UK-listed private equity group 3i today confirmed plans to return £800 million (€1.2 billion; $1.6 billion) to shareholders after realisations hit a record £2.4 billion during the year to the end of March.
Reporting its annual results this morning, 3i said it was returning the cash following “an exceptional year.” The group realised £830 million profit from £2.4 billion of asset sales, leading to a total return of £1.1 billion. It was also busy on the investment front, putting £1.6 billion to work – a 42 percent increase on the previous year.
3i chairman Baroness Hogg praised the group’s “strong financial performance”, but said the various business development initiatives undertaken during the year – particularly the launch of two new divisions – were even more significant. “Most importantly of all, [the group] has taken important steps to develop the business for the longer term,” she said.
3i’s buyouts division performed particularly well, generating a 54 percent return – almost twice the figure for the previous year. Of the £788 million total, about 84 percent came from realisations – notably European oil and gas business Vetco Gray and UK off-street parking company NCP – with the rest coming from an uplift in the value of its unrealised portfolio. The division also raised its biggest ever fund, the €5 billion Eurofund V, which is already being invested. This took the group’s total third-party funds under management to £2.8 billion.
Elsewhere, the growth capital team also performed strongly, yielding a 49 percent return. The division has been ramping up investment activity during the year, putting £482 million to work across 21 deals. Asia was a key focus, accounting for over half of the £482 million invested during the year, while the division also opened a US office. Realisations were strong, garnering profits of £235 million; 3i said this was mainly from trade sales, though four portfolio companies were successfully listed.
3i’s venture capital arm was the only disappointing performer, falling in value by 6 percent. 3i blamed the poor results on a weaker market for realisations and a fall in the share price of several listed portfolio assets, particularly internet telephony group Vonage, which has lost 79 percent of its value since listing in May.
Other significant developments for 3i last year included the launch of two new divisions. A listed infrastructure fund, headed by Michael Queen, raised £700 million in March, and with gearing will have firepower of more than £1 billion. The firm also launched a Quoted Private Equity division, which will take minority stakes in public companies and look to apply private equity value creation techniques.
Investors reacted positively to the results, sending 3i’s share price up 2.14 percent to £11.93 at 10:00 BST.
Chief executive Philip Yea warned that 3i’s realisations were likely to slow during the coming year, but said: “We remain confident of reporting further good progress in the delivery of our strategy over the year ahead.”
Hogg also suggested 3i had less to fear than most from the increased scrutiny of private equity. “Our track record as a FTSE 100 company since 1994, and our pioneering approach to governance and corporate responsibility issues in the industry, stand 3i in good stead as the debate about responsibility and transparency in the industry develops,” she said.