Interim Results
3i Group PLC
14 November 2002
3i Group plc announces
Interim results for the six months to 30 September 2002
14 November 2002
Introduction
3i announces today its interim results for the six months to 30 September 2002.
Summary of results
• A negative total return of 14.4% on opening shareholders' funds, a
significant outperformance of the FTSE 100 and the FTSE All-Share, which
both fell by 28%, and the MSCI Europe which fell by 34%
• Strong realisation proceeds of £619 million, generating net realised
profits of £118 million over opening valuation
• Investment of £393 million (including co-investment funds managed by 3i)
• Total return of £(570) million, and a diluted net asset value per share of
548p
• Unchanged interim dividend of 4.9 pence per share
Baroness Hogg, Chairman of 3i Group plc, commenting on the results, said: 'A
notable feature of these results is the realisations performance, markedly
higher than in the preceding half year, resulting in a strong financial position
at the period end. 3i is taking advantage of its unique network to generate
value and is well placed to invest actively in the future.'
Brian Larcombe added: 'This is a robust performance in a difficult climate.'
Operating review
3i has delivered a strong performance over the period when compared with quoted
market benchmark indices. Cash flow was very positive and the balance sheet is
strong. 3i is well positioned to take advantage of attractive opportunities for
investment.
Substantial progress has been made in developing 3i's business. Sector focus has
been sharpened, investment processes strengthened and more value is being
delivered from the network.
3i has continued to use the network to generate and select the best investment
opportunities and add value to its portfolio. In the six months to 30 September
3i invested £393 million, including unquoted funds under management. This is
broadly in line with overall market activity. 3i's market share in Europe
continues to be around 10% for buy-outs, growth capital and early stage
investments.
The strong level of realisations, together with the structure of our balance
sheet and funds under management means that 3i has the financial capacity to
invest actively. We expect to be net investors in the second half of the year.
Financial review
3i's total return was a negative 14.4% during the period. This represents an
outperformance of the FTSE 100 and the FTSE All-Share which both fell by 28%.
Strong realisations of £619 million generated net realised capital profits of
£118 million.
Net cash inflow of £274 million reduced gearing to 27% from 30% at 31 March and
the balance sheet is strong. Equity realisations have been made at a profit of
49% above valuations at 31 March 2002.
Revenue profit of £47 million was lower than last year largely due to a decline
in dividends received on the sale or restructuring of investments and a fall in
interest income. These were partly offset by a reduction of £10 million in
administrative costs.
The decline in net asset value was 14.4%, before deduction of the interim
dividend. The most significant factor contributing to this was the unrealised
fall in the valuation of the portfolio, largely due to lower quoted markets, the
decline in weighted average price earnings ratio used to value the unquoted
portfolio and provisions, which at £141 million were less than the provisions of
£252 million for the same period last year.
Summary
3i has significantly outperformed its benchmark indices over the period.
Realisations have been strong resulting in a positive cash flow and strengthened
balance sheet. The negative total return is mainly the result of stock market
movements.
3i's financial performance maintains the long term record of outperformance over
3, 5, 7 and 10 years against the FTSE All-Share index.
- ends -
For further information, please contact:
Brian Larcombe, Chief Executive Tel: 020 7975 3386
3i Group plc
Michael Queen, Finance Director Tel: 020 7975 3400
3i Group plc
Liz Hewitt, Director of Corporate Affairs Tel: 020 7975 3283
3i plc
Issued by:
Philip Gawith Tel: 020 7379 5151
The Maitland Consultancy
Notes to editors
3i brings capital, knowledge and connections to the creation and development of
businesses around the world. It invests in a wide range of opportunities from
start-ups to buy-outs and buy-ins, focusing on businesses with high growth
potential and strong management. 3i invests in businesses across three
continents through local investment teams in Europe, US and Asia Pacific.
The Interim results press release, the presentation and speeches given by Brian
Larcombe, Chief Executive and Michael Queen, Finance Director, announcing the
Interim results will be published from 10.30am, 14 November 2002 on 3i's
website: www.3i.com/investorrelations/.
Chairman's statement
3i made a good start to the year on the back of the spring rebound in global
economic activity and business sentiment. But by late summer the weakening of
economic prospects, accompanied by sharp falls in stock markets, had reduced the
value of our portfolio. However, 3i's fall in net asset value, before deduction
of the interim dividend, of 14.4% in the six months to 30 September 2002 was
significantly less than the fall of 28.4% in the FTSE All-Share total return
index. The Directors have announced an unchanged interim dividend of 4.9p.
A notable feature of these results was the realisations performance. In the six
months to 30 September 2002, 3i achieved realisations and repayments of £619
million, markedly higher than in the preceding half year, resulting in a strong
financial position at the period end. Moreover, equity investments were realised
at a 49% profit over valuations at the start of the period.
Investment activity in the private equity and venture capital industry has been
lower than in the past two years and this has been true of 3i too. However, 3i
has strengthened its market position as weaker competitors have withdrawn from
the market.
We announced in September some changes to the Board. I am delighted to welcome a
new non-executive Director, Christine Morin-Postel, whose wide European
experience brings us an important new dimension. Meanwhile, we have also
announced that two of our executive Directors, Richard Summers and Peter
Williams, will be retiring from the Board at the end of 2002 after more than 25
years' service with 3i. They have made an enormous contribution: Richard in the
development of our continental European network and Peter in driving the
development of our UK investment business and I thank them both for all they
have done for 3i.
Looking forward most forecasters are still expecting growth to improve slightly
in 2003, although economic prospects this autumn continue to be overshadowed by
geopolitical risk. 3i is taking advantage of its unique network to generate
value from its portfolio and is well placed to invest actively in the future.
Baroness Hogg, Chairman
13 November 2002
Operating and financial review
Macro environment
The business environment in which 3i operates has continued to be difficult.
This is most obvious in the weakness of the capital markets with lower levels of
merger and acquisition activity and very few new public issues. In a low
inflationary and low growth environment, corporate profits are under pressure
and our latest Enterprise Barometer shows a further decline in business
confidence.
In this environment, it is encouraging that 3i has enjoyed a strong cash flow
from realisations at generally good prices and that the 3i portfolio continues
to show earnings growth.
Market environment
The 3i/PricewaterhouseCoopers Global Private Equity survey for investment and
fundraising in 2001 shows a sharp fall in the amount of funds raised and
investments made, by 39% and 50% respectively, and a further decline in activity
has continued in 2002.
We believe that growth in investment will return and are encouraged by a recent
increase in investment opportunities at prices that we view as attractive. It is
worth remembering that, in the recession of the early nineties, investments made
produced many of the highest returns of the decade. We consider that this may be
a good time to be investing, although we have adopted a cautious approach and
made fewer investments than in recent years.
3i's position in the venture capital market has strengthened as competitors have
withdrawn or found it difficult to raise funds. 3i's mix of permanent capital
and funds under management enables us to take advantage of market opportunities
in a way not open to many of our competitors.
Strategy
3i is Europe's leading venture capital company and our strategy is to continue
to build our business internationally using our unique network as a competitive
advantage. While investment and realisations policy will change according to
market conditions, the following key elements of strategy continue to drive the
development of the business.
We aim to build strong businesses in each of the major venture capital markets;
to achieve a balanced business by product, by industry sector and by geographic
region; to invest in companies that have the potential to grow their revenues
and profits; and to use our international network to provide real competitive
advantage for 3i and our investee companies.
3i has a strong market position in its three product areas, buy-outs, growth
capital and early stage investments. We also have a unique network across
Europe, the US and Asia Pacific that some of our competitors are now striving to
emulate. Within the venture capital industry, we expect some consolidation and
may, in consequence, see opportunities to manage more investments.
Our own balance sheet, which remains strong, together with our funds under
management means that we have the financial capacity to invest actively.
Operations
During the last six months, there have been fewer investment opportunities and
transactions have generally taken longer to complete. In this environment, our
network has helped us to identify and select the best investment opportunities
and to harness the resources necessary to complete them. We invested £393
million in the six months to 30 September 2002 and our market share in Europe
continues to be at around 10% for buy-outs, growth capital and early stage
investments.
3i's focus on adding value to its investee businesses through its network and
expertise has been particularly important. We have been very active in managing
our portfolio, providing input at Board level through our executives or
appointees on strategy and review of operational performance and in making
further investments to enhance our prospective returns.
We announced in September some changes to our Executive Committee. These changes
reflect a greater focus on the management of our business by product as well as
geographically. Jonathan Russell has for two years headed our management buy-out
business on a worldwide basis and has improved our investing process and the
value of our portfolio of buy-out investments. Rod Perry as head of our
technology business has also instigated a large number of process changes which
deliver the benefits of our network. Our technology business is now clearly
organised on a sector basis, enabling better investment selection and improving
our ability to add value to our investments. The appointment of Chris Rowlands
to head our growth capital product increases the emphasis on this more
traditional area of our business which has strong potential for excellent
returns. We are confident that each of our three products are in growth markets
with good profit potential.
New regional heads have been appointed for Germany, France and Benelux to bring
broader international experience to these areas. Chris Rowlands will also be
responsible for Germany and the Nordic region and Paul Waller will be
responsible for France, Benelux, Spain and Italy in addition to his Unquoted
Funds responsibilities.
The development areas of our business, Asia Pacific and the US, are now both
managed by Martin Gagen. Although the difficulties in most of the technology
markets have damaged the early stage venture capital industry in the US, this
will remain the world's largest market and will continue to offer the potential
for good returns.
Financial review
Total return
For the six months to 30 September 2002, there was a negative total return of
14.4% on opening shareholders' funds, which was disappointing in absolute terms,
but represents a significant outperformance of the benchmark stock market
indices, the FTSE 100 and the FTSE All-Share, which both fell by 28%, and the
MSCI Europe which fell by 34%. Net asset value per share at 30 September 2002
was 548p compared with 645p at 31 March.
The negative total return of £570 million includes revenue profit of £47
million, realised capital profits of £118 million and unrealised value movement
of £(701) million. A positive cash flow of £274 million was generated in the
period.
The buy-out portfolio was the strongest of our product businesses and early
stage technology was the weakest performer, in line with industry and market
experience. Our UK portfolio generally performed well which is consistent with
the relatively more robust UK economy.
Revenue profit
Revenue profit earned was £47 million compared with £69 million in the six
months to 30 September 2001. Equity dividend income reduced by £18 million to
£50 million following a significant reduction in dividends received on the sale
or restructuring of investments which amounted to £9 million (2001: £31
million). Interest receivable on loan investments declined by £12 million to £48
million which results mainly from a reduction in the loan portfolio and a lower
income yield. Interest payable on borrowings, largely fixed rate, has fallen to
£52 million in line with the reduction in borrowings, while interest receivable
was lower at £17 million because of lower short term interest rates and a
reduction in average holdings of treasury assets. Fee income was also lower by
£4 million as a consequence of lower investment activity. Total administrative
expenses were reduced by £10 million following the organisational changes made
last year.
Realised capital profits
Realised capital profits were strong at £118 million which compares with losses
of £5 million in the first half and losses of £34 million in the second half of
last year.
The level of realisation proceeds at £619 million in total was also higher than
both halves of last year. This included the sale of Go, the low cost airline,
which generated £144 million of proceeds and contributed £86 million to capital
profits. Equity realisations generated an uplift in value of 49%, with 7% of the
equity portfolio being realised, which is a substantial improvement on the
uplifts achieved in the two preceding six month periods.
Realised capital profits are stated net of write-offs which were £32 million in
the period. This is less than the same period last year (£49 million) and the
second half of last year (£102 million).
Unrealised value movement
The unrealised value movement of £(701) million compares with £(1,060) million
for the same period last year.
The impact of the deterioration of the quoted markets has had a twofold effect
on the value of the portfolio. Firstly, quoted investments have fallen in value
by £192 million and, secondly, the weighted average price earnings ratio used to
value the portfolio fell from 10.0 at March to 8.3 at September 2002, resulting
in a reduction in value of £212 million.
Investee companies' earnings, where used as the basis of valuation at the start
and end of the period, have increased by 2%, contributing £38 million of value
growth.
Provisions made for investments which may fail were £141 million in the six
months to 30 September 2002, substantially lower than the £252 million in the
same period last year. Technology investments comprise 69% of these provisions.
In addition, there were reductions in value of £130 million for down rounds
which have already taken place, or are expected to take place within the next
six months.
Investment
Investment in the period was £393 million (£315 million from 3i directly and £78
million from co-investment funds). This is 35% lower than the investment made in
the same period last year and 10% lower than the six months to 31 March 2002.
Investment has been predominantly in buy-outs (45% of total investment) and
growth capital (31%). Investment in early stage technology companies amounted to
24%, mainly comprised of further investments in existing portfolio companies.
UK investment accounted for 63% of the total as a result of several large UK
based buy-out and growth capital deals. In continental Europe, investment fell
to £111 million compared to £246 million in the same period last year. US
investment also decreased, representing 8% of total investment.
Cash flow and balance sheet
Net cash flow for the six months was a positive inflow of £274 million compared
with an outflow of £220 million for the same period last year. Net borrowings
have decreased to £911 million and gearing has reduced to 27% from 30% at 31
March.
The total value of the investment portfolio has fallen by 17% from £5.1 billion
to £4.3 billion. This has resulted from strong realisations and lower levels of
investment as well as an unrealised reduction in the value of the portfolio. At
30 September 2002, the portfolio comprised quoted investments of £251 million
and unquoted investments of £4.0 billion. By product, the portfolio includes
buy-out investments of £1.6 billion, growth capital investments of £1.2 billion,
early stage technology investments of £0.8 billion, and late stage and quoted
technology investments of £0.7 billion.
In accordance with FRS17 Accounting For Retirement Benefits, we disclosed that
at 31 March there was a deficit of £14 million in respect of the 3i Group
Pension Plan. We estimate that at 30 September 2002 the equivalent figure was
£105 million. This amount has not been reflected in the total return or balance
sheet.
Financial summary
A positive cash flow of £274 million and the low level of gearing result in a
strong balance sheet.
The decline in net asset value is mainly the result of stock market movements
and provisions which are at a lower level than last year. 3i's financial
performance supports our long term record of outperformance over 3, 5, 7 and 10
years against the FTSE All-Share index.
This is a robust performance in a difficult climate.
Brian Larcombe, Chief Executive
13 November 2002
Consolidated statement of total return
for the six months to 30 September 2002
6 months to 30 September 6 months to 30 September 2001 12 months to 31 March 2002
2002 (unaudited) (audited)
(unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£m £m £m £m £m £m £m £m £m
Capital profits
Net realised
profits/(losses) over
opening valuation 118 118 (5) (5) (39) (39)
Net unrealised value
movement in the period (701) (701) (1,060) (1,060) (890) (890)
(583) (583) (1,065) (1,065) (929) (929)
Total operating income
before interest payable 153 153 204 204 355 355
Interest payable (52) (3) (55) (59) (3) (62) (114) (6) (120)
101 (586) (485) 145 (1,068) (923) 241 (935) (694)
Administrative expenses (53) (23) (76) (63) (23) (86) (121) (50) (171)
Amortisation of goodwill - - - (2) (72) (74) (2) (71) (73)
Cost of changes to
organisational structure (9) (9) (18) (9) (9) (18)
Return before tax and
currency translation
adjustment 48 (609) (561) 71 (1,172) (1,101) 109 (1,065) (956)
Tax (1) 2 1 (2) 8 6 (3) 4 1
Return for the period
before currency
translation adjustment 47 (607) (560) 69 (1,164) (1,095) 106 (1,061) (955)
Currency translation
adjustment 1 (11) (10) - (2) (2) (4) (1) (5)
Total return 48 (618) (570) 69 (1,166) (1,097) 102 (1,062) (960)
Total return per share
Basic (pence) 7.8p (101.3)p (93.5)p 11.4p (191.8)p (180.4)p 16.8p (174.5)p (157.7)p
Diluted (pence) 7.8p (101.0)p (93.2)p 11.4p (191.3)p (179.9)p 16.7p (173.3)p (156.6)p
Movement in shareholders' funds
for the six months to 30 September 2002
6 months to 6 months to 12 Months to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
£m £m £m
Opening balance 3,945 4,973 4,973
Revenue return 48 69 102
Capital return (618) (1,166) (1,062)
Total return (570) (1,097) (960)
Dividends (29) (29) (78)
Proceeds of issues of shares 4 7 10
Movement in the period (595) (1,119) (1,028)
Closing balance 3,350 3,854 3,945
Consolidated revenue statement
for the six months to 30 September 2002
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
£m £m £m
Interest receivable on loan investments 48 60 113
Fixed rate dividends 10 9 19
Other interest receivable and similar income 17 26 46
Interest payable (52) (59) (114)
Net interest income 23 36 64
Dividend income from equity shares 50 68 111
Share of net (losses)/profits of joint ventures (1) 8 9
Fees receivable 28 32 56
Other operating income 1 1 1
Total operating income 101 145 241
Administrative expenses and depreciation (53) (63) (121)
Amortisation of goodwill - (2) (2)
Cost of changes to organisational structure (9) (9)
Profit on ordinary activities before tax 48 71 109
Tax on profit on ordinary activities (1) (2) (3)
Profit for the period 47 69 106
Dividends
Interim (4.9p per share proposed, 2002: 4.9p per share paid) (29) (29) (29)
Final (2002: 8.1p per share paid) (49)
Profit retained for the period 18 40 28
Dividends per share (pence) 4.9p 4.9p 13.0p
Earnings per share
Basic (pence) 7.7p 11.4p 17.4p
Diluted (pence) 7.7p 11.4p 17.3p
Consolidated balance sheet
as at 30 September 2002
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
Assets £m £m £m £m £m £m
Treasury bills and other eligible bills 1 1 1
Loans and advances to banks 695 673 563
Debt securities held for treasury purposes 198 216 191
Debt securities and other fixed income
securities held as financial fixed asset
investments
Loan investments 1,326 1,477 1,408
Fixed income shares 264 390 324
Equity shares
Listed 210 406 413
Unlisted 2,451 2,771 2,964
4,251 5,044 5,109
Interests in joint ventures
Share of gross assets - 267 133
Share of gross liabilities - (152) (98)
- 115 35
Tangible fixed assets 52 60 50
Other assets 185 220 184
Total assets 5,382 6,329 6,133
Liabilities
Deposits by banks 343 632 519
Debt securities in issue 1,373 1,487 1,339
Other liabilities 221 269 246
Provision for joint venture deficit
Share of gross assets (74) - -
Share of gross liabilities 80 - -
6 - -
Subordinated liabilities 89 87 84
2,032 2,475 2,188
Called up share capital 305 304 305
Share premium and redemption reserve 347 341 343
Capital reserve 2,403 2,917 3,021
Revenue reserve 295 292 276
Equity shareholders' funds 3,350 3,854 3,945
Total liabilities 5,382 6,329 6,133
Net asset value per share
Basic (pence) 549p 633p 647p
Diluted (pence) 548p 631p 645p
Approved by the Board
13 November 2002
Consolidated cash flow statement
for the six months to 30 September 2002
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
£m £m £m
Operating activities
Interest received and similar income arising from debt
securities
and other fixed income securities held as financial fixed asset 44 59 102
investments
Other interest received and similar income 16 26 51
Interest paid on borrowings (54) (56) (113)
Dividends received from equity shares 47 68 109
Fees and other net cash receipts 31 34 62
Operating and administrative costs paid (59) (75) (148)
Net cash inflow from operating activities 25 56 63
Taxation received/(paid) 3 (2) (2)
Capital expenditure and financial investment
Investment in equity shares, fixed income shares and loans (299) (493) (804)
Investment in equity shares and loans acquired from joint (10) (174) (233)
ventures
Sale, repayment or redemption of equity shares, fixed income
shares and loans 624 617 1,123
Investment administrative expenses (23) (23) (59)
Investment interest paid (3) (3) (6)
Investment in joint ventures (5) (330) (347)
Divestment or repayment of interests in joint ventures 10 223 281
Disposal of investment properties - - 7
Purchase of tangible fixed assets (3) (4) (7)
Sale of tangible fixed assets - - 1
Net cash flow from capital expenditure and financial investment 291 (187) (44)
Acquisitions
Acquisition of subsidiary undertakings - (46) (51)
Equity dividends paid (49) (48) (78)
Management of liquid resources (122) 183 293
Net cash flow before financing 148 (44) 181
Financing
Debt due within one year (87) (223) (394)
Debt due after more than one year (50) 241 165
Issues of shares 4 7 10
Net cash flow from financing (133) 25 (219)
Increase/(decrease) in cash 15 (19) (38)
Notes to the financial statements
for the six months to 30 September 2002
1 Reconciliation of revenue profit before tax to net cash inflow from operating activities
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
£m £m £m
Revenue profit before tax 48 71 109
Depreciation of equipment and vehicles 3 4 8
Amortisation of goodwill - 2 2
Interest received by way of loan note (15) (5) (30)
Tax on investment income included within income from overseas
companies - - (2)
Movement in other assets associated with operating activities 7 (3) (5)
Movement in prepayments and accrued income associated with
operating activities (10) (14) 13
Movement in accruals and deferred income associated with
operating activities (5) 9 (31)
Movement in provisions for liabilities and charges (4) - 8
Reversal of losses/(profits) of joint ventures less
distributions 1 (8) (9)
received
Net cash inflow from operating activities 25 56 63
2 Reconciliation of net cash flows to movements in net debt
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) (audited)
£m £m £m
Increase/(decrease) in cash in the period 15 (19) (38)
Cash flow from management of liquid resources 122 (183) (293)
Cash flow from debt financing 142 (1) 252
Cash flow from subordinated liabilities (5) (17) (24)
Cash flow from finance leases - - 1
Change in net debt from cash flows 274 (220) (102)
Foreign exchange movements - 2 5
Non-cash changes 2 - 9
Movement in net debt in the period 276 (218) (88)
Net debt at start of period (1,189) (1,101) (1,101)
Net debt at end of period (913) (1,319) (1,189)
3 Analysis of net debt
Other 30
1 April Exchange non-cash September
2002 Cash flow movement changes 2002
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
£m £m £m £m £m
Cash and deposits repayable on demand 48 15 1 - 64
Treasury bills, other loans, advances and treasury
debt 707 122 1 - 830
securities
Deposits and debt securities repayable within one (310) 87 6 (152) (369)
year
Deposits and debt securities repayable after one (1,548) 55 (6) 152 (1,347)
year
Subordinated liabilities repayable after one year (84) (5) (2) 2 (89)
Finance leases (2) - - - (2)
(1,189) 274 - 2 (913)
Basis of preparation and independent review report
Basis of preparation
The accounting policies used in the preparation of this Interim report are the
same as those used in the statutory accounts for the year to 31 March 2002 and
those expected to be used for the year to 31 March 2003. The six month period is
treated as a discrete period except in so far as tax in the revenue account is
charged on the basis of an estimated annual effective rate.
The figures for the year to 31 March 2002 have been extracted from the accounts
filed with the Registrar of Companies on which the auditors issued an
unqualified report. This Interim report does not constitute statutory accounts.
Independent review report to 3i Group plc
Introduction We have been instructed by the Company to review the financial
information for the six months ended 30 September 2002 which comprises
Consolidated statement of total return, Movement in shareholders' funds,
Consolidated revenue statement, Consolidated balance sheet, Consolidated cash
flow statement and the related notes 1 to 3 and the basis of preparation. We
have read the other information contained in the Interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities The Interim report, including the financial
information contained therein, is the responsibility of, and has been approved
by the Directors. The Directors are responsible for preparing the Interim report
in accordance with the Listing Rules of the Financial Services Authority which
require that the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed We conducted our review in accordance with guidance
contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in
the United Kingdom. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with United Kingdom Auditing
Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion On the basis of our review we are not aware of any material
modifications that should be made to the financial information as presented for
the six months ended 30 September 2002.
Ernst &Young LLP
London
13 November 2002
New investment analysis
Analysis of the equity, fixed income and loan investments made by 3i Group. The
analyses below exclude investments in joint ventures.
Investment by geography (3i only - excluding co-investment funds) (£m)
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
UK 197 240 377
Continental Europe 84 179 312
US 31 72 119
Asia Pacific 3 7 26
Total 315 498 834
Investment by geography (including co-investment funds) (£m)
UK 248 273 443
Continental Europe 111 246 446
US 31 72 119
Asia Pacific 3 9 31
Total 393 600 1,039
Continental European investment (£m)
Benelux 3 62 64
France 12 27 84
Germany/Austria/Switzerland 48 86 146
Ireland - 2 2
Italy 7 8 13
Nordic 23 36 90
Spain 17 25 45
Other European(1) 1 - 2
Total 111 246 446
(1) Other European includes investments in countries where 3i did not have an
office at the period end.
Investment by stage of development (£m)
Start-ups 16 56 95
Management buy-outs 172 179 332
Management buy-ins 4 7 29
Growth capital 169 313 511
Share purchase 1 14 16
Recoveries 31 31 56
Total 393 600 1,039
Investment is based on venture capital industry definitions of stage of
development of the company when this period's investment was made, rather than
when the original investment was made. These definitions differ from
3i's product classification for management of the business.
Investment by FTSE industrial classification (£m)
Resources 3 13 15
Industrials 86 60 110
Consumer goods 130 84 206
Services and utilities 61 254 352
Financials 33 11 26
Information technology 80 178 330
Total 393 600 1,039
Technology investment by sector (£m)
Healthcare 43 62 96
Communications 31 81 173
Electronics, semiconductors and advanced technologies 34 36 87
Software 61 122 192
Total 169 301 548
Portfolio analysis
The Group's equity, fixed income and loan investments total £4,251 million at 30
September 2002. The analyses below exclude investments in joint ventures.
Portfolio value by geography (including co-investment funds) (£m)
At 30 At 31
September March
2002 2002
UK 3,390 4,018
Continental Europe 1,683 1,984
US 200 270
Asia Pacific 80 101
Total 5,353 6,373
Portfolio value by geography (3i only - excluding co-investment funds) (£m)
UK 2,831 3,386
Continental Europe 1,152 1,373
US 198 264
Asia Pacific 70 86
Total 4,251 5,109
Continental European portfolio value (£m)
Benelux 61 78
France 195 253
Germany/Austria/Switzerland 339 385
Ireland 15 18
Italy 82 103
Nordic 269 304
Spain 187 222
Other European(1) 4 10
Total 1,152 1,373
(1) Other European includes investments in countries where 3i did not have an
office at the period end.
Portfolio value by FTSE industrial classification (£m)
Resources 233 268
Industrials 933 1,117
Consumer goods 953 1,080
Services and utilities 1,078 1,318
Financials 256 273
Information technology 798 1,053
Total 4,251 5,109
Portfolio value by valuation method (£m)
Imminent sale or IPO 94 51
Listed 210 413
Secondary market 41 89
Earnings 969 1,210
Cost 889 1,077
Further advance 155 185
Net assets 133 132
Other 170 220
Loan investments and fixed income shares 1,590 1,732
Total 4,251 5,109
Portfolio analysis
Buy-out portfolio value by valuation method (£m)
At 30 At
September 31 March
2002 2002
Imminent sale or IPO 38 13
Listed 33 72
Earnings 485 592
Cost 77 101
Net assets 33 32
Other 50 91
Loan investments and fixed income shares 906 1,051
Total 1,622 1,952
Technology portfolio value by stage (£m)
Early stage 837 1,042
Late stage
Quoted 120 290
Buy-outs 250 214
Growth capital 224 170
594 674
Total 1,431 1,716
The early stage portfolio comprises investments in immature businesses which
typically require further funding. The late stage portfolio comprises
investments in more mature, typically self funding businesses, including
investments made by way of buy-outs and growth capital.
Technology portfolio value by valuation method (£m)
Imminent sale or IPO 7 10
Listed 86 219
Secondary market 34 71
Earnings 68 94
Cost 721 827
Further advance 142 170
Net assets 5 11
Other 58 48
Loan investments and fixed income shares 310 266
Total 1,431 1,716
Technology portfolio value by sector (£m)
Healthcare 370 421
Communications 265 308
Electronics, semiconductors and advanced technologies 225 233
Software 571 754
Total 1,431 1,716
Growth capital portfolio value by valuation method (£m)
Imminent sale or IPO 49 28
Listed 91 122
Secondary market 7 18
Earnings 416 524
Cost 91 149
Further advance 13 15
Net assets 95 89
Other 62 81
Loan investments and fixed income shares 374 415
Total 1,198 1,441
Realisations analysis
Analysis of the Group's realisation proceeds (excluding third party
co-investment funds). The analyses below exclude divestment of non-venture
capital investments in FTSE 350 companies (six months to 30 September 2001 and
twelve months to 31 March 2002: £156 million).
Realisations proceeds by geography (£m)
6 months to 6 months to 12 months to
30 September 30 September 31 March
2002 2001 2002
UK 535 399 794
Continental Europe 79 56 133
US 1 - 10
Asia Pacific 4 1 2
Total 619 456 939
Realisations proceeds (£m)
IPO 33 14 55
Sale of quoted investments 79 232 370
Trade and other sales 257 123 303
Loan and fixed income share repayments 250 87 211
Total 619 456 939
Realisations proceeds by FTSE industrial classification (£m)
Resources 53 27 52
Industrials 167 93 193
Consumer goods 117 134 255
Services and utilities 217 128 288
Financials 32 13 18
Information technology 33 61 133
Total 619 456 939
Funds under management
(£m) At At
30 September 31 March
2002 2002
Third party unquoted co-investment funds 1,739 1,995
Quoted investment companies (1) 457 761
Total 2,196 2,756
(1) Include the 3i Group Pension Plan.
Ten largest investments
At 30 September 2002, the Directors' valuation of the ten largest investments
was a total of £377 million. These investments cost £306 million.
Investment (date first invested in) and description of business Proportion Directors'
Cost of equity valuation
£m shares £m
(Note 1) held (Note 1)
Travelex Holdings Ltd (Note 2) (1998) Foreign currency services
- 19.6% 51
Equity shares
- 51
Mettis Group Ltd (1999) Orthopaedic and aerospace component
service provider
Equity shares 1 40.0% 1
Loans 46 46
47 47
Beltpacker plc (2000) Manufacture/marketing of
healthcare/beauty products, footwear and accessories
Equity shares 12 35.6% -
Loans 43 43
55 43
Nordisk Renting AB (2001) Renting real estate
Equity shares 62 35.0% 42
62 42
Westminster Health Care Holdings Ltd (2002) Care homes operator
Equity shares 1 49.6% 1
Loans 40 40
41 41
ERM Holdings Ltd (Note 3) (2001) Environmental consultancy
Equity shares - 39.0% 1
Loans 33 33
33 34
Morse plc (Note 4) (1995) Leading technology integrator
Equity shares 8 19.0% 33
8 33
ASCo plc (1996) Oilfield logistics
Equity shares 11 32.2% 15
Fixed income shares 14 14
Loans 2 2
27 31
Ben Sherman Ltd (Note 5) (1993) Manufacture of shirts and swimwear
Equity shares
Loans - 49.6% -
4 28
4 28
Pets At Home Ltd (1995) Retailer in pets and pet supplies
Equity shares 2 26.0% -
Loans 27 27
29 27
Notes
1 The investment information is in respect of 3i's holding and excludes any
co-investment by 3i managed funds.
2 The cost of the equity shares held in Travelex Holdings Ltd is £121,000.
3 The cost of the equity shares held in ERM Holdings Ltd is £465,000.
4 Quoted company.
5 The cost of the equity shares held in Ben Sherman Ltd is £420,000. In June
2000, 3i led a secondary buy-out and 3i's equity value was converted into a loan
and into new equity shares.
Note 1
The Interim report 2002 will be posted to shareholders on 25 November 2002 and
thereafter copies will be available from the Company Secretary, 3i Group plc, 91
Waterloo Road, London SE1 8XP.
Note 2
The interim dividend will be payable on 8 January 2003 to holders of shares on
the register on 6 December 2002. The ex-dividend date will be 4 December 2002.
Note 3
Investments statistics referred to in this announcement relate to investments
made by 3i Group and third party unquoted co-investment funds managed by 3i
unless otherwise stated.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 31st May 2024
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