3i Group Plc · LSE:III
3i — H1 FY2021 Earnings Presentation
60 slides from 3i's earnings presentation, Nov 12, 2020
Slide 1: Results for the six months to 30 September 2020
Results for the six months to 30 September 2020 12 November 2020
Slide 2: Business review
Business review Simon Borrows Chief Executive 2
Slide 3: Resilient performance despite severe disruption from Covid-19
Resilient performance despite severe disruption from Covid-19 Six months to 30 September 2020 Group Private Equity Infrastructure Total return Operating cash First dividend Gross investment Gross investment on equity profit per share return return 15% £14m 17.5p 19% 12% NAV per share Liquidity Geari
Slide 4: Private Equity: strong post-lockdown recovery and focused investment activity
Private Equity Strong post-lockdown recovery and focused investment activity Good performance across the portfolio • 19% gross investment return • 85% of top 20 assets by value grew earnings in the period Disciplined investment approach, focus on buy-and-build • £64m new investment in GartenHaus, a
Slide 5: Good performance and resilience to Covid-19 across the portfolio
Private Equity Good performance and resilience to Covid-19 across the portfolio Strong performance Good recovery since the Continued challenges throughout pandemic lifting of lockdowns (less than 5% of portfolio value) Tato Themes and trends Themes and trends • Value-for-money / recession • Remote w
Slide 6: Portfolio earnings growth of top PE investments
Private Equity Portfolio earnings growth of top 20 PE investments1 >40% £584m 3 companies 20 - 40% £785m 3 companies 10 - 19% £4,818m 0 - 9% £401m <0% £1,204m 1 Last 12 months’ earnings growth. This represents 99% of the Private Equity portfolio by value (31 March 2020: 98%). 6
Slide 7: Action – an impressive growth trajectory
Private Equity Action – an impressive growth trajectory Net sales (€m) 5,114 +10%1 4,373 4,216 28% CAGR 3,418 2,675 Buyout 1,995 21% 1,506 CAGR 1,155 873 607 718 426 515 231 284 341 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD P10 Action has shown impressive gr
Slide 8: Action – trading has been strong since stores reopened
Private Equity Action – trading has been strong since stores reopened Like for like sales growth by period 17% • Strong performance weeks 1-11 12% 13% 12% 11% 9% 7% • Over 900 stores closed in the peak of the crisis (11%) • All but two distribution centres (20%) closed or partially closed • Strong p
Slide 9: Action – strong growth in all geographies and categories
Private Equity Action – strong growth in all geographies and categories LFLs by country (week 20-43)1 Top performing category LFL growth (Q3 2020) Netherlands c.9% Garden & Outdoor c.34% Belgium c.14% Household Goods c.21% Germany c.20% Sports c.20% France c.15% Decoration c.20% Austria c.22% Linen
Slide 10: Action – strong current trading and operational performance
Private Equity Action – strong current trading and operational performance YTD P9 (P1-9) P10 Actual Last year Variance Actual Last year Variance Net sales (€m) 3,833 3,550 +8% 540 417 +29% Operating EBITDA (€m) 376 338 +11% 75 46 +63% as % of sales 9.8% 9.5% +30bps 13.8% 11.1% +270bps New stores 93
Slide 11: Action – store network continues to expand
Private Equity Action – store network continues to expand +7 394 +27 84 +33 +4 380 186 +5 +1 5 9 +10 +28 64 545 # Stores open at end of P10 2020 # Additions in 2020 (to P10) 11
Slide 12: Action – DC network has demonstrated resilience and flexibility
Private Equity Action – DC network has demonstrated resilience and flexibility Wrocław, PL (Hub, 2020) DC Verrières, FR (2020) • 9th distribution centre in Inbound operations have Verrières, France, has started. Construction of DC Verrières was started inbound delayed around 3 operations months as a
Slide 13: Action – all countries continue to operate within new Covid-19 restrictions
Private Equity Action – all countries continue to operate within new Covid-19 restrictions As at 10th November YTD stores / DCs Stores / DCs open Full assortment Netherlands 394 All open ✓ Belgium 188 All open Essentials only Luxembourg 9 All open ✓ France 547 All open Essentials only Germany 382 Al
Slide 14: Action – business plan remains on track
Private Equity Action – business plan remains on track 2011 2019 2023 The fastest growing non-food discounter in Europe Sales €0.7bn 7.3x €5.1bn c.€9.0bn Exceptional track record of growth and attractive returns EBITDA €86m 6.3x €541m >€1bn Further European white space potential of c.5,000 stores #
Slide 15: Portfolio value growth of £1.1bn supported by robust performance
Private Equity Portfolio value growth of £1.1bn supported by robust performance Largest value increases (>£20m) Largest value declines (>£20m) Value Value at Value Value at Portfolio growth 30 Sep Key driver of value Portfolio decline 30 Sep Key driver of value company (excl FX) 2020 movement compan
Slide 16: Attractive growth in an online niche market: GartenHaus
Private Equity Attractive growth in an online niche market: GartenHaus £64m new investment1 • Online leader in garden buildings, sheds, saunas, and related products in the DACH region • Differentiated through own product development, excellent customer service, management of complex logistics and on
Slide 17: Expansion of our global bioprocessing consumables platform: SaniSure
Private Equity Expansion of our global bioprocessing consumables platform: SaniSure Bioprocessing platform acquires Sani-Tech West and rebrands as SaniSure • Transformational acquisition delivers immediate scale and global reach, and enhances product offering and capabilities in high value therapeut
Slide 18: Creating a global leader in data centre equipment maintenance: Evernex
Private Equity Creating a global leader in data centre equipment maintenance: Evernex Evernex acquires Technogroup with 3i funding of £41m • Leading provider of third-party maintenance of critical IT infrastructure in DACH region and Poland • 5,200+ customers in Central Europe; quadrupled in size ov
Slide 19: Infrastructure
Infrastructure Resilient performance and good cash contribution to the Group Good performance across portfolios • 12% gross investment return • Good contribution from 3iN, with 17% share price appreciation and £12m of dividend income in the period Strong contribution to operating cash profit • £33m
Slide 20: Infrastructure: strong recovery in the share price
Infrastructure Strong recovery in the share price driven by robust portfolio performance 3iN relative share price performance since 1 April 2020 HY2021 highlights (rebased to 3iN, pence per share) • 19% TSR and 4% total return • Focused investment in existing portfolio • Good portfolio income • On t
Slide 21: Scandlines
Scandlines Solid despite significant disruption to traffic from Covid-19 • Gross investment return of £15m, or 3% of opening portfolio • Solid performance through the pandemic – freight volumes >90% of prior-year levels – good recovery in passenger traffic once travel restrictions lifted • Denmark a
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Slide 23: Financial review
Financial review Julia Wilson Group Finance Director 23
Slide 24: NAV per share up 13% to 905 pence demonstrating portfolio resilience
NAV per share up 13% to 905 pence demonstrating portfolio resilience NAV per share (pence) 950 124 (7) (12) 4 9 (17) 905 900 850 804 800 750 700 31-Mar-20 Value growth Net carry Pension Other 1 FX Dividends 30-Sep-20 payable 1 Other includes portfolio income, third party fee income and operating cos
Slide 25: Strong value growth of £1,210 million
Strong value growth of £1,210 million Value movement by basis (£ million) 644 Action 546 PE increases (119) PE reductions 127 Infrastructure 12 Scandlines 25
Slide 26: Good performance and resilience reflected in valuation approach
Private Equity Good performance and resilience reflected in valuation approach Strong performance Good recovery since the Continued challenges throughout pandemic lifting of lockdowns (less than 5% of portfolio value) Tato • Substantially all valued on June LTM • Maintainable or forecast • Some norm
Slide 27: £1,071 million value increase
Private Equity £1,071 million value increase Value movement by basis (£ million) 644 Action performance 1 392 Performance increases 1 (154) Performance decreases 211 Multiples (60) DCF (1) Other 11 Imminent sales 28 Quoted 1 Performance includes value movements relating to earnings and net debt move
Slide 28: Action – approach to valuation
Private Equity Action – approach to valuation Enterprise value (post discount) €10.80bn • March 20 valuation consistent with EFV €10.25bn €10.25bn transaction value; reverted to run rate basis in Q1 Sep-19 1 Dec-19 EV Mar-20 Transaction EV Fair value EV 1 The September 2019 valuation was based on ru
Slide 29: Action continues to compare well to peers
Private Equity Action continues to compare well to peers EV/ LTM EBITDA 40x Five Below, 39.0x 35x 30x 25x Costco, 21.8x Average, 21.1x 20x Ollie’s, 21.0x Grocery Outlet, 20.0x Dollarama, 19.5x 15x Dollar General, 14.8x B&M, 11.6x 10x 5x 0x Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Source: CAP
Slide 30: Action – approach to valuation
Private Equity Action – approach to valuation Enterprise value (post discount) €11.26bn €10.80bn • Run rate earnings of €626m €10.25bn €10.25bn • 18.0x multiple post discount • Triangulation against peer group and DCF model • March 20 valuation consistent with EFV transaction value; reverted to run
Slide 31: Strong performance from the Private Equity Portfolio
Private Equity Strong performance from the Private Equity Portfolio Six months to 30 September £ million 2020 2019 Gross investment return 1,245 666 % of opening portfolio 19% 11% Realisations1 82 1 Cash investment2 231 221 Six months to 30 September £ million 2020 2019 New investment 64 139 Further
Slide 32: Strong performance from 3iN
Infrastructure Strong performance from 3iN Six months to 30 September £ million 2020 2019 3iN 113 53 Smarte Carte (5) 3 Regional Rail 12 1 Other funds 7 2 Portfolio revaluation 127 59 Dividend, interest income and FX 7 29 Gross investment return 134 88 % of opening portfolio 12% 9% 32
Slide 33: Scandlines: solid performance
Scandlines Solid performance Six months to 30 September £ million 2020 2019 Gross investment return 15 44 % of opening portfolio 3% 8% 30 September 31 March £ million 2020 2020 Valuation 452 429 33
Slide 34: Operating cash profit provides resilience
Operating cash profit provides resilience Six months to 30 September £ million 2020 2019 Private Equity 50 13 Infrastructure 33 37 Scandlines − 27 Cash income 83 77 Operating cash expenses1 (69) (79) Operating cash profit/(loss) 14 (2) Objective is to at least break even 1 Operating cash expenses in
Slide 35: Pension buy-in
Pension buy-in One-off impact on NAV of 12 pence • Trustees of UK defined benefit plan executed a £650m buy-in contract • No financial contribution required from 3i • IAS19 accounting write-down of £118m Good outcome for plan members and 3i 35
Slide 36: Simple balance sheet and conservative capital management
Simple balance sheet and conservative capital management £9,578m • High quality, defensive portfolio £687m • Gross cash held centrally with no material restrictions • Gross debt made up of 2023, 2032 and the new £400m bond expiring £975m in 2040 £400m • Undrawn RCF expiring in March 2025 £1.1bn liqu
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Slide 38: Q&A
Q&A
Slide 39: Sustainability
Sustainability
Slide 40: Our sustainability strategy is defined by three key priorities
Sustainability Our sustainability strategy is defined by three key priorities 1. Invest responsibly 2. Recruit and develop a diverse pool of talent For more information: 3i.com/sustainability/sustainability-reports- 3. Act as a good corporate citizen library/2020/ 40
Slide 41: Our values are at the core of how we operate
Sustainability Our values are at the core of how we operate Ambition Rigour and energy Focus on generating value for all our Clarity of vision supported by practical execution stakeholders Thorough analysis leading to clear decision- Strive for excellence and continuous making and effective implemen
Slide 42: Our Responsible Investment policy has been in place for over a decade
Sustainability Our Responsible Investment policy has been in place for over a decade Our RI policy applies to all investments. We invest only in businesses which are committed to: Fair and safe The environment working conditions Business integrity Good governance Specific exclusion list for “no go”
Slide 43: Action has launched multiple initiatives to make its business more sustainable
Sustainability Action has launched multiple initiatives to make its business more sustainable Sustainable cotton increased to Sustainable timber increased to DC BREEAM certifications Replaced disposables 71% (Q2 2020) 57% (Q2 2020) sustainability assessment method Partnership with SOS Children’s Sup
Slide 44: Transparency and disclosure are important to our approach
Sustainability Transparency and disclosure are important to our approach Disclosures since 2017 Disclosures since 2006 Rated ‘B’ in 2019 assessment Signatories since 2011 Member of several sustainability indices Rated ‘A’ in the 2020 assessment 44
Slide 45: Additional information
Additional information
Slide 46: Our business model
Our business model Delivering sustainable returns over the cycle What we offer Value creation Who benefits ➔ Conservative balance sheet management ➔ Tight grip on operating costs Expertise ➔ Operating cash profit Access to capital BLN 1 Shareholders Invest Active partnership Portfolio Reputation com
Slide 47: The portfolio has defensive underlying exposures
The portfolio has defensive underlying exposures Portfolio value as at 30 September 2020 Examples Value-for-money Action, Hans Anders, Basic-Fit 10% 4% 3iN, Scandlines, Infrastructure Regional Rail, Smarte Carte 11% Healthcare Cirtec, Q Holding, SaniSure 49% 8% Exposure to consumer WP, Royal Sanders
Slide 48: Q2 NAV increased from 858 pence to 905 pence
Q2 NAV increased from 858 pence to 905 pence NAV per share (pence) 950 81 (5) (10) 5 (7) (17) 905 900 858 850 800 1 30-Jun-20 Value growth Net carry Pension Other FX Dividends 30-Sep-20 payable 1 Other includes portfolio income, third party fee income, operating costs and the fair value movement on
Slide 49: 3i Group large investments
3i Group 20 large investments Investment Business description Valuation Valuation Sep 20 (£m) Mar 20 (£m) Action General merchandise discount retailer 4,269 3,536 3i Infrastructure plc Quoted investment company, investing in infrastructure 778 665 Scandlines Ferry operator between Denmark and German
Slide 50: Group investment portfolio
Group investment portfolio Portfolio value at 30 September 2020 (£m) Portfolio value at 31 March 2020 (£m) 472 394 452 429 458 452 778 665 4,269 3,536 523 281 1,850 1,472 776 869 Action 2013-2016 Private Equity Action 2013-2016 Private Equity 2016-2019 Private Equity 2019-2022 Private Equity 2016-20
Slide 51: Net asset exposure by currency
Net asset exposure by currency 2% Change Change Currency Net assets YTD £m 15% 15% Sterling £1,268m n/a n/a Euro1 £5,954m (2.5%) £130m US dollar1 £1,347m 4.3% £(53)m Danish krone £130m (2.7%) £3m 68% Other2 £42m n/a n/a Sterling/non-revaluing Euro Total £8,741m £80m US dollar Danish krone & other 1%
Slide 52: Private Equity portfolio by value
Private Equity portfolio by value By office location (%) By sector (%) By vintage (%) 1% 1% 5% 7% 13% 13% 6% 8% 12% 9% 9% 65% 54% 5% 60% 7% 16% 4% 4% 2% Netherlands France Action (Consumer) Consumer Pre 2014 2014 2015 Germany UK Industrials B&TS* 2016 2017 2018 US Others 2019 2020 2021 Healthcare Po
Slide 53: Increase in portfolio value driven by strong performance
Private Equity Increase in portfolio value driven by strong performance £ million 8,500 1,071 (80) 116 7,890 8,000 7,500 7,000 231 6,552 6,500 6,000 5,500 5,000 4,500 4,000 1 Portfolio value as at Cash investment Value growth Divestment value FX / Other Portfolio value as at 30 31 March 2020 Septemb
Slide 54: Top assets continue to show good earnings growth
Private Equity Top 20 assets continue to show good earnings growth 3i carrying value at 30 September 2020 (£ million) Number of companies: 3 4,818 9 3 3 2 1,204 401 785 584 <0% 0-9% 10-19% 20-40% >40% Last 12 months’ earnings growth1 1 This represents 99% of the Private Equity portfolio by value (31
Slide 55: Portfolio leverage
Private Equity Portfolio leverage Ratio of total net debt to earnings by 3i carrying value at 30 September 20201 (£ million) 4,643 839 898 228 130 317 <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x 4.0x leverage across the whole portfolio 1 This represents 89% of the Private Equity portfolio by value (31 Ma
Slide 56: Proprietary capital and external funds
Private Equity Proprietary capital and external funds Vintage1 Proprietary capital value at 30 September 2020 Vintage money multiple at 30 September 2020 2 Buyouts 2010-2012 £1,470m 10.0x Growth 2010-2012 £19m 2.1x 2013-2016 £776m 2.2x 2016-2019 £1,850m 1.3x 2019-2022 £523m 1.2x Other3 £3,252m n/a T
Slide 57: Carried interest payable reduction a result of carry paid in the period
Private Equity Carried interest payable reduction a result of carry paid in the period Six months to 30 September 2020 2019 £ million Income statement Carried interest receivable (2) 81 Carried interest payable (61) (63) Net total (expense)/return (63) 18 30 September 31 March £ million 2020 2020 Ba
Slide 58: AUM of £4.9 billion at September 2020
Infrastructure AUM of £4.9 billion at 30 September 2020 AUM by fund or strategy (%) 7 3i Infrastructure plc 2 7 3i Managed Infrastructure Acquisitions LP 10 3i European Operational Projects Fund 53 BIIF 5 3i India Infrastructure Fund 3i Managed accounts 16 US Infrastructure AUM increased by £452m in
Slide 59: Infrastructure assets under management
Infrastructure Assets under management Fee income 3i commitment/ Remaining 3i % invested at received Close date Fund size share commitment September 2020 AUM1 in the period 3iN1 Mar 07 n/a £778m n/a n/a £2,576m £12m 3i Managed Infrastructure Jun 17 £698m £35m £5m 86% £784m £3m Acquisitions LP 3i Eur
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