3i Group share price: Company updates on first-quarter performance

3i Group (LON:III) has updated investors on its first-quarter performance this morning.

**Highlights from the company statement:**
Simon Borrows, Chief Executive, commented:

“This was a busy quarter for 3i. To date we have announced some £580 million of realisations, as well as two new investments in Private Equity and a £131 million further investment in 3iN. As we announced on 30 June 2016, we have materially increased the valuation of Action to £1.5 billion.

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We remain focused on executing our strategy and we will continue to drive the performance of our portfolio and seek attractive investment opportunities.”

Private Equity
Investments
The team started the year with a promising pipeline of opportunities. In May we announced a €181 million investment in Schlemmer, a global leader in cable management solutions for the automotive industry headquartered in Germany. The investment is subject to customary regulatory approvals. In early July we announced a c.£132 million investment in BoConcept, an urban interior design brand in the affordable luxury segment headquartered in Denmark.

Realisations

We generated total cash proceeds in the quarter of £438 million. The strong realisations activity has continued in the second quarter and we agreed the sales of GEKA, Polyconcept and UFO Moviez in July 2016.
Portfolio performance

As announced previously, we have materially increased Action’s valuation to £1,488 million1 (31 March 2016: £902 million). This implies a post discount run-rate EBITDA multiple of 18.2x applied to the run-rate earnings as at 31 March 20162 and is equivalent to a post-discount multiple of less than 15x the expected run rate earnings at 31 December 2016.

The Private Equity portfolio continued to perform well in the quarter despite the challenging macroeconomic and market conditions. Overall, our decision to adjust multiples to reflect sector and multiple trends helped to mitigate the immediate impact of the market volatility caused by the result of the EU referendum. Our exposure to the sectors which have experienced the most obvious challenges over the last 12 months remains limited and, while we cannot be immune to what we expect will be a volatile and challenging period, we expect the portfolio to be generally resilient as the wider implications of Brexit unfold.

Infrastructure

As part of 3iN’s successful £385 million capital raising, 3i invested £131 million to maintain its 34% shareholding.

Debt Management

The Debt Management team closed Harvest XV, a new European CLO, for €413 million in May 2016, raising new assets under management of £335 million. 3i invested £22 million into this CLO.
Total return and NAV position

We continue to generate good levels of cash income whilst remaining disciplined over costs and operating cash profit was £14 million in the quarter.

The increase in Action’s valuation resulted in a corresponding uplift in the amounts of carry receivable and payable. The net carry payable recognised in the quarter was £53 million. We expect that net carry payable will be accrued at the lower end of 10-15% of gross investment return for this financial year.

The positive foreign exchange impact was 20 pence in the quarter as the portfolio benefitted from the weakening of sterling following the result of the UK’s EU referendum. Based on the balance sheet at 30 June 2016, a 1% movement in the euro and US dollar would result in a total return movement of £30 million and £7 million respectively.

These factors, together with the value growth from our investment portfolio resulted in an increase in diluted NAV per share to 538 pence (31 March 2016: 463 pence) and 522 pence ex-dividend.

Balance sheet and dividend

The Group’s balance sheet remains strong and well funded. Net cash increased to £437 million, principally due to good levels of realised proceeds in the quarter. The 16 pence final FY2016 dividend was paid on 22 July and amounts to £154 million.
As of 07:17 BST, Wednesday, 27 July, 3i Group plc share price is 608.50p.