INTERIM FINANCIAL RESULTS...INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019 Tough...
Transcript of INTERIM FINANCIAL RESULTS...INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019 Tough...
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
FOR THE SIX MONTHS ENDED 30 JUNE 2019
INTERIM FINANCIAL RESULTS
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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%
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Financial Overview
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Operating Profit
203
293
344
404428
0
50
100
150
200
250
300
350
400
450
2015 2016 2017 2018 2019
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 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)
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
SCHOOLSSCHOOLS
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Balancing Act
“Running a company is a permanent juggling act” – The Economist
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
13 Schools5 Campuses
5 379 Students
*Feb 2019
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Balancing act
INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
• 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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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%
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
What we are doing - example of a performance scorecard
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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)
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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%
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
13 Schools5 Campuses
5 379 Students
*Feb 2019
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
TERTIARYTERTIARY
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
IIE MSA - Integration
On track – going well
Added 32 qualifications to portfolio – total220 accredited courses in the Tertiary
division
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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%
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Varsity College
Increase capacity to meet demand
• Cape Town Campus• Move to new
premises• Pretoria Campus
• Expand existing site
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
Rosebank College
On track for 2020 opening
Cape Town Mega Campus
Port Elizabeth Digitally Enabled Campus
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
RESOURCING
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
QUESTIONS
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
THANK YOU
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INTERIM FINANCIAL RESULTS for the six months ended 30 June 2019
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