3i Group makes 'busy' start to financial year
It was a busy start to the year for 3i Group, it reported on Wednesday, with a net asset value per share of 628p and total return of 4.1% as at 30 June.
The FTSE 100 company reported a “good level” of new investment in its private equity division during the first quarter, with £276m invested in Hans Anders and Lampenwelt and a further £241m committed to Formel D and Cirtec.
It also successfully closed two new infrastructure funds in the period - the 3i Managed Infrastructure Acquisitions Fund and the 3i European Operational Projects Fund.
“This was another good quarter for 3i and our portfolio of international investments is performing well against an improving economic backdrop,” said chief executive Simon Borrows.
“We completed or signed four new investments in Germany, the Netherlands and the US and some £250m of divestments, including the announced sale of Mémora at a significant uplift to its March 2017 value.
“We also added two new Infrastructure funds, the 3i Managed Infrastructure Acquisitions Fund and the 3i European Operational Projects Fund.”
In the private equity unit, 3i’s board said the portfolio performed “well” during the quarter, with Action continuing to see “strong” earnings growth and cash flow generation.
The division saw “robust” earnings growth across the portfolio more generally, 3i added, with a “good contribution” from ATESTEO, Q Holding and Audley Travel, together with “strong” cash flow generation from Scandlines.
“We completed our investments in Hans Anders - £172m - and Lampenwelt - £104m - in May 2017, and Formel D - £136m - in July 2017,” the board said.
“We also announced a $136m investment in Cirtec Medical, a leading provider of outsourced engineering and manufacturing to the medical device sector, which is expected to complete by 30 September 2017.”
The private equity division generated total cash proceeds of £107m in the quarter from the full realisations of MKM and Dphone at uplifts of 3% and 30% respectively, against 31 March book value.
“We also announced the sale of Mémora on 17 July 2017,” the board added.
“This disposal, which is expected to complete by the end of September 2017, will generate proceeds of £117m to 3i.
“Mémora was valued at £86 million at 31 March 2017 and has been moved to an imminent sales basis at 30 June 2017.”
The company’s infrastructure team, which advises FTSE 250 firm 3i Infrastructure, was said to be working “actively” on its more recent acquisitions - including potential follow-on investments - as well as its pipeline of possible new investments.
3i said it also invested £21m in the new 3i Managed Infrastructure Acquisitions Fund, and committed €40m to the new 3i European Operational Projects Fund, which achieved its first close in April.
“The continued weakening of sterling against the euro following the UK General Election in June 2017 contributed to a total foreign exchange gain in the quarter of £68m,” the board added.
“Based on the balance sheet at 30 June, a 1% movement in the euro and US dollar would result in a total return movement of £37m and £7m respectively.
“Altogether the diluted NAV per share increased to 628p [from 604p at 31 March], and 609.5p following the payment of the 2017 final dividend.”
3i Group said its balance sheet remained “well funded”, with net cash reducing to £161m during the period, which the board put down to investment activity in the quarter.
Liquidity reportedly remained “strong” at £1.09bn.
The £136m investment in Formel D completed on 17 July, the board confirmed, and the 18.5p 2017 final dividend - a total of £178m - was paid on 21 July.