TIDMIII
RNS Number : 9089F
3i Group PLC
10 November 2022
10 November 2022
3i Group plc announces results for the
six months to 30 September 2022
Resilient performance in a challenging market
-- Total return of GBP1,765 million or 14% on opening
shareholders' funds (September 2021: GBP2,199 million, 24%) and NAV
per share of 1,477 pence (31 March 2022: 1,321 pence), including a
74 pence gain on foreign exchange translation.
-- Our Private Equity business delivered a gross investment
return of GBP1,970 million or 16% (September 2021: GBP2,373
million, 27%). Action continues to perform very strongly and we
continue to see strong earnings growth and momentum in a number of
our portfolio companies in the value-for-money consumer,
healthcare, specialty industrial and business and technology
service sectors. However, a limited number of investments have seen
a deterioration in performance as a result of cost pressures and
reduced demand. 91% of our Private Equity portfolio companies by
value grew earnings in the 12 months to 30 June 2022. Valuation
multiples were reduced for eight portfolio companies.
-- Action 's sales in the nine months ending on 2 October 2022
("P9") grew to EUR6.1 billion (P9 2021: EUR4.8 billion) and
like-for-like sales growth was very strong at 15.7%, with footfall
significantly ahead of last year. Last 12 months' EBITDA to the end
of P9 was EUR1,036 million (P9 2021: EUR765 million), representing
a 35% increase over the same period last year. Action is seeing
strong sales growth across all countries and categories; margins
continue to be well managed, with tight operational cost control
mitigating increased operating costs.
-- In competitive markets the Private Equity team deployed
GBP292 million in four new investments, two portfolio bolt-on
acquisitions and other further investments. In addition, our
portfolio companies completed three self-funded bolt-on
acquisitions. Realisations for the current financial year are off
to a good start, with GBP193 million of proceeds received in the
period and a further GBP476 million received in early October 2022
following the completion of the realisation of Havea, which
achieved a 50% uplift on 31 March 2022 value.
-- Our Infrastructure business generated a gross investment
return of GBP35 million, or 3% (September 2021: GBP60 million, 5%).
We continued to see strong performance across our Infrastructure
portfolios, with assets benefiting from defensive characteristics
and positive correlation to inflation and power prices, however the
return was impacted by a 12.4% decline in 3i Infrastructure plc's
share price, despite the 9.3% total return on its opening NAV it
achieved in the first half.
-- First dividend of 23.25 pence per share for FY2023, set at
50% of the total dividend for FY2022, to be paid in January
2023.
Simon Borrows, 3i's Chief Executive , commented:
"This was a good half for 3i against a tough macroeconomic and
market backdrop. We have carefully constructed our Private Equity
and Infrastructure portfolios over many years with the aim of
generating good returns for our shareholders across the market
cycle. Over the past few years, there have been significant levels
of investment in the private equity industry, at elevated prices
and often with significant leverage. In contrast to many private
equity investors, we were highly selective in the new investments
made in 2020 and 2021, which together account for only 5% by value
of our current investment portfolio.
Action continues to exceed expectations as it expands across
Europe and attracts significant new customer flow through very low
prices and the flexibility of its category format.
We are anticipating difficult macroeconomic conditions in 2023
which will continue to present significant challenges to the
consumer and corporate sector alike and the Group's conservative
capital structure gives us considerable flexibility to respond to
opportunities and developments as they arise. Our near-term
decisions will remain guided by patience and discipline as we
continue to deliver the significant growth potential of our
existing portfolio. "
Summary financial highlights under the Investment basis
3i prepares its statutory financial statements in accordance
with International Financial Reporting Standards as adopted by the
European Union ("IFRS"). However, we also report a non-GAAP
"Investment basis" which we believe aids users of our report to
assess the Group's underlying operating performance. The Investment
basis (which is unaudited) is an alternative performance measure
("APM") and is described on page 20. Total return and net assets
are the same under the Investment basis and IFRS and we provide a
reconciliation of our Investment basis financial statements to the
IFRS statements from page 21. Pages 1 to 17 are prepared on an
Investment basis.
Six months to/as Six months to/as 12 months to/as
at 30 September at 30 September at 31 March
Investment basis 2022 2021 2022
-------------------------------------------------------------- ----------------- ----------------- ----------------
Total return(1) GBP1,765m GBP2,199m GBP4,014m
% return on opening shareholders' funds 14% 24% 44%
Dividend per ordinary share 23.25p 19.25p 46.5p
============================================================== ================= ================= ================
Gross investment return(2) GBP2,016m GBP2,463m GBP4,525m
As a percentage of opening 3i portfolio value 14% 24% 43%
Cash investment(2) GBP298m GBP59m GBP543m
Realisation proceeds GBP193m GBP124m GBP788m
3i portfolio value GBP16,417m GBP12,784m GBP14,305m
Gross debt GBP1,129m GBP975m GBP975m
Net debt (2) GBP1,074m GBP931m GBP746m
Gearing(2) 8% 8% 6%
Liquidity GBP801m GBP544m GBP729m
Diluted net asset value per ordinary share ("NAV per share") 1,477p 1,153p 1,321p
============================================================== ================= ================= ================
1 Total return is defined as Total comprehensive income for the year, under both the Investment
basis and the IFRS basis.
2 Financial measure defined as APM. Further information on page 18.
Disclaimer
These half-year results have been prepared solely to provide information to shareholders.
They should not be relied on by any other party or for any other purpose. These half-year
results may contain statements about the future, including certain statements about the future
outlook for 3i Group plc and its subsidiaries ("3i" or "the Group"). These are not guarantees
of future performance and will not be updated. Although we believe our expectations are based
on reasonable assumptions, any statements about the future outlook may be influenced by factors
that could cause actual outcomes and results to be materially different.
Enquiries:
Silvia Santoro, Group Investor Relations Director 020 7975 3258
Kathryn van der Kroft, Communications Director 020 7975 3021
A PDF copy of this release can be downloaded from www.3i.com/investor-relations
For further information, including a live webcast of the results presentation at 10.00am on
10 November 2022, please visit www.3i.com/investor-relations
3i Group Half-year report 2022
Chief Executive's review
Against a tough macroeconomic backdrop, the Group delivered a
good result in the first half of its financial year, generating a
total return of GBP1,765 million, or 14% on opening shareholders'
funds (September 2021: GBP2,199 million, or 24%) . The NAV per
share at 30 September 2022 was 1,477 pence (31 March 2022: 1,321
pence), including a 74 pence gain on foreign exchange translation,
and after payment of the 27.25 pence second FY2022 dividend in July
2022. Our Private Equity and Infrastructure portfolios continue to
perform well and demonstrate their trading resilience. We have
remained active and disciplined investors in more volatile markets,
deploying capital in four new investments for Private Equity and
one new investment for Infrastructure. We also completed or signed
realisations totalling GBP669 million at good premiums to their
carrying values, underlining the quality of our portfolio.
Private Equity
The Private Equity portfolio delivered a gross investment return
("GIR") of GBP1,970 million or 16% on opening value in the period,
including a GBP685 million gain on foreign exchange translation.
Despite a challenging macroeconomic environment, 91%(1) of our
portfolio companies by value grew earnings in the last 12 months
("LTM") to the end of 30 June 2022. Our portfolio is well
constructed from a thematic, geographic and sector perspective and
continues to demonstrate resilience in the current environment. A
number of our portfolio companies in the value-for-money consumer,
healthcare, specialty industrial and business and technology
service sectors have generated strong earnings growth and have good
momentum as we head into the second half of our financial year. Our
portfolio company management teams have reacted quickly and
decisively taking the necessary actions to partially mitigate the
impact of inflationary pressures and weaker consumer sentiment
across the portfolio. A small number of our portfolio companies
have been disproportionately affected by the current macroeconomic
environment and we continue to actively manage these companies
through this challenging period.
Our Private Equity portfolio is funded with all senior debt
structures, with long-dated maturity profiles and with over 80% of
the total repayable from 2025 and beyond. Average leverage across
our Private Equity portfolio was 2.7x at 30 September 2022 (31
March 2022: 3.3x) or 4.1x excluding Action (31 March 2022: 4.6x).
As part of our active portfolio management, we monitor and manage
our portfolio companies' interest rate related risk. Across our
Private Equity portfolio term debt is well protected against
interest rate rises with over two-thirds of total term debt hedged
at a weighted average tenor of more than 3 years with the interest
rate element capped at a weighted average hedge rate below 2%. The
average margin across the portfolio is under 4%, so the all in debt
cost across the portfolio is capped below 6%.
Action performance
Action continues to trade very strongly, reaffirming the
attractiveness of its low-price format to a wide range of
increasingly price-conscious customers. In the nine months ending
on 2 October 2022 ("P9"), sales grew to EUR6.1 billion (P9 2021:
EUR4.8 billion) and like-for-like sales growth was 15.7%, with
footfall significantly ahead of last year. Action delivered LTM
EBITDA of EUR1,036 million to the end of P9 2022 (P9 2021: EUR765
million), a 35% increase over the same period in the prior year.
Action is seeing strong sales growth across all countries and
categories and margins continue to be well managed, with tight
operational cost control mitigating increased operating costs.
Strong trading continued through to 30 October 2022 ("P10"), with
sales increasing to EUR6.8 billion and LTM EBITDA of EUR1,057
million.
The business has opened 182 new stores in the year to the end of
P10 2022 and is on track to open more stores than it opened in
2021. Store roll-outs across Poland and the Czech Republic are
proceeding well and its new markets of Italy and Spain are showing
strong early trading, underpinning the case for further sizeable
store expansion in these countries. Action strengthened its
distribution infrastructure in the half by opening a new hub in Le
Havre, France and has plans to open three new distribution centres
("DCs") in 2023. The business remains highly cash generative, with
a cash balance of approximately EUR800 million at P10 2022 and net
debt to run-rate EBITDA of under 2.0x.
1.LTM adjusted earnings to June 2022. Includes 31 companies.
Other portfolio performance
SaniSure continues to outperform our expectations, benefiting
from sustained demand for its products in the bioprocessing market.
The business continues to grow its top line and increase capacity
in its manufacturing operations, which will allow it to further
accelerate its growth both organically and through selected bolt-on
acquisitions. nexeye's value-for-money omnichannel proposition
remains very attractive to its customers and the business continues
to expand its store network. The business added 13 stores in the
first six months of its financial year, taking the total number of
stores to 723, with significant expansion potential remaining
across its markets. Since our initial investment in early 2021, we
have seen WilsonHCG continue to prove its value proposition in an
attractive recruitment process outsourcing market, helping its
customers stay ahead of shifting labour market trends globally and
drive better results for reoccurring hiring needs. Tato traded well
through the first six months of 2022, with good overall demand for
its products, and has maintained good levels of supply. Whilst
there are signs of more challenging market conditions into the
second half of 2022, Tato's global footprint and specialty
chemicals focus provide mitigation against potential headwinds. AES
has delivered a strong performance as a result of its leading
position in the global seal market. WP recorded a solid performance
in the period as the business benefits from exposure to
non-discretionary products and its broad geographical
diversification.
We have seen a good increase in demand across our travel-related
assets. Audley Travel has demonstrated an encouraging recovery
profile, particularly in the US. arrivia' s membership bookings
have been ahead of 2019 levels, however cruise travel recovery has
been slower than expected, particularly outside of the US. In
September 2022, the business completed the bolt-on acquisition of
RedWeek, an online timeshare marketplace that connects travellers
to lodging options offered by timeshare owners.
Consumer discretionary spending is increasingly constrained due
to high inflation, cost of living pressures and weakening consumer
sentiment. Like many of its eCommerce peers, Luqom is experiencing
muted demand as consumers react to the current challenging backdrop
and demand normalises from the peak seen during the pandemic.
During the period, the business made significant progress on
strategic and operating initiatives designed to mitigate the
current challenges and further improved its more resilient
Business-to-Business ("B2B") proposition through the acquisition of
Brumberg. Following a solid start to 2022, YDEON (previously known
as GartenHaus) has experienced a decline in order intake as a
result of weaker discretionary consumer spending. The price of
YDEON's main raw material, wood, has normalised at a lower level in
recent months which will help to maintain margins in the near
term.
Investment and realisation activity in the period
The volume of buyout transactions across the market has slowed
considerably compared to 2021 and we continue to maintain
discipline when assessing new and bolt-on investments. We completed
four new Private Equity investments totalling GBP217 million: the
GBP100 million investment in xS uite , an accounts payable process
automation specialist focused on the SAP ecosystem; the GBP60
million investment in Konges Sløjd, a premium brand offering
apparel and accessories for babies and children; the GBP37 million
investment in VakantieDiscounter, a technology-enabled online
travel agency in the Benelux focused on affordable holidays; and
the GBP20 million investment in Digital Barriers, a provider of
unique video compression technology. We also completed five bolt-on
acquisitions for our portfolio companies including two (Luqom's
acquisition of Brumberg and arrivia's acquisition of RedWeek) that
required further funding from 3i and three which were self-funded
by the portfolio companies.
In the period, we completed or signed realisations totalling
GBP669 million. We completed the sale of Q Holding's QSR division,
which we announced in April 2022, for proceeds of GBP190 million
and retained a significant stake in its medical business, QMD. In
June 2022, we agreed the sale of Havea. We delivered a significant
strategic transformation in Havea during our holding period
resulting in double-digit organic growth and the completion of five
bolt-on acquisitions. We received proceeds of GBP476 million from
the sale of Havea in October 2022, representing a 50% uplift on its
31 March 2022 value, resulting in a sterling money multiple of 3.1x
and an IRR of 24%.
Infrastructure
In the six months to 30 September 2022, our Infrastructure
business delivered a GIR of GBP35 million or 3% on opening value,
predominantly driven by a gain on foreign exchange on investments
of GBP58 million and good dividend income offsetting a 12.4%
decrease in the 3i Infrastructure plc ("3iN") share price to 304
pence at 30 September 2022 (31 March 2022: 347 pence).
3iN generated a total return on its opening NAV of 9.3% in the
six months to 30 September 2022 as its underlying portfolio
continues to perform significantly ahead of the expectations set at
the beginning of this financial year. During the period, 3iN
completed its new investment in Global Cloud Xchange ("GCX") and
agreed the acquisition of an additional stake in its existing
portfolio company, TCR. 3iN also completed the sale of its European
projects portfolio to the 3i European Operational Projects Fund
("3i EOPF") for GBP106 million.
Smarte Carte exceeded expectations in the period, as the
business is benefiting from strong US domestic leisure travel
volumes increasing demand for its airport service offering, as well
as from valuable contract improvements. The two assets in our North
American Infrastructure platform are performing well: Regional Rail
has seen good performance across the majority of its freight lines,
largely offsetting inflationary pressures in fuel and labour
expenses; whilst EC Waste is seeing strength in the high margin
landfill segment.
Scandlines
Scandlines delivered a solid performance in the period. Freight
volumes remained strong, ahead of 2021 record levels, and leisure
volumes traded ahead of pre-pandemic levels during the peak summer
months of July and August 2022. The recovery in performance
following the Covid-19 Omicron variant resulted in a GBP12 million
dividend to 3i in the period. Scandlines has good liquidity and is
well equipped to manage potential headwinds as a result of the
uncertain macroeconomic outlook.
Sustainability
We continue to advance our sustainability agenda, with a
near-term focus on the climate topic. We have continued to make
good progress in the collection of greenhouse gas ("GHG") emissions
data from the portfolio with the objective of setting a portfolio
baseline, and are further improving our assessment of
climate-related risks and opportunities in our investment and
portfolio management processes and equipping the teams with the
necessary skills. We intend to report in alignment with the TCFD
framework by the 2024 deadline set by the FCA for asset managers
such as 3i and will report on progress in that direction in our
next annual report.
Balance sheet, liquidity, foreign exchange and dividend
We increased our available liquidity in the period by
introducing an additional two-year GBP400 million tranche to the
existing base GBP500 million RCF; which matures in March 2027. The
GBP400 million additional tranche provides the Group with
additional financial flexibility at low cost.
At 30 September 2022 we had total liquidity of GBP801 million
(31 March 2022: GBP729 million) . Gross debt was GBP1,129 million,
comprising GBP975 million of fixed debt and a GBP154 million RCF
drawdown. Net debt was GBP1,074 million and gearing was 8% (31
March 2022: GBP746 million net debt, gearing 6%), before the
receipt of the Havea proceeds (GBP476 million) in early October
2022.
Post the period end, and in light of significant volatility in
foreign exchange markets, we implemented a medium-term foreign
exchange hedging programme to partially reduce the sensitivity of
the Group's future returns to euro and US dollar exchange
movements. The exposure of the Group's underlying investment
portfolio to euro and US dollar has increased significantly in
recent years through the organic growth of our existing European
and US portfolio companies and due to the majority of our new
investments being denominated in euro and US dollar. At 30
September 2022, 88% of the Group's net assets were denominated in
euros or US dollars . As at 4 November 2022, the notional amount of
the forward foreign exchange contracts held by the Group associated
with this hedging programme was EUR2.0 billion and $1.2 billion. We
do not currently expect to extend this hedging programme materially
beyond these amounts. In addition, we have increased the size of
our hedging programme for Scandlines, increasing the notional
amount from EUR500 million to EUR600 million in September 2022.
Following implementation of the hedging programme, a 1% movement in
the euro and US dollar would now result in a net total return
movement for 3i of GBP83 million and GBP13 million (30 September
2022 excluding hedging programme: GBP101 million and GBP24 million)
respectively.
In line with our dividend policy, we will pay a first FY2023
dividend of 23.25 pence, which is half of our FY2022 total
dividend. This first FY2023 dividend will be paid to shareholders
on 11 January 2023.
Valuation
While the valuation of private assets has become a much debated
subject over the last 12 months, we have not changed our
well-established approach to the valuation of our Private Equity
portfolio. Over many years, our valuation approach has used
"through the cycle" multiples, cross referenced where appropriate
with relevant transaction multiples. In practice, we have seen the
stock market increase in recent years to valuation levels we didn't
view as sustainable or as representative of fair value based on our
cross-cycle marks. Whilst we are not immune from this year's market
correction and economic headwinds, our cross-cycle valuation
approach has limited the impact of the recent market volatility
across our portfolio, however we have reduced valuation multiples
for eight portfolio companies. Where there are limited relevant
public comparables for our portfolio companies, we look at a range
of alternatives that have similar growth and financial profiles.
Our non-Action portfolio companies, comprising businesses that
target a doubling of profitability over a five-year hold period,
are held at a weighted average multiple post liquidity discount of
around 13x EBITDA. This compares favourably with most other Private
Equity portfolios and has consistently delivered strong returns and
healthy premiums on exit, as has recently been demonstrated through
the sales of Q Holding's QSR division and Havea.
Our largest investment, Action, has very few close comparators
of a similar growth and financial profile. Action has outstanding
organic growth potential and is one of those rare retail businesses
that has demonstrated an ability to expand across international
borders. In addition, Action has consistently outperformed the
peers we currently reference across its most important operating
key performance indicators ("KPIs"). We use an 18.5x (post
liquidity discount) LTM run-rate EBITDA multiple to value Action
and take comfort from the fact that its excellent annual growth
over the last 30 years, including the last 11 years under our
ownership, means this 18.5x historic multiple translates to a much
more modest prospective multiple. Action's excellent growth meant
its valuation at 30 September 2021 of 18.5x LTM run-rate EBITDA
translated to 13.8x the run-rate EBITDA achieved one year
later.
Outlook
This was a good half for 3i against a tough macroeconomic and
market backdrop. We have carefully constructed our Private Equity
and Infrastructure portfolios over many years with the aim of
generating good returns for our shareholders across the market
cycle. Over the past few years, there have been significant levels
of investment in the private equity industry, at elevated pricing
and often with significant leverage. In contrast to many private
equity investors, we were highly selective in the new investments
made in 2020 and 2021, which together account for only 5% by value
of our current investment portfolio.
Action continues to exceed expectations as it attracts
significant new customer flow through very low prices and the
flexibility of its category format. Our wider portfolio is trading
resiliently in the current environment, while our investment teams
continue to devote significant time to the assets which have seen a
deterioration in performance as a result of cost pressures and
reduced demand. We will continue to invest capital carefully, as
well as execute realisations selectively in the current volatile
markets.
We are anticipating difficult macroeconomic conditions in 2023
which will continue to present significant challenges to the
consumer and corporate sector alike and the Group's conservative
capital structure gives us considerable flexibility to respond to
opportunities and developments as they arise. Our near-term
decisions will remain guided by patience and discipline as we
continue to deliver the significant growth potential of our
existing portfolio.
Simon Borrows
Chief Executive
9 November 2022
Business and Financial review
Private Equity
Our Private Equity business performed well in the first half,
generating a GIR of GBP1,970 million (September 2021: GBP2,373
million), or 16% of the opening portfolio value (September 2021:
27%), including a gain on foreign exchange on investments of GBP685
million (September 2021: GBP97 million).
Table 1: Gross investment return for the six months to 30
September
2022 2021
Investment basis GBPm GBPm
===================================================================== ====== ======
Realised (losses)/profits over value on the disposal of investments (4) 12
Unrealised profits on the revaluation of investments 1,244 2,219
Dividends - 10
Interest income from investment portfolio 39 33
Fees receivable 6 2
Foreign exchange on investments 685 97
Gross investment return 1,970 2,373
===================================================================== ====== ======
Gross investment return as a % of opening portfolio value 16% 27%
===================================================================== ====== ======
Investment
Table 2: Private Equity cash investment in the six months to 30
September 2022
Investment Type Business description/ bolt on description Date GBPm
=================== ======== ================================================================ =============== ====
Accounts payable process automation specialist focused on the
xSuite New SAP ecosystem August 2022 100
Premium brand offering apparel and accessories for babies and
Konges Sløjd New children August 2022 60
Online travel agency in the Benelux focused on affordable
VakantieDiscounter New holidays August 2022 37
Digital Barriers New Provider of unique video compression technology August 2022 20
Total new cash investment 217
---------------------------------------------------------------------------------------------------------------- ----
ten23 health Further Biologics drug product CDMO July 2022 13
Other Further Various Various 5
Total further cash investment 18
---------------------------------------------------------------------------------------------------------------- ----
Brumberg: B2B manufacturer and distributor of luminaries and
Luqom Further lighting products June 2022 34
arrivia Further RedWeek: Online timeshare marketplace September 2022 23
------------------- -------- ---------------------------------------------------------------- --------------- ----
Total further cash investment for bolt-on investment 57
---------------------------------------------------------------------------------------------------------------- ----
Total Private Equity Cash investment 292
---------------------------------------------------------------------------------------------------------------- ----
Table 3: Private Equity portfolio bolt-on acquisitions - funded
by the portfolio company
in the six months to 30 September 2022
Asset Name of acquisition Business description of bolt-on investments Date
------- ------------------- ------------------------------------------------------------------------ --------------
MAIT Nittmann & Pekoll Austrian abas ERP partner June 2022
Evernex XS International Specialist in a suite of IT lifecycle services and IT hardware lifecycle September 2022
support
Evernex Integra Provider of IT maintenance and cloud services September 2022
------- ------------------- ------------------------------------------------------------------------ --------------
During the period, our Private Equity business invested GBP292
million (September 2021: GBP58 million), comprising GBP235 million
of new and further investment and GBP57 million of bolt-on
investments.
Our new investments in xSuite, VakantieDiscounter and Digital
Barriers continue to build on our thematic approach of
digitalisation and technological disruption. Our investment in
Konges Sløjd already has a well-established international footprint
and has several organic opportunities to accelerate its growth
across Europe, Asia and North America. A description of the new
investments is provided in Table 2 and in the Chief Executive's
review.
We continued our focus on buy-and-build acquisitions for a
number of our portfolio companies. Luqom completed the acquisition
of Brumberg, a well-known B2B lighting brand in Germany, whilst
arrivia acquired RedWeek, a leading timeshare rental marketplace.
We supported these acquisitions with further investments of GBP34
million and GBP23 million respectively. Our portfolio companies
also completed a number of self-funded bolt-on investments. MAIT
completed its acquisition of Nittmann & Pekoll, the fifth since
our investment, and Evernex completed its acquisitions of XS
International and Integra, enabling the business to expand its
footprint in the US, Nordic and Benelux markets.
We also invested a further GBP13 million in ten23 health to
support the growth of the platform.
Realisations
We recognised total realised proceeds of GBP193 million in the
period (September 2021: GBP118 million), of which GBP190 million
was received following the completion of the sale of Q Holding's
QSR division.
Table 4: Private Equity realisations in the six months to 30
September 2022
31 March Uplift on
Calendar 2022 3i realised Profit/(loss) opening Residual
year value (1) proceeds in the year (2) Value (3) value
Investment Country invested GBPm GBPm GBPm % GBPm
============================ ========= ========== ========== ============ ================ ========== =========
Partial realisations
Q Holding US 2014 189 190 1 1% 272
Other n/a n/a 8 2 (6) n/a n/a
Deferred consideration
OneMed Sweden 2011 - 1 1 n/a -
Total Private Equity realisations 197 193 (4) - 272
=================================================== ========== ============ ================ ========== =========
1 For partial realisations and refinancings, 31 March 2022 value represents
value of stake sold or refinanced.
2 Cash proceeds realised in the period less opening value.
3 Profit in the year over opening value.
In June 2022, we agreed the sale of Havea at a 50% uplift to the
value at 31 March 2022, for proceeds of GBP476 million. These
proceeds were received in October 2022, realising a sterling money
multiple of 3.1x and a sterling IRR of 24%.
Portfolio performance
Table 5: Unrealised profits/(losses) on the revaluation of
Private Equity investments(1) in the six months to 30 September
2022 2021
GBPm GBPm
=============================================== ====== ======
Action
Performance 1,156 1,491
Earnings based valuations (excluding Action)
Performance 142 354
Multiple movements (180) 162
Other bases
Discounted cash flow ("DCF") 4 1
Other movements in unquoted investments (1) -
Imminent sale 154 166
Quoted portfolio (31) 45
============================================== ====== ======
Total 1,244 2,219
=============================================== ====== ======
1 More information on our valuation methodology, including definitions and rationale, is included
in our Annual report and accounts 2022 on pages 212 to 213.
Action valuation and performance
In the 12 months to the end of Action's P9 2022 (which ended 2
October 2022), the business continued to perform ahead of
expectations, with strong sales, earnings growth and cash
generation driving the unrealised value growth of GBP1,156 million
(September 2021: GBP1,491 million), as shown in Table 5. As the
largest Private Equity investment by value, it represented 59% of
the Private Equity portfolio at 30 September 2022 (31 March 2022:
58%). Further information on Action's performance in the period is
provided in the Chief Executive's review.
At 30 September 2022, Action was valued using its LTM run-rate
earnings to the end of P9 2022 of EUR1,135 million. The LTM
run-rate earnings used included our normal adjustment to reflect
stores opened in the year. At 30 September 2022, Action was valued
on a multiple of 18.5x net of the liquidity discount (31 March
2022: 18.5x). This resulted in a valuation of our 52.7% stake in
Action of GBP8,612 million (31 March 2022: GBP7,165 million). As
part of our valuation process, we check our multiple based mark
against the results of a DCF analysis. The assumptions required to
correlate our 30 September 2022 valuation mark through this DCF
analysis are not demanding.
Performance (excluding Action)
Excluding Action, the performance of investments valued on an
earnings basis resulted in unrealised profits of GBP142 million
(September 2021: GBP354 million), primarily driven by strong
earnings growth and cash generation from some of our portfolio
companies operating in the value-for-money consumer, healthcare,
specialty industrials and business and technology service sectors.
This more than offset softer performance from companies in the
discretionary retail sector, which are experiencing challenging
consumer headwinds.
SaniSure 's strong first half performance was driven by robust
industry demand resulting in accelerated top line growth, which it
was able to deliver via investments in capacity and improvements in
operational processes that materially increased output. The company
has had modest exposure to Covid-19 end-demand, which demand across
the industry has moderated, and looking forward SaniSure's core
customer demand and commercial pipeline remain strong. nexeye
continues to perform well. The business has maintained an
attractive price point for customers helping to maintain order
intake, whilst remaining stringent on cost control, leading to good
margins. Eyes + More, part of the nexeye Group, has seen a gradual
recovery in its German market and contributed 12 of the 13 new
stores opened by nexeye in its financial year. WilsonHCG has
capitalised on the expansion of outsourcing in recruitment,
evidenced by expanding the scope of work with its existing
customers and new customer wins. WilsonHCG's onboarding of new
customers, the reoccurring nature of its relationships, and
diversification across industries
will help offset potential headwinds in labour markets. Tato
traded well in the period with good overall demand for its products
and is well positioned to mitigate more challenging market
conditions. AES continues to perform well financially and
operationally, whilst WP recorded a solid performance in the period
as the business benefits from exposure to non-discretionary
products and its broad geographical diversification.
With the re-opening of key travel destinations, Audley Travel
benefited from increased departure revenue and an increase in
bookings in the period. Detail on Audley Travel's valuation can be
found under the DCF heading below. arrivia 's acquisition of
RedWeek increases its exposure to the resilient timeshare rentals
end market where arrivia has strong customer relationships. The
business has seen an increase in memberships in the period, however
its recovery in cruise has been slower than expected.
Luqom has seen a normalisation in demand from the peak levels
achieved during the pandemic, as well as muted customer sentiment
as a result of ongoing pressures on disposable incomes. The
business has made significant operational and strategic
improvements across sourcing, operations and pricing and its
acquisition of Brumberg increases its exposure to the more
resilient business-to-business segment. YDEON (formerly known as
GartenHaus) has faced similar headwinds to Luqom, with significant
pressure on its order book. As a result YDEON is initiating a broad
set of measures to improve sales, reduce the cost base and develop
further international expansion opportunities. Mepal has also seen
softening demand from smaller offline retail customers and in
non-core markets.
Overall, 91%(1) of our portfolio companies by value in our
Private Equity portfolio grew their earnings in the 12 months to 30
June 2022.
Table 6: Portfolio earnings growth of the top 20 Private Equity
investments(1)
3i carrying value
Number of companies at 30 September 2022
at 30 September 2022 GBPm
========= ===================== =====================
<0% 5 1,076
0 - 9% 4 1,170
10 - 19% 3 1,136
20 - 29% 2 279
>=30% 6 9,733
--------- --------------------- ---------------------
1 Includes top 20 Private Equity companies by value excluding Havea, which was valued on imminent
sale basis and Audley Travel, which was valued on a DCF basis. This represents 92% of the
Private Equity portfolio by value (31 March 2022: 96%). LTM adjusted earnings to 30 June 2022
and Action based on LTM run-rate earnings to P9 2022. P9 2022 runs to 2 October 2022.
Our Private Equity portfolio is funded with all senior debt
structures, with long-dated maturity profiles with over 80%
repayable from 2025 and beyond. Across our Private Equity portfolio
term debt is well protected against interest rate rises with over
two-thirds of total term debt hedged at a weighted average tenor of
more than 3 years with the interest rate element capped at a
weighted average hedge rate below 2%. The average margin across the
portfolio is under 4%, so the all in debt cost across two thirds of
the portfolio is capped below 6%. Average leverage was 2.7x at 30
September 2022 (31 March 2022: 3.3x). Excluding Action, leverage
across the portfolio was 4.1x (31 March 2022: 4.6x). Table 7 shows
the ratio of net debt to adjusted earnings by portfolio value at 30
September 2022.
1.LTM adjusted earnings to June 2022. Includes 31 companies.
Table 7: Ratio of net debt to adjusted earnings(1)
3i carrying value
Number of companies at 30 September 2022
at 30 September 2022 GBPm
======= ===================== =====================
1 - 2x 3 8,984
2 - 3x 5 890
3 - 4x 6 1,449
4 - 5x 5 743
5 - 6x 1 314
>6x 3 234
======= ===================== =====================
1 This represents 87% of the Private Equity portfolio by value (31 March 2022: 92%). Quoted
holdings, assets valued on an imminent sale basis, and companies with net cash are excluded
from the calculation. Net debt and adjusted earnings as at 30 June 2022. Action based on net
debt at P9 2022 and LTM run-rate earnings to P9 2022.
Multiple movements
We continue our approach of taking a long-term through the cycle
view on the multiples used to value our portfolio companies,
consistent with our approach to value creation. When selecting
multiples to value our portfolio companies we consider a number of
factors including recent performance and outlook, comparable recent
transactions and exit plans, and the performance of quoted
comparable companies. Since the start of this calendar year,
capital markets have been volatile, particularly since Russia's
invasion of Ukraine, with significant inflation and central bank
interventions resulting in expectations for lower growth or even
contraction across major markets. As a consequence, we have seen a
derating of quoted comparable company multiples across the majority
of the portfolio, especially those with discretionary spending
exposure. The consistency of our long-term, through the cycle
approach to the setting of valuation multiples has enabled us
largely to mitigate the impact of recent market volatility. Whilst
our portfolio companies often outperform their quoted peers, we do
take into account the derating of comparable companies when
determining the level of our multiples. As a result, we adjusted
eight of the valuation multiples for our portfolio companies,
recognising a decrease in value due to multiple movements of GBP180
million (September 2021: GBP162 million value growth increase).
Action continues to trade strongly across all important KPI's
and its relative performance continues to compare favourably to any
of its quoted comparable peer group. As a result, we made no change
to the multiple used to value Action at 30 September 2022. Based on
the valuation at 30 September 2022, a 1.0x movement in Action's
post-discount multiple would increase or decrease the valuation of
3i's investment by GBP526 million.
DCF
Audley Travel remains valued on a DCF basis. Audley Travel's
performance has improved significantly since the lifting of
Covid-19 related travel restrictions. We expect the travel market
to continue to recover into 2023.
Imminent sale
At 30 September 2022, Havea was valued on an imminent sale basis
after we agreed a sale of the business at a 50% uplift to the 31
March 2022 value. The uplift reflects Havea's strong organic
growth, investments made in the business during our ownership, and
the strategic value of the business. We received proceeds of GBP476
million in October 2022 from this divestment.
Quoted portfolio
Basic-Fit is the only quoted investment in our Private Equity
portfolio. We recognised an unrealised value loss of GBP31 million
from Basic-Fit in the period (September 2021: unrealised value gain
of GBP45 million) as its share price decreased to EUR30.98 at 30
September 2022 (31 March 2022: EUR40.42). At 30 September 2022, our
residual 5.7% shareholding was valued at GBP103 million (31 March
2022: GBP129 million).
Assets under management
The value of the Private Equity portfolio, including third-party
capital, increased to GBP19.6 billion (31 March 2022: GBP16.7
billion) principally due to unrealised value movements in the
period.
Table 8: Private Equity 3i vintage carrying value and money
multiple
3i carrying value (3) Vintage 3i carrying value (3) Vintage
30 September 2022 money multiple (4) 31 March 2022 money multiple (4)
Vintages (1) GBPm 30 September 2022 GBPm 31 March 2022
=================== ====================== =================== ====================== ===================
Buyouts 2010-2012 2,959 13.3x 2,462 12.3x
Growth 2010-2012 26 2.2x 18 2.1x
2013-2016 934 2.4x 1,022 2.3x
2016-2019 2,445 1.9x 2,210 1.8x
2019-2022 1,497 1.5x 1,319 1.3x
2022-2025 223 1.0x - -
Other(2) 6,399 n/a 5,389 n/a
=================== ====================== =================== ====================== ===================
Total 14,483 12,420
=================== ====================== =================== ====================== ===================
1 Assets included in these vintages are disclosed in the Glossary o n pages 47 and 49 .
2 Includes value of GBP5,653 million (31 March 2022: GBP4,703 million) held in Action through
the 2020 Co-investment vehicles and 3i.
3 3i carrying value is the unrealised value for the remaining investments in each vintage.
4 Vintage money multiple (GBP) includes realised value and unrealised value as at the reporting
date.
Table 9: Private Equity assets by geography
3i carrying value
at 30 September 2022
3i office location Number of companies GBPm
==================== ==================== =====================
Netherlands 10 9,872
France 2 792
Germany 8 850
UK 9 1,056
US 9 1,882
Other 3 31
==================== ==================== =====================
Total 41 14,483
==================== ==================== =====================
Table 10: Private Equity assets by sector
3i carrying value
at 30 September 2022
Sector Number of companies GBPm
================================ ==================== =====================
Action (Consumer) 1 8,612
Consumer 14 1,965
Industrial Technology 7 1,128
Business & Technology Services 13 895
Healthcare 6 1,883
Total 41 14,483
================================ ==================== =====================
Infrastructure
Our Infrastructure portfolio generated a GIR of GBP35 million in
the period, or 3% on the opening portfolio value (September 2021:
GBP60 million, 5%) , including a gain on foreign exchange on
investments of GBP58 million (September 2021: GBP7 million).
Table 11: Gross investment return for the six months to 30
September
2022 2021
Investment basis GBPm GBPm
=============================================================== ===== =====
Realised profits - 3
Unrealised (losses)/profits on the revaluation of investments (47) 30
Dividends 16 15
Interest income from investment portfolio 8 5
Foreign exchange on investments 58 7
Gross investment return 35 60
=============================================================== ===== =====
Gross investment return as a % of opening portfolio value 3% 5%
=============================================================== ===== =====
Fund management
3iN
3iN 's portfolio continues to perform strongly, demonstrating a
positive correlation between inflation, power prices and total
portfolio value and is significantly ahead of the expectations set
at the beginning of this financial year. In the six months to 30
September 2022, 3iN generated a total return on opening NAV of 9.3%
(September 2021: 10.6%) and is on track to meet its dividend target
for the year to 31 March 2023 of 11.15 pence per share, up 6.7%
year-on-year.
In the period, 3iN completed its $377 million investment to
acquire a 100% stake in GCX and agreed to acquire an additional
stake in TCR for EUR394 million, in a transaction that closed in
October 2022. 3iN also completed the sale of its European projects
portfolio to the 3i European Operational Projects Fund ("3i EOPF")
for GBP106 million.
As 3iN's investment manager, 3i received a management fee of
GBP23 million in the period (September 2021: GBP16 million).
North American Infrastructure platform
Both assets within our North American Infrastructure platform
are performing well. Regional Rail benefited from strong freight
volumes from food and agriculture customers, largely offsetting
increased fuel and wage expenses. In the period, Regional Rail
agreed to acquire a portfolio of rail assets located across central
Canada, further diversifying its geographical footprint. EC Waste
saw good performance from its landfill segment with an increase in
special waste volumes. Both assets were valued on a DCF basis at 30
September 2022.
Other funds
Following the acquisition of the European projects portfolio
from 3iN, 3i EOPF has now deployed 85% of its total commitments.
Both 3i EOPF and the 3i Managed Infrastructure Acquisitions LP
performed in line with expectations in the period.
Assets under management
Infrastructure AUM was GBP5.9 billion at 30 September 2022 (31
March 2022: GBP5.7 billion) and we generated fee income of GBP30
million from our fund management activities in the period
(September 2021: GBP23 million).
Table 12: Assets under management as at 30 September 2022
Fee
income
% invested (2) at earned in
Close 3i commitment/ Remaining 3i September AUM the period
Fund/strategy date Fund size share commitment 2022 GBPm GBPm
================== ============ ========== =============== ============= ================== ======= ===========
3iN(1) Mar 07 n/a GBP817m n/a n/a 2,706 23
3i Managed
Infrastructure
Acquisitions LP Jun 17 GBP698m GBP35m GBP5m 87% 1,160 2
3i European
Operational
Projects Fund Apr 18 EUR456m EUR40m EUR5m 85% 353 1
BIIF May 08 GBP680m n/a n/a 91% 479 2
3i India Mar 08 US$1,195m US$250m n/a 73% - -
Infrastructure
Fund
3i managed
accounts various n/a n/a n/a n/a 518 1
3i North American
Infrastructure
platform Mar-22(3) US$495m US$300m US$116m 58% 377 1
US Infrastructure Nov-17 n/a n/a n/a n/a 304 -
================== ============ ========== =============== ============= ================== ======= ===========
Total 5,897 30
================================ ========== =============== ============= ================== ======= ===========
1 AUM based on the share price at 30 September 2022.
2 % invested is the capital deployed into investments against the total Fund commitment.
3 First close completed in March 2022.
3i's Infrastructure investment portfolio
Quoted stake in 3iN
3iN's share price decreased by 12.4% in the period, closing at
304 pence on 30 September 2022 (31 March 2022: 347 pence),
resulting in the recognition of a GBP117 million unrealised value
loss (September 2021: GBP20 million unrealised value gain) on our
3iN investment. We partially offset this unrealised value loss with
GBP14 million of dividend income in the period (September 2021:
GBP13 million). At 30 September 2022, our investment in 3iN was
valued at GBP817 million (31 March 2022: GBP934 million).
Smarte Carte
Smarte Carte has outperformed compared to expectations, due to
the strong recovery in the domestic US travel market and resulting
demand for its airport service offering. As at 30 September 2022,
Smarte Carte was valued on a DCF basis in line with our policy for
infrastructure assets.
Table 13: Unrealised (losses)/profits on the revaluation of
Infrastructure investments(1) in the six months to 30 September
2022 2021
GBPm GBPm
============ ====== =====
Quoted (117) 20
DCF 63 8
Fund/other 7 2
Total (47) 30
============ ====== =====
1 More information on our valuation methodology, including definitions and rationale, is included
in our Annual report and accounts 2022 on pag es 212 to 213.
Scandlines
Scandlines generated a GIR of GBP11 million (September 2021:
GBP30 million) or 2% of opening portfolio value in the period
(September 2021: 7%).
Table 14: Gross investment return for the six months to 30
September
2022 2021
Investment basis GBPm GBPm
=========================================================== ===== =====
Unrealised profit on the revaluation of investments - 30
Dividends 12 -
Foreign exchange on investments 21 4
Movement in the fair value of derivatives (22) (4)
=========================================================== ===== =====
Gross investment return 11 30
=========================================================== ===== =====
Gross investment return as a % of opening portfolio value 2% 7%
=========================================================== ===== =====
Performance
Scandlines delivered a solid performance in the period. Freight
volumes remained strong, ahead of 2021 record levels, and leisure
volumes were ahead of pre-pandemic levels during the peak summer
months of July and August 2022. The business remains cash
generative and we received a dividend of GBP12 million in the
period. At 30 September 2022, Scandlines was valued at GBP554
million (31 March 2022: GBP533 million) on a DCF basis and this
valuation reflects the proven resilience the business continues to
demonstrate and its ability to manage through potential short-term
pressure on freight and leisure volumes as a result of current
macroeconomic headwinds.
Foreign exchange
We hedge the balance sheet value of our investment in Scandlines
for foreign exchange translation risks. In September 2022, we
increased the size of this hedging programme from EUR500 million to
EUR600 million to cover the higher underlying valuation of our
investment.
We recognised a GBP21 million gain on foreign exchange
translation (September 2021: GBP4 million) offset by a GBP22
million fair value loss (September 2021: GBP4 million) from
derivatives in our hedging programme.
Overview of financial performance
We generated a total return of GBP1,765 million, or a profit on
opening shareholders' funds of 14%, in the six months to 30
September 2022 (September 2021: GBP2,199 million, or 24%). The
diluted NAV per share at 30 September 2022 increased to 1,477 pence
(31 March 2022: 1,321 pence) including the 74 pence gain on foreign
exchange translation in the period, and after the payment of the
second FY2022 dividend of GBP262 million, or 27.25 pence per share
in July 2022 (September 2021: GBP203 million, 21.0 pence per
share).
Table 15: Gross investment return for the six months to 30
September
2022 2021
Investment basis GBPm GBPm
=========================================================== ====== ======
Private Equity 1,970 2,373
Infrastructure 35 60
Scandlines 11 30
Gross investment return 2,016 2,463
=========================================================== ====== ======
Gross investment return as a % of opening portfolio value 14% 24%
----------------------------------------------------------- ------ ------
Total comprehensive income ("Total return") 1,765 2,199
=========================================================== ====== ======
Total return on opening shareholders' funds 14% 24%
=========================================================== ====== ======
GIR was GBP2,016 million in the period (September 2021: GBP2,463
million) driven by the strong performance of Action and some of our
portfolio companies operating in the value-for-money consumer,
healthcare, specialty industrial and business and technology
service sectors . The GIR also includes a GBP742 million net
foreign exchange gain on translation of our investments (September
2021: GBP104 million gain). Further information on the Private
Equity, Infrastructure and Scandlines valuations is included in the
business reviews.
Operating cash loss
Table 16: Operating cash loss for the six months to 30
September
2022 2021
GBPm GBPm
======================================= ===== =====
Cash fees from external funds 33 24
Cash portfolio fees 1 3
Cash portfolio dividends and interest 33 26
======================================= ===== =====
Cash income 67 53
Cash operating expenses(1) (84) (72)
======================================= ===== =====
Operating cash loss (17) (19)
======================================= ===== =====
1 Cash operating expenses include operating expenses paid and lease payments.
We generated an operating cash loss of GBP17 million in the
period (September 2021: GBP19 million). Cash income increased to
GBP67 million (September 2021: GBP53 million) principally due to an
increase in dividend income and third-party fee income compared to
the same period last year. Cash operating expenses incurred during
the period increased to GBP84 million (September 2021: GBP72
million) driven principally by higher compensation costs. We expect
to report an operating cash profit at 31 March 2023, due to a good
pipeline of cash income.
Net foreign exchange movements
At 30 September 2022, 88% of the Group's net assets were
denominated in euros or US dollars (31 March 2022: 86%). The Group
recorded a total foreign exchange translation gain of GBP711
million net of derivatives during the period (September 2021: GBP98
million) as a result of the weakening of sterling against the euro
and US dollar.
Post the period end, and in light of significant volatility in
foreign exchange markets, we implemented a medium-term foreign
exchange hedging programme to partially reduce the sensitivity of
the Group's future returns to euro and US dollar exchange
movements. The exposure of the Group's underlying investment
portfolio to euro and US dollar has increased significantly in
recent years through the organic growth of our existing European
and US portfolio companies and due to the majority of our new
investments being denominated in euro and US dollar. As at 4
November 2022, the notional amount of the forward foreign exchange
contracts held by the Group associated with this hedging programme
was EUR2.0 billion and $1.2 billion. We do not currently expect to
extend this hedging programme materially beyond these amounts. The
total notional amount of the forward foreign exchange contracts
held by the Group, including the Scandlines hedging programming, is
EUR2.6 billion and $1.2 billion.
Table 17 sets out the sensitivity of net assets to foreign
exchange movements at 30 September 2022 and post 30 September 2022
including the hedging programme.
Table 17: Net assets and sensitivity by currency at 30 September
2022
Net 1% 1%
assets sensitivity sensitivity (2) (after
hedging programme
implemented post
30 September 2022)
FX rate GBPm % GBPm GBPm
============== ======== ======= ==== ============ =======================
Sterling n/a 1,500 10% n/a n/a
Euro(1) 1.1387 10,104 71% 101 83
US dollar 1.1162 2,365 17% 24 13
Danish krone 8.4681 238 2% 2 2
Other n/a 33 - n/a n/a
============== ======== ======= ==== ============ =======================
Total 14,240
============== ======== ======= ==== ============ =======================
1 Sensitivity impact is net of derivatives at 30 September 2022.
2 Sensitivity based on net assets at 30 September 2022 including the
impact of the hedging programme implemented post 30 September 2022.
Euro and US dollar sensitivity is net of derivatives.
Carried interest and performance fees
We pay carried interest to participants in plans relating to our
proprietary capital invested. We also receive performance fees from
third-party funds and pay a portion of those performance fees to
participants in our carry plans. Carried interest at 30 September
2022 was calculated assuming that remaining assets in the portfolio
were realised
at their fair value at that date.
Table 18: Carried interest and performance fees for the six
months to 30 September
Investment basis Statement of comprehensive income 2022 2021
GBPm GBPm
==================================================== ====== ======
Carried interest and performance fees receivable
Private Equity 2 2
==================================================== ====== ======
Total 2 2
==================================================== ====== ======
Carried interest and performance fees payable
Private Equity (157) (194)
Infrastructure (5) (6)
==================================================== ====== ======
Total (162) (200)
==================================================== ====== ======
Net carried interest payable (160) (198)
==================================================== ====== ======
Table 19: Carried interest and performance fees
Investment basis Statement of financial position 30 September 31 March
2022 2022
GBPm GBPm
================================================== ============= =========
Carried interest and performance fees receivable
Private Equity 10 8
Infrastructure - 51
Total 10 59
================================================== ============= =========
Carried interest and performance fees payable
Private Equity (1,106) (926)
Infrastructure (8) (37)
================================================== ============= =========
Total (1,114) (963)
================================================== ============= =========
In Private Equity, we typically accrue net carried interest
payable at between 10% and 13% of GIR. We accrued carried interest
payable of GBP157 million (September 2021: GBP194 million) for
Private Equity in the period. This was driven by the continued
strong performance of the 2010-12 vintage, which includes Action,
as well as by the return generated by other Private Equity carry
vintages.
Carried interest is paid to participants when cash proceeds have
actually been received following a realisation, refinancing event
or other cash distribution and performance hurdles are passed in
cash terms. Due to the time between investment and realisation, the
schemes are usually active for a number of years. Their
participants are both current and previous employees of 3i. Total
carried interest and performance fee cash paid in the period was
GBP39 million (30 September 2021: GBP13 million), and total
performance fee cash received in the period was GBP51 million (30
September 2021: GBP8 million).
Overall, the effect of the income statement charge, the cash
payments, as well as the currency translation meant that the
balance sheet carried interest and performance fees payable
increased to GBP1,114 million at 30 September 2022 (31 March 2022:
GBP963 million).
Balance sheet
Table 20: Simplified consolidated balance sheet
30 September 31 March
2022 2022
Investment basis GBPm GBPm
================================================== ============= =========
Investment portfolio 16,417 14,305
Gross debt (1,129) (975)
Cash and deposits 55 229
================================================== ============= =========
Net debt (1,074) (746)
================================================== ============= =========
Carried interest and performance fees receivable 10 59
Carried interest and performance fees payable (1,114) (963)
Other net assets 1 99
================================================== ============= =========
Net assets 14,240 12,754
================================================== ============= =========
Gearing(1) 8% 6%
================================================== ============= =========
1 Gearing is net debt as a percentage of net assets.
The investment portfolio value increased to GBP16,417 million at
30 September 2022 (31 March 2022: GBP14,305 million) driven by
unrealised profit of GBP1,197 million and gains on foreign exchange
translation.
At 30 September 2022, the Group had net debt of GBP1,074 million
(31 March 2022: GBP746 million) after the payment of the second
FY2022 dividend of GBP262 million.
Going concern and liquidity
The Half-year consolidated financial statements are prepared on
a going concern basis following the assessment by the Directors,
taking into account the Group's current performance and
outlook.
Liquidity increased to GBP801 million at 30 September 2022 (31
March 2022: GBP729 million) and comprised cash and deposits of
GBP55 million (31 March 2022: GBP229 million) and a facility of
GBP746 million (31 March 2022: GBP500 million). Net debt was
GBP1,074 million (31 March 2022: GBP746 million) and gearing was 8%
(31 March 2022: 6%).
In July 2022, we increased our available liquidity by
introducing an additional two-year GBP400 million tranche to the
existing base GBP500 million RCF which matures in March 2027. At 30
September 2022, GBP154 million was drawn. The RCF drawdown was
repaid in October 2022.
Alternative Performance Measures ("APMs") .
We assess our performance using a variety of measures that are
not specifically defined under IFRS and are therefore termed APMs.
The APMs that we use may not be directly comparable with those used
by other companies. Our Investment basis is itself an APM.
The explanation of and rationale for the Investment basis and
its reconciliation to IFRS is provided from page 20 . The table
below defines our additional APMs and should be read in conjunction
with our Annual report and accounts 2022.
APM Purpose Calculation Reconciliation
to IFRS
Gross investment A measure of the performance It is calculated The equivalent balances
return as a percentage of our investment portfolio. as the gross investment under IFRS and the
of opening portfolio For further information, return, as shown reconciliation to
value see the Group KPIs in the Investment the Investment basis
in our Annual report basis Consolidated are shown in the
and accounts 2022. statement of comprehensive Reconciliation of
income, as a % of consolidated statement
the opening portfolio of comprehensive
value. income and the Reconciliation
of consolidated
statement of financial
position respectively.
================================ =========================== ==============================
Cash realisations Cash proceeds from The cash received The equivalent balance
our investments support from the disposal under IFRS and the
our returns to shareholders, of investments in reconciliation to
as well as our ability the period as shown the Investment basis
to invest in new opportunities. in the Investment is shown in the
For further information, basis Consolidated Reconciliation of
see the Group KPIs cash flow statement. consolidated cash
in our Annual report flow statement.
and accounts 2022.
================================ =========================== ==============================
Cash investment Identifying new opportunities The cash paid to The equivalent balance
in which to invest acquire investments under IFRS and the
proprietary capital and recognising reconciliation to
is the primary driver syndications in the Investment basis
of the Group's ability the period as shown is shown in the
to deliver attractive on the Investment Reconciliation of
returns. For further basis Consolidated consolidated cash
information, see the cash flow statement. flow statement.
Group KPIs in our Annual
report and accounts
2022.
================================ =========================== ==============================
Operating cash By covering the cash The cash income The equivalent balance
profit/(loss) cost of running the from the portfolio under IFRS and the
business with cash (interest, dividends reconciliation to
income, we reduce the and fees) together the Investment basis
potential dilution with fees received is shown in the
of capital returns. from external funds Reconciliation of
For further information, less cash operating consolidated cash
see the Group KPIs expenses and leases flow statement.
in our Annual report payments as shown
and accounts 2022. on the Investment
basis Consolidated
cash flow statement.
The calculation
is shown in Table
16 of the Overview
of financial performance.
================================ =========================== ==============================
Net cash/(net A measure of the available Cash and cash equivalents The equivalent balance
debt) cash to invest in the plus deposits less under IFRS and the
business and an indicator loans and borrowings reconciliation to
of the financial risk as shown on the the Investment basis
in the Group's balance Investment basis is shown in the
sheet. Consolidated statement Reconciliation of
of financial position. consolidated statement
of financial position.
================================ =========================== ==============================
Gearing A measure of the financial Net debt (as defined The equivalent balance
risk in the Group's above) as a % of under IFRS and the
balance sheet. the Group's net reconciliation to
assets under the the Investment basis
Investment basis. is shown in the
It cannot be less Reconciliation of
than zero. consolidated statement
of financial position.
================================ =========================== ==============================
Principal risks and uncertainties
3i's risk appetite statement, approach to risk management and
governance structure are set out in the Risk section of the Annual
report and accounts 2022, which can be accessed on the Group's
website at www.3i.com .
Notwithstanding increased market volatility, global economic
uncertainty and current geopolitical tensions, the principal risks
to the achievement of the Group's strategic objectives are
unchanged from those reported on pages 67 to 71 of the Annual
report and accounts 2022 and remain broadly stable in terms of
impact and likelihood. Given the challenging external operating
environment and uncertain outlook, the Group's principal risks
continue to be closely monitored and may be subject to change.
Principal risks
External - Risks arising from external factors including
political, legal, regulatory, economic and competitor changes,
which affect the Group's investment portfolio and operations.
As noted above, there is considerable uncertainty in the outlook
for the global economy, impacted by a range of factors including
increased cost of living, higher interest rates and lower forecast
economic growth. These economic headwinds have the potential to
affect trading performance, liquidity and valuations in varying
degrees across 3i's investment portfolio. As outlined below, 3i has
a well-funded balance sheet and a diverse portfolio of
international companies operating in a range of different sectors,
which has continued to perform well overall.
Investment - Risks in respect of specific asset investment
decisions, the subsequent performance of an investment or exposure
concentrations across business line portfolios.
The portfolio continues to perform well in the current economic
conditions. However, some portfolio companies are potentially more
exposed to the adverse effects of, for example, higher energy
prices and the impact of higher living costs on consumer
discretionary spend. This is being closely monitored. The current
economic and market uncertainties add complexity to transactions;
for example, pricing and the setting of investment case
assumptions. In addition, changes to the availability and pricing
of debt could potentially impact investment activity or refinancing
plans.
Operational - Risks arising from inadequate or failed processes,
people and systems or from external factors affecting these.
The Group's day-to-day operations have been stable in the
period. This includes the continued resilience and security of the
Group's IT systems and maintenance of robust processes and internal
controls. Staff turnover rates have been stable notwithstanding a
competitive recruitment market.
Capital management - Risks in relation to the management of
capital resources including liquidity risk, currency exposures and
leverage risk
3i's approach to capital management remains conservative, with a
well-funded balance sheet and low company debt. The company
increased available liquidity in July 2022 by way of an additional
two-year GBP400 million tranche to the existing base GBP500 million
RCF which matures in March 2027. This provides the Company with
additional financial flexibility at low cost. The investment and
divestment pipeline and balance of investment and realisation flows
are subject to regular reviews.
Post the period end, the Group implemented a medium-term foreign
exchange hedging programme to partially reduce the sensitivity of
the Group's future returns to euro and US dollar exchange movements
as part of its overall capital management approach.
The Half-year report provides an update on 3i's strategy and
business performance, as well as on market conditions, which is
relevant to the Group's overall risk profile and should be viewed
in the context of the Group's risk management framework and
principal risks as disclosed in the Annual report and accounts
2022.
Reconciliation of the Investment basis to IFRS
Background to Investment basis numbers used in the Half-year
report
The Group makes investments in portfolio companies directly,
held by 3i Group plc, and indirectly, held through intermediate
holding company and partnership structures ("investment entity
subsidiaries"). It also has other operational subsidiaries, which
provide services and other activities such as employment,
regulatory activities, management and advice ("trading
subsidiaries"). The application of IFRS 10 requires us to fair
value a number of investment entity subsidiaries that were
previously consolidated line by line. This fair value approach,
applied at the investment entity subsidiary level, effectively
obscures the performance of our proprietary capital investments and
associated transactions occurring in the investment entity
subsidiaries.
The financial effect of the underlying portfolio companies and
fee income, operating expenses and carried interest transactions
occurring in investment entity subsidiaries are aggregated into a
single value. Other items which were previously eliminated on
consolidation are now included separately.
To maintain transparency and aid understanding of our results,
we include a separate non-GAAP "Investment basis" consolidated
statement of comprehensive income, financial position and cash
flow. The Investment basis is an APM and the Chief Executive's
review and the Business and financial review are prepared using the
Investment basis, as we believe it provides a more understandable
view of our performance. Total return and net assets are equal
under the Investment basis and IFRS; the Investment basis is simply
a "look through" of IFRS 10 to present the underlying
performance.
A more detailed explanation of the effect of IFRS 10 is provided
in the Annual report and accounts 2022 on page 53.
Reconciliation between Investment basis and IFRS
A detailed reconciliation from the Investment basis to IFRS
basis of the Consolidated statement of comprehensive income,
Consolidated statement of financial position and Consolidated cash
flow statement is shown on pages 21 to 24.
Reconciliation of consolidated statement of comprehensive
income
Six months to 30 September 2022 Six months to 30 September 2021
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================== ====== =========== =========== =========== =============== =========== ===============
Realised
(losses)/profits
over value
on the disposal
of investments 1,2 (4) 2 (2) 15 (4) 11
Unrealised profits
on the
revaluation of
investments 1,2 1,197 (657) 540 2,279 (1,205) 1,074
Fair value
movements
on investment
entity
subsidiaries 1 - 962 962 - 1,094 1,094
Portfolio income
Dividends 1,2 28 (12) 16 25 (3) 22
Interest income
from investment
portfolio 1,2 47 (32) 15 38 (25) 13
Fees receivable 1,2 6 - 6 2 1 3
Foreign exchange
on investments 1,4 764 (502) 262 108 (66) 42
Movement in the
fair value of
derivatives (22) - (22) (4) - (4)
================== ====== =========== =========== =========== =============== =========== ===============
Gross investment
return 2,016 (239) 1,777 2,463 (208) 2,255
================== ====== =========== =========== =========== =============== =========== ===============
Fees receivable
from external
funds 33 - 33 25 - 25
Operating expenses 1,3 (67) 1 (66) (56) - (56)
Interest received 1 1 - 1 - - -
Interest paid 1 (27) - (27) (27) - (27)
Exchange movements 1,4 (31) 51 20 (6) 5 (1)
Income from
investment entity
subsidiaries 1 - 28 28 - 11 11
Other income 1 - 1 - - -
Operating profit
before carried
interest 1,926 (159) 1,767 2,399 (192) 2,207
================== ====== =========== =========== =========== =============== =========== ===============
Carried interest
Carried interest
and performance
fees receivable 1,3 2 - 2 2 - 2
Carried interest
and performance 190
fees payable 1,3 (162) 153 (9) (200) (10)
================= ====== =========== =========== =========== =============== =========== ===============
Operating profit
before tax 1,766 (6) 1,760 2,201 (2) 2,199
================== ====== =========== =========== =========== =============== =========== ===============
Tax charge 1,3 (1) - (1) (2) - (2)
================== ====== =========== =========== =========== =============== =========== ===============
Profit for the
period 1,765 (6) 1,759 2,199 (2) 2,197
================== ====== =========== =========== =========== =============== =========== ===============
Other comprehensive income
that may be reclassified
to the income statement
Exchange
differences on
translation of
foreign
operations 1,4 - 6 6 - 2 2
Other comprehensive
expense that will not be
reclassified to the income
statement
Re-measurement of
defined - - - - - -
benefit plans
================= ====== =========== =========== =========== =============== =========== ===============
Other
comprehensive
income for the
period - 6 6 - 2 2
================== ====== =========== =========== =========== =============== =========== ===============
Total
comprehensive
income for
the period
("Total return") 1,765 - 1,765 2,199 - 2,199
================== ====== =========== =========== =========== =============== =========== ===============
Notes:
1 Applying IFRS 10 to the Consolidated statement of comprehensive income consolidates the line
items of a number of previously consolidated subsidiaries into a single line item "Fair value
movements on investment entity subsidiaries". In the Investment basis accounts we have disaggregated
these line items to analyse our total return as if these investment entity subsidiaries were
fully consolidated, consistent with prior periods. The adjustments simply reclassify the Consolidated
statement of comprehensive income of the Group, and the total return is equal under the Investment
basis and the IFRS basis.
2 Realised profits, unrealised profits and portfolio income shown in the IFRS accounts only
relate to portfolio companies that are held directly by 3i Group plc and not those portfolio
companies held through investment entity subsidiaries. Realised profits, unrealised profits
and portfolio income in relation to portfolio companies held through investment entity subsidiaries
are aggregated into the single "Fair value movement on investment entity subsidiaries" line.
This is the most significant reduction of information in our IFRS accounts.
3 Other items also aggregated into the "Fair value movements on investment entity subsidiaries"
line include operating expenses, carried interest and performance fees receivable, carried
interest and performance fees payable and tax. Operating expenses, carried interest and performance
fees receivable and tax do not impact fair value movements on investment entity subsidiaries
for the six months to 30 September 2022.
4 Foreign exchange movements have been reclassified under the Investment basis as foreign currency
asset and liability movements. Movements within the investment entity subsidiaries are included
within "Fair value movements on investment entity subsidiaries".
Reconciliation of consolidated statement of financial
position
As at 30 September 2022 As at 31 March 2022
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
==== ============================== ============ ============ ============ ============ ============ ==========
Assets
Non-current assets
Investments
Quoted investments 1 920 (103) 817 1,063 (129) 934
Unquoted investments 1 15,497 (8,763) 6,734 13,242 (7,534) 5,708
Investments in investment
entity subsidiaries 1,2 - 7,817 7,817 - 6,791 6,791
============================== ==== ============ ============ ============ ============ ============ ==========
Investment portfolio 16,417 (1,049) 15,368 14,305 (872) 13,433
============================== ==== ============ ============ ============ ============ ============ ==========
Carried interest and
performance
fees receivable 1 9 1 10 8 1 9
Other non-current assets 1 50 (4) 46 50 (5) 45
Intangible assets 6 - 6 6 - 6
Retirement benefit surplus 53 - 53 53 - 53
Property, plant and equipment 3 - 3 3 - 3
Right of use asset 11 - 11 13 - 13
Derivative financial
instruments 1 - 1 7 - 7
Deferred income taxes 1 - 1 1 - 1
Total non-current assets 16,551 (1,052) 15,499 14,446 (876) 13,570
============================== ==== ============ ============ ============ ============ ============ ==========
Current assets
Carried interest and
performance
fees receivable 1 1 - 1 51 - 51
Other current assets 1 21 (3) 18 105 (1) 104
Current income taxes 1 - 1 1 - 1
Derivative financial
instruments 4 - 4 10 - 10
Cash and cash equivalents 1 55 (17) 38 229 (17) 212
============================== ==== ============ ============ ============ ============ ============ ==========
Total current assets 82 (20) 62 396 (18) 378
============================== ==== ============ ============ ============ ============ ============ ==========
Total assets 16,633 (1,072) 15,561 14,842 (894) 13,948
============================== ==== ============ ============ ============ ============ ============ ==========
Liabilities
Non-current liabilities
Trade and other payables 1 (21) 7 (14) (21) 7 (14)
Carried interest and
performance
fees payable 1 (1,110) 1,062 (48) (915) 873 (42)
Loans and borrowings (775) - (775) (775) - (775)
Retirement benefit deficit (27) - (27) (26) - (26)
Lease liability (7) - (7) (9) - (9)
Derivative financial
instruments (12) - (12) - - -
Deferred income taxes (1) - (1) (1) - (1)
Provisions (3) - (3) (3) - (3)
============================== ==== ============ ============ ============ ============ ============ ==========
Total non-current liabilities (1,956) 1,069 (887) (1,750) 880 (870)
============================== ==== ============ ============ ============ ============ ============ ==========
Current liabilities
Trade and other payables 1 (69) 3 (66) (81) 1 (80)
Carried interest and
performance fees payable 1 (4) - (4) (48) 13 (35)
Loans and borrowings (354) - (354) (200) - (200)
Lease liability (5) - (5) (5) - (5)
Derivative financial
instruments (1) - (1) - - -
Current income taxes (4) - (4) (4) - (4)
Total current liabilities (437) 3 (434) (338) 14 (324)
============================== ==== ============ ============ ============ ============ ============ ==========
Total liabilities (2,393) 1,072 (1,321) (2,088) 894 (1,194)
============================== ==== ============ ============ ============ ============ ============ ==========
Net assets 14,240 - 14,240 12,754 - 12,754
============================== ==== ============ ============ ============ ============ ============ ==========
Equity
Issued capital 719 - 719 719 - 719
Share premium 790 - 790 789 - 789
Other reserves 3 12,839 - 12,839 11,346 - 11,346
Own shares (108) - (108) (100) - (100)
============================== ==== ============ ============ ============ ============ ============ ==========
Total equity 14,240 - 14,240 12,754 - 12,754
============================== ==== ============ ============ ============ ============ ============ ==========
Notes:
1 Applying IFRS 10 to the Consolidated statement of financial position
aggregates the line items of investment entity subsidiaries into the
single line item "Investments in investment entity subsidiaries".
In the Investment basis, we have disaggregated these items to analyse
our net assets as if the investment entity subsidiaries were consolidated.
The adjustment reclassifies items in the Consolidated statement of
financial position. There is no change to the net assets, although
for reasons explained below, gross assets and gross liabilities are
different. The disclosure relating to portfolio companies is significantly
reduced by the aggregation, as the fair value of all investments held
by investment entity subsidiaries is aggregated into the "Investments
in investment entity subsidiaries" line. We have disaggregated this
fair value and disclosed the underlying portfolio holding in the relevant
line item, ie quoted investments or unquoted investments. Other items
which may be aggregated include carried interest, other assets and
other payables, and the Investment basis presentation again disaggregates
these items.
2 Intercompany balances between investment entity subsidiaries and trading
subsidiaries also impact the transparency of our results under the
IFRS basis. If an investment entity subsidiary has an intercompany
balance with a consolidated trading subsidiary of the Group, then
the asset or liability of the investment entity subsidiary will be
aggregated into its fair value, while the asset or liability of the
consolidated trading subsidiary will be disclosed as an asset or liability
in the Consolidated statement of financial position of the Group.
3 Investment basis financial statements are prepared for performance
measurement and therefore reserves are not analysed separately under
this basis.
Reconciliation of consolidated cash flow statement
Six months to 30 September 2022 Six months to 30 September 2021
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
========================== ====== ============ ============ ============ ============ ============ ============
Cash flow from operating
activities
Purchase of investments 1 (241) 209 (32) (59) 35 (24)
Proceeds from investments 1 228 (194) 34 123 (61) 62
Amounts paid to
investment entity
subsidiaries 1 - (233) (233) - (50) (50)
Amounts received from
investment entity
subsidiaries 1 - 220 220 - 78 78
Net cash flow from
derivatives 4 - 4 6 - 6
Portfolio interest
received 1 2 (2) - - - -
Portfolio dividends
received 1 31 (12) 19 26 (3) 23
Portfolio fees received 1 1 - 1 3 - 3
Fees received from
external funds 33 - 33 24 - 24
Carried interest and
performance fees
received 1 51 - 51 8 - 8
Carried interest and
performance fees paid 1 (39) 11 (28) (13) - (13)
Operating expenses paid (81) - (81) (70) - (70)
Co-investment loans
received/(paid) 1 - 1 1 (4) - (4)
Tax paid - - - (1) - (1)
Interest received 1 1 - 1 - - -
Net cash flow from
operating activities (10) - (10) 43 (1) 42
========================== ====== ============ ============ ============ ============ ============ ============
Cash flow from financing
activities
Issue of shares 1 - 1 - - -
Purchase of own shares (30) - (30) - - -
Dividend paid (262) - (262) (203) - (203)
Lease payments (3) - (3) (2) - (2)
Interest paid (20) - (20) (19) - (19)
Drawdown of revolving
credit facility 145 - 145 - - -
Net cash flow from
financing activities (169) - (169) (224) - (224)
========================== ====== ============ ============ ============ ============ ============ ============
Change in cash and cash
equivalents 2 (179) - (179) (181) (1) (182)
========================== ====== ============ ============ ============ ============ ============ ============
Cash and cash equivalents
at the start of the
period 2 229 (17) 212 225 (9) 216
Effect of exchange rate
fluctuations 1 5 - 5 - 3 3
Cash and cash equivalents
at the end of the period 2 55 (17) 38 44 (7) 37
========================== ====== ============ ============ ============ ============ ============ ============
Notes:
1 The Consolidated cash flow statement is impacted by the application
of IFRS 10 as cash flows to and from investment entity subsidiaries
are disclosed, rather than the cash flows to and from the underlying
portfolio. Therefore, in our Investment basis financial statements,
we have disclosed our consolidated cash flow statement on a "look through"
basis, in order to reflect the underlying sources and uses of cash
flows and disclose the underlying investment activity.
2 There is a difference between the change in cash and cash equivalents
of the Investment basis financial statements and the IFRS financial
statements because there are cash balances held in investment entity
subsidiaries. Cash held within investment entity subsidiaries will
not be shown in the IFRS statements but will be seen in the Investment
basis statements.
IFRS Financial statements
Condensed consolidated statement of comprehensive income
Six months to Six months to
30 September 30 September
2022 2021
(unaudited) (unaudited)
Notes GBPm GBPm
============================================================================ ====== ============== ==============
Realised (losses)/profits over value on the disposal of investments 2 (2) 11
Unrealised profits on the revaluation of investments 3 540 1,074
Fair value movements on investment entity subsidiaries 8 962 1,094
Portfolio income
Dividends 16 22
Interest income from investment portfolio 15 13
Fees receivable 4 6 3
Foreign exchange on investments 262 42
Movement in the fair value of derivatives (22) (4)
============================================================================ ====== ============== ==============
Gross investment return 1,777 2,255
---------------------------------------------------------------------------- ------ -------------- --------------
Fees receivable from external funds 4 33 25
Operating expenses (66) (56)
Interest received 1 -
Interest paid (27) (27)
Exchange movements 20 (1)
Income from investment entity subsidiaries 28 11
Other income 1 -
Operating profit before carried interest 1,767 2,207
---------------------------------------------------------------------------- ------ -------------- --------------
Carried interest
Carried interest and performance fees receivable 4 2 2
Carried interest and performance fees payable (9) (10)
=========================================================================== ====== ============== ==============
Operating profit before tax 1,760 2,199
---------------------------------------------------------------------------- ------ -------------- --------------
Tax charge (1) (2)
============================================================================ ====== ============== ==============
Profit for the period 1,759 2,197
============================================================================ ====== ============== ==============
Other comprehensive income that may be reclassified to the income statement
Exchange differences on translation of foreign operations 6 2
Other comprehensive expense that will not be reclassified to the income statement
Re-measurements of defined benefit plans - -
=========================================================================== ====== ============== ==============
Other comprehensive income for the period 6 2
============================================================================ ====== ============== ==============
Total comprehensive income for the period ("Total return") 1,765 2,199
============================================================================ ====== ============== ==============
Earnings per share
Basic (pence) 5 182.7 227.4
Diluted (pence) 5 182.5 226.9
=========================================================================== ====== ============== ==============
The Notes to the accounts section forms an integral part of
these financial statements.
Condensed consolidated statement of financial position
30 September 31 March
2022 2022
(unaudited) (audited)
Notes GBPm GBPm
======================================================= ============= ==========
Assets
Non-current assets
Investments
Quoted investments 7 817 934
Unquoted investments 7 6,734 5,708
Investments in investment entity subsidiaries 8 7,817 6,791
=================================================== ============= ==========
Investment portfolio 15,368 13,433
=================================================== ============= ==========
Carried interest and performance fees receivable 10 9
Other non-current assets 46 45
Intangible assets 6 6
Retirement benefit surplus 53 53
Property, plant and equipment 3 3
Right of use asset 11 13
Derivative financial instruments 1 7
Deferred income taxes 1 1
Total non-current assets 15,499 13,570
======================================================= ============= ==========
Current assets
Carried interest and performance fees receivable 1 51
Other current assets 18 104
Current income taxes 1 1
Derivative financial instruments 4 10
Cash and cash equivalents 38 212
======================================================= ============= ==========
Total current assets 62 378
======================================================= ============= ==========
Total assets 15,561 13,948
======================================================= ============= ==========
Liabilities
Non-current liabilities
Trade and other payables (14) (14)
Carried interest and performance fees payable (48) (42)
Loans and borrowings (775) (775)
Retirement benefit deficit (27) (26)
Lease liability (7) (9)
Derivative financial instruments (12) -
Deferred income taxes (1) (1)
Provisions (3) (3)
=================================================== ============= ==========
Total non-current liabilities (887) (870)
======================================================= ============= ==========
Current liabilities
Trade and other payables (66) (80)
Carried interest and performance fees payable (4) (35)
Loans and borrowings (354) (200)
Lease liability (5) (5)
Derivative financial instruments (1) -
Current income taxes (4) (4)
Total current liabilities (434) (324)
======================================================= ============= ==========
Total liabilities (1,321) (1,194)
======================================================= ============= ==========
Net assets 14,240 12,754
======================================================= ============= ==========
Equity
Issued capital 719 719
Share premium 790 789
Capital redemption reserve 43 43
Share-based payment reserve 27 33
Translation reserve - (6)
Capital reserve 11,657 10,151
Revenue reserve 1,112 1,125
Own shares (108) (100)
=================================================== ============= ==========
Total equity 14,240 12,754
------------------------------------------------------- ------------- ----------
The Notes to the accounts section forms an integral part of
these financial statements.
Condensed consolidated statement of changes in equity
Share-
For the six months
to
30 September 2022
(unaudited)
=====================
Capital based
=====================
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
Total equity at the
start of
the period 719 789 43 33 (6) 10,151 1,125 (100) 12,754
Profit for the
period - - - - - 1,686 73 - 1,759
Exchange differences
on translation of
foreign operations - - - - 6 - - - 6
Re-measurements of
defined benefit - - - - - - - - -
plans
Total comprehensive
income for the
period - - - - 6 1,686 73 - 1,765
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
Share-based payments - - - 12 - - - - 12
Release on
exercise/forfeiture
of share awards - - - (18) - - 18 - -
Exercise of share
awards - - - - - (22) - 22 -
Ordinary dividends - - - - - (158) (104) - (262)
Purchase of own
shares - - - - - - - (30) (30)
Issue of ordinary
shares - 1 - - - - - - 1
Total equity at the
end of the period 719 790 43 27 - 11,657 1,112 (108) 14,240
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
1 Refer to the Glossary on pages 47 to 49 for the nature of the capital and revenue reserves.
Share-
For the six months
to
30 September 2021
(unaudited)
=====================
Capital based
=====================
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
Total equity at the
start of
the period 719 788 43 34 (5) 6,733 916 (64) 9,164
Profit for the
period - - - - - 2,129 68 - 2,197
Exchange differences
on translation of
foreign operations - - - - 2 - - - 2
Re-measurements of
defined benefit - - - - - - - - -
plans
Total comprehensive
income for the
period - - - - 2 2,129 68 - 2,199
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
Share-based payments - - - 12 - - - - 12
Release on
exercise/forfeiture
of share awards - - - (19) - - 19 - -
Exercise of share
awards - - - - - (18) - 18 -
Ordinary dividends - - - - - (203) - - (203)
Issue of ordinary
shares - 1 - - - - - - 1
Total equity at the
end of
the period 719 789 43 27 (3) 8,641 1,003 (46) 11,173
===================== ======== ======== =========== ======== ============ =========== =========== ======= ========
1 Refer to the Glossary on pages 47 to 49 for the nature of the capital
and revenue reserves.
The Notes to the accounts section forms an integral part of
these financial statements.
Condensed consolidated cash flow statement
Six months to Six months to
30 September 30 September
2022 2021
(unaudited) (unaudited)
Notes GBPm GBPm
======================================================== ============== ==============
Cash flow from operating activities
Purchase of investments (32) (24)
Proceeds from investments 34 62
Amounts paid to investment entity subsidiaries (233) (50)
Amounts received from investment entity subsidiaries 220 78
Net cash flow from derivatives 4 6
Portfolio dividends received 19 23
Portfolio fees received 1 3
Fees received from external funds 33 24
Carried interest and performance fees received 51 8
Carried interest and performance fees paid (28) (13)
Operating expenses paid (81) (70)
Co-investment loans received/(paid) 1 (4)
Tax paid - (1)
Interest received 1 -
Net cash flow from operating activities (10) 42
======================================================== ============== ==============
Cash flow from financing activities
Issue of shares 1 -
Purchase of own shares (30) -
Dividend paid 6 (262) (203)
Lease payments (3) (2)
Interest paid (20) (19)
Drawdown of revolving credit facility 145 -
Net cash flow from financing activities (169) (224)
======================================================== ============== ==============
Change in cash and cash equivalents (179) (182)
======================================================== ============== ==============
Cash and cash equivalents at the start of the period 212 216
Effect of exchange rate fluctuations 5 3
Cash and cash equivalents at the end of the period 38 37
======================================================== ============== ==============
The Notes to the accounts section forms an integral part of
these financial statements.
Notes to the condensed consolidated financial statements
Basis of preparation and accounting policies
Compliance with International Financial Reporting Standards
("IFRS")
The Half-year condensed consolidated financial statements of 3i
Group plc have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority
and IAS 34 Interim Financial Reporting as adopted for use in the
UK. The Half-year condensed consolidated financial statements
should be read in conjunction with the Annual report and accounts
2022 which have been prepared and approved by the Directors in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and in accordance
with UK-adopted international accounting standards. The Annual
report and accounts for the year ended 31 March 2023 will be
prepared in accordance with UK-adopted international accounting
standards.
The Half-year condensed consolidated financial statements are
presented to the nearest million sterling (GBPm), the functional
currency of the Company. The accounting policies applied by 3i
Group plc for the Half-year condensed consolidated financial
statements are consistent with those described on pages 155 to 192
of the Annual report and accounts 2022. There was no change in the
current period to the critical accounting estimates and judgements
applied in 2022, which are stated on page 157 of the Annual report
and accounts 2022.
The financial information for the year ended 31 March 2022 and
for the six months ended 30 September 2022 contained within this
Half-year report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. The statutory accounts
for the year to 31 March 2022, prepared under IFRS in conformity
with the requirements of the Companies Act 2006, have been reported
on by KPMG LLP and delivered to the Registrar of Companies. The
report of the Auditor on these statutory accounts was unqualified
and did not contain a statement under section 498(2) or section
498(3) of the Companies Act 2006.
Going concern
These condensed consolidated financial statements are prepared
on a going concern basis. The Directors have made an assessment of
going concern for a period of at least 12 months from the date of
approval of the accounts, taking into account the Group's current
performance, financial position and the principal and emerging
risks facing the business. As detailed in the Chief Executive's
review and Business and Financial review, the Group delivered a
good result in the first half despite a tough macroeconomic
backdrop as our portfolios continue to perform well and demonstrate
their trading resilience. To support the going concern assessment
the Directors considered:
-- an analysis of the Group's liquidity, solvency and regulatory
capital position. The Group manages and monitors liquidity
regularly, ensuring it is adequate and sufficient and is
underpinned by its monitoring of investments, realisations,
operating expenses and receipt of portfolio cash income. At 30
September 2022, the Group has liquidity of GBP801 million (31 March
2022: GBP729 million). Liquidity comprised of cash and deposits of
GBP55 million (31 March 2022: GBP229 million) and an undrawn
facility of GBP746 million (31 March 2022: GBP500 million), which
has no financial covenants. In July 2022, we increased our
available liquidity by introducing an additional two-year GBP400
million tranche to the existing base GBP500 million RCF which
matures in March 2027, to further support the Group's long-term
liquidity. In October 2022, we received proceeds of GBP476 million
from the realisation of Havea and utilised some of these proceeds
to repay the Group's GBP154 million draw of the RCF. Within the
next 12 months, the Group's GBP200 million fixed rate bond is due
for repayment and the Group is expected to have adequate liquidity
to meet the liability as it falls due; and
-- the stress test scenarios on the Group's portfolio. The
Directors have modelled a number of severe, yet plausible
individual and combined stress test scenarios based on the position
of the Group as at 30 September 2022. The scenarios include the
consideration of the potential impact of a recession induced by
persistent inflation and supply chain disruption, as well as the
impact of a significant downturn event relating specifically to the
Group's largest asset. These scenarios include a range of estimated
impacts, primarily based on providing additional support to
portfolio companies. The scenarios are most sensitive to a delay in
realisations which contribute to liquidity of the Group. A key
judgement applied is the extent of recessionary impacts alongside
the likely recovery profile of portfolio companies. The severe
scenarios include assumptions modelling a combined scenario of a
recessionary environment modelled alongside the impact of a
significant downturn event on the Group's largest asset.
The results of each of the stress test scenarios indicate that
the Group is able to meet its obligations as they fall due for a
period of at least 12 months from the date of approval of these
financial statements by, in certain cases, making use of
controllable management actions. In all these scenarios, the
Directors expect the Group to be able to recover without a
permanent long-term impact on its solvency or capital requirements.
Mitigating actions within management control include, for example,
drawing on the existing RCF or temporarily reducing new investment
levels.
Having performed the assessment on going concern, the Directors
considered it appropriate to prepare the condensed consolidated
financial statements of the Group on a going concern basis and have
concluded that the Group has sufficient financial resources, is
well placed to manage business risks in the current economic
environment and can continue operations for a period of at least 12
months from the date of issue of these financial statements.
1 Segmental analysis
The tables below are presented on the Investment basis which is
the basis used by the chief operating decision maker, the Chief
Executive, to monitor the performance of the Group. A description
of the Investment basis and a reconciliation of the Investment
basis to the IFRS financial statements is provided on pages 20 to
24. Further detail on the Group's segmental analysis can be found
on pages 159 to 161 of the Annual report and accounts 2022. The
remaining Notes are prepared on an IFRS basis.
Investment basis
Private Of which is
Equity Action Infrastructure Scandlines Total(4)
Six months to 30 September 2022 GBPm GBPm GBPm GBPm GBPm
=================================================== ======== ============ =============== =========== =========
Realised losses over value on the disposal
of investments (4) - - - (4)
Unrealised profits/(losses) on the revaluation
of investments 1,244 1,156 (47) - 1,197
Portfolio income
Dividends - - 16 12 28
Interest income from investment portfolio 39 - 8 - 47
Fees receivable 6 - - - 6
Foreign exchange on investments 685 291 58 21 764
Movement in the fair value of derivatives - - - (22) (22)
=================================================== ======== ============ =============== =========== =========
Gross investment return 1,970 1,447 35 11 2,016
=================================================== ======== ============ =============== =========== =========
Fees receivable from external funds 3 - 30 - 33
Operating expenses (43) - (23) (1) (67)
Interest received 1
Interest paid (27)
Exchange movements (31)
Other income 1
Operating profit before carried interest 1,926
=================================================== ======== ============ =============== =========== =========
Carried interest
Carried interest and performance fees receivable 2 - - - 2
Carried interest and performance fees payable (157) - (5) - (162)
================================================== ======== ============ =============== =========== =========
Operating profit before tax 1,766
=================================================== ======== ============ =============== =========== =========
Tax charge (1)
=================================================== ======== ============ =============== =========== =========
Profit for the period 1,765
--------------------------------------------------- -------- ------------ --------------- ----------- ---------
Other comprehensive income
Re-measurements of defined benefit plans -
================================================== ======== ============ =============== =========== =========
Total return 1,765
=================================================== ======== ============ =============== =========== =========
Realisations(1) 193 - - - 193
Cash investment(2) (292) - (6) - (298)
=================================================== ======== ============ =============== =========== =========
Net divestment (99) - (6) - (105)
=================================================== ======== ============ =============== =========== =========
Balance sheet
Opening portfolio value at 1 April 2022 12,420 7,165 1,352 533 14,305
Investment(3) 326 - 6 - 332
Value disposed (197) - - - (197)
Unrealised value movement 1,244 1,156 (47) - 1,197
Other movement (including foreign exchange) 690 291 69 21 780
=================================================== ======== ============ =============== =========== =========
Closing portfolio value at 30 September 2022 14,483 8,612 1,380 554 16,417
=================================================== ======== ============ =============== =========== =========
1 Realised proceeds may differ from cash proceeds due to timing of receipts.
During the period Private Equity received GBP2 million of cash proceeds
which were recognised as realised proceeds in FY2022 and Infrastructure
received GBP33 million of cash proceeds which were recognised as realised
proceeds in FY2022.
2 Cash investment per the segmental analysis is different to cash investment
per the cash flow due to a GBP57 million syndication in Infrastructure
which was recognised in FY2022.
3 Includes capitalised interest and other non-cash investment.
4 The total is the sum of Private Equity, Infrastructure and Scandlines.
"Of which is Action" is part of Private Equity.
Interest received, interest paid, exchange movements, other
income, tax charge and re-measurements of defined benefit plans are
not managed by segment by the chief operating decision maker and
therefore have not been allocated to specific segment.
Investment basis
Private Of which is
Equity Action Infrastructure Scandlines Total (3)
Six months to 30 September 2021 GBPm GBPm GBPm GBPm GBPm
================================================== ======== ============ =============== =========== ==========
Realised profits over value on the disposal
of investments 12 - 3 - 15
Unrealised profits on the revaluation
of investments 2,219 1,491 30 30 2,279
Portfolio income
Dividends 10 - 15 - 25
Interest income from investment portfolio 33 - 5 - 38
Fees receivable 2 - - - 2
Foreign exchange on investments 97 43 7 4 108
Movement in the fair value of derivatives - - - (4) (4)
================================================== ======== ============ =============== =========== ==========
Gross investment return 2,373 1,534 60 30 2,463
================================================== ======== ============ =============== =========== ==========
Fees receivable from external funds 2 - 23 - 25
Operating expenses (35) - (20) (1) (56)
Interest received -
Interest paid (27)
Exchange movements (6)
Operating profit before carried interest 2,399
================================================== ======== ============ =============== =========== ==========
Carried interest
Carried interest and performance fees receivable 2 - - - 2
Carried interest and performance fees payable (194) - (6) - (200)
================================================= ======== ============ =============== =========== ==========
Operating profit before tax 2,201
================================================== ======== ============ =============== =========== ==========
Tax charge (2)
Profit for the period 2,199
-------------------------------------------------- -------- ------------ --------------- ----------- ----------
Other comprehensive income
Re-measurements of defined benefit plans -
================================================= ======== ============ =============== =========== ==========
Total return 2,199
================================================== ======== ============ =============== =========== ==========
Realisations(1) 118 - 6 - 124
Cash investment (58) - (1) - (59)
================================================== ======== ============ =============== =========== ==========
Net investment 60 - 5 - 65
================================================== ======== ============ =============== =========== ==========
Balance sheet
Opening portfolio value at 1 April 2021 8,814 4,566 1,159 435 10,408
Investment(2) 97 - 1 - 98
Value disposed (106) - (3) - (109)
Unrealised value movement 2,219 1,491 30 30 2,279
Other movement (including foreign exchange) 91 43 13 4 108
================================================== ======== ============ =============== =========== ==========
Closing portfolio value at 30 September 2021 11,115 6,100 1,200 469 12,784
================================================== ======== ============ =============== =========== ==========
1 Realised proceeds may differ from cash proceeds due to timing of receipts.
During the period Private Equity received GBP3 million of cash proceeds
which were recognised as realised proceeds in FY2021. During the period
Infrastructure recognised GBP4 million of realised proceeds which
are to be received in the second half of FY2022.
2 Includes capitalised interest and other non-cash investment.
3 The total is the sum of Private Equity, Infrastructure and Scandlines.
"Of which is Action" is part of Private Equity.
Interest received, interest paid, exchange movements, tax charge
and re-measurements of defined benefit plans are not managed by
segment by the chief operating decision maker and therefore have
not been allocated to specific segment.
2 Realised profits over value on the disposal of investments
Six months to 30 September 2022 Unquoted
investments Total
GBPm GBPm
====================================== ============ ======
Realisations 1 1
Valuation of disposed investments (3) (3)
====================================== ============ ======
(2) (2)
====================================== ============ ======
Of which:
- profit recognised on realisations 1 1
- losses recognised on realisations (3) (3)
===================================== ============ ======
(2) (2)
===================================== ============ ======
Six months to 30 September 2021 Unquoted
investments Total
GBPm GBPm
====================================== ============ ======
Realisations 58 58
Valuation of disposed investments (47) (47)
====================================== ============ ======
11 11
====================================== ============ ======
Of which:
- profit recognised on realisations 11 11
- losses recognised on realisations - -
===================================== ============ ======
11 11
===================================== ============ ======
3 Unrealised profits on the revaluation of investments
Six months to 30 September 2022 Unquoted Quoted
investments investments Total
GBPm GBPm GBPm
============================================ ============ ============ ======
Movement in the fair value of investments 657 (117) 540
============================================ ============ ============ ======
Of which:
- unrealised gains 780 - 780
- unrealised losses (123) (117) (240)
=========================================== ============ ============ ======
657 (117) 540
=========================================== ============ ============ ======
Six months to 30 September 2021 Unquoted Quoted
investments investments Total
GBPm GBPm GBPm
============================================ ============ ============ ======
Movement in the fair value of investments 1,054 20 1,074
============================================ ============ ============ ======
Of which:
- unrealised gains 1,065 20 1,085
- unrealised losses (11) - (11)
=========================================== ============ ============ ======
1,054 20 1,074
=========================================== ============ ============ ======
4 Revenue
Items from the Consolidated statement of comprehensive income
which fall within the scope of IFRS 15 are included in the table
below:
Private
Equity Infrastructure Total
Six months to 30 September 2022 GBPm GBPm GBPm
===================================================== ======== =============== ======
Total revenue by geography (1)
UK 4 27 31
Northern Europe 5 2 7
North America 2 1 3
Other - - -
Total 11 30 41
===================================================== ======== =============== ======
Revenue by type
Fees receivable(2) from portfolio 6 - 6
Fees receivable from external funds 3 30 33
Carried interest and performance fees receivable(2) 2 - 2
Total 11 30 41
===================================================== ======== =============== ======
Private
Equity Infrastructure Total
Six months to 30 September 2021 GBPm GBPm GBPm
===================================================== ======== =============== ======
Total revenue by geography(1)
UK 2 21 23
Northern Europe 2 1 3
North America 3 1 4
Other - - -
Total 7 23 30
===================================================== ======== =============== ======
Revenue by type
Fees receivable(2) from portfolio 3 - 3
Fees receivable from external funds 2 23 25
Carried interest and performance fees receivable(2) 2 - 2
Total 7 23 30
===================================================== ======== =============== ======
1 For fees receivable from external funds and carried interest and performance fees receivable
the geography is based on the domicile of
the fund.
2 Fees receivable and carried interest receivable above are different to the Investment basis
figures included in Note 1. This is due to the fact that Note 1 is disclosed on the Investment
basis and the table above is shown on the IFRS basis. For an explanation of the Investment
basis and a reconciliation between Investment basis and IFRS basis see pages 20 to 24.
5 Per share information
The calculation of basic net assets per share is based on the
net assets and the number of shares in issue at the period end.
When calculating the diluted net assets per share, the number of
shares in issue is adjusted for the effect of all dilutive share
awards.
30 September 31 March
2022 2022
========================================================== ============= =========
Net assets per share (GBP)
Basic 14.79 13.24
Diluted 14.77 13.21
Net assets (GBPm)
Net assets attributable to equity holders of the Company 14,240 12,754
========================================================== ============= =========
30 September 31 March
2022 2022
============================================== ============= ============
Number of shares in issue
Ordinary shares 973,282,405 973,238,638
Own shares (10,497,272) (10,212,745)
==============================================
962,785,133 963,025,893
==============================================
Effect of dilutive potential ordinary shares
Share awards 1,607,098 2,705,623
==============================================
Diluted shares 964,392,231 965,731,516
The calculation of basic earnings per share is based on the
profit attributable to shareholders and the weighted average number
of shares in issue. The weighted average shares in issue for the
period to 30 September 2022 are 962,660,451 (30 September 2021:
966,063,483). When calculating the diluted earnings per share, the
weighted average number of shares in issue is adjusted for the
effect of all dilutive share awards. The diluted weighted average
shares in issue for the period to 30 September 2022 are 964,057,452
(30 September 2021: 968,079,404).
6 months 6 months
to 30 September to 30 September
2022 2021
Earnings per share (pence)
Basic 182.7 227.4
Diluted 182.5 226.9
Earnings (GBPm)
Profit for the period attributable to equity holders of the Company 1,759 2,197
6 Dividends
6 months to 6 months to 6 months to 6 months to
30 September 30 September 30 September 30 September
2022 2022 2021 2021
pence pence
per share GBPm per share GBPm
Declared and paid during the period
Second dividend 27.25 262 21.0 203
27.25 262 21.0 203
Proposed first dividend 23.25 224 19.25 186
The dividend can be paid out of either the capital reserve or
the revenue reserve subject to the investment trust rules.
The distributable reserves of the parent company as at 31 March
2022 were GBP3,968 million (31 March 2021: GBP3,811 million) and
the Board reviews the distributable reserves bi-annually, including
consideration of any material changes since the most recent audited
accounts, ahead of proposing any dividend. The Board also reviews
the proposed dividends in the context of the requirements of being
an approved investment trust. Shareholders are given the
opportunity to approve the total dividend for the year at the
Company's Annual General Meeting. Details of the Group's continuing
viability and going concern can be found in the Risk management
section on pages 58 to 71 of the Annual report and accounts
2022.
7 Investment portfolio
This section should be read in conjunction with Note 11 on page
167 of the Annual report and accounts 2022, which provides more
detail about initial recognition and subsequent measurement of
investments at fair value.
6 months to Year to
30 September 2022 31 March 2022
Non-current GBPm GBPm
Opening book value 6,642 5,010
Additions 94 138
- of which loan notes with nil value - (4)
Disposals, repayments and write-offs (3) (282)
Fair value movement(1) 540 1,781
Other movements and net cash movements(2) 278 (1)
Closing book value 7,551 6,642
Quoted investments 817 934
Unquoted investments 6,734 5,708
Closing book value 7,551 6,642
1 All fair value movements relate to assets held at the end of the period
and are recognised in unrealised profits on the revaluation of investments.
2 Other movements includes the impact of foreign exchange and accrued
interest.
3i's investment portfolio is made up of longer-term investments,
with average holding periods greater than one year, and thus is
classified as non-current.
The table below reconciles between purchase of investments in
the cash flow statement and additions as disclosed in the table
above.
6 months to Year to
30 September 2022 31 March 2022
GBPm GBPm
Purchase of investments 32 324
Transfer of portfolio investments to investment entity subsidiaries - (157)
Syndication(1) 57 (53)
Investment 89 114
Capitalised interest received by way of loan notes 5 24
Additions 94 138
1 In the year to 31 March 2022 we recorded a GBP53 million syndication
in Infrastructure which is treated as negative investment against
our additions and recognised as a receivable as at 31 March 2022.
In the period to 30 September 2022, we received the GBP57 million
cash syndication.
Included within profit or loss is GBP15 million (30 September
2021: GBP13 million) of interest income. Interest income included
GBP2 million (30 September 2021: GBP3 million) of accrued income
capitalised during the period and GBP13 million (30 September 2021:
GBP10 million) of accrued income remaining uncapitalised at the
period end.
Quoted investments are classified as Level 1 in the fair value
hierarchy and unquoted investments are classified as Level 3 in the
fair value hierarchy; see Note 9 for details.
8 Investments in investment entity subsidiaries
This section should be read in conjunction with Note 12 on page
168 of the Annual report and accounts 2022, which provides more
detail about accounting policies adopted, entities which are
typically investment in investment entities and the determination
of fair value.
Level 3 fair value reconciliation - investments in investment
entity subsidiaries
6 months to Year to
30 September 2022 31 March 2022
Non-current GBPm GBPm
Opening fair value 6,791 4,905
Amounts paid to investment entity subsidiaries 233 349
Amounts received from investment entity subsidiaries (220) (685)
Fair value movement on investment entity subsidiaries 962 1,974
Transfer of portfolio investments to investment entity subsidiaries - 205
Transfer of assets to investment entity subsidiaries 51 43
Closing fair value 7,817 6,791
Transfer of portfolio investments from investment entity
subsidiaries includes the transfer of investment portfolio between
investment entity subsidiaries and the Company at fair value. The
consideration for these transfers can either be cash or intra-group
receivables.
Restrictions
3i Group plc, the ultimate parent company, receives dividend
income from its subsidiaries. There are no restrictions on the
ability to transfer funds from these subsidiaries to the Group at
30 September 2022.
Support
3i Group plc continues to provide, where necessary, ongoing
support to its investment entity subsidiaries for the purchase of
portfolio investments.
9 Fair values of assets and liabilities
This section should be read in conjunction with Note 13 on pages
169 to 171 of the Annual report and accounts 2022, which provides
more detail about accounting policies adopted, the definitions of
the three levels of fair value hierarchy, valuation methods used in
calculating fair value and the valuation framework which governs
oversight of valuations. There have been no changes in the
accounting policies adopted or the valuation methodologies
used.
Valuation
The Group classifies financial instruments measured at fair
value according to the following hierarchy:
Level Fair value input description Financial instruments
Level 1 Quoted prices (unadjusted) from active markets Quoted equity instruments
Level 2 Inputs other than quoted prices included in Level 1 that are observable Derivative financial instruments
either directly (ie
as prices) or indirectly (ie derived from prices)
Level 3 Inputs that are not based on observable market data Unquoted investments
The table below shows the classification of financial
instruments held at fair value into the valuation hierarchy at 30
September 2022:
30 September 2022 31 March 2022
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Quoted investments 817 - - 817 934 - - 934
Unquoted investments - - 6,734 6,734 - - 5,708 5,708
Investments in
investment entity
subsidiaries - - 7,817 7,817 - - 6,791 6,791
Other financial
assets - 5 36 41 - 17 37 54
Liabilities
Other financial
liabilities - (13) - (13) - - - -
Total 817 (8) 14,587 15,396 934 17 12,536 13,487
We determine that in the ordinary course of business, the net
asset value of an investment entity subsidiary is considered to be
the most appropriate to determine fair value. The underlying
portfolio is valued under the same methodology as directly held
investments, with any other assets or liabilities within investment
entity subsidiaries fair valued in accordance with the Group's
accounting policies. Note 8 details the Directors' considerations
about the fair value of the investment entity subsidiaries.
The fair values of the Group's financial assets and liabilities
not held at fair value, are not materially different from their
carrying values, with the exception of loans and borrowings. The
fair value of loans and borrowings is GBP970 million (31 March
2022: GBP1,069 million), determined with reference to their
published market prices. The carrying value of the loans and
borrowings is GBP1,129 million (31 March 2022: GBP975 million) and
accrued interest payable (included within trade and other payables)
is GBP20 million (31 March 2022: GBP13 million).
Level 3 fair value reconciliation - unquoted investments
Six months to Year to
30 September 31 March
2022 2022
GBPm GBPm
Opening fair value 5,708 4,213
Additions 94 138
- of which loan notes with nil value - (4)
Disposals, repayments and write-offs (3) (282)
Fair value movement(1) 657 1,644
Other movements and net cash movements(2) 278 (1)
Closing fair value 6,734 5,708
1 All fair value movements relate to assets held at the end of the period
and are recognised in unrealised profits on the revaluation of investments.
2 Other movements includes the impact of foreign exchange and accrued
interest.
Unquoted investments valued using Level 3 inputs also had the
following impact on profit or loss: realised losses over value on
disposal of investment of GBP2 million (30 September 2021: GBP11
million gain), dividend income of GBP2 million (30 September 2021:
GBP9 million) and foreign exchange gains of GBP262 million (30
September 2021: GBP42 million).
Assets move between Level 1 and Level 3 when an unquoted equity
investment lists on a quoted market exchange. There were no
transfers in or out of Level 3 during the period. In the six months
to 30 September 2022, eight assets changed valuation basis within
level 3. Two assets moved from other basis to an earnings-based
valuation, one asset moved from a DCF to an earnings-based
valuation, four assets were acquired in the period valued on an
Other basis, in line with their fair value, and one asset moved
from an earnings-based valuation to an imminent sale basis. Action
remains unchanged on an earnings-based valuation. The changes in
valuation methodology in the period reflect our view of the most
appropriate method to determine the fair value of the eight assets
at 30 September 2022. Further information can be found in the
Private Equity and Infrastructure sections of the Business and
Financial review starting on page 7.
The following table summarises the various valuation
methodologies used by the Group to fair value Level 3 instruments,
the inputs and the sensitivities applied and the impact of those
sensitivities to the unobservable inputs. The significant majority
of our portfolio has demonstrated its trading resilience against a
challenging macroeconomic backdrop. We continue our approach of
taking a long-term through the cycle view on the multiples used to
value our portfolio companies. The recent market volatility and the
derating of quoted comparable company multiples across the majority
of our portfolio, especially those with discretionary spend
exposure has been an important consideration in our fair value at
30 September 2022. We have maintained a 5% sensitivity which is
appropriate given the good performance of our companies. For the
small number of companies in our portfolio that have been
disproportionately impacted by the current challenging
macroeconomic environment, our fair value at the 30 September 2022
reflects the impact this has had on performance and multiple. All
numbers in the table below are on an investment basis.
Level 3 unquoted investments
Methodology Description Inputs Fair value at 30 September Sensitivity on key unobservable input Fair value impact of
2022 (GBPm) sensitivities (GBPm)
+5%/-5%
Earnings (Private Equity) Most commonly used Private Equity valuation methodology Earnings multiples are applied to the earnings of the company to determine the enterprise 13,409 For the assets valued on an earnings basis, we have applied a 5% sens 781
value itivity to the earnings
multiple
Earnings multiples (31 March 2022: 11,586) (31 March 2022: 695)
When selecting earnings multiple, we consider:
1. Comparable listed companies' current performance and through the cycle averages
Used for investments which are typically profitable and for which we can determine a set 2. Relevant market transaction multiples
of listed companies and precedent transactions, where relevant, with similar characterist
ics
3. Exit expectations and other company specific factors (791)
For point 1 and 2 of the above we select companies in the same industry and, where possi (31 March 2022: (697)
ble,
with a similar business model and profile in terms of size, products, services and custo
mers,
growth rates and geographic focus
The pre-discount multiple ranges from 6.8x - 20.0x (31 March 2022: 8.0x - 20.0x)
Action is our largest asset, and we have included a 5% sensitivity
on Action's earnings multiple
of 19.5x (equivalent to 18.5x net)
486
(31 March 2022: 417)
(486)
(31 March 2022: (417))
Other inputs:
Earnings
Reported earnings are adjusted for non-recurring items, such as restructuring expenses,
for
significant corporate actions and, in exceptional cases, run-rate adjustments to arrive
at
maintainable earnings
The most common measure is earnings before interest, tax, depreciation and amortisation
("EBITDA")
Earnings are usually obtained from portfolio company management accounts to the preceding
quarter end, with reference also to forecast earnings and the maintainable view of
earnings
Action, our largest asset, we value using run-rate earnings
Discounted cash flow (Private Equity/ Infrastructure/ Scandlines) Appropriate for businesses with long-term stable cash flows, typically in Infrastructure o Long-term cash flows are discounted at a rate which is benchmarked against market data, w 1,146 For the assets valued on a DCF basis, we have applied a 5% sensitivity (43)
r here to the discount rate
alternatively businesses where DCF is more appropriate in the short term possible, or adjusted from the rate at the initial investment based on changes in the ris
k
profile of the investment
The range of discount rates used in our DCF valuations is 10% to 15%. (31 March 2022: 1,023) (31 March 2022: (41))
46
(31 March 2022: 37)
Imminent sale (Private Equity) Used for assets where a sale has been agreed Based on expected proceeds net of fees 478 n/a n/a
(31 March 2022: nil)
NAV (Private Equity/Infrastructure) Used for investments in unlisted funds Net asset value reported by the fund manager. The valuation of the underlying portfolio i 95 A 5% increase on closing NAV 5
s
consistent with IFRS
(31 March 2022: 77) (31 March 2022: 4)
Other (Private Equity/Infrastructure) Used where elements of a business are valued on different bases Values of separate elements prepared on one of the methodologies listed above 369 A 5% increase in the closing value 18
(31 March 2022: 556) (31 March 2022: 28)
10 Related parties
All related party transactions that took place in the six months
ending 30 September 2022 are consistent in nature with the
disclosures in Note 29 on pages 186 to 188 of the Annual report and
accounts 2022. Related party transactions which took place in the
period and materially affected performance or the financial
position of the Group, together with any material changes in
related party transactions as described in the Annual report and
accounts 2022 that could materially affect the performance or the
financial position of the Group are detailed below.
Investments
The Group makes investments in the equity of unquoted and quoted
investments where it does not have control, but may be able to
participate in the financial and operating policies of that
company. IFRS presumes that it is possible to exert significant
influence when the equity holding is greater than 20%. The Group
has taken the investment entity exception as permitted by IFRS 10
and has not equity accounted for these investments, in accordance
with IAS 28, but they are related parties. The total amounts
included for investments where the Group has significant influence,
but not control, are as follows:
Consolidated statement of comprehensive income Six months to Six months to
30 September 30 September
2022 2021
GBPm GBPm
Realised profits over value on the disposal of investments - 1
Unrealised profits on the revaluation of investments 60 87
Portfolio income - 6
Consolidated statement of financial position 30 September 31 March
2022 2022
GBPm GBPm
Unquoted investments 745 674
Management arrangements
The Group acted as Investment Manager to 3i Infrastructure plc
("3iN"), which is listed on the London Stock Exchange, for the
period to 30 September 2022. The following amounts have been
recognised in respect of the management relationship:
Consolidated statement of comprehensive income Six months to Six months to
30 September 30 September
2022 2021
GBPm GBPm
Unrealised (losses)/profits on the revaluation of investments (117) 20
Dividends 14 13
Fees receivable from external funds 23 16
Consolidated statement of financial position 30 September 31 March
2022 2022
GBPm GBPm
Quoted equity investments 817 934
Performance fees receivable - 26
Statement of Directors' responsibilities
The Directors, who are required to prepare the financial
statements on a going concern basis unless it is not appropriate,
are satisfied that the Group has the resources to continue in
business for the foreseeable future. In making this assessment, the
Directors have considered information relating to present and
future conditions, including future projections of profitability
and cash flows .
The Directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted
for use in the UK; and
b) the Half-year report includes a fair review of the
information required by:
i) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year ending 31 March 2023
and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
ii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being (i) related party transactions that have taken place in
the first six months of the financial year ending 31 March 2023
which have materially affected the financial position or performance
of 3i Group during that period; and (ii) any changes in the related
party transactions described in the Annual report and accounts
2022 that could materially affect the financial position or performance
of 3i Group during the first six months of the financial year
ending 31 March 2023.
The Directors of 3i Group plc and their functions are listed
below.
The report is authorised for issue by order of the Board.
K J Dunn , Secretary
9 November 2022
List of Directors and their functions
The Directors of the Company and their functions are listed
below:
David Hutchinson, Chairman and Chairman of the Nominations
Committee
Simon Borrows, Chief Executive and Executive Director
James Hatchley, Group Finance Director and Executive
Director
Jasi Halai, Chief Operating Officer and Executive Director
Caroline Banszky, non-executive Director and Chairman of the
Audit and Compliance Committee
Stephen Daintith, non-executive Director
Lesley Knox, non-executive Director
Coline McConville, non-executive Director and Chairman of the
Remuneration Committee
Peter McKellar, non-executive Director and Chairman of the
Valuations Committee
Alexandra Schaapveld, non-executive Director
Independent review report to 3i Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2022, which comprises: the Condensed
consolidated statement of comprehensive income, the Condensed
consolidated statement of financial position, the Condensed
consolidated statement of changes in equity, the Condensed
consolidated cash flow statement and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2022 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Company to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in 'Basis of preparation and accounting policies',
the annual financial statements of the group are prepared in
accordance with UK adopted international accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Jonathan Mills
For and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
9 November 2022
Portfolio and other information
20 large investments
The 20 investments listed below account for 93 % of the
portfolio value at 30 September 2022 (31 March 2022: 93%).
Residual Residual
Business line cost(1) cost(1) Valuation Valuation
Geography September March September March Relevant
Investment First invested in 2022 2022 2022 2022 transactions
Description of business Valuation basis GBPm GBPm GBPm GBPm in the period
Action* Private Equity 623 623 8,612 7,165
General merchandise Netherlands
discount retailer 2011/2020
Earnings
3i Infrastructure plc* Infrastructure 305 305 817 934 GBP14 million cash
Quoted investment UK dividend
company, investing 2007 received
in infrastructure Quoted
Cirtec Medical* Private Equity 172 172 613 513
Outsourced medical US
device manufacturing 2017
Earnings
Scandlines Scandlines 530 530 554 533 GBP12 million cash
Ferry operator between Denmark/Germany dividend received
Denmark and Germany 2018
DCF
Havea* Private Equity 201 196 478 304 Sale agreed in June 2022.
Manufacturer of natural France Proceeds of GBP476
million
healthcare and cosmetics 2017 received in October
products Imminent sale 2022
Tato Private Equity 2 2 437 407
Manufacturer and seller of UK
specialty chemicals 1989
Earnings
SaniSure* Private Equity 76 76 422 277
Manufacturer, distributor US
and
integrator of single-use 2019
bioprocessing systems and Earnings
components
nexeye* Private Equity 269 269 401 345
Value-for-money optical Netherlands
retailer 2017
Earnings
Luqom* Private Equity 239 196 341 448 Acquisition of
Online lighting specialist Germany Brumberg for
retailer 2017 GBP34 million in
Earnings June 2022
Royal Sanders* Private Equity 136 136 322 297
Private label and contract Netherlands
manufacturing producer of 2018
personal care products Earnings
Evernex* Private Equity 292 285 314 291 Acquisition of
Provider of third-party France XS International
maintenance services for 2019 and Integra in
data centre infrastructure Earnings September 2022
Smarte Carte* Infrastructure 197 187 304 207
Provider of self-serve US
vended luggage carts, 2017
electronic lockers and DCF
concession carts
AES Engineering Private Equity 30 30 298 269
Manufacturer of mechanical UK
seals and support systems 1996
Earnings
Q Holding* Private Equity 162 162 272 398 Sale of QSR
Manufacturer of precision US division in May
engineered elastomeric 2014 2022 for
components Earnings GBP190 million
WP* Private Equity 248 239 251 234
Global manufacturer of Netherlands
innovative plastic 2015
packaging
systems Earnings
WilsonHCG* Private Equity 77 77 183 115
Global provider of US
recruitment process 2021
outsourcing and other Earnings
talent
solutions
BoConcept* Private Equity 105 99 177 184
Urban living designer Denmark
2016
Earnings
MPM* Private Equity 145 139 175 162
An international branded, UK
premium and natural 2020
pet food company Earnings
Dynatect* Private Equity 65 65 141 102
Manufacturer of US
engineered,
mission critical 2014
components
that protect equipment Earnings
Audley Travel* Private Equity 243 243 121 117
Provider of experiential UK
tailor-made travel 2015
DCF
4,117 4,031 15,233 13,302
* Controlled in accordance with IFRS.
1 Residual cost includes cash investment and interest net of
cost disposed.
Glossary
2013-2016 vintage includes Aspen Pumps, Audley Travel,
Basic-Fit, Dynatect, Kinolt, ATESTEO, JMJ, Q Holding, WP,
Scandlines further (completed in December 2013), Christ, Geka,
Óticas Carol and Blue Interactive.
2016-2019 vintage includes BoConcept, Cirtec Medical, Formel D,
nexeye, arrivia, Luqom, Magnitude Software, Havea, Royal Sanders
and Schlemmer.
2019-2022 vintage includes Evernex, SaniSure, YDEON, MPM,
WilsonHCG, Dutch Bakery, ten23 health, insightsoftware, MAIT, Mepal
and Yanga.
2022-2025 vintage xSuite, Konges Sl øjd, VakantieDiscounter and
Digital Barriers.
Approved Investment Trust Company This is a particular UK tax
status maintained by 3i Group plc, the parent company of 3i Group.
An approved Investment Trust company is a UK company which meets
certain conditions set out in the UK tax rules which include a
requirement for the company to undertake portfolio investment
activity that aims to spread investment risk and for the company's
shares to be listed on an approved exchange. The "approved" status
for an investment trust must be agreed by the UK tax authorities
and its benefit is that certain profits of the company, principally
its capital profits, are not taxable in the UK.
Assets under management ("AUM") A measure of the total assets
that 3i has to invest or manages on behalf of shareholders and
third-party investors for which it receives a fee. AUM is measured
at fair value. In the absence of a third-party fund in Private
Equity, it is not a measure of fee generating capability.
Board The board of Directors of the Company.
Buyouts 2010-2012 vintage includes Action, Amor, Element,
Etanco, Hilite, OneMed and Trescal.
Capital redemption reserve is established in respect of the
redemption of the Company's ordinary shares.
Capital reserve recognises all profits that are capital in
nature or have been allocated to capital. Following changes to the
Companies Act, the Company amended its Articles of Association at
the 2012 Annual General Meeting to allow these profits to be
distributable by way of a dividend.
Carried interest payable is accrued on the realised and
unrealised profits generated taking relevant performance hurdles
into consideration, assuming all investments were realised at the
prevailing book value. Carried interest is only actually paid when
the relevant performance hurdles are met and the accrual is
discounted to reflect expected payment periods.
Carried interest receivable The Group earns a share of profits
from funds which it manages on behalf of third parties. These
profits are earned when the funds meet certain performance
conditions and are paid by the fund once these conditions have been
met on a cash basis. The carried interest receivable may be subject
to clawback provisions if the performance of the fund deteriorates
following carried interest being paid.
Company 3i Group plc.
Discounting The reduction in present value at a given date of a
future cash transaction at an assumed rate, using a discount factor
reflecting the time value of money.
EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation and is used as the typical measure of
portfolio company performance.
EBITDA multiple Calculated as the enterprise value over EBITDA,
it is used to determine the value of a company.
Fair value movements on investment entity subsidiaries is the
movement in the carrying value of Group subsidiaries, classified as
investment entities under IFRS 10, between the start and end of the
accounting period converted into sterling using the exchange rates
at the date of the movement.
Fair value through profit or loss ("FVTPL") is an IFRS
measurement basis permitted for assets and liabilities which meet
certain criteria. Gains and losses on assets and liabilities
measured as FVTPL are recognised directly in the Statement of
comprehensive income.
Fee income (or Fees receivable) is earned for providing services
to 3i's portfolio companies and predominantly falls into one of two
categories. Negotiation and other transaction fees are earned for
providing transaction related services. Monitoring and other
ongoing service fees are earned for providing a range of services
over a period of time.
Fees receivable from external funds Fees receivable from
external funds are earned for providing management and advisory
services to a variety of fund partnerships and other entities. Fees
are typically calculated as a percentage of the cost or value of
the assets managed during the year and are paid quarterly, based on
the assets under management to date.
Foreign exchange on investments arises on investments made in
currencies that are different from the functional currency of the
Group entity. Investments are translated at the exchange rate
ruling at the date of the transaction. At each subsequent reporting
date investments are translated to sterling at the exchange rate
ruling at that date.
Gross investment return ("GIR") includes profit and loss on
realisations, increases and decreases in the value of the
investments we hold at the end of a period, any income received
from the investments such as interest, dividends and fee income,
movements in the fair value of derivatives and foreign exchange
movements. GIR is measured as a percentage of the opening portfolio
value.
Growth 2010-2012 vintage includes Element, Hilite, BVG, Go
Outdoors, Loxam, Touchtunes and WFCI.
Interest income from investment portfolio is recognised as it
accrues. When the fair value of an investment is assessed to be
below the principal value of a loan, the Group recognises a
provision against any interest accrued from the date of the
assessment going forward until the investment is assessed to have
recovered in value.
International Financial Reporting Standards ("IFRS") are
accounting standards issued by the International Accounting
Standards Board ("IASB"). The Group's consolidated financial
statements are required to be prepared in accordance with IFRS.
Investment basis Accounts prepared assuming that IFRS 10 had not
been introduced. Under this basis, we fair value portfolio
companies at the level we believe provides the most comprehensive
financial information.
IRR Internal Rate of Return.
Key Performance Indicator ("KPI") is a measure by reference to
which the development, performance or position of the Group can be
measured effectively.
Like-for-like compare financial results in one period with those
for the previous perio d.
Liquidity includes cash and cash equivalents (as per the
Investment basis Consolidated cash flow statement) and RCF.
Money multiple is calculated as the cumulative distributions
plus any residual value divided by paid-in capital.
Net asset value ("NAV") is a measure of the fair value of our
proprietary investments and the net costs of operating the
business.
Operating cash profit/loss is the difference between our cash
income (consisting of portfolio interest received, portfolio
dividends received, portfolio fees received and fees received from
external funds as per the Investment basis Consolidated cash flow
statement) and our operating expenses and lease payments (as per
the Investment basis Consolidated cash flow statement).
Operating profit includes gross investment return, management
fee income generated from managing external funds, the costs of
running our business, net interest payable, other losses and
carried interest.
Organic growth is the growth a company achieves by increasing
output and enhancing sales internally.
Performance fee receivable The Group earns a performance fee
from the investment management services it provides to 3i
Infrastructure plc ("3iN") when 3iN's total return for the year
exceeds a specified threshold. This fee is calculated on an annual
basis and paid in cash early in the next financial year.
Portfolio income is that which is directly related to the return
from individual investments. It is comprised of dividend income,
income from loans and receivables and fee income.
Proprietary Capital is shareholders' capital which is available
to invest to generate profits.
Realised profits or losses over value on the disposal of
investments is the difference between the fair value of the
consideration received, less any directly attributable costs, on
the sale of equity and the repayment of loans and receivables and
its carrying value at the start of the accounting period, converted
into sterling using the exchange rates at the date of disposal.
Revenue reserve recognises all profits that are revenue in
nature or have been allocated to revenue.
Revolving credit facility ("RCF") The Group has access to a
credit line which allows us to access funds when required to
improve our liquidity.
Segmental reporting Operating segments are reported in a manner
consistent with the internal reporting provided to the Chief
Executive who is considered to be the Group's chief operating
decision maker. All transactions between business segments are
conducted on an arm's length basis, with intrasegment revenue and
costs being eliminated on consolidation. Income and expenses
directly associated with each segment are included in determining
business segment performance.
Share-based payment reserve is a reserve to recognise those
amounts in retained earnings in respect of share-based
payments.
Syndication is the sale of part of our investment in a portfolio
company to a third party, usually within 12 months of our initial
investment and for the purposes of facilitating investment by a
co-investor or portfolio company management in line with our
original investment plan. A syndication is treated as a negative
investment rather than a realisation.
Total return comprises of operating profit less tax charge less
movement in actuarial valuation of the historic defined benefit
pension scheme.
Total shareholder return ("TSR") is the measure of the overall
return to shareholders and includes the movement in the share price
and any dividends paid, assuming that all dividends are reinvested
on their ex -- dividend date.
Translation reserve comprises all exchange differences arising
from the translation of the financial statements of international
operations.
Unrealised profits or losses on the revaluation of investments
is the movement in the carrying value of investments between the
start and end of the accounting period converted into sterling
using the exchange rates at the date of the movement.
Information for shareholders
Note
The first FY2023 dividend is expected to be paid on 11 January
2023 to holders of ordinary shares on the register on 2 December
2022. The ex-dividend date will be 1 December 2022.
3i Group plc
Registered office:
16 Palace Street,
London SW1E 5JD, UK
Registered in England No. 1142830
An investment company as defined by section 833 of the Companies
Act 2006.
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END
IR UKVRRUAUARUA
(END) Dow Jones Newswires
November 10, 2022 02:00 ET (07:00 GMT)
3i (LSE:III)
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