Johannesburg - South Africa’s largest private schools operator, Curro Holdings, yesterday reported a 59 percent growth in profits to R81 million for the six months to June helped by an increase of 16 percent in learner numbers and said demand for schools was far greater than the supply.
Parents are seeking alternatives to government schooling, with many classrooms containing up to 40 pupils. Curro did not declare a dividend for the period. Its shares closed 3.56 percent down to R41.17 on the JSE yesterday.
Chief executive Chris van der Merwe said: “We are now in the sixth year since listing on the JSE and have more than delivered on our prelisting statement of 2011. While it was originally assumed that the market will be saturated with 200 independent schools by 2020, it is now clear that the demand is far greater than the supply.”
He said Curro would apply its vision and business concept beyond 2020.
He said: “We are nevertheless mindful of sustainable portability and have over the years developed an optimal rate for constructing new schools and campuses, being six campuses or between 15 to 18 schools per year.
Curro has 41 693 learners in 110 schools on 47 campuses.
However, Van der Merwe said Curro’s vision would not be achieved at the expense of the smooth running of the business. “We are ensuring that we are keeping our bad debts to a minimum which 1.2 percent currently,” he said.
Curro’s 2016 investment programme included the construction of nine new campuses to the value of R950m.
It had acquired Windhoek Gymnasium in Namibia with about 1 700 learners, effective from March; Building Blocks, a pre- and primary school in Midrand with 805 learners, as well as St Conrad’s College, a primary and high school in Klerksdorp with 600 learners in July.
Revenue for the period rose by 24 percent to R872m, up from R705m in 2015. Earnings before interest, taxation, depreciation and amortisation grew by 29 percent, while headline earnings per share increased by 51 percent to 22 cents per share, up from 14.5c per share as compared to the last period.
Nolwandle Mthombeni, an analyst at Mergence Investment Managers, said the business model was largely a fixed-cost, which meant that Curro built schools and filled up the capacity in schools with learners.
Mthombeni said in 2015 Curro was the second best performer of the top 100 of the Alsi, delivering a 104.8 percent capital return compared to 5.1 percent from the Alsi. This was fuelled by Curro’s prospects as a growth stock. But looking at current year figures to July the picture had reversed and Curro was the fourth worst performer, delivering a minus 26.5 percent return.
“The reason behind this is that since listing in 2011, Curro has had five rights offers and the company is yet to generate returns in excess of its cost of capital. This means there isn’t any shareholder value creation yet and investors are now starting to become more cautious,” said Mthombeni.
BUSINESS REPORT