Market headwinds are occupying minds at private equity group 3i (III). Significantly, management flagged market volatility and economic weakness in the eurozone as big drags on investment activity. And while healthy asset prices boosted the group's book value at the half-year stage, that also makes new investments expensive.
Against that backdrop, 3i continues to work on costs - which fell 7 per cent year on year at the operating level - as well as on its longer-term strategy of refocusing the portfolio on the best-performing assets. The book comprised an unwieldy 487 investments back in 2008, but that's now down to 72.
Regardless of market headwinds, 3i still invested a total of £199m in the period (up from £92m a year earlier). Meanwhile, realisations were £324m, with a further £218m of realisation proceeds since the period ended. It's actually the fairly volatile rate of realisations that explains the dividend cut. Along with a half-year base dividend of 2.7p, 3i pays an additional dividend comprising around 20 per cent of gross realisations. Last year the tally of realisations was £528m at the half-year stage, triggering a higher overall payout.
Broker Keefe, Bruyette & Woods expects full-year book value of 395p a share (from 348p in 2014).
3i (III) | ||||
|---|---|---|---|---|
| ORD PRICE: | 409p | MARKET VALUE: | £4bn | |
| TOUCH: | 408-409p | 12-MONTH HIGH: | 428p | LOW: 334p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 6 | |
| PREMIUM TO NAV: | 14% | NET DEBT: | 5% | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 324 | 164 | 17.3 | 6.7 |
| 2014 | 358 | 257 | 27.0 | 6 |
| % change | +10 | +57 | +56 | -10 |
Ex-div: 11 Dec Payment: 7 Jan | ||||
