Intermediate Capital Group plc : Final Results for the financial year ended 31 March 2023

PERFORMANCE OVERVIEW

Historical performance

The Board and management monitor the financial performance of the Group on the basis of alternative performance measures (APM), which are non-UK-adopted IAS measures. An explanation can be found on page 8 and a reconciliation of the APM to the UK-adopted IAS measures on page 43, along with the UK-adopted IAS consolidated financial statements and supporting notes, can be found on pages 34 to 92.

The Group’s profit after tax on an UK-adopted IAS basis was below the prior period at £278.4m (FY22: £525.1m). On the APM basis it was below the prior period at £229.3m (FY22: £538.0m).

Unless stated otherwise, the financial results discussed herein are on the basis of APM, which the Board believes assists shareholders in assessing the financial performance of the Group.

Long-term growth

¹ FY18 – FY23. Dividend per share includes proposed FY23 final dividend.
² Includes impact of AUM policy change in FY23 which increased Total AUM and third-party AUM by $3.1bn and fee-earning AUM by $0.5bn – see page 8

AUM

¹ On a constant currency basis
² Includes impact of policy change in FY23 which increased Total AUM and third-party AUM by $3.1bn and fee-earning AUM by $0.5bn – see page 8
³ Realisations of third-party fee-earning AUM; ⁴ From direct investment funds

Financial

Medium-term guidance

Our medium-term guidance remains unchanged and is set out below:

COMPANY PRESENTATION

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A recording and transcript of the presentation will be available on demand from the same location in the coming days.

COMPANY TIMETABLE

ENQUIRIES

This results statement may contain forward looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.

ABOUT ICG

ICG provides flexible capital solutions to help companies develop and grow. We are a global alternative asset manager with over 30 years’ history, managing $80bn of assets and investing across the capital structure. We operate across four asset classes: Structured and Private Equity, Private Debt, Real Assets, and Credit.

We develop long-term relationships with our business partners to deliver value for shareholders, clients and employees, and use our position of influence to benefit the environment and society. We are committed to being a net zero asset manager across our operations and relevant investments by 2040.

ICG is listed on the London Stock Exchange (ticker symbol: ICP). Further details are available at www.icgam.com.

LETTER FROM THE CHAIRMAN

To my fellow shareholders,

It is a pleasure to write to you as Chairman of ICG, a role I am honoured to have taken on in January 2023. I would like to start by expressing my gratitude on behalf of the Board to Andrew Sykes, who fulfilled the duties of Interim Chairman while the search for a permanent Chairman was undertaken. I look forward to his continued insight and guidance around the Board table in his role as Senior Independent Director.

Since Andrew’s letter last year, geopolitical and economic uncertainty has continued to rise. The economic landscape has become increasingly complex, with inflation reaching multi-year highs in a number of countries, which has in turn forced central banks to raise interest rates at a time when many economies are slowing down. Today, the outlook remains nuanced. Certain countries and sectors are more vulnerable, while others are demonstrating significant resilience.

Elevated levels of uncertainty present difficulties for Boards. Many businesses, ICG included, can react tactically in the short term as opportunities present themselves. However, to create long-term value, they are required to make strategic decisions around allocating economic and intellectual capital, and then to pursue these vigorously and consistently over a number of years. An unclear outlook and an increasing cost of capital make these decisions more challenging, and we have seen some of the implications of this during the last twelve months in elevated volatility within public markets, a transfer of value from equity to debt, reduced valuations in many sectors, and a slowdown in M&A activity globally.

Against this background, I am comforted that private markets have shown a remarkable ability to adapt and innovate across economic cycles. Indeed, ICG’s business model today is the result of a strategic decision taken over a decade ago to pivot to being a third-party asset manager – a transition that was pursued with determination and to great effect. There have been a number of periods of economic uncertainty during that time since the Global Financial Crisis, including the Euro crisis, Brexit, and of course Covid-19 pandemic. Throughout all of these we have focused on executing a clear strategy of expanding our product offering, client base, and AUM. This has been delivered consistently and successfully, and in doing so we have grown and diversified the sources and robustness of our fee income.

There is always the risk that long-term ambitions get forgotten during periods of short-term challenge. Concerted efforts to reduce our environmental impact and to enhance diversity, equity and inclusion in the workplace must not be seen as optional and “only for the good times”. I am proud to Chair in ICG an organisation that is action-orientated in these areas, being amongst the first group of alternative asset managers to commit to net zero (by 2040) and exceeding its commitment made under the UK Women in Finance Charter two years earlier than planned. Of course, many other initiatives in these areas continue and I am pleased with the progress we have made over the last 12 months.

As a direct result of these decisions and actions, ICG today is better positioned – strategically, financially, operationally and culturally – than at any time in our history. We manage our clients’ assets across a broad range of products, spanning the entire capital structure from common equity to senior debt. From the perspective of our portfolio companies, we are a partner who can provide the most appropriate form of capital to meet their needs. For our clients, this diversification allows us to help them achieve their investment objectives in their alternative asset allocations – whether in Structured and Private Equity, Private Debt, Real Assets, or Credit. For shareholders, the diversity of our business is a powerful driver of resilience and growth, providing multiple avenues to increase our AUM and thereby develop further long-term streams of management fee income.

A consequence of our business and financial model is that we are able to sustain business activity across economic cycles, and this is visible in the results we report for FY23. We continued to deploy and realise our clients’ capital, and recorded year-on-year growth across AUM, fee income, FMC PBT and the distributions made to our shareholders¹.

Our confidence in the long-term and through-cycle prospects of ICG is underlined by our simplification of the dividend policy to being progressive. We are also stating the we intend over the long-term to increase the dividend per share by at least mid-single digit percentage points on an annualised basis. The breadth and scale of ICG today allows us to have this dividend policy as an integral part of our approach to capital allocation, running alongside commitments to our funds and using our balance sheet to seed new strategies.

None of this is instant. Building and scaling a platform that generates compounding growth over the long-term takes time, and that is precisely what we are doing at ICG. In recent months, Andrew Sykes and I have had a number of discussions with shareholders in a variety of forums. We have both been encouraged by the level of engagement around ICG; the clear understanding our shareholders have of the business; and the thoughtful, long-term view with which they approach ICG’s strategy and our potential to generate long-term equity value. I look forward to more discussions with shareholders and our broader stakeholders in the coming months.

Post year-end there were two changes to the Board. Kathryn Purves stepped down after nine years as a Non-Executive Director, during which time she made a wide-ranging contribution including chairing the Risk Committee and more recently serving as Senior Independent Director. We also announced the appointment of David Bicarregui, who joined ICG in April and who will take up the role of CFO in July, replacing Vijay Bharadia. I would like to pass on my and the Board’s thanks to Kathryn and to Vijay for their significant contributions to ICG.

The last twelve months have demonstrated the strategic and financial benefits of our scale and diversification. Notwithstanding our strong historical growth, I believe the investments we have made give us substantial runway to continue to grow in the coming years, and that in many respects ICG is still at the beginning of its journey. Mindful of the uncertainty and volatility we may face in the future, we are well positioned to navigate complex markets for the benefit of our clients, portfolio companies and shareholders.

Over a number of decades I have watched and admired ICG’s growth and development from afar. I am excited at the prospect of being actively involved in its future, and look forward to working with the ICG team, our shareholders and other stakeholders in the years to come.

William Rucker

Chairman

CHIEF EXECUTIVE OFFICER’S REVIEW

The last twelve months have been a busy and successful period for ICG. Our scale and breadth have enabled us to capture opportunities in a dynamic market environment. The investment landscape and client appetite have shifted towards our areas of particular expertise such as structured transactions, private debt and infrastructure. We have continued to execute successfully on our strategy of growing up and growing out, and have invested selectively across the organisation to augment our investment teams, marketing and client relations offering, and to enhance our operating platform. By investing today, we are positioning ourselves to benefit from what could be a rapid and significant rebound in private markets activity when conditions become less volatile, and when the market could continue to further concentrate around scaled, broad managers.

Over the last year we have developed opportunities that embed further long-term growth potential. The single largest contributor to fundraising this year was our direct lending strategy, Senior Debt Partners, which raised $3.3bn during the financial year ended 31 March 2023 (FY23) and which is continuing to fundraise – an already-successful strategy that became incrementally attractive both to clients and portfolio companies given its exposure to floating rate debt and its ability to provide debt financing when many other sources were not available. The year saw the final closes of three funds (all at or above their original hard-caps) which in aggregate account for $13.2bn of third-party AUM² at 31 March 2023, including Europe VIII closing with almost twice as much capital committed from clients as the previous vintage. We launched second vintages of Infrastructure, Europe Mid-Market and Sale and Leaseback; marketed a number of first-time funds; hired new teams for future strategies, including Infrastructure Asia and Real Estate Asia; and invested £214m of our balance sheet capital to seed a number of future strategies.

The financial results we are reporting today reflect this strong strategic performance. Third-party fee income for the year was £501.0m, up 12% compared to FY22 (with management fees up 23%), and record Fund Management Company (FMC) profit before tax was £310.7m, up 9% compared to FY22. Our diversified and robust balance sheet is performing in line with our expectations, generating NIR of 4% over the twelve months. At 31 March 2023 the balance sheet had net gearing of 0.50x and total available liquidity of £1.1bn. The Board has declared a final dividend of 52.2p per share, bringing total dividends for the year to 77.5p per share, an increase of 2% compared to FY22. Over the last five years, ordinary dividends per share have grown at an annualised rate of 21%, and the Board is reaffirming its commitment to a progressive dividend policy.

The nature of our business is that we generate growth and value over the long-term, and in recent years we have successfully scaled and broadened our product offering and client franchise. We have raised a total of $33bn so far in this fundraising cycle since the beginning of FY22, and are on track to meet our accelerated fundraising guidance of at least $40bn cumulatively from FY22 to FY24. We now manage $77bn of client capital, up 15%³ in the year and 19%² on an annualised basis over the last five years. Over the same period our third-party fee income has grown at an annualised rate of 25% and our FMC profit before tax at 27%. Our balance sheet has delivered long-term value for our shareholders, generating a five-year average net investment return of 11.2% and a NAV per share annualised growth rate of 9.7% over the same period.

ICG’s business model today therefore provides a high degree of stability and visibility, which is particularly powerful during periods of volatility such as we have experienced over the last twelve months. At 31 March 2023 we had $62.8bn of fee-earning AUM, with an indicative annualised management fee generation potential of ~£459m, and a further $14.7bn of AUM that is not yet fee-earning which, when deployed, has the indicative potential to generate ~£116m of annualised management fees.

Our ability to deliver attractive returns for our clients underpins our future success. Our portfolio companies are generally continuing to show strong operational performance, with those in our European Corporate strategy for example showing LTM EBITDA growth of 13% and those in direct lending (SDP) showing LTM EBITDA growth of 20%. We are reporting increases in fund valuations across many of our strategies for the period; very low loss ratios with historically high returns in debt strategies; and attractive life-to-date IRRs, MOICs and DPIs in strategies with equity exposure. During the year we realised $6.9bn of third-party fee-earning AUM at a realised annualised return of 18.7%³, further anchoring the performance of our funds. The track records we are developing today are important components of marketing future vintages, and we continue to pay very close attention to portfolio management to reinforce our track record.

Successful execution of our strategies around Sustainability and Diversity, Equity and Inclusion (DE&I) are important components of our ability to generate value for our clients and portfolio companies. In January we published our latest Sustainability and People Report, detailing our achievements over the last twelve months and our areas of future focus. I was delighted to welcome a new Global Head of Sustainability and ESG in an enhanced role during FY23, and we are rapidly building on an already-strong position. At the first anniversary of ICG’s commitment to be net zero by 2040, nine portfolio companies have set science-based greenhouse gas (GHG) emissions reduction targets: 15% of relevant investments in our first year alone. Furthermore, many other portfolio companies have advanced their target-setting plans, placing us on track to achieve our interim target of 50% of relevant investments having such targets by 2026. Our achievements in the areas of Sustainability and ESG are recognised in our public ESG ratings, and for the first time ICG became a member of DJSI Europe as a result of our assessment by S&P Global CSA. In the related area of DE&I, we were delighted to be top-ranked for Private Equity globally in the Honordex, measuring DE&I efforts and outcomes. This sits alongside extensive work around enhancing DE&I not just for ICG but across our industry, including through a comprehensive charity framework designed to increase career access to our industry for underprivileged groups.

Looking to FY24 and beyond, I remain excited by our prospects. We reiterate our fundraising target of at least $40bn cumulatively from FY22 to FY24, and we will be marketing a number of first-time and follow-on vintages in the coming year. We will invest for the future, across our product offering, client franchise and operating platform.

We are well placed to deploy capital in dynamic market conditions, with $20.9bn of dry powder at 31 March 2023 and local origination teams with exceptional market access, supported by a disciplined investment process. We have hundreds of companies across our portfolio, giving us access to a large number of datapoints on the performance of businesses across geographies and sectors, enabling us to spot trends early and understand more holistically how investment opportunities might perform. In the near-term, transaction volumes might remain slower in the broader market. ICG is well positioned to execute on opportunities that are particularly attractive today, including in structured transactions, private debt and real assets.

Longer-term, I expect the structural demand for private markets to remain intact, and it was good to welcome many of you to our shareholder seminar in January on fundraising and client strategy. For portfolio companies, the attractions of private capital are largely unimpacted by the broader macroeconomic context: bilateral bespoke agreements; being capitalised by investors with substantial dry powder to support future growth; and an ability to focus on longer-term value creation. For clients, lower volatility, higher returns, longer duration, and investments in parts of the economy that cannot be accessed through public markets continue to make allocations to private markets an important component of a long-term asset allocation strategy. Our strategy of “growing up” and “growing out” has enabled us to capture a growing breadth of the market and has generated significant value for shareholders, accelerated by our strong balance sheet. I see ample runway for many years of profitable growth by continuing to execute successfully on our strategy.

I believe there will be substantial rewards for the winners emerging from this era of higher interest rates, inflation and macro uncertainty. To be amongst that group, private markets managers will need sufficient scale to be relevant, a broad product offering, a differentiated origination capability, a track record of managing portfolios to generate value through cycles, and a sophisticated client strategy and operating platform.

ICG possesses all of those qualities. Today we are larger, broader, more financially resilient, and the FMC more profitable than at any point in our history, and I believe we are well positioned to navigate the future for the benefit of our clients, portfolio companies and shareholders.

Benoît Durteste

FINANCIAL REVIEW

The Board and management monitor the financial performance of the Group on the basis of Alternative Performance Measures (APM), which are non-UK-adopted IAS measures. The APM form the basis of the financial results discussed in this review, which the Board believes assist shareholders in assessing their investment and the delivery of the Group’s strategy through its financial performance.

The substantive difference between APM and UK-adopted IAS is the consolidation of funds and related entities deemed to be controlled by the Group, which are included in the UK-adopted IAS consolidated financial statements but excluded for the APM.

Under IFRS 10, the Group is deemed to control (and therefore consolidate) entities where it can make significant decisions that can substantially affect the variable returns of investors. This has the impact of including the assets and liabilities of these entities in the consolidated statement of financial position and recognising the related income and expenses of these entities in the consolidated income statement.

The Group’s profit before tax on an UK-adopted IAS basis was below the prior period at £251.0m (FY22: £565.4m). On the APM basis it was below the prior period at £258.1m (FY22: £568.8m).

Detail of these adjustments can be found in note 4 to the UK-adopted IAS consolidated financial statements on pages 34 to 92.

AUM
Refer to the Datapack issued with this announcement for further detail on AUM (including fundraising, realisations and deployment).

Total AUM
During the period, total AUM grew 14% on a constant currency basis (up 11% on a reported basis) and at 31 March 2023 was $80.2bn (31 March 2022: $72.1bn). The balance sheet investment portfolio accounted for 4.1% of the Total AUM (31 March 2022: 5.0%).

Third-party AUM and fee-earning AUM
Third-party AUM grew 15% on a constant currency basis during the period, and stood at $77.0bn at 31 March 2023 (31 March 2022: $68.5bn).

Fee-earning AUM grew 10% on a constant currency basis during the period, and stood at $62.8bn at 31 March 2023 (31 March 2022: $58.3bn).

At 31 March 2023 we had $20.9bn of third-party AUM available to deploy in new investments (dry powder), $14.7bn of which is not-yet-fee-earning, but will be when the capital is invested or enters its investment period.

With effect from 31 March 2023, the methodology for calculating third-party AUM was updated in line with industry practice to include i) all uncalled capital commitments until they are legally expired (previously, uncalled capital commitments were removed from third-party AUM as a ‘step-down’ despite the fund being legally able to call such capital); and ii) permanent fund-level leverage where such leverage has been signed with the leverage provider and where we charge fees on the leverage. The aggregate impact of these changes is to increase third-party AUM by $3.1bn and fee-earning AUM by $0.5bn.

At 31 March 2023 56% of our fee-earning AUM was in euros; 31% in dollars; 12% in sterling; and 1% in other currencies. Our funds pay fees in their fund currency. Third-party AUM reduced by $1.6bn during the period due to FX movements, partially offset by positive market moves of $0.7bn impacting funds that charge fees on NAV. For more details on the impact of FX rates on our reported financials, see page 20.

1. Includes $0.3bn of steps-up;
2. See page 20 for an explanation of constant exchange rate calculation

1. See page 20 for an explanation of constant exchange rate calculation

Business activity

1. Direct investment funds;
2. Realisations of third-party fee-earning AUM

Fundraising

• We attracted $10.2bn of new money during the period, in line with our guidance and bringing the total raised since 31 March 2021 to $32.8bn, on track to meet accelerated fundraising target of at least $40bn cumulatively between FY22 – FY24
• Structured and Private Equity attracted $3.5bn of capital. Within this, Strategic Equity IV raised $1.3bn, Europe VIII raised $1.2bn and Asia Pacific IV raised $450m. All three of these funds had final closes during the period at or above their original hard caps. During the year, we also raised for Strategic Equity V, LP Secondaries I and Europe Mid-Market II
• Private Debt was the largest contributor to fundraising during the period amongst our asset classes, attracting a total of $3.8bn, $3.3bn of which was in SDP V and SDP SMAs. During the period we launched North America Credit Partners III and had closed $427m of third-party commitments at 31 March 2023
• Real Assets raised $1.1bn, with the majority ($591m) coming from Real Estate Debt strategies. In addition we raised $414m for Sale and Leaseback II
• Credit raised $1.9bn, of which $1.2bn was from new CLOs (two in Europe and one in the US) and the remainder was within our liquid credit funds
• At 31 March 2023 funds that were actively fundraising included: SDP V and SDP SMAs; Strategic Equity V; North America Credit Partners III; Europe Mid-Market II; Infrastructure II; Sale and Leaseback II; LP Secondaries I; Life Sciences I; and various credit strategies. The timings of closes for those funds depends on a number of factors, including the prevailing market conditions

Deployment

• During the period we deployed a total of $10.5bn of AUM on behalf of our direct investment funds
• Within Structured and Private Equity, Strategic Equity saw strong activity, deploying $2.6bn (FY22: $2.5bn), with the remainder across European Corporate including Europe Mid-Market I and various other strategies
• Within Private Debt, deployment was driven by our direct lending strategy, Senior Debt Partners, which deployed $3.9bn. The Australia Senior Loan fund deployed $0.3bn and North American Private Debt $0.2bn
• Within Real Assets, real estate debt strategies deployed $0.9bn, Infrastructure Equity I deployed $0.5bn and Sale and Leaseback deployed $0.3bn

Realisations

• Despite the slowdown in transaction activity across the market, we continued to realise investments, with $5.3bn fee-earning AUM realised from our direct investment funds (FY22: $6.4bn)
• Structured and Private Equity accounted for $2.3bn of realisations within fee-earning AUM, with the majority of activity coming from Europe VI and Europe VII (2015 and 2018 vintages’ respectively)
• Realisations of fee-earning AUM in Private Debt were $2.0bn, with the vast majority ($1.7bn) being within direct lending (Senior Debt Partners)
• Real assets accounted for $1.0bn of realisations within fee-earning AUM, almost all of which was across a range of real estate debt strategies

Performance of key funds
Refer to the Datapack issued with this announcement for further detail on fund performance.

A summary of selected ICG drawdown funds that have had a final close at 31 March 2023 is set out below:

Note co-mingled funds only. Where there are funds with multiple currencies, FX rates at 31 March 2023 used to convert

1. Gross MOIC as at 31 March 2023
2. For current vintages only
3. Third-party AUM plus ICG plc commitment at point of final close. MOICs and DPI for SDP III and SDP IV shown for EUR sleeves

Overview: Group financial performance

Fund Management Company (FMC) revenue was £539.9m (FY22: £512.8m) and FMC profit before tax was £310.7m (FY22: £286.2m), an increase of 9% compared to FY22, resulting in an FMC operating margin of 57.5% (FY22: 55.8%).

Net investment returns (NIR) for the Investment Company (IC) of 4%, or £102.3m, and over the last five years have averaged 11%. The IC as a whole recorded a (loss) of £(52.6)m (FY22: profit of £282.6m).

The Group generated a Group profit before tax of £258.1m (FY22: £568.8m) and Group earnings per share were 80.3p (FY22: 187.6p).

ICG has a progressive dividend policy, and the proposed final dividend of 52.2p per share brings the total dividend per share to 77.5p for FY23, an increase of 2% compared to FY22. Over the last five years the dividend per share has grown at an annualised rate of 21%.

Our balance sheet remains strong and well capitalised, with net gearing of 0.50x, total available liquidity of £1.1bn and a net asset value per share of 694p.

Our medium-term financial guidance, set out on page 3, remains unchanged from 31 March 2022.

Fund Management Company

The FMC is the Group’s principal driver of long-term profit growth. It manages our third-party AUM, which it invests on behalf of the Group’s clients.

Third-party fee income

Third-party fee income grew to £501.0m in FY23 (FY22: £448.7m), a year-on-year increase of 12% (an increase of 7% on a constant currency basis).

Our third-party fee income is largely comprised of management fees, which have a high degree of visibility and are directly linked to our fee-earning AUM.

The increase in management fees during FY23 was due to a number of factors including fundraising for Europe VIII and Strategic Equity IV (both of which charge fees on committed capital); net deployment within Private Debt (which charges fees on invested capital); and changes in foreign exchange rates. The £12.7m reduction in fee income for Real Assets was due to the prior period including £14.3m of catch-up fees (largely for Infrastructure Equity I and Sale and Leaseback I), which are non-recurring. Excluding those catch-up fees, third-party fee income for Real Assets is up approximately 3.4%.

Management fees during FY23 include a total of £30.6m catch-up fees (FY22: £14.3m). We do not expect significant catch-up fees for FY24 given the funds we have in market and the potential timing of first closes.

The effective management fee rate on our fee-earning AUM at the period end was 0.90% (FY22: 0.88%). The increase was due to the fundraising within Structured and Private Equity in strategies with higher fee rates charging fees on committed capital as well as a positive mix effect in other asset classes. The fee rate is split between asset classes as follows:

Performance fees are a relatively small part of our revenue, and during the five years to 31 March 2023 have accounted for an average of 10.2% of our third-party fee income. With lower transaction activity in the broader market, timing expectations for various exits within our funds have been extended. This has resulted in a lower level of performance fees being recognised in this period, although does not impact the absolute level of performance fees we expect to receive if our funds perform in line with expectations. At 31 March 2023 the Group had an asset of £37.5m of accrued performance fees on its balance sheet (FY22: £91.0m):

Our funds charge fees in the fund currency, and third-party fee income for the period was 56% in euros, 32% in US dollars, 11% in sterling and 1% in other currencies. On a constant currency basis our third-party fee income grew by 7% compared to FY22.

Movements in Fair value of derivatives and other income

During the year the Group changed its policy regarding hedging of non-sterling fee income. Previously the Group’s policy was to hedge non-sterling fee income to the extent that it was not matched by costs and was predictable (transaction hedges). For FY23 FMC revenue included a negative impact of £(26.8)m due to changes in the fair value of these transaction hedges (FY22: £(0.4)m). During the financial year the Group decided to no longer enter into transaction hedges as a matter of course (although it may still do so on an ad hoc basis), and economically closed out all outstanding transaction hedges. Further detail on our hedging policy and sensitivities can be found on page 20.

Other income includes recorded dividend receipts of £40.2m (FY22: £38.0m) from investments in CLO equity, which are continuing to be received in line with historical experiences. The FMC also recognised £25.0m of revenue for managing the IC balance sheet investment portfolio (FY22: £24.8m), as well as other income of £0.5m (FY22: £1.7m).

Operating expenses and margin
During the year we remained focussed on managing costs, resulting in operating expenses increasing by only 1% compared to FY22 and totalling £229.2m (FY22: £226.6m). Salaries increased broadly in line with headcount (which grew 11%), while incentive scheme costs grew by only 6%. Both administrative costs and depreciation and amortisation recorded absolute reductions compared to FY22. Administrative costs reduced due to lower professional and consulting costs, lower placement agent fees and lower recruitment costs given the lower hiring in FY23 compared to FY22.

Operating expenses for the period were 70% in sterling, 9% in euros, 14% in US dollars and 7% in other currencies.

The FMC recorded a profit before tax of £310.7m (FY22: £286.2m), a year-on-year increase of 9% and an increase of 14% on a constant currency basis (excluding the change in fair value of derivatives).

The FMC operating margin of 57.5% (FY22: 55.8%) was above our medium-term guidance of above 50%, driven in part by a combination of catch-up fees and a strong focus on cost control.

Investment Company

The Investment Company (IC) invests the Group’s proprietary capital to seed and accelerate emerging strategies, and invests alongside the Group’s more established strategies to align interests between our shareholders, clients and employees. It also supports a number of costs, including for certain central functions, a part of the Executive Directors’ compensation, and the portion of the investment teams’ compensation linked to the returns of the balance sheet investment portfolio (Deal Vintage Bonus, or DVB).

Balance sheet investment portfolio

The balance sheet investment portfolio grew 3% in absolute terms during the year and was valued at £2.9bn at 31 March 2023 (31 March 2022: £2.8bn). It experienced net realisations during the period of £128m (FY22: £253m), being new investments of £666m (FY22: £952m) and realisations of £794m (FY22: £1,205m). Realisations in FY23 include £101m of proceeds received when we sold down a portion of the balance sheet’s exposure to ICG’s liquid credit funds.

We made a number of new seed investments totalling £214m, including on behalf of Life Sciences, LP Secondaries, US Mid-Market and Real Estate Opportunistic Equity Europe. These investments are held in anticipation of being transferred to a third-party fund. At 31 March 2023 the balance sheet held £330m of seed investments (31 March 2022: £178m).

At 31 March 2023 the balance sheet investment portfolio was 45% euro denominated, 27% US dollar denominated, 21% sterling denominated and 7% in other currencies.

1. Within Credit, at 31 March 2023 £65m was invested in liquid strategies, with the remaining £298m invested in CLO debt (£106m) and equity (£192m)
2. Formerly referred to as Warehouse investments. Adjusted to include three assets previously reported with Real Assets, with a combined value of £83m at 31 March 2022

Net Investment Returns

For the five years to 31 March 2023, Net Investment Returns (NIR) have been in line with our medium-term guidance, averaging 11.2%. For the twelve months to 31 March 2023, NIR were £102.3m (FY22: £485.7m), or 4% (FY22: 18%).

NIR was comprised of interest of £113.2m from interest-bearing investments (FY22: £76.8m), unrealised losses of £(13.2)m (FY22: gain of £404.0m) and other income of £2.3m. NIR were split between asset classes as follows:

1. FY22 NIR adjusted to reflect three assets with Seed Investments that were previously included within Real Assets
   • Structured and Private Equity, which accounted for 60% of the total balance sheet investment portfolio at 31 March 2023, saw a positive NIR driven by European Corporate and Strategic Equity
   • Within Private Debt, SDP is performing resiliently and a strong performance during year within North America Credit Partners² driving the majority of the positive NIR
   • Real Assets – which as noted above now excludes three investments that have been moved to Seed investments – saw a strong return within Infrastructure, offsetting valuation reductions within Sale and Leaseback. The Real Estate debt strategies have continued to perform well, recording positive NIR during the year
   • Credit NIR of £(30.1)m includes a reduction of £(40.2)m in the value of the balance sheet’s holdings of CLO equity to reflect CLO dividend receipts recorded in the FMC and a reduction of £(6.3)m in respect of changes in the value of CLO debt and co-investments in our liquid credit funds. This is partially offset by a £16.4m valuation gain on CLO equity, driven by gains arising from actual defaults being lower than projections as well as by the passage of time increasing the current value of discounted future cashflows
2. Formerly North America Private Debt

In addition to the NIR, the IC recorded other revenue as follows:

As a result, the IC recorded total revenues of £98.4m (FY22 revenue: £451.7m).

Investment Company expenses

Operating expenses in the IC of £103.1m decreased by 13% compared to FY22 (£118.6m), which was largely due to a £22.9m reduction in incentive scheme costs:

Lower incentive scheme costs were predominantly the result of lower accrual of DVB during the period: £36.6m compared to £66.5m in FY22. DVB, which is linked to the performance of certain investments within the balance sheet investment portfolio, only pays out upon cash realisations.

Employee costs for teams who do not yet have a third-party fund are allocated to the IC. For FY23, the directly-attributable costs within the Investment Company for teams that have not had a first close of a third-party fund was £24.4m (FY22: £15.4m). When those funds have a first close, the costs of those teams are transferred to the Fund Management Company.

Interest expense was £61.8m (FY22: £50.5m) and interest earned on cash balances was £13.9m (FY22: nil).

The IC therefore recorded a (loss) before tax of £(52.6)m (FY22: profit before tax £282.6m).

Group

Tax

The Group recognised a tax charge of £(28.8)m (FY22: tax charge of £(30.8)m), resulting in an effective tax rate for the period of 11.2% (FY22: 5.4%). The increase compared to the prior year is due to the change in composition of our earnings and the lower NIR in FY23 compared to FY22.

As detailed in note 14, the Group has a structurally lower effective tax rate than the statutory UK rate. This is largely driven by the Investment Company, where certain forms of income benefit from tax exemptions. The effective tax rate will vary depending on the income mix.

Dividend

The Board of ICG is simplifying our dividend policy and reaffirming it as a progressive dividend policy, demonstrating our confidence in the long-term growth prospects of the business. Over the long-term, the Board intends to increase the dividend per share by at least mid-single digit percentage points on an annualised basis. The dividend will continue to be paid in two instalments, with the interim dividend being one third of the prior year’s total dividend.

For FY23, in addition to the 25.3p per share interim dividend, the Board is proposing a 52.2p per share final dividend. This would result in a total dividend of 77.5p per share being paid for the year, an increase of 2.0% compared to FY22 (76.0p). Over the last five years, ordinary dividends per share have increased at an annualised rate of 21%. We continue to make the dividend reinvestment plan available.

Balance sheet

Balance sheet strategy

Delivering our strategy and maximising shareholder value requires a clear approach to managing our balance sheet. We have a robust, diversified balance sheet and a strong liquidity position that allows us to invest in the business through economic cycles. This provides us with significant strategic and financial flexibility, enabling us to take advantage of opportunities to generate future incremental fee income.

Our approach to managing our balance sheet is structured around three priorities. These ensure we have the financial and operational flexibility to successfully execute our strategic objectives:

Align the Group’s interests with its clients:

• co-invest in our strategies alongside our clients, whilst seeking to reduce the Group’s commitments over time where appropriate

Grow third-party fee income in the FMC:

• fund and warehouse seed investments to launch new strategies that will be a source of future incremental management fees in the FMC

Maintain robust capitalisation:

• retain strong liquidity
• long-term objective of zero net gearing

Liquidity and net debt

At 31 March 2023 the Group had total available liquidity of £1,100m (FY22: £1,312m), net financial debt of £988m (FY22: £893m) and net gearing of 0.50x (FY22: 0.45x).

During the period cash reduced by £212m from £762m to £550m, including the repayment of £195m of borrowings that matured.

The table below sets out movements in cash, including certain APM metrics, which management believes will help shareholders understand where cash is being generated and used within the Company. The Glossary sets out the reconciliations from the APM cash measures in the table below to the UK-adopted IAS measures of Net cash flows from/(used in) operations; Net cash flows from/(used in) investing activities; and Net cash flows from/(used in) financing activities.

1. The aggregate cash (used)/received from balance sheet investment portfolio (additions), realisations, and cash proceeds received from assets within the balance sheet investment portfolio
2. Interest paid, which is classified as an Operating cash flow under UK-adopted IAS, is reported within Group cashflows from financing activities – APM
3. Investing cashflows (UK-adopted IAS) in respect of purchase of intangible assets, purchase of property, plant and equipment and net cashflow from derivative financial instruments (“Net cash flows used in financing activities” per Note 4) and “Payment of principal portion of lease liabilities” (see Note 4)

At 31 March 2023, the Group had drawn debt of £1,538m (31 March 2022: £1,655m). The change is due to the repayment of certain facilities as they matured, along with changes in FX rates impacting the translation value:

Net financial debt therefore increased to £988m (31 March 2022: £893m):

During the period the Group’s credit rating provided by S&P was upgraded to BBB, and at 31 March 2023 the Group had credit ratings of BBB (stable outlook) / BBB (stable outlook) from Fitch and S&P, respectively.

The Group’s drawn debt is provided through a range of facilities. All facilities except the ESG-linked RCF are fixed-rate instruments. The weighted average cost of drawn debt at 31 March 2023 was 3.17% (31 March 2022: 3.29%). The weighted-average life of drawn debt at 31 March 2023 was 4.1 years (31 March 2022 4.6 years). The maturity profile of our term debt is set out below:

For further details of our debt facilities see Other Information (page 93).

Net asset value

Shareholder equity increased to £1,977m at 31 March 2023 (31 March 2022: £1,995m), equating to 694p per share (31 March 2022: 696p):

Net gearing

The movements in the Group’s cash position, debt facilities and shareholder equity resulted in net gearing increasing to 0.50x at 31 March 2023 (31 March 2022: 0.45x). We maintain our long-term objective of having zero net gearing.

Foreign exchange rates

The following foreign exchange rates have been used throughout this review:

We report our AUM in dollars: 56.1% of our fee-earning AUM at 31 March 2023 was in euros; 30.6% in dollars; 11.5% in sterling; and 1.8% in other currencies.

At 31 March 2023 our third-party AUM was $77.0bn, based on FX rates at 31 March 2023. If GBP:USD had been 5% higher (1.2954) our reported third-party AUM would have been $0.5bn higher. If EUR:USD had been 5% higher (1.1388) our reported third-party AUM would have been $2.2bn higher.

Where noted, this review presents changes in AUM, third-party fee income and FMC PBT on a constant exchange rate basis. For the purposes of these calculations, prior period numbers have been translated from their underlying fund currencies to the reporting currencies at the respective FY23 period end exchange rates. This has then been compared to the FY23 numbers to arrive at the change on a constant currency exchange rate basis.

During the year the Group changed its policy regarding hedging of non-sterling net fee income. Previously the Group’s policy was to hedge non-sterling fee income to the extent that it was not matched by costs and was predictable (transaction hedges). For FY23 FMC revenue included a negative impact of £(26.8)m due to changes in the fair value of these transaction hedges (FY22: £(0.4)m). During the financial year the Group decided to no longer enter into transaction hedges as a matter of course (although it may still do so on an ad hoc basis), and economically closed out all outstanding transaction hedges.

The table below sets out the indicative impact on our reported management fees, FMC PBT and NAV per share had sterling been 5% weaker or stronger against the euro and the dollar in the period (excluding the impact of any legacy hedges):

1. Impact assessed by sensitising the average FY23 FX rates. Excluding impact of legacy hedges
2. NAV / NAV per share reflects the total indicative impact as a result of a change in FMC PBT and net currency assets

RISK MANAGEMENT

Managing risk

Effective risk management is a core competence underpinned by a strong control culture.

Our approach

The Board is accountable for the overall stewardship of ICG’s Risk Management Framework (RMF), internal control assurance, and for determining the nature and extent of the risks it is willing to take in achieving the Group’s strategic objectives. In so doing the Board sets a preference for risk within a strong control environment to generate a return for investors and shareholders and protect their interests.

The risk appetite is reviewed by the Risk Committee, on behalf of the Board, and covers the principal risks that the Group seeks to take in delivering the Group’s strategic objectives.

The Risk Committee is provided with management information regularly and monitors performance against set thresholds and limits to support the achievement of the Group’s strategic objectives, within the boundaries of the agreed risk appetite. The Board also seeks to promote a strong risk management culture by encouraging acceptable behaviours, decisions, and attitudes toward taking and managing risk throughout the Group.

Managing risk

Risk management is embedded across the Group through ICG’s RMF, which ensures that current and emerging risks are identified, assessed, monitored, controlled, and appropriately governed based on a common risk taxonomy and methodology. The RMF is designed to protect the interests of stakeholders and meet our responsibilities as a UK listed company and the parent company of a number of regulated entities.

The Board’s oversight of risk management is proactive, ongoing and integrated into the Group’s governance processes. The Board receive regular reports on the Group’s risk management and internal control systems. These reports set out any significant risks facing the Group, and changes made to the systems. Evaluating risk events and corrective actions supports the Board’s assessment of the Group’s effectiveness at mitigating event impacts. The Board also meet regularly with the internal and external auditors to discuss their findings and recommendations, which helps it gain insight into areas that require improvement. The Board reviews the Risk Management Framework regularly, and it forms the basis on which the Board reaches its conclusions on the effectiveness of the Group’s system of internal controls.

Taking risk opens up opportunities to innovate and further enhance our business, for example new investment strategies or new approaches to managing our client relationships. Therefore, we maintain a risk culture that provides entrepreneurial leadership within a framework of prudent and effective controls to enable effective risk management.

Taking responsibility and managing risk is one of our key values that drive our success.

Lines of defence

We operate a risk framework consistent with the principles of the ‘three lines of defence’ model. This ensures clarity over responsibility for risk management and segregation of duties between those who take on risk and manage risk, those who oversee risk and those who provide assurance.

• The first line of defence is the business functions and their respective line managers, who own and manage risk and controls across the processes they operate.
• The second line of defence is made up of the control and oversight functions who provide assurance that risk management policies and procedures are operating effectively.
• The third line of defence is Internal Audit who provide independent assurance over the design and operation of controls established by the first and second lines to manage risk.

Assessing risk

The Group adopts both a top-down and a bottom-up approach to risk assessment:

• The Risk Committee undertakes a top-down review of the external environment and the strategic planning process to identify the most consequential and significant risks to the Group’s businesses. These are referred to as the principal risks.
• The business undertakes a bottom-up review which involves a comprehensive risk assessment process designed to facilitate the identification and assessment of key risks and controls related to each business function’s most important objectives and processes. This is primarily achieved through the risk and control self-assessment process (RCSA).

The risk assessment process is supported by the Group’s Risk Taxonomy which is a top-down comprehensive set of risk categories designed to encourage those involved in risk identification to consider all types of risks that could affect the Group’s strategic objectives.

Key developments in FY23

During the year the Group undertook its first Internal Capital Adequacy and Risk Assessment (ICARA) under the requirements of the UK Investment Firm’s Prudential Regulation (IFPR). The new regime sets new capital and liquidity requirements, revised remuneration and governance standards and requires ICG to complete an ICARA for our relevant UK entities. The Group is now identifying, assessing, and managing risk of harm to clients, markets, and the Group itself.

Other key initiatives included:

• Monitoring the Russia-Ukraine crisis for potential risks to people, assets, operations, and supply chains in the region and globally.
• Monitoring the macro-economic environment – the inflationary pressure, rising interest rates and ongoing disruption to international supply chains – and adapting our approach as appropriate.
• Supporting the Audit Committee in its oversight of the Group’s plans to implement the UK Government’s audit reform proposals and strengthening internal controls.
• Monitoring risks associated with the Group’s transformation agenda, recognising the challenges of implementation and successful delivery.
• Enhancing the combined assurance process to provide an integrated and coordinated approach to align the Group’s assurance activities across the Group.
• Monitoring the Group’s technology and resiliency requirements to ensure that the management of cyber risk remains appropriate to mitigate the continued and changing nature of the threat and to support the growth of the business.
• Further embedding ESG into the Risk Management Framework.
• Improving the use of risk information and incorporating risk connectivity into the Group’s Risk Management Framework to allow for more proactive management of risk.

Principal risks and uncertainties

The Group’s principal risks are individual risks, or a combination of risks, that can seriously affect the performance, future prospects or reputation of the Group. These include those risks that would threaten the Group’s business model, future performance, solvency, or liquidity. The Group considers its principal risks across three categories:

1. Strategic and business risks

The risk of failing to respond to developments in our industry sector, client demand or the competitive environment, impacting the successful delivery of our strategic objectives.

1. Financial risks

The risk of an adverse impact on the Group due to market fluctuations, counterparty failure or having insufficient resources to meet financial obligations.

1. Operational risks

The risk of loss resulting from inadequate or failed internal processes, people or systems and external events.

Reputational risk is not in itself one of the principal risks. However, it is an important consideration and is actively managed and mitigated as part of the wider risk management framework.

We use a principal and emerging risks process to provide a forward-looking view of the potential risks that can threaten the execution of the Group’s strategy or operations over the medium to long term. We proactively assess the internal and external risk environment, as well as review the themes identified across our global businesses for any risks that may require escalation, updating our principal and emerging risks as necessary. The Board, Risk Committee and Executive Directors continue to monitor relevant impacts on the business which are considered further below.

Within the three categories noted above, the Group’s RMF identifies eight principal risks which are accompanied by the associated responsibilities and expectations around risk management and control. Each of the principal risks is overseen by an accountable Executive Director, who is responsible for the framework, policies and standards that detail the related requirements.

The Directors confirm that they have undertaken a robust assessment of the principal risks in line with the requirements of the UK Corporate Governance Code, and that no significant failings or weaknesses in internal controls has been identified. In making this assessment the Directors consider the likelihood of each risk materialising, in the short and long term. This is supported by an annual Material Controls assessment and Fraud Risk Assessment, facilitated by the Group Risk Function, which provides the Directors with a detailed assessment of related internal controls. Additionally, Internal Audit findings, Compliance Monitoring findings, and risk events reported during the period are reviewed to assess whether any deficiency has been identified which is a significant failing or weakness.

External environment risk

Risk appetite: Moderate

Executive Director Responsible: Benoît Durteste

Fund performance risk

Risk appetite: Moderate

Executive Director Responsible: Benoît Durteste

Financial Risk

Risk appetite: Low to moderate

Executive Director Responsible: Vijay Bharadia

Key Personnel Risk

Risk appetite: Low to moderate

Executive Director Responsible: Antje Hensel-Roth

Legal, Regulatory and Tax Risk

Risk appetite: Low

Executive Director Responsible: Vijay Bharadia

Operational Resilience Risk

Risk appetite: Low to moderate

Executive Director Responsible: Vijay Bharadia

Third-Party Provider Risk

Risk appetite: Moderate

Executive Director Responsible: Vijay Bharadia

Key Business Process Risk

Risk appetite: Low to moderate

Executive Director Responsible: Vijay Bharadia

Climate Risk

The Group’s risk management framework defines how climate risk, and broader ESG risks, are assessed for their proximity and significance to the Group. Climate risk is considered a cross-cutting risk type that manifests through all of ICG’s established principal risks. While our direct operations have very limited exposure to climate-related risk, it is integrated into the Group-wide operational risk management framework through existing policies, processes, and controls. We consider the climate-related risks and opportunities surrounding our third-party funds and our fund management activities as a key part of our business. Climate-related risk for both our own operations and our fund management activity are addressed in greater detail in ICG’s TCFD disclosures.

Please refer to note 1 of the financial statements on page 39 which sets out how this risk has been considered in the basis of preparation.

Emerging risks

Emerging risks are thematic risks with potentially material unknown components that may form and crystallise beyond a one-year time horizon. If an emerging risk were to materialise, it could have a material effect on the Group’s long-term strategy, profitability, and reputation. Existing mitigation plans are likely to be minimal, reflecting the uncertain nature of these risks at this stage.

Emerging risks are identified through conversations and workshops with stakeholders throughout the business, attending industry events, and other horizon scanning by Group Risk and Compliance. The purpose of monitoring and reporting emerging risks is to give assurance that the Group is prioritising our response to emerging risks appropriately in our strategy, which is the primary risk management tool for longer-term strategic risks.

Examples of emerging risks which have been considered during the year include; current and developing macro challenges, including the elevated levels of inflation and interest rate rises that could impact the Group and our fund investments; ongoing risks related to the transformation programmes underway to deliver our strategy for growth; implications of IFPR; and the increased importance of diversity and other social issues.

Risk appetite for the principal risks

Risk appetite is defined as the level of risk which the Group is prepared to accept in the conduct of our activities. It sets the ‘tone from the top’ and provides a basis for ongoing dialogue between management, Executive Directors, and the Board with respect to the Group’s current and evolving risk profile, allowing strategic and financial decisions to be made on an informed basis. The risk appetite framework is implemented through the Group’s operational policies and procedures and internal controls and supported by limits to control exposures and activities that have material risk implications.

RESPONSIBILITY STATEMENT

The responsibility statement below has been prepared in connection with the Company’s full annual report for the year ending 31 March 2023. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

• the financial statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

This responsibility statement was approved by the Board of Directors on 24 May 2023 and is signed on its behalf by:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2023

Other than for amounts reported as discontinued operations, all activities represent continuing operations.

The accompanying notes 1 to 34 are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2023

The accompanying notes 1 to 34 are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2022

1. Retained earnings and Non-controlling interest have been restated. See Note 2 for more details.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the year ended 31 March 2022

The Group’s cash and cash equivalents include £407.5m (2022: £230.3m) of restricted cash held principally by structured entities controlled by the Group (see note 6).

The presentation of the consolidated statement of cash flows have been updated to improve the presentation of this information. The reconciliation of cash generated from/used in operations to profit before tax from continuing operations is now disclosed in note 32.

The accompanying notes 1 to 34 are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2022

1. The capital redemption reserve is a reserve created when a company buys its own shares which reduces its share capital. £1.4m of the balance relates to the conversion of ordinary shares and convertible shares into ordinary shares in 1994. The remaining £3.6m relates to the cancellation of treasury shares in 2015.
2. Other comprehensive income/(expense) reported in the foreign currency translation reserve represents foreign exchange gains and losses on the translation of subsidiaries reporting in currencies other than sterling.
3. The movement in the Group Own shares reserve in respect of Options/awards exercised, represents the employee shares vesting net of personal taxes and social security.
4. The associated personal taxes and social security liabilities are settled by the Group with the equivalent value of shares retained in the Own shares reserve.
5. Retained earnings and Non-controlling interest brought forward as at 1 April 2022 have been restated. See Note 2 for more details.

The accompanying notes 1 to 34 are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. General information and basis of preparation

General information

Intermediate Capital Group plc (the ‘Parent Company’, ‘Company’ or ‘ICG plc’) is a public company limited by shares, incorporated, domiciled and registered in England and Wales under the Companies Act, with the company registration number 02234775. The registered office is Procession House, 55 Ludgate Hill, New Bridge Street, London EC4M 7JW.

The consolidated financial statements for the year to 31 March 2023 comprise the financial statements of the Parent Company and its consolidated subsidiaries (collectively, the ‘Group’). The nature of the Group’s operations and its principal activities are detailed in the Strategic Report.

Basis of preparation

The consolidated financial statements of the Group and Company are prepared in accordance with UK-adopted international accounting standards (‘UK-adopted IAS’) and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of section 408 of the Companies Act 2006 not to present the Parent Company profit and loss account.

The financial statements have been prepared on a going concern basis and under the historical cost convention, except for financial instruments that are measured at fair value through profit and loss at the end of the reporting period, as detailed in note 5, and certain investments in associates and joint ventures held for venture capital purposes, as detailed in note 30.

In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The judgements, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Details of the critical judgements made, and key sources of estimation uncertainty, are included in note 1 and in the note to which the critical judgement or source of estimation uncertainty relates.

In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context of the climate change risks identified in the TCFD Report. The Directors’ considerations included the medium and longer-term cash flow impacts of climate change on a number of key estimates within the financial statements, including:

• the valuation of financial assets; and
• the application of the Group’s revenue recognition policy, primarily the impact on the net asset value (‘NAV’) of funds on which performance-related fees are generated.

These considerations did not have a material impact on the financial reporting judgements and estimates in the current year. This reflects the conclusion that climate change is not expected to have a significant impact on the Group’s short-term cash flows including those considered in the going concern and viability assessments.

The accounting policies as set out in the notes to the accounts have been applied consistently to all periods presented in these consolidated financial statements.

Basis of consolidation

The Group’s financial statements consolidate the results of Intermediate Capital Group plc and entities controlled by the Company for the period to 31 March each year. Control is achieved when the Company has power over the relevant activities, exposure to variable returns from the investee, and the ability to affect those returns through its power over the investee.

The assessment of control is based on all relevant facts and circumstances and the Group reassesses its conclusion if there is an indication that there are changes in facts and circumstances. Subsidiaries are included in the consolidated financial statements from the date that control commences, until the date that control ceases. See note 28 which lists the Group’s subsidiaries and controlled structured entities.

Each component of other comprehensive income and profit or loss is attributed to the owners of the Company and to the non-controlling interests.

Adjustments are made where required to the financial statements of subsidiaries for consistency with the accounting policies of the Group. All intra-group transactions, balances, unrealised income and expenses are eliminated on consolidation.
1. General information and basis of preparation continued

Critical judgements in the application of accounting policies and key sources of estimation uncertainty

Critical judgement

In preparing the financial statements, apart from those involving estimations, two critical judgements have been made by the Directors in the application of the Group’s accounting policies:

• The Group’s assessment as to whether it controls certain investee entities, including third-party funds and carried interest partnerships, and is therefore required to consolidate the investee, as detailed above. The Group’s assessment of this critical judgement is discussed further in note 28.
• The application of the Group’s revenue recognition policy in respect of the performance fee component of management fees. Judgement is primarily applied in considering the timings of when expected performance conditions will be met and the appropriate constraint to be applied. The Group’s assessment of this critical judgement is discussed further in note 3.

Key sources of estimation uncertainty

The key sources of estimation uncertainty at the reporting date, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, results from the Group’s assessment of fair value of its financial assets and liabilities (discussed further in note 5 and note 7) and the impact of this assessment on trade and other payables related to the Deal Vintage Bonus (‘DVB’) – see notes 13 and 21.

Critical judgements and key sources of estimation uncertainty are reviewed by the Audit Committee during the year.

Foreign currencies

The functional currency of the Company is sterling as the Company’s shares are denominated in sterling and the Company’s costs are primarily incurred in sterling. The Group has determined the presentational currency of the Group is the functional currency of the Company. Information is presented to the nearest million (£m).

Transactions denominated in foreign currencies are translated using the exchange rates prevailing at the date of the transactions. At each reporting date, monetary assets and liabilities denominated in a foreign currency are retranslated at the rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated at the rate prevailing at the date the fair value was determined. Non-monetary items that are measured at historical cost are translated using rates prevailing at the date of the transaction.

The assets and liabilities of the Group’s foreign operations are translated using the exchange rates prevailing at the reporting date. Income and expense items are translated using the average exchange rates during the year. Exchange differences arising from the translation of foreign operations are taken directly to the foreign currency translation reserve. On disposal of a foreign operation, exchange differences previously recognised in other comprehensive income are reclassified to the income statement.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of preparing the financial statements.

In assessing the Group’s ability to continue in its capacity as a going concern, the Board and the Executive Directors of the Group considered:

• The impact of conflict in Ukraine and the macro-inflationary backdrop on investment performance
• The impact on the Group’s fee income. Specifically, performance-related revenue, as part of this assessment the Group performed additional sensitivity analysis around performance fees and the impact this would have on overall fee income. This is discussed in note 3
• The adequacy of the Group’s capital and liquidity and potential shortfalls in access to capital. As at 31 March 2023 the Group has available liquidity of £1.1bn, including £550m of undrawn debt facilities. The macro-economic stress scenarios were in line with those used in the Internal Capital Adequacy and Risk Assessment (‘ICARA’) stress test
• The operational resilience of the Group’s critical functions and key service providers to maintain risk management and compliance, including IT, finance, treasury and operations
• The regulatory and legal environment and any potential conduct risks which could arise
• The appropriateness of valuation techniques applied to determine the fair value of investments that are not quoted in an active market. This is discussed further in note 5

1. General information and basis of preparation continued

• Those entities which are not controlled by the Group but where the Group has a joint venture relationship or has significant influence over an associate and whether they have the ability to continue as a going concern. These risks have been captured in the Group’s overall fair value assessments of the underlying assets described in note 5

The Directors have concluded based on the above assessment that the preparation of the financial statements on a going concern basis, to 30 November 2024, a 18 month from the date of signing of the financial statements, continues to be appropriate.

2. Changes in accounting policies and disclosures

New and amended standards and interpretations

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. These new standards are not expected to have a material impact on the Group.

Changes in significant accounting policies

No changes to significant accounting policies were implemented.

Group restatements

The Group has restated the Consolidated Statement of Financial Position and Consolidated Statement of Changes in Equity as a result of the reversal of an allocation of retained earnings to non-controlling interest. As a result of the reversal the following has been restated:

1. Retained Earnings increased by £25.1m from £1,688.9m to £1,714.0m; and
2. Non-controlling interest reduced by £25.1m from £55.1m to £30.0m

3. Revenue

Revenue and its related cash flows, within the scope of IFRS 15 ‘Revenue from Contracts with Customers’, are derived from the Group’s fund management company activities and are presented net of any consideration payable to a customer in the form of rebates. The significant components of the Group’s fund management revenues are as follows:

⁴Included within management fees is £22.4m (2022: £57.5m) of performance related fees.

Management fees

The Group earns management fees from its investment management services. Management fees are charged on third-party capital managed by the Group and are based on an agreed percentage of either committed capital, invested capital or NAV, dependent on the fund. Management fees comprise both non-performance and performance-related fee elements related to one contract obligation . Non-performance-related management fees for the year of £459.2m (2022: £371.9m) are charged in arrears and are recognised in the period services are performed.

Performance-related management fees (performance fees) are recognised only to the extent it is highly probable that there will not be a significant reversal of the revenue recognised in the future. This is generally towards the end of the contract period or upon early liquidation of a fund. The estimate of performance fees is made with reference to the liquidation profile of the fund, which factors in portfolio exits and timeframes. For certain funds the estimate of performance fees is made with reference to specific requirements. A constraint is applied to the estimate to reflect uncertainty of future fund performance. Performance fees of £22.4m (2022: £57.5m) have been recognised in the year. Performance fees will only be crystallised and received in cash when the relevant fund performance hurdle is met.

There are no other individually significant components of revenue from contracts with customers.

Critical judgement

A critical judgement for the Group is whether performance fees will meet their expected performance conditions within the expected timeframes. The Group bases its assessment on the best available information pertaining to the funds and the activity of the underlying assets within that fund. The valuation of the underlying assets within a fund will be subject to fluctuations in the future, including the impact of macroeconomic factors outside the Group’s control. The information on which this judgement is based is the liquidation NAV of the relevant funds (which are subject to annual audit).

The Directors base their projected views on a 24-month look-forward basis, the ‘forecast period’, from the year end. The Directors believe they have a reasonable basis on which to judge expected exits and value within a 24-month horizon, but not beyond that.

Within this forecast period, the Directors will consider funds that have either reached their hurdle rate or are expected to reach the hurdle rate in the forecast period. In determining whether a fund is expected to reach the hurdle rate, the key inputs are the latest expected repayment dates of the underlying assets and expected proceeds on realisation, as approved by the Fund Investment Committees.

Where the hurdle date is expected to be reached within 24 months of the year end but performance fees are not yet paid, a constraint will be applied within the determination of the performance fee receivable. Application of the constraint limits the revenue recognised. This is assessed by on a case-by-case basis.

The weighted-average constraint at the reporting date is 43% (2022: 46%). If the average constraint were to increase by 10 percentage points to 53% (2022: 56%) this would result in a reduction in revenue of £1.13m (2022: £0.62m). Conversely, a 10% decrease in constraint would result in an increase in revenue of £1.13m (2022: £0.55m) being recognised in the income statement. In certain limited circumstances performance fees received may be subject to clawback provisions if the performance of the fund deteriorates materially following the receipt of performance fees.

4. Segmental reporting

For management purposes, the Group is organised into two operating segments, the Fund Management Company (‘FMC’) and the Investment Company (‘IC’) which are also reportable segments. In identifying the Group’s reportable segments, management considered the basis of organisation of the Group’s activities, the economic characteristics of the operating segments, and the type of products and services from which each reportable segment derives its revenues. Total reportable segment figures are alternative performance measures (‘APM’).

The Executive Directors, the chief operating decision makers, monitor the operating results of the FMC and the IC for the purpose of making decisions about resource allocation and performance assessment. The Group does not aggregate the FMC and IC as those segments do not have similar economic characteristics. Information about these segments is presented below.

The FMC earns fee income for the provision of investment management services and recognises the fair value movement on any associated hedging derivatives and incurs the majority of the Group’s costs in delivering these services, including the cost of the investment teams and the cost of support functions, primarily marketing, operations, information technology and human resources.

The IC is charged a management fee of 1% of the carrying value of the average balance sheet investment portfolio by the FMC and this is shown below as the Inter-segmental fee. It recognises the fair value movement on any associated hedging derivatives. The costs of finance, treasury and legal teams, and other Group costs primarily related to being a listed entity, are allocated to the IC. The remuneration of the Executive Directors is allocated equally to the FMC and the IC.

The amounts reported for management purposes in the tables below are reconciled to the UK-adopted IAS reported amounts on the following pages.

Reconciliation of APM amounts reported for management purposes to the financial statements reported under UK-adopted IAS

Included in the following tables are statutory adjustments made to the following:

• All income generated from the balance sheet investment portfolio is presented as net investment returns for reportable segments purposes, whereas under UK-adopted IAS it is presented within gains on investments and other operating income.
• The structured entities controlled by the Group are presented as fair value investments for reportable segments (APM), whereas the statutory financial statements present these entities on a consolidated basis under UK-adopted IAS. The impact of this consolidation on profit before tax is shown in the table on the following page.
• The warehouse funds, their investments and other current assets within controlled entities are presented as fair value investments for reportable segments (APM), whereas the statutory financial statement present these entities on a consolidated basis under UK-adopted IAS. The impact of this consolidation is disclosed within ‘Gain/(loss) after tax from discontinued operations’ on the following page with further detail in note 29.

4. Segmental reporting continued

Consolidated income statement

4. Segmental reporting continued

Consolidated statement of financial position

4. Segmental reporting continued

Consolidated statement of cash flows

4. Segmental reporting continued

4. Segmental reporting continued

Geographical analysis of non-current financial assets at fair value

Geographical analysis of Group revenue

5. Financial assets and liabilities

5. Financial assets and liabilities continued

Fair value measurements recognised in the statement of financial position

The information set out below provides information about how the Group and Company determines fair values of various financial assets and financial liabilities, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs)

The following table summarises the valuation of the Group’s financial assets and liabilities by fair value hierarchy:

1. Level 3 Investments in or alongside managed funds includes £47.8m senior debt (2022: £41.1m), £1,319.8m subordinated debt and equity (2022: £1,487.7m), £284.5m of real estate assets (2022: £215.1m), and £492.2m private equity secondaries (2022: £369.0m).
2. Level 3 Investment in private companies includes £91.3m subordinated debt and equity (2022: £96.2m) and £9.1m of real estate assets (2022: £26.5m).

5. Financial assets and liabilities continued

Valuations

Valuation process

The Group Valuation Committee (‘GVC’) oversees the valuation processes and provides independent review of the methodologies, models and assumptions used to value the Level 3 assets and liabilities, in accordance with the principles and guidelines set out in the Group Valuation Policy, and to assess the reasonableness of the resulting fair value measurement. The GVC reviewed valuations on a quarterly basis and reports to the Audit Committee semi-annually. The GVC is independent of the boards of directors of the funds and no member of the GVC is a member of either the Group’s investment teams or Investment Committees (‘IC’s).

Valuation methodologies are identified for each category of Level 3 assets, based on the specific characteristics of each asset and liability and considering factors such as the nature, complexity, and risk profile of the investment. Each asset is attributable to a fund or investment strategy managed by the Group.

The IC of that fund or strategy is responsible for the review, challenge, and approval of the related funds’ valuations of the assets managed by that strategy investment team. Sources of the valuation include the ICG investment team, third-party valuation services and third-party fund administrators. The IC provides those valuations to the Group, as an investor in the fund assets.

The IC is also responsible for escalating significant events regarding the valuation to the Group (as an investor in the fund assets), e.g. change in valuation methodologies, potential impairment events, material judgements etc.

The table in page 54 outlines in more detail the range of valuation techniques, as well as the key unobservable inputs for each category of Level 3 assets and liabilities.

Investment in or alongside managed funds

When fair values of publicly traded closed-ended funds and open-ended funds are based on quoted market prices in an active market for identical assets without any adjustments, the instruments are included within Level 1 of the hierarchy. The Group values these investments at bid price for long positions and ask price for short positions.

The Group also co-invests with funds, including credit and private equity secondary funds, which are not quoted in an active market. The Group considers the valuation techniques and inputs used by these funds to ensure they are reasonable, appropriate and consistent with the principles of fair value. The latest available NAV of these funds are generally used as an input into measuring their fair value. The NAV of the funds are adjusted, as necessary, to reflect restrictions on redemptions, and other specific factors relevant to the funds. In measuring fair value, consideration is also given to any transactions in the interests of the funds. The Group classifies these funds as Level 3.

Investment in private companies

The Group takes debt and equity stakes in private companies that are, other than on very rare occasions, not quoted in an active market and uses either a market-based valuation technique or a discounted cash flow technique to value these positions.

The Group’s investments in private companies are held at fair value using the most appropriate valuation technique based on the nature, facts and circumstances of the private company. The first of two principal valuation techniques is a market comparable companies technique. The enterprise value (‘EV’) of the portfolio company is determined by applying an earnings multiple, taken from comparable companies, to the profits of the portfolio company. The Group determines comparable private and public companies, based on industry, size, location, leverage and strategy, and calculates an appropriate multiple for each comparable company identified. The second principal valuation technique is a discounted cashflow (‘DCF’) approach. Fair value is determined by discounting the expected future cashflows of the portfolio company to the present value. Various assumptions are utilised as inputs, such as terminal value and the appropriate discount rate to apply. Typically, the DCF is then calibrated alongside a market comparable companies approach. Alternate valuation techniques may be used where there is a recent offer or a recent comparable market transaction, which may provide an observable market price and an approximation to fair value of the private company. The Group classified these assets as Level 3.

Investment in public companies

Quoted investments are held at the last traded bid price on the reporting date. When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the contract is reflected on the trade date.
5. Financial assets and liabilities continued

Investment in loans held in consolidated structured entities

The loan asset portfolios of the consolidated structured entities are valued using observable inputs such as recently executed transaction prices in securities of the issuer or comparable issuers and from independent loan pricing sources. To the extent that the significant inputs are observable the Group classifies these assets as Level 2 and other assets are classified as Level 3. Level 3 assets are valued using a discounted cashflow technique and the key inputs under this approach are detailed on page 54.

Derivative assets and liabilities

The Group uses market-standard valuation models for determining fair values of over-the-counter interest rate swaps, currency swaps and forward foreign exchange contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including both credit and debit valuation adjustments for counterparty and own credit risk, foreign exchange spot and forward rates and interest rate curves. For these financial instruments, significant inputs into models are market observable and are included within Level 2.

Senior and subordinated notes of CLO vehicles

The Group holds investments in the senior and subordinated notes of the CLOs it manages, predominately driven by European Union risk-retention requirements. The Group employs DCF analysis to fair value these investments, using several inputs including constant annual default rates, prepayments rates, reinvestment rates, recovery rates and discount rates.

The DCF analysis at the reporting date shows that the senior notes are typically expected to recover all contractual cashflows, including under stressed scenarios, over the life of the CLOs. Unobservable inputs are used in determining the fair value of subordinated notes, which are therefore classified as Level 3 instruments. Observable inputs are used in determining the fair value of senior notes and these instruments are therefore classified as Level 2.

Liabilities of consolidated credit funds

Rated debt liabilities of consolidated CLOs are generally valued at par plus accrued interest, which we assess as fair value, as evidenced by the general availability of market prices and discounting spreads for rated debt liabilities of CLOs. This is consistent with the valuation approach of the rated debt assets held in the unconsolidated CLOs. As a result we deem these liabilities as Level 2.

Unrated/subordinated debt liabilities of consolidated CLOs are valued directly in line with the fair value of the CLOs’ underlying loan asset portfolios. These underlying assets comprise observable loan securities traded in active markets. The underlying assets are reported in both Level 2 and Level 3. As a result of this methodology deriving the valuation of unrated/subordinated debt liabilities from a combination of Level 2 and Level 3 asset values, we deem these liabilities to be Level 3.

Real estate assets

To the extent that the Group invests in real estate assets, whether through an investment in a managed fund or an investment in a private company, the underlying assets may be a debt instrument or property classified as investment property in accordance with IAS 40 ‘Investment Property’. The fair values of the directly held investment properties have been recorded based on independent valuations prepared by third-party real estate valuation specialists in line with the Royal Institution of Chartered Surveyors Valuation – Global Standards 2020. At the end of each reporting period, the Group reviews its assessment of the fair value of each property, taking into account the most recent independent valuations. The Directors determine a property value within a range of reasonable fair value estimates, based on information provided.

All resulting fair value estimates for properties are included in Level 3.

5. Financial assets and liabilities continued

1. During the year certain assets in Investments in loans held in consolidated entities were reassessed as Level 3 (from Level 2) and these changes are reported as a transfer in the year. Transfers out of Disposal groups held for sale represented the re-designation of an asset as Investment Property (see note 29)
2. Included within net investment returns are £141.8m of unrealised gains (which includes accrued interest).

1. During the year certain assets in Investments in or alongside managed fund and Investments in loans held in consolidated entities were reassessed from Level 3 and these changes are reported as a transfer in the year
2. Included within net investment returns are £439.7m of unrealised gains (which includes accrued interest) 
.

Reconciliation of Level 3 fair value measurements of financial liabilities

The following tables sets out the movements in reoccurring financial liabilities valued using the Level 3 basis of measurement in aggregate. Within the income statement, realised gains and fair value movements are included within gains on investments, and foreign exchange gains/(losses) are included within finance costs.

During the year ended 31 March 2023 changes in the fair value of the assets of consolidated credit funds resulted in a reduction in the fair value of the financial liabilities of those consolidated credit funds, reported as a ‘fair value gain’ in the table below.

Transfers in and out of Level 3 financial liabilities were due to changes to the observability of inputs used in the valuation of these liabilities.

5. Financial assets and liabilities continued

Valuation inputs and sensitivity analysis

The following table summarises the inputs and estimates used for items categorised in Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis:

1. Where the Group has co-invested with its managed funds, it is the type of the underlying investment, and the valuation techniques used for these underlying investments, that is set out here.
2. For investments valued using a DCF methodology (including Infrastructure investments) the imputed earnings multiple is used for this sensitivity analysis.
3. The sensitivity analysis is performed on the entire portfolio of subordinated notes of CLO vehicles that the Group has invested in with total value of £182.8m (2022: £174.2m). This value includes investments in CLOs that are not consolidated (2023: £7.5m (2022: £9.1m)) and investments in CLOs which are consolidated (2023: £175.3m (2022: £165.3m)). The upside case is based on the default rate being lowered to 2.5% p.a. for the next 24 months, keeping all other parameters consistent. The downside case is based on the default rate being increased over the next 24 months to 6.5% p.a., keeping all other parameters consistent.
4. The effect of fair value across the entire investment portfolio ranges from -£345.4m (downside case) to +£343.0m (upside case) (2022: -£281.0m (downside case) to +£279.3m (upside case).

5. Financial assets and liabilities continued

Derivative financial instruments

The Group holds £8.5m of cash pledged as collateral by its counterparties as at 31 March 2023. As at 31 March 2022 the value of cash held in margin accounts and therefore pledged as collateral by the Group was £27.0m. The counterparties were: Citigroup Global Markets Limited, Citibank NA, Lloyds Bank Corporate Markets Plc and ANZ. All the Credit Support Annexes that have been agreed with our counterparties are fully compliant with European Market Infrastructure Regulation ‘EMIR’.

There was no change in fair value related to credit risk, in relation to derivatives as at 31 March 2023 (31 March 2022: £nil).

Under the relevant International Swaps and Derivatives Association (‘ISDA’) Master Agreements in place with our counterparties, the close-out netting provision would result in all obligations under a contract with a defaulting party being terminated and there would be a subsequent combining of positive and negative replacement values into a single net payable or receivable. This reduces the credit exposure from gross to net.

6. Cash and cash equivalents

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as shown above.

The Group’s cash and cash equivalents include £407.5m (2022 : £230.3m) of restricted cash, held principally by structured entities controlled by the Group. The Group does not have legal recourse to these balances as their sole purpose is to service the interests of the investors in these structured entities.

In the current year £5.5m cash and cash equivalents were included in disposal groups held for sale (2022: £11.1m) (note 29).

7. Financial liabilities

7. Financial liabilities continued

¹ Unsecured bank debt represents the value of associated fees which are amortised over the life of the facility.

1. Financial liabilities held at amortised cost within Disposal Groups Held for Sale are disclosed in Note 29.

Other financial liabilities are lease liabilities. Details of the cash outflows related to leases are in the Consolidated statement of cash flows, interest expenses associated with lease liabilities are in note 11, the Right of Use (‘ROU’) assets and the income from subleasing ROU assets are in note 18.

The fair value of the Listed notes and bonds, being the market price of the outstanding bonds, is £613.1m (2022: £956.4m) . Private placements and unsecured bank debt is held at amortised cost which the Group has determined to be the fair value of these liabilities.

Movement in financial liabilities arising from financing activities

The following tables sets out the movements in total liabilities held at amortised cost arising from financing activities undertaken during the year.

8. Finance loss

9. Other income

10. Net gains on investments

11. Finance costs

12. Expenses

Further detail in respect of material administrative expenses reported on the income statement is set out below:

12. Expenses continued
Auditor’s remuneration includes fees for audit and non-audit services payable to the Group’s auditor, Ernst and Young LLP, and are analysed as below.

13. Employees and Directors

13. Employees and Directors continued
ICG plc, the Company, does not have any employees but relies on the expertise and knowledge of employees of ICG FMC Limited, Intermediate Capital Group Inc., Intermediate Capital Group SAS, Intermediate Capital Asia Pacific Limited and Intermediate Capital Group Polska Sp. z.o.o, subsidiaries of ICG plc.

Contributions to the Group’s defined contribution pension schemes are charged to the consolidated income statement as incurred.

The performance related element included in employee costs is £151.6m (2022: £169.7m) which represents the annual bonus scheme, Omnibus Scheme, the Growth Incentive Scheme and the DVB Scheme.

In addition, during the year, third-party funds have paid £46.0m (2022: £62.0m) to former employees and £93.4m (2022: £123.2m) to current employees, including Executive Directors, relating to distributions from investments in carried interest partnerships made by these employees in prior periods. Such amounts become due over time if, and when, specified performance targets are ultimately realised in cash by the funds and paid by the carried interest partnerships (‘CIPs’) of the funds (see note 28). As these funds and CIPs are not consolidated, these amounts are not included in the Group’s consolidated income statement.

14. Tax expense

14. Tax expense continued
The Group is an international business and operates across many different tax jurisdictions. Income and expenses are allocated to these jurisdictions based on transfer pricing methodologies set out both (i) in the laws of the jurisdictions in which the Group operates, and (ii) under guidelines set out by the Organisation for Economic Co-operation and Development (‘OECD’).

The effective tax rate reported by the Group for the period ended 31 March 2023 of 11.7% (2022: 5.5%) is lower than the statutory UK corporation tax rate of 19%.

The FMC activities are subject to tax at the relevant statutory rates ruling in the jurisdictions in which the income is earned. The lower effective tax rate compared to the statutory UK rate is largely driven by the IC activities. The IC benefits from statutory UK tax exemptions on certain forms of income arising from both foreign dividend receipts and gains from assets qualifying for the substantial shareholdings exemption. The effect of these exemptions means that the effective tax rate of the Group is highly sensitive to the relative mix of IC income, and composition of such income, in any one period.

Due to the application of tax law requiring a degree of judgement, the accounting thereon involves a level of estimation uncertainty which tax authorities may ultimately dispute. Tax liabilities are recognised based on the best estimates of probable outcomes and with regard to external advice where appropriate. The principal factors which may influence the Group’s future tax rate are changes in tax legislation in the territories in which the Group operates, the relative mix of FMC and IC income, the mix of income and expenses earned and incurred by jurisdiction and the timing of recognition of available deferred tax assets and liabilities. The Group accounts for future legislative change, to the extent that is enacted at the reporting date, in its recognition of deferred tax.

A reconciliation between the statutory UK corporation tax rate applied to the Group’s profit before tax and the reported effective tax rate is provided below.

14. Tax expense continued

Deferred tax

During the year deferred tax assets that reversed, due to timing differences, were mainly due to the utilisation of tax losses and unpaid interest expense in the Group’s US business. As set out in the table above in column ‘Share based payments and compensation deductible as paid’, deferred tax assets at the reporting date were solely due to employee remuneration schemes in the UK and US.
The Group has undertaken a review of the level of recognition of deferred tax assets and is satisfied they are recoverable and therefore have been recognised in full.
Deferred tax (assets)/liabilities have been accounted for at the applicable tax rates enacted or substantively enacted, in the relevant jurisdictions at the reporting dated. There are no deferred tax assets recognised on the basis of losses.
In its March 2021 Budget, the UK Government announced that the UK rate of corporation tax would increase from 19% to 25% from 1 April 2023 . This legislative change has been substantively enacted, and has been considered when calculating the closing deferred tax balances at the reporting date.
The OECD Pillar II proposals for a global minimum tax rate of 15% are due to be implemented from 1 April 2024 (financial year ending 31 March 2025). The Group has performed an impact analysis and does not expect the implementation to be significant. It is expected that the IASB will treat any impact as a ‘permanent in-the-year’’difference for financial year ending 31 March 2025 onwards.

15. Dividends
Accounting policy
Dividends are distributions of profit to holders of Intermediate Capital Group plc’s share capital and as a result are recognised as a deduction in equity. Final dividends are announced with the Annual Report and Accounts and are recognised when they have been approved by shareholders. Interim dividends are announced with the Half Year Results and are recognised when they are paid.

Of the £236.4m (2022: £165.7m) of ordinary dividends paid during the year, £4.3m (2022: £6.0m) were reinvested under the dividend reinvestment plan offered to shareholders.

16. Earnings per share

17. Intangible assets

Impairment of non-financial assets and goodwill

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

1. Goodwill was acquired in the ICG-Longbow Real Estate Capital LLP business combination and represents a single cash generating unit. The recoverable amount of the real estate cash generating unit is based on fair value less costs to sell where the fair value equates to a multiple of adjusted net income, in line with the original consideration methodology. The significant headroom on the recoverable amount is not sensitive to any individual assumption.
2. During the prior year the Group carried out a review of its intangible assets relating to investment management contracts. £0.3m was reclassified from intangible assets to financial assets.
3. Investment management contracts derecognised represented fully amortised balances.

17. Intangible assets continued
During the financial year ended 31 March 2023, the Group recognised an expense of £0.5m (2022: £0.6m) in respect of research and development expenditure.

18. Property, plant and equipment

Group as Lessor

18. Property, plant and equipment continued

1. The prior year figures have been re-presented to £0.4m receivable within one year, £1.1m receivable from one to five years.

19. Investment property

During the year, the Group held £284.0m (2022: £59.3m) of investment property within disposal groups held for sale (see note 29).

20. Trade and other receivables

20. Trade and other receivables continued

Non-current trade and other receivables excluding structured entities controlled by the Group comprises performance-related fees (see note 3).

21. Trade and other payables

Current trade and other payables excluding structured entities controlled by the Group includes £31.4m (2022: £69.4m) in respect of DVB, (see note 13) and non-current Trade and other payables excluding structured entities controlled by the Group is entirely comprised of amounts payable in respect of DVB

22. Financial risk management

The Group has identified financial risk, comprising market and liquidity risk, as a principal risk. Further details are set out on page 26. The Group has exposure to market risk (including exposure to interest rates and foreign currency), liquidity risk and credit risk arising from financial instruments.

Interest rate risk

The Group’s assets include both fixed and floating rate loans and non-interest-bearing equity investments.

The Group’s operations are financed with a combination of its shareholders’ funds, bank borrowings, private placement notes, public bonds, and fixed and floating rate notes. The Group manages its exposure to market interest rate movements by matching, to the extent possible, the interest rate profiles of assets and liabilities and by using derivative financial instruments.

The sensitivity of floating rate financial assets to a 100 basis points interest rate increase is £56.5m (2022: £55.5m) and to a decrease is £(56.5)m (2022: £(55.5)m). The sensitivity of financial liabilities to a 100 basis point interest rate increase is £47.1m (2022: £46.0m) and to a decrease is £(47.1)m (2022: £(46.0)m). These amounts would be reported within Net gains on investments. There is an indirect exposure to interest rate risk through the impact on the performance of the portfolio companies of the funds that the Group has invested in, and therefore the fair valuations. There is no interest rate risk exposure on fixed rate financial assets or liabilities.

Exposure to interest rate risk

Foreign exchange risk

The Group is exposed to currency risk in relation to non-sterling currency transactions and the translation of non-sterling net assets. The Group’s most significant exposures are to the euro and the US dollar. Exposure to market currency risk is managed by matching assets with liabilities to the extent possible and through the use of derivative instruments.

The Group regards its interest in overseas subsidiaries as long-term investments. Consequently, it does not normally hedge the translation effect of exchange rate movements on the financial statements of these businesses.

The Group is also exposed to currency risk arising on the translation of fund management fee income receipts, which are primarily denominated in euro and US dollar.

The effect of fluctuations in other currencies is considered by the Directors to be insignificant in the current and prior year. The net assets/(liabilities) by currency and the sensitivity of the balances to a strengthening of foreign currencies against sterling are shown below:

22. Financial risk management continued

The weakening of the above currencies would have resulted in an equal but opposite impact, being a decrease in net assets.

Liquidity risk

The Group makes commitments to its managed funds in advance of that capital being invested. These commitments are typically drawn over a five-year investment period (see note 26 for outstanding commitments). Funds typically have a 10-year contractual life. The Group manages its liquidity risk by maintaining headroom on its financing facilities, particularly its bank facilities.

The table below shows the liquidity profile of the Group’s financial liabilities, based on contractual repayment dates of principal and interest payments. Future interest and principal cash flows have been calculated based on exchange rates and floating rate interest rates as at 31 March 2023. It is assumed that Group borrowings under its senior debt facilities remain at the same level as at 31 March 2023 until contractual maturity. Included in financial liabilities are contractual interest payments. All financial liabilities, excluding structured entities controlled by the Group, are held by the Company.

Liquidity profile

Other financial liabilities are lease liabilities.
As at 31 March 2023 the Group has liquidity of £1,099.9m (2022: £1,311.5m) which consists of undrawn debt facility of £550m (2022: £550m) and £549.9m (2022: £761.5m) of unencumbered cash. Unencumbered cash excludes £407.6m (2022: £230.3m) of restricted cash held principally by structured entities controlled by the Group.

22. Financial risk management continued

¹ Disclosure now includes liquidity profile of Other Financial Liabilities and the prior year has been re-presented accordingly.

The Group’s policy is to maintain continuity of funding. Due to the long-term nature of the Group’s assets, the Group seeks to ensure that the maturity of its debt instruments is matched to the expected maturity of its assets.

Credit risk

Credit risk is the risk of financial loss to the Group as a result of a counterparty failing to meet its contractual obligations. This risk is principally in connection with the Group’s investments.

This risk is mitigated by the disciplined credit procedures that the relevant Fund Investment Committees have in place prior to making an investment and the ongoing monitoring of investments throughout the ownership period. In addition, the risk of significant credit loss is further mitigated by the Group’s policy to diversify its investment portfolio in terms of geography and industry sector and to limit the amount invested in any single company.

The Group is exposed to credit risk through its financial assets (see note 5) and investment in joint ventures reported at fair value.

Exposure to credit risk

22. Financial risk management continued
The Group manages its operational cash balance by the regular forecasting of cashflow requirements, debt management and cash pooling arrangements. Credit risk exposure on cash and derivative instruments is managed in accordance with the Group’s treasury policy which provides limits on exposures with any single financial institution. The majority of the Group’s surplus cash is held in AAA-rated Money Market funds. Other credit exposures arise from outstanding derivatives with financial institutions rated from BBB to AA-.

The Group is exposed to credit risk as a result of financing guarantees provided. The maximum exposure to guarantees is £7.9m (2022: £7.4m). No liability has been recognised in respect of these guarantees.

The Directors consider the Group’s credit exposure to trade and other receivables and current assets held for sale to be low and as such no further analysis has been presented. The Directors consider the credit risk of the investments within the structured entities controlled by the Group to be low.

The Group’s investments in CLOs and loans held within structured entities controlled by the Group principally comprise senior loans. The Group’s exposure to the credit risk of this collateral, in these consolidated entities, is limited to its investment into these entities, which at 31 March 2023 was £339.4m (2022: £426.0m).

The carrying amount of financial assets represents the Directors’ assessment of the maximum credit risk exposure of the Group and Company at the balance sheet date. Decreases in fair value during the year reflect the decline in prices on individual assets, as a result either of company specific or of general macroeconomic conditions.

Other than the Group investments in CLOs and loans held within structured entities controlled by the Group, the Group has no direct exposure to defaulted and past due financial assets.

Capital management

Managing capital is the ongoing process of determining and maintaining the quantity and quality of capital appropriate for the Group and ensuring capital is deployed in a manner consistent with the expectations of our stakeholders. The primary objectives of the Group’s capital management are (i) align the Group’s interests with its clients, (ii) grow third-party fee income in the FMC and (iii) maintain robust capitalisation, including ensuring that the Group complies with externally imposed capital requirements by the Financial Conduct Authority (the FCA). The Group’s strategy has remained unchanged from the year ended 31 March 2022.

(i) Regulatory capital requirements

The Group is required to hold capital resources to cover its regulatory capital requirements. The Group’s capital for regulatory purposes comprises the capital and reserves of the Company, comprising called up share capital, reserves and retained earnings as disclosed in the Statement of Changes in Equity (see page 38). The full Pillar 3 disclosures are available on the Group’s website: www.icgam.com.

(ii) Capital and risk management policies

The formal procedures for identifying and assessing risks that could affect the capital position of the Group are described in Risk Management on page 21. The capital structure of the Group under UK-adopted IAS consists of cash and cash equivalents, £957.5m (2022: £991.8m) (see note 6); debt, which includes borrowings, £1,536.7m, (2022: £1,653.4m) (see note 7) and the capital and reserves of the Company, comprising called up share capital, reserves and retained earnings as disclosed in the Statement of Changes in Equity, £825.8m (2022 : £943.9m). Details of the Reportable segment capital structure are set out in note 4.

23. Called up share capital and share premium

Share capital represents the number of issued ordinary shares in Intermediate Capital Group plc multiplied by their nominal value of 26¼p each.

Under the Company’s Articles of Association, any share in the Company may be issued with such rights or restrictions, whether in regard to dividend, voting, transfer, return of capital or otherwise as the Company may from time to time by ordinary resolution determine or, in the absence of any such determination, as the Board may determine. All shares currently in issue are ordinary shares of 26¼p each carrying equal rights. The Articles of Association of the Company cannot be amended without shareholder approval.

The Directors may refuse to register any transfer of any share which is not a fully paid share, although such discretion may not be exercised in a way which the Financial Conduct Authority regards as preventing dealings in the shares of the relevant class or classes from taking place on an open and proper basis. The Directors may likewise refuse to register any transfer of a share in favour of more than four persons jointly.

The Company is not aware of any other restrictions on the transfer of ordinary shares in the Company other than:

• Certain restrictions that may from time to time be imposed by laws and regulations (for example, insider trading laws or the UK Takeover Code)
• Pursuant to the Listing Rules of the Financial Conduct Authority whereby certain employees of the Company require approval of the Company to deal in the Company’s shares

The Company has the authority limited by shareholder resolution to issue, buy back, or cancel ordinary shares in issue (including those held in trust, described below). New shares are issued when share options are exercised by employees. The Company has 294,332,182 authorised shares (2022: 294,285,804)

24. Own shares reserve

The movement in the year is as follows:

24. Own shares reserve continued

Of the total shares held by the Group, 3,733,333 shares were held by the Company in the Own Share Reserve at 31 March 2023 and 31 March 2022 at a cost of £21.3m. These shares were purchased through a share buy back programme in prior years.

The number of shares held by the Group at the balance sheet date represented 3.1% (2022: 2.6%) of the Parent Company’s allotted, called up and fully paid share capital.

25. Share-based payments

The total charge to the income statement for the year was £39.5m (2022: £29.6m) and this was credited to the share-based payments reserve. Details of the different types of awards are as follows:

Intermediate Capital Group plc Omnibus Plan

The Omnibus Plan provides for three different award types: Deferred Share Awards, PLC Equity Awards and Special Recognition Awards.

Deferred Share Awards

Awards are made after the end of the financial year (and in a small number of cases during the year) to reward employees for delivering cash profits, managing the cost base, and employing sound risk and business management. These share awards typically vest one-third at the end of the first, second and third years following the year of grant, unless the individual leaves for cause or to join a competitor. Dividend equivalents accrue to participants during the vesting period and are paid at the vesting date. Awards are based on performance against the individual’s objectives. There are no further performance conditions.

PLC Equity Awards

Awards are made after the end of the financial year to reward employees, including Executive Directors, for increasing long-term shareholder value. These share awards typically vest one-third at the end of the third, fourth and fifth years following the year of grant, unless the individual leaves for cause or to join a competitor. Dividend equivalents accrue to participants during the vesting period and are paid at the vesting date. Awards are based on performance against the individual’s objectives. There are no further performance conditions.

Special Recognition Awards

Awards are made after the end of the financial year to reward employees for delivering cash profits, managing the cost base, and employing sound risk and business management. These share awards vest at the end of the first year following the year of grant, unless the individual leaves for cause or to join a competitor. Dividend equivalents accrue to participants during the vesting period and are paid at the vesting date. Awards are based on performance against the individual’s objectives. There are no further performance conditions.

25. Share-based payments continued

Share awards outstanding under the Omnibus Plan were as follows:

The fair values of awards granted under the ICG plc Omnibus Plan are determined by the average share price for the five business days prior to grant.

Intermediate Capital Group plc Buy Out Awards

Buy Out Awards are shares awarded to new employees in lieu of prior awards forfeited. These share awards shall vest or be forfeited according to the schedule and terms of the forfeited awards, and any performance conditions detailed in the individual’s employment contract. Buy Out Awards may be cash settled.

Buy Out Awards outstanding were as follows:

The fair values of the Buy Out Awards granted are determined by the average share price for the five business days prior to grant.

Save As You Earn

The Group offers a Sharesave Scheme (‘SAYE’) to its UK employees. Options are granted at a 20% discount to the prevailing market price at the date of issue. Options to this equity-settled scheme are exercisable at the end of a three year savings contract. Participants are not entitled to dividends prior to the exercise of the options. The maximum amount that can be saved by a participant in this way is £6,000 in any tax year.

Fair value is measured using the Black–Scholes valuation model, which considers the current share price of the Group, the risk-free interest rate and the expected volatility of the share price over the life of the award. The expected volatility was calculated by analysing three years of historic share price data of the Group.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share awards and options at grant date, which is remeasured at each reporting date. The total amount to be expensed during the year is £210,031 (2022: £187,660).

25. Share-based payments continued

Growth Incentive Award

The Growth Incentive Award (‘GIA’) is a market-value share option. Grants of options are made following the end of the financial year to reward employees for performance and to enhance alignment of interests. The GIA is a right to acquire shares during the exercise period (seven years following the vesting date) for a price equal to the market value of those shares on the grant date. These options vest at the end of the third year following the year of grant, unless the individual leaves for cause or to join a competitor. Awards are based on performance against the individual’s objectives. .