Can ADvTECH trump Curro with new CEO, Leslie Maasdorp?

ADvTECH announced via the stock exchange news service today that Leslie Maasdorp, chairman of its board of directors would be taking over the reins as chief executive officer. Maasdorp will officially take over from Frank Thompson on the 24th of October who announced his retirement plans last year. Jeff Livingstone will be taking Maasdorp’s place as chairman of the board. Alec Hogg was joined in studio by Leslie, to discuss his appointment, and if he is going to be the man to help ADvTECH gain back its competitive edge against Curro – the company that provides private schooling has seen its share price increase by just under 44% over the last year, where ADvTech has only seen growth of 13.04%. – LF

ALEC HOGG: Well, we’re getting a double bonus now. AdvTech has announced that Lesley Maasdorp, the Chairman of the Board of Directors is becoming the Chief Executive of that company, but Les is a banker of great repute, having worked with Absa Capital recently (or Barclays Capital) and having worked with international groups. He’s with us in the studio. Les, you’re going to have to forgive us. We’re not hijacking your appointment. We will talk to you about that in a moment, but the whole Abil story is something that you would know better than most others would. Have you been involved with this kind of an issue before?

LES MAASDORP: Not directly Alec, but obviously, this is a matter that I wouldn’t (with my AdvTech hat on) what to comment on. I’m no longer in the banking industry and I know that the banking supervision department, the Reserve Bank, lenders, and everybody’s eyes are focused on how to deal with this and ensure that there’s so systemic risk to the financial system. I’m sure that those in authority will do a good job, doing that.

ALEC HOGG: They certainly seem to have, but you were involved with the American banks at the time of the difficulties it went through there, so you have a feeling – better than most – of exactly how it feels at a time like this.

LES MAASDORP: The only thing I would say Alec, is that this country is renowned for the strength and the robustness of its financial regulatory architecture, for example The Reserve Bank, banking supervision, and the Financial Services Board. You know that the South African banking system was ranked in the top five in the world, so I’m sure that those in the leadership will deal with this issue as they’ve done before.

ALEC HOGG: We’re blessed.

LES MAASDORP: Absolutely.

ALEC HOGG: We’re blessed from that perspective, for sure. All right, so you’re not going to tell us about your banking background, so tell me: how does a Chairman of a company suddenly become its CEO (non-exec) in a field where you’re a banker. You’re not an educator.

LES MAASDORP: Sure. Firstly, Alec, I’m very excited about this role. It’s obviously changed. The important thing is that I know the business since 2009 as a non-executive director and then as Chairman for most of the period, so I’m not new to the strategy of the business – not new to the sector at all. The company in the sector is very hot right now. As you know, we will be engaging in further strategies to effect growth. Many of the skills that I’ve acquired in the banking world will be very valuable and useful for this next phase. I think it’s important to say that I’ve been part of the development of strategy over the last number of years, but there are a few areas where we will inject new and fresh moment, going forward. The sector as you know is really on fire, not just in South Africa, but globally.

ALEC HOGG: CURRO is on fire. I don’t know so much about you guys.

GUGULETHU MFUPHI:  That’s my next question. How are you going to respond to the competition?

LES MAASDORP: CURRO occupies one particular segment in the market. AdvTech, as you would know… We’ve been a leader in the premium branded education products. With our segment, we are the market leader. What we will be embarking on though, is a new entrée if you like, into the low-fee or affordable school sector where there’s massive growth. CURRO is partially in that space as well, and I think that there’ll be lots of other new players entering the market, not just from South Africa but also internationally. You see it in other emerging markets. Private equity players are entering this space as well. I think the space is large and we will – in our chosen segment, as AdvTech – carve our own growth path. I think it’s also important to note that this is not a South Africa story. We will be exploring other geographies in time. South Africa remains the heart of our focus, but sub-Saharan Africa is a big opportunity.

As you know, there’s massive growth – six, seven, and eight percent – in most parts of sub-Saharan Africa, especially the English-speaking world in Ghana, Nigeria, Kenya, and Uganda. These countries are all growing at much higher rates than South Africa, so they will be a target, going forward.

GUGULETHU MFUPHI:  Just on that, the exploration onto the rest of the continent: surely, Government times will be something that will be quite important.

LES MAASDORP: Gugu, the issue of partnerships is also central to our strategy. Maybe I should start by saying that education (the public good) remains fundamentally in the public domain. Private education is not going to solve the education crises in South Africa or the rest of the continent. However, I think private education has an important role to play to complement existing strategies by Governments across the continent, to educate their populations and if you like, have an educated and skilled workforce. Modern day economy requires skilled and educated people, so we will also be embracing partnerships with the Government. In South Africa, we’re already embarking on a whole series of ideas to strengthen and deepen the request by Government for the private sector to step in. You might know that in June/July last year, big companies together with Government, Law, and international education collaborative trust….

ALEC HOGG: So even in the Budget – Sizwe, but that’s not why you’re here. You’re here because shareholders are looking at you and saying ‘I bought into AdvTech. The share price is up 15 percent last year. I have a three-and-a-half-billion market cap. A little CURRO came across. It is up 46 percent in the last year and its market caps eight-and-a-half-billion’, so it’s come from behind and gone way past AdvTech. How are you doing to close that gap?

LES MAASDORP: Look, when you start out you can experience huge growth levels off a low base. We’re an established company that’s been around for a long time, so the segment that we occupy will continue to drive organic growth, but that is not going to shoot the lights out. Where we are going to grow significantly, as I mentioned earlier on, is in that space in the low-fee private education space.

ALEC HOGG: What’s in a margin like that?

LES MAASDORP: CURRO has their own strategy.

ALEC HOGG: But what’s the margin like in the lower space, if you’re focusing there?

LES MAASDORP: Well, it all depends on the way in which the cost base is managed. We believe (and this is where we are different) that by clever use of technology through innovation, we’ll be able to provide both low-fee/low-cost education, but with a high degree of quality. If there are innovative ways in which you use technology, it’s not inferior education. In the future, we’re not going to be a business with premium branded [inaudible 06:52] schools etcetera, and inferior education. What we will be having is different segment, low-fee private schools with a huge focus on technology.

GUGULETHU MFUPHI:  That will also mean that you’ll need to up your capital-raising initiatives.

LES MAASDORP: Sure, Gugu. We’ve already announced R3bn program over the next ten years that is already signed off by the board. What we are saying now is we’re accelerate our capital investment program because of this new focus in the low-fee private school segment.

ALEC HOGG: Well, we’ve often given poor old Frank a hard time by saying that CURRO were beating him to the punch. Under your management, perhaps next time we’re going to talk to you and you’ll say ‘see what we’ve done to CURRO now. We’re going to get a higher rating’.

LES MAASDORP: I look forward to coming to talk to you again as the strategy unfolds.

ALEC HOGG: Les, good luck. It is a big move from being a Chairman to being the CEO, but I’m sure you know the business as you’ve said before, and you have the strategy. It’s a pity you wouldn’t talk to us about the banking story, because we know that’s an area you know very well, as well. That was Leslie Maasdorp. He is the incoming CEO of AdvTech.

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