Private schools could get a caning
JSE-listed AdvTech, one of the biggest private education groups in SA with brands such as CrawfordSchools and Trinityhouse in its portfolio, says it is feeling the effects of the fallout from the Covid-19 lockdown, with the group about 20% behind on school fee collections for April, compared with the same month last year.
CEO Roy Douglas tells Business Times it is too early to read anything into these figures but they are "indicative of the potential problems and the environment we are in".
South Africans across the board are reeling from the financial impact of the coronavirus pandemic and the associated lockdown.
"If we took last week and compared that to that week last year, our rate of collection is about 20% lower this year than last," says Douglas.
"The debt is still due but the cash collection is lower. Of course the question would be, are people able to pay and will it just take them longer, or will that become a default?"
Douglas says AdvTech is well aware of the crippling effects of the economic disruption and it has "undertaken to engage with individuals to understand the extent of the problems and the consequences".
"We have entered into payment plans and arrangements in terms of trying to ease the burden. Our goal of course has been to try to continue with education with the least disruption as we can."
Douglas says the group's schools have been "very successful" in shifting operations online, and its teachers are "very much at work".
"Our operations are continuing uninterrupted but in a very different guise."
He says this has been most difficult to do at primary school level and entails a greater deal of parental involvement. Nonetheless, AdvTech has managed to implement programmes from pre-primary and up.
But just because pupils are not in bricks-and-mortar classrooms at the moment does not mean there are no longer operating costs.
"We still have costs like security costs and maintenance. You still have to sustain and maintain properties so everything is in order when we do return."
Douglas says it is "impossible" for AdvTech to "do across-the-board deep discounting" on fees.
He says sometimes there is a "naïve" view that because the classroom is now virtual there should be a discount. "It is not practical when one understands the economics and the cost structure of the business."
AdvTech had already been reducing its pipeline of new schools or the expansion of existing facilities even before Covid-19 because of the weak economy, he says. The group has opened three new schools this year, but no new schools are planned for 2021 or the year after that.
"We are watching things closely - our goal is to move through this with a limited amount of disruption to our staff and stakeholders," Douglas says.
"If the situation worsens then we look at across-the-board salary reductions, but in a graded manner. The staff at lower levels we would want to impact as little as we can, and those at higher levels we would pull back more.
"But those are actions and steps that will be done with scenario planning. We will wait until we have greater clarity about what is happening before we implement on that score," he says.
Competitor Curro Holdings says the lockdown has had "an enormous impact on the sector". "Strategies have had to be reconsidered - from learning to business plans," Mari Lategan, executive for marketing and communications at Curro, said in a statement. "With schools remaining closed for the time being, we have moved our in-class learning to the remote and online learning space."
She says the group is "well equipped in this department", with its online learning approach "stemming from years of development".
Small Talk Daily analyst Anthony Clark says it is too early to tell what the effects of Covid-19 will be on groups such as AdvTech and Curro, but that there are cost implications for both.
He says if the lockdown is extended, some parents might ask for discounts on the grounds that the "school experience" is being lost.
The lockdown and resulting loss of income for parents who lose their jobs or businesses could also lead to greater student attrition, says Clark.