9th Nov 2006 07:02
3i Group PLC09 November 2006 9 November 2006 Interim results for the six months to 30 September 2006 "Good performance driven by strong realised profits" • Total return of 9.3% (£374 million) for the first six months • Realised profits of £216 million, up 14% over the same period last year • Good level of investment at £589 million (£700 million including co-investment funds) For the six months to 30 September 2006 2005Total return £374m £447mTotal return on opening shareholders' funds 9.3% 12.1%Adjusted total return on opening shareholders' funds* 11.0% -Realised profits over opening valuation £216m £189mUnrealised profits on revaluation of investments £141m £223mPortfolio income £123m £109mRealisation proceeds £849m £1,041mInvestment (excluding co-investment funds) £589m £706mDiluted net asset value per ordinary share 792p 677pInterim dividend per ordinary share 5.8p 5.5p *Adjusted for the £700 million return of capital approved in July 2006. Commentary • Buyouts and Growth Capital have delivered very strong gross portfolio returns of 19.8% and 14.2% respectively for the period • Venture Capital delivered a negative gross portfolio return of (8.4)%, largely as a result of the mark-to-market valuation of its quoted portfolio • SMI delivered another good performance, generating £118 million of cash proceeds and a gross portfolio return of 13.7% for the period Commenting on the results, Baroness Hogg, Chairman of 3i Group plc, said: "3i has delivered another good performance of 9.3% on opening shareholders'funds in the half year and is positioned well against the current marketopportunity." 3i's Chief Executive, Philip Yea, added: "We are pleased with the results for the first six months and believe that theyconfirm our continued progress on delivering our near and long-term agendas. We see little change in our major markets and expect to report further progressover the coming period. At this stage the Group is on track to deliver growth innew investment over the whole year." - ends - For further information regarding the announcement of 3i's interim results to 30September 2006, including video interviews with Philip Yea and Simon Ball(available 7.15am), a live webcast of the results presentation (at 10.30am), andan on-demand webcast and podcast (available from 2.00pm), please seewww.3igroup.com. For further information, please contact: Philip Yea, Chief Executive Tel: 020 7975 3386 Simon Ball, Finance Director Tel: 020 7975 3356 Patrick Dunne, Group Communications Director Tel: 020 7975 3283 Issued by:Philip Gawith Tel: 020 7379 5151The Maitland Consultancy Notes to editors 3i is a world leader in private equity and venture capital. We focus on buyouts,growth capital and venture capital and invest across Europe, the US and Asia. Our competitive advantage comes from our international network and the strengthand breadth of our relationships in business. These underpin the value that wedeliver to our portfolio and to our shareholders. Chairman's statement 3i delivered a total return of £374 million for the six months to 30 September2006. This represents a return of 9.3% on opening shareholders' funds, whichcompares with a FTSE All-Share total return of 1.7% for the same period. TheDirectors have approved an interim dividend of 5.8p per ordinary share, up from5.5p last year. In line with our commitment to balance sheet efficiency, a £700 million returnof capital by way of a bonus issue of listed B shares was proposed toshareholders, approved in July and executed shortly thereafter. The total returnon opening shareholders' funds, adjusted for this return of capital, would havebeen 11.0%. The performance of our mid-market Buyouts business in the first half was ofparticular note. A gross portfolio return of 19.8% on opening portfolio valuewas an exceptionally good result, demonstrating the continuing strength of ourbusiness model in this competitive area. 3i's Growth Capital business also enjoyed a good first six months, deliveringreturns above our across-the-cycle expectations. Our Venture Capital business,however, incurred a negative return, largely due to the fall in the share pricesof some of its quoted holdings. A high level of investment and realisation activity was matched by strategicdevelopment at a Group and business line level. We recently announced the firstclosing of our new €5 billion European buyout fund, Eurofund V. We have also continued to extend 3i's international reach, with teams nowestablished in Beijing and New York. Our business in Asia continues to buildmomentum: our investment in the region in the first six months of this year wasclose to the total for the whole of the previous year. As the only private equity business in the FTSE 100, and indeed one of only afew companies of any size offering quoted access to private equity returns, wehave watched the listing of other private equity vehicles with interest. Thesemoves, we believe, will help to raise awareness of the benefits of investing inprivate equity. In September we were delighted to welcome Robert Swannell to the Board as anon-executive Director, joining our Nominations and Valuations Committees.Robert is Vice Chairman of Citigroup Europe and a member of Citigroup's GlobalInvestment Banking Operating Committee. He has extensive experience ininternational financial services and a wide experience of business. As a Board, we place considerable emphasis on corporate responsibility and onshareholder communications. It is therefore encouraging that 3i is not only amember of the Dow Jones Sustainability Index for 2006/7 but has been rankedfirst in the financial services sector globally. These results, and the progress we have made at a strategic level, would nothave been possible without the commitment and ability of our leadership team andstaff across the world. I would like to thank them and also the many managementteams and advisers who have helped 3i to achieve success. To conclude, 3i has delivered another good performance in the first half and iswell placed strategically. Our balance sheet strength, combined with the spreadof the portfolio internationally, by sector and by type of investment activity,should also enable us to take full advantage of growing markets whilemaintaining a diversified risk profile. Baroness HoggChairman 8 November 2006 Chief Executive's statement These results for the first six months of the financial year confirm continuingprogress on both our near-term and long-term agendas. Gross portfolio return, at 11.6%, was in line with the equivalent figure forlast year (12.1%), although the mix between our business lines changed somewhat,with an exceptional figure of 19.8% for Buyouts compensating for a significantfall in our Venture Capital return (negative 8.4% compared to positive 8.2% forthe equivalent period last year). The returns for both our Growth Capital andSMI businesses remained strong. The Interim review which follows gives anexplanation of the underlying factors affecting the Group's performance in theperiod. Although the levels of both realisations and investments were below last year'sequivalents, these figures were still strong in the context of our currentbusiness model, where concentrating on fewer larger investments means that ourinvestment and divestment cash flows are more variable across accountingperiods. Total return, at £374 million, was below the £447 million for the equivalentperiod last year. Realised profits grew by 14% to £216 million (2005: £189million). Our net asset value per share grew by 53p in the period, from 739p to792p, another good result, despite dilution of around 15p as a result of the Bshare issue and related share capital consolidation in July. The most visible indicators of the long-term reshaping of our business passednew thresholds in the period. The number of portfolio investments, at 942, isnow below 1,000, compared to a little over 2,000 investments three years ago.Our international portfolio now represents 61% of our total portfolio value,compared to 42% three years ago. The strategic development of the Group continues apace and we believe that thereare opportunities to expand our Infrastructure and private equity business yetfurther, particularly in the long-hold segment. Consistent with our philosophyof building capabilities ahead of building assets, we intend to build ourInfrastructure team internationally and to strengthen our Growth Capitalbusiness. At the appropriate stage, we also believe it would be in shareholders' interestsfor our infrastructure assets to be held in a separate vehicle managed oradvised by 3i, and therefore giving rise to annual and performance fees tosupplement the pure investment return from such assets. To support these objectives, Michael Queen, who currently leads our GrowthCapital and Infrastructure businesses, will increasingly concentrate onaccelerating the broadening of our infrastructure activities. In order tofacilitate this transition and maintain the considerable momentum of our GrowthCapital business in Europe, we have announced that Guy Zarzavatdjian, whocurrently heads our French business, will take over responsibility for GrowthCapital in Europe on 1 January 2007, reporting to Michael. It is our intentionthat he will succeed Michael as Managing Partner, Growth Capital on 1 April2008, allowing Michael at that time to become full-time Managing Partner ofInfrastructure. In view of the growing importance of our Asian opportunity, Chris Rowlands,Managing Partner, Group Markets, who has led our drive in this region, willshortly relocate to Singapore in order to build our capabilities as othercountry and asset markets are developed. In signing off my Chief Executive's statement in May, I said that we expectedour level of realisations for the financial year to be below last year'sexceptional levels and that we expected to increase the amount invested. Wecurrently see little change in outlook and expect to report further progress over the coming six months. Looking further out, after a period in which divestments have been attractive in what are exceptional markets, we expect the overall level of realisations to moderate as value is built in more recent investments and as our SMI portfolio reduces to a core of less liquid holdings. At this stage, the Group is on track to deliver growth in new investment overthe whole year. We believe that 3i is well placed against the current marketopportunity. Philip YeaChief Executive 8 November 2006 Interim review Group overviewThe Group achieved a total return of £374 million (2005: £447 million) for theperiod, as shown in table 1. This represents a return of 9.3% on openingshareholders' funds (2005: 12.1%), or 11.0% on an adjusted basis (calculated onthe assumption that the £700 million return of capital was effected at the endof the previous financial year). Table 1: Total return-------------------------------------------------------------------------------- 6 months to 6 months to 30 September 30 September 2006 2005 £m £m-------------------------------------------------------------------------------Realised profits on disposal of investments 216 189Unrealised profits on revaluation of investments 141 223Portfolio income 123 109-------------------------------------------------------------------------------Gross portfolio return 480 521Fund management fees 15 15Carried interest receivable 35 57Carried interest payable (48) (26)Operating expenses (115) (96)-------------------------------------------------------------------------------Net portfolio return 367 471-------------------------------------------------------------------------------Net interest payable (2) (11)Movements in the fair value of derivatives 11 (33)Exchange movements (11) 35Other (2) --------------------------------------------------------------------------------Profit after tax 363 462-------------------------------------------------------------------------------Reserve movements (pension, property and currency translation) 11 (15)-------------------------------------------------------------------------------Total recognised income and expense ("Total return") 374 447------------------------------------------------------------------------------- Gross portfolio return on the opening portfolio value, as shown in table 2, was11.6% (2005: 12.1%). Strong levels of realised profits, combined with a numberof unrealised uplifts relating to valuations on an imminent sales basis at theperiod end, were key to achieving this. Table 2: Return by business line (£m)6 months to 30 September-------------------------------------------------------------------------------- Growth Venture Buyouts Capital Capital SMI Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005--------------------------------------------------------------------------------Gross portfolioreturn 290 199 182 168 (69) 61 77 93 480 521--------------------------------------------------------------------------------Return as %of openingportfolio 19.8 13.1 14.2 13.0 (8.4) 8.2 13.7 12.3 11.6 12.1--------------------------------------------------------------------------------Net portfolioreturn 367 471-------------------------------------------------------------------------------Return as % of opening portfolio 8.9 10.9--------------------------------------------------------------------------------Total return 374 447--------------------------------------------------------------------------------Total return as % of opening shareholders'funds 9.3 12.1-------------------------------------------------------------------------------- Return profiles for each individual business line are covered in detail in table2. In summary, Buyouts and Growth Capital returns were ahead of expectations forthe six months, whereas those for Venture Capital were below. The Group's net portfolio return was 8.9% on the opening portfolio value (2005:10.9%). The difference of 2.7% between gross portfolio return and net portfolioreturn is consistent with our expectations of 5% to 6% dilution for a full 12months. New investment in the period totalled £589 million (2005: £706 million). As canbe seen from table 3, Buyouts represents 40%, Growth Capital 38% and VentureCapital 22% of this investment. Consistent with our growth strategy in theregion, investment in Asia was up markedly compared with the same period lastyear. There were 33 new investments in the period and, in addition to £589 millioninvested from the Group's balance sheet, a further £111 million was invested onbehalf of co-investment funds (2005: £129 million). Table 3: Investment by business line and geography (£m)6 months to 30 September-------------------------------------------------------------------------------- Growth Venture Buyouts Capital Capital SMI Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005--------------------------------------------------------------------------------Asia - - 85 36 - - - - 85 36ContinentalEurope 128 204 116 141 10 12 1 2 255 359UK 106 154 21 109 34 18 1 2 162 283US - - - - 76 28 - - 76 28Rest of the world 2 - - - 9 - - - 11 ---------------------------------------------------------------------------------Total 236 358 222 286 129 58 2 4 589 706-------------------------------------------------------------------------------- Realisation proceeds, as can be seen from table 4, totalled £849 million (2005:£1,041 million), and continued to be ahead of our expectations. Realised profitsof £216 million (2005: £189 million) represent an uplift of 34% over openingvalue (2005: 22%). Realised profits are stated net of write-offs of £1 million(2005: £40 million). Table 4: Realisation proceeds by business line and geography (£m)6 months to 30 September-------------------------------------------------------------------------------- Growth Venture Buyouts Capital Capital SMI Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005--------------------------------------------------------------------------------Asia - - 37 35 - - - - 37 35ContinentalEurope 171 201 165 169 6 49 26 26 368 445UK 217 178 115 135 5 56 92 135 429 504US - - - 42 15 15 - - 15 57--------------------------------------------------------------------------------Total 388 379 317 381 26 120 118 161 849 1,041--------------------------------------------------------------------------------Note There were no Rest of the world proceeds in either period. Overall, some 15.3% (2005: 19.7%) of the opening portfolio by value was realisedduring the period, continuing the high churn seen in the previous 18 months. Although sales of quoted investments were low in the period, four portfoliocompanies achieved an IPO. At 30 September 2006 quoted investments represented7% of 3i's total portfolio value (2005: 6%). The unrealised value movement for the period of £141 million (2005: £223million) was driven by several factors, as shown in table 5. A continuing strongmarket for exits is demonstrated by a contribution of £160 million from upliftto imminent sale. The fall in the value of quoted investments contributed anegative £59 million (2005: positive £58 million). Table 5: Unrealised profits/(losses) on revaluation of investments------------------------------------------------------------------------------- 6 months to 6 months to 30 September 30 September 2006 2005 £m £m-------------------------------------------------------------------------------Earnings multiples(1) 22 66Earnings(2) 16 27First-time uplifts(3) 64 23Provisions(4) (28) (37)Net up/(down) rounds 8 (3)Uplift to imminent sale 160 128Other movements on unquoted investments (42) (39)Quoted portfolio (59) 58-------------------------------------------------------------------------------Total 141 223------------------------------------------------------------------------------- 1 The weighted average earnings multiple applied to investments valued on an earnings basis, at both the start and end of the period, increased from 12.2 to 12.3 over the period. 2 The aggregate attributable earnings of investments valued on an earnings basis at both the start and end of the period increased by 3%. 3 The net valuation impact arising on investments being valued on a basis other than cost for the first time. 4 Provisions against the carrying value of investments in businesses which may fail. BuyoutsAt 19.8% (2005: 13.1%) 3i's Buyout business delivered an exceptional grossportfolio return for the period. This performance was driven by realised profitsof £76 million (2005: £62 million), on proceeds of £388 million (2005: £379million), and an unrealised value movement of £151 million (2005: £79 million). Two key investments, Swiss-based aviation engineering business SR Technics andFrench transportation company Keolis, were valued on an imminent sale basis,producing a combined uplift in value of £132 million. First-time uplifts fromcost on investments totalled £27 million. Total investment during the period was £236 million (2005: £358 million), withseven new investments in five different countries. In August the Buyout business announced the first closing of its latest fund,Eurofund V. At €4.3 billion, this was ahead of its initial target of €3.5billion. The fund's final close, which is capped at €5 billion, is expected inNovember 2006. The health of the Buyout portfolio remained good, with the loss rate fromEurofunds III and IV at just 5% of investment cost at 30 September 2006 (31March 2006: 3%). Growth CapitalGross portfolio return from 3i's Growth Capital business line also exceededexpectations at 14.2% for the period (2005: 13.0%). Realised profits of £90million (2005: £60 million) on proceeds of £317 million (2005: £381 million)were a key driver of this return. Unrealised value growth from investments made in recent years was alsosignificant. First-time uplifts on several assets were a key driver of this. Income from this business line was also significant at £36 million (2005: £22 million). Asia was the highest growth area for new investment with five of the 13 newinvestments in the period being made in that region. 3i's rapidly-developing business in infrastructure is also managed through theGrowth Capital business line. A highly-experienced team is now in place, anumber of significant investments have been made and there is a good level ofwork in progress. Portfolio health improved over the period, with 89% of the portfolio by costbeing classified as healthy at the period end (31 March 2006: 84%), against athree-year rolling average of 78%. Venture CapitalThe six month gross portfolio return from 3i's Venture Capital business was £(69) million (2005: £61 million), or (8.4)% (2005: 8.2%) of opening portfoliovalue. This business line has a relatively high proportion of its portfolio value inquoted assets compared to the Group as a whole (Venture Capital 23%, Group 7% asat 30 September 2006). Consequently, the fall in quoted technology prices ingeneral, and more significant reductions in a small number of higher-valuequoted assets in particular, contributed £(68) million to the gross portfolioreturn. 3i's two largest quoted venture assets, US-based broadband telephony businessVonage Holdings Corp ("Vonage") and the UK-based electronics company CSR plc("CSR") contributed a combined £38.5 million of the value reduction in theperiod. Both remain successful investments, with IRRs of 39% (Vonage) and 59%(CSR) at 30 September 2006 valuations. A weak IPO market for technology companies also influenced the mergers andacquisitions market and weakened prices. As a consequence, 3i deferred a numberof exits, which resulted in the low level of Venture realisations for the periodof £26 million (2005: £120 million). A weaker market for exits, however, meant a better market for investing,especially in late-stage opportunities in the US and the UK. Investment for theperiod of £129 million (2005: £58 million) includes £72 million of late-stageinvestment (2005: £16 million). Consistent with this late-stage focus, the average size of investment alsoincreased, from £3 million for the year to 31 March 2006 to £7 million for thesix months to 30 September 2006. Portfolio health improved, with 72% of the portfolio by cost classified ashealthy at 30 September 2006 (31 March 2006: 67%), against a three-year rollingaverage of 68%. SMISmaller Minority Investments delivered another good gross portfolio return at13.7 % (2005: 12.3%). This performance was driven by a small number ofrealisations at prices significantly above carrying values. SMI also made goodprogress in reducing the total number of assets under management, from 526investments at the start of the period to 426 at the end. The portfolioBy value, 61% of the portfolio is now outside the UK (2005: 50%), with Asiaaccounting for 5% (2005: 2%). The number of investments in the portfolio fellfrom 1,087 (561 excluding SMI) at 31 March 2006 to 942 (516 excluding SMI) at 30September 2006. As shown in table 6, the closing value of the portfolio, at£4,174 million, was almost identical to the opening value of £4,139 million. Table 6: Summary of changes to investment portfolio------------------------------------------------------------------------------- 6 months to 6 months to 30 September 30 September 2006 2005 £m £m-------------------------------------------------------------------------------Opening portfolio 4,139 4,317Investment 589 706Realisation proceeds (849) (1,041)Realised profits on disposal of investments 216 189Unrealised profits on revaluation of investments 141 223Other movements (62) (5)-------------------------------------------------------------------------------Closing portfolio 4,174 4,389------------------------------------------------------------------------------- Cash flows and capital structureThe cash inflow from operations was £235 million (2005: £265 million). Netborrowings increased over the period to £475 million, from £56 million at 31March 2006, with the cash inflow from operations being offset by the £700million return of capital in July. The level of gearing rose from 1% at 31 March2006 to 13% at the period end. Net carried interest payableThe charge in respect of amounts payable to executives under carried interestschemes was £48 million (2005: £26 million). This reflected the strongperformance of recent Buyout and Growth Capital vintages. Carried interestreceivable of £35 million (2005: £57 million) from 3i's managed funds relatesprimarily to realised and unrealised profits generated on the Eurofund III andEurofund IV buyout funds. Operating expensesOperating expenses for the period of £115 million (2005: £96 million) weremaintained at the same level as for the six months to 31 March 2006. Employeenumbers were up from 737 at 31 March 2006 to 757 at the period end. PensionsThe deficit on the Group's defined benefit plan, calculated under InternationalAccounting Standard 19 "Employee Benefits", reduced over the period, from £17million at 31 March to £3 million at 30 September, mainly as a result of anincrease in bond yields. The plan was closed to new members from 1 April 2006and the next full actuarial valuation is due to take place in summer 2007. Growth in net asset value per shareThe good operational performance in the period, combined with the return ofcapital, resulted in growth in diluted net asset value per share of 53p (2005:63p), from 739p to 792p. Consolidated income statementfor the six months to 30 September 2006------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £m £m £m-------------------------------------------------------------------------------Realised profits over value onthe disposal of investments 216 189 576Unrealised profits on therevaluation of investments 141 223 245------------------------------------------------------------------------------- 357 412 821Portfolio income Dividends 35 39 75 Income from loans and receivables 81 52 133 Fees receivable 7 18 24-------------------------------------------------------------------------------Gross portfolio return 1 480 521 1,053Fund management fees 15 15 24Carried interest Carried interest receivable from managed funds 35 57 79 Carried interest payable to executives (48) (26) (64)Operating expenses (115) (96) (211)-------------------------------------------------------------------------------Net portfolio return 367 471 881Treasury interest receivable 45 25 55Interest payable (47) (36) (72)Movements in the fair value of derivatives 11 (33) (78)Exchange movements (11) 35 47Other income - 1 22-------------------------------------------------------------------------------Profit before tax 365 463 855Income taxes (2) (1) (3)-------------------------------------------------------------------------------Profit after tax and profit for the period 363 462 852------------------------------------------------------------------------------- Earnings per share Basic (pence) 2 70.3 79.6 152.0 Diluted (pence) 2 67.8 77.0 147.3------------------------------------------------------------------------------- Consolidated statement of recognised income and expensefor the six months to 30 September 2006------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £m £m £m-------------------------------------------------------------------------------Profit for the period 363 462 852Gain on valuation of property - 1 -Exchange differences on translation of foreign operations (3) (9) (5)Actuarial gains/(losses) 14 (7) (16)-------------------------------------------------------------------------------Total recognised income and expensefor the period 374 447 831-------------------------------------------------------------------------------Analysed in reserves as Revenue 69 52 117 Capital 308 404 719 Translation reserve (3) (9) (5)------------------------------------------------------------------------------- 374 447 831------------------------------------------------------------------------------- Consolidated reconciliation of movements in equityfor the six months to 30 September 2006------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £m £m £m-------------------------------------------------------------------------------Opening total equity 4,006 3,699 3,699Total recognised income and expensefor the period 374 447 831Share-based payments 5 4 8Ordinary dividends (52) (56) (86)Special dividends - (245) (245)Issue of B shares (700) - -Issues of shares 10 5 13Share buy-backs - (151) (222)Own shares 5 8 8-------------------------------------------------------------------------------Closing total equity 3,648 3,711 4,006------------------------------------------------------------------------------- Consolidated balance sheetas at 30 September 2006------------------------------------------------------------------------------- 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £m £m £m-------------------------------------------------------------------------------AssetsNon-current assetsInvestments Quoted equity investments 279 260 259 Unquoted equity investments 2,507 2,625 2,514 Loans and receivables 1,388 1,504 1,366-------------------------------------------------------------------------------Investment portfolio 1 4,174 4,389 4,139Carried interest receivable 108 65 77Interests in joint ventures - 39 -Property, plant and equipment 31 35 31Investment property - 7 --------------------------------------------------------------------------------Total non-current assets 4,313 4,535 4,247-------------------------------------------------------------------------------Current assetsOther current assets 99 199 149Derivative financial instruments 25 29 19Deposits 763 501 1,108Cash and cash equivalents 711 373 847-------------------------------------------------------------------------------Total current assets 1,598 1,102 2,123-------------------------------------------------------------------------------Total assets 5,911 5,637 6,370------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesCarried interest payable (106) (68) (83)Loans and borrowings (1,038) (1,145) (1,243)Convertible Bonds (359) (353) (365)B shares (11) - -Subordinated liabilities (21) (49) (24)Retirement benefit obligation (3) (30) (17)Deferred income tax (1) - (1)Provisions (4) (6) (5)-------------------------------------------------------------------------------Total non-current liabilities (1,543) (1,651) (1,738)------------------------------------------------------------------------------- Current liabilitiesTrade and other payables (138) (130) (160)Carried interest payable (31) (28) (60)Loans and borrowings (400) - (231)Derivative financial instruments (145) (108) (168)Current income tax (3) (2) (2)Provisions (3) (7) (5)-------------------------------------------------------------------------------Total current liabilities (720) (275) (626)-------------------------------------------------------------------------------Total liabilities (2,263) (1,926) (2,364)-------------------------------------------------------------------------------Net assets 3,648 3,711 4,006------------------------------------------------------------------------------- EquityIssued capital 294 296 292Share premium 379 368 376Capital redemption reserve 22 13 17Share-based payment reserve 22 13 17Translation reserve (3) (4) -Capital reserve 2,718 2,866 3,110Revenue reserve 280 228 263Own shares (64) (69) (69)-------------------------------------------------------------------------------Total equity 3,648 3,711 4,006------------------------------------------------------------------------------- Consolidated cash flow statementfor the six months to 30 September 2006------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £m £m £m-------------------------------------------------------------------------------Cash flow from operating activitiesPurchase of investments (559) (724) (1,068)Proceeds from investments 858 1,025 2,213Interest received 53 28 67Dividends received 35 39 76Fees received from investment and fund management activities 11 30 46Carried interest received 5 2 9Carried interest paid (49) (29) (30)Operating expenses (118) (105) (216)Income tax paid (1) (1) (8)-------------------------------------------------------------------------------Net cash flow from operations 235 265 1,089------------------------------------------------------------------------------- Cash flow from financing activitiesProceeds from issues of share capital 10 5 13Repurchase of own ordinary shares - (151) (222)Repurchase of B shares (689) - -Dividend paid (52) (301) (331)Interest received 44 26 50Interest paid (40) (36) (60)Proceeds from long-term borrowings 1 1 69Repayment of long-term borrowings (2) (47) (54)Net cash flow from short-term borrowings 18 (86) 188Net cash flow from deposits 345 384 (223)------------------------------------------------------------------------------- Net cash flow from financing activities (365) (205) (570)------------------------------------------------------------------------------- Cash flow from investing activitiesPurchases of property, plant and equipment (3) (2) (15)Sales of property, plant and equipment 1 - 24Divestment from joint ventures - 2 2-------------------------------------------------------------------------------Net cash flow from investing activities (2) - 11-------------------------------------------------------------------------------Change in cash and cash equivalents (132) 60 530-------------------------------------------------------------------------------Cash and cash equivalents at 1 April 847 314 314Effect of exchange rate fluctuations (4) (1) 3-------------------------------------------------------------------------------Cash and cash equivalents at the endof the period 711 373 847------------------------------------------------------------------------------- Notes to the accounts 1 Segmental analysis------------------------------------------------------------------------------- Smaller Growth Venture Minority6 months to 30 September 2006 Buyouts Capital Capital Investments Total(unaudited) £m £m £m £m £m -------------------------------------------------------------------------------Gross portfolio returnRealised profits over value on the disposal of investments 76 90 5 45 216Unrealised profits on therevaluation of investments 151 56 (78) 12 141Portfolio income 63 36 4 20 123------------------------------------------------------------------------------- 290 182 (69) 77 480-------------------------------------------------------------------------------Net (investment)/divestmentRealisation proceeds 388 317 26 118 849New investment (236) (222) (129) (2) (589)------------------------------------------------------------------------------- 152 95 (103) 116 260-------------------------------------------------------------------------------Balance sheet-------------------------------------------------------------------------------Value of investment portfolio 1,534 1,310 826 504 4,174------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Growth Venture Smaller Growth Venture Minority6 months to 30 September 2005 Buyouts Capital Capital Investments Total(unaudited) £m £m £m £m £m-------------------------------------------------------------------------------Gross portfolio returnRealised profits over value on the disposal of investments 62 60 36 31 189Unrealised profits on therevaluation of investments 79 86 23 35 223Portfolio income 58 22 2 27 109------------------------------------------------------------------------------- 199 168 61 93 521-------------------------------------------------------------------------------Net (investment)/divestmentRealisation proceeds 379 381 120 161 1,041New investment (358) (286) (58) (4) (706)------------------------------------------------------------------------------- 21 95 62 157 335-------------------------------------------------------------------------------Balance sheet-------------------------------------------------------------------------------Value of investment portfolio 1,665 1,321 740 663 4,389------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Smaller Growth Venture Minority Buyouts Capital Capital Investments Total12 months to 31 March 2006 (audited) £m £m £m £m £m-------------------------------------------------------------------------------Gross portfolio returnRealised profits over value on the disposal of investments 208 232 72 64 576Unrealised profits on therevaluation of investments 124 60 51 10 245Portfolio income 115 49 5 63 232------------------------------------------------------------------------------- 447 341 128 137 1,053-------------------------------------------------------------------------------Net (investment)/divestmentRealisation proceeds 877 855 207 268 2,207New investment (451) (497) (156) (6)(1,110)------------------------------------------------------------------------------- 426 358 51 262 1,097-------------------------------------------------------------------------------Balance sheet-------------------------------------------------------------------------------Value of investment portfolio 1,465 1,284 826 564 4,139------------------------------------------------------------------------------- 2 Per share informationThe earnings and net assets per share attributable to the equity shareholders of the Company is based on the following data:------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited)-------------------------------------------------------------------------------Earnings per share (pence)Basic 70.3 79.6 152.0Diluted 67.8 77.0 147.3-------------------------------------------------------------------------------Earnings (£m)Profit for the period attributable toequity holders of the Company 363 462 852Effect of dilutive potential ordinary shares 7 5 14------------------------------------------------------------------------------- 370 467 866-------------------------------------------------------------------------------------------------------------------------------------------------------------- 6 months to 6 months to 12 months to 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Number Number Number-------------------------------------------------------------------------------Number of shares Weighted averagenumber of shares in issue 516,335,648 580,583,146 560,684,598Effect of dilutive potentialordinary shares Share options 4,917,861 1,697,906 2,744,369 Convertible Bonds 24,750,000 24,750,000 24,750,000-------------------------------------------------------------------------------Diluted shares 546,003,509 607,031,052 588,178,967------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited)-------------------------------------------------------------------------------Net assets per share (pence)Basic 798 679 743Diluted 792 677 739-------------------------------------------------------------------------------Net assets (£m)Net assets attributable toequity holders of the Company 3,648 3,711 4,006-------------------------------------------------------------------------------------------------------------------------------------------------------------- 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Number Number Number-------------------------------------------------------------------------------Ordinary shares 467,344,551 557,787,039 550,556,502Own shares (10,035,981) (11,423,094) (11,080,758)-------------------------------------------------------------------------------Number of shares in issue 457,308,570 546,363,945 539,475,744Effect of dilutive potential ordinary shares Share options 3,320,915 1,952,013 2,916,552-------------------------------------------------------------------------------Diluted shares 460,629,485 548,315,958 542,392,296------------------------------------------------------------------------------- Accounting policies Basis of preparation These financial statements are the unaudited interimconsolidated financial statements (the "Interim Financial Statements") of 3iGroup plc, a company incorporated in Great Britain and registered in England andWales, and its subsidiaries (together referred to as the "Group") for thesix-month period ended 30 September 2006 (the "interim period"). The InterimFinancial Statements have been prepared in accordance with InternationalAccounting Standard 34 Interim Financial Reporting ("IAS 34") and should be readin conjunction with the Consolidated Financial Statements for the year to 31March 2006 ("Report and Accounts 2006"), as they provide an update of previouslyreported information. The Interim Financial Statements were authorised for issue by the Directors on8 November 2006. The Interim Financial Statements have been prepared in accordance with theaccounting policies set out in the Report and Accounts 2006 as the new andrevised International Financial Reporting Standards and interpretationseffective 1 April 2006 have had no impact on the accounting policies of theGroup. The presentation of the Interim Financial Statements is consistent withthe Report and Accounts 2006. Where necessary, comparative information has beenreclassified or expanded from the previously reported Interim FinancialStatements to take into account any presentational changes made in the Reportand Accounts 2006. The Interim Financial Statements do not constitute statutory accounts. Thestatutory accounts for the year to 31 March 2006, prepared under IFRS, have beenfiled with the Registrar of Companies on which the auditors issued a report,which was unqualified and did not contain a statement under section 237(2) orsection 237(3) of the Companies Act 1985. The preparation of the Interim Financial Statements requires management to makejudgments, estimates and assumptions that affect the application of policies andreported amounts of assets and liabilities, income and expenses. The estimatesand associated assumptions are based on historical experience and other factorsthat are believed to be reasonable under the circumstances, the results of whichform the basis of making the judgments about carrying values of assets andliabilities that are not readily apparent from other sources. Actual results maydiffer from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. The most significant techniques for estimation are described inthe accounting policies and in our "valuation methodology" for investments inthe Report and Accounts 2006. The Group operates in business lines where significant seasonal or cyclicalvariations in activity are not experienced during the financial year. Independent review report to 3i Group plc Introduction We have been instructed by 3i Group plc to review the financialinformation for the six months to 30 September 2006 which comprises theConsolidated income statement, Consolidated balance sheet, Consolidated cashflow statement, Consolidated reconciliation of movements in equity, Consolidatedstatement of recognised income and expense and the related notes 1 to 14. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financialinformation contained therein, is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the interimreport in accordance with the Listing Rules of the Financial Services Authoritywhich require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual accounts except where any changes, and the reasons for them,are disclosed. Review work performed We conducted our review in accordance with guidancecontained in Bulletin 1999/4 'Review of interim financial information' issued bythe Auditing Practices Board for use in the United Kingdom. A review consistsprincipally of making enquiries of Group management and applying analyticalprocedures to the financial information and underlying financial data, and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any materialmodifications that should be made to the financial information as presented forthe six months to 30 September 2006. Ernst & Young LLPLondon, 8 November 2006 Note 1The Interim report 2006 will be posted to shareholders on 20 November 2006 andthereafter copies will be available from the Company Secretary, 3i Group plc, 16Palace Street, London SW1E 5JD. Note 2The interim dividend will be payable on 3 January 2007 to holders of ordinaryshares on the register on 1 December 2006. The ex-dividend date will be 29November 2006. Ten largest investments ------------------------------------------------------------------------------- First Residual Directors' Business Invested Cost(1) valuation(1)Investment line Geography in £m £m-------------------------------------------------------------------------------SR Technics Holding Buyouts Switzerland 2002Technical solutions provider for commercial aircraft fleetsEquity shares 7 117Loans 31 30------------------------------------------------------------------------------- 38 147-------------------------------------------------------------------------------Financiere Keos SA Buyouts France 2004(Keolis)Transport operatorEquity shares 9 111------------------------------------------------------------------------------- 9 111-------------------------------------------------------------------------------Parking InternationalHoldings Limited (NCP) Buyouts UK 2005Transport management and parking servicesEquity shares 1 1Loans 107 107------------------------------------------------------------------------------- 108 108-------------------------------------------------------------------------------Sistemas Tecnicos deEncofrados S.A. (STEN) Growth Spain 2006Sale and rental of formwork and scaffolding equipmentEquity shares 81 81------------------------------------------------------------------------------- 81 81-------------------------------------------------------------------------------Infrastructure Investors(2) Growth UK 2005Secondary PFI and infrastructure investment fundEquity shares - 8Loans 58 58------------------------------------------------------------------------------- 58 66-------------------------------------------------------------------------------H-Careholding AB Buyouts Sweden 2005Elderly, primary and specialist careEquity shares 11 11Loans 56 55------------------------------------------------------------------------------- 67 66-------------------------------------------------------------------------------Giochi Preziosi spa Buyouts Italy 2005Retailer and wholesaler of toysEquity shares 63 62------------------------------------------------------------------------------- 63 62-------------------------------------------------------------------------------Boxer TV-Access AB Growth Sweden 2005Digital TV distributorEquity shares 56 57------------------------------------------------------------------------------- 56 57-------------------------------------------------------------------------------FM-Holding AB Buyouts Sweden 2004(Coor Service Management)Facilities management servicesEquity shares 1 30Loans 28 26------------------------------------------------------------------------------- 29 56-------------------------------------------------------------------------------Senoble Holding SAS Growth France 2004Manufacturer of dairy products and chilled dessertsEquity shares 9 36Loans 18 19------------------------------------------------------------------------------- 27 55------------------------------------------------------------------------------- Notes 1 The investment information is in respect of the Group's holding and excludes any co-investment by 3i managed funds. 2 The investment by 3i is into three Infrastructure Investors' entities. 3i is a limited partner in the fund and is invested in the general partner of the fund and the management company. As well as the loan shown, the investment has a cost of £3,177 for partnership capital. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
3i Group