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3i dispels doubts as total returns surge

The private equity group has shrugged off anxieties over June's EU referendum to drive up total returns
November 14, 2016

There was speculation that private equity groups would suffer in the run-up to June's European Union referendum, but the latest half-year figures from 3i (III) suggest that these worries were overdone. In fact, the subsequent devaluation of sterling resulted in a net foreign exchange gain of £283m. The group, which also incorporates infrastructure and debt management divisions, shrugged off geopolitical uncertainties and some shortlived market volatility to post a gross investment return of 25.3 per cent, while driving total returns over the £1bn mark from £168m in the corresponding period in 2015.

IC TIP: Hold at 616p

It was a particularly busy period in terms of private equity realisations, reflected in proceeds of £654m with returns over double the level of invested capital. With an eye on future returns, 3i invested £287m in two new private equity investments: Schlemmer and BoConcept.

Elsewhere in the group, investors will take encouragement from the performance of the infrastructure business, which delivered a gross investment return of £90m in addition to fee income. And although the group launched two new collateralised loan obligations through to the end of September, a decision was taken subsequent to the period-end to hive off the debt management business to Investcorp for gross cash proceeds of £222m.

Analysts at JPMorgan Cazenove expect net asset value of 584p a share for the March 2017 year-end, up from 463p in 2016.

3I (III)
ORD PRICE:616pMARKET VALUE:£5.99bn
TOUCH:616-617p12-MONTH HIGH:680pLOW: 381p
DIVIDEND YIELD:3.9%PE RATIO:4
PREMIUM to NAV:11%NET CASH:£187m

Half-year to 30 SepNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201540315015.86.0
201655494698.58.0
% change+37+531+523+33

Ex-div: 8 Dec

Payment: 4 Jan