3i Group plc announces results for the six months

to 30 September 2024

3i Group delivered good financial performance in the first half of FY2025

Simon Borrows, 3i's Chief Executive, commented:

"Against an uncertain geopolitical environment and weak growth across much of Europe, we move into the second half of FY2025 with a portfolio that is well positioned to build on a solid first half.

Action is the major contributor to our returns and continues to produce sector-leading growth. With a strong business and financial model and significant white space to expand into, we believe it will continue to do so for many years to come. In addition, the leading companies in our portfolio are performing strongly and a number of the portfolio companies that were adversely impacted by challenges in 2023 are beginning to turn the corner and see improved trading.

We have seen good momentum across our investment and realisation activity in the half and we have a good pipeline of high-quality realisations for the next 12 months. We also have some interesting potential opportunities in our investment pipeline, which we will continue to review in a disciplined way and progress those that are most attractive."

Summary financial highlights under the Investment basis

3i prepares its statutory financial statements in accordance with UK adopted international accounting standards. However, we also report a non-GAAP "Investment basis", which we believe aids users of our report to assess the Group's underlying operating performance. The Investment basis (which is unaudited) is an alternative performance measure ("APM") and is described later in this document. Total return and net assets are the same under the Investment basis and IFRS and we provide a reconciliation of our Investment basis financial statements to the IFRS statements later in this document. The first page of this document until the end of the Financial review is prepared on an Investment basis.

1 Total return is defined as Total comprehensive income for the year, under both the Investment basis and the IFRS basis.

2 Financial measure defined as APM. Further information can be found later in this document.

Disclaimer

These half-year results have been prepared solely to provide information to shareholders. They should not be relied on by any other party or for any other purpose. These half-year results may contain statements about the future, including certain statements about the future outlook for 3i Group plc and its subsidiaries ("3i" or "the Group"). These are not guarantees of future performance and will not be updated. Although we believe our expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

Enquiries:

A PDF copy of this release can be downloaded from www.3i.com/investor-relations

For further information, including a live webcast of the results presentation at 10.00am on 14 November 2024, please visit www.3i.com/investor-relations

3i Group Half-year report 2024

Chief Executive's review

The Group delivered good financial performance in the first half, generating a total return of £2,046 million in the six months to 30 September 2024, or 10% on opening shareholders' funds (September 2023: £1,669 million, 10%). NAV per share at 30 September 2024 was 2,261 pence (31 March 2024: 2,085 pence), including a 48 pence per share loss on foreign exchange translation (September 2023: 11 pence per share loss) and after the payment of the 34.50 pence per share second FY2024 dividend in July 2024.

Action continues to produce impressive results, with sales, EBITDA and cash generation ahead of our expectations. We received proceeds of £1,164 million from Action in the period, following another successful refinancing and pro-rata share redemption, and subsequently completed a significant reinvestment of £768 million, further increasing our ownership position.

Despite a muted macroeconomic backdrop across Europe and moderate growth in the US economy, the majority of our other portfolio companies have demonstrated resilient performance in the period, and we are seeing the gradual unwind of some of the challenges which weighed on performance in 2023.

Against a difficult realisation market, which is showing some signs of improvement, we secured two significant Private Equity realisations, generating total proceeds of £662 million, both at sterling money multiples of 2x or greater, and one at a good premium to our 31 March 2024 value. Likewise, our Infrastructure business maintained its track record of delivering significant uplifts on exit, following the receipt of a binding offer for an existing portfolio company and a partial syndication of another. We also deployed capital into a new Private Equity investment and saw good buy-and-build momentum across both portfolios in the period.

Private Equity

The Private Equity portfolio delivered a gross investment return ("GIR") of £2,071 million in the period, or 11% on opening value. This includes a £456 million loss on foreign exchange translation, after the impact of foreign exchange hedging, due to the strengthening of sterling in the period. Action generated a GIR of £1,827 million in the period, or 13% over its opening value. In the 12 months to the end of 30 June 2024, 94% of our portfolio companies by value grew earnings.

Action performance

In the nine reporting periods ending on 29 September 2024 ("P9"), Action generated net sales of €9,567 million (nine reporting periods ended P9 2023: €7,912 million) and operating EBITDA of €1,344 million (nine reporting periods ended P9 2023: €1,065 million), 21% and 26% ahead of the same period last year. Over the same period, LFL sales growth was 9.8%, driven by strong growth in customer transactions, outperformance in everyday necessities and a small negative price effect. LFL sales growth for the same period last year was 19.2%.

Action's strategy of passing through deflation in purchase prices to customers and sharing the benefits of increasing buying power continues to resonate well with Action's customers in what remains a tough cost of living environment.

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Action generated an EBITDA margin of 14.0% in the first nine reporting periods of the year compared to 13.5% in the same period last year and remains focused on cost discipline against industry-wide upward pressure on, amongst others, wages and container prices.

Action added 189 stores in the first nine reporting periods of the year (nine reporting periods ended P9 2023: 153 stores) and is now on track to add approximately 350 stores this year. Its store roll-out across Italy, Portugal, Slovakia and Spain, its most recent expansion markets, is ahead of our expectations.

In July 2024, Action successfully completed a refinancing event, raising €2.1 billion in total, including a second US dollar term loan of $1.5 billion and a €700 million term loan. It also completed a capital restructuring with a pro-rata redemption of shares, returning £1,164 million (€1,374 million) of gross proceeds to 3i. Alongside a number of existing LPs in the 2020 Co-Investment Programme, 3i took the opportunity to acquire further shares in Action and, including one small further purchase of an existing LP stake in Action later in the period, 3i reinvested a total of £768 million in Action, increasing 3i's gross equity stake from 54.8% to 57.9%.

At 30 September 2024, Action was valued using the last 12 months ("LTM") run-rate earnings to 29 September 2024 of €2,065 million. This includes our normal run-rate adjustment to reflect stores opened in the last 12 months. At that date, Action's valuation net debt, post the refinancing event, comprised total senior debt of c.€6.6 billion and cash of €733 million, resulting in a net debt to run-rate EBITDA ratio of 2.9x. Our valuation multiple remains unchanged at 18.5x net of the liquidity discount, resulting in a valuation of £15,543 million (31 March 2024: £14,158 million) for 3i's 57.9% equity stake at 30 September 2024.

Action continues to outperform a broad range of discount competitors, across all relevant operating KPIs. Its consistent and unrelenting focus on the customer is what gives us confidence in its ability to continue to execute its growth opportunity in existing and new countries. Action's excellent growth meant its valuation at 30 September 2023 of 18.5x LTM run-rate EBITDA translated to 14.6x of the run-rate EBITDA achieved a year later.

Strong trading momentum has continued into Action's P10 (30 September 2024 to 27 October 2024), generating net sales of €1,166 million and operating EBITDA of €188 million for that reporting period. Cash at the end of P10 was €830 million and Action added a further 31 stores in P10, taking the total number of stores added to 220 in the ten reporting periods to 27 October 2024. Action has good product availability ahead of the key trading period in the remainder of the final quarter of the year.

Other Private Equity portfolio performance

The Private Equity portfolio, excluding Action, delivered a GIR of £244 million, or 4% on opening value in the period, or 6% excluding the net loss on foreign exchange translation. Our portfolio companies operating in the value-for-money and private label sectors have continued to perform well and we are also seeing some encouraging developments across some of our industrial and healthcare assets.

Royal Sanders continued to deliver significant organic growth in the first half of 2024, with strong volumes across its key customers, supported by outperformance across its bolt-on acquisitions. The most recent self-funded acquisition of Karium, a platform of established brands across the hair care, body care and skin care categories, strengthens the brands division within Royal Sanders and provides significant growth opportunities. European Bakery Group ("EBG") traded resiliently in the period, despite pressure on selected input costs and wage inflation. After a period of strong cash generation, EBG returned proceeds of £22 million to 3i, within 12 months of 3i's further investment to support the acquisition of coolback in 2023.

Audley Travel performed strongly across its US and UK markets in the period and continues to demonstrate an excellent post-Covid recovery. It continues to gain share in both markets. MPM continues to grow well across all of its markets, in particular the US, its largest market.

After a challenging 2023, Tato saw a good recovery in sales volumes and improved profitability in the first half of 2024. While its input costs have largely stabilised, a tougher competitive dynamic is driving pricing pressure across its end markets and is expected to persist through the second half of 2024.

Cirtec Medical delivered strong top-line growth and improved margins in the period, driven by increased demand from customers across its product range and by operational improvements. The business continues to see a robust pipeline across its end markets and has a number of new programmes that will launch into production during late 2024 and the first half of 2025. SaniSure saw encouraging bookings momentum in the first half of 2024 and, while the recovery has not been linear, momentum has continued through the second half of 2024 and the order book development is pointing to a more positive 2025, as customer destocking ends and normal ordering patterns return. Whilst a broader recovery across the bioprocessing market has taken longer than expected, market consensus is for a return to attractive growth in 2025-2026.

MAIT completed two further bolt-on acquisitions in the period and has traded resiliently, as its focus on mission-critical enterprise resource planning and product lifecycle management areas has limited the impact of softening discretionary spending on IT hardware. xSuite is making good progress with its SaaS transition plan, with recurring sales performing ahead of expectations.

WilsonHCG continues to operate through a weak white-collar recruitment market. Against this backdrop, the business has maintained its core customer base through strong service and secured new customer wins, while right sizing its resourcing and operations for the current lower demand environment. We invested a further £4 million in WilsonHCG in the period to support the near-term requirements of the business. Konges Sløjd has seen softer business-to-business sales across its main geographies but has maintained stable margins.

Private Equity investment and realisation activity

Despite some signs of improvement, the Private Equity transaction market remains challenging. Against this backdrop, we have maintained our price discipline and deployed our capital selectively, whilst continuing our rigorous focus on asset management. We invested £98 million in Constellation, an IT managed services provider specialised in hybrid cloud and cyber security. We have also continued to support the development of ten23 health, our contract development and manufacturing organisation ("CDMO") platform, with a further investment of £30 million.

We secured two significant realisations in the period. In July 2024, we completed the sale of nexeye, a company which we supported financially when its stores were closed during stages of the pandemic and which doubled its sales and EBITDA during our period of ownership. This realisation achieved a small profit over 31 March 2024 value and returned proceeds of £382 million which, combined with distributions already received during our ownership, resulted in a sterling money multiple of 2.0x. In July 2024, we also signed an agreement to sell our stake in WP, in which we initially invested in 2015 and which has since grown to become a leading provider of innovative plastic packaging solutions with a strong presence across Europe and Latin America. This transaction completed in October 2024, at an 18% profit over 31 March 2024 value, delivering proceeds of £280 million including interest income of £3 million which, combined with the £45 million of proceeds received earlier in our period of ownership, results in a sterling money multiple of 2.2x.

Infrastructure

In the six months to 30 September 2024, our Infrastructure portfolio generated a GIR of £43 million, or 3% on opening value.

3iN generated a total return on its opening NAV of 5.1% in the six months to 30 September 2024, resulting in a NAV of 374.7 pence per share, driven by good underlying portfolio performance. Tampnet performed well in the period, supported by revenue growth in its fixed units in the North Sea and Gulf of Mexico and TCR continues to see strong demand for its rental offering. SRL has, however, seen softer trading across its core rental business as a result of a wider market downturn.

In the period, 3iN invested £30 million to support Future Biogas's acquisition of a 51% stake in a portfolio of six anaerobic digestion plants. At the end of September 2024, 3iN completed the syndication of 23% of its stake in Future Biogas to an external investor, at a 15% uplift on 31 March 2024 value. At the beginning of October 2024, 3iN received a binding offer for its stake in Valorem. Subject to acceptance of the offer, the expected net proceeds of €309 million represent a 15% uplift on 31 March 2024 value and a money multiple of 3.5x.

3iN's share price increased to 341 pence at 30 September 2024 (31 March 2024: 327 pence). Whilst this increase in the share price largely reflects improved market sentiment for the infrastructure asset class, 3iN continues to trade at a discount to its 30 September 2024 NAV, even after several periods of outperformance from its portfolio and the business delivering another realisation significantly above carrying value.

We have seen good buy-and-build momentum in our North American Infrastructure Fund with both Regional Rail and Amwaste completing bolt-on acquisitions in the period. Smarte Carte commenced cart operations in London Heathrow in June 2024, and steady US and international passenger numbers were reflected in its volumes across its various offerings in the period.

Scandlines continues to show resilience. The leisure segment had a record peak summer season, whilst freight remained stable against a benign macroeconomic backdrop. Cash generation remains strong and 3i received a dividend of £12 million from Scandlines in the period.

Balance sheet, liquidity, foreign exchange and dividend

We ended the period with cash of £386 million (31 March 2024: £396 million) and total liquidity of £1,286 million (31 March 2024: £1,296 million), including an undrawn RCF of £900 million. Net debt was £805 million, with gearing of 4% (31 March 2024: £806 million, 4%). Since the end of the period, we received proceeds of £280 million from the realisation of WP.

We continued to reduce the carried interest liability associated with Action, with carry crystallisation payments totalling £283 million in the period, meaning our equity stake in Action, after the reinvestment in the period and net of the carried interest liability, has increased to 57.4% (31 March 2024: 53.2%). Going forward, the Buyouts 2010-12 vintage (which relates to our investment in Action) will accrue net carried interest payable at a rate of less than 1% (31 March 2024: c.3%) of Action's GIR.

Due to the strengthening of sterling in the period, we recorded a total foreign exchange translation loss of £466 million (September 2023: £107 million loss), including a gain on foreign exchange hedging.

In line with our dividend policy, we will pay a first FY2025 dividend of 30.5 pence per share, which is half of our FY2024 total dividend. This first FY2025 dividend will be paid to shareholders on 10 January 2025.

Outlook

Against an uncertain geopolitical environment and weak growth across much of Europe, we move into the second half of FY2025 with a portfolio that is well positioned to build on a solid first half.

Action is the major contributor to our returns and continues to produce sector-leading growth. With a strong business and financial model and significant white space to expand into, we believe it will continue to do so for many years to come. In addition, the leading companies in our portfolio are performing strongly and a number of the portfolio companies that were adversely impacted by challenges in 2023 are beginning to turn the corner and see improved trading.

We have seen good momentum across our investment and realisation activity in the half, and we have a good pipeline of high-quality realisations for the next 12 months. We also have some interesting potential opportunities in our investment pipeline, which we will continue to review in a disciplined way and progress those that are most attractive. 

Simon Borrows

Chief Executive

13 November 2024

Business and Financial review 

Private Equity

Our Private Equity portfolio generated a GIR of £2,071 million (September 2023: £1,826 million), or 11% of the opening portfolio value (September 2023: 11%), including a loss on foreign exchange on investments, after the impact of foreign exchange hedging, of £456 million (September 2023: £127 million loss).

Table 1: Gross investment return for the six months to 30 September

Investment and realisation activity

In July 2024, Action raised €2.1 billion in a refinancing event and also completed a capital restructuring with a pro-rata redemption of shares. 3i received total proceeds £1,164 million from this share redemption. 3i, alongside a number of existing LPs in the 2020 Co-Investment Programme, took the opportunity to acquire further shares in Action and, including one small further purchase of an existing LP stake in Action later in the period, it reinvested a total of £768 million in Action, increasing 3i's gross equity stake from 54.8% to 57.9%.

In the period, we invested £98 million to acquire Constellation, a hybrid cloud and cybersecurity managed services provider, which is well positioned to be a key consolidator in a fragmented IT services French market. We also invested a total of £44 million across further and bolt-on investments, of which £30 million related to a further investment in ten23 health, £5 million to support xSuite's bolt-on acquisition of tangro, and £4 million to support WilsonHCG through current market headwinds. Following good performance and cash generation, we received £22 million back from EBG as a return of funding within 12 months of our investment to support its acquisition of coolback in 2023.

Our portfolio companies completed four self-funded bolt-on acquisitions, including two for MAIT and one for Royal Sanders, which continued their significant buy-and-build growth strategies, and one for AES, which expanded its product offering in North America.

We secured two significant realisations in the period, crystallising money multiples of 2x or greater. In July 2024, we completed the sale of nexeye, which achieved a small profit over 31 March 2024 value and returned proceeds of £382 million which, combined with distributions already received during our ownership, resulted in a sterling money multiple of 2.0x. In July 2024, we also agreed the realisation of WP. This transaction completed in October 2024, at an 18% profit over 31 March 2024 value, delivering proceeds of £280 million which, combined with the £45 million of proceeds received earlier in the period of ownership, results in a sterling money multiple of 2.2x.

In total, in the period to 30 September 2024, 3i invested £888 million in Private Equity (September 2023: £50 million) and generated total proceeds of £1,548 million (September 2023: £1 million).

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Table 2: Private Equity cash investment in the six months to 30 September 2024

Table 3: Private Equity portfolio bolt-on acquisitions funded by the portfolio company

in the six months to 30 September 2024

Table 4: Private Equity realisations in the six months to30 September 2024

1 Cash proceeds realised in the period less opening value.

2 Profit in the year over opening value.

3 Cash proceeds over cash invested. Money multiples are quoted on a GBP basis.

Portfolio performance

Table 5: Unrealised profits/(losses) on the revaluation of Private Equity investments1

in the six months to 30 September

1 More information on our valuation methodology, including definitions and rationale, is included in our Annual report and accounts 2024 on page 217.

Action performance and valuation

As detailed in the Chief Executive's review, Action performed strongly in the period.

At 30 September 2024, Action continued to be valued using its LTM run-rate earnings to the end of P9 2024 of €2,065 million, which included our normal adjustment to reflect stores opened in the last 12 months. We continue to value Action at a multiple of 18.5x net of the liquidity discount (31 March 2024: 18.5x). Its performance across key operating KPIs continues to compare favourably against all peers that we use to benchmark its results. Whilst the overall average multiple of the peer group reduced marginally in the period, the top quartile peers within this group continue to outperform and maintain their premium rating. In addition, recent transactions with 3i and various LPs in the co-investment vehicles have taken place at a 3i carrying value of Action, providing further support for our valuation mark.

Action ended P9 2024 with a cash balance of €733 million and a net debt to LTM run-rate earnings ratio of 2.9x. This result is after the refinancing event which took place in July 2024.

At 30 September 2024, the valuation of our 57.9% stake in Action was £15,543 million (31 March 2024: 54.8%, £14,158 million). We recognised unrealised profits from Action of £2,170 million (September 2023: £1,810 million), as shown in Table 5.

Table 6: Action financial metrics

Performance (excluding Action)

Excluding Action, the Private Equity portfolio valued on an earnings basis generated £319 million of value growth from performance increases in the period (September 2023: £353 million), more than offsetting £66 million of performance decreases (September 2023: £219 million).

Royal Sanders performed strongly in the period, with continued growth at key customers and its recent bolt-on acquisitions, including the most recent self-funded acquisition of Karium. EBG sustained good trading in the period despite persistent pricing and input cost headwinds, demonstrating the high quality of the business.

Audley Travel saw impressive UK and US booking volumes in the period and is expecting a strong end to 2024, with full coverage across its order book already achieved. MPM continues to grow its presence in the US market, while continuing to outperform in its more mature markets.

Tato returned to growth in the first half of 2024, as end-market demand has gradually improved, resulting in increased volumes. Its margins have benefitted from substantially lower input costs compared to the prior year. Tato continues to experience intensifying pricing competition, which is expected to persist through the second half of 2024.

Commercial traction at Cirtec Medical has led to a robust pipeline across all parts of its business, with demand from new and existing customers contributing to a positive result in the period. SaniSure saw solid improvement across all of its key metrics in the first half of 2024 and is making good progress in strategic initiatives across high value R&D developments. While the recovery from post-Covid destocking has not been entirely linear, leading to inconsistent near-term trading, bookings momentum remains strong and indicative of a return to attractive growth in 2025-2026.

MAIT traded resiliently in the period despite softer IT hardware spend in its markets. Its recent bolt-on acquisitions position the business well for further consolidation of a fragmented market and for capitalising on increasing demand for its services. Operating in a similar market environment, Evernex has delivered stable top line growth, benefitting from significant contract wins towards the end of 2023. xSuite's SaaS transition is well progressed, leading to an increased proportion of recurring revenue. tangro, its most recent acquisition, is already contributing to the business positively.

Over the last 18 months, reduced employee turnover and lower new hiring activity has impacted the US recruitment industry, impacting performance at WilsonHCG. A recovery to more typical turnover levels remains slow as employees continue to "stay put", albeit we are beginning to see some initial encouraging indicators across the US economy. We will continue to support Wilson through these headwinds. We have seen some softer performance from Konges Sløjd, which is being impacted by a slowdown in orders following constrained customer spending, as well as from Dynatect, which has been impacted by the delayed ramp of a key contract.

Overall, 94%1 of our Private Equity portfolio companies by value grew LTM adjusted earnings in the 12 months to 30 June 2024.

1 Based on LTM adjusted earnings to June 2024. Includes 29 companies.

Table 7: Portfolio earnings growth of the top 20 Private Equity investments1

1 Includes top 20 Private Equity companies by value excluding ten23 health and WP. This represents 96% of the Private Equity portfolio by value (31 March 2024: 96%). LTM adjusted earnings to 30 June 2024 and Action based on LTM run-rate earnings to P9 2024. P9 2024 runs to 29 September 2024.

Leverage

Our Private Equity portfolio is funded with all senior debt structures, with long-dated maturity profiles. As at 30 September 2024, 90% of portfolio company debt was repayable from 2027 to 2031. Average leverage was 3.1x at 30 September 2024 (31 March 2024: 2.7x). Excluding Action, leverage across the portfolio was 3.7x (31 March 2024: 3.9x). Table 8 shows the ratio of net debt to adjusted earnings by portfolio value at 30 September 2024.

Table 8: Ratio of net debt to adjusted earnings1

1 This represents 92% of the Private Equity portfolio by value (31 March 2024: 91%). Quoted holdings, ten23 health, WP and companies with net cash are excluded from the calculation. Net debt and adjusted earnings as at 30 June 2024. Action based on net debt at P9 2024 and LTM run-rate earnings to P9 2024.

Multiple movements

When selecting multiples to value our portfolio companies, we take a long-term, through-the-cycle approach and consider a number of factors including recent performance, outlook and bolt-on activity, comparable recent transactions and exit plans, as well as the performance of quoted comparable companies. At each reporting date, our valuation multiples are considered as part of a robust valuation process, which includes independent challenge throughout, including from our external auditors, culminating in the quarterly Valuations Committee of the Board.

Global indices have generally performed well over the period, despite the geopolitical uncertainty, as inflation has begun to stabilise, leading to interest rate cuts. We moved one multiple up and one down in the period, reflecting relative momentum in trading. This resulted in a net multiple-driven unrealised value gain of £8 million in the period (September 2023: £23 million unrealised value loss).

Action's valuation multiple at 30 September 2024 remained unchanged at 18.5x net of the liquidity discount. Based on the valuation at that date, a 1x movement in Action's post-discount multiple would increase or decrease the valuation of 3i's investment by £994 million.

Quoted portfolio

Basic-Fit is the only quoted investment in our Private Equity portfolio. We recognised an unrealised value gain of £9 million from Basic-Fit in the period (September 2023: unrealised value loss of £31 million) as its share price increased to €23.42 at 30 September 2024 (31 March 2024: €20.68). At 30 September 2024, our residual 5.7% shareholding was valued at £74 million (31 March 2024: £67 million).

Imminent sale

Following the agreement reached to sell WP in July 2024, we valued the business on an imminent sale basis as at 30 September 2024, at an 18% profit over 31 March 2024 value. This transaction completed in October 2024.

Sum of the parts

ten23 health was valued on a sum of the parts basis as at 30 September 2024, mainly using a discounted cash flow ("DCF") methodology.

Assets under management

The assets under management of the Private Equity business, including third-party capital, increased to £28.3 billion (31 March 2024: £27.5 billion) principally due to unrealised value movements offset by net divestment and foreign exchange losses in the period.

Private Equity 3i proprietary capital by vintage

The performance of our vintages (Table 9) is driven by our portfolio companies. The primary driver of the Other category is Action and Royal Sanders, both of which have provided strong value contribution in the period.

Table 9: Private Equity 3i proprietary capital

1 Assets included in these vintages are disclosed in the Glossary which can be found later in this document.

2 Includes Action's value of £15,543 million for a 57.9% stake (31 March 2024: £14,158 million, 54.8% stake) held directly and indirectly via co-investment vehicles.

3 3i carrying value is the unrealised value for the remaining investments in each vintage.

4 Vintage money multiple (GBP) includes realised and unrealised value as at the reporting date for all investments in the vintage.

Table 10: Private Equity assets by sector

Infrastructure

Our Infrastructure portfolio generated a GIR of £43 million in the period, or 3% on the opening portfolio value (September 2023: £31 million, 2%), including a loss on foreign exchange translation of investments of £28 million (September 2023: £8 million gain).

Table 11: Gross investment return for the six months to 30 September

Fund management

3iN

In the six months to 30 September 2024, 3iN generated a total return on opening NAV of 5.1% (September 2023: 6.3%) and is on track to meet its dividend target for the year to 31 March 2025 of 12.65 pence per share, up 6.3% year-on-year.

Across 3iN's underlying portfolio, Tampnet performed well in the period, driven by sustained offshore activity and demand for bandwidth upgrades. The business continues to expand its fibre network, with new developments across the Gulf of Mexico. TCR continues to experience strong commercial momentum and has secured notable new contract wins. 3iN also saw good contributions in the period from Joulz, Global Cloud Xchange and Infinis. We have seen softer performance from SRL following a continued reduction in market activity levels as a result of reduced local authority capital expenditure. DNS:NET is now tracking more closely to expectations as it continues its fibre rollout across Germany.

In August 2024, Future Biogas acquired a 51% stake in a portfolio of six anaerobic digestion facilities for £68 million, of which £30 million was funded by 3iN. In September 2024, 3iN syndicated 23% of its stake in Future Biogas for proceeds of £30 million, at a 15% uplift to 31 March 2024 value. After the period end, 3iN received a binding offer for its 33% stake in Valorem for anticipated proceeds of €309 million, a 15% uplift on 31 March 2024 value. The transaction is expected to complete in Q1 2025, subject to acceptance of the offer and regulatory clearances.

As its investment manager, 3i received a management fee from 3iN of £26 million in the period (September 2023: £25 million).

North American Infrastructure Fund

The assets within this Fund delivered resilient trading overall in the period. EC Waste saw good performance across its collection contracts and transfer stations and Regional Rail benefitted from higher demand across its railroads. It continued to expand its network, adding 70 miles of track in Ohio through the bolt-on acquisition of Cincinnati Eastern Railroad. Amwaste saw mixed trading in the period and completed a bolt-on with the acquisition of C&C Sanitation, furthering both collection and post-collection services in Georgia. In the period, we invested £4 million across the bolt-on acquisitions in the Fund and received a distribution of £5 million from Regional Rail. All assets were valued on a DCF basis at 30 September 2024.

Other funds

3i Managed Infrastructure Acquisitions LP performed in line with expectations in the period.

Assets under management

Infrastructure AUM decreased to £6.2 billion at 30 September 2024 (31 March 2024: £6.7 billion), reflecting the sale of our operational projects infrastructure fund capability in May 2024. We generated fee income of £31 million from our fund management activities in the period (September 2023: £34 million).

Table 12: Assets under management as at 30 September 2024

3i's proprietary capital Infrastructure portfolio

The Group's proprietary capital infrastructure portfolio consists of its 29% quoted stake in 3iN, its investment in Smarte Carte and direct stakes in other funds.

Quoted stake in 3iN

At 30 September 2024, our 29% stake in 3iN was valued at £918 million (31 March 2024: £879 million) as its share price increased by 4% to 341 pence in the period (31 March 2024: 327 pence). We recognised an unrealised gain of £39 million (September 2023: unrealised loss of £23 million) and £16 million of dividend income (September 2023: £15 million) in the period.

North America Infrastructure proprietary capital

Smarte Carte performed resiliently in the period as it continues to benefit from improved contract economics, as well as from ongoing business development initiatives including expansion of its international airport footprint with commencement of cart operations at London Heathrow Airport, a new carts contract win at Sydney International Airport and near completed roll-out of 450 new United States Postal Service lockers. At 30 September 2024, the business was valued on a DCF basis.

Table 13: Unrealised profits/(losses) on the revaluation of Infrastructure investments1

in the six months to 30 September

1 More information on our valuation methodology, including definitions and rationale, is included in our Annual report and accounts 2024 on page 217.

Scandlines

Scandlines generated a GIR of £23 million (September 2023: £10 million) or 4% of opening portfolio value in the period (September 2023: 2%).

Table 14: Gross investment return for the six months to 30 September

Performance

Scandlines performed steadily in the period. The leisure segment had a record peak summer season, whilst freight continued to deliver stable volumes in a challenging market environment. Cash generation remains strong and 3i received a dividend of £12 million in the period. At 30 September 2024, Scandlines was valued at £519 million (31 March 2024: £519 million) on a DCF basis.

Foreign exchange

We hedge the balance sheet value of our investment in Scandlines for foreign exchange translation risk. We recognised a loss of £15 million on foreign exchange translation (September 2023: £7 million loss) offset by a fair value gain of £13 million (September 2023: £7 million) from derivatives in our hedging programme.

Overview of financial performance

We generated a total return of £2,046 million, or a profit on opening shareholders' funds of 10%, in the six months to 30 September 2024 (September 2023: £1,669 million, or 10%). The diluted NAV per share at 30 September 2024 increased to 2,261 pence (31 March 2024: 2,085 pence) including the 48 pence per share loss on foreign exchange translation in the period (September 2023: 11 pence per share loss), and after the payment of the second FY2024 dividend of £332 million, or 34.5 pence per share in July 2024 (September 2023: £286 million, 29.75 pence per share).

Table 15: Gross investment return for the six months to 30 September

The GIR was £2,137 million in the period (September 2023: £1,867 million), and includes a £486 million foreign exchange loss on translation of our investments (September 2023: £119 million loss), net of the impact of foreign exchange hedging in the period. Further information on the drivers of GIR can be found in the Private Equity, Infrastructure and Scandlines business reviews.

Table 16: Operating cash (loss) / profit for the six months to 30 September

1 Cash operating expenses include operating expenses paid and lease payments.

We generated an operating cash loss of £2 million in the period (September 2023: £6 million profit). Cash income decreased to £81 million (September 2023: £88 million), principally due to the sale of our operational projects infrastructure fund capability in May 2024. Cash operating expenses incurred during the period remained broadly in line with the prior period at £83 million (September 2023: £82 million). We expect to end our financial year with an operating cash profit based on our expected pipeline of cash income more than offsetting cash operating expenditure in the second half of FY2025.

Net foreign exchange movements

The Group recorded a total foreign exchange translation loss of £466 million (September 2023: £107 million loss), including the impact of foreign exchange hedging in the period as a result of sterling strengthening by 3% against the euro, and by 6% against the US dollar.

At 30 September 2024, the notional value of the Group's forward foreign exchange contracts was €2.6 billion and $1.2 billion. The €2.6 billion includes the €600 million notional value of the forward foreign exchange contracts related to the Scandlines hedging programme.

Table 17 sets out the sensitivity of net assets to foreign exchange movements at 30 September 2024 after the hedging programme.

Table 17: Net assets1 and sensitivity by currency at 30 September 2024

1 The Group's foreign exchange hedging is treated as a sterling asset within the above table.

2 The sensitivity impact calculated on the net assets position includes the impact from foreign exchange hedging.

Carried interest and performance fees

We receive carried interest and performance fees from third-party funds and 3iN. We also pay carried interest and performance fees to participants in plans relating to returns from investments. These are received and/or paid subject to meeting certain performance conditions and when cash proceeds have been received following a realisation, refinancing event or other cash distribution and performance hurdles are passed in cash terms. Due to the length of time between investment and realisation, the schemes are usually active for a number of years and their participants include both current and previous employees of 3i.

In Private Equity (excluding Action), we typically accrue net carried interest payable of c.12% of GIR and for Action the net carried interest payable accrual is now c.1% (March 2024: c.3%) of Action's GIR, based on the assumption that all investments are realised at their balance sheet value.

In the period to 30 September 2024, we reduced our carried interest and performance fees payable balance to £464 million (31 March 2024: £818 million), primarily driven by the crystallisation of the net carried interest liability in the Buyouts 2010-2012 carry scheme of £283 million, which relates principally to Action. As a result of these payments and the reinvestment in Action in the period (see Private Equity section later in this document for further details), our net holding in Action, after carried interest, is now 57.4% (31 March 2024: 53.2%).

The strong performance of Action in the Buyouts 2010-2012 vintage and the good performance of a number of other portfolio companies in our other vintages in Private Equity led to a £42 million (September 2023: £147 million) carried interest payable expense in the period.

The carried interest and performance fees cash paid in the period was £381 million (September 2023: £510 million). The total performance fees and carried interest cash received in the period was £44 million (September 2023: £37 million), primarily from Infrastructure.

Overall, the effect of the income statement charge of £48 million (September 2023: £176 million), cash payments of £381 million (September 2023: £510 million), as well as currency translation meant that the balance sheet carried interest and performance fees payable was £464 million (31 March 2024: £818 million).

Table 18: Carried interest and performance fees for the six months to 30 September

Table 19: Carried interest and performance fees

Table 20: Carried interest and performance fees paid for the six months to 30 September

Balance sheet and liquidity

At 30 September 2024, the Group had net debt of £805 million (31 March 2024: £806 million) and gearing of 4% (31 March 2024: 4%) following the nexeye realisation and the net inflow from the Action transaction, offsetting the payment of carried interest and performance fees of £381 million and the second FY2024 dividend of £332 million. Since the end of the period, we received total proceeds of £280 million from the realisation of WP.

The Group had liquidity of £1,286 million at 30 September 2024 (31 March 2024: £1,296 million), comprising cash and deposits of £386 million (31 March 2024: £396 million) and an undrawn RCF of £900 million (31 March 2024: £900 million).

The investment portfolio value increased to £22,953 million at 30 September 2024 (31 March 2024: £21,636 million), mainly driven by unrealised profits of £2,527 million in the period.

In May 2024, the UK defined benefit pension plan ("the Plan") completed a full buy-out. As at 30 September 2024, no pension liability or insured assets remain. The Plan's only remaining assets are those surplus assets that were not needed to complete the buy-out.

Table 21: Simplified consolidated balance sheet

1 Gearing is net debt as a percentage of net assets.

Going concern

The Half-year consolidated financial statements are prepared on a going concern basis following the assessment by the Directors, taking into account the Group's current performance and outlook.

Alternative Performance Measures ("APMs")

We assess our performance using a variety of measures that are not specifically defined under IFRS and are therefore termed APMs. The APMs that we use may not be directly comparable with those used by other companies. Our Investment basis is itself an APM.

The explanation of and rationale for the Investment basis and its reconciliation to IFRS is provided later in this document. The table below defines our additional APMs and should be read in conjunction with our Annual report and accounts 2024.

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Principal risks and uncertainties

3i's risk appetite statement, approach to risk management and governance structure are set out in the Risk section of the Annual report and accounts 2024, which can be accessed on the Group's website at www.3i.com.

The Half-year report provides an update on 3i's strategy and business performance, as well as on market conditions, which is relevant to the Group's overall risk profile and should be viewed in the context of the Group's risk management framework and principal risks as disclosed in the Annual report and accounts 2024.

Principal risks

The principal risks to the achievement of the Group's strategic objectives are reported on pages 89 to 93 of the Annual report and accounts 2024, and categorised into four main areas:

External - External risks from external factors including political, legal, regulatory, economic and competitor changes, which affect the Group's investment portfolio and operations.

Investment - Investment risks in respect of specific asset investment decisions, the subsequent performance of an investment or exposure concentrations across business line portfolios.

Operational - Operational risks from inadequate or failed processes, people and systems or from external factors affecting these.

Capital management - Capital management risks in relation to the management of capital resources including liquidity risk, currency exposures and leverage risk.

The principal risks and risk mitigation plans are reviewed quarterly by the Group Risk Committee and have remained broadly similar over the half-year period. During the period, the risk of "Government fiscal and economic policy changes" was promoted from the watchlist to a principal risk due to the increasing pressure on government deficits across core markets causing likely changes in fiscal and economic policies and creating uncertainty for businesses. 

The principal risks and uncertainties are expected to be substantially the same over the remaining six months of the financial year. They continue to be closely monitored and may be subject to change.

Reconciliation of the Investment basis to IFRS

Background to Investment basis used in the Half-year report

The Group makes investments in portfolio companies directly, held by 3i Group plc, and indirectly, held through intermediate holding company and partnership structures ("investment entity subsidiaries"). It also has other operational subsidiaries which provide services and other activities such as employment, regulatory activities, management and advice ("Trading subsidiaries"). The application of IFRS 10 requires us to fair value a number of investment entity subsidiaries that were previously consolidated line by line. This fair value approach, applied at the investment entity subsidiary level, effectively obscures the performance of our proprietary capital investments and associated transactions occurring in the investment entity subsidiaries.

The financial effect of the underlying portfolio companies and fee income, operating expenses and carried interest transactions occurring in investment entity subsidiaries are aggregated into a single value. Other items which were previously eliminated on consolidation are now included separately.

To maintain transparency in our report and aid understanding, we include a separate non-GAAP "Investment basis" consolidated statement of comprehensive income, financial position and cash flow. The Investment basis is an APM and the Chief Executive's review and the Business and Financial review are prepared using the Investment basis, as we believe it provides a more understandable view of our performance. Total return and net assets are equal under the Investment basis and IFRS; the Investment basis is simply a "look through" of IFRS 10 to present the underlying performance.

A more detailed explanation of the effect of IFRS 10 is provided in the Annual report and accounts 2024 on page 75.

Reconciliation between Investment basis and IFRS 

A detailed reconciliation from the Investment basis to IFRS basis of the Consolidated statement of comprehensive income, Consolidated statement of financial position and Consolidated cash flow statement is shown later in this document.

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Reconciliation of consolidated statement of comprehensive income

Reconciliation of consolidated statement of financial position

Reconciliation of consolidated cash flow statement