3i boosts NAV 19% despite Agent Provocateur writedown


3i Group disclosed “accounting issues” at portfolio company Agent Provocateur

The company reaffirmed its commitment to spending up to £750 million a year on four to seven new investments, with chief executive Simon Borrows saying on an earnings call: “Expect [it] to be a busy year for investments and divestments.”

In the statement the firm said it has adopted a “patient approach” to investing “in an environment where valuations remain high”.

Borrows added that the firms sees “potential to grow earnings significantly over time” in the mid-market.

He dismissed concerns around the UK’s vote to leave the European Union and said sterling depreciation had benefited the firm.

“We’re not seeing any major impact across portfolio from the Brexit vote and uncertainties,” said Borrows. “Seventy percent of our investments are non-sterling investments…We don’t have any property companies.”

The firm said it generated £654 million of proceeds from private equity realisations during the period, with an average a 2.3 times money multiple, more than double the £307 million in the same period a year earlier.

During the period it made £287 million of private equity investments, including capital injections in furniture company Bo Concept and cable management solutions business Schlemmer. On November 4, the firm announced its third private equity commitment of the fiscal year, a £150 million in consumer healthcare business Ponroy Santé.

However it reduced the value of its investment in upmarket lingerie retailer Agent Provovateur by £39 million, saying it was hit by declining luxury spending, problems with new stores, and “the discovery of accounting issues”.

Borrows warned that “there’s been continuing weakness of businesses with indirect exposure to oil and gas”, but added that the firm has “remained disciplined” in its approach.

Assets under management in its debt management business, which it agreed to sell to Investcorp for £222 million in October “doubled under 3i ownership”, Borrows said. He added that the purpose of selling was that it wasn’t core to 3i’s business.

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