Johannesburg - Curro Holdings, South Africa’s largest private schools operator, plans to raise R1 billion in a rights issue this year and to invest a further R1bn as it ramps up acquisitions and builds new schools.
The company said yesterday that shareholders would receive the right to acquire one share at R33 for every 11 shares held. This represented a 26 percent discount to the 30-day volume weighted average price of R44.45 as of February 19.
The rights offer will take place during May.
Curro had already invested R1bn last year for expansion and acquisitions.
It announced the move as the company posted stellar results for the year to December, with its profit rising 80 percent to R92m.
Headline earnings a share increased by 67 percent to 28.7c and revenue was up by 38 percent to R1.38bn.
Private schools in South Africa have become a good investment as parents choose to invest in their children’s future, despite household incomes becoming constrained due to rising interest rates and increasing inflation.
Chief executive Chris van der Merwe said: “Curro intends to invest up to R2bn in 2016, with R800m earmarked for the construction of new campuses and R450m for the expansion of existing campuses.
“The remainder will be used for acquisitions and land banking opportunities. We are raising R1bn through the rights issue and the other R1bn will be financed by the company.”
Today South African’s will be looking to Finance Minister Pravin Gordhan’s Budget speech to see what provisions he has made for education.
The government is battling to invest enough into school infrastructure as the population expands, leading in some cases to classes being overcrowded and hence demand rising for home schooling or private schools.
“Over the past five years since we (Curro) listed on the JSE in 2011, you will notice that the demand for Curro private schools has been growing every year. There are always possible acquisitions in the pipeline,” Van der Merwe said.
Curro has been a popular stock among retail investors, ever since it listed in June 2011. Its share price was at R10.12 on June 3, 2011 and closed yesterday at R41.75, an increase of 312.5 percent, with a market capitalisation of R14.9bn.
In December, its smaller rival, private education group AdvTech, announced that a R850m rights issue had been oversubscribed by 207 percent and that the company had raised funding to pursue its growth strategy.
Van der Merwe said even though the economy had slowed down, Curro had continued to report excellent results.
“We are operating in a vibrant market with unlimited opportunities. It shows that parents are willing to pay for the future of their children. Approximately 50 percent of our learners attend our schools where the average school fees range between R2 000 and R4 000 per month, with 30 percent in schools with average school fees of less than R2 000 per month.
“The balance of learners attend schools where the average school fee is in excess of R4 000 per month.”
Van der Merwe said the rights offer would fund teacher development. There was huge demand in teacher training in the last 24 months.
“Our Embury Institute for teacher education based in KwaZulu-Natal province will educate more than 800 full-time and 100 distance learning students. It will also provide development education courses to approximately 4 000 teachers.”
At the start of the month, Curro bought Windhoek Gymnasium for R180m in Namibia.
The number of learners also increased from 35 970 to 41 864 this year.