Source: Sharecast
Dan Coatsworth, head of markets at AJ Bell, said the share-price reaction reflected concerns over 3i’s exposure to its largest holding.
“Shares in FTSE 100 investment trust 3i Group crashed 19% after the company paid the price for being too reliant on a single holding. Its portfolio is dominated by Dutch value retailer Action whose news flow has soured of late,” he said.
The company said total return for the year ended 31 March was £5.30bn, or 22% on opening shareholders’ funds, compared with £5.05bn, or 25%, a year earlier.
Net asset value per share rose to 3,030p from 2,542p, including a 77p per share gain from foreign exchange translation.
3i’s Private Equity business generated a gross investment return of £5.30bn, or 23%, compared with £5.11bn, or 26%, in the prior year.
Action remained the main driver of performance, generating a gross investment return of £4.51bn, or 25% on its opening value.
“For a long time, Action was seen as invincible, one of the fastest growing retailers in Europe and the reason why investors were happy to pay a large premium to own 3i Group shares,” Coatsworth said.
“That goodwill has now disappeared.”
The retailer delivered 2025 net sales growth of 16%, like-for-like sales growth of 4.9% and EBITDA growth of 14%.
In the first three periods of 2026, ended 29 March, Action reported net sales of €4.01bn, up from €3.52bn a year earlier, with operating EBITDA of €498m, compared with €464m, and like-for-like sales growth of 3.6%.
However, the market reaction suggested investors were more concerned by the latest trading update, after 3i said Action’s year-to-date like-for-like growth had slowed to 2.4% by 10 May, against a 6.8% comparable period last year, as seasonal categories underperformed due to cooler weather and consumer caution weighed on trading in France and Germany.
“First, 3i Group warned that Action wasn’t doing as well in France, then it revealed the retailer would try its luck at the highly competitive US market. Now we’ve got a warning of a broader slowdown in sales growth, blamed on France again and lower footfall in Germany,” Coatsworth said.
“The Middle East conflict is clearly having a negative impact on consumer confidence as individuals face the prospect of a higher cost of living and potentially greater borrowing costs.”
FMCG categories continued to trade well, while performance in the Netherlands, Belgium and Southern Europe was in line with or ahead of expectations.
Action had opened 69 new stores so far in 2026 by 10 May, and had a cash balance of €925m.
During the year, 3i increased its stake in Action from 57.9% to 65.4% through a combination of cash and non-cash transactions, including the issue of new 3i shares.
As at 31 March, 3i valued its stake in Action at £23.74bn, using an unchanged post-discount EBITDA multiple of 18.5 times.
The scale of the share-price fall also pointed to concerns over the valuation placed on Action, given the retailer’s outsized contribution to 3i’s net asset value and annual return.
“The past 12 months have shown that Action is as immune to setbacks as all other retailers, and that’s effectively removed the halo from above 3i Group,” Coatsworth said.
Elsewhere, Royal Sanders delivered another year of robust growth, while 3i said there were several standout performers across its consumer and private label portfolio and resilience across its other sectors.
Private equity realisations included the sales of MPM and MAIT, which generated total proceeds of £542m and money multiples ahead of 3i’s 2x return target.
The sale of MPM generated £395m of proceeds and a 3.2x money multiple, while MAIT generated £147m and a 2.8x money multiple.
The infrastructure business generated a gross investment return of £106m, or 7%, up from £52m, or 3%, a year earlier.
3i said the performance reflected a 5% rise in the share price of 3i Infrastructure, as well as dividend income.
During the year, 3i Infrastructure announced the sale of its largest asset, TCR, for proceeds of €1.1bn to 3i Infrastructure, representing a money multiple of 3.6x.
Scandlines generated a gross investment return of £55m, or 10%, supported by resilient leisure demand, although freight volumes remained softer due to weak economic conditions in Germany and Scandinavia.
Across the group, 3i received £1.9bn of cash proceeds from its portfolio during the year.
It ended March with liquidity of £1.86bn, net debt of £547m and gearing of 2%, compared with net debt of £771m and gearing of 3% a year earlier.
The group recommended a second dividend of 48.0p per share, subject to shareholder approval, taking the total dividend for the year to 84.5p, up from 73.0p.
Separately, 3i said it would start a share buyback programme of up to £750m on 14 May, with completion expected no later than 31 December.
The programme would be carried out by Barclays Bank, with shares bought in the market and subsequently cancelled, reducing 3i’s share capital.
Before the company’s 2026 annual general meeting, purchases would be limited to the existing authority granted at the 2025 AGM, which allows up to 97 million shares to be bought back.
Continuation after the AGM would depend on shareholder approval of a renewed authority.
“2026 was another good year for 3i with strong contributions from each of Action, the broader Private Equity portfolio and Infrastructure,” said chief executive Simon Borrows.
“The market environment remains complex with heightened geopolitical risk from the unresolved Middle East situation in particular.
“As a result, we expect to see an increase in inflation over the coming months.”
Borrows said Action continued to differentiate itself through “quality at the lowest price”, adding that its growth was underpinned by a multi-year store rollout programme and compounding like-for-like sales growth.
“The announcement of our buyback programme reinforces our consistent focus on optimising value creation,” he said.
“In addition, our focus on active asset management across the portfolio has served us well over many years and gives us confidence in our ability to continue to compound returns for 3i shareholders both this year and over the long term.”
At 0856 BST, shares in 3i Group were down 18.46% at 1,974p.
Reporting by Josh White for Sharecast.com.
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