31 March 2014 14 May 2014 Strategic objectives met and good - PowerPoint PPT Presentation

Results for the year to 31 March 2014 14 May 2014

Strategic objectives met and good progress Simon Borrows Chief Executive 2

Generating real momentum in the business  Strong performance in FY2014 benefiting from the restructuring plan launched in June 2012  We have met or exceeded all of our strategic priorities and targets in the year  3i is now a more streamlined and decisive organisation, with a clearer focus on performance and shareholder returns  Introduction of Proprietary Capital and Fund Management framework provides further disclosure for performance measurement 3

Strong year benefitting from restructuring FY2014 performance highlights Strong total shareholder return total shareholder 30% return 20p proposed total dividend Good flow of uplift to 43% Private Equity realisations opening value Building investment of cash £372m momentum in Private Equity investment Substantially outperformed of operating cost £70m cost savings target savings Solid and simplified gross interest £47m balance sheet reduction Annual cash income annual operating £5m exceeds operating costs cash profit 1 Total Shareholder Return from close of 28 March 2013 to close of 31 March 2014 (financial year end). 4

A clear vision and strategy  A leading international investment manager of proprietary and third-party capital in: – mid-market Private Equity – Infrastructure – Debt Management 5

The 3i Value Build An attractive, multi-year value proposition Increase the underlying value of Grow investment portfolio earnings our investment portfolio Realise investments at good uplifts Demonstrate the value of our to book value and strong cash-on- existing investment portfolio and enhance our P/NAV rating cash multiples Generate a sustainable annual Generate additional value beyond operating profit from our Fund the value of our Proprietary Capital investments Management activities Invest in further value-creating Utilise our strong balance sheet growth opportunities across our business lines Increase shareholder distributions Greater capital efficiency; through our enhanced distribution focus on shareholder value policy 6

Key phases of organisational change and strategic delivery  FY2013 FY2014 - 15 FY2016+ Transition and Restructuring Strategic goal delivery We have met or exceeded all of our strategic priorities and targets in FY2014 7

Our strategic priorities for FY2014 FY2013 FY2014-2015 FY2016+ We have delivered against all of our strategic priorities and targets for FY2014: Deliver further Private Equity realisations to support an enhanced 1  shareholder distribution in FY2014 Realise fully the benefits from the Private Equity asset management 2  improvement initiatives Invest in Private Equity through proprietary capital and third-party 3  co-investment Grow Infrastructure and Debt Management businesses and third- 4  party fund management profits Further reduce operating costs, gross debt and funding costs 5   Implement fully the new compensation arrangements 6 8

Private Equity  Investment portfolio performing well – Good growth in value of “keeper” assets  Strong flow of realisations at good uplifts – Streamlining of portfolio with exits of a number of problematic or low-value assets  Selective investment through a combination of proprietary and third-party capital – Building investment pipeline – Continuing to be selective in current high-priced environment 9

Key realisations as part of well constructed exit plans 1 Notable realisations in FY2014: Uplift to Investment Calendar year Cash opening value Money Residual value multiple 1 realised invested proceeds (31/3/2013) (31/3/2014) Xellia 2008 £143m 46% 2.3x Civica 2008 £124m 48% 2.1x Action 2011 £59m 23% 5.3x £501m Trescal 2010 £58m 16% 2.1x Quintiles 2008 £51m 70% 2.6x £122m Hyperion 2008 £44m 2% 1.7x Everis 2007 £29m 32% 1.1x Bestinvest 2007 £25m 525% 0.6x Joyon 2007 £21m 31% 1.8x 1 Money multiple calculated using 3i GBP cash flows and for partial exits (Action and Quintiles) includes 31/3/2014 residual value. Uplift of 43% to opening valuations at 31 March 2013 10

Private Equity: clearly defined portfolio segmentation 2 The buckets: Selected examples: Action, Element, Longer-term hold and value creation Mayborn, Scandlines Strong performers; position for sale over the Civica, Quintiles next few years Azelis, Bestinvest, Manage intensively; potential value upside Memora, OneMed, Xellia Low or nil-valued assets Romprest 11

Private Equity: selective investment 3 Selective and measured investment through a combination of proprietary and third-party capital Proprietary + Date of Proprietary Third-party Investment announcement capital capital Comments  Discount fitness operator in Basic-Fit Dec 2013 £81m £95m Europe  Investment made alongside co-investor  Purchase of an additional Scandlines Dec 2013 £77m £138m equity stake  Global management JMJ Oct 2013 £44m £57m consultancy  Investment made alongside co-investor under framework agreement  German transmission GIF Oct 2013 £63m £64m testing business; 7x EBITDA acquisition multiple Improving investment pipeline Continuing to be selective in high-priced environment 12

Basic-Fit 13

Infrastructure – A Year of Change 4  K ey contributor to Group’s annual cash income through advisory fees and dividend from 3iN  India Fund’s performance challenged due to depreciation of rupee and difficult macro-economic conditions  Broadening of Infrastructure platform through strategic acquisition of European PPP platform 14

Debt Management – good growth 4 Our Top 10 global CLO manager with AUM of £6.5bn platform 29 investment professionals based in London, New York and Singapore Our Levered senior loan Unlevered loan funds PE FoF & other products funds 2 PE FoF, 1 mezzanine 13 European and 2 open-ended funds loan fund, 1 credit 9 US CLOs opportunities fund Clear  Further growth of CLO platform strategy  Optimise operating leverage to increase profitability  Potential incremental revenue through managed accounts Leverage platform to continue to grow AUM profitably Four new CLOs issued raising £1.2 billion of AUM 15

Significantly reduced operating costs 5 Run-rate cost savings (like-for-like basis) +17% +28% £70m £40m £51m £60m 31 March 2013 31 March 2014 Run-rate cost savings Cumulative run-rate cost savings Target Actual Achieved £70m of cumulative run-rate cost savings at March 2014, well ahead of £60m target Including acquisitions, total run-rate operating costs of c.£129m 16

Covering operating costs with annual cash income 5 1 £m 200 + Reduction in operating 150 costs + Growth in cash income 100 from Infrastructure and 50 Debt Management - ─ Reduction in third- (50) (127) (140) party fee income from (171) (179) (100) (208) Private Equity (150) (200) (250) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Reported operating costs excluding restructuring costs Total cash income Annual operating cash profit/(loss) Cash income exceeded operating costs in FY2014 17

New compensation arrangements fully implemented 6 Fair and transparent split of returns Closely aligned with key strategic objectives Focused on creating shareholder value New compensation arrangements aligned with key strategic objectives and incorporating significant 3i shares element 18

Transition and delivery: clear priorities in FY2015 FY2013 FY2014-2015 FY2016+ Strategic priorities: Focus on consistency and discipline of investment processes and asset management Selective new investment utilising our strong balance sheet to generate attractive returns for our shareholders Maintain cost discipline Continue to improve capital allocation, focus on enhanced shareholder distributions 19

Improvement in capital efficiency and allocation Average over FY10-FY12 FY14 Fees and Fees and portfolio portfolio income 27% income 19% 31% 41% 14% 36% 3% 29% Realisations Operating Debt Shareholder Funds to Realisations Operating Debt Shareholder Funds to costs, net repayment distributions invest costs, net repayment distributions invest carried and interest carried and interest interest and costs interest and costs tax tax Shift in capital allocation driving increased capital available for shareholder distributions and re-investment 20 Further improvement expected in FY2015

Combination of proprietary and third-party capital  3i’s mix of proprietary and third - party capital represents a ‘hybrid’ asset manager model 3i Group Total AUM: £13bn Investor Manager Proprietary capital: £3.4bn Third-party capital: £9.5bn 4% 14% 67% 19% 14% 82%  Private Equity  Infrastructure  Debt Management Combination of proprietary capital investor and manager of third- party capital represents a differentiated business model 21

Tracking our progress and performance Key Performance Indicators: 3i Group  Total shareholder return  Annual operating cash profit Proprietary Capital investing Fund Management activities  Gross investment return  Total AUM and fee growth  NAV and portfolio income  Fund Management profit and margin 22