Business review Financial review
This review provides detailed information on our financial performance for the year and the financial position at the year end.
Investment activity
| Table 1: Investment
by business line and geography (£m) for the year to 31 March |
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| Continental Europe | UK | Asia | US | Rest of World | Total | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Buyouts | 326 | 248 | 169 | 203 | – | – | – | – | 3 | – | 498 | 451 |
| Growth Capital | 212 | 234 | 11 | 168 | 258 | 91 | – | – | 1 | 4 | 482 | 497 |
| Venture Capital | 15 | 53 | 81 | 31 | 1 | – | 92 | 70 | 11 | 2 | 200 | 156 |
| Infrastructure | 6 | – | 374 | – | – | – | – | – | – | – | 380 | – |
| QPE | – | – | 14 | – | – | – | – | – | – | – | 14 | – |
| SMI | 1 | 3 | 1 | 3 | – | – | – | – | – | – | 2 | 6 |
| Total | 560 | 538 | 650 | 405 | 259 | 91 | 92 | 70 | 15 | 6 | 1,576 | 1,110 |
Investment
A total of £1,576 million was invested from our balance sheet during the year in 62 new assets, including the £91 million cash investment in 3i Infrastructure Limited (2006: £1,110 million, 58 new assets). Buyouts accounted for 32% of this total investment; Growth Capital 31%; Infrastructure 24%; and Venture Capital 13%. Investment made on behalf of co-investment funds, principally in Buyouts, was £290 million (2006: £212 million).
This represents a year-on-year increase of 42% in investment and followed an increase in the average size of new investment for the year to £26 million (2006: £15 million). The two largest new investments for each of Buyouts, Growth Capital and Venture Capital are profiled in the Case studies section.
The increase also reflects, in line with our strategy, the significant growth of investment in Asia, which included transactions in China, India and Singapore, totalling £259 million (2006: £91 million). The significant rise in investment in the UK included the £251 million investment in AWG. US Venture Capital investment, principally in later-stage situations, also grew by 31% and accounted for 6% of total Group investment in the year.
The Group invested a further £77 million in private equity funds of which £26 million was in new funds (Ithmar Capital L.L.C., Korea Global Fund L.P., D T Capital Partners, Indiareit Offshore Fund and the SVG Strategic Recovery Fund II). Commitments to these five new funds totalled £81 million.
| Table 2: Realisation
proceeds by business line and geography (£m) for the year to 31 March |
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| Continental Europe | UK | Asia | US | Rest of World | Total | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Buyouts | 617 | 471 | 724 | 406 | – | – | – | – | – | – | 1,341 | 877 |
| Growth Capital | 435 | 293 | 203 | 453 | 53 | 66 | – | 43 | – | – | 691 | 855 |
| Venture Capital | 61 | 84 | 69 | 89 | 1 | 1 | 56 | 33 | – | – | 187 | 207 |
| Infrastructure | – | – | 5 | – | – | – | – | – | – | – | 5 | – |
| QPE | – | – | – | – | – | – | – | – | – | – | – | – |
| SMI | 46 | 43 | 168 | 225 | – | – | – | – | – | – | 214 | 268 |
| Total | 1,159 | 891 | 1,169 | 1,173 | 54 | 67 | 56 | 76 | – | – | 2,438 | 2,207 |
Realisations
The ability to capitalise on continued favourable market conditions throughout this year gave rise to realisation proceeds of £2,438 million (2006: £2,207 million).
Once again, this represented a high level of portfolio activity resulting in some 39% of the total opening portfolio value being realised in the year (2006: 38%). Europe continued to represent the majority of realisations, with the continental European portfolio contributing £1,159 million (2006: £891 million), and the UK £1,169 million (2006: £1,173 million). Realisations from the portfolio in Asia of £54 million came principally from Chinese investments.
The nature of realisations followed a broadly similar pattern to last year with 37% of proceeds arising from trade sales (2006: 31%) and 8% through refinancing portfolio businesses (2006: 8%). Sales to other private equity firms, so-called "secondaries", amounted to £651 million (2006: £404 million). Ten portfolio companies achieved an IPO during the year and realisations from these and other quoted portfolio companies amounted to £240 million (2006: £372 million).
The SMI portfolio delivered realisations of £214 million from 233 investments (2006: £268 million, 278 investments). Consistent with our strategy, this portfolio, which is now valued at £391 million, has been reduced from 1,079 companies as at 31 March 2004 to 293 at 31 March 2007, realising £916 million in the process.