Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stadio Holdings Ltd (JSE:SDO, Financial) reported a 16% increase in revenue, reaching ZAR826 million.
- Student numbers grew by 10% to 47,024, indicating strong demand for their educational offerings.
- Profit after tax increased by 14% to ZAR144 million, showcasing solid financial performance.
- Earnings per share rose by 20% to ZAR0.163, reflecting improved profitability.
- The company has a strong balance sheet with no external debt, providing financial stability.
Negative Points
- EBITDA margins remained flat at 29%, indicating no improvement in operational efficiency.
- The loss allowance increased slightly, suggesting challenges in debt collection.
- Operational costs grew by 16%, which is in line with revenue growth but indicates high expenditure.
- The company faces tough economic conditions, which could impact future performance.
- There is uncertainty in the accreditation process for new programs, which could delay growth initiatives.
Q & A Highlights
Q: Could you please unpack the cost growth, excluding bad debts and D&A of 16%? It feels quite variable in the context of revenue growth of 16%.
A: We intentionally invested in new programs and capacitated other areas of our business, which led to employee cost growth. Operating cost increases were driven by new qualifications, marketing and advertising campaigns, and travel costs. Both operating costs and employee cost margins as a percentage of revenue remained in line with our growth strategy. - Ishak Kula, CFO
Q: Clarifying operational changes by disallowing students to reregister if accounts are not up to date. Does this mean students don't progress if accounts have an outstanding balance?
A: Correct. If account balances are not brought up to an acceptable value and the student has not engaged with the institution, we will no longer allow that student to reregister for studies. - Ishak Kula, CFO
Q: Can you please explain the change in the view on your EBITDA margins from 30%-35% to 30%-33%?
A: In the short term, we are aiming for 30%-33%. Long term, we are targeting a 35% EBITDA margin. - Ishak Kula, CFO
Q: Please remind us why Milpark is scaling back B2B education training. Is this market considered to be less attractive?
A: The new strategy at Milpark is to reduce dependency on the seasonal B2B business due to a decline in corporate expenditure on training in the tough economic environment. - Chris Vorster, CEO
Q: Could you give us some understanding of the timing to get programs approved? Is it quicker to get a program accredited if STADIO already has approved this program to get it accredited to a different campus?
A: The accreditation process can take between six to 19 months. While it should be quicker to get a program accredited for a new campus, in practice, site extensions can take just as long as new program applications. - Chris Vorster, CEO
Q: Could you talk about competition in contact and distance learning? Is the distance learning market more competitive than the contact learning?
A: There are new competitors in the distance learning space, but we are confident in our offerings due to extensive investments in technology and infrastructure to support growing student numbers. - Chris Vorster, CEO
Q: In 2023, core headline earnings per share were ZAR0.136 per share in half one and ZAR0.11 in half two. Is there a reason why half two should differ significantly from half one?
A: The major impact in the second half of 2023 was the increase in the loss allowance. This year, we are optimistic that our collection efforts and operational changes will help curb the second-half impact. - Ishak Kula, CFO
Q: How are you going to increase the revenue and EBIT per student, given that your margins are slightly contracting?
A: Revenue growth will be linked to student numbers, with a focus on affordability. Efficiency improvements and cost management as the business matures will also contribute to margin growth. - Chris Vorster, CEO
Q: What is the capacity of the new Durbanville campus?
A: Phase 1 will accommodate just over 2,000 students, and after Phase 2, the capacity will be 5,000 students. - Chris Vorster, CEO
Q: Can you please elaborate on how exactly you'll get to the 30%-33% margins for the business?
A: The upside will come from efficiencies and cost management as new programs mature and student numbers increase to offset initial costs. - Chris Vorster, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
