TIDMIII
RNS Number : 3540B
3i Group PLC
30 January 2020
30 January 2020
3i Group plc
FY2020 Q3 performance update
Solid underlying performance
* Increase in NAV per share to 877 pence (30 September
2019: 873 pence) despite the negative translation
effect of sterling strengthening in the quarter
(GBP314 million), and total return of 10.1% for the
nine months to 31 December 2019.
* Very strong growth in the quarter from Action drove a
solid result from the Private Equity portfolio.
* Private Equity generated cash proceeds of GBP189
million in the quarter, mainly from the partial
divestment of Basic-Fit and the distributions from
Audley Travel and Hans Anders.
* Signed the disposal of Aspen Pumps at an overall
money multiple of 4.1x and a 34% IRR.
* Completed two new Private Equity investments in
Evernex and a bioprocessing platform and four further
bolt-on acquisitions for ICE, Formel D, WP and Q
Holding.
* Another strong quarter from our Infrastructure team
with the highly accretive sale of Wireless
Infrastructure Group ("WIG") out of 3i Infrastructure
plc ("3iN") and further rail investment in North
America.
* Transaction to provide liquidity to Eurofund V
("EFV") investors from the sale of their holding in
Action, which successfully closed on 17 January 2020.
Simon Borrows, Chief Executive, commented:
"This was a very busy quarter for the 3i team. We executed two
outstanding realisations in the sale of Aspen Pumps from our
Private Equity portfolio and WIG from 3iN. New investment and
bolt-on activity has continued across both portfolios, as has
refinancing activity. And, importantly, we successfully provided
liquidity to the EFV investors in Action while the company has
continued to drive sector-leading sales and profit growth as it
expands across Europe."
Private Equity
Portfolio performance
The Private Equity portfolio generated good returns for the
quarter. Action finished the year very strongly. In the twelve
months to the end of December 2019, Action generated revenue growth
of 21%, like-for-like ("LFL") sales growth of 5.6% and opened 230
new stores, taking its total to 1,552 stores across seven
countries.
At 31 December 2019, our valuation methodology for Action
remained unchanged, using run-rate earnings to 31 December 2019, a
post discount run-rate multiple of 18.0x (30 September 2019: 18.0x)
and the capital structure at 31 December 2019.
The challenging conditions in the automotive sector continued to
weigh on a few of our portfolio companies and in December Schlemmer
filed for administration in Germany. Schlemmer had continued to
suffer from operational challenges in its North American plants as
well as a significant decline in volumes in its European plants in
the second half of 2019. As a result, we have written down our
investment to zero. This write down has resulted in an unrealised
value loss of GBP67 million in the quarter and a cumulative loss of
GBP170 million since investment in 2016.
In the quarter we recognised a significant uplift on our
investment in Aspen Pumps following the announcement of the signed
exit. We also signed an agreement to sell our investment in ACR at
a value close to our September 2019 valuation. The significant
majority of the proceeds, subject to regulatory clearance, are
expected in the second half of 2020 with further proceeds, subject
to various escrows, expected in 2021.The remaining portfolio showed
resilient performance in a tightening macro environment with
notable value growth increases from Basic-Fit, Tato, Royal Sanders
and Cirtec. We have, however, seen value reductions in some
companies including Q Holding (sale of Silicone Altimex to 3i's new
bioprocessing platform and softer trading, particularly automotive)
and WP (softer trading).
Action transaction
On 17 January 2020, we closed the transaction to provide
liquidity to investors in Eurofund V from a sale of the Fund's
entire investment in Action, funded by a combination of rolling
LPs, new LPs and 3i. At the same time, Action completed its new
EUR625 million Term Loan refinancing. Action used the proceeds of
the Term Loan and some excess cash to pay a pre-closing dividend to
its shareholders. 3i has reinvested its share of this dividend plus
its proportion of the Eurofund V carried interest arising from the
sale back into Action. The impact of this transaction will be
reflected in the Group's valuation of Action at 31 March 2020 with
the consequent changes to the Group's carried interest position
being reported on the balance sheet. We expect 3i's interest in
Action, net of its ongoing carried interest liability, to have
increased to c.49% as at 31 March 2020.
We are delighted that GIC, AlpInvest Partners, Coller Capital,
HarbourVest Partners, J.P. Morgan Asset Management, Pantheon, as
well as investment funds managed by each of Aberdeen Standard
Investments, Goldman Sachs Asset Management and Neuberger Berman,
amongst others, have decided to either roll their existing
investment or make a significant new investment in the next chapter
of Action's remarkable growth story.
Private Equity investments
Private Equity Investment
Investment Type Business description Date GBPm
------------------------------- ----------------------- ------------------------------ --------------- -----------
International provider of
third-party maintenance
services for data centre
Evernex New infrastructure October 2019 214
Single use bioprocessing
platform serving the
Bioprocessing platform New biopharmaceutical sector November 2019 60
ICE's acquisition of We Make
People Happy Vacations
("WMPH"), a cruise travel
ICE Further agency December 2019 7
Value for money optical
Hans Anders Return of overfunding retailer December 2019 (35)
Other n/a 4
------------------------------- ------------------------------------------------------------------------ -----------
Total Q3 FY2020 investment 250
========================================================================================================= ===========
H1 FY2020 investment 221
========================================================================================================= ===========
Total investment as at 31 December 2019 471
========================================================================================================= ===========
In the quarter, we completed the GBP214 million investment in
Evernex and GBP60 million investment in a bioprocessing platform,
formed by the initial acquisition of Cellon and carve out
acquisitions of TBL Performance Plastics (acquired by Q Holding in
October 2019) and Silicone Altimex from our existing portfolio
company Q Holding.
We have continued to grow portfolio value through our
buy-and-build strategy with WP's bolt-on acquisition of Orange
Poland, a manufacturer of deodorant packaging systems and Formel
D's bolt-on acquisition of CPS Quality, a specialist in quality
control activities with a focus on the automotive industry, with no
additional investment from 3i. We also supported ICE's acquisition
of WMPH, a cruise travel agency, for which we provided GBP7 million
of further funding.
In December 2019, following its acquisition of eyes + more which
closed in January 2019, Hans Anders completed a refinancing,
returning proceeds of GBP35 million to 3i. The proceeds from the
refinancing have been treated as a reduction in the further
investment made for eyes + more.
Private Equity realisations
Private Equity Realisation proceeds
GBPm
------------------------------------------------ ---------------------
Basic-Fit 76
Audley Travel 47
BoConcept 12
Other 1
================================================ =====================
Total Q3 FY2020 realised proceeds 136
================================================ =====================
H1 FY2020 realised proceeds 1
================================================ =====================
Total realised proceeds as at 31 December 2019 137
================================================ =====================
In December 2019, we generated GBP76 million of proceeds from
the partial divestment of 2.9 million shares in Basic-Fit, at a
price of EUR31.25 per share. We retain a 12.7% stake (30 September
2019: 18.0%) in the business, valued at GBP198 million at 31
December 2019 (30 September 2019: 18.0% holding valued at: GBP249
million).
We generated GBP65 million of cash from the Audley Travel
refinancing, GBP18 million of which was recognised as cash income
and the remainder as realisation proceeds. We also received GBP12
million of proceeds from BoConcept following the repayment of a
shareholder loan.
In December 2019, we announced the sale of Aspen Pumps, for
proceeds of c.GBP208 million, and including the GBP52 million of
proceeds already received, generated an overall money multiple of
4.1x and an IRR of 34%. At 31 December 2019, Aspen Pumps was held
on an imminent sale basis and valued at GBP203 million, reflecting
the 2.5% discount to exit value in line with our valuation policy,
compared to its 30 September 2019 valuation of GBP134 million.
Infrastructure
The Infrastructure business had another busy quarter. In
December 2019, 3iN announced the sale of its UK projects portfolio
for proceeds of c.GBP194 million and the sale of its 93% stake in
WIG for proceeds of c.GBP387 million. Following 3iN's successful
placing of 81 million shares in October 2019 at a price of 275
pence per share, its share price closed at 294 pence at 31 December
2019 (30 September 2019: 295 pence) valuing 3i's 30% stake (30
September 2019: 33%) at GBP791 million (30 September 2019: GBP794
million). In addition, we also recognised dividend income of GBP12
million from 3iN in the quarter.
In October 2019, we announced a US Infrastructure investment in
the significant bolt-on acquisition of Pinsly Railroad Company's
Florida operations for Regional Rail. This investment of GBP76
million completed at the end of December 2019.
The 3i European Operational Projects Fund completed the EUR70
million acquisition of an 80% stake in Sociedad Concesionaría
Autovía Gerediaga Elorrio, S.A. ("AGESA"), a Spanish motorway PPP.
The Fund continued its investment momentum into January 2020 with
the announced agreement to acquire a portfolio of eight operational
projects in France from DIF Infrastructure III. On completion of
this transaction, the Fund will have deployed c.60% of its total
commitments.
Top 10 investments by value at 31 December 2019
Valuation Valuation
Valuation Valuation Sep-19 Dec-19
basis currency GBPm GBPm Activity in the quarter
=============== =========== ========== ========== ==============================================
Action Earnings EUR 3,243 3,461
=============== =========== ========== ========== ==============================================
3iN Quoted GBP 794 791 Accrued a GBP12 million FY2020 interim
dividend
=============== =========== ========== ========== ==============================================
Scandlines DCF EUR 485 464 Received a GBP10 million dividend
=============== =========== ========== ========== ==============================================
Cirtec Medical Earnings USD 262 256
=============== =========== ========== ========== ==============================================
Hans Anders Earnings EUR 303 249 Received GBP35 million of refinancing
proceeds reducing the initial investment in
eyes + more
=============== =========== ========== ========== ==============================================
Q Holding Earnings USD 277 245 Sale of Silicone Altimex and TBL Performance
Plastics (acquired by Q Holding in October
2019)
to 3i's newly established Bioprocessing
platform
=============== =========== ========== ========== ==============================================
WP Earnings EUR 253 237
=============== =========== ========== ========== ==============================================
Audley Travel Earnings GBP 270 217 Received GBP65 million of refinancing
proceeds
=============== =========== ========== ========== ==============================================
Evernex Earnings EUR - 206 New investment completed
=============== =========== ========== ========== ==============================================
Aspen Pumps Imminent sale GBP 134 203 Announced signed exit
=============== =========== ========== ========== ==============================================
The 10 investments in this table comprise 72% (30 September
2019: 70%) of the total Proprietary Capital portfolio value of
GBP8,814 million (30 September 2019: GBP8,551 million).
Total return and NAV position
We recognised a net GBP314 million loss on foreign exchange in
the quarter, or 32 pence per share, as both the US dollar and euro
weakened against sterling. Based on the balance sheet at 31
December 2019, a 1% movement in the euro and US dollar would result
in a total return movement of GBP51 million and GBP13 million
respectively, net of any hedging. The diluted NAV per share
increased to 877 pence (30 September 2019: 873 pence) or 859.5
pence after deducting the 17.5 pence per share first FY2020
dividend, which was paid on 8 January 2020.
Balance sheet
At 31 December 2019 net debt was GBP145 million and gearing of
1.8%. The 17.5 pence first FY2020 dividend of GBP169 million was
paid on 8 January 2020.
- ENDS -
Notes
1. Balance sheet values are stated net of foreign exchange translation. Where applicable, the
GBP equivalents at 31 December 2019 in this update have been calculated at a currency exchange
rate of EUR1.1798:GBP1 and $1.3247:GBP1 respectively. At 31 December 2019, 65% of the Group's
net assets were in euro and 16% were in US dollar.
2. At 31 December 2019 3i had 971 million diluted shares.
3. Action was valued using a post discount run-rate EBITDA multiple of 18.0x based on its run-rate
earnings to 31 December 2019.
For further information, please contact:
Silvia Santoro
Group Investor Relations Director
Tel: 020 7975 3258
Kathryn van der Kroft
Communications Director
Tel: 020 7975 3021
About 3i Group
3i is a leading international investment manager focused on
mid-market Private Equity and Infrastructure. Our core investment
markets are northern Europe and North America. For further
information, please visit: www.3i.com.
All statements in this performance update relate to the three
month period ended 31 December 2019 unless otherwise stated. The
financial information is unaudited and is presented on 3i's
non-GAAP Investment basis in order to provide users with the most
appropriate description of the drivers of 3i's performance. Net
asset value ("NAV") and total return are the same on the Investment
basis and on an IFRS basis. Details of the differences between 3i's
consolidated financial statements prepared on an IFRS basis and
under the Investment basis are provided in the 2019 Annual report
and accounts. There have been no material changes to the financial
position of 3i from the end of this quarter to the date of this
announcement.
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END
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