TIDMIII
RNS Number : 2130T
3i Group PLC
21 July 2022
21 July 2022
3i Group plc
FY2023 Q1 performance update
A good start to FY2023
-- Increase in NAV per share to 1,406 pence (31 March 2022:
1,321 pence) and total return of 6.6% for the three months to 30
June 2022.
-- A resilient quarter from the Private Equity portfolio with
strong contributions from Action, AES, Dynatect, MAIT, nexeye
(previously known as Hans Anders), SaniSure, Tato and WilsonHCG.
90% of our top 20 Private Equity companies by value grew their
earnings to March 2022. The return for the quarter included
material reductions in the value of two non-discount consumer
companies, Luqom and GartenHaus.
-- Very good sales and EBITDA growth from Action in the quarter.
Sales for the quarter were EUR2,061 million, 22% above 2021 and 70%
above 2019. EBITDA for the quarter was EUR263 million, 29% above
2021 and 115% above 2019. Action's LTM operating EBITDA to 3 July
2022 was EUR991 million.
-- Announced the sale of Havea for expected proceeds of c.EUR540
million, representing a c.50% uplift on the value at 31 March 2022,
resulting in an estimated sterling money multiple of 3.0x and IRR
of 23%. Completed the sale of Q Holding's QSR division for proceeds
of GBP190 million, meaning our sterling money multiple, including
our remaining value in Q Holding, is 2.7x.
-- Signed three new Private Equity investments in the quarter
and announced a fourth new investment in July 2022. All are
expected to complete by the end of Q2 FY2023.
-- 3i Infrastructure plc ("3iN") completed the sale of its
European projects portfolio to the 3i European Operational Projects
Fund for GBP106 million.
-- Recognised a GBP332 million (or 34 pence per share) gain on
foreign exchange in the quarter, net of hedging, as sterling
weakened against the euro and US dollar.
Simon Borrows, Chief Executive, commented:
"3i has made a good start to its new financial year. Both
portfolios are trading resiliently in the current environment and
Action is continuing to grow at an impressive rate. We have already
announced a number of new investments this year and executed
realisations at significant premiums to their carrying values in
recent months, underlining the quality of our portfolio.
We see broader economic conditions deteriorating over the rest
of the year but remain confident in the composition of our
portfolio. We continue to focus on actively managing our portfolio
and making sensibly priced investments and bolt-on acquisitions. We
will also pursue our realisation projects where conditions
allow."
Private Equity
Portfolio performance and valuation at 30 June 2022
Action's impressive performance continues. In the six months
ending 3 July 2022, sales grew to EUR3,885 million (2021:EUR2,973
million) and operating EBITDA grew to EUR449 million (2021: EUR286
million). Action sales and EBITDA for the first half of the year
were 69% and 119% ahead of the same period in 2019, the last
financial year without any Covid-19 impact. In the six months
ending 3 July 2022 like-for-like sales growth was 18.6% with
footfall significantly ahead of last year, more than offsetting a
slightly lower average basket size. Action continues to attract
significant new customer flow through very low prices and good
product availability in stores. Last twelve months ("LTM")
operating EBITDA to 3 July 2022 reached EUR991 million, almost at
the 2023 five-year plan target of EUR1 billion. Action has opened
87 net new stores so far this year and remains on track to exceed
the 267 new stores opened last year. Cash generation continues to
be strong with the group's cash balance standing at EUR529 million
on 3 July 2022.
At 30 June 2022, Action was valued using the LTM run-rate
earnings to 3 July 2022 (EUR1,068 million) and an unchanged
multiple of 18.5x net of the liquidity discount, resulting in a
valuation of GBP7,811 million (31 March 2022: GBP7,165 million) for
3i's 52.7% equity stake. Action's relative performance has
continued to compare very favourably to its quoted peer group over
recent years, despite being more impacted by Covid-19 compared to
the majority of its peers. The sale of over 30% of Action's equity
in the first quarter of 2020 remains an important mark for Action's
current valuation multiple. The business is trading materially
ahead of the business plan presented at that time and, based on the
valuation at 30 June 2022, the buyers in that transaction have
already made a 2.4x return.
The remainder of the Private Equity portfolio continues to trade
resiliently in spite of the challenging inflationary environment.
Of our top 20 Private Equity portfolio companies, 90% by value grew
their earnings to March 2022, with notably strong performance from
AES, Dynatect, MAIT, nexeye, SaniSure, Tato and WilsonHCG. However,
we reduced the valuation multiples for Luqom and GartenHaus as a
result of significant declines in digital retailer valuations over
the quarter to the end of June 2022. The valuation of Luqom and
GartenHaus reduced by GBP102 million and GBP74 million respectively
in the quarter. We have seen a marked uptick in performance from
our travel-related investments across both Private Equity and
Infrastructure. We will assess all of these developments across the
portfolio carefully at our Portfolio Company Reviews in September
2022 ahead of our half year results.
Private Equity investments and realisations
In the period, we announced three new investments totalling
c.GBP195 million: xSuite, an accounts payable process automation
specialist focused on the SAP ecosystem; Konges Sløjd, a premium
international lifestyle brand offering apparel and accessories for
babies and children; and Digital Barriers, a provider of Internet
of Video Things, surveillance and security products. In July 2022
we announced a new investment in VakantieDiscounter, a leading,
technology-enabled online travel agency in the Benelux region
focused on affordable holidays. All four are expected to complete
by the end of Q2 FY2023.
We also invested a further GBP34 million in Luqom to support its
acquisition of Brumberg, one of the best known B2B lighting brands
in Germany, whilst MAIT completed the self-funded acquisition of
Nittmann & Pekoil.
In May 2022, we completed the sale of Q Holding's QSR division
for proceeds of GBP190 million, meaning our sterling money
multiple, including our remaining value in Q Holding, is 2.7x and,
in June 2022, we agreed the sale of Havea. Upon completion of the
sale of Havea we expect to receive proceeds of c.EUR540 million, a
c.50% uplift on opening value, resulting in an estimated sterling
money multiple of 3.0x and IRR of 23%.
Infrastructure
At 30 June 2022, 3iN's share price closed at 329 pence (31 March
2022: 347 pence), valuing our 30% stake at GBP884 million (31 March
2022: GBP934 million). We also recognised dividend income of GBP14
million from 3iN in the period. In June 2022, 3iN completed the
sale of its European projects portfolio to the 3i European
Operational Projects Fund for GBP106 million.
Scandlines
Freight volumes remain strong, ahead of 2021 record levels and
above expectations set for 2022. Leisure volumes continue to
improve as we enter the peak summer period. In the period we
received a dividend of GBP12 million from Scandlines.
Top 10 investments by value at 30 June 2022
Valuation Valuation
Valuation Valuation Mar-22 Jun-22
basis Currency GBPm GBPm Activity in the quarter
---------------- --------------- ----------- ---------- ---------- ----------------------------------------------
Action Earnings EUR 7,165 7,811
--------------- ----------- ---------- ---------- ----------------------------------------------
3iN Quoted GBP 934 884 GBP14 million dividend recognised
--------------- ----------- ---------- ---------- ----------------------------------------------
Cirtec Medical Earnings USD 513 563
--------------- ----------- ---------- ---------- ----------------------------------------------
Scandlines DCF EUR 533 541 GBP12 million dividend received
--------------- ----------- ---------- ---------- ----------------------------------------------
Havea Imminent sale EUR 304 453 Announced the sale of Havea which is expected
to complete in Q3 FY2023
--------------- ----------- ---------- ---------- ----------------------------------------------
Tato Earnings GBP 407 449
--------------- ----------- ---------- ---------- ----------------------------------------------
Luqom Earnings EUR 448 395 Acquisition of Brumberg, required GBP34
million of further equity funding from 3i
--------------- ----------- ---------- ---------- ----------------------------------------------
nexeye Earnings EUR 345 388
--------------- ----------- ---------- ---------- ----------------------------------------------
SaniSure Earnings USD 277 350
--------------- ----------- ---------- ---------- ----------------------------------------------
Royal Sanders Earnings EUR 297 310
--------------- ----------- ---------- ---------- ----------------------------------------------
The 10 investments in this table comprise 80% (31 March 2022:
78%) of the total Proprietary Capital portfolio value of GBP15,101
million (31 March 2022: GBP14,305 million).
Total return and NAV position
We recognised a GBP332 million gain on foreign exchange in the
quarter, net of hedging, as sterling weakened against the euro and
US dollar. As at 30 June 2022, 70% of the Group's net assets were
denominated in euro and 15% in US dollar. Based on that, a 1%
movement in the euro and US dollar would result in a net total
return movement of GBP94 million and GBP20 million respectively.
The diluted NAV per share increased to 1,406 pence (31 March 2022:
1,321 pence) or 1,378.75 pence after deducting the 27.25 pence per
share second FY2022 dividend, which will be paid on 22 July
2022.
Balance sheet
At 30 June 2022, cash was GBP426 million (31 March 2022: GBP229
million), and including our undrawn GBP500 million revolving credit
facility ("RCF") liquidity was GBP926 million (31 March 2022:
GBP729 million). Net debt was GBP549 million and gearing 4% (31
March 2022: GBP746 million and 6%). On 13 July 2022 we increased
our available liquidity by introducing an additional two year
GBP400 million tranche to the existing base GBP500 million RCF
which matures in March 2027.The GBP400 million additional tranche
provides the Company with additional financial flexibility at low
cost.
The 27.25 pence per share second FY2022 dividend, totalling
GBP262 million, will be paid on 22 July 2022.
- ENDS -
Notes
1. Balance sheet values are stated net of foreign exchange translation. Where applicable, the
GBP equivalents at 30 June 2022 in this update have been calculated at a currency exchange
rate of EUR1.1622: GBP1 and $1.2149: GBP1 respectively.
2. At 30 June 2022 3i had 965 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 3 July 2022 of EUR1,068 million. The LTM run-rate earnings used include
our normal adjustment to reflect stores opened in the year.
4 . Completion of the sale of Havea is subject to regulatory clearances.
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 2022 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 2022 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
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