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UK fund 3i emerges from restructuring with strong earnings

[LONDON] Private equity firm 3i reached the end of a three-year restructuring with strong earnings growth at its portfolio companies, helping it post a full-year return on investment of 719 million pounds (US$1.1 billion).

The British owner of Agent Provocateur and Benelux retailer Action said its net asset value (NAV) rose 14 percent to 396 pence a share, despite a negative hit from currency fluctuations worth 114 million pounds, or 12 pence a share.

The company was the best performer on the FTSE 100 on Thursday, climbing 3.1 per cent to 528 pence by 0854 GMT.

Shareholder frustration at weak results and a poor share price performance forced a change in leadership at the company in 2012 and led to the restructuring.

3i has embarked on a selling spree to rebalance its private equity business, targeting a portfolio of fewer than 40 companies. It owned 65 as of end of March this year.

The company realised proceeds of 831 million pounds from selling assets, while its infrastructure division saw its strongest performance since its 2007 initial public offering (IPO) after selling a stake in Eversholt rail. "In infrastructure we will focus on more medium-sized core assets, away from some of the very aggressive pricing we're seeing from sovereign wealth funds and the like," said Chief Executive Simon Borrows in a conference call.

3i's infrastructure division teamed up with Goldman Sachs to bid for the Swedish power grid of Finnish utility Fortum. But the group lost out to Borealis and Swedish pension funds in a 6.6 billion-euro deal in March.

The firm proposed a final dividend of 14 pence a share, bringing the total for its 2015 financial year that ended on March 31 to 20 pence, the company said in a statement.

3i said it expected to commit between 500 million euros (US$567 million)and 750 million in four to seven new investments a year, adding that it would fund this from proprietary capital in the short to medium term, rather than raising external funds.

Borrows said despite media reports last year, Agent Provocateur was not for sale for now. "We did take advice from a party to look at the market relative to the growth plan of the business. The conclusion was that it was performing well and it was better to hold on to for a while," he said.