3i Group plc · LSE:III
3i — Investor Presentation (June 2012)
41 slides from 3i's investor presentation, Jun 29, 2012
Slide 1: Investor meeting
Investor meeting Simon Borrows Chief Executive London Stock Exchange 29 June 2012
Slide 2: My strategy and vision for 3i
My strategy and vision for 3i The investment proposition An international investor with three strong investment platforms: – focused mid-market Private Equity business – class-leading Infrastructure investor – growing Debt Management business Clear vision and strategy 2
Slide 3: Key challenges
Key challenges To achieve 3i’s vision of being a leading international investor in private equity, infrastructure and debt management, it is critical for 3i to meet the following key challenges: get its ‘house in order’ re-build its reputation through delivering top quartile cash investment retu
Slide 4: 3i – shape of the business as at March 2012
3i – shape of the business as at 31 March 2012 3i Group AUM £10.5bn(1) Private Equity Infrastructure Debt Management AUM £5.3bn AUM £1.7bn AUM £3.4bn Fee income £32m Fee income £25m Fee income £32m Portfolio value £2,531m Portfolio value £528m Portfolio value £42m 90 portfolio companies 11 portfolio
Slide 5: Demonstrating 3i's capabilities – recent new investments
Demonstrating 3i’s capabilities – recent new investments Size of Investment investment Business description Selected comments made by 3i GEKA GmbH Value not German-based manufacturer of Announced in disclosed brushes, applicators and February 2012 comprehensive packaging systems Majority stake
Slide 6: My assessment of 3i – reasons for underperformance
My assessment of 3i – reasons for underperformance International network too thinly spread Decentralised and Examples of inconsistency in investment and unfocused asset management processes Lack of central control Portfolio not actively managed enough Behaviour and Over-investment at peak
Slide 7: No formal mechanism to prevent over-investment
No formal mechanism to prevent over-investment 3i own balance sheet cash investment by financial year ended 31 March £m 2,500 2,000 1,500 1,000 Average of FY2002-06 500 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 7
Slide 8: Operating costs not currently aligned with cash income
Operating costs not currently aligned with cash income Illustrative analysis 31 March financial year-end Aggregate FY2009 FY2010 FY2011 FY2012 Figures in £ millions FY09-12 Total cash fees and portfolio income(1) 151 129 119 151(2) 550 Reported operating expenses(1) (250) (221) (181) (180) (832) Imp
Slide 9: My priorities
My priorities Control Consistency and Fitter and and focus discipline more efficient New Chief Executive with strategic mandate to pursue clear and concrete set of measures to maximise shareholder value 9
Slide 10: My strategic mandate
My strategic mandate
Slide 11: Private Equity – investment strategy
Private Equity – investment strategy Focus on our clear strengths Re-balancing and enhancing the capabilities of our investment teams 11
Slide 12: Private Equity – portfolio by sector
Private Equity – portfolio by sector % of Private Equity Sector Selected comments direct portfolio value(1) Industrials 30% June 2011 investment in Hilite (German-based automotive components), followed by sale of emissions control business in April 2012 Recent large realisations include: Ålö, Hy
Slide 13: Private Equity – FY2011-12 buyouts
Private Equity – FY2011-12 buyouts Company(1) Date Value EBITDA invested multiple(2) 2011 vs. 2010 Action Sep 2011 1.2x Hilite June 2011 1.2x Element Dec 2010 1.4x 3i only residual cost: Etanco Oct 2011 0.9x £563m Amor Dec 2010 1.2x 3i only value at 31 March 2012: OneMed Mar 2011 0.5x £599m Vedici M
Slide 14: Private Equity – portfolio by geography
Private Equity – portfolio by geography % of Private Portfolio 3i region Equity direct Selected comments (1) status portfolio value Low near-term market growth outlook. Portfolio comprises a number of UK 22% international assets Exits of MWM (November 2011) and Norma (April 2011), investment Germany
Slide 15: Private Equity – refining our international network
Private Equity – refining our international network Combined Developed and Developing Private Equity Single Private Investing in buyouts and growth capital Equity business Continue to ensure delivery of existing fund mandates New investment primarily focused on Northern Europe and Brazil Tig
Slide 16: Infrastructure and Debt Management – investment strategy
Infrastructure and Debt Management – investment strategy Class-leading business Long-term, stable and cash-generative investments Infrastructure Continued strong performance in Europe Focus on continuing to grow and develop the Infrastructure business Successful acquisition of MIM in Febru
Slide 17: Asset management – overview
Asset management – overview Ensure a consistent and disciplined approach to new investment New investments considered in the context of the most appropriate capital allocation across the Group Strengthen – liquidity and working capital investment – debt reduction and refinancing processes – shar
Slide 18: Asset management – overview
Asset management – overview Rigorous investment review processes, including: – governance; management and Board assessment – monitoring and performance tracking of investments Particular focus on intensively managing the Private Equity investments made in FY2007-09 to preserve Intensive asset an
Slide 19: Key improvement initiatives
Key improvement initiatives Six key improvement initiatives: 1. Investment review process 2. People: governance and resourcing 3. Operational capabilities, knowledge management & networks 4. Monitoring and performance tracking 5. Valuation process and exit strategy & planning 6. Systems upgrade and
Slide 20: Operating costs – progress to March 2012
Operating costs – progress to 31 March 2012 Actual reported operating costs Actual operating costs (£m) Addition of Debt Management business and Brazil Private Equity team (£m) The chart shows financial years ended 31 March. Considerable progress has been made, but significantly more to do to bring
Slide 21: Operating costs – review process
Operating costs – review process
Slide 22: Operating costs – actions being taken
Operating costs – actions being taken 435 employees at 31 March 2012 Reduction of over 160 employees by 31 March Reduce staff 2013 – reduction comprising 1/3 investment professionals and 2/3 support staff Office closures: Barcelona, Birmingham, Consolidate office Copenhagen, Hong Kong, Milan a
Slide 23: Operating costs – targets
Operating costs – targets £45m targeted annualised run-rate cost savings by 31 March 2014 Base-line operating costs Targeted annualised run- One-off implementation rate cost savings costs £5m £180m £185m £40m Up to £30m FY12 actual Annualised run By 31 March 2013 By 31 March 2014 During FY13 and F
Slide 24: Balance sheet - priorities
Balance sheet - priorities £m Gross debt 2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009 2010 2011 2012 As at 31 March £m Debt repayment profile at 28 June 2012 400 350 300 250 200 150 100 50 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2033 Financial year to 31 March Seeking to s
Slide 25: Capital allocation - strategy
Capital allocation - strategy Average over last three years Target shape (illustrative) Fees and Fees and portfolio portfolio income 27% income 20-25% 5-10% 41% 15-20% 50-55% 3% 29% Realisations Operating Debt Shareholder Funds to Realisations Operating Debt Shareholder Funds to (1) (1) cash flows r
Slide 26: Capital distribution policy
Capital distribution policy Rebased dividend in November 2011 to 8.1p (3.6p last year) Defined basis of aggregate shareholder distributions as 15-20% of gross cash proceeds from realisations, provided that: – gearing < 20% – gross debt is on target to be < £1bn by June 2013 Flexible mechanism
Slide 27: Delivering the strategic mandate
Delivering the strategic mandate Annual results - 16 May 2013 Update on progress against KPIs HY results – 15 November 2012 Update on progress and set out key performance indicators (KPIs) IMS – 27 July 2012 Update on progress implementing new strategy. Quarterly NAV reported for first time Investor
Slide 28: Slide 28
Slide 29: Questions
Questions 29
Slide 30: Appendix
Appendix 30
Slide 31: Infrastructure - investment strategy
Infrastructure - investment strategy Class-leading business Long-term, stable and cash-generative investments 3i’s exposure is through its investment in 3i Infrastructure plc, the 3i India Infrastructure fund and a number of direct investments Continued strong performance in Europe Strategic
Slide 32: Debt Management - investment strategy
Debt Management - investment strategy Successful acquisition of MIM in February 2011 Total AUM of c.£3.4bn as at 31 March 2012, managed by 24 London- based executives Generated £32m of fee income in FY2012 - well ahead of plan Launch of the Credit Opportunities Fund in September 2011 Recen
Slide 33: Asset management initiatives: 1. Investment review processes
Asset management initiatives 1. Investment review processes Current process and scope Key areas of focus Key elements of 3i’s review process Refresh processes and policies throughout the lifecycle of its to ensure that consistent and investments: disciplined approach across all - Due diligence a
Slide 34: Asset management initiatives: 2. People: governance and resourcing
Asset management initiatives 2. People: governance and resourcing Current process and scope Key areas of focus Assessment of portfolio Improve the effectiveness and companies’ Boards and key consistency of approach across management the whole portfolio - As part of the original investment - Stan
Slide 35: Asset management initiatives: 3. Operational capabilities, knowledge management & networks
Asset management initiatives 3. Operational capabilities, knowledge management & networks Current process and scope Key areas of focus Skills and capabilities of Enhance the skills and capabilities investment teams of Private Equity investment teams Supporting capabilities and - Best balance o
Slide 36: Asset management initiatives: 4. Monitoring and performance tracking
Asset management initiatives 4. Monitoring and performance tracking Current process and scope Key areas of focus Monthly reporting of portfolio Provide greater visibility to the company KPIs and performance Group Executive team and Board ‘dashboards’ to Board, Group on how investments are Execut
Slide 37: Asset management initiatives: 5. Valuation process and exit strategy & planning
Asset management initiatives 5. Valuation process and exit strategy & planning Current process and scope Key areas of focus Processes for determining More detailed and rigorous quarterly reported Group NAV valuation processes for both: based on calculations of fair value - Quarterly Group NAV an
Slide 38: Asset management initiatives: 6. Systems upgrade and reporting
Asset management initiatives 6. Systems upgrade and reporting Current process and scope Key areas of focus New ‘end-to-end’ system being Reduce the significant complexity implemented across ‘front’, ‘mid’ of 3i Group’s existing systems and ‘back’ offices to consolidate a architecture number of c
Slide 39: Operating costs – review process
Operating costs – review process Review process Detailed review of costs undertaken across the whole Group – CEO-led with full involvement of business line and function heads – supported by external consultants Focus of review has been on the appropriate level of resource required to support: –
Slide 40: Assets under management as at March 2012
Assets under management as at 31 March 2012 Outstanding 3i Gross money Original fund Original 3i % invested at Close date commitment at multiple at AUM size commitment March 2012 March 2012 March 20121 Private Equity 3i Eurofund III July 1999 €1,990m €995m €90m 91% 2.1x €82m 3i Eurofund IV June 2004
Slide 41: Ten largest investments at March 2012
Ten largest investments at 31 March 2012 Value at Value at Company Business line 31.3.12 31.3.11 £m £m 3i Infrastructure plc Infrastructure 375 320 Action* Private Equity 143 **n/a ACR Capital Holdings Private Equity 118 146 Mold Masters* Private Equity 115 86 Hilite* Private Equity 115 **n/a Foster