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Thursday, May 15, 2008, 15:20
Philip Yea, chief executive of the grandaddy of the UK venture capital market, said today: 'We are in a period of considerable uncertainty and have seen over the last 12 months a significant adverse change in the outlook for the world's economy.
'Major flaws in the soundness of the global financial system have been revealed, the full consequences of which have still to be understood.
'It is likely to be some time before the extent of the downturn in the real economies will be seen and even longer before it will be possible to judge the effects of the credit crunch.'
Yea admitted that though 3i's high command believes the buoyancy of the debt market for private-equity is unsustainable, the firm had not foreseen the sharp turnaround and collapse in the mergers and acquisitions market.
That is reflected in 3i's figures, which showed a sharp fall in realisation proceeds - the money it gets when it sells out of an investment - down nearly 30% at £1.7bn in the year to end-March.
Opportunities also dwindled, with 3i making 25% fewer investments in the year at 47, though on average they were nearly 50% larger.
Returns for the year - profits from sales plus dividend income from investment as a proportion of total portfolio valuation - came in 18.6%, roughly in line with its long-term target of 20% with the five-year return averaging 20.4%. The final dividend is up 5% at 10.9p.
3i is also launching a £425m convertible bond, due 2011, to replace and refinance its €550m convertible due to be repaid in August.
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