Good morning. Welcome to 3R's interim results presentation. As we remind you every time we meet, Our strategy aims to deliver mid to high teens returns to our shareholders.
We do that through a combination of thoughtful capital allocation, a disciplined approach to making PE and infrastructure investments and through solid portfolio management. As you will have seen from the results we announced this morning, We're making good progress on all our strategic objectives. So let's look at the detail. It's been another good half for 3i. We've delivered a steady flow of realizations and good portfolio growth across both divisions, Underpinning our returns.
We also made some attractive new investments as well as a number of bolt on acquisitions across our portfolio. We just need to wait for the slides to move, I'm afraid. So another good financial result with a total return of 10% in the first half and good momentum across both portfolios. We've taken advantage of the plentiful supply of dry powder with a decent flow of realizations at good prices. But on the buy side, We've been careful to avoid those processes that have attracted the big spenders.
Our private equity team has delivered another very good return. In general, the portfolio is developing well with good momentum in a number of our larger assets. In the new deal market, We focused only on those assets where we have a high degree of conviction that we can meet or beat our target of 2 times. We've also recovered significant value in some of our legacy investments, as well as managing excellent realizations in scanlines and basic book. Our portfolio has continued to perform well with good earnings growth in particular and few write downs.
Apart from action and AES, the growth has all come from our recent investments, some of which are now growing very strongly. There is one very disappointing number on the right of this page, which is frustrating and concerns Schlemmer, our cable protection business in the automotive sector. Schlemmer has continued to achieve good top line growth, but has struggled with its operational and procurement costs. This has impacted cash flow and has been compounded by port controls and problems with some legacy IT systems. The problem boils down to weak leadership and the need to accelerate an operational improvement plan.
So over the summer, we concluded we had to change the CEO and other top managers, Then rebased the investment. We now have a strong new CEO and CFO combination, And we've made a number of other senior appointments to bring Schlemmer back on track. As I said earlier, we've continued to be careful purchasers, passing on numerous opportunities this year on price expectations alone. In fact, we've been very surprised at some of the prices being paid for decent but unexceptional businesses. So we've worked hard to seek out opportunities where we can exploit a competitive advantage.
Always straightforward acquisitions for existing portfolio companies deliver both cash synergies and strategic benefits. At the same time, our conviction about the quality of our current portfolio And the value of putting more resource and capital behind our winners has increased. I remain confident that through a combination of our geographic origination teams and established sector investments, We can continue to grow and refresh our portfolio. Royal Sanders is an interesting example of where we have used our established Portfolio. To gain a competitive advantage to secure a high quality consumer asset in the Netherlands.
Walsan has a very strong track record based on the private label initiatives of the high growth discount and convenience retail sector across Continental Europe and the UK. And the company is a key partner as a contract manufacturer for high growth brands in Europe. And shortly after completing the acquisition, we entered into negotiations with McBride to buy their personal care plants in the UK and Belgium. This is a very exciting development for Royal Sanders, and we hope to I conclude this acquisition this month. ICE is another good example of a thoughtful purchase.
With ICE, we focused on an asset which has few peers and is a relatively complex business. But it's in the travel sector, which we know well. The role of ICE is to sell travel inventory to consumers via 3rd party loyalty programs. And ICE has proprietary software to make it work. Let me give you an example of what ICE does.
As I'm sure you know, It is important for a cruise ship to sail with a full complement in its cabins, because the cruise companies get a big part of their revenue from on ship purchases during the cruise itself. So the large cruise companies use ICE to sell excess cabin inventory Into loyalty programs, where consumers can buy cabins at opaque prices, through the redemption of loyalty credits And Kash. And the newer the ship is, I. E. Without an existing fan club or the more tricky the market, The more crucial the role of ice in dealing with that unsold inventory.
We bought both ice and raw sanders at sensible prices, And they are performing ahead of our investment case. As I said a minute ago, we've been busy with portfolio M and A across a good number of assets. In the last 12 months alone, The total amounted to some €375,000,000 of enterprise value. Price value. The majority of the acquisitions we've made have been financed by the cash flows of our portfolio companies without the need of equity from 3i.
And we have a strong pipeline of further bolt on investments going forward. Now we signaled in May that we would target some €700,000,000 to €800,000,000 of realizations this year. After taking account of the Scanline's reinvestment, We've already raised over €500,000,000 of that target. And we've got a number of other processes in train. Importantly, the realizations of recent vintage investments, scan lines and basic fit, I've been made at returns significantly ahead of our 2 times target.
Scan lines has been a great investment for 3i, are holding on to a 35% stake in the company, because we are convinced about the strength of the business and its cash flows and the likelihood of further value growth over time. Now it's been another tricky year for retailers in Europe. With the continued growth of online competition, extreme weather in both winter and summer, strikes and truck driver shortages. And you've seen the negative impact of this across numerous retail results announcements already this year. But you won't be seeing too much of an impact on Action.
Actions contributed £271,000,000 of value growth in the first half, and that's been based purely on earnings growth. Actions continue to grow strongly this year, with sales to date up about 24% over 2017. Actions put a lot more focus this year on building solid foundations for future growth. With significant investment in commercial, stock planning, distribution and supply chain capabilities. We've recruited a new planning team as well as adding a number of really experienced people to the commercial and supply chain teams.
We've also embarked on a significant acceleration of our DC network. We are now planning to open 3 new DCs in 2019 and a further 3 in the following 18 months. The DC rollout is a big project That will facilitate Action's ambition to become a pan European €10,000,000,000 sales company. Like for like this year are up around 3% in all three of our biggest markets of Holland, France and Germany. And I'm sure that performance compares well with other retailers in Continental Europe.
It represents continued decent performance in Holland and Germany, but actually a real drop for Action's French stores. France has remained strong, but basket size has been smaller as a result of supply issues. As we told you last May, we've struggled with operational issues in the supply chain as action. And that has led to product availability problems, particularly in France, our largest market. In many ways, we have an exquisite problem in France.
We have a very large number of high performing stores with annual turnovers ranging between €6,000,000 10,000,000 3,000,000 is the average action store. But these stores need considerable logistical support, given the value of goods physically going through them. And at the moment, We can't provide a timely and comprehensive stock delivery as we would like. So while like for likes are relatively good in France, They are clearly not as good as they could be. Here are 2 stores we opened in September.
One is in the south and one is in the north of France. And they're both in modest towns rather than the city. See what I mean about footfall. Those stores sold out almost a third of their entire stock in the 1st day alone. We opened a new DC at Lyon in February and a further DC in Northwest France in early 2020, which will put us in a much better position to feed the high volume French store network effectively.
In the meantime, we've decided to defer into January 2019 the opening of about 20 stores we had planned to open in France next month. That way we can more effectively manage our peak trading month of December in France. We will still open some 2 30 stores across the Action Network in 2018, once we allow for this change. So Action is becoming a very large business. It needs solid foundations and a resilient supply chain to really capitalize on the attraction of the format to consumers wherever it opens.
Now I'd like to turn to infrastructure, Where the team is putting together another strong performance based on strong asset management, quality new investments and good AUM growth. 3i Infrastructure Plc is having another good year. They produced a 16% TSR in the first half, And we've seen barely a flicker in the share price during the sell off in October. Our infra team have put together an interesting and well defined diversified portfolio through our infrastructure. And that solid portfolio will underpin strong NAV and dividend growth going forward.
Happy holders of our 33% stake. I'd now like to close by saying a little about the shape of 3i. As we continue to navigate the current political, economic and market uncertainties. 2018 has been a pretty interesting year in the stock market and other capital markets, We're 2 particularly wobbly months in March October. 1st, and at risk of stating the obvious, The group looks very different today to how it looked in the last major downturn in 2,007.
Our portfolio has, in the main, been built around key secular trends. These are our top 10 assets mapped against those trends that have been determining our capital allocation policy in recent years. And secondly, the group itself is now built on solid conservative foundations. We have a strong balance sheet with net cash over €500,000,000 and no outstanding fund commitments. We now have a lean organization with around 240 people across 6 main offices And an annual cost base of approximately €125,000,000 And incidentally, that cost base It's about what it has been for each of the last 5 years and is 1% of AUM.
And it will be more than covered by this year's group cash income, Such as the dividends from 3i Infrastructure and Scanlines and 3rd party fees. Whichever measure you choose, Whether it's people, offices or annual costs, these overhead numbers are a fraction of what they were in 2007. We have a PE portfolio, which is growing in EBITDA terms in the mid teens Off a base of low leverage. In terms of geographic markets, we play to our strengths In the deepest and most liquid markets in Northern Europe and North America, where governance is strong Our long established local teams and brand strength give us a real competitive advantage. We're very careful about how we buy assets and then how we mark them.
We don't do this with one eye on the next fundraising. We are not infallible in our judgments, but We are investing with proprietary capital and are very focused on what is in the long term interest of our shareholders. Okay. I hope you're as pleased with these results as we are, and I'll now hand over to Julia. Thank you.
Thanks, Simon. So as you've just heard, this has been another good half for 3i. Our total return of 10% on shareholder funds Led to an increase in NAV per share of 7.76p at the 30th September. That NAV increase was driven by strong portfolio performance and the tailwinds that we got from sterling weakness. You can see here how that NAV has developed in the half.
You'll find the same slide for the Q2 in the pack, Together with the usual sensitivities for changes in FX, realized profits contributed 8p, And value growth added another 49p Simon touched on the realizations, So I'll focus on the value growth. This slide shows you how the GBP478,000,000 of value growth It's split between our business lines. Action generated £271,000,000 of value growth. That's another very strong contribution from this exceptional business. But we also had A significant £230,000,000 positive contribution, almost all of which came from our stronger assets In the 2013, 2016 and the 20 sixteentwenty 19 Private Equity Vintage Assets, And that contribution was driven by earnings, not multiples.
You heard about Shlena from Simon, And that alone accounts for £53,000,000 of the £84,000,000 negative contribution. The infrastructure business and its portfolio also had a strong first half. They delivered an excellent £76,000,000 of value growth from the 14% share price increase of 3 IN. You'll notice the new corporate assets segment. For now, corporate assets only includes our reinvestment into scanlines.
Just to be clear, the GBP 835,000,000 realization of our total investments in Scanlines As shown in our Private Equity business performance, the GBP 529,000,000 of reinvestment Is in this new corporate asset segment. And I'll show you the net impact on group investments and realizations when we get to the balance sheet. One of the key attractions of ScanLines from a group perspective is its strong cash generation. Since our reinvestment in June, we have already received £22,000,000 of dividend income. Scanline is valued on a DCF basis, and the £15,000,000 value movement Basically reflects the other side of the £22,000,000 dividend income received.
We had a good first half in private equity and generated nearly 11% gross investment return. The realizations include the ScanLines disposal I just talked about, as well as proceeds from SLR, Itanko and basic fit. The realized profits of £75,000,000 and uplift to sale of 8% Reflect the fact that scan lines and SLR were valued on an imminent sales basis at the 31st March. You can see here how the private equity portfolio value has developed since the 31st March. The new investments in Royal Sanders and ICE account for almost all of the GBP 254,000,000 of new investments in the half.
The good value growth of GBP 417,000,000 reflects the strong earnings growth of the majority of assets In our top 20 investments, that clearly demonstrates evidence of the resilience of our portfolio. We support that resilience by not leveraging our investments too aggressively. The average net debt in the overall portfolio was 4 times At the 30th September or 3.6 times if you take out action. Changes in net debt and earnings growth flow through to the GBP 342,000,000 of performance That you can see on this slide.
Of the CHF
417,000,000 total private equity value growth, We had only a £30,000,000 increase in value from multiple movements. We made small increases in the multiple of Four of our better performing investments. And the value weighted average, again excluding action, Increased from 11 times to 11.1 times. Now of course, our valuations are based on equity markets on the 30th September, And it was an interesting October. And despite some recovery since then, we appear to be in another period of equity market volatility.
As I've talked about before, we have been taking a longer term view on multiples for some time. This means that when we set the multiples for our valuations, we not only look at what the screen tells you at a point in time, But we also look at things like longer term sector averages, recent transactions And the level that we might expect to exit an investment at. As a result, we have set multiples which are lower than the average comp set in 14 out of the 22 companies that we value on an earnings basis. So to bring this a bit more to life, here is an illustrative version of the slide that I review when we're finalizing the portfolio valuations. It shows in dark blue the multiple we're using to value a company.
And next to it in light blue, you can see the average Of the concept. Before anyone starts counting, there are 13 datasets here, And that's because I've excluded action as we already disclosed the multiple for that valuation. This gives you a picture of the buffer that we have against market volatility. Our approach clearly won't insulate is completely from a fundamental market shock, but it is effective in mitigating against the type of volatility That we've seen over the last few weeks. And this is what the picture looked like at the end of October.
The differences have reduced, but the shape is roughly the same. Strong realizations and value growth play through to carried interest receivable and payable. Carrie only pays out when the relevant scheme is through its performance hurdle, and then only when cash is generated from an investment. This £37,000,000 of cash paid in the first half relates to the action refinancing, which we completed in March 2018. Simon said a minute ago, we have had another very good half for our infrastructure business With a 13% growth investment return, as well as benefiting from strong share price performance of 3IN, Our infrastructure business is an important contributor to our cash income.
This comes from 3IN's dividends and fee income, And we were delighted that the 3IN Board agreed to extend our management agreement with them for a further 4 years to 2022. And fee income is also increasingly coming from management fees from the infrastructure team's other fundraising initiatives. You can see here the increasing diversity of infrastructure's assets under management. At the 30th September, that The cash income from infrastructure and stand lines Means that we have generated a cash operating profit of £4,000,000 in the first half. Of course, £4,000,000 is a small number in absolute terms, especially compared to the realizations generated by private equity.
But it is the critical aspect of our resilience in volatile markets. We do not want to be in the position of having to sell investments To pay the costs of running the business. That's why we continue to focus on the cash operating profit Patrick, we also want to be funded to take advantage of investments regardless of short term realization conditions. And that's why we maintain a conservative balance sheet. We had net cash of £512,000,000 at the 30th September And liquidity of £1,400,000,000 But as Simon has emphasized, we will be careful about making new investments To make sure we can generate sustainable returns for our shareholders over the longer term.
We're now operating our new dividend policy. As you will recall, the intention was to have a simpler approach to dividends, With the intention to maintain or grow the dividend, and of course, that remains subject to the strength of the balance sheet And levels of investments and realizations. The interim dividend is now a straightforward formula. It's 50% of the prior year total dividend. Consequently, we've confirmed today that we will pay an interim dividend of 15p.
So this has been another good half for 3i. And despite market and political volatility, We remain focused on generating mid to high teens returns for our shareholders. Thank you. We'll now be happy to take questions.
Thank you very can you hear me? Yes. Thank you very much. This is Meliadis from Bank of America. Firstly, if I may, on the investment sort of outlook over the coming few years.
You seem to have pulled back a bit. Could we get a sense of Out of the $750,000,000 maximum target, would we be how much of that would you be aiming to spend, Half of it closer to the MAX lower or the lower end? Thank you.
Well, I guess we spent about GBP 250,000,000 so far. That's excluding the reinvestment in scan lines of GBP 500,000,000 I think it's very hard to call at the moment. We have a number of interesting processes ongoing. They tend to be of the type that I've talked about, which is either additive to the current portfolio or bilateral type discussions where we're more confident about where the price may go to. I don't think we'll hit 7.50, but I think we'll do more than we've done today, but I can't be a lot more helpful than that.
It's is a lot of uncertainties around the demand. Thank
you. And then another question on action, if I may. If you could give us a bit more color on the distribution Network and how it's currently operating, are there any issues there perhaps similar to what we saw in Mossy in France? And potentially also what kind of supply issues have you had recently or how that's tracking along as well? Thank you.
Sure. I mean, the supply chain network, in general, works extremely well. So we have very effective distribution centers in Holland and Germany in particular, but we do have in France one particular distribution center which is not able to work to the same formulas and KPIs as we see in the other Distribution centers. And an example of that is it takes almost twice as long to unload a supplier's truck in this French DC as it does In either the German or the Dutch DCs. And this causes bottlenecks within that particular DC, which does feed a lot of our busiest stores in the north of France.
And as a result of that, we have not been able to provide those stores with the Full catalog of goods that we have at Action frequently enough. And while, the footfall going through those stores is up A similar amount to what it was up last year. Basket sizes are down because of the availability of key products. So we're traveling at 3% like for like there instead of 6% or 7% is what is occurring. Now we've got a couple of ways around that.
We can improve the systems, the training, the leadership in that particular DC In the short term, we can also limit the amount of stores it needs to look after. But in order to do that effectively, we need to open the new DC at Lyon, we're going to do at February. And we're going to open a further D. C. In the north in the west later in 2019.
So The plans are afoot. I don't think it's a permanent situation, but it's taken the edge off the growth this year in what are some of our various busy stores Across the Action Network. So we're on it, and we're spending a lot of money on it, but we're not quite there yet.
Final question that I receive fairly often from investors is if we could get an update on Euro Fund 5 Wind up and where we're at with that. Thank you.
Okay. I mean Eurofund 5 is in its final extension period. That extension period comes to an end at the end of November next year, and We will be winding it up at that point. I actually feel there'll be a limited number of investments in it at that point, But action will clearly be one of those. And therefore, we're going to focus on how we deal with a combination of different positions The LPs that make up that fund later on next year, because there are LPs in that fund who would like to Reinvest in action, so find a way of maintaining their exposure to action.
And the RLPs in that fund who are simply timed out Because they're in a fund to fund or something else. So we have to accommodate both sides in looking at a resolution of the action position. So it's not going to be an IPO or anything like that, but there will be a trade of some equity in action at a point in time over the next 12 months or so. 3, I won't be selling any of its stake, by the way. Any more questions?
There's a mic coming.
Sorry, another action question. You were introduced to new product lines or tweak them This year, can you talk about how they've been performing? And also, does 2 50 stores a year feel like a natural initiative expansion?
I mean, let me tackle the second question first. We don't really know where the limit for store expansion is. We were originally targeting opening about 2 50 stores this year, But we've decided late on, in order to deal with the very busy trading in December in France, to Simply defer. Stores that are ready to open their doors, but simply to open them in January so that we don't put more pressure on the supply chain in France. I suspect the optimum number is somewhere between €250,000,000 and €300,000,000 and that's where we'll ultimately get to.
But we need the supply chain In order to properly underpin that. So that's where I think it will go to. In terms of the new categories, they've made a very good start, in Sports is our highest selling in terms of improved category over the year and has phenomenal Performance behind it. So they've been great introductions. And the leaner clothing category focused around basics It's doing much better than the broader fashion category that we had prior to that.
Ian?
Hi, good morning. It's Ian Scullo from Stifel. I was wondering if you could just talk a bit about the infrastructure business. I mean, if we exclude 3rd structure. I mean, how have assets under management changed over the last 6 12 months?
And are there any sort of Plans for growth, a major growth on the horizon on that business?
Well, yes, the fundraising during the course of the year has been focused on our EOPS And we're looking at other opportunities. The business is doing very well and the franchise plays very well. You'll have seen from our segment today, we've continued to invest in people in the U. S. So we expect those initiatives to play through turn our numbers in due course.
Thank you.
Another question here.
James Brown from You referred to the specific issues at the one distribution center in France and the desire to open other distribution centers, which should relieve those issues. Can you go into a bit more detail there on why the logistics issues at that one DC shouldn't apply to others in France?
Yes. We suffer it's in a suburb of Paris, and we suffer from Issues to do with absenteeism, issues to do with strikes, issues to do with militancy and trade unions, It's a tricky area to operate. We have discovered there are many other DCs there who have the same sorts of issues. So it's really about labor and labor relations, frankly.
And that's a specific geographic issue, though?
Yes. We don't have the same issue in La Bastille, which is the DC down near Toulouse. Chris?
Chris Graham from JPMorgan. Just a small little question on the on action again. I noticed you bought a small additional stake. Are you able to say much more about that?
Yes, very simply, that was the Finance Director who moved on, Frederick, at the end of the summer. We bought in his stake. That's what that amounts to.
And you're not able to comment on pricing, presumably that's a sensitive issue?
It was very much priced in relation to what we had in our books. Yes.
Thank you.
Any more questions? Okay. Thanks for coming this morning. Appreciate it.