14 Feb 2017
Investcorp (or ‘the Firm’), a global provider and manager of alternative investment products, has announced its fiscal half year (H1 FY17) results for the six months ending December 31st, 2016.
Although the challenging and uncertain global macroeconomic and geopolitical backdrop, saw investors in the Gulf exercising some caution, the Firm witnessed a period of healthy activity on all fronts of its business in terms of investment acquisitions, realizations, performance and fundraising.
In the six months to December 31, 2016 distributions to Investcorp and its clients from realizations and other distributions totaled $1.1 billion, a 123% increase on the same period last year.
In parallel, the Firm successfully concluded its first closing for Technology Fund IV, building on the successes of the first three funds that have seen Investcorp develop a strong reputation as a leading technology investor. The Real Estate business continued to grow both geographically, by establishing a full-fledged investment team in Europe, and in terms of new products, through the acquisition and placement of two US-based club-style deals over the last 12 months. The Firm also continued to invest in its distribution platform to deepen client relationships in the Gulf. These developments were all received well by the market.
During this period of forward-looking investments to position the Firm for its strategic evolution, the Firm continued its track record of delivering solid profitability, with net income of $35.6 million, which is 30% lower from $50.9 million in H1 FY16. Gross operating income was correspondingly lower at $153.3 million (H1 FY16: $178.4 million).
The decline versus the comparable period last year was solely due to a one-off write-down of a legacy investment in real estate. Gross operating income excluding this write-down remained solid at $170 million, reflecting a stable performance from core operations. Fully diluted earnings per share for the period was at $0.48 per share (H1 FY16: $0.71 per share) reflecting a lower net income and a higher weighted average number of shares. Return on equity for the period was 6%.
Fee income for the period was $128.0 million (H1 FY16: $134.7 million), reflecting the uncertain market environment and a more cautious stance taken by clients in making capital commitment decisions. Core asset based income in the period, excluding the one-off legacy asset write-down referenced above, was $42.3 million (H1 FY16: $44.7 million). Reduction in asset based income from corporate investments was mostly offset by a rebound in returns from the Alternative Investment Solutions business and solid current rental yield from real estate investments. Treasury and other income also increased to $9.0 million from $0.6 million in H1 FY16.
Aggregate operating expenses remained flat at $89.3 million (H1 FY16: $89.0 million) demonstrating Investcorp’s focus on controlling overall costs, whilst continuing to invest in broadening the Firm’s product capabilities and client-facing resources. The Firm’s cost-to-income ratio was 71% at the end of the period (H1 FY16: 64%).
Investcorp remains well capitalized with total assets as at December 31, 2016, at $2.7 billion, up from $2.5 billion as at June 30, 2016. Total liquidity remains strong at $1.2 billion and more than covers the bonds and bank debt maturing over the next 5 years. The Bank’s capital adequacy ratio, at 30%, remains strong and is more than double the requirements of the Central Bank of Bahrain (12.5%).The Bank remains well within the required leverage ratio and maintains significant headroom in all financial covenants. The strength of the balance sheet provides the Firm with flexibility to seize strategic investment opportunities as they arise. Fitch upgraded its rating on Investcorp to positive outlook in November 2016.
Mohammed Alardhi, Executive Chairman, said: “In the first half of the financial year we continued to focus on delivering on our strategic goals, and we have made great strides forward to building the foundation for our future growth. At the same time, we have returned to Investcorp and its clients $1.1 billion of distributions following successful investments that deliver attractive returns across a diversified portfolio of alternatives investments. We look forward to the rest of 2017 and beyond with great confidence as a bigger, more geographically diversified firm with a broader range of products which will see us continue to deliver value to our clients and shareholders.”