Release Date: March 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Student numbers increased by 9% in the first semester and 10% in the second semester of 2023.
- Revenue grew by 16% to ZAR1.4 billion.
- Profit after tax rose by 27%, and earnings per share increased by 26%.
- Core headline earnings went up by 19% to ZAR209 million.
- Return on equity improved by 18% to 11.7%.
Negative Points
- EBITDA margin decreased from 29% to 28%, primarily due to an increase in loss allowance.
- Loss allowance increased by 58%, reflecting the economic pressure on students.
- Employee costs rose by 14% to ZAR586 million, and other operating expenses increased by 19%.
- Integration challenges with the new ERP system affected operational efficiency.
- The competitive environment remains challenging, impacting market share growth.
Q & A Highlights
Q: Provision coverage on debtors relating to the current year is down year-on-year from 44% to 42%. Could you please help us understand this decline given that students are taking longer to pay and upfront deposits are reduced?
A: (Ishak Kula, CFO) We've seen that as debt ages, there's a higher propensity for default, leading to higher levels of provision. Specifically, our semester one debt provision coverage increased from 55% to 57%, and prior academic year debt provision increased from 94% to 95%. However, the semester two debt, which is fresher, has shown better subsequent receipts, leading to a slightly lower provision.
Q: How does the acquisition of Brimstone's stake in Milpark impact the BEE credentials of Milpark and the group overall and its ability to do B2B business?
A: (Chris Vorster, CEO) The acquisition will not significantly impact the overall group's BBBEE ownership. However, Milpark, currently at level two, will move down a level. Milpark is committed to transformation and will focus on maintaining its levels. We will also consider other BEE deals in the future.
Q: Can you please talk to the 2024 enrollment growth?
A: (Chris Vorster, CEO) Enrollment is still ongoing, with registrations closing at the end of March. We are currently tracking ahead of last year's numbers, showing growth in both distance and contact learning. Final numbers are not yet available and can still change.
Q: What sort of increase are you planning for this year in terms of fees?
A: (Chris Vorster, CEO) Our fee increases are inflation-related and vary across programs. Some programs had minimal increases of 1% to 2%, while others saw increases up to 6.5%. On average, the increase is between 5% to 6%.
Q: Employee costs have gone up 14% to ZAR586 million and expenses are 18% higher to ZAR390 million. Can you unpack these and provide guidance for 2024?
A: (Ishak Kula, CFO) We aim to maintain employee costs as a percentage of revenue around 41% to 42%. The increase in expenses is due to investments in people, systems, and processes to drive efficiencies and support growth.
Q: Can you update us on the ongoing accreditation of your qualifications?
A: (Chris Vorster, CEO) We are happy with the accreditations coming through. For 2024, we have already received 15 new accreditations, which will be offered in 2025. Overall, the accreditation process is progressing well.
Q: Which fields of studies and faculties are the most popular and fast-growing? What type of educational field accounts for the bulk of your income?
A: (Chris Vorster, CEO) Our biggest schools include business and commerce, education, law, and creative arts. We see significant growth in BCom fields, education, law, and BA in creative arts at AFDA. The growth is spread across all three institutions.
Q: What is the capacity utilization at the Centurion campus and is it breakeven yet?
A: (Chris Vorster, CEO) We expect the Centurion campus to reach breakeven levels for EBITDA in 2024. This positive outlook supports our decision to proceed with the Durbanville campus.
Q: Given the under-pressure consumer environment, how do you see bad debt and the quantum of receivables going forward?
A: (Chris Vorster, CEO) We expect the current levels of provisioning to remain. The consumer remains under pressure, and interest rates are a significant factor. We've taken a prudent approach and believe the current levels are sustainable given the growth in the underlying business.
Q: Will you be able to create a medical school, not necessarily for doctors but medical-related fields?
A: (Chris Vorster, CEO) At this stage, a medical school is not a priority. We have other priorities to drive significant growth at our campuses. However, we are still exploring this possibility behind the scenes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
