Taaleem Holdings PJSC (TAALEEM) Earnings Call Transcript & Summary

Hello, everyone. This is Hatem Alaa from EFG Hermes, and welcome to Taaleem Holding, the first quarter '24/'25 Results Call. I'm pleased to have on the call today from Taaleem, Alan Williamson, CEO; Arnaud Prudhomme, CFO; and Nora Ghannam, Head of Investor Relations. We'll start by a presentation from management, and then we'll open the floor for Q&A. [Operator Instructions]. Alan, please go ahead.

Thank you, Hatem. [Foreign Language], and thank you to everyone for joining our Q1 call. We have had another successful quarter and I want to take you through the first of all, the highlights in numbers. Obviously, if you have been following the Taaleem story a couple of key changes for us as we move into Q1 and very exciting announcements with the acquisition of Lycée Libanais Francophone Privé, the French curriculum school in Meydan and also our plans to expand the outstanding Dubai British School Emirates Hills. So operating revenue is up all of the or the majority of the headlines here are year-on-year so contrasting Q1 of the previous year with Q1 of this year, and we're well aware that most of you will have been into the other 2 presentations. So operating revenue is up on the back of increased enrollment and that follows through into the EBITDA and net profit. I'm wondering that we always give our valued shareholders and investors, but we recognize at 10 months of revenue with 12 months of costs. So the best comparison for you is year-on-year, and the growth in revenue, EBITDA and net profit as compared with Q1 last year. Premium enrollment is up. THP announced that this week there was 6% across Dubai. We are including in this figure, our acquisitions and the growth of expansion, such as Greenfield International Schools. The growth of the PPP is mainly about the substantial expansion of Dubai schools Barsha and the move from Dubai schools Mirdif to Dubai schools are [indiscernible] each. Premium capacity is up on the back of the Lycée and also on the back of the Dubai British School Jumeirah funding year. Premium utilization therefore is slightly down. So despite enrollment being up in every single premium school, obviously, by adding 2,000 seats in the Lycée and 500 seats in Greenfield and 1,900 seats in DBS Jumeirah, a slight decline in utilization, but very, very positive outcome. The PPP utilization declining because of dramatic increase in scale and size of the Dubai Schools, moving from 1,000 student capacity schools to 3,000-plus capacity schools. Just a quick operational reminder, again, we're very that most of our shareholders and stakeholders who are on the call have now been with us on the IPO journey. The main highlights here is to highlight the move from 10 premium schools if you're tracking us to 12 premium schools with the announcement in Q1, the first year of Dubai British School Jumeirah, we'll cover that later, and the introduction of the Lycée Libanais. Premium schools in terms are very good and outstanding. And the Lycée Libanais is a very good rated score. So slight increase in our Dubai very good schools in relation to the competition and also, obviously, very proud to have 3 outstanding rated schools in Jumeira part DBS and Emirates Hills. Again, more of a reminder to stakeholders and shareholders, but also nice to see the Lycée Libanais fits into what we call the suites spot in the market that premium sector, where the dark circles represent the Taaleem portfolio that values the best value price point, a very lucrative price point, recession resilient price point but also to show where our Dubai Schools, portfolio set and very excited by the addition of the Harrow schools. So overall, if you look at the left-hand side of the presentation, you will see the blending utilization in our premium schools and Dubai schools and the growth there. The blended utilization, the reason we've looked in this slide at premium and Dubai schools if you're aware of our story, the Dubai schools actually, although the PPP is set on our P&L. So the capacity has went up with the addition of DBS Jumeira, Lycée Libanais, the expansion of Greenfield and the 2 new public/private partnership, Dubai Schools with the Executive Council. It's therefore, understandable with adding 3,000 student capacity schools that the utilization will drop slightly. 15 schools, if you take this as a segment, 12 private, 3 Dubai schools. Thank you. So plans on track to boost premium capacity with the economy of the U.A.E. in such a growth trajectory and in particular, and the population growth with the real estate expansion in Dubai and Abu Dhabi, at 10,000 student capacity expansion between '24 and '26 as M&A and our greenfield grow you will -- if you're familiar with the slide from previous presentations, you will see that the Lycée Libanais now sits in there with 2,000 seats, Greenfield with 500 seats, Jumeira now open with 1,900 seats, the acquisition of the Amity Nursery, which next year will lead to an additional 500 seats in Emirates Hills. The opening of Mira which should actually reach September 2025. That is a mistake in the presentation, which I apologize for. And the opening of the two Harrows, one in Dubai and one in Abu Dhabi in 2026. It's important always to remind ourselves that it's not just about the money, the business of education is simple and complex. If you get the education right, then the profitability flows. And this is just a tiny snapshot of the achievements across our schools in the previous quarter. So many successes in Greenfield American academy, Uptown sporting successes in DASSA league and the ADEK cup. So we're very, very proud of our students, Jumeirah Park, became a center of excellence, Emirates Hills rated outstanding by BSO as well as KHDA. And one lovely story on this is a group of Uptown International students won the Class of Your Own challenge, and we're flown to London to present and receive the prize for designing an innovative railway station in relation to design technology. Some shout-outs to our teachers in our architectural designed for DBS Jumeira, shortlisted for public building of the year and AAG teacher in Dubai Schools teacher recognized for Women of the Year, Inspirational Women of the Year and Teacher of the Year. This is what makes our schools special and amazing places that they are. I'll pause for a second and hand over to Arnaud. Arnaud?

Thank you, Alan. So good afternoon, everyone. I will dive into the financial performance during the first quarter of the financial year '24/'25. As we can see on this board, we had a very strong start to the financial year with our main financial KPIs showing a strong growth versus Q1 last year. In terms of revenue, the driver were fundamentally the enrollment increasing by 12.8% and as well the price impact related to the increase of the tuition fees on average by 3% versus Q1 the previous year. The EBITDA recorded a level of AED 108 million versus AED 104 million last year, which is a growth close to 8% year-on-year, and it flows down to the net profit, which recorded growth close to 46%. The CapEx, a huge increase is mainly driven by the 2 acquisitions we have done, which represent AED 437.5 million of CapEx, the rest being the usual expansion CapEx in existing school like GIS and the maintenance CapEx, but we'll come back to this a bit later. Looking at the balance sheet, it's always very -- still very strong, as you know. We have a decrease of the cash and cash equivalent, which is a reflection of the fact that we are executing the strategy and we have done some transactions, some M&A transactions, 2 of them. As a consequence, we have started to releverage the debt on the balance sheet. We were at AED 140 million at the end of the financial year -- previous financial year. We are now sitting at AED 613 million, mainly correspond to the 2 acquisitions and the growth of the Greenfield project. Net fixed asset, the same. It affects mainly the fact that we have added to our assets, the Lycée and the Amity Nursery. And finally, in terms of free cash flow conversion, there is a negative number here, which is not a source of concern. It's just that the EBITDA has increased on one side. And on the other side, the free cash flow is negative as usual in Q1 and Q2. Why? Because the school year starting before the financial year this year by 6 days, most of the term 1 fees have been paid in the previous term in the previous financial year and not in Q1. We will again get new fresh money from the parents starting for Q2, practically from December. A bit of a focus on the revenue. So I will not go through all the items here. One of the things I want to space is the fact that our core business, what I would call our core business, the premium schools represent close to 85% of the total revenue of the company. And if you just focus on the operational revenue, it's even 87%. In the average growth tuition fee for the premium school. As you can see on the right-hand side of this board has increased by 3%. Again, it corresponds to 2 elements. One is the increase of the tuition fee correspond to the average of it. And the second thing is the fact that students are promoted, meaning they move up a grade each year, which usually corresponds to higher fees that we perceive. A couple of words now on the EBITDA. We continue to leverage the fact that we have a group, and we action further the operational leverage to make sure that we control the cost in a proper way, why allocating corporate resources as well to the schools to make sure that the quality of education is not jeopardized. So this is the same balance that we constantly manage, again, to make sure that the value of the brand, the value of the product and the value of the offering remain at least constant or continue to improve. So the EBITDA attribution, which is the second element on this board shows again that the premium school are the core of the business and where the management is spending its time it's nearly 95% of the total EBITDA, 97%, sorry, of the total EBITDA. In terms of operating costs and general and admin expenses versus as a percentage of operational revenues, you can see there is a slight -- not improvement, but the other way around. It is deterioration. It is just for a seasonality reason and because we have added some staff to the schools to make sure they are resourced properly. Practically, we have recruited in net terms 290 teachers to cater for the opening of new grades in schools or to cater for the needs for the schools. So nothing to be worried about. And again, the seasonality impact is quite important because usually some schools spend money at the beginning of the financial academic year to make sure they have the resources they need like school supplies or these kind of things. Income statement, I don't come back on this. I think we have gone through the different elements. So I'll move to the following one, which is on the balance sheet. So as I mentioned, we keep a very strong financial position. And the deferment element here continues to reflect the fact that we strategically and prudentially manage the balance sheet. So the total debt has increased. Yes, the increase is quite significant, but the starting point was very low. And we have, from this net debt position, we said has changed. This is the result of the new debt which has been acquired and the fact that we have grown on the IPO proceeds as we do, so we end up with a net debt position positive of AED 43 million, which is very small. Obviously, we continue to use the IPO proceeds not yet deployed and to boost our financial income and our earnings at the end of the day in a context where the interest rates are slightly decreasing. CapEx as I mentioned, you have 3 parts. As usual, you have the acquisition, which are the 2 M&A transactions we have concluded during the Q1. You have the expansionary CapEx, which correspond mainly to GIS and some other expansion in some schools. And the maintenance has remained as constant compared to Q1 last year. It's usually between 2.7%, 3.2% of the operating revenue, and we are on this trend. Again, there is some seasonality impact slightly lower, but because the maintenance is not something we decide, it depending on the needs. These liabilities is mainly because we have onboarded the lease for Harrow Dubai in a very premium location versus Q1 last year. Cash flow finally, a word on this. So as you can see, the Board is showing a bridge between the end of August '24 and the end of the first quarter of the new financial year, there are 4 items to state, first the CapEx. As you can see, the amount of cash CapEx, which has been expensed during this period. Second is a borrowing to get further inflows to fund acquisition and the growth of the greenfield, their expansion. We have paid as well, as you know, a dividend of AED 120 million to the shareholders in November last year. And finally, you have own shares. As you remember, we use a third-party provider to manage the liquidity of the stock. And it means that part of the share that this provider was having on our behalf have been sold on the market to generate the profit and so it's a net cash inflow of AED [ 22.5 ] million. Cash and cash equivalents, again, it has decreased just because we use a positive rate during IPO to invest and to support the growth. Restricted cash correspond to what we received from ESE and charter school programs to manage this program precisely and again, free cash flow to firm and free cash flow conversion, which explain or show how much EBITDA generated by Taaleem is converted into cash. Nothing to worry about. It's a -- it's fundamentally related to the seasonality of the activity. I will pause there and give back the floor to Alan, who will take us through the premium school performance. Thank you.

Thank you, Arnaud. So looking, first of all, at the expansion in capacity and enrollment, again, focus here segment wise on our premium schools, again, the change from 10 to 12 schools. So this slide includes DBS Jumiera and the Lycée Libanais. So actually, we see a growth in enrollment year-on-year and a growth in revenue, as Arnaud explained, both from both students and the uplift in fees. The EBITDA as Arnaud explained, slight decline in the margin. Nothing to worry about Arnaud explained it very well, seasonality and, of course, when you open a new school, such as DBS Jumeira despite a fantastic enrollment performance when a school has 500 students in the first couple of years, you have an expensive staffing of the principal and the Director of [ Barabe, ] et cetera, et cetera, and that balances out as a school increases its enrollment. So nothing to worry about in relation to that. CapEx investment, obviously, exciting. It's what the shareholders and stakeholders that we engage with want to see in relation to the growth story. Enrollment by curricular is interesting to look at. Previously, you have been used to looking at the British schools, the U.K. curriculum schools sitting at 98%, 99% as Jebel Ali School moves the capacity. But obviously, now we have added DBS Jumeira into the mix and a slight extension by moving some classrooms around in DBS JP. So 12% enrollment growth, absolutely still the strongest enrollment performer in the Group, about 82% capacity now that DBS Jumeira is online, and you will see that when DBS Mira joins. IB Dubai, a really strong performance, and this is a good indicator for you of Taaleem's performance given that KHDA again, have published a 6% growth. We are seeing here that with the expansion of GIS and the ongoing success of Uptown in Jumeira Baccalaureate School that we're moving quickly in the right direction and 6.2% growth in Abu Dhabi. Obviously, Garden is all about capacity, Raha Garden, so we're looking at the enrollment growth there, the improvement in capacity utilization being the growth of Raha to be specific, incidentally, in IB, despite decline year-on-year is because obviously, we've put 500 additional seats into Greenfield. American Academy for Girls, a niche bespoke boutique school, we're actually happy with the fee per se growth in enrollment there and now declaring the 1,332 to date actually 1,333 students in the Lycée is a 64% capacity utilization. So overall, a slight decline year-on-year. But remember, we are adding a huge number of seats with Jumeira, with the Lycée, with the expansion of Greenfield, with a slight extension in a couple of our other schools into that capacity. So again, I think you're familiar now, if you've been following our presentations with the right-hand side, the important line, if you like, is the success of Taaleem from 8.7 to 6.6 over the last 5 years, 5.5 years when Arnaud and I have been leading the company as management. We have a slight growth in the capacity because of the acquisition of the Lycée, the building of Jumeira and expansion of Greenfield. But that's in the current economic climate that's what we want. We want seats because we were 100% capacity in our U.K. schools with no seats to sell. So this leaves us in a strong position moving forward. So I'm going to touch on strategy now as we conclude our presentation. Again, we've been focused as a management team on these 5 pillars of growth. The first 1 is the greenfield expansion of premium and super premium schools the opening of DBS Jumeira. DBS Mira is on track. We're at the same stage in terms of the building process as we were with Jumeira, we've actually caught up given in the Mira context, we've not been able to work 24 hours a day. We can only work during opening times of the community and the 2 Harrow schools, adding existing capacity, the headlines, the expansion of GID open 500 seats beautiful building in the campus and the acquisition of Amity in order to expand Emirates Hills. I will dig deep on that in a second. Ramp-up of utilization and key part of our strategy as we presented between 3% in the American, 8% in the IB and 12% enrollment growth in the U.K. schools. Government partnerships. This is year-on-year. So you are aware from the previous quarter that we were given an additional charter school taken from Aldar and given to Taaleem, we're working towards the opening of the 4 new ADEK nurseries, and also excited to be working with ADEK on the extension of our 11 charter schools for an additional 3 years. In organic growth, the acquisition of the Lycée Libanais and also the acquisition of Amity in order to expand Emirates Hills. So individuals, this is again, a page that you're familiar with, it's getting wider as we add additional strategy to it. We've mentioned Greenfield, Jumeira, we will be modeling, and I know a lot of you are analysts, we will be modeling the old Emirates Hills campus for financial analysis, and although it will be 1 SKU, like DBS and DBS Jumeirah Park, we will model the Amity campus because it's technically in the Jumeirah Islands geographical attachment area of Dubai, we will model that as DBS Islands. DBS Mira as I said, on track to correct the date there of 2025 and land lease in Dubai signed and about to be signed in Abu Dhabi, everything on track. So digging deep into the Emirates Hills expansion, what is the technical detail of that for you. Firstly, we have bought a nursery that's 300 meters away from our flagship outstanding Emirates Hills campus, that nursery we will call DBS Islands, there'll be 400-plus seats in the Island stroke Amity campus. And obviously, backfilling -- moving the younger children from Emirates Hills campus into that early years campus, early years in primary and backfilling the seats in Emirates Hills. So that overall, we had the 1,188 to the 400-plus. And so very excited by that. We -- all design, et cetera, is being worked on at the moment. We have a short window to renovate that campus to world-class facilities for the early years. Thank you. The Lycée Libanais Francophone Privé, Meydan, an award winning architectural building in the heart of Meydan in a prime location, a growing location in terms of the Dubai population, absolutely fantastic location 2,000 seat capacity, 1,300-plus students immediately, immediately profitable school and 64% utilization and rated very good. So it's exactly hitting the parameters with the value accretion capacity in it that we were set by our Board in relation to acquisition. Ramp-up in our existing schools just wanted to highlight for you that the success of Taaleem and the plus 1,000 enrollment over the last 3 to 4 years, is coming not only from the population growth of Dubai. If you look at the left hand pie chart but also very proud and important to say that we continue to shine above the competitors and continue to take around 38% of our new enrollment from competitors. So it's very much a mix of earlier students joining our schools overseas population growth coming into the country and taking students from competitor schools with the reputation of schools like Dubai British School, Jumeira Baccalaureate School, Raha School, et cetera. I just wanted to focus on our strategy and the success of that strategy in relation to some premium schools. And obviously, we always get a slight population, student population growth over the winter break. So actually, Raha International School today is sitting at 99%. So we're actually even since announcing our Q1 results, we've shortened the amount of seats there. And Greenfield has grown slightly above 83%. Jebel Ali School getting close to 99% with more success over the winter break. A lot of world wide education groups would say but 95% is full capacity utilization. Arnaud and I push our principles to move towards 100% where every single seat in the school is filled. Very hard to do that in the senior year groups where the curriculum choice, obviously, chemistry or physics or psychology, et cetera, sometimes means it's very difficult for principles to close the last 25, 30 seats in each school. Target schools for us still is closing Jumeira Baccalaureate School, Uptown and the American Academy and that's still a focus for us in a possible growth area. Just a reminder of the success of our acquisition, many of you as loyal shareholders and investors in Taaleem had been asking us over the first year of the IPO, post-IPO reminding us of what commitment to M&A at the IPO. We've now fulfilled that IPO promise, the Lycée Libanais diversifies our curriculum allows an opportunity to grow that brand like we have grown the DBS brand and the Raha brand. And as part of our strategy, we hope also to grow. We expect also to grow the Jebel Ali brand. These are our parameters, we've stuck to them, and they might move slightly up or down on a case-by-case basis. But we hope to over the next 2 to 3 years, continue to focus on M&A. Thank you. And just to close, I'm going to hand over to Arnaud to just update us on high-level guidance at the moment.

Thank you, Alan. So indeed, it's the first guidance for the full financial year, '24/'25 at this end of the Q1 results. Two comments before commenting on the numbers. One, as we are reporting in IFRS, as you are all aware, we recognize, and I insist on this because you cannot derive from Q1 results, the full year results. We report the tuition fee revenue over 10 months and the cost over 12 months. The second element is this number. This guidance excludes any additional M&A transactions that could happen between now and the end of the financial year. So in a nutshell, we have had a strong start to the year, and it will continue. So the journey to the growth strategy is going to be again delivered this financial year. Enrollment growth will be around 12% -- between 12% and 12.5% year-on-year. Why is this variance? Because it depends on the end of the day of the net joiners we will benefit from in Q2 -- in term 2, sorry, and in terms 3 of the academic year The revenue growth will be varying around this level as well, 15% to 18%. The EBITDA should reach between AED 300 million and AED 310 million, which is a big jump versus the previous year. The EBITDA margin should stabilize around 27%. The CapEx, it's between AED 900 million and AED 1 billion. The exact number is not yet known. It will depend on how we progress the different works of the Greenfield. And again, it might as well vary if we do an additional production. Free cash flow will come back to the normal historic level between 90%, 95% of the EBITDA. And finally, we continue to leverage the balance sheet as we progress the deployment of the strategy, including to raise or acquire additional bond debt to fund the 2 our schools, which are under development.

Thank you, Arnaud. And thank you to everyone for joining us today and for your continued investment as stakeholders and shareholders in the Taaleem journey. I'm happy to pass back to Hatem at this stage for Q&A.

[Operator Instructions] We'll take the first question from the line of Harry Wilson.

Okay. Great. And congratulations on the strong results. I had a few questions, just to clarify some of the kind of dynamics in the -- on the costs. I think there was a slight pickup in operating costs and G&A. And I just wanted to fully understand what like -- what that can be attributed to? How much of it was related to the new costs related to the expansion and how much was sort of like-for-like?

Yes. So indeed, we have an increase or a deterioration of the ratio versus operating revenue. As I mentioned, there is part of it, which is related to the expansion and the growth of the portfolio, like opening DBS Jumeira, like taking on board Lycée so on and so forth. But as well, again, there is a strong element of seasonality. So I don't think you should draw a strong conclusion of permanent firm conclusion about the full financial year about this. Say marketing expenses are usually expensed at the beginning of the academic year or sometimes only at the end of the academic May or closer to the end of the academic year depending on their strategy. School supplies are spent at the beginning of the academic year, sometimes maintenance as well when you have all the students coming in, and sometimes you have immediately some expense to go there. So in terms of attribution, I need to come back to you because I don't have the number on top of my head, but the main driver is the growth. And the main driver within the growth are the teachers we have added to the cohort, which again is over 200 new teachers net to the existing staffing.

Got it. Okay. And I think I read in the earnings release that there was you attributed a decrease -- I think you said the revenue decreased due to a 4-day revenue cutoff last year as opposed to a 6-day cut off this year. And I just wanted to make sure that I understood the dynamics there.

Yes. So it's an IFRS requirement that we followed. So it's derived from the fact that our financial year starts on the first of September, whereas our education year, academic year start usually earlier. This year, it was starting with 6 days before the financial year. So this period, we present some revenue, which are calculated in a way corresponding to IFRS, and this revenue are attributed to the previous financial year. So when it comes to Q1, you take them out of your revenue of the quarter. This year compared to the previous year, we are having an impact of AED 17.5 million. Last year, it was a negative impact of AED 10 million. And it's just because we have added 1 day, and we have more enrollment. At the end of this financial year, we'll benefit from the fact that we have now 7 days for the next academic year. So it will have an impact on the closing of this financial year and again, a negative impact on the Q1 of the following financial academic year.

It really depends on when the regulator starts the academic year in relation to our financial year. So sometimes, we'll start on the third of September, and then it will be 2 days out of the way and sometimes it will start on the 27th of August. And as Arnaud said, it was 6 days as opposed to 4 days. So that actually it's impacting the EBITDA as well.

Yes. Okay. That's clear, I understand. And also, I think there was a mention of some expenses related to the PPP schools in G&A, AED 2.3 million. And -- so yes, is it -- and you talked about the expansion of PPP. But just wanted to see if you can give any more color because, obviously, that's a full recognition business as opposed to the other government?

Yes. So the added charter school and the ESE Ajyal Schools are pure management contracts. The Dubai Schools of both the government provide the building, we are actually responsible for operational CapEx. So actually, we have invested quite a bit of money, Harry, in these schools because they went from 1,000 student schools to 3,500 student schools. And although we haven't put all of the CapEx into the first year, significant operational CapEx is required to science equipment, music instruments, canteen furniture, classroom furniture, and we really only see the benefit of that when these schools ramp up to 2,500, 3,000 student schools. So although the government provide the building, actually the operational CapEx there falls on us. So it is in a way have taken us to a J curve, quite a deep J curve for these 3 Dubai Schools. Obviously, as a mid-market product, you really see the benefit of that when the schools scale up.

Okay. And my last question was just related to the French school. Like can you share what the price paid was like what kind of multiple was paid for the business?

Yes. So the price paid is AED 340 million, that's a consideration price. You will have the details if you are interested in the financial statements, which have been published, but this is for AED 340 million. Now if you look at it as an EBITDA multiple, we are close -- whatever forward EBITDA you look at 1 year, 2 years, 3 years, we are close to 10 multiple, EBITDA multiple. And if you compare it to our trading EBITDA multiple over the last 12 months, it's faring at 16.3%. We have -- I signed on an acquisition, which is quite beneficial for Taaleem from this viewpoint.

We'll take the next question from the line of Nitin Garg.

It's always good to listen to the Taaleem management. My first question is on the French School. So you mentioned AED 340 million. So can we assume that land is leased 35,000 square meter?

The building has been bought as part of the acquisition. So we bought the land, the building and the business and the AED 340 million represent the value of all of these.

All of this. Okay. And just to understand why the utilization is 64%? I mean when was this school opened? I mean how many years under operation and till how many grades it is? Just to understand why the utilization is low. I mean your usual foot schools or outstanding schools are British School brand, it is 90% utilization. So just to understand the dynamics here.

Yes. Okay. So it's important to understand a bit more perhaps about the history of the use Lycée Libanais Francophone and like Jebel Ali School, it was actually a not-for-profit school for many, many years, and it was only an early years and primary school and was located in old Dubai and was in a rundown building. About 4 or 5 years ago, the governance of the school decided to move the campus quite considerably far away from its location in Old Dubai to Meydan and transformed the school from a primary school to a secondary school. However, at that point, the KHDA actually nullified the rating of the new school because they changed the price point of the fees, the government changed the fees of the school. So actually, this year, was its first PD rating as the new LLFP Meydan. And it's the first school along with Royal Graner School to ever been given a very good rating. And also, as you are possibly familiar when we've been talking about DBS Jumeira and Raha Khalifa City, they also had to negotiate the ramp-up of their grades. So the secondary school has not ramped up yet because it was a brand-new secondary. It's only been a brand-new secondary for 3 or 4 years. So that's the gap in capacity utilization. Also, as we found out with Jebel Ali School, remember, we bought Jebel Ali School, which was our incredible reputation school, but not for profit. The governance in the school of Jebel Ali and Lycée Libanais didn't see enrollment capacity, profitability as the main driver of the school. So for example, in both Jebel Ali and in Lycée Libanais, there was no marketing of the school. So we will bring the synergies of the Taaleem expertise in relation to marketing, admissions, finance, et cetera, into the school. And as you know, we bought Jebel Ali at 1,200 students. And within 2 to 3 years, it's now at 2,000 students. So that ramp up, it may not be quite as dramatic as this because it is largely a Libanais Francophone school, not French curriculum, but not for -- there's not a huge number of French nationals in the school, but we are still ambitious that like how we've absolutely transformed Jebel Ali school that we'll be able to also bring successful enrollment improvement to the Lycée Libanais.

Next question from the line of Ahmed [indiscernible].

Can you hear me?

Yes.

Just a couple of questions from my end. If you could elaborate on how you plan to fund your upcoming projects you previously guided that you will be looking at a 50-50 capital structure for your CapEx. But the recent acquisition on the Greenfield project appears to have been mostly funded through debt. So could you elaborate on the rationale behind this decision? And are you aiming to retain cash on the book for other near-term projects?

Okay. Arnaud. We said 50-50 in different opportunities because we usually business plan with some conservatism on purpose. Now when the market conditions and the offer we can get from the bank's consults are better with higher leverage and what we thought at the time were of the business plan, we go for a higher especially because our debt ratios far from being are fully met and far from being saturated. So indeed, what we have done from the 2 acquisitions -- for the acquisition of the [indiscernible] and for the growth of Greenfield project is to raise debt at the level of 80%, the 20% coming -- balance coming from the equity, which was raised during the new process. And we will continue to do so if, again, the conditions, the terms and conditions we can get from the market are better than having a lower leverage. Again, as well, our leverage currently is at a very low level. In fact, when you look at it, AED 613 million, we are going to refund -- to repay it shortly, AED 70 million. So we will end up the financial year, probably around the same level, AED 600 million plus depending on how the work is progressing for the Greenfield projects, depending if it will be on this financial year or more on the next financial year.

And the impact of cash on future strategy?

So the cash from the idea obviously is used. We are going to continue to use it as we progress in our project. We were sitting at the end of August on AED 651 million. You might remember, we raised net AED 725 million. We should end up the financial year around AED 400 million. In the meantime, obviously, we use deposits to get remuneration on it in. If we spend vanilla products with no complexity and no waste. And as it decreases, we will then move to the excess cash from operations further the growth. And don't forget as well that because we have this growth because we have these new assets, we generate EBITDA. So this EBITDA in a way, will replace progressively. The fact that we had a lot of cash sitting on our balance sheet until it is deployed for the execution of the strategy.

Clear. My second question, are you currently facing challenges in recruiting qualified teachers for your new schools, given the shortage of educators in Dubai. And if so, do you expect the higher staff costs in the upcoming quarters? And do you expect it to reflect on your margins?

Thank you, Ahmed. The short answer to the first part of your second question is no, thankfully, Taaleem's reputation is strong in the local U.A.E. community. So we are still likely have seen students transfer to Taaleem schools. We are also seeing the teachers transfer to Taaleem schools. We've invested in improved insurance, which is out in the market, in the teacher market in the room or now of the teacher market. So some teachers are coming to us in relation to the brands, Raha, Dubai, British School, we have that unsuccessful in Raha application, we can move them into say, on Dubai Schools project. We also have diversified our curriculum. So we're not just looking for British, IB, American trench teachers now. But also Dubai and Abu Dhabi is, if I'm honest, it's not just down to Taaleem. It's also a highly attractive place for American, European, Australian, Irish, British teachers are still coming to Dubai, wanting to come to Dubai and Abu Dhabi to live. In terms of margins, it is a constant effort. I would say that challenged sometimes, I would say that. However, we do have some attrition, and we encourage some attrition and some of our older staff leave and were able to bring in younger staff at a cheaper price point. We did give the salary increase this year to our teachers, we did slightly improve the housing provision and their insurance provision. And Arnaud and I work very hard to stop that impacting on the EBITDA margin. But honestly, there is a slight decline, it's still worthwhile to retain the strongest teachers because only with the strongest teachers will we get a very good and outstanding outcome. So our Board are very clear with us on that, but it's about profitability, but first and foremost, it's about delivering quality education. The 3% fee increase that comes from KHDA and ADEK across the portfolio, I'm comfortable if that is swallowed up mainly, maybe not entirely, but mainly by improving conditions for our teachers and retaining the best teachers.

Okay. Clear. I just have one more question. The electricity and water charges has increased around 57%, I believe, year-on-year. Just to understand, is this increase related only to the opening of the 2 school or there has been an increase in consumption? Do you expect the costs to remain at this level in the upcoming quarters?

So it's related mainly to the new schools added to the portfolio and to the expansion of the Dubai [indiscernible] program schools. There has been a massive increase of the capacity with new buildings, and this translated to the higher cost of utilities. Is it going to be at this level? Honestly, I believe it will continue to increase a bit. Even though -- and it's another part of the answer, but it's quite important. In our premium portfolio, we are currently implementing different initiatives to control better the use of utilities, water and electricity mainly, and we have results school by school, but it's not enough to offset the impact of the new school joining the portfolio.

I'll take a question from the chat from Seki Mutukwa. What is the staff cost inflation on a like-for-like basis? And is that a significant influence on your EBITDA guidance for 2025? Where could the EBITDA margin stabilize a few years out as utilization ramps up?

So on the first element of the question about the staff cost, when we do cash on cash. If you look at it, we increase the salaries by 1.5% versus the previous year. It's what we usually allocate to salary increases for the teachers. For the non-teacher staff, the nonteaching staff, sorry. Usually, we increased the salary only every 3 years by 3%. It might be slightly different as a base, but only it comes to this. Now in terms of EBITDA margin, we are in a bit of a pressure zone for the reason we explained mainly the growth of the portfolio. And the fact that we are in front of -- or we have in our portfolio not yet matured asset. DBS Jumeira is a good example. It has happened. The current utilization rate is close to 30%, below 30% in practice. So obviously, as the school will continue to grow and the enrollment are quite strong, much stronger in fact than what we anticipated in our business plan. the EBITDA margin will stabilize. And the rest of the portfolio, as it matures, will sustain an improvement in the EBITDA margin. So a school like DBS Jumeirah Park, which is mature, can generate a margin, which is close to 40% at the level of the EBITDA. So now if you look at our 5-year plan that we produce every year, we plan to improve the EBITDA margin at a level close to 30%, 30% plus.

I think it's worthwhile pointing out that the EBITDA margin actually improved slightly in the vast majority of our premium existing portfolio. But as Arnaud said, when you are introducing a greenfield school, it's more challenging even with strong enrollment, which we've got in, say, DBS Jumeira, the expansion of Greenfield International School. You still have a lot of investment, a lot of salary costs compared with enrollment. But what Arnaud said, 1 children is start with school like Raha Garvin or DBS Jumeirah Park, [indiscernible], then you should have a much stronger EBITDA margin.

The question from the line of Musa [ Rastani ].

Regarding Lycée Libanais, what is the tuition per student and what's the targeted utilization rate for the current academic year. And if you could please shed some insight on the demand for the French curriculum and the UAE, that would be great.

Yes. Okay. If you look at the fee point here, compared with our other schools, you look at the dark dots, which are the Taaleem portfolio, it's most certainly a premium school. It fits comfortably into that rectangle. Although it is towards the lower point of our fee. So average fee, I think, is around AED 53,000 if I remember right. If you go to the summary page on school, some present enrollment is 1,350 the students, and that is a 64% capacity. There is a strong French and Francophone community in both Dubai and Abu Dhabi. The French curriculum is actually a curriculum that was almost at capacity exceeding sort of 70% across the whole of Dubai with many trench schools that are full [indiscernible]. [Technical Difficulty]

Apologies for this, there is an issue with the connectivity at the management side. And unfortunately, we have exceeded the time for the call. So we will be concluding the call at this point. If you have any questions, feel free to contact me through the Investor Relations team at Taaleem. Apologies again for this, and thank you, everyone, for participating. And this concludes today's call. Thank you.