A classy act
Private education venture AdvTech could not have chosen a better time to produce a good report card to shareholders
Who knows what might have transpired at private education specialist AdvTech by the time August 24 rolls around.
In roughly six weeks AdvTech will publish its interim report card which, according to last week’s trading update, should show that the past few years of hard work and corporate discipline are beginning to pay off. The company — which owns the academically renowned Crawford College and Trinity House independent school brands as well as an array of specialist tertiary offerings and human resources brands — should post earnings of around 25c/share for the half year to June.
The trading update pointed out that the increase in earnings stemmed from a strong performance in all three divisions driven (and this is the important bit) “by organic growth augmented by the benefits of the successfully implemented investment programme of the past few years”. The wording of the trading statement is critical considering that AdvTech has indicated, as speculated in the Financial Mail last month, that it has received “an unsolicited proposal from a third party”.
I identified AdvTech’s fast growing rival Curro Holdings as the most likely suitor. The trading update serves as a timely reminder of AdvTech’s disciplined learning curve. While Curro — which trades on a historic p:e of over 180 times — dwarfs AdvTech in terms of market capitalisation, it’s worth remembering AdvTech is still the bigger business by revenue and profit. AdvTech also has a far longer track record in earnings growth and dividends.
AdvTech’s biggest problem is that Curro’s adventurous expansion plans (probably entailing around 100 schools by 2020) have made its expansion and growth plans look pedestrian. But, on re-examining the wording of AdvTech’s trading statement, I think the company’s executive are politely reminding investors that the interim results were driven by organic growth initiatives rolled out in the past three years — and not by any additional push from new acquisitions like Centurus and Maravest. I suspect Centurus and Maravest will probably be earnings neutral in the short term.
I would be surprised if