2 Feb 2014
Bahrain, February 2, 2014 – Investcorp, a global provider and manager of alternative investment products, today announced its first half fiscal 2014 (H1 FY14) results for the six months ended December 31, 2013.
Investcorp’s profitability momentum continued with net income for the period up 53% to $60.1 million (H1 FY13: $39.2 million). This was driven by a solid performance across its core business underpinned by strong transaction activity, coupled with ongoing demand for alternative investment assets from Gulf investors as market sentiment continues to improve across all of its geographies. The total enterprise value of the companies and the real estate properties acquired in the period exceeded $1.5 billion, including two investments that were signed in FY13 and closed during H1 FY14.
Gross operating income increased by 14% to $174.9 million (H1 FY13: $152.9 million) with fee income increasing by 16% to $171.0 million (H1 FY13: $147.6 million). The significant growth in fee income is also partly reflective of an improved macro-economic environment, with recovery in the US markets and more stability in Europe.
Net income from the Group’s fee business showed a very strong performance, rising by 24% in H1 FY14 to $74.3 million (H1 FY13: $59.8 million).
Asset-based income declined by $1.4 million to $3.9 million (H1 FY13: $5.3 million), reflecting a few valuation markdowns in corporate investment and real estate, which offset higher hedge fund returns.
Total deal by deal fundraising in the Gulf during the period was $446 million, an increase of 61% from the $277 million raised in H1 FY13. This was driven by continued client appetite for attractive alternative investment opportunities that provide a balanced risk-reward profile and aim to benefit from a combination of the global economic recovery currently underway and Investcorp’s value enhancement capabilities.
Furthermore in hedge funds, market demand from new investors and increasing allocations from existing institutional investors enabled Investcorp to raise $440 million, net of redemptions. Investcorp’s hedge fund co-investment portfolio delivered solid returns of 4.1% in the period (annualized: 8.2%).
Investcorp returned $0.9 billion in proceeds to its investors from investment realizations and distributions with further significant realization proceeds pending from the sale of Skrill Group, subject to regulatory approvals, and TDX Group, both of which are expected to close in H2 FY14.
Investcorp continued to invest in its business to ensure it provides investors with a ‘best in class’ service. The Investcorp Group is now licensed to operate in Bahrain, New York, London, Riyadh and Abu Dhabi. Following the opening of its representative office in Abu Dhabi in October last year, Investcorp is in the process of applying for regulatory approval for a new subsidiary to be licensed to operate in Qatar.
Nemir A. Kirdar, Executive Chairman & CEO, commented: “Investcorp has reaffirmed the strength of its global franchise with a performance trajectory that continues to deliver consistently positive results for our investors. We continue to identify and secure a steady flow of attractive investment opportunities worldwide. In the last six months, we raised significant funds and completed deals in Europe, the US, the Gulf and most recently in Turkey, while launching new real estate and special opportunity portfolios. This investment activity has been balanced with a series of successful realizations, which have generated premium returns for our investors.
We will continue to invest in our business and in our Gulf office network in particular, as we consolidate our position as the region’s key investment bridge between the Gulf and Western markets.”
Highlights for the period:
- Exits for the period included completion of the sale of Armacell to Charterhouse for more than €500 million; the sale of Skrill Group to funds advised by CVC Capital Partners for a total value of €600 million; partial realization of Randall-Reilly following a refinancing; and secondary sales of additional tranches of Fleetmatics. TDX Group has also been sold to Equifax Inc. in January 2014 for £200 million.
- The aggregate equity deployed in new corporate investments during H1 FY14 was $445 million across three deals: Tyrrells English Crisps in the UK, Paper Source, Inc. in the US and Namet Gida Sanayi ve Ticareti A.S. (“Namet”) in Turkey.
- The acquisitions of Leejam Sports Company and Theeb Rent a Car Co. which were signed in FY13, were closed during H1 FY14.
- Corporate investment placement was $285 million which represented a 40% increase over the $204 million placed in H1 FY13. This included placement of newly acquired corporate investments Tyrrells, Paper Source and Leejam.
- The aggregate equity deployed in new real estate investments was $207 million in H1 FY14 across four new portfolios. In October 2013, Investcorp also co-originated a $10 million mezzanine loan secured by Nashville City Center.
- Real estate placement was $128 million, which represented a 75% increase over the $73 million placed in H1 FY13. This included placement of the newly formed portfolios 2013 US Residential Portfolio and 2013 US Commercial Portfolio.
- SOP III, consisting of collateralized US commercial mortgage backed securities positions was placed with clients and raised $32 million.
- Investcorp seeded hedge fund manager Prosiris Capital Management LLC surpassed $1 billion in assets under management.
- New senior management team appointments included Gary Appel as Vice Chairman of Corporate Investment North America and Lionel Erdely as Head of Hedge Funds and Chief Investment Officer.
- Total balance sheet assets as at December 31, 2013 were $2.4 billion with a capital adequacy ratio of 28.3%, comfortably in excess of the Central Bank of Bahrain’s regulatory minimum requirement of 12%. Balance sheet cash liquidity covers all outstanding medium and long term debt maturing through FY17.