South African private university boom

Private higher education institution Stadio reported solid interim results, with student enrolments up 10%, leading to strong revenue growth.

Stadio released its results for the six months through June 2023, which revealed a strong performance.

The company increased semester 1 student enrolments by 10% to 47,024 students as of June 2024, compared to 42,874 at the same time last year. Distance learning student numbers also reflected good overall growth of 10% to 40,702.

Stadio explained that a strong demand for professional qualifications continued to drive strong growth in registrations in the period.

However, it said distance learning student numbers are still impacted by the legacy business-to-business (B2B) Milpark Education business offerings. 

Excluding the impact of the B2B business, the distance learning student numbers grew by 17%.

Milpark is a private higher educational institution wholly-owned by Stadio. Stadio explained that Milpark Education is in the process of repositioning the business to become less reliant on the B2B business.

Contact learning student numbers showed good growth of 9% to 6,322 from 5,807 the year prior. Registrations of new contact learning students in Stadio Higher Education increased by 14%. 

“This follows the strategy of accrediting new programmes as well as expanding the offering of qualifications to new campuses,” the company explained.

These increased enrolments saw the company’s revenue grow by 16% to R826 million, with EBITDA growing by 12% to R236 million. 

Despite this growth, the company’s EBITDA margin remained the same.

It explained that EBITDA was impacted by increased costs incurred on marketing and advertising, licensing and computer costs and increased staff training costs in the period.

The loss allowance margin of 8.3% of revenue has improved since the 9% full-year margin as of 31 December 2023, with a slight increase of 0.6% from 30 June 2023. 

For the six-month period, bad debts recovered improved to R5.7 million, up from R2.3 million the year prior due to enhanced collection efforts.

“The payment trends of distance learning students are generally over a longer period of time than for contact learning students and, given the growth in distance learning across the company, this has impacted the overall value of the debtors’ book,” the company explained.

“The loss allowance, therefore, considers the associated potential risks in collections due to the longer payment trends and has increased in line with the increase in the debtors’ book.”

Stadio reported a profit after taxation of R144 million, up from R127 million in 2023.

Its earnings per share (EPS) also grew to 16.3 cents per share compared to 13.6 cents per share in 2023. Headline earnings per share were up to 16.2 cents per share, compared to 13.5 cents the year prior.

This growth was primarily due to organic growth in the underlying institutions and lower growth in depreciation for the period of 3%. 

In addition, the additional 15.4% shareholding acquired in Milpark Education positively impacted profit attributable to the parent.

Stadio utilised R100 million of their rolling credit facility to fund the acquisition of the additional shares in Milpark Education, resulting in additional finance costs for the period. 

These finance costs largely offset the higher interest income earned on higher cash balances.

The cash generated from operations increased by 20% to R307 million for the period.

For the six-month period, Satdio invested R49 million into capital expenditure for the development of curriculum intangibles, solar projects and the Durbanville campus construction. 

Stadio is in a strong cash position with cash balances of R98 million as of 30 June 2024 and no external debt.

The company has access to a revolving credit facility of R100 million, with an option to increase it by another R100 million. 

In January 2024, Stadio used the R100 million facility to settle the R117.5 million consideration payable for the additional interest acquired in Milpark Education in December 2023. The full R100 million debt was repaid during the period.

“The Group continues to pursue growth opportunities whilst returning excess cash to shareholders through the payment of annual dividends and repurchasing of shares to avoid shareholding dilution that could arise through the shares that vest via the Group Share Incentive Scheme,” the company said.

Stadio did not declare an interim dividend for the six months through June 2024.