3i Group Plc · LSE:III
3i — Investor Day (September 2021)
75 slides from 3i's investor day presentation, Sep 27, 2021
Slide 1: Capital Markets Seminar
Capital Markets Seminar 27 September 2021
Slide 2: Agenda and introduction
Agenda and introduction Simon Borrows Chief Executive
Slide 3: Indicative agenda
Indicative agenda 14.00- Agenda and introduction Simon Borrows 14.10 Chief Executive 14.10- GartenHaus Peter Wirtz 14.50 Q&A Co-head, Private Equity 14.50- ten23 Richard Relyea 15.30 Q&A Partner, Managing Director North America 15.30- MPM Rupert Howard 16.10 Q&A Director, Co-head of UK Private Equit
Slide 4: Portfolio update
Portfolio update • Good progress for investment portfolios in Private Equity and Infrastructure in this financial year to date • Strong performance in the significant majority of our Private Equity investments, including healthcare, retail, e-commerce and value-for-money investments • Action continu
Slide 5: Today's seminar
Today’s seminar 2020 2021 Online leader in the garden homes, sheds, Development, manufacturing and testing saunas and related projects market in the company for biotech start-ups and the DACH region established pharmaceutical industry 2020 International branded, premium and natural pet food company
Slide 6: Today's presenters
Today’s presenters Peter Wirtz Richard Relyea Co-Head, Private Equity Partner, Managing Director North America Joined 3i in 1998. Served as 3i Ger many Co-head betw een 2009 and 2019. Joined 3i in 2007. Appointed co-head of 3i’s North America Private Equity team Member of Executive Committee, Invest
Slide 7: Submitting questions
Submitting questions Click here 7
Slide 8: GartenHaus
GartenHaus Peter Wirtz Partner and Co-Head, Private Equity
Slide 9: 3i in Germany
3i in Germany • Frankfurt office since 1984 • 15 investment professionals • Strong core team with recent new hires • Market reputation as one of the oldest PE houses in Germany 9
Slide 10: GartenHaus was our first investment at the beginning of Covid-19
GartenHaus was our first investment at the beginning of Covid-19 10
Slide 11: GartenHaus is the European online leader in the garden homes and related products market
GartenHaus is the European online leader in the garden homes and related products market • Leading European e-Commerce category leader for garden homes, sheds, saunas, and related products • Pure-play e-Commerce retailer with c.80% of sales through private label assortment; outsourced manufacturing
Slide 12: Company well positioned to benefit from sustainable, favourable market trends
We developed conviction early on that the company is well positioned to benefit from sustainable, favourable market trends • Lockdowns led to accelerated digitisation and Accelerated forced adoption of online channels resulting in digitisation an increase in online affinity, especially among older a
Slide 13: We acquired GartenHaus in a process that leveraged our strengths
We acquired GartenHaus in a process that leveraged our strengths across various dimensions • In-depth knowledge of the e-Commerce sector through the successful Sector knowledge investment in LUQOM • Identified GartenHaus as part of sub-sector deep dive in specialist e-Commerce Process • Direct appro
Slide 14: What we like about GartenHaus
What we like about GartenHaus 1 Favourable market dynamics and shift to online 2 Leading online specialist with scale advantages 3 Resilient financial profile & cash generation 4 Dedicated and proven management team 14
Slide 15: Favourable market dynamics
Favourable market dynamics 1 Growth in online garden market supported by strong underlying drivers DACH online garden & home TAM • Overall home and garden market in the DACH region expected to continue to grow by ~2% 13% CAGR • Online penetration projected to increase to c.16% in the DACH region 10%
Slide 16: Sustainable impact of Covid on market growth
Favourable market dynamics 1 Sustainable impact of Covid on market growth Covid Demand Pre-covid Post-covid Time 16
Slide 17: Leading online specialist with scale advantages
Leading online specialist with scale advantages 2 Differentiated proposition vs Amazon and large online generalists • Garden market is fragmented along a range of dimensions: # offline and online retailers, # manufacturers, # brands, … Market structure • Compared to other end markets, the garden & h
Slide 18: Resilient financial profile
Resilient financial profile 3 Strong track record of profitable growth and cash generation Financial profile and track record (sales, €m) 64 +52% CAGR 29 23 18 2017 2018 2019 2020 2021 2022 entry Note: Includes add-on acquisition of Polhus. 18
Slide 19: Dedicated and proven management team
Dedicated and proven management team 4 Strong management team with proven team of second line managers Strong management team Aligned with 3i • Sebastian Arendt is leading the • Incentivised management team business as CEO having that invested alongside 3i into previously worked at OBI Next the buyo
Slide 20: Strong BLN contribution
Strong BLN contribution Experienced Board that ensures knowledge transfer from LUQOM • Executive Chairman of LUQOM and Board Member at Christ • Former Schüco and Grohe executive • Deep know-how of e-Commerce and digital business models • Experienced start-up investor Jochen Wilms Executive Chairman
Slide 21: Significant opportunities for value creation over the next 3-5 years
Significant opportunities for value creation over the next 3-5 years M&A International • Upside from consolidating highly DACH • Penetration and scale in fragmented market existing international • Potential market entry • Strengthen leading markets and product expansion positioning in DACH • Enter s
Slide 22: Sustainability is a key strategic focus for GartenHaus
Sustainability is a key strategic focus for GartenHaus Significant progress to date Strategic initiatives • The wood used for GartenHaus • Develop an own sustainability products is from sustainably label to harness increased managed forest areas in northern consumer awareness Europe • Measure carbon
Slide 23: Building the leading European platform for home and garden projects
Our vision for the company Building the leading European platform for home and garden projects 23
Slide 24: Significant progress in implementation of growth strategy in first year
Significant progress in the implementation of our growth strategy in our first year of ownership Operational • Strong trading above expectations performance • Efficient management of raw material price and trading increases Strategy • Developed full potential plan • Strengthened the organisation thr
Slide 25: Acquired Polhus, the online leader in garden houses in the Nordics
Acquired Polhus, the online leader in garden houses in the Nordics, within three months of the initial GartenHaus investment • Swedish based leading online retailer of garden houses and related products in Business Scandinavia overview • Complementary product assortment to GartenHaus with a premium
Slide 26: Entering six new countries in less than one year
Accelerated the growth story to deliver the vision by entering six new countries in less than one year Geographical footprint at entry in Sep-2020 Geographical footprint today in Sep-2021 26
Slide 27: GartenHaus Q&A
GartenHaus Q&A
Slide 28: ten23 health
ten23 health Richard Relyea Partner, Managing Director North America
Slide 29: 3i in the US
3i in the US • 3i Private Equity has been investing in the US for c.14 years • 14 investment professionals • Focus on Healthcare, Business & Technology Services and Industrials 29
Slide 30: 3i interest & activity in biotech / pharma value chain
3i interest & activity in biotech / pharma value chain Pharmaceutical value chain Discovery Development Manufacture Quality control Logistics Products Services Instrumentation • Products and consumables used to • Outsourced service providers supporting • Instrumentation and equipment support researc
Slide 31: Overview of ten23 health
Overview of ten23 health Company overview Example services • Partnership with Dr. Hanns-Christian Mahler • Provides drug product development services to programmes ranging from early-stage to late- stage, as well as post-launch (eg reformulation) • ten23 health offers unmatched expertise and Molecul
Slide 32: Hanns-Christian Mahler – ten23 health CEO
Hanns-Christian Mahler – ten23 health CEO Biologics drug product expert Professional history • Experienced drug product specialist with a history of building and leading drug product focused organisations like ten23 health ̶ Lonza (2015 -2021): built from scratch Lonza’s Sterile Drug Product Service
Slide 33: Key biologics CDMO summary themes
Key biologics CDMO summary themes A Growing appetite for biologics CDMO services currently and long-term sustained interest will persist B The biologics CDMO market is a c. $15bn market growing at mid-teens and is characterised by a high degree of fragmentation C Increasing outsourced penetration ex
Slide 34: ten23 health key investment merits
ten23 health key investment merits 1 • Biologics CDMO market growing c. 17%, driven by 8%-10% biologics market growth, Highly attractive growth market with with cutting edge modalities (eg cell & gene therapies) growing 30%+ and increased strong, long-term secular tailwinds outsourcing penetration 2
Slide 35: Scope of drug product development and manufacturing
Scope of drug product development and manufacturing Helping customers turn a molecule into a medicine Initial envisioned scope for ten23 health Molecular Analytical Manufacturing Sterile fill Formulation manufacturability method process and finish development assessment development development manuf
Slide 36: Value chain focus
Value chain focus Drug product solution focused biologics CDMO (formulation and F&F) Process Preclinical & Early Clinical Market Discov ery Cell line dev elopment Dev elopment (“PD”) clinical (Ph. I – II) Ph. III supply Drug Pre and early- Late stage Master cell substance PD Research & Lead Manufact
Slide 37: Biologics development pathway
Biologics development pathway Investments in drug development require 10+ year horizon, $1bn+ of capital Pre-IND activities First IND Clinical studies NDA/BLA 15% 35% 50% 50% Success rate (%) 4.5 1.0 1.5 2.5 2.5 1.5 Duration (years)* Total: 10-15 years Costs: > $1bn Discovery Activities Target Pre-C
Slide 38: Value of formulation services
Value of formulation services High criticality to successful commercialisation Customers facing project failure or significant delay Time period that project is delayed due to due to formulation formulation challenges 52% No 38% 40% 10% Yes 60% Less than 12 months More than 12 months No delay, but p
Slide 39: Value of formulation services
Value of formulation services Formulation increasingly viewed as a competitive advantage On a scale from 1 to 5, please rate the importance of the following aspects of formulation Facilitated Transport / 15% 29% 32% 15% 3% 6% Logistics Longer Shelf Life 26% 39% 25% 6% 1%3% Reduced 38% 25% 23% 8% 5%
Slide 40: Formulation development anticipated to see increases in complexity and spend
Formulation development is anticipated to see increases in both complexity and spend Outsourcing of more complex formulation types is Outsourcing spend per asset anticipated to increase over anticipated to increase in the future the near term, driven by multiple factors “Which formulations do you ou
Slide 41: Biologics pipeline expected to continue double-digit growth
Biologics pipeline expected to continue double-digit growth Modalities of focus for ten23 expected to grow mid-teens to 20s% Historical and forecast biologics pipeline, by modality Number of assets CAGR% 12,000 '15-'19E '19E-'24F 10,725 12% 11% 10,000 Gene therapy 20% 16% 9,538 8,512 8,000 7,637 Cel
Slide 42: Biologics development pipeline and commercial products
Biologics development pipeline and commercial products Breakdown of molecules by phase and modality – US and Europe Trial pipeline and commercial products1 by phase and modality 2020, %, US and Europe ~3,029 ~1,004 ~2,917 ~2,125 ~3,475 ~3% ~0% ~0% ~3% Gene therapy ~11% ~8% ~4% ~15% ~0% Cell therapy
Slide 43: Benefits driving transition to complex drug delivery devices
Benefits driving transition to complex drug delivery devices Including subcutaneous pumps and autoinjectors Benefits for patient Benefits for pharma ✓ Ease of use and convenience ✓ Competitive differentiation ✓ Improved compliance and outcomes ✓ Improved patient compliance drives improved demonstrat
Slide 44: Market dynamics driving new drug delivery devices
Market dynamics driving new drug delivery devices Value-oriented reimbursement models necessitate cost reduction Administration costs of biologic drugs 1 Drug formulations which enable less complex delivery methods greatly reduce associated costs and drive savings for providers and patients 1 Source
Slide 45: Product improvement potential by therapeutic area
Product improvement potential by therapeutic area Oncology and haematology show high reformulation potential Role of subcutaneous (SC) dosing by therapy area Rheumatoid Asthma arthritis ? Multiple sclerosis Predominant administration route Crohn’s SC Ulcerative disease colitis ? Diabetes Primary imm
Slide 46: ten23 health – broad biologics CDMO platform opportunity
ten23 health – broad biologics CDMO platform opportunity A Drug product development B Drug product manufacturing C Additional platform considerations Utilise existing laboratories to support drug Expand service offering to include Pursue organic and inorganic investments product and formulation deve
Slide 47: A leader and company committed to ESG
A leader and company committed to ESG ten23’s commitment to patients, people, and planet Commitment to the United Nations Sustainable Development Goals (“SDGs”) By supporting clients in delivering safe and effective medicines • ten23 health is committed to contributing to that can improve patients’
Slide 48: Progress of ten23 health against key build milestones
Progress of ten23 health against key build milestones ✓ Lab operations secured & live 1 August 2021 ̶ secured operational labs in Basel with 4,000 sqm / 40,000 sqft (4 floors + 2 underground), with labs and offices ̶ investing in further equipment / resource buildout to scale with customers ✓ Leader
Slide 49: Premium valuation environment for CDMO assets
Premium valuation environment for CDMO assets EV / LTM EBITDA multiples for CDMO peers1 Select precedent M&A comparables 70.0x 50.0x 80.0x Bubble size: 45.0x 65.0x $1.2B TEV 60.0x 50.0x 40.0x 50.0x EV / LTM EBITDA Multiple 35.0x 40.0x 30.0x 25.0x 30.0x 20.0x 20.0x 15.0x 10.0x 10.0x 5.0x 0.0x 0.0x 20
Slide 50: Priorities for the near/medium future
Priorities for the near/medium future Build-out of ten23 health development services platform • Continue operationalising the business and building the platform infrastructure • Onboard recent senior leaders and continue building the scientific team responsible for executing for clients • Position t
Slide 51: ten23 Q&A
ten23 Q&A
Slide 52: MPM
MPM Rupert Howard Director, Co-Head of UK Private Equity
Slide 53: 3i in the UK
3i in the UK • Investing in UK growth business for 70 years+ • 9 investment professionals in the London office Current portfolio Selected previous investments 53
Slide 54: MPM
MPM International leader in branded, premium, natural pet food Company overview Transaction highlights • Owns the Applaws, Encore and Reveal • First identified in 2017 brands • Secondary buyout • Differentiates through high quality, • c. £125m 3i investment human-grade natural products, clean-label
Slide 55: We identified the pet food market as an attractive investment area
We identified the pet food market as an attractive investment area Scale Growing International Resilient Humanisation Natural Premium Polarised 55
Slide 56: MPM plays in a large and growing addressable market
MPM plays in a large and growing addressable market MPM’s core premium Wet Cat market worth £4.4bn Premium pet food growing across MPM’s core markets 2018 mark et value (£bn) Premium pet food market growth forecast 2018-2024 CAGR 7.5% 5.3% 5.1% 5.0% 4.8% 4.4% 2.5% 0.0% UK W. Europe Australia US Addr
Slide 57: Highly resilient pet food market through the cycle
Highly resilient pet food market through the cycle Pet food market (particularly premium) proven resilient in a recession Pet owners protect spending on their pet above other activities Global pet food value growth CAGR In financial hardship, which are you least lik ely to cut spending on (%) 5.0% 4
Slide 58: Accelerated through Covid-19
Accelerated through Covid-19 Growth in pet Younger pet Structural Channel numbers parents consumer shifts development • Step-change • Millennials now the • Work from home • Online penetration increase largest segment of • De-urbanisation notably higher pet owners • Significant and • Particularly for
Slide 59: 3i acquired MPM in a process that played to our strengths
3i acquired MPM in a process that played to our strengths • UK headquartered with significant international sales Mandate • Operations predominantly in Western Europe and North America • Result of deep sector insight developed across geographies • Scale, global market with accelerating premium categ
Slide 60: What we like about MPM
What we like about MPM 1 Organic growth track record 2 Differentiated product 3 Differentiated positioning 4 Asset light model 5 Balanced portfolio 6 Proven team 60
Slide 61: Consistent organic growth track record
1 Consistent organic growth track record Gross sales (£m) • Leading premium natural pet food brands ~100 • Founded in 2002 and headquartered in Manchester, UK +27% CAGR • Clean label, natural, human grade quality ingredients • Global distribution with brands sold in 49 markets worldwide with offices
Slide 62: Visibly different products with only natural ingredients
2 Visibly different products with only natural ingredients • 100% natural • Clean label, limited ingredients • Ingredients that customers can recognise and trust • No animal derivatives, no fillers, no preservative • Food that looks good, tastes good and smells good 62
Slide 63: Premium, clean-label and limited ingredient offering
Premium, clean-label and limited ingredient offering Look good, taste good and smell good Competitor product Sludge, bad odour, less tasty 63
Slide 64: A "cat-first" proposition
3 A “cat-first” proposition • Cats and dogs are fundamentally different – cats require a repertoire and variety of food Cat treat; Tuna – cats are “fussy” eaters loin • Limited overlap between cat owners and dog owners • Majority of pet food brands lead with dog and then launch cat • Unlike many com
Slide 65: Flexible, scalable and global supply chain
4 Flexible, scalable and global supply chain Flexible supply chain facilitates serving an international customer base 65
Slide 66: Shape of MPM today
5 Shape of MPM today 5% 20% Reveal 15% 30% Dry Encore Grocery 30% Online 80% 80% Wet Applaws 40% Pet Specialty Channel Product Brand 66
Slide 67: Multi-brand strategy allows for clear brand identity and avoids channel conflict
5 Multi-brand strategy allows for clear brand identity and avoids channel conflict Specialty • Pet is one of few categories where there is a genuine need for a Specialty channel • Focus on in-store experience to drive consumer footfall • Retailers are keen to differentiate from Grocery and Online ch
Slide 68: >70% of revenues are derived outside of the UK
5 >70% of revenues are derived outside of the UK Asia ANZ UK 14% 3% 28% USA 20% 35% EMEA 68
Slide 69: Team and Board
6 Team and Board Julian Bambridge James Bracewell David Millward CEO COO CFO Joined MPM in 2009 Joined MPM in 2012 Joined MPM in 2016 Tim Whiting Nick Wood Steve Marton Non-Executive Chairman Adviser Adviser Long-term 3i BLN Key BLN for DD Ex-CEO of Halo (US Natural Pet Food) Experienced PE Chairman
Slide 70: Social responsibility is at the heart of MPM
Social responsibility is at the heart of MPM Sustainable Recyclable Highest ethical Corporate sourcing packaging standard responsibility ✓ Fish only from sustainable ✓ Environmental impact ✓ Human food quality ✓ Certified B Corp status sources minimisation standards ✓ Balanced pursuit of both ✓ Tuna
Slide 71: First year of ownership
First year of ownership People Strategy 180 day plan Finance • Board • Strategic plan • Governance • Banking • Advisers • Full potential • Reporting • Hedging • Management • People IT Operations Trading Sustainability • IT assessment • Supply chain • New customers • BCorp • IT opportunities • Produc
Slide 72: Our investment thesis is built upon four key pillars
Our investment thesis is built upon four key pillars 4 3 Online Brand 2 US 1 Core 72
Slide 73: Pet sector continues to be very active
Pet sector continues to be very active Selected transactions Apr 2020 Sep 2020 Oct 2020 Oct 2020 TRADE PE TRADE PE Dec 2020 Jan 2021 Jun 2021 Aug 2021 Pet treats PE IPO TRADE PE 73
Slide 74: MPM Q&A
MPM Q&A
Slide 75: Closing remarks and final questions
Closing remarks and final questions