TIDMIII
RNS Number : 5790G
3i Group PLC
20 July 2023
20 July 2023
3i Group plc
FY2024 Q1 performance update
A good start to FY2024
* Increase in NAV per share to 1,814 pence (31 March
2023: 1,745 pence) and total return of 4.1% for the
three months to 30 June 2023, after the negative
translation effect of sterling strengthening in the
quarter (GBP331 million or 34 pence)
* Very strong performance from Action in the quarter
(P4-P6 2023), with net sales and operating EBITDA of
EUR2,701 million and EUR374 million (P4-P6 2022:
EUR2,061 million and EUR263 million)
* In the six months to the end of Action's P6 (ending 2
July 2023), li ke-for-like ("LFL") sales growth was
21.8% primarily driven by high customer footfall, and
Action's LTM operating EBITDA to the end of P6 was
EUR1,439 million (LTM operating EBITDA to the end of
P6 2022: EUR991 million), 45% ahead of the same
period last year
* Resilient performance from the majority of the
remaining Private Equity portfolio, with notable
contributions from Royal Sanders, AES, European
Bakery Group and MAIT, offsetting softer performance
in Tato, Luqom and Mepal
* Investment activity focused on bolt-on transactions
in the period including transformational transactions
for the European Bakery Group
* Successfully issued a EUR500 million euro bond,
ending the quarter with gross cash of GBP660 million
and gearing of 3%
Simon Borrows, Chief Executive, commented:
"3i has made a good start to its new financial year with the
Private Equity and Infrastructure portfolios trading resiliently.
Action has achieved significant growth in its first half and
generated impressive LFL sales growth with strong footfall and
sales across all countries.
The macroeconomic environment is challenging at present and we
remain cautious about the economic outlook. We will maintain our
focus on active management of our portfolios and selective
investment and realisation activity."
Private Equity
Portfolio performance and valuation at 30 June 2023
Action continues to outperform our expectations. In the six
months ending 2 July 2023, Action generated net sales of EUR5,186
million (2022: EUR3,885 million) and operating EBITDA of EUR683
million (2022: EUR449 million), 33% and 52% ahead of the same
period last year. Over the same period, LFL sales growth was 21.8%,
primarily driven by high customer footfall. The significant
outperformance of sales in the first half of 2023 has resulted in a
higher than budgeted EBITDA margin for the same period. Action
added 90 net new stores in the six months to 2 July 2023 (P6 2022:
77 stores), and remains on track to add c.300 new stores in 2023.
The business continues to be highly cash generative, ending the
period with a cash balance of EUR681 million. Action is set for
another good year, even if LFL performance comparisons will be more
challenging in the second half than the first.
At 30 June 2023, Action was valued using the LTM run-rate
earnings to 2 July 2023 of EUR1,556 million and an unchanged
multiple of 18.5x net of the liquidity discount, resulting in a
valuation of GBP11,953 million (31 March 2023: GBP11,188 million)
for 3i's 52.9% equity stake.
The majority of the remaining portfolio continues to demonstrate
its resilience against challenging trading conditions, with strong
performance in the period from Royal Sanders, AES, European Bakery
Group and MAIT. Our travel assets continue to demonstrate good
booking momentum.
Weak end-market demand and price inflation for key inputs have
resulted in continued pressure on Tato's margins in the period, and
we also continue to see softer performance for several of our
discretionary consumer assets including Luqom and Mepal. As a
result, we recorded a combined unrealised value loss for the three
assets of GBP84 million in the period.
The ratio of net debt to EBITDA across the Private Equity
portfolio reduced from 2.5x at 31 March 2023 to 2.3x at 30 June
2023. The Private Equity portfolio leverage excluding Action
decreased from 4.0x to 3.9x.
Private Equity investments
We continue to grow portfolio value through our buy-and-build
strategy. Royal Sanders completed the acquisition of Lenhart, a
manufacturer of private label products for the personal care
industry in April 2023.
In the period, Dutch Bakery agreed to combine with coolback, a
German bakery group specialised in bake-off bread, to create the
European Bakery Group, a pan-European bakery platform. Panelto, a
manufacturer of bake-off artisan breads, subsequently agreed to
join the European Bakery Group, establishing the UK and Ireland
platform within the group. These transformational acquisitions, the
third and fourth since our initial investment, will further expand
European Bakery Group's product assortment and customer base across
Europe. In July 2023, the bolt-on acquisition of coolback completed
with 3i contributing GBP38 million to the acquisition. The
completion of Panelto is expected in Q2 FY2024.
Infrastructure
3i Infrastructure plc's ("3iN") share price closed flat in the
quarter to 30 June 2023 at a share price of 313 pence (31 March
2023: 313 pence), valuing 3i's 29% stake at GBP841 million (31
March 2023: GBP841 million). We also recognised dividend income of
GBP15 million from 3iN in the quarter.
Smarte Carte continued to deliver strong performance across all
business lines, with both revenue and earnings outperforming our
most recent expectations.
Scandlines
Scandlines continues to see good leisure performance entering
into the summer peak period, whilst freight volumes are slightly
down compared to last year, driven by the current macroeconomic
backdrop.
Top 10 investments by value(1) at 30 June 2023
Valuation Valuation
Valuation Valuation Mar-23 Jun-23
basis currency GBPm GBPm Activity in the quarter
----------------- ----------- ----------- ---------- ---------- ---------------------------------------------
Action Earnings EUR 11,188 11,953
----------- ----------- ---------- ---------- ---------------------------------------------
3iN Quoted GBP 841 841 Recognised GBP15 million of dividend income
----------- ----------- ---------- ---------- ---------------------------------------------
Scandlines DCF EUR 554 541 Recognised GBP10 million of dividend income
----------- ----------- ---------- ---------- ---------------------------------------------
Cirtec Medical Earnings USD 552 530
----------- ----------- ---------- ---------- ---------------------------------------------
Royal Sanders Earnings EUR 369 405 Completed the bolt-on acquisition of Lenhart
----------- ----------- ---------- ---------- ---------------------------------------------
nexeye Earnings EUR 393 383
----------- ----------- ---------- ---------- ---------------------------------------------
AES Engineering Earnings GBP 351 382
----------- ----------- ---------- ---------- ---------------------------------------------
SaniSure Earnings USD 389 379
----------- ----------- ---------- ---------- ---------------------------------------------
Tato Earnings GBP 411 364
----------- ----------- ---------- ---------- ---------------------------------------------
Smarte Carte DCF USD 300 316
----------- ----------- ---------- ---------- ---------------------------------------------
1. The valuations are translated at the spot rate of the balance
sheet date. Sterling strengthened by 2.4% against the euro and by
2.9% against the US dollar in the quarter to 30 June 2023.
Individual valuations exclude the benefit of the foreign exchange
hedges.
The 10 investments in the table above comprised 84% (31 March
2023: 83%) of the total investment portfolio value of GBP19,116
million (31 March 2023: GBP18,388 million).
Total return and NAV position
We recorded a total foreign exchange translation loss of GBP331
million including a gain on foreign exchange hedging in the period.
Movements in interest rates had a negative impact on the
mark-to-market valuation of the hedges in the period.
Based on the net assets at 30 June 2023 and including the impact
of hedging, a 1% movement in the euro and US dollar would result in
a net total return movement of GBP113 million and GBP12 million
respectively. The diluted NAV per share increased to 1,814 pence
(31 March 2023: 1,745 pence) or 1,784.25 pence after deducting the
29.75 pence per share (GBP286 million) second FY2023 dividend,
which will be paid on 28 July 2023.
Balance sheet
On 14 June 2023, we successfully issued a six-year EUR500
million euro bond at a coupon of 4.875%, further strengthening our
liquidity profile. At 30 June 2023, gross debt was GBP1,204 million
(31 March 2023: GBP775 million), net debt was GBP544 million and
gearing was 3% (31 March 2023: GBP363 million and 2%). At 30 June
2023, cash was GBP660 million (31 March 2023: GBP412 million), and,
including our undrawn GBP900 million revolving credit facility,
liquidity was GBP1,560 million (31 March 2023: GBP1,312
million).
-S -
Notes
1. Balance sheet values are stated net of foreign exchange translation. Where applicable, the
GBP equivalents
at 30 June 2023 in this update have been calculated at a currency exchange rate of EUR1.1652:
GBP1 and $1.2715: GBP1 respectively.
2. At 30 June 2023 3i had 967 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 July 2023 of EUR1,556 million. The LTM run-rate earnings used include
our normal adjustment to reflect stores opened in the year.
4. As at 30 June 2023, the notional amount of the forward foreign exchange contracts held by
the Group was EUR2.6 billion (including EUR600 million associated with Scandlines) and $1.2
billion.
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 .
All statements in this performance update relate to the
three-month period ended 30 June 2023 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 2023 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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END
UPDUKAWRONUBAAR
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July 20, 2023 02:00 ET (06:00 GMT)
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