Slide 1: Results for the year to 31 March 2018
Results for the year to 31 March 2018 17 May 2018
Slide 2: A strong result for the year
A strong result for the year Year to 31 March 2018 Group Private Equity Infrastructure Total return Total dividend Proprietary capital Fee and portfolio on equity per share invested income 24% 30p £587m £81m NAV per share Net cash Realisation 3iN special dividend proceeds 724p £479m £1,002m £143m St
Slide 3: Our post-restructuring track record
Our post-restructuring track record Year to Year to Year to Year to Year to Year to Year to 31 Mar 2018 31 Mar 20171 31 Mar 20161 31 Mar 20151 31 Mar 20141 31 Mar 20131 31 Mar 20121 Total return £1,425m £1,592m £824m £659m £478m £373m £(656)m % over opening net asset value 24% 36% 22% 20% 16% 14% (2
Slide 4: Our business model – delivering sustainable returns
Our business model – delivering sustainable returns Invest our proprietary Grow portfolio Realise a money multiple Cover costs with fee 1. capital in Private Equity 2. earnings and cash flow 3. of >2x in Private Equity 4. and portfolio income Mid to high-teens IRR net of carry No cost dilution over
Slide 5: 1. Investment – Private Equity
1. Investment – Private Equity Strategic clarity and focus leading to a better “hit rate” Clear focus Themes/megatrends • Consumer, Industrial, Business & Tech Services • Flexibility to follow long- term trends that support • Northern Europe, North earnings growth America Flexible to adapt to market
Slide 6: Flexibility to follow developing themes and megatrends
1. Investment – Private Equity Flexibility to follow developing themes and megatrends Compliance/ Polarisation/ Testing, inspection Demographics Technological disruption Health & Wellness Value-for-money and certification Our investments are supported by developing megatrends 6
Slide 7: Our approach is producing good results
1. Investment – Private Equity Our approach is producing good results Proprietary capital invested in each Private Equity vintage c.£2.1bn invested in £100m £265m £328m £352m £471m £587m FY2013-FY2018 Other follow-on Cirtec/ FY2013-FY2016 Vascotube MM of 2.1x Q/Degania Investment of £135m Ponroy San
Slide 8: Action continues to grow strongly
2. Grow portfolio earnings and cash – Private Equity Implementing organic roll-out strategies: Action continues to grow strongly 5 DCs, 2017 +28% revenue growth +25% EBITDA growth 1,095 stores 243 net new stores added of which 2 2 DCs under construction Highlights new in 2017 Consistent high growth
Slide 9: Cirtec’s transformational acquisition of Vascotube
2. Grow portfolio earnings and cash – Private Equity Building platform assets: Cirtec’s transformational acquisition of Vascotube Vascotube is a precision nitinol tubing component supplier that serves fast growing medical device end markets • Transformational acquisition completed four months after
Slide 10: Good earnings performance drove value growth of £1,080m in FY2018
2. Grow portfolio earnings and cash – Private Equity Good earnings performance drove value growth of £1,080m in FY2018 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 compa
Slide 11: Realise a money multiple of >2x from PE investments
3. Realise a money multiple of >2x from PE investments Meeting objective from both recent and legacy investments Full realisations (proceeds, money multiple) FY2018 realisations ATESTEO Mémora MKM Refresco £1,002m proceeds £278m; 4.8x £119m; 1.4x £70m; 5.9x £43m; 2.0x from realisations and F+P Ótica
Slide 12: ATESTEO – 4.8x money multiple from a typical 3i transaction
3. Realise a money multiple of >2x from PE investments ATESTEO – 4.8x money multiple from a typical 3i transaction • £278m realisation announced in December 2017 – 4.8x money multiple over a 4-year holding period – 100% uplift to valuation at 31 March 2017 • Doubled EBITDA during holding period thro
Slide 13: Private Equity portfolio weighted towards better assets
Our Private Equity portfolio is now weighted towards our better assets and capable of delivering our overall objectives The buckets Selected examples % of value FY2018 FY2017 1 Longer-term hold; value creation Action, Scandlines, Audley, Q Holding, Ponroy c.67% c.64% 2 Strong performers; performing
Slide 14: Cover costs with fee and portfolio income
4. Cover costs with fee and portfolio income to reduce potential dilution of capital returns Operating cash profit (£m) Growing fee and portfolio income • Managed Infrastructure Acquisitions Fund • European Operational Projects 28 Fund 11 45 37 (1) 11 • US Infrastructure platform 5 (32) • Regular ca
Slide 15: 3iN continues to develop well and pay significant dividends
4. Cover costs with fee and portfolio income 3iN continues to develop well and to pay significant dividends to 3i 3iN relative share price performance – FY2018 Strong performance (rebased to 3iN, pence per share) in FY2018 220 • 3iN total return 3iN Listed infrastructure investment companies* of 29%
Slide 16: We continue to improve our capital efficiency and allocation
We continue to improve our capital efficiency and allocation Year to 31 March 2018 Average over FY2010-FY2012 £1.4bn 9% £1.0bn 27% 5% 2% 18% 41% 66% 3% 29% Realisations, Operating costs,Debt repayment Shareholder Funds to invest Realisations, Operating Net carried Net interest Shareholder Funds to f
Slide 17: Our business model – delivering sustainable returns
Our business model – delivering sustainable returns Mid to high teens return net of carry through the cycle, higher if we exceed our 2x MM objective Invest our proprietary Grow portfolio Realise a money multiple Cover costs with fee 1. capital in Private Equity 2. earnings and cash flow 3. of >2x in
Slide 18: Our proprietary capital strategy
Our proprietary capital strategy Highly successful investments drive Group outperformance Net investment return1 from annual Outperformance of FY2014 investments vintages (£m) Total annual investment (£750m) Cost: £81m Cost: £74m Cost: £77m Average investment size (£150m) Entry: Dec-13 Entry: Oct-13
Slide 19: NAV up 20% to 724 pence driven by strong portfolio performance
NAV up 20% to 724 pence driven by strong portfolio performance NAV per share (pence) 780 5 2 (2) (26) 740 30 1 724 700 90 660 21 620 604 580 31-Mar-17 Realised profits Value growth Other (including Net carry FX Dividends 31-Mar-18 fee income, costs, receivable interest etc) 1. Scandlines transaction
Slide 20: Private Equity
Private Equity Gross investment return driven by value growth Year to 31 March £ million 2018 2017 Gross investment return 1,438 1,624 % of opening portfolio 30% 43% Realised profit 199 38 Total realisation proceeds 1,002 982 Cash investment 587 478 Portfolio value 5,825 4,831 48% uplift and 2.4x mo
Slide 21: Private Equity
Private Equity Increase in portfolio driven by value growth and cash investment £ million 7,000 1301 (803) 1,080 6,000 5,825 587 5,000 4,831 4,000 3,000 Portfolio value as at Cash investment Value movement FX / Other Divestment value Portfolio value as at 31 March 2017 31 March 2018 £994 million / 2
Slide 22: Private Equity
Private Equity Top 20 investments continue to show good earnings growth 3i carrying value at 31 March 20181 £ million 4 6 Number of companies: 5 2,590 1,599 5 870 452 < 0% 0 - 9% 10 -19% > 20% 1. Earnings growth in the top 20 investments including Scandlines and Basic-Fit. 22
Slide 23: Private Equity
Private Equity £1,080 million value growth Value movement by basis (£ million) Performance1 March March 541 Multiples2 2018 2017 Scandlines Action 16.5x 16.0x transaction value 302 3i ex. Action 11.0x 9.9x Multiples 144 Quoted 81 Other 3 12 0 100 200 300 400 500 600 1 Performance includes value move
Slide 24: Action valuation
Private Equity Action valuation 1 18.2x 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 Valuation methodology – Run-rate earnings to 31 March 2018 – Run-rate multiple: 16.5x (post discount) £2,064 million value at
Slide 25: Scandlines
Private Equity Scandlines • Valued using the transaction value less 2.5% discount at 31 March 2018 • After completion, Scandlines will be a longer term hold proprietary capital asset • Dividends will contribute to cash income Excellent result: total money multiple of 7.4x and 5.8x on the 2013 invest
Slide 26: Carried interest receivable and payable
Private Equity Carried interest receivable and payable a function of good performance £ million 2018 2017 Income statement Carried interest receivable 138 275 Carried interest payable (196) (431) Net total return charge (58) (156) Balance sheet Carried interest receivable 505 359 Carried interest pa
Slide 27: Infrastructure
Infrastructure Outstanding performance from 3iN and completed first US investment Year to 31 March 2018 £ million 2018 2017 Gross investment return 113 87 % of opening portfolio 16% 17% Cash investment 217 131 Contribution from 3iN - Dividend and advisory fee income 61 48 - Performance fee 90 4 - Sp
Slide 28: Infrastructure
Infrastructure Proprietary capital of £832 million and AUM of £3.4 billion at 31 March 2018 28
Slide 29: Balance sheet remains well funded for investment
Balance sheet remains well funded for investment 31 March 31 March £ million 2018 2017 Investments (827) (689) Realisations 1,323 1,275 Net divestment 496 586 Net cash 479 419 Net assets 7,024 5,836 Liquidity 1,404 1,323 29
Slide 30: …and shareholder distributions
…and shareholder distributions 2015 2016 2017 2018 Base 8.1p 8.1p 16.0p 16.0p Additional 11.9p 13.9p 10.5p 14.0p 20.0p 22.0p 26.5p 30.0p • Base dividend of 16.0 pence (8.0 pence interim and 8.0 pence final) • Additional dividend of 14.0 pence Dividend of 22.0 pence to be paid in July 2018, subject t
Slide 31: Updated dividend policy from FY2019
Updated dividend policy from FY2019 • Propose to replace the current base plus additional dividend policy with a simpler policy • New proposal aims to maintain or grow the dividend year-on-year subject to: – maintaining our conservative balance sheet strategy, which excludes structural gearing at th
Slide 32: Additional information
Additional information
Slide 33: Q4 NAV up from 701 pence to 724 pence
Q4 NAV up from 701 pence to 724 pence NAV per share (pence) 750 7 (11) 740 2 17 (8) 730 724 720 16 710 701 700 690 680 31-Dec-17 Realised profits Value growth Other (including Net Carry FX Dividends 31-Mar-18 fee income, costs, receivable interest etc) 33
Slide 34: Strong progress across all KPIs
Strong progress across all KPIs Gross investment return (%) Cash realisations (£m) Cash investment (£m) 40% 827 1,308 1,277 29% 638 24% 27% 20% 841 369 433 671 718 276 1 1 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Operating cash profit (£m)2 NAV per share (pence) Tot
Slide 35: Maintained an operating cash profit
Maintained an operating cash profit Year to 31 March 2018 £ million 2018 2017 Private Equity 39 43 Infrastructure 78 59 Other 9 19 Cash income 126 121 Operating cash expenses (115) (116) Operating cash profit 11 5 Infrastructure and Scandlines dividend income will be important contributions to opera
Slide 36: Net asset exposure by currency
Net asset exposure by currency 1% Change 2% Currency Net assets YTD Impact 12% 20% Sterling £1,390m n/a n/a Euro £4,542m (2.6)% £81m US dollar £862m 10.8% £(90)m Danish krone £137m (2.3)% £3m Other1 £93m n/a £(10)m 65% Total £7,024m £(16)m Sterling/non-revaluing Euro US dollar Danish krone Other 1%
Slide 37: Private Equity large investments
Private Equity 20 large investments1 Valuation Valuation Investment Business description March 18 March 17 £m £m Action Non-food discount retailer 2,064 1,708 Scandlines Ferry operator between Denmark and Germany 803 538 Basic-Fit Discount gyms operator 270 184 WP Supplier of plastic packaging solut
Slide 38: Leverage
Private Equity Leverage Ratio of total net debt to earnings by 3i carrying value at 31 March 2018 (£ million) 803 Scandlines Action 2,064 29 489 615 395 714 <1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x Note: The chart above represents 88% of the Private Equity portfolio by value. Quoted holdings, deferred consid
Slide 39: Proprietary capital portfolio
Private Equity Proprietary capital portfolio By 3i office location (%) By sector (%) By vintage (%) 9 2 6 1 10 16 20 14 7 11 10 48 8 37 24 26 35 12 4 Benelux France Consumer Pre 2012 2012 20141 Germany UK Action (Consumer) 2015 2016 2017 US Other Industrials 2018 Scandlines (Industrials) Business &
Slide 40: Eight realisations in the year
Private Equity Eight realisations in the year Calendar year Realisation Uplift to opening Money Residual value Full realisations invested proceeds value multiple1 (31 Mar 2018) ATESTEO 2013 £278m 100% 4.8x - Memora 2008 £119m 37% 1.4x - MKM 2006 £70m 3% 5.9x - Refresco Gerber 2010 £43m 30% 2.0x - Fo
Slide 41: Refinancings, partial realisations and deferred consideration
Private Equity Refinancings, partial realisations and deferred consideration Calendar year Realisation Uplift to opening Money Residual value Investment realised invested proceeds value multiple1 (31 Mar 2018) Refinancings Action 2011 £307m - 24.5x £2,064m Scandlines 2007/2013 £50m - 7.4x £803m ATES
Slide 42: Recognising carried interest receivable under IFRS 15 in FY2019
Private Equity Recognising carried interest receivable under IFRS 15 in FY2019 • Carried interest calculation Carried interest from EFV 2018 2017 £ million unchanged but we will have to consider what could constrain Balance sheet recognition Carried interest receivable 484 340 Carried interest payab
Slide 43: Proprietary capital and external funds
Private Equity Proprietary capital and external funds Vintage Proprietary capital value at 31 March 2018 Multiple at 31 March 2018 Buyouts 2010-2012 £2,139m 7.2x Growth 2010-2012 £33m 2.2x 2013-2016 £1,695m 2.1x 2016-2019 £1,057m 1.1x Other £901m n/a Total Proprietary capital value £5,825m Remaining
Slide 44: Assets under management and advisory agreement
Infrastructure Assets under management and advisory agreement 3i Remaining 3i % Fee income Fund size at 31 commitment/ commitment invested at received Close date March 2018 share at March 2018 March 2018 AUM in the year 3iN1 Mar 07 n/a £581m n/a n/a £1,731m £34m 3i Managed Infrastructure Acquisition