Tar­get­ing those who can pay for ed­u­ca­tion

Financial Mail - Investors Monthly - - Analysis -

Ad­vTech is an ed­u­ca­tion and hu­man re­source group with a foot­print across SA and in some South­ern African coun­tries.

It has a schools di­vi­sion, which con­trib­utes about 45% to the group’s to­tal rev­enue, a ter­tiary di­vi­sion (about 39%) and a re­sourc­ing di­vi­sion (about 16%).

Ad­vTech is a com­peti­tor to Curro in the pri­vate school space, though through its var­i­ous brands of schools it ed­u­cates just over 27,000 pupils, mak­ing it about half the size of Curro. But it has two di­vi­sions that Curro does not have: the ter­tiary ed­u­ca­tion and re­cruit­ment busi­nesses.

Brands, or schools, owned by Ad­vTech in­clude Craw­ford Schools, which has 20 cam­puses in Gaut­eng and KwaZulu-Natal; Trin­ity House, with 13 cam­puses in Gaut­eng and KwaZulu-Natal; Cen­tu­rus Col­leges, with nine cam­puses in Gaut­eng and North West; Maragon Schools, with nine cam­puses in Gaut­eng; and Ju­nior Col­leges, with seven cam­puses in Gaut­eng. There are a few more, but the ones listed here have the largest foot­print of the var­i­ous brands. In­stead of group­ing all the brands to­gether un­der one ban­ner, Ad­vTech is al­low­ing each to build and main­tain its own rep­u­ta­tion and stan­dards.

Things get a lit­tle big­ger for Ad­vTech in the ter­tiary space. It has about 36,000 pupils at its var­i­ous cam­puses and about 29,000 pupils ac­com­mo­dated via dis­tance learn­ing.

Brands in the ter­tiary di­vi­sion in­clude Var­sity Col­lege (eight cam­puses), Rose­bank Col­lege (seven cam­puses), Vega (four), Cap­sicum Culi­nary Stu­dio ( six), and The Univer­sity of Africa in Zam­bia and Oxbridge Academy, which of­fer dis­tance learn­ing.

When th­ese two di­vi­sions are com­bined, Ad­vTech pro­vides ed­u­ca­tion to more than 92,000 pupils, mak­ing it the most sig­nif­i­cant pri­vate ed­u­ca­tion busi­ness in SA, par­tic­u­larly in the ter­tiary ed­u­ca­tion space.

Within the re­sourc­ing di­vi­sion there are sev­eral re­cruit- ment and hu­man re­source brands that fo­cus on re­cruit­ing high-qual­ity can­di­dates on be­half of hir­ing com­pa­nies. Some of the brands in this di­vi­sion in­clude Net­work Re­cruit­ment, fo­cus­ing on en­gi­neer­ing IT and fi­nance re­cruit­ment; Com­mu­ni­cate Re­cruit­ment, with fo­cuses on en­gi­neer­ing, IT and fi­nance as well as sup­ply chain and freight in­dus­tries; and CA Fi­nan­cial Ap­point­ments, which fo­cuses on ap­point­ments in ac­count­ing. Again, there are sev­eral brands com­pet­ing against each other.

In the most re­cently re­ported fi­nan­cial re­sults, Ad­vTech re­ported a 13% in­crease in rev­enue (from R2bn to R2.26bn) for the six months ended June 2018, of which about 11% was from out­side SA (rest of Africa op­er­a­tions).

The bad news is that ba­sic earn­ings per share fell by 10% for the pe­riod, from 38.5c to 34.8c per share, which can be ex­plained by a one-off im­pair­ment of in­tan­gi­ble as­sets and an in­vest­ment in pro­pri­etary tech­nol­ogy sys­tems made dur­ing the pe­riod, which had a neg­a­tive im­pact on earn­ings, as

well as a 9% con­trac­tion in rev­enues from the re­sourc­ing di­vi­sion.

From a share price per­spec­tive, the stock has been a rel­a­tive un­der­per­former when com­pared to the top 40 in­dex since mid-2017. This is prob­a­bly at­trib­ut­able to the same fac­tors driv­ing Curro to be an un­der­per­former over the same pe­riod. Th­ese could in­clude an ov­er­en­thu­si­as­tic in­vest­ment com­mu­nity that ex­pects higher earn­ings growth and is con­tin­u­ously dis­ap­pointed, as well as dif­fi­cult over­all eco­nomic con­di­tions within SA.

Once again, we have a sit­u­a­tion where the pri­vate sec­tor is pro­vid­ing a ser­vice usu­ally ren­dered by gov­ern­ments, and a pub­lic that is rapidly in­creas­ing its con­sump­tion of that ser­vice. Con­sumers who can af­ford pri­vate ed­u­ca­tion are mak­ing use of it. This eases the pres­sure on pub­lic uni­ver­si­ties and schools, and cre­ates op­por­tu­ni­ties for in­vestors to profit from pri­vate ed­u­ca­tion. Petri Redel­inghuys

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.