REG - 3i Group PLC - 3i Group plc - Q3 performance update

3iAnnouncement

30/01/2025 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250130:nRSd1932Va&default-theme=true

RNS Number : 1932V  3i Group PLC  30 January 2025

 

 

30 January 2025

3i Group plc

FY2025 Q3 performance update

 

 

A good compounding quarter for 3i

 

·      Increase in NAV per share to 2,457 pence (30 September 2024:
2,261 pence) and total return of 20% for the nine months to 31 December 2024,
after a negative foreign exchange translation impact of £476 million, or 49
pence.

 

·      Action produced another outstanding result with very strong
sales, EBITDA and cash generation in 2024. In the 12 months to 29 December
2024, net sales and operating EBITDA were 22% and 29% ahead of 2023.

 

·      Action's like-for-like ("LFL") sales growth was 10.3% in the year
(2023: 16.7%) and 352 net new stores were added compared to 303 in 2023.

 

·      3i received a dividend from Action of £215 million in December
2024. After this distribution, Action ended 2024 with a cash balance of €814
million. Action also completed an amend and extend transaction on
approximately 40% of its senior debt in November 2024, resulting in a
significant interest cost saving and extended debt maturities.

 

·     The majority of our remaining Private Equity portfolio companies
are performing resiliently, despite a difficult macroeconomic environment. We
continued to see strong contributions from a number of our consumer and
private label portfolio companies. A small number of assets exposed to
discretionary consumer spending and the recruitment market continue to
experience challenging conditions.

 

·     We signed a £121 million new investment in WaterWipes in December
2024, which completed in January 2025, and completed four bolt-on acquisitions
across our existing Private Equity portfolio. We also completed the
realisation of WP in October 2024, which returned proceeds of £280 million to
3i, at an 18% premium over 31 March 2024 value. In January 2025, we signed a
new investment in OMS Prüfservice, with completion expected in Q4 FY2025.

 

·     We enter the final quarter of our financial year with a
well-funded balance sheet. At the end of December 2024, the Group had gross
cash of £792 million, an undrawn RCF of £900 million and gearing was 2%.

 

 

Simon Borrows, Chief Executive, commented:

 

"Action's excellent 2024 result is another step in its remarkable growth
journey and it has had a good start to 2025. Action's performance has been
driven by: consistently sharing the benefits of scale with its customers
through very competitive price points; a flexible category assortment; and a
record number of new store openings. All new countries have performed ahead of
budget and we have once again seen a good step up in sales densities as a
result of growth in the volume of customer transactions across all markets.

 

We continue to see some significant growth within our other leading consumer
and private label portfolio companies, more than offsetting weaker trading at
a small number of companies which continue to face specific market challenges.
We have also executed on a number of realisations, and managed to secure new
investments in familiar sub-sectors without compromising on our price
discipline.

 

Whilst we remain cautious on the macroeconomic and geopolitical environment,
we believe 3i is well positioned for a strong financial year to 31 March
2025."

 

 

Private Equity

 

Action performance and valuation at 31 December 2024

 

In the 12 months to 29 December 2024, Action generated net sales of €13,782
million (2023: €11,324 million) and provisional operating EBITDA, subject to
audit, of €2,076 million (2023: €1,615 million), which were 22% and 29%
ahead of 2023. LFL sales growth was 10.3% for the year (2023: 16.7%) and 11.5%
in Q4 2024 against 11.4% in Q4 in the previous year. Transaction volumes
accounted for 102% of the LFL increase over the year. The business delivered
strong EBITDA margin performance of 15.1% in 2024 (2023: 14.3%), underpinned
by its LFL performance and strong operational execution.

 

Despite the unseasonably warm weather in December 2024, Action generated very
strong sales of its Christmas and holiday items in the run up to the end of
its financial year. In its final quarter (P10-P12) of 2024, Action generated
net sales of €4,215 million (Q4 2023: €3,412 million) and operating EBITDA
of €732 million (Q4 2023: €550 million), 31% and 35% of the overall 2024
net sales and operating EBITDA result.

 

Action added 352 net new stores in 2024, taking its total store footprint to
2,918 at 29 December 2024. Trading across Action's most recent expansion
markets of Italy, Spain, Slovakia and Portugal has exceeded our expectations,
whilst its largest mature markets of France, Germany, Netherlands and Poland
all traded ahead of the LFL sales growth budget for the year. Cash generation
remained strong, and Action paid an interim dividend to shareholders in
December 2024, resulting in a distribution of £215 million to 3i. Action
finished the year with a cash balance of €814 million, resulting in a net
debt to run-rate EBITDA ratio of 2.6x.

 

In November 2024, Action completed an amend and extend and repricing
transaction for approximately 40% of its c.€6.6 billion total senior term
debt, pushing out Action's debt maturities and delivering c.€14 million of
recurring annual debt interest cost savings for the business.

 

At 31 December 2024, Action was valued using an LTM run-rate EBITDA to 29
December 2024 of €2,251 million, which includes the usual adjustment to
reflect stores opened in the last 12 months. The multiple of 18.5x, net of the
liquidity discount, remained unchanged, resulting in a valuation of £17,139
million for 3i's 57.9% equity stake (30 September 2024: £15,543 million).

 

Further details of Action's 2024 performance and 2025 guidance will be
provided during the Action Capital Markets Seminar in March 2025.

 

Action financial metrics

 

                          Last 12 months to P12 2024    Last 12 months to P12 2023
                          (29 December 2024)            (31 December 2023)
 Financial metrics        €m                            €m
 Net sales                13,782                        11,324
 LFL sales growth                     10.3%                         16.7%
 Operating EBITDA         2,076                         1,615
 Operating EBITDA margin              15.1%                         14.3%
 Run-rate EBITDA          2,251                         1,753
 Net new stores added     352                           303

 

Portfolio (excluding Action) performance

 

Royal Sanders delivered further impressive organic growth, and MPM generated
strong sales volumes across its markets, with particularly noteworthy
performance in the US. Audley Travel delivered another quarter of good booking
volumes and had a strong end to 2024. Luqom continued to see an encouraging
recovery and saw good seasonal sales in its final quarter of 2024.

 

Cirtec Medical continues to see encouraging demand from its customers for its
key products, and SaniSure's most recent trading is in line with our latest
expectations, tracking well with the broader market uptick.

 

We received cash dividends from both Tato and AES in the period, totalling
£12 million.

 

The white-collar recruitment market remains significantly subdued, with
voluntary staff turnover below 2019 levels, resulting in further
underperformance of WilsonHCG and the recognition of a total value reduction
of £76 million in the year to date. BoConcept has seen softer order intake,
as prolonged weaker consumer sentiment in certain geographic markets continues
to weigh on discretionary purchases. Dynatect continues to experience delays
in the ramp-up of

a key contract.

 

The ratio of net debt to EBITDA across the Private Equity portfolio decreased
from 3.1x at 30 September 2024

to 2.8x at 31 December 2024. The average Private Equity portfolio leverage
excluding Action was 3.7x (September 2024: 3.7x).

The overall averages of our quoted comparable multiples across the portfolio
were largely stable over the quarter and we made no adjustments to portfolio
company valuation multiples in the period. The weighted average multiple of
the Private Equity portfolio (excluding Action) was 13.4x at 31 December 2024
(30 September 2024: 13.3x).

Private Equity investments

 

 Portfolio company  Type          Business description                                                         Date          £m
 Royal Sanders      Further       Private label and contract manufacturing producer of personal care products  Oct 2024      39
 ten23 health       Further       Biologics focused CDMO                                                       Various       15
 Other              Further       Various                                                                      Various       4
 Total Q3 cash investment                                                                                                    58
 Total investment in H1 FY2025                                                                                               888
 Total cash investment as at 31 December 2024                                                                                946

 

In the quarter, we completed a further £39 million investment in Royal
Sanders, and we continued to develop the ten23 health platform with a further
investment of £15 million.

 

In December 2024, we signed the acquisition of WaterWipes, a global, premium,
natural wet wipe brand focused on the baby category, with new product
innovation in the adult category. This transaction completed on 22 January
2025 with 3i investing £121 million. In January 2025, we also signed a new
investment in OMS Prüfservice, the largest specialised service provider in
testing electrical systems and equipment for B2B customers in the DACH region,

with completion expected in Q4 FY2025.

 

In the period, we completed four bolt-on investments, all of which were
self-funded by our portfolio companies. Constellation completed its first
bolt-on acquisition under our ownership, with the addition of ILKI, a cloud
architecture specialist based in France, and Evernex acquired Ultra Support, a
leading UK-based third-party maintenance provider, adding local in-house
technical and delivery capabilities, as well as a granular geographic coverage
of the UK. MAIT acquired TFH technical services, a Dutch consulting provider
specialising in the implementation and use of product lifecycle management
software solutions and AES added PSS Marine Seal to its core business.

 

Private Equity realisations

 

 Portfolio company         Type                      Date      £m
 WP                        Full Realisation          Oct 2024  277
 Other                     Various                   Various   1
 Total Q3 FY2025 realised proceeds                             278
 Total realised proceeds in H1 FY2025                          1,548
 Total realised proceeds as at 31 December 2024                1,826

 

In October 2024, we completed the sale of WP at an 18% profit over the value
at 31 March 2024, delivering proceeds of £280 million, including interest
income of £3 million. These proceeds, combined with the £45 million of
proceeds received earlier in our period of ownership, resulted in a sterling
money multiple of 2.2x.

 

Whilst we remain cautious on the wider M&A market, we have a good pipeline
of high-quality realisations for the next 12 to 18 months.

 

Infrastructure

 

3i Infrastructure plc's ("3iN") share price decreased by 7% in the quarter to
December 2024, closing at 317 pence

(30 September 2024: 341 pence), valuing 3i's 29% stake at £853 million (30
September 2024: £918 million).

We recognised dividend income of £17 million from 3iN in the quarter.

Bolt-on activity within the North America Infrastructure Fund continued with
Amwaste completing the acquisition of  Georgia based Waste Away Environmental
LLC, whilst Regional Rail completed the buyout of a minority stake in its
Canadian rail operations.

 

Scandlines saw resilient freight and leisure volumes in the period. Cash
generation remains strong, and we received a dividend of £7 million in the
period.

 

Top 10 investments by value(1) at 31 December 2024

 

                                        Valuation  Valuation

                                                              Activity in the quarter
                  Valuation  Valuation  Sep-24     Dec-24
                  basis      currency   £m         £m
 Action           Earnings   EUR        15,543     17,139     £215 million dividend proceeds received
 3iN              Quoted     GBP        918        853        £17 million dividend recognised
 Royal Sanders    Earnings   EUR        695        783        £39 million further investment
 Cirtec Medical   Earnings   USD        583        628
 Scandlines       DCF        EUR        519        520        £7 million dividend received
 AES Engineering  Earnings   GBP        407        406        £4 million dividend received. Self-funded acquisition of PSS Marine Seal in
                                                              October 2024
 Tato             Earnings   GBP        372        377        £8 million dividend received
 SaniSure         Earnings   USD        312        334
 Evernex          Earnings   EUR        329        329        Self-funded acquisition of Ultra Support in November 2024
 Smarte Carte     DCF        USD        283        312

1. The valuations are translated at the spot rate of the balance sheet date.
Sterling weakened by 6.6% against the US dollar and strengthened by 0.6%
against the euro in the quarter to 31 December 2024. Individual valuations
exclude the benefit of the foreign exchange hedges.

The 10 investments in the table above comprised 89% (30 September 2024: 87%)
of the total investment portfolio value of £24,461 million (30 September
2024: £22,953 million).

 

Total return and NAV position

 

In the third quarter of our financial year, the Group recorded a total foreign
exchange translation loss of £10 million, including the impact of foreign
exchange hedging, as a result of sterling weakening by 6.6% against the US
dollar

and strengthening by 0.6% against the euro. In the nine months to 31 December
2024, we recorded a total foreign exchange translation loss £476 million,
including the impact of foreign exchange hedging.

Based on the net assets at 31 December 2024 and including the impact of
hedging, a 1% movement in the euro and US dollar would result in a net total
return movement of £173 million and £12 million respectively. The diluted
NAV per share increased to 2,457 pence (30 September 2024: 2,261 pence) or
2,426.5 pence after deducting the 30.5 pence per share (£293 million) first
FY2025 dividend, which was paid on 10 January 2025.

 

Balance sheet

 

At 31 December 2024, cash was £792 million (30 September 2024: £386
million), and, including our undrawn £900 million revolving credit facility,
liquidity was £1,692 million (30 September 2024: £900 million and £1,286
million respectively). Net debt was £396 million, and gearing was 2% (30
September 2024: £805 million and 4%).

 

In the period, we completed the final carry buy back associated with Action,
with a further £70 million to be paid in Q4 FY2025. This means there is now
no dilution to our gross equity stake in Action of 57.9% and we will no longer
accrue carried interest payable for the Buyouts 2010-12 vintage (which relates
to our investment in Action).

 

- ENDS -

 

 

Notes

 1.  Balance sheet values are stated net of foreign exchange translation. Where
     applicable, the GBP equivalents at 31 December 2024 in this update have been
     calculated at a currency exchange rate of €1.2097: £1 and $1.2527: £1
     respectively.
 2.  At 31 December 2024 3i had 968 million diluted shares.
 3.  Action was valued using a post-discount run-rate EBITDA multiple of 18.5x
     based on its LTM run-rate earnings to 29 December 2024 of €2,251 million.
 4.  As at 31 December 2024, the notional amount of the forward foreign exchange
     contracts held by the Group was €2.6 billion (including €600 million
     associated with Scandlines) and $1.2 billion.

 

 

For further information, please contact:

Silvia Santoro

Group Investor Relations Director

Telephone: 020 7975 3258

 

Kathryn van der Kroft

Communications Director

Telephone: 020 7975 3021

 

 

About 3i Group

3i is a leading international investment manager focused on mid-market Private
Equity and Infrastructure. Our core investment markets are Europe and North
America. For further information, please visit: www.3i.com
(http://www.3i.com/) .

 

All statements in this performance update relate to the nine-month period
ended 31 December 2024 unless otherwise stated. The financial information is
unaudited and is presented on 3i's non-GAAP Investment basis in order to
provide users with the most appropriate description of the drivers of 3i's
performance. Net asset value ("NAV") and total return are the same on the
Investment basis and on an IFRS basis. Details of the differences between 3i's
consolidated financial statements prepared on an IFRS basis and under the
Investment basis are provided in the Annual report and accounts. There have
been no material changes to the financial position of 3i from the end of this
quarter to the date of this announcement.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTPPUCGGUPAGBB