3i Group (III) Investor Update summary

Portfolio performance and outlook

• Private Equity and Infrastructure portfolios are performing strongly, with Action, Royal Sanders, European Bakery Group, and Audley Travel delivering robust growth despite a weak macroeconomic backdrop in the UK and Europe.

• Action reported €9.3 billion in year-to-date sales (up 21%), like-for-like sales growth of 9.6%, and operating EBITDA expected to reach €1,880 million for the 12 months to September 2024, a 23% year-on-year increase.

• Cash generation remains robust, with €779 million in cash balances as of September 2024.

• Action has opened 179 net new stores year-to-date and is on track to exceed 330 new stores in 2024.

• Healthcare and software assets are gaining momentum, and several previously challenged assets are returning to better trading trajectories, though Wilson HCG has not yet seen recovery in recruitment outsourcing.

Investment strategy in services and software

• Focus is on selective, disciplined investments in IT services, tech-enabled outsourcing, and mature software, leveraging global reach and local expertise.

• Preference for profitable, cash-generative companies in growing markets, while avoiding high technology risk.

• Buy-and-build and bolt-on acquisitions are key to value creation, helping to average down entry multiples and create operational synergies.

• Conservative approach to leverage, primarily using senior debt.

• Track record of successful investments in tech-enabled outsourcing and mature software, with strong returns and IRRs (e.g., Trescal, ATESTEO, WilsonHCG, Magnitude).

Value creation and ESG initiatives

• Systematic value creation framework includes building consolidation platforms, accelerating recurring revenues, complementing service portfolios, and creating operational leverage.

• Evernex and MAIT illustrate successful scaling, recurring revenue growth, and operational efficiency through multiple add-ons and digitalisation.

• Constellation stands out for ESG leadership, with a mission to reduce carbon emissions, circular IT services, and internal decarbonisation targets.

• 3i’s ecosystem approach and permanent capital model foster strong partnerships and alignment with management teams.

• Buy-and-build and SaaS transitions have driven high IRRs and successful exits in the portfolio.