Inside PSG’s lucrative distance-learning venture
What are PSG’s intentions with its lucrative distance-learning venture which overlaps with Curro and Stadio?
PSG Group’s penchant for private education is now stretching well beyond its core holding in JSE-listed schools business Curro Holdings (see Market Watch) and its tertiary offshoot Stadio.
The group’s investment presentation for the year to end-February betrayed considerable bullishness around 88%-owned distance learning venture FutureLearn.
The centralised learning platform already hosts about 18,500 learners and 1,500 tutors. It offers services to 1,700 schools and learning products to 200 corporates and tertiary institutions.
In April, FutureLearn was bolstered by a merger with PSG-controlled education technology company ITSI, which itself caters for 200 schools and 70,000 learners.
PSG CEO Piet Mouton believes huge cross-selling opportunities will be created by harnessing ITSI’s "learning paths" model and FutureLearn’s "guided learning" model.
PSG is pencilling in some big numbers for the enlarged FutureLearn — which might be taken very seriously considering the enormous expansion success achieved by Curro over the past eight years and the promising start shown by Stadio.
Revenue of R320m is forecast for this financial year, an amount that is markedly up on the R210m that was chalked up in the 2018 financial year.
By 2020 PSG estimates revenues should reach about R420m.
The group’s investor presentation also showed a 31% organic compound annual growth rate for FutureLearn over the past five years. Considering the business turned profitable only in 2016, the past few years have clearly shown extraordinary growth.
It seems, judging from a breakdown in revenue, that FutureLearn has been highly successful in diversifying from its "home schooling" core in the past four years.
In financial 2016 schools and corporate represented less than 10% of revenue, but in the 2019 financial year this breakdown could show schools and corporate business accounting for about half of revenue.
The big question, of course, is where PSG intends taking FutureLearn. The business overlaps with both Curro and Stadio, which might preclude a convenient reversal of these assets into either business. PSG does have a preference to list its investments when critical mass is achieved and growth capital is required to further growth ambitions.
With FutureLearn — where operating margins and capital expenditure patterns would be fascinating to gauge — there must be an opportunity to cash in on the goodwill created by Curro and Stadio.