Companies / 19 March 2019, 12:00pm / Sandile Mchunu
DURBAN – Private education group ADvTECH has shifted its sights on consolidating its school's division into the rest of its portfolio with an eye on growing its future earnings in the year ahead after going on an acquisitions spree in the past four years.
In South Africa, the school's division reported only 5 percent growth in its operating profit to R330million for the year to end December.
But the operating profit from schools in the rest of Africa has declined due to the costs incurred ahead of the opening of Crawford International School in Nairobi, Kenya.
The company said that the challenging South African economic climate and the unsettled socio-political environment has continued to impact organic growth, with increased levels of withdrawals owing to emigration and financial pressures, a trend that had continued into 2019.
More parents were now also selecting the monthly payment terms as opposed to the upfront payment option as well as some parents delaying payment until after year-end.
The group increased its school's portfolio by opening seven new schools during the period.
ADvTECH said the growth in student enrolments for the year was "largely off the back of its expansion strategy to enter faster-growing economies outside of South Africa”.
Chief executive Roy Douglas said that the past year had been a time of integration and consolidation following a four-year period of acquisitions in which they acquired 49 schools, to take the overall total of schools to 103 in its portfolio.
“This significant growth has doubled the division's size.
"We have used the opportunity to rationalise and restructure the divisional systems and processes that are better suited to the increased scale of the business and which included the reorganisation of the schools division’s management structure and support functions,” Douglas said.
Douglas emphasised: “We are now focusing on the schools division and we are confident that the re- organisation and consolidation measures will ensure a sustainable performance improvement.”ADvTECH now operates 132 education sites comprising 103 schools and 29 tertiary campuses.
The two other divisions, the tertiary and resourcing divisions, both reported double-digit growth in operating profit, which helped the group to report an overall operating growth of 14percent to R725m, while revenue increased by 11percent to R4.4 billion during the year.
The tertiary division reported a 23percent growth in operating profit to R395m and the resourcing division was up by 22percent in operating profit to R39m.
The group’s earnings before interest, tax, depreciation and amortisation increased by 14percent to R942.1m and profit was up by 8percent to R397.4m.
Headline earnings per share increased by 7percent to 73.6cents a share.
The board declared a final gross dividend of 15c a share, down from last year’s 19c.
The group said that after making capital commitments of R1.9bn during the year it was a responsible decision to “preserve cash and have, therefore, reduced the dividend pay-out during this high capital investment period”.