Taaleem Holdings PJSC (TAALEEM) Earnings Call Transcript & Summary

Hello, everyone. This is Ahmed Moataz from EFG Hermes, and welcome to Taaleem's 2023/2024 Results Conference Call. I'm pleased to be joined with the management team from Taaleem: Alan, the Chief Executive Officer; Arnaud, the Chief Financial Officer; and Nora, Head of Investor Relations. The company will start with a brief presentation, and then we'll open the floor for Q&A. Gentlemen, please go ahead.

[Foreign Language], Ahmed, and thank you to EFG Hermes again for hosting this investor call. It's a pleasure to be here. [Foreign Language] and we are delighted to report to you our Q4 and end of financial year results. And it's been a fantastic year for Taaleem, not just in relation to financial outcomes, but also most importantly, in relation to our schools. It's been a fantastic academic year, and we will update on that later. Some of the headlines and KPIs that we are focused on and proud of at the end of the financial year is the EBITDA and net profit uplift, which obviously is majorly influenced by the increase in enrollment and the uplift in, obviously, revenue coming directly from enrollment and also business development revenue. The EBITDA margin on the edge of 30%, a 32% year-on-year increase in the EBITDA and a 55% increase in net profit pretax and close to 20% margin. We will talk in detail about the increase in enrollment and capacity utilization. And obviously, I'm delighted, actually, believe it or not, to see the CapEx go up because it means that we are delivering on our IPO commitment and with the construction of our new Greenfield School. So a very, very strong performance and margins that we are particularly proud of as Taaleem. In relation to the big picture, the macro situation remains very favorable. I'm aware that almost every investor and shareholder on the call will know as much as me, if not more, about the macroeconomic situation. But it remains very favorable to operating a private school business in the UAE. You will see some snapshot data on the board here. Enrollment continues to be strong in private schools in Dubai with an additional 40,000 students coming into the marketplace. You can see between 2018 and 2024 in the middle slide, a dramatic increase in private school enrollments, which is changing the curve there in relation to private and government schools. And the government of the UAE remains committed to investing in the education environment. We are seeing a fairly -- not fairly, a significant population growth in the UAE. If you are living here in Dubai and Abu Dhabi, you're seeing that on things like roads and infrastructure improvement, and that has been also reflected in the private school sector. In relation to any new shareholders on the call today or anyone unfamiliar with the Taaleem story, a very brief update on who we are, 10 private schools in the previous financial year, now with the addition of DBS Jumeira in the new financial year, moving to 11, and situated in Dubai and Abu Dhabi. And a collection of government partnership schools called the Dubai Schools with the Dubai government, Charter Schools with the Abu Dhabi government and Ajyal Schools with the federal government in the Northern Emirates. The important thing about this slide is to show our share of the market in relation to very good and outstanding schools. We are super proud that in this financial year that we're reporting on, Dubai British School Jumeira joined its sister school, Dubai British School Jumeirah Park -- sorry, joined its sister School, Dubai British School Emirates Hills as one of only two of 21 outstanding schools. So I believe we are the only schools group that has both of our branded schools, the DBS brand, as outstanding in relation to K-12. So the other exciting aspect of this slide is the growth story. And you will see that we are adding new schools in Dubai and in Abu Dhabi. A reminder of where we sit in relation to our portfolio. The Dubai Schools is not on this chart as we've set lower than 40,000. But in relation to our 10 and soon to be 14 schools, they sit within the premium, and on the right of the slide, the super premium sector that we will be entering into. So the dark dots are the Taaleem schools, and we're very proud that we offer best values-based education, you will see that we have a plethora of the 29 very good schools and two of the outstanding schools at Dubai British School Jumeirah Park and Dubai British School Foundation both rated outstanding by KHDA and by the British Schools overseas. In terms of utilization, we are focusing here on the Dubai Schools Public Private Partnership and the premium schools. And a reminder that the premium schools bring in around 90% of our revenue. And we're very pleased to report, on the left-hand side, the closing of the capacity utilization gap and a fairly dramatic increase from 76% to almost 85% capacity utilization in the 13 schools that are being reported here, the 10 private schools and the 3 Dubai Schools. So you will see year-on-year closing blended utilization and increasing blended enrollment and obviously, reducing the seats available. And we'll break this down by curriculum in the presentation. So again, this is referring to our strategy, part one and two is already delivered. If you look at the right hand slide in the numbers, the expansion of the existing Greenfield International School, a reminder that this school was IB School of the Year, had reached capacity of around 1,600 students. We've added 500 seats to that campus and immediately took the school beyond 1,700 students. And DBS Jumeira opened on the water canal and a beautiful state-of-the-art campus. We exceeded our business plan and in some ways, we exceeded even our dreams with over 500 fantastic young people joining that school. I believe we are correct to report that this is the highest performing premium or super premium opening in relation to Dubai. So it's a fantastic performance by the management team and the new principal in that school. Still to come and being built, and we do have images of Mira, which we will report in Q1 in the next quarter. But DBS Mira in the community down past the Al Qudra Road or on the Al Qudra Road, sorry. And then two super premium schools, one in Dubai and one in Abu Dhabi, giving us a total of 14 private schools in relation to our greenfield and existing campus expansion. Also, in this academic and financial year, we are very excited to introduce Harrow School to the portfolio. We have signed a partnership with Harrow to give exclusivity to Taaleem across the GCC and ambitious plans with Harrow's international school portfolio, 10 schools across the world, newly opened in [ Bangalore ] and also in New York. So this is really an exciting opportunity for Taaleem to bring world-class, truly world-class education. If you were to stop someone on the street of the United Kingdom and say what are the two best schools, most famous schools in the United Kingdom, then they would definitely say Eaton and Harrow. So very, very excited to bring this to the UAE. And two land leases have been signed, one in Abu Dhabi on Saadiyat Island, and one on Hessa Street in Dubai. And we are awaiting regulatory approval and in the process of regulatory approval for this school in both cities. Thank you. So as I said at the start, although this call is celebrating financial results, it's most important that we also celebrate the individual students in our school, the collective school management of the principals across our portfolio. And we've won tremendous awards this year at school level, individual success that you see on the right in the sporting arena and in the world of expressive arts. And on the left, teachers and groups of teachers have won prestigious awards. As I said at the outset, the [ piece of our resistance ] of our achievement this year is the outstanding rating of DBS Jumeira Park joining one of two Taaleem schools in the top 21 outstanding schools. Worthwhile also stating that we had fantastic AP in the American curriculum, DP in the IB, GCSE and EAL results. Indeed, for the first time, all of our IB and British schools are ranked outstanding in English language examinations, which is really an incredible achievement for an organization that has 89 different nationalities across schools. And two successes that I want to particularly highlight because many investors are interested in our innovation and our ambition in IT. We've a fantastic IT Director, Wael Omar. And he won -- recently won a fantastic award that we're very proud of. And also in terms of the architectural design of DBS Jumeira and the cafes, the mangrove design cafes that we are introducing across our schools. So always nice to pick up architectural awards as well. I'm going to pause there and come back later with more detail on strategy. And in the interim, I'm going to hand over to Arnaud, who has been responsible for leading our company to another year of fantastic financial results.

Thank you, Alan. Good afternoon, everybody. So I'm very pleased to present this afternoon the fantastic financial results for the financial year '23/'24. This slide is showing some highlights. We'll deep dive a bit on revenue, EBITDA, net profit and CapEx later on. If I focus for the time being on cash and cash equivalent and if I take not only what is callable cash plus Wakala deposits only, as you can see in the balance sheet, which will be -- has been provided separately, all in, the cash in hand of Taaleem has increased by AED 25 million. This is due to many elements, including the fee collected from the students. But what is it I want to stress and what is important to note is that we have spent part of the IPO cash or continue to do it to fund our new schools project like DBS Jumeira last year, obviously, and DBS Mira, for which we have started the construction as well. In terms of debt, as you know, we were having a very, very low leverage at the end of the previous financial year at around AED 27 million of debt on the balance sheet. We are now sitting at AED 140 million. The reason being, as I've always explained in every quarter call, is the fact that we want to releverage the balance sheet, especially as we are now in a declining interest rate environment, where we can potentially leverage this opportunity. So the debt which is sitting on the balance sheet currently correspond to DBS Jumeira and DBS Mira for constructing these two schools. And we'll continue, obviously, continue to leverage the balance sheet as we see fit for the new project. In terms of net fixed assets, it's a translation partially of the CapEx we have increased dramatically during the financial year. Net fixed asset increase is due to DBS Jumeira, DBS Mira and the campus improvement plan, which represents roughly AED 17 million last year. As you know, we have a 3- to 5-year improvement plan for the existing campuses, and we continue to invest in the facilities for the benefit of the students and parents. Finally, the free cash flow to firm conversion 90%. It's sitting at a high level. It's slightly below last year. Nothing to be worried about. It depends on two elements, the numerator of which is mainly the movements in the working capital and is related to the cutoff dates when the financial year has started versus the academic year. And the second thing is because it's -- the conversion is EBITDA, obviously, as our EBITDA dramatically increased, this has had this impact, which looks negative, but it's not. A bit of focus now on the revenue. So what is important, the revenue has increased by 15.5% compared to the previous year. This is driven mainly by two elements. Price impact, so as you might remember, we have increased the tuition fee at the start of the academic year of last year in September, and it represented close to AED 20 million additional revenue with an average increase of 2.4% across the portfolio. It's a weighted average. And in addition to that, we have a volume impact, which is related to the higher enrollment, the strong increase year-on-year of the enrollment over 33% versus the previous year. As a consequence, the tuition fee has increased on average, the weighted one is reaching now AED 59,700 versus AED 58,000 plus last year. Looking at the EBITDA. So that's very interesting to see that our EBITDA has dramatically increased 32% at AED 270.8 million. What is striking, if I may say, is the fact that we have continued, obviously, to invest in human capital and in the facility. So you see that our operating costs have increased rather substantially 14.5%. It's a lower increase than the revenue increase itself, which is slightly above this, but what is important is that we have, at the same time, managed the cost base in a tight way, so that we manage, in fact, to make savings and efficiencies ending up with a 58.5% of the operating cost versus revenue versus 59% the previous year. And in terms of general and admin expenses, we have come back to a normalized amount following the IPOs, which explains the decline. Only again, our EBITDA has grown dramatically and the margin, which is probably more important, has gone up by more than 3%, 3.6% year-on-year. Last comment on the EBITDA. This is very important to note that the premium school are making the bulk of the EBITDA, more than 95%. As we have always said, the PPPs are important for different angles, but they are not the driver of the revenue and profitability of Taaleem. Now on the income statement, I will not expand too much on the different KPIs that you will focus on. Double-digit growth across all of them. I will just focus 1 minute on the net profit, especially on the margin, which has increased as well from 14.3% to 19.3%. Quite a fantastic result, honestly, before tax and -- this is before tax. But after tax, we have a considerable increase as well. And all of this obviously is driven by the growth of the EBITDA as well by some financing terms that we benefit from. We have, on average, generated more than AED 30 million of finance income during the year, thanks to the deposit waiting to be deployed for the execution of the strategy. Balance sheet. So the debt we have again started to releverage the balance sheet. We have drawn more than AED 113 million of debt vis-a-vis the market. This is again to fund the construction of DBS Jumeira last year and starting the construction of DBS Mira, which is ongoing, and will be open at the end of this academic year. The net debt has reduced. It remains negative because we have more cash today than the level of the leverage on the balance sheet. However, it has decreased because we have started to continue or we have continued to deploy the cash raised during IPO. CapEx, as Alan said, we are very pleased to see that it's increasing, especially the expansionary CapEx. It is the translation of the execution of the strategy. And finally, the lease liabilities. This is as well a translation of the strategy in the sense that we have secured a lease for a super premium plot of land in Dubai to be able to develop on this plot a super premium school. Cash flow generation. So you see the different cash flow and movement. I don't come back on the cash and cash equivalents. On the free cash flow to the firm, the free cash flow conversion again is not a concern, it's normal. You can see as one of the elements I wanted to stress here is the fact that we continue to grow our cash, even though we use the cash IPO to deploy and we deploy it for the execution of the strategy, but our cash continue to grow just because we are generating more free cash through the fee collection and other element. Now a couple of word on the market. I think it's important for you to remember that we have been added to three indexes or indices during the year, the S&P Global, the MSCI Emerging Markets Index and the FTSE Emerging Markets Index as well. That's an important element to ensure the visibility and the liquidity of the stock, and I think it's important. In terms of research, we have now four sell-side analysts covering the stock. We will see on the next slide how they position the stock. What is important as well to notice, our ownership remains locally, meaning UAE anchored, and it's very important to keep the ethos of the company. As we can see, it is close to 68% of the shareholding. It has not varied during the year. And the rest of the shareholders, which are obviously very welcome, contribute to the diversity of the shareholding base and its stability. All these investors, especially the local ones, are long-term and stable investor and all are buying in the growth equity story that we are delivering. Looking again on the way the market is looking at the stock. These four sell-side analysts have produced different reports. All of them are on the buy side. One of them is even proposing to overweight the stock in the portfolio. And as you can see, the upside potentially is considered quite significant, over 40% in most of the cases. Thank you, Alan, and I give you back to the floor to continue the presentation.

Thank you. And we're going to take a more in-depth look at the premium schools. As Arnaud highlighted, these are the basis of the Taaleem story in relation to both revenue percentages and our profitability. So currently, we -- in the financial year that we're reflecting on today, we're reporting on 10 schools. And obviously, DBS Jumeira will make that 11 schools moving forward. Really important to show the enrollment increase from 75% to 83% capacity utilization. And we're going to break that down for you in a minute by curriculum to show you where we're sitting and to show you how that fits in with our strategy. An increase in revenue, obviously, Arnaud was explaining that the fee increase was introduced across the majority but not all of our schools in the previous financial year, but we did bank the fee increase, for example, in the American Academy in the escalator and greenfield such that we are at liberty to use that at a future time. And also, of course, as we've explained to shareholders before, as the students in our private schools and our legacy schools move into the older year groups, there's a slight uplift in average tuition fees. EBITDA margins, Arnaud has answered questions before showing that the management ambition and indeed reality in the existing schools, in the private schools is to move the EBITDA margin above 30%. And you see that as we focus on our premium schools here. And obviously, the investment that we've already discussed into the strategy. So as promised, the breakdown by curriculum is very interesting. We are at 100% in our British schools. So even though Jebel Ali is sitting slightly under that and still has room for another 100 students in the school, actually, Emirates Hills and Jumeirah Park Foundation are slightly over. And again, we have touched on that in questioning where we can time table carefully in the senior space to enable us to do that. Our IB Dubai I'm particularly proud of, a greenfield at capacity utilization and therefore, the strategy to move that forward with an additional 500 seats. But impressive enrollment in the previous year and indeed in this year in places like Jumeira Baccalaureate School and Uptown International School. And investors and shareholders who have been with us since the IPO are increasingly aware of the gap in the IB and Abu Dhabi is the result of Raha Khalifa City School and the regulatory opening of that school 3 years ago only in the younger year groups. We're now moving into Grade 10 in that school. So we are sitting in a very healthy position in Raha Khalifa City but that identifies the gap there. And although you're seeing only a 4.8% year-on-year growth in the American Academy for Girls, management are actually overjoyed with the reputational improvement in the American Academy for Girls. And that increase of 50 to 100 students is very, very positive for that school. So overall, the premium sector last year sitting at 83%. Therefore, we kick into our strategy. We add Jumeira. So the school numbers in terms of capacity will go up, but obviously, our legacy schools continue to provide an opportunity to close that gap. And again, you can see this visually on the right-hand side. The 5,400 additional seats came in '22 with 3,000 seats in Raha Khalifa City and the addition of Jebel Ali School to the portfolio. An important line is the bold line below where you see year-on-year growth of up to or over 1,000 students adding to the portfolio. And again, as we will show you in Q1, we're reflecting on similar growth trajectory in this academic year. Okay. Let's take a more intensive look at the strategy. There's five parts to it, and they are all going well. We have obviously expanded our premium schools, plans to deliver four premium and super premium schools. And of course, we have delivered DBS Jumeira performing above our expectations in its first opening. And we've expanded existing schools, and we've shown that with the additional growth of our Dubai Schools portfolio, which we will report to you in Q1, but for your information, Dubai Schools Al Khawaneej, which used to be -- if you are tracking our portfolio, used to be Dubai Schools Mirdif and Dubai Schools Barsha and Dubai Schools Nad Al Sheba have expanded the capacity. And we'll hopefully report to you in Q1 on exciting plans that we have for one other school. And we're ramping up our existing schools. You saw that on the previous slide. We've moved from 76% to 83% capacity in our existing portfolio, and that doesn't just happen. That goes with investment in these schools with working and challenging and supporting our leadership in these schools to improve outcomes. As I said to you in terms of academic results, the first year that all our schools have reported outstanding outcomes in English language examinations and ongoing partnership work with the government across the PPP. In relation to our acquisition, we have been working hard on that. And we can't report anything on that today but rest assured that the Taaleem Board, the Taaleem management team, Arnaud and I have been working hard on delivering the IPO commitment of enhancing our portfolio not only with greenfield, but also with acquisition. So a visual on that strategy, 500 additional students in Greenfield, an additional 1,900 added to DBS Jumeira and ambitious plans, Mira on track in the community east of the 311 and Abu Dhabi and Dubai status of them, land acquired and approval processed to open one of the most exciting brands or one world class brand bringing to the UAE. In terms of utilization, I think it's always interesting to break that down for you. And we haven't always been as transparent with you as shareholders, but it's worthwhile looking at some of the portfolio in more detail. And Raha Gardens -- and by the way, I've worked for three major education organizations and then two of the other ones and the Board of Governors accepted 95% as capacity in a school. Interestingly, Arnaud and myself, not the Board, but obviously encouraged by the Board at Taaleem, have introduced 100% as a school being at capacity. The reason for that is in the upper school in the AP phase, the diploma phase, the A level phase, it's often accepted that these phases, because of particular subject choice, will never actually be at capacity. That's exemplified in the Raha number because in Raha Gardens, we only operate diploma phase, we don't operate career space. So if you are a lower ability child, you leave Raha International School and go back to, say, the American curriculum. And this year, we've introduced an application to also become a career school, in which case, Arnaud and I will be targeting the school with the education team to move it to 100%. That's the type of thing that's going on in Jumeira Baccalaureate School, only 138 seats to go for the fantastic cooperation with Francophone and introducing the French community into Jumeira Baccalaureate School. And equally, the careers program there is beginning to take off, and we will close the final seats and beginning to plan for the possibility of Jumeira Baccalaureate School too. And ditto for Jebel Ali School. As we reach capacity, we begin to plan knowing that a new school will take 2 years additional capacity in that brand, within the brand. The final thing on this slide is to highlight and credit to our schools that we are still taking considerable number of students from our competitor schools. So when you look at the breakdown of that and the assumption is with the population growth that every single new joiner into Taaleem is coming as a new expat into the UAE. But when you look at the breakdown, up to 40% of our students, and we've tracked this now for 3 years, are actually coming from competitor schools. Now when you look at our strategy of delivering 7,800 seats into the portfolio and you look at the projected growth and published this aligned to the government of the UAE that they expected 65,000 new people -- new young people, sorry, into the UAE, and you give also regulatory ramp-up into that equation, we are more than comfortable about our ambitions to fill the early year seats up to regulatory capacity in the new schools. Just a quick update for those not familiar with Dubai as to where our new super premium school is. It really could not be in a more central location. That shaded area in the circle is the future development of what we call the Jebel Ali Racecourse here locally. It will be akin to a new Dubai Hills. So we're very, very excited to open the first super premium school to the west of the Al Khail Road. In terms of our investment strategy and M&A, the example that the management talk about is the successful acquisition of Jebel Ali School. We took over with 1,200 students. We took over with its Arabic and Islamic departments rated weak. We've transformed the academic outcomes in school. And as you saw in the previous slide, the school is now reaching 2,000 students. So that's the type of impact the Taaleem management can have on a school. So the parameters set by our Board are given to you. That's our investment strategy, and we are presently working to close two possible acquisitions that will meet these parameters for us. Okay. And I will hand -- I will conclude there. And thank you for your attendance today and I'll pass back over to Arnaud as we look at our forecast guidance for the year ahead.

Thank you, Alan. So a couple of words on the guidance for the financial year '24/'25. This guidance doesn't include any M&A transactions, that's important to stress. So we continue, as you can see on the right-hand side of this slide, we continue our journey on the path to a strong growth. We will continue to generate an increase of the EBITDA and the net profit, and we will continue as well to execute the strategy to deploy CapEx. As you can see, there is a strong increase versus the result of '23/'24. And the net debt to EBITDA, for this reason, will decrease. That's the translation of that. What you can notice as well is there will be, for the EBITDA margin, a slight decrease. This is due precisely to the execution of the strategy and the fact that as we are going to open DBS Mira and continue to invest into the Dubai PPP program, we have this impact on the margin. But what is important to note is that the DBS Mira will be from the first year of its operation, as it is the case currently with DBS Jumeira, EBITDA positive, and the net profit will come slightly later during the operations of the school. So again, it's because we have in '24/'25 a big CapEx jump an investment, which corresponds to the launch of new schools that we have this slightly less margin in terms of EBITDA compared to last year.

Thank you. Thank you, Arnaud. So we'll now hand back to Ahmed. I have alluded to the possibility of some news in Q1. Obviously, that is subject in the case of our super premium schools to regulatory approvals, and sometimes that takes time. And also in relation to M&A, no solid commitment, as we all know. But even when plans are put in place, I smile, lawyers become involved, et cetera, et cetera. But we are putting in a huge amount of work to both securing the regulatory approvals for the announcement of the super premium schools and also to delivering on our commitment to M&A. So we welcome questions, Nora, Arnaud and myself, and we'll hand back to Ahmed.

[Operator Instructions] I will start with questions from the line of Nikhil Mishra.

A couple of questions from my side. First of all, in terms of your guidance, revenue guidance has stayed around 13% year-over-year and your enrollment growth is around 9%. So should we assume that around 3.5%, 4% of the growth you will see in terms of fees, gross tuition fees? And if so, how do you plan to increase the fees this year? Is that something in the plans or have you undertaken this particular fees increase already in August? And also this fees increase, just to understand, this new school, DBS Jumeira, which has come online. So I was assuming that the average tuition fees for this school, which has more than 500 enrollments, would be a bit lower because the grades or the years are lower, opening years are lower as of now. So just some clarity, just some color on how we should then look at the revenue growth, especially in the context of enrollment growth of 9%. And secondly on the acquisition. So what is the capacity for acquisition from your side? Can you just put some numbers there or just some kind of color on how big the acquisition could be that you are looking for? And also, is that just one acquisition you are looking at or something which is going to be a strategy for you, let's say, every 2 or 3 years going forward?

Thank you, Nikhil. Thank you for the questions. And we always welcome your input to our calls. I will go through the three parts to your questions, and I'm sure Arnaud can add flavor to my answers. The first question related to the fee increase, obviously, you -- I smile, you're direct in the management who have presented Q1 to 4 from the previous year to look ahead into Q1 of this year. Obviously, you're right in that the year has actually started. So this information is available. ADEK and KHDA both published fee increases around 2.5%, 2.6%. And again, we took the opportunity to introduce these fees into almost all but not all of our portfolio. As we've explained to investors before, we have to take a case-by-case decision, and Arnaud will be aware of an average blended fee increase. There was a couple of schools, as always, like in the previous year, we didn't use the escalator in the American Academy -- sorry, we didn't use the fee increase in the American Academy. We didn't use the escalator in Dubai British School -- sorry, in Greenfield International School. In this academic year, we put the fee increase across the majority of our portfolio. And actually, we used the accelerator in the outstanding achievement of Dubai British School Jumeirah Park. And for particular reasons, we didn't use the fee increase in Raha Gardens this year. So again, there will be a blended fee increase, not far away, not quite at that 3% that you attributed to but it will be blended across. And again, it will have the same impact that we presented today. Although as many investors and shareholders have pointed out, they do want us to reinvest in our schools and in particular, reinvest in not losing our outstanding teachers. So we have invested in their salaries and their housing. To turn to DBS Jumeira, you're right in your assumption that there will be a slightly below average fee because the school only opened from kindergarten to Grade 4 or in English system, FS1 to year 5. So that's the correct assumption that we are in the lower school fees. But obviously, it means that as the school progresses, we are going into the more profitable fee increase. In relation to acquisition. And I smile, I didn't want to give any lawyers who are on the call a bad name. That was not at all my intention. As you know, we've been targeting an off-market acquisition. As I said to you, we're looking seriously and in detail and at an advanced stage with two of these that we can hopefully report TBC into Q1. You know our parameters, you know the type of school that we are looking at, an acquisition that's value accretive to you, shareholders, and also to us as a company. In relation to our future strategy, no one has a crystal ball. I have loosely alluded to us continuing with the IPO strategy, where over the course of a 3- to 4-year period, we are adding one or two schools a year and also continuing over a 3- or 4-year period to look at, at least one acquisition in that time period. Do you want to add anything?

Maybe on the variance between the enrollment growth by 9% in the guidance and the revenue growth, it's related, as you mentioned, Nikhil, rightly to the fee increase, but as well to the fact that students are moving up grades year after year. So obviously, when they move up grades, the price charged to them is moving up. And that explain why this gap between the two growth percentages.

Thank you.

We have a question from the line of [ Valerie ] from Morgan Stanley Saudi Arabia.

So the first question is that in terms of you mentioned that the macro backdrop continues to be very positive. Are you seeing anything additional versus last year? Or is continuation of the same population growth, economy being strong, et cetera? So that's my first question. And the second question, in terms of the enrollment you have seen in your different schools, is there anything that may require you to change a bit your strategy in terms of accelerating or moving faster in terms of different offerings that you have? So those are the two questions.

Thank you. Great questions. In terms of the macro economic outlook. Everybody on the call today, whether you're a shareholder or management, will have the opinions about that. I actually had two engagements with -- two of the Big 4 today and meetings, looking at this position, and both were super positive about the macro situation in the UAE. I think if you just want a snapshot of that and you want some quantitative evidence, I would point to DBS Jumeira's enrollment. As I said, we business planned and we were very transparent with shareholders over the last 2 to 3 quarters that we were business planning for 300 students in the school. The demand was incredible. And I think that reflects both the management of Taaleem, I think it reflects the strength of the Dubai British School brand. And obviously, two of the schools now being outstanding. But I think it also does reflect the Dubai economy and the fact that probably, for the first time in a few years, demand is quite aggressively outstripping supply of quality schools. Now you can get a seat in an acceptable or a good school, but getting a seat in the 29 very good schools and the 21 outstanding schools is becoming all but impossible. Even if you look at our portfolio slide, then we showed you Jumeira Baccalaureate School, Raha School, we showed you even Uptown School, and these schools are not at capacity utilization, but what we're not showing you is from Kinder Garden to about Grade 8, they are at capacity utilization. So if you're bringing a child into Dubai and they are between 4 years old and 12 years old, it's almost impossible to get them into a very good or an outstanding school. Look, everybody on the call is seeing restaurants truly booked, seeing hotel rooms at capacity utilization, traffic roads investment by the Dubai and Abu Dhabi government in resolving these infrastructure issues. So I don't -- I've yet to speak to someone that's not positive about the macro situation. Even the tragic events in surrounding countries, they tend to result, if anything, in Dubai being -- and Abu Dhabi, of course, and the UAE being a safe haven, [Foreign Language]. So if anything, I think it will strengthen with even an increase in the oil price, the situation here in the UAE. And the second question in relation to our strategy and enrollment, that's a good slide, we are almost behind the curve. It would have been good to open two British Schools this year. If you look at the slide that shows the capacity across the curriculum, I think we've got our strategy right. And obviously, we didn't have a crystal ball 3 years ago when we began to build these skills. They take 2 years to build, but we're reaching a stage where we're opening Jumeira, opening Mira, opening the two Harrow Schools at a time where we're 100% capacity utilized in our British schools. We still have capacity in our IB portfolio. So I think we're really well placed to say that we have our strategy on point. And if anything, as we look forward, we may take a decision to diversify our curricula further. There are other curriculums out there, and it may well be that we enter an additional space to further diversify our portfolio. Thank you. Returning to Ahmed.

We have two questions in the chat. Actually, three of them. Seki from Ashmore has two. Do you envision CapEx to peak at AED 410 million excluding M&A? Or is academic year '25/'26 levels to be similar? That's the first question. The second is can you speak about the materiality of the move into nursery schools?

Thank you, Seki. It was great to meet up again recently in London. I'm going to let Arnaud reflect on the CapEx investment and whether it will be similar in the year ahead as it is today. Obviously, at the moment, a lot of that investment is going into, we've finished Jumeira, now moving into Mira and the design phase of Harrow. I'm going to answer the early year sector. We haven't taken yet the growth mindset and a strategic move into early years other than we've opened some nursery capacity in some of our existing schools. And we have discussed at length with our Board a move, a strategic move into the early years. The multiples of acquisition in the early years are more favorable. So it would be possible for Taaleem to move into the early years. You could argue that it would be beneficial in terms of creating a pipeline into our premium schools. The only argument against that is at present, we have no issues, and I mean no issues filling the early years in our schools with new students because of the reputation of our schools. So I'll turn to Arnaud to answer the CapEx query.

Yes. So I think there are 2 years, year one in which we are, '24/'25, and the following year where we have a kind of peak of the CapEx amount. The number you see here in the guidance at the beginning of the year for '24/'25 is probably the peak of the peak. And the following year, it should start to decrease because the bulk of it again will be deployed this year. So it will be around 350, 370 this kind of order of magnitude. I'm talking only about the expansion CapEx here and not as well about the maintenance CapEx, which will remain in terms of revenue percentage or ratio to revenue, similar to what we planned for this financial year.

We have one final question in the chat. Afterwards, after you answered, please, with any concluding remarks, go ahead. KHDA has recently announced its E33 strategy with one of the KPIs being a minimum of 49,000 growth in seat capacity in affordable schools by 2033. Is this a segment Taaleem could benefit from?

That's a really great question. It was actually, believe or not, a focus of our Board meeting strategy. Taaleem are not under any obligation by KHDA to deliver. I think one of the interesting questions about that is defining affordable schools. If you go to the fee screen, please, Nora. We have always pitched and strongly believe that when you look at Taaleem schools against other competitors, again, I draw your attention, if you have a visible access to the screen at the moment, to draw your attention to the dark dots on the screen. So while we do operate in the premium sector, which is loosely defined in the rectangle from, say, 45,000 average to around 75,000, 80,000 average and our schools rated outstanding, very good and good are actually at the lower direction of this segment. And you also see that when we've opened DBS Jumeira and DBS Mira, we haven't pushed them actually even towards Dubai British School Jumeirah Park. So for aspirational professional people, which the market research is telling us is who is arriving in Dubai and Abu Dhabi at the present time, I actually think we are delivering values-based education at best value. However, it's worth pointing out that a good and exciting growth trajectory for us is the Dubai Schools, the Dubai Schools PPP. They don't feature on this diagram, but they are operating at a price point, average price point between sort of AED 25,000 and AED 30,000. And in Q1, we will announce that these schools, I think it's common knowledge, has been actually announced by the Knowledge Fund with the KHDA and the Executive Council of Dubai that these campuses have expanded to 4,000 student campuses and are only operating in around the 1,000 mark. So there is growth for Taaleem to deliver on the KHDA strategy. And at the present time, we don't have a strategy, but it's not that there won't be one to operate in the mid-market. And we do have a brand that has been given approval that would operate in -- a Taaleem brand that would operate in the mid-market should we choose to go there. So I hope that answers the question. Obviously, there are other aspects of the KHDA and Government of Dubai strategy for E33 that KHDA -- sorry, Taaleem are absolutely delivering on. Ahmed?

Yes, we have no further questions in the chat or Q&A.

Okay. So thank you, [Foreign Language] to all of you for joining us today. Once again, I would like to thank EFG Hermes for hosting this. I would like to thank you all for giving up your time, but also for your investment in Taaleem. I believe, and does Arnaud, that this is a very exciting growth story. And as I've alluded to today -- through today, we hope to bring you more exciting updates in the coming weeks and months. So thank you [Foreign Language] for your support and for joining us today. Goodbye, [Foreign Language].

Thank you very much to Taaleem's management team and to all participants. This concludes today's earnings call. Have a good rest of the day, everyone.