TIDMIII
RNS Number : 5335U
3i Group PLC
30 July 2020
30 July 2020
3i Group plc
FY2021 Q1 performance update
Strong start to FY2021
* Increase in NAV per share to 858 pence (31 March
2020: 804 pence) and total return of 6.8% for the
three months to 30 June 2020
* Resilient performance from the majority of the
Private Equity portfolio in the first quarter of
FY2021, despite the significant economic and social
disruption caused by the Covid-19 pandemic
* Strong sales, EBITDA and cash generation at Action
following the reopening of all stores across all
geographies in mid May 2020
* Provided GBP37 million of capital to Basic-Fit and
Hans Anders to support the businesses and completed
significant bolt-on acquisitions for Evernex and our
Bioprocessing platform investment in July 2020
* Good share price recovery from 3i Infrastructure plc
("3iN")
* Issued a 20-year GBP400 million, 3.75% bond, further
strengthening the balance sheet against a prolonged
Covid-19 scenario
Simon Borrows, Chief Executive, commented:
"We delivered a robust result for the three months to 30 June
despite the significant economic and social disruption caused by
the Covid-19 pandemic. Our Private Equity and Infrastructure
portfolios have been resilient and delivered strong earnings
performance this quarter.
Action is rebounding impressively, and we have seen good share
price recovery at 3i Infrastructure and Basic-Fit. Our investment
teams remain busy and in July 2020, we completed two transformative
Private Equity bolt-on acquisitions for Evernex in France and for
our Bioprocessing platform in the US."
Private Equity
Portfolio performance and valuation at 30 June 2020
The Private Equity portfolio demonstrated resilient performance
in the first quarter of FY2021 despite the significant economic and
social disruption caused by the Covid-19 pandemic.
Action is executing a very impressive recovery. Since all stores
reopened in mid May 2020, sales, EBITDA and cash generation have
been strong. P7 (July 2020) has continued this strong performance
with Action's cash balance closing at over EUR631 million,
exceeding its target of reaching EUR500 million cash by the end of
July 2020 . LTM sales are now back above the FY 2019 sales total
and LTM EBITDA to the end of P7 has recovered to EUR539 million,
having dropped to EUR491 million at the end of P4 (April 2020).
Action opened 48 new stores in the seven months to the end of July
2020 and is on track to meet its target to open 152 new stores in
the year. As a result of this rapid recovery, we have reverted to
our normal valuation approach for Action using its run-rate
earnings to 30 June and a multiple of 18.0x net of the liquidity
discount. This results in a very similar enterprise value to the
valuation at March 2020, with the increase in value of our stake to
GBP3,733 million (31 March 2020: GBP3,536 million) being
attributable to the excellent development of Action's cash
position.
We continue to see good momentum in our portfolio companies
exposed to medical technology (Cirtec Medical and our Bioprocessing
platform), personal care products (Royal Sanders), e-commerce
(Lampenwelt) and other speciality manufacturers (Tato), which are
all experiencing strong demand and recorded good earnings and value
growth in the quarter.
Conversely, g lobal t ravel restrictions continued to weigh on
Audley Travel, which, as expected, experienced a large decline in
year-on-year bookings in April, May and June 2020, with all
departures restricted during this period. We continue to support
Audley Travel as we believe there will be significant value upside
as travel restrictions are eased further and the business resumes
full operations. ICE's performance in Q1 FY2021 was relatively
resilient, largely due to a significant portion of its revenue
being tied to membership products that have held up well since the
start of the pandemic, whilst membership cancellations are
effectively in line with 2019 levels. Q Holding continued to
experience softer trading in
its QSR business that has exposure to the automotive
industry.
Private Equity investments
Private Equity Investment
investment Type Business description Date GBPm
---------------------------- --------- ---------------------------------- ------------ -----------
Hans Anders Further Value-for-money optical retailer April 2020 20
Basic-Fit Further Discount gyms operator June 2020 17
---------------------------- --------- ---------------------------------- ------------ -----------
Total Q1 FY2021 investment 37
----------------------------------------------------------------------------------------- -----------
In April 2020, we completed the GBP20 million equity injection
in Hans Anders. The company's stores have resumed trading with
safety measures in place to protect employees and customers and
recovery of sales has been ahead of expectations.
In June 2020, we invested GBP17 million in Basic-Fit to provide
expansion capital. In the period, the majority of Basic-Fit's gyms
reopened which was reflected in a strong rebound in the share price
at 30 June 2020 to EUR23.35 per share (31 March 2020: EUR15.20)
valuing our investment in the business at GBP163 million (31 March
2020: GBP93 million). As of the date of this announcement, all the
gyms are open.
In June 2020, Evernex, in which we invested in October 2019,
announced the acquisition of Technogroup, the leading third-party
maintenance player in Germany, Austria and Switzerland.
Subsequently in July 2020, the investment completed with 3i
investing c.EUR45 million of additional capital to finance the
transaction alongside Evernex's management team, who reinvested
c.EUR3.5 million.
Also, in July 2020, our single-use Bioprocessing platform
acquired Sani-Tech West, Inc. (Sani-Tech West and subsidiaries
SaniSure(R) and SureTech), a leading US-based manufacturer,
distributor and integrator of single-use bioprocessing systems and
components. This acquisition will significantly expand the combined
group's global footprint and market-leading product portfolio.
Infrastructure
3iN's share price rebounded well in the three months to 30 June
2020 closing at 292 pence (31 March 2020: 247 pence), valuing 3i's
30% stake at GBP786 million (31 March 2020: GBP665 million) and
generating value growth of GBP121 million. We also recognised
dividend income of GBP12 million from 3iN in the quarter. The
Infrastructure portfolio overall is performing as expected. In the
period, Infinis completed and funded the acquisition of the
development rights for a 6MW solar PV project at the Ling Hall
landfill from REG Holdings Limited.
We have established a new 3i-managed vehicle that will co-invest
alongside 3i Infrastructure plc in certain transactions, with a
commitment of EUR400 million from Industriens Pension of
Denmark.
In the period, our 3i European Operational Projects Fund
completed the acquisition of a portfolio of eight operational
projects in France from DIF Infrastructure III. The Fund has now
deployed c.60% of its total commitments.
Scandlines
Scandlines demonstrated resilient performance in the quarter,
supported by stable freight volumes. On 15 June 2020, the
Danish-German border opened, albeit with some restrictions still in
place. As a result, car volumes have increased considerably. Since
the middle of July 2020, residents of Sweden are no longer required
to quarantine on arrival in Germany and are now able to transit to
Germany via Denmark. Our core DCF valuation assumptions remain
consistent with the March 2020 valuation.
Top 10 investments by value at 30 June 2020
Valuation Valuation
Valuation Valuation Mar-20 Jun-20
basis currency GBPm GBPm Activity in the quarter
---------------- ----------- ----------- ---------- ---------- --------------------------------------------------
Action Earnings EUR 3,536 3,733
----------- ----------- ---------- ---------- --------------------------------------------------
3iN Quoted GBP 665 786 Accrued GBP12 million FY2020 final dividend
----------- ----------- ---------- ---------- --------------------------------------------------
Scandlines DCF EUR 429 452
----------- ----------- ---------- ---------- --------------------------------------------------
Cirtec Medical Earnings USD 302 349
----------- ----------- ---------- ---------- --------------------------------------------------
WP Earnings EUR 244 248
----------- ----------- ---------- ---------- --------------------------------------------------
Tato Earnings GBP 196 239
----------- ----------- ---------- ---------- --------------------------------------------------
Royal Sanders Earnings EUR 198 234
----------- ----------- ---------- ---------- --------------------------------------------------
Evernex Earnings EUR 217 231 Announced acquisition of Technogroup in June
2020, subsequently completed in July 2020
----------- ----------- ---------- ---------- --------------------------------------------------
Hans Anders Earnings EUR 196 222 Completed GBP20 million investment to support the
business
----------- ----------- ---------- ---------- --------------------------------------------------
Havea Earnings EUR 182 213
----------- ----------- ---------- ---------- --------------------------------------------------
The 10 investments in this table comprise 77% (31 March 2020:
76%) of the total Proprietary Capital portfolio value of GBP8,735
million (31 March 2020: GBP8,098 million).
Total return and NAV position
We recognised a net GBP144 million gain on foreign exchange in
the quarter, as both the euro and US dollar strengthened against
sterling. Based on the balance sheet at 30 June 2020 , 64% of the
Group's net assets were in euro and 15% were in US dollar and a 1%
movement in the euro and US dollar would result in a total return
movement of GBP52 million and GBP12 million respectively, net of
any hedging. The diluted NAV per share increased to 858 pence (31
March 2020: 804 pence) or 840.5 pence after deducting the 17.5
pence per share second FY2020 dividend , which was paid on 17 July
2020 .
Balance sheet
On 5 June 2020, we successfully issued a 20-year GBP400 million
bond at a coupon of 3.75%, further strengthening the balance sheet
against a prolonged Covid-19 scenario. At 30 June 2020, gross debt
was GBP975 million (31 March 2020: GBP575 million), net debt was
GBP146 million and gearing 1.8%.
At the start of July 2020, we received the proceeds from the
sale of Kinolt and the first and most significant tranche of
proceeds from the sale of ACR, which totaled c.GBP159 million. The
17.5 pence second FY2020 dividend of GBP168 million was paid on 17
July 2020.
During the period, the 3i Group Pension Plan Trustees completed
a GBP650 million buy-in transaction with Legal & General. This
transaction was completed without additional contributions from 3i
Group. The 3i Group Pension Plan benefits are now fully insured
through buy-in policies which are held as assets of the Plan. At 30
June, the IAS 19 surplus was GBP148 million and we expect to
reflect the accounting impact of this excellent outcome for Plan
members at 30 September 2020, following the actuarial revaluation
of the Plan.
Covid-19 update
We have continued to work remotely very effectively throughout
the Covid-19 lockdowns across Northern Europe, Asia and the US. Our
offices are now at different phases of a cautious re-opening as
local conditions permit and in line with local regulations and
guidance.
- ENDS -
Notes
1. Balance sheet values are stated net of foreign exchange translation. Where applicable, the
GBP equivalents at 30 June 2020 in this update have been calculated at a currency exchange
rate of EUR 1.1008: GBP1 and $1.2358: GBP1 respectively.
2. At 30 June 2020 3i had 967 million diluted shares.
3. Action was valued using a post discount run-rate EBITDA multiple of 18.0x based on its run-rate
earnings to 30 June 2020.
For further information, please contact:
Silvia Santoro
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 2020 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 2020 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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