Intermediate Capital Group Plc Ordinary 20p (ICP)

Company overview

Intermediate Capital is a leading independent European source of mezzanine finance. Just at the mezzanine lies between two conventional floors in a building, so mezzanine finance fills the gap between senior bank loans (which normally have first right of repayment in the event of financial difficulty) and equity capital.

HL Update (28 May 2008)

The group’s recent full year results continued in a similar vein to the half year results back in November. Bad news for the banks in tightening lending procedures following the unfolding of the credit crisis has become good news for mezzanine financiers such as Intermediate. Core income over the year increased by 22pc to £136m, whilst pre-tax profit was up 2pc to £230m, although aided by derivatives movements held for hedging purposes. Both a recent rights issue and a new £500m lending facility have strengthened the group’s balance sheet, funds under management rose by 25pc to £7.3 billion and the group continues to expand across Europe, the USA and Asia. On balance, management concedes that the company remains exposed to the general health of global economies, although confidence in the future is expressed via an 18pc increase in the dividend payment over the full year. A limited market consensus opinion is currently favourable in tone.

HL Comment (23 November 2007)

The company was established back in 1989 by six investment professionals whose goal was to become a leading provider of sub-investment grade finance – in particular mezzanine finance – to a wide variety of companies. Since then the company has invested in a wide selection of transactions worth more than eight billion euros and has now become a highly recognized player across Europe, Asia and North America, particularly within the leverage buy-out arena.

The group’s recently announced half year results (late November 2007) saw solid further progress being made. Both earnings per share and pre-tax profits were up by an impressive 33pc, whilst core underlying revenues rose by 24pc. It appears that bad news for the banks in tightening lending procedures following the unfolding of the credit crisis has become good news for mezzanine financiers such as Intermediate. Companies either finding closed or restricted finance in the more traditional avenue have been turning to Intermediate Capital. Furthermore, demand in relatively new Asian markets has also continued to grow. Underlying management confidence going forward, the half year dividend has been raised by 18pc.

Acting for negative investor concerns, the group is still broadly sensitive to the overall health of global economies going forward and management will need to retain their tight grip on lending criteria. On the positive, it appears that one man’s loss is another man’s gain. Furthermore, the dividend is not to be ignored and prospects in the growing Asian region provide further attraction. On balance, market consensus opinion is currently very positive in tone.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-03-2008	429.10	229.50	213.40	7.30	1.80	4.00	65.00	4.20
31-03-2007	427.10	224.00	204.60	9.60	0.30	33.00	58.00	3.00
31-03-2006	343.40	190.10	154.35	9.20	0.10	74.00	48.21	3.40
31-01-2005	191.90	95.00	88.60	12.90	n/a	n/a	40.00	3.50
31-01-2004*	138.90	64.60	n/a	n/a	n/a	n/a	34.50	3.20

* Prior to 31st January 2005, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).