3i Group Plc · LSE:III
3i — H1 FY2022 Earnings Presentation
44 slides from 3i's earnings presentation, Nov 11, 2021
Slide 1: Results for the six months to 30 September 2021
Results for the six months to 30 September 2021 11 November 2021
Slide 2: Business review
Business review Simon Borrows Chief Executive
Slide 3: A strong result exceeding our financial targets
A strong result exceeding our financial targets Six months to 30 September 2021 Group Private Equity Infrastructure Total return NAV per share Gross investment Gross investment on equity return return 24% 1,153p 27% 5% Gearing First dividend Proprietary capital Cash income per share invested1 8% 19.
Slide 4: Private Equity: strong performance and good momentum into the second half
Private Equity Strong performance and good momentum into the second half of the year Strong performance across the portfolio • 27% gross investment return • 96% of top 20 assets1 by value grew earnings in the period Growing portfolio through new and bolt-on investments • Two new investments in ten23
Slide 5: Strong earnings growth across the portfolio
Private Equity Strong earnings growth across the portfolio Portfolio earnings growth of top 20 PE investments1 ≥ 30% £7,721m 8 companies 20 - 29% £254m 1 company 10 - 19% £1,106m 3 companies 0 - 9% £1,067m <0% £463m 1 Includes top 20 Private Equity companies by value excluding Magnitude Software val
Slide 6: Our approach sets the foundations for value creation over the long term
Private Equity Our approach sets the foundations for value creation over the long term Careful portfolio construction and active management over the last decade underpin strong performance from current portfolio Long-term, patient capital Accelerate Structural growth through growth drives bolt-ons s
Slide 7: Continued support from long-term structural growth trends
Private Equity Continued support from long-term structural growth trends Long-term structural growth trends continue to drive performance despite near-term disruption Value-for-money Demographic change Covid-19 and post-vaccine bounce ‘Nesting’ Inflationary pressures Digitisation and online shift Su
Slide 8: Value creation: bolt-on acquisitions average down entry multiples
Private Equity Value creation: bolt-on acquisitions average down entry multiples FY2017 entry FY2018 entry FY2018 entry FY2019 entry FY2020 creation FY2021 entry Value £265m £453m £488m £295m £189m £89m Unrealised multiple money 1.7x 3.0x 2.8x 3.1x 2.5x 1.3x Average entry multiple = 12.1x (before bo
Slide 9: Performance drives portfolio value growth of £2.3bn
Private Equity Performance drives portfolio value growth of £2.3bn Largest value increases (>£20m)1 Largest value declines (>£20m)1 Value Value at Value Value at Key driver of value Key driver of value Portfolio company growth 30 Sep Portfolio company decline 30 Sep movement movement (excl FX) 2021
Slide 10: Action – P9 and P10 2021 update
Private Equity Action – P9 and P10 2021 update • Sales to the end of P9 of €4.8bn, 25% ahead of same period last year • LFL sales growth of 12.9%, vs (2.5)% last year • P9 LTM EBITDA of €765m, 32% ahead of same period last year • Sales to the end of P10 of €5.4bn and LTM EBITDA of €777m • 181 stores
Slide 11: Action – current trading and outlook
Private Equity Action – current trading and outlook • Business continues to trade well. All stores are open and trading with no restrictions • Global supply chain disruption and inflationary pressures managed proactively to minimise impact on the business • Roll-out in Italy accelerated following su
Slide 12: Good levels of investment activity in a competitive market
Private Equity Good levels of investment activity in a competitive market New and bolt-on investments in the period + + Cardea Catheter Innovations + New and bolt-on investments since the period end + + + 12
Slide 13: New investment: MAIT
Private Equity New investment: MAIT • Provider of digital solutions to over 5,300 SME customers in DACH region • €120m sales, 550 employees • Market expected to grow by 8% annually in coming years driven by IoT and Industry 4.0 • £56m 3i investment Attractive growth opportunity in a fragmented marke
Slide 14: New and bolt-on investment: ten23 health and Swissfillon
Private Equity New and bolt-on investment: ten23 health and Swissfillon • Established ten23 health as a pure-play biologics drug product CDMO • First bolt-on acquisition of Swissfillon, which provides sterile fill & finish services, announced in October • Total 3i funding of £69m to date ‘Build-and-
Slide 15: New investment: Dutch Bakery
Private Equity New investment: Dutch Bakery • Industrial bakery group specialised in home bake-off bread and snack products • Growth market, driven by premiumisation, growth in e-commerce and increased time spent at home • £46m 3i investment Opportunity to consolidate highly fragmented market Nether
Slide 16: Bolt-on investment: acquisition of Outdoor Toys by GartenHaus
Private Equity Bolt-on investment: acquisition of Outdoor Toys by GartenHaus • Among largest online D2C retailers of garden toys in UK • Vertically integrated value chain • 70% growth p.a. since 2019 • Expands portfolio and geographic reach for GartenHaus • £47m 3i investment Second acquisition for
Slide 17: Realisation: Magnitude Software
Private Equity Realisation: Magnitude Software • Sale to insightsoftware completed in November • Proceeds of £345m, 109% uplift to March 2021 value • Sterling MM of 2.5x • IRR of 44% Outstanding return after two and a half years of ownership US Business and technology services 17
Slide 18: Infrastructure: good performance and cash contribution to the Group
Infrastructure Good performance and cash contribution to the Group Good performance across portfolios • 5% gross investment return • Good contribution from 3iN, with 3% share price appreciation and £13m of dividend income • US portfolio performing in line with expectations 3iN continues to perform w
Slide 19: Scandlines
Scandlines Performed well despite significant disruption to leisure traffic from Covid-19 • Gross investment return of £30m, or 7% of opening value • Freight volumes ahead of 2019 levels • Leisure travel levels have improved through the summer and now back at 2019 levels • Cash generative; well posi
Slide 20: Good momentum into the second half of the year and beyond
Good momentum into the second half of the year and beyond • Strong return is the result of a decade of careful portfolio construction and active management • High quality portfolio, strategically positioned to benefit from secular growth trends • Resilient platform, prudent financial management and
Slide 21: Financial review
Financial review Julia Wilson Group Finance Director 21
Slide 22: Total return on equity of 24% in the first half of the year
Total return on equity of 24% in the first half of the year NAV per share (pence) 1200 235 (21) 10 1 (21) 1,153 1100 1000 947 2 900 800 700 1 2 31-Mar-21 Realised Value growth Net carry FX Other Dividends 30-Sep-21 profits payable NAV per share up 22% to 1,153 pence 1 FX net of derivatives. 2 Other
Slide 23: Overall portfolio: strong value growth from high quality portfolio
Overall portfolio Strong value growth from high quality portfolio Value movement by basis (£ million) 1,491 Action 1 402 PE Performance increases 1 (48) PE Performance decreases 162 Multiples 166 Uplift to imminent sale 65 Quoted 30 Scandlines 9 DCF 2 Other £2.3bn value increase driven by performanc
Slide 24: Action valuation
Private Equity Action valuation Enterprise value (post discount) €15.63bn • LTM EBITDA to P9 2021 of €765m €12.62bn • LTM run-rate EBITDA earnings of €845m1 €11.26bn €10.25bn • 18.5x (Mar-21: 18.5x) multiple post discount Mar-20 Sep-20 Mar-21 Sep-21 Valuation at 30 September 2021 £6,100m 1 Including
Slide 25: Very strong performance and good level of transaction activity
Private Equity Very strong performance and good level of transaction activity Six months to 30 September £ million 2021 2020 Gross investment return 2,373 1,245 % of opening portfolio 27% 19% Realisations 118 82 Cash investment 58 231 Six months to 30 September £ million 2021 2020 New investment 63
Slide 26: Good performance from the Infrastructure portfolio
Infrastructure Good performance from the Infrastructure portfolio Six months to 30 September £ million 2021 2020 3iN 20 113 Smarte Carte 2 (5) Regional Rail 6 12 Other funds 2 7 Portfolio revaluation 30 127 Gross investment return 5% 12% Realisation proceeds 6 - Cash income 39 33 26
Slide 27: Scandlines performing well
Scandlines Scandlines performing well Six months to 30 September £ million 2021 2020 Gross investment return 30 15 % of opening portfolio 7% 3% 30 September 31 March £ million 2021 2021 Valuation 469 435 27
Slide 28: Operating cash position
Operating cash position Six months to 30 September £ million 2021 2020 Private Equity 14 50 Infrastructure 39 33 Scandlines − − Cash income 53 83 Operating cash expenses1 (72) (69) Operating cash (loss) / profit (19) 14 Temporary operating loss position expected to turn positive by end of financial
Slide 29: Simple balance sheet and conservative capital management
Simple balance sheet and conservative capital management £12,784m • High quality, strong portfolio £44m • Gross cash held centrally with no material restrictions £975m • Gross debt made up of bonds expiring in 2023, 2032 and 2040 £500m • Undrawn RCF as at 30 September 2021 £544m liquidity at 30 Sept
Slide 30: First FY2022 dividend of 19.25 pence per share
First FY2022 dividend of 19.25 pence per share • Our dividend policy aims to maintain or grow the dividend year-on-year subject to: – maintaining our conservative balance sheet strategy – careful consideration of the outlook for investments and realisations and market conditions 30
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Slide 32: Additional information
Additional information
Slide 33: Our business model
Our business model Delivering sustainable returns over the cycle What we offer Value creation Who benefits ➔ Conservative balance sheet management ➔ Tight grip on operating costs Expertise ➔ Operating cash profit Access to capital BLN 1 Shareholders Invest Active partnership Portfolio Reputation com
Slide 34: Q2 NAV increased from 1,063 pence to 1,153 pence
Q2 NAV increased from 1,063 pence to 1,153 pence NAV per share (pence) 1200 116 (11) 5 (21) 1,153 1150 1100 1,063 1 1050 1000 950 900 850 800 30-Jun-21 Realised profit Value growth Net carry payable Fx1 Dividends 30-Sep-21 1. FX net of derivatives. 34
Slide 35: 3i Group large investments
3i Group 20 large investments Investment Business description Valuation Valuation Sep 21 (£m) Mar 21 (£m) Action General merchandise discount retailer 6,100 4,566 3i Infrastructure plc Quoted investment company, investing in infrastructure 817 797 Cirtec Medical Outsourced medical device manufacturi
Slide 36: Group investment portfolio
Group investment portfolio Portfolio value at 30 September 2021 (£m) Portfolio value at 31 March 2021 (£m) 694 612 383 362 469 435 817 797 863 4,566 6,100 745 2,505 2,062 953 829 Action 2013-2016 Private Equity Action 2013-2016 Private Equity 2016-2019 Private Equity 2019-2022 Private Equity 2016-20
Slide 37: Private Equity portfolio by value
Private Equity portfolio by value By office location (%) By sector (%) 1% 13% 11% 8% 8% 9% 8% 65% 55% 5% 17% Netherlands France Action (Consumer) Consumer Germany UK Industrials B&TS* US Others Healthcare Portfolio of 34 investments (31 March 2021: 33) * Business and Technology Services. 37
Slide 38: Action performing strongly compared to peers
Private Equity Action performing strongly compared to peers EV/LTM EBITDA 45x 40x 35x 30x 25x Costco, 23.0x 20x Five Below, 20.2x Dollarama Inc., 18.3x Pepco, 17.0x Avg, 16.1x 15x Avg. Ex. Pepco, 16.0x Dollar General, 13.5x Grocery Outlet, 12.8x Ollie’s, 12.3x B&M, 11.7x 10x 5x Sep-20 Oct-20 Nov-20
Slide 39: Carried interest payable a result of strong value growth in the period
Private Equity Carried interest payable a result of strong value growth in the period Six months to 30 September 2021 2020 £ million Income statement Carried interest receivable 2 (2) Carried interest payable (194) (61) Net total expense (192) (63) 30 September 31 March £ million 2021 2021 Balance s
Slide 40: Top assets continue to show good earnings growth
Private Equity Top 20 assets continue to show good earnings growth 3i carrying value at 30 September 2021 (£ million) Number of 8 companies: 7,721 4 4 3 1 463 1,106 254 1,067 <0% 0-9% 10-19% 20-29% >30% Last 12 months’ adjusted earnings growth1 1 Includes top 20 Private Equity companies by value exc
Slide 41: Portfolio leverage
Private Equity Portfolio leverage Ratio of total net debt to earnings1 by 3i carrying value at 30 September 2021 (£ million) 6,100 22 1,148 144 871 733 802 <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x >6x 3.3x leverage across the whole portfolio 1 This represents 88% of the Private Equity portfolio by val
Slide 42: Net asset exposure by currency
Net asset exposure by currency 2% Net assets Change Impact Currency Fx rate £m YTD £m 12% 16% Sterling n/a 1,269 n/a - Euro1 1.1633 7,813 (0.9)% 60 US dollar 1.3481 1,827 (2.3)% 36 Danish krone 8.6500 240 (0.9)% 2 70% Other n/a 24 n/a - Total 11,173 98 Sterling/non-revaluing Euro US dollar Danish kr
Slide 43: Infrastructure: AUM of £5.1 billion at September 2021
Infrastructure AUM of £5.1 billion at 30 September 2021 AUM by fund or strategy 6% 7% 3i Infrastructure plc 9% 3i Managed Infrastructure Acquisitions LP 3i European Operational Projects Fund 5% 54% BIIF 3i Managed accounts 19% US Infrastructure AUM increased by £107m in the first half 43
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