3i Asset Values Lag Market Surge

LONDON (Reuters) – British private equity firm 3i Group (III.L) said asset values increased just 2 percent in the first half of its financial year as the real economy failed to keep up with rebounding stock markets.

Its shares were 6.5 percent lower, leading the list of UK blue-chip fallers, after it said net asset value per share (NAV) increased to 286 pence at the end of September from 279 pence six months earlier, towards the bottom of analysts’ expectations.

“It is difficult to see what will drive the NAV in the short term; realisations are likely to be low for some time, with activity levels in the private equity market only slowly picking up,” said Cazenove analyst Chris Brown in a note.

Cazenove said it was likely to adjust its new NAV target for 3i to 276 pence a share, down from 307 pence.

“Recent stock market rallies do not seem to reflect the real economy and, as a result, we remain cautious,” 3i said.

It had hoped to be reporting clear evidence of an upturn, but has only seen clear signs of recovery in India and China.

There are mixed signals from the U.S., while Europe remains challenging due to a combination of high government debt, low consumer demand and stressed banking sectors, which it sees creating a tough environment for some time to come.

As a result, the group invested just 190 million pounds in the six months to end September, compared with 668 million over the same period of 2008.

Realisations were also down to 507 million pounds from 597 million as the group limited portfolio company disposals in the depressed M&A market.

It declared an interim dividend of 1 pence, down from 3.8p the previous year.

By Simon Meads

(Editing by Will Waterman)