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ICG: Interim Results Statement for the six months ended 30 September 2022
17 November 2022
Interim Results Statement for the six months ended 30 September 2022
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| Uncertain environment highlighting our strengths |
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| Highlights
Note: unless otherwise stated the financial results discussed herein are on the basis of Alternative Performance Measures - see page 2 |
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| Benoît Durteste |
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| CEO and CIO |
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| We take a long-term perspective on managing ICG and have been building resilience and growth levers into the business for a number of years. The fruits of this work are evident in our performance for this period. Today we have over 600 clients, our fee-earning AUM is up 16% year over year1 and we have generated third-party fee income of £515m over the last twelve months. |
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PERFORMANCE OVERVIEW
The Board and management monitor the financial performance of the Group on the basis of alternative performance measures (APM), which are non-IFRS measures. An explanation can be found on page 7 and a reconciliation of the APM to the IFRS measures on page 31, along with the IFRS condensed consolidated financial statements and supporting notes, can be found on pages 23 to 42. The Group’s profit after tax on an IFRS basis was below the prior period at £32.2m (H1 FY22 £242.4m). On the APM basis it was also below the prior period at £38.7m (H1 FY22 £240.7m). Unless stated otherwise the financial results discussed herein are on the basis of APM, which the Board believes assists shareholders in assessing the financial performance of the Group.
Long-term growth
| Last five years CAGR1 |
Third-party AUM | 17% |
Third-party fee income | 28% |
Fund Management Company profit before tax | 27% |
1 30 September 2017 to 30 September 2022
AUM
| 30 September 2022 | 31 March 2022 | 30 September 2021 | Last six months1 | Last twelve months1 |
Total AUM | $68.5bn | $72.1bn | $68.9bn | 3% | 13% |
Third-party AUM | $65.6bn | $68.5bn | $65.3bn | 4% | 14% |
Fee-earning AUM | $57.3bn | $58.3bn | $55.6bn | 6% | 16% |
| 1 April 2022 - | 1 April 2021 - | Change |
Fundraising during period | $5.7bn | $13.8bn | (59)% |
Deployment during period2 | $5.0bn | $8.4bn | (41)% |
Realisations during period3 | $2.4bn | $4.8bn | (50)% |
1 On a constant currency basis; 2 From direct investment funds; 3 Realisations of third-party AUM
Financial
| Six months ended | Six months ended | Change |
Third-party fee income | £265.3m | £199.0 m | 33% |
Fund Management Company profit before tax | £143.7m | £120.9 m | 19% |
Investment Company (loss)/profit before tax | £(108.1)m | £143.8 m | (175)% |
Group profit before tax | £35.6m | £264.7 m | (87)% |
Group earnings per share | 13.5p | 83.9p | (84)% |
Dividend per share | 25.3p | 18.7p | 35 % |
| 30 September 2022 | 31 March 2022 | Change |
Balance sheet investment portfolio | £2.9bn | £2.8bn | 2 % |
Net asset value per share | 658p | 696p | (5)% |
Net gearing | 0.55x | 0.45 x | 0.10 x |
Medium-term guidance
Our medium-term guidance remains unchanged from our FY22 results announcement and is set out below:
Fundraising | Performance fees | FMC operating margin | Net Investment Returns |
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COMPANY PRESENTATION
A presentation for investors and analysts will be held at 09:00 GMT today, and can be viewed via the link on our website.
A recording and transcript of the presentation will be available on demand from the same location in the coming days.
COMPANY TIMETABLE
Ex-dividend date: 8 December 2022
Record date: 9 December 2022
Last date to elect for dividend reinvestment: 14 December 2022
Payment of ordinary dividend: 9 January 2023
Q3 trading statement: 26 January 2023
Shareholder seminar on Fundraising and Client Strategy: 26 January 2023
Full year results announcement: 25 May 2023
ENQUIRIES
Shareholders / analysts: |
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Chris Hunt, Head of Shareholder Relations, ICG | +44(0)20 3545 2020 |
Media: |
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Fiona Laffan, Global Head of Corporate Affairs, ICG | +44(0)20 3545 1510 |
This results statement 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.
ABOUT ICG
ICG provides flexible capital solutions to help companies develop and grow. We are a global alternative asset manager with over 30 years’ history, managing $69bn of assets and investing across the capital structure. We operate across four asset classes: Structured and Private Equity, Private Debt, Real Assets, and Credit.
We develop long-term relationships with our business partners to deliver value for shareholders, clients and employees, and use our position of influence to benefit the environment and society. We are committed to being a net zero asset manager across our operations and relevant investments by 2040.
ICG is listed on the London Stock Exchange (ticker symbol: ICP). Further details are available at www.icgam.com.
CHIEF EXECUTIVE OFFICER’S REVIEW
The resilience of our business model, along with our product breadth, global footprint, client relationships and brand strength, have enabled ICG to demonstrate another period of impressive performance for the six months to 30 September 2022. We have continued to execute across our three strategic objectives encompassing fundraising, deployment and realisations:
“Grow AUM”: $5.7bn third-party AUM raised in an off-cycle year, bringing total AUM to $68.5bn
“Invest”: $5.0bn third-party AUM deployed from our direct investment funds
“Manage and realise”: strong operating performance of portfolio companies, realisations of $2.9bn1
Following the defining year of FY22, the six months to 30 September 2022 saw a number of notable events for ICG: final closes for Europe VIII, Strategic Equity IV and Asia Pacific IV; the launches of the fifth vintage of our flagship direct lending strategy (SDP) and the second vintage of Sale and Leaseback; seed investments for – amongst others – Real Estate Equity Europe; and a number of strategic hires within our investment and marketing and client relations teams.
The appeal of our strategies and the ongoing client demand for private markets is underlined by the increasing size of our funds. During the period we held final closes for three funds, all of which were above the initial target size: Europe VIII (total fund size: €8.1bn) has 93% more third-party AUM than its predecessor; Strategic Equity IV (total fund size: $4.2bn) has 145% more; and Asia Pacific IV (total fund size: $1.0bn) has 84% more.
In today’s fundraising environment debt strategies should be particularly attractive, with our direct lending strategy (SDP), for example, giving clients exposure to floating-rate senior secured debt in the upper mid-market.
Against a market-wide backdrop of tighter financial conditions and lower transaction velocity, our ability to provide structured and flexible solutions (especially within our Structured and Private Equity asset class) has helped us execute bespoke transactions for portfolio companies where a traditional control buyout was not the most appropriate solution. We have also seen a strong pipeline within direct lending, providing senior debt financing to upper mid-market companies where the high-yield bond and leveraged-loan markets have been largely shut.
For clients and portfolio companies, it is increasingly evident that our scale and breadth are powerful drivers of being able to provide solutions in all market backdrops; and for shareholders our diversified exposure to private markets provides a resilient business model.
Our client base is continuing to grow and evolve, and at 30 September 2022 stood at 618 (FY22: 586). I believe that private markets will remain very attractive for a large range of clients globally and to that end I invite you to join our next shareholder seminar, on 26th January 2023, when we will be discussing our long-term approach to “Fundraising and Client Strategy” in more detail.
The operational performance of our portfolio companies is strong, with those in our European Corporate strategy for example showing LTM EBITDA growth of 15%. We are actively supporting our portfolio companies as they seek to take advantage of the current dislocation by growing organically and inorganically, as well as ensuring that they have the people, systems and capital structure in place to navigate a period of potentially protracted uncertainty. In that context – and as a function of our firm-wide focus on downside protection – our funds have shown attractive performance, with income and earnings growth largely offsetting reduced valuation multiples and higher costs of capital.
Looking ahead, rising costs of capital, higher inflation and lower growth are putting pressure on consumers and businesses alike. We have been preparing for a downturn for some time:
Fund performance: investing in companies with strong market positions, supporting our portfolio companies to drive growth, levering companies prudently, anchoring fund performance through disciplined approach to realisations;
Strategically: scaling our platform; broadening our product offering, deepening our client franchise; and
Financially: focusing on management fee income that is visible and insulated from market volatility; maintaining a high operating margin; building a very strong balance sheet.
As a result of this, our business model today provides us with a high degree of stability. We have $16bn of dry powder across a range of strategies following our substantial fundraising in the last 18 months, and fee-earning AUM of $57bn at 30 September 2022 with an apitalize management fee generation potential of ~£464m. We have stable and visible management fee income, are not under pressure to deploy, and can apitalize on opportunities that we expect will emerge across all of our asset classes.
These strategic and financial characteristics are powerful features of our business, enabling us to take a long-term approach to creating value by growing up and growing out. By pursing this strategy, we expect to generate increasingly diverse streams of compounding fee income over the coming years.
There will be substantial rewards for the winners emerging from this era of dislocation as the private markets sector continues to mature. To be amongst that group, I believe private markets managers need to have a broad product offering, a sophisticated client strategy, a differentiated origination capability and a track record of managing portfolios to generate value through cycles. Importantly, all of that needs to be underpinned by a strongly-capitalised firm with a dynamic, entrepreneurial culture.
We have built those qualities into the DNA of ICG over the last thirty three years. Today ICG is broader and stronger than ever before, and we are well positioned for the future as we continue to grow our waterfront of products and our client franchise.
Benoît Durteste
SUSTAINABILITY AND PEOPLE
Successfully executing our priorities in the areas of sustainability and people are key to our continued development, and the resilient results we are announcing today are testament to the hard work of our people and their collaborative, entrepreneurial approach. We would like to extend our thanks to each of our colleagues for their continued dedication to ICG.
Strategic hiring across the apitalized continued during the period to ensure we have the breadth and depth of expertise to execute on the long-term opportunities ahead. Building on the investments we made in FY22, we have continued to welcome a number of senior hires within the apitalized across our investment, ESG and Sustainability, and marketing and client relations teams. These are important hires, helping to future-proof ICG as we continue to market and invest a larger range of products to a growing and increasingly complex set of clients.
The number of Group permanent employees grew by 10% during the period to 575 (31 March 2022: 525). Over the last five years, our employee base has grown at a CAGR of 14% and as a result of these investments, we expect hiring for the rest of the financial year and into FY24 to slow relative to this historical pace.
During the period we made progress on climate change, with two portfolio companies receiving approval for their science-based targets. This is part of our long-term strategy to achieve Net Zero by 2040.
We continue to integrate sustainability into our existing and new strategies, and during the period we had the final close for Europe VIII, which is taking an enhanced thematic ESG approach with a particular emphasis on climate change, human capital management and D&I. These topics will feed directly into the governance of portfolio companies, as well as into the tracking and reporting of their strategic, operational and financial performance. We also launched the second vintage of our highly successful Sale and Leaseback strategy, which has a bespoke sustainable framework – aligned to EU taxonomy – in which 2% of the committed capital will be allocated to ESG initiatives. Of the AUM raised during the year that is classified under the Sustainable Finance Disclosure Regulation (SFDR), 99% was apitalized as Article 8.
A number of the financing facilities for the Group and at a fund level have ESG criteria embedded within them, and at 30 September 2022 we had $3.6bn of ESG-linked financing committed across Group- and fund-level facilities.
We will be publishing our 2022 Sustainability and People Report in January 2023, in which we will provide further information on our actions and ambitions around these important matters.
Benoît Durteste and Antje Hensel-Roth
FINANCIAL REVIEW
The Board and management monitor the financial performance of the Group on the basis of Alternative Performance Measures (APM), which are non-IFRS measures. The APM form the basis of the financial results discussed in this review, which the Board believes assists shareholders in assessing their investment and the delivery of the Group’s strategy through its financial performance.
The substantive difference between APM and IFRS is the consolidation of funds and related entities deemed to be controlled by the Group, which are included in the IFRS condensed consolidated financial statements but excluded for the APM.
Under IFRS, the Group is deemed to control (and therefore consolidate) entities where it can make significant decisions that can substantially affect the variable returns of investors. This has the impact of including the assets and liabilities of these entities in the condensed consolidated statement of financial position and apitalized the related income and expenses of these entities in the condensed consolidated income statement.
The Group’s profit after tax on an IFRS basis was below the prior period at £32.2m (H1 FY22 £242.4m). On the APM basis it was also below the prior period at £38.7m (H1 FY22 £240.7m).
Detail of these adjustments can be found in note 3 to the IFRS condensed consolidated financial statements on pages 23 to 42.
AUM and fund performance
Refer to the Datapack issued with this announcement for further detail on AUM (including fundraising, realisations and deployment).
Total AUM
During the period, total AUM grew 3% on a constant currency basis2 (down 4% on a reported basis) and at 30 September 2022 was $68.5bn (31 March 2022: $72.1bn). The balance sheet investment portfolio (excluding warehoused assets) accounted for 4.3% of the Total AUM (31 March 2022: 5.0%).
Third-party AUM and third-party fee-earning AUM
Third-party AUM grew 4% on a constant currency basis during the period, and stood at $65.6bn at 30 September 2022 (31 March 2022: $68.5bn).
Third-party fee-earning AUM grew 6% on a constant currency basis during the period, and stood at $57.3bn at 30 September 2022 (31 March 2022: $58.3bn).
During the period, our reported AUM experienced notable changes as a result of FX movements. While we report our AUM in dollars, 53% of our fee-earning AUM at 30 September 2022 was in euros; 34% in dollars; 11% in sterling; and 2% in other currencies. Our funds pay fees in their fund currency. As such, while a stronger dollar against the euro and sterling reduces our AUM in dollars, our fee income (before the impact of any hedging) is increased by sterling being weaker against the euro and the dollar. For more details, see page 19.
Third-party AUM ($m) | Structured and Private Equity | Private Debt | Real Assets | Credit | Total third-party AUM |
At 1 April 2022 | 22,507 | 19,806 | 8,028 | 18,127 | 68,468 |
Additions | 3,059 | 1,020 | 655 | 1,023 | 5,757 |
Realisations | (678) | (367) | (313) | (1,085) | (2,443) |
FX and other | (1,586) | (1,974) | (968) | (1,683) | (6,211) |
At 30 September 2022 | 23,302 | 18,485 | 7,402 | 16,382 | 65,571 |
Change $m | 795 | (1,321) | (626) | (1,745) | (2,897) |
Change % | 4 % | (7) % | (8) % | (10) % | (4) % |
Change % (constant exchange rate)1 | 13 % | (1) % | 7 % | (3) % | 4 % |
LTM change % (constant exchange rate)1 | 21 % | 13 % | 26 % | 1 % | 14 % |
Additions to third-party AUM include step-ups of $98m, being capital that we have called during the period from vintages of funds that have previously had a step-down and are therefore reflected in third-party AUM on a net invested cost basis.
Third-party fee-earning AUM ($m) | Structured and Private Equity | Private Debt | Real Assets | Credit | Total third-party fee-earning AUM |
At 1 April 2022 | 22,100 | 11,953 | 6,873 | 17,409 | 58,335 |
Funds raised: fees on committed capital | 3,024 | — | 414 | — | 3,438 |
Deployment of funds: fees on invested capital | 176 | 2,478 | 447 | 1,023 | 4,124 |
Total additions | 3,200 | 2,478 | 861 | 1,023 | 7,562 |
Realisations | (668) | (1,532) | (699) | (885) | (3,784) |
FX and other | (1,547) | (1,067) | (717) | (1,512) | (4,843) |
At 30 September 2022 | 23,085 | 11,832 | 6,318 | 16,035 | 57,270 |
Change $m | 985 | (121) | (555) | (1,374) | (1,065) |
Change % | 4 % | (1) % | (8) % | (8) % | (2) % |
Change % (constant exchange rate)1 | 14 % | 8 % | 3 % | (3) % | 6 % |
LTM change % (constant exchange rate)1 | 24 % | 21 % | 20 % | 3 % | 16 % |
Fundraising
We raised $5.7bn of third-party AUM during the period, following our record fundraising last year
Structured and Private Equity was the key driver of fundraising, contributing $3.0bn. Within this, each of Europe VIII and Strategic Equity IV raised $1.2bn, and Asia Pacific IV raised $450m. All three funds had final closes during the period with fundraising above their initial target. We also raised $121m for our first time LP Secondaries fund, which had a first close in March 2022, currently has a total fund size of $357m and is continuing to fundraise
Private Debt raised a total of $1.0bn, $0.9bn of which was in SDP V and related SMAs
Real Assets raised $0.6bn, with the majority ($0.4bn) coming from Sale and Leaseback II, which had its first close during the period and is continuing to fundraise. The remainder came from real estate debt strategies
Credit raised $1.0bn, of which $0.8bn was from new CLOs (one in Europe and one in the US) and the remainder in liquid funds
At 30 September 2022 funds that were actively fundraising included: SDP V and associated SMAs; Sale and Leaseback II; LP Secondaries I; and various credit strategies. Post period-end we had a first close for North American Credit Partners3 III. During the remainder of FY23 we may launch Strategic Equity V, Europe Mid-Market II, and Infrastructure Equity II, although the timing of launching those funds and of their first close depends on a number of factors including the deployment pace of existing funds and the prevailing market conditions
Realisations
Despite the slowdown in transaction activity across the market, we continued to realise investments, with $2.4bn of realisations within third-party AUM (H1 FY22: $4.8bn) and $3.8bn of realisations of third-party fee-earning AUM (H1 FY22: $6.1bn), of which $2.9bn was from direct investment funds (H1 FY22: $3.5bn)
Structured and Private Equity accounted for $0.7bn of realisations within both third-party AUM and third-party fee-earning AUM, with the majority of activity coming from Europe VI and Europe VII (2015 and 2018 vintages respectively)
Realisations of third-party AUM in Private Debt were $0.4bn, whilst realisations within third-party fee-earning AUM were $1.5bn. The difference between the two is that the majority of realisations were from funds and mandates within Senior Debt Partners where we can re-deploy the capital we apitali. We do not earn fees on uninvested capital on these funds and mandates, and so it is no longer within third-party fee-earning AUM. However, it remains within our third-party AUM (and we will earn fees on the capital once it is re-deployed)
Real assets accounted for $0.3bn of realisations within third-party AUM and $0.7bn within third-party fee-earning AUM, the vast majority of which were across a range of real estate debt strategies
Credit apitali $1.1bn within third-party AUM and $0.9bn in third-party fee-earning AUM, almost all of which was due to redemptions from our liquid credit funds
Deployment
During the period we deployed a total of $5.0bn of AUM on behalf of our direct investment funds (H1 FY22: $8.4bn), split between our asset classes as follows:
$m | H1 FY23 | H1 FY22 |
Structured and Private Equity | 1,478 | 4,985 |
Private Debt | 2,478 | 2,404 |
Real Assets | 1,005 | 1,028 |
Group | 4,961 | 8,417 |
Within Structured and Private Equity we saw particularly strong activity in Strategic Equity, which deployed $1.0bn, with the remainder across European Corporate ($0.2bn), Recovery Fund II ($0.1bn) and LP Secondaries ($0.1bn)
Within Private Debt, deployment was driven by our direct lending strategy, Senior Debt Partners ($2.0bn), which saw a particularly strong pipeline given the dislocation experienced in other sources of senior secured leveraged lending in the mid-market and upper mid-market space (bank lending, leveraged loan and high yield bonds). Our Australia Senior Loan fund deployed $0.3bn and North American Private Debt II $0.2bn
Within Real Assets, real estate debt strategies deployed $0.5bn, Sale and Leaseback I deployed $0.3bn and Infrastructure Equity I deployed $0.2bn
At 30 September 2022 we had $16.1bn of third-party AUM available to deploy in new investments (dry powder), $8.3bn of which is not yet paying fees but will do so when the capital is invested or enters its investment period
Deployment levels of key funds
Deployment levels are lead indicators of our potential fundraising timetable. The deployment level for funds that charge fees on invested capital also has an impact on our profitability. The table below details the deployment levels for funds whose fundraising cycle for the subsequent vintage is dependent on the deployment level of the current vintage (excluding funds that were still fundraising at 30 September 2022):
| Percentage deployed at |
Fees charged on committed capital |
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Structured and Private Equity |
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Europe VIII | 35 % |
Strategic Equity IV | 63 % |
Asia Pacific IV | 32 % |
Europe Mid-Market I | 72 % |
Recovery Fund II | 59 % |
Real Assets |
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Infrastructure Equity I¹ | 51 % |
Sale and Leaseback I | 85 % |
Fees charged on invested capital |
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Private Debt |
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North American Private Debt II | 86 % |
Senior Debt Partners IV1 | 83 % |
1 Co-mingled fund, excluding mandates, and, for Senior Debt Partners IV, excludes mandates and undrawn commitments
To ensure continuity between two fund vintages, ICG’s fundraisings usually follow a cycle whereby successor vintages start investing when the predecessor fund is close to being fully invested. This means that the investment period of the predecessor fund typically ends when approximately 90% of its total commitments are invested (with the remaining commitments being used primarily for add-on acquisitions and other capital injections as well as for ongoing expenses).
Performance of key funds
Refer to the Datapack issued with this announcement for further detail on fund performance.
Against a fast-moving global economic backdrop, we have continued to successfully manage our client’s assets. Fund valuations remained broadly flat during the period, with strong underlying performance of our portfolio companies and income from our interest-bearing investments largely offsetting reductions in valuation multiples or increasing costs of capital.
We take a disciplined approach to portfolio management. This is reflected in our core sectors such as healthcare services, software, education and renewable energy, as well as in how we structure our transactions (typically with lower leverage and a focus on downside protection). We also work closely with our portfolio companies and partners to ensure they are appropriately hedged against interest rate risks, and this is an area we have been spending time on during the last twelve months.
Gross MOIC (Multiple of Invested Capital) is an indication of the returns our funds have made, including both apitali and apitalize returns, and therefore of the value that we have created (before fees). The target MOIC will vary between strategies and within strategies, and newer vintages with more recent investments will typically have a lower MOIC as the investments have not had time to grow in value. Realised MOIC is an indication of the cash return that has been generated, and is therefore not at risk if performance or valuations deteriorate.
The Gross Total and Realised MOICs of key ICG funds that have had a final close at 30 September 2022 are set out below:
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| Investment period started | Total | Realised | Total | Realised |
Structured and Private Equity |
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Europe V | September 2011 | 1.8x | 1.7x | 1.8x | 1.7x |
Europe VI | March 2015 | 2.1x | 1.7x | 2.1x | 1.4x |
Europe VII | April 2018 | 1.7x | 0.2x | 1.7x | 0.1x |
Europe VIII | April 2021 | 1.1x | — | 1.1x | — |
Europe Mid-Market I | May 2019 | 1.3x | 0.1x | 1.2x | 0.1x |
Asia Pacific III | July 2014 | 2.0x | 1.0x | 2.1x | 1.0x |
Asia Pacific IV | February 2020 | 1.4x | — | 1.4x | — |
Strategic Secondaries II | March 2016 | 2.8x | 1.8x | 2.8x | 1.8x |
Strategic Equity III | November 2018 | 2.3x | 0.3x | 2.2x | 0.1x |
Strategic Equity IV | March 2021 | 1.6x | 0.1x | 1.3x | — |
Private Debt |
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Senior Debt Partners II | March 2015 | 1.3x | 0.9x | 1.3x | 0.8x |
Senior Debt Partners III | December 2017 | 1.2x | 0.6x | 1.2x | 0.3x |
Senior Debt Partners IV | January 2020 | 1.1x | 0.4x | 1.1x | 0.2x |
North American Private Debt I | June 2014 | 1.5x | 1.3x | 1.4x | 1.2x |
North American Private Debt II | January 2019 | 1.2x | 0.4x | 1.2x | 0.4x |
Real Assets |
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Real Estate Partnership Capital III1 | December 2012 | 1.4x | 1.4x | 1.4x | 1.2x |
Real Estate Partnership Capital IV1 | February 2015 | 1.4x | 1.1x | 1.3x | 1.0x |
Real Estate Partnership Capital V1 | April 2018 | 1.2x | 0.4x | 1.2x | 0.3x |
Infrastructure Equity I | March 2020 | 1.2x | — | 1.2x | — |
Sale & Leaseback I | September 2019 | 1.3x | — | 1.3x | — |
1 Data as at 30 June 2022
Overview: Group financial performance
Fund Management Company (FMC) revenue was £256.9m and FMC profit before tax was of £143.7m, an increase of 19% compared to H1 FY22, resulting in an FMC operating margin of 55.9% (H1 FY22: 52.2%).
The broader macro environment and the consequent impact on the valuation of our funds led to net investment returns (NIR) for the Investment Company (IC) of (1)%, or £(26.5)m. The IC as a whole recorded a loss of £(108.1)m (H1 FY22: profit of £143.8m).
The Group as a whole generated a Group profit before tax of £35.6m (H1 FY22: £264.7m) and Group earnings per share were 13.5p (H1 FY22: 83.9p).
We remain committed to our progressive dividend policy that is linked to the profits of our FMC. In line with our stated policy that the interim dividend will equate to a third of the prior-year total, the Board has approved an interim dividend of 25.3p. We continue to make the dividend reinvestment plan available.
Our balance sheet remains strong and well apitalized, with net gearing of 0.55x, total available liquidity of £1.3bn and a net asset value per share of 658p. We have a long-term objective to have zero net gearing.
Our medium-term financial guidance, set out on page 2, remains unchanged from 31 March 2022.
£m unless stated | 30 September 2022 (Unaudited) | 30 September 2021 | Change |
Third-party management fees | 251.5 | 180.5 | 39 % |
Third-party performance fees | 13.8 | 18.5 | (25) % |
Third-party fee income | 265.3 | 199.0 | 33 % |
Movement in FV of derivative | (45.6) | — | — |
Other income | 37.2 | 32.7 | 14 % |
Fund Management Company revenue | 256.9 | 231.7 | 11 % |
Fund Management Company operating expenses | (113.2) | (110.8) | 2 % |
Fund Management Company profit before tax | 143.7 | 120.9 | 19 % |
Fund Management Company operating margin | 55.9 % | 52.2 % | 3.7 % |
Investment Company revenue | (30.3) | 224.1 | n/m |
Investment Company operating expenses | (47.7) | (55.4) | (14) % |
Interest expense | (30.1) | (24.9) | 21 % |
Investment Company loss/profit before tax | (108.1) | 143.8 | n/m |
Group profit before tax | 35.6 | 264.7 | (87) % |
Tax | 3.1 | (24.0) | n/m |
Group profit after tax | 38.7 | 240.7 | (84) % |
Earnings per share | 13.5p | 83.9p | (84) % |
Dividend per share | 25.3p | 18.7p | 35 % |
| 30 September 2022 (Unaudited) | 31 March 2022 | Change |
Liquidity | £1,267.6m | £1,311.5m | (3%) |
Net gearing | 0.55x | 0.45x | 0.10x |
Net asset value per share | 658p | 696p | (5%) |
Fund Management Company
The FMC is the Group’s principal driver of long-term profit growth. It manages our third-party AUM, which it invests on behalf of the Group’s clients.
Third-party fee income
Third-party fee income grew 33% to £265.3m in the period (H1 FY22: £199.0m).
£m | Six months ended 30 September 2022 | Six months ended 30 | Change |
Structured and Private Equity – management fees | 152.6 | 94.7 | 61% |
Structured and Private Equity – performance fees | 9.1 | 16.7 | (46)% |
Structured and Private Equity | 161.7 | 111.4 | 45% |
Private Debt – management fees | 39.9 | 25.7 | 55% |
Private Debt – performance fees | 4.0 | 0.1 | n/m |
Private Debt | 43.9 | 25.8 | 70% |
Real Assets – management fees | 24.5 | 27.1 | (10)% |
Real Assets – performance fees | 0.7 | — | — |
Real Assets | 25.2 | 27.1 | (7)% |
Credit – management fees | 34.5 | 33.0 | 5% |
Credit – performance fees | — | 1.7 | — |
Credit | 34.5 | 34.7 | (1)% |
Third-party fee income | 265.3 | 199.0 | 33 % |
Of which management fees | 251.5 | 180.5 | 39% |
Of which performance fees | 13.8 | 18.5 | (25)% |
Our third-party fee income is largely comprised of management fees, which have a high degree of visibility and are directly linked to our third-party fee-earning AUM. The increase in management fees during H1 FY23 was largely due to fundraising for Europe VIII and Strategic Equity IV, both of which charge fees on committed capital, as well as net deployment within Private Debt, which charges fees on invested capital. The £1.9m reduction in fee income for Real Assets was due to the prior period including £8.2m of catch-up fees (largely for Infrastructure Equity I and Sale and Leaseback I), which are non-recurring. Excluding those catch-up fees, third-party fee income for Real Assets is up approximately 33%.
Management fees during H1 FY23 include a total of £29.3m catch-up fees (H1 FY22: £8.2m), primarily due to Europe VIII and Strategic Equity IV. These funds have both had final closes during the period and we do not expect them to generate incremental catch-up fees during H2.
The effective management fee rate on our third-party fee-earning AUM at the period end was 0.91% (FY22: 0.88%). The increase was due to the fundraising within Structured and Private Equity in strategies with higher fee rates charging fees on committed capital as well as a positive mix effect in other asset classes. The fee rate is split between asset classes as follows:
| 30 September 2022 | 31 March 2022 |
Structured and Private Equity | 1.25 % | 1.24 % |
Private Debt | 0.85 % | 0.83 % |
Real Assets | 0.88 % | 0.87 % |
Credit | 0.48 % | 0.47 % |
Group | 0.91 % | 0.88 % |
Performance fees are a relatively small but integral part of our revenue, and during the five years to 30 September 2022 have accounted for an average of 9.2% of our third-party fee income. With lower transaction activity in the broader market, timing expectations for various exits within our funds have been extended. This has resulted in a lower level of performance fees being apitalize in this period, although does not impact the absolute level of performance fees we expect to receive if our funds perform in line with expectations.
Our funds charge fees in the fund currency, and third-party fee income for the period was 54% in euros, 35% in US dollars, 10% in sterling and 1% in other currencies. The weakening of sterling therefore had a positive impact on our third-party fee income. We estimate management fees would have been £10.6m lower had weighted average FX rates been at the same levels as they were for the six months to 30 September 2021.
Movements in FV of derivatives and other income
The Group’s policy is to hedge non-sterling fee income to the extent that it is not matched by costs and is predictable. FMC revenue in H1 FY23 included a negative impact of £(45.6)m due to changes in the fair value of the FX hedges (H1 F22: £nil). Of this change in the fair value of the FX hedges, £(4.9)m related to fees earned during the period and £(40.7)m related to future fee income. Further detail on our hedging policy and sensitivities can be found on page 19.
The FMC recorded dividend receipts of £23.8m (H1 FY22: £20.2m) from investments in CLO equity, which are continuing to be received in line with historical experiences. The FMC also apitalize £12.7m of revenue for managing the IC balance sheet investment portfolio (H1 FY22: £12.5m), as well as other income of £0.7m (H1 F22: £nil).
Operating expenses and margin
During the period we maintained a strong focus on managing costs, resulting in operating expenses increasing by only 2% compared to H1 FY22 and totalling £113.2m (H1 FY22: £110.8m). Salaries increased broadly in line with headcount, while incentive scheme costs grew by only 3%. Both administrative costs and depreciation and apitalized recorded modest absolute reductions compared to H1 FY22.
£m | Six months ended | Six months ended | Change |
Staff costs | 41.9 | 37.6 | 11% |
Incentive scheme costs | 46.0 | 44.6 | 3% |
Administrative and other costs | 22.5 | 24.6 | (9)% |
Depreciation and amortisation | 2.8 | 4.0 | (30)% |
FMC operating expenses | 113.2 | 110.8 | 2% |
FMC operating margin | 55.9% | 52.2% | 4% |
The FMC recorded a profit before tax of £143.7m (H1 FY22: £120.9m). Excluding the impact of changes in the value of FX hedges that relate to future fee income, the FMC profit before tax was £185.4m.
The largest single currency exposure within our cost base is sterling, and the weakening of sterling against the euro and dollar, along with the one-off benefit of catch-up fees, supported our operating margin, which was 55.9% for the period (H1 FY22: 52.2%). For FY23 as a whole we continue to expect an operating margin in excess of 50%, consistent with our medium-term guidance.
Investment Company
The Investment Company (IC) invests the Group’s proprietary capital to seed and accelerate emerging strategies, and invests alongside the Group’s more established funds to align interests between our clients, employees and shareholders. It also supports a number of costs including for certain central functions, a part of the Executive Directors’ compensation, and the portion of the investment teams’ compensation linked to the returns of the balance sheet investment portfolio (Deal Vintage Bonus, or DVB).
Balance sheet investment portfolio
The balance sheet investment portfolio was broadly flat compared to the start of the period, valued at £2.9bn at 30 September 2022 (31 March 2022: £2.8bn). On a cash basis, it experienced net realisations during the period of £122.4m, being new investments of £314.4m and realisations of £436.8m.
During the period we made a number of new warehouse investments totalling £118.3m, including on behalf of LP Secondaries, US Mid-Market4 and Real Estate Opportunistic Equity. These investments are held in anticipation of being transferred to a third-party fund. At 30 September 2022 the balance sheet held £223.5m of warehoused investments (31 March 2022: £94.6m).
The balance sheet investment portfolio is 43% euro denominated, 28% US dollar denominated, 22% sterling denominated and 7% in other currencies.
£m | As at 31 | New | Realisations | Gains/ (losses) | FX & other | As at 30 |
Structured and Private Equity | 1,826 | 124 | (306) | 17 | 110 | 1,771 |
Private Debt | 149 | 20 | (28) | 10 | 20 | 171 |
Real Assets | 305 | 49 | (51) | (8) | 5 | 300 |
Credit1 | 447 | 4 | (45) | (46) | 41 | 401 |
Warehoused investments | 95 | 118 | (8) | (2) | 21 | 224 |
Total Balance Sheet Investment Portfolio | 2,822 | 315 | (438) | (29) | 197 | 2,867 |
1 Within Credit, at 30 September 2022 £128.1m was invested in liquid strategies, with the remaining £273.5m invested in CLO debt (£101.8m) and equity (£171.7m)
Net Investment Returns
During the five years to 30 September 2022, Net Investment Returns (NIR) have averaged 12.4% and we continue to expect NIR of low double-digit percentage points over the medium term, mirroring the returns of the funds alongside which the balance sheet invests. For the six months to 30 September 2022, NIR were £(26.5)m (H1 FY22: £237.9m), or (1)% (H1 FY22: 18%). This was comprised of interest of £53.0m from interest-bearing investments and apitalize losses of £(79.5)m. NIR were split between asset classes as follows:
| Six months to 30 September 2022 | Six months to 30 September 2021 | ||
£m | NIR (£m) | NIR (%) | NIR (£m) | NIR (%) |
Structured and Private Equity | 18.2 | 1% | 207.7 | 26 % |
Private Debt | 10.3 | 6% | 14.0 | 18 % |
Real Assets | (6.7) | (2%) | (1.0) | (1) % |
Credit | (45.9) | (11%) | 7.0 | 3 % |
Warehoused investments | (2.4) | (2%) | 10.2 | 21 % |
Total net investment returns | (26.5) | (1) % | 237.9 | 18 % |
Structured and Private Equity, which accounted for approximately 62% of the total balance sheet investment portfolio at 30 September 2022, saw a modestly positive NIR. This was largely a result of strong operational performance of the underlying portfolio companies broadly offsetting generally lower valuation multiples and higher costs of capital
Private Debt continues to perform strongly, with no assets in default within SDP at 30 September 2022
Real Assets was negatively impacted by a write-down of a single real estate investment, excluding which the asset class would have shown a small positive NIR
Credit NIR of £(45.9)m include a reduction of £(23.8)m in value of the balance sheet’s holdings of CLO equity to reflect CLO dividend receipts, as well as a reduction of £(17.6)m in respect of changes in the value of CLO debt and co-investments in our liquid credit funds. The remainder (a reduction of £(4.5)m) is the net effect on the valuation of our CLO equity of increases in default and discount rate assumptions (both of which have been increased given the macroeconomic environment), largely offset by other factors including the unwinding of the discount in the valuation
In addition to the NIR, the IC recorded other operating income of £1.2m, other interest of £3.9m, paid a fee of £(12.7)m (H1 FY22: £(12.5)m) to the FMC and recorded a fair value gain of £3.8m (H1 FY22: loss of £3.2m) in movements on derivatives. This resulted in the IC recording negative revenues of £(30.3)m (H1 FY22 positive revenue of £224.1m).
Investment Company expenses
Operating expenses in the IC of £47.7m decreased by 14% compared to H1 FY22 (£55.4m). The decrease is predominantly due to a £11.8m reduction in incentive scheme costs, driven by lower accrual of DVB during the period of £14.0m (H1 FY22: £24.4m). This scheme, which is linked to the performance of certain investments within the balance sheet investment portfolio, only pays out upon cash realisations.
Employee costs for teams who do not yet have a third-party fund are allocated to the IC. For H1 FY23, the directly-attributable costs within the Investment Company for teams that have not had a first close of a third-party fund was £10.7m (H1 FY22: £8.4m). When those funds have a first close, the costs of those teams are transferred to the Fund Management Company.
£m | Six months ended 30 September 2022 | Six months ended 30 September 2021 | Change |
Staff costs | 9.2 | 8.4 | 10% |
Incentive scheme costs | 26.6 | 38.4 | (31)% |
Administrative costs | 10.6 | 7.3 | 45% |
Depreciation and amortisation | 1.3 | 1.3 | — |
IC operating expenses | 47.7 | 55.4 | (14)% |
Interest expense was £30.1m (H1 FY22: £24.9m), and the IC therefore recorded a loss before tax of £(108.1)m (H1 FY22: profit before tax £143.8m).
Group
Tax
The Group apitalize a tax credit of £3.1m (H1 FY22: tax charge of £(24.0)m), resulting in an effective tax rate for the period of (8.7)% (H1 FY22: 9.1%). The negative effective tax rate in the period at a Group level was due to the mix of the NIR from the balance sheet investment portfolio generating taxable losses that more than offset the taxable profits generated elsewhere within the Group.
As detailed in note 7, the Group has a structurally lower effective tax rate than the statutory UK rate. This is largely driven by the Investment Company, where certain forms of income benefit from tax exemptions. The effective tax rate will vary depending on the income mix.
£m | Six months ended 30 September 2022 | Six months ended 30 September 2021 |
Profit on ordinary activities before tax | 35.6 | 264.7 |
Tax (charge) at 19% thereon | (6.8) | (50.3) |
Effects of: |
|
|
Non-taxable NIR and other income | 12.8 | 32.4 |
Other impacts | (2.9) | (6.1) |
Tax (charge) / credit for the period | 3.1 | (24.0) |
Effective tax rate | (8.7) % | 9.1 % |
Dividend
We have a progressive dividend policy, distributing 80-100% of FMC profit after tax, to be paid twice-yearly (with the interim dividend being one-third of the previous year’s total dividend). In line with this policy, the Board is declaring an interim dividend of 25.3p per share (H1 FY22: 18.7p). We continue to make the dividend reinvestment plan available.
Balance sheet
Balance sheet strategy
Delivering our strategy and apitalize shareholder value requires a clear approach to managing our balance sheet. We have a robust, diversified balance sheet and a strong liquidity position that allows us to invest in the business through economic cycles. This provides us with significant strategic and financial flexibility, enabling us to take advantage of opportunities to generate future incremental fee income.
Our approach to managing our balance sheet is structured around three priorities. These ensure we have the financial and operational flexibility to successfully execute our strategic objectives:
Align the Group’s interests with its clients:
co-invest in our strategies alongside our clients, whilst seeking to reduce the Group’s commitments over time where appropriate
Grow third-party fee income in the FMC:
fund and warehouse seed investments to launch new strategies that will be a source of future incremental management fees in the FMC
Maintain robust apitalizedon:
retain strong liquidity
long-term objective of zero net gearing
Liquidity and net debt
At 30 September 2022 the Group had total available liquidity of £1,268m, net financial debt of £1,034m and net gearing of 0.55x.
During the period cash reduced from £762m to £718m, which includes the impact of repaying one US Private Placement of £33m that matured:
| £m |
Cash at 1 April 2022 | 762 |
Net cash generated by operating activities | 140 |
Debt (repayment) – term debt | (33) |
Dividend paid | (164) |
Foreign exchange losses and other | 13 |
Cash at 30 September 2022 | 718 |
Available undrawn ESG-linked RCF | 550 |
Total available liquidity (cash and undrawn debt facilities) | 1,268 |
At 30 September 2022, the Group had drawn debt of £1,752m (31 March 2022: £1,655m). The change is due to the repayment of certain facilities as they matured, along with changes in FX rates impacting the translation value:
| £m |
Drawn debt at 31 March 2022 | 1,655 |
Debt (repayment) | (33) |
Foreign exchange losses | 130 |
Drawn debt at 30 September 2022 | 1,752 |
Net financial debt therefore increased slightly since 31 March 2022, from £893m to £1,034m:
£m | 30 September 2022 | 31 March 2022 |
Drawn debt | 1,752 | 1,655 |
Cash | 718 | 762 |
Net financial debt | 1,034 | 893 |
During the period the Group’s credit rating provided by S&P was upgraded to BBB, and at 30 September 2022 the Group had credit ratings of BBB (stable outlook) / BBB (stable outlook) from Fitch and S&P respectively.
The Group’s drawn debt is provided through a range of facilities. All facilities except the ESG-linked RCF are fixed-rate instruments. The weighted average cost of drawn debt at 30 September 2022 was 3.33% (31 March 2022: 3.29%).
Committed debt facilities in place at 30 September 2022 were as follows:
| Underlying currency | Drawn (£m) | Undrawn (£m) | Total (£m) | Interest rate | Maturity |
ESG-linked RCF | GBP | — | 550 | 550 | SONIA + 1.37% | Jan-25 + 1yrs |
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|
|
|
|
Eurobond 2020 | EUR | 439 | — | 439 | 1.63% | Feb-27 |
EMTN 2015 | GBP | 160 | — | 160 | 5.00% | Mar-23 |
ESG Linked Bond | EUR | 439 | — | 439 | 2.50% | Jan-30 |
Total bonds |
| 1,038 | — | 1,038 |
|
|
|
|
|
|
|
|
|
PP2013 – Class B | USD | 57 | — | 57 | 6.25% | May-23 |
Private Placement 2013 |
| 57 | — | 57 |
|
|
PP 2015 – Class C | USD | 71 | — | 71 | 5.21% | May-25 |
PP 2015 – Class F | EUR | 39 | — | 39 | 3.38% | May-25 |
Private Placement 2015 |
| 110 | — | 110 |
|
|
PP 2016 – Class B | USD | 101 | — | 101 | 4.66% | Sep-24 |
PP 2016 – Class C | USD | 48 | — | 48 | 4.96% | Sep-26 |
PP 2016 – Class F | EUR | 26 | — | 26 | 2.74% | Jan-25 |
PP 2016 – Class E | EUR | 19 | — | 19 | 3.04% | Jan-27 |
Private Placement 2016 |
| 194 | — | 194 |
|
|
PP 2019 – Class A | USD | 112 | — | 112 | 4.76% | Apr-24 |
PP 2019 – Class B | USD | 90 | — | 90 | 4.99% | Mar-26 |
PP 2019 – Class C | USD | 112 | — | 112 | 5.35% | Mar-29 |
PP 2019 – Class D | EUR | 39 | — | 39 | 2.02% | Apr-24 |
Private Placement 2019 |
| 353 | — | 353 |
|
|
Total Private Placements |
| 714 | — | 714 |
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|
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Total |
| 1,752 | — | 2,302 |
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The weighted-average life of drawn debt at 30 September 2022 was 4.2 years (31 March 2022: 4.6 years). The maturity profile of our term debt is set out below:
£m | H2 FY23 | FY24 | FY25 | FY26 | FY27 | FY28 | FY29 | FY30 |
Term debt maturing | 160 | 57 | 278 | 200 | 506 | — | 112 | 439 |
Net asset value
Shareholder equity decreased to £1,875m at 30 September 2022 (31 March 2022: £1,995m), equating to 658p per share (31 March 2022: 696p):
£m | 30 September 2022 | 31 March 2022 |
Balance sheet investment portfolio1 | 2,867 | 2,822 |
Cash and cash equivalents | 718 | 762 |
Other assets | 426 | 419 |
Total assets | 4,011 | 4,003 |
Financial debt | (1,752) | (1,655) |
Other liabilities | (384) | (353) |
Total liabilities | (2,136) | (2,008) |
Net asset value | 1,875 | 1,995 |
Net asset value per share | 658p | 696p |
1 Balance sheet investment portfolio shown including warehouse assets
Net gearing
The movements in the Group’s cash position, debt facilities and shareholder equity resulted in net gearing increasing to 0.55x at 30 September 2022 (31 March 2022: 0.45x). We maintain our long-term objective of having zero net gearing.
£m | 30 September 2022 | 31 March 2022 |
Net financial debt (A) | 1,034 | 893 |
Shareholder equity (B) | 1,875 | 1,995 |
Net gearing (A/B) | 0.55 x | 0.45 x |
Foreign exchange
The following foreign exchange rates have been used throughout this review:
| Six months ended | Six months ended | 12 months ended 31 March 2022 Average | 30 September 2022 Period end | 30 September 2021 Period end | 31 March 2022 Period end |
GBP:EUR | 1.1691 | 1.1631 | 1.1755 | 1.1394 | 1.1640 | 1.1876 |
GBP:USD | 1.2053 | 1.3833 | 1.3626 | 1.1170 | 1.3474 | 1.3138 |
EUR:USD | 1.0306 | 1.1893 | 1.1595 | 0.9803 | 1.1576 | 1.1063 |
During the period, our reported AUM experienced notable changes as a result of FX movements. We report our AUM in dollars: 53% of our fee-earning AUM at 30 September 2022 was in euros; 34% in dollars; 11% in sterling; and 2% in other currencies. A stronger dollar against euro and sterling therefore reduces our headline AUM.
At 30 September 2022 our third-party AUM was $65,571m, based on FX rate at 30 September 2022. If GBP:USD had been by 5% higher (1.1729) our reported third-party AUM would have been $397m higher. If EUR:USD had been 5% higher (1.0294) our reported third-party AUM would have been $1.8bn higher.
Where noted, this review presents changes in AUM on a constant exchange rate basis. For the purposes of these calculations, prior period AUM numbers have been translated from their underlying fund currencies to dollars at the respective H1 FY23 period end exchange rates. This has then been compared to the H1 FY23 closing AUM to arrive at the change on a constant currency exchange rate basis.
Our funds pay fees in their fund currency. As such, our fee income (before the impact of any FX hedging) is increased by sterling being weaker against the euro and the dollar. The Group’s policy is to economically hedge non-sterling fee income to the extent that it is not matched by costs and is predictable. The Group accounts for changes in the fair value of hedges through the income statement. FMC revenue in H1 FY23 included a negative impact of £(45.6)m due to the change in value of the hedges, based on foreign exchange rates at 30 September 2022.
The table below sets out the Indic”tive’Impact on our reported management fees, movements in fair value of FX derivatives and NAV per share had sterling been 5% weaker or stronger against the euro and the dollar in the period:
| Impact on H1 FY23 management fees1 | Impact on H1 FY23 movements in FV of management fee FX hedges2 | NAV per share at 30 September 20223 |
Sterling 5% weaker against euro and dollar | +£12m | -£(30)m | -(4)p |
Sterling 5% stronger against euro and dollar | -£(11)m | +£27m | +3p |
1 Impact assessed by apitalized the average H1 FY23 FX rates
2 Impact assessed by apitalized the spot H1 FY23 FX rates
3 NAV per share reflects the total indicative impact as a result of a change in management fees, fair value of management fee FX hedges and net currency assets
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties to which the Group is exposed for the remainder of the year have been subject to robust assessment by the Directors and remain consistent with those outlined in our annual report for the year ended 31 March 2022.
Careful attention continues to be paid to the ongoing potential impacts of Covid-19 and the resulting impact on our principal risks and the overall risk profile of the Group. There have been no material changes and we will continue to monitor the situation and potential exposures as matters evolve.
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
The condensed set of financial statements have been prepared in accordance with UK-adopted IAS 34 ‘Interim Financial Reporting’ and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority;
The interim management report, which is incorporated into the Directors’ report, includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
There have been no material related-party transactions that have an effect on the financial position or performance of the Group in the first six months of the current financial year since that reported in the 31 March 2022 Annual Report.
This responsibility statement was approved by the Board of Directors on 16 November 2022 and is signed on its behalf by:
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Benoît Durteste |
| Vijay Bharadia |
CEO |
| CFOO |
INDEPENDENT REVIEW REPORT TO INTERMEDIATE CAPITAL GROUP PLC
Conclusion
We have been engaged by Intermediate Capital Group plc (‘the Company’ or ‘the Group’) to review the Condensed consolidated financial statements in the Half-year financial report for the six months ended 30 September 2022 which comprises the Condensed consolidated income statement, Condensed consolidated statement of comprehensive income, Condensed consolidated statement of financial position, Condensed consolidated statement of cash flows, Condensed consolidated statement of changes in equity and the related notes 1 to 10 (together the ‘Condensed consolidated financial statements’). We have read the other information contained in the Half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed consolidated financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the Condensed consolidated financial statements in the Half-year financial report for the six months ended 30 September 2022 is not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34, ‘Interim Financial Reporting’, Based on our review, nothing has come to our attention that causes us to believe that the Condensed consolidated financial statements in the Half-year financial report for the six months ended 30 September 2022 is not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34, ‘Interim Financial Reporting’, and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ (‘ISRE 2410’) issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group will be prepared in accordance with UK-adopted international accounting standards. The Condensed consolidated financial statements included in this Half-year financial report have been prepared in accordance with UK-adopted International Accounting Standard 34, ‘Interim Financial Reporting’.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed, however future events or conditions may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the Half-year financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
In preparing the Half-year financial report, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the financial information
In reviewing the Half-year financial report, we are responsible for expressing to the Company a conclusion on the Condensed consolidated financial statements in the Half-year financial report. Our conclusion, including our ‘Conclusions Relating to Going Concern’, are based on procedures that are less extensive than audit procedures, as described in the ‘Basis for Conclusion’ paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Ernst & Young LLP
London
16 November 2022
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 September 2022
|
| Six months ended 30 September 2022 | Six months ended 30 September 2021 |
| Notes | £m | £m |
Fee and other operating income | 2 | 257.0 | 193.2 |
Finance loss |
| (41.4) | (0.3) |
Net gains on investments |
| 5.8 | 282.5 |
Total Revenue |
| 221.4 | 475.4 |
Finance costs |
| (31.4) | (28.2) |
Administrative expenses |
| (164.1) | (180.5) |
Share of results of joint ventures accounted for using equity method |
| 4.9 | (0.3) |
Profit before tax |
| 30.8 | 266.4 |
Tax credit/(charge) | 7 | 3.3 | (24.0) |
Profit after tax from continuing operations |
| 34.1 | 242.4 |
Loss after tax from disposal groups held for sale |
| (1.9) | — |
Profit for the period |
| 32.2 | 242.4 |
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|
|
|
Attributable to: |
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|
|
Equity holders of the parent |
| 33.4 | 240.5 |
Non-controlling interests |
| (1.2) | 1.9 |
|
| 32.2 | 242.4 |
|
|
|
|
Earnings per share (pence) | 5 | 11.7p | 83.9p |
Diluted earnings per share (pence) | 5 | 11.5p | 82.8p |
All activities represent continuing operations.
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2022
| Six months ended 30 September 2022 | Six months ended 30 September 2021 |
| £m | £m |
Profit after tax | 32.2 | 242.4 |
Items that may be subsequently reclassified to profit or loss if specific conditions are met |
|
|
Exchange differences on translation of foreign operations | 46.8 | 6.1 |
Total comprehensive income for the period | 79.0 | 248.5 |
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|
Attributable to: |
|
|
Equity holders of the parent | 80.2 | 246.6 |
Non-controlling interests | (1.2) | 1.9 |
| 79.0 | 248.5 |
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2022
|
| 30 September 2022 (Unaudited) | 31 March 2022 |
| Notes | £m | £m |
Non-current assets |
|
|
|
Intangible assets |
| 16.8 | 17.1 |
Property, plant and equipment |
| 58.0 | 60.4 |
Investment property |
| 1.3 | 1.5 |
Investment in Joint Venture accounted for under the equity method |
| 6.3 | 2.2 |
Trade and other receivables |
| 39.0 | 91.1 |
Financial assets at fair value | 4 | 6,854.8 | 6,973.1 |
Derivative financial assets | 4 | 19.1 | 1.3 |
Deferred tax asset | 7 | 21.5 | 25.0 |
|
| 7,016.8 | 7,171.7 |
Current assets |
|
|
|
Trade and other receivables |
| 250.0 | 283.1 |
Current tax debtor |
| 63.9 | 31.9 |
Financial assets at fair value | 4 | 11.2 | — |
Derivative financial assets | 4 | 32.3 | 137.3 |
Cash and cash equivalents |
| 862.0 | 991.8 |
|
| 1,219.4 | 1,444.1 |
Assets of disposal groups held for sale |
| 617.3 | 256.7 |
Total assets |
| 8,853.5 | 8,872.5 |
Non-current liabilities |
|
|
|
Trade and other payables |
| 30.0 | 76.4 |
Financial liabilities at fair value | 8 | 4,366.6 | 4,364.7 |
Financial liabilities at amortised cost | 8 | 1,581.8 | 1,452.3 |
Other financial liabilities | 8 | 52.7 | 52.2 |
Derivative financial liabilities | 4 | 12.5 | 2.9 |
Deferred tax liabilities | 7 | 27.9 | 15.1 |
|
| 6,071.5 | 5,963.6 |
Current liabilities |
|
|
|
Trade and other payables |
| 264.2 | 434.4 |
Current tax creditor |
| 15.0 | 14.5 |
Financial liabilities at amortised cost | 8 | 178.3 | 201.1 |
Other financial liabilities | 8 | 6.9 | 6.5 |
Derivative financial liabilities | 4 | 94.4 | 153.4 |
|
| 558.8 | 809.9 |
Liabilities of disposal groups held for sale |
| 316.7 | 97.2 |
Total liabilities |
| 6,947.0 | 6,870.7 |
Equity and reserves |
|
|
|
Called up share capital |
| 77.3 | 77.3 |
Share premium account |
| 180.3 | 180.3 |
Other reserves |
| 24.3 | 0.2 |
Retained earnings |
| 1,569.4 | 1,714.0 |
Equity attributable to owners of the Company |
| 1,851.3 | 1,971.8 |
Non-controlling interest |
| 55.2 | 30.0 |
Total equity |
| 1,906.5 | 2,001.8 |
Total equity and liabilities |
| 8,853.5 | 8,872.5 |
1. Retained earnings and Non-controlling interest have been restated. See Note 1 for more details.
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 September 2022
| Notes | Six months ended 30 September 2022 (Unaudited) | Six months ended 30 September 2021 (Unaudited) |
|
| £m | £m |
Cash generated from/used in operations |
| 149.3 | 53.6 |
Taxes paid |
| (16.5) | (22.5) |
Net cash flows from/used in operating activities | 9 | 132.8 | 31.1 |
Investing activities |
|
|
|
Purchase of intangible assets |
| (2.8) | (3.1) |
Purchase of property, plant and equipment |
| (0.5) | (0.7) |
Net cashflow from derivative financial instruments |
| (50.9) | 7.7 |
Cashflow as a result of change in control of subsidiaries |
| (7.0) | 127.3 |
Net cash flows from/used in investing activities |
| (61.2) | 131.2 |
Financing activities |
|
|
|
Purchase of Own Shares |
| (38.9) | — |
Payment of principal portion of lease liabilities |
| (0.6) | (2.3) |
Proceeds from borrowings |
| — | 75.0 |
Repayment of long-term borrowings |
| (34.9) | (96.0) |
Dividends paid to equity holders of the parent |
| (164.4) | (112.2) |
Net cash flows from/used in financing activities |
| (238.8) | (135.5) |
Net increase/(decrease) in cash and cash equivalents |
| (167.2) | 26.8 |
Effects of exchange rate differences on cash and cash equivalents |
| 37.4 | 6.2 |
Cash and cash equivalents at 1 April |
| 991.8 | 581.2 |
Cash and cash equivalents at 30 September |
| 862.0 | 614.2 |
The Group’s cash and cash equivalents includes £144.4m (31 March 2022: £230.3m) of restricted cash held principally by structured entities controlled by the Group.
The presentation of the condensed consolidated statement of cash flows have been updated to improve the presentation of this information. The reconciliation of cash generated from/used in operations to profit before tax from continuing operations is disclosed in note 9. The prior year comparatives are consistent with those presented in the Half Year Financial Statements for the period to September 2021.
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2022
| Share | Share | Capital redemption reserve1 | Share based payments reserve | Own | Foreign currency translation reserve2 | Retained | Total | Non-controlling interest5 | Total |
Group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
Balance at 1 April 2022 | 77.3 | 180.3 | 5.0 | 67.5 | (93.0) | 20.7 | 1,688.9 | 1,946.7 | 55.1 | 2,001.8 |
Prior year adjustment5 | — | — | — | — | — | — | 25.1 | 25.1 | (25.1) | — |
Balance at 1 April 2022 (as restated) | 77.3 |
