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

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

Good morning, and welcome to our 3i 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 two of our Private Equity team, who I will introduce shortly. The main purpose for this Capital Markets Day is to tell you about two of our recent Private Equity investments, WaterWipes and OMS and more about our recent disposals of MPM and MAIT. The agenda for today is set out on this slide. There will be an opportunity to ask questions 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. Both portfolios are performing resiliently against subdued macroeconomic environment. Action continues to generate strong sales and EBITDA growth. Year-to-date sales at 21st September 2025 of EUR 10.9 billion are 18% ahead of the same period last year. Like-for-like sales growth over the same period was 6.5%. Like-for-like stood at 6.8% at the end of August, driven by transaction growth in all countries. Weaker overall consumer spending in France and Germany has been a feature of year-to-date performance, with recent general strikes and unrest in France causing the reduction of like-for-like to 6.5% for the group. Performance has benefited from good seasonal sales and strong trading from new and recently opened stores. And we expect operating EBITDA for the 12 months to the end of P9 2025 to be circa EUR 2.295 billion compared to EUR 1.894 billion at the end of September '24, an increase of 21%. The LTM P9 2025 operating EBITDA figure is after a one-off expense of EUR 26 million related principally to a payment to eligible Action employees in June 2025 to mark Action's 3000th store opening. Cash generation has continued to be strong with cash balances at 21 September '25 at EUR 758 million. Action has now added 207 net new stores in the year-to-date and remains on track to deliver or exceed 370 net new stores in 2025. New openings this year include the first 7 stores in Switzerland and the first store in Romania in Pitesti, which opened yesterday. Royal Sanders continues to perform well, and the broader Private Equity portfolio is showing improving momentum. Since the publication of our Q1 performance update at the end of July, we announced the sale of MAIT, one of our PE portfolio companies, to a fund advised by DBAG. Total gross proceeds to 3i for this sale were estimated to be about GBP 143 million, which represents a 30% uplift to the 31 March valuation of MAIT and results in a 2.7x multiple of invested capital and 27% IRR. We've also announced today that we have bought a further 2.2% equity interest in Action in exchange for 3i shares. This is consistent with our strategy of continuing to increase our exposure to Action when the opportunity arises. Okay. On to today's presentations. First up is Rupert Howard, who heads our London PE team. He is part of our consumer and retail team and has been at 3i for 7 years. Rupert will be talking about the recent sale of MPM and our new investment in WaterWipes. Next will be Peter Wirtz, who is the overall Head of our PE team and based in Frankfurt. Peter will talk about the recent sale of MAIT and our latest investment in the testing sector, OMS. I'll now hand over to Rupert. Thank you.

Thank you, Simon. Good morning, everyone. I'm delighted to join you today to talk through the successful exit of MPM and introduce our most recent consumer investment, WaterWipes. As Simon said, I'm Rupert Howard, I head the U.K. Private Equity team here at 3i, having been with the firm for 7 years. Prior to that, I spent 13 years at Rothschild, also in consumer, retail and leisure M&A. Consumer has long been a core sector for 3i. Over the last 2 years, we've deployed around EUR 1.7 billion into the sector. Today, over 80% of our Private Equity portfolio by value sits in consumer. And I'm sure you're all familiar with these names that sit across branded products, private label, e-commerce, retail and travel. It's a sector we understand deeply and continue to invest behind. 3i has been investing in U.K. growth businesses for more than 80 years. We have a team of 14 PE investment and banking professionals based in London. Today, the U.K. portfolio includes WaterWipes, which we acquired earlier this year; Audley, our tailor-made travel provider; AESSEAL, our specialist seals and support business; and THOR, a manufacturer of specialty chemicals. Previous successful investments and exits from the U.K. team include MPM, MKM, Aspen and Mayborn, all of which delivered 3x plus returns. So now let's turn to MPM. MPM is an international leader in branded premium natural pet food, focused particularly on cats. It owns the Applaws and Reveal brands. Reveal is known as Encore outside the U.S. Its proposition is distinct. All products are clean label and human grade. They're entirely natural with limited ingredients, and the business benefits from a fully outsourced manufacturing model with its wet food being made in Thailand and dry food being made more locally. The cat-first proposition is important. 90% of MPM sales are cat related, and it's a market that's often ignored in favor of dogs. We first identified MPM in 2017 and acquired it in late 2020, investing around GBP 125 million in the secondary buyout from ECI alongside the existing management team who rolled significantly. Talking about the team. When we invested in 2020, it was in the depths of the COVID pandemic, and the relationship that we have built and our confidence in Julian, the CEO; James, the COO; and Dave, the CFO, enabled us to push on with the transaction as we had high conviction in the quality of the business and the team that we were investing behind. We complemented the Board with the appointment of Tim Whiting as Non-Exec and Chairman. The business had scaled to a point, but we had ambitions to scale it further, and we're aware that it required upweighting in certain areas, notably bringing in the Head of the U.S. business, Kim, and in marketing with a new CMO in the form of Sam. The impact of those hires will become clear as we progress through this presentation. The global premium cat food market is large, growing and resilient. When we entered, growth was running at about a 7% CAGR. This accelerated to 11% during our whole period and forecasts now show, it's growing about 6% going forward. So what's driving this growth behind cat? Well, pet ownership is rising, especially among younger urban consumers, and this trend is even more pronounced with cats. Delayed family formation drives more pet ownership. Cats, those of you who've got them, are lower maintenance than dogs, and they live longer, approximately 15 years. Critically, cats' behavior and dietary needs are globally consistent, which makes this a truly international play. Our investment thesis, which some of you may remember, I took you through in September 2021, was built around four clear pillars: the core, building on the already strong foundations; U.S., growing in the world's largest pet food market; online, the fastest-growing channel; and brand, migrating the business towards becoming a more consumer-focused branded business. So let's go through those in a little bit more detail. As I said, MPM's products are visibly differentiated. Typically, there are just three ingredients, for example, flake chicken or tuna, broth and rice. And this is very different from what else there is in the market, which is usually pack full of preservatives and sweeteners to increase shelf life and palatability. We've backed two brands with distinct but complementary identities. Applaws which was born in the specialist channel, a playful, fun, natural proposition, generally appealing to families and slightly older shoppers; and Reveal, born in grocery, which stands for connection, warmth, the satisfaction you get from feeding your pet, generally appealing to a younger consumer. Indeed, under our ownership, these brands have attracted quite different consumers and are now sold alongside each other in stores and online, for example, in PetSmart, driving higher basket value to our retail customers. Together, these brands double the addressable white space. But it's also worth flagging that in core, we're referring to some of the business enablers, such as the strong management team, the great market position, strong customer relationships and a dynamic disruptive culture. Turning to the U.S., which at entry was about 14% of sales. Today, it's over 40%, having grown more than 6x. And that growth came from a number of factors. I mentioned the hiring of a U.S. CEO, but we also built a 30-plus person team in the U.S. We invested ahead of the curve. We took some calculated inventory positions to support future listings, which were particularly beneficial in the face of the shipping and logistics dislocation that impacted the market. We were able to take advantage of competitor out of stocks and the continued support from the retailers for our brands. And finally, product innovation, including the recent launch of [ Vitality ], which is a complete product range, with added natural nutrients, addressing a new space in the market for MPM. As a result, MPM now has a strong presence in specialists like PetSmart and Petco, in grocery, Kroger and Walmart and online such as Chewy. So as I said, online was the third core pillar and a big growth lever for us. At investment, our largest customer was Zooplus in Europe, the specialist online pet retailer. We saw the opportunity to expand into Chewy in the U.S., a business many times larger than Zooplus. Today, U.S. online sales have grown 10x and account for almost half of MPM's entire business in the U.S. A key enabler for this was that we built a digital-first strategy around the right assortment, strong availability, targeted content and full-channel integration. In 2024, we completed a major rebrand of Applaws, giving the brand a more modern and unified look across the channels, a clearer emphasis on its natural and tasty credentials and a flexible identity to support that innovation. This brand work that you see on the slide was instrumental in increasing customer appeal, shelf presence and allowing that harmonization across channels, both online and offline. And this slide shows how the valuation of our investment developed over the years. It follows a fairly typical path with investment in the team and the business in the early years leading to moderate growth, which accelerated towards the end of the whole period as the benefits of these investments came through. And our exit at around GBP 400 million was at a GBP 60 million premium to our March '25 valuation. So our investment thesis that I just outlined was validated in June 2025 when we announced the sale of MPM to Partners Group, which subsequently completed earlier this month. The headline results of GBP 400 million gross proceeds to 3i, a 3.2x money multiple at a 29% IRR. We ran a disciplined and well-prepared process with interest from both strategic and Private Equity parties and from all corners of the globe. Our exit was aided by the business consistently outperforming. And even when Liberation Day disrupted bids just after round 1, we kept momentum and reengaged constructively with selected parties. MPM is a great example of our investment strategy of backing world-class winning companies that benefit from structural trends and delivering strong international execution through a partnership between 3i and the management team. So now let's turn to WaterWipes, our latest consumer investment. We acquired the business in January 2025, but it is one that we have tracked for a long time, and many of us here at 3i are loyal customers. We invested EUR 145 million in a limited process. And importantly, we are delighted that the Founder, Edward McCloskey, has retained a significant minority stake, partnering with us on the next stage of the journey. WaterWipes has a genuinely inspirational founder story with Edward setting the business up in 2008 because he couldn't find a product in the market that was clear of nasty chemicals that contributed to his daughter's nappy rash. Fast forward to today and WaterWipes is a leading premium natural wet wipe brand. It's a clean label product, 99.9% pure water with just a drop of seed extract. Its products are accredited by global dermatological bodies. And the business is omnichannel and diversified internationally with over 50% of the revenue coming from the U.S. I mentioned a limited process. What we mean by that is that Edward deliberately set up the process to be narrow, with a huge focus on finding the right partner for his business. This played to our strength as we have significant experience partnering with founders across 3i, and we were able to demonstrate how we could add value to WaterWipes, for example, by drawing some of the clear parallels with the success of our investment in MPM. The global wet wipes market is huge. It's worth about EUR 13 billion and is growing mid-single digits. In addition, the market tailwinds include a consumer that is focused on natural skin-safe products, which is even more pronounced at the newborn or baby end of the market, a clear premiumization trend, an established omnichannel presence. It's very important to both bricks-and-mortar and online retailers. And it's a sector that is dominated by a few CPG companies and private label, providing a genuine role and high retailer appetite for challenger brands. Wipes have many uses and presents an opportunity to move beyond core baby into adjacent occasions and categories. WaterWipes sits across a number of subsectors that we have specific domain expertise in. Personal care, through our investments in Havea, which actually has its own wipes product and Royal Sanders, premium brands such as Mepal and MPM. [ Juvenile and Children ], our historic success with Mayborn and our experience with Konges Slojd, our premium lifestyle brand. And we're able to leverage our experience and our network across all of these categories to underpin our investment decision and deliver on our thesis. There are a number of attractive attributes that beyond our portfolio experience that I touched on, gave us confidence that 3i was the right investor for WaterWipes. The business is Irish headquartered with the majority of its revenue coming from international and clearly sits at the premium end of the market. There are attractive market tailwinds that we just discussed and a sector and model that we understood from a number of different angles. People is always a critical part of the assessment. And not only do we have a strong management team in place, with a great entrepreneurial culture, but we have that continuity with Edward investing alongside us. That culture is underpinned by purpose, with consumers trusting WaterWipes with their newborn's skin. Moreover, sustainability is not a buzzword, but is at the core of WaterWipes products, which are entirely natural and plastic-free. And clearly, a strong financial profile is important for us, with WaterWipes delivering consistent top line growth at attractive margins and cash conversion. So there were five attributes in particular that we wanted to dive into. The first being the differentiated product and IP, the proprietary seven-stage purification process. The brand and consumer loyalty, #1 in premium in the U.K. and U.S. and leading accreditations. International and omnichannel. It's well diversified with strong growth levers. A strong financial profile. And sector interest, this is an active M&A environment in personal care. The WaterWipes' formulation was developed by Edward back in 2008 and is based on 99.9% purified water, with only natural fruit seed extract added. This means that there are no preservatives, surfactants or emulsifiers in our products. And this is clinically proven to reduce skin reactions and preserve the skin microbiome, a big differentiator, particularly with sensitive skin and even as far as neonatal care. Unlike our competitor products, going back to the founding principles, WaterWipes do not cause any irritation to the skin. It does not upset the pH balance of the skin and nor does it leave behind any nasty chemicals after use. This unique and versatile formulation is proudly manufactured in WaterWipes' own facility in Drogheda in Ireland. And WaterWipes has already achieved strong market positions. I referred to the #1 positions in the premium space in the U.K. and Ireland, France and the U.S. Brand loyalty is extremely high. 98% of physicians would recommend the product. NPS scores are also industry-leading across consumers and professionals. And I'm sure that many of you on this call are or have been customers. Finally, there's very strong consumer ranking on Amazon, which is a key partner for the business. And hopefully, on this slide, you can see that the business is well diversified across both geography and channel. As I mentioned, the U.S. is broadly half the business, but there are strong positions in the U.K., Europe and the Middle East. This is the benefits of a globally applicable product. Everyone has babies and everyone with babies needs wipes. And channel-wise, it's well balanced across retailers, online distributors and pharmacy. And this gives resilience and a platform for growth across a genuinely blue-chip international customer base. I mentioned earlier the impressive financial performance, but this chart demonstrates it in a bit more clearly. Since 2017, WaterWipes has delivered a greater than 20% CAGR before that, even higher, with strong top line growth across all markets, high gross margins, robust EBITDA and cash generations. And net sales in 2024 were around EUR 200 million. Lastly, personal care remains an active M&A category with a full range of transactions such as strategic exits like Dr. Squatch, PE to trade deals and healthy valuations, especially for premium branded assets. This gives us confidence that when we do come to exit, there will be multiple avenues to take. Our investment thesis is based on four pillars. The observant of you will note that these are very similar to what we executed at MPM. Firstly, around the core and new product development, continuously working to improve the product. Indeed, a new improved 2x stronger and thicker wipe is rolling out in stores as we speak. International, we'll continue to expand internationally, deepen our presence in the U.S. and Europe and unlock white space where we undertrade. In terms of channel, we have ambitions to grow in club, convenience and pharmacy, all of which are developed wipe channels, but where we have a more limited presence to date relative to others. And category. While WaterWipes today is predominantly a baby product, there is significant opportunity beyond baby, towards broader life stages such as toddler, adults, senior care and even convenience with our on-the-go product. As you've been listening to this, you will have, hopefully, seen that there is significant read across between what we have done with MPM and what we intend to do with WaterWipes, which goes well beyond the simple four-stage investment thesis. The playbook might be familiar, but it is also effective. Both MPM and WaterWipes address large global markets. They benefit from global trends towards premium and natural segments. They compete against large incumbents as the clear challenger brands. The brands both have very strong consumer advocacy and a loyal base of passionate customers. They both leverage natural clean label, limited ingredient positioning, putting sustainability at the heart of their proposition to further differentiate from their competitors and have multiple avenues for growth across the U.S., online and product innovation. The first few years of -- sorry, the first year of a new investment is always busy as we seek to tackle a number of areas. Our key priorities in year 1 include. Strategy, aligning on the markets, channels and products. NPD, driving product innovation and enabling that strategy. From a marketing perspective, building digital and in-store awareness. From an operations perspective, ensuring supply chain flexibility and delivering that renovated wipe that is 2x stronger than the previous iteration. From a people perspective, we're bolstering the leadership and building governance. And like MPM, we're delighted that we have been able to attract quality talent to the team to help deliver on our ambitions. Finance and IT, we're leveraging our expertise in banking and hedging as well as ensuring ERP optimization. And while sustainability is already at the core of the WaterWipes proposition, we are ensuring that we build on that already strong ESG credential. We're hugely excited about what lies ahead for WaterWipes. It's a great brand, a strong team and a market full of potential. It sits across a number of subsectors where we have deep expertise and shares a number of attributes with MPM, which has been a very successful investment for us. Thank you for your time, and I'm happy to take any questions.

[Operator Instructions] Please stand by while we compile the Q&A roster. Thank you. We are now going to take our first question. And the questions come from the line of Gregory Simpson from BNP Paribas Exane.

Two from my side. The first is for both MPM and WaterWipes. The U.S. is a meaningful part of the story. Can you maybe talk through what you've seen so far in terms of the impact of the U.S. tariffs around consumer businesses? Is it causing a lot of uncertainty in terms of your forward planning? Did it weigh on the MPM sale process and so on? And then the second question is, MPM was sold to another private equity firm who presumably think they can get a lot more growth out of the business. Could you maybe frame the decision to exit now versus maybe keeping it as more of a longer-term compounder like you're doing with Royal Sanders?

Yes, sure. I'll take tariffs. And Simon, do you want to take...

Yes, I can.

So yes, look, clearly, the U.S. tariffs are something that we've had to deal with from both an MPM perspective and a WaterWipes perspective. Liberation Day itself caused us to pause the process, as I referred to earlier, just while the market digested the impact of, particularly, the Thailand tariffs. However, I think that the market was pretty quick to understand the implications, which are more applicable to the entire sector than necessarily the individual businesses. And there are a number of parties who are able to price that and move forward with the transaction. From a WaterWipes perspective, yes, the business is exposed to the 15% tariffs placed on the EU. But our view is that, that is manageable within the pricing and the cost infrastructure in the business.

Thanks, Rupert. Yes, let me pick up on the exit long-term hold decision. I think you have to remember that the majority of our investments will be on the normal private equity cycle of holding for 5 or 6 years and then selling at that point. In this particular case, we didn't focus on it as a long-term hold candidate, not because of the quality of the business, but simply that it was a long way from reaching our EUR 100 million EBITDA threshold, which we have to have for those businesses to move across.

We are now going to proceed with the next question. The next questions come from the line of Manjari Dhar from RBC.

Just two questions from me, if I may. The first question is on the overall portfolio exposure to the consumer sector. I appreciate that, that Action will be a good chunk of that. But maybe ex Action, how do you see the exposure to consumer evolving going forward? And then secondly, just a question on WaterWipes. I appreciate that, that has significant exposure to the U.S. I suppose the question is, do you think that there's material more growth opportunity in that market now? Or would you be focusing growth maybe elsewhere?

Why don't you take the second first, and I'll do the [ first ].

Yes, we see huge opportunity in the U.S. I think if you look at the scale of the market and the size of the business as it is today, while it is a large business, it is still relatively small compared to some of the larger FMCG businesses out there. I referenced in the presentation some of the beyond baby opportunity that we see. That gives us more than enough conviction that if we were to get any meaningful scale in any of those categories, the business would be significantly larger than it is today. So in short, we are very bullish on the U.S. opportunity.

Thanks, Rupert. On the weight of the consumer sector, when I first joined 3i in 2011, I did quite a bit of research on the nature of the portfolio going back over a decade in order to define what sectors we would use going forward. And it was very clear from that analysis that consumer had been the largest sector in the group for quite some time, and it will continue to be. It's obviously somewhat overweight because of the great success of a number of our consumer companies pointing to Action, Royal Sanders in particular. But as you know, we have permanent capital, and we will run our winners, and we do expect a consistent number of winners to come out of the consumer portfolio.

I am showing no further questions. So I will now hand over to Silvia Santoro, 3i's Group Investor Relations Director, to address the written questions submitted via the webcast page.

So the first question is from William Woods at Bernstein. He says, you have given two good examples of FMCG investments. However, in the wider space, many FMCG challenger brands have failed to reach sustainable scale. What do you think are the hallmarks of MPM and WaterWipes that make them different to other FMCG challengers that have failed in the space?

I would like to think that I may have set out a few answers to that as we've been through it. But I think in particular, these businesses, both appeal to globally applicable markets. So the pets or babies, everyone has them, it gives you real runway and potential to expand, not in a single market, and therefore, you have portfolio diversification and more avenues for growth than if you were operating in a single market. I think challenger brand is a term that is often loosely thrown around. A challenger brand can be a small start-up with EUR 1 million of capital. These brands have proven that they are, while challengers compared to, say, a P&G, they are of scale. They have a proposition that works. They deliver a consumer benefit, and they deliver a rate of sale to their customers, whether that's online or offline, that is additive to the proposition that they're offering.

Thank you, Rupert. We have another question from Ashton Olds at the Rothschild, Redburn. He says, are you able to give some insight as to how exits can be managed when you are partnering with a founder who is selective about their investment partner?

How exits are managed when you...

When you're partnering with a founder who is selective about their investment partner?

Hopefully, they like you. No, I think it gives an opportunity for you to leverage the experience you already have within your portfolio to give them real comfort that you go beyond the "We're really great and you should partner with us." We were able, with Edward in particular, to demonstrate, as I hopefully showed in the slides, across Havea, how we understood the space, how we have grown the consumer brand in a similar category in France and materially added value to it. With pet food, how we've taken a business that was predominantly European into the U.S. and scaled it. So it's all about differentiating your proposition and what value you are going to bring so that founder is comfortable partnering with you.

Yes. I would just add that we -- in order to have a co-investor like a founder in a business, we have to have an agreement on the way forward. The agreement around this is that we were looking at it as a normal private equity investment, but with a very responsible mindset. And if it meets our criteria, we would then consider whether it should join the long-term hold bucket at 3i because we will run our winners. So we have that understanding.

A further question from [ Robert Platt ]. You mentioned the own Ireland manufacturing site for WaterWipes. What's the CapEx needed for WaterWipes going forward with the growth you plan and capacity they have currently? And also, what's to stop larger competitors developing their own water-only pure brand?

So from a CapEx perspective, clearly, that was a core part of our diligence and the business, and the site is very well invested. There is no need for material CapEx to deliver on our investment case. Clearly, if the business outperforms and grows further, then we'll need to put in the CapEx to support that growth, but that will be a decision to be made further down the line. In terms of competitors copying it, again, as you can imagine, that was a pretty core focus of our investment decision. The simple answer is, they've tried and failed many times. The more detailed answer, as I hopefully set out, is that there is a very differentiated and frankly, very clever process that is used to enable the product to be so different to anything else on the market.

Great. There is another from Jeremy Kincaid at Van Lanschot Kempen. You said you were looking to expand use cases and the occasion for the wipes. What are the biggest opportunities there? And how do they compare to the existing baby-related occasions?

So I've talked about the opportunity to expand beyond baby. All-life stages ultimately are addressable by wipes as a proposition. So whether that is extending from baby into toddler who are still messy, that's where we have a small part of our business. Through to senior care, which is a massively growing category, particularly in the U.S., where we already have a small proposition. And then between the two of those, there is the adult and the convenient product. And in that case, for us, it's all about making people aware, not just us growing into an existing market, but actually growing the market itself as we show people where and why you can be using the WaterWipes product. So roundabout answer, but any of those avenues could be of significant scale and could be larger than baby if we execute.

Thank you, Rupert. It looks like we have no further questions, so we can move on to Peter's presentation.

Thank you very much, Silvia. Good morning also from my side and a brief introduction. My name is Peter Wirtz, as Simon already mentioned, and I'm heading 3i's PE business. In 1 week, I have been with 3i with -- for 27 years, 1st of October, and I've been based in Frankfurt since then. I have been co-heading the German business for 10 years before taking over the leadership of our private equity business internationally in 2019. I'm also a member of the Investment Committee and the Executive Committee. Besides these tasks, I am still getting involved in transactions supporting deal teams to originate and execute deals, particularly in Germany. And I'm currently sitting on five boards of our portfolio companies, one of which is OMS, which I'm going to talk about. Brief look at Germany. So we have been in Germany on the ground for more than 30 years now. So we have been pioneering Private Equity also in this market like in other European markets. And we are a recognized brand name in Germany with a broad and deep network as a result. We are currently 12 investment professionals and 2 of our sector heads are based in Frankfurt, Andre Perwas, heading the software and service sector; and Malte Fehn, who recently joined us from DBAG, a German competitor, who heads our industrial sector. On the slide, you can see our current portfolio and the selection of investments we made over the years in the German market. And on the current portfolio, I'm going to talk about two of our companies: one, OMS, that we just bought; and the other one is MAIT, that we just sold. Before I come to the companies themselves, I just -- have a quick look at our approach in the software and services sector. We focus on three subsectors. One is the tech-enabled services where OMS is placed. And I'm going to talk about what tech-enabled means later in the presentation. So I think OMS will give a lot of color on what we actually mean by that. Then we have mature software. And there we have a German asset xSuite, which is a leading accounts payable process automation specialist focused on the SAP ecosystem. And then we have IT services where MAIT sits and two other French investment, Constellation and Evernex, which I believe was introduced last year at this occasion. Okay. Let's have a look at MAIT. So what is MAIT? What is MAIT doing? MAIT is a German IT service provider with a focus on the manufacturing Mittelstands, where it generates 80% of its net revenues. They do this as a partner -- they are a trusted partner for their customers and support them on their digitalization journey. And they do this as a partner for four core software vendors, which you see there. It's Siemens, Abas, PTC and Comarch. Siemens and PTC are both in the PLM area, and PLM stands for product life cycle management. And the purpose of PLM is to establish a data foundation or -- you could say, a single source of truth, to track the product across its life cycle and hereby connecting all departments within a manufacturing business. And the other part is ERP. For many of its customers, MAIT has been a partner for over 10 years, and this underpins the quality that MAIT delivers to its customers and the ability to grow together with them. What excited us about MAIT was, first, the resilience of the business, the strong downside protection. I'm going to talk about this in more detail. And then the strong track record in buy and build. We continue this story with 14 add-ons acquisition in only 4 years during our ownership. Again, I'm going to talk about this in a bit more detail. How did we find or how did we source MAIT? A partner in our -- in the Frankfurt office, Michael Specht, who focuses on services and software, identified MAIT in 2020 as part of the subsector work on IT services. which has since become a core pillar of the software and services sector strategy. We then bought the company in a fully proprietary and bilateral process, leveraging our strong network in Germany to a small-cap investor, [ Finders ], investing GBP 53 million in September 2021. Since then, we have worked hand in glove with existing management around CEO, Stefan Niehusmann; and the COO, Axel Schmid, to scale the business. Let's have a look at the investment thesis that we invested on. I touched on the first point, strong downside protection as a foundation. MAIT has proven to be a very stable business even in tough economic climate. And this is due to the solution itself, sells and implements that are truly core to the operations and mission-critical for their clients. So this is not something you can switch on and off. So there's very little churn, and the churn is less than 2% per year. So a very stable customer base. And the customer base itself is also very broad and diverse with over 7,000 clients, so no big client risk -- or not one client making a lot of your sales. Finally, its solutions are typical sold as a subscription, leading to a share of 50-plus of contractually secured revenues. Then the growth of its core market in PLM and ERP. This is driven by megatrends as mid-market manufacturing clients or any clients or any company needs to move to the digitalization and needs to move to cloud solution. And therefore, the applications are becoming more and more complex, and they are looking for experts to outsource their IT services, and the market as such is growing as a result of that. The third pillar, M&A. I will touch on this on the next slide. And then finally, DACH expansion. We saw the potential for geographic expansion from a German-centric business to a true DACH organization by building structures, processes and teams in Austria and Switzerland. and creating a more international group, first focused on DACH. And in 2024, we also paved the way for further international growth with the first small add-on in the Benelux. Now as I said, let's have a look at the M&A agenda. Over the 4 years, we have completed 14 add-ons with MAIT, and there's a clear strategic rationale for M&A in the market. The smaller players lack the depth and breadth of offering that is required by the software vendors and the customers. The solutions are getting more and more complex, and the smaller companies can't cope with that increased complexity. So smaller founder-led partners often saw MAIT as a natural next step of growth and a good home for their business. We have acquired across MAIT's portfolios of vendors but especially strengthens the strategic PLM side of the business. As you can see -- you can see the most of the clicks at Siemens. Each of these acquisitions were sourced bilaterally outside of sale processes and importantly, they were tightly integrated because buying a business is not that tough. It's more the integration to have it properly integrated, which is the hard part of it. And our team helped particularly with the M&A, the financing and the integration of these companies. And that strategy delivered, as you can see, from GBP 53 million value in September '21 to GBP 143 million at exit, delivering a 27% IRR and a 2.7x money multiple. Talking about the exit. Throughout our investment, MAIT received strong interest from investors that valued its stability, downside protection, M&A track record and its clear strategic focus on the manufacturing industry. We have started to thoroughly prepare the exit already a year before. This is what we do with all our investments. We start early on to make the companies that we own exit-ready, that they have all the data available that will allow us to run efficient and good processes. We had initially targeted a post-summer process with the start in September 2025, so now. However, after early informal meetings between management and potential investors, we noted very strong interest in MAIT. And over the summer, DBAG, who we know well, then stepped forward with an accelerated preempt, and this provided a high level of transaction uncertainty at an attractive valuation. So the transaction was then signed on the 29th of August and delivered, as I said, 2.7x money multiple and a 27% IRR. We now expect completion of the transaction in Q 2025 after approval of the German and Austrian merger control authorities. So this is our story on MAIT, and you see a quote from Stefan Niehusmann, who's -- on the right-hand side. I think bringing it together, I think it's a good summary of our journey with that management team. We then turn to our latest investment, OMS. OMS, what does OMS do? OMS is a testing business for electrical safety equipment, portable and fixed equipment. So on the right-hand side, you see the portable appliances -- sorry, portable appliances, PAT, which is basically everything in an office that has a cable and needs to be checked for safety on a regular basis. And that is 70% to 75% of the business today. And then you have the bigger machinery installations and machinery, which is called I&M, which stands for 25% to 30% of the business. As I said, these needs to be regularly checked, and OMS is the service provider who is doing these checks. The company has 700 -- more than 700 employee service staff who are executing these checks across 43 locations in the DACH region, serving more than 7,000 customers. It's the best operator in the market, we believe, because of its proprietary software platform, and I'm going to talk about that platform called Inspektra later in the presentation. It's a key differentiator for us in the market, making the business more efficient and more profitable than anyone else in the market. We have been following that company for many years. We first identified it in 2019. It is a primary buyout that we bought in a bilateral and proprietary process. which I think is very important for us, not only -- I mean, we always pay good valuations or fair valuations, but bilateral process allows you to get closer to the business to execute a much better due diligence than what you can do in a process. We invested roughly GBP 100 million. And again, you probably can see a bit of a pattern here, significant reinvestment of the sellers and the founders, announced it in January '25 and completed it in February '25. This is actually a growth pattern we really like. So this is from 2016 to 2024. It's a compounding business. It's a consistent growth that you see. There are no big jumps up and down, but a very constant continuous growth pattern between '16 and '24, you can see more than 40%, we're looking at revenues here. And on the lower side, you can see the number of sites that the company operates from 2 in 2016 to 43 in 2024. So this is a very nice growth trajectory that we, of course, found very appealing and attractive. What about the other attractions for us? So first of all, the market. OMS service fundamentally backed -- services are fundamentally backed by EU regulation, transferred into national law. So these tests that OMS does are compulsory. They are relatively low cost for its customers, but severe consequences in case of noncompliance. So if an MD of a company who has an accident in evolving electrical equipment, if he hasn't done the test, he's personal liable. So there are -- the cost of noncompliance can be very high. Loss of insurance, personal liability, risk for management. Then the second key attraction is scale. OMS is the clear market leader. We have 5% to 10% market share in DACH in a highly fragmented market. And why this matters, I'm going to talk about in a minute. It has a density with over 40 branches with close proximity and high project efficiency. I'm going to talk about the software in a second, but this is a key differentiator that we see, highly data KPI-driven testing processes enabled by the Inspektra software. A strong experienced management team that built the business over the last years. And finally, a very strong financial profiles with reoccurring revenues and revenue visibility. The backlog of typically -- are typically multiple months from both new and repeat business, which allows the business to optimize service staff hiring and project staffing. Let's have a look at the underlying market. In 2024, the market in DACH, so was roughly [ EUR 900 million ]. It's the EUR 0.7 billion plus Austria and Switzerland. So it is a sizable market, and it's made up of machinery installed and portable testing. And we expect a CAGR over the next 6 years of 9% to EUR 1.2 billion. So it's a sizable, big enough market for us, and the market is driven by two factors. First of all, the inspection penetration rate, increasing from 37% in 2018 to 67% in 2030. So more people or more companies testing as a result of increased awareness. And the piece of outsourced share of testing growing from 53% in '28 to 67% in 2030. So this is driving the market. We expect good market tailwinds for the foreseeable future. We now come then to the density model or the geographic coverage of our business. And this is one of the differentiated factors. No one else has this network of branches. Why is it important? It drives productivity as it reduces driving times. The testers or the service staff travel from the various locations to their customers. The more density or the more sites you have, the closer -- the shorter the routes will be, the more efficient they can be. It's also the proximity of local leadership to service staff for management and coaching is also important. And then finally, your customers like to have you close by. So if you have a branch in their regional area, that helps in the selling process. Now the second one is our software, which we call the Inspektra platform. This has been developed over several years and is supported by a large in-house software development team, a key differentiator for us. No one else has this kind of platform or this kind of proprietary tech. And OMS derives significant advantages from it both for internally but also for its customers. And the internal benefits are that Inspektra fully digitize OMS testing processes, and it enables highly data-driven operations. So project leaders can live track testing performance, how quick someone tests, how many tests in an hour and so on and allowing for early interventions and rapid problem solving. And we have seen this in the numbers. In the “PAT segment, the launch of a testing app that the company uses in 2022 delivered a substantial productivity gain in the testing as previously manual steps were automated. We have seen this clearly in the numbers when we did our due diligence. And these learnings can be leveraged to further optimize and digitize processes around other segments. So the focus so far was on PAT, where we have 75% of our sales, and we are now rolling it out to I&M, currently 25% to make comparable productivity gains. In terms of the customer-facing benefits, this is a cloud-based portal software that acts as a one-stop shop, enabling customers to access testing data, review outcomes and actively manage assets, for example, to track and resolve defective devices after inspection. And beyond the core segments, OMS also offers additional services through INSPEKTRA, such as self-testing and home office testing. All these features are highly valued by customers and enhanced stickiness, and this is what we mean with tech-enabled services. And the next slide brings those two differentiating factors together the density that we have and the software-enabled services. On the left-hand side, you see the travel time per project that from 2021 to the last 12 months declined. At the same time, the testing efficiency, so that measured in a real speed number of tests per FTEs increased. And that has an impact on the productivity and output per FTE. On the right-hand side, you see 2022 to LTM, the number of volumes of tests per FTE and the revenue per service FTE, both going up significantly in that period. And that you can imagine, has a significant input on our P&L and our EBITDA margin. So as the business grows, it scales very nicely also on the bottom line. So this is how we found the business or how we came across it. So we have been following this business for many years, 6 years, but we have also known the owners for more than 10 years now. And we have a very trustful relationship with the sellers. They all know us from other transactions, and they know that we do what we say. So there was a trustful relationship with us that allowed us to get into a proprietary process. They trusted that we would deliver what we said we would. I think what also helped is 3i's TIC expertise. Right at the beginning, I've shown you a list of companies in the TIC sector that we have owned and that we have successfully grown and exited. What always resonates with -- particularly with founders, but also with the CEOs is our permanent capital approach that we invest from our own balance sheet that we are not limited by fund periods that also resonated and also our active partnership approach that we work with our companies very intensively and help building capabilities and -- capabilities and growth. So finally, the investment thesis overview. The first one is actually more of the same, which is always nice in an investment case if you can do something that has been proven. And there's a lot of -- there's a lot of potential in the market still. As we already pointed out, the market is growing and with increasing penetration, we can leverage our existing network that we already have and our existing software that we have. So doing more of what we already do should contribute to good profitability growth. As I said, 75% today is PAT, 25% is IMS. I think the potential in IMS is much bigger for the company, and we are currently thinking about how we can focus and how we can tap into this market more. Enhance operational efficiency, we constantly develop our inspector platform to get additional gains in efficiency and improve our processes further. And then lastly, selectively M&A to strengthen our core segments and potentially to push into adjacent business areas or geographies. As you can imagine, if you acquire -- the market is highly fragmented, you are able to acquire smaller competitors where you can use your software and where you can integrate in your already existing network, that makes a lot of sense for the business. And here's a slide that you -- that Rupert also has shown for MPM. This is almost a standard that we have in our business that we, in the first year of ownership, make sure we have every -- the basis are right that in the coming years, we are set for growth. And -- but this is what we do in the first year, we look at everything, particularly here in operations, this is a business that needs to show operational excellence. You're managing a lot of people, a lot of tests that you're doing and the more efficient you are in these operations, the better it's one of the key pillars of this business being successful. IT, optimization of the IT architecture, as you can imagine, is key here, given how important the software is. We're helping the business with the financing. We just closed the banking or the financing of the transaction. So all these things we are focusing on. But I would say after the first -- what is it now, yes, 4, 5 or 6 months almost, I think we are on a good way. Thank you very much.

So do we have any questions for Peter now?

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Manjari Dhar, RBC.

I just had one question on OMS. I'm just curious about that. The long-standing relationship and the 6 years between when you first identified or made initial contact and the first investment. I'm just curious about that timeline and what was it that led to the investment being made in 2025 and not before? So what was the trigger point there?

That's a very good question, and we tried to buy it earlier. But as you can see, I mean, if you remember the slide with the number of sites, so they invested quite heavily in this business, but the profitability needed to come through. So they opened a lot of branches, which was not -- were not mature enough to contribute to the profitability. But you could see with every year and the branches maturing, getting more customers, how the profitability went up. And they could see this effect. So they waited basically to show better numbers and then eventually, we could buy it.

We are now going to proceed with our next question. And the next questions come from the line of Andrew Lowe from Citi.

I've got two questions. One is on OMS and the other is just a bit broader about the returns that you generated in your private equity portfolios. So on the OMS question, I noticed on Page 46 that your -- the number of sites that you've had has slowed quite a bit in the past couple of years. So just curious how sort of many sites you think kind of what's the end game? Is this just sort of small incremental growth now you've got the kind of densities up? And then the second question, maybe it's one for Simon, but you flagged some really good IRRs, some really good money on money returns. Can you just help us maybe think about how we kind of benchmark that versus your peers? Have you got any data to sort of to say where your returns are versus your peers, be it in a quartile? Or anything you could do there would be really helpful.

I'll take the first one. Yes, I mean, it's a right observation that the growth has slowed. Probably in Germany, we have another two or three, four sites we're going to open, which doesn't mean that the growth has come to an end. It's just that we need to make these branches now more efficient. Now we have full German coverage. But these branches are -- and you can see it like the cohorts, how they grow, these branches will grow every year and gain more customers in the region. So the growth from just opening branches will slow down, but the branches itself, they're going to grow by higher penetration or penetrating the market better. Then we see potentially further openings in Switzerland and Austria. That's the answer to that question.

Thanks, Peter. I'll take the second. This is always quite difficult because comparisons and information and transparency are not of the best in this industry, as you know well. But -- if you look at us, we do it in 3-year cycles. So we have 3-year vintages. The first vintage that we're really talking about from when I've been here is 10, 12, and then they go 3-year cycles from there. The majority of those vintages would be top quartile, we think, but not all of them. There is still question marks over whether we can attain that in a couple of them. But certainly, overall, the compounding growth that we've had from our PE portfolio is really not seen anywhere else, I would suggest.

And I'm showing no further questions. So I will now hand over to Silvia Santoro, 3i Group's Investor Relations Director, to address the written questions submitted via the webcast page.

The first question is from William Woods at Bernstein. And is it, does AI change your perspective on the opportunities and risks of investing in software and services space, either from an operational or valuation perspective?

Yes, I think that is a very broad question. I mean, yes, I think this is certainly something that our sector is evaluating on an individual basis, I would say. Really, I don't -- of course, we're following what's happening. And we look at every investment, how AI might affect it. I don't think we have an overall view on how exactly the sector will evolve, because I think there's a lot of moving parts at this point of time. But it will certainly have an impact -- has some kind of impact on the industry and what it does. That's for sure, but I can't give you a precise view on what we -- how we're looking at it. Sorry.

Thanks, Peter. Then there's a question about international expansion. I think you alluded to opportunities in Austria and Switzerland. But given that this regulation and the compliance rules are EU-wide, is there a broader opportunity as well?

There might be, yes. At this point of time, I think we see still so much potential in Germany and the DACH region that we focus on that. But as I said, it's a EU regulation and the German take it particularly serious. But at the end of the day, all other countries will have to do the same thing, and then I think we're well placed. But at this point of time, we focus on Germany. But I alluded to potential M&A outside of Germany to enter into adjacent geographies, that might be an option, because in principle, the software should also work there.

Thanks, Peter. And then we have some more detailed questions about the comparison, the cost comparison between outsourcing and doing this testing in-house for a company and the reasons for outsourcing, whether that's driven by risk mitigation or cost reasons.

I think it's both. The documentation, you have to be you need to document the work you're doing very well. And if you do it in-house, it's not always clear that this documented patient has done well. And then I think if you test these kind of equipments, I don't know, every day as your job, you're much faster and much more efficient than you're trying to read into what you have to do with your people that you have to be electrically trained to do that. So not everybody can do it.

And the final question on the size of a fine versus -- the cost of non-compliance versus just not doing.

Well, I think it can be very high. As I said, it's a personal liability if there is an accident, then you -- the General Manager or the MD is responsible for that.

I think, we are showing no further questions. So perhaps we can move on to closing remarks from Simon.

Well, thank you, Peter. I hope you found today's presentation is helpful. And we're now happy to take any final questions that people may have, which is not about the investments that we've heard about today.

[Operator Instructions] We are now going to proceed with the first question. And the questions come from the line of Manjari Dhar from RBC.

For management, this -- I could ask a question on the statement this morning. I see that you've entered an agreement with GIC to purchase some additional action equity in exchange for 3i Group shares. Is this kind of transaction something that you guys think you could do a little more of in the future? Is it something you'd explore to further increase the action stake?

Well, we have a long-standing appetite to buy more action equity, as you know. In this particular case, we were approached regarding using shares rather than using cash. We have the flexibility to do either. And -- the benefit, I suppose, of using shares for the seller is that they continue to maintain their exposure to our compounding story over the long term. And so I wouldn't be at all surprised if this happens again, and we will continue to have appetite for increasing our stake, should it do so.

We are now going to proceed with our next question. And the question comes from the line of Ashton Olds from Rothschild & Co Redburn.

Ashton, here. First question is just whether you have any more commentary you can provide around France and what you're seeing there at the moment? And then my second question is just related to gross margin. It seems seasonal sales were quite good, which suggests that gross margins might be a little bit stronger in the period. And then obviously, as we go into next year, we might have the benefit of FX and changes at the factory gate. I suppose how are you thinking about reinvesting versus sort of maintaining gross margins going forward?

Okay. I mean, just let me say a few comments on France, but we have been reasonably detailed in the release. Context is important. So like-for-like is always a measure against the previous year. September last year was our strongest like-for-like month, and it had 3 of the top 6 like-for-like weeks in it. So this was a very high hurdle we're jumping. And that's why with the disruption we've seen since the beginning of September in France, it has pulled those like-for-likes down a little. We're still trading very positively in France, and we're very confident about the last quarter. But the economic situation and the political situation is very difficult and that is affecting consumer sentiment and consumer confidence. There's no doubt about that. In terms of the gross margin sales mix, you're right. Seasonal sales have been strong this year over the summer, although we would like colder weather in September, because that does help. And some of the weather last year was very favorable to sales in September. So we are seeing a nice margin increase as a result of sales mix, not as a result of us increasing any prices. And when it comes to the future and the better buying prices that we're seeing this year, then we will be passing on the majority of that benefit to the consumers in the price of the catalog in store next year.

Thank you. I'm showing no further questions. So I will now hand over to Silvia Santoro, 3i Group's Investor Relations Director, to address the written questions submitted via the webcast page.

There are no further questions.

Okay. Great. Well, thank you to everyone. I hope you found this morning interesting, and thanks for dialing in. Have a good day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.