Advtech gains from smart focus on higher education
Interim results showed the company was able to capitalise on consistent demand for its specialised tertiary offering
Private education group Advtech’s smart investments in capacity at its diversified tertiary division are paying off with further organic growth on the cards for the full year to end-December.
Interim results to end-June released on Monday showed Advtech was able to capitalise on consistent demand for its specialised tertiary offering, once again outshining the larger private schools division.
Private tertiary offerings have proved increasingly popular in recent years as students battle to qualify for limited places at traditional universities, look for more affordable options or pursue non-university training courses.
Advtech’s tertiary segment increased its margin to 22% from 20%, transforming a 12% gain in revenue to R882m into a 24% hike in operating profit to R195m.
Advtech CEO Roy Douglas said 99% of the growth notched up by tertiary was organic.
"The operating leverage is fantastic, and we will be looking at further campus expansions".
The tertiary business – which comprises Varsity College, Rosebank College and an array of specialist offerings spanning accounting, design, hospitality and communication — only accounted for 39% of top-line but made up more than 50% of the operating profits.
Although Advtech is still awake to further tertiary opportunities, there will be a continued focus on organic growth for the medium term.
In terms of expansion efforts, he noted Advtech opened three new tertiary campuses in 2018, including two digitally-enabled, blended learning sites at Rosebank College in Pietermaritzburg and Bloemfontein.
Vunani Securities analyst Anthony Clark said Advtech’s business model had "flipped".
"Tertiary, once the drag on Advtech, has became the growth superstar in terms of consistent growth from 2014. Schooling simply lost its way and its profitability…"
Clark said the tertiary division managed to widen its operating margin, while the margin in the schools division had contracted. He added that the tertiary division’s operating margin was a mere 10.2% in 2014.
Advtech’s schools division – anchored mainly around Crawford Colleges, Trinity House and Abbotts – was again held back by ongoing learner withdrawals due to emigration and financial pressures.
Revenue skipped up 18% to about R1.1bn on the back of acquisitions and growth in the mid-fee sector schools. But operating profit was static at R172m, with the margin pressed down to 16%.