Interim Financial Results

FOR THE SIX MONTHS ENDED 30 JUNE 2015

Agenda

1 Environment

2 Operations

3 Financial analysis

4 Strategic and prospects

5 Questions

GDP E

NV

IRO

NM

EN

T

1

Source: Stats SA 2015

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

OPERATIONS 2

Group at a glance O

PE

RA

TIO

NS

2

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

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%

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

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

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%

FINANCIAL ANALYSIS 3

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%

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

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

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

HEPS trend3

FIN

AN

CIA

L A

NA

LY

SIS

15

20

25

30

11 12 13 14 15

Cents

Group operating margin3

FIN

AN

CIA

L A

NA

LY

SIS

10%

12%

14%

16%

18%

11 12 13 14 15

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)

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%

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

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

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

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

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

Resourcing division 3

FIN

AN

CIA

L A

NA

LY

SIS

0

50

100

150

11 12 13 14 15

R'm

Revenue

Resourcing division 3

FIN

AN

CIA

L A

NA

LY

SIS

0

5

10

15

11 12 13 14 15

R'm

Operating profit

STRATEGIC

AND PROSPECTS4

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%

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

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

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

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

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

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

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

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

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

QUESTIONS 5