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Intermediate Capital keeps raising funds

A drag on fund manager shares obscures ICP’s solid performance
Intermediate Capital keeps raising funds
  • Funds still flowing into PE investments
  • Dividend hiked by a third 

Private equity has seen an exceptionally busy 18 months in the UK, as firms acquired a range of businesses in acquisitions that saw some of the most recognisable companies disappear from the public markets into private ownership. Intermediate Capital (ICP) was one beneficiary of this trend as the funds broker matched capital with investment opportunities in its usual efficient way. Despite market turmoil in the final quarter, the net result for ICP was a continued rise in profits and a more than 35 per cent hike in the dividend.

The trend towards funding private equity buyouts meant that the flow of third-party fee earning funds continued largely unabated. These rose by 30 per cent to $58bn (£45bn) for the year, while $22.5bn was raised across a range of its specialist funds. There is currently no sign that private equity firms are having any difficulty in raising funds for potential buyouts and the pace of acquisitions is likely to pick up again in the second half on the back of depressed share price valuations.

Meanwhile, ICP’s total assets under management were up by a quarter to $72bn; the company is also a year ahead in terms of raising $40bn in aggregate funds, although management did say a decision was made to pull forward significant amounts of fundraising.

It is hard to argue with ICP’s performance and income investors will appreciate the rising dividend. Our reiteration of our speculative buy call was ill-timed (2,404p, 16 Nov 2021), although all fund managers are suffering from similar market attrition. However, with the forward price/earnings ratio now down to 12 for 2023, the speculative value opportunity is still there. Buy.

Last IC View: Buy, 2,404p, Nov 16, 2021

INTERMEDIATE CAPITAL (ICP)  
ORD PRICE:1,547pMARKET VALUE:£4.5bn
TOUCH:1,546-1,548p12-MONTH HIGH:2,493pLOW: 1,285p
DIVIDEND YIELD:4.9%PE RATIO:8
NET ASSET VALUE:670pNET DEBT:36%*
Year to 31 MarFee & operating income (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
201815719988.830.0
201921318363.445.0
202026611538.250.8
202133151016056.0
202243456518476.0
% change+31+11+15+36
Ex-div:16 Jun   
Payment:5 Aug   
*Consists of financial liabilities at amortised cost + other financial liabilities.