AdvTech benefits from rest of Africa

• The group says it is well positioned to benefit from education demand in SA and rest of Africa

Private education provider AdvTech’s results show that its bet on Africa is paying off as revenue and operating profit rose in its schools and human resources business on the continent. Unlike retailers, which struggle with the difficulties of logistics and running supply chains in Africa, education is easier to offer.

Private education provider Advtech’s results show that its bet on Africa is paying off as revenue and operating profit rose in both its schools and human resources business on the continent.

Unlike retailers, which struggle with the difficulties of logistics and running supply chains in Africa, education is easier to offer as it does not require moving products in and out of countries, the group has said.

AdvTech, which owns Crawford, Pinnacle and Trinityhouse schools in SA, reported on Monday that revenue for the year ended December rose 18% to R7bn, but revenue in its rest of Africa school division gained 25% to R334m.

Headline earnings per share, a common profit measure in SA that excludes certain items, rose a fifth to 146.5c.

In its school division for the rest of Africa, operating profit increased 69% to R80m, with the operating margin improving from 17.7% to 23.9%.

Its schools on the continent include the private Crawford International School in Kenya and the Makini schools that offer both the Cambridge and local government curriculum, and an international school in Botswana.

CEO Roy Douglas said the continent represented a good opportunity. “What we find is that in [the rest of] Africa, the economies generally perform significantly better than SA’s and the demand for education is very strong.”

Capacity grew at Crawford International, from which many students go on to study in universities abroad. The school’s final-year students, completing their A-level qualification, achieved 95% acceptance at universities in the US, UK, Europe, Canada, Hong Kong, Asia and Australia, the group said.

Douglas said its investments in the rest of Africa are entering positive territory on the J-curve and becoming more profitable. The J-curve is an investment term that denotes the initial negative profit stream of a new entity before an expected sharp uptick as the business matures.

“We’re extracting the efficiencies and improving the performance of the schools in general,” he said. The profit margins at schools in the rest of Africa exceeded those of SA schools. “It’s good to be able to show the market that we believe these are good investments with more potential to come,” he said.

Total enrolments across the group advanced 5.1% to 88,631, comprising 55.7% of SA tertiary education students, with basic education learners making up the rest. More than a fifth of the pupils enrolled at the company’s basic education institutions is outside SA.

AdvTech also runs a human resource business that conducts administration, payroll and hiring of contractors for nongovernmental organisations and businesses in the rest of Africa that do not have full operations on the continent.

The division operates in 19 countries and its revenue increased 38% to R1.4bn, up from just more than R1bn in 2021 with operating profit up 129% to R89m from R39m.

AdvTech‘s profit jumped almost a quarter in 2022.

The group took higher education, science & technology minister Blade Nzimande to court to force him to draft legally required regulations on what criteria a private institution must meet to be called a university. It won a judgment in 2022 forcing the minister to comply. Draft regulations were published for comment in 2022 but have yet to be finalised.

As things stand, private institutes may not call themselves universities even though they offer degrees. The Higher Education Act makes provision for the minister to draft criteria for a university, college or institute of higher education.

Advtech’s tertiary institutions include Vega, Rosebank College and Varsity College.

AdvTech and its competitor Stadio believe private institutions should be able to use the name ‘university’. Douglas said being forced to be called a higher education institute drives perceptions that private tuition is of a lower quality.

The same bodies, the Council on Higher Education and the SA Qualifications Authority, accredit degrees at state or private levels. “Our bachelor of commerce degrees are exactly the same as the bachelor commerce degrees in the public system.”

WE’RE EXTRACTING THE EFFICIENCIES AND IMPROVING THE PERFORMANCE OF THE SCHOOLS IN GENERAL

Roy Douglas

CEO

“It’s probably an infringement of our students’ rights to say they can’t claim they went to a university when anybody who completed a similar qualification at a public institute can.”

The group said it would continue to engage with the department to allow it to plot its path to achieving university status.

Advtech’s share price closed 0.6% higher at R16.88.