REG - 3i Group PLC - Half Yearly Report <Origin Href="QuoteRef">III.L</Origin> - Part 5
13/11/2014 08:21
- Part 5: For the preceding part double click ID:nRSM9002Wd
- (6) (6)
Retirement benefit deficit (12) (13) (14)
Derivative financial instruments - (16) -
Deferred income taxes - (2) -
Provisions (1) (4) (4)
Total non-current liabilities (879) (909) (901)
Current liabilities
Trade and other payables (155) (156) (158)
Carried interest and performance fees payable (5) (5) (6)
Derivative financial instruments - (3) (4)
Current income taxes (2) (2) (2)
Deferred income taxes - (1) (1)
Provisions (7) (5) (8)
Total current liabilities (169) (172) (179)
Total liabilities (1,048) (1,081) (1,080)
Net assets 3,426 3,062 3,308
Equity
Issued capital 718 718 718
Share premium 783 781 782
Capital redemption reserve 43 43 43
Share-based payment reserve 24 16 19
Translation reserve 227 288 242
Capital reserve 1,157 844 1,051
Revenue reserve 554 464 542
Own shares (80) (92) (89)
Total equity 3,426 3,062 3,308
IFRS basis financial statements
Consolidated cash flow statement
for the six months to 30 September 2014
Six months to Six months to 12 months to
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
(restated)
£m £m £m
Cash flow from operating activities
Purchase of investments (82) (76) (114)
Proceeds from investments 107 351 452
Cash inflow from fair value subsidiaries 128 178 46
Portfolio interest received 8 5 6
Portfolio dividends received 14 7 25
Portfolio fees received 4 6 4
Fees received from external funds 24 24 52
Carried interest and performance fees received 2 1 1
Carried interest and performance fees paid (10) (10) (20)
Operating expenses (61) (62) (125)
Interest received 1 2 3
Interest paid (15) (15) (57)
Income taxes paid (2) (2) (3)
Net cash flow from operating activities 118 409 270
Dividend paid (126) (51) (114)
Repayment of short-term borrowings - (164) (164)
Purchase of B shares (6) - -
Net cash flow from derivatives 2 (23) (32)
Net cash flow from financing activities (130) (238) (310)
Net cash flow from deposits - 70 90
Net cash flow from investing activities - 70 90
Change in cash and cash equivalents (12) 241 50
Cash and cash equivalents at the start of the period 643 610 610
Effect of exchange rate fluctuations (2) (13) (17)
Cash and cash equivalents at the end of the period 629 838 643
Notes to the accounts and accounting policies
Basis of preparation
These financial statements are the unaudited condensed half-yearly consolidated financial statements
(the "Half-yearly Financial Statements") of 3i Group plc, a company incorporated in Great Britain and registered in England
and Wales, and its subsidiaries (together referred to as the "Group") for the six-month period ended 30 September 2014.
The Half-yearly Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim
Financial Reporting ("IAS 34") and should be read in conjunction with the Consolidated Financial Statements for the year to
31 March 2014 ("Report and Accounts 2014"), as they provide an update of previously reported information.
The Half-yearly Financial Statements were authorised for issue by the Directors on 12 November 2014.
The Half-yearly Financial Statements have been prepared in accordance with the accounting policies set out in the Report
and Accounts 2014 except for the adoption of new standards and interpretations effective as of 1 January 2014. These
include amendments to IAS 32 Amendment to offsetting financial assets and financial liabilities, IAS 36 Recoverable amount
disclosures for non financial assets and IAS 39 Novation of derivatives and continuation of hedge accounting. None of these
standards have impacted the Group's financial statements.
The Half-yearly Financial Statements do not constitute statutory accounts. The statutory accounts for the year to
31 March 2014, prepared under IFRS, have been filed with the Registrar of Companies and the auditors have issued a report,
which was unqualified and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.
The preparation of the Half-yearly Financial Statements requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods. The most significant techniques for estimation
are described in the accounting policies and in "Portfolio valuation - an explanation".
The Half-yearly Financial Statements have been prepared using the going concern basis, and the Directors are not aware of
any new events or circumstances which would make this inappropriate.
The Group operates in business lines where significant seasonal or cyclical variations in activity are not experienced
during the financial year.
The Group adopted IFRS 10, 11, 12, 13 and IAS 19(R) in the Report and Accounts 2014 which require a restatement for the six
month period to 30 September 2013. IFRS 11 has no material effect on the financial statements. IFRS 12 and 13 require
additional disclosures which are included in the Report and Accounts 2014 as well as in these financial statements where
required. A description of the impact of IAS 19(R) on the financial statements is included in the Report and Accounts 2014.
The nature and the impact of IFRS 10 is described below:
IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements
Under IFRS 10 a large number of entities within the Group have been classified as investment entities. As a result they are
no longer consolidated and are instead held at fair value. The detailed application of IFRS 10, including the judgements
made, is disclosed in the Report and Accounts 2014.
Impact on statement of comprehensive income
As a result of this change in treatment the total return generated by investment entities is no longer presented on a
line-by-line basis but combined and shown as a new line in the Statement of comprehensive income - "Fair value movements on
investment entity subsidiaries". This has resulted in a restatement of prior year figures where previously consolidated
line items are now aggregated into this line.
The impact of this restatement by line item for the six months to 30 September 2013 is:
Realised profits over value on the disposal of investments (£(36) million); Unrealised profits on the revaluation of
investments (£(126) million); Dividends (£(6) million); Income from loans and receivables (£(11) million); Fees receivable
from external funds (£(12) million); Operating expenses (£9 million); Carried interest receivable from external funds (£(3)
million); Carried interest and performance fees payable (£36 million); Income taxes (£1 million); Exchange movements (£(19)
million); Fair value movements on investment entity subsidiaries (£147 million); and Income/(expense) from fair value
subsidiaries (£20 million). There is no overall change to total return.
Basic and diluted earnings per share of the Group have been restated as a result of adopting IFRS 10.
Impact on statement of financial position
The closing fair value of the net assets of the investment entities is now combined and stated in a new line "Investment in
investment entities". This has resulted in a restatement of prior year figures where previously consolidated line items are
now aggregated into this line.
The impact of this restatement by line item for the six months to 30 September 2013 is:
Quoted investments (£(317) million); Unquoted investments (£(1,258) million); Carried interest receivable (£(12) million);
Intangible assets (£(19) million); Other current assets (£(15) million); Cash and cash equivalents (£(43) million); Trade
and other payables (£46 million); Carried interest and performance fees payable (£58 million); Current income taxes (£(1)
million); Provisions (£1 million); and Investment in investment entities (£1,560 million).
Cash balances held in investment entity subsidiaries are aggregated into the "Investment in investment entities" line and
not consolidated. Intercompany balances between investment entity subsidiaries and consolidated Group entities which would
have previously been eliminated on consolidation are no longer eliminated. There is no change to the net assets presented
as a result of the adoption of IFRS 10, albeit that gross assets and gross liabilities have changed as a result of the
changes to cash and intercompany balances.
Impact on cash flow statement
The cash flow statement is impacted by the adoption of IFRS 10 because the cash held by investment entity subsidiaries is
no longer consolidated. It now forms part of the fair value of the investment entity subsidiary. Additionally, the cash
flow statement now includes a new line to disclose the cash movements to and from investment entities, "Cash inflow from
fair value subsidiaries". This has resulted in a restatement of prior year figures where previously consolidated line items
are now aggregated and disclosed in these lines.
The impact of this change on cash and cash equivalents at 30 September 2013 is: a decrease of £43 million and the change by
line item is:
Purchase of investments (£16 million); Proceeds from investments (£(177) million); Portfolio interest received (£(4)
million); Portfolio dividends received (£(9) million); Fees received from external funds (£(15) million); Carried interest
received (£(1) million); Carried interest and performance fees paid (£7 million); Operating expenses (£16 million); Income
taxes paid (£3 million); Investment/Divestment into fair value subsidiaries (£167 million); and Cash and cash equivalents
at the start of the year (£(46) million).
1 Segmental analysis
Operating segments are the components of the entity whose results are regularly reviewed by the entity's
chief-operating-decision-maker to make decisions about resources to be allocated to the segment and assess its performance.
The chief-operating-decision-maker for the Group is considered to be the Chief Executive. The Group considers the
businesses' activity on two bases. Firstly, as business divisions determined with reference to market focus, geographic
focus, investment funding model and the Group's management hierarchy. Secondly, in line with the strategy of the Group, it
considers separate Proprietary Capital and Fund Management businesses focused on investment returns and Fund Management
profits respectively.
The performance of the business divisions is primarily assessed based on Gross Investment Return.
The Proprietary Capital segment is assessed based on Operating profit before carry which comprises Gross Investment Return,
direct costs and a synthetic fee paid to the fund manager and funding expenses.
The Fund Management segment is assessed based on Operating profit before carry which comprises fees receivable from
external funds and a synthetic fee paid from the Proprietary Capital segment offset by operating expenses of the investment
teams.
In line with IFRS 8, the tables below are presented on the Investment basis which is the basis used by the
chief-operating-decision-maker to monitor the performance of the Group. A description of the Investment basis is provided
in the Financial review.
Investment basis Private Debt Proprietary Fund
Six months to 30 September Equity Infrastructure Management Total Capital Management Total
2014 £m £m £m £m £m £m £m
Realised profits over value on the disposal of investments 34 1 - 35 35 - 35
Unrealised profits/(losses) on the revaluation of investments 308 9 (10) 307 307 - 307
Portfolio income
Dividends 5 10 6 21 21 - 21
Income from loans and receivables 27 - 3 30 30 - 30
Fees receivable/(payable) 3 - (1) 2 2 - 2
Foreign exchange on investments (95) 2 (5) (98) (98) - (98)
Gross Investment Return 282 22 (7) 297 297 - 297
Fees receivable from external funds 9 14 18 41 - 41 41
Synthetic fees - - - - (22) 22 -
Operating expenses (31) (14) (18) (63) (13) (50) (63)
Interest receivable 1 1 - 1
Interest payable (26) (26) - (26)
Movement in the fair value of derivatives (1) (1) - (1)
Exchange movements 25 25 - 25
Other income 1 1 - 1
Operating profit before carry 275 262 13 275
Carried interest and performance fees
Receivable from external funds 7 8 4 19 19
Payable (36) (7) (2) (45) (45)
Acquisition related - - (5) (5) (5)
earn-out charges
Operating profit 244 244
Income taxes (3) (3)
Other comprehensive income
Re-measurements of defined benefit plans (7) (7)
Total return 234 234
Net divestment/
(investment)
Realisations 316 8 - 324 324 324
Cash investment (104) - (95) (199) (199) (199)
212 8 (95) 125 125 125
Balance sheet
Value of investment portfolio at the end of the period 2,984 491 197 3,672 3,672 3,672
Investment basis
Six months to Private Debt Proprietary Fund
30 September 2013 Equity Infrastructure Management Total Capital Management Total
(restated) £m £m £m £m £m £m £m
Realised profits over value on the disposal of investments 129 - - 129 129 - 129
Unrealised profits/(losses) on the revaluation of investments 161 (24) - 137 137 - 137
Portfolio income
Dividends 2 11 5 18 18 - 18
Income from loans and receivables 24 - 1 25 25 - 25
Fees receivable/(payable) 6 - - 6 4 2 6
Foreign exchange on investments (65) (5) (5) (75) (75) - (75)
Gross Investment Return 257 (18) 1 240 238 2 240
Fees receivable from external funds 9 11 16 36 - 36 36
Synthetic fees - - - - (25) 25 -
Operating expenses1 (42) (9) (17) (68) (13) (55) (68)
Interest receivable 1 1 - 1
Interest payable (28) (28) - (28)
Movement in the fair value of derivatives 10 10 - 10
Exchange movements (4) (4) - (4)
Other income - - - -
Operating profit before carry 187 179 8 187
Carried interest and performance fees
Receivable from external funds - - 3 3 3
Payable (24) 1 (2) (25) (25)
Acquisition related earn-out charges - - (4) (4) (4)
Operating profit 161 161
Income taxes (2) (2)
Other comprehensive income
Re-measurements of defined benefit plans 16 16
Total return 175 175
Net divestment/
(investment)
Realisations 528 - - 528 528 528
Cash investment (10) - (82) (92) (92) (92)
518 - (82) 436 436 436
Balance sheet
Value of investment portfolio at the end of the period 2,424 479 155 3,058 3,058 3,058
1 Includes restructuring costs of £4 million, nil and nil for Private Equity, Infrastructure and Debt Management respectively and nil and £4 million for Proprietary Capital and Fund Management respectively.
Investment basis Private Debt Proprietary Fund
Year to 31 March 2014 Equity Infrastructure Management Total Capital Management Total
£m £m £m £m £m £m £m
Realised profits over value on the disposal of investments 201 1 - 202 202 - 202
Unrealised profits/(losses) on the revaluation of investments 478 (13) 10 475 475 - 475
Portfolio income
Dividends 13 21 10 44 44 - 44
Income from loans and receivables 46 - 4 50 50 - 50
Fees receivable/(payable) 9 - (2) 7 4 3 7
Foreign exchange on investments (100) (7) (6) (113) (113) - (113)
Gross Investment Return 647 2 16 665 662 3 665
Fees receivable from external funds 17 24 32 73 - 73 73
Synthetic fees - - - - (51) 51 -
Operating expenses1 (79) (23) (34) (136) (28) (108) (136)
Interest receivable 3 3 - 3
Interest payable (54) (54) - (54)
Movement in the fair value of derivatives 10 10 - 10
Exchange movements (3) (3) - (3)
Other income - - - -
Operating profit before carry 558 539 19 558
Carried interest and performance fees
Receivable from external funds (1) - 4 3 3
Payable (82) - (3) (85) (85)
Acquisition related earn-out charges - - (6) (6) (6)
Operating profit 470 470
Income taxes (3) (3)
Other comprehensive income
Re-measurements of defined benefit plans 11 11
Total return 478 478
Net divestment/
(investment)
Realisations 669 2 6 677 677 677
Cash investment (276) - (61) (337) (337) (337)
393 2 (55) 340 340 340
Balance sheet
Value of investment portfolio 2,935 487 143 3,565 3,565 3,565
1 Includes restructuring costs of £7 million, £1 million and £1 million for Private Equity, Infrastructure and Debt Management respectively and £1 million and £8 million for Proprietary Capital and Fund Management respectively.
2 Realised profits/(losses) over value on the disposal of investments
Six months to 30 September 2014 Unquoted Quoted
investments investments Total
£m £m £m
Realisations 107 - 107
Valuation of disposed investments (101) - (101)
6 - 6
Of which:
- - profit recognised on realisations 7 - 7
- losses recognised on realisations (1) - (1)
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