ICG plc · LSE:ICG
ICG — Intermediate Capital Group — H1 2014 Earnings Presentation
52 slides from ICG's earnings presentation, Nov 21, 2013
Slide 1: ICG plc Interim Results 2014
ICG plc Interim Results 2014 21 November 2013 Intermediate Capital Group plc
Slide 2: Highlights
Highlights Operational Performance Financial Performance Fundraising momentum has continued with €1.7bn Fund Management Company profit down 3% at being raised in the first half £16.7m (£17.2m in H1 13) Strong period of balance sheet realisations Investment Company profit1 of £145.4m, up from consoli
Slide 3: Expansion into Japan
Expansion into Japan ICG and Nomura agree to launch Japanese domestic mezzanine fund Overview Partnership to structure and distribute new domestic mezzanine investments Funds will be jointly seeded, distributed and managed by a local Japanese fund management company that will be established Mezzanin
Slide 4: Market update
Market update Intermediate Capital Group plc 3
Slide 5: Investment market update
Investment market update On-going mid market imbalance in supply and demand Europe UK Real Estate Imbalance of supply and Increased availability of demand for mid market debt for blue chip Nascent return of CLO opportunities market Shortfall of financing M&A market slow but remains for mid market ol
Slide 6: Fundraising market update
Fundraising market update High demand for diverse product range and positive track record Fundraising Market What ICG offers Increased liquidity Long term track record of quality investments On going search for yield Specific investment propositions Renewed interest from US pension funds in European
Slide 7: Fund Management
Fund Management Intermediate Capital Group plc 6
Slide 8: Fund management - fundraising
Fund management - fundraising On track to exceed last year’s fundraising achievements Raised €2.4bn to date, eclipsing last year’s Third Party Fundraising record fundraising of €2.3bn, with €1.7bn €bn raised in H1 14 3.5 ICG Longbow Fund III closed at hard cap of 3.0 £700m in H1 14 2.5 Senior Debt P
Slide 9: Fund management – fundraising
Fund management – fundraising Recent successes and initiatives Recent successes Current and future initiatives Europe Fund V: Closed at hard-cap of North American Private Debt €2.5bn in December 2012 Asia Pacific successor fund ICG-Longbow III: Fund reached its hard- cap of £700m in only 7 months Au
Slide 10: Fund management - expanding product range
Fund management - expanding product range Product suite offering more products across more geographies FY11 Product Offering FY14 Product Offering and Pipeline Europe European Mezzanine European CLOs European Specialised Credit (m) European Mezzanine European Senior Debt Partners Asia Pacific Mezzan
Slide 11: Fund management – mezzanine
Fund management – mezzanine Strong period of realisations consolidating track record Europe Legacy European funds realised over €400m in the period generating good returns for investors – European Fund 2006 has returned €300m in the period resulting in a 1.8x MM total realised return – Mezzanine Fun
Slide 12: Fund management – real estate
Fund management – real estate ICG Longbow managing over £1bn AUM Real Estate £bn ICG Longbow AUM Fund II investments are beginning to exit with 1.25 Including ICG commitment £20m having been returned to investors – three realisations to date with a weighted average IRR of 26% and 1.4x MM 1.00 Senior
Slide 13: Fund management – credit funds
Fund management – credit funds Strong fundraising across a number of credit products Senior Debt Partners Senior Debt Partners strategy raised over €700m as at September, including a commitment of €50m from ICG, expected to close in excess of €1.5bn Senior Debt Partners has already invested in 10 de
Slide 14: Case study: St Paul’s III CLO
Case study: St Paul’s III CLO CLO Overview Market Context An arbitrage cash flow CLO, managed by ICG St Paul’s III is a large CLO for Europe, most are in the Transaction priced on 7 November at €550m, upsized €300- €400m range from €500m due to investor demand Around €6bn of CLO issuance in Europe Y
Slide 15: Investment company
Investment company Intermediate Capital Group plc 14
Slide 16: Investment Company
Investment Company Strong period of realisations enabling investment in growth Realisations High level of realisations in the year totalling £786m compared to £154m realised for the full year FY13 Current period realisations consist of £528m of principal repayments, £155m of PIK and £103m of realise
Slide 17: Case study: Allflex
Case study: Allflex ICG’s largest ever single capital gain History Exit Allflex is a global leader in animal identification Electra launched a sale process in January 2013 The company was acquired by Electra Partners in Extremely competitive bidding process 1998, ICG provided a £19m mezzanine loan T
Slide 18: IC portfolio
IC portfolio Portfolio remains stable with weaker assets underperforming % of assets performing at or above prior year 80% The performance of our investment portfolio is 70% broadly resilient 60% 50% Currently 59% above or at last year’s level; 75% 40% on a weighted basis 30% Restructured assets sho
Slide 19: Priorities for FY14
Priorities for FY14 Maintain momentum in delivering our strategic priorities FY14 Priorities Progress So Far Fundraising momentum to be maintained Longbow Fund III closed at hardcap of £700m ‒ Final close on Longbow Fund III SDP to raise in excess of €1.5bn, final close imminent ‒ Further closes on
Slide 20: Financial Review
Financial Review Intermediate Capital Group plc 19
Slide 21: Financial highlights
Financial highlights H1 14 impacted by increased level of capital gains Pre-tax profit* of £162.1m vs £41.1m in prior year – FMC Profit before tax: £16.7m vs £17.2m in prior year – IC Profit before tax*: £145.4m vs £23.9m in prior year – Group and IC profit include £110.1m of capital gains recycled
Slide 22: Segmental reporting
Segmental reporting Investment £m H1 14 H2 13 H1 13 Fund Fee income 48.7 55.9 44.8 Management Company Div & other income 0.1 1.2 0.3 Admin expenses (32.1) (33.9) (27.9) FM profit 16.7 23.2 17.2 Investment Net interest income 71.4 79.7 80.0 Company Div & other income 20.2 3.0 0.8 Admin expenses (27.3
Slide 23: Third party AUM
Third party AUM Momentum in fundraising continuing; realisations impacting AUM €bn Third party fundraising and realisations (LTM) 4.0 3.0 2.0 1.0 0.0 (1.0) (2.0) (3.0) H2 11 H1 12 H2 12 H1 13 H2 13 H1 14 Fundraising Realisations Net Movement Intermediate Capital Group plc 22
Slide 24: Third party fee income
Third party fee income Significant growth in underlying management fees £90m Fundraising of €1.7bn to deliver fee income growth as these funds are £80m invested. Once invested, these funds will contribute £14.2m in annualised £70m fee income £60m H1 14 performance fees of £5.1m include £4.8m of carr
Slide 25: Loan book
Loan book Significant realisations has resulted in a 25% decrease in loan book £3,000m 131 97 £2,800m 2,696 £2,600m £2,400m 528 57 £2,200m 185 103 76 2,029 £2,000m 60 £1,800m Mar 13 Interest New Lending Repayments Repayments Unrealised Realised Impairments FX & Other Sep 13 Income Principal Interest
Slide 26: Net interest income
Net interest income Decrease in NII driven by decrease in average book size £2,500m £140m FY14 average loan book impacted 44 by high level of exits in first half 63 £120m £2,000m 93 142 Net interest income moving in line with investment book 196 £100m £1,500m £80m 2,224 £60m £1,000m 2,074 1,980 1,98
Slide 27: Seed capital
Seed capital Balance sheet capital to seed new products and growth initiatives Capital Deployed Accounting £753m of unutilised cash and bank facilities to seed IC return earned on seed capital by: new products and initiatives • Interest / dividend income; or Committed £110m into Longbow as seed acro
Slide 28: Long terms provisions
Long terms provisions Net provisions expected to be first half weighted 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 2.5% 0% FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY13 H1 14* Net Provisions Average pre-crisis * LTM to 30/09/2013 Net impairments of £59
Slide 29: Gains on investments
Gains on investments High realised capital gains due to the exit of Allflex £m H1 14 H2 13 H1 13 Net realised gains 101.0 3.4 10.7 Unrealised gains 56.4 37.6 21.3 Total gains 157.4 41.0 32.0 Total unrealised capital gains of £61.1m – £56.4m to income statement – £4.7m to reserves Income statement un
Slide 30: Group operating costs
Group operating costs Increasing headcount to support growth £60m Costs higher as impact of investment in growth of the business flowing £50m through – US, Japan, distribution capability £40m Administrative costs impacted by placement fees being amortised. H1 14 £2.4m versus £5.8m in FY13, £30m whic
Slide 31: Balance sheet
Balance sheet BALANCE SHEET 30 September 2013 - £m 31 March 2013 – £m Loans & investments 2,029 2,696 Net current assets 233 22 2,262 2,718 Borrowings 740 1,155 Shareholders’ funds 1,522 1,563 2,262 2,718 BALANCE SHEET METRICS 30 September 2013 - £m 31 March 2013 – £m LTM ROE* 13.5% 8.9% Gearing rat
Slide 32: Cash core income
Cash core income Solid dividend coverage £700m Rolling 3 Year Cash Income vs Dividend Paid £600m £500m £400m £300m £200m £100m £0m March 12 September 12 March 13 September 13 Cash core income Cash from capital gains (net of MTIS) Dividends paid Cash core income of £169m with a further £103m from rea
Slide 33: Financial outlook
Financial outlook Strengthened outlook with new products and growth initiatives FMC Fundraising momentum to continue with SDP final close, US products in marketing and good pipeline of opportunities Funds raised in first half to boost fee income by £14.2m per annum once fully invested Improving qual
Slide 34: Conclusion and Q&A
Conclusion and Q&A Intermediate Capital Group plc 33
Slide 35: Appendix
Appendix Intermediate Capital Group plc 34
Slide 36: Top twenty assets
Top twenty assets Company Activity Country Sponsor Performance Applus+ Inspection, certification & technological services Spain Carlyle Gerflor PVC flooring France ICG Materis Speciality chemicals manufacturer France Wendel Ethypharm Drug development and manufacturer France Astorg Westbury Contract
Slide 37: Top ten equity assets
Top ten equity assets Company Activity Country Sponsor Performance Gerflor PVC flooring France ICG AAS Link Share registry and fund administration services Australia Pacific Equity Partners Intelsat Fixed satellite services USA BC Partners Applus+ Inspection, certification and technological services
Slide 38: Fair value accounting – Top AFS and FVTPL assets
Fair value accounting – Top AFS and FVTPL assets AFS assets Value (£m) at Value (£m) at Company Business Country Sep-2013 Mar-13 Intelsat Fixed satellite services USA 42.1 38.0 AAS Link Share registry and fund administration services Australia 32.8 29.1 Menissez Bread Manufacturing France 21.0 17.9
Slide 39: Third party AUM
Third party AUM Third party AUM down 1% to €9.8bn primarily due to realisations offsetting €1.7bn of new funds raised €10,800m €10,600m 1,115 €10,400m €10,200m €10,000m 9,900 0 577 36 9,834 €9,800m 23 €9,600m €9,400m 451 €9,200m 1,320 €9,000m Mar 12 New Realisations New Realisations New Realisations
Slide 40: Fee income
Fee income £m H1 14 H2 13 H1 13 Mezzanine Fund Management fee income 28.6 33.6 24.6 Credit Fund Management fee income 9.4 10.2 9.0 Third Party Funds fee income 38.0 43.8 33.6 Investment Company fee income 10.7 12.1 11.2 Total fee income 48.7 55.9 44.8 Intermediate Capital Group plc 39
Slide 41: Credit funds fee income
Credit funds fee income H1 14 H2 13 H1 13 £m AUM Fees AUM Fees AUM Fees CDOs 2,865 7.3 3,159 7.2 3,296 6.7 Managed Accounts & Pooled 1,143 1.8 1,037 2.8 755 2.3 Funds Performance and Catch up Fees - 0.3 - 0.2 - - Total 4,008 9.4 4,196 10.2 4,051 9.0 Intermediate Capital Group plc 40
Slide 42: Impairments
Impairments £m H1 14 H2 13 H1 13 Gross impairment 79.8 55.0 86.1 Restructurings (17.3) - - Recoveries (3.5) (39.8) (21.3) Net impairment 59.0 15.2 64.8 Intermediate Capital Group plc 41
Slide 43: Pre-tax profits, earnings per share & dividends
Pre-tax profits, earnings per share & dividends H1 14 H1 13 H1 12 Pre tax profit excluding FV* (£m) 162.1 41.1 100.7 Pre tax profit (£m) 155.3 39.6 108.8 Net profit (£m) 122.9 39.5 85.1 Adjusted EPS * (pence per share) 33.7 10.7 19.6 EPS (pence per share) 32.0 10.3 21.6 DPS (pence per share) 6.6 6.3
Slide 44: Cash flow analysis
Cash flow analysis £m H1 14 H2 13 H1 13 Operating cash flow 168.6 18.9 12.4 Cash flow relating to Capital Gains 103.4 24.9 (28.3) Repayments & recoveries 446.8 82.3 66.0 Tax & others (14.7) (15.5) (29.9) Free Cash flow 704.1 110.6 20.2 New investments (132.9) (64.2) (197.7) Dividend (52.8) (24.4) (5
Slide 45: Operating cash flow
Operating cash flow £m 400 350 300 (53.1) (19.0) 250 200 258.1 150 262.6 262.6 100 27.9 50 48.7 0 Interest & Dividend Fee Income Realised Capital Gains Costs excl Incentive Interest Payments Net Operating Cash Income & PIK Schemes Flow* * Net cash flow from operating activities less incentive scheme
Slide 46: Cash core income
Cash core income Cash core income calculation £m Pre tax profit excluding FV 162.1 Less capital gains (157.4) Plus provisions 76.3 Less accrued PIK (66.4) Plus PIK realised 154.6 Cash core income 169.2 Intermediate Capital Group plc 45
Slide 47: Debt summary
Debt summary £700m £600m £500m Bank facilities extended £400m New Private placements £300m New Private New Term Loan £200m placements £100m £0m H1 '14 H2 '14 H1 '15 H2 '15 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18 H2 '18 H1 '19 H2 '19 H1 '22 H1 '24 FY25 Securitisation Private placements Retail bond Drawn B
Slide 48: Incentive schemes
Incentive schemes Group Segmental £m H1 2014 FM Co Inv Co FY 10 Awards 0.6 0.3 0.3 FY 11 Awards 3.8 1.0 2.8 FY 12 Awards 2.6 1.4 1.2 FY 13 Awards 3.4 2.0 1.4 FY 14 Accruals 7.5 2.0 5.5 Total 17.9 6.7 11.2 Intermediate Capital Group plc 47
Slide 49: Long term P&L impact of incentive schemes
Long term P&L impact of incentive schemes (excluding balance sheet carry) £30m Based on FY10 to FY13 £25m actual awards, and constant £20m FY13 awards for future £15m years £10m £5m £0m FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY10 awards FY11 awards FY12 awards FY13 awards FY14 awards
Slide 50: Assets in BSC Scheme
Assets in BSC Scheme Year of investment Portfolio companies * EOS * Westbury Street Holdings FY11 * Fort Dearborn * Gerflor * Team System * Courtepaille * Quorn * Tegel * HMG FY12 * BvD * Citic * Ventura Motors * Riverland * Punter Southall FY13 * Symingtons * ATPI * SCF * Viking * Esmalglass * Icop
Slide 51: Consolidation of US CLOs
Consolidation of US CLOs The first two US CLOs are expected to be Group Balance Sheet consolidated in line with IFRS FY14 Forecast Balance Sheet ICG US CLOs Consolidated Consolidation does not impact the risk profile £m excl US CLOs Adjustments ICG of the Group Seed Capital 384 (50) 334 Loans & inve
Slide 52: Disclaimer
Disclaimer THE MATERIALS BEING PROVIDED TO YOU ARE INTENDED ONLY FOR INFORMATIONAL PURPOSES AND CONVENIENT REFERENCE AND MAY NOT BE RELIED UPON FOR ANY PURPOSE. THIS INFORMATION IS NOT INTENDED TO PROVIDE, AND SHOULD NOT BE RELIED UPON, FOR ACCOUNTING, LEGAL, TAX ADVICE OR INVESTMENT RECOMMENDATIONS
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