AdvTech pays dividend thanks to growth in Africa

JSE-listed private education group AdvTech declared a final gross dividend of 57 cents per ordinary share for the year ended 31 December 2023.

The group, which has education operations locally and in other parts of Africa and offers corporate recruitment services, increased its headline earnings per share (Heps) for the full year by 19%. Revenue was up 13%, and operating profit 18%.

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The group’s share price strengthened by 1.09% to R28.70 in mid-morning trade, R1.30 shy of its 52-week high of R30.00 on 11 March 2024.

AdvTech share price

AdvTech’s operating margins in the education divisions improved to 23.8%, while cash generated by operating activities was up 10% to R1.9 billion. The strong cash generation meant the group could, among other things, fund capital expenditure of R669 million, pay finance costs of R189 million, dividends of R415 million, and settle debt of R190 million.

“The significant investments made by the group over a number of years have begun contributing meaningfully to both earnings and cash generation, and therefore it could reduce borrowings,” AdvTech noted.

Outgoing CEO Roy Douglas, who retired at the end of February but stayed on for the delivery of the results, said AdvTech is now in a position where the group is generating cash in excess of its investment funding requirements, enabling it to increase its dividend payout by 45%.

The group’s South African operations include schools such as Crawford International, Trinity House, and Abbotts College High School, as well as tertiary education brands like Vega, Varsity College, and Rosebank College. All of the brands in the South African business segment have shown volume and operating growth. Enrolments at Pinnacle Raslouw in Centurion – a private school from Grade 0 to 9 – in January 2023 surpassed expectations, AdvTech said.

Its South African Schools division increased revenue by 13% to R2.8 billion and operating profit by 18%. Schools in the rest of Africa, including countries such as Kenya and Botswana, continued to drive growth, with revenue up by 14% to R381 million and operating profit up by 43%.

South Africans’ school enrollment increased by 5% from February 2023 to February 2024. For schools in Africa, enrolments have increased by 4% year on year.

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Douglas told Moneyweb that the group acknowledges that private education is expensive. “We are well aware that the successes we enjoy are because parents are committed to finding the best quality education for their children. They make amazing sacrifices.”

The efficiency of eliminating wastage by consolidating services across the school and tertiary education segments, especially, means AdvTech could plough the cost savings back into its pricing strategy. “We’ve always said we charge (fees) in line with inflation, but we ask ourselves if we’re at a point now where the successes we’ve enjoyed in our efficiency strategies could mean pricing below inflation,” he added.

AdvTech’s tertiary divisions performed well, thanks to the group’s ability to offer multi-modes of tuition – contact, hybrid, distance, and online – full- and part-time. Rosebank College opened a new campus in Mbombela in January, while Varsity College’s Pretoria and Midrand campuses were expanded to cater to growing demand. Revenue increased by 10% to R2.9 billion and operating profit by 16%.

As for AdvTech’s resourcing division, its Africa operations grew, with revenue up by 26% and operating profit up 28%. The South African business’s revenue, however, fell by 9%, partly due to the disposal of its 51% share in the Contract Accountants group and the muted activity in a tough trading environment.

Geoff Whyte took over the reins from Douglas on 1 March. He holds a Master’s degree in economics from the University of Aberdeen, Scotland, and has over 30 years’ of experience across various industries. He has executive experience in global organisations, including Unilever, PepsiCo, Cadbury-Schweppes, SAB-Miller and Nando’s.

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