REG - 3i Group PLC - 3i Group Half-year results to 30 September 2017 <Origin Href="QuoteRef">III.L</Origin> - Part 4
16/11/2017 07:10
- Part 4: For the preceding part double click ID:nRSP6442Wc
£m £m
Unquoted investments 423 429
1 Comparatives for the six months ended 30 September 2016 have been re-presented to show the results from the retained Debt Management assets, previously shown as discontinued operations, as continuing operations. See Note 11.
From time to time, transactions occur between related parties within the investment portfolio that the Group influences to
facilitate the reorganisation or recapitalisation of an investee company. These transactions are made on an arm's length
basis.
Advisory arrangements
The Group acts as an adviser to 3i Infrastructure plc, which is listed on the London Stock Exchange. The following amounts
have been recognised in respect of this advisory relationship:
Consolidated statement of comprehensive income Six months to Six months to
30 September 30 September
2017 2016
£m £m
Unrealised profits on the revaluation of investments 11 48
Dividends 8 6
Fees receivable from external funds 11 9
Consolidated statement of financial position 30 September 31 March
2017 2017
£m £m
Quoted equity investments 397 390
Performance fees receivable - 4
11 Discontinued operations
On 3 March 2017, the Group completed the disposal of its Debt Management business to Investcorp and received cash proceeds
of £270 million. All assets associated with the Debt Management business were classified as held for sale in the Half-year
report 2016. Following the completion of the transaction on 3 March 2017, the Group determined that the investments not
sold to Investcorp would be retained beyond the 12 month period prescribed by IFRS 5. Accordingly, they were no longer
classified as held for sale and were included as continuing operations in the Annual report and accounts 2017.
Comparatives for the six months to 30 September 2016 have been re-presented to reflect the reclassification of the residual
Debt Management assets as continuing operations. The impact of this re-presentation on a line by line basis is presented
below. There was no profit or cash flow from discontinued operations in the six months to 30 September 2017.
Condensed consolidated statement of comprehensive income - Impact of re-presentation
Six months to 30 September 2016 As previously Effect of As
reported re-presentation re-presented
£m £m £m
Realised profits over value on the disposal of investments 7 - 7
Unrealised profits on the revaluation of investments 80 12 92
Fair value movements on investment entity subsidiaries 670 1 671
757 13 770
Portfolio income
Dividends 10 8 18
Interest income from investment portfolio 2 - 2
Fees receivable 4 - 4
Foreign exchange on investments 53 8 61
Gross investment return from continuing operations 826 29 855
Fees receivable from external funds 23 - 23
Operating expenses (53) - (53)
Interest received 1 - 1
Interest paid (25) - (25)
Exchange movements 35 - 35
Other income 8 - 8
Carried interest
Carried interest and performance fees receivable 205 - 205
Carried interest and performance fees payable (74) - (74)
Operating profit before tax from continuing operations 946 29 975
Income taxes (2) - (2)
Profit for the period from continuing operations 944 29 973
Profit for the period from discontinued operations 79 (29) 50
Profit for the period 1,023 - 1,023
Other comprehensive expense that may be reclassified to the income statement:
Exchange differences on translation of foreign operations (3) - (3)
Other comprehensive expense that will not be reclassified to the income statement:
Re-measurement of defined benefit plans (19) - (19)
Other comprehensive income for the period from continuing operations (22) - (22)
Other comprehensive income for the period from discontinued operations 5 - 5
Total comprehensive income for the period ("Total return") 1,006 - 1,006
Cash flows - Impact of re-presentation
Six months to 30 September 2016 As previously Effect of As
reported re-presentation re-presented
£m £m £m
Net cash flows from operating activities 43 (1) 42
Total net cash flows from discontinued operations 43 (1) 42
Independent review report to 3i Group plc
Introduction
We have been engaged by 3i Group plc (the 'Company' or the 'Group') to review the condensed consolidated financial
statements in the Half-year report for the six months ended 30 September 2017 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, Basis of preparation and accounting
policies and the related notes 1 to 11 (together the 'condensed consolidated financial statements'). We have read the other
information contained in the Half-year report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review
Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The Half-year report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the Half-year report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in the Basis of preparation and accounting policies, the annual financial statements of the Group are prepared
in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed consolidated
financial statements included in this Half-year report have been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the
Half-year report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. 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. 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial
statements in the Half-year report for the six months ended 30 September 2017 are not prepared, in all material respects,
in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London, United Kingdom
15 November 2017
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 by the EU;
b) the Half year report includes a fair review of the information required by:
i) DTR 4.2.7R of the Disclosure Rules and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year ending 31 March 2018 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 Rules and Transparency Rules, being (i) related party transactions that have taken place in the first six months of the financial year ending 31 March 2018 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 2017 that could materially affect the financial position or performance of 3i Group during the first six months of the
financial year ending 31 March 2018.
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
15 November 2017
List of Directors and their functions
The Directors of the Company and their functions are listed below:
Simon Thompson, Chairman and Chairman of the Nominations Committee
Simon Borrows, Chief Executive and Executive Director
Julia Wilson, Group Finance Director and Executive Director
Jonathan Asquith, non-executive Director, Deputy Chairman and Chairman of the Remuneration Committee
Caroline Banszky, non-executive Director and Chairman of the Audit and Compliance Committee
Stephen Daintith, non-executive Director
Peter Grosch, non-executive Director
David Hutchison, non-executive Director and Chairman of the Valuations Committee
Portfolio and other information
20 large investments
The 20 investments listed below account for 82% of the portfolio at 30 September 2017 (31 March 2017: 77%). This table
excludes one investment for commercial reasons.
Residual Residual
Business line cost1 cost1 Valuation Valuation
Geography March September March September
Investment First invested in 2017 2017 2017 2017 Relevant transactions
Description of business Valuation basis £m £m £m £m in the period
Action* Private Equity 1 1 1,708 2,009
Non-food discount retailer Benelux
2011
Earnings
3i Infrastructure plc* Infrastructure 399 396 655 670 Dividend of
Quoted investment UK £13 million received
company, investing 2007
in infrastructure Quoted
Q Holding* Private Equity 162 162 222 243
Manufacturer of engineered US
precision elastomeric 2014
components Earnings
Weener Plastic* Private Equity 161 168 200 218
Supplier of plastic packaging Germany
solutions 2015
Earnings
Basic-Fit Private Equity 11 11 184 218
Discount gym operator Benelux
2013
Quoted
Audley Travel* Private Equity 177 185 185 208
Provider of experiential UK
tailor made travel 2015Earnings
Hans Anders* Private Equity - 178 - 195 New investment in
Value for money Benelux the period
optical retailer 2017
Earnings
ATESTEO* Private Equity 39 40 160 182
International transmission Germany
testing specialist 2013
Earnings
Schlemmer* Private Equity 162 168 154 152
Provider of cable Germany
management solutions for 2016
the automotive industry Earnings
BoConcept* Private Equity 140 136 146 145 DKK 100 million
Urban living brand Denmark over-funding repaid
2016 in the period
Earnings
Formel D* Private Equity - 137 - 135 New investment in
Quality assurance provider Germany the period
for the automotive industry 2017
Earnings
AES Engineering Private Equity 30 30 113 134
Manufacturer of mechanical UK
seals and support systems 1996
Earnings
Ponroy Santé* Private Equity 123 126 122 133
Manufacturer of natural France
healthcare and cosmetics 2017
products Earnings
ACR Private Equity 105 105 135 130
Pan-Asian non-life Singapore
reinsurance 2006
Industry metric
Tato Private Equity 2 2 112 112
Manufacturer and seller of UK
speciality chemicals 1989
Earnings
Lampenwelt* Private Equity - 105 - 109 New investment in
Online lighting Germany the period
specialist retailer 2017
Earnings
Aspen Pumps* Private Equity 78 82 88 104
Manufacturer of pumps and UK
accessories for the air 2015
conditioning, heating and Earnings
refrigeration industry
Christ* Private Equity 101 102 98 100
Distributor and retailer of Germany
jewellery 2014
Earnings
Cirtec Medical* Private Equity - 103 - 99 New investment in
Outsourced medical device USA the period
manufacturing 2017
Earnings
Euro-Diesel* Private Equity 57 60 95 91
Manufacturer of Benelux
uninterruptible 2015
power supply systems Earnings
* Controlled in accordance with IFRS.
1 Residual cost includes capitalised interest.
Glossary
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.
Capital reserve recognises all profits that are capital in nature or have been allocated to capital. Following changes to
the Companies Act 2006, the Company amended its Articles of Association at its 2012 Annual General Meeting to allow these
profits to be distributable by way of a dividend.
Carried interest 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
or received when the relevant performance hurdles are met on a cash basis and the accrual is discounted to reflect expected
payment periods. Carried interest receivable is generated on third-party capital over the life of the relevant fund when
relevant performance criteria are met.
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 the performance of our portfolio companies.
EBITDAmultiple Calculated as the enterprise value over EBITDA and is used to determine the value of a company.
Fees receivable from external funds are fees received by the Group, from third parties, for the management of Private
Equity and Infrastructure funds.
Investment basis accounts are 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. The commentary in the
Interim report refers to this basis as we believe it provides a more understandable view of our performance.
Money multiple is calculated as the cumulative distributions plus any residual value divided by paid-in capital.
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
Cash flow statement) and our cash operating expenses (as per the Investment basis Cash flow statement).
ProprietaryCapital Shareholders' capital which is available to invest.
Revenue reserve recognises all profits that are revenue in nature or have been allocated to revenue.
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.
Information for shareholders
Note
The interim dividend is expected to be paid on 10 January 2018 to holders of ordinary shares on the register on 15 December
2017. The ex-dividend date will be 14 December 2017.
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.
This information is provided by RNS
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