Johannesburg - Due to the rights issue ADvTECH undertook in December, the company could now embark on gaining further acquisitions, the private sector leader in the fields of education and resourcing said yesterday.
The company, with a market capitalisation of more than R7.41 billion, saw its share price gain 2.41 percent to close at R14.05 a share yesterday on the JSE, after announcing its operating profit for the year to December rose 75 percent to R448 million.
Chief executive Roy Douglas said the R1.7bn invested in growth projects had “dramatically” increased capacity and enrolments, which resulted in an increase in assets employed and a harder working and more demanding capital structure. “In addition to this, the successful rights offer, which raised R850m late last year, and the finalisation of new long-term funding agreements for facilities totalling R1.5bn, the Board believes that ADvTECH is now appropriately geared and has sufficient headroom to fund new projects and acquisitions.”
Douglas said the company had been able to restructure its balance sheet and it had enough capital to fund its future projects. “Our gearing level stands at 51 percent now,” he said. Gearing is a measure of financial leverage, demonstrating the degree to which a firm’s activities are funded by owner’s funds versus creditor’s funds.
ADvTECH’s revenue grew by 40 percent to R2.7bn. Normalised earnings per share rose 27 percent to 53.9c and headline earnings per share increased 27 percent to 51c. The company has declared a dividend per share of 29.5c.
ADvTECH has three divisions: the schools division, the tertiary division, and the resourcing division.
The schools division’s year-end enrolments grew by 73 percent, resulting in a revenue increase of 57 percent to R1.4bn and an 85 percent increase in operating profit to R299m. Operating margins increased from 18 percent to 21 percent. The division contributed 53 percent to group revenue.
The tertiary devision continues to show impressive growth. Revenue grew 19 percent to R982m, while operating profit increased by 60 percent to R134m.
The resourcing division posted revenue growth of 53 percent to R297m, up from R194m and an operating profit increase of 60 percent to R29m.
The division acquired a majority stake in CA Global, Africa HR Solutions and Contract Accountants during the year. Both CA Global and Africa HR Solutions focus on the wider African continent, while Contract Accountants is one of the preferred financial recruiters in South Africa.
Last year its rival in the education sector, Curro Holdings, offered to buy ADvTECH for R13 a share. ADvTech was trading at R10.74 a share at the time. However, the ADvTECH board rejected Curro’s offer.
“Yes, there was an offer for the company last year, but it is in the past now. There is no change of ownership that we are aware of,” Douglas said.
ADvTECH owns premium schools, including Crawford College, Maragon Private Schools, Trinity House and a tertiary education operation.
“There is no doubt the pressure is on the consumer. The good thing about us is that ADvTech is a defensive stock. The parents will still pay for their children’s education, even if there is a downturn in the economy,” Douglas said.
The students can expect to pay between R75 000 and R110 000 per annum for grade 12 for the high end. The mid-fee market for the same grade would fetch between R40 000 to R65 000 and the lower fee market between R12 000 and R30 000 a year.
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