TIDMICP
4 June 2020
Final results for the financial year ended 31 March 2020
Fund management profits up 27%, EUR10.2bn of new money raised.
Total dividend up 13%
Highlights
-- AUM up 22% on 31 March 2019 to EUR45.3bn, with EUR10.2bn of new money
raised
-- Fund Management Company profits up 27% to GBP183.1m (2019: GBP143.8m);
average fee rates maintained
-- Investment Company loss of GBP68.6m (2019: GBP39.1m profit) reflecting
lower valuations of unrealised assets in the final quarter as a result of
Covid-19, leading to Group profit before tax on an IFRS basis down 37% to
GBP114.5m (2019: GBP182.9m)
-- Earnings per share of 38.2p (2019: 63.4p); Fund Management Company 63.4p
(2019: 49.0p) and Investment Company a loss of 25.2p (2019: 14.4p
profit)
-- Final ordinary dividend up 2% to 35.8p per share; total ordinary
dividends in the year up 13% to 50.8p per share
-- Business remains fully operational with colleagues adapting rapidly to
new ways of working and interacting closely with portfolio companies,
investments and clients
-- Outlook: despite the challenges of Covid-19, our business remains
resilient with good visibility on future management fees due to the
long-term nature of our funds, underpinned by a strong and
well-capitalised balance sheet, with GBP1.2bn of available liquidity
Commenting on the results, Benoit Durteste, CEO, said:
"This has been another strong year for ICG, and with our strategic focus
on the growth and performance of our fund management business, we raised
EUR10.2bn during the year. Despite the impact of the Covid-19 pandemic
on the latter part of our fiscal year, we continue to drive long-term
value creation for our shareholders. We are in a resilient position with
long-term contracted fee streams, a strong balance sheet and GBP1.2bn of
available liquidity.
We expect lower fundraising and investment activity in the short term,
but our market fundamentals remain strong, our exposure to the most
affected sectors is limited, and we are working closely with all our
investments and portfolio companies to help them adapt to this new
environment. We believe that the long-term drivers of increased
allocations to the alternative asset class will continue and the current
conditions will present investment opportunities for private capital to
help bolster economies.
Given our strengthened business model, EUR11.4bn of investment capacity
and disciplined investment capabilities, we are well placed to benefit
from these opportunities and continue to create value for our
shareholders and clients."
Commenting on the results, Lord Davies of Abersoch, Chairman, said:
"In these unprecedented times, ICG has an essential role to play in
supporting business success, thereby generating financial returns for
its fund investors and its shareholders. ICG is in an excellent position,
with a resilient business model underpinned by a strong,
well-capitalised balance sheet. We are therefore well placed to weather
the current economic storm and to emerge in a stronger position than
before. It is this backdrop that enabled the Board to recommend a 2%
increase in the final ordinary dividend to 35.8p."
Financials
31 March 2020 31 March 2019 % change
-------------------------------- ---------------- ---------------- --------
Alternative Performance Measure
Fund Management Company profit
before tax(1) GBP183.1m GBP143.8m 27%
Investment Company (loss)/profit
before tax(1) GBP(72.3)m GBP134.5m (154%)
Group profit before tax(1) GBP110.8m GBP278.3m (60%)
Earnings per share(1) 38.3p 94.9p (60%)
Gross gearing(1) 1.46x 0.86x 70%
Net gearing(1) 0.76x 0.74x 3%
Net asset value per share(1) GBP4.63 GBP4.93 (6%)
IFRS Consolidated
Fund Management Company profit
before tax GBP183.1m GBP143.8m 27%
Investment Company (loss)/profit
before tax GBP(68.6)m GBP39.1m (275%)
Group profit before tax GBP114.5m GBP182.9m (37%)
Earnings per share 38.2p 63.4p (40%)
Dividend per share in respect of
the year 50.8p 45.0p 13%
-------------------------------- ---------------- ---------------- --------
(1) These are non IFRS alternative performance measures and exclude the
impact of the consolidation of certain funds and CLOs following the
adoption of IFRS 10. In the prior year, under IFRS the valuation of CLO
loan notes held by the Group was aligned with the valuation technique
used for the alternative performance measure resulting in a one-off
reduction to the IFRS reported profit after tax. Further details and a
reconciliation of the numbers can be found on page 38.
Assets under management(1)
31 March 2020 31 March 2019 % change
-------------------------------------- ------------- ------------- --------
Third party assets under management EUR42,829m EUR34,461m 24%
Balance sheet portfolio EUR2,471m EUR2,621m (6%)
-------------------------------------- ------------- ------------- --------
Total assets under management EUR45,300m EUR37,082m 22%
-------------------------------------- ------------- ------------- --------
Third party fee earning assets under
management EUR35,868m EUR29,626m 21%
The following foreign exchange rates have been used:
31 March 2020 31 March 2019 31 March 2020 31 March 2019
Average Average Period end Period end
-------- ------------- ------------- ------------- -------------
GBP:EUR 1.1447 1.1343 1.1249 1.1619
GBP:USD 1.2712 1.3090 1.2420 1.3038
Enquiries
A presentation for investors and analysts will be held at 13:00 BST
today on our website via the Webcast link under Latest Results
https://www.icgam.com/shareholders. For those unable to dial in it will
be available on demand https://www.icgam.com/shareholders later in the
day.
Investor enquiries:
Ian Stanlake, Investor Relations, ICG +44 (0) 20 3201 7880
Media enquiries:
Alicia Wyllie, Corporate Communications, ICG
+44 (0) 20 3201 7994
Neil Bennett, Sam Turvey, Maitland +44 (0) 20 7379 5151
This results statement has been prepared solely to provide additional
information to shareholders and meets the relevant requirements of the
UK Listing Authority's Disclosure and Transparency Rules. The results
statement should not be relied on by any other party or for any other
purpose.
This results statement may contain forward looking statements. These
statements have been made by the Directors in good faith based on the
information available to them up to the time of their approval of this
report and should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying such forward looking information.
These written materials are not an offer of securities for sale in the
United States. Securities may not be offered or sold in the United
States absent registration under the US Securities Act of 1933, as
amended, or an exemption therefrom. The issuer has not and does not
intend to register any securities under the US Securities Act of 1933,
as amended, and does not intend to offer any securities to the public in
the United States. No money, securities or other consideration from any
person inside the United States is being solicited and, if sent in
response to the information contained in these written materials, will
not be accepted.
This Results statement contains information which prior to this
announcement was insider information.
About ICG
ICG is a global alternative asset manager with over 30 years' history.
We manage EUR45.3bn of assets in private debt, credit and equity,
principally in closed-end funds. We provide capital to help companies
grow through private and public markets, developing long-term
relationships with our business partners to deliver value for
shareholders, clients and employees.
We operate across four asset classes -- corporate, capital market, real
asset and secondary investments. In addition to growing existing
strategies, we are committed to innovation and pioneering new strategies
across these asset classes where the market opportunity exists.
ICG is listed on the London Stock Exchange (ticker symbol: ICP). Further
details are available at: www.icgam.com. You can follow ICG on LinkedIn
https://www.globenewswire.com/Tracker?data=MZa2ktoBsJAqeDkKouy3DDBWpO4wpajjWZODGzmlKCLV8iq2yKtdABpo9AGVbHt9M_AKUZjOEZXIB-QBnitxcXREd19Bi08Ia6wusuMeE1sTKMf_kCMgR9AziPl2kA6-
https://www.linkedin.com/company/52126.
Business review
We have continued to grow our global alternative asset management
business in line with our strategic objectives, delivering:
-- Strong fundraising: EUR10.2bn raised across a diverse range of strategies
and well in excess of our target
-- Stable fee rates: weighted average fee rate(1) at 0.86% in line with the
prior year
-- Substantial investment capacity: after deploying EUR5.9bn across our
strategies we have EUR11.4bn of capital available to support portfolio
companies and take advantage of market opportunities
-- Robust financial position: strong balance sheet, with GBP1.2bn of
available liquidity
Notwithstanding the above, the year-end unrealised valuation of the
portfolio has been negatively impacted by the market dislocation due to
the Covid-19 pandemic.
Resilient business model
The human consequences of the Covid-19 pandemic are of the utmost
importance to management and the Board and will remain a focus for some
time to come. We have remained fully operational throughout the
lockdowns imposed by many governments and are proud of the way our teams
have responded and adapted to new working practices. We remain alert to
the practical challenges for some, as well as the increased mental and
physical health risks, and have put in place comprehensive support for
our people. We have been in contact with our key outsourced providers
and have been reassured that they have sufficient, robust processes in
place. We have also supported two charities who are working to soften
the wider impact of Covid-19 around the world.
As a result of the pandemic and measures to manage it, the global
economy has contracted sharply in recent weeks. We have entered a period
of significant uncertainty. The timing and nature of any economic
recovery, as well as the potential longer-lasting effects on countries,
policies and industries, remain highly unpredictable. Since the
emergence of the pandemic, we have been in active dialogue with our
portfolio companies and working with their management teams to
understand, and address, the specific challenges they are facing. We
have discussed remediation measures and exit strategies, as well as the
buy-and-build opportunities which we anticipate will arise with some
sector consolidation.
Resilience becomes the new watchword, and over the decade since the
Global Financial Crisis (GFC), we have transformed and strengthened our
business model. We have evolved from being a balance sheet investor to
become a leading global alternative asset manager. We now have a
diversified product offering from which we derive dependable recurring
fee streams from a broad and global institutional client base, supported
by a strong and well-capitalised balance sheet. These are the
foundations of our resilient business model. In addition, as our funds
are primarily closed-ended, long in duration, and with no redemption
option, we are differentiated from traditional asset managers, and
better able to withstand economic cycles.
The alternative asset management industry has also evolved over the last
decade to become an integral part of the global financial system.
Institutional investors, attracted by enhanced returns, lower volatility
and diversification opportunities, have increased their allocations to
alternative investment strategies year-on-year. At the same time, the
investment market has grown, with companies staying private for longer,
benefiting from alternative sources of financing. We expect these
long-term trends to continue and, as after the GFC, potentially further
to accelerate in the wake of the current crisis.
Fundraising increases recurring fee streams
At EUR10.2bn (2019: EUR10.0bn), this has been an exceptional year for
fundraising, the lead indicator for future fees and profitability. Of
this, EUR2.5bn was raised in the last two months of the year by which
time the potential impact of Covid-19 was already becoming evident. With
86% of our AUM in closed end funds, investor commitments and related fee
streams are fixed for the life of the fund (typically 6-12 years) and
are unaffected by valuation movements.
We had significant success during the year in raising EUR1.6bn across
our three new strategies: Sale & Leaseback, Infrastructure Equity and
European Mid-Market. Fees on all three are payable on committed capital
from the first close, and hence have already started to contribute to
our profits. We continue to fundraise for our Sale & Leaseback and
Infrastructure Equity funds.
We had further success with Senior Debt Partners. We decided to bring
forward fundraising for this, one of our largest strategies, to take
advantage of favourable market conditions and raised EUR3.3bn in the
year, across Fund IV and segregated mandates. Our liquid open-ended
credit strategies raised EUR1.8bn, continuing the momentum of prior
years. We also raised money for our real estate strategies; the fourth
vintage of our Asia Pacific Fund; completed the fundraising for our
Strategic Equity strategy; closed two CLOs; and raised money for our
Australian Senior Loans fund, demonstrating the depth and diversity of
our product offering.
As at the end of March 2020, we had EUR11.4bn of capital available to
deploy across all strategies. This places us in a strong position to
access the attractive deal opportunities that are emerging.
During the year, we deployed EUR5.9bn across our direct investment
strategies, in line with the prior year. Of note, deployment in the
current year was weighted more to our senior secured debt strategies as
we adopted a more conservative approach to investing amid changed market
conditions.
We have had no significant outflows from our open-ended funds (which
represent 14% of total AUM) during the year or up to the date of this
report. Indeed, these funds have experienced net inflows since the year
end, reflecting the relevance of our strategies to fund investors and
our increasingly established track record in this market.
Diversified portfolios support resilient long-term performance
To date, the negative effect of the economic shock caused by Covid-19 on
our portfolios has been reduced by diversification, the nature of the
instruments we invest in, and our conservative approach to structuring.
We are investing across 21 strategies globally and have very little
exposure to industries which are most exposed to the Covid-19 crisis.
Private debt consists a significant proportion of our portfolios which
is structurally less susceptible to valuation swings when compared to
private or indeed public equity. We do not leverage our funds, even for
our senior debt strategies.
We continue to adopt a robust valuation methodology taking account of
the longer-term prospects for our portfolios as assessed at the year
end. In addition, our disciplined approach to realising assets when
possible in order to anchor performance means we already have good
visibility over the likely outcomes for many of our vintages. Our
clients assess our performance on the returns we generate over the life
of a fund, and we still expect to meet or exceed our fund return hurdle
rates over the longer term.
Our balance sheet capital is invested alongside our funds and is both an
enabler and an accelerator of the growth of our fund management
business. Our balance sheet portfolio is widely diversified, investing
in over 300 companies, across 36 industries and 34 countries through the
funds it has invested in. Although we experienced unrealised losses on
our balance sheet portfolio due to the market dislocation caused by the
Covid-19 pandemic, these were moderate due to our diversification. Only
5% of the balance sheet portfolio is exposed to oil and gas, and other
industries currently most exposed to a downturn. A further 13% is
invested in CLOs managed by our team, in line with regulatory minimums.
We believe this level of diversification increases the resilience of the
portfolio.
Robust financial position and progressive dividend
The Group maintains conservative financial leverage, and we continuously
manage our sources of balance sheet financing to ensure we have
appropriate diversification, and had liquidity of over GBP1.2bn at
year-end. The weighted average life of drawn debt at 31 March 2020 was
4.2 years with GBP250m of maturities in the financial year ending 31
March 2021, in part funded by raising a EUR500m seven-year Eurobond with
a coupon of 1.625% in February 2020.
In line with our dividend policy, and reflecting the performance of our
Fund Management Company, our resilient business model and our robust
financial position, the Board recommends a final dividend of 35.8p per
share (2019: 35.0p) equating to a total for the year of 50.8p per share
(2019: 45.0p), an increase of 13%. This represents 80% of the post-tax
profits of the Fund Management Company, using the Group's effective tax
rate. It is also covered 0.75 times by total adjusted earnings. We
continue to make the dividend reinvestment plan available.
Board changes
We have seen a number of changes at board level, welcoming Lord Davies
of Abersoch as Chair and Vijay Bharadia and Antje Hensel-Roth (in April
2020) as Executive Directors. They bring with them a wide variety of
experience and perspectives and are already making valuable
contributions to board proceedings. We are grateful to Kevin Parry
(former Chair) and Philip Keller (former CFOO) who have left the Board
having contributed to the Group's strategy over many years.
Outlook: significant long-term growth potential
It is likely to be some time before the full social and economic impact
of Covid-19 is known. During this time the Board and management will
continue to work closely together to manage the business in the best
interests of our people, our shareholders, our clients and other
stakeholders.
We have made a strong start to the fundraising year, but overall
fundraising will be slower in the current financial year. In addition to
the wider market challenges, this is in part because once Senior Debt
Partners is fully raised, we will have none of our larger funds in the
market in the coming year, in line with our well-established, long-term
fundraising plan.
Since the outbreak of the pandemic, both investment and realisation
activity have slowed materially. While we do not expect significant
realisations in the coming financial year, we have already signed a
number of new investments across strategies and geographies. Once
lockdown measures are eased further and there is greater clarity around
the economic outlook, we expect investment activity to pick up. We will,
as always, remain disciplined in our approach, but expect to find
attractive opportunities for investments which will support business
recovery and success over the long investment horizons of our
strategies.
We will continue to manage our portfolios closely, and while we take a
robust approach to portfolio valuations, it is too early to take a view
on the extent of further unrealised write downs which might be required
if conditions further deteriorate during the year. However, our focus on
closed-end funds, with clients committed over a long term, enables us to
manage our portfolios through economic cycles, with the aim of
continuing to deliver superior returns for all our investors.
Our market fundamentals remain strong and we expect the current
environment to present further opportunities for us to innovate and
increase diversification by asset class and geography. We have a proven
track record of launching and scaling up new strategies, making us an
attractive proposition for new teams. During the year, we began the
process for developing a global secondaries fund strategy as well as a
US private equity fund strategy, with high profile hires. The teams will
use balance sheet capital to make initial investments and demonstrate
proof of concept for these scalable strategies, before commencing
preparations for launching dedicated third-party funds.
These are unprecedented times, but with our resilient business model
underpinned by a strong, well-capitalised balance sheet, we are in a
strong position from which to navigate the challenges and capitalise on
the opportunities that this crisis will present. We have transformed
into a leading global alternative asset manager and are well placed for
significant long-term growth and shareholder value creation.
(1) These are non IFRS GAAP alternative performance measures. Please see
the glossary on page 38 for further information.
Finance and operating review
The financial information prepared for, and reviewed by, management and
the Board is on a non-IFRS basis. These are alternative performance
measures as defined in the glossary on page 38. The IFRS financial
statements are on pages 22 to 37.
Under IFRS the Group is deemed to control funds where it can make
significant decisions that can substantially affect the variable returns
of investors. There are 16 credit funds and CLOs that are required to be
consolidated under this definition of control. This has the impact of
including all of the assets and liabilities of these funds in the
consolidated statement of financial position and recognises all the
related interest income and gains or losses on investments in the
consolidated income statement. However, the legal and economic structure
of these funds means that shareholders are only exposed to the Group's
own investment into these funds and CLOs.
The Board believes that presenting the financial information in this
review on a non-IFRS basis, and therefore excluding the impact of the
consolidated credit funds and CLOs, assists shareholders in assessing
their investment and the delivery of the Group's strategy through its
financial performance. This is consistent with the approach taken by
management, the Board and other stakeholders.
The Group's profit after tax on an IFRS basis was below the prior year
at GBP110.6m (2019: GBP184.5m). On the alternative performance
measurement basis, it was also below the prior year at GBP109.2m (2019:
GBP269.3m). The reconciliation is as follows:
2020 2019
IFRS IFRS
Income Alternative performance measurement basis Adjustments as reported Alternative performance measurement basis Adjustments as reported
statement GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Revenue
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Fee and other
operating
revenue 277.8 (11.7) 266.1 219.8 (7.2) 212.6
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Finance and
dividend
income 41.2 (11.1) 30.1 34.4 (8.8) 25.6
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Net investment
returns /gains
on
investments 49.4 68.0 117.4 275.1 (49.2) 225.9
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Total revenue 368.4 45.2 413.6 529.3 (65.2) 464.1
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Finance costs (31.2) (27.1) (58.3) (36.7) (17.2) (53.9)
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Administrative
expenses (226.4) (15.0) (241.4) (214.3) (13.6) (227.9)
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Other - 0.6 0.6 - 0.6 0.6
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Profit before
tax 110.8 3.7 114.5 278.3 (95.4) 182.9
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Tax (1.6) (2.3) (3.9) (9.0) 10.6 1.6
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
Profit after
tax 109.2 1.4 110.6 269.3 (84.8) 184.5
--------------- ----------------------------------------- ----------- ------------ ----------------------------------------- ----------- ------------
The prior year difference between internal and IFRS financial
information is primarily in the valuation of the CLO loan notes within
the Investment Company. The adoption of IFRS 9 in the prior year
prompted the Group to reconsider the valuation technique used to
determine the valuation of the CLO loan notes in the IFRS financial
information. The IFRS valuation of CLO loan notes has been aligned with
the valuation technique used under the alternative performance measure
basis resulting in a one-off reduction to the IFRS reported profit after
tax. Going forward we do not anticipate profit, or earnings per share,
on an alternative performance measure basis to be materially different
to that on an IFRS basis.
The Group has adopted IFRS 16 'Leases' with effect from 1 April 2019,
with the impact of adoption detailed in note 1 to the financial
statements.
Alternative performance measures are denoted by (1) throughout this
review. The definition, and where appropriate, reconciliation to the
IFRS measure, is included in the glossary on page 38.
Overview
The Group's profit before tax(1) for the period under the alternative
performance measurement basis was 60% lower at GBP110.8m (2019:
GBP278.3m), with Fund Management Company (FMC) profit of GBP183.1m
(2019: GBP143.8m) and Investment Company (IC) loss(1) of GBP72.3m (2019:
GBP134.5m profit).
Our principal profit metric is FMC profit which has benefited from the
increase in assets under management, increased fee income and a slower
increase in operating costs. The IC has reported a loss reflecting lower
net investment returns due to unrealised losses recognised in March 2020
arising from the year end portfolio valuations which have been
negatively impacted by the market dislocation due to the Covid-19
pandemic.
The IC loss includes a gain of GBP26.6m (2019: gain of GBP17.2m) arising
from the fair value of hedging derivatives. We use derivatives to match
the currency exposure of our Investment Company assets and related
liabilities; the fair value movement reflects the average unhedged net
asset position in the period.
Income statement 31 March 2020 31 March 2019 Change
Alternative performance measurement basis GBPm GBPm %
------------------------------------------- ------------- ------------- ------
Fund Management Company 183.1 143.8 27%
------------------------------------------- ------------- ------------- ------
Investment Company (72.3) 134.5 (154%)
------------------------------------------- ------------- ------------- ------
Profit before tax 110.8 278.3 (60%)
------------------------------------------- ------------- ------------- ------
Tax (1.6) (9.0) n/a
------------------------------------------- ------------- ------------- ------
Profit after tax 109.2 269.3 (59%)
------------------------------------------- ------------- ------------- ------
The effective tax rate is lower than the standard corporation tax rate
of 19%, as detailed on page 35. This is due to a significant proportion
of the Investment Company's assets being invested directly into funds
based outside the United Kingdom. Investment returns from these funds
are paid to the Group in the form of non-taxable dividend income. This
outcome is in line with other UK investment companies. The Investment
Company's taxable costs offset the taxable profits of our UK Fund
Management business, reducing the overall Group charge.
Based on the alternative performance measurement profit above, the Group
generated a ROE(1) of 7.9% (2019: 20.0%) and earnings per share(1) for
the period of 38.3p (2019: 94.9p).
Net current assets(1) of GBP762.3m are up from GBP328.1m at 31 March
2019, with a GBP784.7m increase in cash, partially offset by financial
liabilities maturing within one year increasing by GBP256.0m.
Fund Management Company
Assets under management
A key measure of the success of our strategy to generate value from our
fund management business is our ability to grow assets under management
(AUM). New AUM, or fundraising, is our best lead indicator to recurring
future fee streams and therefore increasing sustainable profits. In the
year to 31 March 2020, the net impact of fundraising and realisations
increased third party AUM(1) by 24% to EUR42.8bn. AUM by strategic asset
class is detailed below.
Third party
AUM by Capital Market Total
strategic Corporate Investments Investments Real Asset Investments Secondary Investments Third Party AUM
asset class EURm EURm EURm EURm EURm
------------- --------------------- -------------- ---------------------- --------------------- -----------------
At 1 April
2019 17,144 11,505 3,581 2,231 34,461
------------- --------------------- -------------- ---------------------- --------------------- -----------------
Additions 4,795 2,526 1,701 1,128 10,150
------------- --------------------- -------------- ---------------------- --------------------- -----------------
Realisations (1,180) (204) (190) (91) (1,665)
------------- --------------------- -------------- ---------------------- --------------------- -----------------
FX and other (70) 4 (148) 97 (117)
------------- --------------------- -------------- ---------------------- --------------------- -----------------
At 31 March
2020 20,689 13,831 4,944 3,365 42,829
------------- --------------------- -------------- ---------------------- --------------------- -----------------
Change % 21% 20% 38% 51% 24%
------------- --------------------- -------------- ---------------------- --------------------- -----------------
Corporate Investments
Corporate Investments third party funds under management increased 21%
to EUR20.7bn in the year, with new AUM of EUR4.8bn, including EUR3.3bn
for Senior Debt Partners and EUR0.9bn for the new Europe Mid-Market Fund,
exceeding the realisations from our older funds.
Capital Market Investments
Capital Market Investments third party funds under management increased
20% to EUR13.8bn, with new AUM of EUR2.5bn raised in the year. During
the year we raised two CLOs, one each in Europe and the US, raising a
total EUR0.7bn. The remaining EUR1.8bn was raised across our other
liquid credit funds and multi-asset mandates.
Real Asset Investments
Real Asset Investments third party funds under management increased 38%
to EUR4.9bn, with new AUM of EUR1.7bn raised in the year, primarily for
ICG-Longbow Fund V, our UK real estate partnership capital strategy, and
our UK real estate senior debt strategy. Included in this strategic
asset class is our new Sale & Leaseback strategy which raised EUR0.5bn
during the year and Infrastructure Equity which raised EUR0.2bn. As both
these strategies charge fees on committed capital they are immediately
contributing to the Group's profit.
Secondary Investments
Secondary Investments third party funds under management increased 51%
to EUR3.4bn, with new AUM of EUR1.1bn raised in the year for our
Strategic Equity strategy, including EUR0.8bn for Strategic Equity Fund
III and EUR0.3bn of segregated mandates.
Fee earning AUM
The investment rate for our Senior Debt Partners strategy, Real Estate
funds and North American Private Debt Fund has a direct impact on FMC
income as fees are charged on an invested capital basis. The total
amount of third-party capital deployed on behalf of the direct
investment strategies was EUR5.9bn in the year compared to EUR6.0bn in
the last financial year. The direct investment funds are investing as
follows, based on third party funds raised at 31 March 2020:
Strategic % invested at % invested at Assets in fund at Deals completed
asset class Fund 31 March 2020 31 March 2019 31 March 2020 in year
------------ ------------ -------------- -------------- ----------------- ---------------
Corporate ICG Europe
Investments Fund VII 52% 38% 8 2
North
American
Private
Corporate Debt Fund
Investments II 26% 22% 7 2
Senior Debt
Corporate Partners
Investments III* 90% 43% 37 17
Senior Debt
Corporate Partners
Investments IV* 19% - 4 4
Corporate Asia Pacific
Investments Fund III 93% 93% 8 0
Europe
Corporate Mid-Market
Investments Fund 7% - 1 1
ICG Longbow
Real Asset Real Estate
Investments Fund V 61% 25% 14 6
Strategic
Secondary Secondaries
Investments II 100% 82% 12 1
Secondary Strategic
Investments Equity III 30% - 3 3
------------ ------------ -------------- -------------- ----------------- ---------------
*Co-mingled fund, excluding mandates and undrawn commitments
Fee earning AUM has increased 21% to EUR35.9bn since 1 April 2019
primarily due to the immediate impact of those funds which charges fees
on committed capital and the deployment of Senior Debt Partners and real
estate funds. New investments made are partially offset by realisations
in our older funds as detailed below:
Third party Capital Market Real Asset Total
fee earning Corporate Investments Investments Investments Secondary Investments Third Party Fee Earning AUM
AUM bridge EURm EURm EURm EURm EURm
------------- --------------------- -------------- ------------ --------------------- -----------------------------
At 1 April
2019 13,545 11,123 2,891 2,067 29,626
------------- --------------------- -------------- ------------ --------------------- -----------------------------
Additions 4,091 2,360 1,186 1,128 8,765
------------- --------------------- -------------- ------------ --------------------- -----------------------------
Realisations (1,952) (319) (188) (90) (2,549)
------------- --------------------- -------------- ------------ --------------------- -----------------------------
FX and other (43) 18 (105) 156 26
------------- --------------------- -------------- ------------ --------------------- -----------------------------
At 31 March
2020 15,641 13,182 3,784 3,261 35,868
------------- --------------------- -------------- ------------ --------------------- -----------------------------
Change % 15% 19% 31% 58% 21%
------------- --------------------- -------------- ------------ --------------------- -----------------------------
Fee income
Third party fee income(1) of GBP277.8m was 26% higher than the prior
year due to the successful fundraising of funds which charge fees on
committed capital and investments made by other funds that charge fees
on invested capital. Details of movements are shown below:
31 March 2020 31 March 2019 Change
Fee income GBPm GBPm %
--------------------------- ------------- ------------- ------
Corporate Investments 156.4 131.1 19%
--------------------------- ------------- ------------- ------
Capital Market Investments 53.2 42.8 24%
--------------------------- ------------- ------------- ------
Real Asset Investments 25.1 22.4 12%
--------------------------- ------------- ------------- ------
Secondary Investments 43.1 23.5 83%
--------------------------- ------------- ------------- ------
Total third-party funds 277.8 219.8 26%
--------------------------- ------------- ------------- ------
IC management fee 22.4 20.5 9%
--------------------------- ------------- ------------- ------
Total 300.2 240.3 25%
--------------------------- ------------- ------------- ------
Third party fees include GBP23.5m of performance fees (2019: GBP21.9m),
of which GBP19.9m (2019: GBP16.4m) related to Corporate Investments and
GBP3.3m (2019: GBP5.3m) to our Strategic Equity fund strategy. At 8.5%
(2019: 10.0%) of total third-party fees, the amount of performance fees
recognised in relative terms has reduced from the prior year reflecting
the expected slowdown in realisations in the near term due to the
Covid-19 pandemic. Performance fees remain a small but integral part of
the fee income profile and profitability of the Group.
Third party fees are 85% denominated in Euros or US dollars. The Group's
policy is to hedge non-Sterling fee income to the extent that it is not
matched by costs and is predictable. Total fee income included a GBP4.0m
(2019: GBP2.0m) FX benefit in the year.
The weighted average fee rate(1), excluding performance fees, across our
fee earning AUM is 0.86% (2019: 0.86%).
31 March 2020 31 March 2019
Weighted average fee rates GBPm GBPm
--------------------------- ------------- -------------
Corporate Investments 1.05% 1.05%
--------------------------- ------------- -------------
Capital Market Investments 0.49% 0.52%
--------------------------- ------------- -------------
Real Asset Investments 0.91% 0.88%
--------------------------- ------------- -------------
Secondary Investments 1.49% 1.29%
--------------------------- ------------- -------------
Total third-party funds 0.86% 0.86%
--------------------------- ------------- -------------
Other income
In addition to fees, the FMC recorded dividend receipts(1) of GBP41.2m
(2019: GBP34.4m) from the increased number and performance of CLOs. CLOs
are structured so that dividends can only be paid if the fund is meeting
its leverage covenant test. If the credit ratings of the underlying
portfolios were to be sufficiently downgraded, the level of dividends
received from CLOs in the short term would reduce.
Operating expenses
Operating expenses of the FMC were GBP158.3m (2019: GBP130.9m),
including salaries and incentive scheme costs.
Salaries were GBP55.7m (2019: GBP47.3m) as average headcount increased
20% from 282 to 337, with continued investment across our platform.
Increased headcount also increased incentive scheme costs to GBP56.8m
(2019: GBP44.5m). Other administrative costs have increased to GBP45.8m
(2019: GBP39.1m) reflecting the growth of the business, with no
individually significant increases.
The FMC operating margin(1) was 53.6% up from 52.3% in the prior year,
as a result of average fee earning AUM increasing 26% to EUR33.1bn for
the year thereby increasing the operating leverage of our existing
strategies.
Investment Company
Balance sheet investments
The balance sheet investment portfolio(1) reduced 3% in the year to
GBP2,197m at 31 March 2020, representing 5.5% (2019: 7.1%) of total
assets under management, as illustrated in the investment portfolio
bridge below.
GBPm
--------------------------------- -------
At 1 April 2019 2,255.7
------------------------------------ -------
New investments 329.4
------------------------------------ -------
Net transfer from current assets 11.6
------------------------------------ -------
Realisations (475.2)
------------------------------------ -------
Net investment returns 38.0
------------------------------------ -------
Cash interest received (16.5)
------------------------------------ -------
FX and other 53.8
------------------------------------ -------
At 31 March 2020 2,196.8
------------------------------------ -------
Realisations comprise the return of GBP262.7m of principal and the
crystallisation of GBP212.5m of net investment returns.
In the period GBP128.5m was invested alongside our Corporate Investments
strategies for new and follow on investments. Of the remaining GBP200.9m,
GBP45.1m was invested in new and reset CLOs, GBP111.9m in our Real Asset
Investment strategies and GBP43.9m in our Strategic Equity strategy.
The Sterling value of the portfolio increased by GBP58.6m due to FX
movements. The portfolio is 49% Euro denominated, 24% US dollar
denominated and 16% Sterling denominated.
The balance sheet investment portfolio is weighted towards the higher
returning asset classes as illustrated below:
As at As at
Target 31 March 2020 % of 31 March 2019 % of
return profile GBPm total GBPm total
------------ --------------- -------------- ------ -------------- -------
Corporate
Investments 15-20% 1,327 60% 1,343 59%
------------ --------------- -------------- ------ -------------- -------
Capital
Market
Investments 5-10% 433 20% 556 25%
------------ --------------- -------------- ------ -------------- -------
Real Asset
Investments c10% 297 14% 183 8%
------------ --------------- -------------- ------ -------------- -------
Secondary
Investments 15-20% 140 6% 174 8%
------------ --------------- -------------- ------ -------------- -------
Total
balance
sheet
portfolio 2,197 100% 2,256 100%
------------ --------------- -------------- ------ -------------- -------
In addition, GBP12.8m (2019: GBP110.7m) of current assets are held on
the balance sheet prior to being transferred to third party investors or
funds.
Net investment returns
Net investment returns(1) of GBP49.4m (2019: GBP275.1m) represent the
total return generated from the balance sheet portfolio in the year and
represent 2.2% of the average balance sheet portfolio (2019: 12.6%). In
the first eleven months of the financial year net investment returns
were GBP201.8m, but have been reduced by net unrealised losses of
GBP152.4m recognised in March 2020 as a result of the year end portfolio
valuations which have been negatively impacted by the market dislocation
due to the Covid-19 pandemic. However, recognised unrealised losses do
not result in cash outflows. The Group's long-term business model,
involving management of predominantly closed-end funds, means that teams
are not forced to exit investments to meet liquidity needs. They have
the benefit of time and can wait for valuations to potentially recover.
ICG's funds are structured to perform through economic cycles.
Net investment returns by asset class were as follows:
As at As at
31 March 2020 31 March 2019
GBPm GBPm Change %
----------------------------- -------------- -------------- --------
Corporate Investments 105.9 201.1 (47%)
------------------------------- -------------- -------------- --------
Capital Market Investments (87.2) 38.1 (329%)
------------------------------- -------------- -------------- --------
Real Asset Investments 9.0 8.4 7%
------------------------------- -------------- -------------- --------
Secondary Investments 21.7 27.6 (21%)
------------------------------- -------------- -------------- --------
Total net investment returns 49.4 275.1 (82%)
------------------------------- -------------- -------------- --------
The fair value of the Group's Corporate Investments is determined in
line with industry guidelines and uses both earnings multiple and
discounted cash flow valuation techniques. The reduction in net
investment return is due to the unrealised losses arising from the
year-end valuations which reflected weaker market conditions arising
from the expected economic impact of the Covid-19 pandemic.
Within Capital Market Investments is the Group's regulatory investment
in the CLOs it manages. The fair value of the CLO equity assets is
assessed using discounted cash flow models, a key assumption of which is
the expected default rate. In light of recent developments, the expected
default rate was increased to 8% from 3% per annum. The CLO debt assets
are valued based on observable market prices which during March 2020
experienced considerable decline due to Covid-19. This has resulted in a
reduction in the carrying value of the Group's investments in CLO's and
liquid funds.
We take a robust approach to valuations, but given the uncertainty
arising from the Covid-19 crisis it is not possible to determine the
extent of any further unrealised or realised losses that may arise in
the future if conditions deteriorate further. Conversely, if conditions
improve, we may experience recoveries.
Interest expense
Interest expense(1) of GBP57.8m was GBP3.9m higher than the prior year
(2019: GBP53.9m), following the issuance of a EUR500m bond in February
2020 and of private placement debt in the current and prior year.
Operating expenses
Operating expenses(1) of the IC amounted to GBP68.1m (2019: GBP83.4m),
of which incentive scheme costs of GBP47.5m (2019: GBP66.4m) were the
largest component. The GBP18.9m decrease is due to a reduction in the
value of our deal vintage bonus scheme and a lower cash bonus. Other
staff and administrative costs were GBP20.6m compared to GBP17.0m last
year, a GBP3.6m increase.
Group cash flow and debt
The balance sheet remains well-capitalised, with GBP1.2bn of available
cash and debt facilities at 31 March 2020, excluding the consolidated
funds and CLOs. During the year, the Group issued new US private
placement debt and a EUR500m bond, to refinance upcoming debt maturities
and extend the overall debt maturity profile. The bond has a coupon of
1.625% and a maturity of seven years. The movement in the Group's
unutilised cash and debt facilities during the year is detailed as
follows:
GBPm
----------------------------------------------------- -------
Unutilised cash and debt facilities at 31 March 2019 572.7
-------------------------------------------------------- -------
Private placement notes issued 139.7
-------------------------------------------------------- -------
Bond issued 444.1
-------------------------------------------------------- -------
Movement in cash 753.9
-------------------------------------------------------- -------
Movement in drawn debt (730.9)
-------------------------------------------------------- -------
FX 37.0
-------------------------------------------------------- -------
Unutilised cash and debt facilities at 31 March 2020 1,216.5
-------------------------------------------------------- -------
Total drawn debt at 31 March 2020 was GBP1,915m compared to GBP1,184m at
31 March 2019, with unencumbered cash of GBP917m compared to GBP163m at
31 March 2019. The increase in unencumbered cash is due to the EUR500m
bond issuance, and the drawdown of GBP250m on the Group's bank
facilities in early March as a precautionary measure.
Capital position
Shareholders' funds reduced by GBP74.2m to GBP1,309.2m (31 March 2019:
GBP1,383.4m), as the retained profits in the period were offset by the
payment of the ordinary dividend and purchase of own shares. Total net
debt(1) to shareholders' funds (net gearing(1)) as at 31 March 2020
increased to 0.76x from 0.74x at 31 March 2019. Gross gearing(1) of
1.46x (2019: 0.86x) is a less meaningful measure in the current year
given the level of unencumbered cash on the balance sheet.
Principal risks and uncertainties
MANAGING RISK
Effective risk management is key to our success and is recognised as an
essential part of delivering the Group's corporate strategy.
Our approach
The Board is accountable for the overall stewardship of the risk
management framework, internal control assurance, and for determining
the nature and extent of the risks it is willing to take in achieving
the Group's strategic objectives. In doing so, the Board sets a
preference for risk within an effective control environment, to generate
a return for clients and investors and protect their interests.
The risk appetite is reviewed by the Risk Committee, on behalf of the
Board, and covers the principal risks that the Group expects to
encounter in delivering its strategic objectives. The Committee is
provided with management information on a quarterly basis and monitors
performance against set thresholds and limits to ensure that the Group's
strategic objectives can be achieved, within the boundaries of the risk
appetite.
The Board also seeks to promote a strong risk management culture by
encouraging acceptable behaviours, decisions and attitudes toward taking
and managing risk throughout the Group.
Managing risk
Risk management is embedded across the Group through the risk management
framework, which ensures that current and emerging risks are identified,
assessed, monitored, controlled and appropriately governed based on a
common risk taxonomy and methodology. The risk management framework is
designed to protect the interests of all stakeholders and meet our
responsibilities as a UK listed company and parent of a number of
regulated entities.
The Board reviews the risk management framework regularly and it forms
the basis on which the Board reaches its conclusions on the
effectiveness of the Group's system of internal controls.
Lines of defence
We operate a risk framework consistent with the principles of the 'three
lines of defence' model. This ensures clarity over responsibility for
risk management and segregation of duties between those who take on risk,
those who oversee risk and those who provide assurance.
-- The first line of defence is the business functions and their respective
line managers, who own and manage risk and controls across the processes
they operate
-- The second line of defence is made up of the control and oversight
functions, Legal, Risk and Compliance, who provide assurance that risk
management policies and procedures are operating effectively
-- Internal Audit is the third line of defence and provides independent
assurance over the design and operation of controls established by the
first and second lines to manage risk
Assessing risk
We have adopted a bottom-up and top-down approach to risk assessment:
-- The Risk Committee undertakes a top-down review of the external
environment and the strategic planning process to identify the most
consequential and significant risks to the Group's activities. These are
referred to as the principal risks
-- The business undertakes a bottom-up review which involves a comprehensive
risk assessment process designed to facilitate the identification and
assessment of key risks and controls related to each business function's
most important objectives and processes. This is assessed through the
emerging risk and control self- assessment process (RCSA) and the Risk
Taxonomy
The Risk Taxonomy which is a top-down comprehensive set of risk
categories designed to encourage those involved in risk identification
to consider all types of risks that could affect the Group's strategic
objectives.
Key developments
In August, a new Head of Risk was appointed, presenting the Group with
an opportunity to further develop the risk management framework,
ensuring it keeps pace with industry standards and reflects the risk
profile of the Group.
During the year, progress has been made to further deliver and embed the
risk management development plan (RMDP) that commenced the previous year,
focusing on the implementation of the RCSA program. The Head of Risk has
expanded the RMDP into a three-year program to further strengthen risk
management and embed the framework in the activities of the business.
During the financial year, other key initiatives included:
-- Testing our business continuity and recovery plans, which have been
invoked in response to Covid-19
-- Mitigating the impact of Brexit on the business by strengthening EU
operations and obtaining the required permissions to enable continuity of
marketing services
-- Enhancing our product approval process to continue to ensure risks are
identified and mitigated and that new products are operationally feasible
-- Undertaking a review of our supplier management framework to improve the
management of our third-party administrators
-- Refining our risk appetite by enhancing our risk appetite statements and
metrics
-- Implementing the Senior Management and Certification Regime (SMCR),
including training and support for senior managers and certified staff
Principal risks and uncertainties
The Group considers its principal risks across three categories:
1. Strategic and external risks
The risk of failing to deliver on our strategic objectives, resulting in
a negative impact on investment performance and Group profitability.
2. Financial risks
The risk of an adverse impact on the Group due to market fluctuations,
counterparty failure or having insufficient resources to meet financial
obligations.
3. Operational risks
The risk of loss resulting from inadequate or failed internal processes,
people or systems and external events.
Reputational risk is not in itself one of the principal risks, however,
it is an important consideration and is actively managed and mitigated
as part of the wider risk management framework.
The Group continuously monitors internal and external environments to
identify new and emerging risks. Following the year end, there have been
significant developments in relation to the Covid-19 outbreak. These
developments are unprecedented and likely to have a material impact on a
number of our principal risks, most notably on external environment risk,
sustained investment underperformance risk including valuation risk, and
adverse market fluctuation risk.
Covid-19
The global impact of the Covid-19 outbreak continues to rapidly evolve
and has caused severe disruption, thereby adversely impacting many
global economies across many industries. The full scale of the impact is
not yet known, and unpredictable and uncontrollable outcomes may still
have the potential to materially impact a number of our principal risks.
It remains uncertain as to how quickly economic activity will resume and
accordingly it is impossible to gauge the longer-term impact of the
crisis to our business, or industry performance more generally. Much
will depend on the duration of the lockdown and the shape of the
subsequent economic recovery. The Board, Risk Management Committee and
Executive Directors continue to closely monitor the impacts on our
business as a result of the crisis, which are considered within the
relevant principal risks on the following pages.
The magnitude of the Covid-19 crisis is unprecedented and has provided
valuable insights to the Group's risk management framework and our
business continuity arrangements. We intend to apply this experience
into developing our risk framework to incorporate more severe scenario
planning, with revised assumptions and sensitivities. Our risk reporting
will also be enhanced to provide a more dynamic profile of emerging
risks and the potential impact to our principal risks.
The Directors confirm that they have undertaken a robust assessment of
principal risks in line with the requirements of the UK Corporate
Governance Code. The principal risks are described on the following
pages:
External environment (including political risk)
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Macroeconomic and political uncertainty creates risks A range of complementary approaches are used to inform Due to the Covid-19 crisis, in the near term we expect
for the Group's operations and broader risks to tax, strategic planning and risk mitigation. This includes to experience a slowdown in fundraising, capital deployment
credit, liquidity and foreign exchange. This may have active management of the Group's balance sheet, our and realisation activity. The key controls, trends
direct financial consequences by negatively impacting portfolios, scenario planning and stress testing. and outlook associated with these risks are described
balance sheet exposures, profitability and surplus The Board actively monitors and assesses macroeconomic further under the relevant principal risk headings.
capital. Additionally, it may also limit the Group's conditions and geopolitical events impacting the Group's The Group cannot fully eliminate the downside impacts
ability to raise new AUM, deploy capital, and effectively key markets, and acts as appropriate to ensure impacts of Covid-19, however the risks will continue to be
manage our portfolios, resulting in a reduction in to the balance sheet, funds and our clients are minimised. monitored to ensure appropriate controls and mitigants
revenue streams The Investment Committees also receives financial are implemented
performance and specific market information for each
investment, to determine valuations and impairments.
The business model is predominantly based on long-term
investment in closed-end funds, therefore fee streams
are 'locked in', which provides some mitigation against
market downturn.
The Group mitigated the impact of Brexit on the business
by strengthening EU operations and obtaining the required
permissions to enable continuity of marketing services.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Sustained investment underperformance
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Prolonged and/or significant investment and fund underperformance The Group has in place a robust and disciplined investment The funds are in line with or ahead of their required
may decrease the demand for our products, which could process where investments are selected and regularly hurdle rates or respective industry benchmarks. However,
negatively affect the Group's balance sheet exposures, monitored by the Group's Investment Committees for if the disruptions caused by Covid-19 continue, our
our ability to retain and raise new AUM and funds fund performance, delivery of investment objectives, funds' portfolio companies could suffer materially,
as well as reducing revenues asset performance and to identify 'at risk' assets which would decrease the value of our funds' investments
that are subject to a detailed review. Additional and thereby adversely impact our funds' performance.
monitoring is in place for the Group's balance sheet Our Investment Company could experience material unrealised
exposures. losses given we have investments in our funds.
Rigorous credit research is applied both before and We have extensively engaged with the management of
during the period of investment. The Group limits our portfolio companies to assess the risks faced
the extent of credit and market risk by diversifying and continue to provide support as necessary to implement
its portfolio assets by sector, size and geography. relevant remediation measures. In our Capital Market
Robust oversight of major portfolio investments supports Investments strategies, we are regularly monitoring
the delivery of capital preservation and anticipated the market developments and actively managing the
returns. portfolio.
We have enhanced client reporting to include comprehensive
commentary on the potential impact of Covid-19 on
each business, together with a summary of actions
being taken.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure to raise or retain third party funds
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure to raise new funds would negatively impact The Group has dedicated fundraising and scalable business In this financial year, the Group significantly exceeded
the Group's long-term income and ability to launch support teams to grow and diversify the institutional its fundraising target. However, due to the impacts
new strategies. Additionally, failure to retain funds client base by geography and type. of Covid-19 we are anticipating a slowdown of fundraising
would reduce the Group's management fee income. The product portfolio has been expanded to address for new or successor strategies which may result in
a range of client requirements. delayed growth in management fees.
Client sentiment in open-ended funds is monitored The Group's track record and reputation remains strong
through regular engagement. and we are focusing our fundraising efforts on strategies
that are expected to be attractive in the current
environment, such as direct lending. We are also considering
launching opportunistic strategies while continuing
to market new strategies launched in the prior year,
such as the Sale & Leaseback and the Infrastructure
fund.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Untimely deployment of committed capital
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure to deploy committed capital in a timely manner The rate of investment is kept under review by the Due to Covid-19, the Group may experience a decline
would reduce the value of the Group's future management Investment Committees and senior management to ensure in the pace of our investments and, if our funds are
fees, investment income and performance fees. Additionally, acceptable levels are maintained in current market unable to deploy capital at a pace that is sufficient
there is a potential negative impact on investment conditions. to offset the pace of our realisations, our management
performance and the ability to raise new funds. The Group monitors the investment pace of the direct fee revenues could decrease.
investment funds against targets. The Group will continue to maintain investment discipline
and remain alert to new opportunities. Our deep local
origination capabilities remain a competitive advantage
in sourcing investment opportunities. The Group will
closely monitor external market developments and opportunities.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Adverse market fluctuations
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
The risk of loss arising from fluctuations in market The extent of credit and market risk is limited by Political and economic uncertainties, notably the
variables including, but not limited to, foreign exchange diversifying the Group's portfolio assets by sector, impact of Covid-19, continue to increase the volatility
rates, interest rates, credit spreads and the performance size and geography. of foreign exchange and interest rates.
of the underlying portfolio. This could lead to changes The Group hedges non sterling income, expenditure, The Group will continue to monitor and appropriately
in the values of assets and liabilities on the Group's assets and liabilities to minimise short-term volatility mitigate the impact on the availability and cost of
balance sheet and the investments we manage as part in the financial results of the Group. capital and will implement appropriate measure to
of our AUM which could materially reduce revenue, Currency and interest rate exposures are reported mitigate the impact of these fluctuations.
earnings and cash flow. Heightened market volatility monthly and reviewed by the Group's Treasury Committee. The Group's implementation of a new treasury system,
can also have a negative short-term impact on the Portfolio valuations are reviewed quarterly by the aimed at delivering automation of key controls and
Group's stock market performance. Group Valuation Committee. integration with other systems, is on track.
The impact to the Group's investment portfolio arising
from Covid-19 is discussed under principal risk: 'Sustained
Investment Under Performance'.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failed counterparty
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
The Group uses derivatives to hedge market risk on The Group's counterparties are national or multinational The Group has managed counterparty credit risk consistently
its balance sheet and by entering into these derivatives, banks. The treasury team identify, evaluate, sanction, throughout the year, limiting Counterparty exposure.
is exposed to financial loss as a result of a failed limit and monitor various forms of credit exposure, The Group's implementation of a new treasury system,
counterparty. individually and in aggregate. aimed at delivering automation of key controls and
Counterparty exposures are reviewed by the Group's interaction with other systems, remains on track.
Treasury Committee on a monthly basis.
Counterparty exposures are also managed within limits
agreed by the Board, which are reviewed annually.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure to meet financial obligations
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
An ongoing failure to refinance our liabilities could The Group obtains debt funding from diversified sources The Group remains well funded with a high level of
result in the Group failing to meet its payment obligations and the repayment profile is managed to minimise material current and forecast liquidity present, ahead of dividend
as they fall due. repayment events. and debt repayments later in the year.
The profile of the debt facilities available to the During the financial year, the Group issued new US
Group is reviewed frequently by the Treasury Committee. private placement debt and a EUR500m bond to refinance
Contingency funding is in place to address liquidity upcoming debt maturities and extend the overall debt
requirements in stress scenarios. maturity profile.
Long-term forecasts and stress tests are prepared
to assess the Group's future liquidity as well as
compliance with the regulatory capital requirements.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Unplanned departure of key persons
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
A breach of any 'Key Person' clause could result in The Group rewards its investment professionals and The Covid-19 pandemic represents a significant threat
the Group having to stop making investments for the other key employees in line with market practice, to our employees' wellbeing and morale. Our key employees
relevant fund or impair the ability of the Group to which is periodically benchmarked to remain competitive. may become unwell or otherwise be unable to perform
raise new funds if not resolved in a timely manner. Senior investment professionals also typically receive their duties for an extended period. ICG's Family
Additionally, the unplanned departure of a key employee long-term incentives. & Carers Network and our Wellbeing Hub continues to
and the inability to recruit Senior management reinforce a commercial and entrepreneurial provide links to useful support articles and videos
into key roles could have a negative impact on the culture to attract and retain talent, which is supported to help staff adjust to this new way of working.
Group's ability to deliver its strategy. by feedback from the employee engagement survey. During the year, the Group has successfully managed
The Group has succession plans in place for key employees, succession following the expected departure of the
and an appraisal and development programme to ensure CFOO and Chairman.
that individuals remain sufficiently motivated and Careful consideration continues to be made to recruitment
appropriately competent. and integration capacity as Group growth continues.
Employee engagement is critical, and the Group undertook Introduction of a new HR system 'Workday' will enhance
an employment engagement survey at the end of 2019 the Group's recruitment and onboarding processes and
to proactively manage employee satisfaction levels. reporting.
The outputs will be addressed throughout 2020.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Regulatory or legislative failing
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
A material regulatory or legislative failing could The Group has a governance structure in place that During the year, the Group successfully managed the
result in regulatory censure, penalties or other claims allows for the identification, assessment and control implementation of Senior Management and Certification
negatively impacting the Group's reputation and impairing of material regulatory and legislative risks resulting Regime (SMCR) and met its regulatory obligations in
our ability to retain and raise new AUM. Additionally, from the geographical and product diversity of the advance of the deadline. Compliance will continue
adverse regulatory change could impact the ability Group. to review the Group's arrangements, to ensure SMCR
of the Group to deliver its strategy in areas such The Group has a tailored compliance monitoring program adherence evolves in line with peers and FCA expectations.
as people, deploying capital and raising AUM. that specifically oversees regulatory and legislative The Group successfully mitigated the impacts of Brexit
risks. on the business by strengthening EU operations and
Horizon scanning for relevant regulatory and legislative obtaining the required permissions to enable continuity
change is a key part of the legal and compliance process of marketing services.
and external advisers are commissioned to support The Group continues to invest in relevant system capabilities
this. to enhance compliance and legal processes and internal
reporting.
The Group's plan to transition away from LIBOR and
equivalents is also on track.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Technology resilience and innovation
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
The failure of the Group to deliver an appropriate The Group's information security policies are supported The extended period of remote working by our employees
information security platform could result in unauthorised by a governance structure and a risk framework that due to the restrictions imposed by the Covid-19 may
access by malicious third parties, breaching the confidentiality, allows for the identification, control and mitigation introduce heightened cyber security risk. Remote working
integrity and availability of our data and systems, of technology risks. environments may be less secure and more susceptible
negatively impacting the Group's reputation and our The adequacy of the systems and controls the Group to hacking attacks, including phishing attempts.
ability to maintain continuity of operations and retain has in place to mitigate technology risks is continuously We increased employee awareness and vigilance of cyber
and raise new AUM. Additionally, a lack of investment monitored and subject to regular testing, such as security in response to the rise of malicious campaigns
in workplace technology and systems could compromise penetration testing, vulnerability scans and patch exploiting the crisis.
the ability of the Group to adapt to changing business management. The Group also carries out quarterly phishing The Group enhanced its business continuity planning
requirements and deliver our strategy in areas such tests and delivers an annual user education programme. and disaster recovery process via migration to a cloud
as fund management and operations. Incident management plans and preparedness exercises datacentre, which has proved highly effective in the
are complemented by an automated Business Continuity current Covid-19 environment as our employees carry
Planning tool. out their roles and responsibilities from home.
The Group's technology requirements will be kept under
review to support the growth of the business.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure of key business process
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure of key business processes, including product Risks arising from process execution are inherent Despite the transition to remote working in response
approval, valuation and client reporting could result in the Group's business and we seek to minimise the to Covid-19, there were no significant business process
in adverse client impact, significant reputational incidence and impact of these through our controls failures or material control weaknesses identified
damage and a financial loss across all our principal and management actions. during the year.
risks and impair the Group's ability to raise and The Group assesses its operational risk and control A target operating model assessment was undertaken
retain new AUM. environment across its businesses and functions with to develop a future operating model fit for the growth
a view to maintaining an acceptable level of residual ambitions of the Group. Resulting recommendations
risk. currently being implemented are expected to drive
Management are actively engaged in maintaining an process efficiencies and improve the control environment,
appropriate control environment. Our key business which will assist the Group in the effective management
processes are regularly reviewed, and the risks and of risk across our key processes.
controls are assessed through the risk and control The Group continues to enhance its risk management
self-assessment process. framework, to ensure it keeps pace with industry standards
The effectiveness of the control framework for key and reflects the risk profile of the Group.
business processes is subject to periodic review by The risk is heightened to acknowledge these ongoing
management, the Head of Risk and by Internal Audit, developments and the impact this may have on the current
with corresponding oversight by the Risk and Audit operating model, now and in the future.
Committees.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure of key supplier
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
The risk that the Group's key third-party suppliers The supplier oversight framework consists of policies, In response to the Covid-19 crisis, we have engaged
fail to deliver services in accordance with their procedures and tools to govern the due diligence, with all key fund administrators and suppliers for
contractual obligations, which would compromise our appointment, monitoring and oversight of key suppliers. an assessment of their business continuity preparedness
operations and impair our ability to respond in a The stress and scenario testing programme includes and the service levels continue to be monitored closely.
way which meets client and stakeholder expectations consideration of supplier risk. Additionally, the risk function completed a review
and requirements. Failure to adequately select or of the current supplier management framework, resulting
manage key third-party suppliers, could result in in several recommendations for improvement which are
the Group's inability to raise new funds and operate being incorporated into the wider target operating
its fund management business. model initiatives.
The risk remains heightened but stable to reflect
these enhancements, and the potential impacts of Covid-19
on the effectiveness of our suppliers' business continuity
programs and broader business resilience.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Financial misstatement
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Risk description Key controls and mitigation Trend and outlook
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Failure to ensure financial statements are materially The Group's financial reporting is aligned to external The market dislocation arising from the Covid-19 crisis
accurate, timely and in line with legislative requirements, reporting standards and industry best practice. has resulted in increased risk to significant judgements
could result in financial and reputational damage, Control procedures are in place to ensure that financial and assumptions used in the valuation of the balance
and regulatory censure reporting processes are identified, documented and sheet portfolio. Ensuring appropriate governance around
and penalties or other claims. monitored. quarterly valuations remains a key focus for the Group.
The effectiveness and efficiency of the control framework The Group has initiated a number of resource enhancements,
for financial reporting is subject to periodic review including hiring a new Head of Finance with deep valuation
by management, the Head of Risk and by Internal Audit, expertise to provide dedicated leadership to the finance
with corresponding oversight by the Risk and Audit function. In addition, a number of financial reporting
Committees. process enhancements will be undertaken to improve
The Group Valuation Committee comprising the CEO, the control environment and process efficiency.
CFOO, Head of Finance,
Head of Treasury and Head of Risk sits quarterly to
review and challenge the valuation assumptions used
in respect of the balance sheet portfolio.
------------------------------------------------------------------ ------------------------------------------------------------- ----------------------------------------------------------------
Responsibility statement
The responsibility statement below has been prepared in connection with
the Company's full annual report for the year ending 31 March 2020.
Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as adopted by
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- the management report, which is incorporated into the directors' report,
includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on
3 June 2020 and is signed on its behalf by:
Benoit Durteste Vijay Bharadia
CEO CFOO
Consolidated income statement
For the year ended 31 March 2020
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
------------------------------------------------------- --------------- ---------------
Fee and other operating income 266.1 212.6
Finance income 30.1 25.6
Net gains on investments 117.4 225.9
Total revenue 413.6 464.1
--------------------------------------------------------- --------------- ---------------
Finance costs (58.3) (53.9)
Administrative expenses (241.4) (227.9)
Share of results of joint ventures accounted for using
equity method 0.6 0.6
Profit before tax 114.5 182.9
--------------------------------------------------------- --------------- ---------------
Tax (charge)/credit (3.9) 1.6
--------------------------------------------------------- --------------- ---------------
Profit after tax 110.6 184.5
--------------------------------------------------------- --------------- ---------------
Attributable to
------------------------------------------------------- --------------- ---------------
Equity holders of the parent 108.9 180.1
Non controlling interests 1.7 4.4
--------------------------------------------------------- --------------- ---------------
110.6 184.5
------------------------------------------------------- --------------- ---------------
Earnings per share 38.2p 63.4p
--------------------------------------------------------- --------------- ---------------
Diluted earnings per share 38.2p 63.4p
--------------------------------------------------------- --------------- ---------------
The Group has adopted IFRS 16 'Leases' from 1 April 2019. As permitted
under the transition rules the prior year comparatives have not been
restated. Further information can be found in note 1.
All activities represent continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 March 2020
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
----------------------------------------------------- -------- --------------- ---------------
Profit after tax 110.6 184.5
Items that will not be reclassified subsequently to
profit or loss
Exchange differences on translation of foreign
operations 2.7 8.8
Tax on items taken directly to or transferred from
equity (0.7) (1.5)
------------------------------------------------------ ------- --------------- ---------------
2.0 7.3
Total comprehensive income for the year 112.6 191.8
--------------------------------------------------------------- --------------- ---------------
Consolidated statement of financial position
As at 31 March 2020
31 March 2020 31 March 2019
GBPm GBPm
----------------------------------------------------- ------------- -------------
Non current assets
Intangible assets 26.7 15.4
Property, plant and equipment 13.4 12.6
Investment property 8.1 -
Investment in joint venture accounted for under the
equity method 2.5 1.8
Financial assets at fair value 5,492.6 5,647.1
Derivative financial assets 12.8 3.1
Deferred tax asset 11.1 12.8
------------------------------------------------------ ------------- -------------
5,567.2 5,692.8
----------------------------------------------------- ------------- -------------
Current assets
Trade and other receivables 201.8 227.1
Financial assets at fair value 12.8 77.3
Derivative financial assets 126.5 51.6
Current tax debtor 22.8 8.4
Cash and cash equivalents 1,086.9 354.0
------------------------------------------------------ ------------- -------------
1,450.8 718.4
----------------------------------------------------- ------------- -------------
Disposal groups held for sale - 107.1
------------------------------------------------------ ------------- -------------
Total assets 7,018.0 6,518.3
------------------------------------------------------ ------------- -------------
Equity and reserves
Called up share capital 77.2 77.2
Share premium account 179.9 179.5
Other reserves (28.3) (3.5)
1,080.4
Retained earnings 1,080.4 1,130.2
------------------------------------------------------ ------------- -------------
1,309.2
Equity attributable to owners of the Company 1,309.2 1,383.4
------------------------------------------------------ ------------- -------------
Non controlling interest 1.5 10.9
------------------------------------------------------ ------------- -------------
Total equity 1,310.7 1,394.3
------------------------------------------------------ ------------- -------------
Non current liabilities
Provisions 0.1 0.9
Financial liabilities at fair value 3,329.3 3,449.0
Financial liabilities at amortised cost 1,664.1 1,183.5
Other Financial liabilities 5.5 -
Derivative financial liabilities 41.4 45.8
Deferred tax liabilities 1.9 0.2
------------------------------------------------------ ------------- -------------
5,042.3 4,679.4
----------------------------------------------------- ------------- -------------
Current liabilities
Provisions 0.7 0.4
Trade and other payables 336.0 350.5
Financial liabilities at amortised cost 252.8 -
Other financial liabilities 3.2 -
Current tax creditor 6.6 2.7
Derivative financial liabilities 65.7 14.1
------------------------------------------------------ ------------- -------------
665.0 367.7
----------------------------------------------------- ------------- -------------
Liabilities directly associated with disposal groups
held for sale - 76.9
------------------------------------------------------ ------------- -------------
Total liabilities 5,707.3 5,124.0
------------------------------------------------------ ------------- -------------
Total equity and liabilities 7,018.0 6,518.3
------------------------------------------------------ ------------- -------------
Consolidated statement of cash flows
For the year ended 31 March 2020
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
------------------------------------------------------- -------------- --------------
Operating activities
Interest received 277.2 220.8
Fees received 198.1 184.7
Dividends received 2.9 3.3
Payments to suppliers and employees (151.0) (174.6)
Proceeds from sale of current financial assets and
disposal groups 183.4 200.1
Purchase of current financial assets and disposal
groups (101.7) (306.9)
Proceeds from sale of non current financial assets 2,204.1 2,475.3
Purchase of non current financial assets (2,386.2) (2,666.0)
Net cash (outflow)/inflow from derivative contracts (16.1) 55.4
Cash generated from/(used in) operating activities
before taxes paid 210.7 (7.9)
Taxes paid (12.6) (20.2)
-------------------------------------------------------- -------------- --------------
Net cash generated from/(used in) operating activities
after taxes paid 198.1 (28.1)
-------------------------------------------------------- -------------- --------------
Investing activities
Purchase of intangibles assets (6.1) -
Purchase of property, plant and equipment - (5.2)
Cashflow as a result of change in control of subsidiary (37.0) 12.9
Net cash (used in)/generated from investing activities (43.1) 7.7
-------------------------------------------------------- -------------- --------------
Financing activities
Dividends paid (142.8) (88.3)
Interest paid (188.0) (181.4)
Interest paid on lease liabilities (0.5) -
Principal paid on lease liabilities (4.7) -
Increase in long-term borrowings 1,154.6 2,338.2
Repayment of long-term borrowings (226.8) (2,152.3)
Purchase of own shares (40.3) (49.3)
Net cash generated from/(used in) financing activities 551.5 (133.1)
-------------------------------------------------------- -------------- --------------
Net increase/(decrease) in cash 706.5 (153.5)
-------------------------------------------------------- -------------- --------------
Cash and cash equivalents at beginning of year 354.0 520.7
Effect of foreign exchange rate changes 26.4 (13.2)
-------------------------------------------------------- -------------- --------------
Net cash and cash equivalents at end of year 1,086.9 354.0
-------------------------------------------------------- -------------- --------------
The Group's cash and cash equivalents includes GBP172.2m (31 March 2019:
GBP191.3m) of restricted cash held principally by structured entities
controlled by the Group.
Consolidated statement of changes in equity
For the year ended 31 March 2020
Capital
Share Share redemption Share based Own Retained Total
capital premium reserve payments reserve shares Foreign currency translation reserve earnings Total Non controlling interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Balance at 1 April 2019 77.2 179.5 5.0 64.3 (92.8) 20.0 1,130.2 1,383.4 10.9 1,394.3
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Adjustment on initial application of IFRS 16 (note
1) - - - - - - (1.8) (1.8) - (1.8)
Profit after tax - - - - - - 108.9 108.9 1.7 110.6
Exchange differences on translation of foreign
operations - - - - - 2.7 - 2.7 - 2.7
Tax on items taken directly to or transferred from
equity - - - (0.7) - - - (0.7) - (0.7)
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Total comprehensive (expense)/ income for the year - - - (0.7) - 2.7 108.9 110.9 1.7 112.6
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Movement in control of subsidiary - - - - - - 4.2 4.2 (11.1) (6.9)
Own shares acquired in the year - - - - (70.3) - - (70.3) - (70.3)
Options/awards exercised - 0.4 - (30.4) 48.7 - (18.3) 0.4 - 0.4
Credit for equity settled share schemes - - - 25.2 - - - 25.2 - 25.2
Dividends paid - - - - - - (142.8) (142.8) - (142.8)
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Balance at 31 March 2020 77.2 179.9 5.0 58.4 (114.4) 22.7 1,080.4 1,309.2 1.5 1,310.7
--------------------------------------------------- -------- -------- ----------- ----------------- ------- ------------------------------------ --------- ------- ------------------------ -------
Capital Available
Share Share redemption Share based for sale Own Retained Total
capital premium reserve payments reserve reserve shares Foreign currency translation reserve earnings Total Non controlling interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Balance at 1 April 2018 77.2 179.4 5.0 61.9 5.7 (77.6) 11.2 1,054.8 1,317.6 0.5 1,318.1
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Adjustment on initial application of IFRS 9 (note
1) - - - - (5.5) - - 5.5 - - -
Adjustment on initial application of IFRS 15 (note
1) - - - - - - - (5.1) (5.1) - (5.1)
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Profit for the year - - - - - - - 180.1 180.1 4.4 184.5
Exchange differences on translation of foreign
operations - - - - - - 8.8 - 8.8 - 8.8
Tax on items taken directly to or transferred from
equity - - - (1.3) (0.2) - - - (1.5) - (1.5)
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Total comprehensive (expense)/ income for the year - - - (1.3) (0.2) - 8.8 180.1 187.4 4.4 191.8
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Movement in control of subsidiary - - - - - - - (6.0) (6.0) 6.0 -
Own shares acquired in the year - - - - - (49.3) - - (49.3) - (49.3)
Options/awards exercised - 0.1 - (23.3) - 34.1 - (10.8) 0.1 - 0.1
Credit for equity settled share schemes - - - 27.0 - - - - 27.0 - 27.0
Dividends paid - - - - - - - (88.3) (88.3) - (88.3)
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Balance at 31 March 2019 77.2 179.5 5.0 64.3 - (92.8) 20.0 1,130.2 1,383.4 10.9 1,394.3
--------------------------------------------------- -------- -------- ----------- ----------------- --------- ------- ------------------------------------ --------- ------- ------------------------ -------
Notes to the financial statements
For the year ended 31 March 2020
1. Basis of preparation
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31 March
2020 or 2019. The financial information for the years ended 31 March
2020 and 2019 is derived from the statutory accounts for those years.
The statutory accounts for 2019 have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified, did not draw attention to any matters by way of emphasis
without qualifying their report and did not contain a statement under
s498(2) or (3) Companies Act 2006. The audit of the statutory accounts
for the year ended 31 March 2020 is not yet complete. These statutory
accounts will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual
General Meeting.
While the financial information included in this announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs) as adopted by the
European Union, this announcement does not itself contain sufficient
information to comply with IFRSs. The Company expects to publish full
financial statements that comply with IFRSs in June 2020.
Changes in significant accounting policies
During the year the Group has adopted IFRS 16 'Leases' with effect from
1 April 2019. As permitted under the transition rules, comparative
figures for the year ended 31 March 2019 have not been restated. The
impact of adopting these new accounting standards on the Group's
significant accounting policies are summarised below.
IFRS 16 'Leases'
IFRS 16 introduces changes to lease accounting by removing the
distinction between operating and finance leases. This requires the
Group to recognise a 'right-of-use' (ROU) asset and a lease liability at
the commencement of all leases, except for short-term leases, those
leases that are contractually less than 12 months, and leases of low
value.
Under the new standard, the present value of total rentals payable over
the life of the lease is recognised as a liability. The lease liability
is initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted by using the rate
implicit in the lease; if this rate cannot be readily determined, the
Group uses its incremental borrowing rate. On transition to IFRS 16 the
weighted average incremental borrowing rate applied to lease liabilities
recognised under IFRS 16 was 4.5%. The lease liability is offset by an
asset comprising the initial measurement of the corresponding lease
liability, and any other initial direct costs, lease incentives and any
costs to dismantle or return the asset to its original form. The ROU
asset is subsequently measured at cost less accumulated depreciation and
impairment losses.
The standard therefore increases debt liabilities on the balance sheet
and the income statement expense is represented as depreciation and
finance cost, rather than rent.
On transition, those leases previously accounted for as operating leases
with a remaining lease term of less than 12 months and for leases of
low-value, as described below, the Group has elected not to recognise a
right-of-use asset. The Group has accounted for the lease expense on a
straight line basis over the remaining lease term.
The Group has assessed low value assets to be those with a value of less
than GBP10,000 (or local currency equivalent). As a result, the Group's
material leases impacted by the adoption of this accounting standard are
its rented office spaces.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in existence
at the date of initial application of IFRS 16. The Group has also
elected to measure the right-of-use assets at an amount equal to the
lease liability adjusted for any prepaid or accrued lease payments that
existed at the date of transition. There were no critical judgements or
estimates applied in adopting the standard.
The new Standard has been applied using the modified retrospective
approach, with the cumulative effect of adopting IFRS 16 being
recognised in equity as an adjustment to the opening balance of retained
earnings for the
Notes to the financial statements continued
For the year ended 31 March 2020
current period. Prior periods have not been restated. The impact on the
consolidated statement of financial position is as follows:
31 March 2020 1 April 2019
GBPm GBPm
------------------------------ ------------- ------------
Non current assets
Property, plant and equipment 12.5 8.5
Non current liabilities
Other financial liabilities 5.5 7.3
------------------------------- ------------- ------------
Current liabilities
Other financial liabilities 3.2 3.0
------------------------------- ------------- ------------
Equity and reserves
Retained earnings - 1.8
------------------------------- ------------- ------------
The following is a reconciliation of total operating lease commitments
as disclosed in the financial statement for the
year ended 31 March 2019, to the lease liabilities recognised at 1 April
2019:
GBPm
-------------------------------------------------------- -----
Operating lease commitments as of 31 March 2019 13.8
Recognition exemption for leases with contractual
terms less than 12 months as of 1 April 2019 (0.3)
Rent payments for joint venture accounted for by equity
method (0.5)
Effect of discounting at the incremental borrowing
rate (2.7)
-------------------------------------------------------- -----
Lease liabilities as of 1 April 2019 10.3
-------------------------------------------------------- -----
2. Business segments
For management purposes, the Group is currently organised into the Fund
Management Company (FMC) and the Investment Company (IC). Segment
information about these businesses is presented below and is reviewed by
the Executive Directors.
The Group reports the profit of the FMC separately from the profits
generated by the IC. The FMC is defined as the operating unit and as
such incurs the majority of the Group's costs, including the cost of the
investment network, i.e. the Investment Executives and the local offices,
as well as the cost of most support functions, primarily information
technology, human resources and marketing.
The IC is charged a management fee of 1% of the carrying value of the
average investment portfolio by the FMC and this is shown below as fee
income. The costs of finance, treasury and portfolio administration
teams, and the costs related to being a listed entity, are allocated to
the IC. The remuneration of the Executive Directors is allocated equally
to the FMC and the IC.
Notes to the financial statements continued
For the year ended 31 March 2020
Analysis of income and profit before tax by operating segment
Year ended 31 March 2020 Year ended 31 March 2019
Operating segments Operating segments
FMC IC Total FMC IC Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ------ ------------------ ------ ------ ------------------
External fee
income 277.8 - 277.8 219.8 - 219.8
Inter-segmental
fee 22.4 (22.4) - 20.5 (20.5) -
----------------- ------ ------ ------------------ ------ ------ ------------------
Fund management
fee income 300.2 (22.4) 277.8 240.3 (20.5) 219.8
----------------- ------ ------ ------------------ ------ ------ ------------------
Net investment
returns - 49.4 49.4 - 275.1 275.1
Dividend income 41.2 - 41.2 34.4 - 34.4
Total Revenue 341.4 27.0 368.4 274.7 254.6 529.3
----------------- ------ ------ ------------------ ------ ------ ------------------
Interest expense - (57.8) (57.8) - (53.9) (53.9)
Net fair value
gain on
derivatives - 26.6 26.6 - 17.2 17.2
Staff costs (55.7) (8.9) (64.6) (47.3) (7.8) (55.1)
Incentive scheme
costs (56.8) (47.5) (104.3) (44.5) (66.4) (110.9)
Other
administrative
expenses (45.8) (11.7) (57.5) (39.1) (9.2) (48.3)
----------------- ------ ------ ------------------ ------ ------ ------------------
Profit before tax 183.1 (72.3) 110.8 143.8 134.5 278.3
----------------- ------ ------ ------------------ ------ ------ ------------------
Reconciliation of financial statements reported to the Executive
Directors to the position reported under IFRS
Included in the table below are adjustments made from operating segments,
which are equivalent to alternative performance measurers 'APM' to IFRS:
-- All income generated from Investment Company investments is presented as
net investment returns for operating segments purposes whereas under IFRS
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 operating segments purposes, whereas the statutory
financial statements present these entities on a fully consolidated
basis.
Notes to the financial statements continued
For the year ended 31 March 2020
Consolidated Income Statement
Operating Consolidated structured
Year ended segments entities Financial statements
31 March 2020 GBPm GBPm GBPm
------------------------------------------------------ --------- ----------------------- --------------------
- Fund management fee income 277.8 (21.6) 256.2
- Other operating income - 9.9 9.9
Fee and other operating income 277.8 (11.7) 266.1
- Interest income - 0.5 0.5
- Dividend income 41.2 (41.2) -
- Net fair value gain on derivatives - 29.6 29.6
Finance income 41.2 (11.1) 30.1
Net investment returns/Gains on investments 49.4 68.0 117.4
Total revenue 368.4 45.2 413.6
------------------------------------------------------ --------- ----------------------- --------------------
- Interest expense (57.8) (0.5) (58.3)
- Net fair value gain/(loss) on derivatives 26.6 (26.6) -
Finance costs (31.2) (27.1) (58.3)
- Staff costs (64.6) 0.4 (64.2)
- Incentive scheme costs (104.3) - (104.3)
- Other administrative expenses (57.5) (15.4) (72.9)
Administrative expenses (226.4) (15.0) (241.4)
Share of results of joint venture accounted for using
equity method - 0.6 0.6
Profit before tax 110.8 3.7 114.5
------------------------------------------------------ --------- ----------------------- --------------------
Tax charge (1.6) (2.3) (3.9)
------------------------------------------------------ --------- ----------------------- --------------------
Profit after tax 109.2 1.4 110.6
------------------------------------------------------ --------- ----------------------- --------------------
Notes to the financial statements continued
For the year ended 31 March 2020
Consolidated Income Statement
Operating Consolidated structured
Year ended segments entities Financial statements
31 March 2019 GBPm GBPm GBPm
------------------------------------------------------ --------- ----------------------- --------------------
- Fund management fee income 219.8 (20.7) 199.1
- Other operating income - 13.5 13.5
Fee and other operating income 219.8 (7.2) 212.6
- Interest income - 0.1 0.1
- Dividend income 34.4 (34.4) -
- Net fair value gain on derivatives - 25.5 25.5
Finance and dividend income 34.4 (8.8) 25.6
Net investment returns/Gains on investments 275.1 (49.2) 225.9
Total revenue 529.3 (65.2) 464.1
------------------------------------------------------ --------- ----------------------- --------------------
- Interest expense (53.9) - (53.9)
- Net fair value gain/(loss) on derivatives 17.2 (17.2) -
Finance costs (36.7) (17.2) (53.9)
- Staff costs (55.1) 0.6 (54.5)
- Incentive scheme costs (110.9) - (110.9)
- Other administrative expenses (48.3) (14.2) (62.5)
Administrative expenses (214.3) (13.6) (227.9)
Share of results of joint venture accounted for using
equity method - 0.6 0.6
Profit before tax 278.3 (95.4) 182.9
------------------------------------------------------ --------- ----------------------- --------------------
Tax (charge)/credit (9.0) 10.6 1.6
------------------------------------------------------ --------- ----------------------- --------------------
Profit after tax 269.3 (84.8) 184.5
------------------------------------------------------ --------- ----------------------- --------------------
Notes to the financial statements continued
For the year ended 31 March 2020
Consolidated Statement of Financial Position
31 March Operating segments Consolidated structured entities Financial statements
2020 GBPm GBPm GBPm
------------ ------------------ -------------------------------- --------------------
Non current
financial
assets 2,196.8 3,298.3 5,495.1
Other non
current
assets 60.0 12.1 72.1
Cash 947.9 139.0 1,086.9
Current
financial
assets 12.8 - 12.8
Other current
assets 240.0 111.1 351.1
------------- ------------------ -------------------------------- --------------------
Total assets 3,457.5 3,560.5 7,018.0
------------- ------------------ -------------------------------- --------------------
Non current
financial
liabilities 1,669.6 3,329.3 4,998.9
Other non
current
liabilities 43.0 0.4 43.4
Current
financial
liabilities 256.0 - 256.0
Other current
liabilities 182.4 226.6 409.0
------------- ------------------ -------------------------------- --------------------
Total
liabilities 2,151.0 3,556.3 5,707.3
------------- ------------------ -------------------------------- --------------------
Equity 1,306.5 4.2 1,310.7
------------- ------------------ -------------------------------- --------------------
Total equity
and
liabilities 3,457.5 3,560.5 7,018.0
------------- ------------------ -------------------------------- --------------------
Operating segments Consolidated structured entities Financial statements
31 March 2019 GBPm GBPm GBPm
----------------------------------------------------- ------------------ -------------------------------- --------------------
Non current financial assets 2,255.7 3,393.2 5,648.9
Other non current assets 36.1 7.8 43.9
Cash 163.2 190.8 354.0
Current financial assets 110.7 (33.4) 77.3
Other current assets 215.7 71.4 287.1
Disposal groups held for sale - 107.1 107.1
------------------------------------------------------ ------------------ -------------------------------- --------------------
Total assets 2,781.4 3,736.9 6,518.3
------------------------------------------------------ ------------------ -------------------------------- --------------------
Non current financial liabilities 1,183.5 3,449.0 4,632.5
Other non current liabilities 46.7 0.2 46.9
Other current liabilities 161.5 206.2 367.7
Liabilities directly associated with disposal groups
held for sale - 76.9 76.9
------------------------------------------------------ ------------------ -------------------------------- --------------------
Total liabilities 1,391.7 3,732.3 5,124.0
------------------------------------------------------ ------------------ -------------------------------- --------------------
Equity 1,389.7 4.6 1,394.3
------------------------------------------------------ ------------------ -------------------------------- --------------------
Total equity and liabilities 2,781.4 3,736.9 6,518.3
------------------------------------------------------ ------------------ -------------------------------- --------------------
Notes to the financial statements continued
For the year ended 31 March 2020
Consolidated Statement of Cash Flows
Operating
segments Consolidated structured entities Financial statements
31 March 2020 GBPm GBPm GBPm
--------------------------------------------------- --------- -------------------------------- --------------------
Interest received 25.8 251.4 277.2
Fees received 209.2 (11.1) 198.1
Dividends received 41.1 (38.2) 2.9
Payments to suppliers and employees (137.0) (14.0) (151.0)
Proceeds from sale of current financial assets and
disposal groups 183.4 - 183.4
Purchase of current financial assets and disposal
groups (101.7) - (101.7)
Proceeds from sale of non current financial assets 487.0 1,717.1 2,204.1
Purchase of non current financial assets (329.4) (2,056.8) (2,386.2)
Net cash inflow from derivative contracts (19.6) 3.5 (16.1)
---------------------------------------------------- --------- -------------------------------- --------------------
Cash generated from/(used in) operating activities 358.8 (148.1) 210.7
---------------------------------------------------- --------- -------------------------------- --------------------
Taxes received (12.6) - (12.6)
---------------------------------------------------- --------- -------------------------------- --------------------
Net cash generated from/(used in) operating
activities 346.2 (148.1) 198.1
---------------------------------------------------- --------- -------------------------------- --------------------
Net cash used in investing activities (6.1) (37.0) (43.1)
---------------------------------------------------- --------- -------------------------------- --------------------
Dividends paid (142.8) - (142.8)
Interest paid (50.4) (137.6) (188.0)
Interest paid on lease liabilities (0.5) - (0.5)
Principal paid on lease liabilities (4.7) - (4.7)
Increase in long term borrowings 798.2 356.4 1,154.6
Repayment of long term borrowings (140.0) (86.8) (226.8)
Purchase of own shares (40.3) - (40.3)
Net cash used in financing activities 419.5 132.0 551.5
---------------------------------------------------- --------- -------------------------------- --------------------
Net increase/(decrease) in cash 759.6 (53.1) 706.5
---------------------------------------------------- --------- -------------------------------- --------------------
Cash and cash equivalents at beginning of year 163.2 190.8 354.0
Effect of foreign exchange rate changes 25.1 1.3 26.4
---------------------------------------------------- --------- -------------------------------- --------------------
Cash and cash equivalents at end of year 947.9 139.0 1,086.9
---------------------------------------------------- --------- -------------------------------- --------------------
Notes to the financial statements continued
For the year ended 31 March 2020
Operating
segments Consolidated structured entities Financial statements
31 March 2019 GBPm GBPm GBPm
--------------------------------------------------- --------- -------------------------------- --------------------
Interest received 21.5 199.3 220.8
Fees received 185.0 (0.3) 184.7
Dividends received 35.6 (32.3) 3.3
Payments to suppliers and employees (167.8) (6.8) (174.6)
Proceeds from sale of current financial assets and
disposal groups 201.8 (1.7) 200.1
Purchase of current financial assets and disposal
groups (345.4) 38.5 (306.9)
Proceeds from sale of non current financial assets 643.9 1,831.4 2,475.3
Purchase of non current financial assets (603.1) (2,062.9) (2,666.0)
Net cash inflow from derivative contracts 48.0 7.4 55.4
---------------------------------------------------- --------- -------------------------------- --------------------
Cash generated from/(used in) operating activities 19.5 (27.4) (7.9)
---------------------------------------------------- --------- -------------------------------- --------------------
Taxes paid (16.3) (3.9) (20.2)
---------------------------------------------------- --------- -------------------------------- --------------------
Net cash generated from/(used in) operating
activities 3.2 (31.3) (28.1)
---------------------------------------------------- --------- -------------------------------- --------------------
Net cash (used in)/generated from investing
activities (5.3) 13.0 7.7
---------------------------------------------------- --------- -------------------------------- --------------------
Dividends paid (88.3) - (88.3)
Interest paid (51.3) (130.1) (181.4)
Increase in long term borrowings 308.3 2,029.9 2,338.2
Repayment of long term borrowings (181.8) (1,970.5) (2,152.3)
Net purchase of own shares (49.3) - (49.3)
Net cash used in financing activities (62.4) (70.7) (133.1)
---------------------------------------------------- --------- -------------------------------- --------------------
Net decrease in cash (64.5) (89.0) (153.5)
---------------------------------------------------- --------- -------------------------------- --------------------
Cash and cash equivalents at beginning of year 247.9 272.8 520.7
Effect of foreign exchange rate changes (20.2) 7.0 (13.2)
---------------------------------------------------- --------- -------------------------------- --------------------
Cash and cash equivalents at end of year 163.2 190.8 354.0
---------------------------------------------------- --------- -------------------------------- --------------------
3. Dividends
The proposed final ordinary dividend for the year ended 31 March 2020 is
35.8 pence per share (2019: 35.0 pence per share), which will amount to
GBP101.6m (2019: GBP100.0m). The total dividend in respect of the year
ended 31 March 2020 was 50.8 pence per share (2019: 45.0 pence per
share)
Of the GBP142.8m (2019: GBP88.3m) of ordinary dividends paid during the
year, GBP0.7m were reinvested under the dividend reinvestment plan that
was offered to shareholders (2019: GBP1.3m).
Notes to the financial statements continued
For the year ended 31 March 2020
4. Earnings per share
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
-------------------------------------------------------- -------------- --------------
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to the equity
holders of the parent 108.9 180.1
--------------------------------------------------------- --------------- --------------
Number of shares
-------------------------------------------------------- --------------- --------------
Weighted average number of ordinary shares for the
purposes of basic earnings per share 284,813,542 283,915,372
Effect of dilutive potential ordinary share options 51,255 25,528
--------------------------------------------------------- --------------- --------------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 284,864,797 283,940,900
--------------------------------------------------------- --------------- --------------
Earnings per share 38.2p 63.4p
--------------------------------------------------------- --------------- ----------------
Diluted earnings per share 38.2p 63.4p
--------------------------------------------------------- --------------- ----------------
Reconciliation of total number of shares allotted, called up and in
issue
Number of
shares in
Total number of ordinary shares of 26 1/4 allotted, own share
called up and fully paid reserve
As at 1 April 2019 294,084,351 11,218,285
Purchased (ordinary
shares of 26 1/4
p) - 4,778,936
Options/awards
exercised - (5,097,737)
Shares issued 94,823 -
----------------- -------------------------------------------------------- ----------------
As at 31 March 2020 294,179,174 10,899,484
------------------- -------------------------------------------------------- ----------------
5. Tax
Year ended Year ended
31 March 2020 31 March 2019
Analysis of tax on ordinary activities GBPm GBPm
------------------------------------------- -------------- --------------
Current tax
Corporate tax 4.1 16.0
Prior year adjustment (2.9) 5.4
-------------------------------------------- -------------- --------------
1.2 21.4
------------------------------------------- -------------- --------------
Deferred taxation
Current year (0.2) (19.1)
Prior year adjustment 2.9 (3.9)
-------------------------------------------- -------------- --------------
2.7 (23.0)
------------------------------------------- -------------- --------------
Tax charge/(credit) on profit on ordinary
activities 3.9 (1.6)
-------------------------------------------- -------------- --------------
Notes to the financial statements continued
For the year ended 31 March 2020
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 ICG operates, and (ii) under
guidelines set out by the Organisation for Economic Co-operation and
Development (OECD). The effective tax rate results from the
consolidation of taxes paid or credited on earnings attributable to the
tax jurisdictions in which they arise. The vast majority of the Group's
operating profits in the period arose in the UK.
The current effective tax rate reported by the Group of 3.4% (FY19:
(0.9%) credit) is lower than the statutory UK corporation tax rate of
19%. 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.
Accounting for tax involves a level of estimation uncertainty given that
the application of tax law requires a degree of judgment, which tax
authorities may ultimately dispute. Tax liabilities are recognised based
on the best estimates of probable outcomes, 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.
A reconciliation between the theoretical statutory tax rate applicable
to the Group and the reported effective tax rate is provided below.
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
-------------------------------------------------------- -------------- --------------
Profit on ordinary activities before tax 114.5 182.9
Profit before tax multiplied by the rate of corporation
tax in the UK of 19% (2019: 19%) 21.8 34.8
Effects of:
Prior year adjustment to current tax (2.9) 5.4
Prior year adjustment to deferred tax 2.9 (3.9)
--------------------------------------------------------- -------------- --------------
- 1.5
Non taxable and non deductible items (2.0) (0.1)
Current year risk provision charge - 1.6
Impairment of tax debtor balance - 3.3
Different tax rates of overseas subsidiaries (9.5) (32.5)
Changes in statutory tax rates - 2.0
Other temporary differences (6.4) (12.2)
Current tax charge/(credit) for the year 3.9 (1.6)
--------------------------------------------------------- -------------- --------------
Notes to the financial statements continued
For the year ended 31 March 2020
6. Post balance sheet events
Since the year end, the outbreak of Covid-19 has continued to cause
major global uncertainty and continues to impact global financial
markets. The Group has implemented its business continuity plan, and its
critical teams and functions continue to work remotely to support the
business.
The overall financial impact of Covid-19 is uncertain; however, the
Group determined that its key sensitivity was in relation to fair value
assessment of its financial assets. The principal source of uncertainty
concerns estimates applied in determining such assessments. The Group
has an established policy and robust process where valuations are
challenged by the Group Valuation Committee both qualitatively and
quantitively. All investments are subject to review at a minimum
quarterly, and those which have been identified to have a significant
reduction in fair value are subject to enhanced monitoring and review.
As a result of Covid-19, the Group placed enhanced focus on its
valuation assessment and the effectiveness of methodologies applied. The
Group has included additional sensitivities to its valuations and
stress-testing for the potential impact of Covid-19-related market
dislocation. Since 31 March 2020, the Group continued to monitor
estimates and valuations that may have had a significant risk of causing
a material adjustment to fair value assessments as of the balance sheet
date. The Group has not identified any material changes requiring
adjustment subsequent to year end.
As part of the Board's assessment of the going concern basis and
viability of the Group, a range of stressed scenarios and sensitivity
analyses were examined to identify conditions that might result in the
Group's covenants being breached. This included the consideration of
possible remedial action that the Group could undertake to avoid such
breaches. The nature of the diversification and defensive
characteristics of the Group's closed-end funds were also considered.
The results from the scenario analysis is that the Group is sensitive to
the reduction in the fair value of its investments which are dependent
on external factors; however, due to the long-term nature of the Group's
funds, a reduction to the fair value of an investment does not result in
an outflow of cash. Therefore, this does not impact the liquidity of the
Group.
The Group has sufficient liquidity following the issuance of a EUR500m
Eurobond, and private placement debt during the year. The Group is not
in breach of any of its facility covenants and has sufficient headroom.
Based on the Board's review and drawing on its skills and experience it
expects that, even in the identified extreme scenario, the Group would
have the capacity to continue as a viable entity.
As of 15 May 2020, the Group has taken occupation of Procession House,
55 Ludgate Hill, New Bridge Street, London EC4M 7JW. This site is
currently in the process of being fitted out and will be the new London
Headquarters where the Group's London staff will be based later on in
the year.
Glossary
Items denoted with a (1) throughout this document have been identified
as non IFRS alternative performance measures. These are defined below:
Term
Short form
Definition
Adjusted earnings per share
Adjusted EPS
Adjusted profit after tax divided by the weighted average number of
ordinary shares as detailed in note 4.
Adjusted Group profit before tax
Group profit before tax adjusted for the impact of the consolidated
structured entities. As at 31 March, this is calculated as follows:
2020 2019
Profit before tax GBP114.5m GBP182.9m
Less consolidated structured entities (GBP3.7m) GBP95.4m
Adjusted group profit before tax GBP110.8m GBP278.3m
Adjusted Investment Company profit before tax
Investment Company profit adjusted for the impact of the consolidated
structured entities. As at 31 March, this is calculated as follows:
2020 2019
Investment Company profit before tax (GBP68.6m) GBP39.1m
Less consolidated structured entities (GBP3.7m) GBP95.4m
Adjusted Investment Company profit before tax (GBP72.3m) GBP134.5m
Adjusted return on equity
Adjusted profit after tax (annualised when reporting a six month
period's results) divided by average shareholders' funds for the period.
As at 31 March, this is calculated as follows:
2020 2019
Adjusted profit after tax GBP109.2m GBP269.3m
Average shareholders' funds GBP1,388.6m GBP1,343.8m
Adjusted return on equity 7.9% 20.0%
Assets under management
AUM
Value of all funds and assets managed by the FMC. During the investment
period third party (external) AUM is measured on the basis of committed
capital. Once outside the investment period third party AUM is measured
on the basis of cost of investment. AUM is presented in Euros, with
non-Euro denominated at the period end closing rate.
Balance sheet investment portfolio
The balance sheet investment portfolio represents non-current financial
assets from the Statement of Financial Position, adjusted for the impact
of the consolidated structured entities. See note 2 for a full
reconciliation.
Cash profit
PICP
Cash profit is defined as profit before tax and incentive schemes,
adjusted for non-cash items on an alternative performance measure basis.
2020 2019
Adjusted profit before tax GBP110.8m GBP278.3m
Add back incentive schemes GBP104.3m GBP110.9m
Other adjustments GBP150.5m (GBP52.6m)
Cash profit GBP365.6m GBP336.6m
Dividend income
Dividend income represents distributions received from equity
investments. Dividend income reported on an alternative performance
measure basis excludes the impact of the consolidated structured
entities. See note 2 for a full reconciliation.
Earnings per share
Profit after tax divided by the weighted average number of ordinary
shares as detailed in note 4.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
Gross gearing
Gross gearing is used by management as a measure of balance sheet
efficiency. Gross borrowings, excluding the consolidated structured
entities, divided by closing shareholders' funds. Gross borrowings
represent the cash amount repayable to debt providers. As at 31 March,
this is calculated as follows:
2020 2019
Gross borrowings GBP5,244m GBP4,633m
Less consolidated structured entities (GBP3,329m) (GBP3,449m)
------------------------------------- ----------- -----------
Adjusted gross borrowings GBP1,915m GBP1,184m
Shareholders' funds GBP1,309m GBP1,383m
Gross gearing 1.46x 0.86x
Interest expense
Interest expense excludes the cost of financing associated with the
consolidated structured entities.
Liquidity
Liquidity represents the Group's unencumbered cash and available undrawn
debt facilities.
Net asset value per share
Total equity from the Statement of Financial Position divided by the
closing number of ordinary shares. As at 31 March, this is calculated as
follows:
2020 2019
Total equity GBP1,311m GBP1,394m
Closing number of ordinary shares 283,279,690 282,866,066
Net asset value per share 463p 493p
Net current assets
The total of cash, plus current financial assets, plus other current
assets, less current liabilities as reported on the alternative
performance measure basis. This excludes the consolidated structured
entities. As at 31 March, this is calculated as follows:
2020 2019
Cash GBP947.9m GBP163.2m
Current financial assets GBP12.8m GBP110.7m
Other current assets GBP240.0m GBP215.7m
Current financial liabilities (GBP256.0m) -
Other current liabilities (GBP182.4m) (GBP161.5m)
----------- -----------
Adjusted net current assets GBP762.3m GBP328.1m
On an IFRS basis net current assets are as follows:
2020 2019
Cash GBP1,086.9m GBP354.0m
Current financial assets GBP12.8m GBP77.3m
Other current assets GBP351.1m GBP287.1m
Disposal groups held for sale - GBP107.1m
Current financial liabilities (GBP256.0m) -
Other current liabilities (GBP409.0m) (GBP367.7m)
Liabilities directly associated with disposal groups - (GBP76.9m)
held for sale
----------- -----------
Net current assets GBP785.8m GBP380.9m
Net debt
Net debt, along with gearing, is used by management as a measure of
balance sheet efficiency. Net debt includes unencumbered cash whereas
gearing uses gross borrowings and is therefore not impacted by movements
in cash balances.
Total drawn debt less unencumbered cash of the Group. As at 31 March,
this is calculated as follows:
2020 2019
Adjusted gross borrowings GBP1,915.1m GBP1,184.3m
Less unencumbered cash (GBP916.5m) (GBP162.7m)
Net debt GBP998.6m GBP1,021.6m
Net gearing
Net gearing is used by management as a measure of balance sheet
efficiency. Net debt, excluding the consolidated structured entities,
divided by closing shareholders' funds. Gross borrowings represent the
cash amount repayable to debt providers. As at 31 March, this is
calculated as follows:
2020 2019
Net debt GBP998.6m GBP1,021.6m
Shareholders' funds GBP1,309.2m GBP1,383.4m
Net gearing 0.76x 0.74x
Net investment returns
Net investment returns is the total of interest income, capital gains,
dividend and other income less asset impairments.
Operating cashflow
Operating cashflow represents the cash generated from operating
activities from the Statement of Cash Flows, adjusted for the impact of
the consolidated structured entities. See note 2 for a full
reconciliation.
Operating expenses of the Investment Company
Investment Company operating expenses are adjusted for the impact of the
consolidated structured entities. See note 2 for a full reconciliation.
Operating profit margin
Fund Management Company profit divided by Fund Management Company total
revenue. As at 31 March this is calculated as follows:
2020 2019
Fund Management Company Profit GBP183.1m GBP143.8m
Fund Management Company Total Revenue GBP341.4m GBP274.7m
Operating profit margin 53.6% 52.3%
Return on equity
ROE
Profit after tax (annualised when reporting a six month period's
results) divided by average shareholders' funds for the period.
Third party fee income
Fees generated on fund management activities as reported in the Fund
Management Company including fees generated on consolidated structured
entities which are excluded from the IFRS consolidation position. See
note 2 for a full reconciliation.
Weighted average fee rate
An average fee rate across all strategies based on fee earning AUM in
which the fees earned are weighted based on the relative AUM.
Other definitions which have not been identified as non IFRS GAAP
alternative performance measures are as follows:
Term Short Definition
form
-------------- --------- ----------------------------------------------------------
AIFMD The EU Alternative Investment Fund Managers Directive.
-------------- --------- ----------------------------------------------------------
Alternative APM These are non-GAAP financial measures.
performance
measure
-------------- --------- ----------------------------------------------------------
Catch up fees Fees charged to investors who commit to a fund after
its first close. This has the impact of backdating
their commitment thereby aligning all investors in
the fund.
-------------- --------- ----------------------------------------------------------
Closed end A fund where investor's commitments are fixed for
fund the duration of the fund and the fund has a defined
investment period.
-------------- --------- ----------------------------------------------------------
Co-investment Co-invest A direct investment made alongside or in a fund taking
a pro-rata share of all instruments.
-------------- --------- ----------------------------------------------------------
Collateralised CDO Investment grade security backed by a pool of non-mortgage
Debt based bonds, loans and other assets.
Obligation
-------------- --------- ----------------------------------------------------------
Collateralised CLO CLO is a type of CDO, which is backed by a portfolio
Loan of loans.
Obligation
-------------- --------- ----------------------------------------------------------
Close A stage in fundraising whereby a fund is able to release
or draw down the capital contractually committed at
that date.
-------------- --------- ----------------------------------------------------------
Core Plus Core+ Assets which have infrastructure characteristics (physical
assets, protected and predictable cash flows) with
a slightly higher risk/return profile than Core assets.
-------------- --------- ----------------------------------------------------------
Direct Funds which invest in self-originated transactions
investment for which there is a low volume, inactive secondary
funds market.
-------------- --------- ----------------------------------------------------------
Employee EBT Special purpose vehicle used to purchase ICG plc shares
Benefit Trust which are used to satisfy share options and awards
granted under the Group's employee share schemes.
-------------- --------- ----------------------------------------------------------
Environmental, ESG Environmental, social and governance (ESG) criteria
Social, are a set of standards for a company's operations
Governance that socially conscious investors use to screen potential
criteria investments
-------------- --------- ----------------------------------------------------------
Financial FCA Regulates conduct by both retail and wholesale financial
Conduct service firms in provision of services to consumers.
Authority
-------------- --------- ----------------------------------------------------------
Financial FRC The UK's independent regulator responsible for promoting
Reporting high quality corporate governance and reporting.
Council
-------------- --------- ----------------------------------------------------------
Fund FMC The Group's fund management business, which sources
Management and manages investments on behalf of the IC and third
Company party funds.
-------------- --------- ----------------------------------------------------------
HMRC HM Revenue & Customs, the UK tax authority.
-------------- --------- ----------------------------------------------------------
IAS International Accounting Standards.
-------------- --------- ----------------------------------------------------------
IFRS International Financial Reporting Standards as adopted
by the European Union.
-------------- --------- ----------------------------------------------------------
Illiquid Asset classes which are not actively traded.
assets
-------------- --------- ----------------------------------------------------------
Internal ICAAP The ICAAP allows companies to assess the level of
Capital capital that adequately supports all relevant current
Adequacy and future risks in their business.
Assessment
Process
-------------- --------- ----------------------------------------------------------
Investment IC The Investment Company invests the Group's capital
Company in support of third party fundraising and funds the
development of new strategies.
-------------- --------- ----------------------------------------------------------
Internal Rate IRR The annualised return received by an investor in a
of Return fund. It is calculated from cash drawn from and returned
to the investor together with the residual value of
the asset.
-------------- --------- ----------------------------------------------------------
Key Man Certain funds have designated Key Men. The departure
of a Key Man without adequate replacement triggers
a contractual right for investors to cancel their
commitments.
-------------- --------- ----------------------------------------------------------
Key KPI A business metric used to evaluate factors that are
performance crucial to the success of an organisation.
indicator
-------------- --------- ----------------------------------------------------------
Key risk KRI A measure used to indicate how risky an activity is.
indicator It is an indicator of the possibility of future adverse
impact.
-------------- --------- ----------------------------------------------------------
Liquid assets Asset classes with an active, established market in
which assets may be readily bought and sold.
-------------- --------- ----------------------------------------------------------
Open ended A fund which remains open to new commitments and where
fund an investor's commitment may be redeemed with appropriate
notice.
-------------- --------- ----------------------------------------------------------
Payment in PIK Also known as rolled up interest. PIK is the interest
kind accruing on a loan until maturity or refinancing,
without any cash flows until that time.
-------------- --------- ----------------------------------------------------------
Performance Carry Share of profits that the fund manager is due once
fees it has returned the cost of investment and agreed
preferred return to investors.
-------------- --------- ----------------------------------------------------------
Realisation The return of invested capital in the form of principal,
rolled up interest and/or capital gain.
-------------- --------- ----------------------------------------------------------
Securitisation A form of financial structuring whereby a pool of
assets is used as security (collateral) for the issue
of new financial instruments.
-------------- --------- ----------------------------------------------------------
Senior debt Senior debt ranks above mezzanine and equity.
-------------- --------- ----------------------------------------------------------
Structured Entities which are classified investment funds, CLO's
entities or CDO's and are deemed to be controlled by the Group,
though its interest in either an investment, loan,
fee receivable, guarantee or commitment. These entities
can also be interchangeably referred to as credit
funds.
-------------- --------- ----------------------------------------------------------
Total AUM The aggregate of the third party external AUM and
the Investment Company's balance sheet.
-------------- --------- ----------------------------------------------------------
UK Corporate The Code Sets out standards of good practice in relation to
Governance board leadership and effectiveness, remuneration,
Code accountability and relations with shareholders.
-------------- --------- ----------------------------------------------------------
UNPRI UN Principles for Responsible Investing.
-------------- --------- ----------------------------------------------------------
Weighted An average in which each quantity to be averaged is
average assigned a weight. These weightings determine the
relative importance of each quantity on the average.
-------------- --------- ----------------------------------------------------------
Company timetable
Ex-dividend date 18 June 2020
Record date 19 June 2020
Last date for dividend reinvestment election 15 July 2020
AGM and Trading statement 21 July 2020
Payment of ordinary dividend 5 August 2020
Half year results announcement 17 November 2020
(END) Dow Jones Newswires
June 04, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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