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CURRO HOLDINGS LIMITED - Unaudited interim results for the six months ended 30 June 2013

Release Date: 20/08/2013 07:05
Code(s): COH     PDF:  
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Unaudited interim results for the six months ended 30 June 2013

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 SIX MONTHS ENDED 30 JUNE 2013


- Revenue increased by 91% to R309 million
- EBITDA increased by 178% to R51 million
- Learners increased by 76% to 21 908

Condensed consolidated statement of comprehensive income

                                                         Unaudited    Unaudited       Audited
                                                         30 Jun 13    30 Jun 12     31 Dec 12
                                                          6 months     6 months     12 months
                                                             R'000        R'000         R'000
Revenue                                                    308 766      161 303       355 886
Other income                                                 6 874        2 123         9 863
Operating expenses                                        (264 357)   (144 957)      (312 535)
Earnings before interest, taxation, depreciation
and amortisation (EBITDA)                                   51 283       18 469        53 214
 Schools                                                   75 374       30 803        78 870
 Head office                                              (24 091)     (12 334)      (25 656)
Depreciation and amortisation                              (15 888)      (6 053)      (17 848)
Earnings before interest and taxation (EBIT)                35 395       12 416        35 366
Investment revenue                                           1 682          549         1 502
Finance costs                                              (16 665)     (17 107)      (16 618)
Profit/(loss) before taxation                               20 412       (4 142)       20 250
Taxation                                                    (5 692)       1 160        (5 573)
Profit/(loss) for the period                                14 720       (2 982)       14 677
Other comprehensive income                                                                
Total comprehensive income/(loss)                           14 720       (2 982)       14 677
Profit/(loss) attributable to:
Owners of the parent                                        14 135       (2 982)       15 104
Non-controlling interest                                       585                      (427)
                                                            14 720       (2 982)       14 677

EBITDA margin                                                  17%          11%           15%
Earnings/(loss) per share (cents)
 Basic                                                        5.3         (1.8)          7.1
 Diluted                                                      5.3         (1.8)          7.0
Reconciliation of headline earnings/(loss)
Earnings/(loss) attributable to owners of the parent        14 135       (2 982)       15 104
Adjusted for:
Profit on disposal of property, plant and equipment           (181)        (145)         (125)
Taxation effect thereon                                         51           41            35

Headline earnings/(loss)                                    14 005       (3 086)       15 014
Headline earnings/(loss) per share (cents)
 Basic                                                        5.3         (1.9)          7.0
 Diluted                                                      5.2         (1.9)          7.0
Number of shares in issue (millions)
 Basic number of shares in issue                            293.7        161.2         240.4
 Diluted number of shares in issue                          298.9        165.5         245.7
Weighted average number of shares
in issue (millions)
 Basic weighted average number of shares in issue           265.8        161.2         213.0
 Diluted weighted average number of shares in issue         268.7        165.5         215.5

Condensed consolidated statement of cash flows
                                                        Unaudited     Unaudited       Audited
                                                        30 Jun 13     30 Jun 12     31 Dec 12
                                                         6 months      6 months     12 months
                                                            R'000         R'000         R'000
Net cash generated from operating activities               31 097         8 421        56 165
Net cash utilised in investing activities                (495 746)     (404 459)     (726 907)
Net cash from financing activities                        581 724       380 970       614 869
Cash and cash equivalents movement for the period         117 075       (15 068)      (55 873)
Cash and cash equivalents at the beginning of
the period                                                (46 036)        9 837         9 837
Cash and cash equivalents at the end of the period*        71 039        (5 231)      (46 036)
* Consists of:
 Cash and cash equivalents                                71 039        34 819        28 504
 Bank overdraft                                                       (40 050)      (74 540)
                                                           71 039        (5 231)      (46 036)
Condensed consolidated statement of financial position

                                                   Unaudited    Unaudited        Audited
                                                   30 Jun 13    30 Jun 12      31 Dec 12
                                                    6 months     6 months      12 months
                                                       R'000        R'000          R'000
Assets
Non-current assets                                 1 932 840    1 029 783      1 426 179
Property, plant and equipment                      1 570 698      859 927      1 209 758
Goodwill                                             270 004      132 832        148 861
Intangible assets                                     92 138       37 024         67 560
Current assets                                       100 073       48 159         57 520
Inventories                                            2 929                          
Current tax receivable                                 2 009          305          1 288
Trade and other receivables                           24 096       13 035         27 728
Cash and cash equivalents                             71 039       34 819         28 504
 
Total assets                                       2 032 913    1 077 942      1 483 699
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of parent    1 529 633      368 190        861 211
Share capital                                      1 495 645      369 787        843 710
Share-based payment reserve                            6 416        2 119          4 065
Retained income/(accumulated loss)                    27 572       (3 716)        13 436

Non-controlling interest                               1 091                        507

Total equity                                       1 530 724      368 190        861 718
Liabilities
Non-current liabilities                              394 500      196 537        320 572
Loans and other financial liabilities                284 156      158 569        236 243
Deferred tax                                         110 344       37 968         84 329
Current liabilities                                  107 689      513 215        301 409
Loans from related parties                                       196 040          5 033
Loans and other financial liabilities                 14 280        4 425        125 275
Current tax payable                                    1 280          994          2 216
Trade and other payables                              28 979       16 504         21 285
Prepaid school fees and deposits                      57 150       35 259         36 400
Acquisition payables                                   6 000      219 943         36 660
Bank overdraft                                                    40 050         74 540

Total liabilities                                    502 189      709 752        621 981

Total equity and liabilities                       2 032 913    1 077 942      1 483 699

Net asset value per share (cents)                      520.5        228.4          358.2

Condensed consolidated statement of changes in equity

                                                   Unaudited    Unaudited        Audited
                                                   30 Jun 13    30 Jun 12      31 Dec 12
                                                    6 months     6 months      12 months
                                                       R'000        R'000          R'000
Balance at the beginning of the period               861 718      369 774        369 774
Total comprehensive income/(loss)                     14 720       (2 982)        14 677
Issue of shares                                      661 198                    475 632
Share issue costs                                     (9 263)                    (1 710)
Recognition of share-based payments                    2 351        1 398          3 345
Balance at the end of the period                   1 530 724      368 190        861 718

Notes to the financial statements

1. Statement of compliance
   The consolidated interim financial information for the six months ended 30 June 2013
   has been prepared in accordance with the framework concepts and the measurement
   and recognition requirements of International Financial Reporting Standards (IFRS), the
   SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
   Financial Reporting Pronouncements as issued by the Financial Reporting Standards
   Council, the information as required by IAS 34: Interim Financial Reporting, the Listing
   Requirements of the JSE and the requirements of the Companies Act of South Africa,
   as amended. The report has been prepared using accounting policies that comply with
   IFRS which are consistent in all material aspects with those applied in the financial
   statements for the year ended 31 December 2012. The unaudited interim results have
   been prepared by DN Hartshorne, CA(SA) under the supervision of the Chief Financial
   Officer, B van der Linde, CA(SA) CFA.

2. Basis of preparation
   The condensed interim financial statements are prepared in thousands of South
   African Rand (R'000).

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 2012. For a full list of standards and interpretations
   which have been adopted, we refer you to our 31 December 2012 annual
   financial statements.

4. Issued capital
   Effective 10 May 2013, 50.5 million shares were issued through a 21 for 100 rights
   issue at R12.00 per share. On 29 May 2013, 2.8 million shares were issued through a
   specific issue at R19.75 per share.

5. Operating Segments
   Due to all of the services being education-related and within South Africa, the Group
   has only one reportable segment. All historical information presented represents the
   financial information of this single segment.

6. Events after the reporting period
   There are no significant events after the reporting period.

Other key ratios
                                                     31 Dec       31 Dec        30 Jun
                                                       2011         2012          2013
Number of campuses                                       12           22            26
Learners per campus                                     463          567           843
Staff                                                   654        1 630         2 414
Educators                                               446        1 151         1 283
Learner/educator ratios                                  12           11            17
Building size (m²)                                   75 000      169 024       221 346
Land size (ha)                                          107          153           188
Capital investment (Rm)                                 328          782           500
 Current campuses                                       80          223           232
 New campuses                                          175          237            65
 Acquisitions                                           73          322           203

The table below illustrates the J-Curve effect from newly established schools to more
mature schools.

Interim period ended 30 June 2012

        Number     % of eventual         Learner            EBITDA       EBITDA
    of schools          capacity         numbers             R'000*      margin
             5              025           1 313            (3 099)        (23%)
             8             2550           4 071             5 047          12%
             8             5075           5 575            23 757          28%
             1            75100           1 240             5 097          26%
            22                            12 199            30 803          19%

 Interim period ended 30 June 2013

        Number     % of eventual         Learner            EBITDA       EBITDA
    of schools          capacity         numbers             R'000*       margin
             3              025             750            (1 120)         (9%)
            11             2550           6 913            13 936          14%
             6             5075           5 396            23 182          25%
             6            75100           8 849            39 377          36%
            26                            21 908            75 374          24%

Note:
* EBITDA at school level (excluding head office costs).

Commentary

Overview
Curro celebrated its 15th birthday in July. The school opened with 28 learners on that winter's morning
in 1998 and today has 21 908 learners. The following components remain key focus areas to ensure
Curro's continued success in the future:

-  Support from our clients
-  Efficient and timeous development of our campuses
-  Debt and equity funding
-  Product and people development

Curro's vision of 80@20, meaning 80 schools by 2020, is achievable.
During the period under review, the Group:

-  Acquired the Embury Institute for Teacher Education for R53 million. This Durban-based teachers
   training college will be expanded to Gauteng and the Western Cape and will work with Curro schools
   to educate and train educators for Curro, other private schools and the public sector at large.
-  Took ownership of the 4 500-learner Northern Academy Campus with effect from 1 April 2013.
   This school has provided intellectual capital that will form the basis for the development of the
   Meridian schools.
-  Raised R605 million through a rights issue.

 Results
 On a comparative basis, Curro's revenue increased by 91% to R309 million and EBITDA increased by 178% 
 to R51 million for the period ended 30 June 2013. This is mainly due to the significant increase in 
 learner numbers as a result of both organic and acquisitive growth.

 A headline profit of R14 million was recorded for the six-month period compared to a headline
 loss of R3 million in the previous period.

 Headline earnings per share of 5.3 cents were achieved compared to a headline loss per
 share of 1.9 cents in the previous period.

Balance sheet and funding

The rights issue has significantly strengthened the balance sheet of the Company. Over the short
term, all the legacy funding at different terms and covenants have been repaid save for R60 million in
moveable asset finance. This has now created a base to raise funding at more favourable terms. This
will be balanced between a Domestic Medium-Term Note (DMTN) programme and term and facility
funding from banks. In this regard Curro has obtained a BBBcredit rating. The only other outstanding
debt as at 30 June 2013 was in respect of the Meridian business.

Meridian
Meridian is a ring-fenced structure of which Curro owns 65% and The Schools and Education Investment
Impact Fund of South Africa owns 35%. The total initial extent of this partnership is R440 million. As at 
30 June 2013, R263 million has been drawn down.

Developments
Curro will be investing more than R500 million in the expansion and development of new campuses
this financial year. New Curro campuses are being built in Ballito and Port Elizabeth. For the Meridian
business, a new campus is being built in Karino (Nelspruit), as well as an additional campus in
Polokwane. The first new Curro Castle is under development in George.

Dividends
No dividend has been declared for the period under review. As soon as cash generated exceeds
capital requirements, dividends will be paid.

Prospects
The 2014 enrolment numbers are looking promising. Management will ensure the delivery of quality
education in the classrooms, the timeous completion of expansion projects and the driving of
efficiencies in all areas of the business.

On behalf of the Board

SL Botha			 CR van der Merwe
Chairman			 CEO

Directors: SL Botha* (Chairman), CR van der Merwe (CEO), AJF Greyling (COO), B van der Linde (CFO), HG Louw (CIO), PJ Mouton*, B Petersen**, ZL Combi**, S Muthwa**,
(* Non-executive, ** Independent Non-executive)

Registered office: 38 Oxford Street, Durbanville, 7550

Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001| PO Box 61051, Marshalltown, 2107

Corporate advisor and sponsor: PSG Capital, 1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600

These results are available at www.curro.co.za


Date: 20/08/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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