Private education conglomerate Advtech experienced a marked slowdown in growth in its core schools division, but this was offset by an excellent result from its tertiary division.
In the half-year to end-June results released on Monday, Advtech’s schools division reported a 10% increase in revenue to R904m with operating profit creeping up 5% to R172m.
The schools division — including brands such as Crawford College, Trinity House and Abbotts — is the biggest operating segment for Advtech, accounting for 45% of revenue and half of operating profit. This performance lagged rival Curro, which last week reported its school division growing revenue 28% in the same period.
Advtech CEO Roy Douglas believed the slower growth in the school segment was a temporary issue, pointing out that new enrolments were still in line with expectations.
He conceded, though, that the difficult economic climate and unsettled sociopolitical environment had a more significant effect on enrolment numbers than had been expected.
Douglas said increases in the number of families emigrating meant pupils leaving in grades where it was difficult to replace pupils. Advtech had also experienced an increase in withdrawals and exclusions because of financial pressures.
To offset slower growth, Douglas said the school division would enrol more students in additional classes at key entry points, restructure operations to improve efficiencies and implement shared services and the rationalisation of transactional processing. Demand for (lower fee) Advetch Academies was ahead of expectation.
Advtech’s tertiary division, which includes brands such as Vega, Rosebank College and Varsity College, had a rollicking six months with revenue up 33% to R789m. Most encouraging was a fattening of the operating margin from 17% to 20% with Douglas reporting significant operational leverage from strong volume growth. Operating profit soared 56% to R157m.
There has been a fair deal of investor attention in the tertiary education space with Curro opting to spin off and separately list its fledgling tertiary assets on the JSE under Stadio Holdings.
Douglas said increased corporate activity in private tertiary education had raised asset prices. "We are pleased to already have a well-established tertiary platform from which we can build. At the moment buying new assets might be too expensive for us and there is still plenty of opportunity to leverage our existing brands."
Douglas believed there were still acquisition opportunities in the private schools sector.
Advtech continued to diversify away from SA’s slow economy, he said, reiterating the medium-term goal of generating 30% of revenue from the rest of Africa by 2020.
An interim payout of 15c per share was declared, supported by a 31% rise in cash flow generated by operations to R785m.
hasenfussm@fm.co.za
WE ARE PLEASED TO ALREADY HAVE A WELL-ESTABLISHED TERTIARY PLATFORM FROM WHICH WE CAN BUILD
BUYING NEW ASSETS MIGHT BE TOO EXPENSIVE … THERE IS OPPORTUNITY TO LEVERAGE OUR EXISTING BRANDS
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