You would be forgiven for thinking private equity was protected from the mood swings of public markets. But investors such as 3i (III) need to value companies in which they hold stakes, and to unlock value through sales, and these processes often depend on stock markets. Considering the late-summer correction in stocks, 3i is not doing too badly.
A gross investment return of 7 per cent, relative to portfolio value at the start of the period, compared unfavourably with 8 per cent in the first half of FY2015. Profit on disposals* came in lower at £26m, compared with £34m. But it was the revaluation of 3i's private equity investments which was well down on last year, both because earnings growth provided less of a boost and because the valuation multiples applied to earnings moved in the wrong direction. All in all, 3i received £174m from revaluations over the period, far less than the £308m uplift in the first half of last year.
The challenge for private equity investors is clear. "We have been quite a long way down the altar on a couple of investments, but they have just moved away from us in terms of price," says finance chief Julia Wilson. As a result, 3i realised more investments than it made - a situation that will become a concern if maintained.
Barclays expects book value of 440p at the end of March 2016, up from 396p a year before.
*13 November 2015: The original version of this article referred only to "disposals". This was amended for clarity.
| 3i (III) | ||||
|---|---|---|---|---|
| ORD PRICE: | 490.3p | MARKET VALUE: | £4.8bn | |
| TOUCH: | 490.2-490.8p | 12-MONTH HIGH: | 567p | LOW: 392p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 30 | |
| PREMIUM TO NAV: | 22% | NET DEBT: | £12m | |
| Year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 361 | 257 | 26.8 | 6 |
| 2015 | 403 | 155 | 16.3 | 6 |
| % change | +12 | -40 | -39 | - |
Ex-div: 10 Dec Payment: 6 Jan | ||||
