Post on 20-Mar-2016
description
April 20091
Education Development International plcSeptember 2008 Results and Trading Updates
Nigel Snook, Chief ExecutivePaul Bird, Finance Director
April 20092
Contents
Background
• Introduction
• Marketplace
• What we do
• Business segments
• Revenue sources
• Strong team
• Financial trends
Results
• Highlights
• Acquisitions
• Segmental performance
• Income and margins
• Impact of tax
• Cashflow
• Balance sheet
• January and April trading updates
Looking Ahead
• Business resilience
• Development strategy
• Drivers for growth
• Shareholder profile
April 20093
Introduction
• A leading educational quality assurance company:
- Government approved and regulated
- UK and international reach
- Expertise in IT-based product delivery and administration
• AIM float April 2000 as GOAL plc:
- Merger with London Chamber of Commerce and Industry Examinations Board in December 2002 to form EDI
- Seven bolt-on company and product acquisitions, fully integrated
- Major investment in organisation, systems and products completed
April 20094
Marketplace
Illustrative course costs
£50 (High margin)
£150 (Mid margin)
£800 (Low margin)
£1000
Exam Boards/Awarding Bodies
EDI, 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.
Publishers
Pearson, 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
April 20095
What We Do
• Design and implement assessment strategies – face-to-face and online – and provide certification for UK government approved vocational qualifications (Apprenticeships, NVQs, Diplomas).
• Endorse and certificate company training programmes (Sainsbury’s, Victoria and Albert Museum).
• Prepare syllabi and examination papers for international business qualifications and deliver secure examination sessions, marking and certification (LCCI branded).
• Design and deliver online key stage and related assessments for schools (GOAL).
• Design, build and operate online testing platforms (i-assess).
• Design, build and operate online qualifications administration systems (Campus).
• Provide customised administration, software and broadband services.
• Deliver industry leading customer service and support.
April 20096
Business Segments
UK Qualifications and Assessment Services
• 318 accredited vocational qualifications.• 279 specialist awards and approved programmes.• 1,873 registered centres (300 increase through ASET acquisition).• 200,000 candidate registrations a year.• 12% share of programme funded vocational qualifications in target sectors.• 652 school customers for online assessment services.
International Qualifications
• 65 business qualifications branded London Chamber of Commerce and Industry.• 4,530 registered centres across 103 countries.• 275,000 candidate registrations a year.
Support and Internet Services
• Eight contracts for specialist online testing platform services, (ACCA, CIMA, OCR).• Winding down administration and logistic contracts to focus on own customers.• 502 customers for commercial quality broadband services.
April 20097
Revenue Sources
• UK government funded programmes:- Centres’ annual registration fee : £500- Candidate registration and certification : £25 - £85- Candidate administration platform (eNVQ) : £25 - £50
• Company training programmes:- Initial audit and annual review fee : typically £5,000- Candidate certification : £5 - £15
• Schools’ assessment service:- Subject £299- Full range upto £5,000
• International business qualifications:- Candidate entry and certification : £25 - £85
• Software and Internet services:- Software licence fees up to £5,000 plus £2 - £8.50 per test- Broadband : £250 to £5,000 per month- Development work – one-off project fees
April 20098
Strong Team
Non-Executives Richard Price, Sir Bryan Nicholson, Barrie Clark
Executive Directors Nigel Snook, Jenifer Moody, Paul Bird
Senior Team Gareth Phillips, Stewart Jardine, Chris Daniel
Staff Coventry Head Office 117, sub-offices 18, home-based 21
Associates 234 part-time examiners and verifiers
Agents 15 overseas representative agreements (50 countries)
Centres 6,400+ schools, colleges, private trainers and corporates in the UK and worldwide registered to offer EDI qualifications
April 20099
Financial Trends
14,175
16,057
21,500
29,000
1,1642,158
3,339
7,0008,100
4,712
7,738
10,000
16,200
21,400
27,000
2005/06 2006/07 2007/08 2008/09 2009/10
Turnover
Adjusted Operating Profit
Net Assets
£000s - IFRS Basis
Analyst's Forecast24 April 2009
Analyst's Forecast24 April 2009
April 200910
Highlights
Financial Headlines
• Revenue up by 34% to £21.50m.
• Operating profit up by 35% to £2.70m.
• Adjusted operating profit* up by 58% to £3.34m.
• Basic earnings per share up by 36% to 6.0p.
• Adjusted earnings per share** up by 51% to 6.2p.
• Net cash generated from operations up by 137% to £4.46m.
• Net cash at year end £3.23m (2007: £3.05m).
*Operating profit adjusted for net finance income and amortisation charge on acquired intangible assets.
**Adjusted earnings per share is based on adjusted operating profit.
Highlights
• Acquisition of ASET Group Limited on 19 November 2007 and integration completed by 30 September 2008 with transfer of administrative functions to Head Office.
• Disposal of 50.4% shareholding in Singapore based Educational Resources Pte Limited on 4 January 2008 and introduction of new agency agreement for SE Asia.
• Full accreditation as a 14-19 Diploma awarding body.
• Long-term contracts agreed with ACCA, Protocol Skills and JHP Training.
• Business systems accredited under ISO 9001/2000.
• Final dividend of 0.3p per share recommended bringing the total dividend for the year to 0.42p, up 27%.
April 200911
Acquisition
ASET Group Limited : Acquisition 19 November 2007
• Accredited UK awarding body with revenues of £2.2m – sound strategic fit.
• Consideration – £2.7m on completion (£1.9m cash and £800k shares at 37.65p) - £590k net assets acquired.
• Deferred consideration of £200k paid in April 2008 after successful administration handover.
• Further payment of £200k not triggered as sales performance £120k short of £2.65m sales target.
• Re-organisation costs of £88k expensed.
• Net reduction in staff of 25 – 11 sales and development staff transferred to EDI.
• Full integration completed by 30 September 2008 – York and Macclesfield offices lease surrenders negotiated.
April 200912
Segmental PerformanceUK Qualifications and Assessment Services (55% of turnover)
• Sales up 53% to £11.88m:- ASET contributes £2.20m- Like-for-like sales growth 25%
• Extended products range, new customers, increasing average value per customer.• Long-term contracts agreed with two largest customers.• Positive response to schools’ service re-packaging and increased range.• £450k NVQ certification levy collected for QCA drops out next year, no bottom line impact.
International Qualifications (27% of turnover)
• Sales up 9% to £5.81m – after £69k adjustment for the disposal of ER.• Strong trading in South East Asia (revenue up 23%) and Germany (revenue up 21%).• Positive impact of strengthening Euro in second half, £250k.• Strengthened management capacity and focus on agent co-ordination.
Support and Internet Services (17% of turnover)
• Sales up 30% to £3.71m.• Like-for-like sales growth of 11%.• Fusion revenue £788k (like-for-like increase 83%).• Low margin administration services contract with annual revenue of £957k finished on 30
September:- In line with strategy to focus on EDI customers and high margin contracts
• Long-term contracts for software services agreed with ACCA, OCR, RHS and Newcastle University.
April 200913
Income and MarginsContinuing Operations (£000s)
UK International Support Other 2008 2007
Revenue 11,881 5,810 3,714 95 21,500 16,057
Cost of Sales (1,975) (3,009) (969) - (5,953) (4,606)
Gross profit 9,906 2,801 2,745 95 15,547 11,451
Gross margin % 83.4 48.2 73.9 100.0 72.3 71.3
Administration expenses: (excluding amortisation charge on acquired intangible assets)
Product developmentBusiness development and marketingOperations and IT developmentBusiness administrationProperty and facilitiesOther overheads
1,6822,4534,0622,1991,617
263
9811,8653,4801,4231,403
226Total (12,276) (9,378)
Net finance income 68 40
Adjusted operating profit 3,339 2,113
Adjusted operating margin %
Amortisation of intangible assets
Operating profit
15.5
(576)
2769
13.2
(78)
2035
April 200914
• Tax losses of £4.3m bought forward will be fully utilised during 2009.
2007 2008 2009 2010
Revenue 16,057 21,500 27,000 29,000
Adjusted operating profit 2,113 3,339 7,000 8,100
Adjusted fully diluted EPS:
- Fully taxed 3.0 4.4 8.7 10.1
- Actual/forecast 4.0 5.9 11.5 10.1
Impact of Tax
* Partially taxed – estimate after utilisation of tax losses.
*
April 200915
Cashflow
£000’s 2008 2007
Profit before tax 2,312 2,210
Depreciation and amortisation 967 411
Share options 76 21
Working capital movement 1,170 (644)
Interest and tax (66) (28)
Operating cash flow 4,459 1,880
Capital expenditure (198) (163)
Acquisitions and disposals (3,529) (729)
Purchase of own shares net of issues (355) (95)
Dividend paid (201) (160)
Net increase in cash 176 733
Opening cash 3,053 2,320Closing cash 3,229 3,053
A £1m overdraft facility is in place.
April 200916
Balance Sheet
£000’s 2008 2007
Goodwill 7,261 6,291
Other intangible assets and equipment 1,844 1,401
Investments – AEC holding 265 -
Deferred tax 1,238 556
10,608 8,248
Net current assets 773 702
Pension liabilities (564) (190)
Other non-current liabilities (524) (1,022)
Net assets 10,293 7,738
Dividend per share 0.42p 0.33p
April 200917
January and April Trading Updates
• Revenue and profits significantly exceed expectations.
• ‘One-offs’:- Exchange rate gains- Budget underspend (tight cost control)- Provisions releases- Short-term sales peak for taxi driver qualification
• Underlying Growth:- UK vocational qualifications ‘star performer’:
- Broad based demand - Major new customer - Government expenditure
- International business ‘sound’: - Exchange rate gains
- Support services ‘focussed’: - High value software contracts
April 200918
Business Resilience
• Visibility of revenue – annual education cycle and three year/open-ended contracts.
• Cash reserves and cash generative – self funded acquisition and investment programmes.
• Market share growth – plenty to go for.
• International spread – South East Asia a main market.
• Positive exposure to Sterling weakness.
• Significant and growing government funding for UK vocational education.
• Individual and company investment in skills development – especially in recession.
• Consolidating after acquisitions and major organisational changes – strong cost control.
• Current focus on organic growth with cautious approach to acquisition opportunities.
• Very experienced non-executive and executive management team.
April 200919
Development Strategy
UK Qualifications Size £750m+Grow 15-20% annually
• Become vocational qualifications number two after City & Guilds.• Package and grow range of services to schools.• Invest in product range, online delivery and customer service.
International QualificationsSize £1bn+Grow 8-10% annually
• Develop existing markets and exploit LCCI brand.• Professionalise and grow representatives network.• Invest in product presentation and support materials.
Support and Internet ServicesSize £500m+Grow 10-12% annually
• Focus on high value software contracts.• Withdraw from low value administration contracts.• Strengthen ISP business and cross-sell.
Organisation DevelopmentBecome a household name and exemplary employer
• Profile raising programme.• Invest in staff training and development.• Invest in systems development and quality audit.• Corporate responsibility projects.
April 200920
Drivers for Growth
• Growing global investment by governments, businesses, families and individuals in personal, vocational and English language skills development.
• Significant profile raising activity and momentum in business.
• Strength of underlying business, supported by positive investment strategy and acquisition programme.
• Accredited awarding body status, including for the new Diplomas.
• Winning market share with UK training providers and further education colleges.
• Partnerships to accredit employer training programmes.
• Increasing acceptance of screen based/online education services.
April 200921
Shareholder Profile• Total voting rights 57,585,304 at 27 April 2009.
• Total number of shareholders 486
Company directors and employees: - Employee Benefit Trust- Chief Executive- Non-executive directors- Employees
3,955,0003,109,2372,756,0001,094,098
6.9%5.4%4.8%1.9%
10,914,335 19.0%
Hargreave Hale Limited (Combination of funds & private clients) 5,794,450 10.1%
Wynford Dore (Founder) 5,000,300 8.7%
Octopus Investments 4,046,550 7.0%
Pershing Nominees (Williams de Broe) 3,231,650 5.6%
J D Slater and Family 2,985,000 5.2%
Blackrock UK 2,500,000 4.3%
Slater Investments 2,395,000 4.2%
Bank of New York Nominees 2,238,812 3.9%
Real Time Consultancy (Singapore) 1,650,000 2.9%
Gareth Newman (Founder) 1,405,000 2.4%
HSBC Global Nominee (UK) 1,300,000 2.3%
Simon Knott 1,200,000 2.1%
• Total share options under contract 4,632,855 (including SAYE options) with 85% EBT cover.