3i investments weather Covid storm as firms adapted to lockdown conditions

·2 min read
<p>3i companies changed their businesses to cope with crisis</p> (PA Wire)

3i companies changed their businesses to cope with crisis

(PA Wire)

The value of 3i’s private equity investments shot up 30% during the past year despite the coronavirus crisis.

The company’s performance has generally been heavily reliant on the surging value of its fast growing European budget retailer Action, but in the past year, six other companies in the portfolio outperformed “materially”, said CEO Simon Borrows.

These including Cirtec Medical, a medical devices business, and Luqom, which sells interior lighting online.

Luqom doubled its profit for the year, with 3i chief executive Borrows highlighting it as the type of business that would benefit longer term from the impact of Covid.

“It seems we are all looking at a permanent ‘hybrid’ working. That will affect different sectors differently. The blurring of home and office has big implications for city centres. What will happen at Canary Wharf if people have that approach? And that ricochets into the property and retail segments.”

However, he said there were a number of “megatrend” sectors for 3i that would keep rising in value such as healthcare, tech business services and digital and value-for-money retail.

“All those will see improvements,” he said.

Even bricks and mortar stores could benefit from lessons learned during Covid, he said, citing how 3i’s upmarket furniture business Bo Concept had changed the way it operated.

“They were seeing big demand from the ‘nesting effect’ but changed the system so customers booked their appointment online and had a consultation about ideas, how they want to build the room and make it look, then when they arrive for their appointment in the shop, all the products are there and ready for them to see.”

The result, he said, was a big increase in the number of sales per customer. “The person in the shop is not trying to talk to three customers at once, there are fewer people wandering around; it’s just more organised.”

He said the basket size of purchases at the Action budget retailer have also increased because of the queuing system imposed where everyone gets an allotted time they are allowed in store. “People are choosing the shops they spend their time in more carefully,” he said.

Losers in the 3i portfolio were travel businesses Arrivia, a cruise operator, and Audley Travel, which it propped up with £46 million of extra capital.

Its automotive businesses were hit by the economic conditions and the global semiconductor shortage.

3i made three private equity investments during the year. It put £61 million into GartenHaus, an online seller of garden buildings, sheds and saunas; £124 million into dog food maker MPM and £90 million into WilsonWCG, a recruitment process outsourcing company.

3i’s net asset value increased to 947p per share from 804p a year earlier with a total return on shareholders’ funds of 22%.

The shares today rose 2% on a day which saw the FTSE tumble sharply.

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Comment: 3i shares should be up, not down after its Action retail chain deal

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