SIMON BROWN: I’m chatting now with ADvTECH CEO Roy Douglas. Disclaimer upfront: I hold this share. In the results to year-end December, revenue is up 8%. Broken down, schools [are] up 4%, tertiary up 9%, resourcing up 15%, and a 20 cent dividend [was declared] after skipping the dividend for 2019. Of course, the 2019 year was not pandemic impacted but at the time the declaration was coming we saw the pandemic coming.
Roy, morning, I appreciate your time. Robust numbers. I suppose this really talks to the oft-mentioned story around education that a family wants to educate not just its children, but in many cases themselves. And you’ve got that adult education segment as well. [Parents] will perhaps scrape and forfeit other parts of the budget to ensure that that they are paying the bill for the kids’ education.
ROY DOUGLAS: Yes, absolutely, Simon. Education in the past has always been considered a very good defensive stock, and of course, more recently we’ve been going through quite a significant growth spurt, fuelled primarily by I think the problems probably in the public sector in the sense of providing quality education, and parents will undoubtedly seek out the best-quality education they can for their children and will make significant sacrifices to ensure that happens. I think in these tough times and very difficult economic circumstances we’re seeing the evidence of that. Undoubtedly, yes.
SIMON BROWN: You mentioned that in previous years and last year around obviously the Covid pressures in your school division. But you’d also had, previously to that, emigration, families leaving, and the challenge with that as a kid leaves in Grade 4 or 6 or something, and you don’t get them through that entire cycle of education. Was that still an issue last year, or was that completely overwhelmed by Covid – or have they sort of mitigated themselves?
ROY DOUGLAS: Well, you’re absolutely right. The impact of emigration, which we’ve seen over the last few years has certainly subdued to some extent. I suppose there is nothing quite like a global lockdown accretion. But nevertheless, we did still see some level of emigration, more specifically at the beginning of the year, of course, before the real impacts of the Covid lockdown took place. I think that might still be a factor. South Africa has experienced very subdued economic growth with a number of socio-political-economic problems over the last few years, and I think those people who perhaps have the wherewithal and the skill sets to look at emigrating might still have those plans. They may just have been put on a temporary hold while the globe recovers from the pandemic.
That has lessened, but certainly, financial exclusion has also been one of the key issues for us in the past; that escalated during the pandemic. There’s no doubt that consumers were extremely hard-hit. It was obviously incumbent upon us to look and see what we could do. We decided not to do a sort of limited across-the-board discounting, which we felt would miss the mark in many instances, but rather have a very focused approach to engaging with our parents, with those who were experiencing difficulties, and putting together packages for them.
And you saw we helped over 5 300 families to the tune of some R47 million in terms of financial assistance, in addition to increased provisions and increased debt write-off.
Despite all of that our balance sheet has improved. Our gearing is lowered. And I think again it’s testimony to the very strong cash generation of the business and its ability to adapt.
SIMON BROWN: You mentioned 5 000 families there, and of course some of those families will have multiple children. How many children do you have across your schools division?
ROY DOUGLAS: Well, we have around 34 000 or so in the schools division, and we have over 45 000 in tertiary. So it’s quite a substantial number of people. And probably one of the key features of the pandemic year is the fact that we managed to switch some 75 000 students to online education within the space of about three weeks. We are immensely proud [of that] and I think that certainly helped us to continue the academic year. We never lost a single academic day. That obviously helped the sustainability of the business because we were able to bill parents, those who could afford [to pay], again underlying the feature of the very strong cash generation of our business which secured our educational staff. As you said, a robust performance from the business which we are very pleased to have delivered.
SIMON BROWN: Obviously [when it comes to] students and the work-from-home (trend) in the corporate space – we debate when and if we go home. Students are going to go back to school. But you did launch your Evolve Online School. You launched it in August and opened in January 2021. How was take-up on that? Obviously, it’s very early days, but how was that initial tranche?
ROY DOUGLAS: Obviously online homeschooling became very topical. I do stress that we run a portfolio of brands that are designed to meet various different market segments. We’ve always identified homeschooling, online schooling as an issue. It is quite a niche, and one looks at it in the total overall numbers in terms of the global experience. So in other more developed markets where homeschooling is perhaps a feature, it’s interesting. There are places like Germany where homeschooling is outlawed, which is quite an issue.
But we’ve seen, we think, good take-up, certainly ahead of our targeted enrolments. This was an offering we were preparing to launch [in] any event. Obviously, it’s quite topical at the moment. So we have, I think, close to 470-odd students enrolled since the launch, which we were very pleased and comfortable with. But it does remain small in the overall context of our business and we’ll see how that grows and how that performs.
But we are excited and I think for us it was important not just to have a sort of paper-behind-glass situation that is ‘here you are, you can home school’. But it’s a very different curriculum. It’s designed to meet the specific needs of the children and to allow them to progress at their own rate.
It’s an MIT-designed curriculum. And, rather than being governed by the sort of the Grade 1, Grade 2, Grade 3 academic year, children progress on the basis of their mastery of certain skills.
They either are able to accelerate their own progress, or take more time to consolidate. So it’s a very specific and tailored offering that we think will meet the needs of homeschooling and those people who are interested in that format.
SIMON BROWN: And niche. I grew up in some rural areas – it was years ago – but my choices of school back then were whatever there was down the local road. This does offer some more optionality.
We’ll leave that there. Roy Douglas, CEO of ADvTECH, sir, I appreciate your early morning time.