3i Group Plc · LSE:III
3i — H1 2018 Earnings Presentation
38 slides from 3i's earnings presentation, Nov 16, 2017
Slide 1: Results for the six months to 30 September 2017
Results for the six months to 30 September 2017 16 November 2017
Slide 2: Business review
Business review Simon Borrows Chief Executive
Slide 3: Our strategy is clear and consistent
Our strategy is clear and consistent Grow investment portfolio earnings Realise investments with good cash-to-cash returns Maintain an operating cash profit Use our strong balance sheet Increase shareholder distributions 3
Slide 4: Our post-restructuring track record continues to improve
Our post-restructuring track record continues to improve Six months to Year to Year to Year to Year to Year to Year to 30 Sep 20171 31 Mar 20171 31 Mar 2016 31 Mar 2015 31 Mar 2014 31 Mar 2013 31 Mar 2012 Total return £655m £1,592m £824m £659m £478m £373m £(656)m % over opening net asset value 11% 3
Slide 5: A good start to the year
A good start to the year Six months to 30 September 2017 Group Private Equity Infrastructure Total return Interim dividend Proprietary capital Assets under on equity per share invested management 11% 8p £506m £3.6bn NAV per share Net debt Realisation Operating proceeds cash income 652p £48m £350m £3
Slide 6: Private Equity: good portfolio performance and strong investment momentum
Private Equity Good portfolio performance and strong investment momentum Good portfolio performance • £715m gross investment return, 15% of opening book driving value growth value • 91% of top 20 assets by value in the portfolio grew earnings in the period Strong momentum in • £506m proprietary capi
Slide 7: Good portfolio performance drove portfolio value growth
Private Equity Good portfolio performance drove portfolio value growth of £517m in H12018 Largest value increases (>£10m) Largest value declines (>£10m) Value Value at Value Value at Portfolio Key driver of value Portfolio Key driver of growth 30 Sep decline 30 Sep company1 movement company value mo
Slide 8: Action continues to perform strongly
Private Equity Action continues to perform strongly • Continued sector-leading levels of growth • Investing to build a €10bn turnover business – fourth and fifth distribution centres to open this year – targeting 230 new stores in 2017 • 3i stake now valued at over £2bn 8
Slide 9: Focused and disciplined approach to origination and new investment
Private Equity Focused and disciplined approach to origination and new investment Clear focus Themes/megatrends • Consumer, Industrial, Business Services • Develop views on long-term trends that support earnings • Northern Europe, North growth America Core objective: Generate >2x cost from investmen
Slide 10: Our approach is producing good results
Private Equity Our approach is producing good results Proprietary capital invested in each vintage £100m £265m £328m £352m £471m £514m c.£2bn invested since FY2013 Cirtec Q/Degania FY2013-FY2016 MM of 1.9x1 Ponroy Santé Formel D Christ Audley Scand- Travel Lampen- lines Schlemmer welt Q Holding Euro
Slide 11: New investment: Cirtec
Private Equity New investment: Cirtec (£103m proprietary capital invested) Leading provider of outsourced medical device manufacturing United States, Industrial Outsourced manufacturing, growth in minimally invasive therapeutic technologies, favourable demographics CEO was part of the 3i network sin
Slide 12: New investment: Lampenwelt
Private Equity New investment: Lampenwelt (£104m proprietary capital invested) Largest specialty online retailer of lighting products in Europe Germany, Consumer Disruptive retail, lifestyle Jochen Wilms from BLN introduced opportunity, involved in diligence process and now chairman of the board Ent
Slide 13: Growing our portfolio through bolt-on acquisitions
Private Equity Growing our portfolio through bolt-on acquisitions + + + • Straesser is a leading • ERSA Group is a designer • Acquisition of pump player in road testing and and distributor of premium manufacturer Javac vehicle test driving services pharmaceutical food broadens product offering • Sel
Slide 14: Continuing to realise legacy investments at good uplifts
Private Equity Continuing to realise legacy investments at good uplifts Realised Profit/(loss) Money multiple Investment proceeds in the period over cost1 IRR H12018 realisations Full realisations Mémora £119m £32m 1.4x 4% £350m total proceeds MKM £70m £2m 5.9x 19% Óticas Carol £27m £9m 1.9x 15% 2.7
Slide 15: A portfolio weighted towards our better assets
Private Equity A portfolio weighted towards our better assets The buckets Selected examples % of value H12018 FY2017 1 Longer-term hold; value creation Action, Scandlines, Audley, ATESTEO c.68% c.64% 2 Strong performers; performing in line with investment case WP, Hans Anders, BoConcept c.19% c.22%
Slide 16: Infrastructure: good performance and progress in fundraising
Infrastructure Good performance and progress in fundraising activity Contributing to capital • £32m gross investment return, or 5% of and income returns opening book value • £34m operating cash income 3iN continues to perform • Total return of 7% and TSR of 5% in H12018 strongly • Embedding new inve
Slide 17: 3iN: robust returns
Infrastructure 3iN: robust returns 3iN relative share price performance since 1 January 2016 (rebased to 3iN, pence per share) • NAV total return of 7% 220 in H12018 June 2016: Open Offer 210 and Placing at 165p • TSR of 5% in H12018 200 • TSR of 22% on 3i’s £131m investment in 190 June 2016 placing
Slide 18: Our first infrastructure investment in the US: Smarte Carte
Infrastructure Our first infrastructure investment in the US: Smarte Carte • Leading concessionaire of essential infrastructure equipment • 140,000 owned units consisting primarily of airport baggage carts and self-storage lockers • Operates at over 2,500 locations in seven countries • EV of $385m •
Slide 19: Financial review
Financial review Julia Wilson Group Finance Director
Slide 20: NAV up 8% to 652 pence driven by strong portfolio performance
NAV up 8% to 652 pence driven by strong portfolio performance NAV per share (pence) 680 6 (1) (18) 56 655 652 630 5 605 604 580 31 Mar 17 Realised profits Value growth FX Net carry payable Dividends 30 Sep 17 20
Slide 21: Private Equity: strong performance
Private Equity Strong performance Six months to 30 September £ million 2017 2016 Gross investment return 715 989 % of opening portfolio 15% 26% Realised profit 53 52 Uplift over book value1 21% 9% Money multiple 2.7x 2.3x Realisations 350 654 Cash Investment 506 291 Portfolio value 5,692 4,351 Portf
Slide 22: More focus on origination results in higher investment levels
Private Equity More focus on origination results in higher investment levels £ million 6,500 1 135 (297) 6,000 517 5,692 5,500 506 5,000 4,831 4,500 4,000 3,500 3,000 Portfolio value as at Cash investment Value movement FX / Other Divestment value Portfolio value as at 1 April 2017 30 September 2017
Slide 23: Good growth in the top assets
Private Equity Good growth in the top 20 assets 3i carrying value at 30 September 2017 (£ million) 3 7 Number of 2,336 companies: 1,483 4 3 3 455 485 529 < 0% 0 - 9% 10 -19% 20 - 29% > 30% Last 12 months’ earnings growth1 1 Earnings growth in the top 20 investments, 15 using EBITDA, 4 using EBITA an
Slide 24: £517 million value growth
Private Equity £517 million value growth Value movement by basis (£ million) September March Use of earnings 2017 2017 1 Performance 283 % valued on an 81% 78% earnings basis Forecast indicates 3 1 Multiples 59 negative outlook (no.) September March Multiples2 1 2017 2017 Other 145 Action 16.0x 16.0
Slide 25: Infrastructure: steady gross investment return
Infrastructure Steady gross investment return Six months to 30 September £ million 2017 2016 Gross investment return 32 90 % of opening portfolio 5% 17% Fee income 21 18 Cash income 34 28 Cash investment 43 131 Portfolio value 765 722 Assets under management 3,615 2,948 25
Slide 26: Operating cash profit
Operating cash profit £ million FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 H1 2018 Total cash income Operating expenses Operating cash profit/(loss) Infrastructure initiatives will improve measure in due course 26
Slide 27: Strong balance sheet supported step up in investment
Strong balance sheet supported step up in investment 30 September 31 March £ million 2017 2017 Investments (572) (689) Realisations 374 1,275 Net (investment)/divestment (198) 586 Net (debt)/cash (48) 419 Net assets 6,320 5,836 Liquidity 877 1,323 27
Slide 28: Dividend policy
8 pence interim dividend confirmed today • Policy to pay 8.0p interim dividend and 8.0p year end dividend plus additional final year dividend, provided: – gearing <20% – gross debt on target to be <£1bn • Final year dividend dependent on cash realisations, investment pipeline and balance sheet a
Slide 29: Continuing to improve capital efficiency and allocation
Continuing to improve capital efficiency and allocation Average over FY10-FY12 Year to 30 September 2017 £1.0bn £1.1bn 12% 27% 7% 29% 41% 24% 3% 29% 28% Realisations, Operating Debt Shareholder Funds to Realisations, Operating Net carried Debt Shareholder Funds to fees and costs, net repayment distr
Slide 30: Additional information
Additional information
Slide 31: Q2 NAV up from 628 pence to 652 pence
Q2 NAV up from 628 pence to 652 pence NAV per share (pence) 680 (1) 40 1 (2) (18) 655 652 4 630 628 605 580 30 Jun 17 Realised profits Value growth Other (including fee Net carry payable FX Dividends 30 Sep 17 income, costs, interest etc) 31
Slide 32: Net asset exposure by currency
Net asset exposure by currency 2% Change 2% Currency Net assets YTD Impact 12% 21% Sterling £1,326m n/a n/a Euro £3,968m (3.2)% 105 US dollar £778m 6.6% (51) Danish krone £145m (3.1)% 4 Other1 £103m n/a (6) 63% Total £6,320m 52 Sterling/non-revaluing Euro US dollar Danish krone Other 1% movement in
Slide 33: Private Equity: large investments
Private Equity 20 large investments Investment 1 Business description Valuation Sep 17 Valuation Mar 17 £m £m Action Non-food discount retailer 2,009 1,708 Q Holding Manufacturer of engineered precision elastomeric components 243 222 WP Supplier of plastic packaging solutions 218 200 Basic-Fit Disco
Slide 34: Private Equity leverage
Private Equity leverage Ratio of total net debt to EBITDA by 3i carrying value at 30 September 2017 (£ million) 2,680 1,266 573 391 94 < 1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x Net debt / EBITDA segmentation Note: The above table includes assets not valued on an EBITDA basis. This represents 88% of the Priva
Slide 35: Private Equity portfolio
Private Equity portfolio By region (%) By sector (%) By vintage (%) 3 4 7 10 11 16 8 7 9 34 56 9 36 78 13 Northern Europe Consumer Pre 2012 2012 North America Industrial 2014 2015 UK Business and Technology 2016 2017 Other Other 2018 Portfolio of 39 investments, down from 40 at 31 March 2017 Note: A
Slide 36: Assets under management: Private Equity
Assets under management Private Equity Remaining Gross Fee 3i % invested money income 3i commitment1 at multiple2 received Close commitment/ at September September at September in the date Fund size share 2017 2017 2017 AUM3 period 3i Growth Mar 10 €1,192m €800m €346m 53% 2.0x £43m – Capital Fund 3i
Slide 37: Assets under management: Infrastructure
Assets under management Infrastructure Remaining 3i % Gross money 3i commitment invested at multiple1 Fee income Close commitment/ at September September at September received date Fund size share 2017 2017 2017 AUM2 in the period 3iN Mar 07 n/a £670m n/a n/a n/a £1,995m £13m 3i Managed Infrastructu
Slide 38: Debt Management
Debt Management Residual investments Six months to 30 September £ million 20171 2016 Unrealised profits on revaluation – 12 Cash income 7 8 Foreign exchange on investments (8) 10 Gross investment return / total return (1) 30 30 September 31 March £ million 2017 2017 Residual CLO investments 46 50 Gl