3i Group H2 Earnings Call Highlights
3i Group (LON:III) reported a 22% return on equity for the year ended March 31, 2026, as Chief Executive Simon Borrows said the investment company delivered “another good result” despite a challenging market backdrop.
Net asset value per share rose 19% to GBP 30.30, supported by GBP 4.2 billion of portfolio value growth and favorable foreign exchange movements. The company ended the year with 2% gearing and announced a full-year dividend of GBP 0.845 per share, up 15.8% from the prior year, subject to shareholder approval.
3i also launched a share buyback program of up to GBP 750 million through the end of December 2026. Group Finance Director James Hatchley said shares bought under the program will be canceled. He said the decision reflected what 3i sees as a disconnect between its share price and “fundamental value,” adding that the company has a strong balance sheet and visibility on dividend flows, particularly from Action.
Action Remains the Main Driver of Returns
Action, the European discount retailer that remains 3i’s largest investment, again accounted for the bulk of portfolio gains. Borrows said Action generated a 25% gross investment return in the year, while 3i’s private equity portfolio overall produced a 23% gross investment return.
Action’s net sales rose 16% in 2025, with more than 380 new store openings and like-for-like growth of 4.9%, on top of 10.3% growth in 2024. The retailer entered Switzerland and Romania during the year, and has since opened in Croatia, with preparations underway for Slovenia in the autumn. Borrows said Action remains on track for its store opening target this year, which would deliver close to 13% store growth year over year.
Action’s operating cash flow grew to nearly EUR 2 billion, with cash conversion of 83% of operating EBITDA. The company also approved another dividend this month, from which 3i expects to receive about GBP 255 million.
Hatchley said 3i continues to value Action at 18.5 times last-12-month run-rate EBITDA of EUR 2.65 billion, implying an enterprise value of EUR 49.1 billion as of March 31. 3i’s 65.4% holding was valued at GBP 23.7 billion. During the year, 3i acquired an additional 7.5% stake in Action for GBP 2.6 billion, partly in cash and partly through 3i share consideration.
Trading Softness in France and Germany Draws Investor Focus
While Action’s annual results were strong, management faced several analyst questions about recent trading trends. Borrows said year-to-date like-for-like growth was 2.4% as of the prior week, compared with 6.8% in the comparable period last year. He said Action was about 1.5 percentage points behind internal expectations, mainly because cooler weather had weighed on seasonal categories.
Borrows said 3i still views the pressure on Action as cyclical rather than structural. In France, he said consumer conditions have been weaker since last autumn, though footfall remains good. In Germany, he said Action has seen lower footfall since late March, which he linked to weaker consumer confidence following the deterioration in the Middle East situation, as well as cooler weather.
“We remain very confident in the German business,” Borrows said, adding that the issue appeared to be marketwide rather than specific to Action. He said Germany is still expected to open 60 to 65 stores this year.
Seasonal categories have been a major drag in recent weeks. Borrows said garden and outdoor, the largest seasonal category, produced 27% like-for-like growth in the comparable period last year but was down 3% this year. He said last year’s period benefited from a heatwave in parts of continental Europe.
Management did not change Action’s guidance. Borrows said the guidance was issued only about five weeks earlier and that less than one-third of Action’s sales and profits for the year had been recorded. He said the company continues to expect a stronger second half, helped by easier comparatives.
Price Cuts Support FMCG Volumes
Borrows said fast-moving consumer goods categories are trading well and benefiting from price reductions made in February and again in May, with more cuts planned for the summer. He said FMCG represents about one-third of Action’s catalog, while Action’s store assortment is now roughly balanced between essentials and discretionary items.
He said suppliers are seeking inflationary price increases, but Action is resisting significant increases and using its growing order volumes to manage negotiations. Borrows said Action has seen volume benefits from recent price cuts and believes it is “very much on the front foot” in pricing baskets.
Asked about online competition from companies such as Temu, Borrows said it may affect certain categories “at the margin,” but 3i does not view it as a significant factor in Action’s recent trading in France and Germany.
Non-Action Portfolio Improves
Beyond Action, Borrows said the non-Action private equity portfolio improved, generating a 14% gross investment return supported by earnings growth. He said 96% of the portfolio by value grew earnings during the year.
Royal Sanders generated strong sales and profit growth and acquired Vendoleo during the year. 3i invested additional capital in Royal Sanders, lifting its holding to more than 90%.
Hatchley said the private equity performance outside Action reflected value growth in Royal Sanders, Orderly and Luqom, partly offset by decreases related to Cirtec Medical and Wilson. Borrows said Cirtec performed well, though earnings were held back by the transition of one neuromodulation device.
3i generated about GBP 1.5 billion of portfolio cash proceeds from realizations and refinancings and more than GBP 280 million of dividend income. The company had two strong private equity realizations during the year, which management said achieved good money multiples, internal rates of return and premiums to book value.
Infrastructure Contributes Cash Income
The infrastructure business delivered GBP 104 million of cash income to 3i. Borrows highlighted 3i Infrastructure’s announced sale of TCR, the airport ground support equipment lessor, which produced a 50% uplift on realization, a 3.6 times money multiple and a 20% gross internal rate of return.
Hatchley said the infrastructure portfolio, including Scandlines, was valued at just over GBP 2.1 billion. Overall cash income across the group totaled GBP 421 million, while operating cash expenses were GBP 145 million.
3i ended the year with GBP 664 million of cash and GBP 1.9 billion of liquidity, with its revolving credit facility undrawn. Hatchley said the buyback would be funded from available capital and that 3i does not intend to raise new debt for the program.
In closing remarks, Borrows said 3i remains focused on long-term compounding and will not be distracted by short-term trading volatility. He said the portfolio’s composition and the competitive strength of its larger assets give management confidence in its medium-term momentum.
About 3i Group (LON:III)
3i is an investment company specialising in Private Equity and Infrastructure. We invest in mid-market companies headquartered in Europe and North America. We generate attractive returns for our shareholders and co-investors by investing in private Equity and infrastructure assets. As proprietary capital investors we have a long-term, responsible approach. We aim to compound value through thoughtful origination, disciplined investment and active management of our assets, driving sustainable growth in our investment companies.
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