Interim / Quarterly Report • Sep 30, 2011
Interim / Quarterly Report
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for the six months to 30 September 2011
| Overview | |
|---|---|
| Key financial data | 3 |
| Chairman's statement | 4 |
| Chief Executive's statement | 6 |
| Business review | |
| Group overview | 9 |
| Model for returns | 11 |
| Net portfolio return by business line | 11 |
| Assets under management | 12 |
| The market | 14 |
| Returns | 16 |
| Gross portfolio return | 16 |
| Net portfolio return | 20 |
| Total return | 21 |
| Investment activity | 22 |
| Portfolio | 25 |
| Balance sheet | 28 |
| Long-term performance | 29 |
| Risks and uncertainties | 30 |
| Financial statements | |
| Consolidated statement of comprehensive income | 31 |
| Consolidated statement of changes in equity | 32 |
| Consolidated balance sheet | 33 |
| Consolidated cash flow statement | 34 |
| Notes to the accounts | 35 |
| Accounting policies | 43 |
| Statement of Directors' responsibilities | 44 |
| Independent review report | 45 |
| Ten largest investments | 46 |
| Forty other large investments | 47 |
| Information for shareholders | 50 |
This Half-yearly report may contain certain statements about the future outlook for 3i Group plc and its subsidiaries ("3i"). Although we believe our expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
This report has been drawn up and presented for the purposes of complying with English law. Any liability arising out of or in connection with the Half-yearly report for the six months to 30 September 2011 will be determined in accordance with English law. The Half-yearly results for 2011 and 2010 are unaudited.
| 6 months to/as at | 6 months to/as at | |
|---|---|---|
| 30 September | 30 September | |
| 2011 | 2010 | |
| Returns | ||
| Gross portfolio return | £(331)m | £307m |
| Gross portfolio return on opening portfolio value | (8.3)% | 8.7% |
| Net portfolio return | £(385)m | £236m |
| Net portfolio return on opening portfolio value | (9.6)% | 6.7% |
| Total return | £(523)m | £117m |
| Total return on opening shareholders' funds | (15.6)% | 3.8% |
| Dividend per ordinary share | 2.7p | 1.2p |
| Assets under management | ||
| 3i | £5,262m | £5,513m |
| External funds | £7,019m | £3,791m |
| Total assets under management | £12,281m | £9,304m |
| Balance sheet | ||
| 3i portfolio value | £3,412m | £3,679m |
| Gross debt | £1,722m | £2,156m |
| Net debt | £531m | £352m |
| Liquidity | £1,680m | £2,129m |
| Net asset value | £2,804m | £3,161m |
| Diluted net asset value per ordinary share | £2.94 | £3.30 |
| Investment activity | ||
| Investment | £448m | £327m |
| Realisations | £532m | £293m |
"Resilient in the face of strong headwinds."
By any measure, the market and macroeconomic environment in the first half of the financial year was turbulent, producing strong headwinds for investment businesses like 3i. Fortunately, due to our focus on the portfolio, the strengthening of our balance sheet, and a measured approach to investment activity, we entered the financial year in a robust financial position. Indeed, the performance of the portfolio, especially that of our more recent investments, provided considerable comfort.
Unsurprisingly, the major factor driving the financial performance for the six months to 30 September was the significant fall in stock markets during the period, which impacted the multiples used to value our private equity portfolio at 30 September 2011. Although earnings growth was good in some areas of the portfolio, increased uncertainty over the outlook for many countries and sectors also led us to take a more cautious view of current year forecast earnings for a number of portfolio companies.
As a consequence of these two factors, and despite good performances from our Infrastructure and Debt Management businesses, the total return for the period was (15.6)% of opening shareholders' funds at £(523) million (2010: £117million).
Throughout the first half, we continued with a highly selective approach to new investment. This, combined with a strong level of realisations at the beginning of the period, resulted in good cash flow enabling a further reduction in our gross debt to £1.7 billion (31 March 2011: £2.0 billion).
Having set out our return objectives at our annual results in May, in our pre-close statement in September we announced that the Board was reviewing the proportion of this return which should be paid to shareholders in the form of dividends. This review is complete and, as a result, the Board has decided that a significant rebasing of the dividend is appropriate.
The Board has declared an interim dividend of 2.7p (2010: 1.2p) and announced its intention to propose a total dividend for the year as a whole of 8.1p, subject to shareholder approval. In making this decision the Board has been very mindful of the needs of the business and the varying requirements of our shareholders, as well as taking into account the considerable uncertainty and volatility in the environment.
Simon Borrows, who brings a broad range of financial and investment experience, joined the Board as Chief Investment Officer on 17 October 2011. He is also a non-executive director of British Land Company plc and Inchcape plc and was formerly Chairman of Greenhill & Co International LLP.
We are currently in the later stages of a process to recruit additional non-executives to the Board and the Board notes the publication of the Davies Report on Women on Boards. We strongly support the
ad experience and to make appointments on merit and gainst objective criteria, including diversity. principle of boardroom diversity, of which gender is one important aspect. Our aim is to have a bro range of approaches, background, skills and a
the tage, especially in our high potential markets, and continue to improve all aspects f our performance. Predicting the outlook these days is one of the most challenging aspects of producing a Chairman's statement. High degrees of uncertainty remain over several key drivers of the global economy. At the same time there are significant opportunities for businesses such as 3i emerging out of growth in developing economies and the structural changes taking place in many sectors and countries. The right thing for 3i to do is therefore to ensure that we retain our strong financial position, increase our competitive advan o
d our Infrastructure and Debt Management usinesses mean that we face the future with confidence. 3i's permanent capital, international reach, portfolio diversity and liquidity have enabled 3i to be resilient in the face of strong headwinds. These strengths, combined with the opportunities we have in Asia an South America, together with increasing contributions from b
Montague November 2011 Sir Adrian Chairman 9
"We have not been immune to the broader market turmoil and the challenging environment has had a direct impact on our results.
However, the steps we have taken over the last two and a half years to improve the financial and operational strength of the Group, and to reduce the risk in our portfolio, give the Board confidence in announcing a significant increase in our dividend today."
2011 began with promising signs of a return in confidence, with an increase in M&A activity and the opening up of financial markets. However, over the summer months, concerns about the stability of the Eurozone area and particularly high levels of sovereign debt intensified. This resulted in large falls in global stock markets and increased volatility over the first six month period of 3i's financial year.
We have not been immune to the broader market turmoil and the challenging environment has had a direct impact on our results for this period. Our Net Asset Value has fallen by 16% from 351p per share at 31 March 2011 to 294p per share at 30 September 2011; primarily as a result of the fall in market multiples which we use to value the majority of our private equity portfolio. However gross portfolio return at (8.3)% was in line with the relevant market movement for our portfolio.
Notwithstanding the economic conditions the private equity portfolio delivered an increase in earnings, on a value weighted basis, of 8%. However, it is clear that the environment is creating greater pressure for a number of our portfolio companies, particularly those with higher leverage that we invested in during 2007 and 2008.
We achieved a good level of realisations at £532 million at good exit money multiples, with the larger disposals ranging from 2.5 to 7.8x cash invested, although most of these were before the recent period of uncertainty began in the summer. Investment was £448 million and our investment priorities remain focussed on companies and sectors which are well positioned for the current environment. Our investment in Hilite, the German based engineering business is an excellent example of this.
Our Infrastructure business line continued to deliver a robust performance. The Debt Management business performed well in the period exceeding fee income expectations.
Although conditions are clearly difficult, and it is easy to compare the macroeconomic picture to the first stage of the financial crisis in 2008, 3i is better placed to face the current situation. One of the key reasons for this is that over the past two and a half years we have taken steps to strengthen the balance sheet as a precaution against exactly the kind of market conditions we are seeing today.
We have reduced gross debt from a peak of £2.6 billion to £1.7 billion today, and net debt currently stands at around £0.5 billion compared to £1.9 billion in March 2009. During this 6 month period we reduced the amount of maturing debt that we roll-over into new facilities and have bought in approximately €95 million of debt that was due to mature in 2012. Together with our strong liquidity position, this gives us much more confidence to face what appears to be an increasingly uncertain period for both realisations and refinancings.
And it is not just at the corporate level where we have made improvements. Our investment and asset management capabilities have also been strengthened since 2008, which is showing in the performance of our recent investments and the good progress of our Infrastructure and Debt management business lines. In addition, we have been reducing gearing at the portfolio level to better enable companies to deal with any temporary fluctuations in performance that might be brought about by current operating conditions.
The triennial funding valuation of our UK pension scheme was also agreed in September. The Group has agreed to make additional cash contributions; £60 million was paid in September and £36 million will be paid in the next financial year. We have also entered into a contingent asset arrangement, which gives us the flexibility to enter into a de-risking strategy and reduce future volatility for shareholders.
Last year we announced the combination of our European Growth and Buyout teams to form a single European private equity business. As we reach the end of the Eurofund V investment period, we are now further reshaping this combined business to reflect the current market condition and the likely new investment environment over the next few years. In addition we are integrating our US team to create a Developed Markets Private Equity Team. This will allow operating efficiencies to be achieved across the business which in turn enable a reduction of operating expenses of at least £15 million per annum, from financial year 2012/2013.
Over the past three years we have reduced operating expenses, excluding debt management, by about 40% and these changes will result in a further step reduction to that cost base.
In developing markets private equity we have strengthened our China team with the appointment of Paul Su as head of the business and in Brazil we established an Advisory Board to support the team in Sao Paulo.
Our European Infrastructure assets have continued to perform well. In India we have launched the second India Infrastructure Fund which we expect to complete during 2012.
In Debt Management the CLO funds are performing ahead of our original business plan, generating good advisory and performance fees. During the period we have launched a new Credit Opportunities Fund initially funded by 3i. The aim is for the fund to take advantage of the dislocation that we see in credit markets.
The changes in the Private Equity business require some changes to the Leadership Team and a realignment of leadership roles. As we have already announced, Simon Borrows has joined as Chief Investment Officer, while his predecessor Ian Nolan is leaving 3i.
Menno Antal and Alan Giddins will jointly lead our developed markets private equity business covering Europe and the US, and Guy Zarzavatdjian will take over responsibility for developing markets in addition to his current responsibility for the Growth Capital Fund.
Bob Stefanowski will step down from the Leadership Team to focus on two of our larger portfolio companies.
At the full year results in May, I introduced the model for returns that we are using to guide the business' performance over the medium term. For the first time, we have presented our net return performance by business line to give shareholders a clearer view on the composition of the total return that they receive.
Today's announcement of a significantly rebased dividend and progressive dividend policy is a signal of the Board's confidence in the long term achievement of our strategic goals and the delivery of this model for returns.
Although we are making good progress towards the delivery of our strategy, it is clear that 3i is not immune to the market turmoil and volatility. Concerns over excessive levels of sovereign debt taken on by many Western governments combined with political turbulence and de-leveraging pressures on the banking system are likely to lead to increased risk and lower growth, particularly in Europe. This means that now, more than ever, we need to manage the business with a greater margin of safety than we would under more stable economic conditions.
We will continue to provide support and challenge to our portfolio companies to ensure that they not only withstand a tough market environment, but that they come out the other side in a stronger position and ready to seize the opportunities that a recovery will bring.
At the Group level, the transformation that 3i has undergone over the past two years has put us in much stronger shape to face this tough market with confidence. Today we have announced changes to prepare for the next stage in our private equity business' development. Together with the opportunities we are pursuing in infrastructure and debt management, these position us well to deliver on our strategy and maximise value for our shareholders for the long term.
Michael Queen Chief Executive 9 November 2011
| Six months to 30 September 2011 |
Six months to 30 September 2010 |
Year to 31 March 2011 |
|
|---|---|---|---|
| Total return | (15.6)% | 3.8% | 10.6% |
| Gross portfolio return | (8.3)% | 8.7% | 17.1% |
| Net portfolio return | (9.6)% | 6.7% | 12.8% |
| Cost efficiency1 | 1.4% | 1.7% | 3.2% |
| Operating expenses per AUM | 0.8% | 1.0% | 1.8% |
| Net debt | £531m | £352m | £522m |
| Net asset value per share movement2 | £(0.55) | £0.11 | £0.33 |
1 Cost efficiency is net operating expenses over opening portfolio value.
2 Growth in NAV per share is stated before dividends.
3i is an international investor focused on private equity, infrastructure and debt management, investing in Europe, Asia and the Americas. All three business lines invest using a combination of capital from the Group's own balance sheet capital and external funds. Total assets under management, including 3i's commitments to funds, at 30 September 2011 were £12.3 billion (31 March 2011: £12.7 billion). This business review provides detail on our performance for the six months to 30 September 2011 as well as our financial position as at that date, together with commentary on our markets and principal risk factors.
The major factors driving the Group's financial performance for the first half of the financial year were the significant fall in stock markets in the period and macro-economic uncertainty, which impacted both the multiples used to value our portfolio and, in some cases, the earnings outlook. As a consequence, despite the solid performance of the Private Equity portfolio and good performances from our Infrastructure and Debt Management businesses, the total return for the period was £(523) million or (15.6)% of opening shareholders' funds (30 September 2010: £117 million and 3.8%).
A further reduction of gross debt to £1.7 billion (31 March 2011: £2.0 billion) was achieved through a highly selective approach towards new investment, a good level of realisations and the repayment of debt maturing in the period. Liquidity, including cash and undrawn facilities of £1.7 billion at 30 September 2011 (31 March 2011: £1.8 billion) remained strong. Net debt increased marginally to £531 million at 30 September 2011 (31 March 2011: £522 million).
Net operating expenses reduced in the period to £55 million (2010: £59 million), with an increase in operating expenses offset by additional fees generated in the period, resulting in an improvement in both cost efficiency at 1.4% (2010: 1.7%) and operating expenses per AUM at 0.8% (2010: 1.0%).
Further strategic progress was made in the period. A team was established in Sao Paolo, Brazil, to develop 3i's presence in the growing South American private equity market. In addition, this team will support portfolio companies elsewhere in the world with the development of their business in the region. 3i also became the first European firm to secure an allocation (\$100 million) from the Chinese government to invest in renminbi.
The Group exercised the entirety of its holding of 3i Infrastructure plc warrants during the period, increasing its holding to 35%. In sharp contrast to much of the stock market, 3i Infrastructure's shares increased in value by 3% in the period.
In Debt Management, the integration of Mizuho Investment Management (UK) Limited ("MIM"), acquired in February 2011, has proceeded well. Active portfolio management has seen a marked improvement in the performance of the acquired funds, with strong management fee income in the period. New strategic initiatives include the Credit Opportunities Fund, which was launched in August 2011, targeting European bonds, loans and floating rate notes and, in addition, Vintage II, a private equity fund of funds, had its first close in November 2011.
Overall, the Group's financial strength and the performance of its portfolio enabled it to be resilient to market conditions, which became significantly more challenging towards the end of the period.
| Table 1: Net portfolio return by business line |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Debt | ||||||||||
| Private Equity | Infrastructure | Management | Non-core | Total | ||||||
| for the six months to | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| 30 September | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Gross portfolio return | (321) | 242 | (2) | 31 | (2) | 5 | (6) | 29 | (331) | 307 |
| Fees | 15 | 21 | 11 | 9 | 17 | - | - | - | 43 | 30 |
| Net carried interest | 9 | (16) | (4) | 4 | (4) | - | - | - | 1 | (12) |
| Operating expenses1 | (74) | (73) | (11) | (11) | (10) | (2) | (3) | (3) | (98) | (89) |
| Net portfolio return | (371) | 174 | (6) | 33 | 1 | 3 | (9) | 26 | (385) | 236 |
| (10.9)% | 6.1% | (1.3)% | 8.1% | 7.1% | 4.0% | (7.4)% | 15.8% | (9.6)% | 6.7% |
1 Operating expenses by business line include direct costs and an allocation of all other operating expenses.
The model for returns at a Group and business line level was set out in the Annual report for the year to 31 March 2011. As can be seen from Table 1, we have increased disclosure further by reporting net portfolio return by business line.
All three of 3i's business lines invest using a combination of the Group's own balance sheet capital and external capital. The profile and composition of gross and net portfolio returns for each business line reflect the mix of own and external capital deployed. Overall, the Group aims to deliver an average 15% return on equity over a five year period. For the financial years to 31 March 2010 and 2011, the Group achieved total return of 16.2% and 10.6% respectively.
Given the blend of own and external capital deployed in this business line (30 September 2011 own: 64%, external: 36%), gross portfolio return is the key component of performance. An 8% reduction in the multiples used to value the portfolio, contributed significantly to a negative gross portfolio return of £321 million for the six months to 30 September 2011 (2010: £242 million profit).
Fees earned by managing external funds generated £15 million in the six months to 30 September 2011 (2010: £21 million), the reduction being due to lower fees from Eurofund V. Net carried interest was a positive £9 million in the period (2010: £16 million cost), reflecting the reduction in the valuation of the portfolio. Operating expenses remained broadly in line with the prior period, despite the addition of the Brazilian team.
At 30 September 2011, 31% of the assets under management of the Infrastructure business were from the Group's own balance sheet, broadly in line with the Group's aim (25%), with the balance provided by external investors. The Infrastructure business line's performance was underpinned by the increase in 3i Infrastructure plc's share price, which resulted in a gain of £11 million for the Group, as well as by dividends of £9 million received from 3i Infrastructure plc in the period. However, this was offset by an unrealised value loss for the 3i India Infrastructure Fund of £22 million, principally as a result of the fall in the share price of Adani Power and foreign exchange losses arising from the depreciation of the rupee against the US dollar.
Fees earned by the Infrastructure business line in the period increased to £11 million (2010: £9 million), resulting from the growth in the portfolio of 3i Infrastructure plc. Typically we would expect fees, net carry and operating expenses to be accretive to gross portfolio return. However, due to the reversal of carried interest accruals following the value reduction of the 3i India Infrastructure Fund in the period, this has not been the case for the six months under review.
As new funds are launched in Debt Management, the Group aims to have 10% of the assets under management in this business line provided by 3i. At 30 September 2011 this percentage was 1%.
The main driver of returns for the Debt Management business line is fees earned from managing the underlying collateralised loan obligation ("CLO") and debt funds. A strong performance in the underlying funds resulted in a good level of fees at £17 million (2010: £nil).
| % invested | Gross money multiple1 |
|||||
|---|---|---|---|---|---|---|
| Original | Original 3i | at September | at September | |||
| Close date | fund size | commitment | 2011 | 2011 | AUM | |
| Private Equity | ||||||
| 3i Eurofund III | July 1999 | €1,990m | €995m | 91% | 2.1x | €96m |
| 3i Eurofund IV | June 2004 | €3,067m | €1,941m | 96% | 2.3x | €691m |
| 3i Eurofund V | Nov 2006 | €5,000m | €2,780m | 80% | 0.8x | €5,000m |
| 3i Growth Capital Fund | March 2010 | €1,192m | €800m | 52% | 1.0x | €1,192m |
| Growth Capital non-fund | various | various | various | n/a | n/a | £981m |
| Other | various | various | various | n/a | n/a | £252m |
| Infrastructure | ||||||
| 3i India Infrastructure Fund | March 2008 | \$1,195m | \$250m | 65% | 1.1x | \$945m2 |
| 3i Infrastructure plc | March 2007 | £1,004m3 | £352m4 | n/a | n/a | £1,004m |
| Other | various | various | various | n/a | n/a | £75m |
| Debt Management | Paying | |||||
| yield5 | ||||||
| Harvest I | April 2004 | €514m | €15m | 100% | 9.4% | €273m |
| Harvest II | April 2005 | €552m | €5m | 100% | 11.4% | €518m |
| Harvest III | April 2006 | €660m | €5m | 100% | 9.2% | €617m |
| Harvest IV | June 2006 | €752m | €6m | 100% | 10.3% | €723m |
| Harvest V | April 2007 | €650m | €10m | 100% | 4.6% | €599m |
| Windmill I | October 2007 | €600m | €5m | 100% | 5.3% | €491m |
| Friday Street | August 2006 | €300m | nil | 100% | 2.6% | €143m |
| 3i Credit Opportunities Fund | September 2011 | €50m | €50m | 23% | n/a | €50m |
| Vintage I | March 2007 | €500m | nil | 100% | 4.4x1 | €413m |
| Non-core | £108m | |||||
| Total AUM (in sterling) | £12,281m |
1 Gross money multiple is cash returned to the Fund plus value, as at 30 September 2011, as a multiple of cash invested.
2 Adjusted to reflect 3i Infrastructure plc's \$250 million commitment to the Fund.
3 Based on latest published NAV (ex-dividend).
4 3i Group's proportion of latest published NAV.
5 The paying yield of the CLO and debt funds is the average annual return for equity note holders since the funds' inception.
The Group defines its assets under management ("AUM") as the total commitments, including the Group's, to its active managed and advised funds, as well as the residual cost of investments in funds that are already invested and the cost of any other investments owned directly by 3i.
Total AUM of £12,281 million at 30 September 2011 (31 March 2011: £12,686 million) reflected net divestment activity from both the Group's balance sheet and invested funds and a £171 million reduction due to the strengthening of sterling against the euro and US dollar denominated active managed and advised funds. These factors were partially offset by the launch of the €50 million 3i Credit Opportunities Fund in the period.
Signs of a macroeconomic recovery in Europe and the US for the first half of calendar 2011 were reversed over the summer months as concerns about the Eurozone intensified. Financial markets and mergers and acquisitions ("M&A") activity reflected this. Dealogic's Global M&A Review for the third quarter of 2011 reported global M&A activity down 23% in the quarter, compared with a 27% increase in the first half of the year. At 24%, Europe accounted for its lowest share of worldwide M&A since 1998, due to growth elsewhere and caution over the environment in Europe.
European private equity activity followed this pattern. According to unquote's Private Equity Barometer, rising deal volumes in the first half of 2011 were followed by a 31% fall in the three months to 30 September 2011. Reports suggest that European private equity activity is likely to be subdued in the final quarter of 2011 and into early 2012, due to macroeconomic uncertainty and the availability of debt to finance transactions. However, should capital markets regain confidence, private equity activity is likely to benefit from the resultant increase in M&A activity and capital available for investment.
As can been seen from Chart 1, from 2005 to 2008, funds raised were substantially in excess of the amount invested. This overhang of capital has been reduced by the levels of investment relative to fund raising in recent years and, increasingly, by the lapsing of commitments made in earlier years for funds not invested. Another potential consequence of this pattern is that the number of private equity exits may increase overall M&A activity as funds reach the end of their life.
Private equity fundraising in developing markets continues to be centred on China, India and Brazil, which together attracted 70% of all capital raised in the first six months of calendar 2011 (2010: 50%). However, private equity investment, as a percentage of GDP, in these three countries remains well below developed economies such as the US and the UK. Growth in these markets may therefore arise from continuing increases in GDP as well as increased penetration. Notwithstanding the attractive fundamentals of these emerging markets, the high level of competition warrants a measured approach in order to ensure appropriate pricing of new investments.
The fundamentals for the infrastructure market remain broadly positive, despite a slow-down in M&A activity, driven by increased uncertainty around pricing and a deterioration in the availability and terms of debt. Given the stable nature of its underlying investments, the asset class is seen as a relative safe haven in times of economic uncertainty. In Europe, a few sizeable transactions were completed, but activity has tended to focus on infrastructure sub-sectors where debt is more readily available, namely those offering a defensive earnings profile and a degree of inflation protection.
Markets in India have been volatile, resulting in a slow-down in transaction activity. This was also due to the caution exercised by the government in approving new projects. The local banking market, however, remains supportive of infrastructure development.
We expect that transaction volumes in the infrastructure market are likely to remain relatively subdued for the second half of the year, with activity still focused on sectors where debt is available in the right quantum and on the right terms.
Near term, deal flow in Europe is expected to be supported by continuing political commitments to reduce deficits and by non-core asset disposals. Further opportunities will arise as infrastructure funds nearing the end of their investment periods look to sell or refinance assets to prove valuation points. In India, there remains significant demand for infrastructure investment. In the long term, reforms to the legal and regulatory environment are likely to benefit investors who can bring international standards of governance to the market.
A lack of primary asset deal flow and an uncertain market outlook in Europe meant that there was limited fundraising in the debt management market in the first half of calendar 2011. New European primary issuance slowed during the summer months, with an increase in the number of unsyndicated transactions and an increase in arranging banks amending transactions. Looking forward, expectations are that new primary issuance will be more conservatively structured (lower leverage and higher level of equity). We have seen secondary prices in the European loan market falling, in line with other asset classes, reflecting wider European macro concerns but providing some opportunity for investment in strong underlying businesses.
| Table 3: Total return |
|||
|---|---|---|---|
| For the six | For the six | For the | |
| months to | months to | year to | |
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| £m | £m | £m | |
| Realised profits over value on disposal of investments | 31 | 30 | 124 |
| Unrealised (losses)/profits on revaluation of investments | (441) | 196 | 325 |
| Portfolio income | |||
| Dividends | 20 | 23 | 41 |
| Income from loans and receivables | 51 | 57 | 110 |
| Fees receivable | 8 | 1 | 1 |
| Gross portfolio return | (331) | 307 | 601 |
| Fees receivable from external funds | 43 | 30 | 67 |
| Carried interest receivable from external funds | (11) | 19 | 25 |
| Carried interest and performance fees payable | 12 | (31) | (63) |
| Operating expenses | (98) | (89) | (181) |
| Net portfolio return | (385) | 236 | 449 |
| Net interest payable | (52) | (72) | (127) |
| Movement in the fair value of derivatives | (16) | (8) | (1) |
| Net foreign exchange movements | (19) | (29) | (17) |
| Pension actuarial loss | (49) | (7) | 20 |
| Other (including taxes) | (2) | (3) | - |
| Total comprehensive income ("Total return") | (523) | 117 | 324 |
A total return for the Group for the six months to 30 September 2011 of £(523) million (2010: £117 million), represented a 15.6% loss over opening shareholders' funds (2010: 3.8% profit). The turbulence noted in global financial markets since July 2011 has had a negative impact on the valuation of the portfolio, driving a value decrease of £(441) million (2010: £196 million). Earnings multiples, typically derived from comparable quoted companies, used to value the portfolio were 8% lower in the six month period to 30 September 2011. The portfolio has however maintained a solid trading performance overall in light of tough trading conditions, with earnings used in the valuations contracting by 1% in the period, whereas earnings on a value weighted basis grew by 8% in the period.
Net operating expenses reduced in the period to £55 million (2010: £59 million) as a result of flat or reduced costs in most parts of the business. Fees receivable from external funds were £43 million (2010: £30 million) in the six months to 30 September 2011 and operating expenses were £98 million (2010: £89 million). Strategic initiatives, including the acquisition of MIM in February 2011 and the launch of the Brazilian business have increased both fee income and operating expenses.
The Group's gross portfolio return for the six months to 30 September 2011 was £(331) million (2010: £307 million) and was comprised of realised gains of £31 million (2010: £30 million), portfolio income of £79 million (2010: £81 million) and an unrealised value reduction of £441 million (2010: £196 million profit).
As can be seen from Table 4 below, the Private Equity gross portfolio return was the biggest influence on the Group's gross portfolio return for the six months to 30 September 2011, which was a loss of £331 million (2010: £307 million profit), representing an 8.3% negative return on the opening portfolio value (2010: 8.7% profit).
| Gross portfolio return | Return as % of opening portfolio value | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| for the six months to 30 September | £m | £m | % | % |
| Private Equity | (321) | 242 | (9.5) | 8.4 |
| Infrastructure | (2) | 31 | (0.4) | 7.6 |
| Debt Management | (2) | 5 | (14.3) | 6.7 |
| Non-core activities | (6) | 29 | (5.0) | 17.6 |
| Gross portfolio return | (331) | 307 | (8.3) | 8.7 |
The Private Equity gross portfolio return, a loss of £321 million (2010: £242 million profit), was substantially driven by unrealised value decreases of £414 million (2010: £172 million profit). Asset valuations decreased as a result of a reduction in the market multiples used to value the portfolio and the use of current year forecast earnings where lower than historic, offset by earnings growth on a value weighted basis of 8% in the period.
Realised profits and portfolio income from the Private Equity portfolio were £25 million (2010: £4 million) and £68 million (2010: £66 million) respectively.
The Infrastructure business line generated a negative gross portfolio return for the period of £2 million (2010: £31 million profit). The return benefitted from the increase in 3i Infrastructure plc's share price (£11 million), and dividends (£9 million), offset by unrealised value losses in the 3i India Infrastructure Fund and by the negative impact of foreign exchange movements across all assets. Operational performance of the assets was solid with good growth in EBITDA for operational assets relative to the corresponding period last year.
Debt Management's gross portfolio return reflects the value movement and associated income resulting from the equity holdings owned by the Group in the underlying CLOs, managed by the Debt Management team. The broker quotes used to value these holdings and the investments in the Credit Opportunities Fund experienced a sharp decline in September, creating a value decrease of £3 million for the six months to 30 September 2011 (2010: £2 million value decrease).
Non-core activities represented a total of £105 million of value in 39 portfolio companies at 30 September 2011 (31 March 2011: £121 million in 60 companies). A negative £6 million gross portfolio return (2010: £29 million profit) reflects the lower market multiples used to value the portfolio.
Realised profits of £31 million represented an uplift of 6% on the opening portfolio value (2010: 11%). The lower percentage uplift was due to the timing of the largest realisations in the period, which were at the beginning of the financial year. The largest disposals were made at money multiples, ranging from 2.5x to 7.8x cash investment.
The unrealised value movement for the six months to 30 September 2011 was a reduction of £441 million (2010: £196 million profit). This reflected the impact of the fall in global financial markets from 31 March to 30 September 2011, which resulted in a reduction in the multiples used to value the portfolio. Multiples used to value the portfolio were 8% lower than at 31 March 2011.
Actual earnings growth for the portfolio in the period, on a value weighted basis, was 8%. However, the use of a greater proportion of forecast earnings, reflecting caution about the environment, resulted in a reduction of 1% in the earnings used to value the portfolio at 30 September 2011, compared to those used at 31 March 2011.
Table 5 shows an analysis of portfolio value by valuation basis at 30 September 2011.
| % | |
|---|---|
| Earnings | 64 |
| Imminent sale | 5 |
| Discounted Cash Flow | 7 |
| Quoted | 15 |
| Industry metric | 5 |
| Other | 4 |
| 2011 | 2010 | |
|---|---|---|
| six months to 30 September | £m | £m |
| Private Equity, Infrastructure and Non-core | ||
| Earnings and multiples based valuations | ||
| Equity - Earnings multiples |
(182) | (71) |
| - Earnings | (52) | 273 |
| Loans - Impairments (earnings basis) |
(52) | (42) |
| Other bases | ||
| Provisions | (43) | (40) |
| Uplift to imminent sale | 6 | 66 |
| Discounted Cash Flow | (2) | 13 |
| Loans – Impairments (other basis) | (14) | (24) |
| Other movements on unquoted investments | (41) | 7 |
| Quoted portfolio | (58) | 16 |
| Debt Management | ||
| Broker quotes | (3) | (2) |
| Total | (441) | 196 |
The multiples used in the valuations process reflected the fall in markets noted in the period, reducing by 8% since 31 March 2011. This is in line with the movement in multiples seen in relevant sector and geographic public markets.
The average EBITDA multiple used to value the Private Equity portfolio on an earnings basis was 8.2x before marketability discount (March 2011: 8.8x).
When valuing a portfolio investment on an earnings basis, in general the earnings used are the last 12 months management accounts data to June 2011, unless the data from the current year forecast is lower. The mix of earnings used to 30 September 2011 was 4% audited accounts (March 2011: 4%), 73% management accounts (March 2011: 84%), and 23% current year forecast accounts (March 2011: 12%). The increase in the number of valuations using forecast earnings reflected the reduction in forward-looking earnings expectations of a number of portfolio companies, which has been symptomatic of the outlook for many economies and markets.
The reduction in aggregate earnings used for valuations was 1%, which reflects the use of these forecast earnings. Earnings growth performance compared to the prior year was stable with a 1% increase in aggregate. However, on a weighted by value basis, earnings in the portfolio grew by 8%. ("weighted by value basis" refers to the aggregate earnings movement noted, weighted by the carrying value of each portfolio company at 30 September 2011). This indicates that the larger assets in the portfolio continue to perform well in challenging market conditions. More detail on the portfolio earnings is included in the Portfolio section of this report.
Where the attributable enterprise value of a portfolio company is less than the carrying value of 3i's shareholder loans, the shortfall recognised is classified as an impairment. Impairments for the past six months totalled £(66) million (2010: £(66) million), of which £(52) million (2010: £(42) million) related to assets valued on an earnings basis.
A provision is recognised where we anticipate that there is a 50% or greater chance that a company may fail within the next 12 months. The £43 million provision in the period relates to two portfolio companies.
Imminent sale includes those assets in a negotiated sale process. MWM was the only material investment valued on an imminent sales basis at 30 September 2011, with the associated value growth totalling £6 million. Proceeds of £197 million, £4 million higher than the 30 September 2011 valuation, were received on 1 November 2011.
The 'other' category includes a number of assets valued using different valuation bases, such as industry specific methods, or sum of parts (where different divisions are valued on a different basis). There were no individual asset movements worthy of note.
The Group's quoted portfolio increased as a proportion of the whole to 15% in the period following the IPO of Norma. However, the total quoted equity movement for the six months to 30 September 2011 was a reduction of £58 million (2010: £16 million increase). The value movement in quoted bid prices in the period reflected an increase of £11 million relating to 3i Infrastructure plc. This was offset by value decreases of £69 million across the remaining quoted portfolio, the most notable being Norma (£49 million) and Adani Power (£17 million).
Portfolio income of £79 million (2010: £81 million) comprised interest receivable on loans of £51 million (2010: £57 million), dividends of £20 million (2010: £23 million) and fees receivable of £8 million (2010: £1 million). As a proportion of interest receivable continues to be capitalised, total income received as cash in the period was £30 million (2010: £29 million).
This section comments on the Group net portfolio return. Details regarding net portfolio return performance for each business line is provided in the Model for returns section.
| Table 7: Net portfolio return |
|||
|---|---|---|---|
| For the six | For the six | For the | |
| months to | months to | year to | |
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| £m | £m | £m | |
| Gross portfolio return | (331) | 307 | 601 |
| Fees receivable from external funds | 43 | 30 | 67 |
| Net carried interest and performance fees payable | 1 | (12) | (38) |
| Operating expenses | (98) | (89) | (181) |
| Net portfolio return | (385) | 236 | 449 |
Fees receivable from external funds increased to £43 million for the six months to 30 September 2011 (2010: £30 million), reflecting the acquisition of MIM and the subsequent improvement in performance of the CLO funds managed by the Debt Management business line. Fees in the period comprised £15 million (2010: £21 million) of fees from our managed private equity funds, £11 million (2010: £9 million) receivable from advisory and management services to 3i Infrastructure plc and the 3i India Infrastructure Fund, and £17 million (2010: £nil) from the management of debt funds.
Carried interest payable is accrued on the realised and unrealised profits generated, taking relevant performance hurdles into account. Net carried interest in the six months to 30 September 2011 was £1 million receivable (2010: £12 million payable), due to the reduction in value in the Private Equity portfolio in particular, which gave rise to the reversal of previous accruals.
| 2011 | 2010 | |
|---|---|---|
| £m | £m | |
| Operating expenses | 98 | 89 |
| Fees receivable from external funds | (43) | (30) |
| Net operating expenses | 55 | 59 |
| Operating expenses/AUM | 0.8% | 1.0% |
| Cost efficiency (Net operating expenses/opening portfolio) | 1.4% | 1.7% |
Net operating expenses reduced in the period to £55 million (2010: £59 million), with an increase in operating expenses offset by additional fees generated in the period, resulting in an improvement in both cost efficiency at 1.4% (2010: 1.7%) and operating expenses per AUM at 0.8% (2010: 1.0%).
Gross operating expenses of £98 million (2010: £89 million) were higher as a result of the development of the Debt Management business and the launch of 3i in South America. Total head count remained flat at 492 (31 March 2011: 491).
Net interest payable Net interest payable for the six months to 30 September 2011 was £52 million (2010: £72 million). Interest payable reduced to £58 million (2010: £79 million), as a result of the reduction in gross debt following the convertible bond maturing, as well as repurchases and repayments of other debt balances in the period where the decision was taken not to refinance. Interest receivable reduced marginally to £6 million in the period (2010: £7 million), following a reduction in the average level of cash and deposits held.
The Group continued to operate a partial hedging strategy against the portfolio using core currency borrowings and derivatives. As a result, debt hedging ratios at 30 September 2011 were 66% of European and Nordic euro and krona denominated portfolios and 52% of the North American and Asian US dollar portfolios. The net foreign exchange charge of £19 million in the six months (2010: £29 million) was driven by the strengthening of sterling against the unhedged element of the euro balance sheet, offset partially by the weakening of sterling against the unhedged element of the US dollar balance sheet.
The negative impact of the financial markets has also impacted the UK defined benefit pension scheme, resulting in an increase in value of the scheme's liabilities driven by a reduction in bond yields. Together with the accounting impact of the funding settlement of the triennial valuation for the UK scheme, this resulted in an IAS 19 pension charge of £49 million (2010: £7million).
The triennial funding valuation was completed on 29 September 2011. Additional contributions to the pension scheme have been agreed with the Pension Trustees. The Group has agreed to make additional funding contributions, £60 million of which was paid in September 2011, and a further amount, expected to be £36 million, to be paid in April 2012. The effect of both payments is reflected in the actuarial charge for this period in accordance with IAS 19. In addition, the Group has agreed to put in place a contingent asset arrangement at no cash or strategic cost to the Group, allowing flexibility to implement a longer-term de-risking strategy. Further details of these arrangements are provided in Note 10 to the financial statements.
| Six months to | Six months to | Year to | |
|---|---|---|---|
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| £m | £m | £m | |
| Realisations | 532 | 293 | 609 |
| Investments | (448) | (327) | (719) |
| Net divestment/(investment) | 84 | (34) | (110) |
The Group realised £532 million in the first six months of the year (2010: £293 million), taking advantage of attractive market pricing. Investment increased but remained measured at £448 million (2010: £327 million) as the Group continued to be a selective investor.
| New investment | 302 |
|---|---|
| Acquisition finance | 9 |
| Capitalised interest1 | 95 |
| Other | 42 |
| Total | 448 |
1 Includes PIK notes.
| £m | |
|---|---|
| Private Equity | 409 |
| Infrastructure | 33 |
| Debt Management | 6 |
| Non-core activities | - |
| Total | 448 |
| £m | |
|---|---|
| UK | 113 |
| Continental Europe | 305 |
| Asia | 12 |
| The Americas | 18 |
| Rest of World | - |
| Total | 448 |
Total investment in the six months to September 2011 was £448 million (2010: £327 million). This increase reflected the improvement in the pipeline for new investment. Despite the increase, 3i continued its measured and selective approach in the face of continuing market uncertainty and high pricing.
Table 10 illustrates the split of total investment in the six months by nature of investment. Other investment of £42 million included the £33 million exercise of 3i Infrastructure plc warrants.
Table 11 shows investment by business line, the significant majority of which (£409 million of the £448 million) was in Private Equity and included the six new Private Equity investments listed in Table 13, which comprised £294 million of the £302 million new investment in the six months to 30 September 2011 (2010: £58 million). Infrastructure investment represented the exercise of 3i Investments plc warrants that the Group received at the IPO of 3i Infrastructure plc, which increased 3i Group's holding to 35% at 30 September 2011. Debt Management had investment of £6 million in the period, relating to the newly created Credit Opportunities Fund.
| investment | ||||
|---|---|---|---|---|
| £m | ||||
| Action | Eurofund V | Netherlands | Consumer | 134 |
| Hilite | Eurofund V | Germany/US | Industrials and Energy | 95 |
| TouchTunes | Growth Capital Fund | US | Technology, Media, Telecoms | 18 |
| Loxam | Growth Capital Fund | France | Business Services | 17 |
| GO Outdoors | Growth Capital Fund | UK | Consumer | 17 |
| World Freight | Growth Capital Fund | France | Business Services | 13 |
| Total | 294 |
In addition to 3i's own balance sheet investment, a further £261 million was invested on behalf of managed and advised funds, of which £224 million was for Buyouts funds, £36 million was for the Growth Capital Fund and £1 million was for Infrastructure.
Table 14: Realisations by business line (£m) for the six months to 30 September 2011
| £m | |
|---|---|
| Private Equity | 523 |
| Infrastructure | 1 |
| Debt Management | - |
| Non-core activities | 8 |
| Total | 532 |
Table 15: Realisations by geography (£m) for the six months to 30 September 2011
| £m | |
|---|---|
| UK | 63 |
| Continental Europe | 452 |
| Asia | 8 |
| The Americas | 9 |
| Rest of World | - |
| Total | 532 |
| £m | |
|---|---|
| Trade sales | 91 |
| Secondaries | 338 |
| IPO | 74 |
| Loan repayments | 16 |
| Other | 13 |
| Total | 532 |
Proceeds from realisations in the six months to 30 September 2011 at £532 million (2010: £293 million) were higher than last year, although at a lower uplift to opening value of 6% (2010: 11%). This is as a result of these portfolio investments being realised early in the period and hence proceeds were therefore in line with the "imminent sales basis" valuation at 31 March 2011.
As can be seen from Table 14, Private Equity generated the largest level of realisations at £523 million, with strong proceeds of £180 million from the sale of the Buyout investment Hyva, £139 million for Growth Capital investment Alo Intressenter and £74 million for the partial disposal of the Buyout investment Norma at IPO.
Non-core realisations of £8 million arose from the continuing disposal of non-core assets, with seven businesses exited in the period, bringing the total non-core portfolio number down to 39.
Table 15 shows the geographic split of realisations. The majority of realisations of £452 million were in continental Europe, primarily reflecting the exit of Hyva, Alo Intressenter and partial disposal of Norma.
As can be seen from Table 16, the Group was able to take advantage of attractive pricing in the secondary market in the period, which represented sales of £338 million (2010: £15 million), some 64% (2010: 5%) of total realisation proceeds.
The value of the portfolio at 30 September 2011 was £3,412 million (31 March 2011: £3,993 million).The Private Equity portfolio represents 82% of the total portfolio, with Infrastructure accounting for 14%, Debt Management less than 1% and non-core activities 3%.
As can be seen from Chart 2, earnings growth weighted by value in the Private Equity portfolio was strong at 8%. This compares to the aggregate earnings growth across the Private Equity portfolio of 1%. The earnings used to value the portfolio reduced by 1% and includes forecast earnings where this is expected to be lower than the latest management accounts.
For the 61 companies valued on an EBITDA basis, which account for 74% of the Private Equity portfolio by value, the average multiple used at 30 September 2011 was 8.2x (March 2011: 8.8x).
Within the Private Equity portfolio, health remained at broadly the same level as at 31 March 2011, with 70% of the assets by cost classified as healthy at 30 September 2011 (31 March 2011: 68%). Private Equity portfolio health by value was 97% (31 March 2011: 95%). Leverage in the Private Equity portfolio remained similar to that at 31 March 2011 at 3.4x net debt to EBITDA weighted by value (March 2011: 3.3x). Leverage levels in the Buyouts element of the Private Equity portfolio also remained broadly flat at 4.4x (March 2011: 4.3x).
1 This represents 97% of the Private Equity portfolio
As at 30 September 2011, 76% (March 2011: 69%) of the outstanding debt in the Private Equity portfolio was repayable in 2015 or later. During the period debt has been refinanced and maturity extended in a number of our portfolio companies.
Infrastructure 3i's Infrastructure investment principally comprises its 35.0% holding in 3i Infrastructure plc and its US\$250 million commitment to the 3i India Infrastructure Fund.
At 30 September 2011, 3i Infrastructure plc, which is advised by 3i, had investments in 15 assets spanning the social infrastructure, utilities and transportation sectors. 3i Infrastructure plc reported a total return of £15.9 million for the six months to 30 September, representing a return of 1.6% on shareholders' equity, underpinned by strong income generation from underlying assets and stable operational performance. During the period, 3i increased its investment in 3i Infrastructure plc through the exercise of warrants received at the IPO of the company in 2007, increasing its equity holding to 35.0%.
3i has a US\$250 million commitment to the US\$1.2 billion 3i India Infrastructure Fund and, at 30 September 2011, US\$182.7 million had been drawn down (31 March 2011: US\$180.5 million). The Fund's mandate is to invest in ports, airports, roads and power assets. The six assets in the Fund performed well operationally in the period. However, the share price of the quoted asset, Adani Power, which is also the Fund's largest asset, reduced by 24%, resulting in an overall value decrease for the Fund of £22 million for the Group, including foreign exchange losses of £13 million. The value of the other assets in the Fund increased modestly.
The Debt Management portfolio consists of the Group's investment in the underlying CLOs managed by the Group, as well as investment in the Credit Opportunities Fund, which launched in the period. There are seven investments within the Debt Management portfolio, which were valued at £18 million at 30 September 2011, representing a value decrease of £3 million in the period. Despite the value decrease, the performance of the CLOs to 30 September 2011 was good, with four of the CLO funds now paying subordinate fees compared with one at the time of acquisition.
| Opening portfolio value 1 April 2011 £m |
Investment £m |
Opening value Realised £m |
Value movement £m |
Other £m |
Closing portfolio value 30 September 2011 £m |
|
|---|---|---|---|---|---|---|
| Core business lines | ||||||
| Private Equity Infrastructure Debt Management |
3,394 464 14 |
409 33 6 |
(498) (1) - |
(414) (11) (3) |
(93) 6 1 |
2,798 491 18 |
| 3,872 | 448 | (499) | (428) | (86) | 3,307 | |
| Non-core activities | 121 | - | (2) | (13) | (1) | 105 |
| Total | 3,993 | 448 | (501) | (441) | (87) | 3,412 |
The value of assets directly owned by the Group decreased from £3,993 million at 31 March 2011 to £3,412 million at 30 September 2011. Investments, realisations and value movements are discussed elsewhere in this report. The other movements relate primarily to foreign exchange and movements in capitalised interest.
As can be seen from Tables 18 and 19, 3i continues to have a well diversified portfolio by geographic region and sector.
The main geographic movement was observed in the continental European portfolio. Both sales of investments and value decreases in the current portfolio reduced the size of the portfolio in the period. This was only partially offset by the new investments in Action (£134 million), Hilite (£95 million), Loxam (£17 million) and World Freight (£13 million).
| As at 30 September 2011 £m |
As at 30 September 2010 £m |
As at 31 March 2011 £m |
|
|---|---|---|---|
| Continental Europe | 1,640 | 1,625 | 2,060 |
| UK | 997 | 1,286 | 1,071 |
| Asia | 501 | 508 | 579 |
| The Americas | 268 | 253 | 277 |
| Rest of World | 6 | 7 | 6 |
| Total | 3,412 | 3,679 | 3,993 |
The portfolio remains diversely spread by sector. The largest movement in sector exposure in the period was a reduction in Industrials and Energy, as a consequence of the sales of Hyva, Alo Intressenter and the partial exit on IPO of Norma, as well as value decreases. New investment partially offset this reduction
| As at 30 September |
As at 30 September |
As at 31 March |
|
|---|---|---|---|
| 2011 | 2010 | 2011 | |
| £m | £m | £m | |
| Business Services | 576 | 681 | 618 |
| Consumer | 534 | 322 | 449 |
| Financial Services | 241 | 329 | 259 |
| Healthcare | 407 | 414 | 483 |
| Industrials and Energy | 946 | 1,286 | 1,491 |
| Technology, Media, Telecoms | 218 | 223 | 229 |
| Infrastructure | 490 | 424 | 464 |
| Total | 3,412 | 3,679 | 3,993 |
| As at 30 September |
As at 30 September |
As at 31 March |
|
|---|---|---|---|
| 2011 | 2010 | 2011 | |
| Shareholders' funds | £2,804m | £3,161m | £3,357m |
| Gross debt | £1,722m | £2,156m | £2,043m |
| Net debt | £531m | £352m | £522m |
| Liquidity | £1,680m | £2,129m | £1,846m |
| Gearing | 19% | 11% | 16% |
| Diluted net asset value per share | £2.94 | £3.30 | £3.51 |
Gross debt reduced in the period from £2,043 million to £1,722 million, as a result of the Group's continuing focus on conservative balance sheet management. The reduction in debt included the maturity of the remaining £139 million of the £430 million convertible bond raised in 2008, a \$50 million private placement and the repurchase of £81 million of the €500 million floating rate note, together with the repayment of £67 million of a bank facility.
Net debt increased marginally from £522 million to £531 million as the cash inflow from net divestment and portfolio income was offset by operating expenses in the period, including the additional funding contribution to the pension plan of £60 million paid in September 2011. The Group continues to manage net debt to a limit of £1 billion, consistent with our conservative balance sheet management approach.
Although net debt was largely flat, gearing also increased from 16% to 19%, due to the reduction in shareholders' funds in the period.
Liquidity reduced in the six months from £1,846 million to £1,680 million. This reduction reflected the repurchase and repayment of gross debt, partially offset by net divestment and portfolio income and the net £100 million increase in committed bank facilities. Liquidity at 30 September 2011 comprised cash and deposits of £1,191 million and undrawn facilities of £489 million. The Group has also refinanced the £300 million multi-currency facility to £450 million, extending the maturity from October 2012 to June 2016, and the £100 million bilateral facility, reducing the principal to £50 million and extending the maturity from October 2012 to April 2016.
The diluted NAV per ordinary share at 30 September 2011 was £2.94 (31 March 2011: £3.51). This primarily reflected the negative total return in the period of £523 million (55p) as well as the impact of the payment of the year end dividend of £23 million (2p).
| New investments made in | ||||||
|---|---|---|---|---|---|---|
| financial years to | Total | Return | Value | IRR to | IRR to | IRR to |
| 31 March | investment¹ | flow | remaining | 30 September | 31 March | 30 September |
| Vintage year | £m | £m | £m | 2011 | 2011 | 2010 |
| 2012 | 229 | - | 227 | n/a2 | n/a | n/a |
| 2011 | 258 | - | 281 | 12% | n/a | n/a |
| 2010 | - | - | - | - | - | - |
| 2009 | 410 | 2 | 248 | (9)% | 1% | 4% |
| 2008 | 841 | 154 | 419 | (7)% | (6)% | (11)% |
| 2007 | 743 | 387 | 305 | 9% | 17% | 22% |
| 2006 | 516 | 1,176 | 12 | 48% | 49% | 49% |
| 2005 | 387 | 1,044 | 52 | 63% | 61% | 61% |
| 2004 | 332 | 705 | 3 | 35% | 35% | 35% |
| 2003 | 278 | 671 | 36 | 49% | 49% | 49% |
1 Total investment includes capitalised interest.
2 2012 vintage IRR is not meaningful, as the assets in the vintage are less than 12 months old.
| New investments made in | ||||||
|---|---|---|---|---|---|---|
| financial years to | Total | Return | Value | IRR to | IRR to | IRR to |
| 31 March | investment¹ | flow | Remaining | 30 September | 31 March | 30 September |
| Vintage year | £m | £m | £m | 2011 | 2011 | 2010 |
| 2012 | 66 | - | 63 | n/a2 | n/a | n/a |
| 2011 | 21 | - | 22 | 12% | n/a | n/a |
| 2010 | 46 | - | 28 | (43)% | 8% | n/a |
| 2009 | 208 | 45 | 122 | (8)% | (5)% | (3)% |
| 2008 | 1,075 | 458 | 531 | (1)% | 1% | (3)% |
| 2007 | 554 | 236 | 308 | (1)% | 1% | 0% |
| 2006 | 482 | 628 | 58 | 23% | 23% | 22% |
| 2005 | 179 | 301 | 8 | 25% | 26% | 25% |
| 2004 | 297 | 516 | 11 | 26% | 26% | 26% |
| 2003 | 233 | 551 | - | 27% | 27% | 26% |
1 Total investment includes capitalised interest.
2 2012 vintage IRR is not meaningful, as the assets in the vintage are less than 12 months old.
Tables 21 and 22 show the long-term performance of the Private Equity Buyout and Growth Capital portfolios. As a result of a combination of significant reductions in valuation multiples and subsequent weaker performance, the 2007 to 2009 vintages, which were invested prior to the credit crisis, continue to show poor returns compared to prior vintages.
The 2010 vintage contains one Growth Capital investment which has experienced a downturn in profits due to commodity pricing and subsequent margin pressures during the year, although long-term expectations remain positive.
The early performance of the 2011 vintage is good and expectations remain positive for this vintage.
The main elements of 3i's risk management framework, together with a detailed description of the principal risks and uncertainties faced by the Group and its approach to risk mitigation, are set out in the Risk section of the 3i Group Annual report and accounts 2011. The following provides a description of the main inherent risk factors. These remain unchanged in the period and are expected to remain as principal inherent risks and uncertainties in the second half of the financial year:
External – Risks arising from external factors including political, legal, regulatory, economic and competitor changes which affect the Group's operations.
Strategic – Risks arising from the analysis, design and implementation of the Group's business model and key decisions on the investment levels and capital allocations.
Investment – Risks in respect of specific asset investment decisions, the subsequent performance of an investment or exposure concentrations across business line portfolios.
Treasury and funding – Risks in relation to changes in market prices and rates; access to capital markets and third-party funds; and the Group's capital structure.
Operational – Risks arising from inadequate or failed processes, people and systems or from external factors affecting these.
The Group continues to review the effectiveness of its risk management and has undertaken several initiatives to deepen its understanding of risks faced by portfolio companies. This Half-yearly report makes reference to the evolution and management of key risks, and related results and outcomes, which should be viewed in the context of the risk management framework and principal inherent risk factors.
for the six months to 30 September 2011
| Six months to | Six months to | 12 months to | ||
|---|---|---|---|---|
| 30 September | 30 September | 31 March | ||
| 2011 | 2010 | 2011 | ||
| (unaudited) | (unaudited) | (audited) | ||
| Notes | £m | £m | £m | |
| Realised profits over value on the disposal of investments | 2 | 31 | 30 | 124 |
| Unrealised (losses)/profits on the revaluation of investments | 3 | (441) | 196 | 325 |
| (410) | 226 | 449 | ||
| Portfolio income | ||||
| Dividends | 20 | 23 | 41 | |
| Income from loans and receivables | 51 | 57 | 110 | |
| Fees receivable | 8 | 1 | 1 | |
| Gross portfolio return | 1 | (331) | 307 | 601 |
| Fees receivable from external funds | 1 | 43 | 30 | 67 |
| Carried interest | ||||
| Carried interest receivable from external funds | (11) | 19 | 25 | |
| Carried interest and performance fees payable | 12 | (31) | (63) | |
| Operating expenses | (98) | (89) | (181) | |
| Net portfolio return | (385) | 236 | 449 | |
| Interest receivable | 6 | 7 | 12 | |
| Interest payable | (58) | (79) | (139) | |
| Movement in the fair value of derivatives | 4 | (16) | (8) | (1) |
| Exchange movements | (45) | (101) | (135) | |
| Other income | 1 | (1) | 3 | |
| (Loss)/profit before tax | (497) | 54 | 189 | |
| Income taxes | (3) | (2) | (3) | |
| (Loss)/profit for the period | (500) | 52 | 186 | |
| Other comprehensive income | ||||
| Exchange differences on translation of foreign operations | 26 | 72 | 118 | |
| Actuarial (loss)/gain | (49) | (7) | 20 | |
| Other comprehensive income for the period | (23) | 65 | 138 | |
| Total comprehensive income for the period ("Total return") | (523) | 117 | 324 | |
| Analysed in reserves as: | ||||
| Revenue | (21) | 31 | 72 | |
| Capital | (528) | 14 | 134 | |
| Translation reserve | 26 | 72 | 118 | |
| (523) | 117 | 324 | ||
| Earnings per share | ||||
| Basic (pence) | 8 | (52.7) | 5.5 | 19.6 |
| Diluted (pence) | 8 | (52.7) | 5.4 | 19.5 |
for the six months to 30 September 2011
| Six months to | Six months to | 12 months to | ||
|---|---|---|---|---|
| 30 September | 30 September | 31 March | ||
| 2011 | 2010 | 2011 | ||
| (unaudited) | (unaudited) | (audited) | ||
| Notes | £m | £m | £m | |
| Total equity at the start of the period | 7 | 3,357 | 3,068 | 3,068 |
| (Loss)/profit for the period | 7 | (500) | 52 | 186 |
| Exchange differences on translation of foreign operations | 7 | 26 | 72 | 118 |
| Actuarial (loss)/gain | 7 | (49) | (7) | 20 |
| Total comprehensive income for the period | (523) | 117 | 324 | |
| Share-based payments | 7 | 3 | (1) | - |
| Issue of ordinary shares | 7 | 1 | - | - |
| Purchase of own shares | 7 | (11) | - | - |
| Release on exercise/forfeiture of share options | 7 | - | (4) | (5) |
| Ordinary dividends | 9 | (23) | (19) | (30) |
| Total equity at the end of the period | 2,804 | 3,161 | 3,357 |
as at 30 September 2011
| 30 September | 30 September | 31 March | ||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | ||
| Notes | (unaudited) £m |
(unaudited) £m |
(audited) £m |
|
| Assets | ||||
| Non-current assets | ||||
| Investments | ||||
| Quoted equity investments | 502 | 385 | 405 | |
| Unquoted equity investments | 1,489 | 1,898 | 2,134 | |
| Loans and receivables | 1,421 | 1,396 | 1,454 | |
| Investment portfolio | 1 | 3,412 | 3,679 | 3,993 |
| Carried interest receivable | 42 | 78 | 82 | |
| Derivative financial instruments | 4 | 1 | - | 1 |
| Intangible assets | 19 | - | 21 | |
| Retirement benefit surplus | 68 | - | 44 | |
| Property, plant and equipment | 14 | 16 | 15 | |
| Total non-current assets | 3,556 | 3,773 | 4,156 | |
| Current assets | ||||
| Other current assets | 71 | 67 | 80 | |
| Derivative financial instruments | 4 | 1 | - | 2 |
| Deposits | 525 | 713 | 560 | |
| Cash and cash equivalents | 666 | 1,091 | 961 | |
| Total current assets | 1,263 | 1,871 | 1,603 | |
| Total assets | 4,819 | 5,644 | 5,759 | |
| Liabilities | ||||
| Non-current liabilities | ||||
| Carried interest and performance fees payable | (45) | (87) | (81) | |
| Loans and borrowings | 5 | (1,381) | (1,840) | (1,837) |
| B shares | (6) | (6) | (6) | |
| Derivative financial instruments | 4 | (39) | (56) | (25) |
| Retirement benefit deficit | (3) | (9) | (4) | |
| Deferred income taxes | (6) | (2) | (6) | |
| Provisions | (4) | (6) | (4) | |
| Total non-current liabilities | (1,484) | (2,006) | (1,963) | |
| Current liabilities Trade and other payables |
(172) | (190) | (198) | |
| Carried interest and performance fees payable | (56) | (24) | (58) | |
| Loans and borrowings Convertible bonds |
5 6 |
(293) | (63) (187) |
(31) (138) |
| Derivative financial instruments | 4 | - (5) |
(4) | (9) |
| Current income taxes | (2) | (4) | (1) | |
| Provisions | (3) | (5) | (4) | |
| Total current liabilities | (531) | (477) | (439) | |
| Total liabilities | (2,015) | (2,483) | (2,402) | |
| Net assets | 2,804 | 3,161 | 3,357 | |
| Equity | ||||
| Issued capital | 7 | 717 | 717 | 717 |
| Share premium | 7 | 780 | 779 | 779 |
| Capital redemption reserve | 7 | 43 | 43 | 43 |
| Share-based payment reserve | 7 | 18 | 16 | 17 |
| Translation reserve | 7 | 289 | 217 | 263 |
| Capital reserve | 7 | 564 | 973 | 1,093 |
| Revenue reserve | 7 | 484 | 497 | 526 |
| Other reserves | 7 | - | 5 | 5 |
| Own shares Total equity |
7 | (91) 2,804 |
(86) 3,161 |
(86) 3,357 |
for the six months to 30 September 2011
| Six months to | Six months to | 12 months to | |
|---|---|---|---|
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Cash flow from operating activities | |||
| Purchase of investments | (353) | (211) | (561) |
| Proceeds from investments | 532 | 293 | 609 |
| Portfolio interest received | 6 | 7 | 15 |
| Portfolio dividends received | 20 | 22 | 41 |
| Portfolio fees received | 4 | - | 1 |
| Fees received from external funds | 38 | 34 | 62 |
| Carried interest received | 28 | 15 | 17 |
| Carried interest and performance fees paid | (26) | (49) | (54) |
| Operating expenses | (177) | (135) | (218) |
| Interest received | 6 | 7 | 12 |
| Interest paid | (46) | (54) | (124) |
| Income taxes paid | (2) | (1) | (2) |
| Net cash flow from operating activities | 30 | (72) | (202) |
| Cash flow from financing activities | |||
| Dividend paid | (23) | (19) | (30) |
| Purchase of own shares | (11) | - | - |
| Repayment of long-term borrowings and convertible bonds | (171) | (26) | (56) |
| Repurchase of long-term borrowings | (147) | (28) | (48) |
| Repurchase of convertible bonds | - | (195) | (249) |
| Net cash flow from short-term borrowings | - | (89) | (88) |
| Net cash flow from derivatives | (3) | - | (34) |
| Net cash flow from financing activities | (355) | (357) | (505) |
| Cash flow from investing activities | |||
| Acquisition of subsidiary | - | - | (18) |
| Net cash acquired with the subsidiary | - | - | 18 |
| Purchase of property, plant and equipment | - | - | (5) |
| Proceeds on sale of property, plant and equipment | - | - | 2 |
| Net cash flow from deposits | 35 | 15 | 168 |
| Net cash flow from investing activities | 35 | 15 | 165 |
| Change in cash and cash equivalents | (290) | (414) | (542) |
| Cash and cash equivalents at the beginning of the period | 961 | 1,524 | 1,524 |
| Effect of exchange rate fluctuations | (5) | (19) | (21) |
| Cash and cash equivalents at the end of the period | 666 | 1,091 | 961 |
| Private Equity | Infrastructure | Debt Management |
Non-core Investments |
Total | |
|---|---|---|---|---|---|
| 6 months to 30 September 2011 (unaudited) | £m | £m | £m | £m | £m |
| Gross portfolio return | |||||
| Realised profits over value on the | 25 | - | - | 6 | 31 |
| disposal of investments | |||||
| Unrealised losses on the | (414) | (11) | (3) | (13) | (441) |
| revaluation of investments Portfolio income |
|||||
| Dividends | 9 | 9 | 1 | 1 | 20 |
| Income from loans and receivables | 51 | - | - | - | 51 |
| Fees receivable | 8 | - | - | - | 8 |
| (321) | (2) | (2) | (6) | (331) | |
| Net portfolio return | |||||
| Fees receivable from external funds | 15 | 11 | 17 | - | 43 |
| Carried interest receivable from external funds | (11) | (11) | 11 | - | (11) |
| Carried interest and performance fees payable | 20 | 7 | (15) | - | 12 |
| Operating expenses1 | (74) | (11) | (10) | (3) | (98) |
| (371) | (6) | 1 | (9) | (385) | |
| Net (investment)/divestment | |||||
| Realisations | 523 | 1 | - | 8 | 532 |
| Investment | (409) | (33) | (6) | - | (448) |
| 114 | (32) | (6) | 8 | 84 | |
| Balance sheet | |||||
| Value of investment portfolio at the end of the period | 2,798 | 491 | 18 | 105 | 3,412 |
| Private Equity2 | Infrastructure | Debt Management2 |
Non-core Investments |
Total | |
|---|---|---|---|---|---|
| 6 months to 30 September 2010 (unaudited) | £m | £m | £m | £m | £m |
| Gross portfolio return | |||||
| Realised profits over value on the | 4 | - | 4 | 22 | 30 |
| disposal of investments | |||||
| Unrealised profits/(losses) on the | 172 | 22 | (2) | 4 | 196 |
| revaluation of investments | |||||
| Portfolio income | |||||
| Dividends Income from loans and receivables |
11 54 |
9 - |
- 3 |
3 - |
23 57 |
| Fees receivable | 1 | - | - | - | 1 |
| 242 | 31 | 5 | 29 | 307 | |
| Net portfolio return | |||||
| Fees receivable from external funds | 21 | 9 | - | - | 30 |
| Carried interest receivable from external funds | 8 | 11 | - | - | 19 |
| Carried interest and performance fees payable | (24) | (7) | - | - | (31) |
| Operating expenses1 | (73) | (11) | (2) | (3) | (89) |
| 174 | 33 | 3 | 26 | 236 | |
| Net (investment)/divestment | |||||
| Realisations | 221 | 1 | 16 | 55 | 293 |
| Investment | (306) | - | (21) | - | (327) |
| (85) | 1 | (5) | 55 | (34) | |
| Balance sheet | |||||
| Value of investment portfolio at the end of the | |||||
| period | 3,040 | 424 | 82 | 133 | 3,679 |
1 Operating expenses by business line include direct costs and an allocation of indirect costs.
2 The Debt Warehouse, which was previously included within the Private Equity business line, was transferred to the Debt Management business line created during the second half of the year to 31 March 2011. Consequently, the 30 September 2010 Debt Warehouse numbers have been reclassified to the Debt Management business line.
| Debt | Non-core | ||||
|---|---|---|---|---|---|
| Private Equity | Infrastructure | Management | Investments | Total | |
| 12 months to 31 March 2011 (audited) | £m | £m | £m | £m | £m |
| Gross portfolio return | |||||
| Realised profits over value on the | |||||
| disposal of investments | 62 | - | 24 | 38 | 124 |
| Unrealised profits on the | |||||
| revaluation of investments | 277 | 29 | 8 | 11 | 325 |
| Portfolio income | |||||
| Dividends | 20 | 17 | - | 4 | 41 |
| Income from loans and receivables | 102 | (1) | 7 | 2 | 110 |
| Fees receivable | 1 | - | - | - | 1 |
| 462 | 45 | 39 | 55 | 601 | |
| Net portfolio return | |||||
| Fees receivable from external funds | 40 | 25 | 2 | - | 67 |
| Carried interest receivable from external funds | 19 | 6 | - | - | 25 |
| Carried interest and performance fees payable | (54) | (8) | (1) | - | (63) |
| Operating expenses1 | (147) | (23) | (5) | (6) | (181) |
| 320 | 45 | 35 | 49 | 449 | |
| Net (investment)/divestment | |||||
| Realisations | 372 | 1 | 145 | 91 | 609 |
| Investment | (634) | (36) | (49) | - | (719) |
| (262) | (35) | 96 | 91 | (110) | |
| Balance sheet | |||||
| Value of investment portfolio at the end of the period | 3,394 | 464 | 14 | 121 | 3,993 |
| 6 months to 30 September 2011 Unquoted equity (unaudited) £m |
6 months to 30 September 2011 Quoted equity (unaudited) £m |
6 months to 30 September 2011 Loans and receivables1 (unaudited) £m |
6 months to 30 September 2011 Total (unaudited) £m |
|
|---|---|---|---|---|
| Realisations | 386 | 1 | 145 | 532 |
| Valuation of disposed investments | (364) | (3) | (134) | (501) |
| Investments written off | - | - | - | - |
| 22 | (2) | 11 | 31 |
| 6 months to | ||||
|---|---|---|---|---|
| 6 months to | 6 months to | 30 September | 6 months to | |
| 30 September | 30 September | 2010 | 30 September | |
| 2010 | 2010 | Loans and | 2010 | |
| Unquoted equity | Quoted equity | receivables1 | Total | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £m | £m | £m | £m | |
| Realisations | 127 | 1 | 165 | 293 |
| Valuation of disposed investments | (89) | (1) | (161) | (251) |
| Investments written off | - | - | (12) | (12) |
| 38 | - | (8) | 30 |
| 12 months to | ||||
|---|---|---|---|---|
| 12 months to | 12 months to | 31 March 2011 | 12 months to | |
| 31 March 2011 | 31 March 2011 | Loans and | 31 March 2011 | |
| Unquoted equity | Quoted equity | receivables1 | Total | |
| (audited) | (audited) | (audited) | (audited) | |
| £m | £m | £m | £m | |
| Realisations | 263 | 16 | 330 | 609 |
| Valuation of disposed investments | (160) | (14) | (310) | (484) |
| Investments written off | (1) | - | - | (1) |
| 102 | 2 | 20 | 124 |
1 Loans and receivables include net proceeds of £nil (September 2010: £16 million, March 2011: £145 million) and realised profits of £nil (September 2010: £5 million, March 2011: £24 million) from the variable funding notes relating to the Debt Warehouse.
| 6 months to | ||||
|---|---|---|---|---|
| 6 months to | 6 months to | 30 September | 6 months to | |
| 30 September | 30 September | 2011 | 30 September | |
| 2011 | 2011 | Loans and | 2011 | |
| Unquoted equity | Quoted equity | receivables | Total | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £m | £m | £m | £m | |
| Movement in the fair value of equity | (273) | (58) | - | (331) |
| Provisions, loan impairments and other movements1 | - | - | (110) | (110) |
| (273) | (58) | (110) | (441) |
| 6 months to | ||||
|---|---|---|---|---|
| 6 months to | 6 months to | 30 September | 6 months to | |
| 30 September | 30 September | 2010 | 30 September | |
| 2010 | 2010 | Loans and | 2010 | |
| Unquoted equity | Quoted equity | receivables | Total | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £m | £m | £m | £m | |
| Movement in the fair value of equity2 | 279 | 16 | - | 295 |
| Provisions, loan impairments and other movements1 | (20) | - | (79) | (99) |
| 259 | 16 | (79) | 196 |
| 12 months to 31 March 2011 |
12 months to 31 March 2011 |
12 months to 31 March 2011 Loans and |
12 months to 31 March 2011 |
|
|---|---|---|---|---|
| Unquoted equity | Quoted equity | receivables | Total | |
| (audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
|
| Movement in the fair value of equity | 572 | 23 | - | 595 |
| Provisions, loan impairments and other movements1 | (20) | - | (250) | (270) |
| 552 | 23 | (250) | 325 |
1 Included within loan impairments is a £1 million value decrease relating to the Credit Opportunities Fund, which launched in August 2011. Loan impairments in prior periods also include the variable funding notes relating to the Debt Warehouse (September 2010: £2 million value decrease, March 2011: £1 million value increase).
2 Investments made through the 3i India Infrastructure Fund have been reclassified as individual investments, rather than a fund which is classified as unquoted equity. The prior periods have been restated.
Provisions have been recognised only on investments where it is considered there is greater than 50% risk of failure. All other equity movements are included within the movement in the fair value of equity.
| 6 months | 6 months | 12 months to | |
|---|---|---|---|
| to 30 September | to 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Interest rate swaps | (15) | (8) | - |
| Call options | (1) | - | (1) |
| (16) | (8) | (1) |
Exchange movements in relation to forward foreign exchange contracts are included within exchange movements in the statement of comprehensive income. During the period, a £2 million gain was recognised in exchange movements in relation to forward foreign exchange contracts (September 2010: £nil, March 2011: £12 million loss).
Derivative assets and liabilities have been reclassified for prior periods between current and non-current positions to reflect the maturity of long-dated interest rate swaps.
| 30 September | 30 September | 31 March | |
|---|---|---|---|
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Loans and borrowings are repayable as follows: | |||
| Within one year | 293 | 63 | 31 |
| In the second year | 259 | 395 | 638 |
| In the third year | - | 517 | 265 |
| In the fourth year | 50 | 50 | 50 |
| In the fifth year | 161 | - | - |
| After five years | 911 | 878 | 884 |
| 1,674 | 1,903 | 1,868 |
| 30 September | 30 September | 31 March | |||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | |||
| (unaudited) | (unaudited) | (audited) | |||
| Rate | Maturity | £m | £m | £m | |
| Issued under the £2,000 million note issuance programme | |||||
| Fixed rate | |||||
| €350 million notes (public issue) | 5.625% | 2017 | 302 | 303 | 309 |
| £200 million notes (public issue) | 6.875% | 2023 | 200 | 200 | 200 |
| £400 million notes (public issue) | 5.750% | 2032 | 375 | 375 | 375 |
| Other | 34 | 95 | 62 | ||
| Variable rate | |||||
| €500 million notes (public issue) | EURIBOR+0.20% | 2012 | 293 | 395 | 382 |
| Other | 259 | 260 | 265 | ||
| 1,463 | 1,628 | 1,593 | |||
| Committed multi-currency facilities | |||||
| £100 million | LIBOR+2.75% to +3.00% | 2012 | - | 66 | 69 |
| £300 million | LIBOR+2.75% | 2012 | - | 159 | 156 |
| £200 million | LIBOR+3.75% | 2014 | 50 | 50 | 50 |
| £50 million | LIBOR+1.50% | 2016 | - | - | - |
| £450 million | LIBOR+1.00% | 2016 | 161 | - | - |
| 211 | 275 | 275 | |||
| Total loans and borrowings | 1,674 | 1,903 | 1,868 |
The £100 million multi-currency facility was refinanced to £50 million with maturity extended from October 2012 to April 2016.
The £300 million multi-currency facility was refinanced to £450 million with maturity extended from October 2012 to June 2016.
The Group is subject to a financial covenant relating to its Asset Cover Ratio; defined as total assets (including cash) divided by gross debt. The Asset Cover Ratio limit is 1.45 at 30 September 2011 (September 2010: 1.35, March 2011: 1.40), the Asset Cover Ratio at 30 September 2011 is 2.81 (September 2010: 2.62, March 2011: 2.82).
All of the Group's borrowings are repayable in one instalment on the respective maturity dates. None of the Group's interest-bearing loans and borrowings are secured on the assets of the Group. The fair value of the loans and borrowings is £1,643 million (September 2010: £1,878 million, March 2011: £1,875 million), determined where applicable with reference to their published market price.
| 30 September | 30 September | 31 March | |
|---|---|---|---|
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Opening balance | 138 | 363 | 363 |
| Amortisation | 1 | 19 | 24 |
| Repurchase during the period | - | (195) | (249) |
| Repayment at maturity | (139) | - | - |
| Closing balance | - | 187 | 138 |
On 29 May 2008, a £430 million three year 3.625% convertible bond was raised. The Group share price on issue was £8.86 and the conversion price for bondholders was £11.32. Following the rights issue, the conversion price for bondholders reduced to £7.51.
On issue, part of the proceeds was recognised as a derivative financial instrument and the remaining amount recognised as a loan held at amortised cost with an effective interest rate of 8.5%.
The convertible bond matured on 31 May 2011 and was repaid in full.
| Share | Share | Capital redemption |
Share based payment |
Translation | Capital | Revenue | Other | Own | Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| capital | premium | reserve | reserve | reserve | reserve | reserve | reserves | shares | equity | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| 6 months to 30 September 2011 Total equity at the start of |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| the period | 717 | 779 | 43 | 17 | 263 | 1,093 | 526 | 5 | (86) | 3,357 |
| Loss for the period | (479) | (21) | (500) | |||||||
| Exchange differences on | ||||||||||
| translation of | ||||||||||
| foreign operations | 26 | 26 | ||||||||
| Actuarial loss | (49) | (49) | ||||||||
| Total comprehensive | ||||||||||
| income for the period | - | - | - | - | 26 | (528) | (21) | - | - | (523) |
| Share-based payments Release on lapse of |
3 | 3 | ||||||||
| equity settled call options | 5 | (5) | - | |||||||
| Purchase of own shares | (11) | (11) | ||||||||
| Settlement of share | ||||||||||
| awards | (6) | 6 | - | |||||||
| Issue of ordinary shares | 1 | 1 | ||||||||
| Release on | ||||||||||
| exercise/forfeiture of | ||||||||||
| share options | (2) | 2 | - | |||||||
| Ordinary dividends | (23) | (23) | ||||||||
| Total equity at the end | ||||||||||
| of the period | 717 | 780 | 43 | 18 | 289 | 564 | 484 | - | (91) | 2,804 |
| Share | ||||||||||
| Share | Share | Capital redemption |
based payment |
Translation | Capital | Revenue | Other | Own | Total | |
| capital | premium | reserve | reserve | reserve | reserve | reserve | reserves | shares | equity | |
| 6 months to 30 September 2010 | (unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
(unaudited) £m |
| Total equity at the start of | ||||||||||
| the period | 717 | 779 | 43 | 24 | 145 | 959 | 482 | 5 | (86) | 3,068 |
| Profit for the period | 21 | 31 | 52 | |||||||
| Exchange differences on | ||||||||||
| translation of | ||||||||||
| foreign operations | 72 | 72 | ||||||||
| Actuarial loss | (7) | (7) | ||||||||
| Total comprehensive | ||||||||||
| income for the period | - | - | - | - | 72 | 14 | 31 | - | - | 117 |
| Share-based payments | (1) | (1) | ||||||||
| Release on | ||||||||||
| exercise/forfeiture of | ||||||||||
| share options | (7) | 3 | (4) | |||||||
| Ordinary dividends Total equity at the end of |
(19) | (19) |
| Capital | Share based |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share | Share | redemption | payment | Translation | Capital | Revenue | Other | Own | Total | |
| capital | premium | reserve | reserve | reserve | reserve | reserve | reserves | shares | equity | |
| Year to 31 March 2011 | (audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
(audited) £m |
| Total equity at the start of | ||||||||||
| the period | 717 | 779 | 43 | 24 | 145 | 959 | 482 | 5 | (86) | 3,068 |
| Profit for the year | 114 | 72 | 186 | |||||||
| Exchange differences | ||||||||||
| on translation of | ||||||||||
| foreign operations | 118 | 118 | ||||||||
| Actuarial gain | 20 | 20 | ||||||||
| Total comprehensive | ||||||||||
| income for the year | - | - | - | - | 118 | 134 | 72 | - | - | 324 |
| Share-based payments | - | |||||||||
| Release on | ||||||||||
| exercise/forfeiture of | ||||||||||
| share options | (7) | 2 | (5) | |||||||
| Ordinary dividends | (30) | (30) | ||||||||
| Total equity at the end of | ||||||||||
| the period | 717 | 779 | 43 | 17 | 263 | 1,093 | 526 | 5 | (86) | 3,357 |
The earnings and net assets per share attributable to the equity shareholders of the Company are based on the following data:
| 6 months | 6 months | 12 months to | |
|---|---|---|---|
| to 30 September | to 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Earnings per share (pence) | |||
| Basic | (52.7) | 5.5 | 19.6 |
| Diluted1 | (52.7) | 5.4 | 19.5 |
| Earnings (£m) | |||
| (Loss)/profit for the period attributable to equity holders of the Company | (500) | 52 | 186 |
| 6 months | 6 months | 12 months to | |
| to 30 September | to 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Number | Number | Number | |
| Weighted average number of shares in issue | |||
| Ordinary shares | 970,725,309 | 970,444,952 | 970,513,394 |
| Own shares | (21,652,035) | (19,689,835) | (19,660,791) |
| 949,073,274 | 950,755,117 | 950,852,603 | |
| Effect of dilutive potential ordinary shares | |||
| Share options1 | - | 6,251,029 | 3,486,081 |
| Diluted shares | 949,073,274 | 957,006,146 | 954,338,684 |
| 1 The potential effect of share options is excluded from the September 2011 dilution calculation, as the impact is anti-dilutive. | |||
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Net assets per share (£) | |||
| Basic | 2.96 | 3.32 | 3.53 |
| Diluted | 2.94 | 3.30 | 3.51 |
| Net assets (£m) | |||
| Net assets attributable to equity holders of the Company | 2,804 | 3,161 | 3,357 |
| 30 September | 30 September | 31 March | |
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Number | Number | Number | |
| Number of shares in issue | |||
| Ordinary shares | 970,843,005 | 970,538,698 | 970,650,620 |
| Own shares | (22,165,246) | (19,631,587) | (19,631,587) |
| 948,677,759 | 950,907,111 | 951,019,033 | |
| Effect of dilutive potential ordinary shares | |||
| Share options Diluted shares |
3,817,309 952,495,068 |
7,964,960 958,872,071 |
4,600,795 955,619,828 |
| 6 months to | 6 months to | 12 months | ||||
|---|---|---|---|---|---|---|
| 30 September | 6 months to | 30 September | 6 months to | to 31 March | 12 months | |
| 2011 | 30 September | 2010 | 30 September | 2011 | to 31 March | |
| (unaudited) | 2011 | (unaudited) | 2010 | (audited) | 2011 | |
| pence | (unaudited) | pence | (unaudited) | pence | (audited) | |
| per share | £m | per share | £m | per share | £m | |
| Declared and paid during the period | ||||||
| Ordinary shares | ||||||
| Final dividend | 2.4 | 23 | 2.0 | 19 | 2.0 | 19 |
| Interim dividend | - | - | - | - | 1.2 | 11 |
| 2.4 | 23 | 2.0 | 19 | 3.2 | 30 | |
| Proposed dividend | 2.7 | 26 | 1.2 | 11 | 2.4 | 23 |
| 30 September | 30 September | 31 March | |
|---|---|---|---|
| 2011 | 2010 | 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Contingent liabilities relating to guarantees available to third | |||
| parties in respect of investee companies | 4 | 7 | 5 |
The Company has guaranteed the payment of principal and interest on amounts drawn down by 3i Holdings plc under the committed multi-currency facilities. At 30 September 2011, 3i Holdings plc had drawn down £221 million (September 2010: £225 million, March 2011: £225 million) under these facilities.
The Company has provided a guarantee to the Trustees of the 3i Group Pension Plan in respect of liabilities of 3i plc to the Plan. 3i plc is the sponsor of the 3i Group Pension Plan. The Company has agreed to transfer eligible assets (£150 million of ordinary shares in 3i Infrastructure plc) to a wholly owned subsidiary of the Group. The Company will retain all income and capital rights in relation to the 3i Infrastructure plc shares, as eligible assets, unless the Company becomes insolvent or fails to comply with material obligations in relation to the agreement with the Trustees, all of which are under its control.
At 30 September 2011, there was no material litigation outstanding against the Company or any of its subsidiary undertakings.
The Group has various related parties stemming from relationships with limited partnerships managed by the Group, its investment portfolio, its advisory arrangements, and its key management personnel. In addition the Company has related parties in respect of its subsidiaries.
The Group manages a number of external funds which invest through limited partnerships. Group companies act as the general partners of these limited partnerships and exert significant influence over them. The following amounts have been included in respect of the management of these limited partnerships:
| Statement of comprehensive income | 6 months to | 6 months to | 12 months to |
|---|---|---|---|
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Carried interest receivable | (11) | 19 | 25 |
| Fees receivable from external funds | 38 | 25 | 55 |
| Balance sheet | 30 September 2011 | 30 September 2010 | 31 March 2011 |
| (unaudited) | (unaudited) | (audited) | |
| £m | £m | £m | |
| Carried interest receivable | 42 | 78 | 82 |
The Group makes minority investments in the equity of unquoted and quoted companies. This normally allows the Group to participate in the financial and operating policies of those companies. It is presumed that it is possible to exert significant influence when the equity holding is greater than 20%. These investments are not equity accounted for (as permitted by IAS 28) but are related parties. The total amounts included for these investments are as follows:
| 6 months to | 6 months to | 12 months to | |
|---|---|---|---|
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Statement of comprehensive income | £m | £m | £m |
| Realised profits over value on the disposal of | |||
| investments | 17 | 18 | 9 |
| Unrealised (losses)/profits on the revaluation of investments | (336) | 195 | 313 |
| Portfolio income | 50 | 75 | 136 |
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Balance sheet | £m | £m | £m |
| Quoted equity investments | 435 | 311 | 321 |
| Unquoted equity investments | 950 | 1,481 | 1,633 |
| Loans and receivables | 1,322 | 1,236 | 1,294 |
From time to time, transactions occur between related parties within the investment portfolio which the Group influences to facilitate the reorganisation or recapitalisation of an investee company. There has been no single transaction in the period with a material effect on the Group's financial statements and all such transactions are fully included in the above disclosure.
The Group acts as adviser to 3i Infrastructure plc and the following amounts have been included in respect of this advisory relationship:
| 6 months to 30 September 2011 (unaudited) |
6 months to 30 September 2010 (unaudited) |
12 months to 31 March 2011 (audited) |
|
|---|---|---|---|
| Statement of comprehensive income | £m | £m | £m |
| Unrealised profits on the revaluation of investments | 11 | 11 | 21 |
| Fees receivable from external funds | 6 | 5 | 17 |
| Dividends | 9 | 9 | 16 |
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Balance sheet | £m | £m | £m |
| Quoted equity investments | 363 | 310 | 320 |
The Group's key management personnel comprises the members of the Leadership Team, which replaced the Management Committee in September 2010, and the Board's non-executive Directors. The following amounts have been included in respect of these individuals:
| 6 months to | 6 months to | 12 months to | |
|---|---|---|---|
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| Statement of comprehensive income | £m | £m | £m |
| Salaries, fees, supplements and benefits in kind | 3 | 3 | 6 |
| Bonuses and deferred share bonuses | 4 | 2 | 6 |
| Carried interest and performance fees payable | 7 | 11 | 15 |
| Share-based payments | 2 | - | 1 |
| 30 September 2011 | 30 September 2010 | 31 March 2011 | |
|---|---|---|---|
| (unaudited) | (unaudited) | (audited) | |
| Balance sheet | £m | £m | £m |
| Bonuses and deferred share bonuses | 4 | 3 | 8 |
| Carried interest and performance fees payable within one year | 6 | 2 | 8 |
| Carried interest and performance fees payable after one year | 12 | 14 | 11 |
| Deferred consideration included within trade and other payables1 | 9 | - | 9 |
1 Deferred consideration relates to the acquisition of Mizuho Investment Management Limited on 15 February 2011.
Carried interest paid in the year to key management personnel was £3 million (September 2010: £11 million, March 2011: £16 million).
These financial statements are the unaudited condensed half-yearly consolidated financial statements (the "Halfyearly Financial Statements") of 3i Group plc, a company incorporated in Great Britain and registered in England and Wales, and its subsidiaries (together referred to as the "Group") for the six-month period ended 30 September 2011.
The Half-yearly Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ("IAS 34") and should be read in conjunction with the Consolidated Financial Statements for the year to 31 March 2011 ("Report and Accounts 2011"), as they provide an update of previously reported information.
The Half-yearly Financial Statements were authorised for issue by the Directors on 10 November 2011.
The Half-yearly Financial Statements have been prepared in accordance with the accounting policies set out in the Report and Accounts 2011. The new and revised International Financial Reporting Standards ("IFRS") and interpretations effective in the period have had no impact on the accounting policies of the Group. The Half-yearly Financial Statements do not constitute statutory accounts. The statutory accounts for the year to 31 March 2011, prepared under IFRS, have been filed with the Registrar of Companies and the auditors have issued a report, which was unqualified and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.
The preparation of the Half-yearly Financial Statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The 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. The most significant techniques for estimation are described in the accounting policies and in "Portfolio valuation – an explanation" in the Report and Accounts 2011.
The Half-yearly Financial Statements have been prepared using the going concern basis, and the Directors are not aware of any new events or circumstances which would make this inappropriate.
The Group operates in business lines where significant seasonal or cyclical variations in activity are not experienced during the financial year.
The Directors confirm to the best of their knowledge that:
The Directors of 3i Group plc and their functions are listed below.
By order of the Board
K J Dunn Secretary 9 November 2011
Sir Adrian Montague, Chairman Michael Queen, Chief Executive and executive Director Julia Wilson, Finance Director and executive Director Simon Borrows, Chief Investment Officer and executive Director Jonathan Asquith, Non-executive Director Alistair Cox, Non-executive Director Richard Meddings, Non-executive Director and Senior Independent Director Willem Mesdag, Non-executive Director
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 which comprises the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and the related notes 1 to 11. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in the accounting policies, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this halfyearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP London 9 November 2011
The list below provides information on the ten largest investments in respect of the Group's holding, excluding any managed or advised external funds.
| Business line | Proportion | |||
|---|---|---|---|---|
| Investment | Geography | of equity | Residual | |
| Website | First invested in | shares | cost | Valuation |
| Description of business | Valuation basis | held (%) | £m | £m |
| 3i Infrastructure plc | Infrastructure | 35.0 | 302 | 363 |
| 3i-infrastructure.com | UK | |||
| Quoted investment company, investing | 2007 | |||
| in infrastructure | Quoted | |||
| MWM GmbH | Private Equity (BO) | 41.3 | 71 | 193 |
| mwm.net | Germany | |||
| Provider of decentralised power generation systems | 2007 | |||
| Imminent sale | ||||
| ACR Capital Holdings Pte Limited | Private Equity (GC) | 31.1 | 105 | 147 |
| asiacapitalre.com | Singapore | |||
| Reinsurance in large risk segments | 2006 | |||
| Industry metric | ||||
| Peer Holdings BV (Action) | Private Equity (BO) | 45.0 | 134 | 131 |
| action.nl | Netherlands | |||
| Non-food discount retailer | 2011 | |||
| Earnings | ||||
| Foster + Partners1 | Private Equity (GC) | 40.0 | 122 | |
| fosterandpartners.com | UK | |||
| Architectural services | 2007 | |||
| Earnings | ||||
| Mémora Servicios Funerarias | Private Equity (BO) | 34.7 | 114 | 118 |
| memora.es | Spain | |||
| Funeral service provider | 2008 | |||
| Earnings | ||||
| Mold Masters Luxembourg Holdings S.A.R.L. | Private Equity (GC) | 49.3 | 75 | 98 |
| moldmasters.com | Canada | |||
| Plastic processing technology provider | 2007 | |||
| Earnings | ||||
| Quintiles Transnational Corporation | Private Equity (GC) | 4.9 | 74 | 96 |
| quintiles.com | US | |||
| Clinical research outsourcing solutions | 2008 | |||
| Earnings | ||||
| Eco US Holdings Inc (HILITE) | Private Equity (BO) | 25.4 | 97 | 96 |
| hilite.com | Germany | |||
| Fluid control component supplier | 2011 | |||
| Earnings | ||||
| Mayborn Group Limited | Private Equity (BO) | 37.9 | 95 | 93 |
| mayborngroup.com | UK | |||
| Manufacturer and distributor of baby products | 2006 | |||
| Earnings |
1 The residual cost of this investment cannot be disclosed per a confidentiality agreement in place at the time of investment.
In addition to the ten largest investments shown, detailed below are forty other large investments which are substantially all of the Group's investments valued over £15 million. This does not include six investments that have been excluded for commercial reasons.
| Business line | Proportion | |||
|---|---|---|---|---|
| Investment | Geography | of equity | Residual | |
| Website | First invested in | shares | cost | Valuation |
| Description of business Scandferries Holding GmbH (Scandlines) |
Valuation basis Private Equity (BO) |
held (%) 27.3 |
£m 38 |
£m 92 |
| scandlines.de | Germany | |||
| Ferry operator in the Baltic Sea | 2007 | |||
| DCF | ||||
| OneMed Group | Private Equity (BO) | 30.5 | 91 | 83 |
| onemed.com | Sweden | |||
| Distributor of consumable medical products, devices | 2011 | |||
| and technology | Earnings | |||
| Azelis Holding S.A. | Private Equity (BO) | 36.5 | 50 | 74 |
| azelis.com | Luxembourg | |||
| Distributor of specialty chemicals, polymers and | 2007 | |||
| related services | Earnings | |||
| NORMA Group Holding GmbH | Private Equity (BO) | 21.1 | 0 | 71 |
| normagroup.com | Germany | |||
| Provider of engineered joining technology | 2005 | |||
| Quoted | ||||
| Eltel Networks Oy | Private Equity (BO) | 42.6 | 85 | 71 |
| eltelnetworks.com | Finland | |||
| Network services | 2007 Earnings |
|||
| Stork Materials Technology | Private Equity (BO) | 42.2 | 60 | 68 |
| storksmt.com | Netherlands | |||
| Testing and Inspection | 2010 | |||
| Earnings | ||||
| Tato Holdings Limited | SMI | 26.1 | 2 | 65 |
| thor.com | UK | |||
| Manufacture and sale of speciality chemicals | 1990 | |||
| Earnings | ||||
| Cornwall Topco Limited (Civica) | Private Equity (BO) | 40.2 | 91 | 65 |
| civica.co.uk | UK | |||
| Public sector IT and services | 2008 | |||
| Earnings | ||||
| Navayuga Engineering Company Limited | Private Equity (GC) | 10.0 | 23 | 61 |
| necltd.com Engineering and construction |
India 2006 |
|||
| Other | ||||
| Labco SAS | Private Equity (GC) | 12.3 | 64 | 52 |
| labco.eu | France | |||
| Clinical laboratories | 2008 | |||
| Earnings | ||||
| Hobbs | Private Equity (BO) | 47.0 | 72 | 50 |
| hobbs.co.uk | UK | |||
| Retailer of women's clothing and footwear | 2004 | |||
| Earnings | ||||
| Amor GmbH | Private Equity (BO) | 42.1 | 49 | 44 |
| amor.de | Germany | |||
| Jewellery supplier focusing on procurement, | 2010 | |||
| logistics and servicing | Earnings | |||
| AES Engineering Limited | Private Equity (GC) | 40.6 | 30 | 43 |
| aesseal.co.uk | UK | |||
| Manufacturer of mechanical seals and support systems |
1996 Earnings |
|||
| Sortifandus, S.L. | Private Equity (BO) | 42.8 | 47 | 42 |
| (GES – Global Energy Services) | Spain | |||
| services-ges.com | 2006 | |||
| Wind power service provider | Earnings |
| Investment | Business line Geography |
Proportion of equity |
Residual | |
|---|---|---|---|---|
| Website | First invested in | shares | cost | Valuation |
| Description of business Adani Power |
Valuation basis Infrastructure |
held (%) 1.6 |
£m 25 |
£m 38 |
| adanipower.com | India | |||
| Power generation | 2007 | |||
| Quoted | ||||
| Phibro Animal Health Corporation pahc.com |
Private Equity (GC) US |
29.9 | 90 | 38 |
| Animal healthcare | 2009 | |||
| Earnings | ||||
| Otnortopco AS (Xellia/Alpharma) | Private Equity (BO) | 30.4 | 79 | 37 |
| xellia.com | Norway | |||
| Developer and supplier of specialist active | 2007 | |||
| pharmaceutical ingredients Trescal |
Earnings Private Equity (BO) |
23.5 | 31 | 37 |
| trescal.com | France | |||
| Calibration services | 2010 | |||
| Earnings | ||||
| Krishnapatnam Port | Infrastructure | 3.0 | 24 | 30 |
| krishnapatnam.com | India | |||
| Port | 2009 DCF |
|||
| Environmental Scientifics Group (ESG) | Private Equity (BO) | 38.0 | 32 | 30 |
| esg.co.uk | UK | |||
| Global testing and inspection | 2007 | |||
| Earnings | ||||
| Polyconcept Investments BV | Private Equity (GC) | 13.0 | 43 | 29 |
| polyconcept.com Supplier of promotional products |
Netherlands 2005 |
|||
| Earnings | ||||
| Joyon Southside | Private Equity (GC) | 49.9 | 15 | 28 |
| joyon.cn | China | |||
| Real estate | 2007 | |||
| LHI Technology Private Limited | DCF Private Equity (BO) |
37.5 | 16 | 28 |
| lhitechnology.com | Hong Kong | |||
| Medical cable assemblies | 2008 | |||
| Earnings | ||||
| Refresco Group B.V. | Private Equity (GC) | 10.7 | 46 | 28 |
| refresco.com | Netherlands | |||
| Manufacturer of private label juices and soft drinks | 2010 Earnings |
|||
| Hyperion Insurance Group Limited | Private Equity (GC) | 19.1 | 21 | 28 |
| hyperiongrp.com | UK | |||
| Specialist insurance intermediary | 2008 | |||
| Industry metric | ||||
| Lekolar AB | Private Equity (BO) | 33.3 | 29 | 27 |
| lekolar.se Distributor of pedagogical products and educational |
Sweden 2007 |
|||
| materials | Earnings | |||
| Soya Concept A/S | Private Equity (GC) | 45.0 | 13 | 24 |
| soyaconcept.com | Denmark | |||
| Fashion design company | 2007 | |||
| BVG India Ltd | Earnings | |||
| bvgindia.com | Private Equity (GC) India |
19.6 | 21 | 22 |
| Business services | 2011 | |||
| Earnings | ||||
| Goromar XXI, S.L. (Esmalglass) | Private Equity (BO) | 21.6 | 21 | 22 |
| esmalglass.com | Spain | |||
| Manufacture of frites, glazes and colours for tiles | 2002 | |||
| Consultim Finance SAS | Earnings Private Equity (GC) |
20.0 | 24 | 21 |
| cerenicimo.fr | France | |||
| Wholesaler of rental real estate | 2007 | |||
| Earnings |
| Business line | Proportion | |||
|---|---|---|---|---|
| Investment | Geography | of equity | Residual | |
| Website Description of business |
First invested in Valuation basis |
shares held (%) |
cost £m |
Valuation £m |
| TouchTunes Interactive Networks | Private Equity (GC) | 9.4 | 18 | 19 |
| touchtunes.com | US | |||
| Out of home interactive media and entertainment | 2011 | |||
| network | Earnings | |||
| Pearl (AP) Group Limited (Agent Provocateur) | Private Equity (BO) | 34.5 | 48 | 19 |
| agentprovocateur.com | UK | |||
| Women's lingerie and assorted products | 2007 | |||
| DCF | ||||
| John Hardy Limited | Private Equity (GC) | 23.5 | 15 | 17 |
| johnhardy.com | China | |||
| Designer jewellery business | 2007 | |||
| Earnings | ||||
| MKM Building Supplies (Holdings) Limited | Private Equity (GC) | 30.3 | 15 | 17 |
| mkmbs.co.uk | UK | |||
| Building material supplier | 1998 | |||
| Earnings | ||||
| Gain Capital | Private Equity (GC) | 10.1 | 24 | 17 |
| gaincapital.com | US | |||
| Retail online forex trading | 2008 | |||
| Quoted | ||||
| SOMA Enterprise | Infrastructure | 2.9 | 11 | 16 |
| soma.co.in | India | |||
| Infrastructure development | 2007 | |||
| Other | ||||
| UFO Moviez | Private Equity (GC) | 27.6 | 11 | 16 |
| ufomoviez.com | India | |||
| Provider of digital cinema services | 2007 | |||
| Earnings | ||||
| Loxam Holdings | Private Equity (GC) | 3.8 | 17 | 16 |
| loxam.fr | France | |||
| Professional equipment rental | 2011 | |||
| Earnings | ||||
| GO Outdoors Topco Limited | Private Equity (GC) | 13.3 | 17 | 15 |
| gooutdoors.co.uk | UK | |||
| Retailer of outdoor equipment, | 2011 | |||
| tents, clothing and footwear KMC Roads |
Earnings | |||
| kmcgroup.co.in | Infrastructure India |
6.7 | 15 | 15 |
| Engineering, procurement and construction services | 2011 | |||
| DCF |
The online Half-yearly report 2011 will be available at www.reportingcentre.3igroup.com/2011/halfyearlyreport from 3.00pm today.
The interim dividend is expected to be paid on 11 January 2012 to holders of ordinary shares on the register on 9 December 2011. The ex-dividend date will be 7 December 2011.
16 Palace Street, London SW1E 5JD, UK Telephone +44 (0)20 7928 3131 Fax +44 (0)20 7928 0058
Website www.3igroup.com
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