3i maintains dividend despite Covid-19 profits hit

Private equity giant 3i said it would still pay a dividend, despite a fall in profits as the coronavirus led to a slump in valuations of its travel, transport, retail and automotive company investments.

The company on Thursday reported a full year total return of £253m, down from £1.25bn as net asset value fell to a better-than-expected 804p a share from 815p. The company committed to an annual dividend of 35p a share.

3i said the total return represented a profit on opening shareholders’ funds of 3% compared with 18% a year earlier. Investors have taken flight as governments impose lockdowns around the world to stymie the spread of the coronavirus, forcing businesses to the brink and the global economy into recession.

The company added that the Covid-19 pandemic had seen increased demand for its medical, personal care or cleaning products businesses.

3i valued its European retail chain Action at €10.25bn, based on “very strong” trading in the first 11 weeks of the year and despite a major short-term disruption from the coronavirus pandemic as it was forced to implement total or partial temporary store closures in a number of countries. The valuation compared with £3.6bn at the end of 2019.

Virtually all of Action's stores had reopened and the chain was "rebounding strongly" now that lockdowns were being lifted.

"We expect our investment rate to be lower than previous years as our main focus for the next 12 months will be on managing and growing our existing portfolio through some tough trading conditions," said chief executive Simon Burrows.

"For 3i and many other businesses, the next 12 to 24 months will be among the most challenging periods historically in which to operate a business and generate a return. Our strong balance sheet and lean cost base mean we are under no pressure to realise assets in our portfolio before they reach their full potential."

"It is frustrating for all of us to produce such strong performance over 11 months and then to see events outside our control wreak such enormous social and economic damage."