When the new school year began in September 2017, 10 new private facilities opened their doors to pupils in Dubai, with investors and educators keen to make their mark in a competitive and potentially lucrative market. The new crop of schools offered a range of curricula, with four British, two Indian, one Canadian, one French, one US and one providing an international baccalaureate (IB). Fees also varied widely, from Dh15,000 ($4080) a year for the youngest pupils taking the Indian curriculum at Amity School, to Dh130,000 ($35,400) for the most senior pupils studying for the IB at North London Collegiate. At the start of the 2016/17 academic year there were 187 private schools in Dubai; with the new additions, there are now almost 200.
Potential Gains
According to the “Capacity for Growth” guide, a 2016 publication by the Knowledge and Human Development Authority (KHDA) aimed at investors interested in the sector, while there is sufficient supply for existing demand, with 89% of current school places taken, Dubai will require new schools to meet future expected demand growth.
According to a September 2016 report by PwC, some 74,500 additional places will be required in 50 new private schools in Dubai by 2020. For IB schools the consultancy forecast particularly strong growth, albeit from a lower base. Based on a compound annual growth rate (CAGR) of 20.3% from 2009 to 2015, PwC calculates that 29,512 children will be at IB schools by 2020, compared to 114,209 in UK schools and 104,297 in Indian ones, based on CAGRs of 6.7% and 6.1%, respectively.
The experiences of schools that opened in the 2003-13 period has shown that, on average, 30% capacity was reached in the second year of operation, 50% by the third year, 60% by the fourth year and 80% by the seventh year, according to the KHDA. This suggests investors may have to wait some time to see a return, and must undertake sound marketing and gauge demand to ensure a healthy intake in the first years of operation. From their eighth or ninth year, schools that have earned a good academic reputation have seen enrolment reach 75%, providing investors with a satisfactory return.
The KHDA report also notes that new schools, sometimes opened in newly developing areas of Dubai, are capturing an increasingly large share of expanding enrolment figures. From 2011 to 2013, new schools accounted for 33% of enrolment growth, compared to 32% for existing ones classified as good, very good or outstanding and 35% for other schools. However, in 2013-15 there was a significant shift in these figures, with the share of new enrolments by new schools accounting for 60%, good schools for 39% and other schools 1%.
Successful Formula
There are some well-known educational brands in Dubai, including names of English private schools and trusted curricula from the UK. However, the most successful companies have a clear understanding of the Dubai market. “Newer independent schools and higher education institutions are entering the market particularly well, as they capitalise on home-country reputation, as well as bringing in best practices for operations and ensuring that lessons learned about the Dubai market are integrated prior to opening their doors,” Sajida Shroff, CEO of education investment and advisory firm Altamont Group, told OBG. “These newer institutions are also making the application process very clear and timely for students, while creating a strong impression of family-friendly environments.”
One of the emirate’s oldest providers is GEMS Education, which has grown from an ad hoc operation opened in 1959 by KS Varkey and his wife Mariamma, into an international business with schools in 14 countries, expanded by their son and grandchildren. The business has been built on firm educational foundations, but also on clear commercial principles. Rather than adhering to one curriculum or fee structure, GEMS Education has adapted its offering to a range of communities in Dubai and, later, further afield. It has also had to adapt to changes in the marketplace. In April 2017 it merged two of its schools, moving pupils from its 20-year-old Dubai American Academy to its new GEMS Nations Academy. The latter opened in September 2016 – one of six new GEMS schools in Dubai that year – offering students an enriched US curriculum and new facilities, including a 50-metre swimming pool, a 400-metre running track, theatres, and studios for music and arts. While GEMS has consolidated in some areas, it has expanded in others, acquiring in 2017 Wesgreen International School, operational in the neighbouring emirate of Sharjah since 1991.
Funding Growth
Despite being a third-generation family business, GEMS Education has been tapping private equity for a decade to fuel its growth. In 2007 it sold a 25% stake to Abraaj Group, and today is backed by private equity firms Blackstone Group and Fajr Capital, as well as the Bahrain Mumtalakat Holding Company. In June 2017 Bloomberg reported that GEMS Education had been meeting with banks to discuss a possible initial public offering (IPO) in London, in which it hoped to fetch a valuation of $4bn. The company had global revenues of $539.1m in the six months to end-February 2017, according to the Nasdaq Dubai exchange, up 15% year-on-year, driven by growth in student numbers, tuition fees and income from new schools, including two acquisitions. For the same six-month period, the company had capital expenditures of $242.7m compared to $89.3m in the same period a year before, a rise related to the repurchase of three previously leased school buildings and improvements that were financed in a sale and lease-back transaction. Student enrolment in the year to February 2017 increased by 10.7%, to reach 113,345 students, with total capacity at GEMS schools standing at 132,438 seats and its property and equipment portfolio reaching a value of $1.1bn.
Competition
Other businesses in the sector are also weighing an IPO. In both 2016 and 2017, Shailesh Dash, CEO of Dubai investment firm Al Masah Capital, told local press that shares in its schooling business Al Najah Education could be floated in London or New York. Al Najah began life in 2012 and has since opened or acquired schools and nurseries in Dubai, Oman and Singapore. According to its financial reports, Al Masah Capital manages $700m across private equity, real estate and asset management with a focus on retail, health care and education.
Expansion Plans
In June 2017 Al Najah Education announced it had earmarked funds for future expansion, including acquisition of two schools in the GCC, with plans to spend Dh367m ($99.9m) over eight months and a total of Dh550m ($149.7m) over two years, targeting Abu Dhabi and either Kuwait or Qatar for the new schools. It plans to double its enrolment from 14,000 to 28,000 over two years.
Today Al Najah operates four schools, three of them in Dubai, and a number of nurseries. Its first venture into education was Horizon English School in 2012, a non-selective primary school in Al Safa, which the KHDA rates as very good. In 2013 it opened Horizon Nursery, which operates the British early years foundation stage (EYFS) curriculum, as well as Horizon International School, a school teaching UK curriculum to children from nursery to sixth form, which the KHDA rated as good. In October 2015 it then acquired Sabari Indian School, established two years earlier with an acceptable KHDA rating. Sabari was given permission to expand to offer places to eighth-grade pupils from February 2017.
Creche To College
Al Najah Education is one of many private providers catering to children from nursery through to secondary school. The strategy allows a “feeder system” to be developed for primary schools and subsequently for senior years. It also reflects demand; there are twice as many children in first grade as in 11th, the KHDA notes. Other providers are Innoventures Education, which operates Burj Daycare Nursery, and Raffles International School Nurseries (RISN), which offers the EYFS curriculum. The RISN network, which operates in several locations offering either EYFS or Montessori, has enrolment approaching 850 children. Innoventures also runs four schools, with the Raffles World Academy (RWA) and Raffles International School (RIS) a few blocks apart in Jumeirah; RIS offers a UK curriculum and RWA a choice between that and the IB. A US curriculum is taught by Collegiate American School (CAS), while the IB is offered at Dubai International Academy. CAS enrols nearly 1000 students while RWA, RIS and Dubai International have about 2000 pupils each. Another provider, Taaleem (formerly Beacon Schools), has two nurseries offering a customised multi-lingual introduction to education and seven schools, which use US, IB and British systems.
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