Curro keen to reward investors

• Education group targets maiden dividend as profit and earnings increase

Shareholders in rapidly growing private education company Curro Holdings could receive a maiden dividend payout in early 2019. Speaking after the release of its results for the year to the end of December, Curro CEO Chris van der Merwe said the company was keen to reward shareholders who had supported the business in its formative years.

Shareholders in rapidly growing private education company Curro Holdings could receive a maiden dividend payout in early 2019.

Speaking after the release of its results for the year to end December, Curro CEO Chris van der Merwe said the company was keen to reward shareholders that had supported the business in its formative years.

“We are confident of a [maiden] dividend payment in the near future … most likely at the end of the 2018 financial year if everything goes to plan,” he said.

The results confirmed Curro’s ambitious growth plans, which entail 80 campuses and 200 schools by 2020 as well as accommodating 80,000 pupils by the end of 2017, are firmly on track.

Curro reported a 69% increase in bottom line profit to R169m, with headline earnings stretching 55% to 43.9c per share (with additional shares after a rights issue in 2016). The performance goes some way in justifying Curro’s dizzy market rating, which reflects a trailing earnings multiple of more than 100 times.

Vunani Securities analyst Anthony Clark said the results came in at the top end of guidance. “The J curve is really kicking in. With a fat growing profit before tax it can only be a matter of time that we get a dividend.”

Revenue was up 27% to R1.7bn with enrolment rising 14% to 47,589 at the beginning of 2017. The school network comprises 128 schools with Van der Merwe reiterating that Curro was still comfortable opening seven campuses (15 to 18 schools) a year.

Cash flow from operations rose 30% to R399m — a welcome development since Curro intended investing R1.8bn in its private education initiatives in the financial year ahead.

During the 2016 financial year, Curro raised R1.75bn in equity funding, nearly R1.1bn in a rights issue and R650m through two private placements.

Van der Merwe said Curro had a low gearing with a debt to equity ratio of 33%, or 21% if the ring-fenced Meridian private education entity is excluded.

He said another rights issue was unlikely. It has raised funds in this way every year since listing in 2011. “The 2017 investments will be funded through a combination of own cash and debt funding. A rights offer will only be considered if we find a large acquisition target.”

About a possible listing of Curro’s fledgling tertiary education assets, Van der Merwe said research over the past 36 months had indicated a huge demand for tertiary education products. “Curro has positioned itself to access the market more aggressively this year and into the future.”

Van der Merwe said the Embury campus in Durban had been extended to enrol 2,600 students – more than double the 2017 intake — at the start of 2018. He said the Waterfall Estate campus in Johannesburg had received full accreditation to enrol 1,600 students and should be in operation by the end of 2017, while the Montana campus in Pretoria — with capacity for 1,200 students — should be ready for student enrolment by mid-2017.

Van der Merwe said that Curro anticipated having a future market of about 100,000 tertiary students.

Curro has been one of the fastest-growing shares on the JSE. When controlling shareholder PSG decided to take the company to the JSE in 2011, the inferred value of the company was about R100m.

At Tuesday’s closing price on the JSE of R48.99, the company’s market capitalisation was at about R19.9bn.

CURRO HAS POSITIONED ITSELF TO ACCESS THE MARKET MORE AGGRESSIVELY THIS YEAR AND INTO THE FUTURE