ADvTECH Limited (ADH) Earnings Call Transcript

Well, good afternoon. Welcome to ADvTECH interim results presentation. It's good of you to join us. Just reminding that as we're going out online, what we will do is run through the presentation. Anybody is welcome to ask questions, which we will record and then we will do our best to answer those questions at the end of the presentation. Okay. So I think just to start off, and remind people, I'm probably sure that not many people do need reminding that we're operating in a pretty tough subdued economic environment. I think that's well recorded. GDP growth well below what we would require, sort of just around the 1.5% forecasting, sometimes revised up, sometimes revised down. Consumers under significant pressure, which is only probably worsening. High levels of unemployment. In fact, during this past period under the reporting period, we peaked at one of the highest -- the highest level of unemployment. Slight improvement since then, but really not much to talk about. And of course, I think the latest topic of conversation is the fact that we are into an increasing inflation period and big unknown is how long that will last, how high it will go. And that certainly would put consumers under pressure. So not exactly an optimal economic environment in which we've been operating. On the other hand, education is a very resilient sector, often unaffected by the economic factors. And that really, it's always been seen as a very good defensive stock. When the child reaches school-going age, the chronological clock starts. And there's nothing that one can do about it, good economic times or bad economic times, and that certainly stands us in good stead. Ironically, some of the factors that are positive for us in private education are the travails and the struggles that the public sector is having in delivering quality education. And I think those are also well documented and well recorded. If we look since 2000, the number of students enrolled in the public sector has declined by 14%, and that's a significant number of students. Despite the fact that we've had population growth throughout that period and the numbers enrolled in private schools has grown quite significantly. And of course, that's all private schools, the independent well-established sector and smaller private schools as well. And they have seen growth as parents recognize that in order to have quality education for their children, they need to seek alternatives to the public system. The public system battling, well recorded, well documented, observed. I think the disappointing factors despite the fact that the government commits a significant level of funds to education in the country, and that's an area where they cannot be criticized for the results that are delivered from the public system are really disappointing. And frequently, we see that South Africa's performance is right at the bottom end of any kind of comparative scale. Again, another factor forcing parents to really look for an alternative to the public system. The statistics really are actually tragic, I think, is probably the only word to describe them. For every 100 students that start out on their educational system, let's say, for 2010 for the matric class of 2021. Only 2/3 of those actually got to matric. So a high level of dropout before they even reach the matric exam. Of those that actually did get to matric, only 48 of those pass and only 23 actually achieved university, bachelor degree passes, okay? The DBE, Department of Basic Education pass rate at around 76% compared, of course, to our system, 99.3% pass rate, and a bachelor pass rate of 98.4%. So the evidence is overwhelming that if you are looking to give your child of quality education, you need to look at the private sector. And that's really what has -- despite the poor economic circumstance, despite the fact that we haven't had job creation, despite the pressure that consumers are under, why we still see inherent underlying demand for private education. Effects also the tertiary sector, where access is limited to all intents and purposes of the public system is full. There are a greater number of students coming into the higher education space, and the opportunity for acceptance into the public system is limited. The actual -- although, again, the funds allocated are significant. And I think, again, the government has to be commended for that. One can see that given the state of the fiscal -- the government's fiscal status, there are ever-increasing pressures to support that public sector as well. So these are the factors that have really contributed to the growth of the private sector and the underlying inherent demand, which we are fortunate enough to be able to take advantage of. I think all of that is the background that leads to our results, which are really very pleasing. This is one of the reporting periods where all of the divisions of ADvTECH, all of our various segments have really performed exceptionally well underlining the inherent strength and robust nature of our business model. So we are delighted. If we look at our schools business, for some years, we have been working at repositioning, restructuring, reorganizing, and the signs of success have been there for a number of years now, but it really is solidifying and demonstrating the potential that we always have known is in that business, with revenue up 14% and operating profit up 16% here in South Africa. Our Rest of Africa business, really, again, also demonstrating strong potential that we've believed and we've understood and identified that exists for us there. Again, we've been through a process of optimization restructure. We were a little set back by the COVID pandemic, which, of course, had quite a negative impact in terms of our Africa operations, but the recovery and the underlying demand is really pleasing. And revenue up 27% and operating profit up 70% from the rest of Africa schools, which is a great performance. Our tertiary business, which for some years now, has really consistently delivered a very solid business, has reached a scale and level of performance, which has been consistent and strong and another good year from our tertiary business. Revenue up 9%, operating profit up 13%, which I think under the circumstances is a really good performance. It looks perhaps the underachiever in a segmental report, which is very strong. But nevertheless, if you consider the base of that business and where it's coming from, those growth rates, that operating level of that operating performance is very strong. And the star performer in this reporting period is our resourcing business. Of course, resourcing in South Africa was particularly hard hit as a result of COVID. So there is some recovery. I think it's to be appreciated given the subdued economic environment that we've outlined and that we are operating in, it is nevertheless a very tough market. So we have not recovered to the extent that we were perhaps pre-COVID, but I think the resourcing South Africa management have done an outstanding job, riding the ship, putting it back on to track and the profit position and results that we're seeing, I think, are commendable. And then our Rest of Africa business, understanding that we operate in a difficult market and that resourcing place in this business in a low-growth economy that isn't really creating jobs. Our management team looked for alternative geographies, alternative markets. And the benefit of that strategy is really paying handsome dividends with a fantastic performance, 65% revenue growth on new business and a significant performance in the operating profit up 136%. It's not only the benefits of those new volumes and new business coming through, but improved operational processes and practices has delivered an outstanding result to that resourcing business. And you'll see the impact that it had on the group's results overall a little later on in some of the slides. So an outstanding performance, which summarized in terms of the group meant that we posted 18% revenue growth, 19% operating profit and translating through into 23% headline earnings and 22% normalized. So a really strong performance in a difficult market and showing the benefits of our business. Of course, our educational business. The key and most important driver is enrollment growth, student enrollment growth. And again, we have continued on this consistent performance of growing our enrollment growth. Our schools business at 9% growth, our tertiary business at 4% giving overall student growth at 6%, a really solid performance under the circumstances with some very pleasing areas of performance that we'll cover in more detail as we go forward. That translates into revenue growth of 18%. And again, the important point is to highlight the consistent growth and delivery that ADvTECH has managed to achieve over the last few years. An operating profit now up some 100 million, 19%, again, a very strong performance. And what is pleasing is to see the group margin edging up. Now ironically, with such a performance, and you've seen how all of those segments delivered really good results, one might have expected the group margin to move, but it's the impact of resourcing, having grown so strongly. And as we will highlight again, the fact that we have to recognize the Rest of Africa's revenue as the payrolls, which we run that has a disproportionate growth in the revenue line, which overall affects the group performance. But if we split it out to understand it better, you can see how the margin performance of the business has really been quite impressive in this period. Our educational business is now running at 21.3%, which is the highest level that we've recorded certainly for some time. And I think that's really important. I know the market will appreciate that as we see in the recovery in our schools business. From the restructuring, repositioning efforts there, the continued performance of the tertiary, but a really nice performance from the educational businesses. Resourcing division at 5.2%. Obviously, the Rest of Africa has a much lower margin business. But really, they've done an excellent job in growing that margin from improved business practices as well. So when we unpack that a little later on, you'll see it. If we go into the schools division now and we look at the student enrollment and the split of that enrollment, I mentioned that overall, we're up at -- if we look at school South Africa, 8% enrollment growth in 2022. And all brands grew, our premium brands, our mid-fee brands where we've been doing a lot of work recently, right across the range, our speciality brands, all showed really strong good enrollment growth here in South Africa. And that level of 8% was particularly pleasing for us. So a really strong performance from our schools division, reflecting, I think, the good positioning of the brands and their focus on their value propositions and marketing activities. In Rest of Africa, up 10%. That is the area where we're expecting to see good volume growth. And certainly, we're seeing it coming through. The demand for our offerings in Africa is very exciting. And we expect that to continue to be the key driver, whereas we have a good solid base in South Africa. It's wonderful to see the brands performing and we'll look to growth in our home market as that demand for private education, quality education continues, but we think there's some exciting opportunities in Africa and these results underpin it. So altogether, up 9% across our schools business, very encouraging. If we look at South Africa, good strong revenue growth at 14%, operating profit up 16%. And here, you can see our margin now at 19%, and on its way to that sort of level of the early 20s that I think we've been signaling that we expect from this business and that we're confident we're going to be able to deliver now that the brands are well positioned and are functioning well. Interestingly enough, the COVID, of course, was somewhat of a setback. But even in that period, our South Africa business demonstrated its potential and group's margin, but it really is nice to see that margin level coming through. If we look at Rest of Africa, strong growth, 27% revenue, 70% in operating profit as we recover from reorganization structures, but particularly the COVID pandemic, which affected our Africa businesses more than it did here in our home market, where we were able to seamlessly transition into online. There, it was a more difficult process. There was less direction from the governments involved as to what was going to happen, when schools might open, what was going to happen to the academic year. We did step in. We did actually transition students into online as best we could in those circumstances. And I think we enhanced our reputation as a very serious and capable academic provider in that basis, and it stood us in good stead as our enrollments have continued to grow and grow strongly. And here, you can start to see our operating margin coming back 18.1%. I think we've indicated to the market that we expect the margin in our Rest of Africa business to exceed that here in South Africa. And we are well on our way, I think, to doing that. In fact, I know that Jaco fully expects to be able to show continued improvement in that margin. And he has the South African schools business in his sites and is determined to show them a thing or two, if not so, Jaco. Okay. Looking forward to that. So overall, the schools division, a very pleasing performance, really demonstrating the inherent potential and a strong business with a great portfolio of brands well positioned into the market, 15% revenue, 20% operating, and that operating margin really giving recovery. And as I say, on its journey to those mid-20s, which we fully expect, [indiscernible]. Tertiary, as I say, tertiary is in the unenviable position of having delivered such a solid result and having built a really substantive base that sometimes they get looked at now sort of the underperformer but that's not true. We've had consistent student growth. You can see the difficulty of the COVID period. You might recall, matric results well delayed. It was difficult for our traditional recruitment marketing processes where we actually visit schools on an extensive basis to engage during the COVID shutdown period. So the recruitment of students into that period was a difficult one, and the year was disrupted, and I think we had a lot of students maybe taking a gap year, deciding what to do, but it's coming back very strongly for us here. And again, the continued trend of a well-positioned, well-performing business. Revenue up, operating profit gain, again, a really substantial powerful business. And our margin at 23.8% is yet again touching on new levels. So a very healthy business, very robust, really sound market position and covering all modes of sectors of delivery, which I think so we have a good market position there. Resourcing, the star performer. As I say, South Africa recovering off to the COVID pandemic period. You can see that the revenue line is up, but the level of activity is still not where it was pre-COVID. It is a very tough operating market share in South Africa. And I think the business is doing an excellent job of winning market share in what is a subdued and probably declining market still yet to have a full recovery from the post-pandemic period. Operating margin, again, recovering, not back to the levels that it was, I think, a few more years before we can probably really bed down and get the kind of volume base going through the business, again. But nevertheless, stabilized, some very tough management decisions made quickly, appropriately to secure the business and now into that recovery period. So credit to the South African team, It has been a difficult time but well done to them. Our Rest of Africa business going gangbusters. Really exciting operating in how many geographies now, Lenn? 44 different countries across Africa. Running contracting and payroll services for large multinationals, NGOs. We've established a really good position as the lead operator in the African market. And again, good management practice has enhanced the business processes, improved the margin and the profit opportunity from what is a low-margin business and the sense is, as I say, we have to recognize the revenue of the payrolls. But this operating margin up at 5.5% is really very good and delivering an excellent result to the business. So overall, the division, a fantastic performance, up 52% on the revenue line, 120% on the profit line. And really an outstanding effort. So the star performer and the award goes to Lenn Honey and his team. We are very pleased. Thank you, Lenn. Just to show you, probably the segmental performance, a good balance in terms of our education portfolio. At one stage, the concern was that the tertiary business was growing and that the schools business was under some pressure, but the reorganizations, restructures have balanced the portfolio and the educational space really well. I think what is really noticeable in this reporting period is the growth in both revenue and, of course, in operating results of our resourcing business, and this contribution to ADvTECH. So that's the big change. As I say, a really pleasing period to report on all divisions performing well and I think delivering an outstanding result under the circumstances, and underlining the consistent performance that we've seen over the last few years from ADvTECH, a really robust, sound business model with good fundamentals, so a nice position. The key feature of our business continues to be our strong cash generation. In this period, nearly ZAR 1.5 billion worth of cash. And just as we grow, as our brands perform, the cash grow substantially, which, of course, gives us a very healthy balance sheet. It allows us to pay down. I recall that at times here, there were some concerns expressed about our borrowings. By the way, we have never come even close to our own internal covenants. Well, I suppose we did come close to our internal covenants, but certainly not the bank's covenants which are well in excess of where our gearing has been. But you can see with the cash generation capabilities of this organization, we quickly are able to pay down the debt we've -- another ZAR 420 million of borrowings paid back, and the balance sheet is incredibly healthy. So a good performance. And that will continue to be the case. It is the feature of our business. The negative working capital, strong cash generation of the business is a wonderful feature, okay. In debtors, another excellent performance. Our group shared services, our drive for efficiency in terms of transaction processing has paid very handsome dividends for us. Our schools business is, yet again, I think, achieved another record benchmark level in terms of collections. So we -- our collection levels despite the growth that we've seen are below that of last year in the schools business. Tertiary, pretty much the same. The resourcing has moved out a little bit, but one might expect that with such strong growth in the revenue in new accounts, but it's still well within control. And if you look at our working capital performance, it's excellent. I think we do have to remember that in this reporting period where we're comparing to, we had come out of the COVID period where there was a significant level of conservative provisioning to ensure that we were able to navigate that uncertain time. Some of those then released, et cetera, which has perhaps affected the comparative period here. But overall, our debtors performance has been excellent. Our shared services, Neil and his team, we appreciate because it certainly is, again, showing the benefit of that consolidation of our transaction processing and the book is very well managed at this point in time, despite the very tough economic environment and undoubtedly, the pressure that consumers are under. So good performance there. CapEx. Again, our ability now, as we grow in scale and size and that cash generation just means that we can absorb levels of CapEx that formally were deemed to be quite very, very easily. If we look at now, we have 2 new sites, the large restructuring investments in our portfolio, I'll talk a little bit about that later, is mostly over, but we still are investing in new capacity with 2 schools, Raslouw and a new Rosebank site in Pretoria, we bought a building in Pretoria to cope with the demand, the student demand and growth in that area. So we are bringing on new site, but the majority of the CapEx being spent and the extensions of existing sites to accommodate, again, the student growth that we're witnessing. So very manageable in terms of CapEx. Okay. So all of that leads really, I think, is that the business now is really well positioned. Our brand portfolio, balanced, structured systems, processes, management teams, I think, to a large extent in place. And we in ADvTECH are starting to really look at how do we enhance the competitive advantage that ADvTECH has in this market space. And it is quite unique. We are both in tertiary and K-12, and sometimes that is questioned because the experience is sometimes that businesses in the education space either specialized in tertiary or in K-12. For us, we are seeing distinct and very specific advantages in having a leg in both of those camps. And it comes about how we've leveraged that capacity. So first and foremost is that we are determined to become the leaders in teaching and learning, okay? Both within our schools environment and also in our tertiary institution. That, at the end of the day, is what we do. Students, scholars come into our institutions to learn, and we provide that educational opportunity. So we have a unique opportunity to use our central academic team to develop the very best of teaching and learning practices, okay? And we're starting to see the benefit of that coming through now. Our academic brand managers in each of the brands in the schools, our operations, our central academic teams that provide quality assurance, lecture development and programs into our tertiary brands, we are able to really stretch that. One of our goals in terms of moving into university status, we're increasing our capability and competence in research. And what we have done is we are specifically directing that research into education and teaching and learning practices. So we are -- there's fabulous opportunity where we have educational faculties in our tertiary business. We can stare research into teaching and learning practices, the best practices globally. We can bring those learnings into our institutions, okay? And we can actually use teacher development program. So a lot of work going into this area. We develop our own teachers. Again, one of our largest faculties in the tertiary space is education. And we are able to pick and choose the very best of students in that area, and there's a lot of work going on between the schools brands and the tertiary division to identify the best potential in those faculties, in those institutions. And bring them into our own schools businesses. We have over 2,200 teachers in the ADvTECH system, not only with the regional split, but now an international split. We are uncovering some fantastic resources in Africa. Don't forget, education is a highly aspirational career. And we are finding enormously capable and competent resources in the Rest of Africa. The opportunity to integrate, to develop the learnings from other areas within our own area, in our own business is phenomenal to provide broader opportunities for those 2,200 teachers to do teacher development within our own system. We are uniquely positioned better than any other institution to take advantage and to make sure that we can grow the very best of teaching resources. So an exciting area that we're working on. The second element is embedding technology into the education. There is a lot of hype around EdTech, okay? The technology space generally does that as a lot of people chase Unicorn's [indiscernible]. What we're interested in is the technology as an enabler. And how do we actually embed that into our business processes and how do we measure the advantage that it has. There are probably 2 specific areas that we are looking for. One is in the development of assessments so that we can truly measure what learning is taking place and how individual students are progressing. And there is a lot of development in the EdTech space around assessments. We are working with some companies on introduction. You can imagine the advantage that we get from leveraging right across our 108 schools. And every one of them in a grade 3 level, at a grade 6 level, at grade 8 level. We can introduce assessment criteria, which enables us to benchmark not only across our own organization, within our own grades, but internationally as well. And we're utilizing technology in that space. Then out of that comes the information for us to do personalized development plans by student. That's the advantage that technology lends the ability to manage large volumes of information, which was not previously the case. So that's where we're applying EdTech in this adaptive and personalized learning space, and we're putting it into our schools right across the board for use of improved teaching and learning and extracting real value, which we're able to measure. So we are determined to follow what we call data-driven insights, the evaluation of the information and decision made on the basis of that information. So it's really exciting for us. And again, we think as ADvTECH with our central academic team, research that we can do in the area of education, teaching and learning and 108 schools across a whole variety of regions, we are uniquely positioned to develop this as a specific area of competence and competitive advantage. And then leveraging the scale. The scale of our operations. I think the evidence in terms of our margin enhancement and the performance improvement of our businesses has been driven by a very focused effort to leverage scale, expertise to centralize where we can and extract the value right across our business. So these are our areas of competitive advantage. We think that they're real and substantive. And we think we are uniquely positioned as an education group to take advantage of these. If we look at our tertiary business, again, incredibly well positioned in the sense is that we have all modes of delivery. Our traditional strength as a business is our face-to-face campus, multicampus, multi-brand strategy. We have an excellent geographic footprint. But added to that is our use of technology in terms of the learning information system, the learning management system, our student information system, and our modes of delivery. So whether it's blended or hybrid, okay, which are 2 different things, or whether it's part-time, full-time, online, distance, we at ADvTECH have an offering and we have qualifications to match. So I think very well positioned to take advantage of growth in this sector. We have an extensive range of faculty and qualification. We're expanding this. Our engineering and health sciences faculty is expanding. We're offering more and more engineering qualifications on a greater number of campuses. And what's more is we're aggressively and actively pursuing a pipeline. So we have some 210 accredited qualifications currently, and we have some 30 additional new qualifications in the pipeline, which gives us an unmatched portfolio suite of offerings in the private sector. I think one of the developments that we're most pleased to be able to report on, as you will recall, if you have been following that some 6, 7, 8 years ago, the Higher Education Act provided for universities, university colleges and higher education institutes as 3 separate criteria, to which the minister was supposed to apply specific criteria as to where one could sit on that hierarchy. That, despite several engagements and attempts to consult and to collaborate had not been forthcoming. And finally, we went to court to insist that the minister then publish those criteria. The court order was established and the minister was required to publish those by the 17th of August, which he did so, I think, on about 7th of August or so. So we now have those criteria, and we are now able to understand. What we have to report back is that really pleasing because it is an important step. We can now have a look at those at that paper. They are quite broad. And certainly, I think, at this point in time and in this format, they have been published for public comment. It would be difficult to make an exact decision as to what was a university, a university college or higher education institute, but there is some guideline and there is some indication as to what those criteria will be. We are working on our submission, which is due in -- when is that due? When do we need to submit the public comment? Next Wednesday, and we will do that, we will comply. The process thereafter is that they will then gazette the recommendations. I must say that the appendices were not published with this. So we don't have the detail. They are quite broad. I think we would probably say that they are better than we had hoped. On the other hand, I think that the final gazetted document might be somewhat different to what has been published at the moment because clearly, there is more work and more detail that is required. So we'll have to wait and see. But we are participating in the process. And at least what we have is a starting point. Okay. Moving on then to the investment case for ADvTECH. As I've said, we are now looking and saying, we have a really well-established brand portfolio in both our tertiary and our schools business that we have been working on. And it's interesting to note just how this brand portfolio has developed over time. We had to reorganize, sharpen the value propositions, make sure that each of the brands understood exactly what their role was in terms of this portfolio. And in fact, we've introduced some -- in 5 years, we really didn't have a presence in this mid-fee sector to any large extent as possible. We now have some 45 schools under that Pinnacle brand over the last 5 years, which I think is quite a significant achievement. It is where we're seeing the most of the numbers growth as one would expect. The pyramid is naturally narrow at the top and broader at the base. So it's been an important addition and it's performing extremely well and quite exciting. We know that one of the criticisms of us over the last period is that as we had a heavy investment program is that the returns on our funds employed started to decline, and I think people were concerned that in the educational sector, there was a bit of a land grab, an arms race. There were acquisitions taking place and perhaps it was without due care and consideration in this rush to sort of dominate. We've always had a very clear and careful plan around our brand portfolio. And we've been investing to establish that balanced portfolio or brands that have very specific market propositions in order to optimize our performance in the market as a whole. And so whilst we were investing and we built, as I say, 45 schools in that Pinnacle brand from over a 5-year period, we've realigned, we've invested to make sure that they're delivering our Trinity brand has grown. We've repositioned our academic support brands in terms of Abbotts. So we've introduced Bridge. We've introduced Evolve. And all of that has been -- but what we have been determined to do, of course, and what we believe, confidently is that the returns will follow once that portfolio is established, and we've got the right propositions and they start to perform accordingly. And what I'm very pleased to show you is that the evidence now is quite clear. We don't do a rocky calculation at half year. This is a forecast of where we think we'll be at the end of the year. But I think the important message is that we've done that investment plan. We've created the balanced portfolio of brands that have clear market focus and the returns, I think, as you can see, growth in student numbers, revenue, operating profit margins and, of course, now translating into an improvement in our return on funds employed. So really good. So essentially, if you look at ADvTECH, there is an inherent underlying demand for education. I actually -- I'm often on record of saying that if you want to be in the education business, then you want to be in Africa. We have a young population. We have a demand for education. We have people understand that the way to a better life is an investment in their education and parents are willing to make enormous sacrifices to do the best they can for their children. It is an unfortunate effect of life, but the public sector here in South Africa is assisting us in terms of creating that demand. So even despite the subdued economic performance, there's inherent underlying demand for private education, quality education, which is our focus. And if you look at the Rest of Africa, the situation is very similar. So if you want to be in education, there's probably not a finer continent on the planet to be in than Africa. And our job is to take advantage of that, and we think that we are a business that is uniquely positioned to do so. We've demonstrated, I think, that we've got a robust, flexible business model where we can leverage scale. We've proven that we can be adaptive and responsive to market circumstances. Our ability to manage the COVID pandemic, I often say was the greatest stress case for us managing to transition 75,000 students online in 3 weeks, proved that we have the technological capability to deliver education online as well as the advantage of our face-to-face existing infrastructure. So we really are covered off on the best of both worlds. I think we've got the investment in people, systems, technology and the capability, really, which is probably second to none. We have a quality asset base, excellent cash flow generation, sound balance sheet and what's more, again, it's probably hard to find a better ESG investment, which, of course, is very topical and important at this point in time. So all in all, I think, a very sound case for ADvTECH investment. A good operational base, an excellent, agile, flexible business model, great growth opportunities, okay? Despite the economy here in South Africa, we still see demand, and we expect that demand to continue and then enhanced by what's available in the Rest of Africa with ADvTECH uniquely positioned to take advantage of it. We've got a track record of consistently growing earnings and profit improvement and performance. So we think that all in all, it's an outstanding investment case for ADvTECH. And of course, the Board, I think, is sharing that confidence at the moment with the declaration of ZAR 0.23 at the interim period, which is 21% up on the prior period, and confidence that the business is in a good position to fund the growth in dividends as well. So all in all, we're pleased to share the story with you, and we're happy to take any questions. [indiscernible]. We've got some questions.

Any questions from the local audience, which is predominantly ADvTECH, and well done to all of you. Thanks very much. It's absolute privilege and pleasure to be able to stand here and report these kinds of results. To all of you who are here, well done. Yes, yes.

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And inflation. Look, we are following a strategy where we're deliberately trying to ensure that our price increases are at or even slightly below inflation. We understand that for many years, education inflation actually exceeded CPI by 2 percentage points often. And we understand that, that's a road that actually is nonsensical and which often then makes the offering uncompetitive and unaffordable. And demand is not the problem, Affordability is the issue. So we're paying a lot of attention to educational productivity. And in that instance, we deliberately introduced the pricing strategy to that. We're always comfortable we will recover our cost increases. But we're trying to make sure that we apply our minds to making sure there's no wastage or duplication in our system so that we can offer real value. So pricing from the educational side is probably at and around about 5% to 6%, depending on the brand. And in most instances, it's probably closer to 5% to 6% in this period that we're reporting. So that would be the inflation element. And the rest, of course, is volume. You've seen sort of the kind of volumes that we've reported by segment. And of course, one of the problems that we do have at a group level is the impact of the resourcing revenue growth, which is quite significant and substantial. And that's because we have to recognize the payroll, the whole payroll that we run on behalf of some of these companies in Africa, which does skew that revenue line a bit. But that's why we have that segmental reporting. Okay. Yes.

Okay. The first question, it's a 2-part question. So SA schools saw very minor margin expansion in the context of 8% volume growth in existing schools. And big fee reset in Abbotts being in the base seems at odds with what one would have expected. Could you please unpack this result for us. And then while increase in bad debt was expected, the size of the increase was more surprising. How much of the increase is because of the low '21 base, given provision release benefit and how much of it is other factors? To the extent it's other factors, what's driving them? So I mean, I think that the margin, it did go up, I think it was 0.4% in South Africa, if I remember correctly. There was an element of the bad debt playing into that as the second part of the question refers to, and I'll come back to that. Also, with some of the schools that we opened in recent years, they were progressing into later grades, particularly into high school. So we have to incur some costs in the high school which is obviously, by and large, in the base now, and we should start seeing further benefit from that as the volumes go up. We have also invested quite a bit over the last -- not just this year, also in the prior year in repairs and maintenance to improve the quality of our sites, particularly the premium schools where some of those buildings were a little old, and we felt that we should invest further in there. So those factors would play into that, but I think we remain confident that it will continue moving up from this level that a lot of the costs are now in the base. I think also the Abbotts' fee reset was in the base to some extent. But we've not taken the final school, Cape Town, which was actually our most profitable Abbotts that was still on the old fee in 2021, and have moved on to the new fee in the current year. So that still -- that reset only up in this financial year. And additionally, Abbotts took significant additional capacity in Cape Town, which again would have a short-term impact on their profits that also would have impacted on the margins to a small extent in the current year for the group, obviously, material for that site. But again, with the volumes that they achieved in 2022, we're confident that the strategy will play out as expected, and they will enhance their returns over the years and Abbotts is well on track to achieving great results for a number of years now. In terms of the debtors provisioning or the cost that impacted the income statement, it is all really about the provisioning in a COVID period at the end of 2020 and then at the time that we were finalizing our provisions for the 2020 financial year. Schools were actually in lockdown again. In January, February of 2021, schools were in lockdown. And on the tertiary side, we were only allowed limited number of students back on site. If I remember correctly, it was only 1/3 of our students were allowed on site at any given time. And so the impact of that is we had relatively poor post year-end collections in those early months, which informed fairly conservative levels of provisioning, which I believe was appropriate under the circumstances. And that -- and then when the lockdowns eased and the students could come back to the sites, we did then receive more cash than our provisions had made allowance for. So the ZAR 79 million in the prior year benefited from that. There were no other factors. I think overall, our debtors were comfortable. Our collections are in line with expectations. As a percentage of revenue, they have declined. And I think that if we had not had that overprovision in hindsight, the numbers would probably be a reasonably like-for-like comparison year-on-year. Next question, what do we expect a sustainable level of CapEx to be post the expansions? I think maybe I'll also deal with this one. I think firstly, we always intend expanding. So there will always be a level of expansion CapEx. I mean, we did announce with these results. The opening of a school in Raslouw for next year. We're also adding quite a lot of capacity to existing sites. So that's all expansion. I think possibly we won't have the same level of expansion as a graph that Roy showed a short while ago. But I would expect that taking care of maintenance CapEx and replacement CapEx -- sorry, maintenance CapEx and expansion CapEx in the region of ZAR 400 million to ZAR 600 million per annum would be fairly sustainable level of CapEx. And it will flex a little bit as we see opportunities. And maybe if we have a year where we're not opening a school, it might drop a bit lower, but we would expect it to be in that kind of range. Sorry, the next question is a repeat, so I'll just skip past that. Highlighting the presentation, cash generation is very good, and debt is materially paid off. Will you also be using this as an opportunity to review the dividend policy? I'll hand that one to Roy.