3i Group Plc · LSE:III
3i — FY2016 Earnings Presentation
51 slides from 3i's earnings presentation, May 19, 2016
Slide 1: Results for the year to 31 March 2016
Results for the year to 31 March 2016 19 May 2016
Slide 2: The Group's performance has been resilient
2016 was another strong year for 3i and built on the success of our recent restructuring. The Group’s performance has been resilient in the face of challenging macro-economic conditions and volatile markets
Slide 3: Good progress against all KPIs
Good progress against all KPIs Group Private Equity Infrastructure Debt Management Total return on Full year dividend Private Equity Infrastructure Debt equity per share realisation realisation Management proceeds proceeds AUM raised 22% 22p £743m £51m £1.5bn NAV per share Operating cash Private Equ
Slide 4: Progress reflected in materially stronger and stable financial performance
Progress reflected in materially stronger and stable financial performance Year to Year to Year to Year to Year to 31 Mar 2016 31 Mar 2015 31 Mar 2014 31 Mar 2013 31 Mar 2012 Total return £824m £659m £478m £373m £(656)m % over opening net asset value 21.7% 19.9% 16.3% 14.2% (19.5)% Dividend per shar
Slide 5: Our strategic objectives
Our strategic objectives 1 Grow investment portfolio earnings 2 Realise investments with good cash-to-cash returns 3 Maintain an operating cash profit 4 Use our strong balance sheet 5 Increase shareholder distributions 5
Slide 6: Fundraising activity still high
Private Equity Fundraising activity still high Global buyout capital raised ($bn) 265 258 239 212 197 175 153 114 108 83 90 71 41 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bain Global Private Equity Report 2016 6
Slide 7: Uninvested dry powder hit record levels in 2015
Private Equity Uninvested dry powder hit record levels in 2015 Global uninvested dry powder at year end ($bn) 1,307 1,189 1,065 1,057 1,076 1,000 955 1,002 940 796 558 405 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bain Global Private Equity Report 2016 7
Slide 8: Private Equity: an excellent year
Private Equity An excellent year Strong return for the year • £1,011m gross investment return • 32% of opening book value Resilient portfolio performance • 17% weighted average earnings growth • Limited direct exposure to oil & gas and commodities Good quality new investment • £365m proprietary capi
Slide 9: Taking advantage of supportive markets to reshape the portfolio
Private Equity Taking advantage of supportive markets to reshape the portfolio Realised Uplift to opening Money multiple Investment proceeds value (31/03/2015) (MM) over cost1 IRR FY16 realisations Element £179m 25% 3.9x 31% Azelis £63m 2% 1.1x 1% £743m total proceeds Touchtunes £40m 3% 2.2x 23% 12
Slide 10: 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 at Value at Portfolio Value Key driver of value Portfolio Value Key driver of 31 Mar 31 Mar company growth movement company decline value movement 2016 2016 Action £411m £
Slide 11: Macro-economic challenges: JMJ
Private Equity Macro-economic challenges: JMJ • Performance remains subdued – tough trading in oil & gas (c.65% of sales) resulting in major capital project delays and cancellations – adverse FX movements • Pro-actively addressing issues – comprehensive cost re-alignment programme undertaken – diver
Slide 12: Key value drivers: Action
Private Equity Key value drivers: Action • Strong results to December 2015: – sales up 32% year-on-year to €2bn – LFL sales growth of 7.6% – operating EBITDA up 36% year-on-year to €226m – net store growth of 141 • Positioning the company for further growth – Distribution Centre 3 now open in Paris
Slide 13: Investing for future growth: Audley Travel
Private Equity Investing for future growth: Audley Travel £156m proprietary capital invested in December 2015 • Leading provider of experiential tailor-made travel to over 80 destinations worldwide • Renowned for superior customer service and destination expertise, driving repeat customers and refer
Slide 14: A portfolio weighted towards our better assets
Private Equity A portfolio weighted towards our better assets The buckets Selected examples % of value FY2016 FY2015 1 Longer-term hold and value creation Action, Scandlines, Audley Travel c.62% c.60% 2 Strong performers; performing in line with investment case Q Holding, Aspen Pumps, Euro-Diesel, W
Slide 15: FY13+ vintages are performing well
Private Equity FY13+ vintages are performing well Financial Total cost Investment year invested Country Sector (£m) Aggregate Geka FY13 Germany Industrials 57 MM of 1.3x Scandlines (further) FY13 Denmark/Germany Transport 77 compares well JMJ FY14 US Business Services 42 with 2013 ATESTEO (GIF) FY14
Slide 16: Infrastructure: Building investment momentum
Infrastructure Building investment momentum Contributing to capital and • £47m gross investment return, or 8% of income returns opening book • £49m cash income • £51m proceeds from 3iN special dividend Good momentum in • advised 3iN on four new investments or investment activity in 3iN commitments,
Slide 17: Dry powder reaching historic highs
Infrastructure Dry powder reaching historic highs Unlisted infrastructure - uninvested dry powder at year end ($bn) 124 110 109 94 89 80 66 66 65 64 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 North America Europe Asia Rest of world Source: Preqin Quarterly Update: Infrastructure, Q1 2016 1
Slide 18: Strong momentum in investment activity for 3iN
Infrastructure Strong momentum in investment activity for 3iN The team refined its approach to new investment to reflect market conditions. This is resulting in strong momentum in investment activity Market focus: Investment Date Amount (£m) • Mid-market core economic Oiltanking terminals Jun 15 52
Slide 19: Debt Management: Good cash generation
Debt Management Good cash generation Continued growth in AUM • Four new CLOs issued in the US and Europe despite difficult markets • £1.3bn new CLO AUM raised • Total AUM of £8.1bn Leveraging strong balance • Seeded $75m to the Global Income Fund, sheet to diversify product which reached AUM of $188
Slide 20: CLO market: Confidence improving
CLO market Confidence improving Average price of CS European and US loan index (LTM) 100 98 96 94 92 90 88 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 Average price (CS European loan index) Average price (CS US loan index) Source: Credit Suisse 20
Slide 21: Continuing to improve capital efficiency and allocation
Continuing to improve capital efficiency and allocation Average over FY10-FY12 Year to 31 March 2016 £1,031m 27% £967m 13% 6% 41% 20% 61% 3% 29% Realisations, Operating costs,Debt repayment Shareholder Funds to invest Realisations, Operating costs,Debt repayment Shareholder Funds to invest fees and
Slide 22: Another strong year
Another strong year
Slide 23: Financial highlights
Financial highlights Continuing to execute our well defined strategy • Weighted average LTM earnings up 17% Grow investment portfolio earnings • Unrealised value growth of £669m Realise investments with good • PE realisation proceeds £743m cash-to-cash returns • Uplift of 14% on opening value Mainta
Slide 24: NAV up 17% to 463 pence
NAV up 17% to 463 pence NAV per share (pence) 500 5 (20) 77 (11) 16 475 463 450 425 396 400 375 350 31 March 2015 Realised profits Net carry payable FX Other 1 Dividends 31 March 2016 and value growth 1 Other includes fee income, operating expenses, interest paid etc. 24
Slide 25: Private Equity: Excellent performance
Private Equity Excellent performance £ million 2016 2015 Gross investment return 1,011 719 % of opening portfolio 32% 24% Realisations 743 831 Realised profit 69 161 Uplift over book value1 14% 27% Money multiple 2.6x 2.0x Portfolio value 3,741 3,148 1 Excludes refinancings. Portfolio reduced to 47
Slide 26: Material progress in the value of some of our larger investments
Private Equity Material progress in the value of some of our larger investments Value at Value at Investment Business description 31 March 2016 31 March 2015 Relevant transactions in the year £m £m Action Non-food discount retailer 902 592 Refinancing returned £168m proceeds £46m of proceeds and inc
Slide 27: Private Equity: Excellent performance
Private Equity Excellent performance £ million 4,500 690 (674) 4,000 3,741 1 212 365 3,500 3,148 3,000 ash1 Portfolio value as at Cash investment Value movement Divestment value FX / Other Portfolio value as at 1 April 2015 31 March 2016 1. Includes capitalised interest and other non-cash investment
Slide 28: Performance driven by earnings growth
Private Equity Performance driven by earnings growth Value movement by basis (£ million) 1 Use of earnings 2016 2015 Performance 460 % value at end of the year 74% 72% valued on an earnings basis Multiples 95 Forecast indicates negative 2 2 outlook (no.) DCF 124 Other 5 Multiples 2016 2015 FTSE 250
Slide 29: 17% value weighted earnings growth, 7% excluding Action
Private Equity 17% value weighted earnings growth, 7% excluding Action 3i carrying value at 31 March 2016 (£ million) 1,000 750 500 942 832 250 373 421 70 302 35 - <(20)% (20)-(11)% (10)-(1)% 0 - 9% 10-19% 20-30% >30% Last 12 months’ earnings growth 1 1 Includes all companies valued on an earnings b
Slide 30: Good portfolio momentum
Private Equity Good portfolio momentum Investment Business description Value at Trend 31 March 2016 Action Non-food discount retailer 902 Scandlines Ferry operator between Denmark and Germany 369 Weener Plastic Supplier of plastic packaging solutions 173 Audley Travel Provider of tailor-made e
Slide 31: Carry receivable and payable a function of good performance
Private Equity Carry receivable and payable a function of good performance £ million 2016 2015 Receivable 58 28 Payable (171) (103) Net payable (113) (75) Net cash paid 9 7 EFV fund multiple 1.7x; Growth Capital fund multiple 1.8x 31
Slide 32: Good portfolio contribution to operating cash income
Private Equity Good portfolio contribution to operating cash income £m 60 55 50 50 16 11 40 30 26 30 20 10 13 9 0 2016 2015 Portfolio fees Dividends and interest Third-party fees 32
Slide 33: Infrastructure: Significant contribution to cash income and value growth
Infrastructure Significant contribution to cash income and value growth £ million 2016 2015 Gross investment return 47 96 Fee income 28 30 Special dividend/realisations 51 10 Portfolio value 527 553 3iN TSR of 13% in period 33
Slide 34: Debt Management: Good contributor to operating cash profit
Debt Management Good contributor to operating cash profit £ million 2016 2015 Fee income 38 34 Portfolio income 35 21 Mark-to-market reduction (43) (25) Proprietary Capital Investment 229 176 Of which CLO equity 151 117 AUM 8,081 7,239 AUM increased to £8.1bn or $11.6bn 34
Slide 35: Improved cash income with contributions from all three businesses
Improved cash income with contributions from all three businesses £ million 180 £(20)m £(8)m £5m £28m £37m 160 171 158 140 171 140 151 132 132 120 130 134 127 100 2012 2013 2014 2015 2016 Cash income Operating expenses 1 Operating expenses exclude restructuring costs up until FY2015. Operating expen
Slide 36: Robust balance sheet
Robust balance sheet £ million 2016 2015 Portfolio value 4,497 3,877 Gross debt (837) (815) Cash and deposits 1,002 864 Net cash 165 49 Liquidity 1,352 1,214 36
Slide 37: FY2016 dividend equal to 27% of realised cash proceeds
FY2016 dividend equal to 27% of realised cash proceeds 2012 policy track record 2014 2015 2016 Base 8.1p 8.1p 8.1p Additional 11.9p 11.9p 13.9p 20.0p 20.0p 22.0p % realised cash proceeds 21% 23% 27% Final dividend of 16 pence 37
Slide 38: Updated dividend policy from FY2017
Updated dividend policy from FY2017 Capital allocation approach Realise investments with good • Expect to remain net divestors in the short to cash-to-cash returns medium term • Plan to invest €500-750m in 4-7 Private Equity investments Investment to support future growth • Support 3iN’s fundraising
Slide 39: Closing statement on FY2016 results
These strong FY2016 results demonstrate 3i’s continued momentum in the face of challenging macro-economic conditions. We enter FY2017 firmly focused on delivering our clear and consistent strategy and generating good returns and distributions for our shareholders 39
Slide 40: Additional information
Additional information
Slide 41: Q4 NAV up from 413 pence to 463 pence
Q4 NAV up from 413 pence to 463 pence NAV per share (pence) 500 16 2 (6) 463 475 43 (5) 450 425 413 400 375 350 1 31 December 2015 Realised profits Net carry payable FX Other Dividends 31 March 2016 and value growth 1 Other includes fee income, operating expenses and interest paid etc. 42
Slide 42: Net asset exposure by currency
Net asset exposure by currency Net Change Impact 4% Currency assets in year £m 16% 31% GBP £1,364m Euro £2,169m 9.1% 159 US dollar £726m 2.8% (1) Swedish krona £106m 9.7% 8 Other £90m n/a (9) 49% Total £4,455m n/a 157 Sterling/non-revaluing Euro US dollar Other 1% movement in euro = £22m, 1% in doll
Slide 43: Assets under management – Private Equity
Assets under management – Private Equity Gross Fee Remaining 3i % money income commitment1 invested multiple2 received Original Original 3i at March at March at March in the Close date fund size commitment 2016 2016 2016 AUM year 3i Growth Mar 10 €1,192m €800m €346m 53% 1.8x €266m £2m Capital Fund 3
Slide 44: Private Equity leverage
Private Equity leverage Ratio of total net debt to EBITDA by 3i carrying value at 31 March 2016 (£ million) 1,724 691 550 406 339 5 0 < 1x 1 - 2x 2 - 3x 3 - 4x 4 - 5x 5 - 6x > 6x Note: the above table includes assets not valued on an EBITDA basis. 45
Slide 45: Private Equity portfolio
Private Equity portfolio By region (%) By sector (%) By vintage (%) 9 10 10 12 8 20 7 32 10 31 2 47 4 1 63 8 26 UK Northern Europe Business Services 2016 2015 North America Other Consumer 2014 2013 2012 2011 Industrials 2010 2009 Other Pre 2009 Note: Analysed by 31 March 2016 valuation. Portfolio of
Slide 46: Private Equity realisations in the year
12 Private Equity realisations in the year Uplift to opening Calendar year Realisation value Money Residual value Investment realised invested proceeds (31 March 2016) multiple1 (31 March 2016) Realisations Element 2010 £179m 25% 3.9x - Azelis 2007 £63m 2% 1.1x - Labco 2008 £42m 17% 0.7x - Touchtune
Slide 47: Refinancings, partial realisations and deferred consideration
Refinancings, partial realisations and deferred consideration Uplift to opening Calendar year Realisation value Residual value Investment realised invested proceeds (31 March 2016) Money multiple1 (31 March 2016) Refinancings Action 2011 £168m -% 11.6x £902m Geka 2012 £17m n/a 1.3x £55m Partial real
Slide 48: Assets under management – Infrastructure
Assets under management – Infrastructure Remaining Gross Fee 3i % money income commitment invested multiple1 received Original Original 3i at March at March at March in the Close date fund size commitment 2016 2016 2016 AUM year 3iN Mar 07 n/a n/a n/a n/a n/a £1,248m2 £16m India fund Mar 08 US$1,195
Slide 49: Assets under management - Debt Management CLOs
Assets under management - Debt Management CLOs Fees Par value of received Closing Reinvestment Maturity fund at Realised equity Annualised equity in the year date period end date launch 1 money multiple2 AUM cash yield3, 4, 5 £m European CLO funds Harvest CLO XIV Nov 15 Nov 19 Nov 29 €400m n/a €400m
Slide 50: Assets under management - Debt Management other funds
Assets under management - Debt Management other funds Fees received Closing Reinvestment Maturity Par value of Realised equity Annualised equity in the year date period end date fund at launch 1 money multiple2 AUM cash yield3, 4, 5 £m Other funds Global Income Fund Jul 15 n/a n/a n/a n/a US$188m n/
Slide 51: Slide 51