Investcorp growth continues; net income rises to $125m
(8/9/2018 7:18:00 AM)
Investcorp, a global provider and manager of alternative investment products, reported an aggregate net income of $125 million for the year ended June 30, 2018 (FY 2018), an increase of 4% year-on-year compared to $120 million in 2017 financial year.
The results showed continued growth momentum and healthy levels of activity on all dimensions across business lines, Investcorp said.
The fully diluted earnings per share increased by 4% to $1.30 (FY17: $1.25). Income for the second half of FY18 was $70 million (FY17: $72 million) and the board is proposing a full year dividend of $0.24 per ordinary share (FY17: $0.24 per share), it said.
"Investcorp continues to make good progress in relation to its growth strategy. Continued geographical diversification of the firm’s investor base and product set has helped support record levels of activity in terms of distributions to clients, investment activity and fundraising across all markets. The strong performance is set against the backdrop of uncertain macroeconomic and geopolitical conditions, particularly in the Gulf," a statement said.
Marking a strong performance across the business, investment activity in the period rose 36% to $2.8 billion (FY17: $2.1 billion) while total placement and fundraising activities rose by 77% to $7.3 billion (FY17: $4.1 billion) reflecting, in part, a full year’s contribution from Investcorp Credit Management (“ICM”) and the firm’s broadening and active client base. Distributions more than doubled to $7.0 billion (FY17: $3.4 billion).
Continued growth in assets under management, which increased by 6% to $22.6 billion in the period, has also, as a consequence of the ICM business, resulted in higher recurring income derived from AuM fees, with AUM fees growing by 27% to $173 million (FY17: $136 million). Asset-based income also grew by 30% to $133 million (FY17: $102 million), primarily driven by successful corporate investment realizations. This drove an increase in gross operating income of 8% to $454 million (FY17: $422 million), it said.
Strong performance across the platform Underlying performance in the Corporate Investment business remained solid with healthy levels of investment activity resulting in three new deals totalling $406 million, two follow-on fundings, $75 million invested through and alongside Investcorp’s Technology Funds III and IV and a further $48 million invested in two special opportunities. $580 million was raised from investors during the full year period with $789 million returned in distributions.
In the US, Investcorp acquired KSI, a leading distributor of replacement auto body parts and ICR, a leading strategic communications and advisory firm. In Europe, Investcorp acquired Kee Safety, a global supplier of safety solutions and products, and established a platform to enter the highly fragmented German dental sector, with its first acquisition being Privatzahnarztklinik Schloss Schellenstein GmbH, one of the leading centres for implantology and dental surgery in Germany. Investcorp also exited CEME Group, a global manufacturer of fluid control solutions serving critical functions; it partially exited SPG Prints, a leading global provider of integrated solutions for rotary screen and digital printing for textiles and industrial applications; and it exited Nobel Learning Communities, one of the leading providers of private education in the United States (from pre-school up to high school) in June 2018.
In Mena, Investcorp made its third healthcare investment to construct a new landmark hospital in Abu Dhabi in partnership with Vamed, a leading global provider of rehabilitation and other services for hospitals.
Following full integration, ICM made a significant first full year contribution, as had been expected at the time of acquisition. ICM’s performance reflects a crystalization of the firm’s strategy to diversify its product offering and its client base by attracting a broader private and institutional client base to attractive investment opportunities across its product platform. ICM reported a 6% increase in AuM to $11.5 billion (FY 2017: $10.8 billion) and showed strong levels of activity with $5.6 billion of fundraising including $1.6 billion of new CLO issuance activity and $5.5 billion of distributions (including refinancing and resets of existing CLOs).
The firm’s real estate division performed well in another active year that saw the team execute its first fundraising for European investments. The firm raised $569 million in the period for real estate investments, 10% more than last year, including from Asian based investors for the first time. Distributions from real estate investments more than doubled to $713 million (FY17: $300 million).
In the US, the firm maintained its position as a leading investor in US real estate, making investments totalling $419 million in a diverse set of properties across the residential, office and industrial sectors. In Europe, the team completed the acquisition of its first two UK real estate portfolios as well as a substantial office property acquisition in Germany, making investments of $147 million in aggregate. The team continues to seek further opportunities across Europe.
Investcorp’s Alternative Investment Solutions business produced equally strong returns. AuM increased by 7% to $3.7 billion (FY 2017: $3.5 billion) driven by strong performance across its products. During the year, the Firm announced strategic partnerships with two managers - Shoals Capital Management, which currently manages approximately $160 million of AuM; and Steamboat, which was a new launch.
In April 2018, the firm announced senior management changes designed to further accelerate its growth strategy. The changes were partly catalysed by Mohammed Al-Shroogi’s decision to retire as co-CEO effective August 2018. He will remain with the firm as a senior advisor. Joining Rishi Kapoor as co-CEO from August 1 is Hazem Ben Gacem, previously head of the firm’s European Corporate Investment team. Daniel Lopez-Cruz succeeded Ben Gacem. The firm also announced the appointment of Jan Erik Back as Investcorp’s new CFO. He will join in September 2018.
The firm’s balance sheet remains robust, maintaining the flexibility to take advantage of inorganic investment opportunities consistent with its stated growth strategy, it said. Total assets as at June 30, 2018 stood at $2.5 billion and total accessible liquidity remains strong at $1 billion.
Mohammed Alardhi, executive chairman, said: “As we continue our growth momentum across the business, we are pleased that the firm has continued to report strong performance across a range of our key indicators delivering high-quality earnings.
"Following the successful integration of Investcorp Credit Management, I am pleased to see the delivery of the anticipated strategic benefits of the acquisition in terms of diversification of both products and clients. Our real estate division produced strong results this year, while our corporate investment and alternative investment solutions teams continued to deliver."