SA private schools under pressure due to emigration and the poor economy

 ·27 Aug 2018

Listed private school and tertiary institution group AdvTech has published its interim results for the six months ended June 2018.

The group reported a 13% increase in revenue to R2.264 billion, from R2.0 billion in the same period last year.

Earnings before interest, taxation, depreciation and amortisation was up 14% to R477.1 million (2017: R417.7 million) – though profits for the period declined by 8% to R196 million (from R213.4 million in 2017).

The group declared an interim dividend of 15 cents per share.

The group’s directors said they were pleased with the results, noting an “exceptional performance” in the group’s tertiary division.

Emigration hitting schools

According to AdvTech, results for its schools division saw revenue up by 18% with demand for mid-fee schools continuing to grow.

Divisional revenue increased by 18% to R1.065 billion (2017: R903 million), representing 47% of group revenue, while trading operating profit grew by 5% to R172 million (2017: R164 million).

However, the group noted that this strong growth in revenue was achieved mainly as a result of acquisitions and good growth in the mid-fee sector, not through organic growth, which has been under pressure.

“The challenging economic climate and unsettled socio-political environment continues to impact on organic growth with increased levels of withdrawals owing to emigration and financial pressures,” the group said.

This echoed the same trend the group saw in 2017, when it noted a “consistent rise in the number of families emigrating”, which had the same negative impact as noted over the latest interim period.

Growth through acquisition

The acquisition which helped the group was the Makini Schools group in Kenya – while it also secured a management contract in Uganda. These added nine schools, five campuses, boarding facilities and approximately 4,100 students to the division’s enrolments.

These mid-fee schools are in growing demand, AdvTech said, with tuition coming in at around R8,000 to R10,000 a term (non-boarding).

“This, together with the imminent opening of the Crawford International School in Nairobi, has resulted in significant progress being made in our strategy of expanding our operations on the rest of the continent,” it said.

The tertiary division achieved growth with operating profit up 24%.

Revenue increased by 12% to R883 million (2017: R789 million), contributing 39% of group revenue. The operating margin increased from 20% to 22% on the back of operational leverage from strong volume growth, resulting in operating profit increasing by 24% to R195 million (2017: R157 million).

“Three new campuses opened in 2018, including two new digitally enabled, blended learning sites of Rosebank College in Pietermaritzburg and Bloemfontein. Facilitating expansion into the fast-growing hospitality sector, a new campus in Johannesburg combines Capsicum Culinary Studio and The Private Hotel School,” the group said.

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