ADvTECH Limited (ADH) Earnings Call Transcript & Summary

Good morning to everyone in the room and on the call. Just some housekeeping before we begin. The presentation will be uploaded to our website later today with the webcast and transcript to follow. I will also take questions in the usual way as per the screen after the slides. [Operator Instructions] So into our results for the first half of 2026. These are the high-level numbers, which I'll unpack as we go through the presentation. So half year revenue was up 8% year-on-year to ZAR 5.1 billion, whilst operating profit grew by 14%, breaking through ZAR 1 billion for the first time. Operating margin improved from 21% to 22% year-on-year whilst headline and normalized earnings per share both grew by 16%. And we're also pleased to announce that we've increased our interim dividend by 18% to ZAR 0.53. Then this slide captures our current brand structure. Looking at the middle box, the simplification of our tertiary business is now complete and already driving focus and operational efficiency. And then looking at the block on the left, you might also notice a reduction in the number of schools brands, which is something I'll come back to later. And we also continue to gear up for growth across the organization. And with that in mind, we recently appointed Anna Molisani to the new role of Group Business Development Executive, adding capacity and experience to our M&A team. And he joins us in a couple of weeks on the first of September. And then taking a look at the current shape of the business. As you can see from this chart, 87% of our revenue and 96% of our operating profits now come from our education business. And within education, we're also pivoting over time towards our fast-growing tertiary division. Tertiary now contributes 53% of operating profit versus 43% from school. And then running through performance at divisional level. School South Africa's revenue was up 8% for the period, whilst operating profit was up by 9% and then the rest of Africa schools, they grew revenue by 8% and operating profit by 11%. Tertiary revenue and operating profit continue to accelerate despite rolling over significantly bigger numbers from last year, up 17% and 19%, respectively. And finally, for the reasons shared at our 2025 full year results, we saw a moderate decline in resourcing revenue and operating profit down 15% and 12%, respectively. And then recapping the 2026 enrollment numbers that we first shared in March, this is really just a reminder. For the total group, enrollments are up for this year by 13%, just short of 120,000. That is an all-time record increase of nearly 13,500 students in a single year. And that breaks down into increases of 5% in schools and 19% in tertiary where we continue to see exceptionally strong growth. And the compound annual growth rates are also looking strong. And then looking at a further breakdown of the 5% schools growth and South Africa, enrollments are up by 1%. And then the rest of Africa, we're up by driven to a degree by the Regis Ronda acquisition in Nairobi. And looking at the compound annual growth rates, we're also seeing consistently strong growth over a 5-year period. Then breaking down the 19% tertiary enrollment growth, our contact student numbers were up 17% year-on-year, while in distance, we were up 34%. And I think it's worth noting that we've nearly doubled distance enrollments in the last 2 years, in line with our strategy. And then comparing our most recent numbers to the 5-year trends, you'll see the significant acceleration in total and on both the contact and distance splits. And although we're pleased to report such strong numbers, the outperformance of Rosebank and distance at lower price points continues to have a mixed impact on revenue. Just as a reminder, Rosebank and distance fees are about 1/3 of what we charge for Contact in Emerus and Vega. And then getting into the financials. This slide gives the 5-year context for the 8% revenue and 14% operating profit increases I shared earlier. And looking at the CAGRs, I'd just point out the consistency in the numbers with revenue and operating profit compounding over 5 years at 11% and 16%, respectively. And then looking at group level operating margin. We've moved from 21% to 22% year-on-year, driven by operating leverage efficiencies and a mix shift towards our higher-margin education businesses, which Hannes will come back to a little later. And I'd also just mention that our margin improvement is net of significant investments into people, systems and facilities as well as setup costs for our new university in Ghana, which continue. And then looking at the high-level margin breakdown between education and resourcing. I'm pleased to report positive movement in both divisions with education up from 23.8% to 24.3% and resourcing improving from 6.5% to 6.8%. And then breaking down the 24.3% education margin. Scores improved from 21.8% to 22.2% whilst the tertiary division increased from 25.9% to 26.4%, despite that hit from setup costs in Ghana, which are having around a 0.3% effect this year. And then further breaking down the schools numbers, South Africa improved from 20.6% to 20.9% while Rest of Africa jumped from 29.4% breaking through to 30% to 30.1% and then contextualizing the normalized earnings per share growth of 16% or shared upfront. This chart shows the growth trend over the last 5 years. And as you can see, NEP is compounding at 18% and has nearly doubled since 2022. And then looking at NEP in U.S. dollars. We're delivering an increase of 25% year-on-year. And whilst recent Rand strength is clearly helpful. It's worth noting that we're also compounding dollar earnings over the longer term at 18%. And then moving into the Schools division. This slide summarizes our schools business. We're currently in 4 countries with 122 schools and nearly 48,000 students. And on this slide, we cover our 10 biggest brands, but we also have a significant number of single school brands in the portfolio. So mirroring the simplification work we've done in tertiary, that's something that we're now addressing. And this chart shows the ongoing consolidation of 9 schools into our flagship brands. Charterhouse, Peak in wood and Glenwood Bay are migrating or have already moved to Pinnacle colleges. In Africa, McKinney, Flipper and the Gabarone International School will fall under our new International Schools Group brand. Glenwood House and Tiger Valley are moving under Trinity House, and Seth Dan's College is migrating to Crowfoot International. And these alignments have been well received by all stakeholders and will significantly simplify our portfolio, driving greater operational efficiency. And then returning to how we are strengthening the organization. Effective first May, we appointed Melt Labuschagne to the new position of General Manager House schools. This was an internal promotion designed to drive a greater focus on operational excellence and enrollment growth. And effective first August, we appointed Justin Painter to the new position of General Manager this time in Crawford International. Justin was promoted from the role of Principal at Crawford North Coast and he's been given a very similar brief to Melt. And in July, we appointed to Costas La chose to the new position of Sales Manager for Crawford International. This role has been created as part of a program to strengthen enrollment growth. And M2ComSys brings some excellent blue-chip experience to the company, having previously worked for Standard Bank and the SA Post Office. And then going back to the numbers. This chart covers the schools division in total. Revenue was up 8% versus last year at ZAR 2.2 billion, whilst operating profit grew by 10% to ZAR 479 million. And looking at the CAGRs, over 5 years, we're compounding at 12% on revenue and 16% operating profit. And then the detail on school South Africa. Revenue was up 8%, with operating profit up 9%. And looking at the CAGR again, we're seeing consistently strong numbers going by 11% and 13%, respectively, over 5 years. And then moving on to Rest of Africa schools. In rands, revenue and operating profit were up a solid 8% and 11%, respectively. And it's not on this chart, but the numbers were much stronger in local currency after some significant weakening of the pullet chilling and burr against the rand. And looking at the picture over 5 years, our international division continues on its strong growth path. And then moving on to built and ultimate capacity. This slide shows how the numbers have moved across all schools from February 2023 to February 2026. And then gives 2026 SE international split in the last 2 columns. And overall, looking across the third row down, if I can bring your eye there, we're maintaining a healthy 84% utilization of built capacity. But looking at the splits, we have a reasonable headroom in South Africa, but a lot less internationally where utilization stands at 93%. So this makes our international schools very efficient to operate, but it limits further enrollment growth. So we continue to work hard on adding new sites and expanding existing facilities where we can. And then moving on to real estate. Our newest Pinnacle College, Ridge View, which opened at the beginning of 2025 continues to perform well. The next building phase is underway and will be completed early next year. And this will increase capacity to 600 students as we add grades to the school. And Pinnacle College Copper Leaf, which opened back in 2017 has also performed very well, but was running out of capacity. So in a project completed last month, we've added space for 500 more students. The expansion cost, ZAR 24 million and included a new dedicated preschool that you can see in the top 2 photographs in the slide as well as an additional class from block for the high school. We'll also be opening a new Abbott high school in Bordeaux in time for the next academic year. This will be built on the site of the old Vega Randburg campus at a cost of ZAR 22 million. It's in a great location and we'll have capacity for 550 students from day one. And then moving into Africa. The McKinney Ronda School in Nairobi, which we acquired in September last year continues to perform well. And on the back of investments to improve facilities and systems, enrollments have grown by 21% since acquisition. And the high demand Cambridge curriculum will be introduced next month at the school, which should give us a further positive bump in student numbers. And then a quick word on McKinney State House. This is a school in a prime location in Nairobi, but it was scheduled to close at the end of its lease this year, which would have lost us 280 enrollments. But after some excellent negotiation from our international team, we've managed to secure a new long-term rental agreement that will allow us to completely rebuild the school and increase capacity to 575 students. And then moving on to the flipper schools in Ethiopia, which we acquired towards the end of 2024. IT upgrades have just been completed, which will enable the implementation of various support systems and academic training for teachers. We've also successfully negotiated the harmonization of school fees across various historic tiers, which significantly strengthens our commercial model. And I also wanted to share a recent setback that we've managed to turn into an opportunity. Earlier in the year, we heard that the Ethiopian government had bought 1 of our lease schools via compulsory purchase giving us only a couple of months to vacate. But our team on the ground have found bigger, better alternative premises in Adasababa's Mexico District as pictured on the left of the slide and the new site comes with the added bonus of increasing capacity by 450 students and has allowed a seamless transfer. And then moving on to the tertiary division. This is a snapshot of our recently simplified structure. We currently run 32 campuses across 5 brands. Our student numbers now stand at nearly 71,500 up 11,400 year-on-year, as you saw on the enrollments chart earlier. And we normally only share this high-level view, but I thought it might be useful for this presentation to show you the geographical breadth of our campuses. So this slide shows the locations of our 11 Emaris contact campuses in South Africa right across the country. So we have very broad penetration and this one shows the existing Rosebank network and 8 South African cities as well as Accra Ghana and we'll add a ninth campus to the brand next year, which I'll come back to in a few slides time. But getting back to the numbers. Treasury revenue is up 17% and despite significant investments to increase capacity and to strengthen our brands, operating profit is up 19% and looking at the 5-year compound annual growth rates, revenue and operating profit are compounding at 14% and 17%, respectively. And this chart maps the qualifications we offer across our tertiary brand portfolio, spanning skills development to PhDs in a range of delivery modes. This has been ongoing work for the last few years, but I think we're now in a really good position. And then covering the question are we with university status. This chart shows our best guess at the forward milestones and timing in the absence of final information from governments. The restructure of our tertiary division, as I said earlier, is now complete, rebranding the IE to Emerus and creating a second degree awarding entity in Rosebank College. We still hope government will publish the final criteria and the application process later this year. When this happens, we understand both brands will immediately be recognized as higher education colleges, which will ignore from a branding perspective, will then apply for the interim step of university coverage status for Rosebank and straight university status for Emaris given that we're further down the track there in terms of research output and post-grad qualifications. And then moving on to real estate. As most of you will be aware, our existing Emerus and Vega sites and Sandton were relocated to a new mega campus on Grayston Drive at the beginning of this year, doubling student capacity to 9,000. And first year enrollments are up over 20% year-on-year. So we've started with a bang in this new location. And in terms of immediate building plans, we are in the process of adding a 200 space parking deck to the site that will open in February next year. And we also hope to add nearby accommodation for around 850 students targeting completion in 2028. And I'd also just share that enrollment interest for the next academic year has been very strong. And we also related our Emaris Nelson Mandela Bay operation to new purpose premises in Walmer Park at the beginning of this year. In many ways, we've mirrored what's been built in Sandton, including the world-class indoor sports center, you can see on the bottom right of this slide. We've also increased capacity by 50% to 4,500 students. And then an update on our KZN University development. We've acquired 10 hectares of land, a huge site southwest of the Kanuma Mall near Schlanger, to build a state-of-the-art campus with capacity for 10,000 students. The new location will consolidate our existing tertiary sites in the region and include world-class sports facilities as well as a sizable amount of student accommodation. Phase 1 will open in 2029 with full build-out GTB completed in 2035. And then moving on to Rosebank, our rebranding from IE Rosebank College to Rosebank International is now complete. As you can see in the photograph, on the top left of this slide. The new logo and iconography position Rosebank International as a trusted aspirational international university with a heritage going back to 1909. And I'm also pleased to report that the renovation and expansion of our flagship brand front in campus, which is what we're showing here, has now been concluded, increasing capacity from 11,500 to 15,000 students. But despite adding that extra capacity, we're already running out of space in brown fining. We've, therefore, acquired new buildings near the main campus that will allow us to increase capacity immediately by another 4,000. Ultimate capacity on this additional site will be 9,000, however, which will give us some very useful headroom. And the total cost of acquiring the buildings and Phase 1 of the Fit at is around ZAR 120 million and work to open in time for the 2027 academic year begin shortly but will be finished by the end of November. And then moving east, rapid growth in demand also means we're running out of space in our Durban campus. So as a result, we'll be relocating to much larger premises in time for the new academic year. We are creating space for an additional 650 students immediately with the ability to add 2,000 more over time. And we're also seeing strong demand in Polokwane, where we've just added 2 new buildings to our existing campus. That's increased capacity by 900 to 4,600 and allowed us to upgrade student facilities at the same time. And then as mentioned a few slides back, Rosebank International will open a new campus in January in KuGompo City, which used to be East London. The brand has acquired lease premises with initial capacity for 600 students that we have the option to increase that to nearly 4,500 on the same site over time. And then a quick word on our online business. Our last contact student growth has been exceptional. We're also very focused on growing distance enrollments. And as part of that drive, we've been adding contact centers to our existing campuses. And these provide distance students with access to devices, the Internet and collaboration spaces. So 6 centers are now up and running with 2 to follow soon in Durban and the new site I just showed you and in Mbombela, and these facilities have proven to be extremely popular with utilization levels running at around 97%. And this initiative is helping us aggressively grow distant student numbers as shared earlier. And then a quick update on Rosebank International in Ghana. We are currently in our first year of operation with enrollments running slightly ahead of business case. We opened with university coverage status and are confident that we'll become a full university next year and we have plans to expand both contact and distance enrollments from this site, specializing in post-graduate qualifications. And then moving on to resourcing. The unexpected closure of USAID in February last year continues to impact our Africa resourcing business, which is the bulk of the division and having pivoted away from clients dependent on U.S. funding, we expect year-on-year performance to be better in the second half. And on the plus side, overall margins in this division improved from 6.5% to 6.8%. And then as covered earlier, divisional revenue and operating profit were down 15% and 12%, respectively, at the half year. Despite this, operating profit is still achieving a compound annual growth rate of 6% over 5 years. And now I'd like to hand over to our CFO, Anders Bunze, to take you through some further analysis of the numbers.

Good morning, everyone in the room and those on online as well from my side, a pleasure to present to you the snapshot on the balance sheet for 30 June. I'll be covering debtors capital structure, and then we'll move to shareholders' returns and dividends as well. And our investor dashboard. But let's start with the most important forward indicator and that is whether people want to pay for our services that we deliver on a daily basis, and that is the debtors tracking. On this slide, as presented before, I'm just going to take you through the slide itself. We've got the group revenue at the top line. Then we've got the education revenue and then the stacked bars, of course, the debtors balances and the loss of the debtors provisions for the full year. But our long-term tracking is indicating to us that we're growing education revenue at 13%, and our gross debtors are only increasing by 9%, which really indicates a good debtors can I say, track record over the period. For this 6 months, we've actually exceeded that expectation. Debtors only increasing by 5% yet education revenue increasing by 13%. That ultimately gives you a 11.5% debtors to education revenue which over the 5-year period is 4% less than what we've had in 2022. I think with that debtors performance, it then starts driving indication of what should the bad debts provision B, and that is sitting at 46.8%, again, a 0.8% differential on what we've had in prior years. But just going to have a look at what the rand impact is of all of this. So similar slides in terms of the debtors balance and the loss allowance coverage, but now the credit losses are added. And just a reminder, the credit losses is a combination of the bad debts recovered, bad debts written off as well as the movement in the provision. And as you can see in the past, the midyear point is usually 2/3 of the full year balance when you look at '25, '24, et cetera, what those midyear balances were ZAR 119 million last year, ZAR 158 million full year. At this stage, again, we've been tracking quite well with a lower number at ZAR 115 million on credit losses. And I think that sets us up nicely for a full 2026 year of where we're going to be on the credit loss percentage. These 6 months already, we're sitting at 2.6%. You'll recall that on December number last year, we're already at 2%. So again, the objective is this year to again get to 2% or better on credit losses, which I think is a fantastic number every rand that we bill, we only actually write off ZAR 2. More importantly, is also the patterns in which our clients do pay us, and that is fees in advance, how we receive money throughout the year. You recall at year-end, there is always a balance that people have paid upfront for the next academic year. But at midyear, this is actually important to track in line with our revenue. So you can see there that, that 8% growth is in line with our revenue in terms of how we're receiving the funds throughout the year. But maybe more importantly is to see what actually hits the bank account in terms of our cash flow. The cash flow determined so much in our business. It determines the whole investment that we have in capital expenditure, our whole view on capital structure. So the cash flow performance is extremely important indicator for us. This year, we've again been predominantly, can I say, for a business that is delivering a service majority of costs being personnel costs your operating profit and your performance and your cash should match each other, and that has been 13%. Of course, it's running a little bit lower on the CAGR, 15% but coming off a high base. How is this cash looking with regards to our debt that we have in the business. And again, just a reminder, a lot of the capital expenditure takes place in the second half of the financial year. So you don't have the biggest capital expenditure in the first 6 months. But I think we've made progress. I had a lot of comments on increasing gearing and as you can see from prior year at a ZAR 30 million net debt situation at 30 June, we've increased it by about ZAR 100 million, where we're standing now. Our capital expenditure is mostly pivoted towards additional capacity, as Geoff has noted and we've got a 23% increase on this capital expenditure from prior year numbers. The spend on IT furniture is more of a replenishment and continuous maintenance of our campuses. The existing sites, of course, is increasing capacity as you've seen from the enrollment numbers that we've experienced, we do need to plan for the future. And then in this 6 months, we've also had a cost for the support office relocation, which is the old Emaris building in Venmo that we've repurposed for our head office relocation. The old head office was, of course, a leased property. This leads me into the impact of the increased spending on our overall debt ratio. And we've been working quite hard in terms of seeing how can we improve our capital structure. And just a reminder, again, that our debt comprises 2 major components: the lease liabilities as well as the bank borrowings. Lease liabilities fairly flat year-on-year. And then, of course, bank borrowings increased by ZAR 100 million. We've been able to just pivot slightly from prior year numbers from 23% to 24% on our debt equity in midyear. And then I've just added on the full year numbers that you can see how big jump we see on that debt number comes through to year-end. So there's a good 15% jump when we get to full year. At the bottom is also a description of a lot of our major projects that we've been investing in, in the past periods and comparable periods. Notably, in this period, it has been the big share buyback and then the expansions that you've seen at the Pinnacle colleges as well as Rosebank International campuses. Our return on equity and return on invested capital, not disclosing a full year number yet. I think we're still at half year, but I'm very positive that the trends that we've seen from '24 to '25 will definitely flow through into our 2026 number. Last year, we've reached the 20% on the ROE looking very positive to even a bigger number this year. We also last year incorporated the ROIC metric, which is actually a metric on all capital funds that's being used by the group to measure ourselves on that. And again, looking good for another half or even a percent increase on that metric. So for shareholders, it's all great that we have percentages, but I guess they want to know what hits their pocket and that is always dividends. This year, we have a dual benefit to shareholders. We've had the dividend itself, which will be payable in September. And we also embarked on a share buyback program of 1% of the share capital of the group. We are still declaring our dividend within the policy that was agreed in 2024, which is a 2x cover, and that continues. Again, we monitor it consistently with regards to future capital needs. And I think for those that have reviewed the long-form statement can even see the increase in our capital commitments from the March numbers we disclosed to now our investment committee quite busy with regards to looking at new opportunities for expansion. We've been very pleased with the share buyback. Current trading levels, definitely much higher than the average price that we were buying the shares up during the April to June period. So just overall, over the long term, where are our shares tracking, I think if you look at the CAGR significant percentage, but keep in mind the change in policy to a little bit of different coverage that we had in 2024, and that is a 24% to 25% long-term average on the dividend declaration. But this period, I've added the effect of the share buyback and what it actually means in sense? I know people would want to maybe get this money in their bank account. But you own 1% more of ADvTECH at the end of the day, and that represents ZAR 0.44 that we've added on to the interim dividend. So close to ZAR 1 that we're declaring to our shareholders. Just a quick wrap-up on the investor dashboard is that where is our profit margins going to move towards in the future? And I think one's going to track and see that how our various divisions contributing to the profit levels in the group. SA schools again, a very stable business I always say, you've got a student for 7 to 9 years. You need that foundation in our group. Resourcing declining a little bit because it's not really our core business. But then you've got these significantly growing divisions in the rest of Africa as well as tertiary that now makes up nearly 63% of our business. And when you start mapping that against the operating margins that we see in the Africa schools and tertiary it automatically indicates an increase of the group operating margin over the period. Just some investor metrics. What is our total shareholders' return being from a period back to 1 January 2025, which is 19 months, we're up 46%. If you then look back, say, 44 -- sorry, 46 months from 1 January 2023, 181%. And I think that's been a good number that's also come through. Market cap has also been an important metric for us. And again, now comfortably above that GBP 1 billion level, and we also exceeded the USD 1.5 billion level, which is also an objective for us. Liquidity has also improved. If you look at the average trading volumes for the 6 months period, [indiscernible] up 19% and then return on equity tracking quite well. I'm not going to quote a number, but I saw on the Moneyweb website yesterday, they trued up our half year numbers. So that 20.6% is currently indicated on the Moneyweb website is 21.6%. So comfortable getting above that 21% level as well. But yes, that's nice. That's it from my side. Over to Geoff, and I'll see you all at Q&A.

So then to close, I'd just like to take a quick look at how we're progressing against our strategy. So this slide recaps our dual ambition as a company to lead in every market segment in which we choose to operate and to be the employer of choice in the education and resourcing sectors and these goals continue to guide us. And then this chart is unchanged from our Capital Markets Day 2 years ago, but I thought I'd just recap how we're doing. It covers our strategic imperatives, and I'm pleased to say that we're making significant progress on all fronts. So we continue to add high-demand tertiary qualifications to both Emeris and Rosebank. Tertiary restructure is complete with schools following quickly behind. Brand propositions and marketing, I think, are in very good shape with major campaigns currently in development. And we've made all the necessary investments to secure university status. We now wait for government. Our African operation continues to expand through both organic growth and acquisition, whilst tertiary distance enrollments, as I said earlier, have nearly doubled over the last 2 years. We've also made significant progress in building and communicating academic advantage across all our brands. And these imperatives will remain our focus as we move forward, though we still have lots of work to do. And then relative to optimizing our marketing, I wanted to touch on the major sponsorship that we announced last week. We signed a 3-year deal with Cricket South Africa with some very specific objectives. We want to build understanding of what ADvTECH uniquely brings to all our brands, which we're calling the ADvTECH Advantage. And this comes in the form of superior academic outcomes, industry-leading AI learning tools, African scale and expertise and our social impact programs. We'll also use the opportunity to further strengthen Emeris as our premium tertiary brands. and to create powerful links to our Cohort and Trinity House schools. So the sponsorship is wide-ranging and it covers CSA's National Youth weeks from under 13 to under 19 and as well as the men's and women's test teams. And we're excited about the benefit this partnership will bring, especially with highly anticipated men's test series coming up against both Australia and England. And then to close, I'd like to leave you with our prospects slide. So just recapping the key points. South Africa's demographic and tertiary tailwinds remain as does demand for quality education in all our markets. Our position as the leaders in teaching and learning across the African continent is stronger than ever, and our financial strength and scale continue to build, as Hannes just touched on. And all of this places ADvTECH in a strong position to continue on our current growth trajectory. So that's it from the slides. I'd now like to invite Hannes back, and we'll happily take some questions.

Yes. [indiscernible] Okay. I think in terms of the forward view on education, I mean, demographics continue to drive population growth. I think the state sector in many places and schools continues to struggle, that helps us. And I think the disarray in the public universities where they're not only capped in terms of places but the quality of what they deliver from a teaching and learning point of view is deteriorating also gives us a nice tailwind. So I think we've got some upside to tap into. And if you look at how we're responding to that, I think Quen Kura, we're still reporting numbers. They were reporting declines in enrollments when we're reporting growth. So I think we're growing share in schools. And if you look at our listed competitor in the tertiary space, they're reporting growth in enrollments of around 9%. And as you just saw, we're reporting 19%. So I think we're growing significant share in both schools and in tertiary in what is a growing market. So we're pretty bullish about the forward picture. And then in terms of resourcing, I think that's been a good business for us. It's shown some very good growth over the last few years. We have had the setback of losing 10% of our clients that were attached to U.S. funding, the U.S.A. that I mentioned earlier. That is a relatively short-term hit. We've pivoted away from U.S. dependent payroll management contracts, that's the bulk of the business. And as I said in the slides, I think performance will be better in the second half. I don't know if you want to add anything to that, Hannes?

100%.

Happy.

First of all, congratulations on a very powerful and impressive set of results. This organization has been built far beyond my expectations when I retired. I have a few observations and questions over. The first is your distance education enrollment has grown rapidly in the tertiary space and is an exciting opportunity. What is, in fact, your strategy regarding the mix of face-to-face and distant students because it seems to me that there is a much smaller CapEx requirement per distance student that makes it perhaps easier and less costly in many ways to grow the distance. And I think that is a very exciting opportunity for ADvTECH, and I would like to hear your thoughts on the strategy but congratulations on the progress thus far. My second comment is on the share buyback, much was made of it by Hannes and but still, it's ZAR 250 million in the phase, ZAR 25 billion, ZAR 26 billion market cap. Is it really material? And perhaps you can comment on the thinking around the value and validity of a share buyback. It concerns me that it potentially shows a negative in the sense that the Board and management may not know what to do with the massive cash flow you have control over and therefore, simply opt to give it back to the shareholders in the form of a buyback. And I think you need to give a more positive justification for a share buyback to overcome that concern. And in that regard, I note your free cash flow per share, which is a special report, non-IFRS that you have persisted with shows free cash flow of about ZAR 2.3 billion in this period. The dividend commitment is about ZAR 400 million. So there's a lot of spare cash working around and what, in fact, is the strategy for that. And then my next comment is...

I'm just moving on to Page 2 of my notes....

That's okay. I thought I'd give them all to you at 1 side either to answer or not. My next comment is Emeris now has 60,000 students, which -- tertiary students, which represents [indiscernible] of a university and 1 which can no longer, I think, simply pick away at the market share of the state universities.

I think we're doing a little more than packing away.

But anyway, -- but I would like you to comment on the future and the strategic thinking about Emeris tertiary, I think the new campus that you've explain to us about in Natal, is a very real threat to the Natal universities. And it seems to me that ADvTECH is building for itself and needs to accept perhaps a role that is a strategic building block of the South African education system and can no longer define its strategy in terms of taking market share away from the public it is a driver in and of itself. My next observation is many South African listed companies have caught some sort of disease in Africa that has hurt them badly and cause them to fall flat on their faces. And I don't need to give you the examples, but the latest one is perhaps Absa. How, in fact, is ADvTECH thinking strategically to avoid the African disease. And given that a significant part of your future seems to lie in Africa, outside South Africa, how will you ensure that the growth remains healthy and vigorous and not prone to the African disease of borrowing expensive dollars but only realizing a revenue in a weak local currency, which seems to be a summary of the major cause of the African disease. And then finally, I would just like to ask you, you talked about the strength and power of the academic machine you're building. I would like to get an indication of the employment of -- let's just use it as a benchmark PhD graduates, in the ADvTECH organization? And how does that compare with a major public university. Geoff. Sorry, that's a bit of a mouthful but there...

Thanks, Frank. That was some great questions. First of all, we spoke about distance and the rapid growth. Our interest in distance is rooted in a couple of ways. So first of all, we think that contact and distance are 2 separate markets. Contact is your average 19-year-old who is looking for the full university experience during a first degree. Distance appeals to people who are older, maybe in the 30s and working and looking to further their career. So there are 2 separate markets. There's very little cannibalization between the 2. So we want to maximize both. Our intent, I don't think we've got a target in terms of the proportion of contact and distance we want to maximize both. So if our strategy is to lead in all the market segments we operate in, we'd like to be #1 in contact and #1 in distance. So we've nearly doubled enrollments in the last 2 years. I think we made a good start, and we will continue to drive that. And I think the Guinean university gives us the opportunity to grow both contact and distance but distance particularly into West Africa with the credibility of hoping that we get full university status tear. So that's the plan on distance, but aggressive growth and looking to lead in that sector the way that we do currently in contact. In terms of the buyback, we see ourselves most definitely as a growth stock. And we have a very significant investment program and a very exciting pipeline of opportunities. So we want to address our capital structure and be under geared but our preference is to find exciting investment opportunities. And I also say we've got a very exciting program that we're looking at there. In the interim, to help the capital structure we felt the right thing to do was to go with what you yourself described as a relatively small share buyback. So we're balancing investment for growth and getting closer to our ideal capital structure. I don't know if you want to comment on that one, Hannes?

Sure, Geoff. Yes. If you look at our past performance, when we look at total cash generation after CapEx, after dividends, we were sitting with an excess of about ZAR 400 million, ZAR 500 million per year, and that drove down a lot of our debt. So that's the starting point. That's the excess cash that we had at the end of the year. A year ago, we started a lot in terms of looking at capacity, looking at growth opportunities. And as you've seen in the capital commitments, we have committed to more than ZAR 2 billion worth of projects over the next 3 years. Emaris, Durban, of course, being the biggest, but many of the others noted by Geoff. So that's giving us a good ZAR 2 billion of CapEx to be invested up to mid '28, 2029, which starts consuming this ZAR 400 million, ZAR 500 million that we're generating every year. In the interim, we actually said, well, because we've got a surplus from 2025, let's start getting into the share buyback game. We're very confident in terms of our projection for the rest in 2026, but the commitment to making much larger share buybacks is driven by what is in the pipeline on the capital commitment side. I think it's been a good start. We're very open to it. And it's a very kind of a flexible model to give money back to a shareholder in the short term. So it's been positively accepted, and it was a start. We will be considering a bit more on that. But I think the cash generation, future projects is important to concern the next 3 years.

Then you mentioned Emaris and the fact that, that is becoming very sizable and what our future plans are there. The market is a very interesting dynamic. I think we've experienced the tailwind of a cap on state places for the last couple of years. There is a fast-emerging second tailwind, which is the deterioration in the quality of teaching and learning in those public universities. We've got some interesting research on that 66% of students 2/3 going to Emeris in the first year, now tell us that we are their first choice institution. So I think we continue to build advantage in systems, security, facilities, all of those things so that we are a better choice. You mentioned the new development KZN, I think the KZN university situation from a state point of view is poor and deteriorating. I think it's a big opportunity for us. So I think we'll continue to benefit from the tailwind of our cap on places but the additional tailwind of deteriorating quality in the state system will also help us. We've got some quite ambitious plans to grow both Emaris and Vega. I don't know if you want to add anything to that, Hannes.

People side happy.

Okay. Yes. The Emaris Vega sector is very much people graduating from private school. It's around the same sort of price as our average private school fee point. For Rosebank, we're much more into the main market. So the average fee price point, 90,000, 95,000 for Emaris but about 35,000 for Rosebank. Okay. Well, I mean, I think in Emaris, we've been heavily invested in degrees and honors. And looking forward, more post-graduate qualifications. Historically, we've been focused on ordinary degrees in Rosebank. We're adding honors and adding PHDs, and we're looking to expand research in both institutions. So -- but that's the history. Okay. The LSM profile, upper end for Emaris, more main market for Rosebank. Okay. So -- and then you also asked about avoiding failure in Africa, which I think is a very good question. I think we've been very choiceful about the countries that we've gone into, and that's important. I think we've got growing expertise, scale in the markets we're in, which is an insulation against market risk. I think being in a small number of carefully chosen countries gives us a portfolio, which, again, is a risk-reducing move. You also talked about funding unless we have a really large capital requirement, we have been funding African expansion with funds generated in Africa. And I think the other -- just the structure of our business insulates us to quite a big degree from risk. We operate on higher margins, the teaching costs those African markets are about 20% lower than South Africa, you saw the margin numbers in the presentation. We also have local supply chains. We've got very little in the way of dollar-based costs. But the only thing we buy in dollars or software licenses and they are very small. And I think we've got high GDP growth, high population growth, and we have high levels of urbanization and less competition in South Africa, so it's a big market opportunity, and we've made a number of moves to mitigate risk. But we still see that as an attractive area to pursue going forward. Again, I don't know if you want to..

Yes, maybe just want to add on to that. Yes, that Africa portfolio is delivering in rand terms about ZAR 200 million to ZAR 230 million pretax. After tax, you're looking, say, ZAR 150 million sorry, ZAR 160 million to ZAR 180 million. If you recall last year, the Ronda transaction was ZAR 170 million. So again, you know what the cash generated out of the Africa portfolio is equivalent to buy a school per year. The demand is, of course, far in excess of it. And probably, the deals are not always as favorable as the Ronda transaction that we've had. But yes, we've looked at funding as well in country, but the interest rates in some of these countries are sometimes 3x the South African rate. So if required, we can still fund from South Africa. And just our cash flow preservation policy is that we don't utilize the African cash generated in any dividend policy because we're still seeing significant growth in that portfolio.

And remittances from the African countries.

Not a problem in Botswana, either in Kenya, Ethiopia is a little bit challenging, but possible, and we've tried it on a small scale. At this stage, again, looking at the campus that we had to relocate and the IT investments we're putting in, we've been utilizing the cash [indiscernible], that will be the most challenging one, but no problem in Botswana and Kenya.

And I think, Frank, the last question you talked about qualifications and PHDs, and I think that was also your question we are particularly in Emaris, but also in Rosebank looking at post-grad qualifications and developing masters and PhD programs over time. Okay. Other questions?

Congratulations on the solid performance. So Mr. Geoff, you did answer a part of my question. So it's in relation to the resourcing division. I just wanted to find out if you guys are seeing any new client wins or contract pipelines that could offset the USA related losses. And then my second question is in relation to the Emeris Sandton campus. So I saw that you guys are looking into adding student accommodation there. So my question is, do you have land or space for that on your existing sites? Or would you have to acquire additional property and then on that, when we last spoke to Mr. Hannes, were all frantic about the parking situation, and he assured us that this was beginning of year issues that would fizzle out, and I believe that's what's happened. So considering the existing students and staff base, has that parking capacity being factored in relation to adding students accommodation on that campus.

Yes. Okay. So maybe taking the first of those questions. And are we picking up new contracts and resourcing. So the answer to that is we're continually cycling contracts. When the businesses that we manage payrolls for become big enough, they would typically take that on and run it themselves. So we are continually adding and cycling out of contracts. The contracts that we've picked up have generally been higher margin than the ones we've lost that is why the margin has improved. We have pivoted strategically away from U.S.-funded NGOs and charities after the USA decision. And we have picked up some contracts and are looking to grow those and also pick up more. So that is actually quite a dynamic business. On the student accommodation question at Emeris. We won't actually be building that ourselves. We'll work with third parties, and it wouldn't directly be on our campus, it will be adjacent to our campus, but that's quite exciting. It effectively stretches the catchment area beyond people who are doing a daily commute. So it should help drive student numbers. And then on parking, I mean, I think the reality is things do settle down after the beginning of term, beginning of an academic year in a new location. We've also taken action to add additional parking and to limit first years parking on site, -- as I mentioned in the presentation, we've added 200 spaces or will add 200 spaces by the end of this year. We currently have 650 on-site spaces. So we've already got quite a big capacity. We'll add a size on about 33% increase. So that should set us up to ease the situation in the short term and also prepare us for growth into the future. Okay. Thank you.

Well done for your results. Yes, you answered my parking question, but I have 2 follow-on questions. One of the slides that stood out to me when you're speaking about the capacities in the -- I believe it was the schools or the education facilities. And it seems to me that the Africa campuses are at higher capacity the South African ones, which to me seems like a mismatch because it seems to me that Africa -- South Africa, particularly the schools division is sort of stagnating in student growth in Africa is supposed to be your growth engine. So how do you deal with that mix, that mismatch?

Yes. I'm not really sure that is a mismatch. I think those schools are full because of market demand and because of the growth that we've had historically. So utilization is a function of demand and success. And I think we've got for the reasons that I just laid out, a more dynamic market opportunity in Africa less competition, higher GDP growth, greater levels of population growth, urbanization. So I think we've got strong brands, huge market demand. and that's led to full schools. And our focus there, as I said in the presentation, is to create extra capacity to accommodate that demand. But I think it does actually make logical sense if you think about it.

And in terms of filling up South African schools because I know it's a tough economy here. GDP is not really growing.

We've had continual enrollment growth in South Africa. It was slightly muted in this last round, but we still grew. And I think in certain areas, we still have demand at stripping supply. So some of the developments that I spoke about in individual schools are about increasing capacity. If you look at the estate in total, we do have some room to growth -- room to grow, sorry. But that's not necessarily a bad position. And you can't actually run high schools at 100% anyway. I think when you're running multiple subjects, that creates an efficiency. In our primary school, we've got a dedicated class and a dedicated teacher then you could get to 100% or very close in high school, you're never going to get to 100%. So 84% is a pretty good number. 93% is actually slightly uncomfortable in Africa.

Okay. Again, maybe add, I think we added a lot of questions earlier on not opening up a big school for 2027, but we've looked at a lot of our sites in the various brands building on as we've shown also on the pictures. And there is quite a lot of capacity that's being added on for January in some of those areas where there is high demand or full schools that we've been able effectively actually indirectly built a new school on current existing sites.

And then in terms of the Emaris campus, a brand, you said it's similar to where your private school students go, I'm assuming your Crawford, those kind of schools you, they want to send them in through to Emaris. I know you do have a campus in Grayston. But to me, it seems like these kind of students want to go to daily use. They want to go the UCT to have that kind of experience. Would it not make sense then to build in these sort of areas so they can live the appease if you want to call it that.

Well, as I showed on the slide, we've got campuses all the way across the country. So we're quite well represented. We are adding sports facilities, recreational facilities to address that in balance. And I'd maybe just pull you back to that stat that I shared, where for first year students this last year, 2/3 of them had Emaris as their first choice. -- they would have had all of the said options to choose from.

So my second question, by the way, my name is Neil from Mazi. A lot of your growth in that tertiary division, and I stand to be corrected, comes from the Rosebank international brand, right, which earns lower revenue per student, I believe. So how should we think of that medium-term margin trajectory as the mix shift continues.