Curro buys HeronBridge in fast-growing Fourways
Curro Holdings has purchased HeronBridge College in Fourways, a mixed-use residential and commercial suburb in northern Johannesburg, which will give the private education provider a presence in one of the fastest-growing nodes in SA’s biggest city.
The transaction, which is subject to regulatory approval, forms part of Curro’s select schools model, which focuses on acquiring stand-alone education institutions with a rich heritage and superior facilities to cater for upper-income consumers.
Curro’s select schools typically retain their original identities and accommodate pupils from the age of three months all the way to grade 12. Pupils in these schools are taught in English and write the Independent Examination Board (IEB) matric certificate assessment when completing their final year of schooling.
“We are delighted to welcome HeronBridge College to the Curro family,” said Andries Greyling, CEO of Curro Holdings. “The school’s extraordinary operational and educational standards achieved over the years have rooted HeronBridge College as an educational leader in Gauteng, and to add this stronghold to our stable is a privilege.”
Curro’s share price slipped 3.7% in the hours after the announcement, trimming its advance so far this year to 24%, which compares with a year-todate gain of almost 39% for rival AdvTech, which owns brands such as Crawford International and Abbots College.
The listed educational counter’s share price declined almost 46% in 2020 as the Covid-19 pandemic shuttered
schools for months and raised concern that its aggressive expansion of its school footprint over the past decade may have been overdone given current prospects for the economy.
“There is scope to improve the underlying profitability and offering of that school by maximising the underlying footprint of the site,” said Anthony Clark, a small-caps analyst at Small Talk
Daily Research. “I have no hesitation in suggesting HeronBridge could become one of their topfive earnings schools in the next few years, and their best schools make between R40m and R60m ebitda [earnings before interest, taxes, depreciation and amortisation] a year.”
While Curro’s average pupil numbers increased 6% to 60,777 last year, the group’s headline earnings per share fell 39% to 36.4c in the year to endDecember 2020.
Even so, Curro said on Wednesday the acquisition of HeronBridge College, which opened in 2001 and has more than 1,260 pupils up to grade 12, is aligned with its intention to expand its geographical footprint and extend its independent education offering.
Clark described the fee structure of HeronBridge, which he said ranges from about R6,000 to R12,000 a month, as “quite aggressive” and comfortably in the “upper range” of Curro’s school offering.
Clark estimates that a school of HeronBridge’s size is likely to have sold for between R150m and R200m given its location in a wealthier suburban and commercial node that is experiencing rapid growth.
While Curro Holdings declined to comment on the transaction value when contacted by Business Day, the company paid about R180m for Windhoek Gymnasium, a private school in Namibia’s capital which it purchased in 2015.
Clark said he understood that Curro paid “about the same” for HeronBridge.
“The underlying replacement cost of that school is significantly higher than its transaction value,” said Clark.
“You certainly couldn’t buy the land in that Fourways node to put down a large school anyway,” he said.
Clark said he does not expect any more “material ongoing transactions” from Curro in the foreseeable future. “This will probably be the largest they will do in the coming months and years,” he said. “The rest will all be bolt-on.”