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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Intermediate Capital Group Plc | LSE:ICP | London | Ordinary Share | GB00BYT1DJ19 | ORD 26 1/4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2,124.00 | 2,128.00 | 2,130.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 737.1M | 280.6M | 0.9801 | 21.67 | 6.08B |
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ICG delivers strong performance from new and existing strategies
Intermediate Capital Group plc (ICG) announces its final results for the
year ended 31 March 2017.
Operational highlights
-- Total AUM up 10% to EUR23.8bn, with EUR4.0bn of new money raised; third
party fee earning AUM up 19% to EUR18.7bn
-- Fundraising performance driven by our newer diversifying strategies:
Strategic Secondaries and Australian Senior Loans; our CLO programme; and
a secondary transaction on Recovery Fund 2008
-- Fundraising pipeline healthy with a number of our larger strategies
expected to be raising successor funds in the new financial year
-- Fund investment is on track whilst maintaining investment discipline in a
competitive market
-- Fund returns benefiting from strong capital gains and robust portfolio
performance
Financial highlights
-- Fund Management Company profits up 21% to GBP74.0m (2016: GBP61.2m), with
third party fee income(1) up 27%
-- Investment Company profits higher at GBP178.4m (2016: GBP97.6m)
-- Group profit before tax of GBP252.4m (2016: GBP158.8m); Adjusted Group
profit before tax(1) was GBP237.5m (2016: GBP175.6m)
-- Earnings per share of 74.5p (2016: 41.9p); Fund Management Company 21.6p
(2016: 16.8p) and Investment Company 52.9p (2016: 25.1p)
-- Final ordinary dividend up 23% to 19.5 pence per share and new dividend
policy announced
-- Total ordinary dividends in the year up 17% to 27.0 pence per share, in
addition to the GBP200m special dividend paid in August 2016
Commenting on the results, Christophe Evain, CEO, said:
"As I prepare to stand down as CEO at our AGM in July, I am proud to
report a particularly strong year of positive performance and successful
delivery. With AUM at a record EUR23.8bn, and both fundraising and
capital deployment on track, we have delivered well on our commitments
to investors and shareholders alike.
The market environment continues to be supportive of both our existing
and new strategies and we see strong, ongoing demand from investors for
diversified sources of higher yield, as well as attractive investment
opportunities for our funds. We remain confident in our ability to
innovate and pioneer new strategies, backed by our balance sheet capital
and disciplined investment culture, as we have seen with our Strategic
Secondaries strategy. The increasing diversity of our business has
ensured that we are well placed to build on this success."
Commenting on the results, Kevin Parry, Chairman, said:
"The Board has conducted and implemented a new progressive dividend
policy that more closely aligns dividends with our strategy of growing
the fund management business. This, along with the performance of the
Group, allows us to recommend a 23% increase in the final dividend."
Financials
31 March 2017 31 March 2016 % change
Fund Management Company profit
before tax(1) GBP74.0m GBP61.2m 20.9%
Investment Company profit before
tax GBP178.4m GBP97.6m 82.8%
Adjusted Investment Company
profit before tax(1) GBP163.5m GBP114.4m 42.9%
Adjusted Group profit before
tax(1) GBP237.5m GBP175.6m 35.3%
Group profit before tax GBP252.4m GBP158.8m 58.9%
Adjusted earnings per share(1) 69.3p 48.1p 44.1%
Earnings per share 74.5p 41.9p 77.8%
Dividend per share in respect of
the year 27.0p 23.0p 17.4%
Gearing(1) 0.95x 0.70x 35.7%
Net debt(1) GBP629.1m GBP753.7m (16.5%)
Net asset value per share(1) GBP4.18 GBP3.94 6.1%
(1) These are non IFRS GAAP alternative performance measures and
represent internally reported numbers excluding the impact of fair value
movements on derivatives (FY17: GBP1.3m; FY16: GBP17.3m). Internally
reported numbers exclude the impact of the consolidation of 12 credit
funds following the adoption of IFRS 10. Further details can be found on
page 39.
Assets under management
31 March 2017 31 March 2016
Third party assets under management EUR21,817m EUR19,312m
Investment portfolio EUR2,008m EUR2,270m
Total assets under management EUR23,825m EUR21,582m
Third party fee earning assets under
management EUR18,742m EUR15,757m
The following foreign exchange rates have been used.
31 March 2017 31 March 2016 31 March 2017 31 March 2016
Average Average Period end Period end
GBP:EUR 1.1890 1.3624 1.1730 1.2624
GBP:USD 1.3020 1.5016 1.2534 1.4374
Enquiries
A presentation for investors and analysts will be held at 09:30 BST
today at ICG's offices, Juxon House, 100 St Paul's Churchyard, London,
EC4M 8BU. The presentation will also be streamed live at 09:30 BST and
be available on-demand from 14:00 BST at
http://www.icgam.com/shareholders/Pages/shareholders.aspx
Analyst / Investor enquiries:
Philip Keller, CFOO, ICG +44 (0) 20 3201 7700
Ian Stanlake, Investor Relations, ICG +44 (0) 20 3201 7880
Media enquiries:
Neil Bennett, Tom Eckersley, Maitland +44 (0) 20 7379 5151
Susan Tether, Corporate Communications, ICG +44 (0) 20 3201 7917
This results statement has been prepared solely to provide additional
information to shareholders and meets the relevant requirements of the
UK Listing Authority's Disclosure and Transparency Rules. The results
statement should not be relied on by any other party or for any other
purpose.
This results statement may contain forward looking statements. These
statements have been made by the Directors in good faith based on the
information available to them up to the time of their approval of this
report and should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying such forward looking information.
These written materials are not an offer of securities for sale in the
United States. Securities may not be offered or sold in the United
States absent registration under the US Securities Act of 1933, as
amended, or an exemption therefrom. The issuer has not and does not
intend to register any securities under the US Securities Act of 1933,
as amended, and does not intend to offer any securities to the public in
the United States. No money, securities or other consideration from any
person inside the United States is being solicited and, if sent in
response to the information contained in these written materials, will
not be accepted.
This Results statement contains information which prior to this
announcement was insider information.
About ICG
ICG is a specialist asset manager with over 28 years' history. We manage
EUR23.8bn of assets in third party funds and proprietary capital,
principally in closed end funds. Our strategy is to grow our specialist
asset management activities to deliver increased shareholder value. Our
goal is to generate income and consistently high returns whilst
protecting against investment downside for our fund investors. We seek
to achieve this through our expertise in investing across the capital
structure. We combine flexible capital solutions, local access and
insight with an entrepreneurial approach to give us a competitive edge
in our markets. We operate across four asset classes - corporate,
capital market, real asset and secondary investments. In addition to
growing existing strategies, we are committed to innovation and
pioneering new strategies across these asset classes where the market
opportunity exists to deliver value to our fund investors and increase
shareholder value.
We are listed on the London Stock Exchange (ticker symbol: ICP) and
provide investment management and advisory services in support of our
strategy and goal through a number of regulated subsidiaries, further
details of which are available at: www.icgam.com.
Business review
We have continued to deliver against our strategic objectives and grow
our specialist asset manager business. The highlights are:
-- Fundraising (inflows): EUR4.0bn raised in total with EUR0.9bn raised for
newer strategies: Strategic Secondaries and Australian Senior Loans,
-- Fees: Weighted average fee rate of 0.91%, up from 0.88% due to improved
mix of investment strategies,
-- Fund investment: Money raised has been deployed in line with expectations
in a highly competitive investment market,
-- Returns: Fund returns benefiting from strong capital gains and robust
portfolio performance,
-- Dividend: Proposed final dividend up 23% and new dividend policy
announced.
ICG is now a more diversified business than at any point in its history.
Our ability to utilise the Group's capital to seed new funds has
supported this success. For example, our expansion into the Secondaries
asset class would not have been as rapid nor as successful, had we not
been able to underwrite the team's early transactions in the first fund.
The market environment continues to offer attractive opportunities to
grow and further expand our range of strategies. As a result, the
profits of the Fund Management Company, with its predictable,
sustainable fee streams, will grow relative to those of the Investment
Company.
Alternative asset market growing strongly The increasing wealth of developing nations, combined with ageing populations, supports the trend of increasing the absolute size of institutional assets under management. At the same time, bond yields remain low, thereby impacting the returns of traditional asset classes. Current macroeconomic uncertainty, including but not limited to the UK's decision to leave the European Union, may prolong and enhance the positive trend in favour of alternative asset classes. Alternative asset classes are therefore attractive to institutional investors, providing diversification and targeting returns in excess of those achievable in public markets. The current fundraising environment is attracting new entrants into the alternative asset management market. However, our established investment led approach of focussing on capital preservation and yield across mid-market transactions in four strategic asset classes, and identifying market opportunities to develop differentiated strategies, remains a competitive advantage. We are of a size and scale that enables investors efficiently to access our range of strategies through mandates tailored to their individual requirements. Furthermore, our long standing investment culture means we only fundraise to the extent that there is the market opportunity to invest the capital raised. Fundraising across all our strategic asset classes Fundraising in the financial year at EUR4bn was in line with our long term target but, as expected, lower than in recent years as our larger strategies had remaining investment capacity. Consequently we concentrated on the more challenging task of fundraising for our smaller and newer strategies which diversify our business and provide future growth opportunities. The breadth of strategies for which we raised money during the year, 11 in total, underlines the increased diversification of our fund management franchise. In 2014 we recruited a team specialising in Strategic Secondaries. The team have a direct approach to secondaries by leading restructuring and investment in mature private equity funds. We have made excellent progress in raising our first Strategic Secondaries fund which is dedicated to the highly complex and structured part of the secondaries market. To date, we have raised $981m, including a $200m investment from our balance sheet, of which $614m was raised during the 2017 financial year. As one of our newer strategies, with fees charged on committed capital, the success of this fund is a positive contribution to our weighted average fee rate and our growing fund management profits. We expect to close this fund above its $1bn target in the new financial year. Another area of success was our Australian Senior Loans strategy. Fundraising was initially difficult, but our perseverance and commitment to this attractive strategy has resulted in AUD$396m being raised in the financial year. Additionally, we closed successor funds for our real estate mezzanine and Asia Pacific mezzanine strategies, and raised new segregated mandates for our Senior Debt Partners and capital markets strategies which included raising four new CLOs during the year. We took an opportunity to sell the entire Recovery Fund 2008, one of our older European mezzanine funds. Its disposal to a secondary fund provided an exit to our investors whilst enabling us to retain the investment management contract for the new fund thereby extending the duration of the fee stream. During the financial year, we extended our office network into Luxembourg and have applied for a regulatory licence in that jurisdiction. This will enable us to retain access to our European clients following the UK's departure from the European Union. We do not anticipate the need for any other significant organisational change and have no intention of moving our UK or head office operations from London. Capital deployment on track in a competitive investment market Our increasing number of strategies means that we operate in a diversified investment market. Across all of our strategies we have seen the investment market remain competitive as institutions seek to deploy the increasing amounts of capital raised so as to access the attractive returns available in private markets. In this environment, the competitive advantage gained from our local teams, sector specialisms and ability to deploy capital flexibly, comes to the fore and has helped us to source attractive deals whilst maintaining our disciplined investment culture. We are pleased to have maintained the pace of investment across our direct investment funds during the financial year which, combined with a solid pipeline of investment opportunities, means we are confident that each of our funds will deploy their available capital within their investment periods. Investment Company portfolio performing robustly Liquidity in the market contributed to a period of strong realisations. Capital gains were particularly strong in the financial year which, as previously indicated, was due in part to the benefit from the one off recycling from reserves of a previously recognised unrealised gain, and in part to unrealised gains arising from the year end mark to market review. Whilst we expect the pace of realisations to remain healthy into the new financial year, the overall level of capital gains recognised in the income statement is likely to be lower. The performance of our portfolios remains robust, with only a small number of assets underperforming. Dividend and capital management Over the last three years, the Board reduced the equity in use and has returned over GBP0.8bn of capital to shareholders. The Board will continue to focus on the efficient use of capital and will maintain its focus on achieving return on equity in excess of 13% over an investment cycle. We recognise that buoyant or stressed market conditions will impact the capital requirements of the Group and are therefore committed to a capital management approach which ensures sufficient capital through all points in the cycle. The Board has determined that its existing dividend policy should be updated to distribute a higher proportion of profits to shareholders in line with the transformation to a business model which is more stable and predictable than in the past. The Board's new policy is to recommend a dividend pay-out of 80-100% of the post-tax profit of the Fund Management Company (FMC). The annual quantum will be judged in the light of contemporary trading, regulatory capital and debt rating considerations. In accordance with current practice, the interim dividend will equate to a third of the prior year total dividend. The dividend policy is also progressive, meaning that absent major adverse circumstances, the dividend will at least be maintained and more normally increased year on year. We anticipate the FMC profits will grow as a proportion of the total profits but in the next few years, until FMC profits can cover our pay-out policy, we will continue to draw on Investment Company (IC) profits to comply with our progressive dividend policy. We currently anticipate recommending growing the dividend per share by 6-8% per annum. It is against the backdrop of continued delivery against our strategic objectives and strong cash generation that the Board recommends substantially increasing the final ordinary dividend for the year to 19.5 pence per share. This makes a total for the year of 27.0p (2016: 23.0p), an increase of 17% on the prior year. The proposed full year dividend is covered 2.9 times based on total profit and equates to 128% of post-tax FMC profits. If approved by shareholders the final dividend will be paid on 4 August 2017 to those shareholders on the register as at 16 June 2017. We continue to make available the dividend reinvestment plan. The Board believes these capital and dividend policies reflect shareholders' desire for transparency, sustainability and regular real growth in cash returns. We continued to actively manage the Group's sources of financing, extending debt facilities and lowering pricing where possible. During the financial year, $292m and EUR74m of US private placements were raised with five, eight and 10 year maturities, enabling the repayment of maturing private placements and a reduction in existing bank facilities. Following this debt raising, the weighted average life of total debt at 31 March 2017 was 3.8 years with a weighted average cost of 3.9%, in line with 31 March 2016. Changes to the Board As previously announced, at this year's AGM our long standing Chief Executive Officer and Chief Investment Officer, Christophe Evain, will step down from his responsibilities after 23 years with the Company, the last seven of which have been as Chief Executive Officer. During his tenure Christophe has successfully transitioned the Company from an investment company to a fund management company supported by ICG's balance sheet. The Board appointed Benoit Durteste to replace Christophe Evain as Chief Executive Officer and Chief Investment Officer. In addition, during the year we maintained and enhanced the knowledge and experience of the Board by appointing two new Non-Executive Directors, Rusty Nelligan and Virginia Holmes. From the conclusion of this year's AGM, 25% of the Board will be female. The year ahead We have a EUR4bn per annum rolling fundraising target. With a healthy pipeline of new funds and with a number of our larger strategies expected to be raising successor funds during the new financial year, we anticipate that financial year 2018 will meet or exceed the long term fundraising target. Fundraising for our Senior Debt Partners strategy has already commenced, and is expected to exceed the EUR3bn size of its predecessor fund.
The US private debt strategy and UK real estate strategy are expected to
begin raising successor funds within the next 12 months. We are working
to convert investor interest in our liquid strategies into investor
commitments during the new financial year.
We continue to size our funds to the market opportunity and aim to
deploy capital in line with the required investment run rate. We
therefore anticipate maintaining our current deployment pace on the back
of attractive investment opportunities. We remain committed to not
compromising our disciplined investment culture in this highly
competitive market.
Outlook
ICG's strategy and operational focus will continue to increase
diversification by asset class and geography. Our track record and a
commitment to strong risk-aware investment performance gives our
institutional clients confidence to place more money with ICG, providing
a strong foundation for continued growth in assets under management and
fee based revenue.
In a world of heightened geo-political uncertainty, our balance sheet is
exposed to volatility of valuations but it is prudently financed by
equity and debt. The long term nature of our fund management business
provides stability of income and visibility of growing income streams.
(1) These are non IFRS GAAP alternative performance measures. Please see
the glossary on page 39 for further information.
Finance and operating review
Financial information enables management to monitor the performance of
the business and inform decision making in support of delivering the
Group's strategic objectives. The financial information prepared for,
and reviewed by, management and the Board is on a non IFRS basis and
therefore differs from the IFRS financial statements on pages 23 to 37.
The Group's profit before tax on an IFRS basis was above last year at
GBP252.4m (2016: GBP158.8m), driven by a high level of capital gains
increasing IC profits.
2017 2016
IFRS IFRS
Income as reported Adjustments Internally reported adjusted as reported Adjustments Internally reported adjusted
Statement GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Finance and
dividend
income 204.2 (29.8) 174.4 207.3 (46.0) 161.3
Gains on
investments 286.8 (85.4) 201.4 137.7 (9.1) 128.6
Fee and other
operating
revenue 134.1 12.5 146.6 104.3 9.6 113.9
Total revenue 625.1 (102.7) 522.4 449.3 (45.5) 403.8
Finance costs (153.4) 99.5 (53.9) (121.9) 76.0 (45.9)
Impairments (25.3) (22.7) (48.0) (8.9) (30.5) (39.4)
Administrative
expenses (194.3) 11.3 (183.0) (141.9) (1.0) (142.9)
Other 0.3 (0.3) - (17.8) 17.8 -
Profit before
tax 252.4 (14.9) 237.5 158.8 16.8 175.6
A full reconciliation between the internally reported financial
information and the IFRS consolidated income statement, consolidated
statement of financial position and consolidated statement of cash flows
is provided in note 7 to the financial statements. The adjustments can
be summarised as follows:
Consolidated structured entities
IFRS deems the Group to control funds where it can make significant
decisions that can substantially affect the variable returns of
investors. There are 12 credit funds and CLOs required to be
consolidated under this definition of control. This has the impact of
including the assets and liabilities of these funds in the consolidated
statement of financial position and to recognise interest income and
gains or losses on investments in the consolidated income statement.
The Group is not exposed to the liabilities and cannot access the assets
of these entities except for the investment made by the Group into these
structured funds. Financial information prepared for internal reporting
purposes includes the fair value of the balance sheet investment in the
statement of financial position, and includes the management fee and
dividend income received from these entities in the income statement.
This is consistent with the treatment of the CLOs for regulatory
reporting purposes.
Other entities
There are two entities, Nomura ICG KK and Questus Energy Pty Limited
where the presentation in the IFRS financial statements is different to
the internal reporting. The Group's 50% share of the revenue and costs
from Nomura ICG KK are included on a line by line basis in the income
statement for internal reporting purposes. These items are collapsed
into a single line in the IFRS financial statements to reflect its
status as a jointly controlled entity. For Questus Energy Pty Limited,
the costs are included on a line by line basis in the income statement
for internal reporting purposes whereas in the IFRS financial statements
these are collapsed into a single line, administrative expenses, to
reflect its status as a non-controlled entity.
Reclassification of income
The Group invests in its European mezzanine, Asia Pacific mezzanine and
North American Private Debt strategies either through a fund structure
or directly into the underlying assets, depending on the fund. This
impacts the presentation of the income statement for investments in debt
instruments under IFRS. For those investments made directly the Group
generates interest income and is subject to impairment risk, whereas for
the investments made through a fund structure the income is recognised
as a net gain on investment.
Regardless of the investment mechanics, the performance of the
investment is reviewed and managed at an asset level. As such, internal
financial information is presented on an asset by asset basis for all
European mezzanine, Asia Pacific mezzanine and North American Private
Debt strategies. This is presentational only and has no impact on the
profit of the Group.
Other
The Group excludes the fair value movement on derivatives from its
internally reported numbers until such time as the derivative settles
and is matched in the income statement against the item that was hedged.
In the prior year the increase in deferred consideration relating to the
purchase of ICG Longbow and the impact of the Employee Benefit Trust
(EBT) were excluded for internal reporting purposes.
The Board believes that presenting the financial information in this
review on a non GAAP basis assists shareholders in assessing the
delivery of the Group's strategy through its financial performance,
consistent with the approach taken by management and the Board.
Non GAAP measures are denoted by (1) throughout this review. The
definition, and where appropriate, reconciliation to a GAAP measure, is
included in the glossary on page 39.
Overview
The Group's adjusted profit before tax(1), when excluding the impact of
the fair value charge on derivatives, was above last year at GBP237.5m
(2016: GBP175.6m). This was driven by a high level of capital gains
increasing IC profits. We continue to make strong operational progress
in developing our fund management franchise, with higher management fee
income from new and existing strategies contributing to higher FMC
profits in the year.
2017 2016
Income Internally reported unadjusted Fair value charge on derivatives Internally reported adjusted Internally reported unadjusted Fair value charge on derivatives Internally reported adjusted
Statement GBPm GBPm GBPm GBPm GBPm GBPm
Fund
Management
Company 74.0 - 74.0 61.2 - 61.2
Investment
Company 162.2 1.3 163.5 97.1 17.3 114.4
Profit
before
tax 236.2 1.3 237.5 158.3 17.3 175.6
Tax (34.9) - (34.9) (16.7) - (16.7)
Profit
after tax 201.3 1.3 202.6 141.6 17.3 158.9
The adjusted profit of the IC and Group in the above table excludes the
impact of the fair value charge on hedging derivatives of GBP1.3m (2016:
GBP17.3m). Throughout this review all numbers are presented excluding
this adjusting item, unless otherwise stated. The effective tax rate for
the period at 15% (2016: 11%) is higher than the prior year due
principally to the mix of jurisdictions in which capital gains were
generated. The tax rate is lower than the standard corporation tax rate
of 20%. This is principally due to the impact of differences in overseas
tax rates where we invest directly into funds which are based offshore.
Based on the adjusted profit above, the Group generated an ROE(1) of
18.2% (2016: 12.9%), an increase on prior year reflecting lower
shareholder funds following the GBP200m special dividend paid in August
and strong capital gains. Capital gains of GBP201.4m (2016: GBP128.6m)
have, as expected, benefited from the one off recycling of previously
unrealised gains of GBP54.4m from reserves, primarily on the disposal of
the remainder of AAS Link, and a robust level of unrealised capital
gains arising from the year end mark to market review. The recycling of
realised gains from reserves is an accounting requirement for pre 2011
equity assets. Excluding the recycled capital gains, ROE for the
financial year was 13.3% which is more indicative of the performance for
the new financial year and longer term trend. Adjusted earnings per
share(1) for the period were 69.3p (2016: 48.1p).
The Group had net current assets(1) of GBP594.1m (2016: GBP229.8m) at
the end of the year. The increase in net current assets is principally
driven by the realisation of balance sheet assets increasing the year
end cash balance.
Fund Management Company
In this review we have aligned the presentation of financial information
with the four strategic asset classes in which we operate - corporate
investments, capital market investments, real asset investments and
secondary investments - to simplify and enhance the understanding of our
financial performance. The principal difference between this
classification and that previously adopted is that the Senior Debt
Partners strategy falls within the corporate investments asset class
whereas all other funds previously reported as credit funds fall within
the capital market investments asset class. A reconciliation between the
two presentations can be found on page 38 of this statement.
Assets under management
A key measure of the success of our strategy to generate value from our
fund management business is our ability to grow assets under management.
New AUM (inflows) is our best lead indicator to sustainable future fee
streams and therefore increasing sustainable profits.
In the year to 31 March 2017, the net impact of fundraising and
realisations saw third party AUM increased 13% to EUR21.8bn. AUM by
strategic asset class is detailed below, where all figures are quoted in
EURm.
Third party
AUM by Capital Market Total
strategic Corporate Investments Investments Real Asset Investments Secondary Investments Third Party AUM
asset class EURm EURm EURm EURm EURm
At 1 April
2016 10,431 4,637 3,305 939 19,312
Additions 1,461 1,635 345 571 4,012
Realisations (1,330) (249) (132) - (1,711)
FX and other 243 148 (228) 41 204
At 31 March
2017 10,805 6,171 3,290 1,551 21,817
Change % 4% 33% 0% 65% 13%
Corporate Investments
Corporate Investments third party funds under management have increased
4% to EUR10.8bn in the year as new AUM of EUR1,461m outstripped the
realisations in our older funds. In the year we closed our third Asia
Pacific fund at EUR614m, including a $200m commitment from the balance
sheet and EUR189m of third party money raised during the financial year.
This was below its target size as the slowdown in growth in China had an
impact on the region. During the year Recovery Fund 2008 sold its
remaining assets to a new secondary fund which is managed by the Group.
The new fund raised commitments totalling EUR638m in the year.
Additionally, we raised EUR351m from segregated mandates into our Senior
Debt Partners strategy and EUR283m for our Australian Senior Loans Fund,
the first third party money raised for this strategy.
Capital Market Investments
Capital Market Investments third party funds under management have
increased 33% to EUR6.2bn, with new third party AUM of EUR1,635m raised
in the year, primarily from our CLO programme. During the year we
completed four CLOs, two in Europe and two in the US, raising a total
EUR1,567m, including EUR85m committed from the balance sheet to meet
regulatory requirements, thereby further increasing the operating
leverage of this strategy. We raised EUR153m across our other capital
market investments strategies, including alternative credit and total
credit.
Real Asset Investments
Real Asset Investments third party funds under management have remained
at EUR3.3bn, with new AUM of EUR345m raised in the year for our UK real
estate fund, ICG Longbow Fund IV. The additional money raised in the
current year has contributed to the fund reaching its maximum size of
GBP1.0bn, including a GBP50m co-investment by the IC, and making it our
second successive UK real estate fund to reach that milestone.
Secondary Investments
Secondary Investments third party funds under management have increased
65% to EUR1.6bn, with new AUM of EUR571m raised in the period for our
Strategic Secondaries strategy. A final close is expected shortly which
would take the Fund above its target size of $1bn, including a $200m
commitment from the balance sheet.
Fee earning AUM
The investment rate for our Senior Debt Partners strategy, Real Estate
funds and North American Private Debt Fund has a direct impact on FMC
income as fees are charged on an invested capital basis. The total
amount of third party capital deployed on behalf of the direct
investment funds was GBP3.1bn in the year compared to GBP2.4bn in the
last financial year. The direct investment funds are investing as
follows, based on third party funds raised at 31 March 2017:
Assets in
fund at Deals
Strategic % invested at % invested at 31 March completed
asset class Fund 31 March 2017 31 March 2016 2017 in year
Corporate ICG Europe
Investments Fund VI 40% 10% 8 5
North
American
Corporate Private
Investments Debt Fund 64% 46% 12 5
Senior Debt
Corporate Partners
Investments II 64% 31% 23 9
Corporate Asia Pacific
Investments Fund III 44% 27% 4 1
ICG Longbow
Real Asset Real Estate
Investments Fund IV 71% 42% 23 6
Secondary Strategic
Investments Secondaries 26% 20% 3 1
The investment pace of our direct investment funds has resulted in fee
earning AUM increasing 19% to EUR18.7bn since 1 April 2016 as detailed
below.
Third party Capital Market Real Asset Total
fee earning Corporate Investments Investments Investments Secondary Investments Third Party Fee Earning AUM
AUM bridge EURm EURm EURm EURm EURm
At 1 April
2016 7,891 4,637 2,521 708 15,757
Additions 2,311 1,635 564 571 5,081
Realisations (1,721) (249) (242) - (2,212)
FX and other 35 148 (176) 109 116
At 31 March
2017 8,516 6,171 2,667 1,388 18,742
Change % 8% 33% 6% 96% 19%
Fee income
Third party fee income(1) of GBP138.6m was 27% higher than the prior
year driven by the investment of those funds that charge fees on
invested capital, fees from our recently established secondaries
strategy and the CLO issuance programme. Details of movements are shown
below:
31 March 2017 31 March 2016 Change
Fee income GBPm GBPm %
Corporate Investments 78.2 70.0 12%
Capital Market Investments 23.7 17.7 34%
Real Asset Investments 21.9 19.1 15%
Secondary Investments 14.8 2.1 n/a
Total third party funds 138.6 108.9 27%
IC management fee 18.1 18.4 (2%)
Total 156.7 127.3 23%
Third party fees include GBP9.8m of performance fees (2016: GBP14.0m),
of which GBP8.5m (2016: GBP12.3m) related to Corporate Investments, as
the realisation of assets from older vintages helped trigger performance
hurdles. Performance fees are an integral recurring part of the fee
income profile and profitability stream of the Group.
Third party fees are 78% denominated in Euros or US Dollars. The Group's
policy is to hedge non Sterling fee income, to the extent that it is not
matched by costs and is predictable. Therefore the impact of the
devaluation of Sterling will be partially felt in both the 2017 and 2018
financial years. Total fee income included an GBP8.1m FX benefit in the
year.
The weighted average fee rate(1), excluding performance fees, across our
fee earning AUM is 0.91% (2016: 0.88%). This slight increase is due to
Fund mix and reflects the impact of raising the higher fee earning Asia
Pacific mezzanine and Strategic Secondaries funds during the year.
Dividend income
Dividend receipts(1) of GBP23.2m (2016: GBP19.3m) are higher than prior
year due to the increased number and improved performance of CLOs.
Operating expenses
Operating expenses of the FMC were GBP105.7m (2016: GBP85.0m), including
salaries and incentive scheme costs. The devaluation of Sterling has had
a more immediate impact on the cost base where 15% of costs are Euro
denominated and 16% US dollar denominated. Costs are GBP4.7m higher in
the year due to FX.
Salaries were GBP39.0m (2016: GBP30.4m) as average headcount increased
11% from 215 to 238. This increase is directly related to investing in
our capital market investments strategies, the ICG Enterprise Trust team
and our operations infrastructure. Incentive scheme costs of GBP33.8m
(2016: GBP24.5m) are higher as a consequence of strong performance.
Other administrative costs have increased to GBP32.9m (2016: GBP30.1m)
as a result of increased occupancy and IT costs in the current year and
the full year impact of ICG Enterprise Trust's administrator costs.
The FMC operating margin(1) was 41.2%, down from 41.9% in the prior year,
reflecting the increased operating costs detailed above.
Investment Company
Balance sheet investments
The balance sheet investment portfolio(1) decreased 5% in the year to
GBP1,711.6m at 31 March 2017, as illustrated in the investment portfolio
bridge below:
GBPm
At 1 April 2016 1,798.0
New and follow on investments 366.0
Net transfer from current assets 36.8
Accrued interest income 94.7
Realisations (803.7)
Impairments (48.0)
Fair value gains 117.1
FX and other 150.7
At 31 March 2017 1,711.6
Realisations comprise the return of GBP501.6m of principal, the
crystallisation of GBP85.8m of rolled up interest and GBP216.3m of
realised capital gains.
In the period GBP276.0m was invested alongside our corporate investments
strategies for new and follow on investments. Of the remaining GBP90.0m,
GBP67.9m was invested in CLOs in accordance with regulatory requirements
and GBP20.6m in our strategic secondaries strategy.
The Sterling value of the portfolio increased by GBP146.4m due to FX
movements. The portfolio is 43% Euro denominated and 32% US dollar
denominated. Sterling denominated assets account only for 15% of the
portfolio. The Group minimises the FX impact of non-sterling assets
through asset/liability management and derivative transactions.
The balance sheet investment portfolio is weighted towards the higher
returning asset classes as detailed below:
As at As at
31 March 31 March
2017 2016
Return profile GBPm % of total GBPm % of total
Corporate
Investments 15-20% 1,120 66% 1,305 72%
Capital Market
Investments 5-10% 333 19% 264 15%
Real Asset
Investments c10% 107 6% 125 7%
Secondary
Investments 15-20% 152 9% 104 6%
Total balance
sheet
portfolio 1,712 100% 1,798 100%
In addition, GBP89.7m (2016: GBP182.6m) of current assets are held on
the balance sheet with the intention of being transferred to third party
funds once their fundraising is complete. The use of the balance sheet
in this way enables our investment teams to continue to source
attractive deals whilst a fund is being raised, and in turn facilitates
the fundraising as potential investors can see the types of assets they
will be investing in. At 31 March 2017, 86% of these assets related to
our real estate and alternative credit strategies.
Investment income
Investment income(1) of GBP360.8m represents the total income earned
from the balance sheet portfolio in the year, analysed as follows:
31 March 31 March
2017 2016 Change
Investment income GBPm GBPm %
Interest income 144.7 126.0 15%
Dividend and other income 14.7 21.4 (31%)
Capital gains 201.4 128.6 57%
360.8 276.0 31%
Interest income(1) was above the prior period due to an increase in
interest bearing assets in our corporate investments and capital market
investments strategies. Cash interest income has increased to 38% (2016:
30%) of the total as the growing US mezzanine and real estate portfolios
are weighted towards cash pay interest.
Dividend income(1) was received from our real estate and senior debt
funds. The prior year included a dividend from our secondaries
investment in the Diamond Castle Partners 2014 LP fund.
Capital gains(1) were, as expected, particularly strong in the financial
year as the income statement benefited from the delayed income statement
recognition of GBP54.4m of capital gains recycled from reserves on
realisation of the underlying assets. In addition, the valuation of the
portfolio as at 31 March 2017 benefited from the strength in global
stock markets and the improved performance across a large number of
portfolio assets over the last 12 months.
Net realised capital gains(1) in the period were GBP235.3m (2016:
GBP75.2m), of which GBP150.9m (2016: GBP51.2m) had been recognised
previously as unrealised gains in the income statement with the
remaining GBP84.4m (2016: GBP24.0m) recognised in the current year,
including the recycling from reserves. Fair valuing the equity and
warrants gave rise to a further GBP112.5m (2016: GBP144.4m) of
unrealised gains in the current period. Of this, GBP117.0m (2016:
GBP104.6m) is recognised in the income statement and a GBP4.5m
unrealised loss in reserves (2016: GBP39.8m unrealised gain).
Interest expense
Interest expense(1) of GBP53.9m was GBP8.0m higher than the prior period
(2016: GBP45.9m), due to the increase in private placement debt and the
FX impact of interest paid on non-Sterling borrowings.
Operating expenses
Operating expenses of the IC(1) amounted to GBP77.3m (2016: GBP57.9m),
of which incentive scheme costs of GBP54.2m (2016: GBP39.7m) were the
largest component. The GBP14.5m increase is due to the cost of balance
sheet carry, the Group's IC carry arrangement, increasing and a higher
cash bonus accrued as a direct consequence of the high level of
realisations in the year. Other staff and administrative costs were
GBP23.1m compared to GBP18.2m last year, a GBP4.9m increase. This
increase is due to an increase in business development costs, of which
the largest component is related to the Australian senior loans strategy,
and the amortisation on the ICG Enterprise Trust management contract.
Impairments
During the period we took asset specific impairments(1) of GBP57.6m
compared to GBP42.8m in the last financial year, with write backs of
GBP9.6m (2016: GBP3.4m) resulting in net impairments of GBP48.0m (2016:
GBP39.4m). This is broadly in line with our historic average of 2.5% of
the opening IC portfolio.
Group cash flow and debt
The balance sheet remains strong, with GBP970.8m of available cash and
debt facilities at 31 March 2017. The movement in the Group's unutilised
cash and debt facilities during the period is detailed as follows:
GBPm
Headroom at 31 March 2016 781.3
New bank facilities 91.0
Bank facilities matured (150.0)
Reduction in bank facilities (142.9)
Increase in private placements 296.1
Private placements matured (82.2)
Movement in cash 377.6
Movement in drawn debt (253.0)
Other (including FX) 52.9
Headroom at 31 March 2017 970.8
Total drawn debt at 31 March 2017 was GBP1,119m compared to GBP866m at
31 March 2016, with unencumbered cash of GBP490m compared to GBP112m at
31 March 2016.
Cashflow
Operating cash inflow(1) for the year was GBP657.3m (2016: GBP185.6m),
reflecting that our operating model is highly cash generative, as
analysed below:
31 March
2017 31 March 2016
GBPm GBPm
Cash in from realisations 716.5 394.3
Cash in from dividends 29.9 45.7
Cash in from fees 148.9 86.3
Cash in from cash interest 142.3 124.3
Cash movement in current assets held in warehouse
or for syndication 153.7 -
Total cash receipts 1,191.3 650.6
Cash interest paid (53.0) (47.0)
Cash paid to purchase loans and investments (366.0) (247.1)
Cash movement in current assets held in warehouse
or for syndication - (35.8)
Operating expenses paid (115.0) (135.1)
Total cash paid (534.0) (465.0)
Total cash generated from operating activities 657.3 185.6
This has been a particularly strong year for cash generation as the FMC
has benefited from increased fees and a strong period of realisations
from our balance sheet portfolio. Fundraising activities have also
enabled current assets held on the balance sheet to be transferred to
third party funds.
Capital position
Shareholders' funds decreased by 6% to GBP1,172.6m (2016: GBP1,241.2m)
in the year, principally due to the GBP200m special dividend paid during
the year. Total debt to shareholders' funds (gearing(1)) as at 31 March
2017 increased to 0.95x from 0.70x. Adjusted return on equity(1) of
18.2% is up 5.3% points from 31 March 2016.
Principal risks and uncertainties
Effective risk management provides the framework within which we can
successfully deliver our strategic priorities.
Risk management is the responsibility of the Board and is integral to
the ability of the Group to deliver on its strategic priorities. The
Board is responsible for setting the risk culture of the Group and
establishing and maintaining appropriate systems and controls to manage
risk. A robust risk management framework has been implemented to support
this.
The Group's risk management framework is overseen by the Risk Committee
under delegation from the Board. The Risk Committee also considers the
effectiveness of the internal control environment.
Identifying principal and emerging risks
The Risk Committee determines the principal risks through a
consideration of the strategy and operating environment of the Group
(top down review) and a detailed analysis of individual processes and
procedures (bottom up review). The principal risks to the Group are
identified and recommended to the Board by the Risk Committee.
The top down review focuses on identifying those risks that could
threaten the business model, future performance, capital or liquidity of
the business. In identifying risks, consideration is given to risks
identified by other asset managers in the sector and relevant regulatory
expectations and external developments. The review also considers
emerging risks.
The bottom up assessment encompasses the identification, management and
monitoring of risks in each area of the business. The infrastructure and
in house distribution teams maintain detailed risk registers which are
regularly reviewed, challenged and updated by the CRO and the
Operational Risk Group (ORG). This review process ensures risk
management responsibilities are embedded in the business' first line
operations. In addition, the Group's Investment Committees provide
oversight of risks related to the investment and fund management
activities of the Group.
Executive responsibility for each principal risk is reviewed and agreed.
The Board and the Risk Committee consider their appetite for risk across
the business and establish the level of acceptable risk for each of the
principal risks. Key risk indicators are set and these are monitored by
the Risk Committee. The Risk Committee also considers any risk
mitigation plans.
The Directors confirm that they have undertaken a robust assessment of
principal risks in line with the requirements of the UK Corporate
Governance Code. There were no changes to the list of principal risks of
the Group in the year.
Emerging risks are regularly considered to assess any potential impacts
on the Group and to determine whether any actions are required. Emerging
risks include the risks related to regulatory change and macroeconomic
and political change which in the current year have included the UK's
decision to leave the European Union.
The Group considers its principal risks across three categories:
1. Strategic and business risks - The risk of failing to deliver on our
strategic objectives resulting in a negative impact on investment
performance and Group profitability,
2. Market, credit and liquidity risk - The risk of an adverse impact on the
Group due to market fluctuations, counterparty failure or having
insufficient resources to meet financial obligations,
3. Operational risks - The risk of loss or missed opportunity, resulting
from a regulatory or legislative failure or inadequate or failed internal
processes, people or systems.
Reputational risk is seen as an outcome of the principal risks
materialising. Reputation and brand risk is carefully managed as part of
the risk management framework.
Monitoring the effectiveness of controls
During the year, the Group further enhanced its processes for monitoring
the effectiveness of material controls. Material controls have been
defined as those critical to the management of the principal risks of
the business. Additional reporting on the effectiveness of material
controls is provided to the Board and Risk Committee to support the
review of the effectiveness of controls in managing the principal risks.
The Board is provided with a number of risk reports which it uses to
review the Group's risk management arrangements and internal controls.
The reports enable the Board to make a cumulative assessment of the
effectiveness with which internal controls are being managed or
mitigated. As part of its review the Board considered whether the
processes in place were sufficient to identify all material controls and
confirmed that this was the case. The Board confirms that the Group's
risk management and internal control systems are operating effectively
and material controls operated effectively throughout the year.
Principal risk Impact Key risk Key controls and Movement in the Focus for
indicator mitigation year FY18
Strategic and business risks
1. Loss or missed opportunity as a result of major Adverse macroeconomic conditions could reduce the Deterioration of Group performance compared to plan. The Board regularly receives detailed market reports, No change - During the year this risk has remained Political uncertainty in Europe as a result of the
external change (including macroeconomic, regulatory, opportunity to deploy capital and impair the ability Impairment rate as a percentage of the opening loan reviewing the latest developments in the Group's key elevated due to ongoing political uncertainty. negotiations over the UK's departure from the European
political and/or competitive impact) of the Group to effectively manage its portfolios, book. markets. To mitigate the risk associated with the UK's decision Union
reducing the value of future management fees, investment The Investment Committees receive ongoing detailed to leave the European Union the Board approved the
income and performance fees. and specific market reviews for each investment. establishment of a Luxembourg licensed entity to ensure
Adverse macroeconomic conditions could also reduce The Board receives regular updates on regulatory developments. the Group maintains access to European Union investors.
demand from investors for the Group's funds.
Adverse regulatory change could impact on the ability
of the Group to deploy capital or could reduce the
demand from investors for the Group's funds.
Failure to maintain acceptable relative performance Performance of fund portfolio companies. The Group has disciplined investment policies, and No change - There have been no material changes in Maintaining investment discipline
1. Failure to maintain acceptable relative investment in the funds may result in a failure to raise new Performance of certain funds compared to benchmark. all investments are selected and regularly monitored the Group's investment markets during the year which Managing conflict of interests resulting from funds
performance funds, reducing the Group's long term income and ability Impairment rate as a percentage of the opening loan by the Group's Investment Committees. would lead the Board to consider that this risk has structured to pay fees on invested capital
to invest in future growth. Investors in open ended book. Disciplined credit procedures are applied both before changed.
funds may reduce or cancel their commitments, reducing and during the period of investment. The Group limits
AUM and fund management fees. the extent of credit risk by diversifying its portfolio
In the short term, fund underperformance may result assets by sector, size and geography.
in lower performance fees in the FMC. For the IC this Continued focus by senior management and executives
may result in a lower return on assets as the IC is ensures maximum recovery is achieved.
exposed to credit risk through its co-investments
with, and its investments in, funds.
A failure to raise new funds would reduce the Group's Forecast fund inflows. The Group has built dedicated fundraising and scalable No change - Investor sentiment remains supportive Maintaining discipline on fees and terms
1. Failure to raise new third party funds long term income and ability to launch new strategies. infrastructure teams to grow and diversify its institutional of the Group's strategies but the fundraising environment Diversification of risk by selectively expanding the
client base by geography and type. is highly competitive. portfolio of investment strategies
The Group has expanded its product portfolio to address During the year the Group has delivered on its target
a range of investor requirements and continues to for raising third party funds.
build a strong product pipeline.
Failure to deploy capital reduces the value of future The proportion of a fund's capital forecast to be The rate of investment is kept under review by the Increased - Competition for new investment opportunities Maintaining investment discipline
1. Failure to deploy committed capital in a timely management fees, investment income and performance available for investment in the final year of the Investment Committees and senior management to ensure is high and this, together with sustained high asset
manner fees. investment period. acceptable levels are maintained in current market prices, puts the deployment of funds in line with
conditions. expectations at risk.
Market, credit and liquidity risks
1. Loss as a result of adverse market fluctuations Volatility in currency and interest rates leads to Value of net unhedged assets. The Group has a policy which seeks to ensure that No change - During the year the Group has applied Market volatility as a result of political uncertainties,
arising primarily from exposure to interest rates and changes in the value of the assets and liabilities Percentage of loan book unhedged. any non Sterling income, expenditure, assets and liabilities its hedging policy consistently. including the impact of the negotiations over the
foreign exchange rates of the Group and, to the extent that these are unhedged, are appropriately hedged and that the residual exposure UK's departure from the European Union
will impact on the financial performance of the Group. to market risk is managed to minimise short term volatility
Volatility in currency and interest rates may impact in the financial results of the Group. This is reviewed
on fund performance which may result in a failure annually. Currency and interest rate exposures are
to raise new funds, reducing the Group's long term reported monthly and reviewed by the Group's Treasury
income and ability to invest in future growth. Committee.
1. Loss as a result of exposure to a failed counterparty The Group uses derivatives to hedge market risk on Counterparty exposure relative to trading limits. The Group has a policy which seeks to ensure that No change - During the year the Group has applied Ongoing monitoring of counterparty exposures
its balance sheet. By entering into these derivatives any counterparty exposures are managed within levels its policy to manage counterparty credit risk consistently.
the Group is exposed to counterparty credit risk. agreed with the Board. This is reviewed annually.
The Group's counterparties are national or multinational Actual counterparty exposures are reported monthly
banks. and reviewed by the Group's Treasury Committee.
Should a financial counterparty of the Group fail
the Group would be exposed to loss.
An ongoing failure to refinance its liabilities could Forecast breach of financing principles. The Group has a policy which seeks to ensure that No change - During the year the Group issued new debt Balance sheet efficiency
1. Failure to meet the Group's financial obligations as result in the Group failing to meet its payment obligations debt funding is obtained from diversified sources into the US private placement market, extending the Regulatory capital requirements
they fall due as they fall due. and that the repayment profile is managed to minimise weighted average life of its debt facilities.
As a result the Group would not be a going concern. material repayment events. The profile of the debt Following the payment of the GBP200m special dividend
facilities available to the Group is reviewed frequently the Group's gearing has remained within its target
by the Treasury Committee. range.
Operational risks
Breach of any 'Key Man' clause could result in the Loss of a key man on a material fund. The Group rewards its investment professionals and Increased - There was no significant impact in the Managing the impact of the UK's departure from the
1. Loss of a 'key person' and inability to recruit into Group having to stop making investments for the relevant other key employees in line with market practice. year as a result of the loss of any employee. European Union on our workforce
key roles fund or may impair the ability of the Group to raise Senior investment professionals typically receive The decision of the Chief Executive to stand down Continued focus on succession planning
new funds if not resolved in a timely manner. long term incentives and are able to participate in from his executive responsibilities at the AGM will
Loss of a key employee from the Group's fund management carried interest. The Group periodically engages external not result in the breach of a Key Man clause. However,
business or a critical infrastructure role could impair consultants to benchmark the rewards offered by the the risk of a breach is temporarily increased until
the Group's ability to deliver its strategic objectives Group to ensure they remain attractive and competitive. additional Key Man nominations are approved by investors.
as planned if that role is not filled in a timely The Group has succession plans in place for key employees.
manner. These are reviewed by the Board.
The Group has an appraisal and development process
for all its employees to ensure that individuals remain
sufficiently motivated and appropriately competent
to ensure the ongoing operation and development of
the business.
The Group's ability to raise new funds and operate Any material breach of regulations. The Group has a governance structure in place, supported No change - During the year the Group has continued Senior Managers and Certification Regime for Asset
1. Negative financial or reputational impact arising its fund management business would be impaired as Other legislative failure. by a risk framework that allows for the identification, to enhance its processes and controls in order to Managers
from regulatory or legislative failing a result of a regulatory or legislative failing. control and mitigation of material risks resulting remain compliant with current and expected legislation. MiFID II
from the geographical and product diversity of the There are no regulatory or business developments which General Data Protection Regulation
Group. The adequacy of the systems and controls the have resulted in an increased risk to the Group.
Group has in place to comply with the regulations
and to mitigate the risks that these represent is
periodically assessed. This includes a tailored compliance
monitoring programme that specifically addresses regulatory
and reputational risks.
The Group's ability to deliver on its strategic objectives Any material breach or severe disruption due to systems Application of the Group's information security policies Increased - The ongoing evolution of external threats Enhancement of business continuity planning and disaster
1. Technology/ information security inadequate or fails relies on technology and information security which failure. is supported by a governance structure and a risk has resulted in an increase in risk to the Group. recovery
to adapt to changing business requirements and/or adapts to changing business demands and external threats. Any material loss or reputational damage arising from framework that allows for the identification, control In response, the Group has continued to improve its Continued focus on cybersecurity threats
external threats Failure to deliver an appropriate technology platform external threats. and mitigation of technology risks. The adequacy of systems and controls to identify and manage technology
may impact the Group's reputation, its ability to the systems and controls the Group has in place to and information security risks.
raise new funds and operate its fund management business. mitigate the technology risks is continuously monitored
and subject to regular testing. The effectiveness
of the framework is periodically assessed.
1. Loss or missed opportunities arising from failure of The Group's ability to raise new funds and operate Any failure of business process resulting in significant Control procedures are in place to ensure that key No change - There were no significant business process Oversight of third party service providers
key business processes, including third party its fund management business would be impaired as business disruption, financial or reputational damage. business processes are identified, documented and failures during the year.
supplier management, valuation and external reporting a result of the failure of key business processes. monitored. Third party suppliers are subject to robust
selection process and performance is monitored against
agreed service levels with exceptions reported and
escalated as appropriate. The effectiveness of the
control framework for key business processes is reviewed
by the Risk Committee.
Responsibility statement
The responsibility statement below has been prepared in connection with
the Company's full annual report for the year ending 31 March 2017.
Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as adopted by
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- the management report, which is incorporated into the directors' report,
includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on
24 May 2017 and is signed on its behalf by:
Christophe Evain Philip Keller
CEO CFOO
Consolidated Income Statement
For the year ended 31 March 2017
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Finance and dividend income 204.2 207.3
Gains on investments 286.8 137.7
Fee and other operating income 134.1 104.3
Total revenue 625.1 449.3
Finance costs (153.4) (121.9)
Impairments (25.3) (8.9)
Administrative expenses (194.3) (141.9)
Change in deferred consideration estimate - (17.8)
Share of results of joint ventures accounted for using
equity method 0.3 -
Profit before tax 252.4 158.8
Tax charge (34.2) (20.2)
Profit for the year 218.2 138.6
Attributable to
Equity holders of the parent 217.8 138.6
Non controlling interests 0.4 -
218.2 138.6
Earnings per share 74.5p 41.9p
Diluted earnings per share 74.5p 41.9p
All activities represent continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2017
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Profit for the year 218.2 138.6
Available for sale financial assets:
(Losses)/gains arising in the year which may be reclassified
to profit or loss in future periods (2.6) 42.6
Reclassification adjustment for net gains recycled
to profit (45.7) (18.0)
Exchange differences on translation of foreign operations 23.0 9.5
(25.3) 34.1
Tax on items taken directly to or transferred from
equity 6.3 (2.4)
Other comprehensive (expense)/income for the year (19.0) 31.7
Total comprehensive income for the year 199.2 170.3
Consolidated Statement of Financial Position
As at 31 March 2017
31 March
2017 31 March 2016
GBPm GBPm
Non current assets
Intangible assets 20.7 23.6
Property, plant and equipment 9.2 8.1
Financial assets: loans, investments and warrants 4,886.7 3,715.9
Derivative financial assets 6.4 3.3
Deferred tax asset 0.3 0.4
4,923.3 3,751.3
Current assets
Trade and other receivables 208.3 216.4
Financial assets: loans and investments 89.7 182.6
Derivative financial assets 40.3 28.3
Current tax debtor 33.7 15.1
Cash and cash equivalents 780.9 182.5
1,152.9 624.9
Total assets 6,076.2 4,376.2
Equity and reserves
Called up share capital 77.1 77.0
Share premium account 179.0 177.6
Capital redemption reserve 5.0 5.0
Own shares reserve (82.2) (77.0)
Other reserves 66.5 95.5
Retained earnings 927.2 963.1
Equity attributable to owners of the Company 1,172.6 1,241.2
Non controlling interest 0.7 0.9
Total equity 1,173.3 1,242.1
Non current liabilities
Provisions 1.3 2.0
Financial liabilities 4,304.9 2,674.2
Derivative financial liabilities 33.6 31.6
Deferred tax liabilities 77.0 51.0
4,416.8 2,758.8
Current liabilities
Provisions 0.7 0.7
Trade and other payables 464.8 233.4
Financial liabilities - 106.6
Current tax creditor 14.0 5.1
Derivative financial liabilities 6.6 29.5
486.1 375.3
Total liabilities 4,902.9 3,134.1
Total equity and liabilities 6,076.2 4,376.2
Consolidated Statement of Cash Flows
For the year ended 31 March 2017
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Operating activities
Interest received 232.4 206.3
Fees received 140.4 77.9
Dividends received 158.5 28.4
Interest paid (149.4) (95.3)
Payments to suppliers and employees (135.9) (141.2)
Net proceeds from/(purchase of) current financial
assets 153.7 (35.8)
Purchase of loans and investments (2,344.6) (1,378.3)
Recoveries on previously impaired assets - 1.7
Proceeds from sale of loans and investments - principal 1,070.0 1,034.1
Proceeds from sale of loans and investments - gains
on investments 797.4 66.6
Cash used in operations (77.5) (235.6)
Taxes paid (7.7) (3.9)
Net cash used in operating activities (85.2) (239.5)
Investing activities
Purchase of property, plant and equipment (4.1) (4.2)
Purchase of intangible assets - (18.3)
Loss of control of subsidiary - (9.1)
Net cash used in investing activities (4.1) (31.6)
Financing activities
Dividends paid (270.9) (378.2)
Increase in long term borrowings 1,931.1 679.1
Repayment of long term borrowings (807.9) (183.1)
Net cash outflow from derivative contracts (150.2) (40.5)
Purchase of remaining 49% of Longbow Real Estate Capital
LLP (41.7) -
Purchase of own shares (23.6) (27.4)
Proceeds on issue of shares 1.5 3.4
Net cash generated from financing activities 638.3 53.3
Net increase/(decrease) in cash 549.0 (217.8)
Cash and cash equivalents at beginning of year 182.5 391.9
Effect of foreign exchange rate changes 49.4 8.4
Net cash and cash equivalents at end of year 780.9 182.5
Consolidated Statement of Changes in Equity
For the year ended 31 March 2017
Capital Available
Share Share redemption Share based for sale Own Retained Total
capital premium reserve payments reserve reserve shares earnings Total Non controlling interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April 2016 77.0 177.6 5.0 43.6 51.9 (77.0) 963.1 1,241.2 0.9 1,242.1
Profit for the year - - - - - - 217.8 217.8 0.4 218.2
Available for sale financial assets - - - - (48.3) - - (48.3) - (48.3)
Exchange differences on translation of foreign
operations - - - - - - 23.0 23.0 - 23.0
Tax on items taken directly to or transferred from
equity - - - (2.8) 9.1 - - 6.3 - 6.3
Total comprehensive income for the year - - - (2.8) (39.2) - 240.8 198.8 0.4 199.2
Movement in control of subsidiary - - - - - - 0.6 0.6 (0.6) -
Own shares acquired in the year - - - - - (23.7) - (23.7) - (23.7)
Options/awards exercised 0.1 1.4 - (12.1) - 18.5 (6.4) 1.5 - 1.5
Credit for equity settled share schemes - - - 25.1 - - - 25.1 - 25.1
Dividends paid - - - - - - (270.9) (270.9) - (270.9)
Balance at 31 March 2017 77.1 179.0 5.0 53.8 12.7 (82.2) 927.2 1,172.6 0.7 1,173.3
Capital Available
Share Share redemption Share based for sale Own Retained Total
capital premium reserve payments reserve reserve shares earnings Total Non controlling interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April 2015 80.6 674.3 1.4 45.8 32.5 (162.0) 783.8 1,456.4 2.2 1,458.6
Profit for the year - - - - - - 138.6 138.6 - 138.6
Available for sale financial assets - - - - 24.6 - - 24.6 - 24.6
Exchange differences on translation of foreign
operations - - - - - - 9.5 9.5 - 9.5
Tax on items taken directly to or transferred from
equity - - - 2.8 (5.2) - - (2.4) - (2.4)
Total comprehensive income for the year - - - 2.8 19.4 - 148.1 170.3 - 170.3
Loss of control of subsidiary - - - - - - (13.4) (13.4) (1.3) (14.7)
Movement in control of subsidiary - - - - - - 10.2 10.2 - 10.2
Own shares acquired in the year - - - - - (24.7) - (24.7) - (24.7)
Options/awards exercised - 3.3 - (22.3) - 30.4 (8.1) 3.3 - 3.3
Credit for equity settled share schemes - - - 17.3 - - - 17.3 - 17.3
Reduction in share premium - (500.0) - - - - 500.0 - - -
Cancellation of shares (3.6) - 3.6 - - 79.3 (79.3) - - -
Dividends paid - - - - - - (378.2) (378.2) - (378.2)
Balance at 31 March 2016 77.0 177.6 5.0 43.6 51.9 (77.0) 963.1 1,241.2 0.9 1,242.1
Notes to the Financial Statements
For the year ended 31 March 2017
1. Basis of preparation
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31 March
2017 or 2016. The financial information for the years ended 31 March
2017 and 2016 is derived from the statutory accounts for those years.
The statutory accounts for 2016 have been delivered to the Registrar of
Companies and those for 2017 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The auditors
reported on those accounts; their report was unqualified, did not draw
attention to any matters by way of emphasis without qualifying their
report and did not contain a statement under s498(2) or (3) Companies
Act 2006.
While the financial information included in this announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs) as adopted by the
European Union, this announcement does not itself contain sufficient
information to comply with IFRSs. The Company expects to publish full
financial statements that comply with IFRSs in June 2017.
1. Business segments
For management purposes, the Group is currently organised into the Fund
Management Company (FMC) and the Investment Company (IC). Segment
information about these businesses is presented below and is reviewed by
the Executive Committee.
The Group reports the profit of the FMC separately from the profits
generated by the IC. The FMC is defined as the operating unit and as
such incurs the majority of the Group's costs, including the cost of the
investment network, i.e. the Investment Executives and the local offices,
as well as the cost of most support functions, primarily information
technology, human resources and marketing. In the current period
external fee income has been shown by strategic asset class and interest
income and interest expense have been shown separately whereas
previously these were disclosed as net interest income. The prior
periods have been restated to reflect these changes.
The IC is charged a management fee of 1% of the carrying value of the
average investment portfolio by the FMC and this is shown below as fee
income. The costs of finance, treasury and portfolio administration
teams, and the costs related to being a listed entity, are allocated to
the IC. The remuneration of the Executive Directors is allocated equally
to the FMC and the IC.
Notes to the Financial Statements continued
For the year ended 31 March 2017
Analysis of income and profit before tax as internally reported
Capital Total
Year ended 31 Corporate Investments Market Investments Real Asset Investments Secondary Investments FMC IC Total
March 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External fee
income 78.2 23.7 21.9 14.8 138.6 - 138.6
Inter-segmental
fee 12.7 2.1 1.7 1.6 18.1 (18.1) -
Fund management
fee income 90.9 25.8 23.6 16.4 156.7 (18.1) 138.6
Other operating
income - 8.0 8.0
Gains on
investments - 201.4 201.4
Interest income (0.2) 144.7 144.5
Dividend income 23.2 6.7 29.9
179.7 342.7 522.4
Interest expense - (53.9) (53.9)
Net fair value
loss on
derivatives - (1.3) (1.3)
Impairment - (48.0) (48.0)
Staff costs (39.0) (14.4) (53.4)
Incentive scheme
costs (33.8) (54.2) (88.0)
Other
administrative
expenses (32.9) (8.7) (41.6)
Profit before tax 74.0 162.2 236.2
Capital Total
Year ended 31 Corporate Investments Market Investments Real Asset Investments Secondary Investments FMC IC Total
March 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External fee
income 70.0 17.7 19.1 2.1 108.9 - 108.9
Inter-segmental
fee 13.5 2.0 1.7 1.2 18.4 (18.4) -
Fund management
fee income 83.5 19.7 20.8 3.3 127.3 (18.4) 108.9
Other operating
income - 5.0 5.0
Gains on
investments - 128.6 128.6
Interest income (0.4) 126.0 125.6
Dividend income 19.3 16.4 35.7
146.2 257.6 403.8
Interest expense - (45.9) (45.9)
Net fair value
loss on
derivatives - (17.3) (17.3)
Impairment - (39.4) (39.4)
Staff costs (30.4) (8.8) (39.2)
Incentive scheme
costs (24.5) (39.7) (64.2)
Other
administrative
expenses (30.1) (9.4) (39.5)
Profit before tax 61.2 97.1 158.3
Notes to the Financial Statements continued
For the year ended 31 March 2017
Reconciliation of financial statements reported to the Executive
Committee to the position reported under IFRS
Included in the table below are statutory adjustments made to the
Investment Company for the following:
For internal reporting purposes the interest earned and impairments
charged on assets where the Group co-invests in funds (ICG Europe Fund V,
ICG Europe Fund VI, ICG Asia Pacific Fund III and ICG North America
Private Debt Fund) and where the investment is in a fund where the
underlying assets are interest bearing (real estate, liquid credit and
senior debt funds) is presented within interest income/impairments
whereas under IFRS it is included within the value of the
investment/dividends.
The structured entities controlled by the Group are presented as fair
value investments for internal reporting purposes, whereas the statutory
financial statements present these entities on a fully consolidated
basis.
Other adjustments relate to the joint venture investment in Nomura ICG
KK which is presented internally on a proportional consolidation basis,
whereas it is equity accounted under IFRS and Questus Energy Pty Limited
where the costs are included on a line by line basis in the income
statement for internal reporting purposes whereas in the IFRS financial
statements these are collapsed into a single line, administrative
expenses, to reflect its status as a non-controlled entity. In the prior
year the one off impacts of the change to the Longbow deferred
consideration estimate and EBT settlement were excluded for internal
reporting purposes.
Consolidated Income Statement
Year ended Internally reported Reclass of interest to dividends and gains Consolidated structured entities Other adjustments Total adjustments Financial statements
31 March 2017 GBPm GBPm GBPm GBPm GBPm GBPm
Fund management fee income 138.6 - (15.0) (0.9) (15.9) 122.7
Other operating income 8.0 - 3.4 - 3.4 11.4
Gains on investments 201.4 51.3 34.6 (0.5) 85.4 286.8
Interest income 144.5 (77.3) 130.6 - 53.3 197.8
Dividend income 29.9 3.3 (26.8) - (23.5) 6.4
522.4 (22.7) 126.8 (1.4) 102.7 625.1
Share of results of joint venture accounted for using
equity method - - - 0.3 0.3 0.3
Interest expense (53.9) - (99.0) - (99.0) (152.9)
Net fair value loss/(gain) on derivatives (1.3) - 0.8 - 0.8 (0.5)
Impairment (48.0) 22.7 - - 22.7 (25.3)
Staff costs (53.4) - - 2.1 2.1 (51.3)
Incentive scheme costs (88.0) - - - - (88.0)
Other administrative expenses (41.6) - (12.0) (1.4) (13.4) (55.0)
Profit before tax 236.2 - 16.6 (0.4) 16.2 252.4
Notes to the Financial Statements continued
For the year ended 31 March 2016
Year ended Internally reported Reclass of interest to gains Consolidated structured entities Longbow deferred consideration EBT settlement Other adjustments Total adjustments Financial statements
31 March 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Fund management
fee income 108.9 - (9.9) - - (0.7) (10.6) 98.3
Other operating
income 5.0 - 1.0 - - - 1.0 6.0
Gains on
investments 128.6 (6.0) 15.5 - - (0.4) 9.1 137.7
Interest income 125.6 (24.5) 87.8 - - - 63.3 188.9
Dividend income 35.7 - (17.3) - - - (17.3) 18.4
403.8 (30.5) 77.1 - - (1.1) 45.5 449.3
Interest expense (45.9) - (57.7) - - - (57.7) (103.6)
Net fair value
loss on
derivatives (17.3) - (1.0) - - - (1.0) (18.3)
Impairment (39.4) 30.5 - - - - 30.5 (8.9)
Staff costs (39.2) - - - - 0.4 0.4 (38.8)
Incentive scheme
costs (64.2) - - - - - - (64.2)
Other
administrative
expenses (39.5) - (2.2) - 2.3 0.5 0.6 (38.9)
Change in
deferred
consideration
estimate - - - (17.8) - - (17.8) (17.8)
Profit before
tax 158.3 - 16.2 (17.8) 2.3 (0.2) 0.5 158.8
Employee Benefit Trust
In the prior year the Group utilised GBP1.3m of a GBP3.6m accrual held
on the balance sheet as at 31 March 2015 in relation to a claim for
taxes in respect of the Employee Benefit Trust (EBT), with the remaining
GBP2.3m released to the income statement.
Longbow Deferred Consideration
In the prior year, the Group acquired the remaining 49% of Longbow Real
Estate Capital LLP, thereby giving it 100% of the equity of the UK real
estate debt specialist. The final deferred consideration amount was
calculated at GBP41.7m following the outstanding success of this
business, resulting in a GBP17.8m increase to the original estimate.
This was recognised through the income statement.
Notes to the Financial Statements continued
For the year ended 31 March 2017
Consolidated Statement of Financial Position
31 March Internally reported Reclass of interest to gains Consolidated structured entities Other adjustments Total adjustments Financial Statements
2017 GBPm GBPm GBPm GBPm GBPm GBPm
Non current
financial
assets 1,711.6 1.1 3,172.7 1.3 3,175.1 4,886.7
Other non
current
assets 36.6 - - - - 36.6
Cash 490.3 - 293.5 (2.9) 290.6 780.9
Current
financial
assets 89.7 - - - - 89.7
Other
current
assets 172.9 (1.1) 111.9 (1.4) 109.4 282.3
Total assets 2,501.1 - 3,578.1 (3.0) 3,575.1 6,076.2
Non current
financial
liabilities 1,121.5 - 3,183.4 - 3,183.4 4,304.9
Other non
current
liabilities 106.5 - 5.4 - 5.4 111.9
Other
current
liabilities 158.8 - 329.8 (2.5) 327.3 486.1
Total
liabilities 1,386.8 - 3,518.6 (2.5) 3,516.1 4,902.9
Equity 1,114.3 - 59.5 (0.5) 59.0 1,173.3
Total equity
and
liabilities 2,501.1 - 3,578.1 (3.0) 3,575.1 6,076.2
31 March Internally reported Reclass of interest to gains Consolidated structured entities Other adjustments Total adjustments Financial Statements
2016 GBPm GBPm GBPm GBPm GBPm GBPm
Non current
financial
assets 1,798.0 (2.9) 1,919.7 1.1 1,917.9 3,715.9
Other non
current
assets 34.1 - 1.3 - 1.3 35.4
Cash 112.7 - 72.2 (2.4) 69.8 182.5
Current
financial
assets 182.6 - - - - 182.6
Other
current
assets 202.8 2.9 55.1 (1.0) 57.0 259.8
Total assets 2,330.2 - 2,048.3 (2.3) 2,046.0 4,376.2
Non current
financial
liabilities 761.2 - 1,913.0 - 1,913.0 2,674.2
Other non
current
liabilities 84.6 - - - - 84.6
Current
financial
liabilities 106.6 - - - - 106.6
Other
current
liabilities 161.7 - 93.8 13.2 107.0 268.7
Total
liabilities 1,114.1 - 2,006.8 13.2 2,020.0 3,134.1
Equity 1,216.1 - 41.5 (15.5) 26.0 1,242.1
Total equity
and
liabilities 2,330.2 - 2,048.3 (2.3) 2,046.0 4,376.2
Notes to the Financial Statements continued
For the year ended 31 March 2017
Consolidated Statement of Cash Flows
Internally
reported Reclass of dividends from realisations Consolidated structured entities Other adjustments Financial Statements
31 March 2017 GBPm GBPm GBPm GBPm GBPm
Interest, fees and dividends received 321.0 122.4 87.9 - 531.3
Interest paid (53.0) - (96.4) - (149.4)
Net proceeds from current financial assets 153.7 - - - 153.7
Purchase of loans and investments (366.0) - (1,978.6) - (2,344.6)
Cash in from realisations 716.5 (122.4) 1,273.3 - 1,867.4
Other operating expenses (115.0) - (20.8) (0.1) (135.9)
Cash generated from/(used in) operating activities 657.2 - (734.6) (0.1) (77.5)
Taxes paid (7.7) - - - (7.7)
Net cash generated from/(used in) operating activities 649.5 - (734.6) (0.1) (85.2)
Net cash used in investing activities (4.1) - - - (4.1)
Dividends paid (270.9) - - - (270.9)
Net increase in long-term borrowings 181.4 - 941.8 - 1,123.2
Net cash flow from derivatives (132.1) - (18.1) - (150.2)
Purchase of remaining 49% of Longbow Real Estate Capital
LLP (41.7) - - - (41.7)
Purchase of own shares (23.6) - - - (23.6)
Proceeds on issue of shares 1.5 - - - 1.5
Net cash (used in)/generated from financing activities (285.4) - 923.7 - 638.3
Net increase/(decrease) in cash 360.0 - 189.1 (0.1) 549.0
Cash and cash equivalent at beginning of year 112.7 - 72.2 (2.4) 182.5
FX impact on cash 17.6 - 32.2 (0.4) 49.4
Cash and cash equivalent at end of year 490.3 - 293.5 (2.9) 780.9
Notes to the Financial Statements continued
For the year ended 31 March 2017
Internally
reported Consolidated structured entities Other adjustments Financial Statements
31 March 2016 GBPm GBPm GBPm GBPm
Interest, fees and
dividends received 256.3 58.8 (2.5) 312.6
Interest paid (47.0) (48.3) - (95.3)
Net purchase of
current financial
assets (35.8) - - (35.8)
Purchase of loans
and investments (247.1) (1,131.2) - (1,378.3)
Cash in from
realisations 394.3 708.1 - 1,102.4
Other operating
expenses (140.3) (2.3) 1.4 (141.2)
Cash generated
from/(used in)
operating
activities 180.4 (414.9) (1.1) (235.6)
Taxes paid (3.9) - - (3.9)
Net cash generated
from/(used in)
operating
activities 176.5 (414.9) (1.1) (239.5)
Net cash used in
investing
activities (22.5) (9.1) - (31.6)
Dividends paid (378.2) - - (378.2)
Net increase in
long-term
borrowings 131.1 364.9 - 496.0
Net cash flow from
derivatives (52.5) 12.0 - (40.5)
Purchase of own
shares (27.4) - - (27.4)
Proceeds on issue of
shares 3.4 - - 3.4
Net cash (used
in)/generated from
financing
activities (323.6) 376.9 - 53.3
Net decrease in cash (169.6) (47.1) (1.1) (217.8)
Cash and cash
equivalent at
beginning of year 278.5 115.3 (1.9) 391.9
FX impact on cash 3.8 4.0 0.6 8.4
Cash and cash
equivalent at end
of year 112.7 72.2 (2.4) 182.5
1. Dividends
The proposed final ordinary dividend for the year ended 31 March 2017 is
19.5 pence per share (2016: 15.8 pence per share), which will amount to
GBP54.7m (2016: GBP49.9m).
Of the GBP70.9m (2016: GBP78.2m) of ordinary dividends paid during the
year, GBP1.2m were reinvested under the dividend reinvestment plan that
was offered to shareholders (2016: GBP1.1m). In addition, a special
dividend of GBP200m was paid in August 2016, which amounted to 63.4
pence per share (2016: a special dividend of GBP300m was paid in July
2015, which amounted to 82.6 pence per share).
Notes to the Financial Statements continued
For the year ended 31 March 2017
1. Earnings per share
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to the equity
holders of the Parent 217.8 138.6
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share 292,255,497 330,685,568
Effect of dilutive potential ordinary share options 13,654 42,077
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 292,269,151 330,727,645
Earnings per share 74.5p 41.9p
Diluted earnings per share 74.5p 41.9p
Reconciliation of total number of shares allotted, called up and in
issue
Number of
shares in
Total number of shares allotted, called up and in own share
issue reserve
As at 1 April
2016 330,310,239 15,010,728
Purchased - 3,611,309
Options/awards
exercised 120,681 (3,587,843)
330,430,920 15,034,194
Share
consolidation (36,714,547) (1,670,466)
293,716,373 13,363,728
Purchased 187,351 -
As at 31 March
2017 293,903,724 13,363,728
On 1 August 2016, the Company undertook a share consolidation issuing
eight new ordinary shares at 26 1/4 pence each for each holding of nine
existing ordinary shares of 23 1/3 pence each, reducing shares in issue
to 293,716,373.
Notes to the Financial Statements continued
For the year ended 31 March 2017
1. Tax expense
Year ended Year ended
31 March 2017 31 March 2016
Analysis of tax on ordinary activities GBPm GBPm
Current tax
Current year 11.6 3.1
Prior year adjustment (9.7) 2.8
1.9 5.9
Deferred tax
Current year 26.8 16.4
Prior year adjustment 5.5 (2.1)
32.3 14.3
Tax charge on profit on ordinary activities 34.2 20.2
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Profit on ordinary activities before tax 252.4 158.8
Profit before tax multiplied by the rate of corporation
tax in the UK of 20% 50.5 31.8
Effects of:
Non deductible expenditure 6.7 4.7
Non taxable income (3.3) (3.4)
Overseas withholding tax suffered - 0.6
Different tax rates of overseas subsidiaries (16.5) (13.4)
Current year risk provision charge - current tax 2.9 -
Changes in statutory tax rates (1.9) (0.8)
Prior year adjustment to current tax (9.7) 2.8
Prior year adjustment to deferred tax 5.5 (2.1)
Current tax charge for the year 34.2 20.2
The Group's effective tax rate is lower than the standard rate of UK
corporation tax of 20%. This is principally due to the impact of
differences in overseas tax rates where we invest directly into funds
which are based offshore. The Group is currently reviewing its transfer
pricing policies and documentation in the light of the revised 'Base
Erosion Profit Shifting' (BEPS) guidelines issued by the OECD. While
the Group has low tax risk status in the UK, and no open enquiries
elsewhere, a provision has been recorded until the review is finalised
and the application of the BEPS guidelines by the tax authorities is
known. The adjustments in respect of prior years relate to the carry
back of UK tax losses into a prior period.
Notes to the Financial Statements continued
For the year ended 31 March 2017
6. Gains and losses arising on investments
(a) Gains and losses arising on AFS financial assets recognised in other
comprehensive income
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Realised gains on ordinary shares recycled to profit (54.4) (19.8)
Impairments of AFS financial assets recycled to
profit 8.7 1.8
Reclassification adjustment for net gains recycled
to profit (45.7) (18.0)
Gains and losses arising on AFS financial assets
- Fair value movement on equity instruments (3.4) 38.4
- Fair value movement on other assets (1.1) 1.4
Foreign exchange 1.9 2.8
(Losses)/gains arising in the AFS reserve in the
year (2.6) 42.6
Net movement in the AFS reserve in the year (48.3) 24.6
(b) Gains and losses on investments recognised in the income statement
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
Realised gains on warrants - 0.3
Realised gains/(losses) on assets designated as FVTPL 13.2 (1.0)
Realised gains in structured entities controlled by
the Group 7.7 5.7
Realised gains on AFS financial assets recycled from
AFS reserves 54.4 19.8
Realised gains on other assets 16.8 2.1
92.1 26.9
Unrealised gains/(losses) on assets designated as
FVTPL
- On equity instruments excluding those held within
structured entities controlled by the Group 169.2 95.9
- On warrants 0.7 17.1
- In structured entities controlled by the Group 109.8 (81.8)
279.7 31.2
Unrealised (losses)/gains on liabilities designated
as FVTPL
- In structured entities controlled by the Group (95.7) 70.9
Realised gains on liabilities designated as FVTPL
- In structured entities controlled by the Group 10.7 8.8
Fair value movements on FVTPL financial assets 286.8 137.8
Realised losses on amortised cost assets - (0.1)
Gains on investments 286.8 137.7
Reporting by strategic asset class
Year ended Year ended
31 March 2017 31 March 2016
AUM (EURm) Fees (GBPm) AUM (EURm) Fees (GBPm)
Corporate Investments
Management Fee Income -
Mezzanine 6,137 56.2 6,008 48.1
Performance Fee Income -
Mezzanine - 7.3 - 9.7
Management Fee Income -
Senior Debt Partners 4,385 13.5 4,423 9.6
Performance Fee Income -
Senior Debt Partners - 1.2 - 2.6
Management Fee Income -
Australian Senior Loans 283 - - -
10,805 78.2 10,431 70.0
IC co-investment -
Mezzanine 1,275 11.8 1,611 12.7
IC co-investment - Senior
Debt Partners 38 0.3 41 0.3
IC co-investment -
Australian Senior Loans - 0.6 81 0.5
Total 12,118 90.9 12,164 83.5
Capital Market Investments
CLOs 5,383 20.4 4,015 15.4
Managed Accounts and
Pooled Funds 788 2.9 622 2.2
Performance Fee Income - 0.4 - 0.1
6,171 23.7 4,637 17.7
IC co-investment 390 2.1 249 2.0
Total 6,561 25.8 4,886 19.7
Real Asset Investments
Management Fee Income 3,290 20.9 3,305 17.4
Performance Fee Income - 1.0 - 1.7
3,290 21.9 3,305 19.1
IC co-investment 126 1.7 157 1.7
Total 3,416 23.6 3,462 20.8
Secondary Investments
Management Fee Income 1,551 14.5 939 2.1
Performance Fee Income - 0.3 - -
1,551 14.8 939 2.1
IC co-investment 179 1.6 131 1.2
Total 1,730 16.4 1,070 3.3
Total External 21,817 138.6 19,312 108.9
Total IC co-investment 2,008 18.1 2,270 18.4
Total 23,825 156.7 21,582 127.3
Glossary
Items denoted with a (1) throughout this document have been identified
as non IFRS GAAP alternative performance measures. These are defined
below:
Term Short Definition
form
Adjusted Adjusted Adjusted profit after tax (annualised when reporting
earnings EPS a six month period's results) divided by the weighted
per share average number of ordinary shares as detailed in note
4.
Adjusted Group profit before tax adjusted for the impact of
Group the consolidated structured entities, the presentation
profit of Nomura ICG KK and Questus Energy Pty Limited (other
before tax adjustments) and the fair value movements on derivatives.
In the prior year profit was also adjusted for changes
to the estimate of Longbow deferred consideration
and the impact of the settlement of the employee benefit
trust.
As at 31 March 2017, this is calculated as follows:
Profit before tax GBP252.4m
Plus other adjustments GBP0.4m
Plus fair value movement of derivatives GBP1.3m
Less consolidated structured entities (GBP16.6m)
Adjusted group profit before tax GBP237.5m
Adjusted Investment Company profit adjusted for the impact
Investment of the consolidated structured entities, the presentation
Company of Nomura ICG KK and Questus Energy Pty Limited (other
profit adjustments) and the fair value movements on derivatives.
before tax In the prior year profit was also adjusted for changes
to the estimate of Longbow deferred consideration
and the impact of the settlement of the employee benefit
trust.
As at 31 March 2017, this is calculated as follows:
Investment Company profit before tax GBP178.4m
Plus other adjustments GBP0.4m
Plus fair value movement of derivatives GBP1.3m
Less consolidated structured entities (GBP16.6m)
Adjusted Investment Company profit before tax GBP163.5m
Adjusted Adjusted profit after tax divided by average shareholders'
return on funds for the period. As at 31 March 2017, this is
equity calculated as follows:
Adjusted profit after tax GBP202.6m
Average shareholders' funds GBP1,115.8m
Adjusted return on equity 18.2%
Balance The balance sheet investment portfolio represents
sheet non-current financial assets from the Statement of
investment Financial Position, adjusted for the impact of the
portfolio consolidated structured entities and the presentation
of Nomura ICG KK (other adjustments). See note 2 for
a full reconciliation.
Capital Capital gains represent the increase in value of equity
gains investments. Capital gains reported on an internal
basis excludes the impact of the consolidated structured
entities and excludes capital gains where the Group's
investment is through a fund structure, but the underlying
assets are interest bearing. See note 2 for a full
reconciliation.
Dividend Dividend income represents distributions received
income from equity investments. Dividend income reported
on an internal basis excludes the impact of the consolidated
structured entities and includes dividends on assets
where the Group's co-investment is through a fund
structure. See note 2 for a full reconciliation.
Earnings Profit after tax (annualised when reporting a six
per share month period's results) divided by the weighted average
number of ordinary shares as detailed in note 4.
Gearing Gross borrowings, excluding the consolidated structured
entities, divided by closing shareholders' funds.
Gross borrowings represent the cash amount repayable
to debt providers. As at 31 March 2017, this is calculated
as follows:
Gross borrowings GBP1,119m
Shareholders' funds GBP1,173m
Gearing 0.95x
Impairments Impairments are recognised on debt instruments to
the extent that the debt is deemed irrecoverable.
Impairments are reported on an internal basis and
includes impairments on assets where the Group's co-investment
is through a fund structure, but the underlying assets
are interest bearing. See note 2 for a full reconciliation.
Interest Interest expense excludes the cost of financing associated
expense with the consolidated structured entities. See note
2 for a full reconciliation.
Interest Interest income is contractual income earned on debt
income investments. Interest income reported on an internal
basis excludes the impact of the consolidated structured
entities and includes interest income on assets where
the Group's co-investment is through a fund structure,
but the underlying assets are interest bearing. See
note 2 for a full reconciliation.
Investment Investment income is the total of interest income,
income capital gains and dividend and other income.
Net asset Total equity from the Statement of Financial Position
value per divided by the closing number of ordinary shares.
share As at 31 March 2017, this is calculated as follows:
Total equity GBP1,173m
Closing number of ordinary shares 280,539,996
Net asset value per share 418p
Net current The total of cash, plus current financial assets,
assets plus other current assets, less current liabilities
as internally reported. This excludes the consolidated
structured entities and the presentation of Nomura
ICG KK and Questus Energy Pty Limited (other adjustments).
As at 31 March 2017, this is calculated as follows:
Cash GBP490.3m
Current financial assets GBP89.7m
Other current assets GBP172.9m
Current liabilities (GBP158.8m)
Net current assets GBP594.1m
Net debt Total drawn debt less unencumbered cash of the Group,
excluding the consolidated structured entities and
the presentation of Nomura ICG KK and Questus Energy
Pty Limited (other adjustments). As at 31 March 2017,
this is calculated as follows:
Total drawn debt GBP1,119.0m
Less unencumbered cash (GBP489.9m)
Net debt GBP629.1m
Operating Operating cashflow represents the cash generated from
cashflow operating activities from the Statement of Cash Flows,
adjusted for the impact of the consolidated structured
entities, the presentation of Nomura ICG KK (other
adjustments). See note 2 for a full reconciliation.
Operating Investment Company operating expenses are adjusted
expenses of for the impact of the consolidated structured entities,
the the presentation of Nomura ICG KK and Questus Energy
Investment Pty Limited (other adjustments). See note 2 for a
Company full reconciliation.
Operating Fund Management Company profit divided by Fund Management
profit Company total revenue. As at 31 March 2017 this is
margin calculated as follows:
Fund Management Company Profit GBP74.0m
Fund Management Company Total Revenue GBP179.7m
Operating profit margin 41.2%
Return on ROA Returns divided by the average balance sheet investment
assets portfolio. Returns comprise interest and dividend
income, plus net capital gains, less impairments (as
defined in this glossary) on the balance sheet investment
portfolio, i.e. excluding assets held for sale. As
at 31 March 2017 this is calculated as follows:
Interest income GBP127.2m
Dividend and other income GBP37.9m
Capital gains GBP184.6m
Net impairments (GBP48.0m)
Total returns GBP301.7m
Average balance sheet GBP1,755m
Return on assets 17.2%
Return on ROE Profit after tax (annualised when reporting a six
equity month period's results) divided by average shareholders'
funds for the period.
Third party Fees generated on fund management activities as reported
fee income in the Fund Management Company including fees generated
on consolidated structured entities which are excluded
from the IFRS consolidation position. See note 2 for
a full reconciliation.
Weighted An average fee rate across all strategies based on
average fee fee earning AUM in which the fees earned are weighted
rate based on the relative AUM.
Other definitions which have not been identified as non IFRS GAAP
alternative performance measures are as follows:
Term Short Definition
form
AIFMD The EU Alternative Investment Fund Managers Directive.
Assets under AUM Value of all funds and assets managed by the FMC.
management During the investment period third party (external)
AUM is measured on the basis of committed capital.
Once outside the investment period third party AUM
is measured on the basis of cost of investment. AUM
is presented in Euros, with non Euro denominated at
the period end closing rate.
Catch up fees Fees charged to investors who commit to a fund after
its first close. This has the impact of backdating
their commitment thereby aligning all investors in
the fund.
Closed end A fund where investor's commitments are fixed for
fund the duration of the fund and the fund has a defined
investment period.
Co-investment Co-invest A direct investment made alongside or in a fund taking
a pro-rata share of all instruments.
Collateralised CDO Investment grade security backed by a pool of non
Debt mortgage based bonds, loans and other assets.
Obligation
Collateralised CLO CLO is a type of CDO, which is backed by a portfolio
Loan of loans.
Obligation
Close A stage in fundraising whereby a fund is able to release
or draw down the capital contractually committed at
that date.
Direct Funds which invest in self-originated transactions
investment for which there is a low volume, inactive secondary
funds market.
EBITDA Earnings before interest, tax, depreciation and
amortisation.
Employee EBT Special purpose vehicle used to purchase ICG plc shares
Benefit Trust which are used to satisfy share options and awards
granted under the Group's employee share schemes.
Financial FCA Regulates conduct by both retail and wholesale financial
Conduct service firms in provision of services to consumers.
Authority
Financial FRC UK's independent regulator responsible for promoting
Reporting high quality corporate governance and reporting.
Council
Fund FMC The Group's fund management business, which sources
Management and manages investments on behalf of the IC and third
Company party funds.
HMRC HM Revenue & Customs, the UK tax authority.
IAS International Accounting Standards.
IFRS International Financial Reporting Standards as adopted
by the European Union.
Illiquid Asset classes which are not actively traded.
assets
Internal ICAAP The ICAAP allows companies to assess the level of
Capital capital that adequately supports all relevant current
Adequacy and future risks in their business.
Assessment
Process
Investment IC The Investment Company invests the Group's capital
Company in support of third party fundraising and funds the
development of new strategies.
Internal Rate IRR The annualised return received by an investor in a
of Return fund. It is calculated from cash drawn from and returned
to the investor together with the residual value of
the asset.
Key Man Certain funds have designated Key Men. The departure
of a Key Man without adequate replacement triggers
a contractual right for investors to cancel their
commitments.
Key KPI A business metric used to evaluate factors that are
performance crucial to the success of an organisation.
indicator
Key risk KRI A measure used to indicate how risky an activity is.
indicator It is an indicator of the possibility of future adverse
impact.
Liquid assets Asset classes with an active, established market in
which assets may be readily bought and sold.
Open ended A fund which remains open to new commitments and where
fund an investor's commitment may be redeemed with appropriate
notice.
Payment in PIK Also known as rolled up interest. PIK is the interest
kind accruing on a loan until maturity or refinancing,
without any cash flows until that time.
Performance Carry Share of profits that the fund manager is due once
fees it has returned the cost of investment and agreed
preferred return to investors.
Realisation The return of invested capital in the form of principal,
rolled up interest and/or capital gain.
Securitisation A form of financial structuring whereby a pool of
assets is used as security (collateral) for the issue
of new financial instruments.
Senior debt Senior debt ranks above mezzanine and equity.
Total AUM The aggregate of the third party external AUM and
the Investment Company's balance sheet.
UK Corporate The Code Sets out standards of good practice in relation to
Governance board leadership and effectiveness, remuneration,
Code accountability and relations with shareholders.
UNPRI UN Principles for Responsible Investing.
Weighted An average in which each quantity to be averaged is
average assigned a weight. These weightings determine the
relative importance of each quantity on the average.
Company timetable
Ex-dividend date 15 June 2017
Record date 16 June 2017
Last date for dividend reinvestment election 14 July 2017
AGM and Trading statement 25 July 2017
Payment of ordinary dividend 4 August 2017
Half year results announcement 14 November 2017
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Intermediate Capital Group plc via Globenewswire
http://www.icgplc.com/
(END) Dow Jones Newswires
May 25, 2017 02:00 ET (06:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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