Intermediate Capital slows down

Tracking the ups and downs of the half for Intermediate Capital (ICP) is not for the fainthearted as the private markets broker’s spread of business and forex exposures can make an accurate appraisal tricky. It is fair to say that the company had a reasonably resilient period despite an investment loss of £108mn wiping out last year’s gains and debt fundraising. Where it acts as broker between private equity clients and debt holders, it was hit by the decline in private equity deal flow – fundraising in the half fell by 59 per cent to $5.7bn (£4.7bn).

The saving grace for Intermediate Capital was the fact that its assets under management (AUM), on which it earns stable fees, were steady at $68.5bn – and third-party fee income was up 33 per cent to £265mn. Another benefit for ICP is that the currency composition of its fees has been a net benefit this year as sterling has fallen against other currencies. Over 50 per cent of fees are paid in euros, 34 per cent in dollars and just 11 per cent in sterling. In other words, favourable foreign exchange rates provided a huge tailwind for its first-half results.

Broker Panmure reckons that fund management is the part of ICP that will deliver the best future growth – margins here hit 55 per cent for the half – while avoiding the fluctuations that plague the rest of the business. We tend to agree with that assessment: ICP’s fee earning during the half compared favourably with the rest of sector. A forward price/earnings ratio of 11 offers good value, along with a forward dividend yield of over 7 per cent. Buy.

Last IC View: Buy, 1,547p, 27 May 22