interim financial results · interim financial results for the six months ended 30 june 2015....
TRANSCRIPT
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Interim Financial Results
FOR THE SIX MONTHS ENDED 30 JUNE 2015
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Agenda
1 Environment
2 Operations
3 Financial analysis
4 Strategic and prospects
5 Questions
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GDP E
NV
IRO
NM
EN
T
1
Source: Stats SA 2015
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UNEMPLOYMENTE
NV
IRO
NM
EN
T
1
Source: Stats SA 2015
35%
7%
15%
30%
13%
June 2015
Not economically active
Discouraged work seekers
Unemployed
Formal employment
Other employment
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OPERATIONS 2
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Group at a glance O
PE
RA
TIO
NS
2
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Scope of operationsO
PE
RA
TIO
NS
2
• Student numbers as at 30 June 2015
Schools 24 000 students at 76 schools
Tertiary 31 000 (25 000 full-time) students at 20 campuses
• The people:
5 024 staff (up from 4 036 at December 2014)
297 with Masters Degrees
37 with PhD
294 Alumni
• Annuity nature of revenue
Roughly 60% of Group revenue from recurring student enrolment
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Enrolment growth O
PE
RA
TIO
NS
2
Student enrolment – ‘000
2013 2014
2015
June
Students (Schools and Tertiary) 30 35 49
Acquisitive growth (y-o-y) 22%
Planned and organic growth (y-o-y) 17% 18%
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Teacher training O
PE
RA
TIO
NS
2
• Varsity College has offered the UNISA BEd degree for the last decade
with an average pass rate of 94%
• Present enrolment = 500 student teachers across the 4 years
• Two new IIE BEd degrees recently accredited
BEd in Foundation Phase Teaching which we are launching in 2016
BEd in Intermediate Phase Teaching to follow
• R3 million bursary commitment at Varsity College
• Schools Division teacher bursary programme supporting 55 students
across all phases
• Comprehensive in-service training and academic development for staff
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TechnologyO
PE
RA
TIO
NS
2
The implementation of Learning Management System (LMS)
• accessed by 10 000 tertiary students already
System for Academic Management (SAM)
• supports some 28 000 tertiary students, and
• 1 500 staff users
Consistent investment in technology opex and capex
• R700m in last six years
Investments in Star Schools and Maramedia
• virtual learning ecosystem which delivers online teaching
• strengthen our capability to design and distribute digital content
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Schools capacity O
PE
RA
TIO
NS
2
‘000 2013 2014 2015
To be
added by
2020
under
R3bn plan
Students enrolled 13 14 24
Ultimate capacity of existing sites 17 20 35 16
% of school capacity available 24% 30% 31%
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FINANCIAL ANALYSIS 3
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Income statement3
FIN
AN
CIA
L A
NA
LY
SIS
R million 1H2014 1H2015 % change
Revenue 959 1 278 +33%
EBITDA 159 254 +60%
Operating profit 117 203 +73%
Profit after tax 81 105 +29%
Distribution (cps) 11.0 12.5 +14%
Free operating cash flow
before capex (cps) 66.0 88.0 +33%
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Balance sheet highlights 3
FIN
AN
CIA
L A
NA
LY
SIS
R million 2014 2015 % change
Tangible assets 1 293 2 438 +89%
Net debtors 185 234 +26%
Fees in advance 459 579 +26%
Shareholders equity 874 1 319 +51%
Net borrowings 88 1 684
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Investment cash flows 2015 YTD3
FIN
AN
CIA
L A
NA
LY
SIS
Centurus 985
Maravest 267
Gaborone International School 90
Rosebank College Building 150
Smaller net flows 48
Total 1 540
Projects in R million
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Revenue trend3
FIN
AN
CIA
L A
NA
LY
SIS
0
200
400
600
800
1 000
1 200
1 400
11 12 13 14 15
R'm
Group revenue
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HEPS trend3
FIN
AN
CIA
L A
NA
LY
SIS
15
20
25
30
11 12 13 14 15
Cents
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Group operating margin3
FIN
AN
CIA
L A
NA
LY
SIS
10%
12%
14%
16%
18%
11 12 13 14 15
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Cash flow generation 3
FIN
AN
CIA
L A
NA
LY
SIS
0 50
100 150 200 250 300 350 400 450 500
11 12 13 14 15
R'm
Cash generated from operations
Cash from operations (after working capital)
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Segmental analysis3
FIN
AN
CIA
L A
NA
LY
SIS
H1 2014 H1 2015 % ch
R million
Revenue Schools 452 683 51%
Tertiary 412 492 20%
Resourcing 97 104 7%
EBIT Schools 70 132 88%
Tertiary 42 64 51%
Resourcing 6 12 97%
Operating margin Schools 15% 19%
Tertiary 10% 13%
Resourcing 6% 12%
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Return on funds employed3
FIN
AN
CIA
L A
NA
LY
SIS
Division Average
funds
employed
EBIT
to June
Return on
funds
employed
2015
Return on
funds
employed
2014
Schools 1 764 132 15% 20%
Tertiary 403 64 32% 27%
Resourcing -4 12 600% 400%
GROUP 2 184 208 19% 23%
• Note: Depending on the assumption used for gearing, WACC is 11%
R million
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Schools division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
100
200
300
400
500
600
700
11 12 13 14 15
R'm
CAGR = 19%
Revenue
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Schools division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
50
100
150
11 12 13 14 15
R'm
CAGR = 23%
Operating profit
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Tertiary division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
100
200
300
400
500
11 12 13 14 15
R'm
Revenue
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Tertiary division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
10
20
30
40
50
60
70
80
11 12 13 14 15
R'm
Operating profit
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Resourcing division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
50
100
150
11 12 13 14 15
R'm
Revenue
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Resourcing division 3
FIN
AN
CIA
L A
NA
LY
SIS
0
5
10
15
11 12 13 14 15
R'm
Operating profit
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STRATEGIC
AND PROSPECTS4
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Capital investment 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
In 2008/9 Group launched a renewed investment strategy for growth
R’m
Actual investment flows last 5 years 2 700
Board approved investment spend 1 500
Board approved projects 1 200
Projects in pipeline 750
Investment aggregate post 2010 6 150
Book value of fixed assets at June 2015 3 727
Ratio 165%
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Capital investment 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Land for development
Sites
Cost
R’m
Land owned for development 13 186
Land under negotiation 7 165
Total land for development 20 351
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R3 billion investment plan 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Investments (Board approved and under development)
Premium Mid-fee Tertiary Other Total
No. of projects 9 8 4 16 37
No. of students 12 134 11 044 2 717 845 26 740
Project cost – R’m
Approved projects* 1 058 1 065 246 338 2 707
Projects in development 750
Total investment projects 3 457
*Total board approved projects. R1.5 billion of this is already authorised for
expenditure
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Capital structure 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Level of borrowings (assuming no new projects added to the
R3bn capex programme)
Currently R1.7bn, mainly bridge facilities
Year-end expected to be at R1.8bn to R1.9bn
Leverage in excess of 4 x last 12 months EBITDA
2016 expected to be marginally higher than in 2015
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Capital structure 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Borrowings facilities
Current covenants allow for maximum indebtedness of R1.8bn to R1.9bn
Current facilities available are R1.8bn
Our Bankers are prepared to temporarily extend our facilities to R2.0bn
Present facilities have effectively been maximised
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Capital structure 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Constraints
Banking facilities are being fully utilised
- Possible constraint to further growth
Little room to navigate a crisis – “MAC”
- Slowdown in economy
- Financial crisis (tightening of credit availability)
- Significant increase in interest rates
Additional funding, if obtained without optimal structure, likely to be costly
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Capital structure 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Objectives
Sound and matched balance sheet
Minimise idle capital
Adequate resources
Efficient cost of capital
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Capital structure4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
Considerations in determining the capital structure
Need to get the balance between:
Efficient cost of capital
Ability to fund our expansion strategy with confidence
Access and availability
Seasonal variance R500m
Covenants and ratios
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Outlook 4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS Operational
Significant capacity available
Moving through the J-curve
Large scale development pipeline
“Baked-in” growth
Strategic
Accelerating trend of growth in recent years
Balanced mix of life cycles
Sound real returns and cash conversion
Strong and deep management and academics
Positioning
Good values, reputation for quality and excellent student outcomes
Well positioned in SA society and economy
New markets in Africa
Exciting progress in technology
Conclusion
Excellent growth prospects with good visibility
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12-Year market cap index4
ST
RA
TE
GIC
AN
D P
RO
SP
EC
TS
0
500
1000
1500
2000
2500
3000
3500
4000
4500
12yr ADH Mark Cap
JSE All Share Index
JSE Small Cap Index
Current
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QUESTIONS 5