Curro has turned corner, says analyst

For the first time in 25 years private school group Curro is generating more free cash, a sign of a healthy business, than it is spending on building, buying and refurbishing schools.

This as it now seeks to fill the schools it has built and bought, and has slowed its expansion.

Smalltalkdaily analyst Anthony Clark thinks the business has “turned the corner” from one that had to invest significantly in building schools across SA to one that will be more profitable.

“For many years, the market was concerned, Curro was a money-spinning machine. This year for the first time in its history it generated more cash than it actually spent,” Clark said.

Curro CEO Cobus Loubser called the change a “major milestone”.

The group generated R875m in free cash and spent R750m on capital expenditure. Curro’s recurring headline earnings were up by 29% to R426m and its group’s operating margin grew to 17.8% from 15.5%.

The education group, however, is struggling to grow its volumes of grade 1 learners, due to the weak economy and younger families who are less advanced in their careers and are struggling to afford private school fees.

Its high school growth is promising as its grade 8 numbers are growing each year.

Loubser said early grades are super important to help children meet developmental milestones setting them up for long-term academic success. He said all parents want to give their children the best possible opportu

THE GROUP, HOWEVER, IMPAIRED R378M AS 28 SCHOOLS ARE NOT EARNING THE RETURN ON INVESTMENT THAT WAS EXPECTED

nities, but young families were struggling to afford schools. Instead, families were enrolling students in primary schools later in grade 4.

The group grew learner numbers by 2% in 2023 to 72,031 and new enrolments in 2024 added another 1.6% to this.

Despite the slight growth, Loubser said management was pleased as most other consumer-facing industries have reported negative volumes.

The group, however, impaired R378m as 28 schools are not earning the return on investment that was expected. This impairment is an international accounting standard and must be applied to the books and also reflects rising interest rates on debt. It also reflects the underperformance of assets.

The impairment resulted in earnings per share plummeting 83% to 7c.

Loubser said the 28 schools were not unprofitable, however.

Clark said: “This is the fourth reporting period where we’ve seen improving underlying results.”

He said the results reflected better operating margins, growth in headline earnings per share and an improved quality in the underlying business. He said the existing group of parents’ ability to pay fees is significantly greater than a few years ago and bad debt had decreased.

Curro was able to put up fees by 8% in 2023.