Commenting on the results ADvTECH CEO Roy Douglas said: “ADvTECH has delivered a solid performance for the year ended 31 December 2020, driven by an improvement in the operational performance at the schools division, continued profit growth in tertiary and a robust result from the rest of Africa resourcing business. The good performance in the education division was despite an increase in loss allowance as a consequence of the COVID-19 pandemic and subsequent weak economy.
A true measure of a business’ character is how it responds to unprecedented circumstances. ADvTECH’s strategic resolve, committed employees, robust technology processes and infrastructure combined to effortlessly deliver high-quality education and a resilient financial performance. This is a clear demonstration of the soundness and sustainability of our business.”
Operational highlights
ADvTECH confidently commenced the 2020 financial year given the strategic foundation, across the schools, tertiary and resourcing divisions, that had been laid in previous years. The group enjoyed good enrolment growth and benefited from restructuring, rationalisation and cost saving initiatives. It was consequently well placed to withstand the effects of the COVID-19 pandemic, and respond timeously to continue offering high-quality, holistic education through various modes of delivery.
At the onset of the pandemic and throughout the period, the group prioritised the safety and wellbeing of all stakeholders, addressing the needs of its students and parents and continued to honor commitments to educators and our stakeholders.
· Rapidly transitioned 75 000 students seamlessly to online tuition without losing a single academic day
· Provided R47 million assistance to 5 386 families
· Heightened monitoring and additional counselling for the general wellbeing of stakeholders
· Provided distinct pastoral care in line with an all-embracing educational offering focused on the full range of needs of students, parents and educators
Financial highlights
The results for the year reflect the clear benefit of the strategic initiatives implemented over the past several years, as well as a focus on cash preservation and careful balance sheet management. In the first quarter of the financial year, the group continued to grow enrolments in the schools and tertiary divisions, while the resourcing division delivered a strong performance. The nine months to end December 2020, however, were characterised by greater volatility because of the lockdown restrictions. The group quickly adapted to this new environment via its sustainable cost control and cash preservation measures.
· Revenue up 8% to R5.5 billion (2019: R5.1 billion)
· Operating profit up 5% to R910 million (2019: R869 million)
· Normalised earnings per share increased by 5% to 89.8 cents (2019: 85.2 cents)
ADvTECH proactively managed costs in a such a way that it was able to maintain the delivery of academic excellence. Fee collection, although slightly short of targeted levels, improved in the second half of the year, and capital expenditure focused on increasing capacity on sites to meet demand and enhancing equipment to assist in the delivery of online and hybrid solutions. Taking the strong cash generation throughout the year and current financial position into account the group decided to declare a dividend of 20.0 cents (2019: 15.0 cents).
Divisional highlights
Both schools and tertiary divisions performed well regardless of the increase in loss allowance due to the impact of a weaker economy. The resourcing division’s business in the rest of Africa delivered a robust performance resulting in good revenue growth for the division.
In response to the unprecedented conditions posed by the COVID-19 pandemic, subsequent lockdown and economic contraction, ADvTECH elected not to increase school fees for 2021 and only marginally increased fees at the tertiary level. The group remains confident in the ongoing demand for quality education in South Africa and across the continent.
Schools division: Sustained quality education via agile offering and multiple modes of delivery
· School student enrolment up 5%.
· Revenue up 4% and operating profit up 7%.
· Efficient business model delivered good results.
· Comprehensive range and flexibility in delivering quality education in a challenging environment.
· Encouraging growth experienced in mid-fee sector (opened Pinnacle Linden and Pinnacle Waterfall in 2020).
· Sustained momentum in the premium fee segment via the opening of Trinityhouse Glenvista in 2020.
· Evolve Online School, opened in 2021 offering an MIT developed programme has enrolled 447 students already.
· Continued to build scale in rest of Africa by increasing enrolments by 10% in 2021.
· Crawford International School, in Kenya, offering the Cambridge International Curriculum, shifted to online tuition and successfully completed the academic year in July 2020.
· Gaborone International School continued to perform well and proceeded with online tuition during Botswana’s lockdowns.
· Revenue in rest of Africa impacted by Makini School, in Kenya, being unable to invoice fees following Kenyan government directive to defer the school year in response to COVID-19.
Tertiary division/ “Private University”: Quality established academic offering and delivery methods delivery - resilient performance
· Revenue up 9% and operating profit up 9%.
· The agility of the operational teams ensured a resilient performance.
· Well established brands with respected value proposition.
· Flexible academic offering and delivery method meant a seamless transition to online studies.
· 2021 enrollment cycle delayed due to late release of matric results.
Resourcing division: Remains profitable due to a good performance in the rest of Africa
· Swift management action to protect the business in difficult circumstances.
· Strategy to expand into the rest of Africa allowed the resourcing division to remain profitable despite the extremely challenging environment in South Africa.
· Growth delivered by operations in the rest of Africa, increasing revenue by 39% and operating profit by 42%.
· Resourcing division remained profitable by having strategically expanded into the rest of Africa.
· Hiring activity in South Africa came to a complete standstill in April and May.
Commenting on the group’s prospects Douglas said: “We remain satisfied that the group has sufficient resilience to navigate through the subdued economic environment. Our focus remains squarely on serving our customers to the best of our ability.
ADvTECH will remain bold and ambitious in the face of these challenging conditions as we believe our performance in 2020 has put us firmly on the front foot. Our strong cash generation and sound balance sheet, together with sustainable cost and capital expenditure containment measures, affords the group significant capacity to navigate any future uncertainty. Overall, the group remains confident in its ability to rapidly implement flexible, quality education delivery models, and provide a consistent value proposition across all our brands.”