AdvTech set to go on a R3bn investment spree
PRIVATE education group, AdvTech, is embarking on R3 billion in investments at least on 20 sites.
The company, which last month rejected an unsolicited bid from Curro Holdings, yesterday reported strong results for the six months ended June, including a 29 percent increase in profit to R104.6 million, up from R81.1m.
In its results for the half year, AdvTech’s revenue increased by 33 percent to R1.27bn from R959m in the same period last year.
Surge
The announcement of AdvTech’s latest interim results caused the stock to surge by as much as 8.5 percent yesterday.
The stock was up 1.62 percent to R11.90 at the close on the JSE yesterday.
The group completed R1.3bn worth of acquisitions and asset takeovers in the half year, com- prising of the R698.9m acquisition of Centurus Colleges, R89.9m for the acquisition of the Gaborone International School, R19m for Boleng Preprimary and Primary School, R28m for the assets of Kathstan Academy, as well as the purchase of the Maravest Group for R524.4m, which was partially settled by issuing 33.7 million shares to the vendors of Maravest.
Payment of R18m for an in- terest in Kyocraft is to be settled in AdvTech shares dependent upon the performance of Maramedia in the year ending December 31, 2015.
“Strong revenue growth and margin improvement was achieved in all three divisions and has led to a substantial improvement in operating profit.
“While this is tempered at earnings level by interest charges arising from the funding of large acquisitions in recent months, the strength of the group’s increasing cash flow will offset these charges in the medium term,” the group said in its interim results.
Operating profit
AdvTech’s operating profit before finance costs paid and interest received increased by 73 percent to R203m from R117.4m in the comparable-period.
It declared an interim dividend of 12.5c per share for the 455 million ordinary shares in issue, making for a total dividend payout of R57m.
“Notably, all of the earnings increase in this period was delivered in effect by organic growth as the interest cost arising from acquisitions offset the operating profit contribution they made.
“No additional central overheads were needed and the acquisitions are expected to contribute to organic earnings growth from next year as strong enrolment growth flows through to utilise existing schools capacity,” the group said.
AdvTech Academies, the recently launched umbrella brand for community orientated schools at a range of fee levels, already has six schools with enrollments exceeding 2 200. AdvTech said the schools division contributed 53 percent of revenue and grew by 51 percent to R683m.
Of the unsolicited bid after Curro offered R6.2bn or R12 per share with an underlying cash payment offer for shareholders exiting the potential new asset, AdvTech said in its interim results it was conditional and unclear on several key issues.
The proposal was in the form of a scheme of arrangement that required the board to consider its merits for AdvTech as a whole.
“The board was greatly encouraged by strong support received from the stakeholder community and the majority of shareholders for its stance on reputation and quality.
“AdvTech has rededicated itself to upholding these values in its pursuit of excellence and long-term sustainability.
“The group continues to invest in quality student outcomes as fundamental elements of its offering and a driver of its success,” it said.
‘Strong revenue growth and margin improvement was achieved in all three divisions.’