Slide 1: Full Year Results Presentation
Intermediate Capital Group PLC Full Year Results Presentation 2 June 2010 Authorised and regulated by the Financial Services Authority
Slide 2: Highlights
Highlights Operational highlights Final close on Recovery Fund at €843m Performance of portfolio companies showing early signs of improvement Repayments objective exceeded Investments resumed Financial highlights Return to profitability; pre-tax profit of £105.8m* Final dividend of 1
Slide 3: Market Update
Icg Market Update
Slide 4: European LBO Volume
European LBO Volume 180 160 140 120 100 €bn 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 10 Source: S&P 4
Slide 5: European LBO Volume: Primary vs Secondary
European LBO Volume Primary vs Secondary Primary LBOs Secondary LBOs 180 160 140 120 100 €bn 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 10 Source: S&P 5
Slide 6: European Private Equity: Commitments and Dry Powder
European Private Equity Commitments and Dry Powder Funds raised Dry Powder 250 200 150 €bn 100 50 0 2005 2006 2007 2008 2009 1Q 10 Source: Preqin 6
Slide 7: European LBO Senior Debt Maturity Profile
European LBO Senior Debt Maturity Profile Fitch-rated credits 70 60 50 40 €bn 30 20 10 0 2011 2012 2013 2014 2015 2016 2017 2018 Source: Fitch 7
Slide 8: US LBO Volume
US LBO Volume 180 430 160 230 140 233 120 100 434 $bn 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 10 Source: S&P 8
Slide 9: Asia Pacific Volume
Asia Pacific Volume Buyouts Non-buyouts 60 50 40 $bn 30 20 10 n/a 0 2003 2004 2005 2006 2007 2008 2009 Q1 10 Source: APER 9
Slide 10: Credit Markets
Credit Markets Price recovered to mid 90s (flow names); mid 80s (mid-market) Default rate peaked at 15.8% in December; Rating agencies now expect low default rate in 2010 Liquidity limited to reinvestment of early repayments €6bn of new issuance in Q1 10, compared to €5bn in 2009 New issue
Slide 11: New Lending vs Repayments
New Lending vs Repayments* 1400 New Lending Repayments 1200 1000 800 £m 600 400 200 0 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 *6 months moving average 11
Slide 12: Exits
Exits £224m of repayments* and £99m of capital gains** Well above objective for the year 5 Top 20 Marken (Sponsor) Medica (IPO) Springer (Refinancing) Sebia (Sponsor) Gala (sold in open market) * Excluding Sebia ** Excluding £24m of capital gains on Sebia ordinary shares 12
Slide 13: European Deal Pipeline
European Deal Pipeline Increased momentum in pipeline Plain vanilla LBO unattractive at present Recovery Buy and build / bolt-ons Restructure balance sheet Primary Market Growth capital 13
Slide 14: Icopal
Icopal Transaction description Investment rationale Icopal is an international manufacturer of Icopal is the leader in almost all its markets roofing and waterproofing products Icopal’s markets are typically highly consolidated The business operates within a niche in the building with stable
Slide 15: CPA Global
Transaction description Investment rationale CPA Global is a worldwide leader in IP renewals and in Clear market leader in patent and trademark the fast growing market for Legal Services Outsourcing renewals, a market with long-term steady growth (LSO) The business was founded 40 years ago to
Slide 16: Portfolio Update
Icg Portfolio Update
Slide 17: Investment Portfolio: Performance vs Prior Year
Investment Portfolio Performance vs Prior Year Percentage of assets performing at or above prior year 80% 70% 60% 50% 40% 30% 20% 10% 0% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Current 17
Slide 18: Top Twenty Assets
Top Twenty Assets Vs Last Business Country Year Private clinic manager France ↓ Manufacturer of medical diagnosis equipment France ↑ Electronic publisher of company information Belgium ↑ Textile rental and cleaning France ↑ Airport operator UK ↑ Cable operator Taiwan ↑ Inspection, certification and
Slide 19: Top Ten Equity Assets
Top Ten Equity Assets Vs Last Business Country Year Manufacturer of medical diagnosis equipment France ↑ Patent & legal services UK → Fixed satellite services USA → Cable operator Taiwan ↑ Livestock identification systems France ↑ Home delivery of frozen foods Germany ↑ Inspection, certification and
Slide 20: Top Ten PIK Assets
Top Ten PIK Assets Vs Last Business Country Year Private clinic manager France ↓ Manufacturer of medical diagnosis equipment France ↑ Credit Bureau Australia ↑ Business management software and outsourcing services UK ↑ Share registry and fund administration services Australia ↑ Share registry and co
Slide 21: Trend in Provisions for Portfolio Companies
Trend in Provisions for Portfolio Companies Gross Provisions Write-backs 250 200 150 £m 100 50 0 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 21
Slide 22: Fund Management
Icg Fund Management
Slide 23: Third Party Funds Under Management
Third Party Funds Under Management CFM Funds Mezz Funds 10 9 8 7 6 €bn 5 4 3 2 1 0 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY08 FY09 FY10 23
Slide 24: ICG European Mezzanine Funds Track Record
ICG European Mezzanine Funds Track Record Capital Position Drawn 180% Returned v Drawn % 4% Unrealised NBV v Drawn%* 160% 161% 140% 58% 120% 128% 104% 100% 100% 100% 93% 96% 80% 60% 55% 40% 20% 0% 7% MF 1998 MF 2000 MF 2003 EF 2006 * NBV is net of provisions but excludes equity or warrant valuation
Slide 25: ICG Asia Mezzanine Funds and Minority Partners
ICG Asia Mezzanine Funds and Minority Partners Track Record Drawn 180% Returned v Drawn % Unrealised NBV v Drawn%* 160% 140% 79% 87% 120% 114% 100% 80% 83% 87% 60% 59% 40% 42% 34% 20% 0% ICAP 05 ICAP 08 IMP 08 * NBV is net of provisions but excludes equity or warrant valuation uplift 25
Slide 26: ICG Credit Funds: Default vs Market Rates
ICG Credit Funds Default vs Market Rates ICG Loans S&P Loans 16% 14% 12% 10% 8% 6% 4% 2% 0% Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Q1 10 Source: ICG and S&P 26
Slide 27: Recovery Fund
Recovery Fund Final Close of Recovery Fund at €843m (€643m of equity) Additional €368m of equity raised Testimony of strength of ICG brand Strong growth in new clients 27
Slide 28: Mezzanine and Growth Capital Funds Fundraising Timetable
Mezzanine and Growth Capital Funds Expected fundraising timetable Asia Pacific III Europe V US I Europe VI 2010 2015 28
Slide 29: CFM Growth Strategy
CFM Growth Strategy Credit Funds Leveraged loan funds Portfolio purchases High yield bond funds Managed accounts Recovery Fund Build a US platform Future growth 29
Slide 30: Financial Review
Icg Financial Review
Slide 31: Financial Highlights
Financial Highlights Pre-tax profit of £105.8m* vs £(67)m in 09** New segmental reporting Fund Management profit of £38.0m vs £30.9m in 09 Investment profit of £67.8m vs £(97.6)m in 09 Cash Core Income of £115.1m vs £53.4m in 09 Additional £67m of debt extended *Including £0.1m positive
Slide 32: Segmental Reporting Key Principles
Segmental Reporting Key Principles Fund Management Co is operating unit Investment network (investment executives, local offices), fund marketing costs and support functions allocated to FM Co Investment Co will be charged a management fee of 1% MDs’ remuneration split 50/50 Finance and Tr
Slide 33: Segmental Reporting
Segmental Reporting March 2010 March 2009 March 2008 Fee income 76.4 80.2 72.6 Fund Management Other income 1.9 6.0 5.9 Company Admin expenses (40.3) (55.3) (54.8) FM Profit 38.0 30.9 23.7 Net Interest Income 209.7 189.9 156.5 Div & other income 3.4 10.0 7.5 Admin expenses (60.7) (57.5) (51.3) Inves
Slide 34: Operating Costs
Operating Costs (Excluding MTIS) Staff Costs Other Admin 70 60 50 40 £m 30 20 10 0 FY 07 FY 08 FY 09 FY 10 34
Slide 35: Proposed Compensation Arrangements: Key Principles
Proposed Compensation Arrangements Key Principles Driving New Schemes Quantum unchanged Better support long term business aims Improve alignment between staff and shareholders; promote staff ownership of the Company In line with FSA guidance Remain on “cash on cash” basis 35
Slide 36: Proposed Compensation Arrangements
Proposed Compensation Arrangements The total award pool will be a percentage of cash profit (pre-incentive operating profit including net provisions adjusted for unrealised gains, unrealised PIK and fair value movements on derivatives) Cash Profit Annual PLC Balance FMC Bonus Equity Sheet Carry Eq
Slide 37: Proposed Compensation Arrangements: Transition & Segmental Impact
Proposed Compensation Arrangements Transition & Segmental Impact Subject to approval at AGM Transition in FY11 & FY12, after which MTIS terminates Transition towards a more balanced allocation between segments; long term split 50-60% FMC vs 40-60% IC On new schemes basis, FMC results oversta
Slide 38: Fund Management
Fund Management Profit before tax up 23% to £38.0m, Flat adjusted for shadow share scheme release 40 35 6.6 30 3.8 8.4 25 4.1 £bm 20 38 15 30.9 10 5 0 Mar-09 Fee income Other income Shadow Share Costs Mar-10 Scheme 38
Slide 39: Mezzanine & Growth Capital Funds Fee Income
Mezzanine & Growth Capital Funds Third Party Fee Income 2010 2009 Management Fee Carried Interest Management Fee Carried Interest Investing Europe 13.7 - 14.6 - Investing Asia 5.7 - 7.0 - Realisation Europe 10.2 2.7 9.0 1.2 Realisation Asia 2.3 - - - Total 31.9 2.7 30.6 1.2 Mezzanine & Growth Capi
Slide 40: Credit Funds Fee Income
Credit Funds Fee Income Fee income down 36% to £14.0m (F1 09: £21.7m) due to lower level of junior fees and the absence of performance fee Some signs of improvements – Might lead to recoveries of junior fees Fee Income in £m Background FY 10 FY 09 FY 10 FY 09 Senior fees 7.3 7.0 All except Opps
Slide 41: Credit Funds: Existing CDOs Run Off Profile
Credit Funds Existing CDOs Run Off Profile Projected CDO Portfolio Principal Balance 4 Assuming normalised conditions 3 £bn 2 1 0 2010 2011 2012 2013 2014 2015 41
Slide 42: Investment Company
Investment Company Return to profitability, Profit before tax at £67.8m 100 80 (8.2) 60 52.3 40 67.8 20 0 £m -20 -40 111.3 (97.6) -60 -80 (6.6) 19.8 (3.2) -100 Mar-09 NII Div & other Expenses Impairment Net Capital FV derivatives Mar-10 income Gains 42
Slide 43: Net Interest Income
Net Interest Income Cash interest on base rate Cash interest spread PIK spread & IFRS Amortisation Cash interest expense 350 300 250 200 150 100 £m 50 0 -50 -100 -150 FY 08 FY 09 FY10 43
Slide 44: Capital Account
Capital Account Provisions Provision write-backs Capital Gains 300 200 100 £m 0 -100 -200 -300 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 44
Slide 45: Balance Sheet
Balance Sheet FY10 FY09 FY09 £m £m % Loans & Investments 2,718 2,923 -7% Net current liabilities (30) (52) 42% 2,688 2,871 Shareholders’ Funds 1,184 776 53% Borrowings 1,504 2,095 -28% 2,688 2,871 ROE 10.8% -8.0% - Gearing Ratio 127% 270% Debt Facilities 2,223 2,403 -7% Headroom 729 307 137% 45
Slide 46: Cash Core Income
Cash Core Income 120 100 Cash Core Income Calculation: 80 Pre tax profit*: £105.7m Less Capital Gains** £(77.1)m £m 60 Plus provisions £161.8m 40 Less Accrued PIK** £(127.9)m 20 Plus PIK realised** £52.6m Cash Core Income £115.1m 0 FY06 FY 07 FY 08 FY 09 FY 10 ** adjusted for FV movements of derivat
Slide 47: Financial Outlook
Financial Outlook Expect lower FMC profit in FY11 due to higher proportion of incentive scheme allocated to segment, stable fee income Expect lower NII, lower provisions and further capital gains, but limited visibility on economic outlook Strong and liquid balance sheet 47
Slide 48: Conclusion
Conclusion
Slide 49: Conclusion
Conclusion Well positioned to grow fund management franchise over the next 5 years Investment portfolio showing early signs of improvement Realisations and Investments resumed But we remain cautious in a fragile economic environment “ We aim to be a leading alternative asset manager, special
Slide 50: Appendix
Appendix
Slide 51: Extended Debt Repayment Schedule
Extended Debt Repayment Schedule Initial Maturity Schedule - Pre Extensions Extended Maturity Schedule 700 700 600 600 500 500 400 400 £m £m 300 300 200 200 100 100 0 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H2 10 10 11 11 12 12 13 13 14 14 24 10 10 11 11 12 12 13 13 14 14 24
Slide 52: P&L Split: New Segment Reporting
P&L Split New Segment Reporting Investment Co Historic Group P&L Fund Management Co Income: Income: Income: Interest income Interest income Fee income Fee income Dividends (ptf companies) Dividends Dividends (Seed equity) Related Expenses: Related Expenses: Related Expenses: Interest expense Interes
Slide 53: Cost Allocation
Cost Allocation Group Segmental Year ended 31 March 2010 (£m) FM Co Inv Co Salaries & ST bonuses 24.7 22.4 2.3 MTIS (PIK) 28.9 - 28.9 Staff Costs MTIS (Capital gains) 21.7 - 21.7 Total 75.3 22.4 52.9 Other Admin Costs 19.6 17.9 1.7 Total 94.9 40.3 54.6 53
Slide 54: Fee Income
Fee Income FY 10 FY 09 10/09 Mezzanine Fund Management fee income 34.6 31.8 9% Credit Fund Management fee income 14.0 21.7 (36%) Third Party Funds fee income 48.6 53.5 9% Investment Company fee income 27.8 26.7 4% Total fee income 76.4 80.2 (5)% 54
Slide 55: Mezzanine & Growth Capital Funds Fee Structure
Mezzanine & Growth Capital Funds Fee structure Funds in investment period Fund Size Equity End of investment period % Invested Main fee 1.25% on committed equity EF06 €1.75bn €1.25bn Nov-2011 68% 0.15% on debt ICAP 08 $0.6bn $0.6bn April-2013 26% 1.5% on committed equity RF08 €0.84bn €0.64bn Oct-201
Slide 56: Management Fee and Carried Interest Contribution to Fee Income
Mezzanine & Growth Capital Funds Management Fee and Carried Interest Contribution to Fee Income Management fees Carried interest 40 35 30 25 £m 20 15 10 5 0 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 56
Slide 57: Credit Funds Fee Income Analysis
Credit Funds Fee Income Analysis Senior fees Junior fees Performance fees 25 20 15 £m 10 5 0 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 57
Slide 58: Gains on Investments
Gains on Investments Year ended Year ended 31 March 2010 31 March 2009 £m £m Realised gains on investments 78.8 30.9 Unrealised gains on investments 20.0 - Cost of medium term (21.7) (6.1) incentive scheme Net gains on investments 77.1 24.8 58
Slide 59: Impairments
Impairments Year ended Year ended 31 March 2010 31 March 2009 £m £m Mezzanine and equity investment Gross Impairment 180.3 266.2 Recoveries (18.5) (28.7) Equity in ICG – managed CDO’s Gross Impairment - 35.6 Recoveries - - Impairment of net write backs 161.8 273.1 59
Slide 60: Breakdown of Provisions
Breakdown of Provisions Portfolio Companies Recoveries CDOs 350 Gross Provisions/ Closing 300 Loan Book (ex CDOs) 36 FY 06: 2.1% 250 FY 07: 2.2% FY 08: 2.2% FY 09: 9.1% 200 FY 10: 6.7% £m 150 266 100 180 50 11 3 50 38 22 0 (2) (3) (15) (29) (19) -50 FY 06 FY 07 FY 08 FY 09 FY 10 60
Slide 61: Pre-tax Profits, Earnings Per Share & Dividends
Pre-tax Profits, Earnings Per Share & Dividends Year ended Year ended 31 March 2010 31 March 2009 £m £m Pre-tax profit* 105.7 (75.0) Pre-tax profit 105.8 (66.7) Earning per share** 25.0p (35.1)p Dividend per share** 17p 17p *Excluding fair value movements in derivates held for accounting purposes **
Slide 62: Disclaimer
Disclaimer The materials being provided to you are intended Distribution of this material to any person other than only for informational purposes and convenient the person to whom this information was originally reference. delivered and to such person’s advisors is This information is not int