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COH - Curro - Unaudited interim results for the 6 months ended 30 June 2011

Release Date: 15/08/2011 11:10
Code(s): COH
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COH - Curro - Unaudited interim results for the 6 months ended 30 June 2011 Curro Holdings Limited (Incorporated in the Republic of South Africa) Registration number: 1998/025801/06 JSE share code: COH ISIN: ZAE000156253 ("Curro" or "the company" or "the group") Unaudited interim results for the 6 months ended 30 June 2011 Revenue up by 117% Learners up by 79% No of schools up from 5 to 12 Condensed group statement of comprehensive income Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December
2011 2010 2010 R`000 R`000 R`000 Revenue 79 271 36 527 74 028 Earnings before interest 5 659 6 347 12 800 taxation, depreciation and amortisation("EBITDA") Depreciation and (3 407) (1 177) (3 014) amortisation Earnings before interest 2 252 5 170 9 786 and tax Net interest expense (13 226) (2 424) (5 106) Profit before taxation (10 974) 2 746 4 680 Taxation 3 278 (391) 553 Total comprehensive (7 696) 2 355 5 233 (loss)/profit for the period Earnings per share (basic (9.6) 2.9 6.5 and diluted) (cents) Headline earnings * (7 696) 2 355 5 233 Headline and diluted (9.6) 2.9 6.5 headline earnings per share (cents) * No non-headline earnings items were included in the total comprehensive (loss) / profit for the period Number of shares in issue 80.6 80.4 80.4 Weighted average number of 80.4 80.1 80.2 shares in issue Capitalisation dividend - 1.3 1.3 per share (cps) EBITDA Margin 7.1% 17.4% 17.4% PAT Margin - 6.4% 7.1% Condensed group statement of financial position Unaudited Unaudited Audited 30 June 2011 30 June 31 2010 December 2010
R`000 R`000 R`000 Assets Non-current assets 410 291 157 118 236 889 Property, plant and 381 566 146 415 225 321 equipment Goodwill 20 083 8 207 8 207 Intangible assets 6 847 1 843 1 783 Deferred tax assets 1 795 653 1 578 Current assets 12 304 3 828 6 422 Trade and other receivables 6 772 2 970 2 285 Cash and cash equivalents 5 532 858 4 137 Total assets 422 595 160 946 243 311 Equity and liabilities Equity 49 842 54 808 57 686 Non-current liabilities 109 001 70 121 99 787 Current liabilities 263 752 36 017 85 838 Loan from holding company 226 649 13 534 54 440 Other financial liabilities 10 197 6 517 10 861 Tax liabilities (197) (342) 63 Trade and other payables 27 103 7 724 17 251 Bank overdrafts - 8 584 3 223 Total equity and liabilities 422 595 160 946 243 311 Net asset value per share 61.8 68.2 71.7 (cents) Condensed group statement of cash flow Unaudited Unaudited Audited 6 months to 6 months 12 months
30 June to to 2011 30 June 31 2010 December 2010
R`000 R`000 R`000 Cash generated from 5 659 6 347 12 768 operations (note 5) Changes in working capital 5 365 309 2 999 - Trade and other (4 487) (1 045) (360) receivables - Trade and other payables 9 852 1 354 3 359 Interest income 207 39 137 Finance costs (13 433) (2 463) (5 243) Taxation paid (260) (887) (594) Net cash from operating (2 462) 3 345 10 067 activities Net cash from investing (173 530) (56 109) (121 203) activities
Net cash from financing 180 611 34 536 101 547 activities Total cash movement for the 4 619 (18 228) (9 589) period Cash at the beginning of the 913 10 502 10 502 period
Total cash at the end of the 5 532 (7 726) 913 period Condensed group statement of changes in equity Unaudited Unaudited Audited
30 June 2011 30 June 31 2010 December 2010 R`000 R`000 R`000
Balance at the beginning of 57 686 52 453 52 453 the period Total comprehensive income (7 696) 2 355 5 233 for the period Dividends paid to - (1 017) (1 017) shareholders Shares issued 800 1 017 1 017 Capital raising expenses (948) - - Balance at the end of the 49 842 54 808 57 686 period Notes to the condensed group financial statements 1. Statement of compliance The condensed financial information has been prepared in accordance with the framework, concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board and in compliance with IAS 34: Interim Financial Reporting. This report has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 31 December 2010. The results have not been audited or reviewed by the group`s auditors, Deloitte & Touche. 2. Dividend No dividend was paid during the interim period. For the comparative period in the previous year a capitalisation dividend of 1.3 cps was paid. 3. Issued capital During the period under review the company issued 200 000 shares at R4 per share. Capital raising fees incurred were set off against share premium. 4. Borrowings During the period under review, the group obtained additional funding from its controlling shareholder. This loan was capitalised as part of the rights issue process that was completed on 11 July 2011. 5. Note to the statement of cash flow Unaudited Unaudited Audited 6 months to 6 months to 12 months to
30 June 30 June 31 December 2011 2010 2010 R`000 R`000 R`000
Cash generated from 5 659 6 347 12 768 operations (Loss)/profit before taxation (10 974) 2 746 4 680 Adjusted for: - Depreciation and 3 407 1 177 3 014 amortisation - Interest received (207) (39) (137) - Finance costs paid 13 433 2 463 5 243 Profit on sale of asset (42) Movement in operating lease 10 accruals 6. Business combinations The initial accounting for the acquisitions made during the period under review has not been finalised. This is the result of uncertainties surrounding the valuation of certain tangible and intangible assets. These uncertainties are expected to be resolved by 31 December 2011 and should not have a material effect on the results for the period ended 30 June 2011. Effective 1 January 2011, Curro acquired the following business operations: - Aurora College for R43m; - Overstrand Learning Academy and Berghof Pre-Primary in Hermanus for R785 000; - Heuwelkruin Kollege in Polokwane for R14,9m; - Cape St Blaize in Mossel Bay for R2,7m; and - Siloam Academy in Brakpan for R4m. Fair value of assets acquired: R`000 Purchase price 50 436 Property, plant and equipment 59 272 Intangible assets 5 324 Other assets 3 350 Liabilities (29 386) Goodwill 11 876 Other key ratios 2011 2010 2009
Number of schools 12 5 3 Number of learners 5 519 3 083 2 059 Learners per campus* 460 617 686 Staff 654 343 251 Educators 446 247 201 Learner/educator ratio** 12.4 12.5 10.2 Building size (mSquared) 75 000 44 500 33 000 Land size (ha) 107 55 27 Capital investment R(m) 280 128 35 - Current campuses 30 13 13 - New campuses 170 114 21 - Acquisitions 80 1 1 * Average planned capacity of 1 400 learners per school ** Target of 18 Commentary The business Curro is the market leader in the provision of affordable, quality private school education in South Africa. Learners from age 3 through to Gr 12 are accommodated in all the educational phases namely: - Early Childhood Development Centre (Playschool) (Ages 3 and 4); - Reception Phase (Gr RR and Gr R); - Foundation Phase (Gr 1 to Gr 3); - Intermediate Phase (Gr 4 to Gr 6); - Senior Phase (Gr 7 to Gr 9); and - FET Phase (Gr 10 to Gr 12). The company was established in 1998 with 28 learners receiving tuition in a church building. Today it hosts more than 5 500 learners on 12 campuses nationwide. Curro develops or acquires schools and by applying its model and experience, delivers excellent learning within an effective budget. The result is an affordable educational product as an alternative to state school education. The establishment of a campus requires significant capital investment. In addition, the typical expenses of a school namely salaries of educators and other staff, and operational costs (including property taxes, electricity and water, curricula expenses and insurance) are mostly fixed in nature. Therefore, until such time that the number of learners reaches a certain critical mass, income does not necessarily cover the expenses. However, over time revenue will increase disproportionately to the corresponding costs as the capacities of the schools are reached. Curro listed on the JSE Limited`s AltX Board on 2 June 2011 mainly to obtain improved access to capital and funding. The company concluded a one for one rights issue during July 2011 whereby R322,4m was raised. This has strengthened the balance sheet and in doing so created gearing capacity to further expand the schools` operations in South Africa. The listing furthermore raised the profile of the company and enhanced the credibility of the Curro brand name. The industry Given the demand for education across all communities in South Africa, Government is now actively being assisted by the private sector in providing this important service. Globally, private school learners account for approximately 13% of all school going children whilst the official number in South Africa is closer to 4%. Curro therefore believes that the fundamentals remain strong for continuous growth in this sector. Curro places its product between the high-end private schools and the ex- model C schools, catering for the broader South African population. Results On a comparative basis, Curro`s turnover has increased by 117% to R79,3m. Organic growth accounted for 31%. EBITDA has decreased by 16% to R5,7m as a result of the creation of learner capacity through the increase in campuses from 5 to 12 coupled with an increase in costs associated with a higher number of staff members and educators. In so doing, the foundation has been laid for significant growth in income without a corresponding increase in expenses going forward for these specific schools. The expanded vision has necessitated human capital investments at head office level which included the Curro Centre for Education Excellence (CCEE), information technology and other back office functions. Head office costs have now reached a plateau that will not increase proportionately to the addition of new campuses. Marketing costs increased to further establish the brand which bode well for learner enrolments going forward. In summary, Curro has now established a solid platform for its planned future growth. Curro made a headline loss of R7,7m for the six months ended 30 June 2011 compared to a R2,4m profit last year. This was mainly as a result of increased levels of debt brought about by the significant capital expansion process over the last 2 years. After the rights issue NAV on a historical cost basis will amount to R2.37 per share. CCEE Product quality is the most important aspect of our business. To ensure consistency across all campuses, we established the CCEE. This unit`s mission is to further equip our head masters (rectors) and the subject heads with curriculum skills, technologies and content so that our written and delivered curriculum can compete with educational systems of first world countries. Furthermore, it is of the utmost importance that our curriculum remains relevant to the kind of knowledge and skills base which is required by companies and industries as well as colleges, universities and other institutions of higher learning. In this regard we liaise with a wide range of educational experts and curriculum writers in an attempt to strive towards excellence. Capital investments For the year ending 31 December 2011 capital investments including acquisitions are about R280m. This includes the construction of new campuses at Nelspruit, Serengeti Golf and Wildlife Estate (Kempton Park), Hermanus, Mossel Bay, the acquisition of Aurora Private School in JHB, Heuwelkruin (Polokwane) as well as the addition of capacity at Durbanville, Hazeldean Primary (Pretoria), Roodeplaat (Pretoria), Bankenveld (Witbank) and Langebaan. Prospects EBITDA historically experiences some form of seasonality as enrolment fees pick up in the second half of the year. It is therefore expected that profit after tax will also improve as the capital injection from the rights issue have been used to settle the majority of debt; the interest expense will as a result reduce significantly over the second part of the year. Commencing 2012, Curro will comprise of at least 14 school campuses with approximately 7 500 enrolled learners, but capacity for 11 000 learners without additional capital investment required. In addition to expanding capacity at existing campuses, Curro plans to grow by at least between 2 and 4 additional schools per year going forward. This will be achieved through the development of own campuses which includes the incorporation of smaller private schools as well as the acquisition of existing private school institutions. The company`s strategic intent is to establish a group of at least 40 campuses with 45 000 learners by 2020. Shareholders are advised that to the extent that any statement in this announcement constitutes a profit forecast, same has not been reviewed nor reported on by the company`s auditors. On behalf of the Board JA le Roux CR van der Merwe B van der Linde Chairman CEO CFO 12 August 2011 Directors JA le Roux SC (Chairman)* CR van der Merwe (CEO) AJF Greyling (COO) B van der Linde (CFO) MC Mehl ** PJ Mouton * B Petersen ** M Vilakazi ** (* Non Executive / ** Independent Non Executive) Registered office Suite 8, Monaco Square 14 Church Street Durbanville 7550 Transfer secretaries Computershare Investor Services (Pty) Limited 70 Marshall Street Johannesburg 2001 PO Box 61051 Marshalltown 2107 Corporate advisor PSG Capital Designated advisor Questco These results are available on www.curro.co.za Date: 15/08/2011 11:10:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). 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