Icg Plc · LSE:ICG
Icg — Intermediate Capital Group — H1 2020 Earnings Presentation
35 slides from Icg's earnings presentation, Nov 19, 2019
Slide 1: First Half Results presentation
First Half Results presentation 19 November 2019
Slide 2: Highlights
2 Highlights Diversification strategy drives assets and FMC profits higher ▪ AUM up 11% on 31 March 2019 to €41.1bn ▪ €4.6bn of new money raised across 14 different strategies with successful launch of two new strategies ▪ FMC profits up 32% to £85.0m as a result of third party fee earning AUM incre
Slide 3: Strategic priorities
3 Strategic priorities FY10 – FY18 FY19 – FY23 Strategic transition Recognised as the leading European specialist asset manager ✓ Enhanced brand and client base ✓ Increased fundraising target of three year rolling average €6.0bn per annum ✓ Developed new strategies to deliver gross fundraising targe
Slide 4: ESG development
4 ESG development ESG enhanced and fully embedded across our business Investment strategies RI Committee PRI Academy Joined PRI established ESG training Working Group Score: AAB RI policy ESG Integration: 1st Annual ESG Integration: 5th CDP Filing ESG Integration: established 48% AUM ESG survey 89%
Slide 5: Financial Review
Financial Review iCG
Slide 6: Financial highlights
6 Financial highlights Fund Management Company profits up 32% on H1 19 6 months to 6 months to 12 months to £m 30 September 2019 30 September 2018 31 March 2019 Fund Third party fee income 135.6 105.4 219.8 Management IC management fee 11.4 10.0 20.5 Company Other income 17.4 16.9 34.4 Operating cos
Slide 7: Balance sheet and capital strategy
7 Balance sheet and capital strategy Balance sheet efficiency maintained, enabling FMC growth 30 September 2019 31 March 2019 £m Assets Loans and investments 2,388 2,256 Held for sale financial assets 116 111 Cash 104 163 Other 262 251 Total assets 2,870 2,781 Liabilities Borrowings 1,229 1,184 Othe
Slide 8: Fund Management Company
Fund Management Company iCG
Slide 9: Assets under management
9 Assets under management Third party AUM continues to grow; up 11% to €38.4bn H1 20 AUM fundraising/realisations by strategy 5 year trend; fee earning and third party AUM €bn €bn 2.0 40.0 38.4 34.5 35.0 1.5 30.0 26.5 1.0 2.0 1.6 25.0 21.8 0.5 19.3 20.0 0.6 0.4 15.7 32.9 0.0 15.0 29.6 (0.1) (0.1) (0
Slide 10: Fee income
10 Fee income Fee income of £1.6bn ‘locked in’ from existing AUM £m 260 240 220 34 32 200 22 30 180 19 17 28 160 54 12 25 53 140 51 9 120 47 22 42 7 100 20 37 4 80 19 132 31 4 17 60 122 114 4 99 27 17 17 40 89 22 4 4 67 20 54 18 20 41 33 21 19 - FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31
Slide 11: What happens in a downturn?
11 What happens in a downturn? UK real estate fees resilient as investment market slows Fee earning AUM progression £m 800 700 600 Actual 500 400 Linear 300 Actual 200 Linear 100 - Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Longbow Fund III Actuals Longbow Fund III - Linear realisation profile Longbow Fund
Slide 12: FMC operating margin
12 FMC operating margin Operating margin target increased to be in excess of 50% £m Operating m argin 300 60% Target 250 50% 200 40% 150 30% 100 20% 50 10% 0 0% FY16 FY17 FY18 FY19 H1 20 Costs (LHS) Income (LHS) Operating margin (RHS)
Slide 13: FMC operating costs
13 FMC operating costs Continuing to invest in our talent across functions 6 months to 6 months to 12 months to % FMC % FMC % FMC £m 30 September 2019 revenue 30 September 2018 revenue 31 March 2019 revenue Investment team staff costs 16.2 10% 15.2 12% 29.5 11% Marketing staff costs 3.6 2% 3.0 2% 6.
Slide 14: Investment Company
Investment Company iCG 14
Slide 15: Net investment return
15 Net investment return New strategies impacting portfolio mix and returns in H1 Net investment return trend £m 2,500 2,435 2,186 2,000 1,891 1,903 1,500 1,000 13.7%¹ 12.6% 12.6% 10.8% 500 258 240 275 132 - FY17 FY18 FY19 H1 20 Average Balance Sheet Portfolio (inc. AFS) Net Investment Return ¹ Net
Slide 16: Net investment return
16 Net investment return Portfolio returns mirror those of the funds over long term Net investment return by fund Net Investment % of total NIR H1 20 NIR % Fund returns life Return to date Strategic Secondaries I* 21.7 16.5 % 68.3 % 17.7 % Europe Fund VII 21.1 16.0 % 18.4 % 22.1 % ICAP III 19.4 14.7
Slide 17: Balance sheet portfolio
17 Balance sheet portfolio Diversified and resilient portfolio an enabler of growth Capital Market funds Direct investment funds 55% CLO risk retention 250+ Companies requirement £2.5bn* 34 45% Industries Short term seed investment in new strategies Corporate Investments Real Asset Investments 20Cou
Slide 18: Investment Company costs
18 Investment Company costs Maintaining cost discipline 6 months to 6 months to 12 months to £m 30 September 2019 30 September 2018 31 March 2019 Staff costs 4.0 4.0 7.8 Cash incentives 7.2 12.4 24.6 Deferred awards 17.2 22.9 41.8 Incentive schemes 24.4 35.3 66.4 Amortisation 1.1 1.1 2.3 Other non s
Slide 19: FY20 guidance – upgraded
19 FY20 guidance – upgraded ▪ Fundraising – average €6bn per annum over 3 year rolling period; FY20 expected to exceed target ▪ FMC operating margin target updated – to be in excess of 50% ▪ Performance fees to average £20m-25m per annum; FY20 trending higher ▪ Net investment return – averaging 11.5
Slide 20: Operating Review
Operating Review iCG
Slide 21: Our strategy
21 Our strategy To grow our specialist asset management activities Invest selectively Grow assets Manage under portfolios to management maximise value Generate strong shareholder returns to invest in growth and pay sustainable dividends
Slide 22: Investment markets
22 Investment markets Private companies continue to grow earnings US and Europe EBITDA growth 14% 12% 10% 8% 6% 4% 2% 0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2015 2016 2017 2018 2019 US EBITDA Growth Rate Europe EBITDA Growth Rate Source: ICG Private Company Trends; November 2019
Slide 23: Investment markets
23 Investment markets European private company leverage levels increasing Europe leverage and interest coverage 6.00x 5.50x 5.00x 4.50x 4.00x 3.50x 3.00x 2.50x 2.00x 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2008 2009 2010 2011 2012 2013 2014 2015 20
Slide 24: Investment markets
24 Investment markets But ICG portfolio leverage stable, counter to market trend Europe leverage: All loans vs ICG Net Debt / EBITDA 5.50x 5.00x 4.50x 4.00x 1 2 3 4 1 2 3 4 1 2 2017 2018 2019 All Loans ICG Corporate Loans Source: ICG Private Company Trends; November 2019
Slide 25: Investing our direct investment funds
25 Investing our direct investment funds Disciplined deployment remains strong across strategies Direct investment funds¹ €m Fund invested at 30 6,500 September 2019 5,991 120% 6,000 297 5,500 613 4,876 100% Asia Pacif ic III 5,000 411 4,500 4,046 Japan SDP III 678 80% 4,000 140 579 Europe Fund VII
Slide 26: Fund performance
26 Fund performance Performance provides foundation for further growth Target Realised Fund 1 IRR on realised assets 1 MM MM ICG Minority Partners Fund 2008 (fully realised January 2016) 1.9x 2.0x ICG Recovery Fund 2008 (fully realised March 2017) 2.0x 1.9x Longbow UK Real Estate Debt Investments II
Slide 27: Fund performance
27 Fund performance Realising assets locks in investment returns and track record Percentage of realised assets exceeding hurdle rate H1 20 realised assets; performance against hurdle 100% 100% 95% 50 92% 92% 3 90% 45 +20% above hurdle 80% 80% 40 Number of assets realised in period 70% 35 60% 30 8 5
Slide 28: Fundraising
28 Fundraising Strong fundraising across diverse portfolio offering €bn Funds raised in H1 20 by strategy (€m) 12 115 255 Sale & Leaseback 441 10 Australian Senior Debt 522 Strategic Equity 8 737 Real Estate Funds 6 CLOs 806 10.0 Credit Funds 4 7.8 850 European Mid-Market 5.2 4.6 2 4.0 European Seni
Slide 29: Fundraising
29 Fundraising Dedicated European Sale & Leaseback strategy launched ▪ Strategic opportunity with favourable financial dynamics ▪ Mission critical real estate ▪ Largest existing players US focused ▪ Diversified, long-dated inflation protected income streams Sale & Leaseback strategy ▪ Good fit with
Slide 30: Fundraising outlook
30 Fundraising outlook Fundraising focus on newer strategies and SDP Fund IV H2 20 FY21 H1 22 Australian Senior Loans European NEW Mid-Market Corporate Europe Investments Fund VIII SDP Mandates Senior Debt Partners IV Asia Pacific Fund IV European Loans, High Yield & Multi-Asset Credit Capital Marke
Slide 31: Summary
31 Summary Well positioned for further growth Grow assets under ▪ Strong fundraising with €4.6bn raised across 14 strategies management ▪ Two new strategies launched - European Mid-Market and Sale & Leaseback ▪ Funds investing at, or ahead of, their linear investment pace Invest selectively ▪ Discip
Slide 32: Q&A
Q&A iCG
Slide 33: Appendix
Appendix iCG
Slide 34: ICG operating model
34 ICG operating model INVESTING FUNDRAISING • Fund deployment • Gross fundraising to average €6.0bn on a 3 year rolling basis • Fund performance and track record • Maintain fee level • Selective product expansion INVESTMENT IN NEW FUNDS IC PROFITABILITY FMC PROFITABILITY • IC gross return on assets
Slide 35: Disclaimer
35 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 RECOMMENDATI
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