ADvTech results are decent enough

19-MAR-12

This morning we had full year numbers from a company that operates in a sector I find very exciting. I'm talking about Advtech, one of two listed companies who offer private education. As expected the results looked fairly good managing to grow revenue by 9% and operating profit by 13%. Operating profit in the education sector grew 17% while overall headline earnings per share grew 9%. This company is not only involved in Private education, they also do job placements which makes sense. After you have received your Tertiary education from the likes of Vega or Varsity College they will help you find a job. If you want to learn more about the company and there brands here is their website.

From a valuations perspective the company actually looks quite expensive.
That's because it has rallied somewhat in the past 6 months, trading as low as 559c in October 2011 to 675c today. The stock made 40c for the year giving the company a historic PE 16.9. A dividend will be finalised after 1 April.

So let's look at operations. Of their revenues education was responsible for 87% while resourcing the other 13%. Of their profits the education segment contributed 90% while resourcing made the rest. That puts things into perspective with what is important here. I would like to focus on the education side which is where I see most of the growth coming from.

In 2011 their education division "addressed the needs of 35 300 (2010: 32 500) full-time students at the 57 (2010: 59) education sites across South Africa from which the Group operates. The hallmark of these results is the strong improvement in revenue and operating margins in the Education division, which enabled a renewed acceleration in investment into new education projects. Outstanding academic results at both schools and tertiary level, reflecting a further improvement on the already high standard, underline the continuing resolute focus on quality education in the Group`s operations. This in turn attracts increasing student numbers from all parts of South African society and further afield."

I have looked at this sector in detail whilst analysing one of their competitors, Curro. It is no secret that there is a huge gap in the market left by the public sector which needs to be filled. Where Advtech differ from Curro is that they offer tertiary education. They are also a lot more established and actually make cash with good margins. However, for me the best part of Curro is their availability to lower income groups. Advtech facilities are expensive and are only available to the rich. I like the sector but I prefer the Curro model, the company looks fairly valued at these levels.