IPO-bound National Education eyes new acquisitions, says CEO

National Company for Learning & Education (NCLE) plans to acquire private schools and proceed with building educational complexes to maintain short-term growth, Khalid Al-Khudair, vice chairman and managing director, told Argaam in an exclusive on Tuesday.

The new complexes will be financed from proceeds of the company’s planned initial public offering (IPO), he said.

NCLE’s share sale will help it expand in the education sector, through the establishment and operation of educational complexes, and offering various services in line with the Saudi Vision 2030.

Al-Khudair shrugged off the impact of expat exits on the company, citing that foreigners account for just 1.5 percent of total students in NCLE schools.

Below is the full interview with Al-Khudair:

Q: Can you provide insight into the company’s profile since its inception?

A: National Company for Learning & Education was established in 1958. It converted into a closed joint stock company in 2002. NCLE’s expansions began in 2009 by establishing Tarbya Namouthajiya Schools in Al-Rawabi district. The company continued to boost its capacity to accommodate over 17,000 students with an occupancy rate of 77 percent in 2017.

Q: Why did NCLE decide to go public in the Saudi market?

A: The decision was driven by the company’s development and conversion from a family business into a public joint stock company. The IPO timing was determined in line with the Kingdom’s vision and plans to privatize the education sector. NCLE will be the first Tadawul-listed education company.

Q: The company will float 30 percent of capital, or 13 million shares in the IPO. How will it use the proceeds from the offering?

A: The share sale proceeds and the company’s resources will be directed towards building five new educational buildings. The new facilities will be located in Riyadh, Qassim and the Eastern Province.

Construction works are ongoing at three complexes now. The launch of these complexes will boost NCLE’s capacity to almost 35,000 students in 2021. Occupancy rates at new complexes usually reach 100 percent between five and seven years.

Q: NCLE’s future expansions will be financed from the IPO proceeds in the medium term. What about expansions next year?

A: The company has strong growth potential in existing educational complexes. It opened a new complex in the Cordoba district last year. Meanwhile, NCLE’s short-term growth strategy focuses on debt-financed acquisitions of private schools. Moreover, the company’s leverage ratio is very low.

Q: What is your take on the growth potential in the Saudi education market?

A: The local education market is promising, thanks to its strong growth prospects. The total number of students enrolled in private schools reached 550,000 in 2011, and this number nearly doubled to over one million students in 2018. The total number of students in public and private schools currently stands at 6 million. The Saudi education market is likely to maintain strong growth, driven by growing demand for educational services.

Q: Does the expat migration pose a new challenge to the company, given its impact on student numbers?

A: Foreigners account for just 1.5 percent of total students in NCLE schools, compared to Saudis who account for 98.5 percent. Accordingly, the departure of expatriates from the Kingdom is unlikely to impact the company going forward.