3i Group Plc · LSE:III

3i — FY2012 Earnings Presentation

44 slides from 3i's earnings presentation, May 17, 2012

  1. Slide 1: Annual results to 31 March 2012

    Annual results to 31 March 2012 17 May 2012

  2. Slide 2: Update

    Update Sir Adrian Montague Chairman 2

  3. Slide 3: Welcome: Agenda for today's meeting

    Welcome Agenda for today’s meeting  Board’s strategic priorities Adrian Montague  Appointment of new CEO Adrian Montague  Update on performance Julia Wilson  Proposed return of capital Julia Wilson  The way forward Simon Borrows  Closing remarks Adrian Montague 3

  4. Slide 4: Board's strategic mandate

    Board’s strategic mandate  Core strategy – affirm diversification strategy into Infrastructure and Debt Management  Resourcing – determine both scale and skill set of investment teams  Costs – ensure that costs are aligned with the market opportunity  Balance sheet – define its size and an appro

  5. Slide 5: Appointment of new CEO

    Appointment of new CEO  Process to identify a successor launched at end of March  Identified skills required to execute Board’s strategic mandate  Announcement today of the appointment of Simon Borrows 5

  6. Slide 6: Annual General Meeting

    Annual General Meeting  Board has set clear, tangible and credible initiatives  AGM to be held on 29 June 2012 “Our priority will be to execute our strategy” 6

  7. Slide 7: Update and performance

    Update and performance Julia Wilson Finance Director 7

  8. Slide 8: Key topics

    Key topics 1. Performance of our portfolio 2. Cost base 3. Balance sheet management 8

  9. Slide 9: Key financials

    Key financials Year to 31 March 2012 2011 Gross portfolio return £(329)m £601m Gross portfolio return on opening portfolio value (8.2)% 17.1% Net portfolio return £(425)m £449m Net portfolio return on opening portfolio value (10.6)% 12.8% Total return £(656)m £324m Total return on opening shareholde

  10. Slide 10: Net portfolio return by business line

    Net portfolio return by business line Private Debt 1 As at 31 March 2012 (£m) Infrastructure Total 2 Equity Management Gross portfolio return (339) 11 1 (329) Fees 32 25 32 89 Net carry - (6) 1 (5) Operating expenses (127) (17) (31) (180) Total (434) 13 3 (425) % opening portfolio value (12.8)% 2.8%

  11. Slide 11: Infrastructure performance

    Infrastructure performance As at 31 March (£m) 2012 2011 Gross portfolio return 11 45 Fees 25 25 Carry (6) (2) Operating expenses (17) (23) Net portfolio return 13 45 % opening portfolio value 2.8% 11.1% Investment 70 36 Realisation proceeds 1 1 Assets under management £1.7bn £1.6bn Continuing stron

  12. Slide 12: Debt Management performance

    Debt Management performance As at 31 March (£m) 20121 2011 Gross portfolio return 1 39 Fees 32 2 Carry 1 (1) Operating expenses (31) (5) Net portfolio return 3 35 % opening portfolio value 21.4% 46.7% Investment 36 49 Realisation proceeds - 145 Assets under management £3.4bn £3.4bn 1 Includes £6m of

  13. Slide 13: Key financials

    Key financials Year to 31 March 2012 2011 Gross portfolio return £(329)m £601m Gross portfolio return on opening portfolio value (8.2)% 17.1% Net portfolio return £(425)m £449m Net portfolio return on opening portfolio value (10.6)% 12.8% Total return £(656)m £324m Total return on opening shareholde

  14. Slide 14: Portfolio performance - overview

    Portfolio performance - overview  Stronger growth in Northern Europe and US and in investments since rights issue  Spain, UK and, to some extent, France, experiencing market fragility  Infrastructure less impacted by macro and portfolio continues to perform well  Largest 10 realisations at 2.9x

  15. Slide 15: Private Equity portfolio – 9% value weighted earnings growth

    Private Equity portfolio – 9% value weighted earnings growth Carrying value (£m) 1,000 900 16* 800 18* 700 600 500 400 300 8* 10* 200 14* 7* 100 - <(20)% (20)-(11)% (10)-(1)% 0-9% 10-20% >20% *Number of assets LTM earnings growth (December 2011)  By value, 80% of portfolio grew earnings 15

  16. Slide 16: Private Equity portfolio – increased disclosure

    Private Equity portfolio – increased disclosure  Increased disclosure  Top 25 assets1 – 66% of Private Equity portfolio value  20 out of 25 grew earnings  9 by over 10% 1 Four assets excluded for commercial reasons and replaced by the next highest value assets 16

  17. Slide 17: Portfolio performance – March valuations

    Portfolio performance – March valuations March 2012 March 2011  Reduced use of forecast Management 90% 84% accounts Forecast1 8% 12% Audited 2% 4% March 2012 March 2011  Multiples reduced in line with FTSE 250 9.6x 9.9x market movements and remain substantially below 3i pre discount 8.2x 8.8x our

  18. Slide 18: Unrealised value movement

    Unrealised value movement Year to 31 March (£m) 2012 2011 Multiples (130) (76) Earnings growth 23 295 Impairments (178) (196) Provisions (138) (71) Uplift to imminent sale - 240 Discounted cash flow (1) 54 Quoted (20) 23 Debt Management broker quotes (3) 8 Industry metric (24) 15 Other (27) 33 Total

  19. Slide 19: Portfolio value - £3,204m

    Portfolio value - £3,204m £m 5,000 (748) 646 4,500 3,993 (498) 4,000 3,500 (101) (88) 3,204 3,000 2,500 2,000 Private 1,500 Equity £2,531m 1,000 (79%) 500 0 Opening Investment Divestment at Value Foreign Other Closing portfolio value movement exchange portfolio  Increasingly weighted to stronger ge

  20. Slide 20: Portfolio performance - disclosure

    Portfolio performance - disclosure  Introduced net portfolio return by business line  Introducing quarterly NAV reporting from 30 June 2012  Granularity on individual company performance  Greater transparency on portfolio performance Allowing shareholders to track performance better 20

  21. Slide 21: Operating expenses – progress and next steps

    Operating expenses – progress and next steps £m %  Operating expenses run rate 300 4 reduced by c.38% since peak 3.5 in 2008 250 3  Staff reduced to 435 from 200 2.5 peak of 788 150 2 – includes addition of 38 in 1.5 Debt Management and Brazil 100 1  Cost savings of c.£25m on an 50 0.5 annualised

  22. Slide 22: Managing the balance sheet

    Managing the balance sheet Gross debt  Gross debt reduced by 21% in £m the year 2,500 – March 2012 £1,623m vs 2,000 March 2011 £2,043m 1,500 1,000  Plan to reduce further to 500 0 – £1.3bn by September 2012 2006 2007 2008 2009 2010 2011 2012 2013 – <£1bn by June 2013 As at 31 March Debt repayment

  23. Slide 23: Capital distribution

    Capital distribution  Rebased dividend in November 2011 to 8.1p (3.6p last year)  Now defining basis of distribution as 15-20% of cash realisations proceeds, provided – gearing < 20% – gross debt is on target to be <£1bn by June 2013  Flexible mechanism – special dividend – standing buyback autho

  24. Slide 24: Summary

    Summary  Portfolio performance improved in the second half but Eurozone stability critical  A focus on operating efficiency with tangible results  Continue to restructure balance sheet – continue de-gearing – actively lowering interest costs  Able to now further clarify distribution plan – rebas

  25. Slide 25: The way forward

    The way forward Simon Borrows Chief Executive 25

  26. Slide 26: Introduction

    Introduction  3i IPO - 1994  3i today  The role from October 2011  My perspective 26

  27. Slide 27: Private Equity portfolio – by geography

    Private Equity portfolio – by geography Direct portfolio value of £2,531m as at 31 March 2012 % of Private Portfolio 3i region Equity direct Selected comments status portfolio value UK 22% Low near-term market growth outlook Exits of MWM (November 2011) and Norma (April 2011), investment Germany 17%

  28. Slide 28: Private Equity portfolio – by sector

    Private Equity portfolio – by sector Direct portfolio value of £2,531m as at 31 March 2012 % of Private Equity Sector Selected comments direct portfolio value Industrials & Energy 30%  June 2011 investment in Hilite (German-based automotive components), followed by sale of emissions control busines

  29. Slide 29: Infrastructure portfolio

    Infrastructure portfolio Direct portfolio value of £528m as at 31 March 2012 Overview Direct portfolio value breakdown1  Portfolio of 11 investments (including 3iN as as at 31 March 2012 single investment), representing 16% of the Sector total 3i direct portfolio value 11% – 6 of these investments

  30. Slide 30: Debt Management

    Debt Management  Continue to grow third party funds  Significant contribution to operating cash flow  Impressive performance in year 30

  31. Slide 31: New investments

    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  Sector: for the cosmetics industry Indus

  32. Slide 32: Investment strategy and asset management

    Investment strategy and asset management Number of important steps already taken to improve the focus and discipline around the Group’s investment processes and asset management approach  Strengthened the Private Equity business’ management and significantly reshaped our team of investment professi

  33. Slide 33: Key areas of focus

    Key areas of focus Immediate focus will be on following key areas  Determining the best shape and investment strategy for the business going forward  Further improvements to the Group’s asset management approach and investment capabilities  Ensuring that the operating and liquidity costs of the G

  34. Slide 34: Slide 34

  35. Slide 35: Appendix

    Appendix

  36. Slide 36: Balance sheet

    Balance sheet As at 31 March (£m) 2012 2011 Investment assets 3,204 3,993 Other net liabilities (113) (114) 3,091 3,879 Gross debt 1,623 2,043 Cash (1,159) (1,521) Net borrowings 464 522 Equity 2,627 3,357 3,091 3,879 Gearing 18% 16% 36

  37. Slide 37: Gross portfolio return by business line

    Gross portfolio return by business line Total Private Debt As at 31 March 2012 (£m) Infrastructure Total* year to Equity Management 31.3.11 Realised profits 17 - 1 23 124 Unrealised value growth (481) (7) (3) (498) 325 Portfolio income 125 18 3 146 152 Total (339) 11 1 (329) 601 % opening portfolio

  38. Slide 38: Portfolio value movement by business line

    Portfolio value movement by business line Opening Closing Unrealised portfolio Value Other portfolio value £m Investment value value disposed movement1 31 March movement 1 April 2011 2012 Business lines Private Equity Developed 2,952 522 (724) (405) (168) 2,177 Developing 442 18 (15) (76) (15) 354 D

  39. Slide 39: Buyouts - performance

    Buyouts - performance Long-term performance Total Return Value Vintage IRR to IRR to investment1 flow remaining year 31.3.12 31.3.11 £m £m £m 2012 281 - 326 n/a n/a 2011 274 - 275 5% n/a 2010* - - - - - 2009 429 5 198 (13)% 1% 2008 843 353 204 (7)% (6)% 2007 764 390 309 9% 17% 2006 521 1,176 3 48% 4

  40. Slide 40: Growth Capital - performance

    Growth Capital - performance Long-term performance Total Return Value Vintage IRR to IRR to investment1 flow remaining year 31.3.12 31.3.11 £m £m £m 2012 70 - 68 n/a n/a 2011 21 - 25 20% n/a 2010 46 - 17 (52)% 8% 2009 210 47 84 (16)% (5)% 2008 1,076 481 525 (1)% 1% 2007 554 238 294 (1)% 1% 2006 487

  41. Slide 41: Portfolio leverage – Buyouts and Growth Capital

    Portfolio leverage – Buyouts and Growth Capital Debt repayment profile – Buyouts portfolio Debt repayment profile – Growth Capital portfolio Repayment index weighted by 3i Group Repayment index weighted by 3i Group carrying values (%) at 31 March 2012 carrying values (%) at 31 March 2012 % % 70 70 6

  42. Slide 42: Ten largest investments at 31 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

  43. Slide 43: Top 25 Private Equity assets

    Top 25 Private Equity assets Company Value bracket 3i equity bracket % Revenue £m Earnings growth % Company 1 >£50m <10% 2,090 1% Company 2 <£50m <10% 701 22% Company 3 >£50m 20-29% 508 4% Company 4 >£50m 10-20% 444 34% Company 5 >£50m 20-29% 484 18% Company 6 <£50m 10-20% 1,305 (12)% Company 7 <£50

  44. Slide 44: Assets under management

    Assets under management 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 €3,067m €1,941m €78

3i Group — FY2012 Earnings Presentation on 6ix