Results for year ended 31 March 2003 1 1 15 May 2003 2 Results - - PowerPoint PPT Presentation

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Results for year ended 31 March 2003

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15 May 2003

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Results for year ended 31 March 2003

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Agenda

CEO’s review Brian Larcombe Product reviews

• Buy-outs

Jonathan Russell

• Early stage technology

Rod Perry

• Growth capital

Chris Rowlands Financial review Michael Queen Closing remarks Brian Larcombe

Brian Larcombe

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Results for year ended 31 March 2003

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Key messages

A tough year and a year of change Disappointing fall in NAV, though an outperformance of benchmarks Strong realisations, investment rebalanced Business organised on product basis Competitive advantages developed

Brian Larcombe

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Results for year ended 31 March 2003

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Financial highlights

Brian Larcombe

Total return on opening shareholders’ funds (23.7)% Net asset value per share 480p Realised profits on disposal £184m Net cash inflow £170m Final dividend 8.6p

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Results for year ended 31 March 2003

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Total return by investment product

Mid-market buy-outs Smaller buy-outs Growth capital Early stage technology 2003 %*

Brian Larcombe

5% (16)% (10)% (51)%

* % return on opening portfolio

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Results for year ended 31 March 2003

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59 82 155 199 101 104 108 135 138 247 151 49

50 100 150 200 250 300 1997 1998 1999 2000 2001 2002 US$bn Investment Funds raised

The world market – funds invested: raised

Brian Larcombe

Est. Est.

Source: 3i/PwC Global Private Equity Review

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Results for year ended 31 March 2003

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3i European Barometer Index

compared with EU 15 real GDP annual growth rate for equivalent quarter

Brian Larcombe

• 120
• 100
• 80
• 60
• 40
• 20

20 40 60 80 100 Q2 Q4 Q2 Q4 Q2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

%

0.5 1 1.5 2 2.5 3 3.5 4 4.5

Inex

Index GDP growth

1998 1999 2000 2001 2002 2003 Index

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Results for year ended 31 March 2003

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Actions taken - market

Made some great investments Realisations at good prices Reinforced competitive advantage

Brian Larcombe

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Results for year ended 31 March 2003

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10 large investments made in year to 31 March 2003

Brian Larcombe

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Results for year ended 31 March 2003

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10 large realisations made in year to 31 March 2003

Brian Larcombe

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Results for year ended 31 March 2003

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Actions taken – organisation

Increased product focus Reshaped local and product leadership Strengthened investment processes – all products Rebalanced network Reduced costs

Brian Larcombe

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Results for year ended 31 March 2003

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Strategy

Brian Larcombe

Developing the business internationally Building a balanced investment business Using the network as our key competitive advantage Investing primarily in growth companies

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48% 31% 6% 15% Buy-outs Growth capital Early stage technology Quoted

Portfolio by value at 31 March 2003 £217m

Excludes co-investment funds

Portfolio analysis

Brian Larcombe £589m £1,206m £1,927m

£3,939m Total

Value

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Buy-outs – performance 2002/03

Jonathan Russell

Investment* £385m £97m Income yield 4.8% 7.4% Realisations proceeds £345m £268m Total return** 5% (16)% Portfolio (excluding funds) £1,073m £928m

* Includes co-investment funds of £159m for mid-market buy-outs and £10m for smaller buy-outs ** Total return on opening portfolio

Mid-market buy-outs Smaller buy-outs

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Results for year ended 31 March 2003

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European mid-market buy-outs

Deal range

 Up to £500m  Sweet spot £25m-£350m

Target characteristics Local relationship significant Operational issues vital Less competitive/non-price issues Exit via consolidation/strategic plan Buy local, sell global

Jonathan Russell

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Results for year ended 31 March 2003

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3i is well placed to exploit this market

See the market

• Geography, sector teams, people programmes

Pick the winners

• Operational expertise – Industry Group, people programmes,

sector teams

• Execution experience
• Management angles

Drive the value

• Aggressive pursuit of business plan
• Management effectiveness
• Exit vision

Create superior returns

Jonathan Russell

Strategy

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Results for year ended 31 March 2003

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The future

Jonathan Russell

The market Distressed corporates Attractive pricing Portfolio health Exit environment 3i Rigorous application of strategy Aggressive approach to market and quality

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Early stage technology – performance 2002/03

Rod Perry

Investment* £176m Income yield 0.6% Realisations proceeds £93m Total return** (51)% Portfolio (excluding funds) £589m

* Includes co-investment funds of £6m ** Total return on opening portfolio

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Results for year ended 31 March 2003

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Source: VentureOne

435 462 375 305 250 198 180 133 383 100 200 300 400 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* 500 1000 1500 2000 2500 3000 Volume €m Value

The market – investment

Rod Perry

European technology market

Volume Value of deals 2001 2002 2003

*VentureOne estimate

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2002/03 technology realisations

Rod Perry

69% 1.7 3.5 Germany Healthcare Dendron 29% 3.7 5.1 UK Healthcare Medeval 49% 3.2 8.0 US Software PlaceWare 25% 6.5 12.6 UK Software Adaytum 45% 7.6 10.2 UK Software Sophos IRR Profit £m Proceeds £m Country Sector Company

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Substantial change

Rod Perry

• Rescale to market opportunity
• More focused, more experienced teams in fewer locations
• Key assets focused on most senior people
• Transformation of

new investment processes portfolio management delivery of added value

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Growth capital

Chris Rowlands

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Results for year ended 31 March 2003

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Growth capital – performance 2002/03

Chris Rowlands

Investment* £273m Income yield 6.2% Realisations proceeds £270m Total return** (10)% Portfolio (excluding funds) £1,349m

* Includes co-investment funds of £39m ** Total return on opening portfolio

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Market attractiveness

Chris Rowlands

Equity attractions v debt Absence of IPO option Local relationship with international reach Attractive yields (6.2%) Diversity - sector, size and situation Realisations through the cycle Plays to regional strength For the company For 3i

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Total return

Michael Queen

Operating income Realised capital profits Costs:

• Net interest payable
• Management expenses
• Organisational change costs

Operating return Unrealised value movement Other – goodwill, tax and currency Total return

2002 £m 2003 £m

309 (39) (263) 7 (890) (77) (960) 274 184 (239) 219 (1,165) 11 (935) (74) (171) (18) (76) (153) (10)

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113 132 106 111 56 56 10

• 1
• 50

50 100 150 200 250 300 350

£m

Loan interest and fixed rate dividend Equity dividends Fee income Joint venture and operating income

Michael Queen

Operating income

2002 2003 £309m £274m

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76 74 153 171 10 18

50 100 150 200 250 300 2003 2002 £m

Net interest payable Management expenses Organisational change costs

Michael Queen

Operating costs

£263m £239m

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Realised profits on disposal

Total proceeds and repayments Net realised (loss)/profit Equity realisations

• proceeds
• net realised profit

Michael Queen

939 (39) 728 4 976 184 640 164 2002 £m 2003 £m

• equity uplift over value

Loan/fixed income share repayments 1% 211 34% 336

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(20) (361) (379) 48 (244) (209) £m Quoted portfolio PE movement Earnings growth Provisions Down rounds & restructuring Other

Unrealised value movement

£(1,165)m

Michael Queen

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Results for year ended 31 March 2003

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Source: VentureOne

250 500 750 1,000 1,250 1,500 Q1 Q2 Q3 Q4 Q1* Q2 €m Value FTSE techMARK 100

The market – investment

Michael Queen

European technology market

Value of deals

2002 2003

*VentureOne estimate

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Revised investment trust SORP

Implemented in current financial year No impact on total return Revenue profit increased by £50m and capital return down by £50m Cost allocation updated Proportion of costs charged to capital = 70%

Michael Queen

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Balance sheet

Investment assets Other net assets/(liabilities) Net borrowings Shareholders’ funds Gearing 5,109 23 5,132 1,187 3,945 5,132 30% 3,939 10 3,949 1,013 2,936 3,949 35% 2002 £m 2003 £m

Michael Queen

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1,000 2,000 3,000 4,000 5,000 6,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 0% 25% 50% 75% 100% 125%

Closing net debt Closing equity shareholders' funds Gearing ratio - net borrowing/shareholders' funds

£m

Gearing

Michael Queen

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Net cash flow

Michael Queen

Cash invested Net realisation proceeds Net investment cash flow Other Net cash outflow 2002 £m 2003 £m (842) 969 127 (269) (142) (673) 975 303 (133) 170

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Net cash flow - long term trend

• 2000
• 1500
• 1000
• 500

500 1000 1500 2000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 £m Cash inflow Cash outflow Net cash flow

Michael Queen

for year to 31 March

2003

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Results for year ended 31 March 2003

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Third party funds under management

Michael Queen

7% 71% 22%

Quoted funds under management Unquoted European buy-out funds Other unquoted funds Total £452m £1,454m £135m £2,039m Total 3i and third party funds under management are £5,978m

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• 15.4%
• 15.8%
• 18.6%

3.6%

• 6.4%
• 0.4%
• 15.6%
• 7.1%

2.6% 5.7%

• 6.6%

2.0% 5.5%

• 2.0%

3.7% 10.1%

Comparative return

After10 years After 7 years After 5 years After 3 years 3i return (NAV + dividend) FTSE All-Share FTSE 100 FTSE SmallCap (ex IT)

Michael Queen

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2 4 6 8 10 12 14 1995 1996 1997 1998 1999 2000 2001 2002 2003

pence

Interim Final

Dividend history

Michael Queen 7.2 8.1 9.2 10.3 11.3 12.2 13.0 13.0 13.5

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Financial summary

Net investor in second half, investment rebalanced Strong realisations, good portfolio income, cost reduction Total return affected by stock market falls and technology sector weakness Strong balance sheet Continued record of longer term outperformance Dividend

Michael Queen

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Michael Queen

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Closing remarks

Brian Larcombe

‘Cautious about the short-term outlook but confident about the business.’

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