Good day, ladies and gentlemen, and welcome to the 3i Group plc results presentation for the six months to thirtieth September 2022. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. Participants can also submit questions through the webcast page using the Ask a Question button located at the top left of the page. I would like to remind all participants that this call is being recorded. I will now hand over to CEO of 3i Group, Simon Borrows, to open the presentation. Please go ahead. Good morning. Welcome to 3i's interim results presentation. As you can see from this morning's numbers, this has been another good half for 3i. Our current portfolio continues to generate healthy earnings growth, and the individual businesses are generally coping well with the pressures of today's macroeconomic environment. We delivered a total return of 14%, giving us an NAV per share of GBP 14.77. We've ended the half with a gross investment return of 16% from private equity and 3% from the infrastructure team, which also produced a good level of cash income of GBP 48 million. Private equity has delivered another solid performance. In fact, 91% of our top 20 assets by value grew their earnings in the 12 months to 30th June 2022. James will take you through the detail later, but a crude summary of the PE return in the first half would focus on three items. The 16% return being attributed primarily to Action, a very healthy profit on the sale of Havea, and foreign exchange. What that thumbnail sketch misses is that the good performance of the top two-thirds of the non-Action portfolio has been offset by a number of writedowns, and they include two very large ones, together with a total of eight reductions in our valuation multiples. The PE team completed four new investments over the summer, as well as five bolt-ons for the current portfolio. Clearly, we're looking at a challenging outlook over the next six months or so, but we have a resilient portfolio that focus on attractive long-term trends. For years, 3i has employed specialist banking teams in both private equity and infrastructure who advise and execute on all aspects of financing and hedging requirements across both portfolios. This is a core competence within the group and plays a pivotal role in both transaction and asset management. The portfolio benefits from having conservative capital structures, where two-thirds of interest rates are hedged and over 80% of the debt is due in 2025 or later. Our portfolio management teams have instituted operational efficiency programs as well as intelligent pricing strategies to mitigate a lot of the challenges we see from input inflation and from more cautious consumer behavior. Earnings growth across our top 20 investments continues to present a strong picture, with 83% of the companies by value growing earnings above 10%. Action and seven other companies are growing earnings at over 20%. You can see our large value increases and decreases on this next slide. Compared to last year's versions of the table, we have more companies on the right-hand side as a result of both performance and multiple reductions. The bulk of those reductions came in the discretionary consumer sector, and they reflect both rising input costs as well as reduced consumer demand. The value increases on the left are all as a result of performance, except in the case of Havea, which is near the top of the list. It's up there as a result of a very profitable realization, which closed in early October. SaniSure, WilsonHCG, and Nexeye have all continued to see good revenue and earnings growth in the first half. Our industrial investments, Tato, AES, and Dynatect, have also generated good returns. As we said at our Capital Markets Day in September, Action has delivered a very strong performance so far this year. 9M LTM EBITDA was EUR 1.036 billion. That's 35% ahead of 2021, with like-for-likes of 15.7% compared to 12.9% last year. These like-for-like sales were driven by material increase in footfall, and that good performance has continued through October. Sales for the year to date are now EUR 6.8 billion, and LTM EBITDA is now EUR 1.057 billion. Better than planned sales, together with tight cost control, are leading to profitability, or EBITDA margin well ahead of budget. On slide nine, we show a breakdown of like-for-like performance against last year. Like-for-likes in the first six months were strong again. COVID effects differed across individual months, but there was a broadly similar performance over the half at over 18% in each year. P7- P10 have been the least affected COVID periods since 2019, with about 12% like-for-like growth in 2020 over those four months. This year, an acceleration in like-for-like started in P7, with a significant step up from the beginning of P9, and that step up has continued through the end of October and into November. As we move into the last two months of the year, the business is trading very well across all countries and categories with continuing strong footfall. The non-seasonal or essential categories are selling particularly well this year. The major operational challenge at the moment is physically getting all our seasonal stock into the stores. Deliveries have been complicated by congestion and severe delays at the ports we use in Europe. We've opened 182 new stores so far this year, and we remain confident that we'll be opening more new stores this year than the 269 we opened last year. Trading in Italy and Spain has been excellent and well ahead of our investment case, and we now have over 20 stores operating in Italy. Action's strong trading has led to another healthy buildup of cash, and the company now has around EUR 800 million on its balance sheet. The four tables on this slide demonstrate what an outstanding performer Action has been since 3i's purchase of the group in 2011. These four KPIs really do set Action apart from its peers, and any effect from the pandemic is barely noticeable in these numbers, even though Action faced significant disruption through store closures and restrictions. Action's organic growth engine, powered by its ability to seamlessly travel across borders, is a very rare attribute in the world of retail. Spain and Italy represent two very large new markets with considerable white space potential for Action like we currently see in France, Germany and Poland. The private equity team have continued to make some interesting new investments this year at sensible prices, and one or two of the companies have the potential to become significant platform investments over time. We've also continued to build on some existing platforms through further bolt-on acquisitions, with three of these funded by the portfolio companies. As I mentioned earlier, our team in Paris pulled off a fine realization in June this year. After five productive years building the Havea business into a very strong health-based consumer platform, they executed an excellent realization, and it's a testament to the quality of the business and the transformation our team and the management engineered over the last five years that the sale was concluded in these terms at such a difficult time in the market. The infrastructure team has had another impressive start to the year. The 3i portfolio actually generated its annual target return in the first six months of the year, and as I said ten minutes ago, they also generated GBP 48 million of cash income for the group. When you look at the quality of the 3i portfolio and its generally positive correlation to both inflation and power prices, it's been puzzling to see such a material pullback in 3i's shares over the last few months. As I said right at the start, it's been a good half for 3i, especially when you consider the overall economic situation and the volatility in so many markets. On that note, I'll hand over to James, who will fill you in on more detail. Thank you, Simon, and good morning, everyone. I'd like to take you through the key financial movements in the half year to the end of September and give you more color on the valuation process this quarter. I will also touch on how the underlying portfolio is positioned as far as interest rates and foreign exchange movements are concerned. As Simon confirmed, our total return on equity was 14% in the first half of the financial year, and we closed the half with an NAV per share of GBP 14.77, as you can see here. The NAV increase was primarily driven by significant value growth of GBP 1.24, and a tailwind from sterling weakness, which contributed GBP 0.74. Dividends and carry deductions explain the rest of the movement. You can see the components of the 124 pence per share or GBP 1.2 billion of value growth here. Simon touched on the momentum at Action, and we can see that its performance provided the largest contribution to the value growth at GBP 1.2 billion. That's almost equal to the overall value increase, but it's important to understand the contribution from the rest of the portfolio. First, we have a number of strong performers making a contribution to the result in the half. Simon mentioned SaniSure, WilsonHCG and nexeye as examples of the larger contributors, and these movements are embedded in the PE performance increases of GBP 347 million. Sticking to the increases, we also announced in the period the sale of Havea, and you can see the uplift above the end of March valuation in the uplift to imminent sale bar of GBP 154 million. Due to the macro and market headwinds during the half, we also had some declines in the PE portfolio totaling GBP 205 million. We also saw a reduction of GBP 180 million as a result of us moving eight multiples down in the period. Lastly, we saw a reduction in our two quoted assets of GBP 148 million and 3IN accounted for most of this. Discretionary consumer businesses accounted both for the majority of the PE performance decreases and the majority of the reduction in multiples bar. Luqom and Idean accounted for the largest proportions. Other examples of multiple reductions include Wilson, Arrivia and Mepal. 3iN share price decline of GBP 117 million drove the majority of the quoted reduction, which, as Simon commented, is a little counter-intuitive, especially when you look at the strength of their underlying portfolio. Taking the pluses and minuses together, the portfolio grew to GBP 16.4 billion. When you consider all the volatility and macroeconomic challenges we've seen, this is a solid result. Let's have a look at Action's valuation in a bit more depth. Simon has talked about Action's strong performance, and we haven't changed our valuation methodology for Action at all. As you can see, we've applied a consistent post-discount multiple of 18.5x to these earnings. That gives Action an enterprise value of EUR 21 billion, and a valuation on the 3i balance sheet at the end of September, after deducting debt and taking account of our percentage ownership of GBP 8.6 billion. Our valuation process for Action is no different from any other 3i asset. Action's performance, both on an absolute and a relative basis, is truly exceptional. We remain confident that an 18.5x multiple is within the relevant peer group range, and more than fairly values what is the global leader in the discount space today. We take additional comfort from the fact that Action's excellent annual growth rate means its historic multiple of 18.5x translates into a much more modest prospective multiple. Taking the last year as a good example, the valuation in September 2021 at 18.5x translated to 13.8x the run rate EBITDA actually achieved one year later. Okay, let's turn to portfolio valuation multiples compared to the peer set. This slide shows our portfolio valuation multiples in dark blue, compared to the average of the multiples for the relevant peer sets in light blue. Over the last 12 months, the downturn in the market has resulted in a significant de-rating of company multiples across our sectors. Fortunately, as you know, our valuation process, which was overseen by Julia for so many years, was centered around a long-term through the cycle view of multiples. That approach meant that buffers were created by not moving our portfolio company multiples up in any meaningful way when the markets rose to levels we didn't think were sustainable, or where we didn't think they were representative of cross-cycle fair value. Our consistent cross-cycle perspective allowed us to absorb some of this volatility, and taken together with the 8 multiple reductions in this half, we have retained a buffer with 20 of the 25 companies on the chart continuing to be marked below the average of the peer set. 4 assets other than Action are marked above the average of the peer set, but importantly, none of these assets, or for that matter, any of our marks, are outside the high-low range set by each of the assets' individual peer group. Despite the volatility and the headwinds, we still believe in the potential value that's embedded in our portfolio companies. We recognize that it's appropriate to take multiple reductions given the market backdrop. We only make decisions on an individual asset-by-asset basis, and those decisions are driven by the discipline that comes from the independence of our valuation process. This is a robust process overseen by the Independent Valuations Committee of the board. We're very comfortable with our overall portfolio weighted average multiple, excluding Action, of 13x when the majority of the companies in the portfolio are on track to more than double their profit over five years. Before moving away from the topic of valuation, I wanted to recap on some of the realizations we've achieved in recent years. This slide shows our last three PE company realizations. In aggregate, they delivered over GBP 1 billion of proceeds to 3i, all at good money multiples and at significant premiums to book value. Importantly, we exited during difficult markets. In the case of Magnitude, we were in the middle of the COVID crisis, and in the case of QSR and Havea, they were both signed after the invasion of Ukraine by Russia. There are a couple of points that we see as important here, which revolve around quality. The quality of our portfolio allows us to get through diligence processes, even if the market is difficult. That quality is often recognized by the market in valuations which offer the potential for upside to 3i on exit. Overall, as Simon explained, our private equity portfolio generated a gross investment return of 16%. Just to be clear, that investment return included a GBP 685 million gain on foreign exchange. Realizations in the half year were GBP 193 million, primarily from the successful exit of QSR, a division of Q Holding. Our cash investments of GBP 292 million largely reflected the new investments Simon's covered earlier, as well as further bolt-on opportunities. We know that today people are rightly focused on leverage, so I'd like to talk about our approach. An important part of our investment process is working towards an optimal capital structure. We aim to balance equity and senior-only debt to make sure we don't over-leverage our portfolio companies. Sticking to that policy is even more important when we're moving into a higher interest rate environment. Today, our portfolio leverage is moderate. We have a net debt to earnings ratio at the end of September of just over 4 times, excluding Action. Action's debt ratio is now below 2 times, and our overall debt maturity profile is long-dated, as you can see on the chart on the right. The majority of the portfolio have maturities in 2025 and beyond. Term debt across our private equity portfolio is well protected against interest rate rises, with over two-thirds of total term debt hedged at a weighted average maturity of more than 3 years. The interest rate element is capped at a weighted average hedge rate below 2%. The average margin is under 4%, and the all-in debt cost is capped below 6%. Our infrastructure team delivered a gross investment return of 3%, with the portfolio decline of GBP 47 million being more than offset by income of GBP 24 million and a foreign exchange gain of GBP 58 million. A couple of minutes ago, I mentioned the market-driven decline in 3IN's quoted share price. That was partially offset by good performance from our U.S. infrastructure portfolio. In particular, our proprietary capital investment in SmartCard is benefiting from a strong recovery in U.S. domestic travel. Through to the end of September, Scandlines has continued to move strong freight volumes, and they've had a good peak summer season, with leisure volumes recovering to pre-pandemic levels. With the current macroeconomic headwinds across Europe, we've remained cautious on Scandlines' short-term outlook. We've reflected that in our September valuation mark. The Scandlines valuation of GBP 554 million is after the payment of a dividend of GBP 12 million in the half. As you know, both infrastructure and Scandlines are important contributors to our operating cash profit. While we have a good level of cash income across our business lines, we recognized a small cash operating loss in the half. Again, like last year, we expect this to be temporary because we have a good pipeline of cash income in the second half, and we expect to end the year with a profit. Moving to the balance sheet. As we set out in the Q1 announcement, we now have access to a multicurrency revolving credit facility of in total GBP 900 million. Cash at the end of September was GBP 55 million, and we closed the period with liquidity of GBP 801 million. Following the receipt of the Havea proceeds in October, we had cash of approximately GBP 360 million and liquidity of approximately GBP 1.3 billion. Gross fixed debt remains at GBP 975 million, and we plan to repay GBP 200 million of debt due at the end of March 2023. At the end of September, 88% of the group's net assets were denominated in either euro or US dollar, as you can see here. Following the considerable weakness of sterling in the half, we recognized a net foreign exchange gain of GBP 711 million, or GBP 0.74 per share. The only hedge the group had taken historically in terms of its balance sheet Forex exchange risk was in relation to Scandlines. Following the period end, and in the light of the significant decline in the sterling exchange rate. We implemented a medium-term foreign exchange hedging program with maturity spread over 3 years to partially reduce the sensitivity of the group's return to future euro and US dollar currency movements. As a result, we have implemented EUR 2 billion and $1.2 billion of hedging since the period end. The weighted average hedge rate of this program is 1.10 for euros and 1.11 for US dollars. Sizing of the program was driven by an assessment of medium-term sterling outflows against potential foreign currency inflows and a consideration of program liquidity risk. We do not currently expect to extend this hedging program beyond these levels. Just to be clear, the majority of our net asset exposure to the euro will continue to move in line with the market exchange rate. We have now hedged more than half of today's US dollar exposure. The sensitivities going forward are therefore now lower than they would have been with a 1% movement in the euro, resulting in a GBP 83 million movement in our asset base, and a 1% movement in the US dollar, resulting in a movement of GBP 13 million. Finally, let's turn to the interim dividend. Here you can see our dividend policy. In line with that policy, we will pay our first FY 2023 dividend of 23.25 pence per share in early January, which is half the prior year's total dividend. Before we get into Q&A, I'll hand it back to Simon. Thanks, James. We're all looking at an interesting period ahead, and particularly so in the U.K., with rampant consumer inflation, increasing energy and interest costs, and a government set on raising more cash flow from both corporate and personal taxation. It's going to be difficult to avoid all these headwinds, but at 3i, we still have decent momentum moving into our second half. Our consistent focus on Northern Europe and North America now means that almost 90% of our investments by value are based outside the U.K. Over 80% of our portfolio by value is focused on the value, infrastructure, and healthcare sectors, which will either thrive or cope pretty well in today's difficult environment. Action in particular is thriving and will be lapping a very weak comparison month in December this year. We are expecting continued acceleration in sales and profits into the year-end. Let me close our remarks by reiterating what 3i is about. We're a long-term investor in mid-market private equity and infrastructure. We invest our own money to make top-tier long-term returns. There is no conflict in our mission. We are not in some mad race to invest ever larger amounts of capital while also trying to invest in a sensible way. We have a proven model which we've evolved and followed carefully since 2012. We have thorough processes, patience, and discipline. We don't pay excessive prices or use excessive leverage, and we certainly don't over-invest in highly priced vintages like a lot of people did in the last year or two. In fact, the private equity investments we made in 2020 and 2021 represent just 5% of our current investment portfolio. We do have real conviction in both the themes and the sectors we pursue, and in the companies and people we support and develop. We're building some exceptional long-term growth businesses, which will be the bedrock of our future returns. We have a highly talented team across our investment and professional services divisions. Once again, I would like to thank them for their good performance, their dedication, and their consistency in keeping to our simple mission to invest well for the long term. Thank you, and we'll now open it up for questions. Participants can submit questions in written format via the webcast page by clicking the Ask a Question button. If you are dialed into the call and would like to ask a question, please signal by pressing star one on your telephone keypad now. We will pause for a moment to assemble the queue. We will take our first question from Michael Sanderson of Barclays. Michael, please go ahead. Morning, Simon. Morning, James. A number of questions, if you don't mind me asking. A couple relating to Action and a couple elsewhere. Just on Action, working through. First of all, you've mentioned footfall, but have you got any additional color you'd like to share on basket size and how that's evolving? 'Cause that does seem to be moving around a bit recently. Secondly, is there any sort of update around the potential liquidity event that might need to or might occur early next year? And then thirdly, you seem to be talking very positively about Spain. Where are we on the stage of that? Potentially sort of wider rollout or not in that country. A couple of other areas, if that's all right, the first one, clearly difficult environments coming up, thinking about realizations over the next 12 months. How are you approaching that? Are there assets that maybe we're approaching that and you are going to have to reassess whether you need to reinvest and hold for longer? What's your thinking there? Finally, that slide around the multiples and the buffer is very interesting. Just always interested to know those assets you hold above peer group averages, what is it that's sort of characterizing, given you've been sort of adjusting multiples downwards in a number of assets, what characterizes those apart from Action, that means you feel comfortable being above the average for the peer group in that space? Thank you. Okay. Thanks, Mike. You've certainly got your fair share here. On footfall and basket size, what I would say is the trend is still similar overall in that footfall is much higher than last year and basket size is down on last year. The basket size is building back and it's not as down as it was earlier in the year. There is a smaller decrease in basket size as we get through into the autumn months. Essentially what we're seeing is the majority of the uplift in sales is definitely down to the more frequent trips or the larger number of people coming into the stores. There's a little bit of a drag from the basket size, but selective price increases that we've made, which have very much been below index inflation rates, particularly in essential products, have mitigated some of that so that the drag has been less than it otherwise would have been through those actions. That's really the flavor. The picture is very strong across every country. It's particularly strong in the essential categories. We feel people are coming into our stores before they go into supermarkets and other places because our goods are considerably cheaper given the lesser price rises we've been putting through our catalog compared to others. In terms of the liquidity event, we have an agreement with the LPs who came in as part of Project Pearl at the end of 2019, early 2020 to offer such a window because there is particularly one institution which has money timed out in 2023, so that will be made available. We expect it's going to not be very sizable because recent soundings of those LPs has indicated that this is probably the best investment they made over the last two or three years in most cases, and they're not looking to sell their stakes. So I think it may be quite a moderate event. That will occur later in 2023. In terms of Spain, for both Spain and Italy, the rollout will accelerate next year. I was in Italy with the team last week, and we're very excited about that the stores are trading extremely well and well ahead of our investment cases. We have over 20 stores open there now. That's looking a very promising market indeed, and the early trading in the smaller number of stores we have in Spain is equally positive. Just on realizations, I'll pick that up and then I'll ask James to do the multiples and buffer question. On realizations, we've made a very decent start this year. We still have a number of projects in train, and we remain confident that between realizations and dividends from the portfolio, we should surpass the GBP 1 billion target again. In terms of looking further out, I mean, that's really going to be down to market confidence, where the Fed tops out in terms of interest rates, and then how people generally feel from a confidence basis. My suspicion is that the herd will start to turn maybe at the end of Q1 into Q2, and we will see a better environment for both selling things and financing things from that point on. I think we could see a different environment in terms of confidence as we get into the meat of our next financial year, and we have an ambitious program for realizations in that year as well. Do you wanna do the multiples, James? Yeah. Thanks for the question, Mike. Just in terms... I mean, your question was in relation to the assets that were valued above the average of their peers. I think it's important to recognize, and I mentioned in my comments, that, you know, all of those assets continue to be valued within the range of the peer set. But obviously, I think for some of the assets in our portfolio, those peer sets aren't perfect. They may represent different types of companies that are in the same sector, but have very different business models. Our portfolio is small, as you know, on a, you know, if you compare us with others in the sector. We can spend a lot of time understanding each individual asset from a valuation perspective and considering the peers in some detail. I think we make an assessment of where it needs to sit within that group. Our companies often have positions as consolidators, and therefore we think the prospects are perhaps brighter than some of the other members of the set. It's really an individual assessment. I think the important thing to note is, you know, we look at the cross-cycle characteristics of the multiples in the sector, and they're within the range more generally. Great. Thank you. Thank you. Next in queue, we have a question from Philip Sheridan at Bank of America. Please proceed. Yeah, good morning, and thanks so much for the presentation. Just two things. First of all, the hedging strategy, I understand why you're doing it. It makes sense. Is this a sort of tactical thing or a structural thing? Are you expecting to be hedged over the long term? Secondly, what are your companies telling you about trading at the moment? I mean, I hear what Simon is saying about when he thinks confidence will return, but what are some of your more cyclical companies saying to you at the moment? Thanks very much. Do you wanna deal with the hedging? Yeah, just on the hedging, Philip. You know, we have noticed, you know, the balance sheet gets bigger, and obviously the 88% of euro and dollar exposure, you know, has during the course of this period produced a big foreign exchange element in our results. I think we took that, you know, together with a risk perspective and looking at sterling outflows and foreign currency in income in coming years, and we felt it was appropriate to put in place a layer of foreign exchange hedging. I think, you know, the plan is that continues to exist in the scale that we've put on the book at the moment. Obviously, as the NAV increases over time, you know, that will become a smaller portion. We've put it on the books. We think it's an appropriate balance between all of those measures of liquidity on the one side, risk on the other. It's not tactical in that sense, it's a bit more structural in the medium term. Let me pick up on the trading question, Philip. I mean, it's really quite a mixed picture. The strong sectors we've identified, value, private label, healthcare, infrastructure, the management teams are looking at really pretty strong numbers coming through, and are not seeing much of a deterioration in that regard, I would say. The more consumer discretionary companies, I suppose you can divide them between those who are just seeing input costs and lack of consumer demand hitting them pretty hard, and those who've taken measures, whether it be around the cost base or whether it be on selective price increases, who are now seeing a build back of margins, et cetera, which is helping them deal with the current environment. In the industrials and the B2B space, it is a bit of a mixed picture. There are some signs of slowing in some of the companies, but some of the other companies are still trading very strongly. It really is a mixed bag, and as the numbers show in our various tables, we have a pretty bifurcated group of companies at the moment, given the environment. Okay, thanks. That's very helpful. Thanks for your question, Philip. Thank you. Another question here from Luke Mason of BNP Paribas Exane. Luke, your line's open. Please go ahead. Yeah, good morning, guys. Just wanted to start on Action EBITDA margins. I mean, trading ahead of expectations at the moment. Just wondering, as we look out into 2023, have you got any more visibility on some of the points around store energy costs, wage inflation, et cetera? I mean, how you expect EBITDA margins to fare as we look into 2023 and beyond? Just a question on the outlook for deployment. I think earlier in the year you mentioned it might be a better time to deploy capital given the downturn in markets. Are you still seeing opportunities to do that? How do you think about buybacks in the context of 3i trading at a discount to NAV? How do you balance potentially buybacks versus deployment in new assets? Thank you. Okay. Thanks, Luke. Let me pick those up. Action, EBITDA margins. I mean, the caution that Action expressed in March this year about EBITDA margins this year relative to last year is not going to be borne out. We are seeing very strong sales leverage, having a very positive impact in margins, as well as some pretty good cost control coming through from the operational management at Action. We will see a pretty decent margin outcome this year unless something exceptional happens in the last six or seven weeks of the year. In terms of going forward, yes, we will see some energy impact. Our energy bill is not as big as quite a lot of other people have been talking about in their different cases. You know, we have about EUR 36 million annual cost for energy. Only about EUR 1 million of that is for gas. All the rest of it is for electricity. We generally hedge that. We will be dealing with some significant inflation around energy, but given that is the size of the cost, it's not going to have that major an impact on our story, EBITDA margins. I think staff cost is a more material element. As we said back in May, on the other side of things, we were starting to see COGS deflation coming through. That has continued to come through the year, and we're beginning to see a good deal of COGS deflation as warehouses are full of unsold stock, quite a few shops are full of unsold stock, and there's a lot of surplus capacity now in factories in the Far East and in other places. This is going to be a matter of juggling all these items. We do expect there will be pressure on our margin next year because of those input costs and because of the significant wages that are being put through. We do think it could be significantly mitigated by the COGS deflation that we're seeing. In terms of buy opportunities for deployment of capital in the market, we had a pretty busy summer, both around new investments and around bolt-ons. We are still very active in terms of bolt-ons and selectively on new opportunities. To be completely frank, the market has gone very quiet, particularly in Europe, with difficult financing markets. We would like to see more activity, but it's quite limited in terms of opportunity at the moment. As for buybacks, I mean, it's something we could consider if we felt there was something structural about the discount that we trade at, in due course. At the moment, we don't really have that view, and we got better uses for our cash than to buying our shares at the moment. Great. Thank you very much. Cheers. Next, we have a question from Charles Murphy at Sinders CM. Please go ahead. Good morning. It's a question for James on the hedging. Could you talk a little bit about how you've put the hedging on and your risk tolerances there? I'm asking the question not out of skepticism of your skills, but over the years, I've seen a lot of hedging programs, basically get taken off just at the point they're needed. Can you just expand on what you've done? Yeah. I think, you know, it's a structured program. It's over three years. It's very evenly spaced, you know, quarter by quarter. It's very plain vanilla in terms of forward contracts. You know, very carefully sort of constructed on the counterparties, and we think it'll serve us well, you know, to make sure that we understand, have more certainty around, you know, the translation of those foreign currency inflows, you know, over time. We think it's a risk mitigation sort of tactic. We think it's appropriate given the mix of the NAV that we see today and the size of the balance sheet. You know, reducing that sensitivity seemed like the right thing to do. Okay. Thank you. There are no further questions on the conference line. I will now hand over to Silvia Santoro, Group Investor Relations Director, to address the written questions submitted by the webcast page. We have a question from Bruce Hamilton at Morgan Stanley. How are you thinking about cash upstream from Action? Would you regear or less likely given more expensive debt costs? We have no immediate plans to regear at the moment. The debt markets are pretty acute at the moment, so I don't think it would be a sensible idea in terms of expense. I mean, at some point, we will look at that. Most of Action's funds are extended to 2025. We have a reasonable amount of time to do that. Distributions from Action are gonna be more about cash flow rather than about using facilities or anything. The cash flow is very strong at the moment. A couple of questions from Christopher Brown at JP Morgan. Why have you not hedged interest rate risk, why is that? There is a second question, which is, are you using forward earnings for the 9% of companies that have not grown earnings? Do you wanna take both of those? Yeah. Sorry, what was the second question again? For how many companies are we using forward earnings on? Yeah. Nine. Yeah. Are we using forward earnings for the 9% of companies that aren't growing earnings or not? Yeah. Just in terms of interest rates, I mean, the interest rate hedging question is quite a complex one. It, you know, some companies, when they take on their debt, they do it all at once. Some companies do a bit at a time. Generally, it's a bit like pound cost averaging. It's not necessarily appropriate to put all your hedging on at once. There are the added complexities of thinking about exits, thinking about penalties, thinking about companies which require, you know, acquisition financings over time. You know, generally across the portfolio, we've done a very solid job working with the individual portfolio companies and putting in place a structured program around hedging, which doesn't lock everybody in at one particular rate, because on one day, a rate looks attractive, and then three months later, it looks expensive. Now, obviously, it's been a bit of a one-way road recently, but we've continued to work with companies to put in place the right sort of consistent policies over time. Some of the timelines there are very long. I guess it, you know, while it would be, you know, perfect to have hedged everything given what's happened, I think, you know, the way policies are basically executed at a company, it's a balance of risk, and it's a balance of maturity and operational factors, which mean that something around the policies that we've executed will be right on average. I think, you know, we've got a very competent team that focuses on that with the portfolio. In terms of forward companies, yes, we do use forecast earnings in a number of cases. We have six companies where we're using forecast earnings rather than LTM at the end of September. We have another question from Charles Bendit at Redburn. For the eight companies whose valuation multiples were reduced in the half, was this mechanically driven by a de-rating in the public market concept or more of a subjective exercise that 3i undertakes based on revised outlook for that performance? In all eight of these examples, is a deterioration in the macro backdrop the primary driver of a worse outlook, or is there any company specific issues you're seeing apart from what is being driven from the macro? Yeah. I think it's important. Sorry for that, smiling. Yeah, it's important when you think about those eight companies, it has to be an individual assessment because as I mentioned when I answered the question on why some of the companies trade above the average of the peer set, we spend a lot of time through the Valuations Committee considering each individual situation in the peer group. You know, when you look at it will be a mix of performance and sector outturns, because some of the sector performance may be driven by bits of the sector which aren't relevant to our company. It is inevitably a mix. If it helps, on average, those multiples have come down somewhere between 1 and 3 turns of the 8 that we've taken down. You know, that's the answer I think that covers all the pieces. Looks like we have no further questions. We're done? Okay. Thank you everyone. Appreciate you listening in and appreciate the questions from everyone who took part. Have a good day. Thank you. Thank you.