3i makes large trechnology writedown

For the 12 months to March 2003, 3i suffered an £890m reduction in the value of its portfolio, chiefly from write-offs and valuation downgrades from technology investments. Provisions for companies that ‘may fail’ will rise from £140m in the first half to £260m in the second, matching the £400m provisions for this category in the previous year, when total provision exceeded £700m. 3i will also write down the value of its remaining technology portfolio by about £360m - double the previous year’s write-down. Technology now represents about 20% by value of 3i’s portfolio. Following the news, announced on 26 March, market analysts cut full-year net asset value forecasts, and 3i shares fell by 49p to 440p on the day, valuing the group at £2.7bn. 3i explained the write-down on the greater economic uncertainty and a likely delay to 2004 in an upturn in capital spend by the larger corporates. 3i reports that general European early-stage investments have fallen by 85%, causing a cull in prices, an important external valuation benchmark. 3i is aiming to exploit the fall in prices, and investment will rise from £393m in the first half to £470m in the second. The 3i results have been viewed as by commentators an indication that the European early-stage technology sector is suffering underlying weaknesses. Meanwhile, data from the European Private Equity and Venture Capital Association (EVCA) estimates that private equity firms across Europe wrote EUR 2.3bn off their portfolios last year. This figure represents as much as the four years from 1997 to 2000 combined.

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