3i Group Plc · LSE:III
3i — Investor Day (September 2019)
47 slides from 3i's investor day presentation, Sep 18, 2019
Slide 1: 3i Group Private Equity Capital Markets Seminar
3i Group Private Equity Capital Markets Seminar 18 September 2019
Slide 2: Today’s seminar
Today’s seminar 2018 2018 Private label and contract manufacturing Global travel and loyalty company that connects producer of personal care products leading brands, travel suppliers and end consumers Residual cost: £135m Residual cost: £129m Valuation: £147m Valuation: £155m 2017 Value-for-money op
Slide 3: Today’s presenters
Today’s presenters Pieter de Jong Andrew Olinick Co-Head, Private Equity Partner, Managing Director North America Joined 3i in 2004 and has been Managing Director of 3i Joined 3i in 2007 and is Co-Head of 3i’s North America Private Benelux since 2011, and Co-Head of Private Equity and a Equity team
Slide 4: Royal Sanders
Royal Sanders Pieter de Jong Co-head, Private Equity
Slide 5: 3i in the Benelux
3i in the Benelux • Amsterdam office since 1998 • Invested €1.9bn of equity in 20 deals in the Benelux • 11 investment professionals Current portfolio Previous investments 5
Slide 6: Royal Sanders
Royal Sanders Leading European producer of personal care products Company overview Deal metrics • Private label and contract manufacturing • Revenues of c€225m • Production facilities in the Netherlands, UK and Belgium • £135m 3i investment producing c370m+ units and c3,500 SKUs each year • Announce
Slide 7: Why we like “value” as an investment theme
Why we like “value” as an investment theme Why we like value Investment track record • Attractive offering to consumers • Polarisation • Increased price transparency • Travels well internationally • Clear differentiation • Defensive in economic downturn 7
Slide 8: Why we like private label personal care
Why we like private label personal care Why we like private label Attractive private label category for personal care retailers to differentiate • Value theme Typical personal care category • Resilient end-market €3.40 / Premium 100ml • Low private label penetration Delta: €0.65 / • Long-term relati
Slide 9: Our private label track record
Our private label track record Refresco: created winning global platform through M&A in low-growth industry Refresco development 2010 2011 2012 2013 2015 2017 Review product portfolio and closing of 3 plants two add-ons 3i investment $136m Acquisition of Cott’s Operational Merger with Gerber IPO on
Slide 10: Origination
Origination Acceleration in a competitive auction process Key success factors 2011: Spotted Sept-Dec 2017: company Met management 15 Jan 2018: ✓ Links with 3i through quick numerous times Process start portfolio generated significant scan ahead of process credibility towards management and ability t
Slide 11: What attracted us to Royal Sanders
What attracted us to Royal Sanders Best-in-class • Strong cost-focused culture delivers industry-leading margins operator • Consistent growth track record, significantly outgrowing the market Winning with the • Longstanding partnerships with winning customers for >5-10 years winners • Mutual depende
Slide 12: High degree of customer retention and loyalty
High degree of customer retention and loyalty Longstanding partnerships with winning customers Development of sales to a typical key Selection of key customers customer Note: March year-end 12
Slide 13: Platform for European consolidation
Platform for European consolidation Overview of European personal care PL / CM players Tier-1 M&A targets Identified in 2017 Currently under review Top-5 player in fragmented European market (end of 2017) Acquired Liquids personal to date care division Successful track record from Royal Sanders UK t
Slide 14: McBride personal care sites
McBride personal care sites Highly complementary geographic footprint, customers and product portfolio Bradford, UK (c€30m sales) Ieper, Belgium (c€25m sales) Product categories Product categories Mouthwash Hand wash Bath & shower Bath & shower Shampoo/conditioner Shampoo/conditioner Other Hair care
Slide 15: Acquisition of McBride personal care sites
Acquisition of McBride personal care sites Significant value creation potential Investment thesis • Highly complementary geographic footprint, customers and Create leading European platform product portfolio • Doubling the number of sites from 2 to 4 • Clear plan to transform loss-making sites into
Slide 16: Royal Sanders ready to drive further consolidation
Royal Sanders ready to drive further consolidation Preston, UK Vlijmen, NL Bradford, UK Ieper, BE Key market presence Core markets of Key regions for M&A at entry acquired plants Netherlands, UK, Germany, CEE UK, France, Belgium UK, France, Germany, CEE 16
Slide 17: ICE
ICE Andrew Olinick Partner, Managing Director, North America Global Head of Business & Technology Services
Slide 18: 3i in North America
3i in North America • 12 Private Equity investment professionals in the New York office • Focus on Business & Technology Services, Healthcare and Industrials Five add-on acquisitions Three platforms in the last two years in the last two years Previous investments Metrigraphics 18
Slide 19: ICE is a market leader in closed-user group travel-based loyalty and membership programs
ICE is a market leader in closed-user group travel-based loyalty and membership programs • Founded in 1997 by technologists (and travel enthusiasts), John and Marcia Rowley, with no external capital • No readily available solution to exchange vacation ownership vacations for cruise. They built a sol
Slide 20: Compelling proposition
Compelling proposition ICE operates closed-user groups that allow consumers to purchase travel at below publicly available market rates while protecting travel supplier pricing Example of how ICE saves Example ICE closed-user group consumer money For an example $2,000 product Suppliers Best availabl
Slide 21: ICE was an ideal 3i deal, acquired in a favourable process
ICE was an ideal 3i deal, acquired in a favourable process that leveraged our strengths • Tracked the business since 2014, when introduced to us through BLN • Met with management pre-process and front-loaded diligence Process • Won a tie due to fit with management team, ability to move quickly and d
Slide 22: ICE has several favourable and differentiated business model attributes
ICE has several favourable and differentiated business model attributes • Strong, direct supplier relationships that provide ICE with unique preferred-rate inventory. ICE has proved to cruise lines that they provide customers that spend more onboard and have a higher lifetime value; to resorts that
Slide 23: ICE has consistently grown at a 10+% EBITDA CAGR
ICE has consistently grown at a 10+% EBITDA CAGR ICE EBITDA ($m) - Sustained, long-term growth 60 ~$50m 45 30 15 0 2015 2016 2017 2018 Note: ICE shown pro forma for SOR transaction 23
Slide 24: Our investment thesis
Our investment thesis Focused on driving increased consumer engagement, expanding into new markets and increasing digital Win new brand partners, expand Market growth in cruise 6+% p.a. outside of vacation ownership Digital marketing to drive Shift more transactions increased consumer engagement onl
Slide 25: We are engaging on an ambitious value creation plan
We are engaging on an ambitious value creation plan with significant investment in our first 15 months of ownership • Completed a strategy project with OC&C to set the long-term strategy with Set the long-term a series of initiatives to accelerate growth and increase value strategy and vision • Adde
Slide 26: Introduction to SOR Technology – acquired in February 2019
Introduction to SOR Technology – acquired in February 2019 Revenue ($m) 30 ~$30m • Founded by two entrepreneurs in 2007 • Software company specialising in private label OTA-like travel clubs 20 • 95+% of transactions booked online • Attractive financial metrics: ‒ historic revenue and EBITDA growth
Slide 27: Foundation is set for future value creation by executing against our plan
Foundation is set for future value creation by executing against our plan Ambitious digital Growth of hotel platform – ICE & SOR Synergies – marketing programme a new focus for ICE hotel, cruise, etc. under new CMO Continued offshoring and Launching of new ‘digitisation’ to drive Select B2C & M&A br
Slide 28: Hans Anders
Hans Anders Boris Kawohl Partner, Global Head of Consumer
Slide 29: A value-for-money optical retailer since 1982
A value-for-money optical retailer since 1982 Then Now 29
Slide 30: Consistent growth track record
Consistent growth track record Net sales (PF eyes + more acquisition), €m • Leading value-for-money retailer of optical and hearing aids products ~300 • Founded in Rotterdam, the Netherlands, in 1982 and headquartered in Gorinchem CAGR: +10% • Focused exclusively on the growing value- for-money segm
Slide 31: European footprint with three complementary value-for-money formats
European footprint with three complementary value-for-money formats across five countries x # of stores Hans Anders 44 • Founded in 1982 • 393 stores in the Netherlands and Belgium • Leading value-for-money operator in Benelux market with #1/#2 positions eyes + more • Acquired in 2018 293 • 194 stor
Slide 32: Great customer value at substantially lower prices than competitors
Great customer value at substantially lower prices than competitors Attractive store environment Best prices Great service Quality & expertise 32
Slide 33: 3i acquired Hans Anders in a process that played to our strengths
3i acquired Hans Anders in a process that played to our strengths • Value-for-money retail core 3i focus area Value-for-money • Successful investment in Óticas Carol retail business • Strong BLN contributions • Tracked asset through two previous ownership cycles Local angle • 3i Paris closely involv
Slide 34: Clear value creation opportunities
Clear value creation opportunities • Structural growth from aging population Attractive market • Spectacles increasingly seen as fashion item • Value-for-money is winning • Comprehensive operational excellence agenda Operational • Focus on store operations (in-store execution, staff planning), assor
Slide 35: Hans Anders operates in a highly attractive segment of the retail market
Hans Anders operates in a highly attractive segment of the retail market 1 Sizeable market with structural volume growth drivers 2 Highly profitable segment with room for value-for-money differentiation 3 Fragmented market that is shifting towards retail chains 4 Online pure-play formats show limite
Slide 36: Hans Anders operates in a sizeable, structurally growing market
Hans Anders operates in a sizeable, 1 structurally growing market Western European optical retail market, €bn GE FR IT UK SP NL AT BE CAGR: +2% 24.2 24.6 23.4 23.8 22.5 23.0 1.0 1.0 21.7 22.2 1.0 1.0 1.1 1.1 20.7 21.2 1.0 1.0 1.0 1.1 1.5 0.9 1.0 1.0 1.0 1.5 1.5 0.9 1.0 1.0 1.4 1.4 1.8 1.0 1.4 1.4 1.
Slide 37: Structural drivers underpin continued volume growth in the market
1 Structural drivers underpin continued volume growth in the market • Shorter replacement cycles Spectacles • More frames per customer increasingly seen as a • Customer journey moves towards fashion item omni-channel % of people who use visual aids in NL by age Population structure, EU-28, % of popu
Slide 38: Eyewear players are highly profitable across the value chain
Eyewear players are highly profitable across 2 the value chain Adjusted EBITDA margin per latest FY reporting, % of net sales Optical retailers Manufacturers 31% 30% 23% Ø 25% 21% 20% Ø 17% 16% 16% 11% GrandVision Fielmann National J!NS Hoya Essilor- Carl Zeiss The Cooper Vision Luxottica Meditec Co
Slide 39: Optical retail is still highly fragmented, with a structural shift towards chains
Optical retail is still highly fragmented, 3 with a structural shift towards chains EXAMPLE GERMANY Total optical retail points of sale in Germany 2012-2017, # stores CAGR: -0.5% Key drivers 12,030 12,000 11,953 11,910 11,826 11,739 10,013 9,947 9,862 9,726 9,593 ✓ Economies of scale -1.2% (marketin
Slide 40: Online penetration is still relatively limited in the eyewear market
Online penetration is still relatively limited 4 in the eyewear market EXAMPLE GERMANY Eyewear market by channel, Germany, €m ✓ Online penetration of prescription glasses Offline Online sales still relatively low CAGR: 3.1% 6,159 ✓ No reliable online 5,831 5,954 eye tests currently 5,626 5,438 5,295
Slide 41: Product complexity and need for consultation make pure play online difficult
Product complexity and need for consultation make pure 4 play online a difficult proposition, especially for multifocal EXAMPLE GERMANY German eyewear market by channel and product category in 2016, % of total sales €5,707m €247m 100 100 100 0% 100% Contact lenses 7% 1% Merchandise 10% Online 4% Fra
Slide 42: Online-first formats realise online-only does not fit the customer journey
4 Online-first formats realise that an online-only presence does not fit the customer journey in eyewear Online-first players have tried to disrupt optical retail with pure play ecommerce strategies, but increasingly recognise that the eye test and fitting components of the customer journey are diff
Slide 43: Highly resilient market, with a profile closer to healthcare than retail
5 Highly resilient market, with a profile closer to healthcare than retail Y-o-y growth of German optical market vs. GDP, healthcare spending and general clothing & footwear Source: Euromonitor; Deutscher Sparkassen- und Giroverband; EY-Parthenon analysis 43
Slide 44: Hans Anders acquired eyes + more in December 2018
Hans Anders acquired eyes + more in December 2018 New rollout Strong platform in Cost and Attractive store value-for-money Germany, revenue economics proposition Europe’s largest synergies market Highly compelling strategic rationale 44
Slide 45: eyes + more
eyes + more Fashionable offering with a differentiated pricing model, based on uniform, low and all-inclusive prices eyes + more differentiates through simplicity and transparency One price for all frames and lenses All regular additional options included in the price Multifocal Single-vision Typica
Slide 46: eyes + more is outgrowing other mid sized optical chains in Germany
eyes + more is outgrowing other mid sized optical chains in Germany # of stores per optical retailer in Germany 145 140 135 130 125 120 119 115 110 107 105 100 99 95 90 85 84 80 79 75 70 65 60 2014 2015 2016 2017 2018 Source: ZVA 46
Slide 47: Substantial white space to roll out the concept with attractive store economics
Substantial white space to roll out the concept with attractive store economics Store count of e + m vs. Apollo and Fielmann (as of September 2019) Store count: 141 Store count: c850 x >6 Store count: c600 X >4 In a total market of c12,000 stores in Germany Sources: Fielmann website, Apollo website,