Mezzanine finance specialist Intermediate Capital returned to profitability in the six months to September, but profits were hit by a hefty £99.4m writedown on investments, although this was a substantial improvement on the £212m charge incurred a year earlier.
The provisions related to a poor performance of two of the larger assets held and it's worth noting that there was no substantial deterioration in the value of most assets held within the group's investment portfolio. Sensibly, Intermediate Capital has worked hard to preserve the credit quality of its portfolio, resulting in most investment opportunities being turned down. Consequently, funds invested or arranged collapsed from £559m a year earlier to just £20m. But protecting the existing portfolio has paid off because of the top 20 assets - which account for 46 per cent of the investment portfolio - 70 per cent were performing on or above budget.
What's more, of the £99.4m provisions, some £68.2m was put aside on assets that have not defaulted, but are considered to be impaired, and management hopes that steps taken to achieve a number of favourable restructuring deals may allow some of these provisions to be recovered.
Core income rose by 11 per cent to £94.1m in the six-month period, mainly due to higher net interest income and a fall in operating expenses. However, dividend income fell sharply from £7.4m to £1.1m as a result of lower payments received from companies within the investment portfolio, while fee income fell 4 per cent to £28.1m, reflecting lower transaction fees.
Looking ahead, net interest income in the second half will be lower as a result of the impairment made in the first half, while interest expenses are expected to rise following the extension of some banking facilities in June and August. However, the group remains confident that improved market sentiment will allow it to achieve a target of realising 15 per cent of the £2.85bn investment portfolio by June 2011.
Intermediate Capital is also well placed to take advantage of an upturn in trading conditions. A successful £351m rights issue, together with extension of £545m of existing debt facilities to 2013, give management close to £2bn of investment capacity.
Numis Securities is forecasting full-year pre-tax losses of £7.9m and a loss per share of 1.8p (£68.7m loss and 87.2p loss per share in 2009)
More analysis of company results
| INTERMEDIATE CAPITAL (ICP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 281p | MARKET VALUE: | £1,092m | |
| TOUCH: | 280-281p | 12-MONTH HIGH: | 346p | LOW: 79p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 286p | |||
| Half-year to 30 Sep | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2008 | 39.8 | 12.3 | 8.5 |
| 2009 | 8.1 | 0.6 | 6.0 |
| % change | -80 | -95 | -29 |
Ex-div: 2 Dec Payment: 29 Dec | |||
