Stadio Holdings Limited (SDO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's 10:00, and welcome to Stadio Holdings' Annual Results Presentation for the Year Ended 31 December 2024. With me this morning to present our financial results is our group CFO, Mr. Ishak Kula. I will start our presentation with a very quick reflection of the 2024 financial year. I will then hand over to Ishak, who will unpack our financial results in detail. Thereafter, I will indicate how we are positioning the business for growth going forward. And then lastly, we will open for a question-and-answer session. So Stadio Holding's purpose is to empower the nation by widening access to quality higher education. Just a short delay over our slides. There we go. We do this through our 3 distinct private higher education institutions. The first one there on the slide is our Milpark brand, Milpark positioned as a leader in online distance learning, our AFDA institution being a world-renowned film school, concentrating on the creative economy industry. AFDA is a contact learning institution. And then in the middle, we have STADIO Higher Education, our comprehensive institution with multi faculties, multimode delivery as well as a multi-range of qualifications. The group already is one of South Africa's largest providers of higher education with over 50,000 registered students. Reflecting on the 2024 year, I can say that 2024 was another good year for Stadio. In the year, we managed to produce a strong set of financial results. This is basically coming from good growth in student numbers. We've managed to exceed the 50,000 student registration mark, 50,039 students to be exact. During the year, exciting for us, we've seen good progress on our debtors' processes and collections, something that we've paid attention to during the year. A lot of work went into that, especially behind the scenes and Ishak's office. And we are happy to say that we are making good progress in managing our debtors. Operating efficiencies is starting to show and should continue to show as the business gets to more mature stage. We are still very confident of the EBITDA target -- EBITDA margin target that we set ourselves of 50%. We believe that is a realistic EBITDA margin, and we are actually well on our way in reaching that. We've seen good growth in this regard. Last year, our EBITDA margin for the group was 27.6%. At the end of 2024, we have reached the 28.4% mark. Exciting new programs were accredited during the '24 financial year. These programs coming from the school of IT, Information Technology, the School of Commerce, the School of Fashion and then also exciting our School of Engineering. During '24, we've commenced with the construction of our Durbanville campus. We started construction in October of '24. And I must say there is great excitement here in the Western Cape for us completing the Durbanville campus. And then exciting, I think, for the group was the appointment of a new CEO for AFDA, namely Diaan Lawrenson. Diaan joined us as the new CEO at the end of 2024, and we have very high expectations for Diaan and AFDA going forward. But without a doubt, ladies and gentlemen, our success is dependent on our people. A big thank you must go to our team for producing these strong results. Unfortunately, I cannot mention and name everybody involved in driving this as there are just too many people involved. But I just want to use a minute to name the executive team, who really went the extra mile in '24 to produce these good results. The executive team include Ishak Kula, our Chief Financial Officer; Professor Divya Singh, our Chief Academic Officer; Johan Human, our Chief Operating Officer; Kate Ridge, our Company Secretary; and then Chariska Knoetze, our Executive Head for STADIO Higher Education Distance Learning; Professor Patrick Bean, Executive Head STADIO Higher Education Contact Learning; and then the 2 CEOs, firstly Diaan, the CEO of AFDA and secondly, Mr. Andrew Horsfall, our CEO of Milpark Education. But here is a summary of our 2024 financial results. As I said, we believe this is a strong set of financial results. If we look at those numbers, student numbers increased in the first semester by 10% and then again, 8% increase in the second semester, getting us to that 50,039 students at the end of 2024. Revenue increased by 14% to ZAR 1.6 billion. EBITDA margins, as I've said, 28.4%. And then a good increase in our profit after tax of 17%. Earnings per share, up 26%. Core headline earnings per share up 28% to ZAR 0.315 per share. Cash generated from operations, up 29% to ZAR 465 million. And then based on that good cash collection, dividends up 31 -- 51% to ZAR 0.151 per share. Our return on equity up by 16%, now at 13.6%. Our target there for the future is to get closer to 18% to 20%. But with that good news and the summary, I will now hand over to Ishak, our Chief Financial Officer, who will unpack these financial results for us in detail. Over to you, Ishak.

Good morning, ladies and gentlemen, an absolute pleasure spending this morning with you and having the opportunity to present our financial results for the 31 December 2024 financial year. I'll walk through a couple of slides and highlight a couple of key items to you. We produced a solid results, as Chris alluded to, with revenue up by 14% to ZAR 1.6 billion, underpinned really by good student growth overall of 8% for the full year. EBITDA margin is very encouraging and very strong and healthy at 28.4%, up from the preceding year of 27.6%. Financial performance, ladies and gentlemen, really encouraging to see a good cash generation for the period there with cash generated by operations increasing by 29% to ZAR 465 million, really driven by an improved working capital cycle in the period, which I'll also unpack a little bit later, particularly within the debtors of the group. Loss allowance margin for the year improved to 8.7% in comparison to the 9% in the prior year, really off the back of generally good collection results despite a tough economic climate. Where did we spend some of our money in the year? So our capital investments of ZAR 106 million for the year. Some of the noteworthy items, we've spent ZAR 16 million on solar installations on our various campuses to try and ensure we hedge ourselves against any load shedding, although there was very little during the year. We've managed to do a number of installations across our campuses. We've also spent ZAR 32 million on the new Durbanville campus as well as including sports facilities. We've also spent ZAR 29 million in curriculum and software development for the period, which includes our strategy, our growth strategy for the future, investing in key core curriculum as we continue our growth trajectory. Ladies and gentlemen, during the period, we've also relocated our School of Fashion students from Randburg and Hatfield to our comprehensive Centurion campus. With that premises in Randburg being vacant, we needed to recognize an impairment there of ZAR 7 million during the period. This property, the Randburg property is also classified as held for sale under IFRS at the end of the year, and we're actively looking to dispose of the property. In fact, we had an auction quite recently, and there seems to be a good indication that there's a high probability that this property may be disposed. Just to continue on our transactions with our Milpark Education non-controlling interest, some of the key points there in early 2024, we acquired an extra 0.76% for ZAR 5.9 million, and we also paid ZAR 117.5 during the first half of this year. And for the shares we acquired from Brimstone Investment Corporation at the back end of December 2023, that also substantially or partially contributed to our overall financial performance as we consolidated a larger portion of those earnings for the Stadio Holdings Group, which now on our Milpark education minority interest at the end of the period is 16.14%. Then looking at our long-term incentive scheme and some shared transactions. During the year, we purchased and canceled about 3.089 million or ZAR 15 million Stadio Holdings shares. That is in anticipation of the share scheme and the settlement of those shares. As communicated previously to our shareholders and stakeholders, our intention is not to dilute the shareholding of the group. And as a consequence, we've bought those shares back. In addition, we settled 3.7 million shares, which was treated as treasury shares at the back end of 2023 in 2024 in lieu of the settlement of the share scheme, and we further had 872,000 shares or ZAR 5.3 million worth of shares issued during the year to settle obligations that arose under the share incentive scheme. Ladies and gentlemen, we also then paid a dividend of ZAR 84.7 million during the year, and we also paid ZAR 11.3 million to minority shareholders during the year. We have a strong balance sheet, and we have no external debt at the end of December 2024 if you exclude the impact of IFRS 16. And very exciting, as Chris also alluded to, we declared a dividend of ZAR 0.151 per share or ZAR 128 million, which will be declared and declared effectively today and paid -- and will be paid on the 29th of April 2025. So with all of that being said, let's have a look at our student numbers for the year. At the half year, 30 June, where our student numbers grew 10% period-to-period from June '24 in comparison to June '23. We had grown our student numbers 17% if we exclude the impact of the legacy Milpark business year-on-year and very encouraging to see we had 14% new contact learning student number growth in STADIO Higher Education. Overall, we've been now at a 10% cumulative annual growth rate from June 2018 to June 2024. Let's have a look at our second semester. Our second semester student numbers increased by 8% from 46,508 students at the end of December '23 to just over 50,000, being 50,039 at the end of December '24. There, our student numbers, if we exclude the impact of the legacy Milpark business, the business, the B2B section of that business, our student numbers increased by 13%, which takes our overall cumulative annual growth rate to 9% for the period December 2018 to December 2024. Looking at our student numbers semester 1 for contact learning specifically. Our student numbers there overall grew by 9% for the period. Growth really coming off site extensions where we've rolled out additional programs and new qualifications to various campuses as well as the historic investment in our programs, with those years filling up the second year, the third year and the fourth year, et cetera, which has contributed to that growth, as well as poor historic enrollments now starting to work its way out and yielding the results for the first semester. Looking at our contact learning student numbers, semester 2, not a significant change from semester 1 to semester 2. Overall growth of 8% and for the same reasons mentioned on the previous slide. Looking at our distance learning student numbers for semester 1, distance learning student numbers in semester 1 grew by 10% from 37,067 at 30 June 2023, moving to 40,702 students at the end of 30 June 2024, which is a 10% growth, and if we exclude the impact of the business-to-business business within Milpark education, those student numbers grew by 17%. Same reason as in contact learning. We've seen a number of new qualifications and the growth in those qualifications overall contributing to this healthy growth. Looking at semester 2, our distance learning student number growth of 8% from 40,689 students at the back end of December '23 to 43,775 students at the end of December 2024, 13% growth if we exclude the business-to-business impact for the period and semester 2 student numbers, slightly down from semester 1, predominantly. You would have recalled, at the half year, we mentioned that our student numbers that in starting higher education because we have 2 registration periods, there's a number of students that we did not allow to reregister in semester 2 to somewhat curb the loss allowance, but also not to allow those students to incur further debt, coupled with the weaker intake in our legacy Milpark business contributed to an 8% growth overall. Our revenue for the period, very exciting. Our revenue growth from ZAR 1.4 billion to the ZAR 1.6 billion underlying or underpinned by that, we've seen 12% growth in our contact learning revenue to ZAR 501 million for the period and a 16% growth in our distance learning to ZAR 1.1 billion, which takes our overall cumulative annual growth rate from December 2018 to December 2024 at 17%. How does that translate into EBITDA and our adjusted EBITDA margins for the December '24 period, not many adjustments. In fact, nothing to our adjusted EBITDA. So our adjusted EBITDA and normal EBITDA are aligned for the period. If we look at how that compares to the preceding December 2023 year, our EBITDA margins, as Chris also alluded, to improve from 28.4% to 27.4% in the prior year. This is very encouraging, ladies and gentlemen, as we're putting a lot of investment and time. [Technical Difficulty] Ladies and gentlemen, apologies for that technical glitch. We're just trying to get the slides back where we can go. See if that works. Thank you very much for that. Apologies, ladies and gentlemen, for that error there. I'm looking at our margins for the period. I'm going to highlight the following to you. In December 2024, our employee costs, which is a big component of our Stadio Group, our employee cost as a percentage of revenue for the period, in line with prior year, at 41.3%. Our other operating costs, our operating cost base, that's where we've seen a big improvement from the prior year to the current year. In the prior year, we were at 23% of revenue, whereas in the current period at 22.5% of revenue. And then as I alluded to earlier, our loss allowance, margin for the period improved from 9% in the prior to 8.7% in the current period, really off the back of the collections that we've seen and the -- and our debtors growth was very limited in the period. Just to give you a sense of what's happened, our trade receivables and loss allowance over the last number of years, we've invested a significant amount of time to improve our collection processes across our various campuses. These are starting to yield results. We've also introduced the operational change in semester 2, where we've prevented students from registering their account balances were not up to date or they haven't entered into a payment plan arrangement with the institution, which we think has contributed to that improvement in loss allowance margin, with the loss allowance margin down from 9% in the prior to 8.7% at the end of December 2024. Then just a quick snapshot of what our debtors book has done from December 2022 to December 2024. If I look at the top section there, you'll see trade debtors and related to the current year, the debtors grew from 2022 to 2023 by 25%, whereas in the current year from December '23 to December '24, debtors grew only by 15%, is 1% higher than the revenue for the period, but significantly better than the preceding year. Then where is our risk associated, we've got the highest concentration risk or credit risk really in our prior year debtors. We continue to be prudent to provide aggressively for prior year debtors. And looking at the bottom section of that slide going from 2022 to 2023, our debtors -- net debtors book or gross debtors book increased in 2022 to 2023 by 36%, whereas in the current period, it increased by 16%. As always, we remain prudent with our loss allowance provision and our net debtors book actually reduced at the end of December 2024 for prior debtors at ZAR 2 million compared to ZAR 4 million in the preceding year at December '23. Then just to give you a quick snapshot of the key components of our income statement of profit or loss for the period. The overall 17% growth for the period is really driven by organic growth in underlying businesses and in EBITDA, as illustrated previously, we've had reduced depreciation and amortization for the period, which also contributed to our growth in the period. As mentioned earlier, we've had an impairment in there, recognized by ZAR 7 million in respect of our rand per campus. And then we continue to invest for future growth with increases -- strategic increases in our marketing and advertising costs as well as staff training and computer and license costs underpinned by student growth, supported then by the net decrease in the loss allowance for the year. What is our earnings per share and headline earnings per share done for the period. On the left of the slide, earnings per share, they're at ZAR 0.309 per share up 26% to the comparative period and headline earnings per share at ZAR 0.314 per share, up 28% from the comparative period, ZAR 0.245. And ladies and gentlemen, core headline earnings, which we believe is our key measure in Stadio Holdings. This basically excludes one-off anomalies within our profit and loss statement that we add back. Looking at that underlying growth. On the left, you'll see core headline earnings increasing from ZAR 209 million in the prior year to ZAR 267 million in the current year, which is up 28%, and in core headline earnings per share also up 28% from ZAR 0.246 per share to ZAR 0.315 per share at the end of the year. So how has our core headline earnings moved for the year, you'll see from left to right, our core headline earnings moved from ZAR 209 million in December '23 to ZAR 267 million at the end of December '24. And we've tried to illustrate to you that 23% of that growth came from the underlying organic growth in our businesses at 23% and then in the period because of the additional Milpark shares we had acquired at the back end of December '23 from Brimstone as well as in early parts of the 2024 that contributed 5% to our overall 28% growth. So taking and looking at a snapshot of this, really encouraging to see that predominantly, the growth still came from the underlying institutions and well supported by the additional interest we had acquired from Milpark in the back end of '23 and early 2024. Then on the statement of financial position, I've talked about the investments, capital investments earlier that I'm not going to repeat, but it's included in this slide. We have a strong balance sheet and continue to have a strong balance sheet with very little gearing. If we exclude the impact of IFRS 16, we have 0 debt in our business, and we still have access to an unutilized credit facility the tune of ZAR 100 million at the end of December 2024. Cash flow from operations, really encouraging to see in December 2024, on the top right of the slide, our cash flows from operations before working capital changes was ZAR 470 million, offset by working capital changes of ZAR 5 million and there, you can see the significant improvement from December 2023. In December '23, our working capital changes was a negative or an outflow of ZAR 44 million compared to ZAR 5 million in the current year, really driven by our improvement in collections and debtors realistically as well as some improvement in contract liabilities, cash we've received upfront from some of our students, which overall contributed to that improvement in the working capital cycle, which then increased our cash generation -- cash generated from operations for the period from ZAR 360 million to the ZAR 465 million, which really takes us to a cash generated from operations, if we express that as a percentage of EBITDA at 102% for the period, which is very, very encouraging to see. And our free cash flow for the period improved from ZAR 217 million in December '23 to ZAR 327 million at the end of December 2024. How did we invest our capital, far right, December 2024, the ZAR 123 million was really the ZAR 117.5 million we paid for the additional shares in Milpark in 2024 as well as the ZAR 5.9 million worth of shares we acquired from the minority shareholder in 2024 as well. That's the ZAR 123 million. We spent ZAR 86 million on infrastructure development and other capital assets as well as ZAR 20 million of program development, taking the total capital invested for the period to ZAR 229 million. Cash utilization for the period. Moving from left to right, we opened the year with ZAR 130 million in January 2024 -- 1 January 2024. Our operating activities, we've generated ZAR 355 million, which we've applied to ZAR 32 million towards Durbanville and sports facilities invested during the period. We also invested the ZAR 29 million in curriculum development and software, which continues to be a strategic imperative for us. We've invested ZAR 16 million in some solar projects for the period. We then had ZAR 28 million, which we've term as recurring CapEx or ongoing CapEx to support the underlying operations of our various businesses. We paid ZAR 28 million in our lease liabilities towards third parties. And then during the period, we've raised -- we've utilized our recurring credit facility to pay for the Milpark shares, and we've also repaid that during the period to the tune of ZAR 102 million. We've paid ZAR 85 million to shareholders as a dividend in April 2024 and ZAR 11 million to minority shareholders as well during the period. And then we've -- there was a net share repurchase of ZAR 12 million for the period. And then ZAR 123 million, which I've alluded to earlier, which was the payment of the Milpark minority shares that we paid for as well as ZAR 5.9 million acquired in January 2024. And then we've had some proceeds on unit trusts we've realized of ZAR 12 million during the period, taking our closing cash balance at the end of the year to ZAR 132 million. So 2025, with our major capital projects, we'll continue to invest in curriculum and intangibles for the period of ZAR 46 million, a number of projects earmarked for that, very exciting Durbanville property and campus, which will be our largest investment in 2025, with earmarked ZAR 203 million in the period for that. And as mentioned previously, we will fund that 50% cash and 50% debt facility and then continued recurring CapEx for the period of ZAR 48 million, taking our total capital projects for the period to ZAR 297 million. Then ladies and gentlemen, this is just a brief 7-year financial overview. Just to illustrate our proven track record, we remain encouraged by the strong growth we've seen in the year, and we're quite optimistic about the future. I'll then hand over to Chris to take us through the latter part of the presentation.

Thank you, Ishak, for those numbers. Ladies and gentlemen, let's move on to how we've positioned the business for growth going forward. I think I would like to start with that slide, just indicating that we have laid the foundations, we believe, for good growth for the Stadio Group going forward. If one thinks back, we only started or the business was established in January 2017 with only 840 students. That same year, we listed on the Johannesburg Stock Exchange, and we acquired -- over the period 2017 to 2020, we acquired 7 quality brands. In those early years, self establishment, we also purchased the land in Centurion as well as in Durbanville with the intention to build 2 comprehensive campuses. The period 2020 to 2023 was what we call our positioning years. During this period, we've launched STADIO Higher Education. STADIO Higher Education came about by merging 4 of those quality brands into one, creating our big comprehensive STADIO Higher Education brand. During this period, we also started to implement the Milpark strategy of online distance learning, and we have really made a lot of progress since when we started in 2020 with that process. In the period 2020 to '23, we really invested a lot in our distance learning infrastructure, especially our logistics center, our systems and processes also relook policies, making sure that we run a smooth and effective distance learning offering. In the period, there was a lot of focus on applying for accreditation for a whole range of new qualifications, which I am also very happy to say that we've made a lot of progress in that regard since we started with all those accurate patient applications in 2020. And then also in that period 2020 to 2023, we saw the opening of our first comprehensive campus in 2021. That was still during COVID, which was a really stressful period for all of us, but we continue believing in the offering, knowing that students will come back to the classroom after that COVID period. The period '23 to '26 is what we've called the growth and expansion period. During this period, it's all about optimization of our campuses, also looking at the consolidation of smaller campuses, selling off those campuses that are not profitable, and that is not meeting our strategic requirements of a full student experience. We've really enhanced our academic offerings. And we've also seen the start of our construction of the Durbanville campus and then to open that campus in January 2026 for our first big intake. During this period, the growth in expansion period, we've focused a lot on student experience, making sure that we offer our students a full typical university experience, not just focusing on curriculum but also on extra curricular activities. In this period, it's definitely a focus for us to position ourselves for university status if and when that becomes available to us. And then we are well on track then to get to our pre-listing promise of 56,000 students by 2026. For the period '26 to 2030, we made the bold step to set a new target for the group and a target of 80,000 students by 2030. We believe in this period, we will also become a preferred institution for South Africans and hopefully, in the Southern African region. And beyond the 2030, we believe that we can get to the 100,000 student mark in the future. And we are comfortable that we would also be able to produce a 20% plus return on equity for our shareholders. The breadth of our qualifications. Currently, we have 96 accredited and registered qualifications and another 34 qualifications in the process of accreditation. Our programs covered a full NQF spectrum from NQF Level 5 with entry-level higher certificate programs, all the way to doctor degrees at NQF Level 10. These qualifications are hosted by our faculties or as we call them our academic schools. These schools include the school of education, the schools of accounting, commerce, management and financial services, the school of engineering and architecture, the schools of film, humanities, media and design and fashion, the school of policing and law enforcement and then very exciting for us for the future, our school of information technology. Our footprint is ever increasing. We see for the STADIO Higher Education institution, we have 4 contact learning -- there we go. We have 4 contact learning campuses for STADIO Higher Education, one distance learning campus in the Krugersdorp area with 2 distance learning support offices in Namibia. A further 2 distance learning support offices has been opened in the Georgia as well as in the Polokwane area. In our AFDA brand, we see 4 contact learning campuses across the country with a new campus coming in January '26, also for the AFDA brand in the Pretoria, Tshwane area and then Milpark, which is our purely online institution with their headquarters in the Western Cape. Ladies and gentlemen, we've invested quite a lot in our campuses over the last few years, ensuring that we offer our students a holistic student experience. We've decided to move away from your typical private higher education institution, that is normally found in an office block or in the second and third floor of an office block. We decided to go the different route of creating more comprehensive campuses, where we can offer our students a real full university experience. With this being said, we will remain with our strategy of accommodating 80% of our students by way of distance learning mode and 20% of students in the contact learning mode. But with the new target that we've set ourselves of 80,000 students by 2030, we are now in the process of creating the infrastructure to accommodate 16,000 students also in the contact learning mode of delivery. Quality remains our focus, and we believe that is our differentiator going forward. How do we ensure quality in our business. Firstly, very important, it is to attract quality academic staff. We have done very well in this regard, and we're continuing to do so. Secondly is to create a campus or campuses that are conducive to higher education in a new world. We believe that our campuses are modern and address the requirements of the modern student and then very important, embracing technology to support the quality of our offering. A lot of focus is currently on technology and how we use technology to benefit our students, but also our business in general. And we will soon make an appointment of a Chief Information Officer for the Stadio Holdings Group. Internationalization and international partnerships are of utmost importance for us also to ensure our international recognition. And then to invite industry into our institution and into the STADIO community. We believe this is essential for what we want to create to ensure that our qualifications are relevant and that our students remain sought after in the world of work. And then lastly, achieving university status when regulations allow us to do so. A lot of work is going in behind the scenes to meet all those requirements set for university status. The need for quality, higher education in South Africa is increasing. And we believe that we have a big role to play in this regard. When we look at the official unemployment rates as released by STATS SA for the fourth quarter of 2024, we see that the unemployment rate of people with a qualification less than a matric is extremely high at 38.2%. People with a matric unemployment rate of 33.8% and other tertiary qualifications, including certificates and diploma programs, at 19.8%. And then very encouraging graduates, the employment rate as low as 8.7%. As our Chairman of the Board indicated that the success of the Stadio Group, it's both a model and financial imperative for South Africa. The Stadio Group is really, we believe, making a significant contribution to the lives of so many South Africans, not just our 50,000 students, but also for their extended families. If we look at the market and the STADIO Higher Education landscape, we see that the industry or the higher education landscape, showing good growth since 2000 to 2022, with 139% increase in total students studying at higher education institutions. In 2022, 1.3 million students studied higher education in South Africa and only 258,000 of those students studied at a private higher education, making up only 19% of the total 1.3 million number. In comparison with international standards, this is more in the range of 30%. So there is a good potential market for private institutions taking a bigger load and ensuring more access to good quality, higher education going forward. If we look at those numbers in more detail, we've seen that 551,000 Grade 12s qualified to go to university in 2022. 356,000 of those students couldn't get entry at public university due to their limited numbers that they can accommodate. So meaning that 356,000 students are eligible to access higher education, showing the size of the market. We estimate that this number has grown and increased to more than 450,000 students this year in 2025. So there is definitely a big market for higher education going forward. We believe that we've set Stadio very well, set it up well for growth. We focus on 4 pillars that we build our growth strategy on. The first pillar is that of accrediting new in-demand programs. We've done very well in this regard as I've already indicated. Currently, we have 96 accrediting programs, with 34 additional programs in the accreditation process. Ladies and gentlemen, this would be an ongoing process of accrediting new in-demand programs as we adapt to the demand for programs coming from industry. Our second pillar, growth pillar is that of taking programs to new sites of delivery. If you remember, when we started in 2020, quite a lot of our campuses were single school campuses, for example, only offering education at the campus or only offering business in commerce. We have now reached a point where all our campuses are multi-school campuses. Opening of new faculties and schools over the last few years, we've opened the school of architecture, the school of information technology and then very exciting next year, January, we will then have our new school of engineering offering new programs in engineering. Our fourth pillar there is opening new comprehensive campuses. As already indicated in 2021, we opened our first comprehensive campus in Centurion. We opened that campus during COVID, and we are off to a slow start with only 400-and-something students registering in 2021. However, we've seen very good growth over the last few years. This year, we will finish the construction of the Durbanville campus, and we believe it would be a total different scenario when we open our comprehensive Durbanville campus in 2026. I actually think the new Durbanville campus can be a real game changer for our contact learning business going forward. And then our fifth growth pillar is that of exploring new opportunities and markets. To be honest, up to now, we haven't given that a lot of focus, but we have now reached the point where we are ready. We believe that we've set a good foundation for the group that we can really now look at exploring other markets and opportunities going forward. So we are well set for growth going forward. Still on track in reaching our pre-listing statement, promise of 56,000 students by 2026. We've reached 50,039 students at the end of 2024. And we are very confident that we will get to that target of 56,000 students by the end of 2026. As I've indicated, our new target that we've set for the group is that of 80,000 students by 2030. To get there, we need to grow by 8% annually, which we think is attainable. Again, just to reiterate, the strategy will stay. 80% of our students to be accommodated in the distance learning mode, 20% in contact learning. Moving on to our exciting Durbanville campus. As I've said, the construction commenced in October. Last year, we're making good progress and still on track to open in January '26. This will be another comprehensive campus, and we will house more than 7 faculties and I think close to 22 new programs when we open our doors on January '26. It would be a campus that will offer our students a holistic student experience with sports facilities as well as other extracurricular activities. We expect to open that campus with around about 1,000 students when we open it. This is a total different scenario to what happened in Centurion. When we opened there during COVID with only 400 students, we are very -- we are very positive that we can open the Durbanville campus with students close to 1,000 or in excess of 1,000 students. Then ladies and gentlemen, as I've said, when we looked at our pillars of growth, we've now reached the point where we're going to make a few changes to our structures. As we stand currently, the holdings executive, the Stadio Holdings Executive is doubling up as the leadership of STADIO Higher Education. Going forward, we want to move and split these 2 roles with a dedicated focus and a dedicated CEO for STADIO Higher Education and a dedicated team then also to look at new growth opportunities in the holdings entity. Looking at my role, as from August this year, I will move as the CEO or will remain as the CEO of Stadio Holdings. And we have appointed Professor Stan du Plessis as the new CEO for STADIO Higher Education. Stan will join us from the 1st of August. For those of you who do not know Professor Stan du Plessis, he is currently the COO of Stellenbosch University and he will be joining Stadio with a lot of experience and being a leader and well-respected individual in the higher education industry. We believe with all these expertise in the contact learning business, especially, he would really complement our already very strong distance learning capabilities. We believe that the appointment of Professor Stan will take the STADIO Higher Education Institution to new heights. With this appointment and moving our holdings team to focus on holding matters going forward, we really believe that we can take the business to a new level and look and act on opportunities that comes our way. I want to conclude by saying that we have laid a solid foundation over the last few years. We're in a position to shift gears. We have low gearing, and we are in a position where we can act quickly at any opportunity that comes our way. And there is a strong belief amongst us here at the team that we can become the biggest higher education provider in South Africa in years to come. Thank you, ladies and gentlemen. We will now share a short video on our construction site on Durbanville. And after the video, we will open for questions. [Presentation]

Thank you, ladies and gentlemen. We will now open for questions. I will ask Kate that is also here with us in the room. Kate, if you could read questions for us, and then we were glad we attend to those questions.

Thank you, Chris. Good morning, everyone. The first question is from [ DK ]. She says, team, thank you for the presentation. How likely are we to see loss allowance margins dropping towards the pre-COVID range given the ongoing improvements in your collection systems?

Thank you, Kate. Thank you for the question. I'll probably start off by saying I think it's unlikely. Although we do everything in our effort to increase or to improve our collection process, there's also a big component of collections that are outside of your control. And I think just to reiterate, the STADIO Higher Education and Stadio Group's philosophy is to widen access. Part of widening access is we have low financial barriers of entry into the organization. We don't do credit checks per se on students. If they meet academic standards, there is no financial credit checks per se built that are built into the system. And as a consequence, we then deal with a consumer that nonetheless and continues to be cash strapped and therefore, I believe as an institution, we are then have to be responsible with the way we go about driving collections in our organization. I think I want to say it in that backdrop. And then second part, an answer to the question, is I don't think we're going to go pre-COVID levels because I think if you looked at the macroeconomic conditions, that moved from 2020 to now, as an example, the interest rate and prime lending rate increased significantly, I think to about from 6% -- 7%, and it peaked at 11.7%. That's a 67% increase in interest rates over the period. Besides the fact that I think that generally the consumer is cash strapped, I don't think it is reasonable to expect that the loss allowance margin to go back to those levels. And therefore, I believe the current ranges in my mind of between to 8.5% to 9.5% is a realistic range given where the institution is and given where the macroeconomic conditions within the country is.

Thanks, Ishak. Another question from [ Zuchs ] also relating to bad debt. There's 2 parts to this. First one for you, second one to Chris. The bad debt result looks good in the context of higher provision against gross receivables, growing about in line with revenues. Can you please talk to trends in the book, bad debt, the consumer environment and your internal efforts to improve management of the book? It will be great to get a sense of how much of the bad debt results we see is helped by internal interventions to manage the book better, and if there were any worsening headwinds or the health of the consumer? And then the second one would be for Chris. Can you talk to contact learning trends going into 2025? And if you could specifically highlight how the Centurion campus is doing.

Thank you, Kate. I'll start it by saying this to answer to Zuchs' question. I think holistically, the way we've scaled the business and the way we provide for our debtors is, I think the first primary risk we try and address in our business is as debt ages and it becomes older, we take higher levels of provision. What we've seen in the current period, in particular, and Zuchs is correct, the gross debtors book for the current year increased in line with revenue. But if you look at that comparatively to the prior years, there's a significant improvement from 2023 to 2024 in relation to that gross debts. It's actually come down. I think it's the first point I want to highlight. I think the second point I want to highlight is given the nature of our business, there's a big chunk of cash we received towards the latter part of each financial year. And then secondly, going into the early stages of the next financial year, so i.e., subsequent receipts. And our subsequent receipts, if we look at that in 2024 and we look at it at the moment, those subsequent receipts are promising in terms of what we're seeing. And it tells me that, that's predominantly driven by the effort in collections in the period because we haven't changed significantly the barriers of entry into the organization and therefore, partially and substantially driven by that. We no doubt see as a consumer drifts and he misses his payment terms, invariably those consumers land up not paying you or paying you slower. So that trend continues to hold year-on-year.

Thanks, Ishak.

Yes, on Zuchs', contact learning trends. Unfortunately, I can't share the final numbers as we have not finalized our student numbers for 2025. However, I can say that we are very excited at the moment looking at contact learning, especially with good growth, especially coming from the STADIO Higher Education brand. I think we will get and exceed our targets that we've set ourselves for 2025. For the Centurion campus, also very excited. I think I can report back that we really see a strategy coming into play very nicely now as the qualifications are filling up in the second and third year. We see good growth at our Centurion campus, especially.

Thank you, Chris. Linked to that is the question from Anthony Clark. He says, Chris, congratulations on the excellent results. I noted your learner growth and the 14% increase in new contact learning. ADvTECH had solid tertiary growth this morning of plus 14%. What are the trends pushing domestic tertiary growth? And what increase in learners do you anticipate with the 34 pipeline qualifications? And what are the time line of these new courses?

So yes, thank you, Anthony. I think as I've indicated, we are very well positioned. We are confident that we will meet our student targets that we've set for 2025. The trends are looking very good. What was the second part of that, question, Kate? Sorry.

How you see the fixed pipeline programs of 34...

Yes, the pipeline is very exciting. We've seen just on new programs that we've introduced this year in 2025. Some of those new programs really show nice growth opportunities going forward. And we believe that those 34 pipeline qualifications, there would definitely be a few game changes among them as well. So very excited about the future for contact learning, but also in our distance learning business, that is our strong point or our bastion I can say, that is serving the business very well. We also make sure that we continuously introduce new in-demand programs also for our distance learning offerings.

Thank you, Chris. Question for Ishak, building on the first 2 questions around I'm assuming bad debts, please may you add more color on the collection strategy and at which point in the age of receivables are those collections outsourced?

Okay. Thank you, Kate. So our strategy in 2024 has been twofold. So I think the first strategy is we try and hand over old debt, that is older than 1 year. We try and hand over sooner. So during 2024, that was one of the key strategic initiatives that we have deployed, and we definitely see the results of that. Then we don't hand over current year students to third parties for collections. And the reasons we don't is remember, we register on mainly in distance learning on a semester-wise basis. And therefore, there are certain trends where students might skip the first month, 2 or 3 and then suddenly catch up on collections. So therefore, strategically, we don't hand over to third parties. But what we do, do is to monitor academic participation to make sure academically, we support those students and engage. And then secondly, financially, we have restructured our debt schemes and the manner in which they collect to target those students sooner in the collection process that then allows us to introduce interventions we require. So there is no handover of current students that enrolled in the current period to third parties.

The next one is for Chris, also linked to your enrolling growth for 2025. So can you please comment on the enrolling growth for 2025? And what will the impact of Milpark B2B have on distance learning for 2025?

As I've indicated, we -- I cannot comment on our exact numbers at this stage. However, we are very confident that we will reach our student targets that we've set for 2025. Looking at the Milpark business, I think the comment that I must make yet is in 2020, 2021, we took the decision when we positioned Milpark to be a poor online institution. We also took the decision not to be so dependent on the B2B business. So we repositioned that business. And we are starting to see that the Milpark business is growing into an institution that is no longer so dependent on the B2B. However, this is not something that will change overnight. So it will still have an effect. But as we progress year-on-year, this would have less of an effect. For 2025, so I can say that there will still be an effect, but we are confident that we should now move into a growth phase again at Milpark and not being so dependent on the B2B business.

Thank you, Chris. There's a question from Shelton that's linked to that, and I think you've covered half of it, saying when do you expect the Milpark legacy B2B impact to normalize, which I think you've just covered? And then is the strategy to eventually own 100% of Milpark?

I think the long term, that is the strategy. But at the moment, we still have those minority shareholders being involved in the business. And we are actually happy with the situation as is currently. But I think long term, the thinking would be to get to 100% ownership.

Another question from Zuchs on a 3- to 5-year view, could you please highlight what engineering programs you intend to offer in the school of engineering? Are these mostly for contact learning? Or can this be done on distance learning as well?

Yes. Zuchs, we're very excited about our new school of engineering. A lot of excitement in the area if we mention that we're going to offer engineering here in the Western Cape. We will start off with both higher certificates in 2026. And then in 2027, we will introduce 3 engineering degrees. So higher certificate as entry requirements and then 3 engineering degrees. For now, the thinking is to do our engineering offerings contact learning based, and we will offer it here from the Durbanville campus in the Western Cape. But we are also explore the possibility of taking engineering online. But there is still a lot of work to be done in that regard. We want to ensure that when we do that, that we will have a quality offering. So we are working on that for the future, but we are not there yet.

Thank you. Chris, linked to this is a question from Carl, he says, quickly on clarity on the new faculties of architecture and engineering. Did I hear correctly that these will open in January that is accredited January 2026, but is accredited this year?

The school of architecture is actually already accredited, and we already offer programs for -- in the school of architecture to our certificate programs. And then next year, we will start with the engineering programs. The engineering qualifications also already been accredited. So very exciting. It's all systems go for us with engineering in 2026.

Thank you, Chris. Thank you, Ishak. I'm not seeing any other questions coming through. If anyone does have further questions, feel free to e-mail me at [email protected], and we can get back to you. Back to you, Chris.

Thank you, everybody. Bye-bye.