Key Takeaways
- 3i reported strong investment performance for the first six months but issued a cautious outlook for the rest of 2025.
- Shares have fallen by almost a quarter in five days.
- CEO Simon Borrows bought £1 million of shares after the selloff.
Shares in 3i Group, the largest UK investment trust and one of the best-performing FTSE 100 stocks, fell more than 20% this week after results for the last six months came in below investors’ high expectations.
The private equity-focused trust, in its latest update to the market, revealed a 13% rise in shareholders’ funds and a 14% gross investment return. But it also flagged concerns over the wider economy and a key portfolio holding. Chief Executive Simon Borrows said the company will be cautious in allocating capital to new investments in the next six months. The focus will be on “lower-risk reinvestments in businesses we know and trust.”
“We are mindful that both the transaction market and the wider environment are likely to remain challenging into the second half our financial year,” he said.
The share price move saw 10% wiped off the company’s market value this week.
Why Retailer Action is Key to 3i’s Fortunes
3i’s success is heavily tied to its largest holding, European discount retailer Action, where it is the majority shareholder. While the group has continued to grow and is on track to open approximately 380 new stores this year, 3i says softening trading conditions in France could pull sales growth below the 6.1% guidance laid down in March.
In a note, Winterflood analyst Shavar Halberstadt said: “It is (…) disappointing that the discount store is not able to take advantage of, rather than suffer from, the French consumer weakness. The managers emphasized that the upcoming holiday period is key, and we suspect longer-term market sentiment will indeed be grounded in that data.”
AJ Bell investment director, Russ Mould, said that 3i’s update was “a little short of expectations”.
“The company warning of an uncertain backdrop will raise concerns about the outlook for Action and its wider portfolio,” he said.
3i’s Long-Term Track Record is Still Impressive
3i has been the best-performing investment trust in the UK over the past decade, and one of the FTSE 100’s star stocks in the last three years. In October, its share price had gained 366% over the last five years and 1,180% over the past decade, including reinvested dividends. Over the past year it has traded at an average 56% premium to net asset value. After the recent share price plunge, the trust’s premium has fallen to 17%. In the year to date, the company’s share price is off around 10%.
In the past six months, gross investment return grew to £3.41 billion from £2.14 billion. The 13% growth in total return was up from 10% last year.
The group is also increasing its interim dividend to 36.5p from 30.5p. The payment, set at 50% of the total dividend for the 2025 financial year, will be paid in January 2026.
3i also announced that on Nov. 13, CEO Borrows bought 30,000 ordinary shares in the company at a price of £33.667 per share—a purchase worth over £1 million.
Elsewhere, the infrastructure portfolio, via 3i Infrastructure 3IN, outperformed its expected returns for the six-month period.
According to FactSet, two brokers have adjusted down the target price for 3i after the release of the financial report, and one broker has issued a sell recommendation. On average, however, analysts’ target price for the trust is £45.04, compared with the current share price of £32.76.
