The interim report card from private education conglomerate Advtech will be keenly scrutinised when it is published next Thursday.
The trading statement for the six months to end-June — released on Wednesday — cites a good number of earnings measures that will require some digging into the financial statements to discern if Advtech is, indeed, making profitable progress.
The initial market reaction was positive with the share price perking up markedly. This gain, of course, is off a low base because Advtech’s share price has been on a steady decline since peaking at R20 in early 2017.
The nub of the trading statement is that Advtech — which owns school brands such as Crawford, Trinity House and Abbotts, as well as tertiary brands such as Varsity College and Rosebank College — has penciled in a 5% to 9% gain in normalised earnings to between 41.4c a share and 43.3c a share.
The gain in both earnings and headline earnings gain was considerably higher at between 21% and 30%. But the normalised earnings number does remove the influence of once-off transactions and corporate action costs.
Further informing the assessment of Advtech’s performance is a restatement of the comparative interim period results, which reduces the normalised earnings gain to between 2% and 6%.
The key indicator, though, is that, on any measure, Advtech’s ballpark earnings will be at least 42c/share. This is comfortably ahead of the recurring earnings number reflected in the interim results of private education practitioner Curro.
Debt relief — or being thrown to the loan sharks?
On Monday, Capitec confirmed what the Banking Association SA (BASA) has been warning the government about; that banks will turn off their lending taps on low-income earners if debt-relief regulations became law.
For Capitec, the bank that was initially built to serve low-income earners, to say it actively reduced its lending exposure to customers who are meant to benefit from the debt-relief law seemed a confirmation to many that BASA has been correct all along.
But there is one thing that this conclusion ignores; the demographic profile of Capitec’s clients has been in a state of flux for a while. The bank does not use income demographics to segment its customer base but it is common knowledge among investment analysts that, as with other banks, Capitec has been “migrating upwards” to cater for higher-income segments.
So while the debt-relief regulations might have added to Capitec’s reasons for reducing the share of its loan book lent to people earning up to R7,500 to just 5%, it probably fast-tracked this decision rather than triggering it. If low-income earners are now good enough to be customers of existing banks, but not good enough to extend credit to, we need someone to disrupt that status quo.
African Rainbow Capital co-CEO Johan van Zyl has promised that TymeBank will bring that disruption by going as far as lending to “gogos renting out back rooms” because to him, that’s consistent income that banks ought to recognise. So, we are waiting, because if formal banks turn their back on the poor, we are throwing the most vulnerable to the loan sharks, who don’t play by the rules.
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