EDITORIAL: More room on the playground for AdvTech

Earlier this year, the Jannie Mouton Foundation bought out private school business Curro with plans to turn it into a nonprofit organisation. Hopefully that noble initiative is faring well.

Market watchers might have felt that with the delisting of Curro, that particular private education model — which once boasted an earnings multiple of 75 — was broken. Curro had been rattled by underwhelming enrolment numbers, which is a problem when your network of schools has expanded at a rapid rate. Curro could have stopped expanding and improved capacity at its existing schools; cash flows would have supported a decent dividend policy, but growth would have been muted.

Shareholders in AdvTech — the JSE’s oldest private education listing — might have felt some trepidation ahead of the results for the year to end-December, especially the report card for the schools division, which includes such brands as Crawford and Trinityhouse.

It’s now clear that the group’s more selective growth ambitions in the schools division are paying off handsomely

While AdvTech was initially criticised for not expanding as fast as Curro, it’s now clear that the group’s more selective growth ambitions in the schools division are paying off handsomely. The latest numbers showed that “robust enrolment” in South Africa has pushed revenue up 10% and operating profit up 13%.

More impressively, schools in the rest of Africa saw revenue up 28% and operating profit up 33%. The scope for further African expansion looks promising. Perhaps there are now opportunities for AdvTech to consolidate profitably in South Africa, too.

Curro — now out of the public eye — will almost certainly be looking inward to efficiencies and yields, rather than aggressively trying to tap new urban growth nodes. There could well be viable market gaps opening up for an opportunistic AdvTech, which is blessed with a well-reinforced balance sheet and aspirational academic brands.