REG - 3i Group PLC - Results for the six months to 30 September 2021
11/11/2021 07:00
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RNS Number : 0173S 3i Group PLC 11 November 2021
11 November 2021
3i Group plc announces results for the
six months to 30 September 2021
High quality portfolio drives strong result
· Total return of £2,199 million or 24% on opening shareholders'
funds (September 2020: £1,142 million, 15%) and NAV per share of 1,153 pence
(31 March 2021: 947 pence) after paying 21 pence second dividend in July 2021.
· Our Private Equity portfolio continues to perform strongly, with
a gross investment return of £2,373 million in the period, or 27% (September
2020: £1,245 million, 19%). The majority of top 20 Private Equity investments
demonstrated considerable momentum in the period, and in particular those in
our chosen areas of focus of value-for-money, e-commerce, consumer and
healthcare. These continue to benefit from our active management and long-term
structural growth trends, some of which were accelerated by the pandemic.
· Action continues to surpass expectations. Its growth has
accelerated since the lifting of Covid-related restrictions, resulting in
sales in the nine months to the end of period nine 2021 of €4.8 billion, 25%
ahead of the same period last year. Like-for-like sales growth over the same
period was also strong at 12.9%, compared to negative 2.5% in the same period
last year. Action delivered last twelve months EBITDA of €765 million to the
end of period nine 2021 (September 2020: €579 million). Strong trading
continued into October 2021, with sales increasing to €5.4 billion and last
twelve months EBITDA of €777 million. The international roll-out is
proceeding well and the business is on track to open about 270 new stores in
2021.
· In competitive markets for new investment our Private
Equity business has continued to deploy capital selectively, with new
investments in MAIT and the newly created ten23 health platform, as well as
bolt-on investments for Cirtec Medical, Luqom and Havea in the period.
Investment activity has continued since the period end, with a new investment
in Dutch Bakery, transformational bolt-on acquisitions for GartenHaus and
ten23 health and a bolt-on acquisition for Evernex. We signed the realisation
of Magnitude Software in September 2021, which completed at the start of
November 2021, returning £345 million of proceeds to 3i, representing a 109%
uplift on 31 March 2021 value. The sale achieved a sterling money multiple of
2.5x and sterling IRR of 44% after a holding period of two and a half
years. In November 2021, we completed a £36 million co-investment in
insightsoftware, the company that acquired our investment in Magnitude
Software and announced the partial sale of our stake in Basic-Fit at €44.25
per share, generating proceeds of c.£146 million.
· Our Infrastructure business delivered a gross investment return
of £60 million, or 5% (September 2020: £134 million, 12%). This return was
driven by the increase in 3i Infrastructure plc's share price and dividend
income. Our other Infrastructure investment vehicles and our direct US
investments performed in line with expectations in the period.
· First FY2022 dividend of 19.25 pence per share, in line with
policy. This will be paid to shareholders in January 2022.
Simon Borrows, 3i's Chief Executive, commented:
"We saw good growth from our two investment portfolios in the first half of
the year and this momentum has continued into November. 3i is beginning to see
a significant compounding effect from the performance of today's carefully
selected Private Equity portfolio.
Despite the social and economic uncertainty that we have seen over the last 18
months, competition for private assets remains very strong. While we will
continue to deploy capital selectively in new and bolt-on investments, we are
also in a good position to benefit from favourable market conditions through
our realisation pipeline to deliver attractive returns for our shareholders."
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 in the Reconciliation of the
Investment basis to IFRS section later in this document. 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 in the Reconciliation of the Investment basis to IFRS section
later in this document. The content from the beginning of this document up to
the Alternative Performance Measures section is 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 2021 2020 2021
Total return(1) £2,199m £1,142m £1,726m
% return on opening shareholders' funds 24% 15% 22%
Dividend per ordinary share 19.25p 17.5p 38.5p
Gross investment return(2) £2,463m £1,394m £2,139m
As a percentage of opening 3i portfolio value 24% 17% 26%
Cash investment(2) £59m £233m £510m
Realisation proceeds £124m £82m £218m
3i portfolio value £12,784m £9,578m £10,408m
Gross debt £975m £975m £975m
Net (debt) (2) £(931)m £(288)m £(750)m
Gearing(2) 8% 3% 8%
Liquidity £544m £1,087m £725m
Diluted net asset value per ordinary share ("NAV per share") 1,153p 905p 947p
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 can be found in the
Alternative Performance Measures section later in this document.
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 (http://www.3i.com/investor-relations)
For further information, including a live webcast of the results presentation
at 10.00am on 11 November 2021, please visit www.3i.com/investor-relations
(http://www.3i.com/investor-relations)
3i Group Half-year report 2021
Chief Executive's review
Our first half performance was very strong, reflecting the quality of our
portfolio and the broader market recovery. We generated a total return of
£2,199 million, or 24% on opening shareholders' funds (September 2020:
£1,142 million, or 15%). Our Private Equity and Infrastructure investment
teams were very active in the period, deploying capital across new, further,
and bolt-on investments whilst also achieving attractive returns from two
divestments signed in the period. NAV per share at 30 September 2021 was 1,153
pence (31 March 2021: 947 pence), after the payment of the 21 pence second
FY2021 dividend in July 2021.
Private Equity
The Private Equity portfolio continued to perform strongly, generating a gross
investment return ("GIR") of 27% in the first half. The majority of our top 20
Private Equity assets demonstrated considerable momentum in the period, with
those operating in our chosen areas of focus (value-for-money, e-commerce,
consumer and healthcare) continuing to benefit from our active management and
long-term secular growth trends. We have continued to work with our portfolio
companies to adapt quickly and respond effectively to the pandemic and its
aftermath including disruption to global supply chains and inflationary and
labour market pressures.
Action performance
Action continues to deliver results ahead of the expectations we set for its
five-year plan in 2019. With the easing of restrictions in Q2 and Q3 2021 and
the reopening of all stores, Action's growth has accelerated, resulting in
sales in the nine months to the end of period nine ("P9") 2021 of €4.8
billion, 25% ahead of the same period last year. Like-for-like ("LFL") sales
growth over the same period was also impressive at 12.9%, compared to negative
2.5% in the equivalent period in 2020, which was significantly impacted by
Covid-19. Action delivered last twelve months ("LTM") EBITDA of €765 million
to the end of P9 2021 (September 2020: €579 million). This strong momentum
continued into October 2021, with sales increasing to €5.4 billion and LTM
EBITDA of €777 million. Action has not been immune from disruptions in
global supply chains and inflationary pressures in product, labour and
transport costs. However, as a large business with 14 categories, a diverse
supplier base and significant buying power, Action has been able to continue
purchasing stock throughout the pandemic and is better placed than many
retailers to manage these pressures while continuing to grow sales and
profits.
Action's store expansion has ramped up in 2021, following a slower roll-out in
the first half of 2020 due to Covid-19. In the year to date, Action opened 181
new stores and is on track to open about 270 stores in 2021. Action continues
to grow its international footprint. Its five pilot stores in Italy are
performing strongly, supporting the decision to roll-out in that country with
the next two stores being opened this month. The roll-out in the Czech
Republic is also proceeding at a high pace following a successful pilot in
2020. Action remains highly cash generative, with a current cash balance of
over €1 billion. As announced on 2 November 2021, Action appointed Hajir
Hajji, currently Action's Commercial Director and member of the Action
executive management team, to succeed Sander van der Laan as CEO. Hajir will
formally become CEO of Action on 1 January 2022.
Other portfolio performance and activity in the period
BoConcept has performed strongly in the last year with record order levels.
Luqom continues to benefit from the structural shift in demand to online
channels, whilst Hans Anders has seen a good uptick in footfall and order
intake as a result of easing restrictions and increased consumer focus on
value for money. SaniSure, the bio-processing platform, is performing well,
benefitting from an acceleration in its key biologics and single-use markets.
It was able to return £59 million of 3i's original investment in the period.
Royal Sanders remained highly cash generative and, following a refinancing,
returned cash of £84 million to 3i. Good momentum at Basic-Fit following the
reopening of all clubs resulted in a 20% increase in the share price between
31 March 2021 and 30 September 2021, whilst Tato and AES continue to perform
well and generated dividend income for 3i in the period.
Q Holding's electrical connector seal business has benefitted from substantial
demand. Its medical business has also performed well due to a rebound in
medical procedures tied to its key products and geographies. Cirtec Medical
continues to enhance its platform value, with recent M&A activity
accelerating its diversification into the minimally invasive therapeutic
device space and broadening the suite of high value capabilities that are now
driving an attractive new product pipeline. Our more recent investment in
GartenHaus has demonstrated good growth levels despite raw material price
increases and supply chain challenges, whilst MPM has benefitted from the
increase in pet ownership over the last 18 months and customer account wins,
particularly in the US.
Audley Travel and arrivia continue to operate in a leisure travel end market
which is recovering but still subject to evolving government restrictions. In
October 2021, we invested a further £25 million in Audley Travel to support
the business as it recovers from the pandemic. Delayed production launches and
contracting volumes in the automotive sector, coupled with semi-conductor
shortages and operational challenges, continue to impact the performance of
Formel D.
Since the start of our financial year, Private Equity markets have continued
to rally with a surge in both volume and value of buyout deal activity fuelled
by record levels of uninvested capital. As a result, private company
valuations continue to increase. In this context, it is very important that we
maintain our price discipline and that we deploy capital selectively, building
value through international roll-outs or bolt-on acquisitions. We invested
£56 million in MAIT, a provider of digital solutions in the DACH region. We
also adopted an innovative approach in forming a new platform, ten23 health,
to create a contract development and manufacturing organisation ("CDMO"),
which provides an integrated offering for sterile drug product development and
manufacturing of biologics, challenging molecules and dosage forms. We also
completed one bolt-on acquisition for each of Cirtec Medical, Luqom and Havea.
Since our original investment, we have completed multiple bolt-on acquisitions
for each of these companies, expanding their international footprint,
diversifying their product offering and generating significant synergies.
We have a busy investment pipeline. Since the period end, in October 2021, we
invested £46 million in Dutch Bakery, an industrial bakery group specialised
in home-baked bread and snack products, which we intend to grow both
organically and through a targeted buy-and-build strategy. We also completed
transformational bolt-on acquisitions for GartenHaus with the acquisition of
Outdoor Toys, a UK-based online retailer of outdoor garden toys, investing
£47 million of 3i proprietary capital, and for ten23 health, investing £62
million to support growth initiatives, including the scale up and expansion of
the Basel formulation and drug development operations, as well as the
acquisition of Swissfillon, a drug product fill and finish CDMO. The total 3i
investment in the ten23 health platform is now £69 million. In November 2021,
we announced Evernex's bolt-on acquisition of Emcon-IT, a leading player in
the third party hardware maintenance industry.
We signalled in our FY2021 annual results announcement that we expected FY2022
to be busier than the preceding year for realisations, and at the start of
November 2021 we completed the sale of Magnitude Software, returning £345
million of proceeds to 3i, representing a 109% uplift on 31 March 2021 value.
The sale achieved a sterling money multiple of 2.5x and sterling IRR of 44%,
an exceptional return after a holding period of only two and a half years.
During this period, 3i supported several new product launches, the transition
from on-premises to cloud software solutions and investments in sales and
marketing which have increased Magnitude Software's organic growth rate. In
November 2021, we completed a £36 million co-investment in insightsoftware,
the company that acquired our investment in Magnitude Software and announced
the partial sale of our stake in Basic-Fit at €44.25 per share, generating
proceeds of c.£146 million. We have a good pipeline of realisations and
distributions which we expect will crystallise in the second half of this
financial year.
Infrastructure
In the six months to 30 September 2021 our Infrastructure business delivered a
GIR of 5%, predominantly driven by a 3% increase in the 3i Infrastructure plc
("3iN") share price to 304 pence at 30 September 2021 (March 2021: 296 pence)
and good dividend income.
3iN generated a total return on opening NAV of 10.6% in the six months to 30
September 2021 driven by strong portfolio performance. 3iN's investment
pipeline remains busy and during the period it completed its new investment in
DNS:NET, as well as a bolt-on acquisition for its existing portfolio company
Joulz. The business also announced the realisation of Oystercatcher's four
European terminals driving an uplift of 69% to its 31 March 2021 value.
Oystercatcher retained a 45% stake in Oiltanking Singapore Limited.
Oystercatcher's unrealised money multiple is now 3.0x and unrealised IRR is
13.9% over 3iN's 14-year investment period. 3iN is on track to deliver its
dividend target of 10.45 pence per share, which is up 6.6% on last year.
Both of our US infrastructure assets performed in line with expectations in
the period. As the US continues to recover from the pandemic, Smarte Carte has
seen increased demand in its airport service offering. Regional Rail, which
delivers essential freight services, has continued to see good performance.
Scandlines
Scandlines performed well in the period. While freight volumes have remained
stable throughout the pandemic, leisure travel and shopping ticket volumes
increased as travel restrictions eased between Denmark, Scandinavia and
Germany over the summer.
Balance sheet and dividend
At 30 September 2021 we had total liquidity of £544 million (31 March 2021:
£725 million), including our £500 million undrawn RCF. Net debt was £931
million, and gearing was 8% (31 March 2021: £750 million net debt, gearing
8%).
In line with our dividend policy, we have decided to pay a first FY2022
dividend of 19.25 pence, which is half of our FY2021 total dividend. This
first FY2022 dividend will be paid to shareholders on 12 January 2022.
Board and people update
Throughout this pandemic, our focus has been on protecting the wellbeing of
our own employees, as well as those of our portfolio companies and the
communities in which we collectively operate. All offices are now open, and it
has been good to work with colleagues in the office environment again.
As announced on 30 September 2021, David Hutchison will become non-executive
Chairman of the Board on the announcement of these half-year results on 11
November 2021. He will succeed Simon Thompson who will step down from the
Board at the same time. I am grateful to Simon for his leadership of the 3i
Board, particularly through the Covid-19 pandemic. The Board also appointed
Lesley Knox as non-executive Director as of 1 October 2021.
Outlook
We saw good growth from our two investment portfolios in the first half of the
year and this momentum has continued into November. 3i is beginning to see a
significant compounding effect from the performance of today's carefully
selected Private Equity portfolio.
Despite the social and economic uncertainty that we have seen over the last 18
months, competition for private assets remains very strong. While we will
continue to deploy capital selectively in new and bolt-on investments, we are
also in a good position to benefit from favourable market conditions through
our realisation pipeline to deliver attractive returns for our shareholders.
Simon Borrows
Chief Executive
10 November 2021
Business and Financial review
Private Equity
Our Private Equity business delivered a very strong return in the first half,
generating a GIR of £2,373 million (September 2020: £1,245 million), or 27%
of the opening portfolio value (September 2020: 19%).
Table 1: Gross investment return for the six months to 30 September
2021 2020
Investment basis £m £m
Realised profits over value on the disposal of investments 12 3
Unrealised profits on the revaluation of investments 2,219 1,071
Dividends 10 43
Interest income from investment portfolio 33 25
Fees receivable 2 6
Foreign exchange on investments 97 97
Gross investment return 2,373 1,245
Gross investment return as a % of opening portfolio value 27% 19%
Investment
Table 2: Private Equity cash investment in the six months to 30 September 2021
Proprietary
capital
investment
Investment Type Business description/bolt on description Date £m
ten23 health Initial Drug product CDMO May 2021 7
Luqom Further Online lighting specialist retailer July 2021 57
MAIT New Provider of digital solutions in the DACH region September 2021 56
Total Private Equity new and further cash investment 120
WilsonHCG Return of funding Global provider of recruitment process outsourcing and other May 2021 (3)
talent solutions
SaniSure Return of funding Manufacturer, distributor and integrator of single-use bioprocessing systems July 2021 (59)
and components
Total Private Equity return of funding (62)
Total Private Equity cash net investment 58
Table 3: Private Equity portfolio bolt-on acquisitions - funded by the
portfolio company
in the six months to 30 September 2021
Asset Name of acquisition Business description of bolt-on investments Date
Luqom Lampemesteren Online retailer of premium lighting products in the Nordic region April 2021
Cirtec Medical Cardea Catheter Innovations Contract manufacturer specialising in the design and development of catheter July 2021
systems
Havea ixX Pharma Independent player in the Belgian premium food supplement segment September 2021
In the period, we invested £56 million in MAIT, an attractive platform in the
software sector, with several strategic acquisition opportunities in a highly
fragmented market. We provided initial capital to ten23 health in May 2021,
creating a pure-play, patient-centric and sustainable biologics drug product
CDMO focused on helping innovative biotech and pharma customers develop and
commercialise injectable biopharmaceutical drugs. We will grow the ten23
health platform both organically and through acquisitions.
In July 2021, we invested a further £57 million in Luqom, which was primarily
for the purchase of a minority holding. As a result of a refinancing, and
within 12 months of our investment in Sani-Tech West, SaniSure returned £59
million of 3i's proprietary capital. Similarly, WilsonHCG returned £3 million
of overfunding.
We also continued to originate acquisition opportunities for our portfolio
companies, as shown in table 3. All three of these bolt-on acquisitions were
funded by the portfolio companies and represent Luqom's second, Cirtec
Medical's eighth and Havea's fifth bolt-on acquisition since our original
investment.
Since the period end, in October 2021, we invested £46 million in Dutch
Bakery, an industrial bakery group specialised in home bake-off bread and
snack products. We completed transformational bolt-on acquisitions for
GartenHaus with the acquisition of Outdoor Toys, a UK-based online retailer of
outdoor garden toys, investing £47 million of 3i proprietary capital, and for
ten23 health, investing £62 million to support growth initiatives, including
the scale up and expansion of the Basel formulation and drug development
operations, as well as the acquisition of Swissfillon, a drug product fill and
finish CDMO. The total 3i investment in the ten23 health platform is now £69
million. In November 2021, we completed a £36 million co-investment in
insightsoftware the company that acquired our investment in Magnitude Software
and announced Evernex's bolt-on acquisition of Emcon-IT, a leading player in
the third-party hardware maintenance industry.
Realisations
We recognised total realised proceeds of £118 million in the period
(September 2020: £82 million). These comprise £84 million of refinancing
proceeds from Royal Sanders, of which £4 million was recorded as income, and
£17 million of proceeds from BoConcept following a partial repayment of a
shareholder loan. Furthermore, we generated proceeds of £21 million from our
legacy portfolio.
In September 2021, we agreed the sale of Magnitude Software for proceeds of
£345 million, which were received in November 2021, realising a sterling
money multiple of 2.5x and sterling IRR of 44% in the two and a half years
since our initial investment.
Table 4: Private Equity realisations in the six months to 30 September 2021
31 March Uplift on
Calendar 2021 3i realised Profit opening Residual
year value(1) proceeds in the year(2) Value(2) value
Investment Country invested £m £m £m % £m
Refinancing
Royal Sanders Netherlands 2018 80 80 - - 295
Full realisations
Other n/a n/a 1 2 1 100% -
Partial realisations
BoConcept Denmark 2016 17 17 - - 240
Other n/a n/a n/a 8 - - n/a
Deferred consideration
Eltel Nordic 2007 - 10 10 - -
Other n/a n/a n/a 1 1 - n/a
Total Private Equity realisations 98 118 12 - 535
1 For partial realisations and refinancings, 31 March 2021 value represents
value of stake sold or refinanced.
2 Cash proceeds realised in the period over opening value.
Portfolio performance
Table 5: Unrealised profits/(losses) on the revaluation of Private Equity
investments(1) in the six months to 30 September
2021 2020
£m £m
Action
Performance 1,491 644
Earnings based valuations (excluding Action)
Performance 354 238
Multiple movements 162 211
Other bases
Discounted cash flow ("DCF") 1 (60)
Other movements in unquoted investments - (1)
Imminent sale 166 11
Quoted portfolio 45 28
Total 2,219 1,071
1 More information on our valuation methodology, including definitions and
rationale, is included in our Annual report and accounts 2021 on pages 188 to
189.
Action valuation and performance
In the nine months to the end of P9 2021, Action delivered very strong
earnings growth and cash generation and continued its international store
roll-out. This was reflected in the £1,491 million (September 2020: £644
million) unrealised profits shown in Table 5. As the largest Private Equity
investment by value, it represented 55% of the Private Equity portfolio (31
March 2021: 52%). Further information on Action's performance in the period is
provided in the CEO statement.
At 30 September 2021, Action was valued using its LTM run-rate earnings to the
end of P9 2021 of €845 million. The LTM run-rate earnings used include our
normal adjustment to reflect stores opened in the year, as well as the add
back of €10 million of exceptional Covid-19 related costs incurred in
Action's first quarter of 2021 and a €7 million adjustment for the 53(rd)
week recognised in 2020. At 30 September 2021, Action was valued on a multiple
of 18.5x net of the liquidity discount (31 March 2021: 18.5x). This resulted
in a valuation of our 52.7% stake in Action of £6,100 million (31 March 2021:
£4,566 million).
Performance (excluding Action)
Our top 20 assets, excluding Action, generated good unrealised profits in the
period. BoConcept continues to trade strongly on the back of operational
improvements implemented since our initial investment. The business has
benefitted from increased spending on the home in some countries and, despite
continued retail closures in other geographies, sales in the first five months
of its fiscal year to April 2022 increased by more than 20% on the prior year.
Luqom has continued to benefit from the structural shift to online shopping
and increased consumer focus on the home and living category. Encouragingly,
despite the lifting of restrictions enabling shoppers to visit competitors'
physical stores, the company has continued to grow revenue and outpace its
peers' growth rates. In addition to completing the bolt-on acquisition of
Lampemesteren, the business has further internationalised its footprint with
QLF, a company it acquired in 2019, launching a further ten webshops in
Southern and Eastern Europe since the beginning of 2021. GartenHaus, which
also operates in the e-commerce space, has benefitted from similar market
trends. The company's proactive supplier management and pricing strategies
enabled the business to grow earnings despite raw material price increases and
longer delivery times. Hans Anders performed resiliently through the first
quarter of 2021 despite significant Covid-19 restrictions. Following the
easing of restrictions in the second quarter of 2021, the business has seen an
increase in footfall and purchases, with particularly strong performance in
the Netherlands and Belgium. The business is also benefitting from its
successful omni-channel strategy and increased operational efficiency since
the onset of the pandemic. Royal Sanders has seen a more normalised level of
demand for hand gels and hand wash in the six months to the end of September
2021 and is addressing industry wide raw material price inflation with pricing
strategies and new account wins.
The majority of our UK portfolio performed well in the period. Tato has
maintained good momentum into 2021, following a combination of sustained
demand for its core biocides products and strong supply levels through the
pandemic from its global platform. The business returned dividend income of
£4 million to 3i in the period. AES has remained resilient throughout the
pandemic and has continued to grow earnings as a result of increased sales
volumes and operational efficiencies. MPM has benefitted from the
pandemic-related increase in pet ownership over the last 18 months. This step
change increase in new pet households represents a significant and lasting
source of demand for pet care products and services across all regions.
Our healthcare sector investments continue to generate good returns. SaniSure
is benefitting from strong momentum in the biologics and single-use markets,
and generated record levels of new orders in the first six months of 2021. The
business continues to ramp up its capacity to meet the fast-growing demand,
while in parallel working to commercialise innovative new solutions. Q
Holding's medical device business is seeing good growth due to a strong
rebound in procedure volumes in its core markets, including emerging markets
that were particularly impacted in 2020 and the first half of 2021, whilst its
electrical connector seal business has seen increased demand as a result of
the shift towards electrification and connectivity in mobility technology
applications and industrial markets. The bolt-on acquisition of Cardea
Catheter Innovations for Cirtec Medical in the period further diversifies its
end-market exposure. The business is well positioned to continue its long-term
strong growth in the coming years, including in the near term capitalising on
expected re-ramping of inventories of key customers and increasing procedure
volumes following destocking in the last year and general lower procedures
levels that have not fully recovered globally.
As at 30 September 2021, only 1% of the Private Equity portfolio by value was
exposed to the leisure travel end market. arrivia continues to operate
resiliently and saw a noticeable recovery in bookings in the first six months
of 2021 for travel lines such as hotel, resort, air and car, before momentum
slowed over the late summer as travellers reacted to variants of Covid-19.
Leisure cruising, arrivia's primary market, remains challenging. Our
expectation is that leisure cruising passenger numbers will recover through
2022 and 2023. Audley Travel's performance has closely mirrored Covid-19
incidence rates and Government policy across its US and UK markets. Recent
easing of UK travel restrictions and improving Covid-19 rates in the US have
driven improved enquiries and bookings across the business. In October 2021,
we invested a further £25 million in Audley Travel to support the business as
it recovers from the pandemic. Further information on the valuation of Audley
Travel can be found under the DCF heading below.
Formel D continues to be severely challenged by the continued contraction of
automotive production volumes, delayed production launches particularly in
Europe, which is Formel D's primary market, by a significant shortage of
semiconductors, as well as company specific operational issues on which
progress is being made.
Overall, 96%(1) of the top 20 portfolio companies by value in our Private
Equity portfolio grew their earnings in the 12 months to 30 June 2021
(September 2020: 85%).
1 Includes top 20 Private Equity portfolio companies by value excluding
Magnitude Software valued on imminent sale basis.
Table 6: Portfolio earnings growth of the top 20 Private Equity investments(1)
3i carrying value
Number of companies at 30 September 2021
at 30 September 2021 £m
<0% 4 463
0 - 9% 4 1,067
10 - 19% 3 1,106
20 - 29% 1 254
>30% 8 7,721
1 Includes top 20 Private Equity companies by value excluding Magnitude Software
valued on imminent sale basis. This represents 95%
of the Private Equity portfolio by value (31 March 2021: 98%). LTM adjusted
earnings to 30 June 2021 and Action based on LTM run-rate earnings to P9 2021.
P9 2021 runs to 3 October 2021.
Leverage across the portfolio was 3.3x at 30 September 2021 (31 March 2021:
3.9x). Excluding Action, leverage across the portfolio was 4.4x (31 March
2021: 4.3x). Table 7 shows the ratio of net debt to adjusted earnings by
portfolio value at 30 September 2021.
Table 7: Ratio of net debt to adjusted earnings(1)
3i carrying value
Number of companies at 30 September 2021
at 30 September 2021 £m
<1x 4 871
1 - 2x 1 22
2 - 3x 1 6,100
3 - 4x 4 1,148
4 - 5x 5 733
5 - 6x 3 802
>6x 3 144
1 This represents 88% of the Private Equity portfolio by value (31 March 2021:
88%). Quoted holdings, assets valued on an imminent sale basis, deferred
consideration and companies with net cash are excluded from the calculation.
Net debt and adjusted earnings as at 30 June 2021. Action based on net debt at
P9 2021 and LTM run-rate earnings to P9 2021.
Multiple movements
In setting or changing a multiple, we consider several factors such as
relative performance, investment size, recent comparable transactions and exit
plans, and monitor external equity markets. Where appropriate, we adjust the
multiples for the impact of the applicable lease accounting standards.
At 30 September 2021, we changed valuation multiples for a small number of our
portfolio companies to reflect their strong performance and position relative
to the sector.
The multiple of run-rate earnings used to value Action at 30 September 2021
remained at 18.5x net of the liquidity discount. Based on the valuation of the
investment at 30 September 2021, a 1.0x movement in Action's post-discount
multiple would have an impact of £383 million on the valuation of 3i's
investment.
DCF
Audley Travel remains valued on a DCF basis and its valuation reflects our
continuing expectation that a sustained recovery in the UK and US travel
markets to 2019 levels will take some time.
Imminent sale
At 30 September 2021, Magnitude Software was valued on an imminent sale basis
after we agreed a sale of the business at a 109% uplift to opening value at 31
March 2021. The significant uplift reflects the current market conditions,
investments made in the business during our ownership, and the strategic value
of the business. We received proceeds of £345 million in November 2021 from
the divestment.
Quoted portfolio
Basic-Fit is the only quoted asset in the Private Equity portfolio. We
recognised an unrealised value gain of £45 million from Basic-Fit in the
period (September 2020: £28 million) as its share price increased to €39.58
at 30 September 2021 (31 March 2021: €32.85). In April 2021, Basic-Fit
raised further capital at €34 per share. We did not participate in that
equity raise and, as a result, our residual stake was reduced from 12.8% to
11.6%. At 30 September 2021, our residual 11.6% shareholding was valued at
£261 million (31 March 2021: 12.8% shareholding valued at £214 million). In
November 2021, we announced the partial sale of our stake in Basic-Fit at
€44.25 per share, generating proceeds of c.£146 million. We retain a 5.7%
holding in that business.
Private Equity proprietary capital
At 30 September 2021, the portfolio consisted of 34 assets (31 March 2021: 33
assets). The value of 3i's Private Equity proprietary capital increased to
£11.1 billion (31 March 2021: £8.8 billion) principally due to unrealised
value movements in the period.
Table 8: Private Equity 3i proprietary capital
Proprietary capital value Vintage Proprietary capital value Vintage
30 September 2021 money multiple(3) 31 March 2021 money multiple(3)
Vintages(1) £m 30 September 2021 £m 31 March 2021
Buyouts 2010-2012 2,096 11.3x 1,569 10.2x
Growth 2010-2012 18 2.1x 16 2.1x
2013-2016 953 2.2x 829 2.1x
2016-2019 2,505 1.8x 2,062 1.4x
2019-2022 863 1.3x 745 1.1x
Other(2) 4,680 n/a 3,593 n/a
Total 11,115 8,814
1 Assets included in these vintages are disclosed in the Glossary at the end of
this document.
2 Includes value of £4,004 million (31 March 2021: £2,997 million) held in
Action through the 2020 Co-investment vehicles and 3i.
3 Vintage money multiple includes unrealised value.
The value of the Private Equity portfolio including third-party capital
increased to £14.8 billion (31 March 2021: £11.6 billion) principally due to
the increase in the valuations of Action and several other top 20 Private
Equity assets.
Table 9: Private Equity assets by geography
3i carrying value
at 30 September 2021
3i office location Number of companies £m
Netherlands 5 7,219
France 2 548
Germany 7 922
UK 8 904
US 9 1,500
Other 3 22
Total 34 11,115
Infrastructure
Our infrastructure business generated a GIR of £60 million, or 5% on the
opening portfolio value (September 2020: £134 million, 12%) in the period,
principally from 3iN's share price appreciation and dividend income.
Table 10: Gross investment return for the six months to 30 September
2021 2020
Investment basis £m £m
Realised profits 3 -
Unrealised profits on the revaluation of investments 30 127
Dividends 15 14
Interest income from investment portfolio 5 5
Foreign exchange on investments 7 (16)
Movement in the fair value of derivatives - 4
Gross investment return 60 134
Gross investment return as a % of opening portfolio value 5% 12%
3iN performance
The 3iN portfolio is performing strongly, with the majority of its portfolio
companies meeting or exceeding the expectations set at the beginning of this
financial year. In the six months to 30 September 2021, 3iN generated a total
return on opening NAV of 10.6% (September 2020: 4%) and is on track to meet
its dividend target of 10.45 pence per share, up 6.6% year-on-year.
In the period, 3iN completed the acquisition of a 60% stake in DNS:NET, an
independent telecommunications provider in Germany, for €182 million, and
invested £12 million in ESVAGT to fund further growth in the offshore wind
segment, including three new Service Operation Vessels ("SOV") under long term
charter with MHI Vestas. In April 2021, Joulz, an existing portfolio company,
completed the acquisition of Zonel Energy, a provider of solar rooftop
solutions to businesses across the Netherlands. At the end of September 2021,
3iN announced the divestment of Oystercatcher's four European terminals
driving a 69% uplift to its 31 March 2021 valuation. Oystercatcher continues
to own a 45% stake in Oiltanking Singapore Limited. Oystercatcher's unrealised
money multiple is now 3.0x and unrealised IRR is 13.9% over 3iN's 14-year
investment period.
As 3iN's investment manager, 3i received a management fee of £16 million in
the period (September 2020: £12 million).
Performance of 3i's proprietary capital Infrastructure portfolio
Table 11: Unrealised profits on the revaluation of Infrastructure
investments(1) in the six months to 30 September
2021 2020
£m £m
Quoted 20 113
DCF 8 7
Fund 2 1
Imminent sale - 6
Total 30 127
1 More information on our valuation methodology, including definitions and
rationale, is included in our Annual report and accounts 2021 on pages 188 to
189.
Quoted stake in 3iN
3iN's share price increased by 3% in the first half of the year and closed at
304 pence on 30 September 2021 (31 March 2021: 296 pence). We recognised £20
million of unrealised profits on our 3iN investment and £13 million of
dividend income (September 2020: £113 million of unrealised value growth and
£12 million of dividend income). At 30 September 2021, our investment in 3iN
was valued at £817 million (31 March 2021: £797 million).
US Infrastructure
Regional Rail has seen good performance with the business benefitting from its
geographic and end-market diversification. Smarte Carte performed well in the
period compared to the same period in 2020, with its airport carts segment
being the key driver of performance, following an accelerated recovery of US
domestic leisure travel. However, caution remains over the timing of the
recovery of the international travel market. Both assets were valued on a DCF
basis at 30 September 2021.
Other funds
The 3i European Operational Projects Fund and 3i Managed Infrastructure
Acquisitions LP performed in line with expectations in the period. At the end
of September 2021, the 3i European Operational Projects Fund made a c.€30
million commitment to invest in NEoT Green Mobility to fund its pipeline of
future projects of which €6.5 million has been drawn to date. The fund is
now c.70% committed. In the period we recognised £6 million of realised
proceeds from KMC Roads, an investment in our 3i India Infrastructure Fund.
Infrastructure AUM increased to £5.1 billion (31 March 2021: £4.9 billion)
and we generated fee income of £23 million from our fund management
activities in the period (September 2020: £19 million).
Table 12: Assets under management as at 30 September 2021
Fee
income
% invested(2) at earned in
Close 3i commitment/ Remaining 3i September AUM the period
Fund/strategy date Fund size share commitment 2021 £m £m
3iN(1) Mar 07 n/a £817m n/a n/a 2,706 16
3i Managed Infrastructure Acquisitions LP Jun 17 £698m £35m £5m 86% 979 3
3i European Operational Projects Fund Apr 18 €456m €40m €14m 62% 242 1
BIIF May 08 £680m n/a n/a 90% 462 2
3i India Infrastructure Fund Mar 08 US$1,195m US$250m USD$35m 73% - -
3i managed accounts various n/a n/a n/a n/a 353 1
US Infrastructure various n/a n/a n/a n/a 310 -
Total 5,052 23
1 AUM based on the share price at 30 September 2021.
2 % invested is the capital deployed into investments against the total Fund
commitment.
Scandlines
Scandlines generated a GIR of £30 million (September 2020: £15 million) or
7% of opening portfolio value (September 2020: 3%) in the period.
Table 13: Gross investment return for the six months to 30 September
2021 2020
Investment basis £m £m
Unrealised profit on the revaluation of investments 30 12
Foreign exchange on investments 4 11
Movement in the fair value of derivatives (4) (8)
Gross investment return 30 15
Gross investment return as a % of opening portfolio value 7% 3%
Performance
Scandlines performed well in the period. Freight volumes remained resilient
and were ahead of 2019 levels. As expected, leisure travel and shopping ticket
volumes were weak in the first six months of 2021 as a result of travel
restrictions. However, following the lifting of restrictions at the start of
July 2021, leisure travel trading has improved, and volumes are now back to
2019 levels. The business remains cash generative and is well positioned to
resume its distributions.
At 30 September 2021, Scandlines was valued at £469 million (31 March 2021:
£435 million) on a DCF basis.
Foreign exchange
We hedge the balance sheet value of our investment in Scandlines. We
recognised no gain or loss on foreign exchange translation (September 2020:
£3 million gain).
Overview of financial performance
3i generated a total return of £2,199 million, or a profit on opening
shareholders' funds of 24%, in the six months to 30 September 2021 (September
2020: £1,142 million, or 15%). The diluted NAV per share at 30 September 2021
increased to 1,153 pence (31 March 2021: 947 pence) after the payment of the
second FY2021 dividend of £203 million, or 21.0 pence per share (September
2020: £169 million, 17.5 pence per share) in July 2021.
Table 14: Gross investment return for the six months to 30 September
2021 2020
Investment basis £m £m
Private Equity 2,373 1,245
Infrastructure 60 134
Scandlines 30 15
Gross investment return 2,463 1,394
Gross investment return as a % of opening portfolio value 24% 17%
Total comprehensive income ("Total return") 2,199 1,142
Total return on opening shareholders' funds 24% 15%
GIR was £2,463 million in the period (September 2020: £1,394 million) driven
by the strong performance of Action and the majority of our other top 20
investments. The GIR also includes a £104 million net foreign currency gain
on translation of our investments (September 2020: £88 million gain). Further
information on the Private Equity, Infrastructure and Scandlines valuations is
included in their respective sections of this Business and Financial review.
Operating cash (loss)/profit
Table 15: Operating cash (loss)/profit for the six months to 30 September
2021 2020
£m £m
Cash fees from external funds 24 19
Cash portfolio fees 3 2
Cash portfolio dividends and interest 26 62
Cash income 53 83
Cash operating expenses(1) (72) (69)
Operating cash (loss)/profit (19) 14
1 Cash operating expenses include operating expenses paid and lease payments.
3i generated an operating cash loss of £19 million in the period (September
2020: £14 million profit). Cash income decreased to £53 million (September
2020: £83 million) principally due to the reduction of dividend income
compared to the same period last year, which included a significant
non-recurring dividend. Cash operating expenses incurred during the period
increased to £72 million (September 2020: £69 million) driven principally by
higher variable compensation costs. We expect to report an operating cash
profit at 31 March 2022, due to a good pipeline of cash income.
Foreign exchange
At 30 September 2021, 86% of the Group's assets were denominated in euros or
US dollars (31 March 2021: 84%). The Group recorded a total foreign exchange
gain of £98 million net of derivatives during the period (September 2020:
£80 million) as a result of the weakening of sterling against the euro and US
dollar.
Table 16: Net assets and sensitivity by currency at 30 September 2021
Net 1%
assets sensitivity
FX rate £m % £m
Sterling n/a 1,269 12 n/a
Euro(1) 1.1633 7,813 70 77
US dollar 1.3481 1,827 16 18
Danish krone 8.6500 240 2 2
Other n/a 24 - n/a
Total 11,173
1 Sensitivity impact is net of derivatives.
Carried interest and performance fees payable and receivable
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 that carry received to participants in our carry plans.
Carried interest at 30 September 2021 was calculated assuming that remaining
assets in the portfolio were realised at their fair value at that date.
Table 17: Carried interest and performance fees for the six months to 30
September
Consolidated statement of comprehensive income 2021 2020
£m £m
Carried interest and performance fees receivable
Private Equity 2 (2)
Total 2 (2)
Carried interest and performance fees payable
Private Equity (194) (61)
Infrastructure (6) (2)
Total (200) (63)
Net carried interest payable (198) (65)
Table 18: Carried interest and performance fees
Consolidated statement of financial position 30 September 31 March
2021 2021
£m £m
Carried interest and performance fees receivable
Private Equity 10 8
Infrastructure - 8
Total 10 16
Carried interest and performance fees payable
Private Equity (727) (533)
Infrastructure (10) (27)
Total (737) (560)
Carried interest and performance fees payable
In Private Equity, we typically accrue net carried interest payable at between
10% and 13% of gross investment return. We accrued carried interest payable of
£194 million (September 2020: £61 million) for Private Equity in the period.
This was driven by the strong gross investment return generated from the
2016-19 vintage and the continued strong performance of the 2010-12 vintage,
which includes Action. We are not yet accruing carried interest payable for
the 2019-22 vintage.
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 length of time
between investment and realisation, the schemes are long term in nature and
active for a number of years. Their participants are both current and previous
employees of 3i.
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 £737 million (31 March 2021: £560
million).
Balance sheet and NAV
Table 19: Simplified consolidated balance sheet
30 September 31 March
2021 2021
Investment basis £m £m
Investment portfolio 12,784 10,408
Gross debt (975) (975)
Cash and deposits 44 225
Net debt (931) (750)
Carried interest and performance fees receivable 10 16
Carried interest and performance fees payable (737) (560)
Other net assets 47 50
Net assets 11,173 9,164
Gearing(1) 8% 8%
1 Gearing is net debt as a percentage of net assets.
The investment portfolio value increased to £12,784 million at 30 September
2021 (31 March 2021: £10,408 million) driven by unrealised profit of £2,279
million and gains on foreign exchange translation offsetting net divestment.
At 30 September 2021 the Group had net debt of £931 million (31 March 2021:
£750 million) after the payment of the second FY2021 dividend of £203
million, carried interest of £13 million and net divestment of
£64 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 reduced to £544 million at 30 September 2021 (31 March 2021: £725
million) and comprised cash and deposits of £44 million (31 March 2021: £225
million) and an undrawn facility of £500 million (31 March 2021: £500
million).
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 in the Reconciliation of the Investment
basis to IFRS section. The table below defines our additional APMs and should
be read in conjunction with our Annual report and accounts 2021.
APM Purpose Calculation Reconciliation to IFRS
Gross investment return as a percentage of opening portfolio value A measure of the performance of our proprietary investment portfolio. For It is calculated as the gross investment return, as shown in the Investment The equivalent balances under IFRS and the reconciliation to the Investment
further information, see the Group KPIs in our Annual report and accounts basis Consolidated statement of comprehensive income, as a % of the opening basis are shown in the Reconciliation of consolidated statement of
2021. portfolio value. comprehensive income and the Reconciliation of consolidated statement of
financial position respectively.
Cash realisations Cash proceeds from our investments support our returns to shareholders, as The cash received from the disposal of investments in the period as shown in The equivalent balance under IFRS and the reconciliation to the Investment
well as our ability to invest in new opportunities. For further information, the Investment basis Consolidated cash flow statement. basis is shown in the Reconciliation of consolidated cash flow statement.
see the Group KPIs in our Annual report and accounts 2021.
Cash investment Identifying new opportunities in which to invest proprietary capital is the The cash paid to acquire investments in the period as shown on the Investment The equivalent balance under IFRS and the reconciliation to the Investment
primary driver of the Group's ability to deliver attractive returns. For basis Consolidated cash flow statement. basis is shown in the Reconciliation of consolidated cash flow statement.
further information, see the Group KPIs in our Annual report and accounts
2021.
Operating cash By covering the cash cost of running the business with cash income, we reduce The cash income from the portfolio (interest, dividends and fees) together The equivalent balance under IFRS and the reconciliation to the Investment
profit/(loss) the potential dilution of capital returns. For further information, see the with fees received from external funds less cash operating expenses and leases basis is shown in the Reconciliation of consolidated cash flow statement.
Group KPIs in our Annual report and accounts 2021. payments as shown on the Investment basis Consolidated cash flow statement.
The calculation is shown in Table 15 of the Overview of financial performance.
Net cash/(net debt) A measure of the available cash to invest in the business and an indicator of Cash and cash equivalents plus deposits less loans and borrowings as shown on The equivalent balance under IFRS and the reconciliation to the Investment
the financial risk in the Group's balance sheet. the Investment basis Consolidated statement of financial position. basis is shown in the Reconciliation of consolidated statement of financial
position.
Gearing A measure of the financial risk in the Group's balance sheet. Net debt (as defined above) as a % of the Group's net assets under the The equivalent balance under IFRS and the reconciliation to the Investment
Investment basis. It cannot be less than zero. basis is shown in the Reconciliation of 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
2021, which can be accessed on the Group's website at www.3i.com
(http://www.3i.com) .
The principal risks to the achievement of the Group's strategic objectives for
the remaining six months of its financial year are largely unchanged from
those reported on pages 58 to 62 of the Annual report and accounts 2021. The
impact and likelihood of the majority of the Group's principal risks were
stable in the period.
Covid-19
The Covid-19 vaccine roll-out has enabled a gradual re-opening of economies in
the period but with evidence of increased price inflation, material and labour
shortages and supply chain disruption. These economic headwinds have the
potential to affect the pace of recovery and, in turn, trading, liquidity and
valuations in varying degrees across the investment portfolio. As outlined
below, 3i has a well-funded balance sheet and the investment portfolio has
continued to perform well.
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 ongoing uncertainty in the outlook for the global
economy which will be influenced by the continuing effectiveness of Covid-19
vaccine programmes and the extent to which inflation and supply-side
constraints impact the recovery momentum. 3i is not immune to these wider
market conditions; however, our balance sheet is well funded with low holding
company debt and we have a diverse portfolio of international companies
operating in a range of different sectors.
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 show strong performance in the current economic
conditions. Covid-19 restrictions continue to affect a very limited number of
portfolio assets in the most exposed sectors e.g. travel, but these are not
material to the overall performance.
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 largely unaffected by the ongoing
impact of Covid-19 related restrictions, and the transition from remote to
more hybrid, office-based working arrangements. This includes the continued
resilience and security of the Group's IT systems; maintaining robust
processes and internal controls; and providing appropriate levels of support
for our staff. Staff turnover rates have remained low notwithstanding an
increasingly competitive recruitment market.
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 2021.
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 2021 on page 45.
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 below.
Reconciliation of consolidated statement of comprehensive income
Six months to 30 September 2021 Six months to 30 September 2020
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments Basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes £m £m £m £m £m £m
Realised profits over value 1,2 15 (4) 11 3 2 5
on the disposal of investments
Unrealised profits 1,2 2,279 (1,205) 1,074 1,210 (605) 605
on the revaluation of investments
Fair value movements 1 - 1,094 1,094 - 634 634
on investment entity subsidiaries
Portfolio income
Dividends 1,2 25 (3) 22 57 (27) 30
Interest income from investment portfolio 1,2 38 (25) 13 30 (20) 10
Fees receivable 1,2 2 1 3 6 1 7
Foreign exchange on investments 1,4 108 (66) 42 92 (78) 14
Movement in the fair value of derivatives (4) - (4) (4) - (4)
Gross investment return 2,463 (208) 2,255 1,394 (93) 1,301
Fees receivable from external funds 25 - 25 21 - 21
Operating expenses 1,3 (56) - (56) (58) 1 (57)
Interest received 1 - - - (1) 1 -
Interest paid (27) - (27) (23) - (23)
Exchange movements 1,4 (6) 5 (1) (8) 5 (3)
Income from investment entity subsidiaries 1 - 11 11 - 12 12
Operating profit before carried interest 2,399 (192) 2,207 1,325 (74) 1,251
Carried interest
Carried interest and performance 1,3 2 - 2 (2) - (2)
fees receivable
Carried interest and performance 1,3 (200) 190 (10) (63) 68 5
fees payable
Operating profit before tax 2,201 (2) 2,199 1,260 (6) 1,254
Tax charge 1,3 (2) - (2) - - -
Profit for the period 2,199 (2) 2,197 1,260 (6) 1,254
Other comprehensive income that may
be reclassified to the income statement
Exchange differences on translation of foreign operations 1,4 - 2 2 - 6 6
Other comprehensive expense that will not
be reclassified to the income statement
Re-measurement of defined - - - (118) - (118)
benefit plans
Other comprehensive income/(expense) for the period - 2 2 (118) 6 (112)
Total comprehensive income for 2,199 - 2,199 1,142 - 1,142
the period ("Total return")
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 2021.
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 2021 As at 31 March 2021
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Notes £m £m £m £m £m £m
Assets
Non-current assets
Investments
Quoted investments 1 1,078 (261) 817 1,011 (214) 797
Unquoted investments 1 11,706 (6,407) 5,299 9,397 (5,184) 4,213
Investments in investment entity subsidiaries 1,2 - 5,983 5,983 - 4,905 4,905
Investment portfolio 12,784 (685) 12,099 10,408 (493) 9,915
Carried interest and performance 1 10 1 11 8 1 9
fees receivable
Other non-current assets 1 60 (4) 56 54 (2) 52
Intangible assets 7 - 7 8 - 8
Retirement benefit surplus 55 - 55 55 - 55
Property, plant and equipment 4 - 4 5 - 5
Right of use asset 15 - 15 16 - 16
Derivative financial instruments 9 - 9 16 - 16
Deferred income taxes 1 - 1 1 - 1
Total non-current assets 12,945 (688) 12,257 10,571 (494) 10,077
Current assets
Carried interest and performance 1 - - - 8 - 8
fees receivable
Other current assets 1 20 (2) 18 21 - 21
Current income taxes 2 - 2 2 - 2
Derivative financial instruments 9 - 9 10 - 10
Cash and cash equivalents 1 44 (7) 37 225 (9) 216
Total current assets 75 (9) 66 266 (9) 257
Total assets 13,020 (697) 12,323 10,837 (503) 10,334
Liabilities
Non-current liabilities
Trade and other payables 1 (24) 7 (17) (24) 7 (17)
Carried interest and performance 1 (732) 689 (43) (543) 494 (49)
fees payable
Loans and borrowings (975) - (975) (975) - (975)
Retirement benefit deficit (29) - (29) (29) - (29)
Lease liability (11) - (11) (13) - (13)
Derivative financial instruments (1) - (1) - - -
Deferred income taxes (1) - (1) (1) - (1)
Provisions (2) - (2) (2) - (2)
Total non-current liabilities (1,775) 696 (1,079) (1,587) 501 (1,086)
Current liabilities
Trade and other payables 1 (61) 1 (60) (64) 2 (62)
Carried interest and performance fees payable 1 (5) - (5) (17) - (17)
Lease liability (5) - (5) (4) - (4)
Current income taxes (1) - (1) (1) - (1)
Total current liabilities (72) 1 (71) (86) 2 (84)
Total liabilities (1,847) 697 (1,150) (1,673) 503 (1,170)
Net assets 11,173 - 11,173 9,164 - 9,164
Equity
Issued capital 719 - 719 719 - 719
Share premium 789 - 789 788 - 788
Other reserves 3 9,711 - 9,711 7,721 - 7,721
Own shares (46) - (46) (64) - (64)
Total equity 11,173 - 11,173 9,164 - 9,164
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 2021 Six months to 30 September 2020
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes £m £m £m £m £m £m
Cash flow from operating activities
Purchase of investments 1 (59) 35 (24) (202) 141 (61)
Proceeds from investments 1 123 (61) 62 187 (79) 108
Amounts paid to investment entity subsidiaries 1 - (50) (50) - (647) (647)
Amounts received from investment entity subsidiaries 1 - 78 78 - 192 192
Net cash flow from derivatives 6 - 6 3 - 3
Portfolio interest received 1 - - - 5 (5) -
Portfolio dividends received 1 26 (3) 23 57 (27) 30
Portfolio fees received 1 3 - 3 2 - 2
Fees received from external funds 24 - 24 19 - 19
Carried interest and performance fees received 1 8 - 8 6 - 6
Carried interest and performance fees paid 1 (13) - (13) (400) 374 (26)
Operating expenses paid (70) - (70) (67) - (67)
Co-investment loans (paid)/received (4) - (4) 13 - 13
1
Tax paid (1) - (1) - - -
Interest received 1 - - - (1) 1 -
Net cash flow from operating activities 43 (1) 42 (378) (50) (428)
Cash flow from financing activities
Dividend paid (203) - (203) (169) - (169)
Proceeds from long-term borrowing - - - 395 - 395
Lease payments (2) - (2) (2) - (2)
Interest paid (19) - (19) (12) - (12)
Net cash flow from financing activities (224) - (224) 212 - 212
Change in cash and cash equivalents 2 (181) (1) (182) (166) (50) (216)
Cash and cash equivalents at the start of the period 2 225 (9) 216 845 (74) 771
Effect of exchange rate fluctuations 1 - 3 3 8 (2) 6
Cash and cash equivalents at the end of the period 2 44 (7) 37 687 (126) 561
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
2021 2020
(unaudited) (unaudited)
Notes £m £m
Realised profits over value on the disposal of investments 2 11 5
Unrealised profits on the revaluation of investments 3 1,074 605
Fair value movements on investment entity subsidiaries 8 1,094 634
Portfolio income
Dividends 22 30
Interest income from investment portfolio 13 10
Fees receivable 4 3 7
Foreign exchange on investments 42 14
Movement in the fair value of derivatives (4) (4)
Gross investment return 2,255 1,301
Fees receivable from external funds 4 25 21
Operating expenses (56) (57)
Interest paid (27) (23)
Exchange movements (1) (3)
Income from investment entity subsidiaries 11 12
Operating profit before carried interest 2,207 1,251
Carried interest
Carried interest and performance fees receivable 4 2 (2)
Carried interest and performance fees payable (10) 5
Operating profit before tax 2,199 1,254
Tax charge (2) -
Profit for the period 2,197 1,254
Other comprehensive income that may be reclassified to the income statement
Exchange differences on translation of foreign operations 2 6
Other comprehensive expense that will not be reclassified to the income
statement
Re-measurements of defined benefit plans - (118)
Other comprehensive income/(expense) for the period 2 (112)
Total comprehensive income for the period ("Total return") 2,199 1,142
Earnings per share
Basic (pence) 5 227.4 130.1
Diluted (pence) 5 226.9 130.0
The Notes to the accounts section forms an integral part of these financial
statements.
Condensed consolidated statement of financial position
30 September 31 March
2021 2021
(unaudited) (audited)
Notes £m £m
Assets
Non-current assets
Investments
Quoted investments 7 817 797
Unquoted investments 7 5,299 4,213
Investments in investment entity subsidiaries 8 5,983 4,905
Investment portfolio 12,099 9,915
Carried interest and performance fees receivable 11 9
Other non-current assets 56 52
Intangible assets 7 8
Retirement benefit surplus 55 55
Property, plant and equipment 4 5
Right of use asset 15 16
Derivative financial instruments 9 16
Deferred income taxes 1 1
Total non-current assets 12,257 10,077
Current assets
Carried interest and performance fees receivable - 8
Other current assets 18 21
Current income taxes 2 2
Derivative financial instruments 9 10
Cash and cash equivalents 37 216
Total current assets 66 257
Total assets 12,323 10,334
Liabilities
Non-current liabilities
Trade and other payables (17) (17)
Carried interest and performance fees payable (43) (49)
Loans and borrowings (975) (975)
Retirement benefit deficit (29) (29)
Lease liability (11) (13)
Derivative financial instruments (1) -
Deferred income taxes (1) (1)
Provisions (2) (2)
Total non-current liabilities (1,079) (1,086)
Current liabilities
Trade and other payables (60) (62)
Carried interest and performance fees payable (5) (17)
Lease liability (5) (4)
Current income taxes (1) (1)
Total current liabilities (71) (84)
Total liabilities (1,150) (1,170)
Net assets 11,173 9,164
Equity
Issued capital 719 719
Share premium 789 788
Capital redemption reserve 43 43
Share-based payment reserve 27 34
Translation reserve (3) (5)
Capital reserve 8,641 6,733
Revenue reserve 1,003 916
Own shares (46) (64)
Total equity 11,173 9,164
The Notes to the accounts section forms an integral part of these financial
statements.
Condensed consolidated statement of changes in equity
For the six months to Share-
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
£m £m £m £m £m £m £m £m £m
Total equity at the start of 719 788 43 34 (5) 6,733 916 (64) 9,164
the period
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 719 789 43 27 (3) 8,641 1,003 (46) 11,173
the period
1 Refer to the Glossary at the end of this document for the nature of the
capital and revenue reserves.
For the six months to Share-
30 September 2020
(unaudited)
Capital based
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
£m £m £m £m £m £m £m £m £m
Total equity at the start of 719 788 43 33 (2) 5,432 822 (78) 7,757
the period
Profit for the period - - - - - 1,164 90 - 1,254
Exchange differences on translation of foreign operations - - - - 6 - - - 6
Re-measurements of defined benefit plans - - - - - (118) - - (118)
Total comprehensive income for the period - - - - 6 1,046 90 - 1,142
Share-based payments - - - 11 - - - - 11
Release on exercise/forfeiture of share awards - - - (17) - - 17 - -
Exercise of share awards - - - - - (11) - 11 -
Ordinary dividends - - - - - (169) - - (169)
Issue of ordinary shares - - - - - - - - -
Total equity at the end of 719 788 43 27 4 6,298 929 (67) 8,741
the period
1 Refer to the Glossary at the end of this document 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
2021 2020
(unaudited) (unaudited)
Notes £m £m
Cash flow from operating activities
Purchase of investments (24) (61)
Proceeds from investments 62 108
Amounts paid to investment entity subsidiaries (50) (647)
Amounts received from investment entity subsidiaries 78 192
Net cash flow from derivatives 6 3
Portfolio dividends received 23 30
Portfolio fees received 3 2
Fees received from external funds 24 19
Carried interest and performance fees received 8 6
Carried interest and performance fees paid (13) (26)
Operating expenses paid (70) (67)
Co-investment loans (paid)/received (4) 13
Tax paid (1) -
Net cash flow from operating activities 42 (428)
Cash flow from financing activities
Dividend (203) (169)
paid
6
Proceeds from long-term borrowing - 395
Lease payments (2) (2)
Interest paid (19) (12)
Net cash flow from financing activities (224) 212
Change in cash and cash equivalents (182) (216)
Cash and cash equivalents at the start of the period 216 771
Effect of exchange rate fluctuations 3 6
Cash and cash equivalents at the end of the period 37 561
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 2021 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 international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. The Annual report and accounts for the
year ended 31 March 2022 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 (£m), 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
133 to 170 of the Annual report and accounts 2021. There was no change in the
current period to the critical accounting estimates and judgements applied in
2021, which are stated on page 135 of the Annual report and accounts 2021.
The financial information for the year ended 31 March 2021 and for the six
months ended 30 September 2021 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 2021, 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 outlook.
The Group has continued to perform strongly in the period, against a backdrop
of more stabilised financial markets following the global Covid-19 vaccine
deployment. 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 2021 the Group has liquidity of £544 million (31 March 2021: £725
million). Liquidity comprised of cash and deposits of £44 million (31 March
2021: £225 million) and an undrawn facility of £500 million (31 March 2021:
£500 million); and
· the stress test scenarios on the Group's portfolio. The Directors
have modelled a number of severe stress test scenarios based on the position
of the Group as at 30 September 2021. The scenarios consider the potential
impact of continued Covid-19 restrictions and the anticipated recovery profile
for each portfolio company, as well as the impact of a significant downturn
event specifically on the Group's largest asset, Action. These scenarios
include a range of estimated impacts, primarily based on providing additional
support to portfolio companies as a result of the downturn and delaying the
Group's ability to realise and make new investments. 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 a continued Covid-19 related
impact on trading activity and restrictions alongside the likely recovery
profile of portfolio companies. The severe scenarios include assumptions
modelling a "U-shaped" recovery (which considers an extended and drawn-out
recovery in which the economy is impacted by rolling lockdowns and much
reduced economic activity), and a scenario in which this "U-shaped" recovery
is combined with a material and significant deterioration in the trading
performance of the Group's largest asset, Action.
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 reduced new investment levels and drawing on
the existing RCF.
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 in the Reconciliation of the Investment basis to IFRS section earlier
in this document. Further detail on the Group's segmental analysis can be
found on pages 137 to 139 of the Annual report and accounts 2021. The
remaining Notes are prepared on an IFRS basis.
Investment basis
Private Of which is
Equity Action Infrastructure Scandlines Total(3)
Six months to 30 September 2021 £m £m £m £m £m
Realised profits over value on the disposal 12 - 3 - 15
of investments
Unrealised profits on the revaluation 2,219 1,491 30 30 2,279
of investments
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 divestment 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 £3 million of cash proceeds which
were recognised as realised proceeds in FY2021. During the period
Infrastructure recognised £4 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.
Investment basis
Private Of which is
Equity Action Infrastructure Scandlines Total(4)
Six months to 30 September 2020 £m £m £m £m £m
Realised profits over value on the disposal 3 - - - 3
of investments
Unrealised profits on the revaluation 1,071 644 127 12 1,210
of investments
Portfolio income
Dividends 43 - 14 - 57
Interest income from investment portfolio 25 - 5 - 30
Fees receivable 6 - - - 6
Foreign exchange on investments 97 89 (16) 11 92
Movement in the fair value of derivatives - - 4 (8) (4)
Gross investment return 1,245 733 134 15 1,394
Fees receivable from external funds 2 19 - 21
Operating expenses (36) (20) (2) (58)
Interest received (1)
Interest paid (23)
Exchange movements (8)
Operating profit before carried interest 1,325
Carried interest
Carried interest and performance fees receivable (2) - - (2)
Carried interest and performance fees payable (61) (2) - (63)
Operating profit before tax 1,260
Tax charge -
Profit for the period 1,260
Other comprehensive income
Re-measurements of defined benefit plans (118)
Total return 1,142
Realisations(1) 82 - - - 82
Cash investment(2) (231) - (2) - (233)
Net investment (149) - (2) - (151)
Balance sheet
Opening portfolio value at 1 April 2020 6,552 3,536 1,117 429 8,098
Investment(3) 300 - 2 - 302
Value disposed (80) - - - (80)
Unrealised value movement 1,071 644 127 12 1,210
Other movement (including foreign exchange) 47 89 (10) 11 48
Closing portfolio value at 30 September 2020 7,890 4,269 1,236 452 9,578
1 Realised proceeds may differ from cash proceeds due to timing of receipts.
During the period Private Equity received £105 million of cash proceeds which
were recognised as realised proceeds in FY2020.
2 Investment per the segmental analysis is different to cash investment per the
cashflow due to £31 million of syndication in Private Equity which was
recognised in FY2020 and received in FY2021.
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.
2 Realised profits over value on the disposal of investments
Six months to 30 September 2021 Unquoted
investments Total
£m £m
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
Six months to 30 September 2020 Unquoted
investments Total
£m £m
Realisations 5 5
Valuation of disposed investments - -
5 5
Of which:
- profit recognised on realisations 5 5
- losses recognised on realisations - -
5 5
3 Unrealised profits on the revaluation of investments
Six months to 30 September 2021 Unquoted Quoted
investments investments Total
£m £m £m
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
Six months to 30 September 2020 Unquoted Quoted
investments investments Total
£m £m £m
Movement in the fair value of investments 534 71 605
Of which:
- unrealised gains 549 71 620
- unrealised losses (15) - (15)
534 71 605
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 2021 £m £m £m
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
Private
Equity Infrastructure Total
Six months to 30 September 2020 £m £m £m
Total revenue by geography(1)
UK (1) 17 16
Northern Europe 3 2 5
North America 2 - 2
Other 3 - 3
Total 7 19 26
Revenue by type
Fees receivable(2) from portfolio 7 - 7
Fees receivable from external funds 2 19 21
Carried interest and performance fees receivable(2) (2) - (2)
Total 7 19 26
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 the Reconciliation of the
Investment basis to IFRS section earlier in this document.
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
2021 2021
Net assets per share (£)
Basic 11.55 9.50
Diluted 11.53 9.47
Net assets (£m)
Net assets attributable to equity holders of the Company 11,173 9,164
30 September 31 March
2021 2021
Number of shares in issue
Ordinary shares 973,205,270 973,166,947
Own shares (6,205,579) (8,530,634)
966,999,691 964,636,313
Effect of dilutive potential ordinary shares
Share awards 2,251,033 2,656,230
Diluted shares 969,250,724 967,292,543
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
2021 are 966,063,483 (2020: 963,542,371). 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 2021 are 968,079,404 (2020:
964,863,213).
6 months 6 months
to 30 September to 30 September
2021 2020
Earnings per share (pence)
Basic 227.4 130.1
Diluted 226.9 130.0
Earnings (£m)
Profit for the period attributable to equity holders of the Company 2,197 1,254
6 Dividends
6 months to 6 months to 6 months to 6 months to
30 September 30 September 30 September 30 September
2021 2021 2020 2020
pence pence
per share £m per share £m
Declared and paid during the period
Second dividend 21.0 203 17.5 169
21.0 203 17.5 169
Proposed first dividend 19.25 186 17.5 169
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 2021 were
£3,811 million (31 March 2020: £3,863 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 50 to 63 of the Annual
report and accounts 2021.
7 Investment portfolio
This section should be read in conjunction with Note 11 on page 145 of the
Annual report and accounts 2021, which provides more detail about initial
recognition and subsequent measurement of investments at fair value.
6 months to Year to
30 September 2021 31 March 2021
Non-current £m £m
Opening book value 5,010 3,454
Additions 32 881
- of which loan notes with nil value - (24)
Disposals, repayments and write-offs (47) (333)
Fair value movements recognised in profit or loss(1) 1,074 1,217
Other movements and net cash movements(2) 47 (185)
Closing book value 6,116 5,010
Quoted investments 817 797
Unquoted investments 5,299 4,213
Closing book value 6,116 5,010
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.
Additions in the period include cash investment of £24 million (31 March
2021: £126 million), £8 million (31 March 2021: £34 million) in capitalised
interest received by way of loan notes, of which none (31 March 2021: £24
million) were written down to nil and no transfer of assets from investment
entity subsidiaries (31 March 2021: £721 million).
In the period no transfer of assets to investment entity subsidiaries were
included within disposals, repayments and write-offs (31 March 2021: £259
million).
Included within profit or loss is £13 million (31 March 2021: £22 million)
of interest income. Interest income included £3 million (2021: £10 million)
of accrued income capitalised during the period and £10 million (2021: £12
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 146 of the
Annual report and accounts 2021, 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 2021 31 March 2021
Non-current £m £m
Opening fair value 4,905 3,936
Amounts paid to investment entity subsidiaries 50 879
Amounts received from investment entity subsidiaries (78) (281)
Fair value movement on investment entity subsidiaries 1,094 792
Transfer of portfolio investments from investment entity subsidiaries - (462)
Transfer of assets to investment entity subsidiaries 12 41
Closing fair value 5,983 4,905
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 2021.
Support
3i Group plc provides, 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 147 to
149 of the Annual report and accounts 2021 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 either Derivative financial instruments
directly (ie as prices) or indirectly (ie derived from prices)
Level 3 Inputs that are not based on observable market data Unquoted equity instruments and loan instruments
The table below shows the classification of financial instruments held at fair
value into the valuation hierarchy at
30 September 2021:
30 September 2021 31 March 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Assets
Quoted investments 817 - - 817 797 - - 797
Unquoted investments - - 5,299 5,299 - - 4,213 4,213
Investments in investment entity subsidiaries - - 5,983 5,983 - - 4,905 4,905
Other financial assets - 18 40 58 - 26 35 61
Liabilities
Other financial liabilities - (1) - (1) - - - -
Total 817 17 11,322 12,156 797 26 9,153 9,976
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
£1,169 million (31 March 2021: £1,161 million), determined with reference to
their published market prices. The carrying value of the loans and borrowings
is £975 million (31 March 2021: £975 million) and accrued interest payable
(included within trade and other payables) is £20 million (31 March 2021:
£13 million).
Level 3 fair value reconciliation - unquoted investments
Six months to Year to
30 September 31 March
2021 2021
£m £m
Opening fair value 4,213 3,036
Additions 32 584
- of which loan notes with nil value - (24)
Disposals and repayments and write-offs (47) (333)
Fair value movements recognised in profit or loss(1) 1,054 1,135
Other movements and net cash movements(2) 47 (185)
Closing fair value 5,299 4,213
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 profits over value on disposal of investment of
£11 million (September 2020: £5 million), dividend income of £9 million
(September 2020: £22 million) and foreign exchange gains of £43 million
(September 2020: £19 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 2021, two assets
changed valuation basis within level 3. One asset moved from other basis to an
earnings-based valuation 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 two assets
at 30 September 2021. Further information can be found in the Private Equity
and Infrastructure sections of the Business and Financial review.
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 sensitives to the unobservable inputs. We have
maintained a 5% sensitivity which is appropriate given the strength in
performance of our companies. For the small number of companies in our
portfolio that operate in more challenged sectors such as travel and
automotive, our fair value at the 30 September 2021, reflects the impact this
has had on performance. All numbers in the table below are on an investment
basis.
Level 3 unquoted investments
Methodology Description Inputs Fair value at 30 September 2021 (£m) Sensitivity on key unobservable input Fair value impact of sensitivities (£m) +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 10,337 For the assets valued on an earnings basis, we have applied a 5% sensitivity 618
enterprise value
(31 March 2021: 8,393) to the earnings multiple
(31 March 2021: 528)
Used for investments which are typically profitable and for which we can
determine a set of listed companies and precedent transactions, where Earnings multiples
(628)
relevant, with similar characteristics.
(31 March 2021: (539)
When selecting earnings multiple, we consider:
Action is our largest asset, and we have included a 5% sensitivity on Action's
1. Comparable listed companies' current performance and through the cycle earnings multiple of 19.5x (equivalent to 18.5x net). On a stand-alone basis,
averages. this is equal to
354
2. Relevant market transaction multiples.
(31 March 2021: 283)
3. Exit expectations and other company specific factors
(355)
(31 March 2021: (284))
For point 1 and 2 of the above we select companies in the same industry and,
where possible, with a similar business model and profile in terms of size,
products, services and customers, growth rates and geographic focus.
The pre-discount multiple ranges from 8.5x-19.5x (31 March 2021: 8.5x -
19.5x).
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 Long-term cash flows are discounted at a rate which is benchmarked against 885 For the assets valued on a DCF basis, we have applied a 5% sensitivity to the (35)
Infrastructure or alternatively businesses where DCF is more appropriate in market data, where possible, or adjusted from the rate at the initial
(31 March 2021: 831) discount rate
the short term. investment based on changes in the risk profile of the investment. (31 March 2021: (38))
37
(31 March 2021: 40)
Imminent sale (Private Equity) Used for assets where a sale has been agreed. A 2.5% discount is applied to expected proceeds net of fees. 343 n/a n/a
(31 March 2021: -)
NAV (Private Equity/Infrastructure) Used for investments in unlisted funds. Net asset value reported by the fund manager. The valuation of the underlying 73 A 5% increase on closing NAV 4
portfolio is consistent with IFRS.
(31 March 2021: 69)
(31 March 2021: 3)
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. 68 A 5% increase in the closing value 3
(31 March 2021: 104)
(31 March 2021: 5)
10 Related parties
All related party transactions that took place in the six months ending 30
September 2021 are consistent in nature with the disclosures in Note 29 on
pages 164 to 166 of the Annual report and accounts 2021. 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 2021 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
2021 2020
£m £m
Realised profits over value on the disposal of investments 1 5
Unrealised profits on the revaluation of investments 87 67
Portfolio income 6 9
Consolidated statement of financial position 30 September 31 March
2021 2021
£m £m
Unquoted investments 664 578
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 2021.
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
2021 2020
£m £m
Unrealised profits on the revaluation of investments 20 71
Dividends 13 8
Fees receivable from external funds 16 12
Consolidated statement of financial position 30 September 31 March
2021 2021
£m £m
Quoted equity investments 817 797
Performance fees receivable - 8
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 2022 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 2022 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 2021 that could materially affect the financial position or
performance of 3i Group during the first six months of the financial year
ending 31 March 2022.
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
10 November 2021
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
Caroline Banszky, non-executive Director and Chairman of the Audit and
Compliance Committee
Stephen Daintith, non-executive Director
David Hutchison, non-executive Director, Senior Independent Director and
Chairman of the Valuations Committee
Lesley Knox, non-executive Director
Coline McConville, non-executive Director and Chairman of the Remuneration
Committee
Peter McKellar, non-executive Director
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 2021 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 2021 is not prepared,
in all material respects, in accordance with UK adopted international
accounting standards and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
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 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.
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
UK.
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.
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
10 November 2021
Portfolio and other information
20 large investments
The 20 investments listed below account for 95% of the portfolio value at 30
September 2021 (31 March 2021: 95%).
Residual Residual
Business line cost(1) cost(1) Valuation Valuation
Geography September March September March
Investment First invested in 2021 2021 2021 2021 Relevant transactions
Description of business Valuation basis £m £m £m £m in the period
Action* Private Equity 623 623 6,100 4,566
General merchandise Netherlands
discount retailer 2011/2020
Earnings
3i Infrastructure plc* Infrastructure 305 305 817 797
Quoted investment UK
company, investing 2007
in infrastructure Quoted
Cirtec Medical* Private Equity 172 172 488 444 Acquisition of
Outsourced medical US Cardea in July 2021
device manufacturing 2017
Earnings
Scandlines Scandlines 529 529 469 435
Ferry operator between Denmark/Germany
Denmark and Germany 2018
DCF
Luqom* Private Equity 169 110 453 307 Acquisition of
Online lighting specialist Germany Lampemesteren
retailer 2017 in April 2021
Earnings £57 million further
investment in July
2021
Tato Private Equity 2 2 412 368
Manufacturer and seller of UK
speciality chemicals 1989
Earnings
Magnitude Software* Private Equity 139 139 343 165 Sale agreed in
Provider of unified US September 2021
application data 2019 and completed in
management solutions Imminent sale November 2021
Hans Anders* Private Equity 268 268 323 262
Value-for-money optical Netherlands
retailer 2017
Earnings
Royal Sanders* Private Equity 136 136 295 364 Distributed
Private label and contract Netherlands £84 million to 3i in
manufacturing producer of 2018 June 2021
personal care products Earnings
Evernex* Private Equity 278 272 283 281
Provider of third-party France
maintenance services for 2019
data centre infrastructure Earnings
WP* Private Equity 230 222 265 259
Supplier of plastic Netherlands
packaging solutions 2015
Earnings
Havea* Private Equity 191 187 265 242 Acquisition
Manufacturer of natural France of ixX Pharma in
healthcare and cosmetics 2017 September 2021
products Earnings
Basic-Fit Private Equity 23 23 261 214
Discount gyms operator Netherlands
2013
Quoted
Q Holding* Private Equity 162 162 254 187
Manufacturer of precision US
engineered elastomeric 2014
components Earnings
AES Engineering Private Equity 30 30 254 212
Manufacturer of mechanical UK
seals and support systems 1996
Earnings
BoConcept* Private Equity 167 165 240 161 Distributed £17
Urban living designer Denmark million to 3i in
2016 July 2021
Earnings
SaniSure* Private Equity 76 135 189 183 Returned £59
Manufacturer, distributor and US million of
integrator of single-use 2019 funding to 3i in
bioprocessing systems and Earnings July 2021
components
Smarte Carte* Infrastructure 181 176 170 160
Provider of self-serve US
vended luggage carts, 2017
electronic lockers and DCF
concession carts
MPM* Private Equity 133 128 149 124
An international branded, UK
premium and natural pet 2020
food company Earnings
Regional Rail* Infrastructure 175 175 140 131
Owns and operates US
short-line freight railroads 2019
and rail-related businesses DCF
3,989 3,959 12,170 9,862
* 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, Hans Anders,
arrivia, Luqom, Magnitude Software, Havea, Royal Sanders and Schlemmer.
2019-2022 vintage includes Evernex, SaniSure, GartenHaus, MPM, WilsonHCG,
ten23 Health and MAIT.
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.
DACH The region covering Austria, Germany and Switzerland.
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 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 figures
(https://dictionary.cambridge.org/dictionary/english/figure) compare
(https://dictionary.cambridge.org/dictionary/english/compare) financial
(https://dictionary.cambridge.org/dictionary/english/finance) results
(https://dictionary.cambridge.org/dictionary/english/result) in one period
(https://dictionary.cambridge.org/dictionary/english/period) with those for
the previous (https://dictionary.cambridge.org/dictionary/english/previous)
perio (https://dictionary.cambridge.org/dictionary/english/period) d.
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 Shareholders' capital which is available to invest to
generate profits.
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 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 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 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 FY2022 dividend is expected to be paid on 12 January 2022 to holders
of ordinary shares on the register on 3 December 2021. The ex-dividend date
will be 2 December 2021.
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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