Intermediate Capital rides positive markets

Intermediate Capital (ICP) is always a challenging company for investors to evaluate as its combination of investment in private equity, as well directing cash towards private lending, can make for wild swings in valuations depending on the market environment. These results were no different in that respect as investment returns of £159mn dropped through to the income statement and reversed a disappointing performance at this point last year. However, ICP is at heart an asset manager and its lifeblood remains the fees that it generates from funds coming through the door.

The picture here was complicated. The company’s management fees came in slightly lower during the half at £253mn, even though this included an impressive £30.6mn of performance-related fees, more than double the total at this point in 2022. Total assets under management were 12 per cent higher year-on-year at $81bn (£64.8bn), up 3 per cent since its March year-end.

However, the results still highlighted how the still largely shuttered public IPO markets are affecting the private equity sector. For instance, ICP had little trouble raising capital from investors for deployment into private equity, but finding opportunities seems to have been difficult – out of $2.6bn raised, only $500mn found a home, whereas $1.4bn raised for private debt funded deployments of $1.6bn.  

Accurately forecasting ICP’s year-end performance is complicated by market volatility. Peel Hunt reckons that the consensus pre-tax profit figure of £361mn for ICP could be upgraded, but this is heavily dependent on returns from its investment company. With a 2024 price-to-earnings ratio of 15, the share price now looks up with events after a decent run. Hold.

Last IC view: Buy, 1,340p, 25 May 2023