3i Group Plc · LSE:III
3i — FY2010 Earnings Presentation
44 slides from 3i's earnings presentation, May 13, 2010
Slide 1: Annual results to 31 March 2010
Annual results to 31 March 2010 13 May 2010 1
Slide 2: Baroness Hogg, Chairman
Baroness Hogg Chairman ie x lo . } (i XC ill
Slide 3: Sir Adrian Montague
Sir Adrian Montague 3
Slide 4: Agenda
Agenda • Introduction and progress Michael Queen • Strategy Michael Queen • Results for year to 31 March 2010 Stephen Halliwell • Closing remarks Michael Queen 4
Slide 5: Michael Queen, Chief Executive
Michael Queen Chief Executive 5
Slide 6: Key themes
Key themes Improved performance Transformed financial position Focused business model with a platform for growth 6
Slide 7: Highlights in the year
Highlights in the year • Total return of £407m, a 16.2% return on opening shareholders’ funds • Realisations of £1,385m Improved Improved • Investment of £386m performance performance • Operating expenses reduced from £250m to £221m • Net asset value up 15% to 321p • Final dividend of 2p per share,
Slide 8: 3i's core business
3i’s core business 3i Group AUM £9.6bn* Buyouts Growth Capital Infrastructure Mid-market investor in Minority investments of Investing in infrastructure companies with an enterprise between €25m-€150m assets, primarily utilities, value up to €1bn in in growth companies in transportation and social E
Slide 9: Performance by business line
Performance by business line Gross portfolio return by business line Vintage Year ended 31 March 2010 2009 year target Buyouts 20% 38% (34)% Growth Capital 20% 11% (44)% Infrastructure 12%/20% 27% (10)% Non-core activities 0% (39)% Group 21% (37)% 9
Slide 10: The European market
The European market €bn 120 Funds raised 100 Investment 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009* Source: EVCA (*preliminary data) Industry challenges Opportunities for 3i • Overhang of capital remains • Mid-market positioning • Pricing for new investment • Companies returning to growth agen
Slide 11: Our approach
Our approach Secure access to capital from multiple sources Build great companies and deliver outstanding returns Invest in our network, people and knowledge See the best investment opportunities Create innovative financial solutions and ensure excellent execution Achieve full potential through acti
Slide 12: Invest in our network…
Invest in our network… Europe • International network Aberdeen Stockholm Copenhagen Amsterdam – Operating in 12 countries London Frankfurt Paris Milan – 480 people Beijing New York Madrid • Business Leaders Network Mumbai – 12 senior advisers Singapore – Over 200 active relationships • Consolidate s
Slide 13: See the best investment opportunities
See the best investment opportunities • 3i Infrastructure plc invested £38.5m in Elgin in January 2010 • Originated through key relationships with I2 and Robertson • Bilateral investment negotiation • Relationship is platform for potential future deals Elgin Investment rationale • Delivers on expres
Slide 14: Create innovative solutions…
Create innovative solutions… • Committed €84m of investment to Refresco in March 2010 • First investment from the new Growth Capital fund • Second investment in Refresco having led a buyout in 2003 • Investment will support successful “buy and build strategy” 14
Slide 15: Achieve full potential…
Achieve full potential… Active partnership • 90 Active partnership initiatives implemented across the portfolio • Focus: strategic, commercial, operational, functional performance improvements Business Leaders Network • 30 chairmen appointed in past three years Banking team • Covenants under review
Slide 16: Achieve full potential…
Achieve full potential… 45% increase in EBITDA further €15m identified • Result of organic growth and acquisitions (12 acquisitions) • Improved EBITDA margins • New divisional CEOs, FDs and operations directors appointed 16
Slide 17: Achieve full potential…
Achieve full potential… Active partnership • Full working capital review • Pricing efficiencies achieved across largest operational divisions • Cost efficiencies identified • Continued review of sales force effectiveness and procurement processes 17
Slide 18: Deliver outstanding investment returns…
Deliver outstanding investment returns… • Invested €207m in Carema in 2005 • Advised, financed and supported integration of Mehilainen in 2006 • Integrated over 24 further acquisitions • Average 15% (sales) and 31% (EBITDA) growth per year from 2004 • February 2010, 3i sold Ambea for €850m (42% IRR)
Slide 19: Secure access to capital…
Secure access to capital… • Announced closing of first Growth Capital fund at €1.2bn • Raised €350m 7 year bond in March 2010 • Conservative funding model Capacity and capability to invest 19
Slide 20: Stephen Halliwell
Stephen Halliwell 20
Slide 21: Key financials
Key financials March Sept March 2010 2009 2009 Investment activity Investment £386m £190m £968m Realisation proceeds £1,385m £507m £1,308m Returns Total return £407m £81m £(2,150)m Return on opening equity 16.2% 3.2% (53.0)% Gross portfolio return 20.9% 7.8% (36.7)% Net asset value per ordinary shar
Slide 22: Total return for the year to March 2010
Total return for the year to 31 March 2010 Gross portfolio return Net portfolio return Total return Realised profits £218m Gross portfolio return £843m Net portfolio return £623m Unrealised value movement £458m Fees receivable £59m Net interest payable £(112)m Portfolio income £167m Net carried inte
Slide 23: Gross portfolio return
Gross portfolio return Year ended 31 March (£m) 2010 2009 Realised profits 218 63 Unrealised profits 458 (2,440) Portfolio income 167 171 Gross portfolio return 843 (2,206) Gross portfolio return by business line Year ended 31 March 2010 2009 Buyouts* 38% (34)% Growth Capital 11% (44)% Infrastructur
Slide 24: Realisations - £1,385m for year to March 2010
Realisations - £1,385m for year to 31 March 2010 3% 13% • 19% uplift over opening portfolio in the year 22% – H1 realisations at 3% uplift – H2 realisations at 30% uplift 1% • Three largest realisations 31% – Ambea (£212m proceeds) – Venture Production (£145m proceeds) 30% – Telecity (£142m proceeds
Slide 25: Unrealised value movement summary - £458m
Unrealised value movement summary - £458m • Earnings recovery in the second half of the year • Earnings multiples improved • Incorporated new IPEV valuation guidelines 25
Slide 26: Movement in portfolio value
Movement in portfolio value £m 5000 Value movement £458m 386 4,050 4000 658 (195) (5) 3,517 (210) 3000 (1,167) 2000 1000 0 Opening Investment Value Unrealised Unrealised Unrealised - Other Closing portfolio realised market driven investment other movement portfolio movement specific including FX mov
Slide 27: Earnings multiples - £536m value movement
Earnings multiples - £536m value movement March Sept March 2010 2009 2009 Weighted average EBITDA multiple - Pre discount 9.5x 8.6x 7.1x - Post discount 8.8x 7.1x * 5.9x * • 78% of unquoted portfolio valued on an earnings basis (2009: 56%) • Weighted average EBITDA multiple up 34% from 7.1x to 9.5x
Slide 28: Valuation earnings
Valuation earnings 30.9.09 Change 31.3.10 39% +40% Management 79% Audited 22% Current year forecast -15% 39% 7% -25% 14% H1 H2 FY Earnings used for valuations – (13)% +5% (8)% movement since March 2009 Value movement impact £(322)m +£151m £(171)m 28
Slide 29: Total return analysis
Total return analysis Year ended 31 March (£m) 2010 2009 Gross portfolio return 843 20.9% (2,206) (36.7)% Fees receivable 59 75 Net carried interest (58) 53 Operating expenses (221) (250) Net portfolio return 623 15.5% (2,328) (38.7%) Net interest payable (112) (86) Exchange movements (35) 315 Actua
Slide 30: Further reduction in operating costs
Further reduction in operating costs £274m £250m £221m • Total costs reduced by 12% • Underlying costs down 16% 2008 2009 2010 Closing 739 607 488 headcount 30
Slide 31: Balance sheet
Balance sheet 31 March (£m) 2010 2009 Investment assets 3,517 4,050 Other net liabilities (191) (276) 3,326 3,774 Net borrowings 258 1,912 Equity 3,068 1,862 3,326 3,774 Gearing 8% 103% Liquidity £2.7bn £1.0bn NAV £3.21 £2.79 31
Slide 32: Michael Queen, Chief Executive
Michael Queen Chief Executive 32
Slide 33: Key themes
Key themes Improved performance Transformed financial position Focused business model with a platform for growth 33
Slide 34: Looking forward – our priorities
Looking forward – our priorities Invest Grow our business Grow our reputation One 3i 34
Slide 35: 35
35
Slide 36: Appendix
Appendix 36
Slide 37: Investment assets
Investment assets Year ended 31 March (£m) 2010 2009 Opening portfolio value 4,050 6,016 Investment 386 968 Value disposed (1,167) (1,245) Unrealised value growth 458 (2,440) Exchange and other movements (210) 751 Closing portfolio value 3,517 4,050 37
Slide 38: Valuation basis
Valuation basis • No assets held at cost • Forecast earnings used, rather than historic, where future earnings are likely to fall • Weighted average EBITDA multiple 9.5x £6,016m £4,050m £3,517m Quoted DCF Industry metric Fund Other Price of recent investment Net assets Imminent sale Earnings Market
Slide 39: Top 10 assets by value at 31 March 2010
Top 10 assets by value at 31 March 2010 Company Business line Value at Value at 31.3.10 31.3.09 £m £m 3i Infrastructure plc Infrastructure 300 228 ACR Growth 149 125 Inspicio Buyout 147 105 Enterprise Buyout 144 125 MWM (Deutz) Buyout 127 91 Quintiles Growth 127 109 Foster + Partners Growth 113 111
Slide 40: Buyouts - performance
Buyouts - performance Vintage IRR performance Vintage Cost As at As at year remaining 31.3.10 31.3.09 2010 n/a n/a n/a 2009 98% 9% n/a • 46% of direct portfolio value • £5.2bn assets under management 2008 73% (18)% (30)% 2007 70% 25% 25% 2006 14% 49% 46% Vintage year is the financial year ended 31 M
Slide 41: Growth Capital - performance
Growth Capital - performance Vintage IRR performance Vintage Cost As at As at year remaining 31.3.10 31.3.09 2010 100% n/a n/a 2009 72% (7)% n/a • 38% of direct portfolio value • £2.5bn assets under management 2008 59% (3)% (16)% 2007 71% (2)% (2)% 2006 31% 24% 23% Vintage year is the financial year
Slide 42: Portfolio leverage – Buyouts and Growth Capital
Portfolio leverage – Buyouts and Growth Capital Contracted repayment profile on acquisition debt Debt repayment profile Buyouts portfolio (1) Growth Capital portfolio (1) Acquisition debt in breach of covenants at 31 March 2010 Acquisition debt not in breach of covenants at 31 March 2010 % 70 % 60 1
Slide 43: Infrastructure
Infrastructure Contribution to Group results (£m) 2010 2009 Realised profits/(losses) - (20) Unrealised profits/(losses) 84 (62) Portfolio income 16 32 Gross portfolio return 100 (50) Fees receivable from external funds 20 26 Assets under management 1,627 1,671 43
Slide 44: Changes to maturity profile of debt
Changes to maturity profile of debt • Extended maturities • Credit rating upgraded to stable outlook from negative 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 £3