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

Good day, and thank you for standing by. Welcome to the 3i Group plc Half Year Results Presentation Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand over to the Chief Executive of 3i Group plc, Simon Borrows, to open the presentation. Please go ahead.

Good morning. Welcome to 3i's interim results presentation. This has been another good half for 3i. We delivered a total return of 10%, giving us a net asset value per share at the end of September of GBP 22.61. And that's after a 48p per share loss on foreign exchange translation and the payment of the 34.5p per share second FY 2024 dividend in July. We ended the half with a gross investment return of 11% from Private Equity and 3% from Infrastructure as well as GBP 68 million of cash income. Our Marimekko chart showing the makeup of the 3i portfolio on a page has continued to develop. Our 4 resilient sectors of value for money, private label, infrastructure and health care now represent 87% of total portfolio value. Private equity delivered a good return, 94% of the portfolio by value grew earnings in the 12 months to the end of June 2024. Action continued to deliver a strong performance. And we got good growth from private label and better trading from some of our online and discretionary consumer companies. Investment and realization activity has picked up this year. We bought more shares in Action, and we have a good level of new investment in bolt-on projects in progress. We're beginning to see more disciplined pricing for potential targets, and we're currently in exclusivity on 2 new assets. That's after closing the purchase of Constellation in the first half. We've also completed 2 significant disposals, nexeye in July and WP in October, and we're now preparing for a number of other sales processes. Overall, the portfolios in PE and Infrastructure are performing well. That's despite the weak growth and political uncertainties across a number of our markets. We continue to see some specific sector difficulties, including the automotive sector and the white collar recruitment market in North America. That weakness has impacted Formel D and Wilson. Earnings growth across our top 20 companies has been strong. Company is making up 88% of the portfolio value, have been growing earnings by more than 10% over the last 12 months. We only have 5 companies where earnings are declining over the same period. We have a good balance of winners over losers for this period. Only one company, Wilson, suffered a material write-down in the half. This year, the relentless growth of Action has continued. Net sales are up 21%. And in the first 9 months of the year, operating EBITDA is up 26% to EUR 1.34 billion. Like-for-like sales at the end of September were up 9.8%. And that's on top of the 19.2% like-for-like growth last year. This like-for-like performance is all volume growth with a small negative price effect as a result of [ 4,000 ] price reductions over the last 21 months. LTM operating profit accelerated through P9 and finished at EUR 1.89 billion. Trading was strong in P10, net sales to the end of October are now EUR 10.7 billion and year-to-date like-for-likes have increased to 10.1%. Over recent months, consistently good supply chain performance and product availability have helped in delivering an improvement in like-for-like sales. Those improved like-for-like sales combined with tight cost control have delivered a strong EBITDA margin performance. And that's despite the negative price effect and the like-for-like growth in the year-to-date. Upturn including last week, we've added 244 new stores, and we're now on track to add approximately 350 by the end of the year. We now have over 100 stores in a new DC in Italy, 50 stores in a new DC in Spain, 25 stores in Slovakia and over 360 stores in Poland. We had anticipated and now seeing like-for-like sales lift in the last quarter relative to last year, and we expect continued good performance throughout the final 2 months of 2024. We believe volume-driven like-for-like sales of over 10% puts Action well ahead of its competitor set. And that performance is all the more impressive when you take account of the cumulative 45% growth in like-for-likes over the prior 3 years. Action's low prices and mix of necessities and surprising products continues to attract a growing consumer following. Trading across Action's new countries of Italy, Spain and Slovakia has been excellent. Here is our Action track record slide. It shows the consistency in Action's growth under 3i's stewardship. The track record is truly exceptional, and that strong performance is underpinned by the consumer enthusiasm for Action stores in all our new countries. That appeal supports Action's considerable white space potential. And the trading to the end of P10 suggests this will be another good year of growth across all of these KPIs. Action completed another refinancing in July this year, raising $1.5 billion in the U.S. market and a further EUR 700 million in Europe. Once again, demand for Action's debt was strong. 2/3 of the debt was fixed at an all-in euro cost of 5.6%, and leverage has already reduced from 3.2x off the transaction to under 3x at the end of P9. We used some GBP 768 million of our GBP 1.16 billion distribution to increase our stake in Action to 57.9%. And we've also further reduced the Action carry liability, and James will brief you on that shortly. We continue to segment our PE portfolio, as you can see here. Both Sanders and Action are producing returns considerably in excess of our group return hurdle. Action now stands at 140x our original investment. And Royal Sanders is also trading very strongly, producing a return of 23% in the first 6 months of this year. Our only new investment over the last half was Constellation in France. Constellation is an IT services business specializing in cloud and cybersecurity, and we talked about it at our Capital Markets Day in September. We were very pleased with the sale of WP signed over the summer for GBP 280 million, which puts our total return for WP at GBP 325 million. We achieved a 2.2x money multiple and an 18% premium to book value despite the difficult realization market in the first half of this year. Management doubled the profitability of WP under our ownership, and they did particularly well in managing the business through the real challenges of the pandemic and the Ukraine war. The Infrastructure team continues to perform well in both Europe and North America, and they've delivered some good realizations at healthy premiums to book value. But it remains disappointing that the share price of 3i infrastructure has failed to recognize the strength of the underlying portfolio. So taken together, this was another solid first half for 3i. Our teams have done a lot of good work as have the portfolio management company teams. This result very much reflects the makeup and quality of our underlying portfolios. On that note, I'll hand over to James, who will fill you in on more detail.

Thank you, Simon, and good morning, everyone. As Simon said right at the start, our total return on equity for the first half of the financial year was 10%, as you can see here. The increase in NAV was driven by value growth of 261p per share. Foreign exchange movements were negative 48p and carry movements negative 5p. Our dividend payment reduced NAV by 35p. That meant we closed the half with an NAV per share of GBP 22.61. You can see the components of the 261p per share or GBP 2.5 billion of value growth here. Action continued to deliver an impressive contribution. For the first time, it crossed the GBP 2 billion mark in the half at GBP 2.17 billion. Other PE value increases include Royal Sanders, a rebound in value at Tato and good contributions from Audley and Cirtec. Collectively, these companies generated the majority of the GBP 319 million of value growth in the half. PE value decreases were smaller in the period at GBP 66 million. And that includes the value reduction in Wilson. We only made 2 changes in multiples in the half, one up and one down. So the net movement was small, as you can see on the chart, at plus GBP 8 million. The change in the quoted investment portfolio of GBP 48 million largely came from the increase in the 3iN share price. The uplift to imminent sale movement of GBP 44 million related to the premium we achieved on the sale of WP. The portfolio ended the period with a value of GBP 23 billion. The valuation approach we apply to all of our investments, including our investment in Action, remains unchanged. We continue to value Action on a post-discount multiple of 18.5x, its LTM run rate EBITDA of EUR 2.065 billion. At 30th September, that gives us an enterprise value for Action of EUR 38.2 billion. The valuation on the 3i balance sheet is GBP 15.5 billion. We don't disclose a forward-looking earnings estimate for Action. So it's not possible to tell you what the Action multiple is on an NTM basis. But we can look back a year to September 2023 when Action was valued as an EV of EUR 30.2 billion. That was at the same 18.5x multiple. And you can compare that to the outturn for run rate EBITDA this September. This would have translated to a forward-looking multiple of only 14.6x, the run rate EBITDA Action achieved 1 year later. Having these 2 benchmarks for the Action valuation, 18.5x and 14.6x, is helpful when you're comparing Action to the usual peer set. We do that on the next slide on both an LTM and an NTM basis. These charts cover the period from September 2023 to September 2024. On an LTM basis, Action's valuation sits well within the better rated peers. We think that is more than justified given its stellar performance. On an NTM basis, Action sits above but closer to the average of the peers. But, as you know, our valuation process takes a long term through the cycle approach. So in that context, it's helpful to look at multiples over a longer time frame. This chart shows the peer group average multiples over 5 years. This 5-year period includes some significant periods of external uncertainty and volatility. I'm referring to things like COVID, Russia's invasion of Ukraine and the significant change in the inflation and interest rate environment. We track the Action multiple against averages rather than any individual stock. Today, as you can see, Action's multiple of 18.5x sits above the average of all the peers. We think that this is justified based on the consistent outperformance of Action's KPI versus the peers. 18.5x sits below the average of the better rated peers and has withstood the test of time well. It's also been the mark use of transactions within the LP pool between buying and selling LPs. In addition, we triangulate the resulting Action valuation through a DCF model to make sure the assumptions required to underpin the value are justified. Let's now have a look at the whole portfolio and its valuation multiples compared to the peer set. Just to remind you, this chart shows the valuation multiples for our PE assets in dark blue and the average of the multiples from the relevant valuation peer set in light blue. The picture hasn't changed materially from the position at year-end. All the assets remain within their respective ranges. One asset valuation multiple was marked up and one down during the period. In both cases, they reflect company-specific factors. Being able to realize assets in what remains a difficult transaction market is the ultimate test of value. We successfully exited 2 sizable assets at good money multiples with valuations that were higher than our book value. You can see this on the next slide. We talked about nexeye at the full year results, and Simon has already covered the exit of WP. It is worth mentioning that our Infrastructure team has also been busy. They executed 2 transactions in the period for Future Biogas and Valorem, both at 15% uplift to the 31st March valuation marks. These 2 assets are part of the 3iN portfolio that 3i manages. All PE and Infrastructure assets are captured as part of the 3i independent valuation process. These transactions are in line with the group's consistent track record of achieving premiums to book value on realization events. So turning back to the business line performance for the half year. Our Private Equity portfolio generated a gross investment return of 11% for the half. Without the FX headwind, that return would have been 13%. We saw the strong realizations of Action and nexeye in the half. Reinvestments included the buying of an additional 3% of Action and the purchase of Constellation. The overall PE portfolio value ended the period at GBP 20.9 billion. In terms of the leverage position across the portfolio, we show that on the next slide. There are 2 changes from the position at year-end. First, in terms of Action, refinancing in July increased the leverage of Action from 2.2 to 2.9x. Secondly, in terms of the non-Action portfolio, leverage levels reduced slightly and remain modest. The maturity profile has also moved out slightly, reflecting the Action refinancing. Our interest rate hedging remains prudent and is similar to the position we had at the year-end with approximately 70% of the interest rate risk hedged within the portfolio. So on to Infrastructure. Infrastructure had a solid performance, although the results were impacted by the strength of sterling against the dollar. 3iN share price was up 4%, but the overall valuation level remains disappointing in comparison to both the quality and the performance of the underlying portfolio. Scandlines' valuation reflects both the currency headwind and the payment of its dividend in the period. We remain cautious on the valuation of this asset in large part because of its exposure to 2 of the weaker economies in Europe, Germany and Sweden. The cash contribution from Infrastructure and Scandlines was a combined GBP 68 million, broadly in line with the contribution last year and we expect to end the year with a cash operating profit even before taking into account any dividend we might get from Action. So now let's take a quick look at the balance sheet. The balance sheet is looking strong with cash of GBP 386 million at the end of September. We received an additional GBP 280 million of proceeds from the sale of WP in October, and that added to the liquidity position you can see here. So turning to carried interest. The carry accrual in the period was GBP 42 million, and the balance sheet accrual is GBP 456 million at the end of September. The GBP 456 million is net of the carry purchase of GBP 283 million made in the period relating to Action. As at 30th of September, about 20% of the total PE carry payable related to Action's. Our guidance for the carry accrual going forward is about 12% of GIR on the rest of the PE portfolio and just 1% on Action. So finally, let's turn to the dividend. Here, you can see our dividend policy. In line with that policy, we will pay our first FY '25 dividend of 30.5p per share in early January. At 30.5p, it's half of last year's full year total dividend. Now before we get into Q&A, I will hand back to Simon.

Thank you, James. This was another decent half for 3i. And despite weak growth across Europe, we're expecting a second half of more good progress. Action and Royal Sanders, our 2 long-term hold investments, are both trading well and delivering sector-leading performance against their peer groups. As you have seen, Action's like-for-like performance so far this year is now over 10%. Price has been a negative factor so Action's strong performance is simply down to growth in the number of customer transactions. Many consumers are still under a lot of pressure across Europe and we see no sign of the situation changing very much anytime soon. It's clear that a lot of consumers are tight on funds in the week before they get their paychecks. Unlike the majority of the PE industry, we have a long-term perspective, and we focus on identifying potential long-term holds and running our winners. We are not constrained by time limited fund capital. That means we can choose to put capital to work for decades, so long as it continues to meet our strategic and financial requirements. And retail is a sector where successful companies can become very large and keep growing for many years. On this slide, we have picked 4 examples from the retail sector where growth has been sustained over many years. But in 3 of these cases, the private equity owners sold out very early in the growth story and missed out on the lion's share of value creation. Our core holding of Action is profiled in the bottom right box. But the power of compounding is best illustrated on the next slide, where we have 2 giants of the retail sector, Walmart and Costco. Both have delivered significant annualized returns over years and years. Aldi, Lidl and IKEA have all done the same thing from a European base for their respective families and foundations. Now Action is early on its journey compared to these giants, but its sales and profit densities and overall store economics already compare very well with any peer group in the retail sector. Action's focus on low prices and store growth attracts a growing number of consumers, which in turn gives it tremendous scale benefits across the narrow set of SKUs it buys. This is a simple and powerful business model, and we believe Action will continue to compound and exceed our 15% return hurdle for many years to come. With that, I'll close the presentation and we'll open up the lines for calls. Thank you.

[Operator Instructions] And your first question comes from the line of Manjari Dhar from RBC.

Congratulations on another strong half. I just had 3 questions, if I may. A couple on Action and then maybe one on the wider business. I just wondered, firstly, on Action, if you could quantify the negative price drag that we've seen so far this year, is it sort of similar to what you guys are talking about in the past? And are there any plans to sort of change that as we head into the last 2 months given they're such important months? And then secondly, I wondered if you could quantify -- if you could give some color on what you're seeing in terms of the buying environment from Action and whether that's likely to sort of lead to further benefits in terms of price reduction that could be passed to the consumer. And then on the deal and the investment environment, I just wondered if you could give any color, Simon, on where you see the most of the potential opportunities and where -- and sort of what sectors of the market you're most excited about at the minute.

Thanks, Manjari. Okay. Well, let me deal with those. I think in terms of the negative price position, it hasn't changed terribly dramatically. We'd be -- instead of low 10%, we'd be in the higher 10% if we didn't have the negative price drag. So it's less than a whole percentage point, if I can leave it there. I don't think we're expecting a major change to that. But I haven't done the math to tell you that. And it rather depends on the quantities of seasonal versus nonseasonal as we go through the balance of the year. In terms of the buying environment, I think the big drops in pricing for COGS are shallowing out, but we definitely have some real scale advantages and quite a lot of the COGS we're buying, and there's very big appetite from suppliers to get into our stores at the moment. So we expect to continue to see some benefit from COGS reductions as we move forward. We're also increasing our direct import component as we move through the years. And then on deals, generally, we're actually seeing it across all of the sectors that we're interested in. And we think there's a greater realism on the part of vendors as to the prices that they may get. We also feel that there's quite a lot of middle-market funds that now are short of money because they've struggled to raise new funds. So it seems to us a better balanced market in that regard, and we hope to follow up with at least a couple of new investments in the second half.

Your next question comes from the line of Michael Sanderson from Barclays.

As always, 3 questions from an analyst. First off, just the industry environment. I mean, it's the first time in a long time we've had a couple of assets excluded from the list of top 20 for commercial reasons. Do you think the selling environment is improving dramatically? Or is it just the performance of these assets that has managed just to simulate the activity? Second piece was you made reference to Action potentially and its dividend second half of the year. Having done the significant restructuring, how does that change thinking around any dividend payments, normally, you do a couple of years. So just interested if there's extra color to come from there. And then finally, the increase in your stake at Action. Where are we on the sort of in that pool of owners of Action of those that are building stake and those that are selling, how much more do you think you could increase your stake, I guess, over the short term, I suppose?

Sure. In terms of the industry environment, I wouldn't get carried away. I don't think it's dramatically changing. I think this is an incremental difference, and there's definitely, as I said, more realistic pricing around disposals and a market that's more in balance between supply and demand around opportunity. So we do see that as a step forward, but we're not about to have a tidal wave of transactions. It's reasonably modest in that regard. In terms of Action dividends, I think we're expecting to follow the normal course, which is -- the next dividend, I hope will be in December, and it will be a more normal course of dividend. And then we look at the same question again in March. In terms of the increase in our stake, we believe there are different LP elements within the LP pool. Some of them have a shorter time horizon on Action because of the limits on the time of their money. And some of them, indeed, have a desire for cash given they haven't been receiving much cash from other GPs. So there will continue to be, in our view, some trading in Action equity stakes, but it's hard to say how much that will be and over what time scale. But we would expect to be more trading in the next 12 months.

Your next question comes from the line of Andrew Lowe from Citi.

I've got a couple. First one is just in France, you've had some legal changes in March of this year, which presented the supermarkets from discounting by more than 34%. So I'm curious how this has affected your market share in general merchandise from supermarkets. And I'm just curious, as a follow-up to that, sort of how quickly or slowly consumer behavior has changed? And is it perhaps reasonable to think that this might give you some market share gains, like-for-like growth tailwinds that may persist into 2025. And the second question is just on the U.S. I know you haven't announced anything and you're sort of exploring work, but if you're able to give any commentary about how potential tariffs may affect your thinking, how you might need to adapt your business model would be really helpful.

Sure. Thanks, Andrew. I mean, it's very hard to break out why certain things are occurring in France. We are trading very well. It's our biggest market. We have about 850 stores there now. Like-for-likes are very healthy. And we think it's another terrific year of progress in France, but whether we can put any of that down to any of the edicts as they affect the supermarkets is hard to sell. It's a competitive market. But we've seen a growing proportion of consumers in France coming to us to buy their everyday necessities as well as some surprise items. So it's another very good year of progress for us. In terms of the U.S. tariffs, I mean, I can't see any near-term effect for Action in this. We are -- we've said we're doing a study on that market, but it doesn't amount to any more than that at the moment. So we'll watch with interest what the new President does around tariffs, but it's not really relevant to us at the moment, I would say, Andrew.

And if, actually, sorry, I could ask additional follow-up, if you don't mind. You made a comment in your closing remarks about consumers being tight on the funds the week before they get the paychecks and that's obviously been a theme with many of your U.S. competitors. I'm just curious if you could maybe give a bit more color on that. Is that -- are you definitely seeing that within Action? Or is that more of a sort of broader industry comment?

Well, we're seeing it in Action. We expect that others are seeing it as well that when you're in the week before either the governments pay their various workers or the normal monthly paycheck month, you definitely see a little bit of a dip in spending compared to the other weeks or particularly the week after they receive their paycheck. So it is quite noticeable, and we'd be surprised if other people aren't seeing that as well.

Your next question comes from the line of Gregory Simpson from BNP Paribas.

Three quick ones on my end. Firstly, it does look like EBITDA margins are tracking somewhat ahead of your targets you laid out at the Capital Markets Day. I think year-to-date, you're up about 60 basis points year-on-year. So just can you -- and you mentioned, I think, tightened cost control of Action. So any kind of thoughts on that 15% 2026 prior guidance? Is it kind of look like there's kind of upside risk from here? Second question would be on -- can you provide an update on direct sourcing at Action? If there's been any change in -- or progress that was previously an ambition to increase that with the mix? And then thirdly, just on the Action's leverage profile. You're below 3x, with debt capital markets being quite open and favorable in terms of spreads, would you be looking to increase that? I know in the past, you were close to 4x at Action.

Sure. Thanks, Gregory. EBITDA margins, yes, well spotted. The -- there is clearly a risk on the upside to these. We are seeing sales well ahead of what we budgeted for, and there is a lot of momentum in the business. And that's clearly having beneficial impact on store operations and other central costs. So we are -- and we're not chasing rents as usual. We're very careful about the rents we sign up to. So we do see pressure on the upside in terms of the guidance at least for this year around EBITDA margin. It's too early to say, though, given we have our biggest 6 or 7 weeks trading in front of us. In terms of direct sourcing, yes, we've seen an increase this year, and we're going to see another increase next year. So this is helpful to us because it gives us greater ability to share the benefits of that -- of those COGS savings with our consumers. So it reinforces the flywheel of lower prices for us, which is the main benefit of that. And then in terms of the leverage profile, we're actually in the market at the moment doing a -- looking to extend a couple of our older term loans, Term Loan 2 and Term Loan 3, just to push the duration out. These are leverage-neutral exercises, they're not looking to increase the leverage. I mean, we periodically look at that, but there's no plans to do anything in the next few months, and we're not doing it with the current exercise, Gregory.

Your next question comes from the line of Nick Johnson from Deutsche Numis.

One question actually just from me. On Action's like-for-like, 10.1% to October, is it possible to provide a broad feel for how that's distributed across the store estate? In particular, what sort of like-for-like performance is Action seeing in the more established stores and geographies?

Yes. I mean if we were to just generally look at the store estate, the older estates in the Netherlands and Belgium would be around mid-single digits. The likes of the next country, say, France and Germany would be around double digits. So sort of close to the group average and the best performer would be Italy, which is in the high 30s and trading incredibly strongly. And Poland is not far behind. It's in the high 20s. So that gives you a span of what we're seeing.

Your next question comes from the line of Hubert Lam from Bank of America.

I've got 3 of them. Firstly, on your store count, I know you're running ahead of schedule or at least ahead of your guidance for this year in terms of store growth. Is that because of front-loading or just doing more? So I'm just wondering if we should expect any change in the midterm guidance around store count? Second question is on the French tax. Just wondering how this will -- what this will do for you, what -- any guidance around how the French tax would affect your Action P&L? And lastly, I know you had some stock-outs last year at the end of last year around Christmas time. Just wondering what are you doing now to kind of avoid the stock-outs that you suffered last year and what lessons you learned?

Sure, Hubert. Okay, let me take these in turn. I mean in terms of store count, this has been a good year for projects getting to completion with limited planning and other constraints, we would say. So we always have a bit of a span internally on how many we might do, and we're coming out at the top end of that span. We have not considered any change to the medium-term guidance, which was the 1,300 to 1,400 stores that we've talked about in the past over this medium-term outlook, but we will update that at the CMD in March, but there's no comment to make at the moment, I would suggest. On the French tax. This is interesting. This is -- it's actually not a tax. It's called a contribution, and it's called a contribution because they're expecting you to pay it in respect of '24. We think as it affects Action, it's going to be in the low tens of millions as a cost to us, and it's really a cash cost. So that's what we anticipate will happen, but it will be affecting people's '24 numbers. It's not just in respect of '25, and that's why it's called a contribution. I hope Rachel Reeves doesn't pick up that particular idea. And then in terms of stock-outs last year, we've got a very good position this year coming into the final year. We've bought plenty of stock in those key items for the Christmas season that we ran out of in November and early December last year. So we're feeling a lot better than that, although we are seeing some very strong buying of certain items already in late October, early November.

Great. Just to clarify, for the French contribution, you mentioned the impact of '24. Would it also impact '25 as well?

Yes, it looks like it. They're going to span it over both those years.

And I assume about the same magnitude for '24, '25, which you mentioned?

Well, yes, subject to the growth that we have in our French business, yes.

We have no further questions on the line. So I will now hand over to Silvia Santoro, 3i's Group Investor Relations Director to address any questions submitted online via the webcast page.

So first question is from Bruce Hamilton. Given Action's like-for-like accelerated to over 10% year-to-date and is well above that this October, should we expect that double-digit growth is sustainable for 2025?

I think it's too early to make a judgment on that. Bruce, I would doubt if we're going to move away from the guidance we give, which is mid-single to high single digits. I would say that's the right range for us, and that will be pretty similar in March, I would anticipate.

And then we have another question from Bruce. Are there strongly performing and scaled assets that are in consideration for the longer-term book?

Yes, we keep our eye on the number. But there's nothing that we're about to move across at the moment, but we do feel we have a number of other candidates within the portfolio.

Then we have a question from Haley, which has been partially answered, which is about the feasibility studies that Action is carrying out in markets in the U.S., U.K. and Asia.

Well, she's right. They're very much studies. There's nothing more concrete than that at the moment.

The next question is from Chris Brown. What is the multiple at which the non-Action PE investments are valued? And what was the LTM earnings growth on these? How long are the interest rate hedges in place for on average? So there are 2 there.

Yes. So at the year-end, we disclosed that the non-Action portfolio was 13x. It hasn't changed materially from there. As you know, we have one up, one down. There's a little bit of movement in the book, but it's effectively a similar level. The earnings growth, I think you can back it out from the slide that Simon produced. And on interest rate hedging, the average -- if you're asking for the interest rate hedging in the portfolio, I think the duration is sort of somewhere between 3 and 4 years.

There was another question from Bruce. What is your view on capital market activity outlook following the U.S. election? Does this increase confidence on deal activity?

Sorry, can you repeat that?

Your view on capital markets activity following the U.S. election. Does the election increase confidence on deal activity?

On deal activity. Well, I think we've got 2 very different situations. In the U.S., I think there's going to be a lot of red blooded activity, and I can see it being quite full on for a period at least. In Europe, I think activity is much more subdued at the moment. Some of the U.S. activity will spill over here. But I think there are a lot of structural issues in Europe. There's a lot more regulation, and I don't see us following the same course.

Then we have a question from a private shareholder. You suggested there might be further shares for sale in Action in the next year or so. And would 3i be a buyer, assuming the price is right? And is there any limit on the size of the 3i stake you would be prepared to hold?

We -- at the moment, we don't have a formal limit or anything like that. We are -- we have appetite to buy further shares in Action because we do see it as having decades of growth in front of it. So yes is the answer to that, and we don't have a formal limits on how much we do.

Can you please also shed some color on the remaining investor base in Action? That's it, sorry.

The remaining investor base in Action is a collection of limited partners in a fund. Some of them are large sovereign wealth funds, and some of them are fund of funds who are probably smaller and have good reason to raise cash from this stake or other sales. So it is a mix of parties. And then there is another private equity investor in Action called Hellman & Friedman, which has about 13% more of the group.

And a follow-up question to that. Can you comment on who the seller was of the Action shares?

There were a number of the LPs, and they're private transactions, but it was a number of the fund of funds parties that sold, and there were some LPs that bought as well as 3i buying.

Finally, another question from another private investor. The continued success of Action, while simply brilliant creates a difficult dilemma for the private investor. Have you considered splitting 3i into Action and 3i that would enable shareholders to choose where they want their investment to sit?

We're not focused on that. We actually believe that the balance between 3i's involvement and ambition for Action and Action's ability to focus on its long-term plan and the management to be completely operationally focused is a very powerful combination. And we think that has produced some stellar performance and growth over the last 14 years, and we expect that to continue. But it's partly the combination partly of the fact that there aren't concerns about short-term quarterly performance and other pressures directly put on Action, I believe, that really underpins this. So there are no thoughts of splitting apart 3i balance from Action at the moment.

And we have a follow-up question from Gregory Simpson at BNP. For the current pipeline of realization you referred to, would you be optimistic on exiting at a premium to holding values?

I mean, we generally have an expectation that that's what we do. That's what our long-term track record says. And so that would be my expectation. That's not to say we always get it right, but 9 times out of 10, we get it right.

It looks like we have no further questions from the webcast.

Okay. Very good. Thanks, Silvia, and thanks, everyone, for calling in. Have a good day. Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.