Slide 1: ICG plc Preliminary Results 2014
ICG plc Preliminary Results 2014 20 May 2014 Intermediate Capital Group plc
Slide 2: Highlights
Highlights Operational Financial A record fundraising year with €3.8bn raised, 45% Operational success to impact results from FY15 in new strategies onwards due to nature/timing of new funds raised A record level of realisations reinforcing our track Fund Management Company profit down 13% a
Slide 3: Priorities for FY14
Priorities for FY 14 Continued momentum in delivering our strategic priorities What we said we would do What we have done Fundraising momentum to be maintained A record fundraising year with €3.8bn raised ‒ Final close on Longbow Fund III Longbow Fund III closed at hard cap of £700m ‒ Further clos
Slide 4: Growing our assets under management
Growing our assets under management Intermediate Capital Group plc 4
Slide 5: Fundraising market update
Fundraising market update Increasing allocation to alternatives Real Yields: The Race to Zero and Beyond Ongoing search for yield Increased interest in alternative credit to balance lower returns from traditional asset classes Favouring well established fund managers that can provide “one stop
Slide 6: Record fundraising year
Record fundraising year A total of €3.8bn of third party capital raised Established strategies €bn 4.5 Three European CLOs were issued totalling €1.3bn making ICG a leading issuer of European CLOs 4.0 ICG Longbow fund III closed at £700m 3.5 Marketing commenced for Asia Pacific fund III 3.0 2.
Slide 7: Investor base
Investor base Investment in distribution strengthening fundraising relationships Funds raised in FY14 had a European focus which is reflected in the geographical diversity of the investor base Increased interest from pension schemes, with some large mandates from UK and Scandinavian pension fund
Slide 8: Expanding product portfolio
Expanding product portfolio Increasing number of first time funds being marketed Growing assets under management FY14 achievements Established strategies ‒ European mezzanine ICG Longbow Fund III ‒ Asia Pacific mezzanine St Paul’s (CLO) II – IV Funds ‒ UK real estate mezzanine raised ‒ European CL
Slide 9: Case study: First time funds
Case study: First time funds Important step in establishing long term fee generating AUM First time funds 45% of funds raised in FY14 were for first time funds of which 75% was Senior Debt Partners (SDP) The AUM and fee maturity is likely to be reached once the third fund is raised and invested
Slide 10: Case study: USA
Case study: USA Delivering on our expansion into North America We have had a New York office since 2007 and been investing from our balance sheet since 2008, building a track record and our understanding of the market Recruited a team of 14 investment professionals with over 150 years investment
Slide 11: Future fundraising
Future fundraising Diverse product portfolio to facilitate AUM growth Europe UK Real Estate European mezzanine Mezzanine fund European CLOs Senior debt fund Total Credit Development fund European Loan Fund Alternative Credit Senior Debt Partners European real estate Japan Japan
Slide 12: Invest selectively
Invest selectively Intermediate Capital Group plc 12
Slide 13: Investment market update
Investment market update European LBO market volumes remain low European LBO volume €bn 150 138 Imbalance in the supply and demand for 125 116 credit by mid sized borrowers being filled 100 by institution led financing and specialist 75 asset managers 49 46 50 33 Availability of senior debt and
Slide 14: Investment market update
Investment market update US is fully functioning but uncertainty remains US LBO volume US$bn Buoyant market with high levels of inflows 350 293 322 from CLOs and mutual funds 300 250 234 234 Liquid credit market and well capitalised 200 180 sponsors increases competition for assets 150 119 95
Slide 15: Investment market update
Investment market update Increasing competition for assets Asia Pacific UK Real Estate Fragmented nature of market provides little UK commercial real estate market is seeing region wide market data increased levels of activity Steady growth in the market Aggregate loans of £120bn have maturi
Slide 16: Investing selectively – direct investment funds
Investing selectively – direct investment funds Deployed £1.9bn on behalf of the IC and Funds The investment rate for direct investment funds, Senior Debt Partners, ICG Longbow III, Europe Fund £m V, remain ahead of plan 2.0 During FY14 our mezzanine investment teams signed 1.8 eight deals in Eu
Slide 17: Investing direct investment funds
Investing direct investment funds Funds on track to be fully invested Who we invested in Supported management buyout of Euro Cater, a ICG Europe 58% leading Nordic food service company Fund V invested ICG and Fund V invested €200m across the capital structure Supported acquisition of regional
Slide 18: Manage our portfolio
Manage our portfolio Intermediate Capital Group plc 18
Slide 19: Realisations
Realisations Year of record realisations Increased availability of finance has seen a record year of realisations with full or partial repayment of 12 of our top 20 assets The IC has realised over £1.1bn of cash during the year at an 12 OF TOP 20 ASSETS REALISED average IRR of 14% Realisations
Slide 20: Realisations by vintage
Realisations by vintage Strong period of realisations enabling investment in growth IRR of realisations Realisations were principally of assets invested 30% between 2005 and 2008 20% The vintages of these assets and the availability of finance suggests a catch up from previous 10% years 0% Ave
Slide 21: Portfolio performance
Portfolio performance EBITDA performance of portfolios improving % of mezz assets performing above prior year The performance of our mezzanine investment 80% portfolio is broadly resilient with 67% above or at 70% last year’s level; 75% on a weighted basis 60% Level of provisions should graduall
Slide 22: Financial Review
Financial Review Intermediate Capital Group plc 22
Slide 23: Financial highlights
Financial highlights Group profit up 18% predominately driven by realisations Highlights Group profit before tax * £175.1m 18% FMC profit before tax £35.0m 13% IC profit before tax * £140.1m 30% Group and IC profit recycled from reserves £125.7m >100% Third party AUM €10,669m 8% Investment
Slide 24: Segmental reporting
Segmental reporting Investment £m March 2014 March 2013 March 2012 Fund Fee income 99.6 100.7 91.2 Management Company Other income 0.9 1.5 2.9 Admin expenses (65.5) (61.8) (56.4) FM profit 35.0 40.4 37.7 Investment Net interest income 133.8 159.7 183.5 Company Div & other income 26.6 3.8 7.6 Admin e
Slide 25: Fund Management Company
Fund Management Company Intermediate Capital Group plc 25
Slide 26: Third party AUM
Third party AUM Momentum in fundraising continuing; realisations impacting AUM Third party AUM up 8% with €3.8bn of new funds raised and €3.0bn of realisations €bn Third party fundraising and realisations (LTM) 5.0 4.0 3.0 2.0 1.0 0.0 (1.0) (2.0) (3.0) (4.0) (5.0) Mar 12 Jun 12 Sep 12 Dec 12 Mar 13
Slide 27: Record fundraising year
Record fundraising year Funds raised in year charge fees on invested capital Impact of FY14 record fundraising has yet to fully €bn FY14 fundraising benefit the income statement due to the mix of 4.5 funds raised 4.0 CLOs typically charge fees on invested capital but are invested quickly so imme
Slide 28: Third party fee income
Third party fee income Fee mix changes as older funds realised and new funds invest £90m Realisation of older mezzanine assets weighted to the first half reducing fee £80m income for the year £70m Mezzanine fees in FY13 benefitted from the close of ICG Europe Fund V £60m Investment of Longbow
Slide 29: Fund Life Cycle
Fund Life Cycle Recent fundraising replenishing AUM and extending fee stream €bn Third party funds by vintage 3.0 Fund classification is based on the date of the final close 2.5 2.0 1.5 1.0 0.5 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Investment Realisation Intermediate Capita
Slide 30: FMC operating costs
FMC operating costs Increasing headcount to drive growth £m 70.0 Operating costs up 6% on FY13 Salary costs up £2.6m due to 60.0 – Annualisation impact of recent hires 50.0 – Average headcount up 21% – Investing in growth 40.0 Non staff costs up 8% with increased IT 30.0 and occupancy costs to
Slide 31: Investment Company
Investment Company Intermediate Capital Group plc 31
Slide 32: Loan book
Loan book Significant realisations has resulted in a 29% decrease in loan book £3,600m 393 £3,200m 184 £2,800m 2,696 £2,400m 757 14 226 51 £2,000m 138 1,914 112 89 £1,600m £1,200m Mar 13 Interest New Repayment Repayment Repayments Unrealised Realised Impairments FX & other Mar 14 income investments
Slide 33: Net interest income
Net interest income Decrease in NII driven by decrease in average book size £2,800m £280m Average interest bearing loan book fell 17% following high level £2,600m £240m of realisations £2,400m Net interest income moved in line £200m with investment book £2,200m Long term trend downwards as £16
Slide 34: Long terms provisions
Long terms provisions Net provisions against our weaker assets 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 2.5% 0% FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Net Provisions Average pre-crisis * LTM to 31/3/14 Net impairments of £95.1m in FY14, excludes £17.3m
Slide 35: Gains on investments
Gains on investments High realised capital gains due to the exit of Allflex £m March 2014 March 2013 March 2012 Net realised gains 122.1 14.1 73.8 Unrealised gains 27.3 58.9 44.2 Total gains 149.4 73.0 118.0 Total unrealised capital gains of £27.3m – Increases in fair value - £70.8m – Decreases in
Slide 36: Balance sheet
Balance sheet Intermediate Capital Group plc 36
Slide 37: Balance Sheet
Balance Sheet BALANCE SHEET March 2014 - £m 31 March 2013 - £m Loans & investments 2,081 2,696 Warehoused assets 116 30 Other (102) (8) 2,095 2,718 Borrowings 587 1,155 Shareholders’ funds 1,508 1,563 2,095 2,718 BALANCE SHEET METRICS March 2014 - £m 31 March 2013 - £m LTM ROE* 10.2% 8.9% Gearing ra
Slide 38: Balance sheet portfolio in transition
Balance sheet portfolio in transition Strong period of realisations enabling investment in growth Co-investment in assets breakdown 2014 %* 2013 %* Co-invest in assets £m Co-invest in funds FY13 Interest bearing 1,044 55% 2,009 74% CLO assets Seed Equity 581 30% 504 19% Total 1,625 85% 2,513 93% N
Slide 39: Capital Management Approach
Capital Management Approach Grow the business to maximise shareholder returns CAPITAL MANAGEMENT Investing to grow the fund management business Grow the business to Investments Co-investments and investments in maximise shareholder returns funds that are: • Established • Maintaining access to New Wi
Slide 40: Capital Allocation
Capital Allocation Recycling of capital into a broad range of strategies Anticipated capital Category Impact Horizon Examples Current balance in investment in next loanbook 3 years Well established Current European Mezzanine £1.5bn £0.5bn – £0.7bn strategies European CLOs Established Current – Mediu
Slide 41: Fees case study
Fees case study Generating returns by effective use of capital Senior Debt Partners US Private Debt ICG invested €50m into a €1.7bn fund ie. 3% of ICG co-invested $200m alongside the fund, with the total fund fundraising ongoing The FMC earns average management fees of The FMC earns average
Slide 42: 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 2011 March 2012 March 2013 March 2014 Cash Core Income Cash from Capital Gains (net of MTIS) Dividends paid FY14 cash core income of £232m with a further £145m f
Slide 43: Financial outlook
Financial outlook Well positioned for growth FMC AUM growth expected with strong product pipeline Improved quality of fee base with new funds raised Increased management fee income with investment of funds raised in FY14 Increased profitability once the Group has invested funds raised over t
Slide 44: Priorities for FY15
Priorities for FY15 Raise and invest our expanded product range in delivering FY15 Priorities Progress So Far Fundraising momentum to be maintained ‒ North America Fund I to close First close of North America Fund I in May 2014 at ‒ Asia Pacific Fund III to close USD$450m ‒ New funds launched in J
Slide 45: Conclusion & Q&A
Conclusion & Q&A Intermediate Capital Group plc 45
Slide 46: Appendix
Appendix Intermediate Capital Group plc 46
Slide 47: Funds
Funds Intermediate Capital Group plc 47
Slide 48: Mezzanine and Growth Capital Funds Fee structure
Mezzanine and Growth Capital Funds Fee structure Funds in investment period Fund Size Equity End of investment period % Invested Main fee ICAP 08 $0.6bn $0.6bn April-2014 77% 1.25% on invested EF V €2.0bn €2.0bn Sep-2016 58% 1.5% on committed equity Funds in realisation Fund Size Equity End of inves
Slide 49: ICG Europe Fund V
ICG Europe Fund V Capital €2,000m Summary Invested 58% Investments 16 Portfolio Invested Capital €1,163m Assets 2 Cost Invested €99m Partial Exits 1.5x / 30% Money Multiples/IRR Distribution €58m (net of recallable capital) Gross IRR 18% Money Multiple 1.2x Performance Average Life 12 months Net IRR
Slide 50: ICG European Fund 2006
ICG European Fund 2006 Capital €1,750m Summary Invested 93% Investments 47 Portfolio Invested Capital €1,621m Assets 13 Cost Invested €446m Exits 1.8x / 20% Money Multiples/IRR Distribution €803m Gross IRR 11% Money Multiple 1.5x Performance Average Life 57 months Net IRR 8% Net MM 1.4x Intermediate
Slide 51: ICG Mezzanine Fund 2003
ICG Mezzanine Fund 2003 Capital €1,340m * Summary Invested 97% Investments 80 Portfolio Invested Capital €1,677m Assets 67 Cost Invested €1,387m Exits Money Multiples/IRR 1.4x / 15% Distribution €992m Gross IRR 14% Money Multiple 1.4x Average Life 101 months Performance Net IRR* 14% Net MM* 1.6x * F
Slide 52: ICG Recovery Fund 2008
ICG Recovery Fund 2008 Capital €843m Summary Invested 89% Investments 11 Portfolio Invested Capital €719m Assets 2 Cost Invested €10m Exits 1.7x / 44% Money Multiples/IRR Distribution €189m Gross IRR 17% Money Multiple 1.6x Performance Average Life 33 months Net IRR 12% Net MM 1.4x Intermediate Capi
Slide 53: ICG Minority Partners Fund 2008
ICG Minority Partners Fund 2008 Capital €132m Summary Invested 91% Investments 4 Portfolio Invested Capital €121m Assets 3 Cost Invested €101m Exits 2.2x / 48% Money Multiples/IRR Distribution €205m Gross IRR 35% Money Multiple 2.0x Performance Average Life 40 months Net IRR 25% Net MM 1.8x Intermed
Slide 54: Intermediate Capital Asia Pacific Fund 2005
Intermediate Capital Asia Pacific Fund 2005 Capital $300m Summary Invested 95% Investments 8 Portfolio Invested Capital $290m Assets 5 Cost Invested $159m Exits 1.4x / 14% Money Multiples/IRR Distribution $391m Gross IRR 14% Money Multiple 1.6x Performance Average Life 59 months Net IRR 11% Net MM 1
Slide 55: Intermediate Capital Asia Pacific Fund 2008
Intermediate Capital Asia Pacific Fund 2008 Capital $600m Summary Invested 77% Investments 10 Portfolio Invested Capital $475m Assets 2 Cost Invested $105m Exits 1.7x / 17% Money Multiples/IRR Distribution $269m Gross IRR 13% Money Multiple 1.3x Performance Average Life 31 months Net IRR 10% Net MM
Slide 56: Funds: Other direct investing funds
Funds Other direct investing funds Intermediate Capital Group plc 56
Slide 57: ICG Senior Debt Partners
ICG Senior Debt Partners Total strategy* Fund* Capital €1,423m €589m Summary Invested 42% 50% Investments 13 13 Portfolio Invested Capital €605m €302m Assets 2 Cost Invested €31m Partial Exits n/a Money Multiples/IRR 1.1x / 13% Distribution Nil Gross IRR 18% Money Multiple 1.1x Performance Average L
Slide 58: ICG Longbow Fund II
ICG Longbow Fund II Capital £242m Summary Invested 100% Investments 13 Portfolio Invested Capital £190m Assets 5 Exits Cost Invested £45m Money Multiples/IRR 1.4x / 23% Gross IRR 14% Performance Net IRR 10% Distribution yield to date 8% Intermediate Capital Group plc 58
Slide 59: ICG Longbow Fund III
ICG Longbow Fund III Capital £700m Summary Invested 37% Investments 13 Portfolio Invested capital £259m Assets 1 Exits Cost invested £33m Money multiples/IRR 1.0x / 3% Gross IRR 16% Performance Net IRR 9% Distribution yield to date 6% Intermediate Capital Group plc 59
Slide 60: Investment Company
Investment Company Intermediate Capital Group plc 60
Slide 61: New Lending vs Repayments
New Lending vs Repayments * £m New Lending Repayments 1,200 1,000 800 600 400 200 0 * last 12 months Intermediate Capital Group plc 61
Slide 62: Top twenty assets
Top twenty assets Company Activity Country Sponsor Performance Applus+ Inspection, certification & technological services Spain Carlyle 1 Gerflor PVC flooring France ICG 1 Materis Manufactures speciality chemicals France Wendel 1 SAG Provides services & technical solutions for utilities Germany EQT
Slide 63: Top ten equity assets
Top ten equity assets Company Activity Country Sponsor Performance Gerflor PVC flooring France ICG 1 Applus+ Inspection, certification & technological services Spain Carlyle 1 AAS Link Share registry and fund administration services Australia Pacific Equity Partners 1 Intelsat Fixed satellite servic
Slide 64: Top ten interest bearing assets
Top ten interest bearing assets Company Activity Country Sponsor Performance Applus+ Inspection, certification & technological services Spain Carlyle 1 Materis Manufactures speciality chemicals France Wendel 1 SAG Provides services & technical solutions for utilities Germany EQT 2 N&W Global Vending
Slide 65: Financial Information
Financial Information Intermediate Capital Group plc 65
Slide 66: Debt Summary
Debt Summary £600m £500m £400m £300m £200m £100m £0m 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 Bonds Drawn Bank facilities Term Loan Undrawn Bank facilities Three bank facilities totalling c.£130m have been either est
Slide 67: Fee Income
Fee Income £m March 2014 March 2013 March 2012 Mezzanine fund management fee income 53.6 55.2 42.6 Credit fund management fee income 18.9 19.2 23.2 Real estate fund management fee income 6.4 3.0 0.9 Total fund management fee income 78.9 77.4 66.7 Investment Company fee income 6.9 1.4 1.5 Total third
Slide 68: Credit Funds
Credit Funds Fee Income March 2014 March 2013 March 2012 £m AUM Fees AUM Fees AUM Fees CLOs 3,851 14.3 3,743 15.3 3,672 15.6 Managed Accounts & Pooled 1,866 3.9 1,229 3.7 1,293 4.4 Funds Performance and Catch up Fees - 0.7 - 0.2 - 3.2 Total 5,717 18.9 4,972 19.2 4,965 23.2 Intermediate Capital Group
Slide 69: Investment Company operating costs
Investment Company operating costs Investment in business growth driving costs higher £m 40.0 FY14 costs are £11.3m higher than the prior year 35.0 Higher cash bonus pool following a 30.0 record year of realisations resulting in a higher incentive scheme charge 25.0 Other costs up £6.8m predom
Slide 70: Impairments
Impairments £m March 2014 March 2013 March 2012 Gross impairment 133.6 141.1 83.5 Restructurings (17.3) - - Recoveries (21.2) (61.1) (12.9) Net impairment 95.1 80.0 70.6 Intermediate Capital Group plc 70
Slide 71: Fair Value Accounting
Fair Value Accounting Top AFS and FVTPL assets AFS assets Value (£m) at Value (£m) at Company Business Country Mar-14 Mar-13 Intelsat Fixed satellite services USA 31.6 38.0 AAS Link Share registry and fund administration services Australia 26.2 29.1 Menissez Bread Manufacturing France 22.7 17.9 Mini
Slide 72: Incentive schemes
Incentive schemes Group Segmental £m March 2014 FMC IC FY 10 Awards 1.2 0.6 0.6 FY 11 Awards 3.0 2.0 1.0 FY 12 Awards 3.4 2.8 0.6 FY 13 Awards 4.3 3.9 0.4 FY 14 Accruals 24.3 4.3 20.0 Total 36.2 13.6 22.6 Intermediate Capital Group plc 72
Slide 73: Long term P&L impact of incentive schemes
Long term P&L impact of incentive schemes (excluding balance sheet carry) Based on FY10 to FY14 actual awards, and constant FY14 awards for future years £30m £25m £20m £15m £10m £5m £0m FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY19 FY10 awards FY11 awards FY12 awards FY13 awards FY14
Slide 74: Cash Flow Analysis
Cash Flow Analysis £m March 2014 March 2013 March 2012 Operating cash flow 252.1 31.3 138.2 Cash flow relating to Capital Gains 144.8 (3.4) 41.7 Repayments & recoveries 683.2 148.3 368.6 Tax & others (28.1) (45.4) (66.6) Free Cash flow 1,052.0 130.8 481.9 New investments 514.8 261.9 123.3 Dividend 7
Slide 75: Pre-tax Profits, Earnings Per Share & Dividends
Pre-tax Profits, Earnings Per Share & Dividends March 2014 March 2013 March 2012 Pre tax profit excluding FV* (£m) 175.1 148.3 198.8 Pre tax profit (£m) 158.7 142.6 198.8 Net profit (£m) 137.4 123.8 187.6 EPS (pence per share) 35.7 32.1 39.2 DPS (pence per share) 21 20 19 * Adjusted for fair value m
Slide 76: Cash Core Income
Cash Core Income Cash Core Income Calculation £m Pre tax profit excluding FV 175.1 Less capital gains (149.4) Add back US CLO gain 0.9 Plus provisions 112.4 Less accrued PIK (133.7) Plus PIK realised 226.4 Cash Core Income 231.7 Intermediate Capital Group plc 76
Slide 77: Consolidation of US CLOs
Consolidation of US CLOs The first US CLO is consolidated in line with Group Balance Sheet IFRS March 2014 Balance Sheet ICG US CLOs Consolidated Consolidation does not impact the risk profile £m excl US CLOs Adjustments ICG * of the Group Financial assets 1,914 167 2,081 Cash 115 50 165 There
Slide 78: 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