If all else fails, put a foot in rest of Africa
THE market has hardly stuck its hand up for Advtech since CEO designate Leslie Maasdorp declared the company’s intention to play in the lower-fee privateschool market. The profit potential of this segment has come to prominence as more and more investors are enlightened by the rapid development efforts of PSG-controlled Curro, likely to have more than 80 schools up and running by 2020.
Advtech has largely built profits on the (excellent) academic achievements of its flagship Crawford and Trinity colleges, two distinctly upmarket private school brands. The company’s decision to have a tilt at lower-fee private schools comes rather late in the day (although even Curro admits the potential is hardly tapped out) and prompted market commentator Anthony Clark to suggest the slow-learning Advtech directors should be given detention.
While it is probably fair to pick on Advtech for missing the early opportunity in lower-fee schools, perhaps there is a chance for the company to make amends by making the first move into Africa. Curro is keen on international expansion, but first wants to ensure its rapid SA expansion remains firmly on track.
Mr Maasdorp would not be wrong in thinking that the Crawford and Trinity brands, which already draw pupils from across SA’s borders, might offer a compelling option for determined pupils in some of Africa’s bigger urban centres.
KAGISO Asset Management analyst Rubin Renecke says Group Five delivered a “good result” in the year to June in a “still tough” business environment in SA. The country represents 76% of group revenues. “Revenues were up strongly in the construction and engineering divisions. However, due to some loss-making contracts in the construction division, margins came under pressure.”
Group Five continues to target cross-border work to diversify its revenue base away from SA. But overall, he says, “its order book looks healthy and its pipeline of work has a strong focus on mining, power and oil and gas projects”. Water projects are coming to market, but real estate is slowing after a period of high orderbook growth. Real estate does not mean state-led housing programmes, which CEO Mike Upton says could be far more dynamic. But he holds out hope that Human Settlements Minister Lindiwe Sisulu will light a fire under this process.
The group says the outlook for the business in the short term is “fair to good”. It has nil net gearing and had a largely unchanged year-onyear bank and cash balance of R2.9bn in June. Mr Upton also says the company is negotiating for a 450MW gas-fired turbine power contract in West Africa.
Meanwhile, he is approaching the group’s executive retirement age of 60 at the end of the year. The board expects to make an announcement on his successor soon.