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MarketTracker™ TRAINING & EDUCATION SECTOR Covering the six month period ending 30 November 2020 WWW.BOXINGTON.COM – 1 – • VALUATION TRACKER “Training & Education sector valuations have bounced back, because of investor expectations that the sector will be a key beneficiary of future government and corporate spending in rebuilding and modernising a post-Covid world” TIM EVANS Managing Director Boxington Corporate Finance WWW.BOXINGTON.COM – 2 – This document contains significant assumptions and has been prepared by Boxington Corporate Finance (Boxington) based on publicly available information, or additional information supplied by the owners and/or managers of the companies described in this document, which has not been independently verified. Accuracy and completeness of the information provided has been presumed and, therefore, its content may or may not be accurate and complete. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information or statements made in this document and Boxington, its affiliates, directors, officers, employees and representatives expressly disclaim any and all liability with regards thereto. This document has been prepared for informational purposes only, is not a research report (as such term is defined by applicable law and regulations) and is not to be relied on by any person for any purpose. In addition, it is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. No part of this material may be copied or duplicated in any form, or redistributed, without the prior written consent of Boxington. • VALUATION TRACKER IMPORTANT NOTICE WWW.BOXINGTON.COM LONDON 52 Brook Street London W1K 5DS United Kingdom T +44 (0)207 355 6270 TOKYO 8th Floor, TOC Dai-ichi Building 1-8-3 Shibuya, Shibuya-ku Tokyo 150-0002 Japan T +81 (0)50 5534 9624 CHICAGO 150 S Wacker Drive Chicago, IL 60606 United States T +1 (312) 788 2620 TRAINING & EDUCATION SECTOR MarketTracker™ BOXINGTON is a modern, full service corporate finance advisory house, operating nationally and internationally out of London (UK), and focused exclusively on advising mid-market companies across the Business to Business (B2B) Services and Technologies space including the Training & Education sector. TIM EVANS Managing Director T +44 (0)207 355 6272 T +44 (0)7584 902 744 E twe@boxington.com SATNAAM KAUR VIRDEE Research Manager T +44 (0)207 268 2265 T +44 (0)7547 531 226 E skv@boxington.com REPORT AUTHORS ALEX COOPER Assistant Director T +44 (0)207 268 2025 T +44 (0)7469 927 413 E ac@boxington.com ABOUT US REPORT SUMMARY ● Training & Education, a sector initially hard hit by Coronavirus, is enjoying a valuation bounce-back, with average share valuations increasing by c.35% in the period and in some cases even surpassing pre-Covid valuations – see page 4 ● This bounce-back is underpinned by investor optimism in the sector’s medium-term growth prospects, which are expected to be driven by: • 1) Extra government funding for the sector to curb rapid unemployment whilst stimulating economic demand; and • 2) New demand from corporates to help reskill workforces for a changed post-Covid world. ● EV/EBITDA multiples also recovered, with the average quoted multiple moving meaningfully upwards by c.36% to 14.3x in the six months to 30th November – see page 5 ● The market’s strong valuation performance has also been helped by the ability of the Training & Education sector to maintain margins by leveraging existing technologies to shift rapidly towards remote learning. ● M&A deal activity returned during the six month period driven by acquisitions made by strategic buyers wanting to move into or increase their exposure to the Training & Education sector, which is expected to take on a new importance in a post-Covid world – see page 7 Boxington is authorised and regulated by the Financial Conduct Authority. WWW.BOXINGTON.COM – 4 – FROM 1 JUNE 2020 TO 30 NOVEMBER 2020 Percentage change in share price (%)• VALUATION TRACKER 6 MONTH VALUATION MOVEMENTS © 2020 Boxington Corporate Finance UK USA EUROPE APAC +34.5% 24.3% 14.2% 53.0% 0.9% 16.0% 5.5% 50.8% -12.4% 71.3% 71.6% 68.4% 52.4% -36.4% 61.8% 114.6% -2.7% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Average movement over the period Pearson posted resilient recent financial results with the growth in its Global Online Learning division (including its Virtual schools) boosting results. More broadly, its ongoing investment in technology, its digital transformation programme and the launch of a new digital marketplace (Pearson Pathways) are being looked upon favourably by investors. The ongoing shift away from print books (driven by increasing virtual learning and a surge in free online content) and Covid-strained library budgets have materially impacted Wiley’s Research publishing segment (52% of fiscal 2020 revenue) and led to investors questioning its future growth prospects. Lagardere’s share price has risen to pre-Covid levels driven by market-defying education publishing results (driven largely by the French government’s support & funding for the education sector) and speculation surrounding the possible sale of Hachette (the largest publishing company in France) to Vivendi. Rise, a China HQ’d education services provider, has been this report’s standout valuation gainer with its share price doubling. This increase has been driven by its Q3 new student enrolment increasing by 122% (due to market share gain from small players hit more severely by Covid) and its GP margin recovering to pre-pandemic level of 49% as its learning centre utilisation rates continue to increase. WWW.BOXINGTON.COM – 5 – 14.3x Average multiple 36% Average movement Change in EBITDAx over 6 monthsFROM 1 JUNE 2020 TO 30 NOVEMBER 2020 6 MONTH EBITDA MULTIPLE MOVEMENTS * Discounts to public company multiples are typically needed when applied to private companies to reflect risk and liquidity differentials. © 2020 Boxington Corporate Finance Current EBITDA multiple (decreased) Prior 6 months EBITDA multiple Key Current EBITDA multiple (increased) UK USA EUROPE APAC 16.3x 21.8x 7.4x 6.6x 50.5x 15.0x 6.9x 9.3x 6.5x 5.7x 15.0x 8.9x 6.5x 12.6x 4.3x 2.4x 18.3x 24.0x 11.4x 6.9x 39.9x 20.0x 12.2x 8.7x 3.7x 10.7x 25.4x 5.0x 5.8x 15.9x 17.0x 3.7x -5.0x 5.0x 15.0x 25.0x 35.0x 45.0x 55.0x Although SaaS-based Cornerstone’s share price increased by 16%, its multiple decreased by c.20%. This is as its earnings growth outstripped its share price growth mainly due to improving client renewal rates and the successful integration of Saba into the group. GP Strategies’ multiple increased significantly by c.81%, on the expectation that it will benefit from new corporate demand for its training & reskilling programs, the on-going transitioning of its programs to virtual modalities, and the rescheduling of face-to- face training activities. Despite Sanoma’s share price increasing by c.52%, its multiple decreased by c.43% because its earnings performance has risen at a faster rate than its share price. This has been driven by a combination of Sanoma’s large ($500m) acquisition of Santillana in October and strong revenue growth in its Learning division. WWW.BOXINGTON.COM M&A ANALYSIS UNDERSTANDING WHY SECTOR BUYERS HAVE MADE ACQUISITIONS WWW.BOXINGTON.COM – 7 – UNDERSTANDING WHY SECTOR BUYERS HAVE MADE ACQUISITIONS • VALUATION TRACKER M&A ANALYSIS © 2020 Boxington Corporate Finance INCREASING RANGE OF SERVICES INCREASING GEOGRAPHIC COVERAGE INCREASING MARKET SHARE & SYNERGIES DIFFERENTIATING EXISTING SERVICES Amadeus, a German-based staffing provider, acquired GFN, a training provider focused on publicly funded adult education in IT. The deal highlights the on- going trend of recruitment firms transitioning into broader providers of HR & training services through acquisition. IXL, the global provider of digital K-12 instructional and assessment tools, acquired 3P Learning, an Australia-based provider of education technology for $135m. The sizeable addition of 3P Learning, broadens IXL’s product portfolio and international footprint in the high growth educational technology space. Pluralsight, a US-based provider of online technology training, acquired DevelopIntelligence of the US, a provider of strategic skills consulting and virtual instructor-led training. The deal enables Pluralsight to deliver an all-in-one remote training solution to clients, helping them upskill a changing and increasingly distributed post-Covid workforce. SCALE SERVICES DEFENSIVE STRATEGIC Buyers UK-based training and education provider, Learning Curve, acquired Acorn, a provider of professional training to young people. The deal solidifies Learning Curve’s position as one of the UK’s largest training providers and underlines their aim to tackle youth unemployment (which has risen sharply due to Covid). WWW.BOXINGTON.COM APPENDIX BASE DATA WWW.BOXINGTON.COM – 9 – TRAINING & EDUCATION SECTOR • VALUATION TRACKER BASE DATA UK USA EUROPE APAC USD$ Enterprise Value (EV) 1,459.16 1,277.11 8,194.79 255.54 4,002.14 318.85 253.30 2,855.97 2,128.76 8,746.48 748.47 2,705.70 56.91 2,972.71 417.94 69.17 Comparable EV (-6 months) 1,301.01 1,307.55 6,354.97 257.16 2,378.23 312.62 229.14 3,112.95 1,780.33 7,635.21 440.93 2,736.48 141.11 1,867.20 201.44 78.92 Market Capitalisation 1,539.49 1,503.83 6,695.92 229.25 2,863.85 322.44 204.23 1,974.13 1,038.78 3,158.01 821.91 2,417.25 130.03 3,170.72 376.04 140.09 Net Debt -48.08 -87.94 1,667.79 27.39 1,149.92 10.71 55.94 922.61 1,085.02 5,527.97 -73.49 282.30 -69.99 -202.82 54.85 -70.02 Last 12 Months (LTM)Revenue 372.80 176.66 4,742.85 278.69 683.59 198.46 505.42 1,839.28 1,460.90 7,289.05 155.68 1,266.39 174.56 1,067.85 153.72 113.48 EBITDA 79.52 53.16 719.75 37.10 100.36 15.92 20.80 327.96 577.30 819.07 29.47 536.52 9.88 187.30 25.34 18.55 EBIT 70.84 21.41 429.70 28.97 26.71 4.65 1.86 208.83 258.16 -192.26 26.87 341.73 2.87 153.61 -19.04 17.13 EBITDAx 18.3x 24.0x 11.4x 6.9x 39.9x 20.0x 12.2x 8.7x 3.7x 10.7x 25.4x 5.0x 5.8x 15.9x 16.5x 3.7x EBITx 20.6x 59.7x 19.1x 8.8x 149.8x 50.5x 136.1x 13.7x 8.2x (45.5x) 27.9x 7.9x 19.8x 19.4x (22.0x) 4.0x EBITDAx (-6 months) 16.3x 21.8x 7.4x 6.6x 59.5x 15.0x 6.9x 9.3x 6.5x 5.7x 15.0x 8.9x 6.5x 12.6x 4.3x 2.4x EBITx (-6 months) 18.2x 48.3x 11.0x 7.3x 161.0x 39.1x 17.3x 13.9x 18.1x 20.5x 16.4x 23.0x 9.3x 16.9x 37.1x 17.3x As at 30 November 2020 Source London | Tokyo | Chicago BOXINGTON CORPORATE FINANCE WWW.BOXINGTON.COM
