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3i completes restructuring programme

The London-listed group said it will not raise another private equity buyout fund

3i Group has successfully completed its three-year business restructuring programme, the London-listed group said in its annual results on Thursday.

In an earnings call, 3i said it had met all targets it set itself in 2012 including reducing debt. Net gearing fell to zero as of the end of March. 3i reported a net cash position of £49 million, up from a negative cash position of £160 million a year earlier and negative £464 million for the 12 months ending 31 March 2012. As part of the restructuring, 3i cut headcount by 168 people and closed six offices.

The group’s chief executive Simon Borrows also said it will not be looking to raise a new private equity buyout fund. However, 3i will continue to invest proprietary capital in mid-market companies in its core regions of Northern Europe and North America.

During the London-listed group’s results presentation, Borrows said the debt division is now the firm’s primary third-party fund management business, having increase its assets under management to £7.24 billion ($ billion; € billion) a 12 percent year-on-year increase over the 12 months ending 31 March 2015.

3i took advantage of a strong exit environment in 2014 to realise £831 million through exits. The 19 full realisations over the full year ending 31 March 2015 generated a 2x money multiple over cost, the firm said. Borrows added that the firm has sold the majority of its weaker investments, and the remaining 65 portfolio companies are mainly made up of its strongest performers.

Recent exits for 3i include the sale of its minority stake in Soyaconcept to the company’s founders, which generated a return of 2x, and North American interactive entertainment network Touch Tunes, which generated a 2.1x money multiple and an internal rate of return of 22 percent.

As well as completing the overall business restructuring plan, Borrows announced that competition in the infrastructure market had prompted 3i to reduce its infrastructure return objective from 10 percent annually to a revised target of between eight and 10 percent over the medium term. The infrastructure dividend target was also de-linked from opening net asset value.

Total return on equity for all three platforms; private equity, infrastructure and debt, reached 20 percent. The group announced a dividend of 14 pence per share, bringing the full year dividend to 20 pence per share. Operating cash profit was £28 million, up from £5 million a year earlier. Overall AUM increased 4 percent to £13.5 billion.

Additional reporting by Rachel McGovern