Estácio: Corporate Presentation - June/2011

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Estácio: Corporate Presentation - June/2011

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Estácio: Corporate Presentation - June/2011

  1. 1. CORPORATE PRESENTATION INVESTOR RELATIONS June, 2011
  2. 2. WHY THIS IS “THE MOMENT” OF BRAZILIAN  EDUCATION SECTOR?STRENGTHENING THE FOUNDATIONS Change in Educational Scenario in Brazil 1 0,8 0,6 0,4 0,2 0 Started Basic Finished Basic Started High Finished High Started Higher School School School School Educacion 1993 1998 2003 2009 Performance and Evolution - Countries Illiteracy Rate - Brazil 57% Performance South Korea Japan 47% 39% Germany 32% France USA 25% Russia 17%450 Chile 10% Mexico Brazil Argentina 1950 1960 1970 1980 1991 2000 2010 Source: IBGE Zero Evolution 2
  3. 3. WHY THIS IS “THE MOMENT” OF BRAZILIAN  EDUCATION SECTOR? Income Distribution Consumer’s Confidence (In millions of people)Source: Cetelem - O Observador Source: BC, ACSP Aging Population Unemployment Rate (%)Source: IBGE Source: BC, ACSP 3
  4. 4. WHY THIS IS “THE MOMENT” OF BRAZILIAN  EDUCATION SECTOR?GOVERNMENT SUPPORTStudent Financing Comparative Interest Rates 33% 12% 13% Long-term financing to low-income students 6% 7% 3.4% p.a. nominal interests with 18-year term 3% No guarantor required from 2011 onwards FIES Inflation Savings Selic Mortgages Auto Allows further penetration in Classes C and D 2011E Account Financing 4
  5. 5. WHY THIS IS “THE MOMENT” OF BRAZILIAN  EDUCATION SECTOR?CREDIT EVOLUTION CAGR Credit in Brazil Total Light Vehicle Sales +11% +19% 2004 2005 2006 2007 2008 2009 2010 Total amount of Credit in Brazil. Source: BACEN Total number of light vehicles sold in Brazil (financed and non financed). Source: ANFAVEA. Mortgage Lending in Brazil Financed Homes +41% +31% 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 2010 Evolution of brazilian mortgage amount financed. New units constructed / acquired through housing finance Source: CBIC/BACEN in Brazil Source: BACEN 5
  6. 6. WHY THIS IS “THE MOMENT” OF BRAZILIAN  EDUCATION SECTOR? 2020 EDUCATION SECTOR  14,000 +  1,050 = 15,050 Youngsters in Class C & D  with High School Degree  are out of the Colleges 903 Young Adults  6% 1,050 stop  in Private Higher  studing Education  1,750  60% Institutions 1,603 New  Graduated  Enrollments 3,500 in High  350 Private Higher  Children  School 700 go  Education Institutions straight to  163 New Students  Start High  350 Public  School  the Colleges 1,750  Institutions “Net" per Annum Every Year Drop‐out  High School 50% 12% ‐1,440  ‐720 Graduated Graduated ‐720 Drop‐out & Drop‐out 12% Sensitivity Analysis– Annual Growth 6,000 Total Base of  “Conversion” of Working Adults The System 6,0 6,5 7,0 7,5 8,0 2.7% Growth Rate  12,0 2,7 4,0 5,2 6,5 7,7 Government per Annum 11,5 3,2 4,5 5,7 7,0 8,2 Break‐even CAGR: target: Drop-out Rate 5% per year 10,000 students 7,637  11,0 3,7 5,0 6,2 7,5 8,7 Total Enrollments  by 2020 10,5 4,2 5,5 6,7 8,0 9,2 Estimated for 2020 10,0 4,7 6,0 7,2 8,5 9,7 6
  7. 7. NATIONAL COVERAGEESTACIO AT‐A‐GLANCE Highlights ESTACIO’s Regional Footprint¹– Largest private post-secondary education group in Brazil Nationwide operations, covering states that account for 86% of GDP and 82% of population– Leading presence in the large and underserved working adults target group– Diversified portfolio of programs with differentiated quality . and competitive pricing . .– First Brazilian education company listed in Novo Mercado . . . Key Figures . . 241k students . University 72 campuses in 36 major cities in Brazil . College . University Center . . . . 51 accredited Distance-learning Centers In process to Upgrade to University Center . . . Distance Learning Center 78 programs . (1) Estácio also owns a University in Paraguay with 2.7 thousand students 7
  8. 8. COMPANY´S BACKGROUND KEY MILESTONES Listed Company Greenfield Consolidation of Growth national leadership and preparation for growth IPO Turn around Follow-On On – Organic growth # of students (‘000) – 2005 – 2007: – Acquisitions in the for-profit São Paulo market – GP acquires – M&A CAGR transformation 20% of Estácio – Efficiency gains – Estácio joins in – Distance Learning Novo Mercado 218 210 241 206 14.8% (5.5%) 1.9% 178 22.5% 141 4.8% – Beginning of – Distance – New management learning academic restructuring launching model 41.7% – Shared Services 35 Center 23 (“SSC”) 1.5% 1970 … … 80’s - 90’s … … 2002 … … 2007 2008 2009 2010 2011Note: Until 2007 the student base did not include graduate students. 8
  9. 9. MANAGEMENT TEAM WITH LARGE EXPERIENCEEduardo Alcalay  Holds a bachelor’s degree in business administration from FGV and a bachelor’s degree in law from the USPChief Executive  Joined GP in 2005 as a PartnerOfficer  More than 15 years of investment banking experience as Head of M&A at DLJ-Brazil and Banco Garantia and as a Partner of Singular  Served as Senior Vice President for Business Development and Board Member at UOL and Grupo FolhaRogerio Melzi  Holds a bachelor’s degree in Mechanical Engineering from Mackenzie University, a bachelor’s degree in Business Administration fromCFO and Investor FGV and Master in Business Administration from Stanford University.Relations Officer  Suplly Chain Planning & Performance at Inbev/Labatt , Financial Planning Officer at Suzano Holding and Associate at Booz-Allen.João Luís Barroso  Holds a bachelor’s degree in Economy from the University Gama Filho, master and doctorate’s degree in Economy from the FGVDevelopment and  Institutional Relations Officer at Vivo, CEO at CBS Security System, Corporate Support Director at CSN.Corporate Relations  RJ Secretary of the Treasury Chief and Assistant Secretary for Economic Policy of the Ministry of Economy, Planning and FinanceMiguel de Paula  Holds a bachelor’s degree in Business Administration from Ulbra University, master in Business Administration at USP and STC Executive at Kellog University, Strategic Human Resources Planning at Michigan University.Human Resources Officer  HR general manager at Gerdau, HR Officer at Farmasa and HR Officer at Votorantim Cimentos Ltda.Paula Caleffi  Holds a bachelor’s degree in History from Universidade Católica/RS and doctorate’s degree at Universidad Complutense de Madrid.Chief Academic Officer  Served as Academic Development officer at University of Vale do Rio dos Sinos.Pedro Graça  Holds a bachelor’s degree in System Analysis from Mackenzie University and postgraduate in Business Administration at FGV.Chief Marketing Officer  Co-owner of ENAD and Sistema Energia de Ensino.  Responsible for the Estacio’s Distance Learning start-up, expansion and consolidation.Virgilio Gibbon  Holds a bachelor’s degree and a graduate degree in Economy from PUC-RJ.Chief Operating Officer  Partner and Director at TOTVS Consulting and responsible for implementing Estácio’s Shared Services Center.  More than 10 years experience at Consulting, mostly dedicated to Operations and Efficiency related projects. 9
  10. 10. TURN AROUND AND RESTRUCTURING PLATFORM FOR GROWTH & INNOVATION Processes Product & People & & IT Marketing Culture 10
  11. 11. COMPANY´S BACKGROUND KEY MILESTONES Seeding Harvesting Listed Company Greenfield Consolidation of Growth national leadership and preparation for growth IPO Turn around Follow-On Follow On – Organic growth # of students (‘000) – 2005 – 2007: – Acquisitions in the for-profit São Paulo market – GP acquires – M&A CAGR transformation Focus on the means toward 20% of Estácio – Efficiency gains – Estácio joins in – Distance Learning Novo Mercado 241 sustainable results 218 206 210 14.8% (5.5%) 1.9% 178 22.5% 141 4.8% – Beginning of – Distance  – New  full learning  academic  management launching model 41.7% restructuring – Shared Services  Center (“SSC”) 35 23 1.5% 1970 … … 80’s - 90’s … … 2002 … … 2007 2008 2009 2010 2011Note: Until 2007 the student base did not include graduate students. 11
  12. 12. PROCESSES ‐ SSCPROCESSES STANDARDIZATION AND CENTRALIZATION TECNOLOGY HUMAN RESOURCES & BILLING & PAYROLL COLLECTION CENTRALIZATION SCALE ACCOUNTINGACADEMIC OPERATIONS SERVICE LEVEL & REGULATORY 72 CAMPUSES S AGREEMNENT INTEGRATION 7.2K TEACHERS S 3.5K ADM. EMPLOYEES C 241K STUDENTS 36 LOCATIONS 2009 INTEGRATION PROCUREMENT STANDARDIZATION EFICCIENCY 300 FTE 250k invoice/month 8k payment/month 17k MEC processes 360k candidates 18 balance sheets 12
  13. 13. PROCESSES – LOOKING AHEADNEW IT ARCHICTECTURE CHANGING THE PLATFORM FOR GROWTH Adding New Features CRM Students briefcase (scanned documents) High performance Academic Solution 400 thousand studentsOver the next 3 years Estácio will invest R$30 mm to completelyredefine its technology platform in order to boost performanceand increase reliability to users. 13
  14. 14. PRODUCT NEW ACADEMIC MODEL Reduced costs … O Integrated curricula with shared disciplines T H 20% of distance learning content in on- Improved gross E campus programs margin R 20% of on-line self-learning activitiesE SST ... with quality and differentiationAC 41 programs updated to labor marketI demands (90% of Estácio’s current studentO Higher base) attraction and Tailor made text books bundled in tuitions retention of Comprehensive student portal students On-line library with more than 2,000 titles Innovation and product reengineering aiming at better quality at competitive pricing 14
  15. 15. CONTINUOUS INNOVATIONUNIQUE PRODUCT OFFERING Quality curricula Improved access to learning tools Accessible prices Bundled in financing 15
  16. 16. PEOPLE & CULTURE Getting the right people at the right place – Expertise in education combined with experience from several industries C Aligning people through meritocracy & variable compensation U L – Stock option to 48 senior executives (up to 4.5% of capital to be granted) – More than 300 managers with individual, monthly tracked goals driving their variable compensation (financial and non financial) – 20% of professors with variable compensation based on performance T Managing by “walking around” to guarantee execution and disseminate culture U – Visits to campuses are constant in CEO’s agenda – Monthly Performance Meetings with regional divisions R – COO visited all units more than once over the last 2 years E Attracting and retaining new talents – Trainee programs and accelerated career planning based on meritocracy – Culture set to groom internal talents for self-sustained growth – Excellence in human talents in all levels is top priority Estacio’s Using managerial tools to develop and improve processes & results way – Zero-based budgeting – “Gestão a vista” – Matrix budgeting – Six Sigma – Business Intelligence – Benchmarking 16
  17. 17. CHALLENGE TO IMPLEMENT ALL THE CHANGES...Fixing the company – Ex.: returning with program coordinators (R$ 12 mm/year)Developing an entirely new productCleaning up student baseCreating a new cultureRevamping company’s imageInvesting in infra structure, technology and services INSS RAMP UP Brazilian Social Security InstituteHolding inflationary pressures and… (in R$ millions) 60Dealing with labor tax (INSS) ramp up (@ R$16mm/year) 45 30 15 2007 2008 2009 2010 17
  18. 18. ...WITHOUT LOSING MARGINS RESULTS  EBITDA MARGIN  Main Operating Indicators 2008 2009 2010 (‘000) Total Student Base 218.3 205.7 210.0 On-Campus 218.3 196.1 183.8 26.2% Distance Learning - 9.6 26.2 21.7% 19.9% 16.8% Main Financial Indicators¹ 2008 2009 2010 17.4% (R$ million) Net Revenue 980.0 1,008.8 1,016.2 12.5% 11.8% Cost of Services (629.1) (656.6) (657.5) 10.0% Sales (83.9) (91.6) (95.3) G&A (177.7) (151.7) (148.8) EBITDA 98.4 119.1 127.3 2008 2009 2010 1Q11 Margin EBITDA 10.0% 11,8% 12.5% EBITDA Margin EBITDA Margin ex. the Brazilian Social Security Institute (INSS)¹ Excluding Depreciation and non recurring items. Changing the tire without parking the car 18
  19. 19. ...AND IMPROVING QUALITYPESA AND CORPORATE CLIMATE  COURSES EVALUATION  ON‐SITE VISITS 2010/11 64 7 Courses 9 Courses 46 62 Courses 60 58 56 56 50 Courses 2008 2009 2010 PESA Corporate Climate Grade 3 Grade 4 Grade 5 No grade Source: Copernicus, Hay. 19
  20. 20. TIME TO HARVEST2011 – LAST YEAR OF LABOR TAX STEP‐UP… STRONG FOUNDATION Processes & Product & People & IT Marketing Culture 20
  21. 21. ORGANIC GROWTH & MARGIN GAINS 3% Market growth + inflation pass-through 800 basis points over 4 years (2011-2014)200 New academic model Online / Sharing / Off-class activities200 Faculty costs Academic planning Benchmarking / Matrix and Zero-based150 Other costs Budgeting/ Centralization Dilution through M&A and Distance250 G&A Learning800 Total 21
  22. 22. DISTANCE LEARNINGDISTANCE LEARNING GROWTH(Students in thousands) Undergraduate Graduate +296.2% 30.9 From zero to 30 thousand students in 1.5 years 26.2 2.7 Expect to reach 80 thousand students in 4 years 24.7 20.9 2.4 2.5 High-quality product, using campuses as centers 16.4 1.7 11 programs and growing 1.5 Opportunity to increase coverage 28.2 9.6 7.8 22.3 23.7 19.2 2.1 1.6 14.9 6.2 7.5 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 22
  23. 23. NEW PRODUCTSEXECUTIVE DIRECTOR FOCUSED ON NEW PRODUCTS Revamp Graduation Programs Preparatory courses  Take advantage of Distance Learning platform  Cross Selling  Academia do Concurso  Over 29,000 students in 2010  R$ 10.4 million net revenue in 2010 Corporate Universities Non regulated short-term products 23
  24. 24. M&AACQUISITIONS WITH DISCIPLINE Region> <# of Targets> IRR Valuation North and NE Post-Audit 48 Targets for variable compensation linked to Business Plan Central Brazil 30 Rio de Janeiro 10 2.016 SP and South private 32 Entities  Size over 2 thousand students  Attractive cities  Strategic fit 120  Assets quality 24
  25. 25. 1Q11 FIRST RESULTSSTUDENT INTAKES EXPANSION 2nd time in a row… all times record for intakes 2 new greenfield campuses 73.5  Sulacap 59.1 +24.4%  Chacara Flora +27.0% 50.3 39.6 12.0 4 M&A 10.2  Atual 4.500 students 11.1 6.4 61.5  FAL 2.400 students 39.2 48.9 33.0  Academia do Concurso 29.000 students  FATERN 3.350 students 3Q09 3Q10 1Q10 1Q11 On‐Campus Distance Learning Total Student Main Financial Indicators 1Q10 1Q11 Chg (R$ million) Net Revenue 256.0 275.8 7.7% Cost of Services (158.6) (168.7) 6.4% Sulacap Gross Margin 35.9% 36.8% 2.5% Sales (24.4) (29.0) 18.9% G&A (36.6) (36.1) -1.4% EBITDA 39.6 47.9 21.0% Margin EBITDA 15.5% 17.4% 1.9 p.p. Chacara Flora  Atual * Excluding depreciation and non recurring items. 25
  26. 26. CONCLUSION Quality + Profitability = Sustainability 26
  27. 27. IR CONTACTS Investor Relations: Flávia de Oliveira E‐mail: flavia.oliveira@estacio.br Phone: +55 (21) 3311‐9789 Fax: +55 (21) 3311‐9722 Address: Av. Embaixador Abelardo Bueno, 199 – Office Park – 6thfloor CEP: 22.775‐040 – Barra da Tijuca – Rio de Janeiro – RJ – Brazil Website: www.estacioparticipacoes.com/irThis presentation may contain forward‐looking statements concerning the industry’s prospects and Estácio Participações’ estimated financial and operating results; these are ereprojections 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 EstácioParticipações’ business plan. These considerations depend substantially on changes in market conditions, government rules, competitive pressures and the performance of thesector 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 ourinterests in SESES, SESSA 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 312007, 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 beenorganized 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 fromFebruary 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 thePROUNI – University for All Program (“PROUNI”). Information presented for comparison purposes should not be considered as a basis for calculation of dividends, taxes or for anyother corporate purposes. 27

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