I think we'll kick off. Good morning and welcome to everyone. Just a couple of pieces of housekeeping before we get into the numbers. All the material from today will be posted on our website immediately after this presentation. We'll then reload or load, I should say, the webcast recording tomorrow, and a transcript will be posted early next week. In terms of questions, at the end of this presentation online, if you could submit using the button on the left-hand side of your screen, and we'll do microphone questions in the room. If anyone wants more information after the event, then please contact Propeller on the address on the screen. Please also join us for snacks and drinks after the presentation.
We also have some small gift packs for you, what we are hoping to build into a tradition, hand-prepared for you by chefs from our Capsicum Culinary Studio. Before I get into the presentation, I just wanted to introduce our new COO, John Sikiotis, joining us this morning. He joined us on the 1st of August and brings a wealth of leadership experience to the company. Our property, IT and African schools divisions will report to him, but his primary focus will be on business development across the group. John's appointment significantly strengthens our Senior Executive Team, and I am delighted to have him on board. Getting into the results. Just for context, this is a reminder of the major brands in our portfolio across three divisions.
I just point out the addition of Flipper and the new logos for Abbotts on the Bridge and also the new look for Rosebank International. The new Rosebank iconography was developed for our new university in Ghana, but we will also be adapting it over time for use in S.A. Then the high-level financials for the half year. We'll get into these in more detail as we move through the slides. Revenue up 10%, operating profit up 14% to just under ZAR 1 billion. Operating margin up to 21%. Our HEPS up 15% and normalized earnings per share up 16%, and an 18% increase in the dividend to ZAR 0.45. This is a snapshot of the current shape of the business in terms of revenue and operating profit.
As you can see from the chart, 84% of our revenue and 95% of our profit now come from the education business. Within education, we're also pivoting over time towards our tertiary division, which now contributes 51% of operating profit versus 44% from schools in total. Running through performance at divisional level. At Schools South Africa, revenue was up 11% for the period, with operating profit up 12%. Driven by a combination of organic growth and the Flipper acquisition, Schools Rest of Africa grew revenue by 31% and operating profit by 34%. Tertiary revenue and operating profit were up 13% and 14% respectively. For reasons I'll come back to later, we had a marginal decline in resourcing revenue and operating profit, down 5% and 2% respectively.
Recapping our 2025 enrollments. For the total group, enrollments this year are running up by a very healthy 13%, and that breaks down into increases of 11% in schools and 14% in tertiary. Looking at the compound annual growth rates, you'll note that we increased enrollments this year well ahead of the five-year trends in both divisions. Looking at a further breakdown of the 11% schools growth. In South Africa, enrollments are up by 4%, and in the rest of Africa we're up by 40%. Looking at the compound annual growth rates, we're also seeing consistently strong growth over a five-year period. Breaking down the 14% tertiary enrollment growth. Our contact student numbers were up 11% year-on-year, while in distance we were up 40%.
You'll recall from our strategy day that growth in distance is a strategic imperative. You'll also note the acceleration here ahead of our five-year compound annual growth rates in total and on both splits. Although we are pleased to report such strong numbers, as I guided at our full- year results presentation, the outperformance of Rosebank and Distance at lower fee points is having a mixed impact on revenue of just under 5%. Just for reference, Rosebank and Distance fees are about a third of what we charge for Contact in Varsity College and Vega. Then moving on to more detail on our financial performance. This slide gives the five-year context for the 10% revenue and 14% operating profit increases that I shared earlier.
Looking at the CAGRs, I just point out the consistency of our delivery with revenue and operating profit compounding over five years at 13% and 18% respectively. Looking at the group level operating margin. We've moved up to 21% from 20.2% for the same period last year, driven by operating leverage efficiencies and a favorable mix shift towards our higher margin education businesses. Just looking at the bottom left block, I'd also just mention that our margin improvement is net of significant investments into people, systems, and facilities to strengthen our brands. Looking at the high level margin breakdown between education and resourcing, there have been positive shifts in both divisions climbing to 23.8% and 6.5% respectively.
Breaking down the 23.8% education margin, schools improved from 21.3% to 21.8%, while the tertiary division increased from 25.8% to 25.9%. It's worth noting that the tertiary number is being tempered by about half a percent by our university investment in Ghana. Further breaking down the schools numbers, South Africa posted an improvement from 20.3% to 20.6%, while rest of Africa increased by 0.7% to 29.4%. Contextualizing the normalized earnings per share growth of 16% I shared up front with the compound annual growth rates. As you can see, NEPS is compounding over five years at 20% and has more than doubled since 2021.
Looking at NEPS growth in US dollars, the business is up 90% versus the comparable period last year. If we look at the CAGRs, it's compounding in dollars over five years at 13%. Going into more detail on the Schools Division. This slide summarizes our major brands. We're currently in four countries with 119 schools and just short of 46,000 students. These numbers exclude the recently announced Regis Runda acquisition in Kenya, which will add three schools and around 1,000 students. Looking at the Schools Division in total, revenue is up by 13% versus the comparable period last year to just over ZAR 2 billion, whilst operating profit is up by 16% to ZAR 437 million.
Looking at the CAGRs, over five years, we're compounding at 14% on revenue and 19% on operating profit. Moving to schools South Africa, revenue is up 11% with operating profit up 12%. Looking at the CAGRs, again, we're seeing consistently strong numbers over five years. Then moving on to Rest of Africa Schools, as covered earlier, revenue and operating profit are up 31% and 34% respectively. Looking at the picture over five years, our international division is growing well and now making a significant contribution to group operating profits. On the back of accelerating growth in our rest of Africa business, we are strengthening our regional management team. I just wanted to share the forward international school structure, where most of the roles in this chart have already been filled.
As I've covered on the slide, the key objectives for this team are delivering superior academic outcomes, optimizing systems, hiring and retaining the best teachers, integrating teaching and learning technology, and clearly driving enrollment growth. I just wanted to expand on a couple of appointments to new positions that have recently been created. The first is Germari Eksteen, who's been appointed as Marketing Director of International Schools. Germari is an internal appointment, having been our lead school's marketing manager, from 2019 until her recent promotion. The second new position, Godfrey Odhiambo, who's been appointed as General Manager of Makini Schools, which has now hit a certain level of scale that requires a senior manager to be in place.
Godfrey is an experienced and well-qualified external hire who will take over operational management of the Makini brand, starting in about six weeks. Moving on to Real Estate and Acquisitions. Just a quick update on our new Pinnacle College Ridgeview. It opened in January, and it's opened well, and it's trading in line with expectation. An update on our expansion of Crawford International in Nairobi, where we're increasing student capacity from 900 to 1,300, and that is nearing completion in time for the new academic year. An update on Flipper, which as you may recall, we acquired in November last year, adding Ethiopia to our international operation. This is a good fit with our existing mid-fee African model. We've spoken about the acquisition price and the internal funding previously.
As a reminder, this is five well-established schools in Addis Ababa with a strong academic reputation. We bought this group understanding that there was surging market demand. That's definitely proven to be the case. Enrollments have actually grown 5% since we acquired, which is a pretty short space of time. Just in terms of the integration and progress there, a significant investment is being made into IT, teaching and learning support systems, and academic training for staff. The school, slightly uncomfortably, is now running at 100% of capacity. We have an 800+ waiting list, which is a good problem in one way, but we're working hard and urgently to acquire additional sites to accommodate that demand.
In Ethiopia, fees are typically paid up front, which is a great model, and, 97% of first-term fees have already been collected. So going well. Also, when we enter a new country and a new market, I think relationships with government and the regulator and the Parent Teacher Association are very important, and those are progressing well. A little bit about Regis Runda in Nairobi. So we acquired the operational assets of Regis Runda Academy. Again, a good fit with our existing mid-fee model. We're gonna bring this under Makini. The acquisition price was ZAR 172 million, which again, was internally funded. This is in a great location in the trade zone that we're not currently in with Makini or Crawford, as I'll show you in a second.
We have 1,000 students currently in the school, but immediate capacity to accommodate 2,000, so some headroom for growth and ultimate capacity for 3,000. We will invest on acquisition to upgrade facilities and the academic support systems, and we'll also introduce the high-demand Cambridge curriculum next year. We assumed operational control of Regis last Wednesday, the 20th of August. Just for context, we paid about two-thirds of the cost of a new Pinnacle school in South Africa. This is looking like a very positive acquisition for the group. Then just to contextualize geographically, we've got the five Makini campuses in the middle of Nairobi. We have Crawford to the north at Tatu City, and Regis Runda is in that new trade zone I mentioned, but very well-positioned to accommodate expansion.
An investment in the Makini Ngong Road site, where we've upgraded the facilities in June. We've added new AstroTurf multi-purpose sports fields and we now have the best sports facilities in the area by a significant margin. Then on building capacity, it's a slide we always include. Our utilization of built and ultimate capacity is pretty stable year on year at 83% and 71% respectively. We're happy with those numbers. Moving on to the tertiary division. This slide summarizes the major brands in the tertiary part of the group. We currently run 34 campuses with just over 60,000 students. As you can see on the slide here, we have a comprehensive range of qualifications on offer, from skills development to PhDs.
I would just mention in passing that we're moving from paper-based teaching materials at Oxbridge, it's down on the left here at this point, to a fully digital platform, and that should improve the student experience and also deliver some operational efficiencies. As you can see from this chart, investment in pursuit of university accreditation is accelerating. We're driving radical shifts in the number of our staff with Doctorates and Master's degrees through recruitment and the provision of study bursaries to existing staff. If you look at the numbers on the top left there, a staff with doctorates are up by 175% over 3 years to 242, and staff with master's climbing by around the same percentage to 1,355. Our per capita research output now ranks amongst the public universities.
Big shift there. Postgraduate degrees now account for 8% of our enrollments. We are the only private institution in Varsity College with a DHET-accredited research journal that is now well-established. Seven faculties have been established to deliver 140 qualifications spanning from Higher Certificates all the way through to PhDs. We've got university partnerships established in both Africa and Europe. Running through the numbers, our average minimum time degree completion rates, we believe are nearly 20% better than the public universities, which is obviously an important thing for both students and parents. We have also invested in impactful community engagement, establishing law clinics as one example across South Africa. In terms of qualifications we're adding, we've added 17 degree qualifications since 2022 and with 24 more in preparation.
Those of you with good memories will note that when we've quoted these numbers before, there's been a big shift from the last presentation in terms of the number of accredited degrees and the strength of our pipeline. We are very ready to become a university, but frustratingly, government still haven't published final criteria despite the original court order compelling them to do so by the sixteenth of August in 2022. Quite remarkable that they still haven't been published. We are looking at all our options to compel them to comply, and I wouldn't rule out further legal action. Recapping the high-level tertiary numbers. Revenue is up 13%, affected to a degree by the mix shift I mentioned earlier.
Despite significant investments to prepare for university status and to prepare in various ways a strengthening of our brands, operating profit is up 14%. Looking at the compound annual growth rates, revenue and operating profit are compounding at 12% and 15% respectively over five years. Doing a quick recap on the real estate and acquisition front. These are some new renderings of our new university campus in Grayston Drive in Sandton. Just as a reminder, we will be relocating the Varsity College Sandton and Vega Bordeaux campuses to the new site on Grayston. This is an investment of just under ZAR 420 million over two years. It's a huge land area. It will double current capacity in phase one to 9,000 students.
Actually, we can accommodate many more over time. We've got lots of space to build. Building work is progressing in line with expectations. Going well and a very exciting project. The Rosebank College relocation in Cape Town. We have just had our official opening. It's a prime central location. It's a really fantastic building. It's doubled our capacity from 3,000 to 6,000 students, and it's also allowed us to significantly enhance both the teaching and learning facilities and the social and recreational options for students. We've also incorporated a new contact center for Distance Learning students. Going back to our strategy, those of you with good memories will remember that it's a strategic imperative to put distance learning contact centers across our campuses. Rosebank College in Braamfontein.
The mega campus build is progressing well. That will increase capacity from 11,500 to 15,000 students. Rosebank International University College in Ghana. I just note that we're opening as a university in Ghana, but still waiting for the criteria in South Africa. This adds Ghana to our rest of Africa operation and extends the Rosebank brand outside S.A. for the first time. We think we have a very advantaged fee price point, so undercutting the established international universities, but offering a really great experience and product to local students. We've established that there is strong demand for tertiary education. There is a similar kind of shortfall in public places to what we see in South Africa. Our capacity in phase I here is 1,500.
We've had great support from the Ghanaian government, and the timelines are all on track in terms of buildings, accreditation, and marketing. There's some hot off the press photographs from the grand opening held back end of last week, and great representation from the academic fraternity and government in Ghana. Then moving on to resourcing. Just a couple of points here. The unexpected closure of USAID has had a negative impact on our rest of Africa business. Around 10% of our client base, which is NGOs and the charity organizations that they support, was impacted by the sudden withdrawal of their funding, which pretty much happened overnight. Despite that setback, the business delivered a credible performance. You've seen the numbers, and we are focused on securing new contracts.
Again, our margin improved slightly over the period. Some good news, it's a tiny part of the business, but the South African resourcing business has returned to profitability, and that's been through right-sizing effort and a focus on efficiencies and cost management. Then recapping those numbers. Revenue down 5% and operating profit down 2%, but with some strong underlying compound annual growth rates. With that summary, I will hand over to Hannes to talk through some of the other financial numbers.
Good morning from my side to the audience as well as the investor community online. I think I just wanna start with a graph we did display in March and just our progression on the South African school enrollment. I'm just gonna cover it from both sides, where we started in 2024 and ended in 2025. Important to note that we do have matric leavers, and that's a given every year. You then gotta compare those matric leavers to the joiners that you do get every year. As you can see, it more than three times make up for that. The difficult part that we're looking at is more that middle section in terms of the immigration and financial leavers that we have.
I must note, in 2025, we've not really experienced the trends that we've seen in 2024. It's actually, you know, going much better on this side. Maybe everybody that's left has left or semi-graduated. Then there's these other leavers that are leaving for various, can I say, product or personal reasons, which I think we can work on. If one had to just look at a scenario that if you have a slight improvement in the economy, we can drive a little bit better on the immigration and financial, as well as our own efforts in terms of the other leaver, leavers. I've just done a scenario of if these 5,000 students, you can maybe just reduce by a third, that would give us a 7% increase in South African enrollment of students.
If it reduces by 50%, that would be a 12% increase in South African enrollment. A little tweak and work that lies ahead for us, but exciting to work on these opportunities and to confirm that our current student numbers mid-year is still on track with regards to what we've actually noted in March. My next point, just on the debtors. This is all displayed on page 13 of the long form announcement. I've put it all on one slide. Just to go through it. At the top line is our revenue growth over the last four years, then also the progression of our gross debtors, and then also the progression of our loss allowance.
If you look at it, over the period, we've been able to grow our debtors by 11% as well as the revenue. I think notably for the 2025 year, where we're standing now, is that we've had a 10% growth in revenue, but only a 3% growth in debtors, which already starts indicating that there is quite a big improvement in our debtors book. The loss allowance has also decreased from the prior year. If I wanna catch your eye to the bottom line, our loss allowance percentage standing as at 30 June is at 47.6% compared to 49.5%.
The ratio of revenue to debtors has also improved the best in the last four years. I describe this to a lot of work that we've done on the financial controls, the debtors controls, and especially the impact that we've seen in the tertiary side. I think a lot of those systems and controls are being implemented at school level, and we'll still continue to see the benefit of that coming through in the last six months of the year. But another element that I also wanted to subscribe to is that there's been a concerted effort in the last year to define our products, to define our marketing. I think it already starts with when you enroll a student, that a student knows what is the culture and the ethos that he's signing up for.
Once you have a client that meets that expectation, I mean, I think the payment terms starts from there. Credit to the whole group for actually pulling together in terms of defining our products, even at a campus level. Just from the cash flow from operations. This is the pure business side, excluding the working capital, which I'll get to just now. Continues to grow in line with our earnings growth over the time, and notably a 14% increase, you know, for the period year- on- year. I think it will continue, you know, going through that for the full year. If we add the working capital movement, which of course bumps the numbers up by nearly ZAR 1 billion in each of the years, we see a 18% increase in the cash generated by operating activities.
We compare that now to our net borrowing situation. As at year-end, we were sitting with ZAR 600 million worth of borrowings, but ZAR 570 million worth of cash. Now, obvious question is, why don't you just offset that? That's linked to our strategy of also keeping African cash in Africa. Approximately ZAR 475 million of that cash balance is sitting in the Africa operations, ZAR 125 million in the resourcing business. Nearly ZAR 370 million sitting in our Nairobi, Kenyan operations, awaiting the Regis acquisition, as well as the expansion that we've had for the profit business. I think the strategy is working well. We probably didn't get the timing right on the Regis.
If it was a bit earlier, I think the picture to 2024 would have been exactly the same, where last year this time we were in a net borrowing situation of ZAR 189. I think always an important factor that we do consider is just, you know, how are we actually doing on the capital that we've invested and what have we invested on. As we are transitioning from ROFE to ROIC, and I'll speak a little bit about that, I just still wanted to put down the historic trend that we've seen. A great performance over the last four years by nearly increasing ROFE by 50% from the 2020 base that we were at, up to 2024. These, of course, the prior year numbers being annual numbers and the current 2025 number is only a six-month period.
I do wanna give guidance that that ZAR 327 million is probably going to be in line with what we've seen in the prior year, due to the CapEx program that we have and listed there at the bottom, especially on the Grayston opportunity that we've had and some of the Pinnacles that we also completed during the year. I'll get to the CapEx split a little bit later on, but it's important to note that the Grayston opportunity, as mentioned by Geoff, ZAR 420 million, but split over two years. There is an incremental ZAR 200 million extra this year in the tertiary split.
Looking at the ROFE, the demand from the market has been that we should maybe consider not just the return on our assets, but we should also consider how do we actually fund a lot of those acquisitions. Hence we've moved over to the return on invested capital, which I think has been a good metric for the group to consider going forward. The reason for that is that every day when we face new projects, we can either finance internally through borrowings or we can finance perhaps through a lease. We will consider what is the best outcome for that going forward into the future for that specific project. Keeping in mind, of course, the brand ambitions, whereby sometimes it is great to have that lease signed up.
It's immediate, less capital, immediate revenue that you link to it. As you can see with the Grayston opportunity, we wanted to get a more specialized building that we can own and actually, you know, promote the brand a bit stronger. On the long term, ROIC will be our metric to measure. End of the year, hopefully that growth keeps on improving. Which I do think will be the case considering the growth in our earnings and the static CapEx that I've just noted. On the capital expenditure question I get a lot again is just confirming that we probably only spent 35%-40% in this first six-month period.
A lot of the bigger physical CapEx projects only comes to fruition in the next 3-4 months. Therefore you will start seeing that number increasing significantly towards the year-end, compared to when there is a need to spend money on demand at the moment. Therefore you see the ZAR 110 million spent on IT, furniture, et cetera, because that's students in demand that it needs to be met in a February, March situation. Again, the continuous maintenance CapEx, I think on all our properties in schools and tertiary, probably sitting at about ZAR 350 million a year.
Then our continuous CapEx, which has been a static number for the last two, three years, it's probably ZAR 750 million, which we will continue to invest in to make our properties desirable, because we can see the effect that it has on students and just in the social media that promotes the properties quite a lot. Yeah. The dividend's always a difficult one to motivate. Also, you've mentioned the cash generation that we've had. I think we must firstly maybe just take a bow because, you know, in the current economic situation, a group that can increase its dividend by 18% is a great achievement. I think we're proud of that ZAR 0.45.
We continue to evolve to the 2x dividend cover, and are confident that that will be met as of year-end, considering our current cash resources as well as the projections. I get a lot of questions on, "But why aren't you increasing the dividend, a lot more?" I just wanna remind all of us that the dividend cover is a long-term view that we wanna give guidance to. I think there's quite a lot of projects that we are considering at this stage, maybe not disclosed yet to the market, but in 2026 we will disclose it, where a lot of our capital expenditure projects could be increasing. We're keeping that in mind with our 2x dividend cover for the year.
Just a progression over the past couple of years on how the dividend has grown. I think firstly, as with the NEPS that doubled, a great achievement from 2021 when you paid a combined dividend of ZAR 0.50 up to ZAR 1.00 in 2024. Might be difficult to repeat that performance again. Maybe we can relax on the dividend payout. Our objective is still to continue to grow the dividend in line with the growth of the business. That will definitely be something that we're looking at, as there are many opportunities, as I mentioned, that we do have and need to consider on long-term, and don't want to fluctuate our dividend cover up and down on the short term. I'm gonna be back for questions. Yeah. Just do.
Thanks, Hannes. Just a couple of slides to finish off. This is a reminder of our forward vision, which hopefully, we are today demonstrating progress against. We set out to lead in every market segment in which we choose to operate, and to become the employer of choice in the Education and Resourcing sectors. In terms of our strategic imperatives, I think at the full year we'll go into some more detail on progress. Just as a reminder of areas we're focused on. The addition of new high-demand tertiary qualifications. You saw some of that information earlier. The work to simplify our brand structures continues. A lot of great work being done on optimizing our brand propositions and Marketing, and also delivery of those brand propositions.
Our investment to secure university status, I think, is in fantastic shape compared to the regulatory side of that, but hopefully that'll change soon. Our African operations, we continue to expand successfully. We are making good progress in terms of aggressively growing distance tertiary, that 40% year-on-year increase in enrollments that I covered before. Further extending academic advantage across all our brands in terms of delivery at both schools and tertiary levels. Just in terms of prospects, the South African demographic and supply and demand tailwinds continue, especially in tertiary. Strong demand for quality education persists. I think that joiners number on the slide that Hannes just shared demonstrates that very well. There is strong demand. We are the leaders in teaching and learning across the African continent.
We are strengthening the organization, but we also have growing scale and expertise in Africa, and great to have John Sikiotis on board. Hannes just covered our strong cash generation, which continues in our sound balance sheet. We are very focused on extending competitive advantage across the group. That sets us up, especially with a little bit of caution on the dividend, to invest with confidence in areas of opportunity, and puts us in a good position to maintain our growth trajectory. That's it from a presentation point of view. If I could maybe just invite Hannes to come back, and we will take some questions. If we wanna go online or in the room first. In the room. I'll just get you a microphone.
Morning. Simon Sylvester from Rezco . If you could just maybe unpack the gap between enrollment growth and revenue growth in this period. I know you mentioned sometimes there's some mix shift, but it doesn't seem like that's enough.
Obviously there's acquisitions in Africa, it's fee inflation, but could you just kind of unpack more detail why was there a lagging effect in the revenue growth still to come through from the high enrollments or what's happening there?
If you want to cover that.
Sure. Go for it. Yeah. As you saw, the 13% combined enrollment growth as we published in March, we do have a 10% enrollment growth. I just wanna come back to Geoff's approximate 5% on the tertiary mix. I think that's important to consider that one. We also have a reduction in the revenue on the Resourcing International, Resourcing Africa revenue. And then an upside on the Flipper International acquisition that's come on board. That combined together with the inflation gives you the 10%. The biggest impact is notably the mix in the tertiary side, which is significant considering the size of our business and in the Resourcing International.
Maybe just some comments on fee inflation.
Fee inflation across the schools I think was between 5.5-6%, and I think we mirrored about the same on tertiary.
Yeah. Thanks so much.
Online question. Can you talk a little bit more about the distance learning contact center, and does and why it matters in your distance learning execution?
From a Rosebank perspective, we have a number of distance students that don't have access to the internet or devices. We are putting contact centers into our existing facilities, and over time we'll build some standalone facilities where we don't actually have an operation in some of the rural areas, so that those students are able to come in, have access to a device and the internet. We think that's an important part of unlocking the rapid growth that we're targeting in distance tertiary.
I think at the strategy day you spoke about kind of unifying the branding in tertiary in South Africa. I just wanted to see if there was an update there. Is it linked to getting university status or is it something that you wanna do kind of independently?
We are making progress in terms of our brand structures, and we'll be making some announcements in that regard soon.
The question on the VAT changes in the draft Taxation Laws Bill. Have you worked out what impact that might have on the schools business?
You should be answering this question. Given that you looked into it for us. I don't know if you wanna cover that one.
No, we notably knew that that question was definitely gonna come up, and we've actually recently engaged with our tax specialist. Now, for me, being new to the industry, it was actually interesting to note that their legislation about a year ago included tertiary on this specific ruling. It has been taken out because it's probably so difficult to apply it into tertiary, knowing that many of the state universities are so big and are actually taxable entities. The latest legislation is very specific that it is a school, schools only. I think in our preliminary view, due to us, the IIE, which is our main operating entity, being a dual schools and tertiary entity, it's gonna be very difficult to apply it. To say, well, you must de-register completely for VAT because we've got all the universities in there as well.
I think also we've always applied a very cautionary input VAT principle, whereby a lot of our can I say, educational input costs, we haven't claimed the input VAT, and neither claimed it on any of the revenue that we've been able to. There's very little revenue on the school side that is charged, and these are small little items like, you know, rental out of schools, et cetera, et cetera. For us, we cannot see that this can be properly applied onto the IIE at this stage. If it is going to be de-registration of the VAT component, it will just be meaning that that revenue from January that we do charge VAT on will just fall away. It shouldn't have an impact. At this stage our likelihood of it being applicable to the IIE looks very minimal.
Morning. This is Khumo from FNB. I just have a couple of questions on just expansion in the rest of Africa. I know you guys look at a few metrics when it comes to expansion. A macro view is one of them. Since you guys somewhat look at or target the same kind of student, when it comes to your schools and tertiary, I know there are some. You guys have schools in, you know, Kenya and Ethiopia, but there aren't any tertiary institutions there. You've got a tertiary institution in Ghana, but no school there. Just on expansion, can we expect a tertiary institution in the likes of Ethiopia and Kenya, and likewise, a school in Ghana?
Yeah. That's sort of going back to our strategy day. What we laid out there is that we would like to develop in those four countries of operation, premium schools using the Crawford brand. The mid-fee school, which is Flipper, the Gaborone International School Makini model. And also university. We will look to expand, Rosebank University into those other territories and to take the schools into Ghana. We want to scale those three brands in the four countries.
Lastly, when it comes to acquisitions of schooling.
What do you guys look at? Maybe just give us investors an insight as to what metrics you look at, just so that you know that you guys aren't overpaying or how do you know that you're buying something at a discount or a premium?
Just, Didier gave Hannes a whole coaching day on this when he joined us. I don't know if you wanna cover that.
It is quite a lot. I think when you look at the capital, we've gotta see, well, what does if it's in South Africa, what does it really cost? And compared to Southern Africa, and that's why Geoff made a comment just now on Regis Runda. Looking at the capital and what we bought compared to what we would've built, a Pinnacle in South Africa t hat's definitely one. I think break-even point extremely important. Payback period extremely important. You know, I think overriding all of that, which area are you going to? Which brand is applicable in that area, considering the LSM market that's in there? Can you actually build a school that is scalable?
There's quite a lot of qualitative information that even gets to the proposition before we even get to the financial metrics to make sure that it is feasible for us. I think that's the challenge, that's the art, that's in the brands, that they know what their brand can deliver and what type of market it can speak to.
Yeah. We'll take one more. Yeah, go for it, Yusuf.
The question is: Can we expect tertiary and schools in Africa specifically to grow capacity enrollments at a similar pace in the longer term or, you know, would other opportunities maybe be at slower pace in future?
Yeah. Listen, we are aggressively looking for opportunities to acquire both more space for expansion on existing sites and to enter new trade zones the way we have with Regis. It's a bit difficult to predict exactly the path of that, but we are looking hard and hope to continue the momentum that we've built to date.
Okay. This is Kwame from Longmark Securities. Sorry, I'm just gonna go back to that, enrollment revenue mix question.
Yeah.
If I see your Rest of Africa Schools enrollments grew by 40%, but then your revenue only went up by 30%. I know there's a currency issue and probably a mix. Can you please just unpack that for us? Then also just sort of give us a sense of how you think of pricing, in terms of price growth in your various countries.
Yeah. Well, if I answer the second one first, you know, we're looking to increase fees broadly in line with inflation. That's what we're targeting. There is an opportunity for higher fees where we introduce the Cambridge Curriculum, the kind of U.K. syllabus, which can give us another kick. In terms of the organic growth in the African schools, it was 4% on enrollments.
The balance was made up of the Flipper acquisition. Then you've got the mix change into more of mid-fee, which is what the Flipper school is, relative to the mix of Crawford at a higher fees. There's a mix shift there. It's a combination, I think, of organic and acquisitive growth and the mix on fee level that's driving the number that you mentioned. I don't know if you wanna add to that.
Yeah. No. Thanks. I got a question like that yesterday as well, so I've got the number. On organic basis, the revenue increased by 15%, organic apples for apples, and the operating profit 25%. So the delta what you're seeing is the Flipper acquisition. Notably also there are some, you know, initial costs that's gone into it, with regards to settling it down for the first six months. But organically, 15% and 25% on the two metrics.
Okay.
This question is almost a follow-up to that. How do you protect yourself from foreign currency exposure in the African operation?
I think we're also a business that is mostly incurring all our revenue and costs in-country. At this stage, we are funding our acquisitions also in-country. We've not had too much foreign exposure in terms of that. I think that strategy has paid off in the past and will continue to do so. If you were perhaps a retailer where your profit margin is 5%, you will of course have a bigger exposure on your products moving up and down. In an education environment, you know, your biggest cost is the salaries of the teachers in country. We're kind of hedged with the revenue and the costs in-country.
Yeah. I think just building on that, as we increase our portfolio into more countries with bigger operations, then, you know, it becomes more about swings of roundabouts than exposure to delivery shifts in one country of operation.
Admire Mavolwane from Terra Partners. Just going back to the acquisition metrics there. If one just does a simple comparison of your Flipper and Makini Schools acquisitions and the latest one, there's a big jump. If you take maybe on a capacity basis, you were paying probably for Flipper around ZAR 45,000, for Makini around ZAR 35,000. You acquire for ZAR 172 million an institution with like 1,000 students. Even if you say capacity is 2,000, that's like ZAR 86,000 per seat. So there's that mismatch. What would be different between the latest acquisition and the other two for you to be able to pay a slightly higher amount on that?
I'm not getting the question, but I think I'm gonna try and answer it. I think the difference between what we're saying is if you're going greenfield on any area, Africa or South Africa, I've got a very weak starting point. Low student numbers. I'm not even getting to my breakeven point very quickly. Whereas if I'm buying a current going concern, like in Regis Runda, I am at that breakeven point already. And there's upside for us to still continue with it. The time to which capital is invested and actually revenue profits generated is much shorter than starting a new greenfield operation.
I think my question basically, when one looks at Makini and this latest school, there's a slight implication of having maybe overpaid on the latest acquisition. That's where it's coming. Because you paid a certain amount for 3,200 students, and we are paying ZAR 172 for 1,000 students.
Okay. Yeah. Are you referring to Flipper maybe?
Yeah.
Yeah. You're talking about the Flipper acquisition. ZAR 136 for 3,000 students, and now we're saying ZAR 172 for 1,000 students. Yeah.
I think so.
Yeah. Now again, a lot of the Flipper properties is perhaps also not owned, so we don't have an asset. It depends on exactly the acquisition whether you own the asset or not. The Flipper acquisition also is at full capacity. No additional growth that we can put into it. We have to put more capacity into it, which is gonna cost a lot more than the delta between Flipper and Regis for 1,000 students. That's just where the timing of the CapEx is different.
Yeah. I think it's established business versus one that you're building. Are you buying an operating school that you're leasing or are you buying the assets?
Maybe one last question on Ghana. I think the schools that have year term or semester starts in September. How well has been the enrollment going in terms of like the numbers confirmed?
I haven't got an immediate update for you. That whole operation is in line with expectation and going well.
There's a question on the impact of USAID caps, which impacted the resourcing business. Is there a chance that this impact could also be felt in the schools and tertiary businesses potentially on enrollments in the new year?
We're not anticipating any impacts on the other businesses from that. That shift has already happened and affected our Africa resourcing business, and we haven't seen an impact in either schools or the fledgling operation in Ghana.
Just last two questions from my side. You guys don't have a capacity issue, so you guys don't struggle to fill your schools. So how will the university status impact your financials?
I'm not quite sure what you're asking.
I mean, one would assume that. It's easy to assume that when you guys achieve university status.
Yeah.
Students will flock to your schools. You guys don't have a capacity issue, so you guys don't struggle to fill your schools. Most of your schools are trading near full capacity, and as a result, you have to expand and, you know, your Rosebank College. You need to build mega campuses for Varsity College. How will the impact of a university status, how will that impact your income statements?
Okay. Well, I mean, I think having university status will be a positive for enrollments. It's difficult to say exactly what that number would be. I think conservatively, we've looked at an incremental 1% compounding over a number of years on the existing enrollment numbers. The capacity issue, it's much easier to expand capacity in line with demand in the tertiary side because you're not limited by the four walls around a school. We can flex capacity as required and university status will be a positive. The extent of that positive impact is hard to predict, but I'm sure it will be a positive.
Okay. No, thanks. That helps. Lastly, the new Varsity College campus, is that on track and on budget?
Yeah. Progressing well. Gonna be magnificent from both a teaching and learning perspective and also in terms of the recreational facilities. All on track. Any other questions? Okay. Well, let's close it there. Oh, we've got one more.
Koli Makari, Metabridge Capital. I just wanna follow up on the rest of Africa. Your margins are much better there. The question is how sustainable, and what's the competitive landscape like in countries like Kenya? Is the market more fragmented? Why are the margins high? Do you expect, I mean, competition to come in and reduce prices? What, I mean how sustainable is it going forward?
Yeah. The key driver of our higher margins is that teacher costs in those African markets are about 20% lower than South Africa. That's the key driver. There is competition, but we have some very strong brands. We're working on strengthening our competitive advantage. One of those areas of strength is our expertise in offering the Cambridge curriculum. We continually work to build greater strength into our brands to compete effectively. You've got strong economic growth. You've got growth of the middle class. You've got urbanization. The underlying drivers of demand are very strong.
Okay.
One more.
Late rush of questions. Excellent.
One more question came in. You've mentioned you've done a lot of work in getting university status and also improving brand proposition. What impact will that have on credit losses as a percentage of revenue?
Jeez. Yeah. I think the work that we've done strengthens our offer. It's helping us to gain market share. I think it positions us well for university status when the criteria are finally published. As Hannes covered earlier, our debtor management and credit losses I think are being managed very well. I think we'll take that in our stride and be delighted to take the upside on enrollments. Okay. Great. Thank you all. Please don't forget the gift pack. Join us for a coffee and something to eat b ut thanks very much for coming through.