TIDMIII
RNS Number : 4397D
3i Group PLC
29 January 2015
3i Group plc - Q3 performance update
29 January 2015
3i Group plc ("3i" or "the Group"), a leading international
manager of third-party and proprietary capital across mid-market
private equity, infrastructure and debt management, today issues
its performance update for the three-month period from 1 October
2014 to 31 December 2014 (the "period" or the "quarter"). Financial
information is unaudited and is presented on 3i's Investment basis
in order to provide users with the most appropriate description of
the drivers of 3i's performance. Net asset value ("NAV") and Total
return are the same on the Investment basis and on an IFRS basis.
Details of the differences between 3i's consolidated financial
statements prepared on an IFRS basis and under the Investment basis
are provided in the 2014 Annual Report and Accounts. There have
been no material changes to the financial position of 3i from the
end of this period to the date of this announcement.
Simon Borrows, 3i's Chief Executive said:
"The final quarter of 2014 was busy for 3i and all three of the
Group's businesses continued to perform well. We made two
significant new Private Equity investments, completed a number of
exits and refinancings and continued to support good growth in the
portfolio. Our Debt Management team closed a new CLO in each of
Europe and the US and also secured a first close of the European
Middle Market Loan Fund, continuing its strong fund raising track
record this year. The Infrastructure team advised on two new PPP
investments in the period, the sale of Eversholt Rail Group and is
pursuing a number of new Core investment opportunities.
The wider European economic and political environment continues
to be a concern, but our portfolio remains well positioned and
continues to perform strongly overall. Pricing in Europe in
particular remains very full and, although keen to invest, we
remain cautious and will continue to be an active seller of
investments while this environment persists."
Highlights for the quarter ended 31 December 2014:
* Received GBP245 million of Private Equity realisation
proceeds, bringing total realisations across the
Group for the nine months to 31 December 2014 to
GBP569 million;
* Invested GBP275 million in Private Equity on behalf
of 3i and funds, GBP200 million of which was
proprietary capital, including two significant new
investments;
* Strong value creation from the portfolio, supported
by earnings growth of 15% in the Private Equity
portfolio and GBP39 million of value growth from an
increase in 3i Infrastructure plc's share price;
* Significant growth in Debt Management AUM with the
closing of Jamestown V US CLO, Harvest X European CLO
and the first close of the European Middle Market
Loan Fund adding GBP803 million of new AUM;
* Diluted NAV per share increased by 5% to 375 pence as
at 31 December 2014, before payment of interim FY2015
dividend of 6.0 pence per share on 7 January 2015.
Realisations and investment activity
3 months to 31 December
2014 Private Debt
Equity Infrastructure Management Total
------------------------------- -------- --------------- ----------- ------
Cash proceeds 245 - - 245
Cash investment (200) - 22 (178)
Net cash divestment
/ (investment) 45 - 22 67
------------------------------- -------- --------------- ----------- ------
Non-cash (investment) (50) - - (50)
Net divestment / (investment) (5) - 22 17
------------------------------- -------- --------------- ----------- ------
9 months to 31 December Private Debt
2014
Equity Infrastructure Management Total
------------------------------- -------- --------------- ----------- ------
Cash proceeds 561 8 - 569
Cash investment (304) - (73) (377)
Net cash divestment
/ (investment) 257 8 (73) 192
------------------------------- -------- --------------- ----------- ------
Non-cash (investment) (105) - - (105)
Net divestment / (investment) 152 8 (73) 87
------------------------------- -------- --------------- ----------- ------
Note: 3i proprietary capital only.
Private Equity
Mid-market private equity assets remain fully priced,
particularly in Europe, and debt has been readily available for
good businesses. This has continued to provide us with the
opportunity for realisations and refinancings, while we remain
cautious in our assessment of new investment opportunities.
Market conditions continue to create opportunities for
realisation and refinancings, which together generated cash
proceeds in the quarter of GBP245 million. Notable realisations in
the period included the completion of our exit from Hilite, the
German headquartered automotive supplier, for a money multiple of
2.1x, as well as further partial exits of three of our US listed
investments, Quintiles, Phibro and Gain Capital. Total proceeds in
the nine months to 31 December 2014 were GBP561 million, at an
uplift of 17% to the 31 March 2014 valuation and at an average
money multiple of 1.9x.
We invested a total of GBP275 million in the period, GBP200
million of which was 3i's proprietary capital, including two
significant new investments: GBP102 million into Q Holdings, a US
headquartered leading global manufacturer of highly engineered,
precision moulded rubber and silicone components, substantially
funded by 3i's proprietary capital; and GBP173 million into Christ,
a German headquartered jewellery retailer, funded from Eurofund V
with GBP99 million provided by 3i's proprietary capital.
We announced the successful refinancing of Action in December
and received proceeds of GBP102 million from that transaction in
January. We continue to have an active pipeline of sales,
refinancings and IPOs from the portfolio.
Infrastructure
The European portfolio continued to perform well and generated a
good level of portfolio income to support both dividends and
advisory fees payable to 3i by 3i Infrastructure plc ("3iN"). In
the period, 3i accrued dividend income of GBP10 million from 3iN
and recognised value growth of GBP39 million as the ex-dividend
share price increased significantly from 140 pence at 30 September
2014 to 153 pence at 31 December 2014. Since the period end, on 20
January 2015, 3iN announced the sale of its interest in Eversholt
Rail Group.
The Infrastructure investment team continues to see a healthy
pipeline of investment opportunities, although competition for Core
infrastructure investments remains high. During the period, 3iN
completed two new Primary Public Private Partnership ("PPP")
investments: a commitment to invest EUR22 million in a PPP project
to design, build and maintain the existing and new infrastructure
of the A9 motorway in the Netherlands; and a commitment to invest
EUR12 million in a PPP project involving the design, building,
refurbishment and maintenance of various buildings for La Santé
Prison in France.
Debt Management
Fee income from Debt Management remained strong in the quarter,
with the majority of the funds continuing to pay both senior and
subordinated fees and new fund launches adding to total fee
income.
The Debt Management team closed Harvest X, a new European CLO in
November 2014, and Jamestown V, a new US CLO, in December 2014. 3i
invested GBP29 million of proprietary capital in these two CLOs. We
also announced the first close of the European Middle Market Loan
Fund in November 2014 at EUR250 million, diversifying the product
offering. In aggregate, in the quarter, the team added GBP803
million of new AUM.
We continue to use warehouse facilities that allow the build up
of portfolios ahead of transfer to new CLO structures. We have
warehouses established in both Europe and the US but received a net
GBP51 million return of capital in the period from these warehouses
following the close of the Harvest X and Jamestown V CLOs.
Assets under management
New CLO issuance in Debt Management and new investments in
Private Equity more than offset the effect of divestment activity
in Private Equity and in the older CLOs. AUM of GBP13.3 billion at
31 December 2014 compared to GBP12.9 billion as at 30 September
2014; 74% of the AUM at 31 December related to third-party capital
(September 2014: 74%). Debt Management, Private Equity and
Infrastructure accounted for 51%, 31% and 18% respectively of total
AUM.
Portfolio
The unaudited valuations of our top 10 investments as at 31
December 2014 are shown in the table below. These comprise 57% of
the total Proprietary Capital portfolio by value.
Top 10 investments by value at 31 December 2014
Valuation Valuation
Valuation Sep-14 Dec-14
Investment basis GBPm GBPm Activity in the quarter
------------------- ----------- ---------- ---------- ----------------------------------
Refinancing announced, completion
Action Earnings 573 595 in January 2015
------------------- ----------- ---------- ---------- ----------------------------------
Ex-div 27 November 2014,
3i Infrastructure closing share price 153p
plc Quoted 421 459 on 31 December 2014
------------------- ----------- ---------- ---------- ----------------------------------
Scandlines DCF 218 221
------------------- ----------- ---------- ---------- ----------------------------------
Additional investment into
Amor / Christ Earnings 51 149 Christ
------------------- ----------- ---------- ---------- ----------------------------------
Mayborn Earnings 122 128
------------------- ----------- ---------- ---------- ----------------------------------
Element Earnings 112 124
------------------- ----------- ---------- ---------- ----------------------------------
Proceeds of GBP29m received
during the period, closing
Quintiles Quoted 137 120 share price $58.87
------------------- ----------- ---------- ---------- ----------------------------------
ACR Other 111 116
------------------- ----------- ---------- ---------- ----------------------------------
Basic Fit Earnings 100 108
------------------- ----------- ---------- ---------- ----------------------------------
Eltel Earnings 94 102
------------------- ----------- ---------- ---------- ----------------------------------
The Private Equity portfolio continues to perform well and value
weighted earnings growth over the last twelve months was 15%
(September 2014: 17%).
The value weighted average EBITDA multiple used to value the
Private Equity portfolio decreased by 2% to 10.8x before
marketability discount (September 2014: 11.0x) and 10.1x after
liquidity discount (September 2014: 10.2x).
Action continues to perform very well, with 110 new stores
opened in the year to 31 December 2014. The valuation at 31
December 2014 was based on run-rate earnings as at 30 September
2014. The multiple used to value Action was unchanged at 12.5x
run-rate EBITDA, post liquidity discount.
Quoted assets increased in value during the quarter, including
growth of GBP39 million from 3i Infrastructure plc and GBP7
million, GBP4 million and GBP4 million from our remaining holdings
in Phibro, Quintiles and Gain respectively.
Returns
During the quarter, foreign exchange translation gains totalled
GBP16 million, driven by the strengthening of the US dollar against
sterling, partially offsetting exchange losses experienced in the
first half of the year. For the nine months to 31 December 2014,
foreign exchange losses totalled GBP57 million. Based on the
balance sheet at 31 December 2014, a 1% movement in the euro and US
dollar would lead to a movement of approximately GBP17 million and
GBP8 million in total return respectively.
The IAS 19 revaluation of the UK defined benefit pension scheme
at 31 December 2014 resulted in a total return gain of GBP22
million in the quarter.
The strong value growth from the Private Equity portfolio in
particular led to an unaudited total return of GBP162 million, or
5% on opening shareholders' funds, for the period (three months to
30 September 2014: GBP99 million, 3%). Diluted NAV per share as at
31 December 2014 of 375 pence increased by 5% (September 2014: 358
pence), before taking into account the payment of the interim
dividend of 6.0 pence per share in January 2015. After accounting
for the interim dividend, the diluted NAV per share was 369 pence
on a pro-forma basis as at 31 December 2014.
Balance sheet
The Group's balance sheet remains strong with low gearing and a
high level of liquidity.
Gross debt as at 31 December 2014 was GBP832 million (September
2014: GBP831 million). Net debt as at 31 December 2014 was GBP76
million, representing gearing of 2% (September 2014: GBP161
million, 5%). The reduction is driven by the net realisation
proceeds received during the period.
Liquidity as at 31 December 2014 was GBP1,106 million (September
2014: GBP1,020 million), comprising GBP756 million cash and cash
deposits and GBP350 million undrawn committed facilities.
Shareholder distributions
As announced on 13 November 2014 we expect to pay a minimum
total dividend of 15 pence per share in respect of the financial
year ended 31 March 2015. An interim dividend of 6.0 pence per
share was paid on 7 January 2015.
Ends
For further information, please contact:
Silvia Santoro
Investor Relations Director
Tel: 020 7975 3258
Kathryn van der Kroft
Communications Director
Tel: 020 7975 3021
Notes to editors:
About 3i Group
3i is a leading international investment manager focused on
mid-market Private Equity, Infrastructure and Debt Management
across Europe, North America and Asia. For further information,
please visit: www.3i.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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