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LONDON (Alliance News) - 3i Group PLC Wednesday said its fiscal year profit rose by almost a third, driven by higher gains on its investments and narrowed operating expenses achieved under cost cuts set out in its strategic plan two years ago.
3i Group, which invests in private equity and infrastructure while running a debt management business, said it made a GBP470.0 million pretax profit in the year ended March 31, compared with GBP358.0 million a year earlier.
Gross investment return rose to GBP665.0 million, from GBP598.0 million a year earlier, driven by GBP202.0 million of realised gains on disposals and GBP475.0 million of unrealised gains. Operating expenses narrowed to GBP136.0 million, from GBP170.0 million, as the private equity firm made GBP70.0 million of cumulative run-rate operating cost reductions, ahead of the GBP60.0 million target.
3i has also been taking care of its balance sheet, reducing gross debt and cutting gross interest costs to GBP54.0 million, ahead of the GBP60.0 million target. 3i has been trying to cover operating costs with annual cash income, grow third-party income and generate a sustainable annual operating profit from its fund management activities, and improve capital allocation.
During the year, 3i made a number of new private equity investments and closed the acquisition of Barclays PLC's European infrastructure fund management business. It also closed four collateralized loan obligations during the year, two each in the US and Europe.
Chief Executive Simon Borrows, who set out the three-year strategic plan for 3i in June 2012, said the firm has met or exceeded all of its strategic priorities and targets for the year.
"3i is now a more streamlined, decisive organisation focused on high performance and delivering attractive shareholder returns. We have started the new financial year with good momentum in our private equity portfolio and ambitious plans in our three businesses," Borrows said in a statement.
"The current environment is a tricky one for new investments. There is an excess of capital looking for investment opportunities and this has driven up sellers' price expectations. We have benefited from this in our realisation programme, however as we review new investment we will need to continue to be patient and disciplined," Borrows said.
In addition, 3i said it has made arrangements with Merrill Lynch International to offer to purchase all the issued B shares for cash at 131.4364 pence. There are currently about 4.6 million B shares in issue. Merrill Lynch International will have the right to require 3i to buy the B shares up. If that sale goes ahead, the B shares will be cancelled and de-listed, 3i said.
3i shares were Wednesday quoted at 393.30 pence, up 4.0%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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