TIDMIII
RNS Number : 1878L
3i Group PLC
12 May 2022
12 May 2022
3i Group plc announces results for the year
to 31 March 2022
3i delivered an excellent result in FY2022
-- Total return of GBP4,014 million or 44% on opening
shareholders' funds (March 2021: GBP1,726 million, 22%) and NAV per
share of 1,321 pence (31 March 2021: 947 pence).
-- Our Private Equity business delivered a gross investment
return of GBP4,172 million or 47% (March 2021: GBP1,936 million,
30%). This excellent result was driven by strong earnings growth
and realisation profits with valuation multiple increases
contributing just 6% of Private Equity GIR in the year.
-- Action delivered annual revenue growth of 23% and EBITDA
growth of 36% in 2021 and has started 2022 well. Action's LTM
EBITDA to P3 2022, which ended on 3 April 2022, was EUR932 million
(31 March 2021: EUR602 million) showing the strength in recovery of
the group's trading since the severe Covid-19 restrictions in the
first three months of 2021.This strong performance underpinned
value growth of GBP2,655 million in the year, in addition to GBP284
million of dividends received.
-- In competitive markets the Private Equity team deployed
GBP529 million including six new investments and two
transformational bolt-on acquisitions. In addition our portfolio
companies completed a further 13 self-funded bolt-on
acquisitions.
-- Across the Group, we received over GBP1.2 billion of cash
primarily via portfolio company realisations, refinancings and
dividends in the year.
-- Our Infrastructure business generated a gross investment
return of GBP241 million, or 21% (March 2021: GBP178 million, 16%).
This return was driven by the increase in share price of 3i
Infrastructure plc ("3iN") and dividend income.
-- Scandlines generated a gross investment return of GBP112
million, or 26% (March 2021: GBP25 million, 6%). Freight volumes
have been consistently strong, finishing ahead of 2019 levels,
whilst leisure volumes showed some signs of recovery but remained
below 2019 levels due to varying degrees of travel restrictions
throughout 2021.
-- Total dividend of 46.5 pence per share for FY2022, with a
second FY2022 dividend of 27.25 pence per share to be paid in July
2022 subject to shareholder approval.
Simon Borrows, 3i's Chief Executive , commented:
"We have entered our new financial year acutely aware of the
political and macro-economic challenges the world is facing, but we
do this from a position of strength. Our teams are experienced and
well-embedded in their local markets across northern Europe and
North America. Our processes are carefully designed and disciplined
which allows us to react fast to sudden or sharp changes in markets
or the broader environment and our portfolio is well constructed
from a thematic, geographic and sector perspective and has
demonstrated clear resilience over the last few years. We asset
manage in the knowledge that we have assembled today's portfolio
with real price discipline and we have not over-bought recent
highly-priced vintages. In Action we have a formidable retail
company that will continue to grow and thrive in today's
challenging environment. We also have a number of healthcare and
consumer assets which have the potential to deliver significant
longer-term compounding returns for the Group. "
Financial highlights
Year to/as at Year to/as at
31 March 31 March
2022 2021
------------------------------------------------- -------------- --------------
Group
Total return GBP4,014m GBP1,726m
Operating expenses GBP(128)m GBP(112)m
Operating cash profit GBP340m GBP23m
================================================= ============== ==============
Realised proceeds GBP788m GBP218m
Gross investment return GBP4,525m GBP2,139m
- As a percentage of opening 3i portfolio value 43% 26%
Cash investment GBP543m GBP510m
3i portfolio value GBP14,305m GBP10,408m
Gross debt GBP975m GBP975m
Net debt GBP(746)m GBP(750)m
Gearing(1) 6% 8%
Liquidity GBP729m GBP725m
Net asset value GBP12,754m GBP9,164m
Diluted net asset value per ordinary share 1,321p 947p
Total dividend per share 46.5p 38.5p
1 Gearing is net debt as a percentage of net assets.
S
For further information, please contact:
Silvia Santoro
Group Investor Relations Director Tel: 020 7975 3258
Kathryn van der Kroft
Communications Director Tel: 020 7975 3021
For further information regarding the announcement of 3i's
annual results to 31 March 2022, including a live webcast of the
results presentation at 10.00am, please visit www.3i.com .
Notes to editors
3i is a leading international investment manager focused on
mid-market Private Equity and Infrastructure. Our core investment
markets are northern Europe and North America. For further
information, please visit: www.3i.com .
Notes to the announcement of the results
Note 1
All of the financial data in this announcement is taken from the
Investment basis financial statements. The statutory accounts are
prepared under IFRS for the year to 31 March 2022 and have not yet
been delivered to the Registrar of Companies. The statutory
accounts for the year to 31 March 2021 have been delivered to the
Registrar of Companies. The auditor's reports on the statutory
accounts for these years are unqualified and do not contain any
matters to which the auditor drew attention by way of emphasis or
any statements under section 498(2) or (3) of the Companies Act
2006. This announcement does not constitute statutory accounts.
Note 2
Copies of the Annual report and accounts 2022 will be posted to
shareholders on or soon after 25 May 2022.
Note 3
This announcement may contain statements about the future
including certain statements about the future outlook for 3i Group
plc and its subsidiaries ("3i"). These are not guarantees of future
performance and will not be updated. Although we believe our
expectations are based on reasonable assumptions, any statements
about the future outlook may be influenced by factors that could
cause actual outcomes and results to be materially different.
Note 4
Subject to shareholder approval, the proposed second dividend is
expected to be paid on 22 July 2022 to holders of ordinary shares
on the register on 17 June 2022. The ex-dividend date will be 16
June 2022.
Chairman's statement
"The Group has a clear, consistent strategy that continues to be
well executed, generating attractive and sustainable returns for
shareholders."
3i delivered an excellent result in FY2022, driven by organic
growth and the effective implementation of buy-and-build strategies
in our portfolio.
Overview
I am pleased to report that 3i delivered an excellent result in
the financial year to 31 March 2022 ("FY2022"), my first year end
as Chairman of the Group. The Group has a clear, consistent
strategy that continues to be well executed, generating attractive
and sustainable returns for shareholders.
Performance
The Group's total return for the year was GBP4,014 million
(2021: GBP1,726 million). Net asset value ("NAV") increased to
1,321 pence per share (31 March 2021: 947 pence) and our total
return on opening shareholders' funds was 44% (2021: 22%). This
year's result highlights the resilience that the Group and our
portfolios have demonstrated throughout the pandemic and our
ability to generate growth organically and through value accretive
acquisitions for our portfolio companies.
Market environment
The strength of the Group's FY2022 result has been achieved
against a challenging macro-economic and uncertain geopolitical
backdrop. The start of our financial year coincided with the
initial phase of the global deployment of Covid-19 vaccines.
Despite the emergence of new variants towards the end of 2021, the
effectiveness of the vaccination programme and wider public health
response resulted in reduced restrictions across many of the
regions in which our portfolio companies operate. The resulting
pick-up in economic activity gave rise to supply chain disruption
and inflationary pressures. These pressures have been exacerbated
since Russia's invasion of Ukraine with further increases in
commodity prices, including energy and fuel. The Group has no
direct exposure to Russia or Ukraine and across our portfolios the
exposure is limited.
Dividend
Our dividend policy is to maintain or grow the dividend year on
year, subject to balance sheet strength and the outlook for
investment and realisation levels. In the year, we had a good level
of investment activity across new, bolt-on and further investments,
and also generated a significant cash inflow of over GBP1.2 billion
from our portfolio companies. We also provided liquidity to two of
our portfolio companies to support their recovery from the pandemic
and have capacity to support other portfolio companies if
required.
In line with the Group's policy and in recognition of the
Group's financial performance, the Board recommends a second FY2022
dividend of 27.25 pence (2021: 21.0 pence), subject to shareholder
approval, which will take the total dividend to 46.5 pence (2021:
38.5 pence).
Board and people
I would like to take this opportunity to thank Simon Thompson,
my predecessor, for his stewardship of the Group over the last six
years, particularly through the early stages of Covid-19 and for
facilitating a smooth transition process.
As announced on 11 November 2021, Julia Wilson, Group Finance
Director, will retire from her role and the Board after the AGM in
June 2022 and will be succeeded by James Hatchley, who will also
retain his current Group Strategy responsibilities. We have also
promoted Jasi Halai, currently Group Financial Controller, to Chief
Operating Officer. I would like to thank Julia for her outstanding
contribution to the Group and the Board over her 16-year tenure and
welcome James and Jasi to the Board. I am also delighted to welcome
to the Board Peter McKellar, who succeeds me as Chairman of the
Valuation Committee and Lesley Knox, who has been appointed as our
Senior Independent Director.
Environmental, Social, and Governance ("ESG")
In 2021, ESG and in particular the impact of climate change, was
of significant prominence for governments and businesses. We have
recognised for some time its importance for our shareholders and
investors and wider society and I am encouraged by the Group's
progress during the year in implementing its sustainability agenda
under the oversight of our newly formed ESG Committee.
Outlook
We have started FY2023 with strong momentum across the Group and
our portfolio. The mitigation measures and growth strategies we
have implemented since the start of the pandemic mean that we are
well placed to adapt to the next phase of its evolution. The
current geopolitical instability and the wider implications for the
macro-economic environment remain a key focus for the Group and our
portfolio companies, and while we are not immune, our portfolio is
demonstrating its resilience and ability to generate growth.
The strength of our performance in FY2022 results from our
strategy of investing in assets backed by long-term structural
growth trends, supporting returns for our shareholders through the
cycle.
David Hutchison
Chairman
11 May 2022
Chief Executive's statement
"Since our restructuring in June 2012, we have focused on
investing our proprietary capital to deliver sustainable growth and
long-term compounding of value from our portfolio companies. This
strategy has been executed well by our international investment
teams and through the tight central control of the Group's
Investment Committee. Price discipline, active asset management and
careful cost control have been the hallmarks of the 3i approach
since 2012".
3i delivered an excellent result in FY2022, driven by a
resilient portfolio, carefully constructed and positioned in
sectors benefiting from long-term structural growth. Our Private
Equity and Infrastructure investment teams deployed capital
selectively and innovatively across several new, further and
bolt-on investments and we capitalised on favourable market
conditions to return significant cash to the Group. Against a
backdrop of geopolitical tensions and macro-economic uncertainty,
we enter the next financial year with a diversified portfolio that
has good momentum and is well positioned to generate attractive,
sustainable returns for our shareholders.
We continued to deliver against our long-term strategy and
objectives in FY2022, generating a total return on shareholders'
funds of GBP4,014 million, or 44% (2021: GBP1,726 million, or 22%),
ending the year with a NAV per share of 1,321 pence (31 March 2021:
947 pence). The Group and its portfolio have navigated the various
challenges of the last few years very effectively and the strength
of the 3i team and processes, together with the quality of the
current investment portfolio, have ensured sustained growth and
dividends for shareholders. Throughout the pandemic, rigorous
monitoring and active management of our portfolio enabled us to
respond quickly to developments in the wider environment and to
implement mitigating actions. This is important also in the context
of Russia's invasion of Ukraine. The Group has no direct exposure
to Russia or Ukraine, and the exposure across the portfolio is
limited but, where it exists, we are actively working on options to
deal with the situation in the short term.
A combination of pent-up demand and record levels of uninvested
capital continue to drive competition and aggressive pricing for
private market assets. We have maintained price discipline and
remained flexible, selective and innovative in deploying our
capital. During the year, we completed six new investments in
Private Equity and three in Infrastructure. Bolt-on acquisitions
enable our portfolio companies to increase their scale, customers,
capabilities and access new markets and have been fundamental to
our value creation strategy across both of our portfolios.
In FY2022 we completed a total of 15 bolt-on acquisitions,
including two transformational acquisitions for our Private Equity
portfolio companies and a number of further investments within our
Infrastructure portfolio. Our permanent capital is a distinct
advantage in allowing us flexibility in our investment holding
periods. We are under no pressure to accelerate exits before assets
have reached their full potential. We will, of course, capitalise
on favourable exit and refinancing market conditions when they
arise. Across the Group, we received over GBP1.2 billion of cash
primarily via portfolio company realisations, refinancings and
dividends in the year.
Private Equity performance
Our Private Equity portfolio consists of companies across
northern Europe and North America with international operations
across four sectors: Business & Technology Services; Consumer;
Healthcare; and Industrial Technology. In the year to 31 March
2022, it generated a Gross Investment Return ("GIR") of 47% (2021:
30%), predominately driven by performance, with 93% of our
portfolio companies by value growing their adjusted earnings in the
12 months to December 2021. We remained consistent on our long-term
view on multiples, with multiple increases contributing just 6% to
Private Equity GIR.
Action
Our largest Private Equity portfolio company, Action, is a
leading non-food discount retailer operating in ten countries
across Europe. Action delivered a very strong result for its
financial year ending 2 January 2022, generating sales growth of
23% and operating EBITDA of EUR828 million, 36% ahead of the
previous year. This performance was achieved notwithstanding
Covid-19 restrictions and store closures that affected Action in
six out of 12 months in 2021, as well as widespread global supply
chain disruptions and inflationary pressures.
2021 was a record year in terms of store openings for Action, as
the business added 267 stores. Action's simple and repeatable
format, selling good quality but inexpensive products across 14
different categories, remains highly successful in both its
established and newer markets. Action is seeing strong trading from
seven pilot stores in Italy, opened in 2021, and four pilot stores
in Spain, opened in early 2022. The group now has over 2,000 stores
across 10 countries and plenty of expansion potential in existing
and adjacent countries.
An effective end-to-end supply chain is critical to Action's
growth strategy and, in 2021, Action strengthened its distribution
infrastructure with the addition of two new distribution centres
("DCs"), in Bratislava, Slovakia and in Bieruń, Poland, and opened
a new hub in Wroclaw, Poland. Action's DC network has the capacity
to serve c.2,400 stores, providing important spare capacity to
support further growth, whilst the addition of hubs, used to
coordinate the inbound freight, ensures efficient supply to the
DCs. Enhancements in Action's IT infrastructure and the ability to
directly source products have enabled better quality sourcing, more
supply chain control and improved the availability of products in
stores. The flexibility of Action's product range and its
significant buying power have allowed the business to effectively
manage price inflation, whilst carefully maintaining price distance
to competitors and ensuring value for money for its customers.
Action has made significant progress in the implementation of
its ambitious sustainability agenda. The company has set a number
of important targets relating to the responsible sourcing of some
materials, the transparency of labour conditions in its supply
chain, and importantly aims to have circularity plans in place for
all its categories by the end of 2022. It has also pledged to
reduce the emissions from its own operations by 50% by 2030, from a
baseline year of 2020.
The Board of Action appointed Hajir Hajji to the role of CEO
effective from 1 January 2022 and she has presided over a good
start to the year. In the three months to the end of Action's
period 3 ("P3") which ended on 3 April 2022, all stores were open
for most of the period and the business generated like-for-like
("LFL") sales growth of 28% and opened 30 new stores. Action's last
12 months ("LTM") EBITDA to P3 2022 was EUR932 million (31 March
2021: EUR602 million) showing the strength in recovery of the
group's trading since the severe Covid-19 restrictions in the first
three months of 2021. Action has not been directly impacted by
Russia's invasion of Ukraine and has no stores in that region.
Throughout the pandemic, Action has remained highly cash
generative due to its strong performance, asset-light model and
structurally negative working capital. As a result, Action paid an
interim dividend to shareholders of EUR325 million in December
2021, and a second dividend of EUR344 million in March 2022. After
paying the dividends, Action had a cash balance of EUR394 million
as at 31 March 2022 and a net debt to run-rate earnings ratio of
2.5x.
Healthcare portfolio companies
Over the last five years, we have increased our exposure to
healthcare assets, recognising the significant trends in health and
wellbeing spend, ageing populations and the increased importance of
the sector following the pandemic. The healthcare assets that we
have acquired often operate in highly fragmented markets and the
significant bolt-on activity in each of our businesses is providing
a foundation for considerable growth. Since our initial platform
investment in 2019 and subsequent buy-and-build activity, SaniSure
is now amongst the largest independent pure-play bioprocessing
consumables businesses in the market and delivered very strong
organic growth in 2021. Q Holding's medical business ("QMD") has
seen significant recent commercial momentum with strong sales in
its core products with existing customers, as well as significant
new customer wins in 2021. We continued to enhance Cirtec Medical
with the self-funded acquisition of Cardea Catheter Innovations,
further strengthening Cirtec Medical's interventional segment
following the previous acquisitions of Vascotube and NovelCath.
Over our five-year hold in Havea, we have developed one of the
leading European players in consumer healthcare through the
simplification of its brand portfolio, omnichannel development and
by executing a value accretive buy-and-build strategy. In 2021, the
business delivered a good result despite Covid-19 restrictions
impacting retail footfall and completed the self-funded acquisition
of ixX Pharma.
Consumer portfolio companies (excluding Action)
Our consumer businesses performed well. BoConcept delivered
record order intake in 2021, with strong performance across most
markets, particularly in Japan, as the business continues to
outperform growth in the market and benefit from increased spending
on the home. Operational improvements implemented since our initial
investment and effective pricing strategies have largely offset the
increased supply chain and transportation costs. The business
expanded its international footprint with a further 35 new stores
in 2021, taking the total number of brand stores to 326 across 67
countries.
Hans Anders mitigated Covid-19 restrictions in the first and
last quarter of 2021 through its omnichannel strategy and increased
operational efficiencies. Following the easing of restrictions in
the second and third quarters of 2021, sales rebounded quickly.
Trading in the first quarter of 2022 was robust with all stores
open. High customer demand, driven by a structural shift to online
channels, generated strong performance in the first half of 2021
for Luqom, whilst market headwinds, specifically supply chain
delays and rising inbound container prices, resulted in pressure on
performance in the second half of 2021. The business completed an
important transaction with the bolt-on acquisition of
Lampemesteren, one of the online market leaders in Scandinavia with
a particularly strong position in the premium segment of the
market.
Over the last two years, Covid-19 has presented an unprecedented
challenge to the travel industry, and in 2021 both Audley Travel
and arrivia faced difficult trading conditions. To support their
recovery, we provided additional liquidity to both businesses.
Encouragingly, in the first quarter of 2022, both saw an
improvement in bookings.
Industrial Technology portfolio companies
Our long-term minority investments in AES and Tato continue to
perform well and yield cash dividends for the Group. Tato continued
to see sustained demand for its core biocides products and
maintained its supply levels throughout the pandemic. The Covid-19
driven boost to disinfectant sales normalised through the second
half of 2021 with end markets now driven by conventional consumer
and industrial drivers. AES outperformed our expectations in the
year, driven by increased sales volume and efficient cost
control.
WP successfully navigated resin and other material price
increases with effective pricing strategies in 2021. The business,
which has an operating subsidiary in Russia that contributed c.17%
of its adjusted 2021 earnings, is actively working with our team on
options to deal with the situation in the short term. Formel D's
performance in 2021 was severely impacted by plant shutdowns due to
the semi-conductor shortage affecting automotive production.
Private Equity investment
We invested GBP335 million in six new portfolio companies. Three
of these were in the consumer sector, including the GBP87 million
investment in Mepal, the GBP46 million investment in Dutch Bakery
and the GBP43 million investment in Yanga. These are distinctive
consumer companies with strong customer propositions and
international growth potential. As part of our thematic Business
& Technology Services investment strategy, we invested GBP53
million in MAIT, a leading IT services provider that benefits from
the digitalisation of SME customers in the manufacturing industries
in the DACH region, with a proven M&A platform to drive
consolidation in a highly fragmented market.
Our experience and network in the healthcare sector enables us
to identify investment opportunities away from the typical
processes that are currently commanding very high valuation
multiples. In May 2021, we adopted an innovative approach in
forming a new platform, ten23 health, to create a contract
development and manufacturing organisation ("CDMO"), which provides
an integrated offering for sterile drug product development and
manufacturing of biologics, challenging molecules and dosage forms.
Throughout the remainder of the financial year, we continued to
support the growth initiatives of this platform and completed the
transformational bolt-on acquisition of Swissfillon, a drug product
fill and finish CDMO. To date, we have invested GBP69 million in
the ten23 health platform. In November 2021, we also completed a
GBP37 million co-investment in insightsoftware, the company that
acquired Magnitude Software.
Building value through international roll-outs or bolt-on
acquisitions is fundamental to our investment and value creation
strategy. In the year, we completed several self-funded bolt-on
acquisitions across various stages of the investment lifecycle,
including three for MAIT and one for Dutch Bakery, within 12 months
of the completion of our original investment. We also completed
acquisitions for more established businesses such as Luqom, Cirtec
Medical, Havea, Evernex, Hans Anders, AES and Royal Sanders. We
also funded a transformational bolt-on acquisition for GartenHaus
with the acquisition of Outdoor Toys, a UK-based online retailer of
outdoor garden toys, investing GBP45 million of 3i proprietary
capital.
Further details on our Private Equity investment activity can be
found in the Private Equity section.
Private Equity realisations
Private assets continued to command favourable exit valuations,
with a particularly strong demand for technology assets. We
generated realisation proceeds of GBP684 million in the year.
Following our investment in Magnitude Software in May 2019, we
supported several new product launches, the transition from
on-premises to cloud software solutions and investments in sales
and marketing which increased Magnitude Software's organic growth
rate. With the business well positioned and a favourable market
backdrop, we completed its sale in November 2021, returning GBP346
million of proceeds to 3i, representing a 109% uplift on 31 March
2021 value. The sale achieved a sterling money multiple of 2.5x and
IRR of 44%, a very strong return after a holding period of only two
and a half years.
When market conditions and trading performance allow, we may
refinance our assets. Following refinancings in the year, Royal
Sanders and BoConcept returned proceeds to 3i of GBP84 million and
GBP73 million respectively.
We also capitalised on a recovery in public markets in November
2021 with the partial sale of our stake in Basic-Fit at EUR44.25
per share, generating proceeds of GBP146 million, meaning our money
multiple, including the value of our remaining stake at 31 March
2022, is 5.4x.
At the start of April 2022, we agreed the sale of Q Holding's
QSR division, a leading developer and manufacturer of electrical
connector seals, to Datwyler for an enterprise value of US$625
million. We expect to receive proceeds of c.US$255 million in the
first half of FY2023. The valuation of Q Holding at 31 March 2022
of GBP398 million (31 March 2021: GBP187 million) includes the
expected sale proceeds from QSR and our remaining value of Q
Holding's QMD business, and means our money multiple for the
overall business is 2.5x, with plenty of runway for further value
generation in QMD.
Further details on our Private Equity realisation activity can
be found in the Private Equity section.
Infrastructure performance
Our Infrastructure portfolio generated a GIR of GBP241 million,
or 21% on the opening value (2021: GBP178 million, 16%). This
strong return was driven principally by the increase in share price
of the Group's 30% holding in 3iN, whose shares closed at 347 pence
at 31 March 2022 (31 March 2021: 296 pence). The Infrastructure
business generated strong cash income of GBP91 million (2021: GBP67
million) as a result of good underlying investment activity and
performance.
3iN's investment portfolio outperformed expectations in the year
to 31 March 2022. As a result, 3iN generated a total return on
opening NAV of 17.2% and delivered its dividend target of 10.45
pence, a 6.6% increase on last year.
As 3iN's Investment Manager, we have overseen a period of
significant investment activity, whilst maintaining our price
discipline in a highly competitive asset class. During the year,
the 3iN team completed the acquisitions of DNS:NET, an independent
telecommunications provider in Germany, for GBP190 million and of
SRL Traffic Systems, the market leading traffic management
equipment rental company in the UK, for GBP191 million. The team
also increased 3iN's stake from 50% to 100% in 3iN's existing
portfolio company ESVAGT and agreed to acquire Global Cloud Xchange
("GCX"), a leading global data communications service provider
which owns one of the world's largest private subsea fibre optic
networks. Whilst the investment hold horizon is typically longer in
the infrastructure asset class, we will sell an investment where
this generates attractive returns for shareholders. This year saw
the divestment by 3iN of Oystercatcher's four European terminals,
increasing Oystercatcher's unrealised money multiple to 3.1x.
The underlying 3iN portfolio has no operations in or direct
revenues from Russia or Ukraine and to date the indirect impacts on
portfolio companies has been limited.
In North America, we have now secured commitments from two
third-party blue-chip investors, who have co-invested in Regional
Rail and EC Waste and will make further investments alongside 3i in
its North America Infrastructure platform. As part of these
arrangements, 3i committed US$300 million into the platform and we
received GBP161 million of realised and syndication proceeds from
the co-investment transfers of EC Waste and Regional Rail. We
believe this platform provides the Group with an opportunity to
build on its experience in a market that has significant growth
potential.
Scandlines performance
Scandlines performed well in the year generating a GIR of 26%
(2021: 6%). Freight volumes were consistently strong, finishing
ahead of 2019 levels. Leisure volumes showed some signs of recovery
but remained below 2019 levels as travel restrictions remained in
place between Sweden, Denmark and Germany in the first part of the
peak trading season of 2021 and, following the emergence of another
Covid-19 variant, at the end of 2021. As a result of good cash
management throughout the pandemic, Scandlines was able to resume
its cash distributions in December 2021, and 3i recognised GBP13
million of dividends in the year.
Progress on our sustainability agenda
FY2022 was an important year in progressing our sustainability
agenda. In recognition of the importance of the management of
sustainability issues for the Group and our portfolio, we set up a
formal ESG Committee, with membership drawn from across the
business, to advise me, directly and through the Group Risk and
Investment Committees, on all ESG-related matters. Since its
creation this committee has focused in particular on developing
strategy, policy and governance for assessing and managing
climate-related risks and opportunities across the Group and its
portfolio, a topic of increasing urgency and prominence in society
and a focus area of governments and regulators and our
stakeholders.
As part of this, the ESG Committee has been working on preparing
the Group for reporting in alignment with the TCFD framework by the
2024 deadline set by the FCA for asset managers such as 3i, which
will require us to expand our current TCFD reporting to include
portfolio emissions metrics. To this end, in January 2022 we
started an engagement with EY's sustainability practice to
establish a roadmap to achieve alignment, refine our process for
ESG data collection and perform a first climate scenario analysis
to advance our understanding of climate-related risks and
opportunities in our portfolio companies.
We are now working on a number of initiatives that we have
already set in train. These include:
-- Investment assessment : we are refining our investment
screening process to include an earlier assessment of climate risks
and opportunities, with third-party input where required.
-- Data : we are now completing the process of collecting
greenhouse gas ("GHG") emissions data from our portfolio companies
and improving our processes and tools to ensure that this data can
be easily analysed. Our objective is to measure the carbon
footprint of our entire portfolio by the end of FY2023, to
facilitate TCFD reporting by 2024. This data will also allow us to
improve our engagement with portfolio companies on this topic and
set appropriate targets.
-- Scenario analysis : we are carrying out our first climate
scenario analysis for the entirety of our portfolio, to help us
assess the impacts on portfolio companies of different climate
warming scenarios. We will iterate these analyses periodically to
help us better understand and manage the impact of climate change
on our portfolio companies.
-- Skills and training : we are organising bespoke training
programmes on climate change physical and transition risks and
opportunities, with the objective of equipping everyone in 3i with
the knowledge required to assess and manage these
appropriately.
We will continue to manage climate change with the necessary
urgency. For further information on what we have done to date and
what we have planned in the immediate future, please refer to our
TCFD disclosures.
During the Covid-19 pandemic, we have continued to work closely
with our portfolio companies to ensure the safety and wellbeing of
their employees and to manage the range of operational issues they
have faced as a result of public health measures, and we have
provided financial support where required. The GBP5 million
Covid-19 charitable fund we set up in May 2020 to alleviate the
hardships suffered by many as a result of the pandemic has now been
fully deployed across the countries where we and our investment
teams operate.
3i portfolio companies' support for the humanitarian crisis in Ukraine
Action: donated EUR1 million to UNICEF. In addition, Action offered
the use of its Polish warehouses and logistics to provide supplies and
supported Polska Akcja Humanitarna. In the Czech Republic, Action's
staff worked closely with People in Need to provide support.
BoConcept: supported people affected by the conflict by matching their
employees' donations up to EUR100,000, with the aim of raising EUR200,000
to donate to the UN Refugee Agency (UNHCR).
Christ: donated EUR50,000, split between Aktion Deutschland Hilft e.V.'s
Ukraine Emergency Aid project and the regional organisation Gesellschaft
BochumDonetsk e.V. The latter organisation was chosen because Bochum
is where Christ's logistics department is located and the city is partnered
with Donetsk in Ukraine.
GartenHaus: matched employees' donations to the Csilla von Boeselager
Stiftung Otseuropahilfe e.V., which has been providing emergency aid
in Ukraine for 20 years and operates in Lviv, Beregovo and Zaporizhia.
Havea: donated 100,000 Biolane baby hygiene products, including wipes
and washing gel, for distribution to Ukrainian refugees. A second convoy
of 40 pallets was donated to organisations hosting refugee families
in France.
Scandlines: is offering free transport on its ferries to Ukrainian
passport holders.
ten23 health : supported the Swiss charity HEKS/ EPER (Swiss Church
Aid), which provides humanitarian aid to civilians in Ukraine and those
fleeing the country. The charity also supports Ukrainian refugees in
Switzerland.
3i Group's support for the humanitarian crisis in Ukraine
In March 2022, we donated GBP1 million split equally between UNICEF
and the Médecins Sans Frontières/ Doctors Without Borders
("MSF") Emergency Fund.
UNICEF is working with partners on the ground in Ukraine to reach vulnerable
children and families with essential services - including health, education,
protection, water and sanitation - as well as lifesaving supplies.
MSF provides medical assistance to people affected by conflict, epidemics,
disasters, or exclusion from healthcare.
MSF's Emergency Fund is an annual financial reserve that allows the
organisation to react quickly in emergencies, with an aim of being on
the ground within 48 hours.
Our people
It has been a challenging few years for our team and throughout
the pandemic we have focused on protecting the wellbeing of our
employees and contractors. In September 2021 we implemented a
hybrid working model which supports a strong collaborative culture
while providing employees with a degree of flexibility to manage
non-work commitments and improve their quality of life. I would
like to record a big thank you to the 3i team and the teams in our
portfolio companies for working through the last few years so
well.
We have seen some changes in key personnel this year. James
Hatchley will succeed Julia Wilson as Group Finance Director at the
end of June 2022 and Jasi Halai, currently Group Financial
Controller, will become Chief Operating Officer. They will join the
Board in May 2022.
We promoted Julien Marie, currently HR Director, to Chief Human
Resources Officer. He joined the Executive Committee in April 2022.
Phil White will step down as Managing Partner and Head of
Infrastructure and member of the Executive Committee at the end of
June 2022, remaining with the business on a part-time basis as Vice
Chair of Infrastructure and member of the Group's Investment
Committee. Scott Moseley and Bernardo Sottomayor will succeed him
as Managing Partners and Co-Heads of European Infrastructure, and
will join 3i Group's Executive and Investment Committees, effective
1 July 2022.
We have also seen a marked pick-up in hiring approaches from
competing investment firms targeting our investment and
professional services teams. This activity has resulted from asset
gathering firms in the private equity and infrastructure investment
sectors seeking to grow at a very rapid pace, often with a view to
becoming a listed company. We have had to respond to these
approaches by ensuring that careers and compensation at 3i remain
attractive and competitive for the talented individuals we have
working in the Group.
Operations and balance sheet
Cost discipline across the Group remains central to our
long-term strategy and, in FY2022, we continued to cover our costs
with income, generating an operating cash profit of GBP340 million
in the year, or GBP56 million excluding the GBP284 million of cash
dividends received from Action, which were recognised as
income.
We ended FY2022 with net debt of GBP746 million and 6% gearing,
after returning GBP389 million of cash dividends to shareholders in
the year. We close our financial year with liquidity, including our
undrawn RCF, of GBP729 million, meaning we can move fast when
suitable investment opportunities arise.
Our ten-year track record
Since our restructuring in June 2012, we have focused on
investing our proprietary capital to deliver sustainable growth and
long-term compounding of value from our portfolio companies. This
approach is underpinned by a robust investment strategy focused on
the identification of long-term growth trends across our sectors
and geographies. This strategy has been executed well by our
international investment teams and through the tight central
control of the Group's Investment Committee. Price discipline,
active asset management and careful cost control have been the
hallmarks of the 3i approach since 2012.
Both Julia Wilson and Phil White have been key members of the 3i
team and I am indebted to both for their significant contributions
since the restructuring in 2012. Both have reached the pinnacle of
their respective disciplines and I wish them well in the next phase
of their lives. While they will both be much missed, we have some
very capable internal promotees to step into their shoes.
2012 2022
========================== ======== ======================== =========
22% average total return
NAV per share 279p on equity 1,321p
Dividend growth 8.1p 19% CAGR 46.5p
Proprietary capital value GBP3.2bn 4.5x increase GBP14.3bn
Operating costs as a
% of AUM 1.7% 65% reduction 0.6%
-------------------------- -------- ------------------------ ---------
Outlook
We have entered our new financial year acutely aware of the
political and macro-economic challenges the world is facing, but we
do this from a position of strength.
-- Our teams are experienced and well-embedded in their local
markets across northern Europe and North America.
-- Our processes are carefully designed and disciplined which
allows us to react fast to sudden or sharp changes in markets or
the broader environment.
-- Our portfolio is well constructed from a thematic, geographic
and sector perspective and has demonstrated clear resilience over
the last few years. We asset manage in the knowledge that we have
assembled today's portfolio with real price discipline and we have
not over-bought recent highly-priced vintages.
In Action we have a formidable retail company that will continue
to grow and thrive in today's challenging environment. We also have
a number of healthcare and consumer assets which have the potential
to become significant longer-term compounders for the Group.
Simon Borrows
Chief Executive
11 May 2022
Private Equity
At a glance
Gross investment return
GBP4,172m
or 47%
(2021: GBP1,936m or 30%)
Cash investment
GBP457m
(2021: GBP508m)
Realised proceeds
GBP684m
(2021: GBP114m)
Portfolio growing earnings
93%(1)
(2021: 87%)
Portfolio value
GBP12,420m
(2021: GBP8,814m)
Portfolio dividend income
GBP331m
(2021: GBP53m)
We invest in mid-market businesses headquartered in northern
Europe and North America with potential for international growth.
Once invested, we work closely with our portfolio companies to
achieve their full potential, realising our investments to deliver
strong cash-to-cash returns for 3i shareholders and other
investors.
In the year to 31 March 2022, our Private Equity portfolio
delivered a GIR of GBP4,172 million or 47% on the opening portfolio
value (2021: GBP1,936 million or 30%) and the portfolio value
increased to GBP12,420 million (31 March 2021: GBP8,814 million).
This excellent result demonstrates the portfolio's resilience to
the pandemic and its ability so far to mitigate disruption to
global supply chains and inflationary pressures. 93% of our
portfolio by value grew adjusted earnings to the end of 2021, with
particularly robust performance from Action and our other assets
operating in the consumer and healthcare sectors. Our portfolio
companies grew organically and also completed 15 bolt-on
acquisitions, including two transformational acquisitions. We made
six new investments in FY2022 and ended the year as net divestors.
As we enter FY2023, whilst the direct impact of Russia's invasion
of Ukraine on our portfolio is limited, we continue to monitor its
impact on the broader political and economic environment.
The contribution of Action to the Private Equity performance is
detailed in Note 1 of the financial statements.
1 LTM adjusted earnings to 31 December 2021. Includes 28
portfolio companies.
Table 1: Gross investment return for the year to 31 March
2022 2021
Investment basis GBPm GBPm
----------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 228 29
Unrealised profits on the revaluation of investments 3,545 2,161
Dividends 331 53
Interest income from investment portfolio 73 55
Fees receivable 6 9
Foreign exchange on investments (11) (371)
----------------------------------------------------------- ----- -----
Gross investment return 4,172 1,936
----------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 47% 30%
----------------------------------------------------------- ----- -----
Investment activity
Acquisition multiples in 2021 across the US and Europe remained
high, reflecting fierce competition in private markets, with the
increase in pricing of healthcare and technology assets even more
pronounced. We remained selective and disciplined, deploying GBP335
million of our capital in six new portfolio companies with an
average initial investment size of GBP56 million. This is lower
than our typical average investment size but is part of a
deliberate strategy to avoid the more competitive processes we see
for larger investments. These new assets are all capable of
building scale through bolt-on acquisitions and further
internationalisation.
Between May and October 2021 we invested initial capital in
ten23 health to fund its start-up spend, before completing the
transformational acquisition of Swissfillon in October 2021,
bringing our total invested capital to GBP69 million in the year.
We invested GBP53 million in MAIT, an IT services provider catering
to larger SME clients across the DACH region, operating in a market
segment with structural growth potential and momentum from
digitalisation. In October 2021, we invested GBP46 million in Dutch
Bakery to drive the company's international growth strategy in the
fragmented European private label market for bake-off products,
whilst supporting the business in its continued investment in its
home markets. In December 2021, we completed the GBP87 million
investment in Mepal to continue the international expansion of this
successful consumer brand known for its high-quality products for
storing, take-away and serving food and drink whilst building on
its current core markets, most notably the Netherlands, Belgium and
Germany, and strong online performance.
In January 2022, we invested GBP43 million in Yanga, a sports
drink provider operating in the attractive value-for-money fitness
space, to support its international growth and expansion into North
America. In November 2021, we also completed a GBP37 million
co-investment in insightsoftware, the company that acquired
Magnitude Software.
We continued to execute our buy-and-build strategy more
generally with 15 acquisitions completed by our portfolio
companies. These create material value by adding scale, as well as
broadening the product range and geographical reach while
generating synergy opportunities for our portfolio companies. Two
of these transactions were transformational in size: ten23 health's
acquisition of Swissfillon, and the acquisition of Outdoor Toys by
GartenHaus. The remaining 13 bolt-on acquisitions listed below were
self-funded.
We invested GBP81 million in Luqom to buy out minority holdings
and provide further investment for the next stage of its growth as
well as for M&A. We provided additional funding of GBP25
million and GBP30 million to Audley Travel and arrivia respectively
to support their recoveries from the pandemic. We also completed a
GBP12 million further investment in Christ as part of the
successful extension of its debt package.
As a result of a refinancing, and within 12 months of our
investment in Sani-Tech West, SaniSure returned GBP59 million of
3i's proprietary capital. Similarly, WilsonHCG returned GBP13
million of investment.
In total, in the year to 31 March 2022, our Private Equity team
invested GBP529 million across new, bolt-on and further
investments, or a net GBP457 million after the return of funding of
GBP72 million.
Portfolio company Name of acquisition Business description of Date
bolt-on investments
-------------------------- ----------------- --------------------------- -------------------------- --------------
Private Equity portfolio Luqom + Lampemesteren Online retailer of premium April 2021
bolt-ons - funded by the lighting products in the
portfolio company balance Nordic region
sheets
-------------------------- ----------------- --------------------------- -------------------------- --------------
Cirtec Medical + Cardea Catheter Contract manufacturer July 2021
Innovations specialising in the design
and development of
catheter systems
-------------------------- ----------------- --------------------------- -------------------------- --------------
Havea + ixX Pharma Independent player in the September 2021
Belgian premium food
supplement segment
----------------- --------------------------- -------------------------- --------------
Dutch Bakery + Goodlife Foods Deurne Leading production October 2021
facility specialised in
the production of sausage
rolls
----------------- --------------------------- -------------------------- --------------
Evernex + Emcon-IT US player in the October 2021
third-party hardware
maintenance industry
----------------- --------------------------- -------------------------- --------------
AES + JAtech Services Canada-based asset November 2021
condition monitoring
specialist
----------------- --------------------------- -------------------------- --------------
Hans Anders + Eyes! NV and Eyes Society Belgian franchisee for December 2021
BV Eyes+More
----------------- --------------------------- -------------------------- --------------
SaniSure + GL Engineering Manufacturer of single-use December 2021
filling needles for use in
the fill & finish stage of
production
----------------- --------------------------- -------------------------- --------------
MAIT + Infolutions Swiss-managed services January 2022
provider with a focus on
infrastructure monitoring
----------------- --------------------------- -------------------------- --------------
MAIT + Scirotec German provider of PTC PLM January 2022
solutions
----------------- --------------------------- -------------------------- --------------
Royal Sanders + Otto Cosmetic German manufacturer of February 2022
private label and contract
manufacturing products for
the personal
care industry
----------------- --------------------------- -------------------------- --------------
WilsonHCG + Claro Analytics Talent analytics provider February 2022
that analyses candidate
data to help enterprises
with workforce
planning
----------------- --------------------------- -------------------------- --------------
MAIT + Cytrus Swiss-based product March 2022
lifecycle management
provider
-------------------------- ----------------- --------------------------- -------------------------- --------------
Proprietary
Capital
investment
Portfolio company Business description Date GBPm
--------------- ------------------ --------------------------------------------------- --------------- -----------
Dutch lifestyle consumer brand known for designing
and manufacturing food and drink storage
New investment Mepal and serving solutions December 2021 87
--------------- ------------------ --------------------------------------------------- --------------- -----------
ten23 health1 Pharmaceutical product CDMO Various 69
------------------ --------------------------------------------------- ------------------------------- -----------
IT services provider of PLM & ERP software
applications and IT infrastructure solutions for
MAIT larger SME clients in the DACH region September 2021 53
------------------ --------------------------------------------------- ------------------------------- -----------
Industrial bakery group specialised in home
Dutch Bakery bake-off bread and snack products October 2021 46
------------------ --------------------------------------------------- ------------------------------- -----------
Yanga Sports drink provider for gym operators January 2022 43
------------------ --------------------------------------------------- ------------------------------- -----------
Provider of financial reporting and enterprise
performance management software for the
insightsoftware office of the CFO November 2021 37
------------------ --------------------------------------------------- ------------------------------- -----------
Total new investment 335
---------------------------------------------------------------------------------------- -----------
1 Includes the transformational bolt-on acquisition of
Swissfillon.
Proprietary
Capital
Name of investment
Business Date GBPm
description of
Portfolio company acquisition bolt-on investments
-------------------------------------- ------------------ ------------------- -------------- ------------
Further investment UK-based online
to finance retailer of
portfolio bolt-on outdoor garden
acquisitions GartenHaus + Outdoor Toys toys October 2021 45
------------------- ------------------ ------------------- ------------------- -------------- -----------
Total further investment to finance portfolio bolt-on acquisitions 45
---------------------------------------------------------------------------- -----------
Proprietary
Capital
investment
Portfolio company Business description Date GBPm
---------------------- ------------------ ---------------------------------------------- ------------- -----------
Further investment
to support portfolio
companies Audley Travel Provider of experiential tailor-made travel October 2021 25
------------------ ---------------------------------------------- ------------- -----------
Global travel and loyalty company that
connects leading brands, travel suppliers and
arrivia end consumers March 2022 30
------------------ ---------------------------------------------- ------------------------------------ -----------
Total further investment to support portfolio companies 55
--------------------------------------------------------------------------------- -----------
Proprietary
Capital
investment
Portfolio company Type Business description Date GBPm
----------------- ------------------ -------- ------------------------------------- -------------- ------------
Other investment Luqom Further Online lighting specialist retailer Various 81
----------------- ------------------ -------- ------------------------------------- --------------- -----------
German retailer of jewellery and
Christ Further watches November 2021 12
------------------ -------- ------------------------------------- --------------- -----------
Other Further Various Various 1
------------------ -------- ------------------------------------- --------------- -----------
Total other investment 94
------------------------------------------------------------------------------------ -----------
Total FY2022 Private Equity gross investment 529
--------------------------------------------- ---
Proprietary
Capital
investment
Portfolio company Type Business description Date GBPm
------------------ ------------------ ------------ ------------------------------------ ---------- ------------
Global provider of recruitment
Return process outsourcing and other
Return of funding WilsonHCG of funding talent solutions Various (13)
------------------ ------------------ ------------ ------------------------------------ ----------- -----------
Manufacturer, distributor and
integrator of single-use
Return bioprocessing systems and
SaniSure of funding components July 2021 (59)
------------------ ------------ ------------------------------------ ----------- -----------
Total return of funding (72)
----------------------------------------------------------------------------------- -----------
Total FY2022 Private Equity net investment 457
------------------------------------------- ---
Realisation activity
In the year we completed the sale of Magnitude Software,
returning GBP346 million of realised proceeds to 3i, achieving a
sterling money multiple of 2.5x and an IRR of 44% after only a two
and a half year hold. We also capitalised on a recovery in equity
markets in November 2021, with the partial sale of our shares in
Basic-Fit for EUR44.25 per share, generating proceeds of GBP146
million. We retain a 5.7% holding in the business.
We continue to refinance our most cash generative assets where
appropriate for the business and when the market allows. We
completed refinancing for Royal Sanders and BoConcept, returning
GBP80 million (as well as GBP4 million recorded as income) and
GBP73 million of realised proceeds respectively. BoConcept also
returned a further GBP17 million earlier in the year following the
partial repayment of a shareholder loan. Finally, we received GBP22
million of proceeds from our legacy portfolio.
In aggregate, we generated total Private Equity proceeds of
GBP684 million (2021: GBP114 million) and realised profits of
GBP228 million (2021: GBP29 million).
At the start of April 2022, we agreed the sale of Q Holding's
QSR division, a developer and manufacturer of electrical connector
seals, to Datwyler for an enterprise value of US$625 million. We
expect to receive proceeds of c.US$255 million in H1 FY2023.
Table 2: Private Equity realisations in the year to 31 March
2022
31 March Profit Uplift on
Calendar 2021 3i realised in the opening Residual
year value1 proceeds year value2 value Money
Investment Country invested GBPm GBPm GBPm % GBPm multiple3 IRR
------------------------ ------------ --------- -------- ----------- ------ --------- -------- --------- ---
Full realisations
Magnitude Software US 2019 165 346 180 >100% - 2.5x 44%
Other n/a n/a 1 2 1 100% - n/a n/a
------------------------ ------------ --------- -------- ----------- ------ --------- -------- --------- ---
Total realisations 166 348 181 - 2.5x 44%
------------------------------------------------- -------- ----------- ------ --------- -------- --------- ---
Refinancings1,3
BoConcept Denmark 2016 73 73 - - 184 2.4x 16%
Royal Sanders Netherlands 2018 80 80 - - 297 3.1x 36%
------------------------ ------------ --------- -------- ----------- ------ --------- -------- --------- ---
Total refinancings 153 153 - - 481 n/a n/a
------------------------------------------------- -------- ----------- ------ --------- -------- --------- ---
Partial realisations1,3
Basic-Fit Netherlands 2013 110 146 37 33% 129 5.4x 40%
BoConcept Denmark 2016 17 17 - - 184 2.4x 16%
Other n/a n/a 10 10 - - n/a n/a n/a
Deferred consideration
Eltel Nordic 2007 - 10 10 n/a - n/a n/a
------------------------ ------------ --------- -------- ----------- ------ --------- -------- --------- ---
Total Private Equity realisations 456 684 228 - n/a n/a n/a
-------------------------------------- --------- -------- ----------- ------ --------- -------- --------- ---
1 For partial realisations, 31 March 2021 value represents value of stake
sold.
2 Profit in the year over opening value.
3 Cash proceeds over cash invested. For partial realisations and refinancings,
valuations of any remaining investment are included in the multiple.
Money multiples are quoted on a GBP basis.
Portfolio valuation approach
To varying degrees, our portfolio companies had to respond to
supply chain disruption, commodity price increases, other
inflationary pressures and Covid-19 travel restrictions in FY2022.
Against this backdrop the majority of our portfolio companies
demonstrated great resilience and adaptability and continued to
meet their investment plans. Therefore, our longer-term investment
view on those portfolio companies has not changed and our valuation
approach has remained consistent. For a small number of assets that
remained challenged due to Covid-19, we sought to gather a broader
range of inputs, considered different methodologies and applied
further judgement. We valued earnings directly attributable to
Russian operations at nil as at 31 March 2022.
Our Private Equity portfolio generated an unrealised profit of
GBP3,545 million (2021: GBP2,161 million).
Action valuation and performance
In the 12 months to the end of Action's P3 2022 (which ended on
3 April 2022), Action delivered very strong earnings growth and
cash generation and continued its international store roll-out.
This was reflected in the GBP2,655 million (March 2021: GBP1,202
million) unrealised profits shown in Table 3. As the largest
Private Equity investment by value, it represented 58% of the
Private Equity portfolio (31 March 2021: 52%). Further information
on Action's performance in the period is provided in the Chief
Executive's statement.
At 31 March 2022, Action was valued using its LTM run-rate
earnings to the end of P3 2022 of EUR1,012 million. The LTM
run-rate earnings included our normal adjustment to reflect stores
opened in the year. At 31 March 2022, Action was valued on a
multiple of 18.5x net of the liquidity discount (31 March 2021:
18.5x). This resulted in a valuation of our 52.7% stake in Action
of GBP7,165 million (31 March 2021: GBP4,566 million).
Performance (excluding Action)
Excluding Action, the performance of investments valued on an
earnings basis resulted in unrealised profits of GBP483 million
(March 2021: GBP536 million), driven by strong earnings growth and
cash generation across the portfolio, with particularly robust
performance from our companies operating in the healthcare and
consumer sectors.
Following our initial platform investment in 2019, SaniSure
delivered strong earnings growth in 2021 as the business
capitalised on the double-digit growth of the bioprocessing
single-use market, with a robust order book supporting innovative
therapeutic modalities. The business is well positioned for
sustained growth into 2022 and beyond as it strives for operational
excellence and supply chain enhancement. The QMD business of Q
Holding benefited from an increase in elective surgical procedures
in 2021 and secured significant new product wins that will drive
strong organic growth in 2022. Further information on the valuation
of its QSR business is detailed under sum of the parts heading
later in this section. Cirtec Medical delivered new wins across its
end markets and capabilities, positioning the business for
sustained growth as procedure volumes recover and customers
re-stock their inventories. The bolt-on acquisition of Cardea
Catheter Innovations in the year further expanded its end market
exposure. Despite Covid-19 impacting retail footfall, the strength
of Havea's brands drove good organic growth in 2021, whilst the
business continued its omnichannel development and international
expansion with the bolt-on acquisition of ixX Pharma.
BoConcept generated strong earnings growth and cash flow in
2021, driven by existing store sales growth across almost all
markets and 35 new store openings. Through effective pricing
strategies, utilising its strong relationship with existing
suppliers and by diversifying its supplier base, the business has
largely mitigated the increased raw material and transportation
costs and supply chain constraints seen in its industry. Hans
Anders largely mitigated reduced footfall in the first and last
quarter of 2021 through its online appointment booking tool and
higher conversion rates. When Covid-19 restrictions eased in the
second and third quarter of 2021, sales quickly rebounded. As a
value-for-money optical retailer, Hans Anders' price positioning is
below that of its major competitors and its tight cost control has
enabled it to manage inflationary pressures. Following a very
strong performance in 2020, Luqom 's strong trading momentum
continued into the first half of 2021 as consumer demand for
lighting products online remained robust against a backdrop of
ongoing Covid-19 related restrictions. The second half of 2021 saw
headwinds on performance predominately driven by supply chain
disruptions and rising inbound container prices. Luqom completed
its second bolt-on acquisition since our initial investment, with
the purchase of Lampemesteren, an important acquisition from a
market share and international expansion perspective, particularly
in the premium segment.
Tato delivered strong performance in 2021 with continued demand
for its core biocide products. Given Tato's biocides speciality
focus, scale and strong global diversification of both production
and customers, the business is managing input price inflation with
effective pricing strategies. AES generated strong earnings growth
from increased sales volumes combined with efficient cost control.
The business also strengthened its geographical footprint in North
America following the acquisition of JAtech Services in November
2021. Both Tato and AES were cash generative in the year and
distributed dividends to 3i of GBP18 million in total. Dynatect
generated earnings that materially outperformed pre-pandemic levels
driven by market recovery and strong performance on pricing, which
offset inflationary pressures from materials. MPM performed well in
both its core markets and in its international expansion, with
particularly strong performance in the US. WilsonHCG continues to
benefit from strong labour markets globally as we emerge from the
pandemic.
Over the last 24 months, the pandemic has presented an
unprecedented challenge to the travel industry. arrivia, our
travel-based loyalty services specialist, has been fairly resilient
throughout the pandemic and in 2021 the business saw a noticeable
recovery in bookings for hotels, resorts, air travel and car
rentals, interrupted periodically by various new Covid-19 variants
and restrictions. Leisure cruising, arrivia's primary market,
remained challenged with 2021 bookings returning to just over a
third of 2019 levels. Audley Travel 's performance throughout 2021
closely mirrored Covid-19 incidence rates and Government policy
across its US and UK markets. As restrictions have eased, we have
seen an encouraging recovery in bookings. To support both
businesses through this recovery, we invested a further GBP25
million in Audley Travel and GBP30 million in arrivia in the
year.
WP recorded a solid performance in 2021, despite inflationary
pressures on various input materials and energy costs and subdued
demand in certain personal care products as a result of Covid-19.
It mitigated resin price increases through effective pricing
strategies. The business, which has an operating subsidiary in
Russia that contributed c.17% of its adjusted 2021 earnings, is
actively working with our team on options to deal with the
situation in the short term. Those earnings attributable to Russia
have been excluded from the valuation of WP at 31 March 2022. Our
valuation of Formel D at 31 March 2022 reflects the challenges the
business continues to face as a result of semiconductor shortages
and automotive market impacts from the Ukraine crisis. Formel D has
a small exposure to Russia mostly via testing facilities which are
currently being discontinued.
Table 3: Unrealised profits on the revaluation of Private Equity
investments(1) in the year to 31 March
2022 2021
GBPm GBPm
----------------------------------------- ----- -----
Earnings based valuations
Action performance 2,655 1,067
Action multiple - 135
Performance (excluding Action) 483 536
Multiple movements (excluding Action) 241 408
Other bases
Sum of the parts 132 -
Discounted cash flow 7 (101)
Other movements on unquoted investments 2 3
Quoted portfolio 25 113
---------------------------------------- ----- -----
Total 3,545 2,161
----------------------------------------- ----- -----
1 Further information on our valuation methodology, including
definitions and rationale, is included in the Portfolio valuation -
an explanation section in our Annual report and accounts 2022.
Overall, 93% of the portfolio by value grew LTM adjusted
earnings in the year (2021: 87%). Table 4 shows the earnings growth
of our top 20 assets.
Table 4: Portfolio earnings growth of the top 20 private
equity(1) investment
3i value
at 31 March 2022
Number of companies GBPm
======= ==================== =================
<0% 4 777
0-9% 4 1,453
10-19% 3 1,254
20-29% 1 269
>=30% 8 8,224
======= ==================== =================
1 Includes top 20 Private Equity companies by value. This represents 96% of the Private Equity
portfolio by value (31 March 2021: 98%).
Last 12 months' adjusted earnings to 31 December 2021 and Action based on LTM run-rate earnings
to the end of P3 2022.
Leverage
Leverage across the portfolio decreased to 3.3x earnings (31
March 2021: 3.9x) or increased to 4.6x excluding Action (31 March
2021: 4.3x).
Table 5 shows the ratio of net debt to adjusted earnings by
portfolio value.
Table 5: Ratio of net debt to adjusted earnings(1)
3i value
at 31 March 2022
Number of companies GBPm
===== ==================== =================
<1x - -
1-2x 1 448
2-3x 4 7,595
3-4x 6 1,094
4-5x 7 1,121
5-6x 3 994
>6x 3 236
===== ==================== =================
1 This represents 92% of the Private Equity portfolio by value (31 March
2021: 88%). Quoted holdings, deferred consideration and companies
with net cash are excluded from the calculation. Net debt and adjusted
earnings at 31 December 2021 and Action based on LTM run-rate earnings
to the end of P3 2022.
Multiple movements
The increase in value due to multiple movements was GBP241
million (2021: GBP543 million). When selecting multiples to value
our portfolio companies, we consider a number of factors including
recent performance and outlook, comparable recent transactions and
exit plans, and monitor external equity markets.
Global equity markets saw a strong recovery through 2021 driven
by favourable monetary policy, fiscal stimulus and the global
deployment of Covid-19 vaccines. The emergence of Covid-19 variants
at the end of 2021 and Russia's invasion of Ukraine resulted in
increased volatility in global equities in the first three months
of 2022. Such unpredictable movements reinforce our strategy of
taking a long-term view on the multiples used to value our
portfolio companies.
We increased the valuation multiples for some of our portfolio
companies that have grown organically or through recent
acquisitions and operate in sectors that have benefited from
positive market trends.
There was no change to the multiple used to value Action at 31
March 2022. Based on the valuation at 31 March 2022, a 1.0x
movement in Action's post-discount multiple would increase or
decrease the valuation of 3i's investment by GBP451 million.
DCF
Audley Travel is our largest Private Equity asset valued on a
DCF basis and its valuation reflects our expectation on recovery in
the UK and US travel markets. At 31 March 2022, Audley Travel was
valued at GBP117 million (31 March 2021: GBP85 million).
Quoted portfolio
Basic-Fit is the only quoted investment in our Private Equity
portfolio. Covid-19 restrictions continued to affect Basic-Fit's
performance in 2021 due to temporary club closures and government
restrictions. However, the business saw its membership level
recover to its pre-pandemic levels and expanded its club base by
110 clubs.
At 31 March 2022 our residual 5.7% shareholding was valued at
GBP129 million (31 March 2021: 12.8% shareholding valued at GBP214
million).
Sum of the parts
At 31 March 2022, Q Holding was valued on a sum of the parts
basis. The sum of the parts included the valuation of the QSR
division, valued on an imminent sale basis after the agreed sale
and the value of its QMD business, valued on an earnings basis.
Assets under management
The value of the Private Equity portfolio, including third-party
capital, increased to GBP16.7 billion (31 March 2021: GBP11.6
billion), primarily due to unrealised value movements in the
year.
Table 6: Private Equity assets by geography as at 31 March
2022
3i carrying
value
2022
3i office location Number of companies GBPm
------------------- ------------------- -----------
Netherlands 8 8,296
France 2 595
Germany 7 939
UK 8 960
US 9 1,608
Other 3 22
------------------- ------------------- -----------
Total 37 12,420
------------------- ------------------- -----------
Table 7: Private Equity assets by sector as at 31 March 2022
3i carrying
value
2022
Sector Number of companies GBPm
------------------------------- ------------------- -----------
Action (Consumer) 1 7,165
Consumer 12 2,022
Industrial Technology 7 1,012
Business & Technology Services 11 656
Healthcare 6 1,565
------------------------------- ------------------- -----------
Total 37 12,420
------------------------------- ------------------- -----------
Table 8: Private Equity 3i proprietary capital as at 31
March
3i proprietary Vintage 3i proprietary Vintage
capital value (3) money capital value (3) money
2022 multiple (4) 2021 multiple (4)
Vintages GBPm 2022 GBPm 2021
------------------- ----------------- ------------ ----------------- ------------
Buyouts 2010-20121 2,462 12.3x 1,569 10.2x
Growth 2010-20121 18 2.1x 16 2.1x
2013-20161 1,022 2.3x 829 2.1x
2016-20191 2,210 1.8x 2,062 1.4x
2019-20221 1,319 1.3x 745 1.1x
Others2 5,389 n/a 3,593 n/a
------------------- ----------------- ------------ ----------------- ------------
Total 12,420 8,814
------------------- ----------------- ------------ ----------------- ------------
1 Assets included in these vintages are disclosed in the Glossary.
2 Includes value of GBP4,703 million (31 March 2021: GBP2,997 million) held in Action through
the 2020 Co-investment vehicles and 3i.
3 3i proprietary capital is the unrealised value for the remaining investments in each vintage.
4 Vintage money multiple (GBP) includes realised value and unrealised value as at the reporting
date.
Infrastructure
At a glance
Gross investment return
GBP241m
or 21%
(2021: GBP178m or 16%)
AUM
GBP5,717m
(2021: GBP4,945m)
Cash income
GBP91m
(2021: GBP67m)
We manage a range of funds investing principally in mid-market
economic infrastructure and operational projects in Europe and
North America. Infrastructure is a defensive asset class that
provides a good source of income and fund management fees for the
Group, enhancing returns on our proprietary capital. The team has
been active in its deployment of capital across the portfolio and
in new investments, and brought third-party investors into the 3i
North America Infrastructure platform in March 2022.
Our Infrastructure portfolio generated a GIR of GBP241 million
or 21% on the opening portfolio value (2021: GBP178 million, 16%).
This strong return was driven principally by the appreciation of
our quoted stake in 3iN and dividend income. We grew our North
America Infrastructure platform, with a 3i commitment of US$300
million, seeding our new US infrastructure investment, EC Waste,
alongside our existing investment in Regional Rail. Our 3i European
Operational Projects Fund ("3i EOPF") agreed to acquire a further
eight projects in the year and upon completion will be
substantially deployed.
Table 9: Gross investment return for the year to 31 March
2022 2021
Investment basis GBPm GBPm
----------------------------------------------------------- ----- -----
Realised profits over value on the disposal of investments 10 6
Unrealised profits on the revaluation of investments 178 168
Dividends 31 29
Interest income from investment portfolio 12 10
Fees (payable)/receivable (3) -
Foreign exchange on investments 13 (39)
Movement in fair value of derivatives - 4
----------------------------------------------------------- ----- -----
Gross investment return 241 178
----------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 21% 16%
----------------------------------------------------------- ----- -----
Fund management
3iN
3iN's portfolio performed strongly in the year, with the
majority of portfolio companies trading ahead of expectations and
generating a good level of portfolio income. We have seen
particularly strong performance from assets operating in the
transport and logistics sector, such as Oystercatcher and TCR, the
Energy sector, such as ESVAGT and Valorem and Social Infrastructure
such as Ionisos.
In the year to 31 March 2022, 3iN generated a total return on
opening NAV of 17.2%, materially ahead of its total return target
of 8% to 10% per annum over the medium term and delivered a
dividend of 10.45 pence per share, a 6.6% increase on last
year.
Neither 3iN, nor any of its portfolio companies, has any direct
exposure to Russia or Ukraine and whilst we remain cognisant of the
indirect implications through supply chains and the wider
macro-economic environment, the impact to date on portfolio
companies has been limited.
As investment manager to 3iN we received a management and
support services fee of GBP44 million (2021: GBP25 million) and a
NAV-based performance fee of GBP26 million (2021: GBP8 million)
comprising a third of the potential performance fee for each of
FY2022, FY2021 and FY2020 after the performance hurdle was met in
each year.
Infrastructure assets remain in significant demand resulting in
a highly competitive investment market. Our rigorous process for
identifying, screening and selecting investments means we remain
very active in the market whilst retaining our price
discipline.
During the year, 3iN completed investments in DNS:NET and SRL
Traffic Systems and agreed to invest c.US$512 million to acquire
100% of GCX, a global data communications service provider, with
completion expected in the summer of 2022. 3iN also completed a
GBP258 million further investment in ESVAGT doubling its equity
stake to 100%, a GBP21 million further investment in Valorem to
fund growth and small further investments in Joulz and TCR.
In October 2021, 3iN completed the sale of Oystercatcher's
stakes in four European liquid storage terminals for proceeds of
EUR55 million after debt repayment and continues to hold a 45%
stake in Oiltanking Singapore. In March 2022, 3iN agreed the sale
of its European projects portfolio, for c.GBP103 million, to 3i
EOPF.
North America Infrastructure platform
In November 2021, we invested GBP146 million in EC Waste, a
vertically integrated provider of federally compliant solid waste
services in Puerto Rico. Including bolt-on investments, this
represents our seventh US infrastructure investment. We have now
secured commitments from two third-party blue-chip investors, who
have co-invested in EC Waste and Regional Rail and will make
further investments alongside 3i in its North America
Infrastructure platform. As part of these arrangements, 3i
committed US$300 million into the platform and we received GBP161
million of realised and syndication proceeds from the co-investment
transfers of Regional Rail and EC Waste.
Other funds
3i EOPF and 3i Managed Infrastructure Acquisitions Fund ("3i
MIA") performed well in the year.
During the year, 3i EOPF made a EUR30 million commitment to
invest in NEoT Green Mobility to fund its pipeline of future
projects of which EUR6.5 million has been drawn to date. In March
2022, 3i EOPF completed the acquisition of an 80% stake in La Seine
Musicale, a multi-functional performance complex located in the
Paris area. It also agreed to acquire 3iN's European projects
portfolio for c.GBP103 million. On completion of this transaction
the fund will be substantially deployed.
In the year we recognised GBP7 million of realised proceeds from
KMC Roads and GVK Energy, two investments in the 3i India
Infrastructure Fund. This fund has one remaining investment which
is valued at nil.
Assets under management
Infrastructure AUM increased to GBP5.7 billion (2021: GBP4.9
billion), principally due to the increase in 3iN's share price.
Table 10: Assets under management as at 31 March 2022
Fee
% income
3i Remaining Invested (4) at earned in
Close Fund commitment/ 3i 31 March AUM 2022
Fund/strategy date size share commitment 2022 GBPm GBPm
----------------------------------- ---------- --------- ----------- ---------- --------------- ----- ---------
3iN(1) Mar-07 n/a GBP934m n/a n/a 3,093 44
3i Managed Infrastructure
Acquisitions LP Jun-17 GBP698m GBP35m GBP5m 86% 1,038 6
3i European Operational Projects
Fund(2) Apr-18 EUR456m EUR40m EUR12m 69% 267 2
BIIF May-08 GBP680m n/a n/a 90% 457 4
3i India Infrastructure Fund Mar-08 US$1,195m US$250m n/a 73% - -
3i managed accounts various n/a n/a n/a n/a 357 2
3i North America Infrastructure
platform Mar-22(3) US$495m US$300m US$125m 58% 298 -
US Infrastructure Nov-17 n/a n/a n/a n/a 207 -
----------------------------------- ---------- --------- ----------- ---------- --------------- ----- ---------
Total 5,717 58
----------------------------------------------- --------- ----------- ---------- --------------- ----- ---------
1 AUM based on the share price at 31 March 2022.
2 3i European Operational Projects Fund acquisitions signed but not completed by 31 March 2022
will raise the invested percentage from 69%
to c.84%.
3 First close completed in March 2022.
4 % invested is the capital deployed into investments against the total Fund commitment.
3i's proprietary capital Infrastructure portfolio
The Group's proprietary capital infrastructure portfolio
consists of its 30% quoted stake in 3iN, its investment in Smarte
Carte and direct stakes in other managed funds.
Quoted stake in 3iN
3iN's share price increased by 17% in the year and closed to 347
pence on 31 March 2022 (31 March 2021: 296 pence). We recognised
GBP137 million of unrealised profits on our 3iN investment (2021:
GBP132 million) and GBP27 million of dividend income (2021: GBP26
million).
North America Infrastructure proprietary capital
Smarte Carte performed well over the year due to strong demand
for carts, as the US domestic travel market rebounded ahead of
expectations. International travel continues to recover, albeit at
a slower pace. At 31 March 2022, Smarte Carte was valued at GBP207
million on a DCF basis (31 March 2021: GBP160 million).
Table 11: Unrealised profits on the revaluation of
Infrastructure investments in the year to 31 March
2022 2021
GBPm GBPm
----------------------------- ----- -----
Quoted 137 132
Discounted cash flow ("DCF") 36 26
Fund/other 5 10
----------------------------- ----- -----
Total 178 168
----------------------------- ----- -----
Further information on our valuation methodology, including definitions and rationale, is
included in the portfolio valuation - an explanation section in our Annual report and accounts
2022.
Table 12: Infrastructure portfolio movement for the year to 31
March 2022
Opening Closing
value at Disposals Unrealised value at
1 April at opening profit Other 31 March
2021 Investment book value movement movements 2 2022
Investment Valuation GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- -------- ---------- ---------- ---------- ----------- --------
3iN Quoted 797 - - 137 - 934
Smarte Carte DCF 160 - - 30 17 207
Regional Rail DCF 131 - (91) 3 5 48
EC Waste(1) DCF - 81 - 3 2 86
3i MIA Fund 48 1 - 4 - 53
3i EOPF Fund 20 3 - 1 - 24
India Infrastructure Fund Other 3 - (3) - - -
--------------------------- ---------- -------- ---------- ---------- ---------- ----------- --------
Total 1,159 85 (94) 178 24 1,352
--------------------------- ---------- -------- ---------- ---------- ---------- ----------- --------
1 Investment net of the syndication of GBP65 million.
2 Other movements include foreign exchange.
Scandlines
Gross investment return
GBP112m
or 26%
(2021: GBP25m or 6%)
Scandlines is held for its ability to deliver long-term capital
returns whilst generating cash dividends.
Performance
Scandlines performed well in the year, generating a GIR of
GBP112 million or 26% of opening portfolio value (2021: GBP25
million, 6%). Freight volumes, which have been consistently strong
throughout the pandemic, were above 2019 levels in 2021,
representing a record year for the business. In the first six
months of 2021, including the first part of the peak summer season,
Covid-19 variants had a significant impact on leisure volumes.
Following the introduction of the EU Covid-19 passport in July
2021, leisure volumes gradually recovered, returning to 2019 levels
in October 2021, before the emergence of another Covid-19 variant
at the end of 2021 impacted leisure volumes further. Cost saving
initiatives implemented in 2020 positioned Scandlines well for the
impact of ongoing restrictions in 2021, contributing to earnings
outperformance in the year. Following the good performance in the
year and strong cash generation, the business resumed its
distributions with 3i receiving GBP13 million of dividends in
FY2022.
Sustainability, particularly carbon reduction, remains a key
focus for Scandlines, with an ambitious target to ensure emission
free operations on its Puttgarden-Rødby route by 2030 and for
Scandlines by 2040. As part of this target, the business ordered
its first emission-free freight ferry in November 2021. The new
ferry will increase its current freight capacity on the
Puttgarden-Rødby route by up to 23% and is expected to be delivered
in 2024.
Trading since the start of 2022 has been strong, with freight
volumes ahead of 2019 levels and leisure volumes also recovering.
The business continues to navigate the inflationary environment,
with fuel prices hedged in the short term. The business has no
direct exposure to Russia or Ukraine.
We continue to value Scandlines on a DCF basis and at 31 March
2022 its value was GBP533 million (31 March 2021: GBP435
million).
Foreign exchange
We hedge the balance sheet value of our investment in
Scandlines. We recognised a GBP2 million net loss on foreign
exchange translation (March 2021: GBP3 million net gain) including
a GBP2 million fair value gain (March 2021: GBP20 million) from our
hedging programme.
Table 13: Gross investment return for the year to 31 March
2022 2021
Investment basis GBPm GBPm
---------------------------------------------------------- ----- -----
Unrealised profit on the revaluation of investments 101 22
Dividends 13 -
Foreign exchange on investments (4) (17)
Movement in fair value of derivatives 2 20
---------------------------------------------------------- ----- -----
Gross investment return 112 25
---------------------------------------------------------- ----- -----
Gross investment return as a % of opening portfolio value 26% 6%
---------------------------------------------------------- ----- -----
Financial review
An excellent financial performance
We generated a GIR of GBP4,525 million in FY2022 (2021: GBP2,139
million) and operating profit before carried interest of GBP4,417
million (2021: GBP2,031 million).
The total return was GBP4,014 million, representing a profit on
opening shareholders' funds of 44% (2021: GBP1,726 million or 22%).
The diluted NAV per share at 31 March 2022 increased by 39% to
1,321 pence (31 March 2021: 947 pence) after paying dividends
totalling 40.25 pence per share during the year.
Table 14: Total return for the year to 31 March
2022 2021
Investment basis GBPm GBPm
------------------------------------------------------------ ----- -----
Realised profits over value on the disposal of investments 238 35
Unrealised profits on the revaluation of investments 3,824 2,351
Portfolio income
Dividends 375 82
Interest income from investment portfolio 85 65
Fees receivable 3 9
Foreign exchange on investments (2) (427)
Movement in the fair value of derivatives 2 24
------------------------------------------------------------ ----- -----
Gross investment return 4,525 2,139
------------------------------------------------------------ ----- -----
Fees receivable from external funds 62 44
Operating expenses (128) (112)
Interest receivable - (1)
Interest payable (53) (47)
Exchange movements 9 7
Other income 2 1
------------------------------------------------------------ ----- -----
Operating profit before carried interest 4,417 2,031
------------------------------------------------------------ ----- -----
Carried interest
Carried interest and performance fees receivable 54 5
Carried interest and performance fees payable (454) (184)
----------------------------------------------------------- ----- -----
Operating profit before tax 4,017 1,852
------------------------------------------------------------ ----- -----
Tax charge (5) -
------------------------------------------------------------ ----- -----
Profit for the year 4,012 1,852
------------------------------------------------------------ ----- -----
Re-measurements of defined benefit plans 2 (126)
------------------------------------------------------------ ----- -----
Total comprehensive income for the year ("Total return") 4,014 1,726
------------------------------------------------------------ ----- -----
Total return on opening shareholders' funds 44% 22%
------------------------------------------------------------ ----- -----
Investment basis and alternative performance measures ("APMs")
In our Strategic report we report our financial performance using our
Investment basis. We do not consolidate our portfolio companies; as
private equity and infrastructure investments they are not operating
subsidiaries. IFRS 10 sets out an exception to consolidation and requires
us to fair value other companies in the Group (primarily intermediate
holding companies and partnerships), which results in a loss of transparency.
As explained in the Investment basis and Reconciliation of investment
basis and IFRS sections below, the total comprehensive income and net
assets are the same under our audited IFRS financial statements and
our Investment basis. The Investment basis is simply a "look through"
of IFRS 10 to present the underlying performance and we believe it is
more transparent to readers of our Annual report and accounts.
In October 2015, the European Securities and Markets Authority ("ESMA")
published guidelines about the use of APMs. These are financial measures
such as KPIs that are not defined under IFRS. Our Investment basis is
itself an APM, and we use a number of other measures which, on account
of being derived from the Investment basis, are also APMs.
Further information about our use of APMs, including the applicable
reconciliations to the IFRS equivalent where appropriate, is provided
at the end of the Financial review and should be read alongside the
Investment basis to IFRS reconciliation. Our APMs are gross investment
return as a percentage of the opening investment portfolio value, cash
realisations, cash investment, operating cash profit, net cash/(debt)
and gearing.
Realised profits
We generated total realised proceeds of GBP788 million (2021:
GBP218 million) and realised profits of GBP238 million in the year
(2021: GBP35 million), including realised proceeds of GBP684
million and profit of GBP228 million from Private Equity (2021:
GBP114 million, GBP29 million) and realised proceeds of GBP104
million and profit of GBP10 million from Infrastructure (2021:
GBP104 million, GBP6 million).
Unrealised value movements
We recognised an unrealised profit of GBP3,824 million (2021:
GBP2,351 million). Action's continued strong performance
contributed GBP2,655 million (2021: GBP1,202 million). We also saw
strong performance from our Private Equity investments in Q
Holding, SaniSure and BoConcept. The share prices of our quoted
investments, 3iN and Basic-Fit, closed up 17% and 23%
respectively.
Further information on the Private Equity, Infrastructure and
Scandlines valuations is included in the business reviews.
Table 15: Unrealised value movements on the revaluation of
investments for the year to 31 March
2022 2021
Investment basis GBPm GBPm
----------------- ----- -----
Private Equity 3,545 2,161
Infrastructure 178 168
Scandlines 101 22
----------------- ----- -----
Total 3,824 2,351
----------------- ----- -----
Portfolio income
Portfolio income increased to GBP463 million during the year
(2021: GBP156 million), primarily due to strong dividend income of
GBP375 million (2021: GBP82 million), particularly from Action.
Interest income from portfolio companies, the majority of which is
non-cash, increased to GBP85 million (2021: GBP65 million), whilst
fee income decreased in the year to GBP3 million (2021: GBP9
million), reflecting the transaction fees payable relating to the
North America Infrastructure platform.
Fees receivable from external funds
Fees received from external funds increased to GBP62 million
(2021: GBP44 million). 3i receives a fund management fee from 3iN,
which amounted to GBP44 million in FY2022 (2021: GBP25 million).
The increase in the 3iN fee was due to new investments in DNS:NET
and SRL, a further in ESVAGT and growth in the portfolio during the
year.
3i also received fee income of GBP6 million (2021: GBP6 million)
from MIA through management fees and continued to generate fee
income from other 3i managed accounts and other funds. In Private
Equity, we recognised a GBP4 million (2021: GBP4 million)
administration fee for our management of the 3i 2020 Co-investment
vehicles related to Action.
Operating expenses
Operating expenses were GBP128 million (2021: GBP112 million).
This increase reflects both the return to more normal levels of
spend on travel, marketing and office costs, which were
significantly depressed in the prior year due to Covid-19
restrictions, and the effect of planned recruitment, principally in
Private Equity and Infrastructure, to support our investment and
asset management capability. Operating expenses are expected to
increase again in FY2023, reflecting the full year effect of this
recruitment, and the effect of a highly competitive market for
talent across our business. However, the focus on cost discipline
is unchanged and we expect costs to remain well below 1% of assets
under management.
Operating cash profit
We generated an operating cash profit of GBP340 million in the
year (2021: GBP23 million). Cash income increased to GBP450 million
(2021: GBP131 million), principally due to the receipt of GBP284
million cash dividends from Action. We also received cash dividends
from 3iN, Scandlines, Hans Anders and Tato, as well as a good level
of cash fees from our external funds in Infrastructure. Excluding
the dividends received from Action, operating cash profit was GBP56
million. Cash operating expenses were GBP110 million (2021: GBP108
million), which is lower than the GBP128 million (2021: GBP112
million) of operating expenses recognised in the Consolidated
statement of comprehensive income as a result of share-based
payments and other non-cash expenses such as depreciation and
amortisation.
Table 16: Operating cash profit for the year to 31 March
2022 2021
Investment basis GBPm GBPm
-------------------------------------- ----- -----
Cash fees from external funds 68 39
Cash portfolio fees 9 7
Cash portfolio dividends and interest 373 85
-------------------------------------- ----- -----
Cash income 450 131
-------------------------------------- ----- -----
Cash operating expenses(1) (110) (108)
-------------------------------------- ----- -----
Operating cash profit 340 23
-------------------------------------- ----- -----
1 Cash operating expenses include operating expenses paid and lease payments.
Carried interest and performance fees
We receive carried interest and performance fees from
third-party funds and 3iN. We also pay carried interest and
performance fees to participants in plans relating to returns from
investments. These are received and/or paid subject to meeting
certain performance conditions. In Private Equity, we typically
accrue net carried interest payable between 10% and 13% of GIR,
based on the assumption that all investments are realised at their
balance sheet value. Carried interest is paid to participants when
cash proceeds have actually been received following a realisation,
refinancing event or other cash distribution and performance
hurdles are passed in cash terms. Due to the length of time between
investment and realisation, the schemes are usually active for a
number of years and their participants include both current and
previous employees of 3i.
We generated a strong GIR of GBP273 million in the Private
Equity 2019-22 plan (2021: GBP69 million). As a result, its
performance hurdle has been met on an accruals basis and we are now
accruing carried interest payable for this plan for the first time,
including an element of "catch up". The continued strength of
Action's performance in the Buyouts 2010-12 plan led to a GBP263
million increase in carried interest payable in FY2022.
3iN pays a performance fee based on its NAV on an annual basis,
subject to a hurdle rate of return and partly deferred, subject to
further hurdles. The continued strong performance of the assets
held by 3iN resulted in the recognition of GBP26 million (2021:
GBP8 million) of performance fees receivable. The Infrastructure
team receives a share of the fees received from 3iN, with the
majority of payments deferred and expensed over a number of years.
GBP22 million (2021: GBP11 million) was recognised as an expense
during the year, relating to performance fees from both the current
and previous years. During the year, GBP10 million was paid to the
Infrastructure team. The total potential payable relating to the
FY2022 performance fee was GBP19 million, which together with the
prior periods' performance fee, results in a cumulative total
potential payable but not accrued of GBP48 million.
3i MIA pays a performance fee based on its NAV, subject to a
five year hurdle rate of return. The first-five year period ended
in March 2022, and the strong performance of the 3i MIA assets
resulted in the recognition of GBP25 million performance fees
receivable. The Infrastructure team receives a share of these fees
resulting in an expense of GBP16 million performance fees payable
during the year.
Overall, the effect of the income statement charge, cash
payments of GBP23 million (2021: GBP516 million), as well as
currency translation meant that the balance sheet carried interest
and performance fees payable was GBP963 million (31 March 2021:
GBP560 million).
Table 17: Carried interest and performance fees for the year to
31 March
2022 2021
Investment basis Statement of comprehensive income GBPm GBPm
--------------------------------------------------- ----- -----
Carried interest and performance fees receivable
Private Equity 3 (3)
Infrastructure 51 8
--------------------------------------------------- ----- -----
Total 54 5
--------------------------------------------------- ----- -----
Carried interest and performance fees payable
Private Equity (416) (173)
Infrastructure (38) (11)
--------------------------------------------------- ----- -----
Total (454) (184)
--------------------------------------------------- ----- -----
Net carried interest payable (400) (179)
--------------------------------------------------- ----- -----
Table 18: Carried interest and performance fees at 31 March
2022 2021
Investment basis Statement of financial position GBPm GBPm
------------------------------------------------- ----- -----
Carried interest and performance fees receivable
Private Equity 8 8
Infrastructure 51 8
------------------------------------------------- ----- -----
Total 59 16
------------------------------------------------- ----- -----
Carried interest and performance fees payable
Private Equity (926) (533)
Infrastructure (37) (27)
------------------------------------------------- ----- -----
Total (963) (560)
------------------------------------------------- ----- -----
Net foreign exchange movements
At 31 March 2022, 86% of the Group's net assets were denominated
in euros or US dollars (31 March 2021: 84%). As sterling marginally
strengthened against the euro but weakened against the US dollar,
the Group recorded a net GBP9 million foreign exchange translation
gain in the year (2021: GBP396 million loss), including the GBP2
million translation gain (2021: GBP24 million gain) from the
movement in the fair value of hedging derivatives. The net foreign
exchange position also reflects the translation of non-portfolio
net assets, including non-sterling cash held and net carry payable
at the balance sheet date.
Table 19: Net assets and sensitivity by currency at 31 March
1%
sensitivity
FX rate GBPm % GBPm
------------- ------- ----- ------------
Sterling n/a 1,562 12 n/a
Euro(1) 1.1833 8,953 70 89
US dollar 1.3165 2,033 16 20
Danish krone 8.8031 184 2 2
Other n/a 22 - n/a
------------- ------- ----- ------------
1 Sensitivity impact is net of derivatives.
The Group's general policy is not to hedge its foreign currency
denominated portfolio. Where possible, flows from currency
realisations are matched with currency investments. Short-term
derivative contracts are used occasionally to manage transaction
cash flows. We do hedge the foreign exchange translation risk
associated with our investment in Scandlines, which is considered a
longer-term hold with relatively predictable cash flows. As at 31
March 2022, the notional amount of the forward foreign exchange
contracts held by the Group was EUR500 million, all relating to
Scandlines.
Pension
In FY2021 the 3i Group Pension Plan's Trustees completed a
buy-in transaction with Legal & General for its UK defined
benefit scheme which, alongside previous buy-in policies entered
into with Pension Insurance Corporation and Legal & General in
March 2017 and February 2019 respectively, means that the plan
benefits are now insured. These polices provide long-term security
for the Plan members and 3i is no longer exposed to any material
longevity, interest or inflation risk in the Plan or any ongoing
requirement to fund the Plan.
On an IAS 19 basis, there was a GBP1 million re-measurement loss
on the Group's UK pension scheme during the year (March 2021:
GBP122 million) and the pension remains in a surplus of GBP53
million (31 March 2021: GBP55 million). The last triennial funding
valuation was based on the Plan's position at 30 June 2019.
Tax
The Group's parent company continues to operate in the UK as an
approved investment trust company. An approved investment trust is
a UK investment company which is required to meet certain
conditions set out in the UK tax rules to obtain and maintain its
tax status. This approval allows certain investment profits of the
Company, broadly its capital profits, to be exempt from tax in the
UK. The Group's tax charge for the year was GBP5 million (2021:
nil). The Group's overall UK tax position for the financial year is
dependent on the finalisation of tax returns of the various
corporate and partnership entities in the UK group.
Balance sheet and liquidity
At 31 March 2022, the Group had net debt of GBP746 million (31
March 2021: GBP750 million) and gearing of 6%, after the receipt of
strong cash income of GBP450 million and net cash proceeds of
GBP162 million offsetting dividend payments of GBP389 million in
the year.
The Group had liquidity of GBP729 million as at 31 March 2022
(31 March 2021: GBP725 million) comprising cash and deposits of
GBP229 million (31 March 2021: GBP225 million) and an undrawn RCF
of GBP500 million. During the year the RCF was successfully
extended by one year to March 2027 to further support the Group's
long-term liquidity.
The investment portfolio value increased to GBP14,305 million at
31 March 2022 (31 March 2021: GBP10,408 million) mainly driven by
unrealised profits of GBP3,824 million in the year.
Further information on investments and realisations is included
in the Private Equity, Infrastructure and Scandlines business
reviews.
Table 20: Simplified consolidated balance sheet at 31 March
2022 2021
Investment basis Statement of financial position GBPm GBPm
------------------------------------------------- ------ ------
Investment portfolio 14,305 10,408
Gross debt (975) (975)
Cash and deposits 229 225
------------------------------------------------- ------ ------
Net debt (746) (750)
------------------------------------------------- ------ ------
Carried interest and performance fees receivable 59 16
Carried interest and performance fees payable (963) (560)
Other net assets 99 50
------------------------------------------------- ------ ------
Net assets 12,754 9,164
------------------------------------------------- ------ ------
Gearing(1) 6% 8%
------------------------------------------------- ------ ------
1 Gearing is net debt as a percentage of net assets.
Going concern
The Annual report and accounts 2022 are prepared on a going
concern basis. The Directors made an assessment of going concern,
taking into account the Group's current performance and the
outlook, and performed additional analysis to support the going
concern assessment. Further details on going concern can be found
in the Resilience statement in our Annual report and accounts
2022.
Dividend
The Board has recommended a second FY2022 dividend of 27.25
pence per share (2021: 21.0 pence), taking the total dividend for
the year to 46.5 pence (2021: 38.5 pence). Subject to shareholder
approval, the dividend will be paid to shareholders in July
2022.
Key accounting judgments and estimates
A key judgment is the assessment required to determine the degree of
control or influence the Group exercises and the form of any control
to ensure that the financial treatment of investment entities is accurate.
The introduction of IFRS 10 resulted in a number of intermediate holding
companies being presented at fair value, which has led to reduced transparency
of the underlying investment performance. As a result, the Group continues
to present a non-GAAP Investment basis set of financial statements to
ensure that the commentary in the Strategic report remains fair, balanced
and understandable. The reconciliation of the Investment basis to IFRS
is shown further on in this document.
In preparing these accounts, the key accounting estimates are the carrying
value of our investment assets, which is stated at fair value, and the
calculation of carried interest payable.
Given the importance of the valuation of investments, the Board has
a separate Valuations Committee to review the valuation policy, process
and application to individual investments. However, asset valuations
for unquoted investments are inherently subjective, as they are made
on the basis of assumptions which may not prove to be accurate. At 31
March 2022, 93% by value of the investment assets were unquoted (31
March 2021: 90%).
The valuation of the proprietary capital portfolio is a primary input
into the carried interest payable and receivable balances, which are
determined by reference to the valuation at 31 March 2022 and the underlying
investment management agreements.
Investment basis
Consolidated statement of comprehensive income
for the year to 31 March
2022 2021
GBPm GBPm
------------------------------------------------------------ ----- -----
Realised profits over value on the disposal of investments 238 35
Unrealised profits on the revaluation of investments 3,824 2,351
Portfolio income
Dividends 375 82
Interest income from investment portfolio 85 65
Fees receivable 3 9
Foreign exchange on investments (2) (427)
Movement in the fair value of derivatives 2 24
------------------------------------------------------------ ----- -----
Gross investment return 4,525 2,139
------------------------------------------------------------ ----- -----
Fees receivable from external funds 62 44
Operating expenses (128) (112)
Interest receivable - (1)
Interest payable (53) (47)
Exchange movements 9 7
Other income 2 1
------------------------------------------------------------ ----- -----
Operating profit before carried interest 4,417 2,031
------------------------------------------------------------ ----- -----
Carried interest
Carried interest and performance fees receivable 54 5
Carried interest and performance fees payable (454) (184)
----------------------------------------------------------- ----- -----
Operating profit before tax 4,017 1,852
------------------------------------------------------------ ----- -----
Tax charge (5) -
------------------------------------------------------------ ----- -----
Profit for the year 4,012 1,852
------------------------------------------------------------ ----- -----
Other comprehensive income/(expense)
Re-measurements of defined benefit plans 2 (126)
----------------------------------------------------------- ----- -----
Total comprehensive income for the year ("Total return") 4,014 1,726
------------------------------------------------------------ ----- -----
Consolidated statement of financial position
as at 31 March
2022 2021
GBPm GBPm
-------------------------------------------------- ------- -------
Assets
Non-current assets
Investments
Quoted investments 1,063 1,011
Unquoted investments 13,242 9,397
------------------------------------------------- ------- -------
Investment portfolio 14,305 10,408
-------------------------------------------------- ------- -------
Carried interest and performance fees receivable 8 8
Other non-current assets 50 54
Intangible assets 6 8
Retirement benefit surplus 53 55
Property, plant and equipment 3 5
Right of use asset 13 16
Derivative financial instruments 7 16
Deferred income taxes 1 1
-------------------------------------------------- ------- -------
Total non-current assets 14,446 10,571
-------------------------------------------------- ------- -------
Current assets
Carried interest and performance fees receivable 51 8
Other current assets 105 21
Current income taxes 1 2
Derivative financial instruments 10 10
Cash and cash equivalents 229 225
-------------------------------------------------- ------- -------
Total current assets 396 266
-------------------------------------------------- ------- -------
Total assets 14,842 10,837
-------------------------------------------------- ------- -------
Liabilities
Non-current liabilities
Trade and other payables (21) (24)
Carried interest and performance fees payable (915) (543)
Loans and borrowings (775) (975)
Retirement benefit deficit (26) (29)
Lease liability (9) (13)
Deferred income taxes (1) (1)
Provisions (3) (2)
-------------------------------------------------- ------- -------
Total non-current liabilities (1,750) (1,587)
-------------------------------------------------- ------- -------
Current liabilities
Trade and other payables (81) (64)
Carried interest and performance fees payable (48) (17)
Loans and borrowings (200) -
Lease liability (5) (4)
Current income taxes (4) (1)
Total current liabilities (338) (86)
-------------------------------------------------- ------- -------
Total liabilities (2,088) (1,673)
-------------------------------------------------- ------- -------
Net assets 12,754 9,164
-------------------------------------------------- ------- -------
Equity
Issued capital 719 719
Share premium 789 788
Other reserves 11,346 7,721
Own shares (100) (64)
-------------------------------------------------- ------- -------
Total equity 12,754 9,164
-------------------------------------------------- ------- -------
Consolidated cash flow statement
for the year to 31 March
2022 2021
GBPm GBPm
----------------------------------------------- ----- -----
Cash flow from operating activities
Purchase of investments (596) (479)
Proceeds from investments 758 319
Net cash flow from derivatives 11 7
Portfolio interest received 4 5
Portfolio dividends received 369 80
Portfolio fees received 9 7
Fees received from external funds 68 39
Carried interest and performance fees received 10 6
Carried interest and performance fees paid (23) (516)
Operating expenses paid (106) (103)
Co-investment loans (paid)/received (5) 15
Tax received/(paid) 1 (1)
Interest received - (1)
Net cash flow from operating activities 500 (622)
----------------------------------------------- ----- -----
Cash flow from financing activities
Issue of shares 1 1
Purchase of own shares (54) -
Dividends paid (389) (338)
Proceeds from long-term borrowing - 395
Lease payments (4) (5)
Interest paid (52) (46)
----------------------------------------------- ----- -----
Net cash flow from financing activities (498) 7
----------------------------------------------- ----- -----
Cash flow from investing activities
Purchase of property, plant and equipment - (1)
Net cash flow from investing activities - (1)
----------------------------------------------- ----- -----
Change in cash and cash equivalents 2 (616)
----------------------------------------------- ----- -----
Cash and cash equivalents at the start of year 225 845
Effect of exchange rate fluctuations 2 (4)
----------------------------------------------- ----- -----
Cash and cash equivalents at the end of year 229 225
----------------------------------------------- ----- -----
Background to Investment basis financial statements
The Group makes investments in portfolio companies directly,
held by 3i Group plc, and indirectly, held through intermediate
holding company and partnership structures ("Investment entity
subsidiaries"). It also has other operational subsidiaries which
provide services and other activities such as employment,
regulatory activities, management and advice ("Trading
subsidiaries"). The application of IFRS 10 requires us to fair
value a number of intermediate holding companies that were
previously consolidated line by line. This fair value approach,
applied at the intermediate holding company level, effectively
obscures the performance of our proprietary capital investments and
associated transactions occurring in the intermediate holding
companies.
The financial effect of the underlying portfolio companies and
fee income, operating expenses and carried interest transactions
occurring in Investment entity subsidiaries are aggregated into a
single value. Other items which were previously eliminated on
consolidation are now included separately.
To maintain transparency in our report and aid understanding we
introduced separate non-GAAP "Investment basis" Statements of
comprehensive income, financial position and cash flow in our 2014
Annual report and accounts. The Investment basis is an APM and the
Strategic report is prepared using the Investment basis as we
believe it provides a more understandable view of our performance.
Total return and net assets are equal under the Investment basis
and IFRS; the Investment basis is simply a "look through" of IFRS
10 to present the underlying performance.
Reconciliation of Investment basis and IFRS
A detailed reconciliation from the Investment basis to IFRS
basis of the Consolidated statement of comprehensive income,
Consolidated statement of financial position and Consolidated cash
flow statement is shown on the following pages.
Reconciliation of Investment basis and IFRS
Reconciliation of consolidated statement of comprehensive
income
for the year to 31 March
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
20 22 20 22 20 22 20 21 20 21 20 21
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Realised profits over value
on the disposal of investments 1,2 238 (149) 89 35 (26) 9
Unrealised profits on the revaluation
of investments 1,2 3,824 (2,043) 1,781 2,351 (1,134) 1,217
Fair value movements on investment entity
subsidiaries 1 - 1,974 1,974 - 792 792
Portfolio income
Dividends 1,2 375 (169) 206 82 (33) 49
Interest income from investment portfolio 1,2 85 (55) 30 65 (43) 22
Fees receivable 1,2 3 3 6 9 4 13
Foreign exchange on investments 1,3 (2) (7) (9) (427) 232 (195)
Movement in the fair value of derivatives 2 - 2 24 - 24
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Gross investment return 4,525 (446) 4,079 2,139 (208) 1,931
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Fees receivable from external funds 62 - 62 44 - 44
Operating expenses 4 (128) 1 (127) (112) 1 (111)
Interest receivable 1 - - - (1) - (1)
Interest payable (53) - (53) (47) - (47)
Exchange movements 1,3 9 7 16 7 10 17
Income from investment entity subsidiaries 1 - 32 32 - 22 22
Other income 2 - 2 1 - 1
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Operating profit before carried interest 4,417 (406) 4,011 2,031 (175) 1,856
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Carried interest
Carried interest and performance fees
receivable 1,4 54 (1) 53 5 - 5
Carried interest and performance fees
payable 1,4 (454) 408 (46) (184) 178 (6)
------------------------------------------ ----- ---------- ----------- ------ ---------- ----------- ------
Operating profit before tax 4,017 1 4,018 1,852 3 1,855
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Tax charge 1,4 (5) - (5) - - -
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Profit for the year 4,012 1 4,013 1,852 3 1,855
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Other comprehensive income/(expense)
Exchange differences on translation of
foreign operations 1,3 - (1) (1) - (3) (3)
Re-measurements of defined benefit plans 2 - 2 (126) - (126)
------------------------------------------ ----- ---------- ----------- ------ ---------- ----------- ------
Other comprehensive income for the year 2 (1) 1 (126) (3) (129)
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
Total comprehensive income
for the year ("Total return") 4,014 - 4,014 1,726 - 1,726
------------------------------------------- ----- ---------- ----------- ------ ---------- ----------- ------
The IFRS basis is audited and the Investment basis is
unaudited.
Notes:
1 Applying IFRS 10 to the Consolidated statement of comprehensive income consolidates the line
items of a number of previously consolidated subsidiaries into a single line item "Fair value
movements on investment entity subsidiaries". In the "Investment basis" accounts we have disaggregated
these line items to analyse our total return as if these Investment entity subsidiaries were
fully consolidated, consistent with prior years. The adjustments simply reclassify the Consolidated
statement of comprehensive income of the Group, and the total return is equal under the Investment
basis and the IFRS basis.
2 Realised profits, unrealised profits, and portfolio income shown in the IFRS accounts only
relate to portfolio companies that are held directly by 3i Group plc and not those portfolio
companies held through Investment entity subsidiaries. Realised profits, unrealised profits,
and portfolio income in relation to portfolio companies held through Investment entity subsidiaries
are aggregated into the single "Fair value movement on investment entity subsidiaries" line.
This is the most significant reduction of information in our IFRS accounts.
3 Foreign exchange movements have been reclassified under the Investment basis as foreign currency
asset and liability movements. Movements within the Investment entity subsidiaries are included
within "Fair value movements on investment entities".
4 Other items also aggregated into the "Fair value movements on investment entity subsidiaries"
line include fees receivable from external funds, audit fees, administration expenses, carried
interest and tax.
Reconciliation of consolidated statement of financial
position
as at 31 March
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
2022 2022 2022 2021 2021 2021
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Assets
Non-current assets
Investments
Quoted investments 1 1,063 (129) 934 1,011 (214) 797
Unquoted investments 1 13,242 (7,534) 5,708 9,397 (5,184) 4,213
Investments in investment entity
subsidiaries 1,2 - 6,791 6,791 - 4,905 4,905
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Investment portfolio 14,305 (872) 13,433 10,408 (493) 9,915
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Carried interest and performance fees
receivable 1 8 1 9 8 1 9
Other non-current assets 1 50 (5) 45 54 (2) 52
Intangible assets 6 - 6 8 - 8
Retirement benefit surplus 53 - 53 55 - 55
Property, plant and equipment 3 - 3 5 - 5
Right of use asset 13 - 13 16 - 16
Derivative financial instruments 7 - 7 16 - 16
Deferred income taxes 1 - 1 1 - 1
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total non-current assets 14,446 (876) 13,570 10,571 (494) 10,077
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Current assets
Carried interest and performance fees
receivable 1 51 - 51 8 - 8
Other current assets 1 105 (1) 104 21 - 21
Current income taxes 1 - 1 2 - 2
Derivative financial instruments 10 - 10 10 - 10
Cash and cash equivalents 1 229 (17) 212 225 (9) 216
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total current assets 396 (18) 378 266 (9) 257
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total assets 14,842 (894) 13,948 10,837 (503) 10,334
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Liabilities
Non-current liabilities
Trade and other payables 1 (21) 7 (14) (24) 7 (17)
Carried interest and performance fees
payable 1 (915) 873 (42) (543) 494 (49)
Loans and borrowings (775) - (775) (975) - (975)
Retirement benefit deficit (26) - (26) (29) - (29)
Lease liability (9) - (9) (13) - (13)
Deferred income taxes (1) - (1) (1) - (1)
Provisions (3) - (3) (2) - (2)
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total non-current liabilities (1,750) 880 (870) (1,587) 501 (1,086)
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Current liabilities
Trade and other payables 1 (81) 1 (80) (64) 2 (62)
Carried interest and performance fees
payable 1 (48) 13 (35) (17) - (17)
Loans and borrowings (200) - (200) - - -
Lease liability (5) - (5) (4) - (4)
Current income taxes (4) - (4) (1) - (1)
Total current liabilities (338) 14 (324) (86) 2 (84)
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total liabilities (2,088) 894 (1,194) (1,673) 503 (1,170)
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Net assets 12,754 - 12,754 9,164 - 9,164
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Equity
Issued capital 719 - 719 719 - 719
Share premium 789 - 789 788 - 788
Other reserves 3 11,346 - 11,346 7,721 - 7,721
Own shares (100) - (100) (64) - (64)
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Total equity 12,754 - 12,754 9,164 - 9,164
----------------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
The IFRS basis is audited and the Investment basis is
unaudited.
Notes:
1 Applying IFRS 10 to the Consolidated statement of financial position aggregates the line items
into the single line item "Investments in investment entity subsidiaries". In the Investment
basis we have disaggregated these items to analyse our net assets as if the Investment entity
subsidiaries were consolidated. The adjustment reclassifies items in the Consolidated statement
of financial position. There is no change to the net assets, although for reasons explained
below, gross assets and gross liabilities are different. The disclosure relating to portfolio
companies is significantly reduced by the aggregation, as the fair value of all investments
held by Investment entity subsidiaries is aggregated into the "Investments in investment entity
subsidiaries" line. We have disaggregated this fair value and disclosed the underlying portfolio
holding in the relevant line item, ie, quoted investments or unquoted investments. Other items
which may be aggregated include carried interest, other assets and other payables, and the
Investment basis presentation again disaggregates these items.
2 Intercompany balances between Investment entity subsidiaries and trading subsidiaries also
impact the transparency of our results under the IFRS basis. If an Investment entity subsidiary
has an intercompany balance with a consolidated trading subsidiary of the Group, then the
asset or liability of the Investment entity subsidiary will be aggregated into its fair value,
while the asset or liability of the consolidated trading subsidiary will be disclosed as an
asset or liability in the Consolidated statement of financial position for the Group.
3 Investment basis financial statements are prepared for performance measurement and therefore
reserves are not analysed separately under
this basis.
Reconciliation of consolidated cash flow statement
for the year to 31 March
Investment IFRS IFRS Investment IFRS IFRS
basis adjustments basis basis adjustments basis
2022 2022 2022 2021 2021 2021
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Cash flow from operating activities
Purchase of investments 1 (596) 272 (324) (479) 353 (126)
Proceeds from investments 1 758 (464) 294 319 (135) 184
Amounts paid to investment entity subsidiaries 1 - (349) (349) - (879) (879)
Amounts received from investment entity
subsidiaries 1 - 685 685 - 281 281
Net cash flow from derivatives 11 - 11 7 - 7
Portfolio interest received 1 4 (1) 3 5 (5) -
Portfolio dividends received 1 369 (165) 204 80 (32) 48
Portfolio fees received 1 9 - 9 7 - 7
Fees received from external funds 68 - 68 39 - 39
Carried interest and performance
fees received 1 10 - 10 6 - 6
Carried interest and performance fees paid 1 (23) 9 (14) (516) 483 (33)
Operating expenses paid 1 (106) 1 (105) (103) - (103)
Co-investment loans (paid)/received 1 (5) 2 (3) 15 (3) 12
Tax received/(paid) 1 1 - 1 (1) - (1)
Interest received 1 - - - (1) - (1)
Net cash flow from operating activities 500 (10) 490 (622) 63 (559)
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Cash flow from financing activities
Issue of shares 1 - 1 1 - 1
Purchase of own shares (54) - (54) - - -
Dividends paid (389) - (389) (338) - (338)
Proceeds from long-term borrowing - - - 395 - 395
Lease payments (4) - (4) (5) - (5)
Interest paid (52) - (52) (46) - (46)
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Net cash flow from financing activities (498) - (498) 7 - 7
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Cash flow from investing activities
Purchase of property, plant and equipment - - - (1) - (1)
Net cash flow from investing activities - - - (1) - (1)
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Change in cash and cash equivalents 2 2 (10) (8) (616) 63 (553)
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Cash and cash equivalents at the start of year 2 225 (9) 216 845 (74) 771
Effect of exchange rate fluctuations 1 2 2 4 (4) 2 (2)
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
Cash and cash equivalents at the
end of year 2 229 (17) 212 225 (9) 216
----------------------------------------------- ----- ---------- ----------- ----- ---------- ----------- -----
The IFRS basis is audited and the Investment basis is
unaudited.
Notes:
1 The Consolidated cash flow statement is impacted by the application of IFRS 10 as cash flows
to and from Investment entity subsidiaries are disclosed, rather than the cash flows to and
from the underlying portfolio. Therefore in our Investment basis financial statements, we
have disclosed our cash flow statement on a "look through" basis, in order to reflect the
underlying sources and uses of cash flows and disclose the underlying investment activity.
2 There is a difference between the change in cash and cash equivalents of the Investment basis
financial statements and the IFRS financial statements because there are cash balances held
in Investment entity subsidiaries. Cash held within Investment entity subsidiaries will not
be shown in the IFRS statements but will be seen in the Investment basis statements.
Alternative Performance Measures ("APMs")
We assess our performance using a variety of measures that are
not specifically defined under IFRS and are therefore termed APMs.
The APMs that we use may not be directly comparable with those used
by other companies. Our Investment basis is itself an APM. The
explanation of and rationale for the Investment basis and its
reconciliation to IFRS is provided above. The table below defines
our additional APMs.
Gross investment return as a percentage of opening portfolio value
Purpose Calculation Reconciliation to IFRS
A measure of the performance of our It is calculated as the gross The equivalent balances under IFRS and
proprietary investment portfolio. investment return, as shown in the the reconciliation to the Investment
Investment basis Consolidated basis are shown
statement of comprehensive income, as in the Reconciliation of the
a % of the opening portfolio value. consolidated statement of
comprehensive income and the
Reconciliation
of the consolidated statement of
financial position respectively.
For further information see the Group
KPIs in our Annual report and accounts
2022.
-------------------------------------- -------------------------------------- --------------------------------------
Cash realisations
Purpose Calculation Reconciliation to IFRS
Cash proceeds from our investments The cash received from the disposal The equivalent balance under IFRS and
support our returns to shareholders, of investments in the year as shown the reconciliation to the Investment
as well as our ability in the Investment basis Consolidated basis is shown
to invest in new opportunities. cash flow statement. in the Reconciliation
of the consolidated cash flow
statement.
For further information see the Group
KPIs in our Annual report and accounts
2022.
-------------------------------------- -------------------------------------- --------------------------------------
Cash investment
Purpose Calculation Reconciliation to IFRS
Identifying new opportunities in which The cash paid to acquire investments The equivalent balance under IFRS and
to invest proprietary capital is the in the year as shown on the Investment the reconciliation to the Investment
primary driver basis Consolidated basis is shown
of the Group's ability to deliver cash flow statement. in the Reconciliation
attractive returns. of the consolidated cash flow
statement.
For further information see the Group
KPIs in our Annual report and accounts
2022.
-------------------------------------- -------------------------------------- --------------------------------------
Operating cash profit
Purpose Calculation Reconciliation to IFRS
By covering the cash cost of running The cash income from the portfolio The equivalent balance under IFRS and
the business with cash income, we (interest, dividends and fees) the reconciliation to the Investment
reduce the potential together with fees received basis is shown
dilution of capital returns. from external funds less cash in the Reconciliation
operating expenses and leases payments of the consolidated cash flow
as shown on the Investment statement.
basis Consolidated cash flow
statement. The calculation is shown in
Table 16 of the Financial
review.
-------------------------------------- -------------------------------------- --------------------------------------
Net (debt)/cash
Purpose Calculation Reconciliation to IFRS
A measure of the available cash to Cash and cash equivalents plus The equivalent balance under IFRS and
invest in the business and an deposits less loans and borrowings as the reconciliation to the Investment
indicator of the financial shown on the Investment basis is shown
risk in the Group's balance sheet. basis Consolidated statement of in the Reconciliation of the
financial position. consolidated statement of financial
position.
-------------------------------------- -------------------------------------- --------------------------------------
Gearing
Purpose Calculation Reconciliation to IFRS
A measure of the financial risk Net debt (as defined above) as a % of The equivalent balance under IFRS and
in the Group's balance sheet. the Group's net assets under the the reconciliation to the Investment
Investment basis. It basis is shown
cannot be less than zero. in the Reconciliation of the
consolidated statement of financial
position.
-------------------------------------- -------------------------------------- --------------------------------------
Audited financial statements
Consolidated statement of comprehensive income
for the year to 31 March
2022 2021
Notes GBPm GBPm
========================================================================== ====== ====== ======
Realised profits over value on the disposal of investments 89 9
Unrealised profits on the revaluation of investments 1,781 1,217
Fair value movements on investment entity subsidiaries 1,974 792
Portfolio income
Dividends 206 49
Interest income from investment portfolio 30 22
Fees receivable 6 13
Foreign exchange on investments (9) (195)
Movement in the fair value of derivatives 2 24
========================================================================== ====== ====== ======
Gross investment return 4,079 1,931
-------------------------------------------------------------------------- ------ ------ ------
Fees receivable from external funds 62 44
Operating expenses (127) (111)
Interest receivable - (1)
Interest payable (53) (47)
Exchange movements 16 17
Income from investment entity subsidiaries 32 22
Other income 2 1
========================================================================== ====== ====== ======
Operating profit before carried interest 4,011 1,856
-------------------------------------------------------------------------- ------ ------ ------
Carried interest
Carried interest and performance fees receivable 53 5
Carried interest and performance fees payable (46) (6)
========================================================================= ====== ====== ======
Operating profit before tax 4,018 1,855
-------------------------------------------------------------------------- ------ ------ ------
Tax charge (5) -
========================================================================== ====== ====== ======
Profit for the year 4,013 1,855
========================================================================== ====== ====== ======
Other comprehensive income that may be reclassified to the income statement
Exchange differences on translation of foreign operations (1) (3)
Other comprehensive income/(expense) that will not be reclassified to the income statement
Re-measurements of defined benefit plans 2 (126)
========================================================================= ====== ====== ======
Other comprehensive income/(expense) for the year 1 (129)
========================================================================== ====== ====== ======
Total comprehensive income for the year ("Total return") 4,014 1,726
========================================================================== ====== ====== ======
Earnings per share
Basic (pence) 2 415.4 192.4
Diluted (pence) 2 414.3 191.9
========================================================================= ====== ====== ======
The Notes to the accounts section forms an integral part of
these financial statements.
Consolidated statement of financial position
as at 31 March
2022 2021
GBPm GBPm
================================================== ======= =======
Assets
Non-current assets
Investments
Quoted investments 934 797
Unquoted investments 5,708 4,213
Investments in investment entity subsidiaries 6,791 4,905
-------------------------------------------------- ------- -------
Investment portfolio 13,433 9,915
-------------------------------------------------- ------- -------
Carried interest and performance fees receivable 9 9
Other non-current assets 45 52
Intangible assets 6 8
Retirement benefit surplus 53 55
Property, plant and equipment 3 5
Right of use asset 13 16
Derivative financial instruments 7 16
Deferred income taxes 1 1
================================================== ======= =======
Total non-current assets 13,570 10,077
=================================================== ======= =======
Current assets
Carried interest and performance fees receivable 51 8
Other current assets 104 21
Current income taxes 1 2
Derivative financial instruments 10 10
Cash and cash equivalents 212 216
=================================================== ======= =======
Total current assets 378 257
=================================================== ======= =======
Total assets 13,948 10,334
=================================================== ======= =======
Liabilities
Non-current liabilities
Trade and other payables (14) (17)
Carried interest and performance fees payable (42) (49)
Loans and borrowings (775) (975)
Retirement benefit deficit (26) (29)
Lease liability (9) (13)
Deferred income taxes (1) (1)
Provisions (3) (2)
================================================== ======= =======
Total non-current liabilities (870) (1,086)
=================================================== ======= =======
Current liabilities
Trade and other payables (80) (62)
Carried interest and performance fees payable (35) (17)
Loans and borrowings (200) -
Lease liability (5) (4)
Current income taxes (4) (1)
Total current liabilities (324) (84)
=================================================== ======= =======
Total liabilities (1,194) (1,170)
=================================================== ======= =======
Net assets 12,754 9,164
=================================================== ======= =======
Equity
Issued capital 719 719
Share premium 789 788
Capital redemption reserve 43 43
Share-based payment reserve 33 34
Translation reserve (6) (5)
Capital reserve 10,151 6,733
Revenue reserve 1,125 916
Own shares (100) (64)
================================================== ======= =======
Total equity 12,754 9,164
=================================================== ======= =======
The Notes to the accounts section forms an integral part of
these financial statements.
David Hutchison
Chairman 11 May 2022
Consolidated statement of changes in equity
for the year to 31 March
Share-
Capital based
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ======= ======= ========== ======= =========== ========== ========== ====== =======
Total equity at the start
of the year 719 788 43 34 (5) 6,733 916 (64) 9,164
Profit for the year - - - - - 3,547 466 - 4,013
Exchange differences
on translation of
foreign operations - - - - (1) - - - (1)
Re-measurements of
defined benefit plans - - - - - 2 - - 2
========================= ======= ======= ========== ======= =========== ========== ========== ====== =======
Total comprehensive
income for the year - - - - (1) 3,549 466 - 4,014
========================= ======= ======= ========== ======= =========== ========== ========== ====== =======
Share-based payments - - - 18 - - - - 18
Release on exercise/
forfeiture of share
awards - - - (19) - - 19 - -
Exercise of share awards - - - - - (18) - 18 -
Ordinary dividends - - - - - (113) (276) - (389)
Purchase of own shares - - - - - - - (54) (54)
Issue of ordinary shares - 1 - - - - - - 1
Total equity at the
end of the year 719 789 43 33 (6) 10,151 1,125 (100) 12,754
========================= ======= ======= ========== ======= =========== ========== ========== ====== =======
1 Refer to Note 20 in our Annual report and accounts 2022 for the nature of the capital and
revenue reserves.
Share-
Capital based
Share Share redemption payment Translation Capital Revenue Own Total
capital premium reserve reserve reserve reserve(1) reserve(1) shares equity
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total equity at the start
of the year 719 788 43 33 (2) 5,432 822 (78) 7,757
Profit for the year - - - - - 1,707 148 - 1,855
Exchange differences
on translation of
foreign operations - - - - (3) - - - (3)
Re-measurements of defined
benefit plans - - - - - (126) - - (126)
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Total comprehensive
income for the year - - - - (3) 1,581 148 - 1,726
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
Share-based payments - - - 19 - - - - 19
Release on exercise/
forfeiture of share
awards - - - (18) - - 18 - -
Exercise of share awards - - - - - (14) - 14 -
Ordinary dividends - - - - - (266) (72) - (338)
Purchase of own shares - - - - - - - - -
Issue of ordinary shares - - - - - - - - -
Total equity at the
end of the year 719 788 43 34 (5) 6,733 916 (64) 9,164
========================== ======= ======= ========== ======= =========== ========== ========== ====== ======
1 Refer to Note 20 in our Annual report and accounts 2022 for the nature of the capital and
revenue reserves.
The Notes to the accounts section forms an integral part of
these financial statements.
Consolidated cash flow statement
for the year to 31 March
2022 2021
Notes GBPm GBPm
===================================================== ===== ===== =====
Cash flow from operating activities
Purchase of investments (324) (126)
Proceeds from investments 294 184
Amounts paid to investment entity subsidiaries (349) (879)
Amounts received from investment entity subsidiaries 685 281
Net cash flow from derivatives 11 7
Portfolio interest received 3 -
Portfolio dividends received 204 48
Portfolio fees received 9 7
Fees received from external funds 68 39
Carried interest and performance fees received 10 6
Carried interest and performance fees paid (14) (33)
Operating expenses paid (105) (103)
Co-investment loans (paid)/received (3) 12
Tax received/(paid) 1 (1)
Interest received - (1)
Net cash flow from operating activities 490 (559)
===================================================== ===== ===== =====
Cash flow from financing activities
Issue of shares 1 1
Purchase of own shares (54) -
Dividend paid 3 (389) (338)
Proceeds from long-term borrowing - 395
Lease payments (4) (5)
Interest paid (52) (46)
===================================================== ===== ===== =====
Net cash flow from financing activities (498) 7
===================================================== ===== ===== =====
Cash flow from investing activities
Purchases of property, plant and equipment - (1)
Net cash flow from investing activities - (1)
===================================================== ===== ===== =====
Change in cash and cash equivalents (8) (553)
===================================================== ===== ===== =====
Cash and cash equivalents at the start of the year 216 771
Effect of exchange rate fluctuations 4 (2)
===================================================== ===== ===== =====
Cash and cash equivalents at the end of the year 212 216
===================================================== ===== ===== =====
The Notes to the accounts section forms an integral part of
these financial statements.
Significant accounting policies
Reporting entity
3i Group plc (the "Company") is a public limited company
incorporated and domiciled in England and Wales. The consolidated
financial statements ("the Group accounts") for the year to 31
March 2022 comprise of the financial statements of the Company and
its consolidated subsidiaries (collectively, "the Group").
The Group accounts have been prepared and approved by the
Directors in accordance with section 395 of the Companies Act 2006
and the Large and Medium-Sized Companies and Groups (Accounts and
Reports) Regulations 2008. The Company has taken advantage of the
exemption in section 408 of the Companies Act 2006 not to present
its Company statement of comprehensive income and related
Notes.
A Basis of preparation
The Group and Company accounts have been prepared and approved
by the Directors in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and in accordance with UK-adopted international accounting
standards. The financial statements are presented to the nearest
million sterling (GBPm), the functional currency of the
Company.
The Group did not implement the requirements of any new
standards in issue for the year ended 31 March 2022. No other
standards or interpretations have been issued that are expected to
have a material impact on the Group's financial statements.
The principal accounting policies applied in the preparation of
the Group accounts are disclosed below, but where possible, they
have been shown as part of the Note to which they specifically
relate in order to assist the reader's understanding. These
policies have been consistently applied and apply to all years
presented, except for in relation to the adoption of new accounting
standards.
Going concern
These financial statements have been prepared on a going concern
basis as disclosed in the Directors' report. The Directors have
made an assessment of going concern for a period of at least 12
months from the date of approval of the accounts, taking into
account the Group's current performance, financial position and the
principal and emerging risks facing the business.
As detailed in the Strategic report of our Annual report and
accounts 2022, the Group generated an excellent result despite
varying degrees of Covid-19 restrictions, macro-economic pressures
and more recent geopolitical uncertainties. The Group has no direct
exposure to Russia or Ukraine, and the exposure across the
portfolio is limited, therefore this has no impact on the Going
Concern of the Group. As we enter the next financial year, both our
Private Equity and Infrastructure portfolios are well positioned to
continue on their respectively growth trajectories.
The Directors' assessment of going concern, which takes into
account this business model and the Group's liquidity of GBP729
million, indicates that the Group and parent company will have
sufficient funds to continue as a going concern, for at least the
next 12 months from the date of approval of the accounts. As
detailed within the Financial review, earlier in this document, the
Group covers its cash operating costs, GBP110 million at 31 March
2022, with cash income generated by our Private Equity and
Infrastructure businesses and Scandlines, GBP450 million at 31
March 2022. The Group's liquidity comprised of cash and deposits of
GBP229 million (31 March 2021: GBP225 million) and an undrawn
multi-currency facility of GBP500 million (31 March 2021: GBP500
million), which has no financial covenants. During the year the
Group successfully extended its multi-currency facility by one year
to March 2027 to further support the Group's long-term
liquidity.
The Group manages liquidity with the aim of ensuring it is
adequate and sufficient, by regular monitoring of investments,
realisations, operating expenses and portfolio cash income and
there have been no post balance sheet changes that would be
materially detrimental to liquidity. Within the next 12 months the
Group's GBP200 million fixed rate bond is due for repayment and the
Group is expected to have adequate liquidity to meet the liability
as it falls due. The Directors are of the opinion that the Group's
cash flow forecast is sufficient to support the Group given the
current market, economic conditions and outlook.
In addition, the Directors have modelled a number of severe, yet
plausible, individual and combined stress scenarios over a
three-year period to March 2025. The scenarios include the
consideration of the potential impact of a disrupted recovery in
the wake of Covid-19 in which persistent inflation and supply chain
disruption leads into a recession, as well as the impact of a
significant downturn event specifically on the Group's largest
asset. These scenarios include a range of estimated impacts,
primarily based on providing additional support to portfolio
companies. The scenarios are most sensitive to a delay in
realisations which contribute to liquidity of the Group. A key
judgement applied is the extent of recessionary impacts alongside
the likely recovery profile of portfolio companies. The severe
scenarios include assumptions modelling a combined scenario of a
recessionary environment modelled alongside the impact of a
significant downturn event on the Group's largest asset and the
impact of climate change on the underlying portfolio.
The results of each of the stress test scenarios indicate that
the Group is able to meet its obligations as they fall due for a
period of at least 12 months from the date of approval of these
financial statements including, where appropriate, making use of
controllable management actions. In all these scenarios the
Directors expect the Group to be able to recover without a
permanent long-term impact on its solvency or capital requirements.
Mitigating actions within management control include for example,
drawing on the existing RCF or temporarily reducing new investment
levels.
Having performed the assessment on going concern, the Directors
considered it appropriate to prepare the financial statements of
the Company and Group on a going concern basis, and have concluded
that the Group has sufficient financial resources, is well placed
to manage business risks in the current economic environment, and
can continue operations for a period of at least 12 months from the
date of issue of these financial statements.
B Basis of consolidation
In accordance with IFRS 10 the Company meets the criteria as an
investment entity and therefore is required to recognise
subsidiaries that also qualify as investment entities at fair value
through profit or loss. It does not consolidate the investment
entities it controls. Subsidiaries that provide investment related
services, such as advisory, management or employment services, are
not accounted for at fair value through profit and loss and
continue to be consolidated unless those subsidiaries qualify as
investment entities, in which case they are recognised at fair
value. Subsidiaries are entities controlled by the Group. Control,
as defined by IFRS 10, is achieved when the Group has all of the
following:
power over the relevant activities of the investee;
exposure, or rights, to variable returns from its involvement
with the investee; and
the ability to affect those returns through its power over the
investee.
The Group is required to determine the degree of control or
influence the Group exercises and the form of any control to ensure
that the financial treatment is accurate.
Subsidiaries are fully consolidated from the date on which the
Group effectively obtains control. All intragroup balances and
transactions with subsidiaries are eliminated upon consolidation.
Subsidiaries are de-consolidated from the date that control
ceases.
The Group comprises several different types of subsidiaries. For
a new subsidiary, the Group assesses whether it qualifies as an
investment entity under IFRS 10, based on the function the entity
performs within the Group. For existing subsidiaries, the Group
annually reassesses the function performed by each type of
subsidiary to determine if the treatment under IFRS 10 exception
from consolidation is still appropriate. The types of subsidiaries
and their treatment under IFRS 10 are as follows:
General Partners ("GPs") - Consolidated
General Partners provide investment management services and do
not hold any direct investments in portfolio assets. These entities
are not investment entities.
Investment managers/advisers - Consolidated
These entities provide investment related services through the
provision of investment management or advice. They do not hold any
direct investments in portfolio assets. These entities are not
investment entities.
Holding companies of investment managers/advisers -
Consolidated
These entities provide investment related services through their
subsidiaries. Typically they do not hold any direct investment in
portfolio assets and these entities are not investment
entities.
Limited Partnerships and other intermediate investment holding
structures - Fair valued
The Group makes investments in portfolio assets through its
ultimate parent company as well as through other limited
partnerships and corporate subsidiaries which the Group has created
to align the interests of the investment teams with the performance
of the assets through the use of various carried interest schemes.
The purpose of these limited partnerships and corporate holding
vehicles, many of which also provide investment related services,
is to invest for investment income and capital appreciation. These
partnerships and corporate subsidiaries meet the definition of an
investment entity and are accounted for at fair value through
profit and loss.
Portfolio investments - Fair valued
Under IFRS 10, the test for accounting subsidiaries takes wider
factors of control as well as actual equity ownership into account.
In accordance with the investment entity exception, these entities
have been held at fair value with movements in fair value being
recognised in profit or loss.
Associates - Fair valued
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated statement of
financial position at fair value even though the Group may have
significant influence over those companies.
Further detail on our application of IFRS 10 can be found in the
Reconciliation of Investment basis to IFRS section.
C Critical accounting judgements and estimates
The reported results of the Group are sensitive to the
accounting policies, assumptions and estimates that underpin the
preparation of its financial statements. UK company law and IFRS
require the Directors, in preparing the Group's financial
statements, to select suitable accounting policies, apply them
consistently and make judgements and estimates that are reasonable
and prudent. The Group's estimates and assumptions are based on
historical experience and expectation of future events and are
reviewed periodically. The actual outcome may be materially
different from that anticipated.
(a) Critical judgements
In the course of preparing the financial statements, one
judgement has been made in the process of applying the Group's
accounting policies, other than those involving estimations, that
has had a significant effect on the amounts recognised in the
financial statements as follows:
I. Assessment as an investment entity
The Board has concluded that the Company continues to meet the
definition of an investment entity, as its strategic objective of
investing in portfolio investments and providing investment
management services to investors for the purpose of generating
returns in the form of investment income and capital appreciation
remains unchanged.
(b) Critical estimates
In addition to these significant judgements the Directors have
made two estimates, which they deem to have a significant risk of
resulting in a material adjustment to the amounts recognised in the
financial statements within the next financial year. The details of
these estimates are as follows:
I. Fair valuation of the investment portfolio
The investment portfolio, a material group of assets of the
Group, is held at fair value. Details of valuation methodologies
used and the associated sensitivities are disclosed in Note 13 Fair
values of assets and liabilities in this document. Further
information can be found in Portfolio valuation - an explanation in
our Annual report and accounts 2022. Given the importance of this
area, the Board has a separate Valuations Committee to review the
valuations policies, process and application to individual
investments. A report on the activities of the Valuations Committee
(including a review of the assumptions made) is included in the
Valuations Committee report in our Annual report and accounts
2022.
II. Carried interest payable
Carried interest payable is calculated based on the underlying
agreements, and assuming all portfolio investments are sold at
their fair values at the balance sheet date. The actual amounts of
carried interest paid will depend on the cash realisations of these
portfolio investments and valuations may change significantly in
the next financial year. The fair valuation of the investment
portfolio is itself a critical estimate, as detailed above. The
sensitivity of carried interest payable to movements in the
investment portfolio is disclosed in Note 15 in our Annual report
and accounts 2022.
D Other accounting policies
(a) Gross investment return
Gross investment return is equivalent to "revenue" for the
purposes of IAS 1. It represents the overall increase in net assets
from the investment portfolio net of deal-related costs and
includes foreign exchange movements in respect of the investment
portfolio. The substantial majority is investment income and
outside the scope of IFRS 15. It is analysed into the following
components with the relevant standard shown where appropriate:
i. Realised profits or losses over value on the disposal of
investments are the difference between the fair value of the
consideration received in accordance with IFRS 13 less any directly
attributable costs, on the sale of equity and the repayment of
interest income from the investment portfolio, and its carrying
value at the start of the accounting period, converted into
sterling using the exchange rates in force at the date of
disposal.
ii. Unrealised profits or losses on the revaluation of
investments are the movement in the fair value of investments in
accordance with IFRS 13 between the start and end of the accounting
period converted into sterling using the exchange rates in force at
the date of fair value assessment.
iii. Fair value movements on investment entity subsidiaries are
the movements in the fair value of Group subsidiaries which are
classified as investment entities under IFRS 10. The Group makes
investments in portfolio assets through these entities which are
usually limited partnerships or corporate subsidiaries.
iv. Portfolio income is that portion of income that is directly
related to the return from individual investments. It is recognised
to the extent that it is probable that there will be economic
benefit and the income can be reliably measured. The following
specific recognition criteria must be met before the income is
recognised:
Dividends from equity investments are recognised in profit or
loss when the shareholders' rights to receive payment have been
established;
Interest income from the investment portfolio is recognised as
it accrues. When the fair value of an investment is assessed to be
below the principal value of a loan, the Group recognises a
provision against any interest accrued from the date of the
assessment going forward until the investment is assessed to have
recovered in value; and
The accounting policy for fee income is included in Note 4 in
our Annual report and accounts 2022.
v. Foreign exchange on investments arises on investments made in
currencies that are different from the functional currency of the
Company being sterling. Investments are translated at the exchange
rate ruling at the date of the transaction in accordance with IAS
21. At each subsequent reporting date, investments are translated
to sterling at the exchange rate ruling at that date.
vi. Movement in the fair value of derivatives relates to the
change in fair value of forward foreign exchange contracts which
have been used to minimise foreign currency risk in the investment
portfolio. See Note 18 for more details.
(b) Foreign currency translation
For the Company and those subsidiaries and associates whose
balance sheets are denominated in sterling, which is the Company's
functional and presentational currency, monetary assets and
liabilities and non-monetary assets held at fair value denominated
in foreign currencies are translated into sterling at the closing
rates of exchange at the balance sheet date. Foreign currency
transactions are translated into sterling at the average rates of
exchange over the year and exchange differences arising are taken
to profit or loss.
The statements of financial position of subsidiaries, which are
not held at fair value, denominated in foreign currencies are
translated into sterling at the closing rates. The statements of
comprehensive income for these subsidiaries and associates are
translated at the average rates and exchange differences arising
are taken to other comprehensive income. Such exchange differences
are reclassified to profit or loss in the period in which the
subsidiary or associate is disposed of.
(c) Treasury assets and liabilities
Short-term treasury assets, and short and long-term treasury
liabilities are used in order to manage cash flows.
Cash and cash equivalents comprise cash at bank and amounts held
in money market funds which are readily convertible into cash and
there is an insignificant risk of changes in value. Financial
assets and liabilities are recognised in the balance sheet when the
relevant Group entity becomes a party to the contractual provisions
of the instrument. De-recognition occurs when rights to cash flows
from a financial asset expire, or when a liability is
extinguished.
Notes to the accounts
1 Segmental analysis
Operating segments are the components of the Group whose results
are regularly reviewed by the Group's chief operating decision
maker to make decisions about resources to be allocated to the
segment and assess its performance.
The Chief Executive, who is considered to be the chief operating
decision maker, managed the Group on the basis of business
divisions determined with reference to market focus, geographic
focus, investment funding model and the Group's management
hierarchy. A description of the activities, including returns
generated by these divisions and the allocation of resources, is
given in the Strategic report. For the geographical segmental
split, revenue information is based on the locations of the assets
held. To aid the readers' understanding we have split out Action,
Private Equity's largest asset, into a separate column. Action is
not regarded as a reported segment as the chief operating decision
maker reviews performance, makes decisions and allocates resources
to the Private Equity segment, which includes Action.
The segmental information that follows is presented on the basis
used by the Chief Executive to monitor the performance of the
Group. The reported segments are Private Equity, Infrastructure and
Scandlines.
The segmental analysis is prepared on the Investment basis. The
Investment basis is an APM and we believe it provides a more
understandable view of performance. For more information on the
Investment basis and a reconciliation between the Investment basis
and IFRS can be found in the Reconciliation of Investment basis and
IFRS section earlier in this document.
1 Segmental analysis continued
Investment basis
Private Of which
Equity Action Infrastructure Scandlines Total(4)
Year to 31 March 2022 GBPm GBPm GBPm GBPm GBPm
=========================================================== ======= ======== ============== ========== ========
Realised profits over value on the disposal of investments 228 - 10 - 238
Unrealised profits on the revaluation of investments 3,545 2,655 178 101 3,824
Portfolio income
Dividends 331 288 31 13 375
Interest income from investment portfolio 73 - 12 - 85
Fees receivable 6 1 (3) - 3
Foreign exchange on investments (11) (56) 13 (4) (2)
Movement in the fair value of derivatives - - - 2 2
=========================================================== ======= ======== ============== ========== ========
Gross investment return 4,172 2,888 241 112 4,525
=========================================================== ======= ======== ============== ========== ========
Fees receivable from external funds 4 - 58 - 62
Operating expenses (83) - (43) (2) (128)
Interest receivable -
Interest payable (53)
Exchange movements 9
Other income 2
Operating profit before carried interest 4,417
=========================================================== ======= ======== ============== ========== ========
Carried interest
Carried interest and performance fees receivable 3 - 51 - 54
Carried interest and performance fees payable (416) - (38) - (454)
========================================================== ======= ======== ============== ========== ========
Operating profit before tax 4,017
=========================================================== ======= ======== ============== ========== ========
Tax charge (5)
Profit for the year 4,012
=========================================================== ======= ======== ============== ========== ========
Other comprehensive income
Re-measurements of defined benefit plans 2
========================================================== ======= ======== ============== ========== ========
Total return 4,014
=========================================================== ======= ======== ============== ========== ========
Realisations(1) 684 - 104 - 788
Cash investment(2) (457) - (85) (1) (543)
=========================================================== ======= ======== ============== ========== ========
Net divestment/(investment) 227 - 19 (1) 245
=========================================================== ======= ======== ============== ========== ========
Balance sheet
Opening portfolio value at 1 April 2021 8,814 4,566 1,159 435 10,408
Investment(3) 568 - 85 1 654
Value disposed (456) - (94) - (550)
Unrealised value movement 3,545 2,655 178 101 3,824
Other movement (including foreign exchange) (51) (56) 24 (4) (31)
=========================================================== ======= ======== ============== ========== ========
Closing portfolio value at 31 March 2022 12,420 7,165 1,352 533 14,305
=========================================================== ======= ======== ============== ========== ========
1 Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the
year, Private Equity received GBP3 million of cash proceeds which were recognised as realised
proceeds in FY2021. Infrastructure recognised GBP32 million of realised proceeds which are
to be received in FY2023 and Private Equity recognised GBP1 million of realised proceeds which
are to be received in FY2023.
2 Cash i nvestment per the segmental analysis is different to cash investment per the cash flow
due to a GBP53 million syndication in Infrastructure which was recognised in FY2022 and to
be received in FY2023.
3 Includes capitalised interest and other non-cash investment.
4 The total is the sum of Private Equity, Infrastructure and Scandlines, "Of which Action" is
part of Private Equity.
A number of items are not managed by segment by the chief operating decision maker and therefore
have not been allocated to a specific segment.
Investment basis
Private Of which
Equity Action Infrastructure Scandlines Total(4)
Year to 31 March 2021 GBPm GBPm GBPm GBPm GBPm
=========================================================== ======= ======== ============== ========== ========
Realised profits over value on the disposal of investments 29 - 6 - 35
Unrealised profits on the revaluation of investments 2,161 1,202 168 22 2,351
Portfolio income
Dividends 53 - 29 - 82
Interest income from investment portfolio 55 - 10 - 65
Fees receivable 9 1 - - 9
Foreign exchange on investments (371) (181) (39) (17) (427)
Movement in the fair value of derivatives - - 4 20 24
=========================================================== ======= ======== ============== ========== ========
Gross investment return 1,936 1,022 178 25 2,139
=========================================================== ======= ======== ============== ========== ========
Fees receivable from external funds 4 - 40 - 44
Operating expenses (70) - (40) (2) (112)
Interest receivable (1)
Interest payable (47)
Exchange movements 7
Other income 1
Operating profit before carried interest 2,031
=========================================================== ======= ======== ============== ========== ========
Carried interest
Carried interest and performance fees receivable (3) - 8 - 5
Carried interest and performance fees payable (173) - (11) - (184)
========================================================== ======= ======== ============== ========== ========
Operating profit before tax 1,852
=========================================================== ======= ======== ============== ========== ========
Tax charge -
Profit for the year 1,852
=========================================================== ======= ======== ============== ========== ========
Other comprehensive expense
Re-measurements of defined benefit plans (126)
========================================================== ======= ======== ============== ========== ========
Total return 1,726
=========================================================== ======= ======== ============== ========== ========
Realisations(1) 114 - 104 - 218
Cash investment(2) (508) (9) (2) - (510)
=========================================================== ======= ======== ============== ========== ========
Net (investment)/divestment (394) (9) 102 - (292)
=========================================================== ======= ======== ============== ========== ========
Balance sheet
Opening portfolio value at 1 April 2020 6,552 3,536 1,117 429 8,098
Investment(3) 633 9 2 - 635
Value disposed (85) - (98) - (183)
Unrealised value movement 2,161 1,202 168 22 2,351
Other movement (including foreign exchange) (447) (181) (30) (16) (493)
=========================================================== ======= ======== ============== ========== ========
Closing portfolio value at 31 March 2021 8,814 4,566 1,159 435 10,408
=========================================================== ======= ======== ============== ========== ========
1 Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the
year, Private Equity received GBP105 million of cash proceeds which were recognised as realised
proceeds in FY2020 and recognised GBP4 million of realised proceeds in Private Equity which
was received in FY2022.
2 Cash i nvestment per the segmental analysis is different to cash investment per the cash flow
due to GBP31 million of syndication in Private Equity which was recognised in FY2020 and received
in FY2021.
3 Includes capitalised interest and other non-cash investment.
4 The total is the sum of Private Equity, Infrastructure and Scandlines, "Of which Action" is
part of Private Equity.
A number of items are not managed by segment by the chief operating decision maker and therefore
have not been allocated to a specific segment.
Investment basis Northern North
UK Europe America Other Total
Year to 31 March 2022 GBPm GBPm GBPm GBPm GBPm
========================================= ===== ======== ======= ===== ======
Realised profits over value on the
disposal of investments 1 48 185 4 238
Unrealised profits on the
revaluation of investments 276 3,053 493 2 3,824
Portfolio income 60 390 13 - 463
Foreign exchange on investments - (78) 76 - (2)
Movement in fair value of derivatives - 2 - - 2
========================================= ===== ======== ======= ===== ======
Gross investment return 337 3,415 767 6 4,525
========================================= ===== ======== ======= ===== ======
Realisations 10 328 442 8 788
Cash investment (25) (374) (144) - (543)
Net (investment)/divestment (15) (46) 298 8 245
========================================= ===== ======== ======= ===== ======
Balance sheet
Closing portfolio value at 31 March 2022 1,948 10,388 1,947 22 14,305
========================================= ===== ======== ======= ===== ======
Investment basis Northern North
UK Europe America Other Total
Year to 31 March 2021 GBPm GBPm GBPm GBPm GBPm
========================================= ===== ======== ======= ===== ======
Realised profits over value on the
disposal of investments 2 8 - 25 35
Unrealised profits/(losses) on the
revaluation of investments 280 1,773 300 (2) 2,351
Portfolio income 47 93 13 3 156
Foreign exchange on investments - (289) (135) (3) (427)
Movement in fair value of derivatives - 20 4 - 24
========================================= ===== ======== ======= ===== ======
Gross investment return 329 1,605 182 23 2,139
========================================= ===== ======== ======= ===== ======
Realisations 2 88 74 54 218
Cash investment (171) (175) (164) - (510)
Net (investment)/divestment (169) (87) (90) 54 (292)
========================================= ===== ======== ======= ===== ======
Balance sheet
Closing portfolio value at 31 March 2021 1,645 7,260 1,481 22 10,408
========================================= ===== ======== ======= ===== ======
2 Per share information
The calculation of basic net assets per share is based on the
net assets and the number of shares in issue at the year end. When
calculating the diluted net assets per share, the number of shares
in issue is adjusted for the effect of all dilutive share awards.
Dilutive share awards are equity awards with performance conditions
attached see Note 27 in our Annual report and accounts 2022 for
further details.
2022 2021
========================================================= ====== =====
Net assets per share (GBP)
Basic 13.24 9.50
Diluted 13.21 9.47
Net assets (GBPm)
Net assets attributable to equity holders of the Company 12,754 9,164
========================================================= ====== =====
2022 2021
=================== ============== ============
Number of shares in issue
Ordinary shares 973,238,638 973,166,947
Own shares (10,212,745) (8,530,634)
=================== ============== ============
963,025,893 964,636,313
=================== ============== ============
Effect of dilutive potential ordinary shares
Share awards 2,705,623 2,656,230
=================== ============== ============
Diluted shares 965,731,516 967,292,543
=================== ============== ============
The calculation of basic earnings per share is based on the
profit attributable to shareholders and the weighted average number
of shares in issue. The weighted average shares in issue for the
year to 31 March 2022 are 966,091,793 (2021: 964,217,242). When
calculating the diluted earnings per share, the weighted average
number of shares in issue is adjusted for the effect of all
dilutive share awards. The diluted weighted average shares in issue
for the year to 31 March 2022 are 968,636,820 (2021:
966,547,522).
2022 2021
================================================================== ===== =====
Earnings per share (pence)
Basic 415.4 192.4
Diluted 414.3 191.9
Earnings (GBPm)
Profit for the year attributable to equity holders of the Company 4,013 1,855
================================================================== ===== =====
3 Dividends
2022 2022 2021 2021
pence per share GBPm pence per share GBPm
================== =============== ==== =============== ====
Declared and paid during the year
Ordinary shares
Second dividend 21.0 203 17.5 169
First dividend 19.25 186 17.5 169
================== =============== ==== =============== ====
40.25 389 35.0 338
================== =============== ==== =============== ====
Proposed dividend 27.25 262 21.0 203
================== =============== ==== =============== ====
The Group introduced a simplified dividend policy in May 2018.
In accordance with this policy, subject to maintaining a
conservative balance sheet approach, the Group aims to maintain or
grow the dividend each year. The first dividend has been set at 50%
of the prior year's total dividend.
The dividend can be paid out of either the capital reserve or
the revenue reserve subject to the investment trust rules, see Note
20 in our Annual report and accounts 2022 for details of
reserves.
The distributable reserves of the parent company are GBP3,968
million (31 March 2021: GBP3,811 million) and the Board reviews the
distributable reserves bi-annually, including consideration of any
material changes since the most recent audited accounts, ahead of
proposing any dividend. The Board also reviews the proposed
dividends in the context of the requirements of being an approved
investment trust. Shareholders are given the opportunity to approve
the total dividend for the year at the Company's Annual General
Meeting. Details of the Group's continuing viability and going
concern can be found in the Risk management section.
20 large investments
The 20 investments listed below account for 93% of the portfolio
at 31 March 2022 (31 March 2021: 95%). All investments have been
assessed to establish whether they classify as accounting
subsidiaries under IFRS and/or subsidiaries under the UK Companies
Act. This assessment forms the basis of our disclosure of
accounting subsidiaries in the financial statements.
The UK Companies Act defines a subsidiary based on voting
rights, with a greater than 50% majority of voting rights resulting
in an entity being classified as a subsidiary. IFRS 10 applies a
wider test and, if a Group is exposed, or has rights to variable
returns from its involvement with the investee and has the ability
to affect these returns through its power over the investee then it
has control, and hence the investee is deemed an accounting
subsidiary. Controlled subsidiaries under IFRS are noted below.
None of these investments are UK Companies Act subsidiaries.
In accordance with Part 5 of The Alternative Investment Fund
Managers Regulations 2013 ("the Regulations"), 3i Investments plc,
as AIFM, requires all controlled portfolio companies to make
available to employees an annual report which meets the disclosure
requirements of the Regulations. These are available either on the
portfolio company's website or through filing with the relevant
local authorities.
Residual Residual
Business line cost(1) cost(1) Valuation Valuation
Geography March March March March Relevant
Investment First invested in 2022 2021 2022 2021 transactions
Description of business Valuation basis GBPm GBPm GBPm GBPm in the year
------------------------ ------------------ -------- -------- --------- --------- ----------------------
Action* Private Equity 623 623 7,165 4,566 GBP284 million cash
General merchandise Netherlands dividend received
discount
retailer 2011/2020
Earnings
3i Infrastructure plc* Infrastructure 305 305 934 797 GBP27 million
Quoted investment UK dividend received
company,
investing in 2007
infrastructure
Quoted
------------------------ ------------------ -------- -------- --------- --------- ----------------------
Scandlines Scandlines 530 529 533 435 GBP13 million dividend
Ferry operator between Denmark/Germany received
Denmark
and Germany 2018
DCF
Cirtec Medical* Private Equity 172 172 513 444 Acquisition of
Outsourced medical US Cardea Catheter
device
manufacturing 2017 Innovations
Earnings in July 2021
Luqom* Private Equity 196 110 448 307 Acquisition of
Online lighting Germany Lampemesteren in
specialist
retailer 2017 April 2021 and
Earnings GBP81 million further
investment in the
year
Tato Private Equity 2 2 407 368 GBP14 million dividend
Manufacturer and seller UK received
of
speciality chemicals 1989
Earnings
------------------------ ------------------ -------- -------- --------- --------- ----------------------
Q Holding* Private Equity 162 162 398 187 Sale of QSR
Manufacturer of US division agreed
precision
engineered elastomeric 2014 in April 2022
components Sum of the parts
Hans Anders* Private Equity 269 268 345 262 Acquisition of
Value-for-money optical Netherlands Eyes! NV and Eyes
retailer 2017 Society BV in
Earnings December 2021.
GBP19 million dividend
received
Havea* Private Equity 196 187 304 242 Acquisition of
Manufacturer of natural France ixX Pharma in
healthcare and cosmetics 2017 September 2021
products Earnings
------------------------ ------------------ -------- -------- --------- --------- ----------------------
Royal Sanders* Private Equity 136 136 297 364 GBP84 million
Private label and Netherlands distribution received.
contract
manufacturing producer 2018 Acquisition of Otto
of
personal care products Earnings Cosmetic in
February 2022
----------------------- ------------------- -------- -------- --------- --------- ----------------------
Evernex* Private Equity 285 272 291 281 Acquisition of
Provider of third-party France Emcon-IT in
maintenance 2019 October
services for data Earnings 2021
centre
infrastructure
SaniSure* Private Equity 76 135 277 183 Returned GBP59 million
Manufacturer, US of investment to 3i
distributor and
integrator of 2019 in July 2021.
single-use
bioprocessing systems Earnings Acquisition of GL
and
Engineering in
components December 2021
AES Private Equity 30 30 269 212 Acquisition of
Manufacturer of UK JAtech Services in
mechanical seals
and support systems 1996 November
Earnings 2021
----------------------- ------------------- -------- -------- --------- --------- ----------------------
WP* Private Equity 239 222 234 259
Supplier of plastic Netherlands
packaging
solutions 2015
Earnings
----------------------- ------------------- -------- -------- --------- --------- ----------------------
Smarte Carte* Infrastructure 187 176 207 160
Provider of self-serve US
vended
luggage carts, 2017
electronic
lockers and concession DCF
carts
BoConcept* Private Equity 99 165 184 161 GBP90 million
Urban living designer Denmark distribution received
2016
Earnings
----------------------- ------------------- -------- -------- --------- --------- ----------------------
MPM* Private Equity 139 128 162 124
An international UK
branded,
premium and natural pet 2020
food
company Earnings
GartenHaus* Private Equity 121 72 131 66 Acquisition of
An online retailer of Germany Outdoor Toys in
garden
buildings, sheds, 2020 October 2021 with
saunas and
Earnings GBP45 million of
further
related products funding from 3i
----------------------- ------------------- -------- -------- --------- --------- ----------------------
Basic-Fit Private Equity 11 23 129 214 Proceeds received of
Discount gyms operator Netherlands GBP146 million
2013
Quoted
----------------------- ------------------- -------- -------- --------- --------- ----------------------
Audley Travel* Private Equity 243 197 117 85 Further investment of
Provider of UK GBP25 million
experiential
tailor-made travel 2015
DCF
4,021 3,914 13,345 9,717
------------------- -------- -------- --------- --------- ----------------------
* Controlled in accordance with IFRS.
1 Residual cost includes cash investment and interest net of
cost disposed.
List of Directors and their functions
The Directors of the Company and their functions are listed
below:
David Hutchison, Chairman
Simon Borrows, Chief Executive and Executive Director
Julia Wilson, Group Finance Director and Executive Director
Caroline Banszky, Independent non-executive Director
Stephen Daintith, Independent non-executive Director
Lesley Knox, Senior Independent non-executive Director
Coline McConville, Independent non-executive Director
Peter McKellar, Independent non-executive Director
Alexandra Schaapveld, Independent non-executive Director
By order of the Board
K J Dunn
Company Secretary
11 May 2022
Registered Office: 16 Palace Street, London SW1E 5JD
Glossary
2013-2016 vintage includes Aspen Pumps, Audley Travel,
Basic-Fit, Dynatect, Kinolt, ATESTEO, JMJ, Q Holding, WP,
Scandlines further (completed in December 2013), Christ, Geka,
Óticas Carol and Blue Interactive.
2016-2019 vintage includes BoConcept, Cirtec Medical, Formel D,
Hans Anders, arriva, Luqom, Havea, Royal Sanders, Magnitude
Software and Schlemmer.
2019-2022 vintage includes Evernex, SaniSure, GartenHaus, MPM,
WilsonHCG, Dutch Bakery, ten23 health, insightsoftware, MAIT, Mepal
and Yanga.
Alternative Investment Funds ("AIFs") at 31 March 2022, 3i
Investments plc as AIFM, managed seven AIFs. These were
3i Group plc, 3i Growth Capital B LP, 3i Growth Capital C LP, 3i
Europartners Va LP, 3i Europartners Vb LP, 3i Managed
Infrastructure Acquisitions LP and 3i Infrastructure plc. 3i
Investments (Luxembourg) SA as AIFM, managed one AIF, 3i European
Operational Projects SCSp.
Alternative Investment Fund Manager ("AIFM") is the regulated
manager of AIFs. Within 3i, these are 3i Investments plc and
3i Investments (Luxembourg) SA.
APAC The Asia Pacific region.
Approved Investment Trust Company This is a particular UK tax
status maintained by 3i Group plc, the parent company of 3i Group.
An approved Investment Trust company is a UK company which meets
certain conditions set out in the UK tax rules which include a
requirement for the company to undertake portfolio investment
activity that aims to spread investment risk and for the company's
shares to be listed on an approved exchange. The "approved" status
for an investment trust must be agreed by the UK tax authorities
and its benefit is that certain profits of the company, principally
its capital profits, are not taxable in the UK.
Assets under management ("AUM") A measure of the total assets
that 3i has to invest or manages on behalf of shareholders and
third-party investors for which it receives a fee. AUM is measured
at fair value. In the absence of a third-party fund in Private
Equity, it is not a measure of fee generating capability.
B2B Business-to-business.
Board The Board of Directors of the Company.
Buyouts 2010-2012 vintage includes Action, Amor, Element,
Etanco, Hilite, OneMed and Trescal.
CAGR is the compound annual growth rate.
Capital redemption reserve is established in respect of the
redemption of the Company's ordinary shares.
Capital reserve recognises all profits and losses that are
capital in nature or have been allocated to capital. Following
changes to the Companies Act, the Company amended its Articles of
Association at the 2012 Annual General Meeting to allow these
profits to be distributable by way of a dividend.
Carried interest payable is accrued on the realised and
unrealised profits generated taking relevant performance hurdles
into consideration, assuming all investments were realised at the
prevailing book value. Carried interest is only actually paid when
the relevant performance hurdles are met and the accrual is
discounted to reflect expected payment periods.
Carried interest receivable The Group earns a share of profits
from funds which it manages on behalf of third parties. These
profits are earned when the funds meet certain performance
conditions and are paid by the fund once these conditions have been
met on a cash basis. The carried interest receivable may be subject
to clawback provisions if the performance of the fund deteriorates
following carried interest being paid.
Company 3i Group plc.
DACH The region covering Austria, Germany and Switzerland.
Discounting The reduction in present value at a given date of a
future cash transaction at an assumed rate, using a discount factor
reflecting the time value of money.
EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation and is used as the typical measure of
portfolio company performance.
EBITDA multiple Calculated as the enterprise value over EBITDA,
it is used to determine the value of a company.
EMEA The region covering Europe, the Middle East and Africa.
Executive Committee The Executive Committee is responsible for
the day-to-day running of the Group and comprises: the Chief
Executive; Group Finance Director; the Managing Partners of the
Private Equity and Infrastructure businesses; and the Group's
General Counsel.
Fair value movements on investment entity subsidiaries The
movement in the carrying value of Group subsidiaries, classified as
investment entities under IFRS 10, between the start and end of the
accounting period converted into sterling using the exchange rates
at the date of the movement.
Fair value through profit or loss ("FVTPL") is an IFRS
measurement basis permitted for assets and liabilities which meet
certain criteria. Gains and losses on assets and liabilities
measured as FVTPL are recognised directly in the Statement of
comprehensive income.
Fee income (or Fees receivable) is earned for providing services
to 3i's portfolio companies and predominantly falls into one of two
categories. Negotiation and other transaction fees are earned for
providing transaction related services. Monitoring and other
ongoing service fees are earned for providing a range of services
over a period of time.
Fees receivable from external funds are earned for providing
management and advisory services to a variety of fund partnerships
and other entities. Fees are typically calculated as a percentage
of the cost or value of the assets managed during the year and are
paid quarterly, based on the assets under management to date.
Foreign exchange on investments arises on investments made in
currencies that are different from the functional currency of the
Company. Investments are translated at the exchange rate ruling at
the date of the transaction. At each subsequent reporting date
investments are translated to sterling at the exchange rate ruling
at that date.
Gross investment return ("GIR") includes profit and loss on
realisations, increases and decreases in the value of the
investments we hold at the end of a period, any income received
from the investments such as interest, dividends and fee income,
movements in the fair value of derivatives and foreign exchange
movements. GIR is measured as a percentage of the opening portfolio
value.
Growth 2010-2012 vintage includes Element, Hilite, BVG, Go
Outdoors, Loxam, Touchtunes and WFCI.
Interest income from investment portfolio is recognised as it
accrues. When the fair value of an investment is assessed to be
below the principal value of a loan, the Group recognises a
provision against any interest accrued from the date of the
assessment going forward until the investment is assessed to have
recovered in value.
International Financial Reporting Standards ("IFRS") are
accounting standards issued by the International Accounting
Standards Board ("IASB"). The Group's consolidated financial
statements are required to be prepared in accordance with IFRS.
Investment basis Accounts prepared assuming that IFRS 10 had not
been introduced. Under this basis, we fair value portfolio
companies at the level we believe provides useful comprehensive
financial information. The commentary in the Strategic report
refers to this basis as we believe it provides a more
understandable view of our performance.
IRR Internal Rate of Return.
Key Performance Indicator ("KPI") is a measure by reference to
which the development, performance or position of the Group can be
measured effectively.
Like-for-like compare financial results in one period with those
for the previous period.
Liquidity includes cash and cash equivalents (as per the
Investment basis Consolidated cash flow statement) and undrawn
RCF.
Money multiple is calculated as the cumulative distributions
plus any residual value divided by paid-in capital.
Net asset value ("NAV") is a measure of the fair value of our
proprietary investments and the net costs of operating the
business.
Operating cash profit is the difference between our cash income
(consisting of portfolio interest received, portfolio dividends
received, portfolio fees received and fees received from external
funds as per the Investment basis Consolidated cash flow statement)
and our operating expenses and lease payments (as per the
Investment basis Consolidated cash flow statement).
Operating profit includes gross investment return, management
fee income generated from managing external funds, the costs of
running our business, net interest payable, exchange movements,
other income, carried interest and tax.
Organic growth is the growth a company achieves by increasing
output and enhancing sales internally.
Performance fee receivable The Group earns a performance fee
from the investment management services it provides to 3i
Infrastructure plc ("3iN") when 3iN's total return for the year
exceeds a specified threshold. This fee is calculated on an annual
basis and paid in cash early in the next financial year.
Portfolio effect is the level of risk based on the diversity of
the investment portfolio.
Portfolio income is that which is directly related to the return
from individual investments. It is comprised of dividend income,
income from loans and receivables and fee income.
Proprietary Capital is shareholders' capital which is available
to invest to generate profits.
Public Private Partnership ("PPP") is a government service or
private business venture which is funded and operated through a
partnership of government and one or more private sector
companies.
Realised profits or losses over value on the disposal of
investments is the difference between the fair value of the
consideration received, less any directly attributable costs, on
the sale of equity and the repayment of loans and receivables and
its carrying value at the start of the accounting period, converted
into sterling using the exchange rates at the date of disposal.
Revenue reserve recognises all profits and losses that are
revenue in nature or have been allocated to revenue.
Segmental reporting Operating segments are reported in a manner
consistent with the internal reporting provided to the Chief
Executive who is considered to be the Group's chief operating
decision maker. All transactions between business segments are
conducted on an arm's length basis, with intrasegment revenue and
costs being eliminated on consolidation. Income and expenses
directly associated with each segment are included in determining
business segment performance.
Share-based payment reserve is a reserve to recognise those
amounts in retained earnings in respect of share-based
payments.
SORP means the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital
Trusts.
Syndication is the sale of part of our investment in a portfolio
company to a third party, usually within 12 months of our initial
investment and for the purposes of facilitating investment by a
co-investor or portfolio company management in line with our
original investment plan. A syndication is treated as a negative
investment rather than a realisation.
Total return comprises operating profit less tax charge less
movement in actuarial valuation of the historic defined benefit
pension scheme.
Total shareholder return ("TSR") is the measure of the overall
return to shareholders and includes the movement in the share price
and any dividends paid, assuming that all dividends are reinvested
on their ex--dividend date.
Translation reserve comprises all exchange differences arising
from the translation of the financial statements of international
operations.
Unrealised profits or losses on the revaluation of investments
is the movement in the carrying value of investments between the
start and end of the accounting period converted into sterling
using the exchange rates at the date of the movement.
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END
FR EANSFFAXAEFA
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