Investor relations

Key performance indicators

We use a number of key performance indicators (KPIs) to assess progress against our strategic objectives, including both financial and non-financial measures.

These KPIs are helpful in assessing progress but are not exhaustive as management also takes account of a wide range of other measures in assessing performance.

Gross investment return (“GIR”) as % of opening portfolio value

The performance of the proprietary investment portfolio expressed as a percentage of the opening portfolio value.

FY2018 progress and key risks

FY2018 progress

  • Another year of strong performance with a GIR in Private Equity of £1,438 million, or 30% and a Group GIR of £1,552 million, or 27%
  • Action performed strongly, opening 243 net new stores in calendar year 2017 and generating like-for-like sales growth of 5.3%
  • Significant uplifts recognised as a result of the highly competitive process for Scandlines and the sale of ATESTEO to a strategic buyer
  • 2013–16 vintage of investments delivered a GIR of 29% (2017: 29%)
  • 3iN delivered a TSR of 12% (2017: 16%)
  • GIR includes an £11 million gain from foreign exchange (2017: £269 million gain)

Key risks

  • Investment rates or quality of new investments are lower than expected
  • Subdued M&A activity and/or reduced prices in 3i’s core sectors could impact timing of exits and cash returns
  • Operational underperformance in the portfolio companies impacts earnings growth and exit plans
  • Sterling materially strengthens against the euro and US dollar; at 31 March 2018, 78% of the portfolio was denominated in euros or US dollars

  

Cash realisations £m

Support our returns to shareholders, as well as our ability to invest in new opportunities.

FY2018 progress and key risks

FY2018 progress

  • Private Equity generated proceeds of £1,002 million from the disposal of eight companies and the refinancing of three assets
  • Received a £143 million special dividend from 3iN following the divestments of its holdings in Elenia and AWG
  • Received proceeds of £152 million from the sale of the residual Debt Management investments
  • Total proceeds of £1,323 million include £46 million of cash in transit at 31 March 2018

Key risks

  • Subdued M&A activity in our core sectors reduces investor appetite for our assets
  • Macro-economic uncertainty limits investor appetite for the private equity and infrastructure asset classes
  • Debt markets become less supportive of leveraged buyouts or refinancings

   

Cash investment £m

Identifying new opportunities in which to invest proprietary capital is the primary driver of the Group’s ability to deliver attractive returns. We also invest further capital in existing investments.

FY2018 progress and key risks

FY2018 progress

  • Invested £587 million (2017: £478 million) in four new Private Equity investments and two important further investments in Cirtec and Ponroy Santé to support their acquisitions of Vascotube and Aragan respectively
  • Invested £177 million in our first North American infrastructure investment, Smarte Carte, and supported the launch of two new European Infrastructure funds by investing £40 million

Key risks

  • Competition from other private equity and infrastructure investors, as well as trade and other financial buyers, could make it more challenging to source investments at prices that will meet our return targets
  • Failure to attract, invest in and retain the right investment executives impacts our ability to originate and manage assets
  • Failure to maintain and develop our network of advisers and business leaders reduces the quality of potential deal flow

   

Operating cash profit/(loss) £m

By covering the cash operating cost of running our business with cash income, we reduce the potential dilution of capital returns.

FY2018 progress and key risks

FY2018 progress

  • Increasing cash income from Infrastructure replaced cash income previously generated by the Debt Management business
  • Decision to reinvest in Scandlines to generate cash dividend income for the Group
  • Remain disciplined over operating cash expenses, which declined marginally to £115 million (2017: £116 million)

Key risks

  • Portfolio performance, and therefore portfolio income, is weak
  • Reduced ability to generate interest and dividend income in a private equity structure
  • Infrastructure initiatives do not generate sufficient fee income
  • Unplanned increase in the cost base; for example legal, compliance or regulatory costs

   

Net Asset Value (“NAV”) per share pence

The measure of the fair value per share of our proprietary investments after the net cost of operating the business.

FY2018 progress and key risks

FY2018 progress

  • 20% increase in NAV per share to 724 pence (31 March 2017: 604 pence)
  • Very strong GIR from Private Equity

Key risks

  • Implications of the UK’s decision to leave the EU and the current UK political uncertainty could limit the attractiveness of UK plc
  • Ongoing geo-political uncertainty further dampens investor sentiment
  • Wider G20 political and economic uncertainty impacts 3i’s portfolio companies and valuations

  

Total shareholder return (“TSR”) %

The return to our shareholders through the movement in the share price and dividends paid during the year.

FY2018 progress and key risks

FY2018 progress

  • TSR of 18% driven by a share price increase of 15% in the year, together with the final FY2017 dividend of 18.5 pence and interim FY2018 dividend of 8.0 pence
  • Net divestment, strong balance sheet and closing net cash support a dividend of 30.0 pence per share

Key risks

  • Lower NAV due to investment underperformance or political and economic uncertainty
  • Investor appetite for 3i shares could reduce in a volatile macro-economic environment
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