3i Group plc · LSE:III
3i — H1 2005/06 Earnings Presentation
43 slides from 3i's earnings presentation, Nov 10, 2005
Slide 1: Interim results to 30 September 2005
Interim results to 30 September 2005 1
Slide 2: Interim results to 30 September 2005, 10 November 2005
Interim results to 30 September 2005 10 November 2005 2
Slide 3: Philip Yea, Chief Executive
Philip Yea Chief Executive 3
Slide 4: Agenda
Interim results to 30 September 2005 Philip Yea Agenda Chief Executive’s overview Philip Yea Financial review Simon Ball Growth Capital Michael Queen Venture Capital Jo Taylor Buyouts Jonathan Russell Closing remarks Philip Yea Q&A The team 4
Slide 5: Key messages
Interim results to 30 September 2005 Philip Yea Key messages • Strong first half performance • Progress in the development of the business 5
Slide 6: Financial performance highlights
Interim results to 30 September 2005 Philip Yea Financial performance highlights • Total return £447m • Return on opening shareholders’ funds 12.1% • Interim dividend 5.5p • Net asset value per share 677p • Realisation proceeds £1,041m − including co-investment funds £1,363m • Realised profits on di
Slide 7: Portfolio value and gross returns by business line
Interim results to 30 September 2005 Philip Yea Portfolio value and gross returns by business line Portfolio by value £4,389m* 2005/06 2004/05 First half First half Buyouts 38% Buyouts 13.1% 9.8% Growth Capital 13.0% 7.7% Growth Capital 30% Venture Capital 8.2% 3.4% SMI 12.3% 4.2% Venture Capital 17
Slide 8: Momentum in the business
Interim results to 30 September 2005 Philip Yea Momentum in the business Buyouts Growth Venture SMI Capital Capital Investments Realisations 8
Slide 9: Trend in total portfolio number
Interim results to 30 September 2005 Philip Yea Trend in total portfolio number No 3000 2874 2759 2606 2500 2162 2000 1878 SMI 1502 1500 1285 SMI 1000 SMI 676 500 609 0 2000 2001 2002 2003 2004 2005 30.9.05 Year to 31 March 9
Slide 10: Developing the business – a year ago
Interim results to 30 September 2005 Philip Yea Developing the business – a year ago Group strategy Organisation and operation Financial strategy • Communicate vision • Proposition for our people • Set return targets • Clarify strategies • Attract talent • Improve capital efficiency − Growth Capital
Slide 11: Vision
Interim results to 30 September 2005 Philip Yea Vision 3i shall be the private equity firm of choice • Operating on a world-wide scale • Producing consistent market beating returns • Acknowledged for our partnership style • Winning through our unparalleled resources 11
Slide 12: Creating opportunities – geography - China
Interim results to 30 September 2005 Philip Yea Creating opportunities – geography - China 12
Slide 13: Creating opportunities – geography - India
Interim results to 30 September 2005 Philip Yea Creating opportunities – geography - India 13
Slide 14: Creating opportunities – geography - US
Interim results to 30 September 2005 Philip Yea Creating opportunities – geography - US • US growth equity opportunity - under evaluation • 3i offering of international presence and strong capital base attractive in market 14
Slide 15: Creating opportunities – infrastructure
Interim results to 30 September 2005 Philip Yea Creating opportunities – infrastructure • Dedicated team in place • Long-term demand • Clear strategy • 3i’s track record, resources and balance sheet 15
Slide 16: Proposition for our people
Interim results to 30 September 2005 Philip Yea Proposition for our people • Deal flow • Knowledge and resources • Perpetual capital 16
Slide 17: Philip Yea, Chief Executive
Philip Yea Chief Executive 17
Slide 18: Simon Ball, Finance Director
Simon Ball Finance Director 18
Slide 19: Gross portfolio return
Interim results to 30 September 2005 Simon Ball 2004/05 Gross portfolio return 2005/06 First half First half (as restated) £m £m Realised profits on disposal of investments 189 89 Unrealised profits on revaluation of investments 223 86 Portfolio income 109 126 Gross portfolio return 521 12% 301 7% B
Slide 20: Net portfolio and total return
Interim results to 30 September 2005 Simon Ball 2004/05 Net portfolio and total return 2005/06 First half First half (as restated) £m £m Gross portfolio return 521 12% 301 7% Fund management fee income 15 14 Net carried interest & investment performance plans 31 (24) Operating expenses & share-based
Slide 21: Unrealised value movement
Interim results to 30 September 2005 Simon Ball Unrealised value movement £223m £m Earnings multiple movement 66 Earnings growth 27 First time uplift 23 Provisions (37) Up/(down) rounds (3) Uplift to imminent sale 128 Other movements on unquoted investments (39) Quoted portfolio 58 21
Slide 22: Net carried interest
Interim results to 30 September 2005 Simon Ball Net carried interest 2005/06 2004/05 First half First half £m £m Carry receivable 57 1 Carry payable (26) (25) Net carried interest receivable/(payable) 31 (24) • Eurofund III measurement hurdles passed in the period • Creating a closer alignment in fu
Slide 23: Net cash flow
Interim results to 30 September 2005 Simon Ball Net cash flow 2005/06 2004/05 First half First half £m £m Cash invested (724) (426) Net realisation proceeds 1,025 605 Net investment cash flow 301 179 Operating expenses and other (97) (115) Net cash inflow from operating activities 204 64 Special div
Slide 24: Balance sheet
Interim results to 30 September 2005 Simon Ball Balance sheet As at As at As at 31.3.05 30.9.04 30.9.05 (as restated) (as restated) £m £m £m Investment assets 4,389 4,317 4,397 Other net assets/(liabilities) 74 (73) (6) 4,463 4,244 4,391 Net borrowings 752 545 916 Shareholders’ funds 3,711 3,699 3,4
Slide 25: Financial summary
Interim results to 30 September 2005 Simon Ball Financial summary • Exceptionally active half year • Strong returns achieved at gross, net and total levels • Demonstrated our commitment to capital efficiency 25
Slide 26: Growth Capital, Michael Queen
Growth Capital Michael Queen 26
Slide 27: Growth Capital – performance to September 2005
Interim results to 30 September 2005 Michael Queen Growth Capital – performance to 30 September 2005 As at As at 30.9.05 30.9.04 Gross portfolio return 13.0% 7.7% Realisation proceeds £381m £245m Investment £286m £143m As at As at 30.9.05 31.3.05 Portfolio £1,321m £1,288m 27
Slide 28: Growth Capital – investment focus
Interim results to 30 September 2005 Michael Queen Growth Capital – investment focus • Minority situations • Aligned interests with other shareholders • Portfolio target return of 20% • 20-30 new deals per annum – globally • Increasing deal size − size range €10 million to €100 million − average siz
Slide 29: Growth Capital – Petrofac
Interim results to 30 September 2005 Michael Queen Growth Capital – Petrofac • 3i invested £22m/$40m for a 16.2% stake in May 2002 • 3i reinforced the balance sheet during a period of rapid growth • 3i introduced CFO and Independent Director • 3i also identified RGIT Montrose - acquired in February
Slide 30: Growth Capital – developing the business
Interim results to 30 September 2005 Michael Queen Growth Capital – developing the business • Market access − building from an unrivalled platform − sector focus − US presence • Organisation − one global partnership − focus • Infrastructure 30
Slide 31: Infrastructure investment strategy
Interim results to 30 September 2005 Michael Queen Infrastructure investment strategy • £300m in primary and secondary assets over the next three years • Primary market − three to five new direct investments − £10m to £50m per deal • Secondary market − via I2, a specialist fund − £150m over the next
Slide 32: Venture Capital, Jo Taylor
Venture Capital Jo Taylor 32
Slide 33: Venture Capital – my priorities
Interim results to 30 September 2005 Jo Taylor Venture Capital – my priorities • A more focused portfolio • Improving ability to add value • Delivering more value from our transatlantic bridge • One global carry scheme from 1 April 2006 • New advisory board in place by 1 April 2006 33
Slide 34: Venture Capital – performance to September 05
Interim results to 30 September 2005 Jo Taylor Venture Capital – performance to 30 September 2005 As at As at 30.9.05 30.9.04 Gross portfolio return 8.2% 3.4% Realisation proceeds £120m £58m Investment £58m £72m As at As at 30.9.05 31.3.05 Portfolio £740m £748m 34
Slide 35: Venture Capital – creating value
Interim results to 30 September 2005 Jo Taylor Venture Capital – creating value • 3i invested £11m for a c.30% stake in 2004 • Added value: board building, corporate relationships and exit insight • Revenues grown to $24m in 2005 • Sale of test and measurement business to Aeroflex in May 2005 for $8
Slide 36: Buyouts, Jonathan Russell
Buyouts Jonathan Russell 36
Slide 37: Buyouts – performance to September 5
Interim results to 30 September 2005 Jonathan Russell Buyouts – performance to 30 September 2005 As at As at 30.9.05 30.9.04 Gross portfolio return 13.1% 9.8% Realisation proceeds £379m £218m Investment* £358m £200m As at As at 30.9.05 31.3.05 Portfolio £1,665m £1,521m *Investment including co-inves
Slide 38: Buyouts – the market
Interim results to 30 September 2005 Jonathan Russell Buyouts – the market • Activity is high • Aggressive debt markets • Pricing is an issue • Preferential/proprietary deal flow is key − of 101 opportunities reviewed in depth since January 2004 60% preferential/proprietary • Secondary buyouts − one
Slide 39: Buyouts – value creation
Interim results to 30 September 2005 Jonathan Russell Buyouts – value creation Buying well Performance improvement Value Complex creation processes Platform deals Market opportunity 39
Slide 40: Buyouts – developing the business
Interim results to 30 September 2005 Jonathan Russell Buyouts – developing the business • Maintaining high investment quality • Enhancing approach to adding value - new hires - focus - People Programmes • Building on sector approach • Eurofund V 40
Slide 41: Closing remarks, Philip Yea
Closing remarks Philip Yea Chief Executive 41
Slide 42: Closing remarks
Interim results to 30 September 2005 Philip Yea Closing remarks • Strong first half performance • Market generally favourable • Good start to second half • Focus on building value for the future 42
Slide 43: Interim results to 30 September 2005
Interim results to 30 September 2005 43