3i Group plc

Good day and thank you for standing by. Welcome to the 3i group PLC half-year results presentation webcast. At this time all participants are in a listen-only mode. After the presentation there will be a question and answer session and instructions will follow at that time. Participants can also submit questions to the webcast page using the ask a question button. Please be advised that today's conference is being recorded. I would now like to hand over to the chief executive of 3i Group PLC, Simon Boras, to open the presentation. Please go ahead.

Good morning. Welcome to 3i's interim results presentation. This was another good half for 3i. We delivered a total return of 13%, and that gives us a net asset value per share at the end of September of 28 pounds and 57 pence. compared to £22.61 at the interim last year. That's after the payment of a 42.5 pence per share second dividend and a 78 pence per share gain on foreign exchange translation. We ended the half with a gross investment return of 14% from private equity and 9% from infrastructure. Private equity delivered another good return, with 98% of the portfolio by value, growing earnings in the 12 months to the end of June 2025. Action continued to deliver a very good performance, and we saw good growth from the broader consumer portfolio. We secured two good realizations in the first half, as well as a significant capital restructuring and distribution from Action in October. Our private equity portfolio is defensively positioned and is generally trading resiliently. The challenges we see for a limited number of assets are reflected in their valuations. We remain cautious about the general macro environment and continue to be careful in evaluating new investment opportunities. Earnings growth across our top 20 private equity portfolio has been good. Companies making up some 86% of the portfolio value have been growing earnings by more than 10% over the last 12 months. We have only four mostly smaller companies where earnings have declined over this period. We saw earnings momentum drive positive portfolio value moves in the half. And there were no notable write downs in this period. Action has continued to expand and grow. In the first nine months of the year, net sales were up 17.4% and operating EBITDA up 16.3% to 1.563 billion. Like-for-like sales to the end of September were up 6.3%. Once again, the volume of transactions has been the prime driver of like-for-like growth across Action's estate. LTM operating profit to the end of P9 grew to 2.3 billion euros. P10 was a challenging month. That's due in part to last year's very high like-for-like growth and perhaps this year's unusually mild and very un-Christmassy weather. Net sales to the end of October stood at 12.54 billion euros. Year-to-date like-for-likes to the end of P10 were 5.7%, reflecting the high growth hurdle from last year and the continuing softening consumer environment in France in particular. Up to and including last week, we've added 272 new stores. We're now on track to add approximately 380 new stores by the end of the year. That will be a 13% increase in store numbers over the calendar year. We now have 180 stores in Italy and 90 stores in Spain, as well as eight in Switzerland and five in Romania. These two new countries have started very well. We do believe actions like for like sales at 5.7% are well ahead of many European retailers, a number of whom are experiencing negative non-food like for likes. And that performance by Action is very impressive when you set it against Action's cumulative 56% growth in like-for-likes over the previous four years. Action's low prices and mix of necessities and surprising products continues to attract a growing volume of transactions in all 14 countries where we operate. The French like-for-likes are positive to the end of P10. but they are some way below the rest of the group. France accounts for about one-third of like-for-like sales. That means that the non-French network is delivering like-for-likes of almost 8%. So France is a challenge, but we are well set for a big sales season to come with a strong Christmas assortment, good availability from the supply chain, and some very competitive prices. 3i acquired a further 2.2% stake in Action in September from GIC. We settled that transaction by the issuance of 19.9 million shares and took our holding up to 60% of Action at the end of the first half. Action completed another financing in October, raising 1.6 billion euros in the US and European debt markets. Once again, demand for Action's debt was strong. over two-thirds of that new debt was fixed at an all-in-euro cost of under 4.6%. And pro forma leverage stood at three times at the end of October. Action also took the opportunity to undertake 3.1 billion euros of leverage-neutral repricing and extension of part of its current debt package. That delivered a further interest cost saving of 14 million euros on top of the 33 million we've achieved previously. We used 755 million pounds of our 944 million pound distribution to increase our stake in action further to 62.3%. That left us with net proceeds of 189 million pounds from the share redemption. And I'd like to end this section on action by commenting on action's March CMD guidance. Firstly, this year's store opening program is going well. And as I said a minute ago, we now expect to open approximately 380 new stores. That's an increase over the March guidance we gave you. It is also worth highlighting that trading from these new stores, which are not in the like-for-like numbers, has been ahead of our expectations so far this year. On like for likes, while most countries in our store network are broadly in line or ahead of plan, the market in France, our largest store network, is clearly challenging. We've seen a meaningful step down since the second week in September, which continued through P10. Food inflation is very challenging for those on low and average incomes. And the savings rate is at an all time high in France, reflecting those with more cash having concerns with the political situation. So there is a risk that France pulls us below the 6.1% like for like guidance for the year. But frankly, it's too early to tell. On EBITDA margin, the sales mix is supportive. We've had good higher margin category performance over the first three quarters and good trading from new stores. But the final outcome, as with like for likes, will be determined by trading in the last period, given its very high level of sales and very high level of margin. Okay, I'd now like to move on to Royal Sanders, our second long-term hold asset. Royal Sanders is having another strong trading year. They've delivered good organic growth and excellent cash flow so far this year. Our private equity portfolio, X-Action Royal Sanders, was valued at 4.7 billion pounds at the end of September. The portfolio is invested in broadly equal parts across our four sectors. And as I said earlier, we're seeing good overall momentum in the private equity portfolio, despite anemic growth in Europe and the challenges of the US tariff policy. We certainly have more than our fair share of companies which are still able to grow in this tricky environment. And we secured two good realizations with healthy uplifts over their marks and returns well in excess of our two times target. The infra team is also producing a good performance with some excellent returns from their portfolio and a good level of fee income. On that note, I'll hand over to James who can fill you in on more detail.

Thank you, Simon. And good morning, everyone. Our total return on equity for the half year was 13%. Again, that demonstrates the ability embedded in our portfolio to deliver consistent compounding returns year after year. You can see the detail here. The increase in NAV was principally driven by value growth of 250 pence per share. During the half, foreign exchange movements were positive, driven by the depreciation of the pound against the euro. That gave us a positive contribution of 78 pence. The dividend payment in the half reduced NAV by 43 pence. That meant we closed the half with an NAV per share of 28 pounds and 57 pence. You can see the components of the 250 pence per share or 2.5 billion pounds of value growth here. As Simon said, action continued its growth trajectory with a contribution of 2.1 billion pounds in the half. The PE performance increases of 219 million significantly outweighed the performance decreases of 43 million. And that was despite a challenging macroeconomic background in many of our core markets. Royal Sanders and Audley were the standout contributors to the 219 million increase. There were no material detractors in the half. As part of the valuation process, we took four multiples down But the combined impact was relatively modest at £24 million. The quoted investment portfolio had a good half, with a positive contribution of £139 million. That came from the combination of increases in both the 3IN and basic fit share prices. The uplift to imminent sale of £25 million relates to the premium we received on the sale of MATE. The portfolio ended the period with a value of 29.3 billion pounds. We continue to apply our valuation process consistently, and markets have been broadly supportive over the period. So, starting with action, we continue to value action on a post-discount multiple of 18.5 times its LTM run rate EBITDA of 2.5 billion euros. As at 30th of September, that gave us an enterprise value for action of 46.9 billion euros. The value on the 3i balance sheet, which takes into account our increased shareholding level as of 30th of September of 60%, was 21.5 billion pounds. If we look back a year to September 2024, when action was valued as an EV of 38.2 billion euros, and compare that EV to the outturn for the LTM run rate EBITDA this September, you arrive at a forward multiple of 15.1 times. These are then the multiples we consider when comparing action to the peer group. These are the usual two charts we present, this time covering the period from September 2024 to September 2025. Whilst there have been some movements within the peer group, we continue to see that the average multiple is stable. So we remain comfortable that Action, with its strong operational KPIs, should trade at a premium to the average. The other important point to note is that there have been two third-party trades in Action's equities since our last year end, one in September with GIC and one in October with a broader group of LPs. In that second case, there were both buyers and sellers among the LP group. Both transactions were completed at valuations corresponding to actions June and AV, which reflected the 18.5 multiple we used today. Let's now have a look at the valuation multiples of the rest of the portfolio compared to the peer sets. This chart shows the valuation multiples for our PE assets in dark blue and the average of the multiples from the relevant valuation peer sets in light blue. The red arrows highlight assets for which the multiple was actually reduced in the half. In each case, these decreases reflect company or market specific factors in combination with an assessment of proximity to exit. The weighted average multiple X action is 13.1 times, which for a portfolio aiming to double value over a four to six year time period, we think is fair. During the period, we secured the sale of MPM and MATE. Those transactions reinforced the integrity of our valuation policy. We gave the detail behind these transactions at the recent PECMD presentation, so I won't go over that again. It is, however, worth noting that both assets were sold at good premiums for their opening book values. In MPM's case, this commanded an 18% premium. and for MATE, a 34% premium. Whilst this has been a consistent feature of nearly all 3i exits over time, I think it is particularly impressive when you consider that these transactions were executed against what remains a challenging environment for exits. So turning back to the business line performance for the half year, our private equity portfolio generated a gross investment return of 14% for the half. The gross investment return was 3.2 billion pounds. Of that 3.2 billion, 805 million was the positive impact of FX. The cash realization of 391 million was mainly from the sale of NPM. Investment of 732 million included our purchase of an additional 2.2% of action in the period. The overall PE portfolio value ended the period at 27.1 billion pounds. In terms of the leverage position, we show that on the next slide. As of 30th of September, there was very little change from the position at the full year. For completeness, I've added a couple of extra bars, setting out the pro forma leverage position, including the action refinancing, which took place in October. The maturity profile continues to be very well managed. I'd also like to remind you of our overall approach to leverage across the portfolio. Our debt kit team covered this in detail a couple of years ago in the PECMD in September, 2023. We favor a prudent approach to leverage assessed on a company by company basis. Action remains one of the largest names in the syndicated leveraged loan market in Europe. And today, Action now has a meaningful presence in the loan market in the US. Its debt is well syndicated with over 150 leveraged loan investors For the PE portfolio, X-Action, we value a diverse mix of lender types, but we're always focused on simple senior-only financing structures, with over two-thirds of overall lending provided by relationship banks. Just to be clear, today we have no external subordinated debt or unitranche lending in the portfolio. So, on to infrastructure. It was a better result for the infrastructure segment in the period. That improvement was largely driven by the performance of the 3IN share price, which increased by 14% over the period. The underlying 3IN infrastructure portfolio as a whole is doing well, and TCR is a standout performer. Despite some continued weakness in the freight market, Scanlines also continues to deliver a robust performance. including scanlines, our infrastructure portfolio is valued at 2.2 billion pounds, and it produces a very useful cash income contribution, as you can see on the next slide. Overall cash income totaled 87 million pounds, and we ended the period with a small 12 million cash operating loss. Our expectation remains for a cash operating profit for the year. So now let's take a look at the balance sheet. The group's approach remains one of conservative capital management, with net debt of 772 million pounds and gearing of 3%. We remain well within our tramlines. Our slightly larger RCF gives us liquidity of over 1.6 billion at the end of the period. As of 11th of November 2025, the group's cash balance was 777 million. Before we leave the balance sheet completely, I thought I'd give you a quick update on the net exposure by currency and the hedging position. In the six months of September 2025, we experienced a currency tailwind of 802 million. That principally reflects the 4% depreciation of sterling against the euro during the period. Hedging has reduced this gain by 31 million, resulting in a net gain after hedging of 771 million in the half. That 771 compares to a net currency loss of 466 million in the same period last year. As you know, sterling has continued to weaken, and you can see the updated sensitivities net of our hedging program at the bottom of the slide in the banner. So finally, let's turn to the dividend. Here you can see our dividend policy. In line with that policy, we will pay our first FY26 dividend of 36.5 pence per share in early January. That 36.5 pence per share is half of last year's full year dividend total. Now, before we get into Q&A, I will hand back to Simon.