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Transcript

ADvTECH Annual Results for the year ended 31 December 2024

GEOFF WHYTE

And then getting into the results presentation. First up, a welcome to our new CFO, Hannes Boonzaaier.

Hannes joins us from Afrocentric Group, where he's been CFO for the last 10 years. He has some excellent listed company and M&A experience, I think he's known to a lot of the analysts already, and winner of multiple financial industry awards. We were going to list them, but we didn't have room on the slides, so take my word for it.

And then just getting into the performance, very high level, we'll get into the detail as we go through the slides, but revenue up 8%, operating profit up 14%, our operating margin improved by nearly a point, to

21%, and then we had a 16% increase in HEPS, NEPS, and the full year dividend. I think it's also worth noting that our earnings per share number has moved through two rand for the first time, whilst our dividend has moved through the one rand mark, so some big milestones.

And then again, high level but divisional performance. Schools South Africa, revenue up 11%, operating profit up 12%. Schools in the rest of Africa, revenue up 18%, operating profit up 28%, and in tertiary,

14% growth in revenue, 15% up on operating profit.

Resourcing down a little bit on revenue and operating profit but, as covered at our strategy last year, and looking at the relative size of the divisions, it's just worth noting that our education businesses account for 94% of our operating profit, so the Resourcing numbers have a limited impact overall.

And then just a reminder of our brand portfolios across schools, tertiary and resourcing. Under schools, you'll note the addition of the Flipper Schools group in Ethiopia, and a first outing for our new branding for Abbotts, and The Bridge, which are here, and here. And under tertiary at the bottom in the middle

[of this slide], I'm also pleased to be able to share the new logo for Rosebank University in Ghana, which

I'll talk more about later.

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And then the headlines on enrolments. These are up to date numbers measured against the same dates last year. And looking at the total group number, we are up 13% year on year, and then if we split that, the schools division is up 11%, and the tertiary division up 14%. And if we look at the CAGRs, you can see that we are accelerating ahead of the five year compound annual growth rates, both at a total and divisional split level.

And we're also delighted to have crossed a couple of major milestones this year, with tertiary enrollments breaking through 60 000 for the first time and total enrollments going through 100 000. And

DIDIER OESCH

Okay, good morning. I'm just going to deal with the debtors, cash flow, some return on funds employed, capex and the dividend.

So let's start with debtors. I think we all understand the tough economic environment we are dealing with at the moment, but notwithstanding that, I think we're very pleased that our debtors actually declined year on year. The gross debt is down 1%, if you take the revenue increased 8%, that's a real

- 7 - d ecline of 9%. If we start with, look at it by division, schools actually did increase by a little bit faster than their revenue growth. I think the majority of this debt is in South Africa, about 120 odd million of the

131, so Africa, really very, very strong collections.

In South Africa, also at 120, it's a bit worse than last year, but still not a bad result. I think within the underlying numbers, a really good positive for us, is in the prior year, of the 106 million, 35% was active debtors, so where the kids are still in our schools, and the balance inactive, which is a more difficult collection. In the current year, 41% of the debtors book is active students. So certainly, had a better mix.

So with the active students, we've pretty much collected all of that money subsequent to year end, and with the level of provisioning that we have, there's only a very small amount to still collect on the inactive debtors in order to get ourselves up to these provisioning levels. So that more favorable mix has allowed us to have a slightly lower coverage ratio, dropping from 60 to 58.

I think the standout performance is tertiary. We are 5% lower in terms of the gross debtors’ number, notwithstanding a 14% revenue increase. So again, in real terms, that's a 20 odd percent improvement, so a really great performance, and I think it's really our systems are now, sort of like, we've enhanced them over the last few years, we've added debt collection tools on top, and, you know, the teams are really driving this aspect very hard. Also the decline in the absolute numbers, but also more favorable aging, that it's more in our favor, more recent debt, so that's also allowed us to reduce the coverage ratio marginally from 50% down to 49.

Resourcing, relatively small number, but an increase year on year, again, if we look at the 41 million, about 10 million is in South Africa, so that's a really small part of it. The balance is rest of Africa, and in rest of Africa, we actually changed the way we do business with our clients, which has driven this debtors’ number up. So previous, we run payrolls for major companies, and we are reliant on them paying us ahead of us paying the employees on their behalf, and if they default on that, it puts us in a very difficult position, because for a lot of these, we are the employer of record, so have the legal obligation to pay these employees. So what the management team have been doing, is that they've been insisting on getting deposits from their clients for one month's payroll, so that we're not in a position where if they

- 8 - d efault, we in this difficult position. But I mean, the opposite of that is, I then extended the payment term slightly, which has driven the debtors’ number, however, we've got the money sitting in the deposit account, which shows under creditors. So overall, we actually in a better cash position, although from an accounting point of view, it shows a slightly more negative.

Credit losses have moved roughly in line with the education growth in revenue, where, and that's where the bulk of our debtors is in any event. So I think overall, it remains in a steady state.

Okay, moving on to the cash generation. I think a feature of this business has always been our inherent, our strong, inherent cash generating ability, and that continues. And I mean, as we grow our scale, it just gives us more money to invest in, more opportunity to give funds back to the shareholders, and keeping ourselves in a healthy position, and providing us with opportunity and firepower to take advantage of any opportunities that may come our way. And again, you can see that consistent, you know, double digits mirroring the earnings.

So the benefit of that strong cash flow over the five year period that we're looking at, you can see that borrowings did reduce, in the current year, that trend turned a little bit, where borrowings increased marginally. I think there were three main factors that drove that. The one is the opportunity to acquire the FNB Training Center, which was obviously 180 million check, that was not in our initial plans, but, you know, again, we have the firepower to take advantage at short notice of opportunities that come our way. The other was the acquisition of Flipper, the net impact was 76 million, because although the purchase price was 136 million, the business had 60 million cash in it as well. And then the last aspect that drove that up was the more generous dividend policy that the board approved a year ago. But if you look at it as a ratio to cash generation, it hasn't moved. We well within our covenants, we still believe that we're on the low side of our optimal capital structure, and, you know, could invest in good investments, and drive up the borrowings comfortably, provided, obviously they are investments that are going to enhance the group overall.

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L ooking at the ROFE, you know, we've shown sort of approximately 2% gross per annum over the last few years. That has moderated a bit in the last year, but you can see it's on the back of a significant Capex and acquisition programme. So, I mean, I've always guided sort of capex at somewhere around the 700,

750 million, which you can see 2022 and 2023, were roughly in that range, maybe a little bit lower in 23, but now it accelerated quite a bit, and it's really, again, the Flipper, and the FNB that drove that up. Now, the issue is that we, it's in our asset base for the second half of the year. So, you know, using the opening and the closing balance, so your asset base goes up, but we haven't benefited from the, you know, the income from those investments to any material extent at this stage. I mean, FNB, not at all, and for

Flipper only for two months. In fact, just excluding the Flipper asset and taking out the profits that they did make in the last two months, would have pushed the ROFE up by another 0.1%, so it will, you know, it's slightly muted growth, but still moving in the right direction. And as those investments come on stream, we think that'll drive that, the return on funds employed up again. Again you can see for 2025 not necessary our biggest capex, but some openings, Pinnacle, Ridgeview, so that's more capacity coming on stream. Obviously, the Capex is spent largely in 2024 for the opening, and then again, the

Capsicum, the West Rand site, and Rosebank International, we started investing already in the last quarter of last year, towards getting it open for its September opening.

I think, a slide we've never shown before, the return on invested capital, or ROIC, as the investor community knows it. We have decided to introduce this as our sort of headline measure going forward.

I think that, you know, having assessed the various return measures, we find that invested capital sort of takes into account all forms of capital, no matter where you get them from, whether it's equity borrowing, short term or long term, and it's an after tax measure, so it'll, you know, it's relative to WACC.

It gives you a more accurate measure than probably the return on funds employed. Executive remuneration will be based on this measure going forward, as opposed to ROFE as it has been in the past, and so you will see this presented in the future on a more regular basis. I think again, saying that it's a good comparator to WACC, we have determined our whack to be a 12.3%, I'm sure all investors run their own models, but I'm sure that we're not far out either way. And so, on that basis, we 3.4% ahead of our cost of capital, and again, also steadily improving.

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Moving on to the capex, the new school, that's Ridgeview, that the high school that you saw the pictures of, I don't know, schools don't look the same as when I was at school, you know. And then that at our more mid fee level, never mind a premium level, so ja. Then we move on to the Tertiary, the, sorry, the three new sites. I think the first one is a FNB site that we acquired. We spent another 6 million on, you know, starting to prepare it. So 186 million was spent on the FNB site last year. Then you've got the Vega

Pretoria, where that got built out, and then the last one was the Polokwane, where we acquired the one building and then the other building, and have kitted them out, you know, so that's the three new sites.

In terms of the business and teaching and learning systems, again, there's quite a few things in there, but three standout projects, the rollout of Microsoft D365, to schools, support, office, and shared services, occurred, it went live in May of 2024. Now this system has significant functionality that our old system didn't have, so we can now start harnessing some benefits that we were not able to get from the old system, like, for instance, we now have workflow built into the systems. We have the ability to consolidate creditors ledgers, which will enhance our procurement going forward, it'll, you know, if you've got your consolidated creditors list, you know how much you're spending with each creditor, as opposed to each school having their own creditors list. So you can, you know, start grouping and negotiating discounts or rebates going forward. The second system is the HR system, we rolling out an

HR system, Success Factors, in a phased approach. And the first few modules went live in the last financial year, and more modules will be coming live going forward. That also included sort of changing the payroll system and outsourcing our payroll, which we believe in time, while there might be initial inefficiencies in time, will again enhance our operating efficiencies. And then the last one is we've swapped out our

LMS systems, where we now using Bright Space, which has got a lot more functionality, it's much more modern, we can do much more adaptive learning, personalised learning journeys and that, so we believe that is going to significantly enhance our academic offering going forward.

The additions to existing sites, I went through the capex list yesterday, and I counted 17 sites, that we made some form of additions or improvements to. The bulk, or the bigger of those projects, would be

Gaborone International, where you saw the pictures, that's now complete. Crawford Pretoria, we've done significant renovation in that area. And then three Pinnacle schools, being Waterfall, Kyalami and

Raslouw. Now, Raslouw, we were supposed to pause now, and in a year, or two, continue with the fourth

- 11 - and final stage of the development, but their enrolments have again been so strong, that we've just told the contractors to stay on site and finish the school. So Raslouw will be fully built out, in its, I think, in its full third year of operation, so it'll be fully built out in its third year and probably full within four to five years of opening. Furniture fittings and IT, we had quite a lot of swap out of IT equipment in the year, replacing aging equipment. And then also, obviously having to add equipment to accommodate our growth, as well as to make more equipment available, as we using more IT related tools in the teaching environment. And then the acquisition is Flipper net of the cash in the business, on acquisition date.

Right, moving on to the dividend. So firstly, you know, we've spoken about our cash generation being very strong, and, you know, our investment program, you know, we've been able to fund it in the current year, marginally, not completely, but I think over a sustained period of time, we funded it quite comfortably. So, a year ago, the board decided to change the dividend cover from 2.4 times, to 2 times.

If we look at the final dividend, it's up 11% on last year. The prior year included a bit of a catch up of moving from the 2.4 to the 2 times cover. The full year, 16% up at 101 Rand cents, which is exactly in line with the earnings. So we've maintained that cover, and, you know, I think the board will probably maintain that cover for a while longer, and then assess, you know, what investment opportunities are in front of us, and then make a decision to, whether to continue with that, or maybe be more generous, it'll really depend on what opportunities come our way. I think if we look at it over a period of time, you know, you can see consistently moving up. I think, as Geoff said, in, you know, the strong growth, we've hit the one rand with the dividend, I mean, in 2021 we hit the one Rand in earnings per share for the first time, and three years later, the dividend has surpassed that, so we're very pleased with the performance and the cash that we can give back to the shareholders. You can see how it's played out between interim and final. And I know that we've used the COVID year as the base, of the, sort of, the 50% compound is maybe not the most accurate reflection, but I think any business that can double its dividend payout in a three year period, I think hopefully shareholders would be happy with that. Okay, I'm going to hand back to Geoff.

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GEOFF WHYTE

Thanks Didier. So just a couple of slides to wrap up, a reminder of our forward vision. So we've 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. That second point, particularly acknowledging the centrality of people to our overall business.

And then an update on the strategic imperatives covered at our 2024 Investor Strategy Day. So if I just run through these in order. Looking at the addition of tertiary qualifications, we're making good progress here, adding high demand degrees at both Varsity College and Rosebank. VC is focused on adding Law,

IT, Health Sciences, and Higher degrees, including work on nine new Masters, and three PhDs.

Rosebank is also adding Law degrees alongside Commerce, Education, Social Science, ICT and security studies. And Rosebank will add their first Masters in 2026, and their first PhD in 2028.

On the simplification of brand structures point, this is an ongoing process, but we recently brought

Oxbridge under the management of Rosebank College, and on the school side, we've moved

Charterhouse to the Pinnacle brand, but that process of simplification will continue.

And then the Optimisation of brand propositions and marketing again, as covered at the strategy day, we've developed detailed propositions for all our brands, and we're now working on both delivering and communicating these effectively. And I think it's fair to say that there's been a step change in the level of our marketing over the last year, which is benefiting enrolment growth.

And then our investment to secure university status, I covered a bit of this earlier, but it's a significant area of focus, and we will be ready to apply as soon as the final criteria are published.

And then the expansion of African operations. This initiative is progressing well, as you've seen in the numbers, the 40% growth in African schools that I mentioned earlier on the enrolment side, and the imminent opening of Rosebank University in Ghana, underscore the point.

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And then aggressively growing distance tertiary, as explained at the strategy day, we believe that distance tertiary is a significant area of opportunity, and driven by an expansion in our qualifications basket and better marketing and operations, we grew distance enrolments by 40% this year, so that is very much on track.

And then further extending our academic advantage across all our brands, we continue to invest in people and systems, to improve academic outcomes in both our schools and tertiary divisions, leveraging our 160-strong central academic team. I mentioned our academic results earlier, but we believe that excellence in this area is central to attracting students in a competitive market going forward.

So solid progress there, and then just a quick run through on prospects.

We think that the tail winds in South Africa’s demographics and the supply and demand balance continue. Strong demand for quality education definitely persists in the markets that we operate in. We believe we lead by a margin in teaching and learning. We have a sound balance sheet, the strong cash generation that Didier just mentioned, and growing scale and expertise in Africa. We're working very hard on extending our competitive advantage across the business, and because of that, strong cash generation and sound balance sheet, we're able to invest with confidence when areas of opportunity come up. So, we are in a good position to maintain our growth trajectory.

And if I could pause for a moment and and beg your indulgence, I just want to close by taking a minute to talk about our retiring Commercial Director and CFO. Although Didier has kindly agreed to stay on to support Hannes in a consultancy role for the next year, he officially leaves us at the end of April, and he departs with an impressive track record over two decades. As you can see on the slide, he joined us as a group financial manager in 2005, I don't know if someone died, Didier, but you were promoted almost immediately to Group Financial Director, and then with a big expansion of responsibility in 2019, when

Didier took on the Commercial Director responsibilities alongside CFO.

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And [on the next slide] if I could just cover off some of these shifts. So student enrollments going back to when Didier started were 10,000, they’re now 105,000 as we've covered. Group revenue has gone from R661 million to R8.5 billion and our employees have quadrupled. NEPS has gone from 15.7 cents to 202.5. The share price when, incidentally, Didier acquired most of his shares, was R2.1, and jumped to R33.84 at the end of last year. And if you look at the share price, including cumulative dividends, it's gone from R2.1 to R39.78. And just to pause for a second, the sharp eyed amongst you might be wondering, why we have a 2023 employee number. Well, we wanted to surprise Didier with these slides, and no one was willing to commit to a 2024 number, unless he'd seen it. So we went with 2023. Anyway.

Didier, this is a record to be very proud of, and from everyone at ADvTECH, warm thanks for all you've done. We wish you a long and happy retirement. Well done.

GEOFF WHYTE

And now we can move to the Q&A. Didier if you wanted to join me quickly.

HANNES BOONZAAIER

Didier, maybe we want to start with a question in the room.

GEOFF WHYTE

Right at the back there.

QUESTION

First guys, well done, fantastic results. I think it was slide seven or eight, on the school enrolment. I just want to zoom into that and zoom into the South African segment of it. You obviously have higher LSM schools and some mid to lower. What do their enrollment differences look like across the LSMs’ and across the market positions there.

GEOFF WHYTE

We’ve seen strong growth across all our brands, so it's been relatively even. I mean, clearly when you

- 15 - add a very strongly performing new school in Raslouw, it helps Pinnacle. But we've seen strong growth across the brands.

QUESTION

Okay, and in terms of the bad debt profile, or at least the provisioning on that, likewise, similar, comparisons.

DIDIER OESCH

Slightly higher on the lower fee schools, but I mean, it's not material. I mean it's, we're talking about, you know, I mean, our overall bad debt is 1% across the schools. So, I mean it's sort of, maybe the premium schools are 0.9, 0.8, and the lower fee schools maybe just over 1%, so it's not a material difference. There is a slight difference, noticeable, but not material.

Thanks very much, guys. Maybe I could just echo what Geoff said, Didier, it's been wonderful interacting with you across the years. And like to welcome Hannes.

HANNES BOONZAAIER

Whilst we're just getting ready for another question in the room, just a question online, maybe some background, just on the Ghana operation, which town, did we acquire it, and how was the acquisition funded?

GEOFF WHYTE

Well, we're in Accra. I don't know if you want to cover the detail, Didier.

DIDIER OESCH

So, I mean, it's not an acquisition. I'm not sure if the questions may be mixing a little, so let me deal with

Accra, and then we can come back to Flipper. So, I mean, Accra is where we're renting a building that we

- 16 - obviously kitting out. So again, you know, we want to test the market. We're very confident that it's going to be successful, but, again, we want to test the market before we put, you know, meaningful capex down. So, it's a relatively limited amount of money that we have to spend up front. I think it's about 20 - 25 million, if I remember correctly, upfront, and as we prove this success, we will obviously, you know, release more capex to make this a meaningful size business. I mean, the initial phase is 1 500 kids, but I mean, or students, but I mean, that's not our ambition. Our ambition is to have, you know, meaningful businesses of scale. So we'll continue driving that as we, you know, have tested the model and prove it.

Just in terms of Flipper, if the question is more related to that. We did fund it out of funds from South

Africa. But we believe that will be the only requirement of their funds, yhey've got significant funds in country. They are very strong, strongly cash generative, and we believe from here, we will be able to use their cash flows to fund the build out of the school. I think you all aware that it is quite challenging to take funds outside, out of Ethiopia at the moment, the lack of foreign currency. I mean, there's lots of progress in the country that we think is moving in the right direction, granting banking licenses, opening a stock market, really softening the regulation. But when we make an acquisition like this, it's not just about the initial investment. We want a runway of at least 10 years’ worth of cash that we generate, that we can reinvest, so that we're not stuck in a position where we might have entrapped cash, which is potentially devaluing. So, the team is working on the further expansions, looking at various sites, and we're pretty confident we will be able to roll out a meaningful business with the cash that they have already on hand, together with the cash that they are going to generate over the years.

HANNES BOONZAAIER

Sorry, Didier just linked onto that, another question coming up a bit later on, the Flipper acquisition, just confirmation whether it was done in US dollar or Ethiopian birr, and the confirmation of the 76 million net cash.

DIDIER OESCH

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Ja, so the, sorry, the 76 is the purchase price. The cash was 60 million. The bulk of that cash is sitting in birr within the country. The acquisition was actually done via Mauritius, because there's a holding, their holding company is in Mauritius. And so, we acquired the holding company, and it was paid in US dollars, but, I mean, the Rand equivalent is 136, there's no further exposure, that is the number.

QUESTION

Didier, it's James here. I just also want to thank you for all the years that you've, that we've worked with you, it's been incredible. Thank you. I have a few questions. The first one is, when you move into, when you move Varsity College in Vega, into Greyston, what is happening with Benmore, that campus, what is the carrying value in the books. Then, when you get university status, do you think there's a step-up opportunity in fees, and lastly, do you think that the Cambridge curriculum has a place in the South

African schools?

DIDIER OESCH

Okay, so, we own both the buildings in Benmore and the Vega building in Craighall Park, obviously the site that Varsity College is on has a Crawford as well, so actually, Crawford takes a bulk of it. Our properties team have been doing an exercise to convert the Varsity College into the group head office, and the initial, well, I mean, I think we're quite far on the, in the process, and I think it's going to give us a very good return. It'll enhance our profits, and it's a good investment if we take the rental that we currently paying in our office park.

The other thing is that we can fit in our whole head office, get a return, and we've still got approximately

800 square meters spare. That's also after putting a teacher training center in place. So we, the academic team want to enhance the training of our lecturers and teachers, and so we'll move the whole head office, have a, you know, a really great space to do training of our own staff, and have 800 square meters spare for future expansion, you know, of our shared services and other departments as we, as required.

So we believe that one’s, you know, great opportunity. In terms of Vega, we are considering some options at the moment, in terms of housing one of our brands. We still busy working on that, but, you

- 18 - know, so hopefully we can put one of our other brands into that site, but if not, we will dispose of the building.

GEOFF WHYTE

So, you asked a second question about possibly stepping up the fees, University pricing. What was the other question. Cambridge and SA, okay. Well, let me talk about the step up in fees. We are actually doing a major pricing project to try and optimise profitability and enrolments. So,I don't think we would plan to step away from that project when we get university status. We see the big upside in enrolments, so we're not looking to charge higher fees, but we do think there is potential when we have equivalent status to really drive enrolment numbers. And then on the Cambridge curriculum, it works very well for us in Africa. We do have a little bit of it in South Africa, but I think overall, we think

IEB is the stronger option.

QUESTION

Thank you. Excuse me, morning and once again, congratulations on the good set of results. Just a few questions from my side, on average, how much were the fee increases, year on year?

DIDIER OESCH

Talking 2024 or going into 2025?

QUESTION

I guess you can give me both figures.

DIDIER OESCH

Okay, I think in 2024 it was roughly about 6% at the schools, probably a half a percent or so lower in tertiary, rest of Africa, marginally higher, because they do also have higher inflation rates, and I mean the demand, we see economy is performing better than ours, also gives us a little bit of opportunity.

Going into the current year, it's again, fairly similar, maybe just slightly lower than last year, as inflation

- 19 - has mitigated a bit, but, you know, probably no more than half a percent lower than what we did in

2024.

QUESTION

Then just the second question, is there a possibility of the Makini Cambridge brand increasing its footprint in Africa?

GEOFF WHYTE

Well, there is a very close fit in the brand proposition of Makini with both Flipper and the Gaborone

International School. So, we think there's potential to harmonise those, and certainly we plan to scale those brands in the countries we're in, and if we enter a new country, then certainly that would be an attractive option for us as well. So, the answer is yes.

QUESTION

And then on the University Status, I think the last time we spoke at the strategy day last year, you guys mentioned that you're pretty confident that the minister will publish, like what you guys need in order to achieve that status by last year, December. Is there an update on that?

GEOFF WHYTE

I think I was a bit optimistic. We are hopeful that the final criteria will be issued soon, but we have been serially disappointed. I think the original court order compelled the regulations to be issued in

August of 2022, so they're already quite overdue.

QUESTION

Then the last one from my side. I know Resourcing South Africa is quite tiny in the grand scheme of things, but with business confidence increasing in South Africa, what's the outlook for that business.

GEOFF WHYTE

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Well, I think I covered it on the slide. I think the shift that is required to reignite that South African resourcing business, which, as you mentioned, is extremely small in the group context, is an improvement in the economy. I think at the moment, there is an improvement in sentiment with the

GNU. I'm not sure if we've seen the economic benefits of that yet, so I think if the economy improves, then we'll benefit in our SA resourcing business.

HANNES BOONZAAIER

Just the normal question we usually get, what are the plans for the resourcing division?

GEOFF WHYTE

As I've covered, 94% of our operating profit comes from education, and strategically that's where we're focused. But we make a significant amount of operating profit from Resourcing, and any decisions we take there, will need to take into account value for shareholders.

HANNES BOONZAAIER

Just circling back to the Ghana business, is the 25 million Rand upfront number for all of phase one?

DIDIER OESCH

Yes, that including operating costs. That's a fit out, as well as the costs ahead of starting operations, you know, we obviously have to employ some staff in advance and that. So, yes, that should cover it.

HANNES BOONZAAIER

Bit of a skeptical question, in saying that our enrollment growth is quite high compared to last year's, you know, say overall 7% growth. What is driving the 2025 volume growth?

GEOFF WHYTE

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I think we've got tail winds economically, we've got the tail winds of supply and demand imbalances, particularly in tertiary, but I also think we're doing a great job of delivering great options for students and their parents, at the most attractive price points we can provide. And I think we are clearly winning significant market share on the back of that. So, I think it's a strong performance, but in the context of some tail winds.

HANNES BOONZAAIER

Just another question on the more capital employed, what is your target ROIC on the investments and over what time frame do you expect to see the returns coming through.

DIDIER OESCH

Okay, I sort of our primary measure is actually the internal rate of return. We do look at various measures, but internal rate of return would be our primary measure that we assess projects against.

Clearly, we look at break evens and, you know, sensitivities and all of that as well. But I think again, the way that we build up our returns, is we start with WACC, we take group work, we take single project risk, which is obviously a premium compared to, if you consolidate, and then we look at the specific project as well and what the risk is associated with that project. So, for instance, an investment in resourcing would generally be a lot more risky than an investment in a school. So that would play out.

Also depending on what Capex is and what business it's in, the time period that we allow it to get to the hurdle rate may change. So, for a full K-12 school, we typically allow about 15 to 25 years to get there, a tertiary institution closely, usually closer to 15 years, and obviously, if it was in resourcing, it would be a lot shorter than that. So, I mean, and again, we take country risk as well into the project, you know, when we put the risk premium, we'll take country risk into it. So, I mean, generally, we would be aiming for about 25% to return in terms of IRR. I mean, if the project is not very risky, we would go a bit lower than that, and clearly, if it is more risky, we may require more than that, and then also the period that they have to obtain that in can also change, according to the investment that we are making.

HANNES BOONZAAIER

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I don't see any more questions in the room. Maybe a last question online.

QUESTION

Morning Geoff and Didier, great to be here, and congrats on the solid performance. My question is, in thinking about ADvTECH as a fundamental growth stock, one of, I think the important factors is what is a sustainable growth rate, and the balance between mature and maturing parts of the business, and the growth and investment parts of the business, and how do you think about the sustainable growth rate versus perhaps a really eye catching step change, that will give you massive growth, and therefore massive capital requirements in any of the spaces that you've spoken about, or perhaps something that you just dream about. Thanks.

DIEDIER OESCH

Look, I mean, we always looking at opportunities to accelerate our growth as fast, you know, as fast as possible, but balancing it as well with the risk. So, I mean, I think that, you know, we, I think we have at a step change in our growth in the current year. I mean, it's hard to say whether that's going to sustain, but I think it, sustainably we have been growing at sort of 7, 8% in the businesses. We've started our investment into Africa, which we can, the rest of Africa, which we can see is accelerating, and you know, improving margins and growing at a much faster rate. I accept it's still relatively small in the scheme of things. But I mean, we must remember that other than Botswana, we only started in 2019 with the balance, I think we've added, we're adding two extra countries. We're always looking at the possibility of a needle moving acquisition opportunity, but of course, you know, it's not in our hands, it’s a willing seller, willing buyer situation, and often the price could be, you know, beyond what we prepare to pay.

So, I mean, ja, I think the first thing to us is to obtain sustainable growth, you know, we're not a one-year business, it's sustainable. So, we want to be printing, you know, whether we get 13, 14% next year or not, we certainly want 5% plus, year after year after year, and I think that's our target. And obviously, if we can get something on top of that great, and that's the core of what we do, and then we look for opportunities that may accelerate that. But, I mean, you never know, it's very hard to predict when they're going to come to fruition, but we're always working on them. We in the background, there's lots

- 23 - of things we are working on, but again, a lot of them don't necessarily ever come off, so, but it doesn't stop us from looking.

HANNES BOONZAAIER

Okay, maybe just for all the questions that was asked online. We did cover a few of them with the questions asked in the room. But a last question from the online group, is, given the significant learner growth in tertiary do you expect margins to still increase?

GEOFF WHYTE

I think more students, gives us more opportunity for operational leverage. So yes, I think there's every chance that we can continue pushing our tertiary margins.

HANNES BOONZAAIER

Sorry, I think the online grouping is definitely asking more questions. Something coming up.

Ja, there is, just referring to the Moneyweb story yesterday about the 100,000 matriculants with bachelor passes, and how can ADvTECH absorb this into their tertiary system. Are these the tailwinds that you spoke about?

GEOFF WHYTE

That imbalance of supply and demand, I mean, it's always difficult to you quantify exactly what that is because of multiple applications to the same institution, but I think there is an imbalance of supply and demand, and we will capitalise on that by offering the right qualifications at prices that people can afford, and that's our strategy across our portfolio of tertiary brands.

HANNES BOONZAAIER

I think that concludes our questions online as well.

DIDIER OESCH

Great, great, thank you.

- 24 -

GEOFF WHYTE

Okay, thank you, everyone. Don't forget to pick up your gift pack, put on a kilogram, and help yourself to some lunch. But great to see you all. Thanks for coming through, and once again, thanks to DIDIER.

Thank you.