LONDON (ShareCast) - (Sharecast News) - Investment company 3i Group said in its half-year report on Thursday that despite a challenging global economic and geopolitical environment, it achieved a total return of £1.67bn, representing a 10% return on opening shareholders' funds.

The FTSE 100 firm said that compared to £1.77bn and a 14% return in the same period last year.

Its net asset value per share stood at 1,886p, up from 1,745p on 31 March after accounting for an 11p per share loss on foreign exchange translation and the payment of the second 2023 dividend of 29.75p per share in July.

In the private equity segment, 3i reported a gross investment return of £1.83bn, equivalent to an 11% return.

That was down from a £1.97bn and a 16% return in September last year.

The company highlighted strong performance by its portfolio company, Benelux-focussed discount retailer Action, and several others in the value-for-money, private label, and healthcare sectors.

However, some portfolio companies exposed to discretionary consumer spending and cyclical end-markets experienced weaker performance.

It noted that 89% of the private equity portfolio companies by value grew earnings in the 12 months to 30 June.

Action, in particular, reported significant growth, with net sales reaching €7.9bn in the nine months ended 1 October, up from €6.1bn in the same period a year earlier.

Like-for-like sales growth was robust at 19.2%, primarily driven by increased customer footfall.

Action's operating EBITDA for the last 12 months was €1.53bn, marking a 48% increase over the same period in 2022.

Trading momentum remained strong, with like-for-like sales growth from 2 to 29 October at 13.4%.

Net sales and operating EBITDA for the 10 months ended 29 October were 30% and 43% higher than last year, respectively, with like-for-like sales growth at 18.5%.

In October, Action completed its inaugural dollar-denominated term loan issuance in the US leveraged loan market, raising $1.5bn, fully hedged back to the euro.

The company also underwent a capital restructuring, with a pro-rata redemption of shares.

3i Group used €524m of the €877m gross proceeds to acquire additional shares in Action, increasing its gross equity stake from 52.9% to 54.8%.

As of 3 November, Action's cash balance stood at €1.03bn.

Elsewhere, 3i Group said its infrastructure business generated a gross investment return of £31m, or 2%, compared to £35m and 3% in September last year.

A 2.7% decline influenced that performance in the share price of 3i Infrastructure despite achieving a 6.3% total return on its opening net asset value in the first half.

During the period, 3i Infrastructure agreed to sell its stake in Attero for €215m, realising a 31% uplift on the valuation as of 31 March.

Additionally, the company completed one new investment in its North American infrastructure platform.

3i Group said it had further bolstered its liquidity by successfully issuing a six-year €500m euro bond in June.

The firm's gearing remained low at 6% as of 30 September, with shareholders set to receive a first dividend of 26.5p per share for the 2024 financial year, set at 50% of the total dividend for 2023, to be paid in January.

"Against a tough macroeconomic environment, we delivered another good result in the period for 3i," said chief executive officer Simon Borrows.

"Action continues to perform very well - its like-for-like sales growth, continued new store expansion, and significant free cash flow from operations have once again underlined what an exceptional business it is.

"The strong performance of a number of our other investments in the value-for-money, private label and healthcare sectors underpins our confidence that a number of these investments will also become longer-term compounders over time."

Borrows said the company remained cautious about the investment and realisation market given the macroeconomic environment in general, the breadth of geopolitical risk and its belief that the full implications of the global recalibration of interest rates were still yet to work fully through the system.

"We will continue to look for opportunities to deploy capital into this uncertainty, but we will not change our patient and disciplined approach.

"We have a strong balance sheet and are under no pressure to sell companies if the price or terms do not properly reflect the prospects of the business."

At 0801 GMT, shares in 3i Group were up 0.39% at 2,049p.

Reporting by Josh White for Sharecast.com.

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