TIDMIII
RNS Number : 4605Y
3i Group PLC
13 May 2021
13 May 2021
3i Group plc announces results for the year to 31 March 2021
Strong result built on structural growth trends despite Covid-19
disruption
-- Total return of GBP1,726 million or 22% on opening
shareholders' funds (March 2020: GBP253 million, 3%) and NAV per
share of 947 pence (31 March 2020: 804 pence) after paying 35 pence
of dividends in the year. This result is net of a foreign exchange
translation loss of 41 pence per share and the 13 pence per share
negative accounting impact from a fundamental de-risking of the UK
defined benefit pension plan.
-- Our Private Equity business delivered a gross investment
return of GBP1,936 million or 30% (March 2020: GBP352 million, 6%).
Many of our portfolio companies are supported by structural growth
trends and have either excelled during the pandemic or adapted to
the changing environment very quickly. In FY2021 we saw strong
momentum in earnings growth and cash generation in portfolio
companies operating in consumer goods, e-commerce, healthcare and
business and technology services, while those operating in the
travel and automotive segments continued to face challenges.
-- Action delivered annual revenue growth of 10% and EBITDA
growth of 14% in the year to December 2020, despite prolonged
periods of disruption as a result of the pandemic. The strength of
this result proves the power of its unique customer proposition,
its ability to adapt quickly to changing circumstances and the
strength of its financial model and cash generation capabilities.
This strong performance underpinned value growth of GBP1,202
million in the year .
-- In competitive markets for new investment the Private Equity
team remained selective and price disciplined, making three new
investments in the year in MPM, WilsonHCG and GartenHaus, for a
total of GBP275 million . We continued to focus on M&A activity
by our portfolio companies and completed eight bolt-on acquisitions
in total during the year, including the transformational
acquisitions of Technogroup by Evernex and SaniTech West by our
Bioprocessing platform, since rebranded as SaniSure. In total, we
contributed GBP124 million to fund three bolt-on acquisitions in
the portfolio . Only two of our portfolio companies have required
liquidity support since the outbreak of the pandemic and in the
year we provided a total of GBP66 million of funding to support
Audley Travel and Hans Anders in this challenging environment.
-- Our Infrastructure business delivered a gross investment
return of GBP178 million, or 16% (March 2020: GBP(39) million,
(4)%). This return was driven by the increase in 3i Infrastructure
plc ("3iN")'s share price and strong dividend income. Our US
Infrastructure portfolio proved to be resilient in the year.
Regional Rail, one of our two US investments, completed a
refinancing package in March 2021, returning proceeds of GBP74
million to 3i.
-- Scandlines delivered a solid gross investment return of GBP25
million, or 6% (March 2020: GBP5 million, 1%) despite significant
travel restrictions impacting leisure travel on its ferry
crossings. Its freight activity remained stable in 2020, with
volumes close to 2019 levels.
-- Total dividend of 38.5 pence per share for FY2021, with a
second FY2021 dividend of 21.0 pence per share to be paid in July
2021 subject to shareholder approval.
Simon Borrows, 3i's Chief Executive , commented:
"3i delivered a strong result in FY2021 during a period of
unprecedented uncertainty and disruption caused by the Covid-19
pandemic. This outcome was supported by the resilient performance
of our Private Equity and Infrastructure portfolios, our strong
balance sheet and the capabilities of our experienced team.
We enter our new financial year in the knowledge that we have a
high quality investment portfolio with broad exposure to sectors
with strong underlying growth, as well as a net asset value
grounded in 'through the cycle' valuation multiples, rather than
reflecting some of the very high valuations we are witnessing in
markets at present. We are also maintaining strong price discipline
and avoiding the exuberance seen in many of today's transactions as
we add to our high-quality portfolio."
Financial highlights
Year to/as at Year to/as at
31 March 31 March
2021 2020
------------------------------------------------- -------------- --------------
Group
Total return GBP1,726m GBP253m
Operating expenses GBP(112)m GBP(116)m
Operating cash profit GBP23m GBP40m
================================================= ============== ==============
Realised proceeds GBP218m GBP918m
Gross investment return GBP2,139m GBP318m
- As a percentage of opening 3i portfolio value 26% 4%
Cash investment GBP510m GBP1,248m
3i portfolio value GBP10,408m GBP8,098m
Gross debt GBP975m GBP575m
Net (debt)/cash GBP(750)m GBP270m
Gearing(1) 8% nil
Liquidity GBP725m GBP1,245m
Net asset value GBP9,164m GBP7,757m
Diluted net asset value per ordinary share 947p 804p
Total dividend per share 38.5p 35p
1 Gearing is net debt as a percentage of net assets.
S
For further information, please contact:
Silvia Santoro
Group Investor Relations Director Tel: 020 7975 3258
Kathryn van der Kroft
Communications Director Tel: 020 7975 3021
For further information regarding the announcement of 3i's
annual results to 31 March 2021, including a live webcast of the
results presentation at 10.00am, please visit www.3i.com .
Notes to editors
3i is a leading international investment manager focused on
mid-market Private Equity and Infrastructure. Our core investment
markets are northern Europe and North America. For further
information, please visit: www.3i.com .
Notes to the announcement of the results
Note 1
All of the financial data in this announcement is taken from the
Investment basis financial statements. The statutory accounts are
prepared under IFRS for the year to 31 March 2021 and have not yet
been delivered to the Registrar of Companies. The statutory
accounts for the year to 31 March 2020 have been delivered to the
Registrar of Companies. The auditor's reports on the statutory
accounts for these years are unqualified and do not contain any
matters to which the auditor drew attention by way of emphasis or
any statements under section 498(2) or (3) of the Companies Act
2006. This announcement does not constitute statutory accounts.
Note 2
Copies of the Annual report and accounts 2021 will be
distributed to shareholders on or soon after 25 May 2021.
Note 3
This announcement may contain statements about the future
including certain statements about the future outlook for 3i Group
plc and its subsidiaries ("3i"). 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.
Note 4
Subject to shareholder approval, the proposed second dividend is
expected to be paid on 23 July 2021 to holders of ordinary shares
on the register on 18 June 2021. The ex-dividend date will be 17
June 2021.
Our purpose
We generate attractive returns for our shareholders and
co-investors by investing in private equity and infrastructure
assets.
As proprietary capital investors we have a long-term,
responsible approach.
We create value through thoughtful origination, disciplined
investment and active management of our assets, driving sustainable
growth in our investee companies.
Chairman's statement
In challenging circumstances, 3i delivered a strong result in
our financial year to 31 March 2021 ("FY2021"). Our Private Equity
and Infrastructure portfolios have demonstrated resilience and
adaptability and have continued to generate attractive returns for
shareholders.
Market environment and performance
We began our financial year at a time of unprecedented
uncertainty as Covid-19 spread across the world. Since then,
extraordinary public health measures have been put in place to
mitigate the impact of the pandemic and record levels of fiscal and
monetary stimulus have been deployed by governments and central
banks in our major markets to support business and protect the
economy. Following the initial sharp fall towards the end of March
2020, global markets have rallied significantly but remain
susceptible to volatility as the situation develops. As we move
into our financial year to 31 March 2022 ("FY2022"), the successful
global deployment of vaccines and other health measures are
critical to restoring confidence and stability.
In the midst of the pandemic, the transition period for
Britain's departure from the EU ended on 31 December 2020. Our
portfolio was not exposed to significant Brexit risks and the end
of the transition period brought no major disruption to our
business or portfolio.
The pandemic has accelerated a number of existing economic and
social trends. These have been reflected in the good performance of
many of our portfolio companies, which have demonstrated resilience
and delivered strong performance in the year to 31 March 2021. This
includes our investments in the consumer goods, e-commerce,
healthcare and business and technology services sectors and our
infrastructure assets. There were weaker performances in the
smaller proportion of our portfolio operating in more challenged
sectors, including travel and automotive. The Group's total return
for the year was GBP1,726 million (2020: GBP253 million). Net asset
value ("NAV") increased to 947 pence per share (31 March 2020: 804
pence) and our total return on opening shareholders' funds was 22%
(2020: 3%).
Dividend
Our dividend policy is to maintain or grow the dividend
year-on-year, subject to balance sheet strength and the outlook for
investment and realisation levels. 3i has not received any
government support, furloughed any employees, nor made any
employees redundant as a result of the pandemic. Even though we
have not been using some of our offices for the past 12 months, we
have maintained our third-party outsourced support, including
office cleaning, maintenance and reception services. We provided
liquidity support for two of our portfolio companies and have
capacity to support other portfolio companies, if required.
Recognising the importance of our dividend to institutional and
private shareholders, we maintained shareholder dividends during
FY2021, paying a first dividend of 17.5 pence per share in January
2021. In line with the Group's policy and in recognition of the
Group's financial performance, the Board recommends a second FY2021
dividend of 21.0 pence (2020: 17.5 pence), subject to shareholder
approval, which will take the total dividend to 38.5 pence (2020:
35.0 pence).
Board
During the year to 31 March 2021, Jonathan Asquith, Deputy
Chairman and Senior Independent Director, and Peter Grosch retired
from the Board. I would like to thank both for their valuable
contribution to 3i. David Hutchison was appointed Senior
Independent Director to succeed Jonathan with effect from 25 June
2020. Peter McKellar will join the Board as a non-executive
Director with effect from 1 June 2021. As set out in his biography
in our Annual report and accounts 2021, Peter McKellar brings
highly relevant experience of asset management and private markets.
As part of the long-term succession planning for the Board, I will
not seek re-election at the AGM in 2022. The Nominations Committee
will conduct a search process to identify my successor as chair and
I will step down after an appropriate handover has been
completed.
Our people
The health and wellbeing of our employees and contractors has
been a key priority since the pandemic broke out. For the vast
majority of FY2021, the 3i team has worked remotely and I have been
impressed with how well our colleagues have adapted, while
maintaining their normal high standards of performance. I would
like to thank everyone at 3i and our portfolio companies for their
outstanding contribution during a very challenging year.
Outlook
FY2022 is likely to be another year of social and economic
uncertainty, as many countries continue to face high levels of
Covid-19 infection. Both the Group and our underlying portfolio
have demonstrated strength and resilience over the past 12 months
and, with a strong balance sheet and our experienced investment
teams, we are confident that we are well positioned for FY2022.
Simon Thompson
Chairman
12 May 2021
Chief Executive's statement
"I have been very impressed by how the 3i team has adapted to
getting things done remotely and how well our investment portfolio
has performed during this highly unusual period."
Simon Borrows, Chief Executive
The Group delivered a strong result in FY2021 during a period of
unprecedented uncertainty and disruption caused by the Covid-19
pandemic. This outcome was supported by the resilient performance
of our Private Equity and Infrastructure portfolios, our strong
balance sheet and the capabilities of our experienced team. Our
investment markets remain awash with uninvested capital, but our
strong networks and patient approach meant we completed three new
Private Equity investments at attractive prices, whilst continuing
our focus on enhancing the value of both portfolios through
buy-and-build opportunities. We start our new financial year with a
well-positioned balance sheet and a portfolio of assets that have
good momentum and are strategically positioned to continue to drive
attractive returns for our shareholders.
As an investment institution, our business model is to allocate,
invest and manage risk capital. We do this from a platform
that has good and responsible values, a grounded team culture,
a prudent financial approach and a wide international reach
and diversity through our well-established office network.
Our investment executives are able to use the power of broader
portfolio experience and learnings to grow and improve each
specific investment. This only works with rigorous processes,
robust central control and an uncompromising attitude to the
resilience of the investment portfolio, all of which is governed
by the Investment Committee.
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The start of FY2021 coincided with lockdowns across many of the
geographies in which we and our portfolio companies operate. Our
primary focus was to protect the wellbeing of our own employees,
those of our portfolio companies and of the communities in which we
collectively operate. Our rigorous portfolio management processes
allowed us to identify and respond quickly and effectively to the
challenges that arose as a result of the spring 2020 lockdowns. As
we moved into the summer, our portfolio companies quickly recovered
momentum even though their operations continued to be interrupted
throughout the year by varying degrees of restrictions.
Our investment strategy over the last 10 years has been focused
on assets that are exposed to secular growth trends, including the
growth of value-for-money retail and e-commerce. The pandemic has
resulted in an acceleration of these trends, as well as an
increased focus on health and hygiene, from which our portfolio
continues to benefit. As a result, the Group generated a total
return on shareholders' funds of GBP1,726 million, or 22% (2020:
GBP253 million, or 3%), ending the year with a NAV per share of 947
pence (31 March 2020: 804 pence). Our results include the
significant negative impact of currency translation; 84% of the
Group's assets are denominated in euros or US dollars and we
recorded a net foreign exchange loss of GBP396 million from the
strength of sterling in the latter part of the year. Our total
return was also reduced by an accounting loss of GBP122 million as
we reflected the commercial outcome of the Trustees' decision to
enter into a final buy-in of the UK pension plan's liabilities,
meaning we are no longer exposed to longevity, interest or
inflation risk on the pension plan, and without making any further
cash contribution. Together, the foreign exchange translation loss
and revaluation of the pension plan resulted in a 54 pence
reduction to our FY2021 NAV per share.
Record levels of dry powder, robust credit markets and pent-up
demand following a period of limited global activity in the initial
phases of the Covid-19 pandemic have led to aggressive pricing and
competition in both the Private Equity and Infrastructure asset
classes. We have remained focused and selective in our origination
efforts despite this environment, deploying GBP275 million in three
new Private Equity investments, whilst also financing our Private
Equity portfolio companies with GBP124 million to fund M&A
activity.
Private Equity performance
In the 12 months to 31 March 2021, the Private Equity portfolio
delivered a gross investment return ("GIR") of 30% (2020: 6%). Many
of our portfolio companies have either excelled in this challenging
environment or adapted to the changing circumstances very quickly
and, as a result, 87% of our portfolio by value grew their LTM
adjusted earnings to December 2020.
Action is the leading general merchandise discount retailer in
Europe and our largest investment. In the year to December 2020,
which included a 53rd week, Action delivered revenue growth of 10%
and finished the year with operating EBITDA of EUR616 million, a
14% increase on 2019, despite the Covid-19 pandemic. The strength
of this result re-emphasises the power of Action's unique customer
proposition, its ability to quickly adapt to changing circumstances
and the strength of its financial model and cash generation
capabilities.
Action's performance in 2020 alternated between periods of
robust performance leading up to and after the initial 2020
lockdowns and subsequent periods of disrupted performance due to
restrictions on trading. In the first 11 weeks of 2020, Action
recorded very strong performance with like-for-like ("LFL") sales
growth of over 7% and strong cash generation. As the pandemic took
hold across Europe in March 2020 through to early May 2020, Action
faced government-enforced temporary closures or assortment
restrictions across all markets except the Netherlands. As a result
of the temporary store closures, its supply chain was scaled down,
and this led to some availability issues when all stores reopened
selling the full range between mid-May and the end of October 2020.
However, despite availability challenges, Action delivered double
digit LFL sales growth in every month of that period, reflecting a
combination of pent-up demand, customer loyalty and increased brand
awareness and penetration in markets such as Germany, Austria and
Poland. At the end of 2020, as the second wave of the pandemic took
hold across Europe, renewed restrictions in November and December
2020 resulted in the business being limited to selling essentials
only in Austria, Belgium,
France and Germany and shops being closed entirely in the
Netherlands. Action finished 2020 with LFL at (1.4)%, or 10.4% on a
normalised basis excluding the impact of lockdowns, which was a
remarkable result considering the two major periods of
disruption.
A key value driver of Action's business model is its
international expansion strategy. Despite the disruption caused by
the pandemic, the business continued its international store
roll-out with 164 new stores opened across eight countries in 2020.
Action's most recently established market, Poland, performed well
and exceeded expectations. The five pilot stores opened in the
Czech Republic also delivered encouraging results, supporting the
decision to roll-out further in that market in 2021. There is still
plenty of expansion potential in existing and new countries and
Action opened two new pilot stores in Italy in April 2021 and plans
to open new stores in Spain in 2022. Essential to supporting this
store roll-out and store growth is ensuring sufficient supply chain
infrastructure is in place and, in the year, Action opened its
ninth distribution centre ("DC") in Verrières in France. In 2021,
it will open a new DC in Bratislava, Slovakia and a second in
Bierun, Poland.
Action has been nimble in its response to government-enforced
restrictions, leading to the accelerated implementation of Click
& Collect facilities across multiple markets in the first
quarter of 2021, after pilots were carried out in France and
Belgium in 2020. Additionally, in the Netherlands, Action
implemented a shopping by appointment system, operating in line
with Dutch restrictions, building on its investment in its digital
capabilities. Both measures underpinned a resilient sales
performance in the first quarter of 2021 and are helping to
mitigate the impact of continued trading restrictions across
Europe.
Although Action faced more widespread store closures and store
restrictions in the first quarter of 2021 than it did last year, it
finished the quarter with very strong trading in March 2021 and
run-rate EBITDA for the quarter just ahead of the same period last
year. Action's cash and liquidity remains above EUR500 million.
Lockdown restrictions are now easing across most countries in
Europe and the company saw strong year-on-year trading in April
2021. Action has set a target of opening 300 new stores this year
and is on track to do that after the first four months.
In FY2021, we saw strong momentum in earnings growth and cash
generation for our portfolio companies operating in the consumer
goods, e-commerce, healthcare and business and technology services
sectors. Since our investment in April 2018, Royal Sanders has
doubled both its revenue and EBITDA, driven by continued organic
growth, value-accretive add-on acquisitions and a continuous focus
on operational improvements. Operating in the private label and
contract manufacturing personal care space and with customers
numbering among the largest and most successful retailers and brand
owners across Europe, Royal Sanders has benefited from the
non-cyclical, defensive nature of the industry and has captured a
substantial share of the increase in demand for handwash and hand
gels during the Covid-19 pandemic. Growth of its key customer base
and a number of new customer wins have generated significant
earnings growth in the year, whilst the recent buy-and-build
acquisitions of Royal Herkel and Tunap Cosmetics, both funded from
its balance sheet, have added additional diversification to its
offering. As a result of such strong performance and cash flow
generation, the company made a dividend distribution to 3i of GBP38
million in July 2020.
Luqom , our speciality online lighting retail platform, has seen
favourable tailwinds from the accelerated shift towards e-commerce
and increased consumer discretionary spend on home and living
products. The business has also focused on further
internationalisation, launching web shops in 10 new countries,
taking the number of country websites it operates to 27. Its
acquisition of QLF in 2019 provided the business with a platform
for additional rapid expansion across Europe. As a result, Luqom
doubled its EBITDA in the year and is well positioned to continue
to capitalise on the structural market shift towards e-commerce. At
the end of March 2021, Luqom signed the acquisition of
Lampemesteren, the online market leader for premium lighting
products in the Nordics. The acquisition completed in April 2021
and was funded by Luqom.
Cirtec Medical delivered significant year-on-year growth
supporting key customers during a challenging macro environment and
it continued to demonstrate itself as an "acquirer of choice" in
the fragmented medical device outsourcing ("MDO") market, with its
bolt-on acquisition of NovelCath, a fast-growing catheter-based
delivery systems manufacturer based in Minnesota. NovelCath, a
highly strategic acquisition that will enable both deeper vertical
integration and broader exposure to fast-growing market, is Cirtec
Medical's seventh acquisition since 3i's original investment.
Cirtec Medical continues to be positioned as among the most
differentiated assets in the MDO market, with an attractive mix of
end-market exposure, capabilities and financial profile.
Havea has remained resilient throughout the pandemic, benefiting
from the focus on health and wellness. Its omni-channel strategy
has enabled e-commerce and mail-order sales to mitigate a drop in
footfall in pharmacies and other outlets for its products. The
business also continued to build on its existing platform with the
acquisition of Laudavie, the French specialist in children's food
supplements.
The medical side of Q Holding's business saw resilient demand
for non-discretionary medical products in 2020, offsetting the
effects of reduced elective surgeries that were impacted by reduced
capacity and fewer patient visits due to the pandemic.
Our minority stakes in Tato and AES have performed well and we
recognised dividend income in the year from both assets. Tato, the
manufacturer of speciality chemicals, has benefited from increased
demand for biocidal, disinfectant and hygiene products which is
driving strong earnings growth and cash generation. The business
returned GBP14 million of dividends to 3i in the year. AES
responded well during the pandemic and outperformed our
expectations for sales and profitability, reaffirming its strategic
position in the valuable mechanical seal market.
Our retail businesses have demonstrated their resilience to
restrictions imposed across Europe during the course of 2020 and
into 2021. Following our GBP20 million equity investment into Hans
Anders in April 2020, the performance of the business recovered
since stores reopened in June 2020 through a combination of strong
trading and cost savings. The business enjoys a strong market
position as a value-for-money optical retailer and benefits from
previous investments in digitisation. Increasing online sales and
high conversion rates through shopping by appointment mitigated
trading restrictions imposed across its markets. BoConcept also
experienced a very good recovery in trading after the easing of the
first wave of lockdown measures in H1 2020. The business is
benefiting from a number of operational initiatives taken to
optimise its international franchise model and from the accelerated
omni-channel development with more online interaction with
customers and an improved omni-customer journey.
Our portfolio companies exposed to the travel and automotive
sectors continue to operate in more challenging conditions.
arrivia's core markets have been significantly impacted, with no
cruise sailings since February 2020 and limited resort vacations.
Despite these headwinds, arrivia's business model has proven
resilient relative to other travel businesses, benefiting from
stable cash revenues from membership subscriptions and from
management initiatives taken to streamline the business. As
expected, the current trading conditions remain challenging for
arrivia, with low booking levels anticipated in the first half of
2021 across cruise and vacation ownership until there is greater
vaccine deployment across the US and Europe. However, hotel and air
bookings have shown improvements in recent months with greater
vaccine roll-out in the US, suggesting pent-up travel demand for
when cruise and resort travel can safely resume.
Similarly, and as expected, Audley Travel's revenues have been
under significant pressure, with departures severely restricted
since April 2020. In November 2020, we invested a further GBP46
million of capital to support the business. The bookings trajectory
since our further investment has been positive, driven by improving
sentiment following the progress with vaccines, confirming that
there is clear intent and pent-up demand for travel later in 2021
and beyond amongst the Audley Travel client base. However, despite
these positive developments, we continue to remain cautious about
the recovery in the travel sector.
Formel D's performance in the 12 months to 31 March 2021 was
severely impacted by a combination of prolonged Covid-19
restrictions, a semi-conductor shortage affecting automotive
production and operational challenges in France and US. Whilst we
expect the business to improve in the medium term, the 12-month
outlook remains challenging. Market conditions also impacted the
connector seals and insulators business of Q Holding in the first
half of 2020 due to soft light vehicle and other industrial
production and corresponding supply chain management and plant
shutdowns. Encouragingly, the business began to rebound towards the
end of 2020 and has continued strong year over year growth into
2021 due to end customer volume recovery and supply chain
restocking. Basic-Fit is well positioned to benefit from an
increased focus on health and wellbeing post Covid-19 and, despite
the significant disruption caused by enforced club closures and
having declined to a share price low point for the year of EUR13.4
on 3 April 2020, its share price increased by 116% in the
12 months to 31 March 2021, closing at EUR32.85 (31 March 2020:
EUR15.20).
Private Equity investment
We invested GBP275 million in three new companies, maintaining
our disciplined approach to pricing and originating away from
aggressively competitive processes. In September 2020, we completed
the GBP61 million investment in GartenHaus, an online retailer of
garden buildings, sheds, saunas, and related products in Germany,
Austria, Switzerland and the Netherlands. Shortly thereafter, we
supported GartenHaus in the bolt-on acquisition of Polhus, an
online retailer of garden houses and related products based in
Sweden. Since acquisition, both businesses have been outperforming
our trading expectations.
In December 2020, we completed the GBP124 million investment in
MPM , an international branded, premium and natural pet food
company. MPM has an established presence in the UK, EMEA and APAC
with a fast-growing operation in North America, where expansion is
a focus of our investment thesis. In March 2021, we completed the
GBP90 million investment in WilsonHCG , a global provider of total
talent solutions, with a focus on recruitment process outsourcing.
In addition to these new investments, we invested GBP115 million in
two transformational buy-and-build opportunities for two of our
portfolio companies. In July 2020, we supported Evernex's
acquisition of Technogroup, a third-party data centre maintenance
provider in Germany, Austria and Switzerland. Having established a
Bioprocessing platform last year, we achieved a significant
milestone in the growth and internationalisation of this platform
through the acquisition of Sani-Tech West Inc in July 2020. The
combined business was renamed SaniSure and the total 3i investment
in this platform over the last two years is GBP135 million. In
August 2020, SaniSure completed the acquisition of Biofluidfocus,
which was self-funded. Both Evernex and SaniSure have performed in
line with our expectations.
Private Equity realisations
As a proprietary capital investor, and with the benefit of a
strong balance sheet, we are not under pressure to exit investments
when we believe a longer-term hold may yield greater returns for
shareholders. Given the significant market uncertainty as a result
of Covid-19, we had always expected a lower level of realisation
proceeds in FY2021 compared to prior years. In the year, we
completed one material realisation, the disposal of Kinolt,
receiving total proceeds of GBP91 million, including GBP5 million
of income. As we look ahead to FY2022, the resilience of the
majority of our portfolio companies and their ability to remain
cash generative means we have a much more active pipeline of
refinancings and realisations.
Infrastructure performance
3iN's well diversified portfolio proved resilient to the
challenges of the Covid-19 pandemic. In the 12 months to 31 March
2021, 3iN generated a total return on opening NAV of 9.2% and
delivered its dividend target of 9.8p, a 6.5% increase on last
year. The Infrastructure asset class remains very competitive and,
in our role as 3iN's Investment Manager, we focused on building
value through the existing platform investments, with Infinis
completing the acquisition of the development rights for a 6MW PV
project and Tampnet purchasing a 1,200km offshore fibre cable
system in the Gulf of Mexico. 3iN committed additional capital to
ESVAGT to fund further growth in its offshore wind servicing
segment and completed the acquisition of further stakes in its
existing Dutch PPP projects. In April 2021, 3iN announced a new
c.EUR182m investment to acquire a 60% stake in DNS:NET , a leading
independent telecommunications provider in Germany.
The Group's 30% stake in 3iN was valued at GBP797 million at 31
March 2021, reflecting a strong rebound in the share price, which
closed at 296 pence (31 March 2020: 247 pence). In addition, we
recognised GBP26 million of dividend income from 3iN.
Regional Rail demonstrated its strategic importance to the
transportation of products by rail across the eastern United
States, as it was deemed an essential service throughout the
Covid-19 pandemic. The business benefited from better than expected
operational efficiency at its Carolina Coastal Railway line,
offsetting some freight softness in the winter months across
Northeast America. In March 2021, following strong cash generation,
Regional Rail completed a long-term financing package, returning
GBP74 million of cash to 3i. Smarte Carte has remained cash
generative despite the reduction in air travel across the US. The
business has benefited from its diverse offering and from a better
than expected rebound in US domestic travel over the last six
months, offsetting softness from international travel. The
long-term outlook for the business remains positive.
Over the last year, we established a new 3i-managed vehicle that
will co-invest alongside 3iN in certain transactions, with a
commitment of EUR400 million from Industriens Pension of Denmark.
This fund platform broadens our capabilities and complements our
mandate as Investment Manager to 3iN. Our 3i European Operational
Projects Fund completed the acquisition of a portfolio of eight
operational projects in France from DIF Infrastructure III and has
now deployed c.60% of its total commitments at 31 March 2021. We
expect this to increase to c.62% of its total commitments upon
completion of new acquisitions agreed at the end of March 2021.
Scandlines performance
Scandlines delivered a solid performance and remained profitable
in 2020 despite significant travel restrictions impacting its ferry
crossings between Germany and Denmark. Revenue generated from
freight remained stable in 2020 and throughout the pandemic,
delivering volumes close to 2019 levels. This performance helped
offset lower leisure and retail activity which were significantly
impacted during the spring and winter periods of disruption in
2020. At the time of writing, travel restrictions remain in place
between Sweden, Denmark and Germany which are having a significant
impact on leisure volumes. Freight volumes continue to show
resilience and are currently in line with 2019 levels. The business
has good levels of liquidity and is well positioned to rebound as
restrictions are lifted.
A responsible investor and employer
As proprietary capital investors, we have a long-term,
responsible approach, informed by our long-standing Responsible
Investment policy. When appraising new investments, we make sure
they adhere to our strict environmental, social and corporate
governance ("ESG") standards, avoiding many sectors that we have
concluded are unsuitable from reputation, sustainability or
governance perspectives. For our existing portfolio, we have robust
processes to assess, monitor and manage existing and emerging ESG
risks and opportunities in the portfolio. Our approach is not
confined to risk management and mitigation, but is strategic in
nature. We also assess and support, on an ongoing basis,
investments in our portfolio companies to underpin their long-term
sustainability. We refine our approach to reflect emerging themes
and developments and to ensure that we remain abreast of best
practice.
The 3i team is central to delivering our strategy and objectives
and we expect everyone at 3i to act with integrity, to be
accountable for their behaviour, and to approach their roles with
ambition, rigour and energy. The recruitment, development and
retention of a capable and diverse pool of talent is a clear
priority. We are a meritocracy and provide training and
opportunities for career advancement, reward our employees fairly
and recognise the importance of supporting the wellbeing and
satisfaction of our employees by providing a healthy working
environment and work/life balance. The vast majority of our
employees worked remotely for almost the entire year, facilitated
by additional IT investment.
Well positioned balance sheet to deliver good returns to
shareholders
We ended FY2021 with net debt of GBP750 million after returning
GBP338 million of cash dividends to shareholders and completing
GBP510 million of new and further investments in the year. Our
proprietary capital is the cornerstone of our business model and,
in anticipation of a prolonged Covid-19 scenario and limited
material realisations in the year, we took advantage of favourable
corporate debt market conditions to strengthen our liquidity
further by issuing a 20-year GBP400 million bond at a coupon of
3.75% and increasing our Revolving Credit Facility ("RCF"), from
GBP400 million to GBP500 million, extending its maturity to 2026.
These actions ensure 3i can continue to invest its own proprietary
capital in suitable opportunities, without having to accelerate
realisations of investments before they reach their full potential.
To ensure that our proprietary capital model is as efficient as
possible, we remain disciplined on costs and generated an operating
cash profit of GBP23 million in the year.
Our Covid-19 charitable fund
In May 2020, we announced a GBP5 million charitable fund to
support charities particularly affected by the pandemic, focusing
on the most vulnerable communities in countries where 3i and our
portfolio companies operate. The GBP5 million was funded from
Private Equity and Infrastructure carry and performance fee
arrangements earned and provided for through the income statement
in prior periods. To date, we have donated or committed c.GBP4
million of the fund across c.90 charities. Within this, our
donations targeted a number of areas, including food provision,
education, domestic violence, advancement of minorities and
disadvantaged groups, community development and mental health.
Covid-19 charitable fund
Examples of charities supported through the Fund are:
* Trussell Trust - helped The Trussell Trust, which
gave out 2.5 million food parcels in 2020 to provide
immediate relief, including funding warehousing and
storage grants and supporting initiatives to maximise
the income of food bank users by providing welfare
advice
* Frankfurter Tafel, Germany - funded a year's worth of
fuel costs to keep the charity's 12 vehicles running
daily, which enables the volunteers to serve meals to
c.24,000 people in need every month across Frankfurt
* Rêv'Elles, France - supporting the 'Ton
Potentiel' programme which provides group workshops
during the school holidays and individual follow-up
for 200 girls a year from underprivileged backgrounds
* Stichting Armoedefonds, Netherlands - helped c.1,100
disadvantaged children get off to a good start in
secondary school by providing them with school
supplies
* New York Common Pantry, US - funded c.60,000 meals
for individuals and families in New York who were
negatively affected by the pandemic
* Goonj, India - provided aid kits, containing dry
rations, personal care items and household
necessities to over 1,900 migrant families in Madhya
Pradesh displaced due to the pandemic
Outlook
This year end feels very different to a year ago. In March last
year we were all attempting to work out how we could sustain
progress at 3i on a remote basis and what the likely repercussions
of the pandemic would be across our portfolio, having witnessed a
sharp collapse in confidence and the markets in the latter part of
March. Those pull-backs had a significant negative effect on 3i's
2020 results even though the Group had produced a very respectable
performance in the eleven and a half months prior to that.
This has been a very challenging 12 months for everyone and I
would like to thank the 3i team and the teams in our portfolio
companies for their commitment and focus. I have been very
impressed by how the 3i team has adapted to getting things done
remotely and how well our investment portfolio has performed during
this highly unusual period. Action had another strong year of
performance, but for once its growth rate was eclipsed by a good
number of companies in the portfolio which have really accelerated
their already strong development as a result of the changes brought
on by the pandemic.
We enter our new financial year in the knowledge that we have a
high-quality investment portfolio with broad exposure to sectors
with strong underlying growth, as well as a net asset value
grounded in 'through the cycle' valuation multiples, rather than
reflecting some of the very high valuations we are witnessing in
markets at present. We are also maintaining strong price discipline
and avoiding the exuberance seen in many of today's transactions as
we add to our high-quality portfolio.
Since our restructuring in June 2012, we have delivered an
average annual return on equity of over 20% from an ungeared
balance sheet and we have accomplished this against our objective
of achieving mid to high teens returns across the cycle. As we
manage through the remaining phase of the pandemic, we are keeping
to this objective and to our ambition to outperform it.
Simon Borrows
Chief Executive
12 May 2021
Our thematic approach
We adopt a thematic approach to origination and portfolio
construction, backing businesses benefiting from structural trends
which can support long-term sustainable growth in our
portfolio.
Demographic change
The population in our core investment markets is ageing and, in most cases, shrinking
Increasing life expectancy and reduced fertility rates in most of our core markets are resulting
in an ageing and often declining population, which is increasingly urban. These structural,
long-term trends are resulting in profound changes in consumer behaviour and preferences,
and the development of policy responses to meet the challenges of greater longevity and the
increasing prevalence of age-related chronic illness.
The healthcare investments in our Private Equity portfolio, including Cirtec Medical, an outsourced
medical device manufacturer, the medical device and product side of Q Holding and SaniSure,
which designs and manufactures single-use bioprocessing technology, have all been clear beneficiaries
from this trend. Havea, which is among the leading players in the natural consumer healthcare
industry, is supported by a growing consumer focus on health and wellness. We also have exposure
to this trend in our Infrastructure portfolio, through Ionisos, which provides cold sterilisation
services to the medical and pharmaceutical industries, among others.
Globalisation
The increased mobility of goods, capital and labour affect businesses and consumers
Globalisation and increased economic interdependence have supported rapid economic growth
across the world, but also present significant challenges which require the development of
creative solutions.
We have helped many of our portfolio companies to gain an edge in an increasingly globalised
business environment by internationalising their business footprints, customer bases or supply
chains, either through organic expansion (eg Action, Luqom) or through acquisition (eg Royal
Sanders, Evernex).
Global supply chains can be disrupted by events such as the Covid-19 pandemic or Brexit. Our
portfolio construction has provided resilience to these disruptions, underpinning robust performance
and strong returns.
Digitisation, technological disruption and big data
Business is increasingly mobile and data driven, facilitated by increasing connectivity and
focused on simplifying the customer experience
Technology is developing rapidly. It is changing operating models and digitisation is part
of daily life, permeating all spheres of human activity and interactions. We have been careful
in selecting investments that benefit from this megatrend, while avoiding areas likely to
be impacted by disruption.
Many companies in our Private Equity portfolio benefit from this trend, including Luqom and
GartenHaus, which operate in growing, online retail niches and Evernex, which maintains IT
equipment that is critical for customers' business continuity, including servers, storage
and network equipment. We also have exposure to this trend in our Infrastructure portfolio
through Tampnet, which provides high speed, low latency and resilient data connectivity offshore.
Low carbon and circular economy
The response to the climate and environmental emergencies will be among the defining themes
of our time
The transition to a more sustainable consumption model and the development of solutions to
tackle global warming and climate change, either through regulatory "push" or changes in consumer
preferences, are going to provide attractive investment opportunities for many decades.
We have significant exposure to the renewable energy and waste management sectors through
our Infrastructure division, with investments in companies such as Infinis and Valorem, which
generate renewable energy, and Attero and HERAmbiente, which sort and recycle waste and generate
power from waste that cannot be recycled. Our Infrastructure business is also invested in
ESVAGT, the market leader in the fast growing segment of service operation vessels for the
offshore wind industry.
Our Private Equity portfolio also has exposure to this trend. For example, WP, a manufacturer
of innovative packaging systems for the FMCG industry, is investing in the development of
packaging that is easily recyclable and made with greater use of recycled materials. A core
pillar of Evernex's customer proposition is to repair, reuse and recycle IT equipment, reducing
waste and emissions.
Value-for-money
Consumers want convenience, excitement, relevance and authenticity at good value
We expect consumers' focus on value to increase as a result of the economic uncertainty created
by the Covid-19 pandemic, even as the public health emergency recedes.
Value-for-money has been one of the winning themes in our Private Equity portfolio for many
years and we expect it will remain an enduring trend. Action, our largest investment, has
grown revenues and EBITDA by 817% and 758% respectively since we first invested in 2011, by
providing a good quality, surprising and sustainably sourced assortment at very low prices.
Hans Anders, a value-for-money optical retailer, is winning market share across its markets
by offering private label and branded products at average price points significantly below
its major competitors. Basic-Fit, the European market leader in the value-for-money fitness
market is growing its market share. Royal Sanders, a leading European private label and contract
manufacturing producer of personal care products, is growing strongly thanks to its strong
product offering in the value-for-money segment as well as relationships with the largest
value-for-money retailers.
Private Equity
At a glance
Gross investment return
GBP1,936m or 30%
(2020: GBP352m or 6%)
Investment
GBP508m
(2020: GBP1,062m(1) )
Realised proceeds
GBP114m
(2020: GBP848m(2) )
Portfolio growing earnings
87 % (3)
(2020: 93%)
Portfolio value
GBP8,814m
(2020: GBP6,552m)
Number of companies
33
(2020: 32)
1 FY2020 investment includes GBP591 million
of reinvestment in Action as part of the
Action transaction described on page 19
of the FY2020 Annual report and accounts.
2 FY2020 realised proceeds includes GBP402
million of realised proceeds from Action
as part of the Action transaction described
on page 19 of the FY2020 Annual report
and accounts.
3 LTM adjusted earnings to 31 December
2020. Includes 25 portfolio
companies.
We invest in mid-market businesses headquartered in northern
Europe and North America with potential for international growth.
Once invested, we work closely with our portfolio companies to
achieve their full potential, realising our investments at the
appropriate time to deliver strong cash-to-cash returns for 3i
shareholders and other investors.
Our Private Equity portfolio delivered a GIR of GBP1,936 million
or 30% on the opening portfolio value (2020: GBP352 million or 6%)
in FY2021, after a GBP371 million foreign exchange translation
loss. This result is underpinned by continued good earnings growth
and cash flow despite the disruptions caused by the Covid-19
pandemic. In the 12 months to 31 March 2021, the Private Equity
portfolio value increased to GBP8,814 million (31 March 2020:
GBP6,552 million) driven by organic growth and value accretive
acquisitions in our existing portfolio and new investments. As we
enter the next financial year, the portfolio has good momentum and
is strategically well positioned to continue to benefit from an
acceleration in consumer trends towards value-for-money retail,
e-commerce and health, wellbeing and hygiene.
The contribution of Action to the Private Equity performance is
detailed in Note 1 of the financial statements.
Table 1: Gross investment return for the year to 31 March
2021 2020
Investment basis GBPm GBPm
-------------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 29 90
Unrealised profits/(losses) on the revaluation of investments 2,161 (34)
Dividends 53 5
Interest income from investment portfolio 55 106
Fees receivable 9 9
Foreign exchange on investments (371) 176
-------------------------------------------------------------- ----- -----
Gross investment return 1,936 352
-------------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 30% 6%
-------------------------------------------------------------- ----- -----
New investment
Proprietary
Capital
Portfolio company Business description Date investment
------------------ ---------------------------------------------------------------------- ------------- -----------
MPM International branded, premium and natural pet food company December 2020 GBP124m
WilsonHCG Global provider in recruitment process outsourcing ("RPO") March 2021 GBP90m
and other talent solutions
GartenHaus Online retailer of garden buildings, sheds, saunas and related September GBP61m
products in Germany, Austria, 2020
Switzerland and the Netherlands
------------------ ---------------------------------------------------------------------- ------------- -----------
Total new investment GBP275m
------------------------------------------------------------------------------------------ ------------- -----------
Case studies for new investments can be found in our Annual
report and accounts 2021.
Further investment to support portfolio companies
Proprietary
Capital
Portfolio company Business description Date investment
------------------ ------------------------------------------- ------------- -----------
Audley Travel Provider of experiential tailor-made travel November 2020 GBP46m
Hans Anders Value-for-money optical retailer April 2020 GBP20m
------------------ ------------------------------------------- ------------- -----------
Total further investment to support portfolio companies GBP66m
--------------------------------------------------------------- ------------- -----------
Further investment to finance portfolio bolt-on acquisitions
Proprietary
Capital
Portfolio company Name of acquisition Business description of bolt-on investments Date investment
------------------ -------------------- --------------------------------------------- ------------- -----------
SaniSure(1) + Sani-Tech West US-based manufacturer, distributor and July 2020
integrator of single-use bioprocessing
systems and
components
Evernex + TechnoGroup Third-party IT equipment maintenance business July 2020
in Austria, Germany and Switzerland
GartenHaus + Polhus Online retailer of garden houses and related December 2020
products based in Sweden
------------------ -------------------- --------------------------------------------- ------------- -----------
Total further investment to finance portfolio bolt-on acquisitions GBP124m
------------------------------------------------------------------------------------------ ------------- -----------
1 Bioprocessing platform renamed SaniSure in the year.
Private Equity portfolio bolt-ons - funded by the portfolio
company balance sheets
Portfolio company Name of acquisition Business description of bolt-on investments Date
----------------- ------------------- ------------------------------------------------------------ -------------
Royal Sanders + Royal Herkel Private label and contract manufacturing producer of January 2021
nutritional supplements, medical devices,
pharmaceutical and cosmetic products based in the
Netherlands
Royal Sanders + Tunap Cosmetics European manufacturer active in the aerosols segment of the March 2021
personal care market with a focus
on contract manufacturing
Cirtec + NovelCath Fast-growing catheter-based delivery systems manufacturer December 2020
based in Minnesota
Havea + Laudavie Manufacturer of food supplements which owns Calmosine, the November 2020
French specialist in children's
food supplements
SaniSure(1) + BioFluid Focus Supplier of single-use products for the pharmaceutical and August 2020
biotech industries
----------------- ------------------- ------------------------------------------------------------ -------------
1 Bioprocessing platform renamed SaniSure in the year.
Other investment
Proprietary
Capital
Assets Type Business description Date investment
----------------- --------------------------------------------------------- --------------
Havea Further Manufacturer of natural healthcare and cosmetics products September 2020 GBP23m
Basic-Fit Further Discount gyms operator June 2020 GBP17m
Action Further General merchandise discount retailer December 2020 GBP9m
Luqom Return of funding Online lighting specialist retailer July 2020 GBP(8)m
Various Further n/a n/a GBP2m
--------- ----------------- --------------------------------------------------------- -------------- -----------
Total other investment GBP43m
---------------------------- --------------------------------------------------------- -------------- -----------
Investment activity
Following a period of limited activity in the initial phases of
the Covid-19 pandemic, global investment volumes rebounded through
the second half of 2020. Pent-up demand coupled with record levels
of dry powder and robust credit markets have fuelled very high
investment multiples in the US and Europe. We have remained
selective and price disciplined, investing GBP275 million in three
new assets at attractive prices.
We have continued to enhance the value of our portfolio through
buy-and-build investments for our platform assets. We completed two
transformational bolt-on acquisitions, Evernex's acquisition of
TechnoGroup and, having a Bioprocessing platform last year, we
achieved a significant milestone in the growth and
internationalisation of this platform, through the acquisition of
Sani-Tech West. The combined platform has now been renamed
SaniSure. In addition to these two transformational acquisitions,
we completed a further six bolt-on acquisitions, with only the
GartenHaus acquisition of Polhus requiring funding from 3i.
We also used our capital to support the existing portfolio
through the Covid-19 pandemic, completing a GBP20 million equity
investment in Hans Anders in April 2020 and investing a further
GBP46 million in Audley Travel in November 2020. Other noteworthy
investment includes GBP17 million in Basic-Fit to provide expansion
capital in June 2020, and the repurchase of equity stakes in Havea
and Action. Luqom returned GBP8 million of over funding that we had
provided for the bolt-on acquisition of QLF in FY2020 and this has
been treated as return of investment.
In total, in the 12 months to 31 March 2021, our Private Equity
team invested a total of GBP508 million across new and further
investments.
Realisations activity
As proprietary capital investors, we are not under pressure to
exit investments when we believe a longer-term hold would yield
greater returns for shareholders. As expected, we generated a lower
level of realisations in the year compared to recent years. Our
focus was on managing our portfolio companies and supporting them
through the challenges posed by the pandemic. In total, Private
Equity delivered realised proceeds of GBP114 million (2020: GBP848
million) and realised profits of GBP29 million in the year (2020:
GBP90 million).
In the year, we completed the disposal of Kinolt for total
proceeds of GBP91 million, including GBP5 million of income, and
realised a profit of GBP7 million and we made further progress with
some of our legacy assets in Asia. In October 2020, we received
proceeds of GBP17 million and generated a realised profit of GBP11
million from the disposal of Navayuga and, in the year, we
recognised a further GBP8 million of deferred consideration from
ACR which we had realised in the prior year.
Table 2: Private Equity realisations in the year to 31 March
2021
31 March Profit Uplift on
Calendar 2020 3i realised in the opening Residual
year value(1) proceeds year(2) value(2) value Money
Investment Country invested GBPm GBPm GBPm % GBPm multiple(3) IRR
-------------- ---------- ----------- ---------- ------------ --------- ---------- --------- ------------- ----
Full
realisations
Kinolt Belgium 2015 80 86 7 9% - 1.8x 12%
Navayuga India 2006 5 17 11 >100% - 0.7x -
-------------- ---------- ----------- ---------- ------------ --------- ---------- --------- ------------- ----
Total realisations 85 103 18 21% - 1.4x n/a
--------------------------------------- ---------- ------------ --------- ---------- --------- ------------- ----
Deferred
consideration
ACR Singapore 2006 - 8 8 - - n/a n/a
Other n/a n/a - 2 2 - - n/a n/a
Partial
realisations
(3)
Other n/a n/a - 1 1 - - n/a n/a
-------------- ---------- ----------- ---------- ------------ --------- ---------- --------- ------------- ----
Total Private Equity
realisations 85 114 29 - - n/a n/a
-------------------------- ----------- ---------- ------------ --------- ---------- --------- ------------- ----
1 For partial realisations, 31 March 2020 value represents value
of stake sold.
2 Cash proceeds realised in the period over opening value.
3 Cash proceeds over cash invested. For partial realisations and
refinancings, valuations of any remaining investment are included
in the multiple. Money multiples are quoted on a GBP basis.
Portfolio valuation approach
Compared to valuing our portfolio at 31 March 2020, we now have
greater clarity and understanding of how our portfolio companies
are managing and responding to the varying degrees of restrictions
and other pandemic containment measures. The strength of the FY2021
Private Equity GIR highlights the resilience and momentum of the
majority of our Private Equity portfolio companies, with almost all
performing in line with or better than our re-forecast at the start
of this financial year. In the majority of cases, our longer-term
investment view on our portfolio companies has not changed.
Therefore, we retained our usual valuation process in most cases.
For the small number of more challenged investments, particularly
those in the travel and automotive sectors, we sought to gather a
broader range of inputs, considered different methodologies and
applied further judgement.
Private Equity generated an unrealised profit of GBP2,161
million (2020: GBP34 million unrealised loss) with strong
performance from assets valued on an earnings basis with the most
significant contribution coming from Action.
Action valuation and performance
Action's run-rate earnings proved to be resilient in the 12
months to 31 March 2021, despite the two periods of major
disruption due to significant trading restrictions, and the
business remained highly cash generative throughout this time. This
trend continued into April and early May 2021. With the benefit of
this 12 months of experience we made an adjustment to the earnings
used for valuation purposes, adding back the EBITDA losses that
were incurred in the month of April 2020 as being unrepresentative
of the normal earnings of the business. This effectively means we
are using 11 months of run-rate earnings to 31 March 2021 (1 May
2020-31 March 2021). The run-rate earnings used include our normal
adjustment to reflect stores opened in the year, as well as the
add-back of EUR10 million exceptional Covid-19 related costs
incurred in Action's first quarter of 2021. The valuation at 31
March 2021 includes the net debt and capital structure as at that
date. Further details on Action's performance can be found in the
CEO's statement above.
We increased Action's post discount run-rate multiple to 18.5x
(31 December 2020: 18.0x) and applied this to the run-rate earnings
described above. Further details on the Action multiple can be
found below. At 31 March 2021, Action was valued at GBP4,566
million (31 March 2020: GBP3,536 million) and, as the largest
Private Equity investment by value, it represented 52% of the
Private Equity portfolio (31 March 2020: 54%).
Performance (excluding Action)
Excluding Action, the performance of investments valued on an
earnings basis resulted in unrealised profits of GBP536 million
(March 2020: GBP61 million unrealised loss), as we continue to see
strong momentum in earnings growth and cash generation for
portfolio companies operating in the consumer goods, e-commerce,
healthcare and business and technology services sectors, offsetting
underperformance from companies exposed to the travel and
automotive industries.
Royal Sanders has performed strongly, generating significant
earnings growth and cash flow, which allowed it to return a
dividend to 3i of GBP38 million in July 2020. The business
continued its organic growth and captured a share of the increase
in demand for handwash and hand gels whilst building on its
existing platform with two bolt-on acquisitions. As part of our
valuation process, we estimated the proportion of profits which may
not be maintainable as sales of handwash and hand gels normalise,
and therefore excluded EUR9 million of these profits from the
valuation earnings. The valuation increased to GBP364 million at 31
March 2021 (31 March 2020: GBP198 million).
The accelerated shift towards e-commerce and increased consumer
discretionary spending on home and living products has generated
positive tailwinds for Luqom . The business has grown its
international footprint, launching web shops in 10 new countries
and is well positioned to expand its reach further across Europe.
The business doubled its earnings in the year and was valued at
GBP307 million at 31 March 2021 (31 March 2020: GBP144
million).
Cirtec Medical has benefited from platform-specific tailwinds,
with a number of customers ramping up their orders. Additionally,
it has continued its buy and build strategy with the acquisition of
NovelCath and has completed several margin optimisation
initiatives, all of which delivered strong year-on-year earnings
growth. At 31 March 2021, Cirtec Medical was valued at GBP444
million (31 March 2020: GBP302 million).
The increased focus on health and wellness benefited Havea in
the year. The business mitigated a drop in footfall as a result of
the pandemic with an increased online presence and continued to
build on its existing platform with the acquisition of Laudavie.
Tato has seen increased demand for speciality chemicals used in
biocidal, disinfectant and hygiene products driving strong earnings
growth and cash generation and returned GBP14 million of dividends
to 3i in FY2021. We are now working more closely with management
and the family owners of this minority investment and so reduced
the liquidity discount on our holding.
Measures and initiatives put in place to mitigate the disruption
caused by Covid-19 restrictions have enabled both Hans Anders and
BoConcept to deliver a resilient performance in a challenging
retail environment.
There were weaker performances in the small number of our
portfolio companies operating in the challenged travel and
automotive sectors. The valuation of arrivia recognises the acute
impact on earnings of an extended period of no cruise sailings and
limited resort vacations and the uncertainty on timing of the
travel recovery, but also the strength of its membership revenue
business and the positive impact of vaccine deployment across the
US. A discussion on the performance and valuation of Audley Travel
can be found under Discounted Cash Flow ("DCF") below.
Formel D recorded a steady recovery in output following the
initial temporary plant shut downs in response to Covid-19 in April
2020. However, prolonged Covid-19 restrictions, a semi-conductor
shortage affecting automotive production and operational challenges
in France and the US meant that at 31 March 2021 the business was
valued at GBP62 million (31 March 2020: GBP141 million). Softer
trading in QSR, the connector seals and insulator business of Q
Holding , in the spring and summer of 2020 was largely offset by a
rebound at the end of 2020 and continued strength through the
outset of 2021, as well as robust demand for non-discretionary
medical products throughout 2020 in the medical side of Q Holding's
business.
Overall, 87% of the portfolio by value grew LTM adjusted
earnings in the year (2020: 93%). Table 4 shows the earnings growth
of our top 20 assets.
Table 3: Unrealised profits/(losses) on the revaluation of
Private Equity investments(1) in the year to 31 March
2021 2020
GBPm GBPm
----------------------------------------- ----- -----
Earnings based valuations
Performance (excluding Action) 536 (61)
Multiple movements (excluding Action) 408 (231)
Action performance (2) 1,067 461
Action multiple 135 -
Other bases
Uplift to imminent sale - 1
Write-off - (103)
Discounted cash flow (101) (9)
Other movements on unquoted investments 3 -
Quoted portfolio 113 (92)
---------------------------------------- ----- -----
Total 2,161 (34)
----------------------------------------- ----- -----
1 Further information on our valuation methodology, including
definitions and rationale, is included in the Portfolio valuation -
an explanation in our Annual report and accounts 2021.
2 Action performance in FY2020 includes GBP272 million
unrealised loss which is the adjustment made at 31 March 2020 to
align the fair value to the Action transaction as described on page
19 of the FY2020 Annual report and accounts.
Table 4: Portfolio earnings growth of the top 20 Private
Equity(1) investments
3i value
at 31 March 202 1
Number of companies GBPm
========= ==================== ==================
<0% 7 977
0 - 9% 4 966
10 - 19% 3 4,991
20 - 29% 2 568
>=30% 4 1,105
========= ==================== ==================
1 Includes top 20 Private Equity companies by value. This
represents 98% of the Private Equity portfolio by value (31 March
2020: 98%). Last 12 months' adjusted earnings to 31 December 2020
and Action based on run-rate earnings to 31 March 2021 covering the
period 1 May 2020 to 31 March 2021.
Leverage
Leverage across the portfolio decreased to 3.9x earnings (31
March 2020: 4.1x) or increased to 4.3x excluding Action (31 March
2020: 3.7x).
Table 5 shows the ratio of net debt to adjusted earnings by
portfolio value.
Multiple movements
In setting or changing a multiple, we consider a number of
factors such as relative performance, investment size, comparable
recent transactions and exit plans, and monitor external equity
markets. The increase in value due to multiple movements, including
Action, for FY2021 was GBP543 million (2020: GBP231 million
unrealised loss).
Equity markets during our 2021 financial year were characterised
by relatively high volatility. Initial steep declines as the
pandemic broke out were followed by a progressive recovery as the
outlook improved. However, as a result of market volatility and
declines in earnings, some sector earnings multiples have diverged
significantly from long-term averages. As a result, we have
continued our approach of taking a longer-term view of sector
multiples when determining the valuation of our investments.
We increased the valuation multiples for those portfolio
companies that have both performed strongly and are well positioned
to sustain this performance in line with changing consumer trends,
such as Cirtec Medical, Luqom, Royal Sanders and Tato. We reflected
recent transformational acquisitions and sector movements in the
multiples of Evernex and SaniSure and, to reflect our view of
intrinsic value in assets that have been disproportionately
impacted by the pandemic, we re-rated businesses such as arrivia in
line with higher market multiples.
The multiple of run-rate earnings used to value Action at 31
March 2021 increased to 18.5x net of the liquidity discount (31
December 2020: 18.0x) reflecting its continued strong performance
despite the pandemic and its potential for further growth in the
nine countries it operates in across Europe and beyond. Based on
the valuation at 31 March 2021, a 1.0x movement in Action's
post-discount multiple would increase or decrease the valuation of
3i's investment by GBP307 million.
Table 5: Ratio of net debt to adjusted earnings(1)
3i value
at 31 March 2021
Number of companies GBPm
======= ==================== =================
<1x 3 535
1 - 2x - -
2 - 3x 2 383
3 - 4x 4 5,392
4 - 5x 3 335
5 - 6x 5 931
>6x 2 146
======= ==================== =================
1 This represents 88% of the Private Equity portfolio by value
(31 March 2020: 91%). Quoted holdings, deferred consideration and
companies with net cash are excluded from the calculation. Net debt
and adjusted earnings at 31 December 2020 and Action based on
run-rate earnings to 31 March 2021 covering the period 1 May 2020
to 31 March 2021.
DCF
Audley Travel is our largest Private Equity asset valued on a
DCF basis. The valuation of Audley Travel reflects the year of
minimal departures due to the ongoing travel restrictions and the
assumption that travel does not recover to 2019 levels until 2024.
In November 2020, we invested GBP46 million to support Audley
Travel through this prolonged period of difficulty. The bookings
trajectory since our further investment has been ahead of that
investment case, driven by positive sentiment following the
progress with vaccines, confirming that there is clear intent and
pent-up demand for travel amongst the Audley Travel client base.
However, despite these developments, we continue to remain cautious
around the 2021 outlook for the travel sector, given its dependence
on international control of the pandemic and government policy. At
31 March 2021, Audley Travel was valued at GBP85 million (31 March
2020: GBP124 million).
Quoted portfolio
Basic-Fit, the only quoted investment in the Private Equity
portfolio, was significantly impacted by the Covid-19 pandemic in
2020 and 2021. At the time of writing, current government road maps
indicate possible reopening of Basic-Fit clubs in the Netherlands
in May 2021 and in Belgium and France shortly thereafter and the
business is well positioned to benefit from the anticipated
increased focus on health and wellbeing.
Basic-Fit expanded its network by 121 clubs in 2020, taking its
total to 905 clubs in the Netherlands, Belgium, Luxembourg, France
and Spain.
In June 2020, we invested GBP17 million (at EUR25 per share) in
Basic-Fit to provide expansion capital. We recognised an unrealised
profit of GBP113 million as a result of the increase in share price
to EUR32.85 at 31 March 2021 (31 March 2020: EUR15.20), valuing our
residual 12.8% stake at GBP214 million (31 March 2020: 12.7%
shareholding valued at GBP93 million). Since the year end,
Basic-Fit has raised further capital at EUR34 per share. We did not
participate in that equity raise and, as a result, our residual
stake reduced to 11.6% from 12.8%.
Assets under management
The value of 3i's proprietary capital invested in Private Equity
increased to GBP8.8 billion in the year (31 March 2020: GBP6.6
billion), due to unrealised profit and net investment in the
year.
The value of the Private Equity portfolio, including third-party
capital, increased to GBP11.6 billion (31 March 2020: GBP8.8
billion).
Table 6: Private Equity assets by geography as at 31 March
2021
Number of 3i carrying
companies value
2021
3i office location GBPm
-------------------- ---------- -----------
Netherlands 5 5,567
France 2 523
Germany 6 714
UK 9 800
US 8 1,190
Other 3 20
-------------------- ---------- -----------
Total 33 8,814
-------------------- ---------- -----------
Table 7: Private Equity 3i proprietary capital as at 31
March
3i proprietary Vintage 3i proprietary Vintage
capital value (3) money capital value(3) money
2021 multiple (4) 2020 multiple(4)
Vintages GBPm 2021 GBPm 2020
---------------------- ------------------- -------------- ------------------ -------------
Buyouts 2010-2012 (1) 1,569 10.2x 1,623 9.5x
Growth 2010-2012 (1) 16 2.1x 20 2.1x
2013-2016 (1) 829 2.1x 869 2.2x
2016-2019 (1) 2,062 1.4x 1,472 1.0x
2019-2022 (1) 745 1.1x 281 1.0x
Others (2) 3,593 n/a 2,287 n/a
---------------------- ------------------- -------------- ------------------ -------------
Total 8,814 6,552
---------------------- ------------------- -------------- ------------------ -------------
1 Assets included in these vintages are disclosed in the
Glossary.
2 Includes value of GBP2,997 million (31 March 2020: GBP1,913
million) held in Action through the 2020 Co-investment vehicles and
3i.
3 3i proprietary capital is the unrealised value for the
remaining investments in each vintage.
4 Vintage money multiple (GBP) includes realised value and
unrealised value as at the reporting date.
Infrastructure
At a glance
Gross investment return
GBP178m or 16%
(2020: GBP39m loss or (4)%)
AUM
GBP4,945m
(2020: GBP4,441m)
Cash income
GBP67m
(2020: GBP78m)
We manage a range of funds investing principally in mid-market
economic infrastructure and operational projects in Europe.
Infrastructure is a defensive asset class that has generally been
financially resilient to the challenge of Covid-19 and provides a
good source of income and fees for the Group, enhancing returns on
our proprietary capital. The team is also active in the deployment
of proprietary capital as part of our strategy to build our North
American Infrastructure platform.
The Infrastructure portfolio performed well in the year,
generating a GIR of GBP178 million, or 16% on the opening portfolio
(2020: GBP39 million loss, (4)%), driven by the appreciation of our
quoted stake in 3iN and strong dividend income. Our US
Infrastructure portfolio, which is currently all funded with
proprietary capital, proved to be resilient in the year. We also
made good progress in realising our remaining value in our Indian
Infrastructure Fund.
Table 8: Gross investment return for the year to 31 March
2021 2020
Investment basis GBPm GBPm
-------------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 6 -
Unrealised profits/(losses) on the revaluation of investments 168 (92)
Dividends 29 26
Interest income from investment portfolio 10 12
Fees receivable - -
Foreign exchange on investments (39) 21
Movement in fair value of derivatives 4 (6)
-------------------------------------------------------------- ----- -----
Gross investment return 178 (39)
-------------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 16% (4)%
-------------------------------------------------------------- ----- -----
3iN performance
3iN's diversified, defensive portfolio outperformed our
expectations set a year ago. We have seen particularly strong
performance from assets operating in the utilities sector such as
Joulz, Infinis and Valorem, and good performance from those
operating in natural resources and healthcare sectors such as
ESVAGT and Ionisos. TCR, which operates in the transportation
sector, performed ahead of expectations in a severely hit aviation
market.
In the 12 months to 31 March 2021, 3iN generated a total return
on opening NAV of 9.2%, achieving its total return target of 8% to
10% per annum over the medium term and delivered its dividend
target of 9.8 pence, a 6.5% increase on last year.
As investment manager to 3iN we received a management fee of
GBP25 million (2020: GBP28 million) and a NAV based performance fee
of GBP8 million (2020: GBP6 million) comprising a third of the
potential performance fee for each of FY2021 and FY2020 after the
performance hurdle was met.
3iN investment activity
Competition for infrastructure assets coming to market was
strong in the year, resulting in high prices. 3iN remained
selective and disciplined on price, supporting a number of existing
portfolio companies with bolt-on acquisitions. Infinis completed
the acquisition of the development rights for a 6MW solar project
at the Ling Hall landfill and Tampnet purchased a 1,200km offshore
fibre cable system in the Gulf of Mexico. 3iN committed additional
capital to ESVAGT to fund further growth in its offshore wind
servicing segment and completed the acquisition of further stakes
in its existing Dutch PPP projects.
In April 2021, 3iN announced a new c.EUR182 million investment
to acquire a 60% stake in DNS:NET, a leading independent
telecommunications provider in Germany. Completion is expected in
June 2021.
Performance of 3i's proprietary capital Infrastructure
portfolio
The Group's proprietary capital infrastructure portfolio
consists of its 30% quoted stake in 3iN and its investments in
Regional Rail and Smarte Carte, as well as smaller stakes in our
other Infrastructure funds.
Quoted stake in 3iN
3iN's share price increased by 20% and closed at 296 pence on 31
March 2021 (31 March 2020: 247 pence). We recognised GBP132 million
of unrealised profits on our 3iN investment (2020: GBP76 million
unrealised loss) and GBP26 million of dividend income (2020: GBP24
million).
Table 9: Unrealised profits/(losses) on the revaluation of
Infrastructure investments(1) in the year to 31 March
2021 2020
GBPm GBPm
----------------------------- ----- -----
Quoted 132 (76)
Discounted cash flow ("DCF") 26 (16)
Fund/Other 10 -
----------------------------- ----- -----
Total 168 (92)
----------------------------- ----- -----
1 Further information on our valuation methodology, including
definitions and rationale, is included in the portfolio valuation -
an explanation section in our Annual report and accounts 2021.
Table 10: Infrastructure portfolio movement for the year to 31
March 2021
Opening Closing
value at Disposals Unrealised value at
1 April at opening profit/(loss) Other 31 March
2020 Investment book value movement movements(1) 2021
Investment Valuation GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- --------- ----------- ----------- -------------- ------------- ---------
3iN Quoted 665 - - 132 - 797
Smarte Carte DCF 172 - - (4) (8) 160
Regional Rail DCF 195 - (74) 30 (20) 131
3i Managed Infrastructure
Acquisitions Fund Fund 38 - - 10 - 48
3i European Operational
Projects Fund Fund 20 2 - (1) (1) 20
India Infrastructure Fund Other 27 - (24) 1 (1) 3
-------------------------- ----------- --------- ----------- ----------- -------------- ------------- ---------
Total 1,117 2 (98) 168 (30) 1,159
--------------------------------------- --------- ----------- ----------- -------------- ------------- ---------
1 Other movements include foreign exchange.
North American Infrastructure
Regional Rail operates 25 rail line segments across five states
in the US with over 540 miles of track, and c.190 freight rail
customers with the business classified as an essential service
throughout the Covid-19 pandemic. In the 12 months to 31 March
2021, Regional Rail performed well, with opportunistic growth in
offerings like rail car storage, better than expected operational
efficiency at its recently acquired Carolina Coastal Railway line
and the addition of new customers on its Florida lines more than
offsetting some freight volume softness in the winter months across
Northeast America. In March 2021, following strong cash generation,
Regional Rail completed a long-term financing package, returning
GBP74 million of capital proceeds to 3i. At 31 March 2021, Regional
Rail was valued on a DCF basis at GBP131 million including the
capital proceeds 3i received in the year (31 March 2020: GBP195
million).
Smarte Carte benefited from its diverse product and service
offering helping to offset the reduction in air travel across the
US in the year. To maintain Smarte Carte's position as a leading
concessionaire, the business has focused on maximising liquidity,
improving long-term contract economics and expanding its service
offerings. Despite the challenging travel sector conditions, the
long-term outlook for the business remains positive and the
business has already begun to see a better than expected rebound in
US domestic travel over the last six months, increasing luggage
cart volumes. At 31 March 2021, Smarte Carte was valued on a DCF
basis at GBP160 million (31 March 2020: GBP172 million).
India Infrastructure fund
In the year, we sold our stake in Krishnapatnam Port, returning
proceeds of GBP30 million to the Group. This represented most of
the remaining value in the India Infrastructure fund.
Fund management
Over the last year, we established a new 3i-managed vehicle that
will co-invest alongside 3iN in certain transactions, with a
commitment of EUR400 million from Industriens Pension of Denmark.
This fund platform broadens our capabilities and complements our
mandate as Investment Manager to 3iN.
In the year, our 3i European Operational Projects Fund completed
the acquisition of a portfolio of eight operational projects in
France from DIF Infrastructure III. At the end of March 2021, the
Fund agreed to acquire further stakes in two of those projects and
a 30% stake in a new project in France, which upon completion will
take the total capital deployed from 60% at 31 March 2021 to c.62%
of its total commitments.
Infrastructure AUM increased to GBP4.9 billion (2020: GBP4.4
billion), principally due to the increase in 3iN's share price.
Table 11: Assets under management as at 31 March 2021
Fee
% income
3i Remaining invested(3) earned in
Close Fund commitment/ 3i commitment at 31 March AUM 2021
Fund/strategy date size share 2021 GBPm GBPm
---------------------------------- -------- --------- ------------ -------------- ------------ ----- ----------
3iN(1) Mar 07 n/a GBP797m n/a n/a 2,639 25
3i Managed Infrastructure
Acquisitions LP Jun 17 GBP698m GBP35m GBP5m 86% 959 6
3i European Operational Projects
Fund(2) Apr 18 EUR456m EUR40m EUR15m 60% 227 2
BIIF May 08 GBP680m n/a n/a 90% 484 4
3i India Infrastructure Fund Mar 08 US$1,195m US$250m US$35m 73% 10 1
3i managed accounts various n/a n/a n/a n/a 335 2
US Infrastructure various n/a n/a n/a n/a 291 -
---------------------------------- -------- --------- ------------ -------------- ------------ ----- ----------
Total 4,945 40
-------------------------------------------- --------- ------------ -------------- ------------ ----- ----------
1 AUM based on the share price at 31 March 2021.
2 3i European Operational Projects Fund acquisitions signed but
not completed by 31 March 2021 will raise the invested percentage
from 60%
to 62%.
3 % invested is the capital deployed into investments against
the total Fund commitment.
Scandlines
Scandlines is held for its ability to deliver long-term capital
returns whilst generating cash dividends.
Scandlines delivered a solid GIR of GBP25 million (March 2020:
GBP5 million) or 6% of opening portfolio value (March 2020: 1%)
despite significant travel restrictions impacting its ferry
crossings between Germany and Denmark.
Portfolio performance
Revenue generated from freight volumes remained stable in 2020,
with volumes close to 2019 levels. Leisure volumes were materially
impacted during the initial spring 2020 lockdown. However, as
restrictions were eased over the summer months, leisure volumes
steadily recovered to levels similar to those seen in 2019. The
reintroduction of material travel restrictions in the final months
of 2020 and start of 2021 resulted in a further reduction in
leisure volumes. To mitigate the impact of the pandemic, Scandlines
has focused on driving cost efficiencies and maximising the
availability of liquidity, retaining surplus cash which would
otherwise be returned to shareholders in less challenging
conditions and re-paying debt. The stable freight revenues and cost
measures contributed to the business remaining profitable in 2020.
As expected, we received no dividend from Scandlines in FY2021.
Scandlines continues to invest in its sustainability agenda
making further investment in its business including fuel-efficient
thrusters and a rotor sail for M/V Copenhagen to harness wind power
and provide supplementary propulsion while reducing CO(2)
emissions. In addition, the Company published its first stand-alone
sustainability report.
At the time of writing, travel restrictions remain in place
between Sweden, Denmark and Germany which are having a significant
impact on leisure volumes. Freight volumes continue to show
resilience and are currently in line with 2019 levels. The business
has good levels of liquidity and is well positioned to rebound as
restrictions are lifted.
We continue to value Scandlines on a DCF at GBP435 million (31
March 2020: GBP429 million).
Foreign exchange
We hedge the balance sheet value of our investment in
Scandlines. We recognised a GBP3 million net gain on foreign
exchange translation (March 2020: GBP14 million gain) including a
GBP20 million fair value gain (March 2020: GBP3 million loss) from
our hedging programme.
Table 12: Gross investment return for the year to 31 March
2021 2020
Investment basis GBPm GBPm
----------------------------------------------------------- ----- -----
Unrealised profit/(loss) on the revaluation of investments 22 (46)
Dividends - 37
Foreign exchange on investments (17) 17
Movement in fair value of derivatives 20 (3)
----------------------------------------------------------- ----- -----
Gross investment return 25 5
----------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 6% 1%
----------------------------------------------------------- ----- -----
Financial review
Strong financial performance
We generated a GIR of GBP2,139 million in FY2021 (2020: GBP318
million) and operating profit before carried interest of GBP2,031
million (2020: GBP215 million).
The total return was GBP1,726 million, representing a profit on
opening shareholders' funds of 22% (2020: GBP253 million or 3%).
The diluted NAV per share at 31 March 2021 increased by 18% to 947
pence (31 March 2020: 804 pence) after paying dividends totalling
35 pence per share during the year. This result was after a net
foreign exchange translation loss of 41 pence and the 13 pence
negative accounting re-measurement loss from a fundamental
de-risking of the UK defined benefit pension plan.
Table 13: Total return for the year to 31 March
2021 2020
Investment basis GBPm GBPm
--------------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 35 90
Unrealised profits/(losses) on the revaluation of investments 2,351 (172)
Portfolio income
Dividends 82 68
Interest income from investment portfolio 65 118
Fees receivable 9 9
Foreign exchange on investments (427) 214
Movement in the fair value of derivatives 24 (9)
--------------------------------------------------------------- ----- -----
Gross investment return 2,139 318
--------------------------------------------------------------- ----- -----
Fees receivable from external funds 44 44
Operating expenses (112) (116)
Interest received (1) 1
Interest paid (47) (38)
Exchange movements 7 1
Other income 1 5
--------------------------------------------------------------- ----- -----
Operating profit before carried interest 2,031 215
--------------------------------------------------------------- ----- -----
Carried interest
Carried interest and performance fees receivable 5 85
Carried interest and performance fees payable (184) (84)
-------------------------------------------------------------- ----- -----
Operating profit before tax 1,852 216
--------------------------------------------------------------- ----- -----
Tax charge - (1)
--------------------------------------------------------------- ----- -----
Profit for the year 1,852 215
--------------------------------------------------------------- ----- -----
Re-measurements of defined benefit plans (126) 38
--------------------------------------------------------------- ----- -----
Total comprehensive income for the year ("Total return") 1,726 253
--------------------------------------------------------------- ----- -----
Total return on opening shareholders' funds 22% 3%
--------------------------------------------------------------- ----- -----
Investment basis and alternative performance measures ("APMs")
In our Strategic report we report our financial performance using our
Investment basis. We do not consolidate our portfolio companies; as private
equity and infrastructure investments they are not operating subsidiaries.
IFRS 10 provides an exception from consolidation but also requires us
to fair value other companies in the Group (primarily intermediate holding
companies and partnerships), which results in a loss of transparency.
As explained in the Investment basis and Reconciliation of investment
basis and IFRS sections below, the total comprehensive income and net
assets are the same under our audited IFRS financial statements and our
Investment basis. The Investment basis is simply a "look through" of
IFRS 10 to present the underlying performance and we believe it is more
transparent to readers of our Annual report and accounts.
In October 2015, the European Securities and Markets Authority ("ESMA")
published guidelines about the use of APMs. These are financial measures
such as KPIs that are not defined under IFRS. Our Investment basis is
itself an APM, and we use a number of other measures which, on account
of being derived from the Investment basis, are also APMs.
Further information about our use of APMs, including the applicable reconciliations
to the IFRS equivalent where appropriate, is provided at the end of the
Financial review and should be read alongside the Investment basis to
IFRS reconciliation. Our APMs are gross investment return as a percentage
of the opening investment portfolio value, cash realisations, cash investment,
operating cash profit, net cash/(debt) and gearing.
Realised profits
We generated total realised proceeds of GBP218 million (2020:
GBP918 million) and realised profits of GBP35 million (2020: GBP90
million) in the year, including realised proceeds of GBP114 million
and profit of GBP29 million from Private Equity (2020: GBP848
million, GBP90 million) and realised proceeds of GBP104 million and
profit of GBP6 million from Infrastructure (2020: nil, nil).
Unrealised value movements
We recognised an unrealised profit of GBP2,351 million (2020:
GBP172 million unrealised loss). Our portfolios performed strongly
in FY2021 despite the uncertainty and disruption caused by
Covid-19. Action continued to deliver robust performance
contributing GBP1,202 million of unrealised profits and we also saw
strong performance from our Private Equity investments in Royal
Sanders, Luqom, Cirtec Medical, Tato, SaniSure, Magnitude Software
and AES. The share prices of our quoted investments, 3iN and
Basic-Fit, recovered well in the year.
Further information on the Private Equity, Infrastructure and
Scandlines valuations is included in the business reviews.
Portfolio income
Portfolio income decreased to GBP156 million during the year
(2020: GBP195 million). Interest income from portfolio companies,
the majority of which is non-cash, reduced to GBP65 million (2020:
GBP118 million) as we provided against interest income on the
assets most impacted by the Covid-19 pandemic. Partially offsetting
this was strong dividend income of GBP82 million (2020: GBP68
million), the majority of which was cash, following distributions
from Royal Sanders, 3iN and Tato. Fee income remained stable in the
year at GBP9 million (2020: GBP9 million).
Fees receivable from external funds
Fees received from external funds were GBP44 million (2020:
GBP44 million). 3i receives a fund management fee from 3iN, which
amounted to GBP25 million in FY2021 (2020: GBP28 million). 3i also
received fee income of GBP6 million (2020: GBP6 million) from MIA
through advisory and management fees and continued to generate fee
income from other 3i managed accounts and other funds. In Private
Equity, we recognised a GBP4 million administration fee for our
management of the 3i 2020 Co-investment vehicles related to
Action.
Operating expenses
Operating expenses of GBP112 million (2020: GBP116 million),
decreased in the year due to lower overhead spend and lower travel
cost due to global restrictions on travel. 3i continues to focus on
controlling its operating expenses to achieve an operating cash
profit.
Operating cash profit
We generated an operating cash profit of GBP23 million in the
year (2020: GBP40 million). Cash income decreased to GBP131 million
(2020: GBP160 million), principally due to lower cash interest
following the receipt of non-recurring cash interest in FY2020,
Scandlines' decision not to pay a dividend in 2020, and the
decision to defer the collection of some portfolio income as a
result of prudent portfolio liquidity management during the
pandemic. This was offset by good dividend income from the stronger
performers in the portfolio. Cash operating expenses decreased to
GBP108 million (2020: GBP120 million) driven principally by lower
variable compensation costs and a reduction in travel.
Table 14: Unrealised value movements on the revaluation of
investments for the year to 31 March
2021 2020
GBPm GBPm
--------------- ----- -----
Private Equity 2,161 (34)
Infrastructure 168 (92)
Scandlines 22 (46)
--------------- ----- -----
Total 2,351 (172)
--------------- ----- -----
Table 15: Operating cash profit for the year to 31 March
2021 2020
GBPm GBPm
-------------------------------------- ----- -----
Cash fees from external funds 39 44
Cash portfolio fees 7 12
Cash portfolio dividends and interest 85 104
-------------------------------------- ----- -----
Cash income 131 160
-------------------------------------- ----- -----
Cash operating expenses (1) (108) (120)
-------------------------------------- ----- -----
Operating cash profit 23 40
-------------------------------------- ----- -----
1 Cash operating expenses include operating expenses paid and
lease payments.
Carried interest and performance fees
We receive carried interest and performance fees from
third-party funds and 3iN. We also pay carried interest and
performance fees to participants in plans relating to returns from
investments. These are received and/or paid subject to meeting
certain performance conditions. In Private Equity, we typically
accrue net carried interest payable between 10% and 13% of GIR,
based on the assumption that all investments are realised at their
balance sheet value. 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 usually active for a
number of years and their participants include both current and
previous employees of 3i.
We generated a strong GIR of GBP596 million in the Private
Equity 2016-19 vintage (2020: GBP(145) million). As a result, the
performance hurdle for this vintage has now been met on an accruals
basis and we are now accruing carried interest payable for this
vintage. As this was a first time accrual, it includes an element
of "catch up" leading to a higher than usual carried interest
charge this year. The effect of the catch up is GBP54 million. The
continued robust performance of Action in the Buyouts 2010-12
vintage led to a GBP117 million increase in carried interest
payable in FY2021.
During the year, GBP506 million (2020: GBP35 million) was paid
to participants in Private Equity, of which GBP496 million was paid
to participants in the Private Equity Buyouts 2010-12 carry plan,
which includes a residual Action stake. The amount paid includes
GBP111 million which became due following the decision to acquire
25% of the outstanding carry liability in August 2020. The economic
result of this transaction is the increase in 3i's investment in
Action, net of carry, from 46.2% to 47.7%; the gross investment is
52.7% (31 March 2020: 52.6%) following purchase of a further small
equity stake in Action as described in the Private Equity business
review section.
Overall, the effect of the income statement charge, cash
payments, as well as currency translation meant that the balance
sheet carried interest and performance fees payable was GBP560
million (31 March 2020: GBP1,038 million).
3iN pays a performance fee based on its NAV on an annual basis,
subject to a hurdle rate of return and partly deferred, subject to
further hurdles. The continued strong performance of the assets
held by 3iN resulted in the recognition of GBP8 million (2020: GBP6
million) of performance fees receivable. The Infrastructure team
receives a share of the fee received from 3iN, with the majority of
payments deferred and expensed over a number of years. GBP11
million (2020: GBP21 million) was recognised as an expense during
the year, relating to performance fees from both the current and
previous years. During the year, GBP10 million was paid to the
Infrastructure team. The total potential payable relating to the
FY2021 performance fee was GBP7 million, which together with the
prior periods' performance fee, results in remaining cumulative
total potential payable for performance fees of GBP55 million.
Table 16: Carried interest and performance fees for the year to
31 March
2021 2020
Statement of comprehensive income GBPm GBPm
------------------------------------------------- ----- -----
Carried interest and performance fees receivable
Private Equity (3) 79
Infrastructure 8 6
------------------------------------------------- ----- -----
Total 5 85
------------------------------------------------- ----- -----
Carried interest and performance fees payable
Private Equity (173) (63)
Infrastructure (11) (21)
------------------------------------------------- ----- -----
Total (184) (84)
------------------------------------------------- ----- -----
Net carried interest payable (179) 1
------------------------------------------------- ----- -----
Table 17: Carried interest and performance fees at 31 March
2021 2020
Statement of financial position GBPm GBPm
------------------------------------------------- ----- -------
Carried interest and performance fees receivable
Private Equity 8 11
Infrastructure 8 6
------------------------------------------------- ----- -------
Total 16 17
------------------------------------------------- ----- -------
Carried interest and performance fees payable
Private Equity (533) (998)
Infrastructure (27) (40)
------------------------------------------------- ----- -------
Total (560) (1,038)
------------------------------------------------- ----- -------
Net foreign exchange movements
At 31 March 2021, 84% of the Group's net assets were denominated
in euros or US dollars (31 March 2020: 78%). As sterling
strengthened against both of these currencies, the Group recorded a
total net foreign exchange translation loss of GBP420 million in
the year (2020: GBP215 million gain), before the GBP24 million
(2020: GBP9 million loss) translation gain from the movement in the
fair value of hedging derivatives. The net foreign exchange loss
also reflects the translation of non-portfolio net assets,
including non-sterling cash held at the balance sheet date.
The Group's general policy is not to hedge its foreign currency
denominated portfolio. Where possible, flows from currency
realisations are matched with currency investments. Short-term
derivative contracts are used occasionally to manage transaction
cash flows. We do hedge the foreign exchange translation risk
associated with our investment in Scandlines, which is considered a
longer-term hold with relatively predictable cash flows. As at 31
March 2021, the notional amount of the forward foreign exchange
contracts held by the Group was EUR500 million, all relating to
Scandlines.
Table 18: Net assets and sensitivity by currency at 31 March
1%
sensitivity
FX rate GBPm % GBPm
------------- -------- ----- --- ------------
Sterling n/a 1,254 14% n/a
Euro (1) 1.1741 6,237 68% 62
US dollar 1.3803 1,489 16% 15
Danish krone 8.7315 162 2% 2
Other n/a 22 - n/a
------------- -------- ----- --- ------------
1 Sensitivity impact is net of derivatives.
Pension
During the year, the 3i Group Pension Plan's Trustees` completed
a GBP650 million buy-in transaction with Legal & General. This
transaction was completed without additional contributions from 3i.
This insurance policy, alongside previous buy-in policies entered
into with Pension Insurance Corporation and Legal & General in
March 2017 and February 2019 respectively, means that the Plan
benefits of all members are now insured. This is an excellent
outcome, as it provides long-term security for the Plan members and
3i is no longer exposed to any material longevity, interest or
inflation risk in the Plan or any financing requirements.
The last triennial funding valuation was based on the Plan's
position at 30 June 2019 and, on an IAS 19 accounting basis, the
Plan remains in surplus. We reduced the IAS 19 Plan surplus to
reflect the commercial outcome of the buy-in transaction from
GBP173 million at 31 March 2020 to GBP55 million at 31 March 2021,
which included a GBP122 million re-measurement loss, but no impact
on cash.
Tax
The Group's parent company continues to operate in the UK as an
approved investment trust company. An approved investment trust is
a UK investment company which is required to meet certain
conditions set out in the UK tax rules to obtain and maintain its
tax status. This approval allows certain investment profits of the
Company, broadly its capital profits, to be exempt from tax in the
UK. The Group's tax charge for the year was nil (2020: GBP1
million). The Group's overall UK tax position for the financial
year is dependent on the finalisation of tax returns of the various
corporate and partnership entities in the UK group.
Balance sheet and liquidity
We have run a conservative balance sheet strategy as a
fundamental part of our business model since 2012. The validity of
that choice was demonstrated throughout FY2021, enabling us to
continue to invest without needing to accelerate any realisations.
We had provided guidance that, in a normal economic environment, we
were comfortable operating between GBP500 million of net cash and
GBP500 million of net debt. We have now taken the opportunity to
review this range, having had the benefit of testing our strategy
under the stress of the pandemic and recognising the significant
increase in the quality and value of our net assets since 2012. We
have concluded that our guidance of a GBP500 million net cash
tolerance remains appropriate but that we should extend the net
debt tolerance to GBP750 million and include a gearing tolerance of
up to 15%. Delivery of our mid to high-teens returns is not
dependent on having a geared balance sheet. Any such, gearing would
therefore be short term and tactical, rather than structural. The
GBP750 million net debt tolerance is not a limit, and we would be
prepared to exceed it provided gearing remains below 15%, and there
is good visibility on realisations and refinancings occurring
within the next 12 months.
At 31 March 2021, the Group had net debt of GBP750 million (31
March 2020: GBP270 million net cash) and gearing of 8%, after a
GBP516 million carried interest payment, net cash investment of
GBP160 million and dividend payments of GBP338 million in the
year.
The Group had liquidity of GBP725 million as at 31 March 2021
(31 March 2020: GBP1,245 million) comprising cash and deposits of
GBP225 million (31 March 2020: GBP845 million) and an undrawn RCF
of GBP500 million. The RCF was increased from GBP400 million in the
year and its maturity extended to 2026. In June 2020, we took
advantage of favourable
debt market conditions to strengthen our liquidity further,
issuing a 20-year GBP400 million bond at a coupon of 3.75%. At 31
March 2021, our gross debt was GBP975 million.
The investment portfolio value increased to GBP10,408 million at
31 March 2021 (31 March 2020: GBP8,098 million) with unrealised
profits of GBP2,351 million and net cash investment offsetting a
foreign exchange translation loss in the year.
Further information on investments and realisations is included
in the Private Equity, Infrastructure and Scandlines business
reviews.
Going concern
The Annual report and accounts 2021 are prepared on a going
concern basis. The Directors made an assessment of going concern,
taking into account the Group's current performance and the
outlook, and performed additional analysis to support the going
concern assessment considering the ongoing impact of the Covid-19
pandemic on the portfolio.
Further details on going concern can be found in the Going
concern and Viability statements in our Annual report and accounts
2021.
Dividend
The Board has recommended a second FY2021 dividend of 21.0 pence
per share (2020: 17.5 pence), taking the total dividend for the
year to 38.5 pence (2020: 35.0 pence). Subject to shareholder
approval, the dividend will be paid to shareholders in July
2021.
Table 19: Simplified consolidated balance sheet at 31 March
2021 2020
Statement of financial position GBPm GBPm
------------------------------------------------- ------ -------
Investment portfolio 10,408 8,098
Gross debt (975) (575)
Cash and deposits 225 845
------------------------------------------------- ------ -------
Net (debt)/cash (750) 270
------------------------------------------------- ------ -------
Carried interest and performance fees receivable 16 17
Carried interest and performance fees payable (560) (1,038)
Other net assets 50 410
------------------------------------------------- ------ -------
Net assets 9,164 7,757
------------------------------------------------- ------ -------
Gearing (1) 8% nil
------------------------------------------------- ------ -------
1 Gearing is net debt as a percentage of net assets.
Key accounting judgements and estimates
A key judgement is the assessment required to determine the degree of
control or influence the Group exercises and the form of any control
to ensure that the financial treatment of investment entities is accurate.
The introduction of IFRS 10 resulted in a number of intermediate holding
companies being presented at fair value, which has led to reduced transparency
of the underlying investment performance. As a result, the Group continues
to present a non-GAAP Investment basis set of financial statements to
ensure that the commentary in the Strategic report remains fair, balanced
and understandable. The reconciliation of the Investment basis to IFRS
is shown further on in this document.
In preparing these accounts, the key accounting estimates are the carrying
value of our investment assets, which is stated at fair value, and the
calculation of carried interest payable.
Given the importance of the valuation of investments, the Board has a
separate Valuations Committee to review the valuation policy, process
and application to individual investments. However, asset valuations
for unquoted investments are inherently subjective, as they are made
on the basis of assumptions which may not prove to be accurate. At 31
March 2021, 90% by value of the investment assets were unquoted (31 March
2020: 91%).
The valuation of the proprietary capital portfolio is a primary input
into the carried interest payable and receivable balances, which are
determined by reference to the valuation at 31 March 2021 and the underlying
investment management agreements.
Investment basis
Consolidated statement of comprehensive income
for the year to 31 March
2021 2020
GBPm GBPm
--------------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 35 90
Unrealised profits/(losses) on the revaluation of investments 2,351 (172)
Portfolio income
Dividends 82 68
Interest income from investment portfolio 65 118
Fees receivable 9 9
Foreign exchange on investments (427) 214
Movement in the fair value of derivatives 24 (9)
--------------------------------------------------------------- ----- -----
Gross investment return 2,139 318
--------------------------------------------------------------- ----- -----
Fees receivable from external funds 44 44
Operating expenses (112) (116)
Interest received (1) 1
Interest paid (47) (38)
Exchange movements 7 1
Other income 1 5
--------------------------------------------------------------- ----- -----
Operating profit before carried interest 2,031 215
--------------------------------------------------------------- ----- -----
Carried interest
Carried interest and performance fees receivable 5 85
Carried interest and performance fees payable (184) (84)
-------------------------------------------------------------- ----- -----
Operating profit before tax 1,852 216
--------------------------------------------------------------- ----- -----
Tax charge - (1)
--------------------------------------------------------------- ----- -----
Profit for the year 1,852 215
--------------------------------------------------------------- ----- -----
Other comprehensive income
Re-measurements of defined benefit plans (126) 38
-------------------------------------------------------------- ----- -----
Total comprehensive income for the year ("Total return") 1,726 253
--------------------------------------------------------------- ----- -----
Consolidated statement of financial position
as at 31 March
2021 2020
GBPm GBPm
-------------------------------------------------- ------- -------
Assets
Non-current assets
Investments
Quoted investments 1,011 758
Unquoted investments 9,397 7,340
------------------------------------------------- ------- -------
Investment portfolio 10,408 8,098
-------------------------------------------------- ------- -------
Carried interest and performance fees receivable 8 11
Other non-current assets 54 26
Intangible assets 8 9
Retirement benefit surplus 55 173
Property, plant and equipment 5 5
Right of use asset 16 19
Derivative financial instruments 16 7
Deferred income taxes 1 -
-------------------------------------------------- ------- -------
Total non-current assets 10,571 8,348
-------------------------------------------------- ------- -------
Current assets
Carried interest and performance fees receivable 8 6
Other current assets 21 296
Current income taxes 2 2
Derivative financial instruments 10 6
Cash and cash equivalents 225 845
-------------------------------------------------- ------- -------
Total current assets 266 1,155
-------------------------------------------------- ------- -------
Total assets 10,837 9,503
-------------------------------------------------- ------- -------
Liabilities
Non-current liabilities
Trade and other payables (24) (5)
Carried interest and performance fees payable (543) (505)
Loans and borrowings (975) (575)
Retirement benefit deficit (29) (25)
Lease liability (13) (16)
Derivative financial instruments - (2)
Deferred income taxes (1) (1)
Provisions (2) (3)
-------------------------------------------------- ------- -------
Total non-current liabilities (1,587) (1,132)
-------------------------------------------------- ------- -------
Current liabilities
Trade and other payables (64) (73)
Carried interest and performance fees payable (17) (533)
Lease liability (4) (4)
Derivative financial instruments - (2)
Current income taxes (1) (2)
Total current liabilities (86) (614)
-------------------------------------------------- ------- -------
Total liabilities (1,673) (1,746)
-------------------------------------------------- ------- -------
Net assets 9,164 7,757
-------------------------------------------------- ------- -------
Equity
Issued capital 719 719
Share premium 788 788
Other reserves 7,721 6,328
Own shares (64) (78)
-------------------------------------------------- ------- -------
Total equity 9,164 7,757
-------------------------------------------------- ------- -------
Consolidated cash flow statement
for the year to 31 March
2021 2020
GBPm GBPm
----------------------------------------------- ----- -------
Cash flow from operating activities
Purchase of investments (479) (1,279)
Proceeds from investments 319 801
Net cash flow from derivatives 7 -
Portfolio interest received 5 34
Portfolio dividends received 80 70
Portfolio fees received 7 12
Fees received from external funds 39 44
Carried interest and performance fees received 6 696
Carried interest and performance fees paid (516) (44)
Carried interest held in non-current assets - (14)
Operating expenses paid (103) (116)
Co-investment loans received/(paid) 15 (8)
Tax (paid)/received (1) 10
Interest received (1) 1
Other cash income - 2
----------------------------------------------- ----- -------
Net cash flow from operating activities (622) 209
----------------------------------------------- ----- -------
Cash flow from financing activities
Issue of shares 1 1
Purchase of own shares - (59)
Dividends paid (338) (363)
Proceeds from long-term borrowing 395 -
Lease payments (5) (4)
Interest paid (46) (42)
----------------------------------------------- ----- -------
Net cash flow from financing activities 7 (467)
----------------------------------------------- ----- -------
Cash flow from investing activities
Purchase of property, plant and equipment (1) (3)
Net cash flow from deposits - 50
----------------------------------------------- ----- -------
Net cash flow from investing activities (1) 47
----------------------------------------------- ----- -------
Change in cash and cash equivalents (616) (211)
----------------------------------------------- ----- -------
Cash and cash equivalents at the start of year 845 1,020
Effect of exchange rate fluctuations (4) 36
----------------------------------------------- ----- -------
Cash and cash equivalents at the end of year 225 845
----------------------------------------------- ----- -------
Background to Investment basis financial statements
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 intermediate holding companies that were
previously consolidated line by line. This fair value approach,
applied at the intermediate holding company level, effectively
obscures the performance of our proprietary capital investments and
associated transactions occurring in the intermediate holding
companies.
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 in our report and aid understanding we
introduced separate non-GAAP "Investment basis" Statements of
comprehensive income, financial position and cash flow in our 2014
Annual report and accounts. The Investment basis is an APM and the
Strategic report is 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.
Reconciliation of 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 on the following pages.
Reconciliation of Investment basis and IFRS
Reconciliation of consolidated statement of comprehensive
income
for the year to 31 March
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
20 21 20 21 20 21 20 20 20 20 20 20
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Realised profits/(losses) over value
on the disposal of investments 1,2 35 (26) 9 90 (119) (29)
Unrealised profits/(losses) on the
revaluation
of investments 1,2 2,351 (1,134) 1,217 (172) 144 (28)
Fair value movements on investment entity
subsidiaries 1 - 792 792 - 191 191
Portfolio income
Dividends 1,2 82 (33) 49 68 (46) 22
Interest income from investment portfolio 1,2 65 (43) 22 118 (81) 37
Fees receivable 1,2 9 4 13 9 2 11
Foreign exchange on investments 1,3 (427) 232 (195) 214 (178) 36
Movement in the fair value of derivatives 24 - 24 (9) - (9)
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Gross investment return 2,139 (208) 1,931 318 (87) 231
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Fees receivable from external funds 44 - 44 44 - 44
Operating expenses 4 (112) 1 (111) (116) - (116)
Interest received 1 (1) - (1) 1 1 2
Interest paid (47) - (47) (38) - (38)
Exchange movements 1,3 7 10 17 1 25 26
Income from investment entity subsidiaries 1 - 22 22 - 19 19
Other income/(expense) 1 - 1 5 (2) 3
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Operating profit before carried interest 2,031 (175) 1,856 215 (44) 171
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Carried interest
Carried interest and performance fees
receivable 1 5 - 5 85 (18) 67
Carried interest and performance fees
payable 1 (184) 178 (6) (84) 61 (23)
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Operating profit before tax 1,852 3 1,855 216 (1) 215
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Tax charge 1,4 - - - (1) - (1)
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Profit for the year 1,852 3 1,855 215 (1) 214
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Other comprehensive income/(expense)
Exchange differences on translation of
foreign operations 1,3 - (3) (3) - 1 1
Re-measurements of defined benefit plans (126) - (126) 38 - 38
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Other comprehensive income for the year (126) (3) (129) 38 1 39
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
Total comprehensive income
for the year ("Total return") 1,726 - 1,726 253 - 253
-------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- -----
The IFRS basis is audited and the Investment basis is
unaudited.
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 years. 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/(losses), unrealised profits/(losses), 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 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 entities".
4 Other items also aggregated into the "Fair value movements on investment entity subsidiaries"
line include fees receivable from external funds, audit fees, administration expenses, carried
interest and tax.
Reconciliation of consolidated statement of financial
position
as at 31 March
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
2021 2021 2021 2020 2020 2020
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Assets
Non-current assets
Investments
Quoted investments 1 1,011 (214) 797 758 (340) 418
Unquoted investments 1 9,397 (5,184) 4,213 7,340 (4,304) 3,036
Investments in investment entity
subsidiaries 1,2 - 4,905 4,905 - 3,936 3,936
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Investment portfolio 10,408 (493) 9,915 8,098 (708) 7,390
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Carried interest and performance fees
receivable 1 8 1 9 11 - 11
Other non-current assets 1 54 (2) 52 26 (3) 23
Intangible assets 8 - 8 9 - 9
Retirement benefit surplus 55 - 55 173 - 173
Property, plant and equipment 5 - 5 5 - 5
Right of use asset 16 - 16 19 - 19
Derivative financial instruments 16 - 16 7 - 7
Deferred income taxes 1 - 1 - - -
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total non-current assets 10,571 (494) 10,077 8,348 (711) 7,637
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Current assets
Carried interest and performance fees
receivable 1 8 - 8 6 1 7
Other current assets 1 21 - 21 296 (152) 144
Current income taxes 2 - 2 2 - 2
Derivative financial instruments 10 - 10 6 - 6
Cash and cash equivalents 1 225 (9) 216 845 (74) 771
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total current assets 266 (9) 257 1,155 (225) 930
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total assets 10,837 (503) 10,334 9,503 (936) 8,567
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Liabilities
Non-current liabilities
Trade and other payables 1 (24) 7 (17) (5) 5 -
Carried interest and performance fees
payable 1 (543) 494 (49) (505) 439 (66)
Loans and borrowings (975) - (975) (575) - (575)
Retirement benefit deficit (29) - (29) (25) - (25)
Lease liability (13) - (13) (16) - (16)
Derivative financial instruments - - - (2) - (2)
Deferred income taxes (1) - (1) (1) - (1)
Provisions (2) - (2) (3) - (3)
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total non-current liabilities (1,587) 501 (1,086) (1,132) 444 (688)
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Current liabilities
Trade and other payables 1 (64) 2 (62) (73) - (73)
Carried interest and performance fees
payable 1 (17) - (17) (533) 492 (41)
Lease liability (4) - (4) (4) - (4)
Derivative financial instruments - - - (2) - (2)
Current income taxes (1) - (1) (2) - (2)
Total current liabilities (86) 2 (84) (614) 492 (122)
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total liabilities (1,673) 503 (1,170) (1,746) 936 (810)
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Net assets 9,164 - 9,164 7,757 - 7,757
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Equity
Issued capital 719 - 719 719 - 719
Share premium 788 - 788 788 - 788
Other reserves 3 7,721 - 7,721 6,328 - 6,328
Own shares (64) - (64) (78) - (78)
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
Total equity 9,164 - 9,164 7,757 - 7,757
------------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -----
The IFRS basis is audited and the Investment basis is
unaudited.
Notes:
1 Applying IFRS 10 to the Consolidated statement of financial position aggregates the line items
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 for 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
for the year to 31 March
IFRS IFRS
Investment IFRS IFRS Investment adjustments basis
basis adjustments basis basis (restated)(1) (restated)(1)
2021 2021 2021 2020 2020 2020
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Cash flow from operating activities
Purchase of investments 1 (479) 353 (126) (1,279) 629 (650)
Proceeds from investments 1 319 (135) 184 801 (792) 9
Amounts paid to investment entity
subsidiaries 1 - (879) (879) - (1,176) (1,176)
Amounts received from investment
entity subsidiaries 1 - 281 281 - 1,362 1,362
Net cash flow from derivatives 7 - 7 - - -
Portfolio interest received 1 5 (5) - 34 (24) 10
Portfolio dividends received 1 80 (32) 48 70 (46) 24
Portfolio fees received 1 7 - 7 12 (1) 11
Fees received from external funds 39 - 39 44 - 44
Carried interest and performance
fees received 1 6 - 6 696 (18) 678
Carried interest and performance
fees paid 1 (516) 483 (33) (44) 13 (31)
Carried interest held in non-current
assets 1 - - - (14) 14 -
Operating expenses paid 1 (103) - (103) (116) - (116)
Co-investment loans received/(paid) 1 15 (3) 12 (8) - (8)
Tax (paid)/received 1 (1) - (1) 10 - 10
Interest received 1 (1) - (1) 1 1 2
Other cash income - - - 2 - 2
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Net cash flow from operating
activities (622) 63 (559) 209 (38) 171
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Cash flow from financing activities
Issue of shares 1 - 1 1 - 1
Purchase of own shares - - - (59) - (59)
Dividends paid (338) - (338) (363) - (363)
Proceeds from long-term borrowing 395 - 395 - - -
Lease payments (5) - (5) (4) - (4)
Interest paid (46) - (46) (42) - (42)
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Net cash flow from financing
activities 7 - 7 (467) - (467)
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Cash flow from investing activities
Purchase of property, plant and
equipment (1) - (1) (3) - (3)
Net cash flow from deposits - - - 50 - 50
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Net cash flow from investing
activities (1) - (1) 47 - 47
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Change in cash and cash equivalents 2 (616) 63 (553) (211) (38) (249)
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Cash and cash equivalents at the
start of year 2 845 (74) 771 1,020 (37) 983
Effect of exchange rate fluctuations 1 (4) 2 (2) 36 1 37
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
Cash and cash equivalents at the
end of year 2 225 (9) 216 845 (74) 771
------------------------------------ ----- ---------- ----------- ------ ---------- ------------- -------------
1 Refer to the basis of preparation and accounting polices on page later in this document.
The IFRS basis is audited and the Investment basis is
unaudited.
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 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.
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 above. The table below defines
our additional APMs.
Gross investment return as a percentage of opening portfolio value
Purpose Calculation Reconciliation to IFRS
A measure of the performance of our It is calculated as the gross The equivalent balances under IFRS and
proprietary investment portfolio. investment return, as shown in the the reconciliation to the Investment
Investment basis Consolidated basis are shown
statement of comprehensive income, as in the Reconciliation of the
a % of the opening portfolio value. consolidated statement of
comprehensive income and the
Reconciliation
of the consolidated statement of
financial position respectively.
-------------------------------------- --------------------------------------
Cash realisations
Purpose Calculation Reconciliation to IFRS
Cash proceeds from our investments The cash received from the disposal of The equivalent balance under IFRS and
support our returns to shareholders, investments in the year as shown in the reconciliation to the Investment
as well as our ability the Investment basis is shown
to invest in new opportunities. basis Consolidated cash flow in the Reconciliation of the
statement. consolidated cash flow statement.
-------------------------------------- --------------------------------------
Cash investment
Purpose Calculation Reconciliation to IFRS
Identifying new opportunities in which The cash paid to acquire investments The equivalent balance under IFRS and
to invest proprietary capital is the in the year as shown on the Investment the reconciliation to the Investment
primary driver basis Consolidated basis is shown
of the Group's ability to deliver cash flow statement. in the Reconciliation of the
attractive returns. consolidated cash flow statement.
-------------------------------------- --------------------------------------
Operating cash profit
Purpose Calculation Reconciliation to IFRS
By covering the cash cost of running The cash income from the portfolio The equivalent balance under IFRS and
the business with cash income, we (interest, dividends and fees) the reconciliation to the Investment
reduce the potential together with fees received basis is shown
dilution of capital returns. from external funds less cash in the Reconciliation of the
operating expenses and leases payments consolidated cash flow statement.
as shown on the Investment
basis Consolidated cash flow
statement. The calculation is shown in
Table 15 of the Financial
review.
-------------------------------------- --------------------------------------
Net (debt)/cash
Purpose Calculation Reconciliation to IFRS
A measure of the available cash to Cash and cash equivalents plus The equivalent balance under IFRS and
invest in the business and an deposits less loans and borrowings as the reconciliation to the Investment
indicator of the financial shown on the Investment basis is shown
risk in the Group's balance basis Consolidated statement of in the Reconciliation of the
sheet. financial position. consolidated statement of financial
position.
-------------------------------------- --------------------------------------
Gearing
Purpose Calculation Reconciliation to IFRS
A measure of the financial risk in the Net debt (as defined above) as a % of The equivalent balance under IFRS and
Group's balance sheet. the Group's net assets under the the reconciliation to the Investment
Investment basis. It basis is shown
cannot be less than zero. in the Reconciliation of the
consolidated statement of financial
position.
-------------------------------------- --------------------------------------
Audited financial statements
Consolidated statement of comprehensive income
for the year to 31 March
2021 2020
Notes GBPm GBPm
============================================================================ ====== ===== =====
Realised profits/(losses) over value on the disposal of investments 9 (29)
Unrealised profits/(losses) on the revaluation of investments 1,217 (28)
Fair value movements on investment entity subsidiaries 792 191
Portfolio income
Dividends 49 22
Interest income from investment portfolio 22 37
Fees receivable 13 11
Foreign exchange on investments (195) 36
Movement in the fair value of derivatives 24 (9)
============================================================================ ====== ===== =====
Gross investment return 1,931 231
---------------------------------------------------------------------------- ------ ----- -----
Fees receivable from external funds 44 44
Operating expenses (111) (116)
Interest received (1) 2
Interest paid (47) (38)
Exchange movements 17 26
Income from investment entity subsidiaries 22 19
Other income 1 3
============================================================================ ====== ===== =====
Operating profit before carried interest 1,856 171
---------------------------------------------------------------------------- ------ ----- -----
Carried interest
Carried interest and performance fees receivable 5 67
Carried interest and performance fees payable (6) (23)
=========================================================================== ====== ===== =====
Operating profit before tax 1,855 215
---------------------------------------------------------------------------- ------ ----- -----
Tax charge - (1)
============================================================================ ====== ===== =====
Profit for the year 1,855 214
============================================================================ ====== ===== =====
Other comprehensive income that may be reclassified to the income statement
Exchange differences on translation of foreign operations (3) 1
Other comprehensive (expense)/income that will not be reclassified to the income statement
Re-measurements of defined benefit plans (126) 38
=========================================================================== ====== ===== =====
Other comprehensive (expense)/income for the year (129) 39
============================================================================ ====== ===== =====
Total comprehensive income for the year ("Total return") 1,726 253
============================================================================ ====== ===== =====
Earnings per share
Basic (pence) 2 192.4 22.1
Diluted (pence) 2 191.9 22.1
=========================================================================== ====== ===== =====
The Notes to the accounts section forms an integral part of
these financial statements.
Consolidated statement of financial position
as at 31 March
2021 2020
Notes GBPm GBPm
================================================== ===== ======= =====
Assets
Non-current assets
Investments
Quoted investments 797 418
Unquoted investments 4,213 3,036
Investments in investment entity subsidiaries 4,905 3,936
-------------------------------------------------- ----- ------- -----
Investment portfolio 9,915 7,390
-------------------------------------------------- ----- ------- -----
Carried interest and performance fees receivable 9 11
Other non-current assets 52 23
Intangible assets 8 9
Retirement benefit surplus 55 173
Property, plant and equipment 5 5
Right of use asset 16 19
Derivative financial instruments 16 7
Deferred income taxes 1 -
================================================== ===== ======= =====
Total non-current assets 10,077 7,637
========================================================= ======= =====
Current assets
Carried interest and performance fees receivable 8 7
Other current assets 21 144
Current income taxes 2 2
Derivative financial instruments 10 6
Cash and cash equivalents 216 771
========================================================= ======= =====
Total current assets 257 930
========================================================= ======= =====
Total assets 10,334 8,567
========================================================= ======= =====
Liabilities
Non-current liabilities
Trade and other payables (17) -
Carried interest and performance fees payable (49) (66)
Loans and borrowings 5 (975) (575)
Retirement benefit deficit (29) (25)
Lease liability (13) (16)
Derivative financial instruments - (2)
Deferred income taxes (1) (1)
Provisions (2) (3)
================================================== ===== ======= =====
Total non-current liabilities (1,086) (688)
========================================================= ======= =====
Current liabilities
Trade and other payables (62) (73)
Carried interest and performance fees payable (17) (41)
Lease liability (4) (4)
Derivative financial instruments - (2)
Current income taxes (1) (2)
Total current liabilities (84) (122)
========================================================= ======= =====
Total liabilities (1,170) (810)
========================================================= ======= =====
Net assets 9,164 7,757
========================================================= ======= =====
Equity
Issued capital 719 719
Share premium 788 788
Capital redemption reserve 43 43
Share-based payment reserve 34 33
Translation reserve (5) (2)
Capital reserve 6,733 5,432
Revenue reserve 916 822
Own shares (64) (78)
================================================== ===== ======= =====
Total equity 9,164 7,757
========================================================= ======= =====
The Notes to the accounts section forms an integral part of
these financial statements.
Simon Thompson
Chairman 12 May 2021
Consolidated statement of changes in equity
for the year to 31 March
Share-
Capital based
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total equity at the start
of the year 719 788 43 33 (2) 5,432 822 (78) 7,757
Profit for the year - - - - - 1,707 148 - 1,855
Exchange differences
on translation of
foreign operations - - - - (3) - - - (3)
Re-measurements of defined
benefit plans - - - - - (126) - - (126)
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total comprehensive
income for the year - - - - (3) 1,581 148 - 1,726
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Share-based payments - - - 19 - - - - 19
Release on exercise/
forfeiture of share
awards - - - (18) - - 18 - -
Exercise of share awards - - - - - (14) - 14 -
Ordinary dividends - - - - - (266) (72) - (338)
Purchase of own shares - - - - - - - - -
Issue of ordinary shares - - - - - - - - -
Total equity at the
end of the year 719 788 43 34 (5) 6,733 916 (64) 9,164
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
1 Refer to Note 20 in our Annual report and accounts 2021.
Share-
Capital based
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(2) reserve(2) shares equity
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total equity at the start
of the year(1) 719 787 43 36 (3) 5,590 779 (42) 7,909
Profit for the year - - - - - 21 193 - 214
Exchange differences
on translation of
foreign operations - - - - 1 - - - 1
Re-measurements of defined
benefit plans - - - - - 38 - - 38
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total comprehensive
income for the year - - - - 1 59 193 - 253
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Share-based payments - - - 16 - - - - 16
Release on exercise/
forfeiture of share
awards - - - (19) - - 19 - -
Exercise of share awards - - - - - (23) - 23 -
Ordinary dividends - - - - - (194) (169) - (363)
Purchase of own shares - - - - - - - (59) (59)
Issue of ordinary shares - 1 - - - - - - 1
Total equity at the
end of the year 719 788 43 33 (2) 5,432 822 (78) 7,757
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
1 The adoption of IFRS 16 on 1 April 2019 resulted in the recognition of a right of use asset
of GBP23 million and lease liability of GBP23 million, with nil impact on retained earnings.
2 Refer to Note 20 in our Annual report and accounts 2021.
The Notes to the accounts section forms an integral part of
these financial statements.
Consolidated cash flow statement
for the year to 31 March
2021 2020
(restated)(1)
Notes GBPm GBPm
===================================================== ===== ===== ===============
Cash flow from operating activities
Purchase of investments (126) (650)
Proceeds from investments 184 9
Amounts paid to investment entity subsidiaries (879) (1,176)
Amounts received from investment entity subsidiaries 281 1,362
Net cash flow from derivatives 7 -
Portfolio interest received - 10
Portfolio dividends received 48 24
Portfolio fees received 7 11
Fees received from external funds 39 44
Carried interest and performance fees received 6 678
Carried interest and performance fees paid (33) (31)
Operating expenses paid (103) (116)
Co-investment loans received/(paid) 12 (8)
Tax (paid)/received (1) 10
Interest received (1) 2
Other cash income - 2
===================================================== ===== ===== ===============
Net cash flow from operating activities (559) 171
===================================================== ===== ===== ===============
Cash flow from financing activities
Issue of shares 1 1
Purchase of own shares - (59)
Dividend paid 3 (338) (363)
Proceeds from long-term borrowing 395 -
Lease payments (5) (4)
Interest paid (46) (42)
===================================================== ===== ===== ===============
Net cash flow from financing activities 7 (467)
===================================================== ===== ===== ===============
Cash flow from investing activities
Purchases of property, plant and equipment (1) (3)
Cash flow from deposits - 50
===================================================== ===== ===== ===============
Net cash flow from investing activities (1) 47
===================================================== ===== ===== ===============
Change in cash and cash equivalents (553) (249)
===================================================== ===== ===== ===============
Cash and cash equivalents at the start of the year 771 983
Effect of exchange rate fluctuations (2) 37
===================================================== ===== ===== ===============
Cash and cash equivalents at the end of the year 216 771
===================================================== ===== ===== ===============
1 Refer to the basis of preparation and accounting policies page later in this document.
The Notes to the accounts section forms an integral part of
these financial statements.
Company statement of financial position
as at 31 March
2021 2020
Notes GBPm GBPm
=================================================== ====== ==================== =======
Assets
Non-current assets
Investments
Quoted investments 797 418
Unquoted investments 4,213 3,036
================================================== ====== ==================== =======
Investment portfolio 5,010 3,454
=================================================== ====== ==================== =======
Carried interest and performance fees receivable 38 22
Interests in Group entities 4,921 4,023
Other non-current assets 22 14
Derivative financial instruments 16 7
=================================================== ====== ==================== =======
Total non-current assets 10,007 7,520
=================================================== ====== ==================== =======
Current assets
Carried interest and performance fees receivable - 46
Other current assets 5 122
Derivative financial instruments 10 6
Cash and cash equivalents 195 742
=================================================== ====== ==================== =======
Total current assets 210 916
=================================================== ====== ==================== =======
Total assets 10,217 8,436
=================================================== ====== ==================== =======
Liabilities
Non-current liabilities
Loans and borrowings 5 (975) (575)
Derivative financial instruments - (2)
=================================================== ====== ==================== =======
Total non-current liabilities (975) (577)
--------------------------------------------------- ------ -------------------- -------
Current liabilities
Trade and other payables (536) (483)
Derivative financial instruments - (2)
Total current liabilities (536) (485)
=================================================== ====== ==================== =======
Total liabilities (1,511) (1,062)
=================================================== ====== ==================== =======
Net assets 8,706 7,374
=================================================== ====== ==================== =======
Equity
Issued capital 719 719
Share premium 788 788
Capital redemption reserve 43 43
Share-based payment reserve 34 33
Capital reserve 7,109 5,812
Revenue reserve 77 57
Own shares (64) (78)
=================================================== ====== ==================== =======
Total equity 8,706 7,374
=================================================== ====== ==================== =======
The Company profit for the year to 31 March 2021 is GBP1,651
million (2020: GBP246 million).
The Notes to the accounts section forms an integral part of
these financial statements.
Simon Thompson
Chairman
12 May 2021
Company statement of changes in equity
for the year to 31 March
Capital Share-based
Share Share redemption payment Capital Revenue Own Total
capital premium reserve reserve reserve(1) reserve(1) shares equity
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total equity at the
start of the year 719 788 43 33 5,812 57 (78) 7,374
Profit for the year - - - - 1,577 74 - 1,651
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total comprehensive
income
for the year - - - - 1,577 74 - 1,651
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Share-based payments - - - 19 - - - 19
Release on
exercise/forfeiture
of share awards - - - (18) - 18 - -
Exercise of share awards - - - - (14) - 14 -
Ordinary dividends - - - - (266) (72) - (338)
Purchase of own shares - - - - - - - -
Issue of ordinary shares - - - - - - - -
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total equity at the
end of the year 719 788 43 34 7,109 77 (64) 8,706
=========================== ======== ======== =========== ============ =========== =========== ======= =======
1 Refer to Note 20 of our Annual report and accounts 2021 for the nature of the capital and
revenue reserves.
Capital Share-based
Share Share redemption payment Capital Revenue Own Total
capital premium reserve reserve reserve(1) reserve(1) shares equity
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total equity at the
start of the year 719 787 43 36 5,979 11 (42) 7,533
Profit for the year - - - - 50 196 - 246
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total comprehensive
income
for the year - - - - 50 196 - 246
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Share-based payments - - - 16 - - - 16
Release on
exercise/forfeiture
of share awards - - - (19) - 19 - -
Exercise of share awards - - - - (23) - 23 -
Ordinary dividends - - - - (194) (169) - (363)
Purchase of own shares - - - - - - (59) (59)
Issue of ordinary shares - 1 - - - - - 1
=========================== ======== ======== =========== ============ =========== =========== ======= =======
Total equity at the
end of the year 719 788 43 33 5,812 57 (78) 7,374
=========================== ======== ======== =========== ============ =========== =========== ======= =======
1 Refer to Note 20 of our Annual report and accounts 2021for the nature of the capital and revenue
reserves.
The Notes to the accounts section forms an integral part of
these financial statements.
Company cash flow statement
for the year to 31 March
2021 2020
Notes GBPm GBPm
=================================================== ===== ======= =====
Cash flow from operating activities
Purchase of investments (126) (650)
Proceeds from investments 184 9
Amounts received from subsidiaries 530 1,009
Amounts paid to subsidiaries (1,249) (925)
Net cash flow from derivatives 7 -
Portfolio interest received - 10
Portfolio dividends received 48 24
Portfolio fees paid (1) (1)
Carried interest and performance fees received 38 685
Co-investment loans received/(paid) 12 (8)
Interest received (1) 2
Other cash income - 2
Net cash flow from operating activities (558) 157
=================================================== ===== ======= =====
Cash flow from financing activities
Issue of shares 1 1
Purchase of own shares - (59)
Dividend paid 3 (338) (363)
Proceeds from long-term borrowing 395 -
Interest paid (45) (38)
Net cash flow from financing activities 13 (459)
=================================================== ===== ======= =====
Cash flow from investing activities
Net cash flow from deposits - 50
=================================================== ===== ======= =====
Net cash flow from investing activities - 50
=================================================== ===== ======= =====
Change in cash and cash equivalents (545) (252)
=================================================== ===== ======= =====
Cash and cash equivalents at the start of the year 742 958
Effect of exchange rate fluctuations (2) 36
=================================================== ===== ======= =====
Cash and cash equivalents at the end of the year 195 742
=================================================== ===== ======= =====
The Notes to the accounts section forms an integral part of
these financial statements.
Significant accounting policies
Reporting entity
3i Group plc (the "Company") is a public limited company
incorporated and domiciled in England and Wales. The consolidated
financial statements ("the Group accounts") for the year to 31
March 2021 comprise the financial statements of the Company and its
consolidated subsidiaries (collectively, "the Group").
The Group accounts have been prepared and approved by the
Directors in accordance with section 395 of the Companies Act 2006
and the Large and Medium-Sized Companies and Groups (Accounts and
Reports) Regulations 2008. The Company has taken advantage of the
exemption in section 408 of the Companies Act 2006 not to present
its Company statement of comprehensive income and related
Notes.
A Basis of preparation
The Group and Company accounts 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 financial statements are
presented to the nearest million sterling (GBPm), the functional
currency of the Company.
The Group did not implement the requirements of any other
standards or interpretations that were in issue; these were not
required to be adopted by the Group for the year ended 31 March
2021. No other standards or interpretations have been issued that
are expected to have a material impact on the Group's financial
statements.
The Group adopts the direct method for the cash flow statements,
which requires major classes of gross cash receipts and gross cash
payments to be disclosed separately. As such, the Group has changed
the consolidated cash flow statement to present net cash flows from
investment entity subsidiaries on a gross basis in two line items:
Amounts paid to investment entity subsidiaries and Amounts received
from investment entity subsidiaries. Comparatives for the year to
31 March 2020 have been restated.
The principal accounting policies applied in the preparation of
the Group accounts are disclosed below, but where possible, they
have been shown as part of the Note to which they specifically
relate in order to assist the reader's understanding. These
policies have been consistently applied and apply to all years
presented, except for in relation to the adoption of new accounting
standards.
Going concern
These financial statements have been prepared on a going concern
basis as disclosed in the Directors' report. 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 the
principal and emerging risks facing the business, including the
impact of Covid-19 on global markets and potential implications for
the Group's financial performance.
The Group, its investments and its critical functions have been
operating well throughout the financial year against a backdrop of
the pandemic, and the challenges posed by the various
government-imposed lockdowns and restrictions implemented in
response. As discussed in detail in the Strategic report of our
Annual report and accounts 2021, the majority of the portfolio has
been resilient, with those portfolio companies operating in the
consumer, e-commerce, healthcare and business services sectors
continuing to deliver very strong performances. The assets exposed
to travel and automotive sectors continue to be more negatively
impacted by the pandemic. As we enter the next financial year, our
portfolio of assets should be well positioned to continue to
generate good returns for shareholders.
With the experience of FY2021 at a portfolio and operational
level, the Directors considered the impact of the current Covid-19
environment on the business for at least the next 12 months.
Underpinning the Group's business model is its proprietary capital.
This enables the Group to operate without third-party obligations
regarding the timing of realisations and deployment of capital. The
Group covers its cash operating costs, GBP108 million at 31 March
2021, with cash income generated by our Infrastructure business and
some income from our Private Equity portfolio and Scandlines,
GBP131 million at 31 March 2021. The Directors' assessment of going
concern, which takes into account this business model and the
Group's existing liquidity of GBP725 million, indicates that the
Group and parent company will have sufficient funds to continue as
a going concern, for at least the next 12 months. Liquidity
comprised of cash and deposits of GBP225 million (31 March 2020:
GBP845 million) and undrawn facilities of GBP500 million (31 March
2020: GBP400 million). During the year the Group successfully
issued a GBP400 million bond with a maturity date of 2040.
The Group also increased its RCF to GBP500 million and extended
the maturity to 2026. The Group manages liquidity with the aim of
ensuring it is adequate and sufficient, by regular monitoring of
investments, realisations, operating expenses and portfolio cash
income.
In addition, the Directors have modelled a number of severe
stress test scenarios, including the consideration of 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
'K-shaped' recovery (which sees a greater divergence in the
recovery profile of assets in different sectors) and a 'U-shaped'
recovery (which considers a more extended and drawn-out recovery in
which the economy is impacted by rolling lockdowns and much reduced
economic activity).
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 financial statements of
the Company and 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.
B Basis of consolidation
In accordance with IFRS 10 the Company meets the criteria as an
investment entity and therefore is required to recognise
subsidiaries that also qualify as investment entities at fair value
through profit or loss. It does not consolidate the investment
entities it controls. Subsidiaries that provide investment related
services, such as advisory, management or employment services, are
not accounted for at fair value through profit and loss and
continue to be consolidated unless those subsidiaries qualify as
investment entities, in which case they are recognised at fair
value. Subsidiaries are entities controlled by the Group. Control,
as defined by IFRS 10, is achieved when the Group has all of the
following:
-- power over the relevant activities of the investee;
-- exposure, or rights, to variable returns from its involvement
with the investee; and
-- the ability to affect those returns through its power over
the investee.
The Group is required to determine the degree of control or
influence the Group exercises and the form of any control to ensure
that the financial treatment is accurate.
Subsidiaries are fully consolidated from the date on which the
Group effectively obtains control. All intragroup balances and
transactions with subsidiaries are eliminated upon consolidation.
Subsidiaries are de-consolidated from the date that control
ceases.
The Group comprises several different types of subsidiaries. For
a new subsidiary, the Group assesses whether it qualifies as an
investment entity under IFRS 10, based on the function the entity
performs within the Group. For existing subsidiaries, the Group
annually reassesses the function performed by each type of
subsidiary to determine if the treatment under IFRS 10 exception
from consolidation is still appropriate. The types of subsidiaries
and their treatment under IFRS 10 are as follows:
General Partners ("GPs") - Consolidated
General Partners provide investment management services and do
not hold any direct investments in portfolio assets. These entities
are not investment entities.
Investment managers/advisers - Consolidated
These entities provide investment related services through the
provision of investment management or advice. They do not hold any
direct investments in portfolio assets. These entities are not
investment entities.
Holding companies of investment managers/advisers -
Consolidated
These entities provide investment related services through their
subsidiaries. Typically they do not hold any direct investment in
portfolio assets and these entities are not investment
entities.
Limited Partnerships and other intermediate investment holding
structures - Fair valued
The Group makes investments in portfolio assets through its
ultimate parent company as well as through other limited
partnerships and corporate subsidiaries which the Group has created
to align the interests of the investment teams with the performance
of the assets through the use of various carried interest schemes.
The purpose of these limited partnerships and corporate holding
vehicles, many of which also provide investment related services,
is to invest for investment income and capital appreciation. These
partnerships and corporate subsidiaries meet the definition of an
investment entity and are accounted for at fair value through
profit and loss.
Portfolio investments - Fair valued
Under IFRS 10, the test for accounting subsidiaries takes wider
factors of control as well as actual equity ownership into account.
In accordance with the investment entity exception, these entities
have been held at fair value with movements in fair value being
recognised in profit or loss.
Associates - Fair valued
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated statement of
financial position at fair value even though the Group may have
significant influence over those companies.
Further detail on our application of IFRS 10 can be found in the
Reconciliation of Investment basis to IFRS section.
C Critical accounting judgements and estimates
The reported results of the Group are sensitive to the
accounting policies, assumptions and estimates that underpin the
preparation of its financial statements. UK company law and IFRS
require the Directors, in preparing the Group's financial
statements, to select suitable accounting policies, apply them
consistently and make judgements and estimates that are reasonable
and prudent. The Group's estimates and assumptions are based on
historical experience and expectation of future events and are
reviewed periodically. The actual outcome may be materially
different from that anticipated.
(a) Critical judgements
In the course of preparing the financial statements, one
judgement has been made in the process of applying the Group's
accounting policies, other than those involving estimations, that
has had a significant effect on the amounts recognised in the
financial statements as follows:
I. Assessment as an investment entity
The Board has concluded that the Company continues to meet the
definition of an investment entity, as its strategic objective of
investing in portfolio investments and providing investment
management services to investors for the purpose of generating
returns in the form of investment income and capital appreciation
remains unchanged.
(b) Critical estimates
In addition to these significant judgements the Directors have
made two estimates, which they deem to have a significant risk of
resulting in a material adjustment to the amounts recognised in the
financial statements within the next financial year. The details of
these estimates are as follows:
I. Fair valuation of the investment portfolio
The investment portfolio, a material asset of the Group, is held
at fair value. Details of valuation methodologies used and the
associated sensitivities are disclosed in Note 4 Fair values of
assets and liabilities in this document. Further information can be
found in Portfolio valuation - an explanation in our Annual report
and accounts 2021. Given the importance of this area, the Board has
a separate Valuations Committee to review the valuations policies,
process and application to individual investments. A report on the
activities of the Valuations Committee (including a review of the
assumptions made) is included in the Valuations Committee Report on
in our Annual report and accounts 2021.
II. Carried interest payable
Carried interest payable is calculated based on the underlying
agreements, and assuming all portfolio investments are sold at
their fair values at the balance sheet date. The actual amounts of
carried interest paid will depend on the cash realisations of these
portfolio investments and valuations may change significantly in
the next financial year. The fair valuation of the investment
portfolio is itself a critical estimate, as detailed above. The
sensitivity of carried interest payable to movements in the
investment portfolio is disclosed in Note 15 in our Annual report
and accounts 2021.
D Other accounting policies
(a) Gross investment return
Gross investment return is equivalent to "revenue" for the
purposes of IAS 1. It represents the overall increase in net assets
from the investment portfolio net of deal-related costs and
includes foreign exchange movements in respect of the investment
portfolio. The substantial majority is investment income and
outside the scope of IFRS 15. It is analysed into the following
components with the relevant standard shown where appropriate:
i. Realised profits or losses over value on the disposal of
investments are the difference between the fair value of the
consideration received in accordance with IFRS 13 less any directly
attributable costs, on the sale of equity and the repayment of
interest income from the investment portfolio, and its carrying
value at the start of the accounting period, converted into
sterling using the exchange rates in force at the date of
disposal.
ii. Unrealised profits or losses on the revaluation of
investments are the movement in the fair value of investments in
accordance with IFRS 13 between the start and end of the accounting
period converted into sterling using the exchange rates in force at
the date of fair value assessment.
iii. Fair value movements on investment entity subsidiaries are
the movements in the fair value of Group subsidiaries which are
classified as investment entities under IFRS 10. The Group makes
investments in portfolio assets through these entities which are
usually limited partnerships or corporate subsidiaries.
iv. Portfolio income is that portion of income that is directly
related to the return from individual investments. It is recognised
to the extent that it is probable that there will be economic
benefit and the income can be reliably measured. The following
specific recognition criteria must be met before the income is
recognised:
-- Dividends from equity investments are recognised in profit or
loss when the shareholders' rights to receive payment have been
established.
-- Interest income from the 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.
-- The accounting policy for fee income is included in Note 4 in
our Annual report and accounts 2021.
v. Foreign exchange on investments arises on investments made in
currencies that are different from the functional currency of the
Company being sterling. Investments are translated at the exchange
rate ruling at the date of the transaction in accordance with IAS
21. At each subsequent reporting date, investments are translated
to sterling at the exchange rate ruling at that date.
vi. Movement in the fair value of derivatives relates to the
change in fair value of forward foreign exchange contracts which
have been used to minimise foreign currency risk in the investment
portfolio. See Note 18 in our Annual report and accounts 2021 for
more details.
(b) Foreign currency translation
For the Company and those subsidiaries whose balance sheets are
denominated in sterling, which is the Company's functional and
presentational currency, monetary assets and liabilities and
non-monetary assets held at fair value denominated in foreign
currencies are translated into sterling at the closing rates of
exchange at the balance sheet date. Foreign currency transactions
are translated into sterling at the average rates of exchange over
the year and exchange differences arising are taken to profit or
loss.
The statements of financial position of subsidiaries and
associates, which are not held at fair value, denominated in
foreign currencies are translated into sterling at the closing
rates. The statements of comprehensive income for these
subsidiaries and associates are translated at the average rates and
exchange differences arising are taken to other comprehensive
income. Such exchange differences are reclassified to profit or
loss in the period in which the subsidiary or associate is disposed
of.
(c) Treasury assets and liabilities
Short-term treasury assets, and short and long-term treasury
liabilities are used in order to manage cash flows.
Cash and cash equivalents comprise cash at bank and amounts held
in money market funds which are readily convertible into cash and
there is an insignificant risk of changes in value. Financial
assets and liabilities are recognised in the balance sheet when the
relevant Group entity becomes a party to the contractual provisions
of the instrument. De-recognition occurs when rights to cash flows
from a financial asset expire, or when a liability is
extinguished.
Notes to the accounts
1 Segmental analysis
Operating segments are the components of the Group whose results
are regularly reviewed by the Group's chief operating decision
maker to make decisions about resources to be allocated to the
segment and assess its performance.
The Chief Executive, who is considered to be the chief operating
decision maker, managed the Group on the basis of business
divisions determined with reference to market focus, geographic
focus, investment funding model and the Group's management
hierarchy. A description of the activities, including returns
generated by these divisions and the allocation of resources, is
given in the Strategic report. For the geographical segmental
split, revenue information is based on the locations of the assets
held. To aid the readers' understanding we have split out Action,
Private Equity's largest asset, into a separate column. Action is
not regarded as a reported segment as the chief operating decision
maker reviews performance, makes decisions and allocates resources
to the Private Equity segment, which includes Action.
The segmental information that follows is presented on the basis
used by the Chief Executive to monitor the performance of the
Group. The reported segments are Private Equity, Infrastructure and
Scandlines.
The segmental analysis is prepared on the Investment basis. The
Investment basis is an APM and we believe it provides a more
understandable view of performance. More information on the
Investment basis and a reconciliation between the Investment basis
and IFRS can be found at the end of the Financial review.
Investment basis
Of which
Private
Equity Action Infrastructure Scandlines Total(4)
Year to 31 March 2021 GBPm GBPm GBPm GBPm GBPm
========================================================= ========= ======== ============== ========== ========
Realised profits over value on the disposal of
investments 29 - 6 - 35
Unrealised profits on the revaluation of investments 2,161 1,202 168 22 2,351
Portfolio income
Dividends 53 - 29 - 82
Interest income from investment portfolio 55 - 10 - 65
Fees receivable 9 1 - - 9
Foreign exchange on investments (371) (181) (39) (17) (427)
Movement in the fair value of derivatives - - 4 20 24
========================================================= ========= ======== ============== ========== ========
Gross investment return 1,936 1,022 178 25 2,139
========================================================= ========= ======== ============== ========== ========
Fees receivable from external funds 4 - 40 - 44
Operating expenses (70) - (40) (2) (112)
Interest received (1)
Interest paid (47)
Exchange movements 7
Other income 1
Operating profit before carried interest 2,031
========================================================= ========= ======== ============== ========== ========
Carried interest
Carried interest and performance fees receivable (3) - 8 - 5
Carried interest and performance fees payable (173) - (11) - (184)
======================================================== ========= ======== ============== ========== ========
Operating profit before tax 1,852
========================================================= ========= ======== ============== ========== ========
Tax charge -
Profit for the year 1,852
========================================================= ========= ======== ============== ========== ========
Other comprehensive expense
Re-measurements of defined benefit plans (126)
======================================================== ========= ======== ============== ========== ========
Total return 1,726
========================================================= ========= ======== ============== ========== ========
Realisations(1) 114 - 104 - 218
Cash investment(2) (508) (9) (2) - (510)
========================================================= ========= ======== ============== ========== ========
Net (investment)/divestment (394) (9) 102 - (292)
========================================================= ========= ======== ============== ========== ========
Balance sheet
Opening portfolio value at 1 April 2020 6,552 3,536 1,117 429 8,098
Investment(3) 633 9 2 - 635
Value disposed (85) - (98) - (183)
Unrealised value movement 2,161 1,202 168 22 2,351
Other movement (including foreign exchange) (447) (181) (30) (16) (493)
========================================================= ========= ======== ============== ========== ========
Closing portfolio value at 31 March 2021 8,814 4,566 1,159 435 10,408
========================================================= ========= ======== ============== ========== ========
1 Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the
year Private Equity received GBP105 million of cash proceeds which were recognised as realised
proceeds in FY2020 and recognised GBP4 million of realised proceeds in Private Equity which
are to be received in FY2022.
2 Cash i nvestment per the segmental analysis is different to cash investment per the cash flow
due to GBP31 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 Action" is
part of Private Equity.
A number of items are not managed by segment by the chief operating decision maker and therefore
have not been allocated to a specific segment.
Investment basis
Private Of which
Equity Action Infrastructure Scandlines Total(4)
Year to 31 March 2020 GBPm GBPm GBPm GBPm GBPm
=========================================================== ======= ======== ============== ========== ========
Realised profits over value on the disposal of investments 90 15 - - 90
Unrealised (losses)/profits on the revaluation of
investments (34) 461 (92) (46) (172)
Portfolio income
Dividends 5 - 26 37 68
Interest income from investment portfolio 106 - 12 - 118
Fees receivable 9 2 - - 9
Foreign exchange on investments 176 79 21 17 214
Movement in the fair value of derivatives - - (6) (3) (9)
=========================================================== ======= ======== ============== ========== ========
Gross investment return 352 557 (39) 5 318
=========================================================== ======= ======== ============== ========== ========
Fees receivable from external funds 2 42 - 44
Operating expenses (72) (41) (3) (116)
Interest received 1
Interest paid (38)
Exchange movements 1
Other income 5
=========================================================== ======= ======== ============== ========== ========
Operating profit before carried interest 215
=========================================================== ======= ======== ============== ========== ========
Carried interest
Carried interest and performance fees receivable 79 6 - 85
Carried interest and performance fees payable (63) (21) - (84)
========================================================== ======= ======== ============== ========== ========
Operating profit before tax 216
=========================================================== ======= ======== ============== ========== ========
Tax charge (1)
Profit for the year 215
=========================================================== ======= ======== ============== ========== ========
Other comprehensive income
Re-measurements of defined benefit plans 38
========================================================== ======= ======== ============== ========== ========
Total return 253
=========================================================== ======= ======== ============== ========== ========
Realisations(1) 848 402 - 70 918
Cash investment(2) (1,062) (651)(5) (186) - (1,248)
=========================================================== ======= ======== ============== ========== ========
Net (investment)/divestment (214) (249) (186) 70 (330)
=========================================================== ======= ======== ============== ========== ========
Balance sheet
Opening portfolio value at 1 April 2019 6,023 2,731 1,001 529 7,553
Investment(3) 1,155 651 186 - 1,341
Value disposed (759) (387) - (70) (829)
Unrealised value movement (34) 461 (92) (46) (172)
Other movement (including foreign exchange) 167 80 22 16 205
=========================================================== ======= ======== ============== ========== ========
Closing portfolio value at 31 March 2020 6,552 3,536 1,117 429 8,098
=========================================================== ======= ======== ============== ========== ========
1 Realised proceeds may differ from cash proceeds due to timing of cash receipts. In FY2020
we have recognised GBP117 million of realised proceeds in Private Equity which are to be received
in FY2021.
2 Cash investment includes a GBP31 million syndication of cash investment in Private Equity,
which is to be received in FY2021. This differs to the cash flow due to the timing of the
syndication to be received.
3 Includes capitalised interest and other non-cash investment.
4 The total is the sum of Private Equity, Infrastructure and Scandlines, "Of which Action" is
part of Private Equity.
5 Cash investment includes GBP60 million of purchased LP stakes in EFV prior to the Action Transaction
and GBP591 million of reinvestment as part of the Action Transaction in the Private Equity
section of the Business review in the FY2020 Annual report and accounts.
A number of items are not managed by segment by the chief operating decision maker and therefore
have not been allocated to a specific segment.
Investment basis Northern North
UK Europe America Other Total
Year to 31 March 2021 GBPm GBPm GBPm GBPm GBPm
========================================= ===== ======== ======= ===== ======
Realised profits over value on the
disposal of investments 2 8 - 25 35
Unrealised profits/(losses) on the
revaluation of investments 280 1,773 300 (2) 2,351
Portfolio income 47 93 13 3 156
Foreign exchange on investments - (289) (135) (3) (427)
Movement in fair value of derivatives - 20 4 - 24
========================================= ===== ======== ======= ===== ======
Gross investment return 329 1,605 182 23 2,139
========================================= ===== ======== ======= ===== ======
Realisations 2 88 74 54 218
Cash investment (171) (175) (164) - (510)
Net (investment)/divestment (169) (87) (90) 54 (292)
========================================= ===== ======== ======= ===== ======
Balance sheet
Closing portfolio value at 31 March 2021 1,645 7,260 1,481 22 10,408
========================================= ===== ======== ======= ===== ======
Investment basis Northern North
UK Europe America Other Total
Year to 31 March 2020 GBPm GBPm GBPm GBPm GBPm
============================================ ====== ======== ======= ===== =======
Realised profits/(losses) over value on the
disposal of investments 102 17 - (29) 90
Unrealised (losses)/profits on the
revaluation of investments (109) 112 (167) (8) (172)
Portfolio income 49 133 17 (4) 195
Foreign exchange on investments - 142 65 7 214
Movement in fair value of derivatives - (3) (6) - (9)
============================================ ====== ======== ======= ===== =======
Gross investment return 42 401 (91) (34) 318
============================================ ====== ======== ======= ===== =======
Realisations 252 560 - 106 918
Cash investment - (928) (320) - (1,248)
============================================ ====== ======== ======= ===== =======
Net divestment/(investment) 252 (368) (320) 106 (330)
============================================ ====== ======== ======= ===== =======
Balance sheet
Closing portfolio value at 31 March 2020 1,190 5,698 1,153 57 8,098
============================================ ====== ======== ======= ===== =======
2 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 year 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.
2021 2020
========================================================= ===== =====
Net assets per share (GBP)
Basic 9.50 8.06
Diluted 9.47 8.04
Net assets (GBPm)
Net assets attributable to equity holders of the Company 9,164 7,757
========================================================= ===== =====
2021 2020
=================== ============= =============
Number of shares in issue
Ordinary shares 973,166,947 973,074,585
Own shares (8,530,634) (10,398,032)
=================== ============= =============
964,636,313 962,676,553
=================== ============= =============
Effect of dilutive potential ordinary shares
Share awards 2,656,230 1,649,348
=================== ============= =============
Diluted shares 967,292,543 964,325,901
=================== ============= =============
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
year to 31 March 2021 are 964,217,242 (2020: 968,001,540). 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 year to 31 March 2021 are 966,547,522 (2020:
969,674,941).
2021 2020
================================================================== ===== ====
Earnings per share (pence)
Basic 192.4 22.1
Diluted 191.9 22.1
Earnings (GBPm)
Profit for the year attributable to equity holders of the Company 1,855 214
================================================================== ===== ====
3 Dividends
2021 2021 2020 2020
pence per share GBPm pence per share GBPm
================== =============== ==== =============== ====
Declared and paid during the year
Ordinary shares
Second dividend 17.5 169 20.0 194
First dividend 17.5 169 17.5 169
================== =============== ==== =============== ====
35.0 338 37.5 363
================== =============== ==== =============== ====
Proposed dividend 21.0 203 17.5 168
================== =============== ==== =============== ====
The Group introduced a simplified dividend policy in May 2018.
In accordance with this policy, subject to maintaining a
conservative balance sheet approach, the Group aims to maintain or
grow the dividend each year. The first dividend has been set at 50%
of the prior year's total dividend.
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 are GBP3,811
million (31 March 2020: GBP3,863 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.
4 Fair values of assets and liabilities
Accounting policy:
Financial instruments are initially classified at either
amortised cost or fair value through profit or loss. Financial
instruments classified at fair value through profit or loss are
subsequently measured at fair value with gains and losses arising
from changes in fair value recognised in profit or loss in the
Statement of comprehensive income. Financial instruments classified
at amortised cost are subsequently measured at amortised cost using
the effective interest method with interest income or expense and
foreign exchange gains and losses recognised in profit or loss in
the Statement of comprehensive income.
(A) Classification
The following tables analyse the Group's assets and liabilities
in accordance with the categories of financial instruments in IFRS
9:
Group Group Group Group
2021 2021 2020 2020
Classified Other Classified Other
at fair value financial at fair value financial
through instruments Group through instruments Group
profit and at amortised 2021 profit and at amortised 2020
loss cost Total loss cost Total
GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ============== ============= ======= ============= ============ =====
Assets
Quoted investments 797 - 797 418 - 418
Unquoted investments 4,213 - 4,213 3,036 - 3,036
Investments in investment entities 4,905 - 4,905 3,936 - 3,936
Other financial assets 61 55 116 57 141 198
==================================== ============== ============= ======= ============= ============ =====
Total 9,976 55 10,031 7,447 141 7,588
==================================== ============== ============= ======= ============= ============ =====
Liabilities
Loans and borrowings - 975 975 - 575 575
Other financial liabilities - 163 163 4 200 204
==================================== ============== ============= ======= ============= ============ =====
Total - 1,138 1,138 4 775 779
==================================== ============== ============= ======= ============= ============ =====
Company Company Company Company
2021 2021 2020 2020
Classified Other Classified Other
at fair value financial at fair value financial
through instruments Company through instruments Company
profit and at amortised 2021 profit and at amortised 2020
loss cost Total loss cost Total
GBPm GBPm GBPm GBPm GBPm GBPm
============================= ============== ============= ======== ============= ============ =======
Assets
Quoted investments 797 - 797 418 - 418
Unquoted investments 4,213 - 4,213 3,036 - 3,036
Other financial assets 39 52 91 38 179 217
============================= ============== ============= ======== ============= ============ =======
Total 5,049 52 5,101 3,492 179 3,671
============================= ============== ============= ======== ============= ============ =======
Liabilities
Loans and borrowings - 975 975 - 575 575
Other financial liabilities - 536 536 4 483 487
============================= ============== ============= ======== ============= ============ =======
Total - 1,511 1,511 4 1,058 1,062
============================= ============== ============= ======== ============= ============ =======
Within the Company, Interests in Group entities GBP4,921 million
(31 March 2020: GBP4,023 million) includes GBP4,907 million (31
March 2020: GBP3,938 million) held at fair value and GBP14 million
(31 March 2020: GBP85 million) held at cost less impairment.
(B) Valuation
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 the loans and borrowings is GBP1,161 million (31
March 2020: GBP671 million), determined with reference to their
published market prices. The carrying value of the loans and
borrowings is GBP975 million (31 March 2020: GBP575 million) and
accrued interest payable (included within trade and other payables)
is GBP13 million (31 March 2020: GBP8 million).
Valuation hierarchy
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 Derivative financial instruments
are observable either 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
======== ========================================================= =================================================
Unquoted equity instruments and debt instruments are measured in
accordance with the IPEV Guidelines with reference to the most
appropriate information available at the time of measurement.
Further information regarding the valuation of unquoted equity
instruments can be found in the section Portfolio valuation - an
explanation in our Annual report and accounts 2021.
The table below shows the classification of financial
instruments held at fair value into the valuation hierarchy at 31
March 2021:
Group Group Group Group Group Group Group Group
2021 2021 2021 2021 2020 2020 2020 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================================ ======== ======== ======== ======= ======= ======= ======= ======
Assets
Quoted investments 797 - - 797 418 - - 418
Unquoted investments - - 4,213 4,213 - - 3,036 3,036
Investments in investment entity
subsidiaries - - 4,905 4,905 - - 3,936 3,936
Other financial assets - 26 35 61 - 13 44 57
Liabilities
Other financial liabilities - - - - - (4) - (4)
============================================ ======== ======== ======== ======= ======= ======= ======= ======
Total 797 26 9,153 9,976 418 9 7,016 7,443
============================================ ======== ======== ======== ======= ======= ======= ======= ======
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. Details of the Directors' considerations about
the fair value of the underlying investment entity subsidiaries are
included in Note 12 of our Annual report and accounts 2021.
Movements in the directly held investment portfolio categorised
as Level 3 during the year are set out in the table below:
Group Group Company Company
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
=========================================== ====== ====== ======== ========
Opening fair value 3,036 1,193 3,036 1,193
Additions 584 1,929 584 1,929
- of which loan notes with nil value (24) (6) (24) (6)
Disposals, repayments and write-offs (333) (142) (333) (142)
Fair value movement(1) 1,135 20 1,135 20
Other movements and net cash movements(2) (185) 42 (185) 42
Closing fair value 4,213 3,036 4,213 3,036
=========================================== ====== ====== ======== ========
1 All fair value movements relate to assets held at the end of the
year.
2 Other movements include the impact of foreign exchange and accrued
interest.
Unquoted investments valued using Level 3 inputs also had the
following impact on profit and loss: realised profits over value on
disposal of investments of GBP9 million (2020: GBP29 million loss),
dividend income of GBP33 million (2020: GBP7 million) and foreign
exchange losses of GBP195 million (2020: GBP36 million gain).
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 year. In the 12 months to
31 March 2021, two assets changed valuation basis within Level 3,
one moving from an earnings-based valuation to a DCF and Action
moving from Transaction value which was used as a basis to
determine fair value at 31 March 2020 to 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 31 March 2021. Further information
can be found in the Private Equity and Infrastructure sections of
the Business and Financial reviews earlier in this document.
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 underpinned by the resilient performance of
our portfolio. For the small number of companies in our portfolio
that are exposed to more challenged sectors such as travel and
automotive sectors, our fair value at 31 March 2021, reflects the
impact this has had on performance. All numbers in the table below
are on an Investment basis.
Level 3 unquoted investments
Fair value impact
of sensitivities
Fair value at (GBPm)
31 March (GBPm) Sensitivity on key unobservable input +5%/-5%
Methodology Description Inputs
Earnings multiples are applied to the earnings of the Company to determine
the enterprise
value.
Earnings multiples
When selecting earnings multiples, we consider:
1. Comparable listed companies' current performance and through the cycle
averages
2. Relevant market transaction multiples
3. Exit expectations and other company specific factors
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 (2020: 8.0x - 14.5x).
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"). 528
8,393 (2020 (1) : 216)
Most commonly used Private Equity valuation methodology Earnings are usually obtained from portfolio company management accounts to (2020: 6,328 of
the preceding which 3,536 is
Used for investments which are typically profitable and for quarter end, with reference also to forecast earnings and the maintainable Action based on
which we can determine a set view of earnings. Transaction For the assets valued on an earnings basis, we have applied a 5%
Earnings of listed companies and precedent transactions, where relevant, value at 31 sensitivity to the earnings (539)
(Private Equity) with similar characteristics. Action, our largest asset, we value using run-rate earnings. March 2020) multiple (2020 (1) :(216))
----------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------
Action is our largest asset, and we have included a 5% sensitivity o 283
n Action's earnings multiple
of 19.5x (equivalent to 18.5x net). On a stand-alone basis, this is
equal to
(2020: n/a)
(284)
(2020: n/a)
----------------------------------------------------------------- ---------------------------------------------------------------------------------------- --------------- -------------------------------------------------------------------- ------------------
Discounted cash flow (Private Equity/ Appropriate for businesses with long-term stable cash flows, typi Long-term cash flows are discounted at a rate which is benchmarked against market data, 831 For the assets valued on a DCF basis, we have applied a 5% sensitivi (38)
cally in Infrastructure or, where ty to the discount rate
alternatively, businesses where DCF is more appropriate in the sh possible, or adjusted from the rate at the initial investment based on changes in the ri
ort term. sk
profile of the investment.
Infrastructure/ Scandlines) (2020: 832) (2020: (35))
40
(2020: 37)
----------------------------------------------------------------- ---------------------------------------------------------------------------------------- --------------- -------------------------------------------------------------------- ------------------
Net asset value reported by the fund manager. The valuation of the underlying portfolio
is
NAV (Private Equity/ Used for investments in unlisted funds. consistent with IFRS. 69 A 5% increase on closing NAV 3
Infrastructure) (2020: 58) (2020: 3)
--------------- -------------------------------------------------------------------- ------------------
Other (Private Equity/ Used where elements of a business are valued on different bases. Values of separate elements prepared on one of the methodologies listed above. 104 A 5% increase in the closing value 5
Infrastructure) (2020: 122) (2020: 6)
--------------- -------------------------------------------------------------------- ------------------
1 2020 excludes Action which was valued on Transaction value which was
used as a basis to determine fair value at 31 March 2020.
5 Loans and borrowings
Accounting policy:
All loans and borrowings are initially recognised at the fair
value of the consideration received. After initial recognition,
these are subsequently measured at amortised cost using the
effective interest method, which is the rate that exactly discounts
the estimated future cash flows through the expected life of the
liabilities. Financial liabilities are derecognised when they are
extinguished.
Group Group
2021 2020
GBPm GBPm
=============================================== ===== =====
Loans and borrowings are repayable as follows:
Within one year - -
Between the second and fifth year 200 200
After five years 775 375
=============================================== ===== =====
975 575
=============================================== ===== =====
Principal borrowings include:
Group Group Company Company
2021 2020 2021 2020
Rate Maturity GBPm GBPm GBPm GBPm
===================================== ============ ========= ====== ====== ======== ========
Fixed rate
GBP200 million notes (public issue) 6.875% 2023 200 200 200 200
GBP375 million notes (public issue) 5.750% 2032 375 375 375 375
GBP400 million notes (public issue) 3.750% 2040 400 - 400 -
975 575 975 575
===================================== ============ ========= ====== ====== ======== ========
Committed multi-currency facilities
GBP500 million LIBOR+0.50% 2026 - - - -
===================================== ============ ========= ====== ====== ======== ========
- - - -
===================================== ============ ========= ====== ====== ======== ========
Total loans and borrowings 975 575 975 575
===================================== ============ ========= ====== ====== ======== ========
During the year the Company extended its syndicated
multi-currency facility to March 2026 (2020: March 2025); and
increased the size to GBP500 million (31 March 2020: GBP400
million). The GBP500 million facility has no financial covenants.
The RCF has a one year extension option subject to certain
requirements which if successfully exercised would extend the
maturity date to March 2027.
All of the Group's borrowings are repayable in one instalment on
the respective maturity dates. None of the Group's interest-bearing
loans and borrowings are secured on the assets of the Group. The
fair value of the loans and borrowings is GBP1,161 million (31
March 2020: GBP671 million), determined with reference to their
published market prices. The loans and borrowings are included in
Level 2 of the fair value hierarchy. The interest expense for loans
and borrowings recognised within profit and loss is GBP50 million
(2020: GBP37 million) and the interest paid for loans and
borrowings recognised within the Consolidated cash flow statement
is GBP45 million (2020: GBP38 million).
In accordance with the FCA's Investment Funds sourcebook (FUNDS
3.2.2R and Fund 3.2.6R), 3i Investments plc, as AIFM of the
Company, is required to calculate leverage in accordance with a set
formula and disclose this to investors. In line with this formula,
leverage at 31 March 2021 for the Group is 131% (31 March 2020:
115%) and the Company is 130% (31 March 2020: 104%) under both the
gross method and the commitment method. The leverage for 3i
Investments plc at 31 March 2021 is 100% (31 March 2020: 100%)
under both the gross method and the commitment method.
Under the Securities Financing Transactions Regulation and the
FCA's Investment Funds sourcebook (FUNDS 3.2.4A), 3i is required to
disclose certain information relating to the use of securities
financing transactions ("SFTs") and total return swaps. At 31 March
2021, 3i was not party to any transactions involving SFTs or total
return swaps.
Reconciliation of liabilities arising from financing
activities
The changes in the Group's liabilities arising from financing
activities are classified as follows:
Loans and Lease Loans and Lease
borrowings liability borrowings liability
2021 2021 2020 2020
GBPm GBPm GBPm GBPm
----------------------------- ---------- --------- ---------- ---------
Opening liability 575 20 575 -
Adoption of IFRS 16 - Leases - - - 23
Additions 400 2 - 1
Repayments - (5) - (4)
Closing liability 975 17 575 20
----------------------------- ---------- --------- ---------- ---------
20 large investments
The 20 investments listed below account for 95% of the portfolio
at 31 March 2021 (31 March 2020: 95%). All investments have been
assessed to establish whether they classify as accounting
subsidiaries under IFRS and/or subsidiaries under the UK Companies
Act. This assessment forms the basis of our disclosure of
accounting subsidiaries in the financial statements.
The UK Companies Act defines a subsidiary based on voting
rights, with a greater than 50% majority of voting rights resulting
in an entity being classified as a subsidiary. IFRS 10 applies a
wider test and, if a Group is exposed, or has rights to variable
returns from its involvement with the investee and has the ability
to affect these returns through its power over the investee then it
has control, and hence the investee is deemed an accounting
subsidiary. Controlled subsidiaries under IFRS are noted below.
None of these investments are UK Companies Act subsidiaries.
In accordance with Part 5 of The Alternative Investment Fund
Managers Regulations 2013 ("the Regulations"), 3i Investments plc,
as AIFM, requires all controlled portfolio companies to make
available to employees an annual report which meets the disclosure
requirements of the Regulations. These are available either on the
portfolio company's website or through filing with the relevant
local authorities.
Residual Residual
Business line cost(1) cost(1) Valuation Valuation
Geography March March March March Relevant
Investment First invested in 2021 2020 2021 2020 transactions
Description of business Valuation basis GBPm GBPm GBPm GBPm in the year
------------------------ ------------------- -------- -------- --------- --------- ---------------------
Action* Private Equity 623 614 4,566 3,536
General merchandise Netherlands
discount
retailer 2011/2020
Earnings
------------------------ ------------------- -------- -------- --------- --------- ---------------------
3i Infrastructure plc* Infrastructure 305 305 797 665
Quoted investment UK
company,
investing in 2007
infrastructure
Quoted
------------------------ ------------------- -------- -------- --------- --------- ---------------------
Cirtec Medical* Private Equity 172 172 444 302 Acquisition of
Outsourced medical US NovelCath in
device
manufacturing 2017 December 2020
Earnings
Scandlines Scandlines 529 529 435 429
Ferry operator between Denmark/Germany
Denmark
and Germany 2018
DCF
Tato Private Equity 2 2 368 196
Manufacturer and seller UK
of
speciality chemicals 1989
Earnings
Royal Sanders* Private Equity 136 135 364 198 Acquisition of Royal
Private label and Netherlands Herkel in January
contract
manufacturing producer 2018 2021 and Tunap
of
personal care products Earnings Cosmetics in
March 2021
GBP38 million
dividend
received in July
2020.
------------------------ ------------------- -------- -------- --------- --------- ---------------------
Luqom* (formerly
Lampenwelt) Private Equity 110 113 307 144
Online lighting Germany
specialist
retailer 2017
Earnings
------------------------ ------------------- -------- -------- --------- --------- ---------------------
Evernex* Private Equity 272 219 281 217 Acquisition of
Provider of third-party France Technogroup in
maintenance
services for data centre 2019 July 2020
infrastructure Earnings
Hans Anders* Private Equity 268 221 262 196 Further investment
Value-for-money optical Netherlands of GBP20 million in
retailer 2017 April 2020
Earnings
------------------------ ------------------- -------- -------- --------- --------- ---------------------
WP* Private Equity 222 206 259 244
Supplier of plastic Netherlands
packaging
solutions 2015
Earnings
------------------------ ------------------- -------- -------- --------- --------- ---------------------
Havea* Private Equity 187 155 242 182 Further investment
Manufacturer of natural France of GBP23 million in
healthcare and cosmetics 2017 September 2020
products Earnings Acquisition of
Laudavie in
November 2020
Basic-Fit Private Equity 23 6 214 93 Further investment
Discount gyms operator Netherlands of GBP17 million in
2013 June 2020
Quoted
AES Engineering Private Equity 30 30 212 158
Manufacturer of UK
mechanical seals
and support systems 1996
Earnings
------------------------- ------------------ -------- -------- --------- ---------
Q Holding* Private Equity 162 162 187 222
Manufacturer of precision US
engineered elastomeric 2014
components Earnings
------------------------- ------------------ -------- -------- --------- ---------
SaniSure* Private Equity 135 60 183 64 Acquisition of
(formerly Bioprocessing US Biofluidfocus in
platform) 2019 August 2020 and
Manufacturer, distributor Earnings Sani-Tech West in
and
integrator of single-use July 2020
bioprocessing systems and
components
------------------------- ------------------ -------- -------- ---------
Magnitude Software* Private Equity 139 139 165 121
Leading provider of US
unified
application data 2019
management solutions Earnings
------------------------- ------------------ -------- -------- ---------
BoConcept* Private Equity 165 149 161 119
Urban living designer Denmark
2016
Earnings
Smarte Carte* Infrastructure 176 167 160 172
Provider of self-serve US
vended
luggage carts, electronic 2017
lockers and concession DCF
carts
------------------------- ------------------ -------- -------- ---------
Regional Rail* Infrastructure 175 175 131 195 Distributed
Owns and operates US GBP74 million to 3i
short-line freight 2019
railroads
and rail-related DCF
businesses
------------------------- ------------------ -------- -------- ---------
MPM* Private Equity 128 - 124 - New investment
An international branded, UK
premium and natural pet 2020
food
company Earnings
3,959 3,559 9,862 7,453
* 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, arriva, Luqom, Havea, Royal Sanders, Magnitude
Software and Schlemmer.
2019-2022 vintage includes Evernex, SaniSure, GartenHaus, MPM
and WilsonHCG.
AIFMD Regulations are the Alternative Investment Fund Managers
Regulations 2013.
Alternative Investment Funds ("AIFs") At 31 March 2021, 3i
Investments plc as AIFM, managed five AIFs. These were 3i Group
plc, 3i Growth Capital Fund, 3i Eurofund V, 3i Managed
Infrastructure Acquisitions LP and 3i Infrastructure plc. 3i
Investments (Luxembourg) SA as AIFM, managed one AIF, 3i European
Operational Projects Fund.
Alternative Investment Fund Manager ("AIFM") is the regulated
manager of AIFs. Within 3i, these are 3i Investments plc and 3i
Investments (Luxembourg) SA.
APAC The Asia Pacific region.
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.
Automatic Exchange of Information ("AEOI") regulation covers the
combined legislative requirements of Common Reporting Standards
("CRS") and the Foreign Account Tax Compliance Act ("FATCA"). Both
sets of rules require financial groups to identify investors and
report details to their local authority who will then exchange the
information with other relevant tax authorities.
B2B Business-to-business.
Board The Board of Directors of the Company.
Buyouts 2010-2012 vintage includes Action, Amor, Element,
Etanco, Hilite, OneMed and Trescal.
CAGR is the compound annual growth rate.
Capital redemption reserve is established in respect of the
redemption of the Company's ordinary shares.
Capital reserve recognises all profits and losses 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.
Country-by-Country reporting ("CbC Reporting") refers to a
requirement for large multinational groups, operating in different
countries, to file an annual report with their head office tax
authority. This provides information about the activities of the
entities in the Group, on a country-by-country basis, across the
countries in which the Group operates.
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.
EMEA The region covering Europe, the Middle East and Africa.
Executive Committee The Executive Committee is responsible for
the day-to-day running of the Group and comprises: the Chief
Executive; Group Finance Director; the Managing Partners of the
Private Equity and Infrastructure businesses; and the Group's
General Counsel.
Fair value movements on investment entity subsidiaries The
movement in the carrying value of Group subsidiaries, classified as
investment entities under IFRS 10, between the start and end of the
accounting period converted into sterling using the exchange rates
at the date of the movement.
Fair value through profit or loss ("FVTPL") 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 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
Company. 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, as
endorsed by the EU.
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 useful comprehensive
financial information. The commentary in the Strategic report
refers to this basis as we believe it provides a more
understandable view of our performance.
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 compare financial results in one period with those
for the previous period.
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 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 effect is the level of risk based on the diversity of
the investment portfolio.
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.
Public Private Partnership ("PPP") is a government service or
private business venture which is funded and operated through a
partnership of government and one or more private sector
companies.
Realised profits or losses over value on the disposal of
investments The difference between the fair value of the
consideration received, less any directly attributable costs, on
the sale of equity and the repayment of loans and receivables and
its carrying value at the start of the accounting period, converted
into sterling using the exchange rates at the date of disposal.
Revenue reserve recognises all profits and losses 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.
SORP means the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital
Trusts.
SPAC Special Purpose Acquisition Company.
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 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.
List of Directors and their functions
The Directors of the Company and their functions are listed
below:
Simon Thompson, Chairman
Simon Borrows, Chief Executive and Executive Director
Julia Wilson, Group Finance Director and Executive Director
Caroline Banszky, Independent non-executive Director
Stephen Daintith, Independent non-executive Director
David Hutchison, Senior Independent Director
Coline McConville, Independent non-executive Director
Alexandra Schaapveld, Independent non-executive Director
By order of the Board
K J Dunn
Company Secretary
12 May 2021
Registered Office: 16 Palace Street, London SW1E 5JD
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END
FR EAASAFEFFEAA
(END) Dow Jones Newswires
May 13, 2021 02:00 ET (06:00 GMT)
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