ADvTECH delivers a strong overall performance reflecting quality assets and a responsive, agile business model
ADvTECH’s robust performance and strong cash generation sees dividend ratio reinstated to pre-Covid levels
Commenting on the results ADvTECH CEO, Roy Douglas, said: “ADvTECH has delivered another set of strong results for the six months to June 2021 with increases in operating profit across the board. The results reflect our robust, flexible and agile business model and continues the trend of delivering a consistent performance. We have been focused on continuous improvement through specific initiatives that includes revised structures, improved systems, enhanced technological capability and strong financial management aimed at delivering superior value to our customers. These initiatives contributed to our ability to cope with the circumstances created by the pandemic and sustain a high level of performance.”
“Our commitment to academic excellence is central to our ethos and fundamental to our success. ADvTECH’s comprehensive range, flexible delivery methods and enhanced processes enabled the continued delivery of quality education in the face of a challenging operating environment.”
Operational and financial performance
· Good debtors management, reduced borrowings and continued focus on efficiencies
· Strong cash generation underpins sound balance sheet
ADvTECH delivered another strong operational performance with good enrolment growth, a significant reduction in bad debts and a continued focus on efficiency improvements. The strong cash generation allowed the group to reduce borrowings and maintain a sound balance sheet.
ADvTECH increased operating profit by 16% to R514 million (2020: R445 million) with group operating margins up to 18.0% (2020: 15.7%). Group revenue grew by 1% to R2.9 billion (2020: R2.8 billion). Normalised earnings for the period increased by 31% to R297 million (2020: R226 million) while normalised earnings per share increased by 31% to 54.6 cents (2020: 41.8 cents) per share.
Central to ADvTECH’s strategy and its ongoing success is its commitment to academic excellence combined with delivering value to its customers. The ability to deliver uninterrupted, quality education, while ensuring the health and safety of our employees and students - against the backdrop of uniquely challenging conditions - can be attributed to:
· the comprehensive range of the group’s offering;
· flexible delivery methods;
· improved systems and ability to seamlessly transition between platforms; and
· the adaptability and commitment of the group’s employees and students.
Given the lower level of capital expenditure over the past 18 months, combined with the group’s robust performance and strong cash generation, as well as the significant reduction in net borrowings, the Board has elected to re-instate dividends payments at a similar cover ratio as was in place prior to the COVID-19 induced disruptions.
Schools division
· Good enrolment growth
· Strong recovery in rest of Africa
· Provided quality education through various delivery modes
The schools division in South Africa recorded an encouraging performance. This was achieved through the provision of meaningful value to students that resulted in satisfactory enrolment growth, together with the benefits obtained from ongoing efficiency improvement initiatives.
Cognisant of the pressure the subdued economic environment placed on fee-paying parents, ADvTECH implemented no school fee increases for the 2021 academic year. Even so, schools in South Africa increased revenue by 1% to R1,086 million (2020: R1,072 million) underscoring the robustness of the performance. Operating profit improved by 2% to R202 million (2020: R199 million) while the operating margin increased to 18.6% (2020: 18.5%).
Schools in rest of Africa posted a strong recovery, recording an increase in revenue of 11% to R120 million (2020: R108 million) and operating profit of R16 million (2020: loss R9 million). The group was pleased with the sustained positive enrolment trend (growing by 6%) and remains committed to building scale in identified regions.
Tertiary/University division
· Solid performance
· Agile delivery and flexible academic offering
The tertiary division delivered a solid performance despite the challenges posed by the delayed release of the 2020 matric results and lockdown restrictions. In acknowledgement of the difficult economic conditions, and enhancing its value to its students, ADvTECH kept fee increases to a minimum.
Revenue increased by 3% to R1,218 billion (2020: R1,187 billion), while operating profit improved by 11% to R280 million (2020: R252 million) and the operating margin increased to 22.9% (2020: 21.2%) as a result of effective cost containment measures and reduced credit losses.
Resourcing division
· Resourcing South Africa returns to profitability
· Rest of Africa continue to deliver good performance
Resourcing in South Africa returned to profitability off the back of increased volumes and good cost controls. Operating profit for the rest of Africa grew by 11%. The dual focus on permanent placements and high-end contracting services contributed to the sustainability of the business, both locally and across the continent.
Prospects
· Ongoing demand for quality education that delivers value
· Continue to drive efficiencies focused on customer value
Commenting on the group’s outlook, Douglas said: “We believe economic activity will remain subdued in South Africa. However, there will always be a demand for quality education and as a result we strive to operate the most efficient delivery models that eliminate duplication and waste. In this way, we focus on outstanding academic delivery and provide value to our students and their parents. We are optimistic about the growth opportunities and will continue to carefully identify and prudently evaluate them.”
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