SA private school groups’ results show resilience, and inefficiency of public schools

31 Aug 2022

ADvTech’s Group revenue grew by 18% while Curro’s revenue increased by 15.5%. ADvTech’s Roy Douglas says demand for quality education in South Africa is ‘unrelenting’ – probably more so during tough economic times.

Two of the country’s biggest private education operators are thriving, in a tough economic climate, as parents and caregivers put an increasing premium on quality education, viewing it as essential to success rather than a luxury.

Curro Holdings, one of the oldest and most established independent school providers in South Africa, and ADvTECH, SA’s largest private education provider, released their interim results in recent weeks.

First to release results for the six months ended 30 June 2022 was Curro. Operating in a more affordable private education space than ADvTECH, Curro has 181 schools, 77 campuses in southern Africa, with average pupil numbers increasing “organically” by 6.6% from 66,167 in 2021 to 70,519 in the first half of 2022. By 1 August, Curro had enrolled 71,011 pupils. Its fees range from about R2,500 per month (Meridian) to about R11,000 (Woodhill).

Andries Greyling, CEO of Curro Holdings, says the group had seen its recurring headline earnings increase by 31.4% to R152-million (up from R116-million in 2021) and headline earnings per share growth of 41.8% from 19.4 cents to 27.5 cents compared with the same period last year.

“The group recorded pleasing increases in learners, revenue, profitability and cash generated during the first half of this year,” says Greyling.

Revenue increased by 15.5% from R1.784-billion in 2021 to R2.06-billion for the period. Several factors contributed to that increase: a 13.3% increase in tuition fees due to the rise in pupil numbers, the annual inflationary fee increase, and an increase in ancillary revenue.

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Schools’ Ebitda (earnings before interest, taxation, depreciation, amortisation and head office expenditure) increased by 17.7% to R599-million for the period, while Ebitda after head office expenditure increased by 19.7% from R390-million in 2021 to R467-million.

Greyling says Curro had tightened its cost management processes, by reducing discounts on tuition fees granted to parents from a previous 9.1% to 7.8%.

Credit losses were also being “managed”, with expected losses of R76-million provided for during this period (up from R61-million in 2021). Curro sold the non-performing portion of its debtors’ book (relating to pupils who have left the group) while the remaining debtors’ book consists of R175-million of actively enrolled accounts and R74-million of inactive accounts, owed in school fees from parents whose children are no longer at their schools.

In the period under review, Curro invested R549-million in expansion, with the primary focus on existing facilities. “We are on track with our overall capex programme to invest up to R1.1-billion in the business this year,” says Greyling.

Curro made several acquisitions, including HeronBridge College in Fourways in April 2022 as well as a building in Cape Town to accommodate more pupils at the technology-driven DigiEd Foreshore school, which is focused on e-learning.

Its “affordable fee” Meridian subsidiary, a joint venture with Old Mutual and the Public Investment Corporation, received a once-off subsidy from the government of R25 million — due since 2013, Greyling explained — in the first half of this year to subsidise school fees for parents.

‘Dismal’ public school results

ADvTECH, meanwhile, says the public system’s failures — despite the significant amount of money devoted to basic education — deliver dismal results, which are to the benefit of independent schools.

It has delivered another strong set of results for both the schools and tertiary divisions. ADvTECH CEO, Roy Douglas, says a quality, good tertiary education has become the key to success and a necessity — rather than a luxury.

“Our relentless focus on enhancing our value proposition and academic delivery, as well as driving operational efficiencies, are evident in our continued enrollment growth. Overall, the group’s healthy financial position reflects the quality of our assets as well as the strength, flexibility and agility of our business model.”

Group revenue grew by 18% to R3.4-billion (up from R2.9-billion last year) while operating profit increased by 19% to R612-million (R514-million in 2021). Group operating margin improved to 18.1% (an increase from 17.7% on the previous year). Normalised earnings for the period increased by 23% to R365-million (R297-million in 2021) while normalised earnings per share increased by 22% to 67.3 cents (2021: 55.1 cents) per share.

It’s expected that the group’s growth trend and solid cash generation will continue, with the board announcing an interim dividend of 23 cents (up from 19c in 2021) per ordinary share in respect of the six months ended 30 June 2022.

Its schools division showed encouraging performance in line with expectations: all ADvTECH’s brands are growing, while boarding, extramural and aftercare continued to recover from the Covid-19 disruptions.

Revenue increased by 14% to R1.2-billion (from R1.1-billion in 2021) and operating profit increased by 16% to R235-million (2021: R202-million). Operating margin improved to 19% (2021: 18.6%).

In the rest of Africa, ADvTECH recorded good enrolment growth. Revenue at the division increased by 27% to R153-million (2021: R120 million) and operating profit increased by 70% to R28-million (R16-million the previous year), while the operating margin improved from 13.5% to 18.1%.

The tertiary division, which includes Vega, Varsity College and Rosebank College, also thrived, not only due to the comprehensive range of programmes and qualifications, but also due to the group’s offering of multi-channel modes of delivery (contact, blended, online, full-time, part-time and distance).

Revenue increased by 9% to R1.3-billion (2021: R1.2-billion) and operating profit increased by 13% to R315-million (2021: R280-million). The operating margin increased to 23.8% (2021: 22.9%).

The strategy to expand into the rest of Africa continues to pay dividends, the group says, with revenue increasing by 65% to R536-million (2021: R324-million) and operating profit increasing by 136% to R29-million (2021: R12-million).

The performance of the South African business was encouraging as it continued to grow market share: Revenue increased by 13% to R129-million (2021: R113-million), while operating profit improved by 58% to R5-million (2021: R3-million). BM/DM

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