3i Group plc · LSE:III
3i — FY2002 Earnings Presentation
33 slides from 3i's earnings presentation, May 16, 2002
Slide 1: Results for year ended 31 March 2002
Results for year ended 31 March 2002 11
Slide 2: Preliminary results year ended 31 March 2002
Preliminary results year ended 31 March 2002 16 May 2002 2
Slide 3: A year of two halves
Results for year ended 31 March 2002 Brian Larcombe A year of two halves • Is the downturn over? • Stronger second half • Strategy confirmed • Management actions • Competitive position strengthened • Conditions continuing to improve 33
Slide 4: 3i strategy is to:
Results for year ended 31 March 2002 Brian Larcombe 3i strategy is to: • Develop businesses in each of the major venture capital markets • Balance the portfolio by sector, geography and stage of development • Invest in growth companies • Deliver network benefits 44
Slide 5: 3i markets and products
Results for year ended 31 March 2002 Brian Larcombe 3i markets and products Portfolio at 31 March 2002 10% 29% Quoted £502m Buy-outs £2,094m Early stage £1,046m Growth capital £1,468m 41% Total £5,109m 20% Excludes managed funds 55
Slide 6: European buy-out market £5m-£500m
Results for year ended 31 March 2002 Brian Larcombe European buy-out market £5m-£500m £bn % 25 20 18 23 20 22 16 20 Total transaction value 14 15 12 3i transaction value 11 14 14 10 10 9 9 3i market share % 10 7 8 6 5 4 2.2 1.9 2 1.5 1.0 1.7 0 0 1997 1998 1999 2000 2001 Year ended 31 December Source
Slide 7: 3i buy-out business
Results for year ended 31 March 2002 Brian Larcombe 3i buy-out business • Focus on £5m-£500m market • Objective to see 70% of the market • Targeting deals for value added potential • Process changes to enhance returns • €3bn Eurofund IV 77
Slide 8: European early stage market
Results for year ended 31 March 2002 Brian Larcombe European early stage market £bn % 12 49 50 10 11 40 35 Total transaction value 8 30 3i transaction value 6 3i market share % 6 20 18 4 9 10 10 2 2 0.9 0.2 0.1 0.4 0.1 0.3 0.6 0 0 1997 1998 1999 2000 2001 Year ended 31 December Source: Initiative Eu
Slide 9: 3i early stage business
Results for year ended 31 March 2002 Brian Larcombe 3i early stage business • Process changes to enhance network benefits • Clear sector organisation • Portfolio review 99
Slide 10: European growth capital
Results for year ended 31 March 2002 Brian Larcombe European growth capital £bn % 6 20 18 18 5 6 16 16 14 4 13 Total transaction value 12 11 3i transaction value 3 9 10 3 3 3i market share % 8 2 6 2 4 1 1 0.3 0.4 0.5 0.3 2 0.2 0 0 1997 1998 1999 2000 2001 Year ended 31 December Source: Initiative Eu
Slide 11: 3i growth capital business
Results for year ended 31 March 2002 Brian Larcombe 3i growth capital business • Local market with weaker competition • Investment opportunities sourced from the local network • Strong realisations 11 11
Slide 12: US
Results for year ended 31 March 2002 Brian Larcombe US • World’s largest market • Early and later stage investment • International network a major competitive advantage • Seeing the best opportunities 12 12
Slide 13: Asia Pacific
Results for year ended 31 March 2002 Brian Larcombe Asia Pacific • Volatile economies, now recovering • Venture capital market developing • North and South East Asia hubs • Japan - slowly developing buy-out market 13 13
Slide 14: Value of the network
Results for year ended 31 March 2002 Brian Larcombe Value of the network • Proprietorial deal flow • Apply Group resources to assess opportunities • Select the best • Add value The best network in the industry 14 14
Slide 15: Financial review
Michael Queen Financial review 15
Slide 16: Financial overview
Results for year ended 31 March 2002 Michael Queen Financial overview Total return - £m £(960)m Total return - % (19.3)% Final dividend 8.1p Net asset value 645p 16 16
Slide 17: Results by half year
Results for year ended 31 March 2002 Michael Queen Results by half year First half Second half Year £m £m £m Total return (1,097) 137 (960) Net cash flow (220) 118 (102) Net asset value 631p - 645p 17 17
Slide 18: Total return
Results for year ended 31 March 2002 Michael Queen Total return £m £m Revenue profit 120 Capital profits - Realised capital profits (39) - Unrealised value movement (890) (929) Organisational change costs (18) Goodwill (73) Costs allocated to capital, tax (60) and currency Total return (960) 18 18
Slide 19: Total return by investment product
Results for year ended 31 March 2002 Michael Queen Total return by investment product First half Year £m £m Technology investments (715) (937) Buy-outs and growth capital (308) 50 investments Goodwill (74) (73) Total return (1,097) (960) 19 19
Slide 20: Revenue profit
Results for year ended 31 March 2002 Michael Queen Revenue profit Year ended 31 March 2001 2002 £m £m Income from investments 243 253 Fees 72 56 Net interest payable (74) (68) Costs (121) (121) Costs of organisational change - (9) Goodwill - (2) Profit before tax 120 109 Tax (4) (3) Profit after tax
Slide 21: Realised capital profits
Results for year ended 31 March 2002 Michael Queen Realised capital profits • Net realised capital loss £(39)m • Equity realisations − proceeds £884m − net realised profit £7m • Positive equity uplift of 1% in falling stock markets 21 21
Slide 22: Unrealised value movement
Results for year ended 31 March 2002 Michael Queen - Financial review Unrealised value movement £(890)m £m (303) 0 130 (400) Quoted portfolio PE movement (181) Earnings growth (136) Provisions Downrounds and restructuring Other 22 22
Slide 23: Investment
Results for year ended 31 March 2002 Michael Queen Investment £m 2000 1,972 350 1600 1200 936 1,039 258 800 420 400 686 361 0 2001 2002 Year ended 31 March Buy-outs Early stage technology Growth capital 23 23
Slide 24: Net cash flow
Results for year ended 31 March 2002 Michael Queen Net cash flow £m Investment (804) Return flow 1,123 Net investment cash flow 319 Acquisition of Atle (347) Other (74) Net cash outflow (102) 24 24
Slide 25: Net cash flow - long term trend
Results for year ended 31 March 2002 Michael Queen Net cash flow - long term trend £m 2000 Other (inc. liquidity portfolio) 1500 Return flow Investment Net cash flow 1000 500 0 -500 -1000 Purchase of Acquisition of -1500 liquidity Atle, net of sale portfolio of liquidity -2000 portfolio 1992 1993 19
Slide 26: Funding strategy
Results for year ended 31 March 2002 Michael Queen Funding strategy • Match portfolio segments with appropriate funding • Raise funds ahead of need • Eurofund IV • Preferred securities issue − attractive market conditions − similar to preference shares − £300m 26 26
Slide 27: Balance sheet
Results for year ended 31 March 2002 Michael Queen Balance sheet 31 March 31 March 2001 2002 £m £m Investment assets 6,010 5,144 Other net assets/(liabilities) 61 (12) 6,071 5,132 Net borrowings 1,098 1,187 Shareholders’ funds 4,973 3,945 Preferred securities - - 6,071 5,132 Gearing 22% 30% 27 27
Slide 28: Balance sheet (pro forma)
Results for year ended 31 March 2002 Michael Queen Balance sheet 31 March 31 March 2001 2002 Pro forma £m £m £m Investment assets 6,010 5,144 5,144 Other net assets/(liabilities) 61 (12) (12) 6,071 5,132 5,132 Net borrowings 1,098 1,187 887 Shareholders’ funds 4,973 3,945 3,945 Preferred securities
Slide 29: Funds under management
Results for year ended 31 March 2002 Michael Queen Funds under management Unquoted funds under management Quoted funds under management £bn £bn 2.3 2.1 2.0 1.5 1.3 0.9 0.8 0.8 0.5 0.5 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 as at 31 March as at 31 March 29 29
Slide 30: Comparative return
Results for year ended 31 March 2002 Michael Queen Comparative return After 3 years 4.0% -1.7% -3.5% 5.0% After 5 years 7.7% 3i 6.7% FTSE All-Share 6.7% 4.7% FTSE 100 FTSE SmallCap (ex IT) After 7 years 11.3% 10.8% 11.0% After 10 years 13.8% 11.9% 30 30
Slide 31: Financial summary
Results for year ended 31 March 2002 Michael Queen Financial summary • Positive second half total returns • Positive cash flow from investment activities • Longer term out-performance record maintained • Strong balance sheet 31 31
Slide 32: An update
Results for year ended 31 March 2002 Brian Larcombe An update • Enterprise Barometer • Buoyant April • Go and others Improving outlook 32 32
Slide 33: Results for year ended 31 March 2002
Results for year ended 31 March 2002 33 33