3i warns of poor demand: Venture capital group has pounds 500m in funds available for UK firms

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The Independent Online
THE 3i venture capital group said that although it had more than pounds 500m in long-term investment funds available for British companies, it has yet to see an upturn in demand for capital.

Sir George Russell, 3i's chairman, unveiled a pounds 151m total return for the six months to 30 September following a loss of pounds 73.8m last time but warned: 'We have yet to see much evidence of demand picking up for our capital, particularly for financing capital projects in the UK.'

Ewen Macpherson, chief executive, was optimistic, however, that last week's Budget would help the emerging economic recovery. 'I will be very surprised if the next round of business surveys are not quite positive, compared to being quite flat last time. This confidence should feed through into investment, which hasn't happened in any significant way yet.'

Mr Macpherson stated categorically that flotation of 3i was 'not on the agenda'.

'It's up to the shareholders. As management we have been concentrating on running the business, and we are able to show some quite positive results.'

One benefit of the slowness of the current UK economic recovery, according to Mr Macpherson, is that the usual surge in company failures during the upturn due to shortages in working capital has not been seen. In 1981-82, for instance, many small businesses had been unable to fulfil rising orders without running out of cash.

There is a definite increase in people approaching 3i with business proposals, Mr Macpherson said. A peak of 120 people per month in 1990 fell to 50 a month in September 1992, he said, but now 3i is seeing about 80 people a month.

The chief executive said 3i's improved performance had resulted from increases in all three components of the total return: revenue, realised capital profits and value growth in its investment portfolio.

Revenue before tax doubled to pounds 37.6m from pounds 18.8m. An important factor was a 15.6 per cent increase in dividend flow from 3i's 3,500 investments, from pounds 44.4m to pounds 51.4m.

Also contributing to improved revenues was a near 12 per cent reduction in operating costs and a pounds 13.7m turnaround from net interest payable of pounds 11.3m to net interest receivable of pounds 2.4m.

Strong realisation profits of pounds 62.1m largely reflected the buoyancy of the UK stock market, Mr Macpherson said. Net provisions against bad debts have been reduced from pounds 46.9m to pounds 19.2m. The value of the group's investments increased by pounds 187.2m in the six months to pounds 2.78bn.

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