Annual Financial Results For the year ended 31 December 2013
1 Strategic 2 Operations 3 Financial highlights 4 _ Financial analysis 5 Prospects 6 Questions
1 Strategic
SA Consumer spending vs disposable income Source: Stanlib
Source: Luxemburg Income Study
Attainment Quality Type High productivity jobs and incomes (17%) Mainly professional, managerial & skilled jobs Requires graduates, good quality matric or good vocational skills Historically mainly white Vocational training Affirmative action Labour Market 17% University /FET Type of institution (FET or University) Quality of institution Type of qualification (diploma, degree etc.) Field of study (Engineering, Arts etc.) Some motivated, lucky or talented students make the transition High quality secondary school High quality primary school High SES background +ECD - Big demand for good schools despite fees - Some scholarships/bursaries Minority (20%) Unequal society Majority (80%) Low productivity jobs & incomes Often manual or low skill jobs Limited or low quality education Minimum wage can exceed productivity Semi- Skilled (31%) Unskilled (19%) Low quality secondary school Low quality primary school Low SES background Unemployed (Broad - 33%) Source: Servaas van der Berg QLFS 2011 6
Jobs, jobs, jobs December 2012 12% Not economically active 29% 45% Unemployed Formal employment 14% Other employment Source: Stats SA
Jobs, jobs, jobs December 2013 12.6% Not economically active 42.8% Unemployed 30.8% Formal employment 13.8% Other employment Source: Stats SA
Youth unemployment 2013 Age group % of EAP Official unemployment rate Expanded unemployment rate 15 24 14.5% 53% 67% 25 34 35.1% 30% 40% 35 44 27.3% 19% 27% 45 54 16.0% 12% 20% 55 64 7.1% 7% 14% Total 100% 26% 37% Source: South African Institute of Race Relations
Unemployment and jobs in SA more people have jobs, even though unemployment is up Million 16000 Employed 14000 12000 10000 Unemployed or discouraged 8000 6000 4000 2000 0 1995 2008 2013 1995 2008 2013 Source: South African Institute of Race Relations
Formal employment 000 2001 2013 Increase Increase in economically active population Average growth pa Government 1 436 1 962 526 2.6% Financial Services 988 1 677 689 4.5% Trade 1 365 1 922 557 2.9% Transport 493 626 133 2.0% Other Services 336 752 416 4.3% Productive & extractive 2 366 2 755 389 1.3% Total 6 984 9 694 2 710 1.7% 2.8% Source: South African Institute of Race Relations
Education and jobs in SA 100% 90% 80% 70% 60% 50% 40% 30% 20% Labour Force Participation Rate Employment Rate Unemployment Rate 10% 0% 10 11 12 13 15 16 17 Sub Matric Matric Some Tertiary Completed Tertiary Source: CDE Insight 2013
State expenditure Principal budget allocations: Total of R1.25 trillion Economic Services & Infrastructure Education 20% Social Security Health Housing and community ameneties Public order & Safety Defence Other Source: Budget 2014
Basic overview of matric 2013 The good Matric pass rate increased to 78% Bachelor pass rate increased to 31% More students passing mathematics The bad Some questioning quality of matric pass Public starting to ask questions about why uni s are using NBTs Concerns over culling and whether this lead to increases in NWP and FST The ugly Grade 8 12 dropout is 2x as high (50%) in Q1 rel to Q5 (25%) A white child is 7 times more likely than a black child to obtain a Maths D+ and 38 times as likely to get an A- aggregate (using earlier matric data) Source: Nick Spaull RESEP
Source: South African Institute of Race Relations
80 (1931) 75 (1936) 70 (1941) 65 (1946) 60 (1951) 55 (1956) 50 (1961) 45 (1966) 40 (1971) 35 (1976) 30 (1981) 25 (1986) 20 (1991) Qualifications by age (birth cohort), 2011 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Some tertiary Primary completed No schooling Some primary Degree Matric Some secondary schooling Source: Van der Bergh 2013
Focus on mathematics things are improving Number of students taking mathematics (as opposed to maths-lit) has declined since 2008, but proportion passing has risen Not necessarily a bad thing since many of those students shouldn t have been taking mathematics in the first place 60% 50% 56% 53% 49% 45% 44% 43% 40% 30% 20% 26% 24% 23% 21% 24% 25% Proportion taking maths Proportion passing maths 10% 0% 2008 2009 2010 2011 2012 2013 Source: Taylor (2014)
What proportion of matrics take and pass mathematics? Important statistic is the number passing which was declining from 2008 2011 but has increased between 2011 2013 350000 70% 300000 60% 250000 50% 200000 150000 100000 40% 30% 20% Numbers wrote maths Number passed maths Maths pass rate 50000 10% 0 2008 2009 2010 2011 2012 2013 0% Source: Taylor (2014)
School dropout Of 100 students that started school in 2002 16% Do not reach matric 24% 49% Fail matric 2013 Pass matric 2013 Pass with university endorsement 2013 11% 550 000 students drop out before matric 99% do not get a non-matric qualification (Gustafsson, 2011: p11) What happens to them? 50% youth unemployment Source: Nick Spaull RESEP
How does SA fare internationally Source: Gustafsson (2011) The when and how of leaving school
Effective grade Insurmountable learning deficits: 0.3 SD South African Learning Trajectories by National Socioeconomic Quintiles Based on NSES (2007/8/9) for grades 3, 4 and 5, SACMEQ (2007) for grade 6 and TIMSS (2011) for grade 9) 13 12 11 10 9 8 7 6 5 4 3 2 1 Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 Q1-4 Trajectory Q5 Trajectory 0 Gr3 Gr4 Gr5 Gr6 Gr7 Gr8 Gr9 Gr10 Gr11 Gr12 (NSES 2007/8/9) (SACMEQ 2007) Projections Actual grade (and data source) (TIMSS 2011) Projections Source: Nick Spaull RESEP
Grade 3 maths curriculum: Can perform calculations using appropriate symbols to solve problems involving: division of at least 2-digit by 1-digit numbers 100% 90% 80% 70% 60% 50% 40% 30% 20% 59% 57% 57% 55% 13% 14% 14% 15% 13% 10% 12% 12% 35% 13% 14% 39% Still wrong in Gr5 Correct in Gr5 Correct in Gr4 Correct in Gr3 At the end of Grade 5 most (55%+) quintile 1-4 students cannot answer this simple Grade-3-level problem. 10% 0% 16% 19% 17% 17% Q1 Q2 Q3 Q4 Q5 Question 42 Source: Nick Spaull RESEP
The rise and rise of private education Attending 000 2000 2008 % growth since 2000 2012 % growth since 2000 Public school 11 647 11 873 1.9% 11 924 2.4% Private school 256 366 42.9% 504 96.8% All schools 11 903 12 239 2.8% 12 428 4.4% Source: South African Institute of Race Relations
Matric at ADvTECH 1 344 Matric students at Abbotts College, CrawfordSchools and Trinityhouse 97% of our students qualifying for entrance into higher education institutions 84% of our students qualifying for entrance to bachelor studies at higher education institutions CrawfordSchools 100% pass rate for 20 th consecutive year 125 students achieved 6 or more distinctions Trinityhouse 100% pass rate 12 students achieved 6 or more distinctions Abbotts College 100% pass rate (statistically) 19 students achieved 6 or more distinctions Star Schools 6 398 paper re-write candidates 77% pass rate (national average = 39%) 4 with overall A aggregate
Matric subject averages 2013 English 67% Mathematics 63% Physical Science 63% Information technology 73% Accounting 72%
How we compare in Matric Country ADvTECH Schools Crawford Wrote 562 112 1 344 641 Passed 439 779 1 337 641 % pass 78% 100% 100% B Pass 172 006 1 128 627 % B Pass 31% 84% 98% Wrote maths 245 663 940 534 Achieved 60% 38 323 543 356 % Pass 15% 58% 67% % Pass of class 7% 40% 56% Source: Politicsweb James Myburgh
2 Operations
The Model of Value Relevant Good service Quality and Value Standout offering Dynamic improvement Great reputation GPTW Attract and Retain Best Staff Innovation Well resourced Strong Demand Technology Investment Career success Cash Flow Employer recognition Rewards to stakeholders Community engagement Sustained Income and Market Growth Partnerships Premium Price No subsidy no safety net
Group at a glance
Scope of operations Client base Schools 13 200 students at 37 schools Tertiary 20 200 full-time and 8 800 part-time students at 23 campuses Some 3 350 job candidates placed by 21 staffing branches The People 3 942 staff 297 with Masters degrees 20 with PhD 215 alumni Annuity nature of revenue Some 50% of Group revenue is recurring student enrolment
Employee headcount 5 000 4 000 3 000 2 000 1 000 09 10 11 12 13
Ploughing back Developing Staff Transformation forum: 149 high performing employees part of Developing Leaders for Tomorrow programme 55 on Management & Leadership Development Programmes 64 mentors trained during 2013. Total available 138 98 staff received mentoring Corporate Social Investment Over R72 million spent on bursaries benefitting 5 900 beneficiaries Total CSI expenditure R74 million Extensive outreach and other community engagement projects Crawford College Pretoria training teachers of Tshwane Secondary and assisting with Winter School
Teacher training Teacher Bursary Scheme: Teacher Bursary Scheme launched in 2007 236 bursary recipients since launch 54 bursary recipients in 2013 Varsity College: Offered BEd degree since 2004 Currently offer: - BEd (ECD Foundation Phase) - BEd (Inter & Secondary Phase) - Unisa Pathway: BEd - Post Graduate Diploma in Higher Education (*distance) 425 BEd enrolments in 2014 (2013: 325) BEd average module pass rate 2013: 90% Plan to extend teacher education offering
Infrastructure projects In 2013, completed 9 projects which added 1 375 new places by the start of 2014 Current capital work in progress includes 10 projects which will have capacity for a further 4 700 places once concluded
Capacity Capacity and year of development 2013 (%) 4% 9% 5% 2% 2% Older capacity Capacity created in 2009 Capacity created in 2010 Capacity created in 2011 Capacity created in 2012 Capacity created in 2013 78%
Investment INVESTMENT PROGRAMME 2011-2013 (R859 million) Infrastructural investments made 12% 11% 9% Tertiary properties School properties ICT equipment Other infrastructural equipment 68%
Technology Rm Approximate capex in the last 5 years 220 Approximate opex in the last 5 years 265 Investment in Star Schools 15 Total technology spend 500
3 Financial Highlights
Income statement and cash flow Rm 2013 2012 % change Revenue 1 766 1 687 5% Operating profit 222 200 11% Headline earnings 156 139 12% HEPS (cps) 38.6 34.6 12% Distribution (cps) 25.5 24.0 6% Free operating cash flow before capex (cps) 73.4 67.4 9%
Segmental analysis Revenue 2012 2013 44% 12% 44% 43% 11% 46% Schools Tertiary Resourcing
Segmental analysis Operating profit 2012 2013 16% 11% 73% 22% 8% 70% Schools Tertiary Resourcing
Balance sheet highlights Rm 2013 2012 % change Tangible assets 1 243 980 27% Debtors 112 111 1% Fees in advance 193 169 14% Shareholders equity 853 793 8% Net borrowings 202 62
Ploughing back R m % Total value created 1 270 100 Less: employees 757 60 Less: government taxes 212 17 Available to the business 301 23
Ploughing back R m % Total value created 1 270 Less: employees 757 Less: government taxes 212 Available to the business 301 100 Allocated to communities 74 25 Allocated to investors 103 34 Retained in the group 124 41
4 Financial Analysis
Rm Revenue trend Group revenue 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 09 10 11 12 13
Group operating margin 20% 15% 10% 5% 0% 09 10 11 12 13
Cents HEPS trend 50 40 30 20 10 0 09 10 11 12 13
Rm Cash flow generation 300 250 Free operating cash flow before capex 200 150 100 50 09 10 11 12 13
Rm Schools Revenue 1 000 800 600 400 200 0 09 10 11 12 13
R'm Schools Operating profit 200 150 100 50 0 09 10 11 12 13
Rm Tertiary Revenue 1 000 800 600 400 200 0 09 10 11 12 13
R'm Tertiary Operating profit 200 150 100 50 0 09 10 11 12 13
Rm Resourcing Revenue 1 000 800 600 400 200 0 09 10 11 12 13
Rm Resourcing Operating profit 200 150 100 50 0 09 10 11 12 13
Rising investment 300 Average annual infrastructure investment 250 200 150 100 50 0 2008 2009 2010 2011 2012 2013 Trend = 17%
Return on funds employed 2013 Rm Division Average funds employed EBIT Return on funds employed 2013 Return on funds employed 2012 Schools 723 157 22% 25% Tertiary 230 48 21% 14% Resourcing 2 17 736% 776% GROUP 955 222 23% 25% Note: Depending on the assumption used for gearing, WACC is 10-13%
5 Prospects
SA GDP growth forecast 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2010 2011 2012 2013 2014 2015 2016 Source: World Bank, GDP Growth Forecast
Prime lending rate 2009-2014 15% 8.5% 9% Source: South African Reserve Bank
Rand/US$ exchange rate 2009-2014 Source: Thomson Reuters
Prospects % 14 12 10 CPI and Education Price Index (EPI) Year on year percentage change: 2001 to 2013 CPI EPI 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Stats SA
Investing for our future As at March 2014 Existing investments - Land, building and improvements - Other assets - Revaluation surplus Total existing investments - Capex commitment - Not yet approved, part of projects Rm 1 262 348 737 2 348 1 176 1 490 Total investment line up 2 666 Investment increase % 114% Present FTE students Approximate increase 33 900 23 000 Increase % 68%
12-Year market cap index 4000 3500 3000 2500 2000 1500 12 yr ADH Mark Cap JSE All Share Index JSE Small Cap Index 1000 500 0
6 Questions