Tertiary education helps keep AdvTech revenue buoyant
More schools open but the segment remains under pressure from emigration and tight economy
Private school and tertiary institution AdvTech reported a 16% rise in revenue for the year to June, lifted by its tertiary segment. However, the group’s schools business in SA remained under pressure because of emigration and an economy that has led to some parents not being able to afford the fees.
The groups brands include Crawford College, Trinity House and the Institute of Higher Education, which owns a number of private colleges.
Advtech’s headline earnings per share rose 20% to 86c and revenue was up 16% to R5.1bn.
Advtech’s tertiary division “performed exceptionally well” with a 25% rise in revenue to R2.14bn and operating profit increase of 20% to R496m.
Schools in SA recorded a 3% increase in operating profit to R358m and revenue rose 11% to R2.2bn.
CEO Roy Douglas attributed the schools’ performance to expansion in the middle-income school segment and building or opening five new schools including in Glenvista, south of Johannesburg, and in Linden, Randburg.
Small caps analyst Keith McLachlan said that it was a good set of results as the AdvTech tertiary sector had seen a 13% increase in enrolments this year and this was much a larger part of the business than the school segment, which was under pressure.
He also said the investment in new schools would pay off as there was likely to be a continued demand for well-priced private schooling and tertiary education in light of the Fees Must Fall protests.
“The key metrics are overall students are up 10% and revenue is up 16%," said McLachlan. One advantage of the education sector is that it is defensive even through tough times.
Outside SA, AdvTech bought a school in Kenya that accommodates 3,700 pupils as part of its expansion strategy into the rest of Africa. It also opened a Crawford School in Nairobi, which already has more than 400 pupils.
Its investment in Kenya resulted in a 55% rise in revenue to R204.2m.
“We have had a phenomenal response,” Douglas said of the five new schools in SA and the two in Kenya.
He admitted that emigration remained high, leading to losses in the number of pupils at its schools. Moreover, there was pressure on parents who could not afford fees in tough economic times.
AdvTech delayed the dividend payout due to tremendous uncertainty with the Covid-19 pandemic, which has resulted in the closure of schools across the country. “We thought it prudent to do so.”
McLachlan said the next set of results were likely to be poor given what has happened in the past month with the Covid-19 pandemic.
Douglas said its wealthier schools were well set up for cyber teaching and were ready to teach over the internet at home as long as schools were open to teachers from April 14.
It was looking at ways to support learning of students at tertiary institutes like Rosebank College who may not have access to home internet
“We are really well positioned to keep up to speed with school shutdown and online learning.”