3i Group Plc · LSE:III
3i — Investor Day (June 2015)
74 slides from 3i's investor day presentation, Jun 15, 2015
Slide 1: Private Equity Capital Markets Seminar
Private Equity Capital Markets Seminar 15 June 2015 Simon Borrows, Chief Executive
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Slide 3: Agenda
Agenda 08.30 for 09.00 Registration and coffee 09.00 to 09.10 Introduction by Simon Borrows 09.10 to 10.10 Scandlines Introduction by Peter Wirtz Presentation by Steve Ridgway, Chairman and Per Madsen, CFO of Scandlines Q&A session 10.10 to 10.40 Coffee break 10.40 to 11.40 Basic-Fit Introdu
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Slide 5: FY 2015 – stronger and more resilient with good momentum across the group
FY 2015 – stronger and more resilient with good momentum across the group Group Total return on AUM of £13.5bn £28m operating equity of 20% cash profit NAV of 396p/share Up 4% from Up from £5m (2014: 348p) last year last year Business Private Equity Infrastructure Debt Management lines £831m realisa
Slide 6: Our business model – Private Equity drives capital returns
Our business model – Private Equity drives capital returns Private Equity Infrastructure Debt Management Proprietary Capital portfolio value Fund Management fee income Employs the majority Increasingly a third- Primary driver of of 3i’s proprietary party fund third-party fund capital management mana
Slide 7: Our strategy in Private Equity
Our strategy in Private Equity Clear geographic and sector focus ─ UK, northern Europe and north America 1 Selective 2 Best-in- ─ industrials, consumer and business services class asset investment management Strict return and pricing filters ─ 2x return target over 3-5 years ─ opportunity to exc
Slide 8: An increasingly valuable Private Equity portfolio
An increasingly valuable Private Equity portfolio The buckets Selected examples % of value FY2015 FY2014 Longer-term hold and value Action, Element, 1 creation Basic-Fit, Scandlines c. 60% c. 42% Strong performers; position for Hilite, Vedici, 2 sale over the next few years LHI, Dynatect c. 15% c. 3
Slide 9: An introduction to Scandlines
An introduction to Scandlines Peter Wirtz Partner, 3i Private Equity
Slide 10: 3i has a successful track record in Germany and the Nordic region
3i has a successful track record in Germany and the Nordic region 3i can deploy cross-border teams to source and manage international investments. Our Scandlines team draws from the expertise of our Frankfurt and Stockholm offices Frankfurt office since 1984 – 8 investment professionals – c.€2.2bn
Slide 11: Structure of 3i's investment
Structure of 3i’s investment 2007: 3i (Eurofund V), ACP and Deutsche Seerederei (DSR) purchase Scandlines from Deutsche Bahn and the Danish government 2010: 3i and ACP buy out DSR’s holding 2013: 3i purchases ACP’s 49% holding as a follow-on Eurofund V currently holds 96% of the business; ba
Slide 12: Scandlines is a large ferry operator in the Baltic Sea
Scandlines is a large ferry operator in the Baltic Sea Two high-frequency, large capacity routes between Germany and Denmark – Rødby – Puttgarden – Gedser – Rostock Two land-based retail shops – Puttgarden – Rostock Three ports under full onership Revenues of €445m in FY2014* 4 * Excluding d
Slide 13: Why did we invest in Scandlines?
Why did we invest in Scandlines? Opportunity to capitalise on strong position in a stable market, with good cash generation Clear value creation levers – fixed cost reductions by eliminating double functions in Denmark/Germany – leverage strong market position to drive positive like-for-like vol
Slide 14: Scandlines operates in stable and resilient markets
Scandlines operates in stable and resilient markets Real GDP growth (y-o-y change in %) Consumer expenditures (y-o-y change in %) CAGR: '04-14A '14-16E '16-19E CAGR: '04-14A '14-16E '16-19E 5.0% SE 1.7% 2.9% 2.3% 5.0% SE 2.1% 2.6% 4.6% DK 0.4% 2.1% 1.5% DK 0.7% 2.0% 3.5% 4.0% DE 1.3% 1.9% 1.3% 4.0%
Slide 15: Performance trends and underlying drivers
Performance trends and underlying drivers Volume trends are positive Cargo volumes (k) LTM (all routes) Car volumes (k) LTM (all routes) 530 1,830 520 1,820 510 1,810 500 1,800 490 1,790 480 1,780 470 1,770 460 1,760 450 1,750 Dec13 Jun14 Dec14 Jun15 Dec13 Jun14 Dec14 Jun15 LTM Actual LTM Actual C
Slide 16: Performance trends and underlying drivers: Disposal of Joint Venture
Performance trends and underlying drivers Disposal of Joint Venture on Helsingor-Helsingborg route Scandlines operated the HeHe route in a joint venture (50/50) with Stena Line Oresund AB since 2000 The JV set-up was sub-optimal, and made the achievement of significant cost and revenue synergies
Slide 17: Fehrmarn Belt Fixed Link
Fehrmarn Belt Fixed Link Agreement between Germany and Denmark to build the Fehrmarn Belt Fixed Link reached in 2008 Substantial infrastructure project – investment of c.€8-9bn on the Danish side – additional investment of c.€2bn on the German side High complexity – co-ordination between multi
Slide 18: Steve B. Ridgway
Steve B. Ridgway Chairman, Scandlines 30 years of experience with Virgin Atlantic, including as CEO between 2001 and 2013 Valuable contribution to developing Scandlines’ strategic yield management, as well as its retail and catering services, on-board and in its land-based retail shops Strong
Slide 19: Per Madsen
Per Madsen CFO, Scandlines Joined Scandlines in August 2012 as CFO Previously worked as CFO of Copenhagen Airport and held senior positions at The Coca Cola Company Holds a master´s degree in auditing and accounting from Copenhagen Business School >25 years of business experience 11
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Slide 21: Introduction to Scandlines
Introduction to Scandlines Steve Ridgway, Chairman and Per Madsen, CFO June 2015
Slide 22: 'Clear progress by driving operational excellence'
‘Clear progress by driving operational excellence’
Slide 23: Agenda
Agenda: 1 Scandlines is a focused, short sea route specialist 2 Our onwards journey – creating further value 3 How to compete against a fixed link on Fehmarn Belt
Slide 24: Scandlines is the essential connection between Scandinavia and Continental Europe
Scandlines is the essential connection between Scandinavia and Continental Europe – route of choice for cars and freight Market dynamics Puttgarden-Rødby Situated uniquely Rostock-Gedser bridging some of Europe's most BorderShops prosperous regions Compete against 8 million customers longer an
Slide 25: Earnings split between different customer segments
While Puttgarden–Rødby route is the largest financial contributor, earnings are split between different customer segments Revenue split by route EBITDA split by route Revenue split by segment BorderShops Other BorderShops Rostock- On board 3% Gedser R/C Leisure 6% 10% 31% 18% 25% 53% Puttgarden- 22%
Slide 26: Scandlines 2006 – an unfocused state-owned company
Scandlines 2006 – an unfocused state-owned company with multiple businesses (20 routes in total)
Slide 27: Scandlines 2015 – a focused short sea route specialist
Scandlines 2015 – a focused short sea route specialist (2 routes in total)
Slide 28: Scandlines is a more profitable business today
Scandlines is a more profitable business today despite sale of a large proportion of activities since 2006 …to a short sea specialist with focus on the From a state-owned company with multiple businesses… most attractive routes Revenue split 2006 Revenue split 2014 (excluding discontinued DK-SE JV)
Slide 29: Clear focus on 3 types of customers: Leisure travelers
Clear focus on 3 types of customers Leisure travelers – stable and predictable 30-35% of revenue Seasonal holiday traffic with large degree of predictability Typically 35-55 years old and above average disposable income
Slide 30: Clear focus on 3 types of customers: Shoppers
Clear focus on 3 types of customers Shoppers – optimising asset base 35-40% of revenue Generate traffic year round 50-60% price advantage to domestic SE/DK market Puttgarden is one of the world’s largest border shops
Slide 31: Clear focus on 3 types of customers: Freight
Clear focus on 3 types of customers Freight – high growth potential ~25% of revenue Economic demand Customers are commercial decision makers Scandlines in strong position to gain market share
Slide 32: A well invested asset base – modern fleet and new vessels
A well invested asset base – modern fleet on Puttgarden-Rødby and new vessels to be introduced on Rostock-Gedser this year Puttgarden-Rødby Rostock-Gedser 4 double ended hybrid ferries from 1997 2 new vessels to replace current ones in 2015 with at least 20 year lifetime left Harbours fully up
Slide 33: Scandlines is a resilient and cash generative business
Scandlines is a resilient and cash generative business – stable revenue development combined with improved operating margins Consistent annual revenue … with improvement in … combined with a cash growth – 2% p.a. on average … operating margin – profit generative business model growth of 3% p.a. on a
Slide 34: Agenda
Agenda: 1 Scandlines is a focused, short sea route specialist 2 Our onwards journey – creating further value 3 How to compete against a fixed link on Fehmarn Belt
Slide 35: Our onwards journey – executing a clear strategy
Our onwards journey – executing a clear strategy 2007-2013 2013- Set a clear strategy for Restructuring growth Become a focused short sea Develop growth strategy route operator – sale of adjacent Execute on key strategic business areas projects Improve internal processes, market understandin
Slide 36: A clear strategy focused on four key themes
A clear strategy focused on four key themes Customer focus Cost focus 5 year 1 2 3 4 strategic Leisure: Freight: Lead environ- Capture Business themes: moderate Continued mental change efficiency strong growth in the Baltic Sea growth Clear set of projects in place to achieve strategy SMILE loyalt
Slide 37: SMILE – capturing loyalty
SMILE – capturing loyalty Target: Increase revenue Improve sales Increase basket size, efficiency, cross frequency and selling and upselling volume From mass marketing to direct communication SMILE customer programme launched June 2014 140,000 member database in less than a year
Slide 38: Lead environmental change – a clear commercial benefit
Lead environmental change – a clear commercial benefit Being at the forefront creates several benefits Positive business case (from 0.5 to 5 years payback) – fuel efficiency and Cost savings lower maintenance We have been able to better adjust to new sulphur regulations Generates large interes
Slide 39: Prinsesse Benedikte – the world's largest hybrid ferry
Prinsesse Benedikte – the world’s largest hybrid ferry Built in 1997, hybrid since August 2013
Slide 40: Clear green investment roadmap providing commercial benefits
Clear green investment roadmap providing commercial benefits ZERO EMISSION Today 2015-2017 2018- Hybrid Ferries Plugin Hybrid Ferries Zero Emission Ferries Diesel generator Battery bank Diesel generator Battery bank Charging in harbour 3-4 battery banks Charging in harbour
Slide 41: New vessels for Rostock-Gedser to capture growth
New vessels for Rostock-Gedser to capture growth Capture market growth and gain Increased business efficiency market share Rostock-Gedser offers largest growth Replacement of 35 year old vessels potential covering central and eastern Double up on capacity European corridors – especially for fr
Slide 42: Increase business efficiency by reducing inherited complexity
Increase business efficiency by reducing inherited complexity Adjustment of land-based headcount Legacy setup with two equally large headquarters Copenhagen A much simpler business today Rostock From develop to maintain
Slide 43: Agenda
Agenda: 1 Scandlines is a focused, short sea route specialist 2 Our onwards journey – creating further value 3 How to compete against a fixed link on Fehmarn Belt
Slide 44: A fixed link is planned next to the Puttgarden-Rødby service
A fixed link is planned next to the Puttgarden-Rødby service – opening date still uncertain Germany Rødby Denmark Puttgarden 45 min 15 min Project history In 2008 Germany and Denmark reached agreement to build the Fehmarn Belt Fixed Link Largest Danish infrastructure project requiring €8-9bn inv
Slide 45: A fixed link will impact our business – but a viable case for competing
A fixed link will impact our business – but a viable case for competing Scandlines is increasingly well prepared From full service provider to low cost provider Scalable cost structure Ability to tailor schedule to demand – i.e. lower number of departures from 34,000 to 24,000 offering high freq
Slide 46: Outlook 2015 – continued stable growth
Outlook 2015 – continued stable growth combined with impact of strategic projects Historic - 2011-2014 2015E Revenue: 2 % p.a. Revenue: 3-5 % Operating profit: 3 % p.a. Operating profit: 3-5 %
Slide 47: Conclusion – Scandlines continues to be an attractive investment
Conclusion – Scandlines continues to be an attractive investment Well established infrastructure business in stable market Unique position Strong financials Well invested asset base Clear strategy in place to create further value Customer loyalty, green investments, new vessels and incre
Slide 48: 'Clear progress by driving operational excellence'
‘Clear progress by driving operational excellence’
Slide 49: Basic-Fit
Basic-Fit Pieter de Jong Partner, Managing Director, 3i Benelux
Slide 50: 3i has a successful track record in the Benelux
3i has a successful track record in the Benelux Amsterdam office since 1998 Amsterdam office since 1998 Invested >€1.3bn of equity; >40% IRR since 2001 on 16 investments Eight investment professionals Selected Benelux investments 3i’s investment strategy is to grow successful companies interna
Slide 51: Current Benelux consumer portfolio evidence strategy
Current Benelux consumer portfolio evidence strategy Leading European bottler of Leading European non-food Leading European budget soft drinks and fruit juices discount stores gym operator (€bn) 2.0 514 1.5 400 406 350 321 269 300 1.0 190 220 245 250 127 149 170 79 105 200 0.5 56 150 100 50 - 02 03
Slide 52: Basic-Fit at the time of investment
Basic-Fit at the time of investment Fast growing budget gym operator with a strong 94 value proposition 79 Growing Basic Fit presence in Benelux, and some clubs in France and Spain 9 199 clubs at time of investment Company in transition 17 Strong growth ambitions of management 4
Slide 53: Basic-Fit operates in an attractive market
Basic-Fit operates in an attractive market Seamless fit with our investment strategy Clear evidence of growing budget fitness markets in Netherlands and Belgium Growth is driven by 2 consumer trends: 70% 74% 79% – Lifestyle and well-being 87% 85% 82% – Polarisation Fragmented industry in tar
Slide 54: 3i key differentiators enabled us to unlock the deal
3i key differentiators enabled us to unlock the deal Local team gained access – Team had tracked competitors since 2008 – We knew the situation of the shareholder base – Developed strong relationship with management – Led to exclusive due diligence period Clear investment strategy – Looking for
Slide 55: Investment hypothesis confirmed, performance above plan
Investment hypothesis confirmed, performance above plan Clear market leader in the Benelux More than 3x number of clubs of #2 Fitness penetration increasing with Fast growing discount market segment with ample headroom discount fitness increasing market share New club openings and ingrowth drive
Slide 56: Excellent partnership with management
Excellent partnership with management Adding ~100 clubs in first 18 New club design Opening new clubs in France months of investment and Spain Added 100 clubs vs 10 new openings p.a. in base case Organisational readiness Completed pricing project And… assessment Numerous other projects 8
Slide 57: "This is just the beginning"
Growth has accelerated since 3i’s investment, and will continue going forward 400 Netherlands Objectives going forward: Belgium 350 Fill in white spots Benelux France 300 Spain Accelerate growth in France Luxembourg 250 and Spain 200 Create best value proposition 150 for consumer 100 50 “This
Slide 58: Rene Moos
Rene Moos CEO Basic-Fit From professional tennis player… to successful entrepreneur in fitness 10
Slide 59: Structure of 3i's investment
Structure of 3i’s investment Year invested: 2013 Holding: 44% (balance held by co-investors and management) Value at 31 March 2015: £102m Residual cost at 31 March 2015: £91m 2
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Slide 61: Basic-Fit – 3i Group plc Capital Markets Day
BASIC-FIT – 3I GROUP PLC CAPITAL MARKETS DAY 15 June 2015
Slide 62: Years track record of profitable growth in the fitness industry
31 YEARS TRACK RECORD OF PROFITABLE GROWTH IN THE FITNESS INDUSTRY Basic-Fit HealthCity 300 2013 300 Buyout of BF by 3i Separation 200 Basic-Fit / 2010 Acquisition HealthCity of Basic-Fit 1984 Rene Moos 100 started HealthCity 61 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 63: Overview of Basic-Fit: largest European budget gym operator
OASIC B OF BASIC -FIT: LARGEST VERVIEW -FIT EUROPEAN BUDGET GYM OPERATOR Club portfolio at June 2015 126 Family membership from €15.99 per month 133 No frills, but - High quality equipment and facilities 7 - Long opening hours - Group lessons 12 - Virtual cycling - Personal Trainers 21 - Flexibl
Slide 64: Strong financial and operational performance in 2014
STRONG FINANCIAL AND OPERATIONAL PERFORMANCE IN 2014 Members # of clubs 264 199 +33% +43% 2013 2014 2013 2014 Sales EBITDA +35% +67% 2013 2014 2013 2014
Slide 65: Standardised club concept
STANDARDISED CLUB CONCEPT
Slide 66: High quality equipment, supplied by Matrix and Technogym
HIGH QUALITY EQUIPMENT, SUPPLIED BY MATRIX AND TECHNOGYM
Slide 67: Zoning based on 1,500m2 club format
ZONING BASED ON 1,500M2 CLUB FORMAT
Slide 68: Budget fitness: differentiated low prices based on good core offering
BUDGET FITNESS: DIFFERENTIATED LOW PRICES BASED ON GOOD CORE OFFERING Budget model: good core, differentiated lower prices - enabled by cutting “nice to haves” and attracting higher volumes Mid-market Budget Reception Change rooms/Free showers Weight & Non-Cardio Cardio Swimming Faci
Slide 69: Structural growth in budget fitness segment
STRUCTURAL GROWTH IN BUDGET FITNESS SEGMENT WITH 20 %+ CAGR Budget segment share, NL Budget segment share, BE 74% 70% 70% 82% 79% 80% 87% 85% 93% 92% 90% 90% 26% 30% 30% 18% 21% 20% 13% 15% 7% 8% 10% 10% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Slide 70: Basic-Fit: clear market leader, outperforming competition
BASIC-FIT: CLEAR MARKET LEADER, OUTPERFORMING COMPETITION IN GROWING MARKETS Netherlands Belgium 140 140 133 126 120 114 120 115 # of clubs per year-end # of clubs per year-end 100 93 100 2x 79 80 80 64 9x 60 60 46 43 40 40 33 20 20 20 10 3 0 0 0 2009 2010 2011 2012 2013 2014 Current 2009 2010 2011
Slide 71: France and Spain have a market structure similar to Netherlands and Belgium
FRANCE AND SPAIN HAVE A MARKET STRUCTURE SIMILAR TO NETHERLANDS AND BELGIUM Market size & Penetration
Slide 72: Good progress on operational projects – Social Hub
GOOD PROGRESS ON OPERATIONAL PROJECTS – SOCIAL HUB: DRIVER OF SECONDARY INCOME
Slide 73: Good progress on operational projects – focus on innovation
GOOD PROGRESS ON OPERATIONAL PROJECTS – STRONG FOCUS ON INNOVATION
Slide 74: Outlook: continued international growth
OUTLOOK: CONTINUED INTERNATIONAL GROWTH Mid term potential >500 clubs in NL, BEL, LUX, FR, SP Sales, EBITDA, nr of gyms, nr of members… Today Potential for new 300 clubs countries NL, BEL, LUX market leader FR, SP: emerging 3i entry 199 clubs NL, BEL, FR, SP Basic-Fit acquired 28 clu