3i Group Plc · LSE:III
3i — Debt Investor Presentation (March 2010)
46 slides from 3i's debt investor presentation, March 2010
Slide 1: 3i Debt Investor update
3i Debt Investor update March 2010 1
Slide 2: Disclaimer
Disclaimer THE DISTRIBUTION OF THIS DOCUMENT IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAWS OR REGULATIONS AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH RESTRICTIONS. ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLAT
Slide 3: Content
Content • 3i today • 3i investment portfolio overview • 3i key financials and valuations as at September 2009 • 3i balance sheet strategy • Annexes 3
Slide 4: 3i today
UL =i 3i today
Slide 5: Key themes
Key themes • Transformed financial position • Remain cautious about the economy • Confident in the strength of the portfolio • Ready for the upturn 5
Slide 6: Strategic focus
Strategic focus • Invest in high-return assets • Grow our assets and those we manage on behalf of third parties • Continue to build our strong culture of operating as one company across business lines, geographies and sectors 6
Slide 7: Progress in the first half
Progress in the first half • Reduced net debt from £1.9bn at 31 March 2009 to £854m at 30 September 2009 • Reduced gearing from 103% to 31% • Extended maturity profile of debt with new Revolving Credit Facility • Realisations exceeded new investment by £317m • 33% of opening non-core portfolio value
Slide 8: 3i today - priorities
3i today - priorities • Preserve and optimise value in portfolio – realise assets at the right time • Position the business for the upturn – sector analysis, people, network • Grow external funds under management – stability of earnings • Maintain a long term focus for funding opportunities – balanc
Slide 9: 3i today – sustainable competitive advantage
3i today – sustainable competitive advantage • Market leading business – clear mid market positioning and recognised brand name – ability to invest in a broad range of opportunities at various stages of the business cycle • Growth Capital – companies short of capital – limited competition • Infrastr
Slide 10: 3i investment portfolio overview
3i investment portfolio overview 10
Slide 11: Internationally connected
Internationally connected Europe Stockholm Aberdeen Copenhagen Manchester Beijing Amsterdam London New York Frankfurt Paris Milan Barcelona Mumbai Madrid Singapore • Real competitive advantage • Market access • Investment selectivity • Cornerstone of Active Partnership 11
Slide 12: 3i today
3i today (as at 30 September 2009) 3i Group Buyouts Growth Capital Infrastructure Mid-market transactions in Europe Minority investments in established Investing principally in and Asia and profitable businesses across transportation, utilities and social Europe, Asia and the North infrastructure Tr
Slide 13: Diversified portfolio
Diversified portfolio By business line By geography Continental Europe UK Buyouts India Growth Capital China Infrastructure Other Asia Non-core North America Rest of the World By vintage By sector Business Services Consumer Pre 2005 Financial Services 2005 General Industrial 2006 Healthcare 2007 Med
Slide 14: Value creation strategy
Value creation strategy Creating value throughout the investment process Asset Market access + + model Execution + management • Brand • Brand • Aligned interests • International network • International network • Value creation plans • Sector teams • Sector expertise • Systematic approach • Business
Slide 15: Active Partnership: driving value through performance improvement
Active Partnership: driving value through performance improvement • Delivering value in key functional areas – Working capital management – Pricing – Sales force effectiveness – Procurement – Lean manufacturing 3i Net A dedicated portal for our portfolio • Sharing experience across the portfolio – E
Slide 16: Key financials and valuations
Key financials and valuations 16
Slide 17: Key financials
Key financials 6 months 6 months 6 months Investment activity 30.9.09 31.3.09 30.9.08 Investment £190m £300m £668m Realisations £507m £711m £597m Returns and balance sheet Total return £81m £(1,968)m £(182)m Return on opening equity 3.2% (48.5)% (4.5)% Gross portfolio return 7.8% (35.4)% (1.3)% Net
Slide 18: Realisations - £507m in six months to September 2009
Realisations - £507m in six months to 30 September 2009 • Three largest realisations 11% 15% – Venture Production (£145m proceeds) – AWG (£44m proceeds) 11% – Salamander (£43m proceeds) 13% • Venture Portfolio realisations of £93m – agreed sale of a further £105m • 3% uplift over opening portfolio 5
Slide 19: Investment - £190m in six months to September 2009
Investment - £190m in six months to 30 September 2009 • All investment into portfolio 5% 9% • £47m for equity rescue/equity cures 13% 25% • £92m of capitalised interest including PIK notes • Balance to support portfolio development through acquisition or other means 48% • £94m cash investment Acquis
Slide 20: Strong cash flow generation
Strong cash flow generation 3,000 110% 90% 2,000 70% 1,000 50% 30% 0 10% (1,000) -10% (2,000) -30% -50% (3,000) -70% (4,000) -90% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 30.9.09 Investment (£m) Return flow (£m) Other (£m) Gearing (%, RH Axis) Net cash flow (£m
Slide 21: Movement in portfolio value
Movement in portfolio value £m Value movement £227m 5000 617 190 4,050 4000 (41) 3,780 (193) (349) (494) 3000 2000 1000 0 Opening Investment Value Unrealised Unrealised Unrealised - Other Closing portfolio realised market driven investment other movement portfolio movement specific including FX move
Slide 22: Earnings multiples - £464m value movement
Earnings multiples - £464m value movement At 30.9.09 At 31.3.09 At 30.9.08 Weighted average EBITDA multiple post discount 7.1x 5.9x 6.2x • 71% of unquoted portfolio valued on an earnings basis (2008: 37%) • No assets held at cost (2008: 25%) • Weighted average multiple up 21% from March to September
Slide 23: Valuation earnings - £(322)m value impact
Valuation earnings - £(322)m value impact At 30.9.09 At 31.3.09 At 30.9.08 Audited 22% 37% 48% Management 39% 42% 21% Forecast 39% 21% 31% • Portfolio earnings down 6% in the period • Earnings used for valuation down 13% • Value impact of falls concentrated in a small number of investments 23
Slide 24: Conservative valuation basis
Conservative valuation basis • No assets held at cost • Forecast earnings used, rather than historic, where future earnings are likely to fall • Weighted average EBITDA multiple 7.1 £6,016m £4,362m £4,050m £3,780m Quoted DCF Industry metric Fund Other Price of recent investment Net assets Imminent s
Slide 25: 3i valuation principles and process
3i valuation principles and process • Based on IPEV guidelines Board • Investments valued on an earnings basis using benchmark or sector multiples • Marketability discount of 10% to 30%, the normal Valuations level is 25% for Growth Capital and 15% for Committee Buyouts • 10% discount to any uplift
Slide 26: 3i balance sheet strategy
UL =i 3i balance sheet strategy
Slide 27: Changes to maturity profile of debt
Changes to maturity profile of debt Type Amount Start date Maturity date Multi-currency bilateral facility £100m September 2009 October 2012 Replacement of £150m multi-currency bilateral facility Forward start facility £300m September 2010 October 2012 Multi-currency bilateral facility £200m Novembe
Slide 28: Long term debt repayment profile as at September 2009
Long term debt repayment profile as at 30 September 2009 • No immediate maturities • No covenants on issued debt £m 1000 • Attractively priced 900 • Strong liquidity position 800 • Leverage in portfolio companies non recourse to 3i and long dated 700 600 500 400 300 200 100 0 2009 2010 2011 2012 201
Slide 29: Funding and liquidity priorities
Funding and liquidity priorities • Conservative funding strategy – continue to seek long dated maturities – continue to seek currency funding – continue to target a diverse range of investors – continue to target net debt of £1bn • Conservative liquidity management – cash balances largely held in AA
Slide 30: Contacts
Contacts Maureen Rawlins Group Treasurer Email: [email protected] Direct line: +44 (0) 7975 3115 Investor Relations Douwe Cosijn Corporate Affairs Director, Group Communications Email: [email protected] Direct line: +44 (0) 7975 3019 www.3i.com www.3iGroup.com Acquisitions British Private Pri
Slide 31: Annexes
= Su Annexes
Slide 32: Gross portfolio return
Gross portfolio return 6 months to 6 months to 6 months to 30.9.09 31.3.09 30.9.08 Group £m £m £m Realised profits/(losses) 13 (127) 190 Unrealised profits/(losses) 227 (2,029) (411) Portfolio income 76 28 143 Gross portfolio return 316 (2,128) (78) Realised uplift on opening book value 3% (15)% 47%
Slide 33: Unrealised profits/(losses) on revaluation of investments
Unrealised profits/(losses) on revaluation of investments 6 months to 6 months to 6 months to 30.9.09 31.3.09 30.9.08 £m £m £m Earnings and multiple based valuations Earnings - Earnings multiples 464 (218) (194) - Earnings growth (322) (64) 78 Loans - Impairments (earnings basis) 2 (564) (56) First
Slide 34: Provisions
Provisions Provisions as a percentage of opening portfolio value 3.4% 2.6% 1.5% 1.4% 0.7% 0.7% 2005 2006 2007 2008 2009 H1 2010 34
Slide 35: Total return analysis
Total return analysis 6 months to 6 months to 6 months to 30.9.09 31.3.09 30.9.08 £m £m £m Gross portfolio return 316 (2,128) (78) Fees receivable from external funds 28 37 38 Net carried interest (4) 10 43 Operating expenses (108) (119) (131) Net portfolio return 232 (2,200) (128) Net interest paya
Slide 36: Net carried interest
Net carried interest H1 2010 2009 £m £m Carry receivable (2) (3) Carry payable (2) 56 Net carried interest payable (4) 53 36
Slide 37: Further reduction in operating costs
Further reduction in operating costs £131m £119m £108m 6 months to 30.9.08 6 months to 31.3.09 6 months to 30.9.09 Headcount 731 607 537 37
Slide 38: Balance sheet as at September 2009
Balance sheet as at 30 September 2009 As at As at As at 30.9.09 31.3.09 30.9.08 £m £m £m Investment assets 3,780 4,050 5,934 Other net liabilities (180) (276) (280) 3,600 3,774 5,654 Net borrowings 854 1,912 1,802 Equity 2,746 1,862 3,852 3,600 3,774 5,654 Gearing 31% 103% 47% NAV £2.86 £2.79* £5.90
Slide 39: Buyouts - performance
Buyouts - performance Vintage IRR performance Vintage Cost As at As at year remaining 30 Sept 2009 31 March 2009 2009 100% (8)% n/a 41% of direct 2008 99% (26)% (30)% Group portfolio value 2007 80% 22% 25% £3.8bn assets 2006 34% 47% 46% under management 2005 26% 61% 62% Sept March March March March
Slide 40: Growth Capital - performance
Growth Capital - performance Vintage IRR performance Vintage Cost As at As at year remaining 30 Sept 2009 31 March 2009 2009 100% (19)% n/a 41% of direct 2008 87% (5)% (16)% Group portfolio value 2007 82% (6)% (2)% £1.6bn assets 2006 37% 23% 23% under management 2005 28% 26% 27% Sept March March Mar
Slide 41: Infrastructure
Infrastructure As at As at 30.9.09 30.9.08 Contribution to Group results £m £m Realised profits - 6 Unrealised profits 47 7 Portfolio income 10 23 Gross portfolio return 57 36 Fees receivable from external funds 8 16 Assets under management 1,528 1,477 41
Slide 42: Portfolio leverage – Buyouts and Growth Capital
Portfolio leverage – Buyouts and Growth Capital Buyouts repayment profile of acquisition debt – Growth Capital portfolio debt repayment profile, index weighted by 3i carrying value weighted by 3i Group value % % 100 70% 90 60% 80 50% 70 60 40% 50 30% 40 20% 30 10% 20 0% 10 2009 2010 2011 2012 2013 2
Slide 43: Investment assets
Investment assets 6 months 6 months to 30.9.09 to 30.9.08 £m £m Opening portfolio value 4,050 6,016 Investment 190 668 Realisation proceeds (507) (597) Realised profits on disposal 13 190 Unrealised value growth 227 (411) Exchange and other movements (193) 68 Closing portfolio value 3,780 5,934 43
Slide 44: Key credit considerations – management team
Key credit considerations – management team Committed and experienced management team Chief Executive - Michael Queen Appointed January 2009 Joined 3i in 1987 Previously Finance Director of 3i (1997-2005), Global Head of Growth Capital (2005-2007) and Managing Partner of 3i’s Infrastructure bu
Slide 45: Key credit considerations – management team (cont'd)
Key credit considerations – management team Committed and experienced management team (cont’d) Managing Partner, Infrastructure – Cressida Hogg Appointed January 2009 Joined 3i in 1995 One of the founders of the infrastructure business in 2005 Managing Partner, Group Markets – Bruno Deschamps
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