Education Development International plc

1

• Education Development International plc
• Background Brief, 2007 Results and Trading Update

3 March 2008
2
Contents

• Background Briefing
• Introduction
• Sector activities
• Market players
• Corporate development
• Organisation consolidation
• Organisation structure
• Business segments
• Revenue sources
• Financial trends

• 2007 Results (Page 11)
• Results highlights
• Organic growth and acquisitions
• Financial considerations
• Income and margins
• Cashflow
• Balance sheet

• Trading Update (Page 18)
• Post balance sheet activity
• Trading update 29 February 2008
• Future Developments (Page 22)
• Drivers for growth
• Operational priorities
• Business development strategy
• Acquisition targets
• Shareholder support
• Prospects

3
Introduction

• EDI is accredited by the Government to award
  qualifications and is a leading provider of
• - UK vocational qualifications (Apprenticeships
  and NVQs)
• - International business qualifications
  (branded London Chamber of Commerce and
  Industry)
• - Specialist assessment and administration
  services
• Extensive use is made of IT-based operating
  systems and online delivery platforms.
• We are an educational quality assurance body.

4
Sector Activities

• The Education Services Pyramid

Assessment and
Examinations
Learning Materials Content Publishing
Education and Training Programmes
Delivery
Specialist Administration, Platforms and
Distribution
Services
5
Market Players

• Demand Side
• Schools, further education colleges, private
  training companies, universities, professional
  bodies, employers, individuals and other awarding
  bodies.
• Supply Side
• Governments, public agencies, awarding bodies,
  professional bodies, universities, publishers,
  software companies and distribution/outsourcing
  companies.
• Competitors
• Edexcel (Pearson), OCR (Cambridge University),
  City and Guilds of London Institute, 100
  specialist awarding and professional bodies and
  unapproved bodies. Software and systems
  developers.

6
Corporate Development

• GOAL plc
• - AIM float in April 2000
• EDI formed
• - Merger in December 2002 of GOAL plc and the
  London Chamber of Commerce and Industry
  Examinations Board
• Organisation consolidation and bolt-on
  acquisitions
• - Operational integration and acquisition of
  four awarding bodies/product lines purchased and
• integrated between October 2004 and October
  2006
• eNVQ Limited
• - Acquisition in May 2007 of innovative
  e-portfolio system
• Fusion Media Networks Limited
• - Holding increased to 75 in July 2007 of
  internet service provider (ISP) (eNVQ owned 50
  of FMN).
• Put and call contract in place over
  minority holding
• ASET Group Limited
• - Acquisition on 19 November 2007 of accredited
  UK vocational awarding body

7
Organisation Consolidation

• Commenced July 2004
• - Move to single site in Coventry closure of
  Sidcup and Leamington Spa offices
• - Major staff re-organisation
• - Modernisation and automation of business
  systems
• Programme fully completed March 2007.
• Total cost 1.75m - 700k capitalised.
• Cost saving and efficiency gains of 500k per
  annum.
• Surplus leases either surrendered, assigned or
  being actively marketed.
• Head office is now a scaleable administrative
  hub to support growth.

8
Organisation Structure
9
Business Segments

• UK Qualifications and Assessment Services (48 of
  turnover)
• 250 approved vocational qualifications.
• 1,000 registered customers.
• 250,000 candidates registrations per annum.
• 12 market share for vocational qualifications.
• 650 school customers for online national
  curriculum tests system.
• International Qualifications (34 of turnover)
• 80 examinations branded London Chamber of
  Commerce and Industry.
• 4,200 registered centres in 100 countries.
• 250,000 entries per annum.
• Support Services (16 of turnover)
• Online testing platforms, qualifications and
  learner administration systems, printing,
  logistics and internet service provision.
• 12 contracts including ACCA, CIMA, CIEH and OCR.
• Fusion Media Networks (Recent acquisition)
• Internet service provider one-to-one
  contention.
• Resaler contracts, main supplier Cable
  Wireless.

10
Revenue Sources

• Centre registration fees 250 - 450 per annum.
• Candidate registration 25 - 85 per candidate.
• Certification 5 - 100 per candidate.
• Accredited programmes up to 5,000
  initial/annual audit, plus up to 10 per
  candidate.
• Learner administration (eNVQ) 25 - 100 per
  candidate.
• Support materials 10 - 25 per book.
• Schools assessment packages 299 - 5,000 per
  school per annum.
• Software licence fees up to 6,000, plus 2 -
  8.50 per candidate.
• Contract management fees up to 30,000, plus
  of contract value or per candidate charge.
• Development projects priced on one-off basis.
• Monthly fixed rate supply contracts (Fusion ISP)
  3,000 - 5,500 per customer.

11
Financial Trends
12
2007 Results
13
Highlights

• Results in line with upgraded expectations
  reflecting the benefits of infrastructure
  investments, organic growth and
  acquisitions.
• Financial overview

Profit on ordinary activities before taxation
adjusted for movement in the onerous lease
provision and amortisation charge on acquired
intangible assets

• Cash inflow from operating activities of
  1.88m (2006 1.53m).
• Final dividend of 0.23p per share recommended
  bringing total dividend for the year to 0.33p.
• Results reflect the acquisition of eNVQ
  Limited and a 75 holding taken in Fusion Media
  Networks Limited which together contributed
  398,000 to revenue.
• Full implementation of bespoke Campus
  administration system completed.
• Approved by the Qualifications and Curriculum
  Authority to award the new Diploma qualifications
  for 14-19 year olds.
• Acquisition of ASET Group Limited on 19
  November 2007.

14
Organic Growth and Acquisitions

• Growth in all business segments
• UK qualifications and assessment services, up
  15.
• International qualifications, up 5 (up 9
  without US Dollar impact).
• Support services, up 25.
• Revenue from acquisitions
• eNVQ Limited, e-portfolio software, 185k in four
  months.
• Fusion Media Networks Limited (75 holding),
  internet service provider,213k in four months.
• Total 398k (full year estimate, up to 1.5m).

15
Financial Considerations

• Cash 3.1m (2006 2.3m).
• Operating profit to cash conversion ratio 75
  (2006 93).
• Cash inflow from operational activities of 1.88m
  (2006 1.53m).
• Dollar weakness impact on revenue 220k.
• Onerous lease provision of 758k.
• Pension fund deficit 0.2m (2006 1.4m).
• Shareholder funds up 67 at 7.4m.

16
Income and Margins
17
Cashflow
18
Balance Sheet
19

• Trading Update

20
Post Year End Activity

• Acquisition of ASET Limited
• Accredited UK awarding body sound strategic
  fit.
• 2006/07 revenue 2.23m mostly from further
  education colleges.
• Consideration, up to 2.9m (2.5m after 400k net
  assets underpin)
• - 2.5m on completion including 800k in
  shares (2,125m 3.86 dilution)
• - Plus two, 200k performance payments
  April 2008 and August 2008
• Disposal of majority stake in Educational
  Resources Pte Limited
• Sale of 50.4 shareholding to long-term local
  partner, AEC Education plc.
• Loss on disposal write off 500k.
• Consideration, 2m AEC shares (market value
  240k).
• Payment for new open-ended agency, 450k over
  three years.
• Management review underway.
• Put and Call Option over minority holding in
  Fusion Media Networks
• Contract in place for review in 2012 to purchase
  25 minority holding based on an independent
  valuation.

21
Trading Update 29 February 2008

• Trading
• UK Services showing strongest growth organic
  and acquisition.
• International progress particularly in Germany
  and South East Asia development of new agency
  arrangements.
• Support Services development through new and
  repeat business for specialist software services.
  End of large contract worth 900k pa on 30
  September 2008 after five years will enable focus
  on own business.
• Acquisitions
• eNVQ Limited and Fusion Media Networks Limited
  fully integrated
• - Investment in systems upgrade
• - Focus on marketing and business development
• ASET Group Limited trading in line with
  expectations
• - Transfer of administration to Head Office
  from York by 31 March 2008 and from
  Macclesfield by 31 July no extra staff required
• - Small team of expert staff to continue in
  Macclesfield
• - Restructuring costs of less than 100k
  through PL account. Dilapidations provision
  to goodwill

22
Trading Update 29 February 2008

• People
• Former ASET CEO to head up Sector Skills Councils
  and large employers team Leitch review of
  skills.
• Senior manager appointed from Cambridge
  International Examinations to head up
  international development and professional
  delivery team.
• Financial Considerations
• Significant reduction in cash to fund
  acquisitions.
• 1m short-term overdraft facility in place.
• Lease for Athena House, Sidcup surrendered with
  dilapidations settled at 325k.
• Unlet space in Marlowe House, Sidcup under offer
  at a subsidised rent.
• Surplus leases provision 320k (as at 1 March
  2008).
• Share Options
• Grant of 1,275,000 options from Employee Benefit
  Trust to Chief Executive (1m), Director of
  Business Development (200k) and Financial
  Controller (75k). (Options at 15p cost to EBT).
• Chief Executive now has interest in 3,059,237
  (5.3) ordinary shares and 3,000,000 options
  (5.0 fully diluted) 350k already vested.

23

• Future Developments

24
Drivers for Growth

• Accredited awarding body status including for the
  new Diplomas.
• Growing global investment by governments,
  businesses, families and individuals in personal,
  vocational and English language skills
  development.
• Increasing acceptance of screen based/online
  education services.
• Strength of the underlying EDI business,
  supported by positive investment strategy and
  acquisitions programme.

25
Operational Priorities

• Lock in quality of service
• - ISO 9001/2000 and Investor in People
  accreditation
• Profile raising
• - Appointment of marketing and communications
  agency
• Building sales capacity
• - Investment in trade promotion and additional
  staff
• Comprehensive product development pipeline
• - In-house programme, acquisitions and
  participants on Government programmes (new
  Diplomas)
• Continuing organisation development programme
• - Integration of acquisitions, developing
  international agencies and optimising UK
• associates network

26
Business Development Strategy
27
Acquisition Targets

• Service and related sectors qualifications
  awarding and assessment services.
• Publishing of related education and training
  support materials.
• Software for related education and training
  administration applications.
• Agencies and delivery networks in international
  markets.
• Bolt-on internet service providers.
• Continuing professional development programme
  provision for vocational education and training
  practitioners.

28
Shareholder Support

• Growing investment press coverage and active
  investor relations programme.
• 12 month share price uplift 80 - market
  capitalisation 24m.
• Total voting rights 57,512,291 at 31 January
  2008.
• Top 10 shareholders as at 29 February

29
Prospects

• Benefiting from infrastructure investment,
  organic growth and acquisitions.
• Focused on continuous improvement of service
  levels, extending product range and strengthening
  business development and sales capabilities.
• Constantly reviewing acquisition opportunities to
  broaden range and scope of services.
• Committed and experienced Board and management
  team.
• Continuing return to investors through share
  price growth and progressive dividend policy.