The interim profit of private higher education group Stadio jumped more than a fifth as student numbers increased and the demand for professional qualifications drove growth.
The company, valued at about R4.6bn on the JSE, reported in its results for the six months to end-June that profit grew 21% year on year to R126.6m and headline earnings per share (HEPS), a common profit measure in SA that excludes certain items, by a similar margin to 13.5c.
This was partly because of first semester student numbers increasing 9% to 41,865, and more than a tenth to 46,254 when comparing August 2022 to August 2023.
The group sees even more room for student growth as it aims to enrol 56,000 students by 2026. It said less than 40% of matriculants gain places at government universities, providing it with a big pool of potential students.
It also now has almost 100 accredited courses on offer including law, policing, film, IT, architecture, education and chartered accounting.
Smalltalk Daily analyst Anthony Clark said the stock has a long “growth runway”.
The business is asset light with 86% of courses offered online and is generating significant cash making it able to fund its own expansion, he said.
Stadio has already invested in most of its buildings and distance education courses and will see increasing profits as new students are added, because its high fixed costs are already covered. This is known as operating leverage.
Clark said the stock offers “highly attractive growth for any investor over the long term, especially as Unisa students were choosing Stadio due to the drama and political machinations at the state-owned institution”.
The company, whose brands include AFDA, Milpark and Lisof, was spun out of PSG-controlled private schools business Curro in 2017. Stadio is focused on offering affordable university and other tertiary courses via online tuition and physical campuses.
The number of programmes it offers increased from 87 to 91, with 47 more in development or awaiting accreditation. The average annual tuition for distance learning programmes are R30,000-R35,000 and contact learning R55,000-R60,000.
Revenue rose 16% to R618m, core earnings (ebitda) improved a tenth to R210m, but the ebitda margin declined two percentage points to 29%. Core HEPS, which excludes non-recurring items, increased 20% to 13.6c.
No interim dividend was declared, in line with the company’s policy of only declaring annual dividends.
The company is seeing the impact of the tough economic environment, characterised by high inflation and greater interest rates, the consumable income of students and their ability to pay fees.
“We see that more students are coming under pressure, and a lot of our students take longer to pay,” CEO Chris Vorster said during the results presentation.
As a result, there was an increase in the debtors’ book, particularly for distance-learning students.
However, it always sees a spike in bad debt in June with students resuming payment in July to access their first semester grades and register for the second half of the year.
The group revised its process to better manage bad debt and fee collections helped to grow the amount of bad debt recovered more than a quarter to R2.3m.
The group owns most of the property it uses for its campuses instead of renting, such as its campus in Krugersdorp, Gauteng, of which it will take control in the second half of the current financial year.
As its Bellville campus can no longer meet demand, Stadio will start building a new campus in Durbanville in the northern suburbs of Cape Town. Most of the construction is expected in 2024, the project to be completed in 2025 and be opened for new students in 2026.
“On the comprehensive campuses, we see bigger student numbers and therefore also bigger margins,” Vorster said.
With Katharine Child
Updated: August 30 2023
This article has been updated with additional information
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