Interim results for the six months ended 30 September 2001 and organisational changes

30 Oct 2001

 

Introduction

3i announces today its interim results for the six months to 30 September 2001 and some organisational changes.

Summary of results

  • Net asset value per share fell by 22.6% to 631p largely as a result of the falls in the smaller company and technology public quoted markets.
  • 3i has outperformed the FTSE SmallCap total return and the FTSE techMARK 100 indices which were down 24.1% and 40.2% respectively.
  • New investment of £600 million is broadly in line with realisations.
  • Revenue profit of £69 million was unchanged, after making a provision for the costs of organisational changes.
  • The interim dividend is unchanged at 4.9 pence per share.

Sir George Russell, Chairman of 3i Group plc, commenting on the results, said: 

"In this more challenging environment, I am confident that 3i's portfolio diversity, international network and sound finances will enable us to strengthen our market position."

Operating Review

3i has continued to develop its business in line with its objective to be the leading international venture capital company with a strong position in all the major venture capital markets.

Over the six months to 30 September, 3i has completed its network in Europe, opened an office in Hong Kong and continued to grow its business in the United States.

3i's strategic priorities are developing the strength of its network, ensuring that it has a balanced business between early and later stage investment and having the resources to support its portfolio companies.

The value of the international network continues to grow as knowledge, experience and contacts are increasingly shared across the business. Industry sector and product teams have continued to develop across the Group. This adds value to the investment process and to portfolio companies.

These developments are now being supported by some organisational changes. Rod Perry, Director, will take on responsibility for technology investment across the business, co-ordinating the market approach and delivering best practice in all sectors. Jonathan Russell will take on a similar responsibility for the larger management buy-out business.

Martin Gagen, Director of the US business, will also take on responsibility for activities in Asia Pacific.

The 3i business model which combines our local knowledge with sector expertise has continued to strengthen and a more focussed approach to the management of the portfolio has been developed. These approaches require a minimum level of resourcing that is not feasible in some of the smaller locations and seven offices in the UK and continental Europe will be closed. 3i will then have 36 offices operating in 16 countries.

In the current uncertain conditions, it is prudent to maintain a strong balance sheet. Investment is likely to remain at about the current level for the next year. As a result of this and very low staff turnover, fewer people are needed to meet expected levels of investment. Following a wide ranging review of our staffing needs, 3i is announcing today a reduction in staffing of 185 people, representing about 17% of its staff.

Financial review

Net asset value fell by 22.6% during the period. This represents an outperformance of the FTSE SmallCap total return and FTSE techMARK 100 indices, which were down 24.1% and 40.2% respectively.

Almost all of the fall in net asset value is due to an unrealised reduction in the valuation of the portfolio. Revenue profit after tax was maintained at the same level as the same period last year at £69m after making a provision for the costs of organisational changes. 3i has, despite a falling stock market, continued to realise equity investments at above their valuation at 31 March 2001.

Most of the fall in the valuation of the portfolio results directly from the falls in smaller company and technology stock markets, much of which occurred in September. This has reduced the valuation of 3i's quoted portfolio and also the valuation of the unquoted portfolio as the average price earnings ratio used in earnings based valuations has fallen from 9.7 at 31 March to 7.9 at 30 September. This is the lowest average price earnings ratio used by 3i to value its portfolio at any time since its flotation in 1994 when the average price earnings ratio was 14.0. In addition, there has been an increase in provisions, largely resulting from increased early stage investment over the last two years and more difficult economic conditions.

New investment has been reduced from last year, broadly in line with realisations. Overall, realisations proceeds exceeded investment by £115m. As a result of the acquisition of Atle, a leading Swedish venture capital investor for £330m, there was a net cash outflow of £220m in the period. The balance sheet remains strong.

Summary

The results for the six months to September are an outperformance of the FTSE SmallCap and the FTSE techMARK 100 indices. The fall in net asset value results largely from the falls in smaller company and technology stock markets and, to a lesser extent, from an increase in provisions. The majority of the portfolio continues to perform satisfactorily.

Brian Larcombe added "Our longer term view of the venture and management buy-out markets remains very positive. There is uncertainty about the industry outlook in the short term, but on a medium term view, we expect that the market will return to its growth path.

The Group continues to strengthen the working of its international network. The changes announced today will reinforce our capabilities in industry sectors and products and support the development of the network. The balance sheet is strong which enables 3i to take advantage of good investment opportunities in the markets in which it operates."

For further information, please contact:

 3i Group plc  
 Brian Larcombe, Chief Executive  Tel:  020 7975 3386
 Michael Queen, Finance Director  Tel:  020 7975 3400
 Liz Hewitt, Director Corporate Affairs  Tel:  020 7975 3283
 Issued by The Maitland Consultancy  
 Philip Gawith  Tel:  020 7379 5151

 

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, Asia Pacific and the USA.

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 10:30: 30 October 2001 on www.3igroup.com.