3i Group Plc · LSE:III
3i — FY2019 Earnings Presentation
43 slides from 3i's earnings presentation, May 16, 2019
Slide 1: Results for the year to 31 March 2019
Results for the year to 31 March 2019 16 May 2019
Slide 2: A strong result for the year
A strong result for the year Year to 31 March 2019 Group Private Equity Infrastructure Corporate Assets Total return Total dividend Proprietary capital Cash income Reinvestment in on equity per share invested Scandlines 18% 35p £332m £82m £529m NAV per share Net cash Realisation 3iN TSR Dividend inc
Slide 3: The market context vindicates our approach to investment
Private Equity The market context vindicates our approach to investment We have clear • We invest in the true mid market (EV of €100-500m) investment filters • We focus on clearly defined sectors and geographies We drive • We identify long-term secular growth trends earnings growth • We invest with
Slide 4: Our approach to value creation - spotlight on buy-and-build
Private Equity Our approach to value creation - spotlight on buy-and-build Why buy-and- What makes a What is required build? good buy-and- to get this build candidate? strategy right? • Focus on smaller • Growth underpinned • Deep sector initial investments by a clear secular knowledge growth trend
Slide 5: Spotlight on buy-and-build: Cirtec Medical
Private Equity Spotlight on buy-and-build: Cirtec Medical Outsourced Metal stamping Precision nitinol Design of custom Thin film sensor medical device for medical tubing for high ASICs for substrates manufacturing device end medical medical device serving platform applications device market continuo
Slide 6: Good earnings performance drove portfolio value growth of £916m in FY2019
Private Equity Good earnings performance drove portfolio value growth of £916m in FY2019 Largest value increases (>£20m) Largest value declines (>£20m) Value Value at Value Value at Portfolio Key driver of value Portfolio Key driver of growth 31 Mar decline 31 Mar company1 movement company value mov
Slide 7: The portfolio is weighted towards our better assets
Private Equity The portfolio is weighted towards our better assets The buckets Selected examples % of value FY20191 FY2018 1 Longer-term hold; value creation Action, Audley, Cirtec, Ponroy, ICE c. 69% c.67% 2 Strong performers; performing in line with investment case Hans Anders, WP, Royal Sanders,
Slide 8: Action – continued strong growth in 2018
Private Equity Action – continued strong growth in 2018 2018 +23% revenue growth +16% EBITDA growth 1,325 stores 230 net new stores Highlights An unbroken high growth track record A truly pan-European footprint EBITDA (€m) Sales (€m) Number of stores +28% CAGR 25 378 288 +30% CAGR 167 5 +27% CAGR 42
Slide 9: Action – there is ample potential for growth in existing and new markets
Private Equity Action – there is ample potential for growth in existing and new markets NL BE LU France Austria Germany Poland Other EU Medium-term objective to double current store base 9
Slide 10: Continued good realisations track record
Private Equity Continued good realisations track record Selected full realisations (year invested, proceeds, money multiple, uplift) Scandlines SLR Etanco OneMed £1,235m1 proceeds 2007/2013 2008 2011 2011 £835m1; 7.7x, 4% £30m; 1.3x, 3% £91m; 1.3x, 36% £96m; 0.9x, 118% Post-restructuring investments
Slide 11: Magnitude Software investment
Private Equity c.£139m investment in Magnitude Software announced in March 2019 • Leading provider of unified application data management solutions • Strong relationships (SAP and Oracle) • Operations in the US, NL, UK, Canada and India • Over 1,400 customers, including 50% of the Fortune 100 United
Slide 12: Another extraordinary year for 3iN
Infrastructure Another extraordinary year for 3iN 3iN relative share price performance – FY2019 FY2019 highlights (rebased to 3iN, pence per share) 300 3iN 280 FTSE 250 33% TSR Listed infrastructure investment companies* 260 8.65pps Total dividend 240 £377m Investments and 220 commitments 200 £333m
Slide 13: We are now generating a sustainable operating cash profit
We are now generating a sustainable operating cash profit Operating cash profit/(loss) (£m) Growing fee and portfolio income • Regular cash dividends from Scandlines • Managed Infrastructure 28 Acquisitions Fund 11 45 37 (1) 11 46 • 3i European Operational Projects 5 Fund (32) • US Infrastructure pl
Slide 14: NAV up 13% to 815 pence driven by strong portfolio performance
NAV up 13% to 815 pence driven by strong portfolio performance NAV per share (pence) 900 11 (2) 112 (7) (37) 850 815 800 750 14 724 700 31-Mar-18 Realised profits Value growth Other1 FX Net carry Dividends 31-Mar-19 payable 1 Other includes portfolio income, third party fee income, operating costs a
Slide 15: Group value growth of £1,087 million
Group value growth of £1,087 million Value movement by basis (£ million) 701 Action 342 PE increases (127) PE reductions 162 Infrastructure 9 Corporate Asset 15
Slide 16: Private Equity: Strong performance
Private Equity Strong performance Year to 31 March £ million 2019 2018 Gross investment return 1,148 1,438 % of opening portfolio 20% 30% Realised profit 131 199 Realisations1 1,235 1,002 Cash investment 332 587 Portfolio value 6,023 5,825 1 The 2019 realisations are gross of the Scandlines transact
Slide 17: Strong value growth and cash investment offset by Scandlines realisation
Private Equity Strong value growth and cash investment offset by Scandlines realisation £ million 8,000 916 53 (1,103) 7,000 Scandlines 332 6,023 6,000 5,825 5,000 ash1 Portfolio value as at Cash investment Value growth FX/Other 1 Divestment value Portfolio value as at 31 March 2018 31 March 2019 £9
Slide 18: 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 2019 (£ million) 8 Number of 3,911 companies: 5 3 4 951 404 555 < 0% >0 - 9% 10 -19% >20% Last 12 months’ earnings growth1 1 Calculated based on valuation earnings growth in the top 20 investments: 17 us
Slide 19: £916 million value growth driven by good earnings growth
Private Equity £916 million value growth driven by good earnings growth Value movement by basis (£ million) 1 March March Performance 654 Multiples2 2019 2018 Action 18.0x 16.5x Multiples 219 3i ex. Action 11.1x 11.0x Quoted 55 Other3 (12) £219m multiple change: £260m Action, £(41)m rest of portfoli
Slide 20: Action valuation
Private Equity Action valuation 1 18.2x 18.0x 16.8x 16.5x 15.8x 16.0x 13.5x 14.0x 12.5x Post discount multiple: 9.26x Mar-13 Mar-14 Mar-15 Mar-16 Jun 16 Sep 16 Dec 16 Mar 17 Mar 18 Mar-19 Valuation methodology • Run-rate earnings to 31 March 2019 • Run-rate multiple: 18.0x (post discount) Action val
Slide 21: Action's comparable set
Private Equity Action’s comparable set Action’s comparable set EV/LTM EBITDA Five Below Ollie’s Average Dollarama B&M Inditex Note: Last data point as at 9 May 2019. 21
Slide 22: Carried interest receivable and payable a function of good performance
Private Equity Carried interest receivable and payable a function of good performance Year to/ended 31 March 2019 2018 £ million Income statement Carried interest receivable 128 138 Carried interest payable (206) (196) Net total return charge (78) (58) Balance sheet Carried interest receivable 609 5
Slide 23: Excellent performance from 3iN
Infrastructure Excellent performance from 3iN Year to 31 March £ million 2019 2018 Gross investment return 210 113 % of opening portfolio 25% 16% Contribution from 3iN - Dividend and fee income 53 61 - Performance fee 31 90 - Special dividend ‒ 143 3iN: 29% share price increase and £167 million valu
Slide 24: AUM of £4.2 billion at March 2019
Infrastructure AUM of £4.2 billion at 31 March 2019 AUM by fund or strategy (%) 2 7 3i Infrastructure plc US Infrastructure 18 3i India Infrastructure Fund 53 BIIF Fund 3i Managed Infrastructure Acquisitions LP 13 3i European Operational Projects Fund 3 4 3i Managed accounts Fee generating AUM incre
Slide 25: Scandlines
Corporate Assets Scandlines Year to 31 March £ million 2019 Valuation 529 Gain on foreign exchange hedging 21 Dividend income 28 Gross investment return of £49m since reinvestment in June 2018 25
Slide 26: Operating cash profit
Operating cash profit Year to 31 March £ million 2019 2018 Private Equity 45 39 Infrastructure 82 78 Corporate Assets 28 ‒ Other ‒ 9 Cash income 155 126 Operating cash expenses (109) (115) Operating cash profit 46 11 26
Slide 27: Balance sheet remains well funded for investment
Balance sheet remains well funded for investment Year ended 31 March 2019 2019 2018 £ million Gross Scandlines1 Net Scandlines1 Investments (859) (330) (827) Realised proceeds 1,242 713 1,323 Net divestment 383 383 496 Net cash 495 479 Net assets 7,909 7,024 Liquidity2 1,420 1,404 1 On 21 June 2018,
Slide 28: Total dividend set at 35 pence per share
Total dividend set at 35 pence per share Our dividend policy aims to maintain or grow the dividend year-on-year subject to: • maintaining our conservative balance sheet strategy, which excludes structural gearing at the Group level • careful consideration of the outlook for investments and realisati
Slide 29: Additional information
Additional information
Slide 30: Capital allocation
Capital allocation Our portfolio is defensively positioned for the current environment NAV as at 31 March 2019 Top 10 assets as at 31 March 2019 Value at 31 Mar 2019 (£m) % of NAV at 31 Mar 2019 Value-for-money Action 2,731 34.5% Basic-Fit 254 3.2% Hans Anders 246 3.1% Infrastructure / essential ser
Slide 31: Our post-restructuring track record
Our post-restructuring track record Year to Year to Year to Year to Year to Year to Year to Year to 31 March 2019 31 Mar 2018 31 Mar 20171 31 Mar 20161 31 Mar 20151 31 Mar 20141 31 Mar 20131 31 Mar 20121 Total return £1,252m £1,425m £1,592m £824m £659m £478m £373m £(656)m % over opening net 18% 24%
Slide 32: We are nimble and responsive to external conditions
We are nimble and responsive to external conditions Flexible approach to capital allocation, origination and portfolio construction Private Equity Infrastructure Debt Management 2012 • Europe, Americas, Asia • Europe, India • Europe, US • Broad range of sectors • 2 investment vehicles • £0.1bn capit
Slide 33: Our business model – delivering sustainable returns
Our business model – delivering sustainable returns Capable of delivering mid-teen returns to shareholders across the cycle 2 3 Grow Cover costs portfolio with fee and earnings and portfolio cash flow income 1 4 Fund Realise a MM Invest our investment of at least 2x proprietary in Private Fund capit
Slide 34: Dry powder remains at all time highs
Private equity market context Dry powder remains at all time highs Global private equity assets under management ($bn), 2000-2018 Dry powder Unrealised value 2,198 2,034 1,731 1,624 1,508 1,546 1,380 902 1,106 1,198 836 742 629 496 1,213 285 271 349 418 1,026 324 681 743 830 631 678 671 614 594 557
Slide 35: Smaller companies trade for lower multiples
Private equity market context Smaller companies trade for lower multiples Median EBITDA purchase price multiple for global buyout transactions, by deal size Source: Bain & Company Global Private Equity Report, with data sourced from PitchBook Data, Inc 35
Slide 36: Q4 NAV increased from 802 pence to 815 pence
Q4 NAV increased from 802 pence to 815 pence NAV per share (pence) 900 43 3 (23) 850 (1) (15) 815 802 6 800 750 700 31-Dec-18 Realised profits Value growth Other FX Net carry Dividends Closing value payable 1 Other include portfolio income, third party fee income, operating costs and the fair value
Slide 37: 3i Group large investments
3i Group 20 large investments Investment Business description Valuation Mar 18 Valuation Mar 19 £m £m Action Non-food discount retailer 2,064 2,731 3i Infrastructure plc Quoted investment company, investing in infrastructure 581 744 Scandlines Ferry operator between Denmark and Germany n/a 529 Audle
Slide 38: Group investment portfolio
Group investment portfolio Portfolio value at 31 March 2019 (£m) Portfolio value at 31 March 2018 (£m) 257 464 251 605 529 2,731 2,064 744 803 581 1,503 1,325 1,057 1,296 Action 2013-2016 Private Equity Action 2013-2016 Private Equity 2016-2019 Private Equity 3iN 2016-2019 Private Equity 3iN Scandli
Slide 39: Net asset exposure by currency
Net asset exposure by currency 2% Change Currency Net assets YTD Impact 14% 21% Sterling £1,657m n/a n/a Euro2 £4,966m 1.7% £(63)m US dollar £1,098m (7.6)% £68m Danish krone £152m 1.9% £(3)m 63% Other1 £36m n/a £(2)m Total £7,909m - Sterling/non-revaluing Euro US dollar Danish krone 1% movement in e
Slide 40: Private Equity portfolio by value
Private Equity portfolio by value By Office Location (%) By sector (%) By Vintage (%) 3 11 5 8 12 13 9 11 45 7 15 11 60 9 45 8 3 20 5 Action (Consumer) Consumer Benelux France Germany Industrials B&TS* Pre 2012 2012 2014 2015 UK US Others Healthcare 2016 2017 2018 2019 Portfolio of 32 investments, d
Slide 41: Proprietary capital and external funds
Private Equity Proprietary capital and external funds Vintage1 Proprietary capital value at 31 Mar 2019 Vintage multiple at 31 Mar 2019 Buyouts 2010-2012 £2,679m 8.5x Growth 2010-2012 £25m 2.1x 2013-2016 £1,325m 2.3x 2016-2019 £1,503m 1.2x Other £491m n/a Total proprietary capital value £6,023m Rema
Slide 42: Infrastructure assets under management
Infrastructure Assets under management 3i Remaining 3i % Fee income commitment/ commitment invested at received Close date Fund size share at March 2019 March 2019 AUM1 in the year 3iN1 Mar 07 n/a £744m n/a n/a £2,232m £31m 3i Managed Infrastructure Acquisitions LP Jun 17 £698m £35m £5m 86% £751m £6
Slide 43: Portfolio leverage
Private Equity Portfolio leverage Ratio of total net debt to earnings by 3i carrying value at 31 March 20191 (£ million) 4,081 422 318 248 71 167 <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x >5x 3.7x portfolio leverage excluding Action 1 This represents 88% of the Private Equity portfolio by value (31 March 2018