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EstáCio Apr Corporativa Final

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  • 1. Corporate Presentation 3Q08
  • 2. Who we are Campus Rebouças Campus Tom Jobim Campus R9 Who we are
    • Largest player in the undergraduate sector in Brazil
    • 209k undergraduate students
    • National Footprint: 80 campuses in 16 states
    • 2 Universities, 2 University Centers and 24 Colleges
    • Asset Light Model: ROE of 19,4% (9M08)
    • LTM Revenue of R$940 million and EBITDA of R$100 million (Sep/08)
    • Labor Market Oriented Programs
    • Higher Governance Standards: Only Education Company at Novo Mercado
  • 3. Current Focus: Efficiency Gains 23 26 35 51 70 118 141 135 144 162 167 178 209 * 1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sep08 Turnaround and Preparation for IPO Strong Organic Growth National Leadership North and Northeast: subsidiaries for profit status Main subsidiary with for profit status (Feb/07) Begin National Expansion Undergraduate Students (in thousand) (Accounting and Management Systems) IPO (July/07) Who we are GP (May/08) Efficiency Gains and Consolidation (*) – Includes recent acquisitions CAGR of 25.7% - 1997/2005 (Vs 13.5% for Brazil) Asset Light Model: Long Term Leasing Agreements (Campuses) Early Stages 2008
  • 4. Largest Student Base: 209 k undergraduate students 1 – Sep/08 3.3 12.5 0.7 5.0 4.2 1.8 1.5 2.6 12.5 3.0 1.3 2.8 20.7 Largest Student Base Market-Share per State 2 Source: SINAES/2006 2 – Undergraduate students enrolled (excludes public universities) 3 – Ministry of Education 119.3 2.1 1.4 4.6 2.5 1.4 6.0 Estácio Students per State (th.) 1- Includes recent acquisitions
    • Monthly Tuition: R$458 (9M08; +5.0% yoy)
    • University
    • University Center
    • College
    • Upgrade to University Center
    • (in process of approval with the MEC 3 )
  • 5. Labor Market Oriented Programs Who we are
    • Convenience multi-campus
    • Location (work / home)
    • Internship Programs
    • Adequate Facilities
    • Competitive Price
    • Perceived Quality (above average)
    • Focus on Labor-Market
    Target Market Our Student Profile Self-financed students (with family support) Family income up to 10 minimum salaries (~73%) Searching for Career Searching for Salary improvement Living in Urban Centers (large cities) Young working adults (~70%)
  • 6. ESTC3: Competitive Advantages Headquarter in RJ Campus Tom Jobim Gastronomy Class Competitive Advantages
    • Strong Shareholder Structure: Co-Management with GP Investments (Largest Private Equity in LATAM)
    • Best Governance Practices: Only Voting Shares & Novo
    • Mercado Listing
    • Highly Qualified Professional Management Aligned with Shareholders (Bonus and Stock Option)
    • Widest Scope for Margin Improvement in the Industry
    • Significant Growth Opportunities (M&A / Organic)
    • Huge Undergraduate Student Base (Scale) & Geographic Coverage (presence in different markets)
    • Sound Balance Sheet: No Leverage and Strong Cash Position
  • 7. Large Expertise in the Education Sector National Expansion and Market Leadership Active Management Meritocracy Culture Proven track record in the Brazilian Market (Gafisa, Lame, Ambev, Submarino, ALL, Magnesita and others) Founder Shareholders GP Investments 54.8% 20.0 % 25.2% Corporate Governance Standards Free Float
    • Listed at Novo Mercado: Only Voting Shares
    • 100% Tag Along Rights
    • Independent Board Members
    • Dividend Policy (Shareholder Agreement)
    • Fiscal Council
    • Internal Audit and Risk Management
    • Audit and Compensation Committee
    • Clear Shareholder and Corporate Structure
    Shareholder Structure and Corporate Governance Strong Shareholder Structure
  • 8. Shareholder Agreement with GP Highlights of Shareholder Agreement GP & Shareholders´ Agreement
    • Co-Management  5 years (renewable for
    • 2+ years)
    • Board Members  4 each party (being 2
    • independent)
    • Lockup period of 3 years
    • M&A Agreement
    • Non-Competition Agreement
    • Minimum Dividend Payout (50% of Net Income)
    • Leading Private Equity Firm in LATAM /
    • First Listed Stock
    • Mission: Generate Exceptional
    • Long-Term Returns to its Investors
    • and Shareholders
    • Outstanding performance of invested
    • companies, with integrity, clear targets,
    • entrepreneurship, meritocracy and
    • professionalism. Some examples:
    • IRR: 1,339%
    • (3 year investment)
    • IRR: 148%
    • (3 year investment)
    • IRR: 17%
    • (12 year investment)
    • IRR: 24%
    • (10 year investment)
  • 9. Highly Qualified Professional Management Team Professional Team Management Experience Eduardo Alcalay – CEO GP Partner; Former board member at Estácio, Cemar and Equatorial; Partner at Singular Partners and Vice President at UOL Variable compensation (Bonus + Stock Option) People Development Lorival Luz – CFO Treasury Director at Citibank - Banco Credicard; Corporate Bank Chief of Staff Rogério Melzi – Economic and Operational Planning Head of Financial Planning in Suzano; Planning Officer in Inbev/Labat and Ambev Miguel de Paula – People and Management Head of Human Resources in Farmasa and Votorantim; HR Manager at Gerdau Rubens Vasconcelos – Academic Officer Member of the Board of Directors at Cultura Inglesa; COO at Máxima Consultoria; CFO at Cougar Jessé Hollanda – Operations Principal of Estácio´s College in Ceará; Academic Director of CSN Foundation and Executive Board member of CBS Alexandre Ferraz – Market Officer Sales and Corporate Marketing Manager at Infoglobo Align interests of shareholders and management Implement targets on global and individual basis (cost cutting, quality goals) Reconcile quality and long-term targets Retain key managers and professionals Maximum dilution of 4.15%
    • Faculty Training Program
    • Trainee Program for Estácio´s students
    • Executive Development Plan
    • Qualification for Course Coordinators
    • Variable Compensation for Course Coordinators & Teachers
  • 10. Widest Scope for Margin Improvement in the Industry Widest Scope for Margin Improvement in the Industry General and Administrative Expenses (G&A) Streamline of Organizational Structure Shared Services Center System Integration & Process Review Zero Based /Matrix Budgeting
    • Cost of Services
    • Teacher Union Agreement (Rio)
    • Modularization and Flexible Assessment
    • Common Courses
    • Course Standardization
    • On-Line Programs
    • Distance Learning
    • Extra-Class Activities
    Drivers of Efficiency Gains 12% 21% 21% EBITDA MARGIN (9M08) 24%
  • 11. Margin Improvement: Opportunities on G&A Expenses
      • Management (SAP) and Academic (SIA) Systems – Already running in all our units
    Margin Improvement Opportunities
      • Streamline of organizational structure
      • Process Standardization (Shared Services / Academic Content / Student Assistance / Corporate Centers)
      • BackOffice Centralization: Procurement / Accounting / HR / Legal /
      • Accounts Payable / Treasury / IT / Real Estate Management
      • Zero Based / Matrix Budget
      • Internal / External Benchmarks (“Projeto Modelo”)
      • Best Practices Sharing
    Integrated Systems Streamlined Processes Zero Based Budgeting
  • 12. Margin Improvement: Opportunities on COGS - Faculty Costs Academic Reform MODULARIZATION: Reduce Course Pre-requisites / Reduce Attrition / Flexible Curricula COMMON COURSES: Same Course for Different Programs (Languages, Maths, etc) STANDARDIZED PROGRAMS in all our campuses DISTANCE LEARNING: Increasing usage of on-line activities (up to 20% of Schedule) Labor Agreement - Rio Increase wages below inflation Increase the number of students per class Margin Improvement Opportunities
  • 13. Organic
    • Undergraduate market highly untapped
    • Upgrading Colleges to University Centers
    • Opening of new campuses, programs and seats
    Acquisitions
    • Market share relevance – expansion and consolidation
    • Strategic fit – compatible market positioning
    • Priority for university centers
    • Take advantage of potential synergies
    Distance Learning
    • Opening a new market; reaching new segments
    • Produce and distribute Estácio´s own learning content
    • Marginal CAPEX - sunk costs
    Growth Opportunities Significant Growth Opportunities
    • Maximizing growth opportunities in São Paulo and NE Markets
  • 14. Deeply Discounted vs Domestic and International Peers Education Sector Based on Market Consensus Estacio Offers a Huge Upside Opportunity 8.7 27.3 14.5 US ESTÁCIO Peer Comparison Education Sector 2008 Average EV/EBITDA P/E 12.1 13.6 Brazil International 8.2 14.5 26.9 -40% -55% -43% -56% -6% -17% Discount Vs Brazil US Global
  • 15. Best ROE In Industry High Mobility to Grow Lowest Permanent Assets 1 per Student ESTC R$961 x Industry Average of ~R$2,400 Efficient Business Model Asset Light Model: Low Investment in Real Estate Return on Equity (September/ 08) 1 1 – LTM Net Income / Shareholders´Equity Source: Company Data 14% 20% 10% 12% 1 – Excluding investment / Goodwill / Deferred charges
  • 16. Analyst Coverage & Forecast 131 121 1,053 Analyst Coverage Net Revenue EBITDA Net Income 964 122 86 962 86 113 972 101 95 967 110 UBS Morgan Stanley Average Brokers 171 134 150 153 1,107 1,120 225 175 199 187 182 171 286 241 258 259 244 203 135 1,142 Analyst Coverage & Forecast 1,245 1,151 1,305 1,528 1,940 1,578 2008 2009 2010 2011 R$ million 09/09 07/07 11/13 Report Date Date Rel. R$ 33 TP R$ 47 R$50 Unibanco 12/04 R$ 32 117 979 173 1,195 1,526 1,330 1,561 190 225 348 284 173 209 278 231 103 165 104 946 96 141 1,031 122 166 141 220 189 1,279 1,407 Safra 05/26 R$ 30 Fator 1,320 1,493 295 227 CS 11/04 R$ 33 1,309 219 190 1,052 158 145 957 117 94 110 154 ITÁU 12/02 R$ 32 982 105 88 1,230 162 103 1,526 234 145 1,742 306 208 Net Revenue EBITDA Net Income Net Revenue EBITDA Net Income Net Revenue EBITDA Net Income Santader 12/11 R$ 29 975 102 93 1,147 145 134 1,298 216 191 1,477 298 258
  • 17. 60 (R$ million) 16% 20% 20% 21% 20% 124 164 762 829 860 637 727 (4) 81 229 58 72 271 (48) 12% 12% 56 96 84 79 101 133 172 147 Financial Highlights 16 12% 7% Financial Highlights (1) Adjusted in 9M07, to the payment of taxes in January 07 (SESES became for profit in February 2007) and to extraordinary expenses in 9M08 (2) Excluding goodwill amortization from acquisitions and extraordinary expenses Adjusted Net Income 2 2005 2006 2007 9M08 EBITDA Margin ex-rental EBITDA ex-rental 1 Net Revenue Net Cash 23 264 Adjusted EBITDA 1 Adjusted EBITDA Margin 12% 9M07
  • 18. Annex 17
  • 19. Source: INEP/MEC Sector Overview – Significantly Untapped Demand Post-secondary Enrollments – (Unesco – 2005, million) Post-secondary Institutions in Brazil (units) Total Enrollments (million) Gross Enrollment Rate (Unesco - 2005) Largest market in Latin America, with low penetration rates and increasing demand for qualified labour Positive Sector Dynamics 69% 73% 72% 71% 70% 74% 31% 27% 28% 29% 30% 26% 3.0 4.5 4.2 3.9 3.5 4.7 High Growth Potential
  • 20. Sector Overview: Highly Fragmented Market Top 10 Non-Government Institutions Market Share Based on Number of Enrolled Students Non-Government Institutions (number & Size) 2K < 4.9K 1,014 616 173 Top10 largest post-secondary institutions account for less than 20% of total enrollments 1 Number of institutions Up to 499 500 < 1.9K 5K or more 131 Number of students 23.1% 76.9 % 10+ Others (1) Source: Hoper Educational , MEC Positive Sector Dynamics High Potential for Consolidation 1,934 Institutions 3.9 million enrollments
  • 21. Sector Overview - Regulatory Framework University
    • Autonomy, guaranteed by the constitution , to create programs within the city (except for Medicine, Law, Psychology and Odontology)
    • Allowed to create campuses outside the city, subject to authorization by the Ministry of Education (MEC)
    • Ability to register diploma without the MEC authorization
    University Centers
    • Autonomy, guaranteed by federal gov’t decree , to create programs inside the city, except for Medicine, Law, Psychology and Odontology
    • Ability to register diploma without MEC authorization
    • No need to conduct research
    Colleges
    • No minimum requirements on faculty qualification or hours of work ( full time regime)
    • 1/3 of faculty must hold a master or PhD degree
    • 1/3 of faculty must be in full time regime or must offer 3 master programs with CAPES (ministry’s graduate coordinator) recommendation
    • Need to conduct research
    • 1/3 of faculty must hold a master or PhD degree
    • 1/5 of faculty must be in full time regime
    • Not allowed to create other campuses outside the city
    • No autonomy to create new programs, vacancies or to register diplomas without the MEC authorization
    Institution Costs Benefits 20 Regulatory Framework
  • 22. Students (thousand) Financial and Operational Performance Undergraduate Student base and Revenue Growth Net Revenue (R$ million) * * Includes recent acquisitions
  • 23. Cost of Services and SG&A (R$ million) Cost of Services *NR = Net Revenue SG&A Gross Margin : 39.2% Gross Margin : 39.9% Financial and Operational Performance R$145.4 M R$32.3 M R$43.5 M R$168.7 M
  • 24. Adjusted Net Income 2 Adjusted EBITDA 1 Financial and Operational Performance Adjusted EBITDA and Net Income (R$ million) 1 - Adjusted in 9M07 to the payment of taxes in January 2007 (SESES became for-profit in February 2007) and to the one-off expenses in 9M08 CAGR 34.3% CAGR 87.7% 2 - Excluding goodwill amortization from acquisitions and extraordinary expenses
  • 25. Capex (R$ million) Financial and Operational Performance 7 . 9 14 . 5 67.8 81.9 68.2 (*) – Net Revenue R$28 M : Operational Investments R$7 M : Academic Reform / Distance Learning R$7 M : Building R$5 M : Integration Project
  • 26. Capitalization and Market Data Sound balance sheet and strong cash flow support our strategic positioning as one of the main players in sector consolidation in Brazil 09/30/08 458.5 (0.8) 270.6
      • Stock Price (Nov - 12, 2008): R$14.99 / share
      • Number of Shares: 78.6 million
      • Market Cap: R$1.18 billion
      • Enterprise Value: R$0.91 billion
      • Daily Volume (3-month average): R$2.9 million
    Free Float: 25.2% Financial and Operating Performance Market Data R$ Million Shareholders Equity Debt Net Cash
  • 27. IR Contacts & Disclaimer Investor Relations Team: Lorival Luz – CFO Daniella Guanabara – [email_address] Fernando Santino – [email_address] e-mail: [email_address] Phone: (55) 21 2433 9789 / 9790 / 9791 Fax: (55) 21 2433 9700 Visit our website: www.estacioparticipacoes.com Disclaimer: This presentation may contain forward-looking statements concerning the industry’s prospects and Estácio Participações’ estimated financial and operating results; these are mere 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. das Américas, 3434 - Bloco 7 - 2º andar Cep 22640-102 Barra da Tijuca - Rio de Janeiro IR Contact Info