11th Annual Latin American Conference Why Invest in Education in Brazil
Largest market in Latin America, with low penetration rates and increasing demand for qualified labour
Post-secondary Enrollments – (Unesco – 2005, million) Gross Enrollment Rate (Unesco - 2005) 83% 23.4 71% High Growth Potential 65% 17.3
48% 11.8
9.0
22% 24% 24% 4.5 4.0 11%
China USA India Russia Brazil Japan India China Brazil Mexico Chile Argentina Russia USA Post-secondary Institutions in Brazil (units) Total Enrollments (million) 4.7 4.5 4.2 3.9 3.5 3.0 74% 73% 1,934 2,022 72% 1,789 71% 1,652 1,442 70% 1,208 69%
31% 30% 29% 28% 27% 26% 183 195 207 224 231 248
2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 Source: INEP/MEC Public Private Public Private 1 Positive Sector Dynamics Sector Overview: Highly Fragmented Market
Top10 largest post-secondary institutions account for less than 20% of total enrollments1
Top 10 Non-Government Institutions Market Share (2005) Non-Government Institutions (number & Size)
Based on Number of Enrolled Students
17.4% 5K or more 131 173 2K < 4.9K 500 < 1.9K 616
Up to 499
1,014
82.6%
10+ Others
3.3 million enrollments 1,934 Institutions
High Potential for Consolidation
(1) Source: Hoper Educational (2005)
Positive Sector Dynamics 2 Who we are
Campus Rebouças . Largest Player in the Private Post-Secondary Sector in Brazil, with broadest geographical coverage
. 205* thousand undergraduate students
. National Footprint: 77 campuses in 16 states Campus Tom Jobim
. 2 Universities, 2 University Centers and 20 Colleges
. Strong Shareholders base: Founder Shareholders and GP
. Best Governance Practice: Novo Mercado Campus R9 . Asset Light Model: ROE of 20%
. LTM Revenue of R$901 million and LTM EBITDA of R$98 million
(*) - Includes 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders Meeting
Who we are 3 Growth History
Efficiency Gains Turnaround and Strong Organic Growth and Preparation for IPO Consolidation
(Accounting and Management systems) National 205* Leadership 178 162 167 GP (May/08)
141 144 IPO (July/07) 135 Main subsidiary North and 118 (SESES): for profit Northeast: status (Feb/07) subsidiaries for profit status
Begin National Expansion 70
(in thousand)(in 51
UndergraduateStudents 35 23 26
1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1H08
(*) - Includes 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders Meeting
Who we are 4 Student profile
Young working adults Self-financed students (~70%)
Target Market • Convenience multi-campus • Internship Programs Living in Urban • Adequate Facilities Family income up Centers (large cities) • Competitive Price to 10 minimum • Quality salaries (~73%) • Focus on Labor-Market
Salary improvement Searching for Career
Who we are 5 What we already did in 3 months
• New Board of Directors (8 members, being 3 independent)
Composition reflects the balance between deep knowledge of education sector and the focus on best management practices • New Board of Executive Officers
Formed by executives with extensive experience from companies highly focused on results, as well as by professionals with long expertise at Estácio • Streamlining of Organizational Structure
Prioritize and standardize processes Rigorous control on cost expenses, focusing on growth and quality of academic programs • Variable Compensation Program and Stock Option Plan
Clear and Challenging targets aligned with the financial strategic goals Meritocracy: Business model aims to align management compensation to Company s results Bonus Policy for executives, academic coordinators and directors and faculty Maximum dilution of 5% • Best Governance Practices
Fiscal Council, Audit & Compensation Committees, IFRS by end of 2008 • Stock listed at Novo Mercado (100% voting shares, full tag-along rights)
Align the Company s management with best corporate governance practices
Who we are 6 Estácio Leadership Position: 205 k students1 – June/08 Largest Player in Brazil with National Footprint 1,376 3,337 Market-Share per State2 12,759 PR 0.7% SP 1.0% 691 GO 1.7% MG 2.2% SC 3.0% 1,417 MS 3.6% 6,117 5,029 ES 5.9% 4,430 PE 5.9% 2,418 PA 7.0% 11,706 2,337 BA 8.1% CE 20.5% 3,098 RJ 28.6% 1,614 Source: SINAES/2006 2 – Undergraduate students enrolled (excludes public universities) 1,776 1,322 Average Tuition: R$447 (1H08) University 17,520 2,975 University Centers 4,382 118,175 2,176 Upgrading from College to University Centers (in process of approval with the Mec3) 1- Includes 5 recent acquisitions, which are in process of approval in Extraordinary Shareholders Meeting Colleges
Competitive Advantages 3 – Ministry of Education 7 Multiple Growth Opportunities
• Post-secondary education market highly untapped Organic Growth • Maximizing growth opportunities in São Paulo and NE Markets • Upgrading Colleges to University Centers • Launching new programs and offering new seats
• Market share relevance – expansion and consolidation Acquisitions • Strategic fit – compatible market positioning • Priority for university centers • Take advantages of potential synergies
Distance • Opening a new market; reaching new segments Learning • Produce and distribute Estácio s own learning content • Marginal CAPEX - sunk costs
Competitive advantages 8 Efficiency Gains: Opportunities on G&A Expenses
• Streamline of organizational structure Streamline • Process Standardization Processes • BackOffice Centralization: Procurement / Accounting / HR / Legal / Accounts Payable / Treasury / IT / Real Estate Management
• SAP: Already running in all our Units Integrated Systems • SIA: Academic System - running in all our units by end of 2008
• Zero Based / Matrix Budget Zero Based • Internal / External Benchmarks Budgeting • Best Practices Sharing
Competitive Advantages 9 Efficiency Gains - COGS - Faculty Costs
Union Agreement - RJ Increase wages below inflation
Academic Reform Increase the number of students per class
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)
Competitive Advantages 10 Strong Shareholder Structure and Outstanding Governance Standards
Founder Shareholders GP Investments Expertise in the Active Management Education Sector Meritocracy Culture Proven track record in Free Float Responsible for the the Brazilian Capital Company leadership Market (Gafisa, and national expansion Submarino, Lupatech, ALL and others)
54.8% 20.0 % 25.2%
Higher Corporate Governance Levels • Listed at Novo Mercado • Fiscal Council
• 100% Tag Along rights • No Poison Pills
• 3 Independent members at Board of Directors • Setting up of the Audit and Compensation Committee
Strong Shareholder Structure 11 Professional and Highly Motivated Management Team
Management Variable compensation (Bonus + Stock Option)
João Rosas – CEO Worked at Vale, head of intermodal BU at ALL and consumer Align interests of shareholders and market at Infoglobo management
Lorival Luz – CFO Implement targets on global and individual Wordek at Citibank (Banco Credicard) as Treasury Director and as basis (cost cutting, avg. prices, quality Corporate Bank Chief of Staff goals)
Rogério Melzi – Economic and Operational Planning Reconcile quality and long-term targets Worked as Head of Financial Planning in Suzano, Planning Officer Retain key managers and professionals in Inbev/Labat and Ambev
Miguel de Paula – People and Management Worked as Head of Human Resources in Farmasa and Votorantim People Development and HR Manager at Gerdau
Rubens Vasconcelos – Academic Officer • Faculty Training Program Member of the Board of Directors at Cultura Inglesa, COO at • Trainee Program – Estácio brightest Máxima Consultoria and CFO at Cougar students Jessé Hollanda – Operations • Executive development program Principal of Estácio s College, Academic Director of CSN Foundation and Executive Board member of CBS • Qualification program for course coordinators Alexandre Ferraz – Market Officer Worked as Sales Manager and Corporate Marketing Manager in Infoglobo
Competitive Advantages 12 Financial Highlights
(R$ million) 2005 2006 2007 1H07 1H08
Net Revenue 762 829 860 428 476
EBITDA ex rental1 124 164 172 82 92
EBITDA Margin ex-rental 16% 20% 20% 19% 19%
Adjusted EBITDA1 56 96 101 47 51
Adjusted EBITDA Margin 7% 12% 12% 11% 11%
Adjusted Net Income2 23 60 81 31 43
Net Cash (48) (4) 229 41 256
(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
Financial Highlights 13 IR Contacts & Disclaimer
Investor Relations:
Av. das Américas, 3434 - Bloco 7 - 2º andar Lorival Luz – [email protected] Cep 22640-102 Barra da Tijuca - Rio de Janeiro Carlos Lacerda – [email protected] Fernando Santino – [email protected] e-mail: [email protected] 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.
IR Contact Info 14