- Annual return of 23%
- Action the main driver
- Shares up over 50%
The UK’s largest private equity trust, 3i Group (III), delivered another outstanding return for investors in the year to the end of March despite adverse foreign exchange movements which trimmed NAV (net asset value) growth.
However, with the stock price having risen more than 50% over the past 12 months there was an element of profit-taking and the shares eased 101p or 3.4% to £28.73 in morning trade.
ACTION STATIONS
For the year to March 2024, 3i generated a total return of £3.84 billion or 23% on shareholders’ opening funds, which came on the back of a 36% increase the previous year.
NAV per share increased to £20.85 despite a 33p headwind from foreign currencies, which provided a 65p per share tailwind a year earlier.
The private equity business delivered a gross investment return of £4.06 billion or 25% driven mainly by the ‘very strong’ performance of Dutch value retailer Action which makes up the bulk of the group’s portfolio in value terms.
Action generated a gross investment return of £3.72 billion or 33% thanks to annual revenue growth of 28% and a 34% increase in EBITDA (earnings before interest, tax, depreciation and amortisation).
This gain, together with strong growth in the value-for-money, private-label and healthcare sectors, more than offset temporary weakness in some of the group’s holdings in discretionary consumer spending businesses.
The infrastructure business only generated a gross return on investment of £99 million or 7% due to modest price gains for 3i Infrastructure (3IN) which lagged the underlying portfolio and NAV return, although the US infrastructure portfolio performed well for another year.
During the year, the group received £1.4 billion of cash and the private equity team invested £556 million, principally in a further stake in Action, while some of its portfolio companies made bolt-on acquisitions using their own balance sheets.
YEARS IN THE MAKING
‘The shape of today’s portfolio has served us well in this challenging year and reflects investment decisions taken over the last 12 years’, said chief executive Simon Borrows.
‘We expect that the current macro-economic conditions and geopolitical uncertainty will persist in the near term and that this will continue to impact confidence and pricing expectations in the wider mid-cap M&A market.
‘Our rigorous and disciplined approach to capital allocation remains unchanged. We have been building resilient portfolio companies that are capable of navigating through these challenging trading conditions.’
Disclaimer: The author Ian Conway owns shares in 3i Infrastructure.
