For definitions of our financial terms used throughout this report, please see our Glossary on pages 220 to 222.
Disclaimer
The Annual report and accounts have been prepared solely to provide information to shareholders. They should not be relied on by any other party or for
any other purpose.
The Strategic report on pages 1 to 95, the Directors’ report on pages 96 to 135 and 150 to 155, and the Directors’ remuneration report on pages 136 to
149 have been drawn up and presented in accordance with and in reliance upon UK company law and the liabilities of the Directors in connection with
those reports shall be subject to the limitations and restrictions provided by that law. This Annual report may contain statements about the future,
including certain statements about the future outlook for 3i Group plc and its subsidiaries (“3i” or “the Group”). These are not guarantees of future
performance and will not be updated. Although we believe our expectations are based on reasonable assumptions, any statements about the future
outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
Overview and strategy
Chair’s statement
2
At a glance
4
Chief Executive’s statement
6
Our thematic approach to investment
12
Our business model
14
Our long-term, responsible approach
16
Strategic objectives and
Key performance indicators
18
Business review
Private Equity
21
Infrastructure
34
Scandlines
38
Sustainability
A responsible approach
40
1. Invest responsibly
42
2. Recruit and develop a diverse
pool of talent
52
3. Act as a good corporate citizen
56
Our TCFD disclosures
58
Performance and risk
Financial review
70
Reconciliation of Investment
basis and IFRS
75
Alternative Performance Measures
79
Risk management
80
Principal risks and mitigations
85
Directors’ duties under Section 172
94
Governance
Chair’s governance review
97
Governance at a glance
98
Corporate governance statement
99
Governance framework
101
Board of Directors
102
Executive Committee
104
The role of the Board
106
How the Board operates
107
What the Board did in FY2024
108
Engaging with stakeholders
110
Board performance review
114
Nominations Committee report
116
Audit and Compliance
Committee report
122
Resilience statement
128
Valuations Committee report
131
Directors’ remuneration report
136
Additional statutory and corporate
governance information
150
Audited financial statements
Consolidated statement
of comprehensive income
157
Consolidated statement
of financial position
158
Consolidated statement
of changes in equity
159
Consolidated cash flow statement
160
Company statement of financial position 161
Company statement of changes in equity 162
Company cash flow statement
163
Material accounting policies
164
Notes to the accounts
168
Independent Auditor’s report
203
Portfolio and other information
20 large investments
215
Portfolio valuation – an explanation
217
Information for shareholders
218
Glossary
220
We generate attractive returns for
our shareholders and co-investors
by investing in private equity and
infrastructure assets.
As proprietary capital investors,
we have a long-term, responsible
approach.
We aim to compound value through
thoughtful origination, disciplined
investment and active management
of our assets, driving sustainable
growth in our investee companies.
For more information
and regular updates
www.3i.com
3i Group plc | Annual report and accounts 2024
1
Driving resilient growth
in our portfolio companies
Our strong result in FY2024 reflects another year
of thoughtful and careful allocation of capital and
active asset management of our portfolio companies.
Performance highlights
2,085p
NAV per share
(31 March 2023: 1,745p)
23%
Total return on equity
(2023: 36%)
61.0p
Dividend per share
(2023: 53.0p)
David Hutchison
Chair
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3i Group plc | Annual report and accounts 2024
2
3i delivered a strong result in FY2024,
underpinned by another year of excellent
performance from Action and overall resilient
performance from the wider portfolio,
which continues to operate well through
a challenging macro-economic environment
and geopolitical uncertainty.
Performance
I am pleased to report that 3i delivered a strong set of results in the
financial year to 31 March 2024 (“FY2024”), with a total return
of £3,839 million (2023: £4,585 million). Net asset value (“NAV”)
increased to 2,085 pence per share (31 March 2023: 1,745 pence per
share) and our total return on opening shareholders’ funds was
23% (2023: 36%). Action delivered another year of strong performance
and was the major driver of the Group’s FY2024 result. The remaining
portfolio saw bifurcated performance, with a number of our portfolio
companies delivering a strong contribution, more than offsetting
those that saw weaker performance.
Market environment
The global economy saw a very modest recovery in 2023, as the
macro-economic environment and geopolitical landscape remained
fragile. Whilst inflation has started to moderate, consumer sentiment
remains quite strained, with a continued focus on affordability. These
trends have supported growth from our value-for-money and private
label portfolio companies in the year. Action’s remarkable growth
story continued in 2023, as the business once again generated
sector-leading results across its key performance indicators and
increased its store presence across Europe. We increased our
exposure to these returns, through the allocation of further 3i capital
into Action in FY2024.
We have also seen an encouraging recovery in the healthcare market
and our Infrastructure portfolio continued to trade robustly overall,
generating strong recurring yields. Our discretionary consumer
businesses remained under pressure and some of our more cyclical
businesses continued to experience weaker end-markets.
The global M&A market was subdued in 2023, impacted by
unfavourable financing conditions and pricing misalignment between
vendors and buyers. Against this backdrop, we have continued to
assess new investments and explore potential exits but have
remained disciplined in deploying or realising capital where we
believe valuations are not reflective of intrinsic business value. As a
result, our activity in the year focused primarily on reinvesting our
capital into some of our existing portfolio companies, and refinancing
some of our existing portfolio companies at attractive terms. We also
continued to accelerate growth in some of our portfolio companies
by acquisition.
Dividend
Our dividend policy is to maintain or grow the dividend year on
year, subject to the strength of our balance sheet and the outlook
for investments and realisations. Cash generation remains strong
and in FY2024, we generated cash inflows of £1.4 billion from our
portfolio companies. During the year, we successfully issued a six-
year €500 million bond at a coupon of 4.875%, further
strengthening our liquidity profile.
In line with the Group’s policy and in recognition of the Group’s
financial performance, the Board recommends a second FY2024
dividend of 34.5 pence (2023: 29.75 pence), subject to shareholder
approval, which will take the total dividend to 61.0 pence (2023:
53.0 pence). Based on this recommended dividend and expected
payment in July 2024, we will have returned £3.8 billion to shareholders
in dividends since our restructuring was announced in June 2012,
growing our total dividend by an average compound annual growth
rate of 18% over this period.
Board and people
As announced last year, Caroline Banszky retired from our Board
after our 2023 Annual General Meeting (“AGM”) and was succeeded
by Stephen Daintith as Audit and Compliance Committee Chair.
Stephen, who is CFO of Ocado Group plc, has a wealth of financial
and operating experience, and knowledge that he brings to the role.
Environmental, Social, and Governance (“ESG”)
We made good progress across our ESG agenda in FY2024, and
particularly on our climate change approach and strategy. We are
reporting for the first time in alignment with the Task Force for Climate-
related Financial Disclosures (“TCFD”) recommendations, in
compliance with FCA requirements, including aggregate portfolio
emissions. We are also pleased to announce that our near-term
science-based emissions reduction targets (“science-based targets”)
were approved by the Science Based Targets initiative (“SBTi”) in
March 2024 and our teams have now started to work to meet these
targets over the coming years.
Outlook
In the near term, we expect our investment and realisation activity
to reflect our cautious view on the M&A market and wider macro-
economic environment. We will only deploy capital and realise assets
when we feel we are achieving optimal value for our shareholders.
Trading momentum at the start of FY2025 remains strong at Action,
whilst a number of our other assets are well positioned to continue to
grow despite the uncertain macro-economic outlook.
David Hutchison
Chair
8 May 2024
Alternative Performance Measure (“APM”)
3i prepares its statutory financial statements in accordance with UK-adopted international accounting standards. However, we also report a non-GAAP “Investment basis”
which we believe aids users of our report to assess the Group’s underlying operating performance.
The Investment basis is an APM and is described on page 75. Total return, which is defined as Total comprehensive income for the year and net assets are the same under the
Investment basis and IFRS and we provide a reconciliation of our Investment basis financial statements to the IFRS statements from page 76.
We assess our performance using a variety of measures that are not specifically defined under IFRS and are therefore termed APMs. These include: Gross investment return (“GIR”)
as a percentage of opening value, cash realisations, cash investment, operating cash profit, net (debt)/cash and gearing. These APMs are referred to throughout the report and their
purpose, calculation and reconciliation to IFRS can be found on page 79.
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3i Group plc | Annual report and accounts 2024
3
3i is an investment company specialising in Private
Equity and Infrastructure. We invest in mid-market
companies headquartered in Europe and North America.
3i Group investment
portfolio value
as at 31 March 2024
Private Equity
£19.6bn
Infrastructure
£1.5bn
Scandlines
£0.5bn
Total assets under
management
as at 31 March 2024
Private Equity
£27.5bn
Infrastructure
£6.7bn
Scandlines
£0.5bn
£34.7bn
(2023: £29.9bn)
3i Group
investment
portfolio value
as at 31 March 2024
87% of the portfolio is exposed to the value-for-money, infrastructure and healthcare sectors.
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3i Group plc | Annual report and accounts 2024
4
£21.6bn
(2023: £18.4bn)
Private Equity
What we do
Our Private Equity business is funded principally
from our proprietary capital, with some funding
from co-investors for selected assets. Its principal
focus is to generate attractive capital returns.
Sectors
Our Private Equity business invests in companies
with an enterprise value of typically €100 million
to €500 million at acquisition in our core
investment markets of Europe and North America.
Our teams invest in the following sectors:
Consumer
Services
Healthcare
Software
Industrial Technology
Action
What is Action?
Action is the fastest growing non-food discount
retailer in Europe. With over 2,600 stores across
12 European countries, Action offers its
customers an ever-changing variety of 6,000
products at the lowest possible prices.
Our investment in Action
Following our initial investment in 2011, we have
actively managed Action through its incredible
compounding growth story, with the business
surpassing the €10 billion revenue milestone for
the first time in 2023.
At 31 March 2024, our investment in Action
formed 72% of our Private Equity portfolio
value. The business has returned over £2.9
billion of proceeds over our hold period. This
reinforces our long-term investment horizon
for this investment.
Our thematic approach
Our Private Equity and Infrastructure
teams invest in businesses supported
by long-term structural growth trends
Infrastructure
What we do
Our Infrastructure business manages assets on
behalf of third-party investors and 3i’s proprietary
capital, with the objective of generating attractive
capital returns and earning fund management
fees and portfolio income for the Group.
Sectors
Our Infrastructure business invests across
a broad range of economic infrastructure
businesses in Europe and North America,
in sectors adjacent to:
Communications
Utilities
Healthcare
Energy
Social Infrastructure
Transport/Logistics
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3i Group plc | Annual report and accounts 2024
5
Page 12
Read more about our thematic approach to investment
3i delivered
another strong result
The power of Action’s compounding growth
coupled with several other strongly performing
portfolio companies underpins both our FY2024
result, and our conviction in allocating capital
into our existing “winners”.
3i delivered another strong result in
FY2024, against a backdrop of persistent
global macro-economic headwinds and
geopolitical uncertainty.
The shape of today’s 3i portfolio has served
us well in this challenging year and reflects
investment decisions taken over the last
12 years.
Action’s compelling growth story continues
to be a major driver of the Group’s return,
with overall resilient performance across
the remaining portfolio.
Amidst more difficult markets to match
buyers and sellers, we have remained
disciplined in capital deployment,
prioritising reinvestment in our existing
portfolio either directly or through buy-and-
build acquisitions, whilst receiving good
proceeds and income from some of our
other high-quality portfolio companies.
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Chief Executive’s statement
3i Group plc | Annual report and accounts 2024
6
Simon Borrows
Chief Executive
In FY2024, we generated a total return on shareholders’ funds of
£3,839 million, or 23% (2023: £4,585 million, or 36%), ending the
year with a NAV per share of 2,085 pence (31 March 2023: 1,745
pence per share), including a 33 pence per share loss (31 March
2023: 65 pence per share gain) on foreign exchange translation.
Action remains a major driver of our overall result, following
another very strong year of earnings growth, cash generation and
the achievement of a number of important expansion milestones.
We also increased our exposure to Action’s returns in the year by
acquiring further equity in the business and continuing to reduce
the associated carried interest liability.
We have seen resilient performance across the remaining portfolio.
A number of assets operating in the value-for-money and private
label consumer and healthcare sectors delivered strong growth and
some are exhibiting characteristics which could allow them to
compound growth over the longer term. An example of this is
Royal Sanders, which we have now designated as a longer-term
hold asset, following consistent delivery of organic and acquisitive
growth since acquisition (see further details on page 8). Our
stronger performing assets more than offset softer performance
from a number of portfolio companies operating in the
discretionary consumer sector or in sectors that are working
through adverse phases of their market cycles.
Our permanent capital, strong balance sheet and disciplined
approach to capital allocation mean that we are under no pressure
to invest or realise when market conditions are unfavourable and
there is misalignment on pricing. This is particularly important in the
current environment of subdued global private equity deal activity,
characterised by a persisting dislocation between private and
public market valuations.
Whilst we continued to build our origination pipeline in FY2024,
we have remained extremely disciplined in considering new
investment, primarily in response to unrealistic vendor
expectations. Instead we focused our capital deployment into
some of our most successful portfolio companies. Our Private
Equity portfolio companies remained acquisitive, completing seven
bolt-on acquisitions, whilst in Infrastructure, 3i Infrastructure plc
(“3iN”) completed further investments in three portfolio companies
and our North American Infrastructure Fund completed three bolt-
on acquisitions.
We generated total realised proceeds and portfolio income of £1.4
billion across our portfolios in FY2024, and in April 2024, we agreed
the sale of nexeye, generating expected exit proceeds of c.€452
million. These exit proceeds, combined with distributions already
received, result in a 2.0x money multiple. Also in early May 2024, we
agreed to invest c.€116 million in a new investment for our Private
Equity portfolio, Constellation, an IT managed services provider
specialised in hybrid cloud and cyber security.
Private Equity performance
In the year to 31 March 2024, our Private Equity portfolio, including
Action, generated a GIR of £4,059 million or 25% on opening value
(2023: £4,966 million, or 40%). Action generated a GIR of £3,718
million, or 33%, on its opening value. In the last 12 months (“LTM”) to
the end of 31 December 2023, 93% of our portfolio companies by
value grew earnings.
Action
Action, the fastest growing non-food discount retailer in Europe and
our largest portfolio company, delivered another step up in
performance in 2023, confirming the relevance of its winning formula
to its customers. Action’s continued focus on ensuring customers
benefit from the lowest prices, as a result of its buying power and
flexibility in its category assortment, saw the business reduce prices
across 42% of its product catalogue in 2023, increasing the price gap
against its competitors.
In the 12 months to 31 December 2023, Action generated net sales of
€11,324 million, 28% ahead of 2022 and like-for-like (“LFL”) sales
growth of 16.7%, mainly as result of an increase in footfall and
transaction volumes. Operating EBITDA was €1,615 million in 2023,
34% ahead of 2022. Action’s improved EBITDA margin of 14.3%
compared to 13.6% in the previous year, reflected its scale benefits
and continuous focus on cost control.
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3i Group plc | Annual report and accounts 2024
7
Action now has stores across
12 European countries,
following the opening of new
stores in Portugal in Q1 2024.
Pages 22-25
Read more about Action
Action achieved a number of milestones in its store expansion
roadmap in 2023. In total, the business added 303 stores in the year,
another store opening record, and surpassed 750 stores in France, 500
in Germany, 300 in Poland, 100 in Austria and 50 in Italy. Action also
entered Slovakia, its eleventh country and a new expansion market,
with 15 new stores at the end of 2023. Action’s youngest roll-out
markets, Poland and the Czech Republic, and newly entered markets
Italy, Spain and Slovakia, are all showing strong trading, providing
sizeable expansion opportunities. Action’s expertise in store roll-outs,
efficient operations and dedicated resourcing means it can accelerate
its ability to grow a significant store network after the pilot phase. In
February 2024, Action entered Portugal, its twelfth country, with three
stores opened to the end of March 2024. At the end of Action’s P3
2024 (which ended on 31 March 2024), Action had 2,608 stores across
12 countries. Action’s estimate of additional white space potential in
existing and identified, in-scope countries is c.4,700 stores, and
includes extending to Switzerland and Romania in 2025.
Action continues to optimise its storage and distribution channels to
ensure it can serve its vast and rapidly growing store network. In 2023,
the business opened two further distribution centres, in France and
Poland, growing its distribution centre network to 13 across Europe.
Action continues to make good progress in delivering its
Sustainability Programme, which is focused on the four pillars of
people, planet, product and partnerships. It has continued to
develop its employees, to improve the sustainability of its products
and supply chain, to reduce its Scope 1 and 2 emissions and to
expand its community partnerships. Importantly, it has measured its
Scope 3 emissions and has committed to set science-based targets.
For further details on Action’s sustainability progress, see page 46.
Action’s conversion of EBITDA to free cash flow is very strong,
achieving 104% in 2023, as a result of particularly strong sales in the
last quarter of 2023, and contributing to significant deleveraging over
the course of the year. This, coupled with its remarkable growth,
positioned the business well for its debut US dollar term loan
issuance in the US leveraged loan market in October 2023. The issue
was oversubscribed, with Action raising $1.5 billion at very attractive
pricing. In October 2023, Action also completed a capital
restructuring with a pro-rata redemption of shares. 3i used £455
million of the £762 million gross proceeds from the share redemption
to acquire further shares in Action, increasing our gross equity stake
from 52.9% to 54.8%.
In addition, Action made two dividend distributions to all
shareholders, in December 2023 and March 2024, returning £375
million to 3i. This means that 3i received over £1.1 billion of cash from
Action in FY2024. Cumulatively, since we first invested in 2011, Action
has returned over £2.9 billion to 3i, and the potential for future
distributions is considerable. After paying the dividends, Action had a
cash balance of €558 million as at 31 March 2024 and a net debt to
run-rate earnings ratio of 2.2x.
At 31 March 2024, we valued our 54.8% stake in Action at £14,158
million. This valuation reflects the continued strong growth in Action’s
LTM run-rate EBITDA, its low leverage and an unchanged LTM run-
rate EBITDA valuation multiple of 18.5x, net of the liquidity discount.
We benchmark our long-term, through-the-cycle view on Action’s
multiple against a broad peer group of discounters, with a higher
weighting towards the top quartile subset of North American value-
for-money retailers, noting Action’s operating KPIs continue to
remain superior to this peer group.
Action had strong trading momentum in the first three periods of
2024, delivering sales of €3,004 million and operating EBITDA of €397
million, 21% and 29% ahead of the same period last year, primarily
driven by the increased volume of transactions. Action delivered LFL
sales growth of 9.8% and added 42 stores in the three-month period.
Longer-term hold assets
Action is a truly unique business and, since our initial investment in
2011, has benefitted from our rigorous active management, strong
governance model and ambitious long-term expansion strategy. We
have been clear for some time that we are going to hold Action for
the long term, enabling us to benefit from its compounding growth
and returns. Across the remaining portfolio, a number of other
companies are also starting to demonstrate significant compounding
potential, with impressive earnings growth and cash generation. For
example, since our initial investment in 2018, we have supported
Royal Sanders’ successful international expansion strategy,
organically and by accessing new markets, with six bolt-on
acquisitions, which have contributed strongly to earnings growth.
The business is now a best-in-class operator in its sector and is cash
generative, returning a total of £231 million in distributions to 3i over
the six-year period, including £109 million from a successful
refinancing in FY2024. Recognising this consistent performance,
we have now designated Royal Sanders as a longer-term hold asset.
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3i Group plc | Annual report and accounts 2024
8
Healthcare portfolio companies
As one of the most differentiated and attractive businesses in the
medical device outsourcing market, Cirtec Medical continues to
demonstrate its commercial momentum, leveraging the capabilities
and offerings of its nine acquisitions since our initial investment in
2017. The business delivered good top-line growth in 2023, driven by
outperformance at a number of its sites, and is well positioned for
another year of growth in 2024. ten23 health, our biologics-focused
contract development and manufacturing organisation (“CDMO”),
had another important year as it continued to execute against key
operational and capability expansion initiatives. The business saw
good customer uptake at its Visp and Basel sites and enters 2024 with
a strong development and manufacturing pipeline. The remaining
business of Q Holding, Q Medical Devices, performed well, largely
driven by growth with new and existing customers. Since our
investment in 2019, SaniSure saw a period of rapid expansion
through the majority of 2022, reflecting strong growth in its
bioprocessing end market and elevated demand during the
pandemic. Over the past 18 months, however, the industry has been
rebalancing stock levels, impacting demand for SaniSure’s products.
SaniSure somewhat mitigated the impact of this destocking with a
strong order book coming into 2023 and through operational
efficiencies, but its sales were softer through the majority of the year.
Bookings across the industry are expected to further normalise from
the middle of 2024 and SaniSure is very well positioned to capitalise
on a full market recovery, as one of the market leaders in this space.
Other consumer portfolio companies
Following the transformational acquisitions of coolback and Panelto
in 2023, supported with a 3i investment of £38 million, European
Bakery Group (“EBG”, formerly Dutch Bakery) has established itself
as a key consolidator in its market, with a good pipeline of further
potential M&A. Strong volume growth was an important driver of
EBG’s top-line growth in 2023. MPM continues to deliver good
performance across all of its key markets, including the US, now its
largest. Its online channel has strong momentum and the business
has significant headroom for growth across its channels. Audley
Travel’s strong post-pandemic recovery has continued, driven by
growth in booking numbers, and it ended 2023 with bookings ahead
of 2019 pre-pandemic levels. Despite macro-economic uncertainty
impacting consumer sentiment, Audley Travel saw strong
performance in the US and the UK in the first quarter of 2024.
In April 2024, we agreed the sale of nexeye, the value-for-money
optical platform in which we first invested in 2017. During our
ownership we have supported the business in its market expansion
and customer proposition. We expect to complete the sale in H1
FY2025, returning exit proceeds of c.€452 million to 3i. These exit
proceeds, combined with distributions already received, result in a
2.0x money multiple.
We have continued to see challenging performance across the
majority of our online retail and discretionary consumer businesses.
Luqom's trading in 2023 remained impacted by lower consumer
demand and discounting in the market due to overstocking.
Encouragingly, there are initial green shoots of trading recovery in
early 2024 and the business continues to expand its international
footprint with the roll-out of webshops in further countries.
Whilst we have seen some improvements in trading at the start of
2024, the outlook for YDEON remains more challenged. Muted
consumer demand continues to impact the furniture market and,
whilst BoConcept largely outperformed its peers in 2023, softer order
intake persisted, particularly across China and North America,
coinciding with a slowdown in their real estate markets.
Industrial Technology portfolio companies
AES traded well in 2023, with strong financial, strategic and
operational performance. Its new factory in Rotherham became
operational in the year and is equipped with state-of-the-art
automation in production and storage, resulting in increased capacity
and efficiency. WP delivered good volume growth in 2023,
outperforming the wider market. This was driven by its diversified
geographic presence, new contract wins and the ramp-up of new
projects. The business distributed £42 million to 3i in the year,
including proceeds from a successful amend and extend of its
funding facilities completed in December 2023.
Tato experienced pressure on volumes across all of its regions in
2023, in line with the wider specialty chemicals and biocides industry,
as a result of inflation and supply driven pressure on input costs,
subdued end-market demand and heightened pricing competition.
Encouragingly, performance at the start of 2024 is showing signs
of improvement.
Services portfolio companies
Evernex delivered a number of third-party maintenance contract wins
in 2023, including a new significant client in the US, progressing its
North American expansion strategy. As a global consolidation
platform in its sector, the business completed its sixth acquisition
since our initial investment in 2019, acquiring Maminfo in Brazil, and
doubling the group’s presence in this region. MAIT has also seen
good momentum in its performance in 2023, through a combination
of organic sales growth and strategic M&A, completing the bolt-on
acquisitions of etagis and Quadrix in the year. Building on our IT
services expertise and experience, we agreed a new c.€116 million
investment in Constellation in early May 2024, an IT managed
services provider specialised in hybrid cloud and cyber security. We
expect this to complete in H1 FY2025.
The market for white collar recruitment faced significant headwinds in
2023, following reduced hiring demand and lower voluntary
employee turnover. As a result of these challenging trading
conditions, WilsonHCG has seen pressure on recruiter spend across
the majority of its end-markets resulting in a top-line decline against
2022. New customer wins and optimisation of resource have
somewhat mitigated the short-term softness, and have positioned
the business well for a wider market recovery, albeit the timing of this
rebound remains uncertain. arrivia exhibited favourable performance
in 2023, driven by strong recovery within its core travel markets.
However, the loss of a significant client will impact bookings
going forward.
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3i Group plc | Annual report and accounts 2024
9
Infrastructure performance
In the year to 31 March 2024, our Infrastructure portfolio generated a
GIR of £99 million, or 7% on opening value (2023: £86 million, or 6%).
3iN generated a total return on opening NAV of 11.4% in FY2024,
again exceeding its 8-10% return objective, and delivered its
dividend target of 11.9 pence, a 6.7% increase on last year. Its
underlying portfolio continues to perform robustly, delivering income
growth and capital returns throughout the economic cycle, with
particularly strong performance from TCR, Tampnet and Valorem.
The demand for high-quality infrastructure assets was reflected in the
successful realisation of Attero for proceeds of €214 million, a 31%
uplift on opening value. Whilst 3iN continues to perform well, its
muted share price performance, with an increase of only 4% in the
year to 327 pence at 31 March 2024, was reflective of weak demand
across the market for shares of listed infrastructure investment
companies and a lack of liquidity in the FTSE 250 index.
Our proprietary capital investment in Smarte Carte performed well in
2023, as a result of sustained US and international travel volumes and
positive contract economics. The addition of a long-term contract
with London’s Heathrow Airport provides Smarte Carte with a
foothold for further expansion into the European market. Our North
American Infrastructure Fund had its final close in December 2023.
The Fund completed a new investment in Amwaste, a provider of
non-hazardous solid waste disposal services in the southeastern
region of the US. Regional Rail and EC Waste, two existing
investments in the Fund, completed a total of three bolt-on
acquisitions, as they continue to execute their scaling strategies.
We have agreed to sell our operational projects infrastructure fund
capability to certain members of 3i’s Infrastructure team. The transfer
will comprise the mandates for the management of the BIIF and 3i
European Operational Projects Funds (“3i EOPF”). The rationale for
the sale is to simplify 3i’s Infrastructure business and to facilitate its
focus on core-plus infrastructure. This sale is expected to complete
shortly and its impact will not be material to the Group.
Scandlines performance
Scandlines delivered a steady performance during the year. Leisure
traffic volumes were ahead of last year after a strong summer. This
offset a reduction in freight volumes which was disproportionately felt
across its Scandinavian and German markets, as a result of the more
challenging macro-economic backdrop. Cash generation remains
strong and we received dividends totalling £25 million from
Scandlines in the year.
Sustainability
During the year, we continued to advance our sustainability agenda.
Our main focus stayed on climate change. We achieved progress
across several initiatives, including:
• Climate transition and targets – we are pleased to announce that
our science-based targets were validated by the SBTi on 22 March
2024. Our targets cover our direct Scope 1 and 2 emissions, as well
as the Scope 3 emissions associated with our portfolio. Our targets
are described in the Sustainability section of this report and in our
TCFD disclosures.
• Climate strategy and risk management – we completed a second
phase of climate change scenario analysis. The results provided
further insights into climate change physical and transition risks and
opportunities across our portfolio, and were used to enhance the
climate element of our ESG investment assessment framework.
• Data and disclosures – we further improved our portfolio
greenhouse gas (“GHG”) emissions data coverage and enhanced
the quality and consistency of this data through the roll-out of a
dedicated portfolio ESG data collection software. This has allowed
us to make aggregate portfolio emissions data disclosures for the
first time, in compliance with TCFD-aligned disclosure
requirements for asset managers. Our TCFD disclosures are on
pages 58 to 68 of this report.
We have also begun to address other important areas that impact the
sustainability of our portfolio, including biodiversity and human rights.
3i is keen to support charities which relieve poverty, promote
education and support elderly and disabled people. Our charitable
giving for the year totalled £1.05 million. This included supporting our
nine charity partners, matching staff fundraising, making a number of
one-off donations and promoting the give-as-you-earn scheme in the
UK, through which we matched c.£55,000 of staff donations. Our
portfolio companies also supported a variety of charities relevant to
them and their operations, with donations totalling c.£4.7 million.
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3i Group plc | Annual report and accounts 2024
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We continued to advance
our sustainability agenda,
focusing on climate change.
Pages 39-68
Read more about sustainability
Balance sheet and foreign exchange management
Our proprietary capital model and conservative balance sheet
strategy are a clear advantage in challenging macro-economic
conditions. We are under no pressure to invest or accelerate the
realisation of investments in order to protect shareholder value over
the longer term. We ended the year as net divestors, and continued
to reduce the carried interest liability related to Action, with total
payments of £735 million in the year. As a result of these payments
and the further investment in Action increasing our gross equity stake
from 52.9% to 54.8%, our net holding in Action, after carried interest,
is now 53.2% (31 March 2023: 48.9%). Over the last five years, we have
increased 3i’s net ownership of Action from 33% to 53.2%, through
stake purchases and carry buy-back transactions.
We also further strengthened our balance sheet and liquidity position
with the successful issue of a six-year €500 million bond at a coupon
of 4.875% and successfully extended the tenor of the £400 million
tranche of our £900 million Revolving Credit Facility (“RCF”) to
November 2026. We ended FY2024 with net debt of £806 million and
4% gearing, after returning £541 million of cash dividends to
shareholders in the year and with liquidity, including our undrawn
RCF, of £1,296 million, meaning we are well funded when suitable
investment opportunities arise. We remain disciplined on costs and
generated an operating cash profit of £467 million in the year, or £92
million excluding dividends received from Action.
In FY2024, we generated an unrealised gain of £116 million from our
foreign exchange hedging. In total, including the gain on hedging,
we recorded a total foreign exchange loss of £316 million in the year,
as sterling strengthened against the euro and US dollar.
Outlook
We expect that the current macro-economic conditions and
geopolitical uncertainty will persist in the near term and that this will
continue to impact confidence and pricing expectations in the wider
mid-cap M&A market. Against this backdrop, our rigorous and
disciplined approach to capital allocation remains unchanged; we are
long-term thematic investors, with the aim of compounding value via
organic and acquisition growth, and our active asset management
means we are on the front foot, building resilient portfolio
companies that are capable of navigating through these
challenging trading conditions.
Over the last financial year, 3i has delivered a very strong total
shareholder return of 71%, the majority of which relates to our share
price performance. Indeed, 3i’s share price has come a long way
since the restructuring of the Group in June 2012. Whilst Action
continues to power ahead, some of our other significant portfolio
companies are also showing strong growth and longer-term
compounding characteristics. Together with Action, these other
portfolio companies should support strong future returns for
our shareholders.
I would like to close by thanking the team at 3i and the teams in our
portfolio companies for another good performance in challenging
trading conditions.
Simon Borrows
Chief Executive
8 May 2024
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3i Group plc | Annual report and accounts 2024
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We adopt a thematic approach to origination and portfolio
construction, backing businesses that benefit from structural
trends which can support long-term sustainable growth.
Value-for-money
and discount
The last few years have been characterised by
significant geopolitical and market shocks.
These have had profound consequences for the global economy
and have resulted in significant pressures on consumers through
increases in energy prices, broader inflation, higher interest rates
and slower growth. While there are signs that some of these
pressures may be abating, consumers remain discerning and
continue to seek quality, at a good price.
We believe that these behaviours will endure, as shown by the
permanent shift to“value”concepts by some consumers during,
and in the immediate aftermath of the 2007-2008 financial crisis.
3i response
Value-for-money and discount has long been a winning theme
for our Private Equity portfolio. We highlight a few examples
here. Action has grown from a focus on its Dutch home market to a
pan-European discount retailer, by providing a good-quality and
surprising assortment, including many everyday necessities, at a very
low price.
Royal Sanders, a private label and contract manufacturer of
personal care products, is growing strongly by offering products
at a variety of price points to a broad range of customers,
including value retailers. European Bakery Group, which
produces bake-off bread and snack products for food retailers,
benefits from similar dynamics.
Energy transition, energy
security and resource scarcity
The response to the climate and environmental
emergencies is a defining theme of our time.
The transition towards a low-carbon economy is gathering
pace, leading to increased demand for electricity and
associated services. At the same time, natural resources
are overexploited and governments, businesses and consumers
are focusing on developing and supporting more sustainable
consumption models, which embed more circularity and
shared resources.
3i response
We have exposure to this theme in our Infrastructure business, with
investments in businesses like Infinis and Valorem, which generate
renewable energy, Herambiente, which sorts and recycles waste and
generates power from the waste that cannot be recycled, and Future
Biogas, one of the UK’s largest anaerobic digestion plant developers
and biogas producers.
TCR, also in our Infrastructure portfolio, provides pooled
ground support equipment at airports, reducing the amount of
equipment required.
A number of our Private Equity portfolio companies are making
investments in the circular economy theme, either by adapting their
business models or by offering products or services that directly
support a circular economy model. For example, WP is investing in
more easily recyclable packaging materials and Evernex repairs,
reuses and recycles IT equipment.
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3i Group plc | Annual report and accounts 2024
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Page 51
Future Biogas
Pages 22-25
Action
Digitalisation, digital
transformation and big data
Business is increasingly mobile and data
driven, facilitated by increasing connectivity,
and is focused on simplifying processes and
improving the customer experience.
Technology is developing rapidly and changing business
operating models across many sectors. Digitalisation is part of
daily life, extending to all spheres of human activity and
interactions. It is also intertwined with climate change and is a
precondition to many of the available decarbonisation pathways.
The rapid development of artificial intelligence is accelerating
these trends, creating opportunities not previously possible.
However, not all segments of the economy participate equally in
this transformation. Some businesses are vulnerable to
disruption, and some parts of society are being left behind.
3i response
We have been careful to select investments that benefit from this
theme, while avoiding areas likely to be impacted by disruption. In
our Private Equity portfolio, MAIT provides SMEs with IT solutions
that focus on process optimisation and digitalisation. xSuite
provides accounts payable process automation applications.
Evernex maintains IT equipment that is critical for customers’
business continuity. Luqom, VakantieDiscounter and Konges
Sløjd operate in growing online consumer niches and can benefit
from the ongoing shift to the online channel.
Our Infrastructure business is also exposed to this trend. Tampnet
operates an offshore communication network in the North Sea
and Gulf of Mexico; and Global Cloud Xchange owns one of the
world’s largest subsea fibre optic networks.
Demographic
and social change
Ageing populations are projected to
cause significant social disruption in our
investment markets.
Increasing life expectancy and reduced birth rates in most of our core
markets are resulting in ageing and often declining populations.
These structural, long-term trends are profoundly changing
consumer behaviour and preferences, and are resulting in policy
responses and scientific research to meet the challenges of
greater longevity and the increasing prevalence of age-related
chronic illness.
3i response
Our Private Equity healthcare investments, including Cirtec
Medical, an outsourced medical device manufacturer, as well as
SaniSure and ten23 health, which deliver products and services to
the life sciences industry, provide solutions to the disruption
caused by an ageing population and by scientific breakthroughs
making more advanced medical and pharmaceutical treatments
possible. Ionisos, in our Infrastructure portfolio, provides cold
sterilisation services to the medical and pharmaceutical industries,
amongst others.
Some of our portfolio companies with a consumer focus are also
exposed to this trend. Audley Travel caters to an older and
wealthier demographic cohort that is becoming more dominant.
Konges Sløjd, on the other hand, has developed its offering to
appeal to smaller families, where the spend per child is increasing.
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3i Group plc | Annual report and accounts 2024
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Page 48
ten23 health
We aim to compound value over time by investing
in mid-market companies to create a diverse
portfolio with strong growth potential.
Sectors
Private Equity
Consumer
Healthcare
Industrial Technology
Services
Software
Infrastructure
Communications
Healthcare
Energy
Social Infrastructure
Transport/Logistics
Utilities
Key enablers of value
Permanent
capital and
long-term
investment
horizon
We aim to compound our proprietary capital
value through conviction in our best investments
and by deploying our capital in new mid-
market companies. Our proprietary capital
affords us a long-term investment horizon.
A long-
standing
office network
We have had teams on the ground across
the UK, continental Europe and the US for
many decades, which have built strong
networks within their local business
communities.
An expert
and diverse
team
Our international teams are formed of local
people with great knowledge and
experience of their geography and sector.
We view diversity as a strength and a plurality
of perspectives enhances our origination,
value creation and decision making.
Careful
portfolio
construction
We approach portfolio construction with
great care, originating opportunities
thematically and investing selectively in
businesses that can benefit from long-term
structural growth trends.
Active asset
management
We engage with portfolio companies’
management teams to manage risks and
invest in initiatives that support long-term
sustainable growth.
A strong brand
and reputation
As an investment company with a history
of over 75 years, our brand strength and
long-term approach underpin our reputation
as a responsible investor and business.
Strong
values and
institutional
culture
We promote a strong culture of integrity
among our employees and embed that
culture in our policies and processes.
Page 16
Our long-term, responsible approach
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3i Group plc | Annual report and accounts 2024
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Our thematic
approach
Our Private Equity and
Infrastructure teams invest
in businesses supported by
long-term structural
growth trends
We cover our operating costs with income from our
portfolio and from fund management fees generated
by our Infrastructure business, thereby minimising
the dilution of our capital returns.
Value creation
We manage our balance sheet conservatively. We maintain
a tight grip on operating costs and cover these with fund
management fees and portfolio income.
Invest
We typically make 4 to 7
new Private Equity
investments each year, and
support the development
of our Infrastructure
business
Our value
creation model
delivers on our
strategic
objectives
Realise
We work with
our portfolio
companies to grow
them organically and by
acquisition to produce
strong cash flow and
generate at least a >2x
return on disposal
Grow
We create
value from the
portfolio through active
asset management and
organic and acquisition
growth
Who benefits
Shareholders
Our model is capable of delivering
mid-teen returns to shareholders
through the investment cycle
23%
Total return on opening
shareholders’ funds
61.0p
Dividend per share
0.4%
Operating costs as a percentage
of our FY2024 AUM
Portfolio companies
We work in close partnership with
our portfolio companies to provide
expertise and support, enabling them
to grow sustainably and to contribute
to the communities in which they
operate
Our people
Our people are our most important
resource. We foster the professional
development and wellbeing of our
employees
Page 16
Our long-term, responsible approach
Page 110
Engaging with shareholders
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3i Group plc | Annual report and accounts 2024
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As proprietary capital investors, we have a long-term, responsible
approach. We aim to compound value through thoughtful origination,
disciplined investment and active asset management of our portfolio,
driving sustainable growth in our investee companies. Our success is
founded on the expertise and diverse perspectives of our employees.
We promote a culture of integrity across the organisation.
Invest responsibly
Our responsible approach to investment and portfolio management
is an integral part of our business model. It is based on four pillars:
1. Long-term stewardship
3. Careful portfolio construction
Thanks to our permanent capital we have a medium- to long-
term investment horizon. We have majority or significant minority
stakes in our core portfolio companies and are represented on
their boards. We therefore have the influence to drive long-term,
sustainable growth in our portfolio.
We approach investment origination and portfolio
construction with great care, with a focus on resilience
across the cycle. We make a limited number of new
investments each year, sourced from sectors and
geographies where we have built a strong track record,
in-house expertise and comprehensive networks.
2. Thematic origination
4. Assessment and management
We adopt a thematic approach to investment origination. Our
approach is flexible and can be adapted to take into account
market developments and regulatory, policy, societal or
environmental changes. For example, over the last few years
we have backed businesses that invest in energy transition,
develop products or services that can contribute to a more
sustainable consumption model, or support the medical and
pharmaceutical industries, all of which can benefit from long-
term structural growth trends.
We screen investment opportunities against our
Responsible Investment policy and embed an assessment
of ESG risks and opportunities across our investment,
portfolio management and value creation processes.
We have been signatories to the UN Principles for
Responsible Investment since 2011.
Our approach is designed to support
long-term, sustainable growth in our
portfolio companies.
Pages 12-13
Thematic origination
Pages 42-51
Invest responsibly
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Our people
are our priority
Our success is based on the recruitment,
development and retention of a capable
and diverse team.
We provide training and opportunities for career advancement
and reward our employees fairly. We recognise the importance
of the wellbeing of our employees and support them by
creating a healthy workplace and with tools to improve their
mental and physical health. We benefit from a non-hierarchical
organisational structure, which underpins a culture of open
communication.
249
27
employees1
nationalities
We employ a team of 249 people from 27 countries and value
highly the diversity of perspectives that this brings. We cultivate
an inclusive environment for existing and prospective employees
which respects, involves and leverages diverse talent for greater
organisational good. We support a number of initiatives aimed at
improving gender, ethnic and social diversity at 3i and on an
industry-wide basis.
Pages 39-68
Sustainability
1
Global employee headcount.
Strong values and
institutional culture
We promote a strong culture of integrity
among our employees and embed that
culture in our policies and processes.
We expect all employees to act with integrity, accountability
and a careful ownership mindset and to approach their roles
with ambition, rigour and energy.
Our corporate values are approved by the Board and
the Executive Committee sets the tone and leads by
example. We evaluate all employees annually against
our corporate values.
Our shared values
Ambition
• Focus on generating value for
all our stakeholders
• Strive for excellence and
continuous improvement
Accountability
• Personal and collective
responsibility for protecting
and enhancing 3i’s assets
and reputation
• An ownership mentality in
managing costs, resources
and investments
• An aversion to building hierarchy
Rigour and energy
• Clarity of vision supported
by practical execution
• Thorough analysis leading
to clear decision making
and effective implementation
• High levels of energy, a strong
work ethic and effective team
working
Integrity
• Doing “the right thing”
even when difficult
• Relationships built on trust,
candour and respect
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3i Group plc | Annual report and accounts 2024
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Pages 96-155
Governance
Pages 39-68
Sustainability
Key performance indicators1,2,4
Gross investment return (“GIR”)
as % of opening portfolio value
The performance of the proprietary
investment portfolio expressed
as a percentage of the opening
portfolio value.
Link to strategic objectives
NAV per share
The measure of the fair value per share
of our investments and other assets after
the net cost of operating the business
and dividends paid in the year.
Link to strategic objectives
Cash realisations5
Support our returns to shareholders,
as well as our ability to invest in
new opportunities.
Link to strategic objectives
4%
26%
43%
36%
23%
2020
2021
2022
2023
2024
804p
947p
1,321p
1,745p
2,085p
2020
2021
2022
2023
2024
£801m
£319m
£758m
£885m
£883m
£399m
£126m
£402m
£757m
2020
2021
2022
2023
2024
l Cash realisations l Action reinvestment (2020)
l Proceeds received from Action’s capital
restructuring (2024)
FY2024 progress and FY2025 outlook
• Group GIR of 23%, driven by £3,926 million of
unrealised value growth and £591 million of
portfolio income
• Private Equity GIR of £4,059 million, or 25%,
predominantly driven by Action’s GIR of
£3,718 million
• Infrastructure GIR of £99 million, or 7%,
reflecting the performance of 3iN and US
infrastructure
• Scandlines GIR of £10 million, or 2%, reflecting
steady performance in the year and cash
distributions
• Our portfolios have started FY2025 with good
momentum
FY2024 progress and FY2025 outlook
• 19% increase in NAV per share to 2,085 pence
(31 March 2023: 1,745 pence), after payment of
56.25 pence dividend per share in the year
• Our portfolios have started FY2025 with good
momentum
FY2024 progress and FY2025 outlook
• Cash proceeds of £883 million including £762
million5 of proceeds received from Action’s
capital restructuring
• Realisations and refinancings in FY2025 are
subject to supportive market conditions and
to portfolio company performance
remaining resilient. In April 2024, we agreed
the sale of nexeye, generating expected exit
proceeds of c.€452 million
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Strategic objectives
Grow investment
portfolio earnings
Realise investments with
good cash-to-cash returns
3i Group plc | Annual report and accounts 2024
18
Cash investment6
Identifying and investing in new and
further investments is a key driver
of the Group’s ability to deliver
attractive returns.
Link to strategic objectives
Operating cash profit3
By covering the cash operating cost
of running our business with cash
income, we reduce the potential
dilution of capital returns.
Link to strategic objectives
Total shareholder return
The return to our shareholders through
the movement of the share price and
dividends paid during the year.
Link to strategic objectives
£1,248m
£510m
£543m
£397m
£593m
£657m
£138m
£591m
£455m
2020
2021
2022
2023
2024
l Investment
l Action reinvestment (2020)
l Action reinvestment (2024)
£40m
£23m
£340m
£364m
£467m
£56m
£39m
£92m
£284m
£325m
£375m
2020
2021
2022
2023
2024
l Action dividend
l Other
(17)%
51%
24%
27%
71%
(20)%
46%
20%
21%
67%
2020
2021
2022
2023
2024
l Dividends
l Share price
FY2024 progress and FY2025 outlook
• Invested £593 million, including the
£455 million reinvestment into Action
• Completed seven bolt-on acquisitions for the
Private Equity portfolio, one of which, for EBG,
we supported with further investment of
£38 million. Completed one new investment
in our North America Infrastructure Fund
• Interesting pipeline of new investment
opportunities and bolt-on acquisitions. In early
May 2024, we agreed to invest c.€116 million in
a new investment for our Private Equity
portfolio, Constellation
FY2024 progress and FY2025 outlook
• Generated total cash income of £594 million
(2023: £497 million) of which £456 million (2023:
£351 million) is from Private Equity,
£113 million (2023: £107 million) from
Infrastructure and £25 million from Scandlines
(2023: £39 million). Private Equity includes
£375 million of dividends from Action (2023:
£325 million)
• Cash operating expenses of £127 million
(2023: £133 million)
• Good cash income expected to continue from
Action, Infrastructure and Scandlines
FY2024 progress and FY2025 outlook
• TSR of 71% driven by a share price increase of
67% and by dividend payments of 56.25 pence
in the year
• Well-positioned balance sheet supports a total
FY2024 dividend of 61.0 pence per share
1 A number of our KPIs are calculated using financial information which is not defined under IFRS and therefore they are classified as APMs. Further details on these APMs
are included in our Financial review on page 79.
2 Further information on how these KPIs are factored into decisions concerning the Executive Directors’ remuneration is included in the Directors’ remuneration report on page 136.
3 Cash operating expenses includes lease payments.
4 Key risks which could potentially impact the respective KPIs can be found on pages 89 to 93, which summarises the Group's current principal risks.
5 Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the year, Private Equity recognised £866 million of realised proceeds, of which £5 million
relates to WHT incurred on the proceeds from Action.
6 Cash investment per the segmental analysis is different to cash investment per the cash flow due to a £10 million investment in Private Equity, which was recognised in FY2023 and
paid in FY2024.
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Maintain an
operating cash profit
Use our strong
balance sheet
Increase shareholder
distributions
3i Group plc | Annual report and accounts 2024
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3%
5%
4%
6%
4%
What’s in this section
Private Equity
21
Infrastructure
34
Scandlines
38
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Private Equity
We invest in mid-market businesses
headquartered in Europe and North America.
Once invested, we work closely with our portfolio
companies to deliver ambitious growth plans, and
to realise strong cash returns for 3i shareholders
and other investors.
In the year to 31 March 2024, our Private Equity portfolio delivered
a GIR of £4,059 million, or 25%, on the opening portfolio value
(2023: £4,966 million or 40%), after a £341 million foreign exchange
loss, including the impact of foreign exchange hedging.
Action delivered another year of very strong earnings growth and
cash generation, and accounted for the majority of the Private Equity
GIR in FY2024. In the year, we also received significant realised
proceeds from Action and completed a further reinvestment in the
business. Across the remaining portfolio, we saw strong growth from
portfolio companies operating in the value-for-money and private
label and healthcare sectors, more than offsetting softer performance
from portfolio companies exposed to the discretionary consumer
sector or operating in cyclically impacted end-markets. We
designated Royal Sanders as a longer-term hold asset in the Private
Equity portfolio, following its consistent performance since
acquisition and due to its compounding growth characteristics.
Low levels of global private equity transaction activity persisted
through FY2024. We remained very disciplined on price given the
difficulties to match buyers’ and vendors’ expectations, prioritising
reinvestment into some of our existing portfolio companies and
continuing our buy-and-build momentum. We also generated
proceeds from some of our existing portfolio from refinancing
activities and portfolio income.
Overall, the Private Equity portfolio value increased to £19,629 million
(31 March 2023: £16,425 million). The contribution of Action to the
Private Equity performance is detailed in Note 1 of the financial
statements.
Table 1: Gross investment return
for the year to 31 March
Investment basis
2024
£m
2023
£m
Realised profits over value on the disposal
of investments
–
169
Unrealised profits on the revaluation
of investments
3,874
3,746
Dividends
439
345
Interest income from investment portfolio
80
77
Fees receivable
7
7
Foreign exchange on investments
(437)
493
Movement in fair value of derivatives
96
129
Gross investment return
4,059
4,966
Gross investment return as a % of opening
portfolio value
25%
40%
At a glance
Gross investment return
£4,059m
or 25%
(2023: £4,966m or 40%)
Cash investment
£556m
(2023: £381m)
Realised proceeds
£866m
(2023: £857m)
Portfolio dividend income
£439m
(2023: £345m)
Portfolio growing earnings
93%¹
(2023: 90%)
Portfolio value
£19,629m
(2023: £16,425m)
1
LTM adjusted earnings to 31 December 2023.
Includes 29 portfolio companies.
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For more information
www.action.com
Investing in good businesses
to make them great
Action, the fastest growing non-food discount retailer in Europe and our
largest portfolio company, now has stores in 12 countries, employs over 69,000
people and generated annual revenue in excess of €11 billion in 2023.
231
284
341
426
515
607
718
873 1,155 1,506 2,034 2,675 3,418 4,216 5,114 5,637
6,834
8,859
11,324
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
20
27
32
39
49
71
86
99
128
166
232
310
387
450
541
616
828
1,205
1,615
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
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Customer focus
“Customers come first” is one of Action’s core values.
On average, over 15 million customers visit Action stores
each week, driven by Action’s unique proposition
offering an assortment of essential and surprise good-
quality products, at the lowest prices.
Its low price points are fundamental to its offering and,
in 2023, it continued to invest in its strong customer
proposition by reducing 2,500 prices across its product
assortment. 67% of its products are priced under €2.
Action has a comprehensive process of ensuring its
stores stay relevant for its customers, through store
relocations, enlargements and refurbishments.
Good-quality products
Action has a simple, efficient, and scalable operating
model. It offers 6,000 products across 14 categories, with
two-thirds of the assortment changing frequently.
Action is able to adapt in response to changing times
and customer needs and, in 2023, it applied particular
focus on daily essential products.
International store roll-out
In 2023, Action added 303 stores across its geographies,
including its first 15 stores in Slovakia. In the first quarter
of 2024, it opened its first three stores in Portugal, its
twelfth country. At 31 December 2023, Action had a total
of 2,566 stores, with significant further growth
opportunities across both existing and new markets.
Net sales1
€m
Operating EBITDA1
€m
+21%
CAGR
+26%
CAGR
3i buyout
3i buyout
+28%
CAGR
+28%
CAGR
Source: Company information
1
Including impact of 53rd week.
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Number of stores
at 31 December
2,566
2,263
1,983
1,716
1,552
Supply chain infrastructure
Action continues to build its distribution network to support its
international expansion, with new distribution centres opening in
France and Poland in 2023. Action now has 13 distribution centres
and three hubs across Europe, with three new distribution centres
planned in 2024 and 2025. Action maintained a high level of product
availability throughout 2023.
People
During 2023, Action created over 8,900 new jobs, and now directly
employs more than 69,000 people across its stores and distribution
network. Action continues to invest in the ongoing development and
engagement of its employees, with over 3,100 internal promotions
and 65,000 employees undertaking training in 2023.
Geographical spread of stores, distribution centres and hubs
at 31 December 20231
1
Action opened its first stores in Portugal in Q1 2024 and therefore has stores in 12 countries.
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303
Stores added
during 2023
Netherlands
414
stores and 2 DCs
Belgium/Luxembourg
226
stores
Germany
526
stores and 2 DCs
France
799
stores, 5 DCs
and 2 hubs
Spain
26
stores
Poland
322
stores, 3 DCs and 1 hub
Czech Republic
63
stores
Slovakia
15
stores and 1 DC
Austria
108
stores
Italy
67
stores
2023
2022
2021
2020
2019
Digital
Action continued to develop its digital ecosystem in 2023. Its app is
now available in eight countries and was downloaded 5.3 million
times in 2023. On average, Action records 9.6 million visits to its
website and its app per week, providing a multi-channel touchpoint
for customers to conduct their research online and then continue
their journey with in-store purchases. Action also continues to
improve the technology to enable further efficiencies in the flow of
goods from suppliers to stores.
Partnership
In 2023, Action’s support for its charity partners and other donations
totalled €4.3 million. Action supports charities such as SOS Children’s
Villages and the Johan Cruyff Foundation. Its scholarship fund,
originally set up in 2017, is now available to employees in almost all of
Action’s countries.
Sustainability
Action made further progress across its sustainability programme
in 2023. Further information is available in the Sustainability section of
this report on pages 46 and 47.
Further information is available on Action’s website:
www.action.com
Action financial metrics
Last 12 months to P12 2023 (2022)
€8,859m
€11,324m
Net sales
€1,205m
€1,615m
Operating
EBITDA
280
303
Net new
stores added
18.1%
16.7%
LFL sales growth
13.6% 14.3%
Operating
EBITDA margin
Last three months to P3 2024 (2023)
€2,485m
€3,004m
Net sales
€309m
€397m
Operating
EBITDA
34
42
Net new
stores added
24.3%
9.8%
LFL sales growth
12.4%
13.2%
Operating
EBITDA margin
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2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
Investment and realisation activity
Transaction activity at Action was the main driver of Private Equity
investment and realisations in FY2024. In October 2023, Action
successfully completed its debut US dollar term loan issuance in the
US leveraged loan market, raising $1.5 billion at very attractive
pricing. In October 2023, Action also completed a capital
restructuring with a pro-rata redemption of shares. We reinvested
£455 million of the £762 million of proceeds from the share
redemption to acquire further shares in Action, increasing our gross
equity stake from 52.9% to 54.8%.
We typically refinance our most cash generative assets where
appropriate for the business and where market conditions allow. In
December 2023, Royal Sanders completed an all-senior debt
refinancing, upsizing its debt facilities and returning £109 million to 3i,
of which £48 million was recognised as income. We also completed a
£29 million purchase of an incremental stake in the business.
Our buy-and-build strategy remains an integral part of our approach
to value creation and in FY2024, our portfolio companies completed
seven bolt-on acquisitions. This included Dutch Bakery’s combination
with coolback, a German bakery group specialised in bake-off bread,
to create the European Bakery Group (“EBG”), a pan-European
bakery platform. We supported this acquisition with a £38 million
investment in July 2023. In August 2023, EBG completed the self-
funded acquisition of Panelto, a manufacturer of bake-off artisan
breads, establishing a UK and Ireland platform within the group.
Further details of selected bolt-on acquisitions can be found on
pages 28 to 29.
We continued to develop ten23 health with further investment
totalling £25 million and provided £12 million of capital to support
Luqom, YDEON and Digital Barriers through challenging trading
conditions.
WP returned cash of £42 million to 3i in the year, of which £2 million
was recognised as income, primarily from a successful amend and
extend of its debt facilities.
In total, in the year to 31 March 2024, our Private Equity team
invested £556 million (2023: £381 million) and generated total
proceeds of £866 million (2023: £857 million).
In April 2024, we agreed the sale of nexeye, generating expected exit
proceeds of c.€452 million. These exit proceeds, combined with
distributions already received, result in a 2.0x money multiple. The
transaction is expected to complete in H1 FY2025.
In May 2024, we agreed to invest c.€116 million in Constellation, an IT
managed services provider specialised in hybrid cloud and cyber
security. The transaction is expected to complete in H1 FY2025.
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26
Investments
Portfolio company Business description
Date
Proprietary
capital investment
£m
Reinvestment
Action
General merchandise discount retailer
November 2023
455
Royal Sanders
Private label and contract manufacturing producer of personal care
products
Various
29
Total reinvestment
484
Further investment
to finance portfolio
bolt-on acquisitions
European
Bakery Group
coolback: German bakery group specialising in bake-off bread
July 2023
38
Total further investment to finance portfolio bolt-on acquisitions
38
Further investment
to support portfolio
companies
Luqom
Online specialist lighting retailer
Various
6
Digital
Barriers
Video technology provider
January 2024
4
YDEON
Online retailer of garden buildings, sheds, saunas and related
products
January 2024
2
Total further investment to support portfolio companies
12
Other further
investment
ten23 health
Biologics focused CDMO
Various
25
Other
Various
Various
2
Total other further investment
27
FY2024 Private Equity gross investment
561
Return of investment
Konges Sløjd
Premium brand offering apparel and accessories for babies and
children
September 2023
(5)
Total return of investment
(5)
FY2024 Private Equity net investment
556
Portfolio company Name of acquisition
Business description of bolt-on investment
Date
Private Equity
portfolio bolt-on
acquisitions funded
from the portfolio
company balance
sheets
Royal Sanders
Lenhart
Manufacturer of private label products for the personal care industry
April 2023
MAIT
etagis
Provider of production planning software for ERP systems
June 2023
AES
Triseal
Engineering company specialising in design, manufacture and
application of mechanical seals and associated rotating equipment
June 2023
European
Bakery Group
Panelto
Manufacturer of bake-off artisan breads
August 2023
MAIT
Quadrix
Product lifecycle management software provider
October 2023
Evernex
Maminfo
Brazilian provider of third-party maintenance services
January 2024
Realisations
Portfolio company
Type
Business description
Date
3i realised
proceeds
£m
Realisations
Action
Capital restructuring
proceeds
General merchandise discount retailer
November 2023
762
Royal Sanders
Refinancing
Private label and contract manufacturing
producer of personal care products
December 2023
61
WP
Refinancing &
other
Global manufacturer of innovative plastic
packaging solutions
March 2024
40
Other
Various
Various
Various
3
FY2024 Private Equity realisations
866
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Private Equity bolt-on acquisitions
and further investments
Case study: Bolt-on acquisition
European Bakery Group’s (“EBG”)
acquisitions of coolback and
Panelto Foods
EBG completed the transformational
acquisitions of coolback and Panelto Foods in
2023, establishing a high-quality pan-European
platform in the fragmented European private
label market for bake-off bread.
coolback is a German bakery group founded in 1999, based in the
Berlin area. The company employs more than 600 full-time
employees across three locations in the German municipality of
Brandenburg, which together produce more than 1.2 billion
baked goods per year. It produces and sells private label, frozen
and ambient bake-off bread products to customers active in food
retail and food service across Germany, the Nordics and Poland.
Panelto Foods was founded in 2004 and is headquartered in
Ireland. It produces a range of high-quality frozen par-baked
breads for major retailers’ in-store bakeries across Ireland, the UK
and Europe. The company employs around 300 employees across
two state-of-the-art bakeries with three production lines, which
produce more than 325 million baked goods annually.
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For more information
www.europeanbakerygroup.com
Case study: Bolt-on acquisition
MAIT’s acquisitions of etagis
and Quadrix
Since our investment in 2021, MAIT has
made seven bolt-on acquisitions, including
two in FY2024, proving itself as an active
consolidator in a fragmented market.
etagis, headquartered in Germany, is a provider of software
solutions for production planning and control. The business was
founded in 2005 and has built a network of around 460
customers. This acquisition expands the reach of MAIT’s
proprietary software.
Quadrix, founded in 1997 in Flawil, Switzerland, is a product
lifecycle management software focused sales and
implementation partner, with c.570 active clients. The acquisition
has strengthened MAIT’s position as a leading provider of
product lifecycle management solutions in Switzerland.
For more information
www.mait-group.com
Case study: Further investment
ten23 health
ten23 health is a biologics-focused contract
development and manufacturing organisation
(“CDMO”).
In 2021, we adopted an innovative approach in creating a new
start up CDMO platform in ten23 health. Swissfillon AG, a drug
product fill and finish CDMO located in Visp, was acquired by the
platform later that year. The combined business’s core service
offering includes formulation and drug development,
manufacturing for clinical and commercial applications, and
testing services for sterile pharmaceutical products.
The business operates across two sites in Visp and Basel,
Switzerland, both of which have seen progression across their
operational initiatives and capability expansion activities in
FY2024. The business is also pursuing a greenfield facility buildout
in Visp (“Visp West”) to further expand its fill and finish
manufacturing and quality control offerings.
Momentum across the business remains strong after ten23 health
secured a good pipeline of service and manufacturing
programmes. The business is well positioned for another year of
growth in 2024.
For more information
www.ten23.health
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Action performance and valuation
As detailed in the Chief Executive’s statement and in the Action case
study, Action delivered another year of very strong performance in
2023, and we reflected this in our valuation of Action at 31 March 2024.
At 31 March 2024, Action was valued using its LTM run-rate EBITDA
to the end of P3 2024 of €1,848 million, which includes the usual
adjustment to reflect stores opened in the last 12 months and one-off
expenses of €18.5 million, the majority of which related to a specific
net payment to each full-time Action employee in December 2023 to
mark Action's 30-year trading anniversary. Action continues to
outperform the peers we use to benchmark its performance across its
most important KPIs, supporting our valuation multiple of 18.5x net of
the liquidity discount (31 March 2023: 18.5x).
Action ended P3 2024 with cash of €558 million and a net debt
to run-rate earnings ratio of 2.2x after paying two dividend
distributions in FY2024, of which 3i received £375 million.
At 31 March 2024, the valuation of our 54.8% stake in Action
was £14,158 million (31 March 2023: 52.9%, £11,188 million) and
we recognised unrealised profits from Action of £3,609 million
(March 2023: £3,708 million) as shown in Table 2.
Performance (excluding Action)
Excluding Action, the Private Equity portfolio valued on an earnings
basis generated £689 million (March 2023: £520 million) of value growth
from performance increases, offsetting £368 million of performance
decreases (March 2023: £310 million).
Royal Sanders, which operates in the private label and contract
manufacturing market for personal care products, was the largest
contributor to our Private Equity performance increases (excluding
Action) in FY2024. A combination of continued growth of key
customers and the benefits of its previous bolt-on acquisitions
beginning to manifest resulted in the business delivering strong top-
line and earnings growth and cash generation in the year,
underscoring its good track record since we invested in 2018. As a
result, we have now designated Royal Sanders as a longer-term hold
asset, as we continue to support the compounding growth potential
of the business. Also operating in the private label space, EBG was
another standout performer in FY2024. Following the formation of
the combined EBG platform earlier in the year (as shown in
investments and realisations activity on page 26), the business is
benefitting from an expanded footprint in new geographies and
product categories.
MPM saw good top-line growth in 2023, driven primarily by increased
volumes across its key markets. The US, now its largest market,
continues to see encouraging sales development and there is
significant headroom to scale it further, including through the online
channel. Audley Travel’s reputable brand and customer loyalty
continues to support its strong recovery post the pandemic.
Low consumer confidence impacted the home and living category in
Luqom’s core DACH and Nordic regions in 2023, resulting in financial
underperformance. In response, the business has focused on an
operational transformation to ensure it is well positioned for
improved market conditions. Encouragingly, it has started 2024 with
more positive trading. YDEON faced a sustained deterioration of
consumer confidence in its markets in 2023, particularly in its core
German market. There are some signs of improving performance for
YDEON at the start of 2024, albeit the wider market environment
remains challenging. Whilst largely outperforming the general
furniture market, BoConcept saw softer order intake across most of
its regions in 2023. This was partially offset by stabilising input and
shipping costs.
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Across our healthcare portfolio, Cirtec Medical saw strong
commercial traction with new wins in 2023, including both production
and product development programmes, and has a strong pipeline
moving into 2024 that is expected to support continued growth.
Since our initial investment in 2021, we have invested our capital in
developing the infrastructure, commercial activities and team
expertise of ten23 health. In 2023, the business continued to develop
the production and development services capabilities of its Basel and
Visp sites, and grew a good pipeline of customer programmes.
Q Medical Devices (Q Holding) performed well in 2023, with strong
demand from most of its customers across its business units, and also
benefitted from a number of operational initiatives.
Demand for single-use bioprocessing products remained muted
across the industry in 2023, as destocking persisted for longer than
expected, impacting SaniSure as a participant in this market. Over
this period, SaniSure has focused on driving further improvements in
its business and processes to position itself for a recovery in demand.
Whilst it is difficult to predict when ordering patterns may normalise,
we have seen positive momentum in its order book in the first quarter
of 2024. SaniSure is well positioned to be an outsized beneficiary of
the return to normalised market growth.
AES delivered another year of strong performance in 2023, driven by
order volume growth across its global end-markets. The business
continued to progress reliability, automation and capacity and
completed the bolt-on acquisition of Triseal, an Australian sealing
technology provider.
A combination of good demand in personal care products and new
customers drove good volume growth in WP in 2023. Weak end-
market demand across the consumer DIY and construction markets
resulted in soft trading performance for Tato in 2023. The business has,
however, benefitted from selling down highly-priced inventory over the
year and is now delivering improved margin performance. Tato
remains highly cash generative and returned £7 million of dividend
income to 3i in the year.
Evernex saw good financial performance in 2023, driven primarily by
third-party maintenance sales growth, particularly in southern Europe,
North America, the Middle East, Africa and Brazil. The business also
secured a significant contract in the US as part of its North American
expansion strategy. In January 2024, Evernex completed the bolt-on
acquisition of Maminfo in Brazil, enabling the business to deliver its
capabilities across all Brazilian states. Also operating in the IT services
market, MAIT continues to grow its revenues through a combination
of organic growth and M&A. The business completed the
acquisitions of etagis and Quadrix in the year, achieving further
progress in its buy-and-build strategy.
WilsonHCG continues to operate in a challenging white collar
recruitment market, resulting in softer performance across the
majority of its end-markets. The business has carefully optimised its
resources ensuring that it can service new customer wins in the year,
and is ready to scale quickly when market demand returns. arrivia’s
encouraging post-pandemic recovery and performance in 2023, was
somewhat offset by the loss of a significant client at the end of the
year. This is expected to impact bookings going forward.
Overall, 93% of the portfolio by value grew LTM adjusted earnings
in the year (31 March 2023: 90%). Chart 1 on page 32 shows the
earnings growth of our top 20 Private Equity investments.
Table 2: Unrealised profits on the revaluation of Private Equity investments1 in the year to 31 March
2024
£m
2023
£m
Earnings based valuations
Action performance
3,609
3,708
Performance increases (excluding Action)
689
520
Performance decreases (excluding Action)
(368)
(310)
Multiple increases
68
38
Multiple decreases
(107)
(205)
Other bases
Sum of the parts
60
–
Discounted cash flow
(13)
4
Other movements on unquoted investments2
(14)
4
Quoted portfolio
(50)
(13)
Total
3,874
3,746
1
Further information on our valuation methodology, including definitions and rationale, is included in the Portfolio valuation – an explanation section.
2
FY2024 includes nexeye valued on an imminent sale basis.
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Leverage
Our Private Equity portfolio is funded with all-senior debt structures,
with long-dated maturity profiles. As at 31 March 2024, 85% of
portfolio company debt was repayable from 2027 and beyond.
Across our Private Equity portfolio, term debt is well protected
against interest rate rises, with over 70% of total term debt hedged at
a weighted average tenor of more than three years. The average all-
in debt cost on the total hedged term debt is less than 6.5%.
Average leverage across the portfolio was 2.7x (31 March 2023: 2.5x).
Excluding Action, leverage across the portfolio was 3.9x
(31 March 2023: 4.0x).
Chart 2 shows the ratio of net debt to adjusted earnings
by portfolio value.
Multiple movements
When selecting multiples to value our portfolio companies we take a
long-term, through-the-cycle approach and consider a number of
factors including recent performance, outlook and bolt-on activity,
comparable recent market transactions and exit plans, and the
performance of quoted comparable companies. At each reporting
date our valuation multiples are considered as part of a robust
valuation process, which includes independent challenge throughout,
including from our External auditor, culminating in the quarterly
Valuations Committee of the Board.
Whilst public equity markets generally recovered in the year to the
end of March 2024, we have remained cautious in reflecting this
recovery in the valuation multiples we use for our portfolio
companies, given the persisting dislocation between quoted equity
market multiples and the valuations of private market transactions.
We increased the multiples for three of our portfolio companies in
the year to reflect their performance against their respective
investment cases and the scaling or professionalising of these
businesses, and we adjusted four multiples downwards to reflect
private market transaction dynamics, and in some instances, soft
performance. In total, we recognised a net £39 million unrealised
value reduction from multiple movements in the year (March 2023:
£167 million).
We have made no changes to our approach for the valuation of Action.
Action’s performance and KPIs continue to compare very favourably in
relation to its peer group, which consists of North American and
European value-for-money retailers. This supports our post-discount
valuation multiple of 18.5x, which is unchanged from the prior year. We
take comfort from the fact that Action’s continued growth meant that its
valuation at 31 March 2023 translated to only 14.4x the run-rate EBITDA
achieved one year later. Based on the valuation at 31 March 2024, a 1.0x
movement in Action’s post discount multiple would increase or
decrease the valuation of 3i’s investment by £866 million.
Chart 1: Portfolio earnings growth of the top 20
Private Equity1 investments
l 3i value at 31 March 2024 (£m)
1,276
1,187
871
14,225
1,190
6
5
3
2
4
<0%
0-9%
10-19%
20-29%
≥30%
Number of companies
1
Includes top 20 Private Equity companies by value excluding ten23 health and nexeye. This
represents 96% of the Private Equity portfolio by value (31 March 2023: 96%). Last 12 months’
adjusted earnings to 31 December 2023 and Action based on LTM run-rate earnings to the
end of P3 2024.
Chart 2: Ratio of net debt to adjusted earnings1
l 3i value at 31 March 2024 (£m)
206
15,009
1,120
527
963
124
4
5
5
2
3
3
1-2x
2-3x
3-4x
4-5x
5-6x
>6x
Number of companies
1
This represents 91% of the Private Equity portfolio by value (31 March 2023: 92%). Quoted holdings,
nexeye, ten23 health and companies with net cash are excluded from the calculation. Net debt
and adjusted earnings at 31 December 2023 and Action based on LTM run-rate earnings to the
end of P3 2024.
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Quoted portfolio
Basic-Fit is the only quoted investment in our Private Equity portfolio.
In 2023, the business saw 13% growth in its membership numbers
and added 202 clubs to its network.
In the 12 months to 31 March 2024, its share price decreased by
43.1% to €20.68 (31 March 2023: €36.32). This price values our 5.7%
shareholding in Basic-Fit at £67 million (31 March 2023: £121 million).
Imminent sale
Given the advanced stage of the sale process, we valued nexeye on
an imminent sale basis at 31 March 2024, and we agreed the sale of
the portfolio company in April 2024.
Sum of the parts
At 31 March 2024, ten23 health was valued on a sum of the parts
basis, mainly using a discounted cash flow (“DCF”) methodology.
Assets under management
The assets under management of the Private Equity portfolio,
including third-party capital, increased to £27.5 billion (31 March
2023: £22.9 billion), primarily due to unrealised value movements in
the year.
Private Equity 3i proprietary capital by vintage
The performance of our vintages (Table 4) is driven by our portfolio
companies. Action, the only remaining asset in the Buyouts 10-12
Vintage and the primary driver of the Other category, continues to
perform very strongly. In the year, we designated Royal Sanders as a
longer-term hold Private Equity asset, crystallising the return from
Royal Sanders to date within its previous 2016-19 vintage, at a 5.3x
sterling money multiple. Royal Sanders now sits in the Other
category.
Table 3: Private Equity assets by sector as at 31 March 2024
Sector
Number of
companies1
3i carrying
value
2024
£m
Action (Consumer)
1
14,158
Consumer
13
2,292
Healthcare
4
1,262
Industrial Technology
6
1,107
Services
9
644
Software
3
166
Total
36
19,629
1
The case count excludes legacy insolvent assets.
Table 4: Private Equity 3i proprietary capital as at 31 March
Vintages
3i proprietary
capital value3
2024
£m
Vintage
money
multiple4
2024
3i proprietary
capital value3
2023
£m
Vintage
money
multiple4
2023
Buyouts 2010–20121
1,389
16.0x
2,968
15.1x
Growth 2010–20121
22
2.1x
23
2.1x
2013–20161
788
2.5x
814
2.5x
2016–20191
1,363
1.8x
1,872
1.8x
2019–20221
1,743
1.6x
1,524
1.5x
2022-20251
224
1.0x
228
1.0x
Other2
14,100
n/a
8,996
n/a
Total
19,629
16,425
1
Assets included in these vintages are disclosed in the Glossary.
2
Includes value of £12,769 million (31 March 2023: £8,220 million) held in Action through the 2020 and 2023 Co-investment vehicles and 3i.
3
3i proprietary capital is the unrealised value for the remaining investments in each vintage.
4
Vintage money multiple (GBP) includes realised value and unrealised value as at the reporting date.
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Infrastructure
We manage a range of funds investing
principally in mid-market economic infrastructure
and operational projects in Europe and North
America. Infrastructure is a defensive asset class
that provides a good source of income and fund
management fees for the Group, enhancing the
returns on our proprietary capital.
Our Infrastructure portfolio generated a GIR of £99 million or 7%
on the opening portfolio value (2023: £86 million, 6%), driven
primarily by an increase in the share price of our quoted stake in 3iN,
good value growth from our US infrastructure portfolio and dividend
income. 3iN’s underlying portfolio continues to perform strongly, and
it completed follow-on investments in three portfolio companies, two
self-funded bolt-on acquisitions and disposed of one asset in the year.
We completed the final close of our North American Infrastructure
Fund, and the Fund made one new investment and three bolt-on
acquisitions for its existing portfolio companies in the year.
Table 5: Gross investment return for the year
to 31 March
Investment basis
2024
£m
2023
£m
Realised losses over value on the disposal of
investments
(4)
–
Unrealised profits on the revaluation of
investments
72
23
Dividends
35
33
Interest income from investment portfolio
11
14
Fees payable
(6)
–
Foreign exchange on investments
(9)
16
Gross investment return
99
86
Gross investment return
as a % of opening portfolio value
7%
6%
At a glance
Gross investment return
£99m
or 7%
(2023: £86m or 6%)
AUM
£6.7bn
(2023: £6.4bn)
Cash income
£113m
(2023: £107m)
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Infrastructure acquisitions
New investment: North American Infrastructure Fund
Amwaste
Amwaste, founded in 2010, is a provider of non-hazardous solid waste
disposal services in the southeastern US with operations in Alabama,
Georgia and Louisiana. It operates eight landfill sites, eight transfer
stations and one materials recovery facility.
The company’s service offering includes residential and
commercial waste collection, landfill and post-collection
operations. It serves over 300,000 customers per week
including individual homeowners and some of the highest
profile industrial, commercial and municipal customers in the
southeastern US.
The North American waste and recycling industry generates
c.$75 billion in annual revenue with c.456 million tonnes of
waste produced per annum in the US alone. Amwaste’s
vertically integrated platform enables it to efficiently capture
and internalise waste volumes, driving margin enhancement
and providing a launch pad for future expansion. It has a strong
track record of organic growth and significant white space
opportunity.
3i invested £32 million in Amwaste in FY2024, as it continues to
develop its North American Infrastructure Fund.
For more information
www.amwaste.net
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Fund management
3iN
3iN generated a total return on opening NAV of 11.4% for the year to
31 March 2024, exceeding its total return target of 8% to 10%
per annum, and delivered its dividend target of 11.9 pence per share,
a 6.7% increase on last year.
This result was underpinned by the strong performance of 3iN’s
portfolio companies, as they continued to benefit from long-term
sustainable growth trends. TCR outperformed our expectations for
the year due to a number of contract wins, further increasing its
global presence and strong utilisation rates of its fleet as air traffic
levels continue to grow post the pandemic. Tampnet traded well in
the year, driven by the outperformance of its fixed and mobile units
and by the delivery of new installations across the North Sea and the
Gulf of Mexico. Valorem saw revenues from electricity generation
ahead of expectations driven by favourable wind conditions. Other
notable contributors include Infinis, Joulz, ESVAGT and Global
Cloud Xchange. DNS:NET continues to face challenges with its fibre
network roll out in Germany resulting in weaker performance in the year.
During the year, 3iN completed the realisation of Attero for proceeds
of €214 million, a 31% uplift on opening value. 3iN also completed
follow on investments in Future Biogas, DNS:NET and Ionisos and a
bolt-on acquisition for both TCR and Tampnet, both of which
required no further investment.
As investment manager to 3iN, in FY2024, we recognised a
management and support services fee of £51 million (2023: £49
million) and a NAV-based performance fee of £41 million (2023: £35
million). This performance fee comprised a third of the potential
performance fee for each of FY2024, FY2023 and FY2022, after the
performance hurdle was met in each year. In addition, we received a
performance fee of £21 million on the realisation of Attero from
managed funds that invested alongside 3iN.
North American Infrastructure Fund
Our North American Infrastructure Fund completed its final close in
December 2023, with final commitments of $739 million. As part of
this process, we received further external commitments during the
year, which resulted in a pro-rata rebalancing of existing fund
holdings, resulting in proceeds to 3i of £22 million.
The Fund completed a £32 million new investment in Amwaste, a
provider of non-hazardous solid waste disposal services in the
southeastern region of the US. Regional Rail continued its growth via
new customer additions and bolt-on activity, with the acquisitions of
Indiana Eastern Railroad, Ohio South Central Railroad and Clinton
Terminal Railroad, adding over 100 miles of freight rail to the
platform. Freight load traffic across Regional Rail's existing railroads
continued to grow. EC Waste saw good performance from its landfill
and transfer stations and, the business completed the acquisition of a
further landfill site in Puerto Rico in the year.
Assets under management
Infrastructure AUM increased to £6.7 billion (2023: £6.4 billion),
principally due to an increase in the share price of 3iN and good
performance across our US infrastructure portfolio and 3i Managed
Infrastructure Acquisitions Fund (“3i MIA”).
During the year, we agreed to sell our operational projects
infrastructure fund capability, comprising the management of the
BIIF and 3i EOPF funds, to certain members of the 3i Infrastructure
team, with the aim of simplifying 3i’s Infrastructure business and
facilitating its focus on core-plus infrastructure. At 31 March 2024, this
represented total AUM of £796 million. The sale is expected to
complete shortly. There is no material impact to 3i Group’s net assets
or return from this transaction.
Table 6: Assets under management as at 31 March 2024
Fund/strategy
Close
date
Fund
size
3i
commitment/
share
Remaining
3i commitment
%
invested3
at 31 March
2024
AUM
£m
Fee
income
earned in
2024
£m
3iN1
Mar-07
n/a
£879m
n/a
n/a
3,011
51
3i Managed Infrastructure Acquisitions LP
Jun-17
£698m
£35m
£5m
87%
1,399
4
3i managed accounts
various
n/a
n/a
n/a
n/a
689
4
BIIF4
May-08
£680m
n/a
n/a
91%
437
3
3i North American Infrastructure Fund
Dec-232
US$739m
US$300m
US$85m
75%
541
3
3i European Operational Projects Fund4
Apr-18
€456m
€40m
€4m
87%
359
3
US Infrastructure
Nov-17
n/a
n/a
n/a
n/a
306
–
3i India Infrastructure Fund
Mar-08
US$1,195m
US$250m
n/a
73%
–
–
Total
6,742
68
1
AUM based on the share price at 31 March 2024.
2
First close completed in March 2022. Final close completed in December 2023.
3
% invested is the capital deployed into investments against the total Fund commitment.
4
Fee income earned is non-recurring.
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3i’s proprietary capital infrastructure portfolio
The Group’s proprietary capital infrastructure portfolio consists
of its 29% quoted stake in 3iN, its investment in Smarte Carte
and direct stakes in other managed funds.
Quoted stake in 3iN
Our 29% stake in 3iN (31 March 2023: 29%) was valued at £879 million
(31 March 2023: £841 million) at 31 March 2024, as its share price
increased by 4% year-on-year to 327 pence (31 March 2023: 313
pence). As a result, we recognised an unrealised gain of £38 million
(2023: unrealised loss of £93 million) and £31 million of dividend
income (2023: £29 million).
North American Infrastructure proprietary capital
Smarte Carte traded well in 2023 across most of its business lines,
supported by favourable economics and new contract wins. The
business continues to grow its international presence, recently
signing a new carts contract at London Heathrow Airport, one of the
largest cart operations in the world with over 14,000 trolleys. At 31
March 2024, Smarte Carte was valued at £306 million on a DCF basis
(31 March 2023: £300 million).
Table 7: Infrastructure portfolio movement for the year to 31 March 2024
Investment
Valuation
Opening
value at
1 April 2023
£m
Investment
£m
Disposals
at opening
book value
£m
Unrealised
profit
£m
Other
movements1
£m
Closing
value at
31 March 2024
£m
3iN
Quoted
841
–
–
38
–
879
Smarte Carte
DCF
300
–
–
7
(1)
306
North American Infrastructure Fund2
DCF
171
36
(26)
20
(2)
199
3i MIA
Fund
65
–
–
6
–
71
3i EOPF
Fund
32
–
–
1
–
33
Total
1,409
36
(26)
72
(3)
1,488
1
Other movements include foreign exchange.
2
Includes Regional Rail, EC Waste and Amwaste.
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Scandlines
Scandlines is held for its ability to deliver
long-term capital returns, whilst generating
cash dividends.
Performance
Scandlines’ performance was stable in the year, and it generated a GIR
of £10 million, or 2% of opening portfolio value (2023: £52 million, 10%).
Leisure volumes continued to grow, following a strong peak over the
summer. Freight volumes were softer compared to record levels in
2022, as a result of normalising demand, and a weaker macro-
economic environment particularly in Scandinavia and Germany. The
business remained cash generative in the year, resulting in the
receipt of £25 million of dividend income in FY2024 (2023:
£38 million).
Scandlines continues to invest in upgrading its fleet and reducing its
emissions. A new freight ferry for the Rødby-Puttgarden route, which
will be capable of sailing without direct emissions when fully
operating on electricity, is in the later stages of construction.
We continue to value Scandlines on a DCF basis and, at 31 March 2024,
its value of £519 million (31 March 2023: £554 million) reflected the
dividends received in the year and a degree of caution on the outlook.
Foreign exchange
We hedge the balance sheet value of our investment in Scandlines.
We recognised a £15 million loss on foreign exchange translation
(March 2023: gain of £21 million) offset by a £20 million fair value
gain (March 2023: loss of £7 million) from derivatives in our
hedging programme.
Table 8: Gross investment return for the year
to 31 March
Investment basis
2024
£m
2023
£m
Unrealised losses on the revaluation of
investments
(20)
–
Dividends
25
38
Foreign exchange on investments
(15)
21
Movement in fair value of derivatives
20
(7)
Gross investment return
10
52
Gross investment return as a % of opening
portfolio value
2%
10%
At a glance
Gross investment return
£10m
or 2%
(2023: £52m or 10%)
Dividend income
£25m
(2023: £38m)
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What’s in this section
A responsible approach
40
1. Invest responsibly
42
2. Recruit and develop a diverse pool of talent
52
3. Act as a good corporate citizen
56
Our TCFD disclosures
58
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A responsible
approach
We aim to generate attractive returns across the
cycle by behaving responsibly as an investor, an
employer and a corporate citizen.
We are a small organisation of fewer than 250 employees, with a
limited direct footprint. With assets under management of £34.7
billion, our impact on the environment and society is determined
largely by our portfolio. We have a long-term, responsible approach
to investment and aim to compound value through thoughtful
origination, disciplined investment and the active management of our
portfolio, with regard to the consequences of our actions on
stakeholders. This practice is built on our values, strong governance
and robust processes, both at 3i itself and at its portfolio companies.
This approach has allowed us to earn the trust of our shareholders, co-
investors and portfolio companies, and to recruit and develop
employees who share our values and ambitions.
Our reporting
We have chosen to report in accordance with the Global Reporting
Initiative (“GRI”) and Sustainability Accounting Standards Board
(“SASB”) standards. Please refer to our website for the GRI content
index and SASB disclosures. We also provide additional disclosures
across a number of areas in our data appendix and in the summaries
of relevant policies that are available on our website.
Governance and resources
The Board of Directors is responsible for the oversight of the Group’s
sustainability strategy, approach and policies, including the
Responsible Investment policy. It delegates day-to-day accountability
for sustainability to the executive management and, in particular, the
Chief Executive. The Chief Executive has established a number of
committees to support him in overseeing and monitoring policies
and procedures and to address issues if they arise. This includes an
ESG Committee, which assists and advises the Chief Executive,
directly and through the Investment and Group Risk Committees, on
relevant environmental, social and governance risks and matters,
including developing and proposing the Group’s approach to
managing ESG. It also coordinates the Group’s various sustainability
activities, including the management of ESG risks and opportunities
across the portfolio.
We have several dedicated sustainability professionals, both at
Group level, with a focus on the Group’s overall sustainability
strategy, objectives and reporting, and embedded within each of our
Private Equity and Infrastructure investment teams, with a focus on
the assessment and management of sustainability-related risks and
opportunities within existing and potential portfolio companies.
Page 101
Governance framework
GRI, SASB, Data appendix and summaries of sustainability policies
www.3i.com/sustainability/
Our sustainability strategy is defined by three key priorities:
Invest responsibly
Recruit and develop
a diverse pool of talent
Act as a good
corporate citizen
We give due consideration to the sustainability
profile of portfolio companies before investing
and throughout the holding period. We use our
influence with our portfolio companies to
ensure that they assess their environmental and
social impacts and dependencies and, where
relevant, devise strategies to address them.
Recruiting, retaining and developing our talent
is a priority. We value diversity and believe that
a variety of perspectives enhances our decision
making.
We embed responsible business practices
throughout our organisation by promoting
our values and culture.
Pages 42-51
Read more
Pages 52-55
Read more
Pages 56-57
Read more
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Science-based targets
On 22 March 2024, the SBTi approved 3i’s science-
based targets. Our targets cover our own
operations and our portfolio.
Scope 1 & 2 (own operations)
3i Group plc commits to reduce its absolute Scope
1 and 2 (market-based) GHG emissions by 42% by
FY2030 from a FY2023 base year.
Scope 3 (portfolio emissions)
3i Group’s portfolio targets cover 82% of its total
investment and lending1 by invested capital as of
FY2023.2
3i commits to:
• 31% of its listed and eligible Private Equity
portfolio by invested capital setting SBTi
validated targets by FY2028 and 100% by
FY2040 from a FY2023 base year
• A 68% per megawatt-hour (“MWh”) reduction
in GHG emissions from the electricity
generation sector within its eligible portfolio by
FY2030 from a FY2023 base year
• Continue providing electricity generation
project finance only for renewable electricity
through FY2030
1
The target language makes reference to “lending activities”. 3i does not
engage in lending activities, but had to word its targets in alignment with the
SBTi’s standard language for Financial Institutions.
2
As of FY2023, required activities made up 82% of 3i Group’s total investment
and lending by invested capital while optional activities made up 3% and out of
scope activities made up 15%.
External benchmarking
We believe that it is important to evidence our commitment to
operating sustainably. We therefore provide a wealth of relevant
information to shareholders and other interested stakeholders.
UN Principles for Responsible Investment
We have been signatories to the UN Principles for Responsible
Investment (“UN PRI”) since 2011. 3i scored four out of five stars for
the Policy, Governance and Strategy, Private Equity and Infrastructure
modules in the 2023 UN PRI assessment report.
Sustainability indices
3i is a member of FTSE4Good Index Series and of the Solactive
Europe Corporate Social Responsibility Index.
Orbis Advisory 2023 Private Equity ESG Transparency Index
3i was recognised as the Top ESG Performer overall and in the mid-
market category of the Orbis Advisory 2023 Private Equity ESG
Transparency Index. This index assesses the ESG disclosures of 161
private equity firms listed in the BVCA directory across six categories:
global buy-out funds, mid-market private equity, growth equity,
alternative lenders, direct investors and infrastructure funds.
Sustainability ratings
We engage with multiple rating providers that assess our ESG
performance based on their own methodologies. The summary of
our ratings as at 8 May 2024 (except where indicated) is as follows:
Rating body
Latest rating and scoring scale
CDP
Climate change score: B
Scale: A to D-
S&P Global CSA
48 (93rd percentile)
Scale: 0-100 (higher scores are better)
FTSE Russell
3.8 (81st percentile)
Scale: 0 to 5 (higher scores are better)
ISS ESG
ISS ESG Corporate Rating: B-
Scale: A+ to D-
Sustainalytics3
10.4 Low Risk
Scale: from Negligible (0-10) to Severe (40+)
3
As at October 2023. Copyright © 2024 Morningstar Sustainalytics. All rights reserved. This section contains
information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary
of Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational purposes
only. They do not constitute an endorsement of any product or project, nor an investment advice and are not
warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to
conditions available at https://www.sustainalytics.com/legal-disclaimers.
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3i Group plc | Annual report and accounts 2024
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Invest responsibly
We believe that a responsible approach to
investment aligns with our values and supports
the delivery of attractive returns from our
portfolio over the long term.
We have majority or significant minority holdings in our core portfolio
companies and are represented on their boards. We exercise our
influence to ensure that they assess their material environmental and
social impacts and dependencies and, where relevant, support them
in developing plans to mitigate ESG risks and invest in value creation
opportunities that may arise.
Our investment approach is based on four pillars:
• Long-term stewardship
• Thematic origination
• Careful portfolio construction
• Assessment and management
Pages 16-17
Our long-term, responsible approach
The ESG Committee is responsible for refining our approach to
ensure that it remains aligned with emerging best practice, evolving
stakeholder expectations and recent and upcoming sustainability
regulations across our markets. It reviews how ESG-related risks and
opportunities are assessed throughout our investment and portfolio
management activities and develops and recommends changes to
our processes and to our Responsible Investment policy.
Our Responsible Investment policy
Our Responsible Investment (“RI”) policy sets out the types of
businesses in which 3i will not invest, as well as minimum
requirements in relation to ESG matters, which we expect new
portfolio companies to either meet or commit to meeting over a
reasonable time period. We screen all investments against the RI
policy, irrespective of their country or sector.
3i’s expectations as set out in the RI policy are to invest
in businesses which are committed to:
The environment
A cautious and responsible approach to the environmental
management of their business operations (and those of their supply
chain) by making efficient use of natural resources and mitigating
environmental risks and damage.
Business integrity
Upholding high standards of business integrity, avoiding corruption in all
its forms, and complying with applicable anti-bribery, anti-fraud, anti-
money laundering and data protection laws and regulations.
Fair and safe working conditions
Respecting the human rights of their workers and of the people working
in their supply chain; maintaining safe and healthy working conditions for
their employees, contractors and the people working in their supply
chain; treating their employees fairly; upholding the right to freedom of
association and collective bargaining; treating their customers fairly and
respecting the health, safety and wellbeing of those affected by their
business activities.
Good governance
Implementing a strong corporate governance and risk management
culture and complying in form and substance with established best
practice in corporate governance which is appropriate to the relative
size and complexity of the relevant business and the markets in which it
operates.
Our RI policy was updated in May 2024 to reflect the introduction of
considerations and criteria to enable 3i to achieve its science-based
targets over time, including:
• restrictions on coal investments and a referral mechanism for
consideration of other fossil fuel investments and investments in
companies that derive a significant proportion of their revenues
from fossil fuel-related activities; and
• the introduction of a requirement for in-scope portfolio companies
to set science-based targets within a reasonable timeframe.
A summary of our Responsible Investment policy
www.3i.com/sustainability/responsible-investment/responsible-investment-policy/
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Assessment and management of ESG factors in our investment and portfolio management processes
The active management of ESG risks and opportunities is integral to our investment, portfolio management and value creation processes.
We embed an assessment of the long-term sustainability profile of existing and new investments in our processes. Once invested, we support
companies as they develop strategies and respond to stakeholder expectations, and we gather data to measure progress against ESG
objectives. This enables us to prepare companies ahead of any exit opportunity.
Pre-investment
During investment period
Exit
Assessment and
action planning
• Screen each opportunity
against the requirements of
the RI policy at the first stage
of our process
• Identify and give due
consideration to the most
material ESG factors inherent
in each investment
opportunity
• Commission specialist due
diligence on ESG matters
where required
• Include ESG considerations in
Investment Committee
materials
• Integrate relevant action
points into the post-
investment action plan
Use of influence and
engagement
• Implement robust governance
and procedures at the portfolio
company to ensure that ESG
risks and opportunities are
assessed and managed
appropriately
• Use active participation and
influence on portfolio company
boards to ensure they are
addressing the ESG risks in
respect of their businesses
• Leverage the 3i portfolio and
network to provide introductions
to other companies, useful
contacts and advisers and share
best practice
• Engage with portfolio
companies and provide support
as they devise their sustainability
strategies and implement and
deliver related projects
Data collection and
monitoring
• Collect ESG data from portfolio
companies on an annual basis to
understand the baseline and
measure progress over time
• Prepare detailed quantitative
and qualitative ESG assessments
annually as part of the portfolio
company review process
• Discuss ESG assessment during
portfolio company review
meetings, involving investment
teams, Investment Committee
members and selected 3i Board
members
• Set and monitor progress with
portfolio-wide objectives in line
with ESG minimum requirements
set in the RI policy
Preparation and
communication
• Consider the data collection,
reporting and governance
structures which may be
required in advance of a sale
process
• Work with advisers to
communicate relevant
sustainability information to
potential buyers
Objectives
The Investment Committee may
decline investment opportunities
where red flags are raised in the
pre-investment ESG risk
assessment that cannot be
remedied post investment.
Further specialist due diligence
may be commissioned to assess
whether a situation can be
remedied.
We use our influence to assess and
mitigate risk and ensure value
creation opportunities are
captured.
Data is used to develop our
understanding and management of
ESG matters, to enhance our
decision making, to facilitate better
financing opportunities and to
identify key themes, trends and
opportunities across the portfolio.
It is also used to comply with our
reporting obligations.
Good ESG performance can
protect and potentially enhance
the value achieved in an exit.
In FY2024, we undertook a second phase of climate change scenario analysis for our portfolio. This work improved our understanding of the
critical drivers behind climate-related risks and opportunities in our existing holdings. We used some of the outputs of this work in the
enhancement of our due diligence framework which we will use to assess our forthcoming investment pipeline.
During the year, we implemented a new software tool to increase the consistency and quality of the ESG data we receive from portfolio
companies as part of the annual ESG assessment questionnaire. This tool enables us to prepare year-on-year analyses of portfolio company
performance, enhancing our portfolio monitoring activities.
We continued to offer training to our investment executives on ESG topics that may be relevant to our portfolio, including human rights.
Pages 58-68
TCFD disclosures and climate change scenario analysis
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Proactive engagement with our portfolio
Once invested, we use our influence with portfolio companies with a
view to ensuring, over the life of the investment, that they monitor
ESG factors and that they have a proportionate sustainability strategy
in place. This includes:
• board or management-level responsibility and appropriate
governance, reporting structures and resourcing to manage ESG
risks and opportunities that may impact their business over the
holding period;
• assessing material ESG issues and devising appropriate strategies
to address them;
• measuring their carbon footprint, setting science-based targets or
appropriate decarbonisation plans, and demonstrating
decarbonisation progress within a reasonable timeframe;
• establishing relevant and proportionate governance and
sustainability-related policies and procedures;
• ensuring they are well prepared to meet regulatory requirements;
and
• considering stakeholders in their management of ESG issues and
communicating transparently.
We leverage our knowledge and expertise across our portfolio and
facilitate the sharing of best practice, either through introductions, or
through forums on themes including plastics, carbon and information
security and digital innovation. In addition, ESG was a key agenda
item at our portfolio company CFO forum in November 2023, where
a discussion facilitated by an external specialist consultancy and our
internal portfolio sustainability team focused on the role of the CFO
and finance team in enabling the delivery and monitoring of
sustainability strategies with applicable KPIs. This theme is particularly
relevant given upcoming sustainability regulations in the EU.
In February 2024, we held our inaugural sustainability forum in
Amsterdam, welcoming sustainability representatives from 30 of our
Private Equity and Infrastructure portfolio companies. The agenda
included discussions and expert presentations on topics ranging
from how to develop an effective sustainability strategy and prepare
for ESG regulation, to science-based targets and value-led
decarbonisation. A number of delegates from our portfolio
companies also presented their strategies and experiences of these
topics. The forum was an opportunity for the delegates to get to
know one another in an informal setting and establish a network of
peers across our portfolio. Following the forum, we launched a virtual
space where our team and the sustainability representatives of our
portfolio companies can remain engaged on these and other
relevant topics.
The case studies on pages 46 to 51 highlight a few examples of the
progress achieved by our portfolio companies on some of their
material ESG issues.
69%
of portfolio companies with board or
management team-specific responsibility
for ESG management and compliance1
46%
of portfolio companies publish
sustainability reports1
97%
of portfolio companies report carbon
emissions1
1
Excluding PPP project investments and some legacy minority and other
minority investments where we have limited influence.
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44
ESG risks in our portfolio
Through our pre-investment assessment and subsequent monitoring and engagement, we have identified a number of key ESG risks that our
portfolio companies are exposed to. These, together with applicable mitigating actions, are summarised in the table below.
Key risk
Mitigation
Climate change
Risk of losses due to the physical effects of
climate change or to the transition to a low-
carbon economy
Climate change affects many of our investments through changes in the regulatory framework,
changes in consumer preferences or stakeholder pressure to reduce their carbon and broader
environmental footprint. In addition, many countries have set demanding net zero or emissions
reduction targets, the achievement of which relies heavily on the decarbonisation of the private
sector. We carried out climate change scenario analyses in each of the last two years. These have
allowed us to refine our understanding and assessment of climate risks in our investment and
portfolio management activities. Specific climate change risks and strategies we use to mitigate
them are set out in our TCFD disclosures on pages 58 to 68.
Human rights
Risk of potential adverse impacts on human
rights resulting from the actions or operations
of a portfolio company
3i’s approach to human rights in the context of its investment portfolio is incorporated within its RI
policy. 3i’s policy has been not to invest in businesses which we view as unethical, including those
which do not respect the human rights of their workers. We specialise in core investment markets
in Europe and North America, which are generally considered to have a relatively low potential risk
of human rights breaches. However, we are aware that many of the companies we invest in have
operations and/or supply chains based in higher risk countries.
Human rights risks are assessed in our detailed portfolio company reviews. For companies with
higher-risk supply chains, there is a focus on whether the company has a supply chain policy or
code of ethics in place, who at board level has responsibility for monitoring supply chain issues,
the extent to which supply chain audits are carried out and whether there have been any material
issues in these areas.
Occupational health and safety
Risk that a person may be harmed or suffers
adverse health effects if exposed to a hazard
as part of their employment
The safety and wellbeing of our portfolio companies’ employees is a priority for us. Occupational
health and safety is a risk across many of our portfolio companies. We monitor health and safety
data through our ESG assessments and log incidents on our central risk register. To mitigate
health and safety risks, as significant shareholders we work to ensure that portfolio companies
have robust health and safety policies and procedures in place, that incidents are logged
appropriately and acted upon, that there is clear board-level responsibility for health and safety
and that sufficient resources are dedicated to this area.
Environmental and social regulation
Risk that the development of existing or new
ESG laws and regulations could impact
portfolio companies operationally or
financially
We ensure that our portfolio companies stay abreast of regulatory developments, understand
their impacts on their operations and finances, and that they comply in a timely fashion.
Cyber security
Risk of exposure or loss resulting from a cyber
attack or data breach
3i actively promotes cyber resilience in its portfolio companies as a key component of the
corporate governance programme through its representatives on the boards. We use an external
firm of cyber security specialists to conduct reviews of the cyber resilience of our core portfolio
companies’ key systems. The resulting reports are discussed with the management teams of the
relevant portfolio companies and specific actions agreed where appropriate. Cyber resilience is
one of the governance topics reviewed at the semi-annual portfolio company process using the
cyber security-related data collected as part of the ESG questionnaire and is monitored on a
portfolio-wide basis.
Fraud
Risk of unexpected loss resulting from
fraudulent activities carried out by either
internal or external actors
We monitor and manage fraud risk in our portfolio companies through our investment and
portfolio management processes and aim to ensure that all portfolio companies have adequate
governance structures and resources to manage this risk. Fraud incidents are logged and shared
among investment teams.
Sanctions
Risk of potential exposure or harm resulting
from violations of economic sanctions
imposed by international bodies or individual
countries
The increase in sanctions following Russia’s invasion of Ukraine impacted a very small number of
our portfolio companies. 3i’s policy is to comply with all applicable UK and international economic
sanctions, both directly and in relation to its investment activities. Compliance with our sanctions
policy is monitored by our compliance team.
Changing consumer preferences
Risk that consumers may switch to competitors
who better understand and cater to their
evolving ESG preferences
We ensure that our portfolio companies understand their material environmental and social
impacts, stay abreast of market developments and of customer and consumer preferences, and
that they develop their commercial offering so that it remains attractive and meets stakeholder
expectations.
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Action
Action believes that sustainability should be
accessible for all. Its comprehensive Action
Sustainability Programme is structured
around four pillars: people, planet, product
and partnerships. It sets out Action’s
ambitions on climate, the development of its
people, on community partnerships and
ensuring minimum social and environmental
standards in its supply chain.
Since we became a long-term shareholder in Action in 2011, we
have supported it as it has developed its sustainability strategy.
Action renewed its materiality assessment in 2023, which identified
eight material sustainability topics. We will cover progress on two
of these in this section. Please refer to the Action Update 2023 for
more detail on these and other material topics.
Progress on material topic: energy and emissions
Action has a target to reduce its Scope 1 and 2 emissions by at
least 60% by 2030 from a 2021 baseline. By the end of 2023, it
had achieved a 46% reduction against the baseline while
delivering strong growth in its network of stores and distribution
centres. To achieve this, 90% of electricity is now procured from
renewable sources, most stores have been disconnected from
the gas supply and solar panels have been installed at seven out
of its 13 distribution centres. Action aims to have disconnected
gas, and fitted LED lighting, at all stores by the end of 2024. In
addition, the company is now using HVO fuel for all of its 150
owned trucks and is piloting four new zero-emission1 e-trucks at
distribution centres in the Netherlands and Germany.
Action calculated its Scope 3 emissions for the first time in 2023,
using a 2021 baseline. The exercise showed that Scope 3
emissions account for 99% of Action’s total carbon footprint, with
product raw materials, manufacturing and transportation
representing 75% of the total. The company will use the insights
from this exercise to develop its climate strategy, engaging with
suppliers and supply chain partners to reduce Scope 3 and
product-related emissions in the future. As a first step to
addressing its Scope 3 emissions, Action has agreed with its
most significant ocean freight carriers to use eco-fuels for
shipments from Asia to Europe. The company has committed to
set near-term emissions reduction science-based targets
covering Scopes 1, 2 and 3 and aims to submit these for
validation by the SBTi during 2024.
Progress on material topic: supply chain
transparency and responsible sourcing
Action requires its suppliers to sign up to an ethical sourcing policy,
which sets out minimum standards in areas such as forced labour,
health and safety, pay and working rights. In addition, it requires all
factories in high-risk countries to have an annual social compliance
audit. Regular spot checks are performed to ensure factories remain
compliant. The company looks to expand this programme every
year, and conducted 2,104 assessments at suppliers and factories in
2023, compared to 1,682 in 2022. Action works with external
partners to ensure expected standards are upheld, including amfori
and supply chain expert ImpactBuying.
Action has a long-term commitment to supply chain transparency
and aims to deliver transparency to all tiers of production by 2030.
The current priority is final manufacturing factories (tier 1), where the
company has an ambition to achieve 100% transparency by 2024
(from 88% in 2023). This is an important step to ensure that suppliers
respect human rights and safety.
The business thinks strategically about where it sources its products
from and is actively diversifying its product sourcing to more
geographies. Last year, despite significant sales growth, total
European sourcing was maintained at 45%.
During 2023, Action achieved its goals to source 100% sustainable
cotton (private and white label products) and cocoa (private label
products) and made significant progress towards its goal of
achieving 100% sustainably sourced timber by 2024, with 95% of
timber products certified as sustainable in 2023.
1
The trucks will have zero direct emissions if they are charged using renewable electricity.
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46
Pages 22-25
Action
Read more
www.action.com
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47
ten23 health
ten23 is a leading development, manufacturing
and testing provider of sterile products for the
pharmaceutical and biotech industries. Since its
establishment in 2021, ten23 has been strongly
purpose-driven, with commitments to placing
patients, people and planet at the centre of its
decisions, and operating with a core principle
of “fairstainability” (fairness and sustainability).
This ethos is a key differentiator in a market primarily focused on
patient health and safety, and where the environment is frequently
a secondary consideration.
ten23 has a number of initiatives ongoing across its patients and
people pillars. As part of its planet strategy, ten23 identified plastic
waste and GHG emissions reduction as material focus areas.
Progress on material topic: plastic waste
ten23 set an objective to reduce, substitute or recycle plastics
wherever possible, with a goal of removing twice as much plastic
from the environment than is sent to final disposal, by 2025.
To achieve this, ten23 reduced the use of plastic disposables in
labs, switched to biodegradable or reusable materials where
possible, and improved sorting and recycling rates through the
use of plastic waste collection bins. During 2023, plastic waste sent
to incineration reduced from 5.0 tonnes (in 2022) to 2.7 tonnes,
thanks to an increase in the recycling rate from 34.4% to 43.3%,
despite the company’s year-on-year growth.
Any plastic waste which cannot be separated for recycling is offset
through a partnership with Seven Clean Seas, an organisation
which removes plastic waste from marine environments. Through
this partnership, ten23 has removed 19 tonnes of waste from
oceans and rivers to date, representing more than 150% of the
plastic waste generated by the company since its inception.
Progress on material topic:
GHG emissions reductions
ten23 aims to reduce Scope 1 and 2 emissions by 50% by 2025
on an intensity basis to reflect the growth and maturity of the
business since its establishment. In the first two years of
operations, the company established a baseline for 2021 and
delivered a 44% reduction against this, through a combination
of procuring 100% renewable electricity and implementing
several energy efficiency measures throughout its two facilities,
including a cooling system upgrade, a new HVAC system
installation, office shut-downs implemented to reduce heating
requirements between Christmas and New Year, retrofitting of
motion sensors into lighting and the purchase of an electric
minivan and electric bikes to enable commuting between
company locations.
ten23 expects to meet its initial emissions reduction target one
year ahead of plan and has an ambition to set further emissions
reduction targets in line with the SBTi criteria during 2024.
Collaboration
In addition to making meaningful changes within its own
operations, ten23 aims to address systemic industry issues by
working in collaboration with its suppliers, other pharmaceutical
companies and various other healthcare stakeholders.
One example of this includes a partnership between ten23 and
Elio, an eco-design software provider, to co-design and
develop a tool which will enable technical experts to integrate
sustainability considerations into product and process design.
The purpose of this collaboration is to enable change across the
healthcare industry, by prioritising sustainable practices without
compromising the innovation, efficacy, safety and quality of
sterile medicine formulations and manufacturing practices.
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Read more
www.ten23.health
WilsonHCG
WilsonHCG extends its experience and expertise in DEIB to support
clients to attract diverse and qualified candidates. For example, the
company supported a global IT consulting company to achieve a
specific objective of increasing diversity hires across North America
and EMEA. WilsonHCG provided an inclusive and targeted
approach to candidate sourcing, and networking strategies to
encourage applications from underrepresented groups. This
resulted in a 32% increase in the female diversity slate and a 98%
offer-to-hire rate.
Progress on material topic: employee engagement
and development
Employee development at WilsonHCG begins in the first 90 days of
an employee’s career, when a personalised onboarding plan ensures
they are set up for success. Following this, multiple internal
certification programmes provide dedicated training into specialist
areas of recruitment. Once employees reach leadership positions, a
dedicated programme provides them with foundational skills and
helps to build a peer support network. An ongoing development
programme with monthly content is attended by 87% of leaders
across the business.
WilsonHCG’s commitment to fostering an innovative working
environment has enabled the company to become an employer of
choice. Employees are supported to work how and where they are
most effective, including through a flexible daily schedule and the
opportunity to work from anywhere. As a result, the organisation has
a blended workforce of office-based and virtual employees spanning
65 countries and 78% of employees state they have a healthy
balance between work and personal life. The prioritisation of
workplace culture led to the company earning Great Place To Work
Certification™ for the third consecutive year in 2023, being named a
Fortune Best Workplaces in Consulting & Professional Services™ for
two years in a row and named as a Best Workplace for Millennials™.
WilsonHCG is a provider of talent solutions offering
recruitment process outsourcing, executive
search, contingent workforce solutions, labour
market intelligence and talent consulting services.
As a professional services business, employee development and
recognition, and diversity are material topics for WilsonHCG. The
company is focused on attracting, developing and retaining a
diverse, global pool of over 1,500 talented employees, and
supporting their clients to do the same.
Progress on material topic: diversity
WilsonHCG is committed to fostering Diversity, Equity, Inclusion
and Belonging (“DEIB”) through its culture and values, and by
hiring top talent from across a diverse society.
One way the company achieves this is through its BRITE
programme (Belonging, Respect, Inclusion, Togetherness and
Equity) to promote inclusiveness across the organisation by
highlighting employees’ upbringing and background to break
down social barriers and enable greater understanding of others.
To support DEIB, collaboration and networking across the
workplace, nine Employee Belonging Groups have been
established as safe places for individuals to discuss traits and
experiences which make people diverse. These voluntary groups,
which include the Black community, veterans and military spouses,
and neurodivergent employees, have over 500 members.
Understanding that achieving diversity requires an ongoing
commitment, a DEIB committee is tasked with implementing
initiatives across the organisation. During 2023, the committee
hosted its first company-wide Diversity Summit, attended by more
than 1,200 employees. Highlights included a workshop on inclusive
hiring practices, a leadership panel, and a discussion on DEIB
hosted by an external speaker.
Read more
www.wilsonhcg.com
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Joulz
Joulz owns and provides essential energy
infrastructure equipment and complementary
services to industrial and commercial
customers in the Netherlands, assisting them in
their energy transition journey.
Joulz’s service offering includes medium-voltage infrastructure
(transformers and their related infrastructure), storage (mainly
battery energy storage systems), solar (large-scale installations
under operational lease or with government subsidies), metering
(electricity and gas meters) and EV charging (AC and DC charge
points). Its expertise is in the provision of integrated solutions
which combine multiple service offerings to create a “virtual grid”,
addressing challenges such as grid congestion.
Progress on material topic: GHG emissions
reduction
Given Joulz’s key role in supporting customers with electrification,
the business identified the development of its own credible
decarbonisation plan as a key pillar of its sustainability strategy.
Joulz’s assessment of its Scope 1 and 2 emissions in 2022
indicated that they were limited and largely driven by its vehicle
fleet, stationary combustion used in their operations and gas
heating in offices, which accounted for c.83% of the combined
Scope 1 and 2. The remaining 17% was due to purchased
electricity, mainly for office use.
Following this assessment, Joulz set near-term emissions
reduction science-based targets, receiving SBTi validation in
January 2024. These targets include a commitment to reduce
Scope 1 and 2 emissions by 42% by 2030 from a 2021 baseline
and a commitment to measure and reduce Scope 3 emissions in
due course. Due to its size, Joulz was able to follow the SME route
developed by SBTi and did not have to include a specific Scope 3
reduction target.
Joulz plans to achieve its targets through: a detailed reduction
plan aligned with its sustainability strategy, including the use of
biofuels; a transition to a full electric car fleet; procuring
renewable electricity in its offices; potential rooftop solar
solutions; and the reduction of natural gas use in offices and
operations.
Progress on material topic: occupational health
and safety performance and initiatives
Health and safety is another important topic for Joulz. In 2023,
the business expanded its health and safety team to increase
safety efforts and deliver on safety initiatives. For example,
emergency response procedures were refreshed and evacuation
training provided to employees, and a number of safety
campaigns were held.
An awareness campaign was executed during 2023, consisting of
live sessions with employees, narrowcasting and intranet
messaging. Special attention was given to asbestos, which is a
risk in the environment in which Joulz operates. This is in addition
to the regular workplace inspections, employee certifications and
incident/near miss reporting which are part of Joulz’s safety and
quality certifications.
As a result, the business demonstrated improved performance in
2023 with the ratio of Lost Time Incident Frequency Rate
decreasing to 0 (from 7.9 in the prior year).
Both emissions and health and safety incidents are on the Joulz
top level scorecard, to which senior executive remuneration is
linked.
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Read more
joulz.nl
Future Biogas
Future Biogas is one of the largest anaerobic
digestion (“AD”) plant developers and
producers of biomethane in the UK.
Established in 2010, it owns two AD plants with one further AD
plant in construction, and operates 10 AD plants mainly on behalf
of institutional investors under medium- to long-term contracts,
converting energy crop feedstocks into biogas.
Biogas can be used to generate renewable electricity or be
upgraded into biomethane and injected into the UK’s national
gas network. There is growing demand for domestically produced
biomethane which, as a direct substitute for fossil natural gas,
plays an essential role in decarbonising some of the UK’s gas
dependent sectors such as heat, transport and manufacturing.
Progress on material topic: decarbonisation
Future Biogas is developing a new generation of unsubsidised AD
plants and plans to sell the resulting biomethane under long-term
offtake agreements to its offtake partners. In September 2023,
Future Biogas entered into a 15-year partnership with
AstraZeneca to establish the UK’s first unsubsidised industrial-
scale supply of biomethane gas. Future Biogas will supply several
of AstraZeneca’s sites with up to 100 gigawatt hours (GWh) per
year. Such a partnership provides a blueprint for wider
commercial adoption of renewable gas in the UK. The
collaboration with AstraZeneca, set to begin in early 2025, is
expected to result in a significant reduction of GHG emissions of
approximately 20,000 tonnes of CO2 equivalent.
Future Biogas is optimising the carbon intensity of its
biomethane production. This pioneering effort includes reducing
methane slip and facilitating the accumulation of soil organic
carbon in soils, alongside a range of other measures targeting
emissions from both crop production and on-site activities at the
AD facility.
Progress on material topic: sustainable farming
Future Biogas is actively engaging with the farmers it purchases
feedstock from to support them in the transition to more
regenerative land management practices. The co-production of
food and energy can offer multiple environmental benefits –
increasing crop yields, reducing the demand for plant protection
products (pesticides), enriching biodiversity, and improving soil
health, while decarbonising food and energy systems. In
addition, the anaerobic digestion of the crops for the production
of biogas has a by-product, known as digestate, which is used as
a carbon and nutrient-rich bio-fertiliser displacing the need for
artificial fertilisers, and replenishing soils with organic matter which
is essential for healthy soil and its ability to act as a carbon sink.
In October 2023, Future Biogas established an agricultural
advisory board made up of leading academics and industry
experts to provide the business with independent farming,
scientific and market expertise focusing on a broad range of
subjects including sustainable farming, scientific research and
policy. This will ensure a wide spectrum of perspectives and
specialisms are considered in the scrutiny applied to Future
Biogas’ subsidy-free projects.
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Read more
www.futurebiogas.com
Recruit and
develop a diverse
pool of talent
Our people are our most valuable asset.
Recruiting, retaining and developing our talent
is therefore a priority.
We have an open and non-hierarchical culture, provide an inclusive
and supportive working environment with opportunities for training
and career development, and foster the physical and mental
wellbeing of our employees. We value diversity and believe that a
variety of perspectives enhances our decision making. Our
recruitment, promotion and reward processes are based solely on
merit. We are an equal opportunities employer and prohibit all forms
of discrimination.
Human rights
We do not procure services from, nor invest in businesses which
make use of slavery, servitude, human trafficking, forced labour,
exploitation, compulsory labour or harmful child labour.
Our policies are consistent with internationally-recognised human
rights principles such as the UN Global Compact. We comply fully
with applicable human rights legislation in the countries in which we
operate, for example covering areas such as freedom of association
and the right to collective bargaining, equal remuneration and
protection against discrimination. We also encourage our business
partners and suppliers to adopt the same standards with respect to
human rights. Given the composition of our workforce, which is
characterised by a very small number of employees with very diverse
roles, and considering the nature of our business, our employees are
not unionised, nor do they engage in collective bargaining.
We published our statement on modern slavery for the financial year
ended 31 March 2023 on our website in September 2023, and will
update this statement in September 2024.
Diversity, equity and inclusion strategy and initiatives
We cultivate an inclusive environment for existing and prospective
employees which respects, involves and leverages diverse talent for
greater organisational good. Our main focus is gender and ethnic
diversity, as well as diversity of thought, perspective and background.
We have made reasonable progress in achieving greater diversity
within our organisation across a number of senior investment and non-
investment roles. We aim to continue to improve diversity within our
ranks by considering diversity in all recruitment processes. However, we
are a small organisation with relatively low turnover and recruitment
volumes, which means that it is not feasible for us to implement formal
diversity targets. We recognise, therefore, that achieving better
diversity for us will continue to be an incremental journey, and we aim
to build on our progress with a number of initiatives.
In FY2023, we set up a Diversity, Equity and Inclusion (“DE&I”)
steering group chaired by our Chief Human Resources Officer and
with members drawn from several functions across the organisation.
This steering group provides a forum to discuss DE&I issues and
suggest potential initiatives to improve our performance in this area.
During the year, we expanded the reach of our Leading with Impact
Programme, through which we encourage leaders to reflect on
personal and group biases, with the objective of gaining insights into
how these influence their everyday behaviours and decision making.
Building upon the successful implementation of this programme
within our Private Equity and Infrastructure investment teams in
FY2023, we extended it to our Professional services team leadership
in FY2024. To date, 19 senior employees have taken part in this
programme.
Our internal mentoring programme contributes to our DE&I efforts
by ensuring that mentees receive personalised guidance aligned with
their individual needs and career aspirations. Our mentors undergo
training in bias awareness and inclusion, building their DE&I
knowledge, skills and confidence. This programme is open to all
employees across all geographies and levels of seniority and
supports our wider goal of creating a diverse pipeline of talent, based
on the principles of fairness and equity.
We place great importance on diversity of thought and perspectives.
Recognising its significance, we have been evaluating our individual
and team dynamics to enhance effectiveness and foster inclusivity. In
FY2024, our professional services employees participated in the
Myers Briggs Type Indicator assessment, one of the most widely used
tools for understanding normal personality variations, and a great
instrument to help shape the professional development of individuals
and teams. This was followed by externally facilitated sessions,
delving into our preferences and different ways of working. These
sessions had already been implemented within our Private Equity and
Infrastructure investment teams in the preceding financial year.
During the year, we also arranged a training session with Dr Eliza
Filby, an historian of generational evolution and contemporary
values, on managing a multi-generational workforce in the post-
pandemic age.
Our Equal Opportunities and Diversity, and Global Recruitment and
Selection policies establish that all 3i employees, contract workers
and job applicants are treated fairly and are offered equal
opportunity in selection, training, career development, promotion
and remuneration.
Read more
www.3i.com/sustainability/sustainability-policies/
No incidents of discrimination were reported in FY2024.
249
27
employees1
as at 31 March 2024
nationalities
as at 31 March 2024
1
Global employee headcount.
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Progress and action on gender diversity
We recognise the importance of achieving better gender diversity at
3i and believe we are making reasonable progress in that respect,
within the constraints of a small organisation with modest staff
turnover. Of the 23 new hires we made during the year, 13 were
female and 10 were male1.
As at 31 March 2024, 3i’s total of 249 employees was broken down as
follows, based on biological sex1:
Female
Male
Total
3i employees
101
148
249
Senior managers2
7
17
24
1
Note that we refer to “female” and “male” when discussing biological sex and to “women” and “men” when
discussing gender. The information of biological sex is gathered through employees’ legal documents shared
with us.
2
Senior managers include Simon Borrows, James Hatchley and Jasi Halai, our Chief Executive, Group Finance
Director and Chief Operating Officer, who are also Board members. This disclosure is based on the criteria set
out in Section 414C of the Companies Act 2006. This data is different to the data provided for the FTSE
Women’s Leader review which defines senior management as a level below Executive Committee (excluding
personal assistants and administrative staff). Using that definition, out of 61 senior managers, 15 were female
while 46 were male as at 31 March 2024.
Gender diversity has long been a challenge in the investment
industry. According to the BVCA and Level 20 Diversity & Inclusion
Report 2023, there have been positive developments, but progress
towards gender parity remains slow across the industry: women
made up 40% of the UK private equity and venture capital workforce
in 2022 (38% in 2021), but only 24% of UK investment team
professionals (20% in 2020). Slow progress towards gender parity has
been largely attributed to: (i) a narrow talent pool, as typical feeder
industries (such as investment banking, accounting and consulting)
remain male-dominated, particularly at more senior levels; (ii) a
perception of poor work/life balance, both in the investment industry
and feeder industries; and (iii) a lack of relevant role models.
A substantial improvement in gender diversity in our industry will take
many years, and will only be achieved through a multi-pronged
approach which will include grass-roots education and advocacy work
in schools and universities, for example, as well as positive action
taken by us and other investment firms on recruitment, flexible
working and parental policies. In addition to focusing on diversity in
our recruitment processes and continuing our mentoring
programme, we also offer reasonable flexibility at work and a range
of family-friendly policies, the details of which can be found on our
website. For example, as part of family-friendly benefits in the UK, we
provide maternity and paternity leave, adoption leave, an option for
shared paternal leave as well as bereavement and compassionate
leave. Our HR team periodically reviews our polices and legal
requirements to ensure they are competitive and compliant with
local practices.
Read more on family-friendly policies
www.3i.com/sustainability/sustainability-policies/
We continue our contribution to industry-wide work and advocacy on
gender parity through a number of industry associations and by
participating in forums and initiatives that promote the advancement
of women in the investment sector.
3i is a member of Level 20 in the UK. We also recently joined
Synergist Network, the US national network of women in investing,
focused on connecting women in the first decade of their investing
careers and providing them with the infrastructure and network
critical for long-term success.
We also have signed up two members of our Professional Services
team to WeQual, a global, peer-led community for large
organisations seeking to support, connect and develop their women
leaders.
3i is an official sponsor of Level 20
Level 20 is a not-for-profit organisation dedicated to
improving gender diversity in the European private equity
industry. It is sponsored by over 120 private equity firms. Its
ambition is for women to hold 20% of senior positions in this
industry. It works to empower women who already work
within the industry, encourage new talent to join and provide
leadership teams with insight and best practice solutions to
help them address current gender imbalances within the
industry and their firms. It aims to achieve its goals through
four key pillars of activity:
• Mentoring and development
• Networking and events
• Outreach and advocacy
• Research
Read more
www.level20.org
3i participates in the GAIN Empower
Investment Internship Programme
(in partnership with Level 20)
GAIN (Girls Are INvestors) is a community of investors, with
charitable status, set to improve gender diversity in
investment management by building a talent pipeline of
entry-level female and non-binary candidates. GAIN aims to
inform young women with online resources and to inspire
them with a strong network of relevant role models, who
speak in high schools and universities around the UK and
feature on its online channels, delivering compelling and
high-impact messages on the many benefits of investing as a
career. Among the initiatives managed by GAIN is a summer
GAIN empower investment internship programme, open to
women and non-binary students across the UK. 3i was one of
98 firms participating in the 2023 summer internship
programme, taking on three interns for paid internships. We
will renew our participation in the scheme with three further
interns joining 3i’s investment teams for paid internships in
the summer of 2024. In addition to the internship
programme, a number of our employees are taking part in
the GAIN 1-2-1 mentoring programme, both as mentors
and mentees.
Read more
www.gainuk.org
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Progress and actions on ethnic diversity
We continue to make progress towards the fair representation of
ethnic minorities within our organisation.
As at 31 March 2024, approximately 15% of 3i’s total UK employees
declared to have an ethnic minority (excluding white minority)
background. This statistic is based on the responses to a DE&I survey
we carried out for our existing UK employees at the beginning of
2023 and among new joiners on an ongoing basis. The proportion of
our UK-based employees from an ethnic minority (excluding white
minority) background in mid to higher salary brackets was
approximately 16%.
We are committed to advocating for better representation of ethnic
minorities in our industry and have been participating in the
#10000BlackInterns (formerly #100BlackInterns) initiative organised by
the 10000 Interns Foundation since 2021.
3i participates in the
#10000BlackInterns initiative
by the 10000 Interns Foundation
3i has partnered with the 10,000 Interns Foundation since it
was first established in 2021 to help transform the horizons
and prospects of young black people in the UK. The
#10000BlackInterns initiative seeks to offer 2,000 paid
internships to black students and graduates each year for five
consecutive years. The initiative has partnered up with firms
across over 30 sectors, delivering internships across a range
of business functions. Since its launch, the programme has
garnered great support with over 500 companies offering
internships to black students in the UK as a way of attracting
a more diverse range of talent to their sectors. We welcomed
two students for paid internships in our investment teams in
each of the summers of 2021 and 2022 and one student in
the summer of 2023. We look forward to welcoming another
student for a paid internship in 2024.
Read more
10000internsfoundation.com
Employee engagement
We encourage a collaborative culture, ensuring an open
communication between employees and senior management. As a
small organisation, we operate a relatively flat structure with few
hierarchies. This approach facilitates direct interaction and
accessibility. In addition, our Executive Committee maintains an
open-door policy, encouraging dialogue at all levels. We encourage
feedback from employees to senior management through informal
conversations and more formal forums, including regular team
meetings, as well as through the annual appraisal process. Managers
throughout 3i are expected to keep their teams informed of
developments and to communicate financial results and other
matters of interest.
Additionally, we organise regular conferences for our Private Equity,
Infrastructure and Professional Services teams to review progress
against our strategy, align our goals and discuss future plans in an
open and relaxed manner with all employees involved.
The Board of Directors typically holds at least one of its meetings
every year in one of our international offices. This provides an
opportunity for non-executive Directors to meet the local teams,
often in a more informal setting. In FY2024, the Board held meetings
in our Amsterdam and New York offices. The non-executive Directors
also have other opportunities to engage with employees, for
example, by attending our semi-annual portfolio company reviews.
These important meetings provide the non-executive Directors with
an insight into how our investment business operates and into our
culture. Employees also enjoy this opportunity to interact with the
Board. Our Chair aims to visit all our major international offices on a
rolling cycle and engages with as many employees as possible during
these visits.
At 3i, we actively encourage and facilitate employee share ownership
through variable compensation and share investment plans. The
engagement and the sense of ownership we have fostered over the
years are reflected in low employee turnover rates.
FY2024
FY2023
FY2022
FY2021
FY2020
Participation in UK SIP1
90%
87%
89%
88%
87%
Voluntary employee
turnover rate (global)
6.0%
9.5%
12.2%
7.3%
8.8%
1 Proportion of UK-based employees who subscribe to a Share Incentive Plan available to UK employees only.
Living wage
3i is an accredited London Living Wage Employer. This means that
every member of staff based in London, including contracted
maintenance and reception teams, earns at least a “living wage”
which is an hourly rate higher than the UK minimum wage and is set
independently, updated annually and based on the cost of living in
London.
Outside of London, our overseas offices tend to employ only
investment and professional services staff, as well as support staff,
who are remunerated above applicable minimum or living wage
requirements.
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Learning and development
We can only achieve our strategic objectives if we continue to attract,
retain and develop capable people. We therefore provide our
employees with the opportunities, experience and training to
contribute to the success of the organisation, realise their potential
and develop their knowledge and capabilities.
We encourage employees to take responsibility for their own
development, working with their line managers to devise personal
development plans to support the achievement of their individual
aspirations, consistent with 3i’s objectives. Given the specialised
nature of many of the roles in 3i, an emphasis is placed on work-
based learning, with the provision of development opportunities
supported by appropriate targeted training and mentoring. This is
supplemented by formal courses conducted both internally and
externally and usually with a multinational group drawn from across
the countries in which 3i operates.
In FY2024, we provided formal specialist training on areas and skills
including value creation, presentation and communication skills,
climate change and human rights. We also offered executive
coaching for some employees. Our investment executives regularly
receive education on issues of wider topical interest and impact. For
example, our sustainability professionals delivered a number of
training and information sessions on sustainability.
Some of our employees have access to the Sama Professional
Coaching app, which provides individual personal career coaching by
experienced, credentialed executive coaches, all DEIB trained.
We also have comprehensive induction plans for all new joiners,
including sessions with different teams across the business to help
facilitate integration.
This year, we held a two-day conference for our global support team,
in recognition of the critical contribution of our executive assistants
and support staff to our business. The conference provided a great
opportunity to share knowledge and best practice and to build
relationships and networks to facilitate better collaboration across the
business. It also provided a forum to reflect on how we capitalise on
developments in digitalisation and technology post pandemic.
During the conference, we launched a dedicated learning hub,
facilitated by an external provider, providing tools for our support
teams to enhance their skills and own their professional
development.
Our formal appraisal and objective setting process, held annually for
each employee, is key to their personal development. During this
process, we measure each employee’s performance against their
agreed objectives and 3i’s values to inform decisions on
remuneration, training, career development and future progression.
We encourage employees to make use of an online facility to obtain
360-degree feedback as part of this process.
Employee wellbeing
We recognise the importance of supporting the wellbeing of our
employees by providing a healthy working environment and work/life
balance. All employees enjoy a broad range of formal benefits
aligned with local custom and practice and often enhanced relative
to the statutory minimum. Summaries of our employment and benefit
policies are available on our website.
Physical health
We promote the physical wellbeing of our employees. For example,
in the UK, we provide our employees with annual medical insurance.
All UK employees also qualify for annual health checks and have
access to a Bupa Digital General Practitioner.
Building on our progress last year, in FY2024 we published a
Menopause Policy formalising the details of support available to our
employees. Specifically, our UK-based employees have access to a
range of menopause services, including access to Bupa’s Women’s
Health Hub, a consultation and a follow-up with a menopause-trained
GP, personalised clinical advice on managing symptoms and access
to menopause-trained nurses on a 24/7 basis through the Bupa
Anytime Healthline for a period of one year.
For a number of years, we have provided the services of a personal
fitness and nutrition adviser, bookable free of charge for one-on-one
fitness, nutrition and broader wellness advice sessions. Our adviser
also hosts twice-weekly fitness and Pilates classes which are
complimentary for employees. Recognising the unique needs of our
female employees, our adviser offers specialised sessions focused on
exercise and nutritional strategies to support them with their needs.
Mental health and employee assistance
We recognise the importance of mental wellbeing for our employees.
We have trained 18 “mental health champions” across our business.
These individuals act as first points of contact for employees facing
mental health challenges. Over the past five years, most employees
have participated in workshops facilitated by a specialist mental
health consultancy. These workshops offer a basic understanding of
mental health, strategies to develop and strengthen it, and insights
to recognise the early warning signs of struggle. In addition, our
employees have access to Headspace for Work, the leading
mindfulness-based mental health app offering meditations and
exercises for stress, focus, sleep, and movement.
All UK-based employees have access to an Employee Assistance
Programme that offers free, confidential telephone counselling on a
range of personal and work-related issues and problems, as well as
face-to-face counselling services. The service also provides legal and
financial advice and other information and services and is run by
Health Assured, an independent external service provider.
Employees who are members of the UK private medical insurance,
for which 3i covers premiums, have access to up to 10 sessions per
annum of psychological support without a requirement for General
Practitioner referral.
Flexible working
Employees are provided with the tools to work remotely and can
apply to work flexibly to manage personal or family commitments as
and when required. Flexible working options include remote working,
flexible hours and job sharing.
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Act as a good
corporate citizen
We expect our employees to act with integrity,
accountability and a careful ownership mindset
and to approach their roles with ambition, rigour
and energy. We embed that culture in our
policies and processes.
Governance
Good corporate governance is fundamental to 3i and its activities
and is critical to the delivery of value to our stakeholders. The
corporate values are approved by the Board and the Executive
Committee sets the tone and leads by example.
For full details of our governance structure and processes, please see
the Governance section of this report.
Standards of conduct and behaviour
Our standards of conduct and behaviour are promoted and enforced
through a comprehensive suite of policies and procedures which,
together with our compliance manual and our values, constitute our
code of conduct. Our policies and procedures are reviewed annually.
Our Internal Audit and Compliance teams perform regular reviews
which include compliance with our established standards of conduct
and behaviour. The results of this work are reported quarterly to the
Audit and Compliance Committee, which also carries out an annual
review of risk and internal control effectiveness including general
standards of conduct and policy compliance. Quarterly updates are
also provided to the Board of 3i’s main regulated entity, 3i
Investments plc, which includes members of the Executive
Committee.
We evaluate our employees against our values as part of our annual
formal performance review process. In addition, all employees have a
mandatory conduct objective against which they are formally
assessed as part of their annual performance review.
Public policy
Although 3i will not participate directly in party political activity, it may
engage in policy debate on subjects of legitimate concern to 3i, its
staff and the communities in which it operates. This is done
principally through industry representative bodies such as the British
Venture Capital Association and Invest Europe, where we might
contribute to the formulation of policy positions. From time to time
we may engage directly with government and regulatory bodies on
matters of particular and direct importance to 3i and its businesses.
Lobbying must only be undertaken with the prior approval of the
Executive Committee and in a manner that is lawful and adheres to
3i’s values.
Compliance and policies
Our compliance manual includes policies on:
• Anti-bribery and corruption
• Hospitality, gifts and inducements
• Political donations
• Public policy and activity
• Data protection
Read more
www.3i.com/sustainability/sustainability-policies/
Transparency and openness
We believe that all employees and people connected with 3i deserve
fair treatment and respect for their fundamental rights and therefore
encourage everyone to speak up and report their concerns.
Where any employee discovers information which they believe shows
malpractice or wrongdoing within 3i, under most circumstances they
will raise concerns with their line manager, who will pass this
information to the appropriate Executive Committee member.
Should this route not be suitable, then the employee may approach
the Directors of Compliance or Internal Audit, or the General Counsel
and Company Secretary, who have been designated to provide
impartial advice on the appropriate course of action to follow.
Alternatively, all employees across all our office locations may express
and report their concerns on a completely confidential and
anonymous basis to an independent “hotline” whistle-blowing
service provided by EthicsPoint, an independent, external party. Our
policies make clear that there should be no fear of reprisal or
victimisation or harassment for whistle blowing. There were no
incidents of whistle blowing in the year.
Environmental impact
With fewer than 250 employees globally, 3i has a relatively small
direct impact in terms of the environment and other sustainability
issues. Our impact on the environment is determined largely by our
portfolio. We are committed to minimising our environmental impact
and to improving our environmental performance wherever possible.
We have an Environmental Management System that is
proportionate to the operational size and environmental risk profile
of our business.
We use the precautionary principle to manage environmental risk for
our business and our portfolio proactively.
Our GHG emissions and those associated with our portfolio are
reported in our TCFD disclosures.
Pages 80-84
Risk management
Pages 42-51
Invest responsibly
Pages 58-68
TCFD disclosures
Environmental information
www.3i.com/sustainability/corporate-citizenship/environment/
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Community
3i is keen to support charities which relieve poverty, promote
education and support elderly and disabled people. A few examples
of the charities we support are set out on this page.
Read more
www.3i.com/sustainability/corporate-citizenship/charitable-giving/
Ordinary charitable giving
The charities we partner with are supported on the basis of their
effectiveness and impact. Our charitable giving for the year to 31
March 2024 totalled £1.05 million. This included supporting our nine
charity partners, matching staff fundraising, making a number of one-
off donations and promoting the give-as-you-earn scheme in the UK,
which is administered by the Charities Aid Foundation, and through
which 3i matched c.£55,000 of employee donations.
Career Ready
Since 2018 we have partnered with Career Ready, a UK-based organisation that
connects employers with schools and colleges to provide disadvantaged young people
aged 15-18 with mentors, internships, masterclasses, and employer-led activities that
prepare them for the world of work. 3i takes part in the mentoring programme which
supports young people aged 16 to 18 who lack the opportunities, professional networks
and confidence to find their undiscovered talents.
Community Links
Community Links is a social action charity based in Newham, one of the most deprived
boroughs in London. It offers free legal advice, provides youth and employment
services, delivers projects to promote the early diagnosis of cancer by increasing the
uptake of NHS screening programmes, and advocates for social change by contributing
to public policy debates. At Christmas, our London-based employees raised £3,000 for
the charity’s Toy Appeal. This enabled the charity to buy c.250 toys, which were
distributed to 135 families.
The Passage
The Passage, based near our London office in Westminster, is a homelessness charity
whose services have a high impact on the local community. We support The Passage’s
Employment and Education team, which provides homeless people with life skills and
helps them to end their homelessness by returning to work. Support includes computer
training, literacy classes, help with CV writing and job hunting, and financial and welfare
rights advice. During the year, 17 of our London-based staff volunteered for The
Passage and the charity was one of the recipients of the funds raised by our London-
based staff at our Summer Charity event.
Re-engage
Re-engage is a UK national charity dedicated to tackling loneliness and social isolation
amongst older people. It provides life-enhancing social connections for older people at
a time in their lives when their social circles are diminishing. Supported by a network of
volunteers, the charity provides regular opportunities for companionship for thousands
of older people across the UK.
Snowdon Trust
The Snowdon Trust aims to break down barriers for disabled students on their journey
through post-school education and into employment, for instance through grants to
cover the additional costs that students incur because of their disability or through
scholarships. Snowdon Trust was one of the recipients of the funds raised by our
London-based staff at our Summer Charity event.
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These disclosures reflect 3i’s response to the recommendations of the
TCFD. They set out how we incorporate climate-related risks and
opportunities for our business and portfolio into our governance,
strategy and risk management. They also include disclosures on our
direct GHG emissions metrics and, for the first time, those associated
with our portfolio.
Regulatory background
3i Group plc is an Alternative Investment Fund managed by 3i
Investments plc, a UK Alternative Investment Fund Manager. 3i
Investments plc is a wholly-owned subsidiary of 3i Group plc. This
TCFD report is published in line with the requirements outlined in the
FCA’s Environmental, Social and Governance (“ESG”) sourcebook.
They require 3i Investments plc to disclose publicly specific climate-
related metrics and processes as part of a product report for 3i Group
plc based on the TCFD recommendations. These disclosures also
cover the Group’s, including 3i Investments plc’s, overall approach to
climate change in line with the TCFD recommendations.
The diagram below shows the TCFD reporting requirements for the
entities described above.
3i Investments plc
(AIFM)
3i Infrastructure
plc (AIF)
3i Group plc
(AIF)
Other AIFs in
scope of FCA
TCFD reporting
requirements
ò Funds with public TCFD product reports
Å Funds with on-demand TCFD product report
ò AIFM with entity-level report
This TCFD report should be read in conjunction with the 3i
Investments plc TCFD entity report, which is available on 3i’s website,
and with the rest of this Annual report, which contains other relevant
information. Specific references are provided where applicable.
Read more
www.3i.com/sustainability/
Governance
TCFD recommendations
Disclose the organisation’s governance around climate-related
risks and opportunities:
• Describe the board’s oversight of climate-related risks and
opportunities
• Describe management’s role in assessing and managing
climate-related risks and opportunities
The management of climate-related risks and opportunities is integral
to our processes and operations, including our investment and
portfolio management activities, with oversight by the Board and
delegated authority to the Chief Executive. In determining 3i’s
strategy and approach to climate change, both the Board and the
Chief Executive, assisted by a number of committees, take into
account the laws and regulations of the countries in which 3i and its
portfolio companies operate, as well as the perspectives of relevant
stakeholders, such as those identified on pages 112 and 113. The
governance structure is set out in the graphic below.
Board of Directors
Chief Executive
Audit and
Compliance Committee
ESG Committee
Group Risk Committee
Investment Committee
Non-executive oversight
The Board as a whole is responsible for the approval of the Group’s
approach in relation to ESG matters (including climate-related
matters) and has oversight of the Group’s sustainability strategy,
approach and policies, including our Responsible Investment policy. It
is assisted by the Audit and Compliance Committee in the review and
consideration of any disclosures related to ESG matters, including
climate-related disclosures.
The Board and Audit and Compliance Committee receive regular
updates on ESG matters and climate-related issues from the Chief
Executive and members of the ESG Committee as they become
relevant and material. In FY2024, the main updates on climate-related
issues included:
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l Oversight
l Implementation
May 2023
Review and approval of the FY2023 Annual report,
including the TCFD disclosures and other climate-
and sustainability-related disclosures contained
elsewhere in the report
June 2023
Update to the Board on the ESG risk profile of the
portfolio, following presentations made to the Group
Risk Committee by our investment teams on the
results of the annual ESG assessment of portfolio
companies in March
November
2023
Update to the Board from the Chief Executive on a
number of sustainability-related themes, including
the development and setting of science-based
targets, the second phase of our portfolio climate
change scenario analysis, and the implementation of
a portfolio ESG data gathering tool
December
2023
Session held during the Board Strategy Day, led by
members of the ESG Committee, covering 3i’s
science-based targets and implications for 3i and its
portfolio
Board skills and training
The Board received four dedicated training sessions on climate
change during FY2023, which were externally facilitated by EY’s
sustainability practice. This training programme provided the Board
with some of the tools necessary to improve its oversight of the
Group’s approach to climate change and the resulting impacts on
the portfolio and investment strategy, and to inform the Board’s
decision making.
During FY2024, the Directors engaged with members of the ESG
Committee on a regular basis on 3i’s approach to climate change
and related workstreams and received updates on regulatory and
other relevant developments. For example, the annual Board
Strategy Day in December included a dedicated session on the
science-based targets that 3i had submitted for validation to the
SBTi. In addition, our Directors attend our semi-annual portfolio
company reviews, which include discussions of the material aspects
of portfolio companies’ climate strategy.
A number of our Directors also have experience of assessing climate-
related factors and have received training on this topic through other
executive and non-executive roles.
Executive responsibility
Day-to-day accountability for sustainability, including climate-related
issues, rests with executive management and, in particular, the Chief
Executive. The Chief Executive is supported by a number of
committees in overseeing and monitoring policies and procedures
and addressing issues that arise. These include the ESG Committee,
Investment Committee and Group Risk Committee.
ESG Committee
The ESG Committee membership, shown in the diagram below, is
drawn from a range of investment and non-investment functions
across the Group. The Group Treasurer joined the Committee in
FY2024. The ESG Committee also benefits from input from relevant
functional areas as required.
General Counsel and Company Secretary (Chair)
Central functions
Investment teams
Group Finance Director
Sustainability Director,
Private Equity
Chief Operating Officer
Sustainability Director,
Infrastructure
Group Investor Relations
and Sustainability
Strategy Director
Group Treasurer
The ESG Committee focuses on three main areas:
• reporting to the Chief Executive (directly and through the Group
Risk Committee and Investment Committee) on relevant ESG
matters, including climate-related risks and opportunities, and
developing and reviewing policies, processes and strategies to
manage ESG risks and opportunities for the Group and its
investment activities;
• developing and recommending to the Chief Executive the Group’s
ESG approach (including a climate strategy) for review by the
Board; and
• coordinating and facilitating ESG-related activities and initiatives
across the Group.
The Committee considers relevant legal and regulatory requirements
and industry standards, as well as best market practice, and monitors
progress against its agenda.
The ESG Committee met formally four times in FY2024, but held
three additional informal meetings in the year to implement its busy
agenda. The ESG Committee’s activities and focus for the year are
described throughout this TCFD report.
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Investment Committee
The role of the Investment Committee is described on page 82. In
performing its activities, the Investment Committee ensures that
material ESG matters, including relevant climate-related risks and
opportunities, are properly identified, assessed and managed in the
course of our investment, divestment and portfolio management
activities. The Investment Committee is chaired by our Chief
Executive and comprises individuals drawn from our central functions
(including the Group Finance Director and Chief Operating Officer),
as well as from our Private Equity and Infrastructure investment teams
(including the two heads of Private Equity, the two heads of
Infrastructure and other senior investment and professional services
team members). It meets frequently on an ad-hoc basis to discuss
potential new investments and significant portfolio activity.
Group Risk Committee
The role of the Group Risk Committee is described on pages 82 and
83. As part of its responsibilities, it identifies the principal risks and
new and emerging risks, including climate-related risks, facing 3i, as
well as the associated mitigating actions and key risk indicators. This
committee also maintains oversight of the Responsible Investment
policy and considers and approves amendments to this policy as
required, taking into account legal, regulatory and market
developments regarding climate change. The Group Risk
Committee, which meets four times a year, is chaired by the Chief
Executive, and also comprises the Group Finance Director, Chief
Operating Officer, the General Counsel and the Chief Human
Resources Officer, as well as the heads of our Private Equity and
Infrastructure businesses and a number of functional heads drawn
from across the organisation, including the Group Compliance,
Internal Audit and Investor Relations and Sustainability Strategy
Directors.
Dedicated sustainability resource
We have dedicated sustainability resource embedded across the
organisation, including:
• a Sustainability Director in our Private Equity investment team;
• a Sustainability Director and a Sustainability Senior Associate in our
Infrastructure investment team; and
• a Sustainability Manager in the Group Investor Relations function
to co-ordinate the Group’s work on sustainability and implement
Group-wide projects.
This resource is key in implementing the ESG Committee’s many
activities.
Participation in industry working groups
We are part of the Initiative Climat International (“iCI”), a global,
practitioner-led community of over 250 private markets firms and
investors which represented US$4.1 trillion in AUM as of the end of
August 2023. These firms seek to improve the understanding and
management of the risks associated with climate change. We
contributed our feedback on iCI’s portfolio company decarbonisation
playbook, which focused on Scope 3 reduction in the supply chain
through procurement.
As members of the BVCA, we contributed to the BVCA’s feedback to
the Financial Reporting Council’s call for evidence on the
implementation of International Sustainability Standards Board
(“ISSB”) sustainable disclosure standards in the UK.
Executive remuneration
The Executive Directors receive, in addition to their salary, an annual
bonus and long-term share incentive awards based on the
achievement of a number of performance conditions. For FY2024,
annual bonuses for executive management were awarded based on
a balanced scorecard of both financial and strategic measures
agreed by the Remuneration Committee of the Board, alongside a
consideration of the wider context of personal performance
(including values and behaviours), risk, market and other factors.
Among the strategic and qualitative measures included in the
balanced scorecard to determine the FY2024 annual bonus award, up
to 10% of the maximum annual bonus opportunity was tied to
progress against a number of ESG targets. The Remuneration report
on pages 136 to 149 sets out the Remuneration Committee’s
assessment of the performance of the Executive Directors against the
scorecard’s ESG objectives. This TCFD report and the broader
Sustainability section of this Annual report describe the measures
taken by the Group to make progress against these objectives.
Pages 80-83
Risk management
Page 101
Governance framework
Pages 136-149
Remuneration report
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60
Strategy
TCFD recommendations
Disclose the actual and potential impacts of climate-related risks
and opportunities on the organisation’s businesses, strategy,
and financial planning where such information is material:
• Describe the climate-related risks and opportunities the
organisation has identified over the short, medium, and long
term
• Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and financial
planning
• Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario
Our investment strategy is to make a small number of new
investments each year in our Private Equity and Infrastructure
businesses, selected within our target sectors and geographies on
the basis of their compatibility with our return objectives. We screen
investments against our Responsible Investment policy, which has
been in place for many years and is reviewed as appropriate, and
most recently in May 2024. We believe that the careful assessment
and management of ESG factors, including climate-related risks and
opportunities, can be an important lever for value preservation and,
at times, for value creation in our portfolio. We therefore integrate
this assessment into our investment screening and portfolio
management processes and provide the necessary training and
guidance to our investment professionals. These processes are
described on pages 42 to 45 of this Annual report.
Resilience of our strategy to climate-related risks
Our business model is simple: we invest our proprietary capital and
manage a small number of third-party funds (principally in our
Infrastructure business). We do not manage products with specific
sustainability mandates. Our investment and portfolio construction
approach is flexible and not constrained by overly prescriptive
investment mandates or by limited duration funds, given the
permanent nature of our proprietary capital. The third-party funds we
manage in our Infrastructure business are either permanent or of very
long duration. We make majority or, in a small number of cases,
significant minority investments in our portfolio companies, and exert
influence on their boards.
This flexibility in mandates and holding periods is a considerable
strength, including with respect to the management of climate-
related risks and opportunities, and which has supported our ability
to pivot our investment towards sectors and niches that can benefit
from sustainable growth trends. Combined with the influence we
exert on portfolio companies this has allowed us, for example, to
increase our exposure to renewable energy generation and the
energy transition theme in our Infrastructure portfolio over the last
few years (see the case studies on pages 50 and 51). It has also
allowed us to approve investments within our portfolio companies
that support climate change resilience, for example, through a
reduction in their GHG emissions or the development of products
and services with lower associated emissions.
We do not invest directly in extractive industries (including coal, oil
and gas), albeit some of our investments do have exposure to some
of these sectors.
Climate scenario analysis
Climate change scenario analysis can be a useful tool to assess the
potential future exposure of a portfolio to climate-related risks under
different climate warming scenarios.
Early in FY2023, we carried out our initial, top-down climate scenario
analysis on our Private Equity and economic infrastructure
investments with the help of an external consultant. This analysis
assessed climate-related physical and transition risks for each of these
portfolio companies over short- (< one year), medium- (to 2030) and
long-term (to 2050) time horizons under three broad scenarios: an
orderly net zero transition by 2050; a disorderly net zero transition by
2050; and a hot-house world scenario. We described this scenario
analysis in last year’s TCFD report.
This top-down analysis did not provide detailed insights into our
portfolio, which is relatively concentrated, even in an industry context,
(with investments in approximately 60 companies across Private
Equity, Infrastructure and Scandlines, excluding the PPP project
investments which were not covered) and exposed to a relatively
small number of sectors and geographies. It did, however, help us to
develop our understanding of climate scenario analysis and to
crystallise our belief that a bottom-up approach is better suited to the
characteristics of our portfolio. The output of this analysis also helped
us to form a view on which areas of the portfolio would merit deeper
assessment.
With the benefit of these insights, we designed and carried out a
second phase of climate scenario analysis in FY2024, also with the
support of a specialist consultancy. This analysis used similar
scenarios to those we used for the first phase of our analysis in
FY2023. They are described in detail in the next page. As an initial
step, we performed an analysis of approximately half of our portfolio
companies by number, excluding PPP investments. For each of these
companies, we assessed potential physical and transition risks using
sector information and the geolocation of their main operations and
suppliers. This first step helped us to determine the potential hot
spots of inherent climate-related risks within this part of our portfolio
and to select a small number of portfolio companies for the second
step, “deep dive” analysis of the work.
In this second step, with the use of additional data, and with the
benefit of in-depth interviews with portfolio companies or investment
teams, we carried out a more detailed assessment of inherent and
residual physical and/or transition risks for these portfolio companies.
As part of this, we further developed our understanding of how these
companies assess, manage and mitigate those risks and capitalise on
the related opportunities. This allowed us to improve our assessment
of the residual risk levels for each risk driver significant to the portfolio
companies analysed, and to identify additional engagement levers
that we can use, as significant shareholders, to drive progress. We
have communicated the results of this analysis to the relevant
portfolio companies.
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Orderly transition
We used an orderly transition scenario, which assumes that policies
to mitigate the impacts of climate change are introduced early and
become gradually more stringent, culminating in the achievement of
global net zero CO2 emissions in around 2050 and likely limiting
global warming to below 2°C on pre-industrial averages.
Under this orderly transition scenario, our portfolio is potentially
exposed to a number of inherent risk drivers and respective
opportunities in the categories described on the next page.
Disorderly transition
A disorderly transition scenario assumes that climate policies are
delayed or divergent, requiring sharper emissions reductions,
achieved at a higher cost and with increased physical risks in order to
limit temperature rise to below 2°C on pre-industrial averages by
2050.
Under this scenario, the risks identified as part of the orderly
transition scenario are delayed but amplified in the run-up to 2050,
with a higher potential impact on portfolio companies. For example,
carbon prices could be higher and regulations could have much
quicker implementation timeframes, resulting in higher costs to
achieve compliance. However, the mitigation strategies and
opportunities remain broadly the same and would include investment
in low-carbon products and more resilient and efficient supply chains,
as well as the active monitoring of and compliance with upcoming
regulations and a proactive approach to developing transition plans.
Hot-house world
A hot-house world scenario assumes that no new climate change
mitigation policies are introduced and that only those that have been
implemented already are preserved, that current commitments are
not met and that emissions continue to rise, resulting in a failure to
limit temperature increases, as well as in high physical risks and
severe social and economic disruption.
The climate change scenario analyses we have performed to date
have not identified significant physical risk drivers for the majority of
the portfolio companies assessed in the medium term, with
moderate to low inherent physical risks driven principally by chronic
temperature changes, heatwaves and flooding. A few companies,
however, were identified as having medium or high physical risks in
relation to their own operations or key suppliers. We focused our
attention in the deep dive analysis on some of the companies
identified as having higher risks and have engaged with them with
the results of that assessment.
For our deep dive physical risk analysis, we used a >4°C, SSP5-8.5
2050 climate scenario, which shows an end-of-century temperature
rise of 4.5°C and is considered to be the worst-case hot-house
scenario.
The results of this climate change scenario analysis work were used to
develop a more detailed climate change assessment framework,
which has been incorporated into our overall ESG risk and
opportunity assessment processes.
We intend to refine our approach to climate scenario analysis on a
regular basis. This will be an iterative process, through which we will
build on our understanding and on market and scientific
developments over time.
Value at risk
Following careful consideration, we did not conduct an analysis of
value at risk from climate change impacts. Current climate models to
determine value at risk are at an early stage of development, and do
not yet provide sufficiently reliable results for a concentrated portfolio
like ours. Where relevant and possible, we embed certain climate-
related considerations in the valuations of our portfolio companies.
We will continue to assess climate modelling tools as they develop
and will report on this annually.
Viability statement
In addition to the climate change scenario analyses described above,
we have been assessing the potential financial impact of climate
change on our portfolio as a whole for some time through the work
we do to conduct our annual viability assessment (see pages 129 and
130). When preparing our Viability statement, we carry out a number
of tests which consider the impact on the Group of multiple severe,
yet plausible individual and combined stress scenarios, including the
impact that climate change might have on the value of a number of
our potentially more vulnerable assets through changes in regulation,
in consumer preferences, an increase in physical risks and other
business risks. This analysis is carried out over a three-year timeframe,
and is different to climate change scenario analysis, which analyses
the impacts of climate change over a much longer time period.
Because of the diverse exposures of our current portfolio companies
and the flexibility we have in portfolio construction, our analysis
showed that a climate-related stress scenario is unlikely to impact the
viability of the Group over the three-year time period.
Transition to a low-carbon economy
The ESG Committee discussed the most appropriate approach to
align 3i and its portfolio to the UK’s net zero ambitions and set
relevant targets. We performed a detailed analysis of the portfolio
(excluding the PPP projects) to establish how challenging it is for each
portfolio company to set science-based targets, in light of (i) available
sector guidance and decarbonisation pathways; and (ii) the carbon
maturity of the portfolio company itself.
This analysis supported our decision to set SBTs, which were
validated by the SBTi in March 2024. Information on our SBTs can be
found within the Metrics and targets pillar of this report on page 68.
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Principal climate-related transition risks under the orderly transition scenario
Risk category
Risk drivers
Time horizon
Potential impact, mitigation and opportunities
Policy and legal
• New regulations
and commitments
Short and
medium term
Potential impact
• Non-compliance with regulations and commitments could result in reputational
damage for 3i and its portfolio as well as in legal fees and fines.
Mitigation
• 3i and its portfolio companies monitor the evolution of the regulatory landscape to
ensure that they are prepared for compliance.
• Minimum ESG requirements within our RI policy include compliance with applicable
laws and regulations.
Opportunities
• Compliance with upcoming regulations facilitates the exit process.
• Carbon pricing
mechanisms
Medium term
Potential impact
• The introduction of carbon pricing could increase the operating costs of the portfolio
companies to which they apply.
Mitigation
• Where material, 3i has begun to engage with portfolio companies to identify those at
risk from the introduction of carbon pricing mechanisms, and understand the
potential impacts before addressing next steps.
Opportunities
• Portfolio companies subject to carbon pricing mechanisms could develop low-carbon
processes and products to reduce this impact.
Technology
• Increased investment
required in
sustainable or green
technologies and low
carbon processes
• Competitor
innovation
Medium and
long term
Potential impact
• Increased investments in new technology and processes to reduce carbon emissions
may result in higher costs.
• Successful competitor innovation could result in reduced revenue and market share.
Mitigation
• Portfolio companies monitor their markets to identify potential technology risks and,
with the support of 3i on their board, assess the new investments required to stay
abreast of developments.
Opportunities
• Investment in lower-emissions products and services could lead to improved revenues
and profitability over time.
Market
• Changing consumer
and investor
preferences
• Unexpected shifts
in market
• Changes in job
market
Medium and
long term
Potential Impact
• Changes in consumer preferences in response to climate change (eg preference for
products and services with a lower carbon impact) could result in decreased revenues
for portfolio companies.
• An increasing employee focus on sustainability could make it harder for portfolio
companies to retain and attract talent if they are not perceived to be responding
adequately to the challenges posed by climate change.
Mitigation
• Portfolio companies monitor their offering against evolving consumer preferences
and employee/potential employee expectations.
Opportunities
• Portfolio companies could invest in innovation to ensure that their products and
services align with evolving consumer preferences.
Reputation
• Stigmatisation
of the sector
• Increased stakeholder
concerns
Short and
medium term
Potential impact
• Stigmatisation and stakeholder concerns may result in decreased revenue and
increased operating costs for certain portfolio companies operating in sectors
perceived as having a high impact on climate change.
Mitigation
• Where material, 3i has begun working with portfolio companies to develop transition
plans and develop their business models to ensure that they transition away from
carbon intensive sectors or end markets.
Opportunities
• Portfolio companies that adopt a proactive approach to climate transition could
strengthen their market position, particularly in a disorderly transition scenario.
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Risk management
TCFD recommendations
Disclose how the organisation identifies, assesses, and manages
climate-related risks
• Describe the organisation’s processes for identifying and
assessing climate-related risks
• Describe the organisation’s processes for managing climate-
related risks
• Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management
We recognise the increasing importance of climate-related risks and
monitor these as we do other risks through our comprehensive risk
governance framework, both on a portfolio company level and for
the Group as a whole. The framework is described in detail on pages
80 to 84, and our portfolio ESG assessment process (which covers an
assessment of material climate risks for each portfolio company) is
described on page 43 of this report.
3i’s own operations are not in themselves exposed to material
physical climate risks. We employ fewer than 250 people across seven
offices. Nevertheless, the business is increasingly affected directly by
climate-related legal and regulatory risks, as well as by the related
reputational risks.
The majority of 3i’s climate risk exposure is through its portfolio. We
describe our processes to identify and manage climate-related risks
and opportunities under the Strategy pillar above.
Identification, assessment and management
of climate-related risks
We consider climate-related risks on the Group and the portfolio
through our risk management framework, which is coordinated by
the Group Risk Committee and implemented across the organisation
as described in the Risk review. Specifically, in relation to the
management and mitigation of climate-related risks in the portfolio,
we rely, over the life of the investment, on:
• the assessment of material climate-related risks in the pre-
investment phase. This is performed internally and supplemented
as appropriate by external specialists and can result in Investment
Committee requiring further due diligence to be performed or in
investments being declined. Our climate change assessment
framework was enhanced following the completion of the second
stage of our climate scenario analysis in FY2024 and we will begin
trialling this in the current financial year;
• our ongoing portfolio monitoring process, which involves, in
addition to the monthly monitoring of bespoke financial and
operational KPIs and in-depth semi-annual portfolio company
reviews, a detailed annual ESG assessment which covers a number
of climate factors. This annual ESG assessment was also enhanced
with the benefit of the outputs of our climate change scenario
analysis;
• the Investment Committee to manage portfolio risks;
• the influence we have on portfolio companies. We make majority
or significant minority investments in our core portfolio companies
and exercise influence through membership of their boards;
• the measurement of portfolio company GHG emissions (see
“Metrics and targets” on the next page) and engagement with
portfolio companies on abatement, mitigation and adaptation
strategies; and
• climate scenario analysis, as described under “Strategy” on pages
61 to 63.
Our investment processes are described on page 43 of this Annual
report. We further mitigate climate-related risks by improving our
understanding of climate change and refining our processes over
time. These processes involve an increasing number of employees.
We have been encouraged by the level of staff engagement on this
topic and intend to continue to provide forums for employees to
provide their input and views on how to improve our performance.
Portfolio data collection and management
To support the assessment and management of portfolio
sustainability risks, including climate-related risks, in FY2024 we
continued to improve the quality of the annual sustainability data
(including GHG emissions) we collect from portfolio companies by
refining our ESG assessment questionnaires to ensure that they
reflect our improved understanding of climate drivers across the
portfolio, as well as evolving disclosure requirements, market practice
and other stakeholder needs. We continue to work on improving the
consistency and comparability of portfolio GHG emissions data, as
this will underpin the quality of our portfolio emissions disclosures.
The ESG Committee therefore selected and rolled out a new
dedicated software tool to help us gather, organise and analyse ESG
data from the portfolio, including the data used for the calculation of
the portfolio climate metrics disclosed in this TCFD report. This tool
provides detailed guidance for each of the metrics collected as well
as access to a support team. See “Metrics and targets” on the next
page for more information on portfolio emissions data.
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Metrics and targets
TCFD recommendations
Disclose the metrics and targets used to assess and manage
relevant climate-related risks and opportunities where such
information is material:
• Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its strategy
and risk management process
• Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas emissions, and the related risks
• Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets
3i Group’s portfolio climate metrics
The metrics below provide information on the GHG emissions from
our portfolio companies. These metrics cover 99.5% of the portfolio
value1 of 3i Group plc as at 31 March 2024 and are calculated in line
with the TCFD recommendations implementation guidance.
Results as at
31 March 2024
Definitions of climate metrics
Portfolio emissions
323,539
tCO2e
Total portfolio emissions is the
absolute Scope 1 and 2 GHG
emissions associated with a portfolio.
We are allocating GHG emissions for
each portfolio company using 3i
Group’s fully diluted equity
ownership2.
Carbon footprint
15.0
tCO2e/£m invested
Carbon footprint is total portfolio
emissions (Scope 1 and 2) normalised
by the value of the portfolio2,
expressed in tonnes of CO2e/£m
invested.
WACI
42.5
tCO2e/£m revenue3
Weighted Average Carbon Intensity
(“WACI”) is a portfolio’s exposure to
carbon-intensive companies,
expressed in tonnes CO2e/£m
revenue. It is calculated using the
carbon intensity for each portfolio
company (Scope 1and 2 emissions/
revenue) apportioned based on the
weight of each portfolio company
within the whole portfolio.
1
Note that 3i Investments plc manages a number of co-investment vehicles whose investors are employees or
former employees of 3i. For the purpose of this calculation, we have included these co-investment vehicles
within the 3i Group scope.
2
Sourced from 3i’s finance systems.
3
Sourced from portfolio companies.
Methodology and GHG emissions data source
As a private equity and infrastructure asset manager and owner, 3i is
able to collect data from its portfolio companies.
3i requests Scope 1 and Scope 2 (location and market-based) GHG
emissions data from all core portfolio companies on an annual basis.
This data is provided directly to 3i from portfolio companies through
an ESG data collection tool. If a company provides Scope 2 market-
based data, this is used for the climate metrics calculation. If Scope 2
market-based data is unavailable, location-based data is used. Scope
3 GHG emissions data is provided by portfolio companies where
available and we are working to improve our Scope 3 data coverage
further.
Estimations and data gaps
Where current year data is not available, but previous year data is
available, we estimate the current year data using data from the
previous year, adjusted based on year-on-year changes in revenue.
Where the data is not available, it is noted as a data gap. The
significance of the data gap is disclosed through the data coverage
indicator (99.5% of the portfolio value).
Data quality
As we invest in private companies that are at different levels of
climate-related risk maturity, we have decided to add a data quality
score to the data that we are disclosing to ensure that readers
understand the reliability and quality of the data provided. Some of
our portfolio companies have only just started to estimate their GHG
emissions while others have robust processes in place to calculate
and assure the data.
We have used a custom scale to reflect overall data quality using the
Partnership for Carbon Accounting Financials (“PCAF”) methodology
as a guide and adjusting it to reflect the specificities of our
business model:
Characteristics of the data
Data
quality
Certain
Emissions of the company are available and
reported by the portfolio company as being
verified by a third party
1
Prior year emissions of the company are available
and reported by the portfolio company as being
verified by a third party. The emissions for the
current year are estimated based on prior year
emissions and year-on-year changes in revenue
2
Emissions of the company are available and
reported by the portfolio company as being
verified internally
3
Unverified emissions of the company are available,
including those calculated using our ESG data
collection tool
4
Emissions of the company, including those
calculated by the portfolio company using our ESG
data collection tool, are estimated using a GHG
emissions calculator using spend data
5
Uncertain
The data quality score for 3i Group plc is 2.6. It is derived by
assigning each portfolio company a data quality score, weighted by
that company’s emissions as a percentage of total portfolio
emissions.
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Portfolio net zero alignment scale
Initiative Climat International (iCI) and the Sustainable Markets Initiative’s Private Equity Task Force have developed the Private Markets
Decarbonisation Roadmap to enable private markets firms to drive their transition to a low-carbon economy. The metric used within this
roadmap is based on the climate maturity of each portfolio company rather than on an implied temperature rise metric which is the
methodology suggested by the FCA for climate disclosures. We are using the Private Markets Decarbonisation Roadmap metric because it
aligns best with our science-based targets. The Alignment Scale of the Roadmap (as published by the leaders of the initiative) is summarised
in the table below:
Not started
Capturing data
Preparing to
decarbonise
Aligning
Aligned to
net zero
Definition
Not started to measure
emissions or plan how
to reduce them
Reporting emissions
data but currently no
plan in place to reduce
emissions
Planning to reduce
emissions in line with
an approach agreed
with the GP
Committed to a
decarbonisation plan
aligned to a transition
pathway
Delivering against a net
zero plan and
operations aligned to
science-based target
Criteria
• Minimal or no
emissions data
• No decarbonisation
plan in place
• Measuring Scope 1 and
2 emissions from
operations, alongside
material Scope 3
emissions, and making
data available to fund
• Decarbonisation plan in
place but level of
ambition not aligned to
net zero pathway
• Committed to near-
term science-based
target aligned to a
long-term net zero
pathway
• Demonstrated YoY
emissions profile in line
with pathway
3i Group plc categorised portfolio companies covering 99.2% of its investment portfolio value as at 31 March 2024 in line with the roadmap’s
Alignment Scale. The current alignment of the portfolio based on total portfolio emissions is set out in the diagram below.
While the majority of our portfolio is preparing to decarbonise, we have had to categorise a number of our portfolio companies in the “not
started” categories. Many of these companies have only recently begun to calculate their Scope 3 GHG emissions, but are not yet in a
position to report all material Scope 3 categories to us.
We have categorised companies that have set science-based targets using the SBTi’s SME target setting process as “aligning”, even though
some of them have not yet reported all material Scope 3 categories to us.
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ò
Not started
14%
ò
Capturing data
7%
ò
Preparing to decarbonise
78%
ò
Aligning
1%
ò
Aligned to net zero
1%
3i Group’s emissions from its own operations
This section has been prepared in accordance with our regulatory
obligation to report GHG emissions pursuant to the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2019 which implement the government’s
policy on Streamlined Energy and Carbon Reporting. During the year
to 31 March 2024, our measured Scope 1 and 2 emissions (market-
based) totalled 232.8 tCO2e. This comprised:
FY2024 (tCO2e)
FY2023 (tCO2e)
GHG emissions
(Scope)1
UK
Rest of
the
world
Total
UK
Rest of
the
world
Total
1
101.0 34.7 135.7 105.6 34.4 140.0
2 – location-based
92.2 118.7 210.9 86.6 72.4 159.0
2 – market-based
– 97.1
97.1
– 41.6
41.6
Total 1 and 2
(location-based)
193.2 153.4 346.6 192.2 106.8 299.0
Total 1 and 2
(market-based)
101.0 131.8 232.8 105.6 76.0 181.6
3
n/a
n/a 9,612.8
n/a
n/a 6,802.3
1
Based on IEA data (2023) Emissions factors, www.iea.org/statistics. All rights reserved; as modified by 3i Group
plc.
This is equivalent to 1.0 tCO2e per full-time equivalent employee,
based on an average of 244 employees (2023: 0.8 tCO2e; 241
employees). Overall, our Scope 1 and 2 (market-based) emissions
increased by 28.2% year-on-year. Most of the increase can be
attributed to the move of our offices in New York and Amsterdam, as
we were unable to procure green electricity immediately after the
move, and to the fact that our new premises in New York are heated
with steam.
Our measured Scope 3 emissions totalled 9,612.8 tCO2e. The 41.3%
increase in our Scope 3 emissions in FY2024 compared to the
previous year is attributable to a few factors, including: (i)
improvements to the methodology we adopt to calculate the
emissions related to our purchased goods and services; (ii) the
emissions associated with the move to new offices in New York and
Amsterdam; and (iii) increased business travel following the lifting of
travel restrictions associated with the Covid-19 pandemic.
Our total energy consumption was 1,451.4 MWh (1,451,400 kWh) in
FY2024, 57% of which was consumed in the UK. The split between
energy consumption is shown in the table below.
FY2024
FY2023
Energy
consumption
(kWh in 000s )
UK
Rest of
the world
Total
UK
Rest of
the world
Total
Electricity
445.5 297.2 742.7 447.6
225.8
673.4
Fuels1
378.1 155.1 533.2 578.6
168.3
746.9
District heating,
cooling, steam
– 175.5 175.5
–
25.2
25.2
1 Natural gas and transportation fuels (petrol and diesel).
Methodology
We quantify and report our organisational GHG emissions in
alignment with the World Resources Institute’s Greenhouse Gas
Protocol Corporate Accounting and Reporting Standard and in
alignment with the Scope 2 Guidance. Scope 3 emissions are
calculated in line with the World Resources Institute’s Greenhouse
Gas Protocol: Corporate Value Chain (Scope 3) Accounting and
Reporting Standard as well as the World Resources Institute’s GHG
Protocol Technical Guidance for Calculating Scope 3 emissions. We
consolidate our organisational boundary according to the
operational control approach, which includes all our offices. We have
adopted a materiality threshold of 5% for GHG reporting purposes.
The GHG sources that constituted our operational boundary for the
year to 31 March 2024 are:
• Scope 1: natural gas combustion within boilers, fuel combustion
within leased vehicles and use of refrigeration and air-conditioning
equipment;
• Scope 2: purchased electricity and heat, cooling and steam
consumption for our own use, including leased vehicles;
• Scope 3: purchased goods and services, capital goods, fuel- and
energy-related activities, waste generated in operations, business
travel and employee commuting and emissions associated with
working from home.
In some cases, where data is missing, for example, due to the timing
of invoices from our utilities providers, values have been estimated
using either extrapolation of available data or by using data from the
previous year as a proxy.
The Scope 2 Guidance requires that we quantify and report Scope 2
emissions according to two different methodologies (“dual
reporting”): (i) the location-based method, using the average
emissions intensity of grids for the country in which the reported
operations take place; and (ii) the market-based method, which
reflects the emissions from purposefully chosen energy (eg bundled
electricity, supplier specific rates, direct electricity contracts).
Although we have a relatively low environmental footprint, we are
committed to reducing it further. In our London, Paris, and
Luxembourg offices, which account for over 86% of our overall
electricity consumption, we purchased our electricity from 100%
renewable sources during FY2024. Our New York and Amsterdam
teams moved to new premises during the year. Our New York
landlord is working on delivering green energy, however, it relies on
initiatives to be implemented by the New York state government to
achieve that objective. Our new Amsterdam office switched to green
energy at the end of FY2024. Although the options for energy
efficiency improvements for our offices are limited, we are assessing
whether it is possible to switch to renewable tariffs in our remaining
offices where we do not currently purchase all of our electricity from
100% renewable sources.
Third-party verification
The 3i emissions from its own operations disclosed on this page have
been verified to a limited level of assurance by Accenture to the ISO
14064-3 standard. The portfolio emissions disclosed on page 65 are
not included in this third-party verification.
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67
Science-based targets
On 5 April 2023, we wrote to the SBTi to indicate our commitment to
set up near-term science-based targets for 3i. We submitted our
targets to SBTi for validation on 31 October 2023. SBTi approved our
targets on 22 March 2024. Our science-based targets cover our direct
Scope 1 and 2 emissions, as well as the Scope 3 emissions associated
with our portfolio and are formulated in line with the guidance
published by SBTi for financial institutions and the private equity
sector.
Operations emissions target
3i Group plc commits to reduce its absolute Scope 1 and 2 (market-
based) GHG emissions by 42% by FY2030 from a FY2023 base year.
Our strategy to meet this target involves engaging with our landlords
on the energy efficiency of our premises and on using less carbon
intensive energy sources. We are also engaging with energy suppliers
directly or through our landlords on the procurement of renewable
electricity.
Financed emissions targets
3i Group’s portfolio targets cover 82% of its total investment and
lending by invested capital as of FY2023. As of FY2023, the required
activities made up 82% of 3i Group’s total investment and lending
activities by invested capital while optional activities made up 3% and
out of scope activities made up 15%.
3i Group plc commits to 31% of its listed and eligible Private Equity
portfolio by invested capital setting SBTi-validated targets by FY2028
and 100% by FY2040 from a FY2023 base year.
3i Group plc commits to reduce GHG emissions from the electricity
generation sector within its eligible portfolio by 68% per MWh by
FY2030 from a FY2023 base year.
3i Group plc commits to continue providing electricity generation
project finance only for renewable electricity through FY2030.
Our strategy to meet these targets involves the following actions:
1 As a majority or significant minority investor in our core portfolio
companies, we will continue to use our influence and engage with
portfolio companies to support them to:
(i)
measure and report on Scope 1 and 2 GHG emissions at least
annually;
(ii) measure and report on material Scope 3 GHG emissions at
least annually when appropriate; and
(iii) develop decarbonisation plans and set science-based targets.
2 We will manage our electricity generation portfolio to reduce its
GHG emissions intensity as a whole.
3 We will facilitate knowledge sharing between portfolio companies
in relation to formulating decarbonisation plans and setting
science-based targets.
We will disclose on progress towards achieving these targets on an
annual basis from FY2025.
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68
What’s in this section
Financial review
70
Reconciliation of Investment basis and IFRS
75
Alternative Performance Measures
79
Risk management
80
Principal risks and mitigations
85
Directors’ duties under Section 172
94
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Strong financial performance
Highlights – Investment basis
Gross investment return
Operating profit before carried interest
Total return
£4,168m
(2023: £5,104m)
£4,077m
(2023: £4,956m)
£3,839m
(2023: £4,585m)
Total return on opening shareholders’ funds
Diluted NAV per share at 31 March 2024
Total dividend
23%
(2023: 36%)
2,085p
(31 March 2023: 1,745p)
61.0p
(31 March 2023: 53.0p)
Table 9: Total return for the year to 31 March
Investment basis
2024
£m
2023
£m
Realised (losses)/profits over value on the disposal of investments
(4)
169
Unrealised profits on the revaluation of investments
3,926
3,769
Portfolio income
Dividends
499
416
Interest income from investment portfolio
91
91
Fees receivable
1
7
Foreign exchange on investments
(461)
530
Movement in the fair value of derivatives
116
122
Gross investment return
4,168
5,104
Fees receivable from external funds
72
70
Operating expenses
(147)
(138)
Interest receivable
13
4
Interest payable
(61)
(54)
Exchange movements
29
(29)
Other income/(expense)
3
(1)
Operating profit before carried interest
4,077
4,956
Carried interest
Carried interest and performance fees receivable
62
41
Carried interest and performance fees payable
(305)
(418)
Operating profit before tax
3,834
4,579
Tax charge
(2)
(2)
Profit for the year
3,832
4,577
Re-measurements of defined benefit plans
7
8
Total comprehensive income for the year (“Total return”)
3,839
4,585
Total return on opening shareholders’ funds
23%
36%
Investment basis and Alternative Performance Measures (“APMs”)
In our Strategic report, we report our financial performance using our Investment basis. We do not consolidate our portfolio companies as
private equity and infrastructure investments are not operating subsidiaries. IFRS 10 sets out an exception to consolidation and requires us to
fair value other companies in the Group (primarily intermediate holding companies and partnerships). As explained in the Investment basis,
Reconciliation of Investment basis and IFRS sections below, the total comprehensive income and net assets are the same under our audited
IFRS financial statements and our Investment basis. The Investment basis is simply a “look through” of IFRS 10 to present the underlying
performance and we believe it is more transparent to readers of our Annual report and accounts.
In October 2015, the European Securities and Markets Authority (“ESMA”) published guidelines about the use of APMs. These
are financial measures such as KPIs that are not defined under IFRS. Our Investment basis is itself an APM, and we use a number of other
measures which, on account of being derived from the Investment basis, are also APMs.
Further information about our use of APMs, including the applicable reconciliations to the IFRS equivalent where appropriate, is provided at the
end of the Financial review and should be read alongside the Investment basis to IFRS reconciliation. Our APMs are gross investment return as a
percentage of the opening investment portfolio value, cash realisations, cash investment, operating cash profit, net cash/(debt) and gearing.
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Realised losses/profits
In the year, we recognised a small realised loss of £4 million (2023:
profit of £169 million) relating to Infrastructure. We generated total
realised proceeds of £888 million (2023: £857 million) primarily from
Action’s capital restructuring.
Unrealised value movements
We recognised an unrealised profit of £3,926 million (2023:
£3,769 million). Action’s continued strong performance contributed
£3,609 million (2023: £3,708 million). We also saw good contributions
from a number of our other Private Equity investments including
Royal Sanders, EBG, AES, Cirtec Medical, Q Holding, MPM, ten23
health, MAIT and Audley Travel, offsetting negative contributions
from arrivia, Tato, WilsonHCG, Luqom, SaniSure and Basic-Fit. Our
infrastructure portfolio delivered a good return, driven by the
increase in the share price of our quoted investment in 3iN.
Further information on the Private Equity, Infrastructure and
Scandlines valuations is included in the business reviews.
Portfolio income
Portfolio income increased to £591 million for the year (2023:
£514 million), primarily due to dividend income of £499 million (2023:
£416 million), particularly from Action and Royal Sanders and interest
income from portfolio companies, the majority of which is non-cash.
Fees receivable from external funds
Fees received from external funds increased to £72 million (2023:
£70 million). 3i receives a fund management fee from 3iN, which
amounted to £51 million in FY2024 (2023: £49 million).
The remaining fee income received in the year of £21 million (2023:
£21 million) includes fees from 3i MIA, our management of the 3i
2020 Co-investment Programme related to Action and other funds.
Operating expenses
Operating expenses increased in the year to £147 million (2023: £138
million) driven by a higher share-based payment charge reflecting the
strong performance of 3i’s share price during the year which was
offset by delayed staff recruitment.
Interest payable
The Group recognised interest payable of £61 million (2023:
£54 million). Interest payable predominantly includes interest on the
Group’s loans and borrowings and amortisation of capitalised fees.
Operating cash profit
We generated an operating cash profit of £467 million in the year
(2023: £364 million). Cash income increased to £594 million (2023:
£497 million), principally due to an increase in dividend income, which
included £375 million of cash dividends from Action (2023:
£325 million). We also received cash dividends from Royal Sanders,
3iN, Scandlines, Tato and AES, as well as cash fees from our external
funds. Excluding the dividends received from Action, the operating
cash profit was £92 million.
Cash operating expenses of £127 million (2023: £133 million)
decreased in the year due to the timing of payments. Cash operating
expenses are lower than the £147 million (2023: £138 million) of
operating expenses recognised in the Consolidated statement of
comprehensive income as a result of share-based payments and
other non-cash expenses.
Table 10: Unrealised value movements on the revaluation of investments for the year to 31 March
Investment basis
2024
£m
2023
£m
Private Equity
3,874
3,746
Infrastructure
72
23
Scandlines
(20)
–
Total
3,926
3,769
Table 11: Operating cash profit for the year to 31 March
Investment basis
2024
£m
2023
£m
Cash fees from external funds
74
67
Cash portfolio fees
12
5
Cash portfolio dividends and interest
508
425
Cash income
594
497
Cash operating expenses1
(127)
(133)
Operating cash profit
467
364
1
Cash operating expenses include operating expenses paid and lease payments.
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Carried interest and performance fees
We receive carried interest and performance fees from third-party
funds and 3iN. We also pay carried interest and performance fees to
participants in plans relating to returns from investments. These are
received and/or paid subject to meeting certain performance
conditions. In Private Equity (excluding Action), we typically accrue
net carried interest payable of c.12% of GIR and for Action carried
interest payable of c.3% of Action’s GIR, based on the assumption
that all investments are realised at their balance sheet value. Carried
interest is paid to participants when cash proceeds have actually
been received following a realisation, refinancing event or other cash
distribution and performance hurdles are passed in cash terms. Due
to the length of time between investment and realisation, the
schemes are usually active for a number of years and their
participants include both current and previous employees of 3i.
In the year to 31 March 2024, we reduced our carried interest and
performance fees payable balance to £818 million (2023: £1,351
million), primarily driven by £735 million paid in relation to Action, as
a result of crystallising a further portion of the carried interest liability
in the Buyouts 2010-12 carry scheme. As a result of these payments
and the further investment in Action in the year, our net holding in
Action, after carried interest, is now 53.2% (31 March 2023: 48.9%).
The strong performance of Action in the Buyouts 2010-12 vintage
and good performance of a number of portfolio companies in our
other vintages in Private Equity led to a £262 million increase in
carried interest payable in FY2024.
In Infrastructure, 3iN pays a performance fee based on its NAV on an
annual basis, subject to a hurdle rate of return. The continued strong
performance of the assets held by 3iN and the sale of Attero, resulted
in the recognition of £62 million (2023: £35 million) of performance
fees receivable. £43 million (2023: £25 million) was recognised as
carried interest and performance fees payable. During the year, we
received £58 million of performance fees and paid £33 million to the
Infrastructure team.
Overall, the effect of the income statement charge of £305 million
(2023: £418 million), cash payments of £778 million (2023: £51 million),
as well as currency translation meant that the balance sheet carried
interest and performance fees payable was £818 million (31 March
2023: £1,351 million).
Table 12: Carried interest and performance fees for the year to 31 March
Investment basis Statement of comprehensive income
2024
£m
2023
£m
Carried interest and performance fees receivable
Private Equity
–
4
Infrastructure
62
37
Total
62
41
Carried interest and performance fees payable
Private Equity
(262)
(392)
Infrastructure
(43)
(26)
Total
(305)
(418)
Net carried interest payable
(243)
(377)
Table 13: Carried interest and performance fees at 31 March
Investment basis Statement of financial position
2024
£m
2023
£m
Carried interest and performance fees receivable
Private Equity
5
6
Infrastructure
42
37
Total
47
43
Carried interest and performance fees payable
Private Equity
(803)
(1,325)
Infrastructure
(15)
(26)
Total
(818)
(1,351)
Table 14: Carried interest and performance fees paid in the year to 31 March
Investment basis cash flow statement
2024
£m
2023
£m
Carried interest and performance fees cash paid
Private Equity
745
24
Infrastructure
33
27
Total
778
51
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Net foreign exchange movements
The Group recorded a total foreign exchange translation loss
of £316 million including the impact of foreign exchange hedging
in the year (March 2023: £623 million gain), as a result of sterling
strengthening by 3% against the euro and by 2% against the
US dollar.
At 31 March 2024, the notional value of the Group’s forward foreign
exchange contracts was €2.6 billion and $1.2 billion. The €2.6 billion
includes the €600 million notional value of the forward foreign
exchange contracts related to the Scandlines hedging programme.
Including the impact from foreign exchange hedging, 75% of the
Group’s net assets are denominated in euros or US dollars. Based on
the Group’s net assets at 31 March 2024, including the impact from
foreign exchange hedging, a 1% movement in euro and US dollar
foreign exchange rates would impact total return by £140 million
and £12 million, as shown in Table 15 below.
Pension
The Group’s UK defined benefit plan (“the Plan”) is fully insured
following previous buy-in policies with Legal & General in May 2020
and February 2019 and Pension Insurance Corporation in March 2017.
These polices provide long-term security for the Plan members and 3i
is no longer exposed to any material longevity, interest or inflation
risk in the Plan or any ongoing requirement to fund the Plan. The
Trustees of the Plan wrote to members on 18 March 2024 to confirm
that they were proceeding with their plan to buy out members’
benefits and to distribute the surplus to the Company. This
transaction is expected to complete in FY2025.
During the year the Group recognised a £7 million re-measurement
gain on the Plan, following a reduction in the tax rate used to restrict
the surplus to 25% (31 March 2023: 35%), following a legislative
change made by the government effective from 6 April 2024. There
was no re-measurement gain (2023: £8 million) on the German
defined benefit plan.
Tax
The Group’s parent company continues to operate in the UK as
an approved investment trust company. An approved investment
trust is a UK investment company, which is required to meet certain
conditions set out in the UK tax rules to obtain and maintain its tax
status. This approval allows certain investment profits of the
Company, broadly its capital profits, to be exempt from tax in the UK.
The Group’s tax charge for the year was £2 million (2023: £2 million).
The Group’s overall UK tax position for the financial year is
dependent on the finalisation of tax returns of the various corporate
and partnership entities in the UK group.
Table 15: Net assets1 and sensitivity by currency at 31 March
FX rate
£m
%
1%
sensitivity
£m
Sterling
n/a
4,817
24
n/a
Euro2
1.1695
13,947
69
140
US dollar2
1.2633
1,180
6
12
Danish krone
8.7236
200
1
2
Other
n/a
26
–
n/a
1 The Group’s foreign exchange hedging is treated as a sterling asset within the above table.
2 The sensitivity impact calculated on the net assets position includes the impact of foreign exchange hedging.
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Balance sheet and liquidity
During the year, we successfully issued a six-year €500 million bond at
a coupon of 4.875% and extended the tenor of the £400 million
tranche of our £900 million RCF to November 2026, with both
transactions further strengthening our liquidity profile.
At 31 March 2024, the Group had net debt of £806 million
(31 March 2023: £363 million) and gearing of 4% after the receipt
of strong cash income of £594 million and net cash proceeds
of £280 million, offsetting the payment of carried interest and
performance fees of £778 million and Group dividend payments of
£541 million.
The Group had liquidity of £1,296 million as at 31 March 2024 (31
March 2023: £1,312 million), comprising cash and deposits of £396
million (31 March 2023: £412 million) and an undrawn RCF of £900
million.
The investment portfolio value increased to £21,636 million
at 31 March 2024 (31 March 2023: £18,388 million), mainly driven
by unrealised profits of £3,926 million in the year.
Further information on investments and realisations is included
in the Private Equity, Infrastructure and Scandlines business reviews.
Going concern
The Annual report and accounts 2024 are prepared on a going
concern basis. The Directors made an assessment of going concern,
taking into account the Group’s current performance and the
outlook, and performed additional analysis to support the going
concern assessment. Further details on going concern can be found
on page 128 in the Resilience statement.
Dividend
The Board has recommended a second FY2024 dividend of 34.50
pence per share (2023: 29.75 pence), taking the total dividend for the
year to 61.0 pence per share (2023: 53.0 pence). Subject
to shareholder approval, the dividend will be paid to shareholders
in July 2024.
Table 16: Simplified consolidated balance sheet at 31 March
Investment basis Statement of financial position
2024
£m
2023
£m
Investment portfolio
21,636
18,388
Gross debt
(1,202)
(775)
Cash and deposits
396
412
Net debt
(806)
(363)
Carried interest and performance fees receivable
47
43
Carried interest and performance fees payable
(818)
(1,351)
Other net assets
111
127
Net assets
20,170
16,844
Gearing1
4%
2%
1 Gearing is net debt as a percentage of net assets.
Key accounting judgements and estimates
A key judgement is the assessment required to determine the degree of control or influence the Group exercises and the form of
any control to ensure that the financial treatment of investment entities is accurate. The introduction of IFRS 10 resulted in a number
of intermediate holding companies being presented at fair value, which has led to reduced transparency of the underlying investment
performance. As a result, the Group continues to present a non-GAAP Investment basis set of financial statements to ensure that the
commentary in the Strategic report remains fair, balanced and understandable. The reconciliation of the Investment basis to IFRS
is shown on pages 76 to 78.
In preparing these accounts, the key accounting estimates are the carrying value of our investment assets, which is stated at fair value,
and the calculation of carried interest payable.
Given the importance of the valuation of investments, the Board has a separate Valuations Committee to review the valuation policy,
process and application to individual investments. However, asset valuations for unquoted investments are inherently subjective, as they
are made on the basis of assumptions which may not prove to be accurate. At 31 March 2024, 96% by value of the investment assets
were unquoted (31 March 2023: 95%).
The valuation of the proprietary capital portfolio is a primary input into the carried interest payable and receivable balances,
which are determined by reference to the valuation at 31 March 2024 and the underlying investment management agreements.
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Background to Investment basis financial statements
The Group makes investments in portfolio companies directly, held
by 3i Group plc, and indirectly, held through intermediate holding
company and partnership structures (“Investment entity
subsidiaries”). It also has other operational subsidiaries which provide
services and other activities such as employment, regulatory activities,
management and advice (“Trading subsidiaries”). The application
of IFRS 10 requires us to fair value a number of intermediate holding
companies that were previously consolidated line by line. This fair
value approach, applied at the intermediate holding company level,
effectively obscures the performance of our proprietary capital
investments and associated transactions occurring in the
intermediate holding companies.
The financial effect of the underlying portfolio companies and
fee income, operating expenses and carried interest transactions
occurring in Investment entity subsidiaries are aggregated into
a single value. Other items which were previously eliminated
on consolidation are now included separately.
To maintain transparency in our report and aid understanding we
introduced separate non-GAAP “Investment basis” Statements of
comprehensive income, financial position and cash flow in our 2014
Annual report and accounts. The Investment basis is an APM and the
Strategic report is prepared using the Investment basis as we believe
it provides a more understandable view of our performance. Total
return and net assets are equal under the Investment basis and IFRS;
the Investment basis is simply a “look through” of IFRS 10 to present
the underlying performance.
Reconciliation of Investment basis and IFRS
A detailed reconciliation from the Investment basis to IFRS basis
of the Consolidated statement of comprehensive income,
Consolidated statement of financial position and Consolidated
cash flow statement is shown on the following pages.
Investment basis of consolidation
3i Group plc
The Group
Investment
entity
subsidiaries
Trading
subsidiaries
(regulated
investment
advisers,
employment
entities, etc.)
Inter-company
balance
eliminated on
consolidation
Portfolio
companies
(held directly by
3i Group plc)
Portfolio
companies
l Consolidated
l Fair valued
IFRS 10 basis of consolidation
3i Group plc
The Group
Investment
entity
subsidiaries
Trading
subsidiaries
(regulated
investment
advisers,
employment
entities, etc.)
Inter-company
balance
Portfolio
companies
(held directly by
3i Group plc)
Portfolio
companies
l Consolidated
l Fair valued
l Portfolio company included in fair value
of Investment entity subsidiaries
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Reconciliation of consolidated statement of comprehensive income
for the year to 31 March
Notes
Investment
basis
2024
£m
IFRS
adjustments
2024
£m
IFRS basis
2024
£m
Investment
basis
2023
£m
IFRS
adjustments
2023
£m
IFRS basis
2023
£m
Realised (losses)/profits over value
on the disposal of investments
1,2
(4)
5
1
169
(105)
64
Unrealised profits on the revaluation
of investments
1,2
3,926
(1,184)
2,742
3,769
(1,872)
1,897
Fair value movements on investment
entity subsidiaries
1
–
861
861
–
2,112
2,112
Portfolio income
Dividends
1,2
499
(136)
363
416
(187)
229
Interest income from investment portfolio
1,2
91
(62)
29
91
(62)
29
Fees receivable
1,2
1
2
3
7
3
10
Foreign exchange on investments
1,3
(461)
223
(238)
530
(327)
203
Movement in the fair value of derivatives
116
–
116
122
–
122
Gross investment return
4,168
(291)
3,877
5,104
(438)
4,666
Fees receivable from external funds
72
–
72
70
–
70
Operating expenses
4
(147)
1
(146)
(138)
1
(137)
Interest receivable
1
13
(4)
9
4
–
4
Interest payable
(61)
–
(61)
(54)
–
(54)
Exchange movements
1,3
29
23
52
(29)
23
(6)
Income from investment entity subsidiaries
1
–
21
21
–
30
30
Other income/(expense)
3
–
3
(1)
–
(1)
Operating profit before carried interest
4,077
(250)
3,827
4,956
(384)
4,572
Carried interest
Carried interest and performance fees receivable
1,4
62
–
62
41
–
41
Carried interest and performance fees payable
1,4
(305)
254
(51)
(418)
380
(38)
Operating profit before tax
3,834
4
3,838
4,579
(4)
4,575
Tax charge
1,4
(2)
–
(2)
(2)
–
(2)
Profit for the year
3,832
4
3,836
4,577
(4)
4,573
Other comprehensive income
Exchange differences on translation
of foreign operations
1,3
–
(4)
(4)
–
4
4
Re-measurements of defined benefit plans
7
–
7
8
–
8
Other comprehensive income for the year
7
(4)
3
8
4
12
Total comprehensive income
for the year (“Total return”)
3,839
–
3,839
4,585
–
4,585
The IFRS basis is audited and the Investment basis is unaudited.
Notes to the Reconciliation of consolidated statement of comprehensive income above:
1 Applying IFRS 10 to the Consolidated statement of comprehensive income consolidates the line items of a number of previously consolidated subsidiaries into a single line item “Fair value movements on investment entity
subsidiaries”. In the “Investment basis” accounts we have disaggregated these line items to analyse our total return as if these Investment entity subsidiaries were fully consolidated, consistent with prior years. The adjustments
simply reclassify the Consolidated statement of comprehensive income of the Group, and the total return is equal under the Investment basis and the IFRS basis.
2 Realised profits, unrealised profits and portfolio income shown in the IFRS accounts only relate to portfolio companies that are held directly by 3i Group plc and not those portfolio companies held through Investment entity
subsidiaries. Realised profits, unrealised profits and portfolio income in relation to portfolio companies held through Investment entity subsidiaries are aggregated into the single “Fair value movement on investment entity
subsidiaries” line. This is the most significant reduction of information in our IFRS accounts.
3 Foreign exchange movements have been reclassified under the Investment basis as foreign currency asset and liability movements. Movements within the Investment entity subsidiaries are included within “Fair value movements
on investment entities”.
4 Other items also aggregated into the “Fair value movements on investment entity subsidiaries” line include fees receivable from external funds, audit fees, administration expenses, carried interest and tax.
Notes to the Reconciliation of consolidated statement of financial position on page 77:
1 Applying IFRS 10 to the Consolidated statement of financial position aggregates the line items into the single line item “Investments in investment entity subsidiaries”. In the Investment basis we have disaggregated these items
to analyse our net assets as if the Investment entity subsidiaries were consolidated. The adjustment reclassifies items in the Consolidated statement of financial position. There is no change to the net assets, although for reasons
explained below, gross assets and gross liabilities are different. The disclosure relating to portfolio companies is significantly reduced by the aggregation, as the fair value of all investments held by Investment entity subsidiaries
is aggregated into the “Investments in investment entity subsidiaries” line. We have disaggregated this fair value and disclosed the underlying portfolio holding in the relevant line item, ie, quoted investments or unquoted
investments. Other items which may be aggregated include carried interest, other assets and other payables, and the Investment basis presentation again disaggregates these items.
2 Intercompany balances between Investment entity subsidiaries and trading subsidiaries also impact the transparency of our results under the IFRS basis. If an Investment entity subsidiary has an intercompany balance with a
consolidated trading subsidiary of the Group, then the asset or liability of the Investment entity subsidiary will be aggregated into its fair value, while the asset or liability of the consolidated trading subsidiary will be disclosed
as an asset or liability in the Consolidated statement of financial position for the Group.
3 Investment basis financial statements are prepared for performance measurement and therefore reserves are not analysed separately under this basis.
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3i Group plc | Annual report and accounts 2024
76
Reconciliation of consolidated statement of financial position
as at 31 March
Notes
Investment
basis
2024
£m
IFRS
adjustments
2024
£m
IFRS basis
2024
£m
Investment
basis
2023
£m
IFRS
adjustments
2023
£m
IFRS basis
2023
£m
Assets
Non-current assets
Investments
Quoted investments
1
946
(67)
879
962
(121)
841
Unquoted investments
1
20,690
(6,497)
14,193
17,426
(8,749)
8,677
Investments in investment entity subsidiaries
1,2
–
5,804
5,804
–
7,844
7,844
Investment portfolio
21,636
(760)
20,876
18,388
(1,026)
17,362
Carried interest and performance fees
receivable
1
2
1
3
3
–
3
Other non-current assets
1
36
(8)
28
33
(3)
30
Intangible assets
4
–
4
5
–
5
Retirement benefit surplus
61
–
61
53
–
53
Property, plant and equipment
4
–
4
3
–
3
Right of use asset
49
–
49
9
–
9
Derivative financial instruments
83
–
83
73
–
73
Total non-current assets
21,875
(767)
21,108
18,567
(1,029)
17,538
Current assets
Carried interest and performance fees
receivable
1
45
–
45
40
–
40
Other current assets
1
53
(6)
47
41
(11)
30
Current income taxes
1
–
1
1
–
1
Derivative financial instruments
82
–
82
48
–
48
Cash and cash equivalents
1
396
(38)
358
412
(250)
162
Total current assets
577
(44)
533
542
(261)
281
Total assets
22,452
(811)
21,641
19,109
(1,290)
17,819
Liabilities
Non-current liabilities
Trade and other payables
1
(50)
45
(5)
(11)
7
(4)
Carried interest and performance fees payable
1
(280)
250
(30)
(1,049)
1,006
(43)
Loans and borrowings
(1,202)
–
(1,202)
(775)
–
(775)
Derivative financial instruments
–
–
–
(3)
–
(3)
Retirement benefit deficit
(21)
–
(21)
(20)
–
(20)
Lease liability
(45)
–
(45)
(5)
–
(5)
Deferred income taxes
(1)
–
(1)
(1)
–
(1)
Provisions
(2)
–
(2)
(4)
–
(4)
Total non-current liabilities
(1,601)
295
(1,306)
(1,868)
1,013
(855)
Current liabilities
Trade and other payables
1
(136)
2
(134)
(85)
9
(76)
Carried interest and performance fees payable
1
(538)
514
(24)
(302)
268
(34)
Derivative financial instruments
–
–
–
(1)
–
(1)
Lease liability
(4)
–
(4)
(5)
–
(5)
Current income taxes
(3)
–
(3)
(4)
–
(4)
Total current liabilities
(681)
516
(165)
(397)
277
(120)
Total liabilities
(2,282)
811
(1,471)
(2,265)
1,290
(975)
Net assets
20,170
–
20,170
16,844
–
16,844
Equity
Issued capital
719
–
719
719
–
719
Share premium
791
–
791
790
–
790
Other reserves
3
18,752
–
18,752
15,443
–
15,443
Own shares
(92)
–
(92)
(108)
–
(108)
Total equity
20,170
–
20,170
16,844
–
16,844
The IFRS basis is audited and the Investment basis is unaudited.
Notes: see page 76.
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3i Group plc | Annual report and accounts 2024
77
Reconciliation of consolidated cash flow statement
for the year to 31 March
Notes
Investment
basis
2024
£m
IFRS
adjustments
2024
£m
IFRS basis
2024
£m
Investment
basis
2023
£m
IFRS
adjustments
2023
£m
IFRS basis
2023
£m
Cash flow from operating activities
Purchase of investments
1
(603)
97
(506)
(330)
284
(46)
Proceeds from investments
1
883
(340)
543
885
(658)
227
Amounts paid to investment entity subsidiaries
1
–
(674)
(674)
–
(535)
(535)
Amounts received from investment entity
subsidiaries
1
–
580
580
–
841
841
Net cash flow from derivatives
69
–
69
23
–
23
Portfolio interest received
1
8
(3)
5
19
(7)
12
Portfolio dividends received
1
500
(134)
366
406
(183)
223
Portfolio fees received
1
12
–
12
5
–
5
Fees received from external funds
74
–
74
67
–
67
Carried interest and performance fees received
1
58
–
58
58
–
58
Carried interest and performance fees paid
1
(778)
725
(53)
(51)
22
(29)
Operating expenses paid
1
(121)
–
(121)
(128)
–
(128)
Co-investment loans received
1
42
(37)
5
3
2
5
Tax paid
1
(3)
–
(3)
–
–
–
Other cash income
1
3
(1)
2
–
–
–
Interest received
1
13
(4)
9
4
–
4
Net cash flow from operating activities
157
209
366
961
(234)
727
Cash flow from financing activities
Issue of shares
1
–
1
1
–
1
Purchase of own shares
–
–
–
(30)
–
(30)
Dividends paid
(541)
–
(541)
(485)
–
(485)
Repayment of long-term borrowing
–
–
–
(200)
–
(200)
Proceeds from long-term borrowing
422
–
422
–
–
–
Lease payments
(6)
–
(6)
(5)
–
(5)
Interest paid
(40)
–
(40)
(54)
–
(54)
Net cash flow from financing activities
(164)
–
(164)
(773)
–
(773)
Cash flow from investing activities
Purchase of property, plant and equipment
(3)
–
(3)
(1)
–
(1)
Net cash flow from investing activities
(3)
–
(3)
(1)
–
(1)
Change in cash and cash equivalents
2
(10)
209
199
187
(234)
(47)
Cash and cash equivalents at the start of year
2
412
(250)
162
229
(17)
212
Effect of exchange rate fluctuations
1
(6)
3
(3)
(4)
1
(3)
Cash and cash equivalents at the end of year
2
396
(38)
358
412
(250)
162
The IFRS basis is audited and the Investment basis is unaudited.
Notes to the Reconciliation of consolidated cash flow statement above:
1 The Consolidated cash flow statement is impacted by the application of IFRS 10 as cash flows to and from Investment entity subsidiaries are disclosed, rather than the cash flows to and from the underlying portfolio. Therefore
in our Investment basis financial statements, we have disclosed our cash flow statement on a “look through” basis, in order to reflect the underlying sources and uses of cash flows and disclose the underlying investment activity.
2 There is a difference between the change in cash and cash equivalents of the Investment basis financial statements and the IFRS financial statements because there are cash balances held in Investment entity subsidiaries.
Cash held within Investment entity subsidiaries will not be shown in the IFRS statements but will be seen in the Investment basis statements.
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78
We assess our performance using a variety of measures that are not specifically defined under IFRS and are therefore termed APMs. The APMs
that we use may not be directly comparable with those used by other companies. Our Investment basis is itself an APM. The explanation of
and rationale for the Investment basis and its reconciliation to IFRS is provided on page 75. The table below defines our additional APMs.
Gross investment return as a percentage of opening portfolio value
Purpose
A measure of the performance
of our proprietary investment
portfolio.
Calculation
It is calculated as the gross investment
return, as shown in the Investment basis
Consolidated statement of comprehensive
income, as a % of the opening portfolio
value.
Reconciliation to IFRS
The equivalent balances under IFRS and the
reconciliation to the Investment basis are shown
in the Reconciliation of the consolidated statement
of comprehensive income and the Reconciliation
of the consolidated statement of financial
position respectively.
Page 18
KPIs
Cash realisations
Purpose
Cash proceeds from our
investments support our returns to
shareholders, as well as our ability
to invest in new opportunities.
Calculation
The cash received from the disposal
of investments in the year as shown
in the Investment basis Consolidated
cash flow statement.
Reconciliation to IFRS
The equivalent balance under IFRS and the
reconciliation to the Investment basis is shown in the
Reconciliation of the consolidated cash flow
statement.
Page 18
KPIs
Cash investment1
Purpose
Identifying new opportunities in
which to invest proprietary capital
is the primary driver of the Group’s
ability to deliver attractive returns.
Calculation
The cash paid to acquire investments
in the year as shown on the Investment
basis Consolidated cash flow statement.
Reconciliation to IFRS
The equivalent balance under IFRS and the
reconciliation to the Investment basis is shown in
the Reconciliation of the consolidated cash flow
statement.
Page 18
KPIs
Operating cash profit
Purpose
By covering the cash cost of
running the business with cash
income, we reduce the potential
dilution of capital returns.
Calculation
The cash income from the portfolio
(interest, dividends and fees) together
with fees received from external funds less
cash operating expenses and leases
payments as shown on the Investment
basis Consolidated cash flow statement.
The calculation is shown in Table 11
of the Financial review.
Reconciliation to IFRS
The equivalent balance under IFRS and the
reconciliation to the Investment basis is shown
in the Reconciliation of the consolidated cash flow
statement.
Page 18
KPIs
Net (debt)/cash
Purpose
A measure of the available cash
to invest in the business and
an indicator of the financial risk
in the Group’s balance sheet.
Calculation
Cash and cash equivalents plus deposits
less loans and borrowings as shown
on the Investment basis Consolidated
statement of financial position.
Reconciliation to IFRS
The equivalent balance under IFRS and the
reconciliation to the Investment basis is shown
in the Reconciliation of the consolidated statement
of financial position.
Gearing
Purpose
A measure of the financial risk
in the Group’s balance sheet.
Calculation
Net debt (as defined above) as a % of the
Group’s net assets under the Investment
basis. It cannot be less than zero.
Reconciliation to IFRS
The equivalent balance under IFRS and the reconciliation
to the Investment basis is shown in the Reconciliation
of the consolidated statement of financial position.
1
Cash investment of £593 million is different to cash investment per the cash flow of £603 million due to a £10 million investment in Private Equity which was recognised in FY2023 and paid in FY2024.
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3i Group plc | Annual report and accounts 2024
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Effective risk management underpins
the successful delivery of our strategy
and longer-term sustainability of the business.
Our values and culture are integral to our
approach to risk management.
Understanding our risk appetite
As both an investor and asset manager, 3i is in the business of taking
risks in order to seek to achieve its targeted returns for shareholders
and other investors.
The Board approves the strategic objectives that determine the level
and types of risk that 3i is prepared to accept. The Board reviews 3i’s
strategic objectives and associated risk appetite at least annually.
The Group’s risk management framework is designed to support the
delivery of the Group’s strategic objectives and the longer-term
sustainability of the business and its investment portfolio, within the
agreed risk appetite parameters.
3i’s Risk appetite statement, which is consistent with previous years,
is built on rigorous and comprehensive investment procedures
and conservative capital management. Please refer to page 81
for further details.
Values and culture
Strong values and institutional culture are integral to our approach to
risk management and are embedded in 3i’s approach to risk
governance, described in the next section, led by the Board and the
Chief Executive. To underpin this, 3i has in place a comprehensive
compliance manual, code of conduct and policy framework,
supported by a systematic programme of refresher training and
independent monitoring.
Members of the Executive Committee are responsible for ensuring
individual behaviours meet the Group’s high standards of conduct
across their respective business or functional areas. All employees
share the responsibility for upholding 3i’s strong control culture and
supporting effective risk management. Senior managers, typically
those who report to Executive Committee members, are required to
confirm their individual and business area compliance annually. In
addition, all staff are required to comply with regulatory conduct
rules, complete an annual verification questionnaire, and are
assessed on how they demonstrate 3i’s values as part of their annual
appraisal. 3i’s global policies and procedures are reinforced through
an annual e-learning programme covering topics such as financial
crime, anti-bribery and money laundering, market abuse and
regulatory conduct rules.
Finally, the Remuneration Committee is responsible for ensuring the
Group’s remuneration policy is aligned with the Group’s culture and
values, weighted towards variable compensation dependent
on performance, and does not encourage inappropriate or excessive
risk taking. More specifically, our investment teams, who are
responsible for investment origination and asset management, have
reward structures specifically designed to ensure alignment with
the Group’s investment objectives and risk management appetite.
Approach to risk governance
The Board is responsible for risk assessment, the risk management
process and the protection of the Group’s reputation, brand integrity
and longer-term sustainability. It considers the most significant
current and emerging risks facing the Group using a range of
quantitative data and analyses where possible. These include: vintage
controls which consider the portfolio concentration by geography
and sector; periodic reporting of financial and non-financial KPIs from
the portfolio, including leverage levels and ESG indicators; and
liquidity reporting. Longer-term and new and emerging risks are
evaluated as part of the strategic review process and development of
the Group’s investment strategy.
Board oversight is exercised through the Audit and Compliance
Committee which focuses on: upholding standards of integrity;
financial and non-financial reporting; risk management; going
concern and resilience; and internal control. This includes monitoring
and reviewing the effectiveness of the risk management and internal
control systems. The Audit and Compliance Committee’s activities
are discussed further in its report on pages 122 to 127.
The Investment Committee oversees the investment pipeline
development and approves new investments, significant portfolio
changes and divestments. It is integral to ensuring a consistent
approach to managing the Group’s most material risks. This includes
alignment with 3i’s financial and strategic objectives and risk appetite,
and ensuring that the long-term sustainability of portfolio companies
is taken into consideration.
The Board has delegated the responsibility for risk oversight to the
Chief Executive. He is assisted by the Group Risk Committee (“GRC”)
in managing this responsibility, and is guided by the Board’s appetite
for risk and any specific limits set. The GRC maintains the Group risk
review, which summarises the Group’s principal risks, associated
mitigating actions and key risk indicators, and identifies any changes
to the Group’s risk profile. The review also incorporates a watch list
of new and emerging risks for monitoring and risk mitigation
purposes. The risk review takes place four times a year, with the last
review in April 2024, and the Chief Executive provides updates after
each meeting to the Audit and Compliance Committee.
Please refer to pages 82 to 84 for further details on the Group’s risk
governance framework.
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Risk appetite
Our risk appetite is defined by our strategic
objectives. We invest capital in businesses
to deliver capital returns, and portfolio and
fund management cash income to cover our
costs and increase returns to our investors.
As proprietary capital investors we have
a long-term, responsible approach.
Investment risk
The substantial majority of the Group’s capital is invested in
Private Equity. Before the Group commits to a Private Equity
investment, we assess the opportunity using the following
criteria:
• return objective: individually assessed and subject to a
minimum target of a 2x money multiple over four to six years;
• geographic focus: headquartered in our core markets of
Europe and North America;
• sector expertise: focus on Consumer, Healthcare, Industrial
Technology, Services and Software;
• responsible investment: all investments are screened against
the criteria and exclusions set out in our Responsible
Investment policy; and
• vintage: invest up to £750 million per annum in four to seven
new investments in companies with an enterprise value range
of €100 million to €500 million at investment.
Investments made by 3iN need to be consistent with 3iN’s overall
return target of 8% to 10% over the medium term and generate a
mix of capital and income returns. Other Infrastructure
investments made by the Group should be capable of delivering
capital growth and fund management fees which together
generate mid-teen returns. All Infrastructure investments are also
made subject to the criteria set out in the Group’s Responsible
Investment policy.
On occasion, the Group may conclude that it is in the interest of
shareholders, and consistent with our strategic objectives, to
hold a Private Equity investment for a longer period.
Capital management
3i adopts a conservative approach to managing its capital
resources as follows:
• the Group aims to operate within a range of £500 million net
cash to £1 billion net debt, with tolerance to operate outside of
this range on a short-term basis and up to a gearing level of
15% dependent on investment and realisation flows. The
Group may raise debt, or use other financing from time to
time, to manage investment and realisation flows. The Group
has no appetite for structural gearing; the achievement of its
returns objectives is not reliant on gearing;
• the Group manages liquidity conservatively; maintaining a RCF
to provide additional committed liquidity and financial
flexibility, and monitoring using a framework that assesses
forecast cash flows and a broader range of factors;
• the Group accepts a degree of currency exposure risk with
respect to its investment portfolio, but aims to partially reduce
the impact of currency movements on its net asset value
through a combination of matching currency realisations with
investments and the use of its euro and US dollar foreign
exchange hedging programmes, taking into account the
associated costs and liquidity risks. These portfolio hedging
programmes have a total size of €2.0 billion and $1.2 billion
respectively;
• in addition, the Group may hedge specific assets or exposures
where appropriate; for example, in relation to currency
exposures on longer-term investments, such as Scandlines
(€600 million hedging programme); and
• we have limited appetite for the dilution of capital returns
as a result of operating and interest expenses. All our business
lines generate cash income to mitigate this risk.
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Role of the Investment Committee
Our Investment Committee is fundamental to the management of
investment risk. It is involved in and approves every material step of
the investment, portfolio management and realisation process.
3i’s approach to portfolio construction is built on originating
opportunities thematically and investing selectively in businesses that
benefit from long-term structural sustainable growth. Integral to this
thematic approach is the identification of new and emerging risks
and opportunities, in areas such as: consumer preferences; the
environment and sustainability; technological change; and
demographic and social trends.
New investment opportunities are considered at the outset of the
investment process. Investment proposals cover the expected
benefit of operational improvements, growth initiatives, ESG
initiatives, and M&A activity, that will be driven by a combination of
our investment professionals and the portfolio company’s
management team. They will also include a view on the likely exit
strategy and timing. All proposed investments are screened against
3i’s Responsible Investment policy.
In evaluating new and existing investments, the Investment
Committee considers potential reputational risks and broader ESG
developments and trends. The latter includes the risks and
opportunities in relation to the environmental and social aspects of
each company’s products and services, the markets in which they
operate, and the supply chain. Investment cases may include
consideration of the feasibility and cost of initiatives to reduce
the company’s environmental footprint, where material.
After investing, 3i works with portfolio companies’ management to
manage risks and invest in initiatives that support sustainable long-
term growth, whilst closely monitoring each investment case:
• our monthly portfolio monitoring reviews assess current
performance against budget, prior year and a set of traffic light
indicators and bespoke, forward-looking financial and non-financial
KPIs;
• we hold semi-annual in-depth reviews of our portfolio companies.
These focus on the longer-term performance and plan for the
investment compared to the original investment case, together
with any strategic developments, a detailed assessment of ESG
risks and opportunities, and market outlook; and
• where necessary, additional reviews may take place for assets
where there are more significant operational challenges. As part
of this process, leverage, banking covenants and counterparty risks
are closely monitored across the portfolio.
Our monitoring processes consider instances where individual
portfolio company underperformance could have adverse
reputational consequences for the Group, even though the value
impact may not be material.
The monthly portfolio monitoring reviews and the semi-annual
reviews are attended by the Investment Committee and the senior
members of the investment teams. A number of non-executive
Directors attend the semi-annual reviews.
Finally, we recognise the need to plan and execute a successful
exit at the optimum time, taking consideration of market conditions.
This exit risk is closely linked to the external economic environment.
Exit plans are refreshed where appropriate in the semi-annual
portfolio reviews and the divestment process is clearly defined
and overseen by the Investment Committee.
We regularly review our internal processes and investment decisions
in light of actual outcomes. This includes periodic back-testing of the
more recent Private Equity investments by comparing their
performance and forecast returns on exit against the original
investment case presented at the time of the investment.
Role of the Group Risk Committee
The quarterly Group risk review process includes an analysis of key
developments since its last review; new and emerging risks; and the
key strategic and financial metrics (such as KPIs) considered to be
indicators of potential changes in the Group’s risk profile. The GRC
uses this information to determine and review its principal risks and
the implications of any new and emerging risks.
It then evaluates the impact and likelihood of each principal risk in
the context of the Group’s strategic objectives, risk appetite and with
reference to associated measures and KPIs. The adequacy of the
mitigation plans is then assessed and, if necessary, additional actions
are agreed and reviewed at the subsequent meeting. A report
summarising the key conclusions of each GRC meeting together with
a copy of the risk review report is provided to the Audit and
Compliance Committee, which provides independent oversight of
the work of the GRC, as described on pages 122 to 127.
Overview
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3i Group plc | Annual report and accounts 2024
82
A number of focus topics are also agreed in advance of each
meeting. In FY2024, the GRC covered the following:
• a review of the Group’s IT framework including cyber security,
systems developments, the use of Artificial Intelligence tools, and
IT resilience;
• an update on the Group’s business continuity and resilience
planning and testing, including oversight of third-party suppliers;
• a review of the Group’s stress tests to support its Going concern,
Viability and Resilience statements;
• semi-annual updates from the investment business lines on ESG
issues and themes with respect to the Group’s portfolio
companies, including progress with carbon reporting;
• semi-annual updates from 3i’s ESG Committee, including progress
with TCFD-aligned reporting; and
• the proposed risk disclosures in the FY2024 Annual report
and accounts.
There were no significant changes to the GRC’s overall approach
to risk governance or its operation in FY2024. This approach is
benchmarked from time to time against a peer group of private
equity investment trusts, European investment companies, traditional
asset managers and a selection of US alternative asset managers to
ensure it remains fit for purpose.
The GRC also receives an update on the Group’s risk log which is
used to record operational risk incidents and “near misses”. The
Board and Executive Committee have a very limited tolerance for
operational risk events and errors. Accordingly, a relatively low
reporting threshold is applied. This involves both a qualitative and
quantitative impact assessment; any financial losses or exposures
greater than £20,000 must be reported.
The risk log is also used to record incidents at portfolio companies
which could impact 3i’s reputation as an investor or where 3i may
have regulatory reporting obligations. Examples include fraud, cyber
security, data protection, health and safety, and litigation. The
responsible 3i investment team is required to set out the risk
mitigation steps being undertaken and provide updates on progress.
Role of the ESG Committee
The Group’s ESG Committee provides input and advice on
developing the Group’s ESG strategy; the assessment and
management of relevant ESG risk and opportunities; ESG related
regulatory and reporting obligations; and coordination of ESG-
related activities and initiatives.
The GRC receives semi-annual updates on the work of the
Committee as part of its risk review process. Refer to the
Sustainability section on pages 39 to 68 for further details.
Related risk management activities
3i’s risk management framework is augmented by a separate Risk
Management function (“function”) which has specific responsibilities
under the FCA’s Investment Funds sourcebook and is functionally
and hierarchically separate from the investment teams. It considers
the separate risk reports for each Alternative Investment Fund (“AIF”)
managed by the Group, including areas such as portfolio
composition, portfolio valuation, operational updates and team
changes, which are then considered by the GRC. The function meets
ahead of the GRC meetings to consider the AIF risk reports, and also
to discuss any key developments that might impact the principal risks
affecting the Group.
In practice, the Group operates a “three lines of defence” framework
to support the identification and management of risk. These are:
(1) First line – line management across our business lines and
professional services teams.
(2) Second line – teams with specific oversight and control
responsibilities – for example, Compliance, HR, Finance and IT –
and oversight and challenge by the GRC.
(3) Third line – Internal Audit, which provides independent assurance
over the operation of the Group’s risk management framework
and the internal controls designed to manage and mitigate risk.
Our responsible investment policy
www.3i.com/sustainability/sustainability-policies
Pages 16-17
Our long-term, responsible approach
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3i’s approach to risk management consists of a number of interrelated processes, illustrated
below, the operation of which is overseen by a combination of the Investment Committee,
Executive Committee, Group Risk Committee and ESG Committee.
l Responsibility of Investment Committee
l Responsibility of Group Risk Committee
l Responsibility of ESG Committee
Six-monthly portfolio company
reviews and monthly updates
Valuation process
and monitoring
Oversight by Group
Risk Committee
Regular Board and Audit
and Compliance
Committee updates
Board review of business
line plans and Group
strategic model
Approval of strategic
objectives
Review of organisational
capability, diversity and
succession plans
Regular monitoring
of market, economic and
geopolitical developments
Analysis of technological,
societal and demographic
changes and trends
Setting of sustainability strategy
covering responsible investment,
people and corporate citizenship
Assessment of long-term sustainability,
ESG and reputational risk profile of
portfolio companies
Oversight of ESG regulatory
reporting requirements and
associated processes, eg TCFD
Our purpose
Attractive returns
Responsible approach
Driving sustainable growth
Investment Committee
operates investment strategy,
vintage control and asset
management
Board review of risk appetite
covering investment risk and
capital management
Setting of an appropriate conduct
and culture framework and policies
Alignment with
remuneration strategy
Treasury policy and control
framework, including oversight
of Treasury Transactions
Committee, as required
Group Risk Committee
review and monitoring of risk
mitigation plans
Assessment of principal,
new and emerging risks
Development and testing
of viability and going
concern scenarios
Page 80
Further details of the risk governance structure
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3i Group plc | Annual report and accounts 2024
84
Business and risk environment in FY2024
We define our principal risks as those that have the potential
to impact materially the delivery of our strategic objectives. During
the year, the Directors considered a robust assessment of the
principal and new and emerging risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity. Further details can be found in the Audit and
Compliance Committee report on pages 122 to 127.
This section provides an overview of the Group’s principal risks,
new and emerging risks, and the key matters considered during
the year as part of the risk assessment process.
The Group’s overall principal risk profile, summarised on on pages 89
to 93, has remained relatively stable although the precise nature of
the individual risks may have evolved. The main changes agreed by
the GRC during the year were:
• for the reasons noted opposite, “Geopolitical risks” have
increased; in particular, the potential impact of a wider conflict in
the Middle East;
• the likelihood and impact of the risk of “Volatility in capital markets,
foreign exchange and commodities” has reduced; however, this
could easily change given the current geopolitical backdrop;
• the risk of “Global economic uncertainty” is considered to be lower
compared to last year based on recent economic data and
forecasts, albeit this could be adversely affected by geopolitical
developments and other factors;
• the risk of “Lower investment or realisation rates” increased,
reflecting the low levels of deal activity and lack of liquidity in
private markets; and
• the risk of “Underperformance of portfolio companies” has been
split out to show Action separately from the remainder of the
investment portfolio in view of the materiality of the former.
The Group’s principal risk mitigation plans, which are subject to
regular review by the GRC, have not required any notable changes
during the year.
External
External risks are the risks to our business which are usually outside
of our direct control such as political, economic, environmental,
social, regulatory and competitor risks.
Geopolitical uncertainty has been a focal point of discussion for the
GRC over the past year. Of particular concern has been the potential
impact of the conflict in the Middle East and the risk of further
escalation or widening of the conflict with Russia. These conflicts have
the potential, inter alia, to increase market volatility and disrupt
supply chains, which could affect the operations of some of 3i’s
portfolio companies and impact 3i’s investment and realisation plans.
The period has been characterised by continued inflation, high
interest rates and slow economic growth. More recently, the global
economic outlook has improved, with evidence of falling inflation and
the expectation that interest rates may have peaked. There are still,
however, areas of continued weakness and considerable
uncertainties given the current geopolitical backdrop. The number of
key elections taking place in 2024 may also result in policy changes,
which could add further uncertainty in due course.
The main focus of the GRC has been on understanding how these
changes potentially play out across the different geographies and
sectors in which 3i’s portfolio companies operate, supply chain risks,
and the impact on deal activity. Measures and initiatives put in place
some time ago have enabled portfolio companies to manage their
performance through various economic headwinds. This is reflected
in the continued positive momentum in the overall portfolio
performance across both business lines; in particular, investments in
the areas of value-for-money, private label, healthcare and
infrastructure.
The Group’s resilience assessment and viability testing covers
a range of stress test scenarios including a number of severe
yet plausible external events linked back to the Group’s principal
risks. Further details can be found in the Group’s Resilience
statement on pages 128 to 130. As part of its overall resilience
planning, 3i continues to maintain a conservative approach to
managing its capital resources and costs.
ESG considerations are an important component of our strategic and
investment objectives and approach to risk management. Further
information on work done in relation to ESG reporting and
compliance obligations, including TCFD-aligned reporting, and our
approach to climate-related risk and opportunities can be found in
the Sustainability section on pages 39 to 68.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Principal risks and mitigations –
aligning risk to our strategic objectives
3i Group plc | Annual report and accounts 2024
85
Investment
The Investment Committee is responsible for managing the Group’s
investment risks. The focus of the quarterly GRC meetings is on 3i’s
investment outcomes in the context of the Group’s risk appetite,
overall risk profile and potential risks to the achievement of its
strategic objectives.
The core areas of the Group’s investment strategy and focus remain
unchanged, although delivery of these continues to be refined in
terms of approach, resourcing and processes. The underlying views
on key long-term risks and trends remains consistent with last year.
During the year, the GRC discussed the lack of liquidity and low levels
of deal activity in private markets and the factors contributing to this,
including higher interest rates and unrealistic price expectations on
the part of sellers. This has impacted new investment levels; however,
a very selective and disciplined approach to investment remains
appropriate in the current market.
The risk of “Underperformance of portfolio companies” was split out
to show Action separately from the remainder of the investment
portfolio in view of the materiality and strong, cash generative
characteristics of the former. The GRC concluded that the
performance risk assessment for the portfolio excluding Action, has
been stable over the period, reflecting a resilient performance by the
majority of the portfolio, partly offset by a mixed performance by a
minority of companies in more challenged sectors.
Notwithstanding the challenging external environment described
previously, portfolio performance continues to benefit from: a
combination of the diversity and structure of the portfolio; a
disciplined approach to investment and exit planning; and mitigating
steps taken to address cost pressures and weaker consumer demand
where there is a particular exposure.
Our investment and portfolio monitoring processes continue to
evolve in response to new and evolving risks. 3i has recently updated
its Responsible Investment policy. ESG due diligence on new
investments is shifting from broader screening to a more targeted, in-
depth assessment process, together with enhanced standards and a
clearer ESG maturity roadmap to support portfolio companies.
The GRC receives updates on the work of the ESG Committee and
progress with ESG initiatives across the portfolio. Good progress has
been made in advancing the ESG maturity of the portfolio and
improving carbon measurement and reporting capabilities. This
includes the roll-out of a new ESG data collection tool for the
portfolio, which will support improved ESG reporting and monitoring.
Operational
3i’s operational risk profile has remained stable over the year.
Attracting and retaining key people remains a principal risk and
significant operational priority. Whilst competition in the recruitment
market has eased compared to last year, our overall risk assessment
is unchanged.
During the year, the Group experienced modest levels of voluntary
staff turnover; 6.0% in FY2024. This reflects 3i’s strong performance
and helps to underpin the longer-term resilience of the business.
Our Remuneration Committee ensures that our variable
compensation schemes are in line with market practice and
consistent with sound risk management. These schemes include
carried interest for investment executives, an important long-term
incentive, which rewards cash-to-cash returns.
The effective on-boarding and integration of new hires remains a
priority and is an important part of maintaining a cohesive Group
culture and good control mindset.
Detailed succession plans are in place for each business area.
The Board completed its last formal annual review of the Group’s
organisational capability and succession plans in September 2023.
The GRC also receives updates on IT security and operational
resilience. 3i has continued to operate robust and secure IT systems
supported by key third-party service providers. There were no
significant IT performance or security issues in the period. 3i
continues to review and refresh its IT systems, device strategy, and
cyber security framework. 3i engages the services of a leading cyber
security services company, including a part-time Chief Information
Security Officer, which provides ready access to intelligence and
expert advice on new and emerging cyber security threats.
Overview
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Principal risks and mitigations – aligning risk to our strategic objectives continued
3i Group plc | Annual report and accounts 2024
86
Incident management and business continuity plans are reviewed
at least annually. This includes consideration of a broad range
of “severe but plausible” business disruption scenarios and
incorporates an assessment of third-party supplier risks.
Fraud risk is considered on a regular basis. 3i has a robust fraud risk
assessment and anti-fraud programme in place. The latter includes
fraud prevention work by Internal Audit, awareness training and
provision of an independent reporting service or “hotline” accessible
by all staff. The Group’s cyber security programme also aims to
identify and mitigate the risks of third-party frauds, for example,
ransomware and phishing attacks, through the use of IT security
tools and regular staff training.
Capital management
3i continues to maintain a conservative approach to managing its
capital resources and has operated within the limits set out in its Risk
appetite statement on page 81 and in accordance with the Treasury
policy approved by the Board. The latter includes a detailed liquidity
and currency exposure risk monitoring and reporting framework,
incorporating a range of quantitative and qualitative measures and
associated risk tolerance levels.
Accordingly, there are currently no principal risks in relation to capital
management.
New and emerging risks
The key elements to 3i’s approach to identifying and monitoring new
and emerging risks include the following:
• a thematic approach to investment origination and portfolio
construction, which involves consideration of emerging risks
and trends that can support long-term sustainable growth in the
portfolio;
• the quarterly review by the GRC of significant developments which
could potentially impact the Group’s risk profile and the
achievement of its strategic objectives;
• maintenance of a watch list of risks which are deemed of sufficient
importance to require active monitoring by the GRC, but are not
currently regarded as risks to the achievement of the Group’s
strategic objectives; and
• monitoring of developments by 3i’s professional service teams,
covering their respective specialist areas such as tax, legal and
regulatory compliance, and ESG.
3i’s thematic approach to investment origination and portfolio
construction is developed based on an analysis of new and emerging
risks and trends over a longer time horizon. The current themes
(pages 12 and 13) include: value-for-money and discount; energy
transition, energy security and resource scarcity; digitalisation, digital
transformation and big data; and demographic and social change.
This approach enables 3i to adapt its investment strategy in a way
which manages longer-term risks whilst taking advantage of the
upside opportunities.
The Board carries out an in-depth annual strategic review which
includes an update and discussion on current and emerging risks and
the Group’s risk appetite. The outputs are linked back to the work of
the GRC and the Investment Committee, the latter being responsible
for the execution of the investment strategy, including the
assessment and management of risks over the investment lifecycle.
The outputs also form part of our medium-term viability stress testing
and long-term business resilience assessment (pages 128 to 130).
New and emerging ESG risks are factored into the development of
3i’s investment themes. In addition, changes in legislation and
reporting requirements are closely monitored. Investment
opportunities are screened at an early stage against 3i’s Responsible
Investment policy to filter out any which are exposed to excessive
risks. Once invested, we monitor ESG risks closely and use our
influence to support our portfolio companies across a range of ESG-
related areas, including improvements in risk management processes;
addressing emerging regulations and legislation; and encouraging
the development of more environmentally sustainable behaviours. 3i
also has the flexibility to sell investments that become or have the
potential to become overly exposed to ESG risks. Further information
can be found in the Sustainability section on pages 39 to 68.
The quarterly GRC risk review considers any significant developments
which could impact the Group’s principal risks and the achievement
of its strategic objectives. The areas of risk considered include
external developments, investment outcomes, the Groups’ capital
management and operational risks. External developments typically
cover geopolitical developments, the economic outlook and market
performance. The focus is on near to medium-term emerging risks
and trends. Based on this analysis, the GRC reviews the need to
update principal risks and initiate or change the risk mitigation plan.
The Group’s current principal risks and risk mitigation plan are
summarised on pages 85 to 93.
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87
In addition to the review of principal risks, the GRC maintains a watch
list of risks which are deemed of sufficient importance to require
active monitoring by the GRC but are not currently regarded as risks
to the achievement of the Group’s strategic objectives. This includes
new and emerging risks. The watch list sets out details of how these
risks are being mitigated and any further actions agreed by the GRC.
Risks on the watch list may be reclassified as principal risks and vice
versa based on the GRC’s assessment.
During the year, the risk of the “Impact of Artificial Intelligence (AI)”
was added to the watch list. The risk mitigation steps taken included
the introduction of a specific Group AI policy and the formation of an
AI steering group to make recommendations on the selection,
assessment and deployment of AI tools and to promote training and
awareness.
The other risks on the watch list remain unchanged from last year.
These include:
• external environment – increased ESG reporting and compliance
obligations; reputational risks in relation to the private equity
industry; uncertainty regarding the impact of global and local tax
initiatives; UK/EU trading relationship; and the potential re-
emergence of a global pandemic;
• investment outcomes – portfolio concentration; and the impact of
AI; and
• operations – third-party supplier resilience; and cyber security.
The risk mitigation plans for risks on the watch list are reviewed
quarterly by the GRC. The main changes during the year were in
relation to AI, as outlined above, and the application of 3i’s supplier
relationship management toolkit, which was extended to include
more suppliers for ongoing assessment and tracking purposes as
part of improvements to 3i’s business resilience planning.
Outlook
The longer-term economic outlook continues to be affected by a
number of factors including price inflation; cost-of-living pressures;
higher interest rates; and geopolitical tensions. Whilst there have
been some positive economic indicators, our outlook remains
cautious in view of the number of potential downside factors which
could impact economic growth and market volatility.
3i’s business model, its disciplined approach to investment, active
portfolio management, and diverse investment portfolio have been
resilient to the challenges of the past year. This resilience has also
been confirmed in the results of the latest stress tests carried out as
part of our viability assessment.
3i continues to work closely with portfolio management teams to
support their respective business and contingency plans in response
to challenging economic and market conditions. Where appropriate,
enhanced portfolio monitoring and reporting processes may be put in
place to support portfolio companies through more difficult periods
and to identify possible further actions.
Although we did not make any new Private Equity investments in the
year, we have continued to grow portfolio value; for example,
through our buy-and-build strategy and increased equity stake in
Action. For further information, please refer to the Business review
section (pages 21 to 33). We have a clear and consistent strategy and
a disciplined approach to investment whilst looking to put more
capital behind those portfolio companies we already know well. We
expect competition for the best assets in our sectors to remain
intense and prices high. Accordingly, our focus remains on identifying
attractive and sensibly priced new investments, and value accretive
bolt-on acquisitions for our portfolio companies.
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3i Group plc | Annual report and accounts 2024
88
The disclosures on the following pages are not an exhaustive list of risks and uncertainties faced
by the Group, but rather a summary of the principal risks which are regularly reviewed by the
GRC and the Board, and have the potential to affect materially the achievement of the Group’s
strategic objectives and impact its financial performance, reputation and brand integrity.
Movements in risk status and link to strategic objectives
Risk exposure has increased
Grow investment
portfolio earnings
Realise investments with
good cash-to-cash returns
Maintain an
operating cash profit
No significant change in risk exposure
Use our strong
balance sheet
Increase shareholder
distributions
Risk exposure has decreased
External
Principal risk
Global economic uncertainty
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Impacts general market confidence
and risk appetite
• Higher risk of market volatility, price
shocks or a significant market
correction
• Potential for extended period of higher
inflation and interest rates
• Limits earnings growth or reduces
NAV owing to contraction of earnings
in our investments and/or changes
in multiples and discount rates used
for their valuation
• Increases liquidity or covenant risks
across the portfolio or limits ability
to refinance our investments
• Leads to reduced M&A volumes in
3i’s core markets, economic instability
and lower growth, which impacts
investment portfolio exit plans
and realisation levels
Risk management
and mitigation
• Regular portfolio company reviews
and Investment Committee focus on
investment strategy, exit processes
and refinancing strategies
• Monthly portfolio monitoring
to identify and address portfolio issues
promptly
• Monitoring of valuations and
application of the valuations policy by
the Valuations Committee
• Regular liquidity and currency
monitoring and strategic reviews
of the Group’s balance sheet
• Regular review of resourcing and key
man exposures as part of business line
reviews and the portfolio company
review process
• Overall shape and resilience of the
portfolio
FY2024 outcome
• Strong performance of Action
and overall resilient performance from
the remainder of the portfolio
• Overall increase in portfolio
valuation particularly in value-for-money
and private label consumer, healthcare
and infrastructure sectors
• Group GIR of 23%
• Low Group gearing of 4% and liquidity
of £1,296 million. Undrawn RCF
of £900 million
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3i Group plc | Annual report and accounts 2024
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External continued
Principal risk
Impact of higher interest rates on debt markets and pricing of specific assets
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Higher risk of market volatility, price
shocks or a significant market
correction
• Limits earnings growth or reduces
NAV owing to contraction of earnings
in our investments and/or changes
in multiples and discount rates used
for their valuation
• Increases liquidity or covenant risks
across the portfolio or limits ability
to refinance our investments
• Impacts market confidence and risk
appetite more generally
Risk management
and mitigation
• Regular portfolio company reviews
as well as Investment Committee focus
on investment strategy, exit processes
and refinancing strategies
• Monthly portfolio monitoring,
including financing arrangements,
to identify and address issues promptly
• Monitoring of valuations and
application of the valuations policy by
the Valuations Committee
• Regular liquidity, currency
and counterparty risk monitoring
and strategic reviews of the Group’s
balance sheet
FY2024 outcome
• Strong performance of Action
and resilient performance overall from
the remainder of the portfolio
• Overall increase in portfolio
valuation particularly in value-for-money
and private label consumer, healthcare
and infrastructure sectors
• Group GIR of 23%
• Low Group gearing of 4% and liquidity
of £1,296 million. Undrawn RCF
of £900 million
• Average leverage across the Private
Equity portfolio was 2.7x (31 March
2023: 2.5x)
• Over 70% of our Private Equity term
debt is hedged at a weighted average
tenor of more than three years. The
average all-in debt cost on the total
hedged term debt is less than 6.5%
Principal risk
Volatility in capital markets, foreign exchange and commodities
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• May impact portfolio company
valuations and realisation processes
• Increases risks with exit plans and bank
financing
• Potential for large equity market fall
to impact asset valuations
• Unhedged foreign exchange rate
movements impact total return
and NAV
Risk management
and mitigation
• Portfolio company reviews focus
on investment strategy, exit plans
and refinancing strategies
• Long-term approach to setting
valuation multiples
• Active management of exit strategies
by Investment Committee to enable
us to adapt to market conditions
• Regular liquidity and currency
monitoring, and strategic reviews
of the Group’s balance sheet
• Foreign exchange hedging
programmes and management of
investment and realisation currency
flows
FY2024 outcome
• Continuation of euro and US dollar
medium-term foreign exchange
hedging programme
• Foreign exchange exposures at the
portfolio company level monitored
and hedged where appropriate
• Strong portfolio performance,
demonstrating resilience, leading
to an increase in portfolio value
in the year
• At 31 March 2024, 75% of the
investment portfolio was denominated
in euros or US dollars. Sterling
strengthened by 3% against the euro
and 2% against the US dollar and
as a result, we generated a total foreign
exchange translation loss of £316
million (2023: £623 million gain) net of
derivatives in the year
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3i Group plc | Annual report and accounts 2024
90
External continued
Principal risk
Transaction execution challenges in current market
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Reduced investment rates in
Private Equity and Infrastructure
as a result of higher pricing or market
uncertainties
• Risk of wider outcomes on core
investment case assumptions,
impacting returns
• Market uncertainty may result in some
attractive investment opportunities
• Reduced level of realisations and
refinancing
Risk management
and mitigation
• Strong central oversight and
disciplined approach to investment
pipeline and pricing
• Active management of investments
and exit strategies by Investment
Committee
• 3i’s local teams and networks facilitate
the origination of off-market
transactions
FY2024 outcome
• Increased investment in Action and
Royal Sanders and completed seven
bolt-on acquisitions, with one requiring
3i proprietary capital investment
• Realised proceeds of £888 million
including £762 million proceeds
received from Action’s capital
restructuring
• In April 2024, we agreed the sale of
nexeye, generating expected exit
proceeds of c.€452 million
Principal risk
Geopolitical risks
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Indirect operational impact, eg third-
party suppliers or supply chain
disruption
• Impact of higher energy and
commodity prices, price shocks
and supply chain issues
• Increased transportation times
and costs
• Increased number and complexity
of sanctions
• Direct or indirect reputational risks,
eg exposures to Russia
• Impact on NAV through contraction
of Private Equity portfolio earnings
or changes in valuation multiples
• Reduced realisation potential,
impacting shareholder returns
Risk management
and mitigation
• Detailed scenario and contingency
planning at the portfolio company level
• Steps taken by portfolio companies to
manage through an extended period
of disruption
• Regular assessment of portfolio
company operations and performance
• Sanctions policy and monitoring
• Long-term approach to valuation
multiples
FY2024 outcome
• Contingency plans in place to address
key risks and subject to review as part
of the portfolio company review
process
• Continued monitoring of headwinds
faced from international conflict
• Supply side constraints and price
inflation continue to be closely
managed and monitored across
the portfolio
Investment
Principal risk
Lower investment or realisation rates
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• May impact longer-term returns
and capital management and therefore
ability to deliver strategic plan
• May impact progress with specific
strategic initiatives
• May reduce staff morale and
confidence
• Cost base may not be sustainable
• May impact Group’s reputation as an
investor of proprietary capital and as
a manager of 3iN and other funds
• Increases the importance of the role
of bolt-on acquisition opportunities
Risk management
and mitigation
• Regular monitoring of investment
and divestment pipeline
• Early involvement of Investment
Committee as new investment ideas
are identified
• Disciplined approach to sourcing
investment opportunities and pricing
• Regular review of asset allocation
• Focus on bolt-on acquisition
opportunities, which can be more
attractively priced and offer synergy
benefits
FY2024 outcome
• Increased investment in Action and
Royal Sanders and completed seven
bolt-on acquisitions in Private Equity,
with one requiring 3i proprietary capital
investment
• Investment Committee maintained
a cautious stance, declining a number
of investment proposals where price
and risk and reward failed to meet
Group requirements
• In early May 2024, we agreed to invest
c.€116 million in a new investment for
our Private Equity portfolio,
Constellation
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3i Group plc | Annual report and accounts 2024
91
Investment continued
Principal risk
Underperformance of portfolio companies (ex-Action)
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Reduction in NAV and realisation
potential impacting shareholder
returns
• Impacts reputation as an investor
of proprietary capital and as a manager
of 3iN and other funds
• May set back specific strategic
initiatives
• May impact long-term returns
Risk management
and mitigation
• Rigorous initial assessment of new
investment opportunities to maintain
quality of our investment pipeline
• Monthly portfolio monitoring of
all investments to review operating
performance, identify weaknesses
and opportunities early and act as
appropriate
• Active management of portfolio
company Chair, CEO and CFO
appointments
• Sharing of any incidents of portfolio
fraud and cyber breaches across
investment teams to ensure
monitoring is up to date
FY2024 outcome
• Liquidity support provided to three
portfolio companies in the year
• Close monitoring and adaptation
of portfolio company exit plans
• 93% of our portfolio companies
valued on an earnings basis grew
their earnings over the last 12 months
to 31 December 2023
Principal risk
Underperformance of Action
This risk was
previously considered
as part of the risk of
“Underperformance
of portfolio
companies” but has
been separated out
as a standalone
principal risk on
materiality grounds
Link to strategic
objectives
Potential impact
• Reduction in NAV and realisation
potential impacting shareholder
returns
• Impact on 3i’s reputation as an investor
of proprietary capital
• Materiality of the investment increases
the potential impact and profile
of underperformance
• May set back specific strategic
initiatives
Risk management
and mitigation
• Regular monthly monitoring to review
operating performance, identify
weaknesses and opportunities early
and take action as appropriate
• Additional asset monitoring and
reporting, including 3i Chief Executive
in the role of chair of the Action board
• Sharing of any operational incidents
such as fraud and cyber breaches to
ensure appropriate remedial actions
and monitoring
FY2024 outcome
• Close monitoring of Action, including
frequent performance updates to the 3i
Board
• Action is currently valued on a run-rate
EBITDA, with growth of 28% during the
year
• Action added 303 new stores during
2023
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3i Group plc | Annual report and accounts 2024
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Investment continued
Principal risk
Portfolio ESG and sustainability risk profile/performance
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Poor or insufficient management of
ESG risks or adverse developments
impact 3i’s reputation as an investor
• Potential impact on NAV, realisation
potential and shareholder returns
and on new Infrastructure fundraising
initiatives
• May affect 3i’s ability to meet external
reporting obligations or published
targets
Risk management
and mitigation
• Investment Committee, GRC and ESG
Committee involvement with Board
oversight
• Responsible Investment policy
• Structured approach to identify and
manage ESG and sustainability risks
and “themes” and to collect relevant
data as part of the semi-annual
portfolio company review process
• Early engagement with 3i
Communications team in the event
of any incidents
• Limited exposure to remote/more
challenging geographies and higher
risk sectors
• Close monitoring of trends and
developments in external reporting
• Dedicated 3i ESG resources
and provision of training where
required
FY2024 outcome
• Further refinements in the monitoring of
ESG risks
• Implementation of a new ESG data
collection tool for portfolio companies
• Approval of science-based targets for 3i
in March 2024
• Collected Scope 1 and 2 data from over
97% of our Private Equity portfolio
companies and over 95% of our
economic infrastructure investments1
1
Excludes some legacy minority and other minority
investments where we have limited influence.
Operational
Principal risk
Ability to recruit, develop and retain key people
Movement in risk
status in FY2024
Link to strategic
objectives
Potential impact
• Impairs ability to deliver key
performance objectives
• Potential to delay execution
of strategic plan with possible
impact on shareholder returns
Risk management
and mitigation
• Specific focus by Remuneration
Committee which approves all material
incentive arrangements to ensure they
reflect market practice
• Annual Board review of succession
planning
• Regular review of resourcing and key
man exposures as part of business line
reviews and the portfolio company
review process
• HR policies and procedures for
recruitment and vetting, and ongoing
performance management
FY2024 outcome
• Organisational capability and
succession plan reviewed by the Board
in September 2023
• Successful talent recruitment and
continuous training and development
programmes throughout the year.
23 new hires in FY2024
• Limited staff voluntary turnover of 6.0%
• Good progress with recruitment
and integration of new hires
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3i Group plc | Annual report and accounts 2024
93
Section 172 statement
The Directors believe that during the year they
have, individually and together, acted in way
that they consider, in good faith, was most likely
to promote the success of the Company for the
benefit of its members as a whole, and in doing
so had regard to the factors set out below
(“section 172 factors”)
Our business model is set out on pages 14 and 15 and the Board’s
strategic objectives and key performance indicators are set out
on pages 18 and 19.
When making decisions, the Board takes into consideration the
Company’s purpose and strategic objectives, as well as the potential
long-term impact of those decisions on its various stakeholder
groups, including those listed in section 172 of the Companies Act
2006 (“section 172”). A summary of the principal section 172 factors is
set out below.
Section 172 factors
The likely consequences of any decision
in the long term
Our purpose and strategy, including our long-term responsible
investment approach, aims to drive sustainable growth in our
investment portfolio.
The interests of the Company’s employees
Our employees are critical to the success of the Company. Our
approach as a responsible employer is described more fully in the
Sustainability section.
The need to foster the Company’s
business relationships with suppliers,
customers and others
We engage with all our third-party service providers, suppliers and
customers in an open and transparent way to foster strong business
relationships to ensure both the success of the Company and its
legal and regulatory compliance.
The impact of the Company’s operations
on the community and the environment
We embed responsible business practices throughout our
organisation by promoting the right values and culture. In addition
we partner with charities which relieve poverty, promote education
and support elderly and disabled people.
The desirability of maintaining a reputation
for high standards of business conduct
Our success relies on maintaining a strong reputation and seeking
to ensure our values and culture are aligned to our purpose, our
strategy and our ways of working.
The need to act fairly towards all members
of the Company
The Board engages actively with its shareholders and takes
into account their interests when implementing our strategy.
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3i Group plc | Annual report and accounts 2024
94
Read more in the
Strategic report
Read more in the
Governance report
Read more in the
Sustainability report
Read more in the
Sustainability report
Read more in the Overview and strategy
section and the Sustainability report
Read more in this section
and in the Governance report
How stakeholder
interests have influenced
decision making
The Board takes into account stakeholder interests
and other section 172 factors in its key business
decisions. Directors are reminded of their section
172 duties at Board meetings.
Throughout the year and when implementing the Company’s
strategic priorities, the Board has considered the varied interests of
the Company’s stakeholders and the impact of key decisions on
them. The Board recognises that not all decisions will yield positive
outcomes for every stakeholder group. Therefore, the Board and the
Executive Committee evaluate these conflicts during decision
making.
Key decisions made by the Board this year, along with how
stakeholder interests and other section 172 factors were considered,
are detailed below. Additional information on Board decision making
can be found on pages 107 to 109.
Key decisions in the year
FY2023 second dividend and FY2024 first dividend
Background: In May 2023 the Board decided on an increased
total dividend for FY2023 and in November 2023 a first dividend
for FY2024 (in line with the Company’s dividend policy announced
in May 2018) of one half of the total dividend for the previous year.
Stakeholder considerations: Amidst a difficult macro-economic
environment, the Board carefully considered several factors. These
included shareholders’ desire for income distributions, the necessity
to maintain sufficient liquidity to cover investment activity and
operational and other costs, whilst maintaining a robust, low-geared
balance sheet. Despite adverse macro-economic conditions, the
Company’s investment portfolio had performed well overall with
excellent performance from Action and resilient performance across
the rest of the portfolio, notwithstanding pockets of weakness in
companies with significant exposure to discretionary consumer
spending, the construction sector and recruitment. Additionally, the
Board factored in various external influences, such as inflation, higher
interest rates, elevated energy prices, supply chain disruptions, and
Russia’s continued invasion of Ukraine. These considerations, along
with the Company’s strong financial performance and positive
outlook, informed the decisions regarding the proposed FY2024
second dividend for the current year.
Impact on the success of 3i: Being thoughtful about setting the
dividend is particularly important as it potentially impacts a number
of the Company’s stakeholders. In particular, shareholders can rely on
the Company’s consistent approach to its dividend policy which is an
important aspect of the investment case for 3i’s shareholders.
€500 million bond issuance
Background: For over 11 years, the Company has operated a
conservative balance sheet strategy with no structural gearing. Over
the period, this has significantly de-risked the Group. Alongside the
significant growth in the value of the Company’s investment portfolio,
management has tightly controlled costs resulting in a consistent
operating cash profit. These factors have enabled 3i to adjust to the
pace of investment and divestment flows with limited external
pressure.
The issuance was deemed appropriate because, following the
repayment of the £200 million 2023 bond and the significant growth
in the Group’s NAV, the Company had significant capacity to raise
additional debt whilst maintaining our conservative balance sheet
strategy and prudent approach to managing liquidity.
Stakeholder considerations: In issuing the bond, the Board took into
consideration shareholders’ expectations for the Company to
maintain a conservative balance sheet strategy. Issuing the bond was
within its policy range of £500 million net cash to £1 billion net debt
and was within its tolerance for up to 15% gearing. The Board
considered a range of factors relating to the key terms of the bond
and how these would benefit shareholders. Issuing in euros provided
a natural hedge to the euro portfolio and diversified the funding base
to a larger European investor base. The timing of execution,
proposed tenor and size of the issuance were also considered, with
shareholder interests being an important factor. The consistency of
approach to our balance sheet strategy also sent a positive message
to rating agencies, bond investors and our lenders.
Impact on the success of 3i: Despite volatile financial markets 3i was
able to successfully issue the €500 million bond at a coupon of
4.875%. The bond forms part of the wider approach to maintaining a
conservative balance sheet and prudent liquidity management, which
is fundamental to the Company’s proprietary capital model.
As at 31 March 2024, the Group had gross debt of £1,202m and
gearing of 4%.
For the purposes of the UK Companies Act 2006, the Strategic report
of 3i Group plc comprises pages 1 to 95.
By order of the Board
Simon Borrows
Chief Executive
8 May 2024
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3i Group plc | Annual report and accounts 2024
95
What’s in this section
Chair’s governance review
97
Governance at a glance
98
Corporate governance statement
99
Governance framework
101
Board of Directors
102
Executive Committee
104
The role of the Board
106
How the Board operates
107
What the Board did in FY2024
108
Engaging with stakeholders
110
Board performance review
114
Nominations Committee report
116
Audit and Compliance Committee report
122
Resilience statement
128
Valuations Committee report
131
Directors’ remuneration report
136
Additional statutory and corporate
governance information
150
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3i Group plc | Annual report and accounts 2024
Chair’s governance review
David Hutchison
Chair
I am pleased to present our Corporate Governance Report. The
purpose of this report is to summarise our corporate governance
framework and to explain how we, as a Board, have taken decisions.
Robust and effective corporate governance is fundamental to 3i’s
operations and to the generation of consistent, long-term value for
our shareholders.
As set out in my letter on pages 2 and 3, 3i has responded well to
challenging macro-economic circumstances. As a Board, we are
confident in 3i’s ability to execute its strategic objectives and
discussed more fully in the CEO’s report on pages 6 to 11.
Board activities and consideration of stakeholders
The Board is conscious of its duty to consider the interests of a broad
spectrum of stakeholders and other section 172 factors, particularly in
the current challenging macro-economic and geopolitical climate. An
overview of the range of matters that the Board discussed and
debated at its meetings during the year can be found on pages 108
and 109. How we engaged with our stakeholders is summarised on
pages 110 to 113. The Company’s section 172 statement is available
on page 94.
We work with 3i’s management to ensure that the Company
possesses the necessary financial and human resources to execute its
long-term strategy and promote its long-term success.
Culture and values
Consistent with previous years, the Board recognises the importance
and differentiation that culture and strong values bring to the delivery
of performance. As a Board and as Directors individually we aim to
lead by example, promoting a culture of integrity, rigour and energy,
accountability and ambition in line with 3i’s values as detailed on
page 17, in addition to providing constructive challenge to
management.
Board composition
As announced last year, Caroline Banszky retired from the Board at
the end of the 2023 AGM. There have been no further changes to the
Board composition this year and we continue to maintain an effective
succession plan, more details of which are contained in my
Nominations Committee report on pages 116 to 121.
Dividend
We have continued with our dividend policy to maintain or grow the
dividend year-on-year, subject to the strength of our balance sheet
and the outlook for investment and realisations. As a result the Board
has recommended a second FY2024 dividend of 34.50 pence per
share, taking the total dividend for the year to 61.0 pence per year.
Subject to shareholder approval this will be paid in July 2024.
David Hutchison
Chair
8 May 2024
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Our corporate governance
framework remains an anchor
for 3i’s execution of its
strategic objectives.
Strong corporate governance is essential to create
value for our stakeholders and underpins the long-term
success of our company.
Highlights
as at 31 March 2024
23%
Total return
on equity
Supporting management in a challenging macro-economic
climate to enable them to pursue 3i’s long-term value creation
strategy in the portfolio.
Read more in
the Chief Executive‘s statement and the Financial review
2,085p
NAV per share
An increase of 19% in the NAV in FY2024.
Read more in
Key performance indicators
61.0p
Dividend
per share
Payment of the first dividend of 26.50 pence per share in January
2024 and recommendation of the second dividend in July 2024 of
34.50 pence per share.
Read more in
Financial review
Board focus areas
as at 31 March 2024
Strategy
Financial
Portfolio companies
Read more in
Key performance indicators
Read more in
Financial review
Read more in
Business review
Purpose, culture
and values
Risk management
and internal control
Governance
Read more in
Sustainability report
Read more in
Risk Management
Read more in
Governance report
A balanced Board
as at 31 March 2024
44%
Female representation 11%
Ethnically diverse
66%
Independent directors
Board priorities
for FY2025
Growth
To support the management
in delivering the strategic plan
Shareholders
To achieve long-term
growth for shareholders
Sustainability
Continue to oversee delivery
of the sustainability strategy
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Governance at a glance
3i Group plc | Annual report and accounts 2024
98
The Financial Reporting Council’s UK Corporate Governance Code 2018 (the “Code”)
is the standard against which we measured ourselves in FY2024.
The Board is pleased to confirm that we complied with all of the
provisions set out in the Code for the period under review, save for
provision 19 of the Code in respect of tenure of the Chair.
Details on how we have applied the principles set out in the Code
and how governance operates at 3i have been summarised
throughout this Governance section and elsewhere in this Annual
report as set out below.
Our Governance framework is set out on page 101. (The Code is
available to view on the Financial Reporting Council’s website).
Corporate Governance code
Board leadership and
Company purpose
Page(s)
Audit, risk and
internal control
Page(s)
Effective Board
102–109
External Auditor and Internal Auditor
126–127
Purpose, values and culture
1, 16–17, 40–57, 80, 109, 127
Fair, balanced and understandable review
125, 155
Governance framework
101
Internal financial controls and risk management
80–93, 122–130
Stakeholder engagement
110–113
Workforce policies and practices
52–55, 153–154
Division of responsibilities
Page(s)
Remuneration
Page(s)
Role of Chair
107
Linking remuneration to purpose and strategy
136–137
Independence
150
Remuneration policy review
137
External commitments and conflicts of interest 102-103, 153
Independent judgement and discretion
136–149
Board resources
97, 107
Composition, succession
and evaluation
Page(s)
Appointment to the Board
100, 116, 151
Board skills, experience and knowledge
102-103, 119
Annual Board evaluation
114–115
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3i Group plc | Annual report and accounts 2024
99
Explanation on Provision 19
– Chair tenure
The Board and the Nominations Committee
have carefully considered the extended tenure
of the Chair.
As detailed in our FY2023 Annual report, when appointing David
Hutchison as Chair, the Nominations Committee and the Board were
fully aware of the Code’s provision regarding a Chair’s tenure
exceeding nine years, and the fact that David had then already
served as a non-executive Director for eight years. Despite this, the
Nominations Committee and the Board, when considering the
Company’s long-cycle investment business, recognised that David’s
extensive knowledge of the Company’s business and portfolio assets
– gained in part from his seven-year tenure as Chair of the Valuations
Committee – and his understanding of the Board’s conservative
balance sheet and selective investment strategies, made him the
most suitable candidate to promote the success of the Company.
The Nominations Committee and the Board recognise the potential
risks associated with extended tenure of a chair, including the
possibility of compromised objectivity, inadequate management
accountability, and insufficient promotion of constructive challenge
among Board members. To mitigate these risks further, a number of
additional steps were taken as detailed below.
Steps taken to mitigate risks associated with extended tenure
• The Committee and the Board sought to balance this
appointment by appointing an experienced senior director
as Senior Independent Director. This role, filled by Lesley
Knox in October 2021, includes ensuring corporate
governance arrangements remain robust and appropriate
and leading the annual review of whether David’s continued
tenure as Chair is in the best interests of the Company.
• It was agreed that the Nominations Committee would
undertake an annual review, led by the Senior Independent
Director, of the continued appropriateness of David’s
appointment. This would be in addition to the mitigation
provided by the Board and Chair annual performance
reviews.
The first such annual review was held by the Nominations
Committee in March 2023 and a second review was
conducted in March 2024 (both in the absence of David).
Both reviews concluded that David continued to perform
effectively as Chair, maintained objective judgement and
independence, and promoted constructive challenge among
Board members. The Committee also noted that in a
business where long-term knowledge of the business and its
assets is crucial, David’s continued appointment was
appropriate. The Committee’s overall conclusion was that
David’s continued appointment as Chair for the coming year
was in the best interests of the Company and that the
balance and independence of the Board remained
appropriate.
• Since 31 March 2023, David has not been a member of the
Remuneration Committee.
• The appointment in November 2021 of Peter McKellar, an
independent non-executive Director with extensive
experience of asset management and asset valuation, as
Chair of the Valuations Committee, provided continuity and
effective governance of that Committee.
The Nominations Committee will undertake its next review in
March 2025.
Recommendation
The Board has carefully considered the Chair’s tenure and believes that it is in the best interests of 3i and its stakeholders that
David remains as Chair. The Board is therefore recommending to shareholders the re-election of David at the forthcoming
AGM on 27 June 2024.
For more information
Page 117
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3i Group plc | Annual report and accounts 2024
100
Governance framework
Board
•
Approves risk appetite and strategy
•
Responsible for ensuring effective risk management and oversight processes exist
• Oversees ESG and sustainability strategy, approach and policies
• Assisted by four Board Committees with responsibility for specific areas
• Delegates management to the Chief Executive
• Assesses investment performance against objectives
Nominations
Committee
Audit and Compliance
Committee
Valuations
Committee
Remuneration
Committee
•
Responsible for ensuring that the Board
has the necessary skills, experience and
knowledge
•
Responsible for appointing a diverse
Board
•
Responsible for Board and senior
executive succession
•
Reviews and oversees financial and non-
financial reporting (including sustainability
matters), risks and internal controls, and
the relationship with the External auditor
•
Reviews and challenges management
reports
•
Receives updates from the Chief
Executive on outputs from GRC
•
Oversees tax policy and strategy
•
Specific and primary responsibility for the
valuation policy and valuations (including
underlying assumptions) of the Group’s
investment portfolio
•
Direct engagement with the External
auditor, including its specialist valuations
team
•
Ensuring a remuneration culture
weighted towards performance based
variable reward, whilst discouraging
inappropriate risk taking and taking non-
financial indicators, including ESG
indicators, into account
•
Approves carried interest and asset
performance linked schemes
•
Ensuring Executive Directors’
remuneration is closely aligned with
shareholder returns
•
Oversees the implementation of fair
remuneration for employees
Chief Executive
•
Delegated responsibility for management of the Group
•
Delegated responsibility for investment decisions
•
Delegated responsibility for risk management
•
Delegated responsibility and day-to-day accountability for sustainability matters
Executive Committee
Investment Committee
Group Risk Committee
ESG Committee
•
Assists the Chief Executive in setting the
Group strategy, including sustainability
aspects
•
Monitors divisional performance
•
Facilitates information sharing between
divisions
•
Responsible for recruitment and
retention
•
Meets monthly
•
Manages the Group’s investment
portfolio and monitors its most material
risks
•
Meets when required
•
Strict oversight of each step of the
investment lifecycle
•
Approves all investment, divestment
and material portfolio decisions
•
Monitors investments against original
investment case
•
Ensures investments are in line with the
Group’s investment policy and risk
appetite
•
Implements the Responsible Investment
policy
•
Chaired by the Chief Executive
•
Assists the Chief Executive with the
oversight of risk management
•
Implements the Group’s risk appetite
policy and monitors performance
•
Maintains the Group risk review which
details its principal risk exposures; a
watch list of new and emerging risks;
and appropriate mitigations and
controls
•
Two members of the GRC form the Risk
Management function as required by
FCA rules
•
Maintains oversight of ESG risks, and
relevant ESG regulations
•
Oversight and review of the Responsible
Investment policy
•
Chaired by the Chief Executive
•
Advises the Chief Executive, directly
and through the Investment and Group
Risk Committees, on ESG risks and
opportunities
•
Develops the Group’s ESG approach,
and related policies and procedures
•
Ensures the Group’s compliance with
relevant ESG-related legal and
regulatory requirements, standards and
guidelines
•
Coordinates ESG-related activities and
initiatives
•
Reviews and monitors the Group’s ESG
performance
•
Monitors stakeholder expectations,
market developments, trends and best
practice in relation to relevant ESG
matters
•
Chaired by the General Counsel
Conflicts Committee
•
Deals with potential conflicts as required
Treasury Transactions
Committee
•
Considers specific treasury transactions
as required
Market Abuse
Regulation Committee
•
Considers potential disclosure matters
as required
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3i Group plc | Annual report and accounts 2024
101
Company
Secretary
Board
of Directors
at 31 March 2024
The Board promotes a culture
of strong governance across
the business.
David Hutchison
Chair
Chair since November 2021 and non-executive
Director since 2013. David has considerable
investment and banking experience across a
range of asset classes which supports
his leadership of the Board.
Previous experience
Chief Executive of Social Finance Limited from
2009 to March 2022. Until 2009 Head of UK
Investment Banking at Dresdner Kleinwort Limited
and a member of its Global Banking Operating
Committee. From 2012 to 2017, a non-executive
director of the Start-Up Loans Company.
James Hatchley
Group Finance Director
Group Finance Director since June 2022 and an
Executive Director since May 2022. A member of
the Executive Committee, Investment Committee,
Group Risk Committee and ESG Committee.
Joined 3i in 2017 and was Group Strategy Director
until June 2022.
Previous experience
Formerly Chief Operating Officer of KKR in
Europe and, before that, Co-CEO of Avoca
Capital. Earlier in his career, James was a
corporate finance professional for 20 years,
principally with Greenhill & Co. and Schroders. He
qualified as a chartered accountant in 1992.
Formerly a non-executive director of Great
Ormond Street Hospital for Children NHS
Foundation Trust.
Simon Borrows
Chief Executive
Chief Executive since 2012, and an Executive
Director since he joined 3i in 2011. Chair
of the Group’s Risk Committee, Executive
Committee and Investment Committee. Chair of
the Supervisory Board of Peer Holding I B.V., the
Dutch holding company for the Group’s
investment in Action.
Previous experience
Formerly Chair of Greenhill & Co International
LLP, having previously been Co-Chief Executive
Officer of Greenhill & Co, Inc. Before founding
the European operations of Greenhill & Co in
1998 he was the Managing Director of Baring
Brothers International Limited. Formerly a non-
executive director of the British Land Company
PLC and Inchcape plc.
Jasi Halai
Chief Operating Officer
Chief Operating Officer and an Executive Director
since May 2022. A Member of the Executive
Committee, Investment Committee, Group Risk
Committee and ESG Committee. Joined 3i in
2005 and has held a variety of posts in the
business, most recently as Group Financial
Controller and Operating Officer. Also a non-
executive director of Barratt Developments PLC.
Previous experience
Prior to joining 3i, worked for CDC Group (now
British International Investment) and at Actis
following its demerger from CDC. Jasi is a
chartered management accountant. Formerly
a non-executive director of Porvair PLC.
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102
Stephen Daintith
Independent non-executive Director
Non-executive Director since 2016. Chief Financial
Officer and an executive director of Ocado Group
plc. Stephen contributes directly relevant financial
and operating experience as Chair of the Audit
and Compliance Committee, drawn from a range
of consumer, digital, engineering and other
international businesses, to the Board’s decision
making.
Previous experience
Formerly an executive director of Rolls-Royce
Holdings plc from 2017 to March 2021 and
Finance Director of Daily Mail and General Trust
plc (“DMGT”) from 2011 to 2017. Non-executive
director of ZPG Plc. Prior to joining DMGT he was
Chief Operating Officer and Chief Financial
Officer of Dow Jones and prior to that Chief
Financial Officer of News International. He
originally qualified as a chartered accountant with
Price Waterhouse (now part of PwC).
Peter McKellar
Independent non-executive Director
Non-executive Director since June 2021. Also
Chair of Princess Private Equity Holdings Limited,
non-executive director of Investcorp Capital plc
and a non-executive board member of Scottish
Enterprise, from which he will retire in July 2024 .
Peter brings to the Board significant experience
and understanding of financial services and asset
management, with a particular expertise in private
equity and infrastructure. This enables him to
bring a valuable asset management perspective
to the Board’s discussions and to those of the
Valuations Committee, which he now chairs.
Previous experience
Formerly Deputy Chair of AssetCo plc, Global Head
of Private Markets at Standard Life Aberdeen plc
and previously led Standard Life Investments’
private equity and infrastructure business and was
their Chief Investment Officer. Prior to that, he
held a variety of finance posts in industry and
corporate finance positions.
Lesley Knox
Independent non-executive Director
Non-executive Director since October 2021 and
Senior Independent Director since November
2021. Also Senior Independent Director of Legal
& General Group plc, non-executive director of
Dovecot Studios Limited, Senior Independent
Director and Chair of Remuneration Committee
of Genus Plc, and a trustee of Grosvenor Group
Limited pension fund and National Galleries of
Scotland Foundation. Lesley brings to the Board’s
discussions a wealth of international, strategic and
financial services experience having spent over 17
years in senior roles in financial services, including
in asset management and corporate finance.
Previous experience
Formerly held a number of senior roles in financial
services, including head of institutional asset
management at Kleinwort Benson. Also previously
served as Chair of Alliance Trust PLC, as Senior
Independent Director at Hays plc and non-
executive director of SAB Miller plc, Centrica plc
and Thomas Cook Group plc.
Alexandra Schaapveld
Independent non-executive Director
Non-executive Director since January 2020. Also
non-executive director and Chair of the Audit
Committee at Société Générale S.A. Alexandra
brings extensive financial services expertise in a
number of important markets for 3i as well as
considerable board experience in a variety of
sectors. These help provide an international
perspective to the Board’s decision-making
process.
Previous experience
Formerly on the boards of Bumi Armada Berhad,
Vallourec S.A., FMO N.V., Stage Entertainment
N.V., Holland Casino N.V., VU University and VU
Medical Center and Duin & Kruidberg. Prior to
that, many years of corporate and investment
banking at RBS and ABN AMRO.
Coline McConville
Independent non-executive Director
Non-executive Director since 2018. Also a member
of the Supervisory Board of Tui AG and a non-
executive director and Chair of the ESG
Committee at King’s Cross Central General
Partnership. Coline has a diverse commercial
background, having worked in a range of sectors
and also brings to the Board significant listed
board experience including chairing several
remuneration committees and previously acting as
Senior Independent Director at Fevertree. This
enables her to make valuable contributions to the
Board’s discussions and to those of the
Remuneration Committee, which she now chairs.
Previous experience
Formerly a non-executive director of Fevertree
Drinks plc, Travis Perkins plc, Tui Travel plc, UTV
Media plc, Wembley National Stadium Limited,
Shed Media plc, HBOS plc and Inchcape plc. Prior
to that was Chief Operating Officer and Chief
Executive Officer Europe of Clear Channel
International Limited and had previously worked
for McKinsey and LEK.
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Board of Directors continued
3i Group plc | Annual report and accounts 2024
103
Executive
Committee
at 31 March 2024
Simon Borrows
Chief Executive
James Hatchley
Group Finance Director
Jasi Halai
Chief Operating Officer
Page 102
See profiles
Simon Borrows
Chief Executive
Jasi Halai
Chief Operating Officer
James Hatchley
Group Finance Director
Kevin Dunn
General Counsel and Company Secretary
Joined 3i in 2007 as General Counsel and
Company Secretary. Responsible for 3i’s
legal, compliance, internal audit and
company secretarial functions. A member of
the Executive Committee, Group Risk
Committee and ESG Committee.
Previous experience
Prior to joining 3i, was a Senior Managing
Director, running GE’s European Leveraged
Finance business after serving as European
General Counsel for GE. Prior to GE, was a
partner at the law firms Travers Smith and
Latham & Watkins.
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3i Group plc | Annual report and accounts 2024
104
Rob Collins
Managing Partner,
Head of North American Infrastructure
Joined 3i in 2017 as the Managing Partner
for North American Infrastructure. A member
of the Executive Committee. Also a non-executive
director of Smarte Carte, Regional Rail and
EC Waste.
Previous experience
Prior to joining 3i, led Hastings’ infrastructure
investment team in North America and Europe.
Founded the infrastructure M&A practice
at Morgan Stanley and Greenhill where he was
a Managing Director at both firms. Started his
infrastructure career at Goldman Sachs after
serving as a nuclear-power officer in the US Navy.
Scott Moseley
Managing Partner,
Co-Head of European Infrastructure
Joined 3i in 2007 and was made a Partner in 2012.
Managing Partner, Co-Head of European
Infrastructure since July 2022 and a member of
the Executive Committee, Investment Committee
and Group Risk Committee. Also a non-executive
director of Tampnet, ESVAGT and GCX.
Previous experience
Prior to joining 3i more than 16 years ago, Scott
held various roles within the capital markets teams
at WestLB and Credit Agricole.
Pieter de Jong
Co-Head of Private Equity
Joined 3i in 2004 and served as Managing
Director of 3i Benelux between 2011 and 2019. A
member of the Executive Committee, Investment
Committee and Group Risk Committee. Also a
non-executive director of Yanga, Mepal,
European Bakery Group, Royal Sanders and
Weener Plastics.
Previous experience
Started his career at Stork in the US, before
joining Van Den Boom Group, a corporate
finance consulting firm in Benelux, where he
became partner/owner responsible for M&A.
After selling the firm to NIBC in 2000, he headed
the M&A department until 2003.
Bernardo Sottomayor
Managing Partner,
Co-Head of European Infrastructure
Joined 3i in 2015 as a Partner with responsibility
for origination and execution of new investments
across Europe. Managing Partner, Co-Head of
European Infrastructure since July 2022 and a
member of the Executive Committee, Investment
Committee and Group Risk Committee. Also a
non-executive director of TCR and ESP.
Previous experience
Prior to joining 3i, was a Partner at Antin
Infrastructure and his other previous infrastructure
management experience includes roles as
Managing Director at Deutsche Bank’s European
infrastructure fund, Head of M&A at Energias de
Portugal and further infrastructure M&A advisory
experience with UBS and Citigroup in London.
Julien Marie
Chief Human Resources Officer
Joined 3i in 2001 as HR Manager and was
appointed HR Director in 2004. A member
of the Executive Committee and Group Risk
Committee.
Previous experience
Prior to joining 3i, worked at Bouygues
Construction and Bouygues Telecom for six years.
Peter Wirtz
Co-Head of Private Equity
Joined 3i in 1998 and served as 3i Germany
Co-Head between 2009 and 2019. A member
of the Executive Committee, Investment
Committee and Group Risk Committee. Also
a non-executive director of Luqom and YDEON.
Previous experience
Prior to joining 3i, worked for Deutsche Bank
and spent four years with Procter & Gamble
in various finance functions.
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3i Group plc | Annual report and accounts 2024
105
The role of the Board
The Board’s role is to lead the Company
in promoting its long-term success and thereby
generating value for shareholders. The Board
operates within a robust corporate governance
framework and ensures that this framework is
embedded across the organisation.
The Board oversees the Company’s purpose, values and strategy and
satisfies itself that these are aligned with the Company’s culture. All
Directors are expected to demonstrate integrity, set a positive tone
and adhere to the Company’s culture and values.
The Board, through its Audit and Compliance Committee, assesses
and monitors behaviours and adherence to the Company’s values.
Regular reports from the Internal Audit and Group Compliance
teams consider and comment on culture within the business. The
Remuneration Committee reviews workforce remuneration and the
alignment of incentives and rewards with culture. The Board ensures
that employee policies and practices are consistent with the
Company’s culture and values and supports its long-term success
during its annual review of succession planning and strategic
capability.
The Board approves the Group’s strategic objectives and ensures the
necessary resources are in place for the Company to meet these
objectives through a Board approved planning and budgeting
process. The Board measures performance against those objectives
using the KPIs set out on pages 18 and 19 which are reported to the
Board in the monthly Board report.
The Board meets formally on a regular basis for scheduled Board
meetings and on an ad hoc basis when the need arises. There is a
clearly defined schedule of matters reserved for the Board. The
Board is assisted by various Principal Board Committees which report
to it regularly. Details of their activities in the year are provided on
pages 116 to 149.
Attendance at Board and Committee meetings1
Independence
Board
Audit and
Compliance
Committee
Nominations
Committee
Remuneration
Committee
Valuations
Committee
Total meetings held1
7
6
2
6
4
Number attended:
D A M Hutchison
Independent on appointment
7(7)
–
1(2)
–
4(4)
S A Borrows
Executive Director
7(7)
–
–
–
4(4)
J G Hatchley
Executive Director
7(7)
–
–
–
4(4)
J H Halai
Executive Director
7(7)
–
–
–
–
S W Daintith2
Independent
7(7)
6(6)
2(2)
–
1(4)
L M S Knox
Independent
7(7)
–
2(2)
5(6)
2(4)
C McConville
Independent
7(7)
6(6)
2(2)
6(6)
–
P A McKellar
Independent
7(7)
–
2(2)
6(6)
4(4)
A Schaapveld3
Independent
7(7)
6(6)
2(2)
3(3)
4(4)
C Banszky4
Independent
2(2)
1(1)
–
3(3)
–
1
This table shows the number of scheduled full meetings of the Board and its Committees attended by each Director who is a member thereof in the year, together with (in brackets) the number of meetings they were eligible
to attend. In addition to these meetings a number of additional meetings of the Board and its Committees were held, often at short notice, to deal with ad hoc business as it arose. Non-attendance at meetings was due to
unavoidable prior commitments or illness. As explained in this report Mr Hutchison did not attend the Nominations Committee meeting which included discussion of the Chair’s tenure and performance.
2
Mr Daintith stepped down from the Valuations Committee when he was appointed Chair of the Audit and Compliance Committee after the 2023 AGM.
3
Ms Schaapveld joined the Remuneration Committee after the 2023 AGM.
4
Ms Banszky retired from the Board on 29 June 2023.
Non-executive Directors also attended a number of other Company meetings, portfolio company reviews and Infrastructure partner reviews to
increase their understanding of the 3i business, the portfolio companies and the strength and depth of our people.
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3i Group plc | Annual report and accounts 2024
106
How the Board operates
The Board holds one to two meetings a year at or near one of our
non-UK offices or one of our portfolio companies, providing a chance
for non-executive Directors to meet our local teams and the
management of selected portfolio companies. In January of this year
the Board and Committee meetings were held in Amsterdam where
Directors met the Action senior management team at Action’s
headquarters and visited an Action store. They also met and received
presentations from the CEO of Mepal and the Private Equity team for
Royal Sanders. In March the Board and Committee meetings were
held at 3i’s New York office where Directors met 3i’s US-based teams
and received presentations from the CEOs of Cirtec, SaniSure and
WilsonHCG.
The Board holds an annual Strategy Day.
The Board receives regular reports on potential conflicts of interests
involving Directors and any actual conflicts of interest identified are
managed appropriately. This may involve excluding the Director
concerned from relevant information and discussions.
There is a clear division of responsibilities between the Chair and
Chief Executive. Day-to-day management of the Group is the
responsibility of the Chief Executive. To assist him in this role, the
Chief Executive has established a number of additional management
committees, including the Investment Committee, Group Risk
Committee and ESG Committee, which are outlined in our
governance framework on page 101.
The Board ensures that it has the policies, processes, information,
time and resources it needs in order to function effectively and
efficiently.
Responsibilities of the Chair
• Leads the Board and is responsible for its overall effectiveness
in directing the Company.
• Leads the Board in its oversight of the Company’s purpose,
values and culture.
• Leads the Board in setting its agenda, approving strategy,
monitoring financial and operational performance,
and establishing the Group’s risk appetite.
• Organises the business of the Board, ensuring the Company’s
effectiveness, and the maintenance of an effective
system of internal controls.
• Ensures that Directors receive accurate, timely and clear
information. This includes ensuring that the non-executive
Directors receive regular reports on shareholders’ views
on the Group.
• Responsible for the composition of the Board, facilitates
constructive Board relations and the effective contribution
of all non-executive Directors.
• Leads the annual Board and Board Committee evaluation
process.
Responsibilities of the Chief Executive
• Direct charge of the Group on a day-to-day basis
and is accountable to the Board for the financial and
operational performance of the Group.
• Chairs the Investment Committee to review the
acquisition, management and disposal of investments.
• Leads the Executive management team to develop
and implement the Group’s strategy and manage the risk
and internal control framework.
• Reports to the Board on financial and operational
performance, risk management and progress in delivering
the strategic objectives.
• Regularly engages with shareholders and other key
stakeholders on the Group’s activities and progress.
• Oversees the implementation of the ESG strategy.
• Oversees the Group’s values and culture.
Role of the Senior Independent Director
• The Senior Independent Director provides a sounding board
for the Chair and serves as an intermediary for the other
Directors and the shareholders.
• Leads succession planning for the Chair.
• Leads the Chair’s performance review and the annual review of
the continued appropriateness of the Chair’s appointment.
Role of non-executive Directors
• Provide constructive challenge, strategic guidance
and hold management to account.
• Scrutinise the performance of management in meeting
agreed objectives.
• Seek assurance on the integrity of the financial information
and that financial and non-financial controls and systems
of risk management are robust and defensible.
• Determine appropriate levels of remuneration for
Executive Directors and Executive Committee and
together with the Chair, have a prime role in appointing
Directors and in succession planning for the Board.
• Ensure that they have sufficient time to meet their Board
responsibilities.
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3i Group plc | Annual report and accounts 2024
107
What the Board did
in FY2024
In FY2024, the Board met for seven
scheduled meetings and a strategy day
in December 2023 (see page 106).
The Chair sets the Board’s agenda. Board members and, as
appropriate, executives from the relevant business areas are invited
to present on key items allowing the Board the opportunity to debate
and challenge initiatives directly with the senior management team.
As described on page 94, when making decisions the Board has
regard to the interests of stakeholders, as well as the section 172
factors.
Examples of some important decisions taken by the Board in the year
and how, where relevant, the Board had regard to the interests of
relevant stakeholders are set out on page 95. Our key stakeholders
are set out below and discussed in more detail on pages 110 to113.
In addition to the Board decisions referred to above, the Board also
dealt with its regular annual cycle of business, examples of which are
set out on the next page.
Our key stakeholders
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3i Group plc | Annual report and accounts 2024
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FY2024 Focus areas
Matters approved
Other matters considered/outcomes
Stakeholders
Purpose, culture
and values
• Slavery and human trafficking statement
• Operation and effectiveness of the
Remuneration Policy both for Executive
Directors and the wider employee group
• Executive and senior management
succession planning
• Organisational capability
• Employee leadership and development
initiatives
• Diversity, equity and inclusion initiatives
• Equal Opportunities and Diversity policy
• Board evaluation
• Ongoing meeting of Board diversity
targets
Portfolio companies
• Non-executive Director approvals for
certain investments and divestments
• Portfolio company valuations
• Presentations from the CEOs of Action,
Mepal, Cirtec, SaniSure and WilsonHCG,
and the deal team of Royal Sanders
• Visit to Action HQ and Action store
• Detailed reporting on Action and rotating
updates on portfolio companies at Board
and Valuations Committee
• ESG reviews of portfolio companies
• Attendance at portfolio company reviews
and Infrastructure partner reviews
Strategy
• Group’s approach to environmental
sustainability and climate change
• Senior leadership succession and
contingency planning
• Strategy day
– 3i Group strategic financial planning
and analysis
– Private Equity strategic plan
– Infrastructure strategic plan
– ESG updates
– designation of Royal Sanders as a
longer-term hold asset
– further investment in Action through
the buy back of carried interest
– visit to Action HQ and an Action store
• Private Equity and Infrastructure business
and portfolio updates
Financial
• Payment of the first dividend in January
2024 and recommendation of the second
dividend to be paid in July 2024
• Operating budget
• Annual report, half-year report and
quarterly updates
• Approval of investment valuations
• €500 million bond
• Financial reporting from the Group Finance
Director including key financial highlights
and performance against budget
• Valuations reporting from Group Finance
Director and Chief Operating Officer
• Market overviews
• Funding and Treasury review
• Assessment of investment performance
against objectives
Risk management
and internal control
• Board risk appetite
• Risk review
• Compliance and internal controls updates
• Detailed reporting from the Group Risk
Committee including updates on the
business continuity plan, cyber security
and IT
• Going concern, Viability statement,
Resilience statement and stress testing
Governance
• Approval of the Chair’s continued tenure
• Approval of a shareholder reunification
programme and utilisation of funds
realised as a result of this programme for
charitable purposes
• Updates on the Code
• Oversight of ESG strategy and compliance
with ESG regulation
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review
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Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Division of responsibilities continued
What the Board did in FY2024 continued
3i Group plc | Annual report and accounts 2024
109
Engaging with stakeholders
Engaging and communicating with our stakeholders is an integral part of 3i’s business
and critical to ensuring our continued success. We engage with our stakeholders in a variety
of ways, as detailed in this section.
Engaging with shareholders
In FY2024, shareholders engaged principally on the performance of
Action and of the rest of the portfolio, capital allocation strategy and
market conditions for new investments and realisations.
The CEO, Group Finance Director and the Group Investor Relations
and Sustainability Strategy Director meet with institutional
shareholders and potential investors after the announcement of the
annual results and throughout the year. The Chair meets with
institutional shareholders at their request.
The Investor Relations and Company Secretariat teams are available
to retail shareholders to respond to their queries.
In addition to this ongoing investor engagement, the Company has
an extensive engagement programme detailed below which enables
investors to make informed decisions about their investment in the
Company:
Our FY2024 Investor Relations programme
We engage shareholders through a full programme of events. Our results presentations and capital markets seminars are webcast live
and available to all who are interested. On-demand webcasts and transcripts are also available on the Company’s website after the events.
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3i Group plc | Annual report and accounts 2024
110
June
• BNP Paribas Exane European
CEO Conference
• Kepler Investment Companies
conference
• Annual General Meeting
February
• Q3 performance update
September
• Private Equity capital
markets seminar
• Bank of America Financial
Services conference
2023
2024
July
• Q1 performance update
• Chair’s meetings with
shareholders
March
• Action capital
markets seminar
• Morgan Stanley Financials
Conference
November
• Half-yearly results
announcement and
presentation webcast
May
• Annual results announcement
and presentation webcast
Institutional investors
• UK and international one-on-one meetings with 3i’s
principal shareholders twice a year and throughout the
year as required.
• Large group investor calls are held after the publication of
the annual and half-year results, and quarterly
performance updates, to target both existing and
potential investors.
• Meetings held with the Chair at the request of institutional
shareholders. The SID and the Audit and Compliance
Committee Chair are also available as required.
• Meetings with potential shareholders on a regular basis as
part of arranged UK and international roadshows and as
required.
• Participation in conferences for institutional investors
organised by a number of international banks and
brokers.
• Engagement with analysts from investment banks by the
Group Investor Relations and Sustainability Strategy
Director.
Annual and half-year results presentations
• The annual and half-year results are presented via live
webcasts accessible to all investors on the 3i website.
Listeners are encouraged to submit questions during the
webcasts.
Individual investors
• Can attend live webcasts of the results presentations and
capital markets seminars.
• Can engage directly with non-executive Directors,
Executive Directors, the Company Secretary and the
Group Investor Relations Director at the AGM.
• Can engage with and contact the Group Investor Relations
and Sustainability Strategy Director and the Company
Secretary, whose contact details are on the website, to
raise issues and provide feedback.
Annual General Meeting
• The AGM is held as an in person meeting, preceded by
business presentations from the Chair and Chief
Executive.
• Shareholders are encouraged to ask questions during the
meeting, and have the opportunity to meet Directors
before and after the formal proceedings.
Capital market seminars
• Two capital markets seminars in FY2024, held in
September 2023 and March 2024, both held via a webcast
accessible to all on the 3i website.
• The September 2023 seminar included presentations from
the deal teams on our Private Equity investments of
nexeye and European Bakery Group, and an update on
the role and work of 3i’s Private Equity banking team.
• The March 2024 seminar focused on Action with results
and strategy updates from the CEO and CFO of Action,
along with presentations on Action’s sustainability
programme.
Website
• The 3i website provides a wealth of useful and detailed
information for all shareholders, who can also sign up for
our email alert service to be notified of key
announcements.
Outcome of engagement with shareholders
The outcome of this engagement is that we maintain a strong
relationship with shareholders. The Board recognises the importance
of fostering a proactive and meaningful relationship with current and
prospective shareholders.
The extensive Investor Relations programme enables investors to
understand 3i’s performance, assists them in making their investment
decisions and provides them with an opportunity to engage with
Directors and senior management. Executive Directors routinely
update the Board on investor relations activities and on any feedback
received from analysts and shareholders. Any major issues brought
up by shareholders concerning the Group are communicated to and
discussed with the Board.
Overview
and strategy
Business
review
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Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Division of responsibilities continued
Engaging with stakeholders continued
3i Group plc | Annual report and accounts 2024
111
Engaging with other stakeholders
Fund investors
Why? Fund investors, like shareholders, want to understand and
have confidence in 3i’s strategy, performance, culture,
sustainability policies, compliance and governance. It is also
important that the Board and management understand issues
that are specific to them.
How? There is an engagement programme with fund investors
and co-investors led by the Fund Investor Relations team with
regular and ad hoc meetings, supported by comprehensive
reporting.
The Chief Executive and relevant investment professionals
participate in some of these meetings, as appropriate.
Fund investors have provided capital we have
invested in certain assets as part of our investment
management activities and which generates fee
income for 3i. They are customers to whom we owe
regulatory duties. Positive engagement with Fund
investors enhances our relationship with them and
provides them with the information they require to
maintain their investment in the relevant fund.
Page 36 Total assets under management
Employees
Why? 3i is a people business. Our people are critical to the
success of the Company and we rely on having motivated
people with the appropriate expertise and skills required
to deliver our strategy.
How? Our approach as a responsible employer is described in
the Sustainability section. The Directors’ report on page 154
includes details on their engagement with our employees. We
continue to support our employees and to maintain strong
employee engagement.
Having meaningful engagement with employees
helps create a strong, supportive work culture,
which develops and retains talent, enabling 3i to
continue to deliver strong performance.
Pages 52 to 55 Sustainability report
www.3i.com/sustainability/sustainability-reports-library
Portfolio
companies
Why? 3i’s long-term, responsible approach to its investments
means that it participates in the active management of its
portfolio companies. Close engagement and a strong
governance framework enables us to help them grow and
create value.
How? Our investment teams work closely with investee
companies and their management teams. One or more
investment team professionals are usually appointed as
directors of each investee company. In addition, regular forums
across the Private Equity and Infrastructure portfolios share best
practice and experience. This year we held a Sustainability
forum for ESG and sustainability representatives from across the
PE and Infrastructure portfolios where colleagues could discuss
best practice, shared experiences and develop peer networks.
A CFO forum was held which included presentations on what
data-driven organisations look like, the impact of artificial
intelligence (“AI”) on the role of the CFO, the evolving role of
the CFO in enabling sustainability success and the debt markets
and how to effectively mitigate the higher interest rate
environments. The CTO forum focused on cyber security and
how to enable generative AI adoption in companies. More
recently an online forum was held for portfolio HR directors.
We are able to share best practice and connect
management teams across the portfolio.
Growing and generating value in the portfolio
companies enables 3i to generate attractive returns
for our shareholders and fund investors, contributing
towards the long-term success of 3i.
Pages 14 to 15 Our business model
Pages 42 to 51 Sustainability report
Pages 21 to 38 Investment activity
Stakeholders
Engagement
Outcome
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Division of responsibilities continued
Engaging with stakeholders continued
3i Group plc | Annual report and accounts 2024
112
Debt holders
Why? Access to debt markets provides important flexibility and
resilience to the Company’s financial structure.
How? Together with the Group Finance Director, the Group
Treasurer engages with debt providers and hedging
counterparties through regular reviews and updates including
the Group’s results presentations. A dedicated section on
3i.com is maintained for debt investors.
The successful issue of the recent euro bond
demonstrates the benefits of positive engagement
with debt holders. This provided well priced
additional liquidity, diversified our funding base and
provided additional foreign exchange hedging
whilst maintaining our conservative balance sheet
strategy.
Page 70 Financial review
Page 94 Directors’ duties under Section 172
Pages 184 to 185 Notes to the accounts
Government
and Regulators
Why? The Company works in a regulated environment and can
only continue to operate if it complies with relevant laws and
regulations.
How? Our Group Compliance team and local professionals
lead our relationships with national and international regulators,
including the UK FCA, the US SEC and the Luxembourg CSSF.
The Company actively participates in policy forums, engages
on regulatory matters and is a member of a number of industry
bodies, including the British Private Equity & Venture Capital
Association and Invest Europe.
We maintain active relationships with other governance-related
bodies including the FRC, relevant UK government
departments, ESG rating agencies, the FTSE Women Leaders
Review, the Parker Review and proxy advisers through
participation in consultations, surveys and events.
Maintaining open and constructive dialogue and
strong relationships with relevant authorities and
governance bodies helps support the achievement
of our strategic goals within a compliant framework.
Third-party
professional
advisers and
service providers
Why? The Company relies on its extensive network of
professional advisers and service providers to help it originate,
analyse and execute new investments, to assist with portfolio
management and to support the business operations of the
Company.
How? The investment teams, Executive Directors and functional
teams lead these relationships and maintain close and regular
dialogue with our professional advisers and service providers
who include due diligence providers, operational and IT
support providers, law firms, the Registrars, the External auditor
and the Company’s corporate brokers.
The support from our advisers and service providers
contributes to 3i’s long-term success.
Communities
We embed responsible business practices throughout our
organisation by promoting our values and culture. We use our
influence with our portfolio companies to ensure that they assess
their environmental and social impacts and dependencies and,
where relevant, devise strategies to address them. We also
partner with organisations and charities that support charities
which relieve poverty, promote education and support elderly
and disabled people.
For details of the Company’s contribution to and
engagement with communities see the Sustainability
section.
Page 56 Act as a good corporate citizen
Stakeholders
Engagement
Outcome
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Division of responsibilities continued
Engaging with stakeholders continued
3i Group plc | Annual report and accounts 2024
113
Board performance review
In accordance with the Code, the Board conducted its annual performance review of its own
performance and that of its Committees and the Chair. The Board performance review process
operates on a three-year cycle. This year, the performance review was undertaken internally led by
the Chair and the Company Secretary.
Board performance review process
Each Director and the
General Counsel and
Company Secretary
completed a Board
performance review
questionnaire and all
Directors (except the
Chair) and the General
Counsel and Company
Secretary completed a
Chair performance review
questionnaire.
Responses to the
questionnaire were
collated by the Company
Secretary and shared
with the Chair on a non-
attributable basis.
Sections specifically
relating to the Chair were
shared with the Senior
Independent Director.
The Chair held one-on-
one discussions with
each Director to discuss
their performance and
that of the Board.
Feedback was
shared and
discussed with the
Board at its March
2024 meeting.
Topics covered in the performance review
• Board composition and expertise;
• stakeholder engagement;
• Board dynamics;
• Board support and meeting management;
• performance of the Board’s Committees;
• Board’s strategic and operational oversight;
• risk management and internal control;
• succession and talent oversight; and
• priorities for change.
Findings from the 2024 review and
recommendations
The overall finding of the review was that the Board had
continued to perform strongly and had benefitted from the
leadership provided by the Chair. The Board agreed to focus
on a number of areas including:
• continued oversight on the performance of Action and
other longer-term hold assets, and ensuring the Board
developed and maintained appropriate mechanisms to
satisfy itself in this regard;
• maintaining oversight over the rest of the Private Equity
and Infrastructure portfolio;
• non-executive Director succession planning; and
• the form and process for the FY2025 performance review.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation
3i Group plc | Annual report and accounts 2024
114
Findings from the 2023 performance review
Actions and steps taken
The value of the January 2023 meeting with Action senior
management and that this should be a more regular event.
In January 2024, the Board and Committee meetings were held
in Amsterdam and included meetings with Action senior
management, visits to the Action headquarters and an Action
store. The Board also met with the Benelux investment teams.
The importance to the Board of visits and meetings
with 3i’s other significant overseas investment teams,
visiting one of them each year as time permitted.
In March 2024, Board and Committee meetings were held in
3i’s New York offices and included presentations from New
York team members and US-based portfolio companies.
To continue focus on employee capability
and development.
This was addressed in the annual organisational capability and
succession planning review and on the Strategy day. This was
supplemented by increased reporting to the Board from the Chair
of the Remuneration Committee.
The Board’s size and composition was broadly
appropriate. The Board agreed that following the
appointment of Stephen Daintith as the Audit and
Compliance Committee Chair it would, in due course,
be appropriate to search for a potential successor to him.
Russell Reynolds, an independent search firm, has been engaged
to assist in the search for a new non-executive Director. The
Directors agreed that any such recruitment process would include
focus on diversity in its widest form, alongside finding a candidate
with the appropriate skills and qualifications.
A desire to hear from more external speakers on
topics of relevance and interest.
Directors received a presentation from Bain on artificial intelligence
and from a senior Bank of America economist on developments in
the US economy and its outlook. Presentations were given by the
CEOs of Cirtec, SaniSure and WilsonHCG. In addition, members of
the Private Equity team presented to the Board on ESG, data
analytics and other topics during the year.
To maintain oversight of the Group’s approach
to sustainability.
Over the year the Directors received presentations on the
science-based targets and their impact on the Group and the
portfolio, on sustainability reporting requirements and on
sustainability matters within portfolio companies.
Directors review of the performance of the Chair
In her role as Senior Independent Director, Lesley Knox led a review by the Directors of the performance of the Chair which was also
facilitated by a questionnaire and summary results report prepared by the Company Secretary. Ms Knox subsequently reported back
to the Board on the review and provided feedback to the Chair.
Read more on page 117
Nominations Committee report
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Board performance review continued
3i Group plc | Annual report and accounts 2024
115
Nominations Committee report
David Hutchison
Committee Chair
What the Committee reviewed in FY2024
• Board and senior management succession
– Chair tenure
– Contingency Executive Director succession plan
– Board and senior management succession plans
• Board and Chair evaluation
• Size, balance and composition of the Board
Committee membership
Meetings
David Hutchison (Chair)
1(2)
Stephen Daintith
2(2)
Lesley Knox
2(2)
Coline McConville
2(2)
Peter McKellar
2(2)
Alexandra Schaapveld
2(2)
The column above headed “Meetings” shows the number of meetings of the Committee attended
by each member during the year, together with, in parentheses, the number of meetings they were
entitled to attend. As explained in this report Mr Hutchison did not attend the meeting which included
discussion of the Chair’s tenure and performance.
I am pleased to present the
Nominations Committee report
for the year ended 31 March
2024. My report explains the role
of the Committee and its
work this year.
Dear Shareholder
Role and purpose of the Committee
The Committee’s principal role is to monitor the size, balance and
composition of the Board to ensure that it has the necessary skills and
experience to enable the Group to deliver its current and future
strategic objectives. In doing so it ensures that plans are in place for
orderly succession for both the Board and senior management
positions, including contingency plans for unanticipated events. It
also reviews the Company’s work on diversity, equity and inclusion.
The Committee’s discussions are complemented by discussions at
meetings of the full Board where appropriate.
Directors
Directors’ biographical details are set out on pages 102 and 103.
All Directors are subject to re-appointment every year. Accordingly,
at the AGM to be held on 27 June 2024, all the Directors will retire
from office and, being eligible, will seek re-appointment. The Board’s
recommendation for re-appointment of Directors is set out in the
2024 Notice of AGM.
Caroline Banszky retired from the Board at the end of the 2023 AGM
and there were no changes to the membership of the Board this year.
Throughout the year Lesley Knox continued to serve as Senior
Independent Director. As Senior Independent Director, Lesley
provides support to me, acts as an intermediary with the other
Directors, if necessary, and oversees my appraisal and review of
tenure by the other Directors. Lesley is also available to the
Company’s shareholders to address any concerns they have been
unable to resolve through me, Simon Borrows or James Hatchley
or where they consider these channels to be inappropriate.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
3i Group plc | Annual report and accounts 2024
116
Appointments and appointment process
We maintain a structured and transparent procedure for identifying
the requisite skills and experience, evaluating suitable candidates,
and appointing new Directors. For non-executive Directors, the
assessment process includes an evaluation of their availability to fulfil
their roles. Recommendations for appointments require Board
approval. There have been no non-executive Director appointments
this year. However, the Committee has appointed Russell Reynolds,
an external search consultancy, to assist in the next appointment
process and the search is ongoing. The Committee conducted a
review of its appointment process and confirmed its continued
appropriateness.
Succession planning for the Board
The Committee considers long-term succession planning as part of
ensuring an appropriate level of refreshment and diversity on the
Board. Our approach to succession planning seeks to ensure that
retirements are planned for and occur in a coordinated manner. This
mitigates risks to the Company’s strategic objectives by avoiding
gaps in key skills or a lack of continuity. The Committee believes that
length of service will not necessarily compromise the independence
or contribution of Directors of 3i. The Nominations Committee
evaluates the appropriate balance between the retention of the
corporate memory of the Company (including detailed knowledge of
portfolio companies in which it has been invested for many years), with
maintaining a suitable rate of refreshment at any given point in time.
The Board and Nominations Committee have carefully considered
the question of Chair tenure as detailed on page 100. In my absence
the Nominations Committee, chaired by the Senior Independent
Director, reviewed my tenure as Chair in March 2024. Further details
are set out here in the Report from the Senior Independent Director
and in the Corporate Governance statement on page 100.
The Board also recognises that in providing leadership, governance,
challenge and support it must, when considering the Chair tenure,
take account of matters including: the importance of Director
independence; the need to periodically refresh the Board and its
leadership; knowledge and understanding of the Company’s
investment business and its strategic objectives; as well as diversity,
continuity and retention of corporate memory. We believe that
an appropriate balance of all these factors is essential both for
the effective functioning of the Board and the delivery of the Board’s
purpose. At times this may result in some longer-serving Directors,
including the Chair.
Report from the Senior Independent
Director on the Committee’s annual
review of Chair’s tenure
David Hutchison, who was appointed as Chair of the Board
in November 2021, has now served as a Director for more
than ten years. This does not comply with the provisions of
the UK Corporate Governance Code (“the Code”) and a full
explanation of the background to David’s appointment as
Chair and why the Nominations Committee and the Board
believe it appropriate for the Chair to continue in office is
therefore set out on page 100.
The Board and Nominations Committee are aware of the risks
to good corporate governance which could follow from
excessive Chair tenure. As one of the measures adopted to
mitigate this risk the Nominations Committee has decided
that it will review annually the continued appropriateness of
the Chair’s appointment. This review is led by the Senior
Independent Director and will take place in the absence of
the Chair.
The first such review, led by me, took place in March 2023
and a further review was conducted in March 2024.
The Nominations Committee discussed the reasoning
behind the provisions of the Code limiting Chair tenure,
reviewed the circumstances of David Hutchison’s
appointment as Chair and reviewed his performance in this
role over the past year. This review was conducted in parallel
with the annual Chair evaluation which acts as a further
mitigant to the risks associated with tenure beyond nine years.
At the 2023 AGM, over 91% of shareholders who voted at the
AGM voted in favour of David Hutchison’s continued
appointment. To date, no shareholders have expressed any
concerns to the Company relating to David’s continued
appointment. This year’s review concluded that David
continued to perform effectively as Chair, continued to
exercise objective judgement and continued to appropriately
promote constructive challenge amongst Board members.
The Committee noted the very favourable results from the
Chair evaluation review, in particular David’s thoughtful and
respectful approach and ability to build strong relationships
with fellow non-executive Directors, Executive Directors and
wider management whilst promoting constructive challenge.
The Nominations Committee also noted that in the context
of a company where long-term knowledge of the business
and its portfolio companies was of great importance, David’s
continued appointment was all the more appropriate. The
Committee concluded unanimously that David’s continued
appointment for the coming year was in the best interests of
the Company.
Lesley Knox
Senior Independent Director
8 May 2024
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Nominations Committee report continued
3i Group plc | Annual report and accounts 2024
117
Diversity and inclusion
The Board strongly supports the principle of boardroom diversity and
actively promotes diversity, inclusion and equal opportunity in 3i. The
Board’s aim is to have Directors who have an appropriate mix of skills,
experience and knowledge and who are diverse in terms of gender,
social and ethnic backgrounds, as well as cognitive and personal
strengths. When we engage external consultancies to assist with
Director appointments, they are instructed to put forward a diverse
range of candidates for consideration from which the Board can
make appointments on merit and against objective criteria.
The Board currently comprises nine Directors of whom four are
women. This exceeds the 40% female gender diversity target set by
the FTSE Women Leaders review. The Board meets the Parker
Review recommendation of having at least one Director from a
minority ethnic group.
During the year the Committee reviewed the Company’s Equal
Opportunities and Diversity policy and decided that no changes to
the policy were required at this time. The Committee also reviewed
the Company’s diversity, equity and inclusion activities during the
year and considered how the Company’s Equal Opportunities and
Diversity policy had been implemented. Further details are set out in
the Sustainability report on pages 52 and 55.
The Committee reviews and monitors initiatives aimed at developing
a diverse pipeline of talent within the Company below Board level
through the succession planning process referred to above and the
appointments process. When hiring, we seek to recruit on merit from
a diverse pool of candidates.
Whilst we take a long-term approach to improving the diversity of our
workforce and are committed to creating an inclusive culture in which
both existing and newly-recruited staff can reach their potential,
regardless of their sex, gender, social or ethnic backgrounds, the
challenge nonetheless remains that there is a limited size talent pool,
particularly at senior levels, within an extremely competitive market.
The gender balance of our employees and our senior managers
is reported in more detail in the Sustainability section on page 53.
At 31 March 2024, our employees were 59.4% male and 40.6%
female. The under-representation of women in senior management
and investment roles at 3i is an issue we share with much of the
private equity and alternative asset investment sector. Nonetheless,
3i continues to focus on increasing the number of women in these
roles, whilst recognising that significant change will take time to
achieve. As at 31 March 2024, 29.2% of Executive Committee plus
their direct reports who were senior managers were female (for
further information and details on how this figure is calculated see
page 53 of the Sustainability report).
As at 31 March 2024, approximately 15% of 3i’s total UK employees
declared to have an ethnic minority (excluding white minority)
background. The proportion of our UK-based employees from an
ethnic minority (excluding white minority) background in mid to
higher salary brackets was approximately 16%.
The Company participates in a number of diversity, equity and
inclusion initiatives, details of which are contained in the Sustainability
section on pages 53 and 54.
Diversity of individuals on the Company’s Board and in executive management
In accordance with LR 9.8.6 R (9) of the FCA Listing Rules the Board confirms that, as at 31 March 2024, the Company met the targets
set out in that rule in that at least 40% of the Board were women, that at least one of the specified senior positions on the Board
(the Chair, the Chief Executive, the Senior Independent Director or the Chief Financial Officer) was held by a woman and that at least
one Director was from a minority ethnic background. There have been no changes to the Board since 31 March 2024 which would
affect the Company’s ability to meet these targets.
In accordance with LR 9.8.6 R (10) of the FCA Listing Rules, the following tables set out data, as at 31 March 2024, on the ethnic
background and the gender identity or sex of the individuals on the Company’s Board and in its executive management.
Number
of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number
in executive
management
Percentage
of executive
management
Gender identity or sex
Men
5
56%
3
9
90%
Women
4
44%
1
1
10%
Not specified/prefer not to say
–
–
–
–
–
Ethnic background
White British or other white (including minority-white groups)
8
89%
4
6
60%
Mixed/Multiple ethnic groups
–
–
–
–
–
Asian/Asian British
1
11%
–
1
10%
Black/African/Caribbean/Black British
–
–
–
–
–
Other ethnic group including Arab
–
–
–
–
–
Not specified/prefer not to say
–
–
–
3
30%
The tables above include data for three individuals who are included in both the Board and executive management. The Company’s approach to collecting the data used for the purposes of the above disclosures was
to use data on gender or sex from our employee records and to ask the individuals which ethnic background was applicable to them together with permission to use it for this purpose, save where individuals were
located in non-UK jurisdictions where we believe it would be inappropriate or unlawful to make such a request.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Nominations Committee report continued
3i Group plc | Annual report and accounts 2024
118
Composition of the Board
at 8 May 2024
Tenure
l 22% >9 years
l 22% 6-9 years
l 11% 3-6 years
l 45% 1-3 years
l 0% 0-1 years
Ethnicity
l 11% Ethnically
diverse
l 89% Not
ethnically diverse
Gender diversity
l 44% Women
l 66% Men
Directors’ skills, experience and knowledge
The Directors have a range of core skills, experience and knowledge
which enable them to effectively support and appropriately challenge
management on the delivery of 3i’s strategy. These skills include the
following:
• Audit and finance
• Financial services and global markets
• Investment trusts and asset management
• Consumer/Commercial
• Remuneration
• Sustainability
• Digital
• UK plc governance
• Prior CEO/CFO/CIO
Training and advice
The Company has a training policy which provides a framework within
which training for Directors is planned with the objective of ensuring
Directors understand the duties and responsibilities of being
a director of a listed company and are updated on developments
that particularly impact 3i. All Directors are required to keep
their skills up to date and maintain their familiarity with the Company
and its business.
On appointment, all non-executive Directors participate in an
extensive induction programme. They have discussions with the Chair
and the Chief Executive. This is followed by briefings on: strategy;
finance; Private Equity and Infrastructure including portfolio assets;
external funds and co-investment and legacy funds; HR,
remuneration and carry schemes; and legal, regulatory and
compliance matters including the responsibilities of Directors. The
Company provides opportunities for non-executive Directors to
obtain a thorough understanding of the Company’s business by
meeting members of the senior management team who in turn
arrange, as required, visits to investment or support teams.
In the year, Directors received presentations on data and generative
AI and the US economy, in addition to presentations given by the
CEOs and Private Equity investment teams of a number of portfolio
companies. They also received, during the course of Board and
Committee meetings, updates on developments in relation to
regulatory matters, ESG, risk, financial and other reporting
requirements and the UK and global tax environment. Directors have
the opportunity to suggest additional subjects for presentations
where they believe it would be helpful. All non-executive Directors
have the opportunity to access the Company’s compliance e-training
modules which are used to train the Company’s employees on
regulatory compliance matters.
The Company has procedures for Directors to take independent
legal or other professional advice in relation to the performance
of their duties. In addition, Directors have access to the advice
and services of the Company Secretary, who advises the Board,
through the Chair, on governance matters.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Nominations Committee report continued
3i Group plc | Annual report and accounts 2024
119
Activities in the year
Board and senior
management
succession
Size, balance and composition of the Board,
and non-executive Director appointments
Whilst there were no new non-executive Director appointments
during the year, the Committee has continued to keep the size,
balance and composition of the Board under review.
Immediately following the 2024 AGM, the Board will continue to
comprise nine Directors, being the Chair, three executive
Directors and five independent non-executive Directors.
The Committee remains of the view that a
nine or 10 member Board is an appropriate
size of Board for the Company and that the
Board has the right balance of skills and
experience. The Committee decided that
whilst there was no immediate need for
non-executive Director recruitment, in the
interests of long-term succession planning
it commenced a search process for a
further non-executive Director to join the
Board during FY2025. This process is
ongoing.
Contingency Executive Director succession plan
The Committee reviewed its short-term contingency succession
plans for scenarios where any of the executive Directors were
unexpectedly unable to carry out their duties.
The Committee noted the existing
contingency arrangements for
circumstances where any of the executive
Directors suddenly became unable to carry
out their duties. No changes to these
arrangements were recommended.
Senior management succession plans
In relation to succession planning below Board level, and as part of
the Board’s work to support the development of a diverse pipeline
of talent, the Committee and the Board considered and discussed
the 2024 Group Succession Planning and Strategic Capability
Review, which was presented to the Directors by relevant Executive
Committee members and the Chief Human Resources Officer. This
annual review identifies development and succession plans for key
staff, including all members of the Executive Committee and their
direct reports, with details of short-term contingency arrangements
in case of a sudden vacancy, planned successors and identification
of those who, with further experience, could be potential longer-
term successors.
The Board and the Committee were able
to satisfy themselves as to the
appropriateness of the succession
planning process in place for senior
positions within the Group.
What was discussed
What the Committee did
Outcome
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Nominations Committee report continued
3i Group plc | Annual report and accounts 2024
120
What was discussed
What the Committee did
Outcome
Board
performance
review
Details on how the annual Board performance review process was
conducted and areas covered are on pages 114 and 115. The
evaluation process for the year was conducted internally led by the
Chair supported by the Company Secretary.
The Committee reviewed the evaluation process which had been
followed in the year with a view to identifying whether any changes
or improvements should be made for future years.
Details on the outcome of the evaluation
are set out on pages 114 and 115. The
evaluation process informed the
development of the Board’s rolling agenda
for the subsequent year and confirmed the
Board’s key strategic priorities and
objectives.
The Committee and the Board agreed that
further consideration should be given over
the coming year to evaluation
arrangements going forward including
benchmarking for external facilitators to
conduct the Board’s next externally
facilitated evaluation process.
Review of
Chair tenure
The Committee keeps the continued tenure of the Chair under
regular review. This process is led by the Senior Independent
Director and is particularly important given that the Chair has served
as a Director for in excess of nine years.
Details of the review are set out on page
117 in the report from the Senior
Independent Director. The Committee
concluded that the Chair’s continued
appointment for the coming year was in
the best interests of the Company.
David Hutchison
Chair, Nominations Committee
8 May 2024
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Composition, succession and evaluation continued
Nominations Committee report continued
3i Group plc | Annual report and accounts 2024
121
Audit and Compliance Committee report
Stephen Daintith
Committee Chair
What the Committee reviewed in FY2024
• Financial and non-financial reporting
• External audit
• Internal control, compliance and risk management
• Risk review
Committee membership
Meetings
Stephen Daintith (Chair)
6(6)
Coline McConville
6(6)
Alexandra Schaapveld
6(6)
Caroline Banszky1
1(1)
1
Ms Banszky retired from the Board on 29 June 2023.
The column above headed “Meetings” shows the number of meetings of the Committee attended by
each member during the year, together with, in parentheses, the number of meetings they were entitled
to attend. Other regular attendees at the Committee meetings include the following: the Chair; Chief
Executive; Group Finance Director; Chief Operating Officer; Company Secretary; Director of Group
Reporting and Valuations; Head of Internal Audit; Head of Group Compliance; and the External auditor,
KPMG LLP.
.
I am pleased to present the Audit
and Compliance Committee report
for the year ended 31 March 2024.
This is my first report and I would
like to thank the previous
Committee Chair, Caroline Banszky,
for her stewardship of this role over
the last nine years. My report
explains the Committee’s work this
year.
Dear Shareholder
We held six regular scheduled meetings this year, four of
which were coordinated with 3i’s external reporting timetable.
On 24 May 2023, the Financial Reporting Council (“FRC”) launched a
consultation regarding the Corporate Governance Code and our
response endorsed the views of the General Counsel 100 (“GC100”)
to the proposed changes to the Code. Subsequent to this
consultation, the FRC published a revised version of the UK
Corporate Governance Code 2024 ("revised Code") on 22 January
2024. The revised Code will apply to financial years beginning on or
after 1 January 2025, other than Provision 29, which will come into
effect for financial years beginning on or after 1 January 2026. We
welcome the revised Code and specifically the focus on the
effectiveness of material internal controls.
In addition to the Committee’s usual focus on internal controls and
the integrity of the Group’s financial reporting, this year the
Committee has overseen the implementation of a new financial
reporting key internal controls system, an important enhancement to
our existing control environment. The Committee will continue its
focus on internal material controls across the Group.
The revised Code states that the Audit and Assurance policy and
Resilience statement, which we published in 2021 and 2022
respectively in response to the Brydon Review, are no longer
required. On that basis we have removed the Audit and Assurance
policy from our Annual report and accounts this year, but will retain it
as a standalone document for internal purposes. The intention is that
the policy will be considered by the Committee as part of its review
of the effectiveness of 3i’s risk management and internal control
system; in particular, in its assessment of the scope and adequacy of
audit and assurance activities. We have, however, retained the
Resilience statement as we believe the Resilience statement provides
the user with important insight into how our business model remains
a going concern and viable over the short, medium and long-term
periods.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control
3i Group plc | Annual report and accounts 2024
122
In advance of each Committee meeting, I met with the Group
Finance Director, the Chief Operating Officer and the Heads
of Compliance and Internal Audit to discuss their reports as well as
any relevant issues. I also met privately with KPMG as part of my
ongoing review of their effectiveness and, periodically, with other
members of the 3i senior management team. I continue to have
regular discussions and planning meetings with management and
KPMG on delivering and effective audit.
The rest of the report sets out in detail the Committee’s activities
in the year. It is structured as follows:
• Governance
• Report on the year
• Areas of accounting judgement and control focus
• Risk management and internal control effectiveness
• Internal audit
• External audit
I look forward to engaging with you on the work of the Committee.
Stephen Daintith
Chair, Audit and Compliance Committee
8 May 2024
Audit and Compliance committee’s terms of reference
www.3i.com/investor-relations/governance/principal-board-committees
What the Committee reviewed in FY2024
Financial and non-financial reporting
• Annual and half-year reports and quarterly performance
updates
• Key accounting judgements and estimates
• Update on the relevant thematic reviews from the FRC
• Reviewed the Annual report to ensure that it is fair,
balanced and understandable, including APMs
• Going concern, Viability and Resilience statement
• Bond issuance and RCF extension
• ESG disclosure enhancements including TCFD reporting
and science-based targets
External audit
• Confirmation of the External auditor independence
• Policy and approval for non-audit fees
• FY2024 audit plan, including significant audit risks (being the
valuation of the unquoted investment portfolio and the
calculation of carried interest)
• Audit results report, including the results
from testing Key Audit Matters
• External auditor performance and effectiveness
Internal control, compliance
and risk management
• Review of 3i’s system of risk management and internal
control, including overseeing implementation of a new
financial reporting key internal controls system, replacing the
existing system
• Internal audit reports assessing internal control, processes,
fraud and matters relevant to financial reporting
• Review of the Viability statement and the supporting stress
test scenarios
• Update on cyber security and penetration tests
• Business resilience including IT and disaster recovery
• Annual staff verification exercise
• Audit and Assurance policy
Risk review
• Valuation reports and recommending the investment
portfolio valuation to the Board
• Review of investment themes from portfolio company
review process and portfolio performance including ESG
issues and risks
• Regular reviews of compliance with regulatory rules and
compliance monitoring findings
• Annual tax update and reports on tax policy and strategy
• Reports from the Group Risk Committee (“GRC”) and the
risk log
• Update on litigation matters
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Audit and Compliance Committee report continued
3i Group plc | Annual report and accounts 2024
123
Governance
All members of the Committee are independent non-executive
Directors. The Board believes members have the necessary range
of financial, risk, control and commercial experience required to
provide effective challenge to management. In particular, the Board
is satisfied that Stephen Daintith has recent and relevant financial
experience as outlined in the Code and the Committee as a whole
has competence relevant to the sector in which it operates.
The attendance of members at meetings is shown in the table
on page 122.
The Committee meets privately for part of its meetings and also has
regular private meetings with the External auditor, the Group Finance
Director, the Chief Operating Officer, the Head of Internal Audit
and the Head of Compliance in the absence of other members
of the management team.
Report on the year
The review work of the Committee in the past year is summarised in
the table on page 123. This work included the assessment and
evaluation of the areas of significant accounting judgement, and
monitoring the effectiveness of 3i’s risk management framework as
described in more detail later in this section. In addition, the
Committee focused on a number of topics, which are set out below.
Taxation
The Committee received an annual update from the Group Tax
Director on the Group’s taxation status which covered liaison with
fiscal authorities in the UK and other jurisdictions, relevant external
developments, and material tax projects.
Cyber security and IT
The Committee also received an annual update on cyber security and
key IT projects. There were no serious cyber incidents reported in the
year and the Committee noted the steps taken to improve 3i’s
detective and protective controls, and maintain staff training and
awareness on cyber security risks. The update on IT projects covered
a new AI policy and related oversight process; the continued
migration of “on-premise” data and services to cloud-based
solutions; the device refresh strategy; resilience and continuity
planning; and the roadmap for key systems projects, including the
replacement of the Treasury Management, HR and ERP systems.
Going concern and viability
The Directors are required to make a statement in the Annual report
and accounts as to 3i’s viability. The Committee provides advice to
the Board on the form and content of the statement, including the
underlying assumptions. In advance of the year-end the Committee
reviewed the Group’s proposed stress test scenarios to support the
going concern basis and Viability statement. At the year end, the
Committee evaluated a report from management setting out its view
of 3i’s viability and content of the proposed Viability statement.
This report was based on the Group’s strategic plan and covered
forecasts for investments and realisations, liquidity and gearing,
including forecast outcomes of the stress tests and forecast capital
and liquidity performance against an assessment of the Group’s risk
profile. It incorporated the 31 March 2024 valuations
and consideration of a range of economic outcomes. The Committee
discussed whether the choice of the three-year period remained
appropriate and concluded that it remained the most appropriate
period and provided more certainty on the Group’s performance due
to the nature of the Group’s business and its risk appetite to invest
in Private Equity and Infrastructure investments for a period of four
to six years, whilst acknowledging the reduced reliability of
assumptions in the later period of the plan. See our Resilience
statement on page 128 for further details.
The Directors believe the Group has sufficient financial resources
and liquidity, is well placed to manage business risks in the current
economic environment, and can continue operations for a period
of at least 12 months from the date of issue of these financial
statements. The Directors have also considered key dependencies
set out within the Risk management section including investment
and operational requirements.
Taking into account the assessment of the Group’s stress testing
results and its risk appetite statement on page 80, the Committee
agreed to recommend the Viability statement and three-year viability
period which was subsequently approved by the Board.
Audit and Assurance policy
3i first published an Audit and Assurance policy in FY2021, in
response to the recommendations of the Brydon Review published in
December 2019. We welcomed this initiative and anticipated that it
would eventually become a requirement under the UK government’s
planned audit and corporate governance reforms. The final version of
UK Corporate Governance Code 2024 published in January 2024,
however, does not include the requirement for such a policy nor its
publication.
Accordingly, the Committee has decided not to publish a policy
going forward, but to maintain one for internal purposes. The
intention is that the policy will be considered by the Committee as
part of its review of the effectiveness of 3i’s risk management and
internal control system; in particular, in its assessment of the scope
and adequacy of audit and assurance activities.
Areas of accounting judgement and control focus
The Committee pays particular attention to matters it considers
to be important by virtue of their complexity, level of judgement
and potential impact on the financial statements and wider business
model. Significant areas of focus considered by the Committee are
detailed on the next page, alongside the actions taken by the
Committee (with appropriate challenge from the External auditor)
to address them.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Audit and Compliance Committee report continued
3i Group plc | Annual report and accounts 2024
124
Areas of accounting judgement and control focus
Valuation of the
proprietary capital
investment portfolio
Area of significant attention
The most material area of judgement
and estimation in the financial statements,
and noted as a significant risk and Key Audit
Matter by the External auditor, relates to
the valuation of the unquoted investment
portfolio, which, at 31 March 2024, was
£20,690 million, or 92% of gross assets,
under the Investment basis.
In recognition of the importance of this
area, the Board has a Valuations Committee
to review the valuations policy, process
and application to individual investments.
The Valuations Committee provides
quarterly oral reports to the Audit and
Compliance Committee and the Board,
supported by the relevant minutes of the
Valuations Committee.
What the Committee reviewed and concluded
On behalf of the Board, the Committee received
and evaluated quarterly reports from the Chair of the
Valuations Committee and the External auditor, with
particular focus on the assumptions supporting the
valuation of unquoted asset investments, any
valuation uncertainties and the proposed disclosures
in the financial statements. Members of the
Committee also attend the Valuations Committee
meetings.
The detail on the key valuation considerations
and the review and challenge undertaken in the year
is included in the Valuations Committee report
on pages 131 to 135.
The Committee also reviewed and concluded that no
fair value adjustment should be made to the
investment entity subsidiaries’ NAVs and judgement
for control is appropriate for those investees and
funds consolidated within the Group.
Carried interest
payable
Area of significant attention
The valuation of the investment portfolio
is a primary input into the carried interest
payable and receivable balances, which
are determined by reference to the
valuation at 31 March 2024.
During the year the Group crystallised
£778 million of carried interest liability, with
the majority of payments being made to
participants in the Buyouts 2010-12 scheme.
What the Committee reviewed and concluded
Internal Audit reviews the carried interest balances
and carry plan distributions made to plan participants
before the payments are made. Summaries of the
work done are included in updates to the
Committee.
The Committee reviewed a summary of carried
interest payable as part of the overall summary
prepared by management to support the Annual
report and accounts 2024.
Fair, balanced and
understandable and the
presentation of 3i’s
reports and accounts
Area of significant attention
Under the Code, the Board should establish
arrangements to ensure the Annual report
presents a fair, balanced and
understandable assessment of the
Group’s position and prospects.
The Group prepares the non-GAAP
Investment basis financial statements
to provide a disaggregated view of the
underlying portfolio alongside the IFRS
basis to aid in the understanding of the
results and performance of the underlying
portfolio.
What the Committee reviewed and concluded
The Committee reviewed the half-yearly and annual
financial statements as well as the quarterly
performance updates with management, focusing
on the integrity and clarity of disclosures and
enabling the Board to provide the fair, balanced and
understandable confirmation to shareholders
in the Annual report and accounts 2024.
A report summarising the considerations for the
Annual report and accounts 2024 was reviewed
by the Committee in advance of the year end and
a summary of the detailed procedures undertaken
was prepared alongside the Annual report and
accounts 2024.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Audit and Compliance Committee report continued
3i Group plc | Annual report and accounts 2024
125
Internal audit
The Committee continued to monitor the scope, activity,
and resources of the Group’s Internal Audit function, including
approving the internal audit plan and assessing whether its operating
model remained effective and in line with relevant professional
standards. The Committee receives quarterly updates on internal
audit activity, including the results of reviews of 3i’s investment offices
and professional services teams; updates on outstanding agreed
actions from previous reports; and any changes to the audit plan in
response to business developments or new areas of higher risk.
In the absence of an external quality assessment in FY2024, the
Committee also received an effectiveness self-assessment from the
Head of Internal Audit which is designed to assist the Committee in
its monitoring of the function.
Based on reports and other evidence seen, and meetings held over
the course of the year, the Committee concluded that the Internal
Audit function remained effective.
External audit
The Committee has responsibility for making recommendations
to the Board on the appointment of the External auditor,
determining its independence from the Group and its management
and agreeing the scope and fee for the audit.
KPMG were appointed auditors of 3i Group plc for the year ending
31 March 2021, following a tender process in July 2018. Consistent
with the IESBA Code of Ethics, the current audit partner on the 3i
Group audit is expected to rotate after a maximum of five years.
Auditor independence
The Group has a policy for setting out what non-audit services can be
purchased from the firm appointed as External auditor or a member
of the firm’s network. The aim of the policy is to support and
safeguard the objectivity and independence of the External auditor
and to comply with the FRC’s Ethical Standards for auditors. It also
ensures that where fees for approved non-audit services are greater
than a pre-determined limit, they are subject to the Committee
Chair’s prior approval.
The policy permits certain non-audit services to be procured,
following approval, when the Committee continues to see benefits
for the Group in engaging KPMG. Examples of this include work:
• that is closely related to the external audit as described in para 5.36
of the FRC’s Ethical Standards;
• where a detailed understanding of the Group is required; and
• where KPMG is able to provide a higher quality and/or better
value service than other potential providers.
The key principle of our policy is that permission to engage
the External auditor will always be refused when a threat to
independence and/or objectivity is present or perceived or without
any proper safeguards in place. In line with the FRC’s Ethical
Standards, 3i will not generally use KPMG for any non-audit services
(unless explicitly permitted) that are not closely related to KPMG’s
role as 3i’s External auditor. This includes tax and legal, consulting
and investment-related services such as due diligence.
All proposals for services with KPMG must be forwarded to the Chief
Operating Officer in the first instance and will require approval by the
Chair of the Audit and Compliance Committee above a defined limit
and provided the work is not closely related to KPMG’s role as 3i’s
External auditor. Examples of services that require additional
approval include:
• the fee exceeds £100,000; or
• the service is work other than services closely related to KPMG’s
role as 3i’s External auditor.
Smaller engagements with fees of less than £100,000 and services
that are explicitly permitted and are not considered closely related
to the audit are approved by the Chief Operating Officer on behalf
of the Committee.
KPMG has reviewed its own independence in line with these criteria
and its own ethical guideline standards. This includes the review of
due diligence processes undertaken within the Group’s investment
activities. KPMG has confirmed to the Committee that following its
review it is satisfied that it has acted in accordance with relevant
regulatory and professional requirements.
Audit and non-audit fees
The total audit fee for the year was £3.1 million (2023: £2.8 million).
Non-audit fees paid to the External auditor were £0.4 million
(2023: £0.4 million). The Committee concluded that these fees fell
within its criteria for engaging KPMG and do not believe they pose
a threat to the External auditor’s independence or objectivity.
Assessing external audit effectiveness
The Committee reviews the effectiveness of KPMG through the
use of questionnaires completed by management, by considering
the extent of its contribution at Committee meetings throughout
the course of the year, and in one-to-one meetings.
The FY2024 evaluation also reviewed the quality of the audit process,
the use of KPMG’s valuation specialists to support the audit of the
portfolio valuations and the technical knowledge of the team.
The Committee concluded that the audit was effective and that
there should be a resolution to shareholders to recommend the
re-appointment of KPMG LLP at the 2024 AGM.
Risk management and internal control framework
The Committee is responsible, on behalf of the Board, for
overseeing the effectiveness of the Group’s risk management
and internal control system. The overall framework is reviewed by the
Committee in accordance with the Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting issued
by the FRC.
The GRC, Executive Committee and senior managers are required to
provide the Committee with regular updates on a range of topics to
enable the Committee to form a view on the Group’s principal risks,
risk mitigation plans and any significant new risks, themes or
developments.
The GRC provides an update on the assessment of the Group’s
principal risks and new and emerging risks, together with details of
how these are being managed or mitigated in the context of the
Group’s strategic objectives and risk appetite. The reports also
include updates on key ESG risks and developments, both in relation
to the Group and the investment portfolio. Further details on can be
found in the Risk management section on pages 80 to 93.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Audit and Compliance Committee report continued
3i Group plc | Annual report and accounts 2024
126
The Committee receives a range of reports and information on the
operation of the Group’s system of internal control, including controls
over financial reporting. The Group’s external reporting is subject to
a well-established input, review and verification process, which the
Committee is briefed and consulted on.
Details of what the Committee reviewed can be found in the tables
on pages 123 and 125. A summary of the key control framework is set
out below.
Review of effectiveness
For monitoring and reporting purposes, a significant control
failure or weakness is defined as one resulting in or with potential
to result in a material misstatement in the financial statements or loss
to the business, or significant reputational damage, penalties or
sanctions.
Both the External and Internal Auditors provide the Committee with
details of their respective reporting frameworks, including materiality
limits and risk ratings. This is to ensure there is an understanding of
how the definitions are applied in evaluating the nature and severity
of any risk or internal control findings and the appropriateness
of remedial action plans.
The Committee’s review of the risk management and internal control
system takes into account the various updates and reports outlined in
this section. In addition, the Committee receives an annual risk and
internal control effectiveness review from Internal Audit and an end-
of-audit report from the External auditor. The Executive Committee,
supported by their direct reports, is also required to sign-off an
annual control attestation, the results of which are reported by
Internal Audit. The Committee also reviews the Group’s anti-fraud
programme and use of the whistle blowing facility.
The Committee performed its annual review of the system’s
effectiveness and reported its conclusions to the Board. The Board
noted that the system has been in place for the year under review
and up to the date of approval of this Annual report and accounts
2024, and that there had been no significant control failings or
weaknesses which required remedial action.
Summary of key control framework
Investment process
Investment portfolio companies
Investment portfolio management
• Due diligence process
• Investment procedures
• Investment Committee review and approval
• ESG assessment
• Responsible Investment policy
• 3i board representatives
• Active management of senior appointments
• Minimum ESG requirements
• Procedures for portfolio management
• Monthly portfolio company dashboards
and performance monitoring
• Six-monthly investment and portfolio
company reviews, including reporting against
ESG requirements
Viability and going concern
Valuations process
Financial reporting
• Stress testing methodology and modelling
• Analysis of assets and liabilities
• Capital adequacy review process
• Group strategy and liquidity forecasting
models
• Approved Valuations policy
• Investment and portfolio company review
processes
• Central oversight by the Valuations team,
Investment Committee and Valuations
Committee
• Framework of key financial controls
and reconciliations
• Portfolio, fund and partnership accounting
processes
• Documented analyses of complex
transactions and changes in accounting
requirements and disclosures
• Operating expense budget
People and culture
Advisory relationships
Third-party service suppliers
• Values framework and HR policies
• Performance management framework
• Remuneration policies
• Conduct and compliance policies
and monitoring
• Succession planning process
• Pre-approved suppliers of investment
due diligence services
• Tendering and approval process
for other advisers, eg legal, tax
• Monitoring of performance and patronage
• Confidentiality and conflicts management
• Use of 3i’s Supplier Relationship Management
tool
• Required contractual protections, eg data
security and business continuity
• Oversight and governance frameworks
for critical suppliers
• Independent service organisation reports
Balance sheet management
Change management
IT systems and security
• Treasury policy and control framework
• Liquidity monitoring framework
• Fund transfer and release controls
• Portfolio concentration and vintage control
monitoring framework
• FX hedging programmes
• Approval process for changes to corporate
structure or new products/business areas
• Ongoing monitoring of legal and regulatory
changes
• Active participation and engagement with
government, regulators and trade bodies
• Business systems project governance and
oversight
• IT governance and policy framework
• Access and data security controls
• Back-up and disaster recovery procedures
and testing
• IT and cyber security monitoring and control
framework, and regular penetration tests
• Staff cyber security awareness training
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Audit and Compliance Committee report continued
3i Group plc | Annual report and accounts 2024
127
Resilience statement
Our resilience is dependent on the success
of our investment strategy, careful management
of our balance sheet and costs, and the ability
to attract and retain a capable and diverse team.
This is underpinned by a strong institutional culture
and values, robust corporate governance, and
effective risk and operational management.
The success of our investment strategy, in particular, requires a long-
term, responsible and risk-based approach to building a resilient
portfolio with strong growth potential, and maintaining and
developing the expertise, relationships and institutional culture
to support this. This foundation supports 3i’s ability to generate
attractive returns through sustainable growth.
Our resilience assessment draws upon a number of interdependent
components, illustrated below. Further information can be found
in the sections on the Group’s business strategy (pages 12 to 17),
Approach to risk management (pages 80 to 93) and Sustainability
(pages 39 to 68).
Resilience
assessment
People
Portfolio
Net asset value
Liquidity
Sustainability approach
Stress test scenarios
• Economic downturn
• Concentration
• Geopolitical crisis
• Climate change
Principal risks analysis
Long-term risks
and opportunities
3i business model
Investment Committee
Investment strategy and
Responsible Investment policy
Megatrends/investment themes
Demographic and social change
Value-for-money and discount
Digitalisation, automation
and big data
Energy transition, energy security
and resource scarcity
Strategy and risk
assessment
Strategic objectives
and Key performance
indicators
Short to medium-term
risk assessment
• External environment
• Investment outcomes
• Operational
Longer-term
risk assessment
• Climate/environmental
• Geopolitical
• Societal and demographic
• Technological
• Economic
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
3i Group plc | Annual report and accounts 2024
128
Short-term resilience
In assessing our short-term resilience, we undertake regular portfolio
monitoring, including six-monthly strategic portfolio company
reviews and monthly trading updates for each portfolio company.
These reviews highlight and appraise sources of risk at a portfolio
company level and feed into the quarterly valuation process.
Regular portfolio updates are provided to the Board and Audit
and Compliance Committee.
We also carry out periodic assessments of the Group’s operational
resilience, including key people risks, IT systems and security
infrastructure, and critical third-party suppliers.
Active management of liquidity underpins our short-term resilience,
which is supported by the ready availability of short-term funding
and a conservative balance sheet policy that ensures a low level
of structural gearing at the holding company level.
The identification of material uncertainties, that could cast significant
doubt over the ability of the Group to continue as a going concern,
forms the basis of the Directors’ Going concern statement below.
Going concern statement
Going concern is assessed for a period of at least 12 months
from the date of approval of the Annual report and accounts.
The Directors are required to evaluate whether the Group has
adequate resources to continue in operational existence for at
least the next 12 months. The Directors have made an assessment
of going concern, taking into account both the Group’s current
performance and outlook using the information available up
to the date of issue of these financial statements.
In carrying out their assessment of going concern and short-term
resilience, the Directors considered a wide range of information,
including:
• details of the Group’s strategy, risk appetite, and business
and operating models;
• information on the Group’s principal risks and mitigation plans;
• a summary of the financial position considering performance; and
• current market volatility and geopolitical and economic
uncertainties.
The Group monitors its funding position and its liquidity risk
throughout the year to ensure it has access to sufficient funds
to meet forecast cash requirements.
At 31 March 2024, the Group remained well funded with liquidity
of £1,296 million (31 March 2023: £1,312 million). Liquidity comprised
cash and deposits of £396 million (31 March 2023: £412 million)
and undrawn RCF of £900 million (31 March 2023: £900 million).
During the year, we successfully issued a six-year €500 million bond at
a coupon of 4.875% and extended the tenor of the £400 million
tranche of our £900 million RCF to November 2026. The Group
monitors its liquidity regularly, ensuring it is adequate and sufficient.
This is underpinned by the monitoring of investments, realisations,
foreign exchange hedging (including the liquidity impact of the
Group hedging programme implemented last year), operating
expenses and receipt of portfolio cash income.
Liquidity is also central to the Group’s dividend policy to maintain
or grow the dividend year-on-year. This policy is subject to
maintaining a conservative balance sheet approach and is therefore
informed by the outlook for investment and realisation levels.
Allowing the Group to exercise discretion over the level of dividends
paid ensures that the Directors can recommend a sustainable
dividend which takes into account the need to maintain liquidity
for new investment and operating expenses.
The Directors have acknowledged their responsibilities in relation
to the financial statements for the year to 31 March 2024. After
making the assessment on going concern and short-term resilience,
the Directors considered it appropriate to prepare the financial
statements of the Company and the Group on a going concern basis.
The Group has sufficient financial resources and liquidity and is well
positioned to manage business risks in the current economic
environment and can continue operations for a period of at least
12 months from the date of this report. The Directors have concluded
that there are no material uncertainties or risks that could cast
significant doubt over the short-term resilience of the Group
or its ability to continue as a going concern over the duration
of that period based on investment and operational requirements.
Medium-term resilience
The assessment of medium-term resilience, which includes
the modelling of stress tests and reverse stress tests, considers
the viability and performance of the Group in the event of specific
stressed scenarios which are assumed to occur over a five-year
horizon in line with the Group’s strategic planning process.
The stress testing focuses upon the principal risks, but also
considers those new and emerging risks which are considered to be
of sufficient importance to require active monitoring by the GRC;
these include, for example, concentration risk in the portfolio and
the impact of climate change. The medium-term resilience of the
Group is examined through analysing the impact of these scenarios
on key metrics such as net asset value and liquidity.
In each stress test scenario, the Group remains viable. The medium-
term resilience of 3i is further supported by the availability of
controllable management actions that can mitigate the impact
of certain stress events. These actions include, for example,
the flexing of investment and dividend levels for liquidity purposes.
Viability statement
The stress testing as detailed above forms the basis of the Viability
statement. 3i conducts its strategic planning over a five-year period;
the Viability statement is based on the first three years, which reflects
the nature of the Group’s business and its risk appetite to invest in
Private Equity and Infrastructure investments for a period of four to
six years and, therefore, provides more certainty over the forecasting
assumptions used. The Directors assess 3i’s viability and medium-
term resilience over a three-year period from the date that the
Annual report and accounts is approved. 3i’s strategic plan and
associated principal risks, as set out on pages 85 to 93, are the
foundation of the Directors’ assessment.
The assessment is overseen by the Chief Operating Officer and Group
Finance Director and is subject to challenge by the GRC, review by the
Audit and Compliance Committee and approval by the Board.
Overview
and strategy
Business
review
Sustainability
Performance
and risk
Governance
Audited financial
statements
Portfolio and
other information
Audit, risk and control continued
Resilience statement continued
3i Group plc | Annual report and accounts 2024
129
The Group’s strategic plan projects the performance, net asset value
and liquidity of 3i over a five-year period and is presented at the
Directors’ annual strategy meeting in December and updated during
the year as appropriate. At the strategy meeting, the Directors
consider the strategy and opportunities for, and threats to, each
business line and the Group as a whole. The outcome of those
discussions is included in the next iteration of the strategic plan which
is then used to support the assessment of viability and medium-term
resilience. The current iteration of the strategic plan reflects the
current macro-economic headwinds and geopolitical uncertainty.
The Group’s viability testing considers multiple severe, yet plausible,
individual and combined stress scenarios. These scenarios include a
range of estimated impacts, primarily based on providing additional
support to portfolio companies as a result of a downturn and
delaying the Group’s ability to realise and make new investments.
A key judgement applied is the extent of the impact of certain market
and economic developments, including the outlook on interest rates,
inflation and economic growth. The scenarios tested are as follows:
• widespread economic turmoil – considers the impact of
a recession, triggered by persistent inflation, high interest rates
and weak consumer demand, with a significant impact
on valuations and realisations;
• concentration risk – considers a material adverse event affecting
a single large asset in the investment portfolio;
• combined scenario with widespread economic turmoil and
concentration risk – considers both scenarios occurring at the same
time;
• impact of a significant event – considers the impact of a loss in
value of certain portfolio companies following a material event
such as significant operational underperformance, covenant
breaches, fraud, a cyber security breach or other ESG issues; and
• climate change – considers the impact of climate change on
3i’s portfolio, driven by changes in consumer behaviour,
regulations, and other physical and business risks.
The assessment projects the amount of capital the Group needs
in the business to cover its risks, including financial and operational
risks, under such stress scenarios. The results of each of the stress test
scenarios indicate that the Group is able to meet its obligations as
they fall due for the viability period over three years from the date of
approval of these financial statements by, in certain cases, making
use of controllable management actions. In all these scenarios the
Directors expect the Group to be able to absorb the impact on NAV,
whilst the liquidity and solvency of the Group is protected.
Mitigating actions within management control include reducing new
investment levels, dividend levels and drawing on the existing RCF.
The analysis shows that, while there may be a significant impact on
the Group’s reported performance in the short term under a number
of these scenarios, the resilience and quality of the balance sheet is
such that solvency is maintained, and the business remains viable.
As part of the assessment of viability and medium-term resilience,
the Group also undertakes reverse stress testing to identify the
circumstances under which the Group’s business model would no
longer remain viable. These circumstances include a prolonged delay
in the projected realisation date of investments, at the same time as
continued investment by the Group at a level not supported by the
liquidity forecast. In the absence of any mitigating management
actions, these reverse stress tests determine the point at which the
Group would lack the liquidity to remain viable. Overall, the reverse
stress tests are sufficiently improbable as to provide a low risk
of impact to the Group’s viability and medium-term resilience.
In practice, in the event of a market downturn and a significant
delay in realisations, mitigating actions within management control
would be exercised to provide sufficient liquidity.
Taking the inputs from the strategic planning process and its stress
scenarios, the Directors reviewed an assessment of the potential
effects of 3i’s principal risks on its current portfolio and forecast
investment and realisation activity, and the consequent impact
on 3i’s capital and liquidity.
Based on this assessment, the Directors have a reasonable
expectation that the Company and the Group will be able to
continue in operation and meet all their liabilities as they fall due
up to at least the end of the three-year period of the assessment.
Long-term resilience
The long-term resilience of our business is underpinned
by our capabilities as a leading investor in Private Equity
and Infrastructure assets and our effective risk management of the
core elements of our business model (pages 14 and 15). This includes
our long-term responsible approach to investment, conservative
balance sheet strategy and an effective team built on a consistent
set of shared values.
Fundamental to our long-term resilience is our investment strategy.
We invest capital in businesses to deliver capital returns and portfolio
and fund management cash income to cover our costs, and increase
returns to our investors. Our long-term investment horizon is possible
because we have a permanent capital base and are not driven
by fundraising cycles. We adopt a sector and thematic approach
to origination and portfolio construction which in turn supports long-
term sustainable growth in the portfolio.
Crucially, this investment approach can be adapted in response
to new and emerging risks and challenges including climate change,
societal and demographic trends and technological changes. It also
informs decision taking on portfolio realisations enabling
the composition of the investment portfolio to evolve over time.
The analysis and management of our principal risks is focused on
the short to medium term, and used as a basis to develop a range
of stress test scenarios. Although these are modelled over a five-year
horizon, the resilience shown by the Group, and its ability to recover
from these stressed situations, supports the assessment of our
resilience over a longer term. The availability and effectiveness of
management actions employed in the stress testing scenarios
demonstrates the flexibility with which we can respond to new
and emerging risks.
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3i Group plc | Annual report and accounts 2024
130
Valuations Committee report
Peter McKellar
Committee Chair
Committee membership
Meetings
Peter McKellar (Chair)
4(4)
Simon Borrows
4(4)
Stephen Daintith1
1(1)
James Hatchley
4(4)
David Hutchison
4(4)
Lesley Knox
2(4)
Alexandra Schaapveld
4(4)
The column above headed “Meetings” shows the number of meetings of the Committee attended by
each member during the year, together with, in parentheses, the number of meetings they were entitled
to attend. Other regular attendees at the Committee include the following: Audit and Compliance
Committee Chair; Chief Operating Officer; Group General Counsel; Managing Partners of Private Equity;
Director of Group Reporting and Valuations; and the External Auditor, KPMG LLP.
1
Stephen Daintith stepped down from the Valuations Committee when he was appointed Chair
of the Audit and Compliance Committee at the end of the 2023 AGM.
I am pleased to present the
Valuations Committee report
for the year ended 31 March 2024.
My report explains the role of the
Committee, as well as the work we
reviewed this year.
Dear Shareholder
The Valuations Committee plays a key role in providing the Board
with assurance that the valuation methodology and process are
robust and independently challenged. During the year, we met
four times as part of the Group’s external reporting timetable.
We reviewed and challenged the assumptions behind management’s
proposed asset valuations and reported to the Audit and
Compliance Committee and the Board.
Our principal focus year-on-year is the Group’s unquoted
investments in Private Equity and Infrastructure, as a high level of
judgement is required to value this portfolio of assets. This portfolio
accounts for 96% of 3i’s investment portfolio. The valuation of the
Group’s largest Infrastructure investment, namely the quoted holding
in 3iN, represents 4% of 3i’s investment portfolio, and the valuation is
based on the share price of 3iN at the relevant balance sheet date.
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131
This year, we have predominantly focused on how our portfolio
companies have navigated adverse macro-economic headwinds such
as higher interest rates, inflation and weaker discretionary consumer
sentiment, as well as geopolitical instability that introduced further
volatility and uncertainty into capital markets. Whilst the majority of
our portfolio companies continue to mitigate these headwinds well
and demonstrate resilient trading, some of our portfolio companies
have seen prolonged weaker end-markets or company-specific
challenges. In these instances, alongside our usual rigour and
challenge of earnings and multiples, we have also applied particular
focus on the quality of the normalisations and the overall
maintainability of earnings. In setting our valuation multiples, we have
also applied particular focus and consideration to private market
transactions where there have been difficulties matching buyers and
sellers due to pricing misalignment, compared to quoted market
multiples which have largely seen a good recovery.
Valuations Committee’s terms of reference
www.3i.com/investor-relations/governance/principal-board-committees
At each Committee meeting, we received a detailed report from the
Group Finance Director and Chief Operating Officer recommending
the proposed valuation of the Group’s investment portfolio. This
report highlights the main drivers of value movement, analysed
between performance (movement in earnings and net debt), multiple
movements and other factors. At each meeting, we also reviewed
selected assets for detailed discussion; examples of such assets
covered during the year included Action, European Bakery Group,
Royal Sanders, SaniSure, Tato and WilsonHCG.
I met the Group Finance Director and Chief Operating Officer in
advance of each meeting to discuss the key valuation assumptions
and to review management’s paper before circulation. I also met
the External auditor, KPMG, privately to discuss the results of its
quarterly reviews. These reviews challenged management’s approach
to valuations, the selection of comparable companies and the
relevance of earnings adjustments. Additionally, KPMG selected
a sample of 13 assets, equivalent to 80% of the 31 March 2024
unquoted portfolio by value, across the half-year and full-year ends,
for an in-depth review by its specialist valuations team to help to
derive an independent valuation range. In March 2024, KPMG and
I discussed their approach to the year-end audit and their sample
of assets selected.
In advance of the full-year and half-year ends, management hold
portfolio company review (“PCR”) meetings with the respective
investment teams. Non-executive Directors, including myself, the
Chair and members of the Committee, attended a significant
proportion of the meetings held in September 2023 and March 2024.
Our valuation methodology and process remains consistent. The
valuation inputs for the Group’s portfolio companies are reviewed on
a case-by-case basis and considered against business plans, budgets,
shorter and longer-term views on trading, and sector performance.
Management considers various data points to support the fair value
of investments, including estimates of run-rate and forecast earnings
and the maintainability of these, in addition to historic earnings.
The judgements applied and resulting valuations were discussed
with the Committee and the External auditor throughout the year.
We embed an assessment of ESG factors on our portfolio companies
throughout our investment lifecycle. These assessments form part of
our normal portfolio management process, and as part of our PCR
process, which helps inform investment decisions, mitigation of risk
or value creation opportunities. Management continues to progress
the collection of quantitative and qualitative ESG data and the ability
to store and monitor it. As part of our case-by-case review of our
portfolio companies, the risks and opportunities from climate change
and other ESG factors are an important consideration in the overall
discussion on fair value.
By count, we have a relatively small portfolio of assets, which allows
us to challenge each valuation on an individual basis. We welcome
the FCA’s upcoming review of the disciplines and governance
around private market valuations. We believe our valuation
methodology and process are rigorous and robust and, given we are
a listed entity, we offer greater transparency on our valuation practice
for our shareholders, regulators and other interested parties.
The rest of this report sets out in more detail what the Committee
did during the year.
Peter McKellar
Chair, Valuations Committee
8 May 2024
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3i Group plc | Annual report and accounts 2024
132
The Committee focused on the following significant issues in FY2024:
Earnings and
multiple
assumptions
Area of significant attention
Of the total portfolio by value, 87% is valued using a
multiple of earnings at 31 March 2024, or 22% excluding
Action (see further detail on Action as an area of
significant attention on page 134). This requires
judgement, as the earnings of the portfolio company
may be adjusted so that they are considered
“maintainable”. We also apply a liquidity discount to the
enterprise value determined according to factors such as
our alignment with management and other shareholders
and our investment rights in the company. The liquidity
discounts vary between 5%-33% of the enterprise value
of each portfolio company.
There is also a significant degree of judgement in
selecting the set of comparable quoted companies and
transactions which are used as a key data point in
determining the appropriate multiple to calculate an
enterprise value. Multiples are selected by reference to
the market valuation of quoted comparable companies,
M&A transactions and input, in certain cases, from
corporate finance advisers. We also take into account
growth profile, geographic location, business mix,
degree of diversification, and leverage/refinancing risk.
The multiple implied by the quoted comparables may be
adjusted if, in certain cases, the longer-term view (cycle
or exit plan) supports the use of a different multiple. This
continues to be an important exercise given the market
volatility we have seen as a result of the macro-economic
environment. We continue to consider the impact of IFRS
16 and ASC 842 on the quoted comparable companies
for those assets that report under local GAAP.
Private Equity assets are typically valued using a multiple
of earnings. However, alternative valuation
methodologies, such as a DCF valuation or a sum-of-the-
parts, may be considered as an alternative benchmark for
potential values or as a cross-check relative to the
earnings-based valuation.
In the year, the Committee placed a key focus on:
• the budgets and projections for each portfolio
company versus performance, considering the
uncertainty around the macro-economic outlook;
• the maintainability of earnings across LTM, forecast
and run-rate earnings;
• the quality of earnings across the portfolio and the
impact of one-off related normalisation adjustments;
• portfolio company leverage and covenant monitoring;
and
• our long-term, through-the-cycle, view on multiples
against a challenging environment for private market
transactions and the recovery of capital markets and
the average of the quoted comparable peer sets.
What the Committee reviewed
and concluded
Earnings data is received monthly from Private
Equity portfolio companies and monitored
closely by management. Actual earnings may
then be adjusted in management’s proposed
valuations, for example, to reflect a full year’s
trading of an acquired business, removing profit
from discontinued activities, any forecast
uncertainty or to exclude exceptional transaction
costs. Material adjustments are highlighted to
the Committee in the quarterly report for review
and approval.
All multiples used by management have been
adjusted, where the longer-term view of the exit
or multiple supports the use of a different
multiple. At 31 March 2024, two portfolio
company valuation multiples, including Action,
were valued above their peer set averages but
remain well within the peer set range. Notable
changes in multiples, which commonly result
from significant bolt-on acquisitions, a change
in performance or a shift in market sentiment
in that sector, are presented to the Committee
quarterly and adjustments are reviewed by the
Committee at each meeting.
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3i Group plc | Annual report and accounts 2024
133
The Committee focused on the following significant issues in FY2024:
Action
Area of significant attention
Action forms 65% of the total portfolio by value. Valued
on a multiple of earnings basis, Action is the largest
investment for the Group and, therefore, its valuation
is a key area of focus.
Action’s run-rate earnings grew significantly in the
12 months to the end of Action’s P3 2024 (which ended
on 31 March 2024), driven by new store openings and
increased transaction volumes. All geographies
performed well, with a reduction in prices across 42% of
its catalogue in 2023, contributing to the strong growth in
volumes. Following the successful debut of a US dollar
term loan, Action returned £762 million of proceeds to 3i,
in addition to £375 million of cash dividends further to its
strong cash generation. 3i reinvested £455 million of
these proceeds, increasing its equity interest in Action
from 52.9% to 54.8%.
Action was valued using its run-rate earnings for the
12 months to P3 2024 of €1,848 million and a run-rate
multiple of 18.5x (31 March 2023: 18.5x) after applying
a liquidity discount of 5%.
When considering the multiple for Action we paid
particular attention to the following areas:
• the appropriateness of the comparable peers from
both a forward and backward-looking view; and
• the strength of Action’s performance across its key
performance indicators compared to its peers.
Management also cross-checked the earnings-based
valuation against a DCF model.
What the Committee reviewed
and concluded
The Committee noted Action’s impressive
performance in the year and noted the
momentum in its trading and strong like-for-like
sales growth.
The Committee reviewed the work done
by management on the comparable peer set
and Action’s relative performance across its
key performance indicators, as well as the
potential use of the DCF model.
The Committee agreed with management’s
approach of valuing Action on the basis of
a multiple of earnings, but noted that the
DCF model provides a useful reference point.
The Committee reviewed the run-rate
adjustments and earnings normalisations
to ensure a consistent valuation
methodology was applied.
Assets valued
using a DCF basis
Area of significant attention
For assets valued using a DCF basis, which represent
5% of the total portfolio by value, the key valuation
judgements relate to longer-term assumptions that drive
the underlying business plan and cash flows and
decisions on the appropriate discount rates.
EC Waste, Regional Rail, Scandlines and Smarte Carte
are the significant investments valued using a DCF
valuation basis. A DCF model also forms the most
significant input into an early-stage investment, ten23
health, which is valued on a sum-of-the-parts basis.
What the Committee reviewed
and concluded
Material assumptions for the DCF valuations
are reviewed by the Committee. Sensitivity to
assumptions is also noted. Any material changes
are reviewed by the Committee.
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3i Group plc | Annual report and accounts 2024
134
The Committee focused on the following significant issues in FY2024:
Imminent sale
assets
Area of significant attention
At any point in time, it is likely that a number of potential
exit processes from the portfolio are underway.
Judgement is applied by management as to the likely
eventual exit proceeds and certainty of completion. This
means that in some cases an asset may not be moved to
an imminent sales basis until very shortly before
completion; in other cases, the move may occur on
signing, even if the time to completion is a period of
some months. However, as a general rule an asset moves
to an imminent sale basis only when a process is
materially complete and the remaining risks are
estimated to be small, given the completion risk around
unquoted equity transactions.
In April 2024, we reached an agreement to sell nexeye for
expected proceeds of c.€452 million. The valuation at 31
March 2024 is in line with these proceeds, less a 2.5%
discount to reflect the residual execution risk.
What the Committee reviewed and
concluded
Active sales processes are reviewed by the
Committee, including details such as the
timeline to potential completion, the number
and make-up of bidders for investments,
execution and due diligence risks, and
regulatory or competition clearance issues.
Management proposes a treatment for each
asset in a sales process, which the Committee
reviews at each meeting.
Review process
As part of its challenge and review process, the Committee:
• considered the management information provided to support
the Committee’s review of the valuations, including management’s
responses to any challenges raised by Committee members or the
External auditor;
• sought assurance from the External auditor as to whether and how
they had considered the appropriateness of valuations and the
underlying assumptions made;
• reviewed the consistency of the views of management and
the External auditor and their valuation specialists; and
• reviewed and challenged the differential between carrying values
and those implied by the multiples of comparable quoted
companies and transactions.
The Committee was satisfied that the application of the valuation
policy and process was appropriate during the period under review,
and recommended the portfolio valuation to the Audit and
Compliance Committee and the Board at each quarter end
for approval by the Board.
In addition, the Committee is responsible for keeping the Group’s
valuation policy under review and recommending any changes to
the policy to the Audit and Compliance Committee and the Board.
The policy is reviewed at least annually, with the last update in
January 2024.
More information on our valuation methodology, including
definitions and rationale, is included in Note 13 – Fair values of
assets and liabilities on page 178 and in the Portfolio valuation –
an explanation section on page 217.
External audit
As part of its year-end audit, KPMG’s specialist valuations team
reviews a selection of investments to support its overall audit opinion
on the financial statements as a whole.
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3i Group plc | Annual report and accounts 2024
135
Directors’ remuneration report
Coline McConville
Committee Chair
Committee membership during the year
Name
Meetings
Coline McConville
6(6)
Caroline Banszky
3(3)
Alexandra Schaapveld
3(3)
Lesley Knox
5(6)
Peter McKellar
6(6)
The column above headed “Meetings” shows the number of meetings of the Committee
attended by each member during the year, together with, in parentheses, the number
of meetings they were entitled to attend.
The Chief Executive, the Company Chair, the Remuneration Director and the General Counsel &
Company Secretary attend Committee meetings by invitation, other than when their personal
remuneration is being discussed.
Dear Shareholder
This letter summarises the key Executive Director remuneration issues
considered by the Remuneration Committee in the year and
decisions we arrived at.
FY2024 Performance
3i delivered a strong FY2024 total return on opening shareholders’
funds of 23% (2023: 36%). The FY2024 scorecard, as set out in the
Annual report on remuneration, shows a mix in performance within
the quantitative section, with another year of excellent performance
from Action resulting in it materially overachieving against its target
range. The wider portfolio saw Infrastructure deliver above target
performance, with the Private Equity (ex Action) portfolio delivering a
7% return, below its threshold target of 10%. These strong results
were delivered in spite of challenging economic conditions during
the year.
We saw a modest recovery in the global economy in 2023 as the
fragile macro-economic environment and geopolitical uncertainty
persisted. Although inflation has begun to moderate, consumer
confidence remains strained, with a strong emphasis on affordability.
During the year, these dynamics supported substantial growth for our
value-for-money and private label portfolio companies. Notably,
Action, with its impressive performance, continued its growth
trajectory by expanding its store footprint across Europe. The
healthcare market saw a positive rebound and our Infrastructure
portfolio maintained its resilient performance.
Against the backdrop of a subdued M&A market in 2023, we
continued our disciplined approach to the deployment of capital,
investing a total of £593 million in FY2024, including a further £455
million of investment into Action to increase our stake from 52.9%
to 54.8%. Seven bolt-on acquisitions were completed in the Private
Equity portfolio, one of which required further investment of
£38 million.
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During the year, we made significant progress with our ESG agenda,
with a particular focus on our climate change strategy. We are
reporting for the first time in alignment with TCFD recommendations,
in compliance with FCA requirements, including aggregate portfolio
emissions. Additionally, our near-term science-based targets were
approved by the Science Based Targets initiative in March 2024.
Over the year, we delivered very strong total shareholder returns of
71%, the majority of which is based on our share price performance.
We also further strengthened our balance sheet and liquidity position
with the issue of a six-year €500 million bond.
FY2024 bonus outcomes
As reflected in our remuneration policy, when considering annual
bonuses, the Committee uses the scorecard outcome as a “prompt
and guide to judgement” and “has the discretion to adjust the
annual bonus outcomes, both upwards and downwards (where
significant adjustment is required), to ensure the outcome is a fair
reflection of the overall performance of the Company and the
individual”.
In considering an appropriate FY2024 bonus, reflective of overall
performance, the Committee considered whether the scorecard
outcome of 70.6% reflected the exceptional overall Company
performance. The Committee acknowledged that, in hindsight, the
weighting of Action’s returns within the scorecard was low. Had the
weighting been allocated on the same ratio as the portfolio value (as
at 31 March 2023) the overall scorecard outcome would have been
almost 80%.
Action’s continued exceptional returns have a substantial impact on
the Company’s overall results. The importance of this investment is
reflected in the Chief Executive holding the position of Chair of
Action. In addition, the Group Finance Director and Chief Operating
Officer have been very engaged in executing our strategy of
continuing to reduce the carried interest liability related to Action
and increasing our investment in Action when opportunities arise,
with our shareholding increasing from 52.9% to 54.8% in the year.
The Committee considered whether it was appropriate to exercise its
discretion and award bonuses of 80% (FY2023: 85%) of maximum and
concluded that while overall performance, as well as the shareholder
experience, could be argued to warrant a higher bonus, the
adjustment was not deemed to be sufficiently “significant” (as
required within our Policy) to merit the exercise of discretion.
2021 LTIP outcomes
The 2021 LTIP award was based on two equally weighted
performance conditions: absolute TSR and relative TSR against the
FTSE 350. You will see in this report that based on performance over
the three-year period, the 2021 LTIP achieved 100% vesting with
absolute TSR growth of 33% per annum and relative TSR well above
the upper decile of the peer group. The Committee considered that
the value of awards vesting was appropriate without adjustment.
FY2025 scorecard
The scorecard structure and metrics have remained materially
unchanged since the appointment of the Chief Executive in 2012.
Following the Committee’s discussion of the appropriate FY2024
bonus, it concluded that it will conduct a thorough review of the
scorecard and the appropriate measures of performance for FY2025
and future years. The Company has undergone significant change
since 2012, which should be reflected in the structure and metrics by
which management is assessed. Details of these changes will be
included in next year’s remuneration report.
Looking forward
As noted in previous letters, Jasi Halai joined the Board on 12 May
2022, with remuneration arrangements set in line with the
shareholder-approved policy and at a level that would allow
progression in her role over time. The Committee reviewed Jasi’s
performance, continued progress in the role and overall
remuneration opportunity against a relevant peer group, and
decided that it would be appropriate to increase Jasi’s base salary by
10%. As set out later in the report, the base salaries for Simon
Borrows and James Hatchley will be increased by 4.5%, in line with
other employees in the Group.
Thoughtful allocation of capital and rigorous management of
invested capital are the core components underpinning 3i’s ability to
generate long-term sustainable returns. Our remuneration policy
needs to reflect this and align with our strategy. The existing policy
was approved at last year’s AGM but has remained largely
unchanged for more than 10 years. Whilst our Policy has delivered
appropriate outcomes since the Chief Executive implemented the
new strategy in 2012, the Company has changed significantly since
then in terms of portfolio structure and overall size (by NAV and
market capitalisation). Therefore, over the coming year the
Committee will conduct a thorough review of this policy to ensure
that it remains aligned with the Company’s strategy and will continue
to incentivise and reward management in the medium to long term. If
changes to our policy are required, we will consult with our largest
shareholders, and present any new policy to shareholders to approve
in due course.
I hope that you will find this report a clear account of the way in which
the Committee has implemented the remuneration policy during
the year and I look forward to your support for our Annual report
on remuneration at the upcoming AGM.
Coline McConville
Chair, Remuneration Committee
8 May 2024
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3i Group plc | Annual report and accounts 2024
137
During FY2024, we operated under the remuneration policy approved at the 2023 AGM, which can be found on our website at www.3i.com.
Director remuneration for the year (audited)
Single total figure of remuneration for each Director
FY2024
FY2023
£’000
Salary
/fees
Benefits
Pension
Total
Fixed
Pay
Annual
bonus
LTIP
Total
Variable
Pay
Total
Salary/
fees
Benefits Pension
Total
Fixed
Pay
Annual
bonus
LTIP
Total
Variable
Pay
Total
S A Borrows
713
17
21 751 2,031 5,483 7,514 8,265 687
16
18 721 2,357 6,428 8,785 9,506
J G Hatchley
503
17
53 573 895 283 1,178 1,751 431
14
45 490 921 346 1,267 1,757
J S Wilson
–
–
–
–
–
–
–
– 121
5
13 139
–
–
–
139
J H Halai
357
19
46 422 577 191
768 1,190 298
16
31 345 573 232
805 1,150
D A M
Hutchison
335
–
– 335
–
–
– 335 325
–
– 325
–
–
–
325
C J Banszky
24
–
–
24
–
–
–
24
96
–
–
96
–
–
–
96
S W Daintith
89
–
–
89
–
–
–
89
84
–
–
84
–
–
–
84
L M S Knox
96
–
–
96
–
–
–
96
94
–
–
94
–
–
–
94
P A McKellar
98
–
–
98
–
–
–
98
96
–
–
96
–
–
–
96
C McConville
98
–
–
98
–
–
–
98
96
–
–
96
–
–
–
96
A Schaapveld
92
–
–
92
–
–
–
92
84
–
–
84
–
–
–
84
• Benefits for Executive Directors include a car allowance, provision of health insurance and, for Mrs Wilson and Ms Halai, the value
of the Share Incentive Plan matching share awards.
• The amounts shown as pension are salary supplements in lieu of pension contributions. These supplements were in line with pension
contributions for the Group’s employees generally (12% of pensionable salary).
• Annual bonus awards made in respect of the year are delivered as 60% 3i Group plc shares deferred over four years, and the remaining 40%
as a cash payment in May 2024. All annual bonus awards are subject to the malus/clawback policy. Those shares deferred over four years
are released in four equal annual instalments commencing June 2025 and all share awards carry the right to receive dividends and other
distributions.
• In addition to the table above, dividends or dividend equivalents on unvested deferred share awards were paid during the year
(Mr Borrows: £134k, Mr Hatchley: £53k and Ms Halai: £20k).
• The values shown in the FY2024 LTIP column represent the performance shares vesting from the 2021 LTIP, together with the value
of accrued dividends on those shares. The shares have been valued using the three-month average closing share price to 31 March 2024
(2,450.92 pence). The 2021 LTIP value attributable to share price growth since the awards were granted is £2,585k, £134k and £90k for
Mr Borrows, Mr Hatchley and Ms Halai respectively. Further detail is provided on page 141. The values shown in the FY2023 LTIP column
represent the shares that vested from the 2020 LTIP last year, together with the value of accrued dividends on those shares. This value has
been restated using the prevailing share price at the time of vesting (1,857 pence for Mr Borrows and 1,936.5 pence for Mr Hatchley and Ms
Halai), being the third anniversary of grant.
• The fees shown for the non-executive Directors include fees used to purchase shares in the Company.
• Non-executive Directors receive reimbursement for their reasonable expenses for attending Board meetings. The Group meets
the associated tax cost.
• Ms Halai retained Directors’ fees of £70k from Barratt Developments plc.
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FY2024 performance
Formulaic performance measures (70% of total. FY2024 payout 40.6%)
Area of strategic focus
Weighting Metric
Threshold
Maximum
Performance
Pay-out
Portfolio returns
(Action)
32.5% Gross investment return
(% of opening portfolio value)
16%
21%
33%
100%
Portfolio returns
(excl. Action)
27.5% Private Equity gross investment return
(% of opening portfolio value)
10%
15%
7%
0%
Portfolio returns
(Infrastructure)
7.5% Gross investment return
(% of opening portfolio value)
8%
10%
9.3%
74%
Operating performance
2.5% Operating cash profit
£0m
>£0m
£467m
100%
•
The threshold and maximum return targets are set in line with 3iN’s public return objectives.
•
Excluding the dividend received from Action the operating cash profit was £92 million.
Qualitative performance measures (30% of total. FY2024 payout 30%)
Investment
management
and
operations
7.5%
Private Equity
portfolio
earnings
growth
>10%
24%
93% of our Private Equity portfolio by value grew earnings in 2023,
with particularly strong performance from Action, Royal Sanders and
European Bakery Group.
New capital
invested in
Private Equity
Up to
€700m
€642m
During the year, Action completed its debut US dollar term loan issuance
in the US leveraged loan market raising $1.5 billion. Action also
completed a capital restructuring with a pro-rata redemption of shares.
3i reinvested £455 million of the £762 million of proceeds from the Action
share redemption to increase our gross equity stake from 52.9% to
54.8%. Across the remaining portfolio, we prioritised our capital
deployment into further reinvestments into existing portfolio companies
and continued our buy-and-build activities.
New 3iN capital
committed in
Core/PPP
£100m
£99.5m
The 3iN team has continued to deploy capital while retaining its pricing
discipline and during the year, the team completed follow on
investments in Future Biogas, DNS:NET and Ionisos.
Development
of assets
relative to their
investment
plans
Action delivered another year of very strong performance and across the
remaining portfolio we have seen resilient performance. A number of
assets operating in the value-for-money and private label consumer and
healthcare sectors delivered strong growth. These stronger performing
assets largely offset softer performance from companies working
through adverse phases of their market cycles or experiencing company-
specific issues.
In aggregate, in a challenging environment, we generated total
Private Equity proceeds of £866 million inclusive of the proceeds from
the Action capital restructuring (£104 million ex-Action).
During the year the Infrastructure business completed the realisation of
Attero for proceeds of €214 million, a 31% uplift on opening value.
Area of strategic
focus
Weighting
Metric
Expectation
Performance
Comments
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ESG
10.0%
Environmental,
social and
governance
targets across
the portfolio
and 3i Group
Our science-based targets were validated by the SBTi on 22 March 2024.
These targets cover our direct Scope 1 and 2 emissions, as well as the
Scope 3 emissions associated with our investment portfolio.
The second phase of climate change scenario analysis was completed in
the year. The results provide further insights into climate change risks
and opportunities across our portfolio and were used to enhance the
climate element of our ESG investment assessment framework.
The Company has supported nine charity partners which work across
a variety of areas, donating a total of £1 million through the year.
Strategy
5.0%
Development
of the strategic
vision of the
Group and
progress
of corporate
projects
The Company continues to crystallise outstanding carried interest in the
Buyouts 2010-12 scheme relating to Action.
The North American Infrastructure Fund completed its final close in
December 2023. The Fund completed a new investment in Amwaste and
Regional Rail completed two bolt-on acquisitions adding over 100 miles
of freight rail to the platform.
Together with Action, a number of other companies are starting to
demonstrate significant compounding potential, with impressive
earnings growth and cash generation. We have designated Royal
Sanders as a longer-term hold.
People
7.5%
Development
of the quality
and strength of
the Group’s
staff
The Private Equity business presented its plans for the reorganisation of
the team structure. The Private Equity leaders are now focused on
executing the investment team reorganisation to support our continued
origination and portfolio management.
We continue to take part in various initiatives to improve DE&I internally
and across the industry, including sponsorship of Level 20, offering
internships as part of GAIN (Girls Are INvestors) and #10000BlackInterns
programmes.
Area of strategic
focus
Weighting
Metric
Expectation
Performance
Comments
Consistent with previous years, the Board did not set a threshold and maximum for all metrics, and set expectations rather than targets for
some. This is because the timing of investments and realisations is highly sensitive to market conditions, and a more prescriptive approach
would run the risk of creating perverse incentives for executives. For example, setting a target level of realisations may result in the earlier sale
of assets than would otherwise be appropriate, and setting a target level of investments may result in investing at inflated prices.
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Executive Director annual bonus outcomes
In light of the performance detailed above, and following an assessment taking into account the shareholder, employee, and wider
stakeholder experience, the Committee awarded bonuses to the Executive Directors of 70.6% of maximum. As set out in the Committee
Chair’s covering letter, the Committee considered whether it was appropriate to exercise its discretion and award bonuses above 70.6% and
concluded that while overall performance could be argued to warrant a higher bonus, the adjustment was not sufficiently “significant” (as
required within our Policy) to merit the exercise of discretion. Bonuses are delivered as 40% paid in cash immediately and 60% deferred into
the Company’s shares, vesting in equal instalments over four years. Annual bonus awards are subject to the malus/clawback policy.
Share awards vesting in FY2024 subject to performance conditions
2021 Long-term incentive award (audited)
The Long-term incentive awards granted in June 2021 were subject to performance conditions based on absolute and relative total
shareholder return over the three financial years to 31 March 2024. The table below shows the achievement against these conditions
and the resulting proportion of the awards which will vest in June 2024.
Weighting
Threshold
Maximum
Actual
Total
Total shareholder return measure
%
Performance
% vesting
Performance
% vesting
Performance
% vesting
% vesting
Absolute total shareholder return
50%
10% pa
20%
18% pa
100%
33% pa
100%
100%
Relative total shareholder return
(as measured against the
FTSE 350 Index)
50%
Median
25%
Upper
quartile
100%
Above
Upper
quartile
100%
The table below shows the grants made to the Executive Directors in 2021, at a share price of 1,226.3 pence, and the resulting number
of shares that will vest due to the achievement against the performance targets as set out above. The value of the shares vesting has been
included in the single figure table using the three-month average closing share price to 31 March 2024 of 2,450.92 pence.
As set out in the cover letter from the Committee Chair, reflecting on performance delivered over the performance period (in terms of
operational performance of the business and returns delivered to our shareholders), the Committee considered the formulaic out-turn to be
an appropriate reflection of performance and therefore did not exercise any discretion or downwards adjustment in relation to the award.
Basis of award at grant
Face value
at grant £'000
Number of
shares awarded
at 1,226.3p
per share
% vesting
Number of
shares vesting
Value of
shares vesting
at 2,450.92p
per share £'000
S A Borrows
Face value award of 4 times base salary of £647k
2,589
211,095
100%
211,095
5,174
J Hatchley
Discretionary award made in 2021
134
10,912
100%
10,912
267
J Halai
Discretionary award made in 2021
90
7,339
100%
7,339
180
The proportion of the award vesting to Simon Borrows is subject to a further holding period, and shares will be released on the fifth
anniversary of grant together with the value of dividends that would have been received during the period from grant to the release date.
The awards made to James Hatchley and Jasi Halai were granted before they became Executive Directors and are not subject to a further
holding period. Accordingly, they will be released in June 2024.
Change in the remuneration of the Directors compared to other employees
The table below shows the percentage change in remuneration paid to each Director and employees as a whole for the past four
performance years.
FY2024
FY2023
FY2022
FY2021
Salary/
Fees
Benefits
Bonus
Salary/
Fees
Benefits
Bonus
Salary/
Fees
Benefits
Bonus
Salary/
Fees
Benefits
Bonus
S A Borrows
4%
12%
(14) %
4%
–%
(10%)
3%
–%
9%
–%
–%
149%
J G Hatchley
17%
19%
(3) %
J H Halai
20%
38%
1%
D A M Hutchison
3%
74%
85%
9%
C J Banszky
(75%)
3%
–%
–%
S W Daintith
6%
4%
–%
–%
L M S Knox
2%
114%
–%
–%
P A McKellar
2%
33%
–%
–%
C McConville
2%
3%
3%
3%
A Schaapveld
10%
4%
(5%)
467%
Employees
7%
27%
(5) %
13%
2%
6%
7%
9%
32%
2%
2%
76%
D A M Hutchison was appointed Chair in November 2021. The change in the fees shown above is due to part-year payments.
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Details of share awards granted in the year
LTIP
Performance share awards were granted to the Executive Directors during the year as shown in the table below.
Description of award
A performance share award, which releases shares, subject to satisfying the performance
conditions, on the fifth anniversary of award.
Face value
Chief Executive – 400% of salary, being 155,184 shares.
Group Finance Director – 250% of salary, being 68,386 shares.
Chief Operating Officer – 225% of salary, being 44,098 shares.
The share price used to make the award was the average mid-market closing price over
the five working days starting with the day of the announcement of the 2023 annual results
(1,853.9 pence). We continue to apply our long-held consistent policy of measuring
performance using the three-month average closing share price to 31 March and granting
awards using the five-day average closing price (starting on the day of the announcement
of the annual results).
Performance period
1 April 2023 to 31 March 2026.
Performance targets
50% of the award is based on absolute TSR measured over the performance period,
and vests:
• 0% vesting below 10% pa TSR;
• 20% vesting at 10% pa TSR;
• straight-line vesting between 10% and 18% pa TSR; and
• 100% vesting at 18% pa TSR.
50% of the award is based on relative TSR measured against the FTSE 350 Index over
the performance period, and vests:
• 0% vesting for below median performance against the index;
• 25% vesting for median performance against the index;
• 100% vesting for upper quartile performance against the index; and
• straight-line vesting between median and upper quartile performance.
Total shareholder returns are calculated based on the average closing share price over
the first three months of the calendar year.
Remuneration Committee discretion
The Committee can reduce any award which would otherwise vest if there are unauthorised
breaches of the Group’s liquidity and gearing policies or where significant adjustment is
required to ensure the outcome is a fair reflection of the performance of the Company and
the individual.
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Deferred bonuses awarded in FY2024
All Directors are considered to be Identified Staff and, for awards made during FY2024, 60% of the annual bonus was delivered in 3i Group plc
shares deferred over four years (and which vest one quarter per annum over those four years). The remaining 40% was delivered as a cash
bonus in May 2023. The following awards were made on 4 June 2023 in respect of FY2023 performance:
Face value at grant
Number of shares awarded
at 1,853.9p per share
Vesting
S A Borrows
£1,406k
75,834
Four equal instalments annually from 1 June 2024
J G Hatchley
£620k
33,418
Four equal instalments annually from 1 June 2024
J H Halai
£386k
20,797
Four equal instalments annually from 1 June 2024
The face value of the awards were reported in the FY2023 single figure of remuneration. The share price used to calculate face value was the
average of the mid-market closing prices over the five working days starting with the date of the announcement of the Company’s results for
the year ended 31 March 2023 (11 May 2023 to 17 May 2023), which was 1,853.9 pence. These awards are not subject to further performance
conditions but are subject to our malus and clawback policy.
Share Incentive Plan
During the year, Ms Halai participated in the HMRC-approved Share Incentive Plan which allowed employees to invest up to £150 per month
from pre-tax salary in ordinary shares (“partnership shares”). For each partnership share, the Company grants two free ordinary shares
(“matching shares”) which are forfeited if the participant resigns within three years of grant. Dividends are reinvested in further ordinary shares
(“dividend shares”).
Ms Halai purchased 85 partnership shares, and received 170 matching shares and 600 dividend shares at prices ranging between 1,728.67
pence and 2,805 pence per share, with an average price of 2,146.87 pence.
Hedging of share awards
As a matter of policy the Group ensures that it holds the maximum potential number of shares granted under the LTIP and Deferred Share
Plan from the date of grant. Shares are purchased by the Employee Benefit Trust in the market as and when required to ensure that coverage
is maintained.
Pension arrangements (audited)
The Executive Directors receive pension benefits on the same percentage basis (12%) of their pensionable salaries as other employees
of the Company. During the year, they received salary supplements in lieu of pension of £21k (Mr Borrows), £53k (Mr Hatchley) and £37k
(Ms Halai) respectively.
Prior to 2011, Executive Directors were eligible for membership of the 3i Group Pension Plan, a defined benefit contributory scheme. Pension
accrual ceased for all members with effect from 5 April 2011. Salary linkage was removed in February 2023 and replaced with a time-limited
cash allowance, which the Chief Operating Officer receives (£9k), in line with other, similarly affected staff.
Payments to past Directors (audited)
No payments to past Directors were made in the year.
Payments for loss of office (audited)
No payments to Directors for loss of office were made in the year.
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Statement of Directors’ shareholding and share interests (audited)
The Company’s share ownership and retention policy requires Executive Directors to build up over time and thereafter maintain a
shareholding in the Company’s shares equivalent to at least 3.0 times gross salary in the case of the Chief Executive and 2.0 times gross salary
for the Group Finance Director and Chief Operating Officer. In addition, shareholding targets have been introduced for other members of the
Executive Committee at 1.5 times their gross salaries and for partners in the Group’s businesses at 1.0 times their gross salaries. Since 2018
non-executive Directors and the Chair are required to build up over time and thereafter maintain a shareholding in the Company’s shares
equivalent to at least the same as their respective annual base fees (cash and shares).
Executive Directors are expected to maintain a shareholding in the Company for two years post-employment, at the lower of their
shareholding at the time they leave employment and the levels set out above.
Details of Directors’ interests (including interests of their connected persons) in the Company’s shares as at 31 March 2024 are shown
in the table below. The closing share price on 31 March 2024 was 2,809 pence.
Owned outright
Deferred shares
Subject to
performance
Shareholding
requirement
Current
shareholding
(% salary)
S A Borrows
16,502,204
835,442
365,976
300%
69,142
J G Hatchley
357,798
105,374
161,278
200%
3,459
J H Halai
87,990
54,072
101,908
200%
1,886
Shares owned
outright
Shareholding
requirement
Current
shareholding
(% base fee)
D A M Hutchison
107,170
100%
898
S W Daintith
20,902
100%
836
L M S Knox
2,607
100%
104
P A McKellar
103,030
100%
4,120
C McConville
9,886
100%
395
A Schaapveld
10,054
100%
402
•
The share interests shown for Ms Halai include shares held in the 3i Group Share Incentive Plan. The owned outright column includes partnership and dividend shares under the SIP. The deferred shares column includes matching
shares under the SIP.
•
The number of shares shown includes the 2021 Performance Share award. The performance against the performance targets results in 100% of the shares being released as described on page 141.
•
Directors are restricted from hedging their exposure to the 3i share price.
•
From 1 April 2024 to 8 May 2024, Ms Halai became interested in a further 5 shares overall outright (SIP Partnership Shares) and a further 10 deferred shares (SIP Matching Shares). There were no other changes to Directors’ share
interests in that period.
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Performance graph – TSR graph
This graph compares the Company’s total shareholder return for the 10 financial years to 31 March 2024 with the total shareholder return
of the FTSE 350 Index. The FTSE 350 Index is considered to be an appropriate comparator as it reflects both the variety of the Company’s
portfolio of international investments as well as the diverse currencies in which those investments are denominated.
3i Total shareholder return vs FTSE 350 total return over the 10 years to 31 March 2024
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
0
250
500
750
1000
l 3i Group
l FTSE 350
Rebased at 100 at 31 March 2014
Chief Executive’s single figure remuneration history (£’000)
751
721
695
681
678
666
646
628
812
943
1,045
953
383
472
458
457
1,219
1,414
1,568
1,429
575
1,887
1,832
1,827
2,589
2,587
2,550
1,749
2,192
2,334
2,266
2,200
2,894
3,841
356
498
296
2,518
1,645
2,433
FY2024
FY2023
FY2022
FY2021
FY2020
FY2019
FY2018
FY2017
l Fixed remuneration
l Cash bonus
l Deferred Share Award
l Value of LTIP vesting at grant price
l Additional LTIP value due to share price growth and dividends
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Performance table
Table of historic Chief Executive data
Year
Chief Executive
Single figure of total
remuneration £’000
Percentage of
maximum
annual bonus paid
Percentage
of maximum
LTIP vesting
FY2024
S A Borrows
8,265
70.6%
100%
FY2023
S A Borrows
9,506
85.0%
100%
FY2022
S A Borrows
6,215
98.0%
100%
FY2021
S A Borrows
5,310
92.0%
71%
FY2020
S A Borrows
4,124
37.0%
91%
FY2019
S A Borrows
7,877
92.5%
100%
FY2018
S A Borrows
6,847
92.5%
100%
FY2017
S A Borrows
7,544
95.0%
100%
FY2016
S A Borrows
5,821
92.5%
98%
FY2015
S A Borrows
8,278
92.5%
91%
Relative importance of spend on pay
FY2024
FY2023
Change %
Remuneration of all employees
£102m
£97m
5%
Dividends paid to shareholders
£541m
£485m
12%
Statement of implementation of the remuneration policy in the coming year
The table below sets out how the Committee intends to operate the remuneration policy in FY2025. As mentioned in the Chair’s letter, whilst
our Policy has delivered appropriate outcomes since the Chief Executive implemented the new strategy in 2012, the Company has changed
significantly since then in terms of portfolio structure and overall size (by NAV and market capitalisation). Therefore, over the coming year the
Committee will conduct a thorough review of this Policy to ensure that it remains aligned with the Company’s strategy and will continue to
incentivise and reward management in the medium to long term. If changes to our Policy are required we will consult with our largest
shareholders, and present any new Policy to shareholders to approve at the 2025 AGM.
Base salary
Base salaries for most employees will be increased by 4.5%. The 4.5% increase will also be applied to the Chief
Executive and Group Finance Director. The base salary of the Chief Operating Officer will be increased to reflect
development in the role. Effective from 1 July 2024, salaries for the current Executive Directors will therefore be as
follows:
• Chief Executive: £751,605 (4.5%)
• Group Finance Director: £529,951 (4.5%)
• Chief Operating Officer: £399,685 (10%)
Pension
No changes to the current arrangements are proposed for FY2025 and a pension contribution or salary supplement
will be as follows:
• Chief Executive: 12% of benefit salary (subject to a 3i earnings cap. FY2025: £217,241)
• Group Finance Director: 12% of base salary
• Chief Operating Officer: 12% of base salary
Prior to 2011, Executive Directors were eligible for membership of the 3i Group Pension Plan, a defined benefit
contributory scheme. Pension accrual ceased for all members with effect from 5 April 2011. Salary linkage was
removed in February 2023 and replaced with a time-limited cash allowance, which the Chief Operating Officer
receives, in line with other, similarly affected staff.
Policy element
Implementation of policy during FY2025
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Annual bonus
The maximum annual bonus opportunities for FY2025 will remain unchanged, in line with the remuneration policy,
as follows:
• Chief Executive: 400% of salary
• Group Finance Director: 250% of salary
• Chief Operating Officer: 225% of salary
The scorecard structure and metrics have remained materially unchanged since the appointment of the Chief
Executive in 2012. Following the Committee’s discussion of the appropriate FY2024 bonus it concluded that it will
conduct a thorough review of the scorecard and the appropriate measures of performance for FY2025 and future
years. The Company has undergone significant change since 2012, which should be reflected in the structure and
metrics by which management are assessed. Details of these changes will be included in next year’s Remuneration
Report.
The Committee considers that the specific targets and expectations contained within the FY2025 scorecard
are commercially sensitive and therefore will not be disclosed in advance. We will report to shareholders next year
on performance and the resulting bonus out-turns.
At least 50% of any bonus award will be deferred into shares vesting in equal instalments over four years.
Awards are subject to the Company’s malus and clawback policy.
Benefits
No changes to the current arrangements are proposed for FY2025.
Benefits will continue to include a car allowance, provision of health insurance and any Share Incentive Plan matching
share awards.
Long-term
Incentive Plan
Awards under the Long-term Incentive Plan in FY2025 will remain unchanged and be made as follows:
• Chief Executive: 400% of salary
• Group Finance Director: 250% of salary
• Chief Operating Officer: 225% of salary
Performance will be measured over a three-year period and will be determined by the Remuneration Committee.
Performance measures remain unchanged from the previous year and will be as follows:
50% of the award is based on absolute TSR measured over the performance period, and vests:
• 0% vesting below 10% pa TSR;
• 20% vesting at 10% pa TSR;
• straight-line vesting between 10% and 18% pa TSR; and
• 100% vesting at 18% pa TSR.
50% of the award is based on relative TSR measured against the FTSE 350 Index over the performance period,
and vests:
• 0% for below median performance against the index;
• 25% for median performance against the index;
• 100% for upper quartile performance against the index; and
• straight-line vesting between median and upper quartile performance.
Total shareholder returns are calculated based on the average closing share price over the first three months
of the calendar year.
Awards are subject to the Company’s malus and clawback policy.
To the extent that shares vest, awards are subject to a holding period whereby they are released on or around
(but not earlier than) fifth anniversary of grant.
The Chief Executive, Group Finance Director and Chief Operating Officer do not participate in carried interest plans
or similar arrangements.
Policy element
Implementation of policy during FY2025
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3i Group plc | Annual report and accounts 2024
147
Shareholding
requirements
Shareholding requirements will be as follows:
• Chief Executive: 300% of salary
• Group Finance Director: 200% of salary
• Chief Operating Officer: 200% of salary
• Non-executive Directors (including the Company Chair): 100% of base fee (cash and shares)
• Executive Directors will be expected to maintain a shareholding in the Company for two years post-employment,
at the lower of their shareholding at the time they leave employment and of the levels set out above. Deferred
bonus awards and shares to be released under the Long-term Incentive Plan may be reduced or withheld if the
post-employment shareholding targets for the Executive Directors are not met.
Non-executive
Director fees
The base fees for the non-executive Directors have increased by the same percentage (4.5%) as salaries for
employees. The Chair, Senior Independent Director, Committee Chair and Committee membership fees have been
benchmarked against other FTSE 100 organisations and have been increased accordingly. Overall, fees remain
moderately positioned relative to similar FTSE 100 companies. Fees for FY2025 will be:
Chair fee:
£288,000 plus £82,000 in 3i shares
Non-executive Directors:
Board membership base fee:
£56,500 plus £17,000 in 3i shares
Senior Independent Director fee:
£20,000
Committee Chair:
£25,000
Committee member:
£10,000
Committee fees are payable in respect of the Audit and Compliance Committee, Remuneration Committee
and Valuations Committee.
Malus and
clawback policy
Long-term incentive awards and deferred bonus share awards made during the year to Executive Directors may be
forfeited or reduced in exceptional circumstances, on such basis as the Committee considers to be fair, reasonable
and proportionate, taking into account an individual’s role and responsibilities. Such exceptional circumstances
include:
(1) a material misstatement in the financial statements of the Company or Group or any Member of the Group; or
(2) where an individual has caused, wholly or in part, a material loss for the Group as a result of:
(i) reckless, negligent or wilful actions or omissions; or
(ii) inappropriate values or behaviour;
(3) an error in assessing any applicable Performance Conditions or the number of shares;
(4) the assessment of any applicable Performance Conditions and/or the number of shares to be released being
based on inaccurate or misleading information;
(5) misconduct on the part of the individual concerned;
(6) a Member of the Group is censured by a regulatory body or suffers a significant detrimental impact on its
reputation, provided that the Committee determines that the individual was responsible for, or had management
oversight over, the actions, omissions or behaviour that gave rise to that censure or detrimental impact; or
(7) the Company (or entities representing a material proportion of the Group) becomes insolvent or otherwise suffers
a corporate failure so that ordinary shares in the Company cease to have material value, provided that the
individual is responsible (in whole or in part) for that insolvency or failure.
In exceptional circumstances (and on such basis as the Committee considers fair, reasonable and proportionate taking
into account an individual’s role and responsibilities), the Group may recover amounts that have been paid or released
from awards (including cash bonus awards), as long as a written request for the recovery of such sums is made in the
two-year period from the date of payment or release and in circumstances where either (a) there has been a material
misstatement of Group financial statements or (b) the Group suffers a material loss. In arriving at its decision,
the Committee will take into consideration such evidence as it may reasonably consider relevant including as to
the impact of the affected individual’s conduct, values or behaviours on the material misstatement or material loss,
as the case may be.
Policy element
Implementation of policy during FY2025
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3i Group plc | Annual report and accounts 2024
148
Remuneration Committee advisers
The Committee appointed Deloitte LLP as advisers in 2013 and during the year they provided the Committee with external, independent
advice.
Deloitte LLP are members of the Remuneration Consultants Group and as such, voluntarily operate under the code of conduct in relation to
executive remuneration consulting in the UK. During the year, Deloitte LLP also provided 3i with certain tax advisory services. The Committee
has reviewed the advice provided during the year and is satisfied that it has been objective and independent. The total fees for advice during
the year were £50,250 (excluding VAT) (2023: £63,500 (excluding VAT)).
Result of voting at the 2023 AGM
At the 2023 AGM, shareholders approved the Remuneration report that was published in the 2023 Annual report and accounts. At the 2023
AGM, shareholders approved the Directors’ remuneration policy. The results for both of these votes are shown below:
Resolution
Votes for
Votes against
Total votes cast
Votes withheld
Approval of the Directors’ remuneration report at the 2023 AGM
717,956,004
35,957,994
753,913,998
8,479,583
95.23%
4.77%
Approval of the Directors’ remuneration policy at the 2023 AGM
717,765,664
37,374,379
755,140,043
7,253,538
95.05%
4.95%
Audit
The tables in this report (including the Notes thereto) on pages 138 to 149 marked as “audited” have been audited by KPMG.
By order of the Board
Coline McConville
Chair, Remuneration Committee
8 May 2024
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149
This section of the Directors’ report contains the
corporate governance statement required by FCA
Disclosure Guidance and Transparency Rule 7.2.
Corporate governance
The Corporate Governance Code to which the Company is subject
is the UK Corporate Governance Code (the “Code”) which
was published by the FRC in July 2018 and which is available on
the FRC website.
Details on the Company’s compliance with the Code and an
explanation as to why the Company has not complied throughout
the year with provision 19 of the Code in respect of Chair tenure are
set out in the Corporate Governance statement on pages 99 and 100
and in the report on the Nominations Committee’s review of Chair
tenure on page 117.
The Group’s internal control and risk management systems, including
those in relation to the financial reporting process, are described
in the Risk management section on pages 80 to 93.
Directors: independence and time commitments
Directors’ biographical details are set out on page 102. The Board
currently comprises the Chair, five non-executive Directors and three
Executive Directors. Mr D A M Hutchison (Chair), Mr S A Borrows,
Mr J G Hatchley, Ms J H Halai, Mr S W Daintith, Ms L M S Knox,
Mr P A McKellar, Ms C L McConville and Ms A Schaapveld all served
as Directors throughout the year under review.
The Board regularly considers the independence of non-executive
Directors. The Board considers all of the Company’s non-executive
Directors to be independent for the purposes of the Code. The Chair
was independent on appointment as Chair. Consideration was also
given to time commitments when Directors seek to take on any
additional external appointments and on any Director’s appointment.
Investment policy
The UK Listing Authority’s Listing Rules require 3i, as a closed-
ended investment fund, to publish an investment policy.
Shareholder approval is required for material changes to this
policy. Non-material changes can be made by the Board. The
current policy is set out below. No changes have been made to
the policy since it was published in the Company’s 2018
Report and Accounts.
• 3i is an investment company which aims to provide its
shareholders with quoted access to private equity and
infrastructure returns. Currently, its main focus is on making
quoted and unquoted equity and/or debt investments in
businesses and funds in Europe, Asia and the Americas.
The geographies, economic sectors, funds and asset classes
in which 3i invests continue to evolve as opportunities are
identified. Proposed investments are assessed individually and
all significant investments require approval from the Group’s
Investment Committee. Overall investment targets are subject
to periodic reviews and the investment portfolio is also reviewed
to monitor exposure to specific geographies, economic sectors
and asset classes.
• 3i seeks to diversify risk through significant dispersion of
investments by geography, economic sector, asset class and size
as well as through the maturity profile of its investment portfolio.
• Although 3i does not set maximum exposure limits for asset
allocations, it does have a maximum exposure limit that, save as
mentioned below, no investment will be made unless its cost1
does not exceed 15% of the investment portfolio value as shown
in the last published valuation. A further investment may be
made in an existing portfolio business provided the aggregate
cost of that investment and of all other unrealised investments
in that portfolio business does not exceed 15% of the investment
portfolio value as shown in the last published valuation. A higher
limit of 30% will apply to the Company’s investment in 3i
Infrastructure plc. For the avoidance of doubt, 3i may retain
an investment, even if its carrying value is greater than 15%
or 30% (as the case may be) of the portfolio value at the time
of an updated valuation.
• Investments are generally funded with a mixture of debt
and shareholders’ funds with a view to maximising returns
to shareholders, whilst maintaining a strong capital base.
3i’s gearing depends not only on its level of debt, but also
on the impact of market movements and other factors on
the value of its investments. The Board takes this into account
when, as required, it sets a precise maximum level of gearing.
The Board has therefore set the maximum level of gearing at
150% and has set no minimum level of gearing. If the gearing
ratio should exceed the 150% maximum limit, the Board
will take steps to reduce the gearing ratio to below that limit
as soon as practicable thereafter. 3i is committed to achieving
balance sheet efficiency.
1
Where 3i makes an investment in an existing portfolio business as part of a restructuring or reorganisation of its investment in that existing portfolio business (which restructuring or reorganisation may involve, without
limitation, 3i disposing of all or part of its existing investment in the relevant portfolio business and reinvesting all or part of the proceeds into a different entity which acquires or holds the relevant portfolio business or a
substantial part thereof), the cost of that investment, for the purposes of determining the maximum exposure limit under this policy, shall, to the extent that the investment does not increase 3i’s exposure to the relevant
portfolio business, be deemed to be the cost of 3i’s existing investment in the relevant portfolio business (or, in the case of a partial reinvestment, the pro-rated cost of 3i’s existing investment in the relevant portfolio
business) immediately prior to the restructuring or reorganisation. If 3i’s investment includes a further investment, such that 3i increases its overall exposure to the relevant portfolio business as part of the restructuring
or reorganisation, the cost of any such further investment at the date of such investment shall be added to the cost of the investment in the existing portfolio business as determined pursuant to the previous sentence.
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150
Appointment and re-election of Directors
Subject to the Company’s Articles of Association, the Companies Act
and satisfactory performance evaluation, non-executive Directors are
appointed for an initial three-year term. Before the third and sixth
anniversaries of first appointment, the Director discusses with the
Board whether it is appropriate for a further three-year term to be
served.
Under the Company’s Articles of Association, the minimum number
of Directors is two and the maximum is 20, unless otherwise
determined by the Company by ordinary resolution. Directors are
appointed by ordinary resolution of shareholders or by the Board.
The Company’s Articles of Association provide for all Directors to
retire from office at every Annual General Meeting of the Company
although they may offer themselves for re-appointment by the
shareholders.
Shareholders can remove any Director by special resolution and
appoint another person to be a Director in their place by ordinary
resolution. Shareholders can also remove any Director by ordinary
resolution of which special notice has been given.
Subject to the Company’s Articles of Association, retiring Directors
are eligible for re-appointment. The office of Director is vacated
if the Director resigns, becomes bankrupt or is prohibited by law
from being a Director or where the Board so resolves following
the Director suffering from ill health or being absent from Board
meetings for 12 months without the Board’s permission.
The Board’s responsibilities and processes
The composition of the Board and its Committees, as well as
the Board’s key responsibilities and the way in which it and its
Committees work, are described on pages 97 to 149. The Board
is responsible to shareholders for the overall management of the
Group and may exercise all the powers of the Company subject
to the provisions of relevant statutes, the Company’s Articles of
Association and any directions given by special resolution of the
shareholders. The Articles of Association empower the Board
to offer, allot, grant options over or otherwise deal with or dispose
of the Company’s shares as the Board may decide.
The Companies Act 2006 authorises the Company to make market
purchases of its own shares if the purchase has first been authorised
by a resolution of the Company.
At the AGM in June 2023, shareholders renewed the Board’s
authority to allot ordinary shares and to repurchase ordinary shares
on behalf of the Company subject to certain limits. Details of the
authorities which the Board will be seeking at the 2024 AGM are
set out in the 2024 Notice of AGM.
The Board’s diversity policies in relation to Directors are described
in the Nominations Committee report on page 118 and such policies
in relation to employees are described on pages 153 and 154.
Matters reserved for the Board
The Board has approved a formal schedule of matters reserved
to it and its duly authorised Committees for decision. These include
matters such as the Group’s overall strategy, strategic plan and
annual operating budget; approval of the Company’s financial
statements and changes to accounting policies or practices; changes
to the capital structure or regulated status of the Company; major
capital projects or changes to business operations; investments
and divestments above certain limits; policy on borrowing, gearing,
hedging and treasury matters; and adequacy of internal control
systems.
Rights and restrictions attaching to shares
A summary of the rights and restrictions attaching to shares as at
31 March 2024 is set out below.
The Company’s Articles of Association may be amended by special
resolution of the shareholders in a general meeting. Holders of
ordinary shares enjoy the rights set out in the Articles of Association
of the Company and under the laws of England and Wales. Any share
may be issued with or have attached to it such rights and restrictions
as the Company by ordinary resolution or, failing such resolution,
the Board may decide.
Holders of ordinary shares are entitled to attend, speak and vote
at general meetings and to appoint proxies and, in the case of
corporations, corporate representatives to attend, speak and vote
at such meetings on their behalf. To attend and vote at a general
meeting a shareholder must be entered on the register of members
at such time (not being earlier than 48 hours before the meeting)
as stated in the Notice of general meeting. On a poll, holders
of ordinary shares are entitled to one vote for each share held.
Holders of ordinary shares are entitled to receive the Company’s
Annual report and accounts, to receive such dividends and other
distributions as may lawfully be paid or declared on such shares
and, on any liquidation of the Company, to share in the surplus assets
of the Company after satisfaction of the entitlements of the holders
of any shares with preferred rights as may then be in issue.
There are no restrictions on the transfer of fully paid shares in the
Company, save that the Board may decline to register: a transfer
of uncertificated shares in the circumstances set out in the
Uncertificated Securities Regulations 2001; a transfer to more than
four joint holders; a transfer of certificated shares which is not in
respect of only one class of share; a transfer which is not
accompanied by the certificate for the shares to which it relates;
a transfer which is not duly stamped in circumstances where a duly
stamped instrument is required; or a transfer where in accordance
with section 794 of the Companies Act 2006 a notice (under section
793 of that Act) has been served by the Company on a shareholder
who has then failed to give the information required within the
specified time.
In the latter circumstances, the Company may make the relevant
shares subject to certain restrictions (including in respect of the ability
to exercise voting rights, to transfer the shares validly and, except in
the case of a liquidation, to receive the payment of sums due from
the Company).
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3i Group plc | Annual report and accounts 2024
151
There are no shares carrying special rights with regard to control
of the Company. There are no restrictions placed on voting rights
of fully paid shares, save where in accordance with Article 12 of
the Company’s Articles of Association a restriction notice has been
served by the Company in respect of shares for failure to comply with
statutory notices or where a transfer notice (as described below) has
been served in respect of shares and has not yet been complied with.
Where shares are held on behalf of former or current employees
under employee share schemes, those participants can give
instructions to the holder of such shares as to how votes attached
to such shares should be exercised.
In the circumstances specified in Article 38 of the Company’s Articles
of Association, the Company may serve a transfer notice on holders
of shares. The relevant circumstances relate to: (a) potential tax
disadvantage to the Company, (b) the number of “United States
Residents” who own or hold shares being 75 or more, or (c) the
Company being required to be registered as an investment company
under relevant US legislation. The notice would require the transfer
of relevant shares and, pending such transfer, the rights and
privileges attaching to those shares would be suspended.
The Company is not aware of any agreements between holders
of its securities that may restrict the transfer of shares or exercise
of voting rights.
Share capital and debentures
The issued ordinary share capital of the Company as at 1 April 2023
was 973,312,950 ordinary shares and at 31 March 2024 was
973,366,445 ordinary shares of 73 19∕22 pence each. It increased
over the year by 53,495 ordinary shares on the issue of shares
to the Trustee of the 3i Group Share Incentive Plan.
At the AGM on 29 June 2023, the Directors were authorised to
repurchase up to 97,000,000 ordinary shares in the Company
(representing approximately 10% of the Company’s issued ordinary
share capital as at 8 May 2023) until the Company’s AGM in 2024 or
28 September 2024, if earlier. This authority was not exercised in the
year. Details of the authorities which the Board will be seeking at the
2024 AGM are set out in the 2024 Notice of AGM.
As at 31 March 2024, the Company had sterling and euro fixed rate
notes in issue as detailed in Note 17 to the accounts.
The Articles of Association also specifically empower the Board
to exercise the Company’s powers to borrow money and to
mortgage or charge the Company’s assets and any uncalled
capital and to issue debentures and other securities.
Portfolio management and voting policy
In relation to unquoted investments, the Group’s approach is to seek
to add value to the businesses in which the Group invests through
the Group’s extensive experience, resources and contacts and
through active engagement with the Boards of those companies.
In relation to quoted investments, the Group’s policy is to exercise
voting rights on all matters affecting its interests.
Tax and investment company status
The Company is an investment company under section 833 of
the Companies Act 2006. HM Revenue & Customs has approved
the Company as an Investment Trust under section 1158 of the
Corporation Tax Act 2010 and the Company directs its affairs
to enable it to continue to remain so approved.
Where appropriate, the Company looks to the provisions included
within the Association of Investment Companies SORP.
Major interests in ordinary shares
The table below shows notifications of major voting interests in
the Company’s ordinary share capital (notifiable in accordance with
Chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules
or section 793 Companies Act 2006) which had been received
by the Company as at 31 March 2024 and 18 April 2024.
As at
31 March
2024
% of
issued
share
capital
As at
18 April
2024
% of
issued
share
capital
BlackRock, Inc
104,843,078 10.77 104,462,265 10.73
Vanguard Group Inc
44,327,827
4.55 44,444,774
4.57
Invesco Asset
d
35,481,279
3.65 35,781,215
3.68
FMR LLC
34,428,051
3.54 34,485,382
3.54
J.P. Morgan
30,091,063
3.09 29,405,869
3.02
3i Investments plc
3i Investments plc is authorised by the FCA to, among other things,
manage Alternative Investment Funds (“AIFs”). It is currently the
Alternative Investment Fund Manager (“AIFM”) of seven AIFs,
including the Company and 3i Infrastructure plc. In compliance
with regulatory requirements, 3i Investments plc has ensured that
a depository has been appointed for each AIF. This is Citibank
UK Limited.
The Annual report and accounts meet certain investor disclosure
requirements as set out in FUND 3.2.2R, 3.2.3R, 3.2.5R and 3.2.6R
of the FCA’s Investment Funds sourcebook (“FUND Disclosures”)
for the Company as a standalone entity. The Company’s profit for
the year is stated in its Company statement of changes in equity
on page 159 and its financial position is shown on page 158.
The Company performs substantially all of its investment-related
activities through its subsidiaries and therefore the Group’s
Consolidated statement of comprehensive income is considered
to be more useful to investors than a Company statement.
Furthermore, in some instances the relevant FUND Disclosures
have been made in relation to the Group on a consolidated basis
rather than in respect of the Company on a solo basis. This is because
the Company operates through its Group subsidiaries and therefore
reporting on the Group’s activities provides more relevant
information on the Company and its position. There have been
no material changes to the disclosures required to be made
under FUND 3.2.2R in the past year.
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Although certain FUND Disclosures are made in this Annual report,
full disclosures are summarised on the 3i website at www.3i.com.
This will be updated as required and changes noted in future
Annual reports.
For the purposes of the FUND Disclosures set out in FUND 3.3.5(R)
(5) and (6), the total amount of remuneration paid by the AIFM to its
staff for the year to 31 March 2024 was £292 million, of which
£48 million was fixed remuneration and £244 million was variable
remuneration. The total number of beneficiaries is 242.
The aggregate total remuneration paid to AIFM Remuneration
Code Staff for the year to 31 March 2024 was £82 million, of which
£68 million was paid to senior management and £13 million was paid
to other AIFM Remuneration Code Staff. A summary of the
remuneration policy of 3i can be found on the Company’s website.
Dividends
A first FY2024 dividend of 26.50 pence per ordinary share in respect
of the year to 31 March 2024 was paid on 12 January 2024.
The Directors recommend a second FY2024 dividend of 34.50 pence
per ordinary share be paid in respect of the year to 31 March 2024
to shareholders on the Register at the close of business
on 21 June 2024.
The trustee of The 3i Group Employee Trust and the trustee
of the 2010 Carry Trust have each waived (subject to certain minor
exceptions) dividends declared on shares in the Company held
by those trusts and the trustee of The 3i Group Share Incentive
Plan has waived dividends on unallocated shares in the Company
held by it.
Directors’ conflicts of interests, external
appointments and indemnities
Directors have a statutory duty to avoid conflicts of interest with the
Company. The Company’s Articles of Association enable Directors
to approve conflicts of interest and include other conflict of interest
provisions. The Company has implemented processes to identify
potential and actual conflicts of interest. Such conflicts are then
considered for approval by the Board, subject, if necessary,
to appropriate conditions.
The Board has adopted a policy on Directors’ other appointments
under which additional external appointments should not be
undertaken without prior approval of the Board. Executive Directors
should not take on more than one non-executive directorship in
a FTSE 100 company or other significant appointment.
As permitted by the Company’s Articles of Association during the
year and as at the date of this Directors’ report, there were in place
Qualifying Third-Party Indemnity Provisions (as defined under
relevant legislation) for the benefit of the Company’s Directors
and Qualifying Pension Scheme Indemnity Provisions for the benefit
of the directors of one associated company, Gardens Pension
Trustees Limited.
Directors’ employment contracts
Mr S A Borrows, Ms J H Halai and Mr J G Hatchley each have
employment contracts with the Group with notice periods
of 12 months where notice is given by the Group and six months
where notice is given by the Director. Save for these notice periods
their employment contracts have no unexpired terms. None of
the other Directors has a service contract with the Company.
Employment
The employment policy of the Group is one of equal opportunity
in the selection, training, career development and promotion of
employees, regardless of age, gender, sexual orientation, ethnic
origin, religion and whether disabled or otherwise. Further details
on equal opportunities and diversity are included in the Sustainability
report on pages 52 to 54 and in the Nominations Committee report
on pages 118 and 119.
3i treats applicants and employees with disabilities fairly and provides
facilities, equipment and training to assist disabled employees to do
their jobs. Arrangements are made as necessary to ensure support
to job applicants who happen to be disabled and who respond
to requests to inform the Company of any requirements. Should an
employee become disabled during their employment, efforts would
be made to retain them in their current employment or to explore the
opportunities for their retraining or redeployment within 3i. Financial
support is also provided by 3i to support disabled employees who
are unable to work, as appropriate to local market conditions.
3i’s principal means of keeping in touch with the views of its
employees is through employee appraisals, informal consultations,
team briefings and employee conferences. Managers throughout 3i
have a continuing responsibility to keep their staff informed of
developments and to communicate financial results and other
matters of interest. This is achieved by structured communication
including regular meetings of employees. Members of the Board
have regular formal and informal interaction with a significant number
of 3i employees, including through office visits and one-to-one
meetings.
3i is an equal opportunities employer and has clear grievance and
disciplinary procedures in place. 3i also has an employee assistance
programme which provides a confidential, free and independent
counselling service and is available to all UK employees and their
families in the UK.
3i’s employment policies are designed to provide a competitive
reward package which will attract and retain high-quality staff, whilst
ensuring that the relevant costs remain at an appropriate level.
3i’s remuneration policy is influenced by 3i’s financial and other
performance conditions and market practices in the countries in
which it operates. All employees receive a base salary and are also
eligible to be considered for a performance-related annual variable
incentive award. For those members of staff receiving higher levels
of annual variable incentive awards, a proportion of such awards is
delivered in 3i shares, vesting over a number of years. Remuneration
policy is reviewed by the 3i Group plc Remuneration Committee,
comprising 3i Group plc non-executive Directors.
Where appropriate, employees are eligible to participate in 3i share
schemes to encourage employees’ involvement in 3i’s performance.
Investment executives in the Private Equity business line may also
participate in carried interest schemes, which allow executives to
share directly in future profits on investments. Similarly, investment
executives in the Infrastructure business line may participate in asset-
linked and/or fee-linked incentive arrangements. Employees
participate in local state or company pension schemes as
appropriate to local market conditions.
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Employees are able to raise in confidence with the Company any
matters of concern. Issues can be raised with line management, the
Internal Audit team and the Human Resources team as appropriate.
Employees can also raise matters with an externally run confidential
telephone reporting line, and can do so anonymously if they wish.
Matters raised are investigated and followed up as appropriate.
The Board monitors any matters reported to the externally run
telephone reporting line through an annual report to Audit and
Compliance Committee from Internal Audit.
Workforce engagement
The Company has a Staff Engagement strategy which has been
adopted by the Board as the most appropriate way for the Company
to comply with the relevant requirements of the Code. This is in
preference to adopting one of the three workforce engagement
examples specifically mentioned in the UK Corporate Governance
Code. The Board believes this Strategy is appropriate and
proportionate in the context of an office-based workforce with in the
region of 250 employees worldwide, all of whom engage regularly
with members of senior management. Senior management and
members of the Board meet formally and informally with staff in a
variety of contexts including office visits, investment reviews, Board
and Committee presentations and Board dinners with investment
teams. A general “open door” policy (whether physically or virtually)
adopted by senior management encourages interaction with staff.
The Human Resources team are a point of contact for all members of
staff and they, as well as line managers, report issues requiring
management attention to senior management as they occur. The
Internal Audit and Group Compliance teams consider employee
matters including culture, compliance with the Company’s values and
staff turnover in their reports to senior management. The formal
annual appraisal process provides a further opportunity for
engagement.
During the year the Board visited 3i’s Amsterdam and New York
offices and met formally and informally with the teams based there.
Directors receive updates on employee matters in presentations from
the business line heads, as well as from the Chief Human Resources
Officer, in the annual Board consideration of the Group Succession
Planning and Strategic Capability Review. Committee Chairs held a
number of private and other meetings with function heads during the
year. Non-executive Directors also meet with a wide range of
members of the investment teams at the twice-yearly PCR meetings.
Diversity and inclusion policy
Details of the Company’s approach to diversity and inclusion are set
out under the heading Employment on page 153, in the Sustainability
section on pages 52 and 55 and in the Nominations Committee
report on pages 118 and 119.
Political donations
In line with Group policy, during the year to 31 March 2024,
no donations were made to political parties or organisations,
or independent election candidates, and no political expenditure
was incurred.
Share reunification programme
The Board approved a programme to reunify shareholders with their
dormant shareholding. A tracing programme was conducted by the
Registrar to attempt to contact dormant shareholders, and where this
was not possible, the relevant shares and unpaid dividends were
forfeited in accordance with 3i’s Articles of Association. The Board
agreed that the proceeds of such forfeiture would be used for
charitable purposes. Those dormant shareholders affected by this
programme have a further six years from the point of forfeiture to
contact the Registrar to make a claim.
Significant agreements
As at 31 March 2024, the Company was party to one agreement
subject to a renegotiation period on a change of control of the
Company following a takeover bid. This agreement is a £900 million
multi-currency Revolving Credit Facility Agreement dated 13 March
2020 and as amended from time to time between the Company,
Barclays Bank PLC and a number of other banks. The Company is
required to promptly notify Barclays Bank PLC, as agent bank, of a
change of control. This opens a 20-day negotiation period to
determine if each lender is willing to continue participating in the
facility. For any lender with whom no agreement is reached, amounts
outstanding to that lender would be repayable and their
commitment cancelled, with no less than 10 business days’ notice
after the end of the negotiation period.
Internal control and risk management systems
A description of the Group’s internal control and risk management
systems in relation to the financial reporting process is set out in the
Risk management section on pages 80 to 93.
Going concern
The Directors have acknowledged their responsibilities in relation
to the financial statements for the year to 31 March 2024.
After making enquiries, the Directors considered it appropriate
to prepare the financial statements of the Company, and the Group,
on a going concern basis. The Viability statement is included
on pages 129 and 130.
Audit information
Pursuant to section 418(2) of the Companies Act 2006, each
of the Directors confirms that:
• so far as they are aware, there is no relevant audit information
of which the Company’s Auditor is unaware; and
• they have taken all steps they ought to have taken to make
themselves aware of any relevant audit information and to establish
that the Company’s Auditor is aware of such information.
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3i Group plc | Annual report and accounts 2024
154
Appointment of Auditor
In accordance with section 489 of the Companies Act 2006,
a resolution proposing the reappointment of KPMG LLP as the
Company’s Auditor will be put to members at the forthcoming AGM.
Information required by Listing Rule 9.8.4
Information required by Listing Rule 9.8.4 not included in this section
of the Directors’ report may be found as set out below:
Topic
Location
Capitalised interest
Portfolio income on page 71
Share allotments
Note 20 on page 186
Website
3i’s website provides a brief description of 3i’s history, current
operations, strategy and portfolio, as well as articles, interviews and
videos to showcase specific themes and investments. It also includes
an archive of over 10 years of news and historical financial information
on the Group and details of forthcoming events for shareholders and
analysts.
Information included in the Strategic report
In accordance with section 414 C (11) of the Companies Act 2006,
the following information otherwise required to be set out in the
Directors’ report has been included in the Strategic report: risk
management objectives and policies; post-balance sheet events;
likely future developments in the business; engagement with
suppliers, customers and others; employee involvement; and
greenhouse gas emissions. The Directors’ Viability statement
is also shown in the Resilience statement on pages 129 and 130.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual report
and the Group and parent Company financial statements for each
financial year in accordance with applicable United Kingdom law
and regulations. They are required to prepare the Group financial
statements in accordance with UK adopted international accounting
standards and applicable law and have elected to prepare the parent
Company financial statements on the same basis.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent Company and of their
profit or loss for that period. In preparing each of the Group and
parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable, relevant
and reliable;
• state whether they have been prepared in accordance with UK-
adopted international accounting standards and applicable law;
• assess the Group and parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors’ report,
Directors’ remuneration report and Corporate governance statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Responsibility statement of the Directors in respect
of the Annual financial report
The Directors confirm that to the best of their knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole; and
• the Strategic report includes a fair review of the development
and performance of the business and the position of the Company
and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks
and uncertainties that they face.
The Directors consider this Annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
The Directors of the Company and their functions are listed on pages
102 and 103.
3i Group plc is registered in England with company number 1142830.
Directors’ report
For the purposes of the UK Companies Act 2006, the Directors’
report of 3i Group plc comprises the Governance section on pages
97 to 155 other than the Directors’ remuneration report on pages 136
to 149.
The Strategic report, Directors’ report and Directors’ remuneration
report have been drawn up and presented in accordance with and in
reliance upon English company law and the liabilities of the Directors
in connection with those reports shall be subject to the limitations
and restrictions provided by that law.
By order of the Board
K J Dunn
Company Secretary
8 May 2024
Registered office:
16 Palace Street
London SW1E 5JD
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3i Group plc | Annual report and accounts 2024
155
What’s in this section
Consolidated statement of comprehensive income
157
Consolidated statement of financial position
158
Consolidated statement of changes in equity
159
Consolidated cash flow statement
160
Company statement of financial position
161
Company statement of changes in equity
162
Company cash flow statement
163
Material accounting policies
164
Notes to the accounts
168
KPMG LLP’s independent auditor’s report
203
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156
Notes
2024
£m
2023
£m
Realised profits over value on the disposal of investments
2
1
64
Unrealised profits on the revaluation of investments
3
2,742
1,897
Fair value movements on investment entity subsidiaries
12
861
2,112
Portfolio income
Dividends
363
229
Interest income from investment portfolio
29
29
Fees receivable
4
3
10
Foreign exchange on investments
(238)
203
Movement in the fair value of derivatives
18
116
122
Gross investment return
3,877
4,666
Fees receivable from external funds
4
72
70
Operating expenses
5
(146)
(137)
Interest receivable
9
4
Interest payable
(61)
(54)
Exchange movements
52
(6)
Income from investment entity subsidiaries
21
30
Other income/(expense)
3
(1)
Operating profit before carried interest
3,827
4,572
Carried interest
Carried interest and performance fees receivable
14
62
41
Carried interest and performance fees payable
15
(51)
(38)
Operating profit before tax
3,838
4,575
Tax charge
8
(2)
(2)
Profit for the year
3,836
4,573
Other comprehensive income that may be reclassified to the income statement
Exchange differences on translation of foreign operations
(4)
4
Other comprehensive income that will not be reclassified to the income statement
Re-measurements of defined benefit plans
26
7
8
Other comprehensive income for the year
3
12
Total comprehensive income for the year
3,839
4,585
Earnings per share
Basic (pence)
9
397.9
475.0
Diluted (pence)
9
396.7
473.8
The Notes to the accounts section forms an integral part of these financial statements.
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Consolidated statement of comprehensive income
for the year to 31 March
3i Group plc | Annual report and accounts 2024
157
Assets
Non-current assets
Investments
Quoted investments
11,13
879
841
Unquoted investments
11,13
14,193
8,677
Investments in investment entity subsidiaries
12,13
5,804
7,844
Investment portfolio
20,876
17,362
Carried interest and performance fees receivable
14
3
3
Other non-current assets
16
28
30
Intangible assets
4
5
Retirement benefit surplus
26
61
53
Property, plant and equipment
4
3
Right of use asset
49
9
Derivative financial instruments
18
83
73
Total non-current assets
21,108
17,538
Current assets
Carried interest and performance fees receivable
14
45
40
Other current assets
16
47
30
Current income taxes
1
1
Derivative financial instruments
18
82
48
Cash and cash equivalents
358
162
Total current assets
533
281
Total assets
21,641
17,819
Liabilities
Non-current liabilities
Trade and other payables
19
(5)
(4)
Carried interest and performance fees payable
15
(30)
(43)
Loans and borrowings
17
(1,202)
(775)
Derivative financial instruments
18
–
(3)
Retirement benefit deficit
26
(21)
(20)
Lease liability
(45)
(5)
Deferred income taxes
8
(1)
(1)
Provisions
(2)
(4)
Total non-current liabilities
(1,306)
(855)
Current liabilities
Trade and other payables
19
(134)
(76)
Carried interest and performance fees payable
15
(24)
(34)
Derivative financial instruments
18
–
(1)
Lease liability
(4)
(5)
Current income taxes
(3)
(4)
Total current liabilities
(165)
(120)
Total liabilities
(1,471)
(975)
Net assets
20,170
16,844
Equity
Issued capital
20
719
719
Share premium
791
790
Capital redemption reserve
43
43
Share-based payment reserve
27
42
31
Translation reserve
(6)
(2)
Capital reserve
17,154
14,044
Revenue reserve
1,519
1,327
Own shares
21
(92)
(108)
Total equity
20,170
16,844
Notes
2024
£m
2023
£m
The Notes to the accounts section forms an integral part of these financial statements.
David Hutchison
Chair
8 May 2024
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Consolidated statement of financial position
as at 31 March
3i Group plc | Annual report and accounts 2024
158
2024
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Share-
based
payment
reserve
£m
Translation
reserve
£m
Capital
reserve1
£m
Revenue
reserve1
£m
Own
shares
£m
Total
equity
£m
Total equity at the start of the year
719
790
43
31
(2)
14,044
1,327
(108)
16,844
Profit for the year
–
–
–
–
–
3,309
527
–
3,836
Exchange differences on translation of foreign
operations
–
–
–
–
(4)
–
–
–
(4)
Re-measurements of defined benefit plans
–
–
–
–
–
7
–
–
7
Total comprehensive income for the year
–
–
–
–
(4)
3,316
527
–
3,839
Share-based payments
–
–
–
27
–
–
–
–
27
Release on exercise/forfeiture of share awards
–
–
–
(16)
–
–
16
–
–
Exercise of share awards
–
–
–
–
(16)
–
16
–
Ordinary dividends
–
–
–
–
–
(190)
(351)
–
(541)
Purchase of own shares
–
–
–
–
–
–
–
–
–
Issue of ordinary shares
–
1
–
–
–
–
–
–
1
Total equity at the end of the year
719
791
43
42
(6)
17,154
1,519
(92)
20,170
1
Refer to Note 20 for the nature of the capital and revenue reserves.
2023
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Share-
based
payment
reserve
£m
Translation
reserve
£m
Capital
reserve1
£m
Revenue
reserve1
£m
Own
shares
£m
Total
equity
£m
Total equity at the start of the year
719
789
43
33
(6)
10,151
1,125
(100)
12,754
Profit for the year
–
–
–
–
–
4,064
509
–
4,573
Exchange differences on translation of foreign
operations
–
–
–
–
4
–
–
–
4
Re-measurements of defined benefit plans
–
–
–
–
–
8
–
–
8
Total comprehensive income for the year
–
–
–
–
4
4,072
509
–
4,585
Share-based payments
–
–
–
19
–
–
–
–
19
Release on exercise/forfeiture of share awards
–
–
–
(21)
–
–
21
–
–
Exercise of share awards
–
–
–
–
–
(22)
–
22
–
Ordinary dividends
–
–
–
–
–
(157)
(328)
–
(485)
Purchase of own shares
–
–
–
–
–
–
–
(30)
(30)
Issue of ordinary shares
–
1
–
–
–
–
–
–
1
Total equity at the end of the year
719
790
43
31
(2)
14,044
1,327
(108)
16,844
1
Refer to Note 20 for the nature of the capital and revenue reserves.
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159
Notes
2024
£m
2023
£m
Cash flow from operating activities
Purchase of investments
(506)
(46)
Proceeds from investments
543
227
Amounts paid to investment entity subsidiaries
(674)
(535)
Amounts received from investment entity subsidiaries
580
841
Net cash flow from derivatives
69
23
Portfolio interest received
5
12
Portfolio dividends received
366
223
Portfolio fees received
12
5
Fees received from external funds
74
67
Carried interest and performance fees received
14
58
58
Carried interest and performance fees paid
15
(53)
(29)
Operating expenses paid
(121)
(128)
Co-investment loans received
5
5
Tax paid
(3)
–
Other cash income
2
–
Interest received
9
4
Net cash flow from operating activities
366
727
Cash flow from financing activities
Issue of shares
1
1
Purchase of own shares
21
–
(30)
Dividends paid
10
(541)
(485)
Repayment of long-term borrowing
17
–
(200)
Proceeds from long-term borrowing
17
422
–
Lease payments
17
(6)
(5)
Interest paid
(40)
(54)
Net cash flow from financing activities
(164)
(773)
Cash flow from investing activities
Purchases of property, plant and equipment
(3)
(1)
Net cash flow from investing activities
(3)
(1)
Change in cash and cash equivalents
199
(47)
Cash and cash equivalents at the start of the year
162
212
Effect of exchange rate fluctuations
(3)
(3)
Cash and cash equivalents at the end of the year
358
162
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3i Group plc | Annual report and accounts 2024
160
Assets
Non-current assets
Investments
Quoted investments
11,13
879
841
Unquoted investments
11,13
14,193
8,677
Investment portfolio
15,072
9,518
Carried interest and performance fees receivable
14
5
81
Interests in Group entities
23
5,877
7,867
Other non-current assets
16
16
16
Derivative financial instruments
18
83
73
Total non-current assets
21,053
17,555
Current assets
Carried interest and performance fees receivable
14
71
17
Other current assets
16
9
9
Derivative financial instruments
18
82
48
Cash and cash equivalents
328
128
Total current assets
490
202
Total assets
21,543
17,757
Liabilities
Non-current liabilities
Loans and borrowings
17
(1,202)
(775)
Derivative financial instruments
18
–
(3)
Total non-current liabilities
(1,202)
(778)
Current liabilities
Trade and other payables
19
(760)
(728)
Derivative financial instruments
18
–
(1)
Total current liabilities
(760)
(729)
Total liabilities
(1,962)
(1,507)
Net assets
19,581
16,250
Equity
Issued capital
20
719
719
Share premium
791
790
Capital redemption reserve
43
43
Share-based payment reserve
27
42
31
Capital reserve
17,685
14,563
Revenue reserve
393
212
Own shares
21
(92)
(108)
Total equity
19,581
16,250
Notes
2024
£m
2023
£m
The Company profit for the year to 31 March 2024 is £3,844 million (2023: £4,538 million).
The Notes to the accounts section forms an integral part of these financial statements.
David Hutchison
Chair
8 May 2024
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3i Group plc | Annual report and accounts 2024
161
2024
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Share-
based
payment
reserve
£m
Capital
reserve1
£m
Revenue
reserve1
£m
Own
shares
£m
Total
equity
£m
Total equity at the start of the year
719
790
43
31
14,563
212
(108)
16,250
Profit for the year
–
–
–
–
3,328
516
–
3,844
Total comprehensive income for the year
–
–
–
–
3,328
516
–
3,844
Share-based payments
–
–
–
27
–
–
–
27
Release on exercise/forfeiture of share awards
–
–
–
(16)
–
16
–
–
Exercise of share awards
–
–
–
–
(16)
–
16
–
Ordinary dividends
–
–
–
–
(190)
(351)
–
(541)
Purchase of own shares
–
–
–
–
–
–
–
–
Issue of ordinary shares
–
1
–
–
–
–
–
1
Total equity at the end of the year
719
791
43
42
17,685
393
(92)
19,581
1
Refer to Note 20 for the nature of the capital and revenue reserves.
2023
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Share-
based
payment
reserve
£m
Capital
reserve1
£m
Revenue
reserve1
£m
Own
shares
£m
Total
equity
£m
Total equity at the start of the year
719
789
43
33
10,577
146
(100)
12,207
Profit for the year
–
–
–
–
4,165
373
–
4,538
Total comprehensive income for the year
–
–
–
–
4,165
373
–
4,538
Share-based payments
–
–
–
19
–
–
–
19
Release on exercise/forfeiture of share awards
–
–
–
(21)
–
21
–
–
Exercise of share awards
–
–
–
–
(22)
–
22
–
Ordinary dividends
–
–
–
–
(157)
(328)
–
(485)
Purchase of own shares
–
–
–
–
–
–
(30)
(30)
Issue of ordinary shares
–
1
–
–
–
–
–
1
Total equity at the end of the year
719
790
43
31
14,563
212
(108)
16,250
1
Refer to Note 20 for the nature of the capital and revenue reserves.
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Notes
2024
£m
2023
£m
Cash flow from operating activities
Purchase of investments
(506)
(46)
Proceeds from investments
543
227
Amounts paid to subsidiaries
(1,013)
(805)
Amounts received from subsidiaries
838
1,034
Net cash flow from derivatives
69
23
Portfolio interest received
5
12
Portfolio dividends received
366
223
Portfolio fees paid
(2)
(1)
Carried interest and performance fees received
14
46
34
Co-investment loans received
5
5
Interest received
8
3
Other cash income
2
–
Net cash flow from operating activities
361
709
Cash flow from financing activities
Issue of shares
1
1
Purchase of own shares
21
–
(30)
Dividends paid
10
(541)
(485)
Repayment of long-term borrowing
17
–
(200)
Proceeds from long-term borrowing
17
422
–
Interest paid
(40)
(54)
Net cash flow from financing activities
(158)
(768)
Change in cash and cash equivalents
203
(59)
Cash and cash equivalents at the start of the year
128
188
Effect of exchange rate fluctuations
(3)
(1)
Cash and cash equivalents at the end of the year
328
128
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163
Reporting entity
3i Group plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales. The consolidated financial
statements (“the Group accounts”) for the year to 31 March 2024 comprise of the financial statements of the Company and its consolidated
subsidiaries (collectively, “the Group”).
The Group accounts have been prepared and approved by the Directors in accordance with section 395 of the Companies Act 2006
and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The Company has taken advantage
of the exemption in section 408 of the Companies Act 2006 not to present its Company statement of comprehensive income and related
Notes.
A Basis of preparation
The Group and Company accounts have been prepared and approved by the Directors in accordance with UK-adopted international
accounting standards. The financial statements are presented to the nearest million sterling (£m), the functional currency of the Company.
The following standards, amendments and interpretations have been adopted by the Group for the first time during the year. These new
standards have not had a material impact on the Group.
The principal accounting policies applied in the preparation of the Group accounts are disclosed below, but where possible, they have been
shown as part of the Note to which they specifically relate in order to assist the reader’s understanding. These policies have been consistently
applied and apply to all years presented, except for in relation to the adoption of new accounting standards.
Going concern
These financial statements have been prepared on a going concern basis as disclosed in the Directors’ report. The Directors have made
an assessment of going concern for a period of at least 12 months from the date of approval of the accounts, taking into account the Group’s
current performance, financial position and the principal and emerging risks facing the business.
The Directors’ assessment of going concern, which takes into account the business model on pages 14 and 15 and the Group’s liquidity
of £1,296 million, indicates that the Group and parent company will have sufficient funds to continue as a going concern, for at least the next
12 months from the date of approval of the accounts. As detailed within the Financial review on pages 70 to 74 on the Investment basis the
Group covers its cash operating costs, £127 million at 31 March 2024, with cash income generated by our Private Equity and Infrastructure
businesses and Scandlines, £594 million at 31 March 2024. The Group’s liquidity comprises cash and deposits of £396 million (31 March 2023:
£412 million) and an undrawn multi-currency facility of £900 million (31 March 2023: £900 million), which has no financial covenants. During the
year the Group further strengthened its liquidity profile through the successful issue of a six-year €500 million bond at a coupon of 4.875% and
successfully extended the tenor of the £400 million tranche of our £900 million RCF to November 2026. Post the year end in April 2024, we
agreed the sale of nexeye, generating expected exit proceeds of c.€452 million. These exit proceeds, combined with distributions already
received, result in a 2.0x money multiple. The transaction is expected to complete in H1 FY2025.
As a proprietary investor, the Group has a long-term, responsible investment approach, and is not subject to external pressure to realise
investments before optimum value can be achieved. The Board has the ability to take certain actions to help support the Group in adverse
circumstances. Mitigating actions within management control during extended periods of low liquidity include, for example, drawing on the
existing RCF or temporarily reducing new investment levels. The Group manages liquidity with the aim of ensuring it is adequate and
sufficient, by regular monitoring of investments, realisations, operating expenses and portfolio cash income and there have been no post
balance sheet changes that would be materially detrimental to liquidity. The Directors are of the opinion that the Group’s cash flow forecast is
sufficient to support the Group given the current market, economic conditions and outlook.
Having performed the assessment on going concern, the Directors considered it appropriate to prepare the financial statements
of the Company and Group on a going concern basis, and have concluded that the Group has sufficient financial resources, is well placed
to manage business risks in the current economic environment, and can continue operations for a period of at least 12 months from the
date of issue of these financial statements.
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Effective for annual periods beginning on or after
IAS 1 and IFRS Practice Statement 2
Disclosure of Accounting Policies
1 January 2023
IFRS 17
Insurance Contracts
1 January 2023
B Basis of consolidation
In accordance with IFRS 10, the Company meets the criteria as an investment entity and therefore is required to recognise subsidiaries that
also qualify as investment entities at fair value through profit or loss. It does not consolidate the investment entities it controls. Subsidiaries
that provide investment-related services, such as advisory, management or employment services, are not accounted for at fair value through
profit and loss and continue to be consolidated unless those subsidiaries qualify as investment entities, in which case they are recognised at
fair value. Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group has all of the
following:
• power over the relevant activities of the investee;
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to affect those returns through its power over the investee.
The Group is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that
the financial treatment is accurate.
Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. All intragroup balances and transactions
with subsidiaries are eliminated upon consolidation. Subsidiaries are de-consolidated from the date that control ceases.
The Group comprises several different types of subsidiaries. For a new subsidiary, the Group assesses whether it qualifies as an investment
entity under IFRS 10, based on the function the entity performs within the Group. For existing subsidiaries, the Group annually reassesses the
function performed by each type of subsidiary to determine if the treatment under IFRS 10 exception from consolidation is still appropriate.
The types of subsidiaries and their treatment under IFRS 10 are as follows:
General Partners (“GPs”) – Consolidated
General Partners provide investment management services and do not hold any direct investments in portfolio assets. These entities are not
investment entities.
Investment managers/advisers – Consolidated
These entities provide investment-related services through the provision of investment management or advice. They do not hold any direct
investments in portfolio assets. These entities are not investment entities.
Holding companies of investment managers/advisers – Consolidated
These entities provide investment-related services through their subsidiaries. Typically they do not hold any direct investment in portfolio
assets and these entities are not investment entities.
Limited partnerships and other intermediate investment holding structures – Fair valued
The Group makes investments in portfolio assets through its ultimate parent company as well as through other limited partnerships and
corporate subsidiaries which the Group has created to align the interests of the investment teams with the performance of the assets through
the use of various carried interest schemes. The purpose of these limited partnerships and corporate holding vehicles, many of which also
provide investment-related services, is to invest for investment income and capital appreciation. These partnerships and corporate
subsidiaries meet the definition of an investment entity and are accounted for at fair value through profit and loss.
Portfolio investments – Fair valued
Under IFRS 10, the test for accounting subsidiaries takes wider factors of control as well as actual equity ownership into account. In accordance
with the investment entity exception, these entities have been held at fair value with movements in fair value being recognised in profit or loss.
Associates – Fair valued
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.
Investments that are held as part of the Group’s investment portfolio are carried in the Consolidated statement of financial position
at fair value even though the Group may have significant influence over those companies.
Further detail on our application of IFRS 10 can be found in the Reconciliation of Investment basis to IFRS section.
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C Critical accounting judgements and estimates
The reported results of the Group are sensitive to the accounting policies, assumptions and estimates that underpin the preparation
of its financial statements. UK company law and IFRS require the Directors, in preparing the Group’s financial statements, to select suitable
accounting policies, apply them consistently and make judgements and estimates that are reasonable and prudent. The Group’s estimates
and assumptions are based on historical experience and expectation of future events and are reviewed periodically. The actual outcome
may be materially different from that anticipated.
(a) Critical judgements
In the course of preparing the financial statements, one judgement has been made in the process of applying the Group’s accounting
policies, other than those involving estimations, that has had a significant effect on the amounts recognised in the financial statements
as follows:
I. Assessment as an investment entity
The Board has concluded that the Company continues to meet the definition of an investment entity, as its strategic objective of investing
in portfolio investments and providing investment management services to investors for the purpose of generating returns in the form
of investment income and capital appreciation remains unchanged.
(b) Critical estimates
In addition to these significant judgements, the Directors have made two estimates, which they deem to have a significant risk of resulting
in a material adjustment to the amounts recognised in the financial statements within the next financial year. The details of these estimates
are as follows:
I. Fair valuation of the investment portfolio
The investment portfolio, a material group of assets of the Group, is held at fair value. Details of valuation methodologies used and
the associated sensitivities are disclosed in Note 13 Fair values of assets and liabilities in this document. Given the importance of this area,
the Board has a separate Valuations Committee to review the valuations policies, process and application to individual investments.
A report on the activities of the Valuations Committee (including a review of the assumptions made) is included in the Valuations Committee
report on pages 131 to 135.
II. Carried interest payable
Carried interest payable is calculated based on the underlying agreements, and assuming all portfolio investments are sold at their fair
values at the balance sheet date. The actual amounts of carried interest paid will depend on the cash realisations of these portfolio
investments and valuations may change significantly in the next financial year. The fair valuation of the investment portfolio is itself a critical
estimate, as detailed above. The sensitivity of carried interest payable to movements in the investment portfolio is disclosed in Note 15.
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D Other accounting policies
(a) Gross investment return
Gross investment return is equivalent to “revenue” for the purposes of IAS 1. It represents the overall increase in net assets from
the investment portfolio net of deal-related costs and includes foreign exchange movements in respect of the investment portfolio.
The substantial majority is investment income and outside the scope of IFRS 15. It is analysed into the following components with
the relevant standard shown where appropriate:
i. Realised profits or losses over value on the disposal of investments are the difference between the fair value of the consideration
received in accordance with IFRS 13 less any directly attributable costs, on the sale of equity and the repayment of interest income from
the investment portfolio, and its carrying value at the start of the accounting period, converted into sterling using the exchange rates
in force at the date of disposal. See Note 2 for more details.
ii. Unrealised profits or losses on the revaluation of investments are the movement in the fair value of investments in accordance with IFRS 13
between the start and end of the accounting period converted into sterling using the exchange rates in force at the date of fair value
assessment. See Note 3 for more details.
iii.Fair value movements on investment entity subsidiaries are the movements in the fair value of Group subsidiaries which are classified
as investment entities under IFRS 10. The Group makes investments in portfolio assets through these entities which are usually limited
partnerships or corporate subsidiaries. See Note 12 for more details.
iv.Portfolio income is that portion of income that is directly related to the return from individual investments. It is recognised to the extent
that it is probable that there will be economic benefit and the income can be reliably measured. The following specific recognition criteria
must be met before the income is recognised:
• Dividends from equity investments are recognised in profit or loss when the shareholders’ rights to receive payment have been
established;
• Interest income from the investment portfolio is recognised as it accrues. When the fair value of an investment is assessed to be below
the principal value of a loan, the Group recognises a provision against any interest accrued from the date of the assessment going
forward until the investment is assessed to have recovered in value; and
• The accounting policy for fee income is included in Note 4.
v. Foreign exchange on investments arises on investments made in currencies that are different from the functional currency of the Company,
being sterling. Investments are translated at the exchange rate ruling at the date of the transaction in accordance with IAS 21. At each
subsequent reporting date, investments are translated to sterling at the exchange rate ruling at that date.
vi.Movement in the fair value of derivatives relates to the change in fair value of forward foreign exchange contracts which have been used
to minimise foreign currency risk in the investment portfolio. See Note 18 for more details.
(b) Foreign currency translation
For the Company and those subsidiaries and associates whose balance sheets are denominated in sterling, which is the Company’s functional
and presentational currency, monetary assets and liabilities and non-monetary assets held at fair value denominated in foreign currencies are
translated into sterling at the closing rates of exchange at the balance sheet date. Foreign currency transactions are translated into sterling at
the average rates of exchange over the year and exchange differences arising are taken to profit or loss.
The statements of financial position of subsidiaries, which are not held at fair value, denominated in foreign currencies are translated into
sterling at the closing rates. The statements of comprehensive income for these subsidiaries and associates are translated at the average rates
and exchange differences arising are taken to other comprehensive income. Such exchange differences are reclassified to profit or loss in the
period in which the subsidiary or associate is disposed of.
(c) Treasury assets and liabilities
Short-term treasury assets, and short and long-term treasury liabilities are used in order to manage cash flows.
Cash and cash equivalents comprise cash at bank and amounts held in money market funds which are readily convertible into cash and there
is an insignificant risk of changes in value. Financial assets and liabilities are recognised in the balance sheet when the relevant Group entity
becomes a party to the contractual provisions of the instrument. Derecognition occurs when rights to cash flows from a financial asset expire,
or when a liability is extinguished.
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1 Segmental analysis
Operating segments are the components of the Group whose results are regularly reviewed by the Group’s chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its performance.
The Chief Executive, who is considered to be the chief operating decision maker, managed the Group on the basis of business divisions
determined with reference to market focus, geographic focus, investment funding model and the Group’s management hierarchy.
A description of the activities, including returns generated by these divisions and the allocation of resources, is given in the Strategic report.
For the geographical segmental split, revenue information is based on the locations of the assets held. To aid the readers’ understanding
we have split out Action, Private Equity’s largest asset, into a separate column. Action is not regarded as a reported segment as the chief
operating decision maker reviews performance, makes decisions and allocates resources to the Private Equity segment, which includes Action.
The segmental information that follows is presented on the basis used by the Chief Executive to monitor the performance of the Group.
The reported segments are Private Equity, Infrastructure and Scandlines.
The segmental analysis is prepared on the Investment basis. The Investment basis is an APM and we believe it provides a more
understandable view of performance. For more information on the Investment basis and a reconciliation between the Investment basis
and IFRS, see pages 75 to 78.
Realised losses over value on the disposal of investments
–
–
(4)
–
(4)
Unrealised profits/(losses) on the revaluation of investments
3,874
3,609
72
(20)
3,926
Portfolio income
Dividends
439
377
35
25
499
Interest income from investment portfolio
80
–
11
–
91
Fees receivable
7
6
(6)
–
1
Foreign exchange on investments
(437)
(332)
(9)
(15)
(461)
Movement in the fair value of derivatives
96
58
–
20
116
Gross investment return
4,059
3,718
99
10
4,168
Fees receivable from external funds
4
68
–
72
Operating expenses
(92)
(52)
(3)
(147)
Interest receivable
13
Interest payable
(61)
Exchange movements
29
Other income
3
Operating profit before carried interest
4,077
Carried interest
Carried interest and performance fees receivable
–
62
–
62
Carried interest and performance fees payable
(262)
(43)
–
(305)
Operating profit before tax
3,834
Tax charge
(2)
Profit for the year
3,832
Other comprehensive income
Re-measurements of defined benefit plans
7
Total return
3,839
Realisations1
866
762
22
–
888
Cash investment2
(556)
(455)
(36)
(1)
(593)
Net divestment/(investment)
310
307
(14)
(1)
295
Balance sheet
Opening portfolio value at 1 April 2023
16,425
11,188
1,409
554
18,388
Investment3
683
455
36
1
720
Value disposed
(866)
(762)
(26)
–
(892)
Unrealised value movement
3,874
3,609
72
(20)
3,926
Foreign exchange (including other movements)
(487)
(332)
(3)
(16)
(506)
Closing portfolio value at 31 March 2024
19,629
14,158
1,488
519
21,636
Investment basis
Year to 31 March 2024
Private
Equity
£m
Of which
Action
£m
Infrastructure
£m
Scandlines
£m
Total4
£m
1
Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the year, Private Equity recognised £866 million of realised proceeds, of which £5 million relates to WHT.
2
Cash investment per the segmental analysis is different to cash investment per the cash flow due to a £10 million investment in Private Equity which was recognised in FY2023 and paid in FY2024.
3
Includes capitalised interest and other non-cash investment.
4
The total is the sum of Private Equity, Infrastructure and Scandlines, “Of which Action” is part of Private Equity.
Interest receivable, interest payable, exchange movements, other income, tax charge and re-measurements of defined benefit plans
are not managed by segment by the chief operating decision maker and therefore have not been allocated to a specific segment.
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1 Segmental analysis continued
Investment basis
Year to 31 March 2023
Private
Equity
£m
Of which
Action
£m
Infrastructure
£m
Scandlines
£m
Total4
£m
Realised profits over value on the disposal of investments
169
–
–
–
169
Unrealised profits on the revaluation of investments
3,746
3,708
23
–
3,769
Portfolio income
Dividends
345
328
33
38
416
Interest income from investment portfolio
77
–
14
–
91
Fees receivable
7
1
–
–
7
Foreign exchange on investments
493
285
16
21
530
Movement in the fair value of derivatives
129
22
–
(7)
122
Gross investment return
4,966
4,344
86
52
5,104
Fees receivable from external funds
4
66
–
70
Operating expenses
(88)
(48)
(2)
(138)
Interest receivable
4
Interest payable
(54)
Exchange movements
(29)
Other income
(1)
Operating profit before carried interest
4,956
Carried interest
Carried interest and performance fees receivable
4
37
–
41
Carried interest and performance fees payable
(392)
(26)
–
(418)
Operating profit before tax
4,579
Tax charge
(2)
Profit for the year
4,577
Other comprehensive income
Re-measurements of defined benefit plans
8
Total return
4,585
Realisations1
857
–
–
–
857
Cash investment2
(381)
(30)
(16)
–
(397)
Net divestment/(investment)
476
(30)
(16)
–
460
Balance sheet
Opening portfolio value at 1 April 2022
12,420
7,165
1,352
533
14,305
Investment3
496
30
16
–
512
Value disposed
(688)
–
–
–
(688)
Unrealised value movement
3,746
3,708
23
–
3,769
Foreign exchange (including other movements)
451
285
18
21
490
Closing portfolio value at 31 March 2023
16,425
11,188
1,409
554
18,388
1
Realised proceeds may differ from cash proceeds due to timing of cash receipts. During the year, Private Equity received £1 million and Infrastructure received £33 million of cash proceeds which were recognised as realised
proceeds in FY2022. Private Equity recognised £6 million of realised proceeds which are to be received in FY2024.
2
Cash investment per the segmental analysis is different to cash investment per the cash flow due to a £57 million syndication in Infrastructure which was recognised in FY2022 and received in FY2023 and a £10 million investment
in Private Equity which was recognised in FY2023 and is to be paid in FY2024.
3
Includes capitalised interest and other non-cash investment.
4
The total is the sum of Private Equity, Infrastructure and Scandlines, “Of which Action” is part of Private Equity.
Interest received, interest paid, exchange movements, other income, tax charge and re-measurements of defined benefit plans
are not managed by segment by the chief operating decision maker and therefore have not been allocated to a specific segment.
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1 Segmental analysis continued
Investment basis
Year to 31 March 2024
Europe1
£m
North
America
£m
Other
£m
Total
£m
Realised losses over value on the disposal of investments
(1)
(3)
–
(4)
Unrealised profits on the revaluation of investments
3,919
7
–
3,926
Portfolio income
579
12
–
591
Foreign exchange on investments
(416)
(44)
(1)
(461)
Movement in fair value of derivatives
88
28
–
116
Gross investment return
4,169
–
(1)
4,168
Realisations
865
22
1
888
Cash investment
(532)
(61)
–
(593)
Net (investment)/divestment
333
(39)
1
295
Balance sheet
Closing portfolio value at 31 March 2024
19,485
2,124
27
21,636
Investment basis
Year to 31 March 2023
Europe1
£m
North
America
£m
Other
£m
Total
£m
Realised profits over value on the disposal of investments
169
–
–
169
Unrealised profits on the revaluation of investments
3,445
317
7
3,769
Portfolio income
498
16
–
514
Foreign exchange on investments
418
113
(1)
530
Movement in fair value of derivatives
22
100
–
122
Gross investment return
4,552
546
6
5,104
Realisations
525
332
–
857
Cash investment
(323)
(74)
–
(397)
Net (investment)/divestment
202
258
–
460
Balance sheet
Closing portfolio value at 31 March 2023
16,239
2,122
27
18,388
1
Includes UK.
2 Realised profits over value on the disposal of investments
2024
Unquoted
investments
Total
£m
Realisations
543
543
Valuation of disposed investments
(542)
(542)
1
1
Of which:
– profits recognised on realisations
1
1
1
1
2023
Unquoted
investments
Total
£m
Realisations
193
193
Valuation of disposed investments
(129)
(129)
64
64
Of which:
– profits recognised on realisations
64
64
64
64
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3 Unrealised profits on the revaluation of investments
2024
Unquoted
investments
£m
2024
Quoted
investments
£m
Total
£m
Movement in the fair value of investments
2,704
38
2,742
Of which:
– unrealised profits
2,896
38
2,934
– unrealised losses
(192)
–
(192)
2,704
38
2,742
2023
Unquoted
investments
£m
2023
Quoted
investments
£m
Total
£m
Movement in the fair value of investments
1,990
(93)
1,897
Of which:
– unrealised profits
2,152
–
2,152
– unrealised losses
(162)
(93)
(255)
1,990
(93)
1,897
4 Revenue
Accounting policy:
The following items from the Consolidated statement of comprehensive income fall within the scope of IFRS 15:
Fees receivable are earned for providing services to 3i’s portfolio companies, which predominantly fall into one of two categories:
Negotiation and other transaction fees are earned for providing services relating to a specific transaction, such as when a portfolio
company is bought, sold or refinanced. These fees are generally of a fixed nature and the revenue is recognised in full at the point
of transaction completion.
Monitoring and other ongoing service fees are earned for providing a range of services to a portfolio company over a period of time.
These fees are generally of a fixed nature and the revenue is recognised evenly over the period, in line with the services provided.
Fees receivable from external funds are earned for providing management and advisory services to a variety of fund partnerships and other
entities. Fees are typically calculated as a percentage of the cost or value of the assets managed during the year and are paid quarterly,
based on the assets under management at that date. The revenue is recognised evenly over the period, in line with the services provided.
Carried interest and performance fees receivable – the accounting policy for carried interest and performance fees receivable is shown
in Note 14.
Items from the Consolidated statement of comprehensive income which fall within the scope of IFRS 15 are included in the table below:
Year to 31 March 2024
Private
Equity
£m
Infrastructure
£m
Total
£m
Total revenue by geography1
Europe2
11
120
131
North America
2
4
6
Total
13
124
137
Revenue by type
Fees receivable3
9
(6)
3
Fees receivable from external funds
4
68
72
Carried interest and performance fees receivable3
–
62
62
Total
13
124
137
1
For fees receivable from external funds and carried interest and performance fees receivable the geography is based on the domicile of the fund.
2
Includes UK.
3
Fees receivable and carried interest receivable above are different to the Investment basis figures included in Note 1. This is due to the fact that Note 1 is disclosed on the Investment basis and the table above is shown on the IFRS
basis. For an explanation of the Investment basis and a reconciliation between Investment basis and IFRS basis see pages 75 to 78.
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4 Revenue continued
Year to 31 March 2023
Private
Equity
£m
Infrastructure
£m
Total
£m
Total revenue by geography1
Europe2
16
101
117
North America
2
2
4
Total
18
103
121
Revenue by type
Fees receivable3
10
–
10
Fees receivable from external funds
4
66
70
Carried interest and performance fees receivable3
4
37
41
Total
18
103
121
1
For fees receivable from external funds and carried interest and performance fees receivable the geography is based on the domicile of the fund.
2
Includes UK.
3
Fees receivable and carried interest receivable above are different to the Investment basis figures included in Note 1. This is due to the fact that Note 1 is disclosed on the Investment basis and the table above is shown on the IFRS
basis. For an explanation of the Investment basis and a reconciliation between Investment basis and IFRS basis see pages 75 to 78.
Consolidated statement of financial position
As at 31 March 2024, other current assets in the Consolidated statement of financial position include balances relating to fees receivable
from portfolio and fees receivable from external funds of £5 million and £1 million respectively (31 March 2023: £4 million and £5 million
respectively). Details of the carried interest and performance fees receivable included in the Consolidated statement of financial position
are shown in Note 14. These are different to the balances included in the Investment basis Consolidated statement of financial position.
For an explanation of the Investment basis and a reconciliation between Investment basis and IFRS basis see pages 75 to 78.
5 Operating expenses
Operating expenses of £146 million (2023: £137 million) recognised in the IFRS Consolidated statement of comprehensive income,
include the following amounts:
2024
£m
2023
£m
Depreciation of property, plant and equipment
2
1
Depreciation of right of use assets
5
4
Amortisation of intangible assets
1
1
Audit fees (Note 7)
3
3
Staff costs (Note 6)
102
97
Redundancy costs
2
–
Including expenses incurred in the entities accounted for as investment entity subsidiaries of £1 million (2023: £1 million), the Group’s total
operating expenses on the Investment basis for the year were £147 million (2023: £138 million).
6 Staff costs
The table below is prepared in accordance with Companies Act requirements, which is consistent with both the IFRS and the Investment basis.
2024
£m
2023
£m
Wages and salaries
74
72
Social security costs
15
12
Share-based payment costs (Note 27)
9
9
Pension costs
4
4
Total staff costs
102
97
The average number of employees during the year was 246 (2023: 241), of which 158 (2023: 152) were employed in the UK.
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6 Staff costs continued
Wages and salaries shown above include salaries paid in the year, as well as bonuses and portfolio incentive schemes relating to the year
ended 31 March 2024. These costs are included in operating expenses. The table below analyses these costs between fixed and variable
elements.
2024
£m
2023
£m
Fixed staff costs
48
45
Variable staff costs1
54
52
Total staff costs
102
97
1
Includes cash bonuses and equity and cash-settled share awards.
More detail on staff costs for Directors is included in the Directors’ remuneration report on pages 136 to 149.
7 Information regarding the Group’s Auditor
During the year, the Group received the following services from its External auditor, KPMG LLP. The table below is prepared in accordance
with Companies Act requirements, which is consistent with both the IFRS and the Investment basis.
2024
£m
2023
£m
Audit services
Statutory audit
– Company
1.8
1.7
– UK subsidiaries
0.8
0.7
– Overseas subsidiaries
0.5
0.4
Total audit services
3.1
2.8
Non-audit services
Other assurance services
0.4
0.4
Total audit and non-audit services
3.5
3.2
8 Tax
Accounting policy:
Tax represents the sum of the tax currently payable, withholding taxes suffered and deferred tax. Tax is charged or credited in the
Consolidated statement of comprehensive income, except where it relates to items charged or credited directly to equity, in which
case the tax is also dealt with in equity. The tax currently payable is based on the taxable profit for the year. This may differ from the profit
included in the Consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible.
The affairs of the Group’s parent company are directed so as to allow it to meet the requisite conditions to continue to operate as an
approved investment trust company for UK tax purposes. An approved investment trust company is a UK investment company which
is required to meet certain conditions set out in the UK tax rules to obtain and maintain its tax status. This approval allows certain
investment profits of the Company, broadly its capital profits, to be exempt from tax in the UK.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered. The deferred tax assets and liabilities have
been calculated using the corporation tax rate in the UK of 25% (2023: 25%).
IFRIC 23 has been applied to the recognition and measurement of uncertain tax provisions held at the year end. There were no material
uncertain tax positions arising during the year or at the year end.
The Group is within the scope of the OECD Pillar Two model rules. The United Kingdom, the jurisdiction in which the ultimate parent
company of the Group is tax resident, has enacted the Pillar Two legislation. The Group has no related current tax exposure for its year
ended 31 March 2024, as the rules will first apply to the Group’s accounting period ended 31 March 2025. The Group has applied the
exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided
in the amendments to IAS 12 issued in May 2023.
Under the Pillar Two legislation, the Group is liable to pay a top-up tax for the difference between its GloBE effective tax rate per
jurisdiction and the 15% minimum rate. The application of the legislation and calculating GloBE income to determine the quantitative
impact is complex and the Group is engaged with tax specialists to assist it with applying the legislation. The Group’s key business
operations are not based in low tax jurisdictions and the application of the Pillar Two rules is not anticipated to have a material impact on
the Group.
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173
8 Tax continued
2024
£m
2023
£m
Current taxes
Current year:
UK
3
2
Overseas
1
1
Prior year:
UK
(1)
(1)
Overseas
(1)
(1)
Deferred taxes
Current year
–
1
Total tax charge in the Consolidated statement of comprehensive income
2
2
Reconciliation of tax in the Consolidated statement of comprehensive income
The tax charge for the year is different to the standard rate of corporation tax in the UK, currently 25% (2023: 19%), and the differences are
explained below:
2024
£m
2023
£m
Profit before tax
3,838
4,575
Profit before tax multiplied by rate of corporation tax in the UK of 25% (2023: 19%)
960
869
Effects of:
Non-taxable capital profits due to UK-approved investment trust company status
(838)
(793)
Non-taxable dividend income
(120)
(75)
2
1
Other differences between accounting and tax profits:
Permanent differences – non-deductible items
2
4
Temporary differences on which deferred tax is not recognised
2
1
Overseas countries’ taxes
1
1
Tax losses brought forward and utilised on which deferred tax not previously provided
(3)
(3)
Prior year tax credits
(2)
(2)
Total income tax charge in the Consolidated statement of comprehensive income
2
2
Including a net tax charge of nil (2023: nil) in investment entity subsidiaries, the Group recognised a total tax charge of £2 million (2023:
£2 million) under the Investment basis.
Deferred income taxes
2024
£m
2023
£m
Opening deferred income tax asset/(liability)
Tax losses
1
1
Income in accounts taxable in the future
(2)
(1)
(1)
–
Recognised through Consolidated statement of comprehensive income
Tax losses recognised
–
–
Income in accounts taxable in the future
–
(1)
–
(1)
Closing deferred income tax asset/(liability)
Tax losses
1
1
Income in accounts taxable in the future
(2)
(2)
(1)
(1)
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8 Tax continued
At 31 March 2024, the Group had carried forward tax losses of £1,371 million (31 March 2023: £1,379 million), capital losses of £87 million
(31 March 2023: £87 million) and other deductible temporary differences of £86 million (31 March 2023: £59 million). With the additional
restrictions on utilising brought forward losses introduced from 1 April 2017, and the uncertainty that the Group will generate sufficient
or relevant taxable profits not covered by the Investment Trust exemption in the foreseeable future to utilise these amounts, no deferred tax
asset has been recognised in respect of these losses. Deferred tax assets and liabilities have been calculated using the corporation tax rate
in the UK of 25% (2023: 25%).
9 Per share information
The calculation of basic net assets per share is based on the net assets and the number of shares in issue at the year end. When calculating
the diluted net assets per share, the number of shares in issue is adjusted for the effect of all dilutive share awards. Dilutive share awards
are equity awards with performance conditions attached see Note 27 Share-based payments for further details.
2024
2023
Net assets per share (£)
Basic
20.92
17.50
Diluted
20.85
17.45
Net assets (£m)
Net assets attributable to equity holders of the Company
20,170
16,844
2024
2023
Number of shares in issue
Ordinary shares
973,366,445
973,312,950
Own shares
(8,997,664)
(10,660,078)
964,368,781
962,652,872
Effect of dilutive potential ordinary shares
Share awards
3,104,739
2,849,520
Diluted shares
967,473,520
965,502,392
The calculation of basic earnings per share is based on the profit attributable to shareholders and the weighted average number of shares
in issue. The weighted average shares in issue for the year to 31 March 2024 are 964,007,876 (2023: 962,674,183). When calculating the diluted
earnings per share, the weighted average number of shares in issue is adjusted for the effect of all dilutive share awards. The diluted weighted
average shares in issue for the year to 31 March 2024 are 966,901,059 (2023: 965,273,696).
2024
2023
Earnings per share (pence)
Basic
397.9
475.0
Diluted
396.7
473.8
Earnings (£m)
Profit for the year attributable to equity holders of the Company
3,836
4,573
10 Dividends
2024
pence per
share
2024
£m
2023
pence per
share
2023
£m
Declared and paid during the year
Ordinary shares
Second dividend
29.75
286
27.25
262
First dividend
26.50
255
23.25
223
56.25
541
50.50
485
Proposed dividend
34.50
332
29.75
285
The Group introduced a simplified dividend policy in May 2018. In accordance with this policy, subject to maintaining a conservative balance
sheet approach, the Group aims to maintain or grow the dividend each year. The first dividend has been set at 50% of the prior year’s total
dividend.
The dividend can be paid out of either the capital reserve or the revenue reserve subject to the investment trust rules, see Note 20 and the
statement of changes in equity for details of reserves.
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175
10 Dividends continued
The distributable reserves of the Company are £8,282 million (31 March 2023: £4,940 million) and the Board reviews the distributable reserves
bi-annually, including consideration of any material changes since the most recent audited accounts, ahead of proposing any dividend. The
Board also reviews the proposed dividends in the context of the requirements of being an approved investment trust. Shareholders are given
the opportunity to approve the total dividend for the year at the Company’s Annual General Meeting. Details of the Group’s continuing
viability and going concern can be found in the Risk management section.
11 Investment portfolio
Accounting policy:
Investments are recognised and derecognised on the date when their purchase or sale is subject to a relevant contract and the associated
risks and rewards have been transferred. The Group manages its investments with a view to profiting from the receipt of investment
income and capital appreciation from changes in the fair value of investments.
All investments are initially recognised at the fair value of the consideration given and are subsequently measured at fair value,
in accordance with the Group’s valuation policies.
Quoted investments are accounted for at fair value through profit and loss. Fair value is measured using the closing bid price
at the reporting date, where the investment is quoted on an active stock market.
Unquoted investments, including both equity and loans, are accounted for at fair value through profit and loss. Fair value is determined
in line with 3i’s valuation policy, which is compliant with the fair value guidelines under IFRS and the International Private Equity
and Venture Capital (“IPEV”) Valuation Guidelines, details of which are available in “Valuations Committee report” on pages 131 to 135.
Interest bearing loans accrue interest which is either settled in cash or capitalised on a regular basis and included as part of the principal
loan balance. The capitalisation of accrued interest is treated as part of investment additions during the year. If the fair value of an
investment is assessed to be below the principal value of the loan the Group recognises a fair value reduction against any interest income
accrued from the date of the assessment going forward. “Capitalisation at nil value” is the term used to describe the capitalisation of
accrued interest which has been fully provided for. These transactions are disclosed as additions to portfolio cost with an equal reduction
made where loan notes have nil value.
In accordance with IFRS 10, the proportion of the investment portfolio held by the Group’s unconsolidated subsidiaries is presented
as part of the fair value of investment entity subsidiaries, along with the fair value of their other assets and liabilities.
A reconciliation of the fair value of Investments in investment entities is included in Note 12.
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Opening fair value
9,518
6,642
9,518
6,642
Additions
3,596
908
3,596
908
– of which loan notes with nil value
(6)
(6)
(6)
(6)
Disposals, repayments and write-offs
(542)
(129)
(542)
(129)
Fair value movement1
2,742
1,897
2,742
1,897
Other movements2
(236)
206
(236)
206
Closing fair value
15,072
9,518
15,072
9,518
Quoted investments
879
841
879
841
Unquoted investments
14,193
8,677
14,193
8,677
Closing fair value
15,072
9,518
15,072
9,518
1
All fair value movements relate to assets held at the end of the year.
2
Other movements includes the impact of foreign exchange and accrued interest.
3i’s investment portfolio is made up of longer-term investments, with average holding periods greater than one year, and thus is classified
as non-current.
The table on the next page reconciles between purchase of investments in the cash flow statement and additions as disclosed in the table
above.
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176
11 Investment portfolio continued
2024
£m
2023
£m
Purchase of investments
506
46
Transfer of portfolio investments from investment entity subsidiaries1
3,068
781
Syndication
–
57
Investment (paid)/payable
(2)
2
Investment
3,572
886
Capitalised interest received by way of loan notes
24
22
Additions
3,596
908
1
Includes £2,770 million (31 March 2023: £781 million) related to Action. See Note 12 for further details.
Included within profit or loss is £29 million (2023: £29 million) of interest income. Interest income included £18 million (2023: £14 million)
of accrued income capitalised during the year noted above, £5 million (2023: £12 million) of cash income and £6 million (2023: £3 million)
of accrued income remaining uncapitalised at the year end.
Quoted investments are classified as Level 1 and unquoted investments are classified as Level 3 in the fair value hierarchy, see Note 13 for details.
12 Investments in investment entity subsidiaries
Accounting policy:
Investments in investment entity subsidiaries are accounted for as financial instruments at fair value through profit and loss in accordance
with IFRS 9.
These entities are typically limited partnerships and other intermediate investment holding structures which hold the Group’s interests
in investments in portfolio companies. The fair value can increase or decrease from either amounts paid to or received from the investment
entity subsidiaries or valuation movements in line with the Group’s valuation policy.
Substantially all of these entities meet the definition of a Fund under the IPEV guidelines and the fair value of these entities is their net asset
value.
We determine that, in the ordinary course of business, the net asset value of investment entity subsidiaries is considered to be the most
appropriate to determine fair value. At each reporting period, we consider whether any additional fair value adjustments need to be made
to the net asset value of the investment entity subsidiaries. These adjustments may be required to reflect market participants’
considerations about fair value that may include, but are not limited to, liquidity and the portfolio effect of holding multiple investments
within the investment entity subsidiary. There was no particular circumstance to indicate that a fair value adjustment was required (31 March
2023: no adjustment required) and, after due consideration, we concluded that the net asset values were the most appropriate reflection
of fair value at 31 March 2024.
Level 3 fair value reconciliation – investments in investment entity subsidiaries
Non-current
Group
2024
£m
Group
2023
£m
Opening fair value
7,844
6,791
Amounts paid to investment entity subsidiaries
674
535
Amounts received from investment entity subsidiaries
(580)
(841)
Fair value movements on investment entity subsidiaries
861
2,112
Transfer of portfolio investments from investment entity subsidiaries
(3,068)
(781)
Transfer of assets to investment entity subsidiaries
73
28
Closing fair value
5,804
7,844
Transfer of portfolio investments from investment entity subsidiaries includes the transfer of investment portfolio between investment entity
subsidiaries and the Company at fair value. The consideration for these transfers can either be cash or intra-group receivables. During the year
the Company received a transfer of assets of £3,068 million (31 March 2023: £781 million) from partnerships which are classified as investment
entity subsidiaries, of which £2,770 million (31 March 2023: £781 million) related to Action.
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12 Investments in investment entity subsidiaries continued
Restrictions
3i Group plc, the ultimate parent company, receives dividend income from its subsidiaries. There is £21 million (31 March 2023: £225 million) of
restrictive cash held in investment entity subsidiaries relating to carried interest and performance fees payable.
Support
3i Group plc continues to provide, where necessary, ongoing support to its investment entity subsidiaries for the purchase of portfolio
investments. The Group’s current commitments are disclosed in Note 24.
13 Fair values of assets and liabilities
Accounting policy:
Financial instruments are initially classified at either amortised cost or fair value through profit or loss. Financial instruments classified at fair
value through profit or loss are subsequently measured at fair value with gains and losses arising from changes in fair value recognised
in profit or loss in the Statement of comprehensive income. Financial instruments classified at amortised cost are subsequently measured
at amortised cost using the effective interest method with interest income or expense and foreign exchange gains and losses recognised
in profit or loss in the Statement of comprehensive income.
(A) Classification
The following tables analyse the Group’s assets and liabilities in accordance with the categories of financial instruments in IFRS 9:
Group
2024
Classified at fair
value through
profit and loss
£m
Group
2024
Other financial
instruments at
amortised cost
£m
Group
2024
Total
£m
Group
2023
Classified at fair
value through
profit and loss
£m
Group
2023
Other financial
instruments at
amortised cost
£m
Group
2023
Total
£m
Assets
Quoted investments
879
–
879
841
–
841
Unquoted investments
14,193
–
14,193
8,677
–
8,677
Investments in investment entities
5,804
–
5,804
7,844
–
7,844
Other financial assets
182
106
288
142
82
224
Total
21,058
106
21,164
17,504
82
17,586
Liabilities
Loans and borrowings
–
1,202
1,202
–
775
775
Other financial liabilities
–
242
242
4
167
171
Total
–
1,444
1,444
4
942
946
Company
2024
Classified at fair
value through
profit and loss
£m
Company
2024
Other financial
instruments at
amortised cost
£m
Company
2024
Total
£m
Company
2023
Classified at fair
value through
profit and loss
£m
Company
2023
Other financial
instruments at
amortised cost
£m
Company
2023
Total
£m
Assets
Quoted investments
879
–
879
841
–
841
Unquoted investments
14,193
–
14,193
8,677
–
8,677
Other financial assets
170
96
266
131
113
244
Total
15,242
96
15,338
9,649
113
9,762
Liabilities
Loans and borrowings
–
1,202
1,202
–
775
775
Other financial liabilities
–
760
760
4
728
732
Total
–
1,962
1,962
4
1,503
1,507
Within the Company, Interests in Group entities of £5,877 million (31 March 2023: £7,867 million) includes £5,862 million (31 March 2023:
£7,845 million) held at fair value and £15 million (31 March 2023: £22 million) held at cost less impairment.
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13 Fair values of assets and liabilities continued
(B) Valuation
The fair values of the Group’s financial assets and liabilities not held at fair value, are not materially different from their carrying values, with
the exception of loans and borrowings. The fair value of the loans and borrowings is £1,166 million (31 March 2023: £686 million), determined
with reference to their published market prices. The carrying value of the loans and borrowings is £1,202 million (31 March 2023: £775 million)
and accrued interest payable (included within trade and other payables) is £29 million (31 March 2023: £12 million).
Valuation hierarchy
The Group classifies financial instruments measured at fair value according to the following hierarchy:
Level
Fair value input description
Financial instruments
Level 1
Quoted prices (unadjusted) from active markets
Quoted equity instruments
Level 2
Inputs other than quoted prices included in Level 1 that are observable
either directly (ie as prices) or indirectly (ie derived from prices)
Derivative financial instruments
Level 3
Inputs that are not based on observable market data
Unquoted investments
Unquoted equity instruments and debt instruments are measured in accordance with the IPEV Guidelines with reference to the most
appropriate information available at the time of measurement. Further information regarding the valuation of unquoted equity instruments
can be found on page 181.
The table below shows the classification of financial instruments held at fair value into the valuation hierarchy at 31 March 2024:
Group
2024
Level 1
£m
Group
2024
Level 2
£m
Group
2024
Level 3
£m
Group
2024
Total
£m
Group
2023
Level 1
£m
Group
2023
Level 2
£m
Group
2023
Level 3
£m
Group
2023
Total
£m
Assets
Quoted investments
879
–
–
879
841
–
–
841
Unquoted investments
–
–
14,193
14,193
–
–
8,677
8,677
Investments in investment
entity subsidiaries
–
–
5,804
5,804
–
–
7,844
7,844
Other financial assets
–
165
17
182
–
121
21
142
Liabilities
Other financial liabilities
–
–
–
–
–
(4)
–
(4)
Total
879
165
20,014
21,058
841
117
16,542
17,500
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13 Fair values of assets and liabilities continued
We determine that, in the ordinary course of business, the net asset value of an investment entity subsidiary is considered to be the
most appropriate to determine fair value. The underlying portfolio is valued under the same methodology as directly held investments,
with any other assets or liabilities within investment entity subsidiaries fair valued in accordance with the Group’s accounting policies.
Note 12 details the Directors’ considerations about the fair value of the underlying investment entity subsidiaries.
Movements in the directly held investment portfolio categorised as Level 3 during the year are set out in the table below:
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Opening fair value
8,677
5,708
8,677
5,708
Additions3
3,596
908
3,596
908
– of which loan notes with nil value
(6)
(6)
(6)
(6)
Disposals, repayments and write-offs
(542)
(129)
(542)
(129)
Fair value movement1
2,704
1,990
2,704
1,990
Other movements2
(236)
206
(236)
206
Closing fair value
14,193
8,677
14,193
8,677
1 All fair value movements relate to assets held at the end of the year.
2 Other movements include the impact of foreign exchange and accrued interest.
3 The table in Note 11 reconciles additions.
Unquoted investments valued using Level 3 inputs also had the following impact on profit and loss: realised profits over value on disposal
of investments of £1 million (2023: £64 million), dividend income of £332 million (2023: £200 million) and foreign exchange losses of
£238 million (2023: gains of £203 million).
Assets move between Level 1 and Level 3 when an unquoted equity investment lists on a quoted market exchange. There were no transfers
in or out of Level 3 during the year. In the 12 months to 31 March 2024, four assets changed valuation basis within Level 3. One asset moved
from an other basis valuation to a DCF basis valuation, two assets moved from an earnings-based valuation to an other basis valuation and
one asset moved from an earnings-based valuation to an imminent sale basis. The changes in valuation methodology in the period reflect our
view of the most appropriate method to determine the fair value of the four assets at 31 March 2024. Further information can be found in the
Private Equity and Infrastructure sections of the Business and Financial reviews starting on page 20.
The following table summarises the various valuation methodologies used by the Group to fair value Level 3 instruments, the inputs and the
sensitivities applied and the impact of those sensitivities to the unobservable inputs. Overall, our portfolio companies have delivered a resilient
performance, despite persistent global macro-economic headwinds. Higher interest rates, inflation and low consumer confidence, caused in
part by geopolitical uncertainty, have been important considerations in our portfolio valuations at 31 March 2024. As part of our case-by-case
review of our portfolio companies the risks and opportunities from climate change are an important consideration in the overall discussion on
fair value. These risks are adequately captured in the multiple sensitivity. All numbers in the table below are on an Investment basis.
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13 Fair values of assets and liabilities continued
Level 3 unquoted investments
Methodology
Description
Inputs
Fair value at
31 March 2024
(£m)
Sensitivity on key
unobservable input
Fair value
impact of
sensitivities (£m)
+5%/-5%
Earnings
(Private Equity)
Most commonly used
Private Equity valuation
methodology.
Used for investments
which are typically
profitable and for which
we can determine a set
of listed companies and
precedent transactions,
where relevant, with
similar characteristics
Earnings multiples are applied to the earnings of
the Company to determine the enterprise value
Earnings multiples
When selecting earnings multiples, we consider:
(1) Comparable listed companies current
performance and through-the-cycle averages
(2) Relevant market transaction multiples
(3) Company performance, organic growth
and value-accretive add-ons, if any
(4) Exit expectations and other company specific
factors
For point 1 and 2 of the above we select
companies in the same industry and, where
possible, with a similar business model and
profile in terms of size, products, services and
customers, growth rates and geographic focus
The pre-discount multiple ranges from 7.5x -
20.0x (2023: 6.4x - 20.0x)
Other inputs:
Earnings
Reported earnings are adjusted for non-
recurring items, such as restructuring expenses,
for significant corporate actions and,
in exceptional cases, adjustments to arrive
at maintainable earnings
The most common measure is earnings before
interest, tax, depreciation and amortisation
(“EBITDA”)
Earnings are usually obtained from portfolio
company management accounts to the
preceding quarter end, with reference also
to forecast earnings and the maintainable
view of earnings
Action, our largest asset, is valued using run-rate
earnings
18,916
(2023: 16,109)
For the assets
valued on an
earnings basis,
we have
applied a 5%
sensitivity to the
earnings
multiple
Action is our
largest asset,
and we have
included a 5%
sensitivity on
Action’s
earnings
multiple of
19.5x
(equivalent to
18.5x net)
1,103
(2023: 928)
(1,104)
(2023: (930))
801
(2023: 618)
(801)
(2023: (619))
Discounted
cash flow
(Private Equity/
Infrastructure/
Scandlines)
Appropriate for
businesses with long-
term stable cash flows,
typically in Infrastructure
or, alternatively,
businesses where DCF
is more appropriate in
the short term
Long-term cash flows are discounted at a rate
which is benchmarked against market data,
where possible, or adjusted from the rate at the
initial investment based on changes in the risk
profile of the investment
The range of discount rates used in our DCF
valuations is 10.5% to 16.9% (2023: 10.5%
to 16.9%). An outlier has been excluded from the
range.
1,047
(2023: 1,024)
For the assets
valued on a
DCF basis, we
have applied a
5% sensitivity to
the discount
rate
(34)
(2023: (37))
36
(2023: 39)
NAV (Private
Equity/
Infrastructure)
Used for investments
in unlisted funds
Net asset value reported by the fund manager.
The valuation of the underlying portfolio
is consistent with IFRS
104
(2023: 97)
A 5% increase
on closing NAV
5
(2023: 5)
Imminent sale
(Private Equity)
Used for assets where a
sale has been agreed
A 2.5% discount is applied to expected
proceeds
377
(2023: –)
n/a
n/a
Other (Private
Equity/
Infrastructure)
Used where elements
of a business are valued
on different bases
Values of separate elements prepared on or
triangulated against one of the methodologies
listed above
246
(2023: 196)
A 5% increase
in the closing
value
12
(2023: 10)
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181
14 Carried interest and performance fees receivable
Accounting policy:
The Group earns a share of profits (“carried interest receivable”) from funds which it manages on behalf of third parties. These profits
are earned when the funds meet certain performance conditions and are paid by the fund when these conditions have been met on a cash
basis. In certain limited circumstances the carried interest received may be subject to clawback provisions if the performance of the fund
deteriorates materially following carried interest being paid.
Carried interest receivable
The carried interest receivable recognised at the balance sheet date is calculated based on the valuation of the remaining portfolio assets
in the fund at that date, discounted to reflect the estimated realisation dates. Following initial recognition, carried interest receivable
is accounted for under the amortised cost method in accordance with IFRS 9.
This includes the requirement to calculate expected credit losses at inception. Given that carried interest is received from a small number
of entities which are managed by the Group and are paid shortly following receipt of the proceeds or finalisation of the calculation which
causes the payments to become due, the expected credit losses for these receivables are expected to be negligible.
Performance fees receivable
The Group earns performance fees from the investment management services it provides to 3i Infrastructure plc (“3iN”) when 3iN’s total
return for the year exceeds a specified threshold. These fees are calculated on an annual basis and paid in three equal instalments over
three years. The second and third instalments will only be recognised and received if either: (a) 3iN’s performance in the year in which the
instalment is paid also triggers payment of a performance fee in respect of that year, or (b) if 3iN’s performance over the three years
starting with the year in which the performance fee is earned exceeds a specified threshold.
The Group also earns performance fees from the investment management services it provides to certain other funds when the net asset
value of the fund exceeds the performance threshold. These fees are calculated on an annual basis, and are recognised and paid at the
end of successive five-year performance periods. The first five-year performance period ended on 31 March 2024. In accordance with IFRS
15, revenue from performance fees is recognised when it is sufficiently certain that there will not be a significant reversal, which is usually at
the end of the relevant financial year or performance period, when the calculation is finalised and agreed.
Following initial recognition, performance fees receivable are accounted for under the amortised cost method in accordance with IFRS 9.
This includes the requirement to calculate expected credit losses at inception. Given that performance fees are received from a small
number of entities which are managed by the Group and are paid shortly following receipt of the proceeds or finalisation of the calculation
which causes the payments to become due, the expected credit losses for these receivables are expected to be negligible.
Group
2024
Carried interest
receivable
£m
Group
2024
Performance
fees receivable
£m
Group
2024
Total
£m
Group
2023
Carried interest
receivable
£m
Group
2023
Performance
fees receivable
£m
Group
2023
Total
£m
Opening carried interest and performance fees
receivable
6
37
43
9
51
60
Carried interest and performance fees receivable
recognised in profit and loss during the year1
–
62
62
4
37
41
Received in the year1
–
(58)
(58)
(7)
(51)
(58)
Other movements2
–
1
1
–
–
–
Closing carried interest and performance fees
receivable
6
42
48
6
37
43
Of which: receivable in greater than one year
3
–
3
3
–
3
1 Includes £21 million (2023: nil) of performance fees received from the sale of Attero.
2 Other movements include the impact of foreign exchange.
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182
14 Carried interest and performance fees receivable continued
Company
2024
Carried interest
receivable
£m
Company
2024
Performance
fees receivable
£m
Company
2024
Total
£m
Company
2023
Carried interest
receivable
£m
Company
2023
Performance
fees receivable
£m
Company
2023
Total
£m
Opening carried interest and performance fees
receivable
98
–
98
63
25
88
Carried interest and performance fees receivable
recognised in profit and loss during the year
25
–
25
42
–
42
Received in the year
(46)
–
(46)
(9)
(25)
(34)
Other movements1
(1)
–
(1)
2
–
2
Closing carried interest and performance fees
receivable
76
–
76
98
–
98
Of which: receivable in greater than one year
5
–
5
81
–
81
1
Other movements include the impact of foreign exchange.
The closing carried interest receivable balance above is calculated using the fair value of the assets in the relevant funds at the balance sheet
date. The carried interest receivable recognised in profit and loss during the year predominantly relates to changes in the fair value of the
investments in the relevant funds.
As explained in the accounting policy above, no expected credit losses have been recognised for carried interest and performance fees
receivable as these are deemed to be negligible.
15 Carried interest and performance fees payable
Accounting policy:
The Group offers investment executives the opportunity to participate in the returns from investments subject to certain performance
conditions. “Carried interest and performance fees payable” is the term used for amounts payable to executives on these investment-
related transactions.
A variety of asset pooling arrangements are in place so that participants may have an interest in one or more carried interest plans and
participants include current and former investment participants. Carried interest payable is accrued if its performance conditions, measured
at the balance sheet date, would be achieved if the remaining assets in that plan were realised at fair value. An accrual is made equal to the
participants’ share of profits in excess of the performance conditions in place in the carried interest plan, discounted to reflect the likely
actual cash payment date, which may be materially later than the time of the accrual.
The Infrastructure performance fee payable is accrued based on the expected award. A significant proportion of the amount awarded
is deferred over time and may be granted in 3i Group plc shares. This is recognised over the vesting period in line with the requirements
of IFRS 2 or IAS 19, depending on the type of award.
Under IFRS 10, where carried interest payable reduces the fair value of an investment entity subsidiary, that movement is recorded through
“Fair value movements on investment entity subsidiaries”. At 31 March 2024, £764 million of carried interest payable was recognised in the
Consolidated statement of financial position of these investment entity subsidiaries (31 March 2023: £1,274 million).
Group
2024
£m
Group
2023
£m
Opening carried interest and performance fees payable
77
77
Carried interest and performance fees payable recognised in profit and loss during the year
51
38
Cash paid in the year
(53)
(29)
Other movements1
(21)
(9)
Closing carried interest and performance fees payable
54
77
Of which: payable in greater than one year
30
43
1
Other movements include the impact of foreign exchange and a transfer from trade and other payables.
The carry payable expense in the table above includes a £23 million (2023: £13 million) charge arising from Infrastructure share-based payment
carry related schemes. The charge includes £16 million (2023: £10 million) of equity awards and £1 million (2023: nil) of cash-settled awards,
see Note 27 Share-based payments for further details and £6 million (2023: £3 million) of social security cost.
A 5% increase in the valuation of all individual assets in the underlying investment portfolio held by investment entity subsidiaries would result
in a £41 million increase in carried interest and performance fees payable (31 March 2023: £60 million).
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3i Group plc | Annual report and accounts 2024
183
15 Carried interest and performance fees payable continued
A 5% decrease in the valuation of all individual assets in the underlying investment portfolio held by investment entity subsidiaries would result
in a £41 million decrease in carried interest and performance fees payable (31 March 2023: £60 million).
16 Other assets
Accounting policy:
Assets, other than those specifically accounted for under a separate policy, are stated at their cost less impairment losses. Financial assets
are recognised at amortised cost in accordance with IFRS 9, which includes the requirement to calculate expected credit losses (“ECLs”)
on initial recognition. Any ECLs are recognised directly in profit and loss, with any subsequent reversals recognised in the same location.
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Prepayments
4
3
–
–
Other debtors
71
51
25
25
Proceeds/syndication receivable
–
6
–
–
Total other assets
75
60
25
25
Of which: receivable in greater than one year
28
30
16
16
At 31 March 2024, no ECLs have been recognised against other assets as they are negligible (31 March 2023: nil).
17 Loans and borrowings
Accounting policy:
All loans and borrowings are initially recognised at the fair value of the consideration received. After initial recognition, these are
subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated
future cash flows through the expected life of the liabilities. Financial liabilities are derecognised when they are extinguished.
Group
2024
£m
Group
2023
£m
Loans and borrowings are repayable as follows:
Within one year
–
–
Between the second and fifth year
–
–
After five years
1,202
775
1,202
775
Principal borrowings include:
Rate
Maturity
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Fixed rate
€500 million notes (public issue)
4.875%
2029
427
–
427
–
£375 million notes (public issue)
5.750%
2032
375
375
375
375
£400 million notes (public issue)
3.750%
2040
400
400
400
400
1,202
775
1,202
775
Committed multi-currency facilities: Revolving Credit Facility (RCF)
£400 million tranche
SONIA+0.75%
2026
–
–
–
–
£500 million tranche
SONIA+0.50%
2027
–
–
–
–
Total loans and borrowings
1,202
775
1,202
775
During the year, the Company issued a €500 million maturity bond with a maturity date of June 2029 and extended its £400 million multi-
currency facility to November 2026. The syndicated multi-currency facility of £900 million has no financial covenants.
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3i Group plc | Annual report and accounts 2024
184
17 Loans and borrowings continued
All of the Group’s borrowings are repayable in one instalment on the respective maturity dates. None of the Group’s interest-bearing loans
and borrowings are secured on the assets of the Group. The fair value of the loans and borrowings is £1,166 million (31 March 2023: £686
million), determined with reference to their published market prices. The interest payable for loans and borrowings recognised within profit
and loss is £60 million (2023: £53 million) and the interest paid for loans and borrowings recognised within the Consolidated cash flow
statement is £40 million (2023: £54 million).
In accordance with the FCA’s Investment Funds sourcebook (FUNDS 3.2.2R and Fund 3.2.6R), 3i Investments plc, as AIFM of the Company,
is required to calculate leverage and disclose this to investors. The leverage is calculated using the gross method and commitment method.
Gross method calculates the overall exposure over the net asset value whereas the commitment method calculates the net exposure over
the net asset value. Leverage at 31 March 2024 for the Group is 118% (31 March 2023: 121%) and the Company is 116% (31 March 2023: 117%)
under both the gross method and the commitment method. The leverage for 3i Investments plc at 31 March 2024 is 100% (31 March 2023:
100%) under both the gross method and the commitment method.
Under the Securities Financing Transactions Regulation and the FCA’s Investment Funds sourcebook (FUNDS 3.2.4A), 3i is required to disclose
certain information relating to the use of securities financing transactions (“SFTs”) and total return swaps. At 31 March 2024, 3i was not party
to any transactions involving SFTs or total return swaps.
Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities are classified as follows:
Loans and
borrowings
2024
£m
Lease liability
2024
£m
Loans and
borrowings
2023
£m
Lease liability
2023
£m
Opening liability
775
10
975
14
Additions
422
44
–
1
Interest
–
1
–
–
Repayments
–
(6)
(200)
(5)
Exchange movements
5
–
–
–
Closing liability
1,202
49
775
10
18 Derivatives
Accounting policy:
Derivative financial instruments are accounted for at fair value through profit and loss in accordance with IFRS 9. They are revalued at the
balance sheet date based on market prices, with any change in fair value being recorded in profit and loss. Derivatives are recognised in
the Consolidated statement of financial position as a financial asset when their fair value is positive and as a financial liability when their fair
value is negative. Derivative contracts are disclosed in the Consolidated statement of financial position as either current or non-current
according to there maturity profile. The Group’s derivative financial instruments are not designated as hedging instruments.
Statement of comprehensive income
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Movement in the fair value of derivatives
116
122
116
122
Statement of financial position
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Non-current assets
Forward foreign exchange contracts
83
73
83
73
Current assets
Forward foreign exchange contracts
82
48
82
48
Non-current liabilities
Forward foreign exchange contracts
–
(3)
–
(3)
Current liabilities
Forward foreign exchange contracts
–
(1)
–
(1)
The Group uses forward foreign exchange contracts to mitigate the effect of fluctuations arising from movements in exchange rates in the
value of the Group’s investments in euro and US dollar. As at 31 March 2024, the notional amount of these forward foreign exchange contracts
held by the Company was €2.6 billion (31 March 2023: €2.6 billion) and $1.2 billion (31 March 2023: $1.2 billion).
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3i Group plc | Annual report and accounts 2024
185
19 Trade and other payables
Accounting policy:
Liabilities, other than those specifically accounted for under a separate policy, are stated based on the amounts which are considered
to be payable in respect of goods or services received up to the balance sheet date. Financial liabilities are recognised at amortised cost
in accordance with IFRS 9.
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Trade and other payables
139
80
29
11
Amounts due to subsidiaries
–
–
731
717
Total trade and other payables
139
80
760
728
Of which: payable in greater than one year
5
4
–
–
20 Issued capital and reserves
Accounting policy:
Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over
nominal value being credited to the share premium account. Direct issue costs net of tax are deducted from equity.
Capital reserve recognises all profits and losses that are capital in nature or have been allocated to capital, which include the accumulation
of investment gains and losses as well as changes to the value of financial instruments measured at fair value through profit and loss.
Revenue reserve recognises all profits and losses that are revenue in nature or have been allocated to revenue and is the accumulation
of revenue profits and losses.
Issued and fully paid
2024
Number
2024
£m
2023
Number
2023
£m
Ordinary shares of 7319∕22p
Opening balance
973,312,950
719
973,238,638
719
Issued under employee share plans
53,495
–
74,312
–
Closing balance
973,366,445
719
973,312,950
719
The Company issued 53,495 ordinary shares to the Trustee of the 3i Group Share Incentive Plan for a total cash consideration of £1,137,723
at various prices from 1,729 pence to 2,805 pence per share (being the market prices on the issue dates which were the last trading day
of each month in the year, with the exception of December 2023, when the issue date was 4 January 2024). These shares were ordinary shares
with no additional rights attached to them and had a total nominal value of £39,513.
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3i Group plc | Annual report and accounts 2024
186
21 Own shares
Accounting policy:
Own shares are recorded by the Group when ordinary shares are acquired by the Company or by The 3i Group Employee Benefit Trust.
Own shares are deducted from shareholders’ equity. A transfer is made to retained earnings at their weighted average cost in line with the
vesting of own shares held for the purposes of share-based payments. The number of own shares held by the Trust and the schemes are
described in Note 27.
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Opening cost
108
100
108
100
Additions
–
30
–
30
Awards granted
(16)
(22)
(16)
(22)
Closing cost
92
108
92
108
During the year to 31 March 2024, The 3i Group Employee Benefit Trust did not acquire any shares. During the year to 31 March 2023, the
trust acquired 2.4 million shares at an average price of 1,271 pence per share.
22 Capital structure
The capital structure of the Group consists of shareholders’ equity and net debt or cash. The type and maturity of the Group’s borrowings are
analysed further in Note 17. Capital is managed with the objective of maximising long-term return to shareholders, whilst maintaining a capital
base to allow the Group to operate effectively in the market and sustain the future development of the business.
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Cash and deposits
358
162
328
128
Borrowings and derivative financial liabilities
(1,202)
(779)
(1,202)
(779)
Net debt1
(844)
(617)
(874)
(651)
Total equity
20,170
16,844
19,581
16,250
Gearing (net debt/total equity)
4%
4%
4%
4%
1
The above numbers have been prepared under IFRS and differ from the Investment basis as detailed in the Strategic report.
Capital constraints
The Group is generally free to transfer capital from subsidiary undertakings to the parent company, subject to maintaining each subsidiary
with sufficient reserves to meet local statutory/regulatory obligations. No significant constraints (other than those disclosed in Note 12) have
been identified and the Group has been able to distribute profits as appropriate.
The Group has been subject to the FCA’s MIFIDPRU sourcebook (“MIFIDPRU”) since 1 January 2022. The regulatory capital requirements for
the Group and 3i Investments plc, an investment firm regulated by the FCA, are calculated in accordance with MIFIDPRU 2.5, 4.3, 4.5 and 4.6.
These capital requirements are reviewed regularly by the Group’s Audit and Compliance Committee, and the Board of 3i Investments plc,
respectively. In addition, 3i Investments plc prepares an Internal Capital and Risk Assessment (“ICARA”), which is approved by the Board of
3i Investments plc on an annual basis.
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3i Group plc | Annual report and accounts 2024
187
23 Interests in Group entities
Accounting policy:
The Company has controlling equity interests in, and makes loans to, both consolidated and fair valued Group entities. Equity investments
in, and loans to, investment entities are held at fair value in the Company’s accounts, as this reflects the Group’s business model to hold
assets to seek returns on capital and not contractual cash flow. The net assets of these entities represent fair value. Equity investments in
other subsidiaries are held at cost less impairment and any loans to these subsidiaries are held at amortised cost in accordance with IFRS 9,
which includes the requirement to calculate expected credit losses on initial recognition.
Company
2024
Equity
investments
£m
Company
2024
Loans
£m
Company
2024
Total
£m
Opening book value
5,061
2,806
7,867
Additions
29
173
202
Share of profits from partnership entities
–
2,548
2,548
Disposals and repayments
–
(2,752)
(2,752)
Fair value movements
(1,951)
(72)
(2,023)
Exchange movements
–
35
35
Closing book value
3,139
2,738
5,877
Company
2023
Equity
investments
£m
Company
2023
Loans
£m
Company
2023
Total
£m
Opening book value
3,912
2,889
6,801
Additions
20
453
473
Share of profits from partnership entities
–
1,148
1,148
Disposals and repayments
–
(1,475)
(1,475)
Fair value movements
1,129
(225)
904
Exchange movements
–
16
16
Closing book value
5,061
2,806
7,867
Equity investments in, and loans to investment entities, are held at fair value and equity investments in other subsidiaries are held at cost less
impairment. The measurements at fair value and cost less impairment are assessed against the Company’s equity and loan instruments into
these subsidiaries, which are eliminated on consolidation for the Group. For this reason equity investments and loans into investments entities
do not form part of the investment portfolio for the Company and instead are included within Interests in Group entities. Amounts for equity
investments in, and loans to, investment entities held at fair value and other subsidiaries at amortised cost are detailed in Note 13.
Details of significant Group entities are given in Note 30. No expected credit losses have been recognised on those equity investments
and loans held at amortised cost as they are not material.
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3i Group plc | Annual report and accounts 2024
188
24 Commitments
Accounting policy:
Commitments represent amounts the Group has contractually committed to pay third parties but do not yet represent a charge or asset.
This gives an indication of committed future cash flows. Commitments are recognised in the balance sheet at the point of settlement
subject to associated risks and rewards being transferred. Commitments at the year end do not impact the Group’s financial results
for the year.
Group
2024
due within
1 year
£m
Group
2024
due between
2 and 5 years
£m
Group
2024
due over
5 years
£m
Group
2024
Total
£m
Group
2023
due within
1 year
£m
Group
2023
due between
2 and 5 years
£m
Group
2023
due over
5 years
£m
Group
2023
Total
£m
Unquoted investments
8
–
–
8
9
–
–
9
Company
2024
due within
1 year
£m
Company
2024
due between
2 and 5 years
£m
Company
2024
due over
5 years
£m
Company
2024
Total
£m
Company
2023
due within
1 year
£m
Company
2023
due between
2 and 5 years
£m
Company
2023
due over
5 years
£m
Company
2023
Total
£m
Unquoted investments
8
–
–
8
9
–
–
9
The amounts shown above include £8 million of commitments made by the Group and Company, to invest into funds (31 March 2023:
£9 million). The Group and Company were contractually committed to these investments as at 31 March 2024.
25 Contingent liabilities
Accounting policy:
Contingent liabilities are potential liabilities where there is even greater uncertainty, which could include a dependency on events not
within the Group’s control, but where there is a possible obligation. Contingent liabilities are only disclosed and not included within the
Consolidated statement of financial position.
The Company has provided a guarantee to the Trustees of the 3i Group Pension Plan (“the Plan”) in respect of liabilities of 3i plc to the Plan.
At 31 March 2024, there was no (31 March 2023: no) material litigation outstanding, nor any other matter, against the Company or any of its
subsidiary undertakings, which may indicate the existence of a contingent liability.
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189
26 Retirement benefits
Accounting policy:
Payments to defined contribution retirement benefit plans are charged to profit and loss as they fall due.
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit method with actuarial valuations
being carried out at each balance sheet date. Interest on the net defined benefit asset/liability, calculated using the discount rate used to
measure the defined benefit obligation, is recognised in profit and loss. Re-measurement gains or losses are recognised in full as they arise
in other comprehensive income.
A retirement benefit deficit is recognised in the Consolidated statement of financial position to the extent that the present value of the
defined benefit obligations exceeds the fair value of plan assets.
A retirement benefit surplus is recognised in the Consolidated statement of financial position where the fair value of plan assets exceeds
the present value of the defined benefit obligations limited to the extent that the Group can benefit from that surplus. Where the
retirement benefit scheme is in surplus, this is recognised net, being the lower of any surplus in the fund and the asset ceiling.
(i) Defined contribution plans
The Group operates a number of defined contribution retirement benefit plans for qualifying employees throughout the Group. The assets
of these plans are held separately from those of the Group. The total expense recognised, in operating expenses, in profit and loss
is £3 million (2023: £3 million), which represents the contributions paid to these defined contribution plans. There were no outstanding
payments due to these plans at the balance sheet date.
(ii) Defined benefit plans
The Group operates a final salary defined benefit plan for qualifying employees of its subsidiaries in the UK (“the Plan”). The Plan is approved
by HMRC for tax purposes, is operated separately from the Group and governed by an independent set of Trustees, whose appointment
and powers are determined by the Plan’s documentation.
The defined benefit plan is a funded scheme, the assets of which are independent of the Company’s finances and administered by
the Trustees. The Trustees are responsible for managing and investing the Plan’s assets and for monitoring the Plan’s funding position.
The Plan has entered into buy-in policies which means that the Plan benefits of all members are now insured and 3i, as sponsor, is no longer
exposed to longevity, interest or inflation risk. On an IAS 19 basis, the fair value of three buy-in policies will match the present value of the
liabilities insured. The valuation of the Plan was updated on an IAS 19 basis by an independent qualified actuary as at 31 March 2024. The
Plan’s assets do not include any of the Group’s own equity instruments nor any property in use by the Group.
During the year, the Trustees have taken further steps towards a buy-out and wind up of the Plan. Trustees wrote to members to confirm they
were proceeding with their plan to buy out members’ benefits and to distribute the surplus to the Company. This transaction is expected to
complete in FY2025.
Qualifying employees in Germany are entitled to a pension based on their length of service. The future liability calculated by German
actuaries is £21 million (31 March 2023: £20 million). There is a £1 million expense (2023: £1 million) recognised in operating expenses, in profit
and loss for the year and no gain or loss (2023: £8 million gain) in other comprehensive income for this scheme. Changes in the present value
of the obligation, assumptions and sensitivities of this scheme have not been disclosed as they are not material.
The amount recognised in the Consolidated statement of financial position in respect of the Group’s defined benefit plans is as follows:
2024
£m
2023
£m
Present value of funded obligations
(446)
(450)
Fair value of the Plan assets
530
532
Asset restriction
(23)
(29)
Retirement benefit surplus in respect of the Plan
61
53
Retirement benefit deficit in respect of other defined benefit schemes
(21)
(20)
The total re-measurement gain recognised in other comprehensive income in respect of the Group’s defined benefit plans was £7 million
(2023: £8 million).
A retirement benefit surplus under IAS 19 is recognised in respect of the Plan on the basis that the Group is entitled to a refund of any
remaining surplus once all benefits and expenses have been settled in the expected course. The asset restriction relates to tax that would be
deducted at source in respect of a refund of the Plan surplus. During the year, the tax rate used to restrict the surplus has reduced to 25%
(31 March 2023: 35%) following a legislative change made by the government effective from 6 April 2024.
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190
26 Retirement benefits continued
The amounts recognised in the Consolidated statement of comprehensive income in respect of the Plan are as follows:
2024
£m
2023
£m
Included in interest payable
Interest income on net defined benefit asset
3
2
Included in other comprehensive income
Re-measurement gain/(loss)
–
–
Asset restriction
7
1
Total re-measurement gain and asset restriction
7
1
Total
10
3
Changes in the present value of the defined benefit obligation were as follows:
2024
£m
2023
£m
Opening defined benefit obligation
450
641
Interest on Plan liabilities
21
17
Re-measurement gain/loss:
– gain from change in financial assumptions
(16)
(188)
– experience loss
12
4
Benefits paid
(21)
(25)
Curtailments and settlements
–
1
Closing defined benefit obligation
446
450
Changes in the fair value of the Plan assets were as follows:
2024
£m
2023
£m
Opening fair value of the Plan assets
532
723
Interest on Plan assets
25
20
Actual return on Plan assets less interest on Plan assets
(4)
(184)
Expenses
(2)
(2)
Benefits paid
(21)
(25)
Closing fair value of the Plan assets
530
532
The fair value of the Plan’s assets at the balance sheet date is as follows:
2024
£m
2023
£m
Annuity contracts
446
451
Cash and cash equivalents
84
81
530
532
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191
26 Retirement benefits continued
Changes in the asset restriction were as follows:
2024
£m
2023
£m
Opening asset restriction
29
29
Interest on asset restriction
1
1
Re-measurements
(7)
(1)
Closing asset restriction
23
29
The principal assumptions made by the actuaries and used for the purpose of the year-end valuation of the Plan were as follows:
2024
2023
Discount rate
4.8%
4.8%
Expected rate of pension increases
0% to 3.5%
0% to 3.6%
Retail Price Index (“RPI”) inflation
3.4%
3.5%
Consumer Price Index (“CPI”) inflation
2.8%
2.9%
In addition, it is assumed that members exchange 25% of their pension for a lump sum at retirement on the conversion terms in place at
31 March 2024, with an allowance for the terms to increase in future. The duration of the Plan’s defined benefit obligation at the accounting
date was around 14 years.
The post-retirement mortality assumption used to value the benefit obligation at 31 March 2024 is 90% of the S3NA very light mortality tables,
allowing for improvements in line with the CMI 2021 core projections with a long-term annual rate of improvement of 1.75% (31 March 2023:
90% of the S3NA very light mortality tables, allowing for improvements in line with the CMI 2021 core projections with a long-term annual rate
of improvement of 1.75%). The life expectancy of a male member reaching age 60 in 2044 (31 March 2023: 2043) is projected to be 32.4
(31 March 2023: 32.7) years compared to 30.5 (31 March 2023: 30.9) years for someone reaching 60 in 2024.
As the Plan was closed to future accrual of benefits by members with effect from 5 April 2011, the Group ceased to make regular contributions
to the Plan in the year to 31 March 2012. The latest triennial valuation for the Plan was completed in September 2020, based on the position
as at 30 June 2019. The outcome was an actuarial surplus of £89 million. This valuation is produced for funding purposes and is calculated
on a different basis to the IAS 19 valuation net asset of £61 million which is shown in the Note above. A triennial valuation at 30 June 2022 was
not required as the Plan Trustees intended to pursue a buy-out and wind-up of the Plan and have since commenced the wind-up process with
effect from 4 April 2023. For regulatory purposes, a valuation was carried out as at 30 June 2022 using the Pension Protection Fund's
prescribed methodology and assumptions under Section 179 of the Pensions Act 2004 and this valuation confirmed that the Plan is in surplus.
The third buy-in policy with Legal & General in 2020 was secured using Plan assets and it is expected that the Group will not have to pay any
further contributions to the Plan.
For the year to 31 March 2024, the defined benefit surplus is not impacted by changes in assumptions and sensitivity assumptions are nil
(2023: nil); this is because the defined benefit obligation is matched by annuity contracts.
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192
27 Share-based payments
Accounting policy:
The Group has equity-settled and cash-settled share-based payment transactions with certain employees. Equity-settled schemes are
measured at fair value at the date of grant, which is then recognised in profit or loss over the period that employees provide services,
generally the period between the start of the performance period and the vesting date of the shares. The number of share awards
expected to vest takes into account the likelihood that performance and service conditions included in the terms of the award will be met.
Fair value is measured by use of an appropriate model which takes into account the current share price, the risk-free interest rate,
the expected volatility of the share price over the life of the award and any other relevant factors. In valuing equity-settled transactions,
no account is taken of any vesting conditions, other than conditions linked to the price of the shares of 3i Group plc. The charge is adjusted
at each balance sheet date to reflect the actual number of forfeitures, cancellations and leavers during the year. The movement
in cumulative charges since the previous balance sheet is recognised in profit and loss, with a corresponding entry in equity.
Liabilities arising from cash-settled share-based payment transactions are recognised in profit or loss over the vesting period. They are fair
valued at each reporting date. The cost of cash-settled share-based payment transactions is adjusted for the forfeitures of the participants’
rights that no longer meet the plan requirements as well as for early vesting.
The cost of the share-based payments is allocated either to operating expenses or carried interest depending on the original driver
of the award. Executive Director Long-term Incentive Plans are allocated to operating expenses.
To ensure that employees’ interests are aligned with shareholders, a significant amount of variable compensation paid to higher earning
employees is deferred into shares that vest over a number of years. For legal, regulatory or practical reasons certain participants may be
granted cash-settled awards under these schemes, which are intended to replicate the financial effects of a share award without entitling
the participant to acquire shares. The weighted average fair value grant price for cash-settled awards granted during the year was 1,956p
(31 March 2023: 1,102p) and the reporting price for these awards at 31 March 2024 was 2,809 pence (31 March 2023: 1,685 pence). The carrying
amount of liabilities arising from cash-settled awards at 31 March 2024 is £24 million (31 March 2023: £17 million). The total equity-settled
share-based payment reserve at 31 March 2024 is £42 million (31 March 2023: £31 million).
The cost of the share-based payments is allocated either to operating expenses or carried interest depending on the original driver
of the award. Executive Director Performance Share Awards are allocated to operating expenses.
The total cost recognised in the Consolidated statement of comprehensive income is shown below:
2024
£m
2023
£m
Share awards included as operating expenses1,2
11
9
Share awards included as carried interest1
16
10
Cash-settled share awards3
14
8
41
27
1
Credited to equity.
2
For the year ended 31 March 2024, £9 million shown in Note 6 ( 2023: £9 million), is net of a £2 million (2023: nil) release from the bonus accrual.
3
For the year ended 31 March 2024, £13 million (2023: £8 million) is recognised in operating expenses and £1 million (2023: nil) is recognised in carried interest.
Movements in share awards1
The number of equity and cash-settled share-based awards outstanding as at 31 March is as follows:
2024
Number
2023
Number
Outstanding at the start of the year
6,277,107
6,309,498
Granted
2,336,288
3,181,041
Exercised
(2,387,539)
(2,787,794)
Forfeited
(14,878)
(425,638)
Lapsed
–
–
Outstanding at the end of year
6,210,978
6,277,107
Weighted average remaining contractual life of awards outstanding in years
1.7
1.8
Weighted average fair value of awards granted (pence)
1,708
872
Weighted average market price at date of exercise (pence)
1,953
1,228
1
The above table does not include shares funded by the Carry Trust, for which there is no impact on the Statement of Comprehensive Income or Statement of Financial Position. The prior year comparatives have been updated to
reflect this.
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193
27 Share-based payments continued
Details of the different types of awards are as follows:
Performance Share Awards
Performance Share Awards are granted to employees and Executive Directors under the 3i Group Discretionary Share Plan 2020
(and predecessor rules).
Employees
Performance Share Awards granted to employees (other than Executive Directors) after the financial year-end are subject to performance
conditions based on absolute and relative Total Shareholder Return over three financial years. Awards performance vest, to the extent they
satisfy the performance conditions, following the three-year performance period and are then released in the third year from the date of grant
together with a payment equal to the dividends which would have been paid on the released shares during the period from grant to release.
The method of settlement can either be equity or cash depending on the type of award. The equity awards are measured using the Monte
Carlo model. The model simulates the total shareholder return which has been incorporated into the fair value at grant date by applying
a discount to the valuation obtained.
Executive Directors
Performance Share Awards granted to Executive Directors after the financial year-end are subject to performance conditions based on
absolute and relative total shareholder return over three financial years. Awards performance vest, to the extent they satisfy the performance
conditions, following the three-year performance period. Outstanding Executive Director awards granted up to and including 2019 are
released, to the extent they have performance vested, together with a payment equal to the value of the dividends which would have been
paid on the released shares during the period from grant to release as to 50% in year three and 25% in each of years four and five. Executive
Director Performance Share Awards granted from 2020 onwards are released, to the extent they have performance vested, in the fifth year
from the date of grant together with a payment equal to the value of the dividends that would have been paid on the released shares during
the period from grant to release. The method of settlement is equity. These awards are measured using the Monte Carlo model. The model
simulates the total shareholder return which has been incorporated into the fair value at the grant date by applying a discount to the valuation
obtained. The features of the Group’s share schemes for Executive Directors are described in the Directors’ remuneration report on pages 136
to 149.
Restricted Share Awards
Restricted Share Awards are granted under the 3i Group Deferred Bonus Plan 2020 (and predecessor rules) and are granted to employees
and Executive Directors after the financial year-end and are subject to continued service conditions. The shares subject to the awards are
transferred to the participants on grant subject to forfeiture if the service condition is not fulfilled and cease to be subject to forfeiture in equal
proportions generally over the three years following grant or over four years in the case of certain such awards granted to members of the
Executive Committee. Cash dividends are received by participants on the shares during the period in which they remain subject to forfeiture.
The method of settlement can either be equity or cash depending on the type of award. The equity awards are measured using the Black
Scholes model.
Infrastructure Performance Fee Share Awards
Infrastructure Performance Fee Share Awards are granted to employees in the Infrastructure team under the 3i Special Share Award Plan.
Awards are granted to employees after the financial year-end and are subject to performance conditions based on receipt by 3i plc of certain
instalments of performance fees payable by 3i Infrastructure plc under the terms of its Investment Management Agreement with 3i. The shares
vest and are released, subject to satisfying the performance conditions, in equal instalments in the first and second years after grant together
with payments equal to the value of the dividends which would have been paid on the released shares during the period from grant to
release. If the performance condition is not met in year one, the award does not lapse but is retested in year two when some or all of the
shares may vest. The method of settlement can either be equity or cash depending on the type of award. The equity awards are measured
using the Black Scholes model.
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194
27 Share-based payments continued
Measurement of fair values
The fair values of the plans have been measured using either the Monte Carlo model or Black Scholes model for equity share awards.
The inputs used in the measurement of the grants are based on the following assumptions:
Monte Carlo model
Black Scholes
2024
2023
2024
2023
Share price at grant date (pence)1
1,943
1,171
1,956
1,102
Fair value at grant date (pence)1
1,290
449
1,803
971
Exercise price (pence)
–
–
–
–
Expected volatility (weighted average)
28.2%
32.6%
30.8%
31.0%
Expected life (weighted average)
4 years
4 years
3 years
3 years
Dividend yield
–
–
2.7 %
4.2%
Risk free interest rate
4.70%
1.70%
4.36%
1.72%
1
Where share awards are granted on multiple dates the average price is disclosed.
Expected volatility was determined by reviewing share price volatility for the expected life of each award up to the date of grant.
Holdings of 3i Group plc shares
The Group has established an employee benefit trust and the total number of 3i Group plc shares held in this trust at 31 March 2024 was
9 million (31 March 2023: 11 million). Dividend rights have been waived on these shares. During the year, the trust did not acquire any shares.
During the year to 31 March 2023, the trust acquired 2.4 million shares at an average price of 1,271 pence per share. The total market value of
the shares held in trust based on the year-end share price of 2,809 pence (31 March 2023: 1,685 pence) was £253 million (31 March 2023: £180
million).
28 Financial risk management
Introduction
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out in the Risk management section
on pages 80 to 93. This Note provides further detail on financial risk management, cross-referring to the Risk management section where
applicable, and includes quantitative data on specific financial risks.
The Group is a highly selective investor and each investment is subject to an individual risk assessment through an investment approval
process. The Group’s Investment Committee is part of the overall risk management framework set out in the Risk section. The risk
management processes of the Company are aligned with those of the Group and both the Group and the Company share the same
financial risks.
Financial risks
Concentration risk
3i’s investment process seeks to diversify risk through significant dispersion of investments by geography, economic sector, asset class and
size as well as through the maturity profile of its investment portfolio. Although 3i does not set maximum limits for asset allocation, it does
have a maximum exposure limit for the cost of new investments. This is detailed in the Investment policy on page 150 in the Governance
section. Quantitative data regarding the concentration risk of the portfolio across geographies can be found in the Segmental analysis in Note
1 and in the 20 large investments table on pages 215 and 216.
Action is the largest asset in the Group’s investment portfolio. We first invested in Action in 2011 and throughout our investment have
acquired further stakes in the business seeing strong organic growth over our hold period. A 5% increase or decrease in value would result in a
£708 million (31 March 2023: £559 million) or £(708) million (31 March 2023: £(559) million) impact on the overall value. For further details on
Acton see Action case study on pages 22 to 26.
Credit risk
The Group is subject to credit risk on its unquoted investments, derivatives, cash and deposits. The maximum exposure is the balance sheet
amount. The Group’s cash is held with a variety of counterparties with a minimum rating above A- with 75% of the Group’s unrestricted surplus
cash held on demand in AAA rated money market funds (31 March 2023: 78%). The counterparties selected for the derivative financial
instruments were all banks with a minimum of a A- credit rating with at least one major rating agency.
The credit quality of unquoted investments, which are held at fair value and include debt and equity elements, is based on the financial
performance of the individual portfolio companies. The credit risk relating to these assets is based on their enterprise value and is reflected
through fair value movements. Further detail can be found in the Price risk – market fluctuations disclosure in this Note and the sensitivity
disclosure to changes in the valuation assumptions is provided in the valuation section of Note 13.
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28 Financial risk management continued
Liquidity risk
The liquidity outlook is monitored at least monthly by management and regularly by the Board in the context of periodic strategic reviews
of the balance sheet. The new investment pipeline and forecast realisations are closely monitored and assessed against our vintage control
policy, as described on page 80 of the Risk management section. The table below analyses the maturity of the Group’s gross contractual
liabilities.
Financial liabilities
As at 31 March 2024
Due within
1 year
£m
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Due more
than 5 years
£m
£m
Total
£m
Gross commitments:
Fixed loan notes
56
56
172
1,482
1,766
Committed multi-currency facility
2
2
2
–
6
Carried interest and performance fees payable within one year
24
–
–
–
24
Trade and other payables
134
–
–
5
139
Lease liabilities
4
3
15
27
49
Derivative financial instruments
–
–
–
–
–
Total
220
61
189
1,514
1,984
Gross commitments include principal amounts and interest and fees where relevant. Carried interest and performance fees payable within
non-current liabilities of £30 million (31 March 2023: £43 million) has no stated maturity as it results from investment-related transactions and it
is not possible to identify with certainty the timing of when the investments will be sold. Carried interest and performance fees payable within
non-current liabilities is shown after discounting, which has no impact (31 March 2023: £2 million).
As at 31 March 2023
Due within
1 year
£m
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Due more
than 5 years
£m
£m
Total
£m
Gross commitments:
Fixed loan notes
36
36
110
1,070
1,252
Committed multi-currency facility
2
1
2
–
5
Carried interest and performance fees payable within one year
34
–
–
–
34
Trade and other payables
76
–
–
4
80
Lease liabilities
5
4
1
–
10
Derivative financial instruments
1
2
1
–
4
Total
154
43
114
1,074
1,385
The Company disclosures are the same as those for the Group, with the following exceptions: carried interest and performance fees payable
due within one year is nil (31 March 2023: nil), trade and other payables due within one year is £760 million (31 March 2023: £728 million), trade
and other payables due more than five years nil (31 March 2023: nil) and lease liabilities due within one year nil (31 March 2023: nil), lease
liabilities due between one and two years nil (31 March 2023: nil), lease liabilities due between two and five years nil (31 March 2023: nil) and
lease liabilities due more than five years nil (31 March 2023: nil ).
Market risk
The valuation of the Group’s investment portfolio is largely dependent on the underlying trading performance of the companies within
the portfolio, but the valuation and other items in the financial statements can also be affected by interest rate, currency and quoted market
fluctuations. The Group’s sensitivity to these items is set out below.
(i) Interest rate risk
On the liability side, the direct impact of a movement in interest rates is limited to any drawings under the committed multi-currency facility
as the Group’s outstanding debt is fixed rate. The sensitivities below arise principally from changes in interest receivable on cash and deposits.
An increase of 100 basis points, based on the closing balance sheet position over a 12-month period, would lead to an approximate increase
in total comprehensive income of £4 million (2023: £2 million) for the Group and £3 million (2023: £1 million) for the Company. In addition,
the Group and Company have indirect exposure to interest rates through changes to the financial performance and the valuation of portfolio
companies caused by interest rate fluctuations.
(ii) Currency risk
The Group’s net assets in sterling, euro, US dollar, Danish krone and all other currencies combined are shown in the table on the next page.
This sensitivity analysis is performed based on the sensitivity of the Group’s net assets to movements in foreign currency exchange rates
assuming a 10% movement in exchange rates against sterling. The sensitivity of the Company to foreign exchange risk is not materially
different from the Group.
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28 Financial risk management continued
The Group considers currency risk on specific investment and realisation transactions. Further information on how currency risk is managed
is provided on page 90.
As at 31 March 2024
Sterling
£m
Euro
£m
US dollar
£m
Danish krone
£m
Other
£m
Total
£m
Net assets1
4,817
13,947
1,180
200
26
20,170
Sensitivity analysis
Assuming a 10% movement in exchange
rates against sterling:
Impact on net assets
n/a
1,399
117
20
3
1,539
1
The Group’s foreign exchange hedging is treated as a sterling asset within the above table.
As at 31 March 2023
Sterling
£m
Euro
£m
US dollar
£m
Danish krone
£m
Other
£m
Total
£m
Net assets1
4,797
10,641
1,154
222
30
16,844
Sensitivity analysis
Assuming a 10% movement in exchange
rates against sterling:
Impact on net assets
n/a
1,064
115
22
3
1,204
1
The Group’s foreign exchange hedging is treated as a sterling asset within the above table.
(iii) Price risk – market fluctuations
The Group’s management of price risk, which arises primarily from quoted and unquoted equity instruments, is through the careful
consideration of the investment, asset management and divestment decisions at the Investment Committee. The Investment Committee’s
role in risk management is detailed on page 82 in the Risk management section. A 5% change in the fair value of those investments would
have the following direct impact in profit or loss:
Group
Quoted
investment
£m
Unquoted
investment
£m
Investment
in Investment
entity
subsidiaries
£m
Total
£m
At 31 March 2024
44
710
290
1,044
At 31 March 2023
42
434
392
868
Company
Quoted
investment
£m
Unquoted
investment
£m
Total
£m
At 31 March 2024
44
710
754
At 31 March 2023
42
434
476
29 Related parties and interests in other entities
The Group has various related parties stemming from relationships with limited partnerships managed by the Group, its investment portfolio
(including unconsolidated subsidiaries), its advisory arrangements and its key management personnel. In addition, the Company has related
parties in respect of its subsidiaries. Some of these subsidiaries are held at fair value (unconsolidated subsidiaries) due to the treatment
prescribed in IFRS 10.
Related parties
Limited partnerships
The Group manages a number of external funds which invest through limited partnerships. Group companies act as the general partners
of these limited partnerships and exert significant influence over them. The following amounts have been included in respect of these limited
partnerships:
Statement of comprehensive income
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Carried interest receivable
21
6
25
42
Fees receivable from external funds
19
20
–
–
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3i Group plc | Annual report and accounts 2024
197
29 Related parties and interests in other entities continued
Statement of financial position
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Carried interest receivable
6
8
76
99
Investments
The Group makes investments in the equity of unquoted and quoted investments where it does not have control, but may be able to
participate in the financial and operating policies of that company. IFRS presumes that it is possible to exert significant influence when
the equity holding is greater than 20%. The Group has taken the investment entity exception, as permitted by IFRS 10, and has not equity
accounted for these investments, in accordance with IAS 28, but they are related parties. The total amounts included for investments
where the Group has significant influence, but not control, are as follows:
Statement of comprehensive income
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Realised profits over value on the disposal of investments
1
–
1
–
Unrealised (losses)/profits on the revaluation of investments
(23)
89
(23)
89
Portfolio income
14
18
14
17
Statement of financial position
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Unquoted investments
754
775
754
775
Advisory and management arrangements
The Group acted as Investment Manager to 3i Infrastructure plc (“3iN”), which is listed on the London Stock Exchange, for the year
to 31 March 2024. The following amounts have been recognised in respect of the management relationship:
Statement of comprehensive income
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Unrealised profits/(losses) on the revaluation of investments
38
(93)
38
(93)
Fees receivable from external funds
50
49
–
–
Performance fees receivable
41
35
–
–
Dividends
31
29
31
29
Statement of financial position
Group
2024
£m
Group
2023
£m
Company
2024
£m
Company
2023
£m
Quoted equity investments
879
841
879
841
Performance fees receivable
42
35
–
–
Subsidiaries
Transactions between the Company and its fully consolidated subsidiaries, which are related parties of the Company, are eliminated
on consolidation. Details of related party transactions between the Company and its subsidiaries are detailed below.
Management, administrative and secretarial arrangements
The Company has appointed 3i Investments plc, a wholly-owned subsidiary of the Company incorporated in England and Wales, as
its investment manager. 3i Investments plc received a fee of £8 million (2023: £8 million) from 3i plc, a fellow subsidiary, for this service.
The Company has appointed 3i plc, a wholly-owned subsidiary of the Company incorporated in England and Wales, to provide the Company
with a range of investment management and administrative services. 3i plc received a fee of £25 million (2023: £108 million) for this service.
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3i Group plc | Annual report and accounts 2024
198
29 Related parties and interests in other entities continued
Key management personnel
The Group’s key management personnel comprise the members of the Executive Committee and the Board’s non-executive Directors.
The following amounts have been included in respect of these individuals:
Statement of comprehensive income
Group
2024
£m
Group
2023
£m
Salaries, fees, supplements and benefits in kind
6
6
Cash bonuses
2
2
Carried interest and performance fees payable
31
34
Share-based payments
11
13
Termination payments
–
–
Statement of financial position
Group
2024
£m
Group
2023
£m
Bonuses and share-based payments
18
14
Carried interest and performance fees payable within one year
38
22
Carried interest and performance fees payable after one year
30
64
No carried interest and performance fees payable was paid or accrued for the Executive or non-executive Directors, as they do not participate
in these schemes (2023: nil). Carried interest and performance fees paid in the year to other key management personnel was £58 million (2023:
£7 million).
Unconsolidated structured entities
The application of IFRS 12 requires additional disclosure on the Group’s exposure to unconsolidated structured entities.
The Group has exposure to a number of unconsolidated structured entities, as a result of its investment activities across its Private Equity
and Infrastructure business lines. The nature, purpose and activities of these entities are detailed below along with the nature of risks
associated with these entities and the maximum exposure to loss.
Closed-end limited partnerships
The Group manages a number of closed-end limited partnerships, which are either Private Equity or Infrastructure focused, in return
for a management fee. The purpose of these partnerships is to invest in Private Equity or Infrastructure investments for capital appreciation.
Limited Partners, which in some cases may include the Group, finance these entities by committing capital to them and cash is drawn down
or distributed for financing investment activity.
The Group’s attributable stakes in these entities are held at fair value, fees receivable are recognised on an accruals basis and carried interest
is accrued when relevant performance hurdles are met.
The risk and maximum exposure to loss arising from the Group’s involvement with these entities are summarised below:
Carrying amount
Maximum loss
exposure
£m
Balance sheet line item of asset or liability
Assets
£m
Liabilities
£m
Net
£m
Unquoted investments
104
–
104
104
Carried interest receivable
6
–
6
6
Total
110
–
110
110
At 31 March 2023, the carrying amount of assets and maximum loss exposure of unquoted investments and carried interest receivable was
£98 million and £8 million respectively. The carrying amount of liabilities was nil.
At 31 March 2024, the total assets under management relating to these entities was £10.9 billion (31 March 2023: £9.0 billion).
Regulatory information relating to fees
3i Investments plc acts as the AIFM of 3i Group plc. In performing the activities and functions of the AIFM, the AIFM or another 3i company
may pay or receive fees, commissions or non-monetary benefits to or from third parties of the following nature:
Transaction fees
3i companies receive monitoring and directors’ fees from portfolio companies. The amount is agreed with the portfolio company at the time
of the investment but may be renegotiated. Where applicable, 3i may also receive fees on the completion of transactions such as acquisitions,
refinancings or syndications either from the portfolio company or a co-investor. Transaction fees paid to 3i are included in portfolio income.
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3i Group plc | Annual report and accounts 2024
199
29 Related parties and interests in other entities continued
Payments for third-party services
3i companies may retain the services of third-party consultants; for example, for an independent director or other investment management
specialist expertise. The amount paid varies in accordance with the nature of the service and the length of the service period and is usually,
but not always, paid/reimbursed by the portfolio companies. The payment may involve a flat fee, retainer or success fee. Such payments,
where borne by 3i companies, are usually included in portfolio income.
Payments for services from 3i companies
One 3i company may provide investment advisory services to another 3i company and receive payment for such services.
30 Subsidiaries and related undertakings
IFRS 10 deems control, as opposed to equity ownership, as the key factor when determining what meets the definition of a subsidiary. If a
group is exposed to, or has rights to, variable returns from its involvement with the investee, then under IFRS 10 it has control. This is inconsistent
with the UK’s Companies Act 2006, where voting rights being greater than 50% is the key factor when identifying subsidiaries.
Under IFRS 10, 34 of the Group’s portfolio company investments are considered to be accounting subsidiaries. As the Group applies the
investment entity exception available under IFRS 10, these investee companies are classified as investment entity subsidiaries.
The Companies Act 2006 requires disclosure of certain information about the Group’s related undertakings. Related undertakings are subsidiaries,
joint ventures, associates and other significant holdings. In this context, significant means either a shareholding greater than or equal to 20%
of the nominal value of any class of shares or a book value greater than 20% of the Group’s assets.
The Company’s related undertakings at 31 March 2024 are listed below:
Subsidiaries
3i Holdings plc
100% ordinary shares
1
3i Investments plc
100% ordinary shares
1
3i plc
100% ordinary shares
1
3i International Holdings
100% ordinary shares
1
Investors in Industry plc
100% ordinary shares/
cumulative preference
shares
1
3i Corporation
100% ordinary shares
2
3i Deutschland Gesellschaft für
Industriebeteiligungen mbH
100% ordinary shares
4
Gardens Nominees Limited
100% ordinary shares
1
Gardens Pension Trustees
Limited
100% ordinary shares
1
3i Europe plc
100% ordinary shares
1
3i Nominees Limited
100% ordinary shares
1
3i Osprey GP Limited
100% ordinary shares
1
3i Nordic plc
100% ordinary shares
1
3i GP 2004 Limited
100% ordinary shares
3
3i Ademas LP
100% partnership interest
3
The 3i Group Employee Trust
n/a
6
3i International Services plc
100% ordinary shares
1
3i EFV Nominees A Limited
100% ordinary shares
1
3i EFV Nominees B Limited
100% ordinary shares
1
3i India Private Limited
100% ordinary shares
7
3i Sports Media (Mauritius)
Limited
100% ordinary shares
8
3i EFV GP Limited
100% ordinary shares
1
IIF SLP GP Limited
100% ordinary shares
3
3i Buyouts 2010 A LP
85% partnership interest
1
3i Buyouts 2010 B LP
79% partnership interest
1
3i Buyouts 2010 C LP
60% partnership interest
1
GP CCC 2010 Limited
100% ordinary shares
3
3i GC GP Limited
100% ordinary shares
1
Description
Holding/share class
Footnote
3i GP 2010 Limited
100% ordinary shares
1
3i Growth Capital A LP
100% partnership interest
1
3i Growth Capital G LP
100% partnership interest
1
3i Growth 2010 LP
85% partnership interest
1
Strategic Investments FM
(Mauritius) Alpha Limited
70% ordinary shares
8
3i GC Nominees A Limited
100% ordinary shares
1
3i GC Nominees B Limited
100% ordinary shares
1
3i India Infrastructure Fund B LP
99% partnership interest
1
3i 2004 GmbH & Co. KG
100% partnership interest
4
3i General Partner 2004 GmbH
100% ordinary shares
4
Pan European Growth Co-invest
2006-08 LP
100% partnership interest
1
Pan European Growth (Dutch)A
Co-invest 2006-08 LP
100% partnership interest
1
Asia Growth Co-invest 2006-08 LP 100% partnership interest
1
Pan European Growth (Nordic)
Co-invest 2006-08 LP
100% partnership interest
1
3i PE 2013-16A LP
100% partnership interest
1
3i PE 2013-16C LP
100% partnership interest
1
3i GP 2013 Ltd
100% ordinary shares
1
GP 2013 Ltd
100% ordinary shares
3
3i BIFM Investments Limited
100% ordinary shares
1
BIIF GP Limited
100% ordinary shares
1
BAM General Partner Limited
100% ordinary shares
1
BEIF Management Limited
100% ordinary shares
1
3i BIIF GP LLP
100% partnership interest
1
3i PE 2016-19 A LP
100% partnership interest
1
3i Managed Infrastructure
Acquisitions GP (2017) LLP
100% partnership interest
1
3i Managed Infrastructure
Acquisitions GP Limited
100% ordinary shares
1
3i 2016 Gmbh & Co. KG
100% partnership interest
4
3i European Operational
Projects GmbH & Co. KG
100% partnership interest
4
Description
Holding/share class
Footnote
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3i Group plc | Annual report and accounts 2024
200
30 Subsidiaries and related undertakings continued
Description
Holding/share class
Footnote
GP 2016 Limited
100% ordinary shares
3
3i GP 2016 Limited
100% ordinary shares
1
3i European Operational
Projects GP s.a.r.l
100% ordinary shares
10
3i SCI Holdings Limited
100% ordinary shares
1
3i North American Infrastructure
Partners, LLC
80% equity shares
26
3i Abaco ApS
100% ordinary shares
23
3i Investments (Luxembourg) S.A.
100% ordinary shares
10
3i 2019-22 DLP SCSp
100% partnership interest
10
3i PE 2019-22 A LP
100% partnership interest
1
3i PE 2019-22 B LP
100% partnership interest
1
3i PE 2019-22 Warehouse LP
100% partnership interest
3
3i 2020 Co-investment LP
100% partnership interest
3
3i GP 2019 Limited
100% ordinary shares
1
3i GP 2020 Limited
100% ordinary shares
3
3i GP 2019 s.a.r.l
100% ordinary shares
10
3i GP 2019 (Scots) Limited
100% ordinary shares
3
3i 2020 Co-investment GP s.a.r.l
100% ordinary shares
10
3i France SAS
100% ordinary shares
16
3i IP Acquisitions Limited
100% ordinary shares
1
3i IP Acquisitions GP LLP
100% partnership interest
1
2020 Co-Investment 1 LP
100% partnership interest
1
2020 Co-Investment 2 LP
94% partnership interest
1
3i IIF GP 2020 Limited
100% ordinary shares
1
3i IIF GP LLP
100% partnership interest
1
Coral LP
50% carried interest units
3
3i Benelux B.V.
100% ordinary shares
12
3i Mountain LP
99% partnership interest
3
3i NAI Holdings GP Limited
100% ordinary shares
3
3i PE 2022-25 A LP
100% partnership interest
1
3i PE 2022-25 B LP
100% partnership interest
1
3i GP 2022 Limited
100% ordinary shares
1
3i GP 2022 (Scots) Limited
100% ordinary shares
3
3i PE 2022-25 A (Lux) SCSp
100% partnership interest
10
3i PE 2022-25 B (Lux) SCSp
100% partnership interest
10
3i GP 2022 s.a.r.l
100% ordinary shares
10
3i North American Infrastructure
Fund A LP
100% partnership interest
26
3i NAI Holdings LP
100% partnership interest
3
3i North American Infrastructure
GP, LLC
100% equity units
26
3i ECW Coinvest GP, LLC
100% equity units
26
3i RR Coinvest GP, LLC
100% equity units
26
3i Aura GP (2022) Limited
100% ordinary shares
1
3i Zephyr GP (2022) Limited
100% ordinary shares
1
3i Infra GP 2022 (Scots) Limited
100% ordinary shares
3
3i Infra 2022 Warehouse LP
100% partnership interest
3
3i 2023 Co-investment LP
51% partnership interest
1
3i MME Coinvest GP, LLC
100% equity units
26
Description
Holding/share class
Footnote
Associates
3i Growth Carry A LP
25% partnership interest
3
3i Growth Carry B LP
25% partnership interest
3
Pan European Buyouts (Nordic)
Co-invest 2006-08 LP
26% partnership interest
1
Global Growth Co-invest
2006-08 LP
30% partnership interest
38
Strategic Investments FM
(Mauritius) B Limited
36% ordinary shares
8
3i Growth Capital B LP
36% partnership interest
1
Moon Topco GmbH
49% ordinary shares
13
Layout Holdco A/S
49% ordinary shares
14
Boketto Holdco Limited
47% ordinary shares
15
Klara HoldCo S.A.
43% ordinary shares
10
Shield Holdco LLC
49% equity units
31
Q Holdco Limited
27% ordinary shares
18
3i Infrastructure plc
29% ordinary shares
17
Peer Holding I B.V.
49% ordinary shares
19
AES Engineering Limited
43% ordinary shares
20
Carter Thermal Industries
Limited
32% ordinary shares
21
Harper Topco Limited
42% ordinary shares
22
Orange County Fundo de
Investmento EM Participacoes
40% equity units
25
Tato Holdings Limited
27% ordinary shares
28
Nimbus Communications Ltd
30% ordinary shares
29
Aurela TopCo Gmbh
49% ordinary shares
5
nexeye holding B.V.
49% ordinary shares
27
C Medical Holdco, LLC
49% equity units
2
Crown Holdco B.V.
49% ordinary shares
42
3i India Infrastructure Holdings Ltd
21% ordinary shares
8
Racing Topco GmbH
49% ordinary shares
24
Panda Holdco LLC
49% equity units
2
Scandlines Infrastructure ApS
35% ordinary shares
30
Alinghi 1 S.A.S
49% ordinary shares
11
SaniSure Holdings GP LLC
49% equity units
2
New Amsterdam Software GP
LLC
49% equity units
31
Garden & House International
GmbH
36% ordinary shares
32
T&J Holdco Limited
49% ordinary shares
9
WHCG GP LLC
49% equity units
31
Hydra Holdco B.V.
49% ordinary shares
40
European Bakery Group B.V.
49% ordinary shares
41
Himalaya Topco B.V.
46% ordinary shares
39
MAIT Group GmbH
49% ordinary shares
33
Ten23 Health GP LLC
49% equity units
31
George Topco Limited
49% ordinary shares
34
xSuite Top Holding GmbH
49% ordinary shares
35
Balearia Topco B.V.
49% ordinary shares
36
Kite Topco ApS
49% ordinary shares
37
There are no joint ventures or other significant holdings. The 20 large portfolio companies by fair value are detailed on pages 215 and 216.
The combination of the table above and that on pages 215 and 216 is deemed by the Directors to fulfil the requirements under IFRS 12
on the disclosure of material subsidiaries.
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30 Subsidiaries and related undertakings continued
Footnote
Address
1
16 Palace Street, London, SW1E 5JD, UK
2
300 Park Avenue, 23rd Fl, New York, NY 10022, USA
3
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, UK
4
OpernTurm, Bockenheimer Landstresse 2-4, 60306 Frankfurt am Main, Germany
5
Seelbüde 13, 36110 Schlitz, Germany
6
13 Castle Street, St Helier, JE1 1ES, Jersey
7
Level 7, The Capital B-Wing, Bandra Kurla Complex, Bandra East, Mumbai, 400051, India
8
5th Floor, Ebene Esplanade, 24 Bank Street, Cybercity, Ebene, Mauritius
9
Floor 2, Trident 3, Trident Business Park, Styal Road, Manchester, M22 5XB, UK
10
9 Rue Sainte Zithe, L-2763 Luxembourg, Grand Duchy of Luxembourg
11
16 place de l’Iris, 92 400 Courbevoie, France
12
Cornelis Schuytstraat 74, 1071JL Amsterdam, Netherlands
13
Einsteinring 10, 85609 Aschheim, Germany
14
Mørupvej 16 Mørup, 7400 Herning, Denmark
15
New Mill, New Mill Lane, Witney, Oxfordshire, OX29 9SX, UK
16
29-31, rue de Berri, 75008 Paris, France
17
Aztec Financial Services (Jersey) Limited, Aztec Group House, IFC 6, The Esplanade, St Helier, JE2 3BZ, Jersey
18
1 Bartholomew Lane, London, EC2N 2AX, UK
19
Perenmarkt 15, Zwaagdijk East, 1681PG, Netherlands
20
Bradmarsh Business Park, Mill Close, Rotherham, South Yorkshire, S60 1BZ, UK
21
90 Lea Ford Road, Birmingham, B33 9TX, UK
22
1st James Court, Whitefriars, Norwich, Norfolk, NR3 1RU, UK
23
Nybrogade 12, 1203 Copenhagen, Denmark
24
Schanzenstr. 6-20, Gebäude 2.08, 51063 Cologne, Germany
25
Avenida Brigadeiro Faria Lima, 2055, 19 andar, 01452-001 – Sao Paulo, SP, Brazil
26
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle, Delaware, 19801, USA
27
Papland 21, 4206CK Gorinchem, Netherlands
28
Thor Specialities (Uk) Ltd, Wincham Avenue, Wincham, Northwich, CW9 6GB, UK
29
44 Oberoi Complex, Andheri (West), Mumbai, India
30
Havneholmen 25, 8.,1561 Copenhagen, Denmark
31
251 Little Falls Drive, Wilmington, DE 19808, New Castle, USA
32
Bahrenfelder Chaussee 49, 22761, Hamburg, Germany
33
Berner Feld 10, 78628 Rottweil, Germany
34
Milton Gate, 60 Chiswell Street, London, EC1Y 4AG, UK
35
Hamburger Str. 12, 22926 Ahrensburg, Germany
36
Herengracht 262, 1016 BV Amsterdam, Netherlands
37
Konges Sløjd, Store Kongensgade 77, 1., 1264 Copenhagen, Denmark
38
2nd Floor, Gaspé House, 66-72 Esplanade, St Helier, JE1 1GH, Jersey
39
Aalsvoort 101, 7241 MB Lochem, Netherlands
40
Weidehek 46, 4824 AS Breda, Netherlands
41
Kronosstraat 2, 5048 CE Tilburg, Netherlands
42
Industriepark Vliedberg 12, 5251 RG Vlijmen, the Netherlands
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3i Group plc | Annual report and accounts 2024
202
1. Our opinion is unmodified
In our opinion:
• the financial statements of 3i Group plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2024, and
of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006; and
• the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What our opinion covers
We have audited the Group and Parent Company financial statements of 3i Group plc (“the Group”) for the year ended 31 March 2024 (FY2024) included in the
Annual Report and Accounts, which comprise:
Group (3i Group plc and its subsidiaries)
Parent Company (3i Group plc)
Consolidated statement of comprehensive income
Company statement of financial position
Consolidated statement of financial position
Company statement of changes in equity
Consolidated statement of changes in equity
Company cash flow statement
Consolidated cash flow statement
Notes to the accounts, including the summary of material accounting policies
Notes to the accounts, including the summary of material accounting
policies
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below.
We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion and matters included in this report
are consistent with those discussed and included in our reporting to the Audit and Compliance Committee (“ACC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with UK ethical requirements, including the FRC
Ethical Standard as applied to listed public interest entities.
2. Overview of our audit
Factors driving our view of risks
The year ended 31 March 2024 is our fourth year as the Group’s auditor.
Much of the uncertainty in the macro-economic environment that existed at
the end of FY23 remains.
Due to the continued geopolitical tension and global macroeconomic
downturn, several portfolio companies experienced difficult trading
conditions, although the Company’s largest investment, Action, has
demonstrated resilience. In comparison, some portfolio companies
experienced company-specific issues including lower demand level for
products and services and higher cost base. Hence, the level of judgement
required to be exercised by the Group and Parent Company in valuations of
unquoted investments, in particular as a result of volatility in earnings
(including earnings adjustments), comparable company multiples, and cash
flows continued to be a focus area.
During the year, the private asset market continues to experience challenges
and a low level of market activity. This is primarily driven by the persistent
high interest rate environment and low investor confidence during a period
of geopolitical and macro-economic uncertainty. As a result, we have
increased our focus on the level of judgement required for some key
assumptions, namely valuations earnings adjustments and multiples (for
assets valued using earnings multiple approach) and discount rates (for
assets valued using the discounted cash flow approach).
Carried Interest payable in investment entity subsidiaries has been similarly
impacted, as its calculation is primarily driven by the valuation of the
investment portfolio as at the year end.
Investment entity subsidiaries composed mainly of unquoted investments
and carried interest liabilities. Unquoted investments are considered in 4.1
below with directly held unquoted investments. Whilst the carried interest
liability is included in 4.2 below.
As part of our risk assessment, we have maintained our focus on the valuation
of the unquoted investment portfolio held directly and by investment entity
subsidiaries, and on the accuracy of the carried interest payable included in
the valuation of investment entities. We have designed our audit procedures
accordingly. This has included specific focus on key assumptions adopted by
management. We have considered management’s evaluation of the impact
of the current geopolitical uncertainty and macro-economic downturn on the
portfolio companies. We have also designed additional procedures over the
largest asset in the portfolio, Action.
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KPMG LLP’s independent auditor’s report
to the members of 3i Group plc
3i Group plc | Annual report and accounts 2024
203
Key Audit Matters (Group and Parent Company)
Vs FY23
Items
Valuation of Unquoted Investments
(Group and Parent Company)
4.1
Carried interest payable included in investments
in investment entity subsidiaries (Group) and
interests in group entities (Parent Company)
4.2
Newly identified risk
Similar risk to FY2023
Increase in risk since FY2023
Decrease in risk since FY2023
Audit and compliance committee interaction
During the year, the ACC met 6 times. KPMG are invited to attend all ACC
meetings and are provided with an opportunity to meet with the ACC in
private sessions without the Executive Directors being present. For each Key
Audit Matter, we have set out communications with the ACC in section 4,
including matters that required particular judgement for each. The matters
included in the Audit and Compliance Committee Chair’s report on page
122 are materially consistent with our observations of those meetings.
Our independence
We have fulfilled our ethical responsibilities and remain independent of the
Group in accordance with UK ethical requirements, including the FRC Ethical
Standard as applied to listed public interest entities.
We have not performed any non-audit services during the year ended 31
March 2024 or subsequently which are prohibited by the FRC Ethical
Standard.
We were first appointed as auditor by the shareholders for the year ended 31
March 2021. The period of total uninterrupted engagement is for the four
financial years ended 31 March 2024.
The Group engagement partner is required to rotate every 5 years. As these
are the fourth set of the Group’s financial statements signed by Jonathan
Mills, he will be required to rotate off after the FY2025 audit.
Materiality (item 6 below)
The scope of our work is influenced by our view of materiality and our
assessed risk of material misstatement.
We have determined overall materiality for the Group financial statements as
a whole at £176m (FY2023: £141m) and for the Parent Company financial
statements as a whole at £159m (FY2023: £124m).
A key judgement in determining materiality was the most relevant metric to
select as the benchmark, by considering which metrics have the greatest
bearing on shareholder decisions.
Consistent with FY2023, we determined that Total Assets remains the
benchmark for the Group as the valuation of the investment portfolio remains
the key financial measure. As such, we based our Group materiality on Total
Assets, of which it represents 0.8% (FY2023: 0.79%).
Materiality for the Parent Company financial statements was determined with
reference to a benchmark of Parent Company Total Assets of which it
represents 0.75% (FY2023: 0.7%).
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Total audit fee
£3m (FY2023: £2.7m)
Audit related fees
(including interim review)
£0.3m (FY2023: £0.3m)
Non-audit fee as a % of total audit
and audit related fee %
10% (FY2023: 11%)
Date first appointed
25 June 2020
Uninterrupted audit tenure
4 years
Next financial period which
requires a tender
31 March 2031
Tenure of Group engagement
partner
4 years
Materiality levels used in our audit
Group
Group Materiality
GPM
Group Performance
Materiality
PLC
Parent Company
Materiality
AMPT
Reporting Differences
Threshold
l FY2023 £m
l FY2024 £m
141
105
124
7
176
132
159
9
Group
GPM
PLC
AMPT
Group scope (item 7 below)
We have performed risk assessment and planning procedures to determine
which of the Group’s components are likely to include risks of material
misstatement to the Group financial statements, the type of procedures to
be performed and the extent of involvement required. The Parent Company
is the only component in scope for full scope audit of financial information for
consolidation purposes. This is consistent with the prior year.
The component within the scope of our work accounted for the percentages
illustrated below.
We have performed audit procedures centrally across the Group, as set out
in more detail in item 7. In addition, we have performed Group level analysis
on the remaining components to determine whether further risks of material
misstatement exist in those components.
We consider the scope of our audit, as communicated to the Audit and
Compliance Committee, to be an appropriate basis for our audit opinion.
The impact of climate change on our audit
In planning our audit, we have considered the potential impacts of climate
change on the Group’s business and its financial statements.
Climate change impacts the Group in a variety of ways including the impact
of climate risk on investment valuations, potential reputational risk associated
with the Group’s delivery of its climate related initiatives, and greater
emphasis on climate related narrative and disclosure in the annual report.
The Group’s exposure to climate change is primarily through the portfolio
companies, as the key valuation assumptions and estimates may be
impacted by climate change risks.
We have performed a risk assessment of how the impact of climate change
may affect the financial statements and our audit, in particular over the
valuation of portfolio companies. Our assessment of the impact of climate
change was limited to the valuation of unquoted investments. We held
discussions with our own climate change professionals to challenge our risk
assessment. For the biggest asset in the portfolio, Action, we read its
sustainability report to understand the climate change risks and considered
the impact on its valuation. On the basis of the risk assessment procedures
performed above, we concluded that, while climate change posed a risk to
the determination of the valuation of portfolio companies due to the
potential impact on the maintainability of valuation earnings or free cash
flows forecast, the risk was not significant when we considered the portfolio
of investments. As a result, there was no material impact from this on our key
audit matters.
We have also read the disclosure of climate related information in the front
half of the annual report as set out on pages 58 to 68 and considered
consistency with the financial statements and our audit knowledge. We have
not been engaged to provide assurance over the accuracy of these
disclosures.
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Coverage of Group financial statements
Total assets
l Full scope audit
l Remaining components
Revenue
Net assets
l 96%
l 4%
l 97%
l 3%
l 98%
l 2%
3. Going concern, viability and principal risks and uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent Company or to
cease their operations, and they have concluded that the Group’s and the Parent Company’s financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from
the date of approval of the financial statements (“the going concern period”).
Going concern
We used our knowledge of the Group and Parent Company, their industry,
and the general economic environment to identify the inherent risks to its
business model and analysed how those risks might affect the Group’s and
Parent Company’s financial resources or ability to continue operations over
the going concern period. The risks that management considered most likely
to adversely affect the Group’s and Parent Company’s available financial
resources over this period are:
• Continued geopolitical tension and macro-economic downturn, including
persistent inflation, high interest rates and weak consumer demand
impacting the performance of portfolio companies, including their liquidity
(which may require 3i to provide further liquidity support to portfolio
companies);
• A material downturn in performance of the Group’s largest portfolio
company, Action; and
• A combination of the two scenarios.
We considered whether these risks could plausibly affect the liquidity of the
Group and the Parent in the going concern period by comparing severe, but
plausible downside scenarios that could arise from these risks individually
and collectively against the level of available financial resources indicated by
the Group’s and Parent Company’s financial forecasts. Our procedures also
included an assessment of whether the going concern disclosure in
Accounting Policy A to the financial statements gives a complete and
accurate description of the Directors’ assessment of going concern.
Accordingly, based on those procedures, we found the Directors’ use of the
going concern basis of accounting without any material uncertainty for the
Group and Parent Company to be acceptable. However, as we cannot
predict all future events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were reasonable at the
time they were made, the above conclusions are not a guarantee that the
Group or the Parent Company will continue in operation.
Our conclusions
• We consider that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
• We have not identified, and concur with the Directors’ assessment that
there is not, a material uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s or
Parent Company's ability to continue as a going concern for the going
concern period;
• We have nothing material to add or draw attention to in relation to the
Directors’ statement in Accounting Policy A to the financial statements on
the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and Parent
Company’s use of that basis for the going concern period, and we found
the going concern disclosure in Accounting Policy A to be acceptable; and
• The related statement under the Listing Rules set out on page 129-130 is
materially consistent with the financial statements and our audit
knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a
material inconsistency between the Directors’ disclosures in respect of
emerging and principal risks and the viability statement, and the financial
statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
• the Directors’ confirmation within the Principal risks and mitigations
statement that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would threaten
its business model, future performance, solvency and liquidity;
• the Principal risks and mitigations disclosures describing these risks and
how emerging risks are identified and explaining how they are being
managed and mitigated; and
• the Directors’ explanation in the Viability Statement of how they have
assessed the prospects of the Group, over what period they have done so
and why they considered that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or
assumptions.
We are also required to review the Viability statement set out on page
129-130 under the Listing Rules.
Our work is limited to assessing these matters in the context of only the
knowledge acquired during our financial statements audit. As we cannot
predict all future events or conditions, and as subsequent events may result
in outcomes that are inconsistent with judgements that were reasonable at
the time they were made, the absence of anything to report on these
statements is not a guarantee as to the Group’s and Parent Company’s
longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation to these
disclosures.
We have concluded that these disclosures are materially consistent with the
financial statements and our audit knowledge.
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4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgement, were
of most significance in the audit of the financial statements and include the
most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on:
• the overall audit strategy;
• the allocation of resources in the audit; and
• directing the efforts of the engagement team.
We include below the Key Audit Matters (unchanged from FY2023) in
decreasing order of audit significance together with our key audit procedures
to address those matters and our results from those procedures. These
matters were addressed, and our results are based on procedures
undertaken, for the purpose of our audit of the financial statements as a
whole. We do not provide a separate opinion on these matters.
4.1 Valuation of unquoted investments (Group and Parent Company)
Financial Statement Elements
Our assessment of risk vs FY2023
Our results
FY2024
FY2023
Our assessment of the risk has increased
since last year.
FY2024:
Acceptable
FY2023:
Acceptable
Unquoted investments – Group and parent
£14,193m
£8,677m
Investments in investment entity subsidiaries
£5,804m
£7,844m
Interests in group entities – Parent Company,
£5,804m
£7,844m
Description of the Key Audit Matter
Our response to the risk
Subjective valuation
The investment portfolio comprises a number of unquoted investments.
These are held by the Group and the Parent Company
As these investments are unquoted and illiquid, the fair value is determined
through the application of valuation techniques. The application of valuation
techniques involves the exercise of significant judgement by the Group and
Parent Company in relation to the assumptions and inputs into the respective
models (e.g. maintainability of the earnings, earnings multiple, and discount
rate).
Due to the continued geopolitical tension and global macro-economic
downturn, several portfolio companies experienced difficult trading
conditions, although the Company’s largest investment, Action, has
demonstrated resilience. In comparison, some portfolio companies
experienced company-specific issues including lower demand level for
products and services and higher cost base. Accordingly, the level of
judgement required to be exercised by the Group and the Parent Company,
in particular as a result of the volatility in earnings (including earnings
adjustments) and comparable company multiples, remains high in FY2024.
In addition, the private asset market continues to experience challenges and
a low level of market activity. This is primarily driven by the persistent high
interest rate environment and low investor confidence during a period of
geopolitical and macro-economic uncertainty. As a result, we have increased
our focus on the level of judgement required for some key assumptions,
namely valuations earnings adjustments and multiples (for assets valued
using earnings multiple approach) and discount rates (for assets valued using
the discounted cash flow approach).
As part of our risk assessment, we considered management’s evaluation of
the impact of the geopolitical uncertainty and macro-economic downturn on
the valuation of portfolio companies and have designed our audit
procedures accordingly.
The effect of these matters is that, as part of our risk assessment, we
determined that the subjective estimates in fair value measurement of certain
unquoted investments, as detailed above, have a high degree of estimation
uncertainty, with a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and possibly many times
that amount.
We performed the tests below rather than seeking to rely on any of these
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described
below.
Control design: We obtained an understanding of any key changes to the
processes and controls to determine the fair value of unquoted investments.
We documented and assessed the design and implementation of the
investment valuation processes and controls.
Benchmarking assumptions: We challenged the Group and Parent
Company on key judgements affecting portfolio company valuations, such as
the maintainability of the earnings used in valuations, the appropriateness of
earnings multiples, and projected cash flows, discount rates and terminal
values for discounted cash flow valuations.
We compared key underlying financial data inputs to external sources such
as the investee company audited accounts, and management information as
applicable. We challenged the assumptions around maintainability of
earnings based on the plans of portfolio companies and whether these are
achievable. In addition, we checked mathematical accuracy of the underlying
models.
Our valuation expertise: For a sample of investments, selected based on
audit materiality and risk profile of each investment, we used our own
valuations specialists to assist us in assessing the principles and
appropriateness of the valuation methodology, critically reviewing the key
assumptions, and independently providing a reasonable range for earnings
multiples and discount rates.
Understanding of the business: For the largest asset in the portfolio,
Action, we visited Action’s Head Office in the Netherlands, and held
discussions with Action management and the external audit team for Action
to understand the business strategy, how accounting estimates are made
and any key audit findings.
Historical comparisons: We compared the actual performance or cash
flows achieved by portfolio companies to the inputs used in the valuation
model for the prior year to understand the reasons for any significant
variances and determine whether they are indicative of bias and error in the
Group’s approach to valuations.
Assessing transparency: We considered the appropriateness, in
accordance with relevant accounting standards, of the disclosures in respect
of unquoted investments and the effect of changing one or more inputs to
reasonably possible alternative valuation assumptions.
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Communications with the 3i Group plc Audit and Compliance
Committee and Valuations committee
Our discussions with and reporting to the Audit and Compliance Committee
and the Valuations Committee included:
• Our approach to the audit of the fair value of the unquoted investment
portfolio including details of our planned substantive procedures and the
extent of our controls reliance.
• Our conclusions on the appropriateness of 3i’s fair value methodology
and policy.
• Our conclusions on the appropriateness of the valuation outcome for
individual portfolio companies and, for the sample of investments subject
to valuation specialists’ review, an indication of where the Group’s
valuations multiple and discount rate (where applicable) falls within our
acceptable range.
• The adequacy of the sensitivity disclosures, particularly as they relate to
valuation inputs.
• Our assessment of whether any misstatement identified through these
procedures was material.
Areas of particular auditor judgement
Auditor judgement is required to assess whether the Directors' estimate of
the following key assumptions fall within an acceptable range:
• For assets valued using an earnings multiple approach:
– Determination of valuation multiples
– Determination of maintainable earnings (including any earnings
adjustments)
• For assets valued using a discounted cash flow approach:
– Discount rate
– Projected cash flows
– Terminal value exit multiple
– Terminal value earnings
Our results
Based on the risk identified and our procedures performed, we consider the
valuation of the unquoted investments to be acceptable (FY2023:
acceptable).
Further information in the Annual Report and Accounts: See the Audit and Compliance Committee Report on page 122-127 and the Valuation Committee
report on page 131-135 for details on how the committees considered Valuation as an area of significant attention, and page 176 for the accounting policy for
unquoted investments.
4.2 Carried interest payable included in investments in investment entity subsidiaires (Group) and interests in group
entities (Parent Company)
Financial Statement Elements
Our assessment of risk vs FY2023
Our results
FY2024
FY2023
Our assessment of the risk is similar to
FY2023.
FY2024: Acceptable
FY2023: Acceptable
Investments in investment entity
subsidiaries – Group
£5,804m
£7,844m
Carried interest payable included
in investment entity subsidiaries –
Group (Note 15)
£764m
£1,274m
Carried interest payable included
Interests in Group entities – Parent
Company amounting to £764m
£5,804m
£7,844m
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Description of the Key Audit Matter
Our response to the risk
The valuation of investment entity subsidiaries and interests in group entities
is primarily driven by the valuation of unquoted investments held (see key
audit matter above) and the fair value of the carried interest liabilities.
Carried interest payable is a liability for the investment entity subsidiaries and
interest in group entities which reduces the fair value of investment entity
subsidiaries and interest in group entities. Carried interest payable is
calculated as a function of the investment returns that would be achieved if
the investments within each fund or scheme were realised at reported fair
value at the year-end date, subject to the relevant hurdle rates or
performance conditions (as set out in relevant limited partnership
agreements) being met.
Calculation error
Due to the number of bespoke, complex agreements and the manual nature
of the calculation and recognition process, there is an increased risk of error in
relation to carried interest payable.
We performed the tests below rather than seeking to rely on any of these
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described below.
Subjective valuation
Our audit procedures for the valuation of unquoted investments held in
investment entity subsidiaries and interest in group entities are consistent with
those outlined in section 4.1.
Control design: We obtained an understanding of the Group and Parent
Company’s processes to determine the carried interest payable. We documented
and assessed the design and implementation of the processes and controls.
Test of details:
We performed the following:
• Agreed key inputs, including estimated valuations, relevant hurdles, and
performance obligations to supporting documentation.
• Independently reperformed calculations and compared the results to
management’s calculations.
• Independently reperformed calculations of the funds’ investment returns
and compared them to the relevant hurdle rates or performance conditions.
Methodology implementation: We agreed the methodology used in
management’s calculations to the relevant limited partnership agreements.
Assessing transparency: We considered the appropriateness, in
accordance with relevant accounting standards, of the disclosures in respect
of carried interest.
Communications with the 3i Group plc Audit and Compliance
Committee and Valuations committee
Our discussions with and reporting to the Audit and Compliance
Committee and the Valuations Committee on unquoted investments are
covered in section 4.1 including areas of particular auditor judgement. In
addition, we have covered the following on carried interest:
• Our approach to the audit of carried interest payable component of the
fair value of investment entities and interest in group entities
• Our assessment of whether any misstatement identified through these
procedures was material
• The results of our work over the carried interest payable balance held
within investment entities and interest in group entities
Our results
Based on the risk identified and our procedures performed, we consider
the valuation of carried interest payable included in investment entity
subsidiaries and interest in group entities to be acceptable (FY2023:
acceptable).
Further information in the Annual Report and Accounts: See the Audit and Compliance Committee Report on page 122-127 for details on how the Audit and
Compliance Committee considered carried interest as an area of significant attention, and page 182-183 for the accounting policy and sensitivity disclosure on
carried interest payable, and page 177 for accounting policy on investments in subsidiaries.
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5. Our ability to detect irregularities, and our response
Fraud – identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment
To identify risks of material misstatement due to fraud (“fraud risks”) we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. In this risk
assessment we considered the following:
• Our meetings throughout the year with the Group General Counsel,
internal audit and Head of Compliance including obtaining and reviewing
supporting documentation such as:
– Board and Audit and Compliance Committee minutes;
– Internal audit reports;
– Internal risk registers; and
– Breaches registers.
• Enquiries of directors, finance team, the Group General Counsel, the Head
of Compliance, internal audit, and the Audit and Compliance Committee
as to whether they have knowledge of any actual, suspected, or alleged
fraud.
• Consideration of the Group’s remuneration policies, key drivers for
remuneration and bonus levels; and
• Discussions among the engagement team regarding how and where fraud
might occur in the financial statements and any potential indicators of
fraud. The engagement team includes audit partners and staff who have
extensive experience of working with companies in the same sectors as 3i
operates, and this experience was relevant to the discussion about where
fraud risks may arise.
Risk communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
Fraud risks
As required by auditing standards, and taking into account possible pressures
to meet performance targets, we performed procedures to address the risk
of management override of controls, in particular the risk that Group
management may be in a position to make inappropriate accounting entries
and the risk of bias in accounting estimates and judgements such as the
valuation of the unquoted investment portfolio and investment entity subsidiaries.
On this audit we assessed there to be no fraud risk related to revenue
recognition because the Group has a relatively simple revenue model with
no material estimation or judgement; the simple nature and low volume of
individual revenue transactions means there is a remote risk of material
misstatement from fraudulent manipulation; and opportunities for a material
misstatement due to fraudulent revenue recognition are limited due to the
nature of the portfolio income received.
We identified additional fraud risks relating to the valuation of unquoted
investments held on balance sheet and within investment entity subsidiaries.
As these investments are unquoted and illiquid, they are valued using
valuation techniques. Such techniques are subjective and involve the exercise
of judgement by the Group and Parent Company over areas such as the
maintainability of the earnings used in valuations, the determination of
earnings multiples, and projected cash flows, discount factors and terminal
values for discounted cash flow valuations. In addition, the valuation of
unquoted investments drives the share price of the Group, which in turn
drives remuneration of the Executive Directors, and is a key indicator for their
performance. Due to the highly judgemental nature of these valuations, the
reliance on unobservable inputs, and the linkage to Executive Directors’
remuneration, we consider there to be increased risk of fraud in relation to
the valuation of unquoted investment portfolio. We have further identified
that the group CEO is also the chair of the group’s largest investment,
Action. The CEO can influence decisions made from an operational point of
view and could affect the investment held in Action. We consider this to be
increased risk of fraud in relation to the valuation of Action.
Link to KAMs
We have challenged key judgements and assumptions used in the
valuation of unquoted investments. Further detail in respect to procedures
performed over the valuation of unquoted investments is contained within
the key audit matter disclosures in section 4.1 of this report.
Procedures to address fraud risks
We performed substantive audit procedures including:
• Identifying journal entries to test based on risk criteria and comparing the
identified entries to supporting documentation. These included post close
journals, those journals containing unusual pairings or those with same
preparer and approvers; and
• Assessing significant accounting estimates, including valuation of
unquoted investments and investment entity subsidiaries after deducting
carried interest payable in investment entities as a liability, for any
indicators of management bias.
Laws and regulations – identifying and responding to risks of material misstatement
relating to compliance with laws and regulations
Laws and regulations risk assessment
Identifying and responding to risks of material misstatement related to
compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from our
general commercial and sector experience, and through discussion with the
Directors and other management (as required by auditing standards), and
from inspection of the Group’s regulatory and legal correspondence and
discussed with the Directors and other management the policies and
procedures regarding compliance with laws and regulations.
As the Group operates in a highly regulated environment, our assessment of
risks involved gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory requirements. Our
assessment included inspection of key frameworks, policies, and standards in
place, understanding and evaluating the role of the compliance function in
establishing these and monitoring compliance.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.
Direct laws context and link to audit
The potential effect of these laws and regulations on the financial statements
varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the
financial statements including:
• financial reporting legislation (including related companies legislation),
• distributable profits legislation
• taxation legislation
We assessed the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement items.
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Most significant indirect law/regulation areas
Secondly, the Group is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on amounts or
disclosures in the financial statements, for instance through the imposition of
fines or litigation or the loss of the Group’s license to operate in countries
where the non-adherence to laws could prevent trading in such countries.
We identified the following areas as those most likely to have such an effect:
• Anti-bribery and corruption;
• Competition legislation;
• Pensions legislation;
• Regulatory capital and liquidity
• Health and safety legislation;
• Market abuse regulations; and
• Certain aspects of company legislation recognising the financial and
regulated nature of two of the Group’s subsidiaries and their legal form.
Auditing standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of the Directors and
other management and inspection of regulatory and legal correspondence, if
any. Therefore, if a breach of operational regulations is not disclosed to us or
evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that
we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit
in accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection
of fraud, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to help us
determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements, both individually and in the
aggregate, on the financial statements as a whole.
£176m
(FY2023: £141m)
Materiality for the
group financial
statements
as a whole
What we mean
A quantitative reference for the purpose of planning and
performing our audit.
Basis for determining materiality and judgements
applied
Materiality for the Group financial statements as a whole was
set at £176m (FY2023: £141m). Consistent with FY2023, we
determined that Total Assets remains the main benchmark
for the Group as the valuation of the investment portfolio
remains the key financial measure.
Our Group materiality of £176m was determined by applying
a percentage to the Total Assets. When using an asset
related measure to determine overall materiality, KPMG’s
approach for listed public interest entities considers a
guideline range 0.5% - 1% of the measure. In setting overall
Group materiality, we applied a percentage of 0.8%
(FY2023:0.79%) to the benchmark.
Materiality for the Parent Company financial statements as a
whole was set at £159m (FY2023: £124m), determined with
reference to a benchmark of Parent Company total assets, of
which it represents 0.74% (FY2023: 0.70%).
£132m
(FY2023: £105m)
Performance
materiality
What we mean
Our procedures on individual account balances and
disclosures were performed to a lower threshold,
performance materiality, to reduce to an acceptable level the
risk that individually immaterial misstatements in individual
account balances add up to a material amount across the
financial statements as a whole.
Basis for determining performance materiality and
judgements applied
We have considered performance materiality at a level of
75% (FY2023: 75%) of materiality for 3i Group financial
statements as a whole to be appropriate.
The Parent Company performance materiality was set at
£119m (FY2023: £93m), which equates to 75% (FY2023: 75%)
of materiality for the Parent Company financial statements as
a whole.
We applied this percentage in our determination of
performance materiality because we did not identify any
factors indicating an elevated level of risk.
£9m
(FY2023: £7m)
Audit misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are
considered to be clearly trivial from a quantitative point of
view. We may become aware of misstatements below this
threshold which could alter the nature, timing, and scope of
our audit procedures, for example if we identify smaller
misstatements which are indicators of fraud.
This is also the amount above which all misstatements
identified are communicated to 3i Group plc’s Audit and
Compliance Committee.
Basis for determining the audit misstatement posting
threshold and judgements applied
We set our audit misstatement posting threshold at 5%
(FY2023: 5%) of our materiality for the Group financial
statements. We also report to the Audit and Compliance
Committee any other identified misstatements that warrant
reporting on qualitative grounds.
The overall materiality for the Group financial statements of £176m (FY2023: £141m) compares as follows to the main financial statement
caption amounts:
Total Gross investment income
Group profit for the year
Total Group Net Assets
FY2024
FY2023
FY2024
FY2023
FY2024
FY2023
Financial statement Caption
£3,877m
£4,666m
£3,836m
£4,573m
£20,170m
£16,844m
Group Materiality as % of caption
4.5%
3.0%
4.6%
3.1%
0.9%
0.8%
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3i Group plc | Annual report and accounts 2024
211
7. The scope of our audit
Group scope
What we mean
How the Group audit team determined the procedures to be performed
across the Group.
We have performed risk assessment and planning procedures to determine
which of the Group’s components are likely to include risks of material
misstatement to the Group financial statements, the type of procedures to
be performed and the extent of involvement required. We have scoped in
one component for the audit of financial information for consolidation purposes.
The scope of the audit work performed was fully substantive as we did not
rely upon the Group's internal control over financial reporting
We have performed audit procedures centrally across the Group in the
following areas:
• Journal entry testing;
• Share based payments; and
• Defined Benefit Pension.
In addition, we have performed Group level analysis on the remaining
components to determine whether further risks of material misstatement
exist in those components.
Group audit team oversight
What we mean
The extent of the Group audit team’s involvement in component audits.
Only the Parent Company was scoped in for full scope audit. As this audit is
performed by the Group engagement team, no additional audit team
oversight was required.
8. Other information in the annual report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider
whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements or
our audit knowledge.
Our reporting
Based solely on that work we have not identified material misstatements or
inconsistencies in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
• we have not identified material misstatements in the strategic report and the Directors’ report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’
Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a
material inconsistency between the financial statements and our audit
knowledge, and:
• the Directors’ statement that they consider that the annual report and
financial statements taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy;
• the section of the annual report describing the work of the Audit and
Compliance Committee, including the significant issues that the Audit and
Compliance Committee considered in relation to the financial statements,
and how these issues were addressed; and
• the section of the annual report that describes the review of the
effectiveness of the Group’s risk management and internal control systems.
Our reporting
Based on those procedures, we have concluded that each of these
disclosures is materially consistent with the financial statements and our audit
knowledge.
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3i Group plc | Annual report and accounts 2024
212
Scope
Number of components
Range of materiality applied
Full scope audit
1 (FY2023:1)
£159m (FY2023:£124m)
Audit of one or more account balances
0 (FY2023: 0)
n/a (FY2023: n/a)
Specified audit procedures
0 (FY2023: 0)
n/a (FY2023: n/a)
We are also required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in this respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our
opinion:
• adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches
not visited by us; or
• the Parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not
made; or
• we have not received all the information and explanations we require for
our audit.
Our reporting
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 155, the Directors are responsible for: the preparation of the financial statements including being
satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single electronic reporting format specified in
the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body,
for our audit work, for this report, or for the opinions we have formed.
Jonathan Mills (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
8 May 2024
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3i Group plc | Annual report and accounts 2024
213
What’s in this section
20 large investments
215
Portfolio valuation – an explanation
217
Information for shareholders
218
Glossary
220
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214
The 20 investments listed below account for 95% of the portfolio at 31 March 2024 (31 March 2023: 94%). All investments have been assessed
to establish whether they classify as accounting subsidiaries under IFRS and/or subsidiaries under the UK Companies Act. This assessment
forms the basis of our disclosure of accounting subsidiaries in the financial statements.
The UK Companies Act defines a subsidiary based on voting rights, with a greater than 50% majority of voting rights resulting in an entity
being classified as a subsidiary. IFRS 10 applies a wider test and, if a Group is exposed, or has rights to variable returns from its involvement
with the investee and has the ability to affect these returns through its power over the investee then it has control, and hence the investee is
deemed an accounting subsidiary. Controlled subsidiaries under IFRS are noted below. None of these investments are UK Companies Act
subsidiaries.
In accordance with Part 5 of The Alternative Investment Fund Managers Regulations 2013 (“the Regulations”), 3i Investments plc, as AIFM,
requires all controlled portfolio companies to make available to employees an annual report which meets the disclosure requirements
of the Regulations. These are available either on the portfolio company’s website or through filing with the relevant local authorities.
Action*
Private Equity
1,108
653
14,158
11,188 £762 million of capital
General merchandise discount retailer
Netherlands
restructuring proceeds
2011/2020/2024
and a £375 million cash
Earnings
dividend received.
Completed a £455 million
reinvestment
3i Infrastructure plc*
Infrastructure
305
305
879
841 £31 million dividend
Quoted investment company, investing in
infrastructure
UK
received
2007
Quoted
Cirtec Medical*
Private Equity
172
172
586
552
Outsourced medical device
manufacturing
US
2017
Earnings
Royal Sanders*
Private Equity
165
136
580
369 £109 million received
Private label and contract manufacturing
producer of personal care products
Netherlands
from the refinancing, of
2018
which £48 million is a
Earnings
dividend. Completed £29
million of further
investment and acquired
Lenhart in April 2023
Scandlines
Scandlines
530
530
519
554 £25 million dividend
Ferry operator between Denmark and
Germany
Denmark/
Germany
received
2018
DCF
AES Engineering
Private Equity
30
30
403
351 £6 million dividend
Manufacturer of mechanical seals and
provision of reliability services
UK
recorded. Acquisition of
1996
Triseal in June 2023
Earnings
nexeye*
Private Equity
270
269
377
393 Sale agreed in
Value-for-money optical retailer
Netherlands
April 2024
2017
Imminent sale
Tato
Private Equity
2
2
335
411 £7 million dividend
Manufacturer and seller of specialty
chemicals
UK
recorded
1989
Earnings
Residual
Residual
Business line
cost1
cost1
Valuation
Valuation
Geography
March
March
March
March
Investment
First invested in
2024
2023
2024
2023 Relevant transactions
Description of business
Valuation basis
£m
£m
£m
£m in the year
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3i Group plc | Annual report and accounts 2024
215
SaniSure*
Private Equity
76
76
334
389
Manufacturer, distributor and integrator
of single-use bioprocessing systems and
components
US
2019
Earnings
Evernex*
Private Equity
316
299
331
305 Acquisition of Maminfo in
Provider of third-party maintenance
services for data centre infrastructure
France
January 2024
2019
Earnings
Smarte Carte*
Infrastructure
194
189
306
300 £5 million distribution
Provider of self-serve vended luggage
carts, electronic lockers and concession
carts
US
received
2017
DCF
European Bakery Group*
Private Equity
84
46
267
73 EBG formed following the
Industrial bakery group specialised in
home bake-off bread and snack products
Netherlands
acquisition of coolback in
2021
July 2023 (3i further
Earnings
investment of £38 million)
and Panelto in August 2023
WP*
Private Equity
238
257
234
274 £42 million distribution
Global manufacturer of innovative plastic
packaging solutions
Netherlands
received
2015
Earnings
MPM*
Private Equity
169
153
233
181
An international branded, premium and
natural pet food company
UK
2020
Earnings
Luqom*
Private Equity
262
245
222
271 £6 million further
Online lighting specialist retailer
Germany
investment
2017
Earnings
ten23 health*
Private Equity
129
104
192
111 £25 million further
Biologics focused CDMO
Switzerland
investment
2021
Other
Audley Travel*
Private Equity
303
271
192
162
Provider of experiential tailor-made travel UK
2015
Earnings
Q Holding*
Private Equity
162
162
150
117
Manufacturer of catheter products
serving the medical device market
US
2014
Earnings
BoConcept*
Private Equity
121
110
133
160
Urban living designer
Denmark
2016
Earnings
Dynatect*
Private Equity
65
65
130
128
Manufacturer of engineered, mission
critical protective equipment
US
2014
Earnings
4,701
4,074
20,561
17,130
Residual
Residual
Business line
cost1
cost1
Valuation
Valuation
Geography
March
March
March
March
Investment
First invested in
2024
2023
2024
2023 Relevant transactions
Description of business
Valuation basis
£m
£m
£m
£m in the year
*
Controlled in accordance with IFRS.
1
Residual cost includes cash investment and interest, net of cost disposed.
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216
Policy
The valuation policy is the responsibility of the Board, with additional
oversight and annual review from the Valuations Committee. The
policy is reviewed at least annually, with the last update in January
2024. Our policy is to value 3i’s investment portfolio at fair value
and we achieve this by valuing investments on an appropriate basis,
applying a consistent approach across the portfolio. The policy
ensures that the portfolio valuation is compliant with the fair value
guidelines under IFRS and, in so doing, is also compliant with
the IPEV guidelines. The policy covers the Group’s Private Equity,
Infrastructure and Scandlines investment valuations. Valuations
of the investment portfolio of the Group and its subsidiaries
are performed at each quarter end.
Fair value is the underlying principle and is defined as “the price
that would be received to sell an asset in an orderly transaction
between market participants at the measurement date” (IPEV
guidelines, December 2022). Fair value is an estimate and,
as such, determining fair value requires the use of judgement.
The quoted assets in our portfolio are valued at their closing
bid price at the balance sheet date. The majority of the portfolio,
however, is represented by unquoted investments.
Private Equity unquoted valuation
To arrive at the fair value of the Group’s unquoted Private Equity
investments, we first estimate the entire value of the company we
have invested in – the enterprise value. We then apportion that
enterprise value between 3i, other shareholders and lenders.
Determining enterprise value
The enterprise value is determined using one of a selection of
methodologies depending on the nature, facts and circumstances
of the investment.
Where possible, we use methodologies which draw heavily on
observable market prices, whether listed equity markets or reported
merger and acquisition transactions, and trading updates from our
portfolio.
As unquoted investments are not traded on an active market, the
Group adjusts the estimated enterprise value by a liquidity discount.
The liquidity discount is applied to the total enterprise value and we
apply a higher discount rate for investments where there are material
restrictions on our ability to sell at a time of our choosing.
Note 13 Fair values of assets and liabilities outlines in more detail
the range of valuation methodologies available to us, as well as the
inputs and adjustments necessary for each. Overall, we have seen
resilient performance across the portfolio, driven by a number of
assets in the value-for-money and private label consumer, healthcare
and infrastructure sectors. The fair value of each investment has been
assessed on a case-by-case basis considering historical, current and
forward looking data. Where forward-looking data forms the base of
a valuation, the accuracy, reliability and maintainability of these
forecasts has been considered.
Apportioning the enterprise value between 3i, other
shareholders and lenders
Once we have estimated the enterprise value, the following steps
are taken:
(1) We subtract the value of any claims, net of free cash balances
that are more senior to the most senior of our investments.
(2) The resulting attributable enterprise value is apportioned to
the Group’s investment, and equal ranking investments by other
parties, according to contractual terms and conditions, to arrive
at a fair value of the entirety of the investment. The value is then
distributed amongst the different loan, equity and other financial
instruments accordingly.
(3) If the value attributed to a specific shareholder loan investment
in a company is less than its carrying value, a shortfall is implied,
which is recognised in our valuation. In exceptional cases, we may
judge that the shortfall is temporary; to recognise the shortfall
in such a scenario would lead to unrepresentative volatility
and hence we may choose not to recognise the shortfall.
Other factors
In applying this framework, there are additional considerations
that are factored into the valuation of some assets.
Impacts from structuring
Structural rights are instruments convertible into equity or cash
at specific points in time or linked to specific events. For example,
where a majority shareholder chooses to sell, and we have a minority
interest, we may have the right to a minimum return on our
investment.
Debt instruments, in particular, may have structural rights. In the
valuation, it is assumed third parties, such as lenders or holders of
convertible instruments, fully exercise any structural rights they might
have if they are “in the money”, and that the value to the Group
may therefore be reduced by such rights held by third parties.
The Group’s own structural rights are valued on the basis they
are exercisable on the reporting date.
Assets classified as “terminal”
If we believe an investment has more than a 50% probability of failing
in the 12 months following the valuation date, we value the
investment on the basis of its expected recoverable amount in the
event of failure. It is important to distinguish between our investment
failing and the business failing; the failure of our investment does not
always mean that the business has failed, just that our recoverable
value has dropped significantly. This would generally result in the
equity and loan components of our investment being valued at nil.
Value movements in the period relating to investments classified as
terminal are classified as provisions in our value movement analysis.
Infrastructure unquoted valuation
The primary valuation methodology used for unquoted Infrastructure
investments is the DCF method. Fair value is estimated by deriving
the present value of the investment using reasonable assumptions of
expected future cash flows and the terminal value and date, and the
appropriate risk-adjusted discount rate that quantifies the risk
inherent to the investment. The discount rate is estimated with
reference to the market risk-free rate, a risk-adjusted premium and
information specific to the investment or market sector.
Scandlines unquoted valuation
Scandlines is valued on a DCF basis. This is consistent with
the Infrastructure methodology.
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3i Group plc | Annual report and accounts 2024
217
Financial calendar
Ex-dividend date
Thursday 20 June 2024
Record date
Friday 21 June 2024
Annual General Meeting
Thursday 27 June 2024
Second FY2024 dividend to be paid
Friday 26 July 2024
Half-year results (available online only)
November 2024
First FY2025 dividend expected to be paid
January 2025
Information on ordinary shares
Shareholder profile: Location of investors at 31 March 2024
UK
51%
North America
31%
Continental Europe
15%
Other international
3%
Share price
Share price at 28 March 2024
2,809
High during the year 26 March 2024
2,822
Low during the year 5 April 2023
1,665
Dividends paid in the year to 31 March 2024
Second FY2023 dividend, paid 28 July 2023
29.75p
First FY2024 dividend, paid 12 January 2024
26.50p
Balance analysis summary
Number of holdings
Balance as at 31 March 2024
Range
Individuals
Corporate
bodies
Number of
shares
%
shares
Total
holdings
Individual
shares
Corporate
shares
1–1,000
9,133
184
3,934,434
0.40
9,314
3,861,132
73,302
1,001–10,000
3,880
408
10,001,266
1.03
4,288
8,358,215
1,643,051
10,001–100,000
98
546
22,401,298
2.30
644
2,225,996
20,175,302
100,001–1,000,000
5
414 145,311,165
14.93
419
1,005,489 144,305,676
1,000,001–10,000,000
–
130 375,504,746
38.58
130
– 375,504,746
10,000,001–highest
–
13 416,213,536
42.76
13
– 416,213,536
Total
13,116
1,695 973,366,445
100.00
14,808 15,450,832 957,915,613
The table above provides details of the number of shareholdings within each of the bands stated in the register of members at 31 March 2024.
It should be noted that because many individuals and institutions hold shares through nominees (such as brokers, investment managers
or investment platforms) the actual number of beneficial owners of shares will be greater than the numbers of holdings in the above table.
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The Common Reporting Standard
Tax legislation under the Organisation for Economic Co-operation
and Development (“OECD”) Common Reporting Standard for
Automatic Exchange of Financial Account Information requires
investment trust companies to provide information about certain
shareholders in the company to HMRC. As an investment trust
company, 3i Group plc is required to provide information annually to
HMRC on certain certificated shareholders and corporate entities.
This information includes country of tax residency as well as details of
shares held and dividends received. HMRC may in turn exchange
such information with the tax authorities of another country or
countries in which the shareholder may be tax resident, where those
countries (or tax authorities in those countries) have entered into
agreements with the UK to exchange financial account information.
Certain shareholders have been and will in future be sent a self-
certification form for the purposes of collecting required information.
Boiler room and other scams
Shareholders should be wary of any unsolicited investment advice,
offers to buy shares at a discounted price or offers to buy 3i
shareholdings. These fraudsters use persuasive and high-pressure
tactics to lure shareholders into scams. We have become aware
of what appears to be an increase in calls to current and former
3i shareholders.
The Financial Conduct Authority (“FCA”) has found that victims
of share fraud are often seasoned investors with victims losing
an average of £20,000.
Please keep in mind that firms authorised by the FCA are unlikely
to contact you unexpectedly with an offer to buy or sell shares.
You should consider getting independent financial or professional
advice before you hand over any money or even share any
information with them.
If you receive any unsolicited approaches or investment advice,
you should proceed with caution. Steps that you might wish to take
could include the following:
• always ensure the firm is on the FCA Register and is allowed to give
financial advice before handing over your money. You can check
at www.fca.org.uk/register;
• double-check the caller is from the firm they say they are – ask for
their name and telephone number and say you will call them back.
Check their identity by calling the firm using the contact number
listed on the FCA Register. This is important as there have been
instances where an authorised firm’s website has been cloned but
with a few subtle changes, such as a different phone number or
false email address;
• check the FCA’s list of known unauthorised overseas firms.
However, these firms change their name regularly, so even if a firm
is not listed it does not mean they are legitimate. Always check
that they are listed on the FCA Register; and
• if you have any doubts, call the FCA Consumer Helpline on
0800 111 6768. If you deal with an unauthorised firm,
you will not be eligible to receive payment under the
Financial Services Compensation Scheme.
Annual reports and Half-yearly reports online
If you would prefer to receive shareholder communications
electronically in future, including annual reports and notices
of meetings, please visit our Registrars’ website at
www.shareview.co.uk/clients/3isignup and follow the instructions
there to register.
The 2024 Half-yearly report will be available online only. Please
register to ensure you are notified when it becomes available
at www.3i.com/investor-relations/financial-news.
More general information on electronic communications is available
on our website at https://www.3i.com/investor-relations/
shareholder-centre/.
Investor relations enquiries
For all investor relations enquiries about 3i Group plc, including
requests for further copies of the Annual report and accounts,
please contact:
Investor relations
3i Group plc
16 Palace Street
London, SW1E 5JD
Telephone +44 (0)20 7975 3131
email IRTeam@3i.com
or visit the Investor relations section of our website at www.3i.com/
investor-relations, for full up-to-date investor relations information,
including the latest share price, results presentations and financial
news.
Registrars
For shareholder administration enquiries, including changes
of address please contact:
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex, BN99 6DA
Telephone 0371 384 2031
Lines are open from 8.30am to 17.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales).
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219
3i 2013-2016 vintage includes Audley Travel, Basic-Fit, Dynatect,
JMJ, Q Holding and WP. Realised investments include Aspen Pumps,
ATESTEO, Blue Interactive, Christ, Geka, Kinolt, Óticas Carol and
Scandlines further.
3i 2016-2019 vintage includes arrivia, BoConcept, Cirtec Medical,
Formel D, Luqom and nexeye. Realised investments include Havea,
Magnitude Software, Royal Sanders (transferred out of the vintage in
March 2024) and Schlemmer.
3i 2019-2022 vintage includes European Bakery Group, Evernex,
insightsoftware, MAIT, Mepal, MPM, ten23 health, SaniSure,
WilsonHCG, Yanga and YDEON.
3i 2022-2025 vintage includes Digital Barriers, Konges Sløjd,
VakantieDiscounter and xSuite
3i Buyouts 2010-2012 vintage includes Action. Realised
investments include Amor, Element, Etanco, Hilite, OneMed and
Trescal.
3i Growth 2010-2012 vintage includes BVG. Realised investments
include Element, Hilite, Go Outdoors, Loxam, Touchtunes and WFCI.
Alternative Investment Funds (“AIFs”) At 31 March 2024,
3i Investments plc as AIFM, managed seven AIFs. These were
3i Group plc, 3i Growth Capital B LP, 3i Growth Capital C LP,
3i Europartners Va LP, 3i Europartners Vb LP, 3i Managed
Infrastructure Acquisitions LP and 3i Infrastructure plc. 3i Investments
(Luxembourg) SA as AIFM, managed one AIF, 3i European
Operational Projects SCSp.
Alternative Investment Fund Manager (“AIFM”) is the regulated
manager of AIFs. Within 3i, these are 3i Investments plc and
3i Investments (Luxembourg) SA.
APAC The Asia Pacific region.
Approved Investment Trust Company This is a particular UK tax
status maintained by 3i Group plc, the parent company of 3i Group.
An approved Investment Trust company is a UK company which
meets certain conditions set out in the UK tax rules which include
a requirement for the company to undertake portfolio investment
activity that aims to spread investment risk and for the company’s
shares to be listed on an approved exchange. The “approved” status
for an investment trust must be agreed by the UK tax authorities
and its benefit is that certain profits of the company, principally
its capital profits, are not taxable in the UK.
Assets under management (“AUM”) A measure of the total
assets that 3i has to invest or manages on behalf of shareholders
and third-party investors for which it receives a fee. AUM is measured
at fair value. In the absence of a third-party fund in Private Equity,
it is not a measure of fee generating capability.
B2B Business-to-business.
Board The Board of Directors of the Company.
CAGR is the compound annual growth rate.
Capital redemption reserve is established in respect
of the redemption of the Company’s ordinary shares.
Capital reserve recognises all profits and losses that are capital
in nature or have been allocated to capital. Following changes
to the Companies Act, the Company amended its Articles
of Association at the 2012 Annual General Meeting to allow
these profits to be distributable by way of a dividend.
Carried interest payable is accrued on the realised and
unrealised profits generated taking relevant performance hurdles
into consideration, assuming all investments were realised at the
prevailing book value. Carried interest is only actually paid when
the relevant performance hurdles are met and the accrual is
discounted to reflect expected payment periods.
Carried interest receivable The Group earns a share of profits
from funds which it manages on behalf of third parties. These profits
are earned when the funds meet certain performance conditions and
are paid by the fund once these conditions have been met on a cash
basis. The carried interest receivable may be subject to clawback
provisions if the performance of the fund deteriorates following
carried interest being paid.
Company 3i Group plc.
DACH The region covering Austria, Germany and Switzerland.
Discounting The reduction in present value at a given date of a
future cash transaction at an assumed rate, using a discount factor
reflecting the time value of money.
EBITDA is defined as earnings before interest, taxation, depreciation
and amortisation and is used as the typical measure of portfolio
company performance.
EBITDA multiple Calculated as the enterprise value over EBITDA,
it is used to determine the value of a company.
EMEA The region covering Europe, the Middle East and Africa.
Executive Committee The Executive Committee is responsible
for the day-to-day running of the Group (see page 104).
Fair value movements on investment entity subsidiaries
The movement in the carrying value of Group subsidiaries, classified
as investment entities under IFRS 10, between the start and end
of the accounting period converted into sterling using the exchange
rates at the date of the movement.
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Glossary
3i Group plc | Annual report and accounts 2024
220
Fair value through profit or loss (“FVTPL”) is an IFRS measurement
basis permitted for assets and liabilities which meet certain criteria.
Gains and losses on assets and liabilities measured as FVTPL are
recognised directly in the Statement of comprehensive income.
Fee income (or Fees receivable) is earned for providing services
to 3i’s portfolio companies and predominantly falls into one of two
categories. Negotiation and other transaction fees are earned for
providing transaction related services. Monitoring and other ongoing
service fees are earned for providing a range of services over
a period of time.
Fees receivable from external funds are earned for providing
management and advisory services to a variety of fund partnerships
and other entities. Fees are typically calculated as a percentage
of the cost or value of the assets managed during the year and are
paid quarterly, based on the assets under management to date.
Foreign exchange on investments arises on investments made
in currencies that are different from the functional currency of the
Company. Investments are translated at the exchange rate ruling
at the date of the transaction. At each subsequent reporting date
investments are translated to sterling at the exchange rate ruling
at that date.
Gross investment return (“GIR”) includes profit and loss on
realisations, increases and decreases in the value of the investments
we hold at the end of a period, any income received from the
investments such as interest, dividends and fee income, movements
in the fair value of derivatives and foreign exchange movements. GIR
is measured as a percentage of the opening portfolio value.
Interest income from investment portfolio is recognised
as it accrues. When the fair value of an investment is assessed to be
below the principal value of a loan, the Group recognises a provision
against any interest accrued from the date of the assessment going
forward until the investment is assessed to have recovered in value.
International Financial Reporting Standards (“IFRS”) are
accounting standards issued by the International Accounting
Standards Board (“IASB”). The Group’s consolidated financial
statements are prepared in accordance with UK adopted
international accounting standards.
Investment basis Accounts prepared assuming that IFRS 10 had not
been introduced. Under this basis, we fair value portfolio companies
at the level we believe provides useful comprehensive financial
information. The commentary in the Strategic report refers to this
basis as we believe it provides a more understandable view of our
performance.
IRR Internal Rate of Return.
Key Performance Indicator (“KPI”) is a measure by reference
to which the development, performance or position of the Group
can be measured effectively.
Like-for-like compare financial results in one period with those
for the previous period.
Liquidity includes cash and cash equivalents (as per the Investment
basis Consolidated cash flow statement) and undrawn RCF.
Money multiple is calculated as the cumulative distributions plus
any residual value divided by paid-in capital.
Net asset value (“NAV”) is a measure of the fair value of our
proprietary investments and the net costs of operating the business.
Operating cash profit is the difference between our cash income
(consisting of portfolio interest received, portfolio dividends received,
portfolio fees received and fees received from external funds as per
the Investment basis Consolidated cash flow statement) and our
operating expenses and lease payments (as per the Investment
basis Consolidated cash flow statement).
Operating profit includes gross investment return, management
fee income generated from managing external funds, the costs
of running our business, net interest payable, exchange movements,
other income, carried interest and tax.
Organic growth is the growth a company achieves by increasing
output and enhancing sales internally.
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Performance
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Governance
Audited financial
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Portfolio and
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Glossary continued
3i Group plc | Annual report and accounts 2024
221
Performance fee receivable The Group earns a performance fee
from the investment management services it provides to 3i
Infrastructure plc (“3iN”) when 3iN’s total return for the year exceeds
a specified threshold. This fee is calculated on an annual basis
and paid in cash early in the next financial year.
Portfolio effect is the level of risk based on the diversity
of the investment portfolio.
Portfolio income is that which is directly related to the return from
individual investments. It is comprised of dividend income, income
from loans and receivables and fee income.
Proprietary Capital is shareholders’ capital which is available
to invest to generate profits.
Public Private Partnership (“PPP”) is a government service
or private business venture which is funded and operated through
a partnership of government and one or more private sector
companies.
Realised profits or losses over value on the disposal of
investments is the difference between the fair value of the
consideration received, less any directly attributable costs, on the sale
of equity and the repayment of loans and receivables and its carrying
value at the start of the accounting period, converted into sterling
using the exchange rates at the date of disposal.
Revenue reserve recognises all profits and losses that are revenue
in nature or have been allocated to revenue.
Revolving Credit Facility (“RCF”) The Group has access to a credit
line which allows us to access funds when required to improve our
liquidity.
Segmental reporting Operating segments are reported in a manner
consistent with the internal reporting provided to the Chief Executive
who is considered to be the Group’s chief operating decision maker.
All transactions between business segments are conducted on an
arm’s length basis, with intrasegment revenue and costs being
eliminated on consolidation. Income and expenses directly
associated with each segment are included in determining business
segment performance.
Share-based payment reserve is a reserve to recognise those
amounts in retained earnings in respect of share-based payments.
SORP means the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital
Trusts.
Syndication is the sale of part of our investment in a portfolio
company to a third party, usually within 12 months of our initial
investment and for the purposes of facilitating investment by a co-
investor or portfolio company management in line with our original
investment plan. A syndication is treated as a negative investment
rather than a realisation.
Total return comprises operating profit less tax charge less
movement in actuarial valuation of the historic defined benefit
pension scheme.
Total Shareholder Return (“TSR”) is the measure of the overall
return to shareholders and includes the movement in the share price
and any dividends paid, assuming that all dividends are reinvested
on their ex-dividend date.
Translation reserve comprises all exchange differences arising from
the translation of the financial statements of international operations.
Unrealised profits or losses on the revaluation of investments is
the movement in the carrying value of investments between the start
and end of the accounting period converted into sterling using the
exchange rates at the date of the movement.
Overview
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Business
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Sustainability
Performance
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Governance
Audited financial
statements
Portfolio and
other information
Glossary continued
3i Group plc | Annual report and accounts 2024
222
3i Group plc
Registered office: 16 Palace Street,
London, SW1E 5JD, UK
Registered in England No. 1142830
An investment company as defined by
section 833 of the Companies Act 2006
This report was printed by Pureprint Group using
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were used throughout and 99% of the dry waste
and 95% of the cleaning solvents associated
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FSC® – Forest Stewardship Council®
This ensures that there is an audited chain
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ISO 14001
A pattern of control for an environmental
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3i Group plc
16 Palace Street, London, SW1E 5JD, UK
Telephone +44 (0)20 7975 3131
THR27388
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