Education Development International plc

1

• Education Development International plc
• Final Results Presentation
• 24 November 2009
• Nigel Snook, Chief Executive
• Paul Bird, Finance Director

2
Introduction

• Breakthrough year.
• Acquisitions fully integrated.
• Winning market share.
• Operational gearing.
• Margin growth.
• Currency exchange rates.

3
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.

4
Growth Analysis
Main revenue movements 000s
5
Margins
6
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.

7
Proforma Profit/EPS
Adjusted fully diluted EPS comprises profit after
tax adjusted for amortisation charge on acquired
intangible assets.
8
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

9
Financial Trends
10
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 Sainsburys, 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.

Revenue Split
Support services 10
International services 27
UK services 63
UK Competition
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
11
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 90012000

12
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
  90012000, EFQM and environmental policy.

13
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.

14
Strategy for Growth

• 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.

• 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.

15
Background Annex
16
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.

17
Marketplace
Illustrative course costs
The Players
Awarding Bodies/Exam Boards
EDI, Edexcel, City and Guilds, OCR, AQA,
professional bodies and 100s of others
Exams and Assessments.
50
(High margin)
Publishers
Pearson, Nelson Thornes, Hodder and Stoughton
and 1000s of others
Learning materials, books and online.
150 (Mid margin)
Schools and Colleges
Primary and secondary schools, FE colleges,
private trainers BPP, Melorio and
10,000s of others
800 (Low margin)
Education and training programmes.
1000
In-house and/or outsourced
Delivery and administration software. Logistics.
18
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.

19
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
• NXDs 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.