3i Group Plc · LSE:III
3i — Investor Day (September 2013)
58 slides from 3i's investor day presentation, Sep 24, 2013
Slide 1: Private Equity Capital Markets Seminar
Private Equity Capital Markets Seminar 24 September 2013
Slide 2: Our strategic goal: a leading international manager of third-party and proprietary capital
24/09/2013 Private Equity Capital Markets Seminar Simon Borrows, Chief Executive, 3i Group plc 24 September 2013 Our strategic goal: a leading international manager of third-party and proprietary capital Private Equity Infrastructure Debt Management Illustrative capital allocation Third-party capita
Slide 3: Key phases of organisational change and strategic delivery
24/09/2013 Key phases of organisational change and strategic delivery FY2013 FY2014 - 15 FY2016+ Transition and Restructuring Strategic goal delivery We have delivered all of our FY2013 strategic priorities We are already making strong progress towards the next phase of our strategic plan: “Transiti
Slide 4: Our evolving business model
24/09/2013 Our evolving business model 3i Group Proprietary capital investing Fund management activities Investing own-balance sheet Managing third-party and proprietary capital Portfolio income Fee income Realised and unrealised Carried interest and capital gains performance fees Funding costs Oper
Slide 5: Tracking our progress and performance
24/09/2013 Tracking our progress and performance How does Private Equity contribute? Proprietary capital investing Fund management activities Grow Private Equity portfolio Validate track record of recent earnings vintages to prepare ground for Action new general PE fund Element Invest alongside co-i
Slide 6: The 3i Value Build
24/09/2013 The 3i Value Build An attractive, multi-year value proposition Grow Private Equity investment Grow NAV portfolio earnings Realise investments at good uplifts to Optimise value of existing book value and strong cash-on-cash portfolio and enhance P/NAV multiples rating Generate a sustainabl
Slide 7: Element is a leading materials testing business
24/09/2013 Element is a leading materials testing business Network of accredited laboratories across Europe and the US Over 1,400 employees 3i invested in December 2010 to carve out SMT from the Stork Group – EV$210m Rebranded as Element Materials Technology in December 2011 11 Why did we invest in
Slide 8: Deep sector understanding
24/09/2013 Deep sector understanding Sector deep dive undertaken in 2005 as part of Business Services strategy Appointed Ad Verkuyten, former CEO of RTD, as a special adviser in 2006 Today, recognised as the pre-eminent PE investor in the sector: - Carso - €9.7m (2005) – exit 3.4x MM to FSI / Eurome
Slide 9: Why did we invest in Element?
24/09/2013 Why did we invest in Element? Sector we understood, with a range of attractive growth drivers Business well positioned in its testing vertical Exposed to extremely attractive end-markets Process which played to 3i’s strengths 15 Well positioned in its testing vertical Typical TIC sub-segm
Slide 10: Exposed to extremely attractive end-markets
24/09/2013 Why did we invest in Element? Sector we understood, with a range of attractive growth drivers Business well positioned in its testing verticals Exposed to extremely attractive end-markets Process which played to 3i’s strengths 17 Exposed to extremely attractive end-markets Diligence at th
Slide 11: Process which played to 3i's strengths
24/09/2013 Why did we invest in Element? Sector we understood, with a range of attractive growth drivers Business well positioned in its testing verticals Exposed to extremely attractive end-markets Process which played to 3i’s strengths 19 Process which played to 3i’s strengths Early access to mana
Slide 12: Clear value levers
24/09/2013 Process which played to 3i’s strengths Early access to management and the business Primary buyout Business Leaders Network expertise Ability to move quickly 21 Clear value levers 1. Creating a standalone business Planning the carve-out Rebranding and integration 2. Strategy 3. Commercial
Slide 13: Unique Business Leaders Network expertise
24/09/2013 Process which played to 3i’s strengths Early access to management and the business Primary buyout Business Leaders Network expertise Ability to move quickly 23 Unique Business Leaders Network expertise Peter Regan Ad Verkuyten Former Chief Executive and then Former CEO of RTD-Group Chairm
Slide 14: Element Materials Technology: Conclusion
24/09/2013 Process which played to 3i’s strengths Early access to management and the business Primary buyout Business Leaders Network expertise Ability to move quickly 25 Element Materials Technology Conclusion 13
Slide 15: Charles Noall, CEO Element
24/09/2013 Charles Noall CEO Element Professional experience 2007 - CEO Stork Materials Technology (now Element) 2003 - 2007 Joined Stork Materials Technology as COO responsible for US operations Pre 2003 Several roles with technical communication and software companies including the global market l
Slide 16: Introduction to Element
24/09/2013 Introduction to Element Charles Noall President and CEO September 24, 2013 A Recognised Leader In Our Field 1
Slide 17: Three Distinct Capabilities
24/09/2013 Three Distinct Capabilities Materials Testing Product Qualification Testing Failure Analysis A History Founded in Technology 1827 1973 2010 2011 2
Slide 18: What We Are
24/09/2013 What We Are 40 1,400 36,000 3,000,000 >$800K Locations Engaged Experts Customers Tests Per Year Per Day A Clearly Defined Strategic Growth Plan 3
Slide 19: A Clearly Defined Strategic Growth Plan
24/09/2013 A Clearly Defined Strategic Growth Plan Focus Growth Execution How We Do It Three Revenue Leadership Services Growth Team Four EBITDA Technical Sectors Growth Capability 4
Slide 20: Our Three Core Services
24/09/2013 Our Three Core Services Materials Testing Late R&D (Advanced Materials, Water Jet) Product Qualification Testing Prototype (Bird Strike) Failure Analysis Production Advanced Materials Testing Client Partner New Testing Technologies Equipment 5
Slide 21: Ceramic Matrix Composites in Jet Engines
24/09/2013 Ceramic Matrix Composites in Jet Engines Ceramic Matrix Composites Tests 6
Slide 22: Sample Preparation Using Water Jet Technology for Firth Rixson
24/09/2013 Sample Preparation Using Water Jet Technology for Firth Rixson Failure Analysis Burst Composite Pipe Split “O” Ring From Degradation of thermoplastics after Rapid Depressurisation exposures to oil field fluids Failed Anchor Shackle Close up of Failed Anchor Shackle Component 7
Slide 23: Sectors and Applications Where We Deliver Quality
24/09/2013 Sectors and Applications Where We Deliver Quality Advanced Industrial Products Aerospace Oil & Power Transportation & Defence Gas Generation Quality & Compliance Aerospace & Defense Clients 8
Slide 24: Oil & Gas Clients; Transportation & Power Generation Clients
24/09/2013 Oil & Gas Clients Transportation & Power Generation Clients 9
Slide 25: A Robust Strategic Growth Plan
24/09/2013 A Robust Strategic Growth Plan Geography Sector Activity A Robust Strategic Growth Plan Aerospace & Materials USA Defense Testing 10
Slide 26: A Robust Strategic Growth Plan
24/09/2013 A Robust Strategic Growth Plan Materials Europe Oil & Gas Testing A Robust Strategic Growth Plan Product USA Transport Qualification Testing 11
Slide 27: Core Markets Driving Growth
24/09/2013 Core Markets Driving Growth O&G 10-11% Good A&D Market 6.9% Strong platform for sustainable growth Growth Other 5% New Market Entry Opportunities 12
Slide 28: Acquisitive Growth Opportunities
24/09/2013 Acquisitive Growth Opportunities DTL Mar-Test MERL Sherry Delsen 2011 2012 2012 2013 2013 World Class Facilities and Capabilities Driving Growth Amsterdam Amsterdam Huntington Relocation& relocation Beach, CA Jupiter Beach Jupiter Expansion & Expansion expansion expansion Upgrade Expansio
Slide 29: Execution – Strong Management Team
24/09/2013 Execution – Strong Management Team Execution – Investment In People People Solving our Engaged Experts client’s technical and Trusted commercial Advisor challenges Customer Dialogue 14
Slide 30: Execution - Building An Integrated Platform Business
24/09/2013 Execution - Building An Integrated Platform Business Focus Growth Execution Strong Financial Performance 15
Slide 31: Better than Forecast Revenue Growth
24/09/2013 Better than Forecast Revenue Growth 222 29% 180 169 143 161 $ Millions 133 120 104 2010 2011 2012 2013 2014 Actual Investment case EBITDA Growth Out Performing Expectations 48 39% 37 36 28 $ Millions 26 22 18 2010 2011 2012 2013 Actual Investment case 16
Slide 32: Stable Platform Business With a Bright Future
24/09/2013 Stable Platform Business With a Bright Future Building A Stable Business Platform Safety One Element Brand Rigorous Network & Integration Systems Go To Market Common Consistent KPI’s Processes 17
Slide 33: 24/09/2013
24/09/2013 18
Slide 34: Action
-11% Action Menno Antal Co-head, 3i Private Equity Action is a leading high-growth discount retailer Non-food discount retailer in the Netherlands and Belgium Growing presence in Germany and France 370 stores 11,000 people €1bn revenue 2 1
Slide 35: Consumer sector origination strategy
-11% Consumer sector origination strategy Focused on key themes which drive growth across all consumer sub-sectors Key trends Impact across all subsectors Consumer products Polarisation Food & Beverage Multi-channel Leisure Retail Demographics “Feel good” Lifestyle 3 Consumer deep-dive: discount ret
Slide 36: In 2010, Action was demonstrating strong growth
-11% In 2010, Action was demonstrating strong growth 250 22 new 200 stores p.a. 150 100 50 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Netherlands Belgium Germany 5 Origination using Benelux network Local origination Unique 6 months exclusive off market Sam
Slide 37: Complex due diligence process
-11% Complex due diligence process Raw data No business plan Business NOT prepared for sale Banks unfamiliar Founders exit Closed in September 2011 7 Power of 3i’s network Jos Simons Peter Linzbach Marc van Gelder Ronald van der Mark Ex CEO BiM Chairman AMOR CEO MEDIQ Ex Maxeda Ex Aldi Ex Metro Ex A
Slide 38: Strong investment case has been confirmed
-11% Strong investment case has been confirmed Winning retail format with international potential Strong LFL growth (> 8%) Entered Germany & France Market leader in growing non-food discount retail market 4x the size of #2 in Benelux Non-food discount continues to grow Significant store rollout pote
Slide 39: 3i has been actively involved in value creation
-11% 3i has been actively involved in value creation Best-in-class governance Board of industry experts established Market-leading management team in place Introduced regular financial reporting Chairman appointed September 2013 3i secondee joined the business to accelerate Store roll-out Internatio
Slide 40: Ronald van der Mark, CEO Action
-11% Ronald van der Mark CEO Action Professional experience 2004 - 2011 Maxeda, CFO, COO (KKR led buyout) 1996 - 2004 Cementbout Handel & Industrie, CFO (CVC buyout) 1984 - 1996 Various accounting / controlling positions 13 Action Fast growing market leader in non-food discount retail Ronald van der
Slide 41: Action is different
-11% Action is different The Action format Extraordinary shopping experience Recognized by our customers Simple and differentiated business model Strong continuous growth track record 16 8
Slide 42: Best overall price perception
-11% Best overall price perception Top 10 “low price” retailers (2012: Proposition Strength Index score (0-100)) Source: OC&C Proposition Strength Index 2012, OC&C analysis 17 Best price perception per category Category Price perception Price difference Number 1 Number 2 Number 3 Number 4 Number 5 w
Slide 43: No concessions on quality
-11% No concessions on quality Action HDMI cable tested best in class by consumer program Radar Independent product quality test of HDMI cable • Action EUR 2.99 • ICIDU EUR 14.99 • Hama EUR 39.99 • Profigold EUR 69.99 • Monster EUR 139.99 1 Source: OC&C BDD Commercial Due Diligence 2011 19 Pleasant
Slide 44: Loyal customer base
-11% Loyal customer base Action is the favourite retailer in NL based on July 2013 survey from the largest NL consumer organization Action 29% Hema 17% Blokker 16% de Bijenkorf 12% V&D 11% marskramer 6% Xenos 6% kijkshop.nl 3% Source: Comsumentengids Magazine July-August 2013 21 Strong word-of-mouth
Slide 45: Simple and differentiated business model
-11% Simple and differentiated business model Strong and flexible sourcing model Centralised and efficient supply chain Low cost real estate (B/C locations) with high availability of new locations Action format works in various countries 23 Strong and flexible sourcing model Supplier1 Supplier2 Supp
Slide 46: Centralized and efficient distribution
-11% Centralized and efficient distribution One distribution center in Zwaagdijk (DC-A) of 100,000 m2 A second distribution center (DC-B) will open beginning of 2014 to support further growth 25 DC and trucks 26 13
Slide 47: High availability of low cost real estate
-11% High availability of low cost real estate Flexibility on store locations (B and C locations): - abundance of available locations (“white spots”) Strong position: - limited competition from other retailers - highly attractive tenant Dedicated Real Estate team (HQ) supported by local RE managers
Slide 48: Strong growth since first store
-11% Strong growth since first store 400 350 300 250 200 150 100 50 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD 2013 The Netherlands Belgium Germany France 29 Strong financial track record 1.000 900 800 700 600 500 11,6% 12,0% 11,3% 9,6%
Slide 49: Enormous growth opportunities
-11% Enormous growth opportunities Strategy 1. Building on the success of Action 2. Fast but controlled growth in the Benelux and other countries 32 16
Slide 50: Improve current business
-11% Improve current business Sourcing/commercial: - category management - merchandising - own brands development - direct sourcing - margin management Supply chain/processes in stores: - integral management of our flow of goods - automatic ordering incl. pushing of products to the stores - shelf pl
Slide 51: International expansion: Germany
-11% International expansion: Germany Positive market environment Positive performance of current stores Huge store opening potential 35 THE discounter agrees! Theo Albrecht (92) Founder of Aldi Richest man in Germany Net worth >€20bn 36 18
Slide 52: International expansion: France
-11% International expansion: France Positive market environment Positive performance of current stores Huge store opening potential 37 We are able to deliver 19
Slide 53: The path to further success for Action
-11% The path to further success for Action 3 Refinancing/Exit: Optimize capital structure Develop exit strategies Execute exit strategies 2 Drive the business: Right people in the right place International expansion Implement best practice retail processes 1 Transition from founders/professionalize
Slide 54: Engaged employees; Strong Board and supportive shareholders
-11% Engaged employees Action scores higher than the Retail norm on all themes Compared to Retail norm Operating efficiency 79 9 Career development 67 8 Rewards & perf. management 67 7 Working relationships 89 6 Client & image 87 6 Supervision 85 6 Leadership 73 5 Empowerment 78 4 Engagement 84 1 To
Slide 55: Strong financial position
-11% Strong financial position 1,200 1,000 800 600 11.6% 12.0% 11.3% 11.3% 9.6% 9.4% 9.3% 1,027 873 400 718 607 515 200 426 341 99 116 71 86 32 39 49 -- 2007 2008 2009 2010 2011 2012 LTM P8 2013 Net sales EBITDA EBITDA margin % 43 Significant outperformance of Business Case 2011 Business Case Actual
Slide 56: Conclusions
-11% Rapid deleveraging Net debt to EBITDA performance 6 5 4 3 2 1 0 Closing Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 2011 Covenant Actual 45 Conclusions 23
Slide 57: Thanks for your attention!
-11% Conclusions Action is different Enormous growth opportunities We are able to deliver 47 Thanks for your attention! 24
Slide 58: Action: Conclusion
-11% Action Menno Antal Conclusion Ambition is to maximise the upside potential High quality business originated using local network and sector insight Business performance very strong with significant further rollout potential Transformation of a local business into an international business Succes