3i GROUP PLC (TGOPF) Q2 2027 Earnings Call Transcript

Good day, and thank you for standing by. At this time, all participants are in a listen-only mode. Welcome to the 3i Group PLC Half-Year Results Presentation Webcast. After the presentation, there will be a question and answer session via the conference call, and instructions will follow at that time. Participants can also submit questions through the webcast page using the Ask a Question button. Please be advised that today's conference is being recorded. I will now hand over to the CEO of 3i Group PLC, Simon Burrows, to open the presentation. Please go ahead.

Good morning. Welcome to 3i's interim results presentation. This has been another positive half for 3i. We delivered a total return of 5%, and that gave us a net asset value per share at the end of September of 31 pounds and 54 pence. That's after our payment of a 48 pence per share second dividend, and it's after a 47 pence loss on foreign exchange translation, following a 78% per share gain last year. International events, and particularly the Middle East situation. This has led to a challenging scenario for business and consumers in both Europe and the U.S. Energy prices and supply disruptions have risen dramatically, and that has had a material inflationary effect, which has weighed heavily on consumers and acted as a brake on spending and overall confidence. Against that background, Our long-term holds, our private equity, and our infrastructure portfolios all perform well. During the half, we made one attractive consumer investment, and we purchased additional equity in action. We also executed a £750 million buyback at an average price of £24.95p. In private equity, we delivered a 5% GIR with a 6% contribution from action. Both of these figures are net of the foreign exchange loss I mentioned. 96% of the portfolio by value grew their earnings. The portfolio overall, and action in particular, has dealt with the different macro issues well, demonstrating both the resilience and adaptability. Earnings growth across our private equity portfolio has been good. In fact, only five, mainly smaller companies, declined in the period. We did see some significant inflation across input costs and supply chain in a number of companies, with fuel, energy, plastic, and packaging materials, all seeing significant price increases over the first half. We saw earnings momentum drive portfolio value moves in the half, and there were no material write-downs in the period. James will give you more detail on this in a minute. Over the last nine months, Action has made a series of rolling price reductions, totaling over 1,000 items across its fixed assortment. This covers about half the fixed Assortment. and has been a significant investment. And Action is able to do that without any material impact on its economic model because of two factors. It's increasing buying power and the volume pickup they are seeing across these items after reductions have been made. We believe the breadth of these measures will enhance Action's competitive position over the medium and long term. Benelux and Southern Europe are performing ahead of our like-for-like expectation with particularly strong performance in Spain. France and Germany are also both positive with single-digit like-for-likes and with strong growth in the volume of transactions. So far, France has not been materially disrupted by the riots, but we are seeing lower footfall on specific days. Action's market chair in France has continued to increase. Despite extreme price competition in Poland, Action's Polish business is generating positive like-for-likes and is set to deliver double-digit sales growth and one of the group's highest EBITDA margins. Geographic expansion is going well, with strong early trading in Croatia and Slovenia. As well as good progress towards the planned entries to Bulgaria and the U.S. next year. In the first nine months of the year, net sales were up 13.6%. Operating EBITDA was up 10.7% to 1.73 billion euros. LTM operating EBITDA to the end of P9 grew to 2.54 billion euros. Like-for-like sales were up 3.4% after a very warm summer, including September. The volume of transactions has been the overriding driver of like-for-like sales across the entire estate. Further hikes in fuel prices at the end of September and early October had a negative impact on both traffic and sales in the last week of P9 and the first week of P10. But as we expected, P10 was a much stronger month than last year, with a good step up in like-for-likes after the difficult first week. Net sales to the end of October stood at 14.3 billion euros, and operating EBITDA has accelerated by 232 million euros to 1.96 billion euros at the end of P10. With further, very strong trading in the first two weeks of P11. Up to and including last week, we've added 286 new stores. Cash generation has been very strong again this year. Cash is now at 1.39 billion euros after the payment of a 450 million euro dividend in May. We anticipate that action will generate approximately $2.25 billion of operating cash this year. Against the muted performance in Q4 last year, we anticipate that Q4 this year should have a higher-than-normal impact on action's result for the year. On guidance and subject to no further material disruption to trading in the remainder of the year, Action is on track to open at least 400 new stores, with like-for-likes likely to be around 4%, and the likely outcome for the EBITDA margin is 14.7% or 14.8%. Raw Sanders was resilient in the period. It maintained solid volumes despite a more challenging backdrop, and it recently agreed to acquire Zwetsal, a heritage Dutch baby care brand that will be its 10th acquisition under our ownership. Our private equity portfolio, ExAction and Raw Sanders, was valued at $5 billion at the end of September. Consumer and healthcare are our two biggest sectors. And as I said earlier, we're seeing a resilient performance from the portfolio, despite the weak macro across parts of Europe, with strong trading from a number of our consumer and healthcare companies in particular. This summer we invested in Nutergia. It's a leading natural food supplements brand, with a strong position in the French and Spanish pharmacy sectors. We bought a majority position, while the founder's family have maintained a significant minority holding. The infrastructure team have produced another good performance. They've delivered a 13% gross investment return to the group, or 14% if you include fee income. The portfolios in both Europe and the U.S. have been resilient. And at that point, I will now hand over to James.

Thank you, Simon, and good morning, everyone. Our total return on equity for the half... As Simon said, foreign exchange movements had a negative impact of 47 pence during the half. Other movements added 36 pence, and the dividend payment in the half reduced NAV by 48 pence. That meant we closed the half with an NAV per share, and the dividend payment in the half reduced NAV by 48 pence. Of £31.54. You can see the components of the £186 per share, or £1.9 billion of value growth, here. Action continued its growth trajectory and contributed another £1.5 billion in the period. The PE performance increases of £205 million significantly outweighed the performance decreases of £24 million. Rule Sanders, Sanashore, AES and LUCOM were the main contributors to the £205 million increase. There were no material detractors in the half. We continue to apply our valuation process consistently, and markets have been broadly supportive over the period. As part of the valuation process, we increased the multiples for two assets and took the multiples down for three assets. The combined impact was positive 13 million. The quoted investment portfolio had a good half and delivered a positive contribution of 164 million. That came from the increase in the 3IN share price. The portfolio ended the period with a value of 33.8 billion pounds. So, starting with action. We continue to value action on a post-discount multiple of 18.5 times its LTM run rate EBITDA of 2.8 billion euros. That gave us an enterprise value for action of 51.4 billion euros at the end of September. The valuation on the 3i balance sheet, which takes into account our increased shareholding level of 67.5% at the end of the period, was 25.5 billion pounds. The charts on this slide show the evolution of the peer group multiples in the year to September 2026. There have been some movements within the peer group, as you can see. Dollarama and Costco have derated a little over the last year, but it's still worth noting that both still command a six to eight term premium to the multiple that we ascribe to action. We remain comfortable that action with its strong operational KPIs and outstanding record of white space expansion should trade at a premium to the average. It's also worth cross-checking with a longer time series for LTM EBITDA average multiples, as we do on the next slide. You've seen this chart before. We show it because it takes out some of the noise in terms of short-term movements. As you know, we didn't mark Action up when the valuation of the better-rated comps could have arguably justified it. As a result, we have a degree of insulation when they derate a little, as they've done in recent quarters. Further, the average is really quite stable and Action's relative position is unchanged over time. Finally, as Simon has covered, we completed a further third-party trade in Action's equity in the period. And we did it at a price consistent with the valuation multiple we used to value action today. Now let's look at the valuation multiples of the rest of the portfolio compared to the Here's the pair sets. This chart shows the valuation multiples for our PE assets in dark blue and the average of the multiples from the relevant valuation peer sets in light blue. The green arrows highlight the two assets where the multiple was increased in the half. The red arrows reflect the three assets for which multiples moved down. In each case, these increases and decreases reflect company or market-specific factors. The weighted average multiple X action is 13 times. Which is in line with March. The gross investment return for private equity was £1.5 billion. This was after £482 million of negative impact from FX. This is a £1.3 billion FX swing from the prior period. Adjusted for constant FX, the return this year and last year would have been 7% and 10%. Investment of $892 million included our purchase of an additional 2.1% of action in the period. The PE portfolio ended the period with a value of £31.7 billion. In terms of the leverage position, we show that on the next slide. At 30th of September, there was a reduction of leverage in action following a very strong period of cash generation. Very little change in terms of the rest of the PE portfolio. The maturity profile continues to be very well managed. And the portfolio is over 80% hedged across the entire book. This hedging has been in place for some time. And it's doing its job in terms of insulating the portfolio against the impact of rising interest rates. So, on to infrastructure. It was a better result for the infrastructure segment, driven by the performance of the 3IN share price, which increased by over 18% over the period. The underlying 3IN infrastructure portfolio continues to do well, with the completion of the sale of TCR and the acquisition of the Leftow Mine data center as highlights. At the end of September, including scanlines, our infrastructure portfolio was valued at £2.1 billion. Overall cash income totaled £271 million. In large part, that reflects the action dividend we received in May this year. This, combined with the cash received from the infrastructure portfolio, resulted in a £259 million cash operating profit. So now let's take a look at the balance sheet. The group's approach remains one of conservative capital management, with net debt of £1.3 billion and gearing of 4%. We remain within our gearing tramlines. We had liquidity of over £1 billion at the end of the period. More generally, having a sizeable long-term hold portfolio with strong cash generation characteristics underpins the nature of our balance sheet. In practice, it's given us an enhanced ability to forecast cash flows with a higher level of certainty than we had in the past. So turning to the buyback program. Our first buyback program was announced in May and was up to $750 million, which has now concluded. We've acquired for cancellation about 29.5 million shares, at an average value of £24.95 per share. Today, we announced a second buyback program of up to £750 million, to be executed in the period to the end of May 2027. This second program allows us to further optimize the group's capital deployment and Continue to capitalise on the dislocation between the current share price and what we believe to be the fundamental value of our portfolio. So finally, let's turn to the dividend. Here you can see our dividend policy. In line with that policy, we will pay our first FY27 dividend of 42.25 pence per share in early January. That first dividend... It's half of last year's total dividend. Now, before we get into Q&A, I'll hand back to Simon.

Thank you, James. I'd like to close with a few final remarks. Action is a truly exceptional business. It has been one of, if not, the most successful cross-border retailer in Europe over the last 14 years. It now competes in 16 European countries and has built strong positions or made good starts in all of them. You can count on the fingers of one hand the number of retailers that have achieved anything like that scale and breadth of European expansion in such a short time frame. It has achieved that extraordinary record because consumers flock to its stores. And that consumer enthusiasm is validated by all their consumer awards. This year alone, the team at Action has won the Leading Retailer of the Year award in not one, but in four large European countries. France, Germany, the Netherlands, and Italy. Action is on track to open over 400 new stores this year, about 12% of its base. And this year's vintage is a very strong one. Early trading in new stores is comfortably ahead of expectations. They continue to achieve well under one-year paybacks, with average store contribution margins of over 20% across the whole network. Action still has no unprofitable stores, and their sales and profit densities are some of the highest across the global retail sector. And we, at 3i, particularly like the business because this all leads to exceptional cash generation, which grows materially each year. And that's despite the continuing investments in new market expansion. This, together with the contributions from private equity and infrastructure, has delivered exceptional value and dividend compounding for 3i Group. We are careful investors. And this year, we've been able to buy in shares at an average of 24 pounds and 95p, while also increasing our action holding through the issue of shares priced at 31 pounds, 31 pence. And as James has said, we announced the second 750 million pound buyback to continue the purchase of 3i shares while they trade at a discount to our portfolio value. We're looking forward to the second half. Action is well set in terms of product range, pricing, and availability for a strong close. And we expect to see good performance from our consumer and healthcare sector companies. Our portfolios and action have demonstrated solid resilience in 2026, and we expect they will do the same, but from a larger base in 2027. Thank you, and we'll now open things up for questions.

Thank you. We will now conduct the question and answer session. To ask a question via the conference call, you will need to press star one one on your telephone and wait for your name to be announced. To restore your question, please press star one and one again. As a reminder, participants can also submit questions to the webcast page using the Ask a Question button. We will now take our first question from the line of Hayley Tam from UBS. Please go ahead. Your line is now open.

Good morning. Thank you. Could I ask two questions, please? The first one on action and the second one on the buyback. On action, you did say you've cut prices on more than 1,000 fixed assortment items year to date. And I just wondered, can you contextualize, therefore, first the 3.7% like-for-like you've seen year to date? I'm presuming this is much more than 100% coming from footfall, but any color you can give there would be great. Secondly, in terms of the buyback, the £750 million and your progressive dividend policy, given your cash balance at the end of September 26 is only £186 million. I just wondered, should we be looking for you to use your RCF to finance the buyback, or is this really about expectations of further cash dividends from action? Thank you.

Thanks, Heidi. I'll deal with the cut in prices. So, yes, we've reduced 1,000 of the fixed items. It does mean that like-for-likes are very firmly driven by transactions, if you like, and transactions are running somewhere ahead of the like-for-like number across all countries. So it's really about driving footfall into the stores, and in general, we've seen a much stronger pickup in FMCG sales this year than we saw last year. James, do you want to talk to the buyback?

So in terms of the buyback, Hayley, as you know, Action historically paid a dividend to us a couple of times a year. It continues to have lower gearing. We have always the potential for realizations. You know, overall, we have a strong liquidity position at the end of September. So add that all together, you know, we feel comfortable that we can, you know, both execute the buyback and continue with a progressive dividend policy.

Thank you. If I could have a quick follow-up on the first point, if I may, then we've like for likes really been driven by transactions. Are there any comments you can make to us about the EBITDA margin outlook? Because I know in the past. You said that, you know, footfall driven sales may maybe cost you a little bit more in terms of supply chain costs and diesel costs and everything else now at the moment. Any comments would be helpful. Thank you.

Well, one, we've given guidance on that point to the end of the year, Hayley, and it's fair to say that our biggest cost as a business is the COGS line, and we've seen significant savings in the COGS line given our increased scale.

That's great. Thank you very much.

We will now take our next question. From the line of Gregory Simpson from BNP Paribas, please go ahead.

Yeah, hi. Morning. So, free from my side. Firstly, maybe to go back on to EBITDA margins. They have been tracking down this year, and in Q3 in particular, I think we're down 90 basis points. I think they need to be up quite meaningfully in Q4 to get to the guidance. So, I don't know, just anything you can... Add around margins because it's kind of an expectation into Q4, that's the first question. Secondly, can you remind us of any liquidity windows for actions, other investors, and should we expect similar transactions to the one you just did this period, or is that more of a one-off? And thirdly, just wanted to check it. You say you've got performance ahead of expectations and the better looks. Can you frame exactly where like-for-likes are tracking, given it's a good proxy for your more mature markets? Thank you.

Thanks, Gregory. On the EBITDA margins, I think the important thing to look to here is the profitability that we saw in P10 and the pickup you saw there. P10 was a good step up, both in terms of sales and profitability in particular. The EBITDA margin moved north of 15% for the month. It actually generated as much profit in the month as we did in the whole of the preceding quarter. And P11 and P12 are both higher sales months and higher profit margin months coming up. So I think that, I hope that deals with your point. In terms of the action transaction, yes, it was a one-off, and we were happy to do it for the reasons outlined. There's nothing else in contemplation at the moment, but this is really us responding to LP's particular liquidity requirements or whatever, rather than us initiating these transactions. In terms of the Benelux like-for-likes, we're not giving out specific country like-for-like numbers, but they're much more in line with mid-single-digit type numbers, if that will Thank you.

Thank you. Our next question comes from the line of Andrew Lowe from Citi. Please go ahead.

Hi, thanks for the presentation and taking the questions. I had a couple. So, firstly... You referenced the challenging first week in October. Could you maybe help us quantify that and maybe just talk through a little bit more detail how the French lights and lights have trended in recent months around this period of unrest and disruption? And then the sort of second line of questioning, again, is just on the... Pricing. I believe that store prices were down a couple of percent in 2025 before you started to cut in Q4. So I guess it's reasonable to assume that nominal store prices are down closer to mid-single digits. And how has the competition been responding to this? My understanding was that there was more of a competitive response in Q4 last year and Q1, but maybe less so throughout the year. So does that remain the case in most of your markets? Thanks.

Thanks, Andrew, rather. So the first week was a difficult week in a number of countries, because I think a bit like the UK, there were some releases of caps and things on various energy and fuel prices and things, and it did seem to have an impact on both footfall. And prices. So it was rather at odds with the weeks preceding it and certainly the weeks that have come after it. It was just a very weak week, as was the last week in September. But it appears to have been more of an anomaly than anything else. And I suspect other retailers saw the same effect. So, in terms of the reductions and the store prices, in the fixed items, the sort of reductions we've been talking about, most of them would be in the 5% to 10% range. Some of them would be higher than that. Some of them might be a little lower than that. But it does mean a meaningful step down, particularly in FMCG prices and some aspects of general merchandise like household items, etc. And then the final point is yes, we saw when we reduced prices this time last year, some people reacted to that, but we've definitely seen less people reacting as we've been rolling these prices down across the last nine months.

That's really helpful. Thank you very much.

Thank you. Our next question. Comes from the line of Michael Sanderson from Barclays. Please go ahead. Your line is now open.

Good morning. Could I just a couple of quick ones, please? First of all, I'd be really interested, the early trading in the new countries, you obviously mentioned it being strong, but I'd be interested to understand Croatia and Slovenia, how it compares to, I guess, some of the other new countries you've developed over the last few years. I mean, clearly, there's been a range there. I know it's been universally popular, but just interested to see the pace there. And the second one was broader beyond action. Obviously, sort of deploying the buyback, and I know, James, you laid out how comfortable you were with the cash flows coming through. The scale of investment opportunities elsewhere at the moment, how are you thinking about those, or are they lower priority given capital requirements around choosing the buyback at the moment? Thank you.

Thanks, Mike. We often get very strong sales when we first open in new countries. In Slovenia, the sales were actually exceptionally strong by almost all previous benchmarks. And both countries generally have been as good as we've seen in previous openings. But it's a small sample of stores, obviously. So the initial... The initial bump in those two, and that's a very small part of the opening program, my remarks were really focused on the 286 stores we've opened, and as a collection of stores, those new open stores have performed very strongly this year. So it's not just in the new countries, but certainly Slovenia got very close to a new record for its opening weeks. In terms of investment opportunities elsewhere, it's fair to say that we saw a reasonably thin whip for much of the first half, but actually it has picked up, and we've had a number of later stage reviews in recent weeks. So we are seeing some more opportunities come through, both in terms of new investment and in terms of M&A transactions for the existing portfolio. So I'm optimistic we will do some more in due course, but I think the European market for mid-market via transactions has been... It's relatively thin for a good part of the year. It doesn't really compare with what's been going on in the U.S., I have to say that.

Thank you. Our next question comes from the line of Adam Cochrane from Deutsche Bank. Please go ahead.

Good morning. A question on the EBITDA margins again, if I may. The decline that you saw in Q3, can you just explain what drove the year-over-year decline in EBITDA margin? I think you referenced that there wasn't significant gross margin pressure given your... Given your scale, et cetera. So does that make it more of a cost question year over year compared to the sales performance? And then as we look into Q4, is the recovery in margin largely then driven by sort of better operating cost leverage to drive that recovery? Thanks.

Yeah, thanks, Adam. I mean, I think Q3 was made up of several things. Firstly, we didn't get quite the sales that we were anticipating to get, and I think that was because... The stores were perhaps very busy in May, June, and certainly the first half of July, but with the sort of incessant heat that was over a lot of Europe, we do feel that shoppers toned down their visits to stores, and so we saw a slightly lower level of sales. In terms of the EBITDA margins, we saw two things particularly affect us over that period. One is shrink. Where we did see a jump in shrink. We have seen a jump in shrink this year, which has been higher than in prior years in certain countries. And the other, we saw quite a lot of absenteeism across different countries. So we had to pull in shorter term workers to deal with that, and it had an impact. Upon labor costs. And, you know, these are, I would like to think, more temporary factors. And we're definitely dealing with some of the shrink issues that we've faced in some of the countries. But I would say they were the things that really had an impact on the EBITDA margin.

And so in terms of those factors, as you say, they're things that you think can be controlled in a relatively short period of time, so you saw them in Q3 and can hopefully resolve them in Q4.

Well, I think we're very confident that there is going to be quite a material step up in EBITDA margins in Q4, as October has already illustrated. Okay, thanks.

Thank you. Our next question comes from the line of Manjari Dar from RBC. Your line is now open.

Thank you. Good morning. Thank you for taking my questions. I also had two, if I may. My first question is just a follow-up to that last point. Simon, I wonder if you can get some colour on how you are thinking about managing shrink in peak trading period. And then, secondly, I was just wondering on the price positioning now at Action, how do you guys feel about that here, and do you think there's a further need for price investment for Q4? Are you planning any more for the rest of this year and into next year? Thank you.

Yes, on the shrink, we are taking a number of... Different measures, and they might cover labeling. They might cover display in store. They might cover more security in certain stores. It's a collection of items which we believe will have a downward effect on the level of shrink that we've seen in some stores, in some countries in particular. So it's an active agenda of items that is being implemented as we speak. In terms of price positioning, we have further price reductions to go this year, and we will obviously look at it afresh next year. But it's absolutely top of the agenda at action that they remain the cheapest place for consumers to visit in the markets they trade in. And so that is what's driving that approach.

Thank you. Just a quick follow-up. Are there any cost implications of that, of those shrink management measures that we should be aware of, high security costs, et cetera, still to come through?

It's not material what we're talking about compared to the actual shrink that we've seen in specific instances.

That's very close. Thank you.

Thank you. Our next question comes from the line of Christian Holstein from Bank of America. Your line is now open.

Oh, good morning. Thank you for taking my questions. I just have three of them. My first one was just wanted to just check in on how you're set up for the Christmas period versus last year. Have you also started seeing seasonal benefits yet, or is this still yet to come? Um, my second question is on the EBITDA margin, but maybe more into, like, out a year or outlook there. How, have you changed how you're managing supply costs now in terms of, like, diesel prices and everything? And do you also expect to have any impacts from a higher minimum wage in France? And then my third question was on store openings. So I understand there's a lot of white space opportunities. I'm just wondering if you are slowing down the store openings in these countries at all while the macro environment is weak and focusing on higher growth areas. Thank you.

Thanks, Christian. So the Xmas products are in store. We're pretty excited about them. We think we've got a very strong toys display, very good deco, etc. They're starting to move. Only the very organized customers, I think, are really in there, buying it in detail. But we expect to see the next month is really the busiest trading period in our stores. So this is all beginning to lift. In terms of the EBITDA margin, the various pressures, diesel prices have been a cost through the year, and it's probably led to about 12 million of increased costs so far. So that is something we are obviously managing within the cost base. In terms of wages, we have a three-year wage agreement in France, which means we have a certain perspective. On all of that, and then obviously any changes to minimum wages may have an impact on that, but we enjoy a three-year wage agreement, and we have decent relations in there. In terms of store openings in France and Germany, we're really not letting short-term consumer pressures, which affect like-for-likes, really impact upon our medium- and longer-term plans. We still have about 300 stores to open in France. The openings in France this year have been very, very good, as I tried to suggest earlier. Over a third of those stores are in regions where we know there are very high densities, and so we really are hunting for the right locations in there. So we're not... We're not adjusting the approach. We're going to continue to increase the annual store opening number, and we would expect to see a reasonable share of that in France. We're obviously not opening 100 stores a year in France like we have at various points in time. It's more likely to be in the 30 to 40 stores per year at this particular point in time.

Great. Thank you.

Thank you. As a reminder, to ask a question, press star 1 and 1 on your telephone. Our next question comes from the line of Jeremy Kincaid from Van Lanskampen. Please go ahead.

Good morning. Just one question from me. You mentioned that you are taking pricing reductions on 1,000 items. But, you know, the pressures in the past have been, you know, it seems to be isolated in France and Germany. So my question is, are these pricing reductions just happening in French and German markets, or is it across all countries?

They are happening across all countries, but it is fair to say, Jeremy, that there's more of these happening in particular in those countries.

So should I read it that there's... Also, increasing competitive pressures across all countries now?

No, it's just that we thought it was appropriate to extend some of these reductions to the other countries, but like for likes in those other countries is still running ahead of expectation, essentially.

Yeah, great. Helpful. Thank you.

Thank you. I am showing no further questions, so I will now hand over to Sylvia Santoro, 3IS Group Investor Relations Director, to address the written questions submitted via the webcast page.

Thank you. There is a follow-up on the EBITDA margin. So, how are material are set-up costs related to U.S. entry at this stage? And would the full-year 14.7, 14.8 EBITDA margin outlook look materially different without the U.S.?

No to the last point, but we, you know, we probably have. About 20 professionals work in the U.S. at this point, and so costs are building there. We don't have physical ownership of any stores or DCs, but that will move forward next year.

And there is a question on TEMU and other online platforms and whether we've noticed an impact on market shares following the new customs, the abolition of data minimis tariffs in Europe.

I think when we've been asked about TEMU before, we said we didn't think we were one of the main targets of TEMU's growth in those. Early years, it was more a glancing blow for us, given the difference in our category and price points, et cetera, and we equally believe that now, that it's still glancing blow type stuff.

And then we have a question on the environment in Poland. And the question is whether we've had to be more aggressive on price in Poland than in other geographies, and whether we think we've lost any market share short-term in Poland due to the price investment from competitors.

No is the answer to that, and we believe we are winning market share, and it is an extremely price competitive market, and there are two leading supermarkets who, on a weekly basis, have a go at each other across FMCG pricing in particular, which has affected the whole market. As I said, we still have positive like for likes. We're looking at very strong sales growth, and we have very good profits coming out of Poland. So it's a great business, and we're looking to continue to take more market share in that country.

And then there's a question on the buyback. The question is, if our shares continue to trade at a discount to book, should we expect continued buybacks, given the accretion that we get, and the current total distribution yields running at over 9%?

I think while there is a dislocation in the share price, buybacks are very attractive to us. We've just announced a second program, so that gives an indication of... of how we look at this. It's worth reminding people that for a lot of the time, we've been able to purchase pieces of action when the shares have been at a premium to it, but it really does make sense when they're not at a premium to do buybacks. I think cash generation for the group looking forward is going to be very strong. Action is deleveraging extremely quickly, and it expects some very significant cash flows in the balance of the year. So we've got plenty of cash if we think we need to continue with buybacks at any point.

Then we have a question on the P.E. Portfolio X action and specifically what was the average LTM earnings growth from the P.E. Portfolio X action?

I think it was in the upper mid single digits offhand, but I don't have the number to hand it.

I am showing no further questions here, but I believe there is another question on the phone line.

Our next question on the telephone line is from the line of Andrew Lowe from Citi. Please go ahead.

Hi, thanks for taking the follow-up question. I just wanted to probe a little bit about new customers. So I'm curious how and if you're able to track that information and how that's sort of trended over time. So rather than looking at like total footfall, how many new faces are we seeing in action stores? And the price investments that you've made, I think, in FMCG were actually sort of angled at exactly that, like trying to get new customers into your stores. And then if you could maybe talk a little bit about how the demographics of your customer base has changed, you disclosed some helpful data. Showing a survey, for example, which shows that you're getting more and more customers in sort of mid and high earning households. So any commentary on that would be extremely helpful.

Sure, Andrew. I mean, looking at our own measures, we've observed that there's a good step up in customer flow since this time last year. We're over 23 million weekly visits now. We actually saw in some Nielsen data that was published recently that in Q3, we'd taken significant further share in France. We're capturing more new households visiting us. So our sense is that it's growing, and it's growing in the way it always does. If you look at the Benelux business, People of all income levels and people of all types and in different locations come into our stores, so it's pretty balanced between sex, it's pretty balanced across the age ranges. I have two children who live in Holland. They buy all their laundry and things like that in action because it's such great value. So it's really all ages, both sexes, and all income levels end up coming into our stores.

Right.

Thanks so much.

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Thank you very much, everyone.