3i Group Plc · LSE:III
3i — Investor Presentation (March 2021)
70 slides from 3i's investor presentation, Mar 18, 2021
Slide 1: 3i Capital Markets Seminar
3i Capital Markets Seminar 18 March 2021
Slide 2: Action story enhanced by 2020 performance
Action story enhanced by 2020 performance Action – 3i carrying value, £m1 ✓ Discount retail sector has proven resilient during the pandemic Carrying valuation 4,426 • Increasing customer acceptance of discount retailing • Evergreen attraction of low price focused SKU model 3,536 ✓ Customer value pro
Slide 3: Submitting questions
Submitting questions Click here 3
Slide 4: Today's presenters
Today’s presenters Sander van der Laan Joost Sliepenbeek Chief Executive Officer Chief Financial Officer Joined in October 2015 Joined in November 2018 30 years of Consumer & Retail experience 20 years of Consumer & Retail experience Various positions at Ahold (1998 – 2015) 33 years experience in fi
Slide 5: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance 2020 Sander van der Laan 3. Strategy update Sander van der Laan 4. Financial performance 2020 Joost Sliepenbeek 5. Trading update Sander van der Laan 6. Wrap Up Simon Borrows 5 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 6: Despite the pandemic, 2020 was another year of strong performance
Despite the pandemic, 2020 was another year of strong performance and continued investment for the future €5,569 (1.4)% €609 164 76% Million Like-for-like Million New stores Cash net sales sales Operating opened conversion1) +8.9% EBITDA1) +12.4% +10.4% normalised Significant growth and investment i
Slide 7: Our high growth track record continues
Our high growth track record continues Net sales (€m) Operating EBITDA (€m) 5,569 +24% 5,114 609 +24% 4,216 541 3,418 450 2,675 387 1,995 310 1,506 226 166 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 Store expansion (numbers) & # countries LfL sales growth (%) 10.4%1) + on
Slide 8: LfL throughout 2020 – strong underlying performance
LfL throughout 2020 – strong underlying performance Period 1 and 2 Period 3 to 5 Period 6 to 10 Period 11 and 12 FY Lockdown 1 Lockdown 2 Very strong start Store closures and/or All stores open selling full assortment. Supply chain Store closures and/or assortment restrictions across disruption resu
Slide 9: Covid-19 dominated the year
Covid-19 dominated the year First priority: safety of our customers and employees Implemented door policy to control customer inflow Additional store labour and cleaning costs Strict protocols and measures in place (screens, face masks, safety vests, sprays, hand gels etc.) Working from home policy
Slide 10: Covid-19 interrupted our operations, however business plan not at risk
Covid-19 interrupted our operations, however business plan not at risk Scaling down supply chain temporarily interrupted service levels and product availability Store expansion and new countries slowed down in first half Strong focus on cash management Financial performance remained strong 2023 busi
Slide 11: In 2020 we opened 164 new stores, entered the Czech Republic
In 2020 we successfully opened 164 new stores, entered the Czech Republic and added a new DC and a new hub Opened 100th store in Opened 9th DC in Poland Verrières, France +44 +8 1,716 +164 395 101 +42 +7 389 189 +1 +5 9 5 +15 Started operations in Entered the Czech 69 2nd hub in Wrocław +42 Republic
Slide 12: Strengthened our unique customer proposition
Strengthened our unique customer proposition Extra large store pilot in Paris Genevieve des Bois Self check-outs well received in NL and BE Same articles, same prices and same promotions ~50% of transactions shift to self check-out in first 4 weeks Larger floor plan of 1,600m2 Further improvement in
Slide 13: Very strong performance in the Netherlands
Very strong performance in the Netherlands Strong LfL P1-P11 of 8.4% (lockdown in second half P12) Strong brand with 97% awareness and 64% penetration1) DC Zwaagdijk Upgraded store network +8 → 8 new stores added Really, Action is the store that the Netherlands misses the most → 28 refurbishments Of
Slide 14: France is our biggest market with ample remaining growth potential
France is our biggest market with ample remaining growth potential DC Moissy Strong LfL of 8.1% in P1-P2 and of 13.1% in P6-P10 DC Verrières #1 market in sales, store numbers and sales growth ~16,500 employees and ~2.7m customers per week +42 Total sales driven by expansion and LfL ticket size growt
Slide 15: Germany has made great progress in growth and profit
Germany has made great progress in growth and profit DC Peine Strong P6-P10 LfL of 19.9% DC Echt, NL #3 market in sales and store numbers today 83 million inhabitants provide huge potential for continued expansion +42 Strengthened management team 389 Higher quality of new locations, more focus on ur
Slide 16: Promising start of click & collect
Promising start of click & collect Successfully piloted in multiple markets Sales development in 2021, NL (€m) Customer selects store and products on our website ~28% ~31% ~33% ~40% ~46% ~99% Chooses a pick up time-slot 32.7 11% Order picked instore by Action employee Pick up from service counter or
Slide 17: Other notable successes in 2020
Other notable successes in 2020 Further strengthened our Symphony - expanded KRONOS - 100 % roll out of digital customer interface functionality of planning our workforce management software to improve system availability Further development of Developed a new opening ESG strengthened including priv
Slide 18: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance 2020 Sander van der Laan 3. Strategy update Sander van der Laan 4. Financial performance 2020 Joost Sliepenbeek 5. Trading update Sander van der Laan 6. Wrap Up Simon Borrows 18 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 19: Sustainability is an integral part of Action's strategy
Sustainability is an integral part of Action’s strategy Strengthen our International I unique customer value II geographic expansion proposition Build a simple, efficient and III scalable operating model IV Make sustainability accessible V Organisation, people and values 19 ACTION | 3I CAPITAL MARKE
Slide 20: Action's winning customer proposition and brand appeals to everyone
Action’s winning customer proposition and brand appeals to everyone and is supported by a strong business model… Brand promise – More than you expect for less than you imagine 150-200 new articles per week Quality and Action 6,000 SKUs in Surprising Every day the Weekly Easy Social Responsibility 14
Slide 21: Sustainable advantage and best-in-class unit economics
…with a sustainable advantage and best-in-class unit economics Action continues to reinvest in the customer value proposition through even lower prices, quality and continuous surprise Customer value proposition Competitive advantage Action’s increasing scale Action’s attractive customer value enhan
Slide 22: Strengthen our unique customer value proposition
Strengthen our unique customer value proposition Strengthen our unique customer value proposition 22 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 23: Non-food discounter offering c. 6,000 SKUs across 14 categories
As a non-food discounter Action offers a surprising range of c. 6,000 SKUs across 14 categories Product innovation and quality demonstrated by Number of SKUs per category ranges between ~100 and ~900 numerous awards Garden & Sport Personal care outdoor Decoration DIY Pets Laundry & Toys & Multimedia
Slide 24: Surprising assortment to meet changing customer demand
With a surprising assortment we are able to quickly meet changing customer demand Action offers 150-200 new articles per week Does Action have a surprising assortment? 62% Closest Coca Cola (375ml) 34% competitor €0.73 54% ~1/3 fixed Closest 35% competitor 54% Chocolate Easter eggs Closest 37% €1.45
Slide 25: Unbeatable prices are the core element of our customer proposition
Unbeatable prices are the core element of our customer proposition Product types 60% of SKUs below €2 Known for low prices1) A-brands 92% ~30% ~ 30% ~ 30% Top scoring competitor 58% 83% €1.75 €1.49 €1.79 Top scoring competitor 51% Supplier brands 76% Top scoring competitor 73% ~ 7% 79% €2.59 €4.99 €
Slide 26: Action brand and format appeals to everyone
Action brand and format appeals to everyone Gender Age Brand awareness1) Female Male 50+ 35-49 18-34 97% 89% 26% 76% 47% 44% 42% 47% 42% 57% 57% 58% 58% 57% 65% 54% 49% 33% 48% 30% 24% 30% 27% 31% 43% 43% 42% 42% 43% 35% 34% 40% 26% 26% 21% 28% Income Education Penetration1)2) High Middle Low High M
Slide 27: High sales volumes and density
…which generates high sales volumes and density Examples of high volume items Average sales density (sales / m2) vs. competitors1)2) Variety of face masks Aluminium foil (1 – 50 pieces) 2.8x Price (NL) €1.29 – €4.95 €0.99 Avg. competitors 2.7x Volume ~76.3m >6.3m Avg. competitors 2020 Kitchen paper
Slide 28: Further strengthening of multiple digital customer touchpoints
Further strengthening of multiple digital customer touchpoints Social media followers Launch App first in NL… …and launch loyalty +21%1) +50%1) programme later 2.3m 1.8m Facebook Instagram fans followers Digital Early Receipts updates Emails and website +19%1) +38%1) Seasonal Other stamp card featur
Slide 29: Make sustainability accessible
Strengthen our unique customer value proposition Make sustainability accessible 29 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 30: Supporting customers during the pandemic with essentials
During the pandemic we have been able to support our customers with much needed essentials Example of an Action ad in national newspapers in NL, BE and DE in 2020 30 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 31: Action is already delivering on its ASR strategy
Action is already delivering on its ASR strategy Progress made in plastics Sustainable cotton Sustainable timber Outdoor planting plastic accessories with recycled plastic Action’s sustainable cotton confirmed Action’s sustainable timber confirmed saving 1,900 tonnes of virgin plastic at 76% for 202
Slide 32: Sustainability strategy focuses on four UN sustainable development goals
Our sustainability strategy focuses on four UN sustainable development goals 32 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 33: Product – achieve 100% supply chain transparency
Product – achieve 100% supply chain transparency Safety Social compliance We ensure all our products are safe and responsibly sourced We strive for 100% supply chain transparency Technical file transparency/compliance for 100% transparency of entire full assortment by end 2025 (Product IP) assortmen
Slide 34: Environment - minimise our environmental impact across the supply chain
Environment - minimise our environmental impact across the supply chain Waste management Energy & emissions We commit to mitigating our waste to minimise our footprint We commit to reducing our energy usage and emissions Plastic stretch wrap usage on Reduce energy usage per m2 within our containers
Slide 35: International geographic expansion
International expansion International geographic expansion 35 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 36: New store roll-out is the engine behind Action's growth story
New store roll-out is the engine behind Action’s growth story The reason is simple… … and the economics are extremely attractive 1 One single and successful format 1 year average historical payback on new store CAPEX 2 Proven to travel across borders All stores opened before 2020 are profitable1) 3
Slide 37: Principle of one format across all countries remains unchanged
Principle of one format across all countries remains unchanged 1 1 1 brand store format store operating model Action name resonates in all languages All stores look the same Same policies Marketing and packaging is consistent Stores between 700 to 1,100m2 Same ordering systems and standardised acros
Slide 38: Continued rapid store roll-out in current markets and new markets
Continued rapid store roll-out in current markets and entry in new markets Population in millions 2020 237 61 47 163 % of store potential 2021 2022 1,716 stores open FY2020 Existing markets IT ES Rest of Europe Conservative estimate of white Rapid expansion in space potential in new and existing FR,
Slide 39: Czech Republic – roll-out after successful pilot
Czech Republic – roll-out after successful pilot DC Osla Strong start of our 5 pilots stores Poland DC Bierun Poland (2021) Sales growth Czech Republic on average ~30% better than in Poland1) Population of 11 million allows for at least 150 stores Expect to open at least 12 new stores in 2021 No add
Slide 40: Opening 5-7 pilot stores in North of Italy in 2021
Opening 5-7 pilot stores in North of Italy in 2021 DC Belleville, France Lombardy First store planned in Vanzaghello in Q2 (3 stores) Population of 60 million, initial focus on North of Italy with 28 million people Piedmont (4 stores) Start up delivered from France, first DC location identified Loca
Slide 41: A simple, efficient, responsible and scalable operating model
A simple, efficient, responsible and scalable operating model 41 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 42: Action continues to grow its DC network
Action continues to grow its DC network to enable its store expansion DC Bierun, PL (2021) DC Ensuès, FR (2022) DC Bratislava, SL (2021) 42 ACTION | 3I CAPITAL MARKETS SEMINAR 2021 DCs to open >2020 DCs/Hubs opened in 2020 DCs/Hubs opened <2020
Slide 43: Development of Hubs to improve availability and reduce inventory
Development of Hubs to improve availability and reduce inventory levels across the chain A hub enables direct sourcing of containers from Far East Hubs receive and palletise inventory and supply DCs Benefits: improve availability and lower inventory levels Hub I is a multi-site location and Hub II i
Slide 44: Organisation, people & values
Organisation, people & values 44 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 45: Further strengthened our management team
Further strengthened our management team to support our ambitions CEO CFO Sander Joost van der Laan Sliepenbeek Commercial Director Store Director Director Director HR Director Operations Supply Chain Technology Luc De Baets Hajir Hajji Florian Knauer Joost Bous Jens Burgers GM start-Up GM NL GM BeL
Slide 46: Roll-out of values across the organisation preserves Action DNA
Roll-out of values across the organisation ensures we preserve our Action DNA 46 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 47: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance 2020 Sander van der Laan 3. Strategy update Sander van der Laan 4. Financial performance 2020 Joost Sliepenbeek 5. Trading update Sander van der Laan 6. Wrap Up Simon Borrows 47 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 48: 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 LfL stores profitable • EBITDA margin • High sales density 3 4 • Proven •
Slide 49: 2020 performance explained
2020 performance explained • LfL growth • Store expansion Action’s • Operating leverage repeatable • EBITDA margin financial model • CAPEX • Cash conversion + • Impact of 53rd week • LfL normalisation 2020 additional • Covid-19/social distancing restrictions impact on OPEX drivers • Germany, Austria
Slide 50: Continued strong sales and EBITDA growth in 2020
Continued strong sales and EBITDA growth in 2020 in spite of the Covid pandemic Net sales (€m) Operating EBITDA (€m) 8.9% 10.2% 13.8% 5,637 12.4% 5,569 5,114 609 616 4,216 541 3,418 450 2,675 387 1,995 310 1,506 226 166 2014 2015 2016 2017 2018 2019 2020 2020 (53 2014 2015 2016 2017 2018 2019 2020 2
Slide 51: Full year reported LfL impacted by lockdowns
Full year reported LfL impacted by lockdowns Normalisation for weeks 12 – 22 +480bps → Only applied for countries which were 10.4 forced to close stores and/or remained open with limited assortment → Includes normalisation for reopening 7.6 7.2 6.9 effect → Normalisation based on performance ►6.0% 5
Slide 52: Normalised 2020 LfL growth +10.4% versus (1.4%) reported
Normalised 2020 LfL growth +10.4% versus (1.4%) reported 1 2 3 4 Week 1 – 11 Week 12 – 22 Week 23 – 43 Week 44 – 52 40% +7.3% (34.9)% +7.4% +12.7% (4.8)% +11.3% 20% 0% (20)% (40)% x.x% Reported LfL (60)% x.x% Normalised LfL (80)% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Slide 53: Strong LfL growth in all countries between lockdowns
Strong LfL growth in all countries between lockdowns LfL sales growth by geography, week 23 – 43 20.7% 19.4% 14.5% 13.2% 12.7% 11.8% 8.4% Netherlands Belgium Germany France Austria Poland Total 53 ACTION | 3I CAPITAL MARKETS SEMINAR 2021 Source: company information
Slide 54: Store closures and assortment restrictions in quarters 1, 2 and 4
Store closures and assortment restrictions in quarters 1,2 and 4 Net sales per quarter (€m) 15.3% 23.3% 1,804 1,541 1,564 9.1% (8.8)% 1,216 1,250 1,184 1,085 1,109 Q1 Q2 Q3 Q4 2019 2020 54 ACTION | 3I CAPITAL MARKETS SEMINAR 2021 Source: company information
Slide 55: Store openings: programme delayed by pandemic, catch-up in 2021
Store openings: programme delayed by pandemic, catch-up in 2021 (1) 244 (2) (3) 6 232 230 11 19 197 32 20 6 16 164 115 141 5 89 1 100 93 44 108 68 15 39 42 80 72 23 31 60 59 25 42 24 18 19 18 18 21 17 13 14 13 12 8 8 2014 2015 2016 2017 2018 2019 2020 Czech Poland Austria France Germany BELUX Nether
Slide 56: Consistent margins across all categories
Consistent margins across all categories 60 % 50 % 40 % 30 % 20 % 10 % 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Categories 56 ACTION | 3I CAPITAL MARKETS SEMINAR 2021 Source: company information
Slide 57: Operating leverage shows in all countries
Operating leverage shows in all countries with Germany, Austria and Poland coming of age Average store contribution margin by country P6 to P10 - stores opened before 2019 +100bps +100bps +60bps +285bps +120bps +385bps +215bps # of stores 375 167 288 424 38 25 1,3221) opened <2019 Sales growth P6-P1
Slide 58: Total CAPEX development
Total CAPEX development (In €m) 5.4% (17.5)% 11.3% 210 Lower CAPEX (€37m) versus last year as projects were 199 paused and new store expansion temporarily halted during 179 173 the first lockdown Lower CAPEX spend per new stores reflects continuous efforts to reduce €/m2 Continued investment in IT 1
Slide 59: Strong cash flow: 2020 cash conversion of 76%
Strong cash flow: 2020 cash conversion of 76% 100% Low capital intensity, negative 700 100 92% working capital and fast payback 86% 600 for new stores lead to strong 77% 76% 73% 75 cashflow, notwithstanding Covid- 500 70% 462 451 19 impact on timing of sales and 58% 419 400 working capital and requi
Slide 60: Overview of high-level financials
Overview of high-level financials Change 2020 (53 Change 2019 2020 (vs 2019) weeks) (vs 2019) Net sales (€m) 5,114 5,569 +8.9% 5,637 +10.2% LfL sales growth 5.6% (1.4%) Operating EBITDA (€m) 541 609 +12.4% 616 +13.8% EBITDA margin 10.6% 10.9% 10.9% Cash conversion 77% 76% 73% Number of stores (end o
Slide 61: Impact of IFRS16 on Action 2020 financials
Impact of IFRS16 on Action 2020 financials The average lease period of Action’s store portfolio is RIGHT-OF-USE ASSET AND EBITDA (€m)1) LEASE LIABILITIES (€m) 3.4 years but differs per country → Action is desired as a tenant by landlords as it 758 784 drives traffic to the destination 36 782 202 → A
Slide 62: Summary 2020 financial performance
Summary 2020 financial performance • Strong normalised LfL growth in all countries between lockdowns Strong LfL performance • Product offering tailored to meet changing customer demand 5,569 5,114 • Strong LfL shows operating leverage in all countries Country EBITDA • Additional Covid-19 related ope
Slide 63: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance 2020 Sander van der Laan 3. Strategy update Sander van der Laan 4. Financial performance 2020 Joost Sliepenbeek 5. Trading update Sander van der Laan 6. Wrap Up Simon Borrows 63 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 64: Current trading 2021 – situation by country at 17/3/2021
Current trading 2021 – situation by country at 17/3/2021 m2 per Shopping by Country Stores open Click & Collect Assortment customer appointment NL 25* n/a* Y All* Full BE 10 All Y N Full LU 10 All N N Full DE 10/20/40** 157 out of 391 N 214 stores Full, 18 stores essentials only*** FR 10 554 out of
Slide 65: Current trading 2021
Current trading 2021 Negative LfL sales P1 and P2, turned positive in P3 → Netherlands, Germany and Czech Republic heavily impacted by store closures → YTD LfL week 10 of >25% in Belgium, France, Luxembourg and Poland Supply chain and DCs are operating well with good product availability 2021 store
Slide 66: Agenda
Agenda 1. Introduction Simon Borrows 2. Business performance 2020 Sander van der Laan 3. Strategy update Sander van der Laan 4. Financial performance 2020 Joost Sliepenbeek 5. Trading update Sander van der Laan 6. Wrap Up Simon Borrows 66 ACTION | 3I CAPITAL MARKETS SEMINAR 2021
Slide 67: Action is one of Europe's best retail growth stories
Action is one of Europe’s best retail growth stories… 2020 2023 ✓ Action is one of the most successful retail growth stories in Europe Sales €5.6bn c.€9.0bn ✓ Action story is stronger from the pandemic ✓ 2023 business plan targets are unchanged EBITDA €609m >€1bn # Stores 1,716 c.2,750 # Countries 8
Slide 68: 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 69: Submitting questions
Submitting questions Click here 69
Slide 70: Thank you for your attention!
Thank you for your attention! Thank you for your attention!