Investcorp lifts profits with high profile divestments

26 January 1996

Several high profile sales, including the successful share offer in Gucci Group, contributed to record profits at Investcorp of $70 million in 1995. This is an increase of 38 per cent on a year earlier. The Manama-based investment bank says 1995 was a good year for divestments, but offered few acquisition opportunities. However, the bank expects better buying opportunities in 1996, and will be refinancing a loan facility early in the year.

'We preferred to exit from investments this year, rather than buy, because the market was too high,' says Elias Hallack, co-chief operating officer at Investcorp. '1996 will be better for acquisitions. There are a few deals on which we are working, and carrying forward from the previous year.' In September, Investcorp sold 70 per cent of its stake in Gucci Group, the luxury goods company, following steady profit increases at the group since 1993. Shares were priced at $22 each and began trading on the New York and Amsterdam stock exchanges on 24 October. By the end of 1995, the shares were quoted at $39. Two other public offerings went ahead in the year in TLG, the holding company of Thorn Lighting Group, and the retail chain Circle K Corporation. Investcorp also sold 70 per cent of its holding in Coinputacenter.

Despite the improvement in profits, the bank intends to maintain its dividend at 15 per cent, consistent with dividend levels since its founding in 1982. Hallack says the bank will continue to build up its capital as its long-term strategy. Shareholders' equity rose 13 per cent to $459 million in 1995.

'We carried out an efficiency programme this year, as we normally do, and 1995 was more extensive than others,' Hallack says.

Some savings were achieved by closing the derivatives trading department at the start of the year, after it reported losses in 1994. However, operating expenses still increased in the year.

Investcorp's deposits with banks more than doubled during 1995 to $613 million, accounting for most of the rise in assets to $1,741 million. 'We are flush with cash because we exited from investments towards the end of the year,' says Hallack. 'Normally our balance sheet is very liquid, but this year it is more liquid than previous years.' Hallack says the bank will come to the market in early 1996 for a new medium-term financing facility. 'We will be refinancing one (facility) that matures this year, worth $330 million,' he says. 'Most probably we will reduce its value.' The maturity of the new facility is still being considered. In the first half of 1995, Investcorp raised $200 million through its first five-year facility (MEED 19:5:95).

'Every year there are new challenges, and not just facing us, they are facing every single company,' says Hallack. However, he says he is optimistic that Investcorp will maintain a healthy performance in 1996.

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