3i Group plc · LSE:III
3i — H1 2004/05 Earnings Presentation
50 slides from 3i's earnings presentation, Nov 4, 2004
Slide 1: Interim results to 30 September 2004
Interim results to 30 September 2004 1
Slide 2: Interim results to 30 September 2004, 4 November 2004
Interim results to 30 September 2004 4 November 2004 2
Slide 3: Welcome
Welcome Baroness Hogg Chairman 3
Slide 4: Board update
Interim results to 30 September 2004 Baroness Hogg Board update 4
Slide 5: Agenda
Interim results to 30 September 2004 Baroness Hogg Agenda Chief Executive’s overview Philip Yea Financial review Michael Queen Venture Capital Rod Perry Growth Capital Chris Rowlands Buyouts Jonathan Russell Closing remarks Philip Yea 5
Slide 6: Overview
Overview Philip Yea Chief Executive 6
Slide 7: Key messages
Interim results to 30 September 2004 Philip Yea Key messages • Strong performance • Business in good shape • Opportunities to grow value • A clear management agenda 7
Slide 8: Initial views
Interim results to 30 September 2004 Philip Yea Initial views • Support existing strategy 8
Slide 9: Strategy
Interim results to 30 September 2004 Philip Yea Strategy To: • Develop the business internationally • Build a balanced investment business • Use the network as our key competitive advantage • Invest in growth companies 9
Slide 10: Initial views
Interim results to 30 September 2004 Philip Yea Initial views • Support existing strategy • Confirm business line focus − Buyouts − Growth Capital − Venture Capital • Strategically advantaged • Clear priorities 10
Slide 11: Opportunities to improve
Interim results to 30 September 2004 Philip Yea Opportunities to improve • Responsiveness • Agility • Market facing 11
Slide 12: Opportunities to grow value
Interim results to 30 September 2004 Philip Yea Opportunities to grow value Opportunity Challenge Asset growth Market and returns Geographic expansion People capabilities Business line extension Priorities 12
Slide 13: Organisation
Interim results to 30 September 2004 Philip Yea Organisation • Head of Group Markets • Head of Growth Capital • Finance Director • Human Resources Director 13
Slide 14: Head of Group Markets
Interim results to 30 September 2004 Philip Yea Head of Group Markets • Chris Rowlands • Managing and developing national presence for the business lines • Delivering group resources to the business lines • Asia Pacific special focus 14
Slide 15: Head of Growth Capital
Interim results to 30 September 2004 Philip Yea Head of Growth Capital • Michael Queen • Significant growth opportunity 15
Slide 16: Finance Director
Interim results to 30 September 2004 Philip Yea Finance Director • Simon Ball joins on 7 February 2005 • Strong track record in financial services and change management (Robert Fleming, Kleinwort Benson, DCA) 16
Slide 17: Group Human Resources Director
Interim results to 30 September 2004 Philip Yea Group Human Resources Director • Denise Collis joins Executive Committee on 8 November • Strong track record in major international professional service environment (Ernst & Young, Standard Chartered) • Role is strategic 17
Slide 18: Our return goals over the cycle
Interim results to 30 September 2004 Philip Yea Our return goals over the cycle Cash to cash Cycle Vintage year % returns volatility volatility Buyouts 20% +/- 5 +/- 10 Growth Capital 20% +/- 3 +/- 7 Venture Capital 35% +/- 10 +/- 20 3i’s actual future results may differ materially from the plans, g
Slide 19: Vision
Interim results to 30 September 2004 Philip Yea Vision • Private equity firm of choice • Operating on a worldwide scale • Producing consistent market beating returns • Acknowledged for our partnership style • Winning through our unparalleled resources 19
Slide 20: Financial review
Michael Queen Financial review 20
Slide 21: Financial highlights
Interim results to 30 September 2004 Michael Queen Financial highlights • Total return £231m • Total return on opening shareholders’ funds 7.2% • Net asset value per share 568p • Interim dividend 5.3p • Realised profits on disposal £95m • Unrealised value movement £118m • New investment* £521m * New
Slide 22: Total return
Interim results to 30 September 2004 Michael Queen Total return 2003/04 2004/05 First half First half (as restated) £m £m Realised capital profits 95 134 Unrealised value movement 118 222 Carried interest and investment performance plans (25) (12) Income 140 113 Costs (102) (103) Pension costs and g
Slide 23: Total returns by business line
Interim results to 30 September 2004 Michael Queen Total returns by business line 2004/05 First half %* Mid-market Buyouts 11.1% Smaller Buyouts 5.1% Growth Capital 8.3% Venture Capital 1.4% * % total return on opening shareholders’ funds attributed to each business line 23
Slide 24: Realised profits on disposal
Interim results to 30 September 2004 Michael Queen Realised profits on disposal 2004/05 2003/04 First half First half £m £m Total proceeds and repayments 603 503 Net realised profit 95 134 Equity realisations - proceeds 417 371 - net realised profit 92 141 - equity uplift over value 28% 61% Loan/fix
Slide 25: Unrealised value movement
Interim results to 30 September 2004 Michael Queen Unrealised value movement £118m £m Quoted portfolio (1) Earnings multiple movement 18 Earnings First time uplift 22 Provisions 32 Up/(down) rounds & restructuring Unrealised currency (44) Other 21 27 43 25
Slide 26: Income
Interim results to 30 September 2004 Michael Queen Income £m 150 £140m £121m 34 £113m 21 27 100 52 45 49 50 47 45 54 0 2003/04 2003/04 2004/05 First half Second half First half Loan interest and fixed rate dividend Equity dividends Fee income 26
Slide 27: Costs
Interim results to 30 September 2004 Michael Queen Costs £m 150 £120m £103m £102m 100 93 70 81 50 33 27 21 0 2003/04 2003/04 2004/05 First half Second half First half Net interest payable Management expenses 27
Slide 28: Balance sheet
Interim results to 30 September 2004 Michael Queen Balance sheet As at As at As at 31.3.04 30.9.03 30.9.04 (as restated) (as restated) £m £m £m Investment assets 4,378 4,326 4,066 Other net liabilities (41) (160) (135) 4,337 4,166 3,931 Net borrowings 901 936 807 Shareholders’ funds 3,436 3,230 3,12
Slide 29: Net cash flow
Interim results to 30 September 2004 Michael Queen Net cash flow 2004/05 2003/04 First half First half £m £m Cash invested (426) (194) Net realisation proceeds 605 501 Net investment cash flow 179 307 Other (115) (82) Net cash inflow 64 225 29
Slide 30: Comparative return
Interim results to 30 September 2004 Michael Queen Comparative return After 10 years 7.7% 7.5% 7.6% 6.7% After 7 years 3.4% 1.7% 0.8% 4.2% 3i return (NAV + dividend) FTSE All-Share After 5 years (0.6)% (1.5)% FTSE 100 (2.6)% 1.9% FTSE SmallCap (ex IT) After 3 years (1.2)% 2.3% 1.0% 8.8% After 6 mont
Slide 31: Financial summary
Interim results to 30 September 2004 Michael Queen Financial summary • Outperformance of indices • Good levels of investment and realisations • Strong balance sheet • Increased dividend 31
Slide 32: Venture Capital
Rod Perry Venture Capital 32
Slide 33: Venture Capital – half year review
Interim results to 30 September 2004 Rod Perry Venture Capital – half year review • A neutral return of £8m • Stable market and portfolios • Demonstrable value add through network • Integration delivering 33
Slide 34: Venture Capital - performance to 30 September 2004
Interim results to 30 September 2004 Rod Perry Venture Capital - performance to 30 September 2004 Total return* 1.4% Annualised income yield 0.8% Realisation proceeds £82m Realised profits £11m Investment** £74m Portfolio (excluding funds) £594m * Total return on opening shareholders’ funds attribut
Slide 35: Venture Capital – some recent exits
Interim results to 30 September 2004 Rod Perry Venture Capital – some recent exits Cost of Profit investment over cost Company Purchaser £m £m LGC L&G Ventures 0.4 17 Element 5 Digital River 3 11 Magic4 Openwave 8 4 35
Slide 36: Cambridge Silicon Radio case study
Interim results to 30 September 2004 Rod Perry New updated version of this Cambridge Silicon Radio case study About the company What has 3i done? • Spinout from CCL in 1998 • Co-founded the company • World leader in Bluetooth • Board recruitment (Chairman, CEO, CFO and others) • IPO February 2004 •
Slide 37: Venture Capital - outlook
Interim results to 30 September 2004 Rod Perry Venture Capital - outlook • More active realisation market • Leading to a more active investment market • Expect US to improve again in 2005/06 • Some exciting technology sectors emerging • We expect to meet our returns’ objectives over the cycle 37
Slide 38: Growth Capital
Chris Rowlands Growth Capital 38
Slide 39: Growth Capital - half year review
Interim results to 30 September 2004 Chris Rowlands Growth Capital - half year review • Return underpinned by exits and revenue • Market conditions improved • 3i market position strengthened • Pipeline strengthened • Consistent approach paying off 39
Slide 40: Growth Capital – performance to 30 September 2004
Interim results to 30 September 2004 Chris Rowlands Growth Capital – performance to 30 September 2004 Total return* 8.3% Annualised income yield 6.6% Realisation proceeds £133m Realised profits £39m Investment** £142m Portfolio (excluding funds) £1,493m * Total return on opening shareholders’ funds
Slide 41: Chris Rowlands
Interim results to 30 September 2004 Chris Rowlands 41
Slide 42: Growth Capital - outlook
Interim results to 30 September 2004 Chris Rowlands Growth Capital - outlook • Geographic opportunities • Flexibility of offering • Community marketing • Network potential • Average deal size increasing 42
Slide 43: Buyouts
Jonathan Russell Buyouts 43
Slide 44: Buyouts - half year review
Interim results to 30 September 2004 Jonathan Russell Buyouts - half year review • Strong financial performance • Market credibility enhanced • Increasingly demanding environment • Market access key 44
Slide 45: Buyouts - performance to 30 September 2004
Interim results to 30 September 2004 Jonathan Russell Buyouts - performance to 30 September 2004 Mid-market Smaller buyouts buyouts Total return* 11.1% 5.1% Annualised income yield 6.6% 8.2% Realisation proceeds £219m £169m Realised profits £24m £21m Investment** £291m £14m Portfolio (excluding fund
Slide 46: Mid-market buyout progress since January 2001
Interim results to 30 September 2004 Jonathan Russell Mid-market buyout progress since January 2001 58 investments – amount invested 3i and funds €2,161m 12 realised* delivering €1,380m (average IRR 69%, money multiple 2.6x) 42 performing well – value at 30 September 2004 €2,043m 4 underperforming –
Slide 47: Buyouts - outlook
Interim results to 30 September 2004 Jonathan Russell Buyouts - outlook • Positive deal flow momentum • Conversion on attractive terms challenging • Debt market aggressive • Increasing specialisation 47
Slide 48: Closing remarks
Closing remarks Philip Yea Chief Executive 48
Slide 49: Closing messages
Interim results to 30 September 2004 Philip Yea Closing messages • Strong performance • Strategy reaffirmed • Opportunities to do better • Opportunities to grow value 49
Slide 50: Interim results to 30 September 2004
Interim results to 30 September 2004 50