June is AGM season for the three listed private education players — AdvTech, Curro Holdings and Stadio Holdings. The share prices of these three have followed very different trajectories, and they track IM’s AGM feedback from 2024. Year to date AdvTech is down 8.3% and Curro has slumped 28.1%, but Stadio has romped ahead, up 27.1%.
This review on AdvTech — which owns brands such as Varsity College, Crawford International and Trinityhouse — is an interesting one as the share price performance year to date has not reflected the positive results narrative and recent AGM feedback.
IM is aware, as is the wider market, that one of AdvTech’s largest shareholders, private equity activist Value Capital Partners (VCP), has been selling off its stake, which stood at 9.3% at year-end. It had tried unsuccessfully to offload half its stake late in 2024. IM believes this VCP overhang is the key reason the AdvTech share price has slumbered. This is a hindrance — but also an opportunity.
Operationally, AdvTech’s financial 2024 results show pleasing growth in the key South African school and tertiary assets and continued bumper growth within schools in Africa. Group revenue rose 8% to R8.5bn with operating profits ahead 14% to almost R1.8bn and a 16% increase in headline earnings to 202.2c a share, with a similar percentage increase in dividend to 101c a share.
In profit terms, rises of 12% were recorded for South African schools. 28% for African schools and 15% for tertiary. In every case, the margin increased like on like. After a robust few years, the resourcing business had an 8% slide in profit from a heady base. The largest JSE-listed educator in market cap terms and students (105,710), the group reported a 13% uplift on the year in pupils — aided by the acquisition of the Flipper International School in Ethiopia — but also strong growth (40%) in tertiary online students to 7,822. Total tertiary students rose 14% to 60,067. South African schools had a 4% increase in pupils to 34,093, and for African schools, including Flipper, the increase was 40% to 11,550.
These figures were provided at AdvTech’s recent AGM, where it indicated that its first-half performance had matched its positive year-end guidance.
The soft domestic economy has had little impact on its business, with demand in many cases exceeding supply
The soft domestic economy has had little impact on its business, with demand in many cases exceeding supply. As a result, the company has had to raise capital expenditure, especially for its African schools and domestic tertiary operations. AdvTech maintained its guidance and seemed confident that margin would tick higher. IM learnt that schooling demand remains sticky and enrolment is healthy, and that lots of effort has been directed towards the debtors book, which has improved.
In financial 2024, operating profit in the African schools segment rose 28% to R146m. In Kenya, Makini Schools could expand a further 25% to meet demand. Crawford Kenya has had a new campus built, creating more capacity to meet good demand. Fees in this higher-margin region are set in dollars, so the investment should deliver solid returns. AdvTech has entered the tertiary space in Ghana and is mulling doing so in Kenya.
The soft spot was resourcing, which contributed 5.7% of operating profit in financial 2024. The Trump administration’s freeze on overseas aid programmes has caused some disruption of the resourcing division’s Africa business; the impact will be greater in the second half of 2025.
A flat profit year was anticipated. It was clear in engaging with management that prospects remain sound. Student numbers are growing, especially in tertiary and African schools, with AdvTech aware that it needs to add capacity to meet the population’s appetite for education. Margins continue to improve and the robust, cash-generative balance sheet means investors should have no concerns about AdvTech’s ambition.
AdvTech looks like solid value. But we believe its capital appreciation progression is being capped by the ongoing VCP stake sale, and the market knows that. When that selling abates or is completed, IM believes the market will rerate AdvTech. This is the opportunity that IM envisages and focused vigilance is recommended.
At the current price, IM sees upside value to R36.25 — a jump of 17%.
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