interim financial results...interim financial results for the six months ended 30 june 2019 tough...

INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019

FOR THE SIX MONTHS ENDED 30 JUNE 2019

INTERIM FINANCIAL RESULTS


Tough Economic Times

GDP growth: 5 year avg. 1.0%

3 year avg. 1.1%

GDP Forecast 2019 1.2%

SACCI Business Confidence Index93.7% Q1 2019 vs. 95.5% Q4 2018

Avg. South African poorer – Population growth of 1.4% exceeds GDP growth

UnemploymentSTATSSA QLFS Q2 201929%

Source: IMF, SACCI Business Confidence Index April 2019, Fin24. Info correct as on 8 Aug 2019

GDP contracted- 3.2% Q1 2019 vs. 1.4% Q4 2018


Interim results

Tertiary division• Continued excellent performance• Includes IIE MSA

Schools division• Good progress with mid-fee expansion• Restructuring and rationalisation activities continue• Emigration and financial hardships continue to impact student numbers• Strong growth achieved in the rest of Africa

Resourcing division• Tough market conditions• Remains highly cash-generative


Enrolment numbers N

umbe

r of s

tude

nts

24199 26713 30455 30827

2913833463

3613642829

0

10000

20000

30000

40000

50000

60000

70000

80000

2016 2017 2018 2019

Schools Tertiary: Full Qualifications

53 33760 176

66 59173 656

11%


Financial Overview


Group Revenue

1 223

1 572

1 929

2 175

2 499

0

500

1 000

1 500

2 000

2 500

3 000

2015 2016 2017 2018 2019

R’m


Operating Profit

203

293

344

404428

0

50

100

150

200

250

300

350

400

450

2015 2016 2017 2018 2019


Operating Margin

16.6%

18.6%17.8%

18.6%

17.1%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

2015 2016 2017 2018 2019

0.2 Schools SA0.9 Schools Africa0.4 Resourcing


Normalised earnings per share

25.7

31.9

39.1 39.7

42.5

15

20

25

30

35

40

45

2015 2016 2017 2018 2019


Cash flow generation

255

362424

555587

461

610

785

890

999

0

200

400

600

800

1000

1200

2015 2016 2017 2018 2019

R’m

Axis Title

Cash generated from operations Cash from operations (after working capital)


Free operating cash flow before capex

363.4

495.5

653.9 660.1

752.6

15

115

215

315

415

515

615

715

815

2015 2016 2017 2018 2019

R’m


Net cash position

-1 684

-907 -919

-1 448

-1 805

-2 000

-1 800

-1 600

-1 400

-1 200

-1 000

-800

-600

-400

-200

0

2015 2016 2017 2018 2019

R’m

IIE MSAAcquisition

Covenants• Lenders x3.5• Internal x3• Currently x2


Debtors book

201819.8%

201917.7%

Tough economic environment

Improved performance

Well managed and under control – GSS benefit

Fees received in advance and deposits19% higher than prior year


SCHOOLSSCHOOLS


Balancing Act

“Running a company is a permanent juggling act” – The Economist


Schools: Balancing actPremium schools Growing presence in

mid-fee sectorIncreasing presence in

the rest of Africa• Operational efficiencies• Rationalisation • Integration

• Greenfield developments• Repositioning • Acquisition

• Botswana – GIS• Kenya – Crawford

International– Makini Schools

73 Schools41 Campuses

21 677 Students

18 Schools (24 2020)7 Campuses (9 2020)

3 771 Students


5 379 Students

*Feb 2019


Schools: Revenue

642.0

768.7

844.0

991.1

1076.3

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

2015 2016 2017 2018 2019

R’m


Schools: South Africa Revenue

621.7

739.4

813.5

944.6984.7

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

2015 2016 2017 2018 2019

R’m


Schools: Africa Revenue

29.3 30.5

46.5

91.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2016 2017 2018 2019

R’m


Schools: South Africa operating profit

123.5

152.7159.1

171.8 175.1

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

2015 2016 2017 2018 2019

R’m


Schools: Africa operating profit

• J-Curve• Forex impact

11.713.0

8.1

-5.4

-10.0

-5.0

0.0

5.0

10.0

15.0

2016 2017 2018 2019

R’m


South African Schools

Factors impacting operating profit • At entry points (Grade 1 & Grade 8)

• Joiners are 2.3 x more than leavers for these grades

• Up from 2.1 in 2018• Muted net enrolment growth

• Withdrawals due to financial reasons & emigration – not easing off

• 75% out of our control • Closure of Trinityhouse Palm Lakes high

school• Strategic re-positioning & re-branding

• Pinnacle College Kyalami and Pinnacle College Rynfield to the mid-fee sector

• Initial reduction in revenue at these schools (20% - 25%)

Factors impacting revenue

• Restructuring costs• R4 million in retrenchment payments • Investing in efficiency improvement initiatives• Investing in mid-fee sector for growth


Balancing act


• Make up 75% of school’s portfolio• Net student enrolments - 2.8%• Gr 1 + Gr 8 net positive growth• Staff headcount - 7%• Payroll costs - 2.5%

• Make up 25% of school’s portfolio• Students +13% • Staff headcount + 4.5%• Payroll costs +14.4%• Crawford International investment

• Good enrolment, J-curve• Makini

• Academic enhancement • Facilities upgrade• Operational efficiencies

Reorganising and restructure Growth

Costs


What we are doing

• Student growth is flat• Staff headcount – 4.5%• Payroll cost:

• Initial increase in January with salary increases but reducing and restructuring

• H2 better than H1

Overall SA schools

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

J F M A M J J

All schools, Payroll change

Actual 2018 Actual 2019 Sim - PYM +6%


What we are doing - example of a performance scorecard


What we are doing – Integration

• Group Shared Services momentum:• Transitioned 70%+ of schools billings, collections and payments• Integrated 7 payrolls (1 350 employees & 40 schools)• Reduced billing cycle by 20% • Processing 20 500 statements monthly• 15% improvement processing invoices• Paying 2 800 supplier invoices monthly• Supplier rationalisation & procurement opportunities• Implement standard chart of accounts


Growing mid-fee sector

• Mid-fee 24 schools, 9 campuses by 2020• Strategic re-positioning to mid-fee offering

Opening in 2020

Success

Re-positioning

Mooikloof Olympus


Improved brand proposition and customer focus

LeadsJune 2019

YoY

15%

ApplicationsJune 2019

YoY

23%

EnrolmentsJune 2019

YoY

41%All schools

Repositioned schools (Kyalami & Rynfield)

LeadsJune 2019

YoY

166%

ApplicationsJune 2019

YoY

294%

EnrolmentsJune 2019

YoY

764%

Leads, applications, confirmed enrolments (YoY)


Geographic growth

• Opening 2020• Preparatory, Primary and College

(opening grade 000 – grade 9)• Planned capacity: 1 800

Trinityhouse, Glenvista

Premium sector continues to offer growth opportunities


African Schools Good performance

Good growth opportunities

Makini Schools- Organic growth - Positive enrolment growth of 4%- Restructuring costs - improvements:

- Academic enhancement - Facilities upgrade- Operational efficiencies

Crawford International School- Opened September 2018- Operating loss as it moves through the J-Curve


Crawford International School, Nairobi KenyaFirst greenfield development outside of South Africa

• Preparatory, Primary and College• Boarding • State of the art facilities• Ultimate capacity of 1 685 students• Enrolments exceed expectations

Sept 2018 Jan 2019 July 2019 ConfirmedSept 2019

122 189 216 32055% 77%


Expansion into the rest of AfricaAcquisition: Makini Schools – Nairobi and Kisumu, Kenya

• Positive enrolment growth of nearly 4%• 7 schools, 5 campuses• Kisumu investment

• Academic enhancements• Facilities upgrade• Operational efficiencies


Schools: Balancing actPremium schools Growing presence in

mid-fee sectorIncreasing presence in

the rest of Africa• Operational efficiencies• Rationalisation • Integration

• Greenfield developments• Repositioning • Acquisition

• Botswana – GIS• Kenya – Crawford

International– Makini Schools


21 677 Students

18 Schools (24 2020)7 Campuses (9 2020)

3 771 Students


5 379 Students

*Feb 2019


TERTIARYTERTIARY


Tertiary: revenue

478.7

580.9

777.9

867.9

1038.1

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

2015 2016 2017 2018 2019

R’m


Tertiary: operating profit

63.8

100.3

156.9

204.2

244.7

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2015 2016 2017 2018 2019

R’m


Tertiary: operating margin

13.3%

17.3%

20.2%

23.5% 23.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2015 2016 2017 2018 2019

• Currently lower margin business

• Restructuring plans in place to improve performance


IIE MSA - Integration

On track – going well

Added 32 qualifications to portfolio – total220 accredited courses in the Tertiary

division


The IIE Faculties

FACULTY OF COMMERCE

FACULTY OF INFORMATION & COMMUNICATION TECHNOLOGY

FACULTY OF SOCIAL AND HEALTH SCIENCES

FACULTY OF LAWFACULTY OF EDUCATION

FACULTY OF HUMANITIES

FACULTY OF ENGINEERING


The IIE – Professional qualifications

IIE’s Professional Qualifications

2017 2019 Growth

Law 1 634 2 686 64%Education 1 783 3 964 122%Accounting 166 607 266%Total 3 583 7 257 103%


Varsity College

Increase capacity to meet demand

• Cape Town Campus• Move to new

premises• Pretoria Campus

• Expand existing site


Rosebank College

On track for 2020 opening

Cape Town Mega Campus

Port Elizabeth Digitally Enabled Campus


RESOURCING


Current unemployment statistics

25.0%

25.5%

26.0%

26.5%

27.0%

27.5%

28.0%

28.5%

29.0%

29.5%

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

http://www.statssa.gov.za/publications/P0211/P02112ndQuarter2019.pdf

http://www.statssa.gov.za/publications/P0211/P02112ndQuarter2019.pdf


Market decline - number of ads placed

1 160 0001 200 000

1 030 000

905 000

690 000

554 000

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

2013 2014 2015 2016 2017 2018


Resourcing: revenue

223.8

308.5320.9

387.2

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

2016 2017 2018 2019

R’m


Resourcing: operating profit

8.5

17.9

19.9

13.2

0.0

5.0

10.0

15.0

20.0

25.0

2016 2017 2018 2019

R’m


Resourcing: operating margin

3.8%

5.8%

6.2%

3.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2016 2017 2018 2019

R’m


0

5

10

15

20

25

30

35

40

0

50

100

150

200

250

300

350

400

2018 2019 2018 2019

RESOURCING DIVISION

Mauritius- Revenue

South Africa- Revenue

Mauritius EBIT South Africa EBIT

REVENUE EBIT

Balancing act: resourcing revenue


Resourcing division

Remains highly cash generative African countries • Mauritius-based business • Invested in additional services offerings - future growth

• Country payroll services• Medical aid facilitation• Visa applications

• Good revenue growth

South African market - decline• Highest levels of unemployment in 15 years• Declining employer confidence


Prospects

• ADvTECH Group’s diverse portfolio allows for a resilient performance

• Tertiary division well positioned and performing strongly• Schools division

• Continue integration, consolidation and rationalisation phase• Drive operational efficiencies• Sharpen market focus

• Resourcing division – remains highly cash generative• Optimistic about African investments and opportunities


Dividend –Prudent and responsible

Interim dividend per share15.0 cents

• Balance between preserving cash for development projects and shareholder returns

• Capital allocations amount R1.4bn• Prudent and responsible management of cash

resources


QUESTIONS


THANK YOU


Strategic imperatives

Innovation > Business process> Product/market

development

Africa

Customer focus> Easy to do business with > Understanding needs

Academicexcellence> Teaching & learning> Benchmarking our

performance> Learning analytics> International & Employer

recognition

Growth> Organic and Acquisitive> Channel> Product> Segment> Geographic

REG

ULA

TIO

NS

SOCIO-ECONOMIC ENVIRONMENT

REPUTATIO

N

TRANSFORMATION

Human &capitalproductivity

Excellence through specialisation> Market focus> Benchmarking> Data driven

decisions

interim financial results...interim financial results for the six months ended 30 june 2019 tough...

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