3i Group Plc · LSE:III
3i — FY2017 Earnings Presentation
46 slides from 3i's earnings presentation, May 18, 2017
Slide 1: Results for the year to 31 March 2017
Results for the year to 31 March 2017 18 May 2017
Slide 2: Our strategy is clear and consistent
Our strategy is clear and consistent Grow investment portfolio earnings Realise investments with good cash-to-cash returns Maintain an operating cash profit Use our strong balance sheet Increase shareholder distributions 2
Slide 3: Good progress against all KPIs
Good progress against all KPIs Year to 31 March 2017 Group Private Equity Infrastructure Total return on equity Total dividend Cash invested Advised 3iN on six per share new investments 36% 26.5p £478m £479m NAV per share Operating cash profit1 Realisation proceeds Operating cash income 604p £33m £9
Slide 4: Our post-restructuring track record continues to improve
Our post-restructuring track record continues to improve Year to Year to Year to Year to Year to Year to 31 Mar 20171 31 Mar 2016 31 Mar 2015 31 Mar 2014 31 Mar 2013 31 Mar 2012 Total return £1,592m £824m £659m £478m £373m £(656)m % over opening net asset value 36% 22% 20% 16% 14% (20)% Dividend per
Slide 5: Private equity market
Private equity market Dry powder continues to grow; market environment supports valuations Global private equity assets under management ($bn) 752 869 672 687 558 593 615 671 632 678 525 1,512 1,552 1,635 1,617 385 1,382 1,106 1,200 837 904 630 743 496 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-1
Slide 6: Private Equity: An excellent year
Private Equity An excellent year Strong return for the year • £1,624m gross investment return • 43% of opening book value Resilient portfolio performance • Portfolio value growth of £1,274m driven by growing earnings Good momentum in investment • £478m proprietary capital invested activity • Three n
Slide 7: Robust portfolio performance continues to drive value growth
Private Equity Robust portfolio performance continues to drive value growth Largest value increases (>£20m) Largest value declines (>£20m) Value Value Portfolio Value at Key driver of Portfolio Value at Key driver of growth decline company 31/3/17 value movement company 31/3/17 value movement (excl
Slide 8: FY2013+ vintages continue to perform well
Private Equity FY2013+ vintages continue to perform well Proprietary capital invested in each vintage £1.5bn invested £100m £265m £328m £352m £471m since FY2013 Q/Degania Aggregate Ponroy MM of 1.7x1 Santé Christ Audley Scand- Travel lines Schlemmer Q Holding Euro-Diesel Basic-Fit Oticas Carol Aspen
Slide 9: £478m invested in FY2017 and a further €470m announced for FY2018
Private Equity £478m invested in FY2017 and a further €470m announced for FY2018 Formel D Hans Anders Lampenwelt c€150m €200m €120m announced announced announced May 2017 April 2017 March 2017 Ponroy Santé Q/Degania £122m £62m January 2017 December 2016 Schlemmer BoConcept £155m £132m August 2016 Ju
Slide 10: Continuing to reshape the portfolio through realisations
Private Equity Continuing to reshape the portfolio through realisations Selected full realisations FY2017 realisations Mayborn Quintiles Amor Geka £136m; 3.5x £107m; 3.3x £88m; 2.3x £982m total proceeds £85m; 1.8x Polyconcept UFO Moviez Loxam Lekolar 12 full realisations £44m; 2.1x £16m; 2.9x £40m;
Slide 11: A portfolio weighted towards our better assets
Private Equity A portfolio weighted towards our better assets The buckets Selected examples % of value FY2017 FY2016 1 Longer-term hold and value creation Action, Scandlines, Aspen Pumps, ATESTEO c.64% c.62% 2 Strong performers; performing in line with investment case WP, Q Holding, BoConcept, Schle
Slide 12: Action continues to exceed expectations
Private Equity - Action Action continues to exceed expectations • 3i acquired Action in September 2011 at 8.3x EBITDA • Executive team completed in 2015 with recruitment of CEO and CFO • Number of stores has grown from 269 to over 890 currently TOYS & GARDEN & • Carrying value increased from £106m t
Slide 13: Strong financial track record across all KPIs
Private Equity - Action Strong financial track record across all KPIs Net sales (EURm) Like-for-like sales growth (%) # stores 2,675 8.6% 852 +32% 7.0% 6.9% 6.9% +28% 1,995 6.7% 655 1,506 514 406 1,155 321 873 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 EBITDA (EURm) C
Slide 14: Tangible growth and value creation opportunity
Private Equity - Action Tangible growth and value creation opportunity Retail # Stores Population market Roll-Out Dec 2016 (m) (EUR bn) potential Netherlands 354 16.9 94 Belgium 132 11.3 72 France 220 66.4 420 Germany 136 81.2 453 Austria 7 8.2 59 Action presence Distribution centre S
Slide 15: Leading KPIs versus Inditex, Dollarama, Five Below, XXL and B&M
Private Equity - Action Leading KPIs versus Inditex, Dollarama, Five Below, XXL and B&M Sales growth, 2012-16 (%) Like-for-like sales growth, 2012-2016 (%) New store growth, 2012-16 (%) +12.2% +2.1% +12.0% 32.3% 7.2% 27.6% 27.7% 6.5% 24.1% 5.1% 20.1% 15.6% 3.3% 10.0% 5.0% EBITDA Margin, 2012-2016 (%
Slide 16: Infrastructure market
Infrastructure Inflows in the asset class continue to grow and asset values are rising Global unlisted infrastructure assets under management ($bn) 141 109 105 109 74 84 68 216 232 64 190 66 164 65 145 124 93 15 37 61 34 51 9 17 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 D
Slide 17: Infrastructure: A year of increased activity
Infrastructure A year of increased activity Contributing to capital and income • £87m gross investment return, or 17% of returns opening book value • £59m operating cash income 3iN continues to perform strongly • Advised 3iN on new investment of £479m • Total return of 9% and TSR of 16% in FY2017 Su
Slide 18: 3iN: robust returns and strong momentum in investment activity
Infrastructure 3iN: robust returns and strong momentum in investment activity 3iN relative share price performance (rebased to 100) • New capital of £385m raised in June 2016 • All deployed in 6 new investments worth £479m +11% • £131m investment by 3i to maintain +7% its 34% holding • TSR of 16% in
Slide 19: Infrastructure: New developments
Infrastructure New developments Managed Infrastructure 3i European Operational North America Acquisitions Fund Projects Fund Infrastructure platform • New fund to manage • First close in April at • Team of four investors and assets acquired from €155m, of which up to two support staff in place EISER
Slide 20: Our strategy is clear and consistent
Our strategy is clear and consistent Grow investment portfolio earnings Realise investments with good cash-to-cash returns Maintain an operating cash profit Use our strong balance sheet Increase shareholder distributions 20
Slide 21: Continuing to improve capital efficiency and allocation
Continuing to improve capital efficiency and allocation Year to 31 March 2017 Average over FY2010-FY2012 £1.5bn 8% 10% £1.0bn 27% 23% 41% 18% 41% 3% 29% Realisations, Operating costs,Debt repayment Shareholder Funds to invest Realisations, Operating Net carried Debt Shareholder Funds to fees and net
Slide 22: NAV up 30% to 604 pence driven by strong portfolio performance
NAV up 30% to 604 pence driven by strong portfolio performance NAV per share (pence) 700 9 (16) 650 30 (24) 138 604 600 550 500 463 4 450 400 350 31 March Realised Value growth FX Debt Net carry Dividends 31 March 2016 profits Management payable 2017 business sold 22
Slide 23: Private Equity: Strong performance
Private Equity Strong performance £ million 2017 2016 Gross investment return 1,624 1,011 % of opening portfolio 43% 32% Realised profit 38 69 Uplift over book value1 5% 14% Money multiple 3.7x 2.6x Realisations 982 743 Cash Investment 478 365 Portfolio value 4,831 3,741 Portfolio now 37 assets and
Slide 24: Private Equity: Strong performance
Private Equity Strong performance £ million 6,000 1,274 (944) 5,500 5,000 282 4,831 1 4,500 478 4,000 3,741 3,500 3,000 ash1 Portfolio value as at Cash investment Value movement Divestment value FX / Other Portfolio value as at 31 1 April 2016 March 2017 24
Slide 25: High quality portfolio with strong earnings growth
Private Equity High quality portfolio with strong earnings growth 3i carrying value at 31 March 20171 5 £ million 2,362 7 1,327 Number of companies: 4 3 370 1 241 112 <0% 0-9% 10-19% 20-30% >30% 1 Earnings growth in the top 20 investments 25
Slide 26: Action valuation
Action valuation Consistency in performance and execution since our acquisition 18.2x 16.8x 15.8x 16.0x 13.5x 14.0x 12.5x Post discount 1 multiple: 9.26x Mar-13 Mar-14 Mar-15 Mar-16 Jun 16 Sep 16 Dec 16 Mar 17 • Updated valuation methodology – Run-rate earnings to 26 March 2017 – Run-rate multiple:
Slide 27: £1,274 million value growth driven by Action, Scandlines and 2013-16 vintage
Private Equity £1,274 million value growth driven by Action, Scandlines and 2013-16 vintage Value movement by basis (£ million) 1 Performance 827 Use of earnings 2017 2016 % value at end of the year 78% 74% Multiples 239 valued on an earnings basis Forecast indicates negative 1 2 DCF 158 outlook (no
Slide 28: Carry receivable and payable a function of good performance
Private Equity Carry receivable and payable a function of good performance £ million 2017 2016 Income statement Carried interest receivable 275 58 Carried interest payable (431) (171) Net total return charge (156) (113) Balance sheet Carried interest receivable 359 92 Carried interest payable 650 35
Slide 29: Infrastructure: Significant contribution to cash income
Infrastructure Significant contribution to cash income £ million 2017 2016 Gross investment return 87 47 % of opening portfolio 17% 8% Fee income 36 28 Cash income 59 49 Cash investment 131 - Portfolio value 706 527 3iN TSR of 16% in the year 29
Slide 30: Continuing to focus on operating cash profit
Continuing to focus on operating cash profit £ million 200 100 - (100) (200) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Total cash income Operating expenses1 Operating cash profit/(loss) Operating cash profit/(loss) excluding Debt Management Significant progress since the 2012 strategic
Slide 31: Well funded balance sheet for investment….
Well funded balance sheet for investment…. £ million 2017 2016 Portfolio value 5,675 4,497 Gross debt (575) (837) Cash 994 1,002 Net cash 419 165 Liquidity 1,323 1,352 31
Slide 32: …and shareholder distributions
…and shareholder distributions 2014 2015 2016 2017 Base 8.1p 8.1p 8.1p 16.0p Additional 11.9p 11.9p 13.9p 10.5p 20.0p 20.0p 22.0p 26.5p • Base dividend of 16.0 pence (8.0 pence interim and 8.0 pence final) • Additional dividend dependent on balance sheet strength and outlook for investments and real
Slide 33: Our strategy is clear and consistent
Our strategy is clear and consistent Grow investment portfolio earnings Realise investments with good cash-to-cash returns Maintain an operating cash profit Use our strong balance sheet Increase shareholder distributions 33
Slide 34: Additional information
Additional information
Slide 35: Q4 NAV up from 558 pence to 604 pence
Q4 NAV up from 558 pence to 604 pence NAV per share (pence) 620 3 (4) 55 (8) 610 604 600 590 580 570 560 558 550 31 December 2016 Realised profits and Debt Management Net carry payable Dividends 31 March 2017 value growth business sold 35
Slide 36: Key performance indicators
Key performance indicators Gross investment return (%) Cash realisations (£m) Cash investment (£m) 1,308 40% 638 29% 841 769 433 24% 671 369 18% 20% 606 276 126 2013 2014 2015 2016 2017 2013 2014 2015 2016 20171 2013 2014 2015 2016 2017 Operating cash profit (£m)2 NAV per share (GBp) Total sharehold
Slide 37: Net asset exposure by currency
Net asset exposure by currency 3% 2% Change Currency Net assets YTD Impact1 13% 24% GBP £1,420m n/a n/a Euro £3,373m (8.0)% £203m US dollar £751m (15.0)% £84m Danish krone £147m (8.2)% - 58% Other2 £145m n/a £17m Total £5,836m n/a £304m Sterling/non-revaluing Euro US dollar Danish krone Other 1% mov
Slide 38: Twenty large investments
Private Equity Twenty large investments Valuation Mar 17 Valuation Mar 16 Investment 1 Business description £m £m Action Non-food discount retailer 1,708 902 Scandlines Ferry operator between Denmark and Germany 538 369 Q Holding Precision engineered elastomeric components manufacturer 222 120 Weene
Slide 39: Private Equity leverage
Private Equity leverage Ratio of total net debt to EBITDA by 3i carrying value at 31 March 2017 (£ million) 3,181 595 545 472 32 < 1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x > 6x Net debt/EBITDA segmentation Note: The above table includes assets not valued on an EBITDA basis. This represents 99.9% of the
Slide 40: Private Equity portfolio
Private Equity portfolio By region (%) By sector (%) By vintage (%) 7 11 2 9 18 14 10 1 2 6 10 52 35 8 73 6 36 Northern Europe Consumer pre 2009 2010 2011 North America Industrial 2012 2013 2014 UK Business and Technology 2015 2016 2017 Other Other Portfolio of 40 investments, down from 52 at 31 Mar
Slide 41: Private Equity realisations in the year
12 Private Equity realisations in the year Calendar year Realisation Uplift to opening Money Residual value Full realisations invested proceeds value multiple1 (31 Mar 17) Mayborn 2006 £136m 2% 3.5x - Quintiles 2008 £107m 10% 3.3x - Amor 2010 £88m 2% 2.3x - Geka 2012 £85m 47% 1.8x - Polyconcept 2005
Slide 42: Refinancings, partial realisations and deferred consideration
Refinancings, partial realisations and deferred consideration Calendar year Realisation Uplift to opening Money Residual value Investment realised invested proceeds value multiple1 (31 Mar 2017) Refinancings Action 2011 £187m - 20.8x £1,708m ATESTEO 2013 £48m - 2.7x £160m Partial realisations Basic-
Slide 43: Assets under management: Private Equity
Assets under management Private Equity Remaining 3i % Gross money Fee income Original Original 3i commitment1 invested at multiple2 at received Close date fund size commitment at March 2017 March 2017 March 2017 AUM3 in the year 3i Growth Capital Fund Mar 10 €1,192m €800m €346m 53% 1.9x £50m £1m 3i
Slide 44: Assets under management: Infrastructure
Assets under management Infrastructure Remaining 3i % Gross money Fee income Original Original 3i commitment invested at multiple1 received Close date fund size commitment at March 2017 March 2017 at March 2017 AUM2 in the year 3iN Mar 07 n/a n/a n/a n/a n/a £1,284m £25m India fund Mar 08 US$1,195m
Slide 45: Debt Management
Debt Management Sale to Investcorp completed on 3 March 2017 • Sold: – Fund management platform in the US and Europe – £185 million CLO equity investment • Retained – £51 million CLO equity/warehouse – £79 million Global Income Fund – £8 million Senior Loan Fund £270 million proceeds; £48 million pr
Slide 46: Debt Management: Retained investments
Debt Management Retained investments £ million 20171 20161 Realised profit 1 - Unrealised profits/(losses) on revaluation 9 (22) Portfolio income 19 10 Foreign exchange on investments 15 5 Gross investment return/total return 44 (7) Investments 29 68 Cash income from retained investments 19 10 1 Num