CEO’S rep
ort

Our commitment to academic excellence is at the heart of our business and we place great emphasis on this as we strive to deliver value to our stakeholders by staying at the forefront of developments in education, training and placements.

Despite the very difficult economic environment, our financial results continue the strong momentum the group has shown over the last few years and, notwithstanding the operating circumstances, we believe we have delivered a very credible set of results. Group revenue increased by 11% while operating profit is up by 14%.

The tertiary and resourcing divisions once again performed exceptionally well and the schools division increased its scale significantly. After a period of significant expansion we are now in a phase of integration, rationalisation and consolidation.

The high rate of emigration continues to have an adverse impact on our student numbers in the schools division. There is no doubt that the South African consumer is under significant financial pressure and the average South African has become poorer over the past few years.

However, there are encouraging signs in our portfolio as we realign ourselves to seek out and take advantage of the best opportunities for growth. We have explored a number of these prospects and they have positioned us well as we look towards the future. These include our development of the Pinnacle mid-fee brand and our expansion into the rest of Africa.

We remain the leader in the premium schools education sector. In addition to academic excellence, the common thread in all our schools is the commitment to offering our consumers value.

The past year has been a time of consolidation after a period of acquisitions and we have used this opportunity to rationalise and restructure the schools division.  The restructuring and reallocation of resources has resulted in a more efficient and streamlined division and this ensures that ADvTECH will continue to deliver quality education to students.

We have continued to show good student enrolment growth despite headwinds experienced by the schools division. Underlying gross enrolments show that there is strong demand for our brands even though net enrolments were adversely affected by emigration and financial hardship.

The tertiary division, on the back of good organic growth, delivered an excellent operating profit and sound operational performance. The brands are ideally positioned, the teams efficiently structured and the systems and processes are robust. 

Recognising that the local placement market would remain difficult, the resourcing division has successfully explored alternative markets and geographies to pursue growth and profit opportunities.





SCHOOLS DIVISION

The opening of Crawford International in Kenya in September 2018 was among the highlights of the year. It is our first greenfield development outside South Africa and the enrolment numbers have exceeded expectations.

The acquisition of Makini schools in Kenya with campuses in Nairobi and Kisumu indicates the significant progress made in our strategy of expansion into the rest of Africa.

The mid-fee sector has been a success and continues to experience excellent growth. We have established a new brand, Pinnacle Colleges, to replace the ADvTECH Academies brand. The first Pinnacle Colleges are Kathstan College, now Pinnacle College Rynfield (which no longer offers a remedial element), Summit College, repositioned as Pinnacle College Kyalami, Pinnacle College Founders Hill and Pinnacle College Copperleaf.

The Bridge Assisted Learning school launched in 2018, is successfully filling a gap in the market. Abbotts College moved to new better suited premises in Centurion in 2019.

The past year has been a time of integration and consolidation following a four-year acquisitive period in which we acquired

49 schools, increasing our total number of schools to 103. This significant growth has doubled the size of the division. We have embarked on a process of rationalisation and have restructured the divisional systems and processes so that they are better suited to the increased scale of the business. This was extended to the reorganisation of the management structure and support functions of the schools division.

With rapid acquisitive expansion, we had to ensure that academic standards and teaching practices at all schools were in line with ADvTECH's core strategic objective of delivering academic excellence. To bolster academic excellence further, ongoing individual student progress is supported by continual analysis of student performance data that enables us to implement a personalised learning pathway for each student.

While curricula followed comply with regulatory requirements, our schools are benchmarked, both internally and internationally and all schools have now adopted a future focused education that encompasses global competencies, digital literacy and global citizenship. Proof of the success of this methodology has been seen at both the acquired Centurus Colleges and Maragon schools where academic results, and specifically matric results, have shown consistent improvement.

Excellent academic results were achieved in 2018. Our consistently exemplary matric results are clear proof that we continue to offer the highest standard in education. 

We have critically reviewed and re-evaluated our school's division brand portfolio, as well as each individual school, with the purpose of delivering value to the consumer within a meaningful market proposition.

Among the many changes implemented, we have closed the underperforming Trinityhouse Palm Lakes High School in Kwa-Zulu Natal. This tough, but necessary, decision is an example of our efforts to return the division to its previous high performing status.

As a result of the acquisitions, more than 1 500 employees are being transitioned into ADvTECH. This includes a time consuming and complex process of reviewing packages and benefits and issuing the transitioned employees with new contracts whilst ensuring compliance with regulations.

Innovation is one of our strategic imperatives and we seek to incorporate this at a high level across all sectors, including innovation for business processes and administration. Our goal is to become a significantly more data-driven organisation enabling us to tap into information to make better informed business decisions across the group.

Integration, consolidation and rationalisation is being undertaken to streamline administration and reduce unnecessary overheads. New systems have been implemented to replace the variety of legacy systems.

Integration, consolidation and rationalisation is being undertaken to streamline administration and reduce unnecessary overheads. New systems have been implemented to replace the variety of legacy systems.

The division's revenue increased by 15% to R2 009 million (2017: R1 742 million), representing 46% of group revenue. Operating profit for South African schools increased by 5% to R330 million (2017:  R315 million) while the operating profit from schools in the rest of Africa declined due to the costs incurred ahead of the opening of Crawford International School in Nairobi, Kenya, and as they go through the j-curve.

The table below illustrates the enrolment growth in the last three years and highlights the continued growth in 2019.




TERTIARY DIVISION

The tertiary division continued to show excellent growth with revenue increasing by 10% to R1 719 million (2017: R1 556 million), contributing 39% of group revenue. The operating margin increased on the back of operational leverage from strong volume growth, resulting in operating profit increasing by 23% to R395 million (2017: R321 million).

The Independent Institute of Education (IIE), ADvTECH's higher education division, continued its notable performance in the private higher education sector and remains optimally positioned for future growth, building on its 14-year legacy of student success. The IIE has continued to meet the stipulated standards to take its rightful place beside public universities and is aligned with international best practice having produced, with 43 067 graduates of whom 71% were employed within six months of graduating.

Although private higher education institutions may not yet call themselves private universities, a recent court judgment in favour of the IIE's Varsity College confirmed that registered and accredited institutions and qualifications are equivalent to public university offerings. This is a landmark development for the country's higher education sector as a whole, and ADvTECH in particular.

The IIE is the largest private higher education provider/ 'private university' in South Africa with the most comprehensive investment in curricular development and academic leadership. The IIE is central to our commitment to academic excellence and is responsible for ensuring that our qualifications remain relevant and that they bridge the gap between the curriculum and the constantly evolving workplace.

All our tertiary brands provide an exceptional and contemporary learning experience aligned to the expectations of our students, industry, commerce and employers.

Contact programmes are delivered at state-of-the-art campuses where class sizes are smaller than traditional universities. Our innovative teaching methodologies, together with a personalised learning and student support experience, result in increased student success. Practical components include our work-focused programmes and simulated work experiences. This means that our students are well prepared for employment beyond theoretical knowledge. These are among the reasons for ADvTECH's reputation for academic excellence, quality and international recognition.

The tertiary division at year end offers 201 accredited courses, with a diverse range of offerings including vocational skills training, national certificates and diplomas (N1-N6), higher certificates, diplomas, advanced diplomas, degrees, honours degrees and masters degrees.

Three new campuses opened during 2018, including two digitally enabled Rosebank College Connected sites in Pietermaritzburg and Bloemfontein. A new combined campus in Johannesburg for Capsicum Culinary Studio and The Private Hotel School includes state-of-the-art facilities such as conference facilities and a restaurant serviced by our students. This increases our presence in the burgeoning hotel, hospitality and culinary sectors and offers a secure foundation from which to develop expansion plans.

The Rosebank College portfolio consists of mega campuses in Johannesburg, Pretoria and Durban with a mega campus in the pipeline for Cape Town in 2020. In provincial nodes, the successful blended learning, digitally enabled Rosebank College Connected campuses, which are producing outstanding academic results, are being implemented. There are now three of these successful campuses and additional campuses are planned for the near future.

A major acquisition announced in 2018 was Monash South Africa (MSA). We have now obtained regulatory approval and the acquisition was effective from 1 April 2019. MSA's reputation for academic ethos and excellence provides a perfect match with the ADvTECH tertiary brands as we continue to consolidate our position in the tertiary education sector. The MSA campus is one of the largest private higher education precincts in the country. With a capacity of 6 500 students, it boasts extensive education facilities which include laboratories, sport facilities and four student residences.

In addition, MSA has a comprehensive suite of premium programmes which will bring our tertiary qualification suite to 233 accredited courses and our higher education student complement to more than 43 000 students, cementing ADvTECH's leadership position as SA's largest private higher education provider/'private university'.

Private higher education grew significantly between 2011 and 2016 and we believe that we are part of the solution to the education crisis in South Africa. A strong public sector education system is critical from a nation's perspective whilst we can play a very active role in helping to solve the education crisis. We hope policy will become more inclusive in the role the private sector can play, but in any event, market pressures are ensuring that the opportunity is there for us.


​RESOURCING DIVISION

The resourcing division's outstanding performance is attributed to the success of their strategy to enter alternative and aligned markets outside of South Africa, where we have experienced significant growth. It continues to be highly cash-generative. The division deserves credit for optimising their business in a tough market and positioning themselves for the future.

Notwithstanding the tough market conditions in South Africa, the division increased market share and successfully placed

4 608 candidates (2017: 3 755). The increase in revenue of 4% to R670 million (2017: R644 million) was impacted by the mix of a greater number of lower value but higher margin sales which resulted in operating profit increasing by 22% to R39 million (2017: R32 million).



​OUR PEOPLE

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, and to enhance our existing succession planning in preparation for organisational and structural changes. Our programme includes a management toolkit, coaching and mentoring programmes, a management development programme (MDP) to develop current and future management, and leadership development masterclasses.

With the growth and structural changes in the schools division, we seek to enhance our offering through a specialised principal development programme (PDP) piloted for 20 principals and deputy principals. The primary focus of the PDP is on the principal as the leader and custodian of a culture of customer-centricity at our schools. The programme will be evaluated and modified in 2019 with three cohorts of 24 participants each planned.

The results of a cultural survey conducted in 2017 were very positive and indicated there is support for our approach to the shaping of the organisational culture and transformation. A similar assessment will be undertaken in 2019 in order to measure the results of our efforts for constant improvements.


​PROSPECTS

We continue to see numerous opportunities, both in South Africa and the rest of the continent, and the group remains in a uniquely strong position to pursue its growth strategy.

Our tertiary and resourcing divisions are well positioned and continue to perform strongly. Having significantly increased the scale of our schools division over the past four years, we have now entered a phase of integration, consolidation and rationalisation and we are confident this will drive operational efficiency and sharpen market focus.

Roy Douglas


Group chief executive officer


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