0.2 l.e.k. commercial vdd report (summary)

8/12/2019 0.2 L.E.K. Commercial VDD Report (Summary)

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DRAFT subject to revision

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TSL Education

Business Plan Support Summary Report

L.E.K. Consulting (International) Limited, 40 Grosvenor Place, London SW! "#L, $nited Kingdom

%& 44.'0."*."'00 +& 44.'0."*."440 .le-.com

19 April 2013


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CONFIDENTIAL

WORK IN PROGRESS-NOT FOR CIRCULATION

3

Context of report and focus of work

TSL has asked L.E.K. to provide support in relation to the development of a 5 year business plan

L.E.K.s support has been focused on the outlook for TES Hiring Solutions, covering five main areas:

- market volume of job ads- TES share of jobs by segment- split between online only and print- price and yield trajectory

- opportunity to expand internationally

Other areas of the business have not been covered in this project

This work has been mainly undertaken over a 10 week period to 17 January 2013


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4

Key Themes

Teacher recruitment market is cyclical and will return to pre-recession levels

TES has a high and sustainable market share in online and print in the main segments it addresses anda growing position in primary and support staff

Online penetration will continue to grow but is not a threat to the business

TES can continue to increase yield through continuous price increase and growth in upselling

There is substantial potential opportunity to roll out TES Hiring Solutions in International markets


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Context

Market volumes

Teaching is the largest single profession in the UK with 550k total teachers (c.490k FTEs) and an additional c.780k statefunded support staff (many part time)

The total number of teachers is broadly stable and has grown by an average of 0.2% over the last 25 years- growth is principally driven by population trends- it does not fluctuate significantly due to economic conditions or policy changes

Teacher turnover is impacted by the economic cycle and as a result ad volumes decline in a recession. However, c.50% ofaverage teacher turnover is driven by factors that are largely unrelated to the state of the economy

- retirements and maternity-driven turnover represent c.35% of average turnover and are principally impacted by agedemographics

- leavers, is partly impacted by the general job market but a large proportion of teachers leave the profession withintheir first five years of teaching in the job due to other reasons

The fundamental characteristics of the teacher recruitment market are attractive.It exhibits lower volatility and uncertainty than recruitment markets for other professions


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TES ad volumes are cyclical and declined during the recession but are now wellinto recovery

Market volumes

Note: *Calculated based on YoY change W1-20 FY13 vs. W1-20 FY08 **Scotland volumes have been adjusted to remove lineage adsSource: TES data; L.E.K. analysis

FY11

41.4k

FY10

52.5k

FY09

59.6k

FY08

73.1k

100

80

60

40

20

0

YTD FY13*FY12

52.0k

61.8k

Annual TES ad volumes by sector

Percentage change vs. FY08

Trough

(FY11)

YTD

(FY13)

Total (43.3) (15.4)

(45.0) (10.2)

(91.8)

(56.2)

(53.7)

(4.9)

(58.8)

(50.5)

(25.5)

LA

Special

Scotland

Overseas

General

FE

Independent

(FY12)

(28.8)

(27.3)

(89.8)

(41.8)

(41.7)

17.4

(53.7)

(32.3)

(24.0)

(24.9)

Index 07/08 volumes =100

State Schools(E+W)


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State school ad volume, representing c.66% of FY12 volume, is well correlatedwith teacher turnover which is impacted by the economic cycle

Net turnover rate and number of TES jobs per 1,000 teachers* - state sector (E&W)(1985/86-11/12)

Recession2008 Q2 09 Q2

Note: *Regular qualified FTE teachers in state funded primary and secondary schools in England & WalesSource: TES; NFER; DfE; L.E.K. analysis

Recession1990 Q3 - 91 Q3

Market volumes

TES jobsper 1,000teachers

Netturnover

School years

FY86

0

2

4

6

8

10

12

14

16

18

20

0

20

40

60

80

100

120

140

160

180

200Index [TES jobs per 1,000 teachers in FY08=100]

Percent

(NFER net turnover)

FY12FY10FY08FY06FY04FY02FY00FY98FY96FY94FY92FY90FY88

One off impact ofchange inretirement policy


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Teacher turnover comprises five elements. Churn is the largest component and isimpacted by the economic cycle but attrition is more stable (typically 4-5%)

Estimated permanent FT net turnover state funded sector (E&W)*

Note: *Excludes churn from FT to PT positions; Retirement includes retirement due to ill health (10% in 08), reaching retirement age (43%) and early

retirement (46%); Leavers to other and not known jobs have been prorated across the categories; **extrapolated based on change in market ad volumesnet of change in teacher volumes 2008-11Source: NFER; DfE; L.E.K. analysis

Calendar year

(2)

0

2

4

6

8

10

12

14

16

02010099989796

Percent of teachers

1211100908070605040395949392919089881987

Extrapolated**

Churn(Movementswithin statefunded sector)

Leavers

Retirement

4Maternity

2

3

1

5Change inteacher numbers

Market Volumes

Attrition

Impact ofeconomic cycle

High

Medium

Low

Low

Low

Principal driver

The health of the publicsector drivingexpectations of changes in

education funding

Partly impacted by thestate of the general jobmarket

Age demographics

Changes in pupil numbersand pupil/teacher ratios

Component


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Teacher churn is influenced by the state of the public finances drivingexpectations of future budget cuts and concerns around job security in a new job

Churn (movement within state school teaching) is the most volatile element of teacher turnover

- It ranges from a low of c.3% at the trough of economic cycles and a high of 8-9% at the top of cycles

The decline in churn in a recession is principally driven by concerns around job security caused by an anticipation of cutsin education spending

- teachers are reluctant to change jobs due to fears of being made redundant in their new position if the new schoolsbudget comes under pressure

- schools are cautious in recruiting due to uncertainty around future budgets

As a result, the decline in churn significantly precedes any actual cuts in education expenditure

The increase of public sector net borrowing (PSNB) is a good proxy for the growing concerns around the state of the publicsector finances and the perceived likelihood of future education spending cuts

- there is a high correlation between churn and PSNB as a proportion of GDP

In this recession, the high level of public borrowing caused the government to undertake the Comprehensive Spending

Review (CSR) which resulted in significant uncertainty amongst teachers and schools and depressed churn levels despitea relatively mild impact on the total school budget

- expectations of up to 25% cuts in the budget prior to the publication of the CSR in Oct 2010- better than expected outcome for schools overall but continued uncertainty around individual schools budgets post

the publication of the CSR

- the impact was not played out until the beginning of FY11/12 when volumes started to recover, to a large extent dueto an increasing number of teachers changing jobs

Market volumes

1


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Teacher churn is projected to return close to pre-recession levels by 2017

Full time permanent teacher churn* within the state funded sector (E&W) actual vs. predicted

Calendar years

Note: *Churn = 5.9 + (42.5 x PSNB as a % of GDP) + (1.2 for years post 2000)Source: ONS; OBR (Dec 12); NFER; L.E.K. analysis

+1 Standard Deviation

-1 Standard Deviation

Predicted

Actual

Market volumes

Explanatory variables:

PSNB as a % of GDP, lagged by 3 quarters

Dummy variable (from 2000) to capture the impactof policy changes, most notably the academyprogramme

R2 = 84.8

0

2

4

6

8

10

17161514131211100908070605040302010099989796

Percent

959493929190898887

1


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Proportion* of permanent full time teachers leaving state fundedteaching jobs actual vs. predicted

Note: *1 / proportion of leavers = 0.4 + (5.7 x unemployment rate) (7.2 x lagged annual growth in total employment)Source: NFER; ONS; OBR; L.E.K. analysis

Calendar years

The number of leavers is partly influenced by the state of the general job marketand is expected to recover slowly to reach 95% of FY08 levels by FY17

R2 = 74.2Explanatory variables:

Unemployment (%)Annual growth in total employment (lagged by 1 year) (%)

Market volumes

A large proportion (25-30%) of newteachers leave the profession withinthe first 5 years due to a variety ofreasons, unrelated to the economiccycle

However, the % of leavers in any oneyear is partly influenced by the stateof the general job market

There are fewer leavers in arecession due to fewer external jobs

and reluctance to leave relativelysecure teaching positions

The number of leavers increases asthe economy recovers due to:

- job opportunities in the privatesector (when public sector maystill be subject to cuts)

- lower private sector jobuncertainty

- greater private sector payincreases

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

99989796959493929190898887

Percent

171615141312111009080706050403020100

+1 StandardDeviation

-1 Standard

Deviation

Predicted

Actual

2


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Projected % of retiring full time teachers (state funded sector, E&W)(1987-2017)

Note* 1997 Pension reform required schools to pay a share of the cost for teachers retiring early and required teachers to be regarded as permanently

unfit to teach to qualify for ill-health retirements. This caused many teachers to retire prior to the reform being implemented and overall retirement ratesto settle at a lower level post 1997Source: NFER; DCSF; L.E.K. analysis

0

1

2

3

4

5

Percent

15141312111009080706050403020100999897969594939291908988 1716

Calendar years

The number of retirements is expected to decline slowly due to the changing agedemographics amongst teachers

Forecast

Caused by 1997change in early andill-health retirementpolicies*

PPT change(2012-17)

(0.8)

Market volumes

1987

Retirements are expected todecrease as the proportion ofteachers at or near retirement age(>55) is declining

Recent changes to teacher pensionsare not expected to impact thepropensity to retire

- increases in contribution ratesare modest and unlikely toincrease retirements

- changes to accrual rates andretirement age only impacts

teachers with more than 10years to retirements as of April

2012

3


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The number of teachers is broadly stable and projected growth is in line withhistory

Note: * January of following year for 2009 and all years prior to 2009Source: DfE; L.E.K. analysis

0

100

200

300

400

500

mid

171615141312111009080706050403020100999897969594939291

high

low

9089881987

CAGR%

(1987-11)(11-17)

0.3 0.31.1

Forecast

Projected number of FTE teachers in state funded sectorThousands (November of year*)

Market volumes

(0.4)

Pupil/Teacherratio

YoY growth %(1.7) (1.1) (0.5) (0.9) 0.6 (1.1) - 0.3 0.7 1.00.40.20.4(0.6)0.11.30.40.10.91.00.91.02.31.51.20.8(0.4)-1.10.5

18 18 18 19 19 19 20 18 18 19181818181818181818181918192020202020191918

1.1

5

High case:- If pupils go up, then teachers

increase at the same rate

- If pupils go down, teachersremain flat

Low case:- If pupils go up, then teachers

remain flat- If pupils go down, teachers

decrease at the same rate


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Resulting total teacher net turnover is forecast to recover to be broadly in line withFY08 levels by FY17

Note: *Gross turnover + net changes in teachers. Net teachers has been adjusted to school years based on the distribution of ads across the yearSource: OBR (Dec 12); NFER; OEF; ONS; DfE; L.E.K. analysis

Net full time permanent teacher turnover*, state-funded schools (mid case)(2007/08-16/17)

School years

n/a YOY Change (%)

Cumulativedecline (%)

0 (32) (5) 23 8 (1) 3

n/a 0 (32) (35) (20) (14) (15) (13)

7

(1)

6

(8)

Market volumes

High

Low

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

(2)

0

2

4

6

8

10

12

14

Percent of teachers

Net turnover:mid case

Net changein teachers

Retirement

Leavers

Maternity

Churn


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There are a number of expected policy changes which may modestly impactteacher turnover

More rigorous criteria for admission to teacher training but not a change in number ofplaces

Additional measures to combat bad behaviour could modestly reduce churn (teacherssay bad behaviour is a key driver of resignations), but impact is likely to be marginal

Teacher training

Pupil behaviour

Source: The importance of Teaching: Schools white paper 2010; Guardian; Telegraph; DfE

Market volumes

Potential impacton turnover

Dictates schools to be measured on GCSE performance in 5 core subjects

Could lead to mix changes in required specialisms increasing turnover in near-mid term

Potential further reform of GCSEs / A Levels in longer term

English

baccalaureate andexam reform

School inspections Increasingly demanding school inspections (shorter notice given, and satisfactory to be

regarded as requires improvement). Pressure on teachers could increase turnover

Performance based increases: no further automatic pay increases based on tenure.

Could increase turnover as teachers move in response to poor pay risesTeacher pay

DescriptionPolicy changes

School Direct Allows schools to offer training places direct to graduates. Targeted 9k places of which 59%

replaces GTP

May have small impact on school recruiting in the long term as trainees are expected to getpermanent position. However, the number of incremental places are relatively modest anduptake to date has been low


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Ad volumes are projected to see similar rates of growth across the state fundedsegments. Overseas is seeing significant growth whilst the volume of LA fundedjobs is likely to remain depressed

Market volumes

Source: TES data; L.E.K. analysis

110

100

90

80

70

60

50

40

30

20

10

0

FY17FY16FY15FY14FY13FY12FY11FY10FY09FY08

Market volumes by sectorCAGR%FY12-17

Total 5.3

4.9

14.8

1.0

14.4

4.5

(0.2)

4.4

4.4

LA

Special

Scotland

Overseas

General

FE

Independent

Cumulative% changeFY08-17

2.2

3.3

(55.5)

150.8

1.7

(12.5)

Index FY08 volumes =100

State Schools(E+W)

Remains low due to budget pressure

Historical strong momentum projected tocontinue albeit at a slowing rate of growth

Slightly below state schools due to lowerteacher population growth (Scotland)andshort term funding uncertainty (special)

Recovers as real earnings increase andjob market improves


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The combined market volumes across all sectors are projected to have fullyrecovered to pre-recession levels by FY17

Source: OBR; NFER; OEF; ONS; DfE; L.E.K. analysis

School years

+1 Standard Deviation (16%)

-1 Standard Deviation (84%)

Central forecast (50%)

Market volumes

n/a YOY Change (%)

Cumulativechange (%)

(6) (25) (7) 20 9 0 4

n/a (6) (29) (34) (21) (14) (13) (10)

7

2

6

(4)

0

20

40

60

80

100

120

140

160


Projected market volumes index*

Index FY08 volumes =100


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Key Themes







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TES has a very strong position across all segments in which it participates

0 20 40 60 80 100

79.8

Secondary teachers* 87.5

Secondary leadership 93.8

87.4Independent

Scotland 75.7

FE 58.6

Primary Teachers 45.7

Primary leadership*

TES market share of jobs by segment(FY2012)

Market share

Note: * Permanent positions including heads of department; **Share is calculated using Guardian adjustmentSource: TSL management data (EDS)

Unique (jobs only advertised in TES)

Shared (in TES and one or more other sites / publications)

3.4

48.9

6.4

10.4

5.7

1.6

% of TES2012 ads

16.1

Summary of TES position

Traditional core segments

TES has clear leadership with 80-90% of jobs

and very high reach of teachers

Historically not a focus but increasing position

on the back of the new proposition

Lower share is due to lack of historical focus.However, this represents a future opportunity

TES successfully defended its position vs. the

Scottish public sector job board (myjobscotland)

Percent of jobs**


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Despite different competitive dynamics in print vs. online TES has successfullyestablished a leadership position in both areas

Market Share

TES has a very strong share in print, underpinned by its long history as the leadingpublication for Teachers

Few credible print competitors, mainly regional press.

Online is naturally more competitive than print, with a large number of smaller competitors,due to lower barriers to entry

TES had no online presence until 2006

Despite this, TES has been uniquely successful in establishing a clear leadership position

online as well as in print.

A key drivers of this success was that online ads were made mandatory for all printcustomers ensuring instant liquidity and a very high share of all teacher jobs advertisedonline

Online-only i.e. ability for schools to buy an online ad without the print component wasintroduced in FY08 to compete in the emerging online only (OLO) market (defined as jobs

that are uniquely advertised on online sites and not in any print publications)

Since FY08, TES has rapidly grown its position in the online-only market and its share ofonline-only jobs and is now trending towards its share of print

As a result, unlike most publishers in other sectors, the impact on TES overall market sharefrom migration to online-only advertising is limited

Print

Online


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TES has successfully maintained its strong position in its core segments throughvery strong share performance in online-only

Note:*Including Heads of department; **Includes Headteachers, Deputy Headteachers, and Assistant Headteachers; ***Does not include temporaries;^Share is calculated using Guardian adjustments (5% for secondary teachers and leaders, 25% for primary leaders, and 0% for independent)Source: TSL management data (EDS)

96

718996

74 87

9778 88

0

20

40

60

80

100

Secondary permanent teachersTES share of jobs*** (%)

Total

90

Online only

86

Print

96 99

749599

83 9599

85 94

0

20

40

60

80

100

Secondary leadership**TES share of jobs*** (%)

Total

94

Online only

88

Print

99

97

44

9193

55

8594

6987

0

20

40

60

80

100

Independent (all)TES share of jobs*** (%)

Total

89

Online only

78

Print

94 99

55

8797

6784

97

67 80

0

20

40

60

80

100

Total

74

Online only

65

Print

97

Primary leadership**TES share of jobs (%)

FY12

FY11

FY10

FY13

Market share

1 2

3 4


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TESs implied share of incremental^ online-only ads is very high exceeding 100% insome segments. As a result, the impact of migration to online-only is marginal

Market share

Note: :*Including Heads of department; **Includes Headteachers, Deputy Headteachers, and Assistant Headteachers; ***Does not include temporaries;

^Ads migrating from print to online only in any given year; ^^Share is calculated using Guardian adjustments (5% for secondary teachers andleaders, 25% for primary leaders, and 0% for independent) and incremental online only share is the share of new online ads captured by TESSource: TSL management data (EDS)

TES implied share^^ of incremental online only jobs vs. print and OLO

1 2

3 4

0

50

100

150

11

83

FY10

87

Secondary permanent teachers*

TES share of jobs***

13

118

12

95

0

50

100

150

13

101

12

89

11

10386

FY10

Secondary leadership**

TES share of jobs

0

50

100

150

Independent (all)***TES share of jobs***

1312

104125

11

66

FY10

66

0

50

100

150

63

Primary leadership**TES share of jobs

13

54

12

69

11

84

FY10

OLO share

IncrementalOLO share

Print share


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The Primary teacher segment has traditionally not been a focus for TES butrepresents a large potential incremental opportunity

Market Share

TES has a very high reach of primary teachers, inprint and online

- supported by primary teachers high use ofTES Resources

but historically a relatively low share ofPrimary teacher online only jobs, principally due to

lack of focus

However, the primary teacher segment represents

a large incremental opportunity for TES:

- c. 2.6k schools use TES for some but notnecessarily all permanent teacher ads

- c.3.4k primary schools use commercialmedia for teacher ads but have not

historically used TES

- total potential incremental addressablemarket of 4.2k permanent jobs

87

76

96

46

34

82

0

20

40

60

80

100

OLOPrint Total

TES share of primary teacher jobsvs. core segments (FY12)TES share of jobs**

Core segments

Primary teachers

Note: *Share is calculated using Guardian adjustments(25% of Guardian unique teacher ads removed); **Excludes temporarySource:TES


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To address this opportunity, TES launched Primary+ in January 2012, specificallydesigned for the Primary School segment

Market share

Note: *Share is calculated using Guardian adjustments(25% of Guardian unique teacher ads removed)Source: TSL management data (EDS)

Uptake since launch has been encouraging:

- c.1,000 schools signed up to primary+ inCY2012

- of these c.30% are new to TES

Online only share increased from 23% in FY11 to34% in FY12 of which 8ppt are primary+ ads. Furthergain in FY13 with YTD FY13 share of 37%

Guided by progress to date, TES share of Primary

Teacher ads is projected to increase from 46% inFY12 to 72% in FY17

- TES OLO share increases from 34% in FY12 to71% in FY17

- Primary+ ads as a proportion of total TES adsincrease from c.5% in FY13 to c.16% by FY17

Launched 6 January 2012

499 annual package:

- unlimited ads for teachers and teachingassistants

Competitively priced vs. main competitors

- 499 vs. e-teach at 1,000 and Guardianschoolsjobs at 350

offering higher reach of primary teachers


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The competitive landscape consists of 3 main types of participants

Market Share

History in print

Typically cover a broad set of sectorsbut may have education supplement

Online offer delivered via own site orpartnerships

Traditional

Publishers

Online

Specialists

Public

Regional press

Online presence only

Typically small and positioned at the

lower end of the market

Mainly generalists except eteachwhich focuses on the educationsector

Main competitor Examples of other participantsType Description

LA funded job boards

Typically free to use but some LAs

have recently introduced fees

Mainly used by primary schools


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TESs strong position vs. its competitors is underpinned by its significantly higherreach driving very high ad effectiveness

Market share

Note: * TES number of unique visitors based on Hitwise. The % of visits to jobsite based on management internal dataSource: TSL management data (EDS), Hitwise

918488

0

20

40

60

80

100

% of jobs advertised in TES that are filled

PrimarySecondary Independent

0.5

4.4

1.1

3.3

Monthly unique visits (Millions, Oct 2012)

6

5

4

3

2

10.03

0

TES eteach schoolsjobs

Job

site

Restof site

Total

Higher Reach

High Ad effectiveness

20

30

10

FY12 number of Teacher and Leader jobsPrimary, Secondary and Independent

Thousands of jobs

40

0

schoolsjobs

4

eteach

7

TES

33

Larger inventory of Jobs


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TES has successfully maintained its strong position despite aggressivecompetitor attempts to gain share (1 of 3)

Market share

Note: *Head teachers, Deputy/Assistant Heads in England and Wales; **Permanent Teachers in England and Wales; ***excludes jobs in 2 or more TES competitorsSource: TSL management data (EDS); L.E.K. interviews

Guardian has a strong position in public sector jobs in general but has always been weak in education. To address

this sector, Guardian launched schoolsjobs in March 2011 with an aggressive offer directly aimed at taking sharefrom TES

Its initial strategy focused on building the inventory of jobs with the hope of eventually driving teacher visits and adeffectiveness

- at launch all ads were free of charge, initially up to Jan 2012 but the free offer was subsequently extended

-mainly focused on LAs, aiming to set up automatic links from job boards to capture large number of jobs

Limited impact to date:

- limited share of jobs in TES core segments- majority of jobs on the schoolsjobs site are from LAs and Guardian has had limited traction with schools- has failed to build up demand side (teacher visitors)- poor perceived ad effectiveness relative to TES

Minimal impact on TES position in core segments.Schoolsjobs has not managed to establish a sustainable competitive position

Example 1: Traditional Competitor (Guardian schoolsjobs)

O O


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Market share

Note: *Head teachers, Deputy/Assistant Heads in England and Wales; **Permanent Teachers in England and Wales; ***excludes jobs in 2 or more TES competitorsSource: TSL management data (EDS); L.E.K. interviews

E-teach was founded in 2000 but remains small with total revenue of c.4m

Its model focused on LAs, rather than schools:

- It offers highly discounted all-you-can eat annual packages- in some cases it manages the LA job board under outsourcing deals

As a result,

- the majority of its jobs are primary school jobs- its share in TES core sectors is low due to a lack of access to schools and perceived poor effectiveness

relative to TES

- its revenue per job is very low

Eteachs reach amongst teachers remains significantly below TES

It has lost some share in FY12, partly due to Guardian schoolsjobs, targeting the same customers with a free offer

Example 2: Online Specialists (eTeach)

Despite its early mover advantage, eteach remains a small player in the market

WORK IN PROGRESS


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Market share

LA job boards capture a small share of jobs, mainly fromprimary schools

The number of jobs on LA job boards has grown below thenumber in commercial media, indicating a loss in share

Significant LA budget cuts are causing many LAs to scaledown their recruitment support to schools

We no longer have a budget to support a web site of our own

Richmond upon Thames LA (Nov 2012)

or to start charging schools for using it

The budget cuts must have affected all LAs across the country.

Since April 2012 we do not receive any funds form the government

and have had to start fending for ourselves. This has meant

charging schools for the service we provide.

Kent LA (Nov 2012)

Note: *Includes data for Oxford, Dudley, West Sussex, Bedford, and Suffolk;** Adjusted for free use of Guardian serviceSource: LEAs, LEK analysis

In 2009, the government launched an online recruitmenttool, SRS, aimed at cutting the cost of recruitment forschools and reducing TESs market share

SRS was essentially a free jobs site with an applicationtracking service front end. Target market: the LAs

In response, TSL developed its own free service(HireWire) which launched in Feb 2009. Target Market:the schools

SRS failed to gain scale and was closed down in May2012 having cost the government a total of close to 2m

Since 2009, TES has build a strong relationship withgovernment, and is now seen as part of the solution

Small and weakening position of LA job boardsFailure of government

SchoolsRecruitmentService (SRS)

Example 1: Public Sector competitors

Public sector job boards are not a threat to TES position

WORK IN PROGRESS


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Going forward, TESs share is projected to increase slowly assuming core segmentperformance in line with the recent past and growing share of primary teacher jobs

Market share

Note: *Excludes Overseas, LEA and GeneralSource: TES data; L.E.K. analysis

The forecast assumes TEScontinues recent share performance

in its core segments:

- maintains existing high sharein print

- gradual increase in online onlyshare as TES maintain its highshare of incremental onlineonly penetration

Primary share grows due tocontinuing penetration of thePrimary+ package

No share gains of commercial sectorfrom public sector are assumed(despite LA budgetary pressures)

0

20

40

60

80

100

TES all sector* market share forecastPercent

16/1715/1614/1513/1412/1311/1210/1109/1008/092007/08

(3.0) (0.5) 1.5 1.7 0.7 0.5(1.1)

Central case

(1.5) 1.7

Mid

Low

High

WORK IN PROGRESS


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0

20

40

60

80

100

120140

160

Projected TES volume index (all sectors)Index [FY08 volumes = 100]


Note: *Probability that the outcome will be the predicted value or betterSource: TES data; L.E.K. analysis

Probability*

Based on market volume and share projections, TES total volumes are forecast torecover to FY08 peak volumes by FY17

16%

(35) (23) (12) (8) 4

(7) (32) (39) (28) (19) (17) (11)

(43) (32) (26) (26) (25)

Cumulative

change from2007/08 (%)

(27)

(36)

(4)

(10)

YoY change(%) (7) (26) (11) 20 12 3 7

High (16%)

Central (50%)

Low (84%)

Central (50%)

14

(5)

(23)

7

24

2

(17)

8

Market share

50%

84%

TES actual changes in volume

WORK IN PROGRESS-


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In addition, TES is growing its position in support staff; projected to generate anincremental 19k ads and c.1.5m of revenue by FY17

Market share

Note: * Assuming there is no overlap in upsell between bronze/silver/gold and modulesSource: TES, L.E.K. analysis

Support staff advertising represents a substantial

unaddressed market

- 800k support staff and 70k vacancies p.a.

- a significant proportion advertised incommercial media (in particular in

secondary schools)

TES is building its position in this market by:

- offering free basic ads to build up inventory

- establishing partnerships with organisationswith existing inventory or traffic e.g.jobcentre

- monetising via upselling (of bronze/ silver/gold or premium modules)

YTD FY13 (w1-12) progress is promising

- placed 2.8k support ads- 9% of ads included a premium upgrade

(module, silver or gold)

Millions of pounds

1.2

1.0

0.8

0.6

0.4

0.2

0.0

High

Low

Teachingassistant

Office-basedadmin

Non-officebased admin

FY17FY16FY15FY14

1.8

1.4

1.6

Forecast support ads revenue mid case* (FY14-17F)

13 15 17 19 Number of TES ads (000s) **

37 49 62 76Average revenue / ad(/ad)

236 225 225 229 Average revenue /upsold ad **

Total (mid)

WORK IN PROGRESS-


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33

Key Themes







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However, the speed or extent of migration to online only is not a threat to thebusiness

Online penetration

Note: *Portion of market ads that move online only in any given year; ** Includes circulation and operation and marketing commercial; ^ CombinedTES and THE costs

Limited impacton share

Impact on yieldhistorically more

than offset bypricing and

upsell

Scope to reducecost associated

with print

TES already has a high and increasing share of online only

Its incremental share of online only is at or approaching TES share of print in most of itscore segments

Therefore the impact on TES share from higher than expected growth in online only islikely to be limited

The historical dilutive effect on yield of migration from print to online only has been morethan offset by increases in online pricing and upsell

Significant headroom in potential to increase online prices further (estimated at 315-425). Management plan only assumes an increase of 200

Any negative impact on yield from faster than expected migration to online only cantherefore be mitigated through further price increases

In addition, there is potential to offset loss in print revenue via upsell of premium onlineproducts to migrating customers

Managements internal analysis suggests that if online only penetration exceeds 94%, it iscontribution positive to close print. Eliminated costs^ would total c.12m:

- Print and distribution: 7.7m- Editorial: 3.2m- Other costs**: 2.0m



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By FY17, market online only penetration is projected to reach 85%-95% in all keysegments, resulting in an average of 88%

Online only penetration: primary leadership

Note: Curve fitted using a Fisher-Pry form historical actual data weighted by the number of ads in each period; *Includes independent: 78%(midcase) and FE: 88% (midcase)

Source: Management information; L.E.K. analysis

Percent

100

80

60

40

20

Online only penetration: secondary teachersOnline only penetration: primary teachers

Online penetration

0

20

40

60

80

100

Percent

0

20

40

60

80

100

Percent

LowMid

High

Jan08

Jan09

Jan10

Jan11

Jan12

Jan13

Jan14

Jan15

Jan16

Jan17

FY17 Mid case=93%

FY17 Mid case=88%FY17 Mid case=93%

Fitted curve

and forecast

Actual market data

0

0

Online only penetration: secondary leadershipPercent

100

80

60

40

20

Jan08

Jan09

Jan10

Jan11

Jan12

Jan13

Jan14

Jan15

Jan16

Jan17

FY17 Mid case=83%

Jan08

Jan09

Jan10

Jan11

Jan12

Jan13

Jan14

Jan15

Jan16

Jan17

Jan08

Jan09

Jan10

Jan11

Jan12

Jan13

Jan14

Jan15

Jan16

Jan17

Average online only market penetration* FY17=88%



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TES proportion of online-only jobs is slightly below the market due to its strongposition in print

Online only penetration (all sectors)

Source: EDS; L.E.K. analysis; management data

0

20

40

60

80

100

Percent

FY17FY16FY15FY14FY12FY11FY10FY09FY08FY07FY06FY05FY04FY03FY2002 FY13

Online penetration

TES launched OLO in FY08

OLO market drivenby OLO competitors

(e.g., eteach)

88%

87%

Market

TES

Actual market penetration

Estimated market penetration


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If online only penetration reaches 100% rather than the projected 87%, the profitimpact would be small

Online penetration

Impact on TSL profit if 2017 OLO penetration is 100%(vs. projected 87%)Millions of pounds

20

15

10

5

0

(5)

(10)

(15)

(20)

-25

Print and distribution

Editorial

TES print

HighLow

25

Comments

Total of 3.0m revenue loss from THE(print, print circulation, display print, andWUR print revenue)

THE

TES circulation

(7.4)m

(1.3)m

TES display print

Eliminatedcosts

Potentialpriceopportunities

Marketing, circulation and operations

Revenueloss

Additional onlineprice increase*

Note: *Currently calculated as 100 increase in bronze price, although exact mechanism to reclaim lost print yield uncertain; **

managements plan assumes increase in Bronze price of 200 by FY17Source: TES management data

Assumes TES uses additional headroom inonline pricing above increases assumed inmanagements** plan

Other unidentified savings 2m additional savings (to be identified)



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Key Themes







Yield


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TES has successfully increased yield at 12% p.a. since 2007, despite an increasingproportion of online-only ads

Source: Management information; L.E.K. research and analysis

1,1291,079

1,014920

786

639

0

400

800

1,200

1,600

Average TES revenue per ad total(FY2007-FY12)Pounds

FY12FY11FY10FY09FY08FY2007

CAGR%

(FY07-12)

12.1


Yield


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This has been achieved through continuous increases in prices and proactiveupselling of premium products

Note: * Week 1-12 FY13; **FY08Source: Management information; L.E.K. research and analysis

Annual increase in

online prices

Upsell to silver andgold, priced 250 and500 above bronze

Launch of new webpremium products in

FY12

Increasing print prices

Upsell from mono to

colour ads, at 10higher price per CCM

Online

Print

FY07 FY09 FY12

Bronze entry online

price

200 400 600

% silver and

gold

% uptake of newproducts

2% 17% 39%

12%*

22** 25 28

8% 21% 48%

per mono CCM

% of ads that are colour


Yield: Potential to increase prices


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As a result, the dilutive effect from migration to online-only has been more than offsetby growth in online prices alone with further yield growth achieved via successfulupselling

Note: *OLO and online component of print and online ads; ** excludes online component of print and online adsSource: Management Accounts, L.E.K. Analysis :

1,12977

19

88786

0

200

400

600

800

1,000

1,200

Primary+

12

Colourupsell

Price

(93)

Webclassified

FY12SCC/adGold/Silverupsell

Sources of increase in revenue per advert(FY08 - FY12)Pounds per advert

OLO%

294

Price

4

(237)

FY2008

Print**Online*

From 6% inFY08 to 45%in FY12

Average increaseof 1.5/2 p.a.(mono/colour)

From14% in FY08 to48% in FY12

Averageincrease of 90p.a. since FY08

From under 9%in FY08 to 40%in FY12

Web premium

productslaunched FY12

CAGR %

9.5




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0

200

400

600

800

1,000

1,200

Estimated monthly unique education visits* (000s)

1,2001,1001,0009008007006005004003002001000

Guardianschooljobssecondary

eteach secondary

Guardian schooljobs primary

eteach primary

TES primary

Guardian schooljobseteach

TES bronze

Note: * For competitors which are not education specialists, estimated education visits have been estimated by multiplying total visit numbers by the percentage of

adverts in education; **Package price scaled assuming 1.6 vacancies per year for primary and 6.4 vacancies per year for secondary based on average numberof teachers per school and gross teacher turnover

Source: Company websites; Hitwise; L.E.K. research

TES online pricing vs. competitors is more than justified by higher reach andperceived ad effectiveness

We use TES almost exclusively for our advertisingneeds. Admittedly, it is expensive but we get thebest response rates from there so we will not bechanging any time soon

Primary School, London (Dec 2012)

All permanent teaching and leadership positions goon TES. It has the best reach and we have had agood pool of candidates every time we advertised

Secondary school, Merseyside, (Dec 2012)

TES is certainly the place to go. Im not convincedthat other companies have anywhere near the samereach. A few years ago we briefly used eteach but itwas not very successful

Secondary school, London, (May 2012)

TES has been the main paid publication we havealways used and it has consistently given us thebest response. TES has so far been clearly betterin bringing more and better candidates

Secondary school, London, (Dec 2012)

Guardian schoolsjobs is cheaper but TES has so farbeen clearly better in bringing more and bettercandidates

Secondary school, London, (Dec 2012)

Secondary package**

Primary package**

Single ad

Price for basic 1 month advert (), school year 2012/13

Entry price vs. implied reach by online competitor (Sept 12)




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and historical increases to online pricing have had no discernible impact onshare

Note: *For online change in price represents % change in Bronze price for print and online it is a weighted average of the change in the print and Bronzeprices; **Change in share of ads for schools that have not moved between print and online and only between the two periods; ***FY11-12

numbers distorted by the impact of the launch of Primary+Source: Management information; L.E.K. analysis

Change in TES price* Change in TES share**

10

10

25

10

25

0 5 10 15 20 25

FY10-11

FY10-11

FY11-12

FY11-12

FY11-12

Online onlyschools

SecondaryTeachers

PrimaryTeachers***

Print + Onlineschools

Secondary

Teachers

PrimaryTeachers

2.4

0.2

0.4

1.4

(0.2)

(1) 0 1 2 3

Implied elasticity

~(0.01)

~0

~0

~0

~0

% change ppt change




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There is considerable potential to continue to increase online prices

0 100 200 300 400 500

Analysis of Pricepremium of leadersin other sectors

381

Comparison of Priceand Reach of TES vs.

Competitors

388

Pounds

343Ratio of pricevs. reach inother sectors

FY17 potentialbronze online list

price headroom of

315-425above current list

prices

Analysis of list price vs. reach ofTES vs. eteach and Guardian

suggest potential headroom ofc.185 at current pricing

Estimated potential to increase TES online entry list price (Bronze) by FY17

Review of the list pricing ofmarket leader vs. competitors in8 other sectors* suggest an

average price premium ofc.120%

Comparison of list pricing vs.reach of competitors inmarketing and law suggests aprice headroom of c.250 vs.

eteach

Low (eteach price increases at half historical rate; 15 p.a.)

High (eteach price increases at historical rate; 30 p.a.)

HighLow

Note: *Includes recruitment, retail, finance & accounting, IT, marketing, law, medicine and public sector




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In print, TES print pricing is considerably below major regional newspaper andthere should be room to grow prices further

Note: *Price for a 30 single column centimetre (CCM) advert calculated using the price for a 13 CCM by 2 columns advert as no 30 CCM option

available; ^Online advertising is through fish4jobs; ^^Print rate is for Education Guardian supplementSource: Company websites; NRS data; Premier TGI data, L.E.K. research

Pounds per mono colour SCC(December 2012)

TES print prices aresignificantly belowregional press themain competitors in print

Guardian schoolsjobs issimilar to TES but offerslower reach amongstreaders

10-15 increase perCCM by FY2017 appears

reasonable

77

65

106

3031

0

20

40

60

80

100

120

BirminghamMail

Pounds

Guardianschoolsjobs^^

Telegraph*TES ManchesterEvening

News^




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TES has been very successful in growing the uptake of premium online products

and this trend is expected to continue

Source: L.E.K. Analysis

0

10

20

30

40

50

60

70

FY11

Projected online upsell rates(percent of online ads that are silver or gold)FY2009-FY17Percent of total ads

FY10 FY17FY16FY15FY14FY13FY12

Mid

27

PPT change(FY12-17)

FY09

20

14

ForecastHigh

Low

TES has been highly successful in driving the uptake ofpremium online products (gold/silver ads) through proactiveupselling

for every 1 that comes in TES upsells an additional

0.46 (Week 1-15 FY13)

This trend is expected to continue albeit at a slowing rate ofgrowth, underpinned by:

Recent Agency initiative

agencies have historically been poor at upselling:percent gold and silver in FY12 was 30% for

agencies versus 45% for directly booked ads

TES have now reached agreement with a number ofkey agencies to approach schools directly to upsell

results to date are encouraging (c.10% uplift onFY13 YTD applicable revenue)

Continuing migration from print

Online only penetration significantly higher thanprint (already at 47% vs. 32% for print)

significant potential to upsell customers movingfrom print to online only




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In addition, the recent launch of new web premium products is projected to

contribute an incremental c.5m revenue by FY17

TES has recently launched a range of new web

premium products:- Sponsored Job and Featured Employer in Jan

2011

- range of premium modules (e.g. logo, profilepages), contextual ads, Featured Job and Job ofthe Week in Nov 2011

Performance to date has been strong

- 12.2% of ads* YTD** FY13 has purchased a webpremium product

- annualised FY13 revenue, based on YTD** of1.4m

Note: *Penetration of all ads (olo and online + print ads); **YTD is week 1-12Source: Management, L.E.K. analysis

Web premium revenue(FY2011-FY17)

Avg. yield perpremium ad

201 226 251 277 302305 182

22.5% Penetration rate20.6%18.7%16.8%14.9%10.8%1.9%

Forecast7

Millions of Pounds

5

4

3

2

1

0

FY17FY16FY15FY14FY13FY12FY11

6 High

Mid

Low




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In print, TES has rapidly increased the uptake of colour ads and future growth is

expected to continue at slightly lower rates than historically

Historically very strong uptake in colour following

2006 launch of new colour format

No theoretical limit to the proportion of colour.

Print is increasingly likely to focus on leadership/hard to fill jobs which are more likely to take colour

Potential migration of all jobs to the magazine (100%colour)

Limited cost differential between mono and colour

40

32

21

87

79

71

63

56

48

0

20

40

60

80

100

Percent of print ads

11ppt

8ppt

8ppt

FY17FY16FY15FY14FY13FY12FY11FY10FY09

Colour upsell projections(FY2009-FY17)

High

Low




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The resulting average yield is projected to grow by c.1% p.a. to FY17, slightly

below historical trends

Note: *Other includes print discounts and revenues from cover advertisements; **OLO and online component of print and online ads; *** excludes online

component of print and online ads; **before impact of Primary+Source: Management Accounts, L.E.K. Analysis

1,20815

5160

1,12914

45

0

200

400

600

800

1,000

1,200

1,400

Sources of increase in revenue per advert(FY12 - FY17)Pounds per advert

FY17Colourupsell

SCC/adPrice

(62)

Webpremium

Gold/Silverupsell

Primary+Price

266

OLO%

(344)

FY12

Print**Online*

CAGR %

1.4

From 45% inFY12 to 87%**in FY17

Increase of3 per CCMp.a.

From 48%in FY12 to78% in

FY17

Averageincrease ofc.60 p.a.

From 39% to

59% in FY17

Continued

growth of webpremium16% of ads byFY17



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Key Themes







International Expansion


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Teaching is one of the largest single profession in the world and there is a

significant potential opportunity to improve the efficiency of teacher recruitment

c.80 million teachers worldwide, of which UK is less than 1%

Homogeneous workforce and similar characteristics within and between

countries

Global K-12 education expenditure is estimated at c. 1,500bn of which themajority is teacher salaries (in UK state schools, teacher salaries representc.85% of total expenditure)

Outside the UK, recruitment of teachers is often unstructured, highlyfragmented and very inefficient

However, recognising the importance to the quality of education, some

markets are starting to look for ways to improve the efficiency of teacherrecruitment

80 million teachersworld wide

Need for moreefficient recruitment

platforms




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TES is in a unique position to address this opportunity and roll-out TES hiring

solutions internationally

TES resources are accessed by teachers in 265countries and territories

TES already has close to 500k registered users outsidethe UK and a substantial implied share* of teachers inmany countries e.g.

- 80% in Ireland- 28% in Australia- 22% in UAE

c. 13k new users register every week from an average of150 countries

6% of job ads are from overseas schools, up fromc.3.5% in FY09

Significant international appeal and reachUnique capabilities and assets applicable

internationally

TES position in the UK and the characteristics of themarket are unique in many aspects and TES model isnot directly applicable in other countries

However, TSL has a number of core skills and assetsthat are applicable in other geographies which would

enable it to:

- deliver superior reach of teachers leveragingTES Resources

- provide a more efficient recruitment platform forboth teachers and schools

- monetise the inventory of jobs leveraging its

best-in-class upsell practices

Note: *Calculated as TES registered users divided by number of K-12 teachers in each country




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TES strategy will be adjusted to the local conditions in each market but will

typically be based on a set of common principles

Build job inventory via

- free (or low cost) basic listings- aggregation of jobs advertised in other

channels- direct marketing to schools (via ownresources and partnerships)

Once at sufficient scale, monetise throughupsell of premium ads

Over time, seek to move to a low fee for allads

TESInternational

HiringSolutions

Inventory of job ads Teacher reach and usage

Volume of ads drivesattractiveness of site to teachers

Teacher usage drives efficiency of ads and

attractiveness of site as a recruitmentchannel

Leverage TES Resources to drive initialteacher traffic and usage (and therebyefficiency of job ads)

Establish partnerships with organisations withexisting reach into the teaching communitye.g.

- partnership with AFT in the US- agreement with Government and

Teacher Union in Australia




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TES has already launched in the US and India and are due to establish operations

in Australia

Very large and highly unstructured teacher recruitment market

TES already present via sharemylesson.com, launched in 2012 in partnership

with the American Federation of Teachers (AFT) Agreement with AFT to develop jobsite to radically restructure teacher recruiting

Near termgeographic

focus

Next phase of roll-out

Significant English speaking market, (250k teachers) and highly fragmentedteacher recruiting

TES in 3-way partnership with Australian Government and teacher union to

launch resources and job site

Large market with very high expected growth in number of teachers. Emerging

online recruitment market with no clear leader

TES India launched in October 2012

In the medium term, there is a significant opportunity for TES to roll-out in furthergeographies . The next phase is likely to focus on:

- other countries with large English speaking populations e.g. Canada- Spanish speaking countries / regions e.g. Spain, Mexico, Central and Latin

America




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Significant opportunity to radically restructure the US teacher

recruitment market

Very large market with 3.6m teachers and c.500k

vacancies p.a.

Highly decentralised at a school district level

- total of c.1,800 school districts with on average ofc.153 teachers

Unstructured, fragmented and inefficient teacher

recruitment market

- jobs principally listed on school district sites withlow reach and poor usability

- no efficient state level or national aggregator of jobs- no commercial competitor of significance- high reliance on word-of-mouth (due to lack of

efficient advertising channels)

resulting in significant difficulties for teachers to find

suitable positions and for school to find the bestcandidate for the job

Market characteristics TSL opportunity

Opportunity for TSL to radically restructure the teacherrecruitment market and provide a platform to better

match candidates and jobs via:

- aggregation of jobs at state level making it easierfor teachers to find jobs and providing greater reachfor schools

- more extensive and accurate information abouteach job driving better quality of applicants

- greater usability for both schools and teachers- more opportunities for schools to differentiate and

get higher visibility for hard-to-fill jobs

Existing position provides strong platform for growth:

- sharemylesson.com drives reach amongst teachers- ability to leverage relationship with AFT to driveuptake amongst schools and teachers

Initial focus on 3 largest states to test the proposition




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Opportunity to take leadership in online recruitment on the back of an

agreement with the Australian government and the teacher union

TSL already has significant reach amongst Australian teachers through TES Resources (1.9m downloads in 2012implying an average of c.7 downloads per teacher p.a.)

TSL has been approached by the Australian government to establish a dedicated Australian Resource site and has

extended this agreement to provide job ads

Substantial market 250k FTE teachers (vs. UK of 350k FTE teachers ) and 35-40k vacancies p.a.

Relatively favourable market and competitive characteristics

- large non-government sector (representing c.35% of teachers) already using paid media- government schools in largest states have access to recruitment budget- no significant commercial competitor

Potential for TSL to deliver a differentiated proposition via:

- higher teacher reach (leveraging Resources)- credibility and reach with schools underpinned by relationship with government and union

- superior usability for teachers and schools (e.g. more opportunities for schools to differentiate)

Initially free basic listings to build inventory but potential to move to paid model (for all ads) in the longer term




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Relatively small revenue opportunity in the short term but establishes

TES in prime position to capitalise on expected future high growth

Large number of teachers (c.7.6m) and vacancies(c.210k p.a.)

Very rapid future growth: 2-3.5m additional teachers by2022

Already high use of paid media for teacher recruitment(albeit low spend per job, in particular for state schools)

Online recruitment market in emerging and expected togrow rapidly

Current online competitors are small and unsophisticated

Market characteristics TSL opportunity

Soft launch of TES India in October 2012 with

encouraging results

Potential for TSL to take lead in online teacherrecruitment, leapfrogging existing online specialists byoffering:

- better quality and higher number of job ads- higher liquidity (underpinned by digital content andresources) driving higher response rates

- better usability for teachers and schools

Key medium term opportunity in the private sector (focuson urban areas)

Initially offering free basic listings, monetising via upsellwhen sufficient scale but potential to move to low fee forbasic ads given established paid-for market




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If successful, TES international hiring solutions could generate significant revenue in

the medium term and position the company for high sustainable long term growth

Source: L.E.K. Analysis

Phase I

Build scale and monetise via upsell

Phase II

Move to basic fee for all ad as business

achieves sufficient reach and inventory of jobsLimited coverage Nationwide

2-6m 7-22m

0.5-1.5m 1.5-4.5m

0.5-1.5m

21-47

3-8

2-5

Indicative scale of revenue opportunity (m)

0.2 l.e.k. commercial vdd report (summary)

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