CEOs review

Jonathan Muir, Chief Executive Officer

Performance highlights

2021 was a very strong year and left us well prepared for the new future that we are faced with.

I would like to echo Mervyn’s comments on the abhorrent war and the sincere thanks to our colleagues – over 100,000 people at L1 and in all of our portfolio companies. I genuinely appreciate both the effort that has delivered our good performance; and the sensitivity, calmness and honesty that has helped us manage and transform the business through the pandemic and – as a result of Russia’s unjustified war in Ukraine – the sanctions that have followed.

I said in 2020 that we emerged stronger from the year. 2021 proved that. The work we put into our businesses, and the leadership they have shown, drove an extremely positive result with an increase of over 20% of net asset value from $22,340mn to $26,784mn.

For most of our businesses – Energy, Health, Technology and Pamplona – performance has been good. For Retail, external pressures have suppressed current performance and led us to focus on building the foundations for growth in 2022. Once again, our Treasury has done an outstanding job in managing our liquidity and producing an impressive 4.5% return.

Portfolio performance

L1 Energy

Much of the focus in 2021 was on how we contribute to a balanced and sensible energy transition.

Wintershall Dea (WD) – with a 70% bias to gas – is an important part of this debate. It is clear that gas in particular is an essential transitional energy source as we move to a more sustainable energy economy.

WD has benefited from commodity prices, returning an impressive EBITDAX of €3.8bn and free cash flow of €2.1bn on a record level of oil and gas production (638 kboed). This platform gives us the ability to invest in opportunities that further the transition journey and an ambitious strategy, backed by investment, that delivers both financially and for energy security and stability.

L1 New Energy

It was an exciting year, getting our new business unit up and running. The team has made real progress in a very competitive market. Our focus has been on finding sensibly priced investments that will underpin transition and we believe that Plastic Energy and H2scan are clear demonstrations of that strategy.

L1 Health

The pandemic has focused minds on the importance of a thriving, innovative health sector, which made for a fast-paced year for our health team. Destination Pet has grown rapidly, with over 30 new acquisitions completed. K2 HealthVentures has delivered a strong performance, making six new investments totalling $160mn. We will look to invest further next year. Finally, our joint acquisitions with Blantyre of Remedica and Sun Wave Pharma gives L1 two exciting new investments, increasing our footprint in pharmaceuticals and healthcare products.

L1 Tech

Our technology business also produced encouraging results. VEON showed positive momentum, expanding its 4G customer base to 97.3mn customers and delivering double digit growth of 10.1% for the year. Turkcell grew well despite challenges to local currency, with revenue increasing 36.7% year-on-year. We believe Turkcell has a bright future that can be delivered by strengthening and improving corporate governance.

In June 2021, L1 Technology made an important UK investment, committing up to $1bn to startup altnet Upp, with the aim of connecting 1mn homes to superfast broadband in the East of England. It is off to a strong start, with customers signed up, homes connected and cable laying ahead of forecasts for 2021.

L1 Retail

There is no question that globally the retail sector has been hard-hit by lockdowns and their impact on consumer behaviour and supply chains. Despite this, both Holland & Barrett (H&B) and DIA made important steps forward.

DIA has now refurbished over 1,500 stores, which are strongly outperforming the market. Over 2,500 stores now operate as franchises.

H&B has traded broadly level, with Adj EBITDA increasing 5% to £191mn. A new, strong management team is in place and real progress has been made on digital and omni channel execution, with new customer journeys launched and strong acquisitions made to support growth going forward.

L1 Treasury has had substantial inflows from Pamplona, including $5.4bn following the sale of Parexel, in addition to the successful exits from Latham Pools, Privia and others. The Treasury team has done an excellent job returning 4.5% in such a challenging market environment and end the year with over $9.5bn assets under management.

Looking forwards

Our priority for the year ahead is to stabilise and grow our businesses. The difficulties presented over the last few months have been demanding, but our commitment to the tens of thousands of jobs we support remains undimmed.

Many of the partnerships we have built up over the last 10 years have proved strong. The business has significant liquidity. Our assets are well-placed and, of course, our growth now brings direct benefits to society because of our substantial charity commitment, starting with help for those so terribly affected by the war in Ukraine.

However, charitable commitments are only part of the impact we want to have on society. I’m particularly pleased with the progress we have made on ESG. L1 itself has launched its own strategy, with a focus on diversity and inclusion, but we are also collaborating more closely than ever with our portfolio businesses to challenge and support their journeys.

The year ahead will see an L1 that is different – with new purpose and governance. There will be more challenges ahead, but I am confident that our spirit, skills and values mean it will be no less successful.

Jonathan Muir,
Chief Executive Officer