3i Group Plc · LSE:III
3i — Investor Day (September 2024)
53 slides from 3i's investor day presentation, Sep 24, 2024
Slide 1: Private Equity Capital Markets Seminar
Private Equity Capital Markets Seminar 24 September 2024
Slide 2: Agenda and introduction
Agenda and introduction Simon Borrows Chief Executive
Slide 3: Agenda
Agenda 10.00-10.10 Agenda and introduction Simon Borrows Chief Executive 10.10-11.00 Services & Software sector Rémi Carnimolla presentation Private Equity – Partner Q&A Head of Services & Software sector Marc Ohayon Private Equity – Partner Head of Services & Software sector, France & UK 11.00-11.4
Slide 4: Portfolio update
Portfolio update • We are seeing good overall performance across both the Private Equity and Infrastructure portfolios: – Royal Sanders and European Bakery Group continue to perform well – Customer demand is driving a recovery across the healthcare assets – Audley has continued to see very strong gr
Slide 5: Today's presenters Services & Software
Today’s presenters Services & Software Rémi Carnimolla David Stephens Private Equity – Partner Private Equity – Partner Head of Services & Software Co-head of UK Private Equity Investment Committee member Marc Ohayon Private Equity – Partner Head of Services & Software France & UK 5
Slide 6: Services & Software sector presentation
Services & Software sector presentation 24 September 2024
Slide 7: The Services & Software leadership acts globally with local presence
The Services & Software leadership acts globally with local presence Rémi Carnimolla Global Sector Head Rahul Lulla Marc Ohayon Michael Specht Sector head for USA Sector head for France and UK Sector head for Germany and Benelux 7
Slide 8: Introduction to the Services & Software investment strategy
Introduction to the Services & Software investment strategy Selective and disciplined approach Focused on three segments Tech-enabled IT Services Mature software outsourcing 8
Slide 9: Tech-enabled outsourcing remains a core theme for 3i
Tech-enabled outsourcing remains a core theme for 3i, leveraging successful experience in Testing, Inspection and Certification (“TIC”) Technological expertise embeds superior value proposition or cost advantage Large and global markets with secular outsourcing trend Tech-enabled Global reach for de
Slide 10: Carve-out to build an integrated international leader in TIC
Carve-out to build an integrated international leader in TIC, quadrupling EBITDA in five years Financial development Activity • Material testing and product qualification testing for OEMs and their supply chain Revenues 293 Key achievements / transformation $m 100 Carve-out from Stork, refocused o
Slide 11: Building a global presence in calibration services
Building a global presence in calibration services, expanding in the US, consolidating the market and significantly improving profitability Financial development Activity • Calibration of measurement equipment • Cost advantage with technology (automatisation of services and reporting) Revenues 162 •
Slide 12: Transforming a Mittelstand company into a global product quality testing company
Transforming a diversified “Mittelstand“ company into a global product quality testing company serving the automotive sector Financial development Activity • Global leader in drivetrain testing for the automotive industry 75 Key achievements / transformation Revenues 51 €m Refocused from diversifi
Slide 13: Expanded capabilities to create the #1 rated global RPO company
Expanded capabilities to create the #1 rated global RPO company Tech-enabled outsourcing portfolio Core RPO customer development Activity Number of Core RPO clients from 2019 to 20231 • Global leader in talent solutions, supporting Fortune +47% 94 1000 clients in planning and executing talent acquis
Slide 14: Our approach to the software segment is focused on mature software
Our approach to the software segment is focused on mature software where we can apply our track record of transition to SaaS Benefiting from digitalisation macro-trend Focus on well-embedded software with sticky customer base Profitable and cash-generative businesses only Mature software Possibility
Slide 15: Built a strategic platform and transitioned into SaaS; sold to a strategic buyer
Built a strategic platform and transitioned the traditional revenue model into SaaS with higher recurring revenues; sold to a strategic buyer Financial development 10+% CAGR Activity • “Office of the CFO” • Data and analytics software focused on ERP • Complement leading ERP offer: despite Revenues R
Slide 16: Transformation to a true software company supported by SaaS transition
Transformation to a true software company supported by the transition to SaaS, adding a software-savvy CEO, M&A and expanding in the US Financial development1 Activity • “Office of the CFO” • Premium provider for accounts payable invoice automation (APIA) software with focus ARR 26 on the SAP enviro
Slide 17: The IT Services segment is our core area of focus
The IT Services segment is our core area of focus, with all typical features of a 3i deal Supporting the digitalisation macro-trend without bearing the technology risk Large markets in every 3i geography IT Services Fragmented competitive landscape allowing accretive and synergistic buy and build Ex
Slide 18: Spotlight on our IT services investment strategy
Spotlight on our IT services investment strategy: what we like about this segment $5 trillion global market Growing at high-single-digit to mid-double-digit rates depending on segments Target rich subsector in all 3i geographies Potential to benefit / develop recurring revenues with >10% EBITDA marg
Slide 19: We focus on specific investment themes in the IT services market
We focus on specific investment themes in the IT services market where we already have experience and firsthand knowledge – Illustrations KEY SELECTION CRITERIA avoid targets positioned on undifferentiated services or that compete neck-to-neck with large SIs 3i experience and track record Software v
Slide 20: Our origination and value creation model leverages ecosystems
Our origination and value creation model leverages a robust web of ecosystems to find the best investment platforms for 3i • Working as one global team: global coverage and local presence, looking at the same investment themes 3i • Replication of investment theme deep-dives in each geography Service
Slide 21: How we add value to portfolio companies in IT services
How do we add value to our portfolio companies in IT services: our systematic framework 1 2 3 4 Build consolidation Accelerate growth in Complement the Create operational platforms recurring revenues service portfolio leverage Accretive add-ons Orient sales organisation Defined product Push profitab
Slide 22: From a regional maintenance player to a global data centre maintenance leader
From a regional maintenance player to a global leader of maintenance services for the data centre industry Financial development Activity • Global player in maintenance services for the data centre industry Key achievements / transformation Secured European leadership, expanded presence in the US
Slide 23: We applied our systematic framework
We applied our systematic framework 1 2 3 4 Build consolidation Accelerate growth in Complement the Create operational platforms recurring revenues service portfolio leverage Five accretive add-ons From 72% in Develop and market a Process digitalisation to maintenance (fully “Green IT” offer with a
Slide 24: Illustration of 3i's IT services expertise with MAIT
Illustration of 3i’s IT services expertise with MAIT Supports more than 7,000 Mittelstand industrial and manufacturing companies in the digitalisation of their design and production processes through the integration and management of leading PLM (“product lifecycle management”) and ERP (“enterprise
Slide 25: Transforming from a Germany centric player into a scalable DACH platform
Transforming from a Germany centric player into a scalable platform across DACH Financial development Activity • Digitalisation partner focused on the manufacturing mid-market with mission critical PLM and ERP software supported by managed services and IT solutions Key achievements / transformation
Slide 26: Value added to MAIT since 3i's entry
Value added to MAIT since 3i’s entry 1 2 3 4 Build consolidation Accelerate growth in Complement the Create operational platforms recurring revenues service portfolio leverage 11 add-ons completed Accelerated organic EBITDA margin improved since 2021 growth, Expansion into by 3pt since entry “winnin
Slide 27: Constellation runs the IT infrastructure of mid-market and enterprise customers
Constellation runs the IT infrastructure of mid-market and enterprise customers, notably on public and private cloud (“hybrid cloud”) and cyber managed services c.€110m net sales FY23 c.€22m EBITDA FY23 c.700 FTEs Supports customers on their hybrid infrastructure journey ~600 large medium and enterp
Slide 28: The infrastructure of a mid-sized company is hybrid and complex to operate
The infrastructure of a mid-sized company is hybrid and is complex to operate. CIOs outsource the management of this infrastructure to the likes of Constellation Third-party cloud Third-party cloud provider PUBLIC PRIVATE provider Cloud infrastructure can go up to thousands of servers CLOUD with ded
Slide 29: Constellation's French market is worth €20bn
Constellation’s French market is worth €20bn and is expected to grow by 9% CAGR in the coming five years Constellation market (France, IT Services on segments where Constellation is active) €bn, CAGR 23-28 31.0 +9% KEY DRIVERS Continued digitalisation of mid-sized and enterprise customers 8.3 +8% Hi
Slide 30: Constellation was built to consolidate a fragmented French managed services landscape
Constellation was built to consolidate a fragmented French “managed services” landscape, with a coherent services portfolio pushing for growth and recurring revenue was our top priority target: it stands out in the French IT managed services landscape and the founder/CEO’s strategy meets our own the
Slide 31: Constellation is one step ahead in terms of ESG processes
Constellation is one step ahead in terms of ESG processes Ethos built around fight Circular IT services External Internal processes to against climate change offering advocacy reduce carbon emissions Purpose-driven company Designed several offers to Yearly event organised Carbon emissions measured s
Slide 32: 3i built a longstanding relationship with Constellation's founder
Leveraging its ecosystems and specialised approach, 3i built a longstanding relationship with Constellation’s founder and was the natural partner for the next growth phase Early origination through Leverage the strengths Bring equity and expertise specialisation and ecosystems of the 3i model Identi
Slide 33: Our investment thesis aims to accelerate the founder's strategy
Our investment thesis aims to accelerate the founder’s strategy: buy and build and enhancing the group’s positioning in recurring revenues from cloud and cyber 1 2 3 4 Accelerate growth in Accelerated buy and Complement the Create operational recurring revenues in build service portfolio leverage cl
Slide 34: Conclusion
Conclusion Selective and focused approach to the sector Confidence we can average 3x returns over time Aspiration to make 2-3 new investments per year … … while keeping our discipline on pricing Focus on replicating successes from past deals and leveraging their ecosystem / knowledge Apply same appr
Slide 35: Q&A
Q&A 35
Slide 36: Audley Travel
Audley Travel David Stephens Partner, Co-head of UK Private Equity
Slide 37: 3i in the UK
3i in the UK • Investing in UK growth business for 70 years+ • 11 investment professionals in the London office • Since 2010, the UK team has invested £636m across seven deals with three realised to date, generating a return of £684m (3.6x MM) and a total return of £1.3bn including unrealised assets
Slide 38: Introduction to Audley
Introduction to Audley 38
Slide 39: Audley is the global market leader in tailor-made travel
Audley is the global market leader in tailor-made travel • Founded in 1996 by Craig Burkinshaw and John Brewer • 3i invested £156m in December 2015 alongside management • Audley has grown to over 900 employees across three offices in Witney, Oxfordshire (HQ), London (2014) and Boston (2014) • It is
Slide 40: Diverse, tailor-made product offering
Diverse, tailor-made product offering Tailor-made product offering Diverse portfolio Split by destination (FY23A) (# of bookings) c.100 countries across 7 continents Flights, transfers, Food & Drink Beach Wildlife accommodation & The USA India Canada unique experiences South Africa Costa Rica Japan
Slide 41: Differentiated service offering drives best-in-class client advocacy
Differentiated service offering drives best-in-class client advocacy Traveller rating vs peers across key purchase criteria (KPC) (scores out of 5) Audley Peers1 Audley consistently outscores peer group across all core KPC 4.7 4.7 4.7 4.7 4.8 4.6 4.5 4.2 4.2 4.2 4.1 4.2 4.2 4.2 4.0 4.0 4.5 4.7 4.7 4
Slide 42: Investment highlights
Investment highlights The world’s leading tailor-made travel business Leading Market leader in the UK and made significant position investment in the US, creating a highly in attractive profitable, fast growing and scalable business Materially built market out product Significant Loyal and offering
Slide 43: Growth in the tailor-made travel market is supported by strong drivers
Growth in the tailor-made travel market is supported by strong underlying drivers 1 Large and growing market in both geographies, with the US market significantly larger 2 Consumer demand for differentiated “high touch” model, particularly post Covid where customers seek ease in booking 3 Aging, hea
Slide 44: Affluent and economically resilient customer base
Affluent and economically resilient customer base with a high propensity to travel Typical customer is from the upper income bracket, mortgage-free and economically resilient with significant discretionary spend Highly attractive and resilient With best-in-class customer Driving loyal customer base
Slide 45: Scalable and well invested platform
Scalable and well invested platform Significant investment made to date and through Covid in the technology platform, re-platforming to a scalable, cloud-based model including its booking system to enhance productivity across all functions • Updated in 2021 Employee • End-user device tools • Email,
Slide 46: Country specialists are key to Audley's customer advocacy
Country specialists are key to Audley’s customer advocacy, post Covid we have invested significantly to rescale team Material & continuing direct staff investment over recent … with retention of country specialists a priority years to rebuild the team beyond pre-Covid levels…. Average Direct Staff F
Slide 47: ~$200m sales expected in the US for 2024
~$200m sales expected in the US for 2024 and significant opportunity to further accelerate growth… Market dynamics Delivered since 2015 • Large addressable tailor-made market Significant investment, creating a highly − >2x size of UK today with growing profitable, fast growing and scalable penetra
Slide 48: Several other organic growth initiatives planned across the Group
...with several other organic growth initiatives planned across the Group New source Product Audley Private Family / multi- Cruise markets adjacencies Concierge (APC) generational • Opportunity to • Opportunity to • Further enhance • Create inspirational • Opportunity to enter new source develop pro
Slide 49: Attractive financial profile with negative working capital
Attractive financial profile with negative working capital, significant forward revenue visibility and strong growth in both the UK and US Gross booking sales (£m) 479 US GBS (£m) UK GBS (£m) 2015-2024¹ 386 368 CAGR: 26% 334 281 COVID-19 259 227 189 2015-2024¹ 159 136 147 CAGR: 8% 124 96 74 '11 '12
Slide 50: Customer service and awards
Customer service and awards Certified B CorporationTM - This means that Audley is Travelife Partner - The award is recognition Wanderlust Travel Awards Rated 4.8* on part of a global community of businesses that meet for the long-term efforts and commitment Top Tour Operator 2023 Trustpilot high sta
Slide 51: Q&A
Q&A 51
Slide 52: Closing remarks and final questions
Closing remarks and final questions Simon Borrows Chief Executive
Slide 53: Slide 53