Wednesday 08, August 2018 by Jessica Combes

Investcorp growth continues, net income $125 million

 

Fundraising activities increased by 77 per cent to $7.3 billion.

Investcorp (the Firm), a global provider and manager of alternative investment products, today announced its results for the year ended June 30, 2018 (FY 2018), showing continued growth momentum and healthy levels of activity on all dimensions across business lines.

Aggregate net income increased four per cent year-on-year to $125 million, up from $120 million the year prior, with fully diluted earnings per share increasing by four per cent to $1.30. Income for second half of FY18 was $70 million, with the Board proposing a full year dividend of $0.24 per ordinary share.

Investcorp continues to make good progress in relation to its growth strategy. Continued geographical diversification of the Firm’s investor base and product set has helped support record levels of activity in terms of distributions to clients, investment activity and fundraising across all markets. The strong performance is set against the backdrop of uncertain macroeconomic and geopolitical conditions, particularly in the Gulf.  

Marking a strong performance across the business, investment activity in the period rose 36 per cent to $2.8 billion while total placement and fundraising activities rose by 77 per cent to $7.3 billion reflecting, in part, a full year’s contribution from Investcorp Credit Management (ICM) and the Firm’s broadening and active client base. Distributions more than doubled to $7.0 billion. 

Continued growth in assets under management, which increased by six per cent to $22.6 billion in the period, has also, as a consequence of the ICM business, resulted in higher recurring income derived from AuM fees, with AUM fees growing by 27 per cent to $173 million, while asset-based income also grew by 30 per cent to $133 million, primarily driven by successful corporate investment realizations. This drove an increase in gross operating income of eight per cent to $454 million.    

Underlying performance in the Corporate Investment business remained solid with healthy levels of investment activity resulting in three new deals totaling $406 million, two follow on fundings, $75 million invested through and alongside Investcorp’s Technology Funds III and IV and a further $48 million invested in two special opportunities. $580 million was raised from investors during the full year period with $789 million returned in distributions. 

In MENA, Investcorp made its third healthcare investment to construct a new landmark hospital in Abu Dhabi in partnership with VAMED, a leading global provider of rehabilitation and other services for hospitals. 

Following full integration, ICM made a significant first full year contribution, as had been expected at the time of acquisition. ICM’s performance reflects a crystalisation of the Firm’s strategy to diversify its product offering and its client base by attracting a broader private and institutional client base to attractive investment opportunities across its product platform. ICM reported a 6 per cent increase in AuM to $11.5 billion and showed strong levels of activity with $5.6 billion of fundraising including $1.6 billion of new CLO issuance activity and $5.5 billion of distributions, including refinancing and resets of existing CLOs. 

The Firm’s real estate division performed well in another active year that saw the team execute its first fundraising for European investments. The Firm raised $569 million in the period for real estate investments, 10 per cent more than last year, including from Asian based investors for the first time. Distributions from real estate investments more than doubled to $713 million. 

Investcorp’s Alternative Investment Solutions business produced equally strong returns. AuM increased by seven per cent to $3.7 billion driven by strong performance across its products. During the year, the Firm announced strategic partnerships with two managers—Shoals Capital Management, which currently manages approximately $160 million of AuM; and Steamboat, which was a new launch. 

In April 2018, the Firm announced senior management changes designed to further accelerate its growth strategy. The changes were partly catalysed by Mohammed Al-Shroogi’s decision to retire as co-CEO effective August 2018. He will remain with the Firm as a Senior Advisor. Hazem Ben Gacem, previously head of the Firm’s European Corporate Investment team, joined Rishi Kapoor as Co-CEO from 1 August. Daniel Lopez-Cruz succeeded Ben Gacem. The Firm also announced the appointment of Jan Erik Back as Investcorp’s new CFO. Back will join in September 2018. 

The Firm’s balance sheet remains robust, maintaining the flexibility to take advantage of inorganic investment opportunities consistent with its stated growth strategy.  Total assets as at 30 June 2018 stood at $2.5 billion and total accessible liquidity remains strong at $1 billion. This strong liquidity position is maintained despite the full repayment of a $250 million bond which matured in November 2017, and the repayment of $100 million of preference shares during the year. The Firm’s capital adequacy ratio of 31.5 per cent remains significantly in excess of the requirements of the Central Bank of Bahrain, 12.5 per cent.

Features & Analyses

Economics Adapting to a new era

  Abdullah Al-Fozan, Chairman of KPMG MESA and KPMG Saudi Arabia, provides an exclusive commentary on the Kingdom’s business… read more