3i sees better times ahead

Reporting a fall in its net asset value (NAV) per share, 3i nonetheless hailed a turnaround in its fortunes in the first six months of the financial year.

Listed venture capital firm 3i is hopeful of a strong turnaround, despite seeing NAV per share fall 2.5 per cent to 534p in the six months to 30 September 2003.

The firm generated a return on shareholders’ funds of 12.2 per cent during the period and achieved a net profit of £129m. It announced a ‘significant reduction’ in the level of provisions to £65m (from £141m) and an interim dividend of 5.1p per share, an increase of 4.1 per cent on the same period last year.

The company generated a total return of £359m during the period, compared with a negative figure last time of £570m. The improved performance lifted 3i's share price 15.5p to 628.25p.     

3i invested £273m during the period, compared with £393m in the same period last year. “With positive returns, a strong balance sheet and increasing corporate activity, 3i is well placed to increase investment,” said chief executive Brian Larcombe.

The interim results are 3i's strongest for three years and will provide a welcome boost for the firm, which closed offices in Dublin and Tokyo earlier this year, and recently saw four investment directors leave the London team to plan their own fund launch. The figures will also cheer the firm's industry peers, as 3i is seen as a barometer of the market as a whole due to the sheer volume of deals it participates in.      

As well as its interim figures, 3i also released its latest quarterly European Barometer survey showing increasing confidence among its portfolio companies. The UK, German and Spanish confidence indexes are all at their highest levels since 2000, with Germany having risen from –105 to +61 over the last four quarters (with zero representing an average level of confidence). In the last quarter, Italy has shown the sharpest increase from –41 to +41, while the Nordic countries – which have only been part of the survey for 12 months – are showing their highest level of confidence so far. The only country to buck the trend is France, where negative sentiment has resulted in a further fall from –95 to –126.

3i’s UK companies are generally optimistic, with over half expecting an increase in turnover over the next quarter. UK non-manufacturers (+23) remain more optimistic than manufacturers (-17). The Midlands, which has been the UK’s least optimistic region for the last six quarters, showed an improvement in confidence from –35 to –17.