The investment presentation on Monday last week by private education conglomerate AdvTech — which has seen its schools division stuttering in recent years — did a lot to soothe shareholders in such nerve-racking times.
The key take-away was that capital expenditure plans are being reconsidered — and this means no new schools are planned for opening in 2021.
Of course, there is still the issue of prolonged school closures due to the Covid-19 virus outbreak to consider. There will be revenue lost, undoubtedly, but the quantum will only become clear once there is a clearer indication of the tenure of school shutdowns.
AdvTech — which owns school brands such as Crawford College and Trinity House — can at least celebrate enrolment growth of 5% for 2020, despite continued consumer financial pressure and high levels of emigration.
Capacity expansions for the short term will come from stretching existing campuses, which seems prudent owing to the prevailing uncertainty.
Although it’s difficult to think outside the Covid-19 context, AdvTech did manage some remarkable achievements at new school sites.
The investment presentation showed that Trinity House Glenvista exceeded enrolment targets by 99% and is expected to avoid the traditional J-curve by being profitable from its first year of operation.
The Pinnacle College in Linden — situated on the old Salvation Army premises and which taps the mid-fee market dominated by rival Curro — exceeded enrolment targets by 80%, while Pinnacle College Waterfall exceeded enrolment targets by 25%.
It’s a pity these achievements cannot be appreciated in a business-as-usual scenario. In the meantime, however, some encouragement can be taken from Advtech’s disclosure that the school’s new services hub managed to crank down the debtors book debt-to-revenue ratio of 5.6% in 2018 to 4.6% at the end of 2019.
How many directors are contemplating share buybacks right now?
One source of comfort for jittery investors in these very strange days of the Covid-19 pandemic is seeing directors taking the opportunity to snap up scrip while share prices are still spooked.
There’s been a fair bit of director-dealing activity over the past week, ranging from really significant (relatively speaking, of course) transactions such as Sun International and Capital Appreciation, to smaller forays in Master Drilling and Sea Harvest.
Other companies that saw directors buying up stock included Argent, Brimstone, Wescoal, ARC Investments, PPC, Kaap Agri, Afrocentric, Kumba, Curro, Hudaco and African Phoenix. Perhaps most intriguing were the directors snapping up shares in property counters such as Growthpoint, MAS Real Estate, Stor-Age, Attacq and Accelerate, when sentiment for real-estate stocks is all but vacant.
The question, of course, is how many companies are contemplating share buybacks at this delicate juncture? Or perhaps, more pertinently, how many companies (remembering the need to reinforce balance sheets in case of a prolonged economic shutdown) can afford to consider buying back their own shares?
Last week, private education group AdvTech indicated that it might consider buying back shares, depending, naturally, on developments around Covid-19. ARC Investments, which trades at a gaping discount to its estimated intrinsic net asset value, reportedly dismissed the possibility of a share buyback.
Quite possibly there might be a few announcements around share buybacks — at least from those cash-flush companies not in a closed period — as directors get to grips with longer-term implications of the prevailing contagion. The quantum of such efforts will be very telling.
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