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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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TIDMICP
ICG fundraising and capital deployment at record levels
Intermediate Capital Group plc (ICG) announces its final results for the
year ended 31 March 2018.
Operational highlights
-- Total AUM up 20% to EUR28.7bn, with EUR7.8bn of new money raised, driven
by our Senior Debt Partners strategy raising EUR4.2bn and growing
momentum across our European capital markets strategies.
-- Third party fee earning AUM up 12% in the year to EUR21.0bn.
-- Strong deployment across strategies, up 21% to EUR4.9bn. Continued focus
on investment discipline in a competitive market.
-- Portfolios continue to perform well with all funds on course to meet or
exceed applicable hurdle rates.
-- Excellent start to the new financial year. Europe Fund VII fundraising is
well advanced, with EUR2.6bn raised to date. With a target size of EUR4bn
we are scaling this strategy to reflect the level of investment
opportunities.
Financial highlights
Fund Management Company profits up 29% to GBP95.3m (2017: GBP74.0m),
with third party fee income(1) up 21%.
Investment Company profits lower at GBP103.8m (2017: GBP178.4m), due to
lower investment income.
-- Group profit before tax of GBP199.1m (2017: GBP252.4m); Adjusted Group
profit before tax(1) was GBP168.3m (2017: GBP236.2m).
-- Earnings per share of 88.8p (2017: 74.5p) are higher due to deferred tax
accounting credits; Fund Management Company 44.9p (2017: 21.6p) and
Investment Company 43.9p (2017: 52.9p).
Final ordinary dividend up 8% to 21.0 pence per share. Total ordinary
dividends in the year up 11% to 30.0 pence per share.
Commenting on the results, Benoit Durteste, CEO, said:
"This is another year of impressive performance and successful delivery
of our strategy. With AUM at a record EUR28.7bn, up 20%, and both
fundraising and capital deployment at record levels, we continue to
deliver on our commitments to investors and shareholders. This momentum
has continued into the new financial year.
The market environment continues to be supportive of both our existing
and new strategies and we see strong, ongoing demand from investors, as
well as attractive investment opportunities for our funds. Our
demonstrated ability to innovate and add new strategies to our portfolio
has increased our diversification and resilience, and has further
contributed to our credibility and attractiveness with investors. We
have become a global platform and are well placed to build on this
success."
Commenting on the results, Kevin Parry, Chairman, said:
"These results are further evidence of our status as a leading
specialist asset manager. Fundraising continues to be excellent as
investors have trusted us with their funds due to our sustained
investment outperformance. The strength of our fund management business
allows the Board to recommend an 11% increase in the full year
dividend."
Financials
31 March 2018 31 March 2017 % change
Fund Management Company profit
before tax(1) GBP95.3m GBP74.0m 29%
Investment Company profit before
tax GBP103.8m GBP178.4m (42%)
Adjusted Investment Company
profit before tax(1) GBP73.0m GBP162.2m (55%)
Adjusted Group profit before
tax(1) GBP168.3m GBP236.2m (29%)
Group profit before tax GBP199.1m GBP252.4m (21%)
Adjusted earnings per share(1) 79.3p 68.9p 15%
Earnings per share 88.8p 74.5p 19%
Dividend per share in respect of
the year 30.0p 27.0p 11%
Gearing(1) 0.77x 0.95x (19%)
Net debt(1) GBP773.5m GBP629.1m 23%
Net asset value per share(1) GBP4.66 GBP4.18 11%
(1) These are non IFRS GAAP alternative performance measures and
represent internally reported numbers excluding the impact of the
consolidation of 14 structured entities funds following the adoption of
IFRS 10. Further details can be found on page 7.
To reduce complexity, we have included the fair value movements on
derivatives (FY18: GBP6.5m; FY17: GBP1.3m) within the Adjusted
Investment Company profit. This is a change in presentation from the
prior year.
Assets under management(1)
31 March 2018 31 March 2017
Third party assets under management EUR26,534m EUR21,817m
Balance sheet portfolio EUR2,164m EUR2,008m
Total assets under management EUR28,698m EUR23,825m
Third party fee earning assets under
management EUR20,972m EUR18,742m
The following foreign exchange rates have been used.
31 March 2018 31 March 2017 31 March 2018 31 March 2017
Average Average Period end Period end
GBP:EUR 1.1354 1.1890 1.1399 1.1730
GBP:USD 1.3387 1.3020 1.4019 1.2534
Enquiries
A presentation for investors and analysts will be held at 08:30 BST
today at ICG's offices, Juxon House, 100 St Paul's Churchyard, London,
EC4M 8BU. The presentation will be also be streamed live at 8.30 BST on
our website http://www.icgam.com/shareholders/Pages/shareholders.aspx.
For those unable to dial in it will be available on demand on our
website http://www.icgam.com/shareholders/Pages/shareholders.aspx from
14.00 BST.
Analyst / Investor enquiries:
Philip Keller, CFOO, ICG +44 (0) 20 3201 7700
Ian Stanlake, Investor Relations, ICG +44 (0) 20 3201 7880
Media enquiries:
Helen Gustard, Corporate Communications, ICG
+44 (0) 20 3201 7760
Neil Bennett, Vikki Kosmalska, Maitland +44 (0) 20 7379 5151
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 29 years' history. We manage
EUR28.7bn 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 management business. The highlights of the
financial year are:
-- Fundraising (inflows): EUR7.8bn raised in total with EUR4.2bn raised for
our Senior Debt Partners strategy.
-- Fees: Weighted average fee rate of 0.86%, down from 0.91%. This is due to
the successful investment of our Senior Debt Partners strategy and growth
in our Capital Markets funds.
-- Investment: Deployment remains strong across strategies, up 21% to
EUR4.9bn.
-- Returns: All funds are on course to meet or exceed their applicable
hurdle rates.
We continue to demonstrate our ability to develop successful specialist
asset management strategies, supported by the strength of our client
relationships. Our Fund Management Company (FMC) profits have grown 56% over the last two years, and now exceed the profits of our Investment Company (IC). It is against this backdrop that we increased our fundraising target, to an average of EUR6bn per annum on a three year rolling basis, and FMC operating margin target, to above 43%, during the year. Alternative asset market growing strongly Alternative asset classes continue to be attractive to institutional investors for their enhanced returns and diversification opportunities. The characteristics that have driven the growth in alternative asset classes in recent years remain unchanged. The increasing wealth of developing nations, combined with ageing populations in developed nations, drives higher institutional assets under management. At the same time, bond yields and interest rates remain low thereby impacting the returns of traditional asset classes. We expect the conditions driving the long term attractiveness of alternative asset classes to continue and be largely unaffected by market volatility and the expected increase in Central Bank interest rates. The growing demand for alternative assets makes our markets attractive to new entrants. However, through rising complexity, greater investor expectations and expanding regulation, the market is becoming more sophisticated which increases the barriers to entry. This is accelerating the growth of established and diversified managers as investors look to streamline their number of relationships, preferring global managers with a strong track record, credibility and infrastructure. We are well positioned to take advantage of these market trends as an established global manager focused on the specialist end of alternative asset management. Strong growth and diversification in assets under management At EUR7.8bn, fundraising (inflows) was stronger than in prior periods. As 94% of our AUM is in closed end funds, our inflows are strongly dependent on when our larger funds come to market resulting in fluctuating inflows year on year. Another characteristic of our closed end strategies is the benefit of 'locked in' investor commitments and related fee streams. Current year fundraising was driven by Senior Debt Partners, our largest strategy, closing its third vintage and raising EUR4.2bn through both a co-mingled fund and segregated mandates. The increase in size of our Senior Debt Partners strategy, with assets under management up 68% since 31 March 2017, acts as a differentiator in the European direct lending market as it allows us to offer a broader range of finance solutions to mid-market companies. We upscaled this strategy to permit it to make investments in North American mid-market companies, thereby leveraging our European success with our existing US presence to broaden our direct lending strategy. We have achieved this and been able to increase the average fee rate of the strategy. Since entering the US market in 2014 we have made good progress in establishing our presence in the world's largest and most competitive market. Our North America Private Debt (mezzanine) strategy has closed $1.3bn for its second fund, including $150m from the balance sheet, of which $0.9bn was raised in the financial year. This makes the fund 71% larger than its predecessor, thereby enabling us to compete for larger deals. In addition, we closed our US based Strategic Secondaries Fund above target early in the financial year and raised a further two US CLOs. We have made steady progress in converting investor demand into investor commitments for our liquid strategies, raising EUR1.1bn in the period and increasing the profitability of these scalable strategies. We had further success in closing the third vintage of our real estate senior debt strategy and a first close for the fifth vintage of our real estate proprietary capital fund. Investing selectively in a competitive 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. In these competitive markets, the focus of our local teams and sector specialists, together with their longstanding relationships and understanding of the markets in which they operate, continues to provide deal flow and early access to investment opportunities. As a result we have seen a year of record deployment, investing EUR4.9bn across our direct investment strategies, an increase of 21% on the prior year. This means that some of our larger funds are raising successor funds earlier than expected and provides us confidence that all of our direct investment funds will deploy their available capital within their stated investment periods. We believe our origination heavy investment model is a competitive advantage. We will continue to invest appropriately in our investment, distribution and infrastructure teams to maintain this advantage. Fund returns benefiting from robust portfolio performance Liquidity in the market continues to provide a healthy environment for realisations. Where possible, our portfolio managers are seeking to capitalise on this liquidity and actively realise assets within their portfolio. This enables them to lock in performance and provides the foundations for future fundraising success. The portfolios are performing well. Despite increased market volatility, company performance and credit fundamentals remain healthy. We therefore expect the performance of our portfolios and level of realisations to remain robust in the new financial year. Dividend and capital management The Board's policy is to recommend a dividend pay-out of 80-100% of the post-tax profit of the Fund Management Company. The annual quantum will be judged in the light of contemporary trading, regulatory capital and debt rating considerations. 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. Until such time that FMC profits can cover our pay-out policy, we will continue to draw on IC profits to comply with our progressive dividend policy. In line with our policy and against the backdrop of continued delivery against our strategic objectives and strong cash generation the Board recommends increasing the final ordinary dividend for the year to 21.0 pence per share. This makes a total for the year of 30.0p (2017: 27.0p), an increase of 11% on the prior year, and above our 6-8% guidance range. The proposed full year dividend is covered 3.0 times based on total profit and equates to 110% of post-tax FMC profits. If approved by shareholders the final dividend will be paid on 7 August 2018 to those shareholders on the register as at 15 June 2018. We continue to make the dividend reinvestment plan available. We continued to actively manage the Group's sources of financing, extending debt facilities and lowering pricing where possible. During the financial year the Group's nine bilateral debt facilities were renegotiated and consolidated into a single GBP500m dual tranche revolving credit facility, with initial maturities of two and three and a half years respectively. This, combined with our long term private placement programme, secures the Group's liquidity by extending the maturity of our committed facilities, along with improved terms and a significant reduction in cost. The weighted average life of drawn debt as at 31 March 2018 was 3.6 years. Changes to the Board During the year we have recruited three Non-Executive Directors, expanding the breadth of experience on the Board and in preparation for the retirement of Peter Gibbs and Kim Wahl at this year's AGM. Following the AGM, the Board will comprise two Executive Directors and seven Non-Executive Directors, 33% of whom are female. We are committed to promoting gender balance and diversity throughout the Group, not just at Board level, but like others in our industry have more to do over a sustained period of time to make substantial progress. Outlook We have made an excellent start to the new fundraising year, including EUR2.6bn for Europe Fund VII. Europe Fund VII is on track to be significantly larger than its predecessor fund, and illustrates that where the opportunity arises we will seek to scale proven strategies to further differentiate our offering from other asset managers. With average fee rates higher and fees charged on committed capital, from today, Europe Fund VII will have an immediate impact on operating leverage. With our UK real estate strategy, strategic equity strategy and capital markets strategies also expected to raise money in the new financial year, fundraising is expected to be strong, and weighted to the first half. We will continue to look for attractive opportunities to grow and further expand our range of strategies, using our balance sheet capital as an enabler and accelerator of growth. We have recently hired a team with significant experience in both investing and managing high quality infrastructure assets to help us launch a new European infrastructure investment strategy. In addition, our real estate team are looking at three new strategies to add to their portfolio of products. These strategies are all in the early stages of development and there is no guarantee of success, as illustrated by our decision to discontinue our attempt to develop an Asia Pacific energy strategy due to a lack of attractive investment opportunities. We will continue to keep the market updated on developments at the appropriate time. It is essential to the long term growth of the business that we continue to explore new, scalable strategies. Our business model with a disciplined investment culture and focus on
closed end funds underpins earnings by long term, predictable and highly
cash generative fee income streams. This, combined with a proven fund
investment performance, permits good medium term visibility of
fundraising and fees, whilst offering protection against short term
macroeconomic uncertainty.
(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 as it differs from the IFRS financial statements on pages 24
to 37 are alternative performance measures as defined in the glossary on
page 39 . 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.
The Group's profit before tax on an IFRS basis was below last year at
GBP199.1m (2017: GBP252.4m), as detailed in the table below:
2018 2017
IFRS IFRS
Income Internally reported Adjustments as reported Internally reported Adjustments as reported
Statement GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Fee and other
operating
revenue 173.9 (16.7) 157.2 146.6 (12.5) 134.1
Finance and
dividend
income 139.0 50.8 189.8 174.4 29.8 204.2
Net gains on
investments 144.7 108.3 253.0 201.4 85.4 286.8
Total revenue 457.6 142.4 600.0 522.4 102.7 625.1
Finance costs (63.1) (103.3) (166.4) (55.2) (98.2) (153.4)
Impairments (25.2) 6.4 (18.8) (48.0) 22.7 (25.3)
Administrative
expenses (201.0) (15.0) (216.0) (183.0) (11.3) (194.3)
Other - 0.3 0.3 - 0.3 0.3
Profit before
tax 168.3 30.8 199.1 236.2 16.2 252.4
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 on pages 29 to 35. 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 14 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 the CLO 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.
The consolidated financial statements of ICG Group presented in
accordance with IFRS include the financial statements of the CLO
entities which meet the requirements for consolidation of IFRS 10
Consolidated Financial Statements. CLOs are structured as tranches of
debt, of which control is essentially determined by reference to
ownership of the most subordinated tranche of debt. This is not equity,
and hence no non-controlling interests arise on the consolidation of
these entities. Upon consolidation, all intragroup balances and
transactions, including any related intragroup profits and losses, are
eliminated in full. The difference in profit between the internally
reported and IFRS consolidated measures is solely due to a difference in
valuation assumptions applied for the asset held by ICG and the
corresponding liability held by the CLO entity.
Reclassification of income
The Group invests in its European, Asia Pacific and North American
Private Debt (mezzanine) 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, internal financial information
is presented on an asset by asset basis for all European, Asia Pacific
and North American Private Debt (mezzanine) strategies. This is
presentational only and has no impact on the profit of the Group. As
previously indicated, for the financial year beginning 1 April 2018 our
internal financial information will report our Investment Company income
at a Net Investment Returns level, thereby increasing the alignment
between our internally reported and IFRS GAAP reporting.
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 internally reported profit before tax(1) for the period was
29% lower at GBP168.3m (2017: GBP236.2m), with Fund Management Company
(FMC) profit of GBP95.3m (2017: GBP74.0m) and Investment Company (IC)
profit of GBP73.0m (2017: GBP162.2m). Our principal profit metric is FMC
profit which has benefited from the increase in assets under management,
increased fee income and a slower increase in operating costs. IC
profits have, as expected, normalised after the prior year included the
one off recycling of GBP54.4m of realised capital gains from reserves
and include the impact of the fair value charge on hedging derivatives
of GBP6.5m (2017: GBP1.3m).
Income Statement - as internally 31 March 2018 31 March 2017 Change
reported GBPm GBPm %
Fund Management Company 95.3 74.0 29%
Investment Company 73.0 162.2 (55%)
Profit before tax 168.3 236.2 (29%)
Tax 55.7 (34.9) n/a
Profit after tax 224.0 201.3 11%
The effective tax rate is lower than the standard corporation tax rate
of 19%, as detailed on page 36. This is in part due to a significant
proportion of the Investment Company's assets being invested directly
into funds based outside the United Kingdom. Investment returns from
these funds are paid to the Group in the form of non-taxable dividend
income. This outcome is in line with other UK investment companies. The
Investment Company's taxable costs can therefore be used to offset the
taxable profits of our UK Fund Management business, reducing the overall
Group charge.
In addition, there are two deferred tax accounting adjustments in the
current year which have further reduced the tax charge:
1. Finance Act 2017 widened the definition of the 'Substantial Shareholder
Exemption' rules which exempt companies from tax on the disposal of an
investment in which 10% of the shares are held and certain other
conditions met. As a result there are a small number of legacy assets,
dating from when ICG was a principal investor, that will now qualify for
SSE and be exempt from tax. As tax had previously been expected to be
paid on these balances, a deferred tax liability of GBP15.4m had been
accrued which has been released in the current year.
2. The Group has reviewed, and updated, its transfer pricing policy to
reflect current business practices and in line with the OECD's 'Base
Erosion and Profit Shifting' (BEPS) guidelines. The updated methodology
was prepared in conjunction with our corporate tax advisers and the use
of external benchmarking. Following this exercise, and in light of the
Group's ongoing low risk tax status in the UK and no open enquiries
elsewhere, the Directors reassessed the necessity for a tax risk
provision. The Directors concluded that whilst there remains an inherent
risk of challenge by UK and overseas tax authorities this was not
sufficient to maintain the provision of GBP27.1m.
Based on the internally reported profit above, the Group generated an
ROE(1) of 19.1% (2017: 18.0%) and adjusted earnings per share(1) for the
period of 79.3p (2017: 68.9p).
Net current assets(1) of GBP228.1m are down from GBP594.1m at 31 March
2017.
Fund Management Company
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 2018, the net impact of fundraising and
realisations increased third party AUM(1) by 22% to EUR26.5bn. AUM by
strategic asset class is detailed below.
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
2017 10,805 6,171 3,290 1,551 21,817
Additions 5,003 2,161 581 74 7,819
Realisations (1,547) (455) (230) (43) (2,275)
FX and other (388) (194) (132) (113) (827)
At 31 March
2018 13,873 7,683 3,509 1,469 26,534
Change % 28% 25% 7% (5%) 22%
Corporate Investments
Corporate Investments third party funds under management increased 28%
to EUR13.9bn in the year as new AUM of EUR5,003m outstripped the run off
of our older funds. Fundraising in the period related to our Senior Debt
Partners and North America Private Debt strategies.
Capital Market Investments
Capital Market Investments third party funds under management increased
25% to EUR7.7bn, with new third party AUM of EUR2,161m raised in the
year. During the year we raised three CLOs, one in Europe and two in the
US, raising a total EUR1,173m, including EUR65m committed from the
balance sheet to meet regulatory requirements, thereby further
increasing the operating leverage of this strategy. The remaining
EUR1,053m was raised across our other liquid credit funds, a substantial
increase on the EUR153m raised in the prior year and a reflection of the
investment made into these strategies.
Real Asset Investments
Real Asset Investments third party funds under management increased 7%
to EUR3.5bn, with new AUM of EUR431m raised in the year for our UK real
estate senior debt programme and a EUR150m first close for ICG Longbow
Fund V, our UK real estate partnership capital strategy. Fundraising for
this strategy is ongoing with further closes expected in the new
financial year.
Secondary Investments
Secondaries third party funds under management decreased 5% to EUR1.5bn,
with new AUM of EUR74m raised in the period for our Strategic Equity
strategy offsetting the negative impact of FX. The new AUM in the period
resulted in a final close for our Strategic Secondaries Fund at $1.1bn,
including a $200m commitment from the balance sheet, in excess of its
target size of $1bn.
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 strategies was EUR4.9bn in the year compared to EUR4.0bn in
the last financial year. The direct investment funds are investing as
follows, based on third party funds raised at 31 March 2018:
Strategic % invested at % invested at Assets in fund at Deals completed
asset class Fund 31 March 2018 31 March 2017 31 March 2018 in year
Corporate ICG Europe
Investments Fund VI 81% 40% 14 6
North
American
Corporate Private
Investments Debt Fund 85% 64% 18 6
Senior Debt
Corporate Partners
Investments III 16% n/a 4 4
Corporate Asia Pacific
Investments Fund III 77% 44% 6 2
ICG Longbow
Real Asset Real Estate
Investments Fund IV 100% 71% 32 9
Strategic
Secondary Secondaries
Investments II 54% 21% 7 4
The investment rate of our direct investment funds has resulted in fee
earning AUM increasing 12% to EUR21.0bn since 1 April 2017 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
2017 8,516 6,171 2,667 1,388 18,742
Additions 2,184 2,255 664 74 5,177
Realisations (1,275) (494) (496) (43) (2,308)
FX and other (198) (250) (69) (122) (639)
At 31 March
2018 9,227 7,682 2,766 1,297 20,972
Change % 8% 24% 4% (7%) 12%
Fee income
Third party fee income(1) of GBP167.1m was 21% 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 2018 31 March 2017 Change
Fee income GBPm GBPm %
Corporate Investments 93.0 78.2 19%
Capital Market Investments 34.9 23.7 47%
Real Asset Investments 18.5 21.9 (16%)
Secondary Investments 20.7 14.8 40%
Total third party funds 167.1 138.6 21%
IC management fee 17.8 18.1 (2%)
Total 184.9 156.7 18%
Third party fees include GBP23.1m of performance fees (2017: GBP9.8m),
of which GBP17.2m (2017: GBP8.5m) related to Corporate Investments as
the realisation of assets from older vintages increase the likelihood
that performance conditions will be met. The remaining GBP5.9m (2017:
GBP1.3m) primarily related to our Alternative Credit and Strategic
Equity strategies. Performance fees are an integral recurring part of
the fee income profile and profitability stream of the Group.
The weighted average fee rate(1), excluding performance fees, across our
fee earning AUM is 0.86% (2017: 0.91%). This slight decrease is due to
the successful investment of our Senior Debt Partners and growth in our
Capital Markets funds during the year.
31 March 2018 31 March 2017
Weighted average fee rates GBPm GBPm
Corporate Investments 1.00% 1.04%
Capital Market Investments 0.55% 0.53%
Real Asset Investments 0.89% 0.95%
Secondary Investments 1.40% 1.29%
Total third party funds 0.86% 0.91%
Dividend income
Dividend receipts(1) of GBP25.2m (2017: GBP23.2m) are higher than prior
year due to the increased number and improved performance of CLOs.
Operating expenses
Operating expenses of the FMC were GBP114.8m (2017: GBP105.7m),
including salaries and incentive scheme costs.
Salaries were GBP42.1m (2017: GBP39.0m) as average headcount increased
6% from 238 to 252. This increase is directly related to investing in
our capital markets and senior debt strategies. Other administrative
costs have decreased to GBP31.9m (2017: GBP32.9m) as the amortisation
cost of historic placement fees reduces.
The FMC operating margin(1) was 45.4% up from 41.2% in the prior year,
as a result of average fee earning AUM increasing 14% to EUR19.1bn for
the year thereby increasing the operating leverage of our existing
strategies.
Investment Company
Balance sheet investments
The balance sheet investment portfolio(1) increased 11% in the year to
GBP1,898.5m at 31 March 2018, as illustrated in the investment portfolio
bridge below:
GBPm
At 1 April 2017 1,711.6
New and follow on investments 572.4
Net transfer from current assets 75.8
Accrued interest income 66.8
Realisations (571.3)
Impairments (25.2)
Fair value gains 135.0
FX and other (66.6)
At 31 March 2018 1,898.5
Realisations comprise the return of GBP375.6m of principal, the
crystallisation of GBP37.7m of rolled up interest and GBP158.0m of
realised capital gains.
In the period GBP288.0m was invested alongside our Corporate Investments
strategies for new and follow on investments. Of the remaining GBP284.4m,
GBP118.2m was invested in CLOs in accordance with regulatory
requirements, GBP102.3m in our European liquid strategies and GBP55.6m
in our Strategic Equity strategy.
The Sterling value of the portfolio decreased by GBP55.0m due to FX
movements. The portfolio is 43% Euro denominated, 30% US dollar
denominated and 17% Sterling denominated. 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
Return 31 March 2018 % of 31 March 2017
profile GBPm total GBPm % of total
Corporate
Investments 15-20% 1,257 66% 1,120 66%
Capital
Market
Investments 5-10% 370 19% 333 19%
Real Asset
Investments c10% 111 6% 107 6%
Secondary
Investments 15-20% 161 9% 152 9%
Total
balance
sheet
portfolio 1,899 100% 1,712 100%
In addition, GBP107.2m (2017: GBP89.7m) 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 2018, these assets primarily related
to our Capital Markets strategies.
Net investment returns
Net investment returns(1) of GBP240.1m (2017: GBP312.8m) represent the
total return generated from the balance sheet portfolio in the year,
analysed as follows:
31 March 2018 31 March 2017 Change
Investment returns GBPm GBPm %
Interest income 113.2 144.7 (22%)
Other income 7.4 14.7 (50%)
Capital gains 144.7 201.4 (28%)
Investment income 265.3 360.8 (26%)
Asset impairments (25.2) (48.0) (48%)
Net investment returns 240.1 312.8 (23%)
Interest income(1) was below the prior year due to the average interest
bearing portfolio weighted more towards lower risk and lower return
assets. Cash interest income has decreased to 37% (2017: 38%) of the
total.
Capital gains(1) were, as expected, lower than the prior financial year
when the income statement benefited from the recycling of GBP54.4m of
capital gains from reserves on realisation of the underlying assets.
Excluding this one off item, capital gains were in line with the prior
year as the valuation of the portfolio benefited from the modest
increase in global stock markets over the financial year and the
improved performance of a number of portfolio companies.
Net realised capital gains(1) in the period were GBP159.8m (2017:
GBP235.3m), of which GBP154.7m (2017: GBP150.9m) had previously been
recognised as unrealised gains in the P&L with the remaining GBP5.1m
(2017: GBP84.4m) recognised in the current year, including the recycling
from reserves. Fair valuing the equity and warrants gave rise to a
further GBP123.7m (2017: GBP112.5m) of unrealised gains in the current
period. Of this, GBP139.6m (2017: GBP117.0m) is recognised in the income
statement and a GBP15.9m unrealised loss in reserves (2017: GBP4.5m).
During the period we took asset specific impairments against our weaker
assets of GBP32.6m compared to GBP57.6m in the last financial year. With
write backs of GBP7.4m (2017: GBP9.6m), net asset impairments(1) were
GBP25.2m (2017: GBP48.0m). As previously indicated, for the financial
year beginning 1 April 2018 we will report our Investment Company income
at a Net Investment Returns level, thereby removing asset specific
impairments as a key performance indicator. This will align our
reporting with that of our third party clients and reflects the total
performance of our investments.
Interest expense
Interest expense(1) of GBP56.6m was GBP2.7m higher than the prior year
(2017: GBP53.9m), due to the increase in private placement debt
borrowings.
Operating expenses
Operating expenses(1) of the IC amounted to GBP86.2m (2017: GBP77.3m),
of which incentive scheme costs of GBP64.0m (2017: GBP54.2m) were the
largest component. The GBP9.8m increase is due to higher bonuses payable
as a direct result of realisations. Other staff and administrative costs
were GBP22.2m compared to GBP23.1m last year, a GBP0.9m decrease.
Group cash flow and debt
The balance sheet remains strong, with GBP729.7m of available cash and
debt facilities at 31 March 2018. The movement in the Group's unutilised
cash and debt facilities during the period is detailed as follows:
GBPm
Headroom at 31 March 2017 970.8
Bank facilities matured (42.6)
Movement in cash (242.3)
Movement in drawn debt 97.9
FX (54.1)
Headroom at 31 March 2018 729.7
Total drawn debt at 31 March 2018 was GBP1,021m compared to GBP1,119m at
31 March 2017, with unencumbered cash of GBP248m compared to GBP490m at
31 March 2017. The movement in unencumbered cash in the year of
GBP242.3m reflects that this has been a strong year for deployment for
our funds and balance sheet, compared with the prior year which saw a
high level of realisations.
Capital position
Shareholders' funds increased by GBP145.0m to GBP1,317.6m (31 March
2017: GBP1,172.6m), as the retained profits in the period were offset by
the payment of the ordinary dividend. Total debt to shareholders' funds
(gearing) as at 31 March 2018 decreased to 0.77x from 0.95x at 31 March
2017. Access to permanent capital enables us to accelerate growth by
investing in the development of new scalable strategies. With a number
of new ideas in the pipeline we expect gearing to increase during the
new financial year.
Principal risks and uncertainties
Effective risk management provides the framework within which we can
successfully delivery 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 appetite of the Group,
defining and monitoring the risk culture and establishing and
maintaining appropriate systems and controls to manage key risks. 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 to manage the
principal risks faced by the Group.
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 an analysis of individual processes and procedures
(bottom up review). The principal risks to the Group are updated at
least annually and recommended to the Board by the Risk Committee.
The top down review focuses on identifying those principal risks that
could threaten the business model, future performance, capital or
liquidity of the business. In identifying these risks, consideration is
given to principal risks identified by other asset managers in the
sector, relevant regulatory expectations and external developments. This
review also considers any relevant 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, updated and challenged by the Chief Risk Officer
(CRO) and the Operational Risk Group (ORG). In addition, the Group's
Investment Committees, Commercial and Operational steering committees
and Performance Review meetings provide oversight of risks related to
the activities of the Group. This process ensures risk management
responsibilities are embedded in the business' first line operations.
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. Supplier Management was added as a principal risk of
the Group during the year.
Emerging risks are regularly considered to assess any potential impact
on the Group and to determine whether any actions are required. Emerging
risks include those related to regulatory/legislative change and
macroeconomic and political change, which in the current year have
included the ongoing developments in respect of 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 risks - 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.
Relative willingness to tolerate risk (Risk appetite
The Board acknowledges and recognises that in the normal course of
business the Group is exposed to risk and that it is willing to accept a
level of risk in managing the business to achieve its strategic
priorities. As part of its risk management framework, the Board sets
the risk appetite in relation to each principal risk and monitors this
via key agreed risk indicators and risk tolerances. Where a risk is
approaching or is outside the tolerance set, the Board will consider the
appropriateness of actions being taken to manage the risk.
Principal Risk Impact Key Risk Indicator Key Controls And Mitigation Movement In The Year Focus For 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, During the year this risk has remained elevated due This risk will remain a key area of focus due to the
external change (including macroeconomic, political opportunity to deploy capital and impair the ability Deterioration in outlook for investment valuations reviewing the latest developments in the Group's key to ongoing political uncertainty. political uncertainties in the UK and as part of the
and/or competitive impact) of the Group to effectively manage its portfolios, or loan impairment rates. markets. To help mitigate the risk associated with Brexit ICG Brexit negotiations.
reducing the value of future management fees, investment The Investment Committees receive ongoing detailed has received regulatory approval and established a In addition we remain vigilant to the potential impact
income and performance fees. and specific market reviews for each investment, including Luxembourg licensed entity to ensure the Group maintains of global trade wars, economic uncertainties e.g.
Adverse macroeconomic conditions could also reduce valuations and impairments. access to European Union investors. inflation expectations and the withdrawal of liquidity.
demand from investors for the Group's funds or create The Board receives regular updates on external political/economic
more opportunities for certain asset classes managed developments.
by the Group. The business model is based on long term investment
in illiquid funds, therefore fee streams are 'locked-in'.
This provides some mitigation against market downturn.
2 Failure to maintain acceptable relative investment Failure to maintain acceptable relative performance Performance of closed end funds compared to performance The Group has disciplined investment policies, and There have been no material changes in the Group's Maintaining a robust investment process and investment
performance in the funds may result in a failure to raise new hurdles. all investments are selected and regularly monitored investment markets during the year which would lead discipline.
funds, reducing the Group's long term income and ability Performance of capital market strategies compared by the Group's Investment Committees. Rigorous credit the Board to consider that this risk has changed.
to invest in future growth. Investors in open ended to benchmark. research and procedures are applied both before and Investment performance remains positive across all
funds may reduce or cancel their commitments, reducing Performance of CLOs including the ability to pay dividends during the period of investment. The Group limits key asset classes.
AUM and fund management fees. to equity holders. the extent of credit and market risk by diversifying
In the short term, fund underperformance may result Deterioration in outlook for investment valuations its portfolio assets by sector, size and geography.
in lower performance fees in the FMC. For the IC this or loan impairment rates. Oversight and routine contact with the major portfolio
may result in a lower return on assets as the IC is investments supports the delivery of both capital
exposed to credit risk through its co-investments preservation and anticipated returns. ICG's investments
with, and its investments in, funds. via its balance sheet are also regularly monitored.
3 Failure to raise new third party funds A failure to raise new funds would reduce the Group's Forecast fund inflows. The Group has built dedicated fundraising and scalable Investor sentiment remains supportive of the Group's Maintaining discipline on fees and terms.
long term income and ability to launch new strategies. infrastructure teams to grow and diversify its institutional strategies but the fundraising environment is highly Diversification of risk by selectively expanding the
client base by geography and type. competitive. portfolio of investment strategies.
The Group has expanded its product portfolio to address During the year the Group has seen positive momentum Continuing to grow existing and new strategies.
a range of investor requirements and continues to and delivered above its target for raising third party
build a strong product pipeline. funds.
The Group announced in January 2018 that it has raised
its fundraising target to an average of EUR6bn a year
from EUR4bn.
4 Failure to deploy committed capital in a timely Failure to deploy capital reduces the value of future The proportion of direct investment funds behind their The rate of investment is kept under review by the In a highly competitive environment, capital deployment Maintaining investment discipline and local presence.
manner management fees, investment income and performance investment pace. Investment Committees and senior management to ensure for the larger strategies remains ahead of plan. Closely monitoring external market developments and
fees. There is also a negative impact on investment acceptable levels are maintained in current market opportunities.
performance and the ability to raise new funds. conditions.
Market, Credit and Liquidity Risks
5 Loss as a result of adverse market fluctuations Volatility in currency and interest rates leads to Within Treasury Policy hedging thresholds and no material The Group has a policy which seeks to ensure that During the year the Group has updated and applied Market volatility as a result of political/economic
arising primarily from exposure to interest rates changes in the value of the assets and liabilities breach of interest rate covenant. any non Sterling income, expenditure, assets and liabilities its hedging policy consistently. uncertainties, including the developments relating
and foreign exchange rates of the Group and, to the extent that these are unhedged, are appropriately hedged and that the residual exposure to Brexit.
will impact on the financial performance of the Group. to market risk is managed to minimise short term volatility Continued focus on enhancing FX systems and controls.
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.
Portfolio credit risk is included in Principal Risk
2 above.
6 Loss as a result of exposure to a failed counterparty The Group uses derivatives to hedge market risk on Counterparty exposure above the Treasury Policy limits. The Group has a policy which seeks to ensure that During the year the Group has updated and 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.
7 Failure to meet the Group's financial obligations An ongoing failure to refinance its liabilities could Forecast breach of financing principles. The Group has a policy which seeks to ensure that ICG's committed bank facilities being re-negotiated Continued focus on balance sheet efficiency
as they fall due result in the Group failing to meet its payment obligations debt funding is obtained from diversified sources to extend the maturity reduce cost and minimise refinancing Regulatory capital requirements.
as they fall due. and that the repayment profile is managed to minimise risks.
As a result the Group would not be a going concern. material repayment events. The profile of the debt
facilities available to the Group is reviewed frequently
by the Treasury Committee.
Operational Risks
8 Loss of a 'key Person' and inability to retain/recruit Breach of any 'Key Person' clause could result in Loss of a Key Person on a material fund. The Group rewards its investment professionals and There was no significant impact in the year as a result Managing the impact of the UK's departure from the
into key roles the Group having to stop making investments for the Loss of key employee without appropriate/timely internal other key employees in line with market practice. of the loss of any employee. However staff attrition European Union on our workforce.
relevant fund or may impair the ability of the Group succession. Senior investment professionals typically receive has increased and the recruitment market remains challenging Continued focus on succession planning and managing
to raise new funds if not resolved in a timely manner. Employee engagement survey feedback. long term incentives and are able to participate in for talent. 'key person' fund clause requirements.
Loss of a key employee to the Group's fund management Recruitment and retention rates. carried interest. The Group periodically engages external The planned change of the Chief Executive Officer
business or a critical infrastructure role could impair consultants to benchmark the rewards offered by the was completed smoothly after the AGM in July 2017
the Group's ability to deliver its strategic objectives Group to ensure they remain attractive and competitive. with the internal successor taking over. For a period
as planned if that role is not filled in a timely The feedback from the employee engagement survey is of time the departing Chief Executive continued to
manner. also considered. be a 'key person' on a few funds. This arrangement
The Group has succession plans in place for key employees. ended before 31 March 2018.
These are reviewed by the Nominations and Governance
Committee of 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.
9 Negative financial or reputational impact arising The Group's reputation, ability to raise new funds Number and significance of any regulatory or legislative The Group has a governance structure in place, supported During the year the Group has continued to enhance General Data Protection Regulation (GDPR), Capital
from regulatory or legislative failing and operate its fund management business would be breaches. by a risk framework that allows for the identification, its processes and controls in order to remain compliant Requirements Directive V (CRD V) and the Senior Managers
impaired as a result of a material regulatory or legislative Identification and delivery of all material regulatory/legislative control and mitigation of material regulatory/legislative with current and expected legislation. and Certification Regime (SMCR) will remain key areas
failing. change. risks resulting from the geographical and product Changes resulting from MiFID II have been implemented of focus.
Adverse regulatory change could impact the ability diversity of the Group. The adequacy of the systems where relevant and we continue to monitor/implement
of the Group to deliver its strategy in areas such and controls the Group has in place to comply with future proposed changes such as GDPR and SMCR.
as people risk, deploying capital, raising new AUM. 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.
Horizon scanning for relevant regulatory/legislative
change is a key part of the Legal and Compliance process
and external advisors are used to support this.
10 Technology/ information security inadequate or The Group's ability to deliver on its strategic objectives Any material breach, attempted breach or severe disruption Application of the Group's information security policies The ongoing evolution of external threats has resulted The implementation of the GDPR requirements, cyber
fails to adapt to changing business requirements and/or relies on due to systems/data security failure. is supported by a governance structure and a risk in an increase in risk to the Group. In response, security and the continued enhancements to business
external threats technology and information security which adapts to Any material loss or reputational damage arising from framework that allows for the identification, control the Group has continued to improve its systems and continuity planning and disaster recovery processes
changing business demands and external threats. Failure external threats. and mitigation of technology risks. The adequacy of controls to identify and manage technology and information remain key areas of focus.
to deliver an appropriate technology platform may Service availability. the systems and controls the Group has in place to security risks. .
impact the Group's reputation, and its ability to mitigate the technology risks is continuously monitored During the year there continued to be a high level
raise new funds and operate its fund management business. and subject to regular testing. The effectiveness of focus on cyber security and disaster recovery.
of the framework is periodically assessed.
11 Loss or missed opportunities arising from failure 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 There were no significant business process failures Focus continues on enhancing processes to support
of key business processes, including valuations, financial its fund management business would be impaired as business disruption, financial or reputational damage. business processes are identified, documented and or material control weaknesses identified during the the growth of the business. Particular focus will
reporting and external reporting a result of the failure of key business processes. Increased incidents of processing failures or delays, monitored. The effectiveness and efficiency of the year. The volume of business change remains high. be given to enhancements to the processes for the
Moreover, failure to maintain adequate processes and or over reliance on detective, higher level monitoring control framework for key business processes are subject open-ended strategies.
internal controls over financial reporting and related or audit validation controls. to periodic review by management, the Chief Risk Officer, Specific enhancements to be introduced to the liquid
activities could result in significant losses and/or and Internal Audit, and corresponding oversight by credit funds business area.
regulatory penalties or other claims. the Risk and Audit Committees of the Board.
12 Loss or missed opportunities arising from a failure The Group's ability to raise new funds and operate Any failure of business process resulting in significant Control procedures including appropriate due diligence, There were no significant business process failures Oversight of third party service providers.
to adequately select/manage key third party suppliers. its fund management business would be impaired as business disruption, financial or reputational damage. monitoring and oversight are in place to ensure supplier during the year.
a result of the failure to select/manage key third management is effectively carried out.
party suppliers.
Responsibility statement
The responsibility statement below has been prepared in connection with
the Company's full annual report for the year ending 31 March 2018.
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
21 May 2018 and is signed on its behalf by:
Benoit Durteste Philip Keller
CEO CFOO
Consolidated Income Statement
For the year ended 31 March 2018
Year ended Year ended
31 March 2018 31 March 2017
GBPm GBPm
Fee and other operating income 157.2 134.1
Finance and dividend income 189.8 204.2
Net gains on investments 253.0 286.8
Total revenue 600.0 625.1
Finance costs (166.4) (153.4)
Impairments (18.8) (25.3)
Administrative expenses (216.0) (194.3)
Share of results of joint ventures accounted for using
equity method 0.3 0.3
Profit before tax 199.1 252.4
Tax credit/(charge) 51.7 (34.2)
Profit for the year 250.8 218.2
Attributable to
Equity holders of the parent 251.0 217.8
Non controlling interests (0.2) 0.4
250.8 218.2
Earnings per share 88.8p 74.5p
Diluted earnings per share 88.8p 74.5p
All activities represent continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018
Year ended Year ended
31 March 2018 31 March 2017
GBPm GBPm
Profit for the year 250.8 218.2
Items that may be reclassified subsequently to profit
or loss
Available for sale financial assets:
- Losses arising in the year (14.6) (2.6)
- Reclassification adjustment for net losses/(gains)
recycled to profit 4.6 (45.7)
- Tax on items taken directly to or transferred from
equity 3.0 9.1
(7.0) (39.2)
Items that will not be reclassified subsequently to
profit or loss
Exchange differences on translation of foreign
operations (19.6) 23.0
Tax on items taken directly to or transferred from
equity 4.9 (2.8)
(14.7) 20.2
Total comprehensive income for the year 229.1 199.2
Consolidated Statement of Financial Position
As at 31 March 2018
31 March 2018 31 March 2017
GBPm GBPm
Non current assets
Intangible assets 18.0 20.7
Property, plant and equipment 10.5 9.2
Investment in joint venture accounted for under the
equity method 1.7 1.3
Financial assets measured at fair value 5,068.5 4,667.4
Financial assets measured at amortised cost 171.1 218.0
Derivative financial assets 3.2 6.4
Deferred tax asset - 0.3
5,273.0 4,923.3
Current assets
Trade and other receivables 312.1 208.3
Financial assets: loans and investments 107.2 89.7
Derivative financial assets 80.0 40.3
Current tax debtor 13.4 33.7
Cash and cash equivalents 520.7 780.9
1,033.4 1,152.9
Total assets 6,306.4 6,076.2
Equity and reserves
Called up share capital 77.2 77.1
Share premium account 179.4 179.0
Other reserves 6.2 20.1
Retained earnings 1,054.8 896.4
Equity attributable to owners of the Company 1,317.6 1,172.6
Non controlling interest 0.5 0.7
Total equity 1,318.1 1,173.3
Non current liabilities
Provisions 1.2 1.3
4,149.6
Financial liabilities 149.6 4,304.9
Derivative financial liabilities 76.8 33.6
Deferred tax liabilities 8.9 77.0
4,236.5 4,416.8
Current liabilities
Provisions 0.5 0.7
Trade and other payables 555.3 464.8
Financial liabilities 183.7 -
Current tax creditor 10.8 14.0
Derivative financial liabilities 1.5 6.6
751.8 486.1
Total liabilities 4,988.3 4,902.9
Total equity and liabilities 6,306.4 6,076.2
Consolidated Statement of Cash Flows
For the year ended 31 March 2018
Year ended Year ended
31 March 2018 31 March 2017
GBPm GBPm
Operating activities
Interest received 191.1 232.4
Fees received 139.1 140.4
Dividends received 154.5 158.5
Payments to suppliers and employees (190.3) (135.9)
Proceeds from sale of current financial assets 276.8 374.6
Purchase of current financial assets (368.0) (220.9)
Purchase of loans and investments (3,914.3) (2,344.6)
Proceeds from sale of loans and investments - principal 3,378.6 1,867.4
Recoveries on previously impaired assets 2.4 -
Net cash outflow from derivative contracts (28.7) (150.2)
Cash (used in)/generated from operations (358.8) (78.3)
Taxes received/(paid) 12.5 (7.7)
Net cash (used in)/generated from operating activities (346.3) (86.0)
Investing activities
Purchase of property, plant and equipment (4.2) (4.1)
Net cash used in investing activities (4.2) (4.1)
Financing activities
Dividends paid (80.7) (270.9)
Interest paid (188.5) (149.4)
Increase in long term borrowings 1,578.3 1,931.1
Repayment of long term borrowings (1,208.9) (807.9)
Purchase of remaining 49% of Longbow Real Estate Capital
LLP - (41.7)
Purchase of own shares (26.2) (23.6)
Proceeds on issue of shares 0.6 1.5
Net cash generated from financing activities 74.6 639.1
Net (decrease)/increase in cash (275.9) 549.0
Cash and cash equivalents at beginning of year 780.9 182.5
Effect of foreign exchange rate changes 15.7 49.4
Net cash and cash equivalents at end of year 520.7 780.9
Consolidated Statement of Changes in Equity
For the year ended 31 March 2018
Capital Available
Share Share redemption Share based for sale Own Retained Total
capital premium reserve payments reserve reserve shares Foreign currency translation reserve earnings Total Non controlling interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April 2017 77.1 179.0 5.0 53.8 12.7 (82.2) 30.8 896.4 1,172.6 0.7 1,173.3
Profit for the year - - - - - - - 251.0 251.0 (0.2) 250.8
Available for sale financial assets - - - - (10.0) - - - (10.0) - (10.0)
Exchange differences on translation of foreign
operations - - - - - - (19.6) - (19.6) - (19.6)
Tax on items taken directly to or transferred from
equity - - - 4.9 3.0 - - - 7.9 - 7.9
Total comprehensive income/(expense) for the year - - - 4.9 (7.0) - (19.6) 251.0 229.3 (0.2) 229.1
Own shares acquired in the year - - - - - (26.2) - - (26.2) - (26.2)
Options/awards exercised 0.1 0.4 - (18.9) - 30.8 - (11.9) 0.5 - 0.5
Credit for equity settled share schemes - - - 22.1 - - - - 22.1 - 22.1
Dividends paid - - - - - - - (80.7) (80.7) - (80.7)
Balance at 31 March 2018 77.2 179.4 5.0 61.9 5.7 (77.6) 11.2 1,054.8 1,317.6 0.5 1,318.1
Capital Available
Share Share redemption Share based for sale Own Retained Total
capital premium reserve payments reserve reserve shares Foreign currency translation reserve earnings Total Non controlling interest equity
GBPm 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) 7.8 955.3 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 (expense)/income for the year - - - (2.8) (39.2) - 23.0 217.8 198.8 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) 30.8 896.4 1,172.6 0.7 1,173.3
Notes to the Financial Statements
For the year ended 31 March 2018
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
2018 or 2017. The financial information for the years ended 31 March
2018 and 2017 is derived from the statutory accounts for those years.
The statutory accounts for 2017 have been delivered to the Registrar of
Companies and those for 2018 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 2018.
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 Directors.
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.
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 2018
Analysis of income and profit before tax as internally reported
Total
Year ended 31 Corporate Investments Capital Market Investments Real Asset Investments Secondary Investments FMC IC Total
March 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External fee
income 93.0 34.9 18.5 20.7 167.1 - 167.1
Inter-segmental
fee 11.9 3.2 1.3 1.4 17.8 (17.8) -
Fund management
fee income 104.9 38.1 19.8 22.1 184.9 (17.8) 167.1
Other operating
income - 6.8 6.8
Gains on
investments - 144.7 144.7
Interest income - 113.2 113.2
Dividend income 25.2 0.6 25.8
210.1 247.5 457.6
Interest expense - (56.6) (56.6)
Net fair value
loss on
derivatives - (6.5) (6.5)
Impairment - (25.2) (25.2)
Staff costs (42.1) (11.1) (53.2)
Incentive scheme
costs (40.8) (64.0) (104.8)
Other
administrative
expenses (31.9) (11.1) (43.0)
Profit before tax 95.3 73.0 168.3
Total
Year ended 31 Corporate Investments Capital 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
Notes to the Financial Statements continued
For the year ended 31 March 2018
Reconciliation of financial statements reported to the Executive
Directors 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 American
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. Also included within this adjustment is 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.
Consolidated Income Statement
Consolidated structured
Year ended Internally reported Reclass of interest to dividends and gains entities Financial statements
31 March 2018 GBPm GBPm GBPm GBPm
- Fund management fee income 167.1 - (19.6) 147.5
- Other operating income 6.8 - 2.9 9.7
Fee and other operating income 173.9 - (16.7) 157.2
- Interest income 113.2 (82.8) 156.3 186.7
- Dividend income 25.8 0.8 (23.5) 3.1
Finance and dividend income 139.0 (82.0) 132.8 189.8
Gains on investments 144.7 75.6 32.7 253.0
Total Revenue 457.6 (6.4) 148.8 600.0
- Interest expense (56.6) - (104.2) (160.8)
- Net fair value (loss)/gain on derivatives (6.5) - 0.9 (5.6)
Finance costs (63.1) - (103.3) (166.4)
Impairment (25.2) 6.4 - (18.8)
- Staff costs (53.2) - 2.1 (51.1)
- Incentive scheme costs (104.8) - - (104.8)
- Other administrative expenses (43.0) - (17.1) (60.1)
Administrative expenses (201.0) - (15.0) (216.0)
Share of results of joint venture accounted for using
equity method - - 0.3 0.3
Profit before tax 168.3 - 30.8 199.1
Tax credit/(charge) 55.7 - (4.0) 51.7
Profit after tax 224.0 - 26.8 250.8
Notes to the Financial Statements continued
For the year ended 31 March 2018
Consolidated Income Statement
Consolidated structured
Year ended Internally reported Reclass of interest to dividends and gains entities Financial statements
31 March 2017 GBPm GBPm GBPm GBPm
- Fund management fee income 138.6 - (15.9) 122.7
- Other operating income 8.0 - 3.4 11.4
Fee and other operating income 146.6 - (12.5) 134.1
- Interest income 144.5 (77.3) 130.6 197.8
- Dividend income 29.9 3.3 (26.8) 6.4
Finance and dividend income 174.4 (74.0) 103.8 204.2
Gains on investments 201.4 51.3 34.1 286.8
Total revenue 522.4 (22.7) 125.4 625.1
- Interest expense (53.9) - (99.0) (152.9)
- Net fair value (loss)/gain on derivatives (1.3) - 0.8 (0.5)
Finance costs (55.2) - (98.2) (153.4)
Impairment (48.0) 22.7 - (25.3)
- Staff costs (53.4) - 2.1 (51.3)
- Incentive scheme costs (88.0) - - (88.0)
- Other administrative expenses (41.6) - (13.4) (55.0)
Administrative expenses (183.0) - (11.3) (194.3)
Share of results of joint venture accounted for using
equity method - - 0.3 0.3
Profit before tax 236.2 - 16.2 252.4
Tax credit/(charge) (34.9) - 0.7 (34.2)
Profit after tax 201.3 - 16.9 218.2
Notes to the Financial Statements continued
For the year ended 31 March 2018
Consolidated Statement of Financial Position
31 March Internally reported Consolidated structured entities Financial Statements
2018 GBPm GBPm GBPm
Non current
financial
assets 1,898.5 3,342.8 5,241.3
Other non
current
assets 28.8 2.9 31.7
Cash 248.0 272.7 520.7
Current
financial
assets 107.2 - 107.2
Other current
assets 244.7 160.8 405.5
Total assets 2,527.2 3,779.2 6,306.4
Non current
financial
liabilities 840.5 3,309.1 4,149.6
Other non
current
liabilities 81.9 5.0 86.9
Current
financial
liabilities 183.7 - 183.7
Other current
liabilities 188.1 380.0 568.1
Total
liabilities 1,294.2 3,694.1 4,988.3
Equity 1,233.0 85.1 1,318.1
Total equity
and
liabilities 2,527.2 3,779.2 6,306.4
31 March Internally reported Reclass of interest to gains Consolidated structured entities Financial Statements
2017 GBPm GBPm GBPm GBPm
Non current
financial
assets 1,711.6 1.1 3,174.0 4,886.7
Other non
current
assets 36.6 - - 36.6
Cash 490.3 - 290.6 780.9
Current
financial
assets 89.7 - - 89.7
Other
current
assets 172.9 (1.1) 110.5 282.3
Total assets 2,501.1 - 3,575.1 6,076.2
Non current
financial
liabilities 1,121.5 - 3,183.4 4,304.9
Other non
current
liabilities 106.5 - 5.4 111.9
Other
current
liabilities 158.8 - 327.3 486.1
Total
liabilities 1,386.8 - 3,516.1 4,902.9
Equity 1,114.3 - 59.0 1,173.3
Total equity
and
liabilities 2,501.1 - 3,575.1 6,076.2
Notes to the Financial Statements continued
For the year ended 31 March 2018
Consolidated Statement of Cash Flows
Internally
reported Reclass of dividends from realisations Consolidated structured entities Financial Statements
31 March 2018 GBPm GBPm GBPm GBPm
Interest received 73.0 (26.9) 145.0 191.1
Fees received 151.1 (0.6) (11.4) 139.1
Dividends received 25.8 152.3 (23.6) 154.5
Payments to suppliers
and employees (172.1) - (18.2) (190.3)
Proceeds from sale of
current financial
assets 276.8 - - 276.8
Purchase of current
financial assets (368.0) - - (368.0)
Purchase of loans and
investments (572.4) - (3,341.9) (3,914.3)
Proceeds from sale of
loans and
investments 534.8 (124.8) 2,968.6 3,378.6
Recoveries on
previously impaired
assets 2.4 - - 2.4
Net cash flow from
derivatives (29.2) - 0.5 (28.7)
Cash used in
operating
activities (77.8) - (281.0) (358.8)
Taxes received 12.5 - - 12.5
Net cash used in
operating
activities (65.3) - (281.0) (346.3)
Net cash used in
investing
activities (4.2) - - (4.2)
Dividends paid (80.7) - - (80.7)
Interest paid (54.7) - (133.8) (188.5)
Increase in long term
borrowings (45.8) - 1,624.1 1,578.3
Repayment of long
term borrowings - - (1,208.9) (1,208.9)
Purchase of own
shares (26.2) - - (26.2)
Proceeds on issue of
shares 0.6 - - 0.6
Net cash (used
in)/generated from
financing
activities (206.8) - 281.4 74.6
Net
(decrease)/increase
in cash (276.3) - 0.4 (275.9)
Cash and cash
equivalents at
beginning of year 490.3 - 290.6 780.9
Effect of foreign
exchange rate
changes 33.9 - (18.2) 15.7
Cash and cash
equivalent at end of
year 247.9 - 272.8 520.7
Notes to the Financial Statements continued
For the year ended 31 March 2018
Internally
reported Reclass of dividends from realisations Consolidated structured entities Financial Statements
31 March 2017 GBPm GBPm GBPm GBPm
Interest received 142.3 (36.7) 126.8 232.4
Fees received 148.9 - (8.5) 140.4
Dividends received 29.8 159.1 (30.4) 158.5
Payments to suppliers and employees (115.0) - (20.9) (135.9)
Proceeds from sale of current financial assets 374.6 - - 374.6
Purchase of current financial assets (220.9) - - (220.9)
Purchase of loans and investments (366.0) - (1,978.6) (2,344.6)
Proceeds from sale of loans and investments 716.5 (122.4) 1,273.3 1,867.4
Net cash outflow from derivative contracts (132.1) - (18.1) (150.2)
Cash generated from/(used in) operating activities 578.1 - (656.4) (78.3)
Taxes paid (7.7) - - (7.7)
Net cash generated from/(used in) operating activities 570.4 - (656.4) (86.0)
Net cash used in investing activities (4.1) - - (4.1)
Dividends paid (270.9) - - (270.9)
Interest paid (53.0) - (96.4) (149.4)
Increase in long term borrowings 523.4 - 1,407.7 1,931.1
Repayment of long term borrowings (342.0) - (465.9) (807.9)
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 (206.3) - 845.4 639.1
Net increase in cash 360.0 - 189.0 549.0
Cash and cash equivalent at beginning of year 112.7 - 69.8 182.5
FX impact on cash 17.6 - 31.8 49.4
Cash and cash equivalent at end of year 490.3 - 290.6 780.9
1. Dividends
The proposed final ordinary dividend for the year ended 31 March 2018 is
21.0 pence per share (2017: 19.5 pence per share), which will amount to
GBP59.4m (2017: GBP54.7m). The total dividend in respect of the year
ended 31 March 2018 was 30.0 pence per share (2017: 27.0 pence per
share)
Of the GBP80.7m (2017: GBP70.9m) of ordinary dividends paid during the
year, GBP1.4m were reinvested under the dividend reinvestment plan that
was offered to shareholders (2017: GBP1.2m). A special dividend of
GBP200m was paid in the prior year, which amounted to 63.4 pence per
share.
Notes to the Financial Statements continued
For the year ended 31 March 2018
1. Earnings per share
Year ended Year ended
31 March 2018 31 March 2017
GBPm GBPm
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to the equity
holders of the Parent 251.0 217.8
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share 282,649,240 292,255,497
Effect of dilutive potential ordinary share options 25,601 13,654
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 282,674,841 292,269,151
Earnings per share 88.8p 74.5p
Diluted earnings per share 88.8p 74.5p
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
2017 293,903,724 13,363,728
Purchased - 2,872,221
Options/awards
exercised - (4,880,183)
Shares issued 151,704 -
As at 31 March
2018 294,055,428 11,355,766
1. Tax (credit) / expense
Year ended Year ended
31 March 2018 31 March 2017
Analysis of tax on ordinary activities GBPm GBPm
Current tax
Current year (6.4) 11.6
Prior year adjustment 14.6 (9.7)
8.2 1.9
Deferred tax
Current year (41.4) 26.8
Prior year adjustment (18.5) 5.5
(59.9) 32.3
Tax(credit)/charge on profit on ordinary
activities (51.7) 34.2
Notes to the Financial Statements continued
For the year ended 31 March 2018
Year ended Year ended
31 March 2018 31 March 2017
GBPm GBPm
Profit on ordinary activities before tax 199.1 252.4
Profit before tax multiplied by the rate of corporation
tax in the UK of 19% (2017: 20%) 37.8 50.5
Effects of:
Prior year adjustment to current tax 14.6 (9.7)
Prior year adjustment to deferred tax (18.6) 5.5
Non-taxable and non-deductible items - 3.4
Current year provision (credit)/charge for tax risks (27.1) 2.9
Different tax rates of overseas subsidiaries (38.0) (16.5)
Changes in statutory tax rates - (1.9)
Substantial shareholder exemption - deferred tax
adjustment (15.4) -
Other temporary differences (5.0) -
Current tax (credit)/charge for the year (51.7) 34.2
The effective tax rate is lower than the standard corporation tax rate
of 19%. This is in part due to a significant proportion of the
Investment Company's assets being invested directly into funds based
outside the United Kingdom. Investment returns from these funds are paid
to the Group in the form of non-taxable dividend income. This outcome is
in line with other UK investment companies. The Investment Company's
taxable costs can therefore be used to offset the taxable profits of our
UK Fund Management business, reducing the overall Group charge.
In addition, there are two deferred tax accounting adjustments in the
current year which have further reduced the tax charge:
1. Finance Act 2017 widened the definition of the 'Substantial Shareholder
Exemption' rules which exempt companies from tax on the disposal of an
investment in which 10% of the shares are held and certain other
conditions met. As a result there are a small number of legacy assets,
dating from when ICG was a principal investor, that will now qualify for
SSE and be exempt from tax. As tax had previously been expected to be
paid on these balances, a deferred tax liability of GBP15.4m had been
accrued which has been released in the current year.
2. The Group has reviewed, and updated, its transfer pricing policy to
reflect current business practices and in line with the OECD's 'Base
Erosion and Profit Shifting' (BEPS) guidelines. The updated methodology
was prepared in conjunction with our corporate tax advisers and the use
of external benchmarking. Following this exercise, and in light of the
Group's ongoing low risk tax status in the UK and no open enquiries
elsewhere, the Directors reassessed the necessity for a tax risk
provision. The Directors concluded that whilst there remains an inherent
risk of challenge by UK and overseas tax authorities this was not
sufficient to maintain the provision of GBP27.1m.
Reporting by strategic asset class
Year ended Year ended
31 March 2018 31 March 2017
AUM (EURm) Fees (GBPm) AUM (EURm) Fees (GBPm)
Corporate Investments
Management Fee Income -
Corporate 6,195 58.0 6,137 56.2
Performance Fee Income -
Corporate - 15.5 - 7.3
Management Fee Income -
Senior Debt 7,364 17.0 4,385 13.5
Performance Fee Income -
Senior Debt - 1.7 - 1.2
Management Fee Income -
Australian Senior Loans 314 0.8 283 -
13,873 93.0 10,805 78.2
IC co-investment -
Corporate 1,398 11.6 1,275 11.8
IC co-investment - Senior
Debt 34 0.3 38 0.3
IC co-investment -
Australian Senior Loans - - - 0.6
Total 15,305 104.9 12,118 90.9
Capital Market Investments
CLOs 5,771 25.6 5,383 20.4
Managed Accounts and
Pooled Funds 1,912 5.7 788 2.9
Performance Fee Income - 3.6 - 0.4
7,683 34.9 6,171 23.7
IC co-investment 422 3.2 390 2.1
Total 8,105 38.1 6,561 25.8
Real Asset Investments
Management Fee Income 3,509 20.5 3,290 20.9
Performance Fee Income - (2.0) - 1.0
3,509 18.5 3,290 21.9
IC co-investment 126 1.3 126 1.7
Total 3,635 19.8 3,416 23.6
Secondary Investments
Management Fee Income 1,469 16.4 1,551 14.5
Performance Fee Income - 4.3 - 0.3
1,469 20.7 1,551 14.8
IC co-investment 184 1.4 179 1.6
Total 1,653 22.1 1,730 16.4
Total External 26,534 167.1 21,817 138.6
Total IC co-investment 2,164 17.8 2,008 18.1
Total 28,698 184.9 23,825 156.7
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 form
Definition
Adjusted earnings per share
Adjusted EPS
Adjusted profit after tax (annualised when reporting a six month
period's results) divided by the weighted average number of ordinary
shares as detailed in note 4.
Adjusted Group profit before tax
Group profit before tax adjusted for the impact of the consolidated
structured entities and the presentation of Nomura ICG KK and Questus
Energy Pty Limited.
As at 31 March, this is calculated as follows:
2018 2017
Profit before tax GBP199.1m GBP252.4m
Less consolidated structured entities (GBP30.8m) (GBP16.2m)
Adjusted group profit before tax GBP168.3m GBP236.2m
Adjusted Investment Company profit before tax
Investment Company profit adjusted for the impact of the consolidated
structured entities and the presentation of Nomura ICG KK and Questus
Energy Pty Limited.
As at 31 March, this is calculated as follows:
2018 2017
Investment Company profit before tax GBP103.8m GBP178.4m
Less consolidated structured entities (GBP30.8m) (GBP16.2m)
Adjusted Investment Company profit before tax GBP73.0m GBP162.2m
Adjusted return on equity
Adjusted profit after tax (annualised when reporting a six month
period's results) divided by average shareholders' funds for the period.
As at 31 March, this is calculated as follows:
2018 2017
Adjusted profit after tax GBP224.0m GBP201.3m
Average shareholders' funds GBP1,173.5m GBP1,115.8m
Adjusted return on equity 19.1% 18.0%
Asset Impairments
Asset impairments are recognised on debt instruments to the extent that
the debt is deemed irrecoverable. Asset 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.
Assets under management
AUM
Value of all funds and assets managed by the FMC. 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.
Balance sheet investment portfolio
The balance sheet investment portfolio represents non-current financial
assets from the Statement of Financial Position, adjusted for the impact
of the consolidated structured entities and the presentation of Nomura
ICG KK. See note 2 for a full reconciliation.
Capital gains
Capital gains represent the increase in value of equity 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.
Cash profit
PICP
Cash profit is defined as internally reported profit before tax and
incentive schemes, adjusted for non-cash item.
2018 2017
Adjusted profit before tax GBP168.3m GBP236.2m
Add back incentive schemes GBP104.8m GBP88.0m
Other adjustments (GBP18.2m) GBP83.3m
Cash profit GBP254.9m GBP407.5m
Dividend income
Dividend income represents distributions received 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 per share
Profit after tax (annualised when reporting a six month period's
results) divided by the weighted average number of ordinary shares as
detailed in note 4.
Gearing
Gearing is used by management as a measure of balance sheet efficiency.
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, this is
calculated as follows:
2018 2017
Gross borrowings GBP4,333m GBP4,305m
Less consolidated structured entities (GBP3,312m) (GBP3,186m)
Adjusted gross borrowings GBP1,021m GBP1,119m
Shareholders' funds GBP1,318m GBP1,173m
Gearing 0.77x 0.95x
Interest expense
Interest expense excludes the cost of financing associated with the
consolidated structured entities. See note 2 for a full reconciliation.
Interest income
Interest income is contractual income earned on debt 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.
Net asset value per share
Total equity from the Statement of Financial Position divided by the
closing number of ordinary shares. As at 31 March, this is calculated as
follows:
2018 2017
Total equity GBP1,318m GBP1,173m
Closing number of ordinary shares 282,699,662 280,539,996
Net asset value per share 466p 418p
Net current assets
The total of cash, plus current financial 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. As at 31 March, this is calculated as
follows:
2018 2017
Cash GBP248.0m GBP490.3m
Current financial assets GBP107.2m GBP89.7m
Other current assets GBP244.7m GBP172.9m
Current financial liabilities (GBP183.7m) -
Other current liabilities (GBP188.1m) (GBP158.8m)
Net current assets GBP228.1m GBP594.1m
On an IFRS GAAP basis net current assets are as follows:
2018 2017
Cash GBP520.7m GBP780.9m
Current financial assets GBP107.2m GBP89.7m
Other current assets GBP405.5m GBP282.3m
Current financial liabilities (GBP183.7m) -
Other current liabilities (GBP568.1m) (GBP486.1m)
Net current assets GBP281.6m GBP666.8m
Net debt
Net debt, along with gearing, is used by management as a measure of
balance sheet efficiency. Net debt includes unencumbered cash whereas
gearing uses gross borrowings and is therefore not impacted by movements
in cash balances.
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. As at 31 March, this is calculated as
follows:
2018 2017
Adjusted gross borrowings GBP1,021.1m GBP1,119.0m
Less unencumbered cash (GBP247.6m) (GBP489.9m)
Net debt GBP773.5m GBP629.1m
Net investment returns
Net investment returns is the total of interest income, capital gains,
dividend and other income less asset impairments.
Operating cashflow
Operating cashflow represents the cash generated from operating
activities from the Statement of Cash Flows, adjusted for the impact of
the consolidated structured entities, the presentation of Nomura ICG KK.
See note 2 for a full reconciliation.
Operating expenses of the Investment Company
Investment Company operating expenses are adjusted for the impact of the
consolidated structured entities, the presentation of Nomura ICG KK and
Questus Energy Pty Limited. See note 2 for a full reconciliation.
Operating profit margin
Fund Management Company profit divided by Fund Management Company total
revenue. As at 31 March this is calculated as follows:
2018 2017
Fund Management Company Profit GBP95.3m GBP74.0m
Fund Management Company Total Revenue GBP210.1m GBP179.7m
Operating profit margin 45.4% 41.2%
Return on equity
ROE
Profit after tax (annualised when reporting a six month period's
results) divided by average shareholders' funds for the period.
Third party fee income
Fees generated on fund management activities as reported 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 average fee rate
An average fee rate across all strategies based on fee earning AUM in
which the fees earned are weighted 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.
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 14 June 2018
Record date 15 June 2018
Last date for dividend reinvestment election 17 July 2018
AGM and Trading statement 26 July 2018
Payment of ordinary dividend 7 August 2018
Half year results announcement 15 November 2018
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 22, 2018 02:00 ET (06:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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