South African recruitment firm ADvTech (ADH: SJ) reported revenue for the six months ended 30 June 2017 of ZAR 2.0 billion (USD 151.5 million), an increase of 22% compared to last year.

The group added that the acquisitions of Summit College and Elkanah House have been finalised. Additionally, ADvTech acquired an 80% interest in The Private Hotel School.

“The business continued its trend of strong performance in line with its growth strategy. Both the tertiary and resourcing divisions performed exceptionally well, as evidenced by significant increases in revenue and operating profit whilst the schools division results were somewhat muted,” ADvTech CEO Roy Douglas said.

"The difficult economic climate and unsettled socio-political environment had a more significant effect on school enrolment numbers than had been anticipated,” Douglas said. “We have seen a consistent rise in the number of families emigrating and this trend had a particularly negative effect on enrolled numbers as we lose students in grades where it is difficult to replace. In addition we have seen withdrawals and exclusions as a result of financial pressures. Although we do not foresee short-term relief from the socio-economic uncertainty, we are confident we will see a return to higher levels of increase in profitability as growth projects and restructuring efforts deliver results.”

The company earns most of its revenue through two separate education divisions, Schools and Tertiary. AdvTecH Group’s Resourcing division’s activities include permanent and temporary staffing solutions; as well as recruitment advertising, e-recruitment, and advertisement response handling. The company predominately operates in the IT, Finance, and Engineering sectors.

The School division reported an increase of 10% in revenue to ZAR 904 million (USD 68.4 million). The division contributed 45% to group revenue. The group added that while actual enrolments have been in line with expectations, net student numbers have been adversely affected by the challenging economic and socio-political environment.

ADvTech stated it was confident that it would see a return to higher levels of profitability as growth projects and restructuring efforts deliver results with a number of planned interventions including an increase of students who will be enrolled in additional classes at key entry points to offset the losses experienced in later grades; reorganization of management and operational structures and the implementation of shared services and rationalisation of transactional processing to lower the cost base of the business. Meanwhile, demand for ADvTECH Academies schools has been ahead of expectation and, with new projects in the pipeline, the group stated that it expects to deliver good growth in the sector.

The tertiary division reported revenue was up 33% to ZAR 789 million (USD 59.7 million), contributing 39% to group revenue. The acquisition of the Private Hotel School will contribute to this division. Furthermore, the group added that it will continue to “explore new geographies, delivery channels and product formats to identify further growth opportunities.”

Resourcing revenue increased by 38% to ZAR 309 million (USD 23.4 million) and continues to be highly cash-generative and contributes positively to the group. CA Global group, which includes Africa HR Solutions and CA Financial Appointments, showed strong growth with a significant amount of revenue generated outside South Africa. The South African business performed reasonably well considering the tough economic environment. This endorses the diversification strategy of exploring alternative markets and geographies.

Looking ahead, the group stated that it expects to see numerous opportunities for growth, both at home and on the rest of the continent. “In our core markets, we expect organic and greenfield growth to continue despite the fact that competition has increased and challenging economic conditions remain,” ADvTech stated. “In addition, we are pursuing opportunities available in new market segments and regions, which we believe will enhance our business performance and diversify our portfolio.”

"The group's results reflect management delivering to strategy,” Douglas said. “Our continued investment in the rest of the continent diversifies the business away from the slow South African economy supporting our objective of generating 30% of revenue from the rest of Africa by 2020. We continue to leverage technology to enhance the delivery of education across the continent."

As of last trade, AdvTech traded at ZAR 1,703.00 (USD 128.8), up 1.37% on the day and 12.04% above the 52 week low of ZAR 1,520.00 (USD 115.0) set on 13 December 2016. Based on its current share price the company has a market value of ZAR 9.11 billion (USD 689.2 billion).