Private equity company 3i posts 10 per cent half year return

But shares fall over sale of holdings in its prime retail asset

Leading British private equity company 3i has posted a half year return of 10 per cent – £767 million – aided by a solid trading performance across its portfolio.

3i’s net asset value per share rose 7 per cent to 873 pence on September 30, from 815 pence at March 31. The firm said it would pay an interim dividend of 17.5 pence per share.

However, investors were not entirely impressed, with the company’s shares on the 0'>FTSE – currently trading down by 5.4 per cent at 1,064.5p. Analysts had mixed feelings about whether it is the group’s results that have precipitated the drop, or if traders have been spooked by an initiative to provide liquidity to investors in the group’s Eurofund V fund from the sale of 3i’s holding in discount retailer Action.

The key issue appears to be valuation of the Benelux based retailer. The transaction values Action, which has shown meteoric levels of growth in recent years, at a post-discount enterprise value of €10.25 billion. This represents a net multiple of 18.2 times the underlying earnings (EBITDA) run rate and 20.3 times the last 12 months EBITDA. Yet some analysts believe Action is worth significantly more than the figure it was valued in the transfer.

When 3i invested in Action eight years ago it had just 250 shops in The Netherlands and was worth €600 million. Today it boasts 1,500 stores across the continent and has returned €2 billion to investors.

The retailer is both the best performing asset in the company’s portfolio and also its largest investment.

3i Chief Executive Simon Borrows believes that overall progress has been made in the half year. “Despite the uncertain macroeconomic environment, the majority of our investments have moved into the second half of the year with decent momentum,” he told reporters.

In the half year the company completed new investments in Magnitude Software and Evernex and made seven acquisitions for its portfolio companies in the first half.

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