Preliminary Results
April 08 2003 - 3:01AM
UK Regulatory
RNS Number:7508J
Intermediate Capital Group PLC
08 April 2003
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2003
Intermediate Capital Group PLC ("ICG"), the leading specialist European provider
of mezzanine finance, announces its results for the year ended 31 January 2003.
Financial highlights:
* Core income*, the best measure of ICG's performance, up 18% to #45.9m
* Net capital gains* up from #2.7m to #7.6m
* Pre-tax profits up 28% to #53.5m
* Proposed final dividend of 21.5p making 31.0p per share for the year, an
11% increase
* Loan book increased by 25% to a record #876m
Operational highlights:
* A record #523m of financings arranged during the year
* A new Euro350m loan fund raised
* Funds under management reach #1.4bn
Commenting on the results, John Manser, Chairman of ICG said:
"I am pleased to be able to report a strong performance by ICG in all key areas
in its last financial year.
Although M&A activity has continued to decline, the buyout market has remained
relatively strong, which, along with increased uncertainty in the financial
markets, has helped to produce an attractive environment for mezzanine in
general and for ICG in particular. This has enabled us to achieve high levels
of new lending and consequently a very good increase in our mezzanine loan
portfolio, which has in turn helped to produce strong growth in core income.
Capital gains have been better than might have been expected in today's weak
financial markets; provisions have remained at similar levels to last year as a
result of the relative robustness and diversity of our portfolio.
We have made a good start to our new financial year but are now seeing some
short term slowdown in activity levels because of current global uncertainty.
The current business environment is not without risk but we believe the year
ahead should be a time of opportunity for ICG."
Enquiries:
Tom Bartlam, Managing Director, Intermediate Capital Group PLC (020) 7628 9898
Tom Attwood, Managing Director, Intermediate Capital Group PLC (020) 7628 9898
Gill Ackers/Tricia Parish, Brunswick Group Limited (020) 7404 5959
Note to the Editors
A brief explanation of Intermediate Capital Group's lending activities is
attached.
* The definitions of core income and net capital gains may be found after the
analysis of profit after tax.
Results
For the year ending 31 January 2003 pretax profits were #53.5m, an increase of
28% over the previous year. This profit growth was caused by an increase in
both core income and capital gains.
Dividends
The Board is recommending a final dividend of 21.5p net per share to be paid on
30 May 2003, which, with the interim dividend of 9.5p per share, brings the
total for the year to 31.0p net per share, an increase of 11% over last year's
dividend. The dividend will be paid to shareholders on the register on 9 May
2003.
ICG's policy is to deliver continuing dividend growth subject to satisfactory
core income growth, while also building up retained earnings so as to help
finance the future growth of the business.
The year's dividend is covered 1.8 times by core income net of tax and 1.9 times
by post tax earnings.
Core Income
Core income, the most important element of ICG's profits, which is defined as
net interest income plus fee income less related administrative expenses,
increased by 18% to #45.9m.
Net interest and dividend income grew by 18% to #42.5m primarily as a result of
the growth in the loan book and continuing use of rolled-up interest in
mezzanine structures. Transaction fees increased from #4.7m last year to #7.5m
this year due to increased new deal activity. Fund management fees increased to
#9.3m as a result of the increasing amounts invested by the leverage loan funds.
Total fee income increased by 25% to #17.9m.
Operating expenses increased by 28% to #14.5m. This increase arose principally
from increased staff costs, the cost of the new larger London office and a full
year's charge for the Hong Kong operation.
Capital Gains and Provisions
Gross capital gains for the year increased to #33.9m, compared with #21.1m in
the previous year. Capital gains were realised from nine companies of which
eight were trade sales or refinancings with the remainder being a flotation.
Provisions for the year amounted to #17.5m compared to a net charge of #16.2m in
the previous year. New provisions on three underperforming loans were required
together with increased provisions on some loans which were already partially
provided. The cost of the Medium Term Incentive Scheme increased from #2.2m to
#8.8m this year as a result of higher capital gains and achievement of
performance targets.
The Loan Portfolio
It was a strong year for new lending, resulting in the loan book growing by 25%
to #876m. A total of #523m of new funding was provided, of which #293m was
invested on ICG's balance sheet, #100m was taken by fund management clients,
with the balance of #130m being syndicated to third parties. Of the twenty-two
new loans made during the year, nine were in France, five in the UK, two in each
of Switzerland, the Netherlands and Sweden and one in each of Germany and South
Korea.
Because of the weaker M&A market it was another relatively quiet year for
repayments which amounted in total to #133m in respect of 13 investments.
The European economy further deteriorated during the last year, which created
more difficult trading conditions for some portfolio companies. It is pleasing
to be able to report, however, that the majority of companies in the portfolio
have risen to the challenge of this more difficult business environment and
continued to produce satisfactory performances.
For a small number of companies, primarily those which are operating in
difficult cyclical sectors, trading has continued to suffer and appropriate
provisions have been made. While further economic downturn across Europe would
make life more difficult for some investee companies, we take comfort from the
overall robustness of the diversified portfolio of investments in cash
generative companies.
Funding
During the year ICG raised #90m of new medium term bank facilities together with
#50m of short term facilities which resulted in having total borrowing
facilities at 31 January of #813m. At the year end there were outstanding
borrowings of #671m leaving #142m of unutilised facilities and a gearing ratio
of 3.1:1. ICG is now in the process of raising additional debt facilities to
provide sufficient finance to continue to grow the loan book.
Fund Management
Overall funds under management grew from #1.2bn to #1.4bn reflecting the
successful closing of the second loan fund.
Funds invested on behalf of mezzanine fund management clients increased during
the year from #250m to #319m as a result of the high level of investment in the
second half of the year. Consequently, the most recent mezzanine fund is likely
to be fully invested during the course of the current year and the ICG Mezzanine
Fund 2003 has therefore been launched. Based on the discussions with a select
group of prospective investors, it is expected that there will be a closing of
the fund in the first half of our financial year. The target size of the fund
is Euro750m. This new fund should enable ICG to continue to grow its mezzanine
fund management activity, further strengthen its position in the European
mezzanine market and significantly increase fund management fees in future
years.
The CDOs managed by ICG continue to operate in difficult markets, with both
funds suffering from the poor performance of the high yield market. However,
for the third consecutive year, they have significantly outperformed their peer
group, showing strong relative performance.
During the year a second loan fund, which invests primarily in higher yielding
European bank loans, was successfully raised. This Euro350m fund is gradually
investing its capital as is the Euro450m loan fund raised the previous year. The
performance to date of both these funds is good. There remains the potential of
further substantial growth in these specialist fund management areas and ICG is
committed to growing this activity.
ICG and the European Mezzanine Market
While the levels of M&A activity in 2002 continued to fall, the buyout market,
having started the year slowly as a result of the nervous markets, picked up
materially in the rest of the year and finished with the total level of buyouts
only slightly lower than the previous year. The principal reason for this was
that financial buyers are increasingly the most likely acquirors because they
have large amounts of available cash. Within this active buyout market, while
the overall level of mezzanine activity was somewhat lower than in the previous
year, competitive pressures were reduced and the structuring and pricing of this
mezzanine was, in ICG's view, more attractive. Consequently we found a good
number of attractive mezzanine opportunities.
The high yield bond market remained volatile and illiquid throughout most of
last year and therefore represented an unreliable source of finance for buyouts
thus providing more mezzanine opportunities in larger deals, which are becoming
increasingly common.
Banks are still keen to arrange total debt packages including mezzanine but,
with a few exceptions, have been unenthusiastic about taking any substantial
amounts of mezzanine on to their own balance sheet. Many of them have also, in
these nervous markets, been less willing to take on underwriting risk.
Consequently, when large amounts of mezzanine are being underwritten, it is
often attractive for the bank arranger to seek a significant commitment from ICG
not least because it is now able to make a larger single mezzanine investment
than any other mezzanine provider in the market.
While there has been more activity from the independent funds in the past year,
none of them can compete with ICG either on a Pan European basis or in terms of
size of commitment to any transaction. As mezzanine is becoming a more popular
financial product one expects there to be continuing competitive pressures from
other existing mezzanine providers and further new entrants into the market.
There continues to be on some occasions competition from investment banks who
arrange and seek to place underpriced and/or badly structured mezzanine.
Despite this, because of geographic reach, reputation and size, ICG's market
position remains strong.
The Asian Mezzanine Market
After its first full year's operation, ICG believes its Hong Kong office has
successfully established its reputation in the Asia Pacific region and is
already seen as the first call for any mezzanine financing. Relationships have
been developed with the most likely deal providers and completion of the first
investment was finalised in the second half of the year. While overall levels
of activity in the region were relatively low last year, particularly in the
buyout market, the potential for growth in mezzanine opportunities in future
years appears to be good.
Management and Staff
ICG has continued to grow its staff levels during the year with the most
noticeable event being the recruitment of a Spanish team to develop business in
the Iberian peninsula.
The quality of our people remains the greatest strength of the company and the
key contributor to its success.
Prospects
Looking at the year ahead, ICG is expecting European economies to remain weak
and the financial markets uncertain. Such an environment should produce
attractive investment opportunities for ICG, as it has done in the last
financial year.
The year has started well with three new loans completed, which has resulted in
#50m being invested on Balance Sheet. In the last month there has been a slow
down but once current global uncertainty caused by the Iraq war has passed ICG
believes that investment activity should pick up again. It is hoped that the
record of growing the loan book will continue, although probably not to the same
extent as last year.
The strong growth in the loan book in the second half of last year should help
to continue to increase net interest income this year, which, together with the
prospect of increased fund management fees, will benefit core income.
While ICG has already made some good capital gains this year it is impossible to
predict the market for realisations although it is not expected to be as strong.
The portfolio has held up well in a weakening economic environment. Further
economic deterioration will put more risk on the loan book but ICG remains
confident of its overall strength and quality.
Success in raising the proposed new large mezzanine fund should significantly
strengthen ICG's business position in the European mezzanine market.
ICG continues to be a growing business with a leading position in an attractive
market and looks forward to the future with confidence.
INTERMEDIATE CAPITAL GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 January 2003
Year to Year to
Jan 03 Jan 02
#m #m
----------------------------------------------------- ------------- --------------
Interest and dividend income 66.9 62.9
Gain on disposals 33.9 21.1
Fee and other operating income 17.9 14.3
------------- --------------
118.7 98.3
Interest payable and similar charges (24.4) (26.9)
Provisions against loans and investments (17.5) (16.2)
Administrative expenses (23.3) (13.5)
----------------------------------------------------- ------------- --------------
Profit on ordinary activities before taxation 53.5 41.7
Tax on profit (18.4) (12.8)
------------- --------------
Profit on ordinary activities after taxation 35.1 28.9
Dividend proposed (18.3) (16.4)
------------- --------------
Retained profit transferred to reserves 16.8 12.5
------------- --------------
Earnings per share 59.8p 49.3p
All activities represent continuing operations
Analysis of profit after tax: Core Income Net Capital Gains
Year to Year to Year to Year to
Jan 03 Jan 02 Jan 03 Jan 02
#m #m #m #m
------------------------------------------------------- ------------ ------------ ----------- -----------
Income
Interest and dividend income 66.9 62.9 - -
Gain on disposals - - 33.9 21.1
Fee and other operating income 17.9 14.3 - -
------------------------------------------------------- ------------ ------------ ----------- -----------
84.8 77.2 33.9 21.1
Less:
Interest payable and similar charges (24.4) (26.9) - -
Provisions against loans and investments - - (17.5) (16.2)
Administrative expenses and incentive payments (14.5) (11.3) (8.8) (2.2)
------------------------------------------------------- ------------ ------------ ----------- -----------
Profit before taxation 45.9 39.0 7.6 2.7
================================ ======= ======= ====== ======
Taxation (13.8) (12.0) (4.6) (0.8)
------------------------------------------------------- ------------ ------------ ----------- -----------
Profit after taxation 32.1 27.0 3.0 1.9
------------------------------------------------------- ------------ ------------ ----------- -----------
Earnings per share 54.7p 46.2p 5.1p 3.1p
------------------------------------------------------- ------------ ------------ ----------- -----------
Core income is defined as net interest income and dividend income plus fee
income less related administrative expenses.
Net capital gains represent capital gains after deduction of the specific
provisions and the costs of the medium-term incentive scheme.
INTERMEDIATE CAPITAL GROUP PLC
CONSOLIDATED BALANCE SHEET
31 January 2003
Jan-03 Jan-02
#m #m
Fixed assets
Tangible assets 1.6 1.5
Loans 801.4 633.3
Investments 74.7 70.7
Current assets
Debtors 26.5 14.4
Loans and investments 53.2 33.0
Cash at bank 1.9 1.1
------------- --------------
81.6 48.5
------------- --------------
---------------------------------------------------------- ------------- --------------
Total assets 959.3 754.0
---------------------------------------------------------- ------------- --------------
Capital and reserves
Called up share capital 11.8 11.7
Share premium account 86.0 85.2
Capital redemption reserve 1.4 1.4
Profit and loss and other reserves 117.0 100.2
------------- --------------
Equity shareholders' funds 216.2 198.5
Creditors: amounts falling due after more than one year 627.0 523.5
Creditors: amounts falling due within one year 116.1 32.0
---------------------------------------------------------- ------------- --------------
Total capital and liabilities 959.3 754.0
---------------------------------------------------------- ------------- --------------
INTERMEDIATE CAPITAL GROUP PLC
CONSOLIDATED CASH FLOW
For the year ended 31 January 2003
Year to Year to
Jan 03 Jan 02
#m #m
Operating activities
Interest and dividends received 58.0 58.5
Gain on disposals 33.9 21.3
Fee and other operating income 17.0 16.0
Administrative expenses (15.8) (25.6)
-------------- -------------
93.1 70.2
Interest paid (27.6) (26.7)
-------------- -------------
Net cash inflow from operating activities 65.5 43.5
Taxation paid (10.2) (16.5)
Capital expenditure and financial investment
Loans and investments made (292.9) (184.0)
Realisations of loans and investments 132.9 82.7
Loans for syndication (20.3) 13.8
-------------- -------------
(180.3) (87.5)
Purchase of tangible fixed assets (0.4) (1.3)
-------------- -------------
(180.7) (88.8)
-------------- -------------
Equity dividends paid (17.0) (15.2)
======================= ======== ========
Net cash outflow before financing (142.4) (77.0)
======================= ======== ========
Financing
Increase in share capital 0.9 0.2
Increase in debt 142.3 74.8
------------------------------------------------------------ ------------ -------------
Increase/(Decrease) in cash and cash equivalents 0.8 (2.0)
======================= ======== ========
This announcement is prepared on the basis of the accounting policies as stated
in the previous year's financial statements.
The financial information set out in the announcement does not constitute the
group's statutory accounts for the years ended 31 January 2003 or 2002. The
financial information for the year ended 31 January 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s237(2) or (3) Companies Act 1985. The
statutory accounts for the year ended 31 January 2003 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.
NOTE TO EDITORS
ICG was founded in 1989 and was floated in 1994. Its principal business is to
arrange and provide intermediate, or mezzanine, capital for companies in Europe.
It opened an office in Hong Kong in 2001 to establish a mezzanine investment
business in the Asia Pacific Region. ICG also has a specialist fund management
business relating to higher yielding European debt
ICG makes mezzanine loans from both its own resources and from third party funds
under its management. Mezzanine finance ranks in terms of risk and reward
between bank debt and equity capital. In return for providing finance, ICG
seeks a strong cash yield and an additional return related to the success of the
investee company, usually in the form of a capital gain. Mezzanine finance has
been principally used to finance management buyouts but is also used as
acquisition and refinancing capital.
ICG has a fast growing fund management business which invests institutional
client money in European high yield debt and leveraged loans. Total funds under
management amount to #1.4bn.
ICG now has a market capitalisation of approximately #500m.
In the year ended 31 January 2003 ICG invested in the following twenty-two
companies:
Asia Cinemas is a holding company with a 50% interest in CGV Co. Ltd, the
largest operator of multiplex cinemas in South Korea. ICG arranged and provided
a mezzanine acquisition finance facility of Korean Won 35bn (c. #19m).
Cegelec, a French company, is a leading provider of electrical contracting
services. In August 2002 ICG took a participation of Euro15m in the mezzanine
facility required to assist the buyout.
Cerba is a specialty French laboratory, which performs clinical laboratory tests
for smaller independent clinical laboratories, hospitals and physicians. ICG
arranged and provided a mezzanine facility of Euro12m to assist in the buyout.
Coral Eurobet is one of the UK's "Big Three" bookmakers providing both offline
and online betting services. ICG took a participation of #40m in the senior
mezzanine facility required to assist in the buyout.
Dometic Appliances, a Swedish Company, is the global leader in the supply of
appliances for recreational vehicles. ICG took a participation of Euro14m in the
mezzanine facility required to assist in the buyout.
Elis, a French company, is a leader in textile rental and hygiene and well-being
services. ICG arranged a junior facility of Euro70m and underwrote Euro60m of the
senior mezzanine facility required to assist in a secondary buyout of the
company.
Eurodatacar, a French company, provides services which complement traditional
insurance policies covering theft of vehicles. ICG took a participation of Euro7.5m
in the mezzanine facility required to assist in the buyout.
Halfords is the UK's largest retailer of car parts and accessories, cycles and
cycle accessories. ICG took a participation of #17.5m in the mezzanine facility
required to assist in the buyout.
Jane Norman is a U.K. womens' wear retailer targeting the 15 to 25 year old age
bracket. ICG arranged and provided a mezzanine facility of #10m to assist in the
buyout.
Malmberg, an existing borrower, is a leading publisher of educational material
in the Netherlands and Belgium. ICG arranged a junior mezzanine facility of
Euro7.5m to partially refinance existing shareholder loans.
Moliflor is the third largest operator of casinos in France. ICG arranged the
mezzanine facility of Euro80m required to assist in the buyout.
Nocibe is a leading French company in the retail and selective distribution of
perfumes and cosmetics. ICG arranged and provided a Euro35m senior mezzanine
facility and a Euro22m junior mezzanine facility required to assist in the buyout.
Risdon Pharma, a French company, is a European market leader in the
pharmaceutical primary packaging materials industry. ICG took a participation of
Euro6.5m in the mezzanine facility required to assist in the buyout.
Sab Wabco, a Swedish company, is one of the leading global brake systems
suppliers for rail vehicles and the second largest brake system supplier to the
European transit market. ICG took a participation of Euro8m in the mezzanine
facility required to assist in the buyout.
Sia, a French company, is a designer and importer/wholesaler of high quality
decoration accessories. ICG took a participation of Euro8m in the mezzanine
facility required to assist in the buyout.
SP Investments is an aviation ground handling company operating under the
Swissport name, based in Switzerland. ICG arranged a mezzanine facility of
CHF130m to assist in the buyout.
SR Technics is a global aircraft maintenance provider based in Switzerland. ICG
arranged a mezzanine facility of CHF127.5m to assist in the buyout.
Talbot Underwriting underwrites insurance at Lloyd's, predominantly short tail
in nature and with a major focus on the marine classes. ICG arranged and
provided a US$20m letter of credit as part of raising capital to support its
underwriting.
Thornbury is a company providing crisis nursing staff for mainly NHS hospitals
within the UK. ICG arranged and provided a mezzanine facility of #10m to assist
in the buyout.
Tower Participations is the leading operator of broadcast towers in France,
providing broadcast transmission services to TV channels and radio stations. ICG
underwrote Euro91.7 of two tranches of the mezzanine required to assist in the
buyout.
Viatris, a German company, is a developer, manufacturer and distributor of
branded pharmaceuticals and licences in products from other pharmaceutical
businesses. ICG took a participation of Euro23m in the mezzanine facility required
to assist in the buyout.
WZG Group is the leading distributor of mobility aids for disabled and elderly
people in the Netherlands. ICG arranged and provided a mezzanine facility of
Euro22m to assist in the buyout.
This information is provided by RNS
The company news service from the London Stock Exchange
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