ADvTECH results show strong financial performance on back of continued enrolment growth

“ADvTECH’s strong financial performance for the first six months of the year is a result of a solid contribution from all the group’s operating divisions with improved margins across the board,” says ADvTECH CEO Roy Douglas.

“Our schools and tertiary divisions benefitted from good enrolment growth, moderate fee increases and enhanced operating leverage, while we continued to reap the rewards from our rest of Africa investment in our resourcing division.”

Operational and financial performance
Strong enrolment growth across the board
Operating profit up 23%
Normalised earnings up 26%

ADvTECH’s strong financial performance, solid cash generation and robust balance sheet reflect the group’s sound business model, clear market focus and continued emphasis on effectiveness and efficiencies.

Group revenue grew by 16% to R3.9 billion (2022: R3.4 billion) due to consistent enrolment growth in both the schools and tertiary divisions, as well as from increased business activity in the resourcing division. Operating profit increased by 23% to R754 million (2022: R612 million) with the group operating margin improving to 19.2% (2022: 18.1%). Normalised earnings for the period increased by 26% to R459 million (2022: R365 million) while normalised earnings per share increased by 25% to 84.3 cents (2022 67.3 cents) per share.

Cash generated by operating activities increased by 13% to R1.7 billion (2022: R1.5 billion), demonstrating the strong cash generating capacity of the group.

Capital expenditure focused on increasing capacity on existing sites to meet demand, the development of a new school and a new tertiary site, acquiring equipment to enhance our teaching and learning through technology and enhancing business systems to enable the standardisation of processes across the group to allow for further efficiency improvements.

While the board still see significant investment opportunities, the consistent growth trend and continuing strong cash generation, together with a sound balance sheet and reduced borrowings, has given the board the confidence to increase the dividend at a marginally higher rate than the growth in earnings.

The board is pleased to announce the declaration of an interim dividend of 30.0 cents (2022: 23.0 cents) per ordinary share in respect of the six months ended 30 June 2023.

Schools South Africa
Enrolments up 6%
Operating margin improved to 20.1%

The schools division continued to enhance its value proposition and win market share despite the tough operating environment. All the division’s brands, including the premium brands, recorded volume and operating profit growth.

Revenue increased by 13% to R1 402 million (2022: R1 239 million) and operating profit increased by 20% to R282 million (2022: R235 million) with the operating margin improving to 20.1% (2022: 19.0%).

Pinnacle Raslouw, in Centurion, Gauteng, opened in January 2023. Enrolments were well ahead of expectations necessitating bringing forward the development’s second phase.

Schools in the rest of Africa
Enrolments up 10%
Operating margin improved to 24.7%

ADvTECH’s school brands in the rest of Africa recorded strong enrolment growth and remained operationally sound. Revenue increased by 26% to R193 million (2022: R153 million) while operating profit improved by 73% to R48 million (2022: R28 million) with the operating margin advancing from 18.1% to 24.7%.

Gaborone International School (GIS) in Botswana continued to perform exceptionally well with strong enrolment growth and market leading academic results. Capacity was increased at Crawford International School in Kenya as it continued to experience strong demand.

Tertiary/University
Continued good enrolment growth
Revenue up 13%
Operating profit up 19%

ADvTECH’s tertiary division performed well and continued to grow off the back of a well-established portfolio of quality brands that offer a comprehensive range of programmes and qualifications. Revenue increased by 13% to R1 500 million (2022: R1 324 million) and operating profit grew by 19% to R375 million (2022: R315 million). The operating margin increased to 25.0% (2022: 23.8%) benefitting from effective cost containment measures.

The group’s ability to provide multi-channel modes of delivery (contact, blended, online, full-time, part-time and distance) is fundamental to its value strategy. It allows the division to meet the requirements of every student at any time and at any location.

Resourcing
Rest of Africa continues to build scale

The strategy to expand into the rest of Africa continues to bear fruit. Volumes grew substantially over the period resulting in revenue increasing by 33% to R713 million (2022: R536 million) and operating profit by 52% to R45 million (2022: R29 million).

SA resourcing revenue decreased marginally by 4% to R124 million (2022: R129 million) due to the disposal of the group’s 51% share of the Contract Accountants group in the second half of 2022. The continuing business performed well in a tough economic environment and on a like-for-like basis, excluding the impact of the disposal, revenue was up by 6%. Operating profit remained flat at R5 million (2022: R5 million).

Prospects
The continued growth in demand for quality education in South Africa, and particularly in the rest of Africa, persists. Our ability to convert this demand into good enrolment growth in both the schools and tertiary divisions, supports the Group’s confidence in sustaining its growth trajectory in the near term.

Commenting on the group’s outlook, Douglas said: “ADvTECH remains uniquely positioned to benefit from the growth in demand for education in both South Africa and particularly in the rest of Africa. We look forward to the continued growth of our resourcing footprint in the rest of Africa. We are single-minded in our approach to optimise our performance across the group. Our focus on productivity, efficiency and leveraging scale to deliver value in quality education remains key to our continued growth.”