3i Group Plc · LSE:III
3i — H1 FY2019 Earnings Presentation
43 slides from 3i's earnings presentation, Nov 15, 2018
Slide 1: Results for the six months to 30 September 2018
Results for the six months to 30 September 2018 15 November 2018
Slide 2: Another good half for 3i
Another good half for 3i Six months to 30 September 2018 Group Private Equity Infrastructure Total return Interim dividend Proprietary capital Cash fee and portfolio on equity per share invested income 10% 15p £254m £42m NAV per share Net cash Realisation 3i Infrastructure plc TSR proceeds 776p £512
Slide 3: Private Equity
Private Equity Disciplined approach and strong fundamentals driving performance 11% gross investment return Robust portfolio Larger assets performing well performance 88% of top 20 assets by value grew earnings in the period Disciplined approach £245m investment in Royal Sanders and ICE to new inves
Slide 4: Good earnings performance drove value growth of £417m
Private Equity Good earnings performance drove value growth of £417m in HY2019 Largest value increases (>£10m) Largest value declines (>£10m) Portfolio Value growth Value at Key driver of Portfolio Value decline Value at Key driver of company (excl FX) 30 Sep 2018 value movement company (excl FX) 30
Slide 5: We remain disciplined investors in competitive markets
Private Equity We remain disciplined investors in competitive markets Proprietary capital invested in each Private Equity vintage c.£2.4bn invested in £100m £265m £328m £352m £471m £587m £254m FY2013-FY2019YTD Other follow-on Cirtec/ Vascotube FY2013-FY2016 Q/Degania vintage now at MM Ponroy of 2.3x
Slide 6: Royal Sanders: investing for future growth
Private Equity: investing for future growth Royal Sanders (£135m proprietary capital invested) Leading European private label and contract manufacturing producer of personal care products 6
Slide 7: ICE: investing for future growth
Private Equity: investing for future growth ICE (£110m proprietary capital invested) Unique global travel and loyalty company that connects leading brands, travel suppliers and end consumers 7
Slide 8: Growing platform assets through bolt-on acquisitions
Private Equity: investing for future growth Growing our platform assets through bolt-on acquisitions + + + Personal care products1 + Bolt-on acquisitions for a total EV of c€375m announced in the 12 months to 30 September 2018 1 Announced in July 2018 and expected to complete in Q3 FY2019 8
Slide 9: Strong realisations from recent vintages
Private Equity: strong realisations from recent vintages Full realisations (year invested, proceeds, money multiple) HY2019 realisations £523m net proceeds1 Scandlines SLR Etanco 2007/2013 2008 2011 £306m1; 7.7x £30m; 1.3x £90m; 1.3x Post-restructuring investments achieving high money multiples Part
Slide 10: Scandlines: realising a strong return and re-investing
Private Equity Scandlines: realising a strong return and re-investing in long-term potential Sale of 3i + Eurofund V holding to First State and Hermes • 3i reinvested £529m in a 35% stake (from 55%) • Net proceeds of £306m1, total MM of 7.7x Compelling rationale for re-investment • Strong market pos
Slide 11: Action – strengthening the foundations for future growth
Private Equity: managing growth in the portfolio Action – strengthening the foundations for future growth Supply chain infrastructure and planning Buying organisation Digital, marketing, HR 11
Slide 12: Action – building a Distribution Centre footprint
Private Equity: managing growth in the portfolio Action – building a Distribution Centre footprint to support our store opening plans DC-G (Peine, DE) DC-J (Verrieres, FR) Q1 2019 Q1 2020 DC-H (Osla, Poland) Q3 2019 DC-K (Poland 2) Planned for 2021 DC-E (Belleville, FR) Q1 2019 Existing DCs DC-I (Br
Slide 13: Action – popularity of the stores is undiminished
Private Equity: managing growth in the portfolio Action – the popularity of the stores is undiminished New store opening, South of France New store opening, North of France September 2018 September 2018 13
Slide 14: Infrastructure: building a differentiated product offering
Infrastructure Building a differentiated product offering 3iN 3i MIA PPP funds £1,977m £727m £602m AUM AUM AUM North America/ Other Smarte Carte £180m £206m AUM AUM Scalable platform AUM of £3.7bn. Fee income of £23m in the six months to 30 September 2018 14
Slide 15: 3iN continues to perform strongly
Infrastructure 3iN continues to perform strongly 3iN relative share price performance – HY2019 (rebased to 3iN, pence per share) HY2019 highlights 260 250 9% Total return 240 230 16% TSR 220 210 4.325pps Interim dividend 3iN FTSE 250 200 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 £196m
Slide 16: Our portfolio is well positioned
Capital allocation Our portfolio is well positioned NAV as at 30 September 2018 Top 10 assets as at 30 September 2018 Value at 30 Sep 2018 (£m) % of NAV at 30 Sep 2018 Value-for-money Action 2,381 31.5% Basic-Fit 256 3.4% Hans Anders 203 2.7% Infrastructure / essential services 3iN 659 8.7% Top 10 S
Slide 17: A resilient business
A resilient business With a track record of returns consistently above our objectives A strong balance sheet • £512m of net cash at 30 September 2018 and low annual costs • Average earnings growth in the mid teens A robust PE portfolio… • Prudent leverage • Northern Europe and North America …defensi
Slide 18: NAV up 7% to 776 pence
NAV up 7% to 776 pence driven by strong portfolio performance NAV per share (pence) 6 (4) (22) 800 15 49 776 750 8 724 700 31-Mar-18 Realised profits Value growth FX Other Net carry payable Dividends 30-Sep-18 18
Slide 19: Group value growth of £478 million
Group value growth of £478 million Value movement by basis (£ million) 271 Action 230 PE increases (84) PE reductions 76 Infrastructure (15) Corporate Assets 19
Slide 20: Corporate Assets
Corporate Assets Scandlines Six months to 30 September £ million 2018 Valuation 521 Value movement (15) Dividend income 22 Group reinvested £529m on 21 June 2018 and holds a 35% stake of Scandlines 20
Slide 21: Private Equity: strong performance
Private Equity Strong performance Six months to 30 September £ million 2018 2017 Gross investment return 667 715 % of opening portfolio 11% 15% Realised profit 75 53 Realisations 1,0521 350 Cash investment 254 506 4.8x money multiple for Private Equity on Scandlines, Etanco and SLR 1. The realisatio
Slide 22: Cash investment and value growth offset by Scandlines realisation
Private Equity Cash investment and value growth offset by Scandlines realisation £ million 7,000 167 (977) 417 6,500 254 Scandlines 6,000 5,825 5,686 5,500 5,000 4,500 ash1 1 Portfolio value as at Cash investment Value growth FX / Other Divestment value Portfolio value as at 31 March 2018 30 Septemb
Slide 23: Good growth in the top assets
Private Equity Good growth in the top 20 assets 3i carrying value at 30 September 2018 (£ million) 7 Number of 3,572 companies: 5 4 4 622 490 712 < 0% 0 - 9% 10 -19% >20% Last 12 months’ earnings growth1 1. Calculated based on valuation earnings growth in the top 20 investments: 17 used EBITDA, 2 us
Slide 24: Portfolio leverage
Private Equity Portfolio leverage Ratio of total net debt to earnings by 3i carrying value at 30 September 20181 (£ million) Action 2,381 518 1,121 131 163 ‒ 628 <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x 3.6x portfolio leverage excluding Action 1. This represents 87% of the Private Equity portfolio by
Slide 25: £417 million value growth
Private Equity £417 million value growth Value movement by basis (£ million) Sept March Multiples2 2018 2018 Performance1 342 Action 16.5x 16.5x 3i ex. Action 11.1x 11.0x Multiples 30 Quoted 50 Other 3 (5) 1. Performance includes value movements relating to earnings and net debt movements in the per
Slide 26: Illustration of multiple adjustments
Private Equity Illustration of multiple adjustments 26
Slide 27: Carried interest receivable and payable
Private Equity Carried interest receivable and payable a function of good performance £ million September 2018 September 2017 Income statement Carried interest receivable 53 64 Carried interest payable (79) (81) Net total return charge (26) (17) £ million September 2018 March 2018 Balance sheet Carr
Slide 28: Infrastructure: good performance from 3iN
Infrastructure Good performance from 3iN Six months to 30 September £ million 2018 2017 Gross investment return 107 32 % of opening portfolio 13% 5% Cash income 42 34 - Of which from 3iN 28 26 28
Slide 29: Proprietary capital of £912 million and AUM of £3.7 billion
Infrastructure Proprietary capital of £912 million and AUM of £3.7 billion at 30 September 2018 AUM by region (%) AUM by fund (%) 12 5 3 20 54 15 3 92 5 Europe 3iN North America US Infrastructure Other 3i India Infrastructure Fund BIIF Fund 3i Managed Infrastructure Acquisitions LP 3i European Opera
Slide 30: Operating cash profit
Operating cash profit Year to 30 September 2018 £ million 2018 2017 Private Equity 9 14 Infrastructure 42 34 Corporate Assets 22 - Other - 7 Cash income 73 55 Operating cash expenses (69) (71) Operating cash profit 4 (16) 30
Slide 31: Balance sheet remains well funded
Balance sheet remains well funded 30 September 31 March £ million 2018 2018 Investments, net of Scandlines 1 (250) (827) Realisations, net of Scandlines 2 528 1,323 Net divestment 278 496 Net cash 512 479 Net assets 7,548 7,024 Liquidity 1,437 1,404 1. Gross investment is £779 million. 2. Gross real
Slide 32: Interim dividend set at 50% of the prior year's total dividend
Interim dividend set at 50% of the prior year’s total dividend Our dividend policy aims to maintain or grow the dividend year-on-year subject to: • maintaining our conservative balance sheet strategy, which excludes structural gearing at the Group level • careful consideration of the outlook for inv
Slide 33: Additional information
Additional information
Slide 34: Royal Sanders: investing for future growth
Private Equity: investing for future growth Royal Sanders (£135m proprietary capital invested) Leading European private label and contract manufacturing producer of personal care products Geography / Netherlands Sector Consumer Megatrends Value-for-money, growth in private labels and contract manufa
Slide 35: ICE: investing for future growth
Private Equity: investing for future growth ICE (£110m proprietary capital invested) Unique global travel and loyalty company that connects leading brands, travel suppliers and end consumers Geography / United States Sector Business and Technology Services / Consumer Megatrends Favourable demographi
Slide 36: Q2 NAV up from 760 pence to 776 pence
Q2 NAV up from 760 pence to 776 pence NAV per share (pence) 850 2 (2) (22) 800 5 28 776 760 5 750 700 30 June 18 Realised profits Value growth FX Other (including Net carry payable Dividends 30 Sep 18 fee income, costs, interest etc) 36
Slide 37: Strong progress across all KPIs
Strong progress across all KPIs Gross investment return (%) Cash realisations (£m) Cash investment (£m) 40% 1,308 1,277 779 29% 27% 24% 985 841 718 529 12% 827 835 638 369 433 1 1 2 2 2015 2016 2017 2018 HY19 2015 2016 2017 2018 HY19 2015 2016 2017 2018 HY19 Operating cash profit (£m)3 NAV per share
Slide 38: Group investment portfolio
Group investment portfolio Portfolio value at 30 September 2018 (£m) Portfolio value at 31 March 2018 (£m) 253 250 546 606 521 2,381 2,064 803 659 581 1,401 1,358 1,057 1,296 Action 2013-2016 Private Equity Action 2013-2016 Private Equity 2016-2019 Private Equity 3iN 2016-2019 Private Equity 3iN 1 S
Slide 39: Net asset exposure by currency
Net asset exposure by currency 2% 1% Change Currency Net assets YTD Impact 14% 19% Sterling £1,450m n/a n/a Euro £4,813m (1.6)% £75m US dollar £1,048m (7.6)% £67m Danish krone £146m (1.6)% £1m Other1 £91m n/a £2m 64% Total £7,548m £145m Sterling/non-revaluing Euro US dollar Danish krone Other 1% mov
Slide 40: Private Equity large investments
Private Equity 20 large investments Investment Business description Valuation Sep 18 Valuation Mar 18 £m £m Action Non-food discount retailer 2,381 2,064 WP Supplier of plastic packaging solutions 259 244 Audley Travel Provider of experiential tailor-made travel 258 233 Basic-Fit Discount gyms opera
Slide 41: Private Equity portfolio
Private Equity portfolio By 3i office location (%) By sector (%) By vintage (%) 4 12 5 10 12 13 9 12 42 7 57 16 42 10 12 3 8 21 5 Benelux France Action (Consumer) Pre 2012 2012 Germany UK Consumer 2014 2015 US Other Industrials 2016 2017 Business & Technology Services 2018 2019 Healthcare Portfolio
Slide 42: Proprietary capital and external funds
Private Equity Proprietary capital and external funds Vintage1 Proprietary capital value at 30 Sep 2018 Multiple at 30 Sep 2018 Buyouts 2010-2012 £2,390m 7.7x Growth 2010-2012 £30m 2.2x 2013-2016 £1,358m 2.3x 2016-2019 £1,401m 1.1x Other £507m n/a Total proprietary capital value £5,686m Remaining 3i
Slide 43: Infrastructure assets under management and advisory agreement
Infrastructure Assets under management and advisory agreement Remaining 3i % 3i commitment invested at Fee income commitment/ at September September received Close date Fund size share 2018 2018 AUM1 in the period 3iN1 Mar 07 n/a £659m n/a n/a £1,977m £15m 3i Managed Infrastructure Acquisitions LP J