3i Group Plc · LSE:III
3i — Investor Day (September 2018)
55 slides from 3i's investor day presentation, Sep 17, 2018
Slide 1: 3i Group Private Equity Capital Markets Seminar
3i Group Private Equity Capital Markets Seminar 17 September 2018
Slide 2: Introduction
Introduction Simon Borrows, Chief Executive
Slide 3: Our business model – delivering sustainable returns
Our business model – delivering sustainable returns Invest our proprietary Grow portfolio Realise a money multiple Cover costs with fee 1. capital in Private Equity 2. earnings and cash flow 3. of >2x in Private Equity 4. and portfolio income Investment (4-7 companies) 4-5 year Realisations holding
Slide 4: Strategic clarity and focus in our approach to Private Equity investing
Strategic clarity and focus in our approach to Private Equity investing Clear focus Themes/megatrends • Consumer, Industrial, Business & Tech Services • Flexibility to follow long- and Healthcare term trends that support • Northern Europe, North earnings growth America Flexible to adapt to market de
Slide 5: Flexible approach to follow developing themes and megatrends
Flexible approach to follow developing themes and megatrends Compliance/ Polarisation/ Testing, inspection Demographics Technological disruption Health & Wellness Value-for-money and certification Our investments are supported by developing megatrends 5
Slide 6: Our approach to Private Equity investing is producing good results
Our approach to Private Equity investing is producing good results Proprietary capital invested in each Private Equity vintage c.£2.4bn invested in £100m £265m £328m £352m £471m £587m £245m FY2013-FY2019YTD Other follow-on Cirtec/ FY2013-FY2016 Vascotube MM of 2.1x as at Q/Degania 31 March 2018 Ponr
Slide 7: Today’s seminar
Today’s seminar 2015 2017 Provider of experiential tailor-made travel Outsourced medical device manufacturing Original cost: £156m Original cost: £172m1 Residual cost: £195m Residual cost: £172m1 Valuation: £233m Valuation: £190m 2017 Online lighting specialist retailer Original cost: £95m Residual
Slide 8: Today’s presenters
Today’s presenters Alan Giddins Richard Relyea Managing Partner, Head of Private Equity Partner, Managing Director North America Joined 3i in 2005 and is Managing Partner, Head of Private Equity and Joined 3i in 2007 and was appointed Managing Director and co-head of a member of 3i’s Executive Commi
Slide 9: Audley Travel
Audley Travel Alan Giddins Managing Partner, Head of Private Equity
Slide 10: 3i in the UK
3i in the UK • Investing in UK growth business for 70 years+ • 11 investment professionals in the London office 10
Slide 11: Audley is a market leader in tailor-made travel in the UK and US
Audley is a market leader in tailor-made travel in the UK and US • Founded in 1996 by travel enthusiasts Headquartered in Witney, Craig Burkinshaw and John Brewer Oxfordshire Boston • UK market leader in luxury tailor-made opened 2014 journeys • High quality customer service delivered by genuine spe
Slide 12: Audley creates complex journeys tailored to each client
Audley creates complex journeys tailored to each client Flights, 80 countries transfers, Personalised No inventory across 7 accommodation long-haul trips commitment continents & unique experiences Book on Small party size £14k+ average 6 locations per average 7-8 – 2.5 passengers booking value trip
Slide 13: Growth in the tailor-made travel market is supported by strong underlying drivers
Growth in the tailor-made travel market is supported by strong underlying drivers Increasing spend on experiences vs possessions Consumer expectation of personalisation Travel increasingly a priority for over-55s Forecast tailor-made holiday growth of 10%+ UK, US market potential 3x larger than UK A
Slide 14: The combination of Audley’s positioning and business model provides an attractive platform for growth
The combination of Audley’s positioning and business model provides an attractive platform for growth 1 Broad product offering Enables continued Passionate Country 6 product 2 Specialists with development destination expertise Affluent customer Attractive revenue 5 visibility 3 with high expectation
Slide 15: The combination of Audley’s positioning and business model provides an attractive platform for growth
The combination of Audley’s positioning and business model provides an attractive platform for growth 1 Broad80+ countries product offering Enables continued Passionate Country 10 new countries Extensive training; 6 launched product since 2015 2 400+ Specialists with FAM trips p.a. development desti
Slide 16: We developed conviction early on, enabling us to acquire Audley
We developed conviction early on, enabling us to acquire Audley in a process which played to our strengths • Identified Audley as part of sub-sector deep dive in specialist Early travel identification • Front loaded due diligence ahead of the process • Existing relationship with Chairman through sub
Slide 17: US market – Over $100m sales expected in 2018
US market – Over $100m sales expected in 2018 Market dynamics Delivered since 2015 • Large addressable tailor-made >3.5x growth in US bookings market More than doubled US − 3x size of UK headcount • Less developed destination expertise and personalisation 25% group sales − Agency models preval
Slide 18: Strong growth delivered in the UK and US with attractive financial characteristics
Strong growth delivered in the UK and US with attractive financial characteristics Departure revenue (£m) UK departure revenue 296 US departure revenue 242 2015-2018¹ CAGR: 67% 199 165 137 2015-2018¹ 109 CAGR: 14% 82 2012A 2013A 2014A 2015A 2016A 2017A 2018E 16% EBITDA 100%+ cash Deleveraged from CA
Slide 19: Ongoing digital evolution supports Audley’s omnichannel model
Ongoing digital evolution supports Audley’s omnichannel model Audley Travel Companion app launched Award-winning website 7.1m unique visitors per year (+46% since investment) Inspirational digital platforms encourage customers to enquire Phone converts 5x higher than online enquiries 19
Slide 20: Strong management team and Board
Strong management team and Board Chairman CEO COO Richard Prosser Ian Simkins Nick Longman Transitioning to CEO Jan-19 Director of Director of Digital MD UK MD US CFO HR Director Product Director Technology & Ops & Marketing Mark Hanson Jacqui Lewis Nils Steinmeyer Jemimah Parnell James Herbert Rich
Slide 21: Nick Longman joined the team, transitioning to CEO in January 2019
Nick Longman joined the team on 10 September 2018, transitioning to CEO in January 2019 • 20+ years experience in travel, most recently as MD of Tui UK and Ireland (£6bn+ turnover) • Experience delivering in international markets with roles in North America and Australia • Formerly responsible for d
Slide 22: Future value creation
Future value creation Repeat & New product New source Digital evolution Recommend launches markets Significant whitespace in US market Supported by positive underlying market drivers 22
Slide 23: 3i’s approach to Healthcare
3i’s approach to Healthcare Richard Relyea Partner and Managing Director, North America
Slide 24: 3i in North America
3i in North America • 9 Private Equity investment professionals in New York office • Focus on Healthcare, Industrials, and Business & Technology Services 24
Slide 25: Increasing our focus on Healthcare
Increasing our focus on Healthcare 1 • Steady overall market growth with attractive long-term trends Attractive • Niche and fragmented segments growing high single to double digit sub-segments • Many examples of sub-segments being big enough to be narrow – fit 3i model MDO is a €30bn market growing
Slide 26: Global healthcare: significant market with macro trends driving long-term growth
Global healthcare Significant market with macro trends driving long-term growth $7.5 trillion +4.3% 10.5% Global healthcare expenditures total industry of global GDP Growth rate by region (2017-20) growth forecast spent on healthcare 7.5% (CAGR 2017-22) by 2020 North America Western Europe Transitio
Slide 27: Accelerating innovation unlocking new markets
Accelerating innovation unlocking new markets Intersection of technology and life sciences Biologics Advanced medical device technology • Pharmaceuticals developed from living cells • Google (Verily) and GSK create $715m • Unique ability to treat chronic diseases JV in bioelectronics (2015) • Cost t
Slide 28: How are we currently capitalising?
How are we currently capitalising? Derivative plays with strong fundamental characteristics Target segments Attractive characteristics Pharma services • Strong revenue models Pharmaceuticals Supply chain Processing products • End-market growth + Medical device • Fast growing sub-segments Medical dev
Slide 29: 3i focus area: Outsourced medical device manufacturing
3i focus area Outsourced medical device manufacturing Segment highlights 3i experience Large, fast growing, non-cyclical market • Global medtech sales growing ~4-6% p.a. • Outsourcing market is c$35 bn+, with increasing penetration driving 10-12% growth Fragmented market undergoing consolidation • O
Slide 30: Cirtec
Cirtec Richard Relyea Partner and Managing Director, North America
Slide 31: Cirtec: Leading provider of outsourced medical devices
Cirtec Leading provider of outsourced medical devices Company overview Deal metrics • Focus on complex medical devices • Primary buyout • Design and development -> manufacturing • Completed August 2017, with the further investment and assembly closing in November 2017 • Niche, fast-growing end marke
Slide 32: What we like about Cirtec
What we like about Cirtec Capitalise on MDO • Overall MDO market expected to grow c9-10% due to increasing penetration market growth Attractive therapeutic • Focused on niche, fast-growing therapeutic segments expected to grow in sub-segments aggregate at c11% Leading solutions • Highly differentiat
Slide 33: Cirtec is exposed to some of the fastest growing, niche therapeutic areas
Cirtec is exposed to some of the fastest growing, niche therapeutic areas of the medical device market End-market growth Cirtec’s key end-markets are driven by the increased adoption of its customers’ products due to their ability to treat serious illnesses in new innovative ways 25%+ 17% Weighted a
Slide 34: Consolidated pro forma financials
Consolidated pro forma financials Strong growth trajectory since 2013 Historical PF consolidated revenue – 2013-17A CAGR: 13% 2013A 2014A 2015A 2016A 2017A Cirtec has grown significantly over the last five years with organic revenue growth averaging 13% 34
Slide 35: Visibility into sustained organic growth
Visibility into sustained organic growth Significant new customer Fast growing customer base additions • Numerous notable new customer • Manufacturing a number of fast wins over past 12 months growing product platforms across attractive end markets • Healthy pipeline of new targets • Top customer vo
Slide 36: Neuromodulation overview
Neuromodulation overview What is neuromodulation? Usage overview • Invented in 1960s • Chronic pain (back, limbs) • Electrical stimulation to produce a • Incontinence natural biological response • Sleep apnea • Alternative to long-term drug therapy • Migraine for the symptomatic relief of • Parkinso
Slide 37: Vascotube: Leading provider of precision engineered nitinol tubes
Vascotube Leading provider of precision engineered nitinol tubes Company overview Company highlights and acquisition rationale • Precision engineered nitinol and other specialty metal tubes in a wide variety of sizes and tolerances • Unparalleled ability to manufacture tight tolerance tubing require
Slide 38: TAVR and TMVR market opportunity
TAVR and TMVR market opportunity Procedure overview Artificial heart valve with Transcatheter aortic valve replacement (“TAVR)” nitinol frame Transcatheter mitral valve replacement (“TMVR)” Usage overview The TMVR market is still in its infancy, but could be 2x larger than the TAVR market (data in $
Slide 39: 3i and Cirtec
3i and Cirtec • Significant opportunities to expand the international footprint, International growth particularly through M&A • Opportunity to expand geographic market exposure • Large and fast-growing medical device CMO market Sub-sector focus • Focus on attractive therapeutic areas with strong gr
Slide 40: Lampenwelt
Lampenwelt Peter Wirtz Partner and Managing Director, Germany
Slide 41: 3i in Germany
3i in Germany • Frankfurt office since 1984 • 13 investment professionals • Strong core team with recent new hires • Market reputation as one of the oldest PE houses in Germany 41
Slide 42: Lampenwelt – it all started in a garage…
Lampenwelt – it all started in a garage… 1939 1976 1994 1998 2004 42
Slide 43: Leading European eCommerce player in the lighting space
Leading European eCommerce player in the lighting space • Founded in 2004, leading European online specialist in the lighting space • 45,000 SKUs; 50% of sales through private label products • Web shops in 15 European countries • Strong market position with ~10% market share in Germany, three times
Slide 44: Broad product base and wide geographic reach
Broad product base and wide geographic reach Large collection of own brand products Strong third-party brands 15 country websites 44
Slide 45: We acquired Lampenwelt in a proprietary process that leveraged our strengths
We acquired Lampenwelt in a proprietary process that leveraged our strengths • In-depth knowledge of the lighting sector through previous work on other Sector knowledge targets in the lighting / building materials sector • Review of many eCommerce targets over the last 2-3 years • Direct approach re
Slide 46: What we like about Lampenwelt
What we like about Lampenwelt Favourable market dynamics and shift 1 to online Leading online specialist with 2 scale advantages Resilient financial profile & 3 cash generation Dedicated and proven 4 management team 46
Slide 47: Favourable market dynamics
1 Favourable market dynamics Growth in online lighting market supported by strong underlying drivers Online lighting fixtures market CAGR CAGR (11-16) (16-21F) • Overall lighting fixtures market ~€1,100-1,200m ~14-16% ~12-14% expected to continue to grow by Switzerland ~14-16% ~12-14% 3-3.5% in Lamp
Slide 48: Leading online specialist with scale advantages
2 Leading online specialist with scale advantages Differentiated proposition vs Amazon and large online generalists • Lighting market is fragmented along a range of dimensions: # retailers & installers, # of wholesalers, # manufacturers, # brands, … Market structure • Compared to other end markets,
Slide 49: Resilient financial profile
3 Resilient financial profile Strong track record of profitable growth and cash generation Financial profile and track record (sales, €m) 75 61 50 37 27 30 17 10 0 0 0 1 1 4 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Accelerating professionalisation and internationali
Slide 50: Dedicated and proven management team
4 Dedicated and proven management team Founders continue to lead the business as CEO & COO Strong founder team Aligned with 3i • Thomas Rebmann founded the • Founders continue to lead the business in 2004 together with business as CEO and COO, his brother Andreas, when they respectively started to s
Slide 51: Strong BLN contribution
Strong BLN contribution Approach, diligence and ongoing support as non-executive directors • Worked with 3i on the approach and due diligence of Lampenwelt • Previous collaboration on a previous deal in the lighting space, as well as on a number of potential eCommerce investments • Former Schüco and
Slide 52: Project A involved as minority co-investor
Project A involved as minority co-investor to support further eCommerce professionalisation • Berlin based operational venture capital fund founded in 2012 • €260m assets under management across three funds • Focus on early stage digital / ecommerce / internet businesses • Team of ~100 operational e
Slide 53: Significant opportunities for value creation over the next 3-5 years
Significant opportunities for value creation over the next 3-5 years B2B International • Upside from B2B Germany • Penetration and scale in segment with focus on existing international electricians & installers markets • Potential market entry • Strengthen leading • Enter select number of via buy-an
Slide 54: The growth story continues…
The growth story continues… “Some businesses take time to ripen” “Growth with lighting fixtures” brand eins Frankfurter Allgemeine Sonntagszeitung May 2018 August 2018 54
Slide 55: …and a final aside on Action
…and a final aside on Action New store opening in Angers, France 13 September 2018 55