24 November 20091

Education Development International plcFinal Results Presentation24 November 2009

Nigel Snook, Chief Executive

Paul Bird, Finance Director

24 November 20092

Introduction

• Breakthrough year.

• Acquisitions fully integrated.

• Winning market share.

• Operational gearing.

• Margin growth.

• Currency exchange rates.

24 November 20093

Financial Headlines

• Revenue up by 32% to £28.3m (2008: £21.5m).

• Operating profit £8.1m (2008: £2.7m).

• Adjusted operating profit £8.6m (2008: £3.3m)*.

• Tax losses of £4.3m utilised, effective corporation tax rate of 25%.

• Basic earnings per share 11.3p (2008: 6.0p).

• Adjusted earnings per share 16.2p (2008: 6.2p).

• Net cash generated from operations £8.5m (2008: £4.5m).

• Final dividend of 1.2p per share recommended bringing total dividend to 1.6p (2008: 0.42p).

* Profit on ordinary activities before taxation adjusted for the amortisation charge on acquired intangible assets.

24 November 20094

Growth Analysis

2009 2008 %

• UK Services 17,900 11,900 50

Business Skills

Care

Road Passenger Transport

Key Skills

eNVQ

5,100

2,600

1,700

1,000

900

3,400

1,000

500

600

650

50

160

240

67

33

• International Services 7,500 5,800 29

South East Asia

Germany

Currency Gains

3,200

1,600

1,100

2,800

1,400

200

12

12

450

• Support and Broadband Services 2,800 3,700 (24)

i-assess

Broadband

1,200

900

1,200

800

-

13

• Total (inc other) 28,300 21,500 32

Main revenue movements: £000s

24 November 20095

Margins

£000s UK International Support Other 2009 2008

Revenue 17,916 7,550 2,792 90 28,348 21,500

Cost of sales (1,968) (4,209) (934) - (7,111) (5,953)

Gross profit 15,948 3,341 1,858 90 21,237 15,547

Gross margin %

2008 margin %

89

83

44

48

67

74

-

-

75

72

Administration expenses (12,566) (12,276)

Net finance (costs)/income (22) 68

Adjusted operating profit 8,649 3,339

Adjusted operating margin % 30 15

Amortisation charge on acquired intangible assets

Corporation tax

(619)

(1,992)

(570)

417

Profit after tax 6,038 3,186

Profit margin after tax % 21 15

24 November 20096

Cash and Treasury

Cash Generation

• Net cash from operations £8.5m (2008: £4.5m).

• Cash conversion ratio 93%.

• Net free cash flow £6.6m (2008: £400k).

Hedging

• Forward contracts to sell, totalling £7.6m, in place to September 2012.

• US Dollar and linked, £4.2m from $1.52 to $1.66.

• Euro, £3.4m from €1.10 to €1.15.

Treasury

• Cash at year end £9.5m (2008: £3.2m).

• Working capital requirement £2.5m (2008: £2.5m).

• No debt or borrowings.

• Free cash deposited with three major UK clearing banks.

24 November 20097

Proforma Profit/EPS

£000’s 2007 2008 2009

Adjusted profit after tax 2,358 3,596 6,484

Adjusted fully diluted EPS:

- Actual 4.5p 6.3p 11.4p

- Taxed at 28% 2.9p 4.2p 10.9p

Adjusted fully diluted EPS comprises profit after tax adjusted for amortisation charge on acquired intangible assets.

24 November 20098

Net Assets

Key Points:

• Goodwill £7.2m – no impairment.

• Acquired intangible assets – net book value £589k to be amortised over next 14 months.

• AEC Education plc investment £670k. 3m shares (7.0%) – 1m purchased in March placing.

• Capital policy to expense development costs wherever possible.

• Trade debtors £2.8m (2008: £2.3m):

- Year end debtor days 36 (2008: 38)

- Bad debt provision, 0.9% of revenue

Balance Sheet £000s

2009 2008 %

Non-current assets 10,200 10,600 (4)

Current assets 3,300 2,900 14

Cash 9,500 3,200 197

Current liabilities (5,800) (5,300) 9

Non-current liabilities (900) (1,100) (18)

Net assets 16,300 10,300 58

24 November 20099

Financial Trends

24 November 200910

Segmental Performance

UK Qualifications and Assessment Services

• Vocational qualifications sales up 55% (10/12% market share).

• Main sectors: business skills, care, road passenger transport and key skills.

• Major contract win with esg Group.

• Blue chip clients – Sainsbury’s, Virgin Media, Qantas.

• Review of sales to schools.

International Qualifications

• Like-for-like sales up 10%.

• New South East Asia agency arrangements bedded-in.

• Five year agreement with Germany agent.

• Actively recruiting new representatives.

• Strategic projects with governments – Germany, Malaysia, Hong Kong, China.

Support and Broadband Services

• i-assess software sales flat but usage up 3%.

• Phasing out low margin administration contracts.

• Broadband products/sales strategy.

UK services 63%

International services

27%

Support services

10%

Edexcel - Market share growing - BTEC growth in college market - New MD

City and Guilds - Market share falling - Slow growth, bureaucratic - New CEO

OCR - Market share flat - Focus on academic qualifications

All - Distraction of new Qualifications and Credit Framework - Reorganisation of funding bodies

Revenue Split

UK Competition

24 November 200911

Organisation Development

• Senior team strengthened and new structure implemented:

- High level IT expertise- Integrated sales and product teams for UK and international services- Research and innovation team

• Sales and marketing capacity increased:

- Set up marketing and communications department- Middle management structure for expanded sales teams

• Major upgrade of Campus administration platform commenced:

- £2.0m investment over two years

• Staff training and development focus:

- Strengthened HR department- Investors in People and ISO 9001:2000

24 November 200912

Business Fundamentals

• Government accredited and regulated.

• Business to business service provider – partnership approach.

• Growing market share and profile in UK.

• International exposure – exclusive rights to LCCI brand.

• Operational leverage – bespoke operating system.

• Strong cash generation and reserves.

• Experienced Board and management.

• Focus on excellence – Investors in People, ISO 9001:2000, EFQM and environmental policy.

24 November 200913

Market Fundamentals

• Complex regulatory and administrative context.

• No significant exposure to economic cycle – demographic influence.

• Both main UK political parties committed to vocational education and training.

• Global investment of public, corporate and personal funds in skills development.

• Visibility of revenues – annual education cycle and long-term customer relationships.

• High level of customer retention – limited ‘churn’/long sales cycle.

• Growing demand for ‘just-in-time’ and customised services.

24 November 200914

Strategy for Growth

Potential Acquisition Areas

• Specialist publishing.• Specialist software.• Business psychometrics.• Professional training services.

Organic Investment Programme

• Campus/IT infrastructure upgrade.• Marketing and sales capacity.• Research and innovation.• Management and staff development.

UK Vocational Qualifications (market size £350m+, college and work-based)

• Grow revenues organically 20% year-on-year.

• Become market leader in work-based learning market.

International Qualifications (market size £1bn+)

• Grow revenues organically 10% year-on-year.

• Exploit the status of LCCI brand.

Support Services (market size £100m+)

• Consolidate around high value software contracts.

24 November 200915

Background Annex

24 November 200916

What We Do

• Provide government regulated assessments and quality assurance for education and training programmes.

Education Expertise

• Design and implement assessment strategies for vocational training programmes.• Endorse and certificate in-company training programmes.• Prepare syllabi and examination papers, and administer international business qualifications.

Software Engineering Expertise

• Design, build and operate sophisticated online assessment and testing services.• Design, build and operate sophisticated online administration systems.• Provide customised software and broadband services.

Business Operations Expertise

• Partner and critical friend, not inspector.• Professional, structured approach to marketing and selling.• Industry leading customer service and support.

24 November 200917

Marketplace

Illustrative course costs

£50 (High margin)

£150 (Mid margin)

£800 (Low margin)

£1000

Awarding Bodies/Exam BoardsEDI, Edexcel, City and Guilds, OCR, AQA,

professional bodies and 100’s of others

Exams and

Assessments.

Learning materials,books and online.

Education and training programmes.

Delivery and administration software. Logistics.

PublishersPearson, Nelson Thornes, Hodder and Stoughton and 1000’s of others

Schools and CollegesPrimary and secondary schools, FE colleges, private trainers – BPP, Melorio – and 10,000’s of others

In-house and/or outsourced

The Players

24 November 200918

Business Segments

UK

• 1,500 customers and extensive product range of over 380 vocational qualifications.

• Market leader with private training companies and for service sector qualifications.

• 10/12% share of vocational qualifications market, up from 3% in 2003.

• Growing demand from corporate clients.

• Limited exposure to schools’ market – over 650 users of GOAL online assessments.

International

• 4,000+ customers in over 100 countries for a range of 65 business qualifications:

- Accountancy, mainly South East Asia

- English for Business, mainly Europe

• Branded London Chamber of Commerce and Industry under licence.

• Agency operations and/or representatives in 17 countries.

Support Services

• Small scale software/logistics/broadband services.

24 November 200919

Corporate Background

• April 2000: IPO, as GOAL plc.

• December 2002: Education Development International plc formed through a merger with the London Chamber of Commerce and Industry Examinations Board (founded 1887).

• 2004 – 2007: Seven bolt on company and product acquisitions, all fully integrated.

• Major organisation and systems development programmes completed.

Management and Staff

• NXD’s: Richard Price, Sir Bryan Nicholson and Barrie Clark.

• Senior team: education, software and business expertise.

• 182 full-time staff, 263 associates, 17 international agents/representatives.