Good morning to everyone in the room and on the call. Just some housekeeping before we begin. The presentation will be uploaded to our website later today with the webcast and transcript to follow. We will also take questions in the usual way as per the screen after the slides. Please also join us for snacks and drinks once the formalities have been completed, and do not forget to collect a gift pack hand-prepared by our Capsicum chefs before you leave. It will probably add 0.5 kg To everyone. Into our results for the first half of 2026. These are the high-level numbers, which I will unpack as we go through the presentation. Half-year revenue was up 8% year-on-year to ZAR 5.1 billion, whilst operating profit grew by 14%, breaking through ZAR 1 billion for the first time.
Operating margin improved from 21% to 22% year-on-year, whilst headline and normalized earnings per share both grew by 16%. We are also pleased to announce that we have increased our interim dividend by 18% to ZAR 0.53. This slide captures our current brand structure. Looking at the middle box, the simplification of our tertiary business is now complete and already driving focus and operational efficiency. Looking at the block on the left, you might also notice a reduction in the number of schools brands, which is something I will come back to later. We also continue to gear up for growth across the organization. With that in mind, we recently appointed Onyana Molosane to the new role of Group Business Development Executive, adding capacity and experience to our M&A team. He joins us in a couple of weeks on the 1st of September.
Taking a look at the current shape of the business. As you can see from this chart, 87% of our revenue and 96% of our operating profit now come from our education business. Within education, we are also pivoting over time towards our fast-growing tertiary division. Tertiary now contributes 53% of operating profit versus 43% from schools. Running through performance at divisional level. Schools South Africa's revenue was up 8% for the period, whilst operating profit was up by 9%. The rest of Africa schools, they grew revenue by 8% and operating profit by 11%. Tertiary revenue and operating profit continue to accelerate despite rolling over significantly bigger numbers from last year, up 17% and 19% respectively. Finally, for the reasons shared at our 2025 full-year results, we saw a moderate decline in resourcing revenue and operating profit, down 15% and 12% respectively.
Recapping the 2026 enrollment numbers that we first shared in March. This is really just a reminder. For the total group, enrollments are up for this year by 13%, just short of 120,000. That is an all-time record increase of nearly 13,500 students in a single year. That breaks down into increases of 5% in schools and 19% in tertiary, where we continue to see exceptionally strong growth. The compound annual growth rates are also looking strong. Looking at a further breakdown of the 5% schools growth. In South Africa, enrollments are up by 1%, and in the rest of Africa, we are up by 14%, driven to a degree by the Regis Runda acquisition in Nairobi. Looking at the compound annual growth rates, we are also seeing consistently strong growth over a five-year period.
Then breaking down the 19% tertiary enrollment growth. Our contact student numbers were up 17% year-on-year, while in distance, we were up 34%. I think it is worth noting that we have nearly doubled distance enrollments in the last two years, in line with our strategy. Then comparing our most recent numbers to the five-year trends, you will see the significant acceleration in total and in both the contact and distance splits. Although we are pleased to report such strong numbers, the outperformance of Rosebank in distance at lower price points continues to have a mixed impact on revenue. Just as a reminder, Rosebank and distance fees are about 1/3 of what we charge for contact in Emeris and Vega. Then getting into the financials. This slide gives the five-year context for the 8% revenue and 14% operating profit increases I shared earlier.
Looking at the CAGRs, I would just point out the consistency in the numbers, with revenue and operating profit compounding over five years at 11% and 16% respectively. Then looking at group-level operating margin. We have moved from 21% to 22% year-on-year, driven by operating leverage efficiencies and a mix shift towards our higher margin education businesses, which Hannes will come back to a little later. I would also just mention that our margin improvement is net of significant investments into people, systems, and facilities, as well as set up costs for our new university in Ghana, which continue. Then looking at the high-level margin breakdown between education and resourcing. I am pleased to report positive movement in both divisions, with education up from 23.8% to 24.3%, and resourcing improving from 6.5% to 6.8%. Then breaking down the 24.3% education margin.
Schools improved from 21.8% to 22.2%, whilst the tertiary division increased from 25.9% to 26.4%, despite that hit from set-up costs in Ghana, which are having around a 0.3% effect this year. Then further breaking down the schools numbers. South Africa improved from 20.6% to 20.9%, while rest of Africa jumped from 29.4%, breaking through 30% to 30.1%. Then contextualizing the normalized earnings per share growth of 16% I shared upfront. This chart shows the growth trend over the last five years. As you can see, NEPS is compounding at 18% and has nearly doubled since 2022. Then looking at NEPS in U.S. dollars, we are delivering an increase of 25% year-on-year. Whilst recent rand strength is clearly helpful, it is worth noting that we are also compounding dollar earnings over the longer term at 18%. Then moving into the schools division.
This slide summarizes our schools business. We are currently in four countries, with 122 schools and nearly 48,000 students. On this slide, we cover our 10 biggest brands, but we also have a significant number of single school brands in the portfolio. So mirroring the simplification work we have done in tertiary, that is something that we are now addressing. This chart shows the ongoing consolidation of nine schools into our flagship brands. Charterhouse, Pecanwood, and Glenwood House are migrating or have already moved to Pinnacle Colleges. In Africa, Makini, Flipper, and the Gaborone International School will fall under our new International Schools Group brand. Glenwood House and Tyger Valley College are moving under Trinityhouse, and Southdowns College is migrating to Crawford International. These alignments have been well received by all stakeholders and will significantly simplify our portfolio, driving greater operational efficiency.
Returning to how we are strengthening the organization. Effective 1st May , we appointed Melt Labuschagne to the new position of General Manager of House Schools. This was an internal promotion designed to drive a greater focus on operational excellence and enrollment growth. Effective 1st August, we appointed Justin Paynter to the new position of General Manager, this time in Crawford International. Justin was promoted from the role of Principal at Crawford International North Coast, and he has been given a very similar brief to Melt. In July, we appointed Mtho Khozasisi Hloshe to the new position of Sales Manager for Crawford International. This role has been created as part of a program to strengthen enrollment growth. Mtho Khozasisi brings some excellent blue-chip experience to the company, having previously worked for Standard Bank and the South African Post Office. Going back to the numbers.
This chart covers the schools division in total. Revenue was up 8% versus last year at ZAR 2.2 billion, whilst operating profit grew by 10% to ZAR 479 million. Looking at the CAGRs, over five years, we are compounding at 12% on revenue and 16% on operating profit. The detail on school South Africa. Revenue was up 8% with operating profit up 9%. Looking at the CAGRs, again, we are seeing consistently strong numbers growing by 11% and 13% respectively over five years. Moving on to rest of Africa schools. In rands, revenue and operating profit were up a solid 8% and 11% respectively, and it is not on this chart, but the numbers were much stronger in local currency after some significant weakening of the pula, shilling, and birr against the rand.
Looking at the picture over five years, our international division continues on its strong growth path. Moving on to built and ultimate capacity. This slide shows how the numbers have moved across all schools from February 2023 to February 2026. It gives our 2026 SA international split in the last two columns. Overall, looking across the third row down, if I can bring your eye there, we are maintaining a healthy 84% utilization of built capacity. Looking at the splits, we have reasonable headroom in South Africa, but a lot less internationally, where utilization stands at 93%. This makes our international schools very efficient to operate, but it limits further enrollment growth. So we continue to work hard on adding new sites and expanding existing facilities where we can. Moving on to real estate.
Our newest Pinnacle College, Ridgeview, which opened at the beginning of 2025, continues to perform well. The next building phase is underway and will be completed early next year. This will increase capacity to 600 students as we add grades to the school. Pinnacle College Copperleaf, which opened back in 2017, has also performed very well, but was running out of capacity.
So in a project completed last month, we have added space for 500 more students. The expansion cost ZAR 24 million and included a new dedicated preschool that you can see in the top two photographs on this slide, as well as an additional classroom block for the high school. We will also be opening a new Abbotts College High School in Bordeaux in time for the next academic year. This will be built on the site of the old Vega Randburg campus at a cost of ZAR 22 million.
It is in a great location and will have capacity for 550 students from day one. Moving into Africa, the Makini Runda School in Nairobi, which we acquired in September last year, continues to perform well. On the back of investments to improve facilities and systems, enrollments have grown by 21% since acquisition. The high-demand Cambridge curriculum will be introduced next month at the school, which should give us a further positive bump in student numbers. A quick word on Makini Statehouse Academy. This is a school in a prime location in Nairobi, but it was scheduled to close at the end of its lease this year, which would have lost us 280 enrollments.
But after some excellent negotiation from our international team, we have managed to secure a new long-term rental agreement that will allow us to completely rebuild the school and increase capacity to 575 students. Moving on to the Flipper Schools in Ethiopia, which we acquired towards the end of 2024. IT upgrades have just been completed, which will enable the implementation of various support systems and academic training for teachers. We have also successfully negotiated the harmonization of school fees across various historic tiers, which significantly strengthens our commercial model. I also wanted to share a recent setback that we have managed to turn into an opportunity. Earlier in the year, we heard that the Ethiopian government had bought one of our lease schools via compulsory purchase, giving us only a couple of months to vacate.
Our team on the ground have found bigger, better alternative premises in Addis Ababa's Mexico District, as pictured on the left of the slide. The new site comes with the added bonus of increasing capacity by 450 students and has allowed a seamless transfer. Moving on to the tertiary division. This is a snapshot of our recently simplified structure. We currently run 32 campuses across five brands. Student numbers now stand at nearly 71,500, up 11,400 year-on-year, as you saw on the enrollments chart earlier. We normally only share this high-level view, but I thought it might be useful for this presentation to show you the geographical breadth of our campuses. This slide shows the locations of our 11 Emeris contact campuses in South Africa, right across the country. We have very broad penetration.
This one shows the existing Rosebank International network in eight South African cities, as well as Accra, Ghana. We will add a ninth campus to the brand next year, which I will come back to in a few slides' time. Getting back to the numbers, tertiary revenue is up 17%, and despite significant investments to increase capacity and to strengthen our brands, operating profit is up 19%. Looking at the five-year compound annual growth rates, revenue and operating profit are compounding at 14% and 17% respectively. This chart maps the qualifications we offer across our tertiary brand portfolio, spanning skills development to PhDs in a range of delivery modes. This has been ongoing work for the last few years, but I think we are now in a really good position. Covering the question, where are we with university status?
This chart shows our best guess at the forward milestones and timing in the absence of final information from government. The restructure of our tertiary division, as I said earlier, is now complete, rebranding The IIE to Emeris and creating a second degree-awarding entity in Rosebank College. We still hope government will publish the final criteria and the application process later this year. When this happens, we understand both brands will immediately be recognized as higher education colleges, which we'll ignore from a branding perspective. We'll then apply for the interim step of university college status for Rosebank and straight to university status for Emeris, given that we're further down the track there in terms of research output and post-grad qualifications. Moving on to real estate.
As most of you will be aware, our existing Emeris and Vega sites in Sandton were relocated to a new mega campus on Grayston Drive at the beginning of this year, doubling student capacity to 9,000. First-year enrollments are up over 20% year-on-year, so we've started with a bang in this new location. In terms of immediate building plans, we are in the process of adding a 200-space parking deck to the site that will open in February next year. We also hope to add nearby accommodation for around 850 students, targeting completion in 2028. I'd also just share that enrollment interest for the next academic year has been very strong. We also relocated our Emeris Nelson Mandela Bay operation to new purpose-built premises in Walmer Park at the beginning of this year.
In many ways, we've mirrored what's been built in Sandton, including the world-class indoor sports center you can see on the bottom right of this slide. We've also increased capacity by 50% to 4,500 students. An update on our KZN university development. We've acquired 10 hectares of land, a huge site southwest of the Cornubia Mall near Umhlanga, to build a state-of-the-art campus with capacity for 10,000 students. The new location will consolidate our existing tertiary sites in the region and include world-class sports facilities as well as a sizable amount of student accommodation. Phase one will open in 2029 with full build-out due to be completed in 2035. Moving on to Rosebank. Our rebranding from IIE Rosebank College to Rosebank International is now complete, as you can see in the photograph on the top left of this slide.
The new logo and iconography position Rosebank International as a trusted, aspirational international university with a heritage going back to 1909. I'm also pleased to report that the renovation and expansion of our flagship Braamfontein campus, which is what we're showing here, has now been concluded, increasing capacity from 11,500 to 15,000 students. Despite adding that extra capacity, we're already running out of space in Braamfontein. We've therefore acquired new buildings near the main campus that will allow us to increase capacity immediately by another 4,000. Ultimate capacity on this additional site will be 9,000 however, which will give us some very useful headroom. The total cost of acquiring the buildings and phase one of the fit-out is around ZAR 120 million, and work to open in time for the 2027 academic year begins shortly but will be finished by the end of November.
Moving east, rapid growth in demand also means we are running out of space in our Durban campus. As a result, we will be relocating to much larger premises in time for the new academic year. We are creating space for an additional 650 students immediately, with the ability to add 2,000 more over time. We are also seeing strong demand in Polokwane. We just added two new buildings to our existing campus. That increased capacity by 900- 4,600 and allowed us to upgrade student facilities at the same time. As mentioned a few slides back, Rosebank International will open a new campus in January in Kgompo City, which used to be East London. The brand has acquired leased premises with initial capacity for 600 students, though we have the option to increase that to nearly 4,500 on the same site over time.
A quick word on our online business. Whilst contact student growth has been exceptional, we are also very focused on growing distance enrollments. As part of that drive, we have been adding contact centers to our existing campuses. These provide distance students with access to devices, the internet, and collaboration spaces. Six centers are now up and running, with two to follow soon in Durban in the new site I just showed you, and in Mbombela. These facilities have proven to be extremely popular, with utilization levels running at around 97%. This initiative is helping us aggressively grow distance student numbers, as shared earlier. A quick update on Rosebank International in Ghana. We are currently in our first year of operation, with enrollments running slightly ahead of business case.
We opened with university college status and are confident that we will become a full university next year. We have plans to expand both contact and distance enrollments from this site, specializing in post-graduate qualifications. Moving on to resourcing. The unexpected closure of USAID in February last year continues to impact our Africa resourcing business, which is the bulk of the division. Having pivoted away from clients dependent on U.S. funding, we expect year-on-year performance to be better in the second half.
On the plus side, overall margins in this division improved from 6.5% to 6.8%. As covered earlier, divisional revenue and operating profit were down 15% and 12% respectively at the half year. Despite this, operating profit is still achieving a compound annual growth rate of 6% over five years. Now I would like to hand over to our CFO, Hannes Boonzaaier, to take you through some further analysis of the numbers.
Good morning, everyone in the room and those online as well. From my side, a pleasure to present to you the snapshot on the balance sheet for 30 June. I will be covering debtors, capital structure, and then we will move to shareholders' returns and dividends as well, and our investor dashboard. Let us start with the most important forward indicator, and that is whether people want to pay for our services that we deliver on a daily basis, and that is the debtors tracking. On the slide, as presented before, I am just going to take you through the slide itself. We have got the group revenue at the top line. Then we have got the education revenue and then the stack bars, of course, the debtors balances and the bad debts provisions for the full years.
Our long-term tracking is indicating to us that we are growing education revenue at 13% and our gross debtors are only increasing by 9%, which really indicates a good debtors, can I say, track record over the period. For this six months, we have actually exceeded that expectation. Debtors only increasing by 5%, yet education revenue increasing by 13%. That ultimately gives you an 11.5% debtors to education revenue, which over the five-year period is 4% less than what we have had in 2022. I think with that debtors performance, it then starts driving indication of what should the bad debts provision be, and that is sitting at 46.8%. Again, a 0.8% differential on what we have had in prior years. Let us go and have a look at what the ZAR impact is of all of this.
Similar slides in terms of the debtors balance and the loss allowance coverage, but now the credit losses are added. Just a reminder, the credit losses is a combination of the bad debts recovered, bad debts written off, as well as the movement in the provision. As you can see in the past, the mid-year point is usually 2/3 of the full year balance. When you look at 2025, 2024, etc , what those mid-year balances were, ZAR 119 million last year, ZAR 158 million full year. At this stage, again, we have been tracking quite well with a lower number at ZAR 115 million on credit losses, and I think that sets us up nicely for a full 2026 year of where we are going to be on the credit loss percentage. This six months already, we are sitting at 2.6%.
You will recall that at the 31 December number, the last year, we were already at 2%. Again, the objective is this year to again get to 2% or better on credit losses, which I think is a fantastic number. For every rand that we bill, we only actually write off ZAR 2. More importantly is also the patterns in which our clients do pay us, and that is fees in advance, how we receive money throughout the year. You recall at year-end, there is always a balance that people have paid up front for the next academic year. At mid-year, this is actually important to track in line with our revenue. You can see there that that 8% growth is in line with our revenue in terms of how we are receiving the funds throughout the year.
But maybe more importantly is to see what actually hits the bank account in terms of our cash flow. The cash flow determines so much in our business. It determines the whole investment that we have in capital expenditure, our whole view on capital structure. So the cash flow performance is extremely important indicator for us. This year, we've again been predominantly, can I say, for a business that is delivering a service, majority of costs being personnel costs. Your operating profit and your performance and your cash should match each other, and that has been 13%. Of course, it's running a little bit lower on the CAGR , 15%, but coming off a high base. How is this cash looking with regards to our debt that we have in the business?
And again, just a reminder, a lot of the capital expenditure takes place in the second half of the financial year. So you don't have the biggest capital expenditure in the first six months. But I think we've made progress. I had a lot of comments on increasing gearing. As you can see from prior year, at a ZAR 30 million net debt situation at 30 June, we've increased it by about ZAR 100 million where we're standing now. Our capital expenditure is mostly pivoted towards additional capacity, as Geoff has noted. And we've got a 23% increase on this capital expenditure from prior year numbers. The spend on IT, furniture is more a replenishment and continuous maintenance of our campuses. The existing sites, of course, is increasing capacity. As you've seen from the enrollment numbers that we've experienced, we do need to plan for the future.
And then in this six months, we've also had a cost for the support office relocation, which is the old Emeris building in Benmore that we've repurposed for our head office relocation. The old head office was, of course, a leased property. This leads me into the impact of the increased spending on our overall debt ratio. And we've been working quite hard in terms of seeing how can we improve our capital structure. And just a reminder again that our debt comprises two major components, the lease liabilities as well as the bank borrowings. Lease liabilities fairly flat year-on-year. And then of course, bank borrowings increased by ZAR 100 million. We've been able to just pivot slightly from prior year numbers, from 23% to 24% on our debt equity in mid-year.
And then I've just added on the full year numbers that you can see how big jump we see on that debt number comes through to year-end. So there's a good 15% jump when we get to full year. At the bottom is also a description of a lot of our major projects that we've been investing in the past periods and comparable periods. Notably in this period has been the big share buyback and then the expansions that you've seen at the Pinnacle Colleges as well as Rosebank International campuses. Our return on equity and return on invested capital, not disclosing a full year number yet. I think we're still at half year, but I'm very positive that the trends that we've seen from 2024 to 2025 will definitely flow through into our 2026 number.
Last year, we reached 20% on the ROE, looking very positive to even a bigger number this year. We also, last year, incorporated the ROIC metric, which is actually a metric on all capital funds that is being used by the group, to measure ourselves on that. Again, looking good for another half or even a percent increase on that metric. For shareholders, it is all great that we have percentages, but I guess they want to know what hits their pocket, and that is always dividends. This year, we have a dual benefit to shareholders. We have had the dividend itself, which will be payable in September, and we also embarked on a share buyback program of 1% of the share capital of the group. We are still declaring our dividend within the policy that was agreed in 2024, which is a 2x cover. That continues.
Again, we monitor it consistently with regards to future capital needs. I think for those that have reviewed the long form statement can even see the increase in our capital commitments from the March numbers we disclosed to now. Our investment committee quite busy with regards to looking at new opportunities for expansion. We have been very pleased with the share buyback. Current trading levels definitely much higher than the average price that we were buying the shares up during the April to June period. Just overall, over the long term, where are our shares tracking? I think if you look at the CAGR, significant percentage, but keep in mind the change in policy to a little bit of different coverage that we had in 2024, and that is a 24%-25% long-term average on the dividend declaration.
This period, I have added the effect of the share buyback and what it actually means in ZAR cents. I know people would want to maybe get this money in their bank account, but you own 1% more of ADvTECH at the end of the day, and that represents ZAR 0.44 that we have added on to the interim dividend. So close to ZAR 1 that we are declaring to our shareholders.
Just a quick wrap up on the investor dashboard is that, where is our profit margins going to move towards in the future? I think one has got to track and see how are various divisions contributing to the profit levels in the group. SA Schools, again, very stable business. I always say you have got a student for seven to nine years. You need that foundation in our group. Resourcing declining a little bit because it is not really our core business. Then you have got these two significantly growing divisions in the rest of Africa as well as tertiary that now makes up nearly 63% of our business. When you start mapping that against the operating margins that we see in the Africa schools and tertiary, it automatically indicates an increase of the group operating margin over the period.
Just some investor metrics. What has our total shareholders return been from a period back? So 1 January 2025, which is 19 months, we are up 46%. If you then look back, say, 44, sorry, 46 months from 1 January 2023, 181%, and I think that has been a good number that has also come through. Market cap has also been an important metric for us, and again, now comfortably above that GBP 1 billion level, and we also exceeded the $1.5 billion level, which was also an objective for us.
Liquidity has also improved. If we look at the average trading volumes for the six months period, 2025-20 26, up 19%. Return on equity tracking quite well. I am not going to quote a number, but I saw on the Moneyweb website yesterday, they trued up our half year numbers, so that 20.6% is currently indicated on the Moneyweb website as 21.6%. So, comfortably getting above that 21% level as well. That is it from my side. Over to Geoff, and I will see you all at Q&A.
To close, I would just like to take a quick look at how we are progressing against our strategy. This slide recaps our dual ambition as a company to lead in every market segment in which we choose to operate and to be the employer of choice in the education and resourcing sectors. These goals continue to guide us. This chart is unchanged from our capital markets day two years ago, but I thought I would just recap how we are doing. It covers our strategic imperatives, and I am pleased to say that we are making significant progress on all fronts. We continue to add high-demand tertiary qualifications to both Emeris and Rosebank International. Our tertiary restructure is complete, with schools following quickly behind. Our brand propositions and marketing, I think, are in very good shape with major campaigns currently in development.
We have made all the necessary investments to secure university status. We now wait for government. Our African operation continues to expand through both organic growth and acquisition, whilst tertiary distance enrollments, as I said earlier, have nearly doubled over the last two years. We have also made significant progress in building and communicating academic advantage across all our brands, and these imperatives will remain our focus as we move forward, though we still have lots of work to do. Relative to optimizing our marketing, I wanted to touch on the major sponsorship that we announced last week. We signed a three-year deal with Cricket South Africa with some very specific objectives. We want to build understanding of what ADvTECH uniquely brings to all our brands, which we are calling the ADvTECH Advantage.
This comes in the form of superior academic outcomes, industry-leading AI learning tools, African scale and expertise, and our social impact programs. We will also use the opportunity to further strengthen Emeris as our premium tertiary brand and to create powerful links to our Crawford International and Trinityhouse schools. The sponsorship is wide-ranging, and it covers CSA's National Youth Weeks from under 13 to under 19, as well as the men's and women's test teams. We are excited about the benefit this partnership will bring, especially with highly anticipated men's test series coming up against both Australia and England. To close, I would like to leave you with our prospects slide.
Just recapping the key points. South Africa's demographic and tertiary tailwinds remain, as does demand for quality education in all our markets. Our position as the leaders in teaching and learning across the African continent is stronger than ever. Our financial strength and scale continue to build, as Hannes just touched on. All of this places ADvTECH in a strong position to continue on our current growth trajectory. That is it from the slides. I would now like to invite Hannes back, and we will happily take some questions. Yeah.
Just got two questions.
Yep.
The first one is, how do you see education in South Africa? How do you see that developing? Is there a direction? Where do you fit into it? Has that changed? The second thing is resourcing. You touched on it, but you did not talk much about it. What actually
Okay. I think in terms of the forward view on education, demographics continue to drive population growth. I think the state sector in many places in schools continues to struggle. That helps us. I think the disarray in the public universities, where they are not only capped in terms of places, but the quality of what they deliver from a teaching and learning point of view is deteriorating, also gives us a nice tailwind. I think we have some upside to tap into, and if you look at how we are responding to that, I think when Curro were still reporting numbers, they were reporting declines in enrollments, and we were reporting growth. I think we are growing share in schools. If you look at our listed competitor in the tertiary space, they are reporting a growth in enrollments of around 9%. As you just saw, we are reporting 19%.
I think we're growing significant share in both schools and in tertiary in what is a growing market. We're pretty bullish about the forward picture. Then in terms of resourcing, I think that's been a good business for us. It's shown some very good growth over the last few years. We have had the setback of losing 10% of our clients that were attached to U.S. funding, the USAID that I mentioned earlier. That is a relatively short-term hit. We've pivoted away from U.S.-dependent payroll management contracts. That's the bulk of the business. As I said in the slides, I think performance will be better in the second half. I don't know if you want to add anything to that, Hannes?
100%.
Happy. Okay. Thank you. Good question. Yeah.
Do I need to wait for a microphone?
Sure we can get you one. There we go.
Morning, Geoff.
Morning.
First of all, congratulations on a very powerful and impressive set of results. This organization has been built far beyond my expectations when I retired. I have a few observations and questions, however. The first is, your distance education enrollment has grown rapidly in the tertiary space and is an exciting opportunity. What is in fact your strategy regarding the mix of face-to-face and distance students? Because it seems to me that there is a much smaller CapEx requirement per distance student that makes it perhaps easier and less costly in many ways to grow the distance, and I think that is a very exciting opportunity for ADvTECH, and I would like to hear your thoughts on the strategy. Congratulations on the progress thus far.
Thanks.
My second comment is on the share buyback. Much was made of it by Hannes, but still, it's ZAR 250 million in the face of a ZAR 25 billion-ZAR 26 billion market cap. Is it really material? Perhaps you can comment on the thinking around the value and validity of a share buyback. It concerns me that it potentially shows a negative in the sense that the board and management may not know what to do with the massive cash flow you have control over, and therefore simply opt to give it back to the shareholders in the form of a buyback. I think you'd need to give a more positive justification for a share buyback to overcome that concern.
In that regard, I note your free cash flow per share, which is a special report, non-IFRS, that you have persisted with, shows free cash flow of about ZAR 2.3 billion in this period. The dividend commitment is about ZAR 400 million. So there's a lot of spare cash lurking around, and what in fact is the strategy for that? My next comment is-
I'm just moving on to page two of my notes here.
That's okay. I thought I'd give them all to you at once so you can decide whether to answer or not. My next comment is Emeris now has 60,000 students, tertiary students, which represents a behemoth of a university, and one which can no longer, I think, simply peck away at the market share of the state universities.
I think we're doing a little more than pecking away, but anyway.
I would like you to comment on the future and the strategic thinking about Emeris tertiary. I think the new campus that you've explained to us about in Natal is a very real threat to the Natal universities, and it seems to me that ADvTECH is building for itself and needs to accept perhaps a role that is a strategic building block of the South African education system and can no longer define its strategy in terms of taking market share away from the publics. It is a driver in and of itself. My next observation is many South African-listed companies have caught some sort of disease in Africa that has hurt them badly and caused them to fall flat on their faces. I don't need to give you the examples, but the latest one is perhaps Absa.
How, in fact, is ADvTECH thinking strategically to avoid the African disease? Given that a significant part of your future seems to lie in Africa, outside South Africa, how will you ensure that the growth remains healthy and vigorous and not prone to the African disease of borrowing expensive dollars but only realizing a revenue in a weak local currency, which seems to be a summary of the major cause of the African disease. Then finally, I would just like to ask you talked about the strength and power of the academic machine you are building. I would like to get an indication of the employment of, let's just use it as a benchmark, PhD graduates in the ADvTECH organization, and how does that compare with a major public university? Thanks, Geoff. Sorry, that's a bit of a mouthful, but there you go.
Thanks. Thanks, Frank. Those are some great questions. First of all, you spoke about distance and the rapid growth. Our interest in distance is rooted in a couple of ways. First of all, we think that contact and distance are two separate markets. Contact is your average 19-year-old who is looking for the full university experience doing a first degree.
Distance appeals to people who are older, maybe in their 30s and working and looking to further their career. So they are two separate markets. There is very little cannibalization between the two, so we want to maximize both. Our intent, I don't think we have got a target in terms of the proportion of contact and distance. We want to maximize both. So if our strategy is to lead in all the market segments we operate in, we would like to be number one in contact and number one in distance.
So we have nearly doubled enrollments in the last two years, so I think we have made a good start, and we will continue to drive that. I think the Ghanaian university gives us the opportunity to grow in both contact and distance, but distance particularly into West Africa with the credibility of hoping that we get full university status next year. So that's the plan on distance, but aggressive growth and looking to lead in that sector the way that we do currently in contact.
In terms of growth stock, we have a very significant investment program and a very exciting pipeline of opportunities. So we want to address our capital structure and be under-geared, but our preference is to find exciting investment opportunities, and as I say, we have got a very exciting program that we are looking at there. In the interim, to help the capital structure, we felt the right thing to do was to go with what you yourself described as a relatively small share buyback. So we are balancing investment for growth and getting closer to our ideal capital structure. I don't know if you want to comment on that one, Hannes?
Sure, Geoff. If you look at our past performance, when we look at total cash generation after CapEx, after dividends, we were sitting with an excess of about ZAR 400 million-ZAR 500 million per year, and that drove down a lot of our debt. That is the starting point. That is the excess cash that we had at the end of the year. A year ago, we started a lot in terms of looking at capacity, looking at growth opportunities, and as you have seen in the capital commitments, we have committed to more than ZAR 2 billion worth of projects over the next three years. Emeris Durban, of course, being the biggest, but many of the others noted by Geoff.
That is giving us a good ZAR 2 billion of CapEx to be invested up to mid 2028, 2029, which starts consuming this ZAR 400 million-ZAR 500 million that we are generating every year. In the interim, we actually said, well, because we have got a surplus from 2025, let us start getting into the share buyback game. We are very confident in terms of our projection for the rest of 2026.
But the commitment to making much larger share buybacks is driven by what is in the pipeline on the capital commitment side. I think it has been a good start. We are very open to it, and it is a very, can I say, flexible model to give money back to a shareholder in the short term. So it has been positively accepted, and it was a start. We will be considering a bit more on that, but I think the cash generation future projects is important to consider in the next three years.
Thanks. Then you mentioned Emeris and the fact that that is becoming very sizable and what our future plans are there. The market is a very interesting dynamic. I think we have experienced the tailwind of a cap on state places for the last couple of years. There is a fast-emerging second tailwind, which is the deterioration in the quality of teaching and learning in those public universities.
We have got some interesting research on that. 66% of students, 2/3, going to Emeris in the first year now tell us that we are their first-choice institution. So I think we need to continue to build advantage in systems, security, facilities, all of those things, so that we are a better choice. You mentioned the new development in KZN. I think the KZN university situation from a state point of view is poor and deteriorating. I think it is a big opportunity for us. I think we'll continue to benefit from the tailwind of a cap on places, but the additional tailwind of deteriorating quality in the state system will also help us. We've got some quite ambitious plans to grow both Emeris and Vega. I don't know if you want to add anything on to that, Hannes?
Nothing from my side.
Happy. Okay. The Emeris-Vega sector is very much people graduating from private school. It's around the same sort of price as our average private school fee point. For Rosebank International, we're much more into the main market. The average fee price point, ZAR 90,000-ZAR 95,000 for Emeris, but about ZAR 35,000 for Rosebank International.
The degrees you offer, what marks are they?
Okay. Well, I think in Emeris, we've been heavily invested in degrees and honors and looking forward at more post-graduate qualifications. Historically, we've been focused on ordinary degrees in Rosebank. We're adding honors and adding PhDs, and we're looking to expand research in both institutions. That's the history. Okay. The LSM profile, upper end for Emeris, more main market for Rosebank. Okay. You also asked about avoiding failure in Africa, which I think is a very good question. I think we've been very choiceful about the countries that we've gone into, and that's important. I think we've got growing expertise scale in the markets we're in, which is an insulation against market risk. I think being in a small number of carefully chosen countries gives us a portfolio, which again is a risk-reducing move. You also talked about funding.
Unless we have a really large capital requirement, we have been funding African expansion with funds generated in Africa. I think just the structure of our business insulates us to quite a big degree from risk. We operate on higher margins. The teaching costs in those African markets are about 20% lower than South Africa. You saw the margin numbers in the presentation. We also have local supply chains. We've got very little in the way of dollar-based costs. About the only thing we buy in dollars are software licenses, and they're very small. I think we've got high GDP growth, high population growth, and we have high levels of urbanization and less competition than South Africa. So it's a big market opportunity, and we've made a number of moves to mitigate risk. But we still see that as an attractive area to pursue going forward.
Again, I don't know if you want to-
The margin, I'm not surprised.
Yeah.
Yeah. Maybe just want to add on to that. Yeah, that Africa portfolio is delivering in ZAR terms about ZAR 200 million- ZAR 230 million pre-tax. After tax, you are looking, say, ZAR 150 million, sorry, ZAR 160 million- ZAR 180 million. If you recall, last year, the Runda transaction was ZAR 170 million. So again, you know what? The cash generated out of the Africa portfolio is equivalent to buy us a school per year. The demand is, of course, far in excess of it, and probably the deals are not always as favorable as the Runda transaction that we have had.
But yeah, we have looked at funding as well in country, but the interest rates in some of these countries are sometimes 3x the South African rate. So if required, we can still fund from South Africa. Our cash flow preservation policy is that we do not utilize the African cash generated in any dividend policy because we are still seeing significant growth in that portfolio.
Yeah.
Remittances from the African countries?
Not a problem in Botswana, neither in Kenya. Ethiopia is a little bit challenging, but possible, and we have tried it on a small scale. At this stage, again, looking at the campus that we had to relocate and the IT investments we are putting in, we have been utilizing the cash in-country in Ethiopia. That will be the most challenging one, but no problem in Botswana and Kenya.
And I think, Frank, the last question, you talked about qualifications and PhDs, and I think that was also your question. We are particularly in Emeris, but also PhD programs over time. Okay. Other questions?
Good morning. Thank you very much for your time, and congratulations on the solid performance. Mr. Geoff, you did answer a part of my question, so it is in relation to the resourcing division. I just wanted to find out if you guys are seeing any new client wins or contract pipelines that could offset the USAID-related losses. My second question is in relation to the Emeris Sandton campus. I saw that you guys are looking into adding student accommodation there. My question is, do you have land or space for that on your existing site, or would you have to acquire additional property?
On that, when we last spoke to Mr. Hannes, we were all frantic about the parking situation, and he assured us that this was beginning of year issues that would fizzle out, and I believe that is what has happened. Considering the existing students and staff base, has that parking capacity been factored in relation to adding student accommodation on that campus? Thank you.
Okay, so maybe taking the first of those questions, are we picking up new contracts in resourcing? The answer to that is we are continually cycling contracts. When the businesses that we manage payrolls for become big enough, they would typically take that on and run it themselves. We are continually adding and cycling out of contracts. The contracts that we have picked up have generally been higher margin than the ones we have lost. That is why the margin has improved. We have pivoted strategically away from U.S.-funded NGOs and charities after the USAID decision. We have picked up some contracts and are looking to grow those and also pick up more. That is actually quite a dynamic business. On the student accommodation question at Emeris, we will not actually be building that ourselves. We will work with third parties.
It won't directly be on our campus; it will be adjacent to our campus. That's quite exciting. It effectively stretches the catchment area beyond people who are doing a daily commute. It should help drive student numbers. Then on parking, I think the reality is things do settle down after the beginning of term, the beginning of an academic year in a new location.
We've also taken action to add additional parking and to limit first years parking on site. As I mentioned in the presentation, we've added 200 spaces, or we'll add 200 spaces by the end of this year. We currently have 650 on-site spaces, so we've already got quite a big capacity. We'll add a sizable amount. I think that's about a 33% increase. That should set us up to ease the situation in the short term and also prepare us for growth into the future. Okay. Thank you.
Well done for your results. You answered my parking question, but I have two following questions. One of the slides that stood out to me when you were speaking about the capacities in the, I believe it was the schools or the education facilities. It seemed to me that the Africa campuses are at higher capacity than the South African ones, which to me seems like a mismatch because it seems to me that South Africa, particularly the schools division, is sort of stagnating in student growth, and Africa is supposed to be your growth engine. So, how do you deal with that mismatch?
Yeah. I'm not really sure that is a mismatch. I think those schools are full because of market demand and because of the growth that we've had historically. So utilization is a function of demand and success. I think we've got, for the reasons that I just laid out, a more dynamic market opportunity in Africa. Less competition, high GDP growth, greater levels of population growth, urbanization. So I think we've got strong brands, huge market demand, and that's led to full schools. Our focus there, as I said in the presentation, is to create extra capacity to accommodate that demand. But I think it does actually make logical sense if you think about it.
In terms of filling up the South African schools, because I know it is a tough economy here. GDP is not really growing.
We have had continual enrollment growth in South Africa. It was slightly muted in this last round.
We still grew, and I think in certain areas, we still have a demand outstripping supply. Some of the developments that I spoke about in individual schools are about increasing capacity. If you look at the estate in total, we do have some room to grow. That is not necessarily a bad position. You cannot actually run high schools at 100% anyway.
No, of course.
I think when No. When you are running multiple subjects, that creates an inefficiency. In a primary school, where you have got a dedicated class and a dedicated teacher, then you could get to 100 or very close. In a high school, you are never going to get to 100. 84 is a pretty good number. 93 is actually slightly uncomfortable in Africa.
Mm-hmm. Okay.
Can I maybe just add, I think we had a lot of questions earlier on not opening up a big school for 2027, but we've looked at a lot of our sites in the various brands, building on, as we've shown also on the pictures, and there is quite a lot of capacity that's being added on for January in some of those areas where there is high demand or full schools that we've been able to effectively, actually indirectly build a new school. On current existing sites.
All right. Thanks for answering that question. Then in terms of the Emeris campus, I mean, the brand, you said it's similar to where your private school students go. I am assuming your Crawfords, those kind of schools. They want to send them in through to Emeris. I know you do have a campus in Grayston, but to me it seems like these kind of students, they want to go to Stellies, they want to go to UCT to have that kind of experience. Would it not make sense then to build in these sort of areas, so they can live their upper-class student lives, if you want to call it that?
Well, as I showed on the slide, we have got campuses all the way across the country, so we are quite well represented. We are adding sports facilities, recreational facilities to address that imbalance. I would maybe just pull you back to that stat that I shared, where for first-year students this last year, 2/3 of them had Emeris as their first choice, and they would have had all of the state options to choose from.
Okay. All right. Thank you.
Okay. Yeah.
Good morning again. My name's Nell from Mazie. A lot of your growth in that tertiary division, and I stand to be corrected, comes from the Rosebank International brand, right? Which earns lower revenue per student, I believe. How should we think of that medium-term margin trajectory as the mix shift continues?
Well, as you point out, the revenue per student is lower. The percentage margins are actually pretty similar. It really has a revenue impact more than a margin impact, that disproportionate growth in Rosebank International and distance. Building a revenue impact, not so much the percentage margin.
Yeah. I just want to add onto the same. Yeah, I think we've been seeing that our tertiary margins been growing for the past three years significantly, even with that mix impact. Our guidance have been that it's been between 3% and 5% in terms of the mix on the revenue. I think we can now actually start bringing it down to 3% - 4%. And in these actual results, you've seen a 19% enrollment, 17% revenue. So yeah, we're getting closer to actually the enrollment number on the revenue mix. But on the margin side, again, the model is based on high volume. You actually get the margin. And that's where it works.
The balance over time, as we accelerate growth in Emeris and Vega, is having less of a mix impact on revenue. And as Hannes was saying, our guidance last year and this year is reducing.
Do you have a limit on class size?
In schools? Yes, we do. We keep that to low numbers across all of our SA schools. The numbers are slightly higher in Africa, where the model is more about scale. But yes. We are 25, 26 in South Africa, and up to about 34 in the African schools.
Thank you. There are quite a few online questions. I will just go through them one by one. A common theme across all. I have said congratulations on the good results. First question is, the SA schools revenue growth. It was mostly driven not by student growth but by other factors, probably mix and pricing. They want to know what is the average fee increase in SA schools, and how are you balancing that with affordability?
Do you want to take that one?
Yeah, sure. Our average fee increase, various brands had different increases, and again, dependent on which grade, was between 5.5% and 6%. Then if you add the 1.4% enrollments on that, you are getting close to 7%, 7.5%. That mix impact is just as we have given guidance, that the high school student proportion is much bigger than your primary, pre-primary at a higher fee. That mix impact gives you that extra 1%, 1.5% up to 8% revenue increase.
Yeah. I think strategically, we are trying to limit fee increases to the lowest possible level to drive both affordability and value for parents. That in turn should drive enrollment growth, and that is where really we want to see the commercials benefiting. So we are not trying to push pricing. We are trying to make pricing as affordable as possible, and then see the benefit of that coming through in enrollments.
And capacity utilization.
Yeah. Frank, you should come back.
I love hearing what you do.
Yeah. Maybe one more question online. How many have we got there?
We've got about six.
Okay, let's cover those, and then we can close.
Okay. Can you give a sense of the property mix between owned and leased? How do you strategically see the owning versus leasing decision as you accelerate capacity?
Yeah, I think in schools, we like to have certainty of tenure with specialist buildings, so our preference is to own. Most of the schools, we would actually own directly. We prefer leasing in the main because of the flexibility around growth in tertiary. We have a very sizable property portfolio as a result of that. I do not know if you want to comment on that one, Hannes.
Yeah, it is kind of a flip side of each other. On schools, it is about a 75/25 owned versus leased, and in tertiary, it is exactly the opposite based on our historical model, whereby we went into smaller, can I say, nimble campuses that we leased. As you have seen on some of the real estate changes, a lot of our views are changing on that, whereby we now actually look at mega campuses and rather own those campuses. The tertiary landscape is changing because of the extramural facilities that we are creating and our long-term view on a certain location. But yeah, if you look at just a total count, it is a 75/25 mirror split of tertiary versus schools.
This question is on capacity. Just want to clarify, the Rosebank, Braamfontein, you mentioned that that building is almost already full. Does that mean that the increase to 15,000 from 11,500 has already been absorbed? I do not know if you know. The second part is on Emeris KZN. What would be the incremental increase in capacity once on the new site compared to current capacity?
Yeah. Well, taking the first one, we, through the Braamfontein expansion, have increased capacity from 11,500 to 15,000. The new buildings that we bought will give us extra capacity of 4,000 immediately with an ultimate increase of around 9,000 from those buildings. We are not out of capacity at Rosebank, Braamfontein this year, but with next year's intake, we are going to be very tight on space. So we are planning ahead of the curve but only slightly ahead of the curve. And Emeris capacity, if you look at our regional consolidation of our existing sites, it is round about a doubling of existing capacity, that new Cornubia site near Umhlanga.
Question is on Schools Africa. How much of the revenue growth is organic, and what was the currency impact on revenue?
Okay.
Yeah.
Well, I think I have covered the currency impact, which was quite sizable. But, Hannes, you look like you look keen to handle that one.
No. No problem. Yeah, I think the only addition that we have had in the 2026 period now versus 2026 last year, taking into account that Flipper was included from 1 January 2025 already. So the only additional, can I say, acquired capacity in these numbers are the Runda Campus, which at high level, I would say on the total number is less than 10% of the operating profit. And yet Geoff also indicated the 24% growth that we have had there. So all growth basically in the SA schools, actually, the Africa schools, have been organic.
Yeah, just to mention, and we did not get to those rates, but some of these, can I say, Forex rate differentials from quarter one 2025 to quarter one 2026 range between 14% and 30%. So if we did not have those rate differentials, Africa revenue and profit would have been between 20% and 30%. They were quite significant. We did experience them in the latter part of 2025, and I can at least say that from December till now, we are only seeing a 4% differential. It has been a slow drip on the rand's strength against the African currencies.
I feel like some water. What else do we have?
A question on, when do you see RIUC in Ghana breaking even?
Do you want to cover that one, Hannes?
Yep, sure. I think all our models on definitely tertiary is when you have a full three-year degree university running. So our model is indicating that. We are just in year one with 250, 300 students. So we need to be in year three, then actually the university will break even in Ghana.
Okay. I think there is just two more questions. Do you want to comment on the reasons for the loss allowance coverage being reduced?
I don't think it is reduced. I think it is an effect of looking at our detailed debtors' performance. We are very confident that if we are growing debtors at a far lesser percentage than revenue, we are actually putting a lot of processes in place with regard to debtors' control. I think our communication is better, our customer service in assisting our parents to pay, and our prompt follow-up is much better than in prior years, and that has driven a lot of the debtors' performance. So it is an impact of the actual debtor amounts that we have outstanding.
This should be the last question. What are the incremental ROIC that can be expected, taking into account all the CapEx that is planned in a worst case, base case, and best case scenarios?
Not sure that I can give forward-looking information like that. I think I've disclosed in our integrated report is that we are aiming to have our ROIC numbers at at least WACC + 6%, which is probably around the 17%-18%. Most of our projects that we do invest in is currently generating far in excess of those rates, especially tertiary, whereby deployment of capital and profits, the timing between that is much quicker than in schools. I do think with the bigger growth in tertiary, a lot of our projects are far exceeding that target. So I'm quite positive that in the next few years, ROIC will definitely be increasing at similar, if not bigger trends.
Okay, I clicked one last refresh and no further questions, so thank you.
Great. Thank you. Okay, I think we'll wrap it up there. Thanks to everyone for attending. Please join us for some drinks and snacks outside, and don't forget to collect that Capsicum Chefs gift pack before you leave. But thanks very much.