AdvTech - Weathering The Storm

Yesterday morning we received results from education group, AdvTech. Like all SA inc companies, the business has faced a tough environment, especially in their schools division. Kids are being pulled out of schools because parents cannot afford the fees or they are emigrating. It is very hard to replace children in the middle of the cycle. But the group is diverse and the tertiary division continues to do well. Here are the group highlights.



Schools revenues increased 9%. SA schools increased 4% whilst rest of Africa increased 97%. The Kenyan Crawford came online with good interest. The rest of Africa School's might have helped revenues but they lost money which put pressure on profits. School profits dropped 6% for the period.

Tertiary was again solid. Revenues and profits in that division increased 20%. With over 40 000 students in their system, is this the answer to a State tertiary system under immense pressure? It is at least part of the answer.

Normalised earnings per share increased by 7% to 42.5c whilst cash generation increased 12% to R999 million. This gives management room to continue to invest in capital projects and the odd acquisition.

We like the space and AdvTech is a neat little operation doing their best in a tough environment. We think the company offers value at these levels but it is certainly not immune to SA's problems.