Speaker #1: Being recorded and summarized.
Speaker #2: Hello everyone. This is Haytham Alet from EFGRMS, and welcome to NCLE's full year 25/26 earnings call. I'm pleased to have on the call today from NCLE, Mr. Mohamed El-Khudair, CEO; Mr. Abdallah Belsharaf, Deputy CEO; Ms. Sadeem Al-Muais, Investor Relations Specialist; we'll start by a presentation from management, and then we'll open the floor for questions as an initial reminder to ask a question, you can either type it in the chat box or you can click on the raise hand button.
Speaker #2: Mohamed, please go ahead.
Speaker #3: short comment, Haytham. Bismillahirrahmanirrahim. Good evening, everyone. Today we will go through the investor presentation for the financial year 2026. For those who are covering NCLE for the first time, here's a snapshot of NCLE: we come from 68 years of experience with 17 schools under operation, as of end of the financial year of 2026, which ends on July 31.
Speaker #3: As we speak, the number of schools operating for this academic year is 21, after successfully opening four new schools this year. The level of enrollment as of the end of July 2026, which is the last academic year, is 35,200, with an existing capacity of 45,000.
Speaker #3: NCLE operates, or NCLE expands through greenfield execution, 14 greenfield schools have been opened in the past 6 years, with 4 new schools this year and 3 more additional schools for the coming years.
Speaker #3: The 5-year enrollment growth was 21% CAGR, total assets is 1.7 billion, with 18% return on equity. The recommended dividend for this financial year is 107 million, with 63% payout ratio.
Speaker #3: Debt-to-equity currently on NCLE is 25%. Here you can find all the schools operated by NCLE. This presentation is available on our investor relations website.
Speaker #3: In case you want to dig through it and have detailed information about each one of our schools, in terms of operational updates, NCLE continues to deliver excellence in its operation.
Speaker #3: This year, we have also been invited by ETEC to have five additional schools winning the Excellence Award. Labour Award NCLE has successfully obtained this award for three consecutive years.
Speaker #3: It's the most prestigious award in the human capital sector in KSA, we've been winning this award for 3 executive consecutive years. In Saudi nationalization, in terms of quality as well, King Abdulaziz Quality Award is the most prestigious quality award in the Middle East, and it's an award that happens every 3 years, and NCLE has won the last award, which was back in 2024.
Speaker #3: Last year we've also had the Great Place to Work certificate; of course, our students continue to deliver success in various fields, whether in sports, academic, and other fields as well.
Speaker #3: In terms of financial outlook, I have my colleague Abdallah Belsharaf, Deputy CEO, to take us through the details.
Speaker #4: Good evening, all. Here, we're going to go through a quick financial outlook about our performance in 2026. Here's just a reminder regarding the revenue acquisition accounting change, which was related to revenue recognition over the number of days within the academic year.
Speaker #4: While cost and expenses continue to be recorded in full, and this has no impact on the annual financial result, as the change is only affecting the timing of revenue within the Q.
Speaker #4: So moving to the next slide, which shows the performance of our company during this year. The enrollment of students increased by 20%. This is lead to a revenue growth by 12%, reaching 740 million.
Speaker #4: And achieving a net revenue of 170 million with a growth of 6%. This growth was impacted by also several factors, like the finance cost increased during this year, related to the impact of the lend-lease contracts of Khuzam and Zahrat Leben.
Speaker #4: In addition to the borrowing costs related to the financing part of the purchase cost of land for Ar-Rabi'ah and Yasemeen, these borrowing costs were only part of the previous year.
Speaker #4: Moreover, the zakat expense increased during this year, as last year the company witnessed a reversal in the provision due to finalization of zakat assessment.
Speaker #4: And also the government grant and subsidize decreased this year, due to decrease in the wages subsidies of HRDF. The next slide shows the performance year-by-year since the last 5 years.
Speaker #4: The revenue growth over the last 5 years driven mainly by the growth in the number of students, while the company margin of profit gross profit and net profit profitability margin shows a stable performance between especially the net profit between 2023 and 2024.
Speaker #4: The next slide shows the performance by complex. Again, Rayan and Nuzha Al-Rawabi Al-Qairawan contributed to the majority of the revenue and the gross profits of the company.
Speaker #4: So moving also to the next slide, which shows the performance of Q4 separately. Compared to the Q4 of the comparative year, the revenue grew by 12%, while the net profit declined by 68%.
Speaker #4: This is due to two drivers. The first driver is the zakat base effect, as the comparative quarter witnessed a reversal of zakat by SAR 2.5 million, mainly due to the finalization of prior zakat assessment of prior years.
Speaker #4: And also due to the academic calendar effect, as this Q recorded revenue of 55 days out of 321, while the comparative one 56 out of 314 days.
Speaker #4: Which resulted to a decline in Q4 performance. Now moving to the next section with Mr. Mohammed Al-Khidar.
Speaker #2: So some regular updates
Speaker #3: in the past couple of days or early this week. There has been a royal decrease related to utility cost, and minimum wage. So limited utility cost impact, and no way no wage threshold exposure for the next 18 months.
Speaker #3: So first, in terms of the utility tariffs—the utility tariffs revised the cost for several segments, one of which is private schools. This will take effect from January 1, 2027.
Speaker #3: Saudization wage floor, so and it's very important here to differentiate. Now, the minimum wage was not set as a mandatory for all companies. It's mandatory for those who wish to have the Saudization to be calculated.
Speaker #3: So the first phase from 4,000 to 5,000 will start on April 2027. The second phase is after a year from that, which is April 2028.
Speaker #3: Moving to the next phase, which is the 6,000 riyal minimum monthly salary. So what does it mean for NCLE, and how we are going to respond?
Speaker #3: In terms of utility, it is expected to uplift the cost on revenue and the cost of revenue and the GNA expenses by 1%. And NCLE will have efficiency measures to put in place to absorb or at least to mitigate some of that cost.
Speaker #3: In terms of the Saudization wage floor, for the first phase, there is no exposure, as NCLE already meets the 5,000 riyal floor for the second phase.
Speaker #3: However, we still have 18 months to go, and during these 18 months, some designs in terms of operational efficiency should take place in order to come up with a suitable plan to mitigate that risk, or at least some of that risk.
Speaker #3: In terms of the growth drivers, we look at it from both internal and external factors. In terms of the external factors, the market is growing despite challenges that could be faced in the sector, faced in the economy.
Speaker #3: Overall, the education sector is thriving. The demand for education increases over time, and the demand for quality education increases. The average household expenditure on education also increases.
Speaker #3: The demand for kindergarten increases. The government has set targets for growth in terms of kindergarten, the penetration of private schools has increased over time, and we expect it to continue female participation in the workforce has been increasing, and it will continue to increase.
Speaker #3: And we look at it as an opportunity for demand for private schools. Privatization impact should be a growth driver as well. Now, the current penetration of private schools is only at 17%, and the government targets to go through to reach 25%.
Speaker #3: Now, that percentage will not be reached through business as usual. Movement from private sector, it will in fact include privatization and nothing official has been has started yet from the government side, but we expected internally that the government will start to rely more on private sector to operate public schools in the future, and therefore this will create a new market for NCLE and other education privatification players in the market.
Speaker #3: Riyadh as well, where 90 2% of NCLE schools lies in, is a big market. It's growing. It continues to be a major hub for doing business in Saudi.
Speaker #3: And in the region, which should have demand for services, including education. In terms of internal factors, NCLE still has utilization capacity, which could contribute to the overall growth.
Speaker #3: The team in NCLE is of high quality, delivering excellent education and executing projects in an efficient manner—beating the growth of the sector across all the years.
Speaker #3: Alhamdulillah. And we should inshallah expect this team to continue thriving in this sector. The full day school leadership is also a key driver for NCLE growth.
Speaker #3: We have introduced MIA program, the National School Program, which has created demand in the market. And it's not only the full day school leadership, it's rather the mentality of the team in NCLE that thinks beyond the traditional way of delivering excellent education.
Speaker #3: We still have in our pipeline plenty of projects that should contribute to the growth of the quality of our services and the quality of our offering.
Speaker #3: This year we launched Ishbili School, a successful launch. More details will be addressed in our Q1 earning call and Q1 results, which should be no later than a month around the month from today.
Speaker #3: Al-Rabi' School is the second school we launched also this year. Leban School, the first expansion of NCLE in the West Side of Riyadh. Al-Ula has been a successful launch as well.
Speaker #3: We have launched a school in Al-Ula in a short period of time, but with a very successful opening. As we speak, construction is ongoing in Jeddah.
Speaker #3: For our Jeddah project, as well as Khuzam School, with a land that is in Al-Yasameen that is going under the studies and the contract preparation with the contractors, which should be announced soon on when the school should be operating.
Speaker #3: Thank you very much. That was our brief presentation. I'm sure there are some questions, and we are very happy to address them.
Speaker #1: Thank you, Mohammad Al-Abdullah, for the presentation. Now we'll open the floor for questions. Again, as a reminder, to ask a question, you can either type it in the chat or you can click on the raise hand button.
Speaker #1: I'll unmute your line. Again, you can either type your question in the chat or click on the raise hand button. We'll take the first question from the line of Ibrahim Al-Assam.
Speaker #1: Ibrahim, please unmute yourself. Ibrahim Al-Assam, please go ahead.
Speaker #2: I'm ready now.
Speaker #1: Yes, Ibrahim, go ahead.
Speaker #2: Congratulations. So one question from my side. So how do you think that the government will achieve the private penetration rate of 25% going forward?
Speaker #2: From your experience, I know this question was asked multiple times during the past quarter. But I want to have more clarity.
Speaker #3: Sure. So okay. So when the government set a target for private school penetration, obviously what comes in mind you think about the ease of doing business, how the government effort in terms of financing, in terms of providing lands, in terms of easing the process of operating a school, opening new schools, et cetera, et cetera.
Speaker #3: And when you look at the measures set by the government and all the programs delivered by the government, it's already there, right? So the government has done all the measures necessary for the private sector to expand now.
Speaker #3: Apparently, this is not the only thing that the government could do to achieve this percentage. And throughout the process of exchanging dialogue with the Ministry of Education, the ministry does not look at this percentage as the private school expansion and the private school number of students.
Speaker #3: It looks at it from a bigger angle in which students in public schools operated by private sector will be counted as part of that percentage.
Speaker #3: Okay, so when the government looks at it this way, it's obvious that when the Ministry of Education has a target from the program related to the education sector in Vision 2030, it means that there are some measures and steps to be taken by the Ministry of Education, enabling the private sector to play a big role in operating public schools.
Speaker #3: And therefore, achieve the 25% target by 2030.
Speaker #2: And if you allow me, Mr. Mohammad, so will so for example, leasing a campus by or from the private sector to be operated by the government, is it counted in this calculation?
Speaker #2: Like when the private sector is responsible for building the campus itself.
Speaker #3: And a good question. But I don't think so. Because the percentage the baseline, which is the 17%, is primarily driven by the number of students, right?
Speaker #3: When it comes to delivering the service of education. And if building a school and leasing it to the government was part of that calculation, then it wouldn't be 17% today.
Speaker #3: We would have already achieved the 25%, and you would have heard from the Ministry of Education a celebration that this percentage was achieved. But it's not, because there are, as we speak, 120 schools today that was part of the PPP project PPP program where the private sector has built these schools and leased it to the government.
Speaker #3: And I think there are around what, 150,000 students who actually study in these public schools. It would at least be 19 or 20 percent already by now.
Speaker #3: But that percentage was not part of the calculation. At least address your question.
Speaker #2: Yeah, very clear. Thank you so much.
Speaker #1: Take the next question from the line of Faisal Al-Ghamdi. Faisal, please unmute yourself.
Speaker #2: I have two questions. So, the first question is related to the increase in utilities cost. You mentioned it's 1%. I just wanted to confirm, this is for the year ending in July 2027.
Speaker #2: The second question is related to the workforce that is below the SAR 6,000 salary minimum out of the total staff as a percentage. If you could provide that, it will be very useful.
Speaker #2: Thank you.
Speaker #1: With regard to the utilities, at 7% regardless of year or month or quarter, because it would be the same. So whenever you month you take your year, you just need to add it to 1%.
Speaker #1: But if you mean from the total cost and GND, yes, it is from the last year impact. From the last year performance. But this is again this is considering that there is no mitigation or other controls applied to mitigate such amount.
Speaker #1: With regard to the workforce,
Speaker #2: Sorry, just to clarify this. So, that is a 1% increase that would be realized in the next year, right? That's ending in July 2027, just to confirm.
Speaker #1: It's 1% increase in the cost and GND expenses of last year and you can take it extended to whatever performance considering other items are fixed and stable and there is no movement or variances in the other item.
Speaker #1: But we apply it to last year's performance to make it clear for you. Regarding the second question about the workforce, that is below 6,000, it's not like this.
Speaker #1: I would maybe tell you the average much better, maybe. The average of the Saudi staff—majority of the Saudi staff—is around maybe 5,500 to 5,600.
Speaker #1: But this is again considering that we have—there is something very important here. That it's not necessary to increase it for all. You should only, or I mean, to be considered in Saudization, he should have this salary.
Speaker #1: So this is the average salary for Saudi right now. Without any considering any other changes.
Speaker #2: Thank you. Just one follow-up here. So what's the percentage of Saudi employees out of the total staff that you have?
Speaker #1: In total, 51, 52. This is in total. But for Saudization, it's different from sector to sector. So there is a Saudization percentage in the national track for men.
Speaker #1: There is either one for female and there is another one for the international. So it's very detailed. And each one has its own separate there is a general Saudization rate and then there is a specific Saudization rate for each job.
Speaker #1: For certain job, I mean.
Speaker #2: Thank you. Thank you very much. That's very clear.
Speaker #1: Okay. We'll take the next question from the line of Ramesh. Please unmute yourself. Ramesh, please unmute yourself.
Speaker #4: Hello. Am I audible?
Speaker #1: Yes. Go ahead.
Speaker #4: Yeah. Yeah. So I have two questions. My first question, if you can give what are the current enrollments for these academic year 26, 27 and particularly for the new launches that you had on this year.
Speaker #4: That is my first question. My second question is, this year you have higher provisions for ECL. Do you think this receivables situation will continue next year as well?
Speaker #4: These are my two questions.
Speaker #3: Sorry, can you please repeat the second question?
Speaker #4: This year, the provisions for ECL credit losses, expected credit losses are higher, right? So do you think this higher receivable situation like higher provisions on the receivables will continue in next year as well?
Speaker #1: So with regard to the first question, we will announce it in Q1 after one or one and a half month. The student number per complex, including the new complexes, we're going to give you a very detailed number for each complex.
Speaker #1: With regard to the second question regarding the CL, see, there are two points here, two highlights. First, there is a regular growth supposed to be in the SCL, along with the receivable and along with the revenue, in line with the receivable and the revenue.
Speaker #1: So this is supposed to be continue we are actually at the beginning of this year and you know the SCL is impacted by variance factors.
Speaker #1: Some are economic—certain rates that you take from the economy—and some are regarding the actual performance. We are still very early at the beginning of this year.
Speaker #1: But you know any changes or any I mean, economic or political or any circumstances for sure it has its impact on the receivable and on the SCL.
Speaker #1: But again, we are at a very early stage of the
Speaker #5: So thank you for the platform.
Speaker #6: We'll take the next question from the line of Noura Zouhair. Noura, please. Mute yourself.
Speaker #7: Thank you, management, for the presentation. So one question from my end. When I saw your announcement in Tadawul, you mentioned that there was a decrease in wages subsidy.
Speaker #7: So could you please quantify the effect of that, and if it's possible, and how are you planning to mitigate this going forward? Sure, it's there in the detailed financial statement that we released today.
Speaker #7: So with regard to the HRDF, the decrease is around around 2 million.
Speaker #8: There has been a decrease in the HRDF subsidies this year compared to last year. How are we going to mitigate it? Again, this is maybe the second or third year we have witnessed a decrease in the subsidies.
Speaker #8: So by improving the revenue, by improving the efficiency of the costs, these are the things that we can work on to mitigate any negative variances on other items.
Speaker #7: So this is not the same اللي الدعم حق الرواتب يشعره.
Speaker #8: هل هذا هو الدعم الرواتب؟ أقل مليونين عن السنة اللي فاتت؟ ستتكلمين عن الـ 26 ولا؟ ياس Yes, it's less by 2 million than the comparative year.
Speaker #8: Okay, thank you.
Speaker #6: We'll take the next question from the line of Navid Ahmad. Navid, please unmute yourself. Hello, good afternoon. Thank you for the presentation. I have two questions.
Speaker #6: My first question is going back to the salary increase on the minimum salary. Increase that was announced a couple of days ago. By speaking with some industry operators as well, similar to your, similar to you.
Speaker #6: Uh, they mentioned that there's a possibility that whatever is the incremental cost that will be borne, half of it will be compensated by the HTRF.
Speaker #6: So I just wanted to confirm, do you— is this also your understanding, or probably this is different? That's my first question. My second question is for the new academic year.
Speaker #6: 26, 27, across the portfolio of schools that you have, were there any tuition fee increases that were implemented? So, um,
Speaker #8: Again, so the changes that took place in regulation related to salaries and related to utility costs has been announced earlier this week. Just before a couple of days, and we made our best to address based on the best information we have during today's presentation.
Speaker #8: Now obviously By Q1, there will be more information and more details that we can address related to how could this impact the performance of the financials and whether or not HRDF cost or HRDF subsidy will cover this or not.
Speaker #8: So that's on the first— for the first question. And for the second question, whether it's the number of students, whether it's the level of revenue, whether it's the tuition fee, unfortunately by this time, we may not be able to share any information related to what could impact the disclosure of Q1 financials.
Speaker #8: The good thing is that we are not very far away from announcing Q1 financials, so we may not be able to address any information related to any expectations for the future performance of Fernsehli, whether it's the future performance in the next quarter or the next year.
Speaker #8: Okay, thank you so much. Thank you.
Speaker #6: We'll take the next question from the line of Junaid Farooq.
Speaker #9: Junaid, please unmute yourself.
Speaker #6: Hello. Hi, can you hear me? Yes, okay. Uh, well, uh, first of all, uh, congratulations, uh, to MCL management, uh, for the set of results.
Speaker #6: Um, appreciate your clarification on
Speaker #5: the regulatory developments. I— most of my questions have been answered, but I just have one follow-up question. And if I'm not trying to, uh, ask the same question that Naveed just asked about tuition fee, but I want to improve my understanding.
Speaker #5: I see that advances from customers on the balance sheet have grown by 19% year over year. Is this because you are collecting better, or is it a function of enrollment, tuition fees, or both?
Speaker #10: It's a mix of factors. Doesn't necessarily mean to any project result in any projection of revenue. It has for sure, it has a relation to number of students, it has a relation to the time of starting the academic year, and also it has a relation to collection.
Speaker #10: collection performance. So mainly, maybe this is— these are the 3 major items that are impacting the advances from customer balance. year by year.
Speaker #5: Got it, very clear. Just one follow-up, if I can squeeze, uh, on an earlier question that was asked—and for the abundance of clarity, I think this would be helpful.
Speaker #5: So the 1% impact that you mentioned is the full-year impact of the electricity tariff hike. Since the tariff hike is taking place from 1st of January and your year ends in July, so is it fair to say that the 2027 impact is going to be the 7-month impact, uh, so less than the 1% that you have shown in the presentation?
Speaker #10: Yeah, very fair. Exactly, exactly. This is, this is the idea. Exactly. We just put it on a, on a base of annual, of annual basis to make it more clear.
Speaker #10: But since it is started from January 1st, it's like the same case you, you address now.
Speaker #5: Great, thank you so much. Welcome.
Speaker #9: Thank you again. Okay, I'll take a question from the chat. Question from Kiran: Could you please clarify if the minimum salary of 5,000 or 6,000 Saudi riyals is only the base salary, or is it including other benefits?
Speaker #9: Benefits like insurance, end of service, etc.?
Speaker #10: It's the total salary, but it has nothing to do with the end of service or insurance or other, or other benefits that are given outside the total monthly salary because they are only linked to the salary registered in the GOSI, so GOSI doesn't recognize the other items.
Speaker #9: Okay, thank you. We'll take a question from the line of Usama Khan. Usama, please unmute yourself.
Speaker #6: Hi management, first of all, thank you for the clarity that you have so far provided on the regulatory development. So I just had a couple of questions, the first one being the— there's some news being floated that certain educational allowances that were being provided to some semi-government entities were actually cheated.
Speaker #6: I just wanted to understand if there have been any impact on the overall industry or the overall private sector market, if you could share or talk about something on that front.
Speaker #6: And the second question I'll quickly squeeze in is regarding the mitigants that you have talked about so far, and those have been more centered towards cost efficiencies but not fee increases.
Speaker #6: So just want to understand your strategic thought process going forward on if you— if fee increases are basically on your agenda or not, and if we should see any cost pressure being compensated by efficiencies or anything else.
Speaker #6: That you could share on fee increases, any view on that would be very much appreciated. Thank you very much.
Speaker #9: Sure. So regarding the
Speaker #8: education allowance topic. Obviously, it is, it is a challenge for all education providers, yet NCELE has been operating before that allowance was introduced. And education sector has been growing before this allowance was introduced, and therefore it wouldn't be a major threat or a major challenge that would diminish the chances for NCELE or other education providers to continue growing because demand is still there, and the demand for quality education is still there.
Speaker #8: And not to mention the importance of noticing the level of tuition fee for NCELE schools that is affordable by most of households that NCELE is serving.
Speaker #8: Therefore, we don't look at it as a major challenge that would stop us from growing. That's, that's, that's for the first part. For the second part, the topic of tuition fee increase, again, it's always a mitigation tool that NCELE can use anytime, depends on different scenarios and depends on different responses.
Speaker #8: By each campus separately. We've done this throughout the past couple of years in some of our schools to achieve certain or to respond to certain challenges.
Speaker #8: that we could face, and it will continue to be a tool to be used whenever we look at it from a strategic perspective. It could be related to the competitive landscape.
Speaker #8: It could be to respond— it could be a response to utilization factors and other factors as well. Whenever there is any information regarding tuition fee increase, there will be details to be shared at the right time.
Speaker #11: Thank you very much. Just if you could also share some insights on the 5-year outlook in terms of demand and supply of the overall total market and how much— I mean, demand side Obviously you've talked about the key drivers of the market, but not a lot of clarity is there on the supply side.
Speaker #11: And we've seen quite a lot of schools in the private space actually announcing significant expansions as well. So how do you see the balance between demand and supply, and how do you see utilization rates for the overall sector going forward?
Speaker #11: So that would be all from my side. Thank you very much.
Speaker #8: Thank you very much for your question. I think it is very important, and you're right. We as operators unfortunately don't find much information available in terms of the market.
Speaker #8: The Ministry of Education has been doing really excellent on that space. The clarity of information announced to investors has significantly improved over the past couple of years.
Speaker #8: Yet there is a big space to improve even further. We have submitted our request for the Ministry of Investment and the Ministry of Education to share more information regarding the supply side.
Speaker #8: Internally, we have done our analysis. We have our numbers that we are preparing to announce by Q1, yet it is internal analysis by NCLA team.
Speaker #8: We still need to compare it with official information from the government side. So we can share the best information for— and most reliable information for investors.
Speaker #8: With this mentioned, the number of new schools in the past couple of years. has exceeded the number of new schools in the past 10 years before that.
Speaker #8: Therefore, we see more schools, more supply, especially in Riyadh. Whether it's from international investment companies investing in this sector by opening new schools, or by even local investors opening new schools.
Speaker #8: This obviously puts more pressure on the competitive— on the competition. in a sector that is already highly competitive, yet We look at it from the quality perspective.
Speaker #8: Families invest in their children. They want the best quality for their children. It's not a matter of supply and demand; it's a matter of quality output, and that's our key focus.
Speaker #8: And it has been throughout the past years.
Speaker #11: Thank you very much for your insights and best of luck for the future. Thank you.
Speaker #9: Next question from the line of Ankur Agarwal. Ankur, please unmute yourself. Ankur, please go ahead. Okay, again, as a final reminder, to ask a question you can type it in the chat or click on the 'Raise Hand' button.
Speaker #9: We have a question from Hamza Alsaif. Hamza, please unmute yourself. Hamza, please go ahead.
Speaker #5: Thank you, management, and congratulations on the results. Will the market penetrations remain stable year over year? How would you manage to grow your utilization or keep your market shares since new players in the market are planning to enter Saudi?
Speaker #5: And have you used the buy now pay later instruments or
Speaker #8: Thank you very much for your question. So it's a very good observation. The market may not be growing in terms of penetration, yet we count on the 5 million in the public schools who are looking to transfer to better quality schools in the private sector, which could be a big driver for growth in that space.
Speaker #8: expanding in new markets gives us the advantage of capturing market share from competition in terms of the Study Now Pay Later, Nchele has not yet done any deal with Study Now Pay Later provider.
Speaker #8: But its discussions are always open with multiple providers, and it could be used at the right time when we believe it's the right time to use it.
Speaker #8: Uh, thank you.
Speaker #9: Okay, uh, Anker wrote his questions in the chat. He has a question, as the cost of employees and utilities is going up, should we expect an across-the-board increase in fees in the sector, or do you expect some partial offset from HRDF subsidies?
Speaker #9: The second question is, how has the conflict affected the greenfield expansion in terms of timing and cost escalations, if any?
Speaker #10: Uh, with regard to the first question, we explained the impact of the utilities is around 1%. Do you expect HRDF to offset these subsidies?
Speaker #10: See, we cannot speak on behalf of them. If anything officially stated from their side, for sure we're gonna We're gonna work on it to, to benefit from this initiative.
Speaker #10: So, so far nothing officially any, any informed to us. How this conflict affected the greenfield expansion? No, it has, it has nothing to do.
Speaker #10: Usually there are various changes even in the markets or regulatory changes, but we believe always that we should continue growing, and this is also more helpful to continue growing to cover even if it is impacting the margin, but to cover the— maybe the cost plus that will be added on those items.
Speaker #10: I hope this has answered your question.
Speaker #9: It's a similar question from Iqbal Azhar asking if you expect an increase in the cost of construction or expansionary CapEx due to the recent geopolitical situation.
Speaker #9: I don't know if you have something to add. I think that was partially the previous question.
Speaker #10: Nothing yet. Nothing yet. Any— we know that there is an increase in the shipment cost, but we have not yet any suffered from those items yet.
Speaker #10: And I don't believe it would be because then you are not— we don't have a consumer product or items. So I don't think that would be material to us so far, at least.
Speaker #10: Thank you.
Speaker #9: Final reminder: if there are any questions. Okay, there appear to be no further questions. So, I'd like to thank NCL East management for their time today.
