ICP.L Regulatory News (ICP)

5 Jun 2007 07:02

Intermediate Capital Group PLC05 June 2007 Embargoed until 7.00am onTuesday 5th June 2007 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007 Intermediate Capital Group PLC ("ICG"), a leading independent fund manager andspecialist provider of mezzanine finance in Europe and Asia, announces itspreliminary results for the year ended 31 March 2007. Financial highlights: 12 months to 14 months to 14 months to Annualised % 31 March 2007 31 March 2006 31 March 2006 increase annualised Pre-tax profits £224m £163m £190m 37%Core income* £112m £91m £106 23%Gains on investments £197m £124m £145m 59%Basic earnings per share 205p 154p 179p 33%Total dividend for the year 58p 48p 56p 21%Investment portfolio £1.7bn £1.5bn £1.5bn 17%Funds under management £5.8bn** £3.0bn £3.0bn 93% * The composition of core income can be found as part of the analysis of profitbefore tax.** 69% of these funds were invested at the year end. The prior period results were for a fourteen month period. In commenting ontrends in performance throughout this announcement we have annualised, by takingtwelve-fourteenths of the previous period's results, to obtain percentageincreases to make the comparisons more meaningful. Operational highlights • Record pre-tax profits of £224m • Core income increased by 23% to £112m • Record £1.2bn of investments arranged or provided in 31 companies • Funds under management increased by 93% to £5.8bn • New office openings in Sydney and Tokyo Commenting on the results John Manser, Chairman of ICG said: "ICG has had another excellent year. We have continued to meet the challenge ofchanging market requirements and to expand into new territories. Pre-tax profitshave increased by 37%. Fund management fee income has grown strongly in the yearto £27m. Gains on investments were an outstanding £197m, while net interestincome rose from £107m to £138m. However, market conditions remain challenging driven by excess liquidity in debtmarkets and we expect prices and structures to get worse before they get better.We continue to see high levels of repayments and we do not anticipate that thistrend will slow down in the short term. Maintaining a strong credit discipline,the quality of our portfolio and our rigorous investment process remainpriorities. In these circumstances we are finding ourselves turning down manymore transactions because risk is not being recognised or properly priced andthere is often little or no margin for error. Therefore it is possible that ourbalance sheet may fail to grow and even if it does grow, net interest income mayfall as spreads tighten. Although we expect a good year next year we do notanticipate another record for pre-tax profits but core income should continue togrow satisfactorily. Our strategy is to maintain our position as the leading provider of intermediatecapital in our chosen markets and the fund manager of choice for our investors.Our corporate objective is to double the size of the business every five yearsby employing and motivating great people. We believe we can do more in the nextyear and beyond by continuing to put our partnership approach and stronginvestment culture at the heart of everything we do. We will continue to seekattractive opportunities to expand both geographically and in our productoffering, where they complement and enhance our existing business. Indeed wewill shortly be opening an office in New York. We have a strong balance sheet.The permanent capital it provides will give us a considerable advantage over thecompetition when the market turns. We look forward to the future withconfidence." Enquiries: Tom Attwood, Managing Director, Intermediate Capital Group PLC (020) 7628 9898Philip Keller, Finance Director, Intermediate Capital Group PLC (020) 7628 9898 Deborah Done/Helen Barnes/Leonora Pou, Brunswick Group Limited (020) 7404 5959 Interviews with Tom Attwood, Managing Director, and Philip Keller, FinanceDirector, Intermediate Capital Group PLC, in video, audio and text format isavailable at www.icgplc.com and www.cantos.com Note to the Editors A brief explanation of Intermediate Capital Group PLC's investment activities isattached. Chairman's Statement I am pleased to report that the financial year ended March 2007 was anotherexcellent year for the Group delivering record pre-tax profits of £224m. Ourgrowth has resulted from our continued focus on innovation to meet changingmarket requirements, partnership with our fellow investors, a rigorous creditculture and the high calibre of our employees. We are particularly pleased with the performance of our global network, whichcontinues to develop and thrive even in competitive market conditions. Duringthe year we opened new offices in Sydney and Tokyo, and are already experiencingincreased deal flow from these regions. Indeed our Direct Investment business,where we take investments to our own balance sheet, achieved excellent resultsacross all regions, with Continental Europe flourishing despite the maturity ofthis market. During the year we arranged or provided £1.2bn in 31 transactions. Of this £727mwas held on our balance sheet and £426m was taken by our funds. After takinginto account the high level of repayments our balance sheet portfolio grew by17% in the year to £1.7bn. Our Fund Management business goes from strength to strength, with a 93% increasein our funds under management to a total of £5.8bn, of which 69% was invested asat the end of March 2007. In the year we completed fund-raising for our latestmezzanine fund, the €2.25bn European Fund 2006. On the non-mezzanine FundManagement side we closed two new Collateralised Debt Obligations, increased thesize of the Eurocredit Opportunities Fund and our Institutional Mandated Funds.The Fund Management business complements our Direct Investment business,ensuring that we have the resources to be selective and proactive in thetransactions in which we choose to participate, while the fee income generatedprovides a stable and growing earnings base. Excellent Results Core income grew by £21m to £112m, an increase of 23%* driven by net interestincome and a 40% growth in fee income. We achieved another record gain oninvestments, up 59% from last year at £197m. This was due to the high number ofrealisations of warrants and equity investments, as private equity sponsors tookadvantage of continued buoyancy in the market to realise profits by way ofexits. After impairments, the Medium Term Incentive Scheme, and other expenses,pre-tax profits increased by 37% to £224m. Increase in Dividends Our objective remains to provide double-digit percentage increases in ourdividend broadly in line with growth in core income. The Board is recommending afinal dividend of 41.5p net per share to be paid on 27 July 2007 which, with theinterim dividend of 16.5p net per share, brings the total for the year to 58.0pper share. This is an increase of 21% over the previous period calculated on anannualised basis, reflecting the percentage increase in core income. The dividend will be paid to shareholders on the register on 6 July 2007. Enhanced Capital Position The Group continues to be well placed financially with a strong balance sheet.During the year the Group undertook a thorough review of its balance sheet inthe light of favourable conditions in the credit market. As well as reducing thecosts of our debt we wanted to ensure that our borrowing facilities are alignedwith our strategy of geographic expansion and investing in a variety ofsubordinated investments. Furthermore we wanted sufficient flexibility to makeopportunistic investments through a turn in the credit cycle. Our debt capacityhas increased from £1.5bn to £2.0bn of which £1.2bn was drawn at year-end. With gearing at 192% and, having amended the terms of our facilities, we believewe are very well placed to take advantage of adverse conditions in the debtmarket. Board and Governance In September 2006 Philip Keller was appointed to the Board as Finance Director.Prior to joining ICG Philip was Finance Director at ERM Holdings Ltd, one of theworld's largest environmental consultancies during a period when it undertooktwo leveraged buyouts. This wealth of financial, business management andstrategic planning experience has already made him a strong addition to oursenior executive team. In March 2007 we were pleased to announce the appointment of Jean-Daniel Camusas Non-Executive Director of the company. Jean-Daniel has more than 20 yearsexperience in private equity. He was a founding partner of Orium, a proprietaryinvestment firm, which he joined from LBO France, a pioneer of leveraged buyoutinvestments. The Board believes that Jean-Daniel's extensive private equityexperience will enable him to make an extremely valuable contribution to thework of the Board. Eric Licoys and Peter Stone will retire at the AGM. I would like to thank themfor their considerable and helpful contribution as Non-Executive Directors overthe last nine years, a period of sustained growth. The Board remains committed to maintaining the highest levels of governance andcompliance. We are keenly aware of the need to ensure that our business isresponsive to the needs of clients, investors, staff and the wider community. This year's AGM will be held on 18 July 2007 at our offices at 20 Old BroadStreet in London and I hope to have the opportunity to meet you there. If youmiss it, we will be recording interviews for our website www.icgplc.com. Motivated Employees I would like to thank our employees for their hard work and commitment inhelping to deliver another excellent set of results. In recognising theimportance of the team we are constantly working hard to attract the highestquality people while maintaining an attractive working environment for theexisting staff. Outlook I am very pleased to report that we have started the new financial year well. Wehave a strong and diversified portfolio of investments, selected to be robust inmore difficult market conditions. In spite of this we are expecting prices andstructures, driven by excess liquidity in debt markets, to get worse before theyget better. We are experiencing higher levels of repayments as companies seek toreplace mezzanine with cheaper debt. We do not see this trend reversing orslowing down in the short-term but are determined to maintain our creditdiscipline. Consequently it is possible that our balance sheet may fail to growand even if it does grow, net interest income may fall as spreads continue totighten. Our portfolio and cash reserves anticipate the volatility andopportunity that will result when the market turns. Although the market isincreasingly competitive our network is still originating a number of investmentopportunities which meet our rigorous credit standards. We are a leading provider of intermediate capital in our chosen markets, and thefund manager of choice for our investors. We will invest in the necessary peopleand infrastructure to maximise value to our shareholders, investors and clients.We will continue to be innovative where appropriate, tailoring solutions to meetdemand in changing markets. We expect our fund management business to showsteady growth in income this year and beyond. We will maintain the efficiency ofour balance sheet to give us greater flexibility and capacity whilst ensuringour investment strategy is driven by long-term value creation. We believe we can do more in the next year and beyond by continuing to put ourpartnership approach, credit culture and bespoke tailoring at the heart ofeverything we do. We will continue to seek attractive opportunities to expandgeographically, in our core markets and in our product offering, where theycomplement and enhance our existing businesses. Indeed we will shortly beopening an office in New York. We have a strong balance sheet. The permanentcapital it provides will give us a considerable advantage over the competitionwhen the market turns. We look forward to the future with confidence. * The previous period's results were presented for a 14 month period. Allcomparative data is based upon the previous period on an annualised basis. INTERMEDIATE CAPITAL GROUP PLCCONSOLIDATED INCOME STATEMENTFor the year ended 31 March 2007 Year ended Fourteen months Fourteen months 31 March 2007 ended ended 31 March 2006 31 March 2006 annualised £m £m £m------------------------ ----------- ---------- -----------Interest and dividend income 196.8 146.3 170.7Gains on investments 197.0 124.2 144.9Fee and other operating income 33.3 23.8 27.8 ----------- ---------- ----------- 427.1 294.3 343.4Interest payableand other relatedfinancing costs (66.6) (45.2) (52.7)Impairment of assets (34.8) (23.4) (27.3)Administrative expenses (101.7) (62.8) (73.3) ----------- ---------- -----------Profit before tax 224.0 162.9 190.1Tax expense (80.6) (55.7) (65.0) ----------- ---------- -----------Profit for the periodattributable to the equity shareholders 143.4 107.2 125.1 ----------- ---------- ----------- Basic earnings per share 204.6p 153.7p 179.3pDiluted earnings per share 202.3p 152.3p 178.3p INTERMEDIATE CAPITAL GROUP PLCANALYSIS OF PROFIT BEFORE TAXFor the year ended 31 March 2007 Year ended Fourteen months Fourteen months 31 March 2007 ended ended 31 March 2006 31 March 2006 annualised £m £m £m---------------------- ----------- ----------- -----------Income Interest and dividend income 196.8 146.3 170.7Fee income 33.3 23.8 27.8 ----------- ----------- ----------- 230.1 170.1 198.5Less: related expensesInterest payableand other relatedfinancing costs (66.6) (45.2) (52.7)Add back: net losses on derivatives held for hedging purposes 8.2 5.6 6.5Administrative expenses - salaries and benefits (32.8) (17.0) (19.8)Operating expenses (14.1) (11.1) (13.0)Medium Term Incentive Scheme (12.8) (11.3) (13.2) ----------- ----------- -----------Core Income 112.0 91.1 106.3 Gains on investments 197.0 124.2 144.9Medium Term Incentive Scheme (42.0) (23.4) (27.3) ----------- ----------- -----------Net gains on investments 155.0 100.8 117.6Provisions against loans and investments (34.8) (23.4) (27.3)Net losses on derivatives held for hedging purposes* (8.2) (5.6) (6.5) ----------- ----------- -----------Profit on ordinaryactivities beforetaxation 224.0 162.9 190.1 *Net losses relating to movements in the fair value of derivatives used to hedgecertain liabilities of the group excluding any interest accruals and spot f/xtranslation movements on these derivatives, are not considered part of coreincome. INTERMEDIATE CAPITAL GROUP PLCCONSOLIDATED BALANCE SHEET31 March 2007 As at As at 31 March 2007 31 March 2006 £m £m-------------------------------------------- ---------- -----------Non-current assetsProperty, plant and equipment 2.9 1.1Financial assets: loans and investments 1,749.9 1,493.9 other derivatives 15.3 20.8 ---------- ----------- 1,768.1 1,515.8Current assetsTrade and other receivables 13.3 10.9Financial assets: loans and investments 14.0 70.6Cash and cash equivalents 172.0 52.4 ---------- ----------- 199.3 133.9 ---------- -----------Total assets 1,967.4 1,649.7 ---------- ----------- Equity and reservesCalled up share capital 14.0 14.0Share premium account 175.7 174.5Capital redemption reserve 1.4 1.4Other reserves 11.0 6.4Retained earnings 399.5 297.0 ---------- -----------Equity shareholders' funds 601.6 493.3 ---------- ----------- Non current liabilitiesFinancial liabilities 1,137.0 719.0Deferred tax liabilities 7.4 16.8 ---------- ----------- 1,144.4 735.8 ---------- ----------- Current liabilitiesTrade and other payables 112.7 69.4Financial liabilities 73.6 331.6Liabilities for current tax 35.1 19.6 ---------- ----------- 221.4 420.6 ---------- -----------Total liabilities 1,365.8 1,156.4 ---------- -----------Total equity and liabilities 1,967.4 1,649.7 ---------- ----------- INTERMEDIATE CAPITAL GROUP PLCCONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2007 Year ended Fourteen months Fourteen months 31 March 2007 ended ended 31 March 2006 31 March 2006 annualised £m £m £m---------------------- ----------- ----------- -----------Operating activitiesInterest and feereceipts 180.2 135.4 158.0Dividends received 6.7 6.1 7.1Gain on disposals 206.5 118.4 138.1Interest payments (48.8) (34.8) (40.6)Cash payments tosuppliers and employees (59.9) (41.8) (48.8)Proceeds from sale/(purchase) of currentfinancial assets 54.5 (25.0) (29.2)Purchase of loansand investments (732.1) (563.4) (657.3)Proceeds from sale of loans and investments 435.9 349.6 407.9 ----------- ----------- -----------Cash generated byoperations 43.0 (55.5) (64.8)Taxes paid (74.0) (51.6) (60.2) ----------- ----------- -----------Net cash used inoperating activities (31.0) (107.1) (125.0) ----------- ----------- -----------Investing activitiesPurchase of property, plant and equipment (2.2) (0.5) (0.6) ----------- ----------- -----------Net cash used ininvesting activities (2.2) (0.5) (0.6) ----------- ----------- -----------Financing activitiesDividends paid (40.9) (25.2) (29.4)Increase in long-termborrowings 207.2 126.2 147.2(Decrease)/increase in bank overdrafts (14.7) 2.1 2.5Proceeds on issueof shares 1.2 1.8 2.1 ----------- ----------- -----------Net cash fromfinancing activities 152.8 104.9 122.4 ----------- ----------- -----------Net increase/(decrease) in cash 119.6 (2.7) (3.2)Cash and cashequivalents atbeginning of period 52.4 55.6 55.6====================== =========== =========== ===========Cash and cashequivalents at end of period 172.0 52.4 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the year ended 31 March 2007 Year ended Fourteen months Fourteen months 31 March 2007 ended ended 31 March 2006 31 March 2006 annualised £m £m £m Available for sale investments: Valuation gains taken to equity 56.9 20.1 23.5 Transferred to profit or loss on sale/disposal (53.4) (26.8) (31.3)Tax on items taken directly toor transferred from equity (0.4) 1.9 2.2------------------------------ ---------- ----------- -----------Net income recogniseddirectly in equity 3.1 (4.8) (5.6)Profit for the period 143.4 107.2 125.1------------------------------ ---------- ----------- -----------Total recognised income andexpense for the periodattributable to shareholders 146.5 102.4 119.5------------------------------ ---------- ----------- ----------- The financial information set out in the announcement does not constitute thegroup's statutory accounts for the year ended 31 March 2007 or the period ended31 March 2006. The financial information for the fourteen months ended 31 March2006 is derived from the statutory accounts for that year, which have beendelivered to the Registrar of Companies. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31March 2007 will be finalised on the basis of the financial information presentedby the directors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. The basisof preparation of the preliminary announcement is consistent with the accountingpolicies used in the Financial Statements in the prior and current year. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company expects to publish full Financial Statements thatcomply with IFRSs on 12 June 2007. NOTE TO THE EDITORS ICG's principal business is to arrange and provide mezzanine capital and investin the equity of companies in Europe and the Asia Pacific Region. ICG hasoffices in London, Paris, Stockholm, Madrid, Sydney, Tokyo, Hong Kong and arepresentative office in Frankfurt. ICG also has a specialist fund managementbusiness relating to higher yielding European debt. ICG makes mezzanine loans from both its own resources and from third party fundsunder its management. Mezzanine finance ranks in terms of risk and rewardbetween bank debt and equity capital. In return for providing finance, ICG seeksa strong cash yield and an additional return related to the success of theinvestee company. Mezzanine finance has been principally used to financemanagement buyouts but is also used as acquisition and refinancing capital. In the year ended 31 March 2007 ICG and funds managed by ICG invested in thefollowing 31 companies: Link Group are leading specialists in superannuation administration and shareregistry services in Australia. In January 2007 ICG arranged and providedmezzanine finance of AUD $70m to assist in the acquisition and refinance. ICGalso invested AUD $15m in the equity. Albingia is a specialist French insurance company. In November 2006 ICG invested€20m in the mezzanine finance provided to assist in the buyout. ICG alsoinvested €1m in the equity. Apem is a French company and is one of the world's largest manufacturers ofprofessional switches and keyboards. In December 2006 ICG invested €9.5m in themezzanine finance provided to assist in the buyout. ICG also invested €1.5m inthe equity. Attendo, a Swedish company, is a leading provider of elderly and disabled careservices. In January 2007 ICG co-arranged a SEK 460m mezzanine facility toassist in the secondary buyout. ICG also invested SEK 90m in the equity. BAA is the leading U.K. airport operator and the largest international airportoperator in the world. In August 2006 ICG took a participation of £35.5m in theperpetual 'Toggle' facility arranged to assist in financing the acquisition. ICGinvested a further amount of £22.2m in October 2006. Bodybell is a Spanish retailer of cosmetics and perfumes. In December 2006 ICGarranged and provided mezzanine finance of €20m to assist in therecapitalisation. ICG also arranged the second lien facility. Care Management Group is a UK operator of care homes for people with physicaland learning disabilities. In August 2006 ICG invested £30m in junior mezzanineand equity to assist in a refinancing. Cerba is a French laboratory which performs clinical tests. In July 2006 ICGinvested in €30m of junior and senior mezzanine finance to assist in thesecondary buyout. ICG also invested €9.4m in the equity. Easycash is Germany's largest card payment network service provider. In November2006 ICG arranged and provided mezzanine finance of €25m to assist in thebuyout. Elior, a French company, is a leading contract and concession caterer in Europe.In August 2006 ICG invested €16m in the equity required to take the companyprivate. In October 2006 ICG also took a participation of €142m in the mezzaninefinance. Euroloc is a Spanish company that provides equipment and machinery for hire. InJuly 2006 ICG arranged and provided mezzanine finance of €30.5m to assist in abuyout. ICG also underwrote the senior debt and invested €6m in the equity. Fraikin is France's largest independent truck rental company. In February 2007ICG invested €66.4m in the mezzanine finance provided to assist the buyout. ICGalso invested €9.7m in the equity. Gerflor is a French company that holds the position as Europe's No.2 PVCflooring manufacturer. In November 2006 ICG invested €30m in the mezzaninefinance provided to assist in the tertiary buyout. ICG also invested €5m in theequity. Groupe Moniteur is a leading French magazine group. In June 2006 ICG invested€48m in the mezzanine finance provided to support the secondary buyout. ICG alsomade an equity investment of €10m. Loewenplay is the second largest gaming arcade operator in Germany. In January2007 ICG took a participation of €15m to assist in the secondary buyout. Loyalty Partners is a German company and provides the leading multi-companyloyalty card in that country. In April 2006 ICG took a participation of €23m inthe mezzanine facilities arranged to assist in the buyout. Materis is a French group of businesses in aluminates, mortars, paints,refractories and admixtures. In April 2006 ICG invested €85m in the mezzaninefinance provided to assist in the secondary buyout. Mayborn is a UK company that manufactures baby and household products. InOctober 2006 ICG took a participation of £12m in the mezzanine facility arrangedto assist in the public to private acquisition. Medica is the third largest provider of nursing homes in France. In August 2006ICG took a participation of €61.3m in the mezzanine financing arranged to assistin the secondary buyout. ICG also invested €5m in the equity. Medi-Partenaires is a leading player in the French acute care private hospitalsector. In March 2007 ICG invested €140m in the senior and junior mezzaninefinance provided in support of the secondary buyout. Mehilainen is a Finnish company providing private healthcare. In May 2006 ICGarranged and provided a €20m mezzanine facility to assist in the add-onacquisition to Carema. Minimax, a German company, is the third largest global supplier of fireprotection systems and services. In August 2006 ICG took a participation of €45min the mezzanine loan arranged to assist in the tertiary buyout. ICG alsoinvested €10m in the equity. Motip Dupli, a Dutch company, is the leading European manufacturer of aerosolpaints, touch up pencils and technical aerosols. In April 2006 ICG arranged andprovided mezzanine finance of €25m to assist in the secondary buyout. ICG alsoinvested €13m in the equity. Orizonia is the leading vertically integrated tour operator in Spain. In July2006 ICG provided mezzanine finance of €100m to assist in the buyout. ICG alsoinvested €10m in the equity. Sebia is a French manufacturer of medical diagnosis equipment. In September 2006ICG invested €60m in the mezzanine finance provided to assist in the secondarybuyout. ICG also invested €30m in the equity. Select Service Partners, a UK company, is the world-leading travel cateringbusiness. In July 2006 ICG co-arranged and took a participation of £40m in themezzanine and PIK facilities provided to assist in the buyout. ICG also invested£8m in the equity. TDF is the leading broadcasting operator in France. In January 2007 ICG invested€10m in the equity provided for the secondary buyout. Tegel is the leading brand poultry producer in New Zealand. In April 2006 ICGarranged and provided subordinated notes and mezzanine preference notestotalling NZ$ 89.5m to assist in the buyout. ICG also invested NZ$ 5m in theequity. Viadom is the leading French company in the home hairdressing market. In June2006 ICG invested €22m in the mezzanine finance provided to assist in thesecondary buyout. ICG also invested €3m in the equity. Visma, a Norwegian company, provides business software and enterprise resourceplanning services in the Nordic region. In June 2006 ICG arranged and provided aNOK 600m PIK preference note. ICG also took a participation of NOK 300m in thesenior mezzanine and NOK 225m in the equity. Vivarte is a leading French apparel and footwear retail specialist. In March2007 ICG invested €10m in the equity provided for the secondary buyout. In the same period ICG and funds managed by ICG arranged/participated inrefinancings for the following 4 companies: Duni refinanced in March 2007. ICG reduced its exposure by €11.4m. Marken refinanced in March 2007. ICG increased its exposure by £7.5m. Raet refinanced in January 2007. ICG rolled over its exposure. Target refinanced in September. ICG increased its exposure by £7.5m. This information is provided by RNS The company news service from the London Stock Exchange