A jump in impairment costs from £28.4m to £64.8m in the first half dragged profits lower at Intermediate Capital (ICG). Profits on the mezzanine finance side of the business, where the impairments occurred, were down from £91.7m to £22.4m, and flat in fund management at £17.2m. And, while the group is well placed to take advantage of an upturn in demand for finance, this now looks unlikely to happen in the near term. Accordingly, we are downgrading our previous buy recommendation (341p, 25 February 2011) to hold.
In the fund management division, assets under management grew by 6 per cent since the start of the financial year in March to £12.1bn, helping to lift fee income from £42.9m to £44.8m, while divisional operating expenses were held down at £27.9m against £28m a year earlier.
On the investment side, the average value of the mezzanine finance and equity investment portfolio fell from £2.52bn to £2.25bn, which left net interest income down from £98.5m at £79.8m, although £6m of the fall was due to one-off items, including the impact of early repayments. The £64.8m net impairment cost related to a writedown on shareholder loans and two large mezzanine assets.
Analysts at Numis expect to downgrade their full-year estimates, currently standing at pre-tax profits of £167.5m and EPS of 29.1p.
| INTERMEDIATE CAPITAL (ICP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 293p | MARKET VALUE: | £1.18bn | |
| TOUCH: | 292-293p | 12-MONTH HIGH: | 326p | LOW: 209p |
| DIVIDEND YIELD: | 6.6% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 366p | NET DEBT: | 76% | |
| Half-year to 30 Sep | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2011 | 109 | 21.6 | 6.0 |
| 2012 | 39.6 | 10.3 | 6.3 |
| % change | -64 | -52 | +5 |
Ex-div: 28 Nov Payment: 14 Dec | |||
