Morgan Santley 11th Annual Latin American Conference Presentation

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Morgan Santley 11th Annual Latin American Conference Presentation

  1. 1. 11 th Annual Latin American Conference
  2. 2. Source: INEP/MEC Why Invest in Education in Brazil 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
  3. 3. Sector Overview: Highly Fragmented Market Top 10 Non-Government Institutions Market Share (2005) 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 17.4% 82.6% 10+ Others (1) Source: Hoper Educational (2005) Positive Sector Dynamics High Potential for Consolidation 1,934 Institutions 3.3 million enrollments
  4. 4. Who we are Campus Rebouças Campus Tom Jobim Campus R9 Who we are <ul><li>Largest Player in the Private Post-Secondary Sector in Brazil, with broadest geographical coverage </li></ul><ul><li>205 * thousand undergraduate students </li></ul><ul><li>National Footprint: 77 campuses in 16 states </li></ul><ul><li>2 Universities, 2 University Centers and 20 Colleges </li></ul><ul><li>Strong Shareholders base: Founder Shareholders and GP </li></ul><ul><li>Best Governance Practice: Novo Mercado </li></ul><ul><li>Asset Light Model: ROE of 20% </li></ul><ul><li>LTM Revenue of R$901 million and LTM EBITDA of R$98 million </li></ul>(*) - Includes 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders´ Meeting
  5. 5. Growth History Turnaround and Preparation for IPO Strong Organic Growth National Leadership North and Northeast: subsidiaries for profit status Main subsidiary (SESES): 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 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders´ Meeting 23 26 35 51 70 118 141 135 144 162 167 178 205* 1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1H08
  6. 6. Student profile Who we are <ul><li>Convenience multi-campus </li></ul><ul><li>Internship Programs </li></ul><ul><li>Adequate Facilities </li></ul><ul><li>Competitive Price </li></ul><ul><li>Quality </li></ul><ul><li>Focus on Labor-Market </li></ul>Target Market Self-financed students Family income up to 10 minimum salaries (~73%) Searching for Career Salary improvement Living in Urban Centers (large cities) Young working adults (~70%)
  7. 7. What we already did in 3 months <ul><ul><li>New Board of Directors (8 members, being 3 independent) </li></ul></ul><ul><ul><ul><li>Composition reflects the balance between deep knowledge of education sector and the focus on best management practices </li></ul></ul></ul><ul><ul><li>New Board of Executive Officers </li></ul></ul><ul><ul><ul><li>Formed by executives with extensive experience from companies highly focused on results, as well as by professionals with long expertise at Estácio </li></ul></ul></ul><ul><ul><li>Streamlining of Organizational Structure </li></ul></ul><ul><ul><ul><li>Prioritize and standardize processes </li></ul></ul></ul><ul><ul><ul><li>Rigorous control on cost expenses, focusing on growth and quality of academic programs </li></ul></ul></ul><ul><ul><li>Variable Compensation Program and Stock Option Plan </li></ul></ul><ul><ul><ul><li>Clear and Challenging targets aligned with the financial strategic goals </li></ul></ul></ul><ul><ul><ul><li>Meritocracy: Business model aims to align management compensation to Company´s results </li></ul></ul></ul><ul><ul><ul><li>Bonus Policy for executives, academic coordinators and directors and faculty </li></ul></ul></ul><ul><ul><ul><li>Maximum dilution of 5% </li></ul></ul></ul><ul><ul><li>Best Governance Practices </li></ul></ul><ul><ul><ul><li>Fiscal Council, Audit & Compensation Committees, IFRS by end of 2008 </li></ul></ul></ul><ul><ul><li>Stock listed at Novo Mercado (100% voting shares, full tag-along rights) </li></ul></ul><ul><ul><ul><li>Align the Company´s management with best corporate governance practices </li></ul></ul></ul>Who we are
  8. 8. Estácio Leadership Position: 205 k students 1 – June/08 3,337 12,759 691 5,029 4,382 1,776 1,614 2,337 11,706 3,098 1,322 2,975 17,520 Competitive Advantages Market-Share per State 2 Source: SINAES/2006 2 – Undergraduate students enrolled (excludes public universities) 3 – Ministry of Education 118,175 2,176 1,376 4,430 2,418 1,417 6,117 Largest Player in Brazil with National Footprint 1- Includes 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders´ Meeting <ul><li>Average Tuition: R$447 (1H08) </li></ul><ul><li>University </li></ul><ul><li>University Centers </li></ul><ul><li>Upgrading from College to University Centers (in process of approval with the Mec 3 ) </li></ul><ul><li> Colleges </li></ul>
  9. 9. Organic Growth <ul><li>Post-secondary education market highly untapped </li></ul><ul><li>Upgrading Colleges to University Centers </li></ul><ul><li>Launching new programs and offering new seats </li></ul>Acquisitions <ul><li>Market share relevance – expansion and consolidation </li></ul><ul><li>Strategic fit – compatible market positioning </li></ul><ul><li>Priority for university centers </li></ul><ul><li>Take advantages of potential synergies </li></ul>Distance Learning <ul><li>Opening a new market; reaching new segments </li></ul><ul><li>Produce and distribute Estácio´s own learning content </li></ul><ul><li>Marginal CAPEX - sunk costs </li></ul>Multiple Growth Opportunities Competitive advantages <ul><li>Maximizing growth opportunities in São Paulo and NE Markets </li></ul>
  10. 10. Efficiency Gains: Opportunities on G&A Expenses <ul><ul><li>SAP: Already running in all our Units </li></ul></ul><ul><ul><li>SIA: Academic System - running in all our units by end of 2008 </li></ul></ul>Competitive Advantages <ul><ul><li>Streamline of organizational structure </li></ul></ul><ul><ul><li>Process Standardization </li></ul></ul><ul><ul><li>BackOffice Centralization: Procurement / Accounting / HR / Legal / </li></ul></ul><ul><ul><li>Accounts Payable / Treasury / IT / Real Estate Management </li></ul></ul><ul><ul><li>Zero Based / Matrix Budget </li></ul></ul><ul><ul><li>Internal / External Benchmarks </li></ul></ul><ul><ul><li>Best Practices Sharing </li></ul></ul>Integrated Systems Streamline Processes Zero Based Budgeting
  11. 11. Efficiency Gains - COGS - Faculty Costs Competitive Advantages Academic Reform MODULARIZATION: Reduce Course Pre-requisites / Reduce Attrition / Flexible Curricula COMMON COURSES: Same Course for Different Programs (Languages, Math, etc) STANDARDIZED PROGRAMS in all our campuses DISTANCE LEARNING: Increase usage of on-line activities (up to 20% of Schedule) Union Agreement - RJ Increase wages below inflation Increase the number of students per class
  12. 12. Expertise in the Education Sector Responsible for the Company leadership and national expansion Active Management Meritocracy Culture Proven track record in the Brazilian Capital Market (Gafisa, Submarino, Lupatech, ALL and others) Founder Shareholders GP Investments 54.8% 20.0 % 25.2% Higher Corporate Governance Levels Free Float <ul><li>Listed at Novo Mercado </li></ul><ul><li>100% Tag Along rights </li></ul><ul><li>3 Independent members at Board of Directors </li></ul><ul><li>Fiscal Council </li></ul><ul><li>No Poison Pills </li></ul><ul><li>Setting up of the Audit and Compensation </li></ul><ul><li>Committee </li></ul>Strong Shareholder Structure and Outstanding Governance Standards Strong Shareholder Structure
  13. 13. Professional and Highly Motivated Management Team Competitive Advantages Management João Rosas – CEO Worked at Vale, head of intermodal BU at ALL and consumer market at Infoglobo Variable compensation (Bonus + Stock Option) People Development Lorival Luz – CFO Wordek at Citibank (Banco Credicard) as Treasury Director and as Corporate Bank Chief of Staff Rogério Melzi – Economic and Operational Planning Worked as Head of Financial Planning in Suzano, Planning Officer in Inbev/Labat and Ambev Miguel de Paula – People and Management Worked as Head of Human Resources in Farmasa and Votorantim and HR Manager at Gerdau Rubens Vasconcelos – Academic Officer Member of the Board of Directors at Cultura Inglesa, COO at Máxima Consultoria and CFO at Cougar Jessé Hollanda – Operations Principal of Estácio´s College, Academic Director of CSN Foundation and Executive Board member of CBS Alexandre Ferraz – Market Officer Worked as Sales Manager and Corporate Marketing Manager in Infoglobo Align interests of shareholders and management Implement targets on global and individual basis (cost cutting, avg. prices, quality goals) Reconcile quality and long-term targets Retain key managers and professionals <ul><li>Faculty Training Program </li></ul><ul><li>Trainee Program – Estácio brightest students </li></ul><ul><li>Executive development program </li></ul><ul><li>Qualification program for course coordinators </li></ul>
  14. 14. 60 (R$ million) 7% 12% 12% 11% 11% 56 96 762 829 860 428 476 (4) 81 229 31 43 256 (48) 20% 19% 124 164 92 82 172 47 101 51 Financial Highlights 13 20% 16% Financial Highlights (1) Adjusted in 1H07, to the payment of taxes in jan/07 (SESES became for profit in February 2007) and to extraordinary items in 2Q08 (2) Excluding goodwill amortization from acquisitions and extraordinary expenses Adjusted Net Income 2 2005 2006 2007 1H08 Adjusted EBITDA Margin Adjusted EBITDA 1 Net Revenue Net Cash 23 41 EBITDA ex rental 1 EBITDA Margin ex-rental 19% 1H07
  15. 15. IR Contacts & Disclaimer Investor Relations: Lorival Luz – [email_address] Carlos Lacerda – [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/ir 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

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