AdvTech, owner of private school brands Trinityhouse, Crawford College and Pinnacle, increased profits in 2021 thanks to higher enrolments, even as it chose not to raise school fees.
The private education provider, whose tertiary brands include Rosebank College, Capsicum Culinary Studio and Varsity College, said on Monday that group revenue grew 8% to R5.9bn, with operating profit increasing 22% to R1.1bn. In a nod to consumer weakness, it only increased tertiary fees below inflation.
Headline earnings per share (Heps), an SA measure of profit, were up 33% to 121.6c. The group paid a final divided of 31c per share.
AdvTech said the profit increase was because of the enrolment growth, a significant improvement in up-to-date school fees and a focus on efficiency, with a 21% reduction in finance costs.
Explaining how it cut costs at schools and grew profits even as it elected not to increase fees, CEO Roy Douglas said: “Typically, education and schools are not a sector that thinks a lot about productivity.” But AdvTech has thought a lot about how to run the business and schools more efficiently.
It moved away from employing finance staff at each of its schools, that number more than 100, and instead runs a centralised debtors and creditors department, one way it is cutting costs.
In the school division, revenue increased 4% to R2.2bn from R2.1bn and operating profit grew 10% to R413m as it reduced operating expenses and closed down two Trinityhouse schools, one in Northriding, Johannesburg, and another in Durban at the end of 2020.
AdvTech schools benefited from an increase in pupils attending extramurals and aftercare programmes, both of which suffered from reduced numbers during the pandemic as parents worked from home and faced salary cuts.
SA schools grew enrolments 8% in the year to end-December, but schools are only at 83% capacity, giving the business sufficient room for growth. Its private schools had 36,800 pupils in 2021, up from 33,900 in 2020.
There is a growing demand for private education due to increased competition for admission to state schools that have not expanded to keep up with population growth.
AdvTech’s newer brand of Pinnacle schools aimed at the middle class is expected to benefit from concerns about the quality of many government schools. However, it reported that all its brands from premium to middle class showed growth in 2021.
AdvTech’s schools that offered the Independent Examination Board (IEB) matric qualification boasted 2.1 distinctions per candidate, a 99% pass rate, with 91% of the students qualifying to apply for university.
By contrast, SA schools achieved a 76.5% pass rate, with 36.4% of matrics qualifying for university entrance.
It launched an online-only school, Evolve, in 2021 aimed at the niche homeschooling market. Evolve allows students the flexibility to study each subject at their own pace, which suits students who struggle academically or those who learn more quickly than their peers. This is seen as a niche product as AdvTech does not believe online schools will become mainstream because most learning happens in a social context, such as in a physical classroom with peers.
AdvTech remains successful in Kenya, boasting a R47m operating profit, even as many SA businesses have struggled in East Africa.
Its three-year old Crawford International school in Kenya — aimed at the upper-class market — made its first profit and opened international doors for many students.
It said more than 67% of final-year students completing their A-level qualification at the school had already been accepted into international universities in the US, the UK, Spain and Hong Kong, with most students being awarded full bursaries as well.
The Makini brand of schools in Kenya, which follows a government curriculum and are aimed at the middle-class market, returned to profitability after significant losses in 2021, when schools were kept shut for months due to government Covid-19 restrictions.
Douglas explained why AdvTech thinks it will continue to excel in Africa. “We’re not a manufacturing or retail business, which is dependent on particularly modern and sophisticated supply chains for either raw material supply or distribution.” Supply chains and logistics face multiple delays in Africa.
A classroom is a relatively independent, isolated unit that is not dependent on supply chains, he said.
Douglas said: “We’re pretty much in demand because many governments are not really able to provide the quality education that appeals to parents.”
AdvTech’s SA tertiary division, which includes some online learning, reported a 4% increase in enrolments, with revenue up 4% to R2.4bn while operating profit rose 13% to R609m.
It said face-to-face enrolments keep growing, despite a severely disrupted enrolment and registration cycle due to the delayed release of the 2020 matric results.
AdvTech’s share price closed 3.51% lower at R16.48 on Monday, giving it a market capitalisation of R9.138bn.
Update: March 28 2022
This story has been updated with addition information and comment from AdvTech’s CEO.
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