Investcorp net income up 16 per cent for first six months of FY2018
Investcorp (or ‘the Firm’), a global provider and manager of alternative investment products, today announced its fiscal half year (H1 FY18) results for the six months ending 31 December 2017.
Investcorp’s global focus and product diversification helped to offset the backdrop of unusually higher geopolitical and economic uncertainty in the Gulf, with the Firm maintaining its profitability momentum with net income for the period up 16 per cent to $55.3 million (H1 FY17: $47.7 million), driven by continued strong transactional activity and significantly higher overall AuM resulting from the credit management line of business. Fully diluted earnings per share for the period increased eight per cent to $0.70 per share (H1 FY17: $0.65 per share) while return on equity for the period remained steady at nine per cent on an annualised basis (H1 FY17: nine per cent).
Fee income for the period increased seven per cent to $137.5 million (H1 FY17: $128 million), with a 45 per cent increase in AuM fees somewhat offset by lower deal fees as a result of lower placement fee contribution primarily due to the uncertain market environment in the Gulf. As the short-term uncertainty clears, we anticipate a healthy pick-up in fee income as clients revert to a normalised level of investment activity.
Asset based income in the period was $71 million (H1 FY17: $40.3 million) with strong performance across all business lines. Overall, gross operating income was correspondingly higher at $208.5 million (H1 FY17: $168.3 million).
“We are pleased to report strong growth in profitability during the period, driven by the positive underlying performance across all asset classes and supportive market conditions in the US and Europe. Whilst potential pockets of risk remain, mainly stemming from geopolitical factors, our robust balance sheet, experience and expertise enables us to take advantage of interesting investment opportunities globally. We look forward to the rest of 2018 and beyond with great confidence as a bigger, more geographically diversified firm with a broader range of products which we hope will see us continue to deliver value to our clients and shareholders,” said Mohammed Alardhi, Executive Chairman.
Significant progress has been made against a number of growth initiatives during the period. Earlier in H1, the Firm announced its minority investment in an independent Swiss-regulated private bank based in Geneva and Luxembourg, subject to receiving regulatory and other approvals which we hope to receive shortly. The recently established European Real Estate team completed the formation of its first portfolio with the acquisition of seven additional logistics assets in UK, and the portfolio was subsequently substantially placed with investors. The team continues to seek further opportunities in Germany and France.
More broadly, Investcorp’s continued investment in building out its global distribution capabilities is delivering positive results. The Firm has started receiving some interest as a consequence of its recently established presence in Asia, whilst total fundraising from clients and institutional investors globally stood at $3.6 billion. During the period, distributions to clients and the Firm from realisations and other distributions totalled $3.5 billion.
Aggregate operating expenses increased 34 per cent to $117.3 million (H1 FY17: $87.5 million) reflecting the incremental costs of the credit management business, continued investment in broadening the Firm’s product capabilities and client-facing resources and higher accruals for variable compensation in line with the higher income for the period. The Firm’s cost-to-income ratio was 69 per cent at the end of the period (H1 FY17: 65 per cent).
Investcorp remains well capitalised with total assets as at December 31, 2017, at $2.7 billion and a capital adequacy ratio of 30 per cent, which is more than double the requirements of the Central Bank of Bahrain (12.5 per cent). Total accessible liquidity remains strong at $0.9 billion despite the repayment of a $250 million bond which matured in November 2017. The Bank maintains a conservative leverage ratio and maintains significant headroom in all financial covenants. The strength of the balance sheet provides the Firm with flexibility to assess potential strategic opportunities both by organic and inorganic channels as they arise.