Watch Advtech CEO bristle when questioned about Curro lead, Vunani freeze

Interviewees are usually A-type personalities you can forgive them for sometimes get the roles mixed up. But they need to appreciate that every time they come into the studio – be it television or audio – they move from being the one who calls the shots to the one who needs to answer them. Biznews and CNBC Africa are news organisations. We serve our audience, not those being interviewed. The interviewees are guests who have agreed to face the music, not commanders. Advtech CEO Frank Thompson knows the drill, we've had enough interviews enough over the years. But for some reason he forgot that today, becoming visibly agitated when we picked up on an earlier conversation with Gary Booysen of Vunani who said Advtech had effectively frozen out his company because the analysts were too critical of Thomson's team. It's a pity. That wasn't the only bone of contention to be chewed over here. This is likely to be Frank's last set of Advtech results before he hands over the CEO reins to his former non-executive chairman – an unusual appointment. There's also years-long litigation which drags on with legal fees have now reached almost R20m. Plus the distraction of a Recruitment division whose contribution keeps sliding. All of which made for fascinating discourse, laced with sharp retorts from a bristling CEO. – AH 

ALEC HOGG:  Advtech is one of the largest diversified education, training, training, and placement groups, in South Africa.  It reported first-half profit growth of nine percent in revenues.  Headline earnings were up 14 percent.  Frank Thompson, the Outgoing CEO, of Advtech is with us in the studio.  Frank, there was a bit of criticism that Gary Booysen from Vunani, had a little earlier, but the one thing I couldn't believe, he said you guys don't really talk to them at Vunani anymore because they've been critical over the years.  Is that…that's not your style?

FRANK THOMPSON:  We prefer to engage with professional, independent analysts.

GUGULETHU MFUPHI:  By professional, what do you mean?

FRANK THOMPSON:  Simply that.  I don't think it is really, a topic for discussion here.

ALEC HOGG:  I think it is.  I think it's a serious topic of discussion because it gives us an understanding of the way the company views itself.

FRANK THOMPSON:  Well, it's simple Alec.

ALEC HOGG:  We're not a press release.

FRANK THOMPSON:  We engage with a wide variety of analysts, investors, shareholders, and we get good, professional coverage, and comment on our results and that's what we're happy with.

ALEC HOGG:  But why not engage with critics?  Surely, they're the best people to help you get better.

FRANK THOMPSON:  We engage with a lot of critics and deal with a lot of criticism, constructively.  We talk to those people.  We deal with people who do thorough, proper analysis of Advtech.

ALEC HOGG:  And you feel Vunani don't?

FRANK THOMPSON:  Vunani, I don't know.  I'm not familiar with the gentleman you named, so I can't comment on Vunani, particularly.

ALEC HOGG:  But I'll be very critical and I have been, when Leslie Maasdorp was sitting in that chair.  The question I do not recall a company where a non-executive chairman, who has no operational knowledge of a business, is appointed as the CEO of that company.  You've got to help us through this and let us understand why that was the case.

FRANK THOMPSON:  Sure, I'm happy to do that.  The first observation that he has no operational knowledge is obviously not correct.  He's been on our Board for the last five years, and Chairman since 2010.  During that time, we've been engaged pretty, closely on the operations and, particularly on the strategy of the business, which is the main focus for him, going forward.  We've built a strong management team that runs all of the operations and the finances, and I think the main task, perhaps a little differently to when I started as CEO, is now to develop and see to the execution of the strategy.  This is something that we've been working on closely together for the last five years, and it represents an opportunity for him to come in, bring some new thinking, some new ideas that he has.  While at the same time building on the strategy that the Board is, certainly very happy with that is now in place.

GUGULETHU MFUPHI:  Frank, maybe if we review your ten-year, where do you think the gap might have been, where you might have dropped the ball and given Curro an opportunity to speed up ahead of you?

FRANK THOMPSON:  We don't think we've dropped the ball.  We've followed a very clear strategy, with what we plan to invest in, and that's been going well for the last number of years.  We've put about R1bn into the ground, in the last three-and-a-half years.  We assessed, we did quite a lot of work in the areas of, I would say, low fee schooling, or lower fee schooling.  We've not found that model to be one that really works well for us, so we've concentrated in our premium end, higher fee schools.  We've concentrated in our tertiary division, which as you know, in the last 18 months or so, has needed some particular attention.  I am pleased to report that that's gone really well.  We've developed a strategy that will enable us, organically to extend the reach of our premium collection of schools' brands, around 50 percent or so, of our current R3bn capex program, which we've spoken about before, is in an extension of the present range of schools' brands.

Then the other exciting space we're working in is in technology enabled low fee education, which doesn't involve cutting costs by leaving things out.  It involves the power of technology and the significant front end investment, in driving low fee schools.  There will be more news on that in the coming months.

ALEC HOGG:  But you do acknowledge that Curro, certainly in the public perception, are ahead of you.  They've opened more schools than you have.  Their market cap is more than double yours.

FRANK THOMPSON:  Certainly, they've opened a lot more schools and there is no doubt that the size of the market, in the number of people for example, able to afford in a very understandable pyramid of consumption, they are closer to the broad base of the pyramid.  In terms of numbers, yes, they have been able to grow very quickly.

ALEC HOGG:  One of their criticisms has been that they are focused, entirely on education and you've had distractions.  We've for years spoken about your recruitment division, which again I see is going backwards, in this set of results, and the other thing we've spoken about for years, is this litigation that you're involved with.  At least the costs are coming down but R18m last year, in getting something to Court, another R6m in this six-month period.

FRANK THOMPSON:  Sorry Alec, not R18m last year.  That's the cumulative total from the beginning.

ALEC HOGG:  Okay, I'll double check when I look at it in the sense now, but certainly R6.2m in the six months to June.  That is what your accounts say that you spent on litigation.

FRANK THOMPSON:  No, definitely not.  No, we can check the figures.  I've got them here.

ALEC HOGG:  All right, while I check, will you just…the whole idea with the litigation; is it really necessary to keep banging that drum?

FRANK THOMPSON:  It's unfortunate but dispute ensued, which we have decided to prosecute on this basis.  You talk about a diversion of management, as a matter of fact; the litigation is managed by an independent, dedicated team that concentrates on that and is not part of the management.  As a matter of fact, I'm the only member of the Management Team, with any direct involvement in the litigation, which is being handled separately by its own team.

ALEC HOGG:  My apologies, I read the wrong line.  I was reading the line of your Resourcing operations rather than the litigation (Ed: My mistake – should have read the SENS report more carefully).  The litigation line, as you say, R1.3m in the past year.  So, up to date, it has cost about R18m and it is something that you, now that you are stepping away is it likely to get settled?

FRANK THOMPSON:  No.  This is a matter run by the Litigation Committee of the Board, and a dedicated team of experts, and that we have.  We continuously review; well not continuously but regularly review the planning and the strategy.  We believe that we have a good case and we continue to deal with it in what we believe to be in the best interest of the shareholders.

GUGULETHU MFUPHI:  Just to close off with, what's next for you now?

FRANK THOMPSON:  Well, there are a few things that my wife and I plan to do that we had to put on hold while careers and children happened.  I've been asked to stay and assist Advtech in some of their special projects, without being in the mainstream of executive management, and then there's a whole bunch of things that I've been asked to think about.  The first thing I'm going to do is take some time out to really, think about that carefully, but I won't be growing daffodils.