REG - 3i Group PLC - Q3 Performance update

3iAnnouncement

27/01/2022 07:00

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RNS Number : 7699Z  3i Group PLC  27 January 2022

 

27 January 2022

 

3i Group plc

FY2022 Q3 performance update

 

 

 Continued good performance across the Group

 ·    Increase in NAV per share to 1,235 pence (30 September 2021:1,153
 pence) despite the negative translation effect of sterling strengthening in
 the quarter (21 pence)

 ·    Total return of 32.6% for the nine months to 31 December 2021, with
 continued good performance across both investment portfolios

 ·    Strong sales, EBITDA and cash generation from Action notwithstanding
 significant Covid-19 and supply chain disruption

 ·    Private Equity business completed £310 million of investment in the
 quarter including new investments in Dutch Bakery and Mepal, a co-investment
 in insightsoftware and two transformational bolt-on acquisitions for
 GartenHaus and ten23 health. In addition, five bolt-on acquisitions were
 completed across the portfolio, with no additional funding from 3i and a
 further two bolt-on acquisitions were signed

 ·    Strong cash generation from the Private Equity portfolio with
 combined realised proceeds of £491 million from the divestment of Magnitude
 Software and partial divestment of Basic-Fit

 

Simon Borrows, Chief Executive, commented:

"We saw continued, resilient performance from both our investment portfolios
as well as a good level of cash realisations. There was also further bolt-on
activity and several new investments in the quarter. Action continues to
perform very well and delivered impressive results given the Covid-19 related
challenges in 2021. 3i is well set for a strong close to our financial year
end in March."

 

 

Private Equity

 

Portfolio performance and valuation at 31 December 2021

 

In the 12 months to 2 January 2022, Action generated net sales growth of 23%
(52 week comparison) and added 267 stores, taking its total to 1,983 stores
across nine countries. Provisional 2021 EBITDA, which is still subject to
audit, was €828 million, 36% ahead of 2020 (52 week comparison). Net sales
(€6,834 million) and EBITDA were 34% and 53% ahead of 2019. Covid-19
restrictions and store closures affected the group in six out of twelve months
in 2021 with Action experiencing significant closures and restrictions in the
Netherlands, Austria and Germany in the first quarter of 2021 and in December
2021. Action paid an interim dividend of €325 million in December 2021, and
finished the year with a cash balance of €759 million. Action opened its
2,000th store in Prague last week and all stores are currently open with
trading well ahead of the same period last year.

 

The broader Private Equity portfolio traded resiliently notwithstanding
ongoing Covid-19 related restrictions, supply chain challenges and increasing
cost inflation. In the quarter we saw good performance from SaniSure, which is
capitalising on a robust bioprocessing market, WilsonHCG which delivered good
performance driven by continued strength of the US labour market and
BoConcept, which continues to see strong demand despite restrictions remaining
in some of its key markets. Other notable contributions to our return include
WP and AES. We continue to carefully manage and support our travel companies
and following very recent Omicron developments we are becoming more optimistic
about their prospects in 2022.

 

Private Equity investments

 

 Private Equity                                                                                                                     Investment
 investment       Type               Business description                                                            Date           £m
 ten23 health     Further            Pharmaceutical product CDMO                                                     October 2021   61
 GartenHaus       Further            Digital platform for garden and house projects across Europe                    October 2021   45
 Dutch Bakery     New                Industrial bakery group specialised in home bake-off bread and snack products   October 2021   46
 Audley Travel    Further            Provider of experiential tailor-made travel                                     October 2021   25
 insightsoftware  New                Provider of financial reporting and enterprise performance management software  November 2021  37

                  for the Office of the CFO
                  co-investment
 Christ           Further            German retailer of jewellery and watches                                        November 2021  12
 Mepal            New                Dutch lifestyle consumer brand known for storing and serving food and drinks    December 2021  87
 Total Q3 FY2022 new and further investment                                                                                         313
 MAIT             Return of funding  Provider of digital solutions in the DACH region                                October 2021   (3)
 Total Q3 FY2022 return of funding                                                                                                  (3)
 Total Q3 FY2022 investment                                                                                                         310
 H1 FY2022 investment                                                                                                               58
 Total investment as at 31 December 2021                                                                                            368

 

In the period, we completed new investments in Mepal (£87 million) and Dutch
Bakery (£46 million). We also completed transformational bolt-on acquisitions
for ten23 health, investing £61 million of our proprietary capital to support
growth initiatives including the scale up and expansion of the Basel
formulation and drug development operations, as well as and the acquisition of
Swissfillon, a drug product fill and finish CDMO, and £45 million in
GartenHaus to support the acquisition of Outdoor Toys, a UK-based online
retailer of outdoor garden toys. After the period end, we invested in Yanga
Sports Water to support its international growth and expansion into North
America.

 

Several of our portfolio companies completed bolt-on acquisitions in the
quarter funded by the portfolio company's balance sheet. Evernex completed its
acquisition of Emcon-IT, a US leading player in the third-party hardware
maintenance industry, and Dutch Bakery acquired GoodLife Foods Deurne in an
asset transaction, representing a strategic acquisition for Dutch Bakery in
the Benelux market. AES acquired JAtech Services, a Canada-based asset
condition monitoring specialist, Hans Anders acquired the Belgian franchisee
for eyes+more and SaniSure acquired GL Engineering, a manufacturer of
single-use filling needles for use in the fill & finish stage of
production. Also in the quarter, Royal Sanders agreed to acquire Otto
Cosmetics, a leading German manufacturer of private label and contract
manufacturing products for the personal care industry and MAIT agreed to
acquire Infolutions, a Swiss-based managed services provider with a focus on
infrastructure monitoring.

 

In the period, we completed a £37 million co-investment in insightsoftware,
the company that acquired Magnitude Software, invested a further £25 million
in Audley Travel to support its recovery from the pandemic, and £12 million
in Christ as part of its debt refinancing and extension of facilities.

 

Private Equity realisations

 

 Private Equity                                  Realisation proceeds
 Realisations                                    £m
 Magnitude Software                              345
 Basic-Fit                                       146
 Total Q3 FY2022 realised proceeds               491
 H1 FY2022 realised proceeds                     118
 Total realised proceeds as at 31 December 2021  609

 

In the period, we recognised total realised proceeds of £491 million. We
received £345 million from the full divestment of Magnitude Software,
achieving a sterling money multiple of 2.5x and an IRR of 44%. We also
received £146 million from a partial sale of Basic-Fit shares. We retain a
5.7% holding in the business valued at £133 million at 31 December 2021.

 

 

Infrastructure

 

3iN's underlying portfolio continues to perform well, generating a good level
of portfolio income, and 3iN's share price performed strongly in the quarter,
closing up 16% at 354 pence at 31 December 2021 (30 September 2021: 304
pence), valuing 3i's 30% stake at £953 million (30 September 2021: £817
million). We also recognised £14 million of dividend income from 3iN in the
period.

 

In the period, our US infrastructure team completed a £146 million investment
in EC Waste, the largest vertically integrated provider of federally compliant
solid waste services in Puerto Rico, representing the third platform
investment for our US infrastructure portfolio and, including portfolio
company bolt-ons, our seventh US infrastructure investment.

 

 

Scandlines

 

Scandlines performed well in the period, with strong freight volumes ahead of
2019 levels. Leisure has also continued to recover however volumes were
impacted by the emergence of the Omicron variant and so remained below 2019
levels in the period. As a result of good cash management throughout the
pandemic, Scandlines was able to resume its cash distributions in December
2021, and 3i recognised £13 million of dividend income in the quarter.

 

 

Top 10 investments by value at 31 December 2021

 

                                       Valuation  Valuation
                 Valuation  Valuation  Sep-21     Dec-21
                 basis      currency   £m         £m         Activity in the quarter
 Action          Earnings   EUR        6,100      6,542      Received a cash dividend of £144 million in December 2021
 3iN             Quoted     GBP        817        953        Recognised a dividend of £14 million in November 2021
 Cirtec Medical  Earnings   USD        488        489
 Scandlines      DCF        EUR        469        471        Received a cash dividend of £13 million in December 2021
 Luqom           Earnings   EUR        453        440
 Tato            Earnings   GBP        412        406        Received a cash dividend of £4 million in October 2021
 Hans Anders     Earnings   EUR        323        316
 Royal Sanders   Earnings   EUR        295        289
 Evernex         Earnings   EUR        283        287
 WP              Earnings   EUR        265        281

 

The 10 investments in the table above comprise 78% (30 September 2021: 78%) of
the total Proprietary Capital portfolio value of £13,413 million (30
September 2021: £12,784 million).

 

 

Total return and NAV position

 

We recognised a £201 million loss on foreign exchange, net of hedging, in the
quarter, as sterling strengthened against the euro and US dollar. As at 31
December 2021, 71% of the Group's net assets were in euro and 15% were in US
dollar. Based on that, a 1% movement in the euro and US dollar would result in
a net total return movement of £84 million and £18 million respectively. The
diluted NAV per share increased to 1,235 pence (30 September 2021: 1,153
pence) or 1,215.75 pence after deducting the 19.25 pence per share first
FY2022 dividend, which was paid on 12 January 2022.

 

 

Balance sheet

 

At 31 December 2021, gross debt was £975 million (30 September 2021: £975
million), net debt was £709 million and gearing 5.9%. The first FY2022
dividend of £186 million (or 19.25 pence per share) was paid on 12 January
2022. Liquidity, including our undrawn RCF, was £766 million at 31 December
2021.

 

 

- ENDS -

 

 

Notes

 

 1.  Balance sheet values are stated net of foreign exchange translation. Where
     applicable, the GBP equivalents at 31 December 2021 in this update have been
     calculated at a currency exchange rate of €1.1913: £1 and $1.3546: £1
     respectively.
 2.  At 31 December 2021 3i had 969 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 2 January 2022 of €921 million. The
     LTM run-rate earnings used include our normal adjustment to reflect stores
     opened in the year, as well as the add back of €10 million of exceptional
     Covid-19 related costs incurred in Action's first quarter of 2021.

 

 

For further information, please contact:

Silvia Santoro

Group Investor Relations Director

Tel: 020 7975 3258

 

Kathryn van der Kroft

Communications Director

Tel: 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 northern 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 three-month period
ended 31 December 2021 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 2021 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.

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