3i Group plc (III) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the 3i Capital Markets seminar. [Operator Instructions] I'd like to remind all participants that this call is being recorded. I will now hand over to the CEO of 3i Group plc, Simon Borrows to open the seminar. Please go ahead.

Good afternoon, and welcome to our Capital Markets seminar. I'm Simon Borrows, Chief Executive of 3i. I'm joined today by James Hatchley, our Group Finance Director; and Silvia Santoro, our Investor Relations Director. I'm also joined by some executives from our Private Equity team who I will introduce shortly. The main purpose for this Capital Markets Day is to tell you about 3 of our Private Equity investments and the agenda for today is set out on this slide. There will be an opportunity to ask questions on each investment at the end of each session as well as for more general Q&A at the end. But before that, I intend to give you a brief update on the 3i portfolio. We've completed our September semiannual portfolio company reviews for Private Equity and Infrastructure. Our investment portfolio has continued to make good progress in what are more challenging markets. In our Private Equity portfolio, assets in the value-for-money consumer, the healthcare, specialty industrial and business and technology services sectors have generated strong earnings growth and have good momentum as we head into the second half of our financial year. We also see a sustained increase in demand across the travel-related assets in the portfolio. Assets exposed to discretionary spending continue to see headwinds, but we've been encouraged by the pricing power shown by a number of our more challenged companies and the ability of our management teams to use other levers in their control to partially mitigate rising energy costs, other inflation impacts and weaker consumer sentiment. Non-sterling international investments account for 87% of 3i's investment portfolio today. Action's impressive performance has continued with very strong sales and EBITDA growth. Year-to-date sales of over EUR 5.8 billion and now over 26% ahead of the same period last year with strong trading continuing across all geographies. The Action team continues to execute its strategy well, and the business continues to attract significant new customer flow through very low prices and good product availability in store. We expect LTM EBITDA to the end of P9 to be circa EUR 1.035 billion, compared to EUR 765 million at September last year and EUR 506 million at September 2019. Cash generation has continued to be strong with net debt now standing at less than 2.1x run rate EBITDA. Action has now opened 142 new stores in 2022 and remains on track to open more new stores than in 2021. And finally, Action's energy costs for 2002 are estimated to total less than 0.4% of sales. These are the 3 investments we plan to cover today, which come from our consumer, healthcare and business services teams. First up is BoConcept, which will be presented by Boris Kawohl, who is the head of our Consumer team and is based in our Amsterdam office. We purchased BoConcept through a take-private transaction in Denmark, which completed in July 2016. BoConcept is a good example of a purchase of an underperforming business where we felt confident in the fundamental strength of the brand, and we're prepared to make the operational changes necessary to return the business to a high-performing growth trajectory. Next will be a presentation on Cirtec, together with an update on our healthcare portfolio, which will be presented by Rich Relyea, who runs our New York office and leads our healthcare investments. We first invested in Cirtec in August 2017. And given the significant growth since that time, we thought we would bring it back for this session. It is a very good example of how we can scale up a healthcare asset through organic and inorganic growth. And last but not least, will be WilsonHCG which will be presented by Rahul Lulla, who is a partner in our New York office and focuses on the business services sector. We completed the investment in Wilson, a recruitment process outsourcing business in March 2021. Again, a good example of us having high confidence in the potential of the business and purchasing it in the darkest days of the pandemic. I'll now hand over to Boris for the presentation on BoConcept.

Thank you, Simon, and good afternoon, everybody, on the call. My name is Boris Kawohl. And as Simon mentioned, I'm a partner in our Private Equity team and heading our consumer sector team. I'm based in Amsterdam and joined 3i 17 years ago. And BoConcept as well as the investments I look after, and I'm pleased today to go through the case. To start, I would like to give you a quick snapshot of our Benelux office and our consumer investment strategy before going into BoConcept. The BoConcept -- sorry, the Benelux office was set up in 1998, and we currently have 11 investment professionals in our office. Since 2001, when we started focusing on private equity investments, we have invested EUR 2.4 billion in 24 deals, and we have a pretty solid money multiple and IRR track record that you see on the slide above. It not only is the most stellar investment but also the rest of our investments have realized strong results. And what I'm particularly proud of is that we have not had a loss on any of our investments we did in the last 15 years. And on the right side of the slide, you see our current portfolio where BoConcept is one of them. On the next slide, you see the consumer sector within 3i, which is one of our key sectors with the total equity value of almost GBP 10 billion. And we have realized strong results not only on Action as you see on the top right side, but also on our consumer portfolio generally, where we today have 12 portfolio companies with a total value above GBP 2 billion, where we had realized strong returns over the years. On the left side, we try to summarize in a very concise way how we try to invest in the consumer sector. We focus on what we call a winning customer proposition. We try to scale what works well with consumers rather than try to fix a consumer proposition. What we are, however, are willing to do as being an active owner in improvement to operations of the companies because that allows us to invest in the companies at a reasonable valuation. International growth is a key value driver in almost all our consumer investments as it allows us to compound the returns for a longer period if we are able to create a great company from goodwill. Finally, capital efficiency is key criteria being it for organic or inorganic growth stories since otherwise, the sales growth doesn't create a long-lasting value growth. And now let's turn to BoConcept, which I think fits well into the criteria I just described. On the next slide, you see a snapshot of the company. BoConcept is a global interior design brand with a franchise business model, which is active in the affordable, premium and also furniture market. The purpose of the company is transform spaces into extraordinary places and its vision is to grow the business by bringing inspiration and better living experience to people's homes, leisure and workspaces around the world. And I mentioned also here because I want to make it clear that this is not only about selling a piece of furniture, but BoConcept has a much more integrated approach. The company was founded more than 70 years ago in Denmark. It has today 316 branded BoConcept stores with 140 franchisee partners in 67 countries around the world. 93% of our customers have the intent to repurchase again. And I think it links a point I just made that we wanted to work with winning customer propositions. So this concept is working well with its customers. And on the financial side, the company realized $200 million of their sales with $37 million EBITDA, which is an 18% EBITDA margin and those figures were realized in the financial year ending April 2022. And these figures are relevant for the group, we invested in, so as a BoConcept franchisor. On the total system-wide sales, the sales are roughly EUR 0.5 billion across the globe. On the next slide, we go a little bit deeper into the company where we provide a number of splits into the sales. On the left side, you see the products list, upholstery. Because there was a the maturity of sales followed by board and chairs, and accessories are only a minor percentage of the total sales. In the middle, you see that the franchise stores are the key value generators and the revenue generators for the company and own stores only represents 24% and which is mainly Japan where we have our own stores since franchise malls work less well in that market. And B2B represents only 10% of sales. Finally, on the right side, EMEA is the biggest market for us with roughly 60% followed by APAC region with 27%, and the Americas, mostly South America was 14%. Then on the next slide, we summarize some of the highlights of the transaction when we invested in 2016. It was a take private from the Copenhagen Stock Exchange where 3i invested GBP 130 million into the company. And back then, we saw 3 key value drivers: one, operational upside; two, the cash generation of the business, driven by its franchisor business model; and the third one final growth. And now we would like to show a short video of our BoConcept CEO, Mikael Kruse Jensen. [Presentation]

Our CEO for BoConcept. And hopefully, you have a good understanding of BoConcept's customer proposition and the business. What I would now like to do is focus on the investment side. And on this slide, we have summarized the key features we see in this investment. And then on the next slide, I will go deeper into each of them. So first of all, it's a global affordable premium furniture brand. It's the best-of-breed franchisor with globally proven appeal. It's stable, low risk and highly cash-generated business model. It's asset-light and highly scalable. It operates in a large and growing addressable market. It has a strong management team with a proven growth roadmap. It has a long-term growth track record and demonstrated global white space. So let's start with the first one, on the next slide. It's a leading global affordable premium furniture brand. So the company works with leading designers, which you see some of them on the left side. BoConcept specifies the products that are needed that fit into the overall collection, including price points. And the designers with BoConcept works often for many years already. At the commercial incentive to design towards these specifications to come up with products with a global appeal. In the stores, you see there, it's a customizable approach, whether customers can select what fits them well. And it's not about selling one piece of furniture, but we need to our customers furnish their houses and apartments. And on the right side, you see a picture of the service we provide, where interior design service is a key feature and where we offer services that are -- that include delivery and assembly at people's home, which are included in the prices they pay for the product. On the next slide, we look at the end customer angle where we have done a recent survey with OC&C to understand our customers even better. And it came out as very positive where our customers rate BoConcept very positively which is also interesting, given that we have a homogeneous approach to our global business. In the middle chart, you see that BoConcept go really well on almost all of the key purchase criteria of our end customers. And that translates on the left side to the high repurchasing attend, but also to the very high global Net Promoter Score of 49. On the next slide, you'll see a summary of the features on the franchise model, which is strong for the franchisees and also for BoConcept as a franchisor. For the franchisee, it gives them reasonable exclusivity for the sales of the BoConcept brand. They have access to proven global working model that access to best-in-class tools that helps them to support the business. It requires low upfront investments since it's a standardized approach with a standardized store format across the globe. It has minimal net working capital needs since the products are made to order and the customer prepays for them. And they realize high gross margins, which gives them a strong commercial upside and incentives to grow. For the franchisor, the revenues are very stable since the company sales at the margin, does the franchisees in essence, they get a profit share -- a sales share rather than a profit share. And it gives BoConcept, global growth options due to the model that has proven to work in so many countries. And growth is highly attractive here due to limited CapEx and working capital investments required to realize the growth. The platform is highly scalable as it's a homogeneous concept. And this delivers a stable and growing franchisee base, where 100% of our franchisees said is that they would re-sign with the company. On the next slide, we'll go in a little bit more detail about the stability and low-risk feature of the cash-generative business model. So first of all, the companies are very diversified, which mitigates the risk factor of this industry. The second one is the focus is on the well-off customer base, where spending is less volatile. Third one is this franchise business model, where we have strong partners, but which also requires no investments from the BoConcept side while it is highly cash generator. The production is largely outsourced. Again, requiring no investments into the growth. And number 5 and 6 refer to the business model of major order products where there is no inventory in the business model that reduces risk of obsolete stock and also minimizes any cash requirements to facilitate the growth. And a good proof point on the cash generation of the business is that we have almost fully returned our initial investment despite a low entry and current leverage of the business of below 3x EBITDA. The next slide shows the asset light and highly scalable character. But I already mentioned that the production and retail execution are outsourced with our suppliers and the franchisees. The light blue part is what is done in-house, which is a collection management, the part of the design and the retail format and marketing approach. And this gives BoConcept, a very high return on capital and very little Capex requirements on an annual basis. The next slide illustrates the large market BoConcept is operating in. So what you see here is on the left side, is it a global furniture market, has a size of more than EUR 130 billion. And that compares to system-wide sales of BoConcept of roughly EUR 0.5 billion. And on the right side, you see the key countries on a global basis, where BoConcept today is present in all the key countries, which you see on the right side. And the business has done a bottom-up analysis of the white spots and has identified more than 700 of them. The next slide shows current management team, and we are very proud that we have been able to select this team. And as you see on this slide, many of them have joined after we have invested and we have been able to attract them and are very proud that they today operates business. And on the right side, you see 2 of our Board members with Sanna as our Chairwoman, and both of them have part of our journey since we invested in 2016. So finally, on the next slide, the long-term growth track record of the company where sales have grown from EUR 122 million in 2011 to EUR 200 million in the year just ended in April 22. So what you can see here that there has been an attractive growth and sometimes we get the question that we can't grow the company faster. But what is critical for us is that we have a very strong franchise partner, and we don't want to compromise on the strength of the people we work with as it would increase the volatility of the performance. At the same time, we also -- we don't want to increase the number of stores we run ourselves because we want to -- we remain a highly cash-generative business model with a low risk on our cash we could generate. With that, I would like to continue on the next slide with what we have done since our investment in 2016, where we have fundamentally improved the operations of the business. The top left one is the management team, which we just discussed, and we have introduced since our investment. On the operational side, we have focused on improving the franchise base. We have strengthened the retail processes and tools available. We have built an omni channel expertise in the company. And we have refined store format to facilitate omni-channel approach. On the right side, this is a result of that. It's not only that the NPS score is very high at plus 49%, but it also has materially improved from 27% in 2017. And then on our [indiscernible] valuation, it has taken some time before this became visible, but we believe we have really increased the strength of the business and have built a better business for the future. I will now briefly go into each of these levers on the next slide. So our franchise partners are key to our operations. In the first phase, we had to focus on changing some of the franchisees as they were not strong enough to continue the journey with us or since they did not want to comply with the requirement and agreements we have in that place. That meant that we had to let some of the franchisees go and that we had to close some of the locations. And this clearly has an impact on the sales and EBITDA performance since every sale from the franchisee generates a profit for BoConcept as a group. But we believe that this is the right thing to do to create a strong base to further grow in the future. And that's what we have done is the next phase with the strong partners we have here today, who have a strong business themselves. We are accelerating as a growth and driving the growth by opening more stores and the like-for-likes in their stores. And on the right side, you see that the share of multi-unit franchisees has increased since we do grow with our existing partners, and this allows them not only to scale the operating skills but also some of the back office that is involved with running our franchise. The next slide shows some of the tools that we have introduced over the last couple of years. And I want to highlight 2 of them here. So the first one is sales staff management. Where we help and provide tools to the franchisees to hire, retain and incentivize its right sales people who can help the customers in the best way, but also drive profit for our franchisees and ourselves. And the second one is in the top right corner, chasing excellence, which we do through our virtual academy, where we have all tools available to train our franchisees to help our franchisees train their people, and we continue to add new tools to that toolbox so that we continuously develop our business. The next slide shows some of the features that we have introduced in Mikael just referred to them in the video where we have put a focus on the omni-channel experience for the customers, which is an omni-channel approach and is an online approach. We could just sell our products but that's not our focus. We try to be present in the early phase of the orientation of the customers. That's what you're seeing here with the Pinterest numbers, where we have more than 10 million visitors per month. But at the end of the day, we try to get customers into our stores to help them talk to our salespeople and preferably as an appointment with one of our interior designers in the stores. On the next slide, you see some pictures of the new store concept that we have created and that is homogeneous across the globe. And as I mentioned, you see in the middle here, the customized approach is a key element where the customer chooses the furniture they prefer and which is then made for them on order. So going forward, there are clear strategic priorities of the company, which is on the next slide. We want to continue to scale with our strong partners that we have today. We want to create and to maintain the fans the brand has across the globe. We will continue to raise our retail proposition by continuing to work on what we have done over the last couple of years. We will continue to strengthen our affordable premium offering by working on our designs and continuously upgrade our products. And finally, to further grow in the B2B segment, where we have the partnership with Haworth, where we are working together with them on a global basis to penetrate that market. So we believe that we are on a journey to evolve BoConcept to an extraordinary retail franchisor. ESG is at heart of BoConcept, and it's in the DNA of the company, as you see on the next slide. It's an integral part of BoConcept, in our discussions with the Board and with the management team. BoConcept has joined the UN Global Compact Initiatives to build a more sustainable and inclusive global economy and has published its first CSR report this year. The key pillars for the company are environment, suppliers, customer society and employees. On the environmental side, the first priority of the company is to produce high-quality products that are long-lasting without any obsolete inventory throughout the value chain. The company has done Scope 1 and Scope 2 CO2 reporting this year, it's in place, and the company has communicated its ambition to reduce emissions by 25% by 2023 -- sorry, by 2030. Another element on the environmental side as the products itself and the packaging are used where key initiatives include the increased use of FSC-certified wood and the reduction of certain materials in the packaging that is used. On the supplier side, the code of conduct needs to be followed by all of our suppliers, and they are controlled by it through an order process that is in place. And finally, on the employee side, we have regular service with our employees and also there in a similar way to our franchisees, we mentioned the NPS scores and see a very positive and good development there. So that brings us to the recent results of the company, which are shown on the next slide. The company has just communicated internally. The last year has realized the best numbers in the history of the company. The company now has 316 stores in 67 countries on 6 continents. The company recorded the highest revenue and earnings ever with sales at DKK 1.49 million and EBITDA of DKK 275 million which is an increase of sales by 23% year-on-year and EBITDA by 8%. And the company communicated that it has successfully completed a number of strategic initiatives which I just have talked us through and has realized the highest number of store openings, which provides a very strong basis for the growth in the coming years. On the next slide, we also have mentioned a number of challenges because I think it is clear to everybody that this industry is also faced by some headwinds. So overall, we believe that BoConcept is well placed to bottle the storm as it has shown in the last years doing the COVID crisis. And there are still some remaining COVID impact in the business, although it is largely overcome. There are still some potential for store closures, especially in Asia. And today, there are still some supply chain bottlenecks with inflated cost, but we see that the situation starts to normalize. The BoConcept has traded through COVID. Its global diversification has mitigated the impact, not only on the sales side, but also on the supply side, where BoConcept has key suppliers in Asia, in Eastern Europe and also in Mexico. BoConcept was able to use its virtual selling air tools to react to store closures but also the management in general has reacted really fast and successful on the fast-changing environment. And finally, there's an economic downturn, the current consumer sentiment and inflation. And this will provide short-term headwinds to the business. But at the same time, we believe BoConcept is well placed here compared to other companies operating in the same industry. So first of all, as I mentioned a couple of times, there is a global diversification of the business model. There's a franchise business model, which provides more stability to the business compared to an integrated model. It's focus on the affluent customer provides some protection. We have a make-to-order business model where we won't suffer from inventory that is becoming obsolete. The company is generating very strong cash flows and has a track record of doing so. And finally, the company has a 70-year track record of successful long-term growth on sales but also bottom line level. And with that, I would now like to open to any questions you might have.

[Operator Instructions] And our first question is coming from Bruce Hamilton from Morgan Stanley.

Just 2 questions for me then. In terms of some of the challenges looking forward, in terms of sort of input costs and inflation there, how are you managing that? Is it because of the [indiscernible]? Or is there something else? And then secondly, just to understand your sort of source of competitive differentiation relative to other furniture stores that may be struggling? I'm thinking [ MAIT ] for example, I mean, is it principally to do with the franchise model and the fact that it's made to order? Or what is it that you think really sets apart BoConcept from some of the other operations out there.

So the first one is input cost. We have realized price increases over the last 24 months, and they were double-digit plus if you combine them. So I said we were able to pass on the raw material and supply cost increases to our franchisees and then to the end customers. And that's also what I just mentioned. The EBITDA has been on the highest level ever, but also let's be clear, the EBITDA includes the higher cost that the company was faced with over the last 12 months leading up to April 2022. So that's included in the numbers. And I think it's fair to say that the numbers have been very strong. Then the source of competitive differentiation compared to [ mait.com. ] And I think a lot here is in the business model to start with. So first of all, mait.com is very much focused on the lower end of the market, where in essence, people are shopping for blue couch and they go on the Internet and look at 3, 4 different places, what the price is of a blue couch. And that is a very transparent and very competitive market. And we focus, therefore, and we have always focused on and getting people into the stores to have kind of like integrated approach to them on a more customized level. And once you're with an interior designer describing your home, how you want it to look like, it is just much less logical to try to do the same with 3 or 4 different suppliers. And at the end of the day, with our customized approach, we can also offer you something that fits you and that is not available with other competitors. So that is one. The second one is then with our franchise model. We are generating very strong profits where you specifically referred to mait.com they've never realized the profit. They have grown very strongly, but without being able to make any profit. And that is clearly very different for us. And also, given that they have an integrated model where you don't work with the franchisees, the operating leverage is a lot higher. So if the sales goes down also the impact on the bottom line is, of course, much bigger. And if you already -- if you have never made a profit and then the sales goes down, clearly, you're in a very difficult situation.

And our next question is coming from Luke Mason from BNP Paribas.

Just 2 quick questions. Just firstly, on the potential challenges in like an economic downturn, I'm just wondering if you can give any color on how BoConcept has held up in recent months just in terms of customer behavior or how BoConcept held up during the last financial downturn, what kind of impact would you expect for this business in that kind of scenario? And then just secondly, I'm just wondering if you can give any detail on the capital structure of the business. I think you mentioned 3 times net debt-to-EBITDA today. I'm just wondering what that was at entry. And I think you've taken some proceeds over recent years from 3i's reports. So I'm just wondering if you could talk about that on the capital structure.

Okay. Thank you. So economic impact, I think it is a little bit very glass full, but we are very confident. As I mentioned, there's economic uncertainty, a lot of that is focused on Europe, but we see also some softer trading [indiscernible] the less, and the trading upturns in the recent months, we have seen trading, which was roughly in line with what we have seen a year ago. But in Europe, we see some softness as the global diversification helps BoConcept here. And as I mentioned, due to the franchise setup, we have less operator leverage in our model. So if the markets go down, our profits go down less than for an integrated model. And on leverage, as I mentioned, current leverage is just below sweet times and when we invested into the company, given that the company had a mixed track record in the public markets, we're also starting with a moderate level of leverage, which was a little bit less than the current leverage we have. And on the proceeds, we have taken out, as I briefly mentioned, we have roughly returned our original investment now, where the company still, at the moment, has a moderate level of leverage.

Thanks are no further questions on the conference. I will now hand over to Silvia Santoro, Group Investor Relations Director to address the written questions submitted via the webcast page.

The first written question is from Samarth Agrawal from Citi. And it is what is the typical breakeven period for a new store?

Breakeven period differs by region. And if it's a new franchisee or if it's an existing franchisee, which has back-office operation already in place. But for an existing franchisee, it would be around 1 to 2 years.

Then we have a written question from Kim Bergoe from Numis. He said, you mentioned that the pandemic has had a significant impact on demand for BoConcept products. Is this sustainable post pandemic?

Well, it differs by region, how strong the impact was. What we have seen is in the last 2 years that part of the impact was some increased customer demand due to people staying at home. On the other side, we have realized some very strong operating improvements, which also drove the performance and also what I mentioned that we are today still faced with some COVID lockdowns in some of our Asian markets. So it's not that COVID impact already fully out of the numbers on the negative side. And Silvia on the previous question, what's the question about breakeven or payback, I might have confused it.

About breakeven.

Okay. The breakeven level for our existing franchisee that will be a very short, so that's 2 to 3 months. So the payback is 1 to 2 years for an existing franchisee.

And we have another question, just what's the thinking behind only having 2% of sales online?

Well, the thing behind is that we always struggle to see how we can make a good and stable profit of the online sales. And I think we just had a question on mait.com, which I think has realized strong growth, but never made any money out of that. And that is just something we want to stay away from. We want to have the approach working with our customers to come up with an individual solution to their needs since that allows us to generate sales and sales growth but also profit for our franchisees and ourselves.

There are no further written questions. Operator, do you have any more on the phone line?

There are no further questions on the conference line either.

Okay. So no further questions, I hand over to Rich.

Thanks, Boris, very much. Good afternoon. My name is Richard Relyea. And as Simon mentioned, I lead our PE business in North America as well as our global healthcare sector team. It's a pleasure to have an opportunity to speak to you all today, and I'll be providing an update on our healthcare investing approach generally as well as on one of our platform companies in the sector, Cirtec Medical. Next please. Next page, please. By way of background, we've been actively investing in the U.S. private equity market since roughly 2007. Our team focuses on the healthcare, the business technology services and the industrial technology sectors. Since opening the office, we've been very active in those markets, put to work over $2 billion across roughly a dozen platform companies as well as completed numerous add-ons to help build those businesses. Next page. Our proactive efforts in healthcare are very narrow. We focus on what we call the support ecosystems in pharma biotech in med tech and in life sciences. And what that means is we invest in businesses that provide products and services across the value chains in those markets to enable pharma, biotech sponsors, in other words, the drug owners themselves. As well as medical device OEMs to bring their life-saving or life-changing therapies to market as well as in the upstream life sciences research segment that supports those markets. Now examples of services within those include CDMOs in biotech pharma as well as other pharma services such as CROs and medical device outsource manufacturers or what I'll refer to as MDOs through the presentation. As well as the providers of single-use systems, reagents and other consumables used everywhere from the upstream side of research through downstream into commercial manufacturing. Within large markets are numerous subsegments that are growing rapidly. And importantly, they're underpinned by themes driving structural change in their industry, such as the shift to biologics from small molecules. Increasing regulatory complexity and that really applies across both pharma and med tech. Data proliferation, same, very universal across both markets and increases in outsourcing and evolutions in research tools and technologies to help bring innovative therapies to market. So exciting areas, but very focused. Next page, please. And the approach we take within these is what we call an ecosystem approach. And that means that we seek to build portfolios of companies that can interact with and benefit from each other and which can leverage each other's perspectives, resources, relationships to help advance their own growth and their own development. We've been very active acquirers in these spaces as this page would illustrate with 4 current platforms to each in biotech, life sciences and in MDO and with over 20 acquisitions in total over the last roughly 7 years. This has resulted in a cumulative $675 million in capital deployed across these particular platforms, which today are marked at a blend of roughly 3x as of June 30 and we believe they provide attractive further upside over the coming years. Next page. Just stepping back in terms of the markets. Pharma biotech market has needless to say, experienced a substantial amount of activity in the last years. Resources shifted heavily to COVID programs. There's been substantial evolution in emerging modalities like cell and gene therapies, other biologics, which are as a group making their way through the clinicals and in some cases, into commercial production. Supply chains have undergone substantial volatility, in particular, given broader market supply chain constraints and surges in demand for vaccine-related products and services. We do think, however, and we see within our businesses, the COVID impact on the market is subsiding. There is a return to normal volumes coming and supply chain dynamics is occurring and should continue to occur over the coming years. So there will be some normalcy, but there will certainly be some volatility in that as customers manage their own inventories and activities as they go from the COVID environment into a more normal environment. Through this, the market overall, however, continues to offer many areas of rapid ongoing growth. Areas like biologics, CDMOs, bioprocessing consumables are all growing high single to mid-double digits plus. And when you look at the impact of the decline in the 2019 -- from the 2019 peak in biotech funding, they're certainly causing shifts in behavior patterns but nonetheless, we remain at very high levels of absolute funding in any case, and for biologics use access to capital is constrained. The emphasis is on partners capable of helping them advance their programs with the greatest balance of cost, speed and probability of success, which in our ecosystems presents tremendous opportunities. Now the valuation environment has come off a bit like the broader market, but there remains very strong appetite for leading companies in the space. We see M&A demand, particularly for premium companies remaining very robust for a long time given the strategic and financial appetite for exposure to these sectors and in particular, to the highest end areas of these sectors. Next page, please. To that end, our focus is on building platforms in our ecosystems that are exposed to the fastest-growing and most innovative areas within their markets. In biotech and med tech, there are many of these. And examples in biotech include viral vectors, which provide a means for delivering instructions for therapeutic protein production into cells, mRNA therapies, such as the Pfizer and the Moderna vaccines, and areas like bispecific antibodies, which offer the potential for enhanced targeting and cytotoxic efficacy versus traditional monoclonal antibodies. And our portfolio companies are actively exposed to each of these in a number of the other innovative areas within pharma and biotech. Next page. Similarly, on the med device and the MDO side, the market backdrop offers good growth with pockets of particularly strong growth in innovative areas. Procedure volumes are returning to normal as well, albeit still impacted by staffing levels and hospitals. Outsourcing continues with more value being placed in the hands of key partners capable of delivering real value to the OEMs and there continues to be robust valuations in the market and strong appetite by strategic and financial buyers. Next page. Also similar to biotech, we focus within the med tech market on the fastest-growing and most innovative areas. Our companies are exposed to segments like neurostimulation, the structural heart markets, TAVRs, tricuspid, mitral valve replacement and areas like robotic surgery. We'll touch more on this in the context of Cirtec in the coming pages. And next page. So in summary, when stepping back to look at our approach within healthcare, it is to focus on areas we understand well and which build well off of one another. We leverage the knowledge from one investment and the relationships and resources gained in that investment to identify the most attractive areas in other segments of our ecosystems and to find and unlock opportunities for additional platforms or strategic add-ons. This ecosystem approach also benefits our companies. It gives them advantages in their markets and access to resources they wouldn't have independently. We are ambitious. We try to be visionary alongside, of course, our company leaders. And what this means is we tend to back our companies to grow significantly with an eye towards becoming market leaders in their segments, both via organic investment and through acquisitions. And over these journeys, they strengthen their operational foundations, including their people, their processes, their systems, and we support them actively to invest as needed to do so and to bring in resources who can help as and when needed. Importantly, we cultivate an ownership mindset. We create incentive plans that enable our leaders and employees to benefit from the value creation they deliver, and this really aligns our interests and helps everybody be excited about the businesses that we're building and the value creation that occurs. Next page. So each of Cirtec, SaniSure, ten23 and Q are examples of this approach. Employee counts as a proxy for growth have risen between 107%, 100% during our ownership in each of these cases. We've made substantial investments in facilities and capacity to support growth with footprints increasing between 100% and 200% in each case. And importantly, each of the company's capabilities has expanded significantly with an eye towards being ahead of our customers' needs and to making each of these companies' leaders in their fields. Next page. As noted previously in a number of cases, the increased capabilities have been added via strategic acquisitions, albeit only in some instances because we certainly invest very ambitiously in organic development and capabilities. But what this has meant in terms of our acquisition program is that over the last number of years, we've been one of the most active acquirers in our spaces. Importantly, we do not acquire within our portfolio for scale. We don't believe that adds value in the same way that acquiring strategically to enhance our company's capabilities, their market presence and their geographic reach does. And reflecting this, the vast majority of these acquisitions have been with founder-owned businesses where the owners shared our vision for the opportunities in their segments, saw what we were trying to build and we're excited to have their companies be a part of that, and that's something we are really proud of. Next page. So from our healthcare approach to Cirtec. Cirtec, which we presented a number of years ago. And so some of this will be an update, and some of this will be a refresh. Cirtec is one of the leading medical outsourced manufacturers in the world. It focuses primarily on complex, generally Class II or Class III devices as well as highly specialized components that go into those devices. Its markets include many of the most attractive in medical technologies, including neurostimulation, structural heart, the artificial pancreas for continuous glucose monitoring and it's grown into a true global leader with operations throughout North America as well as now Europe, in Germany and Latin America and Costa Rica. Its management team is one of the most experienced in medical devices, in particular, medical device outsourcing and they bring world-class strategic and commercial capabilities including our CEO, Brian Highley, who we've known for over 10 years and with whom we partnered in 2017 in acquiring Cirtec. Next page. So Cirtec end market mix is one of the most attractive in the industry. The vast majority of its revenue comes from rapidly growing end markets or device categories, which, as I mentioned, include neurostimulation, structural heart, diabetes, but also other areas, including micro stenting for glaucoma and other minimally invasive therapies as well as related delivery systems in Interventional. This mix has been cultivated very intentionally both through organic investment and capabilities and people and via targeted acquisitions to provide for a tailwind of organic growth that allows Cirtec to deliver leading growth consistently year in, year out as well as puts us on the front end of innovation, which matters quite a bit to our customers as we become truly a partner of choice in these critical areas for them. Next page. This growth is reflected in the significant expansion of the business over time with Cirtec in 2022, delivering roughly 8x the revenue that it did in 2015. This has been a combination of organic and acquired growth, but organic alone has been strong double digits over that period of time. And noted in the detail of this slide, which we won't get into in each case, but we've created substantial capacity over this journey through investing in greenfield facilities in areas like Costa Rica; Brooklyn Park, Minnesota; Santa Clara, California as well as creating material expansion of capacity and capability in many of our other facilities which has been necessary to support the growth that we've undergone as well as positions us very well with substantial capacity to support the future growth that we anticipate. Next page. So the company's double-digit CAGR through the '19 to 2022 period, we feel is a testament to its strength, delivering very resilient performance and growth in each year, including in the challenging 2020 period in which many of the peers in our industry declined due to hospital labor shortages and deferral of elective procedures. The medical industry generally tends to be resilient. Now it was not immune to many of the fluctuations that occurred in the last year that impacted other markets like labor shortages, like supply chain constraints and in this year, increased inflation. But in each year, we face different headwinds, but the management team with our support has helped navigate these through the changing landscape of challenges and has truly provided excellent service and importantly, product delivery for its customers, which has been critical, especially as the supply chain has been so difficult. And that performance for our customers has been recognized. It's put us in a place to win new programs at a disproportionate level and makes us truly one of the critical suppliers for our customers. So these last couple of years, we feel have truly helped to differentiate Cirtec relative to the market and our customers recognize that. So we're very proud of that. Next page. So in terms of our investment thesis to recap and provide a bit of an update on the thesis, which we laid out several years ago when we first introduced Cirtec in the past Capital Markets Day. We've made substantial progress against each of our primary goals. And these included delivering on and continuing to grow a large pipeline of complex customer programs. Many of which involve industry-leading and cutting-edge technologies coming to market to deliver novel and impactful therapies for patients. We have vertically integrated to provide greater value to our customers and supply chain stability. And this has been really key. And actually one of the most important parts of the performance we've delivered in the last couple of years where we've helped to minimize supply chain complexity for our customers because of what we can do in-house. We have diversified both our end markets and our geographies and the company has strengthened its foundation to support its growth and evolution into a true leading partner for its customers in areas where they have real needs given the complexity of the products that we work with. Next page. As noted a few times, this journey has involved growing from a strong base of markets where we were in neuromodulation and precision machining at the outset to include a number of new and differentiated products such as the world's best nitinol tubing, which creates the scaffolding for structural heart. Thin-film electrodes, which are utilized in the artificial pancreas, the CGM devices we serve and complex devices such as electrophysiology devices. So there's been a substantial growth and enhancement of our capabilities, and that has led to an enhancement of our various market segments from the time of acquisition. Next page. And this is demonstrated, I think, in a good case, within interventional, where we've added via 3 highly strategic acquisitions as well as substantial organic investment, a leadership position in many of the most complex interventional device categories in therapeutic areas. I've mentioned structural heart on a couple of occasions, and this is a particularly strong area for us as well as a particularly strong growing part of the market. and strategic to our OEMs. But other delivery systems and devices include areas like ablation, neurovascular applications. These give us the ability to support our leading OEMs and innovators in the places that they are particularly focused on driving their own growth and differentiation. This expansion into Interventional has both added to our value to our customers, but it's also created a very large additional addressable market for Cirtec which will help us to provide many ways to continue our strong growth for the foreseeable future. So we think that's a great case study of how we've been able to drive into a new market. Next page. Neurostimulation, I think, similarly, would be a great case study in how we've been able to use vertical expansion for the benefit of our customers. At the time of our acquisition of Cirtec, the business had a small -- had an engineering team, but a small engineering team. Data assembly work, but limited and had defined machining operations. Since that time, through the strategy of the leadership team really to build out a fantastic presence within neurostimulation, we built an extensive engineering team of over 100 engineers, would serve a wide range of disciplines that get utilized throughout the neurostimulation, design, development and engineering requirements. Our vertical component capability has expanded to include the most comprehensive range of processes and components in the industry. And that includes areas like lead design and manufacturing, IPG or implantable pulse generator design and manufacturing, hermetic sealing, welding, testing and a wide range of precision machining and stamping in other areas. That allow us to make the components that go into our devices. We've also acquired one of the strongest chip design capabilities in the market allowing us to engage with our customers at the very early stages of their activities when they're working to put their wave forms on a chip for preliminary testing of their therapies. And that occurs well before clinicals or commercial production. This provides us a wonderful advantage in getting in early, and it allows us to serve the full life cycle of our customers, where we can then go from chip design to product engineering to clinical supply to commercial supply and real life cycle management. So this is a great example in neuro simulation of our ability to verticalize and offer the full life cycle management for our customers. Along this way, we've also acquired a proprietary FDA-approved and commercially-proven platform. Now we are not intending to and we do not serve this platform as a therapy itself, but we instead offer it to our customers so that they can leverage the approved features, and they can customize it or any of its components for their therapy. And what this means is that they take material risk out of their own development process. It saves them years of development because they're working off of a proven platform and it saves the millions of dollars in connection with that. And very importantly, it gets their therapies to market more quickly and cost effectively so that they can serve more patients more rapidly. So neurostim will be a great example of how we've tried to take a vertical and comprehensive approach to a given therapy area that we think is fast growth and one where we can distinguish ourselves. If you go to the next page, I mentioned the importance of geographic growth. Vascotube helped us to establish our European presence. And recently, we have greenfield a facility in Costa Rica, which is now up and running and operating and providing areas like coil winding, IPG leads assembly, device assembly and micro coiling. Importantly, the Costa Rican market offers us access to a number of the OEMs that are in that market, very high quality labor pool, low-cost, good engineering and leadership resources so it expands our ability to offer a life cycle of management to our customers, whether that be mature products that are looking for an opportunity to move to a lower-cost production region, or that be supporting them in their own development of their products, which they are producing in markets like Costa Rica or other areas of Latin America. So this gives us the opportunity, again, to really reinforce our life cycle management capabilities for our customers as well as serve a broader set of their needs in the markets geographically where they are working themselves. So we're excited about this as a development area, but it's only one of the many greenfields that we've undertaken over the course of the last number of years, but it's important in that it gave us geographic growth. On to the next page. In terms of 3i's role, I mean, I think, importantly, we are -- the most important thing is strategic alignment with our management team. And when we talk about the concept of being ambitious to grow ahead of the markets, when we talk about the concept of trying to build leaders in the industry that are serving their customers at the front end, that strategic alignment really is critical. It's also critical that we have a nimble approach to evolving that perspective as the market trends evolve, as our customer needs evolve, as opportunities present themselves to us we need to be able to be close enough to our businesses working in alignment with our management team so that we are able to our approach to really make sure that we continue to be ahead of the markets. So that strategic alignment from the outset and really that proximity to the businesses is absolutely key in making sure that we're making the right decisions quickly, efficiently, and we are acting as a nimble player in the space. We absolutely support our companies in M&A, whether it be execution of add-on acquisitions are helping to facilitate and support the integration process. We provide leadership and site GMs with additional resources when they need them in order to drive business improvement and productivity initiatives, so bringing resources from our network outside of the companies really when that's pull model and the leadership teams know they need to support, and they want the support and the experience that we can help bring. Certainly, governance and risk management is an important area of our contribution to all of our companies across 3i where we assist with kind of making sure the right governance processes in place, controls are in place and particularly given the evolving global risk landscape that we find ourselves in, really, across all of our industries where areas like cyber and international regulations require that you move quickly. And as I mentioned with the both European and the Costa Rican footprints, international expansion has been another area where we've been closely aligned with our management teams to help drive the business. Next page. ESG, thematically, I think as you guys are hearing across all of our companies is incredibly important to 3i. It's also very, very important within the medical devices industries. Our OEMs are placing a more substantial focus on this. and they're expecting it out of their suppliers. So being on the front end of that really is critical. Needless to say, by nature of the products that we serve, the customers that we're serving, we have a daily impact on people's lives. Our products address a number of the most challenging and impactful chronic diseases in the world. And we find that really exciting. Areas like heart disease and diabetes, chronic pain, motor function, stroke, sleep apnea, incontinence, Alzheimer's, I mean being part of the value chain to help address these incredibly impactful conditions or diseases is something that in addition to, obviously, the value creation that really excites our team as well as our management teams of our companies. And so it provides a lot of energy. As a leading provider in the space, I mean, Cirtec has fantastic systems that help to drive waste out, which creates efficiency both in energy and material utilization. And we regularly review opportunities to continue to improve areas like our emissions levels as well as other sustainability -- and reach other sustainability targets. So ESG is a core part of our of the mission within the med tech industry as well as within Cirtec. And on to the next page. Looking forward, our goal has been and continues to be to really create the leading MDO within the market in Cirtec, which we feel we've made tremendous headway in doing. We want to serve the most cutting-edge and innovative technologies. We want to help our customers bring those to market more cost effectively, faster so that they can help have an impact on their patients. We seek to support our customers through their life cycles as mentioned, and that includes everything from design development, engineering through commercial production, component production and supply chain management, so will help take complexity out of their system. We continue to vertically integrate to do this and to provide true supply chain security, and that's obviously an important theme in today's global environment. And we'll continue to pursue select strategic acquisitions in order to help facilitate this journey. And we have to date, and we certainly expect to continue to build a business that we're very proud of and that we would be proud to own for the long term. And along that journey, that will help us to deliver top-tier returns to 3i as well as to the management teams that are driving the business and the other employees and shareholders of Cirtec. So with that, I will pause and turn it over for Q&A.

[Operator Instructions] And our first question is coming from Philip Middleton from Bank of America.

That was really interesting. You talk about a business you've been interested in holding for the long term. To do that, presumably you need a lot of white space to expand into. Could you give us some idea, please, of what you see the addressable markets you have here? How those are growing? And what sort of growth rates they can therefore sustain?

Sure. Yes, I appreciate the question. Thank you. On Page 13 of the presentation, we outlined a couple of the markets that we are serving as well as their growth rate. So areas like neuromodulation and continuous glucose monitoring are substantial markets. Interventional, which is catheter-based delivery systems of various devices, very, very substantial markets; the micro stenting markets; neurovascular markets. These are substantial sized areas within medical technologies. All of which are growing high single digits to well into the double digits and expect it to do so for some period of time. I think I highlighted the interventional market entry that we undertook in the last number of years, and that alone provides a substantial white space for getting into, again, areas like neurovascular, peripheral stenting structural heart, electrophysiology. These are massive markets. So I think when we look at Cirtec and its ability to help its customers be successful in some of these very fast-growth markets, we think that the white space and the opportunity to continue to drive growth for 3i and for Cirtec over a long period of time is very substantial. So I think if you look at Pages 13, 18 as examples, those will help give an indication.

[Operator Instructions] There are no further questions on the conference line. So now I will hand over to Silvia Santoro, Investor Relations.

Apologies, one quick correction. 13 was actually referring to 45 and 18 was supposed to refer to 50. So apologies for the pagination point. I think we're going to turn it over at this point to Rahul to talk us through Wilson. So thanks, Rahul.

No, we have a couple of questions from the website, Rich. We have a question from [indiscernible] from SEB. So who was Cirtec's main customers, its main competitors and what are its key competitive advantages?

Sure. Cirtec's main customers, I think one of the appeals of Cirtec is that it is diversified across the landscape of OEMs. So we serve all of the major med tech OEMs whether that be the Medtronics, the Edwards, the Abbotts, the Boston Scientific of the world. We serve a number of the most innovative players within areas like neuromodulation, I think if you if you look into that space, you'll see that there are a number of therapies that are in market in areas like pain or sleep apnea and we're serving a number of those OEMs. So we really serve across the spectrum of medical device OEMs and emerging innovative medical device companies. And in terms of competitors, that would be the landscape of medical device outsourcers, and it will vary a little bit based on market what you might have areas like in neurostimulation, you'd be competing with an Integer; in areas like interventional, perhaps with TE, Creganna or with the Confluent in areas like certain areas of machining of someone like the [indiscernible], and there are others out there like the Teleflex MDO segment. So there's a reasonably defined set of providers of kind of high-end med device outsourcing, componentry and full device activities. But they really fragment as you get down into the end market where there are typically only a few within any given end device category capable of serving the highest end applications, and that's truly where we want Cirtec to establish itself.

Yes, we have one further question from Greg Knox at Numis. He asks, the build-and-buy strategy in healthcare has been working, can you talk a little about the potential end state on this?

Yes, absolutely. Well, I think that I'll refer back to my point that we don't buy and build for scale. I mean, the end state truly is to create the most comprehensive suppliers of products and services for the particular end markets and customer bases that we're seeking. So again, back to the concept that we identify through our ecosystem approach, the highest growth, highest value areas within our markets, whether that be on the biotech side or beyond the med tech side. We seek to build out our capabilities through acquisitions really to support the companies to offer their customers the absolute top service or product capabilities within those markets. And I think the case study with regards to what we've done with neuromodulation where we have acquired, for example, a number of the processing capabilities that allow us vertical production capabilities on stamping or machining as well as the chip design, which was an acquisition as well as the platform, which was an acquisition, actually 2 acquisitions, are good examples of really trying behind the perspective and knowledge of our leaders as well as the others in our ecosystem to play ahead of the curve of what our customers are looking for strategically and to create a truly comprehensive offering. And so I hope that helps you address the point. Our acquisition, our buy-and-build program. I mean the nice thing about that as we continue to edge out into new innovative areas, there will always be opportunities to continue to strengthen or to edge out and expand our comprehensive capabilities. And so while, again, we certainly are not looking for scale for scale's sake. There's no shortage of opportunities to continue to augment our platforms with strategic acquisitions that enhance our capabilities and our customer propositions.

Looks like we have no further questions. So we can move on to Rahul's presentation. Thank you, Rich.

Thank you, Silvia. Good afternoon, everyone. I'm a partner at 3i based in New York. I've been at the firm for 10 years, and I'm here today to tell you a little bit about our investment in WilsonHCG. Let's start on Page 58 where we provide a high-level view of the company and the transaction. Wilson is a provider of end-to-end talent solutions on a global scale. The company offers a range of services, including HR strategy and consulting, recruitment process outsourcing or RPO, contingent search and executive search. The majority of Wilsons revenue comes from RPO. Both RPO and contingent search are largely contract-driven businesses with recurring and reoccurring revenue and contribute a large majority of the business. Wilson is headquartered in Tampa, Florida, with office presence in 14 locations across 4 continents, 3 on the page and 1 more soon to come. The workforce of 1,500 recruiters is growing rapidly, having more than doubled since 3i invested in the business around 18 months ago. Wilson's expertise is functional. It focuses on roles in sales, engineering, technology, customer service, finance, HR and legal, amongst other roles. The markets it serves are very diverse as these roles are required within most companies. While we won't be discussing specific customer names today, the customer base is largely blue-chip global companies, many of whom are within the Fortune 500 or Fortune 1000. With regards to our investment, after tracking Wilson for nearly 4 years, dating back to a first meeting with the CEO and founder in 2017, 3i invested in the business in early 2021. We were able to find common ground on financial terms with the Wilson management team and their lead investor without the involvement of an investment banker. Since our investment, the business has performed strongly in 2021 and 2022 materially ahead of our investment case. Moving to the next page, I will summarize our investment thesis in 4 key points. The rest of this presentation is largely organized around these points. Firstly, Wilson's core market, the RPO market is one we have strong conviction in. It is a market we have tracked since I was in my third year at 3i back in 2015. This is a double-digit growth market with enduring growth drivers and one we have been looking for exposure to since 2016. Secondly, Wilson is one of the leading players in the market today. Over the years, we have watched the business transition from an emerging player to a leading player driven by a number of factors, most notably its relentless focus on driving the best outcomes for its customers. This has allowed the business to grow roughly 2x market growth levels. Thirdly, this is a very scalable business. Wilson had an attractive margin and cash flow profile when we invested in the business in early 2021. However, given the growth potential, ability to scale margins was a critical due diligence area for us. We found that Wilson's scalability comes from 3 attributes: great people, great processes and great use of technology, whether third-party technologies are proprietary. While we are still early in our ownership, Wilson's scalability has been put to the test, given the revenues and employee count has more than doubled over this period. We have seen the bottom line grow substantially in excess of revenue growth. And finally, we have backed a terrific management team. And when I say this, it not only relates to the senior leadership team, but people at every level of the Wilson organization. This is a team that does for itself what it does for its customers. It attracts A+ talent knows how to train them quickly and ultimately how to motivate and retain them. There is a relentless focus on understanding the customers, their goals and what makes them tick and then on driving the best outcomes for them. Let's move on to the next page and start with the market. The human capital market is one we like. There are 3 broad buckets. Talent acquisition where the RPO industry sits, talent retention and then finally, payroll benefits and other services. There are several key trends impacting these markets. Many of these have accelerated or have been heightened by the pandemic, but existed back in 2015 when we first started to look at the human capital space. Firstly, Employee expectations have been evolving progressively over the last 5 to 7 years. A company's mission, its vision, what it stands for, matter more to employees and candidates with every passing year. Employees have strong opinions on culture, work-life balance, location and more recently, an ability to work in hybrid or remote environments. Baby boomers have proven to be a lot more loyal than millennials, who, in turn, are much more loyal than Gen Z. With the continued retirements of baby boomers, inherent employee churn in companies continues to tick up. The pains of recruiting and retention and the burdens of in-house HR teams are all too clear today. Secondly, over the last several years, there have been shifts in the global workforces with the growth of freelance workers and independent contractors. This has come at the cost of permanent employees who are harder to hire with every passing year. Thirdly, skills gaps, The requirements of what are needed for people have been rapidly changing. With the proliferation of data, the skills of knowledge workers have needed to move towards providing insights with increased automation roles are increasingly focused on hard to automate workflows and one that require increasing judgment. Fourthly, digital transformation. Similar to other functional areas in companies such as sales, marketing and IT, HR is going through its own digital transformation. However, the use of applications and technology and recruitment and retention are far behind other areas such as marketing is one example where digital tools have proliferated over the last 10 to 15 years to attract manage and retain customers. We think the same should be used to do for employees. And finally, outsourcing. As duties become more complicated, specialization is required, outsourcing is becoming more common. The first generation of HR leaders often came from backgrounds in payroll, benefits and other administrative HR tasks. Talent acquisition and retention is often not a core skill set and several business models have emerged to help attain the specialization needed. When you look at these trends, all the above have led to the elevation of the HR leaders role. There is increasing seniority in the role with directors transitioning to VP and SVP roles. Senior VPs transitioning to CHRO rules. And over the last 5 to 7 years, we have seen the growth of the Chief People Officer role dedicated towards attracting the best candidates and engaging employees. And finally, HR budgets are in the up in totality, whether spent in-house or on outsourcing providers. Let's move to the next page where we talk about the recruitment process outsourcing market in particular. And this is the market that drives the majority of Wilson's revenue. RPO comes in various forms and has had an evolving role over the last 10 years. 10 to 15 years ago, the first generation of RPO buyers would define RPO as a service that provided just tactical support to in-house recruiting teams to enable them to be more efficient. As one example, this could mean sourcing and screening of candidates and then quickly passing them back on to the internal recruiter to focus on the highest value candidates to interview. If you turn to the next page, over the last 7 to 9 years, the industry definition has evolved to more end-to-end recruiting beginning with creating talent pools proactively to moving towards several rounds of interviewing assessing and ultimately passing back to the hiring manager for a final round of interviews. Also, RPOs are increasingly helping with post offer support, including reference checks and preemployment onboarding. Let's move to the next page. Today, the definition of RPO is further extending upstream to involve offerings such as helping employers manage their brands for candidates. Defining the recruitment strategy and not just executing on it. And finally, recommending the technology stack for recruiting, which could involve 20-plus technology point solutions. Wilson plays across this value chain on an end-to-end basis. The offerings are backed by long-term contracts and the service has high visibility within the clients' organization. In delivering its RPO solutions, Wilson acts both as a strategic adviser and an executor on all activities related to talent acquisition. The Wilson recruiter is often the face that the candidates see most during the interview process. Moving to the next page. Let's hit on industry growth. The RPO industry has grown 14% over the last decade. After a brief negative spell in 2020 during the first year of the pandemic, the industry has delivered a similar growth rate in the last 3 years as one it would have experienced from 2012 to 2019. The drivers of growth are several of the drivers impacting the broader human capital space that I discussed a few pages ago. First, RPOs are highly specialized. Wilson, in particular, specializes at the functional level and knows what good looks like for the role. The company can bring this specialization to bear to be better, faster and much more cost-effective than an internal talent team. Specialization has driven more companies to outsource talent acquisition. Secondly, at the forefront of digital transformation. In the case of Wilson, we have a large innovation team that spends all their time trying, testing and implementing various technology solutions. There are hundreds of point solutions used in recruiting from various recruitment marketing technologies to attract candidates to assessment tools to assess them and automation and background checking and referencing to validate them prior to an offer. RPO such as Wilson have the scale to sort through and continue to implement the best-in-breed tools and also invest in some proprietary technology. In-house HR teams often don't have the scale and wherewithal to do this. Thirdly, employee churn. With evolving employee expectations and skills mismatches, employee churn has continued to tick up. In-house talent teams are not able to keep up with the levels of churn and replacement needed. And finally, recessions. The great recession back in 2009 was a great driver for the market in the subsequent years. So it has been the first year of the pandemic in 2020. In recessionary periods, in-house talent acquisition teams are often the first to be laid off. Companies make short-term decisions. This leads to more exploration of RPO as a solution. As one comes out of recessions, companies enjoy the variable nature of costs from RPOs, combined with the better outcomes they are seeing and continue to retain and expand the work they do with RPOs. Let's move on to the next page and talk a little bit now about Wilson. Founded in 2002, Wilson is celebrating its 20th anniversary this year. The company organically developed its core RPO business, which contributes to a majority of revenue. In 2015, Wilson expanded into Europe and Canada through acquisitions, the Canadian acquisition, bringing the contingent search business. These were very small tuck-in acquisitions, and Wilson has substantially grown its Canadian and European businesses over the years. In 2019, Wilson acquired a business in Asia, giving it exposure to China, Singapore and Hong Kong. Over the years, the business has heavily invested in processes and systems, both in ERP and an applicant tracking system among a number of other tools. We spent a good amount of time diligencing this as well as the overhead and shared services capabilities in the business, which are very well invested and best-in-class. We believe these provide a great foundation for future growth. Let's move to the next page. Wilson has delivered close to 30% compounded annual growth over the last 8 years. The business has grown in every single year with the exception of 2020, the first year of the pandemic. The drivers of growth have largely been all the drivers driving the market, including: one, adoption from new clients, two, growth from existing clients, including increasing the scope of their work, whether in new geographies, business units or role types; and third, underlying customer growth driven by growth in jobs and in employee churn. An added fourth driver of Wilson's growth are its offerings in contingent search and executive search. It has used these business lines to get through the door and RPO as well as upsell RPO customers into these offerings. Let's move to the next page to talk about Wilson's success, which has been well recognized in the industry. I won't go through this page in detail, but here's a sampling of industry awards across 3 major categories. First, excellence in Talent Services, which is a vote of confidence from customers. Second, excellence is a workplace, which is a vote of confidence from employees and third, excellence is an organization and upholding the highest levels of DE&I principles. Let's move to the next page. On this page, I will cover key elements of Wilson's RPO model. As I discuss these, please note that several of these are also key differentiators of the business versus other players in the market. Firstly, Wilson's relationships often exists at the C level with the CHRO getting involved. They sometimes start there, but if not, they always end up there given the quality and criticality of the work. Second, the client trust Wilson to represent its brand candidates. Candidates often don't know they are talking to a Wilson employee. Wilson's Net Promoter Scores are amongst the highest we have seen in the market and having seen this market across various players over the last 6 years. Fourth, Wilson is a thought partner in technology. Clients are increasingly looking at Wilson to help them make decisions on technology. There are 5 to 30 different point solutions that are integrated into the core applicant tracking system or used as stand-alone solutions in a recruiting workflow. Wilson has a dedicated team that spends all their time researching and implementing the latest technologies. Often, Wilson will use a product on itself before passing it on for use to a customer. Fifth, proprietary analytics. With the recent acquisition of Claro, Wilson has added a proprietary workforce analytics offering. Claro is a tool that provides a score on every candidate and predicts whether they are demonstrating job-seeking behaviors or simply speaking, whether they're looking to switch their job. This is a powerful tool not only to help Wilson's customers understand what talent pools they have access to in a geography but also helps Wilson's client base on client retention -- on talent retention as they look at their own employee base to understand the risk of employee departures. Next, long-term contracts. The business is based on contracts that are renewed either annually or once every 2 to 3 years. These contracts have a significant fixed fee component. Next, a customer-centric and flexible approach. Wilson, unlike a number of RPOs, has a flexible approach on recruiting workflows and technology. It does not make its customer adapt to the Wilson way. It works on our recruiting workflow that best suits the customers' needs and incorporate the technologies that Wilson and the customer agree are the best fit for the work. This is one of the hallmarks of the business and a reason it has been able to grow faster than the market. Next, defined processes and a commitment to excellence. This is one where the results show up in our ability to hit and exceed key customer KPIs and the customer satisfaction levels. And finally, a customer and employee-driven referral model. Wilson's best source of new customers come from referrals from current and past users. Wilson's best employees come from referrals from existing employees. This is not just the case for most players in the market. Let's move to the next page and talk a little bit about management. Led by CEO and founder, John Wilson, this team is one of the best in its market. Several members of the team have received awards and recognition for their excellence in their industry. One out of 8 members of this team came through an acquisition, 6 out of the remaining 7 have been working together for 9-plus years. This is a team that is deeply motivated to be the best in its industry. Moving to the next page. Excellence in various areas of ESG is core to how the Wilson team operates. I will touch on a few elements of this today. First, Wilson has a limited carbon footprint with limited use of office space and travel to and from offices. Many companies move to remote and hybrid workforces since the pandemic. This approach has been core to how Wilson operated for several years before the pandemic. This resulted in far less time and cost to travel relative to most of its RPO peers. Next, a veteran and spouse hiring program. Wilson has an emerging recruiter program, which helps veterans upon their retirement from the military and military spouses to look for a career in recruitment. Participants come from all backgrounds and military service, including Air Force, the Army, Marines and the Navy. We have 30-plus employees and growing that have come out of this program. And finally, we have a highly diverse high-performing workforce. 65% of Wilson's employees are women. Greater than 50% of employees belong to ethnic minorities. And finally, we have a senior leadership team that is split evenly between men and women. Let's move to the next page and talk a little bit about the process. We started coverage of this market back in 2016. We met John Wilson, the CEO in 2017. At that time, Wilson was 1/3 of its size it is today. From our discussions with various CHROs and market participants back in 2017, we knew that this was one of the most promising businesses in the market. We stayed in touch with the Wilson team over the subsequent years. In the second half of 2020, as the labor markets were showing signs of troughing, we proactively approached the management and the majority investor, a private equity firm. A wise investor once said, be fearful when others are greedy and greedy when others are fearful. We knew that given the market uncertainty, this was the right time to pursue the business. While Wilson was not actively looking to sell, we were aware that there were strategics that we're also pursuing the business at the time. And so a decision on a future path was going to be taken. We were able to convince management on the back of our sector experience and our global platform to pick 3i over the strategics. And in turn, they convince their lead investor. We had a creative transaction structure, one that offered a lower upfront value to the business than the strategics, but an additional contingent payment of Wilson achieved certain revenue and profit metrics in 2021. Wilson ultimately ended up materially overachieving the revenue and profit thresholds. We had a highly aligned management team who took most of their proceeds, if not all, from the contingent payment and reinvested it back into the business. Let's move to the next page and talk about the first 18 months of our ownership. The business has performed well ahead of our investment case, outperforming across various metrics, where the new customer adoption, existing customer land and expand, gross and net retention metrics. We are already a few years ahead of our investment case. On the people front, we have had no changes to the senior leadership team. Wilson is currently at 1,500 employees and growing, and this is up from the 600 employees it had in March 2021 when 3i invested. The management's credit productivity from new employees is at the same level as existing employees, which is a testament to how well Wilson is able to hire capable people, train them and get them up to speed quickly. On strategy, we have a multiyear value creation plan with clear prioritization across the initiatives agreed upon with the management team. We continue to further extend our capabilities so we can better serve our customer base. This involves launching presence in new countries as one example. On the systems front, we have a terrific base and are continuing to increasingly adopt more functionality in our ERP and other systems to drive scalability. And finally, on acquisitions, we have an exciting organic plan. The team's approach has always been to build first rather than buy, but there are a few areas where we are looking to supplement our growth through acquisitions. Finally, let's move to the last page to discuss our ambitions. Our ambitions are exactly the same as management's ambitions, which are to build the market-leading provider of total talent solutions. First step of this is capitalizing on existing momentum even with the market for hiring softening in certain sectors, given rising interest rates, the company is seeing growth in its pipeline of new potential customers looking to explore RPO. The North American market, in particular, continues to serve up exciting new opportunities. 6 to 7 years ago, this was an industry that had a 6-month to 2-year sales cycle. Today, with increased sophistication of HR leaders, many of whom who have tried RPO before, the sales cycle can be weeks and months. Second, it's expanding our footprint in low-cost countries. Wilson already has footprint in Poland and Romania, but is looking to expand there are a few other countries. This is largely to support some of our North American and European customer base. Thirdly, it is to strengthen our top of the funnel strategy and consulting offerings. The definition of RPO is continuing to evolve. Our customers want us to be partners, not just executors. We are spending more and more time with them on defining the strategy for recruiting, enhancing their brand value for candidates and helping them explore and deploy the best technologies. This upfront work positions us to be a partner and allows us to be far more sticky in the long term. Fourth, expanding the breadth of roles covered in North America. There are certain markets and job roles we want more exposure to. Wilson will first try to build these in-house, but over time also consider acquisitions. Fifth, expanding our RPO capabilities in Asia. With an acquisition completed in 2019, Wilson has a market-leading executive search business in China, Hong Kong and Singapore, which we will be using as a platform to organically build our RPO capabilities in Asia. And sixth and final executing our playbook in a recession. This means being ready for the worst, but keeping our eye out on the long game and the fact that RPOs have demonstrated strong growth for years to come, coming out of recessions. North America is our largest market. Today, even if we see some hiring soften, this is being offset with increasing scope of work with our existing customers and several new opportunities in our pipeline. Both these latter elements are driving the business to double-digit revenue growth year-over-year even in the second half of 2022. We continue to encourage management to invest in the business and its capabilities even when labor markets are softer because these are the times when we do see increasing pipeline from outsourcing and converting on this positions us well for the medium to long term. And with that, thank you for your time, and I'll open it up to questions.

[Operator Instructions] There are no questions on the conference line. I will now hand over to Silvia Santoro. I'm sorry, one question just came in from Bruce Hamilton from Morgan Stanley. Go ahead.

Thanks for the presentation slide. Just a quick question. Obviously, you gave a lot of comments around the sort of revenue growth opportunity of the market and also Wilson's growth ahead of that over past years. But I didn't see much reference sort of EBITDA and profitability. So could you give us a sense of how sort of profitable this business is and how that's moving forward and how you anticipate that will move from here as you develop this plan.

Sure. I won't discuss specific margins, Bruce, but it's safe to say that this is a highly profitable business when we owned it and the profit margins have grown 60% in our first 2 years of ownership, primarily driven by operating leverage as we've doubled revenue. So while revenue growth has been roughly 2x, profit growth has been substantially more than that.

Can I just cut in. I think we lost sound when you said that the business was significantly ahead of investment case for some reason, the sound cut out.

Okay. I'll just repeat the answer. I think the question was to give you a sense for the level of profit in the business. And the business, Wilson is a highly profitable business, but the margins have just grown over the first 2 years of our ownership. So our profit margins have grown by 60% in the first 18 months, and a lot of that is driven by revenue growth, which has doubled. So I won't give you exact margins, but it is a profitable business. And because of the strong processes and systems, we continue to see nice operating leverage accrue to the bottom line.

And there are no further questions on the conference line. So Silvia, please go ahead.

So Rahul, I think what happened is we lost sound during the webcast where you were talking about the first 18 months of our ownership. So perhaps if you could just summarize that slide again, and then I'll move on to the next question we have.

Sure. So the first 15 months -- first 18 months of our ownership, the business has performed well ahead of our investment case, and it's outperformed across all metrics, whether it's new customer adoption, existing customer land and expand and gross and net retention. So we are a few years ahead of our investment case today. On the people front, we have the same management team that we backed 18 months ago. There have been no changes to the leadership. We are at 1,500 employees and growing, and this is up from 600 employees back in March of 2021 when we invested. Productivity is at the same levels with new employees as it was with existing employees, which is just a testament to the scalability of the platform. On strategy, we have a multiyear value creation strategy we've agreed on with the team, and we just continue to build our geographic footprint and enhance our systems as they drive our scalability. And the final point is on acquisitions. We've completed one acquisition in a technology business, a workflow analytics business a few months ago, and we continue to look at a few more acquisitions where they supplement our organic growth.

Thank you. And we have another question from Kim Bergeo at Numis, and he is asking about key competitors.

Sure. Our competitors, there are a number of RPO players out there, broadly 2 major buckets, the largest staffing companies own RPO divisions. And secondly, there are a number of pure play RPO players similar to Wilson. So there are probably about 15 players in the market out there. Practically, we don't compete with more than 2 to 3. And a large amount of the revenue is through referrals. And so if it goes outside of RFP, which is uncommon for this space, which is a largely RFP-driven space. And this is because when Wilson does a good job for its customer and the CHRO leaves the business they often bring Wilson to the new customer, and we tend to avoid RFPs. So I'd say there's a handful of other pure-play RPOs we compete with. These are also -- a couple of them are private equity backed. But I'd say at least 50% of our business tends to avoid RFPs and we don't compete.

Thank you. There are no further questions, I believe. So we can move on to Simon's closing remarks.

Okay. Thanks, Rahul. I hope you found today's 3 presentations useful. 3 very different companies, but all are high return, low capital intensity businesses with strong cash flows and significant scope for further international growth. And with that, I'll just open it up in case there are any final questions from anyone.

We have an incoming question from Luke Mason from BNP Paribas.

If I could just sneak in some questions on Action after the statement this morning. So just first on EBITDA margin, it seems like a strong EBITDA margin impact for Q3. Just wondering what's going on there and as we're looking to 2023, potentially some headwinds in terms of wage increases, energy, FX. So I'm just wondering how you see the development of EBITDA margin into 2023 and build. And then just secondly, in terms of the top line, I think you previously talked about less discretionary spending offset by customers trading down to Action. So just wondering what you're seeing there in terms of continuation of trends basically? And just last question on store openings. So I think it's running slightly behind what we might have expected at this point in the year, so quite a bit of work to in Q4 just wondering what you're seeing, I think, before you spoke about some property market disruptions, if you give any update on what's going on there and conviction for the store openings for the rest of the year.

Okay. Thanks, Luke. I think on the EBITDA margin, it is running ahead of what we budgeted it to be this year, and that's really principally because sales growth is running ahead of cost inflation. So we are seeing some very good sales leverage, which is having a significant impact on profitability. So that's really, really the answer, I would say. And there's no letup in that footfall in fact, we've just got last week's numbers, and that was a very strong week, indeed. So a very strong footfall driving very strong sales, which is giving us very strong leverage over and above the cost inflation that we've been seeing in the business. I mean I think it's too early to say on '23, we will be getting into our budgeting exercise in the last quarter. You're right, energy, the dollar, although dollar purchasing for us is only about 14% of COGS. Energy is not a huge COG, but it's obviously going to be seriously more than it was this year. So we'll be looking at that in the budget, but we -- I can't really say more than that at the moment. In terms of the top line, it's really being driven by footfall. We're still seeing smaller baskets. We are definitely capturing people who are trading in our stores probably before they go into supermarkets. So we're seeing very strong sell-through in every country and we're seeing very strong sell-through in every category, but the essential categories have been particularly strong this year relative to last year. And then finally, on store openings, we flagged, I think, in March or May that we had stopped say, in Poland, and we had other property interruptions elsewhere. We have caught up quite a way. We always have a busy final quarter in store openings and we're still confident we're going to hit the number that we want to hit this year, which will be ahead of last year.

And it looks like there are no further questions through the webcast.

Okay. Well, thanks, everyone, for tuning in and listening to this. And I'd like to say thank you to the 3 presenters as well. Much appreciate it. Have a great day. Bye-bye.