3i sees improving portfolio earnings and ‘good pipeline’

The firm, which has more than £2bn in cash and undrawn facilities, is tentatively increasing its investment pace.

London-listed 3i Group reported stable and improving earnings among its portfolio companies in an interim management statement on Wednesday morning.

“Despite uncertain markets, the business continues to perform well,” said Michael Queen, chief executive of 3i in the statement. “We are seeing stable to improving earnings performance across the portfolio and continue to see a good pipeline of investment opportunities.”

The firm’s investment pace – it invested £105 million (€127 million; $159 billion) during the second quarter – has increased slightly compared to the same period last year but remains “relatively modest”, said a note from analysts at Oriel Securities, which also noted the strength of 3i’s balance sheet, which is carrying leverage of an estimated 11 percent of the company’s net asset value. 

“3i Group’s balance sheet remains in much better shape than when we went into the downturn two years ago, with cash and undrawn facilities of £2.4 billion currently,” said the note.

At its most highly leveraged, 3i had carried net debt of £1.9 billion in 2009. Following a period in which the firm took a number of measures to shore up its balance sheet, the net debt figure is currently now £325 million.

The lion’s share of investment during the second quarter of 2010 was accounted for by investments in the existing portfolio, with just one new investment – in French care company Vendici – accounting for £35 million.

The firm realised proceeds of £79 million during the period, which does not include the £120 million expected to be generated by the exit of Inspicio. That deal is expected to close by the end of the summer.