Prosveshcheniye, Russia’s largest educational publisher, is looking to float on the Moscow Stock Exchange as early as next year to raise funds to supercharge its transformation from a Soviet school textbook mill into a services supplier to the whole school spectrum: from pupils and parents, to teachers and principals.

“There are new needs which cannot be satisfied by the government – the public schools cannot provide all these services,” Vladimir Uzun, president, told bne IntelliNews at the St Petersburg International Economic Forum in June. “It is a perfect opportunity to develop the business.”

Prosveshcheniye, which means ‘enlightenment’ in Russian, still commands a one-third share of the school textbook market, but government spending on this has not increased since 2011 and the future looks unpromising. “We should be happy if [spending] does not decrease,” says Uzun. “In our business, the share of government procurement has been decreasing every year. Today, the government purchases only 40% of our textbooks,” he adds.

Instead the company has been looking to mine other sources of revenue. Parents of pupils are one promising source.

Russian parents are becoming as demanding as their Western counterparts, Uzun says. “Parents want to see results. They want their children to be successful, to be adapted to meet reality,” he points out. 

The key need is to make education more personal, to create what Uzun calls “individual educational trajectories”. Schools are, he says, “very conservative but this is slowly changing”.

Part of this process is to make education more vocational. Prosveshcheniye is developing more career-focussed textbooks and equipment to enable pupils and their teachers to prepare for the career path they have chosen. “We have seen a huge growth in education services for pre-vocations,” Uzun says.

He adds that the company is developing special learning materials, and providing laboratory and other types of equipment to cater for specialised career-focussed classes dedicated to any topic from engineering to medicine.

Looking online

The new reality also means moving more into online education. Prosveshcheniye has recently formed a key partnership with search group Yandex to develop a school digital platform. Using Yandex’s machine-learning technologies, including computer vision and speech recognition, this will allow schools to create personalised education programmes, with access for pupils, teachers and parents. Each company plans to invest $1mn into the platform by the end of this year.

It also has an existing partnership with Samsung to create special learning products for high school pupils based on Samsung’s software. In the future, the companies also plan to collaborate on special courses, online classes, competitions and contests.  

Another promising new revenue source for the company is educational consulting, including training teachers, as well as advising schools and local authorities on new teaching methods, equipment, or even the layout of schoolrooms. “We have to educate to improve our education system,” says Uzun.

“The company has been expanding as a holding with new directions of development appearing: for teachers and school principals we now hold refresher courses that utilise new products and methods offered by Prosveshcheniye, together with the educational equipment for pre-vocational training and learning process improvement,” he says.

The company has signed agreements with several regions to develop specialised educational programmes for the particular business sectors prevalent in their territories. It will also advise the central government on its plan to build 57 new model schools.

The teacher-training programme has been a particular success. “We did not expect such demand,” says Uzun.

Last year, the company founded the Prosveshcheniye Academy to train teachers to work with new equipment and methodologies. This can include foreign trips to view the latest teaching techniques and technologies.

“We educate teachers. We teach them how to use all this technology, how to navigate in the modern world,” says Uzun.

Prosveshcheniye eventually wants to move into other kinds of professional training and start degree programmes, possibly via acquisitions.

Despite this diversification, more than half of the group’s RUB12.6bn in revenue last year came from the 5,000 textbook titles it produces, with a print run of some 79mn. This proportion will continue to fall as the new business areas grow faster than the mature textbook market.

Since privatisation in 2011 revenues have grown more than four times from RUB3bn to RUB12,7, with growth of 14% in 2016 and a similar growth expected in 2017. The group’s low costs – it claims to have the most revenue per employee of all the major global educational publishers from its 660 employees – give it an up to 20% net profit margin.

But to grow Prosveshcheniye needs further investment – particularly in its digital platform, its regional-specific products and its school equipment offering – hence the plans for an IPO.

Arkady Rotenberg, a childhood friend and judo partner of President Vladimir Putin, came in as a financial investor after the privatisation, but the sanctioned businessman has now sold his minority stake, according to Uzun.

“The rumours that Rotenberg is the real owner of the company are false, he has nothing to do with the company anymore,” he says. “Earlier this year, he sold his stake in the business. It was a good investment for him (the company grew five times in size during the time when he owned a stake), and yet we are happy to have acquired it, as we see substantial potential for further profitable growth and value creation.”

Prosveshcheniye plans to float new shares worth around 25% of the company in 2018-19, and then eventually increase the free float to 50%.

“Initially we considered London but now we are looking at Moscow as well as it operates on the same principles as London,” says Uzun. “If there is no difference, we will work with Moscow.”

Vladimir Uzun, president of Prosveshcheniye.