3i results hint at brighter outlook

3i has bolstered its reputation by turning a £935m total net loss into a £531m total net profit in its latest financial year.

Greeting the results, 3i chairman Baroness Hogg said: “3i has achieved a strong overall performance. We have a highly focused business, clear competitive advantage, a strong balance sheet and good momentum on the new investment front.”        

Other key figures to emerge from 3i’s preliminary results for the year to 31 March 2004 included: new investment during the year of £979 million; an increase in realised capital profits on disposals to £228 million from £190 million the previous year; and a reduction in provisions from £379 million to £143 million and in down rounds from £361 million to £70 million.

Commenting on the results, 3i director Patrick Dunne drew attention to increasing success on the realisations front. During the course of the year the firm achieved IPOs for portfolios companies including Cambridge Silicon Radio, Pixology and Pinewood Studios.

Dunne hailed the growing phenomenon of corporates seeking technology acquisitions, reflected in 3i’s sale of messaging software firm Magic4 earlier this week to Nasdaq-listed Openwave Systems for around $83 million. He also noted “the increasing demand for growth capital as growth strategies make a welcome return.”

The results, which also featured an increase in net assets per share over the year from 480 pence to 553 pence, will come as a welcome relief to 3i at the end of a financial year in which it must have felt besieged at times. Although Dunne said the firm’s latest European buyout fund is on course to raise €3 billion by the end of June, only around €800 million of this is likely to be committed by external investors.

The firm is also seeking a new chief executive after the post’s current incumbent, Brian Larcombe, announced in March he was standing down after seven years in charge. Dunne said the recruitment process, which is being overseen by executive search firm Spencer Stuart, was on course to deliver a successor by the firm’s annual general meeting in July. 3i is considering external as well as internal candidates.

The firm was rocked in October 2003 when four senior executives – Tom Sweet-Escott, Richard Campin, Chris Graham and Hugh Richards – quit to launch a rival private equity firm, Exponent Private Equity, which is currently raising a debut fund.

The last financial year also saw further questions raised over the firm’s European strategy, with offices in Padua and Nantes closed and three UK offices – Bristol, Glasgow and Leeds – halting new investments to focus on portfolio management.

Last weekend a report in the Sunday Express newspaper suggested 3i may become a £5 billion takeover target for US investment banks such as Goldman Sachs and CSFB. A 3i spokesman dismissed the report as “completely without substance”.

In afternoon trading, 3i shares rose 16.5 pence on the London Stock Exchange to 608.5 pence, an increase of 2.8 percent on their opening price.