Intermediate Capital Group PLC Half Year Results 30 September 2010 - - PowerPoint PPT Presentation

intermediate capital group plc half year results
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Intermediate Capital Group PLC Half Year Results 30 September 2010 - - PowerPoint PPT Presentation

Intermediate Capital Group PLC Half Year Results 30 September 2010 Authorised and regulated by the Financial Services Authority Disclaimer Important Notice The materials being provided to you are intended only for informational purposes and


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Intermediate Capital Group PLC

Authorised and regulated by the Financial Services Authority

Half Year Results

30 September 2010

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Disclaimer

Important Notice 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. You should consult your tax, legal, accounting or other advisors about the issues discussed herein. Although information has been obtained from and is based upon sources that Intermediate Capital Group PLC ("ICG PLC") considers reliable, we do not guarantee its accuracy and it may be incomplete

  • r condensed. All opinions, projections and estimates constitute the judgement of the authors as of the date of the document and are subject to

change without notice. ICG PLC excludes all liability and therefore accepts no responsibility for any loss (whether direct or indirect) arising for any action taken or not taken by anyone using the information contained therein. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or investment interest and may not be relied upon in evaluating the merits of investing in these securities or investment interests. These materials are not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Neither ICG PLC or any of its affiliates makes any representation or warranty, express or implied as to the accuracy or completeness of the information contained herein, and nothing contained herein shall be relied upon as a promise or representation whether as to past or future performance. These materials (including their contents) are confidential, being for use only by the persons to whom they are issued. Distribution of these materials to any person other than the person to whom this information was originally delivered and to such person’s advisors is unauthorised and any reproduction of these materials, in whole or in part, or the disclosure of any of their contents, without the prior consent of ICG PLC or its affiliates is prohibited. This communication is limited to and directed to those persons invited to the presentation. It is therefore only directed at professional clients, as defined by the Financial Services Authority. Any other persons should not seek to rely upon the information contained herein. Collective investment schemes referred to herein are not regulated for the purposes of the UK’s Financial Services and Markets Act 2000 and are not available to members of the general public. ICG PLC is authorised and regulated in the United Kingdom by the Financial Services Authority. Intermediate Capital Managers Limited is a wholly-

  • wned subsidiary of ICG PLC and is also authorised and regulated in the United Kingdom by the Financial Services Authority.
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3 Intermediate Capital Group PLC

Highlights

  • Operational highlights
  • Strong realisations; £150m of repayments; £87m of capital gains
  • £437m** of new investments; £128m** for the Investment Company
  • AUM of €11,671m vs €11,191m at 31/03/10
  • Financial highlights
  • FMC Profit before tax: £16.9m vs £15.2m in H2 10
  • IC Profit before tax*: £88.2m vs £82.5m in H2 10
  • Group Profit before tax*: £105.1m vs £97.7m
  • Interim dividend of 6 pence unchanged from last year

* Including £8.5m, impact of fair value movements on derivatives held for hedging purposes (H2 10: loss of £7.5m) ** Excluding the syndicated portion of the EOS Loan Fund 1

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4 Intermediate Capital Group PLC

Strategic priorities

  • Manage our portfolio to maximise value
  • Invest selectively
  • Grow our Fund Management Company
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LBO Market Update

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6 Intermediate Capital Group PLC

European LBO Volume

Source: S&P, 30 September 2010

20 40 60 80 100 120 140 160 180 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 - Q3 2010 €bn Primary LBOs Secondary LBOs

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7 Intermediate Capital Group PLC

European High Yield Issuance

Source: S&P, 30 September 2010

5 10 15 20 25 30 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 - Q3 2010 €bn

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8 Intermediate Capital Group PLC

European Loan Prices

Source: S&P

52 56 60 64 68 72 76 80 84 88 92 96 100 104

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Loan Market Flow Names

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9 Intermediate Capital Group PLC

European Private Equity Drypowder

Source: Preqin, 30 September 2010

50 100 150 200 250 2005 2006 2007 2008 2009 Q1 - Q3 2010 €bn Funds raised Dry Powder

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10 Intermediate Capital Group PLC

European LBO Average Purchase Price

Source: S&P

Multiple of EBITDA (6 months moving average)

6 7 8 9 10 11 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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11 Intermediate Capital Group PLC

European Gearing

Total Debt/EBITDA for European LBOs

Source: S&P

4.24x 4.12x 5.1x 5.94x 5.43x 4.54x 5.17x 4.12x 4.11x 4.04x 4.26x 4.69x

0x 1x 2x 3x 4x 5x 6x 7x 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 - Q3 2010

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12 Intermediate Capital Group PLC

European Refinancing Gap

€0 €10 €20 €30 €40 €50 €60 €70 2010 2011 2012 2013 2014 2015 2016 2017 Year Amount (€B) European CLOs Total Funded Amount by End of Reinvestment Period European Maturing LBO Senior Debt Source: October 2010, JPMorgan Structured Finance Research, INTEX, S&P European Leveraged Loan Index (ELLI)

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13 Intermediate Capital Group PLC

US LBO Volume

434 233 20 40 60 80 100 120 140 160 180 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 - Q3 2010 $bn

Source: S&P

430 230 233 434

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14 Intermediate Capital Group PLC

Asia Pacific LBO Market

  • Growth prospects make market attractive to all
  • Secondary market supporting dynamic primary market
  • Local banks are well capitalised
  • ICG well positioned but cautious given valuations
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Realisations and Investments

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16 Intermediate Capital Group PLC

New Lending vs Repayments*

200 400 600 800 1000 1200 1400 Mar- 05 Jun- 05 Sep- 05 Dec- 05 Mar- 06 Jun- 06 Sep- 06 Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Sep- 08 Dec- 08 Mar- 09 Jun- 09 Sep- 09 Dec- 09 Mar- 10 Jun- 10 Sep- 10 New Lending Repayments

£m

*6 months moving average

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17 Intermediate Capital Group PLC

Exits

  • Market remains a seller’s market
  • £150m of repayments* in H1 11
  • £86.8m of capital gains in H1 11
  • Geoservices
  • Sebia
  • Pasteur Cerba
  • TeamSystem
  • Picard
  • Visma
  • £374m of repayments* and £186m of capital gains since 31 March 2009
  • Well above initial objective of circa £400m for FY10-FY11

* Excludes Picard and Visma due to complete in H2

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18 Intermediate Capital Group PLC

New Investments

  • £128m of new investments
  • TeamSystem
  • Fort Dearborn
  • Eos Loan Fund 1
  • £150m-£200m investment guidance for FY11 unchanged
  • Cautious approach to investments
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19 Intermediate Capital Group PLC

Deal Pipeline

50 100 150 200 250 Deal Volume CY07 Deal Volume CY08 Deal Volume CY09 Deal Volume CY10 Number of Deals

Deals reviewed to preliminary approval PICA IP Funded

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Portfolio Update

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21 Intermediate Capital Group PLC

Investment Portfolio

Performance vs Prior Year

Percentage of assets performing at or above prior year

0% 10% 20% 30% 40% 50% 60% 70% 80% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10

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22 Intermediate Capital Group PLC

Trend in Provisions for Portfolio Companies

50 100 150 200 250 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 H1 11 £m Gross Provisions Write-backs

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Fund Management

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24 Intermediate Capital Group PLC

Third Party Funds Under Management

CFM Funds Mezzanine Funds

1 2 3 4 5 6 7 8 9 10 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY08 FY09 FY10 H1 11 €bn

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25 Intermediate Capital Group PLC

Eos Loan Fund 1

  • 71 Western European loans, all performing loans
  • €1.4bn of par value
  • €841m of debt secured from third party;
  • Equity from RF 08, EF 06, third party investors and IC (€48.5m)
  • AUM contribution of €902m
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26 Intermediate Capital Group PLC

Fund Management Outlook

  • ICG Europe V
  • High Yield
  • CDO consolidation
  • Adjacent asset classes
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Financial Review

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28 Intermediate Capital Group PLC

Financial Highlights

  • Pre-tax profit* of £105.1m vs £97.7m in H2 10
  • FMC Profit before tax: £16.9m vs £15.2m in H2 10
  • IC Profit before tax*: £88.2m vs £82.5m in H2 10
  • Cash Core Income of £43.8m vs £77.4m in H1 10; Interim dividend of 6p unchanged

from last year

  • Third Party AUM of €8,718m vs €8,249m at 31/03/10
  • Investment portfolio £2,630m vs £2,684m at 31/03/10
  • Balance sheet headroom of £619m at 30/09/10**, Investment capacity of €1.5bn

between ICG and funds

*Including £8.5m positive impact of fair value movements on derivatives held for hedging purposes; H2 10: (£7.6m)) ** Pre- proceeds from Picard, Visma and Eos Loan Fund 1 equity syndication

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29 Intermediate Capital Group PLC

Fee income 39.1 34.9 41.5 Other income 1.1 0.8 1.1 Admin expenses (23.3) (20.5) (19.8) FM Profit 16.9 15.2 22.8 Net Interest Income 95.0 107.2 102.5 Div & other income 1.4 2.6 0.8 Admin expenses (33.0) (28.7) (32.0) Impairments (53.1) (64.7) (97.1) Net capital gains 69.4 73.6 3.5 FVM derivatives 8.5 (7.5) 7.6 IC Profit 88.2 82.5 (14.7) Profit before tax 105.1 97.7 8.1 Fund Management Company Investment Company Group H1 11 H2 10 H1 10

Segmental Reporting

£m

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30 Intermediate Capital Group PLC

Eos Loan Fund 1 – P&L Impact

  • Investment Company:
  • €48.5m stake retained
  • Structured as €5m equity and €43.5m shareholder loan
  • Limited marked-to-market risk
  • Revenue stream recognised in interest income line
  • Shareholder loan: cash yield of 10.2%
  • Equity: discount released over life of the fund (EIR methodology)
  • Fund Management Company:
  • c. €4m a year additional fee income (syndicated portion and RF 08 stake)
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31 Intermediate Capital Group PLC

906 8,249 8,718 5 282 150 7000 8000 9000 Mar-10 Realisations Mezzanine New CFM Realisations CFM FX H1 11 €bm

Third Party AUM

  • Third party AUM up due to CFM inflow (Eos Loan Fund 1)
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32 Intermediate Capital Group PLC

Third Party Fee Income

10 20 30 40 50 60 FY 08 FY 09 FY 10 H1 10 H2 10 H1 11 £m Mezzanine Funds CFM Funds

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33 Intermediate Capital Group PLC

16.9 15.2 3.0 0.3 4.2 4.1 1.7 5 10 15 20 H2 10 Fee income Other income Shadow Share Scheme Incentive Schemes Operating Costs H1 11 £m

Fund Management Company

  • Profit before tax of £16.9m due to higher fee income
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34 Intermediate Capital Group PLC

  • Profit before tax and fair value adjustments at £88.2m

Investment Company

82.5 88.2 16.0 11.6 2.4 12.2 4.2 1.2 1.9

10 20 30 40 50 60 70 80 90 100 H2 10 NII Div & other income Incentive schemes Operating Expenses Impairment Net Capital Gains FV derivatives H1 11 £m

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35 Intermediate Capital Group PLC

Long terms provisions

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 H1 11*

  • Provisions (as a % of opening book) gradually trading back to historical levels

* annualised

Average pre-crisis: 2.4%

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36 Intermediate Capital Group PLC

Operating Costs

(Excluding incentive schemes)

10 20 30 40 50 60 FY 08 FY 09 FY 10 H1 10 H2 10 H1 11 £m Salaries Administrative costs One off charge re 20 Old Broad St lease

  • Operating costs impacted by one off impact of 20 Old Broad St lease
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37 Intermediate Capital Group PLC

Incentive Schemes Excluding MTIS

FM Co Inv Co FY10 Awards 3.8 3.0 0.8 FY11 Accruals 5.5 4.4 1.1 Total 9.3 7.4 1.9 H1 11

Segmental Group

Old Schemes* 12.7 12.7

  • FY 10

FM Co Inv Co

* Excluding £6.9m release due to termination of Shadow Share Scheme

  • Impact H1 11 of Awards relating to FY10 on FMC Profit is £3m
  • MTIS on rolled-up interest of £10.1m in H1 11 compared to £15.5m in H1 10

£m

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38 Intermediate Capital Group PLC

31 March 2010 £m

Balance Sheet

Loans & Investments 2,666 2,718 Net current liabilities 52 (30) 2,718 2,688 Shareholders’ Funds 1,198 1,184 Borrowings 1,520 1,504 2,718 2,688 Annualised ROE 11.3% 8.3% Gearing Ratio 127% 127% Debt Facilities 2,139 2,223 Headroom 619 729

30 Sept 2010 £m

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39 Intermediate Capital Group PLC

Cash Core Income

* adjusted for FV movements of derivatives held for hedging and £5.7m negative impact of Old Broad Street lease ** Net of MTIS

20 40 60 80 100 120 FY 08 FY 09 FY 10 H1 10 H2 10 H1 11 £m

Cash Core Income Calculation:

Pre tax profit* £102.3m Less Capital Gains** £(69.4)m Plus provisions £53.1m Less Accrued PIK** £(68.1)m Plus PIK realised** £25.9m Cash Core Income £43.8m

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40 Intermediate Capital Group PLC

Summary & Financial Outlook

Summary

  • Strong financial performance, momentum seen in H2 10 maintained
  • FMC: positive momentum in fee income compared to H2 10
  • IC: Strong realisations and impairments gradually trending towards long term average

H2 Outlook

  • Positive impact of Eos
  • FMC: H2 expect to be broadly in line with H1
  • IC: expect lower NII, lower provisions and further capital gains in H2
  • Cash core income will continue to benefit from exits
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Conclusion

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42 Intermediate Capital Group PLC

Conclusion

  • Investment portfolio showing further signs of improvement
  • Realisations expected to continue
  • £150m-£200m p.a. guidance for new IC investments unchanged
  • Highly selective given fragile economic environment and high valuations
  • Well positioned to grow fund management franchise over the next 5 years
  • ICG Europe Fund V
  • Portfolio acquisitions/Consolidation of CLOs
  • Adjacent asset classes
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43 Intermediate Capital Group PLC

Q&A

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44 Intermediate Capital Group PLC

Appendix

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45 Intermediate Capital Group PLC

Top Twenty Assets

↓ Germany Home delivery of frozen foods ↑ Italy Software solutions Private clinic manager France ↓ Business management software and outsourcing services UK ↑ Electronic publisher of company information Belgium ↑ Textile rental and cleaning France ↑ Airport operator UK ↑ Waste management solutions provider UK ↓ Inspection, certification and technological services Spain ↓ Elderly care homes Sweden ↑ Speciality chemicals for the construction industry France ↑ Private clinical and routine laboratories France ↓ Credit Bureau Australia ↓ Provider of correctional products and services USA ↓ Patent & legal services UK ↑ Supplier of fire protection systems and services Germany ↑ Share registry and fund administration services Australia ↑ Provider of services and technical solutions for utilities Germany ↑ Diversified fund of senior loans Europe n/a Tour operator Spain ↓ Drug development and manufacturer France ↑ Business Country Vs Last Year

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46 Intermediate Capital Group PLC

Top Ten Equity Assets

Business management software and outsourcing services UK ↑ Patent & legal services UK ↑ Fixed satellite services USA → Cable operator Taiwan ↑ Software solutions Italy ↑ Livestock identification systems France ↑ Home delivery of frozen foods Germany ↓ Frozen food manufacture and distribution France ↑ Insurance and roadside assistance UK ↑ Inspection, certification and technological services Spain ↓ Business Country Vs Last Year

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47 Intermediate Capital Group PLC

Top Ten PIK Assets

Airport operator UK ↑ Private clinic manager France ↓ Credit Bureau Australia ↓ Business management software and outsourcing services UK ↑ Share registry and fund administration services Australia ↑ Share registry and corporate administration USA ↑ Private clinical and routine laboratories France ↓ Electronic publisher of company information Belgium ↑ Security services Italy ↑ Cinema owner and operator Australia ↑ Business Country Vs Last Year