3i : Results for the year to 31 March 2020 Presentation

Results for the year to 31 March 2020

14 May 2020

Business review

Simon Borrows, Chief Executive

Resilient performance despite severe disruption from Covid-19

Year to 31 March 2020

Group			Private Equity	Infrastructure	Scandlines
						Cash realisations
Total return	Total dividend		Proprietary capital		Cash income
on equity	per share		invested
3%	35p		£1,062m1		£78m	£70m
NAV per share	Net cash		Realisation		3iN TSR	Dividend income
			proceeds
804p	£270m		£848m1		(7)%	£37m

1 Gross of the divestment and re-investment in Action.	3

Our approach to Covid-19

People and	Balance sheet and
operations	liquidity
•	Flexible remote	•	Prudent balance
	working for all		sheet management
	employees	•	Net cash of £270m
•	Business travel		at the end of March
	cancelled	•	Renewed £400m
•	Extensive use of		RCF
	videoconferencing	•	Capacity to support
•	Mental health and		portfolio if necessary
	wellbeing advice to
	employees

Portfolio management

• Teams and resources focused on supporting existing portfolio
• Close management of operational, liquidity and supply chain issues
• Rigorous monitoring and frequent forecasting

4

Private Equity

Our investment approach provides some resilience to Covid-19

Value-for-money	Health & Wellness	Compliance &	Favourable	Big data
Safety	demographics

Lower

Bioprocessing Platform

Bioprocessing Platform

Covid-19 impact

Higher

5

Private Equity

Action - EFV transaction closed in January 2020

• Transaction value of €10.25bn delivered a 31x money multiple and a 73% IRR
• 3ire-invested proceeds and excess carry to increase its holding
• 3i's direct holding in Action increased to 52.6% gross and
  46.2% net (before and after ongoing carry liability)

€10.25bn

£591m

52.6% gross

46.2% net

6

Private Equity

Action - continued strong growth in 2019

2019	+21%revenue growth		+20%EBITDA growth
Highlights
		A continued high growth track record
		EBITDA (€m)
		Sales (€m)		+27% CAGR
		Number of stores				1,552
				+28% CAGR		1,325	5,114
					1,095	4,216
		+25% CAGR	852	3,418

6552,675

514 1,995

406 1,506

1,155
129		166		226		310		387		450		541
2013	2014	2015	2016	2017	2018	2019
2013	2013	2014	2014	2015	2015	2016	2016	2017	2017	2018	2018	2019	2019

1,552 stores		230new stores

A truly pan-European footprint

	387	57
182	347
	8

517

54

#Number of stores

Existing DCs

DCs planned by 2022

Hub

Investing to become a €10bn turnover business and expand EBITDA margin

7

Private Equity

Action - virtually all stores now open

As at 11th May	YTD stores /	Stores / DCS	Full	Comment
DCs	open	assortment
Netherlands	389	All open	✓	All stores remained open throughout crisis
Belgium	183	All open	✓	All stores reopened on 11 May
Luxembourg	9	All open	✓	All stores open
France	523	>510	✓	Gradual reopening of stores since April. Additional
safety measures put in place for high traffic stores
Germany	357	355 open	✓
Austria	56	All open	✓	All stores reopened 2 May
Poland	67	All open	✓	All stores open
Total	1,584	1,573
DCs	8	8	n/a	As of 4 May all DCs now operational and ramping
back up to full availability

8

Private Equity

Action - consistently strong performance in the Netherlands

• Year-to-dateLfL at end of week 11 was over 7%
• Dutch stores (open throughout crisis) continuing to perform well, with LfL at end week 19
  of over 7%
• Social distancing arrangements in place throughout store network
• Very high volumes of essentials range sold during lockdown period

9

Private Equity

Action - strong spring back post lockdown

•	Q1 2020 finished ahead of prior year on sales and EBITDA
•	P4 sales were 41% of last year
•	Strong trading in May as stores re-open across all territories
•	Restricted footfall compensated by much larger basket size
•	Selected cost measures to minimise impact on 2020 EBITDA
•	Current expectation for new openings in 2020 of 152 stores
•	New country expansion to recommence in H2 2020
•	Cash remains significant at >€300m as at P4 with target of
	€500m by end of July
	Confidence in business model, plan, white space opportunity and competitive
	positioning remains as strong as ever	10

Private Equity

Action - a considered approach to valuation

EV/ run rate EBITDA (post discount)

18.2x	18.0x	c17x
Enterprise value (post discount)
€10.25bn	€10.80bn	€10.25bn

Sep-19	Dec-19 EV	Mar-20 Actual
Transaction EV

Valuation at March 2020 reduced to level consistent with EFV transaction, to reflect

• Covid-19impact
• ongoing uncertainty
• independent fair value mark established by EFV transaction
• triangulation against peer group and DCF model

11

Private Equity

Strong portfolio performance before the outbreak of Covid-19

	Good earnings momentum	Limited areas of weakness
•	93% of portfolio by value grew	•Auto sector and some industrials
	earnings to end December
•	Strong contribution from bolt-on
	acquisitions
•	Consumer and healthcare sectors
	performed particularly well

12

Private Equity

Covid-19 has impacted the portfolio asymmetrically

Stable to positive	Likely temporary impact	Likely prolonged impact
Healthcare
Personal care
Essential ingredients	Bricks and mortar
	retail and leisure
B2B services		Travel
	Industrials and
	automotive
Online retail

13

Private Equity

Considered approach to valuations to reflect the impact of Covid-19

No material change to	Impact of Covid-19	Impact of Covid-19
valuation approach	reflected through earnings	reflected through multiple

Generally:

• No material change to multiple
• Companies that have continued to perform well through pandemic

Generally:

• No material change to multiple
• Impact ofCovid-19 will be limited in time

Generally:

• Material reduction in multiple
• Impact ofCovid-19 could endure beyond the duration of any lock-down

Examples

Examples

Examples

14

Private Equity

Considered approach to valuations to reflect the impact of Covid-19 (cont.)

Largest value increases (>£20m)

Portfolio	Value	Value at	Key driver of value
growth	31 Mar
company	movement
(excl FX)	2020
Action	£461m	£3,536m	Performance/
			Transaction valuation
Tato	£79m	£196m	Performance
Royal Sanders	£47m	£198m	Performance
Cirtec	£41m	£302m	Performance

Largest value declines (>£20m)

Portfolio	Value	Value at	Key driver of
decline	31 Mar
company	value movement
(excl FX)	2020
Schlemmer	£(103)m	nil	Administration
ICE	£(102)m	£69m	Multiple
Audley Travel	£(98)m	£124m	Multiple
Basic-Fit	£(92)m	£93m	Share price
Hans Anders	£(44)m	£196m	Performance
Formel D	£(43)m	£141m	Performance

BoConcept	£(40)m	£119m	Multiple
Performance
Dynatect	£(40)m	£39m	Performance
Q Holding	£(30)m	£222m	Performance
Magnitude	£(24)m	£121m	Performance
WP	£(21)m	£244m	Performance

15

Private Equity

Good realisations in the year

Basic-Fit		Aspen Pumps		ACR

Vintage year	2013		Vintage year	2015		Vintage year	2006
Proceeds	£76m		Proceeds	£205m	Proceeds1	£105m
Money multiple	4.2x		Money multiple	4.1x	Money multiple	1.0x
IRR	37%		IRR	34%		IRR	-
Opportunistic reduction of our		Excellent realisation of a		Positive outcome for a
holding in positive markets		post-2012 investment		challenged legacy investment

1 Recognised realised proceeds at 31 March 2020; proceeds expected to be received in Q3 2020.

16

Private Equity

Disciplined approach to new investment

Magnitude Software

Evernex

Bioprocessing Platform

£139m new investment	£214m new investment	£60m new investment
•Provider of unified	•Provider of third-party	•Single-use bioprocessing
maintenance of critical IT	product platform
application data
infrastructure
management solutions

17

Private Equity

Strong progress on buy-and-build assets with 13 bolt-on acquisitions

+	+	+
+TNC Clips	+	+
+	+	+
+	+	+

18

3i Infrastructure plc

Covid-19 has impacted the share price but underlying performance is good

3iN relative share price performance - FY2020
(rebased to 3iN, pence per share)
330
310
290
270
250
230
210
190
170	3iN	FTSE 250
150
Apr 19 May 19 Jun 19	Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20
Source: Bloomberg

FY2020 highlights

Total dividend per share	9.2p
Investments and	£376m
commitments
Realisations	£581m
Total return	11.4%
Share price on 31 March	247.5p

19

Scandlines

Solid 2019 performance; short-termCovid-19 impact since March 2020

• Good performance and solid results for 2019
• Proceeds of £70m and dividend income of £21m from investment grade refinancing
• Additional dividend income of £16m in the year
• Majorshort-termCovid-19 impact on car volumes as a result of border restrictions; freight traffic continues to flow
• Value decline reflects temporary impact ofCovid-19 on leisure travel and elevated levels of uncertainty
• Pandemic highlights Scandlines' strategic importance to supply chains across region

26% of reinvestment already returned since reinvestment in FY19

20

Financial review

Julia Wilson, Group Finance Director

NAV down 1% to 804 pence due to Covid-19 impact on Q4 valuations

NAV per share (pence)

900

850				23	(38)
9	(18)	13
815										804
800

750

31-Mar-19

Realised profits

Value loss

Other 1

FX

Dividends

31-Mar-20

1 Other includes portfolio income, third party fee income, operating costs and the fair value movement on FX hedging derivatives.

23

Group valuation decrease of £172 million

Value movement by basis (£ million)
		Action Q1-Q3
	733
(272)											Action Q41
	182						PE increases
(677)															PE reductions
(92)									Infrastructure
(46)									Scandlines

1. At 31 March 2020 Action was valued at fair value of the transaction (EV of €10.25bn). The reduction of £272m represents the value movement between the	24
December 2019 and March 2020 basis.

Thoughtful and thorough valuations process

March

31 March

April

May

14 May

• Portfolio company review focus on early impact ofCovid-19
• Detailedshort-term liquidity and banking analysis
• Central guidance issued to all investment teams
• Market multiples known
• Regular updates on liquidity, banking and management responses
• Auditor review and challenge
• Valuation Committee challenge
• Ongoing monitoring of trading, liquidity and banking
• Results announced

25

Private Equity

Action - development of valuation since 30 September 2019

£ million

	591	(272)
353	(387)	8	3,536
3,243

Sept 19 value	Q3 value growth	Value sold in	Reinvestment Q4 value reduction	FX	Mar 20 value
		Action transaction

Holding in Action increased from 45.3% to 52.6%

26

Private Equity

Action - a considered approach to valuation

EV/ run rate EBITDA (post discount)

18.2x	18.0x	c17x
Enterprise value (post discount)
€10.25bn	€10.80bn	€10.25bn

Sep-19	Dec-19 EV	Mar-20 Actual
Transaction EV

Valuation at March 2020 reduced to level consistent with EFV transaction, to reflect

• Covid-19impact
• ongoing uncertainty
• independent fair value mark established by EFV transaction
• triangulation against peer group and DCF model

27

Private Equity

Action - peers have been affected in a different way

EV / EBITDA (LTM)

35x

30x

25x

21.6x

Ollie's

20x

21.3x

Grocery Outlet

19.5x Costco

18.1x Five Below

15x

17.1x Dollarama

13.2x

Inditex

10x

11.4x B&M

5x

0x

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Data as at 30 April 2020. EBITDA on a pre-IFRS 16 basis

28

Private Equity

Considered approach to valuations to reflect the impact of Covid-19

	Stable to positive	Likely temporary impact	Likely prolonged impact
•	December LTM	•	March LTM/	•	March LTM
•	Modest/no change to		maintainable earnings	•	Significant reduction in
	multiple	•	Modest/no change to		multiple
			multiple

Examples

Examples

Examples

29

Private Equity

Strong performance for 11 months of the year

Year to 31 March
£ million	2020	2019
Gross investment return	352	1,148
% of opening portfolio	6%	20%
Realised profit	90	131
Realisations1,2	848	1,235
Cash investment2	1,062	332
Portfolio value	6,552	6,023

1. The 2019 realisationsaregross of the Scandlines transaction. The £529 million reinvestment is included within Scandlines.
2. The 2020 realisations and investment are gross of the Action transaction (£402m and £591m respectively).

30

Private Equity

Carried interest receivable and payable

Year to/ended 31 March	2020	2019
£ million
Income statement
Carried interest receivable	79	128
Carried interest payable	(63)	(206)
Net total return	16	(78)
Balance sheet
Carried interest receivable	11	609
Carried interest payable	(998)	(942)
Net total payable	(987)	(333)

£679 million EFV carry received in January 2020

31

Infrastructure

Reassuring performance from 3iN

Year to 31 March
£ million	2020	2019
3iN	(76)	167
Smarte Carte	(22)	3
Regional Rail	10	-
Other funds	(4)	(8)
Portfolio revaluation	(92)	162
Dividend, interest income and FX	53	48
Gross investment return	(39)	210
% of opening portfolio	(4)%	25%

32

Scandlines

Solid performance for 11 months

Year to 31 March
£ million	2020	2019
Valuation	429	529
Gross investment return	5	49
% of opening portfolio	1%	9%

Valuation adjusted to reflect border closure and economic impact

33

Operating cash profit provides resilience

Year to 31 March
£ million	2020	2019
Private Equity	45	45
Infrastructure	78	82
Scandlines	37	28
Cash income	160	155
Operating cash expenses1	(120)	(109)
Operating cash profit	40	46

Objective is to at least break even

1 Operating cash expenses includes leases paid.

34

Simple balance sheet and conservative capital management

£8,098m

•High quality, defensive portfolio

£845m

•Gross cash held centrally with no material restrictions

£575m

•2023 and 2032 bonds with no financial covenants

£400m

•Undrawn five-year RCF refinanced in March 2020

£1.2bn liquidity at 31 March 2020

35

Total dividend set at 35 pence per share

Our dividend policy aims to maintain or grow the dividend year-on-year subject to:

• maintaining our conservative balance sheet strategy
• careful consideration of the outlook for investments and realisations and market conditions

Second FY2020 dividend of 17.5 pence per share brings total dividend

for the year to 35 pence per share

36

Closing remarks

Simon Borrows, Chief Executive

Outlook

Focus on managing existing portfolio

Investment and realisations lower than in previous years

Prudent management of balance sheet and liquidity

Benefit from proprietary capital model

No change in return objectives and dividend policy

39

Additional information

Our business model

Delivering sustainable returns over the cycle

What we offer

Expertise

Access to capital

BLN

Active partnership

Reputation

Institutional culture

Strong corporate governance

Responsible approach

Value creation

• Conservative balance sheet management
• Tight grip on operating costs
• Operating cash profit

1

Invest

32

RealiseGrow

Who benefits

Shareholders

Portfolio

companies

Employees

41

The portfolio has defensive underlying exposures

Portfolio value as at 31 March 2020

Value-for-money

11%

Examples

Action, Hans Anders, Basic-Fit

3iN, Scandlines,

6%

Infrastructure

Regional Rail, SmarteCarte

10%	Healthcare
	47%
	Exposure to consumer
7%	staples / essentials

B2B Services

19%

Other

Cirtec, Q Holding, Bioprocessing

platform

WP, Royal Sanders, Havea, Tato

Evernex, Magnitude

42

Q4 NAV declined from 877 pence to 804 pence

NAV per share (pence)

900
	9	(109)
877
850
					37	(18)
							804
800				5
			3
750
31-Dec-19	Realised profits	Value loss	Other	Net carry	Fx	Dividends	Closing value
				movement

1 Other includes portfolio income, third party fee income, operating costs and the fair value movement on FX hedging derivatives.

43

3i Group

20 large investments

Investment	Business description	Valuation Mar 19	Valuation Mar 20
£m	£m
Action	General merchandise discount retailer	2,731	3,536
3i Infrastructure plcQuoted investment company, investing in infrastructure	744	665
Scandlines	Ferry operator between Denmark and Germany	529	429
Cirtec Medical	Outsourced medical device manufacturing	248	302
WP	Supplier of plastic packaging solutions	241	244
Q Holding	Manufacturer of precision engineered elastomeric components	241	222
Evernex	Provider of third-party maintenance services for data centre infrastructure	-	217
Royal Sanders	Private label and contract manufacturing producer of personal care products	147	198
Tato	Manufacturer and seller of speciality chemicals	117	196
Hans Anders	Value-for-money optical retailer	246	196
Regional Rail	Owns and operates short-line freight railroads and rail-related businesses	-	195
Havea	Manufacturer of natural healthcare and cosmetics products	174	182
Smarte Carte	Provider of self-serve vended luggage carts, electronic lockers and concession carts	181	172
AES Engineering	Manufacturer of mechanical seals and support systems	172	158
Lampenwelt	Online lighting specialist retailer	119	144
Formel D	Quality assurance provider for the automotive industry	169	141
Audley Travel	Provider of experiential tailor-made travel	270	124
Magnitude SoftwareLeading provider of unified application data management solutions	-	121
BoConcept	Urban living designer	152	119
BasicFit	Discount gyms operator	254	93	44

Group investment portfolio

Portfolio value at 31 March 2020 (£m)

394

429 452

Portfolio value at 31 March 2019 (£m)

665	3,536
281
1,472
869
	Action			2013-2016 Private Equity
	2016-2019 Private Equity			2019-2022 Private Equity
	3iN			Scandlines reinvestment
	Other Infrastructure			Other

Note: The 2013 further Scandlines investment is not allocated to the 2013-2016 vintage for the purposes of this analysis.

45

Net asset exposure by currency

2%

15%20%

63%

Sterling/non-revaluing	Euro
US dollar	Danish krone

		Change
Currency	Net assets	YTD	Impact
Sterling	£1,511m	n/a	n/a
Euro1	£4,904m	(2.6)%	£142m
US dollar1	£1,191m	(4.8)%	£71m
Danish krone	£119m	(2.6)%	£3m
Other2	£32m	n/a	£(1)m
Total	£7,757m		£215m

1% movement in euro = £48 million, 1% in US dollar = £12 million

1 Net of impact of FX hedging derivatives.	46
2.Other mainly includes Indian rupee.

Private Equity portfolio by value

By office location (%)

1%

13%

7%

9%

6%64%

Benelux	France	Germany
UK	US	Others

By sector (%)

12%

9%

11%54%

14%

Action (Consumer)	Consumer
Industrials	B&TS*
Healthcare

By vintage (%)
	6%
3%
12%
5%
7%		60%
5%
2%
Pre 2014	2014	2015
2016	2017	2018
2019	2020

Portfolio of 32 investments (31 March 2019: 32)

* Business and Technology Services.

47

Private Equity

Increase in portfolio value driven by cash investments

£ million

8,000

			260		(759)
1,062		(34)				Action
7,000	Action					transaction
						6,552
	transaction
6,023
6,000

ash1
Portfolio value as at Cash investment	Value growth	FX/Other 1	Divestment value Portfolio value as at
	31 March 2019			31 March 2020

£1,062 cash investment includes further investment in Action (£591m)

1 Includes capitalised interest and other non-cash investment.

48

Private Equity

£34 million value decrease

Value movement by basis (£ million)

										733Action Q1-Q3
(272)											Action Q4 1
	203						Performance increases 2
(264)											Performance decreases 2
(231)											Multiples
(103)									Schlemmer write down
(92)									Quoted
(8)									Other

Value decrease driven by a combination of performance and multiples

1. At 31 March 2020, Action is valued at the fair value of the Transaction EV (post discount). This reduction represents the value movement between December 2019 and March 2020 on this basis.
2. Performance includes value movements relating to earnings and net debt movements in the period.

49

Private Equity

Top 20 assets continue to show good earnings growth

3i carrying value at 31 March 2020

(£ million)

6

	Number of			4,186
	companies:
	8
	3	1,380	3
		466
	413
	< 0%	0 - 9%	10 -19%	>20%

Last 12 months' earnings growth1

1 Calculated based on LTM to 31 December 2019 earnings for the top 20 investments. 18 assets are based on EBITDA and 2 on EBITA. Calculation includes Basic Fit.

50

Private Equity

Portfolio leverage

Ratio of total net debt to earnings by 3i carrying value at 31 March 20201(£ million)

4,644

205	263		322		520
24
<1x	1 - 2x	2 - 3x	3 - 4x	4 - 5x	>5x

4.1x leverage across the whole portfolio

1 This represents 91% of the Private Equity portfolio by value (31 March 2019: 88%). Quoted holdings, deferred consideration and companies with net cash are excluded from the calculation.

Private Equity

Proprietary capital and external funds

Vintage1	Proprietary capital value at 31 Mar 2020	Vintage multiple at 31 Mar 2020
Buyouts 2010-2012		£1,623m		9.5x
Growth 2010-2012		£20m		2.1x
2013-2016		£869m		2.2x
2016-2019		£1,472m		1.0x
2019-2022		£281m		1.0x
Other2		£2,287m		n/a
Total proprietary capital value		£6,552m
	External capital value as at	Gross money multiple	Fee income received in
External capital	31 Mar 2020		at 31 Mar 20203	the year
3i Eurofund V	£26m		3.0x	-
3i Growth Capital Fund	£9m		1.9x	-
3i 2020 Co-investment vehicles	£2,024m		1.0x	£1m
Other	£145m		n/a	£1m
Total external	£2,204m			£2m

1	Assets in these vintages are disclosed on glossary section of the Annual report
2	Includes value of £1,193m held in Action through 3i Co-investment 2020 LP and 3i Group.	52
3. Gross money multiple in external fund currency

Private Equity - Action

Leading KPIs versus comparable set - last five years

Sales growth (%, 5yr CAGR)

+13.5%

27.7%

22.8%

14.2%

6.3%

EBITDA margin (%, 5yr average)

Like-for-like sales growth (%, 5yr average) +1.4%

5.7%	6.8%
	4.3%
	2.3%

Cash flow conversion (%, 5yr average)

Store growth (%, 5yr CAGR)

+13.9%

24.7%

20.8%

10.9%

2.2%

EBITDA growth (%, 5yr CAGR)

-2.1%	24.1%
11.1%	13.2%
	4.1%

	-0.3%
	95.9%
78.2%	78.5%
	60.6%

+11.4%

26.7%

23.6%

15.3%

8.0%

Source: Capital IQ.		Action	Comparable Set
		53
Note: Cash conversion is equal to 'Cash flow from operations / EBITDA'. Grocery Outlet figures since FY16. B&M LFL is B&M UK only.

Infrastructure

AUM of £4.4 billion at 31 March 2020

AUM by fund or strategy (%)

7	3i	Infrastructure plc
5
	US Infrastructure
17	3i	India Infrastructure Fund
	50
	BIIF
11	3i	Managed Infrastructure Acquisitions LP
2	3i	European Operational Projects Fund
8	3i	Managed accounts

AUM increased by £243m in the year

54

Infrastructure

Assets under management

			3i	Remaining 3i	%		Fee income
			commitment/	commitment	invested at		received
	Close date	Fund size	share	at March 2020	March 2020	AUM1	in the year
3iN1	Mar 07	n/a	£665m	n/a	n/a	£2,202m	£28m
3i Managed Infrastructure
Acquisitions LP	Jun 17	£698m	£35m	£5m	86%	£756m	£6m
3i European Operational
Projects Fund	Apr 18	€456m	€40m	€18m	52%	£217m	£2m
3i India Infrastructure Fund	Mar 08	US$1,195m	US$250m	US$35m	73%	£102m	-
BIIF	May 08	£680m	n/a	n/a	90%	£486m	£4m
3i Managed accounts	Various	n/a	n/a	n/a	n/a	£308m	£2m
US Infrastructure	Various	n/a	n/a	n/a	n/a	£370m	-
Total Infrastructure AUM						£4,441m	£42m

1 3iN AUM is based on share price at 31 March 2020. In all other cases, AUM is based on NAV.

55