3i Group Plc · LSE:III
3i — Investor Day (March 2023)
65 slides from 3i's investor day presentation, Mar 23, 2023
Slide 1: 3i Action Capital Markets Seminar
3i Action Capital Markets Seminar 23 March 2023
Slide 2: Action's track record of strong sales and operating EBITDA growth
Action’s exceptional track record of strong sales and operating EBITDA growth continued in 2022 Net sales1 (€m) 8,859 Buyout +24% 6,834 CAGR 5,637 5,114 4,216 3,418 2,675 2,034 1,155 1,506 515 607 718 873 231 284 341 426 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 3: Action's growth through different periods of the economic cycle
Action’s growth has been exceptional and consistent through different periods of the economic cycle Action net sales1 vs. economic development Strong economic Global financial crisis and Steady economic growth Global pandemic and post- growth stagnant market recession recovery 35% Period impacted by
Slide 4: Action continues to outperform its peers
Action continues to outperform its peers Performance over last five years LfL growth average Revenue CAGR EBITDA CAGR +3p.p. +61% +99% 7% 21% 26% 4% 13% 13% Peers average Peers average Peers average Action has outperformed its peers despite being disrupted by Covid-19 Source: CapIQ. Peers include B&
Slide 5: Exceptional performance drives value for 3i shareholders
Exceptional performance drives value for 3i shareholders Action – 3i carrying value, £m1 10,276 7,165 4,566 3,536 2,731 2,064 1,708 592 902 280 501 143 FY12 2 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Q3 FY23 Exceptional value growth and ~£1.7bn cumulative distributions to 3i over the owners
Slide 6: Today's presenters
Today’s presenters Hajir Hajji Joost Sliepenbeek Chief Executive Officer Chief Financial Officer Joined in September 1997 Joined in November 2018 Fulfilled variety of management positions at Action 20+ years of Consumer & Retail experience Commercial Director (2018 – 2021) 35 years experience in fin
Slide 7: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance update Hajir Hajji 3. Strategic update Hajir Hajji 4. Financial performance 2022 Joost Sliepenbeek 5. Trading update Joost Sliepenbeek 6. Wrap up Simon Borrows 3i Capital Markets Seminar 2023 | Action 7
Slide 8: 2022 was another year of strong performance
2022 was another year of strong performance €8.9 +18.1% €1,205 280 78% Billion Like-for- Million Net stores Cash net sales Like sales operating added conversion growth EBITDA +29.6% XXX +45.5% Xxxx A Xxxx A xxxx XX xxxxx hold hold 3i Capital Markets Seminar 2023 | Action 8
Slide 9: Key drivers contributing to our 2022 performance
Key drivers contributing to our 2022 performance High demand for Relevant and strong Continued expansion of discount offering our store base Inflation management Good availability in Dedication and and cost control store flexibility of our team 3i Capital Markets Seminar 2023 | Action 9
Slide 10: Action attracted a significant number of new and repeat customers
Action attracted a significant number of new and repeat customers Broad appeal across Significant increase in Popularity of daily items income and education transactions at very low prices groups 3i Capital Markets Seminar 2023 | Action 10
Slide 11: Sales grew across all categories
Sales grew across all categories Like-for-Like growth by category Our categories 30% 25% 20% Food Do It Stationery Household Laundry Personal Garden & 15% & Drink Yourself & Hobby Goods & Cleaning Care Outdoor 10% 5% 0% Toys & Pets Decoration Linen Clothing Sports Multimedia 1 2 3 4 5 6 7 8 9 10 11
Slide 12: Improvements in our supply chain led to increased store availability
Improvements in our supply chain led to increased store availability External challenges Managing disruptions Organisation and processes Fluctuations in sea freight prices Inventory levels and network Senior management positions capacity sufficient to cater for filled by experienced Action Inflation
Slide 13: Disciplined price and cost management allowed us to manage inflation
Disciplined price and cost management allowed us to manage the impacts of inflation Flexible assortment Cost discipline Price advantage Scale benefits versus competition shared with customers 3i Capital Markets Seminar 2023 | Action 13
Slide 14: We added 280 stores across Europe
We added 280 stores across Europe +7 408 256 481 +46 +81 +8 2,263 stores at the end of 2022 209 +1 44 +23 11 95 280 stores added in 2022 ) +15 726 Record number of store openings in 2022 +73 28 +21 5 +5 # of stores at the end of 2022 Stores added in 2022 1) 282 stores opened and two closed 3i Capita
Slide 15: Recently opened countries delivered a strong performance
Recently opened countries delivered a strong performance Italy Spain DC Labastide, France DC Belleville, France Results of pilots exceeding expectations Acceleration of expansion pace in both countries Presence at the end of 2022 Full team in place in Italy. Building the team in Spain Search areas f
Slide 16: We invest in our people and give back to society
We invest in our people and give back to society Our people Providing fair rewards Internal development Supporting society 8,211 new jobs created Revision of reward 61,343 trainings completed Donation of €1m to packages, including wage UNICEF for Ukraine in We provide work to 80,000 increases Compan
Slide 17: Progress with our Action Sustainability Programme in 2022
We made significant progress with our Action Sustainability Programme in 2022 100% supply chain 85% of our transparency stores are now achieved in disconnected Private Label from gas products 100% of Private 40% reduction Label packaging of scope 1 and 2 is recyclable (no emissions in PVC or black 2
Slide 18: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance update Hajir Hajji 3. Strategic update Hajir Hajji 4. Financial performance 2022 Joost Sliepenbeek 5. Trading update Joost Sliepenbeek 6. Wrap up Simon Borrows 3i Capital Markets Seminar 2023 | Action 18
Slide 19: Action's strategy remains simple and consistent
Action’s strategy remains simple and consistent Strengthen our Drive international I unique customer value II geographic expansion proposition Maintain a simple, efficient and III scalable operating model IV Make sustainability accessible V Treasure our people and values 3i Capital Markets Seminar 2
Slide 20: Flexibility and simplicity enable scaling at low cost
Flexibility and simplicity enable scaling at low cost Big volume No fixed No high street Efficient purchases assortment locations logistics Simple business Standardised Low overhead Low marketing model store processes costs expenditure 3i Capital Markets Seminar 2023 | Action 20
Slide 21: Action offers an assortment of 14 complementary categories
Action offers an assortment of 14 complementary categories ~6,000 items across 14 categories Brand types A-brands Food Do It Stationery Household Laundry & Drink Yourself & Hobby Goods & Cleaning Supplier brands Personal Garden & Toys & Pets Decoration Care Outdoor Entertainment Private Label Linen
Slide 22: Customers can find new products at every visit
Customers can find new products at every visit Surprising assortment Low price points1) Spargo wipes 36% 33% ~1/3 €0.99 fixed 24% Pink-stuff cleaning paste 7% ~2/3 non-fixed €2.95 €0-1 €1-2 €2-5 >€5 Primary offering Assortment 150 new articles each week Main focus on items below €2 1) Based on volum
Slide 23: The Action customer proposition at a glance
The Action customer proposition at a glance 3i Capital Markets Seminar 2023 | Action 23
Slide 24: We have improved our price position versus competitors
We have improved our price position versus competitors Price index1) versus competitors by country 186 180 178 175 173 173 173 171 171 170 168 168 167 166 163 158 155 152 100 100 100 100 100 100 100 100 100 Netherlands Belgium Germany France Austria Poland Czechia Italy Spain Action Competitors Q2 2
Slide 25: We continuously improve on quality and sustainability
We continuously improve on quality and sustainability Spargo – Wooden clothes pegs Zenova – Sunscreen 48pcs 200ml €0.99 €4.79 Upgraded spring mechanism and improved grip Best Buy 2021 – Consumer Association NL Made from FSC wood Microplastics free Reef friendly according to Hawaii, Aruba, Bonaire 20
Slide 26: Investments in Private Label result in award winning products
Investments in our Private Label offering result in award winning products Max&More – Mascara Superfinn – Dishwasher tablets 11ml 44pcs €1.39 €3.33 ‘’Best buy’’ award in Belgium Best product of the year 2022-2023 in Belgium Improved formula and brush design Improved formula for better performance Ve
Slide 27: Action's brand and formula appeal to everyone
Action’s brand and formula appeal to everyone Gender Female Male Age1) 50+ 35-49 18-34 24% 37% 33% 57% 58% 49% 46% 46% 49% 44% 61% 61% 62% 61% 72% 68% 35% 26% 28% 28% 31% 42% 25% 31% 43% 42% 39% 39% 38% 39% 28% 32% 29% 28% 42% 31% 26% 27% 20% 25% Income1) High Middle Low Education1) High Middle Low
Slide 28: Action's loyal customer base spreads the word
Action’s loyal customer base spreads the word 95% 82% Brand awareness1) 75% 64% 55% 50% 54% 43% Penetration1)2) 32% 28% 25% 24% 16% 11% 15% 8% Selection of prizes awarded by customers in 2022 Poland Best department store France Poland Most loved awards won in several non-food Third most loved brand
Slide 29: Our sourcing mix is essential to our customer proposition
Our sourcing mix is essential to our customer proposition A-brands Importers and Direct sourcing Stocklot trader wholesalers Drive quality perception Essential to customer Enable low price and Essential for low price and traffic proposition for newness newness proposition and treasure hunt and seaso
Slide 30: Diversifying sourcing from Asia and growing proximity sourcing
We are diversifying our sourcing from Asia and growing proximity sourcing Geographical diversification in Asia Increasing proximity sourcing Continue our existing growth strategy for direct sourcing Increasing proximity sourcing to enable sustainability from Asia ambitions and to secure commercial o
Slide 31: We invest in our touchpoints to drive store traffic
We continue to invest in our touchpoints to drive store traffic Interactions and customer data is App and bundled to create richer customer Store profiles loyalty Objective is to generate store sales triggered by ‘research online, purchase offline’ (ROPO) Offline Customer App has been rolled out to
Slide 32: Our growing online reach attracts millions of customers
Our growing online reach helps us to attract millions of customers to our stores every week Action social media 2.1m 2.75m Instagram followers Facebook fans 6.5m 19.5bln 6.2m Website, E-mail Weekly website Online product E-mail visits1) impressions subscribers 2.1m +413% 3.3m +420% Website, App App
Slide 33: We always improve our stores to benefit customers and employees
We always improve our stores to benefit our customers and employees Improved shopping experience Further roll-out of 2.0 format Investments in refurbishments, enlargements and relocations New shopping trolley Sustainability efforts Use of recycled material in our stores 95% of our stores have energy
Slide 34: Action Sustainability Programme guided by UN Sustainable Development Goals
The Action Sustainability Programme is guided by the UN Sustainable Development Goals People Planet Product Partnership 3i Capital Markets Seminar 2023 | Action 34
Slide 35: Investing in employees and partnerships in society
Action invests in the development of employees and partnerships in society People – We have employees who are proud to work Partnerships – We act as a responsible partner to for Action society and communities Our commitments Our commitments We focus on increasing diversity in senior positions We sup
Slide 36: Reducing impact on the environment for responsible growth
Action is reducing its impact on the environment to ensure responsible future growth Planet – We commit to reducing our emissions Product – We source our products responsibly Our commitments Our commitments Reduce emissions from our own operations by 60% by 2030 100% sustainable cotton by 2023 and t
Slide 37: Building our distribution network further to support growth
We are building our distribution network further to support our growth Existing DCs Zakroczym, PL - 2023 Planned DCs Zwaagdijk-Oost, NL Peine, DE Wrocław, PL Hubs Echt, NL Osła, PL Bieruń, PL Le Havre, FR Bratislava, SK Moissy, FR Biblis, DE Verrières-en-Anjou, FR Belleville, FR Novara, IT - 2023 En
Slide 38: Track record of expansion in France and Poland
Action’s track record of successful expansion is illustrated by our growth in France and Poland Pilot phase (2012) 2017 2022 1 store 335 stores 726 stores + 334 stores + 391 stores Pilot phase (2017) 2020 2022 6 stores 101 stores 256 stores + 95 stores + 155 stores Distribution centre Includes the D
Slide 39: Current markets include a number of growth engines
Current markets include a number of growth engines Entry year # stores end of 2022 1993 Netherlands 408 2005 Belgium 209 2009 Germany 481 2012 France 726 2015 Austria 95 2015 Luxembourg 11 256 2,263 2017 Poland 2020 Czechia 44 2021 Italy 28 stores at the end of 2022 2022 Spain 5 Slovakia March 2023
Slide 40: Significant further growth opportunities across Europe
Both existing and new markets show significant further growth opportunities across Europe Population in millions 406m 100m 30 67 83 58 61 47 5 10 45 % of store potential Total of 2,263 stores at the end of 2022 Benelux FR DE CE1) IT ES SK PT In-scope2) Not currently in-scope Current estimate of whit
Slide 41: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance update Hajir Hajji 3. Strategic update Hajir Hajji 4. Financial performance 2022 Joost Sliepenbeek 5. Trading update Joost Sliepenbeek 6. Wrap up Simon Borrows 3i Capital Markets Seminar 2023 | Action 41
Slide 42: Our repeatable financial model remains unchanged
Our repeatable financial model remains unchanged 1 2 Low SKU count New store roll-out and country expansion Consistent gross margin across Clear value Superior store categories drivers LfL sales growth economics All stores are profitable1) EBITDA margin High sales density 3 4 Proven Low capital inte
Slide 43: Financial performance was again strong in 2022
Financial performance was again strong in 2022 The reason is simple… … and the economics are extremely attractive 1 1 year average historical payback on One single and successful format new store CAPEX 2 Proven to travel across borders All stores are profitable1) 3 First class store opening teams an
Slide 44: Sales and EBITDA growth accelerated in 2022
Sales and EBITDA growth accelerated in 2022 Net sales (€m) Operating EBITDA (€m) +30% +46% +19% +21% CAGR 8,859 CAGR 1,205 6,834 5,569 828 5,114 4,216 609 3,418 541 387 450 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Operating EBITDA margin (%) 11.3 10.7 10.6 10.9 12.1 13.6 All finan
Slide 45: Full year reported LfL impacted by lockdowns in 2021
Full year reported LfL impacted by lockdowns in 2021 Reported Normalised Methodology for normalisations: Applied in 2020 and 2021 for countries 18.1% where we were forced to close stores and/or remained open with limited assortment Significant impact in 2021 in several 11.0% 10.4% countries. Weeks i
Slide 46: Normalised 2022 LfL 9.7% versus 18.1% reported
Normalised 2022 LfL 9.7% versus 18.1% reported 27.7% 23.4% 19.3% 18.0% 18.1% 11.8% 10.9% 10.9% 10.2% 9.7% 6.4% 7.5% 5.1% 0.3% (0.7%) Q1 Q2 Q3 Q4 FY Restrictions in NL and All stores open selling Strong growth in Strong seasonal sales vaccination entrance full assortment in 2022. number of customers
Slide 47: Strong sales growth in all countries
Strong sales growth in all countries Sales growth by country – stores opened before 2019 and only for periods opened with full assortment 46.3% 36.1% 29.2% 29.1% 26.4% 25.3% 21.9% 23.0% 22.9% 20.7% 18.3% 19.6% 18.6% 14.9% 15.6% 9.5% 11.1% 8.4% Netherlands Belgium1) Germany France Austria Poland 2020
Slide 48: Store openings: another record year
Store openings: another record year Store opening development by country1) 282 269 5 244 7 21 232 16 6 230 23 11 19 32 20 74 16 81 164 115 5 11 89 15 93 44 15 94 74 80 42 72 59 42 46 46 18 19 18 13 14 13 12 8 8 8 8 9 2017 2018 2019 2020 2021 2022 Spain Italy Czechia Poland Austria France Germany BeL
Slide 49: Consistent margins across all categories
Consistent margins across all categories Gross margin by category (%) – 2022 Total gross margin: 39.8% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 3i Capital Markets Seminar 2023 | Action 49
Slide 50: Good operating leverage in all countries
Good operating leverage in all countries Store contribution margin1) 2022 versus 2019 (based on stores opened before 2019) 2019 2022 +180bps +280bps +100bps +290bps +600bps +200bps Netherlands Belgium2) Germany France Austria Poland # of stores 374 172 288 424 38 25 1) Store contribution = adjusted
Slide 51: All stores opened before 2021 are profitable
All stores opened before 2021 are profitable Store contribution (€k) and store contribution margins (%)¹)²) Average store contribution margin: 24% Store contribution margin % Store contribution 2022 Mature stores – ordered high to low store contribution Store contribution (in €k) by store Store cont
Slide 52: Scale effects increasingly benefit margins
Scale effects increasingly benefit margins Proportion of sales with store contribution Supply chain costs margin1) >20% as % of net sales 2019 2022 2019 5.9% €5.1bn €8.9bn 2022 5.2% Net sales with >20% store contribution margin Net sales with <20% store contribution margin 1) Store contribution = ad
Slide 53: EBITDA margin improved mainly as a result of operating leverage
EBITDA margin improved mainly as a result of operating leverage EBITDA margin development 13.6% EBITDA margin increase of 150bps largely driven by operating leverage 0.4% Positive effect of operating leverage partially offset by inflation 0.6% 0.4% Due to the timing of cost inflation, the impact on
Slide 54: Continued investment in our expansion
Continued investment in our expansion CAPEX development (€m) +26% +6% 230 199 210 183 179 173 36 46 25 26 37 9 8 26 45 37 30 123 117 135 105 98 71 (15) 1) 2017 2018 2019 2020 2021 2022 As % of 5.2 4.7 4.1 3.1 2.7 2.6 net sales Store expansion New DCs Technology Store maintenance / RERs2) DC maintena
Slide 55: Strong cash flow: 2022 cash conversion of 78%
Strong cash flow: 2022 cash conversion of 78% Cash conversion 1,000 93% 938 100 Action has low capital intensity, 900 negative working capital and fast 71% 770 78% 800 payback for new stores, which leads to 69% 75 700 64% strong cash flows 600 56% Cash and cash equivalents at the end of 500 432 50 F
Slide 56: Overview of high-level financials
Overview of high-level financials Change 2020 2021 2022 (vs 2021) Net sales (€m) 5,569 6,834 8,859 +29.6% LfL sales growth (reported) (1.4%) 11.0% 18.1% Operating EBITDA (€m) 609 828 1,205 +45.5% EBITDA margin 10.9% 12.1% 13.6% Cash conversion1) 71% 93% 78% Number of stores (end of year) 1,716 1,983
Slide 57: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance update Hajir Hajji 3. Strategic update Hajir Hajji 4. Financial performance 2022 Joost Sliepenbeek 5. Trading update Joost Sliepenbeek 6. Wrap up Simon Borrows 3i Capital Markets Seminar 2023 | Action 57
Slide 58: Current trading 2023: very strong start of the year
Current trading 2023: very strong start of the year Net sales to week 11 (€m) +37% Sales growth of 37% versus same period in 2022 2,090 LfL sales for the first 11 weeks of 2023 24.8% 2023 store expansion plan on track with 23 stores added year-to-date 1,529 Cash and cash equivalents at €802m1) YTD 2
Slide 59: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance update Hajir Hajji 3. Strategic update Hajir Hajji 4. Financial performance 2022 Joost Sliepenbeek 5. Trading update Joost Sliepenbeek 6. Wrap up Simon Borrows 3i Capital Markets Seminar 2023 | Action 59
Slide 60: Action has outperformed its 2019 business plan
Action has outperformed its 2019 business plan Net sales1, €bn 4Y actual 5Y target (2019 plan) €8.9bn ~€9.0bn €6.8bn €5.1bn €5.6bn €4.2bn 2.1x 2.1x 2018 2019 2020 2021 2022 2023 BP Operating EBITDA1, €m €1,205m >€1,000m €828m €541m €616m €450m 2.7x >2x 2018 2019 2020 2021 2022 2023 BP Actuals 2019 B
Slide 61: Continued strong growth trajectory over the next 4 years
Continued strong growth trajectory over the next 4 years Targets for the next 4 years Last 4 years delivery Store openings1 1,300 1,400 938 Mid High Average Like-for-Like 8.3% single digits single digits Targets for the next 4 years 2022 actual Priority to share scale economies EBITDA margin1 with c
Slide 62: Action continues to perform in line with best-in-class retailers
Action continues to perform in line with best-in-class retailers, with a long growth runway ahead Top-line growth since €1bn/$1bn sales (20 years window, rebased to 100) 2,750 2,500 2,250 2013-2022 2,000 1,750 1,500 1,250 1,000 750 500 250 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Years aft
Slide 63: 3i provides long-term capital backing and strong governance
3i provides long-term capital backing and strong governance Governance Long-term vision 3i provides active and responsible governance with a 3i brings an ambitious, growth-orientated long term focus on the ASR agenda mindset to Action Investment Values Prioritisation of investment in Action’s infras
Slide 64: Thank you
Thank you For your attention!
Slide 65: Appendix: impact of IFRS16 on Action 2022 financials
Appendix: impact of IFRS16 on Action 2022 financials Income statement1) Balance sheet1) Excluding Including IFRS 16 Excluding Including IFRS 16 In €m IFRS 16 IFRS 16 impact In €m IFRS 16 IFRS 16 impact Operating EBITDA 1,205 1,465 +260 Non-current assets 1,324 1,327 +3 Adjusting items (21) (21) - Ri