Stadio Holdings Limited (SDO) Earnings Call Transcript & Summary

Thanks, Chris, over to you.

Here we go. Thank you. Thank you, mate. Good morning, ladies and gentlemen and welcome to STADIO Holdings interim results presentation for the 6 months ended 30 June 2024. With me this morning to do our presentation is our Group CFO, Ishak Kula. I will start off the presentation by giving a very brief reflection on the year-to-date. Thereafter, I will hand over to Ishak, who will unpack our interim financial results in more detail. Thereafter, I will come back and give a short growth overview for the last 4 years at STADIO as well as talking to a few strategic items. And then at the end, we will open the session for questions and answers. Don't see the slide show moving. While we try to sort out the slideshow, I will continue. And just to refresh everybody, STADIO Holdings, our purpose, again, is to empower the nation by widening access to quality higher education. We do this through our 3 distinct private higher education institutions being Milpark Education. Milpark, a pure online distance learning institution, focusing on the financial and banking industry. Also in the group, is AFDA, our world-renowned [indiscernible] school, focusing purely on contact learning, and then we will focus on the creative economies. And then thirdly, we have our comprehensive institution being STADIO Higher Education, where we see multi-programs, multi-faculty focus -- sorry, focusing on a variety of program. The first 6 months thus far has been a very busy period here at STADIO, but at the same time, also a very exciting start to the year. The tough economic times are continuing. But despite the tough economic environment we are currently in, we are very proud to present another solid set of financial results. We see continuous growth in our student numbers across distance learning and contact learning. And we also see good progress made in our debtors' process and collections. A lot of work went into this, to unpacking it and really understanding it right down to campus level, but I'm sure Ishak will go into more detail during his presentation. Then during this first half of the year, we've seen exciting new programs being accredited and these programs will then be offered in the 2025 academic year. And then continuous innovation being introduced into our business, right from recruitment all the way to graduation. And we continue to bring this technology in, to make sure that we can deal with the big growth in our student numbers. Looking at the market, we see that the higher education, the demand for higher education has continued to grow. Since 2008, the Matric degree passes have increased annually by 11%. 1st year degree intakes at public universities increased by only 0.8%. So that means there is a great undersupply for students wanting to access higher education. It is estimated that in this year 2024, approximately 180,000 students who qualify for higher education admission will not get place at the public university. Supporting this need for higher education even further is the reason South African unemployment rate figures that rose by 33.5% or is now 33.5% in the second quarter. We've graduate unemployment rates only 9.7%. So the demand for higher education is ever increasing and there is an undersupply. So a great opportunity for private higher education institutions in this market. And we here at STADIO really believe that the only way we can change things in our country is by giving more people access to quality higher education. But before we continue, let's look at our interim results. These are some of the highlights. Looking at student numbers, we see a 10% increase in student numbers for the first semester, up to 47,024 students. Our revenue increased by 16%. EBITDA margins remained flat at 29%, but we are still of the belief that this institution can get to an EBITDA margin of between 30% to 33% and that, that is very sustainable. Profit after tax up 14% to ZAR 144 million and then earnings per share up 20% to $0.163 per share. Core headline earnings per share, up 19% and then also a very positive cash generated from operations, up 20% for this first 6 months period. And then lastly there, the return on equity up 16%. So I would, now, gladly hand over to our group CFO, Ishak Kula who will unpack these results for us in more detail. Thank you, Ishak and over to you.

Thank you, Chris. Good morning, everybody. And with great pleasure, I'd like to present to you and unpack our half year financial results in a bit more detail. As Chris had mentioned, we produced a solid set of results despite tough economic environment. We've managed to grow our revenue by 16% to ZAR 826 million, which is really underpinned by very good student growth of 10% for the period. This financial performance translated also into good cash generation for the period with a 20% increase in cash generated by operations to ZAR 307 million, up from the prior year ZAR 255 million. And as Chris had mentioned, the most students take long to pay and there was a slight increase our loss allowance for the period. We saw good collections on the book in the current period. We've also introduced a number of operational changes, of which the most significant one which we would like to highlight is the operational changes, which now does allow students to reregister if the account balances are not brought up to speed, going into the second semester. And again, I'd like to highlight historically, at the end of each financial year, we'd also prevented students from continuing their studies, if their financial and their accounts were not brought up to speed and also results were not released to those students to ensure that we maintain some form of stronghold on the students and our capability to collect on those. We continue to invest to allow for future growth. We've continued to invest in a number of initiatives, which I'd like to highlight a bit further on in the presentation. Key capital and other investments during the period, we invested ZAR 34 million into capital expenditure, of which ZAR 10 million related to our solar projects under the period, with additional solar projects planned for the remainder of the year. We also spent ZAR 3 million in our exciting new Durbanville Campus with a further ZAR 30 million planned for the remainder of the year, subject to regulatory approvals. And then we also invested ZAR 15 million into the development of new curriculum and software with a further investment plan for the remainder of the year. Then, ladies and gentlemen, transactions with our Milpark Education. We have minority shareholders in Milpark Education. During the period, we acquired a further 0.7% effective interest of ZAR 5.8 million during the period January, 2024, which we paid for in cash. And we also, you would recollect, at the end of December, 2023, we acquired the shares from Brimstone Corporation for ZAR 117.5 million, which we also paid for during the period. We utilized a revolving credit facility, which we took out in January or took up in January and we've fully settled that by 30 June, 2024. That, therefore, takes our Milpark Education effective interest for the minority share in Milpark Education from 31.5% in 2023 to 16.14% in 2024. During the period, we also issued shares and we had some share repurchases. We purchased and canceled 3 million share -- STADIO Holdings shares and we also issued 3 million STADIO holdings shares in April, 2024 in lieu of the settlement of our obligation through the Share Incentive Trust for the employees that qualify for the Share Incentive Trust. A dividend of ZAR 84.7 million also declared on the18th of March and was paid on the 22nd of April. A dividend of ZAR 11.3 million was also paid to minority shareholders in Milpark Education during this period. And I'd like to reiterate, we have a strong balance sheet with no external debt, which we're incredibly proud of. And I'd also like to remind our audience that although we've got very good results for the first 6 months. We have another second semester intake, which is ongoing and the first 6 months' results is not necessarily a reflection of what we can anticipate for the full year, albeit we remain optimistic. And moving on to total student numbers. We've managed to grow our student numbers by 10% from June, 2023 to June, 2024. Our student numbers stood at 47,000 in 2024 -- 47,024 as at 30 June 2024. That takes us to a 10% cumulative annual growth rate from June, 2018 up to present. And we've seen a 17% growth, if we exclude our cyclical business-to-business, student base at resides with our Milpark Education business. So very proud growth and very good growth that we've seen in semester 1. Moving on to our contact learning student growth, a very encouraging growth there. We've seen 9% student growth from June, 2023 to June, 2024 with a cumulative annual growth rate only of 3%, impacted by the historic years where we've had lower intakes post-COVID. But proudly, we grew our current year contact learning base by 9% to 6,322 students. We've seen good growth across a number of our campuses within our group. Then moving on to our distance learning student numbers. We've seen that grow by 10% for the period with a 12% cumulative annual growth rate from June 2018 to June 2024, with total student numbers sitting at 40,702 and we'd like to highlight and remember our audience that Milpark Education continues to transition away from the -- from contact learning. And we've also seen the legacy business excluding that impact in the business, that contact learning student numbers, our contact -- distance learning Student numbers grew by 17%. Then, ladies and gentlemen, our revenue for the period, we've grown that by 16%, as alluded to earlier, from ZAR 714 million in the prior period to ZAR 826 million in the current period. We've seen that growth come from -- 18% come from contact learning, which contributed ZAR 262 million of the ZAR 826 million or 16% revenue growth on distance learning to ZAR 558 million. Over the full period from June, 2018 to June, 2024, we've seen 19% cumulative annual growth rate. EBITDA and adjusted EBITDA, ladies and gentlemen, our margins, adjusted EBITDA and normal EBITDA margins at 29%. No major differences between adjusted EBITDA and normal EBITDA for the period and our margins remain healthy at 29%. And as Chris said, we'd like to move these margins at between 30% and 33%, which we believe is very sustainable and we should see that going forward. Then, ladies and gentlemen, just to unpack the margin analysis a little bit. For June, 2024, you'll see our employee cost base grew by 15% from ZAR 293 million to ZAR 336 million and our employee costs as a percentage of revenue still within the parameters we've set ourselves at 41% of revenue. Our other operating expenses grew by 19% from ZAR 162 million to ZAR 193 million and still within 23% of revenue for the period. We've seen strategic investments, planned strategic investments in marketing and advertising predominantly. We've seen some growth in software licensing and computer costs from the prior period to the current period. And we've also invested into staff development to increase staff training during the period. Our loss allowance, ladies and gentlemen, is at 8% -- 8.3% of revenue for the period, slightly up from the prior period, which I'll unpack a little bit further. So all in all, like we've mentioned, the takeaway here is that we continue to invest in our businesses and our employee cost and operating cost basis are in line with our revenue growth. Then trade receivables and loss allowance for the period. As I've mentioned briefly, the loss allowance grew slightly from the prior comparative period. We've introduced a number of new collection processes, which is starting to yield benefits with which also has translated into our increased cash collections during the period. We've also introduced a major operational change. As I've alluded to earlier, we will now prevent students from reregistering in the second semester if their current balances are not brought up to date or they haven't entered into a payment plan negotiation with the institution, which would allow them to reregister. So our overall loss allowance increased slightly from the prior period, mainly due to 2 reasons. The -- in one of our divisions within our business, we saw slightly weaker collections in the second half of 2023, which allowed us and required us to revisit our collection rates and our loss allowance margin for the current period, which contributed about ZAR 2 million of the current period loss allowance growth and the other main contributor is also a change in the underlying student mix, which is, as a result of the underlying revenue growth and not necessarily due to weaker collections. So all in all, we're very comfortable and happy with where the loss allowance margin is at the moment, and we keep the foot on the accelerator going into semester 2. And then, ladies and gentlemen, just an overview of the gross trade receivables and net rate receivables for the current period in comparison to the prior period. We'll see there in the middle of the slide, gross debtors moved last year from ZAR 384 million at June 2023 to ZAR 444 million in the current period, which grew by 16% overall and in line with our revenue growth, whilst the comparative period June, 2022 debtors to June, 2023 debtors grew by 23%. Taking us to an overall debtors for the current period of ZAR 262 million to ZAR 275 million with a growth of only 5% and that's where we see a significant improvement and our growth in our current year debtors in comparison to the prior period where debtors grew from -- net debtors grew from ZAR 226 million to ZAR 262 million, which was 16%. Then I'd like to highlight our debtors relating to the prior year. That's always our biggest risk in our business and we keep a close tab on that. Our net debtors [indiscernible] from June, '22 to June, '23, grew from ZAR 9 million to ZAR 12 million, which is a 53% growth, whereas in the current period, it grew from ZAR 12 million to ZAR 27 million and with coverage of 84% in the current period compared to 90%. The unprovided net debtors of ZAR 21 million is really underpinned by some timing differences on when those balances are due to be settled as we've seen some of our students, particularly our bursary students, some of those bursaries are earmarked to be settled in semester 2 and more students also entering into payment plans, which allowed to introduce the net coverage for prior period debtors. Then, ladies and gentlemen, our profit and loss for the period. We've grown our -- our profit for the period from ZAR 127 million in the prior year to ZAR 144 million for the period, which is a 14% growth. We see good organic growth in our EBITDA for the period. We've seen also a slightly reduced depreciation in comparison to the prior period. And as alluded to earlier, we continue to invest for the future and a number of strategic initiatives to ensure the business is well positioned for future growth. Earnings per share and headline earnings per share. Our earnings per share up 20% for the period from $0.136 per share to $0.163 per share and our headline earnings per share at $0.135 per share to $0.162 per share. And over the period June, 2018 to June, 2024, we've seen a 29% cumulative annual growth rate in our headline earnings per share, which we are very proud of. Then on core headline earnings per share, our core headline earnings per share grew from $0.136 to $0.162 underpinned by the good student growth and revenue growth and EBITDA growth we've had for the period. And then our core headline earnings per share in rand terms grew from ZAR 116 million to ZAR 137 million, which was 19% for the period. Then, ladies and gentlemen, core headline earnings. And just as a reminder, we used core headline earnings as a measure of the true underlying performance of our business and we adjust for any unusual amounts or variances during the period. And there were no major core headline earnings adjustments for the period with a roll forward of our core headline earnings from June, 2023 to June, 2024 is presented on this slide. June '23, we had ZAR 116 million core headline earnings for the period. It was -- our growth in the period was underpinned by organic growth on the prior of 16%, so your organic growth of ZAR 27 million or 24% was offset by 8% growth -- net growth on the loss allowance for the period, taking organic growth on the prior to 16%. And then moving on to the right of the slide, you'll see there, our net finance cost of ZAR 2 million, which was incurred as a result of fact that we paid for the Milpark Education, noncontrolling interest of the period of ZAR 117.5 million. There was some interest incurred there, which was offset against the additional earnings that the group could now consolidate because it acquired this interest for ZAR 5 million, which took the net impact of the additional Milpark interest acquired to 3% and our cumulative core headline earnings growth of total core headline earnings growth to 19%. On our balance sheet, our statement of financial position. Ladies and gentlemen, as mentioned earlier, we remain and have a very strong balance sheet with well -- not, no external debt for the period. During the period, we also invested into a number of capital projects, as briefly alluded to earlier, we invested ZAR 49 million during the period, of which ZAR 10 million was attributable to our solar projects. We invested ZAR 5 million in software development. We also invested ZAR 10 million into curriculum during the period. We also invested to ZAR 3 million in our Durbanville Campus with more to come, as alluded to earlier and our recurring CapEx -- ongoing CapEx in the business for the period was ZAR 28 million, out of the ZAR 49 million. We have a strong cash balance on hand at the year end of ZAR 98 million and I'll unpack with cash movement now. And as mentioned, with gearing of 6% to include the IFRS 16 liabilities and 0% if you exclude the IFRS 16 liabilities. Cash flow from operations, ladies and gentlemen, highlighting you or taking you to the far right there, our net cash flow before working capital was ZAR 231 million. We've seen good working capital changes in the period of ZAR 76 million, which took our net cash generated from operations to ZAR 307 million and our cash generation from operations as a percentage of our normalized EBITDA to 150%. And our overall free cash flow less recurring CapEx at ZAR 228 million, which is very good growth from the prior year. Capital invested, just giving you a summary and overview of where we invested our capital. As alluded to earlier, acquisitions, ZAR 123 million, that's made up of ZAR 117.5 million for the additional interest acquired at the back end of 2023, paid for only in 2024. And then the addition of Milpark Education noncontrolling interest, acquired in January 2024 of ZAR 5.8 billion. And then the infrastructure development and capital assets, which I've alluded to on the previous slide, ZAR 39 million and then some program curriculum development of ZAR 10 million, which took our total capital invested for the period to ZAR 172 million and cumulative investment of ZAR 2.4 billion. Our cash utilization for the period. We started the year with ZAR 150 million in the bank. We generated a net cash after interest and tax debt of ZAR 252 million. We spent ZAR 3 million on our Durbanville expansion. We've also spent the ZAR 50 million on curriculum and software development, as mentioned earlier. We also spent ZAR 10 million on CapEx for the period on solar project CapEx. We also spent ZAR 21 million on our recurring CapEx. We've repaid and paid on lease liabilities of ZAR 14 million for the period. We paid an external dividend, in April this year, of ZAR 85 million. We also paid ZAR 11 million to our noncontrolling interest in Milpark Education during the period. And we had net share repurchases of ZAR 13 million. We also settled the shares that we acquired in Milpark of ZAR 117.5 million, ZAR 118 million rounded. And we also acquired the additional shares in Milpark Education for ZAR 6 million in January. And then we realized we had a unit trust investment, which we also realized during the period, which was an inflow of ZAR 12 million, taking our closing cash position to ZAR 98 million at the end of the period. Then our 2024 capital expenditure. I've alluded to majority of these already in the previous slides, but there, you can see total capital projects of ZAR 126 million during the period. Then just a brief snapshot, 7-year financial overview. The key takeaway here -- [indiscernible] all the numbers, which I presented in the previous slides is, we are well positioned for growth. We've really delivered on our vision as we continue to lay the platform for higher education and growth for the future. Thank you, ladies and gentlemen. I'll hand it to Chris.

Thank you, Ishak for that unpacking of the interim results. Ladies and gentlemen, I want to continue. Firstly, sometimes it's important just to pause and to reflect on what has been achieved in a very short period of time. I want to attend with the next 2 slides just to take us back to 2020 and to show how far this young brand has come past 4 years. In March 2020, to be exact on the 26th of March 2020, South Africa went into lockdown. And this created a very uncertain time in South Africa, as I'm sure you all remember, but more especially for us as a very young brand at that point in time. Our focus then was all about ensuring the health and safety of our staff and students, ensuring that the continuation of our academic project, which I must say, we were very proud at that stage that we succeeded in offering our academic project right through that pandemic. And then thirdly, there was a focus on protecting our financial resources. Today, it's a total different view, a total different focus. Today, we see our focus more on growth, quality of our offerings, bringing in technology and then the drive in becoming South Africa's first choice higher education institution. If we look down, hold back to 2020, we see on the 24th of March, our share price being as low as ZAR 0.75 in March 2020. And then last week, we saw a 52-week high in our share price of ZAR 5.99. Student numbers in 2020 was 31,000 students and then exciting now in August this year, our students have moved up to over 50,000 students. What was important during those COVID times and especially the period after '21 and '22, we saw a significant decline in our contact learning students going down from the 6,300 to 5,600 in 2022. In 2023, the recovery started. And then now in 2024, we are back to pre-COVID numbers in our contact learning business. In 2020, we had 6 separate registered higher education institutions. We've merged 4 of those 6 into the now STADIO higher education brand, but at that stage, it was also a very difficult period to manage these 4 newly merged higher education institutions into one because these were established businesses with their own policies, their own academic model and we had to merge them all into the new study or higher education with one academic model. I think we've done very well in this regard and we now see the STADIO higher education institution being a well-established brand. In 2020, we had 73 accredited programs. Today, we offer 96 accredited programs and quite an extended pipeline of new programs to come in the future. We had 15 campuses in 2020. largely, many of these campuses were single faculty and single school campuses, offering only 1 or 2 faculties at the campus. Today, we see 13 campuses, but the majority of our campus is now offering comprehensive offerings. The Centurion campus in 2020, we had to push construction and we only completed that product -- project in 2022, in January. We opened that campus with a moderate 401 students, of which 195 were 1st year new students. And we also offered only 6 programs at the Centurion campus when we opened in 2022. Today, it's a total different view at our Centurion campus. We registered 592 new first years in January 2024 on that campus and we now have a total of 954 students on the Centurion campus. And we offer 17 programs. So a very nice pipeline for a good expected future growth on the Centurion campus, which was our first real big comprehensive campus. Return on equity in 2020, 6%. Today, we see return on equity of 13%. No dividends in 2020. And as Ishak already indicated this year, we've paid 10% -- $0.10 dividend in March 2024. So I think you will all agree with me that this young business has come a long way over the last 4 years. Very exciting news for us as an institution. We have reached 50,000 student mark now in August of this year. If you remember, the pre-listing statement, we've set ourselves the target of reaching 56,000 students by the end of 2026. Where we are currently, we're 50,000 students. We see that as a very sustainable target and we believe that we should get there or let me rather say I would be very disappointed if we don't get there before the 2026 academic year. After reaching the 56,000 students, our targets will then shift towards the 100,000 students that we want to achieve in the future. Just briefly, our growth strategy and the items that's driving our growth, the accreditation of new in-demand programs and then secondly, taking these programs to new sites. As I've already said in the past, we -- the majority of our campus with single faculty or single school campuses. With this strategy, it means that we take more programs and more faculties to our different campuses offering a wider range of products at each of these campuses. The opening of new faculties and schools, our recently added school of IT is really taking shape and we are very excited to see the nice growth in the school and we believe that we should see continuous growth of the School of IT on all our different campuses. New schools to be launched in the future, soon to come would be the school of engineering. The fifth pillar there to drive our growth at STADIO is exploring new geographical regions. That is not a focus at the moment, but we are starting to get our toes in the water. And sorry, I just realized that the fourth one there is the opening of our new comprehensive campus which, Durbanville, is the campus that we are planning for 2026. But management is also exploring other growth opportunities through a range of exciting local and international partnerships that we are currently busy with. So ladies and gentlemen, a lot has been said about growth and also rightly so. But as a high education institution, our main focus remains on the quality of our academic programs as well as the student experience that we give to our students. I strongly believe that as this business matures in the future, the quality of our offerings will become our differentiator. And to live up to that, it's important for us as an institution to continue to attract top academic staff to the institution. We are very happy where we are currently, but it would mean that we will have to continue attracting top academics to our different institutions. We should create campuses that are conducive to higher education in the new world, creating spaces that excite students and this also include having access to sport facilities on the different campuses. Thirdly, embracing technology to support the quality of our offerings. This means bringing in technology from the recruitment phase all the way to graduation of our learners. And then [indiscernible] there, very important. We believe that we should align with the world of work. And if we want to make quality our differentiator in the future, we must ensure that we invite industry into our institutions and into the STADIO community as a whole. This will ensure that our programs remain relevant and that our graduates are sought after in the world of work. Looking at our programs currently, we offer 96 qualifications, so really indicated. 52 programs in the development phase, waiting accreditation. And then currently, we expect to offer 11 new programs across the schools of IT, law and risk management in 2025. These programs were accredited in the first half between January to June first semester, but the accreditation came in too late for us to offer it in this academic year. So these 11 new programs will be offered in the second apologies -- we will offer these new programs in the 2025 academic year. Then we're also very excited to report back that we now have access qualifications in all of our schools -- across our different institutions. This means that we are living up to our promise of giving more people access to higher education. And so every school in the STADIO Group will have an access to higher certificates qualification. As both myself and Ishak spoke to you previously, we have a great excitement here at STADIO and we are very confident about building our new Durbanville campus. We've seen good growth in contact learning in especially the 2024 academic year intake. Here in the Western Cape, where we will do the new Durbanville campus, we've seen new student numbers increasing with more than 50%. That means that our Bellville small campus, that we have currently, have also reached capacity and it just makes sense now to go ahead with the construction of our new comprehensive Durbanville campus. We will construct the new Durbanville campus in phases as we've done with the Centurion campus in 2022. And if everything goes according to plan, we should commence with the construction of this campus in September of this year. Phase 1 will cost us ZAR 220 million and it would be funded by 50% cash resources and then 50% long-term debt. Just to clarify the Bellville campus. As soon as we've concluded the construction of the Durbanville campus, we will close down the smaller Bellville campus and we will transfer those Bellville students over to the new Durbanville campus. And as we look at our growth currently, we expect to open the Durbanville campus with approximately 1,000 students from day 1 in 2026, which is very exciting. It's a total different scenario in comparison with what happened in Centurion when we opened in 2022. There, we had only a few programs, as I already indicated, 6 programs in 2026, when we open the Durbanville campus, we will have in the range of 20 new programs that we will offer from that Durbanville campus. This new campus will be our showroom in the Western Cape, and it will also be as a support center to our distance learners in the Western Cape area. We expect to open, as I've already indicated in January 2026. Important to note is that the construction of the Durbanville campus will not hinder our ability to pay dividends going forward. Ladies and gentlemen, we are -- we have invested quite an amount into this young business and we will continue to do so over the next few years. But we really believe that we are establishing a solid foundation that is conducive for future and sustainable growth going forward. We believe that we should see a very big positive impact in the future with all of these investments that we are currently making in the business. Thank you for the opportunity to share these few ideas with you. We will now open for questions. Kate, If I could ask you to read the questions to us. And then we will deal with the questions between myself and Ishak.

Ishak, I think this one is for you. Could you please unpack the cost growth, excluding bad debts and D&A of 16%. It feels quite variable in the context of revenue growth of 15% -- of 16%.

Thank you, Kate. I'll unpack to that. [indiscernible]. Thank you, [indiscernible], for that question. I think we've alluded to it. Under employee costs, we intentionally invested in 2 of our businesses, specifically for the new programs that we had offered from the beginning of this year as well as capacitated other areas of our business that require additional resources link. That's the employee cost growth and the operating cost increases for the period predominantly from, again, one of our -- again, where we've planted new qualifications. That was the 1 driver. The other in addition, you would have seen an increased visibility. So we launched various marketing and advertising campaigns during the year, which largely contributed to that, underpinned by also travel costs for some people in various of our businesses that led to some operating cost increases during the base. But overall, our operating cost base grew in line with what we had originally budgeted at the back end of last year for 2024 when we had put together our budgets and both operating costs and employee cost margins as a percentage of revenue remained in line with what we had originally anticipated and supports our growth strategy.

And another question from [indiscernible], saying, clarifying operational changes by disallowing students to reregister if accounts are not up to date. Does this mean students don't progress if accounts have an outstanding balance? Is the business no longer allowing students in arrears to reregister even if amounts are within a defined limit?

Thank you for that question, [indiscernible]. Just for clarity, correct. If the account balances are brought up to date, there's 2 components to that, one being if it's within acceptable parameters and that student has engaged with the institution, we will allow that student to reregister and continue their studies. But if the account balances are not brought up to an acceptable value nor have they engaged with the student, we will no longer allow that student to reregister for studies.

And then can you please explain the change in the view on your EBITDA margins from 30% to 35% to 30% to 33%?

Thank you, Kate. Our first few -- I'll take that question. I think for clarity, what we've defined is in the short term, we're aiming for 30% to 33%. Absolutely long term, [indiscernible] for clarity, we are targeting the 35% EBITDA margin.

And some questions from [ Charles Boles ]. Please, can you remind us why Milpark is scaling back B2B education training. Is this market considered to be less attractive? If so, please could you let us understand why?

Yes. It's clear that the new strategy at Milpark is to not be so dependent on the seasonal B2B business. We've seen a decline in the B2B business over the last few years with the tough economic circumstances in the country. We see corporates cutting back on expenditure on training to staff. So yes, definitely, we see a decline in the B2B business in the entire industry.

Chris, you talk about a pipeline of 52 programs. Please could you give us some understanding of the timing to get programs approved? If this process is significantly quicker, if STADIO already has approved this program to get it accredited to a different account?

Yes. The accreditation process is actually very murky orders. We've seen program accreditation, the time lines, anything between 6 to 7 months, right up to 18, 19 months for a new program. So that just depends on the capacity for evaluators at a given time at the regulators. So very difficult to say what the exact time line is to get a program accredited. What is the second half of the question again?

Is it quicker to get a program accredited, if you -- to a new campus?

Yes, it should be. But again, I'm going to lie if I say we've experienced that in practice. We've seen a few site extensions to take programs to other sites, taking just as long as our applications for new programs. So not a very clear -- this decisive time lines, but that is just the reality currently in our industry.

And another question from Charles. Could you talk about competition in contact and distance learning. Is the distance learning market more competitive than the contact learning?

No. We've seen a few new competitors entering the distance learning space. However, we are very confident with our distance learning offering. As I've indicated during the presentation, we have invested extensively in making sure that our distance learning offerings are top-notch. We believe that we have the necessary technology in place to deal with growing student numbers and servicing big numbers, students and the facility of 40,000 students going forward. So yes, there is definitely new competition entering in the distance learning space, but we are very confident of our offerings in distance learning, especially.

Another question from Charles. I think, is it? In 2023, core headline earnings per share were $0.136 per share in half 1 and $0.11, half 2, i.e. half 2 was nearly 20% lower versus an aberration. Is there reason why half 2 should differ significantly from half 1?

Thank you, Kate. Yes, in the prior year, I think the major impact in the second half of 2023 was largely the loss allowance and increase in the loss allowance that resulted in the 2nd half being slightly weaker than the 1st half. This year, given our collection with we -- it's hard to say exactly, Charles. I think if we had a crystal ball, we would all know exactly what the end answer is going to be. All I can give you the assurance is we're doing everything in our part to try and contain the loss allowance, particularly in semester 2. Like we've mentioned, I think the operational change, in particular, combined the operational changes will, now, best allow students that haven't brought their account balances [indiscernible] up to speed plus the additional effort we've deployed in our operation, we think that will -- we are positive that will curve that second half impact.

A question from [ Telia ]. I see you have reached your student target of 50,000 students, you have exceeded your targets. What I want to know is how are you going to increase the revenue and EBIT per student, given that anything your margins are slightly contracting?

So I think, firstly, just to look at the principles of STADIO and our whole thinking regarding widening access to higher education. To really widen access to higher education, we will always focus and try to offer higher education at affordable prices. So we should see revenue grow in correlation with our students number growth going forward. But we believe the upside will come over time in our efficiencies as well as in the business get to a more mature state, we should see cutbacks on operational expenses and bringing in new expenses into the business. So I think revenue always, going forward, will be linked to student numbers and always being honored -- honest to our whole purpose of affordable and offering widening access to our quality of our education.

Thank you, Chris. If I may just add to that, Chris. And for clarity, our EBITDA made margins remain at 29%. So still quite robust despite our continued investment and various initiatives across the group.

Question from [ Dale. ] What is the capacity of the new Durbanville campus?

So Durbanville Phase 1 would be close to the 2,000 -- just over 2,000 students. But after completion of Phase 2 as well, we will then be at 5,000 students.

A question from [ Perry. ] Can you please elaborate on how exactly you'll get to the 30% to 33% margins for the business? Where will the margin growth come from, example, higher capacity utilization and contact learning or lower expected loss allowances going into the future?

I think what is important to understand with all the new programs that we're bringing in and launching in the business, it comes with a lot of upfront costs. For example, when we launch a new program, we have to appoint the academic staff, but we are limited to the first intake also with the number of students that we register for a new program. And it's only in year 2, 3 and 4 that you really see the impact of the new program from a student number perspective. So definitely, the upside is coming in year 2 and 3 as the program matures and the student numbers come in to set off against the initial costs that we incurred upfront.

Question from [ Dinesh, ] please can you share more insights on debt collection and recovery efforts. Why have second semester registrations, only now, not allowed -- only now, not out an overdue fees. I think it's the [indiscernible] student financial aid impacting your business.

Okay. I'll take that, Kate. I think I want to just clarify. I think it was in one particular aspect of the business in the back end of semester 2 in the prior year. And therefore, as a result, we started to be -- continue to be prudent and updated a loss allowance provision for that particular circumstance of collection in 1 business unit of the group, I think firstly. Secondly, definitely, we continue to see the students continue to take long to pay. And I think it's up to us also as an institution to help and aid the students where possible and we're exploring various options in that space. But I think we're committed to align our students to continue their studies, if there's also a contribution from the students to make sure the accounts are brought up to speed.

Question from [ Dinesh ]. Can you please explain if these results also reflect benefits from the Educor, deregistration of its 4 colleges or do you view the Educor demise, a benefit to the business?

So the Educor situation had low impact on our business. We did see a few students, especially in the creative economies came over to STADIO, but what one must remember is that the Educor group is also in a teach-out phase. So they still have their students and we'll be teaching them out over the next few years. However, I do believe that they leave a gap in the market and one should see the demand then for higher education to the other remaining private higher education institutions increasing.

A question from [indiscernible]. In 2023, you were speaking with slowdown in collections, which pushed loss allowance up to 9%. Are we expecting to see the same in 2024, you have touched on this?

Yes. Kate, thanks for clarity. See there's still a number of months that we anticipate to collect on. So at the present moment, I can confirm and report back that we -- our collections are in line with the prior's with the growth in -- plus the growth in revenues. So our collections at the moment for prior year debtors are in line with where we want it to be, but there's still a number of months left come to December, but I believe our initiatives that we've deployed, will help us to curb that loss allowance.

Question from Simon, what factors led to the decision to establish the Western Cape campus in Durbanville rather than anywhere else in Cape Town?

So we've done quite extensive research on where to position the campus, the Durbanville campus or the Durbanville area is showing big growth with a lot of residential development, business development and then also soon to come, the new Winelands Airport. So we believe it's right in the growth hub here in the Western Cape. We're well positioned between Cape Town City Center as well as the Winelands. So we believe we've positioned it in a very good growth area here in the Western Cape.

A question from Nick. What ROE are you targeting to achieve? Do you have a time line for this target?

Yes, I think we've always said from, I think, the last 4 presentations that we target an ROE of 20% over time. And I think we're excited to see how we have performed in this regard over the last 4 years, as I indicated in that slide, where we are currently at ROE of 13%. So it's -- we're moving in the right direction, and we target a 20%.

[indiscernible] asks how do you think about LSM and when it looks at your target market of students? Does this differ granularly from course to course and in your marketing to these [indiscernible]? Or do you define your target market more broadly?

So we try to say or we try to be exactly what we say we are, an institution that widen access to quality higher education. So we have a more broader approach to where we recruit our students and pretty much having a focus on affordability and our strong distance learning business gives us that opportunity to cater for the full spectrum on the LSM, meaning our contact learning offerings would normally be more expensive. But then our distance learning programs also -- programs of good quality can cater for the lower LSMs.

Question from [indiscernible]. The school of engineering sounds exciting. Can you please talk about programs you intend to offer here and when you think you'll be ready to bring this up into market?

Yes, I agree. It is very exciting as well as looking at our partnerships locally in this regard. We've received accreditation on 2 high certificate programs in sustainable energy. And I just forgot the second one. But we are also in the process of developing the full engineering degrees that we would submit soon. We are already ready to start offering those higher certificates as easy -- as early as 2025 in the second semester.

And from [ Shelton, ] congratulations on the great results. Is Centurion at EBITDA breakeven yet? May you comment on the amended criteria for university status published earlier this year and how ready is -- STADIO ready for this transition?

[indiscernible] I'll take the university status one. So there is still no new developments in this regard from the regulator and the Department of Higher Education. We have taken the decision to continue to meet all those first indicators or criteria set for university status. We believe that we would be ready, should the legislation change and it becomes possible for private higher education institutions to apply for degree status, a lot of investment in our teaching and learning and especially in research because as a degree awarding institution, that is a challenge for private institutions. So we have a dedicated focus to address that challenge, the research one and we believe we would be well positioned when the opportunity is there to apply for degrees or a university status.

Thank you, Chris. I will just also report back that we are past breakeven point for Centurion. So that's very encouraging and promising and also from partially the basis of our decision to build our Durbanville campus. Also a very good pipeline of interest on that Centurion campus. We believe we should see good growth coming forward.

And a question from [indiscernible]. How important are comprehensive campuses to the distance learning space? It's STADIO investigating in other campuses and to build in the medium term. And then I'm going to also read another question, which is linked to this, saying, are you looking to add additional campuses for the group in the near future? And what are your considerations before investing in any new campus?

So we have a very comprehensive offering in the Distance Learning business, covering all the major academic schools. So comprehensive campuses from a construction point of view, also serve as a support base for the distance learners, meaning they can go to any of these campuses -- that distance learners and have access to library facilities, computer facilities, et cetera. Why the focus on comprehensiveness, if one really have a campus where you offer a variety of programs, it really just makes it so much more feasible from a cost perspective as well as scalability. Second part there, Kate?

Are we looking at any future or additional campuses in the near future? And what are the considerations when thinking?

So the thinking and the strategy is really not to have a wider footprint with increasing the campuses across the country. We want to focus rather on a lesser -- more comprehensive campuses that can really offer a quality student experience. But in our smaller brands or in our niche brands, for example, as AFDA, we are currently considering an additional campus for AFDA in the northern half of the country. But these campuses won't be a big cost from a construction point of view. We look at more smaller niche campuses where we will offer the AFDA programs from.

I think that covered, [indiscernible], your question as well. And further question from [indiscernible], saying, is there a significant difference in loss allowance per students between the on-site and distance learning students. Do we foresee that the current ratio of 86% is [indiscernible] and to have leveled off or do we foresee a further shift in the future?

Thank you, Kate. I'll answer that. Invariably, not that there is a difference, we definitely see that the loss allowance ratio for the contact learning student is smaller given the fact that, that student is regular engagement in contact with the institution, which allows you to have alternative interventions as opposed to a distance learning student. And in the second part of the question, I think, again, in our strategy, in our pre-listing statement, our intention was to have 80% of our student base, distance learners, whilst 20% contact learners. And as we embark on that strategy and particularly with the opportunity of building the new Durbanville campus, it's one step closer to achieving our initial aspiration.

Are we struggling to find academic talent? Or are there sufficient academics to reach your growth goals in the medium term?

Yes, I think we've been very fortunate in attracting quality academics to the institution. This is really not an issue for us currently. And we believe we are creating an environment that is attractive to top academics and we don't foresee that to change.

Question from Sam, as an investment holding company in the education space, STADIO is still actively pursuing new brands to invest in or is the focus on consolidation at the moment?

So we will always look at opportunities that may present itself. Currently, we are considering a few options, but it's still very, very early days. So nothing really to report back. And the focus is still pretty much on expanding and growing our current offerings and bringing in more academic schools and see a more organic growth going forward.

And the final one I see from Charles, he says, it is not a question, but to congratulate management on how they have integrated the businesses and established a coherent and unified STADIO, this has been very well managed. Thanks, Charles.

Thank you very much, Charles.

And I'm not seeing any further questions. If anyone does have questions, feel free to email us at Investor Relations at stadio.co.za and we can get back to you and to you, Chris [indiscernible].

Thank you. If that's all the questions, thank you for the opportunity. And we trust that you also share our excitement in the growth of STADIO Holdings overall. Thank you very much and goodbye.