AdvTech, the owner of private school brands such as Trinityhouse and Crawford College, sees potential in expanding in the rest of Africa where it swung to a half-year profit, recovering from a loss when one of its Kenyan schools was temporarily closed due to the pandemic.
The SA company that owns tertiary institutions such as Rosebank College and Vega also owns two schools in Kenya, one offering the government curriculum and a private school offering the international Cambridge curriculum. It also has a school in Botswana.
In its half-year to June, AdvTech said it recorded revenue growth of 11% in the rest of Africa to R120m, while it was up 1% in SA schools. In SA, it did not increase school fees in the dismal economic environment and kept its tertiary school increases below inflation.
While SA businesses have struggled in Africa, with companies as diverse as food producer Tiger Brands and retailers Shoprite and Massmart reducing their exposure on the continent, offering education was a different proposition, AdvTech CEO Roy Douglas said, adding that retailers had struggled because their success was reliant on efficient supply chains and logistics.
“Our schools are not dependent on any levels of supply chains,” Douglas said. “Parents on the continent appreciate that education is the way out of the poverty trap.”
This half-year, AdvTech recorded an operating profit of R16m in Kenya and Botswana, a sharp swing from last year’s interim loss of R9m when it could not charge fees at one of its Kenyan schools.
Douglas said other African countries faced the same challenge as SA, with governments “battling to provide decent quality education”.
However, AdvTech will not expand recklessly.
“We’re going to be very cautious. We will evaluate carefully and we will not make any ill-considered, long-ranging decisions that risk the business,” Douglas said. However, the company’s success in Kenya was a good indication of the potential that exists.
In SA, the company launched a new online-only school called Evolve for home schoolers who prefer to study at their own pace and attracted 460 students for its inaugural year. Aware of the weakness of the SA economy, it has repositioned Abbotts College private high school at a lower price point, which has boosted enrolments by 15%.
Headline earnings per share, a measure of profit that strips out one-off items, increased 37% to 54.6c per share.
However, AdvTech has not escaped the devastation of the lockdown. At SA’s upper-end private schools, such as Trinityhouse, student numbers were flat with schools attracting enough new pupils to offset students leaving. It recorded more students than usual leaving or being excluded for financial reasons.
Small Talk Daily analyst Anthony Clark said the half-year results were “solid” and maintained his advice from earlier this year to buy the share. The results showed a continued demand for private education in SA despite the weak economy, he said.
The share ended Tuesday 2.41% higher at R17, its highest close since early 2018.
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