Icg Plc · LSE:ICG
Icg — Intermediate Capital Group — H1 2019 Earnings Presentation
37 slides from Icg's earnings presentation, Nov 15, 2018
Slide 1: Half year results presentation
Half year results presentation 15 November 2018
Slide 2: Highlights
2 Highlights Significant increase in FMC profits, driven by strong inflows ▪ Fund Management Company profits up 45% to £64.4m (H1 2018: £44.3m) ▪ €6.1bn of new money raised, AUM up 17% on 31 March 2018 to €33.6bn ▪ Third party fee earning AUM up 24% on 31 March 2018 to €26.0bn resulting in third par
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: Interest rates
4 Interest rates Rising interest rates benefit ICG ▪ Long term structural trend towards alternatives predicted to remain Fundraising ▪ Alternatives will continue to offer vastly superior returns on traditional asset classes ▪ Flexible mandates allow us to deploy at appropriate risk/return Deployment
Slide 5: Financial Review
Financial Review iCG
Slide 6: Financial highlights
6 Financial highlights Fund Management Company profit up 45% 6 months to 12 months to 6 months to £m 30 September 2018 31 March 2018 30 September 2017 Fund Third party fee income 105.4 167.1 77.8 Management IC management fee TO UPDATE 10.0 17.8 8.3 Company Other income 16.9 25.2 12.3 Operating costs
Slide 7: Balance sheet and capital strategy
7 Balance sheet and capital strategy Efficient balance sheet, well placed to support further growth 30 September 2018 31 March 2018 31 March 2009 £m Assets Loans and investments 2,110 1,899 2,943 Assets for syndication 232 107 - Cash 91 248 23 Other 298 273 96 Total assets 2,731 2,527 3,062 Liabilit
Slide 8: Fund Management Company
Fund Management Company iCG
Slide 9: Third party assets under management
9 Third party assets under management Third party AUM up 18% to €31.2bn H1 19 AUM inflows/outflows by strategy ▪ Third party AUM up €4.7bn in the period; inflows €6.1bn, outflows €1.7bn and €0.3bn FX and other €bn 5.0 ▪ Realisations in Corporate Investments arising on the older European and Senior D
Slide 10: Fee income
10 Fee income Fee rates maintained across asset classes Weighted average fee rate¹ by strategy 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Corporate Investments - Corporate Investments - Capital Market Investments Real Asset Investments Secondary Investments Group Private Debt SDP FY17 FY18 H1 1
Slide 11: Fee income
11 Fee income Strong visibility of fees from closed end funds model Management fees ‘locked in’ from current AUM¹ £m 200 17 180 16 21 160 14 17 12 13 140 11 11 42 42 8 120 42 41 39 100 80 60 115 107 100 95 88 40 20 - FY19 FY20 FY21 FY22 FY23 Corporate Investments Capital Market Investments Real Asse
Slide 12: FMC operating margin
12 FMC operating margin Operating margin above target £m Operating m argin 250 50% 45% Target 200 40% 35% 150 30% 25% 100 20% 15% 50 10% 5% 0 0% FY15 FY16 FY17 FY18 H1 18 H1 19 Costs (lhs) Income (lhs) Operating margin (rhs)
Slide 13: FMC operating costs
13 FMC operating costs Increasing operating leverage; costs in line with expectations 6 months to 6 months to 6 months to % FMC % FMC % FMC £m 30 September 2018 revenue 31 March 2018 revenue 30 September 2017 revenue Investment team staff costs 15.2 11% 14.1 13% 13.9 14% Marketing staff costs 3.0 2%
Slide 14: FMC profit trend
14 FMC profit trend Strategic delivery as profits growing year on year FMC profit before tax and AUM trend £m €bn 140 35 120 30 100 25 80 20 60 15 95 40 10 74 61 64 52 20 38 36 38 40 5 31 35 - - FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1 19 FMC PBT Annualised FY19 FMC PBT Third party AUM N
Slide 15: Investment Company
Investment Company iCG 15
Slide 16: Net investment return
16 Net investment return Returns higher mirroring fund performance Net investment return trend £m 2,500 2,174 1,958 2,000 1,891 1,903 1,500 12.1% 13.7%¹ 12.6% 13.3%¹ 1,000 500 237 258 240 145 - FY16 FY17 FY18 H1 19 Average Balance Sheet Portfolio (inc. AFS) Net Investment Return ¹ Net investment ret
Slide 17: Net investment return
17 Net investment return Balance sheet portfolio weighted to higher return strategies Net investment return by fund Net Investment Fund returns to % of total NIR H1 19 NIR % Return date Europe Fund VI 56.7 30 % 21 % 28 % Europe Fund V 24.2 13 % 18 % 17 % ICAP III 20.0 11 % 32 % 24 % Strategic Second
Slide 18: Balance sheet portfolio composition
18 Balance sheet portfolio composition Diversified portfolio supports growth and downside protection Balance sheet - strategy split¹ Europe Corporates Asia Corporates H1 19 US Corporates CLOs Liquids/ Loans Real Estate FY09 Strategic Equity Senior Debt £m 0 500 1,000 1,500 2,000 2,500 3,000 ¹ Balanc
Slide 19: Investment Company costs
19 Investment Company costs Costs stable and in line with expectations 6 months to 6 months to 6 months to £m 30 September 2018 31 March 2018 30 September 2017 Staff costs 4.0 5.2 5.9 Cash incentives 12.4 9.9 14.8 Deferred aw ards 22.9 22.6 16.7 Incentive schem es 35.3 32.5 31.5 Amortisation 1.1 1.2
Slide 20: FY19 guidance - unchanged
20 FY19 guidance - unchanged ▪ Fundraising – average €6bn per annum over 3 year rolling period; FY19 expected to exceed this ▪ FMC operating margin – above 43% ▪ Performance fees to average £20-25m per annum ▪ Net investment return – averaging 11.5% ▪ Balance sheet portfolio – average c£2bn with co-
Slide 21: Operating Review
Operating Review iCG
Slide 22: Our strategy
22 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 23: Investment markets
23 Investment markets Private company growth supports portfolio performance European revenue and EBITDA growth 14% 12% 10% 8% 6% 4% 2% 0% -2% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -4% -6% EBITDA Growth Rate Revenue Growth Rate Source: ICG European Private Company Trends; September 2
Slide 24: Investment markets
24 Investment markets Credit fundamentals strong; 10 year high interest coverage European leverage and interest coverage 7.00x 6.50x 6.00x 5.50x 5.00x 4.50x 4.00x 3.50x 3.00x 2.50x 2.00x 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Senior Debt/EBITDA Net Sub Debt/EBITDA EBITDA/Net Cash
Slide 25: Investing our direct investment funds
25 Investing our direct investment funds Capital deployment strong across strategies Direct investment funds¹ €m Fund invested at 30 5,000 September 2018 120% 4,500 4,046 North America I 4,000 140 100% Asia Pacif ic III 3,551 3,648 579 3,500 63 203 445 80% Strategic 3,000 1,064 Secondaries II 2,770
Slide 26: Fund performance
26 Fund performance Portfolio performance provides platform for future fundraising Target Realised Fund IRR on realised assets 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 Invest
Slide 27: Fund performance
27 Fund performance Realising assets locks in investment returns track record Percentage of realised assets exceeding hurdle rate H1 19 realised assets; performance against hurdle 100% 98% 95% 60 92% 2 +20% above hurdle 90% 86% 80% 50 1 80% Number of assets realised in period 70% 10-20% above hurdle
Slide 28: Fundraising
28 Fundraising Fundraising totals €19.9bn over 3 year rolling period Funds raised in H1 19 by strategy (€m) €bn 4 9 280 Australian Senior Loans 346 8 379 435 US Corporates Fundraising 7 expectations 626 c€6bn pa¹ US CLOs 6 5 European CLOs 4 7.8 Credit Funds 6.4 6.1 4,066 3 5.2 Real Estate Funds 2 4.
Slide 29: Fundraising outlook
29 Fundraising outlook Fundraising focus on newer and smaller strategies H2 19 FY 20 FY 21 Australian Senior Loans Corporate Senior Debt Partners IV Investments Asia Pacific Fund IV European Loans, High Yield & Multi-Asset Credit Capital Market Global Loans & Structured Credit Investments CLOs UK Re
Slide 30: Fundraising – Europe Fund VII
30 Fundraising – Europe Fund VII Larger fund provides access to new investment opportunities Fundraising history €m Co-invest ratio % 4,500 70% 4,000 60% 3,500 50% 3,000 2,500 40% 2,000 3,929 30% 1,500 2,500 20% 1,000 2,006 1,750 1,420 10% 500 - 0% ICG Mezzanine Fund 2003 ICG European Fund 2006 ICG
Slide 31: Fundraising – Europe Fund VII
31 Fundraising – Europe Fund VII Deepening & broadening client relationships creates value Europe VII clients in more than one fund Strategies invested in by Europe VII clients US Private Debt 25% 75% European Senior Debt Asia Pacific Strategic Equity US CLOs 68 clients Real Estate Partnership Capit
Slide 32: Wrap Up Q&A
Wrap Up Q&A iCG
Slide 33: Wrap up
33 Wrap up Well positioned for further growth, with downside protection Grow assets under ▪ Europe Fund VII record fundraise driving €6.1bn of inflows management ▪ Focus of fundraising to shift to newer and smaller fund strategies ▪ All fund strategies investing strongly Invest selectively ▪ Maintai
Slide 34: Appendix
Appendix iCG
Slide 35: ICG operating model
35 ICG operating model INVESTING FUNDRAISING • Fund deployment • Gross fundraising to average €6.0bn over a 3 year rolling period • Fund performance and track record • Maintain fee level • Selective product expansion INVESTMENT IN NEW FUNDS IC PROFITABILITY FMC PROFITABILITY • IC gross return on ass
Slide 36: Brexit and ICG
36 Brexit and ICG ▪ EU regulated subsidiary in operation Clients ▪ Access to clients will not be disrupted ▪ Agile workforce with local offices in key markets People ▪ Low number of London employees who do not meet UK residency criteria ▪ No portfolio companies are dependant on trade between UK and
Slide 37: Disclaimer
37 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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