ADvTECH interim results. Not bad at all.

ADvTECH came out with interim results for the 6 months ended 30 June yesterday. If you don't know who they are, here is a brief description. The ADvTECH Group is one of the largest diversified education, training and placement groups in South Africa. It is listed in the Specialised Consumer Services -- Education, Business Training and Employment Agencies sector of the JSE Ltd. Ever heard of brands such as Abbotts College, Crawford Schools, College Campus, The Design School Southern Africa, Forbes Lever Baker, Imfundo (incorporating Corporate College International), Junior Colleges, Rosebank College, Trinityhouse, Varsity College and Vega? These are the well known brands that fall under their education division which is responsible for 87% of the company's revenues.

The results looked good as the company managed to grow revenues by 7% to R791 million whilst growing operating profit by 10%. This came in at R110 mil equating to 20 cents per share. A dividend of 9.5c per share is being paid. The stock trades at R5.59 and if you annualize those earnings we should expect 40c for the year. That is a forward PE of 14 and a potential dividend yield of 3.6%. I'm not sure how they recognise revenues but you wouldn't expect revenues to grow too much for the next 6 months as yearly tuitions have already been agreed upon. You wouldn't expect them to drop either.

I like the education division. Our country is clearly hungry for education and as our middle class grows people will leave the government education system and enter the private one. This is because most people prioritise the future of their offspring whilst the government education system is struggling in most areas. This division managed to grow revenues by 9% due to both fee and student growth.

The resourcing division which includes permanent and temporary staffing solutions as well as recruitment advertising, e-recruitment and advertising response handling dropped revenues by 4% and now contributes 13% to the overall group. We all know what the labour market is doing at the moment. Things are tough, especially with the current labour laws in place and the strength of the unions. Although long term I expect this to start picking up, it is not particularly a division I'd like to be invested in.

To conclude, an interesting company that offers an essential service to our economy. They have a strong balance sheet and are looking to expand. I like the education division, I don't like the resourcing one. I'll keep my eye on it but not one that I'd be climbing into straight away.