3i Group plc · LSE:III
3i — 3i European Technology Trust — FY2001 Earnings Presentation
39 slides from 3i's earnings presentation, June 2001
Slide 1: The world is yours
U The world is yours
Slide 2: 3i European Technology Trust Preliminary Results Year ended 30 April 2001
3i European Technology Trust plc Preliminary Results Year ended 30 April 2001 Mike Prentis June 2001 2
Slide 3: Key Messages
Results for year ended 30 April 2001 Key Messages • Very difficult technology markets • Performed in line with main technology indices • Strategy and focus remain unchanged • Maintained policy of being fully invested • Medium to long term prospects remain good 3
Slide 4: Company Facts
Results for year ended 30 April 2001 Company Facts Investment objective - to achieve capital growth by: - investing in quoted companies with a significant focus on technology - principally based in Europe - not life sciences companies • Focus on small and mid cap companies. • Net assets at 30 April
Slide 5: Trust's Investment Policy
Results for year ended 30 April 2001 Trust’s Investment Policy • To be well diversified • To be fully invested • Neutral gearing policy of 5-8% of NAV • Individual active stock positions usually <3% of NAV • Like to get to know management • Look for companies in medium term growth markets, with sust
Slide 6: Benefits of the 3i Link
Results for year ended 30 April 2001 Benefits of the 3i Link • Ability to buy stock from 3i on IPO • Access to knowledge on quoted technology companies pre-IPO • Ability to sound out members of our international technology team • 3i technology resources are very substantial • Use of sector groupings
Slide 7: New Issues
Results for year ended 30 April 2001 New Issues • Since launch of the Trust on 10 April 2000, the Trust has bought the following stocks from 3i on flotation:- Date of Cost of Valuation* Growth Change in Change investment investment 30/4/01 since IPO benchmark relative to since IPO benchmark £m £m %
Slide 8: Highlights
Results for year ended 30 April 2001 Highlights • Performance - 3i European Technology Trust (NAV) -53.8% - Composite Benchmark -55.3% -FTSE techMARK 100 Index -42.8% -Neuer Markt Price Index -67.8% - FTSE eTX Innovation Index -56.8% - Nasdaq Composite Index -45.2% • Shares traded at a premium for m
Slide 9: Relative Performance
Results for year ended 30 April 2001 Relative Performance Performance in line with indices and comparative trust Relative performance 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 28/04/00 12/05/00 26/05/00 09/06/00 23/06/00 07/07/00 21/07/00 04/08/00 18/08/00 01/09/00 15/09/
Slide 10: Performance Analysis
Results for year ended 30 April 2001 Performance Analysis % 3i European Technology relative NAV performance 1.5 Controllable factors - Phasing investment in May-July 2000 5.6 - Expenses (1.2) - Sector allocation 4.0 - Stock selection 7.5 - Currency/residual/errors (10.3) 5.6 Uncontrollable factors -
Slide 11: What went wrong? What went right?
Results for year ended 30 April 2001 What went wrong? • Didn’t anticipate such a major correction in ICT spending • Ideally would have been partly invested in cash • Held some stocks too long after profit warnings • Didn’t trade in stocks What went right? • Some good IPO performances from 3i portfol
Slide 12: Software and Computer Services
Results for year ended 30 April 2001 Software and Computer Services Software & services 60.00% 55.00% 50.00% 45.00% 40.00% 35.00% 30.00% De 0 00 Fe 1 M 0 1 M 1 1 Au 0 Se 0 O 0 00 No 0 0 0 r- 0 0 r- 0 0 -0 l-0 0 0 -0 -0 v- n- n- b- g- p- c- ar ct ay Ju Ap Ap Ju Ja ETT 50:50 benchmark 12
Slide 13: Software and Computer Services
Results for year ended 30 April 2001 Software and Computer Services Software • Delays as customers re-examine spending priorities • ‘Non discretionary’ spending proves not to be • Focus on software to reduce costs rather than increase revenues • Trust’s major holdings: - RM - defensive, UK, benefits
Slide 14: Software and Computer Services: IT Services
Results for year ended 30 April 2001 Software and Computer Services IT Services • Outsourcing – IT outsourcing/medium term contractual revenues – R&D outsourcing – Investments include: – Guardian IT - business continuity/disaster recovery – Xansa/ITNET - outsourcing • Systems Integration – Prefer co
Slide 15: Software and Computer Services: Consultancy
Results for year ended 30 April 2001 Software and Computer Services • Consultancy − Weakening utilisation rates − Job cuts by KPMG Consulting, Accenture, Cap Gemini − Trust not heavily exposed − Investments includes: − HiQ - niche telecoms consulting 15
Slide 16: Communications and Networking
Results for year ended 30 April 2001 Communications and Networking Communications & networking 30.00% 25.00% 20.00% 15.00% 10.00% De 0 00 Fe 1 M 0 1 M 1 1 Se 0 O 0 Ja 0 Au 0 No 0 0 0 r- 0 0 r- 0 0 -0 0 0 l-0 -0 -0 0 v- n- n- b- g- p- c- ar ct ay Ju Ap Ap Ju ETT 50:50 benchmark 16
Slide 17: Communications and Networking: Fixed Line
Results for year ended 30 April 2001 Communications and Networking Fixed Line • Significantly above trend spending on networks in 1999/2000 • Telecoms operators heavily indebted and achieving poor returns • Spending now cut substantially • Systems and components suppliers have seen dramatic reversal
Slide 18: Communications and Networking: Wireless
Results for year ended 30 April 2001 Communications and Networking Wireless • Massive payments for 3G licenses in UK/Germany • Further delays to 3G rollout • Wireless operators heavily indebted/struggling to fund infrastructure build • Delays in introductions of 2.5G handsets • Consumers waiting for
Slide 19: Sector Preferences
Results for year ended 30 April 2001 Sector Preferences • Customer care and billing software – Operators must have the raw material to be able to bill customers – Preferred stocks: Comptel, Intec Telecom • Development of future handsets/PDAs – R&D spend less likely to be cut – Increasingly R&D being
Slide 20: e-Business
Results for year ended 30 April 2001 e-Business e-Business 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% De 0 00 Fe 1 M 0 1 M 1 1 Au 0 Se 0 00 00 No 0 0 0 r- 0 0 r- 0 0 -0 l-0 0 -0 -0 v- n- n- b- g- p- c- ar ct ay Ju Ap Ap Ju Ja O ETT 50:50 benchmark 20
Slide 21: Electronics and other technologies
Results for year ended 30 April 2001 Electronics and other technologies Electronics & other technologies 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% De 0 00 Fe 1 M 0 1 M 1 1 Au 0 Se 0 00 Ja 0 No 0 0 0 r- 0 0 r- 0 0 -0 l-0 0 -0 -0 0 v- n- n- b- g- p- c- ar ct ay Ju Ap Ap Ju O ETT 50:50 benchmark 21
Slide 22: Electronics and other technologies
Results for year ended 30 April 2001 Electronics and other technologies • Sector investments break down as follows: Major investments % Semiconductor capital equipment (incl components) ASML, Suess MicroTech 11.1 Semiconductors (including wafers) Elmos, SOITEC 9.2 Digital TV Loewe, Thomson Multimedi
Slide 23: Electronics and other technologies
Results for year ended 30 April 2001 Electronics and other technologies • Sector allocation good as sector outperformed benchmark • Semiconductor capital equipment – our investments have good technology and market positions – book to bill ratio has fallen dramatically – 2002 could be a rebound year
Slide 24: Electronics and other technologies: Semiconductors and Smart Cards
Results for year ended 30 April 2001 Electronics and other technologies Semiconductors • Trust’s focus is companies involved in: – making specialist wafers e.g. SOITEC, Okmetic, IQE – automotive sector e.g. Elmos • Limited exposure to PCs and wireless • Investments generally performing well Smart Ca
Slide 25: Geographical Breakdown
Results for year ended 30 April 2001 Geographical Breakdown UK Germany 8.0% 3.4% France Netherlands 6.4% Finland Sweden 7.2% 45.5% Other European 12.3% 17.2% 25
Slide 26: Market Capitalisation Analysis
Results for year ended 30 April 2001 Market Capitalisation Analysis 45 40 35 30 25 20 15 10 5 0 £0- 500m 250m £251- £5bn+ £501- 1000m 5000m £1001- 26
Slide 27: Change of Benchmark
Results for year ended 30 April 2001 Change of Benchmark • Switch from composite benchmark to FTSE eTX Innovation index on 1 May 2001 • New Benchmark - Excludes life sciences companies and Eurotop 300 constituents - Is pan-European - French stocks 25% • Implications - Trust will continue to invest i
Slide 28: Outlook
Results for year ended 30 April 2001 Outlook • Unclear how marked the technology slowdown in Europe will be • GDP growth in UK and Eurozone weakening but close to trend • Europe has not had the same high level of ICT spending as US - downturn should be less marked • If US recovers quite rapidly, thi
Slide 29: Conclusion
Results for year ended 30 April 2001 Conclusion • A disappointing year in terms of net asset value performance. • Short term uncertainties remain. • Medium/long term - prospects remain very attractive. • Trust provides exposure to a good spread of interesting small/mid cap European technology compan
Slide 30: Top 20 Holdings as at 30 April 2001
Results for year ended 30 April 2001 Top 20 Holdings as at 30 April 2001 % of NAV % of NAV 1. Jenoptik 3.5 11. Suess Microtec 1.9 2. Kontron Embedded Comps 2.8 12. royalblue 1.9 3. TTP Com 2.8 13. NDS Group 1.8 4. EDB Business Partner 2.6 14. Articon-Integralis 1.8 5. Guardian IT 2.6 15. ASM Lithogr
Slide 31: Key differentiating features of the Trust
Results for year ended 30 April 2001 Key differentiating features of the Trust • Only UK Investment Trust giving institutions pure exposure to pan-European small/mid cap technology stocks. • Trust gives exposure to stocks not cash - managers are not trying to time markets • 3i link gives preferentia
Slide 32: Investment Process
Results for year ended 30 April 2001 Investment Process Typical Nature /Source IDEAS - Brokers/analysts - Benchmark constituents - IPOs (3i and other) - Sector reviews/discussions with 3i sector teams - Board sector discussions DUE DILIGENCE - Meet management - Reference internally with Industry Gro
Slide 33: The Management Team
Results for year ended 30 April 2001 The Management Team Mike Prentis: Joined 3i Group plc in 1986, becoming a Local Director in 1995. Managed 3i Smaller Quoted Companies Trust plc from July 1999 to February 2000. Catriona Hamilton: Joined 3i Group in 1999, becoming a member of 3i’s Southern Technol
Slide 34: The Board
Results for year ended 30 April 2001 The Board Patrick Gifford, Chairman Formerly Chief Executive of Fleming Investment Trust Management and a director of Robert Fleming Holdings. Chairman of Fleming Japanese Smaller Companies Trust and a director of several other investment trusts. Nick Pettinati F
Slide 35: The Board
Results for year ended 30 April 2001 The Board Dr Richard Summers Executive Director, 3i Group plc. Responsible for 3i’s continental European and technology business. Non-executive director of 3i Bioscience Trust. Professor Jim Norton Head of e-Business policy at the Institute of Directors, and a no
Slide 36: About the Manager
Results for year ended 30 April 2001 About the Manager • 3i Investments plc manages quoted assets of approximately £2.3bn. − manages quoted investments of 3i Group, which are heavily biased towards technology − also manages 3i Bioscience Trust, 3i Smaller Quoted Companies Trust, 3i UK Select and the
Slide 37: Shareholder Analysis as at May 2001
Results for year ended 30 April 2001 Shareholder Analysis as at 1 May 2001 % shareholding Pension funds 57 Insurance companies 15 Investment/unit trusts 11 Other institutional 9 Individuals 2 Other 6 100 APPENDIXVII 37
Slide 38: 3i's Definition of Technology by Sub-Sector
Results for year ended 30 April 2001 3i’s Definition of Technology by Sub-Sector • Communications and Networking – companies that create and enable the information highway – includes companies providing value - added services, content delivery, fixed and wireless infrastructure, equipment, component
Slide 39: Disclaimer
Disclaimer This document contains details of the 3i European Technology Trust (“3i ET”) and is a summary of an oral presentation (“Presentation”) by executives of 3i Investments plc. Neither this document nor any Presentation constitutes or forms part of, an offer for sale or subscription of, or a s
3i European Technology Trust — FY2001 Earnings Presentation on 6ix