ADvTECH Limited (ADH) Earnings Call Transcript & Summary

Good morning. We're waiting for a couple of people from Cape Town but I think we're on quite a tight time line, so let's maybe get going. So first of all, welcome, and thanks very much for making the time to join us in the wind down to the end of the year. And we're looking forward to a trip to some of our locations and also giving you a flavor of our forward strategy. So let me get straight into the slides. This is the latest snapshot of our brand portfolio. As you can see, it's a wide set of brands across Schools, Tertiary and Resourcing. And the sharp eyed amongst you will have spotted that we've added the Flipper logo on the School side, our new acquisition in Ethiopia, of which I will talk more later. And this is the latest picture of the revenue and profit breakdown of the company, just to give you a sense of the shape. So Tertiary, 40% of revenue, 50% of operating profits, the Schools business split between South Africa and international at 36% in South Africa, 37% of profit, international contributing 5% of revenue and 7% of operating profit. So the Education total 81% of revenue and 94% of profits. And then Resourcing, 19% of revenue and 6% of operating profit. So we will focus today on our Education strategy in the interest of time and because it represents the bulk of the business. And I wanted to share our forward vision, and this is something we've been talking about throughout the company for the last 10 months or so. And we've set ourselves the task of leading in every market segment in which we choose to operate. And that's a little bit of a shift from a focus on incremental year-on-year revenue into a leading share position. And we also want to become the employer of choice in both the Education and Resourcing sector. So moving on from there, just a little bit of background on the process that we've been through to create the work that we're going to share today. And first of all, we took every one of our brands and defined it on this model. And we found that very useful in terms of extracting the essence of our difference in advantage versus the competition in the marketplace. So just to run you through how that model works at the bottom there, you've got the brand icon. So any phrases that we own, any iconography that we own, pay off lines, that kind of thing. And then attributes, and we've identified the key differentiating features of our brands. And the filter there is they must be relevant, differentiating and true. And then we ladder that into the functional benefits. So the benefit of that attribute, what does it mean practically? And then also into the emotional space. And I think particularly when you're dealing with parents and children, that emotional space is also extremely important and then the essence, the defining promise of the brand. So that's the model we work to. And we have done this work across every single one of our brands. And then to give you an example of how that works. This is a live example of Junior Colleges, and you can see that we've added ambition at the top there. So to be Africa's leading preschool group -- And I think leading in preschool is one part of that, the other is the Africa piece because we think we can scale Junior Colleges into the continent. And then starting at the bottom, and you can see the color coding. The attributes are color-coded to the functional benefits above and the defining attributes for Junior Colleges start with purpose-built environments with on-site security and CCTV monitoring and the fact that Junior Colleges is part of ADvTECH, that ladders into the functional benefit above, which is children are safe and secure in the care of the school, which is clearly very important to parents. And then going up, detailed, real-time feedback is given to parents via specialized app. And that means that parents are connected to their child throughout the day, another major consideration if you've got young children out of your control. And then parent support networks, which means that parents are informed and connected both to the school and to each other. And then we have qualified and registered early teachers and play-based learning, and that's very different from just play. And that leads to Superior Grade 1 maths and language scores when we benchmark in Grade 1. Then we have fees, including aftercare, holiday periods and meals, which means known costs and no surprises for parents. And we are open early to late throughout the year, and that leads to year-round flexibility and convenience for parents. So we think that's a very potent mix that really plays to the core of what parents are looking for with children of this age. And then emotionally, parents feel confident their child is safe and in a nurturing and stimulating environment and the students themselves feel loved and engaged and the essence of the brand: Building your child's foundation for life. So we think this is very powerful. As I say, we've done this for all of our brands. It's been very useful. And then this becomes a basis for investment, for focus and communication. So that is central to the strategy process. Around that, and you can see the brand positioning piece with the arrows there. It's a pivot, but we've also defined our segment leadership ambition. We spent a lot of time thinking about target markets, growth trends, what the opportunities are looking like there. Then the broader demographic and market trends, including the supply-demand balances. A SWOT analysis, a full review of our competitors, and then we've taken that into strategy, which in essence is how we will leverage our strengths against the competition to achieve our ambition. And then we've built 5- and 10-year commercial plans behind that, looking at real estate expansion, enrollments revenue, margin and EBIT. So it's been a very thorough and compressive process. And then just before we get into the actual results of that, just a quick word about capital allocation. I think one of the strengths of ADvTECH has been we've been very disciplined in this area, and we are absolutely committed to that continuing. We get asked quite a lot what our ideal capital structure is so we've laid that out there. So 15% negative working capital from fees paid upfront and equity of 40%, debt at 45%. Just a comparison of where we sat at the end of 2023 on the right there. So there or thereabouts on the negative working capital, but a bit higher on equity and a bit lower on debt than we'd like ideally. But when you buy an Ethiopian schools group and a major campus in Sandton, that's probably going to help. The business is strongly cash generative. I think everyone in the room will be aware of that, and we continue to look for attractive investment opportunities, but only where they meet our rigorous criteria. You'll also be aware that we've reduced our dividend cover and increased our dividend payments. And looking ahead, if we do have future excess cash, we'll look at all options to distribute that between increased dividends, special dividends and potentially share buybacks. And then moving into the Education strategy. This is our footprint in South Africa. So you can see massive strength in Gauteng, pretty strong in KZN, reasonably strong in the Western Cape, a bit light on the School side, but I will come back to that, but that's the shape of the business in SA. And then we've done a lot of work distilling at an aggregate level, what our competitive advantage is. And we believe that there are significant synergies through our Schools and Tertiary divisions. If we had the choice of splitting them or keeping them together, we would definitely keep them together. And through that combination, we're getting a lot of value from our Shared Services division, that's centralizing procurement, processing of transactions and account management, and that is delivering really quite large cost savings, some of which is going to margin and some of which is being reinvested back into the brands. And in terms of where we are on that process, we think we're about halfway through the journey. So still lots of upside potential through the Shared Services group. And then on marketing, we are working on creating winning brand propositions and communication, at leveraging our scale when it comes to purchasing media, for example, and also optimizing our pricing strategies. To assist us with that, we hired an industry heavyweight in Steve Miller in June of this year. Steve has been Group Marketing Head for both AVI and Tiger brands and ran global innovation for SAB-Miller. So he knows what he's doing and is already having a big impact. And then from a people point of view, we are leveraging our scale and investment in training and career development to attract and retain the best people. As you can imagine, in a business like ours, people are absolutely essential. It's the biggest part of our cost base. So getting that right is a huge priority. And as I said in the vision statement, we are absolutely committed to be the employer of choice in both education resourcing. And then a huge point of difference and advantage for us that has built over the years is our Central Academic Team, and they are focused on delivering superior academic outcomes across both Schools and Tertiary and that's a team of 160 and they are working on the design and review of qualifications, technological systems to support teaching and learning. I'll talk a bit more about that later. Teacher and leadership development programs, a lot of best practice sharing across the business and also publishing an accredited academic research journal. And just to stop on the Central Academic Team for a second. This is the ambition that we've laid out for that team, and that is to maximize our academic advantage in both the Schools and Tertiary divisions, and also to the international recognized leaders in academic thought and practice. And that's something that we have already started putting a lot of effort behind. And then the areas of focus for that Central Academic Team. So accreditation, academic governance, also quality insurance, making sure the standards are kept very high. There's a compliance piece to that around schools, elevating teaching practices, I just touched on, but also creating and integrating systems to improve learning outcomes and again, I'll come back to those. And then institutional research, elevating the standing of our Tertiary divisions with research and quality enhancements and also creating and optimizing academic support systems. So -- and again, this is a huge benefit to both the Schools division and the Tertiary division. And then moving on to the South African Schools strategy. We have some very helpful tailwinds up at the top left of the slide there. And the first of those is the long-term growth of our middle and high-income target markets. And despite the best efforts of the ANC that continues to head very much in the right direction. And shorter term, everyone is aware, consumer and business sentiment is improving and interest rates are coming down, and that can only be positive for us. In terms of the headwinds, the long-term underperformance of the SA economy, leading to immigration amongst other things. And in the Schools division, it is a highly competitive market. And in terms of our focus, we -- and I've touched on this already, but we're creating winning propositions for all our brands and then communicating them really effectively. And I think any school delivers 3 things: superior academic outcomes as the core, life skills in different flavors supports that and then excellent student experiences. And that's about culture and the facilities. And delivering consistent high quality in every brand for us is very important. We operate at a number of different price points, but the quality standard remains the same. And we flex the number of subject choices and extra curricular choices in line with price points, but that quality standard, as I said, remains. And we also will continue to drive affordability through price increases in line with or even slightly below inflation. And our view there is that drives full schools, and there's tremendous leverage in that for us. And then our well-established portfolio, and I'll give you a flavor of that a bit more in a second, covers all the most valuable areas of demand. I've talked about the focused expansive subject and extracurricular choices. So the stripped down version will be Pinnacle and the most expensive would be Crawford. We also range from traditional to liberal. Trinity is quite traditional. Crawford is quite liberal. Early learning, I touched on Junior Colleges in the opening. Specialized academic support and assisted learning and also online through the Evolve School. And then just coming back to that tailwind, there is some interesting research looking at the actuals for 2020 and '24 and a prediction for 2029, which is the last bar. And that shows a decline in the low-income segments, a pretty steady growth in middle income. We target the middle income with Rosebank, and then LSM 8-10 also showing good growth. So as I said earlier, despite the economic challenges, our target market continues to grow very positively. And this is how the Schools division looks, hurridly updated to include Flipper, so we're up to 118 schools, about 44,000 students and 4,500 staff. And you can see the breakdown there. I won't go through that in detail, but it will be in the packs that we publish. And then to give you an idea of the portfolio and the price segmentation that we're operating. These are the Matric price points for the major brands. So Crawford at just north of ZAR 162,000 in Matric, The Bridge just below that, Trinityhouse at ZAR 127,000, ZAR 128,000, Pinnacle College at ZAR 90,000, Abbotts at ZAR 86,000 and Evolve, the online school, at ZAR 42,000. And then just a quick word about a couple of the systems that we use across the Schools division to support academic excellence. And the first of those is ADvLEARN, which is powered by some very clever tech and AI. So it currently covers a maths -- math literacy and science. We're looking to expand the range of subjects that are included. It tracks student homework and use, but at the same time, it generates personalized landing pathways for the kids, coaches them through problem solving. And then this is incredibly valuable. It provides immediate teacher feedback at both individual level and at class level to the teachers so they can act on it the following day. It also uses AI to build individually focused assessments, and it gives the schools real-time dashboards giving insights into teaching and learning effectiveness. And that has been incredibly powerful for us in terms of driving teaching and learning outcomes. And then the MAP program of international benchmarking. This is looking at adaptive assessments in Maths and English currently. Again, we're looking to expand that. And it gives really powerful insights into student ability and level and set growth goals for them, what's possible and then creates personalized learning plans to close those gaps. And then we assess at year-end each student has done against those goals. And it also allows us to track performance across all our schools and also against international benchmarks. So again, hugely useful and a very powerful tool. And then if you look at what that's translating into, these are our 2023 schools academic results. So on the IEB side, 100% Matric pass rates. Bachelor pass rate at 93%, that is 4% better than for the IEB segment as a whole. That's a result we're proud of. On the SA curriculum, we had 2,669 distinctions at an average of 2 per student. I think that's a great outcome. There, we do have plans to push that higher. And on the Cambridge curriculum, 327 distinctions and 100% of the Crawford International A-level students got into international universities. So I think our academic results are very strong. And then in terms of enrollments. This is looking back a few years. But we are compounding enrollments growth at 5% in South Africa. And the most latest shift there, '23 to '24 was also 5%, so in line with the CAGR. And how that's translating into the commercial side of things. Revenue is compounding at 13%, operating profit at 16%. And you can see that we are continuing to nudge up our operating margins, and that's despite significant ongoing investment into our school system. And this is a slide showing our enrollments build from '23 to '24. And the first point I'd make there is Joiners is a huge number, 8,500 nearly Joiners. So strong demand definitely exists for our Schools brands. And then looking at the other bars, Matric leavers, kids leaving at the end of schools not a lot you can do about them. But if you then focus on the other 2 bars, immigration, relocation and financial and other leavers, that stands at just short of 5,000, largely driven by economic effects. And if we were in a more positive operating environment, the economy improves and that reduced non-leavers -- sorry, non-Matric leavers by 25%. We have grown net SA enrollments this year by 9% instead of 5%. So a small positive shift in the economy will have a significant positive shift on our enrollments. And what does the economic outlook look like at the moment? Well, I think we are all cautiously optimistic about the GNU and the Western Cape is storming ahead, I think, in showing what is possible and that's generating lots of positive headlines. And we found an Investec projection, which may be optimistic, but looking at '23 to '24, we've gone from tepid growth to slightly less tepid growth, but their forward view for next year and further on is that we will see growth heading back up to around 3%, which is still not where it needs to be, but it's clearly a positive trend. So things looking quite positive on the macro front. And then in terms of what we will focus on strategically. So we're going to leverage the CAT, the Central Academic Team and our AI systems to further push academic advantage. That is the core of what students and parents are looking for. We think there's room to go in Shared Services. We are upping our game on marketing, both in delivery and communication of compelling brand propositions linked to the ladders that I shared with you. And we're also going to use scale leverage to grow margins and operating profit, but avoiding aggressive price increases. As I said, our priority is full schools. We also are very focused on becoming the education sector employer of choice, and that's about attracting and retaining the best teachers and academic leaders -- touched on the marketing piece. And should the SA economy improve, we're probably building one school a year at the moment. If that shifts in the right direction, we'll definitely up our plans there, maybe moving up to building 3 school per year. And we're also addressing a slight underrepresentation in schools in the Western Cape. As I showed you on one of the earlier slides, we definitely have some room to grow, and we are attacking that with lots of energy. And then moving on to the Tertiary strategy. This is the shape of the business at the moment. So Varsity College, Rosebank College, the 2 behemoth supported by Vega and then Capsicum on the culinary side and the School of Hospitality and Service Management and then vocationally, Oxbridge Academy. And here, the tailwinds picture is slightly different from Schools. We still have that demographic growth which is very helpful. But the other big driver is the significant and growing shortfall of the supply of state university places, and I'll share some more information on that in a second. In the short term, we're seeing that economic improvement. The headwinds, again, the South African economy has been tough for the last few years. So in Tertiary, we are focused on creating and delivering winning propositions for all our brands. I think we've made some really good progress there. And focused on superior academic and employment outcomes, again, slightly different from the Schools. And there, we're looking at work readiness and career support, leading the way on that and also excellent student experiences. And we think that we've covered all critical areas of demand. So we've got mainstream to niche qualifications and vocation, as you just saw. We've got a broad range of price points, and we're also quite focused on the Distance opportunity. So coming back to that supply and demand imbalance. Looking at -- this is the private higher education sector 2010 to 2021. We'd love to share more recent numbers, but they haven't been published yet. So there is only just we can give you. But I think it demonstrates the trend quite nicely. So private student numbers continue to grow strongly. That nearly tripled over this 11-year time period to 235,000. We've obviously been a huge beneficiary of that growth. They seem to be leveling off at around 6%, 7% annual growth rates off an ever higher base. And the sector is being driven, as I just touched on, by demographic growth on one hand and a constrained public system on the other. And then maybe the more interesting chart is the public chart, again, over the same time period. And we've run some numbers here. So public university student numbers declined by 2%, 2018 to 2021. Growth has been negative in 2 of the last 4, 5 years. And it looks like public places are fairly static at around 1.1 million. And then we've been extrapolating what we think the market opportunity looks like. And to meet the NDP's 2030 targets, if we assume no increase in public sector capacity, which looks likely, private sector places will have to increase by 300,000 by 2030. It's only 5 years away. So that looks like a huge shift. If the public sector matched the last 10 years growth rate, which as I said before, looks a bit unlikely that would still mean a shortfall or nearly 170,000 places. So that supply-demand imbalance is powerful and continuing. And then an idea of our brand portfolio and price points. So Rosebank College covering from ZAR 16,000 to ZAR 50,000 a year; Varsity College ZAR 28,000 to ZAR 110,000; Vega, ZAR 86,000 to ZAR 138,000; Oxbridge on the vocational side and Distance from ZAR 4,000 to ZAR 37,000; the Hospitality School, ZAR 45,000 to around ZAR 70,000; and Capsicum around ZAR 24,000 to ZAR 90,000. But again, a good range of prices covering our basis in the market. And just a high-level positioning for Varsity College. Our target market here is definitely the upper end. So LSM 8-10, and our ambition is to cement Varsity College's position as the leading private universe in the country and also producing the country's most employable graduates. And that second part doesn't relate to just the private sector. We would like to have the most employable graduates across the entire sector, including public. And headline positioning, we want to maximize student academic potential through superior teaching and support systems in safe, optimally equipped campuses in prime locations. And that's really the core of the offer. And then Rosebank, a lower target market, the 4 to 7. And our ambition is to be the largest and most respected university in Africa. We have international ambitions that I'll come back to for Rosebank. And positioning here, is fast-tracking students' careers through affordable employment-focused qualifications delivered by excellent lectures in easily accessible campus locations. We often talk about one taxi, but that easy access is very important for Rosebank. And then just that reminder of the chart that I showed you earlier. So that 5 to 7 group, very powerful for Rosebank and 8 to 10, very powerful for Varsity College. So that demographic shift and the supply-demand I'mbalance are 2 powerful forces running in our favor. And then just to give you an idea of the faculty breakdown, this is Varsity College and Vega, and you can see a good spread of strong numbers there. I would also point out that we are already the biggest law faculty in South Africa at Varsity College with 4,500 students. And then a similar picture for Rosebank, law is in its early stages, but we have big plans on the legal side. And again, strong numbers across the board, but you can see that we heavily focused on commerce currently. And then the shape of the business, everything currently forms part of the IIE, the Independent Institute of Education, which is a registered holding company for all of these brands. And all of our higher education students are currently assessed and certified by the IIE regardless of which brand they're actually attending. So looking forward and with university status in mind, I just wanted to share our forward plan there. So from the IIE, if you look towards Rosebank, we're looking at adding a second entity there under Rosebank College. And then the evolution would be to a university college initially and then to full university status. And then from a Varsity College point of view, we'd like to bring Vega, MSA and the Hospitality School formally under Varsity College. And we think based on the latest regulations or latest draft regulations, we should be able to go straight to university, but with a new name. So that's the plan there. And just in terms of timing, I've laid it out on the right, but we think it's going to take us 18 months to 24, so a couple of years to get to university status. We're hoping that we'll have final criteria by the end of this year that has been promised by government, but they've broken a few promises before, but let's hope it's coming soon. We will apply as quickly as we can, certainly within 6 months of having the criteria. And we hope to have Varsity College University under a new name and Rosebank International University College by 2026. And then just some price comparisons. Historically, Varsity College has been tracking at a big premium to the public universities. What we've seen is a gradual closing of that gap and that's despite the ZAR 30,000 per student subsidy that the government gives public university students. So the price disadvantage that we've historically had is becoming less over time. And again, that clearly works in our favor. And then looking at Varsity College against Private Tertiary. So again, Stadio and Eduvos on this chart. You can see that we operate at a premium price, and we backed that up with a premium offer. So we're definitely commanding a healthy premium against those 2 biggest competitors. And then in terms of our competitive position for Varsity College and Vega, against the public universities on the left of the slide. So we believe we're tracking ahead in terms of the quality of teaching and learning, definitely ahead on campus security. Student support and development, also an advantage. And career services definitely in our favor. If we are losing currently, and we're working on it and I'll come back to this, a range of qualifications isn't quite where we'd like it to be. The level of academic staff in terms of the level of qualification has room for improvement and also upping our research output. A university status I've touched on, we'd love to nail that one and extracurricular facilities and price, we are actively addressing all of those areas of shortfall, however. And then against Private Tertiary, we're winning on student experience, range of qualifications is an upside for us there, quality of teaching and learning, reputation and career services. We are losing on price, we're undercut on price by some lower-quality competition. So we're not too concerned about that, but called it out. And then access, some of the competitors will allow people in to study with lower schools qualifications. And again, we're not going to move our position there, but just called it out. So summarizing that, we are highly advantaged against the private competition, and we have some significant advantages already over the public universities, and we're working on any areas of weakness. And then Rosebank College in terms of the price analysis. So on the left bar, you got the Distance sector. And then on the right, you've got Contact. And again, here, we have some significant price advantage in the market. So we are currently on Distance charging ZAR 10,000 a year less than Varsity College, Vega. We are in line on Distance with key private competition, but also lower than the public universities by around ZAR 8,000. And then moving across to Contact. We are at ZAR 58,000 less than Varsity College, Vega at Rosebank. ZAR 20,000 less than the key private competitors and ZAR 26,000 less than the public universities. So we have a significantly price advantaged brand in Rosebank College. And then just summarizing their competitive position. So we are winning on minimum completion time, so people that actually finish the degree in the time that they're supposed to. Affordability, student support and development, smaller class sizes and campus safety, those are very important things to our students. We lose similar set of our university status, campus facilities, the range of academic offerings, particularly in post-grad which we're addressing and also research output and the level of our electric qualifications. And then against the private higher education institutions, we also went on minimum completion times, affordability and contact, academic reputation, campus facilities and career services. The one area we've identified where we have a shortfall that we want to address is support centers for Distance learning. So places where IT and the Internet can be accessed with computers and connections to the world. And then summarizing, we have a big price advantage over our public and private competitors at Rosebank, and we think Distance is a huge opportunity. And then looking at our enrollments. The CAGR there is 6% in the most recent year, '23, '24, that was 7%. So we're actually tracking against a very positive -- ahead of a very positive long-term trend. And from a commercial performance point of view, revenue is compounding at 12%, operating profit at 16%. And again, we are increasing our operating margins despite investment in the brands. And then just a quick word on Distance. I've said on the slide here, strong growth off a relatively low base. We have, as you'll see, have been growing very aggressively, but our market share of Tertiary Distance, we think is around 4% and that's a long way behind Stadio, for example. And we definitely feel there's an opportunity to go after there. And these are the enrollment growth numbers for Varsity College and Vega. So compounding going back to 2020, at 22%. So in isolation, that's a great number until you look at the market share side. And that growth has been driven by, I think, strong brand proposition and the addition of some carefully chosen new qualifications. And then just for background, we are 88% Contact in Varsity College and Vega and only 12 in Distance. And again, that suggests a big opportunity to grow. And then off a smaller base, this is looking at the Rosebank college Distance enrollment growth. And '24 against 2020, we're up 475%. So this one is really taking off. We have strong business growth that's driven by market demand, attractive pricing and the addition of new qualifications. And interestingly, the split between Contact and Distance is exactly the same as Varsity College and Vega. And again, we think there's big upside there. And then addressing some of those challenges, the product strategy, so the qualifications we offer for Varsity College and Vega, we are going to add high-demand Distance qualifications to drive growth. So in law, IT application development and an MBA, which we don't currently have. The accelerated introduction of higher degrees for university status, so Masters and PhD is quite an aggressive program there. And also leveraging synergies between Vega and Varsity College in terms of teaching and interpolation of students from one to the other to teach various courses and co-locating the campuses, and you'll see that later on our tour. And we're also getting into health with a Bachelor of Physiotherapy degree. And then from a Rosebank point of view, the high-demand fields that 4-7 LSM are in Cybersecurity, Supply Chain, Law Enforcement and Security Management, so a slightly different focus. But we're also going to increase our Distance learning programs, education, law and commerce, and we think there's a particularly large opportunity in law. And we've got a big program of qualifications launching between 2025 and 2028 in Commerce, Finance, Law, Security Studies, ICT, Education and Social Science. So this is a big program. And we're also aggressively expanding our post-grad portfolio with Masters and our first Ph.D. And then to summarize our Rosebank College strategy. So we want to aggressively grow market share in LSM 4-7, both in Contact and Distance whilst further increasing our margins through operational leverage and realizing cost efficiencies. That will be achieved through the expansion of the qualifications I just covered, the introduction of student contact centers to support Distance and improved marketing. And all of those initiatives are currently underway. Our communication will focus on the key points of difference against both public and private, so safety, on-time degree completion and graduate employment rates. And we also will expand the brand into Africa, starting with Ghana in 2025. So very soon opening as Rosebank International University College. Interesting that we can open with no presence in Ghana as a university, but we can't do that in South Africa yet. We also will invest to improve the qualification level of our lectures. We did a lot of work on data-driven pricing, and we will add "international" to the brand name in South Africa post the Ghana opening with a new logo. And this is the new logo that no one else has seen. So you guys are first. And then the Varsity College, Vega strategy, we want to grow market share in LSM 8-10. And we plan to maintain our current premium prices and margins. And we're going to deliver that by investing to build competitive advantage against the private sector and by narrowing the gap against the public universities. So we've got a twin -- twin parts to that strategy. Again, we'll focus on our growing points of advantage against both public and private. But in that, we want to position ourselves as a first-choice option. I think historically, we've been a second-choice option to the public universities. We want to change that. We'll also build a clear Vega sub-brand for Varsity College, with a niche leadership position there, and that will focus back on brand strategy and design. That's been diluted a little over the last few years. And in that process, we're going to migrate the more generic Vega degrees to Varsity College whilst expanding the specialist side in Vega, especially in the postgraduate space. We'll also build a clear School of Hospitality and Service Management brand under Varsity College and our license used MSA brand name is expiring. And when that happens, we will discontinue it. And then the focus areas for Varsity College, so we are going to leverage a number of quite attractive areas. So best-in-country minimum time degree completion and graduate employment, we think those are huge strengths. Superior private university experience, safe class-leading facilities in prime locations. And enhanced reputation for when we nail the university status and the name change. We're going to leverage our academic staff to improve our research output and also our teaching and learning outcomes, which we already believe are very strong. I've spoken about the addition of new qualifications that can scale. Big focus on online market share, particularly in the post-grad side of things, where the biggest growth is happening. Better communication to well-defined target markets as a lot of work being done to improve the quality of our lead generation and also our conversion ratio leads to enrollments. And the development of pricing. Again, I've touched on that, but that's a big area of focus. And then realizing further synergies with ADvTECH brands and divisions. And again, that is a big project. And another final area is to increase our effective catchment areas by supporting third-party owned and run student residences. We don't want to run them ourselves, but we'll definitely facilitate that and that effectively increases our catchment area for students. And then at our interim results, we weren't able to share exactly the details of our new University campus in Grayston Drive that is now public domain. These are a couple of pictures of how it will look, and it's a very significant campus development. And the plan, just to remind you, is to move our existing Varsity College Sandton and Vega Bordeaux campuses to the new site in 2026. We'll invest just short of ZAR 420 million over 2 years. It's a vast land area of 47,000 square meters. It really is a magnificent location and site, and it will double our current capacity to 9,000 students and ultimate built capacity will be at least 11,000. And on our tour later, we're not going to go in, in the interest of time, but we will drive past and give you a look at the actual location. And then moving on to our International division. We used to refer to this as Other Africa or Rest of Africa. So this is now ADvTECH International. I'm very proud of the new logo. And the ambition here is to be the leading private education group on the African continent with the most students, best academic results and best student experience. And we are very focused on delivering all 3 and believe that it is very possible. And then just anticipating a few questions on why we have expanded into selected African countries. So this is really a summary of why we believe Africa is attractive. So demand for high-quality private education is both strong and growing quickly. We've got very strong demographic growth in our favor. Urbanization is happening quickly. And relative to South Africa, you have fast expanding GDP. And then we also think that our business model mitigates many of the risks of African expansion. So our Mega School structure of 3,000-plus students allows us to deliver strong returns on margins at affordable fee points. We also find that the cost of teachers is around 20% lower in Africa than it is in South Africa. The vast majority of what we need to own and operate schools is local, so local supply chains. We operate relative to many businesses on high margins, knocking on 30%, and we have negligible hard currency CapEx costs. So you can never remove the risk of Africa, but we think our business model suits it quite well. There is also generally limited private sector competition and the opportunity for us to differentiate in terms of superior academic results and facilities is huge. And we're also able to leverage our Central Academic Team, putting those AI systems in place, for example, and also optimizing, developing curriculums and qualifications. And we're also able to leverage our support teams in South Africa. It's a huge benefit to us in leveraging property expertise with Stoffel, who's in the room, but also on the people side and also on finance. And we are also able to self-fund expansion in local currency from existing operations. And again, that's a significant derisk. And this is how the International School enrollments are looking. So we're compounding at 9% going back to 2019. And another milestone, I think, with the addition of Flipper. We now have over 11,000 students in our international division, which is slightly more than 1/3 of our student numbers in SA. So the International side of things is becoming very significant for the company. And then the financial performance, again, going back to the half year results, but revenue compounding at 21%, operating profit of 56% and operating margin from '21 to '24 has gone from 13.5% to just short of 29%. And then country selection for the existing operations, just to get an idea of why we've chosen the countries that we have. So Kenya, big economy, strong GDP, strong GDP per capita, sizable and growing population, and it's a young population. Official language is English, that's important for us and the GDP forecast remains strong. Ethiopia, close to Kenya, which is clearly helpful to neighboring countries. It's the fifth largest economy in Africa, strong GDP and GDP per capita, massive population at 107 million, also young. English is the language of instruction in many schools, and again, that's helpful. And we have first mover advantage in the country as the economy liberizes -- liberalizes, and there is relative to the whole country, a high degree of security and political stability in Addis Ababa, and that's reinforced by being the home of the African Union. And again, GDP forecast there north of 6.5%. Ghana, decent-sized economy, reasonable GDP per capita, good base of population, also young, English is the official language, and it's relatively stable, GDP north of 5%. And Botswana, smaller, but close to home, very high GDP for Africa, per capita and youngish population and obviously, operating in English. So those are the core reasons why we've chosen those 4 countries. And then in terms of our growth strategy in any new expansion, your initial focus will obviously be on country entry. But going forward, what we want to do is scale 3 brands in those existing countries of operation. So Rosebank International University, starting with Ghana, the Mid-fee Mega Schools, which are all operating soon very much the same model, probably under a single new brand name and then Crawford. And we think we can fund these developments largely from cash generated by the in-country operations and local borrowing. Obviously, there is a very large acquisition, we might need to look beyond that, but not for the organic expansion. And we will consider further country entries only if they need strict criteria, and I'll share with those with you in a second. And then just to give you an idea of the management structure. Historically, we have been managing all of the African brands through an African team. We're going to change that going forward. So Rosebank at a price point of $2,500 to $3,000 will be managed by Rosebank team based in South Africa under Linda Meyer, who's with us also. The mid-fee Mega Schools ranging from $1,500 to $4,000 in annual fees will be managed by the existing ADvTECH international management team who are based in Nairobi. So there's actually no change there. And then Crawford will move under the management of the Crawford team based in South Africa. And then the key criteria for new country entry. We want to be able to build scale across those 3 brands. We like a large stable economy, preferably one that isn't too cyclical. We're targeting higher GDP growth than South Africa, large populations with high rates of urbanization, high young population, English as the predominant language of instruction and comparatively safe strong countries with good transport links to major cities. And it's a little bit of background on our latest acquisition, Flipper. It adds Ethiopia to our international operation alongside Kenya, Botswana and Ghana. It's a very good fit with our existing mid-fee Mega Schools model. The acquisition price which was internally funded of ZAR 135 million, and it consists of 5 well-established and respected schools in Addis Ababa, so it founded in '98. So there's some history there. 3,000 student, 450 staff, strong academic reputation and surging market demand for quality education. So we are excited about here. Addis Ababa is the 12th largest city in Africa with a population approaching 6 million, and it's the fifth fastest-growing city on the continent. So exciting opportunity there. And then a little bit about Ghana with Rosebank International University. So it adds Ghana to our international operation, extends Rosebank for the first time outside of SA. The fee price points, we're picturing at around $3,000. The existing international universities are between $8000 and 10,000. So we're going to enter with a great proposition with a significant price advantage. There is strong demand for tertiary education. We have the support of the Ghanaian government. Capacity in Phase 1 will be 1,500 students, and we will open in September of 2025. So very excited about that opportunity. And then looking ahead, our 10-year ambition in terms of enrollments. And if we build in Ghana, 1 Crawford and 2 Rosebanks, we think we can go from 0 students to 10,500. At Botswana, if we build 1 more Gaborone International School and 1 Rosebank, that will take us from 3,000 to 10,500 students. Ethiopia, if we build 5 more Flippers, 1 Crawfords and 1 Rosebank, that will take us from 3,000 to 24,000 students. And in Kenya, if we build 2 more Makinis, 1 Cambridge -- sorry, 1 Crawford and 1 Rosebank, that will take us from 5,300 students to 17,300. So in aggregate, that would take us from today at 11,300, including Flipper, north of 62,000. So we think this is a huge opportunity that these numbers over 10 years are very achievable. And that is my story. So if I could maybe ask Didier to join me, we'll be happy to take any questions.

Yes?

Just a question on the SA schools. So obviously, you're quite mature in SA in terms of the schools and a lot of them have sort of gone though the last cycle. If you look at your SA student base, is there still a big tilt towards primary school students? So is that kind of organic growth from students moving across the different grades still in your belly? You obviously to ratchet up as kids...

We're seeing a pretty even pattern, so there's no segment that's going faster or slower. It's relatively steady across the different phases.

But if you look at the current base, are you kind of -- is the organic growth like in a sense that you have more primary school students than you do high school students and they need to progress through the grades?

I mean I think our portfolio is quite balanced. I think we've obviously got more primary school kids because it's 7 years versus 5. But the balance -- we actually -- some school groups have indicated that there's more high school demand. We're actually getting good demand across the whole chain. So the balance remains at all of our entry points, we're getting good enrollment uptake.

Okay. And then the chart that you showed the bridge of leavers and joiners, it's about 15% regretted leavers, if you will, immigration and financial reasons. Where was that number -- where has it been historically?

I mean we've had about 15 years of tough economy, probably the last 7 or 8 worse than the early part. So it's not actually very different to what it's been in the last few years. It's a fairly consistent pattern over the last few years. I mean if we go back to sort of like when I started, I mean the net growth was closer to 10% per year because we had a lot less leavers in that. So we still got a strong demand coming through, but the lever pattern has changed. So hopefully, we're seeing improved economy, improved sentiment. I think 0.5% improvement in the interest rate and people feeling a little bit better, economy going up 1% or so. I don't think it's going to be game changing, but every little bit helps. I mean, if we just reduce it by 300, 400 students, it's -- I mean, the operating leverage of our business is quite significant.

I have 2 questions. Just on your joiners, are they mostly -- grade 0 or grade 1. So are you getting joiners in from the bottom? Or are they coming in from the sites? First question. Second question, because it's not a hard one. Do you also intend to be a market leader in distance learning, given your competition in that segment?

Okay. I'll deal with the first one. You can take the second one.

The second one is, yes, we would like to be leading, and that is our intent. Didier, you answer the hard one.

Look, I mean, the natural entry points are in the preprimary and not necessarily only at the bottom, because it's not compulsory. So a parent can choose whether to send their kid to school when they're 3 years, 4 years, 5 years old. So we will get across those. Then grade 1 sort of grade R or what grade 0 to grade R, you would get a lot of students coming in there. And like our Pinnacle brand, for instance, that is a natural entry point. They don't have pre primaries. And then grade 1, you can get a little bit around sort of grade 4 when you go -- it's a fairly natural point, but it's not a -- say you might get a little bit of movement there because that's when you're going away from class-based teaching to sort of specialist teachers and then again at your entry into high school. So grade 8. You will get a little bit in grade 10 in that. But I mean grade the bottom of your preprimary grade R, grade 1 and grade 8 is where the majority of our students are. Then you're always going to get some movement both ways in the grades in between. Family is moving, changing home and moving area and that -- or maybe their financial circumstances have improved. So now that they can afford to send their kid to a private school, where maybe previously they had to send them to a government school. And we will lose some as well where they move away to a different area and that. But yes, definitely, the natural entry points are at the beginning of the school cycle.

I just wanted to know if you could talk about how you see the J curve evolving, particularly for Ethiopia and for Ghana.

For Ethiopia, there will not be a J curve. It will be...

You'll never make a profit.

We'll make a profit from day 1 from 5 existing schools, that make money.

How is that possible?

Well, I mean the acquisition is at somewhere close to 3x EBITDA multiple. So I mean you can work out the EBITDA from there, take off the interest on the ZAR 135 million, minus some tax, and you can see that we'll be earning enhancing from day 1. For Ghana, it will take us about 3 years to get into profit. So there will be a J-curve for the first sort of 3 years. So I mean, including next year, we only operate for a very -- we only start in September, but we're already starting to incur costs now because you have to have the site in order to get the accreditation. And obviously, you've got to have the staff, some staff in place, one for marketing, but two, to get all the products accredited and get the operations up and running. So we will incur a reasonable amount of cost during the course of next year and then only have 3 months of revenue. So it will be a reasonable J curve next year, but we'll absorb it in our margins.

Okay. And so what was the -- if you can disclose the multiple you paid for Ghana?

No, no, Ghana is...

New country entry.

Greenfield. It's a new country. So it's -- we -- no acquisition there. We are renting a building. So there's obviously a rental cost. When does the rental kick in staffing? It's in March, the rental kicks in, but we get occupation a little bit earlier. And then there's quite a bit of fit out. And obviously, we've got to put IT equipment and desk and chairs in that. So there will be -- again, I can't remember the exact number, but about ZAR 20 million to ZAR 30 million CapEx in year 1. And then obviously, quite a bit of operating cost with very little revenue in 2025. And then obviously, that would start ratcheting up as the enrollments grow into the following year.

And then -- so would this be margin accretive, both expansions into Africa?

Well, I mean in the long term, yes. But I mean in the short term, Ghana will as I say, be negative. So they will make losses for the first 3 years or so. So they will be taking away from the margins. But it's a bit like the rest of the tertiary business, we'll have another great enrollment season and cover it.

And you're speaking about -- sorry, I've probably been asking a lot of questions -- speaking, you've got this new market here. Would he also be marketing into Africa as well or just South Africa?

Fancy new market, I'm going to tell him. He'll be thrilled. Yes, yes. Steve Miller is involved across the business.

Just on Ethiopia, I'm still kind of scratching my head trying to understand the rationale there. I get it ticks all the high-level boxes. But just -- look, I guess, as far as getting current capital out of there, like I understand there's capital controls. Can you actually get the money out and currency devaluations, and how much of the risk is that?

I'm sure you'll have a view. But I mean, we're taking a 10-year view, and there is a very dramatic and fairly quick liberalization happening of the Ethiopian economy. And over 10 years, we're confident that we'll resolve those problems. We'll generate cash in market to expand. And we believe that we'll able to repatriate funds at the time that we'd like to, given that liberalization. I don't know if you want to add to that, Didier.

Yes. Look, I mean, I think, firstly, the acquisition was done after the major devaluation now. Now I mean, again, don't -- you can never say it's not going to happen again. But I think that they've moved the currency to what was a black market rate in any event. So they've just normalized that. So usually when a country does that, there is a little bit more stability, not necessarily 100% stability but better stability. So hopefully, the worst of the currency movement is now behind us, but we'll watch it. But I think as Geoff says, when we enter a new country, the part of what the team that is motivating that acquisition or greenfield opportunity, is we've got -- they've got to justify and motivate and convince us that any excess cash that they will have over the next 10 years, they have an investment plan for it. Because I mean, the worst thing you can have is sit with sort of long in cash that you can't get out in the devaluing currency. I mean that can hurt you. But if you're reinvesting it back into assets, then obviously, that current -- the risk of a devaluation of a currency is avoided. And in Ethiopia, the pricing is dollar-based. So not necessarily that they pay in dollar but they pay the equivalent of dollars. So if it's a $1,000 fee, the parent can either pay $1,000 or that can pay the equivalent of $1,000, but it's dollar-based. So you also derisk the currency to some extent through that.

So just a question around your cost-saving initiatives. And sorry if I may be ignorant here. But you mentioned that 50% of your -- of the cost savings have been realized. Can you just maybe give a sense of the absolute numbers that have been saved. And the remaining 50%, how long will it take to realize that?

Yes. The exact number, I must admit I don't have it, but it must be at least ZAR 50 million that we have saved up to now, probably even starting to get ahead of that. And we believe there's still that opportunity. I mean, the -- a major milestone that we've hit during the course of this financial year, it was in the month of May, is we changed accounting system in our shared services and Schools division. So now tertiary and schools are in the same system. Tertiary is still not in shared services. So we still have that opportunity, but we were running our shared services on a system that was not conducive to a shared service. So for instance, we couldn't have any workflows, all the workflows were manually outside of the system. Our new system, now the workflow goes through. And that other things that we've done that the new system has allowed us to do is collapse our creditors ledger or our supplier list from each brand having their own creditors book to one creditor's book for the whole group. So now we've got about 4,500 suppliers across the group. The intention is to get that down to less than 600. So you'll get the synergy -- well, firstly, the admin that comes with that out. But then when you -- as you consolidate it, you can get -- you can start negotiating pricing volume rebates, all of that. And we're getting some. But I mean when you've got -- when your information is housed and you've got separate accounts for Crawford and Trinity and Abbott and that, it's very difficult to negotiate with suppliers. When you put it all together, it's a lot easier to do, things like automated billing in our -- on the old system, we had to generate an invoice for every student, every month, where on the new system, you do annuity billing, so you generate the student once -- a bill once at the beginning of the year and then only changes. So the amount of admin that goes out over there is quite significant. Early next year, we will be taking Botswana across the line in terms of the new system, which will then also facilitate them coming into the shared services. We're already doing some work for them but minimal. And then after Botswana, we think that there's quite a sort of low-hanging fruit to take Kenya over the line as well. So I mean, in terms of automating process that we couldn't do before that the new system allows, simplifying and standardizing and taking in more of the businesses and then the procurement advantage, I think, would be our big ticket items that we can still leverage quite significantly.

I think there's been some comments around your capital structure being suboptimum at some point. But it seems like trying to move to that ideal capital structure, it's going to address some of those comments. Do you perhaps want to comment in terms of how fast do you plan to get to that level?

It depends a little bit on the acquisition opportunities. We will aggressively pursue attractive acquisitions, but we're not going to drop our rigorous standards. If we are successful, then the capital structure will move closer to our ideal but there are no guarantees of that. It's a long complex process, as you'll understand.

I mean, maybe if I can just add, I mean, as Geoff indicated, we've been building one school per year. And if the economy improves, maybe we can do 3. So to some extent, the better the operating environment, the more likely we are to get to our capital structure within a reasonable period of time because we would then invest more aggressively. And I think in the environment that we've been in over the last sort of 6, 7 years, it was -- I believe it was the right strategy not to be investing aggressively. And I mean that pulled out -- that's changed our capital structure from where we were quite highly geared to now a lot lower. But I mean, if the environment changes, that will certainly help us to find more attractive projects.

And then just one more, sorry. You did indicate that you're going to transfer some of your students from Vega Bordeaux to the new [indiscernible]. Do you mind explaining a little bit in terms of what's going to happen to campus in Bordeaux -- the Vega Bordeaux campus please?

We are looking at various options. We haven't made a definitive call yet, but it's an attractive location, and we've got a number of ideas that we can apply there.

So just to go back on Ethiopia. As you scale in that country, can you scale at the returns implied by your first acquisition over there because at high level, it looks like the implied returns will be good?

Talking about Africa?

Yes, Ethiopia specifically.

Ethiopia specifically, okay.

Yes, Ethiopia specifically. And then number two, fees over there are dollars. So do the parents over there earned in dollars or dollar equivalent earnings? And then is staff also paid in dollars or dollar equivalent?

Yes. So I mean, in the -- again, [indiscernible], and he's done a lot of the work. But my understanding is that the people that can afford private school fees generally have access to dollars or their income is earned aligned to dollar equivalent. So I mean when -- in Ethiopia the issue is that, as I understand, it is that the better off people are actually not impacted by currency devaluations on that. It's sort of the lower affordability levels where people actually feel the pain quite aggressive, quite badly when you get a devaluation. But -- so the part of the market that we are playing in, we think we're reasonably insulated from currency issues. And yes, the teachers, you would also be scaling up their salaries in line with your fee increases in that. So there are -- I think the idea is you collect your fees at the beginning of the term and you dollarize them as quickly as possible. And then obviously, you match your -- you try and match your costs, so that you don't have an open issue where you have your income stuck in, say, bur and your cost devaluing. So you're trying to match them the whole time through dollarizing as quickly as possible, where you can and you're adjusting teacher salaries accordingly.

Two questions from me. Just net working capital in Africa, you've got 15% of your operations funded through negative working capital. Is Africa the same at also 15%? And follow-up question, just also on the balance sheet. I know that there's been complaints about a lazy balance sheet. But going forward, it does seem that more of your operations will be in Africa, which is slightly riskier jurisdiction is now the time to be less conservative on the balance sheet. Just a question.

Okay. So firstly, the way fees are paid outside of South Africa, and it's every country outside of South Africa that we've ever looked at is actually quite different. In Rest of Africa, typically fees are paid at the beginning of every term. So as the term starts, the parents will pay their fees. Now again, you always get some that don't quite make it. So generally, our debtors book is a lot smaller in Rest of Africa than it is in South Africa. And because -- yes, because you're getting your money upfront all the time, if anything, your negative working capital on average is slightly bigger than -- it's a slightly higher percentage than in South Africa. And sorry, I forgot the second question.

Balance sheet optimization.

Yes. Okay. Yes, balance sheet optimization. So I think our aim is to make every country that we enter self-sufficient as quickly as possible so that we don't need to use our South African balance sheet to fund them. I mean, Botswana is more than self-sufficient. They funded their whole CapEx -- ZAR 100 million CapEx program out of their own cash flows, and they supported Kenya with about ZAR 40 million towards their requirements. I mean, Kenya has now got a material EBITDA themselves. And so they can fund all of their own capital requirements. Now it's only if we did a reasonably material acquisition. So I mean, Crawford is about to go through its next expansion. In Kenya, they will fund that themselves. And McKinney is funding their sort of organic growth themselves. But if we do make an acquisition, we may still have to support them. I mean, they do have the ability to leverage their balance sheets quite significantly as well. The only issue that we have is if you take tenure and that interest rates currently, if you go to a bank you're going to pay somewhere around 20%, 21% interest. And then in South Africa, I mean, we're getting our money at JIBAR plus not very much. And when you start taking that interest differential, you're saying, well, is it better to rather pay out of South Africa? And as long as the currency doesn't devalue by more than 10% to 12%, you actually better off. So we're still -- so on a case by case, we look at that. But yes, I think, I don't see our South African balance sheet being put at risk by our investments into Rest of Africa because of our drive to get themselves sufficient as quickly as possible. The only business that will not be self-sufficient for the next 3 years is our Ghana business. They will need us to support them as I go through the J curve.

Just three questions from me. I think you said in the presentation you're looking at 62,000 students in 10 years' time for the international side of the business. If you compare that with the growth in South Africa, what shape of the business, would that be geographically, both in students and in terms of earnings in 10 years' time? And then a follow-up there. What's the target very long term of the international to local split for ADvTECH's tertiary business? And that's the first question. If you'd like to answer that, then I'll go on from there.

Yes. I mean I think we've given you a 10-year ambition -- and there's lots of variables and a long time period. So there's the growth rate in South Africa relative to that aspiration over a long time line. So it's hard to give you a definitive answer. I don't know if you've got any kind of view that would be...

I mean, look, it would be a material part of our business. But I mean we -- South Africa, we also anticipate that growing. So I would still see South African students being hopefully bigger than that in 10 years' time. I mean long, long term, obviously, the continent is a lot bigger than just South Africa. So I mean, at some point, you would expect that to turn -- and I think the tertiary business also is growing. So I think we will still be -- I mean, we will still be generating at least 2/3 of our profits from South Africa with that ambition, if the rest of our business grows in line with expectations, yes.

And then there's a lot of talk about South Africa and the LSM growth and potential GDP growth post the GNU. Regardless, it seems that there is a motivation to expand outside of South Africa. So are you sort of behind the sort of closed doors concerned about growth in South Africa? And is that part of the motivation for the expansion into the broader Africa? If not, can you explain how you think expanding inside South Africa versus outside of Africa and what motivates the international expansion rather than sort of sticking to an economy that served ADvTECH very well over the last sort of 5 to 10 years?

Listen, I think we're optimistic about the GNU. Our Schools business would definitely benefit significantly from an improved economy as hopefully, we demonstrated. The demographic shift and the imbalance of supply and demand in tertiary means that we have a huge opportunity almost regardless of the economic position. So I think we are optimistic because of the broader tailwinds. But if the economy improves, there is definite upside. We're very well positioned to benefit from any improvement.

So do the returns in international business, do they look better than South Africa? Or why aren't we just looking to take full advantage of the South African potential and expand sort of into Africa?

We think the opportunity for faster growth on higher margins Africa mix attractive. But we also think we have a very attractive business in South Africa.

Yes. No, we're not constrained. We can do both. So by going -- we think we can invest at all opportunities in front of us, if that makes sense in South Africa as well as the Rest of Africa, and we're not in a position where we're having to choose. We have more than sufficient cash generation to look at all opportunities. So we don't see it as choosing between the two, we see it as there's opportunity in both.

Okay. And then just my last question. The Ethiopian acquisition seems at a very good multiple. Are you accounting for that as a bargain purchase? Or are you sort of seeing the assets as more that you paid for them? Or is it just a very healthy multiple? And then why do you think they were prepared to sell the asset at such a low multiple to you guys?

Yes. Okay. I mean in terms of -- we've only just taken on the business at the moment. So what we have to do is get a property valuation and value all the assets. And then depending where that comes out, we'll determine whether it's a bargain purchase or not because it will either be negative goodwill or there will still be some goodwill left. So too early to say that yet, but that's just accounting. It really makes no difference in the long run in that. Sorry, what was the second part? Sold for cheap. Look, I mean, Ethiopia is a more risky country in terms of the capital, not being able to get the capital out, and I think that it was other than ourselves, there were maybe a few European investors that were interested in the business. I mean this was part of the Tana business, where they had Moroccan assets and Ethiopian assets. I mean, the Moroccan assets had huge interest from European investors. And I mean it's sold at double the price that we were prepared to pay for it. I mean, I think some of this is family money and that if they get 6% to 8% return on investment, they're happy with that. I don't think our shareholders in this room would be happy with that. So at least you can know that we won't just spend for the -- we won't chase an acquisition for the sake of it. It's got to hit our criteria. But I think it was less attractive to African -- sort of European investors. So I think we had quite a lot of bargaining power there and drove a hard deal. And from a Tana point of view, this -- having tidied up the rest of the education portfolio, this was all that was left and they made their money on Morocco and if they could get something out of this. So I think we had quite a lot of leverage.

Firstly, thank you for the site visit today. It's always gratifying to come along and see what you do. You've answered some of my questions, specifically one on Tana. I know when I met Geoff in Cape Town, probably a good year ago, Vineyard, we had a long discussion.

Not quite.

It seems like a long time. We had a long discussion regarding your ambitions for this company. And here we are discussing quite a lot regarding Africa and the 10-year expansion. I was with your tertiary competitors a couple of weeks ago at the launch in Cape Town. And I was intrigued by your comment regarding university status, which seems to be far more bullish on its time line than the competitors. Perhaps you can give us a bit of color as to why you think it's going to be coming faster than your competitors. Secondly, my question on Africa, good growth. It's what you articulated to me in Cape Town regarding your ambitions. Where next? I know you were fairly keen on Morocco, but the price, as we all know, was outrageous. You did mention some other countries you're looking at. So aside from before, where else could we look at going forward?

Maybe -- our view on university status. So the clear indications from government are that they will issue the final regulations by the end of this year. So we can choose to trust them on that or not trust them, but that's what they're saying. The revised set of criteria that they issued last we believe we can comply with relatively quickly. So if they deliver to their own timing and there isn't a radical change, we believe we can comply quickly. So that's the reason for our view on the timing. I don't know if you want to have a crack at the second one.

Just sorry. Just remind me?

Yes, it was just on...

Yes. Where else? The other countries. Yes, the other countries. I mean,..

I mean, I think we've laid out what our criteria are. So countries that meet those criteria would be of interest, so ability to scale predominantly English, relatively stable, noncyclical, all of those criteria. And we continue to look. So I think you can broadly chalk off a few African countries from that filter and work out what's left, but...

I mean, I think, obviously, there's -- I think there are some attractive countries, but the macros maybe are not at the right time. I mean Egypt would be very attractive, but I mean -- we need to -- I mean, my view is Egypt is probably the best education market in Africa, but we -- the macros are a little scary at the moment. So we'll continue to pay attention and see in the future if things stabilize and look more investor friendly. Yes. And I think we've got quite a lot to build out in the countries. We've already entered while looking at others. And I think there's quite a few countries, as Geoff says, would be ticked off the list that we wouldn't enter. But yes, I think we've got quite a lot on our plates while still looking at one or two other attractive countries and waiting for maybe the timing to be better.

Sorry, maybe if I can just take it back to your Rest of Africa operations. I mean, obviously, the margins there look pretty good. But ultimately, when I look at it for your cost of capital versus your excess returns that you can expect, I'm just trying to figure out how you can make excess returns over there. I mean you touched on how teaching staff was 20% cheaper in the Rest of Africa versus South Africa. But how can you make sure that your -- that you're actually getting right returns in need for the risk you're taking on. Is the cost of land cheaper there? Or yes, just how do you square that circle?

Look, I mean, obviously, we -- when we do the CapEx motivation or the investment motivation upfront, we put in a risk premium in excess of what we do for South Africa. Interesting that the IFC often puts in a higher risk premium for Africa -- for South Africa than a lot of the countries we're invested in but that's a different story. But -- so we would -- I mean, if you take Kenya, for instance, I mean they're WACC, if you do an international based WACC calculation is only marginally higher than South Africa. But yet, we put a fairly significant premium on top of that. And then obviously, Ethiopia and Ghana are higher. But when we do our motivation, we do it in three ways. We do local currency, South African rands and U.S. dollars. And then we benchmark the returns against all three of those currencies. So we obviously take -- we assume what taking inflation rates into account and that what do we think the devaluation is going to be. And then we put a risk premium. Obviously, in local currency, it would be a very risk -- high risk premium. And by the time you turn it to dollars, maybe a slightly smaller one because obviously, you're factoring in the devaluation. But yes, we're -- so with the risk premium, we're quite comfortable. And I mean, if you take a return on funds employed, our Rest of Africa operations are already ahead of our schools in South Africa. So I mean, at the moment, we only have schools in Rest of Africa. So I mean, you compare that sort of -- in that short time that we've had them, we've already been able to get a higher return on our assets. So we're quite confident that our model stacks up and we've put in a sufficient risk premium to make sure that we can accommodate some of these fluctuations and currency devaluations.

Great. Just a question on the SA tertiary opportunity. I mean, you outlined that in your presentation. Are you currently at max capacity. So are you turning down a lot of applications every year. I just want to get a sense of what your current demand supply and balance is right now. I mean if you build a new campus, is there kind of really demand there to build that?

We are very able to scale in line with demand. So we will expand an existing building to run at capacity, opening it in stages. Then we'll look to relocate to a bigger location, which is the pattern that we followed. Didier likes to talk about the rubber walls of tertiary investment, and that's very much how we view it. So we are not constrained in any way in terms of tertiary places growth.

Okay. Because obviously, I mean macro picture is very attractive. There's a huge amount of students coming through from a trick every year. There just isn't places at public universities. But the price point is really, I suppose, what capital market size, it's affordability of -- so do you get a sense that Rosebank is at the right point where you could see that student growth to continue? Are you happy with that being at the right level that a large amount of students can actually afford?

Yes. I mean I think the growth numbers that we've seen and the acceleration that you saw, there's no reason to believe that, that won't continue, given the imbalance of supply and demand in places and demographic growth. So those are the two factors driving demand. I think we are well positioned in terms of pricing, and we're making good returns at those prices. Thanks to the great work of Linda, who's right here.

Maybe you can just talk to us about UNISA and what's going on there. If you do a Google search, it looks like they've got 400,000 students in their system, but I don't know, I haven't met anybody going there. So you gave 1.1 million people in government's tertiary education systems. I assume that excludes UNISA and maybe just talk about that landscape, whether that's an opportunity or a threat.

I'll go at that one. Well, I mean UNISA is still growing. So everybody is talking about them falling over, but actually, they're still growing. So I think, yes, they've had -- I think they've had some administrative issues and...

Challenges to the quality of the qualifications also.

But in terms of attracting students, it's still -- they still don't have a problem with that. I mean, obviously, their fees are at a relatively low price point. being distance and state subsidized. So again, a fairly significant proportion of their students are NSFAS funding. So I mean we believe there's opportunity, but we believe it's actually a very small part of that 400,000. I mean I think the exact numbers, I think I saw was about 360,000, 365,000 students, I think they're at the moment. But I mean...

We have low-quality demand driven by low price. I mean, not really the part of the market that we want to play it -- that's what limits us.

I mean, if I were -- my estimate would be that there's at best 10% of UNISA students that could afford our fees.

You guys no longer do any -- or rely on UNISA for any of your courses or anything like that?

That was a long, long time ago. Yes.

So in online distance learning tertiary. I mean a lot of the rationale for Varsity College, Rosebank College was a place for kids to go and have a tutor or get WiFi or communicate with other people. How does that play into pure online aspirations for tertiary? I mean -- still exist. Or is it hybrid of the two? Or do you a very different target market?

So your face-to-face student is 19 who wants the face-to-face experience. Distant student is in the 30s, often working and studying smaller numbers of units part time. So -- and studying for different reasons, more interested in post-graduate qualifications. So we think they're two very distinct markets.

Yes. Last question. Just at Ethiopia, you own the land and buildings, and I assume any expansion going forward in Africa would be you want to own land and buildings.

Yes, it's a mix. We own the major site and the balance is leased. So I mean, it often is a challenge in our Rest of Africa because I put huge amount of value on the land, unreasonable amount of value to the land. So to buy is often you just can't make the numbers work. But -- so they say their land is worth, I don't know, $40 million, but they're prepared to accept a 1% yield in terms of a rental. So you say, how does that tie up? But it's -- I think there's a very emotional attachment to the value of the land. So yes, I mean, quite a lot of our operations. I mean, McKinney is largely on leased sites. Crawford is -- it's our owned site by -- it's actually a 99-year lease, but so effectively it's owned. Botswana, you can't own land in Botswana, but you lease it from the government that I think we're leasing our site at about 4 pula per annum or something. So that also helps make Botswana such an attractive investment because you get the land for free effectively. So yes, very difficult to own land often in Rest of Africa. Our issue is we're not that concerned whether we own or not as long as we have long-term tenure and a legal system that we trust. So that's a big part of our due diligence when we go into these countries is to check the legal system. And again, sort of IFC, a 4% shareholder of us are very good at assisting us with that. They put us in touch with the right people, both in government and in the legal circles and that so that we can really do a detailed DueDil. And yes, touch wood, we haven't had any land problems to date in that it's -- I think our contracts are water tight and we're trusting the legal system in those countries to perform.

Just to talk about your investments in technology. You mentioned machine learning and AI and kind of platform to help students and I suppose, help teachers with the students. If I recall, that's an external party developing that technology, that's kind of a key AI technology. So maybe just talk to kind of the ownership of the data, the platform, the tooling -- would that external party be allowed to let other schools use it? Would you want to let other schools use it or do you want to really just take advantage? Obviously, we understand and we are old enough to know you've got a data advantage, which means small private school, like, I don't know, like [indiscernible], probably doesn't have enough data, whereas you guys would have a huge data set. So it gives you an advantage in these tools. And where does this progress to -- you spoke about 10-year ambitions for Africa, where does this progress to over 10 years? Does it become quite a comparable kind of competitive advantage for you to have this tooling available to kind of it -- because it also lines up with obviously, teachers wanting to teach there because probably not enough teachers in this room to know they're vocational, they love teaching, but they often moan about their job. How can you make their life a little bit easier? So just kind of unpack that a little bit for me, but also the legal ownership and where it all sits in the data, please.

Listen, I mean, I think it does improve the teaching experience for our staff, and it definitely drives academic outcomes. So it's a powerful tool. In terms of the data, we own our data, that is a third-party supplier, however. So I don't know if you want to enlarge on that, Didier?

Yes. I mean we're paying a license fee. If we develop something, we've got first-mover advantage that it's locked that they can't sell it to anybody else for a period of time. But in terms of them making the tool, we can't restrict them from selling it to other people, but we're actually not that concerned because actually, you can go and find hundreds of apps that do fairly similar things. The difference is integrating it into your operations and your other systems. Most of these apps that a teacher will tell your kid, oh, download this app or whatever and you might even get it for free or for a very low subscription, but you can't get the back-end data. And actually, that's where the value is, is a back-end data. Because it might be useful for the student to go through and have a -- do some sums and maybe the app helps them. But unless you're integrating the data and making it accessible to the teacher and the principal and the school and our academic staff, the value is minimal. So for a stand-alone school or somebody to -- it's a significant investment. And so for us, it's -- the value is in integrating it into our systems and our operations. And the tool is interesting. But actually, if we had a fall out with our existing supplier, we would just go and find another supplier and just reintegrate it. So I think it's our scale and the way that we use it, which is actually where the advantage is and not so much the software itself.

Yes. I think we are almost running out of time. So let's maybe take two more questions, and then maybe we'll have to wrap up and get on the road.

I have two more questions. I don't know if you are going to ask two more people.

Okay. You can have two and then one more person can ask.

So a quick question on your Western Cape opportunity set. You identify that you don't have a huge exposure there. Is that greenfield acquisitive? Is it an area of focus or just something that you're aware of? Second question, just can you compare the economics of your university with the research masters and PhD offering with what you're currently offering? Is it higher margin? Is it et cetera?

We are strong in tertiary in the Western Cape. We believe we're light on schools. So we are very focused on looking for -- it could be a greenfield, it could be an acquisition. I think it's more likely to be greenfield. And we're actually engaging with the Western Cape government to identify land. The second question, in pursuit of university status and adding qualifications that are margin accretive, we believe that masters qualifications where we can drive scale are profitable. PhDs are valuable to the institution, but they're going to be small and they probably won't make money. So we can make money at Masters, less likely to make money at PhDs and the bulk of income comes from scale in adding highly demanded undergraduate qualifications.

I mean, I think by having the masters and the doctorate and that even if they're not making you money, and I think Masters, we think we can, we think it adds gravitas to the institution, and you are likely to get a higher enrollment at the low levels that will more than offset that.

Yes. And it obviously reinforces university status against the existing public institutions. Okay. Last one.

I'm just going to ask two questions in relation to your tertiary division. So to make it easier for students to come to your private higher institutions, are you guys structuring maybe financing deals with the parents? And then secondly, are you able to attract or pursue partnerships with other funders like seaters? And if not, why not?

Yes. Listen, from a corporate point of view, we are definitely engaging with the seaters and quite successfully. The challenges of funding in terms of bad debts and the cost of students relative to paying in installments, make it unattractive. So I don't think that's a big focus for us.

Yes. I mean we've tried, especially in my early years with ADvTECH, I spoke to every bank and loan provider and that to see if we could structure some kind of deal. And we've just never got any meaningful traction. I mean, to me, there's a few things. The criteria that the banks and the other providers put in place are often so onerous that the only people that give the loans to are the people that could afford our fees on our terms in any event. I think secondly, the interest rates are very, very high. Because worldwide student loans is a worst performing book that the banks have. So the interest rates are typically 20% plus. And they -- you've got to be -- sometimes you read their pamphlets and they say, "Oh, funding at 10% or whatever." But it's actually not that honest. Because what they do is they take it as a straight line. So they say, if it's a ZAR 20,000 loan, the interest will be ZAR 2,000. But I mean, obviously, you've got a diminishing balance. And then what they also do is it's like a ZAR 250 fee on month 1 to get it up and then a ZAR 75 monthly admin fee. And by the time you put all of that in, it's well over 20%. So I mean, we offer terms to our students, and we embed an interest rate in the proper way of calculating it on a diminishing balance relative to the cash fee of about 10% to 12-odd percent. And when you take the monthly repayment, it's actually quite attractive because relative to what the banks are giving, you would pay maybe a few hundred rand more on our fees, but over a 10-month period versus a 2- to 3-year period. So students have quite quickly seen that. And some students are getting funding on their own, but we don't see it as a meaningful way of really opening up our offering to a lot of students. The better way is to keep our product as affordable as possible. And just -- so drive efficiencies, keep the price down and that will open the market to a greater number of students.

Yes. And then just in relation to that, if you guys do achieve university status, will your students be eligible for NSFAS?

Not at the moment. So that would have to be a law change. And I think that one we obviously would have a crack at it. But I think that one is going to be quite difficult to get. I mean, we've also got to just be a little bit careful of what we wish for. Because often the students under the NSFAS funding are the ones that are more disruptive to the universities because they see it as a social grant. And if they're about to lose it because they're failing or something, it's in their interest to cause some disruption and say, "Well, on that basis, I couldn't study properly, and that's why I failed, so give it to me next year again." So we -- it's something we're looking at, but we're also cautious about it. Because it could change the makeup of our student body. Touch wood, we don't have student issues on our campuses. Look, you have the isolated incident, but not on mass. We don't have protests and that our students come there, and they're motivated to learn and not to disrupt the campus. So we've got to make sure we maintain that balance. Sorry, I think we need to go, but we're going to be together all day. So feel free to catch us at any moment and ask your questions.