Buoyant year for 3i

You have a strong set of results, and it’s been a very busy year for
the company. Can you start by going through the numbers in a bit more
detail?

Yes, sure. It has been a good year, a buoyant year in terms of market
conditions. Against those market conditions we’ve managed to achieve a strong,
total return at £831m or, put it another way, 22.5% on our opening shareholders’
funds, which compares to £501m in the prior year, and around 15% on opening
shareholders’ funds. So it’s a strong improvement.

There was a good increase in the level of investment. Is the group
able to accelerate its growth in investment without compromising return
objectives?

Yes, I think it is. This year, we’ve achieved investments of just over
£1.1bn, which is up around 47% on last year’s level.

The major element of that increase is coming out of our growth capital
business, which has almost doubled its investment, year on year, and that’s
entirely
consistent with the strategic intent that we set out this time last year to
develop that business line. It’s had a large contribution from our new
activities in Asia and in infrastructure in driving that investment level.

We’ve been absolutely focused on not reducing quality in the way that you
describe. We’ve made 58 new investments this year, which is very low compared to
the historic trend within 3i.

If we look at costs, there has been a significant increase. You did
say at the interims that you expected costs to increase throughout the year, but
they do seem to be running ahead. Is this going to continue?

Costs are up over the year from £177m in the last year to £211m this year.
That’s an increase of around 19%. You’re right, we anticipated that at the start
of the year. Around three-quarters of that, I would say, is a direct reflection
of the investment we’ve made in securing our resource and developing the breadth
and depth of our resource.

In so far as going forward, yes, I would expect to see costs continue to
increase. Perhaps not at the level that we’ve seen this year, but in a sense, as
capital becomes more of a commodity in our industry, the real issue for us is
our ability to
differentiate through our knowledge, through our network and through our
capabilities, and that’s where you’ll see our cost base invested for the future.

If you look at gearing, it remains well below your target range. Are
you still committed to your targets of 30% to 40% here?

I think that’s polite. It’s very well below our target range. I mean, gearing
was 1% at the end of the year, and, yes, we’re absolutely committed to our
gearing target range, which we’ve set at 30% to 40%, which we continue to
believe is the right gearing range given the size, shape and balance of the
current portfolio.