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Corporate Presentation 2Q09
Largest post-secondary Education group in Latin America
202k students spread throughout 77 campuses in all major cities in Brazil
78 programs tailored to large and underserved middle and lower income individuals
54 Distance Learning accredited units strategically located in major centers
R$ 1 billion in LTM Net Revenues and R$ 110 million in LTM EBITDA, R$ 224 million in Net Cash
ESTÁCIO Highlights
Corporate Presentation 2Q09 2
Scale and Strong Balance Sheet pave the way for profitable growth, with major levers being:
Efficiency gains through centralization of business processes
Quality gains through investments in standardized high quality academic offerings and differentiated student support services
More impactful branding and marketing, coupled with selective M&A approach (“can´t miss” add-ons)
Attraction and retention of high quality talents
Value Creation Going Forward
Corporate Presentation 2Q09 3
Focused on growing and underserved addressable market: middle and low income groups
1.9 million students graduating from High School every year
7% net enrollment growth (CAGR 2002-2007)
Quality at affordable cost / location
Career improvement to working adults
Value Creation Going Forward
Corporate Presentation 2Q09 4
Largest Student Base: 202 k undergraduate students
5
3.5 12.8
0.6
4.7
4.3
1.8
1.4
3.0 11.6
2.9
1.2
3.0 22.1
Market-Share per Municipal2
Source: SINAES/20062 – Undergraduate students enrolled (excludes public universities)
Average Ticket: R$424 (1H09;+3.1% yoy)
University University Center College
Upgrade to University Center(in process of approval with the
MEC)
110.2 2.7
1.5
4.3 3.0
1.4
5.8
Estácio Students per State (th.)
35,1%31,0%
18,5%16,1%
15,1%15,0%
12,9%12,2%12,2%
11,8%11,6%
9,1%8,4%
8,1%6,8%
6,0%5,2%
4,0%3,8%
1,8%
RJOURFOR
MACEJN
FLORJF
BHBEL
MCPVIT
ARACRECSAL
VVCG
NATGOSP
CTB
Corporate Presentation 2Q09
23 2635
51
70
118
141135
144
162 167178
207 202
History and Current Status
6
Begin National Expansion
1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Turnaround andPreparation for IPO
Turnaround andPreparation for IPOStrong Organic GrowthStrong Organic Growth
National Leadership
North and Northeast: subsidiaries for profit status
Main subsidiary with for profit status (Feb/07)
(Accounting and Management Systems)
IPO (July/07)
GP (May/08)
Efficiency Gains and
Consolidation
Efficiency Gains and
Consolidation
CAGR of 25.7% - 1997/2005 (Vs 13.5% for Brazil)
Asset Light Model: Long Term Leasing Agreements (Campuses)
1H09
Un
de
rgra
du
ate
Stu
de
nts
(i
n t
ho
us
an
d)
Early Stages
Early Stages
Corporate Presentation 2Q09
Recent accreditation by Ministry of Education (MEC) of 54 Distance Learning units strategically located in major cities throughout Brazil
Satelite units for sales and infra structure support in advanced negotiations
High growth, high margin with low incremental investment
Lower prices and flexible schedules to access larger students prospects base
Distance Learning
Corporate Presentation 2Q09 7
Recent Start-up of Shared Services Center (SSC):
Macro transactional / back office processes fully centralized
Streamlining of backoffice headcount
Lower transaction cost with higher quality (SLAs)
Key for scalability and profitable growth and acquisitions integration
Efficiency Gains Through Centralization of Business Processes
Corporate Presentation 2Q09 8
Investment in high quality, standardized academic offerings:
40 Core programs being updated and nationally integrated towards labor market demands and better integration of shared disciplines: lower faculty costs
Better quality control with standardized lectures outlines, content, exercises and exams banks
Digital platform aimed at quality self-learning activities at minimized costs
Reference books and printed materials tailored made granted in all 40 core programs included in tuitions
Quality Gains
Corporate Presentation 2Q09 9
Improved Students Support Services
New, fully integrated portal - prospects and students
Tracking of students performance for proactive support approach (“Gabaritando”)
Roll-out of national standardized students relationship support
Sourcing of new students
Renewals
Renegotiations
Internship programs
Quality Gains
Corporate Presentation 2Q09 10
More Impactful Branding, Marketing and Sales Efforts
National branding Research oriented new media choices Structured “on-the-road” sales team for cost
effective and more resilient student sourcing (companies and schools)
Building highly scalable platform for maximum optimization of acquisitions
Standard academic model Strong national brand with high quality
products and services Centralized back office (“plug and play”)
Growth
Corporate Presentation 2Q09 11
Result oriented management model and compensation scheme
Budgetary discipline in all business and support areas (Zero Base Budget and goals orientation)
Monthly tracking of results and acting upon deviations
“On-the-Road” management and leadership by CEO and executive officers
Zero Based and Matrix Budget / internal and external benchmarks
Integrated systems (SAP and academic systems)
Streamline of organization structure
Streamlined processes (process standardization / back office centralization)
Permanent Pursuit of Highest Quality Management Model and Professionals
Corporate Presentation 2Q09 12
KROT AEDU SEB ESTC
General and Administrative Expenses (G&A)Streamline of Organizational StructureShared Services CenterSystem Integration & Process ReviewZero Based /Matrix Budgeting
General and Administrative Expenses (G&A)Streamline of Organizational StructureShared Services CenterSystem Integration & Process ReviewZero Based /Matrix Budgeting
Cost of Services - Common Subjects- Course Standardization- Improved “Production Planning”
(Students per Teacher) - On-Line Programs
Distance LearningExtra-Class Activities
Cost of Services - Common Subjects- Course Standardization- Improved “Production Planning”
(Students per Teacher) - On-Line Programs
Distance LearningExtra-Class Activities
Widest Scope for Margin Improvement in the Indutsry
13
12%
22%
17%
EBITDA MARGIN (2Q09)
25% Drivers of Efficiency Gains
Corporate Presentation 2Q09
Financial Highlights
14
Adjusted Net Income2 60
(R$ million) 2005 2006 2007
EBITDA Margin ex-rental 16% 20% 20%
EBITDA ex-rental1 124 164
Net Revenue1 762 829 851
Net Cash
23
(4)
73
229(48)
Adjusted EBITDA1
Adjusted EBITDA Margin 11%
56 96 95
166
12%7%
(1) Adjusted in 2007, to the payment of taxes in January 07 (SESES became for profit in February 2007), Law 11.638 in 2008 and one-off expenses in 2008 and 2009(1) Adjusted in 2007, to the payment of taxes in January 07 (SESES became for profit in February 2007), Law 11.638 in 2008 and one-off expenses in 2008 and 2009
(2) Excluding goodwill amortization from acquisitions and one-ff expenses(2) Excluding goodwill amortization from acquisitions and one-ff expenses
980
98
10%
182
19%
72
191
1H08 1H09
476 513
51 61
11% 12%
92 106
19% 21%
39 44
256 224
Corporate Presentation 2Q09
2008
Corporate Presentation – 2Q09
15
Appendix
Corporate Presentation 2Q09
12%22% 25% 26%
47%
64%72%
82%
Índia China Brasil México Chile Argentina Rússia EUA
31% 30% 29% 28% 27% 26% 25%
69% 70% 71% 72% 73% 74% 75%
2001 2002 2003 2004 2005 2006 2007
Private Public
3.0 4.74.23.9 4.53.5 4.9
183 195 207 224 231 248 249
1.208 1.442
1.652 1.789 1.934 2.022 2.032
2001 2002 2003 2004 2005 2006 2007
Private Public
Sector Overview – Significantly Untapped Demand
16
Fonte: INEP/MEC
Post-secondary Enrollments – (Unesco – 2007, million) Gross Enrollment Rate (Unesco - 2007)
Largest market in Latin America, with low penetration rates and increasing demand for qualified labour
High Growth Potential
Post-secondary Institutions in Brazil (units) Total Enrollments (million)
Corporate Presentation 2Q09
Up to 499
Sector Overview: Highly Fragmented Market
17
Top10 largest post-secondary institutions account for less than 25% of total enrollments1
High Potential for Consolidation
2,032 Institutions3.5 million enrollments
Top 10 Non-Government Institutions Market Share
Based on Number of Enrolled Students
Non-Government Institutions (number & Size)
2K < 4.9K
1,001
687
204
Numbe
r of i
nstit
utio
ns
500 < 1.9K
5K or more140
Number of students
22.6%
77.4%
10+ Others
Corporate Presentation 2Q09
Undergraduate Student Base and Revenue Growth
18
Students (thousand)Students (thousand) Net Revenue (R$ million)Net Revenue (R$ million)
CAGR: 8.5%
CAGR: 8.7%
+ 7.9%
+ 4.7%
Corporate Presentation 2Q09
162 167178
207
193202
2005 2006 2007 2008 1H08 1H09
762829 851
980
476513
2005 2006 2007 2008 1H08 1H09
Cost of Service and SG&A (R$ million)
19
Cost of Services
*NR = Net Revenue*NR = Net Revenue
SG&A
Gross Margin: 39.3%Gross Margin: 39.3% Gross Margin: 38.3% Gross Margin: 38.3%
R$111.2 M
R$28.4 M R$35.3 M
R$105.2 M
Corporate Presentation 2Q09
23.4% NR 20.5% NR
6.0% NR 6.9% NR
1H08 1H09
G&A Selling
R$ 139.6 M (29.4% NR)
R$ 140.6 M (27.4% NR)
46.3% NR 46.8% NR
9.4% NR 9.6% NR
5.0% NR 5.3% NR
1H08 1H09
Faculty Costs Rental Third-Party Services/Other
R$ 288.9 M R$ 316.3 M
23
60
73 72
3944
2005 2006 2007 2008 1H08 1H09
56
96 95 98
5161
2005 2006 2007 2008 1H08 1H09
Adjusted EBITDA and Net Income (R$ million)
20
Adjusted Net Income2Adjusted EBITDA1Adjusted EBITDA1
1 - Adjusted in 2007 to the payment of taxes in January 2007 , Law 11.638 in 2008 and to the one-off expenses in 2008/20091 - Adjusted in 2007 to the payment of taxes in January 2007 , Law 11.638 in 2008 and to the one-off expenses in 2008/2009
2 - Excluding goodwill amortization from acquisitions and one-off expenses2 - Excluding goodwill amortization from acquisitions and one-off expenses
7.3%
11.6% 11.1% 10.0%
10.7%
11.9%
Corporate Presentation 2Q09
Capitalization and Market Data
21
Sound balance sheet and strong cash flow support our strategic positioning as one of the main players in sector consolidation in Brazil
R$ Million 06/30/09
Shareholders Equity
Debt
460.6
(8.1)
Net Cash 223.8
Stock Price (Aug - 12, 2009): R$23.20 / share
Number of Shares: 78.6 million
Market Cap: R$ 1.8 Billion
Enterprise Value: R$1.6 Billion
Daily Volume (3-month average): R$1.6 million
Free Float: 26%Market Data
Corporate Presentation 2Q09
Brazilian Investors
10%
Foreign Investors
90%
IR Contacts and Disclaimer
22
Visit our website: www.estacioparticipacoes.com
Investor Relations Team:
Lorival Luz – CFO
Daniella Guanabara – [email protected]
Fernando Santino – [email protected]
e-mail: [email protected]
Phone: (55) 21 3311 9789 / 9790 / 9791
Fax: (55) 21 3311 9700
Disclaimer:
This presentation may contain forward-looking statements concerning the industry’s prospects and Estácio Participações’ estimated financial and operating results; these are ere
projections and, as such, are based solely on the Company management’s expectations regarding the future of the business and its continuous access to capital to finance Estácio Participações’ business plan. These considerations depend substantially on changes in market conditions, government rules, competitive pressures and the performance of the sector and the Brazilian economy as well as other factors and are, therefore, subject to changes without previous notice. We are a holding company, and our only assets are our interests in SESES, STB, SESPA, SESCE, SESPE and IREP, and we currently hold 99.9% of the capital stock of each of these subsidiaries. Considering that the Company was incorporated on March 31 2007, the information presented herein is for comparison purposes only, on a proforma unaudited basis, relative to the first three months of 2007, as if the Company had been organized on January 1 2007. Additionally, information was presented on an adjusted basis, in order to reflect the payment of taxes on SESES, our largest subsidiary, which from February 2007, after becoming a for-profit company, is subject to the applicable taxation rules applied to the remaining subsidiaries, except for the exemptions arising out of the PROUNI – University for All Program (“PROUNI”). Information presented for comparison purposes should not be considered as a basis for calculation of dividends, taxes or for any other corporate purposes.
Av. Embaixador Abelardo Bueno, 199 – Office Park – 6th floorCep 22775-040 Barra da Tijuca - Rio de Janeiro Av. Embaixador Abelardo Bueno, 199 – Office Park – 6th floorCep 22775-040 Barra da Tijuca - Rio de Janeiro
Corporate Presentation 2Q09