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Johannesburg – Although ADvTECH [JSE:ADH] reported a strong performance in its interim financial results, its schools division was impacted by the underperforming economy.
The educational institution released its financial results for the six months ended June 30 2017 on Monday.
Revenue was up 22% to R2bn, compared to the previous year. Earnings before interest, taxation, depreciation and amortisation lifted 17% to R417.7m. ADvTECH’s bottom line added 13% to R213.4m. An interim dividend of 15c was declared.
The tertiary and resource divisions performed well, reporting revenue growth of 33% and 38% respectively. Operating profit growth of 56% was reported for the tertiary division and 11% for the resources division. Revenue for the schools division grew by 10% to R904m, while operating profit grew 5% to R172m.
The schools division however represents 45% of group revenue. “The difficult economic climate and unsettled socio-political environment had a more significant effect on enrolment numbers than had been anticipated,” the report read.
“We have seen a consistent rise in the number of families emigrating and this trend had a particularly negative effect on enrolled numbers as we lose students in grades where it is difficult to replace.
“In addition, we have seen an increase in withdrawals and exclusions as a result of financial pressures.”
These factors, along with the investments in school expansions also impacted profit. ADvTECH expects more students to be enrolled in additional classes at entry points, offsetting losses of those exiting later grades. In addition, demand for ADvTECH Academies is ahead of expectation, with new projects coming along which could help boost growth, the group said.
Acquisitions
ADvTECH acquired a 51% stake in the University of Africa for a considered amount of R5.6m on January 1 2017. This was part of an expansion strategy for the group’s tertiary division.
The group also acquired a school, Glenwood House, for a considered R108.1m on January 1 2017.
Capital expenditure for the period came to R245.7m, up from R153.6m reported in 2016. Capital commitments increased to R1.533bn, up from R1.219bn reported in the previous year.
The group’s net cash position was R65.2m, and it reported a cash outflow of R229.7m for financing activities. Finance costs increased as net borrowings were higher than the same period last year.
Cash inflows from operating activities increased to R785m from R598.6m reported in 2016. This helped pay investments and capital expenditure of R351m, financing costs of R42m, taxation of R97m and dividends of R104m.
In 2015, private education group Curro dropped a R6bn bid for ADvTECH. ADvTECH's board rejected the bid, saying it was not in the best interests of the company.
ADvTECH shares were trading at R16.95 on the JSE shortly after noon.
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