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3i on a tear thanks to solid returns

The investment group is upping its dividend as investments generate healthy returns
May 22, 2017

3i (III) has placed greater confidence in its private equity and infrastructure investment capabilities. The investment group sold its debt management arm last year, since its remaining two businesses generate enough cash to fulfil its dividend payouts to shareholders. The £270m proceeds of the sale and strength of the investment pipeline meant management boosted the additional element of the dividend to 10.5p a share.

IC TIP: Hold at 833p

Private equity generated an impressive 43 per cent gross return on the starting portfolio value at the beginning of April 2016, mostly upward revaluation. Investments in disruptive value retailer Action and German ferry operator Scandlines were particularly strong performers. In fact, 93 per cent of the portfolio by value grew earnings last year, up from 84 per cent during 2016. Nine unquoted investments were disposed of, including Tommee Tippee-brand owner Mayborn. The business also gained £154m by reducing or exiting some of its listed holdings. Overall, £982m in private equity investments were sold last year, while investments totalling £478m were made.

A further £131m was invested in infrastructure group 3iN, as part of a placing to raise £350m. 3iN completed six new investments, including Wireless Infrastructure Group and wind energy generator Infinis, totalling £479m.

Analysts at Barclays expect adjusted book value of 630p a share at March 2018, flat on 12 months earlier.

3I (III)

ORD PRICE:833pMARKET VALUE:£8.1bn
TOUCH:832.5-833p12-MONTH HIGH:845pLOW: 468p
DIVIDEND YIELD:3.2%PE RATIO:5
PREMIUM TO NAV:38%NET CASH:£419m

Year to 31 MarNet asset value (p)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20133110.3638.38.1
20143480.5254.820
20153960.7073.920
2016 (restated)4630.7985.622
20176041.53169.226.5
% change+30+93+98+20

Ex-div: 15 Jun

Payment: 21 Jul