Intermediate Capital Group plc : Final Results for the financial year ended 31 March 2023
*Delivering growth through cycles* *Highlights*
· Total AUM of $80.2bn^1 and fee-earning AUM of $62.8bn^1, up 14% and 10% respectively compared to FY22 on a constant-currency basis, annualised growth of fee-earning AUM over the last five years of 20%^2
· Fundraising in line with guidance at $10.2bn; $32.8bn raised since 31 March 2021 and on track to meet accelerated fundraising target of at least $40bn cumulatively between FY22 - FY24
· Sustained investment activity across our business, notable deployment in Private Debt and Strategic Equity
· Delivering for clients, strong fund returns across Structured and Private Equity, Private Debt and Infrastructure
· Fee income of £501.0m, an increase of 12% compared to FY22 with management fees up 23%
· Record Fund Management Company profit before tax of £310.7m, an increase of 9% compared to FY22
· Balance sheet investment portfolio generated NIR of 4% (five year average: 11.2%)
· Group profit before tax of £258.1m (FY22: £568.8m) and Group EPS of 80.3p (FY22: 187.6p)
· NAV per share of 694p (31 March 2022: 696p)
· Total dividends for FY23 of 77.5p per share, a year-on-year increase of 2.0% and the thirteenth consecutive annual increase in ordinary dividend per share; 21% annualised growth in dividend per share over the last five years^1 Includes impact of policy change in FY23 which increased Total AUM and third-party AUM by $3.1bn and fee-earning AUM by $0.5bn
^2 Five year AUM growth on reported basis. Unless otherwise stated the financial results discussed herein are on the basis of APM - see page 2 and page 8
William Rucker Benoît Durteste Chairman CEO and CIO The results ICG is reporting are a testament to our long-term focus on building and broadening the ICG platform.Successfully fundraising, growing AUM, and increasing profits from our fund management activities – all delivered against a challenging backdrop – underline the powerful economic characteristics that underpin ICG's resilient business model today.
Looking ahead, we are well positioned to navigate an exciting future, with many opportunities likely to arise as the economic landscape continues to evolve.
I am delighted to have joined ICG as Chairman, and look forward to working with the management team, our shareholders and wider stakeholders in the coming years. ICG has performed strongly over the last twelve months on both a strategic and financial level.We have sustained business momentum across fundraising and investing activities, and have continued to focus on delivering value for our clients and portfolio companies. Rising interest rates and a more uncertain economic outlook are particularly suited to our substantial structured equity and private debt offerings – an important strategic benefit of our scale and breadth, which enables us to operate successfully across market cycles.
Our fund management company has delivered year-on-year growth in fee-earning AUM, fee income and profits. At the same time, the balance sheet has performed in line with our expectations during a period of volatile market conditions.
We take a long-term view on investing for future growth, hiring selectively across the firm and investing balance sheet capital in seed assets for a number of strategies. As ICG continues to grow up and grow out, the strategic and economic benefits of our multiple levers of compounding growth will continue to become increasingly visible.
*PERFORMANCE OVERVIEW*
*Historical performance *
The Board and management monitor the financial performance of the Group on the basis of alternative performance measures (APM), which are non-UK-adopted IAS measures. An explanation can be found on page 8 and a reconciliation of the APM to the UK-adopted IAS measures on page 43, along with the UK-adopted IAS consolidated financial statements and supporting notes, can be found on pages 34 to 92.
The Group’s profit after tax on an UK-adopted IAS basis was below the prior period at £278.4m (FY22: £525.1m). On the APM basis it was below the prior period at £229.3m (FY22: £538.0m).
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 CAGR*^*1*
Third-party AUM^2 19 %
Fee-earning AUM^2 20 %
Third-party fee income 25 %
Fund Management Company profit before tax 27 %
Net Investment Return (five year average) 11 %
NAV per share 10 %
Dividend per share 21%
^1 FY18 - FY23. Dividend per share includes proposed FY23 final dividend.
^2 Includes impact of AUM policy change in FY23 which increased Total AUM and third-party AUM by $3.1bn and fee-earning AUM by $0.5bn - see page 8
*AUM*
*31 March 2023* *31 March 2022* *Change*^*1*
Total AUM^2 $80.2bn $72.1bn 14 %
Third-party AUM^2 $77.0bn $68.5bn 15 %
Fee-earning AUM^2 $62.8bn $58.3bn 10 %
Fundraising during period $10.2bn $22.5bn (55) %
Realisations during period^3,4 $5.3bn $6.4bn (17) %
Deployment during period^4 $10.5bn $15.0bn (30) %
^1 On a constant currency basis
^2 Includes impact of policy change in FY23 which increased Total AUM and third-party AUM by $3.1bn and fee-earning AUM by $0.5bn - see page 8
^3 Realisations of third-party fee-earning AUM; ^4 From direct investment funds
*Financial *
*31 March 2023* *31 **March 2022* *Change*
Third-party fee income £501.0 m £448.7 m 12 %
Fund Management Company profit before tax £310.7 m £286.2 m 9 %
Investment Company profit/(loss) before tax £(52.6)m £282.6 m (119) %
Group profit before tax £258.1 m £568.8 m (55) %
Group earnings per share 80.3 p 187.6 p (57) %
Dividend per share 77.5p 76.0 p 2 %
*31 March 2023* *31 March 2022* *Change*
Balance sheet investment portfolio £2,902 m £2,822 m 3 %
Net asset value per share 694 p 696 p (0.3) %
Net gearing 0.50 x 0.45 x 0.05x
*Medium-term guidance*
Our medium-term guidance remains unchanged and is set out below:
*Fundraising* *Performance fees* *FMC operating margin* *Net Investment Returns*
· At least $40bn fundraising in aggregate between 1 April 2021 and 31 March 2024
· Performance fees to represent 10 - 15% of third-party fee income over medium-term
· In excess of 50%
· Low double-digit percentage points over the medium-term
*COMPANY PRESENTATION*
A presentation for investors and analysts will be held at 09:00 BST today: sign up 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 15 June 2023
Record date 16 June 2023
Last date to elect for dividend reinvestment 14 July 2023
AGM and Q1 trading statement 20 July 2023
Payment of ordinary dividend 4 August 2023
Half year results announcement 15 November 2023
*ENQUIRIES*
Shareholders / analysts:
Chris Hunt, Head of Shareholder Relations, ICG +44(0)20 3545 2020
Media:
Fiona Laffan, Global Head of Corporate Affairs, ICG +44(0)20 3545 1510
This results statement may contain forward looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.
*ABOUT ICG*
ICG provides flexible capital solutions to help companies develop and grow. We are a global alternative asset manager with over 30 years' history, managing $80bn 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.
*LETTER FROM THE CHAIRMAN*
To my fellow shareholders,
It is a pleasure to write to you as Chairman of ICG, a role I am honoured to have taken on in January 2023. I would like to start by expressing my gratitude on behalf of the Board to Andrew Sykes, who fulfilled the duties of Interim Chairman while the search for a permanent Chairman was undertaken. I look forward to his continued insight and guidance around the Board table in his role as Senior Independent Director.
Since Andrew’s letter last year, geopolitical and economic uncertainty has continued to rise. The economic landscape has become increasingly complex, with inflation reaching multi-year highs in a number of countries, which has in turn forced central banks to raise interest rates at a time when many economies are slowing down. Today, the outlook remains nuanced. Certain countries and sectors are more vulnerable, while others are demonstrating significant resilience.
Elevated levels of uncertainty present difficulties for Boards. Many businesses, ICG included, can react tactically in the short term as opportunities present themselves. However, to create long-term value, they are required to make strategic decisions around allocating economic and intellectual capital, and then to pursue these vigorously and consistently over a number of years. An unclear outlook and an increasing cost of capital make these decisions more challenging, and we have seen some of the implications of this during the last twelve months in elevated volatility within public markets, a transfer of value from equity to debt, reduced valuations in many sectors, and a slowdown in M&A activity globally.
Against this background, I am comforted that private markets have shown a remarkable ability to adapt and innovate across economic cycles. Indeed, ICG’s business model today is the result of a strategic decision taken over a decade ago to pivot to being a third-party asset manager – a transition that was pursued with determination and to great effect. There have been a number of periods of economic uncertainty during that time since the Global Financial Crisis, including the Euro crisis, Brexit, and of course Covid-19 pandemic. Throughout all of these we have focused on executing a clear strategy of expanding our product offering, client base, and AUM. This has been delivered consistently and successfully, and in doing so we have grown and diversified the sources and robustness of our fee income.
There is always the risk that long-term ambitions get forgotten during periods of short-term challenge. Concerted efforts to reduce our environmental impact and to enhance diversity, equity and inclusion in the workplace must not be seen as optional and “only for the good times”. I am proud to Chair in ICG an organisation that is action-orientated in these areas, being amongst the first group of alternative asset managers to commit to net zero (by 2040) and exceeding its commitment made under the UK Women in Finance Charter two years earlier than planned. Of course, many other initiatives in these areas continue and I am pleased with the progress we have made over the last 12 months.
As a direct result of these decisions and actions, ICG today is better positioned – strategically, financially, operationally and culturally – than at any time in our history. We manage our clients’ assets across a broad range of products, spanning the entire capital structure from common equity to senior debt. From the perspective of our portfolio companies, we are a partner who can provide the most appropriate form of capital to meet their needs. For our clients, this diversification allows us to help them achieve their investment objectives in their alternative asset allocations – whether in Structured and Private Equity, Private Debt, Real Assets, or Credit. For shareholders, the diversity of our business is a powerful driver of resilience and growth, providing multiple avenues to increase our AUM and thereby develop further long-term streams of management fee income.
A consequence of our business and financial model is that we are able to sustain business activity across economic cycles, and this is visible in the results we report for FY23. We continued to deploy and realise our clients’ capital, and recorded year-on-year growth across AUM, fee income, FMC PBT and the distributions made to our shareholders^1.
Our confidence in the long-term and through-cycle prospects of ICG is underlined by our simplification of the dividend policy to being progressive. We are also stating the we intend over the long-term to increase the dividend per share by at least mid-single digit percentage points on an annualised basis. The breadth and scale of ICG today allows us to have this dividend policy as an integral part of our approach to capital allocation, running alongside commitments to our funds and using our balance sheet to seed new strategies.
None of this is instant. Building and scaling a platform that generates compounding growth over the long-term takes time, and that is precisely what we are doing at ICG. In recent months, Andrew Sykes and I have had a number of discussions with shareholders in a variety of forums. We have both been encouraged by the level of engagement around ICG; the clear understanding our shareholders have of the business; and the thoughtful, long-term view with which they approach ICG’s strategy and our potential to generate long-term equity value. I look forward to more discussions with shareholders and our broader stakeholders in the coming months.
Post year-end there were two changes to the Board. Kathryn Purves stepped down after nine years as a Non-Executive Director, during which time she made a wide-ranging contribution including chairing the Risk Committee and more recently serving as Senior Independent Director. We also announced the appointment of David Bicarregui, who joined ICG in April and who will take up the role of CFO in July, replacing Vijay Bharadia. I would like to pass on my and the Board's thanks to Kathryn and to Vijay for their significant contributions to ICG.
The last twelve months have demonstrated the strategic and financial benefits of our scale and diversification. Notwithstanding our strong historical growth, I believe the investments we have made give us substantial runway to continue to grow in the coming years, and that in many respects ICG is still at the beginning of its journey. Mindful of the uncertainty and volatility we may face in the future, we are well positioned to navigate complex markets for the benefit of our clients, portfolio companies and shareholders.
Over a number of decades I have watched and admired ICG’s growth and development from afar. I am excited at the prospect of being actively involved in its future, and look forward to working with the ICG team, our shareholders and other stakeholders in the years to come.
William Rucker
Chairman
*CHIEF EXECUTIVE OFFICER’S REVIEW*
The last twelve months have been a busy and successful period for ICG. Our scale and breadth have enabled us to capture opportunities in a dynamic market environment. The investment landscape and client appetite have shifted towards our areas of particular expertise such as structured transactions, private debt and infrastructure. We have continued to execute successfully on our strategy of growing up and growing out, and have invested selectively across the organisation to augment our investment teams, marketing and client relations offering, and to enhance our operating platform. By investing today, we are positioning ourselves to benefit from what could be a rapid and significant rebound in private markets activity when conditions become less volatile, and when the market could continue to further concentrate around scaled, broad managers.
Over the last year we have developed opportunities that embed further long-term growth potential. The single largest contributor to fundraising this year was our direct lending strategy, Senior Debt Partners, which raised $3.3bn during the financial year ended 31 March 2023 (FY23) and which is continuing to fundraise – an already-successful strategy that became incrementally attractive both to clients and portfolio companies given its exposure to floating rate debt and its ability to provide debt financing when many other sources were not available. The year saw the final closes of three funds (all at or above their original hard-caps) which in aggregate account for $13.2bn of third-party AUM^2 at 31 March 2023, including Europe VIII closing with almost twice as much capital committed from clients as the previous vintage. We launched second vintages of Infrastructure, Europe Mid-Market and Sale and Leaseback; marketed a number of first-time funds; hired new teams for future strategies, including Infrastructure Asia and Real Estate Asia; and invested £214m of our balance sheet capital to seed a number of future strategies.
The financial results we are reporting today reflect this strong strategic performance. Third-party fee income for the year was £501.0m, up 12% compared to FY22 (with management fees up 23%), and record Fund Management Company (FMC) profit before tax was £310.7m, up 9% compared to FY22. Our diversified and robust balance sheet is performing in line with our expectations, generating NIR of 4% over the twelve months. At 31 March 2023 the balance sheet had net gearing of 0.50x and total available liquidity of £1.1bn. The Board has declared a final dividend of 52.2p per share, bringing total dividends for the year to 77.5p per share, an increase of 2% compared to FY22. Over the last five years, ordinary dividends per share have grown at an annualised rate of 21%, and the Board is reaffirming its commitment to a progressive dividend policy.
The nature of our business is that we generate growth and value over the long-term, and in recent years we have successfully scaled and broadened our product offering and client franchise. We have raised a total of $33bn so far in this fundraising cycle since the beginning of FY22, and are on track to meet our accelerated fundraising guidance of at least $40bn cumulatively from FY22 to FY24. We now manage $77bn of client capital, up 15%^3 in the year and 19%^2 on an annualised basis over the last five years. Over the same period our third-party fee income has grown at an annualised rate of 25% and our FMC profit before tax at 27%. Our balance sheet has delivered long-term value for our shareholders, generating a five-year average net investment return of 11.2% and a NAV per share annualised growth rate of 9.7% over the same period.
ICG's business model today therefore provides a high degree of stability and visibility, which is particularly powerful during periods of volatility such as we have experienced over the last twelve months. At 31 March 2023 we had $62.8bn of fee-earning AUM, with an indicative annualised management fee generation potential of ~£459m, and a further $14.7bn of AUM that is not yet fee-earning which, when deployed, has the indicative potential to generate ~£116m of annualised management fees.
Our ability to deliver attractive returns for our clients underpins our future success. Our portfolio companies are generally continuing to show strong operational performance, with those in our European Corporate strategy for example showing LTM EBITDA growth of 13% and those in direct lending (SDP) showing LTM EBITDA growth of 20%. We are reporting increases in fund valuations across many of our strategies for the period; very low loss ratios with historically high returns in debt strategies; and attractive life-to-date IRRs, MOICs and DPIs in strategies with equity exposure. During the year we realised $6.9bn of third-party fee-earning AUM at a realised annualised return of 18.7%^3, further anchoring the performance of our funds. The track records we are developing today are important components of marketing future vintages, and we continue to pay very close attention to portfolio management to reinforce our track record.
Successful execution of our strategies around Sustainability and Diversity, Equity and Inclusion (DE&I) are important components of our ability to generate value for our clients and portfolio companies. In January we published our latest Sustainability and People Report, detailing our achievements over the last twelve months and our areas of future focus. I was delighted to welcome a new Global Head of Sustainability and ESG in an enhanced role during FY23, and we are rapidly building on an already-strong position. At the first anniversary of ICG’s commitment to be net zero by 2040, nine portfolio companies have set science-based greenhouse gas (GHG) emissions reduction targets: 15% of relevant investments in our first year alone. Furthermore, many other portfolio companies have advanced their target-setting plans, placing us on track to achieve our interim target of 50% of relevant investments having such targets by 2026. Our achievements in the areas of Sustainability and ESG are recognised in our public ESG ratings, and for the first time ICG became a member of DJSI Europe as a result of our assessment by S&P Global CSA. In the related area of DE&I, we were delighted to be top-ranked for Private Equity globally in the Honordex, measuring DE&I efforts and outcomes. This sits alongside extensive work around enhancing DE&I not just for ICG but across our industry, including through a comprehensive charity framework designed to increase career access to our industry for underprivileged groups.
Looking to FY24 and beyond, I remain excited by our prospects. We reiterate our fundraising target of at least $40bn cumulatively from FY22 to FY24, and we will be marketing a number of first-time and follow-on vintages in the coming year. We will invest for the future, across our product offering, client franchise and operating platform.
We are well placed to deploy capital in dynamic market conditions, with $20.9bn of dry powder at 31 March 2023 and local origination teams with exceptional market access, supported by a disciplined investment process. We have hundreds of companies across our portfolio, giving us access to a large number of datapoints on the performance of businesses across geographies and sectors, enabling us to spot trends early and understand more holistically how investment opportunities might perform. In the near-term, transaction volumes might remain slower in the broader market. ICG is well positioned to execute on opportunities that are particularly attractive today, including in structured transactions, private debt and real assets.
Longer-term, I expect the structural demand for private markets to remain intact, and it was good to welcome many of you to our shareholder seminar in January on fundraising and client strategy. For portfolio companies, the attractions of private capital are largely unimpacted by the broader macroeconomic context: bilateral bespoke agreements; being capitalised by investors with substantial dry powder to support future growth; and an ability to focus on longer-term value creation. For clients, lower volatility, higher returns, longer duration, and investments in parts of the economy that cannot be accessed through public markets continue to make allocations to private markets an important component of a long-term asset allocation strategy. Our strategy of "growing up" and "growing out" has enabled us to capture a growing breadth of the market and has generated significant value for shareholders, accelerated by our strong balance sheet. I see ample runway for many years of profitable growth by continuing to execute successfully on our strategy.
I believe there will be substantial rewards for the winners emerging from this era of higher interest rates, inflation and macro uncertainty. To be amongst that group, private markets managers will need sufficient scale to be relevant, a broad product offering, a differentiated origination capability, a track record of managing portfolios to generate value through cycles, and a sophisticated client strategy and operating platform.
ICG possesses all of those qualities. Today we are larger, broader, more financially resilient, and the FMC more profitable than at any point in our history, and I believe we are well positioned to navigate the future for the benefit of our clients, portfolio companies and shareholders.
Benoît Durteste
*FINANCIAL REVIEW*
The Board and management monitor the financial performance of the Group on the basis of Alternative Performance Measures (APM), which are non-UK-adopted IAS measures. The APM form the basis of the financial results discussed in this review, which the Board believes assist shareholders in assessing their investment and the delivery of the Group’s strategy through its financial performance.
The substantive difference between APM and UK-adopted IAS is the consolidation of funds and related entities deemed to be controlled by the Group, which are included in the UK-adopted IAS consolidated financial statements but excluded for the APM.
Under IFRS 10, the Group is deemed to control (and therefore consolidate) entities where it can make significant decisions that can substantially affect the variable returns of investors. This has the impact of including the assets and liabilities of these entities in the consolidated statement of financial position and recognising the related income and expenses of these entities in the consolidated income statement.
The Group’s profit before tax on an UK-adopted IAS basis was below the prior period at £251.0m (FY22: £565.4m). On the APM basis it was below the prior period at £258.1m (FY22: £568.8m).
Detail of these adjustments can be found in note 4 to the UK-adopted IAS consolidated financial statements on pages 34 to 92.
*AUM *
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 14% on a constant currency basis (up 11% on a reported basis) and at 31 March 2023 was $80.2bn (31 March 2022: $72.1bn). The balance sheet investment portfolio accounted for 4.1% of the Total AUM (31 March 2022: 5.0%).
*Third-party AUM and fee-earni**ng AUM*
Third-party AUM grew 15% on a constant currency basis during the period, and stood at $77.0bn at 31 March 2023 (31 March 2022: $68.5bn).
Fee-earning AUM grew 10% on a constant currency basis during the period, and stood at $62.8bn at 31 March 2023 (31 March 2022: $58.3bn).
At 31 March 2023 we had $20.9bn of third-party AUM available to deploy in new investments (dry powder), $14.7bn of which is not-yet-fee-earning, but will be when the capital is invested or enters its investment period.
With effect from 31 March 2023, the methodology for calculating third-party AUM was updated in line with industry practice to include i) all uncalled capital commitments until they are legally expired (previously, uncalled capital commitments were removed from third-party AUM as a ‘step-down’ despite the fund being legally able to call such capital); and ii) permanent fund-level leverage where such leverage has been signed with the leverage provider and where we charge fees on the leverage. The aggregate impact of these changes is to increase third-party AUM by $3.1bn and fee-earning AUM by $0.5bn.
At 31 March 2023 56% of our fee-earning AUM was in euros; 31% in dollars; 12% in sterling; and 1% in other currencies. Our funds pay fees in their fund currency. Third-party AUM reduced by $1.6bn during the period due to FX movements, partially offset by positive market moves of $0.7bn impacting funds that charge fees on NAV. For more details on the impact of FX rates on our reported financials, see page 20.
*Third-party AUM ($m)* *Structured and Private Equity* *Private Debt* *Real Assets* *Credit* *Total*
At 1 April 2022 22,507 19,806 8,028 18,127 68,468
Additions^1 3,747 3,864 1,064 1,895 10,570
Realisations (1,513) (391) (439) (1,928) (4,271)
Policy change 2,381 712 (7) 42 3,128
FX and other 606 (350) (783) (381) (908)
*At 31 March 2023* *27,728* *23,641* *7,863* *17,755* *76,987*
Change $m 5,221 3,835 (165) (372) 8,519
Change % 23 % 19 % (2) % (2) % 12 %
Change % (constant exchange rate)^2 26 % 20 % 3 % (1) % 15 %
1. Includes $0.3bn of steps-up;
2. See page 20 for an explanation of constant exchange rate calculation
*Fee-earning AUM ($m)* *Structured and Private Equity* *Private Debt* *Real Assets* *Credit* *Total*
At 1 April 2022 22,100 11,953 6,873 17,409 58,335
Funds raised: fees on committed capital 3,367 — 414 422 4,203
Deployment of funds: fees on invested capital 436 4,451 928 1,411 7,226
Total additions 3,803 4,451 1,342 1,833 11,429
Policy change (38) (10) (11) 534 475
Realisations (2,327) (1,937) (1,005) (1,654) (6,923)
FX and other 302 (208) (337) (224) (467)
*At 31 March 2023* *23,840* *14,249* *6,862* *17,898* *62,849*
Change $m 1,740 2,296 (11) 489 4,514
Change % 8 % 19 % — % 3 % 8 %
Change % (constant exchange rate)^1 10 % 22 % 5 % 4 % 10 %
1. See page 20 for an explanation of constant exchange rate calculation
Business activity
*$bn*
*Fundraising* *Deployment*^*1* *Realisations*^*1,2*
*FY23* *FY22* *FY23* *FY22* *FY23* *FY22*
Structured and Private Equity 3.5 10.4 4.3 8.0 2.3 2.6
Private Debt 3.8 4.1 4.5 4.9 2.0 2.8
Real Assets 1.0 3.0 1.7 2.1 1.0 1.0
Credit 1.9 5.0 n/a n/a n/a n/a
*Total* *10.2* *22.5* *10.5* *15.0* *5.3* *6.4*
1. Direct investment funds;
2. Realisations of third-party fee-earning AUM
*Fundraising*
· We attracted $10.2bn of new money during the period, in line with our guidance and bringing the total raised since 31 March 2021 to $32.8bn, on track to meet accelerated fundraising target of at least $40bn cumulatively between FY22 - FY24
· Structured and Private Equity attracted $3.5bn of capital. Within this, Strategic Equity IV raised $1.3bn, Europe VIII raised $1.2bn and Asia Pacific IV raised $450m. All three of these funds had final closes during the period at or above their original hard caps. During the year, we also raised for Strategic Equity V, LP Secondaries I and Europe Mid-Market II
· Private Debt was the largest contributor to fundraising during the period amongst our asset classes, attracting a total of $3.8bn, $3.3bn of which was in SDP V and SDP SMAs. During the period we launched North America Credit Partners III and had closed $427m of third-party commitments at 31 March 2023
· Real Assets raised $1.1bn, with the majority ($591m) coming from Real Estate Debt strategies. In addition we raised $414m for Sale and Leaseback II
· Credit raised $1.9bn, of which $1.2bn was from new CLOs (two in Europe and one in the US) and the remainder was within our liquid credit funds
· At 31 March 2023 funds that were actively fundraising included: SDP V and SDP SMAs; Strategic Equity V; North America Credit Partners III; Europe Mid-Market II; Infrastructure II; Sale and Leaseback II; LP Secondaries I; Life Sciences I; and various credit strategies. The timings of closes for those funds depends on a number of factors, including the prevailing market conditions
*Deployment*
· During the period we deployed a total of $10.5bn of AUM on behalf of our direct investment funds
· Within Structured and Private Equity, Strategic Equity saw strong activity, deploying $2.6bn (FY22: $2.5bn), with the remainder across European Corporate including Europe Mid-Market I and various other strategies
· Within Private Debt, deployment was driven by our direct lending strategy, Senior Debt Partners, which deployed $3.9bn. The Australia Senior Loan fund deployed $0.3bn and North American Private Debt $0.2bn
· Within Real Assets, real estate debt strategies deployed $0.9bn, Infrastructure Equity I deployed $0.5bn and Sale and Leaseback deployed $0.3bn
*Realisations*
· Despite the slowdown in transaction activity across the market, we continued to realise investments, with $5.3bn fee-earning AUM realised from our direct investment funds (FY22: $6.4bn)
· Structured and Private Equity accounted for $2.3bn of realisations within fee-earning AUM, with the majority of activity coming from Europe VI and Europe VII (2015 and 2018 vintages' respectively)
· Realisations of fee-earning AUM in Private Debt were $2.0bn, with the vast majority ($1.7bn) being within direct lending (Senior Debt Partners)
· Real assets accounted for $1.0bn of realisations within fee-earning AUM, almost all of which was across a range of real estate debt strategies
*Performance of key funds*
Refer to the Datapack issued with this announcement for further detail on fund performance.
A summary of selected ICG drawdown funds that have had a final close at 31 March 2023 is set out below:
*Vintage* *Total fund size *^*3* *% deployed*^*2* *Gross MOIC*
*31 March 2023* *Gross MOIC*
*31 March 2022* *DPI*
*31 March 2023*
*Structured and Private Equity*
Europe V 2011 €2.5bn 1.8x 1.8x 151%
Europe VI 2015 €3.0bn 2.2x 2.1x 171%
Europe VII 2018 €4.5bn 1.8x 1.7x 42%
Europe VIII 2021 €8.1bn 43% 1.1x 1.1x —%
Europe Mid-Market I 2019 €1.0bn 78% 1.4x 1.2x —%
Asia Pacific III 2014 $0.7bn 2.1x 2.1x 103%
Asia Pacific IV 2020 $1.0bn 43% 1.4x 1.4x —%
Strategic Secondaries II 2016 $1.1bn 2.9x 2.8x 136%
Strategic Equity III 2018 $1.9bn 2.3x 2.2x 28%
Strategic Equity IV 2021 $4.2bn 95% 1.6x 1.3x 5%
*Private Debt*
Senior Debt Partners II 2015 €1.5bn 1.3x 1.3x 75%
Senior Debt Partners III 2017 €2.6bn 1.2x 1.2x 43%
Senior Debt Partners IV 2020 €5.0bn 100% 1.1x 1.1x 9%
North American Private Debt I 2014 $0.8bn 1.5x 1.4x 128%
North American Private Debt II 2019 $1.4bn 92% 1.3x 1.2x 19%
*Real Assets*
Real Estate Partnership Capital IV^1 2015 £1.0bn 1.3x 1.3x 82%
Real Estate Partnership Capital V^1 2018 £1.0bn 1.2x 1.2x 16%
Infrastructure Equity I 2020 €1.5bn 90% 1.3x 1.2x 1%
Sale & Leaseback I 2019 €1.2bn 99% 1.3x 1.3x 7%
Note co-mingled funds only. Where there are funds with multiple currencies, FX rates at 31 March 2023 used to convert
1. Gross MOIC as at 31 March 2023
2. For current vintages only
3. Third-party AUM plus ICG plc commitment at point of final close. MOICs and DPI for SDP III and SDP IV shown for EUR sleeves
*Overview: Group financial performance *
Fund Management Company (FMC) revenue was £539.9m (FY22: £512.8m) and FMC profit before tax was £310.7m (FY22: £286.2m), an increase of 9% compared to FY22, resulting in an FMC operating margin of 57.5% (FY22: 55.8%).
Net investment returns (NIR) for the Investment Company (IC) of 4%, or £102.3m, and over the last five years have averaged 11%. The IC as a whole recorded a (loss) of £(52.6)m (FY22: profit of £282.6m).
The Group generated a Group profit before tax of £258.1m (FY22: £568.8m) and Group earnings per share were 80.3p (FY22: 187.6p).
ICG has a progressive dividend policy, and the proposed final dividend of 52.2p per share brings the total dividend per share to 77.5p for FY23, an increase of 2% compared to FY22. Over the last five years the dividend per share has grown at an annualised rate of 21%.
Our balance sheet remains strong and well capitalised, with net gearing of 0.50x, total available liquidity of £1.1bn and a net asset value per share of 694p.
Our medium-term financial guidance, set out on page 3, remains unchanged from 31 March 2022.
*£m unless stated* *31 March 2023* 31 March 2022 *Change %*
Third-party management fees 481.4 392.7 23%
Third-party performance fees 19.6 56.0 (65%)
*Third-party fee income* *501.0* 448.7 *12%*
Movement in FV of derivative (26.8) (0.4) n/m
Other income 65.7 64.5 2%
*Fund Management Company revenue* *539.9* 512.8 *5* *%*
Fund Management Company operating expenses (229.2) (226.6) 1%
*Fund Management Company profit before tax* *310.7* 286.2 *9* *%*
Fund Management Company operating margin 57.5 % 55.8 % 3%
Investment Company revenue 98.4 451.7 (78%)
Investment Company operating expenses (103.1) (118.6) (13%)
Interest income 13.9 — >100%
Interest expense (61.8) (50.5) 22%
*Investment Company (loss) / profit before tax* *(52.6)* 282.6 *(119)* *%*
*Group profit before tax* *258.1* 568.8 *(55)* *%*
Tax (28.8) (30.8) (6%)
*Group profit after tax* *229.3* 538.0 *(57)* *%*
Earnings per share 80.3 p 187.6p (57%)
Dividend per share 77.5p 76.0p 2 %
*31 March 2023* *31 March 2022* *Change %*
Liquidity £1.1bn £1.3bn (16%)
Net gearing 0.50x 0.45x 0.05x
Net asset value per share 694p 696p —%
*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 to £501.0m in FY23 (FY22: £448.7m), a year-on-year increase of 12% (an increase of 7% on a constant currency basis).
*£m* *Year ended*
*31 March 2023* *Year ended*
*31 March 2022* *Change*
*%*
Structured and Private Equity – management fees 283.1 206.2 37%
Structured and Private Equity – performance fees 13.4 47.3 (72)%
*Structured and Private Equity* *296.5* *253.5* *17%*
Private Debt – management fees 83.7 66.5 26%
Private Debt – performance fees 6.3 6.1 3%
*Private Debt* *90.0* *72.6* *24%*
Real Assets – management fees 48.9 61.4 (20)%
Real Assets – performance fees (0.1) 0.1 n/m
*Real Assets* *48.8* *61.5* *(21)%*
Credit – management fees 65.7 58.6 12%
Credit – performance fees — 2.5 n/m
*Credit* *65.7* *61.1* *8%*
*Third-party fee income* *501.0* *448.7* *12* *%*
Of which management fees 481.4 392.7 23%
Of which performance fees 19.6 56.0 (65)%
Our third-party fee income is largely comprised of management fees, which have a high degree of visibility and are directly linked to our fee-earning AUM.
The increase in management fees during FY23 was due to a number of factors including fundraising for Europe VIII and Strategic Equity IV (both of which charge fees on committed capital); net deployment within Private Debt (which charges fees on invested capital); and changes in foreign exchange rates. The £12.7m reduction in fee income for Real Assets was due to the prior period including £14.3m 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 3.4%.
Management fees during FY23 include a total of £30.6m catch-up fees (FY22: £14.3m). We do not expect significant catch-up fees for FY24 given the funds we have in market and the potential timing of first closes.
The effective management fee rate on our fee-earning AUM at the period end was 0.90% (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:
*31 March 2023* 31 March 2022
Structured and Private Equity 1.26 % 1.24 %
Private Debt 0.82 % 0.83 %
Real Assets 0.91 % 0.87 %
Credit 0.49 % 0.47 %
*Group* 0.90 % 0.88 %
Performance fees are a relatively small part of our revenue, and during the five years to 31 March 2023 have accounted for an average of 10.2% 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 recognised 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. At 31 March 2023 the Group had an asset of £37.5m of accrued performance fees on its balance sheet (FY22: £91.0m):
£m
*Accrued performance fees at 1 April 2022* *91.0*
Accruals during period 19.4
(Received) during period (74.9)
FX and other movements 2.0
*Accrued performance fees at 31 March 2023* *37.5*
Our funds charge fees in the fund currency, and third-party fee income for the period was 56% in euros, 32% in US dollars, 11% in sterling and 1% in other currencies. On a constant currency basis our third-party fee income grew by 7% compared to FY22.
*Movements in Fair value of derivatives and other income*
During the year the Group changed its policy regarding hedging of non-sterling fee income. Previously the Group’s policy was to hedge non-sterling fee income to the extent that it was not matched by costs and was predictable (transaction hedges). For FY23 FMC revenue included a negative impact of £(26.8)m due to changes in the fair value of these transaction hedges (FY22: £(0.4)m). During the financial year the Group decided to no longer enter into transaction hedges as a matter of course (although it may still do so on an ad hoc basis), and economically closed out all outstanding transaction hedges. Further detail on our hedging policy and sensitivities can be found on page 20.
Other income includes recorded dividend receipts of £40.2m (FY22: £38.0m) from investments in CLO equity, which are continuing to be received in line with historical experiences. The FMC also recognised £25.0m of revenue for managing the IC balance sheet investment portfolio (FY22: £24.8m), as well as other income of £0.5m (FY22: £1.7m).
*Operating expenses and margin*
During the year we remained focussed on managing costs, resulting in operating expenses increasing by only 1% compared to FY22 and totalling £229.2m (FY22: £226.6m). Salaries increased broadly in line with headcount (which grew 11%), while incentive scheme costs grew by only 6%. Both administrative costs and depreciation and amortisation recorded absolute reductions compared to FY22. Administrative costs reduced due to lower professional and consulting costs, lower placement agent fees and lower recruitment costs given the lower hiring in FY23 compared to FY22.
Operating expenses for the period were 70% in sterling, 9% in euros, 14% in US dollars and 7% in other currencies.
*£m* *Year ended*
*31 March 2023* Year ended
31 March 2022 *Change*
*%*
Salaries 85.0 76.0 12 %
Incentive scheme costs 92.2 87.2 6 %
Administrative costs 45.7 55.1 (17 %)
Depreciation and amortisation 6.3 8.3 (24 %)
*FMC operating expenses* *229.2* 226.6 1 %
FMC operating margin 57.5 % 55.8 % 2 %
The FMC recorded a profit before tax of £310.7m (FY22: £286.2m), a year-on-year increase of 9% and an increase of 14% on a constant currency basis (excluding the change in fair value of derivatives).
The FMC operating margin of 57.5% (FY22: 55.8%) was above our medium-term guidance of above 50%, driven in part by a combination of catch-up fees and a strong focus on cost control.
*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 strategies to align interests between our shareholders, clients and employees. It also supports a number of costs, including for certain central functions, a part of the Executive Directors’ compensation, and the portion of the investment teams’ compensation linked to the returns of the balance sheet investment portfolio (Deal Vintage Bonus, or DVB).
*Balance sheet investment portfolio*
The balance sheet investment portfolio grew 3% in absolute terms during the year and was valued at £2.9bn at 31 March 2023 (31 March 2022: £2.8bn). It experienced net realisations during the period of £128m (FY22: £253m), being new investments of £666m (FY22: £952m) and realisations of £794m (FY22: £1,205m). Realisations in FY23 include £101m of proceeds received when we sold down a portion of the balance sheet's exposure to ICG's liquid credit funds.
We made a number of new seed investments totalling £214m, including on behalf of Life Sciences, LP Secondaries, US Mid-Market and Real Estate Opportunistic Equity Europe. These investments are held in anticipation of being transferred to a third-party fund. At 31 March 2023 the balance sheet held £330m of seed investments (31 March 2022: £178m).
At 31 March 2023 the balance sheet investment portfolio was 45% euro denominated, 27% US dollar denominated, 21% sterling denominated and 7% in other currencies.
*£m* *As at 31 *
*March 2022* *New *
*investments* *Realisations* *Gains/ (losses) *
*in valuation* *FX & other* *As at 31 *
*March 2023*
Structured and Private Equity 1,826 260 (513) 112 66 1,751
Private Debt 149 31 (33) 14 8 169
Real Assets 222 130 (88) 20 5 289
Credit^1 447 31 (109) (30) 24 363
Seed Investments^2 178 214 (51) (16) 5 330
*Total Balance Sheet **Investment Portfolio* *2,822* *666* *(794)* *100* *108* *2,902*
1. Within Credit, at 31 March 2023 £65m was invested in liquid strategies, with the remaining £298m invested in CLO debt (£106m) and equity (£192m)
2. Formerly referred to as Warehouse investments. Adjusted to include three assets previously reported with Real Assets, with a combined value of £83m at 31 March 2022
*Net Investment Returns*
For the five years to 31 March 2023, Net Investment Returns (NIR) have been in line with our medium-term guidance, averaging 11.2%. For the twelve months to 31 March 2023, NIR were £102.3m (FY22: £485.7m), or 4% (FY22: 18%).
NIR was comprised of interest of £113.2m from interest-bearing investments (FY22: £76.8m), unrealised losses of £(13.2)m (FY22: gain of £404.0m) and other income of £2.3m. NIR were split between asset classes as follows:
*Twelve months to 31 March 2023* *Twelve months to 31 March 2022*
*£m* *NIR (£m)* *NIR (%)* *NIR (£m)* *NIR (%)*
Structured and Private Equity 112.9 6% 457.7 27 %
Private Debt 14.4 9% 24.9 16 %
Real Assets 20.7 8% 9.7 5 %
Credit (30.1) (7%) (0.5) — %
Seed Investments^1 (15.6) (6%) (6.1) (4) %
*Total net investment returns* *102.3* *4* *%* *485.7* *18* *%*
1. FY22 NIR adjusted to reflect three assets with Seed Investments that were previously included within Real Assets
· Structured and Private Equity, which accounted for 60% of the total balance sheet investment portfolio at 31 March 2023, saw a positive NIR driven by European Corporate and Strategic Equity
· Within Private Debt, SDP is performing resiliently and a strong performance during year within North America Credit Partners^2 driving the majority of the positive NIR
· Real Assets - which as noted above now excludes three investments that have been moved to Seed investments - saw a strong return within Infrastructure, offsetting valuation reductions within Sale and Leaseback. The Real Estate debt strategies have continued to perform well, recording positive NIR during the year
· Credit NIR of £(30.1)m includes a reduction of £(40.2)m in the value of the balance sheet's holdings of CLO equity to reflect CLO dividend receipts recorded in the FMC and a reduction of £(6.3)m in respect of changes in the value of CLO debt and co-investments in our liquid credit funds. This is partially offset by a £16.4m valuation gain on CLO equity, driven by gains arising from actual defaults being lower than projections as well as by the passage of time increasing the current value of discounted future cashflows
2. Formerly North America Private Debt
In addition to the NIR, the IC recorded other revenue as follows:
*£m* *Year ended*
*31 March 2023* *Year ended*
*31 March 2022* *Change*
*%*
Changes in fair value of derivatives 16.8 (11.8) n/m
Fee paid to FMC (25.0) (24.8) 1 %
Other 4.3 2.6 65 %
*Other IC revenue* *(3.9)* *(34.0)* *n/m*
As a result, the IC recorded total revenues of £98.4m (FY22 revenue: £451.7m).
*Investment Company expenses*
Operating expenses in the IC of £103.1m decreased by 13% compared to FY22 (£118.6m), which was largely due to a £22.9m reduction in incentive scheme costs:
*£m* *Year ended*
*31 March 2023* *Year ended*
*31 March 2022* *Change*
*%*
Salaries 20.0 16.7 20 %
Incentive scheme costs 59.6 82.5 (28 %)
Administrative costs 20.7 16.0 29 %
Depreciation and amortisation 2.8 3.4 (18 %)
*IC operating expenses* *103.1* *118.6* *(13 %)*
Lower incentive scheme costs were predominantly the result of lower accrual of DVB during the period: £36.6m compared to £66.5m in FY22. DVB, 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 FY23, the directly-attributable costs within the Investment Company for teams that have not had a first close of a third-party fund was £24.4m (FY22: £15.4m). When those funds have a first close, the costs of those teams are transferred to the Fund Management Company.
Interest expense was £61.8m (FY22: £50.5m) and interest earned on cash balances was £13.9m (FY22: nil).
The IC therefore recorded a (loss) before tax of £(52.6)m (FY22: profit before tax £282.6m).
*Group*
*Tax*
The Group recognised a tax charge of £(28.8)m (FY22: tax charge of £(30.8)m), resulting in an effective tax rate for the period of 11.2% (FY22: 5.4%). The increase compared to the prior year is due to the change in composition of our earnings and the lower NIR in FY23 compared to FY22.
As detailed in note 14, the Group has a structurally lower effective tax rate than the statutory UK rate. This is largely driven by the Investment Company, where certain forms of income benefit from tax exemptions. The effective tax rate will vary depending on the income mix.
*Dividend*
The Board of ICG is simplifying our dividend policy and reaffirming it as a progressive dividend policy, demonstrating our confidence in the long-term growth prospects of the business. Over the long-term, the Board intends to increase the dividend per share by at least mid-single digit percentage points on an annualised basis. The dividend will continue to be paid in two instalments, with the interim dividend being one third of the prior year’s total dividend.
For FY23, in addition to the 25.3p per share interim dividend, the Board is proposing a 52.2p per share final dividend. This would result in a total dividend of 77.5p per share being paid for the year, an increase of 2.0% compared to FY22 (76.0p). Over the last five years, ordinary dividends per share have increased at an annualised rate of 21%. We continue to make the dividend reinvestment plan available.
*Balance sheet*
Balance sheet strategy
Delivering our strategy and maximising 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 capitalisation:
· retain strong liquidity
· long-term objective of zero net gearing
Liquidity and net debt
At 31 March 2023 the Group had total available liquidity of £1,100m (FY22: £1,312m), net financial debt of £988m (FY22: £893m) and net gearing of 0.50x (FY22: 0.45x).
During the period cash reduced by £212m from £762m to £550m, including the repayment of £195m of borrowings that matured.
The table below sets out movements in cash, including certain APM metrics, which management believes will help shareholders understand where cash is being generated and used within the Company. The Glossary sets out the reconciliations from the APM cash measures in the table below to the UK-adopted IAS measures of Net cash flows from/(used in) operations; Net cash flows from/(used in) investing activities; and Net cash flows from/(used in) financing activities.
£m *FY23* *FY22*
*Opening cash* *762* *297*
*Operating activities*
Fee and other operating income 573 388
Net cashflows from investment activities and investment income^1 176 292
Expenses and working capital (322) (242)
Tax paid (32) (44)
*Group cashflows from operating activities - APM*^*2* *395* *394*
*Financing activities*
Interest paid (64) (56)
Purchase of own shares (39) (21)
Dividends paid (236) (166)
Net (repayment of) / proceeds from borrowings (195) 302
*Group cashflows from financing activities - APM*^*2* *534* *59*
Other cashflow^3 (77) 7
FX and other movement 4 5
*Closing cash* *550* *762*
Available undrawn ESG-linked RCF 550 550
*Cash and undrawn debt facilities (total available liquidity)* *1,100* *1,312*
1. The aggregate cash (used)/received from balance sheet investment portfolio (additions), realisations, and cash proceeds received from assets within the balance sheet investment portfolio
2. Interest paid, which is classified as an Operating cash flow under UK-adopted IAS, is reported within Group cashflows from financing activities - APM
3. Investing cashflows (UK-adopted IAS) in respect of purchase of intangible assets, purchase of property, plant and equipment and net cashflow from derivative financial instruments ("Net cash flows used in financing activities" per Note 4) and "Payment of principal portion of lease liabilities" (see Note 4)
At 31 March 2023, the Group had drawn debt of £1,538m (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) / issuance (195)
Impact of foreign exchange rates 78
*Drawn debt at 31 March 2023* *1,538*
Net financial debt therefore increased to £988m (31 March 2022: £893m):
*£m* *31 March 2023* *31 March 2022*
Drawn debt 1,538 1,655
Cash 550 762
*Net financial debt* *988* *893*
During the period the Group's credit rating provided by S&P was upgraded to BBB, and at 31 March 2023 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 31 March 2023 was 3.17% (31 March 2022: 3.29%). The weighted-average life of drawn debt at 31 March 2023 was 4.1 years (31 March 2022 4.6 years). The maturity profile of our term debt is set out below:
*£m* *FY24* *FY25* *FY26* *FY27* *FY28* *FY29* *FY30*
Term debt maturing 51 258 185 503 — 101 440
For further details of our debt facilities see Other Information (page 93).
Net asset value
Shareholder equity increased to £1,977m at 31 March 2023 (31 March 2022: £1,995m), equating to 694p per share (31 March 2022: 696p):
*£m* *31 March 2023* *31 March 2022*
Balance sheet investment portfolio 2,902 2,822
Cash and cash equivalents 550 762
Other assets 424 419
*Total assets* *3,876* *4,003*
Financial debt (1,538) (1,655)
Other liabilities (361) (353)
*Total liabilities* *(1,899)* *(2,008)*
*Net asset value* *1,977* *1,995*
*Net asset value per share* *694p* *696p*
Net gearing
The movements in the Group’s cash position, debt facilities and shareholder equity resulted in net gearing increasing to 0.50x at 31 March 2023 (31 March 2022: 0.45x). We maintain our long-term objective of having zero net gearing.
*£m* *31 March 2023* *31 Mar**ch 2022* *Change %*
Net financial debt (A) 988 893 11%
Shareholder equity (B) 1,977 1,995 (1)%
*Net gearing (A/B)* *0.50* *x* *0.45 x* *0.05x*
*Foreign exchange rates*
The following foreign exchange rates have been used throughout this review:
*Average rate*
*for **FY23* *Average rate*
*for FY22* *31 March 2023*
*year end* *31 March 2022*
*year end*
GBP:EUR 1.1560 1.1755 1.1375 1.1876
GBP:USD 1.2051 1.3626 1.2337 1.3138
EUR:USD 1.0426 1.1595 1.0846 1.1063
We report our AUM in dollars: 56.1% of our fee-earning AUM at 31 March 2023 was in euros; 30.6% in dollars; 11.5% in sterling; and 1.8% in other currencies.
At 31 March 2023 our third-party AUM was $77.0bn, based on FX rates at 31 March 2023. If GBP:USD had been 5% higher (1.2954) our reported third-party AUM would have been $0.5bn higher. If EUR:USD had been 5% higher (1.1388) our reported third-party AUM would have been $2.2bn higher.
Where noted, this review presents changes in AUM, third-party fee income and FMC PBT on a constant exchange rate basis. For the purposes of these calculations, prior period numbers have been translated from their underlying fund currencies to the reporting currencies at the respective FY23 period end exchange rates. This has then been compared to the FY23 numbers to arrive at the change on a constant currency exchange rate basis.
During the year the Group changed its policy regarding hedging of non-sterling net fee income. Previously the Group’s policy was to hedge non-sterling fee income to the extent that it was not matched by costs and was predictable (transaction hedges). For FY23 FMC revenue included a negative impact of £(26.8)m due to changes in the fair value of these transaction hedges (FY22: £(0.4)m). During the financial year the Group decided to no longer enter into transaction hedges as a matter of course (although it may still do so on an ad hoc basis), and economically closed out all outstanding transaction hedges.
The table below sets out the indicative impact on our reported management fees, FMC PBT and NAV per share had sterling been 5% weaker or stronger against the euro and the dollar in the period (excluding the impact of any legacy hedges):
*Impact on FY23 management fees*^*1* *Impact on FY23 *
*FMC PBT*^*1* *NAV per share at 31 March 2023*^*2*
Sterling 5% weaker against euro and dollar +22.5m +£22.7m +15p
Sterling 5% stronger against euro and dollar -(20.3)m -£(20.5)m -(14)p
1. Impact assessed by sensitising the average FY23 FX rates. Excluding impact of legacy hedges
2. NAV / NAV per share reflects the total indicative impact as a result of a change in FMC PBT and net currency assets
3.
*RISK MANAGEMENT*
Managing risk
Effective risk management is a core competence underpinned by a strong control culture.
Our approach
The Board is accountable for the overall stewardship of ICG’s Risk Management Framework (RMF), 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 so doing the Board sets a preference for risk within a strong control environment to generate a return for investors and shareholders 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 seeks to take in delivering the Group’s strategic objectives.
The Risk Committee is provided with management information regularly and monitors performance against set thresholds and limits to support the achievement of the Group’s strategic objectives, within the boundaries of the agreed 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 ICG’s RMF, which ensures that current and emerging risks are identified, assessed, monitored, controlled, and appropriately governed based on a common risk taxonomy and methodology. The RMF is designed to protect the interests of stakeholders and meet our responsibilities as a UK listed company and the parent company of a number of regulated entities.
The Board’s oversight of risk management is proactive, ongoing and integrated into the Group’s governance processes. The Board receive regular reports on the Group’s risk management and internal control systems. These reports set out any significant risks facing the Group, and changes made to the systems. Evaluating risk events and corrective actions supports the Board’s assessment of the Group’s effectiveness at mitigating event impacts. The Board also meet regularly with the internal and external auditors to discuss their findings and recommendations, which helps it gain insight into areas that require improvement. 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.
Taking risk opens up opportunities to innovate and further