3i Group plc · LSE:III
3i — H1 2017 Earnings Presentation
43 slides from 3i's earnings presentation, Nov 10, 2016
Slide 1: Results for the six months to 30 September 2016
Results for the six months to 30 September 2016 10 November 2016
Slide 2: Good progress against all KPIs
Good progress against all KPIs Six months to 30 September 2016 Group Private Equity Infrastructure Total return on equity1 Interim dividend Private Equity Infrastructure per share cash invested cash invested 22.6% 8p £291m £131m NAV per share Operating cash profit2 Private Equity Infrastructure real
Slide 3: Strategic developments
Strategic developments Agreement to sell Debt Management to Investcorp • Important contribution in achieving and maintaining operating cash profit • Fit now less clear given strong progress in Private Equity and Infrastructure Cash income from Debt Management less important as we focus on building o
Slide 4: Private Equity: a strong start to the year
Private Equity A strong start to the year Strong return for the period • £989m gross investment return • 26% of opening book value Resilient portfolio performance • Portfolio value growth of £643m in the period • Some softness in assets exposed to oil & gas capex and discretionary consumer spending
Slide 5: Robust portfolio performance continues to drive value growth
Private Equity Robust portfolio performance continues to drive value growth Largest value increases Largest value declines Value Value at Value Value at Portfolio Key driver of value Portfolio Key driver of growth 30 Sep decline 30 Sep company movement company value movement (excl FX) 2016 (excl FX)
Slide 6: FY13+ vintages continue to perform well
Private Equity FY13+ vintages continue to perform well Financial Total cost Investment year invested Country Sector (£m) Aggregate Geka (realised) FY13 Germany Industrials 57 MM of 1.6x Scandlines (further) FY13 Denmark/Germany Transport 77 compares well with 2013 vintage JMJ FY14 US Business Servic
Slide 7: Action continues to grow strongly
Private Equity Action continues to grow strongly • Management team confident that last year’s growth metrics can be replicated • DC3 near Paris opened in June 2016 • DC4 and DC5 near Toulouse and Mannheim now at the planning stage Valued at £1,549m, or 16.8x LTM run-rate earnings (June 2016: £1,488m
Slide 8: Portfolio weak spots
Private Equity Portfolio weak spots • Exposure to capex in oil & gas and commodities • Exposure to discretionary consumer spending • Agent Provocateur substantially written down 8
Slide 9: Continuing to reshape the portfolio through realisations
Private Equity Continuing to reshape the portfolio through realisations Realised Money multiple Investment proceeds (MM) over cost1 IRR HY17 realisations Mayborn £136m 3.5x 17% £654m total proceeds Quintiles £107m 3.3x 23% 2.3x average MM Amor £88m 2.3x 18% 8 full realisations Refi Geka £85m 1.8x 16
Slide 10: New investment: Schlemmer
Private Equity New investment: Schlemmer £155m of proprietary capital invested in August • Global leader in cable management solutions for the automotive industry • Business set to benefit from mega trends in the automotive industry such as connectivity, e-mobility, autonomous driving and safety 10
Slide 11: New investment: BoConcept
Private Equity New investment: BoConcept £132m proprietary capital invested in July in a public-to-private transaction • Urban interior design brand, founded in 1952 • 254 brand franchises and 43 studios across 60 countries • Attractive market segment, with good growth outlook underpinned by demogra
Slide 12: New investment: Ponroy Santé
Private Equity New investment: Ponroy Santé €150m proprietary capital investment announced in November • Leader in the natural consumer healthcare industry in Europe, with a presence in Asia and the Americas • Well known brands include Yves Ponroy, Biolane, Lecitone, Vitarmonyl and Ultrabiotique • G
Slide 13: A portfolio weighted towards our better assets
Private Equity A portfolio weighted towards our better assets The buckets Selected examples % of value HY2017 FY2016 1 Longer-term hold and value creation Action, Scandlines, Audley Travel, ATESTEO c.62% c.62% 2 Strong performers; performing in line with investment case WP, Q Holding, BVG, Schlemmer
Slide 14: Infrastructure: continuing to build investment momentum
Infrastructure Continuing to build investment momentum Contributing to capital and • £90m gross investment return, or 17% of income returns opening book value • £28m operating cash income Investment activity levels • Four new investments/commitments remain strong announced in the period, totalling c
Slide 15: 3iN: robust returns and strong momentum in investment activity
Infrastructure 3iN: robust returns and strong momentum in investment activity 3iN share price (p/share) 210 A27/A1 Valorem Strong performance in HY17 200 TCR Total return on opening NAV 5% Hart van Zuid 190 NAV per share 165.7p Interim dividend per share 3.775p 180 WIG 170 6 months to 30 September:
Slide 16: Continuing to improve capital efficiency and allocation
Continuing to improve capital efficiency and allocation Average over FY10-FY12 Year to 30 September 2016 £1.0bn 27% £1.3bn 14% 6% 16% 41% 64% 3% 29% Realisations, Operating costs,Debt repayment Shareholder Funds to invest Realisations, Operating costs,Debt repayment Shareholder Funds to invest fees
Slide 17: Slide 17
Slide 18: NAV up 19% to 551 pence driven by strong portfolio performance
NAV up 19% to 551 pence driven by strong portfolio performance NAV per share (pence) 600 32 (16) 560 551 76 (10) 1 520 480 5 463 440 1 31-Mar-16 Realised Value growth Net carry Other FX Dividends 30-Sep-16 profits payable Debt Management contributed 9 pence to NAV in the first half 1 Other includes
Slide 19: Private Equity: strong performance
Private Equity Strong performance 6 months to 30 September £ million 2016 2015 Gross investment return 989 246 % of opening portfolio 26% 8% Realised profit 52 26 Uplift over book value1 9% 9% Money multiple 2.3x 1.6x Realisations 654 307 Cash Investment 291 208 Portfolio value 4,351 3,275 Portfolio
Slide 20: Good growth in the top assets
Private Equity Good growth in the top 20 assets 3i carrying value at 30 September 2016 (£ million) 6 2,135 5 4 4 785 1 439 468 59 (20)-(11)% (10)-(1)% 0-9% 10-19% >30% Last 12 months’ earnings growth1 1 Twenty large Private Equity assets as disclosed in the Half-yearly report. This represents 89% of
Slide 21: £643 million value growth driven by Action, Scandlines and recent investments
Private Equity £643 million value growth driven by Action, Scandlines and the more recent investments Value movement by basis (£ million) Sept March Use of earnings 2016 2016 282 Performance1 % valued on an 72% 74% earnings basis 300 Multiple Forecast indicates 2 2 negative outlook (no.) 48 DCF Sept
Slide 22: Carry receivable and payable
Private Equity Carry receivable and payable £ million 6 months to 30 September Income statement 2016 2015 Receivable 203 (8) Payable (302) (36) Net total return charge (99) (44) Balance sheet September 2016 March 2016 Carried interest receivable 296 92 Carried interest payable 623 356 Net cash paid
Slide 23: Good portfolio contribution to operating cash income
Private Equity Good portfolio contribution to operating cash income 6 months to 30 September £ million 35 30 25 9 20 5 5 15 16 10 12 15 5 5 5 2 0 2014 2015 2016 Portfolio fees Dividends and interest Third-party fees 23
Slide 24: Infrastructure: strong gross investment return
Infrastructure Strong gross investment return 6 months to 30 September £ million 2016 2015 Gross investment return 90 23 % of opening portfolio 17% 4% Fee income 18 14 Cash income 28 25 Cash investment 131 - Portfolio value 722 513 3iN TSR of 17% in the period 24
Slide 25: Debt Management: good performance in the first half
Debt Management Good performance in the first half 6 months to 30 September £ million 2016 2015 Gross investment return 69 3 % of opening portfolio 30% 2% Fee income 24 17 Cash income 50 33 Direct operating expenses 12 13 Net contribution to total return 84 5 Launched 3 CLOs and raised £1.0bn of AUM
Slide 26: Debt Management: sale to Investcorp announced October 2016
Debt Management Sale to Investcorp announced 25 October 2016 • Gross cash proceeds of £222m subject to closing adjustments – Sold risk retention equity (£182m at 30 September 2016) and Fund Management business (£9bn of AUM) • Debt Management classified as a discontinued operation and expect remainin
Slide 27: Operating cash profit
Operating cash profit £ million 200 100 - (100) (200) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 HY 2017 Operating expenses Total cash income Operating cash profit/(loss) Operating cash profit/(loss) excluding Debt Management Significant progress since the 2012 strategic review 1 Operating expe
Slide 28: Summarised balance sheet
Summarised balance sheet 30 September 31 March £ million 20161 2016 Portfolio value 5,073 4,497 Gross debt (844) (837) Cash 1,031 1,002 Net cash 187 165 Liquidity 1,360 1,352 1 Excludes Debt Management balances which are included within assets held for sale. 28
Slide 29: Dividends
Dividends • Policy to pay 8.0p interim dividend and 8.0p year end dividend plus additional final dividend, provided: – gearing <20% – gross debt on target to be <£1bn • Final dividend dependent on cash realisations, investment pipeline and balance sheet at year end 8.0 pence interim dividend ann
Slide 30: Slide 30
Slide 31: Additional information
Additional information
Slide 32: Net asset exposure by currency
Net asset exposure by currency 3% 3% Net Change Currency assets YTD Impact 14% 24% GBP £1,296m Euro £2,989m (9.1)% £208m US dollar £741m (10.9)% £57m Danish krone £133m (9.1)% £1m 56% Other £161m n/a £17m Sterling/non-revaluing Euro Total £5,320m n/a £283m US dollar Danish krone Other 1% movement in
Slide 33: Twenty large investments
Private Equity Twenty large investments Value at Value at Relevant Investment Business description 30-Sep-16 31-Mar-16 transactions in £m £m the period Action Non-food discount retailer 1,549 902 Scandlines Ferry operator between Denmark and Germany 434 369 Basic-Fit Discount gyms operator 195 208 I
Slide 34: Private Equity leverage
Private Equity leverage Ratio of total net debt to EBITDA by September 2016 values (£ million) 2,730 541 526 275 263 - < 1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x >5x Note: The above table includes assets not valued on an EBITDA basis. 34
Slide 35: Private Equity portfolio
Private Equity portfolio By region (%) By sector (%) By vintage (%) 8 9 2 17 25 17 7 5 1 5 53 36 3 5 70 37 Northern Europe Consumer Consumer pre 2009 2010 North America Industrials Industrial & Energy 2011 2012 UK Business Business&services Financial services 2013 2014 Other Other Other 2015 2016 Po
Slide 36: Private Equity full realisations in the period
8 Private Equity full realisations in the year Calendar year Realisation Uplift to opening Money Investment realised invested proceeds value multiple Realisations Mayborn 2006 £136m 2% 3.5x Quintiles 2008 £107m 10% 3.3x Amor 2010 £88m 2% 2.3x Geka 2012 £85m 47% 1.8x Polyconcept 2005 £42m 2% 2.0x Elt
Slide 37: Private Equity 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 (30 Sep 2016) Refinancings ATESTEO 2013 £48m -% 2.1x £115m Partial realisations Basic-Fit 2013 £82m -% 3
Slide 38: Assets under management: Private Equity
Assets under management Private Equity Gross Fee Remaining 3i % money income commitment1 invested at multiple2 at received Original Original 3i at September September September in the Close date fund size commitment 2016 2016 2016 AUM period 3i Growth Mar 10 €1,192m €800m €346m 53% 1.8x €211m £1m Ca
Slide 39: Assets under management: Infrastructure
Assets under management Infrastructure Remaining % Gross Fee 3i invested money income commitment at multiple1 at received Original Original 3i at September September September in the Close date fund size commitment 2016 2016 2016 AUM period 3iN Mar 07 n/a n/a n/a n/a n/a £1,662m2 £11m India fund Mar
Slide 40: Assets under management: Debt Management Europe CLOs
Assets under management Debt Management Europe CLOs Fees received Par value of Realised equity Annualised in the Closing Reinvestment Maturity fund at money equity cash period date period end date launch 1 multiple2 AUM yield3, 4, 5 £m European CLO funds Harvest XVI Sep 16 Oct 20 Oct 29 €452m n/a €4
Slide 41: Assets under management: Debt Management US CLOs
Assets under management Debt Management US CLOs Fees received Par value of Realised equity Annualised in the Closing Reinvestment Maturity fund at money equity cash period date period end date launch 1 multiple2 AUM yield3, 4, 5 £m US CLO funds Jamestown CLO IX Sep 16 Oct 20 Oct 28 US$408m n/a US$39
Slide 42: Assets under management: Debt Management other funds
Assets under management Debt Management other funds Fees received Par value of Annualised in the Closing Reinvestment Maturity fund at Realised equity equity cash period date period end date launch 1 money multiple2 AUM yield3, 4, 5 £m Other funds Global Income Fund Jul 15 n/a n/a n/a n/a US$196m 4.
Slide 43: Slide 43