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.
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