Taaleem Holdings PJSC (TAALEEM) Earnings Call Transcript & Summary

Hello, everyone. This is Hatem Alaa from EFG Hermes, and welcome to Taaleem Holdings' First Quarter '23/'24 Results Call. I'm pleased to have on the call today from Taaleem, Alan Williamson, CEO; Arnaud Prudhomme CFO; and Nora Ghannam, Senior Manager of Investor Relations. We'll start by a presentation from management, and then we'll open the floor for Q&A. [Operator Instructions] Please go ahead, Alan.

Thank you, Hatem, and thank you to EFG again for hosting our investor call. We are very excited to take you through our Q1 results. And of course, this is our first opportunity to compare our performance with the previous Q1 since becoming a public company. And the headlines are very positive in relation to our performance. So if you look first of all at our enrollment, we're very pleased that we have grown considerately, 5 new public private partnership schools have joined the Taaleem portfolio, but you'll hear me later in the presentation take a look in more detail at the premium schools, which are, of course, vital for our profitability. And we have an incredible performance there of a growth of over 1,400 students who have joined our premium schools. Revenue is consequently up, as is EBITDA. Net profit looks extremely positive, and we'll just caveat that is, of course, positive, and it's on the back of this enhanced enrollment in particular, in the premium school and the new schools. But the performance is also the result of very sound and prudent investment by Arnaud, our CFO, and the team approved by the Board, where we are investing the -- some of money that we are waiting to deploy in our strategy and benefiting from the interest rates and, of course, our low leverage as a company. We continue to invest in CapEx, and that is a result of the rollout of our greenfield strategy, which I'll talk about later. And really pleased with the ongoing capacity utilization success as our students -- we retain our students and we move into the senior phase and most profitable phase of our education in our K-12 schools. EBITDA margin is strengthening. Net profit margin is strengthening. Profit per student is strengthening. And of course, I have discussed our low debt position. Thank you. I'm going to pause there because 1 of the interesting facts in our Q1 is the auditing of corporate tax and indeed the introduction of corporate tax and I bow to Arnaud's expertise in this area. Arnaud?

Thank you, Alan. Good afternoon, everybody. So taking you through the UAE corporate tax impact on Taaleem. As you probably know, this tax is impacting the results from September '23 onwards. And the first payment -- first return will have to be made by May '25. The current tax -- effective tax rate is -- has reached at the end of Q1, 8.9%, which is below the window, I would say, tax applied to the result, which is 9%. This is a timing issue. So you should not draw any conclusion for the full year from this, and we can expect this percentage in Q1 being slightly higher in the COVID period. The second element to notice, and it's very important because it has an impact on the result is a one-off event, an extraordinary event, which is called deferred tax. Deferred tax is the difference, in fact, of taking the difference between the accounting of some items on the balance sheet and the tax laws and rules. In fact, the regulation was issued in September '23, which required to apply an accounting standard, which is IAS 12 relative to income taxes. Based on this, the economic value generated by business combination of the past needs to be taxed. For Taaleem, it means that AED 27.7 million has to be recognized on the P&L in Q1. It's an accounting entry. It will not drive any cash outflow from Taaleem. We have no liability versus the tax man. Again, it's purely accounting. It's a one-off in the sense that it's related to the past but will not happen again in the future. It will have -- it will -- the positive of it is the fact that because it's related to goodwill to some other intangibles and some fair value assets. As we will continue to amortize these fair value assets and the other intangibles, we will benefit from a credit gain to the P&L moving forward. So the AED 20.7 million (sic) [ AED 27.7 million ] of today will be reducing over time, and we expect this to have a significant positive impact in the future. Thank you, Alan.

Thank you, Arnaud. So we'll now take a look at delivering the strategy, and absolutely delighted to break down the significant growth in enrollment, which is 26% Q1 to Q1, but most importantly, in relation to that, the highest part of the profitability of the company, your -- as I said in the introduction, looking at a significant growth in students in our premium schools. And I would draw your attention to the top right of the presentation, and this is very important in relation to really tracking this and approximately 40% of our cohort are still coming in from the competition in our premium schools. So 25% of new joiners from overseas, that's the success of the Dubai and Abu Dhabi economy, the growth in the expat population and the ongoing progress towards that 65,000 new people -- new young people solely coming into the UAE over the next 5 years. Added to that, of course, some of them will also be included in the new entrants, that's KG joiners into our schools. But the fantastic performance of our schools is that 40% are still leaving competitive schools and wanting to join the success of Taaleem, the improved and improving -- ongoing improvement in reputation of Taaleem in terms of inspection outcomes, examination results and trust in the service that we provide to the education community. Year-on-year levers is also a positive, down from 13.6% to 13.3%, again, showing the parents and students are staying in our schools, which, of course, in the defensive model of K-12 is really important particularly in the senior phase as we want to keep the students in Taaleem schools. If we break that down by premium and government partnership, again, this is a key focus of the senior leadership, a key delivery of our strategy to close the capacity utilization in the existing portfolio. And this is just a time where you will see over the next 2 years, the growth of our physical capacity as we deliver the new Dubai British schools in Jumeira and in Mira. And again, we have been extremely successful by bringing another 1,400 students into our premium schools. In relation to the government schools, again, as we move forward with the strategy, you will see a significant growth in the physical capacity of the 3 Dubai schools, the PPP project that we have with the Executive Council in Dubai. Thank you. In relation to the strategy and at the last Q report, we reported on the new part of our strategy, which is the adding of 500 students to -- 500 seats, sorry, to the Greenfield International School campus in DIP in South Dubai. In relation to DBS Jumeira, DBS Mira and the 2 new super premium schools, we have made significant progress, DBS Mira land we signed and looking at the final part of the approval process and full-scale construction, opening the school in September 2025. And the signing of the lease in Dubai and significant progress in Abu Dhabi with the opening of our 2 new super premium schools. In relation to DBS Mira, if you live in Dubai, you will be seeing the school, the walls are up on the water canal, and we have a time lapse that we will show you, as I speak now, it's really significant that we are 70% through the construction phase. And paint is actually going on the walls, and we're beginning to work now on the interiors of this fantastic school that's being built to the highest environmental standards, and we are already working on enrollment in that school. Thank you. The principal is with us and is working in the Taaleem central office on enrollment. In terms of M&A, we continue to make progress with that, looking at 2 to 3 options for that and very excited about the prospects of that. We can't tell you more at the present time. But we are in the process of looking at options that will be value accretive to shareholders. In relation to government partnerships, as I said before, we introduced 5 new schools, and news since the quarter ended, we have an additional school given to us in Abu Dhabi by the charter schools. Of course, the significant part of this strategy is when the student numbers begin to deliver on the KPIs. So we have the management part of the Abu Dhabi and federal ESE contract. Once we begin to achieve the KPIs, we are hopeful that these will bring more profitability to us. Of course, we are also looking at the expansion of the Dubai schools. In terms of ESG, we have made significant progress. It's something that is embedded in the founding principles of Taaleem. We were founded with 3 key values of respect, inspire and care. And care is at the center of what schools group do. So ESG is at the heart of everything. We are doing -- we've put a plan in place. We played a significant role with our young people and our school leaders in the COP28. In relation to recycling, we have some real initiatives that are underway and our IT department has 2 major initiatives that have been praised and have actually won awards. And in terms of staff well-being, we have taken significant steps, which is all well in terms of staff retention in Taaleem. Thank you. In terms of the portfolio, the main story is the growth and student numbers. We targeted a management target of 14,000 students and have made considerable inroads in relation to that, and I can report at the close of Q1, we had 13,947, as I said, up 1,400 on our previous performance. So the important part to stress here is the profitability of this, and I'll break that down in the next slide or in the next few slides. It's an 11% growth, is above KHDA statistics for Dubai, and therefore, above the competitors. And the key part of this is closing capacity utilization, significant improvement in schools like Uptown to close the IB portfolio and I'll break that down for you if we take a look at that. So our U.K. portfolio, other than a really small amount of seats in Jebel Ali School is all but closed. We have significant progress in Abu Dhabi with Raha at Khalifa City and still the regulatory controls so now hovering at around 50% of the school filled. As I said, really, really pleased with the IB Dubai performance, significant there, around 10%. And even in the American Academy for Girls we have had a significant improvement in our performance. The average gross tuition fee shows that our children are being retained or are being recruited into the older year groups of the school. And if you remember, when we were discussing Greenfield or Uptown or Jumeira Baccalaureate, it's really just the senior seats that are available in relation to these schools, covering plus 90% capacity utilizing. And indeed, there would be schools groups that I have worked for in the U.K. and in the UAE that would declare capacity utilization to be 95%. Arnaud and I have set higher KPIs for our schools and said it has to be 100%, and consequent improvements in profitability as a result of these seats being at the senior school. In relation to that, 40% of students still coming from competitors. And it's worthwhile, not just reflecting on examination results, which I did in the previous quarterly update on inspection outcomes which I will be able to declare to you in either quarter 3 or quarter 4, but our schools continue to be fantastic places, and that is exemplified by awards. And if we look through at almost every school that we are running has been -- has received a significant award. Jumeirah Park topped expressive art school and the UAE AAG's teaching assistant UIS has won an award, that's Uptown for innovation, Jumeira Baccalaureate School for well-being, GIS in relation to recent accreditation inspections. Jebel Ali is now a British schools -- British inspectorate schools outstanding, which is the first stage in its progress to being a KHDA outstanding school. And of course, academic excellence shining for our individual students. In relation to government partnerships, I discussed 5 more schools in this quarterly report that would be improved with the announcement that I'm announcing today of another school joining the portfolio in Abu Dhabi. As I mentioned, the key here is to begin to improve performance in the variable KPIs in the Abu Dhabi charter schools and the ESE skills. And this will be the first real variable KPIs come into the Emirates school's establishment. And in relation to enrollment, I think the 1 that we're most excited by is the growth of the Dubai School's project enrollment from 1,968 to 2,576, 600-plus additional students into these schools. And remember, it's the Dubai schools that sit on our P&L. As these schools scale up, the mid-market economic model begins to become more positive for us. Thank you. I'm going to pause then and pass over to Arnaud to take us through the financial highlights.

Thank you, Alan. So in relation to the P&L first, as you can see, the results are driven by higher enrollment and cost efficiencies. The EBITDA reached AED 100 million at the end of Q1. The net profit before tax reached close to AED 82 million. There is a strong underlying growth of the business. When you look at -- if we focus 1 minute on the net profit before the deferred tax and after the current tax, you can see that we are reaching AED 74.3 million, which is a strong over-performance versus Q1 last year where we were at AED 51 million. Again, the deferred tax is a one-off exceptional item, and you should take it and consider it as such. Thank you. Turning now to the balance sheet. These are the movement since the end of August '23. So as you can see, the cash and cash equivalent has decreased slightly during the period by AED 6 million. It's a reflection of the deployment of the cash to support the construction of DBS Jumeira, the design of DBS Mira, which has been taken into account as well and the expansion of GIS, as mentioned by Alan. The second element is in terms of lease liabilities, it looks virtually the same versus the end of August. But in fact, on one side, you have the amortization -- the depreciation of the liabilities. On the other side, we have the full year impact starting from '23 of the lease signed for DBS Mira in June '23. Third element is the bank borrowing. You can notice that it and as you know, we have fully delevered balance sheet last year, repaying early more than AED 358 million of bank borrowing to benefit from early repayment close, which we are advantageous and reduce the cost of debt in the context of interest rates moving up dramatically. We now are sitting on the balance sheet at the end of Q1, AED 40 million. It's only related to DBS Jumeira, and we will continue to draw on this borrowing to continue and complete the construction of the project. Finally, under our provision and other payables, this is where sits the provision for the deferred tax of AED 27.7 million. Thank you. Turning now to cash and net debt. In terms of movement in cash, the higher part of the table, this is related to cash as IFRS defined, meaning the cash with deposits below 3 months. As you can see, there is a slight decrease in cash. And again, it's due to different element, but the main ones are related to the dividend paid in November to the shareholders, AED 110 million. the construction of DBS Jumeira, for which we are spending cash close to AED 35 million. The fact that we have continued to borrow, which is a positive. So we have drawn AED 13 million for DBS Jumeira construction as well. And finally, you can see a movement related to the own shares. You know that we use a market maker to provide liquidity services to the share. And there has been an acquisition of 5 million shares by the liquidity provider during the period at this number. Turning now to the net debt. If you look at the total cash and Wakala deposit, AED 590 million sitting in the balance sheet today or more precisely with banks as the deposits to earn profit. Virtually, this is -- in terms of net debt, this is virtually stable. And it reflects, in fact, the situation in which we are still, which is before we fully deploy the capital raised at the IPO, knowing that, again, we continue to deploy equity to support the construction of the new greenfield schools. In terms of free cash flow to firm, the Q1 is a specific situation in the sense that we collected the fees for the academic -- the current academic year prior to the start of the financial year. Hence, the fact that the free cash flow to firm at the start of the year is negative. As you can see, it's negative by AED 15 million. Nothing to worry about. It will become again positive from Q2 onwards. Well now on the CapEx. So in terms of maintenance CapEx, as you know, historically, we are between 2% and 3.4% of the total revenue on a full year basis. In Q1, we reached 2%. It's a question of timing. We have spent roughly AED 5 million for this. But again, it doesn't reflect what we will spend for the full year. We will be on the same parameters and as usual, historically. In terms of expansion CapEx, AED 33 million have been expensed. It pertains to the construction of DBS Jumeira and the expansion of Greenfield International School. Thank you.

Thank you, Arnaud. And if you can just go forward, I just -- we're going to -- we've got 2 final slides that summarize our position. The first slide will be summarized by Arnaud. Thank you, Arnaud.

Yes. So it's the first guidance for the full financial year '23/'24. In terms of renewables, we continue to expect the growth at a solid double-digit pace. And it's based from the solid start to the year in terms of enrollment. In terms of CapEx, as I mentioned, the maintenance CapEx will just stay similar to the previous levels in the previous years. In terms of expansion, we plan to spend around AED 310 million depending on the actual timing of cash outflows and the project progress payments is related to the construction of the strategy schools. So the new developments we have started to do. In terms of free cash flow, the margin should stay around 22% or between 22% and 25%, given the level of expansion CapEx. For the EBITDA margin, we expect an expansion by roughly 200 basis points during the year. The net leverage will remain completely under control. We will continue to leverage the balance sheet as the project develops, DBS Jumeira and DBS Mira and so on and so forth. But still, all the covenants of the bank are far from being reached and we are on a safe position. Finally, on the corporate tax rate, the current tax rate will be around 10%. So again, don't take the Q1 result, 8.9% as the guidance for the respective year. It's a question of timing and of the impact of the calculation on the revenue and expenses. And for the deferred tax, it's a one-off Q1, you will not see it again during the rest of the year on the other quarter.

Thank you, Arnaud. So just to summarize, in conclusion, thank you for joining us in today's call. I want to conclude by talking about growth and quality, the execution of the strategy and the strength and determination of our governance. We have really exciting growth. Our schools continue to be successful. Student numbers are going up in both the public-private partnerships, and most importantly, in the premium sector, that growth of 1,000 -- over 1,400 students and continues to grow during the academic year, and that results in revenue, EBITDA and net profit growth. Premium quality, and our schools are successful. We've got numerous examples, as I've explained today, of wider achievement. And our student outcomes are on track to be better than ever in terms of academic results and in relation to school inspections and then accreditations as I demonstrated with Greenfield in IB and Jebel Ali in U.K. we continue to -- in pursuit of what we call our journey to excellence, to have more outstanding schools in our portfolio. In relation to the strategy, almost certainly the most exciting part of being the CEO of Taaleem, the appearance of Dubai British School Jumeira on the canal, having the principal in post, recruiting the staff for the next part of the Dubai British School journey and Dubai British School Mira designed and ready to begin construction and really excited to be moving into the super premium sector, which we will give you more details on as the quarterly reports unfold over the year. And in conclusion, as I said earlier, our company was founded on the values of care, respect and inspiration and our government is determined that the growth of the company will set with environment social governance at heart. So thank you for joining the call and as always, Arnaud and I are happy to answer questions through Hatem. Thank you. Thank you, Hatem.

[Operator Instructions] We'll take the first question from the line of [ Ankur Agarwal ].

Am I audible?

Yes.

So my question really is that are you planning to bring in newer schools or brands into the UAE. I think at some point, there was a discussion around a top global brand being brought to the UAE. So is that still a plan or you are more focused on increasing utilization of existing schools, given the tailwinds and the public private partnership focus on that? And the second question related also, do you plan to go beyond the UAE? I mean Saudi is an exciting market for private schools in education. Is that something that you would consider at any point?

Thank you for the question, Ankur, really interested, and thank you for your support for Taaleem. Yes, we did allude to bringing an additional brand or brands to Taaleem. As I said, as the quarters progress over Q1, Q2, Q3, I hope to give you and expect indeed to give you more information on the move of Taaleem into the super-premium sector, and that will involve a new brand, either within our portfolio, or as you suggested, an external brand with a worldwide reputation. In relation to our present brands, of course, we are closing the capacity utilization and building on 20 years of success of leveraging our brands. We've done it successfully with Raha, and will continue to do to so and we've done it very successfully with the Dubai British school, and we will continue to do that and look at opportunities, for example, with fantastic brands like Jebel Ali School. In relation to the PPP, the growth has been continuous and consistent for 4 years of 4 to 5 additional schools, and we expect that to continue. In relation to Saudi, my answer is very clear that at present, our strategy is centered on the UAE. There is a fantastic opportunity for additional growth here in Dubai and in Abu Dhabi and also through a public private partnership into the Northern Emirates as we're already doing. 65,000 additional young people coming in and needing schools, and we will deliver 8,000 seats, including Greenfield International School's expansion into the UAE. We are, like all businesses in the GCC, looking at Saudi, and we are engaging in conversations on Saudi and in particular, if it's conversations with government entities in Saudi. But at present, we believe there is more than enough growth in the UAE. And I hope that answers your questions, Ankur. And take more questions, Hatem, please.

We'll take the next question from the line of [indiscernible].

Impressive set of results. I have a couple of questions, if you'll allow me. My first question is related to the schools ratings and whether you are working on improving some of those ratings or moving them to a different bracket. What should we forecast basically going forward? And what sort of an impact should we expect? The second question is related to other income. I've noticed around AED 6 million coming in other income. I'm not sure I found a description on the quarterly financials. So if you can clarify that, please?

Thank you for the question. Very interesting, I'll cover the first one, and I'll hand over to Arnaud for the second one. Absolutely, a key target and a key KPI for the management and for the school principals is to improve inspection ratings. It's a very detailed process. And in the previous round of inspections, we went up in 54 elements within the UAE inspection framework across Dubai and Abu Dhabi. And in the most recent inspection this year, this academic year, I mean '23/'24, we went up in 81. So there is incremental improvement in every single one of our schools in relation to the elements of the inspection framework. Sometimes, that doesn't mean that a school will jump from good to very good or from very good to outstanding, but it means that we are journeying towards those targets. The most recent success was Greenfield International School moving from good to very good and was awarded International IB School of the Year. We are presently under inspection in the academic year '23/'24, and over the course of the next 3 years, we have targets of improvement. That stated, and we're very passionate for our communities and for our school teachers and our school students and school parents to maximize inspection outcomes. It's worthwhile noting that if you take the example of Dubai British School Jumeirah Park, it's actually our most profitable school by far in the portfolio, and yet it is rated as very good. If you take Jumeira Baccalaureate School, Jebel Ali School, Dubai British School Jumeirah Park and Greenfield International School, all of them above 95% capacity, all of them rated very good. And it's actually quite rare for a parent to be overly concerned if a school is actually rated outstanding. They are absolutely about the outcomes from the students, the happiness of the students and sometimes even just the school principal and the geographical area of the school. So while we do target outstanding like, for example, Dubai British School Emirates Hills. It's important for us that all our schools are rated very good and above, and that's the target. And over to, Arnaud.

Thank you. So in terms of other income movements, it relates to accounting entries. You have mainly 2 movements that you have to -- which are reflected in the Q1. One is recovery of tuition fees of prior years. You might be aware that Taaleem employ a debt recovery agency, and we use it whenever we need it and it brought some million to this quarter. And the second element is a reversal of excess accruals which we have been selling during the prior years. And the same we consider now we don't need them, and it has been reviewed obviously by our auditors and this explains the movement, the AED 6 million movement that you mentioned into the other income.

Understood. If you allow me 1 more question, if we can go back to the tax expense and the one-off tax expense specifically, I remember reading on your press release that basically, it will be reversed going forward, especially that is related to the tangible assets, but it mentions excluding the goodwill -- but looking at the financials, the goodwill portion, of that tax liability is the biggest. So I was wondering if you could explain that a bit for me if you don't mind?

Yes. So in terms of what we can recover going forward, it's a provision. What can be recovered is what is amortizable and what is amortized effectively. You have 3 components in the AED 27.7 million. You have, as you said, a goodwill, this is not amortizable and not amortized. So you cannot recover anything moving forward. You have a second element, which are other intangible. On our balance sheet, we have one, which is a student relationship, which has been valued when we made the acquisition of Jebel Ali School. It's amortized over 14 years. So there are still 12 years to go. And every quarter, we continue to amortize it and reduce the liability on the balance sheet out of the AED 27.7 million. And you have the third element, which is the fact that we fair value the assets and liabilities when we took over JAS, and before that, when we did the big production in 2007, creating effectively Taaleem as it is today. This can be amortized as well, will continue to be amortized over 30 years. So in a nut shell, out of the AED 27.7 million, you have roughly AED 21 million corresponding to goodwill, which cannot be amortized and will not have any impact moving forward on the reduction of the liability and the rest will continue to be amortized and will have a positive impact.

Thank you. Hatem?

[Operator Instructions]. I'll take a question from the chat from [ Shankar ]. He asked 3 questions. Maybe I'll take them one by one. Can you please provide some color on the fee structure of DBS Jumeira and DBS Mira? And will they be close to DBS Jumeirah Park? That's the first question.

Thank you. The issue here is to ensure that the business plan is successful. So the fees in Dubai British School Jumeirah Park are actually set above the fees in Dubai British School Emirates Hills. And you have to do market research on the villa communities or the downtown community where you are building the schools. So if we take Mira, for example, and you look at the price of renting a villa or purchasing a villa in the Mira community, and you contrast that with the rent and expense of a villa in Jumeirah Park, you're actually in very different communities. So although all of our Dubai British Schools will deliver the same curriculum, the same level of service, the same investment, teachers are paid exactly the same across the portfolio, you will find a slightly different price point across the portfolio. And we have actually looked more at the Dubai British School Emirates Hills fees for the 2 new schools than the Dubai British School Jumeirah Park fees. Of course, as I've alluded to in the presentation, we will be very excited to introduce to you over the course of the year, our 2 new super premium schools, and they will be at a price point even above Dubai British School Jumeirah Park. And it really is about the product, the curriculum, but more so the geographical location, where the schools are located.

I could add maybe another point, which is the fact that for these 2 schools, DBS Jumeira, DBS Mira, the business plan, which is assuming conservative assumptions on purpose, plans that we will be EBITDA positive in year 1 for both schools, which tells you a bit about the fees and the structure of cost of the school.

Second question is what will be the timeline for the capacity addition at Greenfield International. Will all 500 seats be added in September '24 and in which classes the capacity is added?

Yes. And the seats will be -- and assuming the regulation, et cetera, allows us to begin construction, the seats will be available in September 2024. Of course, as with DBS Jumeira and DBS Mira, we will not fill every single seat in that September. And we've a planned enrollment in Mira, Jumeira and Greenfield International that's in line with our business plan. And the seats in Greenfield will be from KG through to Grade 6 with a number of students in each class. So I think there's 20 classrooms in the new build, and we'll be targeting to be a better, positive in year 1 of that as well.

Okay. The third question is, can you please help us reconcile the gross revenue growth of 12% with 11% enrollment growth and the 3% fee hike? Is this due to most of the enrollment growth coming from schools with lower fees?

So just repeat the question, please, Hatem?

So his question is, like you delivered 12% revenue growth, which is lower than 11% enrollment growth plus 3% fee hike. So like the -- is the reason for the average tuition on a blended basis growth being lower than the 3% being that the enrollment is coming from schools with lower fee structures? Because I think you increased tuitions for most of your schools by 3% this year.

Yes. In fact, the fact that the revenue grew by 11% is a combination of different factors. You have to take into account, as you mentioned, the fee increase that was applied from September '23 on average because we didn't increase the fee all across the portfolio of the premium portfolio because some schools were either for commercial reasons or because for the Dubai school PPP, the schools are not vetted yet, so we are not allowed to apply any fee increase. So on average, it was 2.1%, weighted average 2.1% of fee increase across the portfolio. You have a second element, which is what we call the proportion of students, which is the fact that the students move from one grade to a higher grade. And usually, it goes with higher fees. And you have the volume impact which is very important, which is related to the additional students. Then you have to take into account as well the fact that some -- the bulk of the growth of the number of students has gone to the PPPs, mainly charter schools and ESE. And this explains why there is a kind of skewing of the revenue towards maybe some lower fees in some cases. And the other element to take into account is how the students, the new students spread across the different grades between Pre-K, KG, primary and potentially secondary as well. When you combine all of these elements, this explain why you have a variance between the growth of the revenue and the growth of the enrollment.

I think the point I would add is the EBITDA per student has moved, if you take Q1 to Q1, from AED 6,000 to AED 6,800. And the net profit per student has moved from AED 4,000 to AED 4,900. So we are seeing a positive picture in relation to that. Obviously, costs are also under control, but we do have additional teachers, et cetera, that is required in the senior phase of the school. Thank you, Hatem.

We'll take a question from [ SDK ].

Yes, we can just hear you. Try again, please.

Can you hear me now?

Yes.

All right. Great presentation. I just have a few questions, just to clarify a few things, if you don't mind me, should I list them all at once? Or are you going to take one by one?

Just go one by one, it might be easier for us. Thank you.

Okay. All right. Just a quick question. First, because I see in this assets, there's a drop in current total assets. So why is that so? Like whereas just a couple of months, like 2 months back, there was enhancing the assets. And now within 3 months, there is a drop in assets. Why that drop?

A drop in assets? Can you pinpoint where you're getting that information from? Can you help us?

In your own balance -- your unaudited in terms of consolidation -- in the balance sheet, there is a drop of approximately close to AED 100 million or AED 90 million drop in the asset.

Yes. We will answer that now. Thank you. Yes, that's correct. So if you look at the different movements on the asset side, you're completely right, the total showed a drop of the asset by what you mentioned, over AED 100 million. It's mainly driven by movements in the cash and Wakala deposits, and these movements are related themselves to the fact that we deploy some cash to support the construction of the different schools we have mentioned, DBS Jumeira, the design of DBS Mira and other works like the GIS -- expansion of GIS. That explains why our assets at the end of Q1 are declining.

Okay. All right. And just with the same -- follow-up with the same thing. I also see over here that if you look at in the same balance sheet that we have added, if you look at the 9 -- column 9, it says that we took AED 13 million extra additional loan to complete DBS-J, which is Dubai British School of Jumeira. So if we are taking a loan, wouldn't it be an additional burden on the company when we do have the cash?

But what we do for each of the projects we fund, we try to mix equity and debt with different ratios depending on the circumstances of the asset and of the market evolution in terms of interest rates and terms and conditions we can get from it. We mix [Technical Difficulty] the way to boost the return of the project. If you finance it only through equity, usually your levered IRR over 10 years is only levered IRR, doesn't change, but your levered IRR will be lower. We try to get your levered IRR, which is at least over 10 years, 20%. That's why we used some debt to leverage it. The second element is, as you know, for our strategy, we have 4 schools that we need to develop in the coming years, and we have started to do so. And we target as well, if it benefits to the shareholders, for acquisition. So we try to take into account this as well to make sure that we have the firepower available at any time to do an acquisition with some scale and which will obviously bring benefit to the company in terms of value.

Okay. Because in the last closing year, you guys said that you guys have allocated certain budget for the development of schools. So that's why I was getting this clarification. All right. I have just 2 more questions and then that will be it. One is when you talk about the growth, I think 70% to 80% of the growth on the students are coming from PPP, which is the public and private partnerships. So what are the terms of contracts do we have? Because it's not the assets or not the property of Taaleem. It's just a contract that we have. So god forbid if those contracts are gone, then the number of students is going to be depleted. So like what's the terms that we have for those contracts?

The terms of the contracts are the 2 of them are management contracts and the fixed fee management on the number of schools. And the second part of the contract is KPI-related. So the KPIs in Abu Dhabi and at federal level with ESE are on things like, for example, the outcomes of students in the American curriculum in English, in math and science, the outcomes for students in Arabic and the Emiratization of the workforce and compliance and inspection outcomes. So the growth in student numbers will become important as and when we begin to overtake and succeed in the KPIs.

I get that. That -- I'm just asking is like, for example, like you told that you have management contracts and KPI contracts. What's the year, like how long? 2 years, 3 years? What's the contract term?

So they're different, and across the 3 contracts in Abu Dhabi and ESE, they range from 3 to 4 years. They are cyclical. And for example, we have already renewed our first 4 schools in Abu Dhabi. So they are in the second 4 years of the contract. The contract with the Dubai government is 7 years and renewable by both parties in the seventh year. If you want to think about that from the Dubai government's perspective, they are investing hundreds and millions of dirhams in 3 new brand-new state-of-the-art schools. So the longevity of the contracts is not something that concerns Taaleem at the present time.

If I can come back on your previous question, 1 second about the asset, and it's the reduction. On the cash reduction, I mentioned the fact that we deploy equity to fund the construction of some schools. But as well I should have mentioned an important event of Q1, which is a payment of the dividend AED 110 million to the shareholders and this was drawn from the Wakala deposits.

Okay. So basically, you said development plus the dividends, correct? If I'm right that's the drop in the asset dividend, not the development.

Both.

Okay. All right. Just the last question. I was reading that the Taaleem is planning to buy back its shares and why we came to that decision, like why are we intend to buy back shares?

You'll need to send Nora that after call. That would be news to me, Arnaud and the Taaleem board. We are not aware of any statement to that extent. So if you can please send us that article and then we...

I'll do that.

We'll take the last question from the line of [ Harry Welton ].

Harry, we can't hear you.

Alan, I want to thank you very much for this call, and congratulations on the really strong numbers. I just had a couple of questions. First is just on the PPP front. If you -- good to help us understand like what is the utilization increase across these PPP schools? And if you can provide it over each one, that would be really helpful.

There's a slide on that, please, Nora. And just to help me get the exact number, Slide 10, sorry. So basically, the story with the PPP is that the Dubai schools are -- the Dubai Schools part -- let's remember there's the Dubai Schools, the Abu Dhabi Charter and the ESE. So the Dubai schools are at capacity over and...

That is the 3 schools.

Yes, correct. Now you're going to see a shift in the physical capacity of them next year because 2 of them will immediately become 4,000 student campuses and we won't fill it up overnight, why, because of the regulator. We are only in Grade 6 in these schools, and we will only move to Grade 7. So there will be a significant capacity utilization issue in the Dubai schools. In relation to the Charter schools...

It was just actually these PPP ones. I was just wondered -- because these ones are the ones you recognize the full economics of, right?

Yes.

So because if I look at 2023, I think that Al Barsha was 68%, Mirdif was 67% and Nad Al Sheba was 13%, I believe. So I just wanted an update, like an understanding of how those numbers were in the first quarter. And then also on that point about the capacity increasing, like how -- is that -- does that sort of slowly then ramp up to 4,000 for Al Barsha?

I'm not -- I don't know where are you getting those percentages from. I would guess they're much higher than that. And...

KHDA provides -- they've given an estimation of the enrollments in those schools.

Okay. I mean the capacity at Al Barsha is 1,264. The capacity at Mirdif is 950 and the capacity at Nad Al Sheba is 552. And on average, we are about 60 to 70 student short in each of these schools. So I don't know where the KHDA are giving you those figures from. We are much, much closer to 95% in each of these schools, which as a cautionary note, Harry, is going to change dramatically in the Q1 of next year because these schools are going to go to 4,000 student capacity. And as I've explained, we can only push that by year over year. So you will see us -- you will actually see the percentages that you just quoted next year. Does that make sense?

Yes, yes. Yes, because you're increasing the capacity each year, like you won't necessarily get the requisite enrollments immediately.

Yes. So take Al Barsha, the best example, presently sitting around 1,200 students, about 95% capacity, that school is being expanded to 4,000 students, but we will only be allowed to take 1 year group through there. So we're in that regulatory trap. But remember, the P&L of that and the context of that in terms of the building sits with the government. The major CapEx though, and just to be transparent with shareholders, for us there is equipping the school, massive school with obviously furniture, IT, et cetera, et cetera, for 4,000 students. So remember...

So that sit with you over them.

Yes. So that sits with us. And remember, we talk about a J-curve when we open new schools. So we go fairly deep into an operational CapEx J-curve there. But obviously, the exciting part of that is moving the Dubai schools to 3,000, 4,000 student capacity in the next 5 to 6 years and then the profitability of the mid-market will kick in.

Right. Because these are -- currently, these are lower-margin schools because the fees are typically lower and...

Yes, absolutely. So if you need scale, you need to move up to make it work.

Okay. And just from just like a modeling perspective. So actually, instead of capacity going up to like 4,000, like immediately, should we kind of expect that it goes up incrementally because of what you said about the regulatory allowances?

Yes. There's 2 ways to look at capacity, and we have this and the early loops and deep dives of the IPO, you can either look at capacity utilization by the actual seats available in the school or capacity utilization by the amount of classes that we are actually opening and that's about efficiency. And you will have seen in one of our slides today that actually in terms of efficiency, what we feel we're doing well. Can you just going back -- so in actual fact in our premium schools this year, Harry, we've actually moved in terms of student teacher ratio very positively from, I think, 13.3% to around 13.6%, which is one of the KPIs that's very, very important to our profitability.

Got it. Okay. And sorry, just on the students for these PPP schools, would it be all right to say it's about 1,200 for Al Barsha, 880 for Mirdif and 460 then for Nad Al Sheba?

Today. Yes, today.

Yes. Okay. Okay. And the second question was just related to teachers and nonteaching staff. Could you remind us how many would currently be in the entire, like, I suppose it's more related to the premium and the PPP schools?

I have to confess and I'd rather be transparent and open, I don't the exact number of teachers and -- but I will ensure that Nora sends you that HR data. I just don't know the exact...

Great. Best of luck for the rest of the year.

Yes, thank you, Harry. No worries. Hatem?

Yes, I think we're done. We can conclude on that note.

Well, if I could just thank the shareholders for investing in Taaleem and for joining us on today's call. As I said in my conclusion, we're very excited by the ongoing success and the future.

Thank you very much, and thank you, everyone, for participating. And this concludes today's call. Have a good day.

And thank you to you, Hatem, and to EFG as well for providing the support.

Our pleasure as always. Take care.