3i Group annual results presentation webcast 2004 - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

BARONESS HOGG, CHAIRMAN, 3I GROUP PLC: Now good morning everyone, and welcome to 3i and well done for making it through the lift. Thank you for joining us today for this presentation of our annual results to 31st of March 2004, and you'll see from these presentations that 3i has delivered a strong overall performance with significantly improved financial results for the year. Now, as the presentation are being webcast and they include a financial review by our Finance Director Michael Queen, and reviews of 3i's early stage technology of venture capital business, which is lead by Rod Perry. Growth capital, which is headed up by Chris Rowlands, and our buyout business, which is driven by Jonathan Russell. But first, however, I'd like to hand over to Brian Larcombe, our Chief Executive who will start with a review of our business over the last year, and Brian will conclude the presentations with an update since the year-end. I will then take your questions. Thank you.

BRIAN LARCOMBE, CHIEF EXECUTIVE, 3I GROUP PLC: Well, good morning and let me add my words of welcome. Welcome to our results presentation. Now, as usual there is a full copy of the stock exchange announcement in your pack. This also includes a more detailed breakdown of returns than we have presented before. The last financial year has been one of much stronger performance and one in which our strategy and the changes that we've made and driven through the business since 2000 are now delivering good results. We have also outperformed our industry, as I'll show you in a moment. Now, as I suggested last autumn, new investment activity picked up significantly in the second half, and there was also a good flow of realization profits throughout the year. 3i totally returned for the year of 531m pounds, represents some 18.1% return on opening shareholders funds, and the return was 20.3% before unrealized currency translation losses. Net asset value at the year-end was 562 pence per share, that was before the final dividend and 553 pence after a recommended final dividend of 8.9 pence per share, giving us 3.7 increase for the year as a whole. Realized profits were 228m pounds and equity assets were sold at a 58% premium to their value at the start of the year, [Inaudible] with a premium of 34% last year. New investment activity including care investment funds rose to 979m pounds for the year as a whole as the strong pipeline of opportunities, which built up in the first half of last year were converted. Now this slide shows total return by products. As you can see, our buy-out in growth capital businesses have both had an excellent year, and after three difficult years, 3i's venture business has seen a significant turnaround.

Now let us return on an ungeared basis and without a currency translation loss would be modestly positive. Now, our overall return of 18.1% for the year to March can compare with performance data produced by Thomson Venture Economics for the European private equity and venture capital association. Now this shows an overall industry return for calendar 2003 of minus 1.4%. Data is not strictly comparable, but it does suggest that 3i is performing within the top quartile of the industry. I'd now like to look at the market in more detail. This slide shows you the trends for European mid market buyouts and European and US venture investment. The buyout trend is clearly more volatile quarter-to-quarter, but has been rising and venture investing also is rising having bottomed out, it is now recovering from quite a low base. 3i's market share new investment in Europe has stayed fairly constant and we continued to lead the market in all three of our product businesses. Now, the pickup and confidence and general economic activity was forecast in the results of our own quarterly enterprise Barometer (ph) and our latest survey which was conducted between the 9th and 29th of March, which we are also publishing today, does show confidence at its highest level since the end of 1999. And as you can see, there is a good steady recovery from the record low at this time last year. Regular attendees of these presentation of which I am pleased to see that there are a lot of you, you know that this is one of my favorite slides and this is simply because high quality new investment is the feedstock for future value growth and good realization of the ultimate evidence of success, and today you are going to hear from Rod, Chris, and Jonathan who will each give you some more insight into some of these investments. It doesn't at all seem, I would say that in each case, the combination of our local international products and sector expertise was critical, and they all provide great illustrations of the competitive advantage that our network provides.

Now making and managing investments clearly is critical to our success, but we too need to invest in 3i, especially in our own people and in our network, and the most important of these is investment in people. Today, 3i has about 750 people, of whom about 320 are executives directly involved in the making and managing of the investments. In recent years, we've been successful in developing a very strong talent poll of people with international experience, and international mindsets who can work easily across our business. International mobility has become a key strength, and the business is integrated across industry and product sectors. And now to our network. I said for some time that our network is our competitive advantage, and I am more and more convinced of this, and going forward its value will only increase. Our network gives us four key strengths. It gives us preferred access to high quality deal flow, it gives us a greater ability to assess risk and rewards, it gives us the ability to add value to our portfolio companies and ultimately to realize our investments well. And our network is not just our offices and the people we employ, but the extensive networks of high quality business people and large corporates around the work with whom we've strong relationships. A good example is the sector event which we've have been holding across the world in a range of sectors, and this event was for the oil and gas industry, was recently held in Prague, and the format is very simple. The gathering of 3i portfolio chief executives, key players from large corporations, leading industry observers, and our own team in a particular sector.

As an illustration of the power of this, in the seven weeks since this event, we have gained exclusivity on an investment we thought we had lost, we are in advanced discussions on another investment. We have generated a number of new investment opportunities and we strengthened our relationship with the major key corporates. I want to comment briefly on corporate responsibility. For any company corporate responsibility is important, and this is something that we've always taken seriously, both as a corporate and as an investor. And further information is contained on our Investor Relations website. I said before that our strategy is delivering, and most of you would've seen this slide before and let me summarize where we are today. 3i is active in Europe, in Asia Pacific, and the United States. We've 42% of our assets outside of the UK, and in the year March 2004, 51% of our investment was in continental Europe, and a further 10% in the United States and Asia Pacific.

Our international development is a key driver of growth, and a major contributor of 3i returns this year. In each of the product presentations, you will see …