Preliminary statement of annual results for year to 31 March 2002
Positive total return of £137 million in the second half of the year
Total return of £(960) million for the year as a whole, a negative return of 19.3% on opening shareholders' funds
Revenue profit after tax of £106 million
£1.0 billion invested (including co-investment funds)
Realisations of investments generated proceeds of £1.1 billion
Recommended final dividend of 8.1p per share, making a total dividend for the year of 13.0p (2001: 13.0p)
Diluted net asset value per share of 645p
Baroness Hogg, chairman of 3i Group plc, commenting on the results, said:
"Since the autumn, when 3i reported on the difficult conditions it had experienced, there have been some encouraging signs of improvement. Our Enterprise Barometer indicates that business confidence has picked up among the companies in which we invest, and 3i achieved a positive return in the second half of the year."
This has been a year which has had two distinct halves: the first half resulted in a negative total return of £1,097 million with the second half generating a positive return of £137 million.
The overall return is largely due to a fall of £890 million in the valuation of the portfolio. This fall in value was caused by falls in the value of quoted and unquoted technology companies and an increase in provisions.
Proceeds from realisations were higher than investment resulting in a net cash inflow from investment activities of £319 million. After the acquisition of Atle for £347 million and other cash flows, there was a net cash outflow of £102 million.
The outlook is improving and higher levels of investment are expected next year.
3i's vision is to be the leading international venture capital company. 3i's strategy is unchanged. The four core elements of 3i's strategy are to build a strong business in each of the developed economies, to achieve a balanced business by product, by industry sector and geographic region, to invest in companies that have the potential to grow their revenues and profits, and to use our network to provide real competitive advantage for 3i and its investee companies.
In order to implement our strategy and particularly to use the network to add value, 3i's business is organised by region and by product. The geographic regions are the UK, continental Europe, US and Asia Pacific. Overlaying this, the business is also organised by product, buy-outs, early stage technology and growth capital.
3i's European office network comprises 10 UK offices and 20 offices across continental Europe. On 27 April 2001 the acquisition of a leading Swedish venture capitalist, Atle AB, was completed. The integration of this acquisition has created a Nordic business unit covering Denmark, Finland and Sweden. An office has also been opened in Dublin and 3i's European network is now substantially complete.
In the US, the initial three objectives of extending our technology business to the US market, gaining a window on technology developments and accessing high quality deal flow have been achieved.
With the opening of the third Asian office in Hong Kong, 3i has a strong base from which to maximise regional opportunities. The Asia Pacific business is performing in line with initial expectations.
3i invested £889 million in Europe during the year, with an equal amount being invested in the UK and continental Europe. 3i's share of the overall buy-out market has remained stable by number and value over the year and it has strengthened its position in the larger buy-out market. In the early stage technology market, 3i has followed a highly selective investment strategy which has reduced market share, although 3i remains the clear leader in the market.
3i invested £119 million this year and now has a portfolio of 47 companies in the US. The first realisation in the US was successfully achieved this year.
3i invested £31 million in eight companies during the year. The regional portfolio includes investments in 24 companies and has a value of £101 million including co-investment funds.
3i now manages and advises third party unquoted funds totalling £2.0 billion. It is launching a new €3 billion fund focusing on mid market buy-outs across Europe. Unquoted funds under management generated fee income of £35 million for the year.
3i also manages £0.8 billion of quoted funds. 3i Asset Management's objectives are to optimise the value of the Group's quoted portfolio and to utilise the skill gained through managing specialist external funds in areas that are of direct relevance to 3i's core business.
Revenue profit after tax for the period was £106 million after charging the costs of changes to the organisational structure and the write-off of goodwill. Before these items, revenue profit after tax was £117 million, similar to last year. Despite weak merger and acquisition markets, a good level of realisations was achieved, with total proceeds of £1,123 million. Proceeds from the sale of quoted investments amounted to £526 million. The sale of unquoted equity resulted in proceeds of £303 million and the repayment of loan and preference shares totalled £211 million.
During the year, there was a net cash outflow of £102 million. This is largely the result of the acquisition of Atle for a purchase consideration of £347 million. Investment in the period made by 3i, excluding co-investment funds, amounted to £834 million while the return flow from the sale of investments amounted to £1,123 million.
In order to take advantage of attractive investment opportunities, 3i proposes to issue £300 million of preferred securities. These securities, which are similar to preference shares, will be perpetual and bear a fixed non-cumulative coupon.
Commenting on the results, 3i's chief executive, Brian Larcombe, said:
"This has been a challenging year in which we have managed many changes to strengthen the business. We are in good shape and we are seeing clear evidence of improved conditions since the year end."
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. To date, 3i has invested over £14.5 billion (including coinvestment funds).