Curro invests R1.5bn to expand

JSE-listed independent education provider, Curro Holdings, has invested R1.5 billion in the current year for construction, expansion and capital investment in its schools.

The group said R600 million would be spent on the construction of seven new schools, while the remaining R900m would be spent in expansion and capital investment replacement at existing schools.

Chief executive Andries Greyling said: “With education being one of the cornerstones of society, it is one of the best investments we can make in our children’s future.”

The group said an additional R150m of equity was raised through a general issue of shares for cash during the period. Curro would be refinancing existing debt of R850m, with cheaper funding of which the interest rates were 80 basis points (bps) lower than current interest rates. Current and new debt financiers had committed more than R2bn in funding for future expansion needs.

Curro will see its tertiary education business Stadio unbundled from the group and list separately before year end.

Former Curro chief executive Chris van der Merwe has already been appointed as Stadio’s new chief executive.

Stadio will fund its acquisitions with the proceeds of a rights issue planned for later in the year, with Curro providing the bridging financing until such time.

Earnings increase In the six months to end June, the group reported 24 percent increase in revenue to R1.09bn, while headline earnings increased 46 percent to R110m. Headline earnings per share (Heps) increased 22 percent to 26.9c a share, up from 22c, while earnings before interest, tax, depreciation and amortisation (Ebitda) increased 24 percent to R322m.

The group did not declare a dividend during the period.

“The group results were negatively affected by the seven Meridian campuses operating in the rural lower-fee market, experiencing pressure as a result of less-than-expected learner numbers compared to the previous year.

“In addition, there were additional expenses with the expanded vision for the tertiary business, Stadio Holdings,” Greyling said.

Curro provides education to more than 47 000 pupils across 127 schools and 54 campuses throughout southern Africa.

Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the results were not impressive.

“Although it was previously guided in a trading statement the overall enrolment and Ebitda margin growth was below market expectations, especially for the valuation multiple that Curro currently trades at.

“A valuation multiple usually prices in a certain level of growth and Curro is currently not meeting the high growth expectations that the market has,” Mthombeni said.