Our opinion on the current state of ADVTECH(ADH)ADvTECH (ADH) is one of three listed commercial education companies on the JSE, alongside Curro and Stadio. The company operates through two primary divisions: the schools division, which includes well-known brands like Crawford, Trinity House, and Abbots, and the tertiary division, which includes institutions such as Varsity College, Rosebank College, and other specialized tertiary offerings. In total, the group comprises 109 schools and 33 campuses, serving 78,500 students.
Historically, ADvTECH was primarily driven by its schools division, but in recent years, increasing competition has squeezed margins in this segment. As a result, the tertiary division has become the primary driver of profits for the company. The acquisition of Monash College, which now operates as IIE in the West Rand, has added 6,500 students to ADvTECH’s portfolio. This state-of-the-art campus includes laboratories, residences, and sports facilities, strengthening its tertiary division.
In its results for the six months ending 30th June 2024, ADvTECH reported a 9% increase in revenue and a 16% rise in headline earnings per share (HEPS). Total group enrollments were up by 6%. The company highlighted a 15% increase in group operating profit to R865 million, with the education division's operating profit up 16%. Resourcing's operating profit increased by 3%, despite a decline in revenue, and the overall group operating margin improved to 20.2% (from 19.2% in 2023). The operating margin for the education divisions specifically improved to 23.5% (from 22.8%).
Technically, ADvTECH has been in a strong upward trend since May 2020. With a price-to-earnings (P/E) ratio of 17.04, the share still appears to have upside potential. It is a solid, blue-chip company with good medium-term prospects, and it is currently trading at a relatively affordable valuation.
ADvTECH is well-positioned to benefit from any improvement in the South African economy, especially with the appointment of the new government of national unity (GNU). Education is traditionally a defensive sector, as parents tend to prioritize and make sacrifices for their children’s education even in times of economic difficulty.
On 1st October 2024, ADvTECH announced the acquisition of FNB's 47,000 square meter training and conference center in Sandton, further expanding its operational capabilities.
