3i has released preliminary results for last year revealing losses of £1,097 million for the six months from April 2001 but a positive return of £137 million for the following six months. Although the company’s strategy remains the same, at £1 billion last year’s investments were at half the level of those made the previous year. In a statement the company said: “The outlook is improving and higher levels of investment are expected next year.” The rate of investment is already picking up with £116 million committed world wide by the group in April.
The overall loss of £960 million for the year, compared to a negative return of £142 million for 2000-2001, is attributed to a write down of £890 million in the value of quoted and unquoted investments and increased provisions. Quoted investments lost £303 million, down rounds saw unquoted investments reduced by £181 million and provisions of £400 million were made against companies thought likely to fail.
Interim results at the end of October last year brought the initial news of large losses, restructuring and 185 redundancies, representing about 17 per cent of 3i’s staff. Baroness Hogg, who replaced George Russell as the company’s chairman at the end of 2001, said: “Since the autumn, when 3i reported on the difficult conditions it had experienced, there have been some encouraging signs of improvement.” Comfort will certainly be drawn from the profits earned through the sale of airline Go to former rival, easyJet. Just 11 months ago 3i acquired 62 per cent of Go for £83.5 million and the company has recently been sold for £374 million. Brian Larcombe, chief executive of 3i, said: “While the venture capital market remains a tough one, this deal is part of a welcome trend which suggests that the environment is improving.”
Go is the latest in a string of exits for 3i, including Fairview and Brayshay, which contributed to total realisations of £152 million in April. With the UK IPO market beginning to show some signs of life the group has already benefited from the listing of orthopedic device company, Corin and also plans to float 20-year old investment John Wood. Realisations last year generated proceeds of £1.1 billion.
3i is planning to launch a €3 billion (£1.8 billion) mid-market buyout fund to add to the £2 billion in unquoted third party funds and £0.8 billion in quoted funds already under management. The fund, to be raised 50:50 from third party investors and 3i, will be the firm’s fourth devoted to this sector. The last fund raised £1.3 billion in 1999. The firm also plans to issue £300 million of preferred securities to take advantage of attractive investment opportunities. These will be perpetual and bear a fixed non-cumulative coupon.
Last year 3i invested £119 million in the US, where it has been active since 1999, and achieved its first exit. Eight investments worth £31 million were made in Asia and the company acquired Swedish venture capital firm, Atle. 3i’s position in the buyout market remains stable but it has reduced early stage technology investments.