annual report analyst presentation 2007 › 24847d5c › files › uploaded › ap … · money in...

Developing talent to succeed…

Audited resultsfor the year ended 31 December 2007

Developing talent to succeed in an ever-changing world


The chairman said. . . .

AdvTech has, since 2002, recorded a compound annual growth rate in earnings of 42%

The resourcing division has developed ... a reputation as one of the leading human resource placement networks.

Tens of thousands of the Group's graduates are now active in the South African economy


The chairman added. . . .

Group revenues increased in the year by 16% to R963m. Operating profit increased by 31% to R161m and headline earnings per share increased by 41% to 32 cents

Our 967 matric candidates for 2007 achieved a 100% pass rate

Tertiary students achieved an 80% pass rate across 75 000 final exams


Financial highlights

Money in Rm 2007 2006 % growth

Revenue 963 830 +16%

Operating profit 161 122 +31%

Headline earnings 119 84 +42%

HEPS (cps) 32.0 22.7 +41%

Diluted HEPS (cps) 31.0 21.8 +42%

Distribution (cps) 16.0 11.0 +45%


Fixed assets have grown from R396m to R441m

Net cash on hand increased from R59m to R118m

Fees received in advance increased by R18m to R65m

Shareholders funds grew from R329m to R416m

Strong balance sheet


Balance sheet in focusMoney in Rm 2007 2006 % ch

Fixed assets 441 396 +11

Other non-current assets 38 43

Net current assets -177 -158Current Assets 62 31 +100Current Liabilities -239 -189 +26

Employment of funds 302 281

Shareholders equity 416 329 +26

Long term liabilities 4 11

Net cash resources -118 -59 +100

Funds employed 302 281


Cash flow is reality

Money in Rm 2007 2006

Cash generated by operating activities 195 180

Net cash inflow from operating activities 141 101

Net cash outflow into investing activities (75) (73)

Free operating cash flow before capex 157 148


As the directors said, in short. . .

“AdvTech has once again delivered excellent

academic, operational and financial results for the

year ended 31 December 2007”


. . . that we enter 2008 in a less robust economy

than that which prevailed during 2007. Disposable incomes are

likely to be affected by interest rates and growing inflation.

Given this, here are 3 important questions:

What about AdvTech’s strategic positioning?

Is there a sustainable business model?

Do the numbers support the investment case?

There is no doubt. . .


Strategic positioning

In 2006, the Chairman said:

“(AdvTech) needs to be considered in the light of the vast demands for skills and jobs which have such crucial importance for our young democracy”

30% of SA’s people are scholars and students

Unemployment remains a core problem

Critical skills increasingly in short supply


Source: South Africa Institute of Race Relations – Feb 2008

In 1994, 495 000 Matric candidates - 58% passed, yet only 18% passed with university exemption

In 2007, 565 000 candidates wrote the exam and 65% passed yet only 15% passed with university exemption

Of the 7 million students who wrote Matric during the last 14 years 1 million or around 15% passed with university exemption. At current tertiary pass rates, an estimated 240 000 students would have finalised their studies!

During the period 1999 to 2007, 2.6 million students wrote Matric maths, yet only 203 000 passed at the higher grade . . . 7.8% of students who wrote maths or 4.5% of all students who wrote Matric

The annual average of students who passed English on the higher grade is approximately 350 000…

The national challengeDid you realise?


Strategic positioning

The leading, most recognised and most successful independent education provider

Catering for the needs of 45 000 students

A market leader in recruitment services in its selected niche markets

Facilitating new careers for 4300 skilled professionals in 2007

Making a meaningful contribution to transformation, skills development and job creation in SA

Today AdvTech is:


Adding value. . .a broad range of stakeholders benefit

JSE SRI Index

Value created for various participants

Stakeholders Rm %

Our own people 404 55

Society in general 171 24

Our investors 53 7

The Group itself 105 14

Total value created 733 100%


-200400600800

1,000

Rm

2002 2003 2004 2005 2006 2007

Group Revenue

A sustainable model

024681012141618

2001 2002 2003 2004 2005 2006 2007

Group Operating Margin

5-year CAGR in revenue = 15%

%

annuity based income

commitment to quality and transformation

continuous growth and improvement in margin


In 2007

“Figures released by Statistics SA show that only 9.1% of South Africans have a post-school educational qualification.

This compares with 30% in Europe and close to 40% in the US. The Tshwane University of Technology's Wille de Ruyter said: “Although this figure is up from 8.4% in 2001, universities are nevertheless producing far too few graduates to address the country's skills gap. This is due to poor funding to the higher education sector and the lack of basic academic skills”

AdvTech institutions contributed 1.9% of students who passed higher grade

mathematics, although it contributed only 0.2% of national student numbers

70% of students and 50% of placements were HDI candidates

65% of Group Management are women

(Source: South Africa Institute of Race Relations – Feb 2008)

A greater contribution


Academic leadership

To provide academic leadership and governance and ensure the quality of

programmes as well as teaching and learning

Registered with DoE as a Private Higher Education Institute – 30 HE

programmes on 19 sites

Strong academic governance system and Group representation

Employs over 300 at NQF level 8 and above (Master or higher)

Fully compliant with all regulatory requirements

All school sites are registered and accredited Umalusi


Achieved results. . . Against this backdrop, ADvTECH and its school learners achieved:

100% matric pass rate (2006: 100%)

33% of students achieved A aggregate

1 814 distinctions (2006 – 2 200)

107 learners across the Schools division achieved 6 or more A’s

ADvTECH remains the acknowledged leading maths educator:

highest number of HDI maths passes

outstanding contribution to national averages


Achieved results

80% pass rate (2006: 61%)

75 000 final exams written (2006 : 69 000)

KZN Varsity College had 100% pass rate for B.Ed degree

4 Varsity College students in UNISA CTA Exams top 20 nationally

Vega students won 19 Loerie awards

“South Africa spends 5.4% of GDP on education, compared to the sub-Saharan average of 4.5%, yet comparatively does not achieve better outcomes in mathematics and science…”Moneyweb 11 Feb 2008”

Tertiary students achieved:


Brands in education


Brands in resourcing


Investment in infrastructure. . .


Investment in infrastructure


Investment in infrastructure

Continuous programme of capital investment

Total of R413m since 2000

Capital commitments – R170m (R132m)

Operating lease commitments – R184 million (R151m)


Do the numbers stack up?

Consistent pattern of growth

Inherently robust

Commitment to quality and results to show for it

Transformative in nature


Strong cash flowStrong cash flow consistently a key attribute

Cash generated by operations 5-year CAGR = 38%

Cash from operations (after working capital) 5-year CAGR = 37%

-

50

100

150

200

2002 2003 2004 2005 2006 2007

Operating Cash FlowRm


Strong cash flow


Net cash inflow from operating 141 101Net cash outflow from investing (75) (73)Net cash outflow from financing (7) (5)Net increase in cash and cash equivalents 59 24Cash and cash equivalents at end of the year

118 59

Free operating cash flow before capex 157 148

Free operating cash flow before capex per share (cents) 42.1 40.1Cash conversion ratio – free cash to profit 128% 165%


Income more diversified. . .Contribution by Resourcing Business increased year on year


Income more diversified


HEPSTrends in HEPS reflect consistent growth

CAGR = 41%

-48

121620242832

2002 2003 2004 2005 2006 2007


The investment casemore than mere profits. . .


Distribution to shareholders R47m R38mCash conversion ratio 128% 165%ROCE 29% 27%ROA 24% 23%Matriculants (100% pass rate) 967 1132

Distinctions 1814 2200Job Placements 4300 3000


On the employment frontRecruitment businesses have placed 4300 individuals during 2007 (2006: 3000)

Advtech continues to increase own employment numbers:

The number of alumni now employed in the group is 112

-

1,000

2,000

3,000

4,000

2003 2004 2005 2006 2007

Employee headcount


-

200400

600800

1,000

Rm

2002 2003 2004 2005 2006 2007

Group Revenue

024681012141618

2001 2002 2003 2004 2005 2006 2007

Group Operating Margin

Strategy in a nutshell

Academic excellence

National priority

Investment ininfrastructure

Operationalefficiency

Quality

Demand

a proven, sustained strategy to the benefit of all stakeholders

-

500

1,000

1,500

2,000

2003 2004 2005 2006 2007

Market Cap @ 31 December


Ongoing objectives...

Can be defined as:

remaining focused on education standards and results of the highest order

maintaining its focus in niche recruitment sectors

being focused on entrenching a robust and resilient business model

Early indications are that student numbers at both school and tertiary levels

are again increasing from previous levels


ProspectsWill...

Continue to investment in infrastructure and capacity,

Continue to provide a quality academic service offering to an ever

increasing number of students,

Maintain its sustained track record of academic achievement, and

Maintain and sustain trend in financial performance.

Will...

Maintain a focused and effective recruitment business model,

Enhance its leadership positions in its chosen markets,

Deliver high quality job placement experiences to our candidates, and

Maintain and sustain the recent trend in financial performance.


G R O U P

A BETTER LIFE FOR ALL …

Thank you

annual report analyst presentation 2007 › 24847d5c › files › uploaded › ap … · money in...

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