Curro considers buying five more schools

Curro Holdings, the burgeoning private-schools business controlled by PSG Group, could spend more than a quarter of its envisaged R2.2bn capital expenditure budget on acquisitions in the 2018 financial year.

At an annual general meeting on Monday, Curro CEO Andries Greyling said five possible acquisitions could be clinched at the end of this financial year to December. “There are more acquisitions in the offing for 2018. Our balance sheet is well geared for expanding this year.”

Greyling cautioned that a big acquisition was unlikely, adding that price expectations in the remaining large, private school businesses were steep. “The pricing has become ridiculous. We are more likely to look at opportunities in smaller schools.”

He pointed out that Curro, which since listing in 2011 had taken over brands such as Hillcrest, Aurora, Waterstone, Grantleigh and St Dominics, had a strong track record in markedly improving profitability in acquired schools.

Curro’s share price, which has been under pressure in recent months, responded well to the annual general meeting comments, lifting more than 4% in fair volumes.

Its capital expenditure breakdown showed R750m earmarked for expansion and replacement at existing campuses, R470m for building new campuses and R400m for land banking. An amount of R579m has been set aside for possible acquisitions.

Greyling said barring a major acquisition there would be no need for Curro, which has tapped the market more than a handful of times for funding in rights issues, to raise fresh capital. He said debt utilisation would pick up but remain within reasonable levels for the amount of cash generated by Curro.

In terms of the expanding school footprint, Greyling said that by the end of June Curro would have more than 53,000 pupils in 148 schools across 60 campuses. He estimated that by 2019 it should have 165 schools across 72 campuses, and by 2020 this number would be 177 and 76, respectively.

Curro’s share price reflects a heady earnings multiple of over 60 times, which demands that the company expands profitably at a rapid rate.