Good morning, everyone. Welcome to 3i's results to 31st March 2019, and thanks for being so prompt. In preparing for today, I was struck by how much the group has changed over the last few years. We're a much simpler business today with fewer parts.
We're based off a stronger balance sheet with consistent momentum, and we're putting a strong emphasis on proprietary investment. The quality and potential of our portfolio of investments has improved every year, and we now have more than our fair share of high performing companies. Our investment processes are very well ingrained, and our teams now benefit from having a good number of years of applying disciplined active management to our portfolio of companies. We still have to demonstrate the true value of the portfolio we've assembled over the last few years. But in my view, that's simply a matter of when, not if.
Now let's take a look at the detail of 2019. We closed the year with an 18% total return on equity, a net asset value of 8.15p and an increased dividend for the year of 35p. And Giulio will say more about that in a minute. All our teams performed very well again, delivering some major realizations at significant premiums to book value and to our cost. It was another year of over €1,000,000,000 of proceeds for the group, and We closed the year with net cash of €495,000,000 having paid €358,000,000 of dividends in the year.
Today, there's a great deal of interest in private assets, And that's leading to a growing mountain of dry powder in both private equity and infrastructure. But we've positioned ourselves to avoid the worst excesses of behavior and pricing that this dry powder generates. We have a tight focus on the mid market, where price competition tends to be less acute. We focus on well defined sectors and geographies where we're established and where we have a competitive advantage. Our goal is to buy companies which benefit from long term secular growth trends.
And that's because we're aiming to turn 1x into 2x or better over a 4 to 5 year period. We're fortunate to have a quality contact book of experienced business leaders who like working with us to screen opportunities as well as getting involved in the companies once we own them. And with proprietary capital, we can be patient and invest at the right times without the pressure to deploy 3rd party funds. Over the last 6 years, we've constructed a portfolio that contains a good number of platform assets, which are capable of growth through acquisition as well as growing organically. And our portfolio M and A activity produces synergies and uses our sector knowledge to put us ahead of many of the other financial players.
SirTech is a great example of the approach I'm talking about. This slide demonstrates how we have built a medical device manufacturing platform from the relatively modest £103,000,000 initial investment we made in SIRtec in 2017. FY 'nineteen was another strong year of earnings growth across the PE portfolio, where we had a good number of material value uplifts. And we have focused a lot of active investment around some of our weaker performers, with assets like DynaTek returning to decent earnings growth. We also initiated the wholesale change of management and stabilization of trading challenges at Schlemmer are one write down of any size during the year.
And our asset buckets continue to evolve. We have a further concentration into our top 2 buckets, And that's after having transferred scan lines out of the top bucket and into our corporate assets bucket. And it's been a very good year for action. The company has recovered well from some difficult supply chain challenges during last year. And they have delivered another strong set of results.
Like for like results recovered to 4.4% in Q4 last year and now have moved on again in the 1st 4.5 months of 2019. In Q1, they opened 2 new distribution centers in France and Germany. Both centers have started well and added enough capacity to significantly derisk the supply chain. Of course, this is a key year for Action because we intend to manage the sale of some of the Eurofund V limited partner holdings. As you know, we firmly believe in the continued significant growth prospects of action.
So 3i will be retaining our holding in action. We also recognize the importance of 3i's active portfolio management to make absolutely sure that action sets ambitious but realistic targets, then manages its way through the challenges of being a very fast growing retailer. That will mean staying true to its founding principles and focusing on the long term success of the business. Action is a very special business, as any of those companies that compete with it across 7 different countries will tell you. This is a chart that Action presented in March.
It shows the white space opportunity in front of Action in Europe. This is a real opportunity because Action is one of a small number of retailers which has an offer and a brand that travels well across borders. It has strong appeal just as it is to consumers in every country it enters. We've just finished the annual update of Action's 5 year plan. The shape of this plan is compelling.
It doubles the store base from the end of 2018. It puts us close to our €10,000,000,000 sales target. And that increase in scale delivers a group EBITDA margin in excess of 12%. Beyond this plan, we would expect to see the margin move up further as our younger countries continue to scale and move towards the margins of our more established countries. At the moment, this is just a plan, And the execution is still all to do.
But The detail has been carefully considered against our rollout experience so far, and we're well underway And we're well underway in building an organization and a supply chain to manage that growth. The strong cash flow and profit growth in the plan comfortably exceeds our overall target of delivering mid to high teens net returns for our 3i shareholders. FY 2019 was another busy year for realizations. We took advantage of the appetite of financial buyers to sell a number of our older assets, while at the same time recovering significant value in the case of Atanko and OneMed. And we saw further good evidence of value growth through realizations of our 13, 16 portfolio.
In March, we announced £139,000,000 investment in Magnitude Software. They're a data management business with strong relationships with SAP and Oracle. We see good potential to continue magnitude strong growth through an organic and a buy and build approach across both the U. S. And Europe.
Our infrastructure team delivered another year of sector leading performance in 2019. They managed a lot of investment and realization activity as well as a very strong performance from 3IN, with a 33% TSR after last year's 29% return. Our infrastructure team contributed over £80,000,000 of cash income to the group last year, and has led the way in their sector in focusing on core plus investments like WIG, the Telecom TOWs business, while selling those assets from their portfolio with much greater regulatory risk. The team's performance has been crucial in underpinning last year's operating cash profit performance for the group. And in the end, That means that all the returns we create from our proprietary capital approach in private equity go to the shareholders without any cost leakage.
So Through our shareholders, we're effectively paying less than a 1% management fee for our asset management as well as benefiting from very competitive carry rates and FTSE 100 liquidity. We approach FY 2020 in exactly the same way as we approached last year. We're wary of the macroeconomic scene, and we are cautious of market volatility. We're also concerned about the behaviors arriving out of the need of many PE firms to put dry powder to work. But we have a resilient portfolio of investments, energetic and knowledgeable teams, a lean cost base and a strong balance sheet.
And we've got a growing reputation as a capable investor, focused on the long term. Moving into FY 2020, We benefit from strong portfolio momentum. And we're confident that we will execute another year of solid progress for the group. Thank you. I'll hand over to Giulio now.
Thank you, Simon. So as you've seen, this has been another strong year for 3i, with a total return of 18%. That's right in line with our objective of generating mid- to high teen returns through the cycle. We closed the year with NAV per share of 8.15p. That's an increase of 13%, And it's supported by strong performance from our investments, and it's after paying out 37p in dividends to our shareholders.
The significant increase of 112p Comes from over £1,000,000,000 of group value growth. As you can see here, Action is the biggest contributor by some margin, generating £701,000,000 You've heard from Simon about the exceptional nature of that investment. And I'll talk about how we've approached Action's valuation in more detail in a minute. But it isn't all about action. The rest of the Private Equity portfolio has delivered some very good returns.
We got positive contributions Of £342,000,000 from many of our 20 thirteen-sixteen And 20 sixteentwenty 19 Investments, including Audi Travel, Formal D, SIR Tech and Aspen pumps. Schlemmer Accounts for €70,000,000 of the €127,000,000 downs. Infrastructure has also had another great year. They added £162,000,000 of value growth as a result of the 29% increase in 3IN's share price. So looking at this performance in a bit more detail.
I'll start with our Private Equity business. We generated a gross investment return of 20% in FY 2019. That 20% return included realized profits of £131,000,000 As we talked about at the half year, the sale of ScanLines was an excellent realization. It generated £835,000,000 and a 7.7 times return for private equity. The timing of that transaction meant we'd taken most of the uplift over value in FY 2018.
The disposals of Itanko and OneMed produce good uplifts over value, And they account for £76,000,000 of our realized profits this year. You can see the components of the apparently modest change in portfolio value from £5,800,000,000 at the 31st March 2018 to £6,000,000,000 at the 31st March 2019 here. The unrealized value growth of GBP 916,000,000 is again supported by good earnings increases across the private equity portfolio. Five companies had earnings growth in excess of 20%, And 2 of them were over 30%. Action is obviously in the 10% to 19% bar.
For those of you who made it to the Action Capital Markets Day in March, you saw how the need to invest in its distribution network And a number of other external factors had affected its 2018 EBITDA growth That has naturally also had an impact on the run rate EBITDA included in this chart. The good earnings flow through to the performance components of value growth, which together with changes in portfolio net debt With GBP 654,000,000 for the year. The 219,000,000 movement attributable to changes in multiples It's made up of a positive £260,000,000 from the upgrade in actions multiple And a net reduction of £41,000,000 from the rest of the portfolio. The weighted average multiple of the 18 companies valued on an EBITDA basis, excluding Action, Was 11.1 times net of the liquidity discount. That is almost unchanged since the start of the year when it was 11 times, and that's despite the intra year market volatility.
We have continued our approach of taking a longer term approach to longer term sector averages and expectations. When we're setting multiples instead of following markets up and down. At the 31st March 2019, we valued 12 companies That marks lower than the comparable company average. The £41,000,000 reduction Comes principally from our investments in the automotive and consumer sectors: Formal D, Schlemmer and Christ. Coming back to action.
We are valuing it on an 18 times net multiple applied to its March 2019 run rate Earnings. Here's a reminder of the history of the valuation in terms of the multiple that we've used. In setting the value this time around, We have looked at the challenges the business experienced in 2018 and at the significant progress That the action team has made to address those issues. As you heard from Simon earlier, Like for like sales started to improve towards the end of 2018, And the 5 year outlook for the business is very strong. Just for the avoidance of doubt, This increase in multiple is not based on any offers received.
In valuing action, we have continued to look at Ollie's and 5 Below in the U. S. Together with Dollarama, B&M and Inditex as a valuation cross reference. As you can see here, There has been a marked and persistent split between Ollie's and Five Below on the one hand And the rest of the comp set on the other. When you analyze the financials, Action is most like the higher rated companies.
They are both high performing discount retailers. But in particular, like Action, They have significant white space in front of them. It's this last factor, Which is really driving their exceptional growth and stock market rating. And this fits very well with the action situation and its future prospects. Moving the multiple to an 18 times run rate Puts us ahead of the bottom group, but still at a significant discount to the top.
Good performance drives our carry payable to the investment teams As well as the carry receivable from our LP investors. The net carry payable for the year of £78,000,000 was due to the increase in the value of action, The uplifts from OneMed and Atanko as well as the value growth In our 2013, 2016 vintage investments, almost all of the balance sheet receivable And a very significant proportion of the payable relates to investments in Eurofums 5. So we expect those balances to reduce materially after the payouts from any transaction later this year. The €77,000,000 of cash paid in the year relates to the action refinancing we completed in March 2018 And the Scanlines and Itanko transactions. As Simon said, our infrastructure business had another excellent year, And we got a strong contribution from our 33 percent investment in 3IN, £84,000,000 of dividends and fees As well as £167,000,000 of unrealized value growth from the 29% increase In 3IN's share price.
Whereas our private equity strategy is focused on proprietary capital Infrastructure also contributes an important fund management profit through its growth in assets under management. We reached final close on the 3I European Operational Projects Fund in April 2018. And the recent 3IN, Atero and Tampnet investments also created the opportunity To expand our managed accounts. And we announced the U. S.
Infrastructure team's 2nd year investment, Regional Rail, which should complete in the next couple of months. At the end of the 31st March 2019, Infrastructure's AUM was £4,200,000,000 We have made good progress With our £529,000,000 investment in Scanlines, which we're holding separately from Private Equity and Infrastructure As a corporate asset, we're working closely with our co investors, Hermes and First State, And have received £28,000,000 of cash since the reinvestment in June last year. Now as a general rule, we don't use hedging to mitigate FX translation risk On our portfolio values, we have taken a different approach for scanlines. That's because it stands alone and is a longer term hold. In January 2019, We implemented a €500,000,000 rolling 3 year hedging program.
Our entry price was at an average in rate of €1.09 So that hedging has generated a €21,000,000 gain Since then. One of the reasons we invested in Scanlines It's because it is a very cash generative business. And that makes it an important contributor To our operating cash profit of £46,000,000 I've talked about the income from stand lines and infrastructure. The private equity portfolio also made a good contribution this year, Including £18,000,000 of income from the Aspen refinancing and Audley distribution. But that means the £18,000,000 is more non recurring in nature.
So I don't expect the operating cash profit to be as high in FY 2020. Focus on our operating cash profit is an important factor in our resilience. Our strong liquidity is another cornerstone in our conservative balance sheet strategy. We're generally comfortable operating between €500,000,000 of net debt And £500,000,000 of net cash. So the £495,000,000 of net cash at the 31st March Is at the upper end where we would feel comfortable, especially if we expect it to persist For a significant length of time.
The profile of our private equity portfolio means that realizations activity for FY 2020 is likely to be lower than in recent years. There are a lot of moving parts, but I am working on an assumption of about 350 to £500,000,000 We have some interesting opportunities in the WIP, And we want to preserve flexibility in any action liquidity event later in the year, All of which means we are likely to be more fully invested and in a net debt position At the end of FY 2020. Recognizing the good performance of our businesses and our strong balance sheet and funding position, We have set the total dividend for the year at 35p. Having paid a 1st dividend in January of 15p, it means the dividend we will pay in July will be 20p. So this has been another strong year for 3i.
We enter FY 2020 with our diversified portfolio Well positioned and with good momentum for further growth. Together with our careful approach to new investment and a strong balance sheet, we can continue to focus on good returns to shareholders Through the cycle. Thank you. And we're now happy to take questions.
Do we have mics? What can you come up? If you can say your name, where you're from, and then answer the question.
Good morning. This is Shyamuly Ravishanka from Morgan Stanley. Just a question on the EBITDA multiples. Historically, you've guided that it remains stable and you have downside protection in bad markets. It's gone down slightly.
Are you comfortable at this level, say, we see another Q4 2018 kind of market or just Some drivers behind that. Some color there would be useful. And secondly, just on the action, multiple has gone up. But can we expect any more change ahead of For November this year.
So I'll certainly take the first one. I think this period has really vindicated the approach that we've had in setting For the portfolio, as we've talked about, we do look at sets of comparable companies, but we haven't followed the market up over recent years. And as we talked about the half year, as we went into a period of quite significant contraction to the end of 2018, Those so called buffers that we have in the valuation have really helped. And I think that has continued to be the case coming through. We do have, as I said, automotive and consumer sectors, which are under quite a lot of pressure.
And when we look at our particular companies, we've taken a small adjustment to it. I mean, I talked about FormLD. A small adjustment to it. I mean I talked about Form LD. Conversely, Form LD has had a very, very strong performance during course of the year, and you saw that on Simon's slide, is that we've had a significant value growth.
But we'll always be reasonably thoughtful about assessing the multiples with no real change to your process.
I mean, on the action multiple, obviously, refer to the event that we're expecting to manage during the course of this year. Whether that leads to an impact one way or the other by November, I can't say at this point. But there'll be a lot going on in the meantime.
Two questions. Firstly, you alluded to realizations being a bit lower this year And given your comments in the press release about being cautious on investments, should we assume that the portfolio value of The Private Equity business to remain broadly stable over the short term or perhaps going up a little? And secondly, what's your sense of the rest of the portfolio outside of action? And how are you feeling in regards Performance there. Thank you.
I
wouldn't necessarily assume that because at the moment we're seeing in the portfolio that we have today. We're not going to be selling a lot of it in the next 12 months because We have light investment years in 2012, 2013. So in terms of the maturing of the portfolio, it's a very much bigger year in 'twenty one than it is in 'twenty. But the earnings growth we're seeing across the portfolio is in the teens. So we would expect the value to move on in accordance with that unless we see any dramatic change in terms of the portfolio.
In terms of What was the second part? The action.
The rest of the private equity portfolio excluding action how do you feel about the growth
Well, I
think really covered in that. It's that figure captures that.
Michael Sands from Barclays. Just I was interested you talked a bit more about the longer term view on And the EBITDA margin seemed to expand despite the ongoing investment. I was just wondering if you could give us a couple of color as to how we're going to go Beyond 12% in the EBITDA margin as you talked to.
Okay. The I mean, Action finished last year at a little below 11%. That was a reflection on the significant investment going in during the course of the year. We don't Expect that to change materially this year. But thereafter, we do expect significant appreciation in the EBITDA margin.
And if you look at it, it's an average. And at the moment, we have 3 of our long standing markets, the Benelux, Belgium, Netherlands and Luxembourg, on country EBITDA margins in the mid teens. We have a couple of countries that after transport costs are loss making because we're building relatively immature businesses. And then we have 2 businesses closer to the average figure that we talked about. But all of the countries are moving up in terms of their margins, even the mature businesses.
As we get bigger scale, we get more efficiencies. Transport costs come down as we invest in the distribution chain, store operations become more efficient. And we move to more direct imports as we settle down the supply chain challenges that we have. So we do see material movement in the average as a result of dealing with the nascent countries and bringing up the bigger countries to the levels of our more established markets as well as seeing an improvement in our established markets as their like for likes and their efficiencies continue to grow. So there's a great deal of scope in terms of scaling scale benefits here.
Any more questions? Going, going. Okay. Thanks for coming, everyone. Much appreciated.