ICG plc Preliminary Results 2014 20 May 2014 Intermediate Capital Group plc
Highlights Operational Financial Operational success to impact results from FY15 A record fundraising year with € 3.8bn raised, 45% onwards due to nature/timing of new funds raised in new strategies Fund Management Company profit down 13% at A record level of realisations reinforcing our track £35.0m (£40.4m in FY13) record and generating £1.1bn of cash Investment Company profit 1 of £140.1m, up from Third party AUM up 8% to € 10.7bn, with total AUM £107.9m in FY13 flat at € 13.0bn Group profit before tax 1 of £175.1m up from Product pipeline strong, with $450m first close of £148.3m US debt fund in May 2014 Strong balance sheet with unutilised cash and debt Direct investment funds are investing ahead of facilities of £678m target in a competitive environment Final dividend of 14.4p, bringing full year dividend Portfolio broadly resilient but a small number of to 21.0p per share versus 20.0p last year weaker assets are underperforming Share buy back programme of up to £100m following exceptional year of cash generation 1 Excluding the impact of fair value movements on derivatives (FY14: £16.4m; FY13: £5.7m) Intermediate Capital Group plc 2
Priorities for FY 14 Continued momentum in delivering our strategic priorities What we said we would do What we have done A record fundraising year with € 3.8bn raised Fundraising momentum to be maintained ‒ Final close on Longbow Fund III Longbow Fund III closed at hard cap of £700m ‒ Further closes on Senior Debt Partners SDP closed in April 2014 at hard cap of € 1.7bn ‒ New product launches in North America First US CLO closed at $371m ‒ Asia Pacific fund successor launched Marketing underway for Asia Pacific III ‒ New European CLO launched Three European CLOs closed totalling € 1.3bn Invested a total of £1.9bn across direct investment Continue to invest selectively hitting the required funds and the IC investment run rate Realisations have generated £3.8bn of cash including Manage portfolio, particularly those assets £1.1bn of cash for the Investment Company undergoing restructuring, to maximise value Portfolio remains broadly resilient Intermediate Capital Group plc 3
Growing our assets under management Intermediate Capital Group plc 4
Fundraising market update Increasing allocation to alternatives Real Yields: The Race to Zero and Beyond Ongoing search for yield Increased interest in alternative credit to balance lower returns from traditional asset classes Favouring well established fund managers that can provide “one stop shop” mandates Increasing number of funds being raised CLO issuance restricted as a result of new AUM in Alternatives European regulations US$tn 6 5 4 Investors preferring to deal with smaller 3 2 number of global managers 1 0 2003 2008 2012 Intermediate Capital Group plc 5
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 3.0 Marketing commenced for Asia Pacific fund III 2.5 Funds in development 2.0 45% of funds raised will generate new sustainable fee streams 1.5 Senior Debt Partners raised € 1.3bn in FY14 and 1.0 closed at € 1.7bn in early FY15 0.5 First dedicated US fund, a $371m US CLO, raised 0.0 FY12 FY13 FY14 Marketing for US debt fund continues, with a $450m first close in May 2014. This includes $200m Established New In development from ICG Intermediate Capital Group plc 6
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 funds Investor diversity: FY14 vs all funds Geographical diversity: FY14 vs all funds Other 100% 100% 90% 90% Sovereign Wealth 80% 80% Funds 70% 70% Bank Asia Pacific 60% 60% Insurance Company North America 50% 50% Europe / Middle East 40% 40% Fund of Funds 30% 30% Pension 20% 20% 10% 10% Asset Manager 0% 0% All funds FY14 All Funds FY14 Intermediate Capital Group plc 7
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 CLOs € 2.0bn Total Credit Fund New strategies European Loan Fund ‒ Liquid credit products Funds High Yield Bond Fund raised € 0.1bn In development strategies ‒ Direct lending senior debt Senior Debt Partners ‒ US CLOs and debt ICG Longbow Senior Debt ‒ UK real estate senior debt US CLO Funds ‒ Australian senior loans raised ‒ Japanese mezzanine € 1.7bn Intermediate Capital Group plc 8
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 as at that stage there will be: • One fund investing • One fund recently fully invested • One fund in realisation € bn Senior Debt Partners Fee Generating AUM 4.0 For SDP this is at c6 years from the launch of the 3.5 first fund depending on the size and investment pace 3.0 SDP is already profitable as it is leveraging existing 2.5 Strategy matures once investment expertise and infrastructure 2.0 third fund is invested 1.5 Fund 1 Fund 2 Fund 3 1.0 0.5 0.0 Intermediate Capital Group plc 9
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 experience investing in the US market During FY14, we raised our first dedicated US fund, a CLO, and launched our first private debt fund which had a first close in May 2014 North America Private Debt US Senior Loans (CLO) First close of ICG North American Private Debt Raised $371m with the close of US CLO I in March Fund in May 2014 with $450m 2014 Dedicated New York based private debt Dedicated New York based credit fund team investment team recruited to source and manage recruited to invest and manage products investments Currently invested in 135 assets across mid-market Two assets warehoused by the balance sheet for and larger capitalised companies the fund – Convergint and APCO Assets currently being warehoused for a second Marketing continuing with further closes expected CLO to be launched later this year during FY15 Intermediate Capital Group plc 10
Future fundraising Diverse product portfolio to facilitate AUM growth Europe UK Real Estate European mezzanine Mezzanine fund European CLOs Senior debt fund Total Credit Development fund European Loan Fund Alternative Credit Senior Debt Partners European real estate Japan Japanese Mezzanine Asia Pacific USA Asia Pacific mezzanine North America mezzanine US CLOs Australia Australian senior loans Intermediate Capital Group plc 11
Invest selectively Intermediate Capital Group plc 12
Investment market update European LBO market volumes remain low European LBO volume Imbalance in the supply and demand for € bn 150 138 credit by mid sized borrowers being filled 116 125 by institution led financing and specialist 100 asset managers 75 49 46 Availability of senior debt and sponsors’ 50 33 23 19 dry powder means demand for traditional 25 8 5 mezzanine low 0 2006 2007 2008 2009 2010 2011 2012 2013 Q1 2014 LBO market impacted by corporate M&A Senior loan volume competition and buoyant IPO market € bn 180 166 Direct lending market suffered most from 160 131 banks’ withdrawal 140 120 100 Increasing competition for assets 68 80 54 60 44 42 European CLO market recovering from a 29 40 15 15 low base but remains modest 20 0 2006 2007 2008 2009 2010 2011 2012 2013 Q1 2014 Intermediate Capital Group plc 13
Investment market update US is fully functioning but uncertainty remains US LBO volume Buoyant market with high levels of inflows US$bn from CLOs and mutual funds 350 322 293 300 Liquid credit market and well capitalised 234 234 250 sponsors increases competition for assets 180 200 150 LBO volume and demand for traditional 119 95 100 mezzanine is strong 58 50 24 0 2006 2007 2008 2009 2010 2011 2012 2013 Q1 2014 Senior loan volume US$bn 700 605 600 535 482 466 500 375 400 300 236 168 151 200 76 100 0 2006 2007 2008 2009 2010 2011 2012 2013 Q1 2014 Intermediate Capital Group plc 14
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