Slide 1: Results for the year to 30th September 2007
Intermediate Capital Group PLC Results for the year to 30th September 2007 23rd November 2007 Tom Attwood Philip Keller Authorised and regulated by the Financial Services Authority
Slide 2: Operating Highlights
Operating Highlights Step change in credit markets; Reporting strong results and robust and quality portfolio; Many quality opportunities emerging; and We have a strong balance sheet funded long term. 2
Slide 3: Interim Highlights
Interim Highlights Pre-tax profits up 33% to £142.0m Core income up 24 % to £65.3m Capital gains up 4% to £97.1m Dividend up 18% to 19.5p 3
Slide 4: Five Year Strategic Plan FY2007 – 2012
Five Year Strategic Plan FY2007 – 2012 Strategic Objective “To become amongst the world’s most innovative and successful investors, doubling in size every five years by employing and motivating great people” Prospects for the next five years have improved considerably since the changes in the credit
Slide 5: Our Unique Advantage
Five Year Strategic Plan FY2007-2012 Our Unique Advantage Great people; Innovative long term approach; Local network and relationships; Existing portfolio; and Permanent Capital 5
Slide 6: Market Background
Market Background Global credit markets in crisis; Big buy outs a thing of the past; Mid market beginning to reopen; and Record private equity fund raising will in the long term reawaken markets 6
Slide 7: European Primary Market by Investor Type
European Primary Market by Investor Type 75% European Banks 50% Institutional Investors 25% Non-European Banks Securities Firm 0% 1999 2000 2001 2002 2003 2004 2005 2006 3Q 07 Source: S&P 7
Slide 8: Evolution of European Institutional Investor Market
Evolution of European Institutional Investor Market 350 328 300 241 250 200 150 126 115 99 100 70 53 43 33 50 33 21 18 22 8 14 3 3 7 0 1999 2000 2001 2002 2003 2004 2005 2006 Jan-Sep 2007 Manager Groups Active Loan Investment Vehicles Source: S&P 8
Slide 9: European Mezzanine Market
European Mezzanine Market Competitive environment much improved; and Mezzanine in demand as liquidity for senior debt falls Limited or no repayments 9
Slide 10: New Financial Structures
New Financial Structures Recent Example Key Deal Terms Before After Senior Debt 1500 @ 2.125 1225 @ 3.00 Second Lien 300 @ 4.5 0 Mezzanine 0 225 @ 8.125 PIK 0 350 @ EURIBOR Equity 500 500 Senior Leverage 7.0x EBITDA 5.8x Cash Pay Leverage 8.4x 6.8x 10
Slide 11: Geographic and Product Expansion
Geographic and Product Expansion Asia North America Minority Partners 11
Slide 12: Risk
Risk Economic contagion a real possibility; We are expecting an increase in default experience across the market; and Tight monitoring and a disciplined approach to credit still required ICG at its best in difficult markets: return on our worst 10% of deals 1.1 times money 12
Slide 13: Realised IRR – ICG Balance Sheet
Realised IRR – ICG Balance Sheet Realised IRR as at 30 June 2007 100% 60% 20% 1 8 15 22 29 36 43 50 57 64 71 78 85 92 99 106 113 120 127 134 141 148 155 162 169 176 183 190 197 -20% Assets -60% Realised Asset IRR Realised Portfolio IRR @ 20% -100% 13
Slide 14: Slowdown in Mezzanine Portfolio Growth
Slowdown in Mezzanine Portfolio Growth £m 3000 2500 2000 Invested on behalf of fund client 1500 ICG's own portfolio 1000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 Sep-07 14
Slide 15: Investment Activity
Investment Activity New lending growth strong for the period - £468m 15 mezzanine deals in Europe; 3 in Asia Pacific; 1st deal in the US; and 2 minority partner deals Very high levels of repayments (£458m, 26% of opening loan book) but clear sign of slow down for 2nd half Refinancings:
Slide 16: Investment Activity 6 months to 30 September 2007
Investment Activity 6 months to 30 September 2007 Investment Country Business Equity Sponsor Currency Mcurrency Attendo Sweden Operator of care homes Industri Kapital EUR 45.5 Dako Denmark Provider of cancer diagnostics instruments and reagents EQT DKK 263.6 Eisman Germany Frozen food home delivery
Slide 17: European Mezzanine Market Pricing and Structures
European Mezzanine Market Pricing and Structures First half pressure on pricing reversed, particularly on larger deals; but More importantly structures improving substantially Covenants revert to historic precedent Call protection available Even warrants returning in some cases 17
Slide 18: European LBO Funding Sources
European LBO Funding Sources LBO Funding Leverage 9.6x 10.0x 8.8x 8.2x 8.3x 7.7x 7.6x 7.3x 7.3x 9.5x 7.1x 7.0x 6.8x 8.7x 8.2x 8.0x 7.3x 7.7x 7.2x 7.4x 6.3x 7.1x 7.0x 6.7x 5.0x 5.6x 5.4x 5.0x 5.1x 4.9x 4.5x 4.4x 4.6x 4.3x 4.2x 5.4x 4.4x 4.6x 4.1x 3.9x 4.0x 3.7x 3.6x 3.5x 3.5x 3.6x 0.0x 1997 1998 1999
Slide 19: Pricing: Blended Mezzanine Spread – New ICG Investments
Pricing Blended Mezzanine Spread – New ICG Investments* L+1,600 1278.2 1296.8 1282.7 1212.1 1228.7 1158.9 L+1,200 1132.7 1010.8 1013.7 594 511 441 74 310 91 766 462 665 L+800 ` 455 603 645 399 443 356 338 206 199 L+400 341 313 347 359 373 345 368 316 295 L+0 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05
Slide 20: Warranted Mezzanine New Investments by number
Warranted Mezzanine New Investments by number 20
Slide 21: Well Diversified Mezzanine Portfolio
Well Diversified Mezzanine Portfolio At 30 September 2007 Portfolio by Geography Portfolio by Sector Asia Pacific 8% Food Manufacturing & Health & Phamaceuticals Other Europe Retailing 17% Benelux 1% North America 4% 5% 1% Business Spain Services Consumer 6% 16% Products Building Materials 8% German
Slide 22: Fund Management: Mezzanine Fund Management
Fund Management Mezzanine Fund Management Mezzanine Funds performing well; Fee income £17.0m up from £6.1m; Mezzanine Fund 2000 already returned over 100% of investor commitments and paid carry; Mezzanine Fund 2003 fully invested: started satisfactorily; and European Fund 2006 closed at €1
Slide 23: Fund Management: New Mezzanine Funds
Fund Management New Mezzanine Funds ICG Asia Pacific II $1.5b (50% ICG) ICG Minority Partners €1.0b (50% ICG) 23
Slide 24: Fund Management: Non-mezzanine Fund Management
Fund Management Non-mezzanine Fund Management CDO funds: performing satisfactorily; Absolutely no sub-prime exposure of any sort; Funds under management €4.8bn up from €3.4bn; Fee income of £9.4m up from £5.8m; We have just priced Eurocredit VIII raising €636m 24
Slide 25: First Half Results Highlights
First Half Results Highlights Mezzanine portfolio broadly flat New investments offset by high level of repayments Core income up 24% to £65.3m Capital gains at £97.1m up 4% compared to high level achieved in H1 07 Pre-tax profits up 33% to £142.0m EPS up 33% to 132.6p Interim dividend
Slide 26: Core Income Growth
Core Income Growth £m 120 100 Strong Core Income growth driven by 80 25% increase in Net 60 Interest Income* 40 84% increase in Fee Income 20 56% increase in Admin and 0 2000 2001 2002 2003 2004 2005 2006 2007 2007 2008 Operating costs excluding 1H 1H performance related schemes *Adjusted fo
Slide 27: Net Interest Income
Net Interest Income 6 months to 6 months to Increase 30 Sept 2007 30 Sept 2006 £m £m Interest and dividend income 106.0 86.9 22% Interest expense 25.4 32.5 (22%) Of which net gains/(losses) on derivatives held 9.1 (3) for hedging purposes Interest expense included in core income 34.5 29.5 17% Net In
Slide 28: Fee Income
Fee Income 6 Months to 6 Months to Increase 30 Sept 2007 30 Sept 2006 £m £m Arrangement/underwriting fees 3.9 4.6 (15%) Fund management fees 26.4 11.9 122% of which management fee 19.7 11.6 70% performance fee 6.7 0.3 Fee Income 30.3 16.5 84% 28
Slide 29: Fund Management Fee Income Growth
Fund Management Fee Income Growth £m 20 15 10 Non-Mezzanine (£m) Mezzanine (£m) 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2007 2008 1H 1H 29
Slide 30: Continued Increase in Costs following Investments
Continued Increase in Costs following Investments in the Financial Year to 31st March 2007 6 months to 6 months to Increase 30 Sept 2007 30 Sept 2006 £m £m Staff Costs 8.8 5.9 49% Bonus 5.6 2.7 74% Other admin costs 8.4 6.0 40% 22.8 14.6 56% Fund Management performance related 5.3 1.0 - schemes 8.4
Slide 31: Investments in Operating Expenditure
Investments in Operating Expenditure 6 months to 6 months to 6 months to 30 Sept 2007 31 March 2007 30 Sept 2006 £m £m £m Senior and Investment hires 4.0 2.3 0.7 Infrastructure Investments 0.9 1.3 0.2 5.9 3.6 0.9 31
Slide 32: Continued Growth in Pre-tax profits – 33% growth
Continued Growth in Pre-tax profits – 33% growth £m 250 Strong pre-tax profits 200 growth driven by 150 24% increase in Core Income 100 Capital Gains up 4% to £97.1m 50 Low Net Provisions at 0 £9.3m 2000 2001 2002 2003 2004 2005 2006 2007 2007 2008 1H 1H Net gains on investments less provisi
Slide 33: Main Gains on Investments 6 months to 30 September 2007
Main Gains on Investments 6 months to 30 September 2007 Investment Country Business £m Saga UK Provides products and services to people aged 50 and over 17.7 AA UK Provider of roadside breakdown services and insurance 14.2 Takko Germany Apparel retailer 9.6 Allflex UK Animal identification tags 9.5
Slide 34: Impairments
Impairments 6 months to 6 months to 30 Sept 2007 30 Sept 2006 £m £m Gross Impairment 19.9 18.7 Impairments net of write backs 9.3 17.7 34
Slide 35: Balance Sheet
Balance Sheet At 30 Sept 2007 At 31 March 2007 £m £m Loans and investments 1,776 1,750 of which mezzanine 1,409 1490 equity 367 260 Net current liabilities 53 4 1,829 1,754 Shareholders’ funds 670 602 Borrowings 1,159 1,152 1,829 1,754 Net Debt / Shareholders’ funds 161% 163% Gearing excluding equit
Slide 36: Prospects for Second Half of the Financial Year
Prospects for Second Half of the Financial Year Lower repayment levels Core income growth expected to continue Fees remain strong but lower performance element Capital gains below high level achieved in the second half of last year 36
Slide 37: Summary
Summary Delighted to report good results, portfolio remains sound; Step change in credit markets producing much better balance of risk and reward; Some primary activity in the mid market; Some secondary activity too; Considerable opportunities to help refinance busted underwritings; Furt
Slide 38: Disclaimer
Disclaimer The materials being provided to you are intended only for informational purposes and convenient reference. This information is not intended to provide, and should not be relied upon, for accounting, legal or tax advice or investment recommendations. You should consult your tax, legal, acc