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Unaudited interim results for the six months ended 30 June 2012
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)
Unaudited interim results for the six months ended 30 June 2012
Revenue increased by 103%
EBITDA increased by 226%
Learners increased by 125%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
Revenue 161 303 79 271 166 298
Other income 2 123 2 204 4 036
Operating expenses (144 957) (75 816) (159 853)
Earnings before interest taxation depreciation
and amortisation (EBITDA) 18 469 5 659 10 481
Depreciation and amortisation (6 053) (3 407) (6 704)
Earnings before interest and taxation (EBIT) 12 416 2 252 3 777
Investment revenue 549 207 1 437
Finance costs (17 107) (13 433) (14 385)
Loss before taxation (4 142) (10 974) (9 171)
Taxation 1 160 3 278 1 767
Loss for the period (2 982) (7 696) (7 404)
Other comprehensive income
Total comprehensive loss for the period (2 982) (7 696) (7 404)
EBITDA Margin 11% 7% 6%
Earnings per share
Basic loss per share (cents) (1.8) (9.6) (6.2)
Diluted loss per share (cents) (1.8) (9.6) (6.2)
Reconciliation between loss and
headline loss
Basic loss (2 982) (7 696) (7 404)
Adjusted for:
Profit on disposal of property, plant and
equipment (145) (105)
Tax effect thereon 41 29
Headline loss (3 086) (7 696) (7 480)
Headline earnings per share
Basic headline loss per share (cents) (1.9) (9.6) (6.2)
Diluted headline loss per share (cents) (1.9) (9.6) (6.2)
Number of shares
Basic number of shares in issue (millions) 161.2 80.6 161.2
Diluted number of shares in issue (millions) 165.5 80.6 165.5
Weighted average number of shares
Basic weighted average number of shares in
issue (millions) 161.2 80.2 118.9
Diluted weighted average number of shares in
issue (millions) 165.5 80.2 120.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
ASSETS
Non-current assets 1 030 506 410 291 574 661
Property, plant and equipment 859 927 381 566 529 938
Goodwill 132 832 20 083 39 283
Intangible assets 37 024 6 847 5 440
Deferred tax 723 1 795
Current assets 48 159 12 501 22 751
Trade and other receivables 13 035 6 772 12 836
Current tax receivable 305 197 78
Cash and cash equivalents 34 819 5 532 9 837
Total assets 1 078 665 422 792 597 412
EQUITY AND LIABILITIES
Equity 368 190 49 842 369 773
Non-current liabilities 197 260 109 001 132 609
Loans and other financial liabilities 158 569 100 319 122 416
Deferred tax 38 691 8 682 10 193
Current liabilities 513 215 263 949 95 030
Loans from related parties 196 040 226 649 38 686
Loans and other financial liabilities 224 368 10 197 12 291
Current tax payable 994 882
Bank overdraft 40 050
Trade and other payables 16 504 13 175 21 657
Prepaid school fees and deposits 35 259 13 928 21 514
Total liabilities 710 475 372 950 227 639
Total equity and liabilities 1 078 665 422 792 597 412
Net asset value per share (cents) 228.4 61.8 229.4
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
Balance at the beginning of the period 369 773 57 688 57 688
Total comprehensive loss for the period (2 982) (7 696) (7 404)
Issue of shares 800 322 543
Share issue costs (950) (3 774)
Recognition of share-based payment reserve 1 399 720
Balance at the end of the period 368 190 49 842 369 773
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 25 894 11 024 25 112
Investment income 549 207 1 437
Finance costs (17 107) (13 433) (14 385)
Tax paid (915) (260) (670)
Net cash generated from/(utilised in) operating
activities 8 421 (2 462) 11 494
Net cash utilised in investing activities (404 459) (173 533) (327 719)
Net cash from financing activities 380 970 180 611 325 146
Total cash and cash equivalents movement for
the period (15 068) 4 616 8 921
Cash and cash equivalents at the beginning of
the year 9 837 916 916
Total cash and cash equivalents at the end of
the period* (5 231) 5 532 9 837
* Consists of:
- Cash and cash equivalents 34 819 5 532 9 837
- Bank overdraft (40 050) - -
NOTES TO THE FINANCIAL STATEMENTS
1. STATEMENT OF COMPLIANCE
The consolidated interim financial information for the six months ended 30 June 2012
has been prepared in accordance with International Financial Reporting Standards
(IFRS), the AC 500 Standards as issued by the Accounting Practices Board and the
interpretations adopted by the International Accounting Standards Board (IASB).
This set of condensed interim financial statements are presented in compliance with
IAS 34 Interim Financial Reporting and should be read in conjunction with the annual
financial statements for the year ended 31 December 2011.
2. BASIS OF PREPARATION
The condensed interim financial statements are prepared in thousands of South African
rand (R'000) on the historical-cost basis.
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the condensed interim financial
information are consistent with those of the annual financial statements for the year
ended 31 December 2011. For a full list of standards and interpretations which have
been adopted, we refer you to our 31 December 2011 annual financial statements.
4. ISSUED CAPITAL
No shares were issued during the period.
5. DIVIDEND
No dividend was paid during the interim period.
6. OPERATING SEGMENTS
Due to all of the services being educational related and within South Africa the Group
has only one reportable segment. All historical information presented represents the
financial information of this single segment.
7. NOTE TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
CASH GENERATED FROM OPERATIONS
Loss before taxation (4 142) (10 974) (9 171)
Adjustments for:
Depreciation and amortisation 6 053 3 407 6 704
Profit on sale of assets (145) (105)
Investment income (549) (207) (1 437)
Finance costs 17 107 13 433 14 385
Movement on operating lease assets and
accruals (29)
Share-based payment charge expense 1 399 720
Changes in working capital:
Decrease/(increase) in trade and other
receivables 866 (4 487) (5 291)
Increase/(decrease) in trade and other
payables 5 305 9 852 19 336
25 894 11 024 25 112
8. BUSINESS COMBINATIONS
During the period Curro acquired the following business operations:
Effective 1 January 2012 Hillcrest Christian Academy for a cash consideration of
R20 million
Effective 1 March 2012 Embury College and Wonderland for a cash consideration
of R63.2 million
Effective 1 April 2012 Bidi-Bidi for a cash consideration of R5.5 million
Effective 1 May 2012 St Martins in Bloemfontein for a cash consideration of R6 million
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
Fair value of assets and liabilities acquired:
Property, plant and equipment 84 794 17 155 18 000
Intangible assets 16 906 153 2 064
Trade and other receivables 1 065 5 260
Cash 803 439 2 545
Loans and other financial liabilities (2 013) (1 853) (1 963)
Deferred tax liability (5 581) (4 560) (5 095)
Trade and other payables (3 285) (229) (6 580)
Total identifiable net assets 92 689 11 105 14 231
Goodwill 2 148 9 620 15 590
94 837 20 725 29 821
9. ACQUISITIONS OF SUBSIDIARIES
Effective 1 April 2012, Curro acquired the share capital of Woodhill College (Pty) Ltd
and Woodhill College Property (Pty) Ltd for a cash consideration of R178 million as
well as the share capital of Educatum Management Services (Pty) Ltd, the manager of
Meridian Schools, for a cash consideration of R25 million.
Unaudited Unaudited Audited
30-Jun-12 30-Jun-11 31-Dec-11
6 months 6 months 12 months
R'000 R'000 R'000
Fair value of assets and liabilities acquired:
Property, plant and equipment 144 540 41 782 41 782
Intangible assets 16 260 2 335 2 335
Trade and other receivables 3 518 589 589
Cash 20 452 3 198 3 198
Loans and other financial liabilities (24 616) (9 397) (9 397)
Deferred tax (28 550) (10 492) (10 492)
Trade and other payables (19 571)
Total identifiable net assets 112 033 28 015 28 015
Goodwill 91 401 15 485 15 485
203 434 43 500 43 500
10. EVENTS AFTER THE REPORTING PERIOD
Effective 1 July 2012, Curro acquired the business operations and properties of Rosen Castle
pre-primary for a cash consideration of R21.5 million.
Effective 2 July 2012 R476 million was raised through a 0.36 to 1 rights issue and a
specific issue of 21.4 million shares at R6.00 per share.
OTHER NOTES
LEARNER NUMBERS* % change % change % change
2009 2010 2011 2012*
Schools operating in 2009 2 059 15% 2 371 9% 2 581 9% 2 815
Schools operating in 2010 681 42% 969 114% 2 069
Schools operating in 2011 31 2007 28% 2 576
Schools operating in 2012 5 037
Total number of learners 2 059 50% 3 083 80% 5 557 125% 12 497
The table below illustrates the J-Curve effect from newly established schools to more mature schools.
It excludes Rosen Castle with 298 learners.
Interim period ending 30-Jun-11
Number of % of Eventual Learner numbers EBITDA
schools Capacity per category EBITDA ** Margin
1 75%-100% 1 175 4 658 26%
3 50%-75% 2 461 8 846 23%
2 25%-50% 969 1 742 15%
6 0%-25% 952 (2 097) (19%)
12 5 557 13 149 17%
Interim period ending 30-Jun-12
Number of % of Eventual Learner numbers EBITDA
schools Capacity per category EBITDA ** Margin
1 75%-100% 1 240 5 097 26%
5 50%-75% 3 612 14 380 24%
5 25%-50% 2 672 3 412 10%
5 0%-25% 1 313 (3 099) (31%)
2 Acquired (60-70%) 1 963 9 378 43%
3 Meridian (30-50%) 1 399 1 635 21%
21 12 199 30 803 19%
OTHER KEY RATIOS
2009 2010 2011 2012*
Number of campuses 3 5 12 22
Learners per campus 686 617 463 568
Staff 251 343 654 1 392
Educators 201 247 446 951
Learner/teacher ratios 10.2 12.5 12.5 13.1
Building size (m2) 33 000 44 500 75 000 139 588
Land size (ha) 27 55 107 114
Capital investment (Rm) 35 128 315 408
Current campuses 13 13 80 75
New campuses 21 114 175 34
Acquisitions 1 1 60 299
Notes:
* As at 23 July 2012 (includes Rosen Castle)
** EBITDA at school level (excluding head office costs and enrolment fees for new schools)
Includes Woodhill College and Embury College
COMMENTARY
Overview
Curros business is to develop, acquire and manage private schools in South Africa.
These schools provide balanced care and education to learners from age three months
through to grade 12. Four market areas are catered for, namely:
- Traditional Schools
The original Curro model which entails the purchasing of land, the development of
appropriate facilities, the appointment of staff and the implementation of a school
curriculum, all at a value for money offering. There are currently 15 (31 December 2011: 12)
of these schools with 8 700 learners (31 December 2011: 5 557).
In addition to the addition of capacity at the existing campuses, Curro is also developing
four new sites in Bloemfontein (Free state), Century City (Cape Town, Western Cape),
Krugersdorp (Gauteng) and Thatchfield (Centurion, Gauteng). All of these campuses
will be operational in January 2013.
- Select Schools
Select Schools are existing establishments with a long history, unique ethos and product offering that are
well known in its communities. As a result of the acquisition of Woodhill College
(Pretoria, Gauteng) and Embury College (Morningside, Durban, Kwa-Zulu Natal)
during the reporting period under review, we now have two schools with 1 958 learners.
These schools are normally incorporated by means of acquisitions, which Curro
continuously pursues at attractive valuation multiples.
- Private Community Schools
The Meridian Community schools provide an even more affordable product that will
enable a broader range of the South African youth to attend private schools offering
quality education. There are currently three campuses in Pretoria, Polokwane and
Rustenburg with 1 416 learners. A fourth campus that will open in 2013 is being developed
at Pinehurst (Kraaifontein, Cape Town, Western Cape)
In July 2012 Curro entered into a partnership to develop at least 11 schools with the Schools
and Education Investment Impact Fund of South Africa, managed by OMIGSA, with
investors being the Public Investment Corporation and Old Mutual. Loans of R400m
will be provided by the Schools and Education Investment Impact Fund of South Africa.
Curro has a 65% interest in this venture.
- The Creche market
These junior academies cater for learners aged three months to four years. Curro recently
acquired two existing operations and its properties, namely Rosen Castle (Durbanville, Cape Town)
with 298 learners and Bidi-Bidi (Krugersdorp, Gauteng) with 198 learners.
Across the market areas, there are now 22 (31 December 2011: 12) schools with 12 497 learners
(31 December 2011: 5 557). At the commencement of 2013 the greater Curro Group will have at
least 27 schools in operation.
Curro is looking for additional acquisition and development opportunities in all four markets.
Results
On a comparative basis, Curros Revenue increased by 103% to R161.3m for the period ended 30 June 2012.
This is mainly due to the significant increase in learner numbers and acquisitions.
EBITDA amounts to R18.4m, an increase of 226%. This is mainly as a result of capacity being
filled at existing schools without a proportionate increase in costs, as well as the inclusion
of profit making schools from acquisitions for a part of the period.
A headline loss of R2.98m was recorded for the six-month period compared to a headline
loss of R7.70m in the comparative period last year.
A headline loss per share of 1.9 cents and a basic loss per share of 1.8 cents was realised compared
to a headline loss per share and basic loss per share of 9.5 cents per share in the comparative period last year.
Dividends
No dividend has been declared for the period under review. Curro will for the foreseeable future
use all cash generated to expand existing campuses and establish new campuses. In time, a point will
be reached when the operational cash generated will exceed capital requirements. Curro will
then commence with the payment of dividends.
Renewal of cautionary announcement
Further to the cautionary announcement dated 24 July 2012, shareholders are hereby advised that
negotiations are still in progress relating to certain corporate actions, which if successfully
concluded, may have a material effect on the price of the Companys securities. Accordingly,
shareholders are advised to continue exercising caution when dealing in the Companys securities
until a full announcement is made.
Prospects
The provision of quality education and the safety of our leaners remain a top priority.
The growing positive sentiment about the private school market is encouraging. Curros management
will continue to expand the business by means of organic and acquisitive growth in years to come.
The R476 million that was raised through the rights issue and specific issue in July 2012 will be
utilised for this purpose.
On behalf of the board
J.A. Le Roux C.R. van der Merwe
Chairman Chief Executive Officer
17 August 2012
DIRECTORS: JA le Roux SC (Chairman)* CR van der Merwe (CEO) SL Botha** ZL Combi* AJF Greyling (COO)
HG Louw (CIO) MC Mehl** PJ Mouton* B Petersen** B van der Linde (CFO) (* 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 AND SPONSOR: PSG Capital
These results are available at
www.curro.co.za
Date: 20/08/2012 11:09:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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