2nd UPDATE: 3i Group Investments Up 38% In 1Q, Sales Fall 52%

7th Jul 2010 09:10

(Adds analyst comment.) By Marietta Cauchi Of DOW JONES NEWSWIRES LONDON (Dow Jones)--3i Group PLC (III.LN) Wednesday said it had invested GBP105 million in its fiscal first quarter, a rise of 38% compared with the same period last year, and that the company continued to perform well despite uncertain markets. "We are seeing stable to improving earnings performance across the portfolio and continue to see a good pipeline of investment opportunities," Chief Executive Officer Michael Queen said in a statement. In an interim management statement for June 30, 3i said that the bulk of the investment, GBP70 million, was spent on its existing portfolio company while it made one new investment of GBP35 million in Vedici, an acute care company in France. However, realizations, or asset sales, over the period were down over the quarter compared with the same period last year. 3i Group said realisation proceeds totaled GBP79 million, which was 52% less than the GBP163 million it made last year. The largest realisation was the sale of Kniep, which brought in proceeds of GBP29 million. Sales over the period exclude Inspectorate, the oil testing and certification business owned by 3i's portfolio company Inspicio Group, which it agreed last month to sell to French assessment and certification company Bureau Veritas (BVI.FR) for GBP450 million. 3i said the deal was expected to generate proceeds of around GBP120 million when the sale completes at the end of summer. 3i is well-positioned to take advantage of investment opportunities after closing the year in March having posted a 15% rise in full-year net asset value, boosted by strong asset sales and a dramatic cut in debt. As a result of initiatives driven by CEO Queen, including a rights issue and portfolio sales, the company reduced debt by the end of the year to GBP258 million, compared with GBP1.91 billion at the end of fiscal year 2008. On Wednesday, 3i Group said that net debt had increased from its year end level to GBP325 million because of net outflows from its investments and realizations as well as operating costs. Unlike many of its peers, 3i isn't hamstrung by a focus on buyouts and also invests in growth capital and infrastructure. Its 33.3% stake in 3i Infrastructure PLC (3IN.LN) is benefiting from ongoing activity in the sector as emerging market governments develop infrastructure programs in partnership with the private sector and banks worldwide continue to sell non-core assets. For example, 3i Infrastructure is currently part of a consortium conducting due diligence for HSBC Holdings PLC's (HBC) train rolling stock unit, which is valued at approximately GBP2 billion. The company is also likely to bid for High Speed 1, or HS1 Ltd., the U.K.'s first high-speed rail line being sold by the government. At 0808 GMT, 3i Group's shares were down 3 pence, or 1%, at 260 pence, compared with a 1.5% decline in the FTSE General Financial Sector Index. Analysts said the rise in debt was to be expected as the investment environment improved and that the most important part of the business--the private equity firm's portfolio companies--were performing well. "Overall, we would view this statement as a minor positive, as the market has been in worry mode recently, and this update suggests that 3i's portfolio, at least, is in decent shape," Merrill Lynch said. -By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; [email protected] (END) Dow Jones Newswires July 07, 2010 04:10 ET (08:10 GMT)