Boom times for private education providers but weak economy is stifling growth

26 Aug 2024

Stadio, ADvTECH and Curro have released their interim results, showing good growth. However, the weak economy is putting the brakes on a boom.

Private education is on a strong wicket in South Africa. The country’s three biggest private education providers, ADvTECH, Curro and Stadio have reported strong sets of half-year results, despite tough trading conditions.

ADvTECH, which owns Crawford, Trinity College and Vega; and Stadio, which owns Stadio Higher Education, distance learning Milpark Education, and the film school Afda, reported their interim results on Monday.

Curro released its results on Wednesday.

Stadio

First up was Stadio, which announced a double-digit increase in revenue for the period ending June 2024. Revenue rose by 16% to R826-million, driven primarily by a 10% increase in student enrollment. This growth was particularly strong in the Stadio Higher Education segment, which saw a 14% increase in new contact learning students.

Core headline earnings were up strongly, rising 19% to R137-million. Cash generated from operations increased by 20% to R307-million.

To support its future growth, Stadio has invested R49-million in capital expenditure, which includes R34-million for infrastructure and capital assets and R15-million for new curriculum and software development.

As of 30 June this year, Stadio had 47,024 students; 40,702 of whom were enrolled in distance learning, while 6,322 were studying in contact learning facilities. By August, 50,435 students (compared to 46,912 students a year ago) were enrolled, with second-semester enrolments still in progress.

The private education institution has grown rapidly since its unbundling from Curro: in January 2017, it had just 840 students enrolled. By the end of that year, almost 13,000 had enrolled. It is now on track to grow by a further 5% to reach 56,000 by 2026.

It has no external debt and a cash balance of R98-million, with shareholders’ equity of R1.83-billion.

Stadio has accredited new qualifications in information technology, management, architecture, and fashion that will be available to students starting in 2025.

It is also anticipating the start of construction on a new comprehensive “showroom” campus in Durbanville, Cape Town, next month, subject to obtaining regulatory approvals. Phase 1 is set to cost R220-million. The campus is scheduled to open in 2026, with about 1,000 students.

CEO Chris Voster told investors that they have invested heavily in the business.

“And we will continue to do so over the next few years. We are establishing a solid foundation that is conducive to future and sustainable growth going forward. We believe that we should see a very big positive impact in the future of all of these investments that we are making.”

Milpark was scaling back on seasonal B2B business, which Voster said was required as corporates have scaled back on training.

“We’ve seen a decline in the B2B business over the last few years. With the tough economic circumstances in the country, we see corporates cutting back on expenditure on training staff. There’s a decline in B2B business in the entire industry.”

Curro

Curro declared a dividend of R84.7-million on 18 March 2024, which was paid on 22 April 2024. No interim dividend has been declared for the six months ended 30 June 2024.

August has been a great month for Stadio’s former holding company, Curro (from which it unbundled in February 2017): Curro not only celebrated its Olympic silver medalist, Bayanda Walaza, but also had strong results and a sharp rise in pupil numbers.

Walaza, who attends Curro Hazeldean High in Pretoria, was part of the 4x100m SA relay team that clinched silver at the Paris Olympic Games.

Group-wide, Curro reported that revenue was up 8.3% to R2,59-billion, driven by a 0.5% increase in pupil numbers, which totalled 72,758 for the first half of 2024, and a 6% average fee increase. Headline earnings increased by 12.3% to R228-million.

The company has been actively managing its financial position and reducing its debt obligations, but is heavily leveraged: as of 30 June, Curro had a total debt of R3.199-billion, which it had reduced from R3.236-billion in December.

Curro invested heavily in its facilities during the first half of 2024, allocating R306-million to maintain, replace, and expand its existing infrastructure. To address the increasing demand for high school education, Curro plans to invest up to R700-million for the entire year.

Cobus Loubser, Curro’s CEO, gave Walaza a special shout-out at the results presentation: “We are super-proud and excited about what the future holds for him and what our 73,000 other Olympians will achieve in their lives.”

Asked about muted growth in primary school pupil numbers from 2023 to 2024, Loubser said the economy was a factor: “I don’t think you can really see it in bad debts (or)... operating margin. You can’t really see it in the real growth in consumers. But where you can see it is the pressure on young families to get through the month on the back of an obstinately high interest environment over the last two years.

“Our task has been to make sure that we offer an exceptional service at that age, that we can truly convince parents it makes sense to invest in your child’s education as early as possible because it does make a difference.

“Inevitably, young families at some point have had to make decisions, and so we have seen higher terminations, not necessarily low enrollments, but higher terminations in the youngest grades, which is sad, but we hope to see those families back in our schools as soon as possible.”

ADvTECH

Curro competitor, ADvTECH also released a strong set of interim results on Monday. CEO Geoff Whyte said they saw healthy growth in enrolments, despite a challenging economic environment.

Highlights include a 6% rise in enrolments, a 15% increase in operating profit to R865m (from R754-million last year), a 20% increase in operating margin and normalised earnings per share growth of 16% to 97.7c.

ADvTECH’s Education divisions grew revenue by 12% year-on-year, due to healthy enrolment across both Schools and Tertiary (up 4% and 7% respectively). In South Africa, the Schools division saw enrolments up by 5%, leading to an 11% rise in revenue and a 12% increase in operating profit.

Schools in the rest of Africa also experienced significant growth, with enrolments increasing by 4%. Revenue increased by 11% to R214-million, while operating profit increased by 29% to R62-million.

The Tertiary division performed well, with revenue increasing by 13% to R1,693-billion and operating profit by 16% to R436-million.

Expansion projects are underway at Rosebank College’s mega-campuses in Cape Town, Pretoria and Braamfontein.

A new Vega campus is under construction in Pretoria, adjacent to Varsity College.

ADvTECH and other private colleges are eagerly awaiting the gazetting of the new regulations setting out the criteria to qualify as a university, which would allow them to be afforded the same status as public university peers, Whyte told Business Maverick.  The Department of Higher Education invited public comment on the draft regulations in May this year.

“We’ve been working on upskilling our academic staff. We’ve had big increases in the number of our people with doctorates and masters. We have increased our per capita research output fourfold, and we’ve also increased postgraduate enrollments by 23%. We’ve launched our own academic journal.”

He said they were already offering seven faculties spanning everything from masters to PhDs, and that they’re working on partnerships with universities across Africa and Europe.

“We’re already demonstrating superiority to the public universities in a couple of areas. If you look at our minimum time, degree completion and graduate employment rates, we are already ahead of the public universities.

“So we are working hard at making sure that we have a great university offering and that we’re able to comply with the deregulation as soon as they’re published.”

The group is in the process of acquiring a suitable building to be adapted into a university campus. If the purchase is approved by the Competition Commission, it will result in a R419-million investment over the next two years.

Whyte was unable to provide details of where the campus would be located. DM

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