Target reachable, says Advtech
• Appeal of brands drawing students rather than fees protests, says CEO
Private education specialist Advtech has reiterated that its “stretch target” for normalised earnings of 100c per share in the 2018 financial year is achievable.
Private education specialist Advtech has reiterated that its “stretch target” for normalised earnings of 100c per share in the 2018 financial year is achievable.
On Wednesday, Advtech — which owns prominent private education brands such as Crawford College, Trinity House, Abbotts College, Varsity College and Rosebank College — reported strong results for the year to end-December. Revenue was hiked 24% to R3.4bn, with enrolments up 13%. Operating profit before interest grew 36% to R608m, while normalised earnings came in at 66.7c per share (up 24%) and yielded a final dividend of 19c per share.
Most impressive was Advtech’s free operating cash flow before capital expenditure, which topped R478m, or 90.9c per share. Advtech CEO Roy Douglas said the robust performance demonstrated that the company was on track to reach its growth targets. The star performer was the revitalised tertiary segment which turned a 28% gain in revenue to R1.25bn into a 67% increase in operating profit to R223m.
Douglas said there was an incorrect perception that the tertiary sector’s strong performance was linked to a flood of students pouring into private learning facilities following the disruptions at mainstream university campuses during the #feesmustfall movement.
He argued that Advtech had spent substantial capital on positioning its tertiary brands to appeal to students.
Douglas added that Advtech was taking the opportunity to expand its tertiary offering and would open a megacampus for Rosebank College in Durban in 2018 and in Cape Town in 2019.
“Our Polokwane Rosebank campus — which offers blended learning — will also be expanded to Pietermaritzburg and Bloemfontein,” he said.
The enlarged schools division held its operating margin at 21%. The margin could be bolstered markedly if Advtech held back on capital expenditure on its stated strategy of more aggressively expanding the school footprint, Douglas said.
As at the end of December, the private schools division comprised 78 schools across 42 campuses under the operational umbrella of Abbotts College, Advtech Academies, Centurus Colleges, Crawford Schools, Junior Colleges, Maravest Group and Trinityhouse.
Two greenfield schools were developed under the Advtech Academies brand in the mid-fee sector — Founders Hill College in Modderfontein (which opened in 2016) and Copperleaf College in Centurion (which opened in 2017), Douglas said.
The Summit College acquisition, which was concluded in 2016, would be included in Advtech’s financial results from this financial year.
Advtech was also determined to generate 30% of its revenue from the rest of Africa by 2020, he said. Only around 6% of the company’s revenue is generated from the rest of Africa, but a determination to build distance-learning niches on the continent was underlined by the recent acquisition of the University of Africa in Zambia.
Vunani Securities analyst Anthony Clark said Advtech’s strong performance was spurred by a continued resurgence in the tertiary division, which saw operating margins widen from 13.7% to 17.8%.
Considering the profitability of the tertiary segment, Clark suggested Advtech executives pay close attention to the market hype around the midyear listing of the embryonic tertiary division of rival private education group Curro.