3i Group Plc · LSE:III
3i — FY2022 Earnings Presentation
53 slides from 3i's earnings presentation, May 12, 2022
Slide 1: Results for the year to 31 March 2022
Results for the year to 31 March 2022 12 May 2022
Slide 2: Business review
Business review Simon Borrows Chief Executive
Slide 3: An excellent result exceeding our financial targets
An excellent result exceeding our financial targets Year to 31 March 2022 Group Private Equity Infrastructure Total return NAV Gross investment return Gross investment return on equity per share 47% 21% 44% 1,321p Proprietary capital invested Cash income Gearing Total dividend £529m1 £91m per share
Slide 4: Our purpose
Our purpose We generate attractive returns for our shareholders and co-investors by investing in private equity and infrastructure assets. As proprietary capital investors we have a long-term, responsible approach. We create value through thoughtful origination, disciplined investment and active man
Slide 5: How we deliver our purpose
How we deliver our purpose Permanent capital A long-standing network An experienced and diverse team Careful portfolio construction Rigorous portfolio management Strong values and institutional culture A strong brand and reputation 5
Slide 6: Thematic approach to investment
Thematic approach to investment We back businesses that benefit from long-term structural growth trends Demographic and social Climate change and Challenges to globalisation and the economic order change resource scarcity Value for money Internationalisation Digitalisation, technological disruption
Slide 7: Advancing our sustainability agenda
Advancing our sustainability agenda Significant progress in FY2022 Governance Environment Social • New ESG Committee set up • Completing process of GHG • Engagement of DE&I to advise the Chief Executive emissions data collection from consultant to identify areas portfolio for further improvement • R
Slide 8: Private Equity: Excellent performance in FY2022
Private Equity Excellent performance in FY2022 Excellent performance across the portfolio • 47% gross investment return, predominantly earnings driven • 93% of portfolio growing earnings in the 12 months to December 2021 Good level of investment activity and strong cash generation from the portfolio
Slide 9: Strong earnings growth across the portfolio
Private Equity Strong earnings growth across the portfolio Portfolio earnings growth of top 20 PE investments1 ≥ 30% £7,165m (Action) £1,059m 8 companies 20 - 29% £269m 1 company 10 - 19% £1,254m 3 companies 0 - 9% £1,453m <0% £777m 1 Includes top 20 Private Equity companies by value. This represent
Slide 10: Portfolio value growth of £3.5bn predominantly performance driven
Private Equity Portfolio value growth of £3.5bn predominantly performance driven Largest value increases (>£20m)1 Largest value declines (>£20m) Portfolio Value Value at Driver of value Portfolio Value Value at Driver of value company growth 31 Mar movement company decline 31 Mar movement (excl FX)
Slide 11: Action – strong 2021 performance despite continued Covid disruption
Private Equity Action – strong 2021 performance despite continued Covid disruption +23% +36% +11% 93% 267 1,983 Sales growth EBITDA growth LFL growth Cash conversion Net new stores Total stores An unbroken high growth track record Expansion across Europe continues1 EBITDA (€m) Netherlands Poland 401
Slide 12: Action – update
Private Equity Action – update • Q1 trading: net sales of €1.8bn (42% increase vs Q12021), 28% LFL sales, LTM EBITDA of €932m • Q2 trading: good P4 to start Q2 • Store openings: 4 pilots opened in Spain so far, on track to open more stores in 2022 than last year • Outlook: on track for another year
Slide 13: Value creation | SaniSure (2019)
Private Equity Value creation | SaniSure (2019) £277m value Built up the platform through acquisitions • Platform created by combining four complementary companies within nine 3.7x money multiple1 months of ownership • Scaled organically and with three further acquisitions Significant further growth
Slide 14: Value creation | BoConcept (2016)
Private Equity Value creation | BoConcept (2016) £184m value Improved store base and accelerated store expansion • Expanded and repositioned store base with +70 net new stores opened 2.4x money multiple1 • Strengthened the franchisee base, resulting in a significant decline in the number of store cl
Slide 15: Value creation | Hans Anders (2017)
Private Equity Value creation | Hans Anders (2017) £345m value Significant expansion, organically and through acquisitions 1.8x money multiple1 • Acquired eyes+more in Germany and Belgian franchisee for eyes+more • Expanded store base, particularly in Belgium and Germany Significant operational impr
Slide 16: Good level of new investment in a challenging environment…
Private Equity Good level of new investment in a challenging environment… £69m proprietary capital £53m proprietary capital £46m proprietary capital investment investment investment £87m proprietary capital £43m proprietary capital £37m proprietary capital investment investment investment 16
Slide 17: …supplemented by continued bolt-on investment activity
Private Equity …supplemented by continued bolt-on investment activity + + + + Cardea Catheter Innovations + + + + + + + + JATech Services Eyes! NV GL Engineering 17
Slide 18: New investment: Mepal
Private Equity New investment: Mepal • Lifestyle consumer brand • Strong track record of innovation and design • Important focus on ESG • £87m 3i investment Organic international and online growth opportunity Netherlands Consumer 18
Slide 19: Our Private Equity portfolio is increasingly cash generative
Private Equity Our Private Equity portfolio is increasingly cash generative Full and partial realisations Refinancings Distributions Magnitude £346m BoConcept £73m Action £284m Basic-Fit £146m Royal Sanders £80m1 Hans Anders £19m BoConcept £17m SaniSure £59m Tato £14m Other £28m Wilson HCG £10m Othe
Slide 20: Realisation: Sale of Q Holding’s QSR division
Private Equity Realisation: Sale of Q Holding’s QSR division • Sale of QSR to Datwyler agreed in April 2022 • Proceeds to 3i of c$255m after debt repayment • 2.5x money multiple • Uplift of >100% for valuation of combined group to March 2021 valuation 20
Slide 21: Infrastructure
Infrastructure Making progress on strategic initiatives Strong performance across portfolios • 21% gross investment return, with strong performance across investment vehicles and assets • 17% increase in 3iN’s share price in the year • US infrastructure portfolio continues to perform well Good contr
Slide 22: Scandlines
Scandlines Strong performance despite continued disruption to leisure traffic from Covid • Gross investment return of £112m, or 26% of opening value • Freight volumes in 2021 above 2019 levels • Gradual recovery of leisure traffic in summer, before emergence of Omicron • Resumptions of distributions
Slide 23: Financial review
Financial review Julia Wilson Group Finance Director 23
Slide 24: An excellent financial performance
An excellent financial performance NAV per share (pence) 1600 1400 396 (41) 33 (40) 1 1,321 1200 1000 947 25 800 600 400 1 2 31-Mar-21 Realised Value growth Net carry FX Other Dividends 31-Mar-22 profits payable NAV per share up 39% to 1,321 pence and total return on equity of 44% 1 FX net of deriva
Slide 25: Action valuation
Private Equity Action valuation Enterprise value (post discount) €18.73bn • LTM EBITDA to P3 2022 of €932m €15.63bn • LTM run-rate EBITDA earnings of €1,012m €12.62bn • 18.5x (Mar-21:18.5x) multiple post discount €11.26bn • Strong cash flow with €669m paid in dividends to all shareholders Sep-20 Mar
Slide 26: Action performing strongly compared to peers
Private Equity Action performing strongly compared to peers EV/LTM EBITDA 37.5x 35.0x 32.5x 30.0x 27.5x Costco, 26.2x 25.0x Dollarama Inc., 25.3x 22.5x 20.0x Grocery Outlet, 17.1x 17.5x Five Below, 16.9x Avg, 16.5x 15.0x Dollar General, 14.4x 12.5x Pepco, 12.7x Ollie’s, 10.8x 10.0x B&M, 9.0x 7.5x Ma
Slide 27: Strong value growth from high quality portfolio valued at £14.3bn
Strong value growth from high quality portfolio valued at £14.3bn Value movement by basis (£ million) 1 2,655 Action Performance 1 584 PE Performance increases 1 (101) PE Performance decreases 132 Sum of the parts 241 £ Multiples 162 Quoted 101 Scandlines 43 DCF 7 Other £3.8bn value increase driven
Slide 28: LTM valuation multiples compared to the peer set
Private Equity LTM valuation multiples compared to the peer set1 £241 million of value growth from an increase in multiples 1 Valuation multiples used for 23 companies valued on an earning basis compared to 3i comparable set of peer companies. 28
Slide 29: Excellent performance and good level of transaction activity in Private Equity
Excellent performance and good level of transaction activity in Private Equity Year to 31 March £ million 2022 2021 Realised profit 228 29 Unrealised profit 3,545 2,161 Portfolio income 410 117 Foreign exchange on investments (11) (371) Gross investment return 4,172 1,936 % of opening portfolio 47%
Slide 30: Strong performance from the Infrastructure portfolio
Strong performance from the Infrastructure portfolio Year to 31 March £ million 2022 2021 3iN 137 132 US Infrastructure 36 26 Other funds 5 10 Portfolio revaluation 178 168 Gross investment return 21% 16% Realisation proceeds 104 104 Cash investments 85 2 Cash income 91 67 Note: Investment and reali
Slide 31: Good performance from Scandlines
Good performance from Scandlines Year to 31 March £ million 2022 2021 Gross investment return 112 25 % of opening portfolio 26% 6% Year to 31 March £million 2022 2021 Valuation 533 435 31
Slide 32: Operating cash position
Operating cash position Year to 31 March £ million 2022 2021 Private Equity 346 64 Infrastructure 91 67 Scandlines 13 − Cash income 450 131 Operating cash expenses1 (110) (108) Operating cash profit 340 23 Objective is to at least break even 1 Operating cash expenses includes leases paid. 32
Slide 33: Simple balance sheet and conservative capital management
Simple balance sheet and conservative capital management £14,305m • High quality, strong portfolio £229m • Gross cash held centrally with no material restrictions £975m • Gross debt made up of bonds expiring in 2023, 2032 and 2040 £500m • Undrawn RCF at 31 March 2022 and maturity extended to 2027 £7
Slide 34: Total dividend set at 46.5 pence per share
Total dividend set at 46.5 pence per share • Our dividend policy aims to maintain or grow the dividend year-on-year subject to: − maintaining our conservative balance sheet strategy − careful consideration of the outlook for investments and realisations and market conditions Second FY2022 dividend o
Slide 35: Our ten-year track record and outlook
Our ten-year track record and outlook Simon Borrows Chief Executive
Slide 36: Our strategic transformation
Our strategic transformation Consistent execution of a clearly defined strategy over the last 10 years 2012 2022 • 472 employees in • 236 employees in 19 offices1 7 offices • 1.7% operating cost/AUM • 0.6% operating cost/AUM Overhaul of • Defined market and asset • Debt management processes and grou
Slide 37: Our ten-year track record
Our ten-year track record Strong value creation for shareholders NAV per share (GBP) £10.1bn NAV growth 13.2 +17% CAGR since FY2012 9.5 7.2 8.2 8.0 6.0 4.0 4.6 2.8 3.1 3.5 FY121 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Dividend per share (pence) £2.5bn dividends paid to shareholders FY2013–
Slide 38: Outlook
Outlook 3i can continue to deliver strong returns in the future Permanent capital, long-term approach Proven model, underpinned by robust processes and price discipline Thematic approach to investment, with exposure to long-term secular growth trends Resilient portfolio, positioned to withstand curr
Slide 39: Pure alternative asset exposure with focus and investment discipline
Pure alternative asset exposure with focus and investment discipline Infrastructure Private equity £23bn AUM • Exposure to sectors with strong tailwinds • Exposure to sectors with strong tailwinds • Balance of realisation opportunities and • Management fee contribution to cash profit long-term compo
Slide 40: Additional information
Additional information
Slide 41: Our business model
Our business model Delivering sustainable returns over the cycle What we offer Value creation Who benefits Permanent capital ➔ Conservative balance sheet management ➔ Tight grip on operating costs A long-standing office ➔ Operating cash profit network An expert and diverse team Shareholders 1 Carefu
Slide 42: Q4 NAV increased from 1,235 pence to 1,321 pence
Q4 NAV increased from 1,235 pence to 1,321 pence NAV per share (pence) 1360 14 (19) 1340 90 (12) 12 1,321 1320 1300 1280 1260 1240 1,235 1 1220 1200 1180 1 2 31-Dec-21 Realised profit Value growth Net carry Fx Other Dividends 31-Mar-22 payable 1 FX net of derivatives. 2 Other includes portfolio inco
Slide 43: 3i Group large investments
3i Group 20 large investments Investment Business description Valuation Valuation Mar 22 (£m) Mar 21 (£m) Action General merchandise discount retailer 7,165 4,566 3i Infrastructure plc Quoted investment company, investing in infrastructure 934 797 Scandlines Ferry operator between Denmark and German
Slide 44: Group investment portfolio
Group investment portfolio Portfolio value at 31 March 2022 (£m) Portfolio value at 31 March 2021 (£m) 704 612 418 362 533 435 934 797 1,319 4,566 7,165 745 2,210 2,062 1,022 829 Action 2013-2016 Private Equity Action 2013-2016 Private Equity 2016-2019 Private Equity 2019-2022 Private Equity 2016-20
Slide 45: Private Equity portfolio by value
Private Equity portfolio by value By office location (%) By sector (%) 13% 13% 5% 8% 8% 7% 5% 58% 67% 16% Netherlands France Action (Consumer) Consumer Germany UK Industrial Technology B&TS* US Others Healthcare Portfolio of 37 investments (31 March 2021: 33) * Business and Technology Services. 45
Slide 46: Carried interest payable a result of strong value growth in the year
Private Equity Carried interest payable a result of strong value growth in the year Year to 31 March 2022 2021 £ million Income statement Carried interest receivable 3 (3) Carried interest payable (416) (173) Net total expense (413) (176) Year to 31 March 2022 2021 £ million Balance sheet Carried in
Slide 47: Top assets continue to show good earnings growth
Private Equity Top 20 assets continue to show good earnings growth 3i carrying value at 31 March 2022 (£ million) 8 Number of companies: 8,224 4 4 3 1 1,453 1,254 269 777 <0% 0-9% 10-19% 20-29% ≥30% Last 12 months’ adjusted earnings growth1 1 Includes top 20 Private Equity companies by value. This r
Slide 48: Portfolio leverage
Private Equity Portfolio leverage Ratio of net debt to adjusted earnings1 by 3i value at 31 March 2022 (£ million) 7,595 448 1,094 1,121 994 236 - <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x >6x 3.3x leverage across the whole portfolio 1 This represents 92% of the Private Equity portfolio by value (31 Ma
Slide 49: Infrastructure: AUM of £5.7 billion at March 2022
Infrastructure AUM of £5.7 billion at 31 March 2022 AUM by fund or strategy 5% 4% 3i Infrastructure plc 6% 3i Managed Infrastructure Acquisitions LP 8% 3i European Operational Projects Fund 5% 54% BIIF 3i managed accounts 18% 3i North America Infrastructure platform US Infrastructure AUM increased b
Slide 50: Net asset exposure by currency
Net asset exposure by currency 2% Net assets Change Impact Currency Fx rate £m YTD £m 12% 16% Sterling n/a 1,562 n/a - Euro1 1.1833 8,953 0.8% (70) US dollar 1.3165 2,033 (4.6)% 81 Danish krone 8.8031 184 0.8% (2) 70% Other n/a 22 n/a - Total 12,754 9 Sterling/non-revaluing Euro US dollar Danish kro
Slide 51: Cash movements
Cash movements Year to 31 March £ million 2022 2021 Cash inflow Realisation proceeds 758 319 Portfolio income 450 131 Proceeds from long-term borrowing - 395 Other net cash inflow 15 23 1,223 868 Cash outflow Purchase of investments (596) (479) Operating expenses1 (110) (108) Dividend paid (389) (33
Slide 52: Operating expenses
Operating expenses Year to 31 March £ 2022 2021 Total operating expenses 128m 112m AUM 23bn 17bn 0.6% 0.7% Our operating costs equate to less than 1% of our AUM 52
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