Intermediate Capital Group plc : Interim Results for the six months
ended 30 September 2023
ICG plc
Interim Results Statement for the six
months ended 30 September 2023
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Delivering growth today, visibility on future
opportunities |
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Highlights
- Total AUM of
$81.0bn, up 3%1 compared to 31 March 2023
- Fee-earning AUM of
$64.2bn, up 4%1 compared to 31 March 2023, and $14.3bn of AUM not
yet earning fees
- Fundraising in
line with our expectations at $5.0bn, with demand both for our
flagship strategies ($3.2bn) and scaling strategies ($1.8bn);
remain on track to meet our medium-term fundraising guidance
- Management fee
income of £234m (H1 FY23: £252m), up 5% YoY excluding catch-up fees
(H1 FY23: £29.3m, H1 FY24: nil)
- Performance fee
income of £29m (H1 FY23: £14m)
- FMC PBT of £162.7m
(H1 FY23: £143.7m), operating margin of 55%
- Balance sheet
investment performance delivering an annualized NIR of 11% (five
year average: 11%)
- Group profit
before tax of £241.9m (H1 FY23: £35.6m) and Group EPS of 71.5p (H1
FY23: 13.5p)
- NAV per share of
714p (31 March 2023: 694p), robust capitalisation: net gearing of
0.48x, total available liquidity of £1.0bn
- Interim dividend
of 25.8p per share, in line with policy (H1 FY23: 25.3p per
share)
Note: unless otherwise stated the financial results discussed
herein are on the basis of Alternative Performance Measures (APM) -
see page 5. 1On a constant currency basis. |
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Benoît
Durteste |
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CEO and CIO |
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ICG had a strategically and
financially successful first half. We are executing on our strategy
of "scaling up" and "scaling out", and are investing in our people
and platform. Our broad waterfront of products today, built on our
35 years' experience of managing credit, positions us well to
succeed across cycles. During the period we made progress across
flagship, scaling and seeding strategies. Fee-earning AUM, profits
from our fund management activities, and the value of our balance
sheet all grew. Visibility on our future growth and earnings
prospects increased. Key funds generated value for our clients and
shareholders, with low default rates, resilient NAVs, and $1.9bn of
realisations1. This is underpinned by portfolio companies being
appropriately capitalised and growing their earnings. Today,
clients in our debt funds are enjoying historically high returns,
and our teams in more equity-oriented funds are successfully
navigating the impact of rising rates on those portfolios.We are
continuing to invest in further diversification, making seed
investments during the period for strategies including LP
Secondaries, Real Estate Equity, Life Sciences, and Infrastructure
Asia. We are also exploring ways to leverage the breadth of ICG's
platform to distribute products to the HNW and UHNW market,
building on success of Strategic Equity. In a fast-changing macro
background, our long-term business model is performing. We have the
right strategic and financial resources to execute on the
substantial growth potential embedded in ICG today, and we expect
to make further strategic and financial progress in the second half
of the year and beyond.1 Fee-earning AUM of direct investment
funds |
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PERFORMANCE OVERVIEW
Unless stated otherwise, the financial
results discussed herein are on the basis of alternative
performance measures (APM), which the Board believes assists
shareholders in assessing the financial performance of the Group.
See page 5 for further information.
Financial performance
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Six months to 30 September
2023 |
Six months to 30 September
2022 |
Year-on-year growth1 |
Twelve months to 30 September
2023 |
Last five years
CAGR1,2 |
Total AUM |
$81.0bn |
$68.5bn |
12% |
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18% |
Fee-earning AUM |
$64.2bn |
$57.3bn |
7% |
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19% |
Management fee income |
£233.9m |
£251.5m |
(7) % |
£463.8m |
23% |
Performance fee income |
£29.3m |
£13.8m |
n/m |
£35.1m |
5% |
Annualised Net Investment
Return % |
11% |
(2) % |
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10% |
11%3 |
Fund Management Company profit
before tax |
£162.7m |
£143.7m |
13% |
£329.7m |
23% |
Group profit before tax |
£241.9m |
£35.6m |
n/m |
£464.4m |
9% |
Group earnings per share |
71.5p |
13.5p |
n/m |
138.3p |
4% |
NAV per share |
714p |
658p |
9% |
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8% |
Dividend per share |
25.8p |
25.3p |
2% |
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21% |
1 AUM on constant currency basis.2 AUM
and per share calculations based on 30 September 2018 to 30
September 2023, all other items LTM 30 September 2018 to LTM 30
September 2023. Dividend includes H1 FY24 declared dividend.3 Five
year average.
Business activity
Six
months to 30 September 2023 |
Fundraising |
Deployment1 |
Realisations1,2 |
Structured and Private Equity |
$2.6bn |
$0.5bn |
$0.4bn |
Private Debt |
$1.4bn |
$1.6bn |
$1.0bn |
Real Assets |
$0.6bn |
$1.1bn |
$0.5bn |
Credit |
$0.4bn |
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Total |
$5.0bn |
$3.2bn |
$1.9bn |
1Direct investment funds.2Realisations
of third-party fee-earning AUM.
Guidance Our guidance remains unchanged and is set
out below. |
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Fundraising |
Performance fees |
FMC operating margin |
Net Investment Returns |
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At least $40bn fundraising in aggregate between 1 April 2021 and 31
March 2024 |
Performance fees to represent 10 - 15% of third-party fee income
over the medium-term |
In excess of 50% |
Low double-digit percentage points over the medium-term |
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COMPANY PRESENTATION
A presentation for shareholders,
debtholders and analysts will be held at 09:00 GMT today: join via
the link on our website. A recording and transcript of the
presentation will be available on demand from the same location in
the coming days.
COMPANY TIMETABLE
Ex-dividend date |
7 December 2023 |
Record date |
8 December 2023 |
Last date to elect for
dividend reinvestment |
14 December 2023 |
Payment of ordinary
dividend |
8 January 2024 |
Q3 trading statement |
25 January 2024 |
Seminar: Deep-dive on "scaling
out" |
21 February 2024 |
ENQUIRIES
Shareholders & Debtholders /
analysts: |
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Chris Hunt, Head of Corporate
Development & Shareholder Relations, ICG |
+44(0)20 3545 2020 |
Media: |
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Fiona Laffan, Global Head of
Corporate Affairs, ICG |
+44(0)20 3545 1510 |
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.
ABOUT ICG
ICG provides flexible capital solutions
to help companies develop and grow. We are a global alternative
asset manager with over 30 years' history, operating across four
asset classes: Structured and Private Equity, Private Debt, Real
Assets, and Credit.
We develop long-term relationships with
our business partners to deliver value for shareholders, clients
and employees. We are committed to being a net zero asset manager
across our operations and relevant investments by
2040.
ICG is listed on the London Stock
Exchange (ticker symbol: ICP). Further details are available at
www.icgam.com.
FINANCIAL REVIEW
AUM Refer to the Datapack issued with
this announcement for further detail on AUM (including fundraising,
realisations and deployment by fund).
Total AUMDuring the
period, Total AUM grew 3% on a constant currency basis (up 1% on a
reported basis) and at 30 September 2023 was $81.0bn (31 March
2023: $80.2bn). The balance sheet investment portfolio accounted
for 4.0% of the Total AUM (31 March 2023: 4.1%).
Third-party AUM and fee-earning
AUMDry powder and AUM not yet earning fees: at 30
September 2023, we had $22.3bn of third-party AUM available to
deploy in new investments, $14.3bn of which is not yet earning fees
but will do so when the capital is invested or enters its
investment period.
Current fundraising: at 30 September
2023, closed-end funds that were actively fundraising included SDP
V and SDP SMAs; Strategic Equity V; North America Credit Partners
III; Europe Mid-Market II; Infrastructure Europe II; LP Secondaries
I; Life Sciences I; and various Real Estate equity and debt
strategies. The timings of closes for these funds depends on a
number of factors, including the prevailing market
conditions.
Third-party AUM ($m) |
Structured and Private Equity |
Private Debt |
Real Assets |
Credit |
Total |
At 1 April 2023 |
27,728 |
23,641 |
7,863 |
17,755 |
76,987 |
Additions |
2,633 |
1,464 |
634 |
388 |
5,119 |
Realisations |
(428) |
(312) |
(334) |
(1,241) |
(2,315) |
Net additions /
(realisations) |
2,205 |
1,152 |
300 |
(853) |
2,804 |
FX and
other |
(1,137) |
(563) |
(190) |
(134) |
(2,024) |
At 30 September 2023 |
28,796 |
24,230 |
7,973 |
16,768 |
77,767 |
Change $m |
1,068 |
589 |
110 |
(987) |
780 |
Change % |
4% |
3% |
1% |
(6) % |
1% |
Change
% (constant exchange rate) |
6% |
4% |
3% |
(4) % |
3% |
Fee-earning AUM ($m) |
Structured and Private Equity |
Private Debt |
Real Assets |
Credit |
Total |
At 1 April 2023 |
23,840 |
14,249 |
6,862 |
17,898 |
62,849 |
Funds raised: fees on committed capital |
2,412 |
— |
405 |
— |
2,817 |
Deployment of funds: fees on invested capital |
79 |
1,620 |
710 |
490 |
2,899 |
Total additions |
2,491 |
1,620 |
1,115 |
490 |
5,716 |
Realisations |
(409) |
(965) |
(497) |
(1,282) |
(3,153) |
Net additions /
(realisations) |
2,082 |
655 |
618 |
(792) |
2,563 |
Stepdowns |
(220) |
— |
(92) |
— |
(312) |
FX and
other1 |
(371) |
(253) |
(225) |
(47) |
(896) |
At 30 September 2023 |
25,331 |
14,651 |
7,163 |
17,059 |
64,204 |
Change $m |
1,491 |
402 |
301 |
(839) |
1,355 |
Change % |
6% |
3% |
4% |
(5) % |
2% |
Change
% (constant exchange rate) |
9% |
5% |
6% |
(3) % |
4% |
1 See page 16 for FX exposure of
fee-earning AUM, fee income, FMC expenses and Balance sheet
investment portfolio. Group financial performance
The Board and management monitor the financial performance of the
Group on the basis of Alternative Performance Measures (APM), which
are non-UK-adopted IAS measures. The APM form the basis of the
financial results discussed in this review, which the Board
believes assist shareholders in assessing their investment and the
delivery of the Group’s strategy through its financial
performance.
The substantive difference between APM
and UK-adopted IAS is the consolidation of funds, including seeded
strategies, and related entities deemed to be controlled by the
Group, which are included in the UK-adopted IAS consolidated
financial statements at fair value but excluded for the APM in
which the Group’s economic exposure to the assets is
reported.
Under IFRS 10, the Group is deemed to
control (and therefore consolidate) entities where it can make
significant decisions that can substantially affect the variable
returns of investors. This has the impact of including the assets
and liabilities of these entities in the consolidated statement of
financial position and recognising the related income and expenses
of these entities in the consolidated income
statement.
The Group’s profit before tax on an
UK-adopted IAS basis was above prior period at £259.9m (H1 FY23:
£30.8m). On the APM basis it was above the prior period at £241.9m
(H1 FY23: £35.6m).
Detail of these adjustments can be found
in note 3 to the UK-adopted IAS condensed consolidated financial
statements on pages 27 to 28.
£m unless stated |
30 September 2023 (Unaudited) |
30 September 2022(Unaudited) |
Change % |
Twelve months to 30 September 2023
(Unaudited) |
Management fees |
233.9 |
251.5 |
(7) % |
463.8 |
Performance fees |
29.3 |
13.8 |
n/m |
35.1 |
Third-party fee
income |
263.2 |
265.3 |
(1) % |
498.9 |
Movement in FV of
derivative |
— |
(45.6) |
(100) % |
18.8 |
Other
Fund Management Company income |
32.8 |
37.2 |
(12) % |
61.3 |
Fund Management Company revenue |
296.0 |
256.9 |
15% |
579.0 |
Fund Management Company operating expenses |
(133.3) |
(113.2) |
18% |
(249.3) |
Fund Management Company profit before tax |
162.7 |
143.7 |
13% |
329.7 |
Fund Management Company operating margin |
55.0% |
55.9% |
(0.9) % |
57.0% |
Net investment return |
159.4 |
(26.5) |
n/m |
288.2 |
Other Investment Company
Income |
(17.6) |
(7.7) |
n/m |
(13.8) |
Investment Company operating
expenses |
(48.6) |
(47.7) |
(2) % |
(104.0) |
Interest income |
10.0 |
3.9 |
n/m |
20.0 |
Interest expense |
(24.0) |
(30.1) |
20% |
(55.7) |
Investment Company (loss) / profit before tax |
79.2 |
(108.1) |
n/m |
134.7 |
Group profit before tax |
241.9 |
35.6 |
n/m |
464.4 |
Tax |
(37.5) |
3.1 |
n/m |
(69.4) |
Group profit after tax |
204.4 |
38.7 |
n/m |
395.0 |
Earnings per share |
71.5p |
13.5p |
n/m |
138.3p |
Dividend per share |
25.8p |
25.3p |
2% |
78.0p |
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Liquidity |
£1.0bn |
£1.3bn |
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Balance sheet investment
portfolio |
£3.0bn |
£2.9bn |
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Net gearing |
0.48x |
0.55x |
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Net asset value per share |
714p |
658p |
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Structured and Private
Equity
Overview
Flagship strategies |
Scaling strategies |
Seeding strategies |
European CorporateStrategic Equity |
European Mid-MarketAsia Pacific CorporateLP Secondaries |
Life SciencesUS Mid-Market |
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Six months to 30 September
2023 |
Six months to 30 September
2022 |
Year-on-year growth1 |
Twelve months to 30 September 2023 |
Last five years CAGR1,2 |
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Total AUM |
$30.9bn |
$25.3bn |
16% |
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21% |
Fee-earning AUM |
$25.3bn |
$23.1bn |
4% |
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20% |
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Fundraising |
$2.6bn |
$3.0bn |
(15) % |
$3.0bn |
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Deployment |
$0.5bn |
$1.5bn |
(65) % |
$3.3bn |
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Realisations |
$0.4bn |
$0.7bn |
(39) % |
$2.1bn |
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Effective management fee
rate |
1.25% |
1.25% |
— % |
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Management fees |
£127m |
£154m |
(18) % |
£256m |
25% |
Performance fees |
£22m |
£9m |
n/m |
£27m |
6% |
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Balance sheet investment
portfolio |
£1.8bn |
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Annualised net investment
return |
13% |
2% |
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16%3 |
1 AUM on constant currency basis.2 AUM
calculation based on 30 September 2018 to 30 September 2023, all
other items LTM 30 September 2018 to LTM 30 September 2023. 3 Five
year average.
Performance of key funds
Refer to the Datapack issued with this
announcement for further detail on fund performance
|
Vintage |
Total fund size |
Status |
% deployed |
Gross MOIC |
Gross IRR |
DPI |
Europe VI |
2015 |
€3.0bn |
Realising |
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2.2x |
23% |
179% |
Europe VII |
2018 |
€4.5bn |
Realising |
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1.8x |
20% |
42% |
Europe VIII |
2021 |
€8.1bn |
Investing |
43% |
1.2x |
16% |
— |
Europe Mid-Market I |
2019 |
€1.0bn |
Investing |
87% |
1.5x |
27% |
7% |
Europe Mid-Market II |
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Fundraising |
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Asia Pacific III |
2014 |
$0.7bn |
Realising |
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2.1x |
18% |
103% |
Asia Pacific IV |
2020 |
$1.0bn |
Investing |
44% |
1.4x |
24% |
— |
Strategic Secondaries II |
2016 |
$1.1bn |
Realising |
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3.0x |
48% |
155% |
Strategic Equity III |
2018 |
$1.8bn |
Realising |
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2.4x |
47% |
29% |
Strategic Equity IV |
2021 |
$4.3bn |
Investing |
97% |
1.7x |
53% |
4% |
Strategic Equity V |
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Fundraising |
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LP Secondaries I |
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Fundraising |
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Key drivers
Business activity |
Fundraising: Strategic Equity ($1.8bn) and Europe Mid-Market II
($0.8bn) Deployment: Majority coming from European Corporate
($0.2bn) and Europe Mid -Market ($0.2bn)Realisations: European
Corporate ($0.2bn) and Strategic Equity ($0.2bn) |
Fee income |
Management fees: Prior period included £29.3m of catch-up fees (H1
FY24: nil)Performance fees: H1 FY24 includes inaugural recognition
of performance fees for Europe VII (£12.5m) |
Balance sheet investment portfolio |
Investment returns: European Corporate and Strategic Equity drove
positive NIR, with underlying portfolio companies in both
strategies generally continuing to grow profits, as well as some
realisationsCash flow: £86m cash generation, driven by net
realisations in European Corporate and Strategic Equity |
Fund performance |
Portfolio continuing to demonstrate earnings growth; exits during
the period in Europe VIII, Strategic Equity IV and LP Secondaries
underpinning fund valuations and DPI |
Private Debt
Overview
Flagship strategies |
Scaling strategies |
Seeding strategies |
Senior Debt Partners |
North America Credit Partners |
- |
|
Six months to 30 September
2023 |
Six months to 30 September
2022 |
Year-on-year growth1 |
Twelve months to 30 September 2023 |
Last five years CAGR1,2 |
|
Total AUM |
$24.4bn |
$18.7bn |
24% |
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20% |
Fee-earning AUM |
$14.7bn |
$11.8bn |
18% |
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24% |
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Fundraising |
$1.4bn |
$1.0bn |
49% |
$4.3bn |
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Deployment |
$1.6bn |
$2.5bn |
(35) % |
$3.6bn |
|
Realisations |
$1.0bn |
$1.5bn |
(37) % |
$1.4bn |
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Effective management fee
rate |
0.82% |
0.85% |
(0.03) % |
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Management fees |
£47m |
£40m |
16% |
£90m |
28% |
Performance fees |
£7m |
£4m |
73% |
£9m |
16%
|
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|
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Balance sheet investment
portfolio |
£0.2bn |
|
|
|
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Annualised net investment
return |
10% |
13% |
|
|
10%3 |
1 AUM on constant currency basis.2 AUM
calculation based on 30 September 2018 to 30 September 2023, all
other items LTM 30 September 2018 to LTM 30 September 2023. 3 Five
year average.
Performance of key funds
Refer to the Datapack issued with this
announcement for further detail on fund performance
|
Vintage |
Total fund size |
Status |
% deployed |
Gross MOIC |
Gross IRR |
DPI |
Senior Debt Partners II |
2015 |
€1.5bn |
Realising |
|
1.3x |
9% |
81% |
Senior Debt Partners III |
2017 |
€2.6bn |
Realising |
|
1.3x |
9% |
43% |
Senior Debt Partners IV |
2020 |
€5.0bn |
Investing |
100% |
1.1x |
11% |
— |
Senior Debt Partners V |
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|
Fundraising / Investing |
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|
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North American Private Debt
I |
2014 |
$0.8bn |
Realising |
|
1.5x |
16% |
128% |
North American Private Debt
II |
2019 |
$1.4bn |
Investing |
94% |
1.3x |
14% |
24% |
North America Credit Partners
III |
|
|
Fundraising |
|
|
|
|
Key drivers
Business activity |
Fundraising: Senior Debt Partners ($1.0bn) and North America Credit
Partners III ($0.4bn)Deployment: Senior Debt Partners ($1.4bn) and
North America Credit Partners ($0.2bn)Realisations: Senior Debt
Partners ($0.9bn) |
Fee income |
Management fees: continued net deployment driving higher fee
earning AUM Performance fees: higher investment returns (largely
due to base rate rises) increasing performance fee potential |
Balance sheet investment portfolio |
Investment returns: higher base rate and low impairments supporting
NIRCash flow: £18m cash generation, driven by cash interest
received and modest net realisations |
Fund performance |
High base rate, favourable supply / demand dynamics and low
impairments continue to drive attractive performance across our
Private Debt strategies |
Real Assets
Overview
Flagship strategies |
Scaling strategies |
Seeding strategies |
- |
Infrastructure EuropeStrategic Real Estate EuropeMetropolitan (Real
Estate Equity)Real Estate Debt |
Infrastructure AsiaReal Estate Asia |
|
Six months to 30 September
2023 |
Six months to 30 September
2022 |
Year-on-year growth1 |
Twelve months to 30 September 2023 |
Last five years CAGR1,2 |
|
Total AUM |
$8.4bn |
$7.7bn |
— |
|
16% |
Fee-earning AUM |
$7.2bn |
$6.3bn |
5% |
|
18% |
|
|
|
|
|
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Fundraising |
$0.6bn |
$0.6bn |
(2) % |
$1.0bn |
|
Deployment |
$1.1bn |
$1.0bn |
6 % |
$1.8bn |
|
Realisations |
$0.5bn |
$0.7bn |
(29) % |
$0.8bn |
|
|
|
|
|
|
|
Effective management fee
rate |
0.91% |
0.88% |
— |
|
|
Management fees |
£27m |
£25m |
9% |
£51m |
19% |
Performance fees |
— |
£1m |
(100) % |
£(1)m |
n/m |
|
|
|
|
|
|
Balance sheet investment
portfolio |
£0.3bn |
|
|
|
|
Annualised net investment
return |
7% |
(4) % |
|
|
6%3 |
1 AUM on constant currency basis.2 AUM
calculation based on 30 September 2018 to 30 September 2023, all
other items LTM 30 September 2018 to LTM 30 September 2023. 3 Five
year average.
Performance of key funds
Refer to the Datapack issued with this
announcement for further detail on fund performance
|
Vintage |
Total fund size |
Status |
% deployed |
Gross MOIC |
Gross IRR |
DPI |
Real Estate Partnership Capital IV |
2015 |
£1.0bn |
Realising |
|
1.2x |
6% |
97% |
Real Estate Partnership
Capital V |
2018 |
£0.9bn |
Investing |
|
1.2x |
10% |
25% |
Real Estate Partnership
Capital VI |
|
|
Fundraising / Investing |
|
|
|
|
Infrastructure Equity I |
2020 |
€1.5bn |
Investing |
90% |
1.3x |
23% |
1% |
Infrastructure II |
|
|
Fundraising / Investing |
|
|
|
|
Sale & Leaseback I |
2019 |
€1.2bn |
Investing |
99% |
1.1x |
8% |
8% |
Strategic Real Estate II |
|
|
Fundraising / Investing |
|
|
|
|
Key drivers
Business activity |
Fundraising: Real Estate equity strategies ($0.3bn) and
Infrastructure II ($0.2bn)Deployment: Real Estate equity and debt
strategies ($0.8bn), Infrastructure Europe ($0.2bn)Realisations:
Real Estate debt strategies ($0.5bn) |
Fee income |
Management fees: higher fee earning AUM driven by fundraising and
net deploymentPerformance fees: limited given early stages of
performance fee-generating strategies |
Balance sheet investment portfolio |
Investment returns: Infrastructure and Real Estate Equity driving
positive NIR, more than offsetting a modest reduction in Real
Estate DebtCash flow: £36m cash consumptive due to net deployments
in Infrastructure and Real Estate equity |
Fund performance |
Strategic Real Estate and Infrastructure reporting increases in
funds NAV, generally resilient performance in Real Estate Debt |
Credit
Overview
Flagship strategies |
Scaling strategies |
Seeding strategies |
CLOs |
Liquid Credit |
- |
|
Six months to 30 September
2023 |
Six months to 30 September
2022 |
Year-on-year growth1 |
Twelve months to 30 September 2023 |
Last five years CAGR1,2 |
|
Total AUM |
$17.2bn |
$16.8bn |
(2) % |
|
12% |
Fee-earning AUM |
$17.1bn |
$16.0bn |
2% |
|
13% |
|
|
|
|
|
|
Fundraising |
$0.4bn |
$1.0bn |
(62) % |
$1.3bn |
|
Realisations |
$1.3bn |
$0.9bn |
(45) % |
$2.1bn |
|
|
|
|
|
|
|
Effective management fee
rate |
0.49% |
0.48% |
0.01% |
|
|
Management fees |
£34m |
£33m |
2% |
£66.5m |
13% |
Performance fees |
— |
— |
— |
— |
— |
|
|
|
|
|
|
Balance sheet investment
portfolio |
£0.4bn |
|
|
|
|
Annualised net investment
return |
9% |
(22) % |
|
|
0%3 |
1 AUM on constant currency basis.2 AUM
calculation based on 30 September 2018 to 30 September 2023, all
other items LTM 30 September 2018 to LTM 30 September 2023. 3 Five
year average.
Key drivers
Business activity |
Fundraising: US CLO ($0.4bn), with equity tranche supported by
ICG's third-party risk retention fund Realisations: Liquid Credit
($0.9bn) and CLOs ($0.3bn) |
Fee income |
Management fees: Modest increase due to higher fee-earning AUM and
effective management fee ratePerformance fees: Limited performance
fee-eligible strategies within Credit |
Balance sheet investment portfolio |
Investment returns: positive valuation impacts across CLO equity,
CLO debt and liquid funds Cash flow: cash flow neutral, with
realisations and cash interest receipts (excluding dividends from
CLO equity) offsetting new investments |
Fund Management Company
The Fund Management Company (FMC) is the
Group’s principal driver of long-term profit growth. It manages our
third-party AUM, which it invests on behalf of the Group’s
clients.
Management
fees
Management fees for the period totalled
£233.9m (H1 FY23: £251.5m), a year-on-year increase of 5% excluding
the impact of catch-up fees (H1 FY23: £29.3m, H1 FY24: nil). The
effective management fee rate on our fee-earning AUM at the period
end was 0.91% (FY23: 0.90%).
Performance
fees
Performance fees for the period totalled
£29.3m (H1 FY23: £13.8m). The year-on-year increase was largely due
to the inaugural recognition in the current period of performance
fees relating to Europe VII (£12.5m). At 30 September 2023 the
Group had an asset of £58.9m of accrued performance fees on its
balance sheet (31 March 2023: £37.5m):
£m |
|
Accrued performance fees at 31 March 2023 |
37.5 |
Accruals during period |
29.3 |
Received during period |
(8.0) |
FX and
other movements |
0.1 |
Accrued performance fees at 30 September 2023 |
58.9 |
Other income and movements in
fair value of derivatives
Other income includes dividend receipts
of £20.3m (H1 FY23: £23.8m) from investments in CLO equity, which
are continuing to be received in line with historical experiences.
The FMC also recognised £12.3m of revenue for managing the IC
balance sheet investment portfolio (H1 FY23: £12.7m), as well as
other income of £0.2m (H1 FY23: £0.7m).
During FY23 the Group decided to no
longer enter into FX transaction hedges for its fee income as a
matter of course (although it may still do so on an ad hoc basis),
and economically closed out all outstanding such hedges. For H1
FY24 the movement in fair value of derivatives within the FMC was
zero (H1 FY23: £(45.6)m).
Operating expenses and
marginOperating expenses increased by 18% compared to H1
FY23 and totalled £133.3m (H1 FY23: £113.2m). Salaries increased
ahead of headcount (which grew 6%), largely due to a number of
senior hires, while other expenses grew due to timing of expenses
compared to the prior year, a number of senior hires with higher
incentives compared to salary, and ongoing investment in our
operating platform.
£m |
Six months ended 30 September
2023 |
Six months ended 30 September
2022 |
Change |
Twelve months ended 30 September
2023 |
Salaries |
47.3 |
41.9 |
13% |
90.4 |
Incentive scheme costs |
55.2 |
46.0 |
20% |
101.4 |
Administrative costs |
27.4 |
22.5 |
22% |
50.6 |
Depreciation and amortisation |
3.4 |
2.8 |
21% |
6.9 |
FMC operating expenses |
133.3 |
113.2 |
18% |
249.3 |
FMC
operating margin |
55.0% |
55.9% |
(1) % |
57.0% |
The FMC recorded a profit before tax of
£162.7m (H1 FY23: £143.7m), a year-on-year increase of 13% and an
increase of 15% on a constant currency basis.
Investment Company
The Investment Company (IC) invests the
Group’s balance sheet to seed new strategies, and invests alongside
the Group’s scaling and established strategies to align interests
between our shareholders, clients and employees. It also supports a
number of costs, including for certain central functions, a part of
the Executive Directors’ compensation, and the portion of the
investment teams’ compensation linked to the returns of the balance
sheet investment portfolio (Deal Vintage Bonus, or
DVB).
Balance sheet investment
portfolioThe balance sheet investment portfolio was valued
at £3.0bn at 30 September 2023 (31 March 2023: £2.9bn). During the
period, it generated net realisations and related interest of
£26.6m (H1 FY23: £122.4m), being net realisations of £3.2m (H1
FY23: £103.2m) and cash interest receipts of £23.4m (H1 FY23:
£19.2m).
We made seed investments totalling
£170m, including on behalf of LP Secondaries, Real Estate Equity,
Life Sciences and Infrastructure Asia.
£m |
As at 31 March 2023 |
New investments |
Realisations |
Gains/ (losses) in valuation |
FX & other2 |
As at 30 September 2023 |
Structured and Private Equity |
1,751 |
32 |
(118) |
111 |
(10) |
1,766 |
Private Debt |
169 |
6 |
(14) |
8 |
1 |
170 |
Real Assets |
289 |
58 |
(22) |
11 |
(3) |
333 |
Credit1 |
363 |
6 |
(7) |
17 |
(2) |
377 |
Seed
Investments |
330 |
170 |
(138) |
11 |
2 |
375 |
Total Balance Sheet Investment Portfolio |
2,902 |
272 |
(299) |
158 |
(12) |
3,021 |
1 Within Credit, at 30
September 2023 £71m was invested in liquid strategies, with the
remaining £306.4m invested in CLO debt (£106.2m) and equity
(£200.2m).2 See page 16 for FX exposure of fee-earning AUM, fee
income, FMC expenses and Balance sheet investment
portfolio.
Net Investment
Returns
For the five years to 30 September 2023,
Net Investment Returns (NIR) have been in line with our medium-term
guidance, averaging 11%. For the six months to 30 September 2023,
NIR were £159.4m (H1 FY23: £(26.5)m), equating to an annualised
rate of 11% (H1 FY23: 2%).
NIR were comprised of interest of £59.2m
from interest-bearing investments (H1 FY23: £53.0m), unrealised
gains of £99.0m (H1 FY23: loss of £(79.5)m) and other income of
£1.1m. NIR were split between asset classes as
follows:
|
Six months to 30 September 2023 |
Six months to 30 September 2022 |
Twelve months to 30 September 2023 |
£m |
NIR (£m) |
Annualised NIR (%) |
NIR (£m) |
Annualised NIR (%) |
NIR (£m) |
NIR (%) |
Structured and Private Equity |
111.4 |
13% |
18.2 |
2 % |
206.1 |
12% |
Private Debt |
8.9 |
10% |
10.3 |
13 % |
13.0 |
8% |
Real Assets |
11.2 |
7% |
(6.7) |
(4) % |
38.6 |
12% |
Credit |
17.0 |
9% |
(45.9) |
(22) % |
32.8 |
8% |
Seed
Investments1 |
11.0 |
6% |
(2.4) |
(3) % |
(2.2) |
(1%) |
Total net investment returns |
159.4 |
11% |
(26.5) |
(2) % |
288.3 |
10% |
1FY23 NIR adjusted to reflect three
assets with Seed Investments that were previously included within
Real Assets.
For further discussion on balance sheet
investment performance by asset class, refer to pages 6 - 9 of this
announcement.
In addition to the NIR, the other
adjustments to IC revenue were as follows:
£m |
Six months ended 30 September 2023 |
Six months ended 30 September 2022 |
Change |
Twelve months ended 30 September 2023 |
Changes in fair value of derivatives1 |
(5.8) |
3.8 |
n/m |
7.2 |
Inter-segmental fee |
(12.3) |
(12.7) |
3 % |
(24.6) |
Other |
0.5 |
1.2 |
(58) % |
3.6 |
Other IC revenue |
(17.6) |
(7.7) |
n/m |
(13.8) |
1See page 16 for FX exposure of
fee-earning AUM, fee income, FMC expenses and Balance sheet
investment portfolio.
As a result, the IC recorded total
revenues of £141.8m (H1 FY23: £(34.2)m).
Investment Company
expenses
Operating expenses in the IC of £48.6m
increased by 2% compared to H1 FY23 (£47.7m), with modest increases
in salaries and incentive scheme costs being offset by a decrease
in administrative costs:
£m |
Six months ended 30 September 2023 |
Six months ended 30 September 2022 |
Change% |
Twelve months ended 30 September 2023 |
Salaries |
9.9 |
9.2 |
8% |
20.7 |
Incentive scheme costs |
28.6 |
26.6 |
8% |
61.6 |
Administrative costs |
8.7 |
10.6 |
(18) % |
18.8 |
Depreciation and amortisation |
1.4 |
1.3 |
8% |
2.9 |
IC operating expenses |
48.6 |
47.7 |
2% |
104.0 |
Incentive scheme costs included DVB
accrual of £15.4m (H1 FY23: £15.3m), due both to the passage of
time and the impact of underlying valuation changes.
Employee costs for teams who do not yet
have a third-party fund are allocated to the IC. For H1 FY24, the
directly-attributable costs within the Investment Company for teams
that have not had a first close of a third-party fund was £12.2m
(H1 FY23: £10.7m). When those funds have a first close, the costs
of those teams are transferred to the Fund Management Company.
During the period, certain costs within real estate were
transferred from the IC to FMC, resulting in £2.4m of expenses
being recognised in the FMC.
Interest expense was £24.0m (H1 FY23:
£30.1m) and interest earned on cash balances was £10.0m (H1 FY23:
£3.9m).
The IC recorded a profit before tax of
£79.2m (H1 FY23: loss before tax £(108.1)m).
Group
Tax
The Group recognised a tax charge of
£(37.5)m (H1 FY23: tax credit of £3.1m), resulting in an effective
tax rate for the period of 15.5% (H1 FY23: (8.7)%). The increase
compared to the prior year is due to an increase from 19 to 25% in
the UK tax rate and positive NIR.
As detailed in note 7, the Group has a
structurally lower effective tax rate than the statutory UK rate.
This is largely driven by the Investment Company, where certain
forms of income benefit from tax exemptions. The effective tax rate
will vary depending on the income mix.
Dividend
ICG has a progressive dividend policy,
and over the long-term the Board intends to increase the dividend
per share by at least mid-single digit percentage points on an
annualised basis.
In line with our policy of paying an
interim dividend equal to one third of the prior year's total
dividend, the Board is declaring an interim dividend of 25.8p per
share (H1 FY23: 25.3p). We continue to make the dividend
reinvestment plan available.
Balance sheet
We use our balance sheet’s asset base to
grow our fee-earning AUM, and do this through two
routes:
- investing
alongside clients in our existing strategies to align interests;
and
- making
investments to seed new strategies.
During the year we made gross
investments of £102m alongside existing strategies and £170m in
seed investments. See page 11 for more information on the
performance of our balance sheet investment portfolio during the
period.
To support this asset base, we maintain
a robust capitalisation and a strong liquidity
position.
£m
(unless stated) |
30 September 2023 |
31 March 2023 |
Balance sheet investment portfolio |
3,021 |
2,902 |
Cash and cash equivalents |
485 |
550 |
Other
assets |
430 |
424 |
Total assets |
3,936 |
3,876 |
Financial debt |
(1,477) |
(1,538) |
Other liabilities |
(413) |
(361) |
Total liabilities |
(1,890) |
(1,899) |
Net asset value |
2,046 |
1,977 |
Net asset value per share |
714p |
694p |
Liquidity and net debt
At 30 September 2023 the Group had total
available liquidity of £1,035m (31 March 2023: £1,100m), net
financial debt of £992m (31 March 2023: £988m) and net gearing of
0.48x (31 March 2023: 0.50x).
During the period cash reduced by £65m
from £550m to £485m, including the repayment of £51m of borrowings
that matured.
The table below sets out movements in
cash:
£m |
H1 FY24 |
FY23 |
Opening cash |
550 |
762 |
|
|
|
Operating
activities |
|
|
Fee and other operating income |
232 |
573 |
Net cash flows from investment activities and investment
income1 |
30 |
162 |
Expenses and working capital |
(153) |
(322) |
Tax paid |
(1) |
(32) |
Group cash flows from
operating activities - APM2,3 |
108 |
381 |
|
|
|
Financing
activities |
|
|
Interest paid |
(15) |
(64) |
Interest received on cash balances |
13 |
14 |
Purchase of own shares |
— |
(39) |
Dividends paid |
(150) |
(236) |
Net repayment of borrowings |
(51) |
(195) |
Group cash flows from
financing activities - APM2 |
(203) |
(520) |
Other cash flow4 |
26 |
(77) |
FX and
other movement |
4 |
4 |
Closing cash |
485 |
550 |
Available undrawn ESG-linked RCF |
550 |
550 |
Cash and undrawn debt facilities (total available
liquidity) |
1,035 |
1,100 |
1The aggregate cash (used)/received from
balance sheet investment portfolio (additions), realisations, and
cash proceeds received from assets within the balance sheet
investment portfolio.2Interest paid, which is classified as an
Operating cash flow under UK-adopted IAS, is reported within Group
cash flows from financing activities - APM.3Per note 9 of the
Financial Statements, Operating cash flows under UK-adopted IAS of
£(75.0)m (FY23: £291.6m) include consolidated credit funds. This
difference to the APM measure is driven by cash consumption within
consolidated credit funds as a result of their investing activities
during the period. 4Cash flows in respect of purchase of intangible
assets, purchase of property, plant and equipment and net cash flow
from derivative financial instruments.
At 30 September 2023, the Group had
drawn debt of £1,477m (31 March 2023: £1,538m). The change is due
to the repayment of certain facilities as they matured, along with
changes in FX rates impacting the translation value:
|
£m |
Drawn debt at 31 March 2023 |
1,538 |
Debt (repayment) /
issuance |
(51) |
Impact
of foreign exchange rates |
(10) |
Drawn debt at 30 September 2023 |
1,477 |
Net financial debt therefore increased
by £4m to £992m (31 March 2023: £988m):
£m |
30 September 2023 |
31 March 2023 |
Drawn debt |
1,477 |
1,538 |
Cash |
485 |
550 |
Net financial debt |
992 |
988 |
At 30 September 2023 the Group had
credit ratings of BBB (stable outlook) / BBB (stable outlook) from
Fitch and S&P, respectively.
The Group’s debt is provided through a
range of facilities. All facilities except the ESG-linked RCF are
fixed-rate instruments. The weighted-average pre-tax cost of drawn
debt at 30 September 2023 was 3.07% (31 March 2023: 3.17%). The
weighted-average life of drawn debt at 30 September 2023 was 3.8
years (31 March 2023: 4.1 years). The maturity profile of our term
debt is set out below:
£m |
H2 FY24 |
FY25 |
FY26 |
FY27 |
FY28 |
FY29 |
FY30 |
Term debt maturing |
— |
259 |
186 |
496 |
— |
103 |
433 |
For further details of our debt
facilities see Other Information (page 38).
Net asset value
Shareholder equity increased to £2,046m
at 30 September 2023 (31 March 2023: £1,977m), equating to 714p per
share (31 March 2023: 694p).
Net gearing
The movements in the Group’s balance
sheet investment portfolio, cash balance, debt facilities and
shareholder equity resulted in net gearing decreasing to 0.48x at
30 September 2023 (31 March 2023: 0.50x).
£m |
30 September 2023 |
31 March 2023 |
Change % |
Net financial debt (A) |
992 |
988 |
— |
Net
asset value (B) |
2,046 |
1,977 |
3% |
Net gearing (A/B) |
0.48x |
0.50x |
(0.02)x |
Foreign exchange rates
The following foreign exchange rates
have been used throughout this review:
|
Six months ended30 September 2023
Average |
Six months ended 30 September 2022
Average |
12 months ended 31 March 2023 Average |
30 September 2023 Period end |
30 September 2022 Period end |
31 March 2023year end |
GBP:EUR |
1.1597 |
1.1691 |
1.1560 |
1.1541 |
1.1394 |
1.1375 |
GBP:USD |
1.2570 |
1.2053 |
1.2051 |
1.2200 |
1.1170 |
1.2337 |
EUR:USD |
1.0839 |
1.0306 |
1.0426 |
1.0571 |
0.9803 |
1.0846 |
The table below sets out the currency
exposure for certain reported items:
|
USD |
EUR |
GBP |
Other |
Fee-earning AUM (as at 30 September 23) |
33% |
55% |
11% |
1% |
Fee income (6 months to 30
September 23) |
31% |
59% |
9% |
1% |
FMC expenses (6 months to 30
September 23) |
19% |
18% |
53% |
10% |
Balance
sheet investment portfolio (as at 30 September 23) |
30% |
44% |
20% |
6% |
The table below sets out the indicative
impact on our reported management fees, FMC PBT and NAV per share
had sterling been 5% weaker or stronger against the euro and the
dollar in the period (excluding the impact of any legacy
hedges):
|
Impact on H1 FY24 management
fees1 |
Impact on H1 FY24 FMC
PBT1 |
NAV per share at 30 September 2023
2 |
Sterling 5% weaker against euro and dollar |
£11.0m |
£10.9m |
13p |
Sterling 5% stronger against euro and dollar |
£(10.0)m |
£(9.9)m |
(12)p |
1Impact assessed by sensitising the
average H1 FY24 FX rates.2NAV / NAV per share reflects the total
indicative impact as a result of a change in FMC PBT and net
currency assets.
Where noted, this review presents
changes in AUM, third-party fee income and FMC PBT on a constant
exchange rate basis. For the purposes of these calculations, prior
period numbers have been translated from their underlying fund
currencies to the reporting currencies at the respective H1 FY24
period end exchange rates. This has then been compared to the H1
FY24 numbers to arrive at the change on a constant currency
exchange rate basis.
The Group does not hedge its net
currency income as a matter of course, although this is kept under
review. The Group does hedge its net balance sheet currency
exposure, with the intention of broadly insulating the NAV from FX
movements. Changes in the fair value of the balance sheet hedges
are reported within the IC.
PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks and uncertainties to
which the Group is exposed for the remainder of the year have been
subject to robust assessment by the Directors and remain consistent
with those outlined in our annual report for the year ended 31
March 2023.
Careful attention continues to be paid
to the elevated levels of geopolitical and economic uncertainty and
the resulting impact on our principal risks and the overall risk
profile of the Group. There have been no material changes and we
will continue to monitor the situation and potential exposures as
matters evolve.
RESPONSIBILITY STATEMENT
We confirm to the best of our
knowledge:
- The
condensed set of financial statements have been prepared in
accordance with UK-adopted IAS 34 ‘Interim Financial Reporting’ and
the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority;
- The
interim 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 Group and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face;
and
- There have
been no material related-party transactions that have an effect on
the financial position or performance of the Group in the first six
months of the current financial year since that reported in the 31
March 2023 Annual Report.
This responsibility statement was
approved by the Board of Directors on 14 November 2023 and is
signed on its behalf by:
|
|
|
Benoît Durteste |
|
David Bicarregui |
CEO |
|
CFO |
INDEPENDENT REVIEW REPORT TO INTERMEDIATE
CAPITAL GROUP PLC
Conclusion
We have been engaged by Intermediate
Capital Group plc (‘the Group’) to review the condensed
consolidated financial statements in the Interim results statement
for the six months ended 30 September 2023 which comprises the
condensed consolidated income statement, condensed consolidated
statement of comprehensive income, condensed consolidated statement
of financial position, condensed consolidated statement of cash
flows, condensed consolidated statement of changes in equity and
the related explanatory notes 1 to 10 (together the ‘condensed
consolidated financial statements’). We have read the other
information contained in the Interim results statement and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed
consolidated financial statements.
Based on our review, nothing has come to
our attention that causes us to believe that the condensed
consolidated financial statements in the Interim results statement
for the six months ended 30 September 2023 is not prepared, in all
material respects, in accordance with UK-adopted International
Accounting Standard 34, ‘Interim Financial Reporting’, and the
Disclosure Guidance and Transparency Rules of the United Kingdom’s
Financial Conduct Authority.
Basis for
Conclusion
We conducted our review in accordance
with International Standard on Review Engagements 2410 (UK) ‘Review
of Interim Financial Information Performed by the Independent
Auditor of the Entity’ (‘ISRE 2410’) issued by the Financial
Reporting Council. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As disclosed in note 1, the annual
financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards. The condensed
consolidated financial statements included in this Interim results
statement have been prepared in accordance with UK-adopted
International Accounting Standard 34, ‘Interim Financial
Reporting’.
Conclusions Relating to Going
Concern
Based on our review procedures, which
are less extensive than those performed in an audit as described in
the Basis for Conclusion section of this report, nothing has come
to our attention to suggest that management have inappropriately
adopted the going concern basis of accounting or that management
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review
procedures performed in accordance with ISRE 2410, however future
events or conditions may cause the entity to cease to continue as a
going concern.
Responsibilities of the
directors
The directors are responsible for
preparing the Interim results statement in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
In preparing the Interim results
statement, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Auditor's Responsibilities for the review of the
financial information
In reviewing the Interim results
statement, we are responsible for expressing to the Group a
conclusion on the condensed consolidated financial statements in
the Interim results statement. Our conclusion, including our
‘Conclusions Relating to Going Concern’, are based on procedures
that are less extensive than audit procedures, as described in the
‘Basis for Conclusion’ paragraph of this report.
Use of our
report
This report is made solely to the Group
in accordance with guidance contained in International Standard on
Review Engagements 2410 (UK) ‘Review of Interim Financial
Information Performed by the Independent Auditor of the Entity’
issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Group, for our work, for this report, or for
the conclusions we have formed.
Ernst & Young LLPLondon14 November
2023
CONDENSED CONSOLIDATED INCOME
STATEMENT
For the six months ended 30 September
2023
|
|
Six months ended 30 September
2023 (Unaudited) |
Six months ended 30 September
2022(Unaudited) |
|
Notes |
£m |
£m |
Fee and other operating income |
2 |
253.5 |
257.0 |
Finance loss |
|
(6.3) |
(46.1) |
Net
gains on investments |
|
215.9 |
5.8 |
Total Revenue |
|
463.1 |
216.7 |
Other income1 |
|
10.1 |
4.7 |
Finance costs |
|
(24.9) |
(31.4) |
Administrative expenses |
|
(188.0) |
(164.1) |
Share
of results of joint ventures accounted for using the equity
method |
|
(0.4) |
4.9 |
Profit before tax from continuing operations |
|
259.9 |
30.8 |
Tax charge |
7 |
(42.3) |
3.3 |
Profit after tax from continuing operations |
|
217.6 |
34.1 |
Profit/(loss) after tax on discontinued operations |
|
4.4 |
(1.9) |
Profit for the period |
|
222.0 |
32.2 |
|
|
|
|
Attributable
to: |
|
|
|
Equity holders of the
parent |
|
225.0 |
33.4 |
Non-controlling interests |
|
(3.0) |
(1.2) |
|
|
222.0 |
32.2 |
|
|
|
|
Earnings per share
attributable to ordinary equity holders of the parent |
|
|
|
Basic
(pence) |
5 |
78.7p |
11.7p |
Diluted
(pence) |
5 |
77.8p |
11.5p |
|
|
|
|
Earnings per share for
profit from continuing operations attributable to ordinary equity
holders of the parent |
|
|
|
Basic
(pence) |
5 |
76.1p |
11.9p |
Diluted
(pence) |
5 |
75.2p |
11.7p |
-
Interest income for the period ended 30 September 2022 has
been re-presented in line with the format adopted for the period
ended 31 March 2023.
The accompanying notes are an integral
part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the six months ended 30 September
2023
|
Six months ended 30 September 2023
(Unaudited) |
Six months ended 30 September
2022(Unaudited) |
Group |
£m |
£m |
Profit after tax |
222.0 |
32.2 |
Items that may be subsequently reclassified to profit or
loss if specific conditions are met |
|
|
Exchange differences on translation of foreign operations |
5.6 |
46.8 |
Deferred tax on equity investments translation |
(0.4) |
— |
Total comprehensive income for the year |
227.2 |
79.0 |
|
|
|
Attributable
to: |
|
|
Equity holders of the
parent |
230.2 |
80.2 |
Non-controlling interests |
(3.0) |
(1.2) |
|
227.2 |
79.0 |
The accompanying notes are an integral
part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 30 September 2023
|
|
30 September 2023 (Unaudited) |
31 March 2023 (Audited) |
|
Notes |
|
£m |
Non-current assets |
|
|
|
Intangible assets |
|
13.2 |
14.9 |
Property, plant and
equipment |
|
85.2 |
88.2 |
Investment property |
|
0.8 |
0.8 |
Investment in Joint Venture
accounted for under the equity method |
|
— |
5.8 |
Trade and other
receivables |
|
48.5 |
37.1 |
Financial assets at fair
value |
4 |
6,961.6 |
7,036.6 |
Derivative financial
assets |
4 |
7.6 |
8.4 |
Deferred tax asset |
|
19.5 |
17.6 |
|
|
7,136.4 |
7,209.4 |
Current assets |
|
|
|
Trade and other
receivables |
|
304.8 |
232.0 |
Current tax debtor |
|
16.1 |
57.0 |
Financial assets at fair
value |
4 |
9.9 |
4.7 |
Derivative financial
assets |
4 |
4.8 |
13.6 |
Cash
and cash equivalents |
|
709.5 |
957.5 |
|
|
1,045.1 |
1,264.8 |
Assets of disposal groups held for sale |
|
689.5 |
578.3 |
Total assets |
|
8,871.0 |
9,052.5 |
Non-current liabilities |
|
|
|
Trade and other payables |
|
44.8 |
71.1 |
Financial liabilities at fair
value |
4,8 |
4,376.4 |
4,572.7 |
Financial liabilities at
amortised cost |
8 |
1,237.1 |
1,478.2 |
Other financial
liabilities |
8 |
75.3 |
79.6 |
Derivative financial
liabilities |
4,8 |
— |
0.9 |
Deferred tax liabilities |
|
37.7 |
35.5 |
|
|
5,771.3 |
6,238.0 |
Current liabilities |
|
|
|
Trade and other payables |
|
400.7 |
471.4 |
Current tax creditor |
|
7.0 |
14.8 |
Financial liabilities at
amortised cost |
8 |
247.8 |
58.5 |
Other financial
liabilities |
8 |
7.4 |
5.8 |
Derivative financial liabilities |
4,8 |
41.1 |
14.8 |
|
|
704.0 |
565.3 |
Liabilities of disposal groups held for sale |
|
269.2 |
204.0 |
Total liabilities |
|
6,744.5 |
7,007.3 |
Equity and reserves |
|
|
|
Called up share capital |
|
77.3 |
77.3 |
Share premium account |
|
181.3 |
180.9 |
Other reserves |
|
38.1 |
19.0 |
Retained earnings |
|
1,813.4 |
1,742.6 |
Equity attributable to owners of the Company |
|
2,110.1 |
2,019.8 |
Non-controlling interest |
|
16.4 |
25.4 |
Total equity |
|
2,126.5 |
2,045.2 |
Total equity and liabilities |
|
8,871.0 |
9,052.5 |
The accompanying notes are an integral
part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the six months ended 30 September
2023
|
Notes |
Six months ended 30 September 2023
(Unaudited) |
Six months ended 30 September 2022
(Unaudited) |
|
|
£m |
£m |
Cash flows (used in)/generated from
operations |
|
(73.4) |
149.3 |
Taxes
paid |
|
(1.6) |
(16.5) |
Net cash flows (used in)/from operating
activities |
9 |
(75.0) |
132.8 |
Investing activities |
|
|
|
Purchase of intangible
assets |
|
(2.1) |
(2.8) |
Purchase of property, plant
and equipment |
|
(2.0) |
(0.5) |
Net cash flow from derivative
financial instruments |
|
33.7 |
(50.9) |
Cash
flow as a result of change in control of subsidiary |
|
— |
(7.0) |
Net cash flows from/(used in) investing
activities |
|
29.6 |
(61.2) |
Financing activities |
|
|
|
Purchase of own shares |
|
— |
(38.9) |
Payment of principal portion
of lease liabilities |
|
(3.8) |
(0.6) |
Repayment of long-term
borrowings |
|
(50.7) |
(34.9) |
Dividends paid to equity holders of the parent |
|
(149.5) |
(164.4) |
Net cash flows used in financing activities |
|
(204.0) |
(238.8) |
Net decrease in cash and cash equivalents |
|
(249.4) |
(167.2) |
Effects of exchange rate
differences on cash and cash equivalents |
|
1.4 |
37.4 |
Cash
and cash equivalents at 1 April |
|
957.5 |
991.8 |
Cash and cash equivalents at 30 September |
|
709.5 |
862.0 |
The Group’s cash and cash equivalents
include £224.2m (31 March 2023: £407.5m) of restricted cash held
principally by structured entities controlled by the
Group.
The presentation of the condensed
consolidated statement of cash flows have been updated to improve
the presentation of this information. The reconciliation of cash
used in/generated from operations to profit before tax from
continuing operations is now disclosed in note 9.
The accompanying notes are an integral
part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 September
2023
|
Sharecapital |
Sharepremium |
Capital redemption reserve1 |
Share based payments reserve(note
25) |
Ownshares3 |
Foreign currency translation
reserve2 |
Retainedearnings |
Total |
Non-controlling interest |
Totalequity |
Group |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Balance at 1 April 2023 |
77.3 |
180.9 |
5.0 |
73.3 |
(103.4) |
44.1 |
1,742.6 |
2,019.8 |
25.4 |
2,045.2 |
Profit after tax |
— |
— |
— |
— |
— |
— |
225.0 |
225.0 |
(3.0) |
222.0 |
Exchange differences on
translation of foreign operations |
— |
— |
— |
— |
— |
5.6 |
— |
5.6 |
— |
5.6 |
Deferred tax on equity investments translation |
— |
— |
— |
— |
— |
(0.4) |
— |
(0.4) |
— |
(0.4) |
Total comprehensive income/(expense) for the
period |
— |
— |
— |
— |
— |
5.2 |
225.0 |
230.2 |
(3.0) |
227.2 |
Adjustment of non-controlling interest on disposal of
subsidiary |
— |
— |
— |
— |
— |
— |
— |
— |
(6.0) |
(6.0) |
Issue of share capital |
0.0 |
— |
— |
— |
— |
— |
— |
0.0 |
— |
0.0 |
Options/awards exercised4 |
— |
0.4 |
— |
(28.4) |
20.6 |
— |
(4.7) |
(12.1) |
— |
(12.1) |
Tax on options/awards
exercised |
— |
— |
— |
0.5 |
— |
— |
— |
0.5 |
— |
0.5 |
Credit for equity settled
share schemes |
— |
— |
— |
21.2 |
— |
— |
— |
21.2 |
— |
21.2 |
Dividends paid |
— |
— |
— |
— |
— |
— |
(149.5) |
(149.5) |
— |
(149.5) |
Balance at 30 September 2023 |
77.3 |
181.3 |
5.0 |
66.6 |
(82.8) |
49.3 |
1,813.4 |
2,110.1 |
16.4 |
2,126.5 |
|
Sharecapital |
Sharepremium |
Capital redemption reserve1 |
Share based payments reserve |
Ownshares3 |
Foreign currency translation
reserve2 |
Retainedearnings |
Total |
Non-controlling interest |
Totalequity |
Group |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Balance at 1 April 2022 |
77.3 |
180.3 |
5.0 |
67.5 |
(93.0) |
20.7 |
1,714.0 |
1,971.8 |
30.0 |
2,001.8 |
Profit after tax |
— |
— |
— |
— |
— |
— |
33.4 |
33.4 |
(1.2) |
32.2 |
Exchange differences on translation of foreign operations |
— |
— |
— |
— |
— |
46.8 |
— |
46.8 |
— |
46.8 |
Total comprehensive income/(expense) for the
period |
— |
— |
— |
— |
— |
46.8 |
33.4 |
80.2 |
(1.2) |
79.0 |
Adjustment of non-controlling interest on disposal of
subsidiary |
— |
— |
— |
— |
— |
— |
— |
— |
(4.9) |
(4.9) |
Acquisition of non-controlling
interest |
— |
— |
— |
— |
— |
— |
— |
— |
31.3 |
31.3 |
Own shares acquired in the
year |
— |
— |
— |
— |
(38.9) |
— |
— |
(38.9) |
— |
(38.9) |
Options/awards exercised4 |
— |
— |
— |
(27.4) |
25.8 |
— |
(13.6) |
(15.2) |
— |
(15.2) |
Tax on options/awards
exercised |
— |
— |
— |
(2.6) |
— |
— |
— |
(2.6) |
— |
(2.6) |
Credit for equity settled
share schemes |
— |
— |
— |
20.4 |
— |
— |
— |
20.4 |
— |
20.4 |
Dividends paid |
— |
— |
— |
— |
— |
— |
(164.4) |
(164.4) |
— |
(164.4) |
Balance at 30 September 2022 |
77.3 |
180.3 |
5.0 |
57.9 |
(106.1) |
67.5 |
1,569.4 |
1,851.3 |
55.2 |
1,906.5 |
- The capital
redemption reserve is a reserve created when a company buys its own
shares which reduces its share capital. £1.4m of the balance
relates to the conversion of ordinary shares and convertible shares
into ordinary shares in 1994. The remaining £3.6m relates to the
cancellation of treasury shares in 2015.
- Other
comprehensive income/(expense) reported in the foreign currency
translation reserve represents foreign exchange gains and losses on
the translation of subsidiaries reporting in currencies other than
sterling.
- The movement
in the Group Own shares reserve in respect of Options/awards
exercised, represents the employee shares vesting net of personal
taxes and social security.
- The
associated personal taxes and social security liabilities are
settled by the Group with the equivalent value of shares retained
in the Own shares reserve.
The accompanying notes are an integral
part of these condensed financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
For the six months ended 30 September
2023
1. General information and basis of
preparation
Basis of
preparation
The interim condensed consolidated
financial statements have been prepared in accordance with
UK-adopted IAS 34 Interim Financial Reporting (IAS 34), the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, and on the basis of the accounting policies and methods
of computation set out in the consolidated financial statements of
the Group for the year ended 31 March 2023.
The interim financial statements are
unaudited and do not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. Within the notes
to the interim financial statements, all current and comparative
data covering period to (or as at) 30 September 2023 is unaudited.
Data given in respect of 31 March 2023 is audited. The statutory
accounts for the year to 31 March 2023 have been reported on by
Ernst & Young LLP and delivered to the Registrar of Companies.
The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters which the auditors drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The consolidated financial statements of
the Group as at and for the year ended 31 March 2023 which were
prepared in accordance with UK-adopted International Accounting
Standards (UK-adopted IAS) are available on the Group’s website,
www.icgam.com.
Going
concern
In making their assessment, the
Directors have considered a range of information relating to
present and future conditions, including future projections of
profitability, cash flows and capital resources through the twelve
month period to 30 November 2024. The Group has good visibility on
future management fees due to the long term and diversified nature
of its funds, underpinned by a strong, well capitalised balance
sheet and approximately £1.0bn of liquidity in cash and undrawn
facilities at 30 September 2023.
The Directors have concluded, based on
the above assessment, that the preparation of the interim condensed
consolidated financial statements on a going concern basis over the
period to 30 November 2024 continues to be
appropriate.
Related party
transactions
There have been no material changes to
the nature or size of related-party transactions since 31 March
2023.
Changes in significant
accounting policies
The accounting policies adopted in the
preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group’s annual consolidated financial statements for the year
ended 31 March 2023. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective.
Critical judgements in the application of
accounting policies and key sources of estimation
uncertainty
The critical judgements made by the
Directors in the application of the Group's accounting policies,
and the key sources of estimation uncertainty at the reporting
date, are the same as those disclosed in the Group's annual
consolidated financial statements for the year ended 31 March
2023.
Changes in the composition of
the Group
The Group ceased to control 44
subsidiaries of a warehouse fund previously reported as
Discontinued operations within Disposal groups held for sale (see
note 9). The Group disposed of its interest in ICG Nomura KK, a
joint venture.
The Group acquired interests in ten
controlled subsidiaries of warehouse funds reported as Discontinued
operations and six other subsidiaries, all included within Disposal
groups held for sale with no impact on net assets.
2. Revenue
Revenue and its related cash flows,
within the scope of IFRS 15 ‘Revenue from Contracts with
Customers’, are derived from the Group’s fund management company
activities. The significant components of the Group’s fund
management revenues are as follows:
|
Six months ended30 September 2023
(Unaudited) |
Six months ended30 September
2022(Unaudited) |
Type of contract/service |
£m |
£m |
Management fees1 |
252.7 |
254.3 |
Other
income |
0.8 |
2.7 |
Fee and other operating income |
253.5 |
257.0 |
-
Included within management fees is £30.6m (H1 FY23: £14.3m)
of performance related fees.
Management
Fees
The Group earns management fees from its
performance of investment management services. Management fees are
charged on third-party capital managed by the Group and are based
on an agreed percentage of either committed capital, invested
capital or net asset value (NAV), dependent on the fund. Management
fees comprise both non-performance and performance-related fee
elements related to one contract obligation.
Non-performance-related management fees
for the period of £222.1m (H1 FY23: £240.0m) are charged in arrears
and are recognised in the period services are
performed.
Performance-related management fees
(performance fees) are recognised only to the extent it is highly
probable that there will not be a significant reversal in the
future of the revenue recognised. This is generally towards the end
of the contract period or upon early liquidation of a fund. The
estimate of performance fees is made with reference to the
liquidation profile of the fund, which factors in portfolio exits
and timeframes. For certain funds the estimate of performance fees
is made with reference to specific requirements. A constraint is
applied to the estimate to reflect uncertainty of future fund
performance. Performance fees of £30.6m (H1 FY23: £14.3m) have been
recognised in the period. Performance fees will only be
crystallised and received in cash when the relevant fund
performance hurdle is met.
There are no other individually
significant components of revenue from contracts with
customers.
3. Segmental reporting
For management purposes, the Group is
organised into two operating segments, the Fund Management Company
(FMC) and the Investment Company (IC) which are also reportable
segments. In identifying the Group’s reportable segments,
management considered the basis of organisation of the Group’s
activities, the economic characteristics of the operating segments,
and the type of products and services from which each reportable
segment derives its revenues. Total reportable segment figures are
alternative performance measures (APM).
The Executive Directors, being the chief
operating decision makers, monitor the operating results of the FMC
and the IC for the purpose of making decisions about resource
allocation and performance assessment. The Group does not aggregate
the FMC and IC as those segments do not have similar economic
characteristics. Information about these segments is presented
below.
The FMC earns fee income from the
provision of investment management services, including dividends
from CLOs, and incurs the majority of the Group’s costs in
delivering these services, including the cost of the investment
teams and the cost of support functions, primarily marketing,
operations, information technology and human
resources.
The IC is charged a management fee of 1%
of the carrying value of the average balance sheet investment
portfolio by the FMC and this is shown below as the Inter-segmental
fee. It recognises the fair value movement on any associated
hedging derivatives. The costs of finance, treasury and legal
teams, and other Group costs primarily 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.
The amounts reported for management
purposes in the tables below are reconciled to the UK-adopted IAS
reported amounts on the following pages.
|
Six months ended 30 September 2023
(Unaudited) |
|
Six months ended 30 September 2022
(Unaudited) |
|
FMC |
IC |
Reportable segments Total |
|
FMC |
IC |
Reportable segments Total |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
External fee income |
263.2 |
— |
263.2 |
|
265.3 |
— |
265.3 |
Inter-segmental fee |
12.3 |
(12.3) |
— |
|
12.7 |
(12.7) |
— |
Other
operating income |
0.2 |
0.5 |
0.7 |
|
0.7 |
1.2 |
1.9 |
Fund management fee income |
275.7 |
(11.8) |
263.9 |
|
278.7 |
(11.5) |
267.2 |
Net investment returns |
— |
159.4 |
159.4 |
|
— |
(26.5) |
(26.5) |
Dividend income |
20.3 |
— |
20.3 |
|
23.8 |
— |
23.8 |
Net
fair value loss on derivatives |
— |
(5.8) |
(5.8) |
|
(45.6) |
3.8 |
(41.8) |
Total revenue |
296.0 |
141.8 |
437.8 |
|
256.9 |
(34.2) |
222.7 |
Interest income1 |
— |
10.0 |
10.0 |
|
— |
3.9 |
3.9 |
Interest expense |
(1.1) |
(24.0) |
(25.1) |
|
(0.9) |
(30.1) |
(31.0) |
Staff costs |
(47.3) |
(9.9) |
(57.2) |
|
(41.9) |
(9.2) |
(51.1) |
Incentive scheme costs |
(55.2) |
(28.6) |
(83.8) |
|
(46.0) |
(26.6) |
(72.6) |
Other
administrative expenses |
(29.7) |
(10.1) |
(39.8) |
|
(24.4) |
(11.9) |
(36.3) |
Profit before tax and discontinued operations |
162.7 |
79.2 |
241.9 |
|
143.7 |
(108.1) |
35.6 |
-
Interest income for the period ended 30 September 2022 has
been re-presented in line with the format adopted for the period
ended 31 March 2023.
Reconciliation of APM amounts reported
for management purposes to the financial statements reported under
UK-adopted IAS
Included in the following tables are
statutory adjustments made to the following:
- All income generated from
the balance sheet investment portfolio is presented as net
investment returns for reportable segments purposes, whereas under
UK-adopted IAS it is presented within gains on investments and
other operating income.
- The structured entities
controlled by the Group are presented as fair value investments for
reportable segments (APM), whereas the statutory financial
statements present these entities on a consolidated basis under
UK-adopted IAS. The impact of this consolidation on profit before
tax is shown in the table on the following page.
- The warehouse funds, their
investments and other current assets within controlled entities are
presented as investments for reportable segments (APM), whereas the
statutory financial statement present these entities on a
consolidated basis under UK-adopted IAS. The impact of this
consolidation is disclosed within ‘Gain/(loss) after tax from
discontinued operations’ on the following page.
3. Segmental reporting continued
Consolidated income statement
|
Reportable segments |
Consolidated entities |
Financial statements |
Six months ended 30 September 2023
(Unaudited) |
£m |
£m |
£m |
Fund management fee income |
263.2 |
(10.5) |
252.7 |
Other operating income |
0.7 |
0.1 |
0.8 |
Fee and other
income |
263.9 |
(10.4) |
253.5 |
Dividend income |
20.3 |
(20.3) |
— |
Net fair value loss on
derivatives |
(5.8) |
(0.5) |
(6.3) |
Finance
income/(loss) |
14.5 |
(20.8) |
(6.3) |
Net investment returns/gains on investments |
159.4 |
56.5 |
215.9 |
Total revenue |
437.8 |
25.3 |
463.1 |
Other income1 |
10.0 |
0.1 |
10.1 |
Finance
costs |
(25.1) |
0.2 |
(24.9) |
Staff costs |
(57.2) |
— |
(57.2) |
Incentive scheme costs |
(83.8) |
— |
(83.8) |
Other administrative
expenses |
(39.8) |
(7.2) |
(47.0) |
Administrative
expenses |
(180.8) |
(7.2) |
(188.0) |
Share of results of joint ventures accounted for using
equity method |
— |
(0.4) |
(0.4) |
Profit before tax and discontinued operations |
241.9 |
18.0 |
259.9 |
Tax charge |
(37.5) |
(4.8) |
(42.3) |
Profit
after tax from discontinued operations |
— |
4.4 |
4.4 |
Profit after tax and discontinued operations |
204.4 |
17.6 |
222.0 |
|
Reportable segments |
Consolidated entities |
Financial statements |
Six months ended 30 September 2022
(Unaudited) |
£m |
£m |
£m |
Fund management fee income |
265.3 |
(11.0) |
254.3 |
Other operating income |
1.9 |
0.8 |
2.7 |
Fee and other
income |
267.2 |
(10.2) |
257.0 |
Dividend income |
23.8 |
(23.8) |
— |
Net fair value gain/(loss) on
derivatives |
(41.8) |
(4.3) |
(46.1) |
Finance
loss |
(18.0) |
(28.1) |
(46.1) |
Net investment returns/gains on investments |
(26.5) |
32.3 |
5.8 |
Total revenue |
222.7 |
(6.0) |
216.7 |
Other income1 |
3.9 |
0.8 |
4.7 |
Finance
costs |
(31.0) |
(0.4) |
(31.4) |
Staff costs |
(51.1) |
0.1 |
(51.0) |
Incentive scheme costs |
(72.6) |
(0.1) |
(72.7) |
Other administrative
expenses |
(36.3) |
(4.1) |
(40.4) |
Administrative
expenses |
(160.0) |
(4.1) |
(164.1) |
Share of results of joint ventures accounted for using
equity method |
— |
4.9 |
4.9 |
Profit before tax and discontinued operations |
35.6 |
(4.8) |
30.8 |
Tax charge |
3.1 |
0.2 |
3.3 |
Loss after tax from discontinued operations |
— |
(1.9) |
(1.9) |
Profit after tax and discontinued operations |
38.7 |
(6.5) |
32.2 |
- Interest
income for the period ended 30 September 2022 has been re-presented
in line with the format adopted for the period ended 31 March
2023.
4. Financial assets and liabilities
Accounting policyFinancial assetsFinancial assets
can be classified into the following categories: Amortised Cost,
Fair Value Through Profit and Loss (FVTPL) and Fair Value Through
Other Comprehensive Income (FVOCI). The Group has classified all
financial assets as FVTPL.Financial assets at FVTPL are initially
recognised and subsequently measured at fair value. A valuation
assessment is performed on a recurring basis with gains or losses
arising from changes in fair value recognised through net gains on
investments in the consolidated income statement. Dividends or
interest earned on the financial assets are also included in the
net gains on investments.Where the Group holds investments in a
number of financial instruments such as debt and equity in a
portfolio company, the Group views their entire investment as a
unit of account for valuation purposes. Industry standard valuation
guidelines such as the International Private Equity and Venture
Capital (IPEV) Valuation Guidelines - December 2022, allow for a
level of aggregation where there are a number of financial
instruments held within a portfolio company. Recognition of
financial assetsWhen the Group invests in the capital
structure of a portfolio company, these assets are initially
recognised and subsequently measured at fair value, and transaction
costs are recognised in the consolidated income statement
immediately. Derecognition of financial assetsThe
Group derecognises a financial asset when the contractual rights to
the cash flows from the asset expire, or when substantially all the
risks and rewards of ownership of the asset are transferred to
another party. On derecognition of a financial asset in its
entirety, the difference between the asset’s carrying value amount
and the sum of the consideration received and receivable, is
recognised in profit or loss.Key sources of estimation
uncertainty on financial assetsFair value is the amount
for which an asset could be exchanged, or liability settled,
between knowledgeable, willing parties in an arm’s length
transaction at the reporting date. The fair value of investments is
based on quoted prices, where available. Where quoted prices are
not available, the fair value is estimated in line with IFRS and
industry standard valuation guidelines such as IPEV for direct
investments in portfolio companies, and the Royal Institute of
Chartered Surveyors Valuation – Global Standards 2022 for
investment property. These valuation techniques can be subjective
and include assumptions which are not supportable by observable
data. Details of the valuation techniques and the associated
sensitivities are further disclosed in this note on page 34.Given
the subjectivity of investments in private companies, senior and
subordinated notes of Collateralised Loan Obligation vehicles and
investments in investment property, these are key sources of
estimation uncertainty, and as such the valuations are approved by
the relevant Fund Investment Committees and Group Valuation
Committee. The unobservable inputs relative to these investments
are further detailed below.
|
4. Financial assets and liabilities
continued
Fair value measurements recognised in
the statement of financial position
The information set out below provides
information about how the Group determines fair values of various
financial assets and financial liabilities, grouped into Levels 1
to 3 based on the degree to which the fair value is
observable.
- Level 1 fair value
measurements are those derived from quoted prices (unadjusted) in
active markets for identical assets or liabilities
- Level 2 fair value
measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices)
- Level 3 fair value
measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs)
The following table summarises the valuation of the
Group’s financial assets and liabilities by fair value
hierarchy:
|
As at 30 September 2023 (Unaudited) |
As at 31 March 2023 (Audited) |
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
Group |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Financial Assets |
|
|
|
|
|
|
|
|
Investments in or alongside
managed funds1 |
6.0 |
2.2 |
2,214.2 |
2,222.4 |
7.2 |
1.8 |
2,144.3 |
2,153.3 |
Investments in loans held
within structured entities controlled by the Group |
— |
4,064.9 |
454.1 |
4,519.0 |
— |
4,101.4 |
567.7 |
4,669.1 |
Derivative assets |
— |
12.4 |
— |
12.4 |
— |
22.0 |
— |
22.0 |
Investments in private
companies2 |
— |
— |
102.3 |
102.3 |
— |
— |
100.4 |
100.4 |
Investments in public
companies |
4.6 |
— |
— |
4.6 |
5.1 |
— |
— |
5.1 |
Senior and subordinated notes
of CLO vehicles |
— |
106.1 |
17.1 |
123.2 |
— |
105.8 |
7.5 |
113.3 |
Disposal groups held for sale3 |
— |
— |
443.1 |
443.1 |
— |
— |
163.2 |
163.2 |
Total assets4 |
10.6 |
4,185.6 |
3,230.8 |
7,427.0 |
12.3 |
4,231.0 |
2,983.1 |
7,226.4 |
|
|
|
|
|
|
|
|
|
Financial
Liabilities |
|
|
|
|
|
|
|
|
Liabilities of consolidated
credit funds |
— |
(4,253.6) |
(122.8) |
(4,376.4) |
— |
(4,508.0) |
(64.7) |
(4,572.7) |
Derivative liabilities |
— |
(41.1) |
— |
(41.1) |
— |
(15.7) |
— |
(15.7) |
Disposal groups held for sale5 |
— |
— |
(171.4) |
(171.4) |
— |
— |
— |
— |
Total liabilities6 |
— |
(4,294.7) |
(294.2) |
(4,588.9) |
— |
(4,523.7) |
(64.7) |
(4,588.4) |
-
Level 3 Investments in or alongside managed funds includes
£48.5m senior debt (31 March 2023: £47.8m), £1,337.0m subordinated
debt and equity (31 March 2023: £1,319.8m), £330.5m of real estate
assets (31 March 2023: £284.5m), and £498.2m private equity
secondaries (31 March 2023: £492.2m).
-
Level 3 Investment in private companies includes £93.1m
subordinated debt and equity (31 March 2023: £91.3m) and £9.2m of
real estate assets (31 March 2023: £9.1m).
Footnotes 3 to 6 below explain how the
financial assets and financial liabilities set out in this note
reconcile to the Statement of Financial Position (see page
22):
-
Level 3 Disposal groups held for sale financial assets
include £193.7m subordinated debt and equity (31 March 2023:
£163.2m), £42.3m of real assets (31 March 2023: £0.0m), and £207.1m
private equity secondaries (31 March 2023: £0.0m). Other Disposal
groups held for sale assets (not reported within this note)
comprise the following: non-financial (investment property) assets:
£123.9m (31 March 2023: £284.0m) and other operating assets £122.4m
(31 March 2023: £131.1m)
-
Total assets comprises Non-current financial assets at fair
value (£6,961.6m (31 March 2023: £7,036.6m)); Current financial
assets at fair value (£9.9m (31 March 2023: £4.7m)); Non-current
derivative financial assets (£7.6m (31 March 2023: £8.4m)); Current
derivative financial assets (£4.8m (31 March 2023: £13.6m)) and
financial assets included within Disposal groups held for sale
(£443.1m (31 March 2023: £163.2m))
-
Level 3 Disposal groups held for sale financial liabilities
include £171.4m (31 March 2023: £0.0m) liabilities of consolidated
private equity secondaries funds. Other Disposal groups held for
sale liabilities (not reported within this note) comprise other
operating liabilities £97.8m (31 March 2023: £204.0m)
-
Total liabilities comprises Non-current financial
liabilities at fair value (£4,376.4m (31 March 2023: £4,572.7m));
Non-current derivative financial liabilities (£0.0m (31 March 2023:
£0.9m)); Current derivative financial liabilities (£41.1m (31 March
2023: £14.8m)); and financial liabilities included within Disposal
groups held for sale (£171.4m (31 March 2023: £0.0m))
4. Financial assets and liabilities
continued
Valuations
Valuation
process
The Group Valuation Committee (GVC)
oversees the valuation processes and provides independent review of
the methodologies, models and assumptions used to value the Level 3
assets and liabilities, in accordance with the principles and
guidelines set out in the Group Valuation Policy, and assesses the
reasonableness of the resulting fair value measurement. The GVC
reviews valuations on a quarterly basis and reports to the Audit
Committee semi-annually. The GVC is independent of the boards of
directors of the funds and no member of the GVC is a member of
either the Group’s investment teams or Investment Committees
(IC’s).
Valuation methodologies are identified
for each category of Level 3 assets, based on the specific
characteristics of each asset and liability and considering factors
such as the nature, complexity, and risk profile of the investment.
Each asset is attributable to a fund or investment strategy managed
by the Group.
The IC of that fund or strategy is
responsible for the review, challenge, and approval of the related
funds’ valuations of the assets managed by that strategy investment
team. Sources of the valuation include the ICG investment team,
third-party valuation services and third-party fund administrators.
The IC provides those valuations to the Group, as an investor in
the fund assets.
The IC is also responsible for
escalating significant events regarding the valuation to the Group
(as an investor in the fund assets), e.g. change in valuation
methodologies, potential impairment events, material judgements
etc.
The table in page 34 outlines in more
detail the range of valuation techniques, as well as the key
unobservable inputs for each category of Level 3 assets and
liabilities.
Investment in or alongside
managed funds
When fair values of publicly traded
closed-ended funds and open-ended funds are based on quoted market
prices in an active market for identical assets without any
adjustments, the instruments are included within Level 1 of the
hierarchy. The Group values these investments at bid price for long
positions and ask price for short positions.
The Group also co-invests with funds,
including credit and private equity secondary funds, which are not
quoted in an active market. The Group considers the valuation
techniques and inputs used by these funds to ensure they are
reasonable, appropriate and consistent with the principles of fair
value. The latest available NAV of these funds are generally used
as an input into measuring their fair value. The NAV of the funds
are adjusted, as necessary, to reflect restrictions on redemptions,
and other specific factors relevant to the funds. In measuring fair
value, consideration is also given to any transactions in the
interests of the funds. The Group classifies these funds as Level
3.
Investment in private
companies
The Group takes debt and equity stakes
in private companies that are, other than on very rare occasions,
not quoted in an active market and uses either a market-based
valuation technique or a discounted cash flow technique to value
these positions.
The Group’s investments in private
companies are held at fair value using the most appropriate
valuation technique based on the nature, facts and circumstances of
the private company. The first of two principal valuation
techniques is a market comparable companies technique. The
enterprise value (EV) of the portfolio company is determined by
applying an earnings multiple, taken from comparable companies, to
the profits of the portfolio company. The Group determines
comparable private and public companies, based on industry, size,
location, leverage and strategy, and calculates an appropriate
multiple for each comparable company identified. The second
principal valuation technique is a discounted cash flow (DCF)
approach. Fair value is determined by discounting the expected
future cash flows of the portfolio company to the present value.
Various assumptions are utilised as inputs, such as terminal value
and the appropriate discount rate to apply. Typically, the DCF is
then calibrated alongside a market comparable companies approach.
Alternate valuation techniques may be used where there is a recent
offer or a recent comparable market transaction, which may provide
an observable market price and an approximation to fair value of
the private company. The Group classifies these assets as Level
3.
Investment in public
companies
Quoted investments are held at the last
traded bid price on the reporting date. When a purchase or sale is
made under contract, the terms of which require delivery within the
timeframe of the relevant market, the contract is reflected on the
trade date.
4. Financial assets and liabilities
continued
Investment in loans held in
consolidated structured entities
The loan asset portfolios of the
consolidated structured entities are valued using observable inputs
such as recently executed transaction prices in securities of the
issuer or comparable issuers and from independent loan pricing
sources. To the extent that the significant inputs are observable
the Group classifies these assets as Level 2 and other assets are
classified as Level 3. Level 3 assets are valued using a discounted
cash flow technique and the key inputs under this approach are
detailed on page 34.
Derivative assets and
liabilities
The Group uses market-standard valuation
models for determining fair values of over-the-counter interest
rate swaps, currency swaps and forward foreign exchange contracts.
The most frequently applied valuation techniques include forward
pricing and swap models, using present value calculations. The
models incorporate various inputs including both credit and debit
valuation adjustments for counterparty and own credit risk, foreign
exchange spot and forward rates and interest rate curves. For these
financial instruments, significant inputs into models are market
observable and are included within Level 2.
Senior and subordinated notes of
CLO vehicles
The Group holds investments in the
senior and subordinated notes of the CLOs it manages, predominately
driven by European Union risk-retention requirements. The Group
employs DCF analysis to fair value these investments, using several
inputs including constant annual default rates, prepayments rates,
reinvestment rates, recovery rates and discount rates.
The DCF analysis at the reporting date
shows that the senior notes are typically expected to recover all
contractual cash flows, including under stressed scenarios, over
the life of the CLOs. Unobservable inputs are used in determining
the fair value of subordinated notes, which are therefore
classified as Level 3 instruments. Observable inputs are used in
determining the fair value of senior notes and these instruments
are therefore classified as Level 2.
Liabilities of consolidated
credit funds
Rated debt liabilities of consolidated
CLOs are generally valued at par plus accrued interest, which we
assess as fair value, as evidenced by the general availability of
market prices and discounting spreads for rated debt liabilities of
CLOs. This is consistent with the valuation approach of the rated
debt assets held in the unconsolidated CLOs. As a result we deem
these liabilities as Level 2.
Unrated/subordinated debt liabilities of
consolidated CLOs are valued directly in line with the fair value
of the CLOs’ underlying loan asset portfolios. These underlying
assets comprise observable loan securities traded in active
markets. The underlying assets are reported in both Level 2 and
Level 3. As a result of this methodology deriving the valuation of
unrated/subordinated debt liabilities from a combination of Level 2
and Level 3 asset values, we deem these liabilities to be Level
3.
Real estate
assets
To the extent that the Group invests in
real estate assets, whether through an investment in a managed fund
or an investment in a private company, the underlying assets may be
a debt instrument or property classified as investment property in
accordance with IAS 40 ‘Investment Property’. The fair values of
the directly held investment properties have been recorded based on
independent valuations prepared by third-party real estate
valuation specialists in line with the Royal Institution of
Chartered Surveyors Valuation – Global Standards 2022. At the end
of each reporting period, the Group reviews its assessment of the
fair value of each property, taking into account the most recent
independent valuations. The Directors determine a property value
within a range of reasonable fair value estimates, based on
information provided.
All resulting fair value estimates for
properties are included in Level 3.
4. Financial assets and liabilities
continued
Reconciliation of Level 3 fair value
measurements of financial assets
The following tables set out the
movements in recurring financial assets valued using the Level 3
basis of measurement in aggregate. Within the income statement,
realised gains and fair value movements are included within gains
on investments, and foreign exchange gain/(losses) are included
within finance costs. Transfers between levels are determined based
on the closing valuation and therefore take place at the end of the
reporting period.
|
Investment in or alongside managed funds |
Investment in loans held in consolidated
entities |
Investment in private companies |
Senior and subordinated notes of CLO vehicles |
Disposal groups held for sale |
Total |
Group |
£m |
£m |
£m |
£m |
£m |
£m |
At 1 April 2023 |
2,144.3 |
567.7 |
100.4 |
7.5 |
163.2 |
2,983.1 |
Total gains or losses in the
income statement |
|
|
|
|
|
|
– Net investment return2 |
134.6 |
1.6 |
3.5 |
4.2 |
63.4 |
207.3 |
– Foreign exchange |
(10.6) |
0.1 |
(1.1) |
(0.1) |
3.4 |
(8.3) |
Purchases |
100.7 |
111.1 |
0.2 |
5.5 |
213.1 |
430.6 |
Exit proceeds |
(154.8) |
(100.8) |
(0.7) |
— |
— |
(256.3) |
Transfer between levels1 |
— |
(125.6) |
— |
— |
— |
(125.6) |
At 30 September 2023 |
2,214.2 |
454.1 |
102.3 |
17.1 |
443.1 |
3,230.8 |
1. During the year certain assets in
Investments in loans held in consolidated entities were reassessed
as Level 2 (from Level 3) as a result of a change in the number of
broker quotes for these assets, and these changes are reported as a
transfer out. 2. Included within net investment returns are £149.7m
of unrealised gains (which includes accrued interest).
|
Investment in or alongside managed funds |
Investment in loans held in consolidated
entities |
Investment in private companies |
Senior and subordinated notes of CLO vehicles |
Disposal groups held for sale |
Total |
Group |
£m |
£m |
£m |
£m |
£m |
£m |
At 1 April 2022 |
2,112.9 |
145.2 |
122.7 |
9.1 |
89.2 |
2,479.1 |
Total gains or losses in the
income statement |
|
|
|
|
|
|
– Net investment return2 |
172.9 |
(9.6) |
(21.2) |
(1.3) |
(7.1) |
133.7 |
- Foreign exchange |
67.4 |
15.5 |
13.2 |
0.5 |
5.8 |
102.4 |
Purchases |
416.2 |
60.2 |
6.7 |
— |
158.7 |
641.8 |
Exit proceeds |
(625.1) |
(100.7) |
(21.0) |
(0.8) |
(23.8) |
(771.4) |
Transfer between levels1 |
— |
457.1 |
— |
— |
(59.6) |
397.5 |
At 31 March 2023 |
2,144.3 |
567.7 |
100.4 |
7.5 |
163.2 |
2,983.1 |
1.During the year certain assets in
Investments in or alongside managed fund and Investments in loans
held in consolidated entities were reassessed to Level 3 and these
changes are reported as a transfer in the year. Transfers out of
Disposal groups held for sale represented the re-designation of an
asset as Investment Property2. Included within net investment
returns are £141.8m of unrealised gains (which includes accrued
interest)
Reconciliation of Level 3 fair value measurements of
financial liabilities
The following tables sets out the
movements in reoccurring financial liabilities valued using the
Level 3 basis of measurement in aggregate. Within the income
statement, realised gains and fair value movements are included
within gains on investments, and foreign exchange gains/(losses)
are included within finance costs. Transfers between levels are
determined based on the closing valuation and therefore take place
at the end of the reporting period.
During the period ended 30 September
2023 changes in the fair value of the assets of consolidated credit
funds resulted in an increase in the fair value of the financial
liabilities of those consolidated credit funds, reported as a ‘fair
value loss’ in the table below.
|
30 September 2023 (Unaudited) |
31 March 2023 (Audited) |
|
Financial liabilities designated as FVTPL |
Financial liabilities designated as FVTPL |
Group |
£m |
£m |
At 1 April |
64.7 |
239.6 |
Total gains or losses in the
income statement |
|
|
– Fair value loss/(gain) |
52.7 |
(178.2) |
– Foreign exchange
(gain)/loss |
(0.4) |
12.8 |
Purchases |
0.0 |
23.8 |
Disposal groups held for
sale |
171.4 |
(5.0) |
Transfer between levels |
5.8 |
(28.3) |
As at period end |
294.2 |
64.7 |
4. Financial assets and liabilities continuedTransfers
in and out of Level 3 financial liabilities were due to changes to
the observability of inputs used in the valuation of these
liabilities.
Valuation inputs and sensitivity
analysis
The following table summarises the
inputs and estimates used for items categorised in Level 3 of the
fair value hierarchy together with a quantitative sensitivity
analysis:
|
Fair Value |
Fair Value |
Primary Valuation Technique1 |
Key UnobservableInputs |
Range |
Weighted Average/ Fair Value Inputs |
Sensitivity/Scenarios |
Effect on Fair Value430
September 2023 |
|
As at30 September 2023 |
As at31 March 2023 |
Group Assets |
£m |
£m |
£m |
Corporate
- subordinated debt and equity2 |
1,623.8 |
1,574.4 |
Market comparable companies |
Earnings multiple |
5.0x – 30.0x |
15.6x |
'+10% Earnings multiple2 |
201.6 |
Discounted cash flow |
Discount rate |
7.5% - 23.0% |
11.2 % |
'-10% Earnings multiple2 |
(201.4) |
Earnings multiple |
6.2x – 22.1x |
11.6x |
|
|
Real
Assets |
382.0 |
293.6 |
Third-party valuation |
N/A |
N/A |
N/A |
+10% Third-party valuation |
38.2 |
LTV-based
impairment model |
N/A |
N/A |
N/A |
-10% Third-party valuation |
(38.2) |
|
|
|
|
|
Private
Equity Secondaries |
705.3 |
492.1 |
|
|
|
|
|
|
Third-party valuation |
N/A |
N/A |
N/A |
+10% Third-party valuation |
70.5 |
|
|
|
|
-10% Third-party valuation |
(70.5) |
|
|
|
|
|
|
Corporate
- Senior debt |
48.5 |
47.8 |
Discounted cash flow |
Probability of default |
1.2%-3.3% |
1.5 % |
Upside case |
0.1 |
|
Loss given default |
25.4 % |
25.4 % |
Downside case |
(0.8) |
|
Maturity of loan |
3 years |
3 years |
|
|
Effective interest rate |
8.7%-9.5% |
8.7 % |
|
|
Subordinated notes of CLO vehicles3 |
17.1 |
7.5 |
Discounted cash flow |
Discount rate |
13.0% - 14.0% |
13.6 % |
|
|
|
Default rate |
3% - 4.5% |
3.4 % |
Upside case3 |
24.9 |
|
Downside case3 |
(24.3) |
|
Prepayment rate % |
15% -20% |
19.1 % |
|
|
|
Recovery rate % |
75.0 % |
75.0 % |
|
|
|
Reinvestment price |
99.5 % |
99.5 % |
|
|
Investments in loans held in structured entities |
454.1 |
567.7 |
Third-party valuation |
N/A |
N/A |
N/A |
+10% Third-party valuation |
45.4 |
-10% Third-party valuation |
(45.4) |
Total assets |
3,230.8 |
2,983.1 |
|
|
|
|
|
|
Liabilities of consolidated credit funds |
(122.8) |
(64.7) |
Third-party valuation |
N/A |
N/A |
N/A |
+10% Third-party valuation |
12.3 |
|
-10% Third-party valuation |
(12.3) |
Disposal
group held for sale |
(171.4) |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
(294.2) |
(64.7) |
|
|
|
|
|
|
-
Where the Group has co-invested with its managed funds, it
is the type of the underlying investment, and the valuation
techniques used for these underlying investments, that is set out
here.
-
For investments valued using a DCF methodology (including
Infrastructure investments) the imputed earnings multiple is used
for this sensitivity analysis.
-
The sensitivity analysis is performed on the entire
portfolio of subordinated notes of CLO vehicles that the Group has
invested in with total value of £195.1m (31 March 2023: £182.8m).
This value includes investments in CLOs that are not consolidated
(30 September 2023: £17.1m (31 March 2023: £7.5m)) and investments
in CLOs which are consolidated (30 September 2023: £178m (31 March
2023: £175.3m)). The upside case is based on the default rate being
lowered by 2.0% p.a. for the next 24 months, keeping all other
parameters consistent. The downside case is based on the default
rate being increased over the next 24 months by 2.0% p.a., keeping
all other parameters consistent.
- The effect
of fair value across the entire investment portfolio ranges from
-£392.9m (downside case) to +£392.9m (upside case) (31 March 2023:
-£345.4m (downside case) to +£343.0m (upside case).
5. Earnings per share
|
Six months ended 30 September 2023
(Unaudited) |
Six months ended 30 September
2022(Unaudited) |
Earnings |
£m |
£m |
Earnings for the purposes of basic and diluted earnings per share
being net profit attributable to equity holders of the Parent: |
|
|
Continuing operations |
217.6 |
34.1 |
Discontinued operations |
7.4 |
(0.7) |
|
225.0 |
33.4 |
Number of shares |
|
|
Weighted average number of
ordinary shares for the purposes of basic earnings per share |
285,752,340 |
286,293,727 |
Effect
of dilutive potential ordinary share options |
3,430,600 |
3,602,160 |
Weighted average number of ordinary shares for the purposes
of diluted earnings per share |
289,182,940 |
289,895,887 |
|
|
|
Earnings per share for continuing operations
1 |
|
|
Basic, profit from continuing operations attributable to equity
holders of the parent (pence) |
76.1p |
11.9p |
Diluted, profit from
continuing operations attributable to equity holders of the parent
(pence) |
75.2p |
11.7p |
|
|
|
Earnings per share for discontinued operations
1 |
|
|
Basic, profit/(loss) from discontinued operations attributable to
equity holders of the parent (pence) |
2.6p |
(0.2)p |
Diluted, profit/(loss) from
discontinued operations attributable to equity holders of the
parent (pence) |
2.6p |
(0.2)p |
-
The prior period has been re-presented to separately
disclose Earnings per share for continuing operations and Earnings
per share for discontinued operations.
The total number of shares issued during
the period to 30 September 2023 was 32,379 (H1 FY23:
nil).
6. Dividends
Dividends on ordinary shares of 52.2p
per share, £149.5m (H1 FY23 57.3p, £164.4m) were paid during the
period to 30 September 2023.
The Board has approved an interim
dividend of 25.8p per share (H1 FY23: 25.3p).
7. Tax expense
Analysis of tax on ordinary activities |
Six months ended 30 September
2023 (Unaudited) £m |
Six months ended 30 September
2022 (Unaudited) £m |
|
|
|
Current tax |
37.1 |
(15.4) |
Deferred taxation |
5.2 |
12.1 |
Tax charge/(credit) on profit on ordinary
activities |
42.3 |
(3.3) |
The Group is an international business and operates
across many different tax jurisdictions. Income and expenses are
allocated to these jurisdictions based on transfer pricing
methodologies set out both (i) in the laws of the jurisdictions in
which the Group operates, and (ii) under guidelines set out by the
Organisation for Economic Co-operation and Development
(OECD).
The effective tax rate reported by the
Group for the period ended 30 September 2023 of 16.3% (H1 FY23:
(10.8)%) is lower than the statutory UK corporation tax rate of
25%.
The FMC activities are subject to tax at
the relevant statutory rates ruling in the jurisdictions in which
the income is earned. The lower effective tax rate compared to the
statutory UK rate is largely driven by the IC activities. The IC
benefits from statutory UK tax exemptions on certain forms of
income arising from both foreign dividend receipts and gains from
assets qualifying for the substantial shareholdings exemption. The
effect of these exemptions means that the effective tax rate of the
Group is highly sensitive to the relative mix of IC income, and
composition of such income, in any one period. 7. Tax expense
continued
Due to the application of tax law
requiring a degree of judgement, the accounting thereon involves a
level of estimation uncertainty which tax authorities may
ultimately dispute. Tax liabilities are recognised based on the
best estimates of probable outcomes and with regard to external
advice where appropriate. The principal factors which may influence
the Group’s future tax rate are changes in tax legislation in the
territories in which the Group operates, the relative mix of FMC
and IC income, the mix of income and expenses earned and incurred
by jurisdiction and the timing of recognition of available deferred
tax assets and liabilities. The Group accounts for future
legislative change, to the extent that is enacted at the reporting
date, in its recognition of deferred tax.
8. Financial liabilities
Financial liabilities are £5,985.1m (31
March 2023: £6,210.5m), including £1,484.9m (31 March 2023:
£1,536.7m) of financial liabilities at amortised cost. This is a
decrease of £(225.4)m in the period since 31 March 2023 and is
driven by the repayment of long term debt at fair value in the
consolidated structured entities £196.3m and at amortised cost in
operating segments £50.7m.
9. Net cash flows from operating activities
|
Six months ended 30 September 2023
(Unaudited) |
Six months ended 30 September 2022
(Unaudited) |
|
£m |
£m |
Profit before tax from continuing operations |
259.9 |
30.8 |
Adjustments for non
cash items: |
|
|
Fee and other operating
income |
(253.5) |
(257.0) |
Net investment returns |
(215.9) |
(5.8) |
Interest income |
(10.1) |
(4.7) |
Net fair value loss on
derivatives |
1.3 |
86.4 |
Impact of movement in foreign
exchange rates |
5.0 |
(40.3) |
Interest expense |
24.9 |
31.4 |
Depreciation, amortisation and
impairment of property, equipment and intangible assets |
9.3 |
7.9 |
Share-based payment
expense |
21.2 |
20.4 |
Working capital
changes: |
|
|
(Increase)/Decrease in trade
and other receivables |
(23.6) |
59.2 |
Decrease in trade and other payables |
(108.5) |
(287.7) |
|
(290.0) |
(359.4) |
Proceeds from sale of current
financial assets and disposal groups held for sale |
131.9 |
7.3 |
Purchase of current financial
assets and disposal groups held for sale |
(169.9) |
(118.3) |
Purchase of investments1 |
(1,105.8) |
(662.2) |
Proceeds from sales and
maturities of investments |
1,071.0 |
902.9 |
Interest and dividend income
received2 |
218.1 |
151.6 |
Fee and other operating income
received |
237.3 |
334.1 |
Interest paid |
(166.0) |
(106.7) |
Cash flows (used in)/generated from
operations |
(73.4) |
149.3 |
Taxes
paid |
(1.6) |
(16.5) |
Net cash flows (used in)/from operating
activities |
(75.0) |
132.8 |
-
Includes repayment of financial liabilities at FVTPL of
consolidated structured entities £270.6m (H1FY23:
£28.0m).
-
Comprises Interest income received of £218.1m (H1FY23:
£127.8m) and Dividend income received of £ nil (H1FY23:
£23.8m).
Cash flows arising from the acquisition
and disposal of assets to seed new investment strategies (reported
as disposal groups held for sale) are classified as operating, as
this activity is undertaken to establish new sources of fund
management fee income, growing the operating activities of the
Group.
Included within Proceeds from sale of
current financial assets and disposal groups held for sale is cash
consideration received of £113.9m in respect of the partial
disposal of the Group's interest in Metropolitan SCSp resulting in
a loss of control by the Group. Immediately prior to the partial
disposal the net asset value of Metropolitan SCSp was £161.3m,
predominantly comprised of investment property. Proceeds of £18.0m
(H1FY23: £6.4m) were received in respect of an interest in private
equity secondaries fund with no change of control.
Purchase of current financial assets and
disposal groups held for sale includes £90.1m (H1 FY23: £19.0m) of
financial assets and £71.2m (H1 FY23: £44.0m) of investment
property held by controlled subsidiaries.
10. Post balance sheet events
There have been no material events since
the balance sheet date.
Other information
Outstanding debt facilities
|
Currency |
Drawn£m |
Undrawn£m |
Interest rate |
Maturity |
ESG-linked RCF |
GBP |
— |
550 |
SONIA +1.375% |
January-26 |
|
|
|
|
|
|
Eurobond 2020 |
EUR |
433 |
— |
1.63% |
February-27 |
ESG Linked Bond |
EUR |
433 |
— |
2.50% |
January-30 |
Total bonds |
|
866 |
— |
|
|
|
|
|
|
|
|
PP 2015 – Class C |
USD |
66 |
— |
5.21% |
May-25 |
PP 2015 – Class F |
EUR |
38 |
— |
3.38% |
May-25 |
Private Placement
2015 |
|
104 |
— |
|
|
PP 2016 – Class B |
USD |
93 |
— |
4.66% |
September-24 |
PP 2016 – Class C |
USD |
44 |
— |
4.96% |
September-26 |
PP 2016 – Class E |
EUR |
19 |
— |
3.04% |
January-27 |
PP 2016 – Class F |
EUR |
26 |
— |
2.74% |
January-25 |
Private Placement
2016 |
|
182 |
— |
|
|
PP 2019 – Class A |
USD |
102 |
— |
4.76% |
April-24 |
PP 2019 – Class B |
USD |
82 |
— |
4.99% |
March-26 |
PP 2019 – Class C |
USD |
103 |
— |
5.35% |
March-29 |
PP 2019 – Class D |
EUR |
38 |
— |
2.02% |
April-24 |
Private Placement 2019 |
|
325 |
— |
|
|
Total Private Placements |
|
611 |
— |
|
|
|
|
|
|
|
|
Total |
|
1,477 |
550 |
|
|
Glossary
Non-IFRS alternative performance
measures (APM) are defined below:
Term |
|
Short Form |
|
Definition |
APM earnings per share |
|
EPS |
|
APM 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 5. |
APM Group
profit before tax |
|
|
|
Group
profit before tax adjusted for the impact of the consolidated
structured entities. As at 30 September, this is calculated as
follows: |
|
|
Six months ended 30 September
2023 |
Six months ended 30 September
2022 |
Profit before tax |
|
£228.5m |
£30.8m |
Plus/Less consolidated structured entities |
|
£13.4m |
£4.8m |
APM Group profit/(loss) before tax |
|
£241.9m |
£35.6m |
APM
Investment Company profit before tax |
|
|
|
Investment
Company profit adjusted for the impact of the consolidated
structured entities. As at 30 September, this is calculated as
follows: |
|
|
Six months ended 30 September
2023 |
Six months ended 30 September
2022 |
Investment Company profit before tax |
|
£65.8m |
£(112.9)m |
Plus/Less consolidated structured entities |
|
£13.4m |
£4.8m |
APM Investment Company profit/(loss) before
tax |
|
£79.2m |
£(108.1)m |
Assets under management |
|
AUM |
|
Value of
all funds and assets managed by the FMC. During the investment
period third-party AUM is measured on the basis of committed
capital. Once outside the investment period third-party AUM is
measured on the basis of invested cost. AUM is presented in US
dollars, with non-US dollar denominated converted at the period end
closing rate. |
Balance sheet investment portfolio |
|
|
|
The
balance sheet investment portfolio represents financial assets from
the statement of financial position, adjusted for the impact of the
consolidated structured entities and excluding derivatives and
other financial assets. |
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. See note 3 for a full
reconciliation. |
Earnings per share |
|
EPS |
|
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 5. |
EBITDA |
|
|
|
Earnings
before interest, tax, depreciation and amortisation. |
Effective 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. |
Equalisation |
|
|
|
When new
third-party clients subscribe to a closed-end fund after the first
close, they pay a pre-agreed return to clients who subscribed to
the fund at an earlier close. This compensates those clients for
their capital being tied up for longer. This is referred to as
'equalisation' and can result in gain or loss for earlier investors
compared to the latest fund valuation. |
Interest expense |
|
|
|
Interest
expense excludes the cost of financing associated with the
consolidated structured entities. |
APM net
asset value per share |
|
|
|
Total
equity from the statement of financial position adjusted for the
impact of the consolidated structured entities divided by the
closing number of ordinary shares. As at 30 September, this is
calculated as follows: |
|
|
Six months ended 30 September
2023 |
Six months ended 30 September
2022 |
Total equity |
|
£2,045.6m |
£1,875.0m |
Closing number of ordinary shares |
|
286,443,759 |
284,867,428 |
Net asset value per share |
|
714p |
658p |
Net
financial debt |
|
Net
debt |
|
Net debt is defined
as gross financial debt less cash. |
|
|
30 September 2023 |
31 March 2023 |
Gross drawn debt (see page 14) |
|
£1,477m |
£1,538.0m |
Less cash |
|
(£485.0m) |
(£550.0m) |
Net debt |
|
£992.0m |
£988.0m |
|
|
|
|
|
|
|
|
Term |
|
Short Form |
|
Definition |
Net
gearing |
|
|
|
Net gearing is used
by management as a measure of balance sheet efficiency. Net debt,
excluding the consolidated structured entities, divided by total
equity from the statement of financial position adjusted for the
impact of the consolidated structured entities. As at 30 September,
this is calculated as follows: |
|
|
30 September 2023 |
31 March 2023 |
Net
debt |
|
£992.0m |
£988.0m |
Shareholders’ equity |
|
£2,045.6m |
£1,977.4m |
Net gearing |
|
0.48x |
0.50x |
Net Investment Returns |
|
|
|
Net
Investment Returns is the total of interest income, capital gains,
dividend and other income less asset impairments. |
Operating cash flow |
|
|
|
Operating cash flow
represents the cash generated from operating activities from the
statement of cash flows, adjusted for the impact of the
consolidated structured entities. |
Operating
profit margin |
|
|
|
Fund
Management Company profit before tax divided by Fund Management
Company total revenue. As at 30 September this is calculated as
follows: |
|
|
|
Six months ended 30 September
2023 |
Six months ended 30 September
2022 |
|
Fund Management Company profit before tax |
|
£162.7m |
£143.7m |
|
Fund Management Company total revenue |
|
£296.0m |
£256.9m |
|
Operating profit margin |
|
55.0 % |
55.9 % |
Third Party AUM |
|
|
|
Value of
all funds and assets managed by the Group (including both invested
and uninvested capital) on which the Group earns, or has the
potential to earn, fees. |
Third Party Fee Income |
|
|
|
Fees
generated on fund management activities as reported in the Fund
Management Company including fees generated by consolidated
structured entities which are excluded from the IFRS consolidation
position. See note 3 for a full reconciliation. |
Total
AUM |
|
|
|
Total AUM is
calculated by adding Third Party AUM and the value of the Balance
Sheet Investment Portfolio, excluding seed investments: |
|
|
|
30 September 2023 |
31 March 2023 |
|
Third Party AUM |
|
$77.8bn |
$77.0bn |
|
Balance Sheet Investment Portfolio (excluding seed
investments) |
|
$3.2bn |
$3.2bn |
|
Total AUM |
|
$81.0bn |
$80.2bn |
Total available liquidity |
|
|
|
Total
available liquidity comprises of cash and available undrawn debt
facilities. |
Total fund size |
|
|
|
Total fund
size is the sum of third-party AUM and ICG plc’s commitment to that
fund. |
Other definitions which have not been identified as
non-IFRS GAAP alternative performance measures are as
follows:
Term |
|
Short Form |
|
Definition |
Additions (of AUM) |
|
|
|
Within third-party AUM: the aggregate of new commitments of capital
by clients, and calls of capital from funds that have previously
had a step-down and are therefore reflected in third-party AUM on a
net invested capital basis. Within third-party fee-earning AUM: the
aggregate of new commitments of capital by clients that pay fees on
committed capital, and deployment of capital that charges fees on
invested capital (including calls of capital from funds that have
previously had a step-down and therefore charge fees on a net
invested capital basis). |
AIFMD |
|
|
|
The EU Alternative Investment Fund Managers Directive |
Alternative performance measure |
|
APM |
|
These are non-IFRS financial measures. |
CAGR |
|
|
|
Compound Annual Growth Rate |
Catch-up fees |
|
|
|
Fees charged to investors who commit to a fund after its first
close. This has the impact of backdating their commitment thereby
aligning all investors in the fund. |
Client base |
|
|
|
Client base includes all direct investment fund and liquid credit
fund investors. |
Closed-end fund |
|
|
|
A fund where investor’s commitments are fixed for 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 Loan Obligation |
|
CLO |
|
CLO is a type of investment grade security backed by a pool of
loans. |
Close |
|
|
|
A stage in fundraising whereby a fund is able to release or draw
down the capital contractually committed at that date. |
Default |
|
|
|
An ‘event of default’ is defined as: A company fails to make timely
payment of principal and/or interest under the contractual terms of
any financial obligation by the required payment date A
restructuring of the company’s obligations as a result of
distressed circumstances A company enters into bankruptcy or
receivership |
Deal Vintage Bonus |
|
DVB |
|
DVB awards are a long-term employee incentive, enabling certain
investment teams, excluding Executive Directors, to share in the
future realised profits from certain investments within the Group's
balance sheet portfolio. |
Direct investment funds |
|
|
|
Funds which invest in self-originated transactions for which there
is a low volume, illiquid secondary market. |
DPI |
|
|
|
Distribution to Paid- In Capital. |
Employee Benefit Trust |
|
EBT |
|
Special purpose vehicle used to purchase ICG plc shares which are
used to satisfy share options and awards granted under the Group’s
employee share schemes. |
Environmental, Social and Governance criteria |
|
ESG |
|
Environmental, social and governance (ESG) criteria are a set of
standards for a company’s operations that socially conscious
investors use to screen potential investments. |
Financial Conduct Authority |
|
FCA |
|
Regulates conduct by both retail and wholesale financial service
companies in provision of services to consumers. |
Financial Reporting Council |
|
FRC |
|
The UK’s independent regulator responsible for promoting high
quality corporate governance and reporting. |
Fund |
|
|
|
A pool of third-party capital allocated to a specific investment
strategy or strategies, managed by ICG plc or its affiliates. |
Fund Management Company |
|
FMC |
|
The Group’s fund management business, which sources and manages
investments on behalf of the IC and third-party funds. |
Fund level leverage |
|
|
|
Debt facilities utilised by funds to finance assets. |
Gross money on invested capital |
|
Gross MOIC |
|
Total realised and unrealised value of investments (before
deduction of any fees), divided by the total invested cost. |
HMRC |
|
|
|
HM Revenue & Customs, the UK tax authority. |
IAS |
|
|
|
International Accounting Standards. |
IFRS |
|
|
|
International Financial Reporting Standards as adopted by the
United Kingdom. |
Illiquid assets |
|
|
|
Asset classes which are not actively traded. |
Investment Company |
|
IC |
|
The Investment Company invests the Group’s balance sheet to seed
and accelerate emerging strategies, and invests alongside the
Group's more established funds to align interests between the
Group's client, employees and shareholders. It also supports a
number of costs including for certain central functions, a part of
the Executive Directors' compensation and the portion of the
investment teams' compensation linked to the returns of the balance
sheet investment portfolio. |
Internal Rate of Return |
|
IRR |
|
The annualised return received by an investor in a fund. It is
calculated from cash drawn from and returned to the investor
together with the residual value of the asset. |
Key Person |
|
|
|
Certain funds have a designated Key Person. The departure of a Key
Person without adequate replacement triggers a contractual right
for investors to cancel their commitments or kick-out of the Group
as fund manager. |
Key performance indicator |
|
KPI |
|
A business metric used to evaluate factors that are crucial to the
success of an organisation. |
Key risk indicator |
|
KRI |
|
A measure used to indicate how risky an activity is. 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. |
|
|
|
|
|
Term |
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Short Form |
|
Definition |
Money multiple |
|
MOIC or MM |
|
Cumulative returns divided by original capital invested. |
Net currency assets |
|
|
|
Net assets excluding certain items including; trade and other
receivables, trade and other payables, property plant and
equipment, cash balances held by the Group’s fund management
entities, derivative financial assets and liabilities on management
fee FX hedges, and current and deferred tax assets and
liabilities. |
Open-ended fund |
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|
|
A fund which remains open to new commitments and where an
investor’s commitment may be redeemed with appropriate notice. |
Payment in kind |
|
PIK |
|
Also known as rolled-up interest. PIK is the interest accruing on a
loan until maturity or refinancing, without any cash flows until
that time. |
Performance fees |
|
Carried interest or Carry |
|
Share of profits that the fund manager is due once 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. |
Realisations (of AUM) |
|
|
|
Reductions in AUM due to capital being returned to investors and /
or no longer able to be called by the fund, and the reduction in
AUM due to step-downs. |
Recycle (of AUM) |
|
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|
Where the fund is able to re-invest capital that has previously
been invested and then realised. This is typically only within a
defined period during the fund's investment period and is generally
subject to certain requirements. |
RCF |
|
|
|
Revolving credit facility |
Step-down/ Step-up |
|
|
|
Step down is a reduction in AUM resulting from the end of the
investment period in an existing fund or when a subsequent fund
starts to invest. Funds that charge fees on committed capital
during the investment period will normally shift to charging fees
on net invested capital post step-down. There is generally the
ability to continue to call further capital from funds that have
had a step-down in certain circumstances. In this instance, fees
will be earned on that invested capital and it will be added to AUM
through Additions and this is termed as step-up. |
Sustainable Accounting Standards Board |
|
SASB |
|
The Sustainability Accounting Standards Board is an independent
non-profit organisation that sets standards to guide the disclosure
of financially material sustainability information by companies to
their investors. |
SFDR |
|
|
|
Sustainable Finance Disclosure Regulation. |
Separately Managed Account |
|
SMA |
|
Third-party capital committed by a single investor allocated to a
specific investment strategy or strategies, managed by ICG plc or
its affiliates. |
Science Based Targets initiative |
|
SBTi |
|
The Science Based Targets initiative helps drives climate action in
the private sector by approving and validating companies'
science-based emissions reduction targets (SBT). |
Structured entities |
|
|
|
Entities which are classified as investment funds, credit funds or
CLOs and are deemed to be controlled by the Group, through its
interests in either an investment, loan, fee receivable, guarantee
or commitment. These entities can also be interchangeably referred
to as credit funds. |
TCFD |
|
|
|
Task Force on Climate-related Financial Disclosures. |
Total AUM |
|
|
|
The aggregate of the Third Party AUM and the Balance Sheet
investment portfolio, excluding seed investments. |
UK Corporate Governance Code |
|
The Code |
|
Sets out standards of good practice in relation to board leadership
and effectiveness, remuneration, accountability and relations with
shareholders. |
High Net Worth |
|
HNW |
|
High-net-worth-individuals, with global wealth above $1bn. |
Ultra High Net Worth |
|
UHNW |
|
Ultra-high-net-worth-individuals, with global wealth above
$1bn. |
UNPRI |
|
|
|
UN Principles for Responsible Investing. |
Weighted-average |
|
|
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An average in which each quantity to be averaged is assigned a
weight. These weightings determine the relative importance of each
quantity on the average. |
Seed investments (previously warehoused investments) |
|
|
|
Investments within the balance sheet investment portfolio that the
Group anticipates transferring to a fund in due course, typically
made where the Group is seeding new strategies in anticipation of
raising a fund. |
Intermediate Capital (LSE:ICP)
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Intermediate Capital (LSE:ICP)
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