ADvTECH Limited (ADH) Earnings Call Transcript & Summary

[Presentation] Good afternoon, everybody, and welcome to our '21 results presentation. It really is nice to see everybody here in the flesh and particularly some of those from outside our organization. It's nice to see you again after the disruptions of the COVID pandemic in the last couple of years. So welcome, and thank you very much for joining us. Just a quick reminder, because we are actually streaming. We're going to take questions right at the end. Those online can submit questions, and we will collate and answer those right at the end. So if I could ask you all to keep questions until the end of the presentation, we'll deal with them all together and collectively. And then I've also been asked just to remind everyone that the presentation will be live on our website from 1:00 onwards, I think that's the idea. Okay. Good. Well, I'm sure you probably have had an opportunity to look at our results that were published yesterday, and you probably understand why I'm really quite pleased to be able to present these to you today. We think it's an excellent set of results, culmination of some really hard work. And it's very pleasing to see the group in such a healthy and robust position. And we think that as we go through, I hope I will be able to share with you that we are confident of the future, and we are very hopeful that we will sustain a similar level of performance as we go forward. Okay. I think just the key salient features, which you might already be aware, revenue up at 8%, that's somewhat higher than we reported at the half year. Again, I think some issues there. Firstly, the fact that we have more aftercare fees, boarding fees coming through as we've sort of returned to a more normal situation, our schools division. That contributed to a growth in the profit in the last 6 months. And also what's pleasing is that we've actually -- it's been a year where we've actually experienced consistent growth throughout the year. Generally speaking, our experience is that we start the year with a certain level of enrollments and attrition during the course of the year. We end up with somewhat low -- slightly lower level of numbers. And I think during the course of this year, we've actually seen a little bit of a shift in that trend and positive numbers and particularly in some of our brands. So that's pleasing as well and has resulted in a higher than reported revenue figure at the half year. I think the really pleasing is the translation to 22% growth at the operating result, so really good delivery in terms of our cost-effectiveness, debt collections and our operating leverage on the back of, we think, some nice enrollment figures for us as well. Headline earnings and normalized earnings, not much differentiation, which is also pleasing. Not many adjustments in that area. And again, the key feature of our business, one of our great strengths, our very strong cash generation, cash conversion. So all in all, a pleasing set of results. And I think, again, one of the other really pleasing features of these results is that it came from a delivery in all of our divisions. Our schools' business really starting to gather momentum and moving in the direction which we've been signaling and hoping, and we've seen some evidence forward really coming through strongly in the course of this year. Our tertiary division, continuing to deliver good results for us on the back of a number of years. And very pleasingly, after a lot of really hard work and some significant sacrifices, on the behalf of our resourcing management team, I think, very pleasing for them to see a recovery. That was undoubtedly the division that was most hard hit in terms of the effects of the pandemic. And so I think really just rewards for that management team in terms of all the effort that they put in and my upfront thanks to them for their contribution. Perhaps one of the areas is our muted revenue growth. We're actually making no apologies for that. We actually took no fee increases in schools. I'll talk a little bit about that during the course of 2021, acknowledging and recognizing the difficulties that consumers were under in terms of the pressure on disposable incomes. And we took less in inflationary increases in tertiary. There are some mixed issues in the sense. But overall, to be able to have muted revenue growth, which I think is very important in terms of our drive to create real value from consumers, and yet good operating performance results is particularly pleasing. So the revenue line, in particular, although somewhat muted and better in the last 6 months of the year than in the first 6 months, continuing our trend of consistent revenue growth as we build scale. And as I say, particularly pleasing when one takes into account the level of price increase, 0 price increase in schools, a muted price increase in tertiary. Our profit performance, continuing the trends of the last year and growing strongly. I think what was very pleasing and often perhaps what might be misinterpreted in these results is that it's a significant recovery off a low base from the COVID pandemic. And that's not the case. We actually did deliver earnings growth in the prior year as profit growth in the prior year as well. And what we've just shown is that the compounded growth rate over the last 3 years, which includes the impact of the pandemic, is pretty consistent with what we've been achieving for the last 5 years or so. So these are good results on the back of what we thought were pleasing results also under the pandemic circumstances. And very importantly, our margin growing and now at a high watermark for the last 5 years, a direct result of the operating leverage that we're experiencing as relative good enrollment growth, some really excellent results in terms of our operational -- internal operational efficiencies, particularly in the collection of debtors, an outstanding effort. And again, we'll touch a little bit on that later on in the presentation. Our group shared services, consolidation of transaction processing systems and operations really being honed and starting to deliver great value to us. So we're very pleased with that. So all in all, improving margins on the back of our very strong focus on efficiencies or with a view to driving value through our organization. Schools. Revenue up 6%, as I've said, and operating profit up 26%, really, I think, a very, very pleasing and encouraging result, particularly in the light of 0 fee increase. And also, very pleasingly, really started to demonstrate the potential that we see our Africa investments have had starting to come through and staying strongly. I think if we talk about enrollment growth as being the key and operating leverage, one of the drivers of our improving profitability in this area, fundamental to that are 2 really critical areas. Firstly, our brand portfolio. And over the last few years, we have spent a lot of time on making sure that we have a comprehensive portfolio that the value propositions are well understood, that we've resourced those brands correctly in order to -- and align people in terms of what that -- what the brand promises. And we think that this is fundamental to some of the enrollment success that we're enjoying at the moment. And secondly, probably even more importantly, and you'll know that I have spoken about this often in terms of presentations, is that the heart of our strategy is academic excellence. That is the product, that is our offering, that is our promise to consumers, okay? And really what's pleasing to see is how well we are delivering in this area, particularly if you take into account the disruptions from the pandemic, the need to switch in terms of modes of delivery. We've had a mix of online, hybrid back-to-class. So it's been quite a disruptive period, and yet our academic results, I think, are a testimony to ADvTECH's commitment to excellence in this area. If we look at our IEB, the Independent Examination Board results, we achieved a 99.3% right across the group and the IEB averaged at 98.4%. So we're -- I think that's encouraging for us. 91% bachelor degree pass rate, whereas the IEB averages at 89%. And one does need to remember that these are amongst the sort of the upper and better schools that are following the IEB curricular, so to be able to exceed that average, we think, is testimony to our school offerings and fantastic. In terms of the Department of Basic Education results, even more visible evidence of the impact of ADvTECH in the education, the delivery of education. 94% metric pass rate there versus the DBE average at 76% and a 71-degree bachelor pass rate versus a 36 in the DBE students. It was interesting. I was working through this presentation with Didier and I think, again, it's probably a testament to ADvTECH's commitment to results is that he said he was completely dissatisfied with the fact that we are at 94% and we intend to do better. And I think that's absolutely correct. We will strive to do better the whole time and improve those results. But anyway, I think overall and in comparison to market, a very good set of results. Average 2.1 distinctions right across our -- all of our brands, our operating brands, which I think is a good performance. And now 13% of our students enjoyed 6 or more distinctions. So again, strong commitment. In Africa, again, as we move and make these investments offshore, our fundamental premise of academic excellence remains right at the forefront. And probably, I think Jaco will agree with me, even more important in these countries is the delivery of really strong academic results. And here, I'm delighted to say that we've achieved a 100% pass rate in the Cambridge International exams right across our schools, which is, I think, excellent. An average of 3 distinctions per candidate, which is also, I think, an excellent result. And Gaborone International School delivered an outstanding set of results with 3.3 distinctions per candidate in their cohort. And Crawford International, the first year of the Cambridge International exams, and we've had 100% pass rate. And no fewer than 2/3 of those students have been accepted into universities in the United States, the United Kingdom, Hong Kong and Spain. And a lot of those, I'm told are, with this reason, scholarships. So an outstanding result, really underlining and emphasizing the Crawford brand's key proposition, which is academic excellence and helping to build our reputation. News hot off the press, which we celebrated yesterday, is that the Makini Schools, actually, have really come home and delivered. We had the second top candidate in the entire Kenyan government exams. That candidate was second overall in the country and also sixth in the country. So Makini really in the top 10. We've had #2 and #6 of the candidates in Kenya. And believe me, Jaco shared with me a brief social media clip. That was really well and truly celebrated in Nairobi at Makini School. So we think that's really good. And again, underlining the promise and the commitment that ADvTECH has to delivering academic excellence, which is at the heart of our strategy. Okay. So that does translate. If we've got our brand propositions right, our value proposition, our structures and processes and systems, and we are delivering on our core promise of academic excellence, we believe that will translate in terms of enrollment growth, and I think the evidence over the last few years is very clear. What's particularly pleasing is that the 2022 enrollments have been really strong for us and continuing this trend. So we really do feel that there is a significant level of momentum behind the initiatives that we've been putting into place. So overall, our schools division enrollments are growing 9% with schools in South Africa at 8% and schools in the rest of Africa growing at 10%. And I think that augers very well for us and puts us in a good position for 2022. Revenue, again, as I said, continuing the trend over the last few years. Good growth in the rest of Africa, some recovery after the COVID position. But generally speaking, following the trend and building scale, building momentum for us. Again, I remind you, off the back of no fee increases, so good enrollments underlying this. And I think if we look in the rest of Africa, Crawford, now out of a J-curve after 3 years, which I think is particularly good given the fact that we had that COVID disruption. Gaborone International School continues to receive very strong demand. And we are, in fact, looking at expansions on that, came to cope with the level of demand. And we've really seen a significant turnaround in terms of Makini's performance, so those assets performing particularly well for us. If we look at the operating profit, a significant lift for our school's division, moving us in the right direction and the promise that we've seen in the organization. Good profit improvement in schools and very pleasingly, the rest of Africa, after the COVID disruptions, now coming back and delivering strongly for us and demonstrating the potential that we know that those assets have. I think -- this is something that we've been looking forward to delivering. We did show promise. And remember, this was COVID where we actually really showed, I think, under the circumstances, some of them in here, well, the potential that we knew was there. We've now been able to truly deliver in terms of the margin improvement, beg your pardon, both in schools in South Africa. And you can see the rest of Africa now making a strong recovery, and we anticipate that we would obviously be able to do equal to and better than we delivered in South Africa. So I think all in all, a very pleasing result from our schools division. If we look at tertiary now, again, continuing the trend of a really strong performance. Again, on the back of a well-established brand portfolio and more importantly, I think, a very comprehensive range of programs, starting off in terms of short learning, skills development programs through vocational training, higher certificates, which is the bridge into degree programs, diplomas, degrees, honors, masters and doctorates. And the brand portfolio is well-positioned to cover off such a comprehensive range. And importantly, we have all modes of delivery. So what would traditionally be considered kind of distance markets, it's packed, post online, and part time, we differentiate. We are able to meet any consumer's requirement at any time and at any place. And that's fundamental to what we're trying to achieve in the tertiary division. We believe it's not up to us to dictate as to how people wish to consume their education, rather that we have methodologies, processes and systems in place to allow them to meet their own expectations and needs. And we really have, I think, a comprehensive range of delivery and a comprehensive suite of programs. across a really comprehensive portfolio of brands that are well established and trusted in the market. So this has been the case for the last few years in our tertiary division. And you see we continue to build, in our faculties, in higher education, a comprehensive range of offerings, and we think we're extremely well-positioned here and the results show it. So our growth in terms of revenue -- I beg your pardon, enrollments, continuing the trend over the last few years, again, moderate increases in line of -- and slightly less than inflation. And we've been growing in both content and online. So we are building a strong presence in every respect. Operating profit continues to increase -- improve as we enjoy operating leverage share. And our margin, I think, really performing extremely well and a sign of a very healthy, robust business. So enrollment growth, operating profit improving through operating leverage, margins enhancing. We think that our tertiary business is extremely well positioned and serving us well into the future. Resourcing. Yes, the key feature here after a torrid experience through the pandemic, where this business was undoubtedly most adversely affected and the resourcing management team, as I've said, stepped in and took the necessary action in order to preserve and to ensure that it was a sustainable business, and our thanks go to them because that was not easy, but they were determined and swift and very focused in their action. And what's good to see is the recovery now. I think also pleasing was, as we stressed previously, their decision to pursue alternative markets and alternative geographies that really pay dividends when the core of the business in Saharan South Africa suffered so badly during the pandemic. And the figures that I show you coming up will demonstrate that clearly. Our portfolio of brands, which we continue to see -- continue to evaluate, there's been some rationalization of late, so it really is a well-focused business. But if you look, our resourcing revenue continuing to grow, primarily recovery in terms of SA, but the continued growth of the rest of Africa businesses. So the revenue line growing. One of the features here, you will recall is the revenue recognition that's required in terms of the IFRS reporting standards for our Africa operations tends to skew that business. We have to report the revenue of the payrolls that we run in certain instances, depending on the contractual arrangement. That does skew the revenue line somewhat. But again, here is the key features. The operating profit has returned, the breakeven, which was primarily because due to the contribution of the rest of Africa, whereas resourcing in South Africa really suffered. But this year, the recovery here in South Africa, certainly not back to the levels that we would want, but the overall position of the business has been buoyed by the continual growth of our rest of Africa business, which is really proving to be a substantial asset to us. Okay. Margins. Coming back again towards a more normalized situation, recognizing those 2 different aspects of the business that we have in Africa and locally here and resourcing South Africa. Good performance and again, under some really tricky circumstances, but nice to see it recovering. So overall, we think a very strong financial performance. If we look at the revenue contribution Obviously, a disproportionate revenue contribution from our resourcing business because of that issue of revenue recognition that I've spoken about. But our operating profit contribution, resourcing coming back in and a nice balance between our tertiary and our schools business as the schools' profitability has grown and enhanced. And we have -- as we said, we are agnostic between these 2 businesses in terms of school and tertiary. We believe that both have enormous potential for us here locally in South Africa and on the continent, and we are anxious to explore those opportunities for both of those divisions. I think one of the key features, as I mentioned at the outset, was an outstanding performance from our group shared services in the collection of our debtors book. You will see here that our trade receivables are lower than they were in the prior year and yet what you would all expect in a very difficult market, a significant performance. And if we just have a look at the performance over the number of years, and just to kind of -- here -- this is our collection pattern throughout the year. The blue line is 2018. 2019, you can start to see where the gaps, but then bringing it back in line. 2020 obviously, the pandemic and the skewed effect. But if you have a look at what our group shared services have managed to do in terms of collections, this is now one of the best performances. Didier, I stand on correction, perhaps the best performance that the group has ever delivered in terms of its debtors, collections? Yes. So I think starting to demonstrate the value of our group shared services, the change in systems, focus, structures and processes and an outstanding performance, which has resulted in a significant contribution in the income statement in terms of reduction in our credit losses, so a great performance. And to Neal and the team, Boardman, who runs our Group Shared Services, it really is very pleasing to see the impact of the effect that this very focused approach is having on the organization. So as a result, cash flow is, of course, again, a key feature of the ADvTECH business, a really strong performance, which, of course, has allowed us to pay off the debt probably faster than we had anticipated. We have been in a period of investment as we've actually grown in terms of scale. And also, as we've addressed our portfolio, you can see here clearly the investment that we have made over the years, acquisitions and then the alignment of the portfolio, building around mid-fee schools, the investment to make sure that each one of the brands has the correct infrastructure and asset offering in order to meet its value proposition, which increased our level of borrowings. But now we see a significant reduction as we pull back on that level of investment, and we start to get the returns. I might add that at all stages, we've been well within our covenants in terms of borrowings. The balance sheet has always been strong, but it's just at this point in time in an even healthier state, okay? Our actual -- the bank covenants of 3.5. Our internal covenants at 3, the actual at 1.6, and compared to past year at 2.1, so you can see the improvement. So very sound, very strong balance sheet following from the good cash flows that we have. And what we are able to now clearly show, we had perhaps hoped to be -- we'd show this maybe 1 year earlier, but the COVID pandemic kind of interrupted on that score, but a significant turnaround in our ROFE. And so we have been through this period of investment as we've made sure that the business is well structured, well positioned, growing in terms of scale and critical mass, but we now have a portfolio of assets, which we think are performing well, contributing and we expect the ROFE to continue to grow as we deliver on the investments that we have made, so I think all positive and good signs. Just in terms of the CapEx, you can see where our CapEx is directed now. Only 1 new tertiary site, that's the Rosebank College site in Pretoria, is it? Portion of that. A portion of it, yes. Correct, yes. But most of it into actually just the existing sites, building out the capacity as the volumes grow and ensuring the correct fixtures, fittings and investments in IT. So that's the thrust of our CapEx going forward. And of course, you can see how we're starting to improve the utilizations again. Coming from 86%. The investment program as we invested in the mid-fee schools, making sure that we had the right kind of complement and mix of assets, but now our capacity utilization on existing build moving back up to 83% and ultimate capacity moving back to 65%. So we expect that trend to continue as we look forward. Most of our investments and CapEx will be on completion of build-outs. We do see 1 or 2 opportunities, but we will reserve those decisions until we're absolutely certain that the business case for them is sound. So we do expect utilizations to enhance and to improve. Right. So I think we now, within the business, are focusing on building what we believe will be sustainable, long-term competitive advantages. I've shown you our strategy slide in many occasions in the past, and this is a document, this 1 page that really proved to be extremely valuable for focusing our minds in terms of what we have to do and deliver in order to ensure the success of ADvTECH. And I remind you that at the heart of this is our commitment to academic excellence. But these components, if we went through them, which I don't intend to do today, I think you could understand how every single one of them has contributed to the performance of the businesses we're presenting here today. But what we've really done, I think, is put into place some building blocks. We have a clearly defined strategy. We now have well-positioned brands. We've resourced those brands correctly with really capable skill sets. We've demonstrated that we have an agile and flexible business. I think one of the most pleasing aspects of the COVID pandemic, was it gave us the opportunity to stress test the organization. And we moved 75,000 students to online education in 3 weeks. And we did that by leveraging across our various different divisions. We took our online capability, our learning management system from our tertiary business and we quickly used those skill sets, that knowledge, that experience and the technology to supplement in our schools division, which has traditionally been, of course, in the face-to-face area. Highly successful, never lost an academic day and delivered good results. So again, demonstrating, I think, the flexibility, the agility of the organization, its ability to respond to crisis and to survive. And so that actually was a really nice kind of an assessment for us to be able to make. Okay. So we actually feel that now we're in a position to really start to look at building competitive advantage and to invest confidently in the plans and the opportunities that we see in the future. Another way of looking at it is that we spent some time in the first phase of fixing our structures, our systems, getting the brand portfolios and the value propositions correct, investing in the brand resources and really standardizing systems and operating practices. And honing those in the second phase into what I call operational optimization, where we set benchmarks, targets. We focused on performance management, okay? We introduced a number of development programs in areas that we thought were key such as the Principles Development Program to really ensure that those key leaders at our educational institutions have the skill sets and the understanding and the knowledge and the alignment of what it is that we were trying to deliver by way of value propositions in the brands and operational effectiveness, okay? We've lifted our game in terms of customer service and our focus on the marketing required to communicate those value propositions. And I think we've certainly enhanced our financial skills and our financial controls through consolidation, transaction processing, consolidations and standardization, so we built a really solid base. But none of these, okay, would give us what I would call an irreplaceable or a sustainable competitive advantage that wasn't replicable in the relatively short term. Any organization can undertake this kind of an activity with focus and intent. You can standardize your practices. You can put into place good management systems. You can optimize your existing operations. What we're looking to do is to build a sustainable competitive advantage. Now we acknowledge and recognize that there is no such thing as a long-term competitive advantage because everything can be replicated or copied given enough time and money, I suppose. But we think we're in a unique position to build significant competitive advantage that will be much harder to replicate and really differentiate ourselves from the market. And what we're doing is we're looking -- we think that there are 3 areas in which we can focus and which we can do better than anybody else, and that's what we're applying our minds to. The first one is in teaching and learning. We think we are uniquely positioned to become the experts in teaching and learning across the continent, and I'll explain why. The second is that we've created a platform and the structures and processes in which we can really now start to leverage and embed technology for competitive advantage. And I'll explain what we're going to look at in that area. And then finally, we can leverage our scale, okay? And that gives us significant advantage, which I think few other businesses in our sector would be able to do. So firstly, let's look at the teaching and learning and why I believe we are so uniquely positioned. The fact is that we have both schools and tertiary, okay? And we integrate these through our central academic team, the Independent Institute of Education, which is a significant investment in intellectual property. We have a significant number of highly capable, well-qualified people whose basic focus and thrust is in the area of education, okay? Our tertiary business, as we strive for university status, we'll actually spend a great deal more time and effort and resources in research and development. And that research will be focused on the very best of teaching and learning practices, okay, which is inherently the core of our business. We can actually conduct research within our own organization, okay? We have 108 schools. We have 30 tertiary institutions. We have Bachelor of Education programs. We can take that research and development. We can feed it back into our system in terms of how we train, develop and educate teachers for the future. We can take the best of those teachers and bring them into our system and we can actually then move people through our system in terms of our various different brands, our various different geographic locations. We are uniquely positioned, because we are a combination of both schools and tertiary, to leverage the knowledge, the understanding, the expertise of teaching and learning. And that, I think, will give us a significant competitive advantage. It is often spoken about the problem of education will be where will we find the right caliber and quality of teachers and our organization is uniquely positioned to develop our own, to conduct research, to enhance that educational experience and to keep that flow going throughout our organization. So we think that we are uniquely positioned to build significant competitive advantage in this area of teaching and learning. And if that becomes a core focus and a thrust for us within the ADvTECH Group, we think it'll stand us in a significant good stead in the future. The second is to start to embed technology into the way in which we deliver education. You'll appreciate, and there's a lot of hype around technology as to how it might be disruptive and change the models currently. We believe that technology is a phenomenal enabler, okay? But what we really are determined to do is to use it in a very particular, very carefully considered way to embed it into the way we deliver education as opposed to kind of unicorn status that some technology developments have. We spend time building a platform, our systems capability in the areas of customer management, student registration, debt collection, graduation and credit performance management. We have the basic systems, standardized to leverage right across our group. We're now moving into the area where we wanted to try and take technology and integrate it into the teaching and learning process. Now there are many examples in our business, and I know Des will probably have a little bit of a wry smile and roll her eyes because I am known to sometimes throw my toys out of the cot. We have many examples in our business where individual operating units get hugely excited about some sort of app or development and go off and buy it and bring it in. And of course, that has benefits, but in a very limited way as the people who are excited by it, drive it and use it, but nobody else does. Okay. What we're trying to do is to identify the technologies that will really help us to deliver first-class best-of-breed teaching and understand how learning takes place that -- and using technology to facilitate that, but then embedding it in this part of our process. And we have a few examples I'm going to share with you in a short video as to where we believe we will make these, okay. But it's putting it in and making sure that we have the best possible student experience. Out of that technology, the use and the implementation, will be an incredible amount of information, okay? And what we intend to be able to do is to take that information and to use it in terms of making proper decisions with data-driven insights. We will -- we have over 100,000 learners in our group. If you take it right from our skill set programs right the way through to our post-grade qualifications. That in itself is a significant database for us. And if we actually link in the technology developments and data that is going to be available to us [ westward ] through systems, we can start using it in the area of adaptive and personalized and predictive indexes, predictive data-driven decision-making. So this is what we're trying to do is to create, if you like -- I was going to use that buzzword, an ecosystem of the technology. I'm not sure if that's the right approach to it. But starting off with the fact that we've got a base platform and a significant capability, we're looking to use technology embedded entire processes for the extraction of data that helps us in terms of decision-making that improves the whole process. So we think this is another area that if we apply our minds correctly, we can build significant competitive advantage which would be very difficult for any other operation in the sector to duplicate, replicate or even come near to what we could do. This is the video. [Presentation]

Just 1 example of how we are using technology to aid in terms of the learning process. And what is beautiful about that system is that actually, it's fully automated and integrated on the LMS system. So as the children work, as they submit their homework, as it's marked and as it's recorded, all of this data is actually automatically uploaded into the system and the dashboards are extracted automatically. And you can see, you can have real-time information available as to where are the problems, what do we need to do and directing the interventions thereafter. The other beautiful aspect of this is -- that is in Evolve, which is our new brand, our new online school. And so what we're able to do is to start with this technology right at the outset and embed it in the processes. You'll appreciate a lot of other schools are well established. They have their own practices. They have their own ways and methods of operating. And implementing new systems is sometimes quite difficult. Yes, we can use the Evolve brand almost as an incubator, develop the system, hone it, understand, and then we can actually start to develop it through the rest of the ADvTECH organization. Again, a competitive advantage that others would find very difficult to replicate and duplicate. This is just 1 example of how we're using technology. We have a couple of other projects that we're working on at the moment, which are all really exciting in terms of what they enable us to do in terms of improving both teaching and learning practices. I'm quite excited about what we can do here. And the final area of our competitive advantage is how we can deliver, how we can actually leverage our scale to deliver value. Value is what we're talking about in our organization. We understand that private education is expensive. And in fact, the problem with private education over the last quite a few number of years is that it has been 2 to 3 percentage points above inflation, okay? We don't see any value on -- we are concentrating on trying to drive operational efficiencies, effectiveness in every which way we can to eliminate wastage, eliminate duplication, so that we can deliver real value to consumers. We say that in South Africa and in Africa, demand is not the problem. Affordability is the issue. And therefore, if we can really apply ourselves to what we call educational productivity, drive value from a consumer perspective, it's going to position us significantly better than anybody else. And we think our scale gives us a competitive advantage in that area. So those are the 3 areas where we're intending to focus. And as I said, we've been through a process of standardization, operational optimization. We're now moving into where we're going to really concentrate on building these significant areas of competitive advantage, which I think will stand us in really good stead in the long run. So the investment case for ADvTECH, I think, is a powerful one. Firstly, there is an inherent underlying demand for quality education here in South Africa as well as on the rest of the continent, okay? So demand is strong. okay? If we can provide the quality education solution at an affordable price in a value equation that's meaningful, we're well positioned to take advantage of that demand. We've demonstrated and built a robust, flexible business model. I think the results that we're seeing now, the results that we've delivered over the last few years are just starting to gather momentum and demonstrate the potential of the organization. So we're excited about that. There is no doubt in my mind that we are the quality asset in the education sector. We have a wonderful established brand, a portfolio of brands. We've got significant strong free cash generation. We've got a really sound balance sheet, okay, and we've got good financial controls in place. So I think we're a quality asset that is best poised to take advantage of these positions. And of course, there's probably no better ESG investment at the moment than an education entity. So we think we also tick that box from an investor's perspective. I'm going to talk a little bit about Africa because I know it is a point that often -- some of the investment community are concerned. South Africa's track record of cross-border investments is not exactly great and people are actually nervous if we start to venture into other territories. I think that first and foremost, I really believe that Africa represents probably the best global opportunity for education. We have a young population, emerging markets, high degrees of urbanization. All of the factors that you would look for if you were actually interested in investing in education are probably best represented in Africa. Furthermore, governments across the continent really struggle to provide the kind of quality education that parents would be looking for, for their children. So I think we're, again, uniquely positioned to take advantage of that. Yes, we understand that different geographies bring different risks, but I think we're starting to build a track record and a capability and a competence of operating in these environments. And the final point that I make here is that schools, educational institutions are autonomous independent operating units. They are not dependent upon any kind of supply chain which retailing and manufacturing, particularly more sophisticated models of retailing and manufacturing do require efficient and sophisticated supply chains. Our school can operate independently autonomously. Our drive to consolidate transaction processing and we're manning that remotely from the actual education institution is evidence. We are achieving that here in South Africa. There is nothing that's stopping us from achieving it across the continent. And therefore, I think we are positioned quite well to take advantage despite the risks of other geographies. And having said that, we will be careful. We will be cautious. We will be prudent in the evaluation of those opportunities. But I think we're also demonstrating that we've built up a bit of a track record, okay? So we've got a sound operational base, an agile and responsive business model. There are certainly significant growth opportunities for us, and we think that ADvTECH is uniquely positioned with its competitive advantages to be in the best position to leverage those growth opportunities. Our prospects, obviously then, I think we are quite excited and confident about the future. Its ongoing demand, we have really focused our efforts on delivering quality and value through our -- our focus on academic excellence. We think that there are good growth opportunities. And though I might -- our drive on efficiencies, eliminating waste have all been reasonably successful. We're confident that we have more to extract. So we're actually quite excited in the sense that we think that we're well positioned to take advantage despite the fact that here in our home base, there remain a number of socioeconomic problems. They probably will heed the ultimate potential of this market. But we think there are other investment opportunities for us. And one of the things that gives us the greatest level of confidence, I suppose, at this point in time was this very positive enrollment period that we've been through. We spent a lot of time on market, customer service than brand value propositions, systems, processes and delivering on our promise of academic excellence. And we think that to the extent that we're starting to see real momentum gathering in our enrollment growth, that, that's evidence we're delivering in that area. So we're quite excited about that. And probably the best news of all for investors is the Board also encouraged and confident in terms of the business' performance, has looked to reinstate the dividend at and around the same levels of cover that we had before the pandemic. So the final dividend will be ZAR 0.31, making the total dividend for the year at ZAR 0.50 cents, and we think that's also a strong signal of the confidence that the Board has in the financial position and prospects of the business. Okay, so are there any questions?

Firstly, are there any in the room? Any questions here that we can take? Yes?

[indiscernible].

Yes, okay. I can't tell you when we will do that. But what I can tell you is the processes that we're following to try and achieve it. Firstly, internally, we have put into place specific projects in order to make sure that what we've done is we benchmarked against the public sector and said, what do we believe would be absolutely essential for us to have in place to be able to claim university status, okay? And we've looked at the range from what we consider to be the top public institutions to those that are perhaps was more lower down the ladder. And then we're aiming to deliver that. We understand that we need to put that into place. The real issue is that the minister has not yet set the criteria despite the fact and this has been for a number of years now. So we have, in fact, taken legal action to get the minister to define those criteria. We asked him to -- we gave him, I think, some 3 months to set -- to respond to us. He failed to deliver -- he failed to respond and indicated that they did not believe that it was under any time pressure. And as a result, there is a court date, which I think is April 14th, am I correct? Which at this stage is unopposed from the government. So in other words, if we do go to court unopposed, hopefully, the court will then set us an order that the minister needs to give them a particular time to set that criteria. We're not sure if that will actually happen or if, in fact, just prior to the court date, the minister will oppose the papers. If that happens, then obviously, the action would be delayed somewhat and a new court date would be set for that matter to be heard, so we're not sure. Our thinking behind this, though, is that actually what we had intended to do is to get our own house in order and then actually insist that the criteria was set. But we realize that when that's set, it might not be the guarantee that we can achieve it. And so therefore, rather than run these processes sequentially, we've decided to run them parallel to try and shorten the time circuit. So that's a long answer to your questions, says, I don't know. But we do think it's critical, and we are taking very specific steps to try and get those criteria established so that we can actually measure ourselves against it so we can achieve university status. For me, the benefits are quite obvious. At the moment, we have a unitary accrediting system in this country. So our degrees are the exact equivalent of a degree that you would get from any public institution. Capetown, Stellenbosch, Pretoria, Northwest, KZN. We all submit to the same accrediting authority. Once those degrees are accepted and registered and accredited, they have the same SAC or qualification rating. The disadvantage that our students have is that they are not able to say, "I went to university." And no matter what we think or say or think about names and a rose by any other name, that certainly provides, I think, an unfair advantage to students who did go to public institutions who can claim they went to university versus our students who do exactly the same qualification and yet can't say they went to university. So when they go for a job interview, in my mind, they're at an automatic disadvantage, and I think that's unfair. I think that's a compromise on their basic human rights. My speech. So we're determined to do it, and we think, actually, it will really help us in terms of positioning our brands, which really do deliver fantastic academic content and results, okay. Anybody else in the forum? Or can we go to these -- Didier, have you got some questions there?

Yes, we've got quite a few questions. First one, will management or the Board consider a listing in another African country like Kenya to improve localization and raise funds to -- in that market to accelerate outside of South Africa growth?

What I can say is that not necessarily are we considering listing in another African jurisdiction per se. But we certainly have given consideration that once we've gained sufficient scale and size to listing in an altogether different jurisdiction, one of the problems that we believe in terms of ADvTECH and its rating in the market is that we are seeing as very much a South African country risk. If we look internationally at education companies, they generally carry a much higher premium than we've done in the past. And we think that actually, if we were to list in a different geography altogether and perhaps an overseas jurisdiction, and be a pan-African education company, we might be able to overcome that kind of a discount that we have for being a South African-based entity. So that's a part of our plan. But obviously, there's a long road to travel on that one. We have to achieve the necessary scale and size and scope of operation in order to warrant a listing on some other jurisdiction. But it's in our thinking. It's in our thoughts, okay?

Yes. Maybe I can just add to that is we see improved results in the rest of Africa. Our balance sheet is now strong enough to be able to be leveraged to some extent. And we believe, at least, our immediate needs we will be able to fund. So the acquisition -- sorry, the expansion in Gaborone International and as Crawford grows out, we believe we will be able to fund that through our own cash flows and our own Africa balance sheet. So that'll also help. Next question is, is there a minimum dividend cover? And I'll answer that one. In the disclosure that we gave around the dividend, we said that we've returned to approximately the same level of cover as was in place pre-COVID, and -- which is about 2.4x -- the earnings is about 2.4x the dividend. So I think that what the Board is flagging under normal circumstances, we would see the dividend as being between about 40% and 45% of earnings. Obviously, if there's major acquisition opportunities come our way, the Board would obviously consider that, so taking into account the needs of the business. That is sort of the thinking going forward. Okay. Next question, how much operating leverage remains unused in the schools and tertiary business? Is there room for operating profit margin expansion? And sort of the second part of the question, can you comment on the resourcing business performance, mainly sort of post year-end, mainly the South African business?

Okay, I think what we've -- as we said before, we think that the tertiary business is delivering at and around a margin that we think is really positive, the [ ruble ] and we'll maintain at that level. We've indicated that we do believe that the schools' business is going to recover, and we've always targeted to be at and around the same level of our tertiary business. So I think what is pleasing in the results as we started to see that margin moving up, and we do intend to continue to -- we do believe that we can get that to go. So operating leverage in the schools business, absolutely. We think we -- probably the capacity utilizations demonstrate what the opportunity is there. Obviously, we look at, in terms of where there are opportunities for new schools, as I said in the current environment, we think our portfolio is pretty well balanced. There may be 1 or 2 for us that we'll make a decision on in due course. But we think that there is scope for operating leverage still within the schools business and move the margin there. Tertiary business, it's different and much harder to give a specific answer. It's much more flexible in terms of our ability to leverage. And the tertiary business has always surprised us on the upside. So let's just leave it at that, I think, at the moment. Was there any other in that question?

The resourcing.

Oh, resourcing.

The post year-end...

Resourcing. I think probably we're looking for a great recovery in terms of '21 and certainly into 2022, the trading in South Africa has continued to be positive. Lin, would that be fair to say? Yes? And I think -- so the signs are, I suppose, is that the recovery that we've seen is, we believe, sustainable. So here in South Africa, look, it is still very much muted and a suppressed economy. So we're not expecting job creation and employment opportunities to go through the roof. On the other hand, I think what we've always tasked our management team and the resourcing and what they've always delivered on is what we say is in a tough market or a declining market, that we should be growing market share. And that's the goal. That's the objective, and I think they've been able to deliver, and they have a track record in that area. And we also remain very excited about the potential of that Africa business, which seems to go from strength to strength and is not really affected by COVID at all. So it looks like the recovery in resourcing is sustained. And the trading environment, while it's not fantastic or exciting, is at least better than it had been.

Okay. What sort of increases are envisaged for both fees and staff salaries? And then also in terms of the attrition or the financial conditions and stresses on the parents versus immigration in terms of our attrition.

Okay. Our very clear and stated goal is to continue to drive our operational efficiency and effectiveness programs to deliver value. And what we're aiming to try and do is to ensure that our fee increases remain at or even slightly below inflation. We think that's the best way to signal that we're delivering real value. In order to be able to do that, obviously, we need to work hard at eliminating wastage, duplication within our system and continue on this program of consolidation, rationalization, the elimination of administration costs, and in that way, deliver value to consumers. In terms of teachers, again, really a critical or our educators in total, a critical component of our business is an obvious statement. And what we're really looking there are remuneration and reward systems, which are quite innovative in order to try and ensure that our educators can, in fact, enjoy the benefits of the success of ADvTECH. So it's been an area which is quite traditional, quite bureaucratic in terms of how pay structures are formed and what the expectations are. We've done a lot of really good work. Our HR team led by Vanessa Crawford is really sort of driving this to try and be far more innovative, creative and to create alignment between our educators and ourselves in terms of innovative reward systems. As you go, from central academic team, it's also been integral in terms of that. So rewarding performance, rewarding and aligning behaviors, and we're hopeful that we would be able to, at least under that system where we're driving waste out of our system, improving efficiencies, and yet reward our staff in creative and innovative way so that we can attract the best. So we're confident about the position there. And then finally, you're talking about attrition rates. Well, I think our collections in this year speak for themselves, and we are very confident that we'll be able to continue the change processes and systems there and a very clear focus on collection, I think, is evidence in itself. Undoubtedly, it's a tough time for consumers. We understand and we appreciate that. On the other hand, we have the right level of focus, the right understanding, and we intend to continue to drive in that area. Touching on immigration, always a point. I know that everybody is very interested in what's happening and how immigration might affect us. I think it's fair to say that we have seen -- I'm looking at Mike and Maurice and [ Christa ] here as representatives from the division, probably since a return to a more normal environment and borders opening, there has been, I think, a definite escalation in immigration. On the other hand, I think if you look at our enrollment numbers, our net enrollment numbers are very positive. So yes, that's something that we would wish is rather not here. But we talk about controllable departures and uncontrollable departures. And we put immigration into uncontrollable. There's nothing that we can do if families and individuals have decided to leave and look at other pastures. What we're focused on is how do we optimize our own particular performance. So I think, yes, it's a feature, not overly worrying at the moment because, in fact, our enrollments are very positive. We wish it were rather not there, but it is, and we're dealing with it and coping.

Okay. Next question. It's to do with the distance learning in particular. So could you talk about your -- the relative size of the contact versus distance learning markets in tertiary? And does Oxbridge give us sufficient scale in the distance learning market? ADvTECH, through its other brands, seem to be much stronger in the contact and blended.

Look, online is still a relatively smaller portion of our business than our face-to-face, our traditional face-to-face. It is growing, so is our face-to-face business growing. And so we're kind of agnostic in a sense. We have the programs, we have the capability to deliver, and really, we feel that that's up to the market to decide. I'm trying to think in percentage-wise. Didier, I would probably say that our online students are probably not more than 15% at the moment of our tertiary business. But we're comfortable and it's growing, and we'll continue. By the way, whenever we register in a creditor program, we do it for both online and also face-to-face. So we have a full suite of products available and we offer it. Oxbridge. Oxbridge, one needs to think about where its market position is. It very much was a business that was at skill sets, vocational training, and a different area of the market. We're looking at actually extending their product offering into the area of higher education, particularly higher certificates, for example, which is the bridge for those that didn't get bachelor passes into a university degree program. So it forms part of our suite and our portfolio of brands, and we position it accordingly. It has very good capabilities in terms of pack and post, and I think it is important to bear in mind that there are 2 very different sectors of the market. Those that do have access to online data and can make use of learning management systems and the likes, and those that are still relatively unsophisticated environment for distance learning. And South Africa, as you'll appreciate, is a market that has both requirements. So that's generally how we tend to see it, and we're satisfied with the portfolio that we have and how we'll build those propositions in due course.

Okay. The next 2 questions are fairly seamless. I'll try and combine them. It's really to do with the fact that we reported our tertiary numbers at June last year because of the delay in the metric results. And if you compare the February 22 numbers, the enrollment numbers that we've reported now versus June 2021, the tertiary numbers are showing relatively flat. So just to really understand, is there something in the base there or the impact of that?

No, it's more around timing, I would say. It is -- this -- whilst last year was certainly a complicated and compromised enrollment season due to the delay of metric results, this year is equally being quite a challenging registration period for us. And also, we're starting to see a sort of almost -- maybe it's a throw over from the prior year, the delay in the registration. And those figures have moved. We obviously, from a reporting purpose, have to pick a cutoff date to report. I think overall, as we've interrogated the numbers with our various different brands, we're satisfied with performance. In fact, if anything, we are seeing a shift towards what we would call the degree and the postgraduate program, some of the higher certificates, which, as I say, are bridging or perhaps that's an area where we're seeing a shift in terms of numbers. That's not overly concerning to us because, obviously, as we pursue university status where those degree programs and post graduates are the focus, high certificates are in fact, sort of the bridging. So yes, the issue is more around timing, the registration processes. And in the actual underlying information that we're seeing, we're still comfortable with our results.

Okay. There's a second part to the question. It's about if you take the schools, if you take the June 2021 numbers, it would show that utilization of capacity was also at 83%, which is similar to what it is reported now for 2022. And then would that affect the operational leverage going forward? I think -- just remember that going into 2022, we added 7% additional capacity. So even if it is flat relative to June, it's on a much higher capacity. And yes, we do believe there is still operating leverage to be had in the schools division. I think we see strong enrollments where we haven't opened any new sites. We do know that CapEx, on existing sites, is much more efficient than on new sites. And all of our CapEx and all of our capacity expansion in the last year has been on existing sites. So we would think that the operating leverage would still come through over the next few years in the schools division. Okay, a question here. What would we say is our greatest bottleneck to growth -- the -- and execution going forward? Capital skills, affordability? Regulation? Anything else?

I would say, in terms of -- probably regulation and affordability. In fact, maybe affordability and regulation are the greater bottlenecks. I think we're feeling very comfortable about the strength of our balance sheet, the borrowings and our ability to fund any necessary expansion programs that might come our way, barring any significant and unforeseen major acquisition. But certainly, in terms of just coping with our own levels of growth or even improved growth rates, we are confident on that area. I think program accreditation, the regulatory environment, putting into that university status is another area. If we could remove that barrier, I think it would help us in terms of the competition as well. And then affordability. The South African consumer is under significant pressure. One of the other things that we're looking at and although we haven't made that much progress yet, is the NSFAS funding, which, of course, is available only to those in the public sector. We're looking and saying, well, if the objective of that NSFAS funding is to try and improve access for all and particularly those who can't afford, then limiting it to the public sector is not necessarily addressing the issue. Because to all intents and purposes, the public sector is full. Most of the universities have far more applications than places they can offer. And one of the requirements for NSFAS funding is that you have to have an access into a public system. So if you don't get access, you can't get NSFAS funding. Well, if they could get NSFAS funding, we'd be more than happy to accommodate people. And we think that we've got the kind of business which is agile, flexible, responsive and we could cope with that demand. So if the objective of government through NSFAS is to increase accessibility open it up to us, and we'll help solve that problem. At this point in time, that's not the case. So that's something else that we're considering challenging in a way as well. So affordability is probably the biggest, thereafter accreditation, registration in terms of the offering of different programs. But capital and that [ type ], we don't see that as an inhibiting factor.

Okay. Two parts to the next question, but we have dealt with the one regarding fee increases. So the other part is how much more efficiency can be extracted from the group?

Didier, do you want to answer that? I know I can't.

I mean, I think we're still on a journey. We've had a lot of good wins, where you've seen the debtors, how we've improved there. We've -- with the shared services, we've collapsed bank accounts and got efficiencies there and in various other areas. But they're not just in the shared services, within the schools as well. They're looking at their structures. They're timetabling smarter and looking at how do they enhance the value of their product and minimize the costs in areas which are not value enhancing. We've still got a lot we can do in procurement. We're only just starting to centralize procurement. So I mean, I can't give you a rand value, but I think we're still on a -- we're on a journey, and I would still see tens of millions coming out over the next few years. Exactly how much, I don't know. But we're always striving for improvement. So when we get to wherever we were heading, we will aim somewhere higher.

That sounds really clear. When we get wherever we're heading. But I agree with him, there's more to come.

Yes. Okay. A question we probably anticipated. If 1 adds back the net credit losses for both periods, group margins were slightly down compared to the key drivers for uplift. Does this mean the efficiencies achieved were only through improved collection? And what is driving almost double-digit increase in the other operating expenses.

Do you want to handle it?

Okay. I think it's not such a simple comparative. I think, firstly, we are very proud of what we've achieved on the reduction of the credit losses. I think some of it is obviously a slightly better environment compared to COVID in the prior year, but it's also a much improved collections. As you could see from the schools' numbers, where we're significantly lower than we were over the last 3, 4 years. We -- I think we're down at 2017 levels, notwithstanding the growth of the group. So that is pure efficiency and not just COVID. And similarly on tertiary, we've improved our collections. The book has only grown by about 1% on 4% revenue, but it's also a fresher debt. We cleaned out quite a lot of the old debt, so it's quite fresh. But also masked in there is a lot of the other impacts of COVID. As our boarding comes back, for instance, and aftercare and sports, lots of costs come back in as well. So it's very difficult to give an exact number. I think at the half year result, we indicated that approximately ZAR 38 million worth of cost came back into the business for the first half of the year relative to the prior year. And we think for the full year, it's probably closer to ZAR 100 million that we had to absorb. Remembering there was no fee increase as well. So while we held teacher salaries, other costs moved up. Consumables and utilities and that. So we had to cover all of those. So it's -- I can understand the math, but it's not such a simple calculation. There's actually a lot behind it. And the efficiency drives improvements that we got were real and to some extent, masked by expenses coming back in because of COVID. They have not been there last year when we couldn't offer sports in that. As well as for this year, we had pretty much for the whole year or the 2021 year, we had for the whole year, having to deal with COVID protocols. Where for the previous year, we were in lockdown. The first quarter was a clean quarter and then we were locked down for quite a significant period. So we only have to deal with the COVID protocols for a portion of the year as well. So yes, I hope that answers it. Okay. The next question, I think we've answered sort of the split between distance and contact learning. So the following question, will you be setting returns targets in your operational optimization phase? I'm not sure if that's referred to as a ROFE target or if something else. But the next question is what is our ROFE target. So maybe we can try and deal with both together. I think the ROFE target is sort of the stated target from -- is to get at least roughly plus at least 6% -- sorry, not -- WACC plus at least 6%. So that would be a minimum target that we would aim for. Obviously, that's a longer-term target. And in a time of less investment, we would expect it to be higher than that. And when there's more investment, it might come down for a short period of time due to the J-curve effect. But yes, minimum, we would expect sort of WACC plus 6%. So north of 17%. I think in the -- at the moment, with the lesser investment that we've had for the last couple of years, unless a needle-moving opportunity arrives in the next year or 2, we would probably see that roughly moving up quite strongly until probably our next major phase of investment. CapEx projections for 2022 and the split between tertiary and schools. Okay, the main projects that we are doing in the current -- in the 2022 year is we are opening a new greenfield site in Pinnacle Raslouw. We are expanding Gaborone International. We're putting a science and technology center and capacity for about 450 students because that school is full. The demand remains extremely strong, and as you can see from the excellent results academically and then at their fee point, it's a real value proposition. So yes, we will be adding capacity there. And then at Rosebank College in Pretoria, the current -- or until end of 2021. They had a campus in Pretoria, CBD and 1 in Sunnyside. We have acquired a building where we've got the use of the building at the moment, but it hasn't transferred yet. And then the fit out of that building adjacent to our Pretoria CBD campus, so that we can consolidate the 2 campuses into 1 and create capacity for further growth. I mean Rosebank has shown really strong growth into the 2022 cycle again, so we are very confident that, that CapEx will deliver great value to the group. And then the last major big ticket item is Varsity College Pretoria, where we are significantly expanding the capacity and the facilities on that campus as they have outgrown their capacity. So those are the big ticket items. CapEx number, I would expect to be probably in the region of about ZAR 0.5 billion with those 4 projects being the biggest. So slightly higher than the last few years, but about ZAR 75 million for that building acquisition is a rollover from -- that was anticipated to come through in 2021, which is now a rollover into 2022. How do you intend to manage currency fluctuations and cash repatriation in your African growth operations? Will growth be funded with equity, local debt or U.S. dollars? I think at this stage, our Africa HR business, the majority of their business is in U.S. dollars or euros. So they don't actually have too much of an impact from the African countries' fluctuating currencies. So that's quite solid. And then our schools' operations, I mean, their costs and their fees, while they might be based on dollar pricing, they are in local currency. So it's really just the consolidation, which is the issue as a currency fluctuates. I mean, touch wood, the currencies in the 2 countries that we have schools in have been pretty stable. And in fact, the pula has strengthened quite significantly against the rand in the time that we've had our investment. But it is something we are conscious of. And over time, we'd be looking to leverage the balance sheet of the African operations so that our assets and our liabilities are in similar currencies. So there's a natural hedge matching them. Obviously, with us having -- starting our program into Africa, we had to use our South African balance sheet, but we will be looking to move away. And as I think I said a bit earlier. We do believe that our African balance sheets are starting to become strong enough that, that can fund at least a reasonable level of expansion. Certainly, for the existing schools, they can fund their own CapEx. And if a small to mid-acquisition opportunity came along, we could probably handle that off their balance sheet. And hopefully, in 2 or 3 years' time, their balance sheets will be able to fund fairly significant programs. If a more meaningful opportunity came available now outside of South Africa, we would look to fund it, probably with the balance between local currency of wherever the acquisition is, local currency loans together with some borrowings out of South Africa. I don't think there would be a need for an equity raise at this stage. The South African balance sheet is extremely strong. and can be leveraged quite significantly from where the borrowings are at the moment. Okay, then desired level of gearing, if any? And then any enrollment trends for this year? I think we've already answered the enrollment trends. I think that as a group, we -- the investment committee approved by the Board has recommended a long-term gearing of about 2x EBITDA. So net borrowings at about 2x EBITDA. We are below that at the moment because of lesser investment over the last couple of years. And I don't think that's taking the environment into account. I don't think that's a bad position to be in. Now is the time to be a little bit more prudent. And when the economy is more buoyant or -- and whether it's South Africa or outside of South Africa, when we see more opportunities, and there's more stability in the markets and the right opportunities arise, I think we would be quite comfortable to leverage our balance sheet beyond 2x EBITDA. But we believe about 2x, as a long-term ratio, is appropriate to get sort of the leverage impact to improve the returns for shareholders, while at the same time, giving the group flexibility to move at an appropriate pace should opportunities arise that we would like to take advantage of.

Okay. I think we're...

I think we've got a couple more, and I'll need to just refresh again.

I would suggest -- what do we -- have we got a time limit?

I think we're nearly there.

Okay.

Just see, okay. What is a sustainable school payroll to schools revenue percentage that we target? And what is your view on rental versus owning buildings?

Okay. Well, we have set internal targets for our revenue -- salaries and wages to revenue. I'm not really sure that I want to disclose that, Didier. In a sense, I think some of that's quite competitive information for us. So I think we'd rather just keep those ratios internally as benchmarks that we measure our own organization against.

I'm happy with that. And I think other than to say that we're not there yet. We still think there's opportunity and particularly with quite a few schools that are still in their growth phase, obviously, they would be suboptimal. So as they get closer to optimal, we should see some benefit on the salary line relative to revenue.

And then the decision with regards to whether we buy or whether we lease, that actually is done on a case-by-case basis in terms of what we think is the optimal issues. And there's a lot of factors that we take into account to that. So we don't have a hard and fast rule about buying or leasing. The question is we look at each case on its own merits, yes?

Yes. And I think again, location is most important and security of tenure. So particularly for a school, if we are going to lease, there are specialized buildings. We need to know that we're going to have security of tenure for a long period of time. But -- so we look at location probably as the first part and then the financial justification thereafter.

Okay. What else have we got?

Okay. Can you elaborate on the enrollment mix in tertiary? Which faculties are attracting the greatest level of enrollment growth? And how do our fees compared to the public universities?

Okay. Firstly, what I can say is that IT, performing extremely well; law, doing well; our commerce degrees are on track; engineering and health sciences, for us, that's new and starting off, so it's relatively small at the moment, but we're hopeful. So I think we're seeing probably IT, commerce, law and education, of course, sorry, also a very, very popular one. So that's the kind of an indication there. What else was there in that question?

So elaborate on the enrollment mix and the faculties, which are attractive? And how do our fees compare to the public's?

That's interesting because, of course, actually, we have quite a range of fees available. So Rosebank College is really very, very competitive versus a number of the public offerings. One can do a degree at Rosebank College, and I would say at a lower price than you could do in most of the publics. That's sort of an overarching statement in a sense. And Varsity College, which tends to have a more premium level of offering, these days, is also actually very competitive with some of the top universities in price terms. So it's difficult because it does -- course-to-course, it's difficult to give an answer. But quite honestly, these days, our offerings are certainly. I think the gap is closed when there was a point in time where the private sector was deemed to be so much more expensive than the public because, of course, the public sector is heavily subsidized. That's no longer necessarily the case. We are competitive, and particularly -- and if you look at a program-by-program basis, we're highly competitive in some of our offerings.

That's all the questions I have.

Okay. Quite a lot more questions than we've had in the past, but hopefully, that's it. If there are any others. I think, Desiree, we're able to -- we will answer them directly, but I think that's answered all the ones that we've had submitted here. And can I assume there are no other questions in the room? If that's the case, well, thank you once again for joining us. Thanks very much indeed.