Our commitment to excellence is fundamental to the growth of our business. Students, parents, alumni, new and existing clients and all our other stakeholders rely on our ability to stay at the forefront of developments in education, training and placement. This will remain at the very heart of our strategy.
In the education sector, we have earned a reputation for delivering outstanding academic results – a reputation which is built on academic integrity. Never compromising on quality is the core of our business and we strive to always maintain the confidence of all our stakeholders.
Organic growth is a key measure of our business, and together with acquisitions that add value to our existing portfolio, form an important part of our strategy. We need to ensure that our businesses are healthy and growing.
We continuously update our products, systems and processes so that they remain relevant, and we maintain a balance between our commitment to excellence and our operational overheads. Customer service, supported by technology, is essential to our ability to remain operationally competitive. We therefore do our utmost to understand student, parent and client needs so that doing business with us is an easy process, while staying abreast of innovations and advancements in technology.
Attracting and retaining the best people is a key priority and we realise that we would not achieve success without the enthusiasm, commitment and hard work of our staff members. Therefore, we continually invest in our people and strive to offer optimum working conditions to sustain our key differentiators of academic excellence and targeted brand offerings.
The 2017 results clearly demonstrate that the business is continuing its trend of strong performance in line with the growth strategy. The benefit of the group's diversified portfolio is reflected in its strength and resilience, with revenue and trading operating profit increasing by 22% and 20% respectively. The tertiary and resourcing divisions performed exceptionally well, as evidenced by significant increases in revenue and operating profit, while the schools division results were somewhat muted.
For several years, the schools division has been the top performer within the business. Presently, though the gross enrolments are still indicative of strong underlying demand, net enrolments were less than expected due to high levels of emigration and leavers
as a result of significant financial pressures on consumers. However, we remain confident that our brand value proposition is appropriate and with the plans we have in place, the division will resume the delivery of good growth in the near future.
The outstanding growth in the tertiary business is owed to solid organic growth and a sound operational performance. Recognising that the domestic market would remain difficult, the resourcing division strategy included the exploration of alternative markets and geographies to pursue growth and profit opportunities, a strategy that has delivered handsomely. We are therefore confident that the business is well positioned for future growth.
ADvTECH's increased capital investment indicates confidence in the continued growth of the private education sector in South Africa and the rest of the continent.
Revenue increased by 22% to R4.1 billion (2016: R3.4 billion) and trading operating profit increased by 20% to R671 million (2016: R585 million), with trading operating margins narrowing marginally from 16.8% to 16.4%.
Following a period of significant growth, a restructuring process is under way in our schools division, aimed primarily at enhancing operational efficiencies. This drive is being complemented by the shared services project, which is showing good progress. In addition, a new student information system is being implemented to provide a single, student centred platform allowing for efficient data entry and reporting while improving service to stakeholders and allowing our institutions to manage student data from prospect to post graduation. It will ultimately be rolled into the tertiary division.
Overall, through greater operating efficiency, the group remains in a position to pursue an ambitious yet considered organic and acquisitive growth strategy in South Africa and elsewhere in Africa.
Highlights for the year include the expansion of our quality offerings and footprint in countries outside South Africa, the conclusion of several acquisitions and the development of new niche product offerings.
An ethos of academic excellence underpins the significant success achieved by our students. Our Independent Examination Board (IEB) students achieved a 100% matric pass rate and averaged two distinctions per student. Seven of the top 56 outstanding IEB achievers in South Africa studied at an ADvTECH school. At 12.5% this is by far the highest representation from any private school group in the country. Our National Senior Certificate (NSC) students achieved a 98% pass rate compared to the national pass rate of 75% and averaged one distinction per student. Overall, 1 754 matric candidates achieved 2 866 distinctions with a 99% pass rate and 98% of our students qualified for entrance into higher education institutions.Such consistently exemplary matric results are clear indicators that we offer the highest standard in education.
Our methodologies and the pedagogy employed in engaging the students in subject-focused curricula is rigorous and aligned to best practice. This ensures that our students perform optimally in the demanding set of examinations, enabling access to tertiary studies at the end of their school careers. Furthermore, the ongoing individual student progress is supported by continual analysis of student performance data, promoting a personalised learning pathway as identified for every student.
Growth in the mid-fee sector is strong, as one could expect in tough economic times. The success of our first two mid-fee greenfield developments, Founders Hill College and Copperleaf College, led to further expansion projects being implemented and planned in the years ahead. Founders Hill, now in its third year of operation, has more than 760 enrolled students while Copperleaf College is also ahead of expectations. These successes have led to a deliberate strategy to increase our pipeline of projects in this sector, with Maragon Mooikloof High and Copperleaf High coming on stream in 2018, while several suitable properties have been secured for an accelerated roll-out in this market sector over the next few years.
Our footprint in the Western Cape increased considerably with the acquisitions of Elkanah House, Greenwood Bay College and Glenwood House School, making up approximately 3 000 students of the division.
The Bridge Assisted Learning School opened its doors in January 2018, addressing a gap in the market by offering specialised education for students from Grade 0 to Grade 7 who have a range of academic challenges that require specific learning intervention.
Significant capex projects undertaken during the year included capacity expansions to facilities at Crawford Italia, Crawford Lonehill pre-primary, Gaborone International School and Founders Hill College. Boarding facilities were also expanded at Southdowns College and Pecanwood College.
Revenue increased by 14% to R1.9 billion, representing 46% of group revenue, while operating profit declined by 13% to R299 million. Adjusted for the fraud, the trading operating profit showed a 3% increase from R321 million to R330 million.
The tertiary division continued its trend of excellent growth, benefiting from strong organic growth and niched targeted acquisitions. Revenue increased by 26% to R1.6 billion, contributing 39% of group revenue. The operating margin increased from 18% to 20% on the back of operational leverage from strong volume growth, resulting in operating profit increasing by 44% to R321 million.
The tertiary division now offers 165 accredited tertiary courses, with a diverse range of offerings including vocational training, higher certificates, degrees, honours degrees, masters' degrees and PhD programmes.
The table below illustrates the enrolment growth in the last three years, and highlights the continued growth in 2018:
ADvTECH's market differentiator, the Independent Institute of Education (IIE), through its central academic team drives our commitment to academic excellence and focus on ensuring that our qualifications remain current and relevant, and that the content and assessments bridge the curriculum and the constantly evolving world of work. The IIE is the largest and most comprehensive investment in curricular development and academic leadership of any private higher education provider in South Africa.
All our tertiary brands provide an exceptional learning experience aligned to the expectations of our students and that of the industry. Most of our courses are delivered at state-of-the-art campuses, in smaller class sizes, and our innovative teaching methodologies together with a personalised learning and student support experience results in increased student success. Our programmes prepare students for the workplace by incorporating placements and simulated work experiences or other practical components.
The Rosebank College digitally enabled campus pilot in Polokwane has proven the success of the blended learning model with outstanding academic results being achieved. The model provided expansion opportunities in provincial nodes, with 2018 seeing the opening of two new digitally enabled campuses in Pietermaritzburg and Bloemfontein.
In line with our strategy to explore new markets to increase our presence in fast-growing sectors, we acquired a majority share in the highly acclaimed and industry respected The Private Hotel School. Combined with the acquisition of Capsicum Culinary Studio, the increased presence in the fast-growing hotel, hospitality and culinary sector offers a secure foundation to base future plans and expansions. A new joint campus for The Private Hotel School and Capsicum was opened in 2018 in Rosebank, Johannesburg.
The resourcing division's outstanding performance is mainly due to the success of the strategy to enter alternative markets outside South Africa where we have experienced significant growth. While in South Africa the tough market, conditions continue to persist, we have grown our share of a declining market, placing 3 755 job candidates (2016: 3 493). Revenue increased by 40% to R644 million, while operating profit increased by 59% to R32 million. The division continues to be highly cash-generative.
The challenging local market demands that we constantly strive for improvement. Our efforts focus on expediting the process of identifying the best candidates and placing them with clients requiring scarce skills.
The process is optimised with the use of technology and systems, resulting in increased customer satisfaction.
A noteworthy development is the recent establishment of a Broad-Based Ownership Scheme (BBOS). Through the scheme, the Ulwasi Educational Trust was created to facilitate the flow of beneficiary dividends from resourcing to sponsor disadvantaged pupils and students via bursaries at ADvTECH schools. The scheme fully complies with the requirements of the relevant Acts. A BBBEE compliance level 4 is our target.
REST OF AFRICA
With 11% of revenue in 2017 being generated outside of South Africa, we are well on track to meet our 2020 target of 30%. An exciting development is the opening in September 2018 of the first Crawford International School in Nairobi, Kenya, our first greenfield development outside South Africa. In partnership with Rendevour, the largest international property development group in Africa, the project is showing steady progress. This adds to our other investments, which include Gaborone International School in Botswana and the University of Africa in Zambia. In the resourcing division, Africa HR Solutions and CA Global continues to grow strongly as it services operations across Africa.
Our ability to attract and retain skills is key to our success, and we continue to make considerable investments in our people.
Our integrated management development programmes aim to train and develop our employees to enhance succession planning in preparation for organisational and structural changes, comprise a management toolkit, mentoring programmes, a management development programme (MDP) to develop current and future management and a leadership development programme (LDP). With the growth in the schools division, we are looking to enhance our offering through the development of a specialised principal development programme.
For the third year running, we received the international Top Employer certification from the Top Employers Institute with our score improving from 74% to 78%.
Our goal is to provide an innovative and enabling culture to support our strategic objectives. We conducted an internal staff culture survey throughout the group, the objective being to collect data from employees about aspects that shape the organisational culture and our approach to transformation. While there is still room for improvement, the results of the survey were very encouraging and indicative that we are on the right track.
We continue to see numerous opportunities, both in South Africa and the rest of the continent, and the group remains in a strong position to pursue its ambitious yet considered organic and acquisitive growth strategy.
New market segments and new product offerings are continuously being explored, while in our core markets we expect organic and greenfield growth to continue despite increased competition and challenging economic conditions. These factors, we believe, will further enhance our business performance and further diversify our portfolio.
I thank the board and Exco for their insights and guidance. In particular, I would like to thank the staff of ADvTECH who play such a vital role in the success of our business.
The group is committed to being a dynamic company that focuses on excellence in all it does, and creating value for all our stakeholders.
Chief executive officer