REG - 3i Group PLC - Half Yearly Report <Origin Href="QuoteRef">III.L</Origin> - Part 6
12/11/2015 07:02
- Part 6: For the preceding part double click ID:nRSL4327Fe
concerned, No discount is applied 6%
benchmarked to a range of other data such as DCF, trade data and other quotes.
Occasionally DCF, trade or other data may be used if available broker quotes are not
considered to be representative of fair value
Other Private Equity Used where elements of a business are valued on different bases Values of separate elements prepared on one of the methodologies listed above Discounts applied to separate elements as above 7%
Equity shares are valued at the higher of an earnings or net assets methodology. Fixed income shares and loan investments
are measured using amortised cost and any implied impairment, in line with IFRS.
Consistent with IPEV guidelines, all equity investments are held at fair value using the most appropriate methodology and
no investments are held at historical cost.
Twenty five large investments
The 25 investments listed below account for 81% of the portfolio at 30 September 2015 (31 March 2015: 81%). This does not
include the one investment that has been excluded for commercial reasons.
In accordance with Section 29 of the Alternative Investment Fund Manager Directive ("AIFMD"), 3i Investments plc, as
Alternative Investment Fund Manager ("AIFM"), encourages all controlled portfolio companies to make available to employees
and investors an Annual report which meets the disclosure requirements of the Directive. These are available either on the
portfolio company's website or through filing with the relevant local authorities.
Residual Residual
Business line cost1 cost1 Valuation Valuation
Geography March September March September
Investment First invested in 2015 2015 2015 2015 Relevant transactions
Description of business Valuation basis £m £m £m £m in the period
Action Private Equity
Non-food discount retailer Benelux 2 1 592 712
2011
Earnings
3i Infrastructure plc Infrastructure
Quoted investment company, investing in infrastructure UK 302 270 481 450 £51m special dividend following the sale of
2007
Quoted Eversholt Rail
Scandlines Private Equity
Ferry operator between Denmark Denmark/ 114 114 262 257 £46m of proceeds and
and Germany Germany income, net of
2007 transaction fees,
DCF following sale of route between Helsingor and Helsingborg
Amor/Christ Private Equity
Distributor and retailer of Germany 129 129 165 174
jewellery 2010/2014
Earnings
Weener Plastic Private Equity
Supplier of plastic packaging Germany - 145 - 149 New investment
solutions 2015
Price of recent
investment
Mayborn Private Equity
Manufacturer and distributor UK 129 140 133 137
of baby products 2006
Earnings
ACR Private Equity
Pan-Asian non life reinsurance Singapore 105 105 120 120
2006
Industry metric
Basic-Fit Private Equity
Discount gyms operator Benelux 91 95 102 119
2013
Earnings
Q Holding Private Equity
Precision engineered US 100 100 109 117
elastomeric components 2014
manufacturer Earnings
GIF Private Equity
International transmission Germany 68 81 78 106 Further investment of
testing specialist 2013 £11m
Earnings
Quintiles Private Equity
Clinical research outsourcing US 41 26 144 93 Sold 36% and generated
solutions 2008 proceeds of £53m
Quoted
AES Engineering Private Equity
Manufacturer of mechanical UK 30 30 102 85
seals and support systems 1996
Earnings
Mémora Private Equity
Funeral service provider Spain 159 159 61 80
2008
Earnings
Tato Private Equity
Manufacture and sale of UK 2 2 80 72
speciality chemicals 1989
Earnings
Geka Private Equity
Manufacturer of brushes, Germany 69 69 53 63
applicators and packaging 2012
systems for the cosmetics industry Earnings
Aspen Pumps Private Equity
Manufacturer of pumps and UK 65 64 64 62
accessories for the air conditioning, heating and 2015Earnings
refrigeration industry
Dynatect Private Equity
Manufacturer of engineered, US 65 65 71 61
mission critical protective 2014
equipment Earnings
Euro-Diesel Private Equity
Manufacturer of uninterruptible Benelux - 52 - 52 New investment
power supply systems 2015
Price of recent
investment
Agent Provocateur Private Equity
Women's lingerie and associated UK 53 53 53 51
products 2007
Earnings
MKM Private Equity
Building materials supplier UK 22 22 43 51
2006
Earnings
Eltel Networks Private Equity
Infrastructure services for Sweden 13 13 47 51
electricity and telecoms networks 2007
Quoted
OneMed Group Private Equity
Distributor of consumable Sweden 117 122 47 49
medical products, 2011
devices and technology Earnings
Global Income Fund Debt Management
Debt Management open ended fund with exposure to North Europe/North America - 48 - 49 New investment, launched in the first half
American and western 2015
European issuers Broker quotes
Refresco Gerber Private Equity
European bottler of soft drinks Benelux 30 29 47 47
and fruit juices for retailers and 2010
branded customers Quoted
JMJ Private Equity
Global Management US 42 42 53 44
Consultancy 2013
Earnings
1 Residual cost includes capitalised interest.
Glossary
Alternative Investment Funds ("AIFs") At 30 September 2015, 3i Investments plc as AIFM, managed five AIFs. These were 3i
Group plc, 3i Growth Capital Fund, 3i Eurofund V, the European Middle Market Loan Fund and 3i Debt Management Global Income
Fund.
Alternative Investment Fund Managers Directive ("AIFMD") became effective from July 2013. As a result, at 31 March 2015, 3i
Investments plc is authorised as an Alternative Investment Fund Manager ("AIFM"), which in turn manages five AIFs.
Alternative Investment Fund Manager ("AIFM") is the regulated manager of AIFs. Within 3i, this is 3i Investments plc.
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.
Barclays Infrastructure Fund Management business ("BIFM") Acquired by 3i in November 2013 when it managed two active
unlisted funds that invest in UK and European PPP and energy projects, with assets under management of over £700 million.
Board The Board of Directors of the Company.
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 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. Carry is only actually paid or received
when the relevant performance hurdles are met, and the accrual is discounted to reflect expected payment periods.
Carry receivable is generated on third-party capital over the life of the relevant fund when relevant performance criteria
are met.
We pay carry to our investment teams on proprietary capital invested and share a proportion of carry receivable from
third-party funds. This total carry payable is provided through schemes which have been structured typically over two/three
year vintages to maximise flexibility in resource planning.
Collateralised Loan Obligation ("CLO") is a form of securitisation where payments from multiple loans are pooled together
and passed on to different classes of owners in various tranches.
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.
Dividend income from equity investments and CLO capital is recognised in the Statement of comprehensive income when the
shareholders' rights to receive payment have been established.
Earnings before interest, tax, depreciation and amortisation ("EBITDA") EBITDA is defined as earnings before interest, tax,
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.
Executive Committee The Executive Committee is responsible for the day-to-day running of the Group and comprises: the Chief
Executive, Group Finance Director, the Managing Partners of the Private Equity, Infrastructure and Debt Management
businesses and the Group's General Counsel.
Fair value movements on Investment entity subsidiaries 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") 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 is earned directly from investee companies when an investment is first made and through the life of the
investment. Fees that are earned on a financing arrangement are considered to relate to a financial asset measured at fair
value through profit or loss and are recognised when that investment is made. Fees that are earned on the basis of
providing an ongoing service to the investee company are recognised as that service is provided.
Fees receivable from external funds are fees received by the Group, from third parties, for the management of private
equity, infrastructure and debt management funds.
Foreign exchange on investments arises on investments made in currencies that are different from the functional currency of
the Group. 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.
Fund Management A segment of the business focused on generating profits from the management of private equity,
infrastructure and debt management funds.
Fund ManagementOperating profit comprises fee income from third parties as well as a synthetic fee received from the
Proprietary Capital business, less operating expenses incurred by the Fund Management business.
Gross investment return ("GIR") 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 and foreign exchange movements. GIR is measured as a percentage of the opening portfolio value and is the principal
tool for assessing our Proprietary Capital business.
Income from loans and receivables 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") 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. The commentary in the Interim
Management Report refers to this basis as we believe it provides a more understandable view of our performance.
Key Performance Indicators ("KPI") This is a measure by reference to which the development, performance or position of the
Group can be measured effectively.
Money multiple Calculated as the cumulative distributions plus any residual value divided by paid-in capital.
Net asset value ("NAV") NAV is a measure of the fair value of our proprietary investments and the net costs of operating
the business.
Operating cashprofit Defined as the difference between our cash income (cash fees from managing third-party funds and cash
income from our proprietary capital portfolio) and our accrued operating expenses, excluding restructuring costs.
Operating profit includes gross investment return, management fee income generated from managing external funds, the costs
of running our business, net interest payable, movements in the fair value of derivatives, other losses and carried
interest.
Portfolio income is that which is directly related to the return from individual investments. It is recognised to the
extent that it is probable that there will be economic benefit and the income can be reliably measured. It is comprised of
dividend income, income from loans and receivables and fee income.
Proprietary Capital A segment of the business focused on generating profits from 3i capital which is available to invest.
Proprietary Capital operating profit The profit comprises gross investment return, operating expenses, a fee paid to the
Fund Management business and balance sheet funding expenses such as interest payable.
Public Private Partnership ("PPP") A PPP is a government service or private business venture which is funded and operated
through a partnership of government and one or more private sector companies.
Realised profits or losses over value on the disposal of investments 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.
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 intra-segment 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.
Synthetic fee Internal fee payable to the Fund Management business for managing our proprietary capital.
Total return comprises operating profit less tax charge less movement in actuarial valuation of the historic defined
benefit pension scheme.
Total shareholder return ("TSR") This 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.
Underlying Fund Managementprofit Calculated as fee income minus operating expenses related to Fund Management activities,
excluding restructuring and amortisation costs.
Unrealised profits or losses on the revaluation of investments 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.
Value weighted earnings growth The growth in last 12 month earnings, when comparing to the preceding 12 months. This
measure is the key driver of our private equity portfolio performance.
Information for shareholders
ANNUAL REPORTS ONLINE
If you would prefer to receive shareholder communications electronically in future, including annual reports and notices of
meetings, please visit our Registrars' website at www.shareview.co.uk/clients/3isignup and follow the instructions there to
register.
More general information on electronic communications is available on our website at
www.3i.com/investor-relations/shareholder-information
REGISTRARS
For shareholder administration enquiries, including changes of address, please contact:
Equiniti
Aspect House,
Spencer Road,
Lancing,
West Sussex BN99 6DA, UK
Telephone 0371 384 2031
Lines are open from 8.30am to 5.30pm, Monday to Friday.
(International callers +44 121 415 7183)
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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