure
market participants, including BBGI, believe that private capital is well
placed to step in and fill the gap.
In this landscape, we are committed to identifying attractive opportunities
that will allow us to diversify and expand our essential social infrastructure
portfolio. We are exploring prospects for portfolio diversification that
exhibit desirable characteristics, including consistent long-term cash flows
and inflation correlation, in line with our established investment policy.
Such investments may include extended concessions or outright asset ownership.
We will pursue these opportunities with strict adherence to ESG standards,
ensuring that any new investment opportunity is thoroughly evaluated by
comparing their potential benefits with other capital allocation options.
North America
Canada:
Canada's 'Investing in Canada Plan' commits over CAD 180 billion until 2035
for infrastructure projects. It is designed to achieve three objectives:
create long-term economic growth to build a stronger middle class; support the
resilience of communities and transition to a clean growth economy; and build
social inclusion and socioeconomic outcomes for all Canadians. To promote
these objectives, the plan delivers investments across five streams: Public
Transit; Green; Social; Trade and Transportation; and Rural and Northern
Communities. To date, the plan has invested over CAD 144 billion in more than
94,000 projects.
To support Canada's investment ambitions, the Canadian Infrastructure Bank
('CIB') has a mandate to invest in revenue-generating infrastructure that
benefits Canadians and attracts private capital. The following areas remain
priorities for CIB investment: Public Transit (CAD 5 billion); Green
Infrastructure (CAD 10 billion); Clean Power (CAD 10 billion); Trade and
Transportation (CAD 5 billion); and Broadband Connectivity (CAD 3 billion).
CIB's role is continuously evolving, and new areas such as clean fuel
production; hydrogen production, transportation and distribution; carbon
capture, utilisation, and storage; and large-scale zero-emission vehicle
charging and refuelling infrastructure, have been added to its mandate.
BBGI has benefited from Canada's infrastructure investments in the past and
has built a portfolio of 16 social infrastructure assets in the country. With
a reputation as a highly credible purchaser and manager of such assets, BBGI
is well-positioned to take part in infrastructure investments going forward.
While opportunities in traditional PPP procurements have reduced over the last
years, we anticipate there will continue to be a diverse range of social
infrastructure investment opportunities in Canada, in addition to the
continued push into energy, communication, and community services investments.
US:
Deglobalisation is an important megatrend that will bolster private
infrastructure investments. The onshoring of manufacturing capacity and an
increased focus on energy security will necessitate significant investments.
Macro data is beginning to reflect this trend. US construction spending for
manufacturing reached a record high of over USD 130 billion in 2022, following
six years of stagnation, and further accelerated to USD 214 billion in 2023.
However, billions of dollars will not be spent without certainty around energy
supply, transportation networks, utility services, and high-speed internet
access. These tailwinds support investments across all core infrastructure
sectors in the US.
US government policies are playing a significant role. The Infrastructure
Investment and Jobs Act ('IIJA'), also known as the Infrastructure Bill,
provides for USD 1.2 trillion in spending, USD 550 billion of which will be
new federal spending to rebuild roads and bridges, improve clean water
infrastructure resilience, enhance EV charging infrastructure, expand
broadband access, and more. The IIJA also expands how states and
municipalities may use private activity bonds to help finance projects
involving private investment, such as carbon capture and broadband access. The
historic investments included in the IIJA will significantly reshape the
future of infrastructure in the US. There is optimism that an attractive
pipeline of infrastructure projects will continue to emerge, whether through
PPP projects at the federal, state, and municipal levels, under alternative
procurement models, or through private-led initiatives.
Europe
EU:
European Union ('EU') frameworks and initiatives will continue to support
significant infrastructure investments in the region. The European
Commission's ('EC') priorities include objectives such as becoming the first
climate-neutral continent (European Green Deal), creating an economy that
ensures social fairness and prosperity for all, modernising Europe for the
digital age, and enhancing Europe's role and influence in the global arena.
Reducing emissions remains a key focus for the EC, which recently recommended
a 90 per cent net greenhouse gas emissions reduction by 2040 compared to 1990
levels, as part of its commitment to achieving climate neutrality by 2050
under the European Green Deal. All 27 EU Member States have committed to this
target. Setting a 2040 climate target sends important signals on how to invest
and plan effectively for the long term, thereby minimising the risks of
stranded assets. The energy and transportation sectors are significantly
impacted by the ambitions of the European Green Deal. Similarly, the EU's
digital strategy, with a clear focus on data, technology, and infrastructure,
aims to make digital transformation beneficial for people and businesses,
while also contributing to the target of a climate-neutral Europe by 2050.
In 2021, the European Commission unveiled a significant infrastructure
investment strategy aimed at mobilising up to EUR 300 billion of investments
in global development by 2027. The Global Gateway strategy aims to develop
physical infrastructure worldwide in five key sectors: digital, climate and
energy, transport, health, and education and research. This strategy allows
the EU to leverage both public and private investment in priority areas.
By clearly defining its priorities and providing supporting initiatives, the
EU establishes a framework that significantly influences infrastructure
investments across various sub-sectors in its member states. We anticipate a
continuous flow of pipeline opportunities in the core infrastructure space,
which we will diligently review according to our mandate. BBGI has established
a strong investment presence in two key EU countries, Germany and the
Netherlands. With seven existing PPP assets in Germany and three in the
Netherlands, we are well positioned to capitalise on future social
infrastructure opportunities. We have the necessary internal resources,
including native BBGI senior team members, to engage efficiently in
forthcoming transactions. As seen over the last years, PPP deal flow in
greenfield and brownfield assets has been inconsistent and we do not
anticipate a swift change. Nonetheless, we continue to monitor and evaluate
alternative infrastructure activities, particularly focusing on
decarbonisation and digitalisation investments. We believe that Continental
European infrastructure markets remain active and are likely to offer
attractive investment opportunities over the medium term.
UK:
The Infrastructure and Projects Authority ('IPA') published the 2023 Analysis
of the National Infrastructure and Construction Pipeline in February 2024.
This report provides a robust assessment of infrastructure investments over
the next decade in the UK, estimated at a total of GBP 700-775 billion. Like
other jurisdictions, the report identifies the most pressing investment needs
in energy, transportation, and social infrastructure in the short and medium
term. The IPA maps out the expected funding mix, highlighting that energy and
utilities, both privatised sectors, have high proportions of privately
financed infrastructure projects. In contrast, transport and social
infrastructure projects are predominantly funded by the public sector or
through a mixed funding approach (public and private). In total, the IPA
estimates current or future opportunities for private investment worth GBP 63
billion over the 10-year pipeline.
Established in 2021, the UK Infrastructure Bank ('UKIB') focuses on increasing
domestic infrastructure investment by partnering with the private sector and
local governments. UKIB has two strategic objectives: to address climate
change and to support regional and local economic growth by enhancing
connectivity, creating new job opportunities, and increasing productivity
levels. The bank invests across the infrastructure landscape, primarily
targeting economic infrastructure in five priority sectors: clean energy,
transport, digital, water, and waste. This sector-based approach aligns with
the UK Government's net zero strategy, aiming for a 100 per cent reduction in
greenhouse gas emissions by 2050.
By understanding UK government priorities and having access to supporting
initiatives like UKIB, private partners can contribute to the tasks ahead.
Private capital has been essential for maintaining and developing the UK's
existing infrastructure, as well as financing new projects, and will continue
to do so in the future. Despite some high-profile setbacks, we believe the UK
has a well-established and attractive infrastructure market for private
investors. The Private Finance Initiative ('PFI') was a preferred method of
involving the private sector in delivering essential infrastructure in the UK,
but it has not been utilised in recent years (being discontinued in 2018). We
have observed the development of alternative procurement models with similar
attributes, such as the Mutual Investment Model used for several procurements
in Wales. Additionally, we see bespoke partnership models being applied in
other social infrastructure areas, such as health, and there remains openness
to consider next-generation procurement models with well-understood attributes
and risk and return profiles.
With the UK government continuing to recognise the importance of
infrastructure investment alongside private partners in creating jobs,
boosting the economy, and reaching its net zero targets, we remain confident
and committed that opportunities to engage in the future UK investment
pipeline will emerge. We are actively seeking opportunities to expand our
essential social infrastructure portfolio in the UK, searching for investments
with long-term, inflation-linked revenue streams involving public sector
counterparties or with a link to the public sector. We also ensure that our
investments align with our strong ESG approach.
Australia
In Australia, an independent review of the Infrastructure Investment Program
was announced in May 2023, with the aim of ensuring that significant projects
had an adequate business case that would support funding from the Australian
Government. At the announcement of the review, it brought about reassurance
that the Australian Government remained committed to a ten-year, AUD 120
billion infrastructure pipeline. In November 2023 the Australian Government
released its Infrastructure Policy Statement, which aims to define nationally
significant transport infrastructure, sets out three strategic themes that
will guide investment decisions, and outlines how the Government will put
these themes into action.
With the focus on nationally significant infrastructure projects, this will
continue benefitting investments in the land transport network and/or other
key freight routes, but also in projects supporting other broader national
priorities such as housing. Productivity and resilience, liveability and
sustainability are the three strategic themes identified from the policy.
While all themes are centred around transportation, sustainability provides a
strong link to the Australian Government's commitment to cut emissions by 43
per cent by 2030 and achieve net zero by 2050. Here the Government will look
to decarbonise transport assets through the design, construction, and
operation of transport infrastructure, and will encourage projects to
facilitate the take-up of low or zero emission transport technologies, which
is consistent with the Government's National Electric Vehicle Strategy. With
the additional planned activities from the State and Territory governments, we
believe that there will also be significant effort towards energy
transformation and social infrastructure, including hospitals, education and
housing.
Over the last decade, Australia has been very active in the development of
core social infrastructure projects and has demonstrated that it is open for
public and private collaboration. With three large operational PPP assets in
Australia, BBGI has a well-established foundation in the country. We will
continue to monitor actively the market for investment opportunities, which we
believe will continue emerging from the infrastructure investment activities
envisaged at both State and Federal level.
Outlook
BBGI remains committed to expanding our core infrastructure portfolio. Since
2011, our portfolio has grown from 19 social infrastructure assets to 56,
including roads, schools, healthcare facilities, transportation, and modern
correctional facilities. This growth was achieved while maintaining price
discipline and a selective approach to evaluating potential investment
opportunities. As governments continue to run deficits and the demand for
repairing and constructing new infrastructure grows, there is an ongoing need
for private sector investment in infrastructure. We remain poised to seize the
right investment opportunities that are value-accretive, with long-term
predictable and inflation-linked revenues. These future investments will
further diversify and strengthen our portfolio and enhance our overall
portfolio composition and key metrics, ensuring sustainable returns for our
shareholders.
Operating and Financial Review
The Management Board is pleased to present the Operating and Financial Review
for the year ended 31 December 2023.
Highlights and key performance indicators
Certain key performance indicators ('KPIs') for the past five years are
outlined below:
KPI Target Dec-19 Dec-20 Dec-21 Dec-23 Commentary
Dec-22
Dividends Progressive long-term dividend growth in pps 7.00 7.18 7.33 7.48 7.93 Achieved
(paid or declared) Targets: 8.40pps for 2024 and
8.57pps for 2025
NAV per share Positive NAV per share growth 2.0% 1.2% 2.1% 6.6% (1.4%) Not achieved during the reporting period
Annualised total NAV per share return since IPO 7% to 8% annualised 10.0% 8.9% 8.8% 9.1% 8.6% Achieved
Annualised total shareholder return since IPO 7% to 8% annualised 11.3% 11.0% 10.4% 8.8% 7.6% Achieved
Ongoing charge Competitive cost position 0.88% 0.86% 0.86% 0.87% 0.93% Achieved
Cash dividend cover >1.0x 1.30x 1.27x 1.31x 1.47x 1.40x Achieved
Asset availability > 98% asset availability P P P P P Achieved
Single asset concentration risk To be less than 25% of portfolio immediately post-acquisition 10% 9% 11% 11% 11% Achieved
(as a percentage of portfolio)
(GEB) (GEB) (ORB) (ORB) (GEB)
Availability-style assets >= 75% availability-style assets P P P P P Achieved
(as a percentage of portfolio)
Asset management
Cash performance
Our portfolio performed well during the period, with total cash flows ahead of
projections and the underlying financial models.
Construction exposure
Our investment policy is to invest principally in assets that have completed
construction and are operational. Accordingly, investments in assets that are
under construction are limited to 25 per cent of the portfolio's value. We aim
to produce a stable dividend, while gaining exposure to the potential NAV
uplift that occurs when assets move from successful construction to the
operational phase.
As the year closed, all our infrastructure assets were fully operational. The
equity investment in Highway 104, Nova Scotia, Canada reached substantial
completion in September 2023, notably enhancing the region's travel efficiency
and safety, facilitating the flow of goods and services, and strengthening
community connections.
This significant achievement was acknowledged in 2023 when the Canadian
Council for Public-Private Partnerships honoured Highway 104 with the Gold
Award for P3 Design & Construction.
Investment performance
Return track record
The Company's share price has not been immune to the market turbulence
affecting the alternative investment trust sector, leading to the Company's
shares trading at a discount to NAV for a significant part of the year. This
trend of share price softness, reflective of concerns over high interest
rates, high inflation, and potential consumer downturns, has extended to our
UK-listed counterparts within the infrastructure and wider alternatives
sector. Nevertheless, the Board does not believe BBGI's share price adequately
reflects the value of our portfolio, our high-quality inflation linkage, our
strong financial position and operational performance..
With a focus on long-term investment, our Company's portfolio of low-risk,
long-duration assets, allows us to navigate through these episodes of market
volatility. The Board remains vigilant in monitoring the share price discount,
considering it within the broader scope of our capital allocation strategy.
Any measures aimed at reducing the discount are contemplated carefully, with
the overarching goal of ensuring they align with the long-term interests of
the Company and its shareholders.
Against the FTSE All-Share, the Company has shown a low ten-year beta of
0.28(( x (#_edn10) ))
The share price closed at 141.60 pence on 31 December 2023, representing a 4.2
per cent discount to the NAV per share at the period-end.
The total NAV return per share from IPO to 31 December 2023 was +8.6 per cent
on an annualised basis.
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
In April 2023, we paid a second interim dividend of 3.74pps for the period 1
July 2022 to 31 December 2022. Together with the first interim dividend (which
was paid in October 2022), the total dividend for the year ended 31 December
2022 amounted to 7.48pps. The Board approved a 2023 interim dividend of
3.965pps which was paid in October 2023. In February 2024, after the year-end,
the Company declared a second interim dividend of 3.965pps, which is in line
with its dividend target for the year of 7.93pps. Furthermore, the Board is
reaffirming its 2024 dividend target of 8.40pps and a dividend target for 2025
of 8.57pps.
Proven progressive dividend policy
· Average dividend increase of 3.4 per cent on a compound annual
growth rate from 2012 to 2023, which has outpaced UK CPI over the same period.
· BBGI's progressive dividend outpaced UK CPI delivering positive
real returns to shareholders
Investor communications
The Company places great importance on communication with its shareholders and
welcomes their views. We intend to remain at the forefront of disclosure and
transparency in our sector, and therefore, the Management Board and, where
required, the Supervisory Board, regularly review the level and quality of the
information that the Company makes public.
The Company formally reports twice a year through its Annual and Interim
Reports. Other Company information 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, members of the Management Board 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. Webcasts of the results
presentations are available for viewing on BBGI's corporate website and
through the London Stock Exchange website.
Outside of these formal meetings, feedback from investors is received by the
Management Board and the Corporate Brokers and, together with the feedback
from results meetings, is reported to the Supervisory Board. Throughout the
year, Management Board have made themselves available to shareholders and
sector analysts, for discussion of key issues and expectations around Company
performance. The CEO and CFOO 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 (https://www.bb-gi.com/) .
While shareholder engagement is typically conducted by the CEO and CFOO, the
Chair of the Supervisory Board and Chairs of each committee make themselves
available throughout the year to understand shareholder views on governance
and performance.
In 2021, we undertook a comprehensive materiality assessment among our
employees, shareholders, clients, partners and subcontractors to identify ten
material topics influencing our ESG strategy. These ten topics have informed
key ESG commitments and KPIs that we are now tracking to ensure incremental
progress in our delivery of positive stakeholder outcomes. A progress update
of each KPI is provided annually in our ESG Report.
Given this level of engagement with shareholders and other stakeholders, the
Management and Supervisory Boards consider that they meet the requirements of
Association of Investment Companies ('AIC') Code of Corporate Governance
Principle 5D.
Share capital
The issued share capital of the Company is 714,876,637 ordinary shares of
no-par value. All of the issued ordinary shares rank pari passu. During the
year ended 31 December 2023, the Company issued 1,545,560 ordinary shares.
Voting rights
There are no special voting rights, restrictions, or other rights attached to
the ordinary shares, nor are there any restrictions on the voting rights they
carry.
Discount management
The Management Board actively monitor any discount to the NAV per share at
which the ordinary shares may trade and report to the Supervisory Board on any
such discount and to the extent appropriate, 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 2023. The
most recent authority to purchase ordinary shares, which may be held in
treasury or subsequently cancelled, was granted to the Company on 28 April
2023. This authority expires on the date of the next Annual General Meeting
('AGM') to be held on 30 April 2024, at which point the Company will propose
to renew its authority to buy back ordinary shares.
Continuation vote
The Company's Articles of Association ('Articles') require the Boards to offer
a continuation vote to the Company's shareholders at every second AGM to allow
the Company to continue in its current form. On 28 April 2023, 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 on 30 April 2025.
Valuation
The Management Board is responsible for carrying out the fair market valuation
of the Company's investments, which is then presented to the Supervisory Board
for consideration as part of its approval of the Annual and Interim Reports.
The valuation occurs semi-annually on 30 June and 31 December and is reviewed
by an independent third-party valuation expert.
The Company's investments are principally non-market traded investments with
predictable long-term contracted revenue; therefore, the valuation is
determined using the discounted cash flow methodology. Our forecast
assumptions for key macroeconomic factors impacting cash flow include
inflation rates and deposit rates, changes in tax legislation, and enacted
changes in taxation rates during the reporting period. These assumptions are
based on market data, publicly available economic forecasts, and long-term
historical averages. We also exercise judgement in assessing the future cash
flows from each investment, using detailed financial models produced by each
Portfolio Company and adjusting these models, where necessary, to reflect our
assumptions as well as any specific cash flow assumptions. The Company's
consolidated valuation is a sum-of-the-parts valuation with no further
adjustments made to reflect scale, scarcity, or diversification of the overall
portfolio.
The fair value of each investment is then determined by applying an
appropriate discount rate, alongside contracted foreign exchange rates, or
reporting period-end foreign exchange rates, and withholding taxes (as
applicable).
The discount rates applied consider investment risks, including the phase of
the investment (construction, ramp-up or stable operation),
investment-specific risks and opportunities, and country-specific factors.
Our determination of appropriate discount rates involves judgement based on
market knowledge, insights from investment and bidding activities, benchmark
analysis with comparable companies and sectors, discussions with advisers and
publicly available information. As a reasonability check to our market-based
approach and providing further guidance to determine the appropriate market
discount rates, the Company complements its market-based approach by using the
capital asset pricing model ('CAPM') where government risk-free rates plus a
risk premium are used to calibrate discount rates.
A sensitivity analysis on the key assumptions is provided further in this
Valuation section.
The below illustrates the breakdown of movements in the NAV.
NAV movement 31 December 2022 to 31 December 2023
The NAV at 31 December 2023 was £1,056.6 million (31 December 2022: £1,069.2
million), representing a decrease of 1.2 per cent.
NAV movement 31 December 2022 to 31 December 2023 £ million
NAV at 31 December 2022 1,069.2
Add: other net liabilities at 31 December 2022(i) 27.9
Portfolio value at 31 December 2022 1,097.0
Distributions from investments(ii) (90.9)
Rebased opening portfolio value at 1 January 2023 1,006.2
Portfolio return(iii) 93.7
Change in market discount rate (41.0)
Change in macroeconomic assumptions 11.4
Foreign exchange net movement (23.3)
Portfolio value at 31 December 2023 1,047.1
Add: other net assets at 31 December 2023 9.5
NAV at 31 December 2023 1,056.6
(i) These figures represent the net assets of the Group after excluding the
investments at fair value through profit or loss ('Investments at FVPL') and
the net position on currency hedging instruments. Refer to the Pro Forma
Balance Sheet in the Financial Results section of this Annual Report for
further detail.
(ii) While distributions from Investments at FVPL reduce the portfolio value,
there is no impact on the Company's NAV as the effect of the reduction in the
portfolio value is offset by the receipt of cash at the consolidated Group
level. Distributions in the above table are shown net of withholding tax.
(iii) Portfolio return comprises the unwinding of the discount rate, portfolio
performance, the net effect of actual inflation, and updated operating
assumptions to reflect current expectations.
( )
Key drivers for NAV change
The rebased opening portfolio value, after cash distributions from investments
of £90.9 million, was £1,006.2 million.
Portfolio return consists of several components, including the unwinding of
the discount rate, portfolio performance, the net effect of actual inflation,
and updated operating assumptions:
During the period, the Company recognised a £93.7 million portfolio return,
representing an 8.8 per cent increase in the NAV resulting from the unwinding
of discount rates, and portfolio performance, which reflects current
expectations based on the Company's hands-on active asset management. As the
portfolio moves closer to forecasted investment distribution dates, the time
value of those cash flows increases on a net present value basis and this
effect is called unwinding. £18.5 million of the £93.7 million is
attributable to value enhancements delivered by our active asset management
approach. These value-accretive activities included effective lifecycle cost
management, Portfolio Company savings, change order revenue, tax and treasury
management and optimised cash reserving.
Change in market discount rates:
The Company has increased the weighted average discount rate to 7.3 per cent
(31 December 2022: 6.9 per cent), which the Management Board believes to be
appropriate for a portfolio of availability-style social infrastructure
investments. This increase resulted in a reduction of £41.0 million,
representing a 3.8 per cent decrease in the NAV.
To determine the appropriate discount rate for each jurisdiction, the Company
employs its judgement using a multifaceted approach; combining, transactional
analysis, benchmarking with comparable companies and sectors, discussions with
advisers in the relevant markets, and utilising publicly available
information. Complementing this approach when there is reduced market
transaction data, is the CAPM, which integrates government risk-free rates and
a risk premium, with adjustments made to account for observed volatility in
risk-free rates during the year.
While there is no direct correlation between government bond yields and the
risk premium on the one hand and market discount rates on the other, the risk
premium is a useful additional data point.
Transaction volumes showed an increase in the first half of 2023 compared to
the latter half of 2022, but slowed in the second half of 2023, and whilst at
subdued levels, still provided relevant market data. During the first half of
2023, we obtained at least one relevant transactional data point for each
currency in which we invest, except for the Norwegian krone. The CAPM analysis
acts as a reasonability check, providing guidance for potential discount rate
adjustments in instances where transaction data is more limited.
The period saw ongoing macroeconomic uncertainty, marked by significant
volatility in government bond yields between December 2022 and December 2023,
ultimately closing at or below the levels observed in December 2022. These
fluctuations contributed to a cautious environment in the infrastructure
secondaries market as mentioned above.
Individual risk-free rates have generally closed at or below the December 2022
rates, resulting in a reduction in the weighted average risk-free rate to 3.6
per cent (31 December 2022: 3.8 per cent). The decision to increase the
discount rate to 7.3 per cent on a weighted average basis represents a risk
premium of approximately 3.7 per cent.
A risk premium of 3.7 per cent is within historic ranges. The Management Board
believes this to be appropriate for the Company's investment portfolio,
particularly considering the heightened macroeconomic volatility observed
during the period.
(1) Sector average from listed peers for the period from December 2007 until
December 2010 and the BBGI discount rate from December 2011.
(2) Based on the weighted geographical breakdown of BBGI portfolio as at each
valuation period; considering the following securities yield rates: Canadian
Government Debt - 20 Years, UK Government Debt - 20 Years, Australian
Government Debt - 15 Years, US Treasury Bond - 30 Years, German Government -
20 Years, Norway Swap Rate - 10 Years and Netherlands Government Debt - 20
Years.
Going forward, the Company is confident that investment demand for stable and
resilient social infrastructure assets, offering long-term, predictable and
inflation-linked cash flows, will remain strong.
Specific discount rates consider 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, and
country-specific factors. For investments in the construction phase, we apply
a risk premium to reflect the higher-risk inherent during this stage of the
investment's lifecycle. Currently, the portfolio has one investment in the
ramp-up phase, Highway 104, which represents approximately 0.6 per cent of the
overall portfolio value.
Furthermore, we have applied risk premiums or discounts to a limited number of
other investments based on their individual circumstances. For example, we
have adjusted acute care hospitals in the UK, where a risk premium of 50bps
continues to be applied. The only UK acute care hospital in the portfolio is
Gloucester Royal Hospital, representing less than 1 per cent of the overall
NAV. This risk premium reflects the ongoing situation in the UK, where some
public health clients are facing cost pressures and are actively seeking cost
savings, including deductions. To date, BBGI has not been affected.
Change in macroeconomic assumptions:
During the period, the Company recognised an increase in the portfolio value
of £11.4 million, or a 1.1 per cent increase in the NAV, attributed to
changes in macroeconomic assumptions. The primary drivers of this increase
included positive revisions to short-term and long-term deposit rate
assumptions, as well as inflation assumptions. These positive revisions were
partially offset by the negative effect of proposed changes in Canadian tax
legislation.
Short-term and long-term deposit rates accounted for £25.7 million of this
increase. Short-term deposit rates have risen in conjunction with the increase
in underlying benchmark rates and are expected to remain at elevated levels in
most jurisdictions. We also believe it appropriate to update some of our
long-term deposit rate assumptions to reflect the current rate environment,
bringing them in line with long-term averages. The effect of revised deposit
rate assumptions resulted in a £25.7 million, or a 2.4 per cent increase in
NAV.
The net effect of changes to inflation forecasts represented a further
increase of £4.2 million.
The final legislation of the Canadian excessive interest and financing
expenses limitation rules ('EIFEL') were released in late 2023 (see the risk
section for further details). These rules are expected to have an additional
negative impact of £16.3 million on the Company's Canadian portfolio, adding
to the £9.8m provision taken in FY2022. As a result, the Company's NAV at 31
December 2023 fully reflects the expected impact of the final legislation.
Foreign exchange:
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.
The forecasted distributions from investments are converted to Sterling at
either the contracted foreign exchange rate, for 100 per cent of non-Sterling
and non-Euro-denominated cash flows forecasted to be received over the next
four years, or at the closing foreign exchange rate for the unhedged future
cash flows.
During the period ended 31 December 2023, the appreciation of Sterling ('GBP')
against the Canadian Dollar ('CAD'), Australian Dollar ('AUD'), the Euro
('EUR'), the US Dollar ('USD'), and the Norwegian Krone ('NOK') accounted for
a net decrease in the portfolio value of £23.3 million. Since IPO 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 an
increase of £2.0 million, or 0.2 per cent of the 31 December 2023 NAV.
The table below shows the closing exchange rates, which were used to convert
unhedged future cash flows into the reporting currency at 31 December 2023.
GBP/ Valuation impact FX rates as at FX rates as at FX rate change
31 December 2023 31 December 2022
AUD Negative 1.8690 1.7743 (5.34%)
CAD Negative 1.6871 1.6386 (2.96%)
EUR Negative 1.1532 1.1298 (2.07%)
NOK Negative 12.9571 11.9150 (8.75%)
USD Negative 1.2731 1.2097 (5.24%)
Although the closing rate is the required conversion rate to use for the
unhedged future cash flows, 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 three per cent, for a ten per cent adverse movement in foreign
exchange rates. xi (#_edn11) This is achieved by hedging a portion of the
non-Sterling and non-Euro portfolio value. Forecasted distributions in Euro
are not hedged, as a natural hedge is in place due to a significant portion of
the running costs incurred at the consolidated level being denominated in
Euro. The effect 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 at
31 December 2023 would need to be approximately 72 per cent to obtain the same
NAV sensitivity to a ten per cent adverse change in foreign exchange rates, as
shown in the foreign exchange sensitivity table below.
Macroeconomic events
The quality and predictability of portfolio cash flows has come into sharper
focus given uncertainty in the markets generally and continued elevated
inflation levels. Against this backdrop, the Company is well-positioned
through its high-quality inflation linkage, which is achieved through annually
updated contractual indexation in the Company's Project Agreements.
Additionally, there has been no material adverse effect on the portfolio
valuation resulting from current global conflicts. This is primarily because
the Company holds a low-risk portfolio with contracted cash flows, coupled
with strong stakeholder collaboration to identify and mitigate any potential
adverse effects.
Macroeconomic assumptions
In addition to the discount rates, we use the following assumptions
('Assumptions') for the cash flows:
31 December 2023 31 December 2022
Inflation UK((i)) RPI/CPIH 5.20% (actual) for 2023; 3.80% for 2024 then 3.00% (RPI) / 2.25% (CPIH) 13.40% (actual) for 2022; 5.80% for 2023 then 2.75% (RPI) / 2.00% (CPIH)
Canada 3.90% (actual) for 2023; 2.50% for 2024; 2.10% for 2025 then 2.00% 6.30% (actual) for 2022; 4.00% for 2023; 2.30% for 2024 then 2.0%
Australia 4.50% for 2023; 3.50% for 2024 3.00% for 2025 then 2.50% 8.00% for 2022; 4.75% for 2023; 3.25% for 2024 then 2.50%
Germany((ii)) 3.70% (actual) for 2023; 2.70% for 2024; 2.10% for 2025 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Netherlands((ii)) 3.80% (actual) for 2023; 2.70% for 2024; 2.10% for 2025 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Norway((ii)) 4.80% (actual) for 2023; 4.50% for 2024; 2.50% for 2025 then 2.25% 5.90% (actual) for 2022; 4.90% for 2023 then 2.25%
US 3.40% (actual) for 2023 then 2.50% 6.50% (actual) for 2022; 3.40% for 2023 then 2.50%
Deposit rates (p.a.) UK 4.50% to Q4 2024 then 2.50% 2.00% to Q4 2024 then 1.50%
Canada 4.75% to Q4 2024 then 2.50% 3.50% to Q4 2024 then 1.75%
Australia 4.75% to Q4 2024 then 3.50% 3.25% to Q4 2024 then 3.00%
Germany/ Netherlands 3.25% to Q4 2024 then 2.00% 0.50% to Q4 2024 then 1.00%
Norway 4.75% to Q4 2024 then 2.75% 2.00% to Q4 2024 then 2.00%
US 4.50% to Q4 2024, then 2.50% 3.75% to Q4 2024, then 1.50%
Corporate tax rates UK 25.00% 19.00% until March 2023 then 25.00%
Canada((iii)) 23.00% / 26.50% / 27.00% / 29.00% 23.00% / 26.50% / 27.00% / 29.00%
Australia 30.00% 30.00%
Germany((iv)) 15.83% 15.83%
Netherlands 25.80% 25.80%
Norway 22.00% 22.00%
US 21.00% 21.00%
((i)) On 25 November 2020, the UK Government announced the phasing out of the
Retail Price Index ('RPI') after 2030 to be replaced with the Consumer Prices
Index including owner occupiers Housing costs ('CPIH'). The Company's UK
portfolio indexation factor changes from RPI to CPIH beginning on 1 January
2031.
((ii)) Consumer Price Index ('CPI') indexation only. Where investments are
subject to a basket of indices, a projection for non-CPI indices is used.
((iii)) Individual tax rates vary among Canadian provinces: Alberta; Ontario;
Quebec; Northwest Territories; Saskatchewan; British Columbia; New Brunswick.
((iv)) Including solidarity charge; individual local trade tax rates are
considered in addition to the tax rate above.
Sensitivities
Discount rate sensitivity
The weighted average discount rate 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.
Discount rate sensitivity((i)) Change in NAV 31 December 2023
Increase by 1% to c. 8.3% £(77.0) million, i.e. (7.3)%
Decrease by 1% to c. 6.3% £88.3 million, i.e. 8.4%
((i)) Based on the weighted average rate of 7.3 per cent.
Inflation has increased in all jurisdictions across BBGI's geographies, and
interest rates have risen from historical lows, although in some jurisdictions
these trends have reversed over the period. Should long-term interest rates
change substantially further, this is likely to further affect discount rates,
and as a result, impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that macroeconomic movements would affect discount
rates, deposit rates and inflation rates, and not be isolated to one variable.
To illustrate the effect of this combined movement on the Company's NAV, two
scenarios were created assuming a one percentage point change in the weighted
average discount rate, and a one percentage point change in both deposit and
inflation rates above the macroeconomic assumptions.
Combined sensitivity: inflation, deposit rates and discount rates Change in NAV 31 December 2023
Increase by 1% £(16.3) million, i.e. (1.5)%
Decrease by 1% £19.9 million, i.e. 1.9%
Inflation sensitivity
The Company's investments are contractually entitled to receive contracted
revenue streams from public sector clients, which are typically adjusted every
year for inflation. Facilities management subcontractors for accommodation
investments and operating and maintenance subcontractors for transport
investments have similar indexation arrangements. The portfolio cash flows are
positively linked with inflation (e.g. RPI, CPI, or a basket of indices).
This inflation linkage is achieved through contractual indexation mechanics in
the various Project Agreements with the public sector clients at the Portfolio
Companies and the inflation adjustment updated at least annually.
Inflation sensitivity
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 2023
Inflation +1% £45.4 million, i.e. 4.3%
Inflation −1% £(40.9) million, i.e. (3.9)%
Short-term inflation sensitivity
Inflation may continue to be elevated for the short-term before diminishing.
To illustrate the effect of persistent higher short-term inflation on the
Company's NAV, two scenarios were created assuming inflation is two percentage
points above our assumptions for the next one and three years.
Short-term inflation sensitivity Change in NAV 31 December 2023
Inflation +2% for one year £11.7 million, i.e. 1.1%
Inflation +2% for three years £30.7 million, i.e. 2.9%
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:
Foreign exchange sensitivity((i)) Change in NAV 31 December 2023
Increase by 10% £(30.8) million, i.e. (2.9)%
Decrease by 10% £31.1 million, i.e. 2.9%
((i)) Sensitivity in comparison to the spot foreign exchange rates as at 31
December 2023 and considering the contractual and natural hedges in place,
derived by applying a ten per cent increase or decrease to the
Sterling/foreign currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be
maintained as part of the senior debt funding requirements (e.g. six-month
debt service reserve accounts and 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 long-term assumptions in the table
above:
Deposit rate sensitivity Change in NAV 31 December 2023
Deposit rate +1% £21.0 million, i.e. 2.0%
Deposit rate −1% £(21.7) million, i.e. (2.1)%
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or replacing material
parts of an asset to maintain it over the concession term. They involve larger
items that are not covered by routine maintenance and, for roads, will include
items such as replacement of asphalt, rehabilitation of surfaces, or
replacement of equipment. Lifecycle obligations are generally passed down to
the facility maintenance provider, except for transportation investments,
where these obligations are typically retained by the Portfolio Company.
Of the 56 investments in the portfolio, 20 investments retain the lifecycle
obligations. The remaining 36 investments have this obligation passed down to
the subcontractor.
The table below shows the sensitivity of the NAV to a change in lifecycle
costs:
Lifecycle costs sensitivity((i)) Change in NAV 31 December 2023
Increase by 10% £(24.9) million, i.e. (2.4)%
Decrease by 10% £22.8 million, i.e. 2.2%
((i)) Sensitivity applied to the 20 investments in the portfolio that 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 a change in corporate tax
rates compared to the assumptions in the table above:
Corporate tax rate sensitivity Change in NAV 31 December 2023
Tax rate +1% £(12.2) million, i.e. (1.2)%
Tax rate −1% £12.0 million, i.e. 1.1%
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt 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 one percentage point
increase in the forecasted debt rate.
Senior debt refinancing sensitivity Change in NAV 31 December 2023
Debt rate +1% £(7.9) million, i.e. (0.8)%
Refinancing sensitivity relates to the Northern Territory Secure Facilities,
as it is common practice in the Australian infrastructure market to have
senior debt durations that are typically between five and seven years. We
assume three refinancings for the Northern Territory Secure Facilities,
between the fourth quarter of 2025 and the fourth quarter of 2038. Long-term
interest rate hedges fully mitigate base rate risk, leaving exposure only to
potential changes in margin.
Gross Domestic Product sensitivity
Our portfolio is not sensitive to movements in 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 the NAV
calculation include:
· The discount rates and the Assumptions, as set out above,
continue to be applicable.
· The updated financial models used for the 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 investments are valued in local currency and converted to
Sterling at either the period-end spot foreign exchange rates or the
contracted foreign exchange rate.
· Where the operating costs of the Portfolio Companies are
contractually fixed, such contracts are performed according to terms, 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 current forecasts in the valuation models.
· 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 passed down to subcontractors under contractual
arrangements or are part of the planned (lifecycle) forecasts.
· Changes to the concession period for certain investments are
realised.
· In cases where the Portfolio Companies have contracts which are
in the construction phase, they are either completed on time or any delay
costs are borne by the construction contractors.
· Enacted tax rates, enacted regulatory changes, or expected
regulatory changes with a high probability, on or prior to this reporting
period-end with a future effect materially impacting cash flow forecasts, are
reflected in the financial models.
In forming the above assessments, BBGI uses its judgement and works with our
Portfolio Company management teams, as well as using due diligence information
from, or working with, suitably qualified third parties such as technical,
legal, tax and insurance advisers.
Financial Results
The Consolidated Financial Statements of the Group for the year ended 31
December 2023 are in the Financial Statements section of this Annual Report.
Basis of accounting
We have prepared the Group's Consolidated Financial Statements in accordance
with International Financial Reporting Standards accounting 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. 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.
The accounting principles applied are in line with those principles applied in
the prior year reporting.
Income and costs
Year ended Year ended
Pro forma Income Statement 31 Dec 23 31 Dec 22
Investment Basis £ million £ million
Income from Investments at FVPL((i)) 44.5 154.0
Other operating income 1.4 0.1
Operating income 45.9 154.1
Administrative expenses (12.1) (11.7)
Other operating expenses((i)) (1.1) (5.3)
Net finance result (2.5) (2.0)
Net gain/(loss) on balance sheet hedging((i)) 13.4 (12.6)
Profit before tax 43.6 122.5
Tax expense - net (3.3) (3.5)
Profit for the year 40.3 119.0
Other comprehensive loss (0.8) (0.5)
Total comprehensive income 39.5 118.5
Basic earnings per share (pence) 5.6 16.7
(i) Prior year comparative figures have been reclassified to ensure
consistency with the current year's presentation. The realised gain or loss
on the settlement of cash flow hedges is presented under Other operating
income (expenses), and balance sheet hedging is presented under Net gain(loss)
on balance sheet hedging. The unrealised components on the marked-to-market of
the cash flow and balance sheet hedges are included under Income from
Investments at FVPL. This reclassification does not change the previously
reported profit for the year nor the prior period NAV.
During the year, the Group recognised income from Investments at FVPL of
£44.5 million (31 December 2022: £154.0 million). This income comprises the
following components:
Year ended Year ended
31 Dec 23 31 Dec 22
Investment Basis £ million £ million
Discount unwinding 75.2 67.8
Change in market discount rate (41.0) (28.5)
Value enhancements 18.5 13.8
Change in macroeconomic assumptions 11.4 60.7
Net movement on foreign exchange (23.3) 37.1
Others 3.7 3.1
Income from investments at FVPL 44.5 154.0
Administrative expenses include personnel expenses, legal and professional
fees, and office and administration expenses. For more details, refer to the
Group Level Corporate Cost analysis provided below.
Group Level Corporate Cost Analysis
The table below is prepared on an accrual basis.
Year ended Year ended
31 Dec 23 31 Dec 22
Corporate costs £ million £ million
Personnel expenses 8.0 7.9
Legal and professional fees 2.7 2.6
Office and administration 1.4 1.2
Acquisition-related costs 0.1 0.6
Corporate costs 12.2 12.3
Acquisition-related costs incurred for the year amounted to £0.1 million (31
December 2022: £0.6 million), and include unsuccessful bid costs of £0.1
million (31 December 2022: less than £0.1 million).
Taxes
Taxes for the year ended 31 December 2023 totalled £3.3 million (31 December
2022: £3.5 million). This includes withholding taxes from the countries of
origin for certain portfolio distributions received by consolidated entities,
the Company's annual subscription tax and both current and deferred taxes of
the consolidated subsidiaries.
The Company, being an undertaking for collective investment in Luxembourg, is
exempt from corporate income tax and instead incurs a 0.05 per cent annual
subscription tax on its total net assets. As a SICAV, it is not liable for
capital gains or income taxes. Taxes on all other consolidated subsidiaries
adhere to the rates applicable in their respective jurisdictions.
Net finance result
Year ended Year ended
31 Dec 23 31 Dec 22
£ million £ million
Finance costs on loan and borrowings 3.1 2.2
Interest income on bank deposits (0.6) (0.2)
Net finance result 2.5 2.0
The net finance result for the year amounted to £2.5 million (31 December
2022: £2.0 million). This figure includes borrowing costs, commitment fees,
and other related fees associated with the RCF. As of 31 December 2023, the
Group had no outstanding borrowings under the RCF.
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 April 2022.
Year ended Year ended
31 Dec 23 31 Dec 22
Ongoing Charges Information £ million £ million
Ongoing Charges (using AIC recommended methodology) 0.93% 0.87%
In accordance with the AIC recommended methodology, fees that are linked 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.
Fees directly linked to investment performance recorded in 2023 as a
percentage of average NAV were 0.11 per cent (2022: 0.09 per cent). Combined,
the aggregate of Ongoing Charges plus investment performance fees was 1.04 per
cent in the year (2022: 0.96 per cent).
The table below provides a reconciliation of Ongoing Charges and the Ongoing
Charges Percentage to the administration expenses under IFRS.
Year ended Year ended
31 Dec 23 31 Dec 22
£ million £ million (except %)
(except %)
Corporate costs to 31 December 12.2 12.3
Less: Non-recurring costs as per AIC guidelines
Non-recurring professional and external advisory costs (0.6) (0.6)
Non-recurring personnel costs (0.5) (0.8)
Acquisition related advisory costs (0.1) (0.6)
Compensation linked to investment performance (1.2) (1.0)
Recurring costs per AIC guidelines((i)) 9.8 9.3
Divided by:
Average undiluted Investment Basis NAV for 2023 (average of 31
December 2023: £1,056.6 million and 30 June 2023: £1,056.7 1,056.7 1,069.0
million)
Ongoing Charges percentage((i)) 0.93% 0.87%
((i)) Figures reported are based on actual results rather than the rounded
figures presented in this table.
Movement in net cash / debt
Year ended Year ended
31 Dec 23 31 Dec 22
£ million £ million
Net cash/(debt) at the beginning of the year (26.3) 26.9
Distributions from Investments at FVPL((i)) 94.5 96.3
Dividends paid (53.5) (51.7)
Net cash flows used in operating activities (19.4) (20.3)
Additional Investments at FVPL and other assets - (64.5)
Realised hedging gain/(loss) on investing activities 13.4 (12.6)
Impact of foreign exchange movements 1.0 (0.4)
Net cash/(debt) at the end of the year 9.7 (26.3)
((i)) Distributions from Investment at FVPL are shown gross of withholding
tax. The associated withholding tax outflow is included in 'Net cash flows
used in operating activities'.
The Group's portfolio of investments continued to perform strongly over the
year, with gross distributions ahead of forecast.
During the year, the Company made a total repayment of £71.4 million on the
RCF and had no drawdowns outstanding as at 31 December 2023. All drawdowns
relating to the previous year's John Hart and the A7 portfolio acquisitions
were repaid in full by utilising free cash flow generated by the Group's
operations.
Refer to the Consolidated Statement of Cash Flows for further details on cash
flows during the year ended 31 December 2023.
Cash dividend cover
For the year ended 31 December 2023, the Group achieved a cash dividend cover
ratio of 1.40x (year ended 31 December 2022: 1.47x) calculated as follows:
31 Dec 2023 31 Dec 2022
£million £ million
(except ratio) (except ratio)
Distributions from Investments at FVPL 94.5 96.3
Less: Net cash flows used in operating activities (19.4) (20.3)
Net distributions 75.1 76.0
Divided by: Cash dividends paid 53.5 51.7
Cash dividend cover (ratio) 1.40x 1.47x
The strong cash dividend coverage for the year was underpinned by BBGI's
contracted, high-quality inflation-linked portfolio cash flows. We are
reconfirming our progressive dividend policy and we expect our dividend target
for 2024 of 8.40pps to be fully covered.
Pro Forma Balance Sheet 31 Dec 2023 31 Dec 2022
Investment Basis £ million £ million
Investments at FVPL 1,047.1 1,097.0
Trade and other receivables 0.9 0.9
Other assets and liabilities (net) (1.1) (2.4)
Net cash/(debt) 9.7 (26.3)
NAV attributable to ordinary shares 1,056.6 1,069.2
Three-year comparative of Investment Basis NAV 31 Dec 23 31 Dec 22 31 Dec 21
NAV (millions) 1,056.6 1,069.2 1,001.6
NAV per share (pence) 147.8 149.9 140.7
The NAV decreased by 1.2 per cent to £1,056.6 million at 31 December 2023 (31
December 2022: £1,069.2 million), and by 1.4 per cent on an NAV per share
basis. The NAV per share is calculated by dividing the NAV by the number of
Company shares issued and outstanding at the end of the reporting period. This
information presents the residual claim of each shareholder to the net assets
of the Group.
Alternative Performance Measures ('APM')
APM is understood as a financial measure of historical or future financial
performance, financial position, or cash flows, other than a financial measure
defined or specified under IFRS. The Group reports a selection of APM as
summarised in the table below and as used throughout this Annual Report. The
Management Board believes that these APM provide additional information that
may be useful to the users of this Annual Report.
The APM presented here should supplement the information presented in the
Financial Statement section of this Annual Report. The APM used are not
measures of performance or liquidity under IFRS and should not be considered
in isolation or as a substitute for measures of profit, or as an indicator of
the Group's operating performance or cash flows from operating activities, as
determined in accordance with IFRS.
31 December 31 December
APM Explanation 2023 2022
Annualised total NAV return per share On a compounded annual growth rate basis. This represents the steady state 8.6% 9.1%
annual growth rate based on the NAV per share at 31 December 2023 assuming
dividends declared since IPO in December 2011 have been reinvested.(( xii
(#_edn12) ))
Annualised Total Shareholder Return Since IPO ('Annualised TSR') On a compounded annual growth rate basis. This represents the steady state 7.6% 8.8%
annual growth rate based on share price as at 31 December 2023, assuming
dividends declared since IPO in December 2011 have been reinvested. Investment
performance can be assessed by comparing this figure to the seven per cent to
eight per cent TSR target set at IPO.
Asset availability Calculated as a percentage of actual availability payments received, as a 99.9% 99.9%
percentage of scheduled availability fee payments. The Company targets a rate
in excess of 98 per cent. A high asset availability rate can be viewed as a
proxy to strong underlying asset performance.
Cash dividend cover ratio The cash dividend cover ratio is a multiple that divides the total net cash 1.40x 1.47x
generated in the period (available for distribution to investors) by the total
cash dividends paid in the period based on the cash flow from operating
activities under IFRS. A high cash dividend cover ratio reduces the risk that
the Group will not be able to continue making fully covered dividend payments.
Inflation linkage Represents the contractual, index-linked provisions, which adjust annually to 0.5% 0.5%
provide a positive and high-quality link to inflation. The measure represents
the increase in portfolio returns if inflation is one percentage point higher
than our modelled assumptions for all future periods. Under current
assumptions, the expected portfolio return would increase from 7.3 per cent to
7.8 per cent for a one percentage point increase to our inflation assumptions.
Net cash/(debt) This amount, when considered in conjunction with the available commitment £9.7 million £(26.3) million
under the Group's RCF (unutilised RCF amount of £228.9 million as at 31
December 2023), is an indicator of the Group's ability to meet financial
commitments, to pay dividends, and to undertake acquisitions.
Ongoing charges Represents the estimated reduction or drag on shareholder returns as a result 0.93% 0.87%
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.
Target dividend Represents the forward-looking target dividend per share. These are targets 8.40 for 2024; 8.57 for 2025 7.93 for 2023; 8.40 for 2024; 8.57 for 2025
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.
Ten-year beta Calculated using the FTSE All-Share], ten-year data representing the ten years 0.28 0.24
preceding 31 December 2023. This performance measure demonstrates the level of
volatility of the Company's shares in comparison to the wider equity market.
Total Shareholder Return since IPO ('TSR') The TSR combines share price appreciation and dividends paid since IPO in 141.1% 152.6%
December 2011 to represent the total return to the shareholder expressed as a
percentage. This is based on share price at 31 December 2023 and after adding
back dividends paid or declared since IPO.
Weighted average portfolio life Represents the weighted average, by value, of the remaining individual project 19.3 20.2
concession lengths. Calculated by reference to the existing portfolio at 31
December 2023, assuming no future portfolio additions.
Reconciliation of Investment Basis to IFRS
Reconciliation of Consolidated Income Statement
31 December 2023 31 December 2022
Investment Basis Adjust Consolidated IFRS Investment Basis Adjust Consolidated IFRS
£ million £ million £ million £ million £ million £ million
Income from Investments at FVPL((i)) 44.5 (5.6) 38.9 154.0 5.5 159.5
Other operating income((ii)) 1.4 9.2 10.6 0.1 - 0.1
Operating income 45.9 3.6 49.5 154.1 5.5 159.6
Administrative expenses (12.1) - (12.1) (11.7) - (11.7)
Other operating expenses((ii)) (1.1) 0.9 (0.2) (5.3) (7.5) (12.8)
Net finance result (2.5) - (2.5) (2.0) - (2.0)
Net gain/(loss) on balance sheet hedging((ii)) 13.4 (4.5) 8.9 (12.6) 2.0 (10.6)
Profit before tax 43.6 - 43.6 122.5 - 122.5
Tax expense - net (3.3) - (3.3) (3.5) - (3.5)
Profit from continuing operations 40.3 - 40.3 119.0 - 119.0
(i) As outlined above, prior year comparative figures have been
reclassified to ensure consistency with the current year's presentation.
This reclassification does not change the previously reported profit for the
year nor the prior period NAV.
(ii) The adjustment to Other operating income, Other operating
expenses and Net gain/(loss) on balance sheet hedging relates to the
unrecognised net results from our hedging transactions. While these
transactions are presented separately under IFRS, they are partly included as
part of Income from Investments at FVPL under Investment basis reporting.
Reconciliation of Consolidated Statement of Financial Position
31 December 2023 31 December 2022
Investment Basis Adjust ((i)) Consolidated IFRS Investment Basis Adjust Consolidated IFRS
£ million £ million £ million £ million £ million £ million
Investments at FVPL 1,047.1 0.1 1,047.2 1,097.0 5.8 1,102.8
Trade and other receivables 0.9 - 0.9 0.9 - 0.9
Other net liabilities (1.1) 0.1 (1.0) (2.4) - (2.4)
Net cash (debt) 9.7 - 9.7 (26.3) - (26.3)
Derivative financial liability - net - (0.2) (0.2) - (5.8) (5.8)
NAV attributable to ordinary shares 1,056.6 - 1,056.6 1,069.2 - 1,069.2
(i) Under IFRS, unrealised positions on foreign exchange hedging
contracts are reported separately under derivative financial asset
(liability).
Risk
We follow a risk-based approach to internal controls. Our risk management
function facilitates the Management Board's duty to effectively govern and
manage the risks we face. Given the nature of our assets and our interaction
with the capital markets, we do not operate in a risk-free environment. In an
uncertain environment, we take proactive action to address risks, and to
achieve our business and investment objectives.
We identify, analyse, assess, report, and manage all material risks, and aim
to identify risks we face as early as possible, so we can minimise their
impact.
We classify risks into the following risk categories:
· Market risks
· Credit risks
· Counterparty risks
· Liquidity risks
· Operational risks
· Sustainability risks
We analyse all identified risks during the risk reporting process to
understand the range of possible impacts on BBGI. By undertaking this risk
review, we can determine material risks to analyse and respond to, and which
risks require no further attention. This gives the Management Board a
universal interpretation of risk.
Our risk management function performs a risk assessment to determine the
likelihood that a predefined event will occur and any subsequent impact it may
have; it also estimates risk levels for a particular situation, compares these
against benchmarks or standards, and determines an acceptable level of risk.
In the Risk Profile all identified risks are classified according to risk
type, in line with the risk categories above. For material risks identified,
BBGI's Risk Manager advises on key risk indicators to include 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.
We have assessed inherent risk and have applied relevant mitigating factors to
arrive at a remaining residual risk that the Management Board deems manageable
and acceptable.
The following table summarises our material risks but is not an exhaustive
list of all the potential risks BBGI faces. There may be other unknown risks,
or those regarded as less material, that could, in the future, materially
impact our performance, our assets, and our capital resources.
Risk description Risk mitigation
MARKET RISKS
Volatility of discount rates We use a discounted cash flow methodology to value our portfolio of BBGI primarily uses a market-based valuation to determine a base discount rate
investments. Higher discount rates have a negative impact on valuation and the for steady-state, operational investments in the different jurisdictions we
ultimate rate of return realised by our investors, while lower discount rates operate, and we use our judgement in arriving at the appropriate discount
may have a positive impact. rates.
Our most important judgement and variable is the discount rate we apply to During the review period, government bond yields experienced significant
individual investments in our portfolio. Appropriate discount rates are key to fluctuations. As at 31 December 2023, relevant bond yields had shown a modest
deriving a fair and reasonable portfolio valuation. reduction on average compared to the year-end figures of 2022. Over the same
period transaction activity, whilst still at subdued levels, provided some
Changes in market rates of interest (in particular, government bond yields) relevant market data.
may impact the discount rates used to value our future projected cash flows,
and thus our valuation. In this environment, BBGI has continued to complement its market-based
approach by utilising the principles of the CAPM approach, where risk-free
rates plus a risk premium are employed to calculate discount rates. While
there is no direct correlation between government bond yields and the risk
premium on the one hand, and market discount rates on the other, the risk
premium serves as a valuable supplementary data point. This method serves as a
reasonability check for our market-based approach, particularly in periods
such as the last 12 months, where the number of observed transactions in the
market was fewer than in previous years.
As discount rates, government bond yields, deposit rates, and inflation rates
are in principle interlinked - while the individual rates may not move in
lockstep - this concept acts as mitigation for a change in discount rates.
Changes in discount rates often coincide with shifts in government bond
yields, deposit rates and inflation, but are also reflective of overall market
sentiment. Higher inflation rates and deposit rates offset, partially at
least, increased discount rates in our portfolio valuation and vice versa.
A sensitivity analysis to changes in discount rates, and the resulting effect
on NAV, is provided in the Valuation section of this Report.
Foreign exchange A significant proportion of our underlying investments - 67 per cent of the Currency-hedging arrangements for portfolio distributions denominated in
portfolio value at 31 December 2023 - are denominated in currencies other than Australian Dollar, Canadian Dollar, Norwegian Krone and US Dollar are in place
Sterling. for a rolling period of four years to mitigate some foreign exchange risk.
We maintain our financial statements, prepare the portfolio valuation, and pay In addition to cash flow hedging, we also hedge a portion of the non-Sterling,
dividends in Sterling. non-Euro portfolio value, and aim to reduce NAV sensitivity to approximately 3
per cent for a 10 per cent adverse foreign exchange movement.
There is a risk that fluctuations in exchange rates between Sterling and
relevant local currencies will potentially adversely affect the value of our Euro-denominated fund running costs currently provide a natural hedge against
underlying investments, distributions and the ultimate rate of return realised the Euro-denominated portfolio distributions.
by our investors.
Furthermore, the ability to draw on the RCF in the currency of the underlying
asset distributions provides an additional hedging alternative.
BBGI has investments in five currencies other than Sterling, thereby providing
some natural diversification among underlying currencies.
A sensitivity analysis to the movement in foreign exchange rates, and the
resulting effect on NAV, is provided in the valuation section of this Report.
Interest and deposit rates Our performance may be adversely affected by changes in interest rates. BBGI Our Portfolio Companies have sought to hedge substantially all of their
has a direct exposure to interest rates through borrowings under the RCF, floating rate interest liabilities against changes in underlying interest
unhedged debt at the Portfolio Company level and cash deposits. rates with interest rate swaps. We have no underlying base rate exposure
across our portfolio. We have a single asset that carries refinancing risk.
The Portfolio Companies typically have some cash reserves and deposits. From a However, this risk is confined to the margin, as the base rate for the loan
financial modelling perspective, we assume that deposits can be placed at a has been fully mitigated for its entire term.
forecast rate, which varies depending on country.
At the Group level, we maintain deposits at low levels. At 31 December 2023,
If deposit rates exceed or fall below projections for short-term and long-term the Group had no borrowings outstanding under its RCF.
rates, the effect on investment returns will depend on the amount of deposits.
A sensitivity analysis to movement in the senior debt rate, and the resulting
effect on NAV, is provided in the Valuation section of this Report.
Inflation We have observed varying levels of inflationary pressure, and the resulting A scenario of persistent high inflation across our jurisdictions presents the
valuation effects, across the portfolio. Our portfolio's valuation and the risk of declining real returns to investors.
ultimate rate of return realised by our investors may be adversely or
positively impacted by lower or higher than expected inflation. Prolonged We typically mitigate inflation risk for our Portfolio Companies to some
periods of deflation could potentially result in defaults under Portfolio extent by seeking to match the indexation of the revenues to the indexation of
Company loan arrangements. the operational cost.
The revenues and expenditures of our Portfolio Companies frequently undergo It is also important to note that BBGI's equity cash flows are positively
partial or complete indexation. linked to inflation at 0.5 per cent across the BBGI portfolio.
From a financial modelling perspective, it is typically assumed that inflation A sensitivity analysis to movements in inflation rates, and the resulting
will increase at a predetermined rate (which may vary depending on country). effect on NAV, is provided in the Valuation section of this Report.
The impact on investment returns, if inflation surpasses or falls short of the
projections for this rate, typically depends on how each Portfolio Company's The level of inflation linkage across the investments held varies and is
costs and revenues are influenced by inflation and the underlying indexation inconsistent. The consequences of higher or lower levels of inflation than
provisions. assumed by the Company will not be uniform across our investments.
Changes to tax legislation, treaties, and rates There continues to be a risk that enacted changes in tax law, tax rates and Certain risks, such as changes to corporation tax rates (including those
global tax initiatives, including the OECD's recommendations regarding base arising from fiscal constraints), cannot be prevented or mitigated.
erosion and profit shifting or tax treaty eligibility, could adversely affect
our cash flows and reduce investors' returns. We value our portfolio of investments based on enacted tax rates. Our
management team works closely with our global tax advisers and is briefed
periodically on relevant tax developments.
In Canada, the legislation for Excessive Interest and Financing Expenses
Limitation ('EIFEL') rules, which limit the deduction of 'interest and
financing expenses' to a fixed percentage of earnings before interest, tax,
depreciation, and amortisation for Canadian income tax purposes, is now in its
final stage, and is scheduled to take effect from 1 January 2024. The latest
draft legislation does not currently provide for the grandfathering of
existing related party debt, a matter for which the PPP industry
representative body continues to lobby. In light of these developments, and
with the draft bill likely to be enacted in its present form, BBGI recorded an
additional provision of approximately GBP 16.3 million in December 2023.
In addition to these specific legislative changes in Canada, it is important
to recognise that certain risks, such as changes in corporation tax rates, are
beyond our control and cannot be effectively mitigated. However, BBGI's
approach of maintaining a globally diversified portfolio of assets is
instrumental in reducing the tax concentration risk associated with any single
country. This diversification forms a crucial part of our strategy in managing
the overall risk exposure of our investment portfolio.
A sensitivity analysis to movements in corporate tax rates, and the resulting
effect on NAV, is provided in the Valuation section of this Report.
Lifecycle or operational cost risk During the life of an investment, components of our assets - such as asphalt Of the 56 assets in the BBGI portfolio, 20 Portfolio Companies retain the
or concrete for roads and bridges; or roofs and air handling plants for lifecycle obligations and hand-back obligations at the end of the concession
buildings - are likely to need to be replaced or undergo a major period and two of those Portfolio Companies self-deliver the operations. The
refurbishment. remaining 36 assets have these lifecycle and hand-back obligations passed down
to the subcontractor.
There is a risk that the actual cost of replacement or refurbishment of these
lifecycle obligations will be greater than the forecasted cost, or that the Each Portfolio Company forecasts, models, and provides for the timing and
timing of the intervention may be earlier than forecasted. costs of such replacements or refurbishments. This is based on internal or
external technical advice to assist in forecasting of lifecycle timings, scope
Additionally, a potential risk arises if there is a disparity in the of work and costs. Operation & maintenance activities are tailored to the
interpretation of hand-back obligations at the end of the concession period, ongoing needs of the asset and with a view to perform in line with contractual
when the Portfolio Company transfers control and management of the project hand-back requirements. A robust review process is put in place and in many
back to the public sector. This could lead to a budgetary overrun in lifecycle cases reviewed by the Lenders technical advisor to ensure that sufficient
or operational costs. hand-back funds are available to meet pre-defined contractual requirements.
Less than 1% of the BBGI Portfolio is subject to hand-back in the next five
There is also the general risk that other operational costs may be higher than years. The concessions for two of the Company's UK accommodation assets will
budgeted. This typically relates to insurance costs and management service expire in January 2026 and August 2027 respectively. Preparations for their
contracts or where Portfolio Company management teams are responsible for hand-back are underway and following the Infrastructure and Projects Authority
operational service delivery. UK's guidelines, collaborative working groups have been established,
comprising representatives from the public sector, the subcontractors, and the
Portfolio Companies, involved in the projects.
Additionally, as part of acquisition due diligence, we review budgeted costs
and assess their adequacy.
A sensitivity analysis to movements in lifecycle costs is provided in the
Valuation section of this Report.
The risk of insurance cost increases is partly mitigated by a contractual
premium risk-sharing mechanism with certain public sector clients. For other
Portfolio Companies, the risk is borne entirely by the public sector client
but for a limited number of Portfolio Companies there is no mitigation
available.
COUNTERPARTY RISKS
Failure of subcontractor performance or credit risk (construction contractors, The risk of a subcontractor service failure, poor performance or subcontractor Regarding assets under construction, which currently do not feature in our
facility managers, operations and maintenance contractors) insolvency, which is sufficiently serious to cause a Portfolio Company to portfolio, we implement several mitigants and steps to effectively manage this
terminate or to be required by the client or lenders to terminate a risk:
subcontract.
· A construction joint venture with two or more counterparties is
There may be a loss of revenue during the time taken to find a replacement typically jointly and severally liable: if one party fails, the other is
subcontractor. The replacement subcontractor may also levy a surcharge to obligated to take over the obligations.
assume the subcontract, or charge more to provide the services.
· We perform a contractor replacement analysis as part of our
initial investment due diligence. Most subcontractors on our investments are
well established, with several competing providers. Therefore, we expect that
a pool of potential replacement supplier counterparties is available if a
service counterparty fails, although not necessarily at the same cost.
· Construction subcontractors are typically required by lenders to
provide a robust security package, often consisting of letters of credit,
parent company guarantees and/or performance bonding.
The latter two mitigants are also in place for investments once they become
operational. However, any liability of subcontractors is typically capped at
contractually agreed amounts.
Other mitigants during operations include:
· periodic benchmarking of defined soft facility services on some
investments;
· a diversified group of subcontractors, with no substantial
concentration risk; and
· ongoing subcontractor monitoring for our investments, as well as
contingency plans as appropriate, to ensure we mitigate the risk of
counterparty failure.
LIQUIDITY RISKS
Access to capital Prolonged disruptions in the equity markets could hinder our ability to raise As of 31 December 2023, there were no outstanding drawings under the RCF and
new capital. Such market disruptions may potentially limit our capacity for the Company has no investment transaction commitments outstanding. The Company
growth and our ability to repay any future debt that might be incurred under has adequate access to capital with a net cash position of GBP 9.7 million and
our RCF. with GBP 229 million available for drawing under the RCF as required.
We will continue to be disciplined in our approach to capital allocation and Our RCF expires in May 2026. We can seek to refinance the RCF to extend its
will only consider investment opportunities when they are clearly value maturity and reduce a near-term requirement to repay any potential (future)
accretive. Although we have maintained an RCF since July 2012 and have drawings, though we do not intend to be drawn for substantial periods of time.
refinanced it subsequently, there is no absolute certainty that this facility
will always be available to us in the future. Additionally, the ability to The Board and our Company's brokers regularly assess market sentiment. The
issue further shares in the market cannot be guaranteed. Company can also consider, as part of an effective portfolio construction
strategy, the sale of one or more investments to fund potential future
acquisitions.
Premium or discount to NAV The risk of share price volatility, or trading at a discount to NAV, leading To assist BBGI in addressing any temporary or permanent share price to NAV
to lower returns to existing shareholders. discount, as experienced during the year ended 31 December 2023, we employ a
strategic capital allocation policy. This policy includes the option for the
Company to purchase up to 14.99 per cent of its ordinary shares in the market
annually. In the past year, our primary focus was on repaying all drawings
under the RCF with free cash flows generated from our portfolio of
investments. The Management Board, Supervisory Board, and our brokers
consistently review the options available to the Company to ensure the
effective execution of our capital allocation policy.
We offer a continuation vote to shareholders every two years; the next will be
proposed at our Annual General Meeting on 30 April 2025.
OPERATIONAL RISKS
Poor investment due diligence There is a risk that errors may be made in the assumptions, calculations, or BBGI has developed a robust asset acquisition due diligence process. Our
methodology applied during an acquisition due diligence process. typical due diligence includes model, legal, tax, technical, anti-money
laundering, ESG, sustainability and insurance reviews.
In such circumstances, the figures and/or the returns generated by the
Portfolio Company and the ultimate rate of return realised by our investors Internal expertise is complemented with external advice on a case-by-case
may be lower than those estimated or projected. basis.
Valuation The most significant risk of material misstatement in our financial statements Our portfolio valuation is prepared semi-annually by an experienced internal
applies to the fair valuation of the investment portfolio and in particular team, overseen by our Management Board.
the discount rates used and key assumptions applied when valuing these
investments. Furthermore, the valuation is reviewed by an independent, third-party
valuation expert, and is also reviewed and audited by the Company's External
There is a risk that errors may be made in the assumptions, calculations or Auditor.
methodology used in a periodic valuation process.
Financial models are typically reviewed or audited by external advisers.
Financial models, either for the Group or our underlying Portfolio Companies,
may also contain errors, or incorrect inputs, resulting in inaccurate All key assumptions used in the valuation process are outlined in the
projections of distributions. These could adversely impact the valuation on Valuation section of this Report, some of which are subject to sensitivity
individual investments and the overall assessment of our financial position. testing.
Although key assumptions in the valuation are subject to sensitivity testing,
this has its limitations: it cannot provide a comprehensive assessment of
every risk we face and should be considered accordingly.
Construction defects The risk of certain operational costs in relation to construction defects lies In general, Portfolio Companies can submit claims against construction
with the Portfolio Company. subcontractors for defects in the design, construction or commissioning of
project assets. This 'right to claim' applies for a pre-determined period
following the completion of construction ('statutory limitations period'), and
this may differ between jurisdictions.
If disputes arise, an arbitration or court process may be used. Once the
statutory limitations period has ended, the remediation of construction
defects identified after this point typically falls to the Portfolio Company
itself, and thus becomes the risk of the Portfolio Company. In addition, there
may be other situations where the risk would lie with the Portfolio Company,
for example where a subcontractor becomes insolvent, and may no longer be able
to fulfil its obligations to correct these defects.
Change in law or regulation Different laws and regulations apply in the countries where BBGI and our The Management Board seeks regular briefings from its legal and tax advisers
Portfolio Companies are located. There is a risk that changes in laws and to stay abreast of impending or possible changes in law.
regulations may have an adverse effect on the performance of the underlying
investment, which will then affect the cash flows derived from the investments Change in law provisions are included in some contracts, thus providing
and/or the valuation of the investments. further mitigation.
BBGI has a globally diversified portfolio of assets, thereby reducing the
Group's exposure to changes in any single country.
A robust internal control framework, including Compliance, Risk Management and
Internal Audit functions, is in place and operating effectively, under the
supervision of the Management Board.
Succession planning Inadequate succession planning can, if not effectively mitigated, pose a Succession planning: Proactive succession plans are in place to contribute to
significant risk to an organisation's long-term stability and growth. The smooth transitions and continuity in leadership roles. By regularly reviewing
absence of robust succession strategies could potentially disrupt key and assessing the talent within the Company, the Board can identify and
leadership transitions, impacting the ability to ensure seamless operations develop pathways for key individuals and also identify areas where there may
and strategic continuity. be over reliance on a single individual.
Contractual notice periods: Adequate notice periods are in place for each of
the Management Board members.
Competitive compensation packages: The Company offers benchmarked compensation
packages to attract and retain top talent.
Deferred remuneration: The Company has implemented a deferred remuneration
strategy ensuring that Management Board and key individuals have a vested
interest in the long-term success and stability of the Company.
Failing IT systems or cyber-attacks A breach of data security could occur by accident or because of an external BBGI has taken several measures to reduce the risk of a cyber-attack.
cyber-attack. A cyber-attack could affect our IT systems or those of our
Portfolio Companies, causing theft, loss of data, or damage to the We have outsourced the hosting of our IT platform to an industry specialist.
infrastructure's control systems and equipment. In doing so, we benefit from access to IT security experts, with our platform
monitored by an advanced IT security system. By doing so we benefit from
A cyber-attack could affect not only BBGI's reputation, but could also have scale. This approach would be less cost-effective if our IT infrastructure was
legal, financial, and operational repercussions for the Group. maintained onsite.
Each year, we engage an external expert to carry out an intrusion test on our
IT platform to identify and, if required, patch any identified
vulnerabilities.
We perform business continuity tests, carry out disaster recovery tests every
year, and our employees periodically undergo cyber-security training.
In a typical PPP structure, public sector clients have their own IT systems.
However, most of our Portfolio Companies do not maintain their own IT systems.
Instead, subcontractors of a Portfolio Company (such as management service
providers, facility maintenance contractors for accommodation assets, and
maintenance contractors for transport assets) will have their own IT systems,
which will likely house data relating to a project.
Consistent with a typical PPP structure, as seen in BBGI's portfolio, risks
are typically transferred to subcontractors by the Portfolio Company.
However, any liability of a third party is capped to contractually agreed
amounts, including risks relating to design and construction, warranties for
IT systems (such as a warranty that the system will meet specifications
requiring it to meet robust security requirements), and the risk of a
cyber-attack interrupting the provision of services to an asset.
Corporate strategy The chosen strategy may not align with organisational goals or market BBGI has taken several measures to reduce this risk: (i) Regular strategy
dynamics, potentially leading to ineffective outcomes. reviews: We schedule periodic reviews of the strategy to ensure alignment with
Company objectives and market dynamics, (ii) Stakeholder feedback: We
periodically engage with key stakeholders including shareholders to gather
feedback and insights on the strategy's effectiveness, and (iii) Market
analysis: We conduct regular market and competitive reviews to ensure the
strategy remains relevant in the environment in which we operate.
Voluntary termination There remains a risk that public sector clients of our Portfolio Companies The Management Board believes there are mitigants or deterrents to the risk of
choose to exercise their right to voluntarily terminate the contracts. voluntary termination of contracts:
When this happens, the public sector is typically contractually obliged to pay · Delivering high levels of asset performance, as demonstrated
compensation on termination to equity holders, debt providers, and other across the BBGI portfolio, and ensuring open and direct interaction with
parties, depending on the circumstances. clients, are key levers to demonstrate the value provided by the Portfolio
Companies under the existing contractual framework.
While provisions vary between contracts, they generally ensure that our
investors are paid either market value for their equity interests, or a value · In cases where debt or bond facilities were agreed when interest
to achieve the originally projected IRR, and in these cases, where the rates were higher than current levels, interest rate swaps remain largely 'out
compensation amount is less than current valuation levels, we could suffer a of the money' for our Portfolio Companies, and any public body wishing to
material loss. terminate a contract in the current interest rate environment would also need
to cover the cost of the swap breakage fee. Conversely, the cost of unwinding
Project Agreements and repaying senior debt in a rising interest rate
environment could also prove a mitigant to early termination.
· Our Portfolio Company equity investors would, depending on the
contractual provisions, also need to be compensated, as well as the public
sector being required to budget for the ongoing provision of the service.
SUSTAINABILITY RISKS
Sustainability risk Sustainability risk, as defined in the Company's ESG and Sustainability Risk Sustainability risk assessment is integrated into our decision-making process,
Policy, and as specified in Article 2(22) of SFDR, means an environmental, and sustainability risks are monitored during the due diligence phase and
social or governance event or condition that, if it occurs, could cause an throughout the holding period of investments. These risks are primarily
actual or potential material negative impact on the value of the investment. assessed, monitored, and managed at the investment level. Factors influencing
our sustainability risk assessment include the investment sector and the
Sustainability risks include, environmental risks such as climate risks. These location. For each type of sustainability risk, the materiality of potential
encompass both physical disruptions due to factors such as extreme weather and financial harm to the Company (outside-in), as well as the potential
transition challenges in adapting to low-carbon technologies. Other likelihood and severity of damages caused by investments (inside-out) are
environmental risks include biodiversity risks related to ecosystem assessed.
disruption. Sustainability risks also include; social risks arising from
labour practices, occupational health and safety, or human rights violations; · Our focused approach of investing in social infrastructure assets
and governance risks involving legal, financial, and reputational issues due that serve society should limit sustainability risks linked to a social event
to inadequate corporate governance. or condition.
The potential impact of sustainability risk to BBGI could materialise, for · BBGI's exclusion policy, developed to mitigate a variety of
instance, as the risk of material damage to an asset in the portfolio, poor sustainability risks, avoiding certain types of activities that could cause
performance of an asset, disruption of operations and maintenance works, significant harm to society and/or the environment.
un-insurability or difficulty in adequately insuring an asset, the risk of an
asset being unavailable, the risk of stranded assets, increased lifecycle · BBGI monitors Portfolio Companies' sustainability practices by
costs, repricing/value depreciation, risk of early termination, as well as implementing various policies relating to sustainability risks across all
regulation, litigation, and reputational risks. investments. While we recommend those standard policies at all Portfolio
Companies, it is not always possible to achieve 100 per cent adoption when we
have co-shareholders.
· BBGI collects data at the level of our Portfolio Companies
through its ESG monitoring questionnaire, to calculate all SFDR Principal
Adverse Impact ('PAI') indicators. PAI are the most significant negative
impacts of our investment decisions on sustainability factors related to
environmental, social and governance issues.
· For climate-risk specifically, BBGI implements a formal
assessment to understand the impact of physical climate risks for its entire
portfolio. This assessment quantifies the physical impact severity of each
investment under multiple climate scenarios and time periods. The screening of
physical climate-related risks is embedded in the due diligence process.
Environmental, Social and Governance
2023 Update
As BBGI's ESG and Sustainability Director, I am proud to reflect on a year of
progress in our commitments to sustainability. A standalone ESG Report,
providing more details on activities undertaken in 2023 will be published
later in 2024 and made available on our website.
BBGI's ESG Committee (the Committee) is responsible for oversight of the
Group's ESG activities and comprises each of the members of the Management
Board, the Company Secretary, and the Director of ESG and Sustainability. The
Committee functioned throughout 2023 in accordance with its defined Terms of
Reference, which are available on our website.
Investing responsibly
Investing and focusing our business model through an environmental, social and
governance lens improves our operational performance and contributes towards
new investment opportunities, reduced risk, employee retention and better
long-term value. A disciplined approach to ESG is fundamental not only to
deliver positive returns and facilitate access to essential infrastructure,
but also to ensure the long-term durability of the portfolio of infrastructure
assets we maintain on behalf of the public sector.
Continuous improvements in our ESG approach
We are continuously improving our approach to sustainability. In 2023, we
developed our tools and systems for measurement and reporting. We now have a
complete overview of our 56 Portfolio Companies' emissions profiles, expanding
our proprietary ESG database with greenhouse gas ('GHG') emissions data, which
will facilitate developing decarbonisation plans across the portfolio. We have
used this detail to feed into our first SFDR Principal Adverse Impact
Statement, and to respond to the first step of our commitment to the Net Zero
Asset Managers initiative: a GHG inventory covering 100 per cent of our
portfolio.
Collaborating and working with others
We recognise that by working with others we can identify opportunities to
improve our sustainability practices and desired outcomes. In 2023, we
reinforced our collaboration with peers and industry bodies to align with
relevant developments and to shape an industry response to emerging
sustainability and energy transition requirements. We have:
- joined the UK IPA Net Zero Working Group, which aims to establish
a net zero strategy for PPP investments in the UK;
- engaged with the Institutional Investors Group on Climate Change
('IIGCC') for guidance on setting our net zero targets as an infrastructure
investor and our net zero targets were reviewed and validated;
- engaged with the Partnership for Carbon Accounting Financials
('PCAF') Secretariat to understand better how to apply the attribution
methodology to our infrastructure portfolio; and
- provided feedback to the EU Commission's consultation on
Sustainable Finance Disclosure Regulation (SFDR).
Testament to our commitments to transparency is our alignment with global
standards. We incorporate the SFDR, UN Principles for Responsible Investment
('PRI'), UN Global Compact, the Net Zero Asset Managers initiative ('NZAM'),
and the Task Force on Climate-related Financial Disclosures ('TCFD'), and are
proud of the high scores that we obtain from third-party ESG ratings,
including UN PRI and Institutional Shareholder Services ('ISS').
UN PRI Assessment 2023:
Policy Governance and Strategy: ★★★★★
Direct Infrastructure: ★★★★★
Confidence Building Measures: ★★★★✩
Read more: UN PRI 2023 Assessment Report
(https://www.bb-gi.com/media/2328/unpri-2023-private-assessment-report-bbgi-global-infrastructure-sa.pdf)
I UN PRI 2023 Transparency Report
(https://www.bb-gi.com/media/2329/unpri-2023-public-full-transparency-report-bbgi-global-infrastructure-sa.pdf)
ISS E&S Disclosure Quality Score 2023 xiii (#_edn13) :
Environment (Decile Rank: 3) I Social (Decile Rank: 2)
ISS Corporate ESG Rating 2022: Prime B- (Decile Rank: 1)
Sustainalytics ESG Risk Rating 2021:
Strong ESG performance with a risk rating of Negligible (8.3) xiv (#_edn14)
UN PRI Assessment 2023:
Policy Governance and Strategy: ★★★★★
Direct Infrastructure: ★★★★★
Confidence Building Measures: ★★★★✩
Read more: UN PRI 2023 Assessment Report
(https://www.bb-gi.com/media/2328/unpri-2023-private-assessment-report-bbgi-global-infrastructure-sa.pdf)
I UN PRI 2023 Transparency Report
(https://www.bb-gi.com/media/2329/unpri-2023-public-full-transparency-report-bbgi-global-infrastructure-sa.pdf)
ISS E&S Disclosure Quality Score 2023 xiii (#_edn13) :
Environment (Decile Rank: 3) I Social (Decile Rank: 2)
ISS Corporate ESG Rating 2022: Prime B- (Decile Rank: 1)
Sustainalytics ESG Risk Rating 2021:
Strong ESG performance with a risk rating of Negligible (8.3) xiv (#_edn14)
Outlook
Our regulatory and disclosure requirements will increase together with our
stakeholders' expectations. We continue to enhance our disclosures to align
with upcoming regulatory standards, while engaging with our investors and
ensuring ESG compliance. We will also continue to evaluate our portfolio's
impact materiality for our stakeholders, and the financial materiality of
sustainability risks and opportunities to BBGI. Our biggest challenges will be
the decarbonisation of our portfolio and increasing diversity in our Portfolio
Company boards, which will require our ongoing focus. We have opted to
disclose an overview of our ESG strategy and outcomes in this Annual Report,
but we invite you to read our more comprehensive ESG Report to find out more
about our activities and future ambitions.
Cécilia Vernhes
ESG/Sustainability Director
on behalf of the ESG Committee
ESG Commitments and Progress
Environmental commitment: Managing and mitigating impact
Focus
- Ensuring our investments are resilient to climate hazards today
and under future climate warming scenarios.
- Reducing the carbon intensity of our portfolio and absolute
emissions from our direct operations. Target: by 2030, 70 per cent of
Portfolio Companies (by value) will have a long-term goal to be net zero by
2050 or sooner.
- Monitor portfolio companies' biodiversity practices.
Key achievements in 2023
- Quantified Portfolio Companies GHG emissions for the first time,
in line with GHG Protocol and PCAF Guidance.
- Supported asset-level decarbonisation initiatives.
Outlook for 2024
- Use our influence to implement net zero plans where we exercise
significant influence.
- Engage with subcontractors to better understand where
opportunities exist to upgrade existing equipment.
- Consider potential acquisitions that support the transition
towards a lower-carbon economy.
- Continue to oversee the biodiversity practices of our portfolio
companies.
Social commitment: Making an essential social contribution
Focus
- Fund the infrastructure needed to deliver essential services for
healthier, safer and more connected societies.
- Align each of our investments with at least one of six Sustainable
Development Goals ('SDGs') where we intend to make the greatest contribution.
- Guarantee fair employment practices, skills development and health
and safety standards at all levels of our business.
- Address human rights and modern slavery risk at all levels of our
business.
- Support initiatives that benefit the communities living near to
our assets.
Key achievements in 2023
- 100 per cent of our portfolio aligns with our six core SDGs,
demonstrating the strong social contribution of our portfolio.
- Maintaining 60 per cent female board representation with at least
one ethnic minority Board Director and female leaders for both Supervisory
Board and Audit Committee.
- ESG annual training programme focused on Human Rights for all
employees.
- Portfolio Companies donated over £100,000 to local charities, and
offered various employees volunteering.
- BBGI donated £10,000 as matching donations for our employees'
personal donations, fundraising or volunteering.
Outlook for 2024
- Improve the gender representation of our Directors at Portfolio
Company boards.
- Enhance our oversight of material ESG risks and sustainable
practices across our supply chains.
Governance commitment: Integrity and transparency
Focus
- Operate with integrity and transparency at all levels of our
business.
- Continue to integrate sustainability risks and opportunities in
our strategy and decision-making.
- Tie executive remuneration (Short Term Incentive Plan ('STIP') and
Long Term Incentive Plan ('LTIP')) to ESG targets. 10 per cent of LTIP is
subject to reducing corporate emissions and a further 10 per cent is subject
to progress in the implementation of net zero plans.
- Enhance sustainability reporting, in line with evolving
regulations and stakeholders' expectations.
Key achievements in 2023
- Published our first Principal Adverse Impact Statement under SFDR.
- Zero corruption incidents, fines, or penalties across our
operations or at portfolio level.
- UN PRI Assessment 2023: Policy Governance and Strategy:
★★★★★, Direct Infrastructure: ★★★★★, Confidence Building
Measures: ★★★★✩
- ISS E&S Disclosure Quality Score 2023: Environment (Decile
Rank: 3) I Social (Decile Rank: 2).
Outlook for 2024
- Continuous oversight of our remuneration structure by the
Remuneration Committee.
- Maintain our focus on data quality and explore external assurance
of ESG data.
Responsible investment approach
Contribution to the Sustainable Development Goals
Our investment strategy seeks to provide access to essential social
infrastructure by our investments and future acquisitions. The SDGs are used
to assess, measure and monitor our approach and ensure that we keep investing
beyond mere alignment and make a positive contribution to social and
environmental outcomes. Each investment is aligned with at least one of six
SDGs where we intend to make the greatest contribution.
Facilitate essential services for society
SDG 3 23%
600,000 m(2) of healthcare facilities managed providing healthcare delivery
for >4 million patients
33,000 m(2) of fire stations managed providing protection against fire-related
injuries for >800,000 people
SDG 4 9%
430,000 m(2) of schools and colleges managed providing access to education for
>36,000 pupils
SDG 9 53%
2,800 single-lane km of roadways operated providing reliable transport and
reducing travel times for >290 million vehicles
132 MW installed hydroelectric power station supporting access to clean and
reliable electricity for >80,000 homes
SDG 11 5%
39 km of fully electric urban rail providing safe and sustainable public
transport for >32 million passengers
17,000 m(2) of residential housing units, completed by a sport and a leisure
centre, supporting the access to affordable housing for 200 people
SDG 16 10%
16,000 m(2) of police stations managed providing safety for >1.5 million
people
190,000 m(2) of modern correctional facilities managed providing safety and
applying the rule of law for 3,200 detainees
37,000 m(2) of public administration buildings providing access to public
services for >500,000 people
Managing and mitigating impacts
SDG 13 100%
100 per cent of our assets are screened for resilience to climate hazards
demonstrating a high degree of climate resilience
Case study: Haileybury Youth Centre, Tower Hamlets, London
Increasing access for young people and underrepresented groups
The Poplar Baths affordable housing and recreation centres development project
included the Haileybury Youth Centre, which ran several sessions for local
youth groups. However, the building wasn't being fully used due to budget
constraints. As part of our supporting initiatives that benefit communities
living near to our assets, BBGI, through the Portfolio Company, committed to
help fund the centre for four years.
By donating £20,000 each year, we are enabling Haileybury Youth Centre to
increase its range of sessions, engage more effectively with local young
people and reach out to underrepresented groups. During 2023, Haileybury
Youth Centre reached around 200 more young people with over 350 hours of
additional contact each week as a result of this additional funding.
ESG governance
We believe that high-quality governance brings accountability and is essential
to achieving positive outcomes for our investors, society and the environment.
Our Management and Supervisory Boards have endorsed and adopted the main
principles of good corporate governance outlined in the AIC Code of Corporate
Governance ('AIC Code').
The Management Board works in close collaboration with the ESG Committee. We
achieve the successful integration of material ESG considerations throughout
every phase of the investment lifecycle by ensuring close coordination across
essential functions like Asset Management, Valuation, Business Development,
Compliance, Risk and Investor Relations.
Case study: Workplace giving programme
Giving back to our colleagues where it matters
Supporting our communities and our people are core values. Last year, we
launched a new giving programme to connect social impact with those who we are
most closely connected to: our colleagues. We match our employees' financial
donations, fundraising or volunteering time with a contribution to the same
project.
In 2023, c. 40 per cent of BBGI employees volunteered, raised funds and
donated over £6,000 to 27 causes all over the world. We contributed more than
£10,000 to charities including Red Cross, Kanner-Jugendtelefon, Young Lives
vs. Cancer, Rote Nasen, L'Ile aux Clowns, World Food Programme, WWF, Médecins
sans Frontières, World Vision Development and UNICEF, to help causes
including children's education in developing countries; cancer research; and
helping refugees integrate through sports.
Some of our employees even got together to join a sponsored run in Luxembourg.
Together with their families, they raised £4,200 for paediatric cancer
research (Kriibskrank Kanner Fondatioun), with a further £1,900 donated by
BBGI through the workplace giving programme.
Applying ESG frameworks
Sustainable Development Goals
The SDGs inform our entire ESG and social outcomes management process,
impacting every investment and operational decision we make.
ESG & Sustainability Risk Policy
We have implemented a robust framework for ESG integration,
sustainability-risk screenings and impacts assessment across all aspects of
the investment cycle, from initial screening through to end-of-investment
life.
Read more: ESG & Sustainability Risk policy
(https://www.bb-gi.com/media/2272/bbgi_esg-and-sustainability-risk-policy-30062023.pdf)
Sustainable Finance Disclosures Regulation (SFDR)
We have an SFDR Article 8 classification, which means we focus on sustainable
investments with a social objective. We screen our investments to avoid doing
significant harm to other aspects of sustainability, and follow good
governance practices.
The periodic disclosure for SFDR specifically addresses our disclosure
obligations under Article 11 of SFDR, supplemented by Commission Delegated
Regulation (EU) 2022/1288 of 6 April 2022 and Commission Delegated Regulation
(EU) 2023/363 of 31 October 2022.
BBGI's SFDR Periodic disclosure for 1 January 2023 to 31 December 2023 is at
https://www.bb-gi.com/sfdr-periodic-disclosure-2023/
(https://www.bb-gi.com/sfdr-periodic-disclosure-2023/)
Read more: SFDR PAI Statement
(https://www.bb-gi.com/media/2277/bbgi_sfdr-pai-statement_30062023.pdf#page=21)
Sustainability Disclosure Regulation (SDR)
As BBGI is considered a non-UK investment company, it does not fall within the
scope of the Sustainability Disclosure Regulation ('SDR'), and the Company is
therefore currently not required to publish SDR disclosures, nor can it align
to the SDR investment labels regime.
Materiality
We consider a broad range of ESG factors when we assess the sustainability of
our investments. To identify the most material sustainability factors to
include in our due diligence, risk assessment and monitoring, we draw from the
latest regulatory requirements, ESG frameworks and industry best practices,
like the Principal Adverse Impacts set out in SFDR, as well as third-party
tools such as the GRI Standards, SASB Materiality Finder or the GRESB
Infrastructure materiality tool.
Task Force on Climate-Related Financial Disclosures
(https://www.fsb-tcfd.org/) (TCFD)
The Management Board recognises the importance of the TCFD and its related
disclosures and has voluntarily decided to report against the TCFD
recommendations (refer to the section Climate disclosures and the detailed
reporting included in our ESG Report
(https://www.bb-gi.com/esg/sustainability-related-disclosures/) ).
Net Zero Asset Managers initiative (NZAM)
We are signatories to the NZAM Initiative and have set our Financed Emissions
reduction targets and Engagement targets in line with the Paris-Aligned
Investment Initiative Net Zero Investment Framework ('NZIF') and the specific
IIGCC guidance for the infrastructure sector, following a 1.5°C reduction
pathway.
Institutional Investors Group on Climate Change (IIGCC)
Our net zero targets across our portfolio were validated and approved by the
IIGCC in March 2023.
Partnership for Carbon Accounting Financials (PCAF)
Our Financed Emissions have been quantified in accordance with the Partnership
for Carbon Accounting Financials ('PCAF') Financed Emissions Standard.
Engagement
Commitment: Embracing partnership and engagement
As stewards of important social infrastructure investments, many stakeholders
are impacted by our actions: users of the infrastructure; communities living
next to our assets; our employees; investors; public sector clients;
subcontractors; the environment; and society at large.
Focus
(- ) Quality services and positive relations with our public
sector clients.
(- ) Contribute to the development of industry best
practices.
Key achievements in 2023
(- ) Net Promoter Score: Strong NPS of 56(( xv (#_edn15) )),
which is in the top quartile of the achievable range.
(- ) During wildfires and flooding in Canada and the UK,
BBGI's local teams were in close contact with our clients, maintenance and
operations contractors to support teams on-site and to ensure assets available
for users or rescue services.
(- ) Joined the UK Infrastructure and Projects Authority's
('IPA') Net Zero Working Group.
Outlook for 2024
(- ) Leverage on relationships with local governments to
implement decarbonisation initiatives across our investments.
(- ) Continue to participate in industry groups to keep us
informed of industry trends.
(- ) Engage with industry practitioners and share learnings
on best practices.
Case study: Medicine Wheel Garden, Women's College Hospital, Toronto
A space for healing, celebration and tranquillity
Toronto has the largest urban Indigenous population in Ontario. In 2020, the
city's Women's College Hospital opened its Centre for Wise Practices in
Indigenous Health to support a wellness system that acknowledges and respects
Indigenous people, providing meaningful, culturally safe care, which is free
of racism and discrimination.
Following a request from the Centre, BBGI funded £4,000 through the Portfolio
Company, and facilitated the construction of a rooftop Medicine Wheel Garden.
In Native American culture, the Medicine Wheel is a symbol of the circle of
life. The Garden is a place to harvest native, medicinal plants and to be
enjoyed by the Indigenous community.
Christine Monague, Indigenous Peer Support and Relations Advocate, explains
the benefits of the Garden: "When First Nations, Inuit or Métis patients come
to Women's College Hospital for testing, treatments or procedures, we will
have a viable means to offer them comforts for preparation, prayer,
purification and spiritual healing by maintaining our crop of medicinal
instruments at the Medicine Wheel Garden."
Section 172
As a member of the AIC, BBGI acknowledges Provision 5 of the AIC Code's
expectation for all members to comply with the continuing requirement under
Section 172(1) of the UK Companies Act 2006 (the 'CA2006') for boards to take
stakeholder interests into account and to report how they have done so when
performing their duties. We have previously utilised Investor Meet Company for
our results presentations and have retained their services for our 2023 Annual
Results. We will continue to do so in the future as we actively seek to
increase our engagement with retail investors. The AIC Code reflects the main
principles set out in the UK Code on Corporate Governance and associated
disclosure requirements of the Listing Rules, as they apply to investment
companies, including internally managed investment companies.
Detailed insights into how we embody the spirit of those Section 172
provisions, consider our key stakeholders, and uphold our commitment to
generating positive and sustainable outcomes for all stakeholders are outlined
below, highlighting specific actions in 2023.
Key stakeholders Focus area of our engagement Types of engagement and metrics used to monitor and assess relationships Considerations in the Board decision-making process
Our people Our relatively flat hierarchy empowers our talented people to deliver our - Annual and mid-year assessments Feedback from individual assessments is regularly discussed by the Management
Our people are the driving force behind what we do. They are well positioned purpose. We promote an inclusive work environment where all people are treated
Board
to bring their expertise to our clients, subcontractors and partners and equally and are supported to achieve their potential. We regularly engage with - Direct liaison with the Management Board
deliver the results expected by our investors. our teams and seek feedback through a range of communications channels.
Two of our people are elected as representative staff delegates. They act as a
- Regular meetings liaison and mediator between employees in Luxembourg (our headquarters, where
most BBGI employees are based) and the Management Board, on any individual or
- Well defined expectations and targets, including ESG targets for collective grievances with our employment practices.
all executives
- Regular training
- Training metrics
- Whistleblower hotline
Communities By maintaining high-quality and resilient social infrastructure assets, we - Client satisfaction discussed at corporate and Portfolio BBGI donated more than £10,000 to charities supported by our employees
facilitate access to essential services for everyone. Companies' level through the first year of our workplace giving programme.
The positive experience of the people who use our assets and the communities
who live near to our assets are vital to ensuring our success and the We support initiatives that benefit the communities living near our assets. - Partnership, sponsorship and donations Our Portfolio Companies donated over £100,000 to local charities.
satisfaction of our public sector clients.
- Community initiatives
Investors Our goal is to generate long-term, predictable and inflation-linked returns - Investor relations activities, including meetings, webinars, We engaged with selected ESG ratings providers to ensure shareholders have
Our investors provide capital, feedback on our business model, and help to for our investors. We measure our progress against key KPIs. roadshows and direct discussions accurate and up-to-date insights into BBGI's ESG credentials.
shape our future plans.
- Close interactions and feedback with our Corporate Brokers The Board continually keeps under review the returns we offer to our
investors, along with our ability to continue to deliver those returns. This
- Annual General Meeting forms the basis of discussions when determining dividends.
- Annual Report and Interim Report Investor roadshows provide the CEO with an opportunity to speak directly to
our investors, including discussions on ESG initiatives, to understand better
- ESG Report their expectations.
- Website
Supply chain We monitor our contractors to ensure that they conduct their business - Contractor monitoring We selected key contractors to assist us in designing the GHG data collection
according to the high standards of performance, ethics and integrity that we
framework for our portfolio emissions inventory and reporting.
Our supply chain is made of long-term partnerships that are critical to ensure expect. - ESG onboarding
that we can do business and provide our public sector clients with operational
and available assets. Our Portfolio Companies collaborate with the maintenance and operations - Annual ESG KPI survey
contractors for each of our assets. They strive to develop mutually beneficial
long-term relationships and react to any possible event. - Ongoing ESG engagement topics and joint initiatives
- Responsible contractor policy
Public sector clients We aim to build trust by delivering well-maintained and safe social - Regular client meetings Meetings with our clients drive our asset management approach and feed
Satisfied public sector clients are critical to our business model. infrastructure facilities and services for our public sector clients.
directly into our decision-making process. Lessons learned from one asset are
- Service quality feedback adapted and applied across the portfolio.
- Ongoing reporting BBGI joined the UK IPA Net Zero Working Group in 2023, aimed at establishing a
net zero strategy for PPP investments in the UK.
- Net Promoter Score survey
We share the GHG data collected from our investments and share experiences
- Sharing results of our climate risk monitoring and GHG from our own portfolio
inventories
Climate disclosures
Corporate Emissions
Scope 2019 2022 2023
tonnes CO(2)e tonnes CO2e tonnes CO(2)e
Scope 1 12 10 10
Scope 2 (location-based) 4 5 4
Scope 2 (market-based) 5 7 10
Scope 3 264 226 199
Total GHG emissions (location-based) 280 241 213
Total GHG emissions (market-based) 281 243 219
GHG intensity (market-based) 11 tCO(2)e/employee 9 tCO(2)e/employee 8 tCO(2)e/employee
0.3 tCO(2)e/£m invested 0.2 tCO(2)e/£m invested 0.2 tCO(2)e/£m invested
Financed Emissions
Attributable GHG emissions 2022 2023
All operational assets Scope 1 5,806 tCO(2)e The data collection being in progress, we will report on our 2023 Financed
Emissions in our 2023 ESG Report.
Scope 2 10,997 tCO(2)e
Scope 3 7,513 tCO(2)e
Total GHG emissions from operational assets 24,316 tCO(2)e
Assets under construction or major expansion Scope 3 30,583 tCO(2)e
Total GHG emissions 54,899 tCO(2)e
Avoided GHG emissions 404,192 tCO(2)e
Carbon footprint 60 tCO(2)e/€m invested
GHG intensity 40 tCO(2)e/€m revenue
Application of PCAF Financed Emissions framework, as reported in our SFDR
Principal Adverse Impact Statement:
- Data coverage: GHG emissions are reported for the entire
portfolio.
- Methodologies used: BBGI has quantified Scope 1, Scope 2 and
material Scope 3 GHG emissions from its portfolio ('Financed Emissions') in
accordance with GHG Protocol xvi (#_edn16) and PCAF guidance xvii (#_edn17)
.
- Attribution factor: In accordance with the PCAF guidance, BBGI
calculated its attributed emissions based on the proportional share of equity
and subordinated debt held in the Portfolio Companies. GHG emissions reported
the Scope 1, Scope 2 and material Scope 3 emissions of BBGI's investments,
apportioned using an attribution factor.
Formulas for Total GHG emissions:
Total GHG emissions (tCo(2)e) = ∑ Current value of investment x Investee company's Scope 1, 2 and 3 GHG emissions
Investee company's enterprise value
Which applying the PCAF guidance translates into the following application for
the Company:
Total attributable GHG emissions (tCo(2)e) = ∑ Outstanding investment x Portfolio Company's Scope 1, 2 and 3 GHG emissions
(Equity + Debt)
where:
Outstanding investment BBGI's equity and subordinated debt in the investment
Investee company's enterprise value Portfolio Company's Equity plus Debt
Equity Total equity and subordinated debt of the investment excluding the impact of
hedging reserves
Debt Total external debt of the investment
Case study: Ohio River Bridges, Indiana, US
Advantages of electric vehicles for highway patrols
Highway operations and maintenance involve various tasks such as routine
inspections, debris removal, pothole repairs, snow ploughing, and emergency
response. Traditionally, these tasks rely on conventional gasoline or
diesel-powered vehicles, contributing to elevated carbon emissions and high
operational costs. The emergence of electric vehicles ('EV') presents an
opportunity to address these challenges while promoting sustainability and
enhancing public perception.
In 2023, BBGI, through its Portfolio Company, acquired the first EV for the
Ohio River Bridge Project fleet, a Ford F-150 Lightning specially outfitted to
meet the unique needs of highway operations. This vehicle offered multiple
advantages, including operating without air pollutants, lower maintenance
requirements and operating costs, connectivity with smart technologies with
real-time data and acting as a portable supply power for hand tools for
interventions without the need of a generator. With an estimated range of over
300 miles per charge, a maximum payload of 2,200 lbs, and a towing capacity of
10,000 lbs, this vehicle effectively meets the operational requirements of
highway maintenance tasks. The existing solar panel array provides enough
capacity to charge the 98 kWh battery of the vehicle.
Despite certain limitations common to the usage of EV, such as reduced range
in winter, higher capital costs compared to traditional vehicles, faster tires
wear, and charging times: "The incorporation of the Ford F-150 Lightning into
our highway operations and maintenance fleet, exemplifies the potential of
electric vehicles to transform traditional infrastructure management
practices. By embracing EV technology, BBGI not only achieved environmental
and economic benefits but also positioned itself as a leader in sustainable
transportation.", says Volker Ellenberg, BBGI Global Head of Asset Management.
Task Force on Climate-related Financial Disclosures (TCFD) Summary Report
As BBGI is considered a non-UK investment company, it does not fall within the
scope of the Financial Conduct Authority's ('FCA') requirement for commercial
companies with a premium listing to make TCFD disclosures. Notwithstanding
this exemption, the Management Board recognises the importance of the TCFD and
its related disclosures and has, as a result, taken the voluntary decision to
report against the TCFD recommendations. Our full TCFD disclosure is included
in our ESG Report:
https://www.bb-gi.com/esg/sustainability-related-disclosures/
(https://www.bb-gi.com/esg/sustainability-related-disclosures/)
Recommended disclosure Summary Section
Governance
a) Describe the Board's oversight of climate-related risks and opportunities. The Supervisory and Management Boards, supported by an executive-led ESG ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
Committee, ensure comprehensive governance over all climate change and
ESG-related activities. Section: 'TCFD Disclosures'
The Management Board considers climate change issues when setting strategy,
considering new investment opportunities, approving annual budgets, monitoring
performance metrics and targets and approving related disclosures. Section: 'Remuneration Report'
The Supervisory Board's constituted Remuneration Committee designs reward
structures for our Management Board to foster long-term value-creation and
reinforce the organisation's ability to achieve its climate change goals and
targets.
b) Describe management's role in assessing and managing climate-related risks The Management Board has overall responsibility for ESG considerations and ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
and opportunities. ensuring they are integrated into BBGI's investment strategy, including in
relation to climate change. This is achieved through our Investment Committee, Section: 'TCFD Disclosures'
Risk Management function, Corporate Governance function, and ESG Committee.
ESG Committee Terms of Reference (https://www.bb-gi.com/esg/policies/)
Strategy
a) Describe the climate-related risks and opportunities the organisation has Climate-related risks can encompass both physical disruptions due to factors ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
identified over the short, medium and long-term. such as extreme weather, and transition challenges in adapting to low-carbon
technologies or biodiversity risks related to ecosystem disruptions. Section: 'TCFD Disclosures'
Overall, scenario analysis has highlighted that the majority of BBGI's
portfolio is very resilient to climate hazards both today and under future
climate warming scenarios.
Our assessment considered climate impacts over short (1-5 years), medium (5-10
years) and long-term (10+ years) time horizons up until 2050, covering the
maximum investment life duration of our portfolio. When local mitigation
measures are also considered, the exposure of our assets to climate change may
reduce further.
The changes arising from a transition to a low-carbon economy include changes
to laws and regulations, reputational risks, adapting to new low-carbon
materials and technologies (this includes alternatives for road surfaces,
electric vehicles charging infrastructure, and energy-efficient or motion
sensor equipment) and increased electrification.
b) Describe the impact of climate-related risks and opportunities on the The screening of physical climate-related risks is systematically done for ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
organisation's businesses, strategy and financial planning. each asset during the due diligence and monitoring phases of our investment
cycle. Section: 'TCFD Disclosures'
The results of the quantitative climate change assessment have fed into our
strategy in several ways: it informs us on the type of climate risk each of
our assets is exposed to, the magnitude of that risk (from low risk to high
risk, if any) and the corresponding reinstatement value (i.e., the potential
cost of damage from physical climate risks).
There is no climate-related cost in our financial models, but this may change
in relation to increased insurance premiums; however, there is a degree of
contractual protection from increased insurance costs.
The cash flows of our availability-based assets remain largely unaffected by
physical and transition climate-related risks, as they are based on pre-agreed
criteria with the public sector.
c) Describe the resilience of the organisation's strategy, taking into Our climate modelling demonstrates that our investment strategies focus our ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
consideration different climate-related scenarios, including a 2°C or lower investments into infrastructure assets. They are built to the latest
scenario. engineering standards and due to the long-term nature of these assets, we Section: 'Climate-related risks'
consider the long-term effects of climate change when they are built. In our
capacity as an investor, we are developing our resilience by transitioning to
net zero through a mix of portfolio decarbonisation, engagement with key
stakeholders and an ESG integrated investment approach. Net Zero Plan
(https://www.bb-gi.com/media/2226/bbgi-net-zero-plan-dec-2022-final.pdf)
A transition to a lower carbon economy presents several opportunities for
client-supported change orders and new investment, should the business case
support it.
Risk
a) Describe the organisation's processes for identifying and assessing In line with our commitment to executing due diligence on new acquisitions, ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
climate-related risks. within six months of an asset integrating into our portfolio we perform a
systematic screening for various risks. Section: 'TCFD Disclosures'
We also identify climate-related risks through physical risk due diligence. A
summary of the immediate risk exposure is provided under a 'Paris-aligned'
scenario and a 'high emissions' scenario, and then in decadal time steps until
2100. We have reviewed all existing investments for physical climate change
exposure against eight climate perils through quantitative scenario-analysis.
To ensure our portfolio remains resilient to climate risk, we continue to
embed these insights into our investment screening process, ensuring physical
climate risk impacts are assessed for all new investments. The output from the
screening is a bespoke climate factsheet.
b) Describe the organisation's processes for managing climate-related risks. Climate risks identified through our climate risk modelling are managed by our ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
Risk Manager and the Management Board, who take steps to ensure climate risk
considerations are formally embedded within risk management procedures. Section: 'TCFD Disclosures'
c) Describe how processes for identifying, assessing and managing Climate-related risks have been integrated into our risk management ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
climate-related risks are integrated into the organisation's overall risk procedures.
management.
Section: 'TCFD Disclosures'
Where we identify material climate risks, these are escalated where necessary
to the Management Board, ensuring risks can then be appropriately assessed,
managed and monitored per our risk management procedure.
For our portfolio to remain resilient to climate risk, we embed findings into
our investment screening process, ensuring we assess physical climate risk
impacts for all new investments.
Metrics
a) Disclose the metrics used by the organisation to assess climate-related We have quantified both physical severity risk scores and potential projected ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
risks and opportunities in line with its strategy and risk management process. financial impacts from 2020 to 2100 for every asset under each warming
scenario assessed. For each time horizon and for each warming scenario, each Section: 'Climate-related risks'
asset is scored with a climate risk score, on a scale from very low to very
high.
For the 22 assets that have undergone a deep-dive assessment, we conducted SFDR Principal Adverse Impact Statement
further sensitivity analysis that considers all existing resilience measures (https://www.bb-gi.com/media/2277/bbgi_sfdr-pai-statement_30062023.pdf)
and the engineering of our assets in the climate risk score. Since June 2023,
BBGI discloses climate change related metrics as part of our SFDR Principal
Adverse Impact Statement.
b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions, and Refer to section 'Financed Emissions'. ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
the related risks.
Section: 'GHG Protocol'
SFDR Principal Adverse Impact Statement
(https://www.bb-gi.com/media/2277/bbgi_sfdr-pai-statement_30062023.pdf)
c) Describe the targets used by the organisation to manage climate-related Physical risk targets: ESG Report (https://www.bb-gi.com/esg/sustainability-related-disclosures/)
risks and opportunities and performance against targets.
For 22 assets, where we produced a bespoke climate factsheet, we have used it Section: 'Climate-related risks'
when engaging with clients. We will continue to perform a climate-risk
screening for each new investment.
Corporate Emissions reduction targets: Net Zero Plan
(https://www.bb-gi.com/media/2226/bbgi-net-zero-plan-dec-2022-final.pdf)
BBGI has committed to reduce its Corporate Emissions (Scope 1, 2 and 3) 50 per
cent by 2030 from a 2019 baseline and to reach net zero by 2040.
Financed Emissions reduction targets:
We aim for 70 per cent of our Financed Emissions to be 'net zero', 'aligned',
or 'aligning' to net zero by 2030. This means that by 2030, 70 per cent of AUM
(portfolio companies by value) will have a long-term goal to be net zero by
2050 or sooner. We have a goal to have 100 per cent of our Financed Emissions
to be 'net zero' or 'aligned', by 2040.
Corporate Governance
Relevant Application of European Union and Luxembourg Law
BBGI is regulated by the CSSF under Part II of the amended Luxembourg law of
17 December 2010 on undertakings for collective investment, and is subject to
the Luxembourg amended law of 12 July 2013 on Alternative Investment Fund
Managers ('AIFM Law'), which implemented the EU Alternative Investment Fund
Managers Directive ('AIFMD') into national legislation.
AIFM
On 24 November 2023, the Company announced that Frank Schramm, Co-CEO, would
be retiring with effect from 31 January 2024. At the same time, the Company
announced that Andreas Parzych would join the Management Board with effect
from 31 January 2024.
Other than this announcement of intention to retire, there have been no other
material changes during the year in respect of Art. 20 paragraph. 2(d) of the
AIFM Law that warrant further disclosure to our shareholders.
Material risk takers
All members of BBGI's Management Board are considered the material risk
takers, in accordance with Luxembourg's AIFM law of 12 July 2013. Frank
Schramm, as former Co-CEO, therefore, was a material risk taker until his
retirement from the Management Board on 31 January 2024. Andreas Parzych is
deemed a material risk taker since he joined the Management Board with effect
from 31 January 2024. Duncan Ball and Michael Denny are the remaining two
members of the Management Board and remain material risk takers.
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 Recueil
Électronique des Sociétés et Associations ('RESA'). The Articles may be
amended in accordance with the rules set out in article 32 of the Articles.
A copy of the Articles, which were most recently amended by shareholder
approval on 30 November 2020, is available on our website:
www.bb-gi.com/investors/policies/articles-of-association/
(https://www.bb-gi.com/investors/policies/articles-of-association/) .
Governance at a glance
Compliance statement
As an internally-managed investment company, our robust internal controls play
a pivotal role in ensuring the strong financial and operational performance of
our investments.
BBGI is a member of the Association of Investment Companies ('AIC') and aligns
its reporting with the AIC Code of Corporate Governance (the 'AIC Code').
Our work and reporting involve thorough consideration of the Principles and
Provisions of the AIC Code, which in turn addresses the Principles and
Provisions set out in the UK Corporate Governance Code 2018 (the 'UK Code'),
along with additional Provisions of specific relevance to BBGI as an
investment company. We believe that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the Financial Reporting
Council, offers pertinent insight for our shareholders.
For the most part, we comply with the Principles and Provisions of the AIC
Code. Where we do not, we provide explanations. Below, we detail specific
Provisions where we deviate from compliance with the provisions of the AIC
Code, accompanied by relevant section references for detailed explanations:
· AIC Provision 17 (establishing separate Management Engagement
Committee): See Committees of the Supervisory Board.
· AIC Provision 23 (annual re-election of all directors by the
shareholders): See Management Board - General section.
Board attendance
For the year ended 31 December 2023
Name Function Independence Age Original appointment Next renewal date Attendance at Meetings (total meetings held in the year)
Supervisory Board Supervisory Board Audit Committee Nomination Committee Remuneration Committee
(7) (5) (3) (4)
Sarah Whitney((i) (ii)) Chair of Supervisory Board and Chair of Nomination Committee Independent 60 01-May-19 30-Apr-24 6/7 - 3/3 4/4
Andrew Sykes Senior Independent Director and Chair of the Remuneration Committee Independent 66 29-Apr-22 30-Apr-24 7/7 5/5 3/3 4/4
Jutta af Rosenborg Chair of Audit Committee Independent 65 01-Jul-18 30-Apr-24 7/7 5/5 3/3 4/4
Chris Waples Director of the Supervisory Board Independent 65 01-May-21 30-Apr-24 7/7 5/5 3/3 4/4
June Aitken Director of the Supervisory Board Independent 64 29-Apr-22 30-Apr-24 7/7 5/5 3/3 4/4
((i))Ms Whitney was unable to attend one meeting of the Supervisory Board due
to illness. ((ii))Ms Whitney is invited to attend the Audit Committee meetings
as an observer. She attended all Audit Committee meetings held in the year.
Name Function Independence Age Original appointment Next renewal date Attendance at Meetings
Management Board Management Board (22)
Duncan Ball Member of the Management Board Non-independent 58 05-Oct-11 05-Oct-24 22/22
Frank Schramm((i)) Member of the Management Board Non-independent 55 05-Oct-11 - 22/22
Michael Denny Member of the Management Board Non-independent 46 30-Apr-13 30-Apr-24 22/22
Andreas Parzych((ii)) Member of the Management Board Non-independent 51 31-Jan-24 31-Jan-25 -
((i))Mr Schramm retired from the Management Board on 31 January 2024.
((ii))Mr Parzych was appointed 31 January 2024. Prior to his appointment, he
was invited to attend the three preceding meetings of the Management Board as
an observer.
All appointments may be renewed in accordance with the provisions of the
Company's Articles.
Biographies of Directors
Supervisory Board
Sarah Whitney
Chair, Supervisory Board and Nomination Committee
Sarah Whitney has a 35-year career advising on strategy, corporate finance,
real estate, infrastructure, investment and economic matters. She has provided
consultancy services to national and local governments, investors and real
estate companies.
Her prior executive roles include Corporate Finance Partner at PwC; leading
the Government & Infrastructure Team at CB Richard Ellis; and Head of
Consulting & Research at DTZ Holdings plc (now Cushman & Wakefield).
At BBGI, Ms Whitney became Chair of the Supervisory Board on 31 July 2020 and
is Chair of the Nomination Committee.
Ms Whitney sits as a Non-Executive Director on the board of Bellway plc (where
she serves as Senior Independent Director). She also serves as a Non-Executive
Director on the boards of two other investment trusts, JPMorgan Global Growth
& Income plc (where she serves as Chair of the Audit Committee) and Tritax
EuroBox plc (where she serves as Senior Independent Director).
She is a Fellow of the Institute of Chartered Accountants of England and
Wales, Member of the Council of University College London, and has a BSc in
Economics & Politics from the University of Bristol.
Andrew Sykes
Chair, Remuneration Committee and Senior Independent Director
Andrew Sykes has a wealth of financial services and non-executive experience
and spent 26 years of his executive career at Schroders plc. He is an
experienced director of UK-listed companies and has deep knowledge of the
financial services sector and of corporate governance requirements.
He was Chair of SVG Capital plc from 2012 until 2017, serving on the Board
from 2010. He was also Chair of Smith & Williamson from 2013 to 2020.
At BBGI, Mr Sykes was appointed as a Non-Executive Director in April 2022, and
became Senior Independent Director and Chair of the Remuneration Committee on
29 April 2022. He is a Non-Executive Director and Senior Independent Director
of Intermediate Capital Group plc, Chairman of Alder Investment Management
Limited and Deputy Chair of the Governing Body of Winchester College.
Mr Sykes holds a Master's degree in Modern Languages from Oxford University.
Jutta af Rosenborg
Chair, Audit Committee
Jutta af Rosenborg has extensive experience in management and strategy from
her background as an Executive and other senior operational roles at listed
companies. She is also an experienced non-executive director of listed
companies.
Ms af Rosenborg served as CFO, Executive Vice President of Finance and IT and
Member of the Board of Management at ALK-Abelló A/S until 2010. Before this,
Ms af Rosenborg worked at Chr. Hansen Holding A/S as Vice President of Group
Accounting from 2000 to 2003.
At BBGI, Ms af Rosenborg became a Non-Executive Director on 1 July 2018 and
Chair of the Audit Committee on 31 August 2018. She is also a Non-Executive
Director and Chair of the Audit Committee at RIT Capital Partners plc, Nilfisk
Holding A/S and JP Morgan European Growth & Income plc.
Ms af Rosenborg holds an MSc in Business Economics and Auditing from
Copenhagen Business School, and qualified as a state-authorised public
accountant in 1992.
Chris Waples
Independent Director
Chris Waples (CDir FloD) has 35 years' global experience of managing the
acquisition, construction and divestment of infrastructure projects in
progressive high-profile companies. He spent 12 years at John Laing Group plc
where he was Executive Director Asset Management, leading the international
public-private partnership asset portfolio across Europe, North America, and
Asia Pacific, and was also a member of the Executive team that oversaw the
successful £1 billion market capitalisation IPO of John Laing Group plc in
2015. He was Chair of the Investment Committee, Chair of the Investment
Portfolio Committee and Trustee of the John Laing Charitable Trust.
He previously served as Managing Director of Amey plc and held senior
positions with Scottish Power plc and Blue Circle plc.
Mr Waples became a Non-Executive Director at BBGI in May 2021. He is a Fellow
and Chartered Director of the Institute of Directors and holds a Postgraduate
degree in Management Studies and Agricultural Engineering LICG.
June Aitken
Independent Director
June Aitken has over 30 years of experience in global equity markets as an
institutional stockbroker and has been involved in establishing fund
structures in multiple jurisdictions.
She has held senior roles at HSBC Bank plc including as Global Head of
Emerging Market Equity Distribution and Head of Strategy Management.
Previously, Ms Aitken was a Managing Director at UBS (AG), Head of Global
Equity Product, and Global Head of Asian Equities. She was a founding partner
and investor of Osmosis Investment Management LLP, a specialist investment
manager focused on environmental and responsible investment mandates.
At BBGI, Ms Aitken was appointed as a Non-Executive Director in April 2022.
She is the Non-Executive Chair at CC Japan Income & Growth Trust plc, and
a Non-Executive Director and Chair of the Audit Committee at JP Morgan Asia
Growth and Income plc and Schroder Income Growth Fund plc.
Ms Aitken holds a degree in Politics, Philosophy and Economics from Oxford
University, is a member of the Chartered Banker Institute and acts as a mentor
to female entrepreneurs.
Management Board
Duncan Ball
Co-CEO (to 31 January 2024), CEO (from 31 January 2024) and member of the
Management Board
Duncan 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
BBGI's overall strategy and management. He is a member of the Management Board
and sits on the Group's Investment and ESG Committees. He is also a
shareholder representative and holds directorships in key investments of BBGI.
During the financial reporting period ending 31 December 2023, Mr Ball served
as Co-CEO. He was subsequently appointed as CEO, effective 31 January 2024. He
was actively involved in the BBGI IPO in 2011 and BBGI's subsequent growth
from 19 assets to 56 assets at the end of the reporting period.
Michael Denny
CFO (to 1 February 2024), CFOO (from 1 February 2024) 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 its IPO. As CFO of the Group, he
is primarily responsible for all corporate financial matters including
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.
During the financial reporting period ending 31 December 2023, Mr Denny served
as CFO. His role was subsequently expanded to Chief Financial and Operating
Officer, effective from 1 February 2024.
Andreas Parzych
Executive Director and member of the Management Board (from 31 January 2024)
Andreas Parzych has over 20 years' experience in infrastructure investment
across transport, social infrastructure, and renewables in Europe and North
America.
Mr Parzych joined BBGI in 2016 as Director, Head of Business Development,
responsible for identifying, evaluating, and executing investment
opportunities for the fund, and has been actively involved in implementing our
growth strategy since joining BBGI.
Frank Schramm
Former Co-CEO and member of the Management Board to 31 January 2024
During the financial reporting period ending 31 December 2023, Frank Schramm
served as Co-CEO of BBGI since its inception, until he retired from his role
as a member of the Management Board and as Co-CEO on 31 January 2024.
Board leadership and purpose
Our governance structure
BBGI is internally managed and operates with a two-tier governance structure,
comprising a Management Board and a Supervisory Board. The respective
responsibilities of each Board are:
Management Board
· Manages BBGI and its representation vis-à-vis third parties
(e.g. entry into agreements on BBGI's behalf).
· Operational management, including discretionary investment
management of BBGI's investments.
· Sets and implements the Group's overall strategy.
· Implements risk management, monitoring operational risks and
measures related to risks.
· Oversees BBGI's administration, including preparing its
semi-annual valuations, statutory financial statements, management accounts
and its business plan, which defines its active approach to asset management.
· Primary interface for BBGI's investor relations.
· Engages with the Supervisory Board on behalf of BBGI's
shareholders.
In carrying out the function of investment manager via the Management Board,
BBGI does not engage an external investment adviser to provide investment
management services. Accordingly, as Executive Directors, none of the
Management Board sit on the Supervisory Board, nor on its formally constituted
Committees.
Supervisory Board
· Appoints and, where relevant, dismisses members of the Management
Board.
· Supervises management by the Management Board, without being
authorised to interfere with the management.
· Exercises its powers attributed by our Articles, including:
o supervising and monitoring the appointment of the Company's service
providers and those of its subsidiaries;
o reviewing remuneration and compensation levels and structure, and other
benefits and entitlements of our Management Board officers and all BBGI
employees;
o considering prospective issues, purchases, or redemptions of shares
proposed by the Management Board;
o reviewing and monitoring compliance with our corporate governance
framework and financial reporting procedures;
o reviewing and (if thought fit) approving interim and annual financial
statements; and
o providing general supervisory oversight to the Management Board and Group
operations.
The Supervisory Board consists solely of independent Non-Executive Directors
and the Chair, who was considered independent at the time of her appointment.
Directors on both the Management and Supervisory Boards are accountable under
the Listing Rules, as the Listing Rules do not distinguish between different
types of directors.
While BBGI'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 a publicly-listed company (or where
recommendation is customarily given). Any responsibility applied to directors
under the Listing Rules applies to all of our directors.
Stakeholder engagement
Effective engagement with our stakeholders is integral to realising our vision
and purpose. As a non-domiciled, publicly-listed entity on the UK London Stock
Exchange, the UK Companies Act 2006 (the 'CA2006') has limited application.
Nonetheless, we acknowledge the significance of stakeholder interests, and the
continuing requirements under Section 172(1) CA2006 for boards of UK large or
publicly-listed companies to take stakeholder interests into account and
report on how they have done so when performing their duties. As a member of
the AIC, we align with the AIC Code requirement for the matters set out in
Section 172 to be reported on by all companies, irrespective of domicile and
provided there is no conflict with local company law.
Detailed insights into how we embody the spirit of those Section 172
provisions, fully consider our stakeholders, and uphold our commitment to
generating positive and sustainable outcomes for all stakeholders are outlined
in the ESG section.
Under AIC Code Provision 3, members of our Management Board regularly engage
with our major shareholders to understand their views on significant matters.
Going forward, this engagement will be led by the CEO and CFOO. The Chairs of
the Supervisory Board and its delegated Committees are always available to
engage at our shareholders' request.
General Meetings
2023
Our AGM was held on 28 April 2023. There were no other shareholder meetings
held during the year.
2024
Our next AGM will be held on Tuesday 30 April 2024. The Notice of Meeting,
proposed Resolutions and Explanatory Notes, and the associated Proxy Form,
will be circulated to shareholders in accordance with the regulatory
deadlines, and will be available on our website.
Substantial shareholdings
As at 31 December 2023, BBGI had 714,876,637 shares in issue. Pursuant to DTR
5 of the FCA's Disclosure Guidance and Transparency Rules, we had received
notice of substantial interests (five per cent or more) in the total voting
rights of BBGI as follows, in compliance with DTR 7.2.6R:
Name Held % of total share capital(1)
M&G plc 59,502,903 9.42%
Schroders plc 56,304,964 8.48%
Newton Investment Management Limited 39,947,825 8.46%
Rathbones Group plc 31,569,569 5.01%
Evelyn Partners 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 BBGI may have changed since that date.
Board members and other interests
The members of the Management Board also serve as managers of BBGI Management
HoldCo S.à r.l. On 31 January 2024, Mr Parzych was appointed to the Board of
BBGI Management HoldCo S.à r.l., coinciding with Mr Schramm's retirement from
his Board position. Mr Ball, Mr Denny, and Mr Parzych hold service contracts
with BBGI Management HoldCo S.à r.l. Mr Schramm also holds a service contract
with BBGI Management HoldCo S.à r.l. and, following his retirement from the
Management Board on 31 January 2024, will continue to be available as an
adviser until 31 December 2024. No other Board member held service or
management contracts during 2023.
Notice periods of 12 months apply to and from the Company for the CEO, the
CFOO and Mr Schramm. Notice periods of 6 months apply to and from the Company
for Mr Parzych, following his appointment to the Management Board. The Company
has not granted any loans to, nor provided any guarantees for the benefit of,
any Director.
All members of the Supervisory Board (Ms Whitney, Mr Sykes, Ms af Rosenborg,
Mr Waples and Ms Aitken) are considered independent Board members, as they:
· have not been employees of BBGI;
· have not had material business relationships with BBGI;
· have not received performance-based remuneration from BBGI;
· do not have family ties with any of BBGIs advisers, directors, or
senior employees;
· do not hold cross-directorships or have links with other
directors through involvement on other companies;
· do not represent a significant shareholder; and
· have not served on the Board for more than nine years.
Details of Directors' holdings in BBGI's shares are disclosed in our
Remuneration Report.
Internal controls
The Management Board has robust processes and internal controls to help BBGI
manage risk. It oversees the internal control framework and determines the
nature and extent of principal risks we are willing to take to achieve our
long-term strategic objectives. As well as ongoing monitoring, we review these
policies and procedures at least annually.
We recognise that through effective control systems we can manage and mitigate
the risks of failure to achieve business objectives, but we cannot eliminate
them. By their very nature, these procedures are unable to provide absolute
assurance against material misstatement or loss.
During 2023, our Compliance and Risk functions reviewed, assessed and
reinforced our robust governance and risk controls frameworks, including
delegate and due diligence process monitoring, through in-person meetings and
on-site attendance at delegate offices.
· The Supervisory Board monitors our investment performance against
our stated objectives and reviews our activities on a quarterly basis to
ensure that our Management Board is adhering to our investment policy and
guidelines, including: clearly defined investment criteria; return targets;
our risk profile; and compliance framework. During these meetings, the
Management Board reports KPIs on operating performance, cash projections,
investment valuations and corporate governance matters.
· The Head of Compliance and Risk presents our Interim and Annual
Risk Report and quarterly Compliance updates to the Management Board and the
Supervisory Board, and to the Audit Committee, with Board Directors present.
· The ESG Committee oversees the management of material ESG
activities and reports to the Management Board on any recommendations and
proposed actions following each Committee meeting. The ESG Committee meets at
least quarterly. Its membership for 2023 comprised the Co-CEOs, the CFO, the
Director ESG/Sustainability and the Company Secretary. Through the ESG
Committee, the Management Board remains informed about the dual aspect of
sustainability risks: the risk of financial, operational, and direct physical
impacts from sustainability factors on our portfolio (with associated
increased regulation), as well as the effects caused by our investments to
sustainability aspects.
The Internal Auditor carries out its review as part of our triennial audit
plan, as agreed by the Management Board and Audit Committee and communicated
to the CSSF. The nature, timing, and extent of our internal audit procedures
are determined by assessing risk related to specific activities, and the
complexity and sophistication of our operations and systems, including how we
control information processing. The Internal Audit Summary Report is presented
to the Audit Committee in March each year and then submitted to the CSSF.
Division of Responsibilities
Management Board
General
The Management Board comprises three members, each contractually engaged by
BBGI Management HoldCo S.à r.l., a direct consolidated 100 per cent-held BBGI
subsidiary. 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 meets the independence criteria set out in Provision
10.
While our two-tier structure is not explicitly covered by the AIC Code, our
independent Supervisory Board ensures we are compliant with AIC Code Provision
10.
The Company's Articles require the re-election of the Management Board's
members annually by the Supervisory Board, and not by shareholders. This does
not meet the requirements of AIC Code Provision 23, which requires that
directors 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 are subject to
annual re-election by shareholders, who may also dismiss any member. We
consider this procedure satisfies the requirements of AIC Code Provision 23.
Performance evaluation and reappointment
As stated above, the Management Board carries out the functions of BBGI's
investment manager. Management Board Directors are appointed by the
Supervisory Board for a year, and these appointments are then renewed. Mr Ball
was originally appointed in October 2011 for BBGI's IPO. Mr Denny was
originally appointed to the Management Board in April 2013, and Mr Parzych was
appointed in January 2024, following the concurrent retirement of Mr Schramm
from the Management Board.
Delegated functions
We are required to have dedicated Risk Management, Compliance and Internal
Audit functions under AIFM Law; and each function must be functionally and
hierarchically separate from all other operating unit functions. Grant
Thornton Vectis remained as our Internal Auditor for the year ended 31
December 2023.
Our Head of Risk and Compliance is authorised by the CSSF to perform the Risk
Management and Compliance functions, and reports to our Management Board and
Supervisory Board, or one of its formally constituted Committees, as well as
reporting to respective Designated Board Members, who retain responsibility
for overseeing the performance of the respective functions.
Our Management Board is responsible for the correct and effective operation of
the following delegated functions.
Other key delegates and providers:
Central Administrative Agent, Depositary, Paying Agent and Transfer Agent: CACEIS Investor Services Bank S.A. (CACEIS)
Depository (UK): Link Market Services Trustees Limited ('Link')
Central Securities Depository (CSD): LuxCSD S.A. ('Lux CSD')
Principal Agent: Banque Internationale à Luxembourg S.A. ('BIL')
Information Technology: G.I.T.S. PSF
Our shares trade on the main market of the London Stock Exchange. In this
context, Link is our depository, receiving agent and UK transfer agent. All
shares are held in dematerialised form, in accordance with the Luxembourg
Dematerialisation Law.
LuxCSD acts as the Company's EEA-based CSD. BIL acts as the required
intermediary between the Company and LuxCSD. Both LuxCSD and BIL are
classified as delegates and are subject to the appropriate level of delegate
oversight in accordance with our delegate oversight framework.
G.I.T.S. PSF provide a fully outsourced IT solution to BBGI, covering many
areas, including but not limited to private managed hosting, backup services,
and IT security services.
BBGI is registered under the UK's National Private Placement Regime ('NPPR'),
allowing us to continue to market our shares in the UK.
Supervisory Board
General
The Supervisory Board consists of five Non-Executive Directors, all of whom
are independent. All Supervisory Board members are elected for a 12-month
period ending at our AGM each year, when they are required to retire, in
accordance with the Articles. The members can offer themselves for re-election
by shareholders however, reappointment is not automatic.
The Supervisory Board meets at least four times a year and between these
formal meetings, the Management Board and the Company's corporate brokers have
regular contact. Where necessary, both Supervisory and Management Board
members have access to independent professional advice at BBGI's expense. The
Supervisory Board considers items in the Notices and Agendas of meetings,
which are formally circulated to its members before each meeting as part of
the Board papers. It reviews investment performance and associated matters,
compliance and risk profile, the performance of key service providers,
investment and financial controls, marketing and investor relations, peer
group information, industry issues, general administration and other matters
relevant to fulfil its oversight remit. At each meeting, members must advise
of any potential or actual conflicts of interest before discussion.
The Supervisory Board has formally established Audit, Remuneration and
Nomination Committees. Further details are below and in each Committee Report.
Copies of the Terms of Reference for each of our Committees are available on
our website at www.bb-gi.com (http://www.bb-gi.com) .
Audit Committee
In accordance with Provision 29 of the AIC Code and the Disclosure Guidance
and Transparency Rules ('DTR') rule 7.1, the Company has a formally
constituted Audit Committee, to which the Supervisory Board has delegated
responsibility for the general oversight and monitoring of the Company's
compliance with financial and regulatory controls in accordance with AIC Code
and Disclosure, Guidance and Transparency Rules requirements.
The Audit Committee operated throughout 2023 in accordance with the AIC Code
and within clearly defined terms of reference, which are regularly reviewed,
including all matters indicated by DTR 7.1 and the AIC Code.
The Audit Committee reports its findings to the Supervisory Board, identifying
matters where it recommends action or improvement. If there is a conflict
between the provisions of the AIC Code and the provisions of the law on the
Audit Profession, we comply with the provisions of the law on the Audit
Profession and disclose any conflict.
As External Auditor, PwC attends specific Audit Committee meetings to consider
BBGI's Annual and Interim Financial Statements, where PwC presents the
conclusions of its work, and whenever the Audit Committee considers necessary.
The Audit Committee meets at least three times per year, and whenever the
Audit Committee Chair may require. Any member of the Audit Committee, or the
External Auditor, may request additional meetings. Other Directors, employees
and third parties may be invited by the Audit Committee to attend meetings
when appropriate. Ms Whitney is not a Committee member, however, as
Supervisory Board Chair, she is invited to attend each of its scheduled
meetings.
Remuneration Committee
In accordance with AIC Code Provision 37, the Company has a formally
constituted Remuneration Committee, to which the Supervisory Board has
delegated its responsibilities for: establishing the general principles of the
policy for Directors' remuneration; setting remuneration for the Management
Board; and supervising remuneration structure and levels for other employees'
compensation and other benefits and entitlements. The Remuneration Committee
reports its findings and any recommendations to the Supervisory Board.
The Remuneration Committee meets at least twice a year, and whenever the
Remuneration Committee Chair may require. Additional meetings may be requested
by any member of the Remuneration Committee, if necessary. Other Directors,
employees and third parties may be invited by the Remuneration Committee to
attend meetings as and when appropriate.
Nomination Committee
In accordance with AIC Code Provision 22, the Company has a formally
constituted Nomination Committee, to which the Supervisory Board has delegated
its responsibilities for appointing the members of the Management Board and
the appointment of any further Supervisory Board members.
The Nomination Committee meets to consider the renewal of the appointments of
Management Board members (renewable annually for one year), the appointment of
new Supervisory Board members, to review the succession plans for both the
Management and Supervisory Boards and oversees the annual performance
evaluation of the Supervisory Board and its formally constituted Committees.
In recruiting new directors, the Nominations Committee actively seeks greater
diversity by gender, ethnicity, nationality, and other criteria, and is
committed to selecting members based on merit and with the relevant and
complementary skills for BBGI to maximise stakeholder value.
The Nomination Committee meets at least twice a year, and at other times as
the Nomination Committee Chair requires, in accordance with its Terms of
Reference. If necessary, Nomination Committee members can request additional
meetings. Other Directors, employees and third parties may be invited by the
Nomination Committee to attend meetings when appropriate.
In accordance with AIC Code Provision 22, the Chair does not chair any
Committee meeting where her succession is discussed.
Further details on the roles of each Committee and their activities during
2023 are in the individual Committee reports in this Annual Report. Committee
Chairs attend our AGM, where they can respond to any shareholder queries on
their Committee's activities.
Management Engagement Committee
Oversight of delegates and key service providers is highly regulated by the
Luxembourg CSSF, including formal reporting structures, regular oversight
visits and compliance monitoring plans, in accordance with the Company's
Oversight of Delegated Activities framework. Given the Company's internally
managed structure and the Management Board's primary role in overseeing the
delegate process, along with the size of the Supervisory Board, the
Supervisory Board performs the functions of a Management Engagement Committee.
Ms. Whitney serves as the Chair. As a result, we consider it unnecessary to
have a separately constituted management engagement committee, as prescribed
under AIC Code Provision 17, as there would be no material benefit to BBGI and
our shareholders.
In its role as Management Engagement Committee, the Supervisory Board met four
times in 2023 to consider, together with the Management Board, the
performance, effectiveness and appropriateness of the ongoing appointments of
our third-party service providers under Principle H of the AIC Code. During
these meetings, the Management Board provided feedback and key findings from
any meetings with third-party service providers.
Composition, succession and evaluation
We believe the Supervisory Board members have an appropriate combination of
skills, experience and knowledge to fulfil their obligations. They also have a
breadth and diversity of experience relevant to BBGI, and we believe any
future changes to the composition of the Supervisory Board can be managed
without undue disruption. We are unaware of any circumstances that are likely
to impair, or could appear to impair, the independence of any of the
Supervisory Board members.
Board composition, tenure and diversity
The Nomination Committee and the Management Board regularly review BBGI's
succession plans, but ultimate decision-making rests with the Supervisory
Board. To ensure continuity and stability, and to maximise retained knowledge
transfer, our Non-Executive Directors are expected to retire on a staggered
basis, as part of our structured succession plan.
Our Management and Supervisory Boards take the gender and ethnic diversity of
their composition into full consideration. We are supporters of the goals of
FTSE Women Leaders and the Parker Review on Ethnic Diversity on Boards and
integral to this, the Nomination Committee regularly reviews our policies on
diversity, equity and inclusion. We remain one of the few FTSE 350 companies
with both a female Chair and Audit Committee Chair and female representation
on our Supervisory Board at the reporting date remains unchanged at 60 per
cent. Several of our staff at the level reporting directly to the Management
Board are women, with 39 per cent female representation. 20 per cent of the
Supervisory Board and 8 per cent of those employees who report directly to the
Management Board are considered to be from an ethnic minority background as
categorised by the Parker Review. We intend to comply with the Parker Review's
recommendation from next year for disclosure of a target for ethnic minority
representation below the Board level by 2027.
We are proud of having a low employee turnover rate, with no change in the
year across the consolidated Group. Combined with the small number of people
employed, this inevitably presents us with limited opportunities to promote
greater diversity of gender and ethnicity to senior roles. Wherever possible,
the Management and Supervisory Boards understand our need to take all
reasonable and practical steps to evolve diversity throughout the Group,
without compromising on the quality and skills of our team.
Further details on Board composition, tenure, and diversity are in the
Nomination Committee Report.
Re-election of Supervisory Board members
In accordance with the Articles, all members of the Supervisory Board will
offer themselves for re-election at our forthcoming AGM in 2024 and, as a
result of the successful performance evaluation, the Supervisory Board
recommends the re-election of each of its members.
Re-election of Management Board members
The Supervisory Board evaluates the performance of the Management Board and
its Directors annually to ensure they operate effectively and efficiently, and
that the appointment of the individual Directors is in the best interests of
BBGI and its shareholders. Following satisfactory evaluations carried out in
2023, the Supervisory Board resolved to renew Mr Denny's appointment for a
year with effect from 30 April 2023, and Mr Ball for a year with effect from 5
October 2023. While Mr Schramm's appointment was also renewed on 5 October
2023, he informed the Board in November 2023 of his intention to retire, after
12 years, as Co-CEO and member of our Management Board. Mr Schramm remained in
his position until 31 January 2024 and will be an adviser to the business
until December 2024. Mr Parzych was appointed a member of the Management Board
on 31 January 2024 for a year. His mandate will also be considered for renewal
on an annual basis.
Nomination Committee Report
Annual statement from Nomination Committee Chair
I am pleased to present the Nomination Committee (the 'Committee') Report for
the financial year ended 31 December 2023 on behalf of the Supervisory Board.
Terms of Reference
The Committee functioned throughout 2023 according to its defined Terms of
Reference, which are prepared in accordance with the AIC Code. They are
regularly reviewed throughout the year by the Committee and are available to
view on the Company's website. Any proposed amendments to the Terms of
Reference are referred to the Supervisory Board for approval. The roles and
responsibilities of the Committee, as set out in its Terms of Reference, are
reviewed at least annually, and consider relevant regulatory changes and
recommended best practice. There were no material amendments to the Terms of
Reference during 2023.
Responsibilities
The Committee and its Chair are appointed by the Supervisory Board. Membership
is solely confined to Independent Non-Executive Directors. Each of the five
Independent Non-Executive Directors is a Committee Member. The Nomination
Committee's responsibilities include:
· reviewing the renewal of the appointments of the Management Board
members (appointments are renewable annually for one year only);
· considering the composition of the Supervisory Board and the
appointment of new Supervisory Board members (subject to annual shareholder
approval);
· succession planning for the Management and Supervisory Boards;
and
· the annual performance evaluation of the Supervisory Board and
its formally constituted Committees.
Key activities during the year
During the year, the Committee met three times, with all members present.
Supervisory Board composition, tenure, and diversity
As part of its annual oversight and assessment of the composition of the
Supervisory Board, the Committee considered the relationship between the
Supervisory and Management Boards, as well as the balance of skills and
backgrounds of the Non-Executive Directors. Their collective experience
ensures that the relationship with the Management Board is robust, fostering a
culture of healthy discourse and diligent inquiry, leading to thorough
scrutiny and comprehensive oversight.
As such, it is the Committee's view that the size, structure, and composition
of the Supervisory Board and its Committees adequately meet the Company's
needs and effectively fulfil their respective duties.
We appreciate the sustained support from shareholders in affirming the
reappointment of all the Directors at the April 2023 AGM, providing confidence
that we are serving our shareholders' best interests effectively in our
oversight of the Company and Management Board.
We wholeheartedly support the initiatives and regulatory efforts aimed at
advancing gender and ethnic diversity within publicly-listed companies. This
includes initiatives such as the FTSE Women Leaders and the Parker Review.
While after the period to which this Report relates, in light of the FTSE
Women Leaders' Report published in February 2024 identifying BBGI as
maintaining an all-male Executive Committee, we wish to clarify an important
aspect of our corporate structure that has a significant impact on the
interpretation of these findings.
BBGI operates under a two-tier board system, which the Report does not fully
take into account. This structure distinctively separates the roles and
responsibilities of our Supervisory Board from those typically associated with
an Executive Committee. It is crucial to note that our Supervisory Board
boasts a 60 per cent female representation, with both a female Chair of the
Supervisory Board and a female Audit Committee Chair, showcasing our firm
commitment to diversity and inclusion at the highest levels of governance.
This level of female representation is among the highest within the FTSE 350
companies and significantly contributes to the effectiveness and diversity of
thought within our leadership.
Furthermore, the characterisation of our Management Board as an equivalent to
an Executive Committee does not accurately reflect our operational structure.
In reality, a broader Executive Committee within our organisation would
encompass a wider range of senior roles, including direct reports that
significantly bolster female representation beyond the three Executive
Directors. Female representation at the level reporting directly to the
Management Board is at 39 per cent.
We strive to meet gender and ethnic compositional goals at all levels,
including our Management Board and their direct reports. As at 31 December
2023, our team of 26 colleagues comprised 14 different nationalities. 20 per
cent of the Supervisory Board and eight per cent of direct reports to the
Management Board are considered to be from an ethnic minority background as
categorised by the Parker Review.
While we have made significant progress in the area of diversity and
inclusion, we remain committed to enhancing the representation and diversity
of skills and expertise not just among the members of our Supervisory Board
and Committees but throughout the business. This commitment not only aligns
with our corporate values but also ensures we continue to meet the evolving
needs and expectations of our stakeholders.
It is important to note that one of the key positive attributes of our
business has been stability at the Management Board level. Since IPO, the same
team has been serving our shareholders investing for the long term, and below
them sits a team of people who too have seen an enviably low turnover rate,
with no changes in the year across the consolidated Group. Whilst this
stability has clearly played an important part in delivering to our investors
over the long term, this inevitably presents limited opportunities to promote
greater diversity of gender and ethnicity to senior roles within BBGI. Despite
these challenges, we are dedicated to taking all reasonable and practical
steps to evolve diversity throughout the Group.
Succession planning
Following last year's review of our policy on the Appointment and Tenure of
the Supervisory Board Directors, we re-assessed the revised policy, with no
material amendments deemed necessary, and only minor changes were
incorporated. As stated in last year's Annual Report, the Committee recognises
that the AIC does not explicitly preclude a Director from serving more than
nine years, but stating that doing so is one of several factors that could
lead to a Director losing independent thinking. In recognition of the market
sentiment towards excessive periods of tenure beyond nine years, we have
retained those same limits in respect of our Supervisory Board members,
allowing only for an extension of the Chair in exceptional circumstances, such
as to facilitate an effective succession plan and in furthering the
development of a diverse Board.
During the year, the Committee reviewed the composition and membership of the
Management Board, the Supervisory Board, and their formally constituted
Committees. It was determined that no further appointments to the Supervisory
Board were necessary.
Following Frank Schramm's retirement on 31 January 2024, we extend a warm
welcome to Andreas Parzych upon his appointment to the Management Board. We
look forward to the valuable contributions he will make to the Company,
leveraging his unique combination of skills and extensive experience with a
strong focus on business development.
The appointment of Andreas underscores the depth of senior talent within the
Company.
For further information regarding Andreas' background and qualifications,
please refer to the Biographies section of this Annual Report.
The Committee will continue its work in assessing capacity within the
organisation, key person risks and continuous development of appropriate
succession plans for the Supervisory and Management Boards and their direct
reports. We remain committed to complying with AIC Code Provision 26, and plan
to engage an independent third party to facilitate an external performance
evaluation process in 2024.
Succession planning was considered, at both the Supervisory and Management
Board level and also for direct reports to the Management Board. As part of
those reviews and planning, we consider the existing skills and experience
within the business, any potential future departures and key person risks. We
also consider the adequacy of plans to develop talent within the Company.
Where necessary, the Committee will appoint external consultants to assist
with the identification and recruitment of suitable candidates. However, the
Management Board remains responsible for recruitment of all senior positions
below Board-level, and it regularly keeps the Committee and Supervisory Board
appraised of existing and potential future human resourcing requirements.
The process of appointing any new Directors is led by the Nomination
Committee. Our approach is to make appointments across all levels based on
merit, and the strengths, skills and experience that individual candidates
bring to the composition and balance of the Management and Supervisory Boards,
or Company.
Annual Committee planning and member development
During the year, the Committee reviewed its formalised annual work plan. The
plan ensures individual Committee members regularly consider all material
matters, and that sufficient time is allocated for discussion.
We also reviewed the induction process for, and information pack available to,
new Non-Executive Directors. These have been used to support Andreas Parzych's
integration on to the Management Board.
We maintain an internal register of training undertaken by all staff and
Directors. Members of the Supervisory Board are required to provide evidence
of relevant training undertaken in the year. During the year, they were
invited to take part in staff-wide training on Anti-Money Laundering ('AML')
and Counter-Terrorism Financing ('CTF'), Market Abuse Regulations ('MAR'),
cyber-security and ESG related topics.
The Committee also reviews training undertaken to determine the ongoing
commitment and suitability of each Supervisory Board member as an independent
Non-Executive Director of the Company. I am pleased to once again be able to
say that each Supervisory Board member has undertaken relevant training,
ensuring continuing familiarity with the latest regulatory and operational
developments relevant to BBGI's business.
Annual performance review
In response to the 2022 performance review of the Supervisory Board's
effectiveness, we made some minor changes to the management of the Board's
business to improve the effective working of the Board. The 2022 review also
recognised the importance of keeping the Company's strategy and risk
management processes under review given the challenging macroeconomic
environment. The Supervisory Board has allocated a considerable proportion of
its time to these activities, and expects to continue doing so in 2024 and
beyond.
The Committee decided to postpone its earlier resolution to undertake an
externally-facilitated performance review in 2023. This delay is intended to
allow for a smooth integration of a new Management Board member and to enhance
the effectiveness of the subsequent evaluation process in 2024.
Accordingly, the 2023 performance review was conducted by way of individual
one-to-one interviews between myself and each of the Supervisory Board
members. The interviews considered the performance of the Supervisory Board,
its three Committees and their respective Chairs. I also received feedback
from the Management Board. The Committee subsequently met to consider formally
the conclusions from these discussions.
The feedback from those interviews and the Management Board concluded that the
Supervisory Board and its Committees were effective and collaborative, with
all members actively contributing.
The adjustments made in response to last year's performance review, including
holding separate discussions on key matters, were recognised for having
enhanced the value and effectiveness of our regularly scheduled Board and
Committee meetings.
Key priorities for the Supervisory Board for the year will be for enhancing
our involvement in oversight of asset management and leadership development. A
proposal to increase engagement with our assets through site visits and
presentations from key personnel below the Management Board has been set in
motion, with potential for an annual site visit to assets. The Management
Board has our full confidence, and we will support them in maintaining their
continued disciplined approach to asset acquisition and management. The
Committee will also review plans for Supervisory Board succession to ensure it
remains appropriate, sufficiently forward-looking and well-balanced when
accounting for the experience, skills and diversity of our current members.
The 2023 review concluded that the Supervisory Board and its Committees
comprise an appropriate balance of experience, skills, and knowledge to enable
them to discharge their responsibilities properly. Furthermore, the 2023
evaluation concluded that the Board and its Committees operated effectively
throughout the year.
As the Senior Independent Director, Mr Sykes evaluated my performance as Chair
of the Supervisory Board, in accordance with Provision 14 of the AIC Code, and
he concluded that I continue to perform my role effectively.
I have also evaluated the performance of each Supervisory Board member, and
concluded that each member performed their duties effectively throughout the
reporting period, and has sufficient capacity to carry out their duties
properly, with no single member over-boarded by other directorships.
Renewal of Executive Director mandates
The Supervisory Board reviewed the performance of each Management Board
member. Each member is considered to have performed their duties effectively
and was reappointed for another year.
The Committee reviewed the plans for all senior positions for succession
planning. These plans are regularly updated by the Management Board and
reviewed by the Nomination Committee at least annually.
The year ahead
With Frank's retirement, 2024 will bring changes to the composition of the
Management Board. We have strong confidence in the leadership of Duncan and
Michael, both with extensive tenures on the Management Board, serving for 12
and 11 years respectively. Alongside Andreas, who has been a valuable member
of the BBGI team since 2016 and has played a significant role in implementing
the Company's growth strategy, this team is well-prepared to guide BBGI to
success in 2024 and beyond.
As a Committee, we are committed to regular meetings to ensure that the
Supervisory Board continues to provide the essential support required by the
Management Board. This responsibility remains our top priority and holds the
highest position on our agenda for the year. We will also maintain vigilant
oversight of the dynamic macroeconomic landscape and its effects on the
Company's strategy and risk management procedures.
Approval
This Report was approved by the Board on 27 March 2024 and signed on its
behalf by:
Sarah Whitney
Nomination Committee Chair
Audit Committee Report
Annual statement from Audit Committee Chair
I am pleased to present the Audit Committee (the 'Committee') Report for the
financial year ended 31 December 2023 on behalf of the Supervisory Board.
Terms of Reference
The Committee functioned throughout 2023 according to its defined Terms of
Reference, which are prepared in accordance with the Disclosure and
Transparency Rule 7.1, the AIC Code and applicable Luxembourg regulations.
They are regularly reviewed throughout the year by the Committee and are
available to view on the Company's website. Any proposed amendments to the
Terms of Reference are referred to the Supervisory Board for approval. The
roles and responsibilities of the Committee, as set out in its Terms of
Reference, are reviewed at least annually, and consider relevant regulatory
changes and recommended best practice. There were no material amendments to
the Terms of Reference during 2023.
Committee membership
The Committee and its Chair are appointed by the Supervisory Board. The
Committee currently consists of four Independent Non-Executive Directors, all
of whom sit on the Supervisory Board, and membership is at all times confined
to Independent Non-Executive Directors. Ms Whitney, as Chair of the
Supervisory Board, is invited to attend each Committee meeting as an observer,
but is not a member. The biographies of each Committee member are 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.
Responsibilities
The key responsibilities of the Committee include the following:
· Advising 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 Group's position and performance, business model
and strategy.
· Monitoring the integrity of the consolidated and standalone
financial statements of the Company and any formal announcements relating to
the Group's financial performance, satisfying themselves that the financial
statements are compliant with relevant accounting standards and that any
significant financial reporting issues and judgements raised by the External
Auditors are appropriately considered.
· Reviewing the semi-annual valuations of BBGI's investment
portfolio.
· Reviewing the effectiveness of the Group's internal financial
controls and risk monitoring including consistency of accounting policies and
practices on a year-to-year basis, the Group's internal control and risk
management systems, including reviewing the Internal Auditors' Annual
Regulatory Report.
· Reviewing and monitoring the effectiveness of the Group's
Internal Audit function, including the appointment and removal of the
third-party service provider of Internal Audit and reviewing and approving the
tri-annual internal audit plan.
· Formally reporting and making recommendations to the Supervisory
Board for resolutions to be put to shareholders at the AGM, to approve the
appointment, re-appointment, and removal of the External Auditor, and keeping
their associated remuneration and terms of engagement under review.
· Reviewing and monitoring the External Auditor's independence and
objectivity and the effectiveness of the audit process, taking into
consideration relevant Luxembourg and UK professional and regulatory
requirements.
· Ensuring implementation of a policy on non-audit services,
considering relevant guidance and legislation regarding the provision of
non-audit services by the External Auditor and the Company's Non-Audit
Services Policy.
· Reviewing the adequacy and security of the Group's arrangements
for its employees and stakeholders to raise concerns in confidence via BBGI's
whistleblower hotline, about possible wrongdoing in financial reporting,
fraud, bribery, discrimination or any other matters.
These responsibilities form the basis of the Committee's annual work plan. The
Committee is authorised to seek any information it requires from the
Management Board and external parties, and to investigate issues or concerns
as it deems appropriate. The Committee may also obtain independent
professional advice at the Company's expense, to perform its duties.
The External Auditor is routinely invited to attend Committee meetings,
particularly when the Annual and Interim Reports are under review.
Additionally, there are occasions throughout the year when the External
Auditor engages directly with Committee members, independent of the presence
of the Management Board. The Committee maintains direct lines of communication
with both the External Auditor and the Management Board, ensuring
comprehensive oversight. All findings and recommendations are consistently
reported to the Supervisory Board for further action and consideration.
Key activities during the year
At the Audit Committee meetings, the Committee considered, inter alia:
· the Committee's Terms of Reference and annual work plan;
· semi-Annual Valuation Reports for our investment portfolio,
focusing on the assumptions used, sensitivity scenarios, and observations from
the External Auditor and third-party independent valuation specialists;
· management's proposals for interim dividends, including
benchmarking against market peers;
· our 2022 Annual Report, the 2023 Interim Report, and the
appropriateness and consistency of our accounting policies;
· the impact of changes to IFRS reporting standards;
· the re-appointment of PricewaterhouseCoopers as our External
Auditor, overseeing their independence, and the provision of any non-audit
services, where applicable;
· the effectiveness of the audit process and recommending the
External Auditor's plan for the financial year to the Supervisory Board,
including key business risks relevant to the audit;
· reports from the External Auditor to the Committee;
· an in-depth review with management on BBGI's tax strategy;
· the introduction and enhancement of comprehensive climate-related
disclosures;
· an analysis of our overall Risk Profile, Key Risk Indicators,
related tools, and the effectiveness of our risk monitoring;
· an annual review of the Charters and Policies relevant to the
Committee;
· the effectiveness of our Internal Auditor, including the review
of the Internal Auditor's Annual Regulatory Report for 2022 and the scope of
the 2020-2022 triennial internal audit plan, as well as the upcoming 2023-2025
triennial plan;
· the potential ongoing impact of geo-political conflicts on our
portfolio and broader macroeconomic consequences;
· a thorough review of internal controls and policies;
· the results of an externally conducted cyber-security risk
assessment for BBGI, including a review of existing controls and recent
adaptations to mitigate this risk;
· ongoing consultations on, and updates to, the UK BEIS Audit and
corporate governance reforms;
· quarterly presentations from the Head of Compliance and Risk to
the Committee, with all Supervisory Board members present, on the activities
and achievements of the Compliance function, including;
o periodic updates on the oversight of delegated activities and risk-based
monitoring of service providers, including new and forthcoming legislation
concerning IT outsourcing risks;
o the increasing reporting requirements being imposed by the Luxembourg
regulator (CSSF) and across the EU, including self-assessment questionnaires,
financial crime surveys, sustainability disclosures, targeted financial
sanctions screening, etc;
o training in regulatory and corporate governance matters made available by
the Company to staff and board members; and
o periodic updates on the internal control framework including anti-fraud
safeguards such as the whistleblowing hotline, policy updates and data
protection monitoring of group entities and service providers.
· the Director ESG/Sustainability, who chairs BBGI's ESG Committee,
presented to the members of the Committee and Supervisory Board the status of
the Company's various ESG workstreams and related topics, including;
o alignment with the UN Sustainable Development Goals and setting of net
zero targets;
o stakeholder engagement;
o collection of portfolio GHG inventories; and
o ongoing compliance and disclosures in accordance with regulatory and
voluntary reporting frameworks, including SFDR and TCFD.
Valuation of investments
As in previous years, the Committee engaged in discussions with the Management
Board, the External Auditor, and the Internal Auditor, covering a broad range
of topics. We continue to regard the fair valuation of the Company's
underlying investments as the most significant risk of material misstatement
in our financial statements. To address this, we have comprehensive
pre-publication discussions of the Company's annual and interim financial
statements. Sufficient time is allocated for in-depth conversations with the
Management Board, whose twice-yearly valuation of underlying investments,
including NAV sensitivity analyses, are independently reviewed by a
third-party valuation expert.
The Committee was able to request detailed explanations from the Management
Board, scrutinising the rationale behind investment valuations, and examining
the applied assumptions, judgements, and methodologies.
The External Auditor participates in Committee meetings at least twice per
year to present and discuss their audit or review findings. Their audit
process includes a valuation specialist who reviews and reports on the
adequacy of the underlying investment valuations. Special attention is paid to
key assumptions for fair valuation, applied discount rates, and the
macroeconomic context.
The Committee also received briefings from the External Auditor on the
outcomes of their controls testing and audit procedures, with a particular
focus on the risk of material misstatement during the audit/review of the
Annual and Interim Financial Statements.
Following this process and reviews, the Committee concluded that the valuation
methodology applied to the Group's investments in 2023 was appropriate, and
the resulting investment values were reasonable.
External Auditor independence and effectiveness
In assessing the ongoing independence of the External Auditor, the Committee:
· reviewed the External Auditor's report outlining the extent of
non-audit services provided by them and related parties to the Company and its
subsidiaries;
· received confirmation from the External Auditor as to its
compliance with ethical requirements regarding independence and the
application of appropriate safeguards, along with the arrangements in place to
identify, manage and disclose conflicts of interest and that it has remained
independent of the Group in accordance with Regulation (EU) No 537/2014 and
the AIC Code; and
· considered existing engagements with the External Auditor having
been entered into prior to their appointment as External Auditor, along with
associated changes in personnel to maintain independence.
In assessing the ongoing effectiveness of the External Auditor's work, the
Committee considered;
· the External Auditor's fulfilment of the agreed audit plan and
variations;
· feedback from the Management Board evaluating the performance of
the audit team; and
· the Financial Reporting Councils ('FRC's) Annual Report on audit
quality inspections.
With regards to the Audit Plan, I also spoke directly with the External Audit
Partner to ensure that the Committee's specific expectations were met with
regard to any topics of relevance to the Company.
In reviewing the performance of the External Auditors, the Committee noted
with approval the high level of professional scepticism exhibited during the
fiscal year. This was evident from the thorough and probing nature of the
questions posed by the External Auditor, particularly regarding the valuation
process. The Committee was further reassured by the quality and depth of
Management's responses, especially concerning the applied discount rates and
macroeconomic assumptions. These interactions underscored a robust and
effective audit process.
The Committee has reviewed the audit process and confirms its satisfaction
with the adherence to the established terms of engagement. We have observed
that the audit carried out by the External Auditor upholds the principles of
independence and objectivity, thus ensuring its effectiveness. This conclusion
is based on an evaluation of the External Auditor's methodologies and the
transparency of their audit procedures.
Non-audit services
The Committee considered the level of non-audit services provided by the
External Auditor. To the extent that non-audit services are not prohibited,
the Committee will continue to review and, where appropriate, approve
non-audit service engagements performed by the External Auditor on controlled
subsidiaries, in accordance with the Non-Audit Services Policy.
As a general principle, the Committee will not approve the use of the External
Auditor for non-audit services, unless there is a valid and specific
justification.
For the financial year ended 31 December 2023, the External Auditor did not
provide any non-audit services. There were no other non-audit related fees
paid to the External Auditor during the year ended 31 December 2023.
Internal controls and risk management
The Committee reviews the effectiveness of the Group's internal financial
control systems.
The Company has a well-established framework for assessing the effectiveness
of the internal controls. During the year, I worked with our Head of
Compliance and Risk, CFO and Company Secretary to ensure that this framework
was fully documented and that it remained appropriate to the present risks and
operational strategy.
As a Committee, we believe that this framework remains effective, operating
within the three lines of defence:
- The first line of defence are the business units that take or
acquire risks under predefined policy and limits and carry out controls.
- The second line of defence is monitoring the effectiveness and
implementation of those controls on an ongoing basis by the Compliance and
Risk Management functions.
- The third line of defence is the internal audit function
providing an independent, objective and critical review of the first two lines
of defence, and which itself has been delegated to an external and independent
third party, providing further reassurance.
As further reinforcement of the framework's effectiveness, the Committee
receives regular presentations throughout the year from relevant members of
staff and third parties in respect of the Risk Management, Compliance and
Internal Audit functions;
· Risk Management: The Head of Risk and Compliance, in her role as
Risk Manager, presents the Annual and Semi-Annual Risk Reports in person
directly to the Committee, with all members of the Committee and Supervisory
Board in attendance at those presentations. During these presentations, as
well as outside of them, Committee members had the opportunity to challenge
the Risk Manager and members of the Management Board, enabling an appropriate
level of direct oversight. Additionally, the Committee regularly receives and
reviews BBGI's risk profile and related key risk indicators, including any
changes thereto, prepared by the Risk Manager and overseen by the Designated
Management Board Member for Risk.
· Compliance: The Head of Risk and Compliance also presents on
matters of compliance to the Committee on a quarterly basis. To this end, the
Committee receives quarterly compliance reports, which describe the work
performed by the Compliance function, and cover all key areas of the
compliance monitoring programme, including, but not limited to, AML/CTF,
delegate oversight, conflicts of interest, training, regulatory watch, data
protection, fraud, cyber-security, whistleblowing, implementation and update
of policies, ESG and personal transactions. As with our oversight of Risk, the
Management Board members and other representatives were available and
responded to the Committee members' queries and requests for further
clarification. The Head of Risk and Compliance further presented the Committee
with the Annual Compliance Report for the Financial Year ended 31 December
2022, which was required to be submitted to the Luxembourg Regulator, CSSF,
during the year.
· Internal audit: As described in the responsibilities section
above, the Committee undertook a review of the Internal Auditor's
effectiveness, the 2022 Internal Auditor's Annual Regulatory Report and the
final year of the Internal Auditor's 2020-2022 triennial internal audit plan.
As part of this process, the Committee received a presentation from the
Internal Auditor, which covered their specific approach to engagement, a
detailed outline of their scope of work, the audit objectives and their
conclusions resulting from the 2022 engagement. The Internal Auditor also
presented its next triennial internal audit plan, for fiscal years 2023-2025,
to the Committee.
For all three internal control functions - Risk Management, Compliance and
Internal Audit - the Committee and its members are presented with necessary
information to monitor their respective effectiveness. For 2023, the Committee
concluded that each of the Risk Management, Compliance, and Internal Audit
functions have performed effectively and continue to have suitable processes
and controls in place.
Annual Deep Dive: Tax
In alignment with its Annual Work Plan, the Committee allocates time to
explore specific topics preselected earlier in the year. In 2023, Management
presented an overview of BBGI's tax strategy. The Committee engaged in
discussions about global tax regulations, their impact on the Group, and the
existing policies and measures to address tax-related risks. The Management
Board is responsible for tax management and regularly updates the Committee
and Supervisory Board on taxation matters and their influence on the Group.
The Committee appreciates the presentation and the conservative approach to
tax risk, with no aggressive tax structures employed.
Following the presentation, the Committee acknowledged the Company's
commendable standards in tax management. Looking ahead to 2024, the Company
plans to invite its global tax adviser to a scheduled meeting. This will
provide additional reassurance regarding the Company's stance on taxation and
risk appetite.
Going concern and viability statements
Having regard to our assets and liabilities, the Committee considered the
Viability and Management Board Responsibilities Statements, and the processes
and assumptions underlying the statements, considering:
· BBGI's investment policy and investment pipeline;
· the long-term and contractual nature of BBGI's investments;
· investment reviews;
· BBGI's risk profile and key risk indicators (including principal
risks and uncertainties) and mitigating actions put in place;
· relevant financial and economic information and long-term
assumptions;
· scenario testing;
· annual and semi-annual valuations of the investments; and
· whether the Management Board has diligently carried out its
responsibilities in:
o selecting suitable accounting policies and applying them consistently;
o making judgements and estimates that are reasonable and prudent;
o stating whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
o preparing the financial statements on a going concern basis, unless it
would be inappropriate to presume that the Group will continue in business;
o maintaining proper accounting records that disclose with reasonable
accuracy the Group's financial position and enable it to ensure that the
financial statements comply with all relevant regulations; and
o safeguarding the Group's assets and taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Having considered all of the above, and the discussions held with the
Management Board, the Committee is satisfied the Viability Statement and the
Management Board Responsibilities Statement are prepared on an appropriate and
reasonable basis.
Regulatory environment
The Committee was kept informed of regulatory changes throughout 2023,
including changes in scope or interpretation by the regulator, and potential
future developments. This monitoring and update process is facilitated by our
Regulatory Watch, maintained by our Compliance function and is included in the
regular compliance reporting to Committee members by the Head of Compliance
and Risk and the Designated Management Board Member for Compliance.
Focus for 2024
For 2024, we will continue our oversight of the External Auditor and their
effectiveness. We will continue to monitor the integrity of the Company's
reported financial position and disclosures, the effectiveness of the internal
audit function, and our response to material regulatory changes.
As part of our Annual Work Plan to dedicate sessions to deeper analysis of
specific topics, in 2024 the Committee has invited BBGI's Director,
Sustainability and ESG, who also chairs BBGI's ESG Committee, to present on
the topic of sustainability, including global regulatory developments and
disclosure expectations, which she believes are relevant to BBGI.
More generally, the Committee will also continue its work in monitoring the
effectiveness of our internal controls, financial reporting and disclosures,
as well as the impact of political, tax and regulatory developments in
relevant geographies, including the ongoing developments in the UK around
audit and corporate governance reforms.
Together with all Committee members, I am available at the AGM to respond to
any shareholder questions regarding the Committee's activities.
Approval
This report was approved by the Board on 27 March 2024 and signed on its
behalf by:
Jutta af Rosenborg
Audit Committee Chair
27 March 2024
Remuneration Committee Report
Annual Statement from Remuneration Committee Chair
I am pleased to present the Remuneration Committee (the 'Committee') report
for the financial year ended 31 December 2023 on behalf of the Supervisory
Board.
Terms of Reference
The Committee functioned throughout 2023 according to its defined Terms of
Reference, which are prepared in accordance with the AIC Code, and were last
updated on 26 January 2023. They are regularly reviewed throughout the year by
the Committee and are available to view on the Company's website. Any proposed
amendments to the Terms of Reference are referred to the Supervisory Board for
approval. The roles and responsibilities of the Committee, as set out in its
Terms of Reference, are reviewed at least annually, and consider relevant
regulatory changes and recommended best practice. There were no material
amendments to the Terms of Reference during 2023.
Composition of the Committee
The Committee consists of a minimum of three members. The Supervisory Board
appoints Committee members and the Chair (who cannot be the Supervisory Board
Chair) and membership is confined to independent non-executive directors.
Each of our five Independent Non-Executive Directors is also a Committee
member. Our biographies are in the Biographies section of this Annual Report.
Key activities during the year
The Committee met four times during the year.
Responsibilities
The Committee is responsible for establishing the general principles and terms
of the Remuneration Policy for our Directors and employees, for setting the
remuneration of the Management Board and Supervisory Board, and for
determining the terms of the Remuneration Policy.
This Remuneration Report has been prepared in compliance with reporting
obligations outlined in the relevant Luxembourg legislation. To provide
greater transparency to shareholders and employees alike, we have again
voluntarily disclosed additional remuneration detail beyond our legal
reporting obligations. We continue to comply with the provisions of the AIC
Code on remuneration.
Performance in 2023
Despite ongoing macroeconomic challenges, the operational performance of
BBGI's globally diversified portfolio of social infrastructure assets was
strong throughout 2023. This performance is a testament to the Company's
low-risk investment strategy, prudent financial management, and a value-driven
asset management approach.
Financial performance proved resilient, notwithstanding the challenging
macroeconomic environment. The Company met its full-year dividend target of
7.93pps, an increase of six per cent compared to the prior year, with strong
cash dividend coverage of 1.40x. NAV was £1,056.6 million representing a
decrease of 1.4 per cent on a NAV-per-share basis. This decline can be
attributed to several factors, including shifts in the market discount rate,
adverse foreign exchange movements affecting the portfolio's value, and a
provision made to account for the impact of draft Canadian tax legislation,
which seeks to limit excessive interest and financing expense deductibility
for tax purposes, affecting both domestic and international investors and
which is commonly referred to as EIFEL.
The Management and Supervisory Boards of the Company continue to assert the
importance of sound ESG practices for long-term value and resilience, with
sustainable investments in social infrastructure at its core. Several of
BBGI's employees have ESG-related targets and the Management Board's
remuneration framework includes both LTIP and STIP metrics related to ESG.
This year, BBGI advanced its ESG goals, notably collecting comprehensive
Financed Emissions data (Scope 1, 2, and significant Scope 3 GHG emissions)
across all assets, being a key step in the Company's journey to net zero.
Key decisions during the year
As part of its planned remuneration review process, the Committee commissioned
an independent review of the Management Board compensation framework in 2023.
The review indicated that the compensation framework is in line with market
practice and benchmarks, and the Committee has therefore concluded that no
material changes to the framework are required. The Committee's work in 2023
included the following key decisions:
· approval of the annual Remuneration Committee cycle;
· assessing performance against the 2022 STIP targets and approving
the outcome;
· formalising the assessment of the 2019 LTIP outcome;
· setting metrics and targets for 2023 STIP and LTIP
awards(( xviii (#_edn18) )); and
· reviewing and updating the Company's Remuneration Policy and the
Remuneration Committee terms of reference.
Detailed decisions of the Committee
Salary increases
There were no salary increases awarded to the Management Board in 2023. The
average increase awarded to our employees was 7.7 per cent. This approach
reflects the Company's commitment to equitable compensation practices and
furthermore acknowledges the broader economic challenges and increased costs
of living faced by our employees.
Annual bonus (FY23) outcome
For the financial year ended 31 December 2023, the Co-CEOs and CFO were each
eligible for a maximum bonus of 150 per cent of base salary as at 31 December
2023. The Committee assessed the award of this annual bonus against a range of
stretching financial and strategic KPIs (see further in this report) The
Management Board delivered strong performance and progress against targets,
with the annual bonus outcomes at 70 per cent of the maximum opportunity for
the 2023 financial year. One-third of the earned bonus is deferred and will be
used to purchase shares, to be held for three years.
LTIP outcome (2020 award)
In December 2020, LTIP awards were granted to the Co-CEOs and CFO. These
equated to an award value of 200 per cent of salary for the Co-CEOs, and 150
per cent of salary for the CFO, and were based on a stretching NAV total
return target. The 2020 awards will be released following the publication of
the Group's 2023 audited accounts, vesting at 100 per cent of the maximum for
the Co-CEOs and CFO. This outcome reflects the performance against targets for
the three-year period to 31 December 2023. In the period the Company achieved
a NAV total return of 23 per cent.
No discretion was exercised in determining the annual bonus and incentive
outcomes described above.
Supervisory Board remuneration
The Supervisory Board fees were unchanged in 2023, with the last review
conducted in 2022. Further details are provided in this report.
Management Board changes
As announced on 24 November 2023, Frank Schramm informed the Board of his
intention to retire after 12 years as Co-CEO and stepped down from the
Management Board on 31 January 2024. In accordance with his service contract,
Frank's notice period runs to the end of 2024 during which time he will
continue to be available to ensure an orderly handover and seamless
transition.
Remuneration payments for Frank will be made in line with his service contract
and will be disclosed in full in the 2024 Remuneration Committee report. The
Committee agreed to treat Mr Schramm as a good leaver in accordance with the
provisions of the incentive plan rules in respect of his outstanding incentive
awards. Frank was eligible for the 2023 and the 2024 annual bonus award which
will be paid in cash and shares. He did not participate in the LTIP award made
to the Management Board in February 2024. Frank will be subject to
post-employment shareholding requirements in line with the remuneration
policy.
Following Frank's departure, Duncan Ball will continue in his role as sole
CEO. From 1 February 2024, Michael Denny was appointed COO alongside his
existing CFO duties. Effective from 31 January 2024, Andreas Parzych was
appointed to the Management Board.
Mr Parzych's base salary on appointment was set at €250,000 per annum. The
committee believes that this salary level is representative of Mr Parzych's
skills and experience and is appropriately positioned in the market. In line
with other Management Board members, Mr Parzych will receive a pension
allowance of 15 per cent of base salary and will participate in the existing
short-term and long-term incentive plans, with a maximum award opportunity of
75 per cent of salary under both plans.
Andrew Sykes
Remuneration Committee Chair
27 March 2024
Remuneration at a glance
Key remuneration principles
BBGI's remuneration framework is based on the following key principles:
The objectives of the Company's Remuneration Policy are to:
· 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, executing our investment policy and fulfilling our
investment objectives.
· Support strategy and promote our long-term sustainable success.
· Establish performance goals that, if met, are accretive to
long-term shareholder value.
· Link compensation to performance goals and provide meaningful
rewards for achieving these goals. This incorporates both financial and
non-financial performance indicators, including key ESG goals and health and
safety factors.
In considering Management Board remuneration during 2023, the Committee
acknowledged the principles of transparency, clarity, simplicity, risk
management, proportionality, and alignment to culture.
Risk and conduct
BBGI's Remuneration Policy encourages sound and efficient management of risks
and does not encourage excessive risk-taking. The Remuneration Policy is
consistent with sound and effective risk management through:
· implementing a sound governance structure for establishing goals
and for communicating performance goals to colleagues to ensure transparency;
· including financial and non-financial objectives in performance
and result assessments; and
· ensuring an appropriate mix of fixed and variable compensation to
discourage inappropriate risk-taking.
Ex-post risk adjustment mechanisms, in the form of market standard malus and
clawback arrangements, are in place for the Management Board, who are all
identified as material risk takers, in accordance with Luxembourg's AIFM law
of 12 July 2013.
In evaluating the components of variable remuneration, we consider long-term
performance, and current and future risks associated with it, and the lifetime
of the assets under management.
During the year, the Committee reviewed the remuneration policy and its
implementation, and concluded that the relevant remuneration processes and
procedures were implemented in accordance with the policy. Furthermore, the
Committee concluded that the remuneration policy remains consistent with and
promotes sound and effective risk management and does not encourage levels of
risk-taking which are inconsistent with the risk profile of BBGI.
Management Board remuneration framework summary for 2023
Element
Base salary Base salaries xix (#_edn19) :
Co-CEOs: C$902,839 and €596,035(( xx (#_edn20) )) CFO:
€381,754
Pension and benefits Co-CEOs and CFO: 15 per cent of salary (cash allowance).
The Co-CEOs receive a monthly car allowance.
Annual bonus (STIP) Co-CEOs and CFO: performance measures established entitling beneficiaries to
50 per cent of salary at threshold performance, 75 per cent of salary at
target and 150 per cent at maximum.
One-third of bonus is used to purchase BBGI shares to be held for three years.
STIP is based on a balance of strategic, financial, operational, compliance
and ESG metrics, with robust quantitative and qualitative performance
requirements set for threshold, target, and maximum performance.
Long-Term Incentive Plan (LTIP) Co-CEOs: performance measures established entitling beneficiaries to 50 per
cent of salary at threshold performance, 100 per cent of salary at target and
200 per cent at maximum.
CFO: threshold: 50 per cent of salary at threshold, 75 per cent of salary at
target and: 150 per cent of salary at maximum.
Performance is measured over three years. For the 2023 LTIP awards, 80 per
cent of the award is subject to stretching NAV Total Return targets; 10 per
cent is subject to reducing corporate GHG emissions and 10 per cent subject to
progress in the implementation of net zero targets related to BBGI's Portfolio
Companies.
Shareholding requirements The Management Board members are required to build and maintain a minimum
holding of BBGI shares with a value of 200 per cent of salary(( xxi (#_edn21)
)) .
Post-employment shareholding requirements: Management Board members are
required to hold 100 per cent of salary in shares for two years after leaving
BBGI.
Below we have set out total remuneration for each Management Board member for
the year ended 31 December 2023(( xxii (#_edn22) )).
Single figure table - Management Board
Duncan Ball Frank Schramm Michael Denny
In Sterling (Co-CEO) (Co-CEO) (CFO)
2023 2022 2023 2022 2023 2022
Base salary 538,189 553,435 518,444 500,097 332,058 320,307
Benefits 15,165 15,594 14,547 14,032 - -
Annual bonus 563,376 843,542 542,708 762,245 347,598 488,210
Pension 80,728 84,354 77,767 76,225 49,809 48,821
LTIP xxiii (#_edn23) 757,242 239,942 786,303 240,822 377,713 40,134
Total fixed 634,082 653,384 610,758 590,354 381,867 369,128
Total variable 1,320,618 1,083,484 1,329,010 1,003,067 725,311 528,343
Total remuneration 1,954,700 1,736,868 1,939,768 1,593,421 1,107,178 897,471
The figures in the table above are derived from the following:
(a) Base salary Salary earned over the year, shown in the reporting currency of the Group
(Sterling). Both Mr Denny and Mr Schramm receive all cash entitlements in
Euro. Mr Ball receives all cash entitlements in Canadian Dollars. The Sterling
amounts are converted using the average exchange rate for the respective
financial year. For the year ended 31 December 2023, the relevant average
exchange rates were £1 = C$1.6776 and £1 = €1.1497.
(b) Benefits The taxable value (gross) of benefits received in the year. These are
principally car allowance.
(c) Annual bonus (STIP) The value of the bonus earned in respect of the financial year: one-third will
be paid in shares and held for three years. Below we describe achievements
against the performance measures for the latest financial year.
(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 incentives The value of LTIP shares vesting, calculated by the estimated number of shares
that vest in respect of the 2020 LTIP award multiplied by the average share
price over the last quarter of the year ended 31 December 2023 (£1.319).
Additional disclosures for the single figure table
Base salary
Base salary at 31 December 2023 Base salary at 31 December 2022
Duncan Ball £535k £551k
Frank Schramm £517k £528k
Michael Denny £331k £338k
Management Board members receive an annual base salary, payable monthly in
arrears. Both Mr Denny and Mr Schramm receive salaries in Euro (€381,754 and
€596,035 respectively). Mr Ball receives his salary in Canadian Dollars
(C$902,839). The table above presents figures in Sterling, the Group's
reporting currency. The changes in these figures, when compared, solely result
from exchange rate fluctuations, as there were no adjustments made to the base
salaries of Management Board members during the year.
The combined annual base salary received by the members of the Management
Board during the year ended 31 December 2023 was £1,388,691 (2021:
£1,373,839).
Taxable benefits and pension-related benefits
The Co-CEOs received a car allowance amounting to a total amount of £29,712
(2022: £29,627) for 2023. The Co-CEOs and the CFO also received an annual
cash payment for pension, retirement, or similar benefits, equating to 15 per
cent of their annualised base salary as at 31 December 2023.
BBGI has fewer than 30 employees across six different countries and individual
pension arrangements across the team vary by location. In Luxembourg, where
most of the Group's employees are located, normal pension contributions are
made up of eight per cent of salary from the employer, eight per cent of
salary from the state and eight per cent from the employee.
STIP - annual bonus for year ended 31 December 2023
The following table summarises the STIP performance metrics and achievements
in respect of the financial year ended 31 December 2023. The maximum STIP
opportunity for the Co-CEOs and the CFO is 150 per cent of base salary. 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. Against
a challenging economic backdrop, the Management Board delivered strong
performance and progress against the targets set at the start of the year and
as a result achieved 70 per cent of the maximum outturn. No payment under the
STIP is made if performance is below the threshold criteria.
Assessment and performance criteria and weighting
Performance measure Assessment and performance achievement Weighting Outturn (% of maximum)
Threshold performance Target performance (50% vesting equating to 75% of base salary) Maximum performance
(33% vesting equating to 50% of base salary) (100% vesting equating to 150% of base salary)
Key financial targets - dividends · A dividend of 7.93pps was declared for 2023, representing 20% 50%
dividend growth of 6 per cent.
Key financial targets - NAV per share · The Company's NAV per share decreased by 1.4 per cent in the
year. Therefore, the threshold performance requirement was not met and as a
result there will be no payout under this metric.
Operational financial targets - ongoing charge, cash management and budgetary · BBGI maintained the sector's low comparative ongoing charge at 20% 86%
controls 0.93 per cent, attributed to its efficient and cost-effective internal
management, in line with target performance.
· Effective cash management and capital allocation were
consistently maintained, ensuring appropriate cash balances, limited use of
the RCF and robust dividend coverage.
· Expenses were well controlled, with an outturn below budget in
line with maximum performance.
Disciplined growth Throughout the year, the Management Board assessed various acquisition 15% 0%
opportunities. However, adhering to the Company's disciplined capital
allocation strategy, it was decided not to proceed with these opportunities as
they were not deemed accretive to the overall portfolio key performance
metrics. Instead, the primary focus, was on repaying all drawings under the
Group's RCF, which was achieved through using free cash flows generated from
the underlying Portfolio Companies.
Portfolio management The Committee considered management performance against key metrics including 20% 100%
portfolio controls; organisational effectiveness; and project risk management.
The Committee considered that performance continued to be very strong in the
following key areas:
· high levels of asset availability at 99.9 per cent; and
· no material lock-ups or defaults.
Effective oversight, regulatory watch, and risk management The Committee considered the effectiveness of the control frameworks in place 10% 75%
to ensure continued regulatory compliance, the strategy for future regulatory
adaptability and the quality of the risk management and reporting.
Achievements include the following:
· high-quality reporting of regulatory risks;
· effective oversight of key delegates;
· full and continued compliance with AIFMD;
· strong regulatory performance relating to FATCA, IFRS, CSSF
and UKLA;
· proactive planning for potential future regulatory
challenges; and
· risk management was seen as strong overall with an outcome
between target and maximum achieved.
ESG The Committee considered the significant progress against the Company's ESG 15% 100%
objectives during the reporting period, including the following achievements:
· enhanced portfolio-ESG data collection and reporting enabling
the company to have a detailed overview of the portfolio's Financed Emissions,
covering scope 1, 2, and material scope 3 GHG emissions across all our assets;
· full compliance with the Sustainable Finance Disclosure
Regulation;
· voluntary compliance with TCFD disclosure requirements; and
· improved UN PRI ratings across two modules Policy Governance
and Strategy and Direct Infrastructure, scoring 100/100 and 99/100
respectively.
Overall bonus out-turn (% of maximum) 70%
For 2023, awards of 105 per cent of base salary were achieved by the Co-CEOs
and CFO. One-third of the earned bonus will be settled in BBGI shares, with
the net number of shares after settling the associated tax liability to be
held for a period of three years. The remaining STIP awards will be paid in
cash after the release of the annual results for financial year ended 31
December 2023. During the year ended 31 December 2023, the total amount
accrued in respect of the 2023 STIP amounted to £1,453,683 (2022:
£2,093,997). Cash payments under the STIP are made in Canadian Dollars and
Euros.
LTIP - awards vesting (2020 award)
In December 2020, LTIP awards were granted to the Co-CEOs and CFO. These
equated to an award value of 200 per cent of salary for the Co-CEOs and 150
per cent of salary for the CFO. Following the achievement of a NAV Total
Return of 23.5 per cent against stretching targets, the awards vested at 100
per cent of maximum. NAV Total Return reflects both capital returns generated,
and dividends returned to shareholders.
These reflect performance against targets for the three-year period to 31
December 2023.
LTIP - awards granted with effect during the financial year
An LTIP award of 200 per cent of base salary was granted to the Co-CEO (CEO
designate) in February 2024 with effect from December 2023. The CFO's maximum
LTIP award is set at 150 per cent of base salary. As Frank Schramm was
retiring from the Company, he did not participate in the 2023 LTIP award
(award in respect of the period December 2023 to December 2026). All awards
granted are within the approved limits under the current LTIP Plan.
For awards issued in February 2024, 80 per cent of the performance target will
be subject to stretching NAV Total Return targets. NAV Total Return reflects
both capital returns generated, and dividends returned to shareholders.
20 per cent of the award will be linked to key climate-related environmental
metrics, comprising (i) ten per cent linked to a reduction in corporate GHG
emissions (Scopes 1, 2 & 3) (against a 2019 baseline) and (ii) ten per
cent linked to progress in the implementation of net zero targets related to
BBGI Portfolio Companies (Financed Emissions) by value, in accordance with
published targets related to BBGI's commitments as a signatory of the Net Zero
Asset Managers Initiative.
Performance metric Threshold performance Target performance Maximum performance
NAV growth per share + dividends paid 17% 19% 23%
(expressed as a percentage of opening NAV)
(80% of weighting)
ESG - percentage of corporate GHG emissions (Scope 1, 2 & 3) GHG emissions as a percentage of 2019 baseline (at 31 December 2026)
(10% weighting)
68% 65% 61%
ESG - the implementation of net zero plans across BBGI assets (by value) The percentage of asset by value meeting the criteria for 'net zero',
'aligned' or 'aligning'
(10% weighting)
31% 35% 40%
For the CEO designate, 25 per cent and 50 per cent of the maximum award vests
for threshold and target performance respectively. The award vests in full for
maximum performance.
For the CFO, 33 per cent and 50 per cent of the maximum award vests for
threshold and target performance respectively. The award vests in full for
maximum performance.
A key feature of these awards is that they will be settled entirely in BBGI
shares and not cash. All LTIP awards settled by shares fall under the scope of
IFRS 2 'Share-Based Payments' and its specific reporting requirements. Refer
to Note 20 of the Consolidated Financial Statements for further details on
share-based payments.
In line with previous years, no expense was accrued for the LTIP awards
granted with effect in December 2023.
During the year ended 31 December 2023, we settled our 2019 award obligation
by issuing the respective share entitlement to each Management Board member.
In total, we issued and allotted 175,242 shares by way of settlement, which
equated to the net entitlement after taxes.
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 Management Board members.
Total basic and variable remuneration for the financial year
The total basic remuneration paid to all employees (including Management
Board) during 2023 was £3.6 million (2022: £3.4 million). The total amount
accrued for cash-settled variable remuneration at 31 December 2023 was £1.6
million. The total variable remuneration paid in cash in 2023 relating to the
2022 financial year was £1.9 million (2022: £1.8 million).
Restricted share plan
We operate a restricted share plan for most employees (excluding the
Management Board members) with ordinary BBGI shares awarded, subject to a
three-year vesting period. During 2023, we recorded an expense of £0.3
million (2022: £0.2 million) for these restricted share awards. The primary
vesting condition is continued employment at BBGI.
Payments made to former Directors and payments for loss of office during the
year
In 2023, we made no payments for loss of office and no payments to any former
Management Board member.
Single total figure table - Supervisory Board
The Supervisory Board members are our Independent Non-Executive Directors and
they are paid a fixed quarterly fee in GBP. The Remuneration Committee
considers 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 except for reasonable out-of-pocket expenses
and ex gratia fees, which were considered for an exceptional or substantial
increase in the members' workload.
Single total figure of remuneration - Supervisory Board
During the year ended 31 December 2023, the Supervisory Board received fees
totalling £315,000 (2022: £259,190). The table below outlines the fees paid
in Sterling to each of the Supervisory Board members.
Base fee Senior Non-Executive Director Committee Chair Total
In Sterling 2023 2022 2023 2022 2023 2022 2023 2022
June Aitken(1) 55,000 32,788 - - - - 55,000 32,788
Howard Myles(2) - 14,835 - 1,648 - 1,648 - 18,131
Jutta af Rosenborg 55,000 47,500 - - 5,000 5,000 60,000 52,500
Andrew Sykes(3) 55,000 32,788 5,000 3,365 5,000 3,365 65,000 39,518
Chris Waples 55,000 47,500 - - - - 55,000 47,500
Sarah Whitney 80,000 68,750 - - - - 80,000 68,750
Total 300,000 244,161 5,000 5,013 10,000 10,013 315,000 259,187
(1)June Aitken was appointed to the Supervisory Board with effect from 29
April 2022.
(2)Howard Myles retired from the Supervisory Board with effect from 29 April
2022.
(3)Andrew Sykes was appointed to the Supervisory Board with effect from 29
April 2022.
Supervisory Board fees
Details of Supervisory Board fees are below(.)
In Sterling 2023 Fees with effect from 1 October 2022
Chair 80,000 80,000
Non-Executive Director 55,000 55,000
Senior Independent Director(1) 5,000 5,000
Committee Chair(1) 5,000 5,000
(1)These additional fees are paid to the Senior Independent Director,
Remuneration Committee Chair and the Audit Committee Chair.
Supervisory Board fees were unchanged during 2023.
The fees paid to the Supervisory Board are subject to a shareholder approved
maximum aggregate remuneration cap of £400,000.
Share interests and statement of Directors' shareholdings
Total share interests as at 31 December 2023
The Directors' interests and those of their connected persons in BBGI's
ordinary shares as at 31 December 2023 are below.
Shares owned by Directors:
Management Board At 31 December 2023 At 31 December 2022
Duncan Ball 1,071,358 870,983
Michael Denny 650,485 504,004
Frank Schramm 1,001,290 829,184
Supervisory Board At 31 December 2023 At 31 December 2022
June Aitken 56,000 31,000
Jutta af Rosenborg 8,000 -
Andrew Sykes 40,000 40,000
Chris Waples 17,321 17,321
Sarah Whitney 59,641 39,000
Awards under share plans:
Award At 31 December 2022((1)) Granted in the year((2)) Vested in the year Lapsed or At 31 December 2023
forfeited in the year
Management Board
Duncan Ball LTIP 2,194,628 791,704 (152,125) (200,729) 2,633,478
Frank Schramm LTIP 2,160,819 - (152,683) (201,466) 1,806,670
Michael Denny LTIP 918,774 367,527 (25,445) (25,445) 1,235,411
((1)) Reflects maximum potential number of shares under all the awards
granted, including the 2019 award settled in May 2023.
((2)) This LTIP award was announced in February 2024 with effect in December
2023.
Shareholding guidelines:
The Committee has adopted a shareholding guideline for the Management Board,
which requires a shareholding equivalent to 200 per cent of salary. The
respective Management Board members' achievement of this guideline at 31
December 2023 is summarised below:
Management Board Shares counting towards the guideline at 31 December 2023 Required shareholding to achieve((1)) Percentage of shareholding requirement achieved
Duncan Ball 1,071,358 699,903 153%
Frank Schramm 1,001,290 688,427 145%
Michael Denny 650,485 440,930 148%
((1)) Two times the base salary with effect from 1 May 2023 divided by the
Company share price on the same date. The minimum holding requirement is fixed
for a period of three years and will be reset in 2026.
Post-employment shareholding requirements: Management Board members are
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 engaged to provide independent advice to the Committee as
required. Deloitte is a member of the Remuneration Consultants Group and
voluntarily operates under the Code of Conduct in relation to executive
remuneration consulting in the UK. Deloitte LLP's fees for providing
remuneration advice to the Committee were £43k for 2023. The Committee
regularly assesses if Deloitte's appointment remains appropriate or should be
put out to tender, while considering the Remuneration Consultants' Group Code
of Conduct.
Consideration by the Directors of matters relating to Directors' remuneration
Committee responsibilities and composition
BBGI's Remuneration Committee comprises five members: Andrew Sykes, Sarah
Whitney, Jutta af Rosenborg, June Aitken and Chris Waples. Andrew Sykes was
appointed as Remuneration Committee Chair in April 2022. The Terms of
Reference for the Remuneration Committee are available here
www.bb-gi.com/investors/policies/remuneration-committee-terms-of-reference/
(https://www.bb-gi.com/investors/policies/remuneration-committee-terms-of-reference/)
The Committee is responsible for establishing the general principles of the
policy for Directors' and staff remuneration and for setting the remuneration
for the Management Board and for the Supervisory Board. In doing so, the
Committee is responsible for ensuring that the remuneration of the Management
supports the delivery of BBGI's strategic and operational goals without
encouraging undesirable risk-taking behaviour. This is achieved through the
Committee overseeing and approving all aspects of Management Board
remuneration, including development of the remuneration policy, 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 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 for 2023.
Employee remuneration
BBGI provides development opportunities for 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.
Our remuneration components combine to ensure an appropriate and balanced
remuneration package that reflects our business units, the job grade and
professional activity, as well as market practice.
Statement of implementation of Directors' Remuneration Policy for the
financial year commencing 1 January 2024
Base salary
Management Board salaries were unchanged during the year ended 31 December
2023 and are as follows:
Duncan Ball Co-CEO £535k
Frank Schramm Co-CEO £517k
Michael Denny CFO £331k
Andreas Parzych Executive Director £217k (effective 1 February 2024)
As noted earlier in this report, the Committee commissioned an independent
review of the Management Board's compensation packages in 2023. The review
indicated that the compensation framework is in line with market practice and
benchmarks, and the Committee has therefore concluded that no material changes
to the framework are required. However, acknowledging the importance of
maintaining competitiveness and alignment with evolving market standards, the
Committee will keep the remuneration packages under review throughout 2024.
This approach ensures that our compensation policies remain relevant and
effectively support our strategic objectives in a changing market environment.
As previously noted, both Mr Denny and Mr Schramm receive salaries in Euro
(€381,754 and €596,035, respectively). Mr Ball receives his salary in
Canadian Dollars (C$902,839). Mr Parzych will receive his salary in Euro
(€250,000).
Full details of any salary changes made in 2024 will be disclosed in the 2024
Remuneration Committee report.
Annual bonus (STIP)
The maximum bonus opportunity for 2024 will be 150 per cent of salary for the
CEO xxiv (#_edn24) , former Co-CEO (now in an advisory role), the CFOO and 75
per cent of salary for the Executive Director. The target opportunity will be
50 per cent of maximum. One-third of any bonus earned will be used to buy BBGI
shares, to be held for a period of three years.
Payment of the annual bonus is subject to stretching financial and strategic
targets, which are commercially sensitive and therefore remain confidential.
However, the Committee will disclose an overview of the bonus performance
measures and out-turns in the 2024 Directors' Remuneration Report.
LTIP
The Committee intends to recommend the grant of ongoing annual maximum LTIP
awards of 200 per cent of salary to the CEO, 150 per cent of salary to the
CFOO and 75 per cent of salary to the Executive Director, subject to
stretching NAV Total Return and climate-related ESG targets.
Approval
This Report was approved by the Board on 27 March 2024 and signed on its
behalf by:
Andrew Sykes
Chair of the Remuneration Committee
Viability Statement
As part of the ongoing risk monitoring process, and in compliance with AIC
Code Principle N and Provision 36, the Management Board has conducted a
thorough evaluation of BBGI's viability and prospects for the next five years.
While the average remaining life of the portfolio of assets is 19.3 years, we
believe that five years is an appropriate and acceptable length of time to
consider the risks to BBGI's continuing existence. This judgement involves a
comprehensive review of information at Board meetings, including:
· BBGI's investment policy and the investment pipeline;
· the long-term and contractual nature of BBGI's investments;
· investment reviews;
· BBGI's risk profile and key risk indicators (including the
principal risks and uncertainties);
· relevant financial and economic information and long-term
economic assumptions;
· scenario testing; and
· annual and semi-annual valuations.
This viability assessment is an integral part of BBGI's broader annual risk
review process, with further information on principal risks and uncertainties,
including detailed descriptions of the areas and factors of the risks, and the
processes by which the Management Board monitors, reviews, and assesses them,
outlined in the Risk section of this Annual Report.
We maintain a robust risk and internal controls framework to mitigate the
likelihood and impact of poor decision making, risk-taking above agreed levels
and human error.
Our Management Board regularly reviews and assesses principal risks faced by
our business, including those that could threaten our business model,
strategy, solvency, liquidity and future performance. All identified risks are
assessed based on their:
· probability or likelihood of occurrence;
· impact; and
· mitigation measures.
These risks 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 individual asset is carried out every six months at our
financial half-year and year-ends (30 June and 31 December). Such valuations
are based on long-term discounted future cash flows; themselves predominantly
based on long-term contracts and other assumptions. Together, these form a key
part of our overall viability assessment. Once complete, an independent
third-party valuer reviews each portfolio valuation, which is also subject to
audit and review by our External Auditor, and internal oversight by our Audit
Committee.
A key part of the viability assessment is analysing how our NAV could be
impacted in stressed macroeconomic scenarios. This provides further insight
into how BBGI could perform if affected by variables and events outside the
control of our Management Board and our risk management framework. A more
detailed description of the valuations, assumptions and stress-testing applied
is in the Valuation section of this Annual Report.
Having conducted its assessment, the Management Board has a reasonable
expectation that BBGI will be able to continue in operation and meet all its
liabilities as they fall due, up to March 2029. This assessment is subject to
the following conditions: the availability of sufficient capital and market
liquidity allowing for the refinancing/repayment of any short-term recourse
RCF obligations that may be due; and that BBGI's investments are not
materially affected by changes to government policy, laws, regulations, or
other risks that we do not consider material or probable.
BBGI is also subject to a biennial shareholder continuation vote, with the
next scheduled to take place at the AGM in April 2025.
Management Board Responsibilities Statement
The Management Board is responsible for ensuring proper preparation of BBGI's
Annual and Interim Reports and financial statements for each financial
reporting period, in accordance with applicable laws and regulations, which
require it to:
· 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;
· give a true and fair view of the development and performance of
the business and the position of the Group; and
· 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 BBGI
complies with applicable company law and other UK or Luxembourg applicable
laws and regulations.
In preparing these financial statements, the Management Board is responsible
for:
· selecting suitable accounting policies and applying them
consistently;
· making judgements and estimates that are reasonable and
prudently;
· 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 Group's financial position and enable it to ensure
that the financial statements comply with all relevant regulations; and
· safeguarding the Group's assets 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.
· the Chair'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, together with a description of the principal risks and
uncertainties that it faces.
Luxembourg, 27 March 2024
Duncan Ball Michael Denny Andreas Parzych
CEO CFOO Executive Director
Audit Report
To the Shareholders of BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying consolidated financial statements give a true
and fair view of the consolidated financial position of BBGI Global
Infrastructure S.A. (the "Company") and its subsidiaries (the "Group") as at
31 December 2023, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with IFRS
Accounting Standards as adopted by the European Union.
What we have audited
The Group's consolidated financial statements comprise:
• the consolidated statement of financial position as at 31 December
2023;
• the consolidated income statement for the year then ended;
• the consolidated statement of other comprehensive income for the year
then ended;
• the consolidated statement of changes in equity for the year then
ended;
• the consolidated statement of cash flows for the year then ended; and
• the notes to the consolidated financial statements, which include a
summary of significant accounting policies.
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
as adopted for Luxembourg by the CSSF are further described in the
"Responsibilities of the "Réviseur d'entreprises agréé" for the audit of
the consolidated financial statements" section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with the International Code of
Ethics for Professional Accountants, including International Independence
Standards, issued by the International Ethics Standards Board for 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. We have fulfilled our other ethical responsibilities under those
ethical requirements
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 period. These matters were addressed in the context of our 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.
Key audit matter How our audit addressed the key audit matter
Investments at fair value through profit or loss In assessing the valuation of investments at fair value through profit or
loss, we performed the procedures outlined below:
Refer to the consolidated financial statements (Note 3, summary of significant
accounting policies; Note 9, Investments at FVPL). We assessed that the investments valuation policy was in compliance with the
applicable accounting framework.
Investments at fair value through profit or loss, GBP 1 billion, is the most
significant balance on the consolidated statement of financial position. It We understood and evaluated the design and implementation of key controls,
consists of availability-style social infrastructure investments through including relevant information technology systems and controls, in place
public private partnership and/or public finance initiatives or similar around the valuation of investments at fair value through profit or loss.
procurement models ("investments") generating long-term predictable cash
flows.
We tested key controls performed in the valuation process of investments in
relation to the financial data included in the valuation models, the "look
The valuation of the investments is determined using the discounted cash flow back" comparison of the forecast vs actual cash flows for the previous
methodology. financial year, as well as other investment model review controls.
It relies on significant unobservable inputs and requires significant
judgments from the Management Board. A small change in these
The key controls on which we placed reliance for the purposes of our audit
assumptions could result in a significant impact on the fair value of the were appropriately designed and implemented and were operating effectively.
investments. As a consequence, there is an inherent risk that
the fair value of these investments may not be appropriate.
In addition, we obtained substantive audit evidence over the valuation of
investments at fair value through profit or loss as follows:
Taking this into account, coupled with the magnitude of the amounts involved,
we consider this area as a key audit matter.
- We inquired into the qualification of the Management Board and its
internal valuation team and concluded that they have sufficient experience and
expertise.
- We obtained the overall fair value reconciliation of opening to
closing fair value and corroborated significant fair value movements during
the year, thereby assessing the reasonableness and completeness of the
movement in fair value for the year.
- With the support of our own valuation experts, we assessed that
the Group's valuation methodology was in compliance with the International
Private Equity and Venture Capital Valuation Guidelines and market practice
based on our knowledge of the investments held by the Group and experience of
the industry in which the Group operates.
- For a sample of assets selected via risk and value-based targeted
sampling, we assessed that the key macroeconomic assumptions such as
inflation, deposit rates, corporate tax rates, discount rate setting were
appropriate and/or within acceptable ranges based on market research. We also
checked that the selected asset specific discount rates were within acceptable
ranges.
- We obtained and read the valuation report prepared by Management's
external valuation expert which confirmed that the portfolio value prepared by
the Management Board was appropriate.
- Finally, for the entire portfolio, we obtained external
confirmation over the existence and percentage of ownership of the investments
held by the Group.
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 audit report 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 identified above 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 that fact. We have nothing to report in
this regard.
Responsibilities of the Management Board and those charged with governance for
the consolidated financial statements
The Management Board is responsible for the preparation and fair presentation
of the consolidated financial statements in accordance with IFRS Accounting
Standards as adopted by the European Union, 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 of Directors
either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's
financial reporting process.
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 an audit report 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 scepticism 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'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 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 audit report 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 audit report. 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
communicate to them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
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 audit report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the consolidated financial statements and
has been prepared in accordance with applicable legal requirements.
We have been appointed as "réviseur d'entreprises agréé" by the General
Meeting of the Shareholders on 28 April 2023 and the duration of our
uninterrupted engagement, including previous renewals and reappointments, is
one year.
PricewaterhouseCoopers, Société coopérative
Represented by
Emanuela Sardi
Luxembourg, 27 March 2024
Consolidated Income Statement
For the year ended 31 December 2023
In thousands of Sterling Notes 2023 2022
Income from investments at fair value through profit or loss 9 38,865 159,545
Other operating income 10 10,659 83
Operating income 49,524 159,628
Administrative expenses 6 (12,130) (11,756)
Other operating expenses 7 (154) (12,781)
Operating expenses (12,284) (24,537)
Results from operating activities 37,240 135,091
Net finance 8 (2,524) (2,005)
result
Net gain/(loss) on balance sheet 19 8,874 (10,572)
hedging
Profit before tax 43,590 122,514
Tax expense - 12 (3,303) (3,472)
net
Profit for the year 40,287 119,042
Earnings per share
Basic earnings per share 15 5.64 16.70
(pence)
Diluted earnings per share 15 5.62 16.68
(pence)
The accompanying notes form an integral part of the consolidated financial
statements.
Consolidated Statement of Other Comprehensive Income
For the year ended 31 December 2023
In thousands of Sterling Notes 2023 2022
Profit for the year 40,287 119,402
Items that may be reclassified to profit or loss, net of tax
Exchange difference on translation of foreign (351) (450)
operations
Items that will not be reclassified to profit or loss, net of tax
Net loss on a previously consolidated subsidiary (453) -
Other comprehensive income for the year, net of tax (804) (450)
Total comprehensive income for the year 39,483 118,592
The accompanying notes form an integral part of the consolidated financial
statements.
Consolidated Statement of Financial Position
As at 31 December 2023
In thousands of Notes 2023 2022
Sterling
Assets
Property and equipment 93 123
Investments at fair value through profit or 9,19 1,047,244 1,102,844
loss
Deferred tax 12 983 153
assets
Derivative financial 19 2,663 -
assets
Other non-current 16 994 275
assets
Non-current assets 1,051,977 1,103,395
Trade and other 21 865 909
receivables
Other current 13 1,329 994
assets
Derivative financial 19 - 2,885
assets
Cash and cash 11 9,672 31,157
equivalents
Current assets 11,866 35,945
Total assets 1,063,843 1,139,340
Equity
Share 14 852,386 850,007
capital
Additional paid-in 22 3,113 2,502
capital
Translation and other capital 14 (1,635) 14,371
reserves
Retained earnings 202,764 202,298
Equity attributable to the owners of the Company 1,056,628 1,069,178
Liabilities
Loans and 16 - 56,390
borrowings
Derivative financial 19 - 5,687
liabilities
Non-current liabilities - 62,077
Loans and 16 233 230
borrowings
Trade and other 17 2,697 3,242
payables
Derivative financial 19 2,823 3,006
liabilities
Tax 12 1,462 1,607
liabilities
Current liabilities 7,215 8,085
Total liabilities 7,215 70,162
Total equity and liabilities 1,063,843 1,139,340
Net asset value attributable to the owners of the 14 1,056,628 1,069,178
Company
Net asset value per ordinary share 14 147.81 149.89
(pence)
The accompanying notes form an integral part of the consolidated financial
statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Additional Translation and other
Share capital paid-in capital capital reserve Retained earnings Total equity
In thousands of Sterling Notes
Balance as at 1 January 2023 850,007 2,502 14,371 202,298 1,069,178
Total comprehensive income for the year ended
31 December 2023
Profit for the year - - - 40,287 40,287
Other movements in other comprehensive income - - 3 (456) (453)
Exchange difference on translation of foreign operation - - (16,009) 15,658 (351)
Total comprehensive income for year - - (16,006) 55,489 39,483
Transactions with the owners of the Company,
recognised directly in equity
Scrip dividends 14 1,536 - - (1,536) -
Cash dividends 14 - - - (53,487) (53,487)
Equity settlement of share-based compensation 14,22 888 (1,427) - - (539)
Share-based payment 22 - 2,038 - - 2,038
Share issuance costs 14 (45) - - - (45)
Balance as at 31 December 2023 852,386 3,113 (1,635) 202,764 1,056,628
Translation and other capital reserve
Share capital Additional Retained earnings Total equity
In thousands of Sterling Notes paid-in capital
Balance as at 1 January 2022 847,858 1,833 (8,809) 159,661 1,000,543
Total comprehensive income for the year ended 31 December 2022
Profit for the year - 119,042 119,042
- -
Exchange difference on translation of foreign operation - - 23,180 (23,630) (450)
Total comprehensive income for year - - 23,180 95,412 118,592
Transactions with the owners of the Company,
recognised directly in equity
Scrip dividends 14 1,092 - - (1,092) -
Cash dividends 14 - - - (51,683) (51,683)
Equity settlement of share-based compensation 14,22 1,084 (1,068) - - 16
Share-based payment 22 - 1,737 - - 1,737
Share issuance costs 14 (27) - - - (27)
Balance as at 31 December 2022 850,007 2,502 14,371 202,298 1,069,178
The accompanying notes form an integral part of the consolidated financial
statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
In thousands of Sterling Notes 2023 2022
Operating activities
Profit for the year 40,287 119,042
Adjustments for:
Depreciation expense 6 44 34
Net finance results 8 2,524 2,005
Income from investments at fair value through profit or loss 9 (38,865) (159,545)
Loss/(gain) on derivative financial instruments - net 19 (18,107) 21,899
Foreign currency exchange loss/(gain) - net 7,10 (1,319) 840
Share-based compensation 22 2,038 1,737
Tax expense - net 12 3,303 3,472
Working capital adjustments:
Trade and other receivables (114) (506)
Other assets (435) (508)
Trade and other payables (780) 92
Cash used in operating activities (11,424) (11,438)
Interest paid and other borrowing costs (2,735) (1,870)
Interest received 8 537 172
Realised loss on derivative financial instruments - net 19 (913) (3,779)
Taxes paid (4,817) (3,391)
Net cash flows used in operating activities (19,352) (20,306)
Investing activities
Acquisition of/additional investments at fair value through profit or loss 9 - (64,407)
Distributions received from investments at fair value through profit or loss 9 94,465 96,333
Realised gain/(loss) on derivative financial instruments - net 19 13,371 (12,550)
Acquisition of property and equipment (14) (89)
Net cash flows from investing activities 107,822 19,287
Financing activities
Dividends paid 14 (53,487) (51,683)
Repayment of loans and borrowings 16 (71,404) (17,000)
Proceeds from the issuance of loans and borrowings 16 15,000 72,512
Debt and equity instrument issue cost 14 (45) (26)
Net cash flows from/(used in) financing activities (109,936) 3,803
Net increase/(decrease) in cash and cash equivalents (21,466) 2,784
Impact of foreign exchange on cash and cash equivalents (19) 1,511
Cash and cash equivalents as at 1 January 31,157 26,862
Cash and cash equivalents as at 31 December 11 9,672 31,157
The accompanying notes form an integral part of the consolidated financial
statements.
Notes to the Consolidated Financial Statement
For the year ended 31 December 2023
1. Corporate information
BBGI Global Infrastructure 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 ('AIFM') 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 6E, route de Trèves, L-2633 Senningerberg,
Luxembourg and is registered with the Registre du Commerce et des Sociétes of
Luxembourg under the number B 163879.
The Company is a closed-ended investment company that invests, through its
subsidiaries, predominantly in a globally diversified portfolio of Public
Private Partnership ('PPP')/Private Finance Initiative ('PFI') infrastructure
or similar style assets (Investment portfolio'). As at 31 December 2023, the
Group has no investment where the asset is under construction (31 December
2022: one).
As at 31 December 2023, the Group employed 26 staff (31 December 2022: 25
staff).
Reporting period
The Company's reporting period runs from 1 January to 31 December each year.
The Company's consolidated income statement, consolidated statement of other
comprehensive income, consolidated statement of financial position,
consolidated statement of changes in equity and consolidated statement of cash
flows include comparative figures as at 31 December 2022.
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 27 March 2024.
2. Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards accounting
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 using the going
concern principle, under the 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 IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy disclosures that
are more useful by replacing the requirement for entities to disclose their
'significant' accounting policies with a requirement to disclose their
'material' accounting policies and adding guidance on how entities apply the
concept of materiality in making decisions about accounting policy
disclosures.
Definition of Accounting Estimate - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates' and clarify
the distinction between changes in accounting estimates and changes in
accounting policies and the correction of errors. Also, they clarify how
entities use measurement techniques and inputs to develop accounting
estimates.
These amendments have no significant impact on the consolidated financial
statements of the Group.
Functional and presentation currency
These consolidated financial statements are presented in 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
Investment portfolio 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 2023, the Company has
56 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 material accounting policies
a) Basis of consolidation
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).
The Company, which qualifies as an Investment Entity and is required to value
certain subsidiaries at fair value, also holds, directly or indirectly,
subsidiaries which provide services that support the Company's investment
activities. These subsidiaries are consolidated on a line-by-line basis (see
Note 20).
The shares in some of these consolidated subsidiaries have been pledged as a
security under the Company's multi-currency Revolving Credit Facility ('RCF')
(see note 16 for the RCF terms). As such, the financial covenants of the RCF
includes the financial position and net results of the consolidated
subsidiaries. Furthermore, the assets and liabilities of the consolidated
subsidiaries used in the preparation of these consolidated financial
statements, closely approximates its fair value due either to: (i) the
short-term nature of their assets and liabilities or; (ii) their underlying
investments of these consolidated subsidiaries are already measured at fair
value through profit and loss.
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 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 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 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 Sterling at
the exchange rates on the reporting date. The income and expenses of foreign
operations are translated to 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 the consolidated statement of
other comprehensive income, and presented in 'translation and other capital
reserve' in equity, except for exchange differences from intra-Group monetary
items which are reflected in the consolidated income statement. Foreign
currency movements during the reporting period relating to investments are
included as part of the 'Income from investments at fair value through profit
or loss' (income from Investments at FVPL).
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 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 and other capital
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
Initial recognition and measurement
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.
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. The Group's financial
assets classified and measured at amortised cost are held within a business
model with the objective to hold financial assets in order to collect
contractual cash flows which represents solely payments of principal and
interests.
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 19.
Financial assets at amortised cost (debt instruments)
The Group classifies its financial assets at amortised cost only if both of
the following criteria are met:
- the asset is held within a business model whose objective is to collect
the contractual cash flows, and
- the contractual terms give rise to cash flows that are solely payments
of principal and interest.
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 income statement 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 EIR.
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.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Group has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and either (a) the Group has transferred substantially all the risks and
rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
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 Portfolio 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
unchanged from 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 19.
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 a 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 and share-based payment arrangements
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 EIR 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 EIR 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
i) Subscription 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.
Subscription tax is recognized as a tax expense in the consolidated income
statement for the period in which it is incurred.
ii) Income tax
Income tax on the consolidated subsidiaries' profits for the year comprises
current and deferred tax. Current and deferred tax is recognised in the
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 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 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. Material 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 market-based performance condition element of the awards.
Non-market based performance conditions are not taken into account in the
valuation of the unit fair value per share of the LTIP. Instead, the number of
shares is adjusted at each reporting date to take into account the actual
level of non market-based performance condition.
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 22.
4.4 Going concern basis of accounting
The Group's portfolio is currently 100 per cent operational and relies on
availability-style revenues. At the time of producing these consolidated
financial statements, there was no evidence to suggest of material disruption
to the operations of the Group and financial performance is not expected to be
materially affected.
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 (determined
to be the chief operating decision makers or CODM), 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 2023 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Income/(loss) from investments at FVPL (Note 9) 18,803 17,030 (4,022) 7,054 - 38,865
Administrative expenses - - - - (12,130) (12,130)
Other operating income - net - - - - 10,505 10,505
Results from operating activities 18,803 17,030 (4,022) 7,054 (1,625) 37,240
Net finance result - - - - (2,524) (2,524)
Net gain on balance sheet hedging - - - - 8,874 8,874
Tax expense - net - - - - (3,303) (3,303)
Profit/(loss) for the year 18,803 17,030 (4,022) 7,054 1,422 40,287
For the year ended 31 December 2022 North America Continental Holding Activities Total Group
In thousands of Sterling
UK Australia Europe
Income from investments at FVPL (Note 9) 66,910 72,902 10,707 9,026 - 159,545
Administration expenses - - - - (11,756) (11,756)
Other operating expenses - net - - - - (12,698) (12,698)
Results from operating activities 66,910 72,902 10,707 9,026 (24,454) 135,091
Net finance result - - - - (2,005) (2,005)
Net loss on balance sheet hedging - - - - (10,572) (10,572)
Tax expense - net - - - - (3,472) (3,472)
Profit/(loss) for the year 66,910 72,902 10,707 9,026 (40,503) 119,042
Statement of financial position per segment information as at 31 December 2023
and 2022 are presented below:
As at 31 December 2023 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Assets
Property and equipment - - - - 93 93
Investments at FVPL 341,635 477,734 97,181 130,694 - 1,047,244
Other non-current assets - - - - 4,640 4,640
Current assets - - - - 11,866 11,866
Total assets 341,635 477,734 97,181 130,694 16,599 1,063,843
Liabilities
Non-current - - - - - -
Current - - - - 7,215 7,215
Total liabilities - - - - 7,215 7,215
As at 31 December 2022 North America Continental Holding Activities Total Group
In thousands of Sterling
UK Australia Europe
Assets
Property and equipment - - - - 123 123
Investments at FVPL 354,002 504,408 112,414 132,020 - 1,102,844
Other non-current assets - - - - 428 428
Current assets - - - - 35,945 35,945
Total assets 354,002 504,408 112,414 132,020 36,496 1,139,340
Liabilities
Non-current - - - - 62,077 62,077
Current - - - - 8,085 8,085
Total liabilities - - - - 70,162 70,162
The Holding Activities of the Group include the activities which are not
specifically related to a particular 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.
The Group maintains a well-diversified portfolio with no major single asset
exposure.
6. Administrative expenses
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Personnel expenses Short-term benefits
Share-based compensation expenses (Note 22) 5,639 5,919
Supervisory Board fees 2,038 1,737
315 260
7,992 7,916
Legal and professional fees 2,716 2,630
Office and other expenses 1,378 1,176
Depreciation expense 44 34
12,130 11,756
Short-term benefits relate to the Management Board and staff, and include
basic salaries, Short-Term Incentive Plan ('STIP'), staff bonus, social
security contributions and other related expenses.
The Group has engaged certain third parties to provide legal, depositary,
custodian, audit, tax, and other services. 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 £395,000 (2022:
£383,000).
During the year, the Company and its consolidated subsidiaries obtained the
following services from the external auditors.
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Group auditor remuneration: Statutory audit fees
Interim review and other permitted assurance services 290 238
Non-assurance services 104 56
- 5
394 299
Audit and audit-related fees from non-Group auditor 43 65
437 364
7. Other operating expenses
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Acquisition-related costs and others (including unsuccessful bid costs) 154 615
Loss on derivative financial instruments at FVPL - net (Note 19) Foreign - 11,326
currency exchange loss - net
- 840
154 12,781
8. Net finance results
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Finance costs on loans and borrowings (Note 16) 3,061 2,177
Interest income on bank deposits (537) (172)
2,524 2,005
9. Investments at FVPL
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Balance as at 1 January 1,102,844 975,225
Acquisitions of/additions in Investments at FVPL - 64,407
Income from investments at FVPL(i) 38,865 159,545
Distributions received from Investments at FVPL (94,465) (96,333)
Balance as at 31 December 1,047,244 1,102,844
(i) This account reflects the unrealised gain on valuation of
investments.
Income from Investments at FVPL include the impact of net foreign exchange
losses for the year ended 31 December 2023 amounting to £23.3 million (year
ended 31 December 2022: net foreign exchange gain of £34.2 million). Refer to
Note 19 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 Portfolio
Companies; or (c) approvals of the external lenders on the financial models
have been obtained.
As at 31 December 2023 and 2022, loan and interest receivable amounts from
unconsolidated subsidiaries is embedded within Investments at FVPL. The
valuation of Investments at FVPL considers all future cash flows related to
each individual underlying asset including but not limited to interest income,
dividend income, asset-related management fee income and other income.
Details of various asset investments in the Group's portfolio and their
respective acquisition dates are as follows:
Country of Incorporation Ownership Interest Year Acquired
Company((i)) Asset
RW Health Partnership Holdings Pty Limited Royal Women's Hospital Australia 100% 2012
Victorian Correctional Infrastructure Partnership Pty Limited Victorian Correctional Facilities Australia 100% 2012
BBPI Sentinel Holdings Pty Limited, BBGI Sentinel Holdings 2 Pty Limited, Northern Territory Secure Facilities Australia 100% 2014
Sentinel Financing Holdings Pty Limited
and 2015
Golden Crossing Holdings Inc. Golden Ears Bridge Canada 100% 2012
and 2013
Trans-Park Highway Holding Inc. Kicking Horse Canyon Highway Canada 50% 2012
NorthwestConnect Holdings Inc. Northwest Anthony Henday Drive Canada 50% 2012
BBGI KVH Holdings Inc., BBGI KVH Holdings 2 Inc. Kelowna & Vernon Hospitals Canada 100% 2013
and 2020
WCP Holdings Inc. Women's College Hospital Canada 100% 2013
Stoney Trail Group Holdings Inc. North East Stoney Trail Canada 100% 2013
BBGI NCP Holdings Inc. North Commuter Parkway Canada 50% 2015
SNC-Lavalin Infrastructure Partners LP William R. Bennet Bridge Canada 80% 2017
South East Stoney Trail Canada 40% 2017
Canada Line Canada 26.7% 2017
Restigouche Hospital Centre Canada 80% 2017
McGill University Health Centre Canada 40% 2018
John Hart Generating Station Canada 80% 2022
BBGI Stanton Holdings Inc. Stanton Territorial Hospital Canada 100% 2018
and 2020
BBGI 104 GP Inc. Highway 104 Canada 50% 2020
BBGI Champlain Holding Inc. Champlain Bridge Canada 25% 2020
Kreishaus Unna Holding GmbH Unna Administrative Centre Germany 90% 2012
and 2020
PJB Beteiligungs-GmbH Burg Correctional Facilities Germany 90% 2012
Hochtief PPP 1 Holding GmbH & Co.KG Cologne Schools Germany 50% 2014
Rodenkirchen Schools Germany
Frankfurt Schools Germany
Fürst Wrede Barracks Germany
BBGI PPP Investment S. à r.l. A7 Motorway Luxembourg 49% 2022
Noaber18 Holding B.V. N18 Motorway Netherlands 52% 2018,
2019 and
2020
De Groene SchakelHolding B.V. Westland Town Hall Netherlands 100% 2018
and 2019
SAAone Holding B.V. A1/A6 Motorway Netherlands 37.1% 2018
and 2019
Agder OPS Vegselskap AS E18 Motorway Norway 100% 2013
and 2014
Folera TH Holdings Limited Poplar Affordable Housing & Recreational Centres Jersey 100% 2021
Kent Education Partnership (Holdings) Limited Kent Schools UK 50% 2012
Healthcare Providers (Gloucester) Limited Gloucester Royal Hospital UK 50% 2012
Highway Management M80 Topco Limited M80 Motorway UK 50% 2012
Bedford Education Partnership Holdings Limited Bedford Schools UK 100% 2012
Lisburn Education Partnership Holdings (Limited) Lisburn College UK 100% 2012
Clackmannanshire Schools Education Partnership (Holdings) Limited Clackmannanshire Schools UK 100% 2012
Primaria (Barking Dagenham & Havering) Limited Barking Dagenham & Havering (LIFT) UK 60% 2012
East Down Education Partnership (Holdings) Limited East Down Colleges UK 100% 2012
and 2018
Scottish Borders Education Partnership (Holdings) Limited Scottish Borders Schools UK 100% 2012
Coventry Education Partnership Holdings Limited Coventry Schools UK 100% 2012
Fire Support (SSFR) Holdings Limited Stoke & Staffs Rescue Service UK 85% 2012
GB Consortium 1 Limited North London Estates Partnership (LIFT) Liverpool & Sefton Clinics (LIFT) UK 60% (both) 2012, 2014
and 2018
Mersey Care Development Company 1 Limited Mersey Care Hospital UK 79.6% 2013
and 2014
MG Bridge Investments Limited Mersey Gateway Bridge UK 37.5% 2014
Tor Bank School Education Partnership (Holdings) Limited Tor Bank School UK 100% 2013
Lagan College Education Partnership (Holdings) Limited Lagan College UK 100% 2014
Highway Management (City) Holding Limited M1 Westlink UK 100% 2014
Blue Light Partnership (ASP) Holdings Limited Avon & Somerset Police HQ UK 100% 2014,
2015 and
2016
Northwin Limited North West Regional College UK 100% 2015
Northwin (Intermediate) (Belfast) Limited Belfast Metropolitan College UK 100% 2016
Fire and Rescue NW Holdings Limited North West Fire and Rescue UK 100% 2021
Woodland View Holdings Co Limited Ayrshire and Arran Hospital UK 100% 2021
Aberdeen Roads Holdings Limited Aberdeen Western Peripheral Route UK 33.3% 2021
BBGI East End Holdings Inc. Ohio River Bridges US 66.7% 2014
and 2019
( (i)) and its subsidiary companies
10. Other operating income
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Gain on derivative financial instruments - net (Note 19) 9,233 -
Foreign currency exchange gain - net 1,319 -
Others 107 83
10,659 83
11. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to £9,672,000 (31
December 2022: £31,157,000).
12. Taxes
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Current tax:
Income tax and other taxes Subscription tax 3,755 3,705
532 515
4,287 4,220
Deferred tax:
Relating to origination and reversal of temporary differences (984) (748)
3,303 3,472
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 subsidiaries 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 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Profit before tax 43,590 122,514
Income tax using the Luxembourg domestic tax rate of 24.94% 10,871 30,555
Subscription tax during the year 532 515
Reconciling difference mainly due to fair valuation of assets (8,100) (27,598)
Tax charge for the year 3,303 3,472
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 Portfolio Companies. The tax liabilities of the
Portfolio Companies are embedded in the fair value calculation of Investments
at FVPL.
Deferred tax relates to the following:
Consolidated statement Consolidated
of financial position income statement
31 December 31 December
In thousands of Sterling 2023 2022 2023 2022
Losses available for offsetting against future taxable income 983 153 984 748
The Group has additional tax losses carried forward amounting to £12,257,000
(2022: £18,032,000) for which no deferred tax asset was recognised.
Tax liability as at 31 December 2023 amounted to £1,462,000 (31 December
2022: £1,607,000).
13. Other current assets
31 December 31 December
In thousands of Sterling 2023 2022
Prepaid taxes 833 537
Prepaid expenses 230 227
Others 266 230
1,329 994
14. Capital and reserves
Share capital
Changes in the Company´s share capital are as follows:
31 December 31 December
In thousands of Sterling 2023 2022
Share capital as at 1 January 850,007 847,858
Share capital issued through scrip dividends 1,536 1,092
Equity settlement of share-based compensation (Note 22) 888 1,084
Shares issuance costs (45) (27)
852,386 850,007
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 2023 2022
In issue at beginning of the year 713,331 712,126
Shares issued through scrip dividends 1,017 649
Shares issued as share based compensation - net(i) 529 556
714,877 713,331
(i) Being the net share entitlement after adjustments to settle taxes.
Gross number of ordinary shares entitlement, before the settlement of taxes,
as share-based compensation amounted to the following:
31 December 31 December
In thousands of shares 2023 2022
LTIP 330 636
STIP 463 367
793 1,003
All of the ordinary shares issued rank pari passu. 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 and other capital 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 amounting to a debit
balance of £1,635,000 (31 December 2022: credit balance of £14,153,000)
comprises foreign currency differences arising from the translation of the
financial statements of foreign operations. The remaining balance of other
capital reserve relates to statutory amounts required to be allocated to this
reserve account and which may not be distributed.
Dividends
The dividends declared and paid by the Company during the year ended 31
December 2023 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2023
2022 2nd interim dividend of 3.740 pence per qualifying ordinary share - for
the period
1 July 2022 to 31 December 2022 26,679
2023 1st interim dividend of 3.965 pence per qualifying ordinary share - for
the period
1 January 2023 to 30 June 2023 28,345
Total dividends declared and paid during the year 55,024
The 31 December 2022 2nd interim dividend was paid in April 2023. The value of
the scrip election was £1,536,000, with the remaining amount of
£25,143,000 paid in cash to those investors that did not elect for the scrip.
The 30 June 2023 1st interim dividend was paid in October 2023. The value of
the scrip election was £28,345,000. The scrip alternative was not available
with this dividend payment.
The dividends declared and paid by the Company during the year ended 31
December 2022 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2022
2021 2nd interim dividend of 3.665 pence per qualifying ordinary share - for
the period
1 July 2021 to 31 December 2021 26,099
2022 1st interim dividend of 3.740 pence per qualifying ordinary share - for
the period
1 January 2022 to 30 June 2022 26,676
Total dividends declared and paid during the year 52,775
The 31 December 2021 2nd interim dividend was paid in April 2022. The value of
the scrip election was £964,000, with the remaining amount of
£25,135,000 paid in cash to those investors that did not elect for the scrip.
The 30 June 2022 1st interim dividend was paid in October 2022. The value of
the scrip election was £127,000 with the remaining amount of
£26,548,000 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 2023, 31 December
2022 and 31 December 2021 were as follows:
In thousands of Sterling/pence 2023 2022 2021
NAV attributable to the owners of the Company 1,056,628 1,069,178 1,000,543
NAV per ordinary share (pence) 147.81 149.89 140.50
15. Earnings per share
a. Basic earnings per share
The basic earnings per share is calculated by dividing the profit for the year
by the weighted average number of ordinary shares outstanding.
Year ended 31 December Year ended 31 December
In thousands of Sterling/in thousands of shares 2023 2022
Profit for the year 40,287 119,042
Weighted average number of ordinary shares in issue 714,387 712,917
Basic earnings per share (in pence) 5.64 16.70
The weighted average number of ordinary shares outstanding for the purpose of
calculating the basic earnings per share is computed as follows:
Year ended 31 December Year ended 31 December
In thousands of shares 2023 2022
Shares outstanding as at 1 January 713,331 712,126
Effect of scrip dividends issued 763 443
Shares issued as share-based compensation 293 348
Weighted average - outstanding shares 714,387 712,917
b. Diluted earnings per share
The diluted earnings per share is calculated by dividing the profit for the
year by the weighted average number of ordinary shares outstanding, after
adjusting for the effects of all potential dilutive ordinary shares. There
were no items of the consolidated income statement accounts which have a
dilutive effect on the profit for the year.
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 31 December Year ended 31 December
In thousands of shares 2023 2022
Weighted average number of ordinary shares for basic earnings per share 714,387 712,917
Effect of potential dilution from share-based payment 2,412 852
Weighted average - outstanding shares 716,799 713,769
The price of the Company's shares for the purpose of calculating the potential
dilutive effect of award letters (see Note 22) was based on the average market
price for the year ended 2023 and 2022, during which period the awards were
outstanding.
16. Loans and borrowings
The Group RCF with ING Bank, KFW IPEX Bank, DZ Bank, Frankfurt Am Main and
SMBC Bank EU AG for a total commitment of £230 million. The tenor of the RCF
is five years (maturing in May 2026). The borrowing margin is 165 bps over the
reference bank rate. Under the RCF, the Group retains the possibility to
consider larger transactions by virtue of having structured a further £70
million incremental accordion tranche, on which no commitment fees are paid.
Outstanding borrowings under the RCF as at 31 December 2023 amounted to £nil
million (31 December 2022: £57.5 million). As at 31 December 2023, the Group
has utilised £1.4 million (31 December 2022: £1.3 million) of the £230
million RCF, to cover letters of credit.
The interest and other related fees payables under the RCF as at 31 December
2023 amounted to £233,000 (31 December 2022: £230,000).
The RCF unamortised debt issuance cost amounted to £771,000 as at 31 December
2023 (2022: £1,094,000). The unamortised debt issuance cost is presented as
part of 'Other non-current assets' in the Consolidated Statement of Financial
Position (2022: as part of 'Loans and borrowings').
The total finance cost incurred under the RCF for the year ended 31 December
2023 amounted to £3,061,000 (31 December 2022: £2,171,000) which includes
amortisation of debt issuance costs of £323,000 (31 December 2022:
£549,000).
Changes in liabilities arising from financing activities
1 January Foreign exchange 31 December
In thousands of Sterling 2023 Proceeds Repayment Others 2023
Loans and borrowings_non-current 56,390 15,000 (71,404) (1,080) 1,094 -
1 January Foreign exchange 31 December
In thousands of Sterling 2022 Proceeds Repayment Others 2022
Loans and borrowings_non-current - 72,512 (17,000) 1,972 (1,094) 56,390
Pledges and collaterals
As of 31 December 2023, and 31 December 2022, 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, where there is a continuing event of
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.
17. Trade and other payables
Trade and other payables are non-interest bearing and are usually settled
within six months.
18. Financial risk review and management
Risk management framework
The Management Board has overall responsibility for the establishment and
control of the Group's risk management framework.
The Group has exposure to credit risk, liquidity risk and market risk. This
note presents information about the Group's exposure to each of these 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 these risk areas.
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 Sterling 2023 2022
Derivative financial assets Trade and other receivables 2,663 2,885
Cash and cash equivalents 865 909
9,672 31,157
13,200 34,951
The maximum exposure to credit risk on receivables that are neither overdue
nor impaired as of 31 December 2023, amounts to £865,000 (2022: £909,000).
As of 31 December 2023, the Group is also exposed to credit risk on the loan
receivable, interest, and other receivable components of Investments at FVPL
(loans provided to Portfolio Companies) totalling to £275,833,000 (2022:
£282,378,000).
Cash and cash equivalents and foreign currency forwards
The cash and cash equivalents and foreign currency forward contracts (recorded
either as 'derivative financial assets' or 'derivative financial liabilities')
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+/A1 and A+-/Aa3.
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 2023 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Loans and borrowings (Note 16) 233 3,318 1,377 1,941
Trade and other payables 2,697 2,697 2,697 -
Net derivative liability 2,823 2,823 2,823 -
5,753 8,838 6,897 1,941
Contractual cash flows
31 December 2022 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Loans and borrowings (Note 16) 56,620 65,112 19,907 45,205
Trade and other payables 3,242 3,242 3,242 -
Net derivative liability 5,808 5,808 121 5,687
65,670 74,162 23,270 50,892
The Group needs to maintain certain financial covenants under the RCF.
Non-compliance with such covenants may trigger an event of default (see Note
16). At 31 December 2023 and 2022, the Group was not in breach of any of the
covenants under the RCF.
Depending on capital market conditions, the Company has the possibility of
raising capital through the issuance of shares, or it can also use free cash
flows generated by the Investments at FVPL in order to finance further
acquisitions or to 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.
Currency risk
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.
The Group is exposed to currency risk as a result of the cash flows from
underlying Investments at FVPL and cash and cash equivalents being denominated
in currencies other than Sterling. The currencies in which these items are
primarily denominated are Australian dollars (A$), Canadian dollars (C$),
Euros (€), Norwegian kroner (NOK) and US dollars (US$).
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 Sterling, the Group's policy is to ensure that its net exposure is
kept at an acceptable level. The Company accepts that risk from foreign
exchange exposure is an inherent aspect of holding an international portfolio
of investments. However, the Management Board believes that, in addition to
the hedging program in place, this risk is further 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 2023
In thousands of Sterling A$ C$ € NOK US$
Financial assets measured at fair value
Investments at FVPL 97,181 373,986 109,323 21,371 103,749
Financial assets measured at amortised cost
Cash and cash equivalents 1,177 4,084 782 2 96
Trade and other receivables 90 761 - - -
1,267 4,845 782 2 96
Financial liabilities measured at amortised cost
Trade and other payables - (581) (844) - -
31 December 2022
In thousands of Sterling A$ C$ € NOK US$
Financial assets measured at fair value
Investments at FVPL 112,414 386,678 106,655 25,365 117,730
Financial assets measured at amortised cost
Cash and cash equivalents 18 10,117 579 3 101
Trade and other receivables 148 467 76 - 201
166 10,584 655 3 302
Financial liabilities measured at amortised cost
Trade and other payables (17) (688) (877) - (80)
Loan and borrowings - - (42,497) - -
(17) (688) (43,374) - (80)
The significant exchange rates applied during the year ended 31 December 2023
and 31 December 2022 are as follows:
31 December 2023
Average £ Spot rate £
A$ 1 0.535 0.535
C$1 0.596 0.593
€1 0.870 0.867
NOK 1 0.076 0.077
US$ 1 0.804 0.785
31 December 2022
Average £ Spot rate £
A$ 1 0.562 0.564
C$1 0.623 0.610
€1 0.853 0.885
NOK 1 0.084 0.084
US$ 1 0.811 0.827
The sensitivity of the NAV to a 10 per cent positive and adverse movement in
foreign exchange rates is disclosed in Note 19 to the consolidated financial
statements. This scenario assumes that all other macroeconomic assumptions
remain constant
Interest rate risk
Except for the loans and other receivables from Portfolio 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 2023 and 2022, 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 (see Note 16). 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 19 for a sensitivity analysis of the impact of a change on
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 Portfolio Companies. The distributions to be
received from the Portfolio Companies are dependent on cash received by a
particular Portfolio Company under the service concession agreements.
The service concession agreements are predominantly granted to the Portfolio
Companies 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 contracts.
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 Portfolio 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
14) and the RCF (see Note 16) 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 ('cash flow hedges') and on a portion of the non-Sterling and
non-Euro denominated portfolio value ('balance sheet hedges'). 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 other operating
expenses and net gain(loss) on balance sheet hedging.
Derivative financial assets and liabilities are offset and the net amount is
reported in the consolidated statement of financial position as the Group has
a legally enforceable right to offset the recognised amounts, and there is an
intention to settle on a net basis. Cash flows from the settlement of cash
flow hedges and balance sheet hedges are presented as part of the net cash
flows in operating and investing activities, respectively.
19. 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 (i.e. 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.
31 December 2023 Fair value
In thousands of Sterling Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Investments at FVPL - - 1,047,244 1,047,244
Derivative financial assets - 2,663 - 2,663
Financial liabilities measured at fair value
Derivative financial liabilities - (2,823) - (2,823)
31 December 2022 Fair value
In thousands of Sterling Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Investments at FVPL - - 1,102,844 1,102,844
Derivative financial assets - 2,885 - 2,885
Financial liabilities measured at fair value
Derivative financial liabilities - (8,693) - (8,693)
Refer to table presented in Note 9 for the reconciliation of the movements in
the fair value measurements in level 3 of the fair value hierarchy for
Investments at FVPL. There were no transfers between any levels during the
year.
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.
Key Portfolio Company and portfolio cash flow assumptions underlying NAV
calculation include:
- Discount rates and the Assumptions, as set out below, continue to be
applicable.
- The updated financial models used for the 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 investments are valued in local currency and converted to
Sterling at either the period-end spot foreign exchange rates or the
contracted foreign exchange rate.
- Where the operating costs of the Portfolio Companies are contractually
fixed, 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.
- 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 passed down to subcontractors under contractual arrangements or
are part of the planned (lifecycle) forecasts.
- Changes to the concession period for certain investments are realised.
- In cases where the Portfolio Companies have contracts which are in the
construction phase, they are either completed on time or any delay costs are
borne by the construction contractors.
- Enacted tax or regulatory changes, or forecast changes with a high
probability, on or prior to this reporting period-end with a future effect
materially impacting cash flow forecasts, are reflected in the financial
models.
In forming the above assessments, BBGI uses its judgement and works with our
Portfolio Company management teams, as well as using due diligence information
from, or working with, suitably qualified third parties such as technical,
legal, tax and insurance advisers.
Macroeconomic assumptions
31 December 2023 31 December 2022
UK(i) RPI/CPIH 5.20% (actual) for 2023; 3.80% for 2024 then 3.00% (RPI) / 2.25% (CPIH) 13.40% (actual) for 2022; 5.80% for 2023 then 2.75% (RPI) / 2.00% (CPIH)
Inflation
Canada 3.90% (actual) for 2023; 2.50% for 2024; 2.10% for 2025 then 2.00% 6.30% (actual) for 2022; 4.00% for 2023; 2.30% for 2024 then 2.0%
Australia 4.50% for 2023; 3.50% for 2024; 3.00% for 2025 then 2.50% 8.00% for 2022; 4.75% for 2023; 3.25% for 2024 then 2.50%
Germany(ii) 3.70% (actual) for 2023; 2.70% for 2024; 2.10% for 2025 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Netherlands(ii) 3.80% (actual) for 2023; 2.70% for 2024; 2.10% for 2025 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Norway(ii) 4.80% (actual) for 2023; 4.50% for 2024; 2.50% for 2025 then 2.25% 5.90% (actual) for 2022; 4.90% for 2023 then 2.25%
US 3.40% (actual) for 2023 then 2.50% 6.50% (actual) for 2022; 3.40% for 2023 then 2.50%
Deposit rates (p.a.) UK 4.50% to Q4 2024, then 2.50% 2.00% to Q4 2024, then 1.50%
Canada 4.75% to Q4 2024, then 2.50% 3.50% to Q4 2024, then 1.75%
Australia 4.75% to Q4 2024, then 3.50% 3.25% to Q4 2024, then 3.00%
Germany/ Netherlands 3.25% to Q4 2024, then 2.00% 0.50% to Q4 2024, then 1.00%
Norway 4.75% to Q4 2024, then 2.75% 2.00% to Q4 2024, then 2.00%
US 4.50% to Q4 2024, then 2.50% 3.75% to Q4 2024, then 1.50%
UK 25.00% 19.00% until March 2023 then 25.00%
Corporate tax rates (p.a.)
Canada(iii) 23.00%/26.50%/27.00%/29.00% 23.00%/26.50%/27.00%/29.00%
Australia 30.00% 30.00%
Germany(iv) 15.83% 15.83%
Netherlands 25.80% 25.80%
Norway 22.00% 22.00%
US 21.00% 21.00%
((i)) On 25 November 2020, the UK Government announced the phasing out of RPI
after 2030 to be replaced with CPIH. The Company's UK portfolio indexation
factor changes from RPI to CPIH beginning on 1 January 2031.
((ii)) CPI indexation only. Where investments are subject to a basket of
indices, a projection for non-CPI indices is used.
((iii)) Individual tax rates vary among Canadian provinces: Alberta; Ontario;
Quebec; Northwest Territories; Saskatchewan; British Columbia; New Brunswick.
((iv)) Including solidarity charge; individual local trade tax rates are
considered in addition to the tax rate above.
Based on data from transactional activity, benchmark analysis with comparable
companies and sectors, discussions with advisers in the relevant markets,
publicly available information gathered over the year and equity risk premium
over government bond yields, we have increased the weighted average discount
rate to 7.3 per cent (31 December 2022: 6.9 per cent). 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. Furthermore, the Group, with the advice of
external experts, has considered the impact of climate change on the value of
the investments at FVPL and has concluded that no valuation adjustment was
required.
Discount rate sensitivity
The weighted average discount rate 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:
+1% to 8.3% in 2023(i) -1% to 6.3% in 2023(i)
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 (76,995) (76,995) 88,329 88,329
31 December 2022 (87,101) (87,101) 100,702 100,702
(i) Based on the weighted average discount rate of 7.3 per cent (31
December 2022: 6.9 per cent).
Inflation has increased in all jurisdictions across BBGI's geographies, and
interest rates have risen from historical lows, although in some jurisdictions
these trends have reversed over the period. Should long-term interest rates
change substantially further, this is likely to further affect discount rates,
and as a result, impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that macroeconomic movements would affect discount
rates, deposit rates and inflation rates, and not be isolated to one variable.
To illustrate the effect of this combined movement on the Company's NAV, two
scenarios were created assuming a one percentage point change in the weighted
average discount rate, and a one percentage point change in both deposit and
inflation rates above the macroeconomic assumptions.
Increase by 1% Decrease by 1%
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 (16,344) (16,344) 19,915 19,915
31 December 2022 (22,796) (22,796) n/a n/a
Inflation sensitivity
The Company's investments are contractually entitled to receive contracted
revenue streams from public sector clients, which are typically adjusted every
year for inflation. Facilities management subcontractors for accommodation
investments and operating and maintenance subcontractors for transport
investments have similar indexation arrangements. The portfolio cash flows are
positively linked with inflation (e.g. RPI, CPI, or a basket of indices).
This inflation-linkage is achieved through contractual indexation mechanics in
the various project agreements with the public sector clients at the portfolio
companies and the inflation adjustment updated at least annually.
The table below shows the sensitivity of the NAV to a change in inflation
rates compared to the assumptions in the table above:
+1% -1%
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 45,370 45,370 (40,852) (40,852)
31 December 2022 51,508 51,508 (45,524) (45,524)
Short-term inflation sensitivity
Inflation may continue to be elevated for the short-term before diminishing.
To illustrate the effect of persistent higher short-term inflation on the
Company's NAV, two scenarios were created assuming inflation is two percentage
points above our assumptions for the next one, and three years.
+2%
In thousands of Sterling Equity Profit or loss
Inflation +2% for one year 11,667 11,667
Inflation +2% for three years 30,737 30,737
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:
Increase by 10%(i) Decrease by 10%(i)
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 (30,875) (30,875) 31,161 31,161
31 December 2022 (23,665) (23,665) 31,488 31,488
(i) Sensitivity in comparison to the spot foreign exchange rates as at
31 December 2023 and considering the contractual and natural hedges in place,
derived by applying a ten per cent increase or decrease to the
Sterling/foreign currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be
maintained as part of the senior debt funding requirements (e.g. six-month
debt service reserve accounts and 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 long-term assumptions in the table
above:
+1% -1%
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 21,029 21,029 (21,674) (21,674)
31 December 2022 20,659 20,659 (20,635) (20,635)
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or replacing material
parts of an asset to maintain it over the concession term. They involve 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 56 investments in the portfolio, 20 investments retain the lifecycle
obligations. The remaining 36 investments have this obligation passed down to
the subcontractor.
The table below shows the sensitivity of the NAV to a change in lifecycle
costs:
Increase by 10%(i) Decrease by 10%(i)
Effects in thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 (24,865) (24,865) 22,801 22,801
31 December 2022 (25,956) (25,956) 23,459 23,459
((i) ) Sensitivity applied to the 20 investments in the portfolio
that 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 a change in corporate tax
rates compared to the assumptions in the table above:
+1% in 2023 -1% in 2022
In thousands of Sterling Equity Profit or loss Equity Profit or loss
31 December 2023 (12,189) (12,189) 12,045 12,045
31 December 2022 (11,150) (11,150) 11,011 11,011
Refinancing: senior debt rate 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 one percentage point
increase in the forecasted debt rate.
Margin +1%
In thousands of Sterling Equity Profit or loss
2023 (7,942) (7,942)
2022 (9,051) (9,051)
Refinancing sensitivity relates to the Northern Territory Secure Facilities,
as it is common practice in the Australian infrastructure market to have
senior debt durations that are typically between five and seven years. We
assume three refinancings for the Northern Territory Secure Facilities,
between the fourth quarter of 2025 and the fourth quarter of 2038. Long-term
interest rate hedges fully mitigate base rate risk, leaving exposure only to
potential changes in margin.
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 2023 amounted to a net liability of £160,000 (31 December 2022:
£5,808,000 - net liability). The counterparty bank has an S&P/Moody's
long-term credit rating of A+/A1.
During the year, the Group recognised the following net gains/(losses) on
derivatives financial instruments at FVPL:
Year ended Year ended
31 December 2023 31 December 2022
In thousands of Sterling Realised Unrealised Realised Unrealised
Cash flow hedging (913) 10,146 (3,779) (7,547)
Balance sheet hedging 13,371 (4,497) (12,550) 1,978
12,458 5,649 (16,329) (5,569)
20. Subsidiaries
During the year ended 31 December 2023, the Company had the following
consolidated subsidiaries ('Holding Companies' if referred to individually)
which are included in the consolidated financial statements:
Company Country of Incorporation Effective Ownership Interest Year Acquired/ Established
BBGI Global Infrastructure S.A. Luxembourg Ultimate Parent 2011
BBGI Management HoldCo S.à r. l. ('MHC') Luxembourg 100% 2011
BBGI Inv, S.à r. l. Luxembourg 100% 2012
BBGI Investments S.C.A. Luxembourg 100% 2012
BBGI Holding Limited UK 100% 2012
BBGI (NI) Limited UK 100% 2013
BBGI (NI) 2 Limited UK 100% 2015
BBGI CanHoldco Inc. Canada 100% 2013
BBGI Ireland Limited Ireland 100% 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 of Effective Acquired
Company Asset name Incorporation Ownership Controlled
RW Health Partnership Holdings Pty Limited Royal Women's Hospital Australia 100% 2012
RWH Health Partnership Pty Limited Royal Women's Hospital Australia 100% 2012
RWH Finance Pty Limited Royal Women's Hospital Australia 100% 2012
Victorian Correctional Infrastructure Partnership Pty Limited Victorian Correctional Facilities Australia 100% 2012
BBGI Guernsey Holding Limited (i) Northern Territory Secure Facilities Australia 100% 2013
BBPI Sentinel Holdings Pty Limited Northern Territory Secure Facilities Australia 100% 2014
BBPI Sentinel Holding Trust Northern Territory Secure Facilities Australia 100% 2014
BBPI Sentinel Pty Limited Northern Territory Secure Facilities Australia 100% 2014
BBPI Member Trust Northern Territory Secure Facilities Australia 100% 2014
Sentinel Partnership Pty Limited Northern Territory Secure Facilities Australia 100% 2014
and 2015
Sentinel UJV Northern Territory Secure Facilities Australia 100% 2014
and 2015
Sentinel Financing Holdings Pty Limited Northern Territory Secure Facilities Australia 100% 2014
and 2015
Sentinel Financing Pty Limited Northern Territory Secure Facilities Australia 100% 2014
and 2015
Sentinel Finance Holding Trust Northern Territory Secure Facilities Australia 100% 2014
and 2015
Sentinel Finance Trust Northern Territory Secure Facilities Australia 100% 2014
and 2015
BBGI Sentinel Holdings 2 Pty Limited Northern Territory Secure Facilities Australia 100% 2015
BBGI Sentinel Holding Trust 2 Northern Territory Secure Facilities Australia 100% 2015
BBGI Sentinel 2 Pty Limited Northern Territory Secure Facilities Australia 100% 2015
BBGI Sentinel Trust 2 Northern Territory Secure Facilities Australia 100% 2015
BBGI Champlain Holding Inc. Champlain Bridge Canada 100% 2020
BBGI SSLG Partner Inc. Champlain Bridge Canada 100% 2020
Golden Crossing Holdings Inc. Golden Ears Bridge Canada 100% 2012
and 2013
Golden Crossing Finance Inc. Golden Ears Bridge Canada 100% 2012
and 2013
Golden Crossing Inc. Golden Ears Bridge Canada 100% 2012
and 2013
Global Infrastructure Limited Partnership Golden Ears Bridge Canada 100% 2012
and 2013
Golden Crossing General Partnership Golden Ears Bridge Canada 100% 2012
and 2013
BBGI KVH Holdings Inc. Kelowna & Vernon Hospitals Canada 100% 2013
BBGI KVH Inc. Kelowna & Vernon Hospitals Canada 100% 2013
BBGI KVH Holdings 2 Inc. Kelowna & Vernon Hospitals Canada 100% 2020
BBGI KVH 2 Inc. Kelowna & Vernon Hospitals Canada 100% 2020
Infusion Health KVH General Partnership Kelowna & Vernon Hospitals Canada 100% 2013
and 2020
BBGI 104 GP Inc. Highway 104 Canada 100% 2020
WCP Holdings Inc. Women's College Hospital Canada 100% 2013
WCP Inc. Women's College Hospital Canada 100% 2013
WCP Investments Inc. Women's College Hospital Canada 100% 2013
Women's College Partnership Women's College Hospital Canada 100% 2013
Stoney Trail Group Holdings Inc. North East Stoney Trail Canada 100% 2013
Stoney Trail LP Inc. North East Stoney Trail Canada 100% 2013
Stoney Trail Investments Inc. North East Stoney Trail Canada 100% 2013
Stoney Trail Inc. North East Stoney Trail Canada 100% 2013
Stoney Trail Global Limited Partnership North East Stoney Trail Canada 100% 2013
Stoney Trail General Partnership North East Stoney Trail Canada 100% 2013
BBGI NCP Holdings Inc. North Commuter Parkway Canada 100% 2015
BBGI Stanton Holdings Inc. Stanton Territorial Hospital Canada 100% 2018
and 2020
BBGI Stanton Partner 1 Inc. Stanton Territorial Hospital Canada 100% 2018
and 2020
BBGI Stanton Partner 2 Inc. Stanton Territorial Hospital Canada 100% 2020
Boreal Health Partnership Stanton Territorial Hospital Canada 100% 2018
and 2020
PJB Beteiligungs-GmbH Burg Correctional Facilities Germany 100% 2012
Projektgesellschaft Justizvollzug Burg GmbH & Co. KG Burg Correctional Facilities Germany 90% 2012
PJB Management-GmbH Burg Correctional Facilities Germany 100% 2012
Kreishaus Unna Holding GmbH Unna Administrative Centre Germany 100% 2012
and 2020
Projekt- und Betriebsgesellschaft Kreishaus Unna mbH Unna Administrative Centre Germany 90% 2012
and 2020
BBGI PPP Investment S.à r.l. A7 Motorway Luxembourg 100% 2018
De Groene Schakel Holding B.V. Westland Town Hall Netherlands 100% 2018
and 2019
De Groene Schakel B.V. Westland Town Hall Netherlands 100% 2018
and 2019
Noaber18 Holding B.V. N18 Motorway Netherlands 52% 2018, 2019
and 2020
Noaber18 B.V. N18 Motorway Netherlands 52% 2018, 2019
and 2020
Agder OPS Vegselskap AS E18 Motorway Norway 100% 2013
and 2014
Bedford Education Partnership Holdings Limited Bedford Schools UK 100% 2012
Bedford Education Partnership Limited Bedford Schools UK 100% 2012
Lisburn Education Partnership (Holdings) Limited Lisburn College UK 100% 2012
Lisburn Education Partnership Limited Lisburn College UK 100% 2012
Clackmannanshire Schools Education Partnership (Holdings) Limited Clackmannanshire Schools UK 100% 2012
Clackmannanshire Schools Education Partnership Limited Clackmannanshire Schools UK 100% 2012
Primaria (Barking & Havering) Limited Barking Dagenham & Havering (LIFT) UK 100% 2012
Barking Dagenham Havering Community Ventures Limited Barking Dagenham & Havering (LIFT) UK 60% 2012
Barking & Havering LIFT (Midco) Limited Barking Dagenham & Havering (LIFT) UK 60% 2012
Barking & Havering LIFT Company (No.1) Limited Barking Dagenham & Havering (LIFT) UK 60% 2012
Scottish Borders Education Partnership (Holdings) Limited Scottish Borders Schools UK 100% 2012
Scottish Borders Education Partnership Limited Scottish Borders Schools UK 100% 2012
Coventry Education Partnership Holdings Limited Coventry Schools UK 100% 2012
Coventry Education Partnership Limited Coventry Schools UK 100% 2012
Fire Support (SSFR) Holdings Limited Stoke & Staffs Rescue Service UK 85% 2012
Fire Support (SSFR) Limited Stoke & Staffs Rescue Service UK 85% 2012
Highway Management M80 Topco Limited M80 Motorway UK 100% 2012
Tor Bank School Education Partnership (Holdings) Limited Tor Bank School UK 100% 2013
Tor Bank School Education Partnership Limited Tor Bank School UK 100% 2013
Mersey Care Development Company 1 Limited Mersey Care Hospital UK 100% 2013
and 2014
MG Bridge Investments Limited Mersey Gateway Bridge UK 100% 2014
Lagan College Education Partnership (Holdings) Limited Lagan College UK 100% 2014
Lagan College Education Partnership Limited Lagan College UK 100% 2014
Highway Management (City) Holding Limited M1 Westlink UK 100% 2014
Highway Management (City) Finance Plc M1 Westlink UK 100% 2014
Highway Management (City) Limited M1 Westlink UK 100% 2014
GB Consortium 1 Limited North London Estates Partnership (LIFT) UK 100% 2012, 2014
Liverpool & Sefton Clinics (LIFT) and 2018
East Down Education Partnership (Holdings) Limited East Down Colleges UK 100% 2012
and 2018
East Down Education Partnership Limited East Down Colleges UK 100% 2012
and 2018
Blue Light Partnership (ASP) NewCo Limited(ii) Avon & Somerset Police HQ UK 100% 2014
and 2016
Blue Light Partnership (ASP) Holdings Limited Avon & Somerset Police HQ UK 100% 2014, 2015
and 2016
Blue Light Partnership (ASP) NewCo 2 Limited(ii) Avon & Somerset Police HQ UK 100% 2015
GT ASP Limited(ii) Avon & Somerset Police HQ UK 100% 2015
Blue Light Partnership (ASP) Limited Avon & Somerset Police HQ UK 100% 2014, 2015
and 2016
Northwin Limited North West Regional College UK 100% 2015
Northwin (Intermediate) (Belfast) Limited Belfast Metropolitan College UK 100% 2016
Northwin (Belfast) Limited Belfast Metropolitan College UK 100% 2016
Folera TH Holdings Limited Poplar Affordable Housing & Recreational Centres Jersey 100% 2021
Folera Limited Poplar Affordable Housing & Recreational Centres Jersey 100% 2021
Woodland View Holdings Co Limited Ayrshire and Arran Hospital UK 100% 2021
Woodland View Intermediate Co Limited Ayrshire and Arran Hospital UK 100% 2021
Woodland View Project Co Limited Ayrshire and Arran Hospital UK 99% 2021
Fire and Rescue NW Holdings Limited North West Fire and Rescue UK 100% 2021
Fire and Rescue NW Intermediate Limited North West Fire and Rescue UK 100% 2021
Fire and Rescue NW Limited North West Fire and Rescue UK 100% 2021
BBGI East End Holdings Inc. Ohio River Bridges US 100% 2014
(i) Accounted as part of Investment at FVPL starting at 1 July
2023
(ii) In the process of liquidation as at 31 December
2023
21. Related parties and key contracts
All transactions with related parties were undertaken on an arm's length
basis.
Supervisory Board fees
The members of the Supervisory Board of the Company were entitled to total
fees of £315,000 for the year ended 31 December 2023 (2022: £260,000).
Directors' shareholding in the Company
31 December 31 December
In thousands of shares 2023 2022
Management Board
Duncan Ball 1,071 871
Frank Schramm((i)) 1,001 829
Michael Denny 650 504
Supervisory Board
Sarah Whitney 60 39
June Aitken 56 31
Andrew Sykes 40 40
Christopher Waples 17 17
Jutta af Rosenborg 8 -
2,903 2,331
((i) ) Retired on 31 January 2024
Remuneration of 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 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Short-term benefits 2,676 2,944
Share-based payments 1,750 1,536
4,426 4,480
Trade and other receivables
As at 31 December 2023, trade and other receivables include short-term
receivables from non-consolidated subsidiaries amounting to £865,000 (2022:
£909,000).
22. Share-based compensation
Each of the members of the Management Board received award letters ('2022
Award', '2021 Award', and '2020 Award', respectively and referred collectively
as 'Awards') under the Group's LTIP. These Awards are to be settled by MHC in
the Company's own shares. The Awards vest by reference to a combination of
performance measures including the increase in the Company's Investment Basis
NAV per share ('NAV condition'), key climate-related environmental metrics,
including a reduction in corporate GHG emissions (Scopes 1, 2 & 3)
(against a 2019 baseline) and progress in the implementation of net zero
targets related to BBGI Portfolio Companies (Financed Emissions) by value, in
accordance with published targets related to BBGI's commitments as a signatory
of the Net Zero Asset Managers Initiative decrease in Corporate Greenhouse Gas
Emissions ('GHG') over the Return Periods.
2020 Award
For 2020 awards, 100 per cent of the performance target will be subject to
stretching NAV Total Return over a three-year period.
Performance metric Threshold performance Target performance Maximum performance
NAV total return Dividend of 7.18p per annum to 2023, and NAV per share maintained from Dividend growth of 2% per annum to 2023; and 1% per annum NAV per share growth Dividend growth of 2% per annum to 2023; and 2% per annum NAV per share growth
to 31 December 2023. to 31 December 2023.
(100% weighting) 31 December 2020 to 31 December 2023.
2021 Award
For 2021 awards, 90 per cent of the performance target will be subject to
stretching NAV Total Return targets over a three-year period.
10 per cent of the award will be linked to a reduction in corporate GHG
emissions (Scope 1, 2 & 3) (against a 2019 baseline), a key
climate-related ESG metric linked to BBGI's Net Zero Plan.
Performance metric Threshold performance Target performance Maximum performance
NAV total return Dividend of 7.33p per annum to 2024, and NAV per share maintained from 31 Dividend growth of 2% per annum to 2024; and 1% per annum NAV per share growth Dividend growth of 2% per annum to 2024; and 2% per annum NAV per share growth
December 2021 to 31December 2024. to 31 December 2024. to 31 December 2024.
(90% of weighting)
ESG - percentage of Corporate GHG emissions (Scope 1, 2 & 3) GHG emissions as a percentage of 2019 baseline (as at 31 December 2024)
(10% weighting)
77% 75% 72%
2022 Award
For the 2022 award, 80 per cent of the performance target will be subject to
stretching NAV Total Return targets over a three-year period.
20 per cent of the award will be linked to key climate-related ESG metrics,
comprising (i) 10 per cent linked to a reduction in corporate GHG emissions
(Scopes 1, 2 & 3) (against a 2019 baseline) and (ii) 10 per cent linked to
progress in the implementation of net zero targets related to BBGI Portfolio
Companies (Financed Emissions) by value, in accordance with published targets
related to BBGI's commitments as a signatory of the Net Zero Asset Managers
Initiative.
Performance metric Threshold performance Target performance Maximum performance
NAV growth per share + dividends paid 15% 17% 22%
(expressed as a percentage of opening NAV)
(80% of weighting)
ESG - percentage of corporate GHG emissions (Scope 1, 2 & 3) GHG emissions as a percentage of 2019 baseline (as at 31 December 2025)
(10% weighting)
73% 70% 67%
ESG - the implementation of net zero plans across BBGI assets (by value) The percentage of asset by value meeting the criteria for 'net zero',
'aligned' or 'aligning'
(10% weighting)
23% 26% 30%
The fair value of the equity instruments awarded to the Management Board was
determined using the following key parameters:
2022 Award 2021 Award 2020 Award
Share price at grant date £1.550 £1.760 £1.700
Maturity 3 years 3 years 3 years
Annual target dividend (2025) £0.0793 - -
Annual target dividend (2024) £0.0840 £0.0771 -
Annual target dividend (2023) £0.0793 £0.0755 £0.0733
Annual target dividend (2022) - £0.0741 £0.0733
Annual target dividend (2021) - - £0.0733
The Group also has issued restricted share awards to selected employees. The
restricted share award 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 Sterling 2023 2022
2022 Award 407 -
2021 Award 707 354
2020 Award 1,036 691
2019 Award - 445
Deferred STIP 519 708
Staff Award Plan 444 304
Amount recognised in additional paid-in capital 3,113 2,502
During the year ended 31 December 2023, the 2019 Award vested, resulting in a
gross entitlement before tax, of 330,253 shares. A portion of the 2019 Award
was settled in cash in order to realise sufficient funds to settle resulting
tax liabilities arising from the vesting, with only the net number of shares
being issued to each individual. The total accrued amount under the 2019 Award
as at 31 December 2022 was £445,000. This amount was transferred from
Additional paid in capital to Share capital at the settlement date plus an
adjustment of £124,000 for the non-market based performance condition.
The share-based compensation expenses amount recognised as part of
'administrative expenses' in the Group's consolidated income statement are as
follows:
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
2022 Award 407 -
2021 Award 353 354
2020 Award 345 345
2019 Award 123 148
2018 Award - (28)
Deferred STIP 522 718
Staff Award Plan 288 200
Amount recognised in administrative expenses 2,038 1,737
Deferred STIP
One-third of any bonus earned under the STIP is 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 one-third of the anticipated outcome of the
annual bonus for the Management Board. The total value of the Deferred STIP as
at 31 December 2023 was £519,000 (31 December 2022: £708,000).
23. 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 2023, the Group had utilised £1.4 million (31 December
2022: £1.3 million) of the £230 million RCF to cover letters of credit.
Refer to Note 16 for further details on the RCF.
The BBGI Luxembourg office is leased under a cancellable operating lease
agreement. The expenses incurred in relation to such lease are recognised as
office and other expenses under administrative expenses (see Note 6).
24. Service Concession Agreements
As at 31 December 2023, the Group has a portfolio of 56 assets (see Note 9),
with a weighted average portfolio life of 20.2 years. The Group has a diverse
asset mix from which the service concession receivables are derived. All
assets are availability-style. 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, which are all classified as
availability-style social infrastructure:
Period of Concession
% Equity (Operational Phase)
Asset Name Owned Short Description of Concession Arrangement Phase Start Date End Date
Kicking Horse Canyon 50% Design, build, finance and operate a 26 km stretch of the Trans- Canada Operational September 2007 October 2030
Highway, a vital gateway to British Columbia.
Golden Ears Bridge 100% Design, build, finance and operate the Golden Ears Bridge that spans the Operational June 2009 June 2041
Fraser River and connects Maple Ridge and Pitt Meadows to Langley and Surrey,
near Vancouver, British Columbia.
Northwest Anthony Henday Drive 50% Partly design, build, finance and operate a major transport infrastructure Operational November 2011 October 2041
asset in Canada, a ring road through Edmonton, capital of the province of
Alberta.
M80 Motorway 50% Design, build, finance and operate 18 km of dual two/three lane motorway with Operational July 2011 September 2041
associated slip roads and infrastructure from Stepps in North Lanarkshire to
Haggs in Falkirk (Scotland).
E18 Motorway 100% Design, build, finance, operate and maintain a 38 km dual carriageway in Operational August 2009 August 2034
Norway, including 75 bridges and structures and
75 km of secondary roads, carving through a rugged and beautiful landscape
between Grimstad and Kristiansand.
North East Stoney Trail 100% Design, build, finance, operate and maintain a 21 km section of highway, Operational November 2009 October 2039
forming part of a larger ring road developed in Calgary, Alberta, Canada.
Ohio River Bridges 67% Design, build, finance, operate and maintain East End Bridge asset which Operational December 2016 December 2051
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 Bridge 38% Design, build, finance, operate and maintain a new circa 1 km long six-lane Operational October 2017 March 2044
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% Design, build, finance, operate and maintain with significant amount of Operational February 2006 October 2036
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 Parkway 50% Design, build, finance, operate and maintain two new arterial roadways and a Operational October 2018 September 2048
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 27% Design, build, finance, operate and maintain a 19 km rapid transit line Operational August 2009 July 2040
connecting the cities of Vancouver and Richmond with Vancouver International
Airport in British Columbia, Canada.
Southeast Stoney Trail 40% Design, build, finance, operate and maintain a 25 km section of highway, Operational November 2013 September 2043
forming part of a larger ring road developed in Calgary, Alberta, Canada.
William R. Bennett Bridge 80% Design, build, finance, operate and maintain a 1.1 km long floating bridge in Operational May 2008 June 2035
Kelowna, British Columbia, Canada.
A1/A6 Motorway 37% Design, build finance operate and maintain the enlargement of the A1/A6 in the Operational July 2017 June 2042
Netherlands, which involves the reconstruction and widening of this 2x5 lanes
motorway plus 2 reversible direction lanes. The asset involves some 90
engineering structures.
N18 Motorway 52% Design, build, finance operate and maintain the extension of the N18 motorway Operational April 2018 April 2043
between Varsseveld and Enschede in the eastern part of the Netherlands. It
comprises of 15 km of existing and 27 km of a new 2x2-lane motorway with more
than 30 ecological passages, aiming at a reduction in traffic in certain
villages and safety improvement.
Highway 104 50% Design, build, finance, operate and maintain PPP following completion of Operational May 2020 August 2043
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 38 km to the existing divided highway just west of the Addington
Fork Interchange (Exit 31) at Antigonish.
Champlain Bridge 25% Design, construction, financing, operation, maintenance, and rehabilitation of Operational December 2020 October 2049
a new bridge spanning the St. Lawrence River between Montreal and Brossard,
Quebec.
Victorian Correctional Facilities 100% Design, build, finance, operate, and maintain for a period of 25 years, two Operational March 2006 (MRC)/ May 2031
new correctional facilities for the State of Victoria, Australia (MCC and
MRC). February 2006 (MCC)
Burg Correctional Facilities 90% Design, build, finance, operate, and maintain for a concession period of 25 Operational May 2009 April 2034
years, a new correctional facility for the state of Saxony-Anhalt, Germany.
Avon and Somerset Police HQ 100% Design, build, finance, operate and maintain four new build police and custody Operational July 2014/ July 2015 March 2039
facilities in the Avon and Somerset region (UK).
Northern Territory Secure Facilities 100% Design, build, finance, operate and maintain a new correctional facility, Operational November 2014 June 2044
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% Design, build, finance, operate and maintain the redevelopment of two Operational June 2006 December 2035
secondary schools in the County of Bedfordshire.
Coventry Schools 100% Design, build, finance, operate and maintain one new school and community Operational In stages from March 2006 to June December 2034
facilities for the Coventry City Council.
2009
Kent Schools 50% Design, build, finance, operate and maintain the redevelopment, which included Operational June 2007 September 2035
the construction of new build elements for each academy as well as extensive
reconfiguration and refurbishment of six academies.
Scottish Borders Schools 100% Design, build, finance, operate and maintain three new secondary schools for Operational July 2009 November 2038
Scottish Borders Council.
Clackmannanshire Schools 100% Design, build, finance, operate and maintain the redevelopment of three Operational In stages from January to May 2009 March 2039
secondary schools in Clackmannanshire, Scotland.
East Down Colleges 100% Design, build, finance, operate and maintain the three East Down Colleges Operational June 2009 May 2036
campuses in Northern Ireland.
Lisburn College 100% Design, build, finance, operate and maintain Lisburn College in Northern Operational April 2010 May 2036
Ireland.
Tor Bank School 100% Design, build, finance, operate and maintain a new school for pupils with Operational October 2012 October 2037
special education needs in Northern Ireland.
Lagan College 100% Design, build, finance operate and maintain the redevelopment of Lagan College Operational August 2013 June 2038
in Northern Ireland.
Cologne Schools 50% Design, build, finance operate and maintain the redevelopment of five schools Operational April 2005 December 2029
in Cologne.
Rodenkirchen Schools 50% Design, build, finance operate and maintain a school for approx. 1200 pupils Operational November 2007 November 2034
in Cologne.
Frankfurt Schools 50% Design, build, finance operate and maintain the redevelopment of four schools Operational August 2007 July 2029
in Frankfurt.
North West Regional College 100% Design, build, finance, operate and maintain the North West Regional College Operational February 2001 January 2026
educational campus in Northern Ireland.
Belfast Metropolitan College 100% Design, build, finance, operate and maintain the Belfast Metropolitan Operational September 2002 August 2027
educational campus in Northern Ireland.
Westland Town Hall 100% Design, build, finance, operate and maintain Westland Town Hall, a PPP Operational August 2017 August 2042
accommodation asset consisting of a new approximately 11,000m2 town hall for
the Dutch Municipality of Westland.
Gloucester Royal Hospital 50% Design, build, finance, operate and maintain a hospital scheme in Gloucester, Operational April 2005 February 2034
UK.
Liverpool and Sefton Clinics (LIFT) 60% Design, build, finance, operate and maintain the primary healthcare facilities Operational In 7 tranches starting April 2005 and ending February 2013 In 7 tranches starting April 2033 and ending February 2043
in Liverpool and Sefton, UK.
North London Estates Partnership (LIFT) 60% Design, build, finance, operate and maintain the primary healthcare facilities Operational In 4 tranches starting February 2006 and ending June 2013 In 4 tranches starting October 2030 and ending June 2043
of the Barnet, Enfield and Haringey LIFT programme, UK.
Barking Dagenham & Havering (LIFT) 60% Design, build, finance, operate and maintain 10 facilities/clinics in East Operational In 3 tranches starting October 2005 and ending October 2008 In 3 tranches starting September 2030 and ending September 2033
London, UK with asset construction completions between 2005 and 2009.
Royal Women's Hospital 100% Design, build, finance, operate and maintain a new nine-storey Royal Women's Operational June 2008 June 2033
Hospital in Melbourne.
Mersey Care Hospital (part of Liverpool Sefton Clinics (LIFT) above) 80% Design, build, finance, operate and maintain a new mental health in-patient Operational December 2014 December 2044
facility on the former Walton hospital site in Liverpool, UK.
Kelowna and Vernon Hospital 100% Design, build, finance, operate and maintain a new Patient Care Tower, a new Operational January 2012 August 2042
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 Hospital 100% Design, build, finance, operate and maintain the new Women's College Hospital Operational May 2013 (Phase 1), September 2015 (Phase 2), May 2043
in Toronto, Ontario, Canada.
March 2016 (final completion).
Restigouche Hospital Centre 80% Design, build, finance, operate and maintain the new Psychiatric Care Centre Operational June 2015 October 2044
in Restigouche, New Brunswick, Canada.
McGill University Health Centre 40% Design, build, finance, operate and maintain the new McGill University Health Operational October 2014 September 2044
Centre, Montreal, Canada.
Stanton Territorial Hospital 100% Design, build, finance, operate and maintain the new Stanton Territorial Operational December 2018 October 2048
Hospital, Yellowknife, Northwest Territories, Canada.
Stoke & Staffs Rescue Service 85% Design, build, finance, operate and maintain 10 new community fire stations in Operational November 2011 October 2036
Stoke-on-Trent and Staffordshire, UK.
Unna Administrative Centre 90% Design, build, finance, operate and maintain the administration building of Operational July 2006 July 2031
the Unna District in Rhine-Westphalia, Germany.
Fürst Wrede Military Base 50% Design, build, finance, operate and maintain the refurbishment and new Operational March 2008 March 2028
construction of a 32 hectare army barracks in Munich, Germany.
Poplar Affordable Housing & Recreational Centres 100% Design, construction, financing, operation, maintenance, and rehabilitation of Operational October 2015 July 2051
separate buildings.
Aberdeen Western Peripheral Route 33% Design, construction, financing, operations, and maintenance of 12 km of the Operational May 2018 November 2047
existing roadway (upgraded) and 47 km of new dual carriageway including two
significant river crossings.
Ayrshire and Arran Hospital 100% Design, construction, financing and maintenance of a 206-bed acute mental Operational March 2016 March 2041
health facility and community hospital in Irvine, North Ayrshire, Scotland.
North West Fire and Rescue 100% Design, construction, financing, maintenance, and rehabilitation of 16 new Operational June 2013 July 2038
community fire stations in the North West of England.
John Hart Generating Station 80% Design, construction, financing, maintenance and rehabilitation of a new Operational June 2019 October 2033
three-turbine, 132-MW hydroelectric power generation station on the Campbell
River, British Columbia, including a 3 generating unit underground powerhouse,
2.1 kilometers of water passage tunnels and a water bypass system to protect
downstream fish habitat.
A7 Motorway 49% Expansions and upgrades to certain critical sections of the A7 Motorway and Operational December 2019 August 2044
consists of the design, construction, financing, operation, maintenance, and
rehabilitation of 65 km widening from four to six lanes of a section of the A7
Motorway between Bordesholm and Hamburg. The project includes 11 interchanges,
six parking facilities, four rest areas, 79 civil engineering structures,
c.100,000 m2 noise barriers and a c.550-metre noise enclosure tunnel.
25. Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual
periods beginning after 1 January 2024 and earlier application is permitted;
however, the Group has not early adopted any of the forthcoming new or amended
standards in preparing these financial statements.
The Group intends to adopt these new and amended standards, if applicable,
when they become effective. The adoption of the below new standard is not
expected to have a significant impact on the Group's financial statements.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
The amendments specify the requirements for classifying liabilities as current
or non-current and clarify:
- What is meant by a right to defer settlement
- That a right to defer must exist at the end of the reporting period
- That classification is unaffected by the likelihood that an entity will
exercise its deferral right
- That only if an embedded derivative in a convertible liability is itself
an equity instrument would the terms of a liability not impact its
classification The amendments are effective for annual reporting periods
beginning on or after 1 January 2024 and must be applied retrospectively.
26. Events after the end of the reporting period
Dividend declaration
In February 2024, the Company declared a 2nd interim dividend of 3.965 pence
per share for qualifying shareholders for the period 1 July - 31 December
2023. The dividend is expected to be paid in April 2024.
Grant of Share Awards under LTIP
In February 2024, each of the members of the Management Board received an
award letter ('2023 Award'). The maximum number of shares that could be issued
under this award was determined by using the average closing price of the
Company's share price during December 2023, as ascertained from the Official
List, which was 134.31 pence per share. Subject to the achievement of the
performance conditions, the awards will vest after 31 December 2026.
Audit Report
To the Shareholders of BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying financial statements give a true and fair
view of the financial position of BBGI Global Infrastructure S.A. (the
"Company") as at 31 December 2023, and of its financial performance and its
cash flows for the year then ended in accordance with IFRS Accounting
Standards as adopted by the European Union.
What we have audited
The Company's financial statements comprise:
• the statement of financial position as at 31 December 2023;
• the statement of comprehensive income for the year then ended;
• the statement of changes in equity for the year then ended;
• the statement of cash flows for the year then ended; and
• the notes to the financial statements, which include a summary of
significant accounting policies.
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
as adopted for Luxembourg by the CSSF are further described in the
"Responsibilities of the "Réviseur d'entreprises agréé" for the audit of
the financial statements" section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the International Code of
Ethics for Professional Accountants, including International Independence
Standards, issued by the International Ethics Standards Board for 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. We
have fulfilled our other ethical responsibilities under those ethical
requirements.
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 our 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.
Key audit matter How our audit addressed the key audit matter
Impairment of Investment in subsidiary and loans receivable from subsidiary: In assessing the impairment of investment in subsidiary and loans receivable
from subsidiary, we performed the procedures outlined below.
Refer to the financial statements (Note 3.e), impairment testing for
investments and loans and receivables from subsidiary; Note 13 and Note 14). We assessed that the accounting policy in relation with the impairment of the
investment in subsidiary and loans receivable from subsidiary was in
compliance with the applicable accounting framework.
Investment in subsidiary and loan receivables from subsidiary are measured at
cost less accumulated impairment losses. Their carrying amounts are GBP 354
million and GBP 243 million, respectively, and they are the most significant We understood and evaluated the design and implementation of key controls in
balances on the statement of financial position. place around the impairment of the investment in subsidiary and loans
receivable from subsidiary.
The impairment assessment of the investment in the subsidiary and the
determination of expected credit loss (ECL) for loans receivable from We obtained the management's impairment assessment of the investment in
subsidiary is linked to the fair value of the underlying investments which are subsidiary and loans receivable from subsidiary and performed an overall
mainly made of social infrastructure investments through public private assessment to challenge the criteria and inputs used in the impairment
partnership and/or public finance initiatives or similar procurement models analysis, as well as the assumptions and models used to calculate the ECL.
("investments") generating long-term predictable cash flows.
In addition, considering that the impairment of the investment in subsidiary
and loans receivable from subsidiary is linked to the fair value of the
The valuation of the investments is determined using the discounted cash flow underlying investments, we obtained substantive audit evidence over the
methodology. It relies on significant unobservable inputs and requires valuation of the underlying investments as follows:
significant judgments from the Management Board. A small change in these
assumptions could result in a significant impact on the fair value of the
investments. As a
- We tested key controls performed in the valuation process of
consequence, there is an inherent risk that the fair value of these investments in relation to the financial data included in the valuation
investments may not be appropriate. models, the "look back" comparison of the forecast vs actual cash flows for
the previous financial year, as well as other investment model review
controls.
Taking this into account, coupled with the magnitude of the amounts involved,
we consider this area as a key audit matter.
- We inquired into the qualification of Management Board and its
internal valuation team and concluded that they have sufficient experience and
expertise.
- We obtained the overall fair value reconciliation of opening to
closing fair value of the underlying investments and corroborated significant
fair value movements during the year, thereby assessing the reasonableness and
completeness of the movement for the year.
- With the support of our own valuation experts, we assessed that the
Group's valuation methodology was in compliance with the International Private
Equity and Venture Capital Valuation Guidelines and market practice based on
our knowledge of the investments held by the Group and experience of the
industry in which the Group operates.
- For a sample of assets selected via risk and value-based targeted
sampling of the investments
by value, we assessed that the key macroeconomic assumptions such as
inflation, deposit rates, corporate tax rates, base discount rate setting were
appropriate and/or within acceptable ranges based on market search. We also
checked that the selected asset specific discount rates were within acceptable
ranges.
- We obtained and read the valuation report prepared by Management's
external valuation experts which confirmed that the portfolio value prepared
by the Management Board was appropriate.
- Finally, for the entire portfolio, we obtained external confirmation
over the existence and percentage of ownership of the investments held by the
Group.
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 audit report 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 identified above 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 that fact. We have nothing to report in this regard.
Responsibilities of the Management Board and those charged with governance for
the financial statements
The Management Board is responsible for the preparation and fair presentation
of the financial statements in accordance with IFRS Accounting Standards as
adopted by the European Union, 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.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
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 an audit report 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 scepticism 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 audit report 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
audit report. 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
communicate to them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
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 audit report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
We have been appointed as "réviseur d'entreprises agréé" by the General
Meeting of the Shareholders on 28 April 2023 and the duration of our
uninterrupted engagement, including previous renewals and reappointments, is
one year.
PricewaterhouseCoopers, Société coopérative
Represented by
Emanuela Sardi
Luxembourg, 27 March 2024
Company Statement of Comprehensive Income
For the year ended 31 December 2023
In thousands of Notes 2023 2022
Sterling
Administrative 5 (10,525) (11,617)
expenses
Other operating 6 (3,517) (22,748)
expenses
Other operating 7 19,761 4,883
income
Results from operating activities 5,719 (29,482)
Net finance 8 20,563 21,496
result
Profit/(loss) before tax 26,282 (7,986)
Tax 9 (532) (515)
expense
Profit/(loss) for the year 25,750 (8,501)
Other comprehensive income for the year - -
Total comprehensive income/(loss) for the year 25,750 (8,501)
The accompanying notes form an integral part of the Company's financial
statements.
Company Statement of Financial Position
As at 31 December 2023
In thousands of Sterling Notes 2023 2022
Assets
Property and equipment 61 73
Loans receivable from subsidiary 13 233,673 243,212
Investment in subsidiary 13 354,233 354,233
Non-current assets 587,967 597,518
Loans receivable from subsidiary 13 - 37,663
Interest and other receivables from subsidiary 13 10,750 11,164
Other current assets 895 733
Cash and cash equivalents 10 4,710 18,738
Current assets 16,355 68,298
Total assets 604,322 665,816
Equity
Share capital 11 854,669 852,391
Retained earnings (251,673) (222,400)
Equity attributable to the owners of the Company 602,996 629,991
Liabilities
Trade and other payables 1,326 1,200
Advances from subsidiary 13 - 34,496
Tax liabilities 9 - 129
Current liabilities 1,326 35,825
Total liabilities 1,326 35,825
Total equity and liabilities 604,322 665,816
Net asset value attributable to the owners of the Company 11 602,996 629,991
Net asset value per ordinary share (pence) 11 84.35 88.32
The accompanying notes form an integral part of the Company's financial
statements.
Company Statement of Changes in Equity
For the year ended 31 December 2023
Share Capital Retained Earnings Total Equity
In thousands of Sterling Notes
Balance as at 31 December 2022 852,391 (222,400) 629,991
Total comprehensive income for the year - 25,750 25,750
Transactions with the owners of the Company recognised directly in equity
Cash 11 - (53,487) (53,487)
dividends
Scrip 11 1,536 (1,536) -
dividends
Shares issued on behalf of a 11 787 - 787
subsidiary
Share issuance 11 (45) - (45)
costs
Balance as at 31 December 2023 854,669 (251,673) 602,996
Share Capital Retained Earnings Total Equity
In thousands of Sterling Notes
Balance as at 1 January 2022 850,355 (161,124) 689,231
Total comprehensive loss for the year - (8,501) (8,501)
Transactions with the owners of the Company recognised directly in equity
Cash dividends 11 - (51,683) (51,683)
Scrip dividends 11 1,092 (1,092) -
Shares issued on behalf of a subsidiary 11 971 - 971
Share issuance costs (27) - (27)
Balance as at 31 December 2022 852,391 (222,400) 629,991
The accompanying notes form an integral part of the Company's financial
statements.
Company Statement of Cash Flows
For the year ended 31 December 2023
In thousands of Notes 2023 2022
Sterling
Operating activities
Profit/(loss) for the year 25,750 (8,501)
Adjustments for:
Net finance 8 (20,563) (21,496)
result
Foreign currency exchange loss/(gain) - 6,7 3,352 (4,883)
net
Tax 9 532 515
expense
Depreciation 16 3
Working capital adjustments:
Advances/other receivables from subsidiary (10,825) 19,475
Other current assets (162) (407)
Trade and other payables 273 53
Cash used in operating activities (1,627) (15,241)
Interest received 365 24
Taxes paid (661) (502)
Net cash flows used in operating activities (1,923) (15,719)
Investing activities
Loan repayment from subsidiary 21,148 59,557
Loan provided to subsidiary (200) -
Investment in 13 - (3,780)
subsidiary
Interest received 20,502 19,134
Acquisition of property and equipment (9) (69)
Net cash flows from investing activities 41,441 74,842
Financing activities
Equity instruments issue 11 (45) (27)
costs
Dividends 11 (53,487) (51,683)
paid
Net cash flows used in financing activities (53,532) (51,710)
Net increase/(decrease) in cash and cash equivalents (14,014) 7,413
Impact of foreign exchange on cash and cash equivalents (14) 14
Cash and cash equivalents as at 1 10 18,738 11,311
January
Cash and cash equivalents as at 31 10 4,710 18,738
December
The accompanying notes form an integral part of the Company's financial
statements.
Notes to the Company Financial Statements
For the year ended 31 December 2023
1. Corporate information
BBGI Global Infrastructure S.A., ('BBGI', or the 'Company') 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 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 6E, route de Treves, L-2633 Senningerberg,
Luxembourg and is registered with the Registre du Commerce of Luxembourg under
the number B163 879.
The Company is a closed-ended investment company that invests, through its
subsidiaries, principally in a diversified portfolio of operational Public-
Private Partnership ('PPP')/Private Finance Initiative ('PFI') infrastructure
or similar style assets ('Investment portfolio'). As at 31 December 2023, the
Company has no indirectly held investment that is under construction (31
December 2022: one).
The Company had no employees as at 31 December 2023 and 2022, 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 2022.
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
or settled within one year. These financial statements were approved by the
Management Board on 27 March 2024.
2. Basis of preparation
Statement of compliance
The separate financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards accounting
standards ('IFRS') as adopted by the European Union ('EU'). Please refer to
Note 3d) for the accounting policy with respect to 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.
The separate financial statements have been prepared using the going concern
principle under the historical cost basis.
Functional and presentation currency
These financial statements are presented in Sterling, the Company's functional
currency. All amounts presented in tables throughout the report have been
rounded to the nearest thousand, unless otherwise stated.
Changes in accounting policy
New and amended standards applicable to the Company are as follows:
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy disclosures that
are more useful by replacing the requirement for entities to disclose their
'significant' accounting policies with a requirement to disclose their
'material' accounting policies and adding guidance on how entities apply the
concept of materiality in making decisions about accounting policy
disclosures.
Definition of Accounting Estimate - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates' and clarify
the distinction between changes in accounting estimates and changes in
accounting policies and the correction of errors. Also, they clarify how
entities use measurement techniques and inputs to develop accounting
estimates.
These amendments had no significant impact on the Company financial statements
as there were no modifications of the Company's financial instruments during
the period.
3. Summary of material accounting policies
a) Foreign currency transactions
Transactions in foreign currencies are translated into 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 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 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 Sterling at
the exchange rates on the reporting date. The income and expenses of foreign
operations are translated to 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
Initial recognition and measurement
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.
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Company's
business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Company has
applied the practical expedient, the Company initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs.
The Company's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. The Company's financial
assets classified and measured at amortised cost are held within a business
model with the objective to hold financial assets in order to collect
contractual cash flows which represents solely payments of principal and
interests.
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, loan
receivables from subsidiary, interest and other receivables from subsidiary
and cash and cash equivalents.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and either (a) the Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
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 comprehensive 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) Impairment testing for investments and loans and receivables from
subsidiary
The investment in subsidiary and loan receivables from subsidiary 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 subsidiary are directly linked to the PPP/ PFI portfolio
financed by this subsidiary either through loans and/or equity investments.
The ECL, if any, of the Company from its loans and receivables from subsidiary
has a direct link with the fair value of the Company´s Investment portfolio.
The Company performs a fair valuation of the underlying Investment portfolio
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
underlying Investment portfolio is done by calculating the net present value
of the cash flows from these 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
future 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 an
impairment loss. As of 31 December 2023, the Company identified no ECL to be
recorded on its loans and receivables from subsidiary (2022: nil) nor any
impairment on its investment in subsidiary.
f) 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.
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 Company 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) Finance income and finance costs
Interest income and expenses are recognised in the statement of comprehensive
income using the EIR method.
The EIR 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 EIR, 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
the statement of comprehensive income as finance income and finance costs,
respectively.
j) 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.
Subscription tax is recognised as a tax expense in the Company statement of
comprehensive income for the period in which it is incurred.
k) 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. Material 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 3e) 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 end of this
reporting period. 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 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Support agreement fees (Note 13) 7,593 8,914
Legal and professional fees 2,201 2,207
Supervisory Board fees 315 260
Others 416 236
10,525 11,617
Included in the legal and professional fees expensed during the year are those
amounts charged by the Company's external auditor which include audit fees of
£248,000 (2022: £201,000) and audit related fees of £89,000 (2022:
£73,000). Non-assurance services charged by the Company's external auditors
during the year amounted to £nil (2022: £5,000). Also included in the legal
and professional fees are depositary and custodian related charges which
amounted to £395,000 (2022: £383,000)
6. Other operating expenses
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Foreign currency exchange loss - net 3,352 -
Acquisition-related costs and others (including unsuccessful bid costs) 165 422
Foreign exchange indemnity agreement expense (Note 13) - 22,326
3,517 22,748
7. Other operating income
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Foreign exchange indemnity agreement income (Note 13) 19,761 -
Foreign currency exchange gain - net - 4,883
19,761 4,883
The net foreign currency exchange gains are mainly attributable to the
unrealised gains on the translation of foreign currency denominated loans
receivable from the Company's subsidiary.
8. Net finance result
Year ended 31 December Year ended 31 December
In thousands of Sterling 2023 2022
Finance income from multi-currency facility (Note 13) Interest income from 20,198 21,474
deposits
365 24 (2)
Other finance costs
-
20,563 21,496
9. Taxes
As at 31 December 2023, tax payable with respect to subscription tax amounted
to £nil (2022: £129,000).
A reconciliation of the tax expense and the tax at applicable tax rate is as
follows:
Year ended Year ended
31 December 31 December
2023 2022
Profit/(loss) before tax 26,282 (7,986)
Income tax using the Luxembourg domestic tax rate of 24.94% 6,555 (1,991)
Effect of tax-exempt deductions/(income) (6,555) 1,991
Subscription tax expense 532 515
Tax charge for the year 532 515
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 2023, the Company incurred a subscription tax charge of £532,000
(2022: £515,000).
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to £4,710,000
(2022: £18,738,000).
11. Share capital
Changes in the Company´s share capital are as follows:
31 December 31 December
In thousands of Sterling 2023 2022
Share capital as at 1 January 852,391 850,355
Share capital issued through scrip dividends 1,536 1,092
Shares issued as share based compensation 787 971
Shares issuance cost (45) (27)
854,669 852,391
BBGI Management HoldCo S.à r.l. ('MHC'), a wholly owned direct subsidiary of
the Company, provides share-based compensation to senior executives whereby it
issues 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, the Company
issued 175,242 shares, in connection with the 2019 LTIP award at 150.9 pence
per share for a total amount of £264,000 (2022: £604,000). The amount of
£264,000 was recorded as an advance made by the Company to MHC during the
year (2022: £604,000).
Deferred STIP
The STIP provided to senior executives at MHC include a deferred component
with one-third of any bonus earned under the STIP is being deferred into
shares of the Company for three year holding period. The deferral component of
the STIP differs from the Company's share-based compensation as there are no
further vesting conditions on this earned bonus. The amount of £398,000 was
recorded as an advance made by the Company to MHC during the year (2022:
£366,000).
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 2023 2022
In issue at beginning of the year 713,331 712,126
Shares issued through scrip dividends 1,017 649
Shares issued as share based compensation 529 556
714,877 713,331
All the ordinary shares issued rank pari passu. 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 2023 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2023
2022 2nd interim dividend of 3.740 pence per qualifying ordinary share - for 26,679
the period 1 July 2022 to 31 December 2022
2023 1st interim dividend of 3.965 pence per qualifying ordinary share - for 28,345
the period 1 January 2023 to 30 June 2023
Total dividends declared and paid during the year 55,024
The 31 December 2022 2nd interim dividend was paid in April 2023. The value of
the scrip election was £1,536,000, with the remaining amount of
£25,143,000 paid in cash to those investors that did not elect for the scrip.
The 30 June 2023 1st interim dividend was paid in October 2023. Cash dividend
was £28,345,000. The scrip alternative was not available with this dividend
payment.
The dividends declared and paid by the Company during the year ended 31
December 2022 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2022
2021 2nd interim dividend of 3.665 pence per qualifying ordinary share - for 26,099
the period 1 July 2021 to 31 December 2021
2022 1st interim dividend of 3.740 pence per qualifying ordinary share - for 26,676
the period 1 January 2022 to 30 June 2022
Total dividends declared and paid during the year 52,775
The 31 December 2021 2nd interim dividend was paid in April 2022. The value of
the scrip election was £964,000, with the remaining amount of
£25,135,000 paid in cash to those investors that did not elect for the scrip.
The 30 June 2022 1st interim dividend was paid in October 2022. The value of
the scrip election was £127,000 with the remaining amount of
£26,548,000 paid in cash to those investors that elected for a cash dividend.
Net asset value ('NAV')
The Company NAV and NAV per share as of 31 December 2023, 31 December 2022 and
31 December 2021 were as follows:
In thousands of Sterling/pence 2023 2022 2021
NAV attributable to the owners of the Company 602,996 629,991 689,231
NAV per ordinary share (pence) 84.35 88.32 96.78
12. Financial risk and capital risk management
Risk management framework
The Management Board has overall responsibility for the establishment and
control of the Company's risk management framework.
The Company has exposure to credit risk, liquidity risk and market risk. This
note presents information about the Company's exposure to each of these 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 these risk areas.
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 a
subsidiary. This subsidiary has the ability to pay based on the projected cash
flows to be received by such subsidiary from their respective 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 shares 2023 2022
Loans and other receivable to subsidiary (including accrued interest) 244,423 292,039
Cash and cash equivalents 4,710 18,738
249,133 310,777
The maximum exposure to credit risk on receivables that are neither overdue
nor impaired as of 31 December 2023, amounts to £244,423,000 (2022:
£292,039,000).
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 Company also regularly
monitors the forecast and actual cash requirements and matches the maturity
profiles of the Company'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. The following are the
undiscounted contractual maturities of the financial liabilities of the
Company:
Contractual cash flows
31 December 2023 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Trade and other payables 1,326 1,326 1,326 -
Contractual cash flows
31 December 2022 Carrying amount Within 1 year 1-5
In thousands of Sterling Total years
Trade and other payables 1,200 1,200 1,200 -
Advances from subsidiary 34,496 34,496 34,496 -
35,696 35,696 35,696 -
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.
Currency risk
The Company is exposed to currency risk as a result of its cash and cash
equivalents being denominated in currencies other than Sterling.
The currencies in which these items are primarily denominated are Australian
Dollar (A$), Canadian Dollar (C$), Euro (€), Norwegian Krone (NOK) and US
Dollar (US$).
In respect of other monetary assets and liabilities denominated in currencies
other than Sterling, the Company's policy is to ensure that its net exposure
is kept at an acceptable level. The Management Board believes that there is no
significant concentration of currency risk in the Company.
The summary of the quantitative data about the Company's exposure to foreign
currency risk provided to the Management Board is as follows:
31 December 2023
In thousands of
Sterling
A$
C$
€
NOK US$
Cash and cash equivalents 1,177 9 473 2 2
Trade and other payables - (7) (839) - -
1,177 2 (366) 2 2
31 December 2022
In thousands of Sterling A$ C$ € NOK US$
Cash and cash equivalents 13 7 277 2 1
Trade and other payables - - (745) - -
13 7 (468) 2 1
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 2023
and 31 December 2022 are as follows:
31 December2023
Average £ Spot rate £
A$ 1 0.535 0.535
C$1 0.596 0.593
€1 0.870 0.867
NOK 1 0.076 0.077
US$ 1 0.804 0.785
31 December2022
Average £ Spot rate £
A$ 1 0.562 0.564
C$1 0.623 0.610
€1 0.853 0.885
NOK 1 0.084 0.084
US$ 1 0.811 0.827
The impact of a strengthening or weakening of Sterling against the A$, C$, NOK
and US$, as applicable, by 5 per cent as at 31 December 2023 and 31 December
2022 would not have a significant impact on the Company's statement of
comprehensive income and net equity. 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 subsidiary and investment
in subsidiary, with a total carrying value of £587,906,000 (2022:
£635,108,000), amounts to £1,047,000 (2022: £1,104,000). 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. This strong performance is primarily
as a result of the Company holding a low-risk, 100 per cent availability-style
underlying portfolio, coupled with strong stakeholder collaboration during the
reporting period.
13. Related parties and key contracts
Supervisory Board fees
During the year 31 December 2023, the aggregate remuneration paid to the
Supervisory Board was £315,000 (2022: £260,000).
Loans and receivables from subsidiary - multicurrency facility agreement
On 1 January 2017, the Company as a lender and MHC as a borrower, entered into
a multicurrency credit facility agreement ('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 Investment portfolio. The maximum
amount that can be withdrawn from the MCF is £680,000,000. The Company
engages a third-party transfer pricing specialist to determine the reasonable
ranges of interest rates to be applied on borrowings under the MCF.
Movements in the MCF during the year are as follows:
31 December 31 December
In thousands of Sterling 2023 2022
1 January 243,212 243,638
Capitalisation of interest under MCF 90 94
Principal payments received (6,408) (5,253)
Foreign exchange movements (3,221) 4,733
233,673 243,212
During the year, the finance income from the MCF amounted to £20,198,000
(2022: £21,474,000).
Loans receivable from subsidiary - interest free loan agreements
The Company has entered into various interest free loan agreements ('IFL')
with MHC, a direct 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 MHC are
as follows:
31 December 31 December
In thousands of Sterling 2023 2022
IFL receivable from MHC - 37,663
Interest and other receivables from subsidiary
The details of the interest and other receivables from subsidiary are as
follows:
31 December 31 December
In thousands of Sterling 2023 2022
Interest receivable from MCF 10,564 11,164
Other advances to MHC 186 -
10,750 11,164
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 exchange movements, then
it shall pay an equivalent amount to the Company. As at 31 December 2023, the
Company recorded an Indemnity Agreement income amounting to £19,761,000
(2022: £22,326,000 expense).
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 2023, the Company
recorded Support Agreement expenses amounting to £7,593,000 (2022:
£8,914,000).
Advances from subsidiary
This account is non-interest bearing and relates to remaining liabilities
arising from the foreign exchange indemnity agreement, support agreement and
other unsettled advances received from MHC that is usually settled in the next
12 months. Advances from subsidiary as at 31 December 2023 amounted to £nil
(2022: £34,496,000).
Investment in subsidiary
The Company's total equity investment in MHC amounted to £354,233,000 as of
31 December 2023 (2022: £354,233,000). The movements in the Company's
investment in MHC are as follows:
31 December 31 December
In thousands of Sterling 2023 2022
1 January 354,233 350,453
Additional investment through capital contribution - 3,780
354,233 354,233
The Company's investments portfolio, were made and will continue to be made
through MHC.
14. Commitments and contingencies
The Company is an obligor under the Group's Revolving Credit Facility ('RCF'),
and as a result has pledged all its current and future financial assets and
shares in its investments in subsidiary.
Based on the provisions of the RCF, where there is a 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 was £nil outstanding principal
from the RCF as at the 31 December 2023.
15. Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual
periods beginning after 1 January 2024 and earlier application is permitted;
however, the Company has not early adopted any of the forthcoming new or
amended standards in preparing these financial statements. The Company intends
to adopt these new and amended standards, if applicable, when they become
effective. The adoption of the below new standard is not expected to have a
significant impact on the Company's financial statements.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
The amendments specify the requirements for classifying liabilities as current
or non-current and clarify:
- What is meant by a right to defer settlement
- That a right to defer must exist at the end of the reporting period
- That classification is unaffected by the likelihood that an entity will
exercise its deferral right
- That only if an embedded derivative in a convertible liability is itself
an equity instrument would the terms of a liability not impact its
classification
16. Events after the reporting period
Dividend declaration
In February 2024, the Company declared a 2nd interim dividend of 3.965 pence
per share for qualifying shareholders for the period 1 July - 31 December
2023. The dividend is expected to be paid in April 2024.
Board Members, Agents and Advisers
Supervisory Board Management Board
· Sarah Whitney (Chair) · Duncan Ball (Chief Executive Officer)
· Andrew Sykes (Senior Independent Director) · Michael Denny (Chief Financial and Operations Officer)
· June Aitken · Frank Schramm (retired on 31 January 2024)
· Jutta af Rosenborg · Andreas Parzych (appointed as of 31 January 2024) (Executive
Director)
· Christopher Waples
Registered Office Auditors
6E route de Trèves PricewaterhouseCoopers, Société cooperative
L-2633 Senningerberg
Grand Duchy of Luxembourg 2 rue Gerhard Mercator
B.P. 1443
L-1014 Luxembourg
Grand Duchy of Luxembourg
Central Administrative Agent, Luxembourg Registrar Depository, Receiving Agent and UK Transfer Agent
and Transfer Agent, Depositary and Principal Paying Agent Link Market Services Trustees Limited
10(th) Floor
CACEIS Investor Services Bank S.A.
14 Porte de France Central Square
L-4360 Esch-sur-Alzette
Grand Duchy of Luxembourg 29 Wellington Street
Leeds
LS1 4DL
United Kingdom
Corporate Brokers Corporate Brokers
Jefferies International Limited Winterflood Securities Limited
100 Bishopsgate
Cannon Bridge House
25 Dowgate Hill
London EC2N 4JL
London EC4R 2GA
United Kingdom
United Kingdom
EEA based Centralised Securities Depository LuxCSD Principal Agent
LuxCSD S.A. Banque Internationale à Luxembourg S.A.
42 Avenue John F. Kennedy
L-1855 Luxembourg 69 route d'Esch
Grand Duchy of Luxembourg Office PLM 018A
L-2953 Luxembourg
Grand Duchy of Luxembourg
Communications Adviser
H/Advisors Maitland
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
Glossary
Abbreviation / Term Definition
AIC The UK Association of Investment Companies, the trade association for
closed-ended investment companies in the UK
AGM Annual General Meeting of the Company's shareholders
AIC Code The 2019 AIC Code of Corporate Governance
AIC SORP Standard of Recommended Practices issued by the AIC
AIF Alternative Investment Fund
AIFM Law / 2013 Law The Luxembourg amended law of 12 July 2013 on Alternative Investment Fund
Managers
AIFMD EU Alternative Investment Fund Managers Directive
APM Alternative Performance Measures
Availability-style Availability-style, unlike 'demand-based' means that revenues are paid
provided the asset is available for use
BBGI / Company BBGI Global Infrastructure S.A.
CAPM Capital Asset Pricing Model
Carbon neutral a state where the residual GHG emissions have been balanced out by financing
activities that remove atmospheric CO2 ('offsets')
Circular 18/698 CSSF circular 18/698, published 23 August 2018, concerning Authorisation and
organisation of investment fund managers incorporated under Luxembourg law;
Specific provisions on the fight against money laundering and terrorist
financing applicable to investment fund managers and entities carrying out the
activity of registrar agent
Corporate Emissions GHG emissions that pertain to our business activities
CSSF Commission de Surveillance du Secteur Financier, the public institution that
supervises the professionals and products of the Luxembourg financial sector,
including the Company
CPI Consumer Price Index
DTR The UK Disclosure Guidance and Transparency Rules
ECL Expected Credit Losses
EIR Effective Interest Rate
ESG Environmental, Social and Governance
ESMA European Securities and Markets Authority
FCA the UK Financial Conduct Authority
Financed Emissions GHG emissions from our investments
FRC Financial Reporting Council, the UK's regulator of auditors, accountants and
actuaries, and responsible for setting the UK's Corporate Governance and
Stewardship Codes
FRC Code The UK Corporate Governance Code 2018
GDP Gross Domestic Product
GHG Greenhouse Gas
Group The Company and its subsidiaries
IFRS International Financial Reporting Standards as adopted by the European Union
Investments at FVPL Investments at fair value through profit or loss
IPO Initial Public Offering
KPI Key Performance Indicator
LIBOR London Interbank Offered Rate
LIFT The UK's Local Improvement Finance Trust
Lock-up In a PPP project, a lock-up period refers to a contractual restriction that
prevents equity holders from distributing profits or dividends to ensure
financial stability and reinvestment in the project during its critical phases
LTIP Long-Term Incentive Plan
Management Board The Executive Directors of the Company
NAV Net Asset Value
NED Independent Non-Executive Director, a member of the Supervisory Board
NPPR The UK's National Private Placement Regime
NZAM The Net Zero Asset Managers Initiative
O&M Operation and Maintenance
Offsets Removing CO(2) from the atmosphere, by financing projects which are either
creating natural carbon dioxide sinks or technology that captures carbon
dioxide from the air. The long-term removals must be measurable, verifiable,
permanent and additional. Offsets cannot be done in isolation to combat
climate change, they must be supported by science-based targets and GHG
reduction pathways
OGC Ongoing Charges
Pathways Net zero pathways show how much and how quickly companies need to reduce their
GHG emissions to reach their science-based GHG reduction targets
PFI Private Finance Initiative
PPP Public Private Partnership
PwC PricewaterhouseCoopers société cooperative, the Company's External Auditor
RCF Revolving Credit Facility for up to £230 million, with the possibility of
increasing the quantum to £300 million by means of an accordion provision,
and matures in May 2026
RPI Retail Price Index
Science-based targets Targets adopted by companies to reduce GHG emissions are considered
'science-based' if they follow a pathway that is consistent with the latest
climate science and keeping warming to below 1.5°C
SDG, SDGs The UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
SONIA Sterling Overnight Index Average
STIP Short-Term Incentive Plan
Supervisory Board The independent Non-Executive Directors of the Company
TCFD Task Force on Climate-Related Financial Disclosures
TSR Total Shareholder Return
UNGC UN Global Compact
Cautionary Statement
Certain sections of this Annual Report, including, but not limited to, the
Chair'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 using 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 throughout this document and include statements regarding
the intentions, beliefs or current expectations of the Management and
Supervisory Boards concerning, among 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 a guarantee 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, 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 (#_ednref1) Social infrastructure refers to public infrastructure assets
and services. It includes education, healthcare, blue light (fire and police),
affordable housing, modern correctional facilities, clean energy and transport
infrastructure assets. In exchange for providing these assets and services,
BBGI receives a revenue stream that is paid directly by the public sector.
ii (#_ednref2) Refer to the Alternative Performance Measures section of this
Annual Report for further details.
iii (#_ednref3) Pence per share (pps).
iv (#_ednref4) Availability-style means revenues are paid provided the
assets are available for use, so our portfolio has no exposure to demand-based
or regulated investments.
v (#_ednref5) Source: Standard & Poor's credit ratings.
(( vi (#_ednref6) )) In comparison to the latest publicly available
information for all closed-ended, London Stock Exchange-listed equity
infrastructure investment companies.
vii (#_ednref7) SFDR disclosure requirements. The Company is designated as
an Article 8 Fund under SFDR and reports on criteria for a socially beneficial
investment.
viii (#_ednref8) As at 30 September 2023
(( ix (#_ednref9) )) For this illustration, when a project has more than one
FM contractor and/or O&M contractor, the exposure is allocated equally
among the contractors.
x (#_ednref10) Refer to the Alternative Performance Measures section of this
Annual Report for further details.
xi (#_ednref11) Based on the portfolio composition on the date the balance
sheet hedge contracts are entered into.
xii (#_ednref12) Calculated using the Morningstar methodology.
xiii (#_ednref13) ISS Environment & Social Disclosure Quality Score is
based on company disclosure and transparency practices. It ranges from 1
(highest quality disclosure) to 10 (lowest quality disclosures).
xiv (#_ednref14) Sustainalytics' ESG Risk Ratings, range from 0 to 100, with
lower scores indicating lower levels of ESG risk.
xv (#_ednref15) Net Promoter Score ('NPS') is a widely used metric measuring
the likelihood of customers recommending a company's product or service to
others. The score can range from -100 to +100, with a higher NPS indicating a
higher level of customer loyalty and satisfaction. BBGI derives its NPS from
an annual client engagement survey.
xvi (#_ednref16) Greenhouse Gas Protocol Corporate Standard (2004), Revised
Edition ('GHG Protocol').
xvii (#_ednref17) Partnership for Carbon Accounting Financials ('PCAF')
standard for Financed Emissions: PCAF (2022), The Global GHG Accounting and
Reporting Standard Part A: Financed Emissions. Second Edition.
xviii (#_ednref18) The 2023 LTIP award was granted in February 2024. The
vesting period under these awards is from December 2023 to December 2026.
xix (#_ednref19) Base salaries were unchanged during the year ended 31
December 2023.
xx (#_ednref20) The Co-CEOs, Duncan Ball and Frank Schramm, are paid in
Canadian Dollars and Euro, respectively. The CFO is paid in Euro.
xxi (#_ednref21) This minimum holding is calculated based on the Director's
salary at 1 May 2023 and is fixed for three years.
xxii (#_ednref22) The detail in the table above goes significantly beyond
that required to be disclosed under the relevant Luxembourg law.
xxiii (#_ednref23) The 2020 LTIP vests by reference to performance in the
three-year period to 31 December 2023. The associated shares will be released
to the Management Board members following the publication of BBGI's 2023
audited accounts.
xxiv (#_ednref24) Mr Schramm will step down from the Management Board of the
Company on 31 January 2024. In accordance with his service contract, Mr
Schramm's notice period runs to the end of 2024 during which time he will
continue to be available to ensure an orderly handover and seamless
transition. In line with his service contract, Mr Schramm will participate in
the 2024 STIP. Mr Schramm will not participate in the 2023 LTIP award (award
running from December 2023 to December 2026).
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