3i Group Plc · LSE:III
3i — Investor Presentation (May 2009)
34 slides from 3i's investor presentation, May 2009
Slide 1: Investor presentation
Investor presentation May 2009 1
Slide 2: Agenda
Agenda • Background • Fundraising • 3i’s business and competitive strengths • Key financials and valuations • Pro forma balance sheet • Summary 2
Slide 3: Background
Background Analysis of 3i • Strategically advantaged core businesses • High-quality underlying portfolio • Conservative valuation approach • Level of debt too high Priorities • Preserve and optimise existing portfolio • Reduce net debt to about £1bn over next 12/15 months • Position the business for
Slide 4: Fundraising
Fundraising • Equity capital raising of £732m • The fundraising will: – reduce pro forma* net debt to £1.1 billion – reduce pro forma* gearing from 103% to 42% – strengthen the balance sheet to protect against further falls in value – support investment grade rating – enable the Group to manage exis
Slide 5: A focused private equity business
A focused private equity business (as at 31 March 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 No
Slide 6: 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 6
Slide 7: Diversified portfolio
Diversified portfolio By business line By geography Continental Europe UK Buyouts Growth Capital India Infrastructure China QPE Other Asia SMI North America Venture Portfolio Rest of the World By vintage By sector Business Services Consumer Pre 2005 Financial Services 2005 General Industrial 2006 He
Slide 8: 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 Year to Year 31 March to 31 March Investment (£m) Return flow (£m) Other (£m) Gearing (%,
Slide 9: Sustainable competitive advantage
Sustainable competitive advantage • Recognised brand name • Mid-market focus • International network • Strong committed investment team • Growth Capital segment is distinctive • Active Partnership • Investment grade rating • Strong group of high quality Limited Partners 9
Slide 10: Priorities
Priorities • Reduce debt – lower financial volatility • Protect value in portfolio – realise assets at the right time • Prepare for the upturn – sector analysis, people, network • Grow external funds under management – stability of earnings “We need to be in a strong position to protect the value of
Slide 11: Management actions
Management actions • £1.3 billion realisations, including £366m in last quarter • Acquisition of 3i QPE plc, generating £110m of net cash proceeds • Action to reduce expenses by c.15% • Sale of 9.5% of 3i Infrastructure (£61m) • CIO role created • Fundraising generating net cash of £699m Pro forma*
Slide 12: 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 5.9 £6,016m • Weighted average PE multiple 7.4 £4,362m £4,050m Quoted DCF Industry metric Fund Other Price of recent inves
Slide 13: Key financials
Key financials Investment activity (year to 31 March) 2009 2008 Investment £968m £2,160m Realisation proceeds £1,308m £1,742m Returns Gross portfolio return (36.7)% 23.9% Total return £(2,150)m £792m Return on opening equity (53.0)% 18.6% Net asset value per ordinary share (diluted) £4.96 £10.77 13
Slide 14: NAV progression
NAV progression 1077 17 (341) Market multiples including quoted Sale basis (175) Earnings and performance (42) Provisions (44) Liquidity (50) 46 (17) 25 496 Opening Realised Market* Portfolio Provisions First time Other Portfolio Dividend Other Closing NAV profits performance* liquidity value income
Slide 15: Pro forma balance sheet
Pro forma balance sheet March 2009 March March pro forma* 2009 2008 £m £m £m Investment assets 4,022 4,050 6,016 Other net liabilities (276) (276) (321) 3,746 3,774 5,695 Net borrowings 1,103 1,912 1,638 Equity 2,643 1,862 4,057 3,746 3,774 5,695 Gearing 42% 103% 40% * On the basis of the fundraisin
Slide 16: Capital structure and liquidity
Capital structure and liquidity • Target is a conservative capital structure: – want to significantly reduce net debt to approximately £1bn – target an investment grade rating in order to enable access to debt capital markets – lower net debt reduces financial risk and returns volatility • Our gross
Slide 17: Gross debt repayment profile
Gross debt repayment profile • No immediate maturities • No covenants £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 2013 2014 2016 2018 2020 2022 2023 2028 2032 C
Slide 18: Benefits of fundraising
Benefits of fundraising Strengthens equity base Reduced Ratings security risk Reduced leverage Increased More flexibility on realising assets at better prices returns New investment opportunities potential 18
Slide 19: New investment opportunities
New investment opportunities • Growth Capital – companies short of capital – limited competition • Infrastructure – economic stimulus in developed world – new build in developing world • Buyouts – M&A activity – corporates selling non-core assets 19
Slide 20: Summary
Summary • Market leading business • Conservative funding strategy to protect and enhance shareholder value • Rights issue will: – materially accelerates reaching objective of reducing net debt to approximately £1 billion – facilitate maintenance of an investment grade rating – enables the Group to m
Slide 21: 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 22: Annexes
= Su Annexes
Slide 23: Group – gross portfolio return
Group – gross portfolio return 2009 2008 £m £m Realised profits 63 523 Unrealised profits (2,440) 291 Portfolio income 171 227 Gross portfolio return (2,206) 1,041 Realised uplift on opening book value 5% 43% 23
Slide 24: Unrealised (losses)/profits on revaluation of investments
Unrealised (losses)/profits on revaluation of investments 2009 2008 £m £m Earnings and multiple based valuations Earnings - Earnings multiples (412) (162) - Earnings growth 14 307 Loans - Impairments (earnings basis) (620) (16) First time movements from cost (584) 154 Other bases Provisions (156) (1
Slide 25: Provisions
Provisions Provisions as a percentage of opening portfolio value 3.4% 2.6% 1.5% 1.4% 0.7% 2005 2006 2007 2008 2009 25
Slide 26: Total return analysis
Total return analysis 2009 2008 £m £m Gross portfolio return (2,206) (36.7)% 1,041 23.9% Net carried interest 53 (92) Operating expenses less fees from external funds (175) (214) Net portfolio return (2,328) (38.7)% 735 16.9% Net interest payable (86) (16) Movement in the fair value of derivatives (
Slide 27: Net carried interest
Net carried interest 2009 2008 £m £m Carry receivable (3) 60 Carry payable 56 (152) Net carried interest payable 53 (92) 27
Slide 28: Operating expenses
Operating expenses £m 300 6.0% +20.9% +7.5% 250 -8.8% 5.0% +22.7% 200 4.0% +5.5% • Cost ratio 3.0% 150 3.0% • External fund fee income up 25% 100 2.0% • Gross costs down 9% 50 1.0% 0 0.0% 2005 2006 2007 2008 2009 Net operating expenses Fees Cost ratio 28
Slide 29: Balance sheet at March 2009
Balance sheet at 31 March 2009 March Sept March 2009 2008 2008 £m £m £m Investment assets 4,050 5,934 6,016 Other net liabilities (276) (280) (321) 3,774 5,654 5,695 Net borrowings 1,912 1,802 1,638 Equity 1,862 3,852 4,057 3,774 5,654 5,695 Gearing 103% 47% 40% NAV £4.96 £10.19 £10.77 29
Slide 30: Buyouts - performance
Buyouts - performance Vintage IRR performance Vintage Cost As at As at year remaining 31 March 2009 31 March 2008 2009 100% n/a n/a 36% of direct 2008 99% (30)% n/a portfolio value 2007 78% 25% 35% £3.8bn assets 2006 26% 46% 57% under management 2005 25% 62% 62% Vintage year is the financial year en
Slide 31: Growth Capital - performance
Growth Capital - performance Vintage IRR performance Vintage Cost As at As at year remaining 31 March 2009 31 March 2008 2009 100% n/a n/a 39% of direct 2008 100% (16)% n/a portfolio value 2007 85% (2)% 17% £1.7bn assets 2006 41% 23% 43% under management 2005 31% 27% 31% Vintage year is the financia
Slide 32: Portfolio leverage – Buyouts and Growth Capital
Portfolio leverage – Buyouts and Growth Capital Contracted repayment profile on acquisition debt Debt repayment profile % Buyouts portfolio (1) 100% % Growth Capital portfolio (1) 70% Acquisition debt in breach of covenants at 31 March 2009 60% 80% Acquisition debt not in breach of covenants at 31 M
Slide 33: Infrastructure
Infrastructure 2009 2008 Contribution to Group results £m £m Realised (losses)/profits (20) 6 Unrealised (losses)/profits (62) 43 Portfolio income 32 18 Gross portfolio return (50) 67 Fees receivable from external funds 26 18 Assets under management 1,658 1,213 33
Slide 34: Investment assets
Investment assets 2009 2008 £m £m Opening portfolio value 6,016 4,362 Investment 968 2,160 Realisation proceeds (1,308) (1,742) Realised profits on disposal 63 523 Unrealised value growth (2,440) 291 Exchange and other movements 751 422 Closing portfolio value 4,050 6,016 34