25 Nov 2008 07:00
ICG ANNOUNCES INTERIM RESULTS FOR THE SIX MONTH PERIOD
ENDED 30 SEPTEMBER 2008
Intermediate Capital Group PLC ("ICG"), a leading mezzanine and leveraged loan investor and third party fund manager, announces its interim results for the six month period to 30 September 2008.
IFRS Financial highlights for the six months ended 30 September 2008:
| | 6 months to 30 Sept 08 | 6 months to 30 Sept 07 | Increase/ Decrease |
| Net interest income1 | £99.7m | £71.5m | 39% |
| Fee income | £29.4m | £30.3m | -3% |
| Core income2 | £84.6m | £65.3m | 30% |
| Gains on investments | £19.9m | £97.1m | -80% |
| Net provisions | £42.8m | £9.3m | 360% |
| Profit before tax3 | £39.8m | £142.0m | -72% |
| EPS4 | 29.8p | 125.7p | -76% |
| Interim dividend4 | 20.5p | 18.5p | 11% |
1. Excludes fair value movements on derivatives held for hedging purposes (2008: negative impact of £18.0m; 2007: positive impact of £9.1m).
2. Core income is net interest income plus fee income less related administrative expenses.
3. Includes fair value movements on derivatives held for hedging.
4. EPS and DPS for the six months to 30 September 2007 have been adjusted for the Rights Issue in February 2008.
Operational highlights:
Loan and investment portfolio at £2.6bn, up 12 per cent compared to 31 March 2008.
Core income up 30% compared to first half of last year.
A well diversified portfolio which continues to perform satisfactorily although the impact of the economic slowdown is beginning to be felt.
Third party funds under management at £7.4bn, up 2 per cent compared to 31 March 2008. Second Asia Pacific fund of US$1bn raised.
Commenting on the results, John Manser, Chairman of ICG, said:
"ICG has performed well in the six months ending 30 September 2008 given the deteriorating financial and economic environment. We have grown our loan and investment portfolio by 12 per cent and closed our second Asia Pacific fund; at US$1.0 bn it is the largest independent mezzanine fund in the region. The portfolio remains sound overall, with 70 per cent of our largest investments performing better than last year at 30 September 2008. The active management of our portfolio remains our top priority in the weakening economic conditions.
Although the LBO market is effectively shut due to a rapid contraction of credit, the secondary market offers outstanding investment opportunities. Our credit expertise positions us well to take advantage of these opportunities. We are confident that our robust capital position, unwavering credit discipline and 20 year track record of managing through economic cycles will enable us to come through this downturn strongly."
An interview with Tom Attwood, Managing Director, and Philip Keller, Finance Director, of Intermediate Capital Group PLC, in video, audio and text format is available at www.icgplc.com and www.cantos.com
Enquiries
Investors and analysts:
Tom Attwood, Managing Director, ICG (020) 7628 9898
Philip Keller, Finance Director, ICG (020) 7628 9898
Jean-Christophe Rey, Investor Relations, ICG (020) 7448 5876
Press:
David Yelland, Helen Barnes, Brunswick (020) 7404 5959
Amanda Fong, Corporate Communications, ICG (020) 7448 4156
Interim Management Report Chairman's Statement
I am pleased to report that ICG's results for the six months to 30 September 2008 show resilience in an extremely volatile environment. This was reflected in our core income, which was up 30% compared to the first half of last year.
Over the period, we provided or arranged a total of £559m in 11 new investments; £312m on behalf of the ICG balance sheet. While this level of investment was considerably lower than the first half of last year, we benefitted from much improved terms available to mezzanine providers since the onset of the credit crunch. At the same time, we experienced very low levels of early repayments as conditions were less attractive for private equity exits. As a result, our balance sheet loan and investment portfolio grew to £2.6bn, up 12% over the period, and core income increased to £84.6m, up 30% compared to the first half of last year.
Our balance sheet is robust, with gearing of 184% and £656m of undrawn debt facilities as at 30 September 2008.
However, as expected in the current difficult financial and economic conditions, rising provisions and lower levels of realisations led to a marked decline in profit before tax for the period, which totalled £57.8m (excluding the negative impact of £18m of fair value movements on derivatives held for hedging purposes).
Since the end of September, we have witnessed increased turmoil in financial markets leading to a sharp contraction of credit. As a result, leveraged buyout ("LBO") transactions are scarce, limiting investment opportunities in the primary market in the near future.
However, this turmoil has also resulted in unprecedented investment opportunities in secondary loan assets as many banks and investment managers have become forced sellers. We believe that we are well positioned to selectively invest in these opportunities.
It has become increasingly clear that economic conditions are rapidly weakening around the world. Our portfolio, although well positioned and broadly performing satisfactorily is not immune, and the adverse economic environment is affecting the results of some of our companies. Two companies in particular have posted very poor results since the half year end. Overall however we benefit from the cautious approach to investing we took before the crash, and the diversity and defensiveness of the portfolio.
We will continue to actively manage our portfolio; maintain the strength of our balance sheet; raise third party funds; and prudently invest where we see outstanding value.
We have a strong business model, which has stood the test of several economic cycles. Our local network of high calibre investment executives, strong credit culture and operational excellence remain key to our long term success.
The Board has declared an interim dividend of 20.5p, up 11% over last year's interim dividend. The dividend will be paid on 29 December 2008 to shareholders on the register at 5 December 2008.
John Manser
Chairman
24 November 2008
Managing Directors' Review
Market conditions
Although we warned in May 2008 that the liquidity crisis was likely to lead to a credit crisis, we did not anticipate the pace and scale of recent events. Panic followed the bankruptcy of Lehman Brothers in mid-September and forced governments to rescue their collapsing banking systems. Credit markets tumbled even further, this time alongside equity markets around the world.
It is now evident that the governments of mature economies have and will continue to support the banking system at more or less any cost. This is a welcome development but it is still unclear when banks will start to lend money again given their need to reduce the size of their loan books.
So where does this leave the LBO market which ICG serves?
The need for most banks to de-lever further, as well as the demise of many loan fund managers, has led to a drought of senior debt available for private equity transactions and, consequently, the LBO market has stalled. It is unlikely that these banks will seek to finance LBOs in the immediate future given their capital positions and the pressure on them to kick-start the consumer economy and support local SMEs.
We continue to believe in the private equity model. The best investors and the best credit managers in the industry will emerge out of this downturn stronger and with better franchises, as they have done in previous difficult economic cycles. In due course, private equity investors will seek to benefit from low valuations. When this happens, we will be ready to support them in all our local markets.
In the meantime the secondary market offers some outstanding investment opportunities. The sale of increasing numbers of loan portfolios, measured in billions of Euros and Dollars, has been indiscriminate but even so there are very few buyers. The consequence is that loan pricing has reached almost unimagined discounts. It is now possible to buy a good quality portfolio of senior debt in LBOs generating a return of more than 20% per annum. Our view is that, on a selective basis, now is the time to take advantage of these unprecedented opportunities.
ICG's strategy and priorities
We remain focused on our long term strategy. We believe that the strength of our local network will continue to give us privileged access to transactions in the key mezzanine markets around the globe once the LBO market recovers. The next generation of primary LBOs is likely to experience better structuring, better pricing and better terms than we have seen for many years.
In the meantime, our priorities are:
Monitoring and managing our portfolio;
Maintaining a strong balance sheet;
Continuing to raise third party funds;
Investing cautiously into the secondary loan market.
Monitoring and managing our portfolio
Given the economic outlook, monitoring and managing our portfolio is our key priority, and this is reflected in individual and team objectives at every level of our organisation.
Identifying potential problems early and acting quickly to maximise recoveries are fundamental elements of our investment policy. This has driven our strong track record of recoveries. The strength of our local teams provide the platform from which we have historically achieved such high recoveries. We believe that we have the necessary resources and experience, accumulated over 20 years to outperform in this market.
Our portfolio is performing well overall given the deteriorating economic environment. At the September quarterly review, 50% of the companies in our portfolio were on or above budget, and 75% were at or above last year's level. For our 20 largest assets, which accounted for 43% of our investment portfolio at 30 September 2008, these figures were 70% and 85% respectively. Our 10 largest equity investments, accounting for 38% of our equity portfolio, were also performing satisfactorily.
However, a limited number of assets, particularly in the economies or sectors most affected by the economic downturn, are showing signs of strain. It is early days in terms of assessing the full impact of the rapidly deteriorating economy on our portfolio. A number of our investee companies may not survive a severe and prolonged economic downturn, but the diversity of our portfolio and the experience of our investment executives place us in a strong position to outperform the market. With over 130 companies spread across 20 countries and 23 sectors, our portfolio is well diversified.
We will continue to take a prudent approach to provisioning. Gross provisions for the portfolio companies were £54.2m for the six months to 30 September 2008. In this period we also disposed of two assets which had been previously provided for, leading to recoveries of provisions of £25.6m. This illustrates both our conservative approach to provisioning and our determination to maximise recoveries from impaired assets.
Maintaining a strong balance sheet
Earlier this year we raised £175m through a Rights Issue and secured a new £450m bank facility. As at 30 September 2008, our total debt facilities stood at £2.3bn. With gearing of 184% and undrawn facilities of £656m at 30 September 2008, we are in a good position to respond to the current adverse economic environment.
In light of the extraordinary developments in the global financial systems witnessed in recent weeks, our previous assumption that the debt market would open for periods during 2009 and 2010 looks optimistic. We now believe that liquidity will not return to the market for some time. With only £80m due to repay in the next 18 months, our balance sheet remains liquid. Nonetheless, we will continue to review our funding options to maximise liquidity and maintain our financial strength through the current cycle and beyond.
Continuing to raise third party funds
We are committed to the model of co-investment between the balance sheet and our third party mezzanine funds. However, the near absence of debt financing combined with low levels of early repayments limit our ability to leverage our balance sheet further. As a result third party funds are likely to contribute a higher proportion of funding for the transactions we invest in. Although the fund raising environment is challenging, we have been pleased by the level of interest in our funds by both new and existing investors.
In October we closed our second Asia Pacific Fund, ICG Asia Pacific 2008, at US$1bn, twice the size of our first fund. As with the first fund, third parties contributed 60% to the fund with the ICG balance sheet contributing the remainder. In addition we held a first close for the Minority Partners Fund, with new third party commitments of €157m to be invested alongside ICG's balance sheet and mezzanine funds, giving us over €500m for this type of investment. We are also pleased to have completed the first close of our Recovery Fund at €875m, including €275m of new third party commitments as well as commitments from ICG's balance sheet and mezzanine funds. We are actively marketing these two funds and are experiencing a positive response from investors despite the difficult fund raising environment. We expect to reach final closes on these two funds during the financial year.
On Credit Fund Management ("CFM"), there is no appetite for new CDOs and we do not expect to increase funds under management through new structured deals for some time. However, we are seeking to grow the business through new products, as more institutional investors seek to take advantage of the excellent opportunities in the loan market. The calibre of our CFM team and our track record in this asset class are strong competitive advantages.
Investing cautiously into the secondary loan market
The dislocation in the credit market has generated unusually attractive investment opportunities in the secondary loan market. The complementary skills of our CFM and mezzanine teams are a key advantage in identifying and executing the most attractive investments. With over 130 European names on our balance sheet and an additional 120 companies closely monitored by our CFM team, we have unrivalled insight into the performance and value of European LBO assets.
Overview of the First Half
In the six months to 30 September 2008 we invested or arranged £559m in 11 transactions on behalf of our balance sheet, mezzanine funds and other third parties. These new transactions were completed at attractive terms reflecting the reduced availability of liquidity. The average expected returns are 12.5% above LIBOR, more than 200 basis points above the level of pricing achieved in the last two years. This considerably improved risk adjusted return reflects the favourable competitive environment experienced in the first half of this year.
Our mezzanine funds continued to perform well. The ICG European Fund 2006 was 47% invested in 37 portfolio companies at 30 September 2008. Our first Asia Pacific fund, the Intermediate Capital Asia Pacific Mezzanine Fund 2005, was also fully invested as at 30 September 2008.
Within our CFM business, all but one of our CDOs are cash flow vehicles. These funds continue to perform well given the economic conditions. Our CFM business has not experienced any default in the past two years and, in line with the rest of the business, monitoring our portfolios is the key priority. The Eurocredit Opportunities Fund, which is marked to market, remains above its covenant levels. Despite its restructuring in early 2008, it is still under pressure, but to date has been able to withstand severe market shocks.
Outlook
We do not expect liquidity to return to the market any time soon. The primary LBO market is likely to remain effectively shut for the next year, limiting our investment opportunities in that segment. While these market conditions prevail the secondary loan market will continue to offer some extraordinary investment opportunities. Our credit culture, strong local network and knowledge of the LBO market, position us well to take advantage of this dislocation.
However, our portfolio will not be immune to the deteriorating economic conditions. We have heightened our vigilance and the active management of our portfolio is our number one priority. Our performance over the last 20 years demonstrates that we have the skills and commitment to maximise value even in difficult conditions.
The calibre of our investment teams, many with long standing track records at ICG, and the strength of our balance sheet, will be a great advantage as we continue to respond to this downturn by protecting our existing investments and purchasing secondary loan assets.
Tom Attwood
On behalf of the Managing Directors
24 November 2008
Financial Review
Balance Sheet
Investment Portfolio
Our Loan and Investment portfolio increased by 12% to £2,589m in the six months to 30 September 2008. Over the period, we invested or arranged £559m in 11 transactions, compared to £898m in 21 transactions in the first half of last year. £356m was arranged in the first quarter and £203m in the second.
Of this £559m, £312m was retained on our balance sheet, £193m was allocated to our funds and the balance was syndicated or held for syndication to third parties. This compares to £468m retained on the balance sheet in the first half of last year.
Early repayments for the six month period amounted to £70m, considerably below the level experienced in the first half of last year of £458m. As a result net new lending was £242m over this period compared to just £10m last year.
£88m of the total amount invested or arranged in the six months to 30 September 2008 took the form of equity, of which £50m was retained on our balance sheet.
Equity stakes accounted for 18% of our investment portfolio at 30 September 2008. Junior mezzanine (also known as Payment-in-Kind notes) accounted for a further 15% and senior mezzanine 67%.
Capital Position
Our balance sheet remains robust. At 30 September 2008, shareholders' funds were £888m. Our net debt to shareholders' funds ratio at the end of September was 184%.
Total debt facilities were £2,346m at 30 September 2008, with undrawn facilities at £656m. These facilities are sourced from over 30 financial institutions, principally commercial banks.
Maintaining a strong balance sheet continues to be a key corporate objective. With only £80m due to be refinanced in the next 18 months, our balance sheet remains liquid.
Income Statement
Core Income
Core income was up 30%, at £84.6m, principally as a result of continued growth in net interest income.
Net interest income
Net interest income was up 39% to £99.7m excluding the impact of fair value movements on derivatives held for hedging purposes. This increase was driven by the new investments far outstripping early repayments, which has resulted in the average loan portfolio being 45% higher than in the first half of last year.
We have decided no longer to accrue rolled up interest on impaired assets for the entire accounting period during which the impairment is taken. We will continue to apply this methodology going forward. Previously, rolled up interest income on impaired assets was accrued until the day the impairment was identified. This change of treatment had a negative impact of £2.1m on net interest income in the first half.
Interest and dividend income was £147.6m compared to £106.0m in the first half of last year, reflecting the growth of our portfolio and favourable movements in exchange rates. This also included a one off contribution of £2.4m from disposed assets which had been fully provided for. Rolled up interest accounted for 53% of interest income over the six month period to 30 September 2008.
Interest payable (excluding the negative impact of £18.0m of fair value movements on derivatives held for hedging purposes) was £47.9m compared to £34.5m in the first half of last year. The increase was driven by higher average net debt over the period as we drew on our debt facilities to finance new investments.
Fee income
Excluding the contribution from carried interest, fee income was up 17% to £28.7m compared to the first half of last year. Carried interest from ICG European Fund 2000 contributed £0.7m to fee income in the first half of this year compared to £5.6m in the first half of last year. As a result, including carried interest, fee income was 3% lower than in the first half of last year at £29.4m.
Fee income for our Mezzanine Fund Management business was £13.6m, down 20% versus last year's level but up 14% excluding the impact of carried interest. Funds under management at 30 September 2008 were £3.1bn, up 6% since the end of March 2008.
In our CFM business, fee income was up 18% to £11.1m, as Eurocredit VIII, which was raised in November 2007, contributed fully to fee income in the period. Funds under management at 30 September 2008 were £4.3bn.
Arranging fees were up 18% to £4.6m.
Expenses
Operating costs increased 22% compared to the first half of last year to £44.5m. They were, however, 4% lower than in the second half of last year as our investment programme to strengthen our geographic network and support functions is now complete.
As a percentage of core income, expenses went down from 55.8% in the first half of last year to 52.6% this year.
Salaries and benefits were up 19% to £23.4m as the average headcount for the period increased 22% compared to the first half of last year.
Gains on investments
Gains on investments, at £19.9m, were substantially below the very high level achieved in the first half of last year £97.1m, reflecting the less favourable conditions for exits.
Impairments
In line with our cautious approach and our assessment of future economic conditions in the coming year, we have taken gross provisions of £54.2m for portfolio companies already impacted by the downturn. However, write backs on provisions previously charged through the P&L of £25.6m led to significantly lower net provisions of £28.6m for our mezzanine investments.
Further impairments of £14.2m for the equity stakes we own in the ICG managed CDOs led to net impairments of £42.8m. This £14.2m was primarily due to a write down in full of our equity stake in the Eurocredit Opportunities Fund. The carrying value on our balance sheet of the equity stakes in ICG managed CDOs was £20.1m at 30 September 2008.
Profit before tax
Profit before tax was 72% lower at £57.8m compared to £132.9m, excluding the fair value movements on derivatives held for hedging purposes, as the higher core income was more than offset by lower realisations over the period. The impact of fair value movements on derivatives held for hedging purposes was a negative £18.0m in the first half of the year compared to a positive £9.1m in the first half of last year.
Earnings per share
Earnings per share for the six months to 30 September 2008 were 29.8p, down 76% on last year.
Dividend
The Board has declared an interim dividend of 20.5p, up 11% over last year's interim dividend (19.5p restated to 18.5p following the Rights Issue in February 2008).
Financial Outlook
In the second half we expect a lower level of new investments and core income to be broadly in line with the level achieved in the first half adjusted for one off contributions. Interest income on recent investments will be offset by a higher cost of debt interest expenses given that we have partially drawn our new bank facility secured in March 2008, the cost of which is higher than our older facilities. We anticipate that capital gains will remain at the low level experienced in the first half. In light of the deterioration of the economic environment since the end of September, it is likely that gross provisions will be higher in the second half.
Philip Keller
Finance Director
24 November 2008
Principal Risk and Uncertainties for the Second Half
The principal risks and uncertainties faced by ICG are set out in our Annual Report and Accounts 2008. The main categories addressed were: Business Risk, Credit Risk, Funding Risk and Market Risk. Specifically for the second half of this financial year, the principal risk is Credit Risk. Visibility on the severity of the recession and its impact on our portfolio remains limited at this stage. Managing our portfolio has been given the highest priority across the organisation as detailed throughout this Half Year Statement.
New investments
In the six month period to 30 September 2008 ICG and funds managed by ICG invested in the following 11 companies:
Asia Pacific
Veda is Australia and New Zealand's leading supplier of consumer and commercial credit reporting. In September 2008 ICG facilitated the restructuring of Veda's balance sheet by arranging a AUD 150m mezzanine facility to refinance senior debt and to provide additional working capital. This facility was drawn in October. In September 2008 ICG also acquired AUD 15m of Veda's existing subordinated debt in the secondary market. A further AUD 15m was acquired in early October. Only the AUD 15m of Veda's existing subordinated debt purchased in September in the secondary market is included in the new lending figures for the six month period to 30 September 2008.
Europe
Biffa is a leading UK waste management company. In April 2008 ICG invested £100m in the mezzanine provided to support taking the company private. ICG also invested £25m in the equity.
Casa Reha is a German care home operator. In June 2008 ICG invested €30m in the mezzanine provided to support the secondary buyout. ICG also invested €15m in the equity.
CEPL is the leading French logistics provider specialising in the outsourcing of automated multi-product order preparation. In September 2008 ICG invested €50m to assist in the secondary buyout.
Labco, a French company, has the largest network of private clinical or routine laboratories in Europe. In July 2008 ICG invested €80m in the mezzanine facilities provided to assist the buyout. ICG has also committed a further mezzanine facility to assist in future acquisitions.
Löwenplay, a previous investee company, is a German gaming arcade operator. In April 2008 ICG co-arranged the mezzanine facility provided to support the tertiary buyout. ICG invested €60m.
Sicurglobal is an Italian company provides security services. In April 2008 ICG arranged and provided a mezzanine facility of €35m to support the secondary buyout. ICG also invested €13m in the equity.
Veinsur is a Spanish truck distributor that also provides maintenance, repair and after sales services. In June 2008 ICG arranged and provided mezzanine facilities of €36m to support the buyout.
North America
AST is a U.S. company providing share registry services. In May 2008 ICG invested US$93m in the mezzanine facility provided to support the buyout. ICG also invested US$44m in the equity. The deal was completed by our Asia Pacific team.
Behavioral Interventions is the leading U.S. provider of correctional products and services for government agencies. In August 2008 ICG arranged a mezzanine facility of US$100m to support the tertiary buyout. ICG also invested US$2.5m in the equity.
Hudson, a U.S. company, designs and manufactures air cooled heat exchangers and axial flow fans. In August 2008 ICG co-led the mezzanine facility provided to support the secondary buyout. ICG invested US$48m in the mezzanine and US$5m in the equity.
Other
ICG also provided additional funding of over £22m for a further 13 existing investee companies.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board,
John Manser
Chairman
Philip Keller
Finance Director
24 November 2008
Condensed Financial Statements
Condensed consolidated income statement
for the six months ended 30 September 2008
| | Six months ended 30 Sept 2008 (unaudited) £m | Six months ended 30 Sept 2007 (unaudited) £m | Year ended 31 March 2008 (audited) £m |
| Interest and dividend income | 147.6 | 106.0 | 236.9 |
| Gains on investments | 19.9 | 97.1 | 135.2 |
| Fee and other operating income | 29.4 | 30.3 | 57.0 |
| | 196.9 | 233.4 | 429.1 |
| Interest payable and other related financing costs | (65.9) | (25.4) | (38.3) |
| Provisions for impairment of assets | (42.8) | (9.3) | (46.0) |
| Administrative expenses | (48.4) | (56.7) | (115.3) |
| Profit before tax | 39.8 | 142.0 | 229.5 |
| Tax expense | (14.1) | (48.7) | (74.7) |
| Profit for the period attributable to equity shareholders | 25.7 | 93.3 | 154.8 |
| Earnings per share | 29.8p | 125.7p | 213.4p |
| Diluted earnings per share | 29.3p | 124.2p | 210.8p |
All activities represent continuing operations.
Condensed consolidated statement of recognised income and expense
for the six months ended 30 September 2008
| | Six months ended 30 Sept 2008 (unaudited) £m | Six months ended 30 Sept 2007 (unaudited) £m | Year ended 31 March 2008 (audited) £m |
| Available for sale investments: | | | |
| Valuation gains taken to equity | 4.5 | 53.9 | 48.0 |
| Transferred to profit or loss for the period | (1.2) | (50.4) | (42.5) |
| Tax on items taken directly to or transferred from equity | (1.2) | (1.7) | (2.5) |
| Net income recognised directly in equity | 2.1 | 1.8 | 3.0 |
| Profit for the period | 25.7 | 93.3 | 154.8 |
| Total recognised income and expense for the period attributable to the equity holders of the parent | 27.8 | 95.1 | 157.8 |
Condensed consolidated balance sheet
for the six months ended 30 September 2008
| | 30 Sept 2008 (unaudited) £m | 30 Sept 2007 (unaudited) £m | 31 March 2008 (audited) £m |
| Non-current assets | | | |
| Property, plant and equipment | 7.5 | 4.6 | 6.1 |
| Financial assets: loans and investments and warrants | 2,588.9 | 1,775.7 | 2,306.0 |
| other derivatives | 2.3 | 2.9 | 1.8 |
| | 2,598.7 | 1,783.2 | 2,313.9 |
| Current assets | | | |
| Trade and other receivables | 39.3 | 26.1 | 39.6 |
| Financial assets: loans and investments | 56.0 | 157.2 | 151.8 |
| Cash and cash equivalents | 36.3 | 80.7 | 50.9 |
| | 131.6 | 264.0 | 242.3 |
| Total assets | 2,730.3 | 2,047.2 | 2,556.2 |
| Equity and reserves | | | |
| Called up share capital | 17.3 | 14.1 | 17.2 |
| Share premium account | 348.5 | 177.0 | 348.5 |
| Capital redemption reserve | 1.4 | 1.4 | 1.4 |
| Other reserves | 23.2 | 14.1 | 17.9 |
| Retained earnings | 497.7 | 463.6 | 511.2 |
| Equity shareholders’ funds | 888.1 | 670.2 | 896.2 |
| Non current liabilities | | | |
| Financial liabilities | 1,614.1 | 1,195.3 | 1,357.0 |
| Deferred tax liabilities | 8.2 | 6.8 | 12.9 |
| | 1,622.3 | 1,202.1 | 1,369.9 |
| Current liabilities | | | |
| Trade and other payables | 94.1 | 99.1 | 132.7 |
| Financial liabilities | 96.2 | 20.4 | 111.3 |
| Liabilities for current tax | 29.6 | 55.4 | 46.1 |
| | 219.9 | 174.9 | 290.1 |
| Total liabilities | 1,842.2 | 1,377.0 | 1,660.0 |
| Total equity and liabilities | 2,730.3 | 2,047.2 | 2,556.2 |
Condensed consolidated cash flow statement
for the six months ended 30 September 2008
| | Six months ended 30 Sept 2008 (unaudited) £m | Six months ended 30 Sept 2007 (unaudited) £m | Year ended 31 March 2008 (audited) £m |
| Net cash from operating activities | | | |
| Interest and fee receipts | 106.6 | 123.0 | 223.7 |
| Dividends received | 7.4 | 2.8 | 6.2 |
| Gain on disposals | 18.5 | 105.3 | 141.8 |
| Interest payments | (63.5) | (25.7) | (67.6) |
| Cash payments to suppliers and employees | (73.2) | (70.1) | (107.6) |
| Net proceeds from sale/(purchase) of current financial assets | 69.4 | (143.6) | (115.7) |
| Purchase of loans and investments | (312.1) | (467.8) | (939.8) |
| Proceeds from sale of loans and investments | 95.5 | 458.0 | 609.4 |
| Cash used by operations | (151.4) | (18.1) | (249.6) |
| Taxes paid | (36.5) | (30.2) | (60.0) |
| Net cash used in operating activities | (187.9) | (48.3) | (309.6) |
| Investing activities | | | |
| Purchase of property, plant and equipment | (2.0) | (1.7) | (4.6) |
| Net cash used in investing activities | (2.0) | (1.7) | (4.6) |
| Financing activities | | | |
| Dividends paid | (39.2) | (29.2) | (43.0) |
| Increase/(decrease) in long-term borrowings | 214.4 | (8.4) | 65.7 |
| Decrease in bank overdrafts | – | (5.6) | (5.6) |
| Proceeds on issue of shares | 0.1 | 1.9 | 176.0 |
| Net cash from/(used in) financing activities | 175.3 | (41.3) | 193.1 |
| Net decrease in cash | (14.6) | (91.3) | (121.1) |
| Cash and cash equivalents at beginning of period | 50.9 | 172.0 | 172.0 |
| Cash and cash equivalents at end of period | 36.3 | 80.7 | 50.9 |
Notes
1 Analysis of profit before tax
| | Six months ended 30 Sept 2008 (unaudited) £m | Six months ended 30 Sept 2007 (unaudited) £m | Year ended 31 March 2008 (audited) £m |
| Income | | | |
| Interest and dividend income | 147.6 | 106.0 | 236.9 |
| Fee and other operating income | 29.4 | 30.3 | 57.0 |
| | 177.0 | 136.3 | 293.9 |
| Less: related expenses | | | |
| Interest payable and other related financing costs | (65.9) | (25.4) | (38.3) |
| Addback: net loss/(gain) on derivatives held for hedging purposes* | 18.0 | (9.1) | (36.2) |
| Salaries and benefits | (23.4) | (19.7) | (43.2) |
| Operating expenses | (8.9) | (8.4) | (19.5) |
| Medium Term Incentive Scheme | (12.2) | (8.4) | (20.3) |
| Core income | 84.6 | 65.3 | 136.4 |
| Gains on investments | 19.9 | 97.1 | 135.2 |
| Medium Term Incentive Scheme | (3.9) | (20.2) | (32.3) |
| Net gains on investments | 16.0 | 76.9 | 102.9 |
| Provisions against loans and investments | (42.8) | (9.3) | (46.0) |
| Net gain/(loss) on derivatives held for hedging purposes* | (18.0) | 9.1 | 36.2 |
| Profit on ordinary activities before taxation | 39.8 | 142.0 | 229.5 |
The costs of the Medium Term Incentive Scheme included under core income relates to rolled-up interest.
*Net (loss)/gain relating to movements in the fair value of derivatives used to economically hedge certain liabilities of the Group, excluding any interest accruals and spot F/X-translation movements on these derivatives, are not considered part of core income.
2 Basis of accounting
The interim financial statements have been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union, and on the basis of the accounting policies and methods of computation set out in the statutory accounts of the Group for the period ended 31 March 2008.
3 Segmental revenue
(a) Business segments
| | Mezzanine finance £m | Fund management £m | Total £m |
| For the six months ended 30 September 2008 | | | |
| Revenue – external | 164.7 | 32.2 | 196.9 |
| Segment result | 29.8 | 10.0 | 39.8 |
| For the year ended 31 March 2008 | | | |
| Revenue – external | 379.2 | 49.9 | 429.1 |
| Segment result | 191.8 | 37.7 | 229.5 |
| For the six months ended 30 September 2007 | | | |
| Revenue – external | 204.7 | 28.7 | 233.4 |
| Segment result | 121.6 | 20.4 | 142.0 |
(b) Geographical segments
| | Asia Pacific | Europe | US | Total |
| For the six months ended 30 September 2008 | | | | |
| Revenue – external | 11.1 | 180.7 | 5.1 | 196.9 |
| For the year ended 31 March 2008 | | | | |
| Revenue – external | 44.2 | 383.7 | 1.2 | 429.1 |
| For the six months ended 30 September 2007 | | | | |
| Revenue – external | 8.0 | 225.3 | 0.1 | 233.4 |
4 Dividends
The interim dividend of 20.5p per share will be paid to members registered at the close of business on 5 December 2008.
5 Earnings per share
| Earnings | Six months ended Sept 30 2008 £m | Six months ended Sept 30 2007* £m | Year ended Mar 31 2008 £m |
| Earnings for the purposes of basic earnings per share being net profit attributable to the equity holders of the parent | 25.7 | 93.3 | 154.8 |
| Number of shares | 2008 | 2007 | 2008 |
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 86,279,811 | 74,222,027 | 72,548,930 |
| Effect of dilutive potential ordinary shares | | | |
| Share options | 1,393,806 | 909,284 | 887,054 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 87,673,617 | 75,131,311 | 73,435,984 |
\* The earnings per share for 2007 have been restated following ICG's ordinary share Rights Issue in February 2008, by multiplying the prior period eps by the adjustment factor of 0.94797. The weighted average number of ordinary shares have therefore been adjusted by dividing by 0.94797.
6 Financial liabilities
Private placements
During the period, the Group issued two fixed interest rate private placements of £20m and US$22m, repayable in 2018 and 2015 respectively. During the period there were repayments of private placements of US$22m.
Bank facilities
During the period there was a net drawdown of £27m on the facility dated April 2005, amended in December 2006.
A new facility was entered into on 31 March 2008 of £450m. Net drawdowns during the period were £225m.
7 Equity shareholders' funds
| Six months ended 30 September 2008 | Share capital £m | Share premium £m | Capital redemption reserve fund £m | Foreign currency translation reserve £m | Reserve for share based payments £m | Available for sale or reserve £m | Retained earnings£m | Total£m |
| Balance at 31 March 2008 | 17.2 | 348.5 | 1.4 | – | 5.3 | 12.6 | 511.2 | 896.2 |
| Foreign exchange | – | – | – | 0.6 | – | 0.9 | – | 1.5 |
| Exercise of share options | 0.1 | – | – | – | – | – | – | 0.1 |
| Credit for share based payments | – | – | – | – | 2.5 | – | – | 2.5 |
| Revaluation of available for sale investments | – | – | – | – | – | 1.3 | – | 1.3 |
| Profit for the period | – | – | – | – | – | – | 25.7 | 25.7 |
| Dividends paid | – | – | – | – | – | – | (39.2) | (39.2) |
| Balance at 30 September 2008 | 17.3 | 348.5 | 1.4 | 0.6 | 7.8 | 14.8 | 497.7 | 888.1 |
| Six months ended 30 September 2007 | Share capital £m | Share premium £m | Capital redemption reserve fund £m | Reserve for share based payments £m | Available for sale or reserve £m | Retained earnings£m | Total£m |
| Balance at 31 March 2007 | 14.0 | 175.7 | 1.4 | 2.9 | 8.1 | 399.5 | 601.6 |
| Exercise of share options | 0.1 | 1.3 | – | – | – | – | 1.4 |
| Credit for share based payments | – | – | – | 1.3 | – | – | 1.3 |
| Revaluation of available for sale investments | – | – | – | – | 1.8 | – | 1.8 |
| Profit for the period | – | – | – | – | – | 93.3 | 93.3 |
| Dividends paid | – | – | – | – | – | (29.2) | (29.2) |
| Balance at 30 September 2007 | 14.1 | 177.0 | 1.4 | 4.2 | 9.9 | 463.6 | 670.2 |
| Year ended 31 March 2008 | Share capital £m | Share premium £m | Capital redemption reserve fund £m | Reserve for share based payments £m | Available for sale or reserve £m | Retained earnings £m | Total £m |
| Balance at 31 March 2007 | 14.0 | 175.7 | 1.4 | 2.9 | 8.1 | 399.5 | 601.6 |
| Foreign exchange | – | – | – | – | 1.5 | (0.1) | 1.4 |
| Exercise of share options | 0.1 | 1.5 | – | – | – | – | 1.6 |
| Proceeds from Rights Issue | 3.1 | 171.3 | – | – | – | – | 174.4 |
| Credit for share based payments | – | – | – | 2.4 | – | – | 2.4 |
| Revaluation of available for sale investments | – | – | – | – | 3.0 | – | 3.0 |
| Profit for the period | – | – | – | – | – | 154.8 | 154.8 |
| Dividends paid | – | – | – | – | – | (43.0) | (43.0) |
| Balance at 31 March 2008 | 17.2 | 348.5 | 1.4 | 5.3 | 12.6 | 511.2 | 896.2 |
8 Related party transactions
There have been no material changes to the related party transactions as disclosed in the Annual Report and Accounts for the year ending 31 March 2008.
9 General
The interim financial statements for the six months to 30 September 2008 were approved by the Board on 20 November 2008. These financial statements are unaudited, but they have been reviewed by the auditors, having regard to the bulletin "Review of Interim Financial Information" issued by the Auditing Practices Board.
The financial information for the year ended 31 March 2008 does not constitute statutory accounts under section 240 of the Companies Act 1985. A copy of the statutory accounts for that period have been delivered to the Registrar of Companies. The auditors' report on those statements was unqualified and did not include a statement under section 237 (2) or (3) of the Companies Act 1985.
Copies of this statement are available on our website.