Our opinion on the current state of ADVTECH(ADH)ADvTECH (ADH) is one of three listed commercial educational companies on the JSE (the others are Curro and its separately listed sister company, Stadio). ADvTECH has two divisions - a schools division (including Crawford, Trinity House, and Abbots) and a tertiary division (including Varsity College, Rosebank College, and a variety of specialist tertiary offerings). The group includes 109 schools and thirty-three campuses with 78,500 students.
In the past, the company was supported mainly by its schools division, but in the last few years, the schools division has faced increasing competition, which has squeezed margins. At the same time, the tertiary division has become the company's primary source of profits. The company's acquisition of Monash College with its IIE campus in the West Rand has added 6,500 students in a state-of-the-art facility that includes laboratories, four residences, and sports facilities.
In its results for the six months to 30th June 2024, the company reported revenue up 9% and headline earnings per share (HEPS) up 16%. Total group enrollments were up 6%. The company said, "Group operating profit increased by 15% to R865 million (2023: R754 million) with the education division’s operating profit increasing by 16%. Resourcing’s operating profit increased by 3%, notwithstanding the decline in revenue. The group operating margin improved to 20.2% (2023: 19.2%). The operating margin in the education divisions improved to 23.5% (2023: 22.8%)."
In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 13% and 18%. Technically, the share has been in a strong upward trend since the end of May 2020. It is now on a multiple (P:E) of 16.92, and we think it still has upside potential.
In our view, this is a solid, blue-chip company with good medium-term prospects, and it is relatively cheap. Any significant improvement in the South African economy will benefit this company directly, and it will benefit directly from the newly appointed GNU. Traditionally, parents have always been willing to make significant sacrifices to pay for their children's education, which makes this share very defensive in times of low growth.
On 1st October 2024, the company announced that it had acquired FNB's 47,000 square meter training and conference center in Sandton. On 21st November 2024, the company announced that it had acquired an Ethiopian school group for $7.5m.
