3i Infrastructure PLC · LSE:3IN
3i Infrastructure — FY2013 Earnings Presentation
39 slides from 3i Infrastructure's earnings presentation, May 9, 2013
Slide 1: Annual results 2013
Annual results 2013 9 May 2013 Presentation of the results for the year to 31 March 2013
Slide 2: Chairman's introduction
Chairman’s introduction Peter Sedgwick Chairman 2
Slide 3: 2013 – a successful year for the Company
2013 – a successful year for the Company Achieved good growth in NAV, underpinned by the strong performance of the European portfolio, albeit with continued challenges in India Sold Alpha Schools for a considerable uplift to cost and ahead of carrying value Refinanced the Oystercatcher acquisi
Slide 4: Strategic update
Strategic update The Board’s annual review of strategy assessed our strategy and return objectives in the light of – market developments – 3i Infrastructure’s portfolio performance Key conclusions – no new investments in India – new investment focused on the core infrastructure and PPP markets i
Slide 5: Financial review
Financial review Stephen Halliwell 5
Slide 6: Financial highlights for the year
Financial highlights for the year Improved total return Total return of £89.1m, or 8.6% on opening shareholders’ equity 8.6% (2012: 5.6%) Progressive dividend, exceeding target Total dividend of 6.49p, or 5.5% on opening shareholders’ equity 5.5% Strong portfolio income generation Portfolio income g
Slide 7: Reconciliation of movements in NAV
Reconciliation of movements in NAV (£m) (3) Return supported by good income generation and strong value gains for the European portfolio (1) Net of prior year final dividend (2) Foreign exchange movements are addressed in slide 12 (3) Includes other movements of £(0.4)m 7
Slide 8: Dividend progression
Dividend progression Annual dividend (pence per share) +9.3% 6.49 5.72 5.94 5.30 5.50 5.00 3.52 2.86 2.97 3.20 3.30 3.00 2.86 2.97 2.97 2.00 2.10 2.20 2008 2009 2010 2011 2012 2013 September March Strong dividend progression 8
Slide 9: Costs
Costs (£m) £21.9m £20.2m 2.9 1.3 2.9 2.4 0.7 2.3 1.4 15.3 12.9 2012 2013 Advisory fees Performance fees Opex Deal Costs Finance costs Costs reduced year-on-year, driven by lower advisory fee rate 9
Slide 10: Balance sheet
Balance sheet (£m) Investment basis Investment basis Consolidated basis as at Mar 2013 as at Mar 2012 as at Mar 2013 Investment portfolio 918.7 890.8 1,222.6 Other net assets 5.4 2.4 0.4 Cash and cash equivalents 179.2 173.4 185.3 Borrowings - - (160.6) Net assets 1,103.3 1,066.6 1,247.7 Shareholder
Slide 11: Weighted average discount rate
Weighted average discount rate Portfolio weighted average discount rate (%) Weighted average discount rate reduced to 12.0% AWG – reduced to reflect sale of MFS and comparable transaction valuations Oystercatcher – reduced to reflect de-risking following the re-financing 11
Slide 12: Foreign exchange impact
Foreign exchange impact Portfolio currency exposure (%) 11% Sterling Euro Rupee 51% 38% Impact of foreign exchange movements on portfolio value (£m) Year to Six months to Year to Mar 2013 Sep 2012 Mar 2012 £/rupee (0.9) (4.9) (16.0) £/€ (net of hedging) 2.5 (1.0) (0.3) Net foreign exchange impact 1.
Slide 13: Portfolio update and strategic review
Portfolio update and strategic review Cressida Hogg 13
Slide 14: Our portfolio
Our portfolio 14 investments £919m portfolio value £179m cash balances 14
Slide 15: Investment and realisation activity
Investment and realisation activity Investment Realisations Dalmore £11.6m (out of a Alpha Schools Sold 50% £15m commitment) invested in holding in Alpha Schools to HICL the Dalmore Capital Fund, a for proceeds of £21.2m secondary PFI fund (vs opening value of £18.5m Supreme Roads £4.9m and co
Slide 16: Oystercatcher
Oystercatcher Operational highlights for the year Refinancing of the acquisition debt facility completed in March 2013, resulting in a de-risking of the investment and allowing a reduction in the discount rate Terminals performed ahead of expectations EBITDA up 8.4% compared to the prior year
Slide 17: Elenia (formerly LNI)
Elenia (formerly LNI) Operational highlights for the year Post-acquisition corporate reorganisation completed in January, allowing Elenia to pay its first distribution (£20.6m to the Company) Rebranding exercise completed last year Governance enhanced through appointment of new independent cha
Slide 18: AWG
AWG Operational highlights for the year Income down on prior year, due to incremental capex on drought mitigation, as well as to the impact on demand of record rainfall since April 2012 EBITDA up 2.1% compared to the prior year Good progress in implementation of regulatory settlement, with foc
Slide 19: Eversholt Rail Group
Eversholt Rail Group Operational highlights for the year EBITDA up 2.8% on the previous year Strong cash flows, allowing £6.6m unscheduled shareholder loan repayment Eversholt’s 395 trains showcased in the Olympics Javelin Service “Fresh start” for refranchising programme and scheduled start
Slide 20: Social infrastructure investments
Social infrastructure investments Operational highlights for the period Elgin Octagon All 16 projects Good operational and performing in line with financial performance the investment case “Excellent” rating for standards of food, cleanliness, privacy and dignity in an inspection in July by pa
Slide 21: 3i India Infrastructure Fund
3i India Infrastructure Fund Operational highlights for the period Power Transportation Performance affected by Krishnapatnam Port still affected – availability and pricing of fuel, by iron ore export ban, but exacerbated by rupee weakness performance has been resilient as – strain on State Elec
Slide 22: Our investment strategy
Our investment strategy Focus on our core infrastructure capabilities to deliver stable returns and our enhanced dividend yield to our shareholders 22
Slide 23: Portfolio performance
Portfolio performance Portfolio asset return throughout holding period (£m) 16% asset IRR since IPO Strong asset IRR since IPO underpinned by performance of core and social infrastructure investments 23
Slide 24: Our market
Our market Demand for infrastructure assets continues to grow, as investors seek yield in a low interest rate environment As infrastructure M&A volumes remain muted, price points have risen across the infrastructure market, driving down projected returns Economies, particularly in Europe, stru
Slide 25: Strategic update
Strategic update Core portfolio Diverse portfolio with strong track record of returns provides bedrock a bedrock for future development Target Attractive market opportunity in core infrastructure and opportunities PPP projects for skilled investors Return Low return volatility in Europe diluted by h
Slide 26: Portfolio balance
Portfolio balance Over time, the portfolio will rebalance in favour of less volatile core infrastructure and PPP project investments in the developed world, which can deliver a balance of yield and capital growth 26
Slide 27: Our investment proposition
Our investment proposition We have a portfolio and strategy in place to deliver a 10% annual return and the enhanced dividend objective with reduced volatility The European portfolio continues to deliver returns ahead of our expectations and provides a bedrock for future development The market
Slide 28: Additional financial information
Additional financial information
Slide 29: Valuation summary
Valuation summary (£m) Value Invest- Divest- Value Forex Value Profit on Income Asset March ment in ment in move- trans- March disposal in year TR in 2012 year year ment lation 2013 year AWG 209.4 - - 21.2 - 230.6 - 15.5 36.7 Elenia 201.0 - - 0.6 3.9 205.5 - 20.6 25.1 Eversholt 154.2 - (6.6) 6.0 - 1
Slide 30: Portfolio diversification at March 2013
Portfolio diversification at 31 March 2013 By geography By sector By maturity 1% 11% 10% 10% 51% 51% 38% 39% 89% UK and Ireland Social infrastructure Early stage Continental Europe Transportation Operational growth Asia Utilities Mature 30
Slide 31: Total return for the year to March 2013
Total return for the year to 31 March 2013 Investment basis Investment basis Consolidated basis (£m) 31 Mar 2013 31 Mar 2012 31 Mar 2013 Realised profits/(losses) over fair value on disposal of investments 2.7 (4.7) 2.7 Unrealised profits on the revaluation of investments 24.7 7.0 34.4 Foreign excha
Slide 32: Advisory fee rate
Advisory fee rate Portfolio analysis by advisory fee rate (£m) Fees are charged on opening portfolio value and the cost of new investment on the following basis ─ 1.5% for assets held for less than five years ─ 1.25% for assets held for more than five years ─ 1.5% for new investment 32
Slide 33: Income, costs and dividends to shareholders
Income, costs and dividends to shareholders £73.5m 2013 £20.2m £57.2m * £74.6m 2012 £21.9m 51.7m Income, including interest income Costs Dividend * Attributable to increase of dividend payment to 5.5% of opening NAV 33
Slide 34: Sensitivities
Sensitivities Inflation linkage Assets with revenues: Directly linked to UK inflation 21% Directly linked to Sensitivity +1% -1% 37% (for European assets only) point point Finnish inflation Partly linked to Change in inflation over underlying £17.7m £(19.2)m 23% assumption for next 2 years inflation
Slide 35: Total shareholder return
Total shareholder return Total shareholder return (31 March 2007 – 31 March 2013) 72.2% 71.5% 44.4% 30.6% 9.5% -43.2% 3i Infrastructure FTSE 100 FTSE 250 FTSE 350 FTSE 350 FTSE 350 Gas, General Banks Water and Financials Multiutilities Source: Bloomberg 35 Calculated as share price performance with
Slide 36: About 3i Infrastructure
3i Infrastructure plc @ About 31 Infrastructure
Slide 37: Governance and fees
Governance and fees Board of Independent Chairman, five independent non-executive directors and one Directors 3i Group appointed non-executive director Committed to observe requirements of the UK Corporate Governance Code Responsibilities - acts as investment Committee / approves investment op
Slide 38: Senior members of the London Investment Advisory team
Senior members of the London Investment Advisory team Cressida Hogg Managing Partner 17 years at 3i, Managing Partner of the Infrastructure business line since 2009 Co-founded 3i’s Infrastructure business in 2005 Manages the team and leads relationship with 3i Infrastructure’s Board Member o
Slide 39: Sector focus
Sector focus Asset intensive businesses, providing essential services Transport Utilities Social infrastructure Airports Water Healthcare Ports Electricity and gas Education Toll roads distribution Defence Rail Midstream energy Government Waste processing accommodation Oil