Taaleem Holdings PJSC (TAALEEM.AE) Q1 FY2026 Earnings Call Transcript & Summary

Hello, everyone. This is Abdul Kandeel from EFG Hermes. I would like to welcome you all to Taaleem Holdings Q1 '25/'26 Earnings Call. I am pleased to have on the call from the management of Taaleem, Mr. Alan Williamson, CEO; Mr. Arnaud Prudhomme, CFO; and Ms. Nora Ghannam, Head of Investor Relations. As usual, we will start with a presentation from management, and then we'll open the floor for the Q&A session. [Operator Instructions] Management, you now have the floor. Please go ahead.

[Foreign Language] Thank you for joining us today as we are very pleased to report our Q1 to the investor community. I'd like to start with an overview of the financial highlights. I'm pleased to report an uplift in operating revenues as a result of improved enrollment and an improvement in EBITDA, both improved year-on-year. AED 71.3 million net profit, slight decline due to the technicalities of the bargain gain that we gained from the French school in the previous year. And obviously, our CapEx, Amity and LLFP were completed last year. So we're still continuing to invest as we'll see on the other side of the presentation. The balance sheet and liquidity, again, good news in relation to delivering the IPO gains and delivering the strategy, and you'll see our debt increasing, but that is also delivering new schools and the acquisition of Kids First Group aligned with the net debt and with the investment in Kids First Group. Free cash flow, just slight change in relation to the timing of the start of the year and fee collection, and again, the expansion of the portfolio is clearly shown with our net fixed assets. In terms of shareholder returns, the return on equity shows improved profitability and the return on assets shows that we have more assets as a result of delivering the strategy. So an overview, again, Taaleem revenue contribution of the premium schools at 86%. The launch of DBS Mira and the expansion of DBS Emirates Hills with the DBS Islands both of them bringing significant new numbers of seats into the portfolio. And indeed, premium enrollments grew by 12.8%, which we were particularly pleased with given that KHDA had published an overall market comparison of 6%. And as a result of that, the premium utilization has risen, which is a significant achievement given that you read in the 2 bullet points above that we've put all these additional seats into the portfolio. Kids First Group, an equity accounted investment, 35 nurseries. A reminder that we have a 95% stake in Kids First Group. Net profit contribution of AED 2.4 million and again, highlighting an asset-light growth model, performance is expected to strengthen as we scale, and we have a slide on that later. The Dubai Schools has seen significant enrollment growth, 35.4% and now over 4,500 students in the Dubai Schools portfolio. The utilization has obviously improved as a result of that ramp-up. And this is now a key growth driver of our student enrollment in the organization. Charter schools, again, a long-term added contract and delivering stable returns with a slight improvement in enrollment. And as we had previously indicated, the Ajyal Schools, we had 8. We handed 4 back to the Ministry of Education as part of a planned transition program, but we actually gained 1 additional school as one of the other operators completely exited the program. Thank you, Nora. So highlighting on the left-hand side, the growth of the portfolio, Greenfield International School if we compare the map with the ramp-up of our student capacity from 16,900 students to a planned growth of over 29,000 student capacity in Taaleem schools, a growth of 10 schools to 16 schools. Already completed the GIS expansion, the purchase of Lycée Libanais Francophone Privé. The opening of DBS Jumeira, successful opening. The acquisition of Amity and transformation and expansion of DBS Emirates Hills. We are tracking that as a separate campus called DBS Islands in the Jumeira Islands community. DBS Mira opened successfully, overachieving on our business plan with significant enrollment and still to come Harrow Dubai, Harrow Abu Dhabi and the recently announced U.K. curriculum school in Ghaf Woods. Again, repeating that this will take our student capacity in excess of 29,000. I'll pause there and pass over to Arnaud for a detailed look at our financial performance in Q1.

Thank you, Alan. Good afternoon, everybody, and thank you for taking the time to review and discuss our Q1 results. So let's focus first on the P&L and some highlights. So it's another strong financial performance year-on-year with growing revenues, gross profit and EBITDA, whilst we have a decline during the same period of the net profit. All of this is driven by a simple fact, the expansion of the business. We are, as we call it in J-curve at the bottom of the J-curve or nearly close to the bottom of the J-curve, meaning we have invested a lot in CapEx, and we have invested a lot in human resources to support the opening of new school or the ramp-up of the existing portfolio. And this obviously bear on the cost side, whilst the revenue are not yet in a situation where we could qualify the school of mature. So nothing to worry about. It's a normal cycle of the existing of a school. And because we have added up to our portfolio a number of schools since IPO plus the acquisitions, it's obviously the situation in which we are, and we are going to obviously as well get out of it in the coming period. Turning specifically, please, next slide. Turning to the revenues, sustained growth, growth of the operating revenue by close to 21% year-on-year. It's driven fundamentally by the premium enrollment growth, which have reached close to 13% and the PPP expansion with an outstanding growth of the enrollment by close to 31%. It needs to be reminded, but you know it, that the books of the revenue, the bulk of the revenue are coming from the premium school, representing 85.6% of the total revenue. So it's really where we need to focus and where our management is focusing its effort. Enrollment utilization, I don't come back on this, but we have progressed with a lift of the overall utilization to 77.7%, and the average gross tuition fee has increased both because of the promotion of the students from a lower grade to a higher grade, where usually you have higher fees and because we benefited from a fee increase -- regulatory fee increase of 2.3% on average across Abu Dhabi and Dubai, which represents AED 24 million additional revenue, and it's translated in the fact that the average gross fee is now over AED 60,000 per student. Thank you. Now in terms of cost efficiencies, as I mentioned, we are in a growth context with ramp-up expansions, new school and integrating the previous acquisition. We are as well in a context where there is a strong competition to attract and as importantly or even more importantly, to retain the talent, especially the teachers. So all of this explains why the operating cost and the general and administrative expenses are growing at a rate which is quite significant. This is to support this growth, but we do it in a -- we grow this cost in a disciplined manner. If you look at 2 KPIs, which are presented here, one is the operating cost to operating revenue, we have a limited increase, a marginal increase of 0.2% during the period. If you look at now staff and benefits to staff cost on operating cost, it's, in fact, slightly going down by 0.4% versus where we were a year ago. Next slide, please. So now moving to the balance sheet to have a couple of words. So what this board is showing is that we are on a strong footing to support the growth and deliver the strategy. The total debt has increased quite significantly versus 2 years ago, we are standing at AED 140 million. Then we moved at the end of August '25 to AED 1,327 million. And now we are close to AED 1,400 million. This is the fact that we continue to draw down on the existing facilities to fund the construction of the new greenfield projects and because as well, we have raised debt to finance our acquisitions. As a consequence and because we use the cash raised during the IPO to fund the expansion, as a consequence, our net debt is increasing close to now AED 1 billion, but as we will see later in the presentation, the debt situation is completely under control. In terms of CapEx, if you look at face value on this board that the CapEx has gone through a massive decrease compared to Q1 last year. But in reality, like-for-like, if you exclude the acquisition we funded last year, which are the Lycée and the Amity facility, we have increased the CapEx during the period from AED 40 million last year, again, on a like-for-like basis to close to AED 80 million now. And all of this is related to the execution of the strategy. Lease liability, nothing so much to say. It's stable around AED 300 million, it's just reducing a bit as per IFRS standard. And all of this includes the 2 Harrow Schools. Moving to the debt and the financing situation. So we are in a comfortable territory here. We are with a healthy capital position. We historically, and we continue to be in this situation, we prudently manage the debt. We raised it strategically, so to support the growth of the business, and in a sustainable way, so that we make sure that at any point of time, we are not going closer or too close to our bank covenant and what is called a prudent management of the financial situation. We do it on the back of our cash flow generated by the assets, and we have a structure which is based on stage repayment of the debt. The other element to note in our situation in terms of debt is when we launch a new project, we secure the financing, and we know the impact of the financing before we do it. And we usually use a model which is to boost the return of each project taken as a stand-alone with 80% debt raise and 20% equity. We have introduced enough flexibility and optionality in our debt outstanding in the sense that we can repay nearly at any time and usually without any penalty, our existing debt. We structure it with bullet repayment to benefit from the better interest rate environment, which is expected by the market. And we have already benefited this year from this downturn -- downward trend of the interest rate. We can repay, we can refinance, we can do it partially or fully. It will depend on the market conditions at the time, and this is something on which obviously we are working. All in, if you look at the right-hand side of this board with the bank covenants, which are fundamentally 3 net debt-to-EBITDA, the gearing ratio and DSCR, we are very far away of the maximum or minimum required by our banks. We are comfortable with all these covenants, and we'll keep on doing -- being in this situation. Thank you. Last element on the Q1 situation, the cash flow. You know that our business model is by construction, cash generative and at very healthy levels. You can see here how the cash movements have operated during the Q1. What I want to insist on is what is related to the free cash to the firm and the cash conversion. You see negative numbers, and there is nothing to worry about. It's a seasonality impact or effect. In Q1, what happens is that we have collected the tuition fees before the start of the financial year because the academic year started at the end of August '25. Whereas during the first quarter, we have fundamentally expenses to support the opening or the reopening of the schools and the start of the academic year. Now we are collecting or we will start to collect -- when you look at Q2 to give you a bit further comfort, if need be, we have collected the fees for Q2, and we will start shortly to collect the fees for Q3. So this is rebalanced. And you might remember that we ended up the full financial year '24, '25 with a strong positive number for both KPIs. Thank you, Alan. So I give you now back the floor to address the portfolio performance during Q1.

Thank you, Arnaud. So again, a bit of repetition here from my opening and a couple of things touched on by Arnaud. If you track along the premium schools, repeating AED 369 million in Q1 operating revenue and 86.2% contribution from the premium schools and 13.8% from the PPP. So that's been fluctuating between 90% and 10%. The growth there is the significant enrollment in Dubai Schools, the project here in Dubai with Sheikh Hamdan and the Executive Council of Dubai, where we actually receive school fees for this specific PPP program. Again, highlighting the 12.8% year-on-year growth in student numbers in our premium schools, the opening of DBS Mira and the addition of LLFP to the portfolio. And in terms of capacity, again, highlighting with Mira and DBS Islands a further increase in student capacity with the new school at Mira and the addition to the Emirates Hills campus. And again, the most pleasing thing is continuing along the premium schools line is even with 400 additional students in the Islands campus and the opening of DBS Mira, we have still closed capacity utilization in our premium schools. Completing the PPP line, again, the growth in enrollment -- the slight decrease in enrollment is balancing the Dubai Schools growth with the loss of 4 of the Ajyal Schools, similar in relation to capacity. And also the utilization improvement is to do with the growth of the Dubai Schools part of the PPP. So focusing firstly on the premium schools, the additional school of DBS Mira coming into the portfolio, as I mentioned, an improvement overall in capacity utilization, up 1.6% and the additional capacity with Mira and Islands, significant growth in enrollment that's covered by obviously, the improved performance of all of our legacy schools without exception, enrollment is up in every school. In addition, the performance of Mira opening and the additional complete capacity utilization of the new Island campus as part of the Emirates Hills expansion. As Arnaud very clearly and so well explained, the slight decrease in the EBITDA margin, obviously, it's early days at Q1, but we -- our schools are in a J-curve. We've got DBS Jumeira from the previous year, the opening of DBS Mira, costs are high in relation to staffing and the student numbers will come through and close that J-curve. In addition, coming towards the end of the J-curve, but still in it, we have places like Raha Khalifa City, and JAS as they close off their sixth form. And obviously, the acquisition of the French school with 1,200 students and aiming to grow that through to its 2,000 capacity. So look, a very strong performance. And remember, when you track the dotted line on the right-hand side, which is our significant increase in capacity, the most pleasing aspect is the thick solid line up on every single year significantly and ultimately closing the gap despite the fact that when we open a new school, the regulator remember says that we can only open the kindergarten and the primary in that school. So in summary, from left to right, the enrollment increase and the capacity utilization I've covered with Mira and the Islands Campus. A slight increase in our average gross tuition fee. Obviously, we had the KHDA and ADEK-approved fee increases and the average overall 3.7%. EBITDA has, as I said, slightly declined, perfectly understandable, as Arnaud said, we are not worried. And in fact, some of our new schools are overperforming on the business plan, and this will balance out as the schools come out of their J-curve. And again, perfectly understandable, the increased CapEx with our new schools. This is an interesting slide that we put together to demonstrate and justify the fee point of our new Dubai British School and also of the Harrow Schools. And what we're pointing out left to right is not only the ongoing high performance and quality education of our schools rated outstanding, very good and good, but also where Taaleem school sit in relation to competitors that are outstanding, very good and good in terms of price point. So you will see that if you are in 1 of our 3 Dubai British Schools in the outstanding category, you're actually paying far more for an outstanding school in the competition. And although our very good schools are spread further, they are still below the average price point. So if you come to a Taaleem school, you don't only get a quality education, but you get quality education at best value. And therefore, there is confidence in the management team, and we're seeing this already with our enrollment -- early enrollment in Harrow Dubai that even at a higher price point, we are still only coming in where some of the higher-priced outstanding and very good schools are in the market. Turning to government partnerships. Again, one additional school came from a competitor in the Ajyal, while we lost 4 of our existing schools. Capacity utilization, however, overall grows as a result of the Dubai Schools enrollment. The enrollment is, therefore, only slightly down, and that should be surprising given that we've lost 4 Ajyal Schools. And again, the reason there is the rapid growth, rapid and ongoing growth of student numbers. And again, for the solid line of enrollment, had we have kept our Ajyal Schools, you would see a very strong performance there. The EBITDA margin slightly down, nothing to concern about because the Dubai Schools, the 3 Dubai Schools and in particular, Dubai Schools, Nad Al Sheba, they are also in the J-curve where even though student numbers are more, we still have high staff costs, which are in place for 4,000 student capacity schools with the leadership team, et cetera, in place. And overall, with the significant number of 4,500 Dubai Schools students paying fees, the revenue contribution has actually grown. And again, I'll skip through this slide because it just summarizes that the transition of the Ajyal Schools, the revenue growth in the Dubai Schools PPP and the ramp-up of the J-curve in relation to the EBITDA performance in the Dubai Schools portfolio, balanced by the stability of the profitability of the charter school program. So turning to strategy and obviously ending a shorter than usual Q1 analysis given that it is only Q1. We are very, very excited about delivering Harrow Dubai here. If you're driving down Hessa Street and you live in Dubai, you will see that building coming to fruition. And obviously, we were very excited by the announcement of Ghaf Woods and the construction, the ongoing progress with construction of Harrow Abu Dhabi on Saadiyat Island. To repeat the pillars of our strategy, we continue to expand our premium school offering, as I said, very excited to announce Ghaf Woods and see Harrow Dubai and Harrow Abu Dhabi coming to fruition. Continuing to look for opportunities to add capacity to highly successful existing schools such as Emirates Hills and GIS. Ramping up utilization, again, a 12% increase in enrollment in a market which KHDA have said is sitting at 6%. Government partnerships, the stability of the charter school nurseries and our 11 charter schools, balanced by the ambition and growth of the Dubai Schools PPP and the strong relationships with government in relation to returning the Ajyal to the MoE. And obviously, with the acquisition of Kids First Group, we are very excited by the acquisition -- M&A acquisition opportunities that owning one of, if not the most successful early years schools group in the UAE. Thank you, Nora. I'm going to pause and return to Arnaud for our disciplined CapEx phasing.

Thank you, Alan. So we have raised at the time of the IPO, AED 750 million capital. Currently, we have used 75% or close to 75% of it through the deployment with greenfield and the acquisition. As shown on the left-hand side of this board, you can see that we have done it in a prudent and phased approach. You have initially a kind of peak when we -- during the period, which followed the IPO process itself. And then as we progress over time and we deploy the capital, we can get to a situation where a normalized CapEx is happening, which is '27, '28 with Ghaf Woods, which is planned to open at the time. What this board is obviously saying as well is we are working now as management and with the Board on the revised long-term strategy to define what we are going to do post the opening of Ghaf Woods.

Thank you. So in conclusion, again, we're very proud as the Taaleem Board of our track record since IPO in delivering the strategy because it's one thing for a public company to set out a strategy. And as Arnaud has just alluded to, the careful planning and delivery of the strategy is really what we have been focused on. And casting your eyes left to right, we have the red schools that we have delivered, then the gray schools that are very much what the management team are working on day in, day out as we approach the next phase of our growth. So very excited by the progress of Harrow School Dubai, as I said, early indications of a lot of interest in the first Harrow School in the UAE, ongoing planning and delivery of the construction of Harrow Abu Dhabi and putting everything in place in terms of regulation and approvals to announce the U.K. curriculum school in Ghaf Woods. And as Arnaud has alluded to a track record of a management team delivering 1 or 2 schools on an annual basis with a clear plan for 2026 and ambitions for 2027 and 2028. In the education sector, reputation is everything. I alluded to our ongoing strong performance and inspection outcomes. And when a parent puts their trust in a school and signs a school up, it is important as we've shown with Islands, Jumeira expansion of greenfield in Mira to deliver the campus on time and in budget. And if possible, as we've been doing above our business plan. So we're very excited by the future. One of the most exciting slides that I showed today is the growth of the premium portfolio from 12,000 students right through to an ambition to deliver a premium portfolio of over 29,000 students with associated profitability. So I'll pause there, and Arnaud will give us an overview -- sorry, I'm still on. My apologies. I've skipped one of our most exciting recent acquisitions. So turning to Kids First Group. We are very excited by this acquisition. As highlighted in the Q4 announcement, we talked about the integration model and how we can quickly scale up and grow with low CapEx investment, an asset-light model. It diversifies our portfolio, all but guarantees and we didn't need this, but still all but guarantees a pipeline into Taaleem schools. Again, the nursery sector is very strong and growing. There's strong market research. Pricing isn't impacted by the regulation that we see in the K-12. So we have a capacity now of over 6,000 seats and sitting considerably above 4,500 already the impact on the accounting gain of AED 2.5 million, but I will push your eyes to the bottom right-hand side of the presentation. KFG is expected to contribute an average of over 25% -- close to 26% of our net income between '26 and '30 and an EBITDA CAGR of 19.6% over that period. So you'll see an expected growth of KFG's EBITDA from a forecast of AED 103 million and doubled by the close of 2030 as a forecast. So that's a hugely exciting addition for us in terms of the portfolio. So yes, sorry, this is where I was 2 minutes ago. So with a smile, I will return back to Arnaud for guidance.

Thank you, Alan. So 3-year guidance, as we presented during the presentation about the full financial year result '24, '25 in November last year. The point here is we have actualized the '25/'26 guidance and the range provided here show a stronger performance than what we anticipated based again on the actual since the start of the academic year. Specifically, the EBITDA should be around AED 355 million, AED 360 million, looking at only Taaleem without the impact of KFG. The revenue are going to grow as well at a slightly higher pace than what we thought initially. And the net profit consequently will be as well stronger than what we thought between AED 172 million and AED 180 million. The net debt-to-EBITDA has been slightly changed as well because, as you know, it depends on the way we draw down on the facilities. But this is where we should stand at the end of the financial year. For the 2 other years, '26, '27 and '27, '28, there is, at this stage, no change. But obviously, for the 4 -- the 3 years, we'll continue to update you as we move during the year, the financial year.

Thank you, Arnaud. And thank you, repeating Arnaud's thanks at the start of the meeting, for joining us on today's call. We're very happy to return to Abdullah and take questions from the chat or live questions. Thank you.

[Operator Instructions] We have already received two questions in the chat box. I will read out the first one from [ Haroon Rasheed ]. It says, can you share how much did KFG make last year in Q1 '24/'25 before acquisition? You are guiding for full year share of income to be between AED 37 million to AED 42 million. Is that still doable given the AED 2.4 million posted in Q1 '25/'26? Can you explain the seasonality of the new vertical?

Okay. So maybe I'll start with the second question, the seasonality of this vertical. It's quite different from the K-12 schools where you have obviously clear seasonality, especially during the summertime. With this business, it's quite different. In fact, you have all-year round without so many changes, an influx of existing students in the schools in the nurseries, including during the break. Why? Because instead of proper schooling, then campus are proposed to parents and students. So in reality, the only period during the year where you might have a slight decrease is usually August because in August, parents are on holiday or even if they're back to Dubai and Abu Dhabi, they are not necessarily still in the mood to put their child into a nursery. Usually, people start to put their child in the nursery more at the beginning of September, taking care first of potentially other children. So again, seasonality is not to be seen as for the K-12 schools. On the first question, if I remember the numbers, before the acquisition and after the acquisition, there is not so much a change. What we plan this year, as you said rightly, for the net profit from KFG or the net contribution from KFG is something which will be around AED 33 million to AED 37 million, something like this for the contribution. And what we are working on with the management of KFG and the Board of Taaleem is obviously to boost this number. We are working on different opportunities to increase this. Currently, the business operates 35 nurseries. They are going to open next week another nursery, and they are working on potentially opening additional nursery earlier than later. And we are working as well, and it's important in the context of the revised long-term strategy of the business. It includes obviously KFG, and we want to be more aggressive in terms of growth versus the plan we had at the acquisition time because the demand is there and the dynamic and the momentum of the business is there as well. So when we are ready with this, with the new strategy, obviously, it will be presented to you, and it should be probably around Q3 of this financial year.

So the next question from [ Prakatheesh ] in the chat. It's divided into 2 points. The first point says, what would you consider a target optimal utilization rate for premium schools over the medium term? And the second point is also about KFG. It says it appears that the KFG contribution to net profit in 1Q may have been slightly lower than expected. Could you please share your perspective on this? I think you have already touched on that, but feel free to comment.

Maybe I can add one point here. Versus the initial number we could share with the market, we have progressed on one point which is quite important, which is the purchase price allocation, which is an accounting review to fair value the assets and the liabilities and allocate this fair value to liabilities or assets. We end up with -- and it is shown in our financial statements of Q1, we end up with a recognition of brand value for AED 112 million related to KFG. And this brand value has to be amortized over a couple of years, in practice here, 20 years. We have as well some fair value adjustment around different elements, which are detailed into the financial statements. This explains why the contribution which was pre-PPA is slightly lower than what we presented before. But this, again, we try to offset it. We will try to offset this moving forward by growing further the business and accelerating the growth of this vertical.

Okay. I'll deal with the first part of the question with a little bit of difficulty, but if Nora displays this slide, you'll see that it's fairly difficult question to answer because utilization has hovered over -- if you focus on the right-hand side of the screen, you'll see that despite a highly successful enrollment growth, the strategy makes us a victim of our own success because every time we grow enrollment, we open 1 or 2 schools. So it's actually quite hard to break out of that 70%, 80%, which is actually a very, very successful performance of enrollment. But we're obviously adding -- every time we open a school of, say, 1,800 students, then the target goes up. What you will realize, though, is that the -- every time, say, we open a new school every year for, say, the next 5 years, the rest of the portfolio is maturing all the time. So that capacity utilization is improving while we're adding 1,800 seats. And our problem is when we add the 1,800 seats, only about 400, 500 of that seats we can actually fill because the regulator only allows us to open the KG and primary school. We've made it clear to the organization that the target is a 100% utilization. And of course, as we look through our portfolio, schools like Emirates Hills, now Islands, Jumeira Park, Jebel Ali School, and soon to be Greenfield international School, already Jumeira Baccalaureate School, Raha Gardens, these schools are all at capacity there or thereabout. Sometimes it's just some extra seats in the sixth form. So certainly, for the last few reports to investors, we've hovered around 75% to 78%. And while -- as we open Harrow Dubai, as we open Harrow Abu Dhabi, both schools 1,800-plus, and open Ghaf Woods, again, another 1,800, it's going to be difficult to get up into the 80s. But I would think as we develop a 5- and 10-year plan, even with ongoing growth, we should get into above 80% because of the success of our legacy schools. I think it was in Q3 or Q4, and I'm sure we'll do this again, we differentiated the presentation by curricular. And you'll see the success of the enrollment. Indeed, already we're looking at DBS Mira. And even after 1 year and forecasting 2 years with some strategic planning to do around even expanding some of our highly successful openings.

So the next question in the chat from Belal. I think that's already about KFG. You have already answered that. So I will take the next question from Ahmed.

Am I audible?

Yes.

It's Ahmed Eshaqi from SICO Bahrain. I have one question about your strategy going forward. So as you've mentioned, you'll communicate your strategy [ Harrow ] school is announced. So are you thinking of possibly expanding beyond UAE? Do you see any opportunities outside of the UAE? This is my first question. And my second question is regarding the opportunities to expand capacity further in the UAE. Is there still a lot of -- is the education market still underpenetrated with the increase in population? And is demand for premium schools still there? And do you see basically more opportunities? Or is the premium demand more -- or supply more than the existing demand?

Yes. Thank you, Ahmed. I'll answer the first question first. Firstly -- sorry, I'll answer the second question, return to the first question. But just as a fact, Kids First Group have a nursery portfolio into Qatar. So already, we have a small presence outside the UAE. Within the UAE, for certain, we see substantial room for ongoing growth. We can either look at market research on people staying in the UAE, buying into the property market, not a far less transient expat population than previous. We even see that in our schools. The attrition of our students is going down and the attrition of our staff is going down. So maybe not a perfect exemplar, but a small microcosm of people investing in the UAE, investing in property in the UAE and committing to the UAE further than, say, previous years. If you take the opening of DBS Jumeira DBS Mira, again, we business planned around 300 children that previously what we would have done. And both of these schools overperformed substantially. Our portfolio -- our outstanding schools DBS Jumeira Park, DBS Emirates Hills, we'd expect them to be full. But from 5 years ago, we wouldn't have, say, expected our very good schools to be full. But Khalifa City, Raha Gardens, Jumeira Baccalaureate School, previously, these schools always had capacity, Greenfield International School. Even in areas of Dubai such as Mirdif, where our Uptown International School was, previously in the past, that was like 1,200. Even schools like that are full in the kindergarten and the elementary. So I'm answering you by suggesting the strong market research for a young population, an increased population. The Dubai property market, the Abu Dhabi property market continues to be buoyant. And we're not seeing any flattening of that even at this stage, even with the huge capacity that's coming online. So final answer on the beyond the UAE. Look, we're always open. We visited the Kingdom of Saudi Arabia with some Board members recently and we're open to continuing to look there. However, Ahmed, I would say that if the demand continues to be strong in the UAE, first and foremost, our expertise, our experience is firmly here in the UAE with a very, very strong track record.

I will add something on the strategy, if you don't mind, Ahmed, to further the answer about the timing. What we are seeing is the fact that after Ghaf Woods, currently, we have no other committed new development or any acquisition or whatsoever. So the strategy fundamentally finishes with Ghaf Woods, I will say the IPO strategy. We are working now precisely to define exactly what we want to do to propose to the market after Ghaf Woods come online. And this proposal will be presented to the market to you in Q3 this financial year, '25/'26.

Okay. Perfect. Just one more question, if I may. You increased your guidance for net profit for 2026. However, overall, even the EBITDA guidance wasn't increased much. So is this related to anything below the -- is it finance cost related? Why exactly would you increase net profit guidance compared to your last year's guidance if you will still face pressure in terms of finance costs in the next 3 -- let's say, in the short term?

So at the level of the net profit, which encapsulates the previous line, why we increased the guidance, and we increased it significantly because you might remember, the guidance presented was AED 154 million to AED 165 million of net profit Taaleem plus KFG. We do this because we have actualized our enrollment, so hence, revenue and the EBITDA and as well because now we have further clarity on what is called revenue cutoff, which is an accounting treatment of the end of the year versus the date of the start of the academic year. There will be 1 day more, meaning the academic year will start with an additional day earlier than the 1st of September when our financial year will start. And importantly, and we didn't know that before this Q1 review, we know now where we plan to be in terms of enrollment in '26/'27. And this derives the number we can recognize in '25/'26 based on this cutoff accounting standard. And that explains why we have made this kind of jump, which is close to AED 20 million additional net profit versus the previous guidance at the beginning of the financial year.

So I'll be taking the next question from Belal.

We can't hear you, Belal. Have you unmute?

We still can't hear you, Belal. Can you please unmute yourself and ask your question?

Yes. Can you hear me now?

Yes.

And to be honest, it's not clear for me, what you mentioned on Kids First Group in terms of the reason why you lowered the guidance. I was hoping you can explain that again. That's the first thing. And the second thing is I'm having trouble understanding why you've only reported AED 2.4 million for this quarter versus what is now your guidance on the low end of AED 33 million. So is it only an accounting gain that was reported and there was no operational earnings from Kids First Group? Because I think the way we're looking at it is, if it's AED 33 million guidance on 4 quarters, you should be doing at least AED 8 million a quarter. So it's coming well below expectations. So I'm hoping you can clarify that.

Yes. So on the first point, why we changed the guidance for KFG versus the beginning of the year. At the time, as we mentioned in the financial statements, we didn't have completed the purchase price allocation. It's an exercise that follows any acquisition where, as per IFRS, you need to fair value your assets and liabilities. The outcome of it is now taken into account after having gone through an independent third-party review and then being reviewed and validated by our external auditors. The result is known. And the result practically or accounting-wise means that we have to amortize every year, hence every quarter, the brand value attributed to the business we have bought. And we have to take into account as well some fair value adjustment around lease liabilities and right of use of assets. That's the main driver. The rest is allocated to goodwill. And you will see that the goodwill -- or you won't see it necessarily in this paper, but it's presented in the financial statement. The goodwill is quite significant. That's why the guidance has been reduced because, again, we didn't know at the time absolutely at all what will be the result. And the brand value is not an exercise that you can complete yourself very easily. It's quite complex. And you can even argue that the brand value is this or that. So it's a complex process. Now you're right about the number, Q1. The number in Q1, in fact, generated by KFG is higher. But then we have to take into account in Q1 this fair value adjustment, which reduced the number to AED 2.3 million, AED 2.4 million for Q1. How can we plan to be at AED 33 million, AED 37 million at the end of the year? Because there is currently an ongoing catch-up in terms of enrollment at KFG. In fact, they are over their annual target, but it started quite slow, to be very transparent, in September, October. And since then, they have catch up. And now they are over the full year target in terms of enrollment. And the second thing is they are opening a new nursery bringing new capacity, and this nursery will be filled more quickly than what was anticipated. The third element, because of this lagging impact at the beginning of the academic year, September, October, KFG has taken immediately cost reduction measures, which are quite significant to offset this element. This cost reduction takes effect from January mainly. So again, we are comfortable to consider that we will be able to deliver a contribution to the net profit of Taaleem from KFG between AED 33 million and AED 37 million by the end of the financial year.

Okay. That's clear. But even taking into account the adjustments you made for fair value, which reduced the net income contribution to about AED 2.4 million, correct me if I'm wrong, but I believe excluding this factor, what Kids First Group generated in the first quarter is somewhere around the AED 4 million. So is there a seasonality there? Is there a low seasonality, lower utilization in that quarter? And again, just to confirm, so that exercise was like a onetime exercise. Or is it going to be amortized every single quarter going forward? So I'm just trying to get a sense for how the net profit recognition from KFG is going to progress through the year.

Okay. So it's a onetime exercise that you do just following your acquisition. You have a couple of months to do it as per IFRS. But then the impact of the review will be recognized every quarter on our accounts. So the amortization of the brand value over 20 years, you will see it every quarter on KFG accounts. Same for the fair value adjustment around lease liabilities and right-of-use of assets IFRS 16. That's one thing. The second thing, there is no major seasonality apart from what I explained in August. However, it happens at this financial year '25/'26, in September and October, KFG was not on track in terms of enrollment versus what was planned. They took the measure to reduce their cost base, which are now starting to bite into the P&L. And since then, they have caught up for different reasons, increasing marketing, increasing -- different reasons. So that's why, again, we started lower than anticipated. But the expectation or the plan -- not the expectation, the plan for the full financial year is to catch-up and even potentially go even slightly higher if we can. For the time being, it sits AED 33 million, AED 37 million. I repeat myself, we are comfortable to deliver this number for the full financial year.

So I'll take the next question from the chat from [ Seki ]. says by 2028, based on guidance you provided, you forecast ROIC to be more than 10%. Could this be further out? And if so, why?

Return on invested capital at 10%...

Sorry, I didn't get the question. Can you repeat it? Would you mind?

Yes. Yes, sure. It says based on the guidance -- it says, by 2028, based on the guidance you've provided. Do you forecast ROIC to be more than 10%? Could this be further out? And if so, why?

I don't have at this stage a forecast for this KPI. We could look at it and come back to you after this call.

Where are we seeing the ROIC at 10%?

It's not calculated.

We'll answer that one offline?

Yes.

Okay.

So the next question is also from the chat from [ Vihay ]. It says, how do you compare metrics for IB versus British curriculum schools on demand, capacity utilization and margins? Number of IB portfolio of schools has not changed in full year 2020/2021. I appreciate your thoughts.

Can you give me the 4 bullet points? Demand, capacity, utilization...

And margins.

And margins. So to be honest, we don't really expect our IB schools to perform differently than the U.K. schools in terms of, say, margins. Staff costs are not hugely different in our U.K. schools as opposed to our IB schools. Our IB schools are built to a sort of 1,800, 2,000 student capacity. If you look at the utilization of, for example, the 2 Raha Schools in Abu Dhabi, one is full, 100% capacity. The other one was a larger campus but has ramped up above the business plan, I think sitting now in excess of 2,000 students across the Raha Schools. I believe we looked at this and there's well in excess of 4,000 students in our Raha Schools. So in terms of capacity utilization margins, the expectation of the management team is similar to the U.K. schools. However, the market research, the market in general is showing that demand for U.K. schools is slightly stronger than demand for IB schools. There has been a move, not to be stereotypical, but of the affluent Indian community away from the Indian curriculum and into U.K. curriculum. And that is obviously reflecting a very high Indian expat community in the UAE. In general but not without exception, the Russian, East European community have moved into the U.K. curriculum, where their gymnasium schools are more akin to the progress expectation defined curriculum, science, math, et cetera, where there's more comfort in the U.K. curriculum. What you've also got to realize is our Dubai British School brand, and we have 3 U.K. curriculum brands, we have a Harrow, Jebel Ali and Dubai British School, is rated outstanding. And again, only 21 schools are rated outstanding. So we would expect these schools to be at 100% capacity as indeed the 3 legacy schools are. And if you look at the performance of our new Dubai British School, it's not rated but marketed by us as outstanding as part of the outstanding portfolio. They've also performed well. So demand is stronger in the U.K. schools. Capacity utilization is slightly stronger because of the 3 outstanding schools but dampened by the new schools only been open to primary. None of our existing IB portfolio is underperforming in our eyes. Both the Rahas are either at capacity or moving towards capacity. Greenfield and IB school would have been way above capacity, but we expanded by 500 seats. But again, it's heading now towards 100% capacity. Jumeira Baccalaureate School is full, 100% capacity. And Uptown has made significant improvement over the last few years. So the margins are the same, slightly different by the price point, the revenue that you bring in through the historically defined school fees. But our staffing costs, et cetera, are the same across the portfolios.

Thank you, Alan. We have already exceeded the time allocated for this session, but we have 2 more questions in the queue. Management, would you be okay to take them? Or should we...

Of course, Abdullah. Go ahead.

Okay. So the next question, we will take from Nitin.

My first question is on any update on Harrow Schools? So in the last call, you had mentioned about the inquiries, the number of inquiries you have received, I think the number was 150 if I remember correctly. So is there any update on that? Has the number gone up? And second is I was just trying to understand the guidance upgrade on net profit. I mean, like you were explaining before, you have more clarity on the full year business. So I'm just trying to understand, is this that have you increased the fee more than you had expected at the start of the year? Or you have inducted more number of students? I mean, just trying to understand why there is a difference of around AED 15 million to AED 20 million in net profit. These are my 2 questions.

Maybe I take the second one and then give the floor to Alan for the first one. On this question about why we improved the net profit guidance for the full year. There are two main elements, but one is more important than the second one. The less important is an actualization of the enrollment. When we started the year, we didn't know exactly where the student will sit, which school, which grade and so on and so forth. Now we have a complete and clearer view. But the most important thing, most important impact is, as I mentioned, the fact that we know now what we plan to be the enrollment for the group in '26/'27 and because of the IFRS accounting rule about revenue cutoff related to the fact that our financial years, which start on the 1st of September or start later than the start of the academic year, we need to recognize the revenue during these couple of days where the school has started but the financial year has not started. This revenue needs to be attributed to this financial year '25/'26. And this calculation is based on the next year enrollment. And now we know this per school per grade. So we have a much better understanding. And we know as well that there is 1 day additional versus '24/'25. So all in, explain why we have upped the guidance so materially for the net profit.

In terms of Harrow Dubai, we've made a very successful start. And that, as you mentioned, that was without advertising the marketing both on social media and in terms of displays on roads, et cetera, is all now in place. We've created what we call the Harrow Pavilion. It's taken from Harrow on the Hill in London. We've also had some social media with the Headmaster of Harrow on the Hill. Look, we don't want to be too transparent or too optimistic at this early stage. We are above target for where we wanted to be in December. As I had alluded to earlier in the presentation, we previously business planned around 300 students. But this is a super premium school with a super premium price point. And at the moment, we've no concerns at the moment that we will do anything other than overperform. But we can't give you an exact number at the present time. But we're very, very, very happy with the performance of the new headmaster. And as I said, the school is taking shape on Hessa Street, and that's always a concern of parents who are taking their children out of another school as to whether the school will be ready.

So now to the final question from Mehwish in the chat. It says, regarding the amortization of fair value adjustment in KFG, how many quarters it would be spread over and how much is the total adjustment?

So as mentioned, the adjustment related to the brand value will be over 20 years. So the amortization will be every quarter over 20 years to recognize the AED 112 million brand value attributed to the business. For the second adjustment, fair value, ROU and lease liability, it will continue as well every quarter. I need to check the exact timing, but it will be as well over the long term.

Thank you so much. So this was our final question. So I would like to pass the floor back to management for any concluding remarks.

Thank you, Abdullah, and thank you once again to EFG for hosting our quarterly call. I thank all of you on the call for investing in Taaleem. We are very excited, as I said in my conclusion, by delivering the strategy and setting out the strategy in relation to the growth of Kids First Group, the ongoing growth of the Dubai Schools-PPP and the 3 additional schools that we've already declared to the market in relation to Harrow Dubai, Harrow Abu Dhabi and Ghaf Woods. So also, in addition, and finally, thank you for taking the time to join the call and ask the questions. So again, we look forward to meeting you again at Q2.

Thank you so much, management. Thank you, attendees. This concludes today's call.

[Foreign Language]

Thank you.